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Category: venture capital

Frank’s Back

Frank Quattrone made a lot of people a lot of money. He was the i-banker of Web 1.0. Now he’s beaten the charges related to the IPOs he ran for CSFB during the Internet boom. Of course, those who actually remember ancient history (back around the turn of the millenium), would know that Quattrone was never charged directly with the securities violations everyone knew he committed. He was charged with the cover up. He beat that rap.

Bubbles

So now in this new era of Web 2.x, Frank’s back. But things have changed, there’s Sarbanes Oxley, start ups are trying get by without VC funding, and the “first day IPO pop” has been revealed to be the most expensive advertising a company could possible do (as well as an opportunity for the kind of securities violations that Quattrone was originally suspected of). It was the difference between the IPO price and the first trade price that traditional bankers like Quattrone were able to parlay into a network of favors, and a pipeline of deals.

Here in the Bay area, we think the new crop of Web businesses are probably due for a shake out. But it’s also acknowledged that there are some better business models out there that really organically fit into the Web. If there’s a bubble today, it’s a much smaller one. It’ll be interesting to see how Frank will emerge. He wants to get back into the scene, maybe it’ll be M&A this time.

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The Ombudsman: Understanding Wisdom, Power, the Weak and the Marginalized

Roses for Stalin

There’s a lot of capital invested in “the wisdom of crowds” Web companies. This idea that “we” are smarter than “me” is generally a good one. I find the collaborative filtering that Delicious provides a great way to find new information on topics of interest, or to follow the link blogs of people of interest. Obviously there’s a big unexplored territory here.

Sometimes it seems as though the Web has no sense of history, no reference points outside itself. The concept of the “wisdom of crowds” seems to live in some kind of socialist realist illustration from the Soviet era. Happy, productive workers collectively producing the best of the best. The crowd’s idea is better than an individual’s—and you can make some money off of the value of that better idea. In this case when we say “the crowd” is “wise,” we give the crowd power over what counts as “wise.” And of course “wisdom” is always better, smarter, and by definition, more “wise.”

And yet, when you replace the word “wisdom” with the word “power” and start doing some reading you’ll immediately encounter the dark side of this concept. Elias Canetti’s Crowds and Power is one of the classics of the literature. Crowds, both consciously and unconsciously, create a dominant center and push things to the margins. (The opposite of The Long Tail) Sometimes this kind of filtering can be good and valuable, sometimes it can be cruel and dangerous. Instead of the Socialist Realist image of crowds, think of the image created by Billie Holiday in the song Strange Fruit. The crowd is a double-edged sword—it cuts both ways. The sword is real and the sword is sharp.

Jason Calacanis has a related problem with Mahalo. The wisdom of his editors creates the value of Mahalo’s search engine results pages. And there’s no question that Mahalo does create value. But if we replace the word “wisdom” with “power” we uncover the potential dark side of this concept. And that’s where we come to the concept of the Ombudsman.

If the future of the Web is really going to be filled with Social Networks and Distributed Editors filtering our experience, the future must also be filled with the Ombudman. Have the builders of these online filtering systems thought about how to make injustices right? Do they have an algorithm for that? Or is a human process of arbitration the only way to really set things right? Can this kind of process just be tacked on at the end? Shouldn’t it be an essential part of the structural design? Of course, the reason it’s not is that “justice” isn’t part of what creates value, rather it’s a pure expense. Although in the long run, it’s also part of what will make any such service a trusted authority. (See Reputation Management and Craig as Customer Service Rep)

It’s well understood what an Ombudsman is supposed to do, the question exposed by this little ramble of thought is: can an Ombudsman really provide a check and balance to the power of the crowd? Could an Ombudsman save Frankenstein’s monster from the crowd?

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Mahalo & Winer: The Human Element

Calacanis makes products, Winer makes networked formats (and products to support those formats). Calacanis thinks about the Web’s ecosystem, but he also thinks about the economics of the Web and is willing to pay for value at the leading edge (even in the so-called social network space). That makes him rare.

So why the break? What’s really upset Winer about Mahalo? That it’s not a platform? This seems unlikely. While Winer is usually good about thinking about ordinary users, in this case I think he’s really thinking only about developers as users, and not ordinary users.

What’s good about Mahalo? Compare the search results pages for “how to speak french.”

Google: How to speak french

Mahalo: How to speak french

To my eye, the Mahalo page is more useful if a person would like to learn how to speak french. Granted the Google page lists the Mahalo page in its results, but the Google page is filled with advertising. Google doesn’t really tell me how to learn french, it provides a list of pointers based on a keyword query and page rank algorithm. Google doesn’t even know or care about my interest in speaking french.

Is the Mahalo page useful to a Web developer? Is it a low-level network protocol or format that can be mashed up into something new? Not at the moment, but it would be very useful to a developer who wanted to learn to speak french. The interesting thing about Mahalo is that it brings editorial judgement into the process of searching and finding.

And that injection of the “editor” is probably what Winer objects to the most, although he hasn’t put it that way— and maybe doesn’t realize it. Most of the technology that Dave has built is for the purpose of empowering the individual. Blogs, RSS, OPML, Manilla, Frontier — all these things give power to the individual to create. Mahalo doesn’t do that, it just provides good answers to questions. And to do that it needs smart editors to compile, structure and write answers. This makes the editor an important filter. Dave prefers to build his own filters and empower users.

From this perspective, Mahalo moves things in the other direction. Mahalo may start with good editors, but that may not always be true. If I search for “Dave Winer” on Mahalo, what will the editors return as a result? Will the break between Winer and Calacanis have any affect on the results? The human element can provide the extra intelligence that makes the difference between a good list of pointers and good answer to a question. It can also inject bias, cultural prejudice, political agendas, economic agendas, etc. Will Mahalo have the wisdom and ability to respond to its inevitable mistakes? And once that process starts, will Mahalo still be able to provide good answers to questions?

So maybe Winer is thinking about users. Calacanis has created a useful product, but he needs to answer the questions that Winer hasn’t been able to articulate.

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Stop with the Numbers already…

Google’s CEO, Eric Schmidt, on what comes after “Web 2.0.” He defines 2.0 as AJAX (xmlhttprequest) architecture. What comes after— I refuse to give it a number, will be mashup widgets spread virally through official or unofficial social networks.

The interesting point is that it doesn’t matter where, on what page on which site, something is. A store must be in one physical location, that’s not true on the Web. It could be everywhere. Applications don’t need to live anywhere in particular either. The low barrier to entry means there will be lots of creativity.

Identity, authentication and authorization issues will be the friction point that must be overcome before there’s wide-spread consumer acceptance. No one wants Web apps everywhere with multiple logins.

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