Amen, Jeremy.

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I was just chatting with a friend of mine who is spending some time in Pine Apple, Alabama.  I’ve never been to Pine Apple, but I learned alot about it on the Internet:

Me: So where the hell are you, anyway?

A: In a trailer next to the woods directly behind the clinic.

Me: In Pine Apple, AL.

A: Please don’t say anything scary.  Seriously.

Me: I would never do that.  I have my dog here, to keep me company.  Whenever I get scared, I just put my hand under the bed and she licks it until I feel better.

A: Dammit Josh.  You fucker.

Me:  What?  I’m trying to be comforting.  It looks like Pine Apple is pretty far from the beach.

A: Yes, it is.

Me: Not really close to anything- Montgomery, maybe?  I’ve never been there.

A: Closer to Montgomery.

Me: It’s so strange.  Who would have thought that Pine Apple would be right down the road from the Alabama State Mental Hospital for the Criminally Insane?   Google Maps has all sorts of useful information.

A: You are such an asshole.

Me:  I think Mt. Morah Road cuts through an ancient Indian burial ground.

A: Jackass.

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I want to expand a bit on my ‘what facebook is up to‘ post from a couple weeks back.

Plaxo announced that the launch of Pulse this week, which Michael Arrington dubbed the ‘Open Facebook‘.  One of the relatively few criticisms of Facebook is the blogosphere is that it is a ‘walled garden‘ or ‘roach motel‘ for data– information goes into Facebook, but you can’t get it out again.  The conventional wisdom is that this violates the spirit of the Internet, which was build on open standards so that anyone could share information with anyone else, and that in the end, openness always wins out.

Personally, I don’t think Pulse is going to overtake Facebook anytime soon.  Plaxo started life as a way to keep your address book up to date, and earned a reputation for spamminess as it had a tendency to email you every time one of your contacts changed something on their profiles.  Nonetheless, it raises a very interesting question: is it possible for any open social network to overtake Facebook?

Users and Data Streams

Quoting Wikipedia, Metcalfe’s Law states that “the value of a telecommunications network is proportional to the square of the number of users of the system.”  This same logic has been applied to other domains where network effects are important, like operating systems and (lately) social networking applications.  As you’ll notice from the Wikipedia article, a number of people have made various objections to Metcalfe’s law, saying that it over or underestimates the additional value a network receives from each additional user, though everyone seems to agree that the effect is at least superlinear.  My quibble with the way Metcalfe’s law is applied is that the unit of analysis isn’t right, at least when it comes to platforms like operating systems or social networks: the value doesn’t increase with the number of users, it increases with the number of data streams.

For the telephone network, the number of users and the number of data streams is essentially the same– each person has one voice.  But in the context of software, a single user can correspond to multiple data streams.  On Facebook, I control data streams of messages, photos, links, and games of scrabulous.  The day that Facebook opened up their platform to third party applications, the value of their network increased significantly– and would have increased if they hadn’t ever added a single additional user.  Naturally, the fact that the network increased in value from the multiplicative impact of the additional data streams brought more users (and hence more streams) into the network, which increased the value of the network even more, which brought more app developers, which brought more users, etc.

Open networks do not win out over closed networks by default– the fact that Windows is still very much the dominant operating system indicates that the value of all of those third party applications that have been developed for Windows over the years has not been overcome by the more open Linux platform.  Rather, open platforms often win out because it is generally easier to add data streams to an open platform than it is to a closed one.  For example, the original AOL was a true walled garden: third party developers could not create applications that would run inside of AOL nearly as quickly, cheaply, or easily as they could create new web sites using HTML and free tools like apache and perl.

Social Networks, Identity, and one hundred billion dollars

One of the things that people have been pointing out as a favorable aspect of Pulse is its support for OpenID, an open standard for single sign on across the Internet that has been slowly gaining momentum over the last few years.  The goal of OpenID is to prevent any single company from dominating identity on the Internet, and there have been several calls for Facebook to support OpenID.

I’m going to make a bold prediction: Facebook will never truly support OpenID, because Facebook wants to be the centralized single-sign on source for web applications.  My friend Sean is a firm believer in the idea that ‘social networking is a feature‘– not an application in and of itself.  I believe Facebook feels much the same way– social networking is a feature that lots of applications and sites should have, but there isn’t much value in those sites creating their own, closed social networks, any more so than those sites would derive much value from building their own credit card payment services or even their own supply of electricity.  Rather, those sites should pay Facebook to provide the social networking infrastructure for their sites, with Facebook acting as the one true ’social utility’.

Here’s an example to clarify what I’m talking about.  Let’s say that an online clothing retailer wanted to integrate social shopping features to their site.  When you sign in to their site with your Facebook ID, you can see what other friends are shopping at that site right now, chat with them, see what they recently purchased, etc., etc.  Meanwhile, when you login to Facebook, your News Feed contains information about where your friends are shopping and how they are spending their time online.  Facebook can leverage their network, the platform, and the News Feed to become a traffic director for the Internet (ala Google or Yahoo) and gain control over some incredibly valuable marketing data.  For any kind of community or commerce site, not being a part of the Facebook News Feed would become equivalent to not belonging to Google’s index– it’s as if you don’t exist at all.

I think that Facebook’s current valuation should be roughly equal to the product of two numbers: 1) the cash value of controlling and managing online identity, and 2) the probability that they will succeed.  The challenge is that no one really knows what the first number is (aside from “a lot”), nor do they know what the second number is, although it seems like Facebook has a much higher probability than any other player out there.

Can an Open Network Beat Facebook?

Right now, I don’t believe that an open network, starting from scratch, can catch up with Facebook.  My concern is that an open network is going to have more “friction” associated with adding a data stream than a closed network like Facebook has.  Photos, events, and link sharing are fundamental data streams for people using social networks, but a new user at Plaxo will need to configure access to multiple services to provide those features, whereas they are built-in to Facebook.  It seems like every open network service will need to be tightly integrated with these service providers in order to match Facebook’s ease of use, but if that’s the case, I don’t know how “open” the network really is.

More likely, in my opinion, is that one or more of the other big players– Google, Yahoo, Microsoft, Amazon, and eBay– will figure out what Facebook is up to, although not necessarily before it’s too late to stop them.  The pivotal company, in my opinion, is Amazon– they’re savvy enough to see what’s what and have a large enough user base to be a kingmaker for social shopping and online identity.

I see two possibilities: in case one, Amazon and Facebook form a significant alliance that involves Amazon taking an equity stake in Facebook, Amazon building social search apps on top of Facebook identities, and significant data sharing between the two companies.  In case two, Facebook provides identity and social shopping support for a wide swath of Amazon’s competitors, almost certainly including Barnes and Noble.  I believe Facebook is more likely to go with the second option, since Amazon has a significant investment in their own ID system and platform that they might not be willing to sacrifice.  The concern is that if Facebook’s partneships with Amazon’s competitors works out, it will drive Amazon into an alliance with Google, Yahoo, or Microsoft that could counter Facebook.

That said, If I’m Mark Zuckerberg, I’m willing to bet that the Big Five, each with their own positioning and interests with respect to online identity, won’t figure out how to place nicely with each other until it’s too late (if ever).  It’s not an easy bet to make, but the stakes are so high and the game is so nervewrackingly fun, I don’t see how he could help but go all in.

Labels: social networks

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For those of you who I don’t talk to regularly, I’ve spent the past few weeks figuring out how to get off script and start figuring out what might make me happy.  To that end, I’m leaving my current gig to work at Indeed, the job search engine.  They have some fantastic people over there and alot of great problems that I’m looking forward to wrapping my head around.  During my discovery process, I had some conversations with folks over at Google and Facebook, but in the end, I found that it wasn’t time to leave Austin.  There is more work I need to do towards figuring out (and in a way, remembering) what it is that makes me happy.

Passing on Facebook was tough.  The people there were amazing, my friends would have been super-impressed that my obsession with math had earned me a job at the hottest company on the planet, and if the hype is to be believed, I would have almost certainly made many millions of dollars via stock options.  I haven’t found many people who understand why I did it, even among close friends.  Conversely, I have a hard time understanding how they could not understand why I did what I did.  It’s all been very confusing, so I’m going to try to lay it out here.

Two things you need to understand about me: 1) I don’t worry about whether or not I’ll ever make millions of dollars, because I will.  I worry about the way in which I’m going to make millions of dollars.  2)  In the set of all problems to work on, there are two mutually exclusive subsets– My Problems, and not My Problems.

I understand that my first point might sound a little arrogant, so let me explain it a bit.  In my life, I have passed on several opportunities to become a millionaire.  In all likelihood, so have you.  For example, I could have gone to law school after college and gone to work for a big firm.  I could have gone to NYC or Chicago and become a derivatives trader or a quant.  These are both clear paths to lots of money that I passed on, and I feel like it’s easy to understand why: those lifestyles kind of suck, and alot of the people who go down those paths don’t end up being very happy.  I’m not saying Google and Facebook are crappy places to work, I’m just trying to establish that there is more to life than money, and using money as the primary driver of life decisions isn’t generally a good idea.

There are a lot of problems in the world that I find interesting– both in the math world and in the business world.  Within the set of interesting problems, there are a few isolated islands that are My Problems– the problems that I feel a connection with, like my mind was designed to solve them, and working on them is akin to a religious experience.  I don’t generally know where I’m going to come across one, but my experience over the last several years has given me some guideposts.

At the end of the day, that’s why Indeed won– I became bewitched by a particular problem that I felt I could solve there.  Facebook and Google both give off the “Place with Interesting Problems” vibe, and I feel like I could have found something I would have enjoyed doing at either place.  But that’s not ever going to be as compelling as having one of My Problems staring me in the face and getting the opportunity to earn my wealth by solving it, because that’s how I want to make my way in the world.

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Scoble did a post on why Microsoft doesn’t deserve Facebook, and the comment section got into a discussion about what Facebook should do– sell out, IPO, etc.  Most of the comments were the usual thing– people talking down Facebook, saying they should sell the company while they can still get a good price, etc., etc.

This sort of thing has been happening alot lately, and it’s starting to get on my nerves that no one seems to get it, so I weighed in with my own comment on the real value of Facebook– as the source of our online identities.  I was really happy when I checked in later and saw that I got some love from Mario Romero, who wrote my favorite Facebook app, Google Reader Shared Items.

Facebook’s valuation is so hard to pin down because they’re going after something that is absolutely huge– huge enough for Microsoft to make an enormous effort to go after it a few years back– but is incredibly challenging to pull off.  The fact that Microsoft failed completely– no one talks about Passport or HailStorm anymore– might have made people think that it couldn’t be done.  But Facebook has come up with a very clever strategy, and though they face several significant challenges, they are better positioned to make a go of this than anyone right now– better than any of the Big Five (Google, Microsoft, Yahoo, Amazon, and eBay.)

There’s something to all of this stuff that makes me feel like I’m living in some real-life version of The Usual Suspects– the greatest trick that Facebook ever pulled was convincing the world it didn’t want to manage our online identities.  I feel like we’ll be talking about this alot more over the next several months, as more people start to get it.

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I added a link to my Google Reader link blog over on the sidebar, so that you may enjoy reading what I read.  I checked my Reader stats today, and I’ve read 8,373 posts over the last 30 days and shared 41 of them on my link blog, for an approval rate of 0.48%.  If you’re the kind of person who is fascinated with multilevel models, monetizing social networks, and/or whatever Fake Steve Jobs said today, check it out.

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1. Reading The Trap.
2. Listening to St. Vincent.
3. Watching Dexter.
4. Cleaning my house.
5. Falling more and more in love with my iPhone with each passing day.
6. Using Facebook (the webapp that answers the question, “Who is Scoble friends with today?”)

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I was IMing an old friend who I hadn’t talked to in awhile, and I was telling my Amsterdam story when I was inspired to lookup the email I sent a few folks right before I came back from Europe in 2000, where (the much smarter) 21-year old version of me wrote:

perspective…i think about coming back, and i don’t
think about picking up my life where it left off,
because that’s impossible, it’s all changed too much,
i’ve changed too much. so in a very real sense, my
perspective on returning is alot like my perspective
on coming here- it’s going to be a lot of fun
inventing myself into a new world which bears some
resemblance to one that i knew once.

story of my life, it seems.

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I didn’t wake up yesterday and say to myself, “I’m going to buy an iPhone.”

After all, I am a mature, responsible adult with a modicum of self-control. I happened to be running some errands that took me over towards the North Austin Apple Store, and I figured that as long as I was in the neighborhood, I might as well swing by and check one out. I started playing with the web, doing my reference google search, and then moved on to the (stupendously badass) Maps application.

After I plotted driving directions from my house in Austin to Palo Alto, CA, things started to get a little hazy. My fingers got all tingly and my mouth felt dry. I’m generally a pretty rational, scientific guy, but in that moment, I felt a presence all around me. It was the disembodied spirit of Steven P. Jobs, and he was telling me that I had to have an iPhone, and I had to have one now.

At least, that’s what I assume happened, because it’s the only thing that seems to explain what happened next. I hopped into my car for a 95 MPH jaunt down Mopac to the South Austin Apple Store, and before I really knew what was going on, I had my very own 8GB iPhone (the North Austin store only had the 4GB model, and I’d be damned if I wasn’t going to spend as much money on an iPhone as possible.)

After I got home and activated it (it took two seconds to activate, since I already had an AT&T account), I did the most natural thing I could think of- I started making obnoxious phone calls to my friends asking them if receiving a call from me on my iPhone was as cool for them as it was for me. (Invariably, it was.)

There have already been innumerable iPhone reviews that follow a general pattern: the author spends 1-2 sentences saying that the iPhone is completely amazing, and then devotes 4-5 paragraphs to whatever pet peeves they have with the phone.  (Most popular is the slowness of the EDGE network, but the stuff w/the non-replacable battery may have more staying power, and the weird headphone jack thing is just, well, weird.)

My feelings about the iPhone probably sync up best with John Gruber’s, who has done my favorite first-impressions post by far, especially since it seems like he explores the built-in apps (especially Calendar) far more than most of the professional journalists do.

Arguably, the dumbest objection I’ve read so far is the one about the slow EDGE network.  I’m betting it will take all of a week for webapps to launch that begin to compensate for the slow network by adapting content into a format that is optimized for viewing on the iPhone.  The key to all of this, as I see it, is RSS– the Safari browser in iPhone has a built in RSS reader that is automatically launched when you browse to a feed’s URL.  It’s an ideal way to read content on the EDGE network because the data you download is focused primarily on the text of the story (little superfluous javascript or ads) and the Safari RSS reader lets you navigate through the stories quickly and easily.

A clever startup (or, more likely, Google) should launch a webapp that lets you aggregate a number of RSS feeds into a single feed that can be accessed from your iPhone.  Then as you browse through the headlines, said startup would include a link that would allow you to save or share the story in order to read it later on a laptop, or when you were connected via WiFi.  The point here is that we can’t change the bandwidth of the EDGE network nearly as quickly as we can create applications to adjust to its constraints, and that’s the true power of having a real web browser built-in to the iPhone: all of the standard HTML/Javascript tricks and tools are available to anyone who wants to develop applications– no need to learn WAP or whatever else.  Of course, you still have the benefit of being able to load a standard webpage whenever you need it– but I seriously doubt that this will become the standard way to interface with the web on iPhone.  RSS is the way to go.

I think my favorite post about the iPhone so far is this one at Bubblegeneration, about the strategic implications of the iPhone for the mobile device industry, and how similar the strategy is to the one that Apple successfully (if perhaps inadvertently) applied to the music industry with the iPod.  Although most of the focus in the web industry right now is on platforms for rich internet applications, I think there is a very real and very interesting opportunity for companies to develop low-bandwidth, RSS-oriented applications for use with the iPhone.

Labels: tech, iphone

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After Arrested Development was cancelled, the sun was darkened in my eyes, food lost its flavor, and even Fake Steve Jobs couldn’t make me smile.  Thankfully, Michael Cera felt my pain and came up with the wonderful Clark and Michael to ease my suffering.  AD fans should check it out, everyone else can go about their business.

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