What Facebook is missing out on...

It strikes me as somewhat absurd that Facebook don’t see the opportunity they are presented with in face of the recent criticism. The criticism, as you are probably well aware off, is in my view best summed up in Leif Harmsen’s words “It is not ‘your’ Facebook profile. It is Facebook’s profile about you”, he considers it a repressive regime akin to North Korea, and he’s not alone. Yet this isn’t anything new. It’s more a case of the “commoners” starting to question what the more tech savvy ones of us have questioned for quite some time, and thus the topic has gained some momentum in the mainstream press as well.

The problem is obvious, as problems often are, but the solutions keep escaping the minds of clever people. Or does it really? A related debate I have followed since I first heard a discussion about social networking 3.0 at Stanford in 2007, is about how we can transfer ownership, and more importantly control over user information to the users. The simplest solution is of course just to pressure sites like Facebook to change their terms of use, but a more lasting solution would include the possibility for users to bring their friends, pictures and other information with them between social networking sites. Undoubtedly there are many design issues for such a system, for example I certainly have multiple online identities; my Facebook content isn’t really suitable for my LinkedIn page and so on. And where would my information be hosted? Would I have to buy server space in case someone wanted to view my profile while I was online? Would the standard allow new networking sites to add slots for specific information that were only suitable for that site (like favorite recipes for a cooking site, or where I’ve been for a scuba diving site), and how would I controll what and how much  information is sent to each site I visit?

This however isn’t the biggest problem; the reason why such systems haven’t been implemented is that no one with the leverage to create this system has done it yet. This system has to be made by the right people, people that can reach critical mass. At present, only geeks and idealists would bother to learn how to use a totally new system, especially because something like that sounds very complicated. The average user doesn’t want complicated stuff, they want simplicity, and they just want to use the product. So to reach critical mass for such a system you would have to have some way of gaining a lot of users for it fast. Like a big already existing user base, like Facebook has, but wait - why should Facebook make this system? Facebook like it the way it is, they own your content (or their content about you to be accurate), and can use it for pretty much whatever they want. In addition to this Facebook enjoys users that have extremely high switching costs, something which might be their biggest competitive advantage. It seems that Facebook is in a perfect place.

So why should Facebook do it?
The first reason why Facebook should create a system for sharing information is that it would buy them credit. It would buy them credit with the tech community for being open and with the media for listening to them. It would buy them credit with normal users because they would feel safer and because they have the option to leave. Remember why some people escaped the Matrix? It turned out that given an unconscious choice nearly 99 % of test subjects would accept the program anyway. I see no reason why this shouldn’t hold true for Facebook as well, as the primary reason people leave is because they are malcontent by Facebook’s closed systems and strict privacy policy (at least if we believe random Internet chatter - which we do).

Secondly, and maybe more importantly, I believe that if Facebook don’t do this, others will. Services such as Google Accounts and Open ID don’t have a long way to go to allow users to store information that at their request can used by third party sites. Right now Facebook can deny Open ID and other such services to provide login to their site, but can they still do that in 3 years? Right now they can delay the inevitable move to such services, but as I wrote in a blog post some time ago, change happens when change is due. Change isn’t always created willingly, it’s just there and those that catch the wave gain momentum, furthermore no surfer ever caught the back of a wave. If people gets used to logging in to their favorite sites through a third party provider, I’m not sure Facebook can withhold the pressure.

The third reason Facebook should use their user base to create an open, user owned system that can transfer information easily from site to site is that whatever disadvantage Facebook sees in having users logging in to their site via a third party provider will be Facebook’s advantage against new social sites. If users are used to using their Facebook login when they log into pages on the net, they will expect new sites to follow this convention, thus granting Facebook some limited power to monitor and control new services.

The fourth reason Facebook should do this is because there’s bound to be a business model in it. What this model is, I’m not sure, but it could for example be that commercial sites would have to pay a small fee to use the service, or that when you log in you get redirected through Facebook’s ad page.

The fifth and final reason is that this would be a good first step towards extending into new forms of web services. When users already have a login, it should be easier to gain momentum for new and exciting products. Google has already realized this when they launched both Wave and Buzz (though this seems to be bad examples, as both services are virtual ghost towns). Having a customer base like Facebook’s is an incredible asset, in the case of Facebook an asset that remains close to unexploited. Surely marketing new web services through Facebook would ensure enough users to create critical mass for many services?

Maybe Facebook as we know it today is just a stepping stone? I certainly think that they should consider expanding their services, and specifically they should start making a product that they could easily gain market leadership with almost immediately, namely an open profile service that provides an API for other services to let users log in with their Facebook profiles. With the share number of users Facebook has it shouldn’t be a problem becoming the market leader in this "sort of related" market.

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How to deal with uncertainty - the maximize options approach

In a recent blog post I wrote that it is becoming increasingly difficult to forecast the future. As I imply, the problem is choice: Lower distances between people increases the ripple effect of individual choices, and technology together with consumerism increase the sets of choices, and options available to each choice to create an exponentially growing possible futures.

"Difficult to see. Always in motion is the future.” (Yoda)

Simply put I would claim that the uncertainty of the future is a function of the number of people that make choices, times the number of choices available, times the number of options available in each choice, times a coefficient for the impact of each choice. As all the factors that go in to the function have higher values now than they did earlier the uncertainty increases. What I don’t mention is how to cope with the increasing uncertainty; this is what I will address here.

Economists love choices, because they apply math to find the “right” choice. Consider that you’re in a TV game show, you get presented with two choices, a) 100% chance of $ 10 000 or b) 50 % chance of either $0 or $50 000. Any economist will tell you that the options are worth respectively $10 000 and $25 000, so you should choose b) (this is because given enough similar choices the average outcome would be those numbers). Now, if however, you chose b) and you lost and had to go home with $ 0, did you make the wrong choice? Many will say yes, because you lost all the money. These people think that a good choice is a choice that you would not change after you see the outcome; this seems to me like it is a bad definition. I think that you always have to judge a choice based on the information that was available at the time, thus it was still the right choice! If you are presented with a choice of this type, you should follow this procedure.

The problem, as the clever reader has already deduced, is that you rarely know the numbers. And this is exactly what forecasting has been occupied with since the beginning of the industrial era; how can we put numbers on stuff that we know very little about? There are tons of books on this subject, so I won’t go in to it, but rather utter my proposition on how to deal with uncertainty in choices in these days, and especially in the years to come. First, let me repeat myself, in instances where numbers are available or could be attained, follow the above procedure. This is for all those other instances.

I already professed my love for platform technologies, but I haven't explained why, so here goes. The more malleable a technology is, the more uses it can have, thus the more ways it can be successful should it fail in its intentional use. The more adaptable a technology is (Cēterīs paribus), the higher is the probability that its owners will find an application that is profitable. Consider a hypothetical example, two companies are specializing in medical technology, both companies have a development cycle of 15 years, and neither has any information about what its competitors are doing. One company is certain that it can make a cure for let’s say AIDS, and the other is certain that it can make a platform that will cure every bacterial infection known to man, but would only be able to market it for one use at a time. Assume that the technical challenge is equal, and that the main risk is that competitors beat them to market. Which company would you invest in? Since neither has any information about what their competitors are doing (the premise of uncertainty), I would invest in the bacterial platform company. The AIDS company has one chance to succeed, if someone else beats them to market they are dead, finito. If someone else makes the bacterial technology, the company can just change its marketing to target another disease, because the drug can target all diseases, but just market towards one at a time.

By the same principle, even if I don’t believe in global warming I believe in environmentalism, because an earth with rainforests have more options that an earth without them. A country with a highly educated workforce has more options than one without it. A company with several paths to market has more options than one with only one path to market. A technology with many uses has more options than one with limited use. A user friendly computer has more options than one that’s not. A diverse education gives more opportunities than one that’s specific. This principle is universal.

But, you may ask, how does this relate to forecasting the future? Well, the concept I’m trying to explain has two implications for you. Firstly, it means that if there are high uncertainty go with the option that leaves more options open. Secondly, when creating something, try to leave as many options open for as long as possible. If you don’t know how things are going to turn out right now, maybe you will have a better understanding in the future, thus closing doors prematurely is extremely dangerous and will become even more so in the future.

To wrap it up, here are some simple predictions made following this principle:

• Mobile phones that allows anyone to create uses will have more uses than a mobile phone that don’t, thus cell phone producers that have open platforms will outlive those that don’t.
• Countries that have an adaptable workforce will be less affected by upheaval, because they can shift the workforce over in other industries temporarily or permanently should disaster strike in a specific industry.
• Renewable energy producers that use existing infrastructure, such as oil from algae, will be more successful than those that gamble on technologies like hydrogen that requires major rebuilds of gas stations etc, because they have more potential customers, quicker.
• On demand television will outcompete fixed programming, because people will have more options on when and where to watch. On demand television also have more options on how to make money - the business model.
• The deck of cards will survive Monopoly, because you can play many more games with a deck of cards. Also you can do magic, tell someone’s fortune or even use them for a raffle.

The point is that the more adaptable you are, the more likely are you to survive turbulence or achieve your goals in an uncertain world. Forecasting is great, but when that fails, you should try to keep your options open. Even when traditional forecasting is a possibility you should consider looking at what has more options that are favorable to your goal. It’s always better to have two ways to success than just one, especially when the probabilities of each way actually leading to success is unkown.

If you liked this post or any other post feel free to click the “follow” button to the right to stay tuned to new posts when they appear. You can also follow me on Twitter as @vetleen.

The five year forecast problem: A reason it’s becoming impossible.

Imagine for a second that you lived 4000 years ago, how difficult do you think it would be to forecast with some degree of certainty what the world would look like in 20 years? A fair bet would be that it would look very much like it did at the time of the forecast. If however you imagine yourself back in our time, it’s fair to say that such a 20-year forecast would be largely inaccurate. I think we all agree that forecasting has become more difficult and I pose that it just keeps getting worse. Why is this so?

I believe there are three driving forces to this. Firstly, the earth is finite; it has a fixed size, when population increase in a finite space, the distance between people decrease, and each person can reach more people. The direct effect of this is that there are almost no isolated pockets of people in the world, as opposed to 4000 years ago when there were almost only isolated pockets of people. This means that ripple effects of choices reach longer.

Secondly, the numbers of choices we are presented with are increasing, something that is reflected accurately in the movie Trainspotting: “Choose Life. Choose a job. Choose a career. Choose a family. Choose a fucking big television (…)” and so on. While most of our newfound choices are trivial in nature, such as what brand of cereal you want for breakfast, also the number choices that have severe effects are increasing.

This leads us to the third force, technology, which is more of an enabler of the second force. As technology gets more sophisticated, and more accessible, more people have access to items that they can use to affect the world in the direction they please. With more people, more choices and larger ramification of each choice, the equation that would accurately predict the future becomes immensely complex.

To illustrate this we can look at the incident at the WTC in 2001, how do the three forces affect this event? Firstly, the fact that people live closer (globalization) caused friction long before the bombing, as we all know, many people in the Arabic world were growing more hostile to western interference, while the west was growing more hostile to Arabic hostility, though one may put forth hundreds of arguments of race, religion, oil and so on, there can be little doubt that globalization and the shortening of distance played a crucial role. Secondly, not only were there a number of people with motivation to do something, there was a significant number of people with the possibility. Advents in travel and technology made it possible to get to the US, and the vast number of targets available to the terrorists made it impossible for the Americans, even if they knew that an attack was imminent, to predict where. The sets of choices of how and where to strike was so vast that prediction was nearly impossible.

The WTC bombing is but one example, if you compare the financial crisis of 1929 and 2008 you will find that the ripples of the latter traveled much further, faster. However the effects were less significant because more people had thought about how this could be handled, more choices were available. Also more people were in a position of power to induce a financial crisis, experts are still at it about what caused the crisis, was it a bubble? Was it the sub-prime market? Was it regulation? Or was it corrupt bankers? The fact that more people can willingly or unwillingly cause crises of various sorts, also leads to the inevitable fact that the future becomes more uncertain, because it’s not only determined by measurable events, but also by random choices made by people not on anyone’s radar.

The point here is that there are so many options, that however unlikely one isolated event is, it is extremely likely that several extremely unlikely events will occur. It’s not very likely that a specific fortune 500 company goes bankrupt in the next 20 years for example, but it’s very likely that at least one of them does. When there are several thousands of large events like this that will without a doubt happen, we can be certain that the changes in the next 20 years will be profound (so gambling on status quo is the bet with the worst odds), but since we don’t know which immense and unlikely changes will occur, just that some will, we have no way to know in which direction the world will shift. So we are left with the certainty that things will change, and the certainty that we don’t know in which way the world will change.

This also raises another concern. If the forces I have mentioned have driven our path to uncertainty, then we can expect the future to become even more uncertain in the future as these trends continue. Technology continues to evolve, the population to increase, and more people are getting the ability to make greater choices. So what will happen to our ability to predict the future? And what consequences will this have?

If you liked this post or any other post feel free to click the “follow” button to the right to stay tuned to new posts when they appear. You can also follow me on Twitter as @vetleen.

Change happens when change is due

In April 3, 1984 the Norwegian police raid a man’s home in Gjøvik, near Oslo. The reason is that the man has admitted openly to watching foreign television channels through his satellite dish. In the years that followed a number of laws were lifted due to the realization that it was impossible to isolate Norway from the rest of the world.

In 2001 a program called Napster changed the way we consume music, In a major lawsuit effort, the record companies was able to take down Napster, but the damage had already been done. Hundreds of sharing applications was introduced, technologies that was supposed to make it difficult to track and get the file sharers. In our time the main target of the copyright industry has been the thepiratebay.org, and maybe they have succeeded, but it seems each time they cut of the head of this “monster” that is copyright infringement, two new grow out.

The Napster incident was nevertheless not the first move from the copyright industry to take down technology. In 1976, following Sony’s invention of the Betamax (later overtaken by VCR), there was an upheaval in Disney and Universal Studios that led to a lawsuit to shut down the technology. The argument was that this new technology could be used to copy movies and store them for later use, and this would surely be the end of the movie industry. Bear in mind that back then the major income sources of these companies was from theatres and from television, you couldn’t simply buy the movies. The US Supreme Court found that the technology could not be banned, because it could also have legal uses, and that copying a film to watch it later was “fair use”. Today this seems obvious, but the Supreme Court judges disagreed on the matter, and it was only by one vote that the lawsuit was rejected (the majority changed from 6-3 for the act to 5-4 against in the last minute). Today the largest single source of income from the movie industry is sales of video for home use (through DVD/Blue-ray), something that the movie industry couldn’t possibly have predicted.

In the cases listed above, new technology is viewed by the existing power structure as a source of social change, something that can make the old actors irrelevant. In all of the cases progress occurs without the support of those in power, but by the power of the people. Technological change is a wave moving across society, it has force, and powerful change cannot be stopped. Technological change will happen when the time is right. Instead of fighting change, business should embrace it, and try to think how they can be their best in the new environment. How do change in technology, in society, in consumers represent opportunities for your company?