General

Framtíð viðskipta: Opið bókhald og fullkomið gegnsæi?

Ég átti umtalverða peninga í hinum “áhættulausa” og nú alræmda Sjóði 9 hjá Glitni. Það þýðir ekkert að gráta það, þó auðvitað fylgist maður með því hvernig umræðan þróast um það hvort sjóðurinn hafi verið kominn út fyrir yfirlýsta fjárfestingastefnu sína og þá möguleg eftirmál þess.

Þegar ég talaði við minn mann í bankanum í gær, fékk ég þær upplýsingar að eitt af því sem Glitnir hyggðist gera til að auka trúverðugleika bankans – og ekki síður sjóða hans – væri að opna bækur sjóðsins. Ég gat ekki skilið það öðruvísi en svo að í stað þess að gefa öðru hverju (að mér sýnist árlega) út yfirlit yfir það hvað er á bakvið eignir sjóðsins, þá yrði það gert stöðugt – jafnvel í rauntíma. Þannig gæti maður á hverjum tíma séð hvaða skuldabréf sjóðurinn ætti og metið útfrá því á eigin forsendu áhættu hans.

Þetta hitti á einhverjar taugar hjá mér, þar sem ég hef verið að velta mér mikið uppúr gögnum og þá ekki síst fjármálatengdum gögnum síðustu mánuði og hef verið að komast á þá skoðun – óháð þessu atviki – að framtíð viðskipta liggi í rauntíma upplýsingagjöf að öllu leiti.

Lög um upplýsingagjöf í kauphallarviðskiptum eiga sér meira en aldarlanga sögu og tilgangur þeirra er að markaðsaðilar sitji við sama borð með bestu fáanlegu upplýsingar á hverjum tíma. Á þeim tíma sem lögin eru mótuð, hefur ársfjórðungsleg birting á rekstrartölum líklega verið ansi stíf krafa – jaðrað við það að vera rauntíma upplýsingagjöf með þeirra tíma tækni. Í dag er þessu öðruvísi farið. Það er ekkert sem stoppar kauphallir í að setja kröfur um rauntímaaðgengi að hverju sem þeir kjósa. Já – jafnvel inn í bókhald fyrirtækjanna, sjóðsstreymi þeirra, útistandandi kröfur og eignastöðu.

Þannig gæti fjárfestir, hvort sem hann er að fjárfesta í hlutabréfum, skuldabréfum, eða einhverjum sjóðum, grafið sig niður í minnstu smáatriði fjárfestingar sinnar. Svolítið eins og DataMarket og fjárlögin, nema bara á miklu stærri skala og með miklu meiri nákvæmni.

Ef svona hefði verið, hefðu margir verið búnir að benda á samsetninguna í Sjóði 9 og hversu mikið hékk þar á fáum, tengdum aðilum. Það hefði líka verið búið að grafa í alla undirmálsvafningana og gagnrýna þá. Hrunið stafar af miklu leiti af því að fáir, ef nokkur, hafði tækin til að sjá í gegnum flækjuna sem búið var að spinna í allskyns fjármálagjörningum.

Ég held að þegar þessum hamförum á fjármálamörkuðum lýkur og menn fara að endurskoða leikreglurnar, sé eitthvað á þessa leið líklegt til að verða ofan á. Ekkert annað en fullkomið gegnsæi á öll tiltæk gögn getur aukið tiltrú almennings á þessum mörkuðum aftur.

Warren Buffet fjárfestir aldrei í neinu sem hann skilur ekki. Með rauntímaaðgang í undirliggjandi vef fjármála- og bókhaldskerfa myndu allir hafa tólin til að skilja það sem að baki fjárfestingum þeirra og hópnum sem heild treystandi til að veita markaðsaðilum aðhald með því að rýna í þessar tölur með og beita allskyns greiningar og birtingartólum til að koma auga á veilurnar í kerfinu.

Starting up – that would be the fourth

Well, well, well.

I guess it’s some kind of a medical condition, but I’m leaving a great job at Síminn (Iceland Telecom) to start up a new company once again. This will be my fourth start-up, and I’m as excited as ever.

It will be a relatively slow migration as I’m finishing off a few projects at Síminn for the next couple of months, while at the same time setting up the new company, assembling a core team and refining the strategy for an idea that has been with me for some 18 months now, gradually getting more and more focused, until I became so obsessed that I simply had to go for it.

Some would claim this is a horrible time to start a company, with a gloomy economical outlook and a lot of turmoil in the world of business and IT.

I – however – see this as an opportunity. Due to these very conditions, highly qualified people are looking for exciting new opportunities. This is especially true here in Iceland, where the financial sector has drained the market of IT talent for the last 3-4 years, and those adventurous people that really would rather be working on something new and innovative have been tempted by the lucrative salaries and “never-ending party” of our booming banks. Now the banks (and others) are scaling down and being a lot more careful, so these people – many of them not necessarily in danger of loosing their job – might very well want to flex their start-up muscles again. Actually I know for a fact that this is the case.

Secondly, booms and busts in economy seem to come at an interval of 6-8 years. It takes at least 3-5 years to build a great company, so those starting now are likely to catch the next upswing, without having to run too fast for their own good – as long as they can build sufficient income or find the venture capital to fund their operations in the meantime.

The concept I’m working on – and my situation in general – is such that I believe I can pull this off.

I’m not willing to share publicly – just yet – what the concept is, but I’ll surely blog regular updates as things progress.

Long nights and fun times – here I come 🙂

Adventures in copyright: Open access, data and wikis

I’ve just had a very interesting experience that sheds light on some important issues regarding copyright, online data and crowdsourced media such as wikis. I thought I’d share the story to spark a debate on these issues.

For a couple of years I’ve worked on and off on a simple web based system for maintaining and presenting a database of inflections of Icelandic words: Beygingarlýsing íslensks nútímamáls or “BÍN” for short. The data is available online, but the maintenance system is used by an employee of the official Icelandic language institute: Stofnun Árna Magnússonar í íslenskum fræðum. She has been gathering this data, and deriving the underlying structure for years, during a period spanning up to or over a decade. As you can imagine, BÍN is an invaluable source for a variety of things, ranging from foreigners learning Icelandic to the implementation of various language technology projects.

Now before I go any further I think it’s important to say that I’m a big supporter of open data. In fact, one of the few things I’ve ever gotten involved in actively lobbying for is open access to data in the public sector (article unfortunately in Icelandic).

Back to the story. A couple of days ago I got a call from the aforementioned BÍN administrator. She’d gotten a tip that someone was systematically copying data from BÍN into the Icelandic Wiktionary and asked me to look into it.

I started going through the web server log files – and sure enough – comparing the log files to the new entries page on Wiktionary, the pattern was obvious: A search for a word in BÍN and 2-3 minutes later a new entry in Wiktionary with that same word. A pattern consistent with someone copying the data by hand. This pattern went back a few days at least. Probably a lot longer.

In light of this I blocked access from the IP addresses that these search requests originated from and redirected them to a page that – in no uncertain terms – stated our suspicion of abuse and listed our email addresses in order for them to contact us for discussion.

Now – BÍN is clearly stated as copyrighted material – and as the right holder of the content, the institute has the full right to control the access to and usage of their data. Inflections of a word are obviously not intellectual property, but any significant part of a collection of nearly 260.000 such words definitely is.

As said before, I’ve personally been advocating for open access to all public sector data, but I also know that this is a complicated issue – far beyond the opinion of the people working with individual data sets. This institute – for example – must obey the rules set to them by the Ministry of Education, and changing those rules is something that must be taken up on an entirely different level.

The Wiktionary users in question have since contacted us and stated that they were not copying the content, merely referencing it when proofreading their own information. I have no reason to doubt that, but the usage pattern was indistinguishable from a manual copying process, leading to the suspicion and the blocking of their addresses.

We’ve since then exchanged several emails and hopefully we’ll find a way for all parties to work together. It would be fantastic if the enthusiasm and great work that is being put into building the Wiktionary could be joined with the professional experience and scientific approach exercised by the language institute to build a common source with clear and open access.

In the end of the day, open access to fundamental data like this will spur innovation and general prosperity, but as this story shows this is not something that will happen without mutual respect and consensus on the right way to move forward.

Updated Apr. 24: Discussion about this incident is also taking place here and here (both are at least partly in Icelandic).

Firehose aimed at a teacup

Dogbert to Dilbert: Information is gushing toward your brain like a firehose aimed at a teacup.

Every company, organization and individual is continuously gathering and creating all kinds of data. Most of this data collection is happening in separated silos, with very limited connections between the different data collections. This is true, even for data sources within the same organization. A shame really, because the value of the data rises in proportion with the ways it can be interlinked and connected – a network effect similar to the one that determines the value of social networks, telecommunication systems or even financial markets themselves.

Lack of common definitions, data schemes and meta-data, currently make these connections quite hard to make. This is the very problem that the semantic web promises to solve. However a lot of this data is already finding its way to the internet in one form or another, and those that make the effort to identify and collect the right bits can gain insights that give them competitive advantage in their markets. At – and around – the Money:Tech conference I was so fortunate to attend last week, several examples were given:

  • Stock traders are monitoring Amazon’s lists of top sales in electronics and using them as indicators of the performance of the chip maker’s performance in the market. This is done by breaking down the supply chain for each of the top selling devices and thereby establishing who’s benefiting from – say – the stellar sales of iPods.
  • Insurance companies, utilities (energy sector) and stock traders (again) are constantly analyzing weather data to predict things like insurance claims, electricity demand and retail sales patterns.
  • By monitoring in “real time” publicly available sales data in the real estate market, companies like Altos have been able to accurately predict housing price indexes up to a month before the official government numbers are published. Similar insights might be possible to predict other major economical indicators, such as matching the number of job listings on online sites to changes in the unemployment rate, or online retail prices to predict inflation.

But it’s not only data gathered from the internet that’s interesting. Far more data is dug deep in companies’ databases and therefore (usually for a good reason) not publicly available.

Take the area of telecommunications. Mining their data in new ways could help telcos and ISPs to get into areas currently dominated by other players. Take the sizzling hot social networking area as an example: Call data records, cell phone contact lists and email sending patterns are the quintessential social network information. Whom do I call and how frequently? Who calls me? Who is the real hub of information flow within my company? These are all information that can be read pretty directly from the data that a telco is already gathering. Every customer’s social network can be accurately drawn, including the strength, the “direction” and – to some degree – the nature of the relationship. Obviously this would have to be transparent to the customer and used only on a opt-in basis, but in terms of data accuracy it is a “Facebook killer” from day one.

This is clearly something Google would do if they were a telco (and I’m pretty sure that Android plays to this to some extent).

Another interesting aspect of this whole data collection business is the value of data that one company gathers to other organizations. Again, the telco is my example. A telco has – by default – information about the rough whereabouts of every mobile phone customer. Plot these on a time axis and remove all person identifying information and you have a perfect view of the flow of traffic and people through a city – including seasonal and periodical changes in the traffic patterns. This is of limited value to the telco, but imagine the value to city planners, businesses deciding where to build a service station or the opening hours of their high-street store. Add a little target group analysis on top of this and the results are almost scary.

We are probably at the very beginning of realizing the potential in the business of data exchange and data markets, but I’ll go as far as predicting that in the coming years we’ll see the rise of a new industry focusing solely on enabling and commercializing this kind of trade.

Dear Apple – may we pay?

Update (Feb 7): Updated the estimated number of iPhones in Iceland in light of more reliable data.

As stated before: I live in a small country, nobody wants my money.

In the couple of years since I wrote that post, I’ve been watching in awe as my fellow Icelanders – and in fact a lot of people all over the world – have been going to great lengths to pay Apple money for products that are not supported here.

The two main products in question are iTunes credits and the iPhone.

  • iTunes: Iceland is not an iTunes country, and after the ongoing row with the Norwegians, I’ve heard that Apple is even more reluctant than before in entering more markets. This comes down to licenses and slight variations in the way laws are structured and the way the RIAA counterparts in each country interprets them and acts on the behalf of rightholders. With the wealth of illegal alternatives out there, one would assume that people would just ignore iTunes and use some of the P2P programs.

    But – no – Apple has done so well in the marketing and implementation of the iTunes / iPod ecosystem that Icelanders are going to great lengths to buy songs in the iTunes store anyway. The two most used methods are:

    1. registering a secondary address for your credit card in the US, then sign up for a PayPal account with that same address and use that PayPal account as a payment method in iTunes
    2. buying prepaid iTunes credit from online stores such as iTuneShop or even eBay.

    The interesting thing is that a song that you buy this way is just as illegal under Icelandic law as the one you’d download using a P2P program. Apple has no right to sell songs in Iceland and the song you bought is at best licensed to you in the markets were iTunes operates. Strictly, it might even only be licensed for you to listen to it in the US!

  • iPhone: This is the same story as elsewhere in the world. People here are buying the phones abroad, bringing them in and then finding various ways to make them work. An educated guesstimate would be that there are somewhere north of 500 1400 iPhones already in the Icelandic market. That could be as much as 1% is around 2% of the entire handset market here in the 7 months since the phone was launched in the US! All of these phones are bought full price, but obviously Apple is not getting their share in the mobile subscriptions and data revenues.

Of course, the sales of these two products in this tiny market alone doesn’t matter at all to Apple’s bottom line. The lesson here is that when people are going to great lengths to overcome your obstacles and pay you money, you must be doing something right.

On the other hand when you’re making obstacles for people that would happily pay you in the first place, you must be doing something wrong.

So: Dear Apple – may we pay?

The inevitable business model for music

There is a lot of turmoil in the music industry. The big publishers (usually dubbed “the majors”) are finally waking up to the fact that a decade of neglecting to come up with suitable business models for the web has bred a generation of consumers that have never paid for music. For them, music is free. It’s something you get from your friends via IM, through peer-to-peer applications or download directly from artist’s web sites or Myspace profiles.

This will never change back. From now on, basic access to music will be free – i.e. free to the consumers. As TechDirt’s Mike Masnik has rightfully pointed out, the most fundamental theories of economics state that in a market with infinite supply, the price will be zero. Infinite copies of digital music can be made with no cost, hence the ultimate price of a copy will be zero. Zip, nada, nix – nothing whatsoever.

This does not mean that music is dead. On the contrary. The likelihood of a musician being able to live from his art has probably never been greater, and being a music consumer has never been better. Its the roles of the middlemen that are changing, decreasing – and for those that don’t adapt – vanishing.

In my mind, there is an inevitable business model for music. This model consists of three layers.

  1. Basic access for free: Basic access to music will be free to the consumer. Their ISPs, telcos, portals or other music providers will pay a small fee to the rights-holders – something like 2-4$ per active user per month. This will allow them to legally provide their users with the ultimate music services – every song ever recorded, discoverable in every possible way for free – yet with higher quality and in a more user friendly way than today’s illegal file sharing methods.

    These music providers will recoup this cost via other channels, such as advertising, bundling of music services with other products and services, such as telecommunications, and upsell of music related products (see layer 2).

    For some time we’ll probably see this limited to streaming music. The right-holders will struggle to try to sell copies of songs (full track downloads) but a stream can easily be turned into a copy and copies will still float around for free illegally. That, coupled with ever more ubiquitous internet access means that the imagined difference between a stream and a copy will eventually fade.

    At a great conference here in Reykjavik last week, we heard from “media futurist” Gerd Leonhard, that even at the peak of music industry’s revenues, music spending per household in the US never surpassed 5$. This obviously means that 2-4$ per user, sometimes even active on more than one such service in a given month is actually a great deal.

  2. Merchandise and ads: While copies of songs are an infinite resource, most other things aren’t. Merchandise, such as T-shirts, baseball caps, autographed posters and images, special edition vinyl records, books, etc. are desirable items to devoted fans. These can be a great source of revenues both for the bands directly and for the music service providers.

    A captive and focused audience is also of great value to advertisers. Fans of a certain band or of a certain type of music, tend to be highly targetable consumer groups; sweet music to the ears of every ad network and advertiser and quickly worth more than the basic price paid to the rights-holders in layer 1.

  3. Access to artist: The artists themselves, already making money from the activities in layer 1 and 2 are (rightfully) the kings of the future of music.

    The most valuable asset in the whole music value chain is access to the artists themselves in one way or another. Concert tickets and backstage passes are obvious examples. An online video chat with your star together with a group of fans is worth something, and merely a glimpse of an opportunity to get on a devoted phone call with your favorite pop star could be worth dying for!

    Other types of direct access include getting a band to write a new song for your movie or advertisement, or sponsoring the band’s latest tour – in both cases riding on the bands most valuable asset: their devoted audience.

    Finally: While economists may not understand tipping, human beings actually do part with their money even if they don’t have to, just to show their gratitude or affection for something provided to them. Note to hopeful bands: Make it easy for your fans to donate money to you directly – they will.

These layers feed of each other. Unlimited access to music (layer 1) captures bigger audiences. Bigger audiences mean more value to the music service providers (layer 2) which in turn leads to more interest in the direct access (layer 3).

All indications are that this is actually already happening: As revenues from music sales are going down, the revenues from concerts and gigs are at an all time high. What musicians DON’T need anymore is someone to handle the physical distribution of their music – there is no physical distribution. They DO need distributors (music service providers) and they DO need promoters that help them capture and grow their audience. These needs are spurring new types of music companies, but nobody will ever again have the kind of stronghold on the artists that the publishers have had for the past decades.

So it goes.

The Government API

A couple of weeks ago I attended a conference where there was a lot of talk about Business Process Automation (BPA) and Service Oriented Architecture (SOA).

Disclaimer: Yes, I do lead a very exciting life, even if attending such a conference may indicate otherwise.

You’re probably familiar with the story: Companies are increasingly wrapping their legacy systems, back office processing and other components of their day-to-day operations with web service interfaces in order to integrate with a newer breed of software that usually comes with some flavor of WS interfaces out of the box. Then, using Business Process Management they link all of these together, practically describing their businesses as elegantly written computer programs – the cafeteria included. The holy grail is then to automate as much of this as utterly possible – all leading to an increase in productivity, lower costs, more revenues and happy investors.

The concept is great and several companies have excelled at this – while most are probably struggling. This is after all a huge task and requires a change of mind no less than a change of technologies. But that’s besides the point here.

At the conference the following truth dawned upon me: As companies automate more of their operations, not only within, but also in interacting with other businesses (electronic bills, automated orders, etc), a critical part of their ecosystem is being left out: The Government.

So here’s an idea: Let’s wrap a government in an easy to use API – a Web Service interface that will fit nicely into the world of Business Process Automation.

All the mundane, numbing and often error prone tasks of running a company could be automated and integrated with the company’s own infrastructure. Filing of tax reports, filing salaries statements, filing summer vacation payments, filing changes in corporate ownership, issuing new stock, etc., etc. and doing it all in the right way at the right time without anything falling through the cracks – all taken care of automatically by the rules set up in the Business Process Automation system. Sweet!

In this lies a huge opportunity for some small, technically advanced nation that is well integrated in the international legal and business environment. It could really set itself apart in the world by catering to companies that are far along the path of BPA – and new companies that are set up in such a way from day one. These are probably most often sophisticated companies in the IT, financial or other high value industries. If done correctly, this could be no less valuable than tax incentives, already offered in various havens around the globe. Obviously it would need to be competitive there, but not ridiculously so – which in turn would keep the country on friendly terms in international politics, where tax havens are often frowned upon.

This could even lead the way to the world’s first fully automated company – a concept that is probably material for another entry.

Once in place – there is a plenty of derived services that service companies could offer using the same methodology. Companies need banks, financial and auditing services, legal services, IT-infrastructure (email, web hosting, etc) and a whole lot of other stuff a lot of which could be offered as web services if approached correctly. This would make the deal even more attractive to the companies and bring even more value to the nation in question as it would fuel local busines.

It so happens that Iceland – my very home country – seems in many ways well suited to take this step. Good IT infrastructure, many government tasks already electronic at least to some extent, well integrated in the international legal environment, good financial infrastructure and most importantly – a small and highly interconnected society were everybody knows everyone else, essential in order to pull the API-fication off relatively fast.

In any case, I’m sure this will happen somewhere sooner than later and I for one would certainly look into founding my next company where such infrastructure is in place.

Can’t wait to invoke the FormCompany() method, let’s just hope that the FileForBancruptcy() call will not have to be used 🙂

The Polar Express … for data!

I was at a nerd party last Friday and as it goes, ideas became wilder as the beer supply diminished. One of the wilder ones stuck with me: Jarl brought up the possibility of a submarine cable across the Arctic region, properly connecting East-Asia and Europe.

This is certainly a wild idea, but as a matter of fact it may have a great potential. The current routes between Europe and – say – China or Japan are flat out lousy. Ping times to Japan range between 300 and 400ms and to China close to half a second (brief and unscientific tests gave me average ping times of 320 and 420ms respectively). And for a good reason – the traffic has two equally lousy routes to choose from:

  1. Across the Mediterranean, through the Suez Canal and via the Red Sea into the Indian Ocean where it zig-zags its way to the region, probably through a major peering point, located in Singapore.
  2. Across the Atlantic to the Atlantic Coast of the US, across entire North-America and then across the Pacific! Incredibly this is the route I usually saw when tracerouting Japanese and Chinese servers.

Either of these two routes is at least 16 thousand kilometers and probably closer to 20 thousand, with a lot of peering points along the way. (See Wikipedia map of submarine cables for reference)

Iceland is finally becoming pretty well connected as we will soon have at least 3 major submarine cables, each with bandwidth in the 1 Tbit/s range, and directly linked with the main peering points in Europe, namely London and Amsterdam (the latter one is unconfirmed).

From here, the distance through the Arctic region to Japan is less than 10 thousand kilometers as drawn below: From Iceland, north of Greenland and then straight across the North Pole to enter the Pacific Ocean via the Bering Strait and on to Japan. It is probably possible to lay a cable this route using submarines. It has been done, but I bet maintenance is a bit tricky. Somehow I just don’t see a submarine taking in a cable to splice damaged fiber.

A more likely route would therefore be the fabled North-West passage that presumably is now open for cable ships just as well as other vessels, allowing for relatively normal maintenance on a cable lying there. This variation is a little further in total (counting from mainland Europe). Both routes should nevertheless be able to bring ping times from Europe to East-Asia down to the 100ms range (laws of physics, like the speed of light start to kick in at these distances).

This is not perfect, but importantly this is below the threshold acceptable for VoIP traffic, meaning that bandwidth on this route should be hot property. So maybe, Iceland will one day become a major peering point for IP traffic to Asia…

Certainly a big, crazy, wild idea – but worth further investigation.

thumb-polarexpress

Books are too long

I love books, but I never have enough time to read. Most of my book reading is non-fictional except during the Christmas and New Year when I try to swallow the cream of the crop of the years’ fiction.

A lot of the best non-fiction books are really communicating only one or two core ideas. Something that could be hard-boiled down to 20 minutes worth of reading with optional supplementary material.

I’d love if authors would structure their books in this way or if someone would offer the service of extracting the core and publishing it in compact format (just make sure that the author gets her share). I’d pay the same for the books, and probably buy a lot more of them. In fact I’d pay the same to be able to access such “book cores” online as I do a lot of 20 minute reading sessions there anyway.

Shortened versions have been published for a lot of fiction. Often to the author’s (and literature lecturers’) inconvenience. But it makes a lot more sense with business, popular science and other non-fictional books. And there are probably more people out there willing to pay for it.