Oddhead Blog

In a typical pairing of a cell phone and a bluetooth device, the “smart” phone drives the “dumb” bluetooth. The computational brains and user interface controls live inside the cell phone together with the antenna. The bluetooth device simply follows orders. For example, a bluetooth headset acts as an alternate microphone and speaker for the phone. The bluetooth truly is an accessory to the phone.

I’d like a reverse sort of bluetooth device. A bluetooth “sethead”, if you will. The cellular antenna lives inside the earpiece, or maybe stays inside your pocket or bag — technically this is the “phone” but it is a dumb device with no screen or interface. The “bluetooth” part is the thing you hold in your hand with all the smarts: the processor, the address book, the screen, the controls, the camera, the gps, another microphone and speaker — everything you normally expect in a phone except the antenna.

Why do I want this? If it existed, I could choose any carrier with any phone. I select a dumb phone from the best carrier and a smart sethead from the best hardware company. A version of an iPod touch with a camera, microphone, and gps would make an ideal sethead.

A MiFi device comes close: it’s a dumb cellular antenna that creates as a mobile wifi hotspot that can connect you to Skype, etc. (I have one from Verizon Wireless and love it.) But it’s not “always on”. MiFi + iPod is great for making calls but not for receiving calls, so is not sufficient for replacing a cell phone.

Sure, the advent of setheads would speed the carriers’ transformation into “dumb pipes”, something they are resisting, but that is inevitable anyway.

I wrote an essay on “new media” for an entrepreneur friend in February 2004. (My friend launched a new air sports league and .tv channel, hence the emphasis on sports near the end.) I decided to take my own advice and relinquish control. Here it is, with minor re-touches marked and links added. Most of the points remain applicable in 2009. If anything, I’m a little disappointed that, five years later, we haven’t made more progress toward “everything over IP, everywhere”. Sure, Hulu is nice but I still pay obscene amounts to send text messages and watch The Terminator over proprietary pipes.

‘Digital’ means everything and nothing at once. And that’s the point. Music is digital. Movies are digital. Books, news, commentary, communication, ideas, and sexuality are all digital. Even money is digital. Characterizing something as digital conveys no information precisely because most anything can and will be digital. From television to telecom, from Hollywood to Madison Avenue, the transition to digital will take down giants and crown new kings.

Why does digital matter to media? There are three reasons: convergence, copying, and control.

Convergence. Because all content and communication are digital, the delivery mechanism no longer matters. You don’t need a TV to watch television programs. You don’t need a phone to talk to a friend. You don’t need a fax to get faxes or a CD player to hear CDs. All you need is a machine that understands digital and a communications system that carries digital. Today’s best devices for understanding and communicating digital are, respectively, the computer and the Internet. That’s all you need. Tomorrow’s TVs may look and feel and act much like today’s TVs, but rest assured they will be computers in disguise, and they will be connected to the Internet. There’s no inherent reason why Friends should be watched on Thursdays at 8pm on NBC interspersed with commercials. It can, should, and will be watched at the viewer’s leisure, uninterrupted. There is no reason that the biggest “television” phenomenon of 2008 won’t be seen on Yahoo!, for example. [In hindsight, this example was wildly optimistic -- and YouTube/2020 now seems more likely -- though in 2008 viewers flocked to Yahoo! for the Olympics, the election, and short-form video.] Notions of channels and schedules will be virtually meaningless. We already see this happening with DVRs like TiVo, and the blurring will continue with computer/TVs providing access to movies, music, your photo album, weather, news, and the Web. Cable, phone, and satellite companies are providing Internet access. Internet portals and Internet providers are delivering phone calls, movies, TV shows, [radio,] and email all over the same wires [and wavelengths].

There is now, and will continue to be, fierce opposition to convergence from established players. Cable companies objected vehemently to allowing local stations onto satellite TV. Broadcast networks fear TiVo. The Recording Industry Association of America (RIAA) is in a state of panic panicked, suing everyone in sight, including their own customers. Lobbying and lawmaking will slow convergence, but the changes are all but inevitable. While the RIAA and groups like it scramble to rearrange deck chairs on the Titanic, opportunists are busy building entirely new ships.

Copying and Control. Once a piece of media content—whether it is a song, a movie, or an article in a scientific journal—is converted into digital ones and zeros, it can be copied (perfectly) and distributed at almost zero cost. Given the decentralized nature of the Internet and the vagaries of international law, once a piece of content escapes there is almost no reining it in. Current media business models rely on tight controls. Control of scheduling. Control of delivery and distribution. Control of store shelves. Control of artists and content creators. Control of consumers’ attention. But digital content resists nearly all attempts at control. Software and hardware copy-protection schemes are hacked or circumvented. High-quality analog copies of digital content are simply impossible to stop. Artists can self-publish their work and distribute it worldwide. Consumers can suddenly find content that’s not broadcast at primetime or placed at eye level in the store.

Note that digital does not mean the end of marketing, influence, and celebrity. Capturing the public’s interest and attention are still necessary. A self-published song does not magically attract listeners. Talent, personality, advertising, branding, and social forces will still play large roles in driving media success in the digital era. But convergence means that any number of players can provide the marketing and distribution needed, breaking current oligopolies, and almost certainly benefiting artists and consumers alike. Successful business models for the next generation of media companies must address the loss of control on all three fronts: content, artists, and consumers. Content will be copied. Artists will self-publish and shop for marketing services. Consumers will view what they want when they want to.

The New Business of New Media

Media is certainly not dead. Certain aspects will probably never change. People yearn for good stories, for entertainment, for escapism, for information. People flock to charisma and celebrity. People communicate insatiably. From a business perspective, there is undeniable value in having and holding the attention of a number of people.

Although the face of tomorrow’s media is impossible to predict, certain sectors are poised to benefit enormously from the emergence of digital, or are at least less susceptible to its problems.

Here are some winning strategies:

Embrace convergence. Convergence offers almost limitless flexibility in delivering and customizing content. Sports fans can watch an event from any camera, watch real-time animated renderings allowing absolute viewer control, interact with video games with parallel story lines, or chat with other fans. News broadcasts can allow viewers to examine any topic to any depth. Toys can react to signals embedded in Saturday morning cartoons. Consumers can create customized “channels” delivering content tailored to their needs and whims. Companies that capture the voicexyz-over-Internet market will be big winners in the new-media world.

Embrace copying. There is no doubt that a large part of the business value of media lies in its ability to influence (usually via advertising), which in turn benefits most from widespread adoption. For a business built on influence, free and unfettered copying should be encouraged rather than litigated. Not everything has to be free. In some cases, people will pay to get content faster. Live events are the most obvious situation where copies are less valuable than originals. People may pay for live feeds of sporting events, for example. In many cases, people will pay for higher-quality content, for example higher-resolution movies or better-sounding music. For example, with a good digital rights management system, pristine digital copies might be sold for a small premium, even while slightly tarnished analog copies (which are essentially unstoppable) proliferate. People may pay a premium for convenience, anonymity, quality assurance, or to obtain versions stripped of commercial messages. Clearly delineated commercials are a problem in a world where time shifting and copying are prevalent: people will simply skip commercials. So commercial messages must be embedded directly in the content, using product placement or endorsements.

Real-time gambling offers a natural source of revenue for sporting events and other live events. Real-time gambling is spreading quickly throughout the UK and Europe, where it is well regulated and taxed. Real-time gambling offers a situation where live feeds are essential, and copies less damaging. In fact, wide dissemination of copies could be valuable as a marketing device to drive interest in the live events and concurrent gambling services.

As part of an internal hack day I’ve been diving back into greasemonkey, and remembering how much the monkey mentality changes the way you think about the web. Greasemonkey seems to have lost some mindshare momentum, probably due to a natural hype/fatigue cycle, the still minority share of Firefox browsers, and the very real “laziness barrier” that keeps the vast majority of people from installing new stuff.

In any case, rediscovering how easy it is to muck with any and every website, usually for fun, and sometimes to truly improve usability or productivity, brings back the giddy avalanche of ideas of ways to “reclaim the web”.

For example, it wouldn’t be terribly hard to add a bit of xmlhttpRequest to WebVocab to create a shortcut that, with one click, inserts a custom signature into any comment you leave on any web page, at the same time notifying your favorite social feed service (e.g., friendfeed, Facebook, Yahoo! updates) and/or your own server of the comment location and content. Your friends see where and what you’re commenting, and you get a searchable archive of all the breadcrumbs you leave around the web. It’s like a comment aggregator service that users control rather than publishers, and thus that works on any website, putting the user back into user-generated content.

This is the first of a series of challenge posts. I’ll pose a problem in the hopes of convincing the wise Internauts to come forth with solutions. I intend the problems to be do-able rather than mind boggling: simply intriguing problems that I’d love to know the answer to but haven’t found the time yet to work through. Think of it as Web 2.0 enlightenment mixed with good old fashioned laziness. Or think of it as Yahoo! Answers, blog edition.

Don’t expect to go unrewarded for your efforts! I’ll pay ten yootles, plus an optional and unspecified tip, to the respondent with the best solution. What can you do with these yootles? Well, to make a long story short, you can spend them with me, people who trust me, people who trust people who trust me, etc. (In lieu of a formal microformat specification for yootles offers, for now I’ll simply use the keyword/tag “yootleoffer” to identify opportunities to earn yootles, in the spirit of “freedbacking”.)

So, on with the challenge! I just returned from a pit stop in Las Vegas, so this one is weighing on my mind. I’d like to see an analysis of strategies for playing craps that take into account the variance of the bettor’s wealth, not just the expectation.

Every idiot knows the best strategy to minimize the casino’s edge in craps: bet the pass line and load up on the maximum odds possible. The odds bet in craps is one of the only fair bets in the casino, so the more you load up on odds, the closer the casino’s edge is to zero. But despite the fact that craps is one of the fairest games on the casino floor, it’s also one of the highest variance games, meaning that your money can easily swing wildly up or down in a manner of minutes. So on a fixed budget, craps can be exceedingly dangerous. What I’m looking for is one or more strategies that have lower variance, and are thus less risky.

So that this challenge is not vague and open ended, let me boil this overall goal down into something fairly specific:

I prefer if you ignore the center bets in your analysis. Bonus points if you examine what happens with different budgets, table limits, and/or allowed odds. Another way to motivate this is as follows: I have a small fixed budget but want to hang around a high-limit table for as long as possible, because I get a better atmosphere, more drinks, and a glimpse of life as a high roller.

As an example, here is a strategy that appears to have very low variance: On the come out roll, bet on both the pass line and the don’t pass line. If the shooter rolls 2, 3, 7, or 11 you break even. If the shooter rolls 4, 5, 6, 8, 9, or 10, you’re also guaranteed to eventually break even. The only time you lose money is when the shooter rolls a 12 on a come out roll, in which case you lose your pass line bet and keep your don’t pass bet (i.e., you lose half your total stake). There’s only one problem with this strategy: it’s moronic. You have absolutely no possibility of winning: you can only either break even or lose. One thing you might add to this strategy to satisfy condition (1) is to take or give odds whenever the shooter establishes a point. Will this strategy make my $200 last longer on average than playing the pass line only?

For bonus points, I’d love to see a graph plotting a number of different strategies along the efficient frontier, trading off casino edge and variance. Another bonus point question: In terms of variance, is it better to place a single pass line bet with large odds, or is it better to place a number of come bets all with smaller odds?

To submit your answer to this challenge, post a comment with a link to your solution. If you can dig up the answer somewhere on the web, more power to you. If you can prove something analytically, I bow to you. Otherwise, I expect this to require some simple Monte Carlo simulation. Followed of course by some Monte Carlo verification. Have fun!

Addendum: The winner is … Fools Gold!

Here is a fluffy post for a fluffy (but important) topic: the economics of attention.

Yahoo! is in the business of monetizing attention: that’s essentially what advertising is all about. We (Yahoo!) attract users’ attention by providing content, usually free, then diverting some of that attention to our paying advertisers. Increasingly users’ attention is one of the most valuable commodities in the world. This trend will only accelerate as energy becomes cheaper and more abundant, and thus everything we derive from energy (that is, everything) becomes cheaper and more abundant, on our way to a post-scarcity society, where attention is nearly the only constrained resource.

Today, users generally accept content and entertainment in return for their attention, though likely in the future users will be more savvy in directly monetizing their own attention. I’ve heard a number of companies and organizations large and small discuss direct user compensation. Beyond advertising, the economics of attention is important for the future of communication in general.

I haven’t found much academic writing on the topic, though I haven’t looked thoroughly. John Hagel’s piece “The Economics of Attention” is a good start, and he looks to have compiled some nice resources on the topic, though I haven’t yet investigated closely.

An organization that has garnered some attention of their own (of the Web 2.0 buzz variety) is Attention Trust. I find the description on their own website vague and impenetrable. The best explainer on Attention Trust I could find is PC4Media’s, though questions remain. The basic concept is simple enough: users should be empowered to control and monetize their own attention, including the output of their attention (e.g., their click trails, personal data, etc.). Just how Attention Trust plans to hand this power to the people seems to be the hand-wavy part of their story.

Another interesting company in this space is Root Markets, whose business is to connect both sides of the attention market in an attempt to commoditize attention. Their first product is much more specific than that: an exchange for mortgage leads.

If the absence of formal models of the economics of attention is real — and not simply a matter of my own ignorance — than it may be that some economist can make a career by truly tackling the topic in a precise and thorough way.