TRANSPARENT BUNDLES by Seth Goldstein

Transparent Bundles from Wall Street to Web 2.0

I am slowly starting to settle into a routine here in California.  The past few months have been filled with new beginnings- a new school for the kids, a new job and commute for Tina, new grocery stores and restaurants and little league fields.  The Taxi cab-hailing hustle of Manhattan has given way to hustling my bike to the top of Mt Tam. Ideas don't change at the same pace as activities, however, and I find myself thinking through the same issues about transparency that stimulated this blog in the first place.  Back then I was focused on soft dollars and the opacity of financial markets not media markets:

...soft dollars and bundled commissions are the vig that generates much of the wealth among the brokerage industry in New York, which in turn lubricates expense accounts at lunch time and grand Park Avenue co-ops and East Hampton beachfronts. Is it not ironic that New York has a mayor whose namesake company benefits more from monthly soft dollar payments than perhaps any other financial institution. In a way, Bloomberg has taken the notion of value-added brokerage services to the peak of civic duty. Our city itself reflects the residual value of opacity in financial markets. And so the question comes back to what happens to the brokerage industry when transparency become of more value to investors than opacity?

Three years later, soft dollar pratices are as opaque as ever.  The SEC has catered to the rich interests of hedge fund and stock brokerage lobbyists and enabled both sides to continue their practice of doing business with eachother in a very gray market.  Even the most sophisticated individuals outside of the financial services industry have little sense of what is really going on, in terms of the ways in which large institutional investors and large banks and brokers profit from closed data practices.

This is not that different from the dynamics of the online advertising environment- there are large institutional advertisers doing business with large media companies and advertising networks.  Despite the pre-text of openness and transparency, the online media market works hard to obscure the discovery of price by the very individuals producing it; namely the people who are using the medium, searching for things, clicking on ads, and conducting commercial transactions.  The web user, like the individual  investor, has resigned himself to letting larger interests capture, aggregate, and monetize his data behavior.  He has been led to believe that this is simply part of the bargain of having such "low" transaction costs for trading stocks or searching for information.

If I had to draw a continuous line through all of my disparate activities over the past ten years, this would be it:  identifying and interpreting the direct economic value of an individual data actor.  We may never in our lifetime see a day when a person develops an acute, vested interest in the value of his data; the spread between the value of a handful of clicks and that of a mass of aggregate behavior is significant.

Although it may be hard to keep track of the progression of Media Futures, we are stuck between the end of Alchemy and the beginning of Arbitrage.  This is where the creativity stops and the money kicks in; not that surprising against the backdrop of so much M&A activity (DoubleClick, RightMedia, StumbleUpon, etc.)

In May 2005, I made this transition in the first Media Futures series.  It was etymological in nature and only hinted at the real activities that I was engaged with as an entrepreneur, as I handed over the reins of Majestic Research to a new CEO in order to focus on creating Root Markets.  Flash forward two years and I am at a similar juncture; this time moving from Root in NY to AttentionSoft in SF. The transition from Alchemy to Arbitrage that I want to describe this time will be more personal, now that the philosophical ground work has been established.  I want to trace the evolution of a central idea- transparency- through the founding of a new investment research process in 2002 all the way through the creation of a new consumer data platform in 2007.

As always, thanks for staying tuned.

Wall Street 2.0?

 

Tom Glocer,  CEO of Reuters, stands in front of  Media Futures at the Open Data Conference in NY

And so, what does exhibitionism have to do with Wall Street? How does the voyueristic behavior of 20-somethings relate to the commission decisions of hedge fund masters of the universe? Traditionally, very little. Or at least we weren't aware of these connections.  Now, however, the advent of personal surveillance technologies has begun to popularize processes that up until now have been unavailable to individuals.

This resonates with a comment that Reuters CEO Tom Glocer made at the Open Data Conference.  It was the night before the conference, over dinner, that Glocer gave his perspective on the evolution of "open data" in the context of financial services. 

He told a story about the transformation of individual data points into market data.  Surprisingly, he didn't start with a traditional financial services firm, like Reuters, but rather with an individual Schwab customer. This retail trader, by virtue of her decision as to what to buy or sell and at what price, is the most granular actor in the price discovery machine.  As Glocer told the story, the online retail investor was the proverbial butterfly flapping its wings in Hawaii causing hurricanes in China.  Her only action was to trade a stock in her 401K account online; but unbeknownst to her, Schwab took this trading data, along with that of all of the other individual retail investors, and established a higher level trend.  This process reverberated up through larger institutional brokers like Goldman Sachs and ultimately exchanges like the NYSE.   At each step up in aggregation and abstraction, significant economic value was extracted.  Although this individual's behavior is too volatile in and of itself to offer much in the way of trend analysis, this does not mean that her behavior is worthless.

This is the foundation of Wall Street 2.0:  the individual data producer is beginning to wake up to the economic value she is creating. This economic value had in the past been appropriated by those aggregating up the data from above.   Our electronic behavior, whether it be querying a search engine, clicking on an ad, checking out a stock, or trading a share, is generating value for other people that are in a position to aggregate and sell this information to institutions, who in turn transform it into some other form that ends up getting sold back to individuals.   Alchemy... to... Arbitrage.  This is nothing new.  What is new, however, is the extent to which our behavioral trails are no longer hidden, but are instead now available to us via various modes of personal Attention services, also known as myware.   This is the window that Open Data flows through:

Open data is to media what open source is to technology. Open data is an approach to content creation that explicitly recognizes the value of implicit user data. The internet is the first medium to give a voice to the attention that people pay to it. Successful open data companies listen for and amplify the rich data that their audiences produce.

Web Alchemy, Josh Harris & Justin.TV

Web Alchemy

Exactly two years ago, in April 2005, I wrote the first chapter on Alchemy in the Media Futures series.  Over the course of history, Alchemy always promised more than it could deliver.  But it was this promise that captured the imagination of people and drew their Attention to the very impossibility of turning “base metal into gold.”

As it relates to the contemporary Web landscape, Alchemy represents the promise of automatic personalized media creation.  It is the nuclear fission of intersecting Web 2.0 services.  "Maybe, just maybe, if I go to Web 2.0 Expo I will find that one service that that connects me most fully?"  This is the process of extreme triangulation that we- maybe without even knowing- are trying to achieve every moment that we use the Internet to express ourselves. The process is not new.  But its reception is.

When Josh Harris broadcast his life in real-time on weliveinpublic.org in 2000, it was received as strange exhibitionism in SoHo.  He and his girlfriend Tanya Corin went online in a Warhol art-house kind of way.  It wasn't clear what exactly Josh was trying to prove, but like many I was fascinated by the embedded cameras he installed in the Turkish-style bath. On Day 93, long after Tanya walked out and Josh had left it to brokers to sell the 4000 sf+ loft on lower Broadway, a recently arrived journalist who needed a place to crash ended up minding after the apt while it was being shown to potential buyers.  All the surveillance gear was very much in place and there was a working live control room where all the cameras flowed into, as well as the external chatter from those across the community grabbing these streams.  This writer describes what it was like to be there during these last days:

I am doing laundry all the next day, sitting alone, and I learn how to take advantage of the chatters. After all, I am a visitor in the house of a man I do not know. But they, they've lived here for a while... I ask them if Harris allows people to smoke in the loft. I ask if they know where an iron is. In one particularly surreal moment, I realize I have lost my keys. I enter the chat room and ask if anybody happens to see where I might have left them. One guy tells me to check my pockets. And there they were. From The Cyber House Rules By Will Leitch, Jan  1, 1999

Eight years ago when he wrote this, we had a different attitude towards pervasive surveillance than we have today.   Now, as American Idol, YouTube, Twitter and countless other social media phenomena would attest, the quickest road to celebrity is via one's willingness to become-  physically or behaviorally- naked.

And so, how then to describe the performance of Justin.TV?  His omnipresent camera cylinder to the left of his perspective is like the pen-above-the-ear of a great investigative journalist- Dustin Hoffman as Carl Bernstein in All the Presidents Men.

Despite his camera, Justin doesn't care about coming off as a disinterested reporter.  There is no longer even a pretense that the subject drives the interview.  Maybe it's wrong to think of it as an interview at all.  The  recording instruments are so integrated and obvious that everybody Justin comes into contact with gets their own live studio audience.  This shifts the lens of narcissism from Justin to his audience, making him seem almost, well, selfless.

Michael Goldhaber recently defined a "star" as:

(When an attent typically has many audients, thus taking in more net attention than paying out, that person is of course a STAR.  )

On the Internet, this is based in large part on one's ability to express oneself openly, across multiple networks.  For example, in addition to the live video feed and community chat, Justin makes it easy for us to connect to him via shared social networks:

Justin wants people to pay close Attention to his stream and comment on his blog. This is exactly how stars enrapture their fans:  engaging them in production of the very stardom they wish to worship.  There is a significant difference between celebrity in the first Internet cycle and now.  It is not the tools that matter, since many of them have not changed dramatically, but a growing responsibility that more and more of us feel to express our unique, authentic selves online. Justin.TV, like Tia Tequila of MySpace, Reid Hoffman of LinkedIn, Mark Zukerberg of Facebook and Fred Wilson of Typepad, inspire us to be all that we can be online- to open up our API and let the data flow.   

This is the Summer of Love, 40 years later transposed onto the Web.

 

Media Futures 2007: 4/5, Alchemy: History

The History of Alchemy

Practiced in civilizations across the world from ancient times up through the 19th century, the early proto-scientific and philosophical discipline of alchemy is most widely understood as the quest to achieve the transmutation of base metals into the precious metals of gold or silver, as well as the creation of a panacea, which promised to cure all disease, rendering immortality a fate not only reserved for the gods. Taking the commonality of properties of the known metals (gold, silver, iron, copper, tin, lead and mercury) as evidence of a commonality of composition, alchemists operated on the assumption that they might somehow correct the composition of the base metal, rendering it pure gold. To do so, they needed the philosopher’s stone, or the elixir, which would speed up that process of transmutation which, occurring naturally underground, would require the passage of thousands of years.

We might imagine the history of alchemy as a curious double-helix, its Eastern and Western strands decidedly separate but linked by certain commonalities. The Eastern strand of the history of alchemy finds its root in China, where alchemy was closely linked with the pursuit of health through traditional Taoist forms of medicine (specifically Acupuncture and Moxibustion, a therapy that uses mugwort herb to stimulate the circulation of blood through warm regions of the body and key acupuncture points). In that it was not so much concerned with the transmutation of base metals to previous metals, Chinese alchemy stood apart from its Western cousin, but it had its own version of the Philosopher’s Stone, which they called the Grand Elixir of Immortality.

But it is Egypt that promises to remain immortal when it comes to the discussion of the history of alchemy, its position of privilege perhaps embedded in the word alchemy itself. The etymology of the word is contested, traced to the Arabic al-kīmiya or al-khīmiya, meaning “cast together”, “pour together” or “weld”, as well as to the Persian Kimia, meaning “gold.” Others, though, read al- kīmiya as “the Egyptian [science]”, having been borrowed from the Copic word for “Egypt”, or kēme, which is itself derived from a chain that leads back to the ancient Egyptian term for the color black and the country of Egypt itself, kmt.

It is the god Thoth (also referred to as Hermes-Thoth) to whom mythology attributes the honor of being the founder of Egyptian mythology. It his forty-two Books of Knowledge, Thoth wrote in part on alchemy, but it is his Emerald Tablet, preserved Greek and Arabic translations, that is said to form a critical foundation in the alchemy of the West. Like Thoth’s Emerald Tablet, the only works of Egyptian alchemy available today have survived through such Greek and Arabic translations. As the Macedonians conquered Egypt in the 4th century, so came Greek language and culture in tow – and any Egyptian writings on alchemical philosophy and practice were likely burned as a part of Diocletian’s attempts to suppress a 292 revolt in Alexandria, that center of knowledge which figured so prominently in our histories of Automata and Algorithm.

There in Alexandria, the Greeks brought their philosophies of Pythagoreanism, Ionianism and Gnosticism together with the Egyptian hermetic philosophy, the principle tenet of which is called the macrocosm-microcosm belief: “in truth certainly and without doubt, whatever is below is like that which is above, and whatever is above is like that which is below, to accomplish the miracles of one thing.” That central belief, that the exterior world, or the macrocosm, affects the human body, or the microcosm, interacted with the belief that numbers rule the universe, that the universe could be explained by examining natural phenomena and that the world was created in a flawed manner, thereby rendering it imperfect (Pythagoreanism, Ionianism and Gnosticism, respectively, and grossly oversimplified) to create a tradition that left us with the idea that everything in the universe was formed from the elements earth, air, water and fire.

As the Greeks adopted Egyptian alchemical knowledge and traditions, so adopted the Romans the knowledge and traditions of the Greeks. But Christianity then swept through the empire, bringing Christian philosophies, and particularly those of Augustine, into contention with Hermetic ideals. Augustine believed experimental philosophy to be evil and ungodly, maintaining people could understand God through reason and faith. Augustine’s philosophies were in turn used to argue that alchemy was evil and ungodly. But alchemy already had its niche in the Christian tradition, grandfathered in by Greek and Roman culture. As medieval Europe saw Christian philosophers challenge Augustinian doctrine, its alchemists worked from the contributions from the Islamic world, which became the premier stage for scientific and alchemical development after the fall of Rome.

Islamic alchemists were responsible for the technique of distillation; they discovered sulfuric, hydrochloric and nitric acids – and, perhaps most importantly, that the latter two could be mixed together and used to dissolve gold, the noblest of metals. The philosopher Jabir Ibn Hayyan, referred to in English as Geber, remains one of the most influential writers in the history of alchemy, for it was he who sought after the artificial creation of life in the laboratory. He described the elements in terms of their hotness, coldness, dryness and moistness – qualities which could be altered in the laboratory and rearranged, thus resulting in a new metal. He thus introduced the search for the philosopher’s stone, a central thrust of the Western alchemical tradition.

Though many philosophized about alchemy in the early stages of the millennium, some historians argue that the first alchemical experimentation in medieval Europe did not occur until the 13th century, when Roger Bacon is said to have brought on the search for the elixir of life. Bacon’s contributions to science were widespread: in addition to his work in alchemy, he analyzed convex glasses and lenses, invented spectacles, theorized about the telescope and, lest we forget, created the talking head automaton.

Bacon’s European contemporaries were to a great extent members of the clergy, those who had access to and the education to read the world’s assembled alchemical oeuvre. As the 13th century drew to a close, there was an established architecture of alchemical belief, including the aforementioned macrocosm-microcosm theories, the four elements and the four qualities. But most importantly, these Christian alchemists believed that their art could reunite man and God – for if man’s soul had been divided with Adam’s fall, so could the separate parts be purified and brought together again. These philosophies would be struck down in the next century, with the edict of Pope John XXII against alchemy removing clergymen from its practice.

The alchemy of the next three hundred years was thus one of a much different character. Alchemists returned their efforts to the search for the philosopher’s stone and the elixir of youth, and influential figures like Nicolas Flamel and Heinrich Cornelius Agrippa contributed to a major shift in the classification of the art – namely, alchemy went from being characterized as a mystical philosophy to that of an occultist magic. This shift set alchemy up to be struck down by the thinkers of the Age of Reason, who favored rigorous experimentation over such seeds of ancient wisdom. The prescient Paracelsus, perhaps the most important alchemist during the Renaissance, had perceived the occultist label a threat to the alchemical arts as a whole, and as such, he pushed back, casting some occultist threads and Gnostic philosophies out of his alchemical fabric, choosing to focus his efforts on using chemicals and minerals in medicine to achieve a healthy balance in human bodies. But the work of Paracelsus could still not overcome all that occultist image carried with it, all the fallout created by the charlatans and cons who promised transmutation but produced trash.

We might read the intentions of the earliest alchemists as the same as those of the Internet alchemists of today: above all else, the these alchemists concern themselves with the study of changes in the material world and how they might be able to harness the power of these changes for their own purpose and benefit. These solitary materials scientists, mixing various elements together to render their combinations far more valuable than the sums of their parts, set the stage for the Internet alchemists of today, who, in harnessing the power of the changes of Internet media and create entities which are far more valuable. This alchemy takes place in large part in the act of naming – a company, an index, a domain, a category, a database class – for in that move to name, the Internet alchemist creates something far more than simply a representation of some external object or idea.

Thanks to Maggie Dillon for helping with this research

Media Futures 2007: 4/5, Alchemy: Brecht 2.0

My encounter last month with Valleywag over avant garde playright and director Brecht resonated enough in the blogosphere so as to make this site the top result now for the query "seth brecht" or "brecht seth." And so thanks to some kind Attention alchemy, I have become an authority on the subject of Brecht (at least among Seths) in the eyes of the great Pagerank algorithm.

While this doesn't belong up there with Soros' "Real Time Experiment" in the Alchemy of Finance as an example of market manipulation, it  show how one can etch oneself into the way that Google resolves your queries- by using a popular blog to link to you in a certain context, and by routing many of its readers along for the collective experience of you.  Soros explains the reflexivity of markets: the way one perceives a market can in fact impact the behavior of the market.  He made billions off of this insight.  The reflexivity of Attention markets is similarly based on the premise that one's perception of Attention influences its supply.

Before dismissing the sethbrecht as a random blog divet, maybe theater is a useful metaphor for understanding the evolution from API to Alchemy.  As you know, I have been trying to negotiate the transition for a number of months.  I was focused on tracing the pure conversion of our automatic data algorithms into Attention streams, but I was having a difficult time describing how our unique streams collide- other than simply calling it Alchemy.

A few months ago I asked Goldhaber how his book on Attention was coming along.  He perked up and said that he had a new title for it, All the world's a stage: the emerging attention economy and how it distinctly differs from the economies of industry, markets and money that we are used to. Maybe this meant that understanding electronic Attention had something more fundamental to do with theater.  Since I studied dramatic literature in college, this was not so foreign to me.  The hallmark of modern theatre's avant garde (Meyerhold, Pirandello, Brecht, et al) was the participation of the viewer in the mode of theatrical production. Take, for example, Brecht's Lehrstucke (learning plays) from the 1920's. According to Wikipedia,

Brecht described them (Lehrstucke) as "a collective political meeting" in which the audience is to participate actively. One sees in this model a rejection of the concept of the bureaucratic elite party where the politicians are to issue directives and control the behaviour of the masses...

We can look at this audience as active participant model as an early prototype for contemporary social media. In the theater of the avant garde, the writer, director and actors all attempted to directly engage the behavior of the audience.  Brecht's infamous alienation effect was simply a feature set and interface that reminded the audience (aka user) that he was not to get lost in the experience of the media but instead needed to participate in changing it:

For this purpose, Brecht employed the use of techniques that remind the spectator that the play is a representation of reality and not reality itself, which he called the Verfremdungseffekt (translated as distancing effect, estrangement effect, or alienation effect). Such techniques included the direct address by actors to the audience, transposition of text to third person or past tense, speaking the stage direction out loud, exaggerated, unnatural stage lighting, the use of song, and explanatory placards. By highlighting the constructed nature of the theatrical event, Brecht hoped to communicate that the audience's reality was, in fact a construction and, as such, was changeable.  from Wikipedia Entry on Brecht

This experience of being on stage, and using the stage as a means of changing user behavior, is something that is personal to me.  I remember when I was 14 years old performing on the stage at the American Repertory Theatre in Cambridge, Mass.

It was a bitter February evening during the week and I was standing on the stage dressed like an Italian kid fresh off of Ellis Island, with stiff-heeled shoes, an annoying beret and lots of make-up.  The play was Pirandello's Six Characters in Search of an Author, adapted by Robert Brustein. I was standing on stage behind my mother, played by sitcom Alice's Linda Lavin, looking out at the audience, watching them watch me. On the stage behind me was most of the actual ART resident acting group, behaving as if they were in the midst of rehearsals for Gozzi's King Stag, which was in fact being directed then by Andrei Serban. They started the performance all smiles and inside jokes until the door at the back of the theatre opened up and so appeared a family of actors, including me as the youngest son, searching for our author ("any author will do...") who might finish our play.

One of the best descriptions of pure theater that I have come across is by the famous Polish experimental director Jerzy Grotowski. More than anybody, Grotowski was the prototypical green, organic metaphysician of the stage.  He fled communist Poland after WWII, invigorated the downtown NY avant garde scene in the late 60's, taught theory at UC Irvine in the 80's, and ended up practicing what he preached on a remote Italian island before he died a few years ago.  In his classic text, Towards a Poor Theatre, from 1968, Grotowski writes:

By gradually eliminating whatever proved superfluous, we found that theatre can exist without make-up, without autonomic costume and scenography, without a separate performance area (stage), without lighting and sound effects, etc. It cannot exist without the spectator relationship of perceptual, direct, communion….

This "relationship of perceptual, direct, communion" is very close to what I am trying to express with the notion of the readerverse- a place or moment where the reader and writer are both fully engaged in the cooperative process of creating something original (ie Alchemy) by virtue of the  unique, real-time data streams that they surface to eachother.  For a while I struggled to come up with a real-world object that best emblematized the readerverse: a mirror? a shadow? a trail we leave behind? But now I am fairly sure that the readerverse is best expressed as a stage, where we create social media with a sequence of clicks and tags and queries.

And so here we are, beginning to realize that by virtue of paying Attention in the same electronic theatre, that we are creating some strange performance for eachother, by eachother, with eachother.  This is the primal social media expression, one that despite its rough amateur mechanics nevertheless promises a profound shift in the way media is created.  I defer to Steve Gillmor, whose silence about the imminent integration of the Gesture Bank and the AttentionTrust Extension, belies a remarkably prescient insight he had almost two years ago:

What does matter is a pool of attention metadata owned by the users. This open cloud of reputational presence and authority can be mined by each group of constituents. Users can barter their attention in return for access to full content, membership priviliges, and incentives for strategic content... And the media, which now includes publishers, analysts, researches, rating services, advertisers, sponsors, and underwriters, can use the data as a giant inference engine... With so much going for it, how and where is attention vulnerable? It’s vulnerable to being pigeonholed as an automated artificially intelligent approach to personalization. In my view... attention metadata is useful in service of the reputational filter of the people and ideas I and the people I track are interested in. This is not about merely reorganizing my feed data based on my patterns of acquisition, but the cumulative weighting of the minds and interests represented by those feeds and items.  Steve Gillmor, Waiting for Attention, March 2005