Tag Archives: Internet

The economics of bubbles

By Brent Goldfarb and David Kirsch – The space between fiction and reality is where economic bubbles take shape. Froth fills that space.

As the Dutch Tulipmania of the 17th century and the South Sea Bubble of the 18th century attest, speculative bubbles have been with us since the early days of corporations and market capitalism. Instant mass communication, in the form of the radio, was an amazing invention of the 1920s. Almost 700 new radio stations – the United States’ entire current AM broadcast infrastructure – were established in 1922. But nobody had identified a successful business model for radio broadcast.

Often the opportunity for a bubble arrives on the back of a new technology. And some technologies make for fantastic stories – indeed, sci-fi is a whole fictional genre based on this premise. Bubbles form whenever a new story is not only told, but can also be sold. However, not every new story leads to a bubble. Sometimes stories can be told, but not sold.

These cases highlight two important necessary conditions for the formation of a bubble: first, bubbles need narratives. Every startup begins as a story about an imagined future. Every venture, every investment, is a statement about the future, an attempt to create a future that conforms to the imagined vision of the promoter. Teams are formed, resources acquired, alliances entered, products and services developed, all in furtherance of that story and that future.

Every startup story will have some common elements – a protagonist (sometimes, but not necessarily a technology), a plotline in which the protagonist struggles against a challenge from dark forces (incumbents, or the current way of doing things), and a happy ending where the sun shines and human progress is advanced. Ever incomplete, these stories provide the mental scaffolding for individuals and institutions to invest in new ventures. Good stories sell, and the more uncertain the outcome, the more leeway for entrepreneurs to fabulate.

Bubbles inflate as the distance between fiction and reality increases. Contexts – such as investor liquidity, regulatory frameworks and cultural and macro-economic factors – establish boundaries on how far our stories can depart from reality. But entrepreneurs are also creatures of context, and some are better than others at ‘entrepreneuring’, stretching the limits of plausibility and maximizing time for their imagined realities to catch up to their promises.

Sometimes, we don’t observe a bubble not because the stories aren’t sticky or because the technology isn’t narratible, but because the narrative comes to fruition and the technology or entrepreneur delivers. more>

Updates from Chicago Booth

Startup founders, put on your sales hat
Selling skills are essential for entrepreneurs and need to be taken seriously
By Michael D. Alter – I know an entrepreneur who built a hugely successful mobile-marketing company, starting out in the early 2000s until he sold it for a good deal of money in the mid-’00s.

The first few years of his business were in that dark era before smartphones were invented, but the idea was for advertisers to use his platform to get their messages on to people’s phones. He spent a lot of his energy trying to persuade big brands and big advertising agencies to sign up for his service.

One of his board members happened to know the executive chairman of a large US media group, and was able to help the entrepreneur secure a meeting with him to pitch his startup. This was a huge opportunity, but our entrepreneur was confident rather than nervous.

First, this was not his first startup. He already had a few successful new ventures behind him. He knew his skills: he was a good salesperson, and a good entrepreneur. Secondly, he knew he had to do his homework. He prepared more diligently than he had for any other meeting. He had the most impressive slide deck known to PowerPoint, with every imaginable chart and data point for whatever questions the executive might ask.

In the startup world, we talk about the importance of creating strong business plans, building a team with industry experience, and tapping into big markets. All of these are important, but we undervalue what is really the most important thing: selling the product. As a result, we do a disservice to ?<the entrepreneurial world by not giving startups the right priorities for success.

Entrepreneurs often think that if they have a truly great product, sales will take care of itself—as they say: build a better mousetrap, and they will beat a path to your door. I think of this as the first great myth of entrepreneurial selling. In reality, if people don’t know about it, they can’t and won’t buy it.

Selling helps to bridge that information gap. more>

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Updates from Ciena

When the lights go out: How utilities can better assess the impact of outages on their network assets
Do you have access to real-time data and an end-to-end network view to know what network resources are impacted during a power outage?
By Mitch Simcoe – We’ve all seen this movie before.  Back on July 13th, a power outage in New York City impacted 72,000 Manhattan customers (including shutting down Broadway on a Saturday night) which was attributed to an issue with the utility company’s relay protection system. The power grid’s protection system should have triggered a protection relay to isolate the faulty power line which ultimately led to the outage.

Yet as we enter the peak of summer heat in August, additional power outages continued to plague NYC this summer. A little over a week after the Manhattan blackout, 50,000 customers in Brooklyn and Queens lost their power as the temperature rose to above 90 degrees amid a brutal heat wave. “More than 30,000 customers had their juice deliberately cut by the utility thereby avoiding a much longer outage,” Con Ed spokesperson Allen Drury told Curbed at the time. Curbed also indicated that Con Ed had identified a ‘flawed connection’ as the cause of Manhattan’s major blackout.

As these power outages occur, and with more frequency lately, the first question to staff from utility management is: what resources, facilities and customers have been impacted by the outage?

In the world of Operational Technology/Information Technology (OT/IT) networking, how can utilities answer this question if they do not have a complete understanding of the resources underpinning their networks? To effectively manage their networks at the most basic level, utilities need an inventory system that accurately presents all available resources, both physical and virtual, end-to-end.

Why is it a challenge to get this view? more>

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Updates from Adobe

Reality-Defying Photo Composites Master the Impossible
By Jordan Kushins – Juan José Egúsquiza is based in Brooklyn, New York, but he spends much of his time as a man of the world. From Paris to San Francisco to Barcelona to Lucerne and beyond, the Lima, Peru-born multimedia artist and Adobe Creative Resident makes his way across the globe with his camera in hand. While exploring, he captures ordinary moments with a click, and these images become the basis for what he calls “Impossible Stories”: brain-bending composites that challenge the way we relate to and interpret our surroundings.

When I was young, I played music—percussion, mostly—and was in a band with my twin brother, who’s also an artist. He was so creative, and making things all the time, often grabbing trash and turning it into sculptures or instruments. That idea of recycling—of taking elements that were meant to be for something and then using them to build something else—was super, super cool to me. At some point I realized I wanted to start creating my own special things as well.

I was 19 or 20 when I first started taking pictures. I’d be traveling, mostly alone, and all of a sudden I’d be somewhere I’ve never been before: walking around, seeing new things, observing ordinary moments. I’ve always liked those the most; like, someone throwing a cookie away in a garbage can. Once you take a picture of it, it becomes something totally different.

At first, I wouldn’t edit my images at all, but eventually I started thinking: “What if I grabbed one element from this image and put it on something else?” Now that kind of photo compositing is a daily practice. more>

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How America Lost Faith in Expertise

By Tom Nichols – I’m used to people disagreeing with me on lots of things. Principled, informed arguments are a sign of intellectual health and vitality in a democracy. I’m worried because we no longer have those kinds of arguments, just angry shouting matches.

I fear we are moving beyond a natural skepticism regarding expert claims to the death of the ideal of expertise itself: a Google-fueled, Wikipedia-based, blog-sodden collapse of any division between professionals and laypeople, teachers and students, knowers and wonderers—in other words, between those with achievement in an area and those with none. By the death of expertise, I do not mean the death of actual expert abilities, the knowledge of specific things that sets some people apart from others in various areas.

There will always be doctors and lawyers and engineers and other specialists. And most sane people go straight to them if they break a bone or get arrested or need to build a bridge. But that represents a kind of reliance on experts as technicians, the use of established knowledge as an off-the-shelf convenience as desired. “Stitch this cut in my leg, but don’t lecture me about my diet.”

The larger discussions, from what constitutes a nutritious diet to what actions will best further U.S. interests, require conversations between ordinary citizens and experts. But increasingly, citizens don’t want to have those conversations. Rather, they want to weigh in and have their opinions treated with deep respect and their preferences honored not on the strength of their arguments or on the evidence they present but based on their feelings, emotions, and whatever stray information they may have picked up here or there along the way.

This is a very bad thing. more>

Updates from Siemens

Transforming the Capital Asset Lifecycle – Part 1
By John Lusty – “Innovate or die”. Three years ago, in the global oil & gas industry, this was the dire message communicated from the boardroom to the operating plant as falling commodity prices were hollowing out corporate income statements. The same story echoed through the supply chain as engineering contractors and equipment manufacturers fought for survival – trying to win enough work to remain healthy within a shrinking capital project market while creating greater value from the existing capital asset lifecycle.

The cost-cutting that ensued was ugly, and the job losses were substantial. In parallel, the appetite for innovative ideas sky-rocketed as producers worked to wring out costs and remain profitable at any price. This triggered a new behavior within the traditionally siloed energy industry, for the first-time visionaries started to look to other manufacturing industries for capabilities that could be adapted to their own companies.

What they saw was a shock. Despite years of investing in software and technology, capital asset owners in the energy and process industries still had a long way to go to get full value from their technical information compared to other, more mature, industries. Unlike their business information which, to a greater degree, had been consolidated following two decades of ERP implementations, the technical information supporting their plant assets was still scattered across different locations and incompatible file formats.

To make matters worse, data from multiple projects and facilities used software from a variety of vendors along with their own standards and specifications. Plants that came in through acquisitions and mergers were even more unique. more>

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America’s Hot New Job Is Being a Rich Person’s Servant

“Wealth work” is one of America’s fastest-growing industries. That’s not entirely a good thing.
By Derek Thompson – In an age of persistently high inequality, work in high-cost metros catering to the whims of the wealthy—grooming them, stretching them, feeding them, driving them—has become one of the fastest-growing industries.

The MIT economist David Autor calls it “wealth work.”

While there are reasons to be optimistic about this trend, there is also something queasy about the emergence of a new underclass of urban servants.

Wealth work falls into two basic categories. First, full-time retail and service jobs at places like nail salons and spas. “You’re talking about people with $30,000 incomes that are often employed in high-wealth metro areas, or resort economies,” Muro said.

Because they often cannot afford to live near their place o-f work, they endure long commutes from lower-cost neighborhoods. These arrangements aren’t merely time-consuming; they can also be exploitative. For example, New York City nail salons are notorious for flouting minimum-wage laws and other labor regulations, and massage parlors across Florida have served as fronts for human trafficking.

A second category is the “Uber for X” economy—that nebulous network of people contracted through online marketplaces for driving, delivery, and other on-demand services.

Optimistically, these jobs offer autonomy for workers and convenience for consumers, many of whom aren’t wealthy. But the business models that keep these firms aloft rely on the strategic avoidance of laws like the Fair Labor Standards Act, which regulates minimum wage and overtime pay. These laborers often do the work of employees with the legal protections of contractors—which is to say, hardly any. more>

Updates from Ciena

Photonic integration and co-packaging: Design tools for footprint optimization in data center networks
As traffic within and between data centers continues to grow, operators need to constrain the resulting increase in power consumption to minimize operational costs. This is driving the need to manage footprint and power at the system design level. Photonic integration and co-packaging are related approaches to addressing area and power challenges for networking applications.

By Patricia Bower – Data center networks have evolved rapidly over the last couple of years, in large part due to the scalability and flexibility supported by today’s compact modular DCI solutions.  System designers leveraged advances in key foundational technologies to pack significant capacity and service density into these products, and their popularity is growing as these solutions capture new market segments.

The same advances have also paved the way for new consumption models for coherent optical technology in the form of footprint-optimized, pluggable solutions. As traffic growth for server interconnect within data centers continues to increase, greater for interconnect between data centers (DCI) will be required.

Scaling of data center traffic to get more bandwidth adds to the power consumption overhead and real estate requirements for operators which adds to capital and operational costs.

With each new generation of switching platform and coherent optical transport systems, designers have met the challenges by increasing throughput density and reducing power/bit. Both intra-DC and DCI traffic flows will increasingly rely on advances in foundational technologies and system design options to mitigate power consumption while maximizing interconnect densities.

What are these foundational technologies?  They include:

  • Complementary Metal-Oxide Semiconductor (CMOS)
  • Indium phosphide (InP)
  • Silicon photonics (SiPhot)

In networking applications, CMOS is the basis for both high-capacity switch chips used in router platforms and coherent optical digital-signal-processors (DSP).

InP and SiPhot are used to build electo-optical circuits for signal transport over optical fibers.  Together, the DSP and electro-optical components are the heart of coherent optical transport systems. more>

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Updates from Chicago Booth

Are investors chronically pessimistic?
No—but that doesn’t mean they adhere to rational expectations
By Dwyer Gunn – The assumption that investors hold rational expectations of market returns is central to many asset pricing models. However, in recent years, surveys of investors have revealed that market participants’ reported expectations often deviate from the objective predictions of financial models working with large pools of data. One theory is that these deviations are the result of persistent pessimism on the part of investors: survey respondents, according to this hypothesis, are discounting the rationally expected rate of return to reflect the risk of investing in stocks.

To examine whether investors have a pessimistic bias, Oxford’s Klaus Adam, the Bank of Canada’s Dmitry Matveev, and Chicago Booth’s Stefan Nagel examined existing evidence—including surveys of individual investors, professional investors, and CFOs going back to the 1980s—to compare expected returns with realized returns.

The research suggests that, contrary to the pessimism hypothesis, investors are just as likely to be optimistic.

Investor expectations closely matched realized market returns over the full length of time the researchers examined. But at any given time, expectations tended to be procyclical: investors expected higher returns during boom times in the stock market and lower returns during market contractions, even though many asset pricing models work in precisely the opposite direction.

Thus, the apparent conformity of investor expectations to market returns on average over time actually reflected investors’ biases—alternately optimistic and pessimistic, with the two balancing each other out. more>

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Tackling precarity in the platform economy—and beyond

To focus on online platforms in isolation would miss the point that they are part of a wider phenomenon of spreading and intensifying precarity at work.

By Sacha Garben – In our increasingly digitalised world, a crucial role is played by online platforms. These platforms—dynamic websites which constitute digital public squares or marketplaces—affect the economy and our society in various ways and their regulation (or lack thereof) is increasingly the subject of public and political debate. Whether it be the way in which Facebook deals with personal and public information, the influence of Airbnb on our habitat, Uber’s effects on the taxi sector or the working conditions of Deliveroo couriers or tech-workers on Amazon Mechanical Turk, the ‘disruptive’ effects of the activities of the platforms regularly make headlines.

A key social problem is the labor status of those working in the online-platform economy. These drivers, riders, cleaners, designers, translators, technicians and others are often formally contracted as independent and their working arrangements tend to exhibit features which are difficult to square with the traditional employment relationship. These include use of their own materials (such as the driver’s car), autonomy concerning working hours (logging into work via a smartphone app), the short duration of the relationship (translation of perhaps a single sentence) and its multilateral character (the platform linking the producer and consumer).

At the same time, the worker may well be economically dependent on the platform work, the contractual independence can be constructed in rather artificial ways—such as if a driver works full-time for a platform for several years yet remains formally contracted per journey—and the platform can exert significant control over the work and the person performing it.

Furthermore, their ‘independent’ status often means platform workers lack the benefit of the social, labor, health and safety protections which in most countries are connected to an employment contract—even if their precarious working conditions and socio-economic position very much require such protection. more>