Ross Mayfield: WiFi

Trade Winds

Tue, 22 Jul 2003 18:51:45 GMT

The community that was fostered at AO2003 is now providing more pensive analysis. This is a great time to reflect on how social software is changing the events business and the "trades" in general.

An excerpt from Conferenza, which provides a tad more traditional paid research coverage of trade shows, contains this golden nugget of controversy:

Still, there were interesting insights, some intended and some not...

· As a demonstration of the power of interconnection, a panel on Web services featuring Salesforce.com CEO Mark Benioff provoked the most talked-about moment of the conference – at Benioff’s expense. Asserting that the largest e-commerce software supplier is Amazon.com, Benioff pointed toward co-panelists from IBM and Sun Microsystems and said, “None of these companies has any position in [that] market at all. Even Apple’s iTunes music store was built on Amazon,” and asserted that Amazon has 300 people working on its proprietary software.

We thought this was news, until Ross Mayfield, CEO of one of the Web’s leading blogging software providers, Socialtext, led an online chat charge showing that most of this was apparently untrue: Amazon uses standard XML out-of-the-box stuff, and Apple’s iTunes doesn’t use Amazon’s software at all, the chatters charged. As Benioff continued, the audience watched as a group of online contributors disputed fact after fact, input Benioff apparently did not see. “It was sort of like a ‘Saturday Night Live’ skit,” said one attendee. “As Mark spoke, we could see his nose growing longer, like Pinocchio.”

How it played out in the Chat (Archive) was Kevin Marks did the fact checking, which was simultaneously projected on to the big screen:

[11:51] KevinMarks: no he didn't
[11:51] adina: bthey /are/ mentioning public web serivces
[11:51] KevinMarks: he licensed the patent
[11:51] KevinMarks: iTunes backend is not Amazon
[11:51] toughcrowd: this panel is showing lots of promise - but I love that cynical suspicion "lovefest"
[11:51] Ross: Amazon's real smart move was an API for developers
[11:52] adina: tross
[11:52] Ross: but they dont get decentralization. witness http://www.allconsuming.com
[11:52] adina: ross again
[11:52] Ross: Kevin, did he say it was?
[11:52] KevinMarks: Apple had ahuge online store already selling Macs
[11:52] KevinMarks: they built on that for iTunes
[11:53] Ross: real-time fact checking Kevin, I love it
[11:54] DariusD: Do you know that the Apple onnline store was not built on Amazon technology?
[11:54] KevinMarks: It is built on Webobjects

Here's Apple's story of how iTunes was built and how they licensed the one-click form from Amazon. Before we get carried away with the event of a fact check, rather than dynamic itself, its important to understand the context. I doubt Marc had negative intent, he had little to gain if so, and he was just plain conversing.

This parallel channel, a second superpower on a finite scale, first emerged at PC Forum 2002 when Dan Gillmor blogged a fact check on Joe Nacchio. Clay fostered the first experiments with social software as an in-room chat tool. Supernova I was the first to formalize a group weblog. PC Forum 2003 was the first to incorporate a conference wiki. The O'Rielly Emerging Technology conference renewed interest in IRC and Hydra in parallel to the wiki. Supernova II was the first to incorporate chat and wiki. AlwaysOn was the first to add video streaming (Archive), creating a richer remote participation experience.

For some, the choice of modes is overwhelming at first, something we are tuning. But Social Software and its practices for events has a reached a level of maturity where it is solving fundamental tensions of event structure.

Take Bob Frankston's experience with remote participation after in-person attendance the first day:

While it's not the same as being their in person, I was surprised how well the combination of the video and Wiki worked. Over my standard home Internet connection I had very good audio and video quality in looking at the panel.

I don't know how to capture the screen picture that included the video so I simply used my digital camera to take a picture. That's Tony Perkins summing up the conference discussion log is in the lower left. There was a lively discussion with people in the room and others outside such as Joi Itcho in Japan and me at home. Joi mentioned that he was attending in his underwear and people wanted to get a video of him. He obliged though only above the waist...

...I judge events by the attendees more than by the panelists and, by that measure, the event has gotten off to a good start. The concept of being always-on or always connected is a good one though, in my opinion, it is important to distinguish between the transport issues that enable connectivity and the question of what one does with connectivity and the implications. This confusion is reflected in some of the panels.

As I write this I'm still attending remotely. I can view the conference over the Internet with very good audio and video quality. Socialtext is provided a live commenting facility using their Wiki software. This is wonderful for those like me who want to jump up and say "that's stupid" or maybe even be positive. There were problems with 802.11 connectivity the first day so I had only a few opportunities for such commentary though I did make good use of it. Today, from home, it appears to be working better and I've been able to add my own comments on the side.

Participating from afar is interesting. The audio/video works very well but I miss the ability to kibitz with others. A side-chat facility would help. Still, this is my first time trying such remote participation. Having been there for the first day I have some sense of the context and it works very well. Of course this is early stage and I can think of a lot of improvements but it is mundanely useful rather than being a novelty.

David Weinberger recently wrote a great piece in Darwin on the Death of Panels:

...Panelists and audiences do not share the same goals. Audiences want to learn and be entertained. Panelists want to impress and sometimes want to sell. Conversations work against the panelists' natural inclination to manage their speech; conversations develop their own gravitational fields that fling panelists together in ways they can't control.

If you're organizing a conference, as an audience member I implore you to cast aside the spurious safety of panels. If you're a moderator, you'll do everyone a favor if you rearrange the chairs, eliminate the opening statements, confiscate the bulb in the projector and get your participants to just talk. Don't "leave time" for audience participation; open it up from the beginning. Hell, screw the bulb back in and project the online chat where the real life of the conference is probably happening anyway...

Mike from Techdirt yearns for conferences with semi-structured small group interaction.

...An ideal conference, then, would be more like a day full of these lunches - that forced people to think in different ways. Thus, I'd love to see a conference where people are either randomly (or carefully planned by the organizers) split into small groups, and given a task or a challenge. Let them do some scenario planning that forces them to think creatively. Get people thinking, get them involved with the ideas, get them interacting with others and force them to think outside of their own viewpoint. Maybe challenge them. Have different groups "competing" in some way to get people to really pay attention, and really try to get their minds around very difficult issues. ..

Trade Winds

Social Software and Social Networking Models provide the greatest threat and opportunity for the trade industry (trade magazines & shows) -- because they change the notion of audience into participants. The rise of weblogs and participatory media allow domain experts to contribute without making contribution their full time job. Networking models allow people to connect regardless of space or time as is the case with LinkedIn, or in space and time with Meetup. Because these tools work so well in virtuality, it is natural for them to be extended to reality (whatever that means).

Trade shows will fundamentally change their structure to become more participatory -- and the result is more connective, constructive and conversational. Remote and in-room participants will moderate panels, there will be greater use of working groups and communities will persist between events. We used to come to trade shows for the people in the place. As Dr. Weinberger says in Small Pieces Loosely Joined, the web is a set of places itself. Now we have places upon places, where the network is the conversation.

This isn't the place for me to talk about commercial value for event organizers, but let me say this. There is no such thing as a closed system. Bloggers are coming to your conference. You can't throw up Walls. The energy can dissipate or enjoin with the event. Do what Tony did and give out blogger passes. Augment experiences. Create a greater and more open context for your event and the wind will blow at your back.

Vonage, Hacks & Arbitrage

Wed, 28 May 2003 16:06:58 GMT

The way Joi and Gen are using Vonage is a new arbitrage method for international long distance. International telephony has always been about arbitrage (risk free profit). Technology driven cost reduction outpacing regulatory regimes that prop up prices. Here's a brief history of international long distance arbitrage and a suggestion for a next stage.

International telephony was originally governed by the ITUs Global Accounting Rate system. A body of national PTTs that would convene and negotiate bilateral settlement rates. For example, the US and German would tally up the traffic imbalance as measured in minutes and agree on a settlement rate. Problem was, country code #1 had significantly greater amount of outbound call volume. With the Public Switched Telephone Network (PSTN), to this day, calls are paid by the originating carrier to transit and teminating carriers. The US negotiated volume discounts that were significant for its outbound calls.

When the PC came around some smart entreprenuers realized an arbitrage condition existed and the technology to take advantage of it was affordable. They invented Call-Back. An individual customer living abroad calls to a PC in the US, enters the country code of the final destination number (the hub country or another) and then hangs up. The individual is called back by the PC while the PC calls the destination country and recieves a dial tone for the destination country. The settlement fee is paid from the hub country (the lower outbound US rate).

Next came Refile, which turned this arbitrage method from a consumer service to a wholesale operation. Competitive carriers in foreign countries (many were cropping up because deregulation was taking place at the same time, first in the US, then the EU and culminating with the Uraguay round WTO accord that liberalized 90 countries) sent calls in aggregate over International Private Lines to the US. A re-file carrier re-originated calls from the US to foreign countries, initially saving in most cases over 500%.

Calling cards allowed re-file carriers to provide consumers a way circumvent originating carriers and get to their re-file hub.

Next came Internet Telephony. Initially it was used for transit on private lines to take advantage of compression. Then some carriers used the public Internet for transit with some sacrifice for quality. Some new businesses like ITXC leveraged redundancy in transit to increase quality.

Consumer Internet Telephony didn't prosper until now because of the variable quality of transit as well as the interface at the ends. Vonage has changed that with some success (just reached the 25,000 subscriber mark). But its primary focus is domestic long distance. It probably doesnt provide the service internationally both because of the quality of transit, complexity of serving diverse markets and potential regulatory backlash in foreign countries.

What's interesting about Joi & Gen's use, and they aren't the only ones, is they are setting up their own arbitrage method -- originating calls abroad, transiting over the Internet and terminating through Vonage's network (mostly over the Internet) and re-file agreements. Vonage's greatest value is a persistent circumvention of local monopoly carriers (where most of the cost of a call resides because of the above driving efficiency in international markets), but its value for international transit is worth consideration.

It will be interesting to see what Vonage hacks arise. There are a few options created by its bridge feature -- If you're on the phone with party A, you can flash, dial #90, dial party B's number, # and hang up. It then calls party B and the call continues between A and B. A hack that allows you to call to your Vonage box from your wireless phone and have it bridge you to an international destination seems tantilizing.

A hardware hack to make the box more portable would be invaluable (I would rather pay for a dedicated DSL connection from a hotel room and then use Vonage to bypass their telephony toll trolling). Particularly with WiFi support.

When arbitrage conditions exist, as with wireless carrier rates compared to terrestrial or hotel customer capture, the market ultimately converges upon it. Vonage has the potential to be a platform. But if regulators try to stem its diffusion another call delivery method will just take its place.

1IMC: Mobile Weblog Conference

Fri, 23 May 2003 16:05:39 GMT

The First International Moblogging Conference (1IMC) is in Tokyo July 5th. If you can find a way to get there, entry is only $16.

Wifi with Discovery

Wed, 16 Apr 2003 00:25:48 GMT

Sputnik has come out with its first hardware product: The AP 120 wireless access point. It's an enterprise thingie with auto-configuration (plug one into your LAN, it figures out where to get control commands, puts up a dynamic firewall, and immediately becomes a smart but unobtrusive member of the corporate hive — all while putting out a nice little wi-fi signal). Dave Sifry (Sputnik co-founder and main tech guy) tells me the $185 price gets you the equivalent of a Cisco number selling for $800 or so. Sputnik is selling it even more cheaply to OEMs and giving away the firmware for free. I'm sure a market will follow. [The Doc Searls Weblog]

Way to go Dave!

World of Ends

Fri, 07 Mar 2003 05:41:48 GMT

Dr. Weinberger and I decided to sum up a whole bunch of stuff in one big site: World of Ends: What the Internet Is and How to stop Mistaking It for Something Else. Dr. W. explains more here.[The Doc Searls Weblog]

The Nutshell

1. The Internet isn't complicated
2. The Internet isn't a thing. It's an agreement.
3. The Internet is stupid.
4. Adding value to the Internet lowers its value.
5. All the Internet's value grows on its edges.
6. Money moves to the suburbs.
7. The end of the world? Nah, the world of ends.
8. The Internet’s three virtues:
a. No one owns it
b. Everyone can use it
c. Anyone can improve it
9. If the Internet is so simple, why have so many been so boneheaded about it?
10. Some mistakes we can stop making already

It all begins with Simplicity, turns out bandwidth is a commodity, and let's be stupid and not screw it up.

Stanford Open Spectrum Conference

Sat, 01 Mar 2003 14:37:22 GMT

Be there now. I'm trying my best to crash today's Spectrum Policy thing by listening in at a distance, over the Net, using these links here. But they don't seem to be working. Only the first two links point somewhere, but nothing happens.[The Doc Searls Weblog]

Im having the same problem as Doc. Meantime, Im following Joi's Topic Exchange channel for the conference. Could also walk 5 minutes and physically crash the party.

Corporate Moblogging

Sat, 25 Jan 2003 00:57:05 GMT

Phil Wolff [a klog apart] has some great thoughts on the corporate applications of Moblogging:

Part 1 of this look at moblogging is a shallow survey of the possible.
Where klogging meets moblogging 2. -- The deeper effects will come when it changes how people think about memory, privacy, co-working, and place.

Moblogging has the potential easily capture contextualized data. It may even enhance the value of personal interaction to eclipse costs of deploying people. This could be as simple as the decision to buy a conference's educational materials vs. send someone to experience the conference and contextualize it.

Or in the grander scheme unbundle the call center. There service is a commodity, supported at the cost of $65 per hour per employee, to the detriment of satisfaction. A portion of support could be unbundled and armed with Moblogging and other tools -- and redistributed to the field. The value of knowledge gained, beyond customer and employee satisfaction benefits, could justify the otherwise extravegance of actually providing help.

Distruptive Technologies

Thu, 23 Jan 2003 18:48:06 GMT

10 Emerging Technologies That Will Change the World. dsg writes in with a link to this Technology Review article about ten emerging technologies they believe will change the world. Some interesting predictions in the bunch. Mixed in with obvious predictions like "grid computing" are slightly more obscure things like "nano solar cells". These types of articles are always popular in January, and while no one ever seems to look back and see how accurate they are, they're still fun to read just to get your mind thinking about the possibilities. [Techdirt]

I like these lists for the same reason. Here are the 10:

Wireless Sensor Networks
Injectable Tissue Engineering
Nano Solar Cells
Mechatronics
Grid Computing
Molecular Imaging
Nanoimprint Lithography
Software Assurance
Glycomics
Quantum Cryptography

In other news, we are printing cells...

Three-dimensional tubes of living tissue have been printed using modified desktop printers filled with suspensions of cells instead of ink. The work is a first step towards printing complex tissues or even entire organs.

"This could have the same kind of impact that Gutenberg's press did," claims tissue engineer Vladimir Mironov of the Medical University of South Carolina.

Open Spectrum FAQ

Tue, 21 Jan 2003 18:53:09 GMT

Tuesday: Free The Spectrum. Open Spectrum -- spread the meme. This is an amazing, eye-popping idea that I've been hearing David Reed and Dewayne Hendricks talk about for a while. David Weinberger has done a great job distilling the gist of the idea and its importance into the Open Spectrum FAQ. Please read it.

Interference — which we've treated as as law of nature — is an artifact of the way radio were designed 100 years ago. If interference isn't an issue, then the reasons we started to license spectrum become irrelevant.

In fact, the core premise that has undergirded our spectrum policy has dissolved: There is no scarcity of spectrum. It does not need to be doled out. On the contrary, there is an abundance of spectrum.

Our current policies prevent us from benefiting from this abundance.

[istori/log]

3rd law of thermodynamics analogy: Bandwidth is energy and spectrum is a conduit

Udell's Ozzfest

Sat, 04 Jan 2003 18:52:32 GMT

A conversation with Ray Ozzie. In a conversation with InfoWorld Test Center Director Steve Gillmor and Lead Analyst Jon Udell, Ozzie discusses the unique nature of disruptive technologies, the role of collaboration tools in the workplace, and the emerging law of unintended consequences. [Full story at InfoWorld.com] ... [Jon's Radio]

On distruptive technologies [see Jon's 10]: All disruption comes from a soup of elements from which unintended consequences can result.
On how "attention rendezvous" can boost group productivity by an order of magnitude: Mutual selfish behavior yields a greater-good outcome.
On mesh networking: The key technologies that sit on the shoulders of Wi-Fi are then synchronization -- because if you have multiple devices and you're dealing with many people with multiple devices, synchronization is key -- and Web services -- because you're going to want to have your devices requesting programmatic services of things on other devices.
On decentralized synch vs. centralized storage: In the corporate world, all the regulatory compliance is increasing the focus on centralized -- I don't think I'd call it backup -- auditing.
On using Groove as social software (with good examples): these parallel channels are really useful because we do have the ability, some more than others, to multitask, and sometimes that multitasking can be used to bring ... greater focus to the task at hand.

The Great Wireless Hope

Wed, 11 Dec 2002 02:18:03 GMT

David Sifry, Sputnik
Duncan Davidson, SkyPilot
Glenn Flieshman, Journalist
Dave Hagan, Boingo
Martin Rofheart, XTreme Spectrum

missed the beginning of this session

Duncan: many backed off of WiFi because of security without understanding the issues

Killer apps for unlicensed spectrum?

Dave: all the things you want to do on a normal basis wherever you go
David: likes to surf on the crapper and its incredibly sticky

How has FCC regulating this space effected what you are doing?

Martin: Had to get authorization to build, manuf and sell our devices. The process has evolved over decades to serve large companies, does not reflect requirements of tech startups
Duncan: In a political box. Creating a duopoly in cable and wireless and regional monopolies in wireline. Staffers are great people trying to make something happen, but spectrum is lying fallow -- the 3rd pipe, the breakthrough to bust open the last mile. WiFi maybe 2.5, 5G. Open, robust, innovative.
Glenn: will incumbents overtly fight the 3rd pipe to capture available open spectrum?

Dave: congestion at big conferences. at 802.11 planet a success. Its managable and all about forecast and fulfillment. The challenge is at the backbone (IP Transit)
Martin: Only a matter of time until its solved (commons): either carve it up (license) or cognitive radios (open). Open wins because consumers are demanding.
Duncan: Meshed architecture, fully distributed, scalable (I doubt it, each node adds a hop -- diseconomies of span)
David: polite radios
Dwayne: Chairman Powell's taskforce www.fcc.gov/sptf Current is command is control, to move to a commons and a property model. Unlicensed easement - every license has a portion of band that is open as long as it doesnt exceed a temperature. First rule making for this starts tomorrow, Request for Comment issued -- the first tangible output from taskforce. Process continues for the next two years.
Glen: 802.11h amends .11a and allows deployment in Europe, differs by dynamic channel management and power control (polite radios), could be rolled into b & g to realize polite radios.
Duncan: The uniband has been adopted somewhere in the world. Japan, England & Australia. The pressure to get this out will open it in the rest of world.
Duncan: Backhaul on the Mesh...distance between hops almost all is used for relay...
- one thing you can do is have longer radio throws with WiFi (see Tim Pozar's stuff),
- the other is if you put the gateways deep into nieghborhoods
- (still think there are real limits here, especially because gateways already exist somewhere else at the terrestrial backhaul network)
David: Texas Instruments reduced standby power requirements by 10x -- the real potential battery saver when the chipset hits the market.
Martin: still going to have the uptime radio power requirements. Also, UWB Developer Kits shipping
Rohit: can we go below layer 3 for access. Duncan: you are trying to create a carrier grade product, and it is better to get it down to layer 2 to provide an alternative to terrestrial
David: emergency network mesh experimentation projects (SMS hopping its way to 911)
Glen: Zigibee, low power low bandwidth alternative (for remote controls)

Howard Rheingold

Tue, 10 Dec 2002 00:36:34 GMT

Howard: "When power is decentralized, new opportunities arise for new types of collective action."

text messaging allows redistribution of memes to the entire phone book in two thumb strokes

characteristics:

two technologies converging to make a third and distinct, which may even be attractive to segments that didnt even use the other two
role of young early adopters/adapters
PC in 80, Net in 90 -- Moores Law and other factors insure technologies evolve in their quantitative power that enable qualitative evolution

Volunteer grid computing (SETI, Protien Folding project) shows quantitative power of collective action. Science is a form of collective action. Decentralization of literacy & printing press enabling scientific and political collective action

Primitive reputation system of eBay (bi-directional nested feedback) works to form collective trust. Markets are a form of collective action (heterarchy is actually a better description). With trust (from 3rd party) I can engage in one-off transactions on the street (ride sharing example).

Location-based services leveraging social network-based reputation ratings. GPS coordinate-based newsgroups. RFID tags enabling information to be inserted into things (this is Saffo's long time ago prediction of unbiquitous sensors).

Available today: UPC bar code reader tied into Google identifies maker, lawsuits, political watchdog groups -- almost like decommoditizing the PR of CPGs.

Having this information changes the way you percieve the world, as well as those you go through the world with.

Political struggles over these technologies (DCMA, etc.) have to do with:

closed systems trying to remain closure
who controlls innovation (teenage hackers vs. Disney employees)

From the audience:

Dave Winer interjects that we are inventing new monopolies (Google, how open a system will it remain, competition in what you can search for),
someone else interjects the concern of decentralized mob rule -- Howard agrees there are scary aspects of this.
Cory: We can build collective action, but we are not good at sustaining collective action. H: By short cutting the deliberation process it may negatively effect democracy
Kevin's early example of collective overload when he included an email address for a ~94 FCC public comments generated 350k reponses
Democracy by Disclosure book provides cases of how requiring corporate information disclosure leads to better compliance/performance, but collective action differs
Kevin asks what historical mistakes can be avoided.

The core issue of how this threatens democracy or markets hinges upon how these technologies support existing social networks. If these are simply tools that can flow communication to the 12 closest people to the key political decision maker.

Demographic parallel with baby boomers timed with technology maturity are the big trends that make smart mobbery probable. Age impacts what generation of technology is primarily adopted...its kind of like how your favorite songs are the ones that were playing when you first fell in love...15 year olds are adopting mobile phones and instant messaging...leading to a huge demographic block that expects mobility, presence, and real-time connectiveness.

What I like about Howard's views how he is discovering key themes that may make the world a better place, and its something he obviously cares about. Also, places of political strife are where they need smart mob technology the most, and it just so happens that the lack of terrestrial infrastructure (POTS, CATV) are generating the wireless infrastructure in these places.

The Gravity of Decentralization

Fri, 06 Dec 2002 18:57:25 GMT

Designing business architectures (models & systems) is an increasing challenge. Centralized business architectures are a legacy of the industrial era. But the recent downturn has revealed new decentralized systems that promise to enable new business models and evolve the old. We are just beginning to explore the practice of decentralization and the new gravity it creates.

This post explores key benefits of cost and risk reduction:

Capital Expense: Smart Build vs. Dumb Build
Operating Expense: Centralized Complexity vs. Decentralized Service
Market Risk: Centralized Liquidity vs. Decentralized Standardization
Operational Risk: Centralized Security vs. Decentralized Defense

Identifying these benefits should help understanding how to achieve balance between centralized and decentralized gravitational forces.

Capital Expense: Smart build vs. dumb build

Centralized infrastructures (bandwidth, storage & processing) require significant up-front capital investment, justified by "smart build." They rely on "smart" forecasting of capacity requirements to determine what to build in advance of immediate delivery (spot markets). But in absence of forward markets (like futures, only over the counter) to lock in future prices and quantities, and only rudimentary vehicles to pre-sell capacity -- determining requisite supply is done without market data. In addition, IP traffic, which drives investment in capacity to support it, is notoriously bursty and diverse. Sheer complexity and absence of market data make forecasting and planning an art rather than science.

Also, centralized infrastructures rely heavily on economies of scale in both system economics and business models. The upgrade path isn't granular, at best its at the line card level for routers and servers. In the economics of bandwidth builds rights of way and spectrum licenses are the largest costs. This cost is also the largest speculation of future capacity, both in the lag time until monetized and the volume of capacity it represents. Spectrum speculation also relies on the pricing of an intangible asset, driven by market participants compelled to bid to maintain competitive in a market they already sunk significant costs in. Spectrum speculation recently resulted in $150 billion of spend – before the investment of another $150 billion in tangible asset infrastructure; larger than the addressable market.

The second largest cost, digging the trench are the largest costs, compels telecoms to lay as many fiber strands in the trench as they can. Remaining dark. Supply and demand cannot be balanced, and excess capacity inventory is a service requirement. The result is continual glut or failure to meet customer demands. This is fine when capital markets appreciate excess capacity inventory, but otherwise its punishing model.

Dumb builds of decentralized infrastructure do not rely on central planning/forecasting. Capital risks and burdens are pushed to the customer: forecasting individual requirements, upgrade/migration paths and up-front investment. Intangible assets that only serve the purpose of creating barriers to entry for competitors, such as spectrum speculation, can be avoided costs through models such as Open Spectrum.

In addition, decentralized infrastructures can be more granular. Manufacturing of equipment for these infrastructures remains centralized, but there is less risk in the model. Forecasting a diverse network's requirements is several orders of magnitude greater in complexity than forecasting customer units. Manufacturing systems are also built to take advantage of economies of scale, scope and speed. Capital markets understand the mature model of manufacturing capacity & inventory to more adequately assess inherent risks.

Operating Expense: Centralized Complexity vs. Decentralized Self-Service

Centralized business architectures cannot scale when it comes to providing service. Centrally planned automation of functions and processes become rapidly obsolete in a turbulent environment. Inevitably to maintain service, people are thrown at the problem. And people don’t scale. Large centralized IT administration, network administration, customer support centers result in large Sales, General & Administration costs (e.g. 25% of revenues in the telecom industry). What’s worse, service is significantly impersonal and these jobs strain the limits of satisfaction, creating a dysfunctional cycle of quality degradation.

Decentralized business architectures empower customers to serve themselves and provide communities of support. Obviously this results in less cost and enables scale. But the power of self-service, whether for purchasing, provisioning or support cannot be overstated. Provided self-service is simple, providing otherwise internal information to the customer as well as control instills trust and satisfaction.

Market Risk: Centralized Liquidity vs. Decentralized Standardization

As we learned in developing the first B2B marketplaces, liquid emerging markets take time to develop. Marketplaces and market makers must bear significant risks to establish a market. Despite the benefits by design, providing centralized alternatives to the entropy of existing relationships is an inorganic development. Before centralized markets take hold, competing standard alternatives arise in decentralized fashion. Over the counter markets of buyers and sellers with existing relationships transact directly at first.

The role of decentralization in market development is the creation of standards for transactions as a bridge to centralized mature marketplaces. Creating standardized definitions of price, quantity, quality and contracts for goods accelerates over the counter liquidity and creates pockets of price transparency. As the market unfolds, conversations drive convergence of standards and invites participants organically.

Physical liquidity grows and demands risk management in the form of forward and futures markets. These markets demand centralization for both price transparency and liquidity to prevent manipulation The point of describing how market emerge in decentralized form and then transition to centralization – but this process is important to understand in the tech industry as it transitions to datacommodity industry through the adoption of utility models.

Operational Risk: Centralized Security vs. Decentralized Defense

Similar to the challenge of scaling service is scaling security. The diversity of threats and complexity of managing them makes large scale centralized security untenable. Like fighting the adaptive threats of Spam through designing new filters, centrally designed security solutions fail to keep up with environmental changes. Further, security requires expertise and there is a limited pool of human capital to provide it. As companies scale their openness to the environment to take advantage of Internet infrastructure, so to scale the demands to secure. The problem is if the costs to insure security run in parallel and even past the value of what they protect, innovation and infrastructure will be hampered by the security overhead.

Countering the trend of security overhead are emerging autonomic security solutions, for example those of Sana Security. Inspired by the design of the immunity systems in our own bodies, they provide a complex adaptive system that adapts to dynamic threats.

While security systems designers scramble to meet this escalating challenge, many would do well to reassess their fundamental design approach. The unfortunate fact is that the prevailing method of security systems design contains at least one fatal flaw: It assumes that system designers can adequately anticipate and create appropriate responses for every type of security breach possible within the system.

From an article by founder Steven Hofmeyr…

It's only human to think that we've anticipated all of the ways the systems we design can be compromised. After all, if we designed the system, then we must know it inside and out, right? The truth is that that vast majority of engineers and analysts cannot possibly predict the wide variety of viruses, worms and hacker attacks that could cripple their systems in the space of a few minutes…

To counter hackers' ability to stay one jump ahead of system designers, security managers are beginning to move beyond firewalls and IDSs [intrusion detection systems] to incorporate a set of technologies known as adaptive detection and response (ADR) systems. These systems deploy highly sophisticated monitoring agents to track operations at targeted file and operating system levels (similar to the way that the human body monitors its own layers of systems). Unlike IDSs, which look for known system and network threats, ADRs first build a complete profile of normal system operations, then continually monitor for any change in the underlying patterns of the system or network.

Now decentralized architectures cannot be applied everywhere, but the decentralized autonomic approach to security certainly has a prominent role in reducing risk and enabling scale.

Balancing Business Architectures

As the tech industry undertakes its fundamental shift to utility service, the gravity of decentralization is breaking down centralized industrial era structures. The Frontiers of System Economics are being explored. System architectures previously focused on economies of scale and speed increasingly shifts to realize scope and span. Business models undertake a similar shift.

The cost reduction benefits of decentralized architectures, as pointed out by Kevin Werbach are too prominent bottom-line benefits to be ignored. So too are the benefits of risk reduction. The challenge in truly understanding the right balance between centralized and decentralized business architectures is that we are just beginning to explore the top-line benefits of decentralization. The top-line benefits of centralized forms of scalable enhancement of existing revenue and generating new lines of revenue are well known. But the top-line benefits of decentralization will have to be the topic of a future post.