Seth Goldstein

We interrupt this feed for a brief public service announcement for like minded professional entrepreneurs trying to create something great who might no longer be in their 20’s

Companies need clear values for their people, but so do individual entrepreneurs for themselves.  Take the energy of the hustle and rub it against a maniacal focus on execution, against the backdrop of adulthood, and you end up with the following kinds of operating rules:

1. FAMILY
Eat Breakfast and Dinner with your wife and kids.  Weekends are for sports, art projects, reading, napping and aimless nature walks- together as a family.  Turn off the Blackberry, set the cel phone to vibrate, pay attention.  This is why you are working so hard.  Dont forget it. 

2. NO IDOLS
This means not putting any person, however famous or important, on a pedestal.  You don’t need anybody other than yourself and your family.  You don’t need somebody else’s approval to make you feel smart, successful or important.  Do not worship heroes.  See people for who they are not who you want them to be.

3. SLOW DOWN
Don’t rush.  Try to do it right the first time.  Its ok and sometimes even vital to make mistakes but don’t make them if you don’t have to.  Let things play out without force.  Take your time.  Be patient, careful, exact and you will gain in confidence and security whatever you may lose in opportunity.

4. PAY ATTENTION
The little things do matter.  Sweat them, celebrate them, master them.  Understand everything you can about a situation before making a decision.  Every big thing is made up of lots of little things which are made up of even littler things.  Don’t tackle the big without understanding the little.

5. DRESS BRITISH, THINK YIDDISH
Be cheap, frugal, cautious with money.  Before you commit it to anything or anybody make sure you are clear to yourself and who you are paying about what you expect in return.  Make your money work for you before you spend more of it the same way.  Saving empowers more than spending.

6. FOCUS ON NEEDS
Need is biological, familial, social.  Don’t confuse it with control or ego.  Businesses, like people, need money to survive.  Survival depends on profit for businesses and food and shelter for people.  Anything outside of that is want, and although wants can be compelling they are not needs.

7. RELATIONSHIPS MATTER
Outside of your basic biological needs, everything you do is based on relationships with others.  There are many different kinds of relationships, some deep some shallow.  All of them require respect and attention to continue.  Being inconsistent with your relationships influences your reputation which you do not have control over as it depends upon the choices of others.

8. IDEAS
Ideas come from within and contribute to the world around you.  They engender creativity which can generate new ideas from you and others.  Some ideas are better than others; some deserve to be whispered while others deserve to be broadcast.  Treat ideas differently depending upon their value, but listen to them, be open to them, and trust them in yourself. Don’t fall in love with your own ideas and end up pursuing them at any
cost, however.  Take input from those you trust and don’t assume they are trying
to suffocate your creativity if they don’t agree with your ideas.

9. DONT BE IMPRESSIONABLE
Take the time to weigh input from trusted advisors, consider their expertise as it relates to a decision, and make good, solid decisions- don’t get carried away by the the opinions or passions of the last person you talked to

10. MATURITY
Make sure experience and maturity are part of any venture- young, bright people are great to have on board, but balance them out with others- and don’t assume intelligence trumps know-how in terms of building a business that’s sustainable

11. FOCUS
Focus on executing one thing extraordinarily well - no, you can’t pursue a bunch of ideas at once and execute superbly on all of them

12. EMPATHY
It’s not just about YOU.  In doing what you do, you put other peoples’ careers, financial security and emotional well-being on the line.  Care about that at least as much as you care about your own vision.

I am excited to announce the first official gesture in the financial securitization of Attention:

The Chicago Board of Trade, which was established in 1848, has invested in ROOT.  Bernard Dan, the CEO of the CBOT is  joining the ROOT board:

"More than 30 years ago, the CBOT was the first exchange to trade interest rate futures contracts.  Our partnership with ROOT represents an opportunity to be at the forefront of Internet lead futures trading, and we look forward to working with ROOT as this industry continues to evolve.”   For the full press release click  here

ROOT builds upon the thesis of Majestic Research, which was based on a new consumer data-driven research model.  After coming up with the idea, I met Tony Berkman who had been building complex quantitative models for large hedge funds and funds of funds.  Together we founded the company which continues today as the only independent voice of quantitative reason in the investment community.  The irony of today’s announcement begins with the fact that Doug Atkin the CEO of Majestic was formerly the CEO of Instinet which helped usher in a generation of institutional electronic trading.  In December 2004,  I helped organize a conference for Majestic called "Does Online Shopping = Paid Search?".  The implicit thesis was that Internet Advertising was starting to look more like Wall Street than Madison Avenue.  It triggered the first of many blog posts about Attention, called  "Attention Markets":

"Keywords have no inherent value, but
they do typify how both Madison Avenue and Wall Street are valuing the
Internet economy circa 2003 (in the same way that impressions and page
views signified such in 1998). Soon, keywords
will become replaced by leads (or some derivation) and there will be a
new group of old and new companies competing for the spoils."

This investigation led in the Spring of 2005 to the first Media Futures series and specifically the section on Arbitrage:

"But on the other side of the mirror, we are being watched.  Our queries
are being mapped legitimately by companies looking to contact us.  If
you are not careful, an errant click will be answered with a telephone
call from a sales representative.  And so as we succumb to these
performance-based networks, our future purchases, our future media
consumption, our lifetime economic value across hundreds of categories
and thousands of companies, are all being calculated in real-time.  Not
by a single agent, but by multiple agents each trying to evaluate our
momentary state of purchase intent in the context of the many
monetization levers these advertisers have at their disposal."

Soon thereafter ROOT was born, originally with the fitting moniker IAG- the Internet Arbitrage Group.  My idea (developed in conjunction with the beautiful mind of Josh Reich) was that insofar as a company such as a mortgage lender was willing to take delivery of a lead, without controlling where it came from, then such a lead was a commodity.  And insofar as this lead commodity was just personal information along with an intent to enter into a transaction, well then it could be bundled with other leads and securitized in order to price it.  Looking for solid examples in history for this, I turned to my friend and advisor Andrew Bein who said this reminded him of the Mortgage Backed Security Market. 

I did some research and all roads pointed to Lewis Ranieri, the former Vice Chairman of Salomon Brothers and recognized inventor of financial securitization.  I located the following paragraph from Business Week and included it my appendix to the executive summary for IAG:

Business Week, November 29, 2004   
Lewis S. Ranieri: Your Mortgage Was His Bond
The bond trader turned home loans into tradable securities 

The past quarter-century has seen a revolution in finance. It’s felt
every time a homeowner refinances a mortgage or signs up for a credit
card. No one person can claim to have lit the fuse for this
revolution– but Lewis S. Ranieri was holding the match. Joining
Salomon Brothers’ new mortgage-trading desk in the late 1970s, the
college dropout became the father of "securitization," a word he coined
for converting home loans into bonds that could be sold anywhere in the
world. What Ranieri calls "the alchemy"
lifted financial constraints on the American dream, created a template
for cutting costs on everything from credit cards to Third World debt
– and launched a multibillion-dollar industry.

As many know by now, I subsequently met Lew in person and brought him on to join me as Chairman and lead minority investor in what is now ROOT.  The vision continued to evolve and clarify and I built a strong team of people to develop the concept for a true financial marketplace for Internet leads.  In October of last year I described it here on this blog for the first time:

Wall Street Meets Madison Avenue

What is a lead?
A lead is generated
when a consumer clicks on an ad and is directed to a landing page—a web
site that collects information critical to determining how valuable a
potential customer is—and fills out a form.  This form includes both
contact and intention information about the consumer.  This lead is
then sold to an advertiser, who contacts the consumer to close the sale.

What is an exchange?
An exchange
provides a context for giving and receiving.  It is a simple concept
that solves hard problems, frequently in financial contexts: stocks,
bonds, commodities, currencies, etc.  In these markets, exchanges
provide price data and quality information about the underlying
commodity.  Successful exchanges work hard to stay out of the way of
market participants.  This means encouraging liquidity without
providing any:  jujitsu not sumo.  With access to this data, traders
with many different agendas can meet on the same, level playing field
and compete.

Today in Business Week, Rob Hof reports on the full realization of this vision and how the CBOT has become the first Wall Street exchange to recognize one of the last great frontiers of unregulated arbitrage, namely the buying and selling of Attention on Madison Avenue.

ROOT was inspired by a series of blog posts and in less than two years established an entirely new financial security.  For the group of us who huddled together in a small office off of Brad’s trading floor,  this is the validation of our dreams.  The merciless capitalism of Wall Street has moved uptown to take over the shopping windows of Madison Avenue.  Advertising will never be the same.

Now it is time for Attention to take control…

Ever wonder how algorithms threaten our identities?

Tune into AttentionGate, the new series from the folks that brought you Identity Theft

In the Arrival, the first episode in 1967 of the British TV show The Prisoner, Number 6 says:

“I will not make any deals with you. I’ve resigned. I will not be pushed, filed, stamped, indexed, briefed, debriefed or numbered. My life is my own.” 

If an algorithm is an operation that turns a certain input into an equally certain output, then it can be seen as expressing a unique and consistent identity.  The extent to which this algorithm, in trying to faithfully represent a pre-existing identity, in the process reduces that identity to something less than itself, then the algorithm no longer represents identity.  Instead, the algorithm disturbs, distorts and destroys the identity.  It becomes a new, different identity- maybe still disguised as the underlying, organic, authentic, original human identity but actually nothing more than a bionic simulation. 

When the input for an algorithm is the attention of the user, the success of the algorithm is based on its ability to record attention data at its original resolution, preserved in its original context.  For example, it’s not only the specific area of the page I was paying attention to, but who influenced me to go there in the first place.  The failure of attention algorithms to maintain this fidelity began with “My Tivo Thinks I am Gay”

In trying to correct the machine from thinking he was gay, Mr. Iwanyk “tried to tame TiVo’s gay fixation by recording war movies and other “guy stuff.”  His attempt to recalibrate the attention algorithm is too strong, and its starts to generate “documentaries on Joseph Goebbels and Adolf Eichmann” as output.

The specter of the Holocaust casts its shadow once again.  Data costs merge into datacaust.  Before we had identity theft in the information world, we had
identity theft in the physical world.  This was not about stealing a
virtual identity, but about stealing physical bodies.  Removing human
expression (hairstyle, clothing, jewelry, social circle) and reducing
the individual to a single number was the best way to eliminate human identity without eliminating human productivity.

As the number of prisoners brought to the expanding Auschwitz
complex rose, so did the death rate. But if a corpse were separated
from its uniform, identification was rendered all but impossible. With
often hundreds of prisoners dying per day, other methods of
identification were needed… In May 1944, numbers in the "A" series
and the "B" series were first issued to  Jewish prisoners, beginning
with the men on May 13th and the women on May 16th. The "A" series was
to be completed with 20,000; however an error led to the women being
numbered to 25,378 before the "B" series was begun. The intention was
to work through the entire alphabet with 20,000 numbers being issued in
each letter series. In each series, men and women had their own
separate numerical series, ostensibly beginning with number 1…  from The Center for Holocaust and Genocide Studies

 
Today, the seductiveness of Tivo has been eclipsed by the sensitive ears of search boxes.  Every interest is heard, every desire is remembered, every curiosity recorded on somebody else’s server.  In exchange for capturing all of this information, the search algorithm promises to return relevant links that deliver a profitable return on attention. 

When we wonder about the black box, and ask to see the wizard inside of an attention algorithm, invariably that black box opens up to reveal another one: at the same moment link-based algorithms are losing the battle against splogs and fraudulent clicks, personalized search emerges and seduces us effortlessly into a new attention algorithm; at least until people start wondering about the value of consuming their own personal attention residues and log out out from the platform.

Stay tuned for upcoming AttentionGate episodes on AOL search data and pretext surveillance at HP …