Seth Goldstein

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.

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

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.