Barack Obama: A Vote for Hope

The American people have spoken. They have spoken for change—and change is exactly what they’ll get—for better or for worse.

The funny thing about change, is that everyone seems to always emphatically seek it. Our lives are not perfect. In fact, we seem to be unhappy far more than we would like. The idea of the ‘American Dream,’ whereby our greatest desires are fulfilled through the sweat of our brows, is all too distant from the average American. We seek change, because along with change comes the hope that our lives can be better tomorrow than they are today; hope that our dreams may eventually be realized.

It is for this reason alone that we cannot be surprised about the outcome of tonight’s election. It should also come as no surprise, then, that in four years—or perhaps eight if all goes well—there will be another republican in the White House.

And so I lay here in bed this evening, unable to sleep, as the college students of Cornell University parade in the streets of Collegetown, chanting for the change they have so passionately sought. Cars continually drive by, beeping their horns over and over, as exuberant college students repeat the name they believe will be the catalyst toward a brighter future. Despite my annoyance with the noise, I find the cheerful air satisfying and heart-warming.

But as I lay here, at 1:30AM, I can’t help but wonder whether their exuberance is borne of the impending policy changes, or merely of hope. I would venture to guess that such celebrations are not unique to Cornell’s College Avenue, and that they are occurring the world over. If the prospect of change indeed brings hope, and hope leads people to believe in a brighter tomorrow, then the self-fulfilling prophecy will be served. Obama may not have to change a single policy or pass a single statute to restore the economic and social welfare of our nation. His very presence in the White House, as a symbol of change, will in fact lead our country to a better future. Perhaps this cycle of change isn’t so bad after all.

Some Insight into Human Risk-Aversion

“We organics are driven by emotion instead of logic. It is our fatal flaw.” –Saren Arterius, Mass Effect

Why is it that so few young people are willing to assume the risk of starting their own business? There are several factors I believe contribute to this, which I plan to discuss in a later post. First, I’d like to explore a single over-arching theory that strikes at the heart of human risk-aversion.

Humans are unique among organic beings because we have the ability to plan for the distant future. Many mammals can plan for cyclical events, such as the way squirrels gather food for winter. However, there is no evidence that any non-human species, including primates, can use cognitive reasoning (rather than instinct) to make meaningful long-term plans. Humans can imagine themselves in 5, 10, or even 30 years into the future, and these long-term goals influence our decisions in the present.

It would seem reasonable that our ability to understand how our decisions affect our long-term goals would lead to better decision-making. However, it seems to be quite the opposite. The reason for this, I believe, is that human decision-making is more often ruled by emotion rather than logic. Furthermore, the fear of pain weighs more heavily on us than the prospect of happiness.

To illustrate, lets delve into a few examples. Are college students motivated to study hard for tests by the prospect of satisfaction for receiving a high score? Or do they study to prevent a bad grade that could jeopardize their chances of getting a job or getting into graduate school? Do most adults go to work every day for self-satisfaction and financial independence? Or do they do so because if they don’t, they can’t pay their rent, feed their kids, or live a life they’ve become accustomed to? Why do we try to eat healthfully? Brush our teeth every morning? Dress the way we do? The point here, is that there are two ways of looking at the same scenario—in the proverbial glass empty, glass full sort of way. One side cannot exist without the other. But which side drives our actions? Pain is a far more powerful emotion than happiness, and thus rules our decision-making most of the time.

But why does this lead to bad decision-making? Our ability to plan and imagine the future leads us to imagine painful scenarios we wish to avoid. This in turn, shapes our decisions to avoid these scenarios, even at the cost of potentially greater future benefit. This also leads us to usually take the safer route instead of the path less-travelled, as appealing as the latter may seem, because the unknown holds the possibility of pain. We will take the steady job, even if it’s more mundane and offers virtually no upside. We will not ask that girl/boy we like out on a date because the fear or rejection outweighs the benefits of success.

I am not advocating that people stop studying, working, and brushing their teeth, by any means. However, we must be aware that our tendency to avoid pain forces us to miss out on some great opportunities. We go through life avoiding miserable scenarios in hopes that our ultimate goals will somehow achieve themselves. Sometimes, we have to assume the risk of pain in order to reap greater benefits later on.

Facebook Joins The DataPortability Workgroup?

I haven't posted in quite some time. Despite my distaste for beacon and Facebook's current direction, I've remained silent. However, amongst the plethora of tech news pouring out of CES, one small snippet piqued my interest in particular.

According to TechCrunch, Facebook has agreed to join the DataPortability Workgroup, along with Plaxo and Google. What? Data Portability? Facebook wants to play nice with everyone all of a sudden? Is this the same Facebook that chastised Plaxo and vaporized Scobleizer?

The extent to which this news is significant is not yet clear. However, this announcement represents a huge leap in the direction toward openness; a direction Facebook has been only inching towards until recently.

Facebook understands that openness is the future. In the long-term, applications that fail to integrate with the constantly evolving and growing social landscape will ultimately fail themselves. Furthermore, any new application will be fighting a steep uphill battle, should its founders choose a proprietary route, as Facebook did.

But does this mean that Facebook's desire for interoperability is good for its longevity? Absolutely not.

You see, Facebook was able to create an immense user-base, despite its proprietary nature. They got through the hard part. Now that they have all these users on their proprietary platform, they're going to open up their borders and allow them to trickle out? If Facebook makes it easy to migrate data to other platforms, switching costs will be so negligible that a mass-exodus would be possible.

I understand where Facebook is coming from. They want to grow and expand. But I'm of the opinion that Facebook is slowly dying anyway, and that allowing data migration only expedites the inevitable.

When you blow air into a balloon, you have to to close off the end to keep the air inside. Facebook is planning to open up the end of their balloon, in hopes that more air will flow in. Is this making any sense to anyone else?

If Facebook continues along this path, its doom will come earlier than I had anticipated. Can Facebook beat Google at its own game? Will it be able to fend off the host of quickly innovating startups biting at specific demographics within its user-base? Time will tell.

Facebook: Why Applications Suck

When Facebook opened its API to developers in May, programmers scrambled to grab a piece of the Facebook glory. Now, nearly six months later, more than 6,500 applications adorn users' profiles. They span every conceivable interest and personality type, and yet, they have one striking thing in common: They all suck.

One might wonder why this is the case. Surely, at least a handful of developers would create truly innovative and useful applications, right? Nope. In fact, the way the system is set up discourages intelligent and talented developers. The reasoning for this can be summed up with a simple table:

		Create Popular App	Create Unpopular App
	Innovative Idea	You gain a ton of users, and enjoy the glory for a while; that is, until facebook replicates your idea exactly and pushes for it. Now you have to deal with the granddaddy of applications on their turf. Good luck.	Great idea that just isn’t catching on? Don’t worry. The facebook team, or popular facebook developers, will gladly dumb down your great ideas and incorporate them into their silly existing applications.
	Truly Idiotic Idea	This is where the majority of popular facebook apps exist; virtual object tossing, drink passing, and vampirism. If this is your cup of tea, facebook development is for you.	If you’re idea is so ridiculous that even the 14-year old high-schoolers can’t enjoy it, you might want to consider another profession; like flipping burgers. Maybe virtual burgers.

In sum, the only applications that survive are the ones in the lower left quadrant. This reasoning developers go through ensures that useful applications never really make it onto facebook, and explains why the present applications are so ridiculous. If you have a great idea, you're better off trying to swing it on your own. Sure, users won't flock to your application the day you release it, but at least it won't get stolen or swallowed up by others in a position to do so. After all, what's stopping them?

Furthermore, the proprietary code you're forced to use makes it impossible to develop the application for other platforms. So much for every social network following in Facebook's footsteps; you'll still have to write your applications over and over again. Perhaps Google will change all of that soon enough.

Effects of Ridiculous Applications

The poor quality of the applications leads to decreased usefulness of the service, due primarily to excessive decentralization. But, decentralization and customization are good things, right? To an extent, yes. But why, then, do people often prefer Facebook to MySpace? Consider this example that illustrates a drawback of decentralization.

A while ago, Facebook removed the ability to list one's classes on his/her profile. I suppose the Facebook team had no choice, since expanding the user-base to high schoolers and graduates makes such a thing impossible to maintain. Well, no big deal - you can just add one of a dozen or so applications that lists your classes, right? Not quite. Adding one of these applications only links you with other students in your classes who use the same application you use; essentially, nobody. The result? A previously useful feature that will never again function the way it used to. Good luck finding study partners or searching for peers based on what classes they take!

Furthermore, the applications alienate Facebook's core (and most valuable) users. The heaviest application users are the high-school students, whose fickle hearts and fleeting desires change at the slightest whim. Is this the basket you want to put your eggs in, Facebook team? As soon as they find something more fun, they'll jump ship and forget Facebook ever existed.

The valuable, more mature users are more often than not annoyed by the applications. They remember the days of universality; where everyone's page looked the same. Every profile was neat and clean. They knew where to find things on one's page, and everything was useful and universally connected.

Now, they have to scroll for ten seconds just to see a friend's wall posts. Certain core aspects of the service, like contact information, are either minimized or hidden altogether. They also get bombarded with requests for application additions, as if event and group requests weren't annoying enough! Now, my little (14-year old) sister's high-school friends not only ask to be my friend, but ask me to join in on their stupid little application games. Sure, a simple greasemonkey hack can fix this, but most people think greasemonkey refers to a place where you take your car to get an oil change! The vast majority of users are left to bear the annoying reminders (and sometimes e-mails).

Perhaps things will improve with time, though I wouldn't be surprised to see more news regarding traffic drops in the coming months.

Regarding a "Second Tech Bubble"

Discussion has been floating around for quite some time regarding a Second Tech Bubble. Web 2.0 has been labeled as such by just about every major mainstream news source over the past year, and yet venture capitalists keep puring cash into new ventures, in hopes of discovering the next Facebook or MySpace. So, do the VCs know something that the rest of us don't? Is it really the allure of finding the next Google that keeps them going, or is social software here to stay?

I believe that venture capitalists and enterprising young entrepreneurs both realize that social software is here for the long haul. Not only is it here to stay, but it will play an increasingly important part in the economy, and and in our daily lives, over the next five or so years.

Whether we'll admit it or not, we really are in the midst of the second iteration of the web. Our physical lives - who we're friends with, what we do, and what's around of physical selves, is now as much a part of the internet as the modular pieces of information that comprise the traditional website.

One might argue, however, that what exists now is just the beginning of our web-life integration. Even now, we can live life without the internet, even if for only a short time. Soon, our physical lives and internet presences will be so intricately intertwined that one would be almost incapable of existing without the other. Then perhaps, the connections with the people, places, and information of the world will exist not only while we're at our PCs, but will be with us always, no matter where we go. Perhaps the journalists will call this Web 3.0. I'll leave the dramatic labeling to them, and just stick to saying that it will happen.

However, it isn't all rosy on the Web 2.0 front. Perhaps the valuations for the social networks of today are a bit over-the-top. Microsoft's recent investment in Facebook values the service at approximately 15 billion dollars. It's been said that MySpace is worth many times this ludicrous sum. The truth is that these services aren't worth one-tenth there valuations - as they exist right now. The ideals they represent, and the potential revenues their user-base could bring in, are the bases for these valuations.

Will earnings grow into their reported valuations? Perhaps. These networks would need to find revenue schemes that match the values of their user communities, and leverage their unique user-bases to find new ways of earning money. They have the potential to be worth what people say they're worth, but as it stands now, they're really not worth a fraction of what's reported in the news. In the near future, these social networks, or perhaps new ones that don't yet exist, will find ways to create value from the communities they establish.

Lets just hope that it happens soon; Otherwise we really may be in the midst of a second tech bubble....

Facebook: The Failure to Capitalize on Localization

What makes a Facebook user more valuable than a Myspace user? More time spent using the service? Loyalty? These things may be true, but what it boils down to is the geographic density of the user-base.

Facebook users are clumped into geographic heaps – each college campus representing a local community. This is an advertiser’s dream, because they can effectively influence the physical lives of its members, as opposed to solely their online behavior. Here’s why it matters:

The majority of our waking lives are still spent living life rather than sitting at our PCs. Purchasing behavior is no different. More than 98% of all retail purchases still take place at brick-and-mortar retailers. At a projected annual e-commerce growth rate of 14%, it doesn’t look this will be changing too drastically anytime soon.

The problem is that almost all of the money poured into online advertising is geared toward reaching that meager 2%. The brick-and-mortar institutions in your locale – where 98% of consumer spending takes place – have no way of using the internet to effectively reach their local audiences. Sure, Wal-Mart and Best Buy can advertise nationally. But your local Wal-Mart and Best Buy, in addition to all of the sole proprietorships in your area (that comprise half of total spending), have no easy way of reaching you.

Facebook could have solved this problem through localization – that is, connecting the people, events, and businesses in each geographic locale together. Due to the clumpy nature of its user-base, it could have connected its users with their local retailers, restaurants, and happenings in their respective communities. This scheme would have the potential to change the face of advertising forever, and result in Facebook becoming a dominant part of the United States economy. Additionally, this type of physical value would be nearly indestructable, guaranteeing Facebook’s long-term sustainability.

No other web application before it, and none since, have had the opportunity to do so. And yet, Facebook blew it. You might say that Facebook is 'doing just fine,’ but in reality, there is no clear revenue model in sight that effectively monetizes the community Facebook has built. It has become just another social network. Localization could still be utilized, but the direction the company has taken in recent years makes it more difficult.

Rebuilding the Revenue Model

The following is what Facebook’s revenue model could have been. We’ll stay within the confines of Facebook’s (formerly) core audience, college communities, for simplicity.

Local businesses should have the opportunity to reach their target customers – the college students. Pizza parlors and Chinese restaurants should be able to advertise themselves, and even offer discount specials, to their communities. Supermarkets and retailers should have the opportunity to do the same. Facebook doesn’t need to lift a finger, short of setting up the framework, to do it. Local businesses should have the ability to join Facebook, under their own categorization. They can have their own page, in the same way that groups presently have their own pages. These businesses should then have the ability to insert some credit card information, fill out a few simple form fields, and thus, serve up ads. This sounds like an improved version of the Facebook flyer system, but it’s only the beginning of the usefulness of the model.

Once these local businesses are all online, they can be searched for by users. In the mood for pizza? Need laundry done? The businesses are just one search query away. It would effectively create a community yellow pages. Facebook could even go one step further and provide tools for setting up take-out orders and reservations for restaurants, pickup for laundry, online purchases (for pickup) for small retailers, etc. Of course, Facebook takes its cut. The possibilities are endless, especially when you consider expansion outside of college communities.

Why Facebook hasn’t yet leveraged the geographic density of its communities by involving local businesses is beyond me. However, there’s a definite opportunity here for those gutsy enough to pursue it. If you can create a Facebook application that effectively does this, you’ll be king of the hill – at least until Facebook creates its own competing application. Or, you can keep creating apps that pass virtual drinks between friends...

There’s another strategy involving the last component of localization that would provide yet another revenue channel for Facebook. I won’t give any more of this away, since it infringes on a startup I’m presently working on.

My advice to all of the other young entrepreneurs out there, if I’m at all qualified to give advice, would to be keep localization in mind when planning their startups. Facebook won’t be around forever (for reasons I’ll be discussing in later posts), and if you’re in the position to leverage localization, you can succeed where Facebook has failed – and reap the monetary rewards that come with it.

The Inevitable Fall of Facebook

One can't avoid being inundated with reports about Facebook these days. Even now, as its fourth launch anniversary nears, web application blogs and even mainstream sources report on Facebook as if it's the best thing to hit the web since Google. Recent predictions claim that Facebook is poised to overtake Myspace and keep growing until its user-base reaches one billion users. Well, here's one longtime user that doesn't think so.

I've been a Facebook user since May of 2004. I've seen every evolutionary step and minute innovation. I've read all of the criticism, and a great deal of the praise. On the surface, it would seem as though Facebook's present position is as strong as ever, flirting with 40 million active users. However, Facebook has made a host of (arguably) poor decisions that have culminated in a tradeoff between usage-hours and long-term sustainability.

In a continual attempt to increase the breadth of its user-base, Facebook has abandoned a great deal of its core competencies, and alienated its original and most loyal users. Furthermore, it has failed to capitalize on localization, its greatest asset and point of differentiation. Its vague revenue model, and excessive decentralization will also contribute to its collapse. I will discuss each of these points in detail in future posts.

My confidence in these failures is so great that I've put an upper-bound on Facebook's expected life: 5 years. That's how long it will take for Facebook to become a non-contender in the sphere of social computing. Certain strategic changes could dramatically lengthen this prediction, but given the current trends, that's my forecast. Sound crazy? Perhaps. Digest my reasoning in the next few posts, and decide for yourself.