The Now Economy

HedgeStreet has been running ads on the radio locally. A couple of people (Marty was the first) have told me that they’ve heard the ad on KCBS. I couldn’t find anything on HedgeStreet.com or on KCBS about it. (Don’t people ask broadcasters and advertisers about ads they’re running often enough to make it standard practice to announce the campaign in a public place?) Anyway, after googling around for a while, I discovered that Michael Covel of Trend Spotting has a short note about the campaign with a pointer to a recording.

The ad starts out by asking “Are you a person with strong opinions?” The pitch seems to be focused on argumentative people. (”Do you find yourself getting into little debates with your buddies about things like whether Bay Area housing prices will continue to go up?”) The pitch includes a short list of areas in which they have claims (”gas prices, housing prices, oil, gold and more”), and touts the fact that the trades (they never say “bet”) are person-to-person. (”If you buy a Hedgelet that says that gas prices will rise, then someone else is buying one that says that gas prices will fall.”)

I think HedgeStreet could turn out to be very interesting and quite valuable, but at this point, their set of claims is still quite limited and all very short term. It might be fun for some people to bet on the short term direction of gas and crude oil prices (they have claims due September 1, September 30, and December 30), but in order for people to realistically hedge on housing prices, they need much longer time horizons.

They have been adding to their list of subjects. They now have metals, crops, currencies, economic indicators (sales, employment, CPI, interest and mortgage rates), as well as fuel and housing prices. This is much broader than when they started. And the markets are quite thinly traded. If they could add automated market makers to narrow the spreads, it might make it much more interesting for people to make trades which would be good for price makers, too.

Courtesy of Marginal Revolution’s Tyler Cowen, I read about the bet between Matthew Simmons (a Peak Oil pundit) and John Tierney (a NY Times columnist). It looked like another case of interesting public bets demonstrating that there was a contentious issue going unresolved in the public debate, so I proposed a claim for the FX market modeled on my previous claimNLud on a 1995 bet between Kevin Kelley and self-proclaimed Neo-Luddite Kirkpatrick Sale. I persevered, even in the face of James Annan, claiming that it was all a publicity stunt, and that Simmon’s bet shouldn’t be taken seriously, and even pointing out the financial markets where similar claims could be traded. Today I read EconBrowser’s take on it all (thanks to Tyler for the pointer) and decided to withdraw the claim.

EconBrowser points out (as James tried to tell us) that Simmons is making a cheap public bet when he could be making an extremely lucrative investment ($130,000 return for a little more than the $5000 he put in the bet, or $1.3 Million in 5 years if he believed it enough to invest $50,000) if he believed what he was saying. If he made the investment (at much better odds than his cheap public bet) he would be telling the market that oil is getting rarer in way that the market would react to. As it is, I’m sure those who trade in oil futures either laughed at Tierney’s article or ignored it entirely. A friendly bar bet (even at $5000) doesn’t impress the traders the way a change in the price or number outstanding of call options would. So I’m going to withdraw the claim. I was already convinced that it wouldn’t trade at interesting prices; apparently everyone else knew it, too.

I’ve just uploaded a new version of Zocalo to SourceForge. It’s available as a file download or via CVS. Here are the Release Notes and Change List. (Set your CVSROOT to :pserver:anonymous@cvs.sourceforge.net:/cvsroot/zocalo.)

Kevin Hughes built us a pretty home page in the obvious project location on sourceforge. (see the thumbnail on the right) People who know the project name and that we’re on SourceForge will now be able to quickly find a reasonable description of the project.

The new version displays explanations to an experiment’s subjects of the values behind their scores. It also adds a countdown timer so the “Time Remaining” field updates as the experiment proceeds. We’ve changed the login page so the users have to supply a user name rather than choosing one from a list. We also fixed a performance bug in the javascript that was slowing down redisplay significantly.

Kragen Sittaker reviewed The bulk of the javascript code (stripchart.js, used mostly for updating the strip chart), and his suggestions have been incorporated. Mike Linksvayer noticed some mistakes in the INSTALL notes which have been corrected, and suggested the CVS release.

The Wall Street Journal (registration required; bugmenot didn’t work) has an article on rising prices at the pump, titled “New Options for Saving at the Pump”. Most of the article discusses credit card enticements, membership club inducements and websites that help you find the cheapest gas in town. But they also have a paragraph on a web site that is now accepting wagers on the price of gas. The side bar (see image) suggests that “one way to cut fuel costs” is to “bet on the price of gas.”

One Web site, Pinnaclesports.com, started taking wagers earlier this month on where gas prices are headed. The site effectively allows people with long commutes to hedge their exposure. For example, if you think average gas prices in New York or Los Angeles will hit $3 by Jan. 1, you can bet $110 to win an additional $100. If you think prices won’t hit that level, you can bet $110 to win an additional $100.     [chris: that's the same as .476 bid/.485 ask].

Among my top few prediction Market sites, the only other one that is covering gas prices is Foresight Exchange. There was a recent spike (to 90¢!), but the odds there are 22% for the national average to reach $3 by the end of the year.

Two responses to the WSJ article:

• Is the WSJ going to make a habit of looking for market odds or a betting market whenever they can connect it to a story? This would be good built-in advertising for any provider that can move quickly to add topical claims.
• Pinnaclesports.com doesn’t meet even pretty loose definitions of a prediction market. The odds seem to be set by a bookie rather than by offsetting bets of people with different opinions, and the odds are presented in a few different gambler-centric formats that are hard to read as probabilities.

There’s a new prediction market coming soon with some interesting attributes. ProTrade is going to join the ranks of real money markets, and will concentrate on pro athletes. Their big twist on the market is that they’re going to follow the ideas of Billy Beane as presented by Michael Lewis in the book Moneyball. I’m a big fan of the book, and it seems like a wonderful basis for metrics for measuring athletes generally. ProTrade promises to develop statistics for all the major sports (starting with football, basketball, and baseball) that will actually reflect the contribution of each player to winning and losing the game.

Similar in concept to Yahoo!’s Tech Buzz game, the securities have a market price, and pay dividends as the season progresses based on the individual athlete’s on-field performance. Traders are encouraged by the dividends to ensure that the market price reflects the future stream of dividend income. I suspect that all involved understand that some traders will be buying their favorites regardless of what the statistics say, and they will help increase liquidity so that traders who care about the fundamentals will be able to continually make money.

I have some doubts that creating useful statistics is as straightforward as ProTrade makes it sound. One of the things that Lewis made clear in Moneyball was that Beane had to continually evaluate the statistics that the Sabremetricians presented to him, to figure out which ones not only described the past, but could be used as a guide to action in the future. As more coaches and athletes figure out which statistics actually correlate with success, the smart money has to find more reliable and more obscure statistics in order to maintain an edge.

I think ProTrade may have a winner here, but I won’t be putting my money on the line until they add hockey to the list. (Other sports on their coming soon list: golf, auto racing, and soccer.) I haven’t followed the big three sports recently enough to have any instincts about players to compare to the statistics. And I’m not going to learn who all the players are in order to join the game. After all, it just entertainment

Thanks for the pointer to Art Hutchinson

Addendum: Dave Porter pointed out that ProTrade seems to be play money. That’s what I thought at first, and apparently got confused while writing the post since they have FAQs on financial matters, and on whether it is gambling. As I look again, its’s clear that it’s all play money.

Mark Pilgrim has radically transformed MagicLine into MonkeyDo, a new kind of “browsing assistant” that guesses what kind of page you’re on and offers to post it to your personal del.icio.us bookmarks log with the appropriate tags.

I’m not sure he’d agree that there’s a line connecting the dots of MagicLine and MonkeyDo — you can see his attached description for clarification — but I see them both as ways to “evacuate” data detected while surfing to a semi-stable remote store, for eventual reuse such as filling out forms.

His package also includes a ridiculously useful — as in ridiculously 1) complicated and 2) annoyingly absent from the DOM — subroutine that ‘uninherits’ all cascaded style sheets (though Aaron Boodman followed up with an alternative CSS reset technique).

Mark Pilgrim announces MonkeyDo

Think of it as Clippy the Useless Office Assistant, only for the web, and actually useful. (I actually considered naming it Cl.ip.py, but thought better of it.) It sits in the background and watches as you browse, and if it recognizes a type of page that you consider interesting (as defined in Tools –> User Script Commands –> MonkeyDo options), it will offer to post it to del.icio.us. Or if you prefer, you can tell it to automatically post certain types of pages, and it will simply notify you when it has done so.

The heuristic for identifying different types of pages is, of course, somewhat messy, and will inevitably lead to embarrassingly hilarious mis-identification, which someone will no doubt bring to my attention.

Mark’s announcement of MagicLine

It tracks your browsing and collects - page URLs - page titles - referrers - Author, description, keywords from meta tags - Technorati tags from rel=”tag” links - XFN links - autodiscovered RSS/Atom feeds - autodiscovered FOAF files Then you can press Control + Shift + L anywhere to get the MagicLine prompt. Start typing, and it autocompletes based on all the data it’s collected so far.

Tim Bray had an (in)famous series of blog postings he called the Technology Predictor Success Matrix, or TPSM. It came up again recently in a debate over the validity of the Web2.0 moniker. I thought I should try applying it to see how Microformats might fare…

In his original series, Tim Bray evaluated 7 big winners from the last few decades of the computer industry, and 7 big losers according to 9 metrics. The only one that (IHNSHO) was a useful predictor was the 80/20 rule. Nonetheless, the complete list includes:

Compelling idea

The idea that the web is “full of data” just waiting to be harnessed by computers seems so compelling that the entire Semantic Web movement was founded on it. Tantek originally got quite a bit of mileage out of coining the term “lowercase semantic web” to explicitly signify how closely the microformats vision drafts behind the great expectations for the Semantic Web.

More specifically, however, the microformats idea is to weave semantics into ordinary web pages — using a feature primarily intended for style sheets to encode hints about meaning, too. So we can’t simply share the, say, 7/10 score of Semantic Web.

Personally, I think that Microformats comes even closer than XML ever did to the vision of “imagine a web where you could express <price> as easily as boldface. So for the idea of “semantic highlighters” — the idea that anything you can select in a browser can also be marked up as meaningful — I’d rate it a 9/10.

WWTBT? I don’t think Tim would agree — his standard for a 10/10 is AI, and a 9/10 is VRML; he’d rate even breakthrough ideas like the Web or Java in the 5-6 range because the meme is NOT possible to transmit in a few words. So perhaps I’m wildly off by conflating compelling-to-web-geeks with compelling-to-grandma. Because all of the microformats work to date is still less compelling to grandma than dragging-a-satellite-map-image around.

Technical elegance

As an advocate, I’d like to say microformats are an elegant re-imagining of the role of the CLASS, REL, and REV attributes in HTML — but it’s still a hack. Perhaps I could award a 9/10 for cleverness, but that’s not exactly the criteria. To wit: “an entry gets a ten if the inventors are up for the Turing Award; a zero goes to glue-and-string, duct tape and sweat, the things that only work despite themselves.”

Well, there’s no way a microformat’s going to win the Turing Award; it’s not even clear it could ever win the System Software Award. Heck, given the CS/AI community’s thrall to the Semantic Web, I’m not even sure a grad student should pursue a grand-unified-theory of microformats in pursuit of an Doctoral Dissertation Award (instead, look to past winners such as machine learning to translate existing XML data sets).

So, while I’d like to think microformats are elegant, I’d have to score it closer to 3/10.

WWTBT? He might rate it even lower, since an especially-important indicator of elegance for data-formats is the ease of ‘downstream’ processing. It’s spectacularly easy to ‘access’ members of a microformatted data structure for formatting using CSS selector syntax, but frankly, quite painful to do so from XPath or from the DOM. It may be unfair that so many developers have to sit down and write their own getElementsByClassName() function, but it still detracts further from microformats’ elegance score.

Standardization process

What process? No, really, just kidding. Actually, it’s significant that the microformats movement is not aligned around any existing standards body. CommerceNet, to the degree we can be helpful, provides a neutral home for it (and develops some software of its own), but is not a ’standards body,’ if indeed it ever was one.

The social norms that have developed around microformats so far emphasize the need for research into working systems and an interest in codifying what’s common practice already. It does not pay much of a strategy tax yet, because there aren’t so many existing formats that new ones are beholden to the past. And it might be said that the whole philosophy favors ease-of-authoring over ease-of-parsing, but at least it’s open and upfront about its tastes. I’d give it a 3/10.

WWTBT? Tim quoth “Open Source should really have a question mark rather than a zero, because it’s entirely oblivious to standards, it just cares about what works” — that’s probably closer to the spirit of microformats than, say, the Semantic Web (which might be in the sixes, based solely on the profusion of specifications!

(Apparent) Return on Investment

The posited return (to readers) of investment (by writers) is that microformatted data can be reused more easily. This is certainly possible today — particularly on the Mac, where a bit of XSLT wizardry turns blogs into live calendar feeds in iCal, or exports hCards to AddressBook.

However, the ROI proposition here has two weaknesses: the costs and benefits are allocated to different actors, and many of the ‘intelligent apps’ that consume microformats don’t exist yet. [To be sure, not many exist for the Semantic Web yet, either] Since the key is the apparent ROI, I have to admit that many folks have adopted microformats for the cool-factor; or how low the “I” is (’just tweak your templates!’) than by a compelling, documented return as yet. I’d guess it’s 3/10 as yet, but I’d hope it hits the 5/10 range of XML or the Web soon.

WWTBT? As he said of the Web: “the return on viewing everything as net-hyperlinked text through a document rendering engine was far from obvious.” I think that he might even place the ROI closer to that of SGML (1/10, in the it’s-good-for-you! eat-your-vegetables! sense). I wouldn’t be that harsh. That’s where I’d place the ROI on RDF at present <duck/>

Management Approval and Investor Support

The main limitation to measuring approval and support from these two classes of ’suits’ is actually being aware of this technology’s existence in the first place… In fact, we’ve done a reasonable bit of exposing the VC community to microformats (e.g. our workshop at Supernova, persuading various darling startups to adopt them); and at least the scientifically-inclined bits of Corporate America may have seen the Semantic Web piece in Scientific American. But as yet, it’s probably closer to 1/10.

WWTBT? These two predictors in particular can be accused of circular logic: these scores vary significantly across the technology adoption lifecycle. I believe his scores were for the peak of each movement, so maybe he’d cut microformats a bit more slack a few years from now…

Good Implementations and Happy Programmers

You’d think these two qualities would go together hand-in-hand, but in fact there were a few divergent cases. Not least was XML, which he gave a 9 for ready-to-ship and a 3 for fun-to-work-with. Since microformats aren’t a single monolithic technology with an accompanying test suite, it’s that much harder to claim there are good implementations out there (2/10), but there are happy hackers (4/10), and in a transparent attempt to slip in a new category, I’d venture there are happy authors, too (6/10).

WWTBT?“A zero would go to something that arrived as idea-ware and then turned out to be hard to build.” I think that he might classify microformats as closer to idea-ware than I’d be comfortable admitting — but part of the evidence of that is the movement’s self-conscious mantle of promulgating philosophy as much as specifications.

80/20 Point

And so we meander to the punchline — because while the scores haven’t been pretty so far, they’ve all been measured against factors that were largely uncorrelated with eventual success. This one proved key — whether developers could enjoy “80%” of the benefits of the technology after only the first “20%” of effort.

Early in the adoption cycle, the great appeal of microformats is how well-integrated they are with existing idioms for CSS formatting and XHTML hyperlinking. Furthermore, any author can adopt them because they’re plain, inline HTML — no fussy file attachements or external links, no separate languages to parse or scripting languages to learn.

And then there’s the ace in the hole — search engines. Unlke the early Web, this time around we already have lots of investments in scalable, publicly-available, and essentially free services that can adapt once to take advantage of microformats innovations and add value to authors overnight.

Consider the explosive growth of tagging — simply because Technorati/Del.icio.us/etc provide easy aggregation of all the other content out there that hadn’t been connected directly before. Or of vote links, or no-follow, or the XFN friend-mapper, or …

Since microformats appear to be one of those technologies that, rather annoyingly, manage to “work in practice, if not in theory,” I’d award it a 7/10. That puts it behind the stripped-down origins of the Web and the PC (10s), but just shy of SQL or XML.

WWTBT? The 80/20 Tribe’s offerings are denounced as “Just a toy!”, while they hurl back accusations of pedantry, big-system disease, and so on. Amen!

Next time, I’d like to hear back comments (by email, unfortunately), and see if we can’t tackle Everett Rogers’ Diffusion of Innovations model…

PS. For extra credit, someone might want to debate why I didn’t use hReview for this review; and if so, how exactly would I want to express this? Would I use Tim’s original posts as “tags”?

CN collaborator (on Zocalo) and inventor of Prediction Markets and the term “idea futures,” Robin Hanson has been through quite a journey to getting tenure in the world of economics. He started out in artificial intelligence and… well, Jeremy Kahn’s profile from two years ago does a better job than I could of laying out the story. Read on for the full version of this blogpost and his article, “The Man Who Would Have Us Bet on Terrorism.”

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CommerceNet’s newest Board member, Prof. Raj Reddy, has added a new honor to his surely-crowded mantelpiece. This time, it’s for the potential impact of robotics towards a cleaner environment.

Reddy Awarded 2005 Honda Prize From the Honda Foundation

The Honda Foundation has awarded Carnegie Mellon University professor Raj Reddy with the 2005 Honda Prize for his work in computer science and robotics, particularly as it pertains to “Eco-Technology” that is not only efficient and profitable, but also environmentally friendly. Reddy was recently honored as the first recipient of Carnegie Mellon Qatar’s Mozah Bint Nasser Chair of Computer Science and Robotics, and was co-chair of the President’s Information Technology Advisory Committee from 1999 and 2001. His achievements in artificial intelligence earned him the ACM’s 1994 ACM Turing Award, while his work in developing countries secured him a Legion of Honor in 1984. The Honda Foundation cited Reddy’s status as founding director of the Carnegie Mellon Robotics Institute and his commitment to accepting and teaching researchers from companies and universities all over the world in an effort to improve the international robotics community. “As a result, robotics has become one of the most promising technological areas for today’s industry as well as future society in the sense that it helps create more harmonious relationships between man and nature through the involvement of intelligent machines,” declared the foundation. Carnegie Mellon Provost Mark Kamlet pointed to Reddy’s current attempts to bridge the digital divide through the PCtvt personal computer and the Million Book Digital Library. Dean of the School of Computer Science Randal Bryant lauded the professor for his dedication to the concept of technology that improves the quality of life while keeping humans’ environmental impact to a minimum. Reddy’s areas of study include AI, human-computer interaction, and speech and visual recognition by machine.

Click Here to View Full Article

To view Raj Reddy’s ACM A.M. Turing Award citation, visit
www.acm.org/awards/turing_citations/reddy.html.

Fortune magazine has done an impressive job of tracking the developments in prediction markets (with props to BW and Economist, too, of course), but it will be a long while before we get past the emotional and overhyped reactions stirred up by Poindexter’s tenure at DARPA. In the full version of this blogpost, read on to see the latest article on Intrade, by Andy Serwer.

…Notice that we used the word “bet” above. Because it involves putting money on everyday events (like sports), trading contracts on Intrade may seem a little like gambling. But Intrade executives say it’s not: For one thing, Intrade takes only a commission and does not act as “the house” like a Las Vegas casino. Also, investors on Intrade can, at least in theory, use skill to hedge their risk, as they do in the equity market.

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