The world is changing at a speed never before seen, and it’s getting faster. Technology is the driving force behind this change, and Silicon Valley is one of several hotspots where this technology is being built and transformed into businesses. Facebook has changed how people all over the world connect with one another, Kickstarter is fundamentally changing how a business can get off the ground, Path did something very bad by going out of their way to download people’s address books. We need real journalists and real watchdogs to report critically on these businesses, how they’re making money, and weighing in on whether those business models, revenue streams, and ethical decisions make sense.

TechCrunch, the de-facto homepage for “news” about tech, does absolutely none of this. Lyons gets full points for pointing out, Jon Stewart style, just how terrible the state of tech journalism is–if TechCrunch and the like are any indication.

I won’t spend too much time complaining about TechCrunch, it’s terrible and has been for a while. Clicking a link and seeing techcrunch.com resolve in the address bar is always unpleasant, and sometimes morbid curiosity keeps me around to see just how bad the article is going to be. Siegler’s posts probably being the worst–he can neither think nor write.

In terms of reading tech news, nothing makes me happier than seeing that the URL I’m loading resolves to bloomberg.com, you know, real journalists. But Lyons is a real journalist too, and his opinion pieces are well-reasoned and take a stab at the big picture. We badly need more of this. Tech is too important to be left to the bloggers.

The problem is of course money. So far journalism has failed to adapt to the internet. The intermediate solution, or rather the one that’s currently working online, is the Gawker/TechCrunch business model: you can monetize page impressions, so do whatever you need to to get them. The result is a fast and continuous stream of sensational drivel.

People take information for granted. There’s a reason why companies like Gartner and Forrester can charge companies tens of thousands of dollars a year for information and expertise: at its best, this research helps them make better decisions. With techblogs, we’re getting what we’re paying for.

This isn’t a problem unique to the Valley, and no one but The Economist is having much luck staying afloat. While I agree with Paul Graham’s call to Kill Hollywood, I think an even more important project is to Save Journalism. There’s a lot of benefit to those of us who care about tech, like getting access to high quality, reliable, considered analysis, and what works in tech may work for journalism in general.

Access to good information is a public good, we all have a role in making it available.

If we look at all religions as businesses, they have a great cost structure: many incumbents own the property they operate out of, their core product is information, and their main costs are labour, educating new labour, and property maintenance. It’s probably not a stretch to say they have no money tied up in inventory. It’s probably also fair to say that newer churches spend a bit more lavishly on marketing, which just another name for R&D about how to get young people to join up. Organizationally, most religions are bureaucracies, as are most companies. It just so happens that a bureaucracy is a very efficient way to organize employees and direct their efforts towards one specific goal or another.

Their revenue structure is variable, ranging from optional donations to the 10% tithes that many faiths expect of their adherents. They also have the enviable status of being tax exempt, meaning that each dollar of revenue is a real dollar of profit. I would also not be surprised if churches were involved in financial services or investing in some low-risk capacity.

Churches offer people a good deal of value, and we’re now seeing competition as other vendors offer those same values in one capacity or another. Here’s an incomplete list along with some pseudo competitors.

Religions offer people a powerful message about what each of our places is in the world and helps us to feel better about it. So does Starbucks. For every sermon delivered on the good life, there are probably as many customers who fully buy into the marketed belief that by patronizing their local Starbucks and paying fair trade prices for coffee, they’re using their spot in the world to do some good. There’s a fantastic short video where Slavoj Žižek explains how this practice is morally bankrupt, and the economics aren’t favourable either. The fact is that by messing with prices fair trade causes food shortages in developing economies. This is not good. All the same, people clearly want a way to feel good about their place in the world and the impact they’re having on it.

Continuing with the Starbucks example (although Apple is another great candidate), religion gives people a sense of community. Companies are now looking at ways that they can build communities engage customers for the purposes of marketing, innovation, and research and development. My friend and colleague Mike Dover wrote the authoritative book on doing this online. Research and development is great, but if people are willing to buy into a likeminded community for both the big questions of existence and their personal philosophy on coffee, surely there’s some middle ground about other important personal issues. Even software design can do this, 37signals is open about their very specific beliefs around what software should do and how it should work, and they have a vibrant community of people who feel the same way.

Clearly there are benefits to getting people involved in a community like this, as people don’t go door to door explaining something to strangers if they don’t feel strongly about the content they’re sharing. These people are also unpaid, and in fact pay their local organizations in addition to taking on marketing costs. Think how many iPhones Apple has sold because of peer pressure alone.

One of the defining characteristics of modernity is a loss of the feeling of enchantment with the world. We see this everywhere: our smartphones are so magical that we’d have been burnt at the stake in past times simply for checking facebook on one in public, yet we’re entirely blasé about the incredible things they do for us.  For thousands of years, religion has catered to some core needs that people have, and religions are, for better or worse, losing their monopoly position as the vendor to supply those needs.

As we look forward to make new businesses, we should recognize this truth about the world, people don’t just want products that solve problems or make them feel good, we should be building companies that solve hard, personal problems, and make us feel good by doing real good. This there is tremendous opportunity here, both for society and business.

At its core, Facebook is built on the assumption that people are willing to have their private lives intimately examined by marketers in order to talk to their friends online for “free.” Is this a valid assumption? Facebook is hoping it is.

Other businesses have come and gone because their core assumptions about the world were invalid or outdated. Kodak, Blockbuster, and (soon enough) The Yellow Pages were all companies that just couldn’t accept that the world was no longer what they believed it was. These once-vibrant companies started down a hill of decline because they didn’t ask and answer the hard questions at the heart of their businesses. Given the right moment each of them could have been saved—by Philosophers.

But first, some background.

For most of history, the future looked more or less exactly like the past. This is no longer the case. The world has seen as much change in the past 50 years as it did in the previous 500. Capitalism has an interesting side effect: progress. But all this scientific, technological, and social progress has a side effect of its own, complexity and confusion, which can easily lead to incorrect assumptions about the world. Said another way, all this change has made the world easier than ever to misunderstand. Businesses need to understand the world as it is, because capitalism rewards understanding.

This may sound abstract, but everything in the world started out as an idea: democracy, capitalism, even the computer you’re reading this on right now. Ideas are tools that we use to model the real world and structure events around principles that our minds can grasp. Businesses are ideas too—in a much more significant way than a balance sheet or shareholder report might suggest. And businesses, like all ideas, are built.

Like building a house, there are right and wrong ways to build an idea. A house needs to reflect facts about the real world to survive earthquakes, floods, and keep the people inside warm and alive. In the same way, an idea or business model needs to be consistent with itself and the world at large. And like a poorly built house, an idea that isn’t consistent with reality will collapse under its own weight. A successful business is built on the competent execution of good assumptions; it’s able to recognize and adapt to changes in the world.

For bad ideas and business models, it used to be that failure from inconsistencies took some time; competition was slow and expectations were low. But the speed of progress and the accompanying intensity of competition have put all business models—and all ideas—under tremendous pressure. Companies that make bad assumptions about the nature of the world are quickly punished for doing so. This is where Philosophers come in.

Far from being a bunch of crusty old men debating the minutiae of obscure terms, Philosophy is two things. First, it’s the process that structures serious attempts to understand reality—to create a consistent mental model of the world. Second, it’s the surviving record of those attempts. It’s a shame that when people think of the discipline it’s the second quality that comes to mind because the first one is exciting and essential: Philosophy is the set of tools that test ideas to make sure they’re properly built. These tools work very well; they gave us mathematics, economics, psychology, and of course science to name a few.

When a Philosopher sets about answering a question, they start at the start and nothing is off limits. This is a characteristic of those in the Liberal Arts, but given how seldom these skills are explicitly celebrated is it any wonder these students chronically undervalued—both by employers and often themselves? But with some slight tweaking each can offer much to the other. Businesses need to recognize that there are right and wrong ways of looking at the big picture, and Philosophers (and Sociologists, Historians, Political Scientists and others) need to recognize the merits of what they do—outside of the historical record.

Given the amount of time, energy, and money that’s needed to bring the ideas to life as companies and products, why not test-drive them first? Besides, the world is far too exciting a place to be run by only MBAs.

This is a repost of something I wrote for T4G’s Ideas & Insights. See the original here.

Because having higher karma is desired, users behave in ways that will get them karma (karma-whoring). Similarly, users who do not agree with the fat part of the bell curve are punished by losing karma. Posts with low karma are sorted to the bottom and are less-read and set out from the chorus.

It follows that the way to get the most karma is to say stuff that most people will agree with, that is, to be average.

It’s therefore in the interests of reddit users to be as agreeable and indistinguishable as possible from the average voice, giving us the hive-mind of tedium and mediocrity that we see.

It’s also worth noting that there’s a massive selection bias inherent in participating in a web community that calls itself “the frontpage of the internet,” so this pressure to conform is applied an already pretty homogenous mixture of people. It’s a bit chicken and egg, but the result is bad photoshops either way.

Edit: A bit more. Doing some armchair economic analysis on this.

While massive inflation is probably a problem, the fact that nothing is being bought with this currency probably takes a big part of the downside off the table, it’s not like the goods that people would buy with their karma are getting more expensive, because there are no goods.

It’s the signaling that’s messed up. In normal money economies, money acts as a production signal. When money is paid for a good, if the price is “too high” the price acts as a signal to produce more of that good. If you’re selling something and people will spend whatever price you set, you’re clearly going to want to make more–and anyone who witnesses this will want to get in and get a piece of the action. The result is that the price is bid down.

Karma however is not scarce, therefore people will give it away readily–there’s no downside to doing so. This means that posts/users who would not have been good enough to get karma if karma was scarce will be given some, resulting in an “overproduction” of that type of post. There’s therefore an overproduction of the type of average posts, and an incentive to make average posts in order to get more karma.

But capitalism wasn’t perfect, and the first generation to come of age in the new order, the baby boomers, saw much with the world that they disagreed with. In rebellion they turned into hippies. But then something interesting started happening: business realized that hippies were just yet another consumer segment, and so they started offering products and services that spoke to the needs of this new generation. Capitalism was dynamic enough to profitably embrace individualism.

Seeing this, the next generation became intent on not selling out. The young people of the ’70s and ’80s rebelled in even more visibly, these were the punks. They tried to make their rejection of mainstream society so obvious that they went so far as to cover themselves with tattoos and wear spiked leather just to stand out. Capitalism of course didn’t care, and learned to treat this second rebellious cohort as yet another consumer segment. For more on this, check out Heath and Potter’s Rebel Sell.

After the punks came my generation: Gen Y, the baby boom echo, the net generation–or whatever you want to call us, we’re self-centered enough to reject any collectivist name.

But, by virtue of us all being born after all the big fights for individual freedom were picked and “won” by past generations, we have very little to rebell against. Someone born in a Western democracy can pretty much live their life however they’d like to: there are products and services for every lifestyle, and no one much cares what you do so long as you don’t make a mess.

This leaves us with a tricky question: what the hell are we supposed to do?

Adbusters has a snide answer. Lacking anything substantial to do, our generation has started appropriating and remixing the counter-cultural relics of past generations and created the hipster movement. When I say hipster, I don’t mean it with any judgment either positive or negative, they are just the people who, for better or worse, are participating in this remixing and representation of past cultural ideas.

But there’s a wrinkle: our culture cherishes individualism, but actually doing something new to distinguish yourself is very difficult. Instead, people express their individuality by remixing the ideas that have come before. We have enough history that the number of possible permutations is almost literally limitless. The problem is that as soon as an idea catches on, by definition it’s no longer individualistic. With the internet, this can happen faster than ever before. This drives people to go back to the bin of past cultural idea to dust a few off and stitch them together into something we’ve never seen before–hoping to get some mileage out of it before it becomes the next thing. For better or worse happens entirely under the gaze of marketers and is great for consumption.

But dank bars and after hours concerts aren’t the only place where we see people exhibiting this behavior. It’s also thriving online, and Reddit happens to be a great example.

If you look at the way the Reddit community behaves, everything about it is geared to allow people to behave however they want, and it even has an economy with which to reward whatever happens to be most popular. But very little of reddit is actually people creating anything new: posts on the front page tend to be little more than links to off-site articles, images with text on them, screenshots of atheists arguing on facebook, and prolonged community question and answer sessions. None of these really constitutes creation.

In order: Linking to offsite articles is clearly just showcasing someone else’s content, and at best users feel as though they are curators of entertaining links, looking to be rewarded for their good taste. The images with text on them, (quickmemes, after the service that lets people make then with no effort) are nothing more but stock photos updated with new text in the laziest possible way to make a point. They’re barely even a remix. Screenshots of facebook debates are transparent attempts for people to feel good about conversations they’ve already had, and finally, the Ask Me Anything forum is a highly structured way for people to talk about themselves. None of this is real creation, it’s just slight tweaks to earlier derivations.

When people consume content on Reddit, their broad consumption recognizes no difference between a remix and an actual creation: you just click a link, then whether or not you like it you then close the tab and move along. There’s no incentive to actually make something new when everything is examined for at most a minute. Instead, they load up a picture and photoshop slightly different text on it, hoping that others will like it and award them karma. In this way it’s the most self-centered community imaginable. None of this is necessarily bad, Western liberal capitalism is equally self-centered, and indeed that’s one of it’s core strengths.

All the same, I can’t help but be disheartened that the “creative process” has been thoroughly robbed the need for actual effort, especially given the power of the tools that we have today to express ourselves. There’s certainly an argument to be made that everything is a remix, even the great works of art in the past. It’s just that it used to be a lot of work to take an old idea and make it new. Now it’s effortless, and people seem equally satisfied with the result.

It also perfectly captures how fundamentally ill-equipped the school is to cope with the present, let alone lead towards the future.

It’s no secret that the university has been trying to move away from its reputation as a party school, this rebrand is the most transparent attempt possible to do so.

I’m frustrated because education is rotting from within, and this is how the school tries to stay relevant. For all the complaints about how the movie industry is stuck in the 1960s, our education system is stuck in the 1760s. And proposed updates, like Blackboard’s unforgivably bad software (WebCT in my day), do nothing to change how education works, they just digitally codify outdated practices and give university administrators the mistaken impression that they’ve managed to stay with the times.

An “education,” whether for its own value or to help you get a job, is–at least to me–about developing the skills to find the information you need, assess its value, integrate it into the context at hand, and make a better decision than you otherwise could have. These skills aren’t taught at university; we develop them to cope with university.

For example, before most of my exams, I would save a copy of my notes to my phone so that I could check discreetly check them if I got stuck. In other words, I set myself up to cheat. I never actually checked those notes, but it felt nice knowing that I could. (It’s worth noting that in Philosophy you either understood the material or you failed–notes or not.)

In the “real world,” having a copy of your notes is called being prepared. Instead, university exams expect us to tie one hand behind our backs and master a skill we’ll seldom if ever use again. Why not make the problems harder and let students use every possible tool or resource to solve them? Even students singularly focused on learning for its own value would get so much more out of the experience.

“Western University” faced a branding problem and declining academic rankings. Instead of taking the opportunity to have the legions of smart, engaged stakeholders ask and answer hard questions about education, they made their official colour slightly darker and produced an awful video. This problem isn’t unique to Western, this just happened to hit close to home.

Your brand is everything that you do, not how you choose to portray yourself.

We need to make integrity more attractive to politicians. Since capitalism is about designing a context that directs greedy behaviour towards a larger good, why not repurpose some of its better ideas here? Clearly the language politicians think in is money, so let’s start with that. If government is bought and paid for, we’re going to have to pony up some dollars so that we can do the buying.

Here’s the idea. For whatever it’s worth, I release it under the GPL:

With Kickstarter, if you believe in a business, you pledge money. Once enough money is pledged, everyone is charged. (It’s the same structure as Groupon, but used for good instead of evil.) The core idea is that once an event happens, the money is unlocked. With Kickstarter, the event is a total number of dollars pledged. For our purposes, the event could be something like a politician actually delivering on a campaign promise.

In practice, it would work out like this: A politician lists their core goals, and you can tick off the ones you like. Let’s say they’re saying four things you really agree with. You pledge $100 dollars. $20 goes to them off the bat, and each subsequent $20 is linked to a specific election goal. Each time they accomplish a promise, the money linked to that promise is released–to fund re-election or whatever it is that politicians spend money on.

This has a few interesting results:

1. It aligns the interests of politicians with their constituents. They don’t have to worry about raising money from lobbyists to get re-elected, they just have to deliver on their campaign promises.
2. It pushes us towards evidence based policy. If politicians want to get paid, they have to identify measurable goals. None of this “I’ll go to work for you!” It instead become “I’m going to delivery this outcome by this date.” This emphasizes the importance of measurement in governance.
3. It encourages politicians to steal one another’s ideas. I wish there were a lot more of this. Smart ideas can come from anywhere. If politicians are in the evidence based mindset, and their opponent has a great idea that will be in everyone’s best interests, why not just steal it? Good ideas should thrive no matter who’s in charge.

This theme can be varied. For instance, during a campaign people could pledge $10/month so long as there are no attack ads. If a candidate gets too aggressive, they lose access to that revenue stream.

There was a brilliant move by the Obama campaign that I heard about through the grapevine. A system was set up to monitor the things being said against Obama by his critics. Every time an opponent referred to Obama negatively, Obama supporters automatically donated a few bucks into his campaign. Say $5 for calling him a communist, $10 for calling him a terrorist. This way, talking trash about your opponent just bolsters their financial position, so play nice. This kind of secondary/negative market would be easy to set up.

To ensure a level playing field, all donors could be capped at $500/year, and if you wanted to get really progressive about it, you could issue everyone a $500 tax refund to kick things off.

Clearly there will be ways to game this system, but for now it’s a thought experiment. I’m sure that with enough discussion we could map out avenues for exploitation and come up with ways to prevent them.

Also it’s entirely possible that what’s mapped out here is illegal in practice. That can be changed.

Without going into details, there are many different types of cards and some are more rare than others. Cards also work together in sets/combos. Cards can be purchased individually from trading shops, or purchased in random sealed sets of ten or so.

Because some specific cards are desired, because they’re rare or they complete a set/combo, and because the cheapest way to get new cards is to buy the random packages, the game is a random reward schedule–just like lottery tickets and World of Warcraft. Players don’t know when they’re going to get the card they want, so their only response is to buy as many random packs as they can, hoping for the best.

There is also a strategic gameplay component to the game, but it’s only there to drive sales. Put simply, because anyone can spend money to upgrade their deck, everyone has to. Players are locked in an arms race. And by releasing new, more powerful cards, the pressure to buy more is increased.

Zynga’s a brilliantly evil company but Wizards of the Coast was doing the same thing decades earlier–on nothing but pieces of paper.

In a nutshell, the book explains how we, as thinking folk, have two systems at our disposal as we go about trying to understand the world. System 1 is what generally gets us through life, it deals with things very quickly. When we have a casual conversation, estimate how far away an object is, or drive a car, that’s System 1 doing its thing. For more complex problems the higher level but very lazy System 2 kicks in, like trying to multiply 231 times 371, or actively fact checking a claim.

System 1 is great at what it does, but it uses a number of short-hand tricks that sometimes yield bad outcomes. For instance, System 1 is awful at statistics, so estimations it makes about the likelihood of something happening are usually way off. Much of Thinking, Fast and Slow is a chronicle of these accidental misfires that we make in our thinking, and the situations that bring them about. When advertisers look to behavioral economics to save the day, it’s my opinion that they’re looking for ways to exploit these misfires and make people more likely to buy.

System 2 is also good at what it does, but with practice. When it’s called to action, it deals with the world in logical terms. It tends to be very lazy. In reading the above 231 times 371, I’m sure you didn’t bother to actually calculate the result (I didn’t). If you go back and try to do the multiplication, you’ll feel the blood flow to your brain as you develop a strategy to produce the result. This is called cognitive strain. Whenever you feel it, System 2 is dealing with the world for you.

This brings me to facebook Timeline. Try scanning someone’s Timeline. It’s a very unpleasant experience. When information is organized in a list, it’s trivially easy to scan it, but with Timeline your eye has to dart around and try to combine the layout into an understanding of what the person’s been up to. It induces cognitive strain and brings System 2 online.

There was an interesting post a few weeks ago about how Timeline’s core goal is to reconceptualize brands in the eyes of users, and integrate them into the stream of data we see. When we usually see ads, System 1 processes and largely ignores them. But if Timeline causes System 2 to come online, then displays ads to it, facebook will be changing the way our brains process advertising. Timeline also makes branded posts (ads) look nearly identical to the actual content we’re on facebook to see, so it follows that they’d be processed similarly.

Is it as effective? More effective? Less effective? As end users, we lack the data to test it, but facebook does not. Some A/B testing and trading of IP addresses with online stores and it would be trivially easy to tell if these ads are more effective than the usual ones. With 2011 revenues of about $3.3 billion spread across 800,000,000 users, they’re making about $4 a user a year. That’s pathetic given how much the site is used. By contrast, the movie industry, despite trying to weather some radical disruption, collects $10-15  for 90 minutes of entertainment. (Different business models, I recognize.)

This all reminds of a recent quote about the state of the world. Paraphrasing, “the smartest people in the world are working hard to come up with ways to get you to click on ads.” (Edit: source) And it’s absolutely true, Google, Facebook, Microsoft and the like are brain trusts. People recognize that advertising is about psychology, and the bible of psychological decision making was just published. Why wouldn’t these smart people try to use these new tools to make more money? Timeline is just awful, but these people are too smart and skilled to make something so bad accidentally.

It’s on a par with Zynga’s behavior, but if anything that just makes it more facebook-like, not less.

The session or show is going to happen anyway (at whatever it costs to deliver) no matter how many people are in the room. If you can capture a bit more revenue while you expose new people to your service, you’re ahead. It also makes your customer acquisition cost low or negative (provided the Groupon isn’t sold at a loss, and some of your thrifty new customers come back) drastically lowering advertising spend.

But if you’re selling something that doesn’t scale well, stay the hell away.

Also this doesn’t change the fact that Groupon, as a business, is a giant pyramid scheme.