The least resistance to new ideas


Kevin Kelly:

Many years ago the San Francisco Chronicle published a short column in which the writer mentioned that he had been traveling in India, and when he told the clerk at his hotel in New Delhi that he was from the San Francisco Bay Area the clerk responded, “Oh that is the center of the universe” Um, mumbled the traveller, and why do you say that? “Because the center of the universe is wherever there is the least resistance to new ideas.”

I have not been able to come up with a better description of San Francisco’s special relation to futurism. In my experience this is true: more new ideas per person bubble up in the Bay Area than anywhere else on Earth — at this moment.

Do read the whole thing.


Create new Silicon Valleys by exploiting regulatory arbitrage

Marc Andreessen is co-founder of the venture capital firm Andreessen Horowitz. Marc has a very smart article out last week on what works and doesn't work to grow centers of innovation in new locations. He titled this piece aptly Turn Detroit into Drone Valley as you can see here [emphasis mine].

Imagine a Bitcoin Valley, for instance, where some country fully legalizes cryptocurrencies for all financial functions. Or a Drone Valley, where a particular region removes all legal barriers to flying unmanned aerial vehicles locally. A Driverless Car Valley in a city that allows experimentation with different autonomous car designs, redesigned roadways and safety laws. A Stem Cell Valley. And so on.

There’s a key difference from the if-you-build-it-they-will-come argument of yore. Here, the focus is more on driving regulatory competition between city, state and national governments. There are many new categories of innovation out there and entrepreneurs eager to go after opportunities within each of them. Rethinking the regulatory barriers in specific industries would better draw the startups, researchers and divisions of big companies that want to innovate in the vanguard of a particular domain—while also exploring and addressing many of the difficult regulatory issues along the way.

Why this approach? Compared with previous innovation-cluster efforts where governments contrived to do something unnatural, this proposal flows from what governments naturally do best: create, or rather, relax laws.

This is one of those ideas that seems completely obvious once you have seen it. We can quibble with that last phrase “what governments naturally do best: create, or rather, relax laws.” because governments are terrible at relaxing laws. But the possibility was demonstrated in America by airline and telecom deregulation.

I see this sort of regulatory competition as a variation on Paul Romer's theme of Charter Cities. I've not succeeded to think of a way to apply Romer's concept directly to an advanced economy which is being drowned by a mountain of obsolete law and regulation. There are far too many powerful forces who like the status quo just fine. But perhaps Marc's ideas could be implemented at sufficiently small scale that the regulatory reform could be implemented before the status quo interests squashed the innovation.

There is much more to this Andreeseen essay, so be sure to read the original at Politico.

For background on why this will be so hard to implement in the US see Steven Teles on Kludgeocracy.

Homework assignment: how can we structure such a proposal so that politicians would be motivated to take on the change?


Tyler Cowen: Tesla Says “All Our Patent Are Belong To You”

Tyler Cowen has some very big news from Tesla.

Elon Musk writes:

Yesterday, there was a wall of Tesla patents in the lobby of our Palo Alto headquarters. That is no longer the case. They have been removed, in the spirit of the open source movement, for the advancement of electric vehicle technology.

Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal. Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.

When I started out with my first company, Zip2, I thought patents were a good thing and worked hard to obtain them. And maybe they were good long ago, but too often these days they serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors. After Zip2, when I realized that receiving a patent really just meant that you bought a lottery ticket to a lawsuit, I avoided them whenever possible.

…We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.

Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers. We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.

I believe that this announcement will be discussed in business schools for years to come much like Henry Ford’s announcement of the $5 a day wage.


Considering self-publishing?


If you are an accomplished writer with something to say, and you are not already involved in direct publishing, then you really should consider this option — even if you dream of acquiring a power-agent and a traditional publisher (note: publishers are much more likely to give you a look if you have sales and followers). The 10-cent summary:

1. Writing is really hard.

2. Direct publishing is really easy.

3. Selling a LOT of books will require you to put effort into promotion (letting people know you exist, acquiring a following that brings buyers to you by referral).

4. The sooner you get published the faster you will build an audience and learn what your audience wants. If you have only the first 100 pages of your great book written, and are struggling to get beyond that, then think about whether you can make an interesting, useful small book out of what you have already done. Several of my favorite books of 2013-14 are examples of these short books that need not be a page longer:

Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy, 98 pages, by Erik Brynjolfsson, Andrew McAfee 

The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, 128 pages, by Tyler Cowen

An Economist Gets Lunch: New Rules for Everyday Foodies, 304 pages, by Tyler Cowen

Average Is Over, 304 pages, by Tyler Cowen

What I’ve learned from reading various authors who have experience with both independent and traditional publishing is that most authors should “just get on with it, using Amazon as your first and primary channel”. By “most authors” I mean those writing for the general audience, which would include e.g. “How to do great photography with Adobe Lightroom”. If your primary market is not English I have no knowledge of appropriate alternatives, but I’m pretty sure that Amazon is not ideal for the Chinese market.

For the mechanics of getting your book out there, start here with Amazon: Take Control with Independent Publishing: This is Amazon’s homepage for both digital and print publishing.

For an experienced author’s perspective, I recommend How To Self-Publish Your Book Through Amazon. Author Deborah Jacobs, recounts her first-hand experience with both digital and print, as well as channel alternatives: Amazon exclusive vs. a personal website. Deborah gives actual revenue numbers for her print and digital sales. 

Amazon’s suite of services for independent authors makes it possible for me and many other authors to bypass traditional publishing companies. It gives us the tools to create and sell digital books; print and sell paperback copies on demand; add author pages and even market books. Here are five Amazon services, all of them free to set up, that every indie author needs to know about.

Kindle Direct Publishing. This service, known by the shorthand KDP, enables indie authors to sell the digital version of their books on (or other Amazon country websites). There’s no charge to upload the file. Authors get royalties of 35% to 70% of the sale price, depending on whether the book is sold on KDP or through another Amazon service called KDP Select (more about that below).

Unlike most other digital retailers, KDP uses the format known as “mobi.” This is simply the file format for digital books that Amazon uses, and it works on all Kindle devices. You can upload your book on Amazon using other formats as explained on the Amazon site, including ePub, which is the most popular one (that’s what Apple uses), and others such as HTML, Doc, and RTF. However, in my experience it looks better if you start out with a mobi file because any formatting you create – for example for images, charts and tables – stays intact.

Let’s say you have written your book in Word and want to convert it to mobi. You can do this using the free software Calibre (available for PC or Mac). I’ve used the Mac version and it works very well if your Word document has no page numbers. For best results it should include links to each chapter in a table of contents that’s formatted to meet Amazon’s specifications listed here.


One of the nice things about KDP is that Amazon does not require digital exclusivity. So authors can still sell the same digital book anywhere else on the Internet on through other stores like The Nook Book Store or iTunes.

If you want to sell a lot of books it looks like KDP Select is worthwhile. And like most publishing sources I’ve read Jacobs found that free and discount offerings of her works paid off in awareness and higher sales. It’s probably obvious that strong sales are unlikely unless you put some effort into promotion. Deborah explains some of her methods and results.

… Based on my conversations with other indie authors and their posts on various message boards and blogs, other authors also see huge sales on days when their books are discounted, and even more massive downloads on days when those books are free. This, in turn, leads to higher than usual sales on the days right after promotions (when the book has gone back to its regular price), and generally helps to expand awareness of the book.

More tips:

10 Visual Steps To Self-Publishing Your Book On Amazon (excellent, simple how-to get a Kindle book done).

Amazon simplified formatting guide (how to prepare your book for pain-free publishing) 

HOW TO: Self Publish Your Book with Amazon’s CreateSpace (if you want to do a print version).

How My Book Became A (Self-Published) Best Seller

Some background reading on the direct publishing revolution:

JK Rowling blows up the eBookstore business

Confessions of a Publisher: “We’re in Amazon’s Sights and They’re Going to Kill Us”

How crowdsourcing helps robots substitute for humans

MIT'S Erik Brynjolfsson said “We’re at a real inflection point in terms of artificial intelligence and machine learning. Things are speeding up.”

How crowdsourcing helps robots:

White-collar jobs were once deemed mostly immune to such automation, but that is no longer true, either. Carl Benedikt Frey, an economist, and Michael Osborne, a professor of machine learning, at Oxford University estimate that about half of American jobs — sailors, paralegals, you name it — are susceptible to automation. “Software substitution, whether it’s for drivers or waiters or nurses” is coming, Bill Gates said recently at the American Enterprise Institute in Washington. “Twenty years from now, labor demand for lots of skill sets will be substantially lower. I don’t think people have that in their mental model.”


Windows 8 is a disaster. Period.


The reason this happened is that while Sinofsky had the maniacal power and force of will of a Steve Jobs, he lacked Jobs’ best gift: An innate understanding of good design. Windows 8 is not well-designed. It’s a mess. But Windows 8 is a bigger problem than that. Windows 8 is a disaster in every sense of the word.

This is not open to debate, is not part of some cute imaginary world where everyone’s opinion is equally valid or whatever. Windows 8 is a disaster. Period.

While some Windows backers took a wait-and-see approach and openly criticized me for being honest about this, I had found out from internal sources immediately that the product was doomed from the get-go, feared and ignored by customers, partners and other groups in Microsoft alike. Windows 8 was such a disaster that Steven Sinofsky was ejected from the company and his team of lieutenants was removed from Windows in a cyclone of change that triggered a reorganization of the entire company. Even Sinofsky’s benefactor, Microsoft’s then-CEO Steve Ballmer, was removed from office. Why did all this happen? Because together, these people set the company and Windows back by years and have perhaps destroyed what was once the most successful software franchise of all time.

That quote is from Windows guru Paul Thurott, Feb 9 2014 in What the Heck is Happening to Windows? I don’t have an opinion — but it is interesting when an insider like Thurott says words like “disaster” and “destroyed”.

Brooke Allen: If you manage your time terribly, you’ll get more done

This essay isn't quite as silly as it sounds. Example, To-do lists are best if you cannot remember where you put them

The great thing about writing something down is that your subconscious brain will stop obsessing about it and you can relax and go to sleep or the movies or whatever. But the bad thing about to-do lists is that you might feel compelled to do all those things. Luckily, I’m great at making and losing lists. The list helps me get to sleep tonight, and then tomorrow when I cannot find it I only do what I remember to do, which turns out to be the important things.

Also, keep “did” lists. If you track all you’ve already done, the little bit still to do will seem less daunting.


Marc Andreessen: why Bitcoin matters


What technology am I talking about? Personal computers in 1975, the Internet in 1993, and — I believe — Bitcoin in 2014.

This may not be the best essay on Bitcoin, but it is definitely the best essay that I have read. Because I respect Marc Andreessen I pay attention when he decides to write publicly. And when I see that Andreessen Horowitz has invested nearly $50 million in Bitcoin-related startups, that gets my completely focused attention.

Media coverage typically talks about much the value of a Bitcoin has risen (or fallen). Or how Bitcoin is a vehicle for buying drugs and guns. I think you will better understand the significance of Bitcoin by thinking of a fraud-free VISA payments system with nearly zero fees and no minimum transaction. That creates possibilities. Once the infrastructure is in place Bitcoin will enable many possibilities that are way beyond a no-fee VISA. Here’s just one of Marc’s many cases: Remittances. The hard-working people who picked your strawberries are sending cross-border remittances to their family. A big chunk of the funds sent (order of magnitude 10%) is lost to bank-fees and funds-transfer agents. A Bitcoin-based payment system will drop that 10% fee to nearly nothing. That will have a huge impact on the workers’ welfare.

Andreessen summarizes why Silicon Valley is “all lathered up”:

The practical consequence of solving this problem is that Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.

What kinds of digital property might be transferred in this way? Think about digital signatures, digital contracts, digital keys (to physical locks, or to online lockers), digital ownership of physical assets such as cars and houses, digital stocks and bonds … and digital money.

All these are exchanged through a distributed network of trust that does not require or rely upon a central intermediary like a bank or broker. And all in a way where only the owner of an asset can send it, only the intended recipient can receive it, the asset can only exist in one place at a time, and everyone can validate transactions and ownership of all assets anytime they want.
Bitcoin is an Internet-wide distributed ledger. You buy into the ledger by purchasing one of a fixed number of slots, either with cash or by selling a product and service for Bitcoin. You sell out of the ledger by trading your Bitcoin to someone else who wants to buy into the ledger. Anyone in the world can buy into or sell out of the ledger any time they want — with no approval needed, and with no or very low fees. The Bitcoin “coins” themselves are simply slots in the ledger — analogous in some ways to seats on a stock exchange, except much more broadly applicable to real world transactions.

The Bitcoin ledger is a new kind of payment system. Anyone in the world can pay anyone else in the world any amount of value of Bitcoin by simply transferring ownership of the corresponding slot in the ledger. Put value in, transfer it, the recipient gets value out, no authorization required, and in many cases, no fees.

That last part is enormously important. Bitcoin is the first Internet-wide payment system where transactions either happen with no fees or very low fees (down to fractions of pennies). Existing payment systems charge fees of around 2 percent to three percent — and that’s in the developed world. In lots of other places, there either are no modern payment systems or the rates are significantly higher. We’ll come back to that.

Bitcoin is a digital bearer instrument. It is a way to exchange money or assets between parties with no preexisting trust: a string of numbers is sent over email or text message in the simplest case. The sender doesn’t need to know or trust the receiver or vice versa. Related, there are no chargebacks — this is the part that is literally like cash — if you have the money or the asset, you can pay with it; if you don’t, you can’t. This is brand new. This has never existed in digital form before.

Bitcoin is a digital currency, whose value is based directly on two things: use of the payment system today — volume and velocity of payments running through the ledger — and speculation on future use of the payment system. This is one part that is confusing people. It’s not as much that the Bitcoin currency has some arbitrary value and then people are trading with it; it’s more that people can trade with Bitcoin (anywhere, everywhere, with no fraud and no or very low fees) and as a result it has value.

If you give your attention to Marc’s essay for 30 minutes I think you will understand why his firm is actively seeking Bitcoin-related opportunities. Oh, I hear that Amazon will launch a Bitcoin payment window soon. Just kidding, but think about how skinny Amazon’s margins are – and the impact on profits when the 2 to 3% credit card fee goes to 0.01% for purchases by Bitcoin customers. Think about the network effects when Amazon starts accepting Bitcoin.


Uber is a Dating Service

It is very interesting how people with different frameworks react to events. An example is the media storm related to SF startup and dynamic pricing. For the second year now Uber has utilized dynamic pricing for peak demand periods such as Halloween and New Years Eve. Perhaps the media will continue to make January the “dump on Uber” month; or maybe they will go back to easy fillers like “Ten best of 2013”.  Uber seems to be like the political-horse-race meme, journalists can generate column inches without even getting out of their chair. They just need a Twitter account. 

Back to frameworks. I will offer only two examples to illustrate:

  1. computer science, economics
  2. journalists

#1 When I read about Uber inside my framework #1, I see Uber as a dating service that leverages machine learning. They earn a fee only when they match-mate successfully, and better than competitors. They earn more fees if their algorithms allow them to better position their drivers where the demand will be (micro demand prediction) They don’t “own” either side of these matches. In particular, it’s the drivers that are really setting the price and agreeing to the pricing scheme. Uber is providing the platform to enable the transaction. So given my framework, what I see is:

  • Charges of “greed” and “gouging” don’t make sense – if the Uber service doesn’t attract drivers to Halloween or New Years Eve then there is no match. No ride for me, no fee for Uber.
  • If Uber is going to be the winner in this match-making competition, then their secret sauce is going to have to make both buyer and seller prefer Uber to the other ride matching services. Profiles of the “daters” are absolutely essential. Yet journos complain that “the driver rated the passenger”. 

#2 On hearing somebody paid 7x the typical fare on to get home in a December snowstorm? Obviously that is the Uber corporation taking advantage of the helpless passenger. The alternative of the stranded passenger in the snow doesn’t come to mind. On hearing a story that Uber didn’t tell the passenger what the fare would be until they get a big Visa bill they think “Of course, that’s what that greedy corporation would do”. The alternative that the passenger didn’t pay attention to all the Uber price notices and warnings isn’t considered.

I was first aware of the Uber dynamic pricing trials in 2012 from Joshua Gans’ post Uber and the delicate business of creating a platform. Reacting to the first media storm, Joshua summarized Uber’s challenge

Basically, to satisfy one side of its market — the taxi drivers — Uber upset the other side — its customers.

At the time I thought Uber would experiment until they found the right balance to satisfy both “daters”. So far it appears that this techno-optimist called it wrong. I’ve investigated as best I can the bill-of-accusations against Uber. None of it holds up. I’ve examined their FAQ, their user guide, and a number of Travis Kalanick’s blog posts on dynamic pricing. I’m impressed — objectively Uber has worked very hard to avoid surprising a customer with a high fare. How can a client complain “Uber didn’t tell me what the ride would cost” when, from NZ (!), I was able to obtain a London Uber quote in about 60 seconds on my iPad on a slow internet connection. Starting with finding where on the Uber site to get my quote, then choosing London as my city, then typing in my route from Mayfair to Canary Wharf. 


Further down the quote screen is the exact fare basis, which is the same time and/or distance fare basis as for most taxis, including Uber London competitor HAILO. In October Hailo’s minimum fare has gone up to £10 between 6am to 10pm Monday to Sunday; and £15 between 10pm to 6am.

And the famous London Black Taxis. I said same fare basis, not the same coefficients. 



If you read through the Uber Happy New Year bulletin published Dec 30, the day before NYE, you’ll see how totally clear the Uber UI on what you will pay — you can’t just press I ACCEPT HIGHER FARE under the Huge Type multiplier, you also have to key in the multiplier (7 in my example above). And the depth of the coaching (“pro tips” to avoid paying high fares). Travis begins with this:

New Year’s Eve is upon us and we want to give you some quick pro tips for getting around with Uber! This New Year’s Eve we’ll have a record number of cars on the road ready to get you where you want to go. But, that doesn’t change one simple fact: on NYE, everyone wants to move around the city at exactly the same time!

You can avoid the peaks of surge pricing with good timing when you travel. Check out our smart tips below, and don’t forget you’ll always know the price before you request.

So here’s my question: what can Uber do differently than the above, or this (from a Travis Kalanick Dec 16 email reply to “outraged client”):

We regularly do surge pricing when demand outstrips supply. Remember, we do not own cars nor do we employ drivers. Higher prices are required in order to get cars on the road and keep them on the road during the busiest times. This maximizes the number of trips and minimizes the number of people stranded. The drivers have other options as well. In short, without Surge Pricing, there would be no car available at all.

Now granted, that the prices are significantly higher. BUT we notify every customer in big bold images in text, which each customer has to confirm in order to request. Furthermore, every customer also had to type in what the multiplier was in order to double confirm that they understood what they were agreeing to.

So, was it expensive. It was, and we wish it wasn’t necessary. But if you did indeed take the rides described then you confirmed the price which was very up front, and then entered the multiple you read into a text box in order to double confirm.

Airlines and Hotels are more expensive during busy times. Uber is as well. We don’t just charge to make a buck though, we take a small fee of the transaction, but the vast majority goes to the driver so that we can maximize the number of drivers on the road. The point is in order to provide you with a reliable ride, prices need to go up.

If you have other ideas for how to provide a reliable ride during busy times, I am all ears. In the end, Uber is reliable, always, and we will create a system that maximizes the number of people that can get safe and reliable rides. Not surging is saying you shouldn’t have the option. Not surging is saying we should be just like a taxi and be unreliable when people need us most. These are outcomes that take choices away from the consumer and make it harder to get around cities – these are outcomes that we put a lot of hard work in to avoid so that at least you have the choice if you want one.

Uber is recruiting a Policy Economist!

We’re looking for a Policy Economist to tease smart answers to hard questions out of big data

Über iPhone app

Uber is a fascinating enterprise. I think they are going to change cities globally. Not just reform the sclerotic taxi monopoly. Here is an example

Urban transportation has looked the same for a long time – a really long time – thanks in large part to regulatory regimes that don’t encourage innovation. We think it’s time for change. We’re a tech company sure, and we’re working in the transportation space, but at the end of the day we’re disrupting very old business models. Our Public Policy team prefers winning by being right over some of the darker lobbying arts, and so we’re looking for a Policy Economist to tease smart answers to hard questions out of big data. How do the old transportation business models impact driver income? What effect if any is Uber having on the housing market or drunk driving or public transit? To what extent are the different policy regimes in New York City and Taipei responsible for different transportation outcomes? Just a few of the questions we want you to dig on.

Read their placement ad for the full description of the opportunity. And note the Perks:

  • Travel like a European diplomat: employees are showered with Uber credits 
  • Ground floor opportunity at a fast growing company that is changing the face of transportation worldwide 
  • As an early member of our business operations team, you’ll shape the business direction of the company 
  • We’re not just another social web app: we’re moving real assets and real people around their cities 
  • We have access to an amazing list of advisors and investors that we actively engage

If I were a young economist that would look like a big chance.