Yesterday I wrote about the need for competition in search from an Internet ecosystem perspective. But what if you are a shareholder in Yahoo or Microsoft? Should they outsource search to Google? Here too I believe the answer is a clear NO. If Google did not have grand ambitions that are directly competitive with large parts of Yahoo and Microsoft then this might make sense – but one would hardly recommend to GM to buy their engines from Toyota. Yes, there is a lot to a car other than the eng...

Yesterday I wrote about the need for competition in search from an Internet ecosystem perspective. But what if you are a shareholder in Yahoo or Microsoft? Should they outsource search to Google? Here too I believe the answer is a clear NO. If Google did not have grand ambitions that are directly competitive with large parts of Yahoo and Microsoft then this might make sense – but one would hardly recommend to GM to buy their engines from Toyota. Yes, there is a lot to a car other than the eng...

I have presented a bunch of data on household debt, corporate debt, financial sector debt and government debt. But what does it all mean? First, the economic situation is bad. We had economic growth driven by unsustainable levels of consumer spending which was the result of a housing bubble that made consumers feel richer than they were. At the same time corporations and especially financial companies operated with too much leverage. Now consumer spending is dropping off a cliff and corporati...

I have presented a bunch of data on household debt, corporate debt, financial sector debt and government debt. But what does it all mean? First, the economic situation is bad. We had economic growth driven by unsustainable levels of consumer spending which was the result of a housing bubble that made consumers feel richer than they were. At the same time corporations and especially financial companies operated with too much leverage. Now consumer spending is dropping off a cliff and corporati...

When I first came here as an exchange student at age 16, I fell in love with the US. Compared to my native Germany, I felt a wonderful sense of possibility. That is still the case today for many of the businesses we look at and invest in, but I worry about the future of the US. There appears to be a parallel between the US today and Great Britain at the end of the colonial period in the 20th Century. Great Britain expended its resources on ruling a large empire. Those resources were not avail...

When I first came here as an exchange student at age 16, I fell in love with the US. Compared to my native Germany, I felt a wonderful sense of possibility. That is still the case today for many of the businesses we look at and invest in, but I worry about the future of the US. There appears to be a parallel between the US today and Great Britain at the end of the colonial period in the 20th Century. Great Britain expended its resources on ruling a large empire. Those resources were not avail...

It’s not often that I find myself disagreeing with both Tim O'Reilly and Fred and instead agreeing with Mike Arrington. First a quick recap of the discussion (in case you have not followed it). Fred supported the idea of Yahoo outsourcing search to Google as far back as February. Over the weekend, Tim reiterated that view and extended it to Microsoft. Mike responded with a piece titled “The Importance of A Competitive Search Market." Mike points to competition in search being the driver ...

It’s not often that I find myself disagreeing with both Tim O'Reilly and Fred and instead agreeing with Mike Arrington. First a quick recap of the discussion (in case you have not followed it). Fred supported the idea of Yahoo outsourcing search to Google as far back as February. Over the weekend, Tim reiterated that view and extended it to Microsoft. Mike responded with a piece titled “The Importance of A Competitive Search Market." Mike points to competition in search being the driver ...

I have been reading Clay Shirky’s book “Here Comes Everybody." While I was cringing through the chapter on organizations and transaction costs (which manages to ignore the 70 years of economics of the firm that followed Coase’s paper), I loved the chapters on how personal web publishing is changing the very nature of journalism. In those chapters is a real nugget in a section titled "Fame Happens." Clay gives a great definition of fame as occuring when inbound attention exceeds the ability to...

I have been reading Clay Shirky’s book “Here Comes Everybody." While I was cringing through the chapter on organizations and transaction costs (which manages to ignore the 70 years of economics of the firm that followed Coase’s paper), I loved the chapters on how personal web publishing is changing the very nature of journalism. In those chapters is a real nugget in a section titled "Fame Happens." Clay gives a great definition of fame as occuring when inbound attention exceeds the ability to...

Just posted over at the Union Square Ventures blog on a topic that combines my interest in technology with my interest in economics: Structural Change and Marketplaces.

Just posted over at the Union Square Ventures blog on a topic that combines my interest in technology with my interest in economics: Structural Change and Marketplaces.

Several of my friends are very successful public market investors. Some of them routinely find opportunities that produce 2x or better returns in liquid assets. But even they are stumped when it comes to trying to predict how the drama in the financial markets will impact prices. There appear to be (at least) two competing theories. The first theory holds that the actions by the Fed will continue to push down the US dollar which will result in inflation due to increasing prices for imported g...

Several of my friends are very successful public market investors. Some of them routinely find opportunities that produce 2x or better returns in liquid assets. But even they are stumped when it comes to trying to predict how the drama in the financial markets will impact prices. There appear to be (at least) two competing theories. The first theory holds that the actions by the Fed will continue to push down the US dollar which will result in inflation due to increasing prices for imported g...

A little while ago I wrote about why the Fed’s lowering of the interest rate did not alleviate the credit crunch. The Fed has now taken two much more dramatic actions. First, it vastly expanded it’s lending to financial firms by including brokerage firms (under a depression era law) and allowing firms to provide a much larger array of securities as collateral. Second, it made sure that Bear instead of failing was sold. Both of these steps get closer to the heart of the matter since they signi...

A little while ago I wrote about why the Fed’s lowering of the interest rate did not alleviate the credit crunch. The Fed has now taken two much more dramatic actions. First, it vastly expanded it’s lending to financial firms by including brokerage firms (under a depression era law) and allowing firms to provide a much larger array of securities as collateral. Second, it made sure that Bear instead of failing was sold. Both of these steps get closer to the heart of the matter since they signi...

This is another post in thinking out loud about the economics of abundant and digital goods. In particular, I am interested in mechanisms that allow producers to recapture some of the consumer surplus even when the price for (a version of) the good is zero. In photography, there is a well established difference between limited edition prints (sometimes a single one) made by the artist and reproductions of the photograph in catalogs or online. I believe it is possible to create a similar mecha...

This is another post in thinking out loud about the economics of abundant and digital goods. In particular, I am interested in mechanisms that allow producers to recapture some of the consumer surplus even when the price for (a version of) the good is zero. In photography, there is a well established difference between limited edition prints (sometimes a single one) made by the artist and reproductions of the photograph in catalogs or online. I believe it is possible to create a similar mecha...

A little while ago, I read Cory Doctorow’s “Down and Out in the Magic Kingdom” (on DailyLit of course). In the book, he has the concept of Whuffie, a reputation-based currency that has replaced traditional money in a world of abundance. Since then I have been thinking about whether we might possibly be headed towards a scenario in which we have so much of everything that we can choose to or maybe even have to use mechanisms other than traditional monetary cost/price for making decisions. I be...

A little while ago, I read Cory Doctorow’s “Down and Out in the Magic Kingdom” (on DailyLit of course). In the book, he has the concept of Whuffie, a reputation-based currency that has replaced traditional money in a world of abundance. Since then I have been thinking about whether we might possibly be headed towards a scenario in which we have so much of everything that we can choose to or maybe even have to use mechanisms other than traditional monetary cost/price for making decisions. I be...