Mapping Strategy

Obstacles to Prediction Market Adoption

Harvard Business School Associate Professor Andrew McAfee asks, in a recent blog post, why prediction markets haven't been taken up more readily in the corporate world. He writes [links added]:

After writing the [Google prediction markets] case, teaching it a few times, and spending some time understanding the mechanics and utility of prediction markets, I share the puzzlement articulated by James Surowiecki in his book The Wisdom of Crowds:

". . . the most mystifying thing about [prediction] markets is how little interest corporate America has shown in them... companies have remained, for the most part, indifferent to this source of potentially excellent information, and have been surprisingly unwilling to improve their decision making by tapping into the collective wisdom of their employees."

Why is this? It’s not because the technology is hard to acquire... what is the real stumbling block? Is it that companies don’t really want the most accurate information about future events to come out and be widely known?

Sean Silverstone, the editor of HBS Working Knowledge expands on the question in a post last week, outlining what he sees as "three initial roadblocks":

• Unfamiliar with the Concept -- Most managers, especially the veterans, grew up hearing not to trust crowds, to avoid mob rule. Instead, they were encouraged to value expertise and be ready to pay consultants. It’s a major brain-bender to suddenly believe crowds can be smarter than experts.
• Internal Friction -- Corporate prediction markets rankle folks like product managers when company employees start betting on a bad outcome for their product.
  
  
• Implementation Issues -- Until recently, there wasn’t a whole lot of best practices around how to run efficient prediction markets. Results can be seriously skewed by having too few participants, asking the wrong type of questions, or by running a market too long or too short a time.

From my experience working directly with prediction market vendors and corporate implementers, and having watched, thought about and pontificated on this phenomenon for over a dozen* years, Silverstone's points seem reasonable as high-level headings. Several caveats and elaborations may be useful on this rapidly-moving target, however. *(I first heard about them in a pitch by Ken Kittlitz to the Digital Commerce Society of Boston circa 1995/96 -- shortly after I nominally helped co-found that late and loosely constructed organization, and shortly after Kittlitz founded the Foresight Exchange)

First, the number of managers completely unfamiliar with the concept of prediction markets has dwindled markedly over the past five years -- and at an accelerating rate. Silverstone is, I'm sorry to say, somewhat behind in writing that:

A relatively small number of companies including Google, HP, Intel, Yahoo, and Eli Lilly have jumped on this idea by creating prediction markets to aggregate the opinions of employees...

That was true five years ago. It is not the case today.

Doing some research into this recently, I was pleasantly startled to discover that there are at least fifty large corporations running prediction markets 'for real' now, and countless others running small, informal and for the most part un-trackable pilots. (Virtually all of the major vendors offer such trials, though with varying degrees of publicity and enthusiasm as well as varying degrees of ease in setting them up -- though none are terribly difficult). And that's not counting the number of academic institutions and news media organizations that run prediction markets for other reasons (e.g., experimental learning and securing reader attention, respectively).

Add to that the fact that HBS and HBR are covering this topic, conferring a halo of corporate legitimacy, that Surowiecki's book continues to thrust the key concepts into business management if not lay-public consciousness, that barely a week goes by without a major publication giving some ink to the subject (I've stopped even blogging them individually, there are so many) and that the proportion of people in the management class who trade various financial instruments is very high. I.e., they recognize, at some level, that prices represent crowd wisdom -- a body of information to which they may or may not be privy, but which they ignore at the peril of their 401K.

So, given that backdrop, I would turn Silverstone's point around and ask: What excuse can a manager offer, in May, 2008, for being totally 'unfamiliar with the concept' of prediction markets?

Wait. Don't answer that. If your boss isn't reading this, your CEO or your board very well may be, and that's not an idle quip. Some of the most important prediction market initiatives I've seen have come down from the very top, rather than from middle management...

...which leads me to Silverstone's second point: "Internal Friction". That would be putting it mildly.

Some cultures palpably chafe at the idea of unleashing democratic forces within their walls. This is not a scintillatingly deep or novel insight. We know this to be true for countries, and families, as well as for bowling leagues and PTOs for that matter. (I've also observed this when running scenario workshops within certain corporate and, treading lightly here, societal cultures).

Humans almost universally seek some kind of power or at least stability. They work hard for it. And they're loathe to give it up to some impersonal, anonymous and (it can sometimes appear) fickle and BS-penetrating tool (however powerful) that doesn't even have to justify its reasons. (Imagine an election in which each voter had to justify his or her reasons -- to someone -- before casting a vote and you'll understand what I mean.)

Which is all to say that the issue goes well beyond friction to questions of culture, organizational structure, leadership, and the role or perceived role of middle managers. Classically the role of 'middle management' (even the term has taken on a derogatory ring) has been to act as filters and conveyors of information moving between senior management and workers.

Prediction markets usurp some of that role and that can be, quite understandably, unsettling to them. Nobody ever said business was fair. But, bottom line: it is a real reason why prediction markets need to be contextualized carefully in order to succeed. Repeat after me: it's not about the software (mostly).

Which brings me to Silverstone's last point: Implementation Issues. Let's be clear about one thing: 'implementation' here does not refer to the kind of thing one thinks about when installing a big new software system. The software for these things is pretty darned simple in that regard.

The much bigger questions have to do with organizational issues. And those can be sweeping.

For example:

What questions is an organization, a) truly interested in knowing the answer to (strategic), b) willing to tell the employees they might not know the answer to (potentially humiliating) and, c) willing to feed back information on how and why we did or did not act on that input (empowering of morale and loyalty... or cynicism... depending on how it is handled). Just the first part of that is a big, hairy strategy question that goes right to the heart of what a company wants to be when it grows up and where it thinks it is currently 'stuck'.

Bottom line: prediction markets harbor all the paradigm-changing, employee-empowering breakthrough-idea-generating, process-improving, cost-saving potential of the suggestion box... as well as all of its potential as a reason to deride management.

Here are the twists that can and do cause managers to think carefully about the transparency they're prepared to unleash: prediction markets are real-time, they're at least nominally public, and the information they generate isn't really a suggestion (casual) so much as it is a serious investment of time, thought and expectation on the part of those asked to participate. One has to ask then: With all of that potential for discomfort, why have so many big companies begun using them in earnest?

How Much is a Brand Worth?

About ten years ago, I ran across a piece of analysis I haven't seen since and can't seem to lay hands (or search-engine bots) on at the moment. It ran in CFO Magazine and -- according to a set of accounting calculations I don't claim to fully understand -- listed hundreds of major brands whose brand value had ascended or descended the most in the preceding years. I recall such brand icons from the '70s as Peugeot and Nikon as being near the top of the latter category (i.e., the bottom of the list one would want to be on).

What was striking -- at least to this non-accountant -- was how rapidly brand values can change and by how much (many billions of dollars, in some cases).

From the standpoint of the kind of work I do helping clients to think about future strategic imperatives under a wide range of possible scenarios, the implication was clear: even if it hurt in the short term, the value of preserving (or failing to preserve) the brand could be enormous. Take that into a financing event and the advantages (and disadvantages) multiply even more, creating (or precluding) a whole range of strategic options, and so on, and so on. Brands are some of the slipperiest and yet most important assets any firm has. (The same could be said for individuals, but that's a different post.)

All of it can seem tremendously academic to companies that don't deal with consumers directly -- and tremendously obvious to companies that do... which doesn't mean that all of the latter do it well.

Thus it was that this piece in today's WSJ caught my eye:

It all started about two years ago, when a ship carrying 4,703 shiny new Mazdas nearly sank in the Pacific. The freighter, the Cougar Ace, spent weeks bobbing on the high seas, listing at a severe 60-degree angle, before finally being righted.

The mishap created a dilemma: What to do with the cars? They had remained safely strapped down throughout the ordeal -- but no one knew for sure what damage, if any, might be caused by dangling cars at such a steep angle for so long. Might corrosive fluids seep into chambers where they don't belong? Was the Cougar Ace now full of lemons?

The Japanese car maker, controlled by Ford Motor Corp., easily could have found takers for the vehicles. Hundreds of people called about buying cheap Mazdas. Schools wanted them for auto-shop courses. Hollywood asked about using them for stunts.

Mazda turned everyone away. It worried about getting sued someday if, say, an air-bag failed to fire properly due to overexposure to salty sea air.

It also worried that scammers might find a way to spirit the cars abroad to sell as new. That happened to thousands of so-called "Katrina cars" salvaged from New Orleans' flooding three years ago. Those cars -- their electronics gone haywire and sand in the engines -- were given a paint job and unloaded in Latin America on unsuspecting buyers, damaging auto makers' reputations.

Mazda saw no easy way to guard against these outcomes. So it decided to destroy approximately $100 million worth of factory-new automobiles. "We couldn't run the risk of damaging the brand name that Mazda worked so hard over the years to develop," says Jeremy Barnes, the company's corporate-affairs director for North America.

It could be argued that a) $100M is fairly cheap to preserve (and, arguably enhance) a major brand name like Mazda (paltry in comparison with some product recalls, or lack-of-recalls that should have happened but didn't), b) it isn't even that much because both the cars and the demolition operations that Mazda had to invent and undertake were largely overed by insurance and c) it's a tremendous waste, even if it does make sense from a business perspective.

David Einhorn on the Financial Crisis, Government Complicity and Why Rating Agencies Aren't Much Better Than USAToday

Working deep inside Wall Street these past eight months or so, I've had a privileged vantage point from which to observe some of the most tumultuous quakes in the industry in a generation -- and arguably in a century. (Given the near-catastrophic, and still potentially catastrophic nature of those changes, one might legitimately argue with whether 'privileged' or 'punitive' would be the right word to describe my seat in the proverbial bleachers on this one. Since I'm still being paid -- for now -- I'll stick with the former, if only because it has been quite an education.)

Readers without a direct interest in the inner workings and accounting arcana of the financial services industry though, should take a gander at David Einhorn's ten-page pdf/speech: "Private Profits and Socialized Risk". [emphases added in the excerpts below] H/T: Bob Weber.

On the credit-rating agencies:

The market perceives the rating agencies to be doing much more than they actually do. The agencies themselves don't directly misinform the market, but they don't disabuse the market of misperceptions -- often spread by the rated entities -- that the agencies do more than they actually do. This creates a false sense of security and in times of stress this actually makes the problem worse...

It is hard for me to see how the rating agencies survive this debacle with their franchises intact.

On the failure of Bear Stearns and how the SEC has enabled the entire mess:

Rather than looking at its own rules which permitted increased leverage, lower liquidity, greater concentrations of credit risk and holdings of no ready market securities, the SEC is conducting an investigation to see if any short-sellers caused the demise of Bear by spreading rumors.

Of course, Bear didn't fail because of market rumors. It fell because it was too levered and had too many illiquid assets of questionable value and at the same time depended on short-term funding.

On how none of us are really spectators in this

...before Bear Stearns failed... I [had] planned to speculate that regulators believe all of these [major investment banks] are too big to fail and would bail them out, if necessary. The owners, employees and creditors of these institutions are rewarded when they succeed, but it is all of us, the taxpayers, who are left on the hook if they fail. This is called private profits and socialized risk. Heads, I win. Tails, you lose. It is a reverse-Robin Hood system...

As night follows day, it is certain that in the absence of tremendous government regulation, this bailout [of Bear] will lead to a new and potentially bigger round of excessive risk-taking...

On the counter-party credit system

In effect, [with Bear] the government appears to have guaranteed virtually the entire counter-party system. The message is that if you are dealing with a major player -- anyone in the "too big to fail" group -- you don't have to worry about that player's creditworthiness. In effect, your risk is with the U.S. Treasury...

...regulators should consider dismantling the counter-party system... require the posting of all derivative trades, clearing them through a central system and regulating margin requirements...

Sobering stuff, with a few funny bits (check out his water-vs-Coke analogy), along with some interesting long- and short- stock picks near the end. I urge you to read it all. The reason I post it here (a scenario- and big-picture-oriented blog) is that it will eventually touch pretty much everything in the global economy. Ignore it at your peril. Understand it and you'll at least be able to tell the difference between a two-by-four and a rock when it hits you (and all of us) in the back of the head.

Core vs. Context: CBS Talks to CNN

This from today's NY Times [emphasis added]:

CBS... has been in discussions with Time Warner about a deal to outsource some of its news-gathering operations to CNN... reducing CBS’s news-gathering capacity while keeping its frontline personalities, like Katie Couric, the CBS Evening News anchor, and paying a fee to CNN to buy the cable network’s news feeds.

 

For CNN, a deal with a broadcast network would mean a new revenue stream without having to add much in costs. For CBS, an arrangement with a cable channel would allow it to cut costs while maintaining the CBS News brand...

Structural change. In any industry, it can be a long time coming. But then, when it does, it's seemingly so sudden and so obvious in hindsight, leaving many to wonder what took so long and what all the fuss was about. Acknowledging that every industry is different and that this particular deal may have at least as much to do with tactical stumbles on CBS's part as it does any notion of industry grand-strategy, please allow me a quick diversion into another industry to illustrate the point.

Once upon a time, the computer industry was vertically integrated: chips, disk drives, monitors, software, printers and even keyboards were all manufactured--quite literally--by the same company that sold them under its own brand. Digital, Wang, Prime, Data General, IBM, Hewlett Packard, Unisys (and others more easily forgotten) asked customers to settle for second- (or third-) rate components in one area in order to get the pieces they had to have and ensure it all worked together properly. (I had the privilege of consulting to all of these folks between 1988 and the mid '90s, and while I had a ringside seat for only some, I was in the tent with a clear view for all.)

Then suddenly (it seemed, but not really) along came Intel and Microsoft and Dell and Canon (whose printers account for nearly all of what's sold under the HP brand) and people scratched their heads and wondered why they'd ever settled for less, and what on earth had sustained all these second- and third-rate products hidden inside these vertically integrated 'stacks'. (Yes, I know, what came next was not necessarily the perfect competition I'm making it out to be in every case, at every layer, but it was -- at least -- a more horizontally-oriented industry all-of-a-sudden (think pancakes) instead of a bunch of soup-to-nuts, buy-it-all-from-us-or-else brands with their own factories for everything.

Similar tales can be told about the automobile and aircraft industries (among others) however I don't have firsthand knowledge of those and so I leave such analysis to others. All are different. And yet at a very high level, all have been the same:

It becomes clear who's really really good at one particular 'horizontal' aspect of the business (e.g., working 'backwards': customer relationships, brand, distribution, manufacturing (yes, even in services), product development, R&D, etc.) and who's just pretty good. Everyone knows these things, but it's hard to tell because the pieces don't compete with each other directly ('pure plays'). Instead, they're all part of larger packages.

Everyone knows though, who's passionate and committed and has totally nailed a particular discipline and is climbing a learning curve and getting to scale faster than everyone else... and who's just in it (a particular horizontal layer) because they have to be to stay in business and pride or lack of imagination have kept them from having the hard conversation about what is core and what is context.

Internal factors play a huge role here. Pride and corporate politics can be overwhelming. Managers develop fiefdoms and want to stay attached to the mother-ship because they know also that it's cold out there and that their 'stuff' is not really competitive globally.

A quick side story on the side story:

I once consulted to a large computer company that made it's own keyboards (this was ~1991). They'd commissioned me to do a study of a) what customers liked and b) how cost-competitive they were. It was the first time they'd done either thing (telling in itself) and we cast the net very wide indeed to get it right.

Long story short: their manufacturing costs for these keyboards were roughly 8X what others were charging in bulk including shipping from faraway places with factories that had dirt floors and workers who subsisted on meager if not wholly inadequate diets.

But the clincher was this: when we did focus groups, the customers liked the cheap stuff better. It 'felt' better on their fingers. The keyboards were lighter. They could type faster. Case closed. With a vengeance. (I recall the client choking on their diet sodas behind the glass, struggling for something positive amidst the rubble of damning customer consensus... and then explaining to me why their stuff was technically much better and they had the charts to prove it. It didn't matter.)

My client had all but exited the business within a year, redeploying the capital to focus on other things they did much better (and still do).

What does any of this have to do with CBS and CNN? Why the rant?

Just this. As it becomes easier to coordinate assembly of the 'pieces' in a particular industry -- due to better communications, global capital flows and a host of other things. I.e., when the efficiency-driven, convenience-driven reasons for being vertically integrated and settling for best-in-house instead of best-of-breed begin to fade away and Coase's Law and the theory of the firm begin to dissolve (just as he predicted seventy years ago -- he's still with us, btw), we begin to see these kinds of changes in these headlines.

An organization with kick-butt field reporting and the scale to support it far into the future beats out an organization that once used to be known for that... but no longer. And the firm with the pretty faces decides that that's not such a bad thing to be... the face to the 'customer'. The brand. It's a perfectly honorable (and sometimes even very powerful) position to be in (though my personal opinion is that CBS may eventually lose that also). But regardless, clarity is good: You do this. We'll do that. And let's do business together because we're not really competing anymore.

Firms re-invent themselves as pancakes rather than bamboo shoots... horizontally-oriented, best-bar-none specialists rather than vertically-oriented best-in-house behemoths.

Yeah, I've taken some liberties here. Coase talked about other aspects as well. And CBS may merely be in its long-awaited death throes as CNN ascends. But this is a blog post, not a masters thesis.

Here's what I find funny: the obligatory denial-of-reality that's needed to keep the staff of the doomed division from defecting en masse and decimating any negotiating leverage that may remain:

Sandy Genelius, a spokeswoman for CBS News, said, “We are extremely pleased with and proud of our news-gathering operation. No outside arrangements are being negotiated...”

Someone's got to play calming music for the passengers as the deck tilts steeper and steeper.

What if They Published a Newsmagazine and Nobody Read It?

More than any high-level statistics about the print news business, the following quote, from the bottom of an article ("What's Next for Newsmagazines") on the front page of the 'B' (Marketplace) section of today's Wall Street Journal made me sit up and take notice [emphasis added]:

At a recent speech at Columbia University, [Newsweek Editor Jon] Meacham delivered a blistering response after he asked who reads Newsweek and none of the 100-odd students in attendance raised their hands.

He can 'blister' all he wants, but I don't know of any industry in which that's proven effective as a means to enticing potential customers into buying your product. The blow-by-blow of that speech from early February is even more pitiful [emphasis added]:

After about an hour, there seemed to be no more questions for him, so Newsweek editor Jon Meacham turned to his audience—about 100 graduate students at Columbia journalism school—and said he had a question for them: Did anyone in the room read Newsweek or Time? There was a small, awkward rumbling before finally, a man shouted, "No!" ...

"Have you looked at Newsweek?" [asked Meacham]

"Sure," said the J-schooler.

"And it's not up to your standards?"

"I find [it] less useful honestly. The news? I don't get it from Newsweek..."

"Look, I need you," said Mr. Meacham... "It's an incredible frustration that I've got some of the most decent, hard-working, honest, passionate, straight-shooting, non-ideological people who just want to tell the damn truth, and how to get this past this image that we're just middlebrow, you know, a magazine that your grandparents get, or something..."

Unless I'm missing something (and there's not a whole lot more to the interaction than what I just posted) Meacham's entire argument for why people ought to read traditional news magazines rests on three things:

1. He's got 'good' people. That may be true in terms of writing skill, interpersonal integrity, reportorial drive, courage in the field and the like, but here's the bottom line: what 'good' means without reference to customers and their needs is anybody's guess. His assertion that those people are 'non-ideological' is a tip-off that he just doesn't get the blogosphere or Gen-Y, much less how mainstream media has evolved since the '70s.
2. He's frustrated. (He'd do better to have been paranoid, as Andy Grove was at Intel).
3. His business is tanking; he needs more customers. (The big three Detroit automakers circa 1980 come to mind here.)

Short take: it's an insular, supply-side argument for relevance that only a very few, slow-moving institutions (like higher education) can get away with, and even there, not for as long as they used to.

Whither Print Advertising? Whither Newspapers?

I note this new data from the Newspaper Association of America

...total print advertising revenue in 2007 plunged 9.4% to $42 billion compared to 2006 -- the most severe percent decline since the association started measuring advertising expenditures in 1950.

The drop-off points to an economic slowdown on top of the secular challenges faced by the industry. The second worst decline in advertising revenue occurred in 2001 when it fell 9.0%.

Total advertising revenue in 2007 -- including online revenue -- decreased 7.9% to $45.3 billion compared to the prior year.

There are signs that online revenue is beginning to slow as well. Internet ad revenue in 2007 grew 18.8% to $3.2 billion compared to 2006. In 2006, online ad revenue had soared 31.4% to $2.6 billion. In 2005, it jumped 31.4% to $2 billion.

What's neglected here is the basic idea that advertising -- as it has traditionally been conceived -- is merely one of many possible direct and indirect elements in the complex and constantly changing process of convincing customers to buy what you have to sell for more than it cost you to make it.

To the degree that print advertising -- on paper, in electronic form or otherwise -- is less-than-effective compared to the alternatives (mascots, blimps, billboards, word-of-mouth, guerrilla tactics, etc.) it will fade. And as with any such sea-change transition -- long anticipated but still somehow shocking when it finally arrives -- it is much easier to say what is going away and to eulogize it than to say exactly why that is so or what (usually plural) is most likely displace it.

In a related vein, this piece, "Out of Print: The death and life of the American newspaper" in The New Yorker's March 31st edition is also worth perusing though perhaps not for those faithful stockholders with a tendency towards melancholy:

...trends in circulation and advertising––the rise of the Internet, which has made the daily newspaper look slow and unresponsive; the advent of Craigslist, which is wiping out classified advertising––have created a palpable sense of doom. Independent, publicly traded American newspapers have lost forty-two per cent of their market value in the past three years, according to the media entrepreneur Alan Mutter. Few corporations have been punished on Wall Street the way those who dare to invest in the newspaper business have. The McClatchy Company, which was the only company to bid on the Knight Ridder chain when, in 2005, it was put on the auction block, has surrendered more than eighty per cent of its stock value since making the $6.5-billion purchase. Lee Enterprises’ stock is down by three-quarters since it bought out the Pulitzer chain, the same year. America’s most prized journalistic possessions are suddenly looking like corporate millstones. Rather than compete in an era of merciless transformation, the families that owned the Los Angeles Times and the Wall Street Journal sold off the majority of their holdings. The New York Times Company has seen its stock decline by fifty-four per cent since the end of 2004, with much of the loss coming in the past year; in late February, an analyst at Deutsche Bank recommended that clients sell off their Times stock. The Washington Post Company has avoided a similar fate only by rebranding itself an “education and media company”; its testing and prep company, Kaplan, now brings in at least half the company’s revenue.

Yes, that appeared as a single paragraph in the New Yorker piece -- more than a bit ironic for a publication pontificating over the doom of its peers as a generation of multi-tasking, ADD-addled information consumers come up.

From Risk to Uncertainty

I don't agree with everything in this piece by Thomas Homer-Dixon that appeared last week in the Toronto Globe and Mail, but this quote is an absolute gem (emphasis added):

Our global financial system has become so staggeringly complex and opaque that we’ve moved from a world of risk to a world of uncertainty. In a world of risk, we can judge dangers and opportunities by using the best evidence at hand to estimate the probability of a particular outcome. But in a world of uncertainty, we can’t estimate probabilities, because we don’t have any clear basis for making such a judgment. In fact, we might not even know what the possible outcomes are. Surprises keep coming out of the blue, because we’re fundamentally ignorant of our own ignorance. We’re surrounded by unknown unknowns.

It's something I've said for a long time:

It's tempting to think that all things are predictable given enough information, enough minds, enough time and enough computing power. It's just not true. (Which is not to say that some things are not predictable... and with incredible precision... a phenomenon that leads to overestimating the scope of problems and questions that lend themselves to such methods.)

Telling which is which is the trick...

I would go even further to say that really smart people who, by life experience know that some things are fundamentally unpredictable still draw an unvoiced sense of emotional comfort in their business life from the idea that some wise expert somewhere has been to the future (for all intents and purposes) and if we could just find him or her things would be OK... and/or that a really sophisticated computer model or prediction market (the 'collective mind') can provide crystal ball-level insights.

Sometimes yes. Often, no.

I liken Mr. Homer-Dixon's observations to those tragically massive car pile-ups that happen a few times of year in fog-prone areas like the Central Valley of California. Everyone is driving along at a reasonable speed, with reasonable spacing between vehicles. People are sipping coffee, tuning radios, maybe talking on cell phones. Slightly distracted, but mostly responsible. All is normal.

Then the first guy hits a fog bank and can't see squat. He taps his brakes. The second guy sees red lights and fog coming up fast and taps his brakes just a little bit harder, and so on. In just a few seconds, hundreds of cars end up in a tangled heap and people die. All because the guy in front was convinced by every one of his senses and not without justification based on experience that the visibility on the next 100 yards of road would be the same as on the last 100 yards of road.

LinkedIn... to Twinkies?

Fascinating piece by Nicholas A. Christakis (Professor at Harvard Medical School) over at edge.org on the impacts and dynamics of social networks:

...it turns out that all kinds of things, many of them quite unexpected, can flow through social networks, and this process obeys certain rules we are seeking to discover.  We’ve been investigating the spread of obesity through a network, the spread of smoking cessation through a network, the spread of happiness through a network, the spread of loneliness through a network, the spread of altruism through a network.  And we have been thinking about these kinds of things while also keeping an eye on the fact that networks do not just arise from nothing or for nothing.  Very interesting rules determine their structure. 

UPDATE: Taking a somewhat more serious tack than my snarky, early-morning title would suggest is friend and colleague Patti Anklam over at her blog, 'Networks, Complexity and Relatedness'. (She actually specializes in this stuff and can speak with authority on it). She writes:

This work is truly boundary-crossing... His research indicates that it's the norms that are most influential because, as he says, "they can fly through the ether" whereas for behaviors to propagate we need to be physically together. He echoes many of the themes I've developed in my book (Net Work): one of the the things that I have been saying for years is that the key distinction of this 3rd generation of knowledge management is that knowledge is in the network. (In generation 1, we assumed knowledge was in artifacts; in generation 2 it was in people.) Christakis comes to the same conclusion...

How Not to Map the Future

Not recommended in a corporate environment...
...or any other, for that matter    :)
[emphasis added]

Each future mapping system (tarot, astrology, tea leaf reading, I Ching, dowsing, palmistry, rune casting, etc.) has its own unique tools... Runes, Pendulums, Crystal Balls, Tarot Cards, Spirit Boards, Planetary Ephemeris, Psychic Cups

Forward Into the Past! (A Tale of How Not to Listen to Your Customers)

Jason Fry's 'Real Time' column in today's WSJ is worth checking out (subscription required).  He writes:

Earlier this month, Nielsen Soundscan released 2007 data painting yet another portrait of a music industry struggling to make the transition to a more-uncertain, less-profitable business model. For the year, overall units sold rose 14% -- and sales of digital tracks rose 45%. But not all units are created equal: Total album sales fell 15%, and that blow was softened by a 53% rise in sales of digital albums. Subtract digital-album sales, and physical-album sales declined 19%, to 450.5 million in 2007 from 555.6 million in 2006. (Dig into the numbers yourself here¹.)

Or, if you prefer, take this arresting anecdote from the Economist² (found via Nate Anderson's interesting read³, in the always-great Ars Technica): In 2006 EMI honchos invited some London teens to the label's headquarters to discuss their listening habits. By way of thanks, the kids were offered whatever they wanted from a big pile of CDs. Offered free CDs, the kids took … nothing.

[Bold added; links and italics in the original.]

And why should they take anything? The perceived price of zero isn't even the issue, as more folks fall into line and eschew P2P sharing networks in favor of obeying the law. My daughter's latest iPod is the size of a cookie (and not those super-sized ones they sell in airports, or even Oreos, but more like a thin Chips Ahoy). Continuing to sell CDs into this climate is like selling 78s when I was young.