Andrew Ferrier

A long discussion with plv the other day about open source and what it really meant got me thinking about that model when applied to other domains, such as mapping.

Google have clearly made a success of Google Maps (I’ve discussed Google Maps before as compared to Multimap – not entirely favourably – but whatever I think, the market loves the former). Plenty of competitors have also sprung up, notably from Microsoft. Incidentally, Flash Earth brings together all of these services into one ultra-slick interface; although I’d still love to see them available on Jeff Han’s touch screen (iPhone, eat your heart out – your interface is nothing on this).

However, one thing all these services have in common is that the mapping data is (as far as I can tell) commercially licensed, ultimately from a governmental institution. In the UK, we have the Ordnance Survey (who actually produce excellent paper maps, even if their customer-facing technology is a little backward). The Ordnance Survey gets its revenue from licensing data, selling maps, and so on, rather than from general taxation (which is something that as a libertarian I can almost approve of; although it does raise the question of why the government needs to be involved at all, since there’s therefore clearly a market for the data). The closest equivalent in the US appears to be the USGS (which also has other functions).

It always used to be conventional economic wisdom that mapping (or, to be more precise, surveying) was a function that had to be performed by government, because it was so astronomically expensive – in other words, it cost more than the direct revenues one could possibly obtain (presumably the indirect benefit to society is supposedly significant, which is why we engaged in it). Whether you agree with the morality of this depends on your political views, but it is at least plausible. It’s interesting to see that the Ordnance Survey no longer seem to operate on this model, but clearly many folk still believe surveying should be done centrally.

Now technology might be able to change all of this. OpenStreetMap is showing how it might be done – using cheap GPS receivers, driving along streets, and plotting the resultant data (yes, I know the receivers rely on expensive satellites; but there are only a few of them; and they’d be there anyway). Obviously there’s a long way to go, as shown by the short list of places that have been mapped. There are obviously also concerns over completeness, accuracy, and so on (although most of these have an analogy in Wikipedia, too). However, the potential for these maps is huge if the concept does take off – Google Maps mashups would have nothing on the potential richness of data available. The real concern so far has to be over how many people are really interested in creating this data and keeping it up to date.

As with all futurology (aka: guesswork), time will tell.

Update 2006-01-16: A recent edition of the BBC radio programme In Business (available as a podcast) took a rather quaint look at open-source. Worth a listen as a discussion of how hard open-source is to sell, although not as a rigorous discussion of the technological and legal issues.

TEDTalks has hit a home-run again (seriously, I can’t recommend this series of videos highly enough – whatever you think about whatever else I’ve written here, you’ll find something you like). Bjorn Lomborg, who’s not a stranger to controversy, explains in this 2005 TED presentation why climate change, relative to the world’s other great problems (e.g. disease, sanitation), isn’t an efficient problem to solve. This is a finding of the Copenhagen Consensus, who expended no small amount of effort on the exercise. He makes very clear what the ranking means – not that it isn’t desirable to ‘solve’ climate change (it is) but simply that it’s inefficient – there’s more bang for the buck in ‘solving’ free trade or controlling HIV/AIDS than in solving climate change.

Bjorn is an economist (my favourite type of -mist) and I know this doesn’t bode well for the acceptance of this theory: primarily because economics has never done a very good job of publicising what it’s about, and so there’s a frequent misconception that it’s something to do with money. The typical reaction to the conclusion above is that economists only are only looking at the monetary side of things. Well, yes, that’s true, but it’s also the whole point. Economists put prices and costs on all kinds of things that many people don’t (life or death, polluted air, a loving relationship, etc.). Of course one can argue until the cows come home about the what those prices and costs are: and everyone does (even when they aren’t quoting them in dollars or pounds). But the money is only used as a number, as a symbol.

If we were to try and rank which we wanted more, an orange or an apple, we could probably do that. In fact, we could probably say how much more we wanted one than the other (twice as much – give me two apples, and I’ll exchange you an orange). Introduce a banana and the decision becomes more complex, but the principle doesn’t. This is all prices are – a way to trade off one alternative against another and allocate resources (which is similar to the definition of economics you’ll find in any textbook).

This is why it isn’t really callous to rank the world’s big problems and say that maybe climate change doesn’t deserve so much attention. At the end of the day, the world only seems prepared to spend so much time and money solving problems. Doesn’t it make sense to solve the ones that gives humanity the greatest degree of progress, health and prosperity?

Economists approach things in weird ways. I’ve noticed several posts on the more popular economic blogs recently discussing marriage, relationships, and sex: Are Husbands Really Like Potatoes? being a good example, as well as a discussion of polygamy. Tyler Cowen has even briefly looked at how nudity affects human behaviour (arguably not directly related to relationships, but it’s a fun read anyway).

Given that I like the economic way of thinking (given my limited training), I thought I’d take a look at dating, something close to my heart as a bachelor. This arguably makes me so far unqualified to discuss the subject – but I’ll give it a go anyway.

Most relationships go through three simply described phases:

1. Establishment – the fun part – getting to know a new person.
2. Established – the sometimes fun, sometimes not part. Most couples are in this phase right now.
3. Break-up – the not-so-fun part – upsetting, perhaps anger-generating. At the very least, not fun.

Successful long-term relationships, one hopes, never reach phase 3.

Most people enter relationships, I would assert, because they want a piece of phase 1 – it sounds like fun. Phase 3 is far away, and hopefully not going to happen anyway, so they downplay its significance. The question is – if phase 3 could be time-adjusted – expressed in the immediacy of today’s hurt rather than 3 years’ time – would people, on average, assess the situation any differently?

In fact, this comes down to a question of rationality. Economists like to assume that everyone is rational (or at least more rational than most people would). This means that people make optimal decisions, given the information they have. Without this, it’s hard to make markets make sense. Commonly expressed sentiments from friends after a break-up include: ‘at least you learnt something; remember the good times; it’s good you went through that relationship’. If cynical, one could dismiss those as simply statements designed to console and soften the blow. But the presumed implication of those words is that your choice was rational – it was worth the emotional upset in phase 3 for the enjoyment in phases 1 and 2.

I’m deliberately not going to come to a conclusion – I find rationality to be one of the hardest parts of economics – whilst I can understand people making rational choices about where to buy cornflakes from, it’s much harder to map it onto emotions. But it’d be nice to think that we do make sensible choices when it comes to dating, and that we do learn from our mistakes. I wonder if that’s so?

(NB: I know I’ve oversimplified the situation. But I think the same principles hold even if you develop dating into a more complex model)

Faffing with the contents of my wallet today in the supermarket, I began wondering about reward cards – are they still worth the plastic they’re printed on? They’ve been around in the UK for over a decade, and two major supermarkets – Tesco and Sainsbury’s – still use them. I have one of each. However, I sometimes wonder why I don’t throw them away – cash rewards of approximately 1% (presumably all that the supermarkets can afford) hardly seem worth the bother of carrying them.

Safeway (now Morrisons) scrapped their loyalty scheme in 2000, citing that it wasn’t worth the money to run it. They may have been right. Nevertheless, Tesco, now the UK’s biggest grocery retailer, still retains their scheme, and as the Economist states, the information goldmine (the only reason the supermarkets run loyalty schemes) is lucrative – although they don’t say exactly how lucrative. Safeway’s decision indicates the margins can be thin. Despite the low return on hassle I mentioned above, though, there are still plenty of takers – empirical evidence would suggest that more shoppers have loyalty cards than don’t.

There have been other issues; for example, loyalty cards came under fire from David Blunkett in 2004 in a fairly obvious attempt to draw away attention away from the problems surrounding the ID card debate:

Mr Blunkett said the cards produced key details about people’s shopping habits but were accepted because they were run by private firms. People should not distrust ID cards because they are a state idea, he said.

…

Holding up a Nectar card, he said people voluntarily signed up to allow such details to be collected through such loyalty cards by private firms. “There is a real issue about how that should be overseen and supervised,” said Mr Blunkett.

Mr. Blunkett presumably ignored the fact that voluntarily signing up to handing over data about tomato-buying preferences was a more respectable practice than being forced to hand over more medical information to travel. Fortunately, his illiberal idea didn’t seem to gain much traction. In all fairness, though, it’s quite likely than many folks don’t know that their data is used in this way; for that, The Guardian deserves some praise for educating the public.

Maybe reward cards will die out eventually. It’s hard to back that up with public data, although I’m sure Tesco have a hard time quantifying the exact benefit they get from theirs (how do you measure repeat custom accurately – with and without the card?). If I’m right, though, I hope they die because they don’t make business sense – not because the government regulates a harmless practice out of existence. Interestingly, Wikipedia alleges that this has already happened in California.

It’ll be interesting to see where the reward industry is in five years time.

Chris Anderson’s The Long Tail, although now passé for the trendiest MBAs, still seems to be kicking around as a buzzphrase. The canonical example is Amazon – they have a vast range of books available because the cost of maintaining a huge catalogue is low (many books are listed but aren’t in stock; other books are in stock at a third party supplier so Amazon effectively outsource the storage; an online database can be essentially unlimited in size at minimal cost).

This is the long tail of demand; it’s successful because although many sales come from (say) the top 100 books, a significant proportion of sales come from the (say) bottom 2 million. The bottom 2 million couldn’t be readily made available before, so this is why it’s a new concept. Here there is one seller (Amazon), and many millions of customers.

But what about the long tail of supply, where there is one customer and there are many millions of sellers? Does such a thing exist? Could it ever? The long tail of demand seems to exist mostly due to taste: you like that weird music, I like this. That isn’t likely to work where there’s only one customer. Any suggestions?

This year has clearly been the year of YouTube, Google Video and other pretenders to the throne. And as I’ve discussed before, I think Flash-based video is really cool.

However, not everything it’s used for involves cats falling off trees as per You’ve Been Framed, or actors fooling people. One of the best uses has been the huge amount of compelling video that’s been released free from conferences this year. I’ve absorbed tens of hours of it this year, on subjects as diverse as life coaching from legend Tony Robbins (Alexander Kjerulf has been to one of his seminars, and I want to go too), the marketing of spaghetti sauce, and curing aging. ‘Catch-all’ conferences such as Gel, TED, and LIFT have all got in on the act. This, of course, is an alternative to physically travelling, and will surely produce more super-star conferences that attract bigger names, bigger audiences, and grow in stature.

I’d love this video-based content to be one more nail in the coffin of the box in the corner. TV still seems to hold an now-unworthy position, primarily because of the culture of FUD around copyright that scares studios away from the network and causes them to avoid doing anything more adventurous than releasing restriction-encumbered shiny discs. I don’t think this can last, though; despite the nonsense that’s spoken about the ‘ethics’ of ‘owning’ content by those think they’ve bought more than a license, as Cory Doctorow rightly points out, DRM is fundamentally a broken business model. Whichever way the details of the market go, I’m sure we’ll eventually be able to chalk up another win for the long tail. I certainly hope so.

I’m not a big fan of gangster films, so I’m only prepared to watch the very best. Most such films are violent and gruesome, which turns me off (particularly the latter), and Scarface is no exception. However, it’s surprisingly moralistic. As Tony Montana (Al Pacino, of course) says…

I never fucked anybody over in my life that didn’t have it coming to ‘em. You got that? All I have in this world is my balls and my word and I don’t break ‘em for no one.

… and he’s right: at least by his terms. Scarface is also an interesting study of the drugs industry. Of course, it’s hard to know how accurate it is (I suspect real drug dealing is much more mundane than the glamorous life here), but nevertheless, there was more than one scene that reminded me of the interesting study of drug dealing in Freakonomics, with the price of risk being openly discussed.

The film runs much as you’d expect: rise to power followed by fall from grace, but it does it with style, cheap 80s music and cheap 80s fashions. Unlike Roger Ebert, I don’t think it’s a classic (although, as I said, I don’t like the genre much anyway), but Scarface is still one of Pacino’s strongest performances: his jutting jaw and accent so parodied now that it’s hard to watch without being amused. It’s still a strong film.

After writing a few months ago about how bank customers were reneging on the contracts they signed and suing their banks for ‘illegal’ bank charges, it appears that free banking is indeed in danger, with HSBC introducing a monthly fee. I’m glad to see that they won’t be charging them to those account holders with balances greater than £1,500 (read: those who rarely encounter fees anyway), but it’ll still be interesting to see how this shakes up the market. To me, this is a clear example of an unintended consequence of government regulation, in an area that would be better off left alone.

Richard and I went to see Steve Forbes (of Forbes magazine fame) speaking last night at an event organised by The London Junto (a libertarianish organisation). The topic was flat taxes, and Forbes made a compelling argument for one – albeit probably preaching to the converted. Forbes has to be one of the most knowledgeable people I’ve ever seen speak – he dealt with economics, business, and geopolitical questions with equal capability, forthrightness, and clarity. He’s a former Republican presidential candidate, and it’s obvious from his winning politician’s smile. The Lansdowne Club is a traditional old-boys London Club (you can tell this partly because they pointedly use the word criterion on their website), and it made a suitable venue, although it didn’t exactly appeal to my taste. All in all, a worthy experiment.

It seems to be a commonly held contemporary belief that transport and travel are a guilty pleasure at best, and reprehensible at worst, mainly due to the unpleasant environmental side-effects, and should be minimised. Environmentalists have already invented carbon offsetting to assuage collective and individual guilt about the trendy problem of carbon emissions (Tim Harford has explained why this makes no sense; and I think it’s nothing short of miraculous how carbon offsetting services can put a price on emissions so easily).

However, the upside is often overlooked. Travel is pleasurable. Some of the best experiences in my life have involved travelling, and I’m far from the only one. Quality of life does have value. Perhaps even more importantly, transport enables you to get stuff more cheaply. Trade is mostly beneficial, and the wider the scope of a market, the more beneficial it is (because of the greater likelihood that you’ll find large extremes of want and produce a large profit). Fast, cheap, reliable transport increases the efficiency of markets and is good for humankind.

Don’t feel bad next time you hop on a jet, and please don’t waste your money on offsetting carbon. Recycling is a whole ‘nother story.