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April 26, 2003

Comments

Marc Canter

Gnome-girl just got kicked off of Blgshares. I guess she's the Mike Milliken of.....

I'm sure she had to be doing something pretty bad for Sayeed to kick her out.

Gary Santoro

Looking forward to your posts. The efficiencies (and inefficiencies) of markets happen to be an interest of mine as well. It can be said that I do not subscribe to "modern portfolio theory."- Gary

Seyed Razavi

Marc: Gnome-Girl asked for her site to be removed. I never asked her why.

Pierre: Great ideas. Would general shareholders have voting rights? In my conversation with Joi I suggested that two classes of shares would have to be introduced. Class A shares with voting and dividend rights, Class B shares as they are now.

I'm tackling the issue of adding another layer of complexity to the sim and whether it would be worth it but I very much like the idea of owner generated polls for shareholders.

Of course, the utility of it is to have some further entry barrier to voting than just virtual cash at least from the perspective of the blog owner.

Doug Kenline

Pierre,

Thanks to Joi Ito I know of your blog.

Thank you for blogging.

The blog will set the people free.

I am very impressed with Moveable Type. Thank you very much. I may give it a try if I am able. Meanwhile I use blogger.

There is a tax honesty movement in the United States going on. Lead by a man named Bob Schulz.

http://bobschulz.blogspot.com/

For these very reasons, a young truck driver is on his 13th day of a death fast in Austin, Texas.

Please help Gene Chapman as the spirit leads.

http://genechapman.blogspot.com/

Doug Kenline
Atlanta, Georgia
http://dougkenline.blogspot.com/

Pierre Omidyar

Doug, thanks for your comments. I will take a look at your site.

Marc and Gary, thank you for your comments as well.

Seyed, let me first say I'm very impressed by how well thought out BlogShares is. I really need to spend more time trying to understand the implications of the basic rules you've set up.

In terms of multiple classes of shares, you could think about it traditionally with Common shares and one or more series of Preferred shares. Preferred shares are usually the ones that "cost" more to the investor, and therefore come with more rights and privileges.

But I'm still trying to figure out if your model allows investors to put sufficient "skin" in the game. If influence is the currency, that means that I should have to give up some of my influence to acquire and hold shares, and get more influence back when I sell those shares at a higher price. Though as a shareholder, I have a certain amount of specific influence over the stock that I hold, of course, and this may be expressed in the voting plan you have.

There's not enough space here to explore all the issues, I'm sure -- and I'm taking a bit of a risk because I've been thinking about your model only for a few days now, so I'm sure I'm missing something.

Seyed Razavi

Pierre,

I think we're both on the same line of thought on this. I'd be grateful if you do give it any further consideration (feel free to email me if you do).

There are two issues I'm grappling with in terms of introducing Preferential shares:
* Scarcity and overbearing influence of the rich
* Complexity

Scarcity of the shares can lead to the very wealthy (virtually) having a dominant interest in the market so something has to be done about that. It's ok for institutional investors in the real world to control 49% of the entire market (based on last figures I saw) but in the blog world that sort of control may be seen as a great inequality.

Complexity is also a fundemental issue. Adding yet another inner market (for Prefential shares) may be a burden on existing players and increase the entry barrier for newcomers. Already about to integrate two new bond markets into the game (shhh, don't tell anyone).

Joi raised the primary issue about BlogShares: the balancing act between social software, game, financial simulation and search engine / meme is a tricky one. In my path to discovery on the point of equillibrium I've found that there will always be a trade-off that will be unaccpetable to some. Managing expectations is a skill that is more demanding than I expected :-)

Pierre Omidyar

Ahh, yes, managing expectations can be very tricky, especially when you are managing and enabling a marketplace. :-)

JY

Quelle bonne nouvelle que ce Weblog!

Bienvenue !


It's not BlogShares related, but what do you think of "A Random Walk Down Wall Street" from B. Malkiel?

http://www.amazon.com/exec/obidos/tg/detail/-/0393057828/qid=1051567612/sr=8-1/ref=sr_8_1/002-2644570-6654443?v=glance&s=books&n=507846


I appreciated the theory and explanations of the author, but i'm still trying to find balanced opinions.

Thank's, and again, bienvenue à votre Weblog !

JY
Nantes.

Seyed Razavi

> Ahh, yes, managing expectations can be very tricky, especially when you are managing and enabling a marketplace. :-)

I guess I walked into that one... :-)

Joerg Wenck

I would think that the Internet is a marketplace that works faster than any simulation grafted on top of it. What am I missing? Is the simulation supposed to have predictive value? Then you would have to disallow free trade in the simulation. The structural divergence between marketplaces and democracy (one man, one vote vs. one dollar, one vote) does not seem to be present on the Internet. Does this not imply that virtual markets need to be correlated to real-world, non-Internet markets to attract substantial interest? There is no cost involved in checking/enhancing your hit counter, page rankings, aggregator site-presence and other such blogger pastimes...
Why am I supposed to care about anything other than page impressions, comments, downloads etc.? The Internet market presents no barriers other than penalizing non-entry. How do you find the time to research a market whose demands eo ipso outstrip your productive capacity?

Ole Eichhorn

Pierre -

One of the interesting things about BlogShares is that there is already a market of sorts for Blogs, it is called the Internet. Inbound links to your blog are how you get value, and outbound links are how you distribute dividends. The worth of a blog is the value people place on its content, measurable in page views or references or influence (as you suggest). Blogs like Instapundit which link many other blogs have influence because they are connectors. Blogs like Joi's have influence because of the ideas.

I think Technorati is more of a "real" BlogShares than BlogShares itself.

Ole

Ole Eichhorn

Pierre -

I was thinking about you comment to Sayed about "putting skin in the game". I agree that this is essential for a true market. Otherwise there is no risk to balance potential rewards.

I'd suggest there are two kinds of investment people make on the 'net. First, there is their time. If they make time to visit your site, read your posts, etc. then they are investing. If you monitor page views and hits, you are measuring this level of investment. This is not modeled by BlogShares - presumably people don't have to visit a site and read the content in order to buy shares.

The second kind of investment occurs when you have a site of your own. You decide who you'd like to link to, and this is an investment. If your entire site was one huge link to one other site, you'd be putting all your investment into that one link. On the other hand, if you link to hundreds of other sites, the investment is distributed, and there is dilution involved. { Sometimes I see people with hundreds of links in their blogroll, and I wonder if they truly visit all those sites and recommend them, or if they are just being link whores. I'd rather see a short blogroll where the site author visits each site on the roll every day and really recommends them... }

This second kind of investment - making links - is what is modeled by BlogShares. In fact the dilution is explicit, if I have 10 links, the value of each link is (my site's value) / 10, and if I have 100 links the value is (my site's value) / 100. In a way there are common links and preferred links, because links on a blogroll are a lot less valuable than links in context within the content, and a lot less likely to trigger click-throughs, but BlogShares doesn't model this [yet!].

How you "spend" your link investment affects the "return" you get. Some bloggers like Glen Reynolds are 'linkers', almost every post they make is centered on a link to another site. They have many links so there is substantial dilution, but because they link to so many sites, a lot of sites link back. Other bloggers like Steven Den Beste are 'thinkers', they post a lot of thoughtful content but relatively few links. They are concentrating more value in each link, and using their content to attract investment from others.

The 'net itself is a market of ideas. Each site's value is determined by the investments of others in time and links. The measurement of this value is done by sites like Technorati which measure the interconnections between sites, and the access logs of each site which measure the traffic.

Ole

Pierre Omidyar

Ole, very well said. Thank you.

Seyed Razavi

Ole,

You make several good points which I agree with. I particularly agree with the statement that the 'net itself is a market of ideas.

BlogShares is a simulation built to model it, however, imperfectly. It's not the market itself and can never hope to be a perfect map of it either (not enough resources for little ol' me). At best, the objective is to provide something usable for a number of purposes. One of those is similar to what Technorati provides but built using a different algorithm for valuations / rankings and with different starting assumptions.

The biggest distinction at this point is what you clearly highlight in the types of links being considered. It's a medium-term goal to extend the valuation system to include "product lines" which are individual posts. A lot of fun can be had and some colour added to the game by modelling individual posts as products.

However, at this point the links considered are of the second type you describe which I define as social contracts between sites. They're less fluid and require less aggressive indexing which suits my technical limitations. The trade-off between an active, fairly sophisticated interactive web-site and a more aggressive indexing system is clearly leant in favour of the former on BlogShares.

One thing I'm fairly uncertain would add value to the model is traffic measurements. Links offer something tangible: a social contract between sites. Traffic data is mostly noise which requires large error corrections (for robots, refreshes, proxies etc.) which on the lower end of the ditribution for attention doesn't leave much useful data.

Right now, I'm less interested in improving the accuracy of the model than I am in making it more interesting. So whilst individual product lines offer something fun in themselves, they're a second order of priority to emergent categorisation which is high on my wish list.

Ole Eichhorn

Sayed -

I should have prefaced my comments with a compliment to you for the terrific job you've done with BlogShares. It is a fascinating idea and it will be fun to see where it takes you. (I like thinking of blog posts as "products".)

Ole

Jo-Anne Zedrick

Pierre,

This is all very wonderful and heady stuff....but let's get back to real life for a moment, if you will bear with someone from the "common masses".....A quote from you: "Ahh, yes, managing expectations can be very tricky, especially when you are managing and enabling a marketplace. :-)"

Here's an expectation that I guess you can't manage: as an Ebay buyer who has been defrauded, I don't think it is unreasonable to have Ebay's Fraud Protection Program reimburse 100% of my loss, especially in light of the fact that "Omidyar estimates that only 30 sellers out of a million fail to deliver on their promises" (CBS).

If you truly are a "philanthropic geek" remember that charity starts at home and that without buyers there would be no Ebay and without Ebay you may not have all those billions.

Thanks for your time and attention.
Jo-Anne Zedrick

Mishka

Mishka rules !

Boris

Boris rules !

Bill

I would think that the Internet is a marketplace that works faster than any simulation grafted on top of it. What am I missing? Is the simulation supposed to have predictive value? Then you would have to disallow free trade in the simulation. The structural divergence between marketplaces and democracy (one man, one vote vs. one dollar, one vote) does not seem to be present on the Internet. Does this not imply that virtual markets need to be correlated to real-world, non-Internet markets to attract substantial interest? There is no cost involved in checking/enhancing your hit counter, page rankings, aggregator site-presence and other such blogger pastimes...
Why am I supposed to care about anything other than page impressions, comments, downloads etc.? The Internet market presents no barriers other than penalizing non-entry. How do you find the time to research a market whose demands eo ipso outstrip your productive capacity?Thanks from online casino

Jeffry R. Fisher

Pierre wrote, "I completely agree that generally, governing influence should not be proportional to value or wealth"

Why not have both? (per capita and per dollar representation) The purpose of having bicameral legislatures is that we can apportion influence differently in each chamber, and then require majorities in *both* to enable legislation.

This performs an "AND" operation, yielding an intersection of the legislative proposals popular with each type of representation. In other words, when both the rabble and the wealthy agree on something, then it is time to act.

The principle here is that the masses should not be able to loot the wealthy who are few, and the wealthy should not be able to enslave the masses who are undercapitalized. While it's nice to have a constitution say so, it's even better to structure our government in ways that make such lofty goals difficult to circumvent.

I proposed something like this to the UK a couple years ago when Tony Blair was "reforming" (stacking) the House of Lords: Keep the Commons as is, and then assign seats and votes in the Lords according to taxes paid to the Crown last year.

Every taxpayer in the UK would assign a weighted proxy to his/her favorite Lord (or Lady), and the 400 or so peers carrying the greatest voting strength could sit in session.

Once reconstituted, the Lords could claim greater legitimacy to exercise real authority, restoring some balance between the two houses.

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