In 1994 I started the first Internet company, Realtime Anywhere, in Shoreditch, what is now, 20 years later the center of London’s ‘Tech City’. What was London’s Internet center like then and how has it changed?

The reason I know Realtime Anywhere was the first is that there were almost no Internet companies in Britain and almost no technology businesses of any sort in Shoreditch, all of the people involved in creative industries there knew each other. After the property crash of the 80s, when Interest rates hit 18%, light industrial units around Hoxton and Shoreditch, were often derelict, rents were cheap and the area boasted the largest proportion of artists of anywhere in Europe. I was an architect at the time and several architect friends had moved there into quirky, unusual places. A friend, Dan Philips’ place was so big you could ride a bicycle in it and one local resident lived in a signal box on a disused railway line that you had to get to by ladder. I found an empty and very cheap, 3 storey warehouse in Cotton’s Gardens, near Hoxton Square for roughly the price of a parking space today (40,000 pounds) and changed the usage to live-work. This was a new planning option which had been brought in as services like desktop publishing had replaced the partially toxic light industries such as printing that circled London’s financial center. Redevelopment of Liverpool Street station had pushed the boundaries of city worker’s lunchtime excursions northwards, bringing a cluster of seedy strip clubs, or more accurately strip pubs most of which have disappeared apart from the infamous Brown’s where bankers and East End gangster’s would mingle to gawk at lunchtime strippers who included the woman who ran it’s daughter.

There were no Shoreditch pubs or bars open at the weekend, except the Bricklayer’s Arms on Charlotte St. and the definitively parochial Charlie Wright’s International Bar. Both were served by Lil, an orange-rinced barmaid from a Carry-On film. Despite the lack of fancy bars, shops or genuinely international but franchised, nonetheless, Soho House, the atmosphere was surprisingly similar to today. Shoreditch still looks superficially grim and somewhat Dickensian, despite the gentrification and it isn’t so much more colorful on deeper inspection, as creative professionals have merely displaced the more avant-garde creative artists who decamped to places like Berlin. The London Apprentice, gay club, was there in the 90s and the Blue Note was the first piece of nightlife to sit on Hoxton Square. In the mid 90s, just under the railway bridge over the Kingsland road, the first Vietnames restaurant opened, now part of what could justifiably be called Vietnam-town.

Myself and Markham Darbyshire started Realtime Anywhere in 94 from my living room at 5 Cottons Gardens. His dad came to give us advice and when we said that we thought there was a business in creating websites for people, it wasn’t obvious there was a market for that. We also thought domain names might actually have a value but we’d need money to host them (domains were free to register, but you had to have an IP address to host them and Demon Internet in Finchley were the first place in the UK that you could do this for reasonable cost). We registered anywhere.com as our domain and our company email address was anyone@anywhere.com.

We had dial up Internet and later ISDN. My friend Simon Perry started an Internet company, POW communications, down the street and he was the first to have a leased line with a then impressive 64kb connection. Simon kept an Internet diary at the time, noting down the first time he heard people mention the web in the Bricklayers’ (Bloody hell - can you imagine people are actually talking about the Internet in Shoreditch!), the first time he saw a URL on a billboard or read out on TV.

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We started working on more involved projects, a school friend Angus Bankes who had co-founded a healthcare technology company joined and we developed an Intranet connecting hospital staffing around the UK, a genealogy service for Scotland (with my father, who had even earlier Internet cred, having written possibly the first Internet book - The Electronic Mail handbook, in 1979) and some experiment projects such as a 3-d search engine. We then teamed up with Nick Denton, who now runs Gawker Media, and I later moved to San Francisco to create a news search engine, Moreover.

At the time, however, Shoreditch was considered a backwater, and when in 97 we were given the opportunity of a place in Poland Street, above Mr Bongo records in Soho, in exchange for doing their website, we jumped on the chance to move somewhere that would improve our credibility as a technology company.

I registered designskunkworks.com, thinking it would be a good name for an Internet product company, not realizing that Skunkworks was a real, trademarked facility run by Lockheed Martin or that you can now threaten to sue people just for registering a domain name.

I’ve long been a fan of David Thorne’s hilarious email exchanges on 27b/6 and wondered if the technique could be put to use in a real word scenario. Big companies don’t do surreal. So when I received the nasty letter below from Lockheed Martin’s lawyers, I sent them a picture of a kitten.

Below is the email exchange that ensued:

Dear *****,

I’m happy to transfer this domain, since for ethical reasons I do not wish to be associated with Lockheed Martin, the manufacturer of cluster bombs and weapons of mass destruction, or any of the people such as yourselves who represent them in such a harassing manner.

The domain was bought in good faith that it was not a trademark violation, since skunkworks is a commonly used term. I do not host this domain and any monies being made from it are by the domain registrar, whom you can contact separately. Since I have no idea how to assign a domain please send detailed instructions.

Here is a picture of an 8 week old kitten taken by Sasan Geranmehr to take your mind off things http://en.wikipedia.org/wiki/File:Persian_Cat_(kitten).jpg

Regards
David

__________________________________

Dear Mr. Galbraith:

Thank you for your cooperation. In order to transfer the domain name to Lockheed Martin, we will need you to do the following:

(1) Contact your registrar, Domain.com, and request that the domain name be unlocked;

(2) Also request that Domain.com provide you with an authorization code to transfer the domain name (this may not be available for 60 days following the registration of the domain name);

(3) Once you obtain the authorization code, please forward it to my e-mail address as well as to **************@******.com;

(4) As the administrative contact for the domain name, you will then receive an e-mail from Corporation Service Company (i.e., ****************@*******.com) asking that you approve the transfer of the domain name to Lockheed Martin Corporation. Please reply to that e-mail stating “I agree” to the domain name transfer.

We look forward to receiving the transfer authorization code.

Sincerely,

**********

__________________________________

Hi *****,

I was a bit disappointed that you didn’t thank me for the nice picture of the kitten I sent you.

I thought it was a kind gesture since, after having registered a domain that I quite reasonably believed was merely a concatenation of commonly used English words, I was wrongly, distressingly and somewhat unbelievably accused of attempting to harm the business and reputation of a colossal arms manufacturer. I was also incorrectly accused of attempting to make money from this, when simple due diligence would have shown this to be false.

I’m further distressed since having done a Google search for Lockheed Martin to see if you were in fact acting for them or this was just some kind of weird practical joke, there were some really gruesome images of people with no eyes and disfiguring wounds under the title ‘Lockheed Martin Cluster Bomb victim’. I need to see some pleasant and reassuring pictures of cute animals to remove these horrible images which have permeated my subconscious.

So here’s the deal. I’m out of pocket $9.99 for the domain you want me to give to you and doing this transfer to gift it to you is a considerable hassle vs letting the domain lapse, as is, without me ever using it (I have cancelled automatic annual renewals and will never host any website there), which I agree to do unconditionally. I also doubt I would win a fight against someone with nuclear weapons with my Swiss Army Knife.

If you send me a link to a picture of a really cute puppy, I’ll transfer the domain to you.

Best Regards

David

__________________________________

Dear Mr. Galbraith:

We appreciate your cooperation. Our client is willing to reimburse your costs for registration of the domain name if you can provide us with proof of same (e.g., receipt, invoice, etc.). We will also need you to complete the attached W9 form to process any reimbursement costs. Thank you.

Sincerely,

************

__________________________________

Hi *****,

Sorry for the delay, I was in London, which would have been nice had it not rained cats and dogs.

Speaking of which, since the costs of me providing you with what you need to process the $9.99 reimbursement you offer would exceed the amount offered, and since, without doubt, the costs for your client to process this would also exceed the amount. Further, since the costs for yourself to organize this reimbursement would also certainly exceed this, it would be both a waste of money for all parties concerned and merely a symbolic gesture.

I am sure we agree on not wasting money and I am happy that you are interested in a symbolic gesture. The picture of a puppy will be much cheaper and fill me with the joy that money simply cannot buy. It will more that recompense for the tedium of following the steps your client would like, beyond merely not doing anything with the domain DesignSkunkworks.com

I look forward to receiving a wonderful picture of a puppy (as long as it isn’t a Chihuahua, or any other dog that is smaller than a domestic cat when fully grown) after which I will gladly go through the detailed instructions your client would ideally like.

Best Regards

David

__________________________________

Hi *****,

I didn’t receive a response from my last email of July 24th, with the
suggestion of a settlement using puppy pictures rather than cash. I
thought I might, since your first letter contained all sorts of
terrifying crypto-intimidatory legalese like I imagine you get when
you haven’t returned a library book for 36 years in a Kafka novel,
demanding “steps” and “written assurances” etc. with a deadline of
“August 6th, 2012″.

It’s now September and I’ve received less than one puppy image.

I understand that puppy picture payment must be a more demanding
logistical problem, due to its unorthodox nature, for a corporation
like Lockheed Martin in comparison with Byzantine legal procedure or,
indeed, the manufacture of thermonuclear devices. I can comprehend
that, it’s no doubt a serious business and gravitas is important

Gravitas, isn’t important to me, however. I genuinely believe the
world would be a better place if eminently solvable legal disputes
were resolved by the ludicrous ritual exchange of somewhat cloyingly
saccharine pictures that nevertheless made people whose personality
has been subsumed by institutional groupthink melt like grannies
huddled round a new born.

I’ve invented a new term for this, Skunk Puppying.

Accordingly, if I haven’t heard from you by September 17th 2012, I’ll
assume that you are taking this matter no further and I’ll have to get
a copyright free or Creative Commons (CC BY-SA) puppy pic, elsewhere.

All the best

David

__________________________________

Skunkpuppy competition.

I thought it would be good to to a Skunkpuppy logo for other people to use when skunkpuppying. If you want to reward people who send you nasty letters with pictures of cute animals, you would be free to use this under a Creative Commons license.

I was thinking something along the lines of a cartoon dog wearing a superhero outfit with his fist in the air.

My friend Keith had a stab at some ideas already:

Submit your entries in the comments.

The term design is associated with visual things, we design magazines, products and buildings but not music or food and this visual association has carried across when people speak about web design. But Like food, it’s as much about getting the right recipe or the right use case, flow or need - Invisible design.

Here would be my picks for 5 design principles based on invisible web design:

1. Design for beneficial feedback loops
Beneficial feedback is the opposite of virality. A virus spreads but is harmful, something which is beneficial spreads precisely because it is valuable. Don’t design things to get more users, design things where the more use the more value and therefore the more users. Focus on the product and the business will come.

2. Design for incremental value
Create something where the more people use it the more value there is for each of them. This creates community.

3. Design for the primary use case.
Do one thing and do it well. There is no scarcity of resources in Internet land so a secondary use case can be a secondary product. The scarcity is attention, design for the principal thing that will engage people.

4. Design the personal.
Small companies used to pretend to be big companies by appearing less personal .e.g. a switchboard that said “for customer service press 3″. Do the opposite. Design so that 30,000 people appear like 3.

5. Design recipes not visuals.
Achieve 1-4 with recipes not visual designs. A web design will have a specific flow and ingredients. How this looks will change based on the technology it sits on. But the recipe will be universal.

User Experience House Design

Since I’m both an architect and a web product person, I thought it would be fun to design a building the way that web applications are.

Web Design vs Building & Product Design

Web design has come along way in the last few years, since the rise of User Experience (UX) specialists, who are closer to architects in what they do than traditional web designers were. That is not to say that some web designers weren’t good UX people, it’s just that the perception of the role of web designer meant that they were marginalized into graphic design.

Again, this is not to say that graphic design is marginal, just that the web is not a graphic design medium but a product design one. This is why many corporations ended up with good looking, Flash-based websites that were largely useless in terms of doing the things a website is supposed to do. At the other end of the spectrum were the pure usability people like Jakob Nielsen who knew how the web worked but produced things that looked awful. A user’s experience is not just determined by functionality but by all sorts of things such as history, culture and perception, or nobody would use a qwerty keyboard or drive a speed limit breaking Porsche.

Because the web is relatively new, web design still has a way to go before it mirrors what architects and product designers do. For example, VP product is not a standard role in startups and where it is its usually less senior than the CTO, or VP of marketing. Much enterprise software and earlier dotcoms were not design driven cultures, so marketing or product marketing people would gather features and have the final say on what was passed to engineering. In architecture this system is only used for low design quality design & build projects.

For web design to move beyond User Experience to be more like Architect driven design, UX people need to be both more technical and more aesthetics driven. [ Update, February 1st 2011: What I should have added here is that UX should also be less about, brainstorming, interviews, focus groups or research - in architecture this constitutes preparation of the brief is often done by the client, and has little to do with the actual process of designing things. ] The role needs to expand from UX so that a ‘product’ person will actually design the architecture of the system (schemas, hardware and scaling strategy, and specify exactly what the product does), but from a designer rather than engineering perspective. I’ve been banging on a about this for years, but few people seem to relate to the problem, so this is not conventional wisdom and possibly wrong.

Somebody said (can’t remember who) that if the great 19th Century engineer, Brunel, was alive today he would have been a software designer. Software design is more interesting because there are things that haven’t been done being innovated all the time, its like being an creative engineer in the Victorian era, and so if people aren’t ready to design software the way architects design buildings, what about trying to design a building based upon web design methods - nothing complicated just a single diagram.

The diagram

The picture above is the end result. The title is a play on the Case Study Houses of the 1940s. Its not a UX design but a UX inspired one. Neither is it an engineering one - its doesn’t use UML or all of the very structured diagram methods 1. because they don’t map to this process and 2. because I don’t like them for these kinds of tasks. Things like UML work for very well defined rational scenarios but user focused design like a house or consumer software is rarely rational, its based on intuitive feel, so you can invent your diagrammatic language as you go along, mix metaphors and use things inconsistently, in order to get the message across to another irrational human being.

How its different

Web design is very linear, its all about flow and eliminating the niche, to get the bulk of people through a primary use case. Many architects tend to think of buildings as objects, the greatest ones, such as Frank Lloyd Wright, often thought about them as interconnected spaces but they focused on the spaces rather than the flow through them - this is analogous to looking at the stage set rather than the choreography. I’ve often wondered what it would be like to design a building like you would choreograph a dance - so that the end design was a picture of a person moving rather than the environment and where if that was sophisticated enough the environment would be defined by the person’s movement.

User Experience based design is more like choreography.

A specific example

I stayed in a hotel recently where the bedroom was connected to the bathroom by a small dressing room corridor. This arrangement really worked - clothes were neither in a ball on the floor on the bedroom or bathroom and the whole flow of getting up and going to bed worked like a perfectly executed dance or a good website, with everything where you wanted it and in the right order. So much so that I measured it (always carry a tape measure).

Why is this at all interesting?

Good design is often about things which seem mundane and obvious after the fact. An example of this on the web would be the ‘permalink’ - few people can remember that before humble online diaries informed people like the New York Times how to publish on the web, you often couldn’t share a link to a news story (it would be at a url like ‘topstory’ which changed when the top story changed). In the architecture world, most people don’t have dressing rooms or walk in closets, but this is less a function of cost and space than of design, most houses have corridors and cupboards. so in the flow based design above the bedroom module uses the same flow as was in the hotel. Added to this flow is a connection to laundry. In the UK in small houses many people put a washing machine in the kitchen, in the US laundry is more often in a basement and in Hungary the washing machine is usually in the bathroom. The last arrangement makes most sense, but it would be better to combine the US and Hungarian model with a flow which has laundry going from a space between washing and sleeping to a laundry area - e.g. with a laundry chute.

The design

The overall concept of the design is to separate the spaces into active and passive, and look at the day to day activity flow to determine how to subdivide and arrange them. Most rooms in houses are based on obsolete uses, hence the ubiquity of loft spaces - which were obviously based on re-using industrial spaces that were not originally designed to be lived in at all. The drawing room has merged with the living room which in turn has morphed into a TV room as the kitchen and dining room have also merged, giving more living space. This is what starts to move towards spaces which are defined less by activity than by type of activity and the type of environment. This, for example, is how traditional Arab courtyard houses worked based on prototypes in Baghdad - rooms were multipurpose and labeled according to the type of climate in them. A house subdivided primarily into active and passive spaces could have a very different feel for each: cozy, soft, dark for the passive, larger, bright, hard surfaces for the active one and this would in turn create different flows.

For a view of what this would look like in reality, I applied a watered down version of the active/passive subdivision of space to the barn we converted into our home, below are two pictures of it, to illustrate the point.

The passive space is, cube shaped wooden and windowless, while the active one is rectangular with hard surface and bright overhead rooflights and proportions scaled down from a banqueting hall which make it appear much larger than it really is.

Active space:

Passive space:

A new room type, the ‘Maker’ Space.

Going beyond this rough active/passive concept for the flow diagram for Use Case study house #1, I though it would be interesting to add the activities that often happen in the garage which has gone beyond the role of storing cars to being a place of creative activity throughout the US, everything from bands to Apple computer started life in the garage. I brought this space into the house and along side the main active space (the dining area) so that there was an activity space that was all to do with play and making things. A maker space.

Active zone:

The original bedroom flow has been created as a module which can be repeated multiple times and linked to the service spaces (which are all humid - kitchen, bathroom).

Sleeping module:

This might all seem pretentious - the end result is just a simple diagram and its by no means a complete design. But its a diagram that has a lot of work put into it to make it the right diagram, and that’s what makes a good design for a web application.

For me, there is no startup that gloms onto the depressing zeitgeist more wretchedly than Borro which follows mockney Wonga into the foggy world of dodgy debt - the very thing that got us into this mess in the first place.

According to their testimonials, “borro’s service sits somewhere between corporate investment and pawn broker”. Exactly one Planck Length away from the latter, because in my experience, corporate investment doesn’t tend to involve leaving your wristwatch as a deposit. With its lending service, Borro wraps the world of technology, banking and the Great Recession into a nasty little ball, with a story so perfectly intertwined that it reads like contemporary Dickens.

Borro.com, Boo.com with two ‘r’s.

Pawnbroking is when money is loaned against something real but which can be sold quicker than a house if massive interest is not paid. Its in the 7th circle of debt hell, three rings below sub prime, where desperate people sell their granny’s ring to buy crack. It’s not a nice business, but in times like this, its a thriving one.

Things that you can sell quickly have to be reasonably desirable, so pawnbrokers’ windows are full of the best things that poor people have ever owned, giving a bizarre impression of status amongst the deprived. In a pawnbroker you can find gold jewelry and expensive watches and brands that indicate respectability. If you were to extrapolate this further, a ridiculously distorted caricature of a pawnbroker in a dystopian Gatsby would store fine wines, famous paintings and fancy cars. But in this cartoon, behind the mask of respectability would be something vile and predatory.

Montague Tigg outside the London pawnshop.


This Gatsbyesque image of diamonds & Porsche’s is exactly what Borro claim to have attached to pawnbroking and without the vileness behind. Sections on their site include diamonds, gold, fine-art and antiques, vintage cars and, unbelievably, luxury yachts. Items are stored in time-locked steel cages with ‘tremblers’ and 24/7 CCTV, except the yachts of course! In addition there is a section on their site about their values which outline ways they differ from the normal practice of pawnbroking.

There are a number of possible reasons for selling pawnbroking as upmarket, whether they work or not. You could try to make pawnbroking completely up-market with a more lucrative clientele or you could make it less downmarket using a few rich users as anchor clients to attract the masses or you could create the illusion that rich people are using the service to reduce the stigma which a user base of ordinary pawnbroker clients would feel.

So is it real?

According to the Wall Street Journal, which has a piece based on an article in the London Times, it is: “Pawnbrokers to the Rich Boom in Britain” Now if this piece had predated Borro’s current PR push I might have been less skeptical that Borro is meeting a genuine demand for rich people to suddenly use pawnbrokers. But it doesn’t, and there are no other facts in the piece to backup any trend. Note the headline isn’t: “Pawnbroker to the Rich Booms in Britain” it’s plural, as if Borro is the winner in a vast new space. It isn’t just claiming that Borro is booming, but that the rich are also busting.

Its in the journal so it must be true.

But the rich are not going bust in droves. In fact one of the defining trends of the Great Recession is that the gap between rich and poor has widened. If, as the WSJ article says, “borro is sending tow trucks to posh enclaves like Kensington, Chelsea and Fulham to pick up an ever growing list of Porsches and BMW’s”, why have property prices bucked the national UK trend and steadfastly continued to increase there? Sure, the business of pawnbrokers may be thriving, expanding their client base to nip at the heels of the middle classes, but I doubt the last resort lender of the bottom percentage has become a favored recourse for the 1%. In fact the 1% are more likely to be found funding sites like Borro, these days, with nowhere else to put their money.

Here’s what I suspect happened - just my opinion. Borro hasn’t been around long enough to be sending tow trucks to pick up an ever growing list of Porsche’s even if it had struck gold by inverting a thousand year old model of lending. But they’d like to be and that is the story their PR agency is selling. Via the distortions of distance, cultural difference and the persuasiveness of PR flacks, a Wall Street Journalist was duped by a story that if it were true would be emblematic of the bigger picture, of a shit storm of debt default which can only be understood via anecdotes like this. It was a story the writer wanted to believe, it slipped through, no big deal.

But if a single missing ’s’ in the WSJ makes this story fascinating for an OCD pedant like myself, a single letter typo on their website would be enough to excite Benedict Cumberbatch’s Sherlock.

Borro have a list of things that people have already pawned, from Chateau Lafite claret to a Banksy print and a $40000 painting by Jean Dubuffet. Borro point out that the items “are not accurate representations due to client confidentiality however the loan amounts and artists are precise”.

Now aside from the fact that the confidentiality is convenient for a new business with little loot to show, or that DuBuffet paintings are about $750 per square inch meaning it was on the small size (less than 8 inches square), just like Arthur Daley’s memorably dodgy Levys [sic], DuBuffet isn’t spelled the way Borro did: DeBuffet.

DeBuffet is spelled DuBuffet

No big deal I guess, many sites have typos. Perhaps their picture expert did dictate the details and passed on no emails with what they had sold. But in the world of Occam’s Razor, I’m not buying it. Forgive me if the thought hasn’t crossed my mind that there are no DuBuffets in Borro’s trembler cage vaults, no lines of trucks waiting to haul Porsches out of Chelsea parking spaces and that neither the business of pawnbroking has become upmarket nor have the 1% become the latest victims of austerity.

Even if Borro is just a dressed up pawnbroker why is it intrinsically worse than a bank or other distressed debt sites like Wonga?

Banks and even Wonga don’t want you to go bust, or they don’t make money. Some people won’t pay, and the debts will have to be written off, but most will pay back and the net profit will be the interest minus the rate of default. But if everyone defaults on a pawnbroker they can still make money.

On the face of it, Borro aren’t trying to profit from a default. From their values section: “[We] Realize the highest value for our customers’ assets in the ‘last resort’ event of default, so that their loans are repaid in full and any excess is returned to them”. But think about that. If the loan is at a very high interest rate (I’ve seen figures like 60% bandied around) then the selling of collateral is already yielding a big profit before any money is handed back to the borrower. More importantly, with the hand back, there is no incentive for Borro to sell for a maximum beyond the loan value, and businesses where goodwill is in conflict with incentives are either not good will or not good business.

As I’ve written before, the last Internet boom failed when people though they could wave a magic wand at any offline business and Internetify it, bringing unimagined riches as keyboards clattered like a million cash registers. Borro looks to me to be making the same mistake, trying to take pawnbroking online and make it something that it isn’t from a business perspective and which fails to understand how the web works from a product one.

Why does all this matter?

This matters to me on every level. As an Internet entrepreneur, Borro is the kind of mad business that helped creat the last crash. As a technologist, if that happens again it will destroy faith in one of the things that can help get us out of the current mess via innovation or the desire to make things simpler and better such as Simple (BankSimple). And as a person, Simple in turn reflects the ability of technology to solve rather than perpetuate the money-for-its-own-sake mistake of the debt-fueled, financial arms race that nearly destroyed the global economy.

More than that, by having, what is suspect was harmless PR driven fiction enter the archives of the Wall Street Journal, with the title “Pawnbrokers to the Rich Boom in Britain” and the date “January 4, 2012″ this innocuous article could be re-quoted to rewrite history and create the cruel illusion that the 1% were in this together with the 99%.

I used to love trains, in secret I think that I became an architect because I spent so much time building infrastructure for my model railway set, as a kid. Having watched trains crawl along at the speed of slow freight, in my 10 years in the US, I moved back to Europe and was excited by the prospect of regularly using a truly high speed rail network.

Then I actually used it.

A train on France’s TGV from where I live, in Geneva, to Paris takes a mere 3 hours, it is by far the best way to get there. But it costs almost double what a flight does. If I want to use the Swiss network it’s more, and if I want to combine two networks, say by taking the train to Berlin via Basel (which I have done, when flights were delayed by snow) then not only does it take a full day, but the idiosyncratic differences between providers means that the complexity is several orders of magnitude higher than a multi-point plane flight. Ticketing for the TGV is worse, positively Byzantine. There are no print-out tickets, let alone iPhone barcodes, you have to pick up or have a cardboard ticket delivered.

So what’s going on, why is state subsidized, cheap, electric powered transport more expensive than for profit air travel at a time when gas prices are high? This is not just a function of competitive efficiency, although that is part of it, (SNCF went on strike, for example, to prevent freight running on the TGV network), in the UK privatized rail has created prices that are even worse.

The problem is the infrastructure itself. When you fly a plane there is no track required, the infrastructure investment is only at the nodes, and the decentralization of these nodes by low cost airlines in Europe, has driven prices down and broken down the stranglehold of the large airport authorities. On a rail network there is a massive cost for the rails themselves that creates less competition so privatization means monopoly capitalism.

So why isn’t the same true of the road network? That requires massive infrastructure and in France the road network is possibly the most free-market driven infrastructure in the world with private toll freeways operated by companies in places like Dubai. The French road network is ironically far more capitalist than America’s. But it isn’t the nature of the ownership of the infrastructure but the nature of the network itself that determines its character. Railways can only pack a very few number of trains on at one time and there are few exits or stops. Roads have many vehicles like little packets of transport. The road network is like a packet switched one, like the Internet whereas the rail Network is like the legacy, fixed line, monopolistic telephone system.

But at least trains are green, like the nuclear generated electricity that powers the TGV.

We are experiencing a tech boom during a financial crisis. Not just a mere slump but what threatens to be a continuation of global financial meltdown that started with sub-prime mortgages in the US and now concerns sub-prime countries in Europe. According to people who are not prone to hyperbole, like the governor of the Bank of England, we’re in a period worse than the Great Depression of the 1930s. But in San Francisco, at least for some, everything is swell. Twenty year old college dropouts are once more raising millions armed with nothing more than a PowerPoint presentation. As people around the world are protesting banks, people in flip-flops, t-shirts and jeans that look like they would normally be protesting banks are embracing the world’s purest form of capitalism.

People are just starting to call the top of this latest wave in tech, however, in the Wall Street Journal AngelList reports valuations are nearly half what the were six months ago. As someone who was very much a participant in the last tech bubble, I feel I’ve seen this movie before, and maybe there’s something to learn from a quick recap of the prequel.

The dotcom bubble was a form of mass hysteria. By the beginning of 1999, if you were working in technology in the Bay Area, you never needed to buy a drink, the SFGirl website listed which dotcom parties to crash, on a daily basis. These parties were often lavish affairs, such as Ask Jeeves’ in April 2000, where Elvis Costello played. A variety of networking events, such as Drink Exchange were replicated around the world, First Tuesday, a European Internet cocktail party sold for $50million.

This mania wasn’t entirely unfounded it was driven by the realization that the Internet was going to fundamentally change the way that businesses work, that connecting people together via a many-to-many communications network rather than a one-to-many broadcast system, would lay the foundation for a something that would dis-intermediate many of the middle men in business, from music companies to newspapers.

Middle men act where where there is a lack of information or a network disconnect, where the buyer does not know how to find a seller a middle man jealously guards a few contacts and profits. The Internet was about the free flow of data, information liquidity, it promised to replace armies of brokers, trade secrets and hidden contacts with software which connects buyers and sellers or finders and seekers, directly. The dotcom bubble burst when people applied the increasingly over-optimistic belief in people to instantly deliver on the promises of this revolution to mundane things like pet food. They forgot about the how, rather than the what, imagining that you could point a magic wand at any market and Internetify it. Meanwhile a separate group of people that were interested in products rather than markets were figuring out how to make anyone contribute or publish to the Internet, rather than just browse, through the seemingly trivial world of online diaries, weblogs. This would turn the web into a truly two way medium, where people could communicate and be social.

After the crash, both the hipsters and the corporates who were pretending to be geeks quickly moved on, but people like the bloggers remained. People, like Evan Williams of later Twitter fame, had moved to SF during the dotcom boom but had been involved in the web since its inception. The eventual model for today’s social networks came when blogging was reduced to its absolute minimum combining the aggregated feed - a reverse chronological list of all your friend’s updates with the weblog, a reverse chronological list of your own updates publishable with the ease of using a search box. Although much of the innovation and confidence surrounding the web came back during this phase, the Web 2.0 era, what was missing was money, access to capital had somewhat dried up as people questioned the VC model and VCs looked to fashionable areas such as clean tech.

It wasn’t the appearance of Facebook as a clearly huge company that inflated the bubble (although investments would later cluster around ’social’), Paypal or Google, were post dotcom crash companies that didn’t create a new boom. What created the new mania was the 2008 crash which made some people very rich and some rich people with nowhere to put their money. Artificially low interest rates, money printing and risk deleveraging meant that normal market forces were not at work, people with money to invest had few options of where to put it to earn a decent return and so the high risk, high return world of venture funding was a more attractive than normal for a small portion of that wealth. This money went towards ‘angel funding’.

There are far fewer Venture Capital funds than during the late 90’s, with a quarter of the money, funding twice the number of startups, largely because the fixed cost funding required to launch a startup is far less. During the dotcom era, startups would buy expensive hardware from companies such as Sun, enterprise level hosting from people like Exodus and database software from Oracle. Scalable hardware and hosting which used to cost several hundred thousand dollars upfront, have been replaced by cloud services such as Amazon’s EC2 which until you have lots of traffic, costs very little. For startups, proprietary software such as Oracle’s has been replaced by open source LAMP stacks which are as good. Newer document based systems which scale much better for social networks are actually better than what you can buy. What used to require more than a million dollars has been replaced by free.

The fixed costs of creating a startup have become low enough that they can be initially supported by individuals who inject small amounts of capital at the seed stage, business angels. The angel money has been pooled into quasi VC vehicles, from the more esoteric forms of incubators to the super angels, from 500 Startups to Floodgate to Seedcamp to Angel Pad which take a relatively large percentage (up to 5%) for a token investment (as low as ($20K). This acts more like a competition prize than a real investment, an endorsement that makes series A funding more likely (the prestige value of the trophy is worth more than the cash). The stake is in the form of a share IOU, a convertible note that can be exchanged for a percentage of the company at the point a significant amount of money is raised, demanding a proper capital structure and at a discount to the later guys. In other words, at the initial stage these aren’t really proper companies, angel funding is based on a wing and a prayer. This is a gigantic game of musical chairs - with places to sit representing Series A and the people dancing around them being the angel funded.

The benign view of this is that the angel funding has created a rich variety of new pool of species of company where the environment is evolutionary, is constrained and only the fittest will survive. But this is a matter of degree, the startup environment has always been market driven and Darwinistic, this is not the world of state funded arts or military contract cronyism. What we have now is a very large number of companies with a tiny amount of angel funding that either have to be profitable very quickly of they will die, it will be less of a winnowing out than a mass extinction event. This may not be a good thing for anyone, regardless of what will happen to the individual companies, for the ecosystem as a whole, the immediate aftermath of a mass extinction doesn’t showcase variety.

Because this is an ecosystem the startups aren’t the only type of species in the food chain, angels are one step up and there is equal change of a mass extinction there. If investors start seeing poor results from the incubators and the super angels, individuals driven by the fashion for this kind of investment will quickly be put off investing in them and they will become deeply unfashionable. This is largely what Fred Wilson points out and although it may look like he’s talking up the professional VC model out of self interest, I suspect he’s just spot on in predicting that those that come out best from all this will be those at the top of the food chain, the top tier professional VCs and the handful of companies that are never left under funded.

Whether the increased role of the angel or incubator works in the longer term relies on two things: (a) the idea that a primordial soup of experimentation will produce more companies with massive potential than would otherwise emerge and whether that potential can be spotted and (b) that many of the other ideas can turn into sustainable businesses with little extra funding.

Regarding a) I would argue that the potential for companies to be massive is rarely seen before the end of a significant series A round. Most web companies suffer from a chicken and egg problem - to have value you need users and to get users you need value. Money is needed to seed systems with value - and this is particularly true with social networks. For a company like Yelp which I worked on in the incubator it was launched from, half a decade before this bubble, the potential was only really seen after several million and a couple of years, even by its initial investors.

As for b) Its certainly true that the Portfolio of VC’s like Index’s (which I pick just because I recently looked through it) reflects a wide variety of businesses, some of which could see a lowish risk 10x return on little investment and other on a higher risk 10x return on a much larger sum. However, companies that are based on ad revenue and social models will need lots of cash and are competing in an environment where the big social galaxies are already in place. Part of this bubble is distinguished as being all about social, and that’s the part that is most vulnerable.

Today’s Internet boom is a refinement of the original promise rather than a paradigm shift. It is based on the crystallization of the many-to-many model not as portals which were a legacy of the broadcast infrastructure and dominated the dotcom boom but as social networks, platforms for self-emergent non-hierarchical networks. At the same time it’s based on the extension of the Internet from when we are sitting down to when we are moving around, via mobile devices such as smart phones and, in future, ubiquitous health and environment based sensors. All this stuff is real and exciting and providing the feeding ground for the innovation that is the only way out of the financial mess we are in. But the funding cycle is by definition cyclical and while the overall trend for Internet technology is still towards secular growth, we are in a bubble which will burst, leaving the seeds of the next great thing in its gooey mess.

[ Aside from the fact that this directly contradicts the item about glass area, below, I love this stove and its bizarre arrangement of vents on top. A stove is all about the channeling of hot air and the design of this suggests that this presumably is doing something very involved without it looking fake ]

I say designer here because I was tempted to buy a stove purely on aesthetics - and by aesthetics I don’t just mean what the stove looks like, but what the fire is like - I want to see, smell and hear a wood fire, its something archetypal. So here are the minimal criteria that seem to matter and those to ignore.

Ignore

Efficiency: This is heresy, but you can largely ignore the efficiency providing the stove is based on newer technology when air is vented properly. A wood stove will be twice as efficient as a fire and log burning ones typically have efficiencies that vary less than 10%. You can increase the efficiency by going for wood pellets, but I personally think the benefit is mitigated by the aesthetics (unless you are talking about a boiler with an auto feed mechanism) and the fact that where I live logs are a ‘greener’ option, coming from small local suppliers. Further, and I don’t have actual number on this, but if you choose to hide the exhaust pipe (venting out the back, into a pipe in the wall) then you lose more heat than having a super efficient stove. I like the pipe to be vertical and exposed, this is what a stove is about, its not a fireplace.

Look at

Log Size: This one is kind of important, but it majorly affects the design choices for some reason - in Switzerland or France (where I get logs) they come in half meter or meter lengths as standard. Most of the more elegant stove designs take logs that are a max of 35cm, so this is one area where you are wise to cramp your style.

Glass area: I like the maximum glass to see the fire, and prefer 3 sided glass options over stoves that rotate so you can see the fire. Note however that this will be more work - self cleaning glass has a limited ability to live up to its name when you produce charcoal next to it. I also like to be able to leave the door open occasionally (not efficient, but sometimes nice) and you can’t do this with all stoves (I don’t know why and would love if someone could clarify).

Thermostat Control: Most modern stoves have some sort of burn control but not all, so look out for it. A wood fire wants to burn quickly and fiercely, so having some control over this is a really good idea - my advice would be to only go with stoves that have a proper thermostat.

Heating Volume: This gives you one number to concentrate on, based on a combination of efficiency and Wattage and related to something that directly relates to the design of the building you are putting it in.

Double skin insulation: If you have kids you probably want something where the sides won’t burn them if they touch it.

Graph is a term used in mathematics for a spider web style series of points and links. And because of the web and in particular, social networking (think ’social graph’), its understanding has come into the mainstream.

A weighted graph, treats the links like little springs, where the weighting creates forces in the links which then determine the shape of the spiders web.

Reading this article on the emergence of what may be imaginary epidemics in the US, such as autism and bipolar disorder, it struck me that they could perhaps be predicted and identified using a weighted graph of incentives. The older I get the more it seems to me that people very rarely take a view that isn’t in their own interest (people in cities take liberal views rather than liberals living in cities). Conspiracies rarely seem to be real because people are not that organized and that this rather than active collaboration creates the illusion of conspiracy.

In other words:

(a) Its in a drug company’s interest to believe in bipolar disorder to sell drugs.
(b) There is no incentive for a Doctor to challenge a diagnosis of bipolar disorder, she could get sued for not but won’t for doing so.
(b) Parents and human beings in general want simple concrete answers that they can act on - so there is a tendency to label people as having diseases when they are nebulous. (i.e. you won’t get wrong diagnoses for missing a leg but you do for autism etc.).
(d) The scientific community will bolster the idea of the existence of the disease, under social pressures (this one is perhaps the hardest to buy, but here is a real example, where a paper on ADHD rates in the US, which are 20x that of say the UK, looks at whether it is disease caused by Us lifestyles or is under-diagnosed abroad. It ignores completely, the third possibility, that it is over diagnosed in the US. It’s possible that this is because it is not in the authors’ interests to espouse the heresy that children are not suffering from a disease, because anything to do with sick children is an emotionally charged subject. In other words, the consensus has swung away from the truth, due to self interest weightings and its a subject where challenging the consensus will make you look wicked).

An incentive graph would show that autism diagnoses are in everyone’s interest and so will self emerge, passively, without any active conspiracy and independent of whether they are true or not. It would consist of various actors (e.g. doctors, drug companies in the example above), and various opposing stances (autism, not autism).

e.g.
Autism—(diagnosis)—Doctor———-(diagnosis)———-Not Autism
Autism—–(epidemic)—–Drug company——–(epidemic)——–Not Autism
etc.

Each of these 2 dimensional mini ‘tugs of war’, where the dashes are less on the left indicating a percentage bias towards the stance on the left, would create a three dimensional graph when multiple stances were introduced for each actor.

Anyone want to help me build an incentive graph application?