Falling Dollar Kills Off-shoring

For anybody following economic news, the US dollar is in shambles. Initially, I thought this would bring about a depression in the IT sector and possibly a bubble collapse. Don’t get me wrong: I believe there will be a softening in our industry due to things like the crashing housing market (think of all the Adwords purchases that will evaporate). However, another unintended consequence is that off-shoring (the practice of hiring foreign programmers), which was all the rage 2 years ago, is becoming impractical.

As evidence, check out the exchange rate between the Dollar and Rupee: it’s down 15%, and the vast majority only in the past few months. We can sit here and argue if the drop will continue, but we can probably agree that the dollar isn’t going to rise back up anytime soon.

Dollar vs Rupee

This sort of exchange rate suicide means off-shoring practices are now 15% more expensive across the board compared to 24 months ago. Any company doing this has more and more reason to boot the practice, especially considering the added cost of managing remote, non-native English speaking employees. Considering things like term contracts and the threat of a further falling dollar, the practice actually becomes quite dangerous. Just think: you sign a $3M two year off-shoring agreement only to have the dollar drop 10% next year — suddenly you owe an extra $300K.

So aside from all the arguments that exist about money flowing from the housing market back into IT in the form of capital investment (rather than through ad purchases), we can also safely assume that in-house IT operations themselves will become more valauble in 2008. đŸ™‚

The Streisand Effect Helps Ron Paul?

This post is less about politics and more about the Streisand Effect. Lately, I’ve noticed that the Ron Paul campaign seems to be benefiting from the Streisand Effect:

The name Streisand effect comes from a 2003 incident in which Barbra Streisand sued photographer Kenneth Adelman for $50 million in an attempt to have the aerial photo of her house removed from the publicly available collection of twelve thousand California coastline photographs, citing privacy concerns. Adelman was photographing beachfront property as a way to document coastal erosion. The picture of Streisand’s house that previously carried almost no interest to anyone suddenly spread all over the Internet.

In short, an attempt to cover up a piece of information leads directly to its rapid ascent in the consciousness of Internet users.

By my observation, the mainstream (especially the conservative) media has been playing down Ron Paul because they dismissed him as a long-shot candidate. Despite this, he has numerous accomplishments that are impressive for a candidate with only 1% of the national polls: #1 recipient of military donations, winner of the first Republican debate, and more money on hand than Giuliani. And yet you will have a very hard time finding main stream articles that cover these successes (go ahead, try to find them). Of course, Ron Paul supporters have been very active in pointing out these information deficiencies, creating an “outrage” against biased reporting.

As result of these facts being pointed out, we are seeing a massive interest in his candidacy on the Net – A.K.A. the Streisand Effect. Many times, I have wondered how much worse he would be doing right now if the media simply reported his accomplishments instead of omitting them in related articles. I can tell you right now, if it weren’t for the Streisand Effect being in action, I would have never written about this candidate (text book example of the Streisand Effect).

For example, when Ron Paul came in second at the FOX Republican Debate online poll, one of the anchors claimed that getting 10,000 people from the Net to vote is “not that tough.” (Prove him right by getting this article Dugg 10,000 times!) The video contains a humorous segment of the anchors insisting at how impossible it is to send a text message using a phone.

Or another example was when FOX dismissed the news that the top recipient of military donations was Paul by claiming he used some kind of “mailing list” that clearly no other (bigger) candidate could top…

I believe that as a direct consequence of videos such as these being spread, the Streisand Effect is dramatically helping the Paul campaign. When these videos were circulating about a month ago, the search term for “Ron Paul” on Technorati (a very popular blog search engine) was #1. As recent media attention has begun to recognize Paul in recent weeks, his rank has sunk to #3 (no other candidate currently appears in the top 10). In other words, the active suppression of his accomplishments may have contributed to his skyrocketing popularity online.

What makes this particular instance of the Streisand Effect so interesting is that its effect is not limited to online, which has been the case with most other popular instances of the effect. This makes sense given the state of the Internet as compared to a few years ago: it is now even more mainstream than ever. A staggering 1/3 of young adults get the news exclusively from the web (I am one of those people). So unlike previous incarnations of the effect, this instance is manifesting itself into “real life” in places like the debate polls.

So now that I have thrown this theory out there, keep a watchful eye on the media’s effect on his popularity. While it is possible that he is gaining popularity regardless, my theory is that his popularity grows much faster while the media continues to ignore him. This will hold especially true so long as his most loyal supporters continue to call the media out on their omissions.

Anyway, in closing I’d like to post this humorous video of Ron Paul owning a kid at some kind of talk show. It’s from 1988 and widely circulated, but it’s very funny if you haven’t seen it yet.

All this (plus the YouTube debates) just goes to show just how much the 2008 elections may be influenced by the Internet.

2007 Democratic CNN/YouTube Debate

In case you missed the news, the latest Democratic presidential debate was hosted by CNN and YouTube last night. YouTube users were invited to submit questions, which were played live at the debate.

This was the first big step YouTube needed to break out of the “online only” mold. If all goes well, we should see YouTube grow even more as the mainstream world becomes aware of the site through the debate. It’s likely that many of the candidates never even saw a video on YouTube until last night, as with much of the audience watching them.

Anyway, the questions were fresh in the way they were presented, although there were a lot of regular fluff answers. Some of the questions asked were definitely tough. We should look forward to the CNN/YouTube Republican debate on September 17th. Now that this debate has been aired, I hope to see a new twist at the Republican debate after people saw what sort of questions would make it on the air.

You can find all of the questions here.

YouTube is Co-Hosting a Presidential Debate

This may not be news to some avid YouTube followers, but YouTube is hosting presidential debates with CNN on July 23rd (Democrats) and September 17th (Republicans). They are asking that people submit video questions that will be shown, live, during the debates to the presidential candidates.

This is what I am talking about! Rather than being a “website where TV content is shown”, YouTube is now a “TV channel” where, unlike regular TV, viewers will be invited to participate. This is something that no other network can replicate. It also underscores YouTube’s true vision, which is often misunderstood as a massive haven for copyright infringement.

One of the more interesting dynamics that arise from this is the use of visual cues during the video questions. For example, people can show pictures of loved ones or the rundown state of a building to illustrate their points. Not only does this force candidates to address issues they might not have otherwise ignored, but there is a potential to shift public perceptions if a video is really exceptional.

I’m expecting a whole lot of Iraq questions during the Republican debate (YouTube users are liberal leaning, after all), but maybe that’s just me.

Digital Transmission Right – The Anti-DRM Proposal of Bennett Lincoff

So the big news today is the new open letter against DRM. If you don’t want to read a 28 page PDF white paper, keep reading; I have summarized the article’s most important points.

An IP law attorney named Bennett Lincoff has thrown his hat into the ring, but unlike everybody before him, he has offered a solution. Lincoff is suggesting introducing a new type of digital music distribution right  (“digital transmission right”). Here are its upsides:

  • All other traditional distribution rights as applied to digital dissemination are abolished.
  • Regular consumers can copy their own music to other devices or mediums without fear.
  • Downloading non-DRM music would be the norm. No music would need DRM ever again.

But it doesn’t equate to unrestricted free distribution. And this is the key part.

  • Any website that would be distributing music would need to obtain a license.
  • Any centralized P2P network would need to obtain and license.
  • Webcasts would need to obtain licenses.
  • Users of social networking sites would need to obtain licenses unless the website already has one (key point).

How do the record companies make money? Consumers would flock to sites that have the newest, highest quality content where they can share and mingle. This means sites like MySpace, YouTube, and others would need to obtain licenses to continue to operate legally. Seeing as I just named two extremely popular web sites that largely owe their popularity due to copyrighted material, you can see how there is definitely a market for this. The record companies make money by selling this right to distribute to these services.

The juicy stuff starts on page 12. Here’s a blurb about lawful operation of such services:

Licensed services, being lawful, would be able to operate openly, attract investment capital (without exposing investors to copyright infringement liability), and offer users the most sophisticated functionalities. … Service providers who obtain through-to-the-user licenses would have a competitive advantage over those who do not even though they would be required to pay license fees. The availability of through-to-the-user licenses under the digital transmission right would provide a positive economic incentive for service providers to secure the authorization they need.

The above quote also mentions another key point in his proposal, the ability of service providers to obtain “through-to-the-user” licenses, which would essentially be a license authorizing its users to share with each other through its service. In other words, because the license is explicit and replaces the old rights, it is now very clear that not obtaining a distribution license would be stupid. Thus, he argues licenses would be adopted widely.

Operators of centralized P2P networks would be jointly and severally liable with their network participants who share recorded music with others on the network. … Alternatively, a single license held by the operator of the network could authorize all digital transmissions of the licensed recordings through the network.

This means P2P would stay alive. Consumers are able to share and download music without fear of having personal liability – if they are at a properly sanctioned website.

Let’s be clear here: he is not advocating a free file-sharing utopia where nobody pays a dime. He suggests that P2P sites may need to charge to offset this new cost. But let’s think about this. If I can download all the music I want every month, with zero liability, no DRM, at CD quality, the ability to copy and burn it to as many separate devices as I want, and it costs money… Well, it doesn’t sound too shabby, right?

And this means iTunes will still be around. Nothing about it would change except now you would be able to download music without DRM. It also means Rhapsody and other streaming services will be forever changed. This is because his proposal no longer distinguishes between streams and downloads. All that matters is that it was transmitted. Today, there is no difference between a stream and a download except usually the stream has more DRM in it.

I just touched on a very important concept that Lincoff stresses. Because consumers are now able to copy media for personal use without restriction, a whole new market would open up. iPods work with your DVR that works with your laptop that works with your car audio system that works with your computer that works with your Zune that works with… well you get the point. Right now,     interoperability between music devices is a huge obstacle that makes pirating more attractive than ever. He is arguing that with such barriers gone, new and innovating devices will flood the market, further pushing music into everybody’s daily lives, thus further increasing demand for legal channels to obtain the music.

This guy is smart, and has thought through his arguments. For example, he stresses how the natural ecosystem of the Internet will favor legal channels if this distribution model is used.

Decentralized P2P file-sharing networks, on the other hand, do not have network operators … Accordingly, each participant in a decentralized P2P file-sharing network would be responsible for securing authorization for their own conduct on that network. … And again, it stands to reason that the vast majority of consumers who are interested in P2P would likely seek out networks that had secured licenses that authorize their file-sharing activities…

A decentralized file-sharing network would stick out like a sore (and very liable) thumb because you as a user would be liable for whatever you share. Besides, why use such a service when there are other legal alternatives? Well, let’s be honest, some always people will. But through the logic of the above example, it’s clear that there will be a very strong demand for a legal downloading service.

Wait, but how is this different from today? I mean, it’s still illegal to be copying music over a decentralized network, right? Nothing is different!

Wrong. Sharing is legal on sanctioned web sites. Public perception will be different.

As in, YouTube could get a license letting users upload copyrighted content. Napster could buy a transmission license and exist exactly as it did in 1999 (assuming they can make the money back). It means my Rhapsody account lets me download whatever I want whenever I want.

Perhaps the most interesting point he makes is about litigation becoming accepted.

Under these circumstances there would be no justification for public outcry over the industry’s litigation campaign against those who continue to infringe.

He has a point. Pirating is less attractive than it has ever been. His solution both addresses the economic (convenience) and social (“it’s okay because the RIAA is greedy”) reasons people pirate. He argues that action is urgent by reminding the reader that (slow) broadband adoption rates are the only thing keeping pirating at a still relatively low point:

The worst outcome for the music industry would be if worldwide broadband penetration overwhelms the industry’s ability to police unauthorized distribution of recordings before a full, fair and feasible solution for the digital music marketplace is in place.

While I haven’t gone into it here, the last 10 or so pages are dedicated to discussing royalties. He has thought through how the royalty structure could work in a global digital economy. He suggests royalties are paid by assessing both where the transmission originates and ends. He also discusses how the royalties should be divided between the owners of the works. Amazing.

In short, his approach doesn’t just swing blindly at the music industry and DRM. Rather, he takes an intelligent, unbiased, and fair stance that shows that a true compromise can yet be reached. I like his solution, how about you?

Man Cheats on Aids Wife, Aid Bows Out with Dignity

I just came across an article today about a Mayor who had an affair with his campaign managers wife.

After his wife told him about the affair, Tourk approached the mayor about it, then resigned… “It has been an honor and a privilege to serve the Newsom campaigns and the city of San Francisco and its residents,” Tourk said in a news release…

Newsom, who is seeking a second four-year term in November, said in the statement that he accepted Tourk’s resignation “with great sadness,” adding that he was “an extraordinary leader of our campaigns and a tireless public servant.”

Now that’s professionalism. A moment ago, I blogged about the value of private discussions, which, clearly, is what happened here. Yelling, crying, shouting, who knows? But you know what? The public never will.

Imagine if that was some Web 2.0 hot-shot CEO. You can already imagine how he might have handled the situation. Professionalism goes a long way, no matter who’s in the wrong. Please, if you ever become a well-known Internet blogger, keep your dirty laundry and corporate bashing to yourself.

That is, if you don’t want to look like a 16 year old.

The Internet Commons Tax Deduction – Why We Need It

Today, I was visiting tinyurl.com, trying to figure out how the site makes money. I noticed some Yahoo ads. So what happens if they run out of donations? Do people donate? TinyURL is just an example. There are definitely other sites that do give free services with nothing but donations in return.

How many websites get ad spammed or simply close down because the owner can no longer afford to host the material for free? This is when it hit me. Free Internet services needs a tax break.

It would need to encourage giving and have a benefit ceiling to ensure only people that need the protection get it. Here’s an example of how the Internet Commons Tax Deduction could work:

  1. A site owner receives a tax deductible credit up to the same amount as all donations received that year.
  2. The total tax deduction granted can never exceed the hosting costs. **

In other words, this acts as a tax deductible item for the owner, making it beneficial for people that have popular hobby projects running off of their personal bandwidth. And, of course, it only kicks in so long as you’re running at a loss. And, it encourages and amplifies giving. It will never counter the losses 100%, but it certainly softens their effect.

The Internet is where it is today thanks largely to much of it being free. While the cost of bandwidth is ever decreasing, it is still expensive to run a popular site. This means that as a person’s contribution to the net grows, their costs due to bandwidth also grows (see orange chart).

There are plenty of very important websites that contain information to help consumers that are entirely non-profit. Even the non-profit Wikipedia had to start somewhere. Then there’s the websites that merely provide value to the web as entertainment. Finally, there are open source projects. These sites have to deal with all the same costs that for-profit websites do, in some cases their costs are even greater.

The current model requires begging for donations while letting companies (leeches) like Paypal take a percentage. Or slapping on a thousand ads. Okay, we can deal with Paypal, and maybe the ads, but what happens if donations and ads don’t cut it? Should a site be subject to destruction simply because its owner can’t afford to spawn a company around it? Can’t the owner get a break for providing stuff for free to the entire world?

No, the person supplying the free goods gets shafted.

Once, long ago, I wrote a dating site engine. For fun. It was my second major project in PHP that I did as a learning experience. After I completed it, I just left it up for anybody to sign up. Did I have intentions of monetizing it? Not in the slightest. The only reason it is still up today is because I could afford the bandwidth costs, but not everybody could have.

Or last year, I wrote a AIM profile tracking service for fun. That too is also sitting around without being monetized. And hopefully, I’ll never have to take it down due to financial short comings.

There are so many cool little projects that turn into amazing things on the net. Many of them become companies, but this is because, currently, monetizing a particular idea is the best and only way to keep it alive. This is also why many companies die on the net – some ideas just can’t float an entire company. Those are the ideas I am targeting here.

Is this essentially a small business tax break? That’s not the direct intention, but it certainly could have that consequence if the revenue cap is set too high. But it also helps many others:

  • The government – a lot more concept websites will mature from infancy into profitability (tax generating businesses) without dying a premature death.
  • Average Joe – even more free web services will pop up, many of which may have never seen the light of day otherwise.
  • Open source – this will help many of the smaller open source projects afford their hosting costs as well as encourage even more donations.
  • Code junkies like myself – it gives us a true financial incentive to share (and host) our work with the world.

My real point here is that hosting stuff on the web is not free. It costs somebody, somewhere, a ton of money. The little guy, who often is the innovator on the Internet, is the one who gets screwed when too many people take his/her work for granted. It’d be nice if those innovators got a little break from Uncle Sam.

Hey, I can dream, can’t I?

**Here is some hypothetical fine print that would probably need to exist (for you nitpickers):

  • There is a annual cap of $XXXX that can be credited in this way. The credit given plus donations reported must be less than the annual revenue generated from the site.
  • Limit of 2 sites are eligible for this deduction per person/company.
  • If revenue generated (including donations) from the site exceeds twice the annual cap ($XXXX), this tax deduction no longer applies.

Evolution or Two Gods?

A while back I decided I was going to stay away from political news, but I’ve decided it limits my available topics too much.

Arstechnica had a post bashing Intelligent Design (ID) today. The whole debate is really the same arguments being re-hashed over and over. I hate seeing these circular debates, and I wish people introduced new ideas into the discussion. I have such a proposal, but first — a little background.

I’ve thought about this debate over Intelligent Design. If people want to believe God made life, that’s cool. What’s not cool is then claiming the whole theory has nothing to do with God. I once saw a debate between that Dawkins guy and someone else, and it went something like this:

Dude: Intelligent Design is not religion.
Dawkins: How can you say that!
Dude: It’s a scientific theory, just like Evolution.
Dawkins: You can’t test it. It just claims God made the world.
Dude: No. Intelligent Design does not claim there is a God. Only that life was designed.
Dawkins: Ok. So who is this designer?
Dude: Intelligent Design doesn’t make that assumption of who the designer is.
Dawkins: Who is the designer?
Dude: I’m telling you: Intelligent Design only advocates a designer, not who the designer is.

I’m sure many people have seen similar lines of questioning to this in various debates. Typically, such debates end up something like this:

The Creator is Someone Offensive but Equally Likely
You: Is the designer God?
Dude: Well, Allah, God, Jesus – different religions might refer to the Designer as different things since ID is secular in that respect.
You: Could it be Satan?

I’m not joking here. It is difficult to deny this point without pulling out scripture so most people are forced to accept it as equally likely under ID. Unfortunately, that point doesn’t make ID any more or less correct, it just admits Satan (or a flying spaghetti monster) could have made the world. This does nothing to further the discussion, but it is the usual knee-jerk response.

The next example is what I wish was more often pushed during discussion:

Polytheism as a Counter Theory
You: How many Designers are there?
Dude: ID makes no claims about the nature of the designer.
You: Any reason why many Designers is less likely than One?

I am not sure if you’ve learned about this, but one of the great mysteries of biology is why there are two genders when population survival would be simpler if there was only one sex. There are various theories about this, but the question is further complicated by the existence and survival of hermaphroditic animals (hamlets, snails, worms). Well, this is a tangent, but you get my point. Why only one, right? Most animals have two parents, so why not the Designers of life as we know it? No, really. Think about this. Without bringing in religious texts, why only one? Doesn’t it seem equally, if not more likely, that there are two Designers by looking at most higher order animals (especially humans)? Doesn’t it seem like there is more evidence of multiple designers rather than one?

Again, this argument does not serve to invalidate ID. You can’t invalidate a theory that can’t be tested. However, it goes to show how incredibly non-secular ID is. People can roll their eyes at the Satan/FSM comments because nobody says those things and means it (usually it’s in sarcasm), but a polytheistic argument using my biology example should be highly understandable. I’d love to see a monotheist push ID as a multi-designer theory because it will never happen since it is not a secular concept.

Even if ID caught on in public schools, it should be forced to mention the Designer as “Intelligent Designer(s).” If you are offended by this idea, it is because you agree with me in that Intelligent Design is not secular.

You can’t separate religion from this debate, folks. And that’s why it doesn’t belong in public schools.