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Let the Semantic Web Begin!

I'm writing a book on the business implications of the semantic web, and I need your help. The book is called Business 3.0, to be published by Harvard Business School Press. As you can see by reading the other blogs I have written here, I'm a passionate advocate of the Semantic Web. I think companies will build new business practices on the Semantic Web, and I think companies like Google and Microsoft will find the playing field shifting underneath their feet because of it. There are huge changes coming, and I want you to know about them.

I'll be writing hard for the next few months. I could use your help. Here's my list of things I'm looking for:

A business intern, who will help research the business aspects I mention in the book. There will be lots of little facts to check and figures to chase after. I would love someone who is in an MBA program or a graduate who has an interest in the Semantic Web. There's a lot to work on - how will the Semantic Web affect banking, health care, transportation, distribution, transactions, security, media, advertising, and just about every other aspect of commerce? I could use a small army of researchers! In fact, I would love if a professor who is interested in innovation would ask his/her class to help.

A semantic researcher and web production person, who can build and maintain my coming blog on Business 3.0. My goal is to be the single point of information for all things semantic as this new world takes shape. I'll need to constantly be on the lookout for new companies, technologies, standards, events, people, and developments. I need someone curious, agile, plugged in. Someone who blogs or reads a lot of blogs. Someone who does searches at Digerati. Someone who reads Techcrunch. Someone who knows what microformats are. Is that you? Do you know the person I'm looking for? Let me know - david@dsiegel.com.

Interesting case studies that show companies using Semantic Web technologies. I'm looking for companies embracing semantic technologies in their verticals, from banking to health care to automotive to travel to advertising. Show me the innovation! Show me the enthusiasm! Let me make you famous!

Interesting start-ups in the semantic space. Who's doing what? You can help me learn.

Venture capitalists and investors putting money into semantic projects.

Interesting semantic projects and developments in ...

    Microformats

    Industry standard formats

     Semantic software

    Ontologies gaining momentum

    Health care (Google, Microsoft, VistA, patient privacy, HIPPA, etc.)

    Banking, micropayments, insurance, loan applications, securities, bonds

    Human Resources

    Legal

    Consumer goods

    Security

    Identification

    Supply chain

    RFID

    Architecture, design, construction, building management

    Transportation

    Knowledge

    Etc.

If you have any resources, contacts, or developments in the semantic world, please send them to david@dsiegel.com

I'm going to turn comments on for this post. If you have anything to contribute, feel free to add it at the bottom of this page, so others can see!

If you want to read more, click on the archive entries on the left side of the page.

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Defining Web 3.0

    - David Siegel

The World Wide Web has evolved from the original hypertext system envisioned by physicists to a planetwide medium that has already transformed most of our lives. What comes next should be truly stunning. Web 3.0 refers to a combination of advances that will change the Internet radically, making Web 2.0 look like a new paint job on an old car going down the Information highway.

In 2000 I gave a speech to business leaders telling them that as a futurist I could predict the future of eCommerce with 100% accuracy. The next phase of eCommerce, I said, was going to be called - commerce. There wasn't going to be anything special about purchasing goods and services online.

In this article, I'm not trying to predict the future of the Web. I'm helping create it. Web 3.0 starts now. The waiting is over. For a while, it's going to be called Web 3.0, to distinguish it from what we have today. After the transition phase, though, it's going to be called - everyday life.

[SIDEBAR: In 1996, Jon Bosak, Tim Bray, and others laid the foundation for Web 3.0 by creating XML, the eXtensible Markup Language, which began to add structure to the Web. Tim Berners Lee envisioned the Semantic Web as early as 1998. In my 1999 book, Futurize Your Enterprise, I described a set of commercial scenarios to help show how different this world could be. ]

I'll start by simply describing where we are today, but soon you'll see that the world of tomorrow is going to be very different.

Web 1.0

The Web started as a way to share written electronic documents of all kinds. This blog is a Web 1.0 project. Amazon.com is a Web 1.0 project. Even Google (the search engine) is designed to figure out what you mean when you enter something like "Sofia Coppola" and show you an appropriate document. However, If a search for "Sofia Coppola" leads you to this page, you're not likely to be too interested in what you've found, because this page contains the words "Sofia Coppola" but is not about "Sofia Coppola". Web 1.0 generated a lot of words, pictures,  sounds, documents, and MySpace pages (does Sofia Coppola have a MySpace page?). And all these pages are meant to be read (some of them enjoyed) by humans.

Web 1.0 is a great start, but its utility is starting to wane. We can continue to add more media (mobile, video, music, interaction), but it's getting harder to actually accomplish something. It's good for selling advertising. But it's far from turbo-charging your life or your business.

Web 2.0

Do I even dare define Web 2.0, after the great Tim O'Reilly has told us in no uncertain terms?

Sure.

Web 2.0 is a lot of things. It's Sarbanes-Oxley, which made it so only a few companies can go public, which led Google to go on a buying spree, which led VCs to invest in companies to sell to Google, creating a long slow boom in valuations, bringing in more investors, fueling more innovation. It's AJAX, technology that lets us run applications in our browsers rather than having to download a Java applet or a plug-in. Using AJAX, I typed this article right into my browser without opening Microsoft Word. Because of AJAX, I can play Sudoku on my cell phone without having to manage any downloads. It's a 10x reduction in cost of building and maintaining web sites and applications. It's cheaper bandwidth and servers, so you can now run enterprise-class servers out of your dorm room. It's mashups, which lets you scrape Craigslist and put all the puppies for sale with their Flickr photos on a Google Map. It's tagging, which brings us Del.icio.us and TagWorld, and video searching. It's Wikis, which let people contribute (and sometimes delete) content on a drive-by basis. It's collaboration, which lets people contribute to knowledge bases like Digg by acting in their own best interest. It's social networking, which has pretty much doubled the Web's traffic inside of 18 months and given us the power to flirt electronically. It's RSS and podcasting, which lets us subscribe to documents and have them delivered to us fresh off the hard disk.

Recently, IBM announced its "Marvel" system that can transcribe speech in a video to text you can read online. They call this exciting breakthrough (which several other startups have already developed) Web 3.0 - the Semantic Web. Is this Web 3.0? Is it semantic? No. Despite the hype, this is just transcription. It's still human-readable media in a more searchable format. Web 2.0 makes lots of things more searchable, but you're still searching for keywords and phrases and trying to infer context.

In short, Web 2.0 is really a faster/better/cheaper Web 1.0, with a few innovative concepts (and some rounded corners) helping glue things together. It's very cool. Almost everything Google does is Web 2.0. I'm even starting a few companies to take advantage of it (like Large Scale Dynamics and LTR.com), but Web 2.0 is still fundamentally Web 1.0 on steroids. It's faster and better, but it's not more meaningful. 

Web 3.0 Overview

Whenever a new technology comes along, people first use it to recreate the old ways of doing things. The first photographs were still-lifes and portraits. The first films were of stage plays. The first typefaces looked like calligraphy. The first TV shows were based on radio shows. So it's no surprise that the Web recreated many familiar documents from the paper world: books, magazines, newspapers, TV shows, reports, radio shows, guides, movies, catalogs, contracts, and other human-readable documents. And we have indexes that help us find the words and phrases they contain.

The indexes try to be smart by implying meaning and context, but they have to guess what they think you are looking for. Ask Google to show you "a map of all the stores in San Francisco that carry maps of New York City." Google has a lot of the information, but Google has no way to make sense of what you're asking. Google doesn't look at the little contextual words "of" and "in", which in this case are very important. Although today's search engines get a lot of things right, they don't have the power to take us into the future.

The world of Web 3.0 is the world of semantics, where every piece of information has a standard meaning that can be understood not just by people but by programs designed to do mundane tasks for us. The standard example of Web 3.0 is scheduling. We all have calendars, but they exist just as text. Our calendars can't collaborate. When I try to arrange a dinner for 10 people, I have to manually coordinate the schedules of all the people and the available tables at the restaurants I'm willing to consider. That takes hours of going back and forth trying to maximize many variables in our heads and on paper. What I should be able to do is simply list my restaurants in order of preference, specify the preferred dates and times, ask all my friends to do the same, and let software agents work out all the scheduling details. A software agent is just a small program that carries out these kinds of tasks for us, saving the hassle and letting us make the decisions, rather than do the legwork. For that, all these systems need a common language that really doesn't exist. Yet.

Web 3.0 is much more than just semantics. Another example (of my own) is collaboration. Suppose I'm collaborating with a team of architects and designers on the design of a building. We decide to use X23 lights in all the corridors. The X23 lights (I'm just making them up) are energy efficient and light weight. By spacing them 8 feet apart, we would have to order 4080 lights. Today, we would look in the catalog or online, research the lights, then specify them by name and add their symbols into the drawings. Some one later would have to take our specification and turn it into an order - probably with mistakes after all the various changes in the plans. But if instead we could refer dynamically to their online specifications, then everything known about these lights would go into our design system, so the design system would instantly calculate how much weight they add to the entire building, how much light they would add to each floor, how much energy the building would use when they are on, create models of the lighting at different times of day, etc. And, if we changed to the X45 lights, which are heavier and more expensive but burn cooler and last longer, and space them 9 feet apart, we could see the impact on all these systems immediately. We could run comparisons, seeing how they light the hallways, how much the wiring has to change, how much the lights cost to maintain over time and where the savings are. Then, when we want to order, the system initiates and maintains the order automatically, so that each time we change the number of lights needed per floor, or the number of floors, the system automagically updates the order. As the building is built, the system changes from a design system to a construction system. Each light now has its own destination -- right on each light's box are the exact geospacial coordinates of where it's to be placed in the building. Eventually, the construction system turns into a maintenance system, and lights are re-ordered when they burn out (or even as they are predicted to burn-out, based on the actual data from other lights in the building and from lights in the same manufacturing run used by other buildings around the country. In this world, everything is not only connected, it speaks an interchangeable language of information, so each system knows what the other system knows.

That's Web 3.0.

When your doctor writes a prescription, why isn't the medicine simply waiting for you at your favorite drug store or shipped to your home? Why do you have to take a scribbled piece of paper to a drugstore and wait around while they fill it? Why does the pharmacist have to decipher the doctor's scribbles, hoping you don't have any drug interactions that kill 100,000 people in the US every year? Wouldn't it be better if we could catch problems the second the doctor tried to prescribe your pills?

The brakes on our car can pulse 30 times per second, but they can't start applying themselves early enough to prevent an accident. Our cars don't even know there are other cars on the road - that's so 20th Century! Our cameras are digital, but they don't know enough about the subject matter, conditions, or desired result to give us the photo we want. Our headphones are noise-canceling, but they can't help us hear our cell phone ringing. Laser scanners can add up our purchases at the check-out counter, but they can't count our calories or alert us when we buy products that have trace amounts of nuts someone could be allergic to. There's a lot of cool technology in our lives, but most of it is simply more, faster, and better at doing things the old way.

The best way to sum up Web 3.0 is to say that, in the future, everything will be smart. No longer will you need to go to several web sites to research flights and fares, then book your own ticket with your credit card information on a particular site. In Web 3.0, you'll just send your software agent on a mission to watch for and book a flight that meets your criteria at the best price (and at the last possible second, giving you more flexibility than you had before). You will be able to see the records for every flight you ever take on any airline, how many miles you have, where you went, what happened to your luggage, etc - all in one place.

We're going to need to get good at specifying the exact meanings of things, and we'll need to get good at expressing our research or purchase criteria more precisely, so various pieces of software can make sense of our requests. It's a lot easier than repeatedly trying to find the right phrase to type into Google!

Web 3.0 is to Web 1.0 as X is to Y. What are X and Y? That's a good riddle. It's challenging to try to come up with a good analogy, because almost nothing in our world is smart. Perhaps as we look closely at the three main areas of Web 3.0 we'll discover some useful analogies. The three areas are:

  • Semantics
  • Product and Service Descriptors
  • The Online Desktop

Let's look at each area to see how the web will get a lot smarter.

The Semantic Web 

I have a dream for the Web [in which computers] become capable of analyzing all the data on the Web – the content, links, and transactions between people and computers. A ‘Semantic Web’, which should make this possible, has yet to emerge, but when it does, the day-to-day mechanisms of trade, bureaucracy and our daily lives will be handled by machines talking to machines. The ‘intelligent agents’ people have touted for ages will finally materialize.

    - Tim Berners Lee

He may not be Martin Luther King, but Tim Berners Lee does have vision, and the Semantic Web is a good one. If this smart web is going to become a reality in our lifetimes, there are two ways to build it: 1) use the human-readable text we see on the web today, and build super smart software agents that can magically make sense of everything in context, or 2) make all the information available in standard formats so that even relatively simple software agents can make sense of them. The first approach should take another 20-30 years of research into artificial intelligence. The second method should be able to scale up within about five years.

Academics and consortium members have been talking about the Semantic Web since before Tim Berners Lee wrote his May, 2001 Scientific American article describing several scenarios and the basic frameworks needed to bring them about.

Now, six years later, the Semantic Web is still a bunch of parts lying around in the shop, waiting for someone to put them together into something we can all use. We need a way to define an appointment, a price range, a contract, a ticket, an approval - in ways that software can understand and use on our behalf. 

Here's my first analogy. The Semantic Web is to Web 1.0 as automatic scoring is to manual scoring in bowling. Remember the old days of bowling - Bowling 1.0? You got a big sheet of paper, you wrote down all the names, and then you'd make pencil marks on the paper and add up each person's score, according to the sometimes tricky bowling math. There was always someone like me in every group who volunteered to do the scoring, in much the same way we still write down golf scores today.

Then came computer technology. For a while, we had a computer screen where we could input each person's score and the computer would do the necessary math and display the result - Bowling 2.0. Today, the pinsetting machines tell the computer which pins remain after each frame, so the scoring software works automagically. Today, bowling alleys are smart. No longer do you have to worry about scoring - you just concentrate on your technique, and the system tells you the score, rather than vice-versa. Wow, that's pretty Web 3.0, don't you think?   

It's a start. It would be even better if you could show up at the bowling alley, have the software recognize you, charge your account automatically for every frame, and then add your score for the day to your personal online data locker, where all your bowling scores live in one place. No matter where you bowl, every frame you throw will be recorded into your personal online bowling data locker, where you can chart your progress and use online tools to help manage your bowling life. You could even have a tournament against 10,000 other bowlers in hundreds of cities around the globe on the same day. That's Web 3.0. In the bowling realm, we're really not very far away.

Now think about golf. For this to happen in golf, we would need an enormous amount of technology that hasn't been invented yet. The smart golf club, smart golf ball, and smart golf course don't exist yet, much less talk to each other. Rather than having a scorecard that's a place to input your score, your smart golf scorecard of the future will tell you what your score is at all times and record your score in your personal online golf data locker, where you can chart your progress and use online tools to help manage your golf life. Today, in Golf 1.0, the best we can do is use a golf course's web site to sign up for a tee time.

Web 3.0 turns things around, from being a place where we use tools and applications (like reservations or ticketing) on different web sites to being a set of helpers that come to us, automatically assisting us in the context of what we are doing (everyday life). The Web has a long way to go until all the drudgery is done by software agents on our behalf. A lot of the pieces have been defined, but it's been slow in coming together. A search for "semantic web" shows many sites that haven't been updated in several years. Why? Why don't we have a Semantic Web browser? Why do we have PDF documents floating around, rather than semantic documents? Where is our utopian world of interconnected knowledge?

Let me see if I can answer that by way of example. I'm starting a new dating site, LTR.com. I think it's the best dating site ever built. To join my dating site, you need to fill out a profile that tells the system and other singles about you - your physical characteristics, your beliefs, your activities, your values, etc. All dating sites do this. You might ask - hey, isn't there a single form I can fill out and then send that description to ALL the dating sites?

Alas, no. It would be cool if we could have a basic identity and characteristics package that anyone could easily submit, and then each site with its own angle (one focuses on people who own dogs, another focuses on quizzes, another focuses on Long Term Relationships) could add its own special fields for you to fill out. But at least the basics would go in automatically, rather than having to re-invent the wheel every time. Why can't singles who have HIV see all the other HIV-positive singles in the entire world? It doesn't exist because there hasn't been enough demand to pull it through or enough push from the industry to agree on what it should be. And, in many cases, the businesses that get more customers on their proprietary platform make more money. This situation is typical of many industries.

Every time you go see a new doctor, you fill out three pages of medical history and emergency contacts, and they store it in some paper file somewhere, just like all the other doctors' offices do. How many of these do you have to fill out in one lifetime? Probably quite a few, because the medical informatics industry is very slow to adopt standards everyone can use.

Fortunately, World Vista, a new OpenSource standard is emerging for electronic patient records. It's based on Vista, developed by the VA, and now open to groups everywhere. It could form the DNA of a new world-wide system of interchangeable health information, and if everyone adopts the same standard, health care as we know it will change radically. By one estimate, 40% of all the medical tests performed in the US are done because previous test resultls are not readily available. According to Thomas Goetz, who writes for WIRED:

Using the VistA record system, the veterans department has managed to improve nearly every benchmark of quality in health care. In a decade, the department increased its pneumonia vaccination rate among at-risk patients to 94 percent from only 29 percent. That translates into 6,000 saved lives and $40 million saved each year from fewer pneumonia hospitalizations. On a host of other benchmarks — beta blocker use, cancer screening, cholesterol screening and so on — the department outperforms the nation’s best care.

Thanks to VistA, costs per patient at the Veterans Health Administration system are 32 percent lower, using inflation-adjusted dollars, than they were a decade ago. Over the same period, the medical consumer price index has increased 50 percent for the country as a whole.

There are a couple of other bright spots. As I noted in my 1999 book, colleges are starting to use the CommonApp. The Common App is a way for a prospective student to fill out one application and have it go to dozens of universities. It's been around for over ten years, yet only about 300 universities accept the common app. It's a start, but why isn't it simply accepted everywhere? The Common app just doesn't have enough demand from applicants or attention from school administrators to set a strong standard. It's the best we have, but it's far from a "smart" college application form.

Whether you're applying to a dating site, a new doctor, or a university, you need to fill out your name, address, birth date, contact info, and other essentials. And yet a common format for these small building blocks of information doesn't even exist. or, rather, they do exist, but no one is using them. The right way to build the Semantic Web is to use so-called microformats - small forms you can fill out once and then use as modules to create larger documents. And the Web we use in the future should be built of thousands of microformats that all plug-and-play with each other like lego building blocks, so you can construct most of a personals profile or college application or apply for a loan or rent a car simply by joining the lego blocks and reusing them as needed. Rather than reinventing the wheel every time you give out your information, all you need to do is keep track of the changes.

In Web 3.0, every single person has a personal profile online, just as most people have their resumes online. The search agents do the filtering and bring us results whenever they find anything. Dating sites turn into dating search agents. Employment sites turn into employment filtering tools.

I want to give my camera example, which comes out of my 1999 book, Futurize Your Enterprise. In this future world, most people's cameras will measure 0" x 0" x 0" and weigh zero pounds and zero ounces. Think you could carry one of those on your next trip? Today, in Camera 2.0, your camera has lots of memory and high resolution and you take photos and then upload them to your photo site, as I do with my art collection. In Camera 3.0 we realize that a) most people hate dealing with cameras, b) most people are terrible photographers, and c) most people just want good photos of themselves to magically appear on a web site (see "The Online Desktop," below) so they can look at them, share them with friends, and, even though I don't quite understand this behavior, print them onto paper from time to time. (Only a small percentage of people really enjoy screwing around with cameras and actually taking photos.)

How will this happen? Simple! Just add your Web 3.0 identity stack to something you're carrying on your person (a phone, purse, watch, or even a chip embedded in your skin), and turn on the switch that says "My ID number is xxxxx and I'm on vacation, I would like to be photographed." There are cameras everywhere. Most are now in the hands of people who enjoy taking photos. So, as you go do things, people take your photo and send them to your (anonymous) web site, where you can look them over and either accept them as gifts (if offered) or pay a few pennies (or whatever the photographer asks) for each photo you like. When you buy them, they go into your personal data locker (see below) or into your Flickr account, or wherever you like. Pretty much, all you need to do is get five people together in front of any monument, and ten opportunistic photographers will run up to take your photo. If five of you are in the photograph, you'll all come home to find the photos you were in waiting for you, along with links to the others' pages. In one day, you could get hundreds of photos taken of you by dozens of photographers you never even see. Fixed cameras sit at obvious points everywhere -- you take your own photo using your cell phone (or your headset) to send the camera a message saying you want it to take your photo and where to send the image.

If you don't want to be photographed, turn that switch off and no one will take any interest. Just turn it on when you want some one to photograph you. If you find this creepy, simply get a camera and bring it with you and don't forget to charge the batteries. Also, don't spend a week at Club Med, where they take your photo all day long and try to sell it to you that evening after dinner.

When people start to adopt these lego building blocks, the Semantic Web will take off like a rocket. You'll check into a hotel room in Dubai, and your bed will automatically be set at the firmness you like, the shower water will be at the temperature you like, your favorite TV show list will pop up on the TV screen, a list of invitations to events and restaurants in town you might be interested in will be shown in another window on the TV screen, and the alarm clock will automatically coordinate with your schedule, no matter how many times you make changes to it. You'll vote in elections from your cell phone. You'll get the care you need from any hospital in the world, because they will have immediate access to your vital health care records, even if you're unconscious. You'll be able to hand your big project off to someone else easily, so you can take on another project or go on vacation. Your phone will tell you when a call is important or "just checking in." You'll be able to make changes to the airplane you're designing, even as the first one is rolling down the production line. Buildings will reorder their own supplies. You'll never buy an album or even a single song again. You'll be able to switch all your accounts (cash, bonds, stocks) to another bank or brokerage using your browser in under a minute. You'll be able to see what your kids are up to at any moment, every mile you drive in your car, every photograph you take, and every agreement you sign. All via the Semantic Web.

So that's the second analogy. Web 3.0 is to Web 1.0 as Lego bricks are to sticks, glue, and cardboard. We just need people to start using those Lego pieces. And we need the security and validation structures to support those lego pieces, so we retain our privacy and can verify what others claim. There's a lot of work left to do, but various companies are working on pieces of the puzzle.

There's an interesting category of companies I call Web 2.5. These are companies that are trying to take an intermediate step, by categorizing the data that's either unstructured or loosely structured in a nonstandard way. eBay does this by asking people to categorize certain items themselves. They often don't do a good job, or the descriptions don't quite match up to the categories, but it's a start. Another company, called Silver Creek Systems, looks at all your data and tries to find common values it can create structure around. A company called Transparensee tries to make more sense of existing databases for singles and for housing. These aren't true lego blocks, because they don't allow much interchange with other systems, but they are an interesting temporary approach that shows the need for meaningful information.

This is the way things are heading. If we don't build interlocking Lego blocks, we'll have to get better and better at guessing. So we can either do it the easy way, or we can keep plowing money into artificial intelligence and sophisticated methods of guessing what we mean. With luck, the right standards will emerge, and Web 3.0 will wipe out the need for Web 2.5.

Universal Product and Service Descriptors

I've written about the product space extensively, both here and in my book. I want to paint a picture of how different the world will be when we have standardized structured metadata. What's metadata? It's descriptive information about a thing or a service. When you see a product description page at Dell.com describing a laptop, that's all metadata, including the photos, videos, and any sound files. A restaurant menu contains metadata for all the food they serve. In the last section, I mentioned your online storage locker for your information (You'll find the online data locker is a recurring theme in Web 3.0). In this section, I'll describe the various Descriptor Stacks and show how they will change our lives. Click this diagram to open it in a new window, then click on it again to enlarge it and keep it open as you continue reading ...

Genericstackdiagram

The first descriptor stack is our Identity Stack. It consists of the information found in all our government-issued identity documents, with varying degrees of protection and anonymity. There are online identities for individuals, couples, families, groups, corporations, and other organizations. It's beyond the scope of this article to describe how this stack works and how you keep personal information from falling into the wrong hands, but keep in mind that we do this with our bank accounts every day.

The Product Descriptor Stack is a new way of creating and using metadata. It consists of a base - the database of standardized product/service descriptions, a middle - the digital birth certificate and the personal data locker, and the top - the AJAX product/service presenter and the Semantic Browser. All these things combine to lay the foundation for Web 3.0 - ordinary life as it will be in the future.

At the bottom of the stack is a database of standardized product descriptions. In this database is the definitive description of any product ever made (are the Google people listening?). For example, there's a description of every make/model/year of every car ever made, starting with the Model A. The manufacturer's information is a small portion of the data available. Let's look at the 2012 Tesla 3, a car that happens to be near and dear to my heart. There is a huge amount of information on this car in the database: from the manufacturer, reviewers, magazines, insurance companies, enthusiasts, owners, etc. There are hundreds of photos, broken out by year, color, options, etc. Owners manuals are there, owners' tips, links to owners' groups, etc. Pretty much anything you want to know about this car is in this database, and it's easy to refer to this information from any application online. The key is that the data for every car is in a standard format, so you can compare all cars by any criteria you can think of: stated gas mileage, actual gas mileage that users get, repair records, weight, length, available colors, size of cup holders, crash-test ratings, BTUs of their heaters, etc. All products in any category can be compared head-to-head, apples-to-apples.

In another database, there's a standardized structured digital birth certificate for each car manufactured. The birth certificates have all the pertinent information for each particular car made, in addition to pointing to the generic description of the car (previous paragraph). In fact, each component of the car also has a digital birth certificate, so the car's digital birth certificate actually has a number of pointers to birth certificates at various suppliers. Does this remind you of the Lego building blocks we encountered earlier? The birth certificate never leaves the database, but information about who owns the car and what has happened to it gets added as the car goes from showroom to owner to next owner.

In the middle of the stack is my personal data locker, which houses my personal identity stack and an inventory of everything I own. It contains an ownership pointer that points to my car's digital birth certificate. Also associated is my personal owner's record, which includes every gallon of gas I've ever put into the car, GPS coordinates for every mile driven, all service actions, repairs, notices, condition of the car, and insurance records (remember, in Web 3.0, everything is smart). This is all under my control. If there's ever a recall on, say, a production run of 100 battery packs placed in that model of car and others like it, the company can follow the ownership pointers backwards to find the 100 cars that have those exact battery packs. It's important to distinguish between 1) the generic information for that make/model/year of car, which comes from the standard database; 2) the specific information about my vehicle - color, date made, options, photos, date/place sold - all part of the digital birth certificate, and 3) the owners' record - place bought, gas, mileage, condition, repair record, photos, etc. - all of which lives in my car's information folder in my personal data locker online. Still with me? Did you notice that all three places have photos? The standard description has photos of other cars of the same make/model/year, the birth certificate has photos of the car when it was made, and my personal data locker has photos of the car I've taken and various repair shops have taken over the years. Essentially, I have my own personal owner's manual in my data locker, and I can access it from my car or my phone any time I want.

At the top of the stack is the AJAX product presenter, which allows any web site to put up a window that lets other people view the car, according to the owner's permission. For example, I can list my car on eBay without moving any information. I simply refer to my car's folder in my personal data locker, and - automagically - people can see everything about my car that I want them to see. They can also see all they way down to the digital birth certificate and all the reviews and generic information, even down to the latest news on the company that makes the car. If I want to list the same car on Craigslist (yes, Craigslist still exists), I simply add the presenter to my listing on Craigslist and point it to my car as well. Note that I haven't copied any of this information, and if the car gets an oil change tomorrow, the people bidding on the car on eBay or looking at the car on Craigslist will see that reflected in the service record the day it happens.

(Note that when I say AJAX, I realize that in ten years it will be replaced by something else. I say AJAX now to prevent any confusion with a downloadable presenter. There will likely be several presenters using different technology. But that's fine, because each presenter uses the standardized metadata from lower down in the stack, so the actual technology for any particular layer can change easily.)

When I sell the car, all this information transfers to the new owner. The system tracks the full ownership chain and protects everyone's identity. I have more details on this, but I'm saving them for investors who want to help me make it a reality.

What if I've sold my car and want to buy a new mountain bike to replace it? Where would I look online for a mountain bike? Today, there are a hundred sites, from MTBR.com to Craigslist to eBay to Mountainbikeclassifieds.com to Pinkbike.com to Totalbike.com to BikeNashbar.com and many others. I have to find bikes that match my criteria by searching on keywords - good luck! Furthermore, my neighbor may have the perfect bike and want to sell it, but I have no idea. As I've noted in previous blog entries, searching by keyword is full of false positives (finding the wrong thing) and false negatives (what you're really looking for doesn't show up on search results).

To find a mountain bike, the Web 3.0 scenario is that I specify all the attributes I'm looking for - frame, transmission, wheels, suspension, price, etc. - using ranges or specific criteria, name any brand names, add my price and distance/shipping parameters, and then see all mountain bikes that fit my search criteria on a map, ranked by price or by condition or whatever criteria I want to see them ranked by. Can Google do that? Not last time I checked. If I don't see what I'm looking for, I want to just wait for my search bot to tell me a new bike has just come on the market that matches my criteria. Why should I have to go out searching all the time, re-running searches over and over looking for the right bike to show up in my neighborhood? Using Google to search for a bike, half the listings are from stores in England and prices are in pounds - what's up with that?

Why can't search be smart?

Search won't be smart until product descriptions are well structured and understood by all. The key to this new world of product descriptions, ownership, searching, and purchase is standardized structured metadata. It's so nonexistent that sites like Dell, c|net, eBay, and Amazon have had to invent their own taxonomies. Unfortunately, those taxonomies don't talk to each other, so general searches won't work because there are no standards. Have you ever tried to find a piece of clothing or a pair of shoes on eBay? Good luck! eBay actually has a size finder, and it helps, but there are still false positives and negatives, and there are no standards. You can't compare globes by diameter, cordless drills by voltage, stereo headphones with three drivers, or find all the American footballs (not soccer balls). Today, there are better online standards for avocado ripeness than for the most popular consumer goods categories.

Come to think of it, why are all the product descriptions locked up in web sites like Amazon.com, c|net, eBay, and millions of other databases? Why not just put the descriptions of everything you own and everything you want right on the Web and let the search bots find it? If everything were sitting out on the web, you'd be able to find everything, every single item that meets your search criteria. For example, if you're looking for a 17-85mm lens for a Canon camera for under $400, you could use a Web 3.0 search engine to see every single lens of this type, used or new, on a map of your city, and what prices people are willing to accept for them. If you found one nearby that someone wants $420 for, you might go for it, because you could go out and get it in a few minutes. Or you might go for the cheapest one on the map. If you had a lens like this, you could just leave it in your personal inventory locker, name your price, and wait for people to send you offers. This is called passive commerce, and it's a lot more convenient than checking a dozen sites every day or listing your item over and over, hoping the right buyer will just happen to see your auction or your listing that week. Rather than searching on dozens of sites, you could manage everything you have and everything you want right on one single site - your own private data locker. Why not let the information come to you?

In previous blogs, I've written that product descriptions are all written in different languages and standards - you can't make apples-to-apples comparisons from one web site to another if they all use nonstandard text to describe products. Recently, I've been searching for a pair of ice axes for ice climbing. It turns out that the descriptions, even within REI's web site, show the weight of various axes either in ounces, or in pounds and ounces, or in grams. You can't compare them apples-to-apples. As I've pointed out before, it's currently very difficult to learn the exact details you want on many products, much less make good comparisons.

Think of all the pages on the Internet that describe products. Whether it's an Amazon.com page, a page on Teslamotors.com, a page on Consumer Reports, Craigslist, or eBay, an Excel file, a Word file, or a product PDF, there are millions and millions of product descriptions online. Perhaps as much as 20% of the entire Web (without Myspace) is dedicated to product descriptors. How would you like to see product information? You may want different views depending on what you're looking for and what role you are in at the time. Someone doing research on plasma vs LCD displays is in a different mode from someone looking to buy a specific plasma display and bring it home and set it up that weekend. Comparing two houses or two diamonds side-by-side can't be done. Today, all these pages are made to imitate brochures or product data sheets or catalog pages or classified ad listings. In the future, they will be part of the semantic browsing experience, which is going to require a lot of infrastructure and a whole new way of looking at things.

The same is true of services. Have you tried finding services by keyword? It's pretty hit-or-miss. Suppose you have a new dating site, and you want to patent your amazing new matching algorithm. Try to find all the law firms that specialize in software patent law in and around San Francisco. Did you find them all on Google? I don't think you did. Today, the only way to find those law offices is to look for directories that have gathered the information. Directories are always out of date, even if they're online. And people compiling directories don't always look for the same things you look for. In the future, the law offices will have a chance to label their own sites with standard service descriptors, so their own web site tells the world what they do and the directories can syndicate that information, which will always be up to date. Today, most law offices have web sites today that list their practice areas, but this is just text. In the future, these descriptors will be standardized, so the search engines will be able to pick them up and categorize them appropriately. Then the search engine can compile lists of all the law firms who practice various types of software patenting, down to fairly minute detail (how many patents they apply for each year, average size of job, years doing patent work, number of attorneys, and so on). All service firms will take the small step of describing what they do using standard descriptors on their own web sites, and the directories and search engines will syndicate that information for all to use.

Describing goods and services requires a standardized ontology - a map of all items and attributes that everyone can agree on. An example of an ontology is the Dewey Decimal system in the library or the way products are arranged on the shelf at the grocery store. Every ontology has its drawbacks, but having a standard and extensible ontology for products and services will help form the base of Web 3.0. That's why the bottom of the stack has to be an open-standard ontology that everyone agrees to use.

When you try to categorize media, however, ontologies can get you into trouble quickly. Try organizing all your personal photos with a single ontology - it won't work. Try organizing your songs or your videos - the way you do it is going to be different from the way others do it. For that reason, tags are still the best way to add information that describes media. In Web 3.0, goods and services will use standardized structured descriptions with an ontology at the base, and media will use tags on top of standardized structured descriptions. For example, an album by the Scissor Sisters will contain factual information about the band, their producers, the recording, etc. But the genre and the categorization is best done by adding tags - words people associate with their type of music. Such tag-based ontologies are called folksonomies - people using tags build structures that can be useful, especially for describing media, even if incomplete or constantly changing. A folksonomy is probably the most useful way to index all the information found in blogs around the Web.

In Music 1.0 we have physical media, like disks and tapes. In Music 2.0, we have MP3 files flying around the web, people buying the rights to own a song, downloading it, then storing it to play it on their various devices. In Music 3.0, everything is streamed, and you just subscribe. You pay by the minute, and there's a scale of payment for various types of music, from free to expensive. You buy minutes in bulk and you simply listen to whatever you want as it streams into your earpiece or headphones or car stereo or home stereo. Same with all movies, although you'll be able to buy those per title as we do today. (Exception: new releases, which are still shown in theaters.) With media 3.0, you are always connected and always have access to the streaming media you want.

The presenter I've described goes beyond products and services. It shows schedules, tickets, weather data, information about your photos and other media, and many other things. The reason we have a presenter is that it can present information in human-readable form when you come to see it, but it can also send that same information to any program authorized to request it. The presenter could serve up the same information a hundred different ways, depending on the need and the context.   

Is there a good analogy here to Web 1.0? I'm not sure there is. But let me give you a real-world example that gives us a ray of hope. There's one industry that's even ahead of the bowling industry, and that's publishing. Yes, good old-fashioned book publishers! The stodgy bespectacled people who sell paper artifacts have created a standard way to describe a book. It's called ONIX, and it's become an industry-wide standard. Today, publishers can maintain their catalogs using special software by GiantChair.com, and the software keeps all the ONIX descriptions for each book up to date on their web site. Then, rather than submitting that information t their distributor and having the distributor copy it and send it to retailers, the retailers can scrape their site using automatic agents, find every book description, and syndicate that information through their retail site. That's right - Amazon.com has software that takes updated book descriptions right from publishers' sites and promotes that information directly to the corresponding book page, so if the publisher makes a change to a book description, that change is reflected on the Amazon.com page for that book immediately. That's a good start!

ONIX provides a standardized generic description of a book title. In the future, you'll be able to put your entire library online via your personal data locker. You can describe each book, where you bought it, what condition it's in, and what price you want for it. If someone wants to buy (or borrow) one of your books and you're willing to sell it, you'll get an email offer and you can accept it. Rather than buying a book on Amazon.com, you might find that the book you're looking for is available for less right across the hall. ONIX is in place now, so to make this dream a reality, all we need is the online personal data locker and search bots that will do the drudge work for us.

Passive commerce is the future of commerce online. Whether you're General Motors or a kid with a comic book collection, you'll put your inventory online and let the search-bots connect you with buyers who have entered their search criteria. You won't go to a site to book a flight or a doctor's appointment. You won't go anywhere online, unless you're just browsing around for fun or trying to widen your search by getting new ideas. Instead, the Web will come to you.

The Online Desktop

The Web will come to you via the Online Desktop, which is your dashboard for interacting with the rest of the entire Web. Also called the WebTop, it's a web site where you keep all your information, dispatch software agents to do things for you, and see the results. As I've mentioned in previous blog entries, Google and Microsoft (and others) are going after the online desktop like they want to own it. What's the problem? They are both putting applications onto the online desktop that look and feel and work pretty much like our old desktop applications. This is to be expected, but it's far from Web 3.0. Done properly, Web 3.0 combines the Lego-like approach to information structures with the "always on" online desktop of the future that no one has really built yet. Let's break it down.

Single Source documents are key to Web 3.0. How many times have you received a document as an attachment? Once you receive it, it's dead. If you make changes and the author makes changes, it's difficult to reconcile the two files. If the author makes a small change, she sends it out again, and again, and again, so the attachments pile up and the emails and the versions get all mixed up. How many times has someone emailed you a photo with the file name of me.jpg? Once again, this is recreating the old world with new technology.

The Web 2.0 solution is Google Docs and Microsoft Live documents, which are traditional documents that live online. You don't need a word processor or a spreadsheet to open them, you just need a browser and the software comes to you. You don't send these documents to anyone. Instead, you send invitations to read or write these documents where they are. If someone has permission to write in a document you're editing, all the edits show up on both screens simultaneously. The document is always up to date. You can search the document's history for any changes you want to bring back, but there are no versions to maintain or get out of synch.

In Web 3.0, documents will have structure. Each kind of document -- a contract, friendly letter, business letter, medical chart, research report, product brochure, user's manual, menu, invitation - has its own inherent structure. And many of these documents lend themselves to an orderly building-block approach. It's easy to see the inherent structure in a menu: types of food, item names, descriptions, ingredients, prices, etc. Why use a word processor to build a menu, when you can preserve the structure and the meaning of all its contents using a specialized menu template and standardized menu descriptors? Now, each food item uses a standardized menu descriptor, and then I could send a query to a given restaurant asking to show which items are vegan, so I could order lunch delivered. Or, I could compare all the vegetarian Thalis from all the Indian restaurants in a given city, listed by price. I could see which restaurants in New York offer fresh live lobsters. I could find a place that serves vegetarian chili with cilantro. Or, rather, I could tell my software agent to do any of these things, and my agent would use my preferences to know what to do.

It's true that short stories and poems don't have much structure, and novels have even less. But many of today's documents are really just forms filled out. Even an invitation is really a structured document - a filled-out form. All information-based documents could benefit from the standardized structured approach, so that the same information I give to my doctor is used later to make my hospital bracelet, fill out my patient chart, fill prescriptions, schedule physical therapy, send me my x-rays, log the results of my blood tests, sign waivers, make claims against my insurance policy, make changes to my will, etc. The rule in Web 3.0 is: never duplicate information, always work from the master document.

In Futurize Your Enterprise I wrote an entire chapter on how Lawyers could use semantic building blocks to write contracts, so they could finally get paid for discovering facts and working with the law rather than tweaking words in poorly-written, haphazardly-structured documents. I'm not sure we'll see that kind of progress in my lifetime, but there are billions of dollars of QWERTY-style inefficiency in our economy waiting for Web 3.0 to streamline.

Web 3.0 documents will syndicate. Think of all the forms you fill out: magazine subscriptions, school documents, licenses, contacts, tickets, purchases, service contracts, donations to your favorite causes, checks, reservations, banking forms, etc. All these forms live in your online data locker. Now, if you change your address on the identity building block, every single document online would automagically update to show your new address - no extra effort needed! This is even better when you apply it to contacts - I can keep all my contacts online, and whenever any one of my contacts changes his/her address or phone number, that change goes to everyone's contact list automagically! You never have to send an email to everyone saying your email or phone number has changed! You can grab any cell phone and it shows your contacts in seconds, without copying anything. Make a notation to a number via your cell phone and you're actually changing the master online version. In fact, if you want to send me a package, you should simply address it to david@dsiegel.com and the Post Office's software will figure out (from my schedule) where I am at every hour of the day and intersect me with the package (first sending me a notice asking if I want to accept it or rerout it or send it back).

That's just contact information. Now think about catalogs. If you make a single change to a product description in your catalog, every catalog in the world will instantly show that change, because everything is linked, not copied. That's the power and leverage of Web 3.0.

The Online Data Locker is where you store all your information. You don't need to store anything on your computer. All your contacts live in one place, all your personal documents live in one place, even your drivers' license and passport will live here eventually. Think of ALL the documents you have in your paper files at home and on your computer - they will all live online some day. They'll be structured, they'll syndicate, they'll have protections, passwords, permissions, authors, viewers, and other properties. They will play with other documents. And you'll get at them from anywhere, any time.

Laptops go away. You won't have a laptop. Or, rather, any laptop is your laptop. You'll just grab any screen that's connected to the Internet, log in, and boom! - there's your desktop. You could use your earpiece for your phone to interact with your online desktop, listen to your messages, send messages, listen to music, etc. Your audio earpiece is fitted to your ear, so that's the only real piece of hardware you need. Your audio earpiece will get wireless music streamed in as you walk around town or drive down the street. Your audio earpiece talks to anything that can communicate with it. Keyboards, screens, and mice are everywhere and cost practically nothing. You don't need a hard disk anywhere. Nick Negroponte's hundred-dollar laptop is going to start looking awfully expensive in just a few short years!

Same with your phone. If you lose your phone, just grab mine and log in. In Web 3.0, phones don't have any brains or memory at all. They get everything from your online data locker and from the Net. They store all the music ever recorded, every movie ever made, and every photo ever taken, because they are always connected to the Web. By 2020, most phones will simply be a custom-fitted earpiece and nothing more.

The Semantic Browser helps you see all the semantic information in your online data in your particular context. If the AJAX presenter is pushing the information at you, then the semantic browser is the other half - a viewer you use to see the presenter in the way you want to see it. A semantic browser can make sense of all the metadata describing a product or service. For example, you can tell your semantic browser you prefer to see Metric measurements, you are looking for models rather than clothing, you're looking for specific phisical dimensions, you prefer to see reviews with higher rankings above company product information, you want to see time-sensitive information first, you prefer to buy things locally rather than pay for shipping, etc. You could be looking for stock photography of horses, not horses themselves; you could be looking for manufacturers, not retailers. Your semantic browser can tell all the presenters that you're in "research and compare" mode, not "compare and buy now" mode. A semantic browser would keep you from seeing all those ecommerce sites in the UK if you wanted to shop in the US (or vice-versa). You could see all the listings for a conference either by time, by category, by speaker - however works for you. There are a lot of interesting preferences to semantic browsing, and there will probably be different semantic browsers for different kinds of jobs in different sectors of the economy.

The data stays in one place and the applications roam the web. This is going to sound strange, but have you noticed that here in 2007 we are still moving data all over the place, from one application to another? I have Excel and you have Excel, so I send you a spreadsheet and you use your application to see the data I just sent. In Web 3.0, the data stays in one place, and the applications come to the data as needed. The document we're working on can require all kinds of extra capabilities as it evolves, and the software comes in from around the web to help us do what we're trying to do. There are no versions, no documents to leave behind on a particular machine. Doesn't this make more sense? It doesn't cost you anything to lose an application, but if you lose your data, you can be in big trouble! Why is all our data sitting on our personal computers, where it's vulnerable? Increasingly, more data is being stored online, but we still don't have the paradigm of applications moving to where the data is.

The software that helps an architect sketch a building is different from the software that creates the structural elements. Once the data is online, however, you can bring all different kinds of software in to test the structure, simulate seasons, design the window envelope, lay out the electrical system, design the water supply, heat and cool the building, maintain temperature, track maintenance orders, etc. All this software can now come to one place and work on the original document, rather than having to send updated copies all over and coordinate everything. 

Let me now define three different types of tasklets: widgets, applets, and agents, all of which are small programs that do your bidding. (Not to be confused with bots and spiders, which search for information and compile indexes.)

A widget is a small piece of software that brings you live information that you can plug into any context you like. Most of us have weather widgets on our desktops already. Widgets will become much more useful in the context of a Web 3.0. document. You could use a widget to give you a list of all the countries in the world today, and if you use that widget, the list will automagically update itself whenever a new country is created. You could be writing a report on the financial markets and use a widget to show the performance of the S&P 500 in a box on the side of the page. The widget will always show the most current data.

An applet is a piece of software that comes to you and does your bidding on your data. An applet can come translate your document into Chinese. An applet can create a map of the trip you're on. An applet can help you manage your wine list. An applet can help lay out the electrical circuits on a blueprint for your house. An applet can do structural testing on the bicycle frame you're designing or look for viruses in your data or analyze CAT-scan data or help you plan a party. You could use an applet to record all your favorite channels and TV shows, and use that list to drive any device that can show a video signal. The applet can use an agent to be on the lookout for new material you might like.

An agent goes out and does things on your behalf. Your agent could look through many databases to find you a date for Friday night, a good restaurant in Budapest, a ticket to a sold-out concert, a video about ice climbing, a babysitter in Tokyo, the best croissants in Winnepeg, etc. Agents can interact and collaborate with each other to schedule meetings, agree on prices, negotiate terms, find a movie everyone hasn't already seen, etc.   

This new world of tasklets will replace today's monolithic desktop applications. You could be working on a book to be printed, collaborating with 15 authors and 4 editors around the globe, working with their agents to schedule meetings and press checks, bring in an applet to manage the color calibration for the 3 different printing presses you're going to use around the world, use another applet to check the digital rights for all the photographs and dispatch agents to go get rights you don't own, use another applet to lay out the headlines for the chapter headings, and use a widget to include all the pertinent data that needs to be up-to-date before going to press. In this world, we no longer have monolithic applications, and we no longer have monolithic companies offering all the applets. Instead, we have a constantly improving ecosystem of tasklets competing for service niches that can be turned on or off easily.

You own your own data. In Web 3.0, electronic money doesn't live in a bank or a brokerage house. It lives in your online data locker just as securely but under your control. Want to invest in a mutual fund? Just bring the mutual fund to your money and give them access to it. Want to trade a stock? All the stock in your portfolio lives in digital stock certificates held by the exchange, or by a custodian. You simply own a pointer to each share of stock. (Moving pointers rather than digital stock certificates themselves is important, because then they all live in one place and all owners of one company's stock can be found immediately.) If you want to sell the stock, you can engage a broker to sell it for you and transfer cash to your account. You can let the brokers compete for each transaction. This is very different from today's world, where stocks and bonds are stuck inside a brokerage house and accounts are very difficult to transfer. Want to apply for a home loan? Your application is always filled out and updated, 24/7. Just allow the banks to look at it, tell them which property you want to buy, and wait for the offers to come in from all the banks that want your business.

The same is true for all your medical records. They live in your personal data locker under your control. Every x-ray, scan, test, visit, procedure, prescription, and appointment lives in your locker under your control. You decide who gets access to it. You can send a prescription to any pharmacy, and they instantly have access to all your relevant records. You can switch doctors or hospitals, or get a second opinion, without having to requisition copies of all your records.

The same is true for all your personal inventory. When you buy something, say a set of golf clubs, the ownership transfers to your personal locker the second you complete the electronic funds transfer to the retailer (or to another person). You can look at everything you own right in your personal locker from anywhere and get instant updates from manufacturers as necessary.

Your home has a smart owner's manual that lives in your personal data locker, and you can see at a glance how much energy you use, how much you spend on maintenance, the value of your home and everything in it, how much you could save by converting to different energy sources, how much energy you sell back to the grid, what needs replacing when, etc.

The Web is the Operating System of the Future. Come back in 20 years and it won't be Microsoft or Google. We won't have hard disks in our offices or living rooms. A set of open standards and full-tilt bandwidth makes this new world possible, and no one company will dominate our use of machines. Several companies will provide platforms for various kinds of documents in certain industries, but much of the really useful stuff will come from the edges. The future belongs to the small, the light, and the nimble. You'll forget that even your car is connected to the Web 24/7. Your data lives in one place, and the applications and applets come to you. You can fire them any time you like. We will look back on Microsoft Vista as the last of the dinosaurs before the impact of the Web 3.0 meteor that changed the climate and wiped them out.


Summary

The Semantic Web is smart, it's inside-out, it's made of interchangeable parts, and it updates instantly. Notice I have used the word "automagically" several times. This is funny. You'd have to be Rip Van Winkle to be amazed at today's bowling technology. We don't even think about the technology anymore - we just go bowling. At the moment, the term Web 3.0 helps describe how different things are going to be. But in 20 years, your kids won't think there's anything automagic about a grocery store cart that updates your total as you put items in or take them out and then charges your account on your way out the door. They'll just go shopping. Or golfing. Or do business without having to deal with the mechanics of moving the information from place to place. Your kids are going to call this newfangled Web "ordinary everyday life."

I want to be clear about something. To forge this world out of the keywords and documents sitting on the Web today will take a ton of artificial intelligence that we don't have and aren't likely to have soon. The horizon on "smart" AI systems seems to keep receeding as we race toward it. But the Semantic Web I'm describing isn't smart itself at all. It's simply well described. People take the care and attention to add a bit of information about everything they describe online using universal descriptors, and - voila! - the Web gets very smart very quickly. So we can either do it by hand, filling out online birth certificates and descriptors for everything and linking them together, or we can wait for the Web to evolve the smarts to figure things out for us. There is very little AI in the world I describe here, because it's a world in which everything is designed to fit together, and the context is specified by the user, not implied by the search engines. More accurate, less guessing - what more could you want in a World Wide Web?

Some day, companies will compete on the value they add to the economy, rather than trying to get a monopoly on the file formats or the distribution of information. Some day, the Internet playing field could be flat, rather than islands of information. This is the world we are tasked to create. The world everyone wants (except, perhaps, Steve Ballmer and Dick Cheney). If there's a Web 3.0 conference and all the key players get vaporized by a laser-guided bomb, it's not going to stop this future world from materializing. It's just a question of when. It's going to come from the margins into the center, so don't expect IBM's next press release to save the day.

There's a ton of work to do. We need more standards, more indistry buy-in, more public-accessible ontologies, and a new generation of tools. My goal is to raise a fund to start Web 3.0 companies here in New York City. If I had a partner in San Francisco, that would be even better. Any VCs want to join me in raising a fund together? I think the next Google-sized opportunity is here, somewhere on this page. I have an idea how to get it started (okay, I have a 28-page business plan), but I need help. I need the financing and partners to help make this world a reality. I'd also love to start having Web 3.0 conferences that can really address the marketing, business, and adoption issues. It's great to have a lot of the semantic layers in place, but getting consumers to adopt Web 3.0 means solving specific problems and addressing their needs. Commercializing Web 3.0 is where I want to contribute.

There are horizontal businesses everywhere here, from infrastructure to tools to services to applications to tasklets, soas, plug-ins, authentication, validation, identity, security, translation, and much more. I think they will be light and very competitive. There are vertical tools, systems, applications, and services to build in almost every sector. This is where the brands will be built. Done properly, Web 3.0 should rip the supply chain apart completely and reassemble it in a new and smarter way - completely integrated, and completely based on the syndication of standardized structured metadata. Done right, Web 3.0 will disintermediate industries that try to hang onto the means of distribution (classifieds, auctions, real-estate listings, stock trading, ticketing, etc) and create a new generation of value-add services and tools that will be about improving business rather than dominating the channel.

Hmm, come to think of it, I think I may have found the right analogy. Web 3.0 is to Web 1.0 as Web 1.0 was to the pre-internet world that only a few people can remember today.

Relevant Links

I've been writing about this for a long time...

Structured Metadata   

Kill the laptops   

Built to Evolve 

Futurize Your Enterprise, Wiley & Sons, 1999

Articles:

Semantic Web

Intro to Semantic Web

Semantic Browser

Wikipedia's Webtop list

Companies:

MetaWeb

RadarNetworks

Finally, I'm looking for a Web 3.0 intern to do some research for me and help maintain some lists of Web 3.0 developments. If you're interested, please send me your resume.

This article is brought to you by:

Logo_red


This is for keri dae sutterfield
 

Built to Evolve

It feels good to be back in the startup game, rested and ready for the next Internet bubble. Since last fall, things have really accelerated: more people doing more interesting things online than in the past five years. There are a few differences this time, and I'd like to point out what I think will be at least a few of the important features of this new era. I'll also show where I'm putting my bets and spending my time.

It's practically impossible for any company to go public these days, which is why the average person hasn't heard about the Web 2.0 Gold Rush. Back in 1998, everyone and his housekeeper was a VC or a day trader. This time, the public markets don't reflect the frenzy. But it's there. Venture capitalists are now funding start-ups at practically 1998 levels. Because this bubble has less public hype, it may not pop the way the last one did. It's time, once again, to be an optimist. Let's dig in.

To me, it feels like Web 2.0 has already come and gone: the days of Delicious and MySpace grabbing headlines are over, everyone has figured out that JotSpot is lame, the blog sites are all pretty much terrible (including Typepad, the service I use and that you are reading now), so finally we can get over the hype and start building the next generation of ways to work and play. Social networks really can be useful, even if the design is so bad that they cause river blindness. Tens of millions of people use photo-sharing sites. Millions have RSS start pages. Google will soon offer an online word processor (Writely, which I'm using at the moment to write this), an online spreadsheet, and likely some uber-startpage where you can do all your Google stuff (you heard it here first, kids). Companies like YouOS let you store ALL your information online and forget about your hard drive. Every day, entrepreneurs announce new products and services, some of which really have a good chance to change our lives.

What's clear to me is that most of the Web 1.0 companies, and I include Google in this category, are now sitting ducks. The business plan at any successful web site at this point should be to aggressively put yourself out of business. Startups are sucking good people out of large companies faster than I can delete my spam. Consulting is back. New ideas are back. New companies can once again thrive.

LTR.com

I'm starting a company to address the friendability problem. I want people online to be more friendable, and eventually to find people for long-term relationships. So I'm starting a personals dating web site. In June, I found a partner, in July, we bought our Domain name, last September we had the team together and started building, and in 2007 we are launching the most advanced dating site ever built...

Bluelogo_2Why, you ask? Why would I start a dating web site now, with about 20 million people already registered to Match.com, EHarmony, and other established sites? Because these sites are going to be dead soon. A new generation of dating sites is sprouting quickly, and they are all free. Granted, most of them are terribly designed, but they all offer the same functionality as Match.com without charging a thing. Things are going to change, and I'm going to tell you exactly how they will change.

The free dating sites are out there and gathering members quickly. One thing you'll notice is that they all have Google ads running up and down their pages. And who exactly is advertising on those free dating sites? It won't surprise you to learn that almost all the ads on those sites are paid for by EHarmony, Match.com, Date.com, etc. (And ringtones - don't forget ringtones.) I'm sure these large sites are thrilled to have a set of "low end" sites handing people over to them to sign up for subscriptions. It makes sense - a small percentage of people will sign up for a pay site, hoping the pay site is safer and more reliable and that the people are more worth meeting.

So it would seem that there is room for the free sites and the pay sites. In fact, you can imagine the pay sites buying up the free sites and keeping them essentially as they are - a lead-generating front-end for the larger pay site. Yes, it would seem that way, unless something comes along to disrupt this equilibrium.

And that something is a company called LTR.com. We have a new model, one that isn't based on Google ads. A model we think will cause the nice people at Match.com to stand by and watch as we suck all their customers out, leaving a shell of a site with no people in it. Eventually, the people at Match.com will lose their jobs and close the site. Because our model is better for everyone.

Much of what we're doing in Web 2.0 is taking Web 1.0 for granted, and that's exactly what we should be doing. We assume all the databases have all their data. We assume we can use AJAX in the browsers. Now what? Now it's time to start seeing how useful a network can really be. I'll talk about this more in a minute, but let me start with some examples of what's new and cool as of this writing ...

Sites
A few things I've run into recently that I like ...

Shopwiki
   - More information makes things more findable

YouOS
   - why back-up your data online when you can create it there in the first place?

DabbleDB
   - FileMaker Pro in Ajax - Get in before Google buys them

Explorexy.com
   - A cool tool that will tell you how anything corelates to anything else (God, won't the Daily Show have fun with this little toy!)

Fon.com
   - Become a fonero and get free WiFi around the world.

OpenRecord.org

   - A very extendable OpenSource Wiki

StreetEasy.com
   - Much better information than Realtor.com (yuck)

Farecast
   - Helps you optimize the amount of money you pay for a given airline seat.

Amazon.com's Diamond Finder

Sacred Cow Dung
  - A good technology blog

The Agile Manifesto
  - One way to think about programming

Microformats
  - Small standardized things can be useful

Pandora.com
  - The Music Genome Project

SomaFM
  - What I listen to at work

Books

In addition to reading all the Harry Potter books in French (it only takes me 6 months to read 1,000 pages), I'm reading a few books you might find interesting.

Small Pieces Loosely Joined, by David Weinberger
  - Let's start to think differently about the Web

Ambient Findablity, by Peter Morville
   - I think I've bought ten copies of this already and given it to people.

Use Cases: Patterns and Blueprints, by Gunnar Overgaard and Karin Palmkvist
  - Must. Use. Use. Cases.

The Elements of User Experience, by Jesse James Garrett
  - Jesse James Garrett's primer on the web design process

Don't Make Me Think: A Common Sense Approach to Web Usability, by Steve Krug
  - Sites like VRBO and Craigslist need to read this

Futurize Your Enterprise
  - Finally, relevant again

The Tipping Point
  - The Internet is more about people than about technology.

Learnability

Once again, I'm not going to say how fantastic Google is. How many times do I retype my search terms to try to find better results? What clues do I have as to which terms will work best? I often find myself in a sea of Nextag and .co.uk and eBay and PizzaRewardsOnline search results that don't have much to do with what I want to learn. (What? I can get a flu-shot on eBay? How convenient - maybe I should get twelve.)

If you wanted to learn about how much calcium you need, for example, what would you type into Google? Go ahead - give it a try. Type in "Dietary Calcium."

Did you get a link pointing to CalciumInfo.com, owned and operated by the people who make Tums? Did you learn how most people have a calcium deficiency? Could you be one of them? Answer: no, you could not. This kind of search result is called a false positive, also known as a time waster. (You could say the same thing about FOX News, but that's another article.)

Now go to Wikipedia, one of my favorite sites. Type in "Calcium." You'll get an article that again sounds very authoritative and means to help but unfortunately is dead wrong.

Wikipedia is wrong about a lot of things, but it has the ability to learn and get better over time. While the Wikipedia entry on Calcium was based on information from the stone age, the entry on Montenegro was updated on the same day that country became independent from Serbia (June 3, 2006). The Wikipedia has many hands, constantly trying to make it better. The difference between Calciuminfo.com and WikiPedia is that some day, someone will put better information about Calcium on the WikiPedia site.

WikiPedia is based on the philosophy of Karl Popper, who claimed we could never ever really know anything for sure, and the philosophy of Richard Feynman, who believed it was better to keep an open mind and keep challenging our assumptions, increasing our knowledge every day, and never think we're done learning.

Can you say the same thing about Google? Kind of. Google is meant to evolve, but it's evolving according to the needs of advertisers as much as to the needs of people doing searches. Try typing "dietary calcium" into the Google Health database, and you get the same uninformative links as you do with a regular Google search. Google wants to build a universe of services around your need for advertising, and they'll buy and try pretty much anything to do that. Google is designed to push more than pull. Google results are NOT always more relevant than Yahoo!s. Google changes over time, but sites like Calciuminfo.com are likely to come out ahead of sites that try to tell the truth about Calcium.

Which brings us to a little topic near and dear to my heart: the truth. It's about as easy to find the truth online as it is offline. And experts are rarely the best source of the truth. Experts are often good at explaining things in simple terms that are dead wrong. Walter Willett, chief of the Harvard School of Nutrition, has written many books and articles, given many speeches, and had many opinions about nutrition, most of which turned out to be stunningly wrong. These days, he's more careful about what he says. He's taken a learning approach to publishing, saying what he doesn't know as much as what he does. His page on calcium is a good example. He may not have all the answers, but he's going slowly and watching for real evidence. He's stopped perpetuating myths. He's less of an expert now, but he's right more often.

Not only is the web evolving, but web sites are evolving. A good web site is now built to evolve along with its owners, builders, contributors, and users.

Is your web site built to evolve? Does your site point out what it doesn't know as well as what it does know? Does your site say that there's more to learn? Does your site ask people to help make it better? If you ask me, that's what this Web 2.0 stuff is all about.

Findability

As Peter Morville says, "We're at an inflection point in the evolution of findability." I truly believe that. I'm interested in findability, because that's where I think the web is weakest. When you don't know what kind of door knob you need, search for information about door knobs. When you know which knob you need, you need to find one and get it.

Finding things online is difficult. Google and Yahoo! aren't designed to help you find specific things. You get a lot of false positives ("We have the custom orthotics you want at Overstock.com!") and false negatives (the great orthotic clinic you're looking for is just down the street, but it's not listed anywhere). So one definition of findability is "making it easy to learn the location of things without any false positives or false negatives."

Today, we use search engines to do research and stumble into interesting web sites. But no one has yet invented a findability engine. A few companies are trying.

Transparensee.com is a good example of this new breed of companies in the findability space. Transparensee tries to glean as much information as possible from the Web and make it as structured as possible. So, for example, you can use Transparensee to search for homes by specific attributes that you won't find at Realtor.com.

This is the same approach taken by Shopwiki.com, a site that tries to keep adding more information about products so it can keep getting smarter. It isn't very smart yet, but it has promise.

Globalspec.com is a B2B metacatalog, where you can look for fairly detailed items. The site searches a number of B2B catalogs, giving you access to information that Google doesn't track. Globalspec works by maintaining a detailed index of many B2B categories, like CMOS Camera Image Sensors, that don't exist anywhere else. An index like this is called a taxonomy; it's a necessary step for making things findable.

Riya is a consumer photo-sharing site that uses pattern matching to make things findable. I upload all my photos into Riya. Then I "train" it to recognize my neice Nina's face by circling her face in a few photographs. From there, Riya can find Nina in all my photos. Riya does this with remarkable accuracy, resulting in few false positives (thinking another little girl is Nina) and few false negatives (not finding Nina in a particular photo).

How good are search engines at helping me find something? Let me give you a complete example. I'm an amateur photographer. I'm looking for a lightweight tripod that I can take on trips and hiking. I'm willing to pay for the lightest tripod I can get, and I'm not interested in anything over 2 pounds (1 kilo). How do I find the right one? Let's break it down into steps.

1: Search. I type "Lightest tripod" into Google. The first few results are for Bogen tripods, none of which is under 2 pounds. Looking at the ads on the right side, I am immediately lured to an ad for the "Trek-Pod," a device I consider light and tall enough but not stable enough for my needs. A good detour, but not what I'm looking for. The third Google result links to an article that says "Not the lightest tripod, but a good value nonetheless." Oh, that's helpful. The next several links are to online forums, where I find a link to a Davis and Sanford "Traveler" tripod that weighs 2 pounds and costs only $20 but only goes up to about my waist. I find that Gitzo makes fantastic carbon-fiber tripods and explore the Gitzo web site, which is a heavy Flash-based experience that doesn't let me compare weights directly and is difficult to navigate (you don't want to know what happens when you hit the "back" button). Finally, I find the tripod I'm looking for: it only weighs .68 pound and does everything I want. Then I realize that the metadata for this product is wrong - the tripod weighs 3.8 pounds (I had to learn that from another source).

2: Compare. Another link sucks me into Amazon.com, where I can't do the one thing I want: compare tripods by weight. I can list the tripods by price, but not by weight. By accident, I learn about the Simmons Compact tripod, which weighs 1.5 pounds but doesn't reach very high. So I type "Compare tripods by weight" into Google, which takes me to a page on Epinions.com, where the tripods are not compared by weight. Back to my Google comparison search, I find tripods at PriceSort.com, which (surprise!) lets me sort tripods by price. Nothing lets me compare tripods by weight. Trying to compare takes me in circles. It seems that Gitzo makes the kind of tripods I want, but I don't know for sure.

3: Find. I go back to the Gitzo site. I can't compare by weight directly, but I can look at all the models and find the lightest one (this is called an exhaustive search, something I do routinely online, which is why I'm always so exhausted). Finally, I find it: the Gitzo G1028 Mountaineer Weekend. Comes in two heights (at 1.5 pounds and 1.7 pounds), is well made, and is exactly what I'm looking for. Now I want to find the best price. I start at Amazon.com, which has pretty much every model of Gitzo tripod except the Weekend. Now that I know what I want, ShopWiki helps me find it at Pictureline.com for $385. PriceGrabber gives me similar results. A search on eBay shows one at the same price, but of course the exact tripod I'm looking for could show up tomorrow for less.

4: Buy. I check the retailers online again and verify that $385 is the best price I'm going to get, so I buy the one on eBay. Why? Because it comes from a dealer (reliability), I get the extra positive feedback (reputation), and I'm already registered there (convenience). I should have my new tripod in a few days.

Is this about what you go through to find something? Could the experience be made, say, 800% better? I think it could. I think it's time we start thinking about findability.

Local Findability

Local findability depends on three main factors: the metadata, the functionality, and the interface.

More and more companies are realizing the importance of good, up-to-date metadata. Many companies publish catalogs on paper as well as online, so the metadata is in this tug-of-war between the paper publishers and the online group. In a paper catalog, you must trim the product descriptions to fit the page, and every page counts. Online, more information is better, pages can be practically any length, and detailed descriptions can come out of hiding any time the user asks for them. At this point, the paper people and the online people are starting to realize they need to work together and that their systems aren't very well designed for the versatility they now need.

The functionality is typically a bare-bones catalog site, designed to look more or less like Amazon.com. This will change a lot over the next few years. Catalogs are often one-size-fits-all. The paper catalog has a set table of contents. But that doesn't mean the web site should be a mirror image of the paper catalog. Paper catalogs may have their plus points, but they lack in functionality. Search is hard and ordering is very hard. Online catalogs, on the other hand, have the ability to treat every visitor as unique, or at least as part of a group.

For example, let's look at an interesting site called McMaster.com. This site is run by a fantastic company that really cares about its customers. They have insane customer service - it's hard to imagine how they can get that many specialty items shipped that quickly. You go to McMaster when you need a piece of hardware that's difficult to find and you need it now. Looking at the functionality of their site, you have to admit it's possible to find things there. But how easy is it? In some cases, the site works really well. In others, the approach isn't optimal. For example, protective clothing and office supplies are in the same category. You have to give these people credit - their site is different and easier to navigate than any of their competitors' sites. But - could it be better?

One way it could be better is to address the structure. They could make a site specifically for people in the electrical business, another site for people in the plumbing business, another one for people in construction, another for people in cabinet-making or machine shops. Customer segmentation is one of the most important ways sites can scale to accommodate a growing audience. I wrote an entire book on the subject of natural customer segmentation (Futurize Your Enterprise, Wiley, 1999). By orienting the site toward different groups, the granularity and taxonomy can change, and that makes things more findable. After all, electricians don't often need pumping and filtering items, and they only need a subset of several other categories. So no single way to cut the pie will work for everyone.

Another way to improve McMaster.com is to work on the interface, and this is where good design plus AJAX gives us the secret sauce. Examples of Web 2.0 interfaces are popping up everywhere. One interface I want to show you is at InstantDomainSearch.com - my current tool for finding domains. This is a cool little utility built by Beau Hartshorne. Just type any character into the window and you'll see the application access the entire domain-name database, one character at a time. You never have to hit return. Hit the backspace key, and you get the result of your new query in seconds. So hitting return and getting a new page view are out; having relevant information come to you instantly is in.

Analogous to hitting return is clicking the mouse button. Go to DontClick.it and play around for a while. I might have to wait for you to come back, because it's a pretty amazing experience. It's built in Flash, not AJAX, but you get the idea. Who needs to click a mouse and get a new page when - again - the information can come to you? That's one of the key ideas behind Web 2.0 - the information comes to you. The old click/page/forward/back metaphors are going to melt away, leaving online applications more suited to navigating the content.

So catalogs are becoming Applications. With new standards for metadata, functionality, and interfaces, we can see catalogs morphing into octopus-like living systems, rather than just paper publishing projects. A good example is GiantChair.com (a company I'm an investor in). GiantChair gives publishers a system for maintaining their metadata, so they can keep their catalogs up to date. Not only can it print a paper catalog, but it also provides a turn-key ecommerce web site based on the same information. Better yet, all of the publisher's current metadata lives right on its web site, so the information for each book can be picked up by distributors and retailers and fed right into their systems using an industry-standard format. This way, a spelling change or addition to the metadata flows automatically through the entire system, all the way to Amazon.com, where it changes by subscription rather than manually. This is just one example of how much more powerful catalogs will be in the future.

Global Findability

The other half of findability is global findability. Someone knows what she wants, and you have it, but she doesn't know you exist. It doesn't matter how well designed your catalog is if she can't find your catolog in the first place. In the same way that I found my new tripod from a Google search (eventually), you want both your products and your catalog itself to be findable across the entire Web. At the moment, the best way to make your site findable is to pay attention to what the search engines do and try to optimize your site's chances for showing up on various searches. You can also pay for adwords, ads, leads, and other kinds of traffic.

We all need to do this. We all need to pay attention to the user's perspective from the moment she has a need until the time the thing she's looking for arrives where she wants it to arrive. The best way is to build models of different kinds of customers and try to learn how they go about looking for things. Does a purchasing agent use the same tools and keywords as an engineer does to find the same thing? Probably not. By modeling customers and getting their input, we can try to guess all the different paths they may take to your content.

One way your customer can find your catalog is if it's already on her desk. In the paper world, that means having hundreds of pages of paper nearby to access whenever she needs something you offer. Online, it could mean making a small application that sits on her screen, waiting for her to expand it and start searching/finding stuff right from your database. Why ask for a site bookmark when you can offer an applet that gives her direct access to your database?

I think the findability space is wide open. I see opportunities everywhere. Because I'm only one person, I'm going to focus on building three new companies to help make people and things more findable. If I had a venture fund at my disposal, I'd start more.

Large Scale Dynamics

Some friends and I are starting a company called Large Scale Dynamics (LSD for short) to help companies with catalogs make their catalog items findable. We're going to focus on catalogs because A) catalogs at this point are very broken, and B) new technologies like AJAX will let catalogs finally become mainstream publishing platforms.

My first company, Studio Verso, worked with several catalog companies (we put Office Depot online). I've personally worked with a lot of large-scale sites, and so have the other people in the company. So we're going to try to help make catalogs work a lot better. In fact, we're interested in projects that have large datasets to represent, whether they're dealing in tickets, scientific data, classified ads, personals, real-estate listings, etc. I think it's time to look at how we can make the data in large datasets much more findable. (In fact, that's a common theme for all three of these companies, as you will soon learn.)

At Large Scale Dynamics, we are cooking up a lot of ideas for AJAX-driven databases. We have assembled a very talented team and are looking for the following kinds of people:

  • AJAX/CSS specialists who can work on implementing client-side solutions. We're looking for senior AJAX developers as well as junior developers or interns.
  • Good interactive designers and information architects. We have a fantastic senior designer, but we'll need more people soon. We're also looking for a summer design intern, to play with AJAX and design some cool demos.
  • Clients with large-scale findability problems. The bigger the better. We're hard at work on a new site for our first client (see below), and we're hoping to start doing work for other clients some time during the summer.

If you're one of these people or know someone who is, please email david@dsiegel.com - thank you.

Web-Wide Findability Project

As I mentioned, a number of companies are trying to take the existing information on the Web and come up with ways to make it more meaningful. Transparensee is a good example for consumers. Silver Creek Systems is a good example for businesses with large catalogs. These companies are doing the best with what they have, but we're a long way from being able to compare tripods by weight, toys by safety rating, brownies by sugar content, party venues by capacity or availability, wine by varietal percentages, blue-tooth headsets by length, law firms by number of partners, offices to rent by price per square foot, consultants by practice area, flashlights by brightness,  diamonds by carat weight, cars by gas mileage, speakers by distortion, etc. Sure, you can do a lot of this at various specialty review sites WITH THEIR OWN FORMATS, but you can't do this web-wide.

And, once you've compared, you can't find what you've decided you want. Once you know what you want, what do you want to see next? In many cases, you simply want to see a map of your area with ALL products that match shown on the map (again, no false positives, no false negatives), ranked according to whatever criteria you specify. You could specify a range of products (i.e., all Mercedes Benz 500 SL cars made from 2000 - 2003 with fewer than 80,000 miles) or a very specific product (all 2000 model year silver 500 SLs with black leather seats, black top, with fewer than 35,000 miles, no significant body work, one original owner, and the optional moon roof in the hard top). And again, you just want to see them on the map, rated in some way that makes sense to you (by price and distance, for example). Sure, you can do this on a few sites (kind of), but you can't do this web-wide.

Suppose you're looking for a law firm in your town that specializes in software intellectual property and patents. What you want is to specify all your parameters and then - again - see the results on a map according to your desired sort parameters. There are a few sites where you can try to do that, but you won't get full results. And you can't do this web-wide.

For now.

But, with a little luck and a lot of venture capital, that is about to change.

I've been trying to start this company for 15 years, even since before the Web. I've written about it extensively in past blogs and in Part IV of Futurize Your Enterprise. Tim Berners Lee has written about it. Bruce Sterling has written about it. Now it's time to do it. To write a successful business plan in this space, all you need to do is figure out how to productize and standardize the metadata of all goods and services in the world. Then get a world-class team together, raise some capital, and get going. So that's what I'm doing. I'm looking for world-class people to help in the effort. If you know what the word spime means, and you're really good at doing something, send me your resume. I'm looking especially for marketing people, technologists, security, managers, and others who feel they are at the top of their game. The company will likely be based in California but may have a New York office.

If you want to read more on these topics, you'll find some of the essays on the left interesting. Just click on the various months. For example, start with "Build Wikis, not Laptops."


Looking For a New Home

It's been fun using TypePad as my blog tool, but all things must come to an end. I think the company is poorly managed and unresponsive to user input. It may be great for some people, but I'm ready to move on. The problem is, it's tough to move everything (I like to write), and when you find a new tool you want to think you're going to be there for a long time. So if anyone has any good suggestions for a great wiki-style blogging tool, bring it on.

Here Now, Your Moment of Zen ...

Go learn something about human nature

Spend 45 minutes with Richard Feynman

Turn your browser into a telescope

Cool Portraits


This is for keri dae sutterfield

Build Wikis, Not Laptops!

Following in the footsteps of the great Ted Nelson, I have a hobby in which I sit in my living room writing white papers on the future. Back in 1991, I wrote a white paper on what I called The Communication Appliance, which I also called the computerless computer. This was before the Web. I wrote that there would be flat dumb terminals everywhere, allowing you to access all your stuff online. I said these terminals will be so cheap that they will be sent out as part of mass-advertising campaigns: it will be cheaper to produce the Spiegel and Sears catalogs by sending you a slate that plugs in and connects directly to the company's home page than to print and mail catalogs every quarter. The home page would be permanent, but you could still use the appliance to surf the rest of the sites. In other words, flat dumb terminals with keyboards, mice, voice input, printers, and other I/O devices will be everywhere. You would have 2-3 of these at home, one in your car, one in your office, and they would be ubiquitous so you could always just log in and see your desktop.

Welcome to 2006, where the race is on for the new Web 2.0 infrastructure, which will finally make the communication appliance possible. We're finally at the point where my vision might actually happen (although it's Amazon.com, not Sears, and I don’t even know if Spiegel is still in business). My goal here is to point the way to this future and perhaps put up a few signs for fellow travelers.

My basic assumptions are:

    The Net is always on

    Server space is cheap

    Access is 24/7

    Metcalfe’s law works only when people can interact

You’ll recall that Metcalfe’s law states that the utility of a network increases with the square of the number of nodes. The more people use online applications, the more the ecosphere broadens and people start building more and more useful applications on top of the base layer we are building now.

At this point, it seems like we have passed the event horizon of convergence. Things are starting to accelerate toward the center. Suddenly, everything is coverging toward some magic device that seems to be a combination of the best features of laptops, cell phones, computers, DVD players, MP3 players, video ipods, slates, watches, shoe-phones, and secret-decoder rings.

But as we will soon see, that vision is truly a look into a black hole.

Laptops Be Gone

Just as we managed to kill all the desktop machines and replace them with laptops, the next thing to do is kill all the laptops. I have a gorgeous sleek Toshiba laptop that is about 2cm thick, weighs less than a kilo, and packs easily into my book bag (note that books are still going strong). My laptop has a bright screen and excellent battery life. But what makes it mine is the pattern of bits on the hard disk. Since I’m storing more and more of my stuff online (all my photos are at www.dsiegelphoto.com), why not just put my desktop online and leave my laptop at home?

The laptop of tomorrow will

weigh nothing. It will be invisible.

Its dimensions will be 0x0x0.

Is that small enough for you?

You won’t need to bring it with you. It will already be there before you arrive. Wherever you go, there will be a dumb terminal that is so dumb it can’t even run Windows. This dumb terminal has no filing system, gets no viruses, and never needs to be backed up. It’s just a flat screen, some memory, a processor, and an assortment of peripherals. Your desktop is online and you access it from any connection, anywhere. Want to get some work done on an airplane flight, at a café, or in a hotel room? There will be a screen and a net connection waiting for you.

We won’t call them computers, we’ll call them connections. A connection has a screen, a keyboard, a mouse, probably voice input and sound output, and a 24/7 connection to the Net. It may have a printer or a scanner next to it, but most likely those devices will simply be sitting on a network, so you can use a net-based driver and designate your images to come from or go to any physical location you like.

In the future, you don’t go to the connection store and buy a connection, at least not the flat screen. It comes with your monthly bandwidth, the same as your digital router or your PVR that you get from the cable company. You can pay a few dollars more per month if you want more than one in your home.

The laptop of tomorrow will cost nothing.

Is that cheap enough for you?

Like the answering machine of the old days, your desktop PC will turn into a service. If you have a problem with your connection, your bandwidth provider will replace it. You may want to buy your own peripherals, but you can also go for the standard set of peripherals and just get a new mouse (or eye-tracker, or mind-tracker) sent to you whenever yours stops working.

In other words, as in so much of the rest of the economy, cost of goods is basically zero. The real value is in what you can do with it, and that’s a service you’ll pay for by the month.

 

Mobile Devices

You’ll need something on the go, so at the very least you can be rude to your fellow diners or detonate that bomb in your luggage. We all want to be connected, we hate to waste time standing in line, and we all want to be popular. So we’ll need something that’s a combination of our cell phone, email, video ipod, X-box, browser, and camera.

I think you’ll carry something that’s basically a communication device with an earpiece, a screen, and lens. Your earpiece(s) will be wireless. Your screen will be the smallest one you can carry that’s big enough to meet your needs, and eventually screens will unfurl or unfold.

What do people want to do on the go? They want to: 

    Talk with others in real-time (phone)

    Listen to and view pre-recorded material (i-pod, porn, audible books)

    Listen to and view live material (broadcasts, narrowcasts)

    Send and receive messages (email, IM)

    Query and get results from databases (i.e., directory assistance, traffic, weather, etc)

    Play games (single player, multi-player)

    Use specialized mobile applications (package delivery, sales, etc)

That’s the basic package. And, for most people, something similar to what we have today will work fine, but we’ll need broadband access to be everywhere, all the time.

Beyond that, you may want to capture the world around you and send it back to your server or share it with others. To capture images, your lens will either be really small and built in, or something bigger that you can use as a serious camera, or it will also include a microphone and serve as a video camera. It still uses the wireless device to send your images back to your server as you shoot, and the memory it needs will be on a chip, not on a hard disk.

I predict that laptops won’t get more mobile. I predict that phones will become much more mult-purpose, and that they won’t try to do what laptops can do today. They’ll simply help keep you connected when you are in between connections.

A World without Windows

The online desktop is already here. Several sites offer to store your files, from Yahoo (central server) to 247downloads.com (peer-to-peer), and you can get at them from anywhere you like. This is what virtual private networks are for.

Since your connection doesn’t have a hard disk, it has nothing to manage. It may have plenty of memory, so it can run several applications at once or deal with large data sets, but when you turn it off and boot it up it only knows one thing: the URL of the browser software it needs to load so it can start the browser. It then gives the browser the URL of its start page, and voila – you are looking at your desktop/start page. Your desktop keeps all your favorite bookmarks, documents, and applets ready to launch, so you can configure it however you like. It’s all customized and personalized to look the way you want, no matter how you access it.

The operating system really doesn’t exist, at least not on the connection. Instead, Firefox is the new desktop. The browser manages memory and communication back with the various servers, and the servers have their own operating systems.

 

The Online Office

It doesn’t take much imagination to build a word processor, a spreadsheet, or a database application online. These applications are a start, and there are plenty more coming. Google’s new database feature is a small step in the wrong direction. This is reminiscent of the first films being shot of stage plays – they simply imitated the old ways of doing things with new technology. But soon we’ll see that wiki applications – collaborative online applications – are beginning to flourish and make people much more productive.

Imagine a project-management application. Not only can the project manager modify the program, but all the participants in the project can contribute and change things constantly. Gone are the old days of single-user applications.

Many server-based applications, like Salesforce.com and Evite.com already exist. But the new protocols will allow you to keep everything on your virtual desktop and access everything with, I hope, some kind of similar interface. Ideally, they will all interoperate, so you can move information between programs on your desktop and between desktops with other people.

You may ask: “Okay, how will you do things like cut and paste?” Oy vey. Cut and paste is about as barbaric as e-mail. We can do better! I hope you won’t be able to cut and paste. I hope you’ll be able to move information much more effectively than cut and paste!

You may ask: "What about fonts?" Finally, fonts will be uniform resources, and you’ll pay a subscription to have the rights to use large families of fonts online. You’ll be able to get the rights to use an additional single font easily.

There’s nothing today’s operating system does that can’t be done better online. And we’ll be MUCH less susceptible to viruses. The sooner all this happens, the better. Here are some early examples of online applications ...

    GoOffice -- A suite of office applications

    Gliffy -- draw charts and diagrams

    Writely -- a nice word processor

    Zimbra -- calendar, collaboration, and messaging

Vertical Apps

Okay, you’ve tossed your laptop, gotten a computerless computer, and you’re connected. You can do all the word processing, spreadsheeting, and browsing you want. What about doing finite element analysis? Programming your automatic embroidery machine? Keeping track of your wine collection? Designing your next glider? Writing a screenplay? Configuring your insurance benefits?

All these vertical applications will work via the browser if they don’t already. The goal is for them to work together on your desktop, not in their own domains.

This is a strange concept, but let me propose it anyway: Today, the applications stay in one place and the data moves back and forth. In the networked future, the data stays in one place and the applications and viewers come and go. Is that crazy? It sure will lead to a lot less duplication of data. More and more, programs will become applets that work together with other programs so that we no longer need large applications that try to do everything.

Today, a real-estate management firm uses a custom application that has an entire back-office built in. But in the future, the back-office will be a horizontal application sitting on the Net, and the vertical (building-management) application will talk to it, whether you are using a small applet from your phone or sitting at your desk writing a proposal. Today, you must type your credit card information into every site you want to buy from. In the future, you’ll have a small bank application that manages your money and jumps in to help you purchase, categorizing what you buy and recording the transaction at the time you do it.

Metcalfe’s law continues. Web 2.0 will be much more productive, because some day, programs will talk to each other and we won’t have to re-invent the wheel every time we write an application. Vertical programs will be built on a strong foundation of other applications, so they’ll be able to focus on doing their special task even better.

Will you be able to make a drawing and do video editing online? Yes. You may have to pay for more bandwidth, but I’m convinced your online tools will be much more powerful than today’s desktop tools. Ten editors can cut a single film by leaving the film footage in one place and letting the editors work from anywhere - this is going to change how people work.

Here’s how I know: studies show that people tend to use about 5% of any application’s features most of the time, another 10% some of the time, and the other 85% either rarely or never. So why are we buying huge desktop programs – nay, huge suites of desktop programs – that have all the capability to do what everyone wants, when all we need is about 15% of what they can do? Have you ever tried to use the drawing tools in Microsoft Word? They’re a joke!! Why does Word have to try to solve that problem? Why not simply choose from thousands of little applets and build your own application, the way you want it, and add new tools as your needs change.

Have you noticed how many online applications have messaging, email, and storage of documents? Why do they all have to do those tasks separately? When all applications are on the Net, and when they can talk to each other, you’ll be able to add and subtract small bits of code that do exactly what you want them to do when you want them to do it.

Apple and Microsoft have been thinking about this for decades and doing the opposite. The new Microsoft Live project is no breakthrough, it's just another portal. It’s time to forget about the top-down approach to applications and just let a thousand flowers bloom online.

Social Networks

The big thing these days is social networks. There are thousands of them! So you have to get in the gate, then find your group, then link to people inside you have something in common with. And then you have to do the same thing in dozens of other social networks! I personally have profiles at Match, Meetic, Friendster, Tagworld, Partnerwinner, LinkedIn, and a dozen other sites.

Hello? Does anyone see something wrong here? Isn’t the web itself meant to be a social network? How about at least making these groups porous, so you can link to all your friends in each context just once? A good start is Tagworld.com, which gives access to tags that describe people within. Once you establish who all your friends or workmates are for a particular context (say a club or a team or a work group or a set of neighbors or a class), these new Web 2.0 applications should be able to share information among your group easily. But it won’t happen unless things change.

Why do all the social networks

not have applications?

Why do all the applications

not have social networks?

The answer is that both are too big. They don’t scale well, which is why they are so slow and bulky. This is what the World Wide Web itself is really for – rather than putting my profile up in 20 different places, I should simply put my profile on my own server and set up connections to other people around the Web. If Metcalfe’s Law is really going to start to work, we need to drop the big social networks and the big applications that try to do all things for all people.

 

A New Schema

There are plenty of blogs that talk about AJAX, XML, JAVA, and other technologies that are enabling Web 2.0. It’s a good start. With any luck, a set of interoperability standards will emerge to move us closer to the day when we can stop buying laptops. Here I want to talk about three big steps we can take toward interoperability: Standardized metadata, standardized user interfaces, and wikis.

As I mentioned in my last blog on structured metadata, a lot of people are talking about using XML to accomplish this and that. If we use XML, other web sites and applications will be able to know what our data means and will be able to make use of it. But if every system uses a different flavor of XML to describe the same thing, we won’t be able to interchange data without a set of dictionaries that translates from one set of XML tags to another.

I’m talking about metadata. It’s easy to describe a bottle of wine or a tractor or a pair of ice skates or a jet engine to your own system and perhaps those of a small number of vendors. But it’s another thing to create an industry-wide standard descriptor that everyone can use. Let’s look at two examples.

To describe a house, you need to specify the number of rooms, bathrooms, square feet, pool, car, garage, lighting, heating, etc. And you’d think there would be an industry-wide standard for doing that, starting with the schema behind www.realtor.com. But you would be wrong. Instead, we have a TOB situation (Tower of Babel), in which every site that lists homes for sale (eBay, Craigslist, owners.com, etc) has its own descriptor set. So even though you could map your data from one set to another with some degree of accuracy, in practice people don’t. In practice, these sites don’t communicate, and in practice there’s no real way to learn which homes are on the market in a given area without checking hundreds of web sites.

On the other hand, it’s easy to describe a book in a standard format. The book industry got together and created Onyx, an XML format for describing any book. This allows all the Web applications to pass book information back and forth easily. Publishers can use a system like www.giantchair.com to maintain all their book descriptions and then everyone who uses those descriptions will have accurate data to work with. All applications, from GooglePrint to Amazon.com to Alibris.com and others can work with the same data in the same format. Ideally, when the publisher makes a change to a descriptor field, that change immediately ripples throughout the online world, changing that item in every database. We’re not quite there yet, but starting with Onyx is a critical first step.

Unfortunately, most industries don’t have a standard descriptor for describing things, and the Tower of Babel just gets higher and higher. We need to have standard public descriptors for everything, from wine labels to engine parts to light bulbs to theater tickets to motorcycles to parachutes. When many things have standard descriptors, the new applications will start to show how seriously effective Metcalfe’s law can be.

The best effort we have in this area is called the Dublin Core

User interface standards need the same treatment. If we’re going to ask bits and pieces of code to operate in a standard way on standard data descriptors, then it would be great if the user interfaces were standard as well. A few people doing interesting work are:

    Jared Spool

    Adaptive Path

    Alan Cooper

Wikis rock. The more we can decentralize, the better. A wiki lets people collaborate by writing on the same page, rather than having to get someone else to publish for them. Wikis let me change the content of a web page simply by editing it. This is a great model for calendars, project-management systems, reminders, event-management, scientific collaboration, newsletters, etc. It blurs the line between newsletters and discussion groups, which can be a very effective way to collaborate.

As much as we love our webmasters, system administration, and tech support people, the world would be a better place if we didn’t need them in the first place. I claim that as soon as we have ubiquitous wireless broadband, we can start getting rid of all those people and get on to a more productive life. Wikis will be a big part of replacing the heavy-iron infrastructure with light, modular applications that make publishing as easy as creating. Eleven million bloggers (and rising) are the tip of the iceberg that will lead the way.

Not that all the technical people will go away. We’ll still need databases and database-driven systems to publish web sites. But much of what we call today’s internet and today’s intranet will, I hope, become much easier to use.

One of the keys to Web 2.0 is that building web sites and applications will cost a tiny fraction of what it did five years ago. Smaller applications and wikis are a big part of this. They eliminate all the experts in the middle and just let people communicate, have fun, create, and distribute their work. Here are some small wiki applications …

    Kiko.com -- calendar

    Jot.com -- a flexible tool for creating new applications

    Basecamphq -- project management collaboration

    Rememberthemilk.com -- to-do list and reminders

    Bubbler.net -- Publish web sites wiki style

I’m not talking about all this because it gives my fingers something to do. We must have standard descriptors for things so we can build the wiki applets with common user-interfaces that talk with each other in Firefox so we can kill the laptops and we can have computerless computer connections everywhere and let the magic of Metcalfe’s law transform the Web into something thousands of times more useful than what we have today, which will keep us from straining our backs lugging all that generic hardware around and we can evolve as a species.

Note to Bill Gates:

thanks for the memories.

Please keep helping

kids in Africa.

The Next Macintosh should be no Macintosh at all. It should be Mac.com, where you can establish your space and put all your stuff. Get rid of the hardware, Steve, and let's build the online platform that brings in a new era of application development.

One of the great things about Nick Negroponte's $100 laptop is that it doesn't come with a hard disk. They wanted to include one, but it was too expensive. Thank god! Best thing that could have happened. Now the virtual desktop will have a chance to emerge and countries who buy the laptops will be forced to focus on providing 24/7 access to the Internet.

The list goes on. It's time to start the revolution.

 

Investment

We’re at the very beginning of Web 2.0, and I’m starting to become an optimist again. What I hope doesn’t happen is that the cool apps like Writely start showing up and, one by one, and get harvested and assimilated by big old heavy-iron companies as they ripen individually. The real benefit comes when they stay independent and all start to work together to enrich the ecosystem. 

Investors like Steve Jurvetson and Tim Draper know that daring investments can pay off if you believe that you are making what people really want. I hope a few investors read this and it encourages them to bet on small things that can become ubiquitous. As investors, we shouldn’t be looking for the next big thing. We need to look for the next small thing: the best calendar, the best blogging tools, the best messaging system, the best micropayment system, the best applications that can work across the web, not just within a small community.

How can we help investors promote the growth of small useful tools? Let’s have some conferences centered around interchange and interoperability. Let’s help create the rich soil in which entrepreneurs can plant their seeds and let a thousand flowers bloom.

Summary

The Internet was meant to connect all the islands, but instead it created them. This is largely a result of using the new technology to simply recreate the old world online. Your desktop is an island. Your phone is an island. Your various accounts at eBay, Paypal, Google, Yahoo, Monster, Amazon, LinkedIn, Friendster, Shutterfly, Flickr, Winedemocracy, and all the rest are islands. Yes, they are connected but they aren’t interconnected. The data is still moving from place to place, rather than staying put and letting the applications come to it. And if we continue to follow the lead of Google, the islands will just continue to get bigger and bigger.

The playing field looks more like Swiss cheese than a football field. It’s no wonder people find the Internet frustrating! Search is at 5% of what it could do for us, applications are at about 5%, your computer’s desktop is a horseless-carriage concept from the last century, and your online experience does not become more productive with the square of the number of people using the Net.

We have yet to fulfill the promise of Metcalfe’s law. Instead, we have this barbaric thing called email, and 95% of our relevant information stagnates and is lost in the sea between the islands. Let’s start to learn to swim, rather than build more islands.

The one thing that still needs to fall into place is ubiquitous affordable mobile broadband access to the Net. When will we have this key piece of infrastructure? I think we’ll start to see it fairly soon, and it could roll out on a large scale within the next few years. Once that starts to happen, things will move quickly. With any luck, the last laptop will be sold in 2010. Let the revolution begin.


Here is a good list of Web2.0 software at the end of 2005.

Structured Metadata

- or, How Google Could Become a Really Big Company

Today I want to talk about search engines. In just five years, Google has gone from the engine behind Yahoo! to a household brand name that has become a verb (as in, “I Googled him and he collects Pez dispensers, of all things.”)

Is Google really the best? Let’s take a look.

Suppose you’re looking for an attorney who specializes in intellectual property in the San Francisco Bay Area. What would you type into Google to get the best results? No matter what you type into any search engine, you’ll be lucky to find a few attorneys at a time. Through Google, you could find a number of legal directories, or an online yellow pages, and if you spend enough time with them you’ll probably find what you’re looking for. But you won’t find a single listing of all such lawyers.

Suppose you’re looking for a zoom lens for your new camera. You type in the model number and – voila! – you get bombarded with ads from tons of retailers that don’t have the lens you’re looking for in stock. You can find a few retailers who have the lens, but you can’t find the 500 people in the country who have this lens and would like to sell it. For that, you have to go to Ebay, Craigslist, Overstock, and a hundred other web sites. It’s easy to find a retailer; it’s hard to find the lens you’re looking for at the right price within easy reach. Your neighbor could have that lens and want to sell it, but you’d never know.

Suppose you’re a watch collector looking for a Rolex Daytona with a Zenith El-Primero movement. Rolex has made the Daytona since 1961, using three different underlying movements. Using Google, it took me 33 minutes (I timed it on my stopwatch) to find a table showing which movements were used in which years, so now I know which years to look for. However, Rolex uses letter-based series for their watches (“A” series, “F” series, “K” series, etc) to identify the years. I’ve seen a table online that shows which series used which movements in which years, but I can’t find it again.

Let’s suppose I’ve decided to buy a stainless steel Rolex Daytona with a white dial and black subdials made in the 1990s. There are a lot of these on the market. How to find them? With Google? Good luck! You can try Ebay, Timezone, Ioffer.com, Timemerchants.com, Rolxwatch.com, Craigslist (one search for each city), and a dozen other sites. This way, if you work hard, you’ll probably find about 30% of all the watches available. And, as you’re using Google to find what you’re looking for, you’re going to see “relevant” ads from Shopzilla.com, Dealtime.com, Pricegrabber.com, and a dozen other shopping sites, none of which has a single Daytona from the 1990s. Furthermore, there may be a guy in Connecticut who has the exact watch in his drawer and if I offered him the right price he’d be happy to take it. How am I going to find him?

Suppose I’m looking for a new Lexus RX 400h hybrid SUV in silver with heated seats. Where to look? Google? Hardly. I have to go to different car web sites, auction sites, classifieds, community sites, and car enthusiast sites. I type my request into each one, hoping to find a Lexus that suits me and isn’t too far away. I’m going to spend all day doing this and might find some but not all of the cars that suit me. Furthermore, each site has its own form for describing a car. So a seller has to go through a maze of forms to list her car on several sites.

And many sites try to hide their information from search engines, so people looking for cars have to go to each site and type in keywords to try to find the car they are looking for.

What if I’m looking for a microwave oven, a specific power tool, a Gucci handbag, a new cell phone? Same thing. No search engine can help me find most of the products available, let alone retailers that have the product in stock. On the other side, people who want to list their products have to choose among hundreds of sites and fees for listing, with not much hope of finding a buyer that suits them best. Anyone who has ever listed something on Craiglist knows that the listings go stale after a day or two and have to be relisted.

What about services? I’m looking for a nurse who specializes in home visits for my grandmother in Denver. I’d like to find a bicycle frame builder who works with titanium. I’m looking for someone who makes custom orthotics in New York City. I’m looking for a gardener who specializes in low-maintenance gardens for my place in Flagstaff. An organic bakery in Los Angeles. A dog walker in my neighborhood. A bar of Amedei chocolate (the best in the world). Is this one-stop shopping? Hardly. I’m lucky if I can find a small fraction of what’s available online, even using the online yellow pages.

This isn’t just a problem with Google – any search engine that looks for keywords is going to be woefully inadequate for finding specific things. How many times do I search on Google, only to get a list of stores in the UK or Hong Kong? Does Google know I live in New York? Sometimes I want to find something nearby, other times I want to avoid paying sales tax.

I spend a lot of time rephrasing my search terms each day. Example: some companies, like I/PRO, offer software for measuring/auditing the performance of web sites and web traffic. Good luck finding them with a search engine! The words you need to use are just too common.

Have you tried to find a job online? How many job sites do you have to submit your resume to? Does Google help? No. Google can help you find job sites like Hotjobs.com or Salesjobs.com – that’s not much of a service. Have you looked for a person to hire? How many sites do you have to keep track of? Hundreds. Unless the job is for something extremely specific, like a pediatric oncologist, you’d be lucky to find 20% of all qualified candidates at any given time.

Contextualizing Keywords
All search engines have essentially the same approach: you type in keywords and the search engine tries to guess what would be the best set of documents for you based on what it knows. Google uses a popularity approach, relying on web links and some inference rules to determine what’s relevant to you. Like any search engine, Google tries to match ads to your search by trying to contextualize the keywords you type and give you relevant ads that might make them money if you click on them.

It often works quite well, and it's getting better. If Google sees a UPS tracking number in your email, it offers to make it easy for you to track your package. If i get an email talking about euros or other currencies, I often get a link to a currency converter, which is very useful.

Yet, when you're looking for something specific, Google's results can often be humorous, rather than effective. A friend of mine invited me to a party, and Google's email service showed me several ads for purchasing bridal-shower invitations online. How many times have you typed in something like “Oil Changers,” only to get an ad from Amazon.com offering you to search for books about “Oil Changers” in their online bookstore? How relevant is that?

How can a search engine know what I have in mind? If I type the words “Rolex Daytona” into Google, here’s what I get:

Rolex Daytona Review
danchan is a weblog with the best daily news on the net, high gear cool equipment reviews, tips on backpacking in central europe,   cgi/perl/mysql tutorials ...

2005 Rolex 24 hours of Daytona
2005 24hrs of Daytona Vist us track side from Daytona Speedway. Live updates and photos from track side.

Rolex Daytona - PriceSCAN.com - Unbiased Price Comparisons ...
PriceSCAN is your unbiased guide to finding the lowest prices on Rolex Daytona Watches. Don't buy it before you PriceSCAN it!

Official ROLEX Website: the perpetual spirit watch collections
An inside view of the House of Rolex, classic or elegant watches: discover the art of precision timekeeping, and the Rolex watch collections.

eBay - Rolex, rolex submariner, rolex daytona items on eBay.com
Buy Rolex, rolex submariner, rolex daytona items on eBay. Find a huge selection of omega, breitling items and get what you want now!

MCDOWELL SUSPENDED FROM ROLEX SERIES CROWN ROYAL 250 AT THE GLEN AFTER SEVERAL ...
09/15, New Picchio Daytona Prototype Completes Successful Shakedown Runs ...

These are the first six items returned as of 9/18/05. Note that the search engine has to guess whether I’m looking for a watch, a web site with reviews of cool stuff, or a road racing association. How can the search engine guess correctly? Why don’t we give the search engine a better chance by telling more about ourselves and what we are looking for so it doesn’t have to guess?

Go to Ebay and try your luck. As an art collector, I often go to Ebay to look at art porn. Do you think you can type in the word “painting” and see all the paintings? Absolutely not. You’ll miss a lot of the watercolors because they don’t have the word “painting” in their derscriptions. You have to use the Ebay categories to get anything done at all, and even then you get a lot of crossed listings and see a lot of things you don't want to see.

Google’s basic approach so far has been to be better at contextualizing keywords than anyone else. Look at their Google Desktop software – type in keywords and search your own computer – it’s all about contextualizing keywords. The exciting new GooglePrint project lets you search for any sentence in any book ever written (search for “I don’t know nuthin’ ‘bout birthin’ no babies” and you should be taken to the exact page in “Gone With the Wind” that has that sentence.) While this is helpful, especially for research, we are far from having the tools we really need.

Google probably is the best search engine online today. But we have a long way to go! Think of the 300 million web-enabled telephones that will be online in ten years and you can start to see why keyword searching may not be the final solution. Think of the billions of RFID (radio-frequency ID) tags that will be in use then, offering structured metadata in real time to any system that can take advantage of it.

Structure
Could things be different? Yes. Things could be very different.

To generalize the problem, we could say that we’ve become used to building branded sites that serve as marketplaces, where you list and search according the terms of each site. At Ebay you have to fill out Ebay’s form; at Cars.com you fill out the Cars.com form, and at Craigslist you fill out the Craigslist form. Each database holds its data in a proprietary format. Most databases let you search by keyword and perhaps a few other descriptors (like date, price, location, etc). But much of the searching is by keyword. For example, gray cars aren’t marked as having a particular color. They simply have the word “gray” in their text descriptions. If someone is looking for the word “charcoal” in the text rather than “gray,” the search won’t find it.

We don’t need all these different databases to do all that work for us. We need a standard form that describes something, a form everyone uses. We could then describe everything we “have” and everything we “want,” and simply leave these descriptions on the Internet for all (especially the search engines) to see.

Suppose you want to sell your car. If we had a standard form for describing a car, you could just take a copy of the standard form for a car, fill it out, and then put it on your own personal web site. How do people find your car if it’s not in a database? Simple. Your car’s description is on the Internet. The search engines find it. You can even specify to what degree you’d be interested in selling it (so people looking for a car below a certain price don’t even see your car’s description.) In fact, you can put all your “haves” online and list everything you own, along with an indication of how interested you are in selling each item at what price. Then you can forget about Craigslist or Ebay and just wait until someone contacts you!

To find a car, you again take a copy of the standard description of the form for a car, but this time you fill it out specifying ranges and priorities for the cars that would be acceptable. You may list a range of colors, years, options, prices, and other parameters. Then you simply hit the “search” button on that page sitting on your own web site. The search engine then matches your request to all the cars on the entire Internet. You instantly see a complete list of cars available, sorted according to your priorities. You see 100% of all cars available that meet your criteria. You can even specify preferences (e.g., cars closer to me are better than cars located far away, but lower prices are also better), so cars with higher scores show up first.

If, for some reason, you haven’t found your dream car yet, you just leave your “want” description on the web, and the search engines keep an eye out for any new description that matches your criteria. When a description shows up, you see it immediately. You can keep all your “want” descriptions online, until that elusive 1936 Pez dispenser that would complete your pre-war collection becomes available and you can be the first one to grab it.

The best part about this scheme is that no databases hide the data. All the information is simply sitting on the Internet, waiting for the search-engine spiders to come get it. You no longer have to go to Cars.com, Autobytel.com, Carsdirect.com, Carsbelowinvoice.com, etc. You don’t log in anywhere.

Let’s see – you don’t log in anywhere, you don’t pay any listing or membership fees, you make industries 20 times more efficient, and you see 100% of what you want and 0% of what you don’t want. Is that of any interest to you?

More examples
This approach works for many many markets. Think about buying a home. Again, there are many realtor web sites and real-estate markets online, and they all use different formats for describing a home. With a single universal descriptor, people selling homes could simply fill out the form once. Anyone looking will be able to find them directly, without going through an agent or searching a dozen sites. This is what the Multi-List has done for many years, but there was a stiff charge for getting on the list. With a universal format, anyone can list a home for free. Realtors would have to distinguish themselves by performance and service offerings rather than access to their list.

Think about resumes. How many resume databases are there? Not only do you have to put your resume on 100 different web sites, but they all have different forms and you still don’t know how many employers you’re reaching. Furthermore, once you find a good job, it takes weeks to “turn off” all your resume listings at all those sites! From an employer’s point of view, going to all these different web sites and paying for ads not only costs money, but if the person you’re looking for doesn’t see your ad, then you don’t exist. Why not use the search engines to sort through every single resume available online in one second? This can be done by defining a universal resume that everyone fills out once and that employers fill out with their requirements. Then the search engines simply make the match. And, when you find a good job, you just take your resume offline and – voila! – you stop getting emails from companies.

Retailers would still exist, but they would compete directly with anyone offering a similar product. So they would have to distinguish themselves by offering better service, support, and availability. They could hide their prices from the search engines, but that probably won’t get them any business.

Think about buying an airline ticket. How many discount air-travel sites are there? Thousands! And yet each flight has a certain number of seats, and those seats are the “product” being sold. Why don’t the airlines just put every seat for every flight online and let customers find those seats directly? Now you can see everything available, every individual seat, and when you purchase one then the “availability” flag for that seat turns from “available” to “taken.” If you want to change your plans, you just turn your seat availability back on and sell the seat to someone else. No more travel agents!

The same obviously goes for restaurant bookings, hotel rooms, performances, memberships, events, etc.

Remember my zoom lens example? How many times have you found the right product at the right price, only to learn that it’s not in stock? With structured metadata, you would know exactly how many lenses a retailer has. When your credit-card charge goes through, their system reduces inventory by one unit. This is a far cry from the way things are done today, when someone has to “go look in back” to see what’s in stock. Many retailers have no idea when they are out of a particular item, but if their system knew then the system could just re-order automatically (or re-order more if the product has been moving faster lately).

Want a loan for the house you just found? You could go to a hundred different loan/mortgage web sites and fill out applications, or you could just fill out a standard form once, leave it on the Internet, and wait for the lenders to find you (yes, you can be cloaked to hide your identity, or you could allow access only to banks that meet your criteria). In fact, once you’ve filled out a single standard form (with all the information any bank could ever need), you never have to fill out a loan application again. After you find the right loan, you simply hide your application. Then, next time you’re looking for a loan, you simply update your application and “turn it on” again. In fact, I can do better than that – you could have your loan application update itself constantly.

Interoperability
What I’ve been talking about is called structured metadata. Metadata is simply information that describes something, whether it’s a house, a pair of jeans, or an airline seat. The more structured it is, the more precise our searches become. It may not help you find a good babysitter or recommend a movie you might like, but structured metadata can help you find anything that’s unique or has a serial number or can be described objectively. Structured metadata is being used inside of companies and inside of some industries to streamline processes, and whenever it’s used it’s a huge win.

Believe it or not, we already have tons of structured metadata. Every database uses structure of some sort. Some, like Craigslist, are extremely light, while others, like CDW.com, are extremely heavy in their use of metadata. And yet, we’re far from where we want to be, because there are very few good universal standards for metadata.

The original idea for standardized metadata came from Tim Berners Lee, the inventor of the Web. His vision was to use the Web to find things using the structured metadata that describes them, rather than having to look for keywords and make associations. He called his vision The Semantic Web.

Unfortunately, the Semantic Web never really took shape. But now, organically, it's starting to grow.
When an industry adopts a standard for its metadata, we get interoperability. You see it in pockets, and even in a few entire industries.

One example is the book industry. Books are now described using a format called ONIX. An ONIX description of a book really is a universal descriptor for a book, with all the possible fields anyone could ever need to describe any book in any language. Now, publishers can put all their catalog information into ONIX format and it’s accepted by everyone – libraries, online bookstores, used bookstores, distributors, reviewers, etc.

We’re making progress in a few areas, but we're nowhere near critical mass -- the mass needed for the search engines to adopt these universal descriptors and start to make sense of them. We’ve had a language for expressing structured metadata, called XML, for about ten years now. Many industries are now working to define XML standards for all kinds of products (ONIX is what we call a Data Type Descriptor in XML). But it’s hardly universal. In most cases, different companies use different in-house versions of XML descriptors, and then they need databases to try to translate from one to another.

Very few industries have adopted universal descriptors. The “electronic patient chart” for medical informatics is a great example – there must be over a thousand different kinds of electronic patient charts out there, and none has really risen to the surface as the overall standard. It’s much better to have a flawed standard that everyone uses than to have hundreds of “dream solutions” that don’t talk to each other.

[In fact, this is how the Web came about: some scientists used a really lousy version of a document mark-up language called HTML to build the first web pages, and boy did they suck! They were so successful that the browsers adopted this lousy standard and we’re still stuck with it today, although we’ve bolted a lot of fixes onto it since then.]

The next layer on top of XML is called RDF - the Resource Description Framework. The idea is to create public standards for metadata we can all use. RDF is a strong step in the right direction and, after a few dormant years, is just now starting to pick up a bit of momentum. Anyone interested in further research on this topic should start learning about RDF and the work already being done to apply RDF to specific problems.

I hope we’ll develop universal descriptors everyone can use for every kind of product and service. Almost anything that can be described uniquely and objectively can have its own universal descriptor. It even works for commodity contracts and electronic signatures. Then we need the search engines to see them and use the structure contained within. Let’s use keywords to find articles, scientific papers, contents of books, online brochures, and other information. But when we’re looking for something specific, let’s use structured metadata.

Structured Metadata can revolutionize every industry, from health care records to restaurant reservations to delivery of fresh produce to buying music to automobile assembly. I could go on, and I will, but not here. Instead, I’m going to list a number of interesting resources and let you do further research on your own.

In my opinion, we are about 1% of the way toward having an Internet that really works. Some day, people will look back on the Google days and wonder how we could possibly have lived without structured metadata. Just type “structured metadata” into Google right now, and you’ll see why my 1% estimate may actually be high. Many books have been written about structured metadata, but the revolution has not yet started. Google could do it. They have the resources, the brand, and the right business model. If they don’t do it, the next Google will.


Resources
I have written a white paper on this topic. It contains answers to the questions about where/how to store the metadata, security/privacy issues, more industries revolutionized, and how to make money in the brave new world of structured metadata. I’ll email it to anyone who is interested. My main goal is to get people at Google to read it, so if you can help with that I would appreciate it. Just email david@dsiegel.com and ask me for it.

 

Books
I wrote a book on this topic. It’s called Futurize Your Enterprise, John Wiley & Sons, 1999. Section 4. It’s no longer in print. Use a search engine to find a copy – if you can.

Universal Meta Data Models,by David Maco and Michael Jennings
I haven't read it but it looks interesting.

Links

The Dublincore Metadat Initiative

A strong start in the right direction. Probably the single best resource for bringing together disparate data standards.

2001 Scientific American Article on the Semantic Web
By Tim Berners Lee, James Hendler, and Ora Lassila – a good old article that helps put the concepts into (imaginary) practice.

Metadata Demystified (PDF)
A good online treatise on metadata standards for book publishing – read it with an eye toward other industries as well.

The Semantic Web
By Tim Berners Lee, the original inventor of the Web. Seems to have lost a lot of steam, but the Semantic Web promises to re-emerge as a place of thought leadership.

An Introduction to the Semantic Web
Explains the difference between RDF and XML – a bit geeky, but worth reading.

A primer on RDF - the Resource Description Framework
This comes from the W3C, so it's technical but a good start for any metadata geek.

Resource Description Framework FAQ
Written in reasonably plain english.

XML.com
News and current topics in the world of interchangeability.

Project Liberty
Hopes to create a standard set of identity structures for everything from digital authentication to micropayment.

Search Engine Watch
News on search engines.

 

Search Engines

Scirus
A fantastic place to search for science information

Scinet
Another science search engine – I love these!

Metacrawler
A search engine that searches many search engines at once. Great for comparing results.

Dogpile
Another meta-search engine

 

Companies

Taxonomy Strategies
A company that consults on data interoperability

 

 

The Godzilla Economy

For the past four years, the US economic engine has mostly been powered by housing sales and the throttle has been wide open. The fuel for that engine has been low interest rates. The engine has been running so hot that today’s equivalent of day trading is flipping condominiums for fun and profit. Some people have flipped properties in as little as 24 hours – a sign that the engine is overheated. One study by the National Association of Realtors estimated that 23 percent of homes in 2004 were purchased primarily for investment. As the fuel gets more expensive, how will a slowdown in the housing market affect the economy in general?

If you’re reading this in 2006, you already know the answer. But here in Spring 2005, I want to try to address the question by painting several scenarios for what the impact could be. I’ll start by explaining three important concepts – liquidity, the yield curve, and the trade deficit – and then try to highlight the scenarios that I think are worth considering.

Liquidity

If the price of residential real estate drops, where will the money go? There are only so many places it can go. Commercial real-estate has boomed, filling downtown office buildings up with long-term leases, so their value is likely to continue. People aren’t going to sell their homes until they have to, but they may have to unload their investment real-estate as prices cool off.

Today many of the more liquid markets are already full of cash. The bond markets are full of foreign money. Commodity prices are already high. Oil is at a peak and energy stocks are already over the top. Banks and high-risk lenders are all printing money with credit cards and low-interest loans. Many stock prices are precariously perched, while others are stubbornly stuck in the mud. Warren Buffet says he’s had a hard time finding any good investments and is sitting on the sidelines with $43 billion in cash.

Those who follow liquidity say there aren’t that many places for the money to go. One place would be in precious metals, which always seem to form their own bubbles when the clouds of uncertainty gather (see below).

Liquidity is an important factor, because the more "stuck" you are with a bad investment the longer it could take you to get rid of it, and the more prices could crash. If money pulls out of several markets at once, that could make everyone nervous. If money sloshes from one overheated market to the other, that will increase volatility and potentially magnify other effects.

The Yield Curve

Economists often look to the yield curve (which shows different rates of return for bonds of different maturities, from short-term to long-term) as the best crystal ball for the economy. Normally, the curve is positively shaped, like the top of a Porsche, showing that short-term rates are naturally lower than long-term rates. In times of extreme optimism, the disparity is greater, and in times of pessimism the curve flattens out – bringing short-term rates of return closer to long-term rates.

Today, the yield curve is heading toward and will likely go flat. As Alan Greenspan raises short-term interest rates, there won’t be enough pressure on long-term rates to drive them up, so the difference (also called the “spread”) will diminish. Speculators who have routinely made money on this spread will find that their free lunch has disappeared.

When long-term rates are even lower than short-term rates, the curve is said to be inverted. Everyone knows that an inverted yield curve leads to recession, typically a year later.

Here’s a really cool yield-curve animation that shows every month of the US Treasury yield curve for the past 30 years (don’t click the play button, just grab the diamond and move it by hand, and make sure to pause at November 2000):

Cool yield-curve animation

The Asians Have All Our Money

It may be true that the Asian economies are growing much faster than our aging Baby-Boomer and no-growth economies in the US and Europe, but hey, look at all the cool toys we have! Does it really matter if they have all our money? To understand our trade deficit, look where the profits are.

When you buy a shirt made in Malasia, you’re not paying that much money. The owner of the US brand whose logo is on the shirt is more profitable than the company in Malasia that made the shirt. So most of the profits stay in the US even if most of the money goes to pay Malasian workers.

The situation is even more extreme when you buy a new laptop for $2,000. Of that $2,000, about $100 in profit goes to the distributor, $300 in profit goes to the retailer, about $250 in profit goes to Microsoft, about $60 in profit goes to Intel for licenses on software and chips, about $40 in profit goes to the (probably Chinese or Japanese) makers of disk drives, screens, power supplies, etc. And about $20 in profit goes to the Taiwanese company that put the whole thing together and stuffed it into a box and put it on a boat. By far the lion’s share of the profit goes to US-owned companies, and that profit is what drives the stock market. On the other hand, much of the money (if not the profit) goes to pay the Chinese or Japanese workers their salaries, and that money gets taxed by their government and comes back to the US as investments in treasury bills.

So yes, the Asians do have all our money, but they don’t have anywhere else to invest it but in US T-bills (and possibly stocks). Japan is the largest holder of US T-bills, but China’s share is increasing. Some people fear the leverage this will give China, but in fact the money really has nowhere else to go. Unless another government starts paying spectacularly better interest on debt that is as safe as US Government debt, or if Asian companies become more profitable, the money is likely to stay in the US.

And now you know why the long end of the bond market is not going to go up any time soon: the Asians have nowhere else to put their money.

In the long run, this could change, and the change could be disruptive. Japan is now China’s largest trading partner, and vice versa. If China’s middle class starts looking for ways to make higher salaries, China may have to weaken the bond between the Yuan and the dollar. Other Asian currencies may also devalue the dollar. Then the US – the world’s largest debtor nation – could find itself in a downward spiral where our dollars no longer buy the stuff they make and our credit ratings start to slip. This is a long-term scenario that is probably based on politics (like China’s demand for Taiwanese fealty) and other factors (like war) as much as on economics. Tough to tell now, but being in debt up to your ATM card doesn’t make the situation more comfortable for the US.

Now, with those three concepts in mind, let’s look at some potential scenarios for the next couple of years ...

The Bambi Effect

Some people say interest rates will rise gradually and there will be no sudden dislocations. As prices of housing go up moderately, other industries and innovations will spur new economic growth. People still need a place to live, so housing prices may come down a bit in some markets but in general the strong demand for homes will continue. They contend that when the Fed Funds rate goes from 2.5% to 4.5% monetary policy will be in a “neutral mode,” striking the right balance between carrot and stick for the economy to continue growing modestly. I call this the Bambi Hypothesis, because it envisions a gentle transition out of the real-estate-driven economy into a new round of efficiency and production that keeps the economy frolicking along in the meadow like Bambi, undisturbed by outside influences.

The Bambi proponents say that if you look at the yield curve more closely, it’s more accurate to say that as the yield curve bends toward inversion, the chances of recession go up. Some people say that the curve is going to have to look like a canoe before we can count on a recession in 2007:

Don’t Sweat the Yield Curve

The main driver of the Bambi effect is that everyone expects interest rates to go up gradually and level off. Technology should continue to increase worker productivity. GDP looks like it’s going to keep growing for the indefinite future. Even though many manufacturing jobs have been exported to Bangalore, Americans seem, for the most part, to be working. The low dollar helps us export what we make to Europe. According to the Bambi-ites, it’s okay to buy an index fund and hold onto it, because the markets should continue their relentless upward climb.

If the dreaded inflation monster rears its ugly head, Greenspan could keep interest rates on the low side, so the Bambi scenario is a real one.

The Glass-Half-Full Effect

Some people look at the situation in their usual balanced way, saying that yes, the end of the real-estate economy is near, but other economies are on their way. We’ll see a bust in the housing and asset-based markets, but technology and medicine and exports will lead the way out. They can see plenty of volatility, but overall the economy will continue chugging along. Yes, there will be losers, but there will also be winners. Once people stop buying condominiums in Florida, they’ll go back to mutual funds, which will look to small-cap stocks, biotech, health care, transportation, energy, and another tech rally. And don’t forget, American consumers will continue charging on their credit cards until the undertakers pry them from their cold dead hands, so at least some banks and most imports will continue to thrive.

Part of this effect is that momentum strategies have suffered in the past few years, as the stock markets have mixed sideways movement with sudden upward lurches (as we saw last year and the year before). The trend-followers have had a more difficult time spotting trends and jumping on board. The contrarians are doing better, but it’s been rocky. For a few years now, the hedge fund honchos have been saying that the easy money has already been made.

According to the glass-half-fullers, there’s a tremendous opportunity to make money in the next few years. All you have to do is short anything asset-based and short manufacturing, then buy undervalued service, tech, and health-care stocks. But you’re going to have to choose carefully, they say, as most indexes are likely to go sideways for the next few years.

The Godzilla Effect

The serious contrarians, on the other hand, have kept their powder dry, waiting for just this moment. According to them, we are in the calm before the storm, strongly disputing Alan Greenspan's latest prognostications that the coming rise in interest rates won't be “disruptive.” (What is Greenspan going to say -- that it's going to be disruptive?)

Many people watching the financial sector believe the Godzilla model is appropriate. They believe the rise in interest rates will effectively stomp the housing and consumer-credit markets like Godzilla through a cheap movie set. Just as Godzilla completely destroyed some buildings, did some amount of damage to most, and left certain buildings completely untouched, the coming debt crisis will probably be selective in who it punishes most. It’ll hit hardest where there is the most leverage and where the most money has been made in the past few years. It’ll affect consumer credit across the board and cause a ripple effect as consumer confidence and other indicators get sucked into the same hole.

The Godzilla proponents do not think the coming credit shock is already priced into today’s markets. They have no doubt that many financial stocks and asset-backed securities (like REITS) will be hit fairly hard. They are worried about corporate and government bonds that have extra leverage and derivatives around them, making them more vulnerable to small changes in the yield curve. The seismic rumblings are already on the tape (Enron is far in the past, but GM’s recent downgrade by credit watchers may be just the beginning of a new corporate credit implosion). Greenspan himself said last November: “Rising interest rates have been advertised for so long and in so many places that anyone who has not appropriately hedged this position by now is obviously desirous of losing money.”

The Godzillists go further, saying that the credit markets will feel the coming crunch almost across the board. The higher the yield, the bigger the hit. Many of the debt-based portfolios that are currently in fashion will suffer.

I know what you're thinking: “Hah, the contrarians said that last year, and they were wrong! Look at all the good news coming out of our economy.“ But this year is different. This year the bubble signs are all firmly in place. Where will the money go? A lot of it will simply disappear, vanished with the drop in housing prices. Much of the rest of it will go to cash or high-value commodities. There may be other bright spots, but why go for nickels and dimes when you can pick up quarters shorting banks that aren't prepared for a flat yield curve?

If there’s a bright spot, it’s that you can now identify which tranches of loans are most likely to go bad first, and sharp traders will be discounting those tranches sooner rather than later. Thanks to hedge funds, credit markets are now much quicker to react to changes and therefore more efficient. But on the other side, say the bears, Greenspan has been inflating the bubble past its breaking point for two years too long, allowing too much cheap credit to build up, and the real-estate economy is going to pop within 12 months. Quite simply, says one, “the coming credit implosion is going to hit wherever it can cause the most pain for the most people – it’s going to be the flip side of the free ride they’ve been getting for the past five years.”

Fanny Mae and Freddie Mac – two companies that have participated in the wholesale overleveraging of the US economy, have already shown themselves as the next Enrons, and we’re just beginning to learn how deep that rabbit hole goes. According to Jim Willie CB, professional market curmudgeon, "Fanny Mae deservedly receives a tremendous amount of criticism. It has become the mortgage industry poster boy for uncontrolled inflation, accounting fraud, executive pilfering, and collectivism for home ownership." 

Fat Fannie Falls out of Bed

Queer Eye for the Bond Guy

The Yield Curve Inversion Effect

Alan Greenspan says it's a “conundrum” that as he continues to raise short-term rates, the long term rates haven’t changed. This is one of those unusual signs that says we’re in different territory than we’ve been before. Greenspan can’t explain it. How about all the massive piles of Asian money looking for long-term treasuries, given that the money has no place better to go?

The Chinese Yuan probably should let go of the dollar and let it devalue a bit, but it’s not happening, so the pressure is just building up. This will create another crisis in the future, one that may hit just as the US economy teeters on recession. On the other side of the Pacific, the Japanese have been quietly saving and repairing their economy, to the point where they are now the most healthy economy in the world. Japan is a nation of savers, while the US is a nation of spenders. Does this remind you of any fairy tales you were told before going to bed as a child?

According to Jim Willie CB, "Since 2001, when the Fed began a dozen rate cuts, the expansion of household debt, the enormous federal deficits, the mind-numbing growth in money supply, the insanity of wasteful consumer spending, all of which continue to spiral upward, these point to an extremely bad foundation for the economy and Weimar symptoms of inflation.”

Think of it this way: the Chinese economy is only about 12% of the US economy, and when it gets to about 30% of the US economy it will turn into a much stronger animal, and their currency policy could become ours.

Something to think about: The Contrarian Thinker.

It would take several more dominoes to fall, but the yield curve could invert. In fact, some people have even speculated that the long end could drop down below the short end (this is called reversing the curve “the hard way”). No matter how you slice it, there is a chance of a recession, and the more factors that show up to kick our economy in the teeth, the more real that chance gets. A sub-scenario of this includes deflation, which no one expects but could throw some seriously cold water on the whole show.

Yes, a few people think this economy could simply crater and leave a smoking hole. I’m not one of them, but I have to admit the chances are nonzero. It pretty much happened in Japan a decade ago.

Seeing the Pin Coming

Now that I’ve taken you from “irrational exhuberance” down through the “conundrum” of the yield curve, I bet you’re wondering what I personally think will happen. If that’s true, you’ve been completely fooled by my act, playing an economist when in fact I took my last macro-economics class in 1979, and if I remember correctly I got a B-. But I will throw in my ten yen, and you are welcome to take it for what it’s worth. I will pseudo-prognosticate between now and the end of 2006 (and I refuse to pick Oscar winners, so don’t ask) …

The real question is: What’s the second derivative going to be? The second derivative measures how quickly the changes will occur. If things happen quickly, many dominoes will fall. But if they happen gradually, there may be time for damping effects to soften the blows.

When markets are inflating like balloons, it's hard to see the pin coming. I think we are, right now, at the peak of the housing bubble. I think it’s going to pop sometime between May and October of 2005, because people prefer to put off what’s coming until it finally arrives. When it does, everyone in the herd will go the same direction at the same time. I can’t tell you which rate-hike will be the pin that pops the bubble, but you don’t need much of a prick when the pressure is this high. Then the pop should be pretty audible, especially if you’re a real-estate agent.

If you are an owner trying to sell real estate, get it sold before summer. If you are thinking of buying real estate, keep your powder dry. I’m sure there are a few regional housing markets that won’t be much affected (Montana?), but in general I think the real-estate economy will officially end in May, 2005.

The problems at Fanny Mae and Freddy Mac herald the coming implosion of the bond market. Fanny Mae is the canary in the coal mine of the bond market. The bond market has many moving parts, some of which will simply melt, others will fly off, and much of the rest will get soft and mushy. Holding value in a bond portfolio will be a major accomplishment between now and the end of 2006.

I personally think most micro-cap and small-cap stocks will have a hard time growing over the next two years, because they aren't as liquid as big-cap stocks. We've seen a good run in small caps over the past few years, but I think investors will be too distracted with debt problems and won't want to be stuck with small-cap stocks.

I believe the price of gold will rise, but I can’t bring myself to buy it. Just so people know where I stand on the topic of gold, I’m going to digress for a second and give you the elevator pitch.

Gold is not rare. You no longer look for gold by looking for seams or deposits. Gold is everywhere in minute quantities, and we now know how to harvest it. There’s more gold in the top two feet of topsoil in Nevada than in all of Fort Knox. The technology needed to extract it is a fleet of earth movers and a big sheet of plastic. If the people in the gold industry had the financial incentive to double the current world’s supply of gold in the next ten years, they could do it (and the environment would be the victim, because gold mining is tremendously destructive and toxic). If gold didn’t have a history as a financial instrument, it would just be another industrial metal (mostly used by the electronics industry and a few jewelers). When the price goes up a bit, the gold extractors can get more where that came from, no problem.

That said, however, there probably is a terrific opportunity to make money in gold over the next 18 months. But as the bad news piles in, the smart money will already be in gold and then the greater fools will follow.

I can’t tell you much about Christmas 2005, but I can practically guarantee that Christmas 2006 is going to be no fun. By then, the cows will have come home to roost and the chickens will have hit the fan. By then, the average husband and wife will be looking at each other across the dining room table, knowing they won't be able to make their upcoming mortgage payments. Just in time for the new bankruptcy laws to make things even worse. I can’t imagine the stock market making it’s usual 11% per year over the next two years (of course, I couldn’t have imagined in the past two years, either).

I’ll Take Godzilla to Win.I am sure there will be some bright spots in the economy, but I also think that by the time George Bush is done with his second term, there won’t be any middle class left in America. I think by 2008, the US will meet most of the qualifications for a third-world economy. I won’t be surprised to see Warren Buffet holding onto even more cash at the end of 2006 than at the end of 2004. As a wise man once told me: “Money is hard to make and easy to lose.”

My advice: Preserve capital first, then look for clever ways to capitalize on the coming volatility. The US economy should silently slip into neutral sometime this summer and then coast along, losing speed, until something comes along to get it going again. It may be a while. It all depends on the second derivative.

If you’ve read this far, you should probably read: The Big Picture

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CES 2005

CES Report, by David Siegel

 

I just spent 4 days in that cloudy snowy damp city, Las Vegas -- where the gambling apparatus continuously sucks the money out of over-caffeinated tourists, where the clubs are harder to get into than the showgirls, where everyone is chasing the action (and the showgirls), where transportation breaks down at the mere mention of 120,000 gadget freaks entering town, and where I spent four whole days under the fluorescent rays of the Consumer Electronics Show getting a 400 megawatt tan (not the showgirls). Here’s my report on companies and trends for people interested in technology, investing, and buying new gadgets.

 

5.1.1 Surround Sound

People take a lot of pride in their home theaters. So it wasn’t surprising to see companies offering the latest products designed to make you look like a “real man” in that department. There were motorized red velvet drapes for your 102” Samsung plasma display. And there were many companies selling chairs, couches, and lounges that hook directly to your amp and vibrate your ass every time Rambo blows something up. I think Joe Six Pack will buy a vibra-lounger just to see the look on his neighbor’s face when he gets into the chair (complete with plenty of cup holders, coolers, stirrups, etc) and gets blasted by the soundtrack. Although this category is a gimmick and I have no specific recommendations, I believe this market will see solid growth for several years.

 

Tiny Video/Photo Players

There was a lot of buzz around products like Creative Labs’ Zen “Portable Media Centers” (www.creativelabs.com). These devices show your photo or video collection along with playing your sounds. Needless to say, kids will want to watch and swap music videos, so pretty much anyone who spoke Chinese or Korean at the show had some version of this product to show. This area will explode, and I predict no real winners, just a large growing pie.

 

Another approach to this market is Orb (www.orb.com) – a server that lets you access ALL of your hard-disk contents via your cell phone. Leave your MP3s and your photos at home and simply play them over your phone! Forget about capacity – your cell phone has access to all the gigabytes on your home computer or company server (think about sales presentations). This is clearly going to just be another feature of your cell phone in 2008, but you can have it today for just $10/month.

 

What? You already know what’s on your hard disk? You’d rather get news, sports, weather, and horoscopes on your cell phone? Simply go to www.mobitv.com and see all the content you can get by the minute.

 

PoE – Power over Ethernet

A PoE port is an Ethernet port that, like a USB port, has enough power (12 or 24 volts) to power a phone or another device all by itself. Here’s an estimate of number of ports shipped (predicted to ship):

 

Year Number of Ports

2004 130 million

2005 200+ million

2006 300+ million

2007 500+ million

 

I’m very bullish on this market, not just for powering phones but for products like cameras. You can put a powered-Ethernet camera into the ceiling or wall without a permit because you don’t need to run 110v wires plus conduit through the walls (and batteries for stationary cameras aren’t a good idea). Note - this means wireless stationary cameras probably won't take off, given that they need power anyway. Corporations should be big purchasers of PoE cameras, and other peripherals won’t be far behind. If you’re interested in investing in this space, contact me.

 

Voice Input and Control

www.voicefactor.com

www.voicerecognition.com

I caught a demo of Dragon Systems’ Naturally Speaking 8.0 and wow, was I impressed! I think it’s time for me to pick up a noise-canceling headset and this amazing software product.

 

OQO

www.oqo.com

This Bay Area startup showed their shipping product, which is a full Windows XP machine with screen, keyboard, battery, and Wacom-like tablet in a package the size of a peanut-butter sandwich. Sales are brisk and customers are happy. Thumbs up.

 

Meedio

www.meedio.com

As homes become more automated, the number of remotes tends to grow with the square of the number of devices controlled. Meedio simplifies life with a single interface to control anything from a refrigerator to an alarm system to your MP3 collection to the next episode of the Simpsons. The interface is a horizontal component (you find it in everything), and this company wants to provide consumers with a uniform interface for all their smart products. In reality, they have as much chance at becoming the dominant paradigm as Esperanto has at becoming an international language. But cool nonetheless.

 

Dave Networks

www.dave.tv

This company is aggregating video content for distribution on set-top boxes and on computers connected to the Internet. Think of it as I-Tunes for video. You’ll be able to get everything from free downloads to ad-based views to pay-per-view to pay-to-own videos. They have partnerships with four companies making set-top boxes and they’re out to aggregate all the video content they can get. They also offer “channels,” allowing anyone to publish his/her own video content on the dave.tv web site and sharing revenues based on the payments received (home porn publishing, here we come). It’s an interesting company and a potentially interesting investment.

 

I think they have more milestones to meet before they’re ready for prime time, but their deals with content providers and cable box manufacturers are worthy assets. Still, there are and will be competitors. It’s hard to tell which, if any, will win, but I want to keep my eye on this space. Contact me if you’re interested in learning more.

 

GPS Locators

www.wherifywireless.com

Some day, this product will be injected under the skin. Until then, keep track of your kids, your friends, your stuff, even your dog with a GPS locator that sends you a signal from their unit. I wouldn’t be surprised if this category takes off, but I think it’s more likely to be incorporated as a feature into your cell phone.

 

Dual Cordless Phones

www.dualphone.net

Not quite here in the US but they will be soon, this phone is both a regular RJ-11 phone and a Skype Internet phone. It has distinct ringtones for Skype vs analog, it is cordless on a frequency that won’t gum up your existing wireless network, and it shows you on its display when your Skype friends are logged in and lets you call them with a single button. You can dial phone numbers using stored names and phone numbers or you can make Skype calls by name and IP address. This is the phone I’m looking for. They are looking for domestic distribution now. Can you help them?

 

Flash Memory

I looked hard for flash memory chips to replace the mini hard drives on today’s MP3 players, and I was surprised at how little flash I saw at the show. Prices and capacities just aren’t there yet. The flash players I saw were in the 128mb and 256mb range. Some offered 512mb and the few 1gb flash players I saw seemed to be “not shipping yet.” When I asked about 2mb, everyone said to come back a year from now. One company (www.lexar.com) said they were shipping 2gb drives for USB ports, but their MP3 players still only went to 512mb. Most companies seem to be focused on adding various bells and whistles to today’s MP3 players (Bluetooth, 2-color displays, FM transmitters, phones, etc.). Not ready for prime time but watch out in 2006.

 

PowerGrid Fitness

www.powergridfitness.com

This was the most addictive experience at the show. You step onto a small platform, grab the “wheel” and start playing games. But you’re not controlling the movement with your fingers. You’re getting a workout while playing a video game! The Kilowatt is a game joystick that you have to push with your body to move, burning calories as you chase bandits. I loved this product, and I’m not a game player! I had to stand in line to get a chance to use it. The company has created a new category of entertainment fitness. They want to help couch potatoes burn fat while playing the games they are going to play anyway. You can order yours today for only $800 (less than a Bowflex, and less than a gym membership, which many people give up on after a month or two). I liked it so much I am seriously considering investing.

 

 

TAD Audio Beryllium Speakers

www.tadhomeaudio.com

TAD is way ahead of the pack in beryllium drivers for high-end speakers. Beryllium is an ideal material for tweeters and mid-range cones. I’ll spare you the details, but the other two companies (JBL (yuck) and Focal Utopias (I own these and they rock)) are about two generations behind TAD. The company, owned by Pioneer, will ship just over 100 pairs of its $40,000 Model 1 floor-standing speaker to the lucky few people who can get their hands on them (I predict you’ll see them on Ebay for $70k). Their bookshelf version (under $15k) won’t be out until the fourth quarter. The Model 1 has already beaten most speakers under $100,000 (and tied with several over that price) in various shoot-outs and tests.

 

As an aside, I’m excited about the coming wave of Beryllium applications for consumer products and am looking for other like-minded investors.

 

Morell Speakers

www.morelusa.com

Best bang-for-buck speaker I’ve ever seen. These small speakers (they have many models) are incredible and should be taken seriously. They have speakers from $400 to $4,000; each model delivers about the best possible sound for the price. If you are putting together a home theater and you want the most bang for a reasonable buck, I recommend Morell Speakers paired with Paul Speltz’s winningly inexpensive Anti-Cables:

http://sphl.audiogon.com/cgi-bin/buy_cl.pl?cablspkr&1108271719  

 

Chapter Audio Cables

www.chapteraudio.co.uk

Chapter is a high-end British company making amps and cables. Their foil cables are not cheap but they are amazing. They rival the famous Valhalla cables (www.nordost.com/Cables/speaker-reference-valhalla.htm) at about half the price. A wonderful product if you still believe in analog audio.

 

Turn any Surface into a Speaker

www.soliddrive.com

These have been around for a while and are finally gaining acceptance as real products. A small pair of drivers cements to your glass panel, sheetrock, metal door, or any other planar surface. Hook the wires to your amp and – voila! – your walls become speakers! It has lots of commercial applications and probably no reason to be in the home. These little drivers are strong and turn a piece of glass into a reasonable speaker! They lack bass, but you can add that almost invisibly. Check them out, they definitely have a high cool factor.

 

Flat Panel Displays

I can safely say technology has reached a point where the displays are truly awesome, and so are the prices. The big problem now is getting content good enough to show on your screen. In general, look for 1080p (progressive scan) to be the next resolution plateau. If you’re investing in a high-end display this year, I recommend an LED-backlit LCD display (see below) that can handle a 1080p signal.  It remains to be seen whether the plasmas can match that native resolution, but this year it looks like they won’t.

 

Get the biggest display you can get. With today’s high resolution screens, you’ll want to sit even closer than you did before (about 1.5 to 2 screenwidths back), so a bigger screen will let you sit farther away. Again, the only problem you’ll encounter is price.

 

LCD screens are getting brighter, showing more contrast and brilliance and even better angles than before. This is because Samsung has started to use LEDs to backlight the LCD display, and an LED-backlit TV is the only LCD screen I recommend at this point (the rest are just too dull). They are sharper and as bright as the best plasmas. Sony and Samsung both market these displays. Samsung’s 57” LED-backlit LCD will be my first choice when the street price drops below $10k.

 

Plasma displays are now more efficient, and harder to burn in. They have yet to catch up in native resolution (only one, the LG 71-incher at $75k, supports 1080p), but if yours can display 720p you’ll be happy. LG is making excellent consumer displays, while Pioneer (regular, not the Elite line) and Panasonic are close to equivalent for the money. Runco certainly makes the best 720p screens, but their prices are still stratospheric. Samsung also makes excellent displays. My biggest problem with plasmas, however, is that their pixels are usually bigger and it’s easier to see a blue halo on the right side of a white object and a red halo on the left. This won’t be fixed until the plasmas can display 1080p.

 

Rear-projection TVs remain the best bargain and 1080p units (you guessed it, Samsung again) will be on the market this year. I’d rather have a 1080p RP unit than the same sized plasma or LCD at lower resolution for the same amount of money. But remember, at 1080p, bigger really is better. Don’t get a 1080p screen smaller than 53”. If you’re determined to spend under $5k this year, go for the biggest clearest 720p rear-projection display you can afford.

 

You may have heard terms like 3:2 pulldown, Faroudja processing, artifact removal, and scalers. These things are important. You’ll either get these features in your new screen, or you can add them by getting a scaler box like the ADS Tech Upconverter (www.adstech.com). Pretty soon, your display and your DVD player will already have these features (my favorite DVD player, the Pioneer Elite 59AVI has them). If you’re looking for a display, I’d make sure my display could do these things. If you want the king of upconverters, go to:

www.faroudja.com

 

If you have a dark home theater environment, you’ll want to look at the projectors. I didn’t pay much attention to them, but there are a ton of new products in this category, all trying to provide Runco quality at a Costco price.

 

I don’t think 1080p will “take over” in 2005, but it will help push prices on 720p equipment down to more affordable levels.

 

 

Media Servers

www.interact-tv.com (extremely versatile, expandable, low-cost Linux-based product)

www.buffalotech.com (cheapest terabyte on the market)

www.digitaldeck.com (essentially a TiVO)

www.hushtechnologies.net (high-end no-fan quiet servers)

www.kiss-technologyamerica.com (you’ll find the products at amazon.com)

www.sonos.com (slick interface, ready for prime time, nice solid product)

www.stack9.com (low-to-high-end products, well thought out, pricy but solid)

www.adstech.com (wireless)

 

I went to the show to evaluate the media-server market. A media server is really a large hard disk onto which you can load all your CDs, DVDs, home movies, MP3s, radio programming, TV programming, and HDTV programming. It’s a DVD player, a CD player, a TiVO, and an MP3 player all in one. Ideally, a media server broadcasts to any device you own: your phone, the television in your bedroom, your home theater, etc.

 

Everyone knows that a 300-CD “juke box” is a dinosaur. You don’t want to manage your CDs – you want to manage your music, movies, photos, etc. With a media server, you upload all your content once and then put your disks in storage (the same way you do when adding a new game to your computer’s hard disk). It’s no surprise, then, that Microsoft wants to get into the act and announced a number of partnerships to do so.

 

My take on this market is that it’s going to be huge and practically invisible. The list above doesn’t even include new products announced by Sony, Philips, Toshiba, Netgear, Sharp, and probably Kitchen Aid. Whether you come at it from the PC side, the video side, the audio side, or the networking side, all products are converging and features are being copied faster than RNA base pairs. Even though there is a huge chance RIGHT NOW to create a brand around the simple message of “Put all your media onto this box and play it anywhere,” no one will succeed at doing it. The pie will simply spread out wide and then rise like dough, leaving no clear winners and an ever-evolving set of features that everyone else must match. In my opinion, there’s no clear way to make a winning investment in any particular piece of the pie.

 

The one potential fly in the ointment is the Motion Picture Association of America and its studios, who want to make sure none of their video content gets Napsterized (put on a media server and then served up free to the world). Whoops. Too late:

www.bittorrent.com 

 

Wireless Home Theater

I was expecting this category to be more robust. I can see a day when your media server sends everything digitally, right to your speakers and displays in each room. That day is not here. There were a few spotty efforts (Philips was showing a wireless home theater that looked pretty integrated, but the components are nothing special). I think we can wait until next year to see how things have progressed. I predict that as digital programming takes over, both media servers and wireless transmission will make speaker cables a thing of the past, but it may take a few years to become mainstream.

 

Speak Srowry Prease

If you want to get a sense of what the show experience was really like, just go to this web site:

www.dicagate.co.kr 

 

Next Year in Vegas!

That’s my report. I hope to go back again next year. If you have any questions, feel free to write: david@dsiegel.com

 

For more CES reviews, check out these sites:

www.i4u.com 

 

www.motherdigital.info 

 

 

 

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