First, Nicole Simon’s question. Why would an UnGoogleAble cricket question teach her anything? And if it didn’t, was she a bad student as a result? Or was I a bad teacher? I promised to get back to Nicole when wrapping up this stage of the conversation. I was trying to establish a framework for constructing a decent question in our post-Google world, and suggesting three things:

• it shouldn’t be easy to find via Google
• it should teach the answerer something
• it should be fun

To explain this, I chose two exemplar areas, cricket statistics and prime numbers, each esoteric in its own way, each valuable only to the passionate amateur, particularly one already interested in the mysteries of cricket or primes. For my sins I am a member of both those sets. There was another reason I chose those particular areas. In both cases there was a lot of data on the web, available to the public while remaining not easily GoogleAble. “Open” data. I wanted to find a way of demonstrating what could happen when open data meets the curiosity of the passionate amateur. The cricket question would have been pretty much impossible without access to the data; the prime numbers in series question would have continued its regal and exclusive status of being made available only to those students talented enough to participate in mathematical “olympiads”. Open data has a wonderful democratising effect, accentuating and embellishing the level-playing-fieldness of the internet. Combined with passion and perseverance and patience, the possibilities are boundless, as human beings unleash their creativity in using the tools of the age to work on freely accessible data to test conjectures, solve problems, build new products and services. So Nicole, my answer to you is that I failed. I could not get good enough examples, generic enough examples, to make the post work by itself.  I needed the previous post to try and catalyse some of the examples via the comments and answers given, as you will see. I hope as a result you can take something of value away from this post.

Which then brings me to my second point, the comments/answers given by Obiwan Kenobi and Daen de Leon; Obiwan gave me the perfect example of someone who took my question and then worked the example out in detail, and then proceeded to share the workings with everyone else. The answer was not important. It was the sharing of how he got there, which you can see in his comment. He created a query on Cricinfo Statsguru that required no programming knowledge, just an ability to select filters and sort criteria and views; he then proceeded to copy-paste the output to his tool of choice, then came up with the answer. I’m not quite sure why he needed the copy-paste step, all I did was to inspect the same query output, the same 206 lines over 2 pages, looking for duplicates in the right-hand-most column, managing to avoid a couple of red herrings along the way. Obiwan’s example is useful in helping set out what is needed for open data to be valuable. One, people need to know what’s out there: Obiwan knew of the existence of Cricinfo Statsguru, and we may soon need specialised open data directories. [Yes, someone can write an "app" for that, but please please in HTML5 rather than as a captive device app!]. Two, people need simple tools to manipulate that data, and the ability to learn how to use those tools: Obiwan knew how to use the filters in the Statsguru query builder. And three, Obiwan needed the stimulus of my question to be bothered to do it in the first place: new classes of teacher will emerge to provide such access, training, stimulus. While Daen didn’t give us a blow-by-blow account of how he solved the prime number problem, he did two important things: one, he shared a big clue, that he could work out the constant interval using just the limit and the number of terms. That in turn would allow other readers to consider the role of the interval in the answer, while still allowing for some personal discovery as to how to use that information. But the most important thing that Daen did was to share something else   …. “I’m proud to say I figured out the interval….”.

Daen was doing something really important there, sharing with us the joy he felt when he discovered why something must be true. That’s my third point. The joy of discovery as part of the road to mastery. Kathy Sierra, one of the earliest commenters on my earlier post, is someone I have a lot of time and respect for; to me, what Daen did is the fundamental reason why all the current superficial attempts at “gamification” will fail. All achievements involve learning. The joy of learning is in achieving mastery. In knowledge work, that mastery begins when you have a little light-bulb go off in your head and you say “aha” or “eureka” or “gadzooks”…… because you know why something is true. When a process is standardised, stable and easily repeatable, knowing how may have been enough. Today, many processes are what my friend Sig calls “barely repeatable”, so exception handling becomes the norm, an unsustainable position. So now it’s no longer enough to know how, you need to know why as well. Gamers know something about nonlinear worlds, about patterns rather than processes, about the value of knowing why and not just how, about working in a peer network and using that peer base to select teams and tasks and tools. Gamers have a lot to teach us at work. “Gamification” will remain lipstick on a pig until the designers have the revelation, the road-to-Damascus moment of understanding the joy of mastery. That’s what people like Kathy are trying to get the world to understand, and the world needs to listen.

So what am I saying? It is in the knowledge of the Why that the foundation of the How is laid. The What is just an instance of the How. [Yes, there's a Who's on First gag somewhere there: What doesn't Matter. What matters is How. How Doesn't Matter if you don't know Why.....] It used to be said that the person who knows how will always find work….working for the person who asks (and learns) why. We are fast approaching a world where all the Whats are commoditised. Open. Easily accessible. Published “content” may be seen to be a “what”. And if you’re in the business of making money off content, then you’re going to do everything in your power to protect your business, which means resisting the commoditisation of the what. That’s what most publishing industries face, a commoditisation of the very thing they made their money on, the “what”. The “how” continues to be valuable, so there’s a market for the tools that publish the content, that simplify access, that help massage and manipulate and mutate that content. The “why” is even more valuable, particularly because it is often scarce, tacit, hard to share. But that’s changing.

Which is why I write posts like this one.

Where was I? Oh yes. Why am I so excited about 2012? I’ve shared some of the reasons with you already in my earlier post, but there are a few more that I want to make sure I get on to your radar right from the get-go.

I’m excited about what’s going to happen with intellectual property during 2012. Let me explain. First, a bit of recent history. Here’s a quote from something Esther Dyson wrote. [Esther is a friend and mentor, someone I admire greatly, someone who has influenced how I think far more than she perhaps even realises].

The laws of physics seem to change when you enter a new environment, such as the gravity field of the moon — or the Internet and its easy replication of content. In this issue, we argue that the newly revealed physics of information transfer on the net will change the economics and perhaps ultimately the laws governing the creation and dissemination of intellectual property…call it content to avoid the presumption of ownership.

What happens to intellectual property on the net? Perhaps the question is best answered with another: What new kinds of content-based value can be created on the net? We believe the answers include services (the transformation of bits rather than bits themselves), the selection of content, the presence of other people, and assurance of authenticity — reliable information about sources of bits and their future flows. In short, intellectual processes and services appreciate; intellectual assets depreciate.

Esther Dyson, Intellectual Property On The Net, Release 1.0, 28 December

I guess some of you don’t think her views are going to pan out this year. Maybe you think she’s being a bit too futuristic, too optimistic about human ability to change, and the speed of change. Perhaps.

And perhaps not.

You see, I left out a small piece of information from that quote. The year. Esther Dyson wrote those words over seventeen years ago, in 1994. A great read then, and a great read now. [Incidentally, isn't it fantastic that I could access the archives of Release 1.0 to find the quote, all free-to-air? Thank you Esther for writing it, thank you everyone who's worked on Release 1.0 over the years for mentoring me from afar, and thank you Tim and Sara for continuing to make it available.]

So I’m excited about what’s happening with intellectual property. You must think I’m mad, what with SOPA and ACTA and Hadopi and DMCA and Digital Economy Act and who knows what else. How could I possibly think that things are getting better when they palpably aren’t? What am I smoking?

For the answer to that, I have to turn to a second friend and mentor, Clay Shirky, as quoted famously by a third, Kevin Kelly.

Institutions will try to preserve the problem to which they are the solution.

Change is never easy, especially if you’re the one being changed. That’s not just true of people but of institutions as well. In many ways, I was not surprised at the way the entertainment industry as a whole pushed back on changing their business models while desperately working on changing their business models. They knew that all they could buy was time.

They’ve bought their time. And the time is running out.

The key word in the Shirky quote is “try”. In the same way that nature abhors a vacuum and water seeks its own level, problems cannot be preserved beyond the paradigm and environment that created them. You can try to do that, but over time you will fail. You. Will. Fail.

And that’s what is happening now. SOPA is a terrible act of legislation because of some of the words used in the bill. Words that were put in by people desperately trying to preserve the problems of the past. And the level of desperation is a good measure of the way time is running out.

DMCA. Hadopi. Digital Economy Act. ACTA. SOPA. Yup, with the passage of time, the level of desperation is getting higher, the clauses are getting less and less workable, making the laws harder to enforce, to prosecute, socially, politically, economically. It gets harder to sponsor them when you have information from sites like Maplight available to all; it even gets harder to support, as GoDaddy found out recently.  We live in a world where trust is an increasingly important currency, and where transparency is the mint that produces that currency.

So it’s over. It may not appear so, but it is.

The culture of the internet, the Web, the communities that build it and shape it, it’s a culture of openness. There will always be people who attempt to build walled gardens in the open spaces, and they can succeed. But only up to a point, and only for a short time. It’s like the app-store and device locked apps taking on those built in HTML5. Faites vos jeux, messieurs, faites vos jeux. Only one winner.

Which brings me to my next reason to be excited about 2012. Open data.

Tim Berners-Lee and Nigel Shadbolt wrote an important piece in the Times last Saturday, on how the information age boosts the economy, makes our lives easier. They called data “the new raw material of the 21st century”. Sadly, unlike the archives of Release 1.0, this article is behind a paywall so I don’t have an easy way to share it with you.

They’re not alone in this: I’ve heard Tim O’Reilly wax lyrical about the importance of Open Data, Vivek Kundra show his support and appreciation, people like Wendy Hall and Noshir Contractor at the Web Science Trust (working with TimBL and Nigel) have worked very hard to show what can be done.

Again, it’s a question of timing. There’s a tipping point. And the tipping point is now.

Why? It’s simple. As I said yesterday, we’re beating up on the banks for lending too much and too unwisely, and we’re beating them up for not lending and for lending too slowly. Who would be a banker nowadays? It’s not that easy for governments either, particularly those in the West. Borrow less. Spend less. Perform these miracles without putting people out of work.

If it were only that simple.

Erik Brynjolfsson and Andrew McAfee have written a very interesting book on the economic impact of modern technology on society and work. If you haven’t read it, please go out and buy the e-book. It’s called Race Against The Machine. I had the chance to talk about it with Andy a few months ago, and it’s fascinating.

Many of the current white collar jobs are disappearing and will continue to disappear. And this is where, in my opinion, open data can help us in incredibly powerful ways. How do I love Open Data? Let me count the ways:

One, there’s a lot of data out there that is paid for by the public purse. Governments don’t have to do very much to release that data. In a few cases commercial arrangements have been made about closed private exploitation of such data, but these can be reviewed, often reversed. It’s only a matter of time. The key is that the data is publicly owned and not difficult to make publicly accessible.

Two, when that data gets released, three things happen:

(a) people learn that they can build businesses around that making that “open” data useful to a wider body. The point that Esther Dyson was making in her 1994 article, about people paying for accessibility and ease of use, is coming home to roost. Incidentally, Andrew Savikas wrote a very worthwhile piece on the subject of Content as a Business fifteen years later, you can read it here. People will package and repackage and mash and create useful and valuable services, given the chance. After all, the infrastructure needed to process and distribute the services are now available for peanuts.

(b) people learn that they can build businesses around cleaning up the data, making it better, more accurate. There’s a new form of curation needed, new curators, people with the passion and the domain knowledge and, in all probability, unintended “cognitive surplus” through unemployment. if you think you’ve seen a firehose of data, just you wait. A change is gonna come, as the song goes. 21st century curation is big business, particularly for open data.

(c) as the data gets better and more accessible, there are second-order payouts for the economy and for society. More informed decisions. Less waste.

Of course there are problems to overcome, particularly when it comes to personally identifiable information. John Perry Barlow has been telling us for some time now that the very concept of privacy is changing, that social mores and values will change as well, as we move from a world where we regulated access to personal information to one where we regulate usage.

Whenever there is change there is a mess to deal with. There is an immune system response, an inertia, an attempt by the incumbents to preserve their very existence.

Whenever there is change there is a mess to deal with. There is misinformation and disinformation, as incumbents do everything they can to confuse and befuddle customers. [I work for salesforce.com, and I see the dinosaur dances of dying incumbents every day; if it wasn't for the terrible waste of resource and energy caused by the dinosaur incumbents, I would probably find the whole thing quite funny.]

We’re at a critical inflection point in our existence, surrounded by problems often of our own making, and needing to adopt new ways of thinking in order to solve them. There are barriers that prevent us from doing that, some legal, some social and conventional, some down to pure skulduggery by those who would prolong their survival.

Sometimes I think that if Henry Ford were alive today, he would find that all he could build was “faster horses”. Because the horse industry would have grown another hundred years, grown to a point where it served seven billion people, grown to a point where it had permanent access to K Street, grown to a point where it could arrange for legislation to protect its very existence.

Alan Kay used to say “The best way to predict the future is to invent it”. I met Alan some years ago at a convention in San Diego, and he was affected by the experience of the decades that had passed since he said that. Now, he thinks the saying should be “The best way to predict the future is to prevent it”.

Well, people have been doing just that, trying to prevent the future.

And for a time, they’ve succeeded.

But it’s over.

2012. The Show-Me Year.

And it influences the music I listen to. Take a look at the image below:

It’s a collage of 100 album covers, and represents the first 100 albums I would buy in vinyl if they were available at a reasonable price and in reasonable condition. I’ve “owned” these albums before, sometimes multiple times. I’ve paid for them time and time again, in vinyl format, on prerecorded cassettes, as CDs, as 25th-anniversary-with-extra-tracks-you-never-knew-you-needed-(and-you-were-right!), sometimes even in DVDs. Do I hear you say “sucker”? Yup, that’s me.

I’ve managed to buy quite a few of them on mint vinyl already, not as reissues but by being in the right place at the right time. But.

But given a chance, I would buy them as a single transaction, a job lot, a bundle. Even if there was some further negotiation to be done with respect to the sequence in which I would receive them, and the time over which that would happen.

It’s not just about music. I travel a lot. And I’d love to go to an airline and say, I’d like to buy 100 flights. Return. Most of them are on sectors you fly. I will use those flights up in a year. It may not be just me travelling. I will vary the class of travel, “turning left” for longhaul business travel and for at least one family vacation.

It’s not just about travel. I read a lot. And I’d love to go to a bookstore and say, I’d like to buy 100 books. Most of them are on subjects you stock. I will use up those credits in a year. It may not be just me doing the buying, I will vary the class of book, “turning left” for signed numbered limited editions occasionally and for at least one set of family presents.

Music. Travel. Books. Clothes. Eating out. In some ways it’s all the same to me. I want to tell someone what I’m in the market for, build a relationship between that “person” and me. Tell them how much I’d be prepared to spend and over what period and for what class of thing. Work with them to figure out the sequence, frequency and timing.

And expect them to invest in that relationship as a result, be my friend, guide, partner through that process.

But it needs them to think differently, in order to view what they do differently, move from the product perspective to the customer perspective.

Without that fresh perspective, we’re going to continue to see abominations like region coding on DVDs. Which customer was that designed for?

Let me give an example of something that does not work.

Let’s take Premiership football in the UK. Most grounds have capacities in the 30-50,000 range, with a few clubs below 30,000 and a few above 50,000. All of them have fan bases that are multiples of that number, large enough fan bases to warrant the payment of very large sums of money to acquire “exclusive” rights to the live games.

And then someone chooses which games are broadcast live in the UK…. it would appear that if you didn’t live in the UK, you can watch pretty much all the games live. So my brother in India gets to watch his choice of UK-based Premiership game live, while I can’t. Go figure.

OK, so the hardened supporter buys a season ticket to go to all the games. Guess what? Analog is scarce, so there are waiting lists for many of the clubs. [That's true for most sports at an analog level, and why touts make real money: Lord's, Wimbledon, Twickenham, the O2, the story's the same.].

Since I can’t get an analog season ticket, the smart thing to do is to buy a digital one, right? Wrong. Because you can’t. You’re only the customer. Someone else decides what bundle of matches you get to watch, a bundle designed to disappoint every customer.

Which brings me to the nub of this post.

Customers are fundamentally unpredictable.

In the eyes of people trying to sell them things, that is.

Why is this? It’s because customers want to buy things their way, in terms of the nature of upfront commitment, the choices represented, the frequency, the sequencing, the bundling and the discount. And the ability to change everything.

I want to be able to buy 100 books or flights or albums. Or 10. Or 1000. I want to be able to buy it all from one provider, even if that provider has to source some of the services from elsewhere. I want to be able to choose what and when and how. And to change my mind. Of course, if I do change my mind, I will have to pay for it. But only as and when I exercise that “right”.

I don’t want a buyer’s market, I’m happy to see the service provider make a turn on the service provided. Everyone’s got to eat.

The trouble is, it’s been a seller’s market for far too long. Based originally on natural scarcity and monopoly, now more often based on artificial scarcity, regulatory arbitrage, ploys and schemes you don’t want to believe. All designed to ensure that business becomes more predictable….. at the cost of customer service, service quality and even freedom of choice.

This will change.

Customers will choose to make long-term commitments with companies that give them simplicity, convenience and freedom of choice. In many industries, the early movers have provided simplicity and convenience but not freedom of choice, as a consequence of which there are people who believe that the freedom of choice is not important. That’s a big mistake.

A time is coming when the customer decides on the bundle of products and services to be acquired, not the provider. In fact, that bundle will comprise services from more than one provider…. the services themselves will commoditise, but there will be a premium payable for simplicity and convenience, payable to the “prime” who constructs the multiprovider bundle. The customer chooses the bundle.

A time is coming when the analog components of that bundle will last, as they used to last. Cars. White goods. Entertainment systems. All examples of analog goods that used to be built to last, and are now designed for rapid obsolescence. This won’t be tolerated any more. Planned obsolescence will no longer be accepted.

A time is coming when everything, as a result of commoditisation: every bundle, every analog item, every digital item, will come with a published cost of change. The cost of change will be payable in two forms: an “option price” for the right to change, and  an “execution price” to make the change. The penalty for change must be published upfront.

A time is coming where the maintenance and repair of what is purchased will also be commoditised: where you can choose to go where you like for analog spare parts or digital equivalents. A time is coming when every customer will have the right to look under the hood, to tinker with the product or service, to make changes personally, A time is coming when the current warranty system will be overthrown, when the principle goes back to “fit-for-purpose” rather than “will work for a year or so”.

A time is coming.

Why has this time not come already? Because companies have designed products and services with the overriding principle of aiding predictability rather than meeting customer needs. 

A time is coming.

There’s a part of me that doesn’t want to write this post. The internet wasn’t always a global phenomenon. It grew principally from the vision and commitment of US citizens, and as a result there has been a level of US-centricity about its progress and evolution. If the US were to give up this leadership role (which it no doubt will, if SOPA goes ahead) then others will step into the breach. The internet routes around obstacles, we have seen this repeatedly during Arab Spring.

There’s a part of me that doesn’t want to write this post.  The anchors and frames for this debate have already been subverted; the incumbent lobby has done a good PR job. The commonly held belief is that people against SOPA, by definition support stealing,  support denying artists their rightful income. So everyone who tries to attack SOPA goes through that mill, and the mill grinds slowly and exceeding small.

There’s a part of me that doesn’t want to write this post. Anything I do may not be enough to stop it happening; it may not matter anyway; and it may damage my reputation unduly and unwarrantedly.

There’s a part of me that doesn’t want to write this post. There appear to be only downsides to my action.

So why am I writing it?

Because the internet matters. It matters to the world. It matters to people who are giving their all to changing historical and broken paradigms in education, in healthcare, in business, even in government. As the price of being connected with smart mobile devices drops, as three billion more people join the ranks of the ubiquitous always-on, we’re going to see amazing changes. Changes that will radically improve the lives of our children and grandchildren.

For that to happen, we have to make the internet a safer place. We. Not me. Not you. We. Much has been done to achieve this, much remains to be done. Sustainable cybersecurity is essential if we wish for a world where health, education, welfare, business and government are transformed anew. And there’s been so much progress in making this happen that wasting it is bordering on the criminal, the insane, the criminally insane.

This transformation, bringing in the power of the collective, making everything more social, more sharable, democratising access and knowledge and power, this transformation is essential if we are to solve some of the core problems we face, in environment, in disease control, in health and nutrition, in climate change, in food supplies, in water. The institutions we looked to in the past cannot cope with the complexity they face. They need the internet and what it represents. And they need it to be safe,  secure, reliable.

I’ve read more than I care to list here about SOPA; I can’t claim to understand all of it, I’m neither a lawyer nor a politician. The Wikipedia article is probably a good place for you to start, if you’re interested… the very existence of Wikipedia is threatened by everything that SOPA represents.

There is so much emotion around about SOPA that I wanted to give my readers something fundamentally different to look at, when it comes to forming your views. What I suggest is, leave aside everything else you’ve heard and read about SOPA, and concentrate on this one point:

How do you defend cyberspace while protecting against online piracy?

This research paper by the Brookings Institution: Cybersecurity in the Balance: Weighing the risks of the PROTECT IP Act and the Stop Online Piracy Act, is a must-read in this context. Here’s part of the opening:

This paper does not deal with the questions of economic value, free expression or other issues raised by advocates on both sides. Instead, I highlight the very real threats to cybersecurity in a small section of both bills in their attempts to execute policy through the Internet architecture. While these bills will not “break the Internet,” they further burden cyberspace with three new risks

The “three new risks” mentioned are spelt out further in the article. I summarise them below (my words, my interpretations):

• PROTECT IP and SOPA make it harder and more complex to keep the internet secure, just in terms of architecture and processes
• In addition, as companies and customers are forced to migrate away to less secure places, they will be exposed to greater risks
• Current national and international initiatives to improve security will be undermined, set back, and sometimes even abandoned

We need to frame the argument differently, and the Brookings paper helps us do that.

It’s not “Do you support Hollywood or do you support stealing?”

It is “Do you want a safe internet where health, education, welfare and government are transformed, or do you want a distribution mechanism with protection for Hollywood’s historical business model?”

I hope SOPA does not happen. I hope better, more sensible, more technically feasible, more equitable and more progressive means are found to deal with the problem of decay of Hollywood business models. I hope that the more sensible routes will actually mean that creatives get paid properly, rather than what happens to them today.

I’ve been following the work of W Brian Arthur for over three decades now, starting with his paper on “Samuelson, Population and Intergenerational Transfers” in 1978 or thereabouts, while I was reading Economics at university. During the 1980s, he was responsible for introducing me to the concepts of increasing-returns models, understanding path dependence better, working out the importance of positive-feedback loops and so on. His work on looking at the economy from the perspective of a complex adaptive system was also a key influence on me.

He may have written many books, but the two I’ve read were both brilliant: Increasing Returns and Path Dependence in The Economy (back in 1994) and The Nature of Technology (which came out a couple of years ago). More recently, I made reference to his article in the October 2011 issue of the McKinsey Quarterly, on The Second Economy.

The article is all about this great invisible network of things extremely busy talking to other things so that people like us can get on with our lives. Don’t write it off as yet another “internet of things” article, Professor Arthur deserves real respect. His description of the evolution of the web of interactions between machines is of fundamental importance, particularly once you understand that it’s all about software, particularly when you realise that this is what happens when Wal-Mart grows up.

You can see the sequence, can’t you? There was a world before Wal-Mart, and the machines who lived there were called mainframes. Then came minicomputers and Wal-Mart and some level of distribution. Along came PCs to increase distribution’s reach, and that begat Amazon. And soon we were in the land and ubiquity of mobile phones, heralding the dawn of Facebook. Now, that people are talking about another 10x, the internet of things, who’s going to be the facebook of that generation? What particular Noah Business will they be in? What disruptive vision will they build the infrastructure for?

You can see where you thought I was going. But I’m not going there. That post is for some other day.

Here’s where I am going.

We all appear to be very relaxed about machines talking to machines in their biliions, yet remarkably un-relaxed when it comes to people talking to people. As Doc Searls said in The Cluetrain Manifesto, markets are conversations.

Doc reminded us of the market in the context of the Middle Eastern souk, where relationships come first, then conversations, then transactions.

Let’s look at Facebook in that context.

The Friend Graph is all about relationships.

The Timeline is all about conversations.

Yup, you know where they’re headed. And they should. Relationship before conversation before transaction.

We’ve lived in a transaction-focused world for too long. Transactions are outcomes of relationships and discovered via conversations. That’s why markets are conversations.

I keep quoting Drucker, but who cares? He said people make shoes, not money. Money, like a transaction, is an outcome of something else done well. Not a goal in itself.

The broadcast-model centralised advertising-is-God style of business that dominated the postWar world should have been strangled at birth. But it wasn’t, which is why Messrs Locke, Levine, Weinberger and Searls had to write Cluetrain in the first place. To remind us of what we were losing.

Relationships.

And conversations.

The Facebook Timeline is about persisting conversation in a new way. Making conversation mobile, multimedia, multipartite. Yes, it’s an audit trail and that can make you feel creeped-out. But then your mailbox was an audit trail as well. And your call detail records. And your analog mail.

Over time, it’s become easier to persist the audit trail of conversations. This persistence comes with benefits and with risks.

The risks are to do with our erstwhile concepts of privacy and confidentiality and data protection; the concepts will themselves change, along with the social mores and values they underpin; as the concepts change, as society transforms their meaning and purpose, the law will catch up. Sometime.

But in the meantime there are many benefits to be had as well, as we share more and we understand more about what, when and how we share. As we interact with what we share, individually and in community.

It was only yesterday that I received an email from Pandora suggesting that I “listen to holiday music by Jim Croce”. Why? Probably because I’d tweeted about listening to him, or perhaps even because I’d tweeted my intention to have dinner at Croce’s in San Diego in early February.

One way or the other, they’d identified that I was interested in Jim Croce. They’d managed to identify an email address that went with my twitter handle (assuming their actions were related to my tweeting). But despite all this they hadn’t managed to identify that it’s not easy for me to use Pandora, given they adhere to the barbaric notions of licensing music according to national borders.

In all probability, you’ve been at the receiving end of targeted advertising gone not-quite-right, and sometimes wondered what you’d shown in your profile to get that reaction. That will improve and it will also change. Recommendations by social network are gaining in importance, and intention signalling is becoming more and more common. These developments will alter the advertising landscape in remarkable ways.

Marc Benioff’s Social Enterprise is about all this. It’s about getting the relationships right first, then enabling the conversations, so that the transactions that occur are not ends in themselves, but instead consequences of the relationships and discovered via the conversations.

In a way, when it comes to Professor Arthur’s statements, we may be talking about three economies rather than two: the first, the one we all know, the one that’s lying tattered and broken; the second, the invisible root system between machines; and the third, the now-becoming-more-visible conversations between people.

Markets are conversations. Conversations are social, and take place between people usually around social objects. Social objects come in many shapes and guises.

The Facebook Timeline is about making the discovery of those conversations easier in space, time and context.

[This is not meant to be an economics lesson, even though I read economics at university. I am keen on trying to explain my thoughts from a "first principles" basis, so that I can engender some real dialogue with readers rather than get bogged down in definitions and semantics. The objective of this post is to excite that dialogue, so that I can learn and refine my understanding. And perhaps help you refine yours in the process].

I’ve had an interest in The Maker Generation for some time now, as evinced by these posts over recent years: The Maker State (2007); Dersu Uzala (2008); Ragu and Bolognese and Cory Doctorow and Makers (2009); Better Mousetraps and the Maker Generation (2010); The Maker Generation in the Enterprise (2010);  and most recently 2012: The Year of Maker-Friendly (2011).

For many years now, I’ve been trying to document what it means to make something when you’re a “knowledge worker”. More recently, I’ve started writing a book on the subject (my fifth unfinished book; this Christmas I intend to finish one of them!). But that’s for another day.

Today’s post is about wealth, its creation and distribution. Over the years, besides Calcutta, besides the Jesuits, there have been a number of influences on me when it comes to this post. My father, my family and close friends are the obvious ones. But two other influences have material bearing on what I’m intending to write here, material enough for me to share them here. First off, this post by Paul Graham from May 2004 on How To Make Wealth. I was very taken with it when I read it, even if I didn’t make a song and dance about the post right then. For sure it influenced my thinking. And more recently, this very recent article by W Brian Arthur on The Second Economy. I would urge you to read both articles  slowly, take your time, it is well worth the investment.

So now you have an idea of the people and concepts that influenced what I’m trying to write here. It’s a classic provisional, partly formed Sunday post. I tend to write all my posts start-to-finish in one sitting, usually a couple of hours, usually no going back. Write, quick preview for any images or inserts, then publish. Here goes:

Doing anything at all requires an expending of energy, an effort. This effort gets called work. As you expend the energy, something around you changes. You can imagine this change to be an output, an output of the work you perform.

This output has value. The value can be positive or negative. That depends on whether someone else values the output you’ve created. If someone else values (and values positively) what you’ve created, then you’ve created wealth.

Value can be expressed in many ways; money is just one way, and it is a useful way. Because you can then convert that value you’ve created into something else you may want or need, by using the money you’ve received for the value you’ve created to “pay” for the value someone else has created, to pay for the something you want or need. This is why money works as a store of value and as a medium of exchange.

Everyone can create wealth as a result, just by expending effort to make something that someone else values; that wealth becomes “fungible” if you can exchange the value you create for the value someone else creates. If you exchange one thing for another then you’re bartering. Money, by being a medium of exchange, simplifies this process.

So all human beings can create (and destroy) wealth. This wealth that is created gets distributed in a number of ways, depending on how the wealth is created.

You make something and you sell that something for value; the terms differ but the principle is the same. You do a job and get a salary; you make a sale and get a commission; you invest and get a return; you advise and get fees. Most of the time it’s that simple.

If the value of what you create is greater than the value of the things you want, then you will start accumulating wealth.

There are some quirks. If the something that you make has physical form, then you can rent it out rather than sell it. So you can keep “creating wealth” as long as there’s a rental market for the something you make, a house, a car, a boat, whatever. We’re very clever, we human beings, so we come up with even more extreme ideas. The something you make does not have to have any physical form for it to be designated your property; the State is prepared to let you keep making money from something you did once, and call it “intellectual property”. And sometimes you can even get paid for destroying something: say for example you’re in the demolition business.

One way of looking at all this is that wealth gets created by people doing work, in a plethora of ways. And wealth gets distributed in a plethora of ways as well: through jobs, trading, investments, patents, copyright, and suchlike.

These ways of distributing wealth are usually directly connected to the ways of creating wealth. If there is inequality in the landscape of creating wealth, then there will be inequality in the landscape of distributing wealth.

When it comes to creating wealth, people have advantages (and disadvantages) all the way from birth: inherited wealth; the atmosphere at home, the stability and care from the family; health and nutrition; education; cultural nuances, and so on. We’ve come to recognise this inequality and we’ve tried to deal with this in a number of ways, usually by passing laws against discrimination, occasionally by putting in mechanisms to correct historical inequalities via positive discrimination for a period of time.

This attempt to reduce unequal wealth distribution has probably gathered pace over the last 50 years. It would appear to be true for most democracies; it is likely that steps to reduce inequality have existed longer in the developed world when compared to the developing world.

Fifty years. And I get the impression that wealth inequality has increased during that time. And increased at some pace, particularly in the west.

Hmmm.

There could be many reasons. Equality of opportunity does not guarantee equality of outcome. Some people don’t like hard work. Market mechanisms to value outputs aren’t necessarily fair. A free market can be gamed, sometimes despite regulation, sometimes because of regulation. Barriers to trade, particularly protectionist barriers, can be erected by the incumbents to try and prevent erosion of the power to create wealth, or for that matter erosion of the accreted wealth. Yes, there could be many reasons.

If anti-discriminatory legislation and short-term positive discrimination have not succeeded, then perhaps we need to look at what we can do to change the way wealth is distributed rather than just the way it is created. This can happen in a number of ways; in fact this does happen in a number of ways:

People can amass wealth and give it away, distribute it to the masses, make donations to charities and nonprofits. People can pool their wealth in groups and communities, so that everyone in the community gets helped, as in Acts 2:42 or perhaps in some of the modern Kibbutzim.

Free markets alone don’t seem to work, if the last 50 years are anything to go by. [And non-free markets, if we look at communist examples, appear to fare at least as badly if not significantly worse.] Jobs as the basis for distribution don’t seem to work; for one thing, not everyone has a job; in future, with the current economic environment and demographic trends as the backdrop, full employment is not likely to be anything more than a theoretical economic model, much like the “rational actor” who preceded behavioural economics.

The recent book by Erik Brynjolfsson and Andrew McAfee, Race Against The Machine, is well worth a read in this context; it shares a relatively gloomy outlook on many types and styles of job, a view that is echoed in W Brian Arthur’s article on the Second Economy, which I referred to earlier, since it was the trigger to my writing this post.

So where do we go from here? One of the ideas I’ve been playing with is a simple one:

What if people got paid for their data?

We live in an age of lifestreaming. For decades customers “spoke” in the past tense, “I bought” or “I did”, because it was expensive to invest in the infrastructure to collect anything else. IT-intensive investments were made at the point of sale and in the back office, and so everything the customer did was viewed as a transaction in the past.

More recently, with the ubiquity of smart device and connectivity, customers began to speak in the present tense: “I am doing”. Even more recently, customers have begun to speak in the future tense “I will do” “I plan to” “I want”. Sometimes they even speak in groups “we intend to” “we are prepared to”.

The data in the lifestreams has value.

Soon everyone will be able to lifestream.

What if people got paid for their lifestreams?

Just wondering.

Views? Flame away, I do this to learn. And sometimes I learn best when someone tells me I am talking absolute balderdash and poppycock. As long as you take the time to explain to me why I am so wrong.

Tsukioka Yoshitoshi: Toyotomi Hideyoshi returning to the scene of his army’s victory

It’s that time of year when I get asked to make predictions for the year ahead, particularly in the context of enterprise software. It’s that time of year when I tend not to do anything as a result.

But this year’s different. This year I think we’re on the verge of something sufficiently different to warrant my writing about it. Something that’s been spoken about for over a decade. Something that’s been bubbling under for much of that time. Something that’s happening now; something that will dominate the year to come, perhaps the decade to come.

Max de Pree, one of my favourite writers on leadership, once said:

In some South Pacific cultures, a speaker holds a conch shell as a symbol of temporary position of authority. Leaders must understand who holds the conch—that is, who should be listened to and when.

In 2012, the customer holds the conch. And for years to come, the customer’s going to keep that conch. It’s not just about broken guitars. Or retracted debit card fees. Or shelved plans to break up services. Or even, for that matter, Occupy movements or Arab Springs. 

It’s about all of them. So, with that as context, here are my predictions for the world of enterprise software in 2012.

Prediction 1: The customer will insist on being listened to

Hank Ketcham, the creator of Dennis The Menace, once said, I think via Dennis: Just because I didn’t do what you told me, doesn’t mean I wasn’t listening to you. That’s what companies have been doing, not listening. They’ve spent a long time often pretending to listen to the customer, then doing what they intended to anyway. Listening is going to become more important than ever before. And if you want to listen to the customer, then you’re going to have to go to where the customer is. In the social networks. The hierarchical broadcast model of advertising will get replaced by a networked distributed listening model, something that has already begun to happen. More and more, the use of focus groups and sample surveys will recede, as companies learn that listening at scale is more accurate than the randomness of sampling. The skills required to structure the surveys will still be needed, but the surveys will operate across the customer base rather than concentrate on a select few. Customers are sharing where they are, what they did, what they’re doing and what they’d like to do. They’re sharing who they were with, who they are with and who they’d like to be with. They’re sharing what they liked, what they like and what they would like. Customers are sharing their personal and individual preferences, plans and intentions, and they expect to be listened to. Personalisation and customisation will stop being buzzwords and become business as usual.

Prediction 2: Customers will insist on being listened to

Listening to the customer is not going to be enough. Companies are going to have to learn to listen to customers in groups as well as as individuals, severally as well as jointly. Obfuscation of price and discount and service availability and service quality is going to become more and more difficult, as connected customers learn how to use their power to obtain and sustain transparency; the perfect market that companies have dreamed about will start becoming reality….. for customers. Trust between customers and companies will increasingly come to depend on this transparency. Think Groupon meets Priceline, but on steroids. As a result, companies will have to be able to design services at speed, to listen at speed and to adapt their offerings at speed, responding to customer sentiment, learning by doing. Feedback loops will become more and more important. Customers will also increase the way they listen to each other, as they recognise the value of their social networks not just as recommenders but as filterers.

Prediction 3: Customers will insist on true freedom of choice

Historically, there have been many markets where customer choice has been restricted by companies focused on vertical integration; the ability to mix and match components or ingredients was denied on the basis that vertically integrated end-to-end solutions were cheaper to acquire and easier to use. Over time, this became part of the customer psyche, perhaps akin to Stockholm Syndrome. As customers learn about their power as individuals and as a collective, they will insist on true choice, and continuing choice. Products will be seen as belonging to families and ecosystems, with increasing choice between components of the ecosystem and between ecosystems. Interoperability will become more important.

Prediction 4: The enterprise software landscape will be transformed as a result

Companies will need tools to help them listen to their customers, individually and collectively; to understand what they’re saying; to build, alter and refine their offerings based on customer feedback; to work with other companies in an open and federated manner; to make their products and services work with competitive products and services; to give their customers choice, and to expect their customers to exercise that choice.

Driven by this freedom of choice, the end-to-end control historically enjoyed by many companies will disappear. Process automation will look different, as companies spend more and more time dealing with exceptions rather than norms; a plethora of small, lightweight processes will emerge, to replace the traditional high volume highly repeatable form.

Service transparency will become a mandatory requirement across systems, 24×7, accessible across the web. Customers will choose to shift time and shift place at will. They will expect services to be delivered independent of device or location or operating system; they will expect services to be migrated between device and location and operating system.

The cost of change will finally begin to matter, as companies realise that monolithic vertically-integrated systems appear to provide lower operating costs, but only in a steady-state world. The outsourcing industry will come under immense pressure as a result, as their customers realise the importance of open flexible frameworks with low cost of change by design rather than accident.

 Prediction 5: People will realise that all these predictions could have come true years ago, and start asking what took them so long

None of this is particularly new. I could have written these predictions five years ago, ten years ago. There’s nothing I’ve said that wasn’t already in the Cluetrain Manifesto in 1999. Yet a dozen years have passed. What’s changed? Perhaps nothing. Perhaps I’m all wrong, and the tipping point hasn’t arrived yet. Perhaps Arab Spring will be reversed; perhaps Occupy will come to nothing; perhaps the customer, having tasted true power, will meekly hand it back to the incumbents who’ve shaped the last five decades between them.

Perhaps.

Or perhaps the time has come, and the changes we’re seeing are irreversible. After all, as Hugh Macleod pointed out in the “Hughtrain”:

So that’s it. I’m done with predictions for next year, even if it is that time of year.

Incidentally. It is that time of year. If you read this far, perhaps you’re a fan of this blog. In which case please consider voting for the blog here. And if you’re in voting mood, try this.

And what a pizza it was. The bread was flat, round and unleavened, gently golden. There was a light yet generous tomato sauce, lots of cheese, soft in the middle, a little crisping at the edge; some onion, some garlic, amazing fresh herbs. I keep imagining there was the hint of chilli, but that may just be me…. I like imagining things with chilli. And everything was cooked to perfection. Even today I salivate thinking about it.

It looked a bit like this photo from foodporndaily:

Now my memory’s not what it used to be. Perhaps there were other ingredients in the pizza. Perhaps I was 14 not 13 when it happened. Perhaps I’d already started going out with Flower’s daughter Michal. As I said, my memory’s not what it used to be.

But I still remember what a pizza was. And I still know what a pizza is.

A pizza is not a vegetable.

Apparently this is not a universal truth. According to the Huffington Post, in a story carried last Wednesday, Congress decided that pizza is a vegetable. Confused? Don’t worry. The Gothamist story illustration, reproduced below, may help you:

I read the story, and I was more saddened than surprised. Because I’d seen pizza masquerading as vegetable before.

The recipe seems to run a bit like this:

1. Take a data centre.
2. Add two spoons of tomato sauce.
3. Decorate with the words “private” and “cloud”
4. Serve

Early on, it was a personal fascination with the concept of time, triggered by an experience every child in India goes through: finding out that the hindi word for yesterday: “kal” was the same as that for tomorrow: “kal“. While still at school, as with most of my fellow students in the Sciences stream, the thoughts and writings of Richard Feynman entered my life. His teachings on The Character of Physical Law, more particularly the chapter on The Distinction of Past and Future, influenced my conceptions of time even further, giving me a sense of its irreversible nature. Most 13-14-year olds have a blank-slate approach when it comes to absorbing ideas, and so it was when we were first able to think about what Einstein had been saying about relativity, allowing us to view time as a dimension.

Then came university, where I read Economics, and then work, where none of this appeared to matter. The nearest I came to thinking further about all this was in my late twenties, when I went through a long period of regular dreaming, often lucid, often with repeating themes. [The commonest theme had me in flight: I'd slowly lengthen my stride and then gently take off, more gliding than flying, able to keep myself airborne for a minute or so, soaring and banking using my arms as wings, never flapping, unable to hover.].  They were dreams rather than nightmares, relaxing me, letting me feel rested and refreshed; this, coupled with their lucidity, meant that I tended to remember my dreams. And occasionally, very occasionally, I would experience something in “real life” that seemed, if I stretched it enough, to be something I’d experienced before in a dream. But I “knew” it wasn’t possible and so I dismissed it. Sort of. It didn’t stop me from reading Michio Kaku from the mid-1990s onwards, starting with Hyperspace/Parallel Universes. But the Feynman in me ruled, time continued to be seen as something irreversible.

One other principle stayed with me, influenced by some of the sayings and quotations I’d been attracted to over the years: Einstein saying that we couldn’t solve problems by using the same kind of thinking we used to create the problems in the first place, Einstein suggesting that common sense was the collection of prejudices one has by age eighteen, someone (occasionally credited to Schopenhauer) saying that talent hits a target no one else can hit; genius hits a target no one else can see. In each case, I was reminded of what my teachers had said to me, about not allowing my “knowledge” to constrain my “thinking”. Easier said than done.

Over time, I understood more about cognitive biases and anchors and frames, a learning that was accelerated by conversations with colleagues like Sean Park, Malcolm Dick and James Montier while at Dresdner Kleinwort. So it should come as no surprise that in my roles as deputy CIO and CIO, and as chief scientist, in multiple organisations, I kept taking the “don’t let the past predict the future” tablets, religiously, systematically, every day. That didn’t always endear me to everyone, but it helped me keep my thinking fresh. It was the reason I kept wanting to connect with people outside the organisation at least as much as I spoke with people within the organisation. It was the reason that I’ve always tried to support a graduate intake program in firms I’ve worked in, one way of ensuring that fresh thinking is allowed to enter an organisation.

Which is why I loved the Wayne Gretzky quote about playing where the puck is going to be, not where the puck is or was. Which is why I loved the Steve Jobs quote, in his Stanford Commencement Address in June 2005:

Again, you can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something – your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

In the words of Stephen Stills: Don’t let the past remind us of what we are not now. [That’s taken from my all-time number one favourite song, Suite: Judy Blue Eyes. You can hear a sample, containing the quote, here…. and even buy the MP3 download if you so wish.

It is with all this in mind that I spend time thinking about streams of information. For most of my adult life, these streams have been about the past. Transactions that had already happened. We spent a long time studying the fossil remains of human activity in order to try and predict what the future would look like, a mongrel form halfway between scatology and eschatology.

More recently, we’ve been able to “life-stream”, sharing our current activities and our “status” with others, aided and abetted by near-ubiquitous connectivity, ever-smarter devices and digital frameworks that support the social networks. In the past, we were only able to capture things that had happened. We were used to calling things that had happened “transactions” and so we called the analysis of those records “transaction processing”. We’re able to look now at what people are doing, within “activity streams”, and, because we share our activity streams within social networks, we call the study of this “social media monitoring”.

But we’re on the cusp of something way way more exciting, in a classic William Gibson future-is-here-but-unevenly-distributed kind of way: we’re beginning to what we intend to do.

Doc Searls, a good friend, was the first person I heard using the term “Intention Economy” to describe this. And I’ve signalled my intention to him, by pre-ordering his book on the subject, due May next year.

Esther Dyson, another good friend, when talking about the future of internet search, complimented Bill Gates on saying “the future of search is verbs”….. now that gets interesting, really interesting, when you consider verbs as having tenses. Tenses that help segment the continuum of time. Past. Present. And future.

The future.

When I was at university, one of the things I studied in classical economics was the works of Jean-Baptiste Say. And one of the ways in which his “Law” was paraphrased, originally by John Maynard Keynes, was as follows: Supply creates its own demand.

We’re soon going to be able to signal our intentions in ways that we could never have done before.

Over time, those signals will become more sophisticated, more evolved, more nuanced.  Social norms will be formed, telling us what we can or can’t do with our signalling of intent. The semaphoring of intent will slowly come to include disinformation, the false-carding,  feints and dummies, elaborate ways of disguising intent in order to further some other intent. With that will come the need to watch for, and to recognise, the digital “tells” in the world of supply-and-demand poker. On both sides.

And over time, the systems and processes required to interpret and assimilate those signals into actionable information, this too will evolve.

I cannot wait.

Some of the things we did were standard, like shutting down remote offices when we were retracting our presence from those regions, renegotiating contracts with core suppliers, stopping activities that were yesterday’s necessities but today’s luxuries, that kind of thing. A few were more non-standard: shutting down our offshore operations in India and Eire, changing our hiring policy to stop hiring laterals and increasing graduate intake, establishing a formal commitment to opensource and to start-ups.

But it all began with our trying to understand our cost and allocations structures. Easier said than done. This was because it was not enough for us to save the money, we had to save it in the right places. We had to reduce it very heavily for advisory services, heavily for equities-related asset classes and services, and less so for debt- and treasury- related activities. Which meant that we had to understand how our costs flowed from IT to each business.

For most of my life, I’ve worked in very large organisations, often as an “official maverick” but nevertheless part of an extensive and complex fabric. And for most of my life, I’ve been astounded by the incredible difficulty I’ve had in getting two questions answered: What do I spend? How many people do I have? Over the years, as my career developed in its own serendipitous way, I found myself in charge of larger and larger departments with bigger and bigger budgets. And answering these two questions became harder and harder.

Perhaps I should have known better. When I was in my teens, my father used to say that the only “truth” on a balance sheet was the cash position; everything else was a “conventional” representation of information. If you didn’t understand the conventions being followed, you had no ability to understand the information presented.

So there we were, at Dresdner Kleinwort, trying to understand how much we spent, what we spent it on, what was discretionary, what was not, why. Trying to understand how many people we had, who was permanent, who was not. Trying to understand the people we had who “didn’t exist”, because they were part of a service contract; they took up space, had kit, had desks, had phones and badges, but weren’t part of our headcount. Trying to understand and appreciate the people who weren’t there but were on the payroll: on sabbatical, on maternity leave, long-term ill, in dispute. Some were even certified insane….

It turned out that we “controlled” a relatively small proportion of the money in the first place, particularly when it came to capex, but true even for opex. Far less than half. A big chunk of our budget related to “sins of the father’, the depreciation associated with capitalised investments from prior years. Some of the money related to long-term contracts where we had no swing room. A portion related to guaranteed bonuses of staff hired in prior years, and a similar portion to the “month 13″ payments that were standard in one or more of the operating units. And then there were the things we were legally obliged to do, the projects that related to legal and regulatory requirements.

Then came our allocations and overheads: as the largest shared-service department, we received the lion’s share of the shared-service costs that had to be allocated out, like premises and heating and lighting and insurances.

That didn’t leave very much. Our so-called “discretionary” expenditure was less than 20% of the overall cake. Which made the very idea of a 50% cut interesting to say the least. But we did it, nevertheless.

In that process, I learnt a lot about allocations, augmenting what I’d already learnt in other companies by then. Here’s a sample:

• One firm allocated all its IT costs according to the floor space consumed by each department, something that was easy to calculate. As a result, the investment bankers, the lightest users of technology at the time, were charged the bulk of IT costs.
• It made no sense to me, but apparently it was common practice for one cost centre to charge another. So IT costs for example, not only went direct to the business units, but also via other shared service units. Depended on who did the “sponsoring”; this was probably a throwback to some shared-service manager who wanted his cost centre to look as big as possible, for his CV. But the convention stuck. As a result we had strange anomalies: while our IT costs remained the same, the charge that hit the business unit differed, based on the particular allocation routes and keys used. What this meant in practice was that we “saved” the equities business more money if we took 100 people out of their direct support costs, rather than if we took 120 people out of those who supported equities settlement, whose costs were routed through operations. The idea that two people earning the same money and seated next to each other represented different levels of saving took some getting used to.
• Some labour was capitalised and some was not; if you reduced the headcount in areas where projects were capitalised, the savings took time to flow through. Capitalisation rules were also different for different classes of resource: it was assumed that contractors worked on projects 100% of their chargeable time, but permanent staff spent only 70% of their time on projects, or some such ratio. So the way the costs flowed looked different.
• Shared-service allocations were an art in themselves. In at least one company I worked in, as a result of successive waves of layoffs, there were large swathes of unoccupied desks. Some of these unoccupied areas were islands in the middle of occupied areas, and soon became informal meeting areas. Lo and behold, the areas were chained off and declared verboten, on the basis that you couldn’t use it unless you were paying for it…. even though the company was paying for it anyway.
• In yet another place, we found out that it was more expensive for us not to book a meeting room than to book one…. the allocation key for unused meeting rooms hit us harder than the used version.
• One of the odder effects we noticed was that of project delay. If you delayed the point at which you actually delivered something that went into production, then you delayed the point at which backlogged work-in-progress would start rolling out in capitalised form. [When we froze all code changes during the lead-up to the euro and similarly to Y2K, the monthly charges from IT went down dramatically, even though actual expenditure actually increased...]

By now you should have a feel for the level of complexity involved in allocating costs related to headcount and project and space and shared services in general, by accident and by design. I hope your experiences have been better than mine.

But all this pales into insignificance when you look at how IT infrastructure costs are allocated. Because now you have systems people interacting with accountants and usually a smattering of consultants as well, and between the three a truly Byzantine structure gets formed. When I looked at what happens in the allocation of data centre costs, hardware, storage, bandwidth, market data, and so on; when I looked at how per-processor licence costs were spread out; when I looked at how firewall and security costs were distributed across the organisation; when I saw how operations, maintenance, support and upgrade/fix costs were charged….. I developed a bad case of spreadsheet vertigo.

These experiences have influenced me, affected me, perhaps even scarred me. In fact I think there’s only one form of “allocation” that scares me more than IT infrastructure allocation. And that will be the subject of a post at a later date.

If you have to develop a conventional representation of the costs of your cloud, it’s not cloud.

If you have to create complex allocation keys for your cloud, it’s not cloud.

Cloud is when what you see is what you get, in the context of billing and payment.

Which is why I find all this talk of “private cloud” odd. By electing to retain hardware capital expenditure, by choosing to continue with associated maintenance and upgrade costs, by voting to stay captive within the prison of the related processor-driven licensing models, people are in effect choosing to stay in the world of complex cost allocation models.

Such cost allocation models are part and parcel of why firms find it hard to be agile, to be responsive to change.

In current economic conditions, business agility is no longer a nice-to-have, it’s a must for survival.

Companies that are “born cloud” have this in their DNA; others will have to evolve this capacity, and evolve it quickly.

It’s a tough world out there.