New Release 2.0 on Money 2.0

One year ago, we published an issue of Release 2.0 entitled "When Markets Collide" (download a PDF), in which we considered what Wall Street and Web 2.0 might have to teach one another. Quite a bit, it turned out: the key parallels we uncovered include latency (both have to do their jobs more or less instantly), connectivity (it's the liquidity of Web 2.0), sensors and actuators (and how to use them), and reputation (stockbrokers are no longer curators -- they're rated).

So it's a ripe time to consider the status of the relationship. What's new? What's changed? The amount of financial data available publicly is astonishing. That doesn't mean it's all useful. There's plenty of data out there, but it's plenty confusing. You can't extract alpha until you understand what you're looking at. As Michael Simonsen, president and CEO of Altos Research, puts it, "free data on the internet is a mess."

If anyone doubts that financial markets and technology markets are deeply intertwined, consider this: the same day that JPMorgan Chase revealed its "purchase" of Bear Stearns, a Gartner Group analyst released a report showing that "the financial services industry continued to lead all vertical markets in server revenue, as it accounted for 25.3 percent of worldwide server revenue in 2007." As goes one set of markets, so goes the other.

In this issue of Release 2.0, we consider the Wall Street/Web 2.0 mashup from a number of angles. We talk to Paul Kedrosky, chair of our Money:Tech conference and an influential blogger on the topic (as well as others), about why some on Wall Street hate Web 2.0 -- and what Web 2.0 can do to infiltrate Wall Street nonetheless. Entrepreneur Marc Hedlund, now chief product officer for OATV-funded personal finance startup Wesabe, examines what happens when hidden data gets surfaced. Cathleen Rittereiser talks to hedge fund managers to discover what they want from Web 2.0 -- and what they're actually getting. Longtime Radar contributor Nathan Torkington digs deep into prediction markets and spells out both how to manage them and what companies can gain from implementing them.

It's a truism that alpha lasts longest when it's hidden. That may have been true in the past, but the growing use of Web 2.0 tools means that less data will stay hidden, and what's hidden will stay hidden for a shorter period of time. As James Altucher of Stockpickr said at Money:Tech, "When it comes to data nowadays, closed source is a myth."

You can purchase the current issue of Release 2.0 or, even better, subscribe to the newsletter.

Inside Innovation at Xerox PARC

We were part of a group of journalists and bloggers invited to hear presentations from 10 different research groups within various parts of Xerox, PARC, and Fuji-Xerox. The format was similar to a science fair or a poster session in an academic conference with small groups moving around to hear presentations from the different projects. While other research labs use a large auditorium and parade different researchers in, I thought the smaller, science fair format made for better interactions between the visitors and the researchers.

We saw early prototypes created by the researchers themselves, so the user interfaces were far from polished. Here are some of the highlights from our visit:

Seamless Document Viewer



A J2ME application designed to help solve the problem of viewing documents on small screens (cell phones and other mobile devices), this app automatically segments a document into blocks and displays the keyphrase for each block. The keyphrases are intended to help users navigate to sections of interest quickly. The cell phone demo we saw used a fairly intuitive touchscreen interface that included an interesting way to pan and zoom in and out of sections of a document. Because documents viewed through the application need to be processed and analyzed in advance, it is better suited for viewing PDF's and static documents, not frequently updated web pages.

Hybrid Categorization

Categorizing documents automatically is an old topic in information science. Most tools rely only on the text portion of documents and use a combination of Natural Language Processing and Machine Learning. I was looking forward to this presentation because we use text-only automatic classifiers to help organize some of our data sources.

Hybrid categorization uses both the text and images contained in documents. It isn't clear how scalable their hybrid categorizer is, the results we saw were based on small numbers of documents. Precision measures the accuracy of a categorizer and judging from the results of an academic competition, Xerox' hybrid (text +images) approach may hold some promise.



Erasable Paper

"Reusable paper" refers to paper coated with special materials and a custom printer that shoots UV light onto it. The resulting printed document is designed to fade within 24 hours and the paper can be reused and fed into the printer multiple (10+) times. The printer can even erase the printing on the specially-coated papers, and print an entirely new document on the same sheets of paper. We raised the possibility that a sheet of paper that has nominally erased itself can be reverse engineered to reveal sensitive content: think security agencies or dumpster-diving identity thieves. Surprisingly, the researchers had not seriously investigated the possibility of "recovering erased documents".

The cost of the specially-coated paper is projected to be only 2-3 time the cost of normal paper, while the accompanying printer will cost about the same as a laser printer. Since paper can be reused multiple (10+) times, the obvious environmental benefits also lead to savings. Further savings come from the design of the printer itself: since the printing is done with light (UV LED bar), the printer does not use ink or toner.

Intelligent Redaction

Redaction is the process of removing sensitive information from documents. Popular examples include government/intelligence documents released to the public and medical records. Text redaction is normally a tedious manual process that requires staff possessing significant domain expertise. As an example, privacy rules governing medical records in the U.S. requires redaction of terms associated with HIV/AIDS, mental health and drug/alcohol problems. In the demo we saw, the software tool examined a corpus of documents, automatically came up with terms/phrases associated with the listed illnesses, and redacted them from every document in the corpus.

Other Notables

Clean technology: solar concentrators and membrane-less water filtration

"Environmentally-friendly" plastic: plastic with more than 30% of its weight made from biomass

Cancer detection tools: rare cell detection

Shame on Who?

Being the object of strong opinions--and even conspiracy theories--is all part of the day's work for companies (and people) who are part of the web's open, fast-moving, and ultimately democratic culture. Usually, we let the wilder stories run their course, and we've found that the web community does a good job of fact-checking as well as opinion-sharing. No wonder Wikipedia works.

But in the past few days, a story has bubbled up that I want to acknowledge. Last Thursday, Daya Baran of Silicon Valley WebGuild posted Shame on You Tim O'Reilly, in which he asserts that O'Reilly asked Google to withdraw support for the WebGuild's "Web 2.0 Conference & Expo" because we didn't want the competition from his conference. Today, he included the post in his email newsletter to WebGuild members and I received a couple of inquiring emails from friends.

I'm not sure why Daya decided to bring this up now -- I assume it's an attempt to get publicity for his next gathering. Back on January 1, Michael Arrington first made the issue public in his post WebGuild Using Questionable Tactics To Promote Events (also see Silicon Alley Insider). We were, in fact, concerned that the name of the WebGuild event was so similar to ours. We tried to personally contact Daya many times (via email, phone calls and a certified letter), from October through December. He didn't respond. For the record, we never asked (and we certainly didn't demand) Google to withdraw support of WebGuild or its events.

So, a cordial exchange devolves, four months later, into public name-calling. This one will run its course, as they all do (for example we are now working with Tom Raftery of it@cork on the Web 2.0 Expo in Berlin), but it seems a shame for all of us to spend time and energy on this when there are so many interesting and useful things more deserving of our attention.

Hurrah for Home Chemistry

Today, in most schools, science is taught as a body of acquired knowledge, but not as much as a set of tools and practices that were used to discover that knowledge and expand upon it. Students are expected to learn from lectures and textbooks, not labs with hands-on learning and experimentation. Nothing quite embodies the practice of science like a chemistry set, a home lab that once was a favorite childhood gift has now vanished from the shelves of toy and hobby stores.

In 1964, Robert Bruce Thompson got what he wanted most for Christmas and his first chemistry set introduced him to a fascinating, new world. He went on to major in chemistry in college. Recently, a neighbor's teenage daughter started asking him questions about science, which she wished to pursue as a career, but she admitted she wasn't learning much science in school. Robert wanted to introduce her to the chemistry lab but realized it was nigh impossible to buy a good chemistry set in a store and he couldn't recommend any of the exisiting books on chemistry. So Robert decided that he could write a book himself and that it would start with describing how to build your own chemistry set and set up a lab.

The

Illustrated Guide to Home Chemistry Experiments is Bob's seventh book with O'Reilly; he's written previously about PC hardware and astronomy. A man of many interests, Bob has put together a wonderful book that I'm proud to publish and it completely fits with Make's DIY ethic. Bob's book has the subtitle: "All Lab, No Lecture." What surprised me most about the book was how much Bob had tailored the book to home schoolers and other students who might be getting "chemistry-lite" in school. ("A student who completes all of the laboratories in this book has done the equivalent of two full years of high school chemistry lab work or a first-year college general chemistry lab course.") It also works for adults, like me, who were bored by chemistry in school and did poorly yet could see the fascination of a lab filled with vials, flasks and burettes.

The book is also a great example of collaboration as Bob has worked with Dr. Mary Chervenak and Dr. Paul Jones, each of whom hold Ph.D's in organic chemistry. Their insights are featured throughout the book, not just as subject-matter experts but also as experienced teachers and practitioners. Says Dr. Paul Jones: "Most students are aware of acids and their dangers but are more or less ignorant of the dangers of alkali (base). For instance, aqueous sodium hydroxide can blind you in a matter of minutes if not cleansed thoroughly and I've seen lots of kids who are quick to put on goggles to work with 0.01 M HCI but throw 6 M NaOH around like it's candy. Aqueous bases are every bit as dangerous as aqueous acids."

Concerns about the liablity of practicing science in school have led schools to offer less of it. (Sports is a more common source of serious injury.) This book offers a "real science" alternative. Bob writes: "One of the recurring lessons throughout this book is the importance of assuming personal responsibility for useful but dangerous actions -- understanding the specific risks and taking the necessary steps to minimize or eliminate them."

Bob will be featured at this year's Maker Faire, talking about his love of chemistry and his new book. He'll be in the Maker Shed area all weekend, doing some of the experiments from the book. His talk on the Main Stage on Sunday at 1pm will be "What's Happened to the Chemistry Set?"

When Authors Ask Us About the Consequences of "Piracy"

Over on the Tools of Change for Publishing blog, I've reprinted a great exchange from the Radar backchannel addressing an author's concerns about seeing his books gain steam on PirateBay. Here's Nat's take:

Fantastic! There's absolutely nothing you can do about it, and unless you see sales dipping off then I don't think there's anything you *should* do about it. The HF books work really well as books, so at best the torrents act as advertisements for the superior print product (not often you can say that with a straight face). At worst most of your downloads are going to people who wouldn't have bought the book at cover price and who will, if they enjoy it, rave about it to others. [emphasis added]

So long as the royalty checks are strong, take BitTorrent as a sign of success rather than a problem. A wise dog doesn't let his fleas bother him.

Check out the full exchange here.