Depreciation

Source

More than three years ago, based on Paul Butler's The problem with bitcoin miners, I wrote Generally Accepted Accounting Principles. The TL;DR was that the economic life of Bitcoin mining rigs was estimated at 16 months, as Moore's law in a competitive ASIC market rapidly generated more power-efficient rigs. But the Bitcoin miners' accounts were using 5-year straight-line depreciation for their rigs, which was significantly increasing their nominal profits.

Below the fold I look at the same problem unfolding in the heart of the AI bubble.

The Stanford Digital Library Project

The Stanford Digital Library Project stated its goal thus:

The Stanford Integrated Digital Library Project will develop enabling technologies for an integrated “virtual” library to provide an array of new services and uniform access to networked information collections. The Integrated Digital Library will create a shared environment linking everything from personal information collections, to collections of conventional libraries, to large data collections shared by scientists.

Stanford librarians Vicky Reich and Rebecca Wesley provided the "library" input for the research.

Wayback Machine, 11/11/98

In particular Vicky explained citation indices, the concept behind Page Rank, to Larry Page and Sergey Brin. Andy Bechtolsheim was famously instrumental in persuading them to turn their demo of a Page Rank search engine into Google, the company. In his fascinating interview in the Computer History Museum's oral history collection, Andy explains why the idea of ranking pages by their inbound links was so important.

Below the fold I have taken the liberty of transcribing and cleaning up the relevant section of Andy's stream of conciousness, both because it is important history and because it exactly reflects the Andy I was privileged to know in the early days of Sun Microsystems.

ISP Monopolies

For at least the last three years (It Isn't About The Technology) I've been blogging about the malign effects of the way the FAANGs dominate the Web and the need for anti-trust action to mitigate them. Finally, with the recent lawsuits against Facebook and Google, some action may be in prospect. I'm planning a post on this topic. But when it comes to malign effects of monopoly I've been ignoring the other monopolists of the Internet, the telcos.

An insightful recent post by John Gilmore to Dave Farber's IP list sparked a response from Thomas Leavitt and some interesting follow-up e-mail. Gilmore was involved in pioneering consumer ISPs, and Leavitt in pioneering Web hosting. Both attribute the current sorry state of Internet connectivity in the US to the lack of effective competition. They and I differ somewhat on how the problem could be fixed. Below the fold I go into the details.

Even More On The Ad Bubble

I've been writing for some time about the hype around online advertising. There's a lot of evidence that it is ineffective. Recently, the UK's Information Commissioner's Office concluded an investigation into Cambridge Analytica's involvement in the 2016 US election and the Brexit referendum. At The Register, Shaun Nichols summarizes their conclusions in UK privacy watchdog wraps up probe into Cambridge Analytica and... it was all a little bit overblown, no?:

El Reg has heard on good authority from sources in British political circles that Cambridge Analytica's advertised powers of online suggestion were rather overblown and in fact mostly useless. In the end, it was skewered by its own hype, accused of tangibly influencing the Brexit and presidential votes on behalf of political parties and campaigners using its Facebook data. Yet, no evidence, according to the ICO, could be found supporting those specific claims.

Below the fold I look at this, a recent book on the topic, and other evidence that has emerged since I wrote Contextual vs. Behavioral Advertising.

Liability In The Software Supply Chain

Atlantic Council Report On Software Supply Chains was already rather long when I got to the last of the report's recommendations that I wanted to discuss, the one entitled Bring Lawyers, Guns and Money. It proposes imposing liability on actors in the software supply chain, and I wrote:

The fact that software vendors use licensing to disclaim liability for the functioning of their products is at the root of the lack of security in systems. These proposals are plausible but I believe they would either be ineffective or, more likely, actively harmful. There is so much to write about them that they deserve an entire post to themselves.

Below the fold is the post they deserve.

Informational Capitalism

In The Law of Informational Capitalism, Prof. Amy Kapczynski of the Yale Law School reviews two books, Shoshana Zuboff’s The Age of Surveillance Capitalism and Julie Cohen’s Between Truth and Power: The Legal Constructions of Informational Capitalism to document the legal structures on which the FAANGs and other "big tech" companies depend for their power.

Below the fold, some commentary on her fascinating article.

Regulating Social Media: Part 1

It has become obvious that self-regulated social media are a threat to pretty much every country's national security. This is intended to be the start of a series looking at the range of suggestions as to how, at least in the United States, it might be done, including (I hope) at least these:

• How to Regulate (and Not Regulate) Social Media by Jack Balkin
• Bipartisan legislation would force Big Tech to allow interoperability with small competitors by Cory Doctorow
• The Good And The Bad Of The ACCESS Act To Force Open APIs On Big Social Media by Mike Masnick
• Testimony by Maciej Cegłowski to the Senate Committee on Banking, Housing, and Urban Affairs for their hearing on Privacy Rights and Data Collection in a Digital Economy
• A Framework for Regulating Competition on the Internet by Ben Thompson.
• A Better Internet Is Waiting for Us by Annalee Newitz

Below the fold, I start with the first of them.

Advertising Is A Bubble

The surveillance economy, and thus the stratospheric valuations of:

Facebook and Alphabet (Google’s parent), which rely on advertising for, respectively, 97% and 88% of their sales.

depend on the idea that targeted advertising, exploiting as much personal information about users as possible, results in enough increased sales to justify its cost.This is despite the fact the both experimental research and the experience of major publishers and advertisers show the opposite. Now, The new dot com bubble is here: it’s called online advertising by Jesse Frederik and Maurits Martijn provides an explanation for this disconnect. Follow me below the fold to find out about it and enjoy some wonderful quotes from them.

Web Packaging for Web Archiving

Supporting Web Archiving via Web Packaging by Sawood Alam, Michele C Weigle, Michael L Nelson, Martin Klein, and Herbert Van de Sompel is their position paper for the Internet Architecture Board's ESCAPE workshop (Exploring Synergy between Content Aggregation and the Publisher Ecosystem). It describes the considerable potential importance of Web Packaging, the topic of the workshop, for Web archiving, but also the problems it poses because, like the Web before Memento, it ignores the time dimension.

Source: Frederic Filloux

Despite living in the heart of Silicon Valley, our home Internet connection is 3M/1Mbit DSL from Sonic; we love our ISP and I refuse to do business with AT&T or Comcast. As you can imagine, the speed with which Web pages load has been a topic of particular interest for this blog, for example here and here. (which starts from a laugh-out-loud, must-read post from Maciej Cegłowski). Then, three years ago, Frederic Filloux's Bloated HTML, the best and the worse triggered my rant Fighting the Web Flab:

Filloux continues:

In due fairness, this cataract of code loads very fast on a normal connection.

His "normal" connection must be much faster than my home's 3Mbit/s DSL. But then the hope kicks in:

The Guardian technical team was also the first one to devise a solid implementation of Google's new Accelerated Mobile Page (AMP) format. In doing so, it eliminated more than 80% of the original code, making it blazingly fast on a mobile device.

Great, but AMP is still 20 bytes of crud for each byte of content. What's the word for 20 times faster than "blazingly"?

Web Packaging is a response to:

In recent years, a number of proprietary formats have been defined to enable aggregators of news and other articles to republish Web resources; for example, Google’s AMP, Facebook’s Instant Articles, Baidu’s MIP, and Apple’s News Format.

Below the fold I look into the history that got us to this point, and where we may be going.

The Web Is A Low-Trust Society

Back in 1992 Robert Putnam et al published Making democracy work: civic traditions in modern Italy, contrasting the social structures of Northern and Southern Italy. For historical reasons, the North has a high-trust structure whereas the South has a low-trust structure. The low-trust environment in the South had led to the rise of the Mafia and persistent poor economic performance. Subsequent effects include the rise of Silvio Berlusconi.

Now, in The Internet Has Made Dupes-And Cynics-Of Us All, Zynep Tufecki applies the same analysis to the Web:

ONLINE FAKERY RUNS wide and deep, but you don’t need me to tell you that. New species of digital fraud and deception come to light almost every week, if not every day: Russian bots that pretend to be American humans. American bots that pretend to be human trolls. Even humans that pretend to be bots. Yep, some “intelligent assistants,” promoted as advanced conversational AIs, have turned out to be little more than digital puppets operated by poorly paid people.

The internet was supposed to not only democratize information but also rationalize it—to create markets where impartial metrics would automatically surface the truest ideas and best products, at a vast and incorruptible scale. But deception and corruption, as we’ve all seen by now, scale pretty fantastically too.

Below the fold, some commentary.

The Risks Of Outsourcing

My Cloud for Preservation post was in some sense all about the risks of outsourcing IT infrastructure to the cloud. Below the fold I comment on two recent articles illustrating different aspects of these risks.

Lina M. Khan On Structural Separation

In It's The Enforcement, Stupid! I argued that anti-trust enforcement was viable only if there were "bright lines". I even went further and, following Kim Stanley Robinson's Pacific Edge, suggested a hard cap on corporate revenue, as a way of making anti-trust self-executing.

Much of the recent wave of attention to anti-trust was sparked by Lina Khan's masterful January 2017 Yale Law Journal article Amazon's Antitrust Paradox (a must-read, even at 24,000 words). Now Cory Doctorow writes:

Khan (who is now a Columbia Law fellow) is back with The Separation of Platforms and Commerce -- clocking in at 61,000 words with footnotes! -- that describes the one-two punch of contemporary monopolism, in which Reagan-era deregulation enthusiasts took the brakes off of corporate conduct but said it would be OK because antitrust law would keep things from getting out of control, while Reagan-era antitrust "reformers" (led by Robert Bork and the Chicago School) dismantled antitrust). 

You should definitely read Khan's latest magnum opus. OK, maybe you can skip the footnotes, I admit I did. Below the fold I examine two threads among many in the article.

What is Amazon?

In Why It's Hard To Escape Amazon's Long Reach, Paris Martineau and Louise Matsakis have compiled an amazingly long list of businesses that exist inside Amazon's big tent. After it went up, they had to keep updating it as people pointed out businesses they'd missed. In most of those businesses, Amazon's competitors are at a huge disadvantage:

While its retail business is the most visible to consumers, the cloud computing arm, Amazon Web Services, is the cash cow. AWS has significantly higher profit margins than other parts of the company. In the third quarter, Amazon generated $3.7 billion in operating income (before taxes). More than half of the total, $2.1 billon, came from AWS, on just 12 percent of Amazon’s total revenue. Amazon can use its cloud cash to subsidize the goods it ships to customers, helping to undercut retail competitors who don’t have similar adjunct revenue streams.

In the mid-50s my father wrote a textbook, Organisation of retail distribution, with a second edition in the mid-60s. He would have been fascinated by Amazon. I've written about Amazon from many different viewpoints, including storage as a service, and anti-trust, so I'm fascinated with Amazon, too. Now, when you put recent posts by two different writers together, an extraordinarily interesting picture emerges, not just of Amazon but of the risks inherent to the "friction-free" nature of the Web:

• Zack Kanter's What is Amazon? is easily the most insightful thing I've ever read about Amazon. It starts by examining how Walmart's "slow AI" transformed retail, continues by describing how Amazon transformed Walmart's "slow AI" into one better suited to the Internet, and ends up with a discussion of how Amazon's "slow AI" seems recently to have made a fundamental mistake.
• Izabella Kaminska's series Amazon (sub)Prime? and Amazon (sub)Prime - Part II provides the deep dive to go with Kanter's big picture, looking in detail into one of the many symptoms of the "slow AI's" apparent mistake.

Below the fold, a long meditation on these posts.

It's The Enforcement, Stupid!

Kim Stanley Robinson is a remarkable author. In 1990 he concluded his Wild Shore triptych of novels describing alternate futures for California with Pacific Edge:

Pacific Edge (1990) can be compared to Ernest Callenbach's Ecotopia, and also to Ursula K. Le Guin's The Dispossessed. This book's Californian future is set in the El Modena neighborhood of Orange in 2065. It depicts a realistic utopia as it describes a possible transformation process from our present status, to a more ecologically-focused future.

Why am I writing about this now, nearly three decades later? Follow me below the fold for an explanation.

Cloud For Preservation

Imagine you're responsible for preserving the long-established digital collection at a large research or national library. It is currently preserved in home-grown software, or off-the-shelf software that's been extensively customized, that you are responsible for running on hardware run by your institution's IT department. You are probably not a large customer of theirs. They are probably laying down the law, saying "cloud first", especially as you are looking at a looming hardware refresh. Below the fold, I examine a set of issues that need to be clarified in the decision-making process.

Irina Bolychevsky on Solid

Although I'm an enthusiast for the idea of a decentralized Web, I've been consistently skeptical that the products proposed to implement it have viable businesses. Two months ago, in How solid is Tim’s plan to redecentralize the web?, Irina Bolychevsky (@redecentralize founder and self-described "product person") made related points. Below the fold, some commentary.

Selective Amnesia

Last year's series of posts and PNC keynote entitled The Amnesiac Civilization were about the threats to our cultural heritage from inadequate funding of Web archives, and the resulting important content that is never preserved. But content that Web archives do collect and preserve is also under a threat that can be described as selective amnesia. David Bixenspan's When the Internet Archive Forgets makes the important, but often overlooked, point that the Internet Archive isn't an elephant:

On the internet, there are certain institutions we have come to rely on daily to keep truth from becoming nebulous or elastic. Not necessarily in the way that something stupid like Verrit aspired to, but at least in confirming that you aren’t losing your mind, that an old post or article you remember reading did, in fact, actually exist. It can be as fleeting as using Google Cache to grab a quickly deleted tweet, but it can also be as involved as doing a deep dive of a now-dead site’s archive via the Wayback Machine. But what happens when an archive becomes less reliable, and arguably has legitimate reasons to bow to pressure and remove controversial archived material?
...
Over the last few years, there has been a change in how the Wayback Machine is viewed, one inspired by the general political mood. What had long been a useful tool when you came across broken links online is now, more than ever before, seen as an arbiter of the truth and a bulwark against erasing history.

Below the fold, some commentary on the vulnerability of Web history to censorship.

Vint Cerf on Traceability

Vint Cerf's Traceability addresses a significant problem:

how to preserve the freedom and openness of the Internet while protecting against the harmful behaviors that have emerged in this global medium. That this is a significant challenge cannot be overstated. The bad behaviors range from social network bullying and misinformation to email spam, distributed denial of service attacks, direct cyberattacks against infrastructure, malware propagation, identity theft, and a host of other ills

Cerf's proposed solution is:

differential traceability. The ability to trace bad actors to bring them to justice seems to me an important goal in a civilized society. The tension with privacy protection leads to the idea that only under appropriate conditions can privacy be violated. By way of example, consider license plates on cars. They are usually arbitrary identifiers and special authority is needed to match them with the car owners ... This is an example of differential traceability; the police department has the authority to demand ownership information from the Department of Motor Vehicles that issues the license plates. Ordinary citizens do not have this authority.

Below the fold I examine this proposal and one of the responses.

What Does The Decentralized Web Need?

In, among others, It Isn't About The Technology, Decentralized Web Summit2018: Quick Takes and Special Report on Decentralizing the Internet I've been skeptical at considerable length about the prospect of a decentralized Web. I would really like the decentralized Web to succeed, so I admit I'm biased, just pessimistic.

I was asked to summarize what would be needed for success apart from working technology (which we pretty much have)? My answer was four things:

• A sustainable business model
• Anti-trust enforcement
• The killer app
• A way to remove content

Below the fold, I try to explain of each of them at more readable length.

Josh Marshall on Facebook

Last September in Josh Marshall on Google, I wrote:

a quick note to direct you to Josh Marshall's must-read A Serf on Google's Farm. It is a deep dive into the details of the relationship between Talking Points Memo, a fairly successful independent news publisher, and Google. It is essential reading for anyone trying to understand the business of publishing on the Web.

Marshall wasn't happy with TPM's deep relationship with Google. In Has Web Advertising Jumped The Shark? I quoted him:

We could see this coming a few years ago. And we made a decisive and longterm push to restructure our business around subscriptions. So I'm confident we will be fine. But journalism is not fine right now. And journalism is only one industry the platform monopolies affect. Monopolies are bad for all the reasons people used to think they were bad. They raise costs. They stifle innovation. They lower wages. And they have perverse political effects too. Huge and entrenched concentrations of wealth create entrenched and dangerous locuses of political power.

Have things changed? Follow me below the fold.