As a companion philosophy to The Wisdom of Crowds we now have The Starfish And The Spider; the unstoppable power of leaderless organizations.

Of course guerrilla armies have been using asymmetrical warfare since Moses unleashed boils and other nasty ailments on Pharaoh.  All organizations have a problem when dealing with something that operates as effectively as a virus if you ever seen John Carpenters "The Thing". Of course if it really is 'unstoppable power' that leaderless organizations have, it's not going to be stopped.  (See Distributed Intelligence & Collective Intelligence)

Evidently, the U.S. military is studying small companies to unearth ideas that will help the war on terror.

It may seem a stretch that within the chaos of capitalism are the secrets to fighting al-Qaeda. But the military and business have long borrowed leadership lessons and competitive tactics from each other...

...How large, traditional companies fare in this fight may prove invaluable in developing a strategy against al-Qaeda. That's why the military is going to school. A book making the rounds at the Pentagon is The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations. It was written for a business audience, but military strategists are saying, "This is the best thing I've read that applies to counterterrorism," says Lt. Col. Rudolph Atallah, a Defense Department director in international affairs.

 Linda recommended The Starfish and the Spider, subtitled "The unstoppable power of leaderless organizations." This idea will be familiar to many of us who've been watching open source, wikipedia, and other decentralized online phenomena, but I found that the most interesting parts of this book were about the offline world, and how leaderless organizations have succeeded there.

From the Starfish and the Spider Wiki

And it's not just a entrepreneurs and terrorists who are latching on to this distributed network stuff:

The Earth Intelligence Network

Earth Intelligence Network (EIN), a non-profit with 501c3 status pending exists to provide social intelligence capital by harnessing the distributed intelligence of the Whole Earth and creating a new integrated global mesh that enables life-long education, decision-support, focused research, and consensus-building.

The Earth Intelligence Network has three driving priorities:

1) To create, structure, and share public intelligence in the public interest with respect to the ten high-level threats, the twelve integrated policies to address all threats, and the eight major players whom we must help avoid the horrendous mistakes associated with immoral capitalism and unilateral militarism.

2) To support, at no cost to them, all developers of serious games and games for change that address any or all of the ten threats, twelve policies, and eight major players.

3) To support, at no cost to them, all developers of online budget simulations that can foster citizen understanding of the near and long-term benefits of reality-based budgeting, and the terrible consequences of special interest budgeting.HmmmHmmm

Hmmm. Distributed network of decision makers that operate on their own but towards a communal interest? Seems just like  Patrick Byrne of Overstock.com.com.com is talking about with strategic failure to deliver. The enemy of my enemy is my friend.

It's no real stretch of the imagination to see why distributed, unorganized networks of a like mind are so difficult to defeat. Napster was able to be targeted only because they controlled the linchpin of having the network traffic go through their servers. Everyone is wanting to do the 'user generated content' thing.

Way back in 1999, Business week published an article that pitted A&E against each other. It's an interesting read and surprisingly accurate of the situation as it still exists.

eBay vs. Amazon: Fixed prices or dynamic pricing? 

That's one thing Amazon and eBay agree on. There isn't much evidence that consumers want to ''one-stop shop for every single thing in their life at one company,'' says eBay CEO Margaret C. Whitman. And Bezos rejects the widely held notion that a handful of megastores will dominate. ''There's going to be tens of thousands of winners,'' he says...

...eBay has zoomed to prominence with an even more innovative E-commerce model--one that, in a rare feat, is actually profitable. Because eBay doesn't take possession of the goods--it acts as a broker for buyers and sellers and takes 6% off the top--it incurs none of Amazon's hefty distribution costs. It has only 198 employees to Amazon's 3,000. As a result, its gross profit margins are a Microsoft-like 85%--on gross merchandise that ballooned from $95 million in 1997 to $746 million in 1998. ''Dollar for dollar, eBay has a better revenue and bottom-line model,'' says analyst Mitchell Bartlett of Minneapolis investment bank Dain Rauscher Wessels.

And then there's this sentence that turned my head since this is exactly what we're aiming to do.

Moreover, eBay could even turn the nation's 18 million small businesses into a virtual selling force that could rival that of conventional retail. ''It could be the destination for all these businesses to sell online,'' says Steven R. Mitgang, a senior vice-president for Sitematic Corp., a San Diego software company that has helped several dozen small businesses list their inventory on eBay. Beyond auctions, says Mitgang, ''it has a huge opportunity to become the destination for consumers to buy stuff, period.''

Of course I think that Amazon, eBay, Google, and Yahoo are built bass ackwards for accomplishing this as top down search and retail. But what do I know... Shmula has all the charts.

Genuine VC posted here on Vertical Marketplaces. Of course Nimble is one of these marketplaces so you can read my posting this here as a form of self reinforcement, but what do you expect. I'm on the bandwagon.

The real opportunity here is in the business model itself – not just providing paid advertising listings (or even contextual relevant advertising adjacent to the listings themselves), but rather actually participating in the transaction as a percentage fee. The more intimate the relationship these marketplaces play in the transaction, the greater the value they can capture from it. As Rentacoder has demonstrated, this level of is engagement is possible by assuming the risk of the transaction, which gives both transacting parties the comfort in "paying" for the introductory services in a substantial manner.

Trent Miskin sent me this link to Funding Universe's 7000 company histories.

While it doesn't have everyone of interest (I couldn't find Ebay, or Overstock), it did have PayPal and Amazon in the 7k.

Here's a snippet from the PayPal history:

"In just eight months time, between January and August 2000, PayPal surged from 12,000 accounts to 2.7 million. The company's transaction process helped tremendously to fuel the growth. Money could be transferred to anyone who had an email address, even those who did not have to have a PayPal account. However, recipients did have to open a PayPal account in order to claim their money. The system's convenience and cost won over eBay shoppers. They no longer needed a credit card to buy online, and the service cost them nothing. It was cheaper even than a postal money order and stamp. Sellers were required to pay 1.9 percent of the sales price."

I got the sweetest little iPod Shuffle yesterday to replace the mini that was 'smash-and-grabbed' from my Landrover 6 months ago. (The new Shuffle is the cutest little thing. You just want to play with it.) Anyway, I downloaded the newest iTunes and podded (is that a word?) up my Shuffle with a backlog of podcasts to listen to while driving. The three I listened to last night included Venture Voice interviews with Guy Kawasaki and Reid Hoffman of LinkedIn as well as this one on Pay per Post.

PayPerPost Raises $3 million

Michael Arrington and Rob Hof (Silicon Valley Bureau Chief at Business Week) took a few minutes today to talk to Ted Murphy (founder and CEO of PayPerPost) and Josh Stein (a Director at Draper Fisher Jurvetson) about the funding and the controversial nature of PayPerPost’s business.

The Podcast Driveby

Michael Arrington has a definate load of redass out for the boys at PayPerPost and performed something akin to at podcast Driveby. He must have said 'unethical' thirty times. At one point he says, "I wouldn't want to draw any comparisons...", and then brings up statutory rape as an example of something that the free market would allow but that's not good for society. (Statutory rape?)

It seems that  TechCrunchThinking feels that it's PayPerPost's duty to require that bloggers post that they are being paid to write about a topic and that failure to do so undermines the very fabric of credibility that the bloggosphere has been built upon. He, Michael Arrington, would never allow so crass and slimy a business to become affiliated with his brand and actually pulled a $40 add buy on TechCrunch so that his hands would remain clean. Poor Rob Hof of Business Week was so upset that he could only occasionally interject a 'unethical' comment of his own. (Arrington interjects that Hof is unable to find any humor at all in the situation.)

While the podcast is entertaining since Arrington is doing his best to get his guests to admit that they're willing to slime the bloggosphere and trade in their Dudley Dooright hats for Snidly Wiplash moustaches if the price is right, Michael Arrington is not a great interviewer. The PayPerPost duo actually came across as sympathetic since it was obvious that  Arrington had a pot of boiling oil ready and was just waiting for an opportunity to use it. At various points he interrupts with comments like, ' you say what you're going to and then I'll tell you the real answer." That's an interview in the style of Morton Downey Jr., not a blogger who has 'a social contract with his readers'.

Arrington just can't get past this idea of paid placement. He thinks he has a real A-Ha moment when PayPerPost says that this is a way for small companies to get a 'boost' in name recognition. Arrington trumps that with, 'if the company was worth anything they wouldn't have to pay to get written about'.

Business? What's a business?

This more than anything shows just how insular and elitist the A-list bloggosphere is. Arrington thinks that all the CEO's of all the companies in America should get to know the A-list bloggers and the bloggers will decide if they're worth writing about.

Arringtons world does not contain real red-blooded businesses. It contains room for geeks, aps and ASP's. The very thought of a small regional business reaching out to the bloggosphere in an attempt to gain recognition or be seen by a certain demographic goes completely over Arringtons head. The PayPerPost duo brings up shoe retailers and single locations, Arrington acts like these types of businesses don't exist.

Mainstream media sells editorial

PayPerPost is doing exactly what tradition media does. My business Surface Medical spends money on traditional media. I'll highlight some local examples that I'm intimately familiar with.

Salt Lake Magazine offers paid 'advertorials' in runs with specific topics. For example: Salt Lake Magazine will run a 'health issue' in Jan/Feb. They then go and find health care advertisers and pitch them with inclusion in an advertorial section. The section is purposely designed to appear as though it's editorial. Only it isn't editorial. It's paid advertising. The attraction to the advertiser is that it looks like editorial. I've also been pitched and gone with a service provided by a local paper in which they have an auction, sell my inventory, and keep the money in trade for advertising dollars. 

Selling editorial is frowned on by the editors and love by the ad sales guys and the advertisers. 

The PayPerPost model for business.

Most businesses are not run by geeks or bloggers. Most businesses are local. Most businesses are small.

PayPerPost will be a marketplace whose success or failure will be determined by how effective their advertisers are. The market will determine the benefits and opportunity costs of using paid editorial. Some bloggers who don't disclose that their content has been paid for will be outed and flamed. (Probably by those do-gooders from Wikipedia.)

I'm getting gentrified in my old age.

Yesterday I was with the masses of bloggers descrying the PayPerPost sellouts. Today my view has moderated. PayPerPost is sticking with their mantra of 'markets are efficient and we believe in the American way'. Good for them.

Disclaimer: This post has not been paid for. 

OK. Mark didn't actually threaten to beat me up.

Mark Cuban post on the Long Tail, Vertramp and the Content Ceiling here.

I think trying to define where the Long Tail ends and the Vert Ramp begins is critical, because the fact of the matter is: No Content Creator wants to be on the Long Tail. Anyone who has ever created content realizes that there is a very thick bar a bit above the the base of the Vert Ramp that acts as a content ceiling (thanks to Oliver Luckett for the term). that they are desperately trying to break through in order to get off the long tail and on to the Vert Ramp.

The illustration reflects my horrendous paint skills, but illustrates the point.

I commented about small vertical niches in the tail as a place that had more value in some ways than the head. Mark sent me the following email.

You aren't long tail if you are the leader in you industry or niche. You price according to yr market. Long tail would be your competitor doing 10 readers

HDNet
TV like you have never seen before
Www.hd.net

m"

 (Glad to see Mark's pitching his HDTV in his signature.)

Never one to nitpick with someone who attacks adversaries on the court in front of cameras. (wink) I do think that there has to be some cutoff between the head and tail. Otherwise, everythings a hit. Mark suggests that with 5k readers I'm the market leader. Well... sort of. But I'd argue that I'm still in the tail. If I'm not in the tail then why isn't everything a hit. Almost anything can be hair-split into its own market. The Utah Jazz (Im in Park City) is the only NBA Team in UT. They have the highest ticket sales of any team in UT. Unfortunately, they're in the tail. (At least I think so, I'm a soccer fan and not a basketball one.)

Here's my point. The content I provide is not big enough to be a market on it's own. It's just a small vertical in the tail of a much larger market. But, If I move over the "content ceiling" and try to move into the head, my specialized content looses it's value.

Perhaps it's me that's splitting hairs but It's hard to envision the head being some tiny subset of users of a larger market.

Phil Burns and the Tag Jungle crew gave me pizza today for lunch. That always makes me feel kindly.

Phil was trotting out Tag Jungle again before he tries to find money for more than pizza. That's always a good idea and especially for Phil. I'm generally geek-i-fied enough to follow discussions about blogging in general by I actually had to listen to follow some of the whatchamacallit goes in the gobblygook and comes out here stuff.

Phil et al are going on a roadshow to get more pizza money. Guy Kawasaki recommends watching this pitch by Majora. (Watch it online here.) Who am I to argue. 

I spoke briefly with Phil about building a pre-pitch dinner where Phil can pitch and receive feedback from investor types. I have a few people in mind. If I call you you'll get to see Phil gesture wildly and probably come away with a free T-shirt.

Google's been a golden child for a while. But the Motley Fool folks have some compelling arguments that detail How Google is killing the internet.

Excellent post on 'Barriers to Imitation' from Early Stage VC.

From the post: So what do we really mean when we say what’s your barrier to entry?  I think what we mean is really the reciprocal. What’s everyone else’s obstacle to imitation?  Competitive imitation erodes your uniqueness as in Unique Sales Proposition. It raises the cost of differentiation and it gives the customer more perceived choices.   You have to spend more to stand out and get less market share for it.

Imitation comes in many forms. It can be a current claim, as is “we do the same thing.”  It can be a future promise, as in “we will have that feature, too.” Worst of all, it can be a rapid replica of your actual product.  It is the latter that most investors care about when they fear competitive “entry” or imitation.

Re-casting the question as obstacle rather than barrier also points to how to address the issue.  There is rarely a single obstacle that is so insurmountable as actually to be a barrier.  However, you can often outline a series of speed bumps that will slow down even the fastest fast follower.

 

Here's an alternative to 37 Signals popular Basecamp project managing software: ActiveCollab (Absolutly terrible name.) TechCrunch article link.

 A flaw in the newfound "simple" business model? Seems when somethings so simple it's easy enough to knock off. And since there are any number of programmers ready to provide a free service, where are the barriers to imitation?