by Dana Blankenhorn
  Volume VII, No. XLIV

This Week's Clue: Ordered Liberty vs. Market Order

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This Week's Clue: Ordered Liberty vs. Market Order
SSP (Shameless Self Promotion)
SP (Shameless Promotion)
Dutch Auction
Internet Advertising Comeback?
State of Confusion
Clued-in, Clueless

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For the Week of November 3, 2003

The phrase "ordered liberty" comes to us from America's colonial period and is often attributed to George Washington.

It's a small town concept. The law sits lightly upon us because we keep ourselves within bounds. The ultimate sanction is not death or jail, but shunning. To be thrown into the world beyond the town can mean quick death. Keeping your place within requires that you maintain a reputation based on actions, not just words.

Even on the frontier there were bounds beyond the law, and order was based on a social contract rather than a law book. Those who lived wildly faced death alone, and life went by in an eye-blink. Even in 1900 a man of my age, 48, was considered fairly mature, close to elderly, certainly fortunate to still be sucking oxygen.

This is the world of those who built the Internet. The town in this case was science, or a profession, which admitted you to the network. So shunning was a powerful sanction. To be sent off-campus, into the world of money-grubbing, to make your way alone, that was something to be feared. Most of the Old Internet Lions, even if they worked in the market, still worked within large institutions that shaded and protected them as a university would.

The search for truth, the scientific method, these were the touchstones of the Internet Culture. On the campus of Rice University , which regular readers will remember I attended in the 1970s, we had an Honor Code, presided over by an Honor Council, which was composed of students who were far more severe than any administrator could be. Once, while on the Honor Council, I asked a friend how a test had gone, and wound up in 4 months of hell, convicted of cheating and nearly expelled, until the President himself had to bail me out. Did I break a law? No, but to many (including the person I asked about the test) I acted dishonorably, and that was worse.

Even when it met under a buttonwood tree , the New York Stock Exchange never practiced Ordered Liberty. The rules were not made of iron, to be approached with trepidation. Honor was fine, but winning was finer, and if you could get away with it, even by twisting the letter of the law, that's where the boundary lay. One of my favorite studies at Rice was that of 19th Century Wall Street. I learned of John Jacob Astor subdividing blocks until there was barely room on a lot for a door, Cornelius Vanderbilt squeezing competitors until he broke them, rich men cornering markets to break poor men. It was not a game for sissies. It was Market Order.

What we have seen, on the Internet, over the last several years, has been a move away from the Ordered Liberty of the campus and toward this Market Order. You do what you can get away with. Even if there were a criminal law against spam, you would still have spammers. Even with a criminal law against file trading, you still have file traders. The question of how much order you get with your liberty depends entirely on your willingness to tax yourself, to pay for whatever level of Law & Order you deem necessary.

Making those decisions is a function of government. Thus, each government, around the world, has been making its own laws regarding this new Internet. Some go after sex, others blasphemy, and still others would call this essay a form of treason. Each government has tried to push its view of law on citizens outside, to protect its own from their pollution. Australia, for instance, has tried to go after American companies for libels based on American Web sites viewed in Australia . America, in turn, has gone after Russians for copyright infringements that were not crimes in the places they were committed .

When this happens, the final result hinges again on Market Order, on who has how much power, and which side is willing to invest more in its position. Thus Yahoo links to Nazi pages for U.S. surfers, but not through its French search engine . It agrees to conform to Chinese laws , but will still let an American find dissidents from here.

Thus, the Internet has moved from a system of Ordered Liberty to one of Market Order.

One of the more interesting rhetorical flourishes of the present American campaign has been how Howard Dean has tried to hearken back to the colonial ideal of Ordered Liberty in his critique of the Bush Administration . This has yet to draw the kind of press coverage it deserves. The question will become, is he na´ve, and should American government look more toward the 18th century common or the 19th century Wall Street pit.

I know where I stand, with Ordered Liberty. Morality is how you act when it's certain you can get away with it. The choices we make in business are not always moral choices. It is up to government, by making laws and in choosing how to enforce them, to push business behavior toward or away from sound behavior.

And what is morality, anyway? Is it where you stand in public, or how you behave in private? Who does that choice belong to? Does government have any role, and if so where?

All these are hard questions, but they cannot truly be made on a global Internet without global governance and without the wherewithal to maintain Ordered Liberty. The world, in fact, is governed more like 19th century Wall Street, with no SEC to regulate it, only a flimsy thread of treaties that are honored, by the most powerful, only in the breach.

The questions of Ordered Liberty are made relevant and global by the presence of this network. You may be reading this in Pakistan, or Israel, or South Africa, or even in China, in places where the phrase Ordered Liberty itself may be seditious, or blasphemous. Because Ordered Liberty is not in the hands of your faith, or the state, but within you.

This remains the message of the Internet, the delicious, seditious message of the medium you're on right now. You have the power. So long as you do, then you have something worth fighting for.

What I fight for is Ordered Liberty, the maximum in competition, freedom and democracy for the greatest number. I say that is the path to prosperity, not just financial prosperity but real happiness.

The way I fight for this is by writing about it. I infect other people with my thoughts, as the Internet allows us all to be infected. What happens next is up to you because, as I said, you have the power.

There are risks in standing where I do, as there are risks to your reading these words, and risks in what you do with them. But we are all called to these risks because, in the end, liberty isn't given, even Ordered Liberty. Liberty must be taken, as order must be, and perfection does not exist.

The search for Ordered Liberty, then, both online and offline, is an eternal struggle. And on this medium, for the first time, we can all struggle together. That's why I believe in the Internet.


Shameless Self-Promotion

I work as a business analyst with Progressive Strategies, a New York research firm that has the ear of the world's top technology companies.

My last book, "The Blankenhorn Effect" won the Computer/Internet category in the 2003 Independent Publisher (IPPY) awards .

You have my permission to forward this newsletter widely. And if you have trouble subscribing let me know. Remember: it's journalism that keeps the Clues coming...


Shameless Promotion

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Takes on the News

Dutch Auction

Google has apparently decided to go public next year in a version of a Dutch auction .

The way it works is you offer a number of shares, and anyone who wants them submits a bid. At the end of the bidding, the price of the lowest successful bid is the price everyone pays.

There was talk of this kind of thing back in the 1990s, but no one bit on it because, as it turned out, no one had the kind of company that could survive in a public market without Wall Street backing.

Deals like Google come along only once in a great while. The best comparison is to Microsoft. Microsoft didn't need the money when it went public in the 1980s, it just needed a way for its managers to cash-out their options. Gates and Ballmer treated it as a joke. But it was the Wall Street bankers who had the last laugh, with huge fees for the underwriting, big blocks of shares for favored clients, and a Fortune 500 stock to trade.

To Google, that was money left on the table, money that it would prefer go into its pockets, into its employees pockets, and into its investors pockets. That's why it is taking this risk, and it is a risk. Google will not be paying the big Wall Street fees that made people like Frank Quattrone rich. Thus, it will not be getting the Wall Street hype. But it will also not suffer the Wall Street dilution. Brokerages routinely price new shares so they will generate a "pop" of investor excitement, rising quickly on the first day or two of trading before settling into a trading range. Google hopes to capture the "pop" for itself, and risks getting no "pop" at all if the markets are in the doldrums on the day of the offer.

My hope is that a successful auction by Google will encourage other valuable companies to do the same thing down the road. But this kind of auction is not for the squeamish. Only the very best should try it. And Google is among the very best.


Internet Advertising Comeback?

PriceWaterhouseCoopers has put its name on a Zenith Omnimedia study predicting a big comeback for Internet advertising next year .

It could happen. But it will only happen if Web sites learn an important lesson. That is, they must limit their inventory. If you have 100 slots, you won't double your money with 200, you'll halve it.

What may drive prices upward is multimedia technology that throws ads on top of pages, or in between page clicks. There's a technical limit to the number of such ads you can have. That, not the Flash, is the key to successful ad sales.

Your Clue is this. Limit supply and demand will bid up prices.

State of Confusion

The world of Big Iron still exists.

Big Iron is a phrase given, in the 1960s, to mainframe computers like those of IBM, the BUNCH , and plug-compatibles like Amdahl .

Mainframes themselves have since gone the way of the dinosaur, replaced in the IBM product line by the eSeries servers , but the need for such products remains. We're talking here of high capacity, 24/7 availability of databases for things like transaction processing and enterprise storage.

Here, sales cycles are measured in months or years, but a few wins can mean a lot. The players are IBM, Microsoft (often teamed with Dell hardware), H-P and Sun. As always, the bottom rungs of the ladder are the most precarious perches. H-P's survival strategy is predicated on keeping its feet there (you thought it was digital pictures?) so Carly Fiorina's strategy statements are important.

The problem is, she can't explain it . There is a there there, based on such things as automated back-up, autonomic computing and the concept of computing as a utility, like water and power. The problem is that, for some reason, H-P can't put it together in words of one syllable.

Charles Cooper of C|Net says the H-P strategy is about "selling management middleware," and if that's the word customers hear they're going to run away. What H-P really needs to be selling is the concept of making complexity disappear. That's what is at stake here. If H-P can't deliver that, someone else (like IBM or Microsoft) will. The pieces are there. All H-P needs to do is put it together and sell it.

If Carly can't do that, then Carly must go.


Clued-in, Clueless

Clued-in is James Seng and everyone else fighting the good fight against comment spam.

Clueless is the Broadcast Flag , designed to cripple technology on behalf of free, over-the-air TV.


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