Wednesday, August 16, 2006

Handwaving on the Economy

Fred Wilson had this recent post on the state of the economy. I dropped a line in the comments section of that post (faithfully reproduced here):

“Making predictions about the economy is an exercise fraught with uncertainty (especially for someone who writes code for a living!). But here goes...

It seems like older economic models that guided conventional wisdom can no longer be relied upon in an increasingly globalized world. For example, the inverted yield curve is no longer reason to proclaim recession (so long as the Chinese continue to subsidize American long term interest rates). The US economy is holding up quite well to the high price of oil which is no longer reason enough to predict stagflation.

Likewise, its hard to say that the current boom in web services will burst even if there is a recession. Why? Because monetization for these companies is primarily ad-driven and they will continue to make money as consumers continue to spend more time online (or using their cell phones and iPods) and advertisers respond to this trend.

The burst of 2000 was not so much about economic cycles as it was about a cycle of greed. The fact that investors this time round are maintaining a laser sharp focus on monetization, makes a burst less likely this time round.

I am not disputing the cyclical nature of the economy. All I am saying is conventional wisdom cannot be used to guide investment decisions.”

While most of what I say here is stuff I still stand by, the last comment about the “cyclical nature of the economy” what I am going to talk about here. While I was sleeping, the community of economists seem to have developed a vigorous culture of blogging and a post I read on Prof. Greg Mankiw’s blog got me thinking about something we take for granted – namely business cycles. I am sure this topic has generated much ink in academic circles. But like most other people who have little more than a dilettante’s interest in economics, I look for simple mental models to explain economic phenomena and rely on articles like this one which speculate on the question of whether “the Fed will go too far.” Even modest changes in the Dow and the Nasdaq that follow the Fed Chairman’s speeches are interpreted by the mainstream press as “signs” of the market reading the FOMC’s mind. But the answer is, the Fed will always go too far. The Fed’s only job (by congressional mandate) is to maintain price stability. Do you remember the Fed Chairman talking about anything other than the need to contain inflation? I am thinking that the Fed would much rather bring a recession upon us rather than have the inflation dragon rear its head. They will of course do this by making monetary policy less accommodative than it needs to be. But theories about recessions in the mainstream are limited to “bubbles bursting” and “infectious greed”. Hence this rant : )

Saturday, August 05, 2006 API/Hack

A while after my last post on, Techcrunch wrote about it raising a couple of the issues that I talked about. They published some disappointing traffic stats and questioned their ability to achieve mainstream adoption. Later in the day, they published what amounted to a retraction. Oh well…

I am going to talk a bit more in this post about what I meant by referring to a API in my previous post. I wrote this fairly straightforward python script that takes your username, password and a URL and spits out the tags that people have used to describe it. Definitely install the relavent python packages before expecting this to work :)

import urllib2
import ClientForm
import ClientCookie
import re

cookieJar = ClientCookie.CookieJar()
opener = ClientCookie.build_opener(ClientCookie.HTTPCookieProcessor(cookieJar))
opener.addheaders = [("User-agent","Mozilla/5.0 (compatible)")]

fp = ClientCookie.urlopen("")
forms = ClientForm.ParseResponse(fp)

form = forms[0]
form["user_name"] = "username"
form["password"] = "password"
mainurl = ""
url = "URL"
fp = ClientCookie.urlopen(

fp = ClientCookie.urlopen(mainurl + url)
items = fp.readlines()

for item in items:
    item_s = item.strip()
    l = re.findall("var\stagRec\s=\s", item_s)
    if len(l)==1:
        list1 = re.split("var\stagRec\s=\s", item_s)
        print list1[-1]
    r = re.findall("var\stagPop\s=\s", item_s)
    if len(r)==1:
        list1 = re.split("var\stagPop\s=\s", item_s)
        print list1[-1]

The power of python ensures that this does enough to login, maintain cookie state, parse out relavent HTML and spit out the tags. So this script does a little more than the length of it might imply :-) This is one example of an API call that a user might want. Using tags not just to search but to classify as well. Note that traditional classification methods rely almost exclusively on algorithms (as opposed to user-generated content).

Why would Yahoo! want to go this route in the first place? The answer lies in the fact that while tagged search may be **one** way to improve search results, it most certainly is not the only way. When Yahoo! does end up integrating into their search engine, tags are probably one of many factors (each with its own weight) being considered. So by staying the course, YHOO ends up losing in the noise of the search wars. But if they make their tag data available to their competitors, they actually end up making money off this thing.

The Techcrunch retraction mentioned the fact that now has over a 100 servers in action right now. The kind of infrastructure that can handle gazillions of queries per day from GOOG, MSFT, etc perhaps?

Tuesday, August 01, 2006


It seems like it’s a little late in the day to be talking about Especially, since its been 6 months or so since they got bought by YHOO. So what has Yahoo! done with their new toy since then? Not much from what I can see. Not even a unified login (which is the case with flickr). To be sure, does have some new features (importing/exporting bookmarks). But what I am trying to get at is the fact (the beauty of blogging lies in my right to peddle my opinions as facts ... doesn’t it ? :-P ) that YHOO hasn’t really used to contribute to its bottomline. And that’s what this blog post is about.

Besides, the obvious (ads), there are a couple of ways can be used to make $$. The first approach is somewhat indirect. It was mentioned at the time of the acquisition as a major driver behind the deal and continues to find currency in the blogosphere. Namely, the notion of tagged search. It is a given that any company that relies on search as a source of revenue needs to constantly improve the quality of its search results to grow its user-base (and by implication, its ad-revenue). Algorithmic approaches (to text search at least) have hit something of a plateau of late and one way to show some real improvement is by turning to non-traditional approaches such as the one offered by Though the article I linked to claimed that this is being done, its not obvious to me how. But if YHOO is indeed taking definitive steps towards integrating into their search engine, then good for them.

The other approach to monetizing is somewhat less obvious (to me at least). Offer an API to the startup community and potentially to competitors as well. The latter (making results available to competitors) I think is more powerful. Needless to say, this site has a lot of momentum going in terms of being the leading social bookmarking service. Its hard to see Google replicate the level of success enjoyed by this piece of Internet real estate. Ergo, the only reasonable way Google to improve their search results via tagged search would be to use At the very least, the API should pop out tags(s) to describe an article given its URL. A cursory glance at the API reveals that this may not have been done yet. What I am asking for is something along the lines of what is offered by technorati.

Of course, all this talk about tagged search improving search results is well and good. But what really needs to happen to make that a reality is mainstream adoption of A simple experiment reveals that this may not be the case (yet). Articles from technology centric blogs tend to be heavily bookmarked. But try bookmarking something from a blog on economics or art. You will probably find that you are the first person doing so. No less than the front page article of the New York Times is likely to yield similar results. This suggests that social bookmarking has a ways to go before it Crosses the Chasm.