You may have noticed that our banner spot is now occasionally filled with Google AdWords.

We've experimented in the past with Google Adsense, and we stopped when, after the Thai coup, our coverage of Thailand was attracting Google's advertisments for "Thai Massage Parlours". When the Google sales team rang us a month ago proposing a new set of services, they assured us that we could now filter out unwanted ads. So if anything appears that you find untoward, please leave a comment in this blog, and we'll see if we can get the filter to work properly.

The sight of symbolic attacks on a symbol (the flame) of a symbolic representation of war (the games) may seem too layered even for our mediatised sensitivities. And yet .... the protest works for me. I asked Grace and Kanishk in the office today, and neither could muster much enthusiasm for the games. I asked David (our Front Page editor) later on, and he remarked: "... it all seems overdetermined, don't you think? the games, Tibet ... it's a big year".

My two previous posts from the Summit are on OurKingdom: Lots of programs - but where are the progressives?

Want to feel good about the short term world outlook?

Our friends at Avaaz (including openDemocracy's co-founder, Paul Hilder) have been working at getting a global and significant petition to represent world opinion about events in Tibet. Pasted below is their latest request, which I fully support.

I posted yesterday about what was looking like a difficult moment for Malaysian democracy.

You will have seen, read or heard since then of the astonishing result: although the ruling party won enough seats to form a government, by usual standards, it only scraped through. The opposition went from 19 to 82 seats of the 222 seat parliament. An opposition coalition thought-up by Anwar Ibrahim that stitched together urban middle classes, Chinese and Malay Muslims represents a turning point for Malaysian --- and maybe Muslim --- democracy. Ethnic divisions appear to have been transcended, and a united front against corruption and mis-management by the ruling Barisan Nasional mobilised voters.

Here are this week-end's warnings from friends in democratic difficulty, from Malaysia and Russia:

Folks, Anwar’s party is winning a considerable number of seats ... there is currently no news whatsoever domestically being carried on Anwar’s wins, and there is some concern over whether such wins will in effect be permitted...a time, for Anwar’s friends outside to be vigilant and vocal.

From Zittrain to Aristotle in 600 words

Here is a picture taken during Jonathan Zittrain's LSE lecture yesterday on ``The Future of the Net (and how to stop it)''. In case you can't read it or guess it, the word tattoo-projected onto JZ's forearm is not ``open is we'' or ``CC rules'' but ``Communitarian''. When I saw the word, the memory bells started to ring. I'll tell you why.

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I had a note from Masha Lipman about the closure of the European University at St Petersburg (EUSP).

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Microsoft has done the decent thing and proposed to Yahoo. More even than Google's presence at Davos, it marks the end of the teenage years for the search and internet advertising business - excitement, discovery, novelty and rivalry were all part of it. Dreams of a revolutionary and different future.

Google announced disappointing profits, dragged down by lower than expected growth in pay-per-click revenues (the right hand side of Google search results and Google ads on others' web pages).

Click fraud - the activity by which you cripple a competitor's pay-per-click advertising campaigns by automatically clicking on their advertisements and causing their budget constraints to bite - at Yahoo and Google has gone up from about 20% last year to 30% this year. Almost 1 in 3 paid-for clicks is non-genuine.

The tuberculosis sanatoria of the Magic Mountain at Davos fill every year with the business leaders who, ill of their tarnished images, want to put themselves into the spotlight of the media and tell the world that they are better than the world thinks.

This year, this involved luring Google/YouTube into the "Davos Question": ask the world to post 1 minute videos outlining solutions to the world's problems, and have the leaders watch them. You might be able to spot two problems with the formulation already: a) if you get each person to describe a solution in 1 minute, you can expect something pretty reductive, and b) what if 10 million people did upload their views? How would you filter them? How would the business leaders, with their valuable time measured in the $millions per hour, ever be able to come good on their promise to watch them?

Evan Davis, the telegenic and usually excellent BBC Economicscorespondent, had a heart-stoppingly bad argument this morning on theToday show. Darling is hauling in the gas and power companiesto hear justifications of the 60% price increases we've seen this year.Evan Davis went through A-level oligopoly theory, explaining that"prices are sticky ... energy firms won't reduce prices because theyknow that others will follow them if they do, so doing no good buthurting profits ... and that our energy suppliers know that we don'teasily switch anyway." So much, so (half) true.

There's a new buzz about the way Internet watchers are trying to understand what's happening on the web - a sort of generalised hunt for the next web 2.0. Tim O'Reilly---the one who Trade Marked web 2.0 --- has been posting about the links between financial markets and web services like Google, Wikipedia, etc. He is particularly intrigued by the parallel between market makers trading on their own accounts (possibly in conflict with their clients), and Google entering content provision, in services like YouTube and Blogger (and now Knol, in a head-on with Wikipedia). CoryDoctorow and Jim Wales are writing about the possibility of open source, transparent search --- the moment and the reason for the community to take the power back from Google. Indeed, "Jimbo" has announced the launch of Wikia with the hope that "Transparency" and social aggregation will yield better results than Google.

All this is exciting stuff --- we are getting to the point at which we have digested how social information can be aggregated by networked computers, and we are wondering what comes next.

What I haven't seen fully laid out is the analogy between Web 2.0 services and economic mechanisms. Having this analogy clear is useful because it allows us to ask how all the results known about economic mechanisms translate to Web mechanisms. By and large, I think it also shows that Web 2.0 represents the naif phase of web service development--- akin to economists' modeling of perfect competition. The reality is clearly some way from that, but the lessons from mechanism design are not all encouraging: from the point of view of quality of results, the best from the wisdom of the crowds is behind us.

Google:Attention Auction

Let's start with the PageRank algorithm. This mechanism "auctions" attention (the screen position in a search result) and is paid for in links. At a wine auction, lots are ordered from most to least valuable. Value is measured by bidders' willingness to pay. In a "Google search auction"web sites are ordered from most relevant to least, where relevance is measured by the number of quality-weighted links pointing to a page. If I want to get "openDemocracy.net" to number 1 slot on a "Democracy"search, I need to make sure that no one has better quality-weighted links relating Democracy to the domain "openDemocracy.net".Google is auctioning slots in the results pages. On the left hand side are slots auctioned for links; in the right hand side, they are auctioned for money.

So? What of this parallel?

First, to Cory's point about search not being neutral: the design of the algorithm selects what information is returned, and what meaning is given to "relevance". This is generally the case with all auction-like mechanisms. In the wine auction, you will end up allocating wine to different bidders depending on whether you use an ascending or descending auction; and open out-cry auction or a sealed-bid auction. There is a sort of "gold standard" --- Cory's notion of the "neutral search" --- which in the auction literature is called the "efficient"outcome: the one that allocates each good to the bidder that truly values it most. ("Relevance" is a bit trickier than efficiency because of the philosophical issues it raises, so I am not sure Cory's ideal of neutrality exists for long). The auction literature suggests that achieving efficiency is very hard and often requires unbelievably contorted mechanisms.

The auction design literature tells us that whatever mechanism you adopt, bidders will modify their behaviour to do best for themselves. So, in a "first price" auction (one in which you pay what you announce as being prepared to pay --- as opposed to the E-Bay style second price auction), you think hard about what the next person below you is prepared to pay and bid close to that rather than bidding your own maximum willingness to pay. The electricity markets that I worked on inthe 1990's were, would you believe it, mostly designed as first price auctions! This started years of very profitable manipulation by all power companies. Enron was particularly adept.

PageRank manipulation has also turned into an industry. In its simplest form, you buy awell-regarded web property and you then sell links from that property to other sites that are trying to rise in the ranks.

The mechanism literature is very keen on discovering implementable mechanisms that are non-manipulable, in the sense that it is in everyone's selfish interest to reveal the true information about their valuation. In the PageRank analogy, this would be an algorithm that would lead you to create your content without regard for its impact on its Google position, but only with regard to your readers' best interests. So, for example, the simple Search Engine Optimisation advice that all links should be made with descriptive, meaningful terms, might lead one to make this sort of link in an article: "openDemcoracy's "Democracy in Kenya" coverage suggests that ..." instead of "Peter Kimani suggests that ..." If I do the first rather than the second because that is what the SEO handbooks say will improve PageRank's recognition of openDemocracy's links to "Democracy" and"Kenya" ,I am gaming PageRank just as I am gaming the wine auction by second-guessing how cheaply I can let it go before losing it.

The essence of the efficient mechanism design results is that it is important to divorce what someone pays from the outcome of the mechanism. So, the beauty of the E-Bay style "second price" auction is that what I pay is determined by the bid of the next lowest person, not by my bid. It is quite easy to see that it doesn't (usually) make sense for me to game the E-Bay system. (For the interested, the generalisation of the E-Bay auction to many goods --- which a Google page of results is, since it has many slots, is tricky. See Ausubel).

What does this mean for search? I've thought for a while that the equivalent would be for Google to give you not your own PageRank as as core, but the PageRank of your next closest "competitor", or web site. You could then SEO all you like, it won't affect your PageRank, except in so far as it affects your closest competitors'. The trick in this scheme will be implementing who your "nearest neighbour" is for any web page.

PageRank is a market mechanism. Implementing it---like all mechanisms---requires endless fixing around corner cases. An intriguing example is Google's trouble with Jewishness. This kind of "corner case fixing"  might make one think that longevity in the market allows you to perfect the algorithm like no one else does, and so protects you from entry.

But if I were a Google shareholder, I would be worried by the analogy between Google search and a market mechanism. As every web content producer adjusts to Google, its results become necessarily less and less compelling. The joy of Google past was to think hard about the search query and get a first screen result full of relevant but quirky, even obscure material. A Google result today is much less sensitive to the searcher, because every content maker is trying to "buy" space that it can't pay for in "genuine" links. SEO-- even the unconscious SEO that is now so widely practised --  will ossify Google and a better solution will wipe it out with the speed of an epidemic. The web has become over-fitted to Google like a strain of wheat becomes over-designed to a specific ecology. The web is covered in content strategies over-designed to Google, and a new mechanism will find a source of meaningful, un-manipulated information---just as thehyper-link was before PageRank made it a gameable commodity.

Google will disappear much faster than Wikipedia, because Google provides a flow of services, while the Wikipedia mechanism has been accumulating an asset in its millions of pages. But Wikipedia is not out the woods yet. There is an auction analogy there too, from which I forecast that Wikipedia will be gradually locked down, the process for editing more and more institutionalised. Moreof that in a future post.

predictive-jan08.html

The oD Sophocrats

openDemocracy launched a set of predictivemarktes in January 2007. The idea was that byallowing oD readers to buy and sell forecasts, the oD crowd wouldreveal its special wisdom.

350 readers signed up to the markets over the year. They were give$1000 to buy forecasts. For example, at the start of the year, youcould buy "Sarkozy becomes French President" for $40. When he becamepresident, you could cash that out for $100. In between time, if theprice on Sarkozy seemed to you out-of-kilter, you could trade andspeculate on the price movements. The top ten traders have shown a realskill and dedication. Tan Copsey, my colleague from China Dialogue,had an eye-popping run of profitable predicting, turning those $1,000into $135,442 - I am sure that he can rest assured of an alternativecareer as a carbon trader.

I've been looking forward to Becker's blog posting on sub-prime for a while. I think the current financial crisis will be to economic liberalism what Iraq was to political liberalism: a failure so vast, so shameful, that many will be led to re-assess their world view.

So what does Chicago-school Becker make of it?

He starts with a great piece of fighting rhetoric: The "belief in the beneficial effects of greater knowledge aboutmortgage terms is inconsistent with the evidence that the mostsophisticated banks and investment companies, including Merrill Lynch,Citibank, and Morgan Stanley, have written down their housinginvestments by billions of dollars. No one can reasonably claim that these banks lacked the skills andknowledge to evaluate all the terms of, or the likelihood of repayment,on the subprime and other mortgages that they originated or held asassets."

How should we interpret the massive investments from sovereign wealth funds being taken by UBS, Citi and Morgan Stanley to shore up their capital reserves? Just when the central banks are making huge amounts of liquidity available cheaply, why are these banks going elsewhere for capital? This seems strange: the public is trying to force cheap money into your pockets, and you go elsewhere to shore-up your balance sheet. Are the Chinese and Gulf States offering even cheaper money?Not likely. Banking shares have fallen sharply, indicating that equity finance is very expensive at the moment. In fact, you can expect that the new part-owners have negotiated very good terms. The banks are taking money when they need it - always a sign that they'll get it over a barrel.

Will Hutton was interviewed on Today - the jolly slot at 0857 - about whether the 30,000 UK resident super-rich are good for the country. He talked about incentives, Scandinavia, giving back, Quaker business, Robert Owen ... but I think he missed a real trick - the one Martin Wolf points out in a recent column: the banking super-rich are there thanks to taxpayer subsidy.

In a profoundly radical column in the FT, Martin Wolf asks why the City is so rich and why banks have such a high return on their invested capital - most of the time. For the past 10 years, UK banks have returned an average of 20% on equity, year in, year out. This is huge. The usual defense is that bankers take big risks: hard cash is put up for the mere promise of more later. This is the essence of capitlalistic risk-taking. Of course it earns! - you have to compensate everyone for the roller-coaster ride.

Who you are determines what you mean. What you say can make who you are.

This dance of talking and being makes listening quite hard, and nowhere more so today than in the questions about Islam and the West.

But listening well allows us to find hopeful pluralism in positions that seem opposed. Compare these two moments in the London culture-sphere: the Guardian's argument around Martin Amis' Islamo-criticism, (the best of it here in Ian McEwan's letter) compared to Ayaan Hirsi Ali's tour of the city. (Ed Hussain and Douglas Murray yesterday, Timothy Garton Ash today)

I am in Vienna, a guest of the Institut fur die Wissenschaften vom Menschen, who, for their 25th anniversary, gathered a group ``Towards a European Public Space; International workshop on European media networking''. Mostly new serious media types, with a few academics (and some who were both) and one Commission representative, Habermas hovered over the day.

There was lots of really good material--Mark Hunter's combination of INSEAD hard-headedness with a career in investigative journalism; Jeremy Druker's description of TOL's training/editorial business model; Thierry Chervel, founder of the wonderful SignAndSight project, etc... I will have time to return to these.