Google, SAP, and Salesforce.com Could Save Credit Markets and Journalism
Saturday’s Barron’s had a pithy review of Ken Aulettta’s Googled: The End of the World As We Know It.
To sum it up, reviewer Mark Veverka says, “Google’s science exposes the inefficiency of traditional advertising and threatens to remove middlemen.”
In other words, as went record labels and travel agents, so goes my first chosen profession, journalism. The inefficiency of printing presses and advertising sales staffs (relative to the Internet and to Google) that generated revenue to pay for inquisitive reporters to hold others accountable was finally itself held to account by more efficient business processes to get content to readers. Alas, that also meant less efficient business processes to create revenue to pay professional reporters.
Few have figured out how to sustain journalism so that it can continue to successfully impose accountability on civilization at current levels. My guess is we’ll see a combination of smarter revenue models and more efficient reporting, meaning better target selection with respect to which elements of society require journalistic scrutiny and which can be monitored by other methods — including Internet-enabled transparency and information verification.
Besides Barron’s, I received an invitation to Google Wave on Saturday. The loudest buzz about Wave concerns simultaneous writing and editing. It’s a very cool feature. Even cooler is that Google has the scale to make simultaneous writing and editing pervasive.
And still cooler: Someone once asked Joseph Epstein
, one of my favorite teachers at Northwestern’s Medill, what he thought about a particular issue. His response was simply that he didn’t know what he thought about the issue because he hadn’t written about it. He told us that simple story in the mid-80s, but I’ve never forgotten it.
The point is that the potential of simultaneous thinking, via simultaneous writing and editing, seems vast. Wave sits somewhere among the immediacy of a meeting or conference call, the delays and fixed structures of Wikis, and the pain (opening a vein and bleeding is how Red Smith described it) of good writing. At least for those who have been trained to enjoy the services of a good editor, the potential of selectively expanding and crowd sourcing the editing process is enticing. Perhaps now we’re getting somewhere with this Internet thing.
Alas, I’m blogging solo on the high-wire, without an editor, so with that caveat, here’s why I think Google and a few others might save the credit market.
On Friday, the day before getting my Wave invitation, I sent a memo to a dozen or so folks working to create business systems to make the information necessary for effective market pricing of investment interests in consumer and business credit available in the market. This is the topic of using technology to rebuild the asset-backed securities market, about which I’ve written and discussed at some length, most recently:
Oct. 29: http://hitachidatainteractive.com/2009/10/29/xbrl-an-interview-with-paul-wilkinson-part-1/
The main points of Friday’s memo were to advance the idea that giving all market participants the same information simultaneously helps markets work better and to generate interest in having the U.S. compete (or less likely cooperate) with Europe to create a working and transparent market.
By way of background, the main reason for the panic in September and October 2008 was that a critical mass of people all realized that the old instruments — asset-backed securities and more complex instruments based on asset-backed securities — were worth much less than people thought a few days earlier. No one knew how much less. Moreover, the right people either didn’t know how to generate accurate pricing or feared that the shock of accurate pricing would be worse than the alternative. That alternative was telling Congress (and therefore the world) that without unprecedented government spending and guarantees we would see financial Armageddon.
My own sense is that a cool, dispassionate, honest explanation of the problem, combined with a plan to expedite price discovery, would have caused less harm than what happened — the infliction of terror on the world by stoking fear of catastrophe. But that’s hindsight. By most accounts, today’s foresight is that unless you’re a big company that can sell bonds, it remains extraordinarily difficult for you to get credit.
That’s very bad, because credit has made the economy work for centuries and it’s critically important to small and medium size business that creates the vast majority of new jobs. Certainly credit existed in the world before people found ways to securitize it, but notwithstanding the crisis, most people continue to think that reviving some form of securitization is better than going back to the old days when less credit was available.
At its core, credit depends on the sharing of reliable information among the parties to a credit transaction. Why information should dry up now, in the Information Age, when information sharing tools are more powerful than ever before, simply defies common sense.
So what makes me think Google, SAP, and Salesforce.com could save credit markets and journalism?
The Google Wave preview features several videos labeled “Promising Prototypes.” The prototypes are from SAP, Salesforce.com, and the MediaWiki Wave Project. The MediaWiki video is interesting and has a great soundtrack. More to the point of saving the credit markets, the SAP video concerns the development of financial services products. The Salesforce video wasn’t working at YouTube last time I tried it, but the “response” posted there (which pre-dates the Wave video) shows how easy it is to code these days.
So how do you mash-up these various services to solve the credit crisis? Just start mashing with a simple goal in mind: make timely material information available simultaneously to the largest possible market. As many have noted, much or all of the information necessary to generate prices for asset-backed securities already exists in databases. The trick is making it available somehow for the market to use. Maybe SAP should focus its next wave project on creating that market. Maybe the fact that current market participants failed so miserably should cause new entrants like Google to join the fray, as Peter Vander Auwera suggests in a post today and Umair Haque suggested in a post last week.
In the words of another powerful brand, “just do it.”
And how does that save journalism, too? Well, despite the apparent intellectual bankruptcy on that topic noted in Auletta’s review, if we get credit flowing again, we’ll get the juices of entrepreneurship flowing too. Much of the needed capital traditionally comes from products as simple as home mortgages — people fund their ventures, first, with their own capital. Not only that, but more wealth overall means more ad revenue and more potential for paid subscription models too. In a phrase of my second profession (law), it’s a seamless web. The common denominator is faster, better, and cheaper information. Onward.
