Getting Your Tencent's Worth?

A great blog by Chris Skinner on QQ coins and their role in the future of money. The numbers are extraordinary indeed, leading me to wonder whether certain of the - ahem - "retailers" using the service aren't opening a unique account each time they issue QQ coins to fund a particular transaction?

One also wonders how well the service will weather the alleged Chinese government crack-down reported by Dark Diamond.

Somewhat nervously, I found it interesting to compare QQ coins to the characteristics that I told some RCA students would mark successful financial services innovation:

"1. The service is unlikely to be offered or facilitated by an entity that consumers perceive to be an “institution”;

2. The service solves the root cause of consumers’ critical need in the course of actual or desired activities, linking with trusted third parties to provide a comprehensive consumer experience;

3. The service leverages a shock amongst consumers who subsequently accept that the world has changed, yet helps them to embrace that change;

4. The service leaves day-to-day control of the management of money with the consumer;

5. The service improves rapidly with user collaboration, giving value beyond the facilitator;

6. The service will remain successful so long as the facilitator continues to invest in enhancing the service and meeting related consumer needs rather than seeking merely to enrich itself (i.e. preferring to meet the needs of stakeholders other than consumers);

7. The service is safe, easy to use, and involves communications that are fair, transparent (enabling ready comparison) and neither misleading nor patronising;

8. The service and its operator plays well with the regulators and public policy/opinion-formers."

I sense from Dark Diamond's numerous allegations that, if those allegations are true, QQ coins will prove a little rubbery in terms of 6, 7 and 8, pending the outcome of the alleged Chinese government intervention. But I guess PayPal weathered a similar kind of storm, and even eGold was entitled to remain in business, albeit subject to the laws it and certain of its directors had flouted.

So definitely worth watching that space, as well as how Tencent's western versions, like QQ Games are taken up.

You Can Turn Back the Clock - Mens Sana in Corpore Sano

Yesterday, after 3 years, I finally managed to repeat the same triathlon event on behalf of Prostate UK - the aptly-named Prostate UK Castle Combe Rowing Triathlon (excellently organised as usual by Will Whitmore at DB Max).

So I was keen to find out if I'd improved on the previous one - if I'd turned back the clock.

It was a very near thing, as you can see. But I did it, literally, 'on the run' (NOTE: this year's run time included T2 transition from the bike)

	total	3k row	T1	20k cycle	T2	3k run
2007	1:13:29	11:16	1:35	43:27	2:01	15:10
2008	1:11:51	11:29	1:37	43:25	?	15:20 (incl T2)

Comparing the training regimes, year-on-year, I'd have to put the improvement down to last month's consumption of booze and cigars at Henley Regatta...

Employers: Underreact to Staff Social Network Case

Laurie Kaye reports on a recent case, Hays v Ions, where an ex-employee has had to reveal the data from his LinkedIn account to his former employer. The reason?

"Hays had encouraged Mr Ions to use the LinkedIn services for the purposes of his employment. However, the Court decided this did not constitute authorisation to use the information gathered and stored on his LinkedIn account after he had left Hays."

So Mr Ions was ordered to disclose:

- the business contacts on his LinkedIn page which had been requested by Hays;
- all emails sent to or received by his LinkedIn account from Hays' computer network;
- all documents that indicated his use of the LinkedIn contacts and any business obtained from them."

While employers need to be clear with employees about what is confidential and what is not, let's not rush to amend staff handbooks to deal specifically with social network services in this respect. That would infringe the 'principle' (adage) that a "hard case makes bad law".

This decision does not extend the ordinary obligation on any employee to respect his or her employer's confidentiality. It is clear from the decision that the employee was found to have agreed to use LinkedIn in the course of his employment; in the course of doing so he sent, received and stored confidential information; and then accessed or otherwise used that information outside the employment relationship. That LinkedIn was involved is irrelevant. The result would have been the same (though less topical) if the employee had used a third party email account for the same purpose.

Mystics and Revolutionaries - the Drivers of Innovation

You'll have gathered from the title "Pragmatist" and my explanatory blog, that I'm fairly sceptical when it comes to messages from our institutions, and I support positively disruptive innovation and innovators whenever possible.

Bob Mayo, of St Stephens in Shepherds Bush, is an innovator in one of the most conservative institutions on the planet, so I'm always fascinated to read his crisp observations in "Parish the Thought", Bob's weekly 200 word email. This week Bob hits on a theme at the heart of Web 2.0:

"The gospel passage for this Sunday sees Jesus feeding 5,000 hungry people with five loaves and two fishes (Matthew 14:13-21). Making the world a better place is not something limited to Jesus 2,000 years ago. Helping the poor and hungry and looking after those who are vulnerable or in need is the responsibility of us all. Nouwen (1994) says that we need to be ‘mystics’ and ‘revolutionaries’. The ‘mystic’ is concerned with changing the human heart and the ‘revolutionary’ is concerned with changing human society. In case you think of yourself as being one or the other, Nouwen also says that every real ‘revolutionary’ is challenged to be a ‘mystic’ at heart. ‘Mysticism’ and ‘revolution’ are two aspects of the same desire to make the world a better place to live. The whole socio-political world in which we live is geared against change. This should mean that we do not want to try. William Wordsworth talked about being as ‘impatient as the Wind’"

Two particular aspects chime with the disruptive trend we know as "Web 2.0". First, that the successful disruptive business models are motivated by making the world a better place to "live" - i.e. for individual people, personally. It's not about institutions, it's about each individual customer's personal experience and effort contributing in an "architecture of participation".

The second aspect is the idea that "the whole socio-political world in which we live is geared against change". One cause of our declining faith in our institutions is perhaps the realisation that regulations and rules (including the business rules by which institutions and big suppliers choose to transact with us) have tended to be written to suit the way institutions wish to do things, rather than what might suit us personally. We are told that these regulations and rules are hard to change, but become cynical when we see Parliament rush through laws that curb civil liberties or regulators move quickly to protect the banks but were slow to act when pensioners' money was at stake, or big corporates stop doing things overnight when ordered to do so by some other institution after years of consumer detriment and complaint. Yet inertia means that it takes such shocks and a lot of energy from people who are "as impatient as the Wind" to kick us all the way along the "change curve" to the point where we plan to do things in a different way.

The fascinating aspect of the digital revolution of Web 2.0 is that not only can facilitators enable individuals to harness technology to access more music or personalised holidays more cheaply, but it also provides a medium for generating and sharing the passion and connections necessary for us to find the things in the Long Tail of products that improve our own, personal lives.

Long Tail Financial Services: Passion & Connection Require Social Network Services

Kevin Kelly has built on Seth Godin's discussion of the idea that there are "three profit pockets" on the tail of product popularity.

In brief, Seth says that the first two - at or near the head - are profitable for the creator, while the third - the long tail - is only profitable for the aggregator:

"The most common misconception about Long Tail thinking is that if you don't succeed at pocket 1, don't worry, because the tail will take care of your product and you'll just end up in #2. That's not true. #2 isn't a consolation prize for mass market losers. Mass market losers are still losers. In order to become a mass market star you make choices about features and pricing and quality--and if you lose that game, there's no reason to believe that those choices are going to pay off for a different market."

Kevin (with whom Chris Anderson agrees) says you shouldn't conflate the views of creator and aggregator, but view each section consistently from each perspective. True, because you then see clearly the challenge that each faces when products are in the long tail - albeit one that aggregators are able to meet more easily:

"...if we view the long tail as a market of a different type, as a market of enthusiasm and connection, then as the long tail expands, this increases the chance of two enthusiasts meeting, and so the longer the tail, the better. The first two pockets of the curve are trying to maximize profits; the last pocket of the long tail is trying to maximize passion and connectivity.

There is one further indirect advantage to the long tail. Since your creation now exists in a market (where it would not have existed at all before) it can, if you are lucky, start to migrate uptail."

This emphasises why creating a social network among interested buyers and sellers of each of the products, or sets of products in the long tail, becomes critical to maximising revenue from it. As discussed on Wikipedia:

"A social network is a social structure made of nodes (which are generally individuals or organizations) that are tied by one or more specific types of interdependency, such as values, visions, ideas, financial exchange, friendship, kinship, dislike, conflict or trade."

Facilitators' discussion boards, blogs and social network services all clearly help enable those buyers and sellers to find their type of interdependency - so do open marketplaces like online auctions, or simply knowing what people who bought one item also bought, or what other profiles they viewed, and so on. Ultimately, transparent, reliable, timely pricing and product description are key to sales.

Applying this to retail financial services is interesting, given current market conditions. Where's the passion? Well people get really passionate (angry) when there is significant change. The last time the most people got the most passionate about retail financial services was in the early '90s when many houses prices plunged into negative equity (the dotcom bubble-burst mainly affected the retail investment world - the preserve of far fewer consumers).

The Internet wasn't around commercially to help people get out of negative equity in the early '90s, but a whole "specialist" (and substantially sub-prime) mortgage industry ignited around the fact that 25% of the people who'd had a mortgage from a high street institution suddenly couldn't get one. Connectivity arose because their lawyers and other advisers knew that those clients who were "battlers" and worth a punt. They arranged loans from other clients or themselves, starting new mortgage and loan providers and brokerages in the process. All manner of strange, alternative finance deals became available - a veritable long tail of mortgages, secured and unsecured loans - and daytime television advertising hasn't been the same since.

Most recently, Northern Wreck sent a shock wave rippling through the UK population, and similar disasters are striking at US retail borrowing sentiment. But this time the Internet and social network services are there to facilitate connectivity amongst the passionate at the same time as the institutional and specialist mortgage market has panned. Coincidentally, social lending facilitators, like Zopa (2005) and Prosper (2006), are also on the scene, enabling individual consumers to lend and borrow at rates that suit them personally. Importantly, lenders decide how diversified they wish to be, and choose their borrowers. Zopa is still citing a default rate of less than 0.1%. These sites were started by people (and I confess to being one) familiar with the effect of both the dotcom bubble on personal investment as well as the early '90s issue of negative equity. They've had time to work on their propositions, strategies and tactics - the use of social networking tools being amongst them.

Of course, the long tail of products represented by online social lending did not really exist before (except perhaps more informally, off-line). These products are being created by the individual lenders offering their money, and the borrowers who post their requests for money (depending on the model operated by the relevant facilitator). Successful lenders, in particular, therefore challenge the notion that creators can't make money out of the long tail.

It's also worth keeping a look out for other shocks that signal passion in other markets - particularly those not yet disrupted by the Web 2.0 trend. Insurance? Pensions? I shudder to think of the disasters that will set those wheels in motion!