Cool article on the Indian Premier League in the NYT. Like the “billionaire vs. bollywood” bit. Can’t wait to go back out to Mumbai.

The Indian Premier League is killing it. Everyone had high hopes for the tournament, but there were many risks. It’s a first of its kind for cricket, and it was organised in just over six months, despite being a logistically bigger tournament than the cricket world cup. Added to that, India has never experienced city loyalty/rivalry before (the skeptics said Indian fans are too used to supporting only the national team), which makes the success to date all the more remarkable.

The reason for me being so bullish? Well, I have a lot of anecdotal evidence to the impact its having (it’s on all the Indian tv channels all the time at home), the games are all near sellouts despite it being in the first half of the tournament, the Facebook game is addictive and busy, and I just read this post by Adam Rabiner over on the Live Current blog.

To quote from the Economic Times:

“The ongoing Indian Premier League (IPL) matches have virtually taken the life out of cinema theatres and television programmes….

Star Plus sources said the fresh Television Audience Measurement (TAM) ratings are expected in a day or two. However, till April 22, the IPL dominated the TAM ratings.”

And, I also just had the photo editor from the WSJ contact me for photos, you may even hear about it in the US!

And hey, the IPL has its very own Moneyball-esque Oakland Athletics: The Rajasthan Royals.

Read here for Cricinfo’s view.

An interesting look at (my) top friends by number of mutual facebook friends, courtesy of the fb app mutual friends.

Unsurprisingly, I share the most mutual friends on Facebook with Harjeet.

Harjeet does a really great job of thanking the people who helped us get to where we are.

I’ve talked about the power of our network before.

To echo Harjeet’s sentiment, we’re all very grateful for everyone who’s assisted along the way.

We’re also very appreciative of Live Current, who are taking a bet on our technology and people. I fully believe and we’ll realize the full potential of our combined team.

Also for Phil’s view, our first employee, read this.

there was any ever risk of us taking ourselves too seriously, Baz (Brian Collins) sent me this picture of our team to use for our latest BBC piece.

The response I got after forwarding it to the BBC was, “I’m not sure that would work without explaining who everyone is in the picture”. And so it lives here, on my blog.

From left to right, that’s Phil, Patrick, Brian, John, Harjeet and me, the Auctomatic team.

A while back I was asked to contribute to a discussion on the “future face of enterprise”, by the Make Your Mark campaign.

Here is the viewpoint piece I wrote.

Auctomatic is ready for you to play with!

Get started here!

ps: our BBC article on Auctomatic is currently their 2nd most read business story (and on the UK version homepage), exciting times! Now to pray the servers hold on…

I’m obviously late to the game when it comes to talking about the Bubble (or not), but I wanted to present a different way to make sense of all the discussion going on [1].

A bubble shouldn’t be defined by the amounts of money being spent, the number of people doing startups, the sky-high valuations and so on, (although typically they are all symptoms of being in a bubble), but instead by looking at people’s motivations. This is what typically changes in a bubble. Normally, investors and entrepreneurs are motivated by the fundamentals in a market or in a business. This is great, where there is a problem to be solved or an inefficiency to be eliminated, the opportunity is seized.

However, what soon happens is that this behaviour, when successful, motivates other people to start doing the same, and eventually you end up with people starting companies, writing facebook applications, and making investments not because of the fundamentals, but because everyone else is. When this happens, you know you’re in a bubble.

So, ask yourself, do you know of people starting companies (or writing facebook apps) because everyone else is? Do you see investors making investments to “not miss out” rather than because of a business’ merits? Therein lies a better way to answer the question.

Because people are heavily influenced by what other people are doing, bad decisions become more common (and ‘noise’ is introduced into the market).

I’m expounding a framework that I read in Critical Mass [2], a great book that incidentally is one of the few books not to be panned in The Black Swan.

[1] - In my first meeting with a VC when I went to San Francisco in January, I asked him if he thought there was a bubble, his answer was yes. After the Y Combinator Winter program in March, I asked Paul Graham, and his answer was no. Obviously people use different metrics. And I’ve been thinking about it for far too long.
[2] - In fact, Mr Ball (the author) says talks of bubbles and crashes is also wrong - cycles don’t exist, just continuous fluctuations. He has an excellent blog, and this post is particularly good.

To quote some of it:

“Everyone knows that market statistics, such as commodity values, fluctuate wildly over a wide range of timescales (while, in the long term, showing generally steady growth). There is nothing particularly remarkable or surprising about that: clearly, the economy is a complex system (one of the most complex we know of, in fact), and such systems, whether they be earthquakes or landslides or biological populations or electronic circuits, show pronounced and seemingly random noise. What is unusual about economic noise, however, is that an awful lot of money rides on it.

That is why, rather than regard it indeed as noise, economists and market analysts are desperate to ‘explain’ it. Imagine a physicist looking through a magnifying glass at the wiggles in her data, and deciding to find a causal explanation for each individual spike. But that is precisely the game in market analysis.

The standard approach to this aspect of economic theory is as revealing as it is disturbing. Economic noise is a ‘bad thing’, because it seems to undermine the notion that economists understand the economy. And so it is banished. Noise, they say, has nothing to do with the operation of the market. In the ‘neoclassical’ theory that dominates all of academic economics today, markets are instantaneously in equilibrium, so that they display optimal efficiency and all goods find their way effectively to those who want them. So the marketplace would run as smoothly as the Japanese rail network - if only it did not keep getting disrupted by external ’shocks’.

These shocks come from factors such as technological change - an idea that stems back to Marx - which force the market constantly to readjust itself. The very language of this process, in which economists talk of ‘corrections’ to the market, betrays their insistence that none of this is the fault of the market itself, which is simply doing its best to accommodate the nasty outside world. “Nothing more useless than listening to a newscaster tell us how the market just made a little ‘correction’”, says Joe McCauley of the University of Houston, who believes that ideas from physics can help explain what is really going on in economics. (I have a forthcoming article in Nature on this topic.)

“The economists incorrectly try to imagine that the system is in equilibrium, and then gets a shock into a new equilibrium state”, says McCauley. “But real economic systems are never in equilibrium. There is, to date, no empirical evidence whatsoever for either statistical or dynamic equilibrium in any real market. In their way of thinking, they have treat one, single point in a time series as ‘equilibrium’, and that is total nonsense. It’s completely unscientific.”

I read the following on Valleywag (awesome site, btw):

“It’s a lesson from Marketing 101, but one that most of Silicon Valley has yet to learn: Tout benefits, not features. The iPhone has visual voicemail (that’s a feature) so that you can listen to just the messages you want (that’s a benefit). This new set of ads is all about benefits. They show real people using their phones and loving them.”

It’s a brilliant point made by Jordan Golson.

When blogging on Auctomatic, it’s really easy for me to slip into feature-itis and write about the latest features we’re building without clearly explaining the benefits.

But if you’re dealing with mainstream consumers, then it’s benefits you should communicate, not features! The MPire guys gave us this great advice a while back too with respect to eBay sellers.

In 2004 I did an internship in Deutsche Bank’s Credit Structuring team. It was an incredibly lucrative business, I remember listening in to a phone call with a big European defence agency who bought some structured assets and in the process, made the team of 4 guys I was working with (we were the Germany desk) quite a few million Euro in profit, for what seemed like not a lot of work.

I remember thinking something was weird, how a bunch of bonds that in aggregate didn’t pay much in interest, could be magically combined, and then sliced up, and out of nowhere, 200 or 300 basis points of profit would appear. Surely something to do with the ratings was being manipulated.

Anyway, the profits being made weren’t really profits, in that the ‘profit’ would accrue over the lifetime of the asset, assuming the underlying assets wouldn’t default. But, in terms of bankers’ incentives, no one could care less about how that asset played out as:

1) there was a model showing that the chance of things going tits up was near on impossible
2) bonuses would be in a few months time, and it would be decided by paper profits made that year

Anyhow, the reason I’m blogging this is that I just found out the Deutsche Bank credit traders just lost 100 million Euros, and that several desks have now been shut down. Further, I hear that Lehman Brothers have canned 8% of their global workforce in a month, that Goldman Sachs has a hiring freeze, and shrunk its graduate intake by 25%.

So it’s kind of a big problem. All those structured assets obfuscate

a) what the real level of risk is, and
b) who the hell owns that risk

(Of course I am heavily simplifying).

The Economist has been covering the credit/American sub-prime problem as a leader for the past month or so now. Not that I follow things in much detail, but I’m reminded that in the financial markets uncertainty is the norm, not the exception, and to my final point: you should read The Black Swan.

For further implications of the credit crunch, read how in the UK Northern Rock needed to be bailed out, almost GBP 2bn was withdrawn in the past 3 days, and that investment banks globally are set to lose $30bn.

**
As an aside, the big problem with a lot of financial models is that they assume a normal distribution on variables where they shouldn’t. A normal distribution is fine for independent variables, but in most things where you are modelling human behaviour, things are far from independent (we are heavily influenced by what other people are doing; Facebook Apps are a good example of that). This in turn leads to problems where models heavily underestimate risks of rare events (the normal distribution inherently understates the probability of rare events).