Over the past 5 years more and more companies have found value in the data already in their possession. Companies like Walmart have used data collected to create a competitive advantage, enabling them to dominate their industry. Google is a business founded on the value of data and clearly has set the standard for monetization of data. Even with the data revolution sweeping the business world many business fail to understand the opportunity that sits locked in the applications that run their businesses. Even more disturbing is the data that is never collected due to the limited view of what constitutes a valuable company asset.
In simple terms companies without a comprehensive data collection and monetization strategy will continue to underperform competitors with more forward looking data strategies. Companies without a data collection and monetization strategy will typically view their data in silos, like pricing, supply chain, customer and marketing. Companies without a data collection and monetization strategy may also lose data due to aggressive data retention policies, born of fear and risk management. As the cognitive economy becomes a reality, companies with their silo views will not be competitive and hemorrhage market share to their more informed competitors.
I have long explained to people the value of the data corporations collect. I have seen first hand the value of large pools of correlated, linked, behavior generated data and as Tim O’Reilly points out in his post so does Google.
My favorite definition of Cognitive** is:
Having a basis in or reducible to empirical factual knowledge.
The key part of the definition as it relates to Tim’s post and Google is “Having a Basis in or reducible to” . I also like “empirical”. Cognition requires data and lots of it. Algorithms are secondary to the data for without the data there is nothing.
Google is just a stalking horse for the coming cognitive economy, there are many other players less public and less chic that are working to exploit the coming opportunities.
**”cognitive.” The American Heritage® Dictionary of the English Language, Fourth Edition. Houghton Mifflin Company, 2004. Answers.com 18 Dec. 2007. http://www.answers.com/topic/cognitive
Verna Allee gave a presentation at MeshForum 2006 on Value Networks. I think this is a great presentation. She describes:
“A value network is a way at looking at any purposeful organization, company, or network. It is any web of relationships that creates value through complex, dynamic exchanges of tangible and intangible value.”
She makes the case that the economic theory for the new economy is still undefined. She also details how companies have no good way to measure the value of intangible assets. She says the traditional measures are tied to the the creation of tangible assets, which is then reinforced by current economic theory and practice. My favorite part comes at 36:07 minutes into the podcast, she makes a case for using Living systems as a way to think about the new economy (built on intangible assets like Information, talent, capability). At this point she describes why living systems are so great, because the are capable of renewal and are intelligent (an Autopoietic system). Living system’s are Autopoietic because of two types of exchanges; the first type is an exchange of matter and energy, the second type is an exchange of Intelligence (a.k.a. cognitive exchanges). I think she is on to something.
The cognitive economy is really about exchanges of intelligence. If you have not really followed my posts on the Cognitive economy listen to this presentation.
Steve Gillmor if you haven’t heard this presentation yet, you should listen to it. Ed Batista you will also find this presentation interesting. I will have to listen to this one again, I know I’m not doing the presentation justice.
Check it out.
Verna Allee presentation Value Networks at MeshForum 2006 via IT Conversations
IT Conversations RSS feed
More from Verna Allee
More on Autopoiesis via Wikipedia
I was listening to the Resignation Gang (Part 3) and was interested in the arguments around how people like to get their news and inversion of the network. I have a couple questions running through my mind:
Does the head of the Long tail exist because the market has been unable to deliver meaningful specialization?
- Does the impact of low cost software and hardware make specialization more affordable?
- Do improved information strategies make specialization more accessible and understandable for the tail?
The idea that the head of the tail exists because of inefficiencies in the market makes me think that mass market and mass production are dying. It will linger for a long time but it will die. From content to pharmaceuticals to services, all will be become capable of serving the tail.
If the network is inverted does that make everyone a part of the tail?
- What opportunities exist in a infinite tail scenario?
- What is the most efficient mechanism for value creation?
I was thinking that affinity based collaboration may become the new organizational model. In order to manage the scale and complexity of the infinite tail, an economy based on cognitive products and services will be required. I don’t foresee anytime in the near future when we will be dealing with less information. The growth in the amount, type and quality of information will force people to seek solutions that a match the efficiencies of the market and of their own cognitive processes. The cognitive economy will arise as a function of the emergence of the infinite tail.
The Gillmor Gang RSS feed
Resignation Gang (Part 3)
I was reading Jeffrey Veen’s post titled “Intellectual Bargain Shopping” and found the quote below by Friedrich Nietzsche to be very interesting.
To predict the behavior of ordinary people in advance, you only have to assume that they will always try to escape a disagreeable situation with the smallest possible expenditure of intelligence.
Jeffrey Veen comments on the quote,
I love how this quote turns the tables. Users aren’t stupid, they’re efficient. They’re spending the least amount of effort (i.e. intelligence) as they possible can on each step of the goal they’re trying to achieve. If you make them spend more, they’ll go somewhere else — it’s like intellectual bargain shopping.
Let me refine Jeffrey’s thought of user efficiency a bit. People want to expend as little cognitive capital (attention, perception, action, problem solving and memory) as possible to obtain a reasonable or sufficient value. This is why I believe that people are going to demand products and services that create cognitive efficiencies. As applications and services are built today few take into consideration the level of efficiency the customer desires. The more we focus on cognitive efficiencies, the more valuable our applications and services will become. It really is about what you give not what you get.
Jeffrey Veen’s RSS Feed
Intellectual Bargain Shopping
In roughly 50 lines of text Steve Gillmor roughs out the Attention OS. The article has triggered many thoughts, so I will just lay them out in a series of posts.
The Cognitive economy is based on value created by individuals powered by a cognitive suite of tools, services, repositories and raw computing power (includes the attention os). To create pools of value that are sufficient to sustain an economy, there will have to be:
- Attention consumers that continually respect an individual’s usage policies and permissions.
- Attention providers that share very similar usage policies and permissions.
- A standard way of describing and communicating attention usage policies and permissions
For example, there are many French world cup soccer fans, but they may not have the same usage policies and permissions for their attention data and gestures. Some fans may restrict the use of their attention data to French companies only. Another set of French world cup soccer fans may have their attention data and gestures governed by more restrictive government statute. So the challenge becomes creating a constellation of French world cup soccer fans that allow their attention data and gestures to used in the same way for a similar result. The consumer of attention and gesture data will be required to be very aware of the current disposition of its constellation of attention providers. The attention consumer must also continuously update and reform the constellation based on changes in the change in provider policies and permissions.
More to follow.
Google today announced the availability of Account Authentication Proxy for web applications. This is an authentication and authorization service for Google services. It allows third party applications to use Google services on behalf of a Google customer. Google by allowing 3rd parties to create businesses that use their services as a composite part, this only make their company more valuable. Creating opportunity for third parties to add value and profit is similar to the way Amazon has benefited from 3rd party retailers using Amazon services to sell products.
It appears to me Google is going to build a ecosystem around its services and customer data. This announcement just strengthens my belief that Google understands the coming cognitive economy and its requirements for ubiquitous identity and reputation.
Garett Rogers referred to Google’s Account Authentication Proxy as being similar to Passport from Microsoft. I can’t say that I have seen a feature by feature comparison, but I think the way Google has released the service is by far more insightful and politically astute. Google has just added another tool to the innovators tool box, without appearing coercive like Microsoft did when Passport first launched.
Most importantly with this announcment, we as Google customers need to encourage Google to explicitly recognize the right of the customer to own, control, transport and manage their cognitive data (including attention, perception, action, problem solving and memory).
I would be interested to hear what Dick Hardt has to say about google’s new service.
Google’s Account Authentication Proxy for web applications
Garett Rogers RSS Feed
Google releases answer to Passport
In the cognitive economy the role of attention is primarily that of an abstract currency. Attention (in all of its forms) like Dollars, Euros and Pounds will have a value that is ubiquitous and easily measured by all parties. Markets can be created (think something like Root Markets) to speculate upon and trade attention. In the early stages of the cognitive economy attention exchange will be the primary source of revenue for all parties.
An interesting thing about attention is, as a currency it requires more collaborative valuation and regulation processes. Traditionally currency is created, regulated, and valued by a centralized authority and its designated markets. The fact that attention is created and valued in a distributed system by individuals, means there will be no one regulatory body to control it. This in my opinion is both a strength and weakness of attention.
Some strengths of attention are:
- it allows for a very customizable valuation model, depending on the parties involved and the context.
- flexible transaction structures and terms.
- it retains value over time.
- it can be traded multiple times.
- it is highly portable.
- is independant of borders and governments (this is not completely true, think China and the middle east).
- its supply is only limited by our imaginations and our time on this earth.
Some weaknesses of attention are:
- an individual can have control of their attention co-opted by third parties.
- value models can poisoned and manipulated by monopolies and governments.
- it can be shared without authorization.
- one can be overwhelmed with the amount created and its complexity.
Some day we will have to claim on our tax returns the value received from exchanging our attention since most of the value will be in a non-traditional form (not dollars).
We as individuals must work to assert control over our attention, it’s our currency. The Attention Trust is a non-profit organization whose mission is to help the individual own and benefit from their attention. So, if you want understand more about attention and your rights go to www.attentiontrust.org and look around. (disclosure: I am member of the Attention Trust)
The Attention Trust:
The Blog and RSS feed
The Cognitive economy is not
- mass marketing
- Information asymmetry
- a monologue
- about monopoly
- less information
- small, simple or easy
- a short term thing
I have been thinking real hard about the Attention economy and then about the Intention economy. In the past I have written about the Situational Awareness economy and online cognitive models, well I think I was in the right neighborhood. I think the economic revolution before us is the Cognitive Economy. The Cognitive economy revolves around memory, attention, perception, action, problem solving. It will be the businesses, organizations, services and people that build value around those key components that will be sucessful in the long term. Now in some ways this is a No Duh moment.
Continue reading “The Cognitive Economy” →