The hobby economist – How Taxi Stockholm really works

If you’re anything like me (which you probably are since you got here), you’re constantly interested in how stuff works and why it works the way it does.

Taxi systems interest me, they work very differently in different countries (everyone drives their own car, 100% on provision, big firms with drivers on commission, government run etc) and I think you can tell based on the kind of service you get.

I’m also interested in the general supply and demand problem of planning taxis.

Therefore, the other day, going home from Arlanda airport, I took the chance to get the skinny on how Taxi Stockholm really works, who takes the financial risk, how much they make, how they match supply with demand etc. Pretty intesting I think.

There are three basic parts to Taxi Stockholm:

- Drivers:
Unlike what most people think, the drivers usually do not own the cars they drive, more often, 2-3 drivers, are scheduled on a car that is owned by what in Swedish is called an “åkare”, loosely translated as a “garage owner” or “car owner”

- Car/garage owners:
These guys usually own several cars, they take a fairly small amount of the money that their drivers charge the customer, so this is really a scale business, where the money is in having many cars making money simultaneously (almost no drivers actually own their own cars since the revenue from owning a single car is not worth the hassle according to the drivers I asked). The car/garage owner makes sure his cars are scheduled and rolling 24/7. There is a central digital board system hosted by Taxi Stockholm that handles supply and demand between drivers and car owners, where drivers can click the hours that they want to drive a car. Usually a driver always drives the same car. But the car/garage owner doesn’t have anything to do with supplying actual customers to his drivers, this is the job of the dispatch.

- The dispatch:
Taxi Stockholm dispatch is obviously what supplies the actual customers to the drivers. Interestingly, Taxi Stockholm is not a share holder’s company (an AB in Swedish) but what is called an “ekonomisk förening” losely (and lossy) translated to a financial partnership, a cooperative owned jointly by all car/garage owners (about 950 across about 1600 cars).

The dispatch is obviously the whole value of being a part of Taxi Stockholm vs driving on your own since they connect demand for taxis with supply of taxis and apart from waiting outside night clubs at closing hour or Arlanda airport (more on that below), it is very hard to predict where this demand will be.

However, while many people think that the taxis are centrally controlled by the dispatch and told where to go in order to spread out and follow demand, it is actually much more bottom up and controlled by the drivers. All cars have a computer that shows three columns and a bunch of rows. Each row is a zone (e.g. Östermalm, Södermalm or Kungsholmen) and the three columns shows:
1. The taxis in this zone right now.
2. How many outstanding reservations this zone has right now.
3. How many pre-orders this zone has coming up.

Based on this demand info, drivers try to match supply themselves by going to the zone they think will be the best bet. When they enter a zone, they log in and get a queue number based on how many cars came there before them. There are a lot of different strategies out there (kind of like fishing in the words of the driver himself) based on avoiding drunk people, dangerous areas, getting long rides (to Arlanda) vs short ones, predicting demand ahead of time etc.

So what does the money look like?

While I couldn’t get all the numbers, I got a few. Out of what the customer is charged the division looks roughly like the following:

- VAT 6%
- Driver 35% (about 26% net), i.e. 100% performance based salary, no fixed part.
- Car owner ?% (unknown, but the drivers say it is a pretty tough business, let’s assume maybe 35% as well, which needs to cover the vehicle cost before income tax)
- Taxi Stockholm dispatch staff and orgnaization cost ?% (maybe 24% then)

On a good weekday 12 hour shift, a driver makes about 3000 SEK
On a good weekend 12 hour shift, a driver makes about 6000 SEK
On a good month a driver makes about 30 000 SEK gross/20 000 SEK net (which implies working at least 6 nights a week and probably several full weekends)

Some observations: The incentives to drive illegal cabs are really high as you can charge customers roughly the same per minute/mile but make almost four times as much net per minute/mile. On the other hand, you have no dispatch to feed you business, which means you can really only do this successfully around night clubs at closing time where demand is obvious (most hotels and airports have pretty effectively gotten rid of illegal drivers). The lack of a supply/demand function to make them competitive thus means that illegal cabs aren’t really a big problem for the taxi industry financially.

Actually, Arlanda airport has a bigger impact on the type of car that a car owner buys than the general car economy like repairs cost of fuel etc.

Arlanda airport is obviously a very big supplier of customers and they have a taxi system that very strongly incentivize environmentally friendly cars over others. Basically, when drivers arrive at the airport (or have dropped customers off) they have to queue at a site a bit away from the airport instead of driving up to a gate. There, they get a queue number based on the environmental points their car has. A car can get up to 100 points (the passat is apparently the top scoring car at something like 85 points). If you have a low score you can be sitting at the queue site for many hours and might as well not bother (i.e. drive back to Stockholm empty to find new business).

That’s it, I hope you learned something you didn’t already know…


01 2011

List time – My top 50 TED talks!

Ok, I’ve spent part of Christmas looking through new and old TED talks. It’s a great way for me to unwind and zoom out from the narrow view of the world that most of us have at work, focusing on niche specific near term goals, to a 30 000 feet view of what is going on around you across several disciplines and be inspired to think bigger.

Some people asked me to summarize my favorites. So here they are (in no particular order btw). These are obviously skewed to my interests, so not necessarily the best all time talks, just the best in my fields of interest (Technology, Astronomy, Genetics, Economy/incentives). I really do think that if you watch these, you’ll come out a slightly wiser person on the other end. Some of these talks are old (and even proven slightly wrong) but they are very entertaining and inspiring nonetheless.

Also, I’d love to hear your favorite talks (not just TED, but any source) in the comments. Please!

The list

My comment on Ray Kurzweil:
While Ray Kurzweil is perhaps not a very engaging speaker, I think what he has to say about thinking exponentially rather than linearly when estimating technology, as well as his thoughts about a singularity are very important and interesting.

Ray Kurzweil: A university for the coming singularity | Video on
Ray Kurzweil’s latest graphs show that technology’s breakneck advances will only accelerate — recession or not….

Ray Kurzweil on how technology will transform us | Video on
Inventor, entrepreneur and visionary Ray Kurzweil explains in abundant, grounded detail why, by the 2020s, we will have reverse-engineered the human …

My comment on Blaise Aguera y Arcas:
Simply very fascinating and novel use of augmentation.

Blaise Aguera y Arcas demos augmented-reality maps | Video on
In a demo that drew gasps at TED2010, Blaise Aguera y Arcas demos new augmented-reality mapping technology from Microsoft.

My comment on Brian Cox:
The Large Hadron Collider is awesome and so is Brian Cox, it’s a very good combination.

Brian Cox: Why we need the explorers | Video on
…ur exploratory science programs — from space probes to the LHC — are first to suffer budget cuts. Brian Cox explains how curiosity-driven science pays for itself, powering innovation and a profound appreciat…

Brian Cox on CERN’s supercollider | Video on
“Rock-star physicist” Brian Cox talks about his work on the Large Hadron Collider at CERN. Discussing the biggest of big science in…

Brian Cox: What went wrong at the LHC | Video on
In this short talk from TED U 2009, Brian Cox shares what’s new with the CERN supercollider. He covers the repairs now underway and what the …

My comment on Chris Anderson of Wired:
Even if many people nowadays disagree with the long tail, this is still a classic talk and moment in Internet history.

Chris Anderson of WIRED on tech’s Long Tail | Video on
Chris Anderson, the editor of WIRED, explores the four key stages of any viable technology: setting the right pric…

My comment on Chris Anderson of TED:
TED custodian and curator Chris Anderson has done an awesome job of curating and developing the TED conference. He’s also done some good talks himself.

Chris Anderson shares his vision for TED | Video on
Chris Anderson gave this talk in 2002, prior to taking over leadership of TED. Founder Richard Wurman was leaving …

Chris Anderson of TED: How web video powers global innovation | Video on
TED’s Chris Anderson says the rise of web video is driving a worldwide phenomenon he calls Crowd Accelerated Innovation …

My comment on Clay Shirky:
Simply great ideas that feel like a given now, but weren’t at the time Clay spoke about them. He has a very good way of crystallizing and embodying why things are the way we often feel they are but can’t explain.

Clay Shirky on institutions vs. collaboration | Video on
In this prescient 2005 talk, Clay Shirky shows how closed groups and companies will give way to looser networks where small contributors hav…

Clay Shirky: How cognitive surplus will change the world | Video on
Clay Shirky looks at “cognitive surplus” — the shared, online work we do with our spare brain cycles. While we…

My comment on Clifford Stoll:
This guy is just amazing to watch on stage….

Clifford Stoll on … everything | Video on
Clifford Stoll captivates his audience with a wildly energetic sprinkling of anecdotes, observations, asides — an…

My comment on Craig Venter:
Another piece of history that was first forecasted and then realized on the TED stage. Many newspapers (e.g. the Economist) used the image of god (Craig) touching Adam’s finger to create life for their article spreads on Craig. Unlike most scientists, this guy is also a marketing genius who scares a lot of people and now holds patents on synthetic life. You should know who he is….

Craig Venter is on the verge of creating synthetic life | Video on
“Can we create new life out of our digital universe?” Craig Venter asks. His answer is “yes” — and pretty soon. He walks through his latest research and promises tha…

Craig Venter unveils “synthetic life” | Video on
Craig Venter and team make a historic announcement: they’ve created the first fully functioning, reproducing cel…

My comment on Ed Ulbrich:
This (how Benjaming Buttons was made and that it was the first time people were truly fooled by a fully computer rendered actor) fascinates me because of the implications I think it will have for actors and the movie industry, which I’ve written about earlier. In what I think (partially) proves this previous blog post, many people don’t even realize that both Winklevoss twins (Cameron and Tyler) in the movie The Social Network are actually played by the same actor (Armie Hammer) using a body double with Armies head slapped on the body double in the scenes in which both twins are visible at the same time. I think cheap unknown physical body doubles, with famous licensed (computer rendered) heads smeared on, will be the future of the movie industry.

Ed Ulbrich: How Benjamin Button got his face | Video on
Ed Ulbrich, the digital-effects guru from Digital Domain, explains the Oscar-winning technology that allowed h…

My comment on George Dyson:
This guy is amazing to listen to not only because he knows so much about tech history, but because his dad Freeman Dyson is responsible for a lot of it and George lived through it as a kid. Both of these talk are absolute must sees if you’re the least interested in technology.

George Dyson at the birth of the computer | Video on
Historian George Dyson tells stories from the birth of the modern computer — from its 17th-century origins to the hilario…

George Dyson on Project Orion | Video on
Author George Dyson spins the story of Project Orion, a massive, nuclear-powered spacecraft that could have taken us to…

My comment on Freeman Dyson:
It is testament to how rapidly techology has developed (remember, exponentially, not linearly) that Freeman Dyson is actually still alive to talk and talking about the future and what we should do as a species.

Freeman Dyson says: let’s look for life in the outer solar system | Video on
Physicist Freeman Dyson suggests that we start looking for life on the moons of Jupiter and out past Neptune, in the Kuiper…

My comment on Hans Rosling:
Well, he’s aweosome and a Swede, not too many of those around, so of course I had to put him in here.

Hans Rosling: Asia’s rise — how and when | Video on
Hans Rosling was a young guest student in India when he first realized that Asia had all the capacities to recla…

Hans Rosling: Let my dataset change your mindset | Video on
Talking at the US State Department this summer, Hans Rosling uses his fascinating data-bubble software to burst myths about the developing world. Look for new a…

Hans Rosling on global population growth | Video on
…living standards of the poorest can we check population growth. This is the paradoxical answer that Hans Rosling unveils at TED@Cannes using colorful new data display technology (you’ll see).

Hans Rosling: The good news of the decade? | Video on
Hans Rosling reframes 10 years of UN data with his spectacular visuals, lighting up an astonishing — mostly unr…

Hans Rosling shows the best stats you’ve ever seen | Video on
… never seen data presented like this. With the drama and urgency of a sportscaster, statistics guru Hans Rosling debunks myths about the so-called “developing world.”

Hans Rosling on HIV: New facts and stunning data visuals | Video on
Hans Rosling unveils new data visuals that untangle the complex risk factors of one of the world’s deadliest (an…

Hans Rosling’s new insights on poverty | Video on
Researcher Hans Rosling uses his cool data tools to show how countries are pulling themselves out of poverty. He demos Doll…

My comment on Henry Markram:
The brain simply interests me a lot and it feels like a very concrete step in evolution once we’ve actually reverse engineered (and thus can start to superevolve our own brains at potentially the same exponential speeds as the rest of our technology, rather than at darwinistic speeds (See Ray Kurzweil at the top for more about reverse engineering the brain).

Henry Markram builds a brain in a supercomputer | Video on
Henry Markram says the mysteries of the mind can be solved — soon. Mental illness, memory, perception: they’re m…

My comment on James Cameron:
Just very cool talk from a smart and interesting guy.

James Cameron: Before Avatar … a curious boy | Video on
James Cameron’s big-budget (and even bigger-grossing) films create unreal worlds all their own. In this personal …

My comment on James Watson:
Again, to think that the knowledge of DNA is so young that the guy who discovered it is still alive to talk about it is pretty mind boggling…

James Watson on how he discovered DNA | Video on
Nobel laureate James Watson opens TED2005 with the frank and funny story of how he and his research partner, Francis Crick, dis…

My comment on Jason Fried:
We all knew this instinctively, but still, interesting to see people studying it. I don’t really agree with the speaker on the solution (although I agree with the problem). Getting rid of all forms of synchronization/communication however, is not a scalable solution either, many people argue that discussions are actually when most true innovation happens….

Jason Fried: Why work doesn’t happen at work | Video on

My comment on Jeff Bezos:
I’m just a very big fan of Jeff Bezos because he keeps doing things that are very innovative again and again (Amazon, AWS, Kindle etc etc). After having watched these talks you’ll be a fan too (if you weren’t already). Also, he is a very good motivational speaker!

Jeff Bezos on the next web innovation | Video on
The dot-com boom and bust is often compared to the Gold Rush. But founder Jeff Bezos says it’s more like the early days of the electric industry.

Jeff Bezos: What matters more than your talents | Video on
In this Princeton University graduation address, Amazon founder Jeff Bezos makes the case that our character is reflected not in the gifts we’re endowed with at birth, but by…

My comment on Johnny Lee:
Awesome classic!

Johnny Lee demos Wii Remote hacks | Video on
Building sophisticated educational tools out of cheap parts, Johnny Lee demos his cool Wii Remote hacks, which turn the $40 video game controller into a digital whiteboard…

My comment on Nicholas Negroponte:
Nicholas is currently maybe most talked about because of the one laptop per child (OLPC) project. But he is a very smart guy in general and his 1984 predictions are pretty amazing (it’s very hard to unimagine everything that you now know about what happened, but try).

Nicholas Negroponte, in 1984, makes 5 predictions | Video on
With surprising accuracy, Nicholas Negroponte predicts what will happen with CD-ROMs, web interfaces, service kiosks, the touchscreen interface o…

My comment on Peter Diamandis:
A generally very cool guy involved in the ongoing and very interesting privatized exploration of space that seems to be picking up where government efforts left off. I think it is awesome and will be the fastest possible way of bringing the price of space flight down and making it a common reality for industry, science and tourism. I’m however still concerned about bigger projecta (where no commercial value can be seen in reasonable time) not getting done without state/global support. We actually need to get off this rock at some point!

Peter Diamandis on Stephen Hawking in zero g | Video on
X Prize founder Peter Diamandis talks about how he helped Stephen Hawking fulfill his dream of going to space — by flying together…

Peter Diamandis on our next giant leap | Video on
Peter Diamandis says it’s our moral imperative to keep exploring space — and he talks about how, with the X Prize …

My comment on Peter Donelly:
Humans suck at statistics and we focus so much of our early math education on calculus, even though we seldom use advanced calculus in real life, but are constantly subject to (and thus fooled by) by statistics. It makes most politics dumbed down and simplistic since no advanced discussions can be held (and reality is often fairly advanced). Not understanding statistics can also be very dangerous, as shown in this TED talk.

Peter Donnelly shows how stats fool juries | Video on
Oxford mathematician Peter Donnelly reveals the common mistakes humans make in interpreting statistics — and the devastating impact th…

My comment on Richard Branson:
Swell guy! Whish I was a bit more like him.

Richard Branson’s life at 30,000 feet | Video on
Richard Branson talks to TED’s Chris Anderson about the ups and the downs of his career, from his multibilliona…

My comment on Steve Jobs:
One of the most honest, direct and motivating speeches I’ve ever heard. Goosebumps.

Steve Jobs: How to live before you die | Video on
At his Stanford University commencement speech, Steve Jobs, CEO and co-founder of Apple and Pixar, urges us to pursue our dreams and see the opportunities in …

My comment on Tim Berners-Lee:
Well, he invented stuff, like the Internet, I think that merits a listen..

Tim Berners-Lee on the next Web | Video on
20 years ago, Tim Berners-Lee invented the World Wide Web. For his next project, he’s building a web for open, linked data th…

Tim Berners-Lee: The year open data went worldwide | Video on
At TED2009, Tim Berners-Lee called for “raw data now” — for governments, scientists and institutions to make their data op…

My comment on Ueli Gegenschatz:
Just watch the video of wing flight in this talk. It is absolutely amazing…

Ueli Gegenschatz soars in a wingsuit | Video on
…hilarating feat of almost unbelievable daring, where skydivers soar through canyons at over 100MPH. Ueli Gegenschatz talks about how (and why) he does it, and shows jawdropping film.

My comment on Dan Pink:
Motivation and more specifically, incentives, fascinates me. I think it is what drives humanity, and yet we are really bad at rigging the right incentives for stuff we want to get done.

Dan Pink on the surprising science of motivation | Video on
Career analyst Dan Pink examines the puzzle of motivation, starting with a fact that social scientists know but most manage…

My comment on Aubrey de Grey:
The holy grail, eternal youth. It may actually happen. Then what?

Aubrey de Grey says we can avoid aging | Video on
Cambridge researcher Aubrey de Grey argues that aging is merely a disease — and a curable one at that. Humans age in seven basic ways,…

My comment on Brian Greene:
A primer on superstring theory. Very interesting.

Brian Greene on string theory | Video on
Physicist Brian Greene explains superstring theory, the idea that minscule strands of energy vibrating in 11 dimensions cr…

My comment on Dan Ariely:
More on how us humans actually work, what makes us tick and what incentivises us by a really interesting guy.

Dan Ariely asks, Are we in control of our own decisions? | Video on
Behavioral economist Dan Ariely, the author of Predictably Irrational, uses classic visual illusions and his own counterintuitive (…

Dan Ariely on our buggy moral code | Video on
Behavioral economist Dan Ariely studies the bugs in our moral code: the hidden reasons we think it’s OK to cheat or steal (sometime…

My comment on Gero Miesenboeck:
More on reengineering the brain from a slightly scary scientist.

Gero Miesenboeck reengineers a brain | Video on

My comment on Alisa Miller:
Very interesting on how biased our news actually is. This may explain a lot about how things can seem so obvious to us, but not to someone else, and how we think we are very well informed and that everyone sees the same view of the world.

Alisa Miller shares the news about the news | Video on
Alisa Miller, head of Public Radio International, talks about why — though we want to know more about the world…

My comment on Barry Schwartz:
More about how people really work and why giving people more choice (which is inherently good) doesn’t necessarily translate into more people being better off, sometimes the opposite. This also touches on the very interesting question on how much of your life you should take responsibility for yourself (US on one extreme, you make all the choices, Sweden on the other, state makes default choices for most things).

Barry Schwartz on the paradox of choice | Video on
Psychologist Barry Schwartz takes aim at a central tenet of western societies: freedom of choice. In Schwartz’s estimation, cho…

My comment on Chip Conley:
The pursuit of happiness, finally some science.

Chip Conley: Measuring what makes life worthwhile | Video on
When the dotcom bubble burst, hotelier Chip Conley went in search of a business model based on happiness. In an old friendship with an employee and in…

My comment on Malcom Gladwell:
If you’re not an airport litterature junkie like me and haven’t already read Blink, The tipping point, Outliers, What the dog saw etc. You should really watch this and get to know Malcolm!

Malcolm Gladwell on spaghetti sauce | Video on
Tipping Point author Malcolm Gladwell gets inside the food industry’s pursuit of the perfect spaghetti sauce — and makes a larg…

My comment on Steven Levitt:
The perfect marriage of my airport literature problem and human incentive fascination. If you haven’t already read Freakonomics and Superfreakonomics, start with these talks and then do.

Steven Levitt analyzes crack economics | Video on
Freakonomics author Steven Levitt presents new data on the finances of drug dealing. Contrary to popular myth, he says, being a stree…

Steven Levitt on child carseats | Video on
Steven Levitt shares data that shows car seats are no more effective than seatbelts in protecting kids from dying…

Updates from readers:

My comment on Rory Sutherland:
This fantastic talk was on my short list but didn’t quite make it, now adding it by popular request. Thoughts go out to the ad guys and girls at Spotify, this is what your job is really about and what you do all day :)

Rory Sutherland: Life lessons from an ad man | Video on
Advertising adds value to a product by changing our perception, rather than the product itself. Rory Sutherland makes the daring assertion that a change in perceived value can be just as satisfying as what we co…



12 2010

Why Apple will build a TV in 2010

Those who know me well have heard me rant about this before, but I’m going to make it official now.

I think 2010 is the year Apple will launch a TV, not another version of the boring Apple TV box to put under my TV, but an actual, sexy as hell, aluminium cased, thin-as-a-macbook-air, 47″-50″ TV with the iTunes store fully integrated.

I mean think about it. If you were a company who sat on top of…

1. The iTunes store full of TV content.
2. The Apple TV hardware and software.
3. A large screen monitor manufacturing line

…and your corporate strategy was to compete with superior vertical integration between hardware, software and content, (UPDATE! See discussion in the comments section below on why I think this is so valuable) price dumping the non-differentiable content and charging high margin on the differentiated hardware, it would seem almost unavoidable to put 1 inside 2 and then 2 inside 3, slap on a slick, touch based (think magic mouse) remote and voilà, you have a spanking new vertically integrated and very high priced piece of hardware to sell.

So to me the interesting question isn’t why they would build it, but why they wouldn’t.

The missing link is of course a DVB software, Elgato (with their EyeTV) would be a good acquisition target IMHO.

C’mon Steve, you own my cell phone and desktop, now go for the living room, I want my Apple TV on the wall!


01 2010

Why Gowalla and Foursquare are kicking Google’s ass in location – The check-in model

The model that is quickly emerging as the de-facto model for location updates is the so called check-in model.

Contrary to the  always-on, automatically updating friend tracking model used by services like Google Latitude and Loopt, that has been prophesized and expected to take off for years,  the check-in model used by services such as Gowalla, Foursquare and MyTown lets a user manually and deliberately “check in” to an exact/discrete location and actively update friends and others about it.

You could argue that this is not really a new model at all, that it is in fact exactly what Dennis Crowley (now of Foursquare) did over SMS and Wap with his previous company Dodgeball (acquired by Google in May 2005). But for one reason or another, Google did nothing with Dodgeball and it seems like everyone went back to focussing on the prophecy of the always-on friend tracking model for the subsequent years.

Why haven’t the friend tracking services taken off?

  • Until recently, you could argue that it was because there was not critical mass of technically capable devices to get the network started. With the adoption of GPS enabled iPhones, Androids, Blackberries and Nokias etc, that argument doesn’t hold anymore.
  • That leaves the argument that people are simply not prepared to share their location with a bigger group of people, it’s too private. Well, the screaming adoption of these new check-in services, that are actually very public, prove that this was not true either.

To me, it is clear that it was the location model that was wrong. So what is the difference?

What the check-in model solves:

  1. Privacy: With the tracking model, as soon as I friend someone, I will have to go through the mental exercise of thinking if I REALLY want to share all my future locations with this person, which is very hard to do since I don’t know what they will be doing in the future. Alternatively, I’ll have to set different resolutions on different people and remember to turn some or all of them off when I go certain places. The check-in model obviously solves this by way of the model itself, pushing an update is always a deliberate event.
  2. Accuracy: It may seem intutive at first that location information doesn’t have to be very accurate to be useful, This also rhymes well with the fact that you expect people to be more concerned about their privacy the more accurate it is (the reason Google Latitude offers city level-only filters). In reality though, I find it to be totally the opposite. Actually, to be useful at all, the location information has to be super accurate, down to single meters and it has to include altitude. Looking at a dot on a map with an error of  +/-100 meters or so (which is best case, when you’re outside in GPS view) doesn’t tell me very much at all. I want to know if you’re in a ski slope, a particular café/pub or a department store and which floor  and shop of the department store you’re in. The technology to automatically deduce this with sensors and local directory services simply isn’t there yet, and won’t be for a long time.As low-tech as it may seem, the check-in services solve this in a beatiful way, by using the device’s sensors to present a list of adjacent exact/discrete and canonical locations and then letting the user do the “last mile” positioning manually, by choosing one of these. This beatifully solves the problem of getting infinite resolution in both x,y and z axis. It obviously requires a huge amount of discrete locations to check-in to, but as these services let’s you quickly create such locations, if you find yourself on the corner of Broadway and 5th and it doesn’t exist as a discrete location yet, you can simply create it.
  3. Context: Even if the resolution deduced by the sensors would somehow be good enough. If I don’t know that particualar spot myself, an X on a map somewhere doesn’t tell me anything about where that person really is. Is it a hotel, café, store, ski slope etc? Of course, clever mapping to local directory services can attempt to solve some of this, but it will take a loooong time before they will automatically tell me that “Eric is at the skate board ramp in central park” (as opposed to him being at the ice rink 10 m north of it). Not to speak of the complete loss of  Z axes when you go into a 10 story building. The fact that the discrete locations are man made, (but still typed, making them machine readable) means that I get clear text context to that specific location apart from just it’s coordinates.
  4. Update frequency: A constantly tracking service has the generic problem of not knowing when a friend of mine does something interesting or news worthy that I might want to know about (which is likely a tiny fraction of the time that I’m tracking him/her). That results in me constantly having to check the service and all my friend’s locations, making the likelihood of any actual serendipity extremely small. The model of deliberate updates solves this by it’s design and allows for both pushed updates to friends and posting to social networks.

As the fit with services such as Twitter and Facebook are so obvious, I’d expect to see some acquisitions fairly early in 2010


12 2009

Spotify Mobile – Google I/O in San Francisco

So I just returned from an awesome week in San Francisco where Anders, Ludvig and I demoed the first version of Spotify mobile on the HTC Magic Android device. We’ve worked very hard on this application for the last few weeks and are pretty pleased with the result. Using it on the trans-atlantic flight was a good test of the offline sync mode, really useful! :D

I really like the HTC Magic (thanks for giving everyone a free device Google), it’s pretty clear that the form factor is everything when you compare it to the G1. It actually makes my iPhone feel just a little bit big…..

Spotify for Android at Google I/O

The event itself was huge fun. The party on the Wednesday was in true Google style with any and every geek interest represented + ofcourse, the sign of Google, lots of free food and drinks!

I probably don’t need to mention the Google Wave presentation to anyone, how can you have missed it? I would like to say however, that I think the general blogosphere has kind of missed the core of what it is (which is easily done, considering it took 1,5 hours just to demo all the different things it CAN do). But in one sentence, Google wave is about Centralized conversation objects, where everyone edits the same object, rather than the current distributed model, where everyone has local copies of conversations and edits (replies etc) to their individual copy. This basic paradigm difference allows for all of the rest of the features (realtime, simultaneous update, in message editing, collaboration etc). I actually think they should’ve stuck to just the core messaging use case for the demo, to not confuse it too much.

It’s a super ambitious project in itself, but what really blew me away was the fact that they are going after a federated solution right away (i.e. I can have my own Google Wave server), meaning there will be multiple copies of these conversation objects, that need to be kept in sync. I think it was crucial that they did, it just wouldn’t have worked to say that all future communication should be hosted by Google themselvers, but it does make it orders of magnitude more complex I would guess…..


06 2009

The 3 assets of any social network – a valuation model.

Having had the fortune of having Danah Boyd spend two full days in Sweden a few years back, sharing her extensive knowledge on Social Network history and usage with me and som colleagues, attending and following Jyri Engestrom’s talks about his social objects theory, of which I’m a big fan, and meeting with Cameron Marlow while at Yahoo, I’ve gradually started to develop some simple models of my own on how to evaluate and categorize different social networks.

One of the models I use when looking at social networks and trying to figure out if one social network has more or less potential value than another, and where that value lies (as in “what could/should you monetize?”), is what I call the ”3 assets model”.


In my opinion, ALL social networks have these three distinct assets, from to MySpace, Flickr, Facebook , LinkedIn and Twitter. The value of (potential to monetize) the different assets differ greatly between them though.

Communication – Who has the most valuable communication asset?

That’s easy, dating is really the only type of social network that manages to monetize the communication asset, examples are People pay to communicate on these sites. This makes perfect sense since, per definition, enables communication between two people who have no other means of communicating with each other. As a couple grow more confident with each other, they exchange contact details for other free or cheaper communication channels and churn off the service.

Monetizing the communications asset directly using ads just doesn’t work that well IMO. Random communication does not reveal intention very well, so the value will always be low. Even if you’re not working with intention based advertising, but more brand/awareness advertising, that type of advertising needs to be fairly interruptive to be valuable to buyers, which works fine for one-way services like TV, Radio etc where content can be paused during interruption, but does not rhyme well with communication and productivity tools.

There MAY be another, rather unexpected way (for me at least) to monetize the communications asset of a social network, and that is if the communication is COMPLETELY public, i.e. very much on the opposite end of the specturm from the dating site’s communication which is totally private. I’m ofcourse thinking of Twitter search. Once enough people communicate publicallly about random and temporarily popular topics, all of a sudden the sum of that creates a value for people who search through the communicaton to see what is happening on a certain topic in absolute real time, days before Google’s indexing bots find it. Search DOES reveal intention, so it could work. It remains to be seen if and how monetizable these intentions are though. I expect there to be few purchase intention searches, and lots of  breaking news topic/live event searches.

Information - Who has the most valuable information asset?

In my mind, Business and professional networks like LinkedIn have the most valuable static information asset of the social networks because they are so structured on things like area of work, position (which translates to income) etc, that is is actually useful as targeting information for other sites when showing their ads, something LinkedIn is trying with NY Times. The structured information asset is also valuable to recruiters etc. I don’t know HOW valuable it will turn out to be, but it seems like the most valuable asset of the business networks to me. The communication between people on these sites is hard to monetize. XING is trying this though, with it’s premium package where you can pay to contact non-connections. But unlike a dating site, where both ppl want to be contacted by strangers, this is not true for LinkedIn and Xing, where I think the whole point is that your network works as a human filter to unsolicited messages from sales guys :) Nor do I think the social graph is highly monetizable as it only contains a small vertical segment of my real life connections (i.e professional connections) which doesn’t greatly reflect who influences my purchase decisions for different products etc.

Relations – Who has the most valuable relations asset?

I definitely think Facebook’s greatest asset is it’s extensive social graph of REAL people, using their REAL identities. Unlike most of the earlier social networks where people used fake identities, that they later grow out of, Facebook is not really targeted at a specific age segment, stage of life or interest/vertical. You will be yourself your entire life, so you will not grow out of your Facebook identity. The social graph is general and represents my real life connections very well, meaning that it reflects who influences my purchase decisions in almost all different areas. Mark Zuckerberg clearly realizes this and Facebook Beacon was an unfortunate, but IMHO brilliant attempt at monetizing this social graph of influence by offering e-retailers like the chance spread purchase information from a user across his social graph to people who that person influences.

It should be said that Twitters social graph asset may also be valuable as it is clearly people who influence me. But I would say there is a lot more noise in this graph and a big mix between close friends and professional publishers/bloggers etc.


03 2009

Will Brad Pitt become the first digital actor – and what will it cost to license him for my movie?

I recently saw the TED talk about ” The Curious Case of Benjamin Button”, where I learned that for the first hour of the movie, Benjamin, i.e. Brad Pitt’s, face is completely computer rendered, using short people to play his body. The team from Digital Domain created a complete digital version of Brad Pitts face for this, no masks, no make-up, the face of the short actor was simply replaced by the computer rendered version. Now this is very cool in and by itself, but it got me thinking about what this means for the movie industry and what the consequences might be.

- So, it is a fact that Digital Domain now has a “construct” of Brad Pitt (his face anyway) that can be rendered to play him well enough in a movie to fool any living human.

This raised a few questions in my head:

- What will happen a year from now, when Brad Pitt gets a call from Digital Domain saying that they actually want to use that construct for another movie, in which Brad doesn’t act at all? In fact, they will pay him 20% of what he normally charges to be in a movie, without him even having to get out of bed. Better yet, he can be recording another movie at full price at the same time!

- Will Brad at least allow the contsruct to be used when dubbing movies into foreign languages to fix the lipsync for the German version?

- How should Brad charge for this? How can he keep his integrity as an actor now that he can star in an unlimited amount of movies simultaneously? Liensing his construct to too many movies will obviously dilute his brand and how much he can charge per movie.

- You may think that Brad stays away from this and stars in movies himself instead. I don’t. Maybe he will next year, but what about ten years from now, when Brad the actor, then aged 55, can only play men aged 50+, while his construct can still play a handsome 35 – 45 year old man? Then it is not an alternative to cast Brad himself at all anymore? Why not live off of royalties at old age? – the ABBA model – it’s a nice retirement plan!

- What happens a few years from now, when this technology is dirt cheap and when Brad’s construct leaked and ended up on Pirate Bay? Will we start seeing “pirated” Hong Kong movies starring Brad Pitt speaking perfect Cantonese? Movies that we in the west (including Brad Pitt) have never even heard of?

- Will there be an open source version of Brad Pitt?

- Will Brad Pitt the construct eventually get diluted from overuse, and rather than be the lead character, just be used as a cheap alternative to casting real actors for those small roles where you just need a good looking guy for one or two lines? You know, the guy at the gas station, the shop keeper?

- Finally. I wonder if it is Digital Domain or Brad Pitt who actually own the copyright for Brad’s construct?……………….

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03 2009

Why Skype is not disruptive – and mobile Internet could kill it.

I know, old subject and long post. But I keep hearing this from so many people, VC, bloggers etc still, that I need to get it off my chest.

Ok, so first of all, you probably interpret the headline of this post to somehow be negative towards Skype, in the sense that being disruptive is widely regarded as a good thing in tech, so not being disruptive would be a bad thing right?

Well, I don’t think so, I’m an avid user and fan of Skype and love the application, but I don’t think it is disruptive. In fact, if Skype was truly disrupting the traditional Telecom model it would go bankrupt.

There are two things we need to define:

1. So what is Skype…REALLY?

Well, according to me, Skype is actually a very traditional network operator (really Virtual Network Operator – VNO) who makes it’s money by charging for voice minutes in the fixed telephony network, thea same model as any mobile or non-mobile operator.

Skype’s paid business (Skype in/out) is a traditional VNO business, with a small to mid sized userbase, targeting long distance callers with a price proposition (which,  together with pure arbitrage semi-VoIP players like Rebtel etc, HAS indeed put price pressure on the rest of the industry,). There is no difference here from any other traditional operator who competes on price.

But what about the rest of the userbase, who can make free calls (PC to PC) within the Skype network?

Well, unlimited”on-network calls” is actually nothing new either, many (especially mobile) operators have had this as a user acquisition strategy to make whole groups of friends move over from a competing operator, as well as reduce churn of existing users. Now, they may not have been totally free (in the sense that you may pay some kind of monthly fixed fee, and it may be limited to a certain set of friends etc), but the strategy is very similar – inside your own infrastructure, an operator can choose to price dump, eating the cost of the user using the network, and make it up somewhere else.

The true difference between Skype and traditional operators is that Skype’s ”unlimited on-network calls” userbase, i.e. their user acquisition funnel, is HUGE, because it is NOT geographically limited by a physical network and has DRASTICALLY lower underlying cost per user to Skype (i.e. servers and bandwidth cost) than for a traditional fixed operator.

The point is that the absolute majority of the user base, the so-called PC-PC business, which people consider the core business, is not really a business at all, it is rather one of the world’s largest user acquisition/conversion funnels into the traditional VNO business, financed by that business. If the conversion ratio of this funnel would drop below a certain point, the paid business won’t be able to finance the cost of the acquisition funnel (servers and bandwidth) and they will have to shut the free service down.

Caveat: Skype may be able to fund the free business stand alone with some type of adsystem, but there is little evidence that this works (if there was, they would have). Monetizing comms with ads is just very hard because it doesn’t reveal intentions very well, and comms is often used for productivity which means inserting ads is usually very annoying (subject for separate blog post though).

So to answer the question of what Skype really is, I would say:

- Skype is a tradtional VNO, with a non-traditional user aquisition funnel.

The customers are acquired in the ”new” world (i.e. on the Internet), but the money is made in the ”old” world (fixed PSTN). So if they indeed disrupt that old world, their revenue approaches zero.

In general, as ubiquitious, flat rate, mobile Internet access does happen, (e.g via 3G or WIFI) and if the operators and manufacturers allow unlimited VoIP, shifting to just making money off of bigger data packs (as ISPs did), Skype’s current revenue model will approach zero as there would be no need for Skype in/out. The ”emium” of Skype’s Freemium model will disappear….. So in that sense, Internet could kill Skype (or rather it’s current business).

I’m very excited to see what it will mean for Skype to get increasingly integrated into handsets such as the very popular INQ ”Skype” phone and the Nokia N97 announced at MWC this year.

The only way forward in that scenario is to get a cut somewhere else in the vertical value chain, i.e. either :

1. The device sales – because Skype increase the value of the handset, just as a manufacturer pay to license Adobe Flash on a device, or

2. The monthly flat rate the operator charges – because Skype increases demand for their data flat rate packages

Both of these ”vertical revenue shares” are very hard to get  (Apple got it from ATT though), and I don’t know if they exist at the moment for these devices (and if so the structure). I expect this is what Skype is trying to do or have done. Any comments from people more knowledgeable on this are welcome.

2. So what is disruptive…REALLY?

Well, what annoys me is that for several years I’ve gotten the impression that disruptive means killing an incumbent/existing business or business model using new technology”. That new technology usually being the Internet.

I don’t like that. To me, being truly disruptive means shifting revenue streams and spending for a certain service, such as retail, advertising, music etc , from one place/model , e.g. offline, to another place/model, e.g. online.

Internet advertising is truly disrupting tradtional offline advertising becuase the capabilities of the Internet such as interactive, measurable advertising,, direct purhcase and intention-revealing services such as search, are making the customers (the ad-buyers) shift their spending towards the Internet. But Google and Yahoo! and are not killing advertising as a business, they are just shifting the spending budget to online

In the same way, e-commerce is disrupting physical stores because features and benefits possible in electronic stores (“unlimited” inventory, recommnedations etc) are making customers shift their spend from offline to on-line stores, but Amazon is not killing retail as a business it is just shifting the spending budget to online!

VoIP however, is currently NOT shifting customer spend from traditional PSTN networks to the internet. All everyone talks about is simplyt that they will kill the traditional business, including the revenue and customer spend . And they eat cost and VC money to achieve that, for no apparent gain to themselves?…

Now, this is likely very good for human kind in the sense that it not only puts pressure on long distance call pricing, but more more importantly increases access to communication for more people, communication spurs innovation, peace etc. So it definitely speaks to me as a private person and a consumer! But from an investor point of view, that type of disruptive just doesn’t make any sense to me. On the contraty, I would stay away from companies who say ”Hey, we identified this lucrative business called communication, that people are evidentally prepared to pay for if it brings them value…..and we’re going to kill it!”

If I was a VC, I’d be looking for companies and business models that are, or at least have the potential of, shifting an existing, proven willigness to spend in some area into their product. I wouldn’t invest in a company who puts all my money towards killing an entire business for someone else….. What does that do for me? How do I get rich off of that?

A very common comment here is ”It took years for Google to find it’s model – so you have to make a bet”. Yes it took years, but Google’s value proposition was NEVER to simply kill some other existing business, it created entirely new value that didn’t exist before, and that’s always a good bet!

Now you might say that it turned out pretty ok for the Skype investors, and yes, I would’ve loved to be one of those ;-) But it is getting pretty clear that this was at the cost of Ebay, who are likely not going to be that well off as I think their sell price for Skype will be based on it’s paid VNO business – probably with some bonus for it’s amazing customer acquisition engine – but still, some sort of discounted cashflow estimate of the paid business.

A good friend of mine, Johan Gertéll, made the keen analogy to file sharing. File sharing is super successful as a service, and gives awesome user value! But it never managed to shift revenue and willingness to spend, and it’s consistently been a terrible investment for the VCs who went there…

Don’t get me wrong. As a end user, I want all this to happen! Free comms? Yes please! But I don’t want to be an investor in free comms…..


03 2009

Leaving Yahoo! Inc. to head up Spotify Mobile

I came to Yahoo! Inc in 2006 through the acquisition of Mobile social software company Kenet Works AB of which I was CEO and co-founder (learn more about me). After two years as Director of Product Management and later Director of Business Development, I’ve decided to leave Yahoo! Inc in order to join music startup Spotify.

Like many others , my first time using Spotify gave me that very rare ”Wooha!, wait a minute!”-feeling.

I got that same feeling using Skype for the first time a few years back. It wasn’t the VoIP technology, I’d used loads of other VoIP apps before, it was the implementation of the service. The fact that it just worked! I didn’t have to care about firewalls, NATs, VoIP servers or user SIP domains (because they didn’t use SIP). And the core proposition of the service, voice, had awesome quality! Even more importantly, because of this, my friends, and even my parents, got it to work!

Though the technology had been around for ages, it was the first time I, and most people around me started to seriously think of telephony over the Internet as an alternative to using the POTS.

I get that same exact reaction from my friends (and parents) today when they use Spotify for the first time. It just works, the technology is awesome, but invisible, and the content is there. It is the first time they realize and seriously consider that there may be no point in physically getting, owning and storing every song in the world on your own harddrive, you can just have access to all of them! The only thing you need to own and keep are your favourite song lists, and in a world where you are always connected, that’s actually a lot more portable and easy to manage across computers and devices. For most people, who never heard of “cloud services”, this is a pretty mind blowing realization!

So back in December, when I got the chance to join this great team of serial entrepreneurs, and work with some of Europe’s top engineering talent, around a topic such as music, that engages just about everyone from all walks of life, I just had to take it!

Starting in February, I will head up something that a lot of users have already requested and discussed extensively, Spotify on the Mobile. We obviously can’t tell you our plans yet, but make sure you subscribe to this blog to be the first to know!

I want to take the chance to say a big Thanks to all of the great colleagues and friends at Yahoo!, from Madrid (you know who you are!) to Germany, London and Sunnyvale. It’s been a lot of fun working with all of you and I’m very excited to see what the recent changes at the big Y! will bring!

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01 2009

Quick check – should you follow this blog?

First of all, Welcome!

On this blog, I will cover stuff that I’m passionate about, namely, the Internet, Telecom, Social Networks, product philosophy and how I try to model the world to make some sense of it.

I like to build theories and models around stuff and then vet them with people I know. Some models fly and are useful for decision making, and some don’t. I’m hoping this blog can expand that vetting circle to include you!

If you’re convinced, you can  subscribe to this blog or you can  learn more about me .

UPDATE! And ofcourse, news about Spotify mobile as I now work at Spotify!  :-)



01 2009