Mark Pincus Blog

Will SEC ever make corporate insiders pay for fraud?

we are all watching yet another venerable old company (AIG) blow up over corporate accounting fraud and investor misrepresentation. same old story, investors lose billions, often everything, while corporate insiders say 'i'm sorry'. then the SEC tries to go after a small few with expensive criminal proceedings that rarely yield much. in this case the chairman, maurice greenberg, has decided to 'retire' and walk with $2.8 billion, in addition to the millions he's already sold. maybe there'll be a whistle blower. maybe in 5 yrs he'll face trial after an enron style bottom up investigation. this white collar crime has become the norm and the SEC is useless in correcting it.

here's the easy solution - MAKE THEM PAY!. it would be soo simple. just create a rule that says any insider who sold during a time of accounting fraud (or any restatement) has to disgorge all profits. this would immediately make every insider liable for the billions they made without bothering to prove any knowledge of wrong doings. the rationale is that they didnt deserve the profit, that they were selling a 'lemon'. california has this for cars, why cant the SEC have it for stocks? instead we punish all companies (especially small ones) with sarbanes oxley (also known as SUX), one of the dumbest laws our country has ever produced. it makes about as much sense as asking people to swear on the bible before testifying.

last year over 400 public companies restated earnings. think about the billions that would have been recaptured for the injured investors. think about AOL where the insiders walked with billions, virtually unscathed, while the poor saps who owned stock in time warner were left with a billion dollar tab to the SEC over fraudulent accounting. how about gary winnick who sold $600m at global crossing before it blew up? he chose to give back $30m to former employees. with this rule, he would have returned the whole boot. john moores sold $600m in his company, peregrine systems, before it too went bankrupt for fraudulent filings. maybe these guys didnt know about it. WHO CARES. just make them give back the ill-begotten gains. and the SEC can still go after any of these people in the current long drawn criminal process and nab one out of 400 or less at a huge tab to the taxpayers.

we're all disgusted with ken lay and the insanity they brewed at enron (see the enron documentary. you wont want to invest in another texas company!). maybe a few of these guys will see jail time, but even then they'll keep the loot.

so why doesnt the SEC enact this obvious rule? i dont know. maybe the same wall street guys who run the very stock exchange that regulates them have a hand here. maybe this would go too far in causing some real pain to a group that represents massive political donors.

btw, there is a clear precedent for this in the current 16B short swing profit rule that says if an insider buys and sells in a six month period he must disgorge the profit. i'm sure this was enacted after realization that criminal laws were ineffective against insider trading.

if anyone has ideas on how we push the SEC to enact real dollar regulations that will start to protect investors and not white wash the same old game, let me know.

We Need OURMARKETPLACE.ORG

canter's ourmedia.org is a cool idea. i'm not sure i get how it will gain widespread adoption without 'network partners' to make use of it and bring the end users, but we'll see. my question is why isnt anyone developing 'our marketplace'? i mean an open source ebay that any user can use to buy, sell, trade, meet or do any activity without any friction; friction being fees and other commercial offers.

how this might work - the idea would be to create open servers and open databases that any other network could replicate and add onto - or that is, anyone could freely aggregate this db into their own and syndicate back into it.

benefits -

- consumers could see all items ranked by price or whatever measure they like.
- vendors could participate without having to pay for the marketing fees to get the consumers.
- consumers wouldnt have to ultimately pay the bill for being marketed to.
- networks could compete on value added services rather than bigger marketing budgets.

example - my friend works for the largest stamp vendor on ebay. they pay about $30k a month in fees (which just went up) and dont make any profit. one might argue that ebay brings him customers and only takes 10% and he can choose to leave it. however, makes me wonder...what if he could just tell the network of his available inventory and prices and the network can make sure any interested buyer immediately knows.

doesnt this sound familiar? it's called NASDAQ and NYSE. imagine if the stock market worked like the ecommerce on the web...maybe i want to sell 1000 shares of google, i can tell ebay or amazon or try 10 other networks that may or may not have an interested buyer. they may charge me varying levels of upfront and backend fees. the buyer then has to rummage through these different networks. because it's so fragmented neither side has a lot information what the last 1000 sold for or all the offers out there. neither buyer nor seller benefits, only the intermediary who looks to profit off of massive fragmentation.

if all the networks talked to each other in the same language this wouldnt happen. i could visit any stamp site and see all stamps and their prices historical and present. the marketplace function would move from customer acquisition and seller aggregation to value added services like surfacing most relevant offers or best reputation info or dynamic pricing.

i believe this can only be done in an open source manner as it must work like the DNS. it must be a freely distributed db and open protocal that any network can use and enhance.

if anyone knows of efforts that approximate this, i'd love to hear. and i'd say that my company, tribe.net, would happily participate in this type of endevour.

Counting people not blogs

dave sifry from technorati has sent around an interesting chart which tracks total blogs and blog creation. he finds that there are 40,000 new blogs created a day which is twice the number from 5 months ago. while this is exciting, it's ironic that on the same day myspace put out a press release saying they are adding 60,000 new users a day. as most of you probably know, myspace is giving its users unique url's and basic blogging/diary capabilities. now i'm not disputing whether dave is wrong to exclude social network hosted 'blogs' or what constitues a blog, but i do wonder why noone is yet tracking the growth of the peopleweb. seems to me, we should be tracking the total number of people with 'open' profiles of any sort. that would include blogs that are identified as people and SN profiles that are open and publicly findable like blogs.

why should we care? (you may be now asking) well, this will give us an idea of what populations and what part of the overall population is findable and linkable in a public way. seems to me that at some point of critical mass, some of you smart hackers will start to turn on cool applications that will surface the power of the peopleweb. no more waiting for friendster, myspace, tribe to finally turn on the feature you wanted. no more trying to hack it together in a non-scalable way on your neighborhood blog. there will be apps running as web services across the peopleweb. obviously, i see classifieds working pefectly. i'm sure there will be much more fun apps too.

will this all happen through tags? we've all seen tags grow into the latest hot idea and it seems like this could be a vehicle for these new apps, however, i do not believe that normal people (the masses) will ever care about them or adopt them. maybe this is obvious, but tags make a ton of sense in the background, built into the 'sell my car' or 'get me a date' app.

PeopleWeb gets some play

wow. i'm pretty new to this blogging world and am just now experiencing what i guess has been called the echo chamber (?). it's cool. in the 3 days since i (finally) posted my thoughts on the peopleweb a lot of smart people have chimed in with great insights. i'll include some of their snippets here (and i apologize if i get the netiquette wrong) and post my own comments back.

dave evans of corrante says...

I cannot imagine that Match or Yahoo! or Sparks will open up their database to anyone who wants to access their members, whether it be paid-for data-feeds or advertising rates. Big dating sites currently feel they need to lock in their members, making it easy for them to leave for another service is not in their best interest.

to which i say...dave, i think we're closer than you realize. you can go see an example of how the interconnected people search may work on tribe right now. if you look at the 'connected tribes' box on any tribe page you will see that we programmatically link all related groups together via their overlapping membership. this is how the peopleweb will be navigated. you will start to a) identify that you are a person, ie. profile and b) that you are linked to another person usually via a group, friend roll or tribe roll.

i believe that ultimately (in 18 months or less) networks which do not let users 'own' their own profiles and expose them where and how they want will lose their audience faster than you can say friendster. imagine if you could only email people wihthin the same host network?! anyone remember compuserve? anyone remember their email address? (i think mine was like 15555.2345@compuserve.com:)

as for dating sites that dont want to share...i think they'll have no choice within the next year. they'll face a prisoner's dilemma whereby the first to fully embrace the peopleweb will benefit from greatly reduced marketing costs as their members get found by all the people aggregation engines that will flourish; while the rest will soon lose out as they wont be able to keep up with the price reductions from the leader - ie. match becomes the low cost provider of dating because they can add people at $10 instead of $50. they reduce the price to to $10/month which propels them even faster while yahoo personals and the rest cant match them.

btw, this should play exactly the same way for job sites (and is!). indeed.com is quietly crawling everyone from careerbuilder and monster to craigslist. big sites that stay locked may find one day they're paying far more than competitors for traffic. they will need to market their listings, not their brands. just like match will market its hotties and not its brand. and btw this already occured in news. if a news site wrote about the tsunami and wasnt found on google (30% of all news searches), it didnt cover the event.

and stowe boyd from corrante talks about 'unlinking from social networks'...

So we will all becoming unlinked from today's style of networks, when we can instead inhabit our own nodes and become networked through tools that help us find other likeminded souls. But we wouldn't be forced to have ten thousand timny fragments of our digital identiy spread all over the Internet: music preferences here, sex preferences there, business bio yonder.t of FOAF

this is exactly what tribe will enable with our open profiles. we'll let people aggregate themselves in one place. you will ad modules for your blog(s) and rss feeds (typepad), your music playlists (webjay), photo albums (flickr), dating profile (match), references (linkedin), events (evite) and seller ratings (ebay). well, tribe will have the platform in place that will enable this and in many cases let our users scrape their info back. course it will be way easier once all these sites choose to enable their users and turn themselves into web services.

why shouldnt evite be everywhere on the web that people think about events? why should myspace, friendster, tribe and 30 other sites rebuild this and force users to adopt yet another evite function? <em>why cant evite see how much this will propel their business rather than trying to recreate everyone else's wheel by making users creat YASN? OY! we (users) need best of breed services all integrated together. we (service providers) need to be able to be great at one thing and not worry about audience aggregation, registration, photos, blah blah blah. insider pages should just be that. why should they have to buy an audience, convince them to create profiles, invite friends etc...? and they dont want to do any of this but today they have to.

The PeopleWeb

i believe we are close to the point where people will start to be organized online into a 'peopleweb' where browsers will surf and search through people not pages. i will attempt to describe the what, how and why below.

what is the peopleweb? as more people take on 'open' identities online, that can be crawled, found and linked to with bits of semantically organized data like 'profile', 'about me' or 'my tribes or groups', there will soon be an ability for search engines to organize people into relevant groupings. the key relevance here will be based on two intersections; people's group affiliations so that i can quickly find experts in flying bonanzas in baja and people's credibility which may be estimated in a number of ways from how 'linked' you are to who you're linked to to slashdot type ratings if they evolve to work in an independent fashion.

how will the peopleweb happen? along with my vision of the revolution of the ants, the big portals will all succumb to their audience's desire for openness and transportability of online identities. people will no longer choose to invest in a profile that is locked into msn or friendster (or tribe). just like email had to be free and compuserve lost out to aol, so too will profiles. we already have this with blogs. my company, tribe.net, will soon be launching open profiles which will let people compbine elements of their blogs with social and community networks. this will occur with virtually every site, where users will decide who has access to what, whether it's by degrees of separation or group affiliation. this wont be decided by my company, friendster, linkedin, yahoo's new thing etc...

what will the peopleweb enable? well, imagine a future where the network acts as one database. you will tell the web that you are single and what your dating criteria is. your dating profile will only be shown to those people (so no more daily humiliation of your sisters and friends snickering that you describe yourself as a tall dark handsome romantic). kinda unhappy with your job. no problem. tell the network you're available for jobs paying over $150k, vp level, and maybe you want to limit to a few companies or block them. wanna organize a poltical revolution without leaving your home? just tell the network you are into 'emergent democracy' and 'legal revolution' (possibly through group tags) and you will automagically be connected with all the other archair revoultionaries.

i find it exciting that google has no inherent advantages in organizing the world's people and groups. google's forte has been normalizing disparate information that didnt necessarily intend to be found. the peopleweb will be much more about people wanting to be found. if people choose to semantically organize, then the act of aggregating them and sorting relevance will be a trivial task, quickly commoditized and performed by any service.

beyond the peopleweb, the network becomes the marketplace...wanna sell your car? just tell the network make, mileage and price. no more worrying about which network and price will work out best. in a world where all information is free, database lockin and its proponents go away. in this world, the ante is aggregation and syndication, winning is about surfacing better relevance. interesting questions to me are what role does ebay, amazon (used merch) and google play. if i can readily find any new or used book from any online bookstore; if i can just as easily get bids on my car with joecars.com as ebay, where is the value? does the traffic value go away? and then what value is left? do the intermediaries and marketplaces get commoditized and wiped out? will this be similar to how ECN's wiped out the huge spreads and profits of wall street market makers? i wonder if one day ebay's value gets disaaggregated into ratings, payment processing and escrow?

what will the roadmap look like? my guesss is that in the next year we'll see the more enlightened big players realize that they are better off aggregating and syndicating than trying to stand alone defending their franchises and competing with the overall network. join it and extend. dont fight it and get left behind. AOL couldnt keep up with the overall network. i dont believe ebay will be able to either. (in fact, ebay announced today that they are launching an int'l competitor to craigslist. i think they will soon learn that the most powerful approach will be to aggregate everyone out there and syndicate back out. we'll see.)

dont ask dont tell stage...today we're at a point where officially the big players say no crawling, but unofficially they let it fly. indeed.com is quietly crawling everyone job service from career builder to craigslist. i hear that lycos has a dating service crawling all. makes sense. if i'm match.com and have the biggest db of single women, i should be in the pimping business. you can find my women everywhere but pay me if you want to meet them.

all for now. love to hear where any of you are seeing the peopleweb and one marketplace happen.