Yes, Gawker Is Conflicted—But Anonymity Is Still Valuable

As promised—if somewhat delayed—Gawker Media has launched its new commenting system, the one that founder Nick Denton told me he hoped would turn the online media world upside down and put conversation at the heart of the site instead of just the story. Whether it will actually do that in any real way remains to be seen, but there is one interesting aspect of the new system that’s unlike almost any other: Gawker’s commitment to anonymity. At a time when everyone is talking about how important it is to have real identities, Denton is going in the opposite direction. And while that may benefit Gawker for all kinds of selfish reasons, it’s still a goal worth supporting—and an experiment worth watching.

As Denton described in his interview with GigaOM, the new commenting system does away with the previous tiered approach in which certain preferred commenters were awarded “stars” for good behavior, which gave them extra privileges. This is similar to the way online communities such as Slashdot handle comments—it awards “karma points” to its users, giving them extra benefits—and the New York Times also recently rolled out a new commenting system that allows certain favored users to be promoted to a higher level.

But Denton says this approach simply doesn’t work, because the most frequent commenters aren’t always the ones worth hearing from, so they get overwhelmed by social-media experts. As he put it in another interview at the South by Southwest conference:

The most interesting comments, they don’t come from people with Klout scores. They don’t come from people who actually have a long history of commenting on our sites or any sites. Often it’s a first-timer. Often it’s anonymous.

The last part of Denton’s comment is the key. So what Gawker has done is more than just take a step back from the “star” commenter approach: It is effectively doubling down on the concept of anonymity in online discussion, as Denton notes in his post. And that’s an interesting move, especially since the general trend over the past year or so has been that anonymity is something that needs to disappear, particularly when it comes to comments and online discussion. It’s one of the reasons so many newspapers and other sites have outsourced their commenting systems to Facebook.

Facebook has been one of the main promoters of a unified online identity that has a “real” name attached to it, something critics say the giant social network is interested in primarily because it makes it easier to sell advertising. Founder Mark Zuckerberg has gone as far as to say he thinks having one identity for personal reasons and another for professional reasons is a “sign of a lack of integrity,” and his sister Randi said recently she can’t wait for anonymous commentary to be eradicated from the Internet.

Google also jumped on the “real name” bandwagon when it launched its Google+ network, saying verified names were necessary for civil conversation, and it initially blocked anyone who used a pseudonym. After a storm of criticism over this move, however, the company said it was moderating its approach somewhat and would allow people to use pseudonyms in addition to registering with their real names. Meanwhile, a number of high-profile bloggers have turned off comments because they say the noise level is not worth the effort, and much of this is also blamed on anonymity.

As Denton points out in his defense of anonymity, however, the benefit of allowing it in comments arguably outweighs the noise. In particular, the people who are the most likely to have inside information about something important or newsworthy are also the least likely to want to use their real names—and less likely to be long-term commenters who have earned stars or other rewards. In Denton’s view, journalists such as former New York Times reporter Judith Miller are happy to use anonymous sources to help pull an entire country into a war in Iraq, but no one else gets to question them in public.

It’s time for the leakers and the moles to bypass the traditional gatekeepers of information; and it’s time for them to be subject to challenge, not just by their pet reporter, but by readers.

While the Gawker founder would like his defense of anonymity to be seen as a high-minded commitment to journalism, it’s obvious he has his own unique interests in mind as well: Leakers and moles, all of whom are more likely to want to remain anonymous, are also a great source of the kind of insider gossip and speculation that many of Gawker’s properties are known for—the kind that are a great source of traffic regardless of whether they are true or not. And that’s what the new “Burner” account feature is designed for: Commenters effectively get a one-time, totally secure and anonymous identity.

But regardless of whether Gawker’s interest in anonymity is selfish or not, I think it is still worth cheering, especially when everyone else is in such a hurry to force real names to the forefront. Just as anonymity allows gossip to spread rumors in Gawker forums, it also allows those with inside knowledge of all kinds—or stories to tell that might put them in danger, in the case of such controversial subjects as the Arab Spring or other contentious topics—to contribute to the discussion, and that is a valuable goal we shouldn’t lose sight of in our attempts to outlaw trolls and spam.

Also from GigaOM:

The Online Identity Race Is Just Beginning (subscription required)

MIT Creates Glare-Free, Self-Cleaning, Water-Repellent Glass

U.S. iPhone App Downloads Fall After Big Holiday Season

Exclusive: Facebook’s Scuba Project Dives Into Performance Data

The Real Reason for the Greentech IPO Missteps

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The History of 3D Technology

Reasons to Get a PhD in Educational Leadership Through Educational Technology

GE's Billion-Dollar Bet on Big Data

The Steinmetz barn housed GE's first laboratory

General Electric’s (GE) first research laboratory was housed in a barn in upstate New York; its newest is going up in Silicon Valley. In a vivid illustration of how the locus of U.S. innovation has shifted from the East to the West Coast, GE is pouring $1 billion into a facility in San Ramon, Calif., that will be staffed with as many as 400 people.

San Ramon will be home to the new Global Software Center

New hires for the Global Software Center, which is set to open in June, are coming from Oracle (ORCL), SAP (SAP), and Symantec (SYMC). Bill Ruh, the vice president running the venture, was lured away from Cisco Systems (CSCO) last year. The tech industry veteran says persuading developers to forgo windfalls from initial public offerings to come work at an industrial stalwart is not as difficult as one might think. “They want to be in on the Next Big Thing,” he says.

The big thing Ruh is referring to is called “big data,” the fast-growing market for information technology systems that can sift through massive amounts of data to help companies make better decisions. Just as information on millions of Facebook users is prized by advertisers, the details companies amass from their operations can be used to cut costs and boost profits. Norfolk Southern (NSC), which buys diesel locomotives from the Fairfield (Conn.) company, uses customized software to monitor rail traffic, reducing congestion and allowing trains to move at higher speeds. The fourth-largest U.S. railroad estimates that making trains run an average of 1 mile per hour faster will save more than $200 million.

The potential for such technologies is so huge that it’s impossible to come up with an estimate of how much the market is worth, according to Michael Chui, a senior fellow at McKinsey. “It’s just too big,” he says. That doesn’t mean there’s room for all comers, according to Ping Li of Accel Partners, a venture capital firm investing in big-data startups. “If you’re not getting in right now it’s hard to see how you can keep up with the pace of innovation,” he says.

GE’s annual revenue from software already is about $3 billion and on pace to grow to $5 billion in the next couple of years, Chief Executive Officer Jeffrey Immelt told investors in December. Ruh says he wants to marry big data with some of GE’s biggest businesses. He sees an opportunity in helping airlines that buy GE jet engines monitor their performance and anticipate maintenance needs, reducing costly flight cancellations. The technology could also help companies that lease commercial vehicles from GE Capital to optimize delivery routes and provide early warning that a truck may need a trip to the repair shop. “If I can begin to see that something is starting to deteriorate and get out there and fix it before it breaks, that’s a foundational change,” Ruh says. “In the end, what everybody wants is predictability.”

When it comes to big data, GE is playing catch-up to IBM (IBM). The world’s biggest computer-services company is working with energy companies to extend the lives of oil and gas fields by improving oil recovery through analytics. IBM also is working with Vestas Wind Systems (VWS) to find better locations for wind farms. Newer entrants are jumping in as well. Splunk (SPLK), a San Francisco-based startup that just went public, says its customer rolls exceeded 3,700 as of the end of January.

GE is counting on its expertise making industrial equipment—from gas-fired electrical turbines to locomotives—to give it an advantage over rivals focused on exclusively providing data solutions, says Ruh. “If you don’t have deep expertise in how energy is distributed or generated, if you don’t understand how a power plant runs, you’re not really going to be able to build an analytical model and do much with it,” he says. “We have deep insight into several very specific areas. And that’s where we’re staying focused.”

The bottom line: GE is establishing a foothold in Silicon Valley as it targets $5 billion in software sales by 2014.

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Google Fiber in Kansas City Makes Hollywood Nervous

Of all the media industries dragged kicking and screaming into the brave new digital world—news, music, publishing—Hollywood has held up comparatively well. Although physical sales of DVDs and Blu-ray are falling, no single Web company dominates the online video realm, and consumers mostly still get their programming via pricey cable bundles. Poky Internet speeds—the U.S. average of about 5 megabits per second ranks 26th globally—means that pirates can’t swap bulky video files with the same insouciant ease as they do MP3s.

Google (GOOG) might change that. In 2010 the company announced plans to bring super-high-speed Internet access to select communities in America and in 2011 picked Kansas City to start. The search giant has said it hopes to spur innovation among cable companies and Internet service providers by demonstrating what’s possible with Internet speeds 100 times faster than the U.S. average. The project could also foreshadow dramatic changes for Hollywood, both because of the specter of piracy and Google’s possible experiments with new ways to distribute content legally.

Photograph by The Kansas City StarKansas City Internet speeds will increase hundredfold with Google Fiber

Google has already strung more than 100 miles of fiber-optic cable along utility poles in Kansas City, Kan., and Kansas City, Mo., and expects to connect its first homes in the next few months, says Google Fiber spokeswoman Jenna Wandres. Its test network of about 850 homes in a faculty neighborhood near Stanford University in Palo Alto, Calif., already provides blistering download speeds of 922 megabits per second and upload speeds of 883 Mbps. At those speeds, Web surfers—or pirates—can download a DVD in under a minute or a high-definition Blu-ray in five.

Wandres stresses that Google Fiber isn’t meant to empower pirates: “We hope higher speeds will actually make it easier to deliver and download more authorized content,” she says. Nonetheless, Howard Gantman, spokesman for the Motion Picture Association of America, notes that piracy is always a concern of the entertainment industry. Google Fiber “could be a great opportunity for consumers whose access to creative content is often hampered by slow speeds,” he says. But in South Korea, “the home entertainment marketplace was decimated by digital piracy” enabled by the widespread availability of high-speed Internet.

Google doesn’t have the intent or money to build a nationwide fiber network, which is a prerequisite for apocalyptic piracy. Such a project could cost $350 billion, according to the Federal Communications Commission. Still, there are signs that Google’s experiments could affect Hollywood. In December the Wall Street Journal reported that Google was in discussions with Walt Disney (DIS), Time Warner (TWX), and Discovery Communications (DISCA) about offering their content via Google Fiber. Google subsequently obtained licenses from Kansas and Missouri state regulators to offer video services over its fiber-optic network. In February the FCC gave the search company permission to operate a satellite farm, pulling down transmissions that typically carry TV signals, near its data center in Council Bluffs, Iowa. The state’s economic development authority has approved tax breaks to Google for a planned $300 million expansion of that data center.

Such evidence fuels belief that Google will become a content distributor, although the company won’t comment on its plans. Craig Moffett, an analyst at Sanford C. Bernstein (AB), speculates that Google could use its raw data processing power to store TV programming, essentially creating a giant, searchable DVR in the cloud and distributing programming—live or on-demand—to Android smartphones, iPads, and TVs. It could also use the network to develop more targeted ways to sell and deliver TV advertising.

In short, by creating its own pipe, Google can play with new ways to allocate bandwidth between Internet and TV services and see what Kansas City denizens adopt. Mitch Singer, the chief digital strategy officer for Sony Pictures Entertainment (SNE), believes media companies can’t ignore such experimentation. “Google Fiber will definitely be a disruptive force,” he says. “The studios know that if we stick our heads in the sand, we will fail, pure and simple.”

The bottom line: Regulatory licenses and other evidence point to Google considering video distribution as part of its Kansas City fiber project.

Lopez is a Bloomberg Businessweek contributor.

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HP Innovation, One Pricey Giant Screen at a Time

With a tsunami roaring toward Sendai, Japan, Hewlett-Packard’s (HPQ) Photon Engine software directs the response at a nearby command center. Collecting data from traffic cameras, first-responder vehicles, smartphones, and satellites, the software displays information on a huge touchscreen. It lets emergency personnel have what military types call “full situational awareness,” and quickly suggest escape routes.

It’s only a simulation, one that took place recently on HP’s Cupertino (Calif.) campus. Todd Bradley nods approval. The executive vice president of printing and personal systems at the computer giant’s newly merged PC and printer business says Photon Engine is a step toward renewing the company’s “heritage of innovation” and silencing critics who say its best days have passed. Bradley and Chief Executive Officer Meg Whitman say they plan to reverse the decline in research and development spending that occurred under previous CEOs. Last year, HP spent 2.6 percent of sales on R&D, down from more than 4 percent seven years ago. “We underinvested in innovation,” Whitman says.

Photograph by David Paul Morris (Hurd)

The popularity of mobile computing—and HP’s inability to adapt to this new world—has left Bradley’s group producing commoditized gear with dwindling profits. Operating margins have fallen from 8 percent a decade ago to 5.2 percent in January. The increasingly paperless offices that mobile devices make possible have weakened HP’s once highly profitable printer business. The company’s attempt to enter more lucrative markets by spending $1.2 billion on mobile device maker Palm in 2010 fell flat. HP stopped making devices using Palm’s webOS software in 2011.

Bradley acknowledges that the company is behind in integrating hardware and software into “really compelling packages that can compete with Apple (AAPL) and anyone out there.” Photon Engine is an early attempt at catch-up. The package varies, but typically includes projectors, screens, and a high-powered PC and costs $10,000 to $125,00. At the heart of it is software called Pluribus, which is geared to taking disparate forms of data—video streams, GPS coordinates overlaid on a map, Web pages, even 3D footage—and then instantly formatting high-resolution versions for screens of any size. The data can come from iPads, traffic cameras, or other sources, and the output can be displayed with cheap projectors or on $100,000 screens appropriate for concert stages.

Thanks to Photon Engine, HP is “years ahead” of rivals in the so-called immersive displays business, says Richard Doherty, co-founder and director of consulting firm Envisioneering Group. “It should be named the emotion engine because it gives people the ability to see motion, and process information, with the same depth and connection that you’d get from looking at something with your naked eye,” he says.

Fashion house Marchesa recently used Photon Engine at a Bergdorf Goodman store in Florida. Shoppers wore glasses to watch 3D images of models wearing Marchesa’s spring line saunter across a huge screen. Marchesa marketing director Allison Lubin credits the technology with doubling sales that weekend. IMS Research expects the immersive displays business to grow 40 percent annually and reach $7 billion worldwide by 2013. Photon Engine could also help HP sell monitors, projectors, and high-powered PCs, lines that brought in $3 billion in sales last year.

HP is waiting for the fall launch of Windows 8, with its new touch-optimized Metro interface, to have another go at the consumer mobile market. Bradley hints a big emphasis will be on convertible laptops—lightweight PCs with swiveling or detachable touchscreens—to compete with Apple’s iPad and other tablets. Whitman says HP’s turnaround will take three to five years. “It took us a while to get into this, and it’s going to take us a while to get out,” she said in February.

The bottom line: HP says Photon Engine shows it can integrate hardware and software. It’s waiting for Windows 8 to prove it can do the same in mobile.

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3D Printers: Make Whatever You Want

On most weekends, 14-year-old Riley Lewis and a few of his eighth grade friends gather at his house in Santa Clara, Calif. The group of about five, depending on who’s around, grab some chips and bean dip and repair to the garage, where Riley and his dad have created something of a state-of-the-art manufacturing hub. The boys can pretty much fabricate anything they can dream up on a machine called the RapMan. As the hours tick by, they cover tables with their creations: rockets and guitar picks and cutlery. They hold forth on plastic extrusion rates and thermodynamics and how such forces affect the precision of the objects they can produce. “That’s a very beautiful gear you have printed,” a boy named Douglas tells Riley.

The kids obsess over what versions of the Linux operating system they run on their laptops and engage in awkward banter. “I will stab you with flash drives,” Riley tells Vernon, a skinny boy with a braided rattail who shows off a pair of freshly made plastic brass knuckles. Vernon says, “I want to print an essay for one of my teachers and hand it in on sheets of plastic instead of paper just to confuse people.”

Author Ashlee Vance as rendered by MakerBot

Riley and his friends have accepted as a mundane fact that computer designs can be passed among friends, altered at will, and then brought to life by microwave oven-size machines. The RapMan is a crude approximation of far more expensive and sophisticated prototyping machines used by corporations, much in the same way that hobbyist PCs were humble mimics of mainframe computers. Riley and his dad, David, spent 32 hours putting together a 3D printer from a $1,500 hobbyist kit.

Like many 3D printers, the Lewises’ RapMan melts plastic (similar to that used in Legos) and then squirts it out of a movable nozzle in a controlled fashion. The nozzle goes back and forth, accompanied by an electric hum, depositing one ultra-thin layer of plastic at a time on a platform. Asked to build a cup, the machine will put down one ring of plastic, lower the platform by a fraction of a millimeter, put down another ring of plastic, and keep going until the cup is done. Want a handle, or your name inscribed on the cup? The RapMan can do that, too. Simply launch any number of free 3D software applications, tweak the object to match your desires, and click print.

For 25 years, carmakers and aerospace companies have used industrial-grade 3D printers to fashion prototype parts for their vehicles. More recently, the medical field has turned to the machines to make custom hearing aids and invisible braces, while architects use the technology to produce models and consumer electronics companies to build prototypes of their latest gadgets.

To a range of industries, 3D printers have become indispensable for doing business. The large industrial systems now run in price from about $5,000 to $1 million. These days, they can print in different colors of plastic and employ other materials such as metal, glass, and ceramics. Software makers are harnessing this power, making much better tools for manipulating objects.

Today the market for 3D printers stands at about $1.7 billion, says Wohlers Associates, a consulting firm that tracks the industry. With sales of the machines rising quickly, Wohlers predicts the market will reach $3.7 billion by 2015. The industry has gone through a consolidation. Over the past couple of years, 3D Systems (DDD), the company that invented the 3D printing industry, bought one of its rivals as well as a multitude of hardware, software, and design companies. Two other leading players—Stratasys (SSYS) and Objet—recently agreed to merge.

As so often happens with industrial-grade technologies, 3D printing has flowed downstream to consumers. 3D Systems hit the road in mid-April, hawking the Cube. It’s a RapMan at heart but comes preassembled and looks like the brainchild of Apple’s (AAPL) industrial designers. For $1,299, anyone can now buy a 3D printer, hook it up to a Wi-Fi network, and begin downloading files that will turn into real objects. Meanwhile, design software maker Autodesk (ADSK) has released 123D, a suite of free applications that lets ordinary people design and customize objects on their PCs or even their iPads and then send them to a machine like the Cube.

These players have been joined by consumer-oriented upstarts that specialize in printing video-game avatars or topographical maps so you can memorialize in plastic a favorite campsite at Yosemite. A Brooklyn-based manufacturer called MakerBot Industries has dominated the hobbyist market. It’s sold more than 10,000 desktop 3D printers and has just released a preassembled model called the Replicator that costs $1,749. “We have sold machines to Disney (DIS), Google (GOOG), Microsoft (MSFT) and send them to dorm rooms all over the country,” says MakerBot co-founder Bre Pettis. “Our users could be people who work at NASA or Pixar or an ordinary person who wants to live in the future.”

Pettis and his fellow champions of 3D printing do tend to wax grandiose about the technology. It’ll mean the end of bland mass production. Housewares makers will be freed from designing forgettable, lowest-common-denominator products that get stamped out by the millions at some Chinese factory. Amazon.com (AMZN) could lower shipping costs by having items printed at its sorting centers or letting shoppers buy designs and print merchandise at home. Scott Summit, a veteran industrial designer, sees a new generation that has already embraced these ideas. “Twenty-five-year-olds today aren’t burdened with traditional methods and rules,” he says. “There are guys who have been doing 3D modeling since they were 11 and are caffeinated and ready to go. They can start a product company in a week and, in general, have a whole new take on what manufacturing can be.” Summit should know. He’s 3D-printing custom legs for amputees.
The ability to print physical objects wasn’t invented in Silicon Valley or some well-funded corporate research lab. It originated about 30 years ago in Southern California, where Chuck Hull was working for a modest-size manufacturer called Ultra Violet Products, or UVP. An engineer and physicist by training, Hull helped steer the development of the company’s ultraviolet-light curable resins, which were used to add protective coatings to furniture and other surfaces. Always a tinkerer, Hull began experimenting after hours with laying down numerous coats of the resin to make plastic models.

“I had been an engineer for 20 years, and it was always really difficult to prototype plastic parts,” says Hull, now 73. “You would design a part, go to a toolmaker who would build a plastic model, then you would need to fix any problems and start again. The whole process took about six weeks, so the idea of building parts for yourself with a machine was really cool.”

In a back room at the UVP offices, Hull crafted the first crude 3D printer. He filled a small basin with liquid resin and placed a platform controlled by an elevator mechanism inside the basin. Then Hull mounted a movable UV light fixture with a shutter overhead and wrote some software to control the orchestration of all these parts. The platform would be raised near the resin’s surface so that just a thin layer of the liquid sat on top. The light would turn on, the plastic would harden, and then the machine would lower the platform, lay down a new layer of resin, and the process could begin anew.

When Hull showed the machine to UVP’s president, he received disheartening news. The company’s main business had soured, and Hull, along with several other workers, was going to be laid off. So he talked the president into a deal: Hull would start a company around the new technology and give UVP part of the enterprise. Hull patented the process, dubbing it stereo lithography. “There I was, a 40-something-year-old doing a startup,” he says. “We called the company 3D Systems and were off and running.”

A tall, rangy character with a gray mustache and a deep voice, Hull still works in Valencia, Calif., as 3D Systems’ chief technology officer. He has a research lab full of testing equipment for new machines and materials located in an office park. The rest of the company, though, picked up and moved six years ago into sparkling new headquarters in Rock Hill, S.C., packed full of machines that seem straight out of Star Trek.

In a glass-enclosed area near the center of the Rock Hill facility, production manager Chris Lewis stands in front of an sPro 230. This toolshed-size machine is a factory in and of itself. It can produce a shopping cart as easily as it can make a car dashboard, lighting fixture, or toy castle.

Each sPro 230 gets filled with a special type of plastic powder that costs $55 a pound. Lewis sends a computer-generated 3D image of an object to the machine, and it sets to work building the product one micro-thin layer at a time. A mechanical arm spreads a layer of powder on a platform inside the sPro 230. Then a laser beams down from overhead, fusing the powder into solid plastic in specified places and leaving the excess powder undisturbed. Next, the platform drops by 0.003 inches to 0.006 inches, depending on the job; the roller coats the platform with another layer of powder, the laser fires again, and so on. Imagine building a pyramid from top to bottom. The laser would first fuse the powder to make the top of the pyramid and then gradually make ever-larger squares to capture the object’s expanding contour. If you wanted ridges or squiggly lines along the side of the pyramid, the super-precise laser would simply trace out the desired pattern instead of making perfect squares.

While the process still requires handwork today, it’s quickly becoming faster, cheaper, and more automated, which opens the technology up to new customers. Already companies such as Mercedes (DAI), Honda (HMC), Boeing (BA), and Lockheed Martin (LMT) use 3D printers to fashion prototypes or to make parts that go into final products. The technology has broadened out to attract vacuum maker Oreck and Invisalign, which produces custom braces for teeth. Microsoft also uses a 3D printer to help design computer mice and keyboards. “A person who buys a BMW will want a part of the car with their name on it or to customize the seats to the contours of their bodies,” says Abe Reichental, chief executive officer at 3D Systems. “We’re printing with chocolate in our research labs today, so Godiva might print a candy bar with your face on it. The possibilities are only limited by our imagination.”
Reichental, 55, arrived at 3D Systems eight years ago to get the company’s business in order. He had spent 22 years at Sealed Air (SEE), a packaging company that grew from $78 million to $4 billion in sales in that span. Reichental’s last job at Sealed Air was running the division that made plastic films to coat food and other items. It may not sound sexy, but the role taught him the nuances of producing both industrial machines and the materials they consumed.

From a massive office full of 3D-printed objects including a giant ant, machine gears, and a magenta-colored bust of Walt Disney, Reichental talks about proprietary plastic. He’s a man of modest height, with a precisely trimmed beard and a tweed jacket. He says about 70 percent of 3D Systems’ revenue today comes from recurring sales of materials, up from 10 percent when Reichental took over. Last year the company’s annual revenue rose 44 percent, to $230.4 million, from $159.9 million. “The company we have today has little to no resemblance to the one I found,” Reichental says.

He peers out to the factory floor and can see into the various glass-enclosed manufacturing hubs. One of these large rooms contains the tool shed-size machines, which are used to build parts for customers. Another room has cheaper, refrigerator-size machines meant to sit on a customer’s manufacturing floor or at an architect’s or an orthodontist’s office. In the back cleaning areas, 200-pound bags of powder lie next to workstations, looking like deflated balloons. They’re surrounded by yet more machinery that collects the so-called virgin powder from excavated items, so it can be used again. The smell of burnt plastic hangs in the air.

Reichental brags about the print-for-hire services 3D Systems runs out of this facility. Customers will order parts, and Lewis, the production manager, uses special software to arrange them and cram as many objects into one block as possible.

What really has Reichental enthused, though, is 3D System’s foray into affordable printers for consumers. He shows off the early versions of the Cube, which is slated to go on sale in May. Unlike the hobbyist kits, the Cube ships ready to print. People buying the machine will find dozens of 3D printable objects preloaded, meaning they don’t have to learn the nuances of 3D design software right away to make something.

The machine can print in dozens of colors and up to 5? by 5? by 5? inches in size, which is enough to handle objects such as chess pieces, jewelry, and cookie cutters. The Cube’s source material is $50 spools of plastic thread, one of which is enough to make about 15 bracelets capable of holding an iPod Nano. Each bracelet takes 90 minutes to print. You can use software such as Autodesk’s 123D to design your own object or pay for one of the thousands of designs at the 3D Systems Cubify online store—$4.99 for an elephant, $10 for a ring, $15 for a razor handle.

The Cube faces stiff competition in the consumer market. Shapeways, headquartered in New York, is basically the Amazon.com of 3D printing. Its website lets people post product designs and make the objects to order. A coral-shape lamp goes for $760, while trinkets cost just a few dollars. Shapeways also has online design software that lets people personalize things like napkin rings to give their next dinner party added pizzazz. Once you place an order, Shapeways prints the object—often using an industrial machine from 3D Systems or another supplier—and mails it to you.

The unique qualities of 3D printers result in objects that would be near-impossible to create by any other means. You can, for instance, order a ball inside a ball inside a ball inside a ball. “There are other items that have 70 moving parts but are printed as one single piece,” says Peter Weijmarshausen, CEO of Shapeways, as he pulls a 3D-printed bikini out of a box. (It’s made not of fabric but rather interlaced rings of plastic woven together by the 3D printers.) The company sells about 100,000 objects per month; most popular are jewelry, iPhone covers, and model trains.

Like the kids in the Lewis family’s garage, Weijmarshausen has a different perspective on consumer products. Since the Industrial Revolution, manufacturers have been forced to worry about the mass appeal of their products. If you went to the pain of designing a lamp, you wanted to be sure that thousands of people would order it and make the production costs worthwhile. That equation has been flipped on its head. A designer can afford to sell things one or 10 at a time because there is no manufacturing cost until the item is actually ordered. As Weijmarshausen puts it, “The basic premise we’re working toward is, everyone should be able to make or buy whatever they want.”

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Why Half the World Doesn't Have Bank Accounts

In the U.S., bank accounts are nearly ubiquitous, with almost 90 percent of adults having formal accounts. But in poor countries, only a quarter of people report having have accounts. All told, more than 2.5 billion adults around the world—about half—are unbanked, according to a new World Bank data project funded by the Bill & Melinda Gates Foundation and based on Gallup polling in 148 countries. The World Bank launched the Global Financial Inclusion initiative, which it calls Global Findex for short, with both a database and a white paper on the new stats.

A leading reason for the disparity between rich and poor countries is both dispiritedly intractable and painfully obvious: poverty itself. Two-thirds of people without accounts said they simply don’t have enough money to use a bank. The data, though, show some less daunting problems to tackle. People said financial institutions are too far away and too expensive to use. In some regions, including Latin America, people said the institutions required too much documentation. The white paper says fully 35 percent of the unbanked report barriers that are solvable through public policy.

They pointed to success of models that break down distance and costs, as in Sub-Saharan Africa, where 16 percent of adults said they had used a mobile phone to pay bills or send or receive money in the past year. (The World Bank project doesn’t consider mobile money to be a formal bank account; they reserve that definition for accounts at a bank, credit union, cooperative, post office, or microfinance institution.) In Kenya, two-thirds of adults said they received payments on their phone, likely because of the inroads the telecom company Safaricom has made with its M-PESA offering, which transforms mobile phones into virtual wallets.

There are many more facets to the data—how people use accounts, what they save money for, where they get loans if not from banks. The idea is that armed with more on-the-ground data, policy makers can try to find ways to bring more people into the financial mainstream. After all, having formal banking relationships can have all kinds of benefits for people, from promoting savings to borrowing money at rates that aren’t usurious.

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Is 'World of Tanks' the Belarusian 'Farmville?'

(Corrects the spelling of Kixeye in the 7th paragraph.)

This very moment, all around the world, there are 800,000 mostly male gamers pretending to be American or Soviet or maybe German tank commanders in a bloody firefight filled with rockets, explosions and towering plumes of smoke. They are a fraction of the hordes of gamers—24 million and counting—who are flocking to World of Tanks, the online video game that’s turning the whole industry upside down.

Wargaming.net, the company in Minsk, Belarus, that created World of Tanks, has accomplished this feat in two ways: First, it created a so-called massively multi-player online, or MMO, game that enables hundreds of thousands—or even millions—to log on simultaneously. (In February, according to Wargaming, World of Tanks broke the Guinness World Record for most players online simultaneously on one server.) Second, unlike most MMO’s, which have a fantasy-world or medieval theme, World of Tanks targets a specific audience—World War II enthusiasts and military-hardware aficionados.

“Who needs another elf game if there are already 500 on the market,” says Viktor Kislyi, Wargaming’s chief executive officer. “We decided to go niche. You cannot go more niche than World War II.”

Kislyi adds that World of Tanks is less time-consuming than other MMO’s. (The average battle runs about seven minutes.) This lets people with busy schedules—for example, adults—play.

“We moved away from the traditional, hardcore MMO RPG spirit,” Kislyi says, referring to the role-playing games that have dominated the gaming business in recent years. “In those games, you were supposed to go and kill some dragon or smaller animals, and literally fight for three or four hours to get some special diamond. Our game world opened up a new sub-genre.”

The genius of the monetizing scheme behind World of Tanks is that it costs nothing to play. Wargaming makes money when gamers buy extras. For example, it costs 20? to outfit one’s tank with “desert camouflage.” Hundreds of thousands of these micro-transactions take place every day. Wargaming expects that figure to jump into the millions in the not-too-distant future. Kislyi estimates that as much as 70 percent of all the people who play his game will never pay a cent.

Wargaming.net has a ways to go before it can start competing with such gaming companies as Farmville creator Zynga (which has a user base of 250 million) and Angry Birds creator Rovio (700 million). But according to Nicholas Lovell, director of the games consultancy Gamesbrief, “We are moving away from the era of size mattering. Kixeye announced this morning (on TechCrunch) that it had 5 million monthly players of its games on Facebook, including Battle Pirates and Backyard Monsters, and is making $100 million in revenue.”

World of Tanks successfully blends reality and fiction. On one hand, gamers—or tankers—employ tanks and artillery that are carefully modeled after real life. The web site includes extensive, detailed descriptions of all the hardware. Tankers are advised about the pros and cons of light versus medium or heavy tanks, penetration rates, reload times, maneuverability, horsepower, speed limits and “compatible consumables.” (Tankers have to eat, too.) “The creation of project TS-31,” gamers who are considering this top-tier, heavy, American tank are told, “was entrusted to the Chrysler Corporation. … The process of building this tank makes a good example of why the ‘classic’ tank configurations lasted so long.”

On the other hand, tankers are not confined to a particular war or battle—“We wanted to move away from Stalingrad or Normandy,” Kislyi says—and can even mix and match tanks from different countries and periods. It’s not uncommon for the Panzer VIII Maus, which the Nazis developed in 1944 but never deployed, to appear in the same battalion as, say, the Soviet T-50, which was deployed after the war and became a key component of Warsaw Pact forces across Western Europe. (World of Tanks features hardware from the glory age of tank warfare: from the 1930s to the Korean War.)

Gamers are enthusiastic.

One tanker, who goes by the moniker DarkOne, recently posted a review on a gamers’ site called The Nexus Forums. “Never heard of World of Tanks?” DarkOne asks. “This is normally the part where I chastise you, but I’ll let you off this time. … In World of Tanks, you are a tank (I’m not joking), and your job is to work with 10-16 other team mates to destroy the other team’s tanks or capture the enemy team’s base by sitting in it for about a minute without being shot.” DarkOne adds: “I’ve been playing this game to death for the past 10 months (3,500 battles and counting!).”

Tankers are sprouting across the globe. There are now 2 million of them in the United States. As much as 3 percent of the population of Iceland regularly logs on. And Wargaming is very bullish on its prospects in China and Southeast Asia.

Russia and Belarus, where World of Tanks launched, are hotbeds of tanking. But it’s the Poles—perhaps because they’ve been occupied by the Germans and the Russians—who have proven among the most skilled and ruthless tankers.

Kislyi says there’s nothing obviously Soviet or Russian about World of Tanks—Wargaming’s programmers went to great lengths to make sure the Soviet tanks were not given any historically incorrect upgrades—but that’s not entirely true. Russians, after all, spend every May 9 celebrating Victory Day—as in, the victory of the Soviets over the Germans.

For those who don’t care for tanks, fear not. Wargaming is now testing World of Warplanes and World of Battleships, which will both launch within the next two years.

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Bridging the News Industry's Digital Divide

A time-travel fantasy of mine is being a fly on the wall at a newspaper or magazine boardroom at the dawn of the World Wide Web. At some point in 1993 or 1994, editors and business-side people of print publications huddled and, somehow without the help of peyote, exclaimed: “Bingo! Put it all out there on Netscape for free and let’s see what happens. Nothing ventured, right?”

They so rue the day. Now a decimated journalism “industry” is trying to go back and train millions of free blog-consuming readers that they actually have to pay for online content, please/maybe/thank you. Knight-Ridder is gone, having sold itself to McClatchy in 2006, which is not exactly proud of the deal. Tribune, the parent of the Chicago Tribune, Los Angeles Times, and Baltimore Sun, barely endured a costly bankruptcy. The Washington Post Co. (WPO) spun off Newsweek and can no longer count on the largesse of its challenged Kaplan education unit. Businessweek, and yours truly, was rescued by Bloomberg on its 80th birthday.

The venerable New York Times, whose shares have tanked 89 percent in 10 years, is worth less than the $1 billion Facebook just paid for a photography app, Instagram. Craigslist and Monster (MWW) eviscerated print classifieds. Google (GOOG) and Facebook hogged online ad dollars. Department stores merged and Detroit failed, taking retail and auto ads with them.

With all that, the numbers reported by the New York Times Co. (NYT) this week are worth a second look. The Times’ total advertising fell 8 percent, and the company expects continued pressure into this quarter. And even digital advertising sales dropped 10 percent from a year earlier, to $71.1 million. You can blame the company’s underperforming and all-but-forgotten About.com portal, which it bought back in the day for $400 million. But take away About, and the news group’s digital revenue still slipped on its own. “We’ve started to see digital advertising be much more sensitive to the macroeconomic environment,” said Scott Heekin-Canedy, president and general manager of the New York Times, on the earnings call. Ominously, digital ad revenues as a percentage of total company ad revenue fell this past quarter.

And yet circulation sales gained 9.7 percent, to $227 million, the company said. Circulation benefited from a 16 percent jump in its digital subscribers, to 472,000. Finally.

Think about this. U.S. newspapers last year lost $10 in print advertising sales for every dollar gained online, according to the Pew Research Center. That was worse than 2010, when newspapers lost $7 in print advertising for every dollar made from digital. Could the Times, which recently cut the number of its newspaper’s free articles people can read on its site to 10 a month from 20, finally be onto something? Is it finally flexing the pricing power it has with loyal readers to get paid for all the journalism it invests in?

Although the company has been a case study in financial mismanagement, it is now generating an average of $250 annually for every digital subscriber, according to Barclays Capital. If the Times can continue to add paying readers to its rolls, while squeezing more out of its print subscribers, it just might have what it takes to offset declines in print—and now digital—advertising. Might.

This realization might be 19 years too late. And it won’t necessarily apply at less indispensable publications, which have spent a decade gutting their content. But any hint of good news is welcome in the post-apocalyptic business of journalism in 2012.

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Hilary Mason: From Tiny Links, Big Insights

When a restaurant opened near her New York City apartment, Hilary Mason found its menu uninspired: salmon, arugula, and all the other culinary keywords without any of the risky dishes that make for great dining. “I thought, ‘This must be the median West Village restaurant; it’s just so boringly average,’” she says. Most people would have written a tepid Yelp (YELP) review and left it at that. Mason looked to the data for truth. The 33-year-old wrote a program to crawl the Web and download menus from New York eateries. It took her down a rabbit hole of restaurant exploration. She didn’t figure out the perfectly average spot, but she learned that there are 173 different burgers to order in the West Village—but 363 in the East Village, and at lower prices.

Mason, a self-described nerd, calls this “menu hacking,” and it’s one of her many geeky side projects. Her day job is chief scientist at Bitly. The startup is best known as a link-shortening service, a way of making obnoxiously long URLs more compact for sharing on Twitter or anywhere else. This year, Bitly is introducing a suite of data products for professionals developed in part by Mason and her team of six scientists and engineers. One, dubbed Bitly Realtime, tracks terms that receive sudden bursts of attention. Another is a reputation-monitoring system. The goal of the products is “to give people a Spidey sense about what’s going on on the Internet that’s relevant to them,” says Mason.

Plenty of other companies promise to cut through the noise of the social Web: Mass Relevance and Dataminr license data from Twitter and other sources and sift it for meaning. Mason says Bitly is different, because it doesn’t just track what’s being shared but also records which links people actually click on. That’s “valuable information that today is underanalyzed,” says Nick Gall, a vice president at researcher Gartner (IT).

Bitly is not Mason’s first startup experience. She studied computer science at Brown and started teaching at a small university in Providence in 2004. While there, she researched virtual worlds such as Second Life and formed a company to track how users behave in them. She sold it for “beer money” a few years later. “If I knew then what I know now, there would have been another zero on the end,” she says. In 2008 she moved back to her hometown of New York and joined Path 101, which analyzed data gleaned from resumes to help people figure out the right career steps to their dream jobs. The company “failed miserably” in 2009, she says. “It turns out it’s important to build a product and not just a bunch of data models.”

Mason still finds time to pursue her own projects. She created one batch of code to filter bombastic, self-promoting messages from her Twitter stream. When she demonstrated it at a conference, it labeled a friend—who was in the audience—as a narcissist. He didn’t seem to mind, she says. After all, you can’t argue with the data.

Became a machine-learning expert at Brown University

Leads a team of six data scientists at link-shortener Bitly

“Menu hacking” and building Twitter narcissism filters

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In Defense of Stanford University

This week in The New Yorker we discovered much about Stanford University in a piece by Ken Auletta titled “Get Rich U.” For example, Stanford has produced many rich technology entrepreneurs—among both its professors and students. In fact, Stanford has been so successful at nurturing titans of business that it’s causing some unease among certain faculty and school observers.

There’s a glut of engineering-minded, money-hungry students, and perhaps not enough love of learning for learning’s sake and the humanities.

As the story points out, Stanford’s obsession with engineer-cum-entrepreneurs is by design. Frederick Terman, a Stanford professor, set out in the 1920s to unite local radio and electronics businessmen with Stanford’s students. As a result, undergraduate students such as Bill Hewlett and David Packard found themselves visiting the San Francisco lab of Philo Farnsworth when he was in the process of inventing television.

In the years that followed, Hewlett-Packard (HPQ), along with other electronics and technology companies, would place their headquarters on Stanford land. The arrangement helped Stanford compete against more established schools in the East for local talent and gave the local businessmen access to bright kids, research equipment, and new ideas.

Over the years, Stanford has perfected the art of helping its students and professors start businesses and share in the spoils of their work through favorable licensing deals. As a result, generation after generation—HP to Cisco (CSCO) to Sun Microsystems to Yahoo (YHOO) to Google (GOOG), Instagram, and Palantir—have emerged from the university.

If there’s a light of hope in the U.S. economy, it emanates from Silicon Valley, and, my word, Stanford has done an awful lot to contribute to that fact.

That’s a long way of saying Auletta may have been better served by asking why the nation’s other elite universities have done such a poor job at breeding entrepreneurs. You can, of course, point to people from Harvard, Cornell, and other top schools that have created empires from scratch, but Stanford clearly challenges the combined efforts of these other schools on its own. (Frankly, I can’t recall ever meeting a single startup founder from such places as Yale or Dartmouth.)

With China and India are pumping out engineers by the tens of thousands, it’s not so bad to have at least one school stateside that’s a money-gushing, geek mecca. In fact, Stanford’s rivals should perhaps do some more thinking for thinking’s sake around how they can mimic the Cardinal model.

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To Avoid Stupid Mistakes, Think in French

Would you take a bet that offered you an even chance of winning $12 and losing $10? If you’re like most people, you would not. But what if someone offered you the bet in French? New research in the journal Psychological Science suggests that, assuming you understand French, you would.

What is going on here? The explanation is not—as a France-bashing wag might suggest—that it’s always good to bet against the French. The same effect appears when wagers are presented in Japanese, Spanish—even English, if it’s a person’s second language. Instead, says Boaz Keysar, a University of Chicago psychologist and the paper’s lead author, thinking in a non-native language seems to make people more rational.

Over the past decade, the growing field of behavioral economics has shown all the ways that human beings don’t act the way traditional economics says they should. We have an aversion to loss that leads us to avoid certain kinds of smart bets (like the one above) even as we take other, foolish ones, or to stick with the status quo even when we have something to gain by changing it. And we privilege the present over the future, a tendency that has real ramifications in the financial decisions of people and governments alike. A big part of the problem is that our gut instincts can be tripped up by certain sorts of questions about probability. In one example, most people would choose a medicine that they were told will save the lives of 200,000 people out of 600,000, rather than a medicine that will allow 400,000 people out of 600,000 to die, even though the number of lives saved is the same.

So how does French or Japanese or Spanish help? One would think that having to puzzle out a question in a foreign language would make people more likely to foul up the answer. Not so, say Keysar and his co-authors. Cognitive biases such as loss aversion are deeply emotional responses, and understanding a second language requires conscious thought in a way that processing our native tongue doesn’t. Because we have to think more to make sense of the question when it’s in a foreign language, we automatically think carefully about the answer—we don’t just answer based on our cognitive biases. “A foreign language is like a distancing mechanism,” says Keysar. “It’s almost like you’re a slightly different person. You’re removed from yourself.” Interestingly, other researchers have found that you can get a similar effect by writing a question not in a different language but just in a difficult-to-read font.

Asked how people might put his findings to use, Keysar says it’s too early for recommendations to inoculate people against making silly mistakes. Thinking through things in a second language, then comparing the answer to what someone else comes up with in his native language, is one idea. Not everyone has a second language to use, though, and for those people there are other distancing mechanisms: Phrase a question so it describes something in the distant future, or write it in a font that a reader has to puzzle over.

Keysar emphasizes he’s not arguing that distancing people from the questions they’re considering will always lead to better decisions. On the contrary, a large body of experimental evidence shows that emotions are immensely valuable in making good decisions—that gut instincts derive from hard-earned experience and are ignored at our peril.

The trick, then, is to figure out which questions are best considered in the fumbling cadences of our second language and which can be entrusted to our mother tongue.

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What If Facebook Isn’t So Special After All?

As the fateful day of Facebook’s initial public offering draws closer, the giant social network’s financial results are attracting more attention. And while its recently updated securities filing shows some blockbuster numbers—including a mind-boggling 900 million active users, half a billion of whom use the site daily—it also reveals some potential red flags, including rapidly rising costs for marketing and other expenses. All of this raises the question that investors will need to answer before too long: Is Facebook unlike anything we have seen before, or is it just another modestly profitable Web business?

There’s no question Facebook is huge—possibly the largest digital-only social enterprise that has ever existed—and it’s still growing at a fairly rapid rate. Just a few months ago it crossed the 800-million-user mark, and it has now passed 900 million, which suggests it will probably rack up a billion active users sometime later this year. And more than half of that user base visits the site at least once a day, a level of engagement other Web services would likely kill for.

That’s the good news—plus the fact that Facebook’s revenue for the first quarter of 2012 hit $1 billion, up more than 44 percent from the same period last year. The bad news? Well, for one thing, revenue actually fell compared with the previous quarter; this doesn’t look good coming from what is supposed to be a growth company. And net income—in other words, profit—also dropped 12 percent compared with the same quarter in 2011. In fact, Facebook’s profit was lower in the most recent quarter than it was in the previous five quarters.

While the quarterly dip in revenue could be just a seasonal blip in an otherwise growing advertising business (although Facebook’s payment-related revenue also flattened), the fall in net income is a bit more worrisome. Running a Web business without making a profit may be taken for granted when it comes to such startups as Instagram, which Facebook just acquired for $1 billion. But when you get to be Facebook’s size—and you ask the public markets to value your company at almost $100 billion—investors and analysts are going to want to see money, and lots of it, flowing to the bottom line.

According to Facebook’s filing, which is embedded below, the main reason for its lower profit was higher costs, particularly for marketing: Costs related to marketing and sales more than doubled to $159 million from $68 million a year earlier—almost as much as the company spent in all of 2010. In total, Facebook’s cost of revenue climbed more than 65 percent compared with the same quarter in 2011.

It may be stretching things somewhat to compare Facebook to Groupon (GRPN), another highly anticipated public offering, but one of the main criticisms of the group-buying service—and something that has helped push the stock down almost 50 percent since its IPO—is that it has to continually spend more on marketing than it can ever hope to recoup in profit. Like the Red Queen in Through the Looking Glass, the company has to run faster and faster just to stay in the same place, because users leave and it must spend to acquire new ones.

Facebook’s problem is somewhat different: It has nearly a billion active users, but it makes a remarkably tiny amount from each one—about $5 per year. That’s not a lot, considering over half of those users visit every day. And while the amount Facebook makes from the average user rose in the most recent quarter, it grew just 6 percent. Some of the marketing costs the company is racking up are no doubt increasing that number. But how much more can Facebook squeeze out of its existing user base?

As I tried to describe in a recent GigaOM Pro report (subscription required) on Facebook’s IPO, the biggest question about the social network is whether it can grow in any substantial way from its already massive base. With almost a billion users currently, the upside for the company is likely relatively limited, unless you assume Facebook will eventually be used by everyone on the planet. So growth then has to come by increasing the revenue it gets from each user. But what if it has to spend increasingly large amounts of money to do that, either to market itself or to acquire new avenues, such as Instagram, for reaching users?

In a recent essay on Facebook’s prospects, investment adviser Josh Brown called it a “red giant”—a star that, having grown too large, starts to consume its own resources and eventually implodes and becomes a white dwarf. Investors who are looking for a meteoric return on the company’s initial offering should consider that they may wind up with shares of something very different.

Also from GigaOM:

The Real Issue Behind Facebook’s IPO: How Much Bigger Can the Company Get? (subscription required)

Coda Looks to China for Second Low-Cost Electric Car

The Future of TV Isn’t TV, It’s Broadband

Rethinking Facebook’s Role in ‘F-commerce’

A Solar Canal Rises in India

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The Folks Who Called Apple's Big Quarter

The financial press was breathless over Apple again yesterday as the world’s most-valuable company blew past analysts’ estimates for earnings in the second quarter on the strength of 35.1 million iPhones sold. “[A]nother amazing quarter from Apple … is single handedly driving markets this morning,” wrote Peter Boockvar of Miller Tabak. Apple posted earnings per share of $12.30 and $39.2 billion in sales. The Street, or at least the sell-side analysts who carry that tag, predicted $10.02 in earnings per share and $36.9 billion in sales, according to data compiled by Bloomberg. The surprise pushed Apple’s stock up nearly 10 percent and kick-started a worldwide rally.

Who saw this coming? A crowd of 115 people at Estimize did. The startup is opening up earnings estimates to all comers—and, so far anyway, beating the Street. The Estimize crowd predicted $11.68 in earnings per share and actually overshot on sales with $39.5 billion. So next quarter, maybe check “Xiath,” a self-identified buy-side analyst at Estimize who anticipated $12.25 in earnings per share and $39.6 billion in sales.

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Technology Market Research Surveys

The Promise of Technology is Intangible

James Cameron's Trillion-Dollar Question

(Updated with more details.)

Today an all-star cast of adventure capitalists and space entrepreneurs—James Cameron, Larry Page, Eric Schmidt, Charles Simonyi, Peter Diamandis (creator of the X Prize), and others—announced the creation of Planetary Resources, an asteroid-mining company. (The announcement will be live streamed Tuesday off the company’s website at 1:30 p.m. ET.) In theory, asteroid mining is an enormously lucrative endeavor: a single small asteroid has been estimated to contain trillions of dollars in gold, platinum, iron, zinc, aluminum, and other minerals. The first step, its founders say, will be to launch a telescope into space to search for asteroids suitable for mining, something they claim they’ll do within two years.

Still, once suitable candidates have been identified, how would one go about getting all those minerals? As skeptics of the new company’s mission have pointed out, the challenges are enormous, and with current technology, the cost of bringing minerals back from an asteroid to Earth are so great as to dwarf the considerable market value of the minerals themselves.

There’s another, less discussed hurdle, though: figuring out whether it’s legally possible to stake a claim to an asteroid in the first place. Property rights, after all, are often a contentious issue for miners here on Earth, where we have a well-established set of laws governing the question. What would that look like in the wild west of space?

The legal framework governing space behavior is the Outer Space Treaty of 1967, which the U.S. has signed. The exact language of the relevant passage is: “Outer space, including the moon and other celestial bodies, is not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means.” Whether this means that private companies can mine asteroids is up for debate—the passage clearly bans national governments from claiming territory in space, but it doesn’t mention private actors. Because the treaty holds nations responsible for the space-related activities of their own citizens,  many space lawyers (the field does exist) argue that the treaty effectively bans private “appropriation” of property in space.

Others, however, argue that there is already precedent for treating things in outer space as property. The example they point to is moon rocks—specifically the fact that the U.S. and Soviet governments traded moon rocks with each other. To trade something, after all, one has to first of all own it. Whether mineral-rich asteroids will come to be seen as enormous orbiting moon rocks in the eyes of the law remains to be seen. Meantime, some private citizens are taking the matter into their own hands, and not in the way James Cameron, et al., are. In 2001 a Nevada man named Gregory Nemitz claimed he owned the asteroid Eros and sued NASA when one of its robotic spacecraft landed on it. He asked for $20 in parking and storage fees—20? a year, payable in hundred-year installments. A federal judge threw out the case.

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High-Speed Trading: My Laser Is Faster Than Your Laser

(A previous version of this story suggested the new cable had achieved an execution time faster than 60 milliseconds. That speed is expected later in 2012.)

A few weeks ago I wrote about Project Express, a new fiber-optic cable being built across the Atlantic that will give a select number of high-frequency traders a tiny speed advantage in trading times between New York and London. Currently, data take 64 milliseconds (give or take a few fractions of an eye blink) to travel round-trip between New York and London along a cable built in 1998 called the AC-1.

According to its New Jersey-based operator, Hibernia Atlantic, the $300 million Project Express will be 5.2 milliseconds faster than the AC-1, with an execution time of 59.6 milliseconds. That will make Project Express the world’s fastest transatlantic cable when it opens in 2013 and the first to achieve round-trip trading speeds of less than 60 milliseconds. Unless someone beats them to it.

As of this morning, it appears someone will. A small company called Perseus Telecom, in partnership with a subsidiary of India’s big telecom company, Reliance Communications, has announced the launch of QuanTA, a fiber-optic cable stretching from Long Island to the U.K. with an expected round-trip execution time of less than 60 milliseconds by the end of 2012. Rather than build a brand-new cable like Hibernia-Atlantic did, Perseus made improvements to an existing cable called the FLAG Atlantic-1 North, or FA-1 North, a small portion of a 17,000-mile underwater fiber-optic cable stretching from the east coast of North America to Japan. Until now, the FA-1 North was the second-fastest transatlantic cable after the AC-1.

To make the FA-1 North faster, Perseus first upgraded the cable’s “submarine optical systems,” which essentially means equipping it with faster lasers. The company also improved the backhaul systems connecting the core cable to various land-based subnetworks that spread to trading exchanges and data centers. It will next insert a giant router, or branching unit, a few hundred miles off the coast of Nova Scotia to build a shorter route to New York. With the help of submersible vehicles, a grappling hook hauled the cable off the bottom of the North Atlantic about 10,000 feet below the surface and inserted the branching unit, described as a Y-shaped device roughly the size of a conference room table.

The result will be a shorter cable powered by faster lasers. It cost $10 million to upgrade the lasers and the back-end connections. Asked how much it will cost to insert the branching unit and shorten the cable, Perseus Chief Executive Officer Jock Percy offers the following opaque calculation: It is 125th the cost of the new length of cable. Percy will say neither how much that new length costs nor how long it is. Just like the high-frequency trading industry it serves, the business of building submarine fiber-optic cables can be secretive—and highly competitive.

Although Perseus announced in January it was expanding its footprint in the data center hub at 60 Hudson Street in lower Manhattan, the company built QuanTA on the sly, announcing the project after it was done. That’s what Spread Networks did with the Chicago-to-New York underground trading cable it completed in 2010 after three years of boring through 825 miles of mostly rural, mountainous terrain in secret. Like Spread Networks and Hibernia-Atlantic, Perseus won’t disclose the identity of the trading firms it charges to use its cable, nor will it say how many there are or reveal its fees. CEO Percy will say his new project is highly cost-effective and he’s able to pass savings on to speed-trading clients.

“Market participants are always looking for advantages,” says Percy, meaning that speed traders continually look for ways to trade faster. “The cost of that advantage, though, is significant. The success of a trading strategy relies on how effectively people are able to achieve those last few milliseconds, and so a cost-effective way of delivering [faster speed] is really valuable, because just throwing money at the problem doesn’t solve it.”

The problem these new cables are solving is one of speed, not capacity. There’s plenty of fiber-optic capacity connecting most of the world’s big trading hubs, thanks to the fiber boom of the 1990s and early 2000s. Those cables were built before the era of high-frequency traders, so they rarely adhere to the shortest distance between two points: a straight line. Other than improving the caliber of the lasers shooting beams of light through these miles of cables, the only way to make them faster is to make them shorter.

Percy reckons that through a combination of improved lasers and shortened cables, the day may soon come where traders can execute a trade between New York and London at close to 40 milliseconds. Anything faster is physically impossible, save for drilling through the planet.

Assuming Einstein’s theory of relativity is correct, which the Large Hadron Collider in Europe recently reaffirmed, there’s no going faster than the speed of light, about 300 million meters per second. Since the surface of the earth is curved, a cable running along the bottom of the ocean isn’t flat. To straighten it, and thus shorten it, you’d have to drill through the earth’s crust. “If you did that you could get below 40 milliseconds,” says Percy.

So when will he finish that project? “No comment.”

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Insieme: Cisco's Latest 'Spin-In'

Mario Mazzola may have the best gig in Silicon Valley. Other innovators pursue their dreams at the risk of failure; there are few safety nets for an entrepreneur. But Mazzola, who builds computer networking products, is the main beneficiary of a controversial model known as the spin-in. Not once, not twice, but three times, Cisco Systems (CSCO) has agreed to fund and buy companies founded by Mazzola and his longtime lieutenants, Prem Jain and Luca Cafiero, when the startups were little more than ideas. In each case, Cisco invested $50 million or more for a stake in the company, along with an option to buy the remaining shares at a certain date. The final price, while tied to how well the startup’s products sell, is generous. Cisco paid $750 million for Mazzola’s Andiamo Systems in 2004 and $678 million for Nuova Systems in 2009. On April 19, Cisco said it was prepared to spend as much as $750 million for the trio’s most recent effort, called Insieme.

Cisco Chief Executive Officer John Chambers insists the deals are good for his company. By all accounts, Mazzola, 65, and his colleagues are one of the great product teams in the enterprise technology world. They invented a corporate networking switch—which helps shuttle data from one place to another—while at Crescendo Communications in the early 1990s. Cisco bought the company in 1993 for $94 million and built it into a $13 billion business, its largest. The funding of Andiamo in 2002 helped Cisco expand into the storage-related switch market. Nuova enabled Cisco’s most daring strategic move in decades: taking on former partners Hewlett-Packard (HPQ) and IBM (IBM) with its own line of computer servers, part of an effort to offer a full range of data-center hardware and services.

The spin-in structure lets Cisco ensure the allegiance of Mazzola and his team, rather than risk competing with them or losing them to a rival. Mazzola’s startups also help Cisco tap top engineering talent that might otherwise avoid working for a large public company. With almost $47 billion in cash, Cisco can afford its spin-in strategy—which provides huge returns if Mazzola’s team hits a home run. (With Nuova, Cisco says it earned back its investment several times over.) “The team at Insieme is a team that’s been remarkably successful for us,” Chambers told reporters on April 19.

Many former Cisco managers criticize spin-ins as destructive deals that tear at the morale of employees not lucky enough to be involved. Chambers could have made an arrangement with Mazzola, who had already earned millions as a top Cisco executive, that wasn’t so enriching to just a few people. “I think these deals basically suck,” says Samuel Wilson, a former equity analyst who now runs an investment firm called Taos Global Investors. “It suggests Cisco is willing to bribe people who are already employees and raises the question of whether these people are loyal to Cisco or to themselves.” Last fall the trio resigned just weeks after getting the final payout on the Nuova deal, then started work on Insieme.

Cisco doesn’t disclose how much Mazzola, Jain, and Cafiero earn on the spin-ins. After considering Cisco’s stake and shares given to recruits, it’s likely less than 30 percent of the purchase price, say two former Cisco managers who declined to be named because the deals are not public. Still, that could easily mean hundreds of millions for the three executives—none of which shows up as compensation in Cisco’s financial statements.

So far, no other tech companies are following Cisco’s lead. “I can’t think of any other examples,” says Harvard Business School professor David Yoffie. He suggests that other companies may worry that spin-in employees won’t work as hard as independent entrepreneurs because they lack the “unknown upside that comes from a possible IPO or bidding war.”

With Insieme, Chambers expects Mazzola & Co. not to deliver a product for a new market, but to protect an existing one. Cisco’s biggest source of revenue is its pricey machines loaded with proprietary software that direct and process data flows. Insieme is working on a new approach called software-defined networking. It will perform the same task as Cisco’s costly units by running software on everyday PCs.

The bottom line: The spin-in strategy has created important products for Cisco but enriches a few stars at the price of lower morale.

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Bloomberg View: Keeping the Internet Safe From Rogue Regimes

As documented by Bloomberg News, U.S., European, and other companies are selling technologies that enable the repressive Iranian and Syrian regimes to disrupt and monitor the Internet and track down government critics.

On April 23, President Barack Obama issued an executive order giving the U.S. Treasury Secretary the power to sanction individuals and companies that provide goods or services that can be used for such purposes. Those with assets in the U.S. risk having them blocked; individuals without such assets can be barred from entering the country. Perhaps the greatest penalty is the reputational cost of being placed on a U.S. sanctions list.

Of course it’s good for citizens of these countries to have access to online communications. Western providers have been and should be helping to create those infrastructures. When it comes to add-ons, however, Iran and Syria are not like other places. Spam-filtering technology, for instance, can help keep mobile networks running faster, but in Syria it has also allowed government officials to block all messages including words such as “revolution,” “demonstration,” and “strike.” In these countries, the risks of such systems outweigh the benefits. Decent companies have no business selling, installing, or maintaining them.

Issuance of the president’s order alone is unlikely to make companies desist. The U.S. already had a rule barring federal agencies from doing business with companies that export to Iran any technology used to disrupt, monitor, or restrict the speech of Iranians. When the Government Accountability Office produced its report on such companies last June, it came up with none, though soon after journalists detailed several.

The glare of news media exposure has been enough for a couple of companies to pull out of their contracts in Iran and Syria. If the Department of Treasury were to pursue one or two remaining cases, it would pressure those companies that still provide questionable technologies.

To read Simon Johnson on the euro’s future and Al Hunt on Newt Gingrich's last hurrah, go to: Bloomberg.com/view.

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Estimize, a Crowd That Beats the Street

Every three months, Wall Street performs a ritual dance known as quarterly earnings. It goes like this: A company undersells its own expectations. Analysts at brokerage firms, not wanting to alienate a corporate client, follow its lead and give out lowball estimates. Then reported earnings top estimates and the stock price rises, at least temporarily. Since 1994, according to Bianco Research, more than half of the companies in the Standard & Poor’s 500-stock index have topped the median analyst estimate (as collected by Bloomberg LP, the parent company of this publication) in every quarter but four. So far, for the first quarter of this year, 79 percent have “beat the Street.”

Leigh Drogen is out to change the routine. The 26-year-old Chappaqua (N.Y.) native has created an online clearinghouse for earnings estimates called Estimize. The site gathers estimates from all corners of the investment world, from the so-called sell-side analysts at the banks, who have been calling the tune for the past three decades, to their buy-side counterparts at hedge funds and proprietary trading desks, to independent investors. While estimates have been crowdsourced since before there was such a word, Estimize, says Drogen, is a new form of crowd control. “We are able to put forth the guys who are actually the best analysts,” he says, “vs. the guys who are just the loudest or have the biggest names behind their desks.”

Anyone can contribute to Estimize by signing up for a free account. More than 4,300 people have done so since Drogen launched the site in December, with about 77 percent self-identifying as independent, 20 percent as buy-side, and 3 percent as sell-side. Once inside, members can look up a stock and then move toggles to enter their guesses for earnings per share and revenue. There is also a space to include analysis. Estimize aggregates the entries and posts them next to a “Wall Street” number taken from Zacks Investment Research, which uses the “average of all the current estimates made available by brokerage analysts.” So far, says Drogen, his ragtag crew is besting the usual suspects. In the first quarter of Estimize’s life, the crowd’s estimates have been closer to reported results 63 percent of the time. This covers 120 sets of earnings for which Estimize had at least four estimates.

The Estimize crowd anticipated Research In Motion’s (RIMM) underwhelming fourth-quarter revenue, predicting $4.48 billion while Wall Street guessed $4.54 billion. The BlackBerry maker came in at $4.19 billion. And it expected Intel’s (INTC) better-than-expected results for the fourth quarter. Estimize predicted 66 cents in earnings per share; Wall Street, 61 cents. Intel came in at 64 cents. Admittedly, this is cherry-picking from a small sample size, but that, says Drogen, is part of the point. Estimize can not only help correct for corporate spin, or “guidance” as it’s known in the business, but, by opening its doors to all comers, it can help spot unknown talent. The site provides an analyst leaderboard for each stock and a track record for each analyst. Drogen points to Rob DeFrancesco, or TechStockRadar as he is known on Estimize, who has been more accurate than the Wall Street consensus on 11 of his 13 estimates so far and the most accurate analyst on the site for seven of them. “His ability to do this is pretty ridiculous for a guy who just runs his own book,” says Drogen.

Estimize is not the first attempt to bridge the gap between the official consensus and what the financial community really thinks about earnings. For as long as corporations have been gaming the system, analysts (including the very sell-side gang responsible for the deflated numbers) have been circulating another, usually slightly higher, figure called the “whisper number.” Drogen participated in this traffic when he worked at the hedge fund Geller Capital from 2006 to 2009, and later at his own fund Surfview Capital, where he crafted investment strategies around the reliably “skewed set of expectations” produced by the sell-side. Drogen left Geller to work at Howard Lindzon’s social finance pioneer StockTwits, where he noticed that many in that community were already sharing earnings estimates. He offered to build a platform for aggregating the numbers inside StockTwits. Lindzon passed but gave his blessing for Drogen to build it on his own. So Drogen raised $200,000 from a handful of investors and started Estimize.

WhisperNumber has been publishing unofficial estimates since 1998. The New Jersey-based company gathers its numbers from a group of anonymous investors who register with the site, runs these figures through “a proprietary algorithm,” and shares the results for free with its 85,000 users. (The company also sends tips based on its data about how stocks are likely to move on earnings to a smaller set of users who pay about $800 a year.) WhisperNumber’s president, John Scherr, says he has seen plenty of upstarts come and go. “I think he’s a bit late to the party with this,” he says of Drogen’s Estimize. “It’s a nice attempt, but I don’t think it’s going to fly.”

Drogen says he’s not out to topple WhisperNumber or anyone else in the business so much as roll them all into one big, transparent bag of numbers. “What we’re trying to disrupt here is the idea that the whisper number is a whisper number,” he writes in an e-mail. “We want it to be open and transparent where you can see exactly who it’s coming from and how the sausage is created. We actually pull their estimates into our site. We want people to know about them. They are just another data point.” (Scherr has since asked Drogen to remove the WhisperNumber data from Estimize. Drogen says he’ll comply.)

Estimize does allow users to remain pseudonymous, which Scherr suggests undercuts Drogen’s rhetoric of transparency. “If you’re going to go the transparency route, you’ve got to use real names,” he says. “If you’re right, you want to be known, but most people aren’t right. Most people are wrong. And nobody wants to be known as the guy who has a 50 percent accuracy rating.” But the pseudonymous Web, says Drogen, is the future. “We don’t care that you don’t identify yourself as who you are in real life, as long as you create a track record,” he writes by e-mail. “It allows 18-year-old kids who are amazing traders to share their ideas, and be recognized for the quality of what they are sharing,” which is why the site is now hosting a $10,000 challenge for the best estimators.

If all goes according to plan, Drogen will eventually make himself obsolete. As estimates get closer and closer to results, the trading opportunities disappear. “If we’re successful at this, we take a massive amount of volatility out of the market,” he says, “and we’ll be happy if we disrupt ourselves, we’ll be really happy that we succeeded.”

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