Answering the Water Question in the Middle East

I finally finished my senior project earlier today. I still have some work to do tomorrow, like add the appendix and table of contents, but as of right now, I am finished. I am going to read it through one more time and just make sure everything is a-ok, but I think this is it. Projects are Wednesday. I am going to print on Sunday night and bind on Monday. My board is a week from this Monday. The full title is below:

Answering the Water Question in the Middle East: An Equitable and Efficient Solution to the Water Allocation Crisis Between Israel and Palestine

On the internets

On a typical day I'll read about 10 blogs. I have a list of approximately 4 or 5 that I cycle through every day based mostly on political affiliations and hobbies. One of these blogs is A VC. Generally, I think everyone should have at least one tech oriented blog that is updated every day. I used to read Feld Thoughts, but he is a bit too wonky for even my self admitted nerdness. I like to be kept up to date about the cutting edge. Can this new product or service help me? Can I think up some new idea to build on this? About a year or two ago, innovators were in the heyday of web 2.0 stuff. I am fairly certain that we are well into the diminishing returns of web 2.0

Of of the things that made web 2.0 stuff interesting was its simplicity and how robust these tools were. Take del.ico.us, blogger, dig, or feedburner for example. These tools have a lot functionality for very little time invested and are incredibly simply to use. This trend seems to either be slowing down or working in reverse.

One of Fred's newer posts is about this service called Twitter. I honestly don't get it. I like Fred's tenacity and how he will revisit something he originally didn't like... but I still don't understand Twitter. What is it supposed to that I can't do with 100 other services? Why is it important that I send a blog update in 150 characters or less what I am eating, who I am eating with, my daily schedule. I don't see why it is important to anyone other then the person updating and there is a ton of personal organizer type software / hardware stuff already out there. Based on his post he doesn't seem to fully understand it either, and he is just trying it out until he can find a use for it.

This is the point where I diverge and why a lot of these new services are useless. If you seek long enough and hard enough you can find a nitch and use for anything. But these nitches are just that, nitches. They are not all encompassing, easy to use, something that anyone can understand, and usable in nearly every application. Aggregating information doesn't matter if it is not efficient. I can come up with a million different ways of putting information together and if it is not efficient, who cares about my new collection? Take social networks. Since the Youtube and Myspace deals everyone and their brother wants to make a new company with a social network. They are coming every which way and it is annoying. Having a new network defeats the purpose of networking to begin with. The more fragmented these networks become the less purpose they have.

I haven't seen anything that is really interesting in a long time. Every time I see a new service, such as Twitter, I think to myself: Underwear gnomes



1.) Build a new webservice based on a widget
2.) ???????
3.) Profit.

I am certain there are new ideas floating out there. It's all about risk. Now that the risk of web 2.0 has been lessened, the really good, although risky, ideas are getting ignored. I personally don't think we will see an entire wave of new innovations for a while. Not until we have a market correction and the strongest and best ideas will survive.

Taking this idea to the next step in a Georgist direction, technological innovation comes in waves, just like real estate booms and busts come in waves. What we want is for capital to find its way to those who are the most efficient idea generators. It seems that capital finds its way towards the most efficient generators of ideas just after the trough. Markets can't efficiently allocate this funding efficiently at all times because of asymmetric information. VCs don't know who has the best idea. All innovators want capital. Innovators who have the best idea might not be able to make the best sale, or because of the inherent high risk are at a disadvantage; moreover, innovators will not reveal if they are a poor generator of ideas. VCs and investors try to mitigate this gap of information by performing "due dilligence", but this process can only take the venture capitalist so far.

How can VCs direct capital more efficiently? In land markets, taxing land will cause a more efficient use of the land. Land is the scarce, common resource. In venture capital, the VCs time is the scarce, common resource. Not all ideas / firms / businesses (just call them firms for short) require an equal amount of time. Furthermore, firm that only require a short time investment may require a large capital investment and vice versa.

What the VCs want is for the idea generators to reveal how valuable they feel their ideas really are. What the firms want is capital and consulting. I wonder if a different investing strategy could work like this, given thata a VC firm has a fixed number of hours to dedicate to portfolio companies every day and a fixed amount of capital to distribute. Call this fixed number of hours, time slots.

Firms bid on a time slot or many time slots. Because VC firms are made up of people, different timeslots assigned to VCs will have varying quality. The method of bidding is a multiplier on the amount of capital loaned now. So, one firm desires a 2x multiplier, the next 2.1 and so on, the bidding will continue depending on how valuable the firms feel their ideas are. Firms have an incentive to perform at their very best and most efficiently. VCs have an incentive to spend their time as effectively as possible.

There is still a moral hazard problem and there is still the wingnut problem. I don't see the above model as being as simple as laid out here. I actually see a system of screening similar to the one already used. This auction system would only be used as a last round of screening. There are other issues as well. But, as this blog post is getting wicked long (and I doubt anyone would actually try this anyway) I'm going to cut this short as simply food for thought.