Pricing spare resources and options?

[Greg Broiles]

At 01:44 PM 11/18/2001 -0500, dmolnar wrote:

>The recent comments on Mojo Nation prompted me to look at their site
>again. I don't see much guidance on how to set prices for network
>services. There's a mention someplace that business customers will build
>pricing schemes on top of Mojo Nation, but not much indication of what
>these schemes might be.
>
>So what is the "right" way to price resources? (Preferably beyond the
>obvious "supply and demand.")

Unfortunately, one of the evolutionary steps in Mojo Nation's development 
has been their abandonment, for the most part, of user-visible and 
user-configurable economics; they deliberately made it difficult to see how 
many Mojo are held by the local broker, and relatively unlikely that a 
broker will be able to earn significant Mojo by careful pricing - recent 
clients are configured such that the economic brakes on resource usage are 
sharply curtailed or removed entirely.

It's my impression that, given the changes in the venture capital and 
software markets, they've refocused their efforts away from P2P filesharing 
and towards speedy realtime content delivery, whereby people with limited 
net connections can maximize their incoming bandwidth by pulling (or 
getting pushes) from multiple other parties simultaneously, somewhat 
similar to what Morpheus/Kazaa are doing, or what Bram Cohen (a Mojo Nation 
alumnus) is doing with BitTorrent.

The economics seemed to attract people who wanted to experiment with 
pricing, etc., but that wasn't necessarily a market or constituency which 
is interesting to investors or businesspeople.

>A related question - I ran into a friend of mine who had just finished an
>internship in options trading. He suggested it might be worth looking at
>options on spare disk space or other resources, as a means of figuring out
>how to make Mojo-type systems eventually profitable in the real world. Now
>I have a copy of Natenberg's _Option Volatility and Pricing_ to look at...

It seems like there ought to be an interesting market here, but I know and 
worked with several people (with good financial backgrounds) who flogged 
this for awhile and never got anywhere. I guess a big part of the problem 
is that there's such a big difference in the perceived value of a 
megabyte/month of online storage .. if you're on the provider side, you 
think that's pretty expensive, as you've got the investment & etc required 
in building a data center, providing bandwidth to reach customers, paying 
staff, etc - but if you're on the customer side, you look at an 80 Gb drive 
at Fry's in the Sunday newspaper for $160 and think about a $500 1.5mb/s 
frame relay connection, and wonder why the service guys want $3 per 
Mb/month ..

and then the Mojo guys come along and make it sound like the people with 
the cheap frame relay connections and commodity PC hardware ought to be 
able to set up data centers in their back bedrooms or on their old laptops, 
but so far all of the business models proposed involve paying those guys up 
front for an indefinite period of storage, so there's no strong incentive 
to actually store the data for long, especially not if you can resell that 
same disk space 3 or 4 or 50 times.

Seems like the guys who really have hard data about options for bandwidth 
and disk usage are the disaster recovery guys. And that market hasn't been 
so great lately either, Comdisco declared bankruptcy and is their disaster 
recovery unit is getting swallowed up by Sungard, I think.

Anyway, yeah, the Enron guys thought there was something interesting to be 
done in bandwidth futures, too, but I don't know if they ever really got 
anything done before their demise beyond some demonstration projects.


--
Greg Broiles -- gbroiles at parrhesia.com -- PGP 0x26E4488c or 0x94245961
5000 dead in NYC? National tragedy.
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