Personally, I blame Marjorie Scardino. When she announced her retirement, this statement, included amongst her comments, might have been intended to encourage the Pearson troops and point them towards the challenges of the future and the Golden City on the Hill. Unfortunately, her comments also reached the wider publishing community, and encouraged that sort of complacency and fired up the sort of debate that the British publisher appears to love, since it enables him to conclude that it is all too complex and no one knows a guaranteed route to success, so it may be wiser not to try until matters have clarified a little more. To those, like me, who have spent over 40 years declaiming that experiment followed by re-iteration is the only way to go, and that you go nowhere in the digital world until you have failed at something digital, this is, at its least, a little frustrating. You see, I know that we have arrived and that we left the foothills behind in 1999. Not in education, I agree: Dame Marjorie’s brilliant step was to see past the publishers and address the real problems of education markets – administration, assessment, marking, communication with parents, teacher skills etc. The textbook was a small market which could be left until the infrastructure could be digitalized and then Pearson would have a head start in plugging their content into that infrastructure.

Dame Marjorie (aided and abetted by Anthony Forbes Watson) bought Dorling Kindersley for Pearson. Embedded into that company was real digital publishing. In 1996 DK was producing CD-ROM-based encyclopaedias and reference works that were a delight, for their day, in terms of interactivity and multimedia development. They were on CD-ROM only because online did not have the bandwidth, and it is noteworthy now that only with ePub3 has the eBook caught up with the mid ’90s CD-ROM. Yet, as a non-executive director of DK at the time, I was sure that we were doing real digital publishing for very large numbers of real users. So when I saw a report by Linda Bennett in Bookcrunch of a seminar by Cognizant entitled ” Digital Publishing: Still in the foothills?” (27 November) I frayed slightly round the edges. Really good speakers, but in a meeting where a questionner asks “whether publishers who engaged with such innovative ventures as digital development) could still truly call themselves publishers” one wonders whether Publishing will not always be in the Foothills, wandering around, lost and resentful and playing a game of their own with ever dwindling audiences of paper-lovers.

This is not to say that valuable points were not made. Mark Marjurey’s comment that “content won’t cut it much longer” is important, if it reminds us that it is not content per se that matters, but the context in which we deliver it that will drive our future developments. When someone asked “Is it true that social networking doesn’t sell books?” they were reminded that it is word of mouth that sells books (and presumably as effectively on Facebook as on Amazon). When someone said that the rentals model, the disappearing book that dissolves as you read it, “sounds bonkers”, they were at least reminded that this is a very valid model which may eventually prevail. But the skepticism expressed about the digital illustrated book may be totally misplaced. It all depends what experience you want. We have plenty of examples of text files co-located with audio, video and image where the user is invited to chart his own course through the material. But why are we so hung up with trying to replicate the the narrative experience of the illustrated book online?

About an hour later on the Web I did encounter a digital publisher. One who publishes for consumers yet does not use paper at all. Its Vice President was writing a Christmas message to the staff on November 28th. He reported that 13 of the Top 100 Kindle bestsellers were published by their organization, and he recognized 11 authors whose new titles on his list had sold 100,000 copies in the past few months. He pointed to the success of the company language translation scheme, with 12 titles translated by this operation getting into the German Kindle Top 100, and the German into English programme beginning in the New Year with a prize winning German novel. He spoke of serialization and reminded his internal readers that the programme they launched in September was now serializing seven never-before published Kurt Vonnegut stories over the next seven weeks. And he spoke of global outreach and of his plans to open a European operation in Luxembourg early next year.

The writer was of course Jeff Belle of Amazon Publishing. And his words make one realize how late in the day all this foothills talk is. He does, however quote Jeff Bezos as saying “Its still Day One”. Yes, but late in the day on day One!

The best network marketplace ideas are simple. And inexpensive in terms of user adoption. And productivity enhancing. And regulator pleasing. And very, very clever. So we need to give Credit Benchmark, the next business created by Mark Faulkner and Donal Smith, who successfully sold DataExplorers to Markit earlier this year, a double starred AAA for ticking all these boxes from the start. And doing so in the white-hot heat of critical market and regulatory attention currently being focused on the three great ratings businesses: S&P, Moodys and Fitch. Here is a sample from the US (taken from BIIA News, the best source of industry summary these days at

“Without specifying names, the U.S. regulator said on Nov. 15 that ratings agencies in the country experienced problems such as the failure to follow policies, keep records, and disclose conflicts of interest. Moody’s and Standard & Poor’s Corp. accounted for around 83% of all credit ratings, the SEC said. Each of the larger agencies did not appear to follow their policies in determining certain credit ratings, the SEC found, among other things. The regulator also said all the agencies could strengthen their internal supervisory controls.

The SEC noted that Moody’s has 128 credit analyst supervisors and 1,124 credit analysts, in contrast with S&P’s 244 supervisors and 1,172 credit analysts. The regulator also examined the function of board supervision at ratings agencies, and implied in its report that directors should be “generally involved” in oversight, make records of their recommendations to managers, and follow corporate codes of conduct. Source: Seeking Alpha”.

Well, in a global financial crisis, someone had to be to blame. It was the credit rating agencies who let us all down! The French government and the EU have them in their sights. They have a business worth some $5 billion with excellent margins (up to 50% in some instances). They are still growing by some 20% per annum because they are a regulatory necessity. They have become a natural target for disruptive innovation, and small wonder, because this combination of success and embedded market positioning attracts anger and envy in equal parts. Yet no one, least of all the critical regulators, wants disruptive change. It is easy enough to point to the problems of the current system, illustrate the conflicts inherent in the issuer-pays model, bemoan the diminished credibility of the ratings, or criticize the way in which multiple -notch revisions can suddenly bring crisis recognition where steady alerting over a time period would have been more useful, but at present no one has a better mousetrap.

At this point look to Credit Benchmark ( Having successfully persuaded the marketplace, and especially the hedge funds, to contribute data on equity loans to a common market information service at DataExplorers (a prime example of UGC – user generated content – more normally seen in less fevered and more prosaic market contexts) the team there have a prize quality to bring to the marketplace. They have been once, and can be again, a trusted intermediary for handling hugely sensitive content in a common framework which allows value to be released to the contributors, which gives regulators and users better market information, and which does not disadvantage any of the contributors in their trading activities. So what happens when we apply the DataExplorers principle to credit rating? All of a sudden there is the possibility of investment banks and other financial services sharing their own ratings and research via a neutral third party. At present the combined weight of the bank’s own research, in manpower terms, dwarfs the publicly available services – there are perhaps as many as 8000 credit analysts at work in the banks in this sector globally, covering some 74% of the risks. If all members of the data sharing group were able to chart their own position on risks in relationship to the way in which their colleagues elsewhere across a very competitive industry rated the same risk using the same data – in other words show the concensus and show their own position and indicate the outliers – then the misinformation risk is reduced but the emphasis on judgement in investment is increased.

And of course the Big Three credit agencies would still be there, and would still retain their “external” value, though maybe their growth might be dented and the ability to force up prices diminished if there was a greater plurality of information in the marketplace, and if banks and investors were not so wholly reliant upon them .The direction in which Credit Benchmark seem to be going is also markedly one which is very aligned to the networked world of financial services. User generated content; data analytics in a “Big Data” context; the intermediary owning the analysis and the service value, but not the underlying data; the users perpetually refreshing the environment with new information at near real-time update. And these are not just internet business characteristics: they also reflect values that regulators want to see in systems that produce better-informed results. A good conclusion from Credit Benchmark’s contributory data model would be better visibility into thematic trends for investment instrument issuers and their advisors, as well as more perception of and ongoing monitoring of their own, their client’s and their peer’s ratings. In market risk management terms, regulators will be better satisfied if players in the market are seen to be benchmarking effectively, and analysts and researchers who want to track the direction and volatility of ratings at issuer, or instrument, or sector, or regional levels will have a hugely improved resource. And something else will become clear as well: the spread of risk, and where consensus and disagreement lies. Both issuers and owners get a major capital injection of that magic ingredient – risk – reducing information.

None of this will happen overnight. Credit Benchmark are currently working on proof of concept with a group of major investment banks, and the data analytics demand (in a market place which is not short of innovative analytical software at present) is yet to be fully analysed. Yet money markets are the purest exemplars of information theory and practice, and it would be satisfying to be able to report that one outcome of global recession had been vast improvements in the efficacy of risk management and credit rating of investments. Indeed, in this blog in this year alone we have reported on crowd-sourcing and behavioural analysis for small personal loans (Kreditech), open data modelling for corporate credit (Duedil) and now, with Credit Benchmark, UGC and Big Data for investment rating. These are indicators, should we need them, of an industrial revolution in information as a source of certainty and risk reduction. Markets may never (hopefully) be the same again.

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