So, after we looked at how I saw Social Networking (SNW) develop, here is my look at how I see things develop. As I mentioned in the article above, working for Bluepulse made me think about SNW a lot, and I decided the starting point for any conversation on the future of SNW had to be the current standpoint of Facebook.

Now, you see, Mark Zuckerberg has been talking a lot about the social graph. That's the topological graph of people on a social network and the way they are connected. The concept is fairly old, dating back to the original Friendster: you could interact with people depending on their social distance from you, see their profiles if they were your friends' friends, and needed an introduction if they were once removed.

You know, having worked for a social networking startup (Bluepulse) made me spend a ton of time thinking about the purpose of social networking (SNW) itself. I had spent a lot of time on a bunch of different SNW sites, pretty much enjoying just the fun of looking at them, at how they tried to solve a problem, trying to get to the bigger picture.

Of course, it all started with Friendster, the grandmother of SNW. We all joined back in the day, and we had find exploring the possibilities of interacting with friends of friends, getting introduced to them. Friendster showed us that we were connected with people in ways we didn't understand, and that those who we may have thought strangers were actually just a party away from us.

Ok, the market and I saw this coming: Microsoft just announced last night they were going to start an unsolicited bid for Yahoo! at a share price of $31. There had been rumors (confirmed with the bid) that Microsoft and Yahoo! were talking about a merger, but (as Microsoft confirmed) they went nowhere fast.

As an ex-Yahoo!, and one that cares about the company a lot, I am sad to see one of the flagships of the Internet (potentially) disappear, but it was a catastrophe long in the making. At the same time, the transaction makes perfect sense for both parties involved at this stage in their life, and I wish the best to both bidder and biddee (that sounds so like bidet...).

Now that we have a perfect way to make money, let's look at the risks associated with it.

Here is a list of risks, and we'll discuss how they affect the trading below:

• There is no change in behavior: the undersold contract stays undersold, and the oversold contract stays oversold until it matures
• Of the two components of the multiplied expected value we picked the wrong one
• Intrade finds out about this method
• Method trading becomes a large part of overall trading, skewing the values
  
• Intrade runs out of business