Monday, December 31, 2007

First date

It's less than one-hundred minutes shy of the new year. My boys are pecking away -- Club Penguin tonight, with Green Day blasting via iTunes -- on Mac laptops, winding down 2007. They're both aiming for their first stay-up-til-midnight year; doubt it will happen, though I'd wager they'll make it before me.

The holiday break, a tonic of friends, football and brain-numbing farting around, conjurs thoughts of firsts. Firsts as in new experiences, unknown unknowns (prospective firsts), and wonderous what-ifs. A world sans firsts is, to quote my mother-in-law, beige; firsts are a reason for living.

Beyond the wonderment of my five- and eight-year-olds' daily firsts, I conjure a wonderful lesson from my friend Sydey (Prince's Rasperry Berret, which reminds me melodically of Syd, cranks on my son's PowerBook). As the marketing maestro for a kick-ass law firm, she shared an apt story.

Parked in a weekly meeting with the firm's partners, she analogized business development with dating. Think of the first time you took your wife or significant other on a date, Syd set the table. Blank faced, the lawyers nodded. Just like your first date -- I'm paraphrasing here -- you took it easy. Maybe you held hands, perhaps you shared a first kiss.

Courting a prospective client, Syd shared, is similar. You may make it to first base, but the future (a double, triple, or home run?) is engagingly and tantalizinlgly, left for future days. Right?

Syd surveyed the audience. Blank stares, incredulous (what, are you naive?) looks. Getting to first, second, or third was not in the cards; the teach-me-how-to-market lawyers shot for (and hit the) moon on the first date.

Reminds me of a story Tom Wolfe shared in a talk a few years ago at UC Davis. In his quest to author Hooking Up, he parlayed a similar metaphor. Again, I paraphrase (this time Wolfe): When I grew up, people used a metaphor to describe their progress with a mate. First base was kissing, second base was heavy petting, third base oral sex, and hitting a home run: Going all the way. Today, in college, first base is heavy petting, second base oral sex, third base intercourse, and a home run was learning their partner's name.

Syd's point -- perhaps the great Tom Wolfe's too -- was that meaningful relationships are a slow build. You do not need to hit a home run in your first plate appearance. Getting to first, building trust, is a viable initial stride. Business (or relationship) development is a slow build; patience is truly a virtue.

The haste entrepreneurs share to make it happen oftentimes conflicts with reality. Business is based on meaningful, trustful, fruitful, mutually beneficially relationships. Relationships are not transactions -- transactions (results) residue based on the strength and longevity of the relationship. Hitting a home run in your first at-bat may feel good, but it's not necessarily the most healthy product of your effort.

Happy new year. Best wishes for a bountiful 2008 filled with firsts.

Thursday, December 20, 2007

POTW: TripIt

We're polishing plans for a trip down south after Christmas. Two nights in Avila, then a few nights (wrapped around the UCLA-UCD hoops game) in L.A. It's a pretty basic trip -- no flights or car rentals -- but there's still a lot of there there. Pre-departure we'll probably fill a folder with hotel confirmations, tickets, maps and the like.

Which leads me to this week's POTW from Springwise: Effortless Online Travel Organizer. Snapshot:

Anyone who's ever traveled is surely familiar with the dreaded Manila Folder—that sheaf of printouts, receipts and tickets we rely on to stay on schedule during a trip. Now TripIt promises to free us from those manila shackles with an online service that organizes all the pieces into a single, consolidated itinerary.

Users begin by simply forwarding all their travel confirmation emails to TripIt. The site can accept booking confirmations from most travel agencies, airlines, hotels, rental cars, rail providers and even restaurants. All information is kept strictly secure and confidential, and TripIt's "Itinerator" automatically combines everything into a single master itinerary. TripIt then searches the web for complementary information, including Google maps and directions, weather from the NOAA, SeatGuru airplane seat advice, Wikipedia city information, current events information from Eventful, city photos from Flickr, and dining reservations from OpenTable. Users can print out their itinerary and go, or they can customize it with additional maps and directions, notes and webpages. Itineraries can be accessed while on the road from a mobile device, synched into Google or Outlook calendars using iCal, and also shared with friends, family and colleagues through the site's social TripIt Friends component. TripIt is free to users around the world; advertising and referral revenue opportunities are in the works.

Sounds cool and I can see the combinatorial value, though it's a nice-to-have service. TripIt's virtues remind me of two recent conversations. The first occurred in Gainesville a few months ago with a row of fanatical Vanderbilt undergrads (the poor engineers were wearing ties to a football game; 'tis tradition for Vandy students). I asked the pimple-faced gents: What's more valuable to you, email or Facebook? Duh ... Facebook by a mile ("I only use email for classes and talking with my parents."). How about Facebook or instant messaging? After a few pump fakes, the Vandy boys agreed: We can't live without IMing. (My read: Email is nice to have, Facebook is cool, but IMing is a gotta-have tool.)

Conversation two, via last night's dinner-table discussion. What does Berkeley (our lab) need? Food and water, chimed Scott. Two bowls and his bed, opined Ty. Tennis balls and baths, I offered. No, dad, Berkeley doesn't need those things.

Be it travel planning, college communications, or the life of a lab, pursuing needs (versus wants or likes) is imperative.

Wednesday, December 19, 2007

Whiners

We have too many rules in our house; ‘tis life with young boys who are learning consequences and morals on the fly. My wife and I employ a collection of carrots (you can play Club Penguin for 15 minutes if you …) and sticks (if you ______, you can’t leave your igloo/play Club Penguin). I think the sticks work better.

The two most important Soderquist regulations: Be nice to mommy (and your brother), and no whining. The latter is an artifact on my oldest son’s door.

Companies are somewhat like families, artificially inseminated around an idea, a collective purpose, and a bevy of values. Families are directed by moms, companies are ushered by leaders. Both, when successful, are unselfish – they give more than they get. Givers are effortlessly allocentric. Getters are selfish, prone to whining.

It takes just as much, if not more, energy to whine versus give. Whining is a proactive effort; giving is natural, reactive.

What’s worse is the negative energy that whining perpetuates: It can kill a company faster than a poor product or erroneous strategy. Example: I am acquainted with a company that’s embroiled in a board-level cat fight, super smart guys chaperoning a technology with great potential (that, unfortunately, may become notential soon). Big time finger-pointing and negative energy abound (is it possible to have negative momentum, where mass is multiplied by negative velocity?). A contemporaneous (today) email excerpt from one cat to another:

Your making a scene about this now is as helpful as kids screaming in the backseat of a car in traffic.
Happy holidays to you too. Lumps of coal to the side, a resolution is evident if – it’s a major league if – we can discard emotions and apply logic and common sense. Therein lies the challenge: People run companies. People are emotional. Emotions can cloud judgment, for both givers and takers. When this happens, the efficacy and potential of the company, regardless of individual intentions, can dissolve. Fast.

Rewind to the kids and one of their favorite Jack Johnson tunes:
It’s always more fun to share with everyone.
If you've got a ball, bounce it to the gang
If there is a new kid, invite him out to hang
If you've got one sandwich, cut that thing in half
If you know a secret joke, tell it and share a laugh
If you've got two drumsticks, give one to your friend
Make one beautiful rhythm, share a beat that never ends

Monday, December 17, 2007

BMF

When my dad helped crescendo California Analytical Laboratories in the early 80s, he coined a rallying cry: [We are] The Best Mother Fucking Lab. The fridges were stocked with beer, Mick and the boys melodied through the halls, and hippies-turned-chemists cranked out water, soil and air samples, riding the Super Fund wave on their route to catapulting CAL Labs public. Life was good. The license plate on my dad’s Toyota pickup truck was the exclamation point.

Aside from being obviously profane and devilishly in your face (the DMV’s license plate police failed to translate the acronym), BMF – to me, with 20 years of hindsight – was a genuine call to trump mediocrity. Being good, great, or just another analytical lab did not suffice. CAL Labs was the best.

If memory serves, I wrote a few weeks ago about great being the enemy of good. Good enough is, when you’re starting a company or trying to launch a product, often the answer; you do not have enough oxygen, time, or capital to be great. Get it out there, emerge and adapt. Being the best will come if you have the courage to point your tips downhill (destination unknown) and traverse the mountain.

But it’s scary, especially if you’re used to having the answers: Clear visibility and calculable calculus are preferable to blizzard-blocked vision and uncertainty. I live this daily, the quest for certainty, clarity and known knowns. It’s a Pollyannic place.

Jackson Browne phrased it aptly in Red Neck Friend:

Come on and take my hand
I may not have the answer but I believe I got a plan
The Oh shit, we may fail, we do not have the answer bemoan of Eyeores is a cry for mediocrity. If you aspire to be the BMF at whatever you endeavor, you set forth with a plan. The answers will come, perhaps perpetuated in metal.

Friday, December 14, 2007

POTW: That's what I'm talking about

Had a cup of coffee with a friend last week. He -- among many terrific contributions -- authors a wonderful blog. After agreeing that our blogs were a platform to think (and share our thoughts, his more cogent and insightful than mine), we turned to The Great Marc Andreessen. How does he do it? we puzzled, equally amazed at Andreessen's ability to churn out meaningful, treatise-esque posts.

Andreessen strikes again with this week's post of the week: That's what I'm talking about. Therein he continues his wonderful dissertation about the Hollywood writers' strike and the state of the entertainment industry. He parlays a story from a writer/producer-turned entrepreneur and their quest for VC funding:

We met with a lot of VCs.

And had a lot of long, interesting conversations – no money, but that was okay; we were unknowns, and not engineers. Pretty much everyone we met was thoughtful and smart and enthusiastic about the future of web-based entertainment. Everyone we met spent at least 90 minutes with us, talking, musing, thinking out loud.

No one does that in Hollywood.

No one in Hollywood thinks out loud. Not like Fred Wilson, or Brad Feld, or Mike Hirshland or... I could go on.

We don’t think about the machine. We only think about feeding the machine.

And right now we’re all standing around a machine that’s making alarming noises and emitting a funny smell and we’re all arguing about whose fault it is, rather than trying to figure out how to fix it.

Or whether to throw it away.

Three cheers for fatheads.

Fritz

I was reminded this week, thanks to one forgetful meeting, of three things: the resonance of genuine character, the virtue of being enamored with what you do, and the value of telling a good story. The (antithesis) catalyst was a meeting with a fathead, an anything but genuine, passionless, quant-citing financing type. Life to (with) said lard brains is a game of drab checkers. It was one of those encounters, to paraphrase Buffett, where you step on a pop top and blow out your flip flop (cut your heel and have to cruise on back home). What a waste.

Enough whining; back to my memory. Econ courses in grad school kicked my rear. Supply, demand and the point of elasticity were ungraspable concepts. One week in one econ class, we explored the economics of the beer industry. I was trickling through my twenties … beer was the libation (oftentimes the cuisine) of choice. My interest amplified, I immersed myself in the week’s readings and case studies.

At the onset of our lecture, we noticed an older, grandfatherly gentleman in the back row. Must be the prof’s dad, we whispered. A few dozen minutes into his lecture, Dr. Smiley welcomed our guest: I would like to introduce Fritz Maytag, tonight’s guest speaker. Fritz who?

For those in the know – not me, obviously – Mr. Maytag was the proprietor of Anchor Brewing Company. He commenced a two-hour-or-so visit with a story, detailing how – in the early 1960s, if my too-many-Anchor-Steams-ago memory serves – he purchased and operated the brewery. Seated in a tavern in San Francisco, Fritz overheard two advertising execs lamenting their failure to profitably operate Anchor Brewing Company. Tears in their beers, they were getting high on their own failing supply.

A third or fourth generation descendant of the Maytag (appliance) family, Fritz was fresh off earning a masters in Japanese (or something equally esoteric) from Cal. “I didn’t have to work another day in my life,” he shared. Fritz turned to the ad guys and asked if they’d be interested in selling the toilet-spiraling company. Yes.

Commencing with nary a clue about how to make beer, let alone run a brewing company, Fritz and his secretary set forth. Part chemist, part craftsmen, part bottler, part labeler, part deliverer, they brewed their first batch. And then another. The beer – Anchor Steam was and remains their flagship delicacy – got better, consumers multiplied, and taverns throughout the city ordered more and more barrels. A craft – microbrewing – was invented as the company was reinvented.

My favorite (and Fritz’s personal pride): Anchor’s Christmas Ale. Fritz road-trips every year to handpick and procure unique ingredients for the annual recipe, a little nutmeg here, a special crop of hops there. From their site:

The Christmas Ale’s recipe is different every year—as is the tree on the label—but the intent with which we offer it remains the same: joy and celebration of the newness of life. Since ancient times, trees have symbolized the winter solstice when the earth, with its seasons, appears born anew.
Just another story, eh? Not quite. Beer to Fritz was more than hops, barley and water. The business was more than a business. He stood before our wide-eyed class, paused in the tradition of Paul Harvey, hoisted a bottle of Anchor, and opined, “I love my product.” It was the most sincere, genuine, passionate, and memorable reflection I’ve experienced. To that day – in his late sixties and 30-plus years into running Anchor – Fritz visited taverns throughout San Francisco, changing kegs, stocking refrigerators, telling tales.

Fritz shared a story that night and, along the way, taught us a little about economics (and a lot about life). Cheers.

Tuesday, December 11, 2007

Panhandling

I met with a company last week that’s on to something. What, I’m not sure – the company is headed in a half-dozen potentially viable directions – though I’m confident they’ll give it a good run.

The pre-revenue, bootstrapped company is being pulled to a fro. Do this, go there, change that; advice -- mostly sage -- percolates in droves. Included therein is direction to write an executive summary and business plan. For whom and why?, I asked. (Well, for investors and because we were told that’s what we need to do to raise money, they replied.) Such are the erroneous rules of the game.

My advice was contrarian and, I’m sure, confusing: Cease the game of trying to appease potential investors. Halt any efforts to write an exec summary or bplan, or build a five-year P&L (by now I’m leading my sermon atop a chair in the coffee shop). Invest your energy in two areas: Luring users (it’s a Web 2.0 co) and generating revenue. Assume you will not raise any outside money. Build it – a monetizable community of engaged users – and they (investors; if you desire) will come. Worst case: You have a self-sustainable business (or, if it doesn’t work, you have not failed on someone else’s dime). My helium exhausted, I sedated into my seat.

Building on the “someone else’s dime” (or OPM: other people’s money), I was reminded of the dissonance between an entrepreneur’s perception and the reality of employing outside capital. I have spent a lot of time on both sides of the dime: either starting or helping companies that require outside capital, or investing directly (or indirectly through funds) in such companies.

Raising capital – in the right situation and from the right investors – is a great thing; the positives outweigh the negatives, and the relative degree of potential success is heightened. Think mass x velocity = momentum, or the running a marathon solo vs. running it with a team analogy.

It’s imperative, though, that entrepreneurs panhandle with open eyes: The accountability, responsibility, and expectations (to your investors) can be daunting, and the organization, governance and decision-making (at the board level and elsewhere) is, well, different. It’s not entrepreneurship in its true sense: It is the formal, professional and fiscally prudent management of resources as a fiduciary. It’s the difference between being a kid and a grownup, which reminds me of one of my idols, Peter Pan (speaking, I’m sure, on behalf of most entrepreneurs; Peter was anything but a panhandler):

I won't grow up,
I don't want to wear a tie.
And a serious expression
In the middle of July.
And if it means I must prepare
To shoulder burdens with a worried air,
I'll never grow up, never grow up, never grow up
Not me.
It’s easy to handle a pan and there are plentiful passersby who may chip in a dime. The true challenge is deciding whether you need to play (and are up to playing) with other people’s money.

Friday, December 7, 2007

Fish wrap

I’ve lamented the demise of newspapers, perhaps too personally. As a kid I pedaled papers (Bee, Chronicle and Davis Enterprise routes), wrote for the high school paper (The Davis High Hub), and did the same in college (The Mustang Daily) as a journalism undergrad. Fearful that the newspaper industry is perishing, I donned my old reporter’s cap this morning and dug deeper.

Good news: On an average day, roughly 51 million people still buy a newspaper, and 124 million in all still read one. Newspapers' online ad revenue increased 31.5% in 2006 to $2.7 billion. In the first quarter of 2007, online ad revenue increased 22.3% to $750 million. Still, online represented just 5% of the $49.3 billion in total newspaper ad revenue in 2006.

Which leads to the bad news: Tangible ad revenues are in a tailspin, especially cash-cow classifieds (which are off 15% or more in the past year). The convenience and efficacy of searching for a job, finding a car, or perusing real estate listings (the three cardinal classified classes) is profoundly superior online.

Newspapers are in the advertising business. Yes, they relay news, but it’s a means to attract readers who will view advertisements. Content -> Audience -> $. No audience = No ads = No news. As the content’s appeal and reach increase, so too – not necessarily linearly – does readership and revenue. It’s a pretty simple equation.

Which leads to my first-ever multiple-choice blog question: If you are an advertiser posed with a binary choice, which would you choose?

a. A micro-targeted solution where you pay to communicate with prospective customers – one-by-one – who have proactively sought you out and who seek to engage in a conversation.
b. A mass-media alternative where you pay to speak at/to a somewhat faceless aggregate of readers, whether they read your ad and/or are interested in your product or not, in hope that they will react.
Duh. Effective marketing is pretty simple: It engages interested consumers in a meaningful conversation on their terms and with their permission. Traditional – newspaper – advertising falls far short.

Critics lampoon print media’s inability to effectively monetize their readership, their too-late apathetic adaptation to consumer needs. As newspapers bleed, solutions abound. Here’s a year-old take from Freakonomics, Another Way for Newspapers to Not Die, picking up on an SF Chronicle column by Peter Scheer.
... the most interesting point in Scheer’s article is his proposal for how newspapers can protect their value: by placing a 24-hour embargo on their original reporting, not allowing it to appear on free Internet sites until a newspaper’s paying customers have had first crack at it.
Wait, I’m lost: The solution is to penalize readers – and discourage advertisers – by embargoing news, thereby creating or protecting value? Give me more …
“The point is not to remove content from the Internet,” Scheer writes, “but to delay its free release in that venue. A temporary embargo, by depriving the Internet of free, trustworthy news in real-time, would, I believe, quickly establish the true value of that information. Imagine the major Web portals — Yahoo, Google, AOL and MSN — with nothing to offer in the category of news except out-of-date articles from ‘mainstream’ media and blogosphere musings on yesterday’s news. Digital fish wrap.”
Freakonomics laments the challenge – neutering consumer expectations of receiving something for free – while embracing the concept:
… it is a very intriguing idea, maintaining the value of a besieged commodity simply by shifting the time frame of its use.

It takes a lot of time and a lot of money to produce good reporting. Most people who consume good reporting don’t seem to know this, or care to know it. But they will certainly figure it out if the good reporting begins to disappear because media owners can no longer provide the kind of product we’ve become accustomed to getting for free.
Newspapers as we know them will not go away. Consolidations will continue, staffs will be trimmed, content will suffer, and the weak will swim with (perhaps wrap?) the fishes.

++++++++++++
Post-script (17 Jan 08): From Editor and Publisher:

In the most radical move from print to digital advertising by a major newspaper, the Chicago Tribune announced Monday it is eliminating help-wanted [classified] ads from the newspaper on weekdays.

Opines Andreessen: One small step for classifieds, toward the inevitable large step of shutting down the print edition of the newspaper entirely.

++++++++++++
Post-script (03 Feb 08): The Great Andreessen -- how does he do it/where does he get the time? -- further forecasts the morbid clouds in newspaperland: Inaugurating the New York Times Deathwatch. Painful by worthy read.

++++++++++++
Post-script (04 Feb 08): Chris Anderson chimes in with his perspective of the future of radio. "... now that I've switched to an iPhone [atta boy, Chris!], I've noticed a different behavior. I'm listening to more and more of my favorite NPR shows (This American Life, Terry Gross's Fresh Air, Science Friday, etc) as podcasts, something that finally suits me thanks to having a phone that automatically loads the latest shows." He predicts radio is going to get microchunked, just like the rest of media:
The podcast model is getting cheaper and more ubiquitously available (who doesn't have a cellphone?), and it serves individual needs and taste better. Meanwhile the broadcast model, which is all about one-size-fits-all taste, is based on human labor costs and costly transmission equipment and is only getting more expensive. You can see how this story ends.
++++++++++++
Post-script (17 Feb 08): Andreessen shares -- Irony is dead, last gasp of newspaper industry edition -- pieces from the NY Times and Newsweek. "Executives involved said the newspaper companies understand [by which they mean, "used to have a local monopoly but don't anymore"] the local market better than Google, Yahoo and Microsoft..." The ultimate belated (fatal?) pull-your-head-outta-the-sand realization.

++++++++++++
Post-script (17 Apr 08): Andreessen is back (not that he ever left), scribing about The Birth of Newspapers. He looks back at the first fish wrap conceived after the invention of movable type ... a taste:

Aretino could have done something constructive with his little publication. He could have written about Florence under the Medicis becoming the center of art and humanism in the Western world. He could have written about the founding of the University of Palermo, which would soon be a major institution for the advancement of learning...

Aretino did none of this.

Instead, he "produced a regular series of [anti-religious] obscenities, libelous stories, public accusations, and personal opinion". The opinion was boldly, and often vulgarly, expressed. It was also for sale, with Aretino running a kind of protection racket on those who were the subjects of his stories: pay what he asked and he praised you; refuse and you were slathered with abuse.

Good stuff. He wraps (more to come):
And we see the nature of the birthing pains of a new medium -- any new medium -- and obviously, all of the birthing pains of the modern consumer Internet are trivial in comparison to the mind-boggling headwinds the original newspaper entrepreneurs faced.

Thursday, December 6, 2007

Mix it up

One of my first businesses was an ill-fated venture with my friend Elvis. The Fonz was Eddie Haskel-esque in his ability to con all-comers to purchase a mix tape (TDK SK-90, of course), loaded with their favorite tunes. Three bucks a tape, if memory serves; we made less than a mint. I spun the vinyl (Elvis Costello, The Clash, OMD, Depeche Mode, and UB40 were faves), Elvis loaded a bowl, and the world (e.g., a handful of Davis teens) was musically a better place. The scratch of the between-song needle resonates today, as does the predictable source of our failure (Elvis got high on our own supply, giving away tapes to too many enamored amigas).

A Springwise post, Music Promotion with a Profit-Sharing Twist, reminded me of our bygone days.

Similar to GoodStorm's MixTape, which we covered earlier this year, Mixaloo is an online venture that lets music lovers create, distribute and sell custom mixes of the tracks they love and receive a share of the profits in return.
Twenty-five years later, companies are mimicking our juvenile efforts. Tell me more ...
Mixaloo, which just opened its doors to the public a few weeks ago [little late to the party, eh?], allows music fans to choose from more than 3 million songs [we boasted 200 or so albums; 3,000 songs, max] when they create their mix, including every major label and thousands of independent artists. Based on their searches, Mixaloo also suggests related artists to consider [intuitive search engines and vast choice? We called the shots.]. Once users finalize their mix, they can distribute it with 30-second song samples inside a widget to any personal or social networking website, or email it directly to their friends [email did not exist; our customers could pirate our pirated product by copying a tape for a friend].
Enough sarcasm; there's a valuable lesson therein:
"Everyone's favourite songs are closely tied to the experiences and memories they represent, which makes creating and sharing mix tapes such an enjoyable way for people to express themselves," explains Mark Stutzman, Mixaloo's cofounder and CEO. "We created Mixaloo to merge that experience with the viral nature of blogs and social networking communities, giving users the added incentive of earning cash for popular mixes. This 'social record store' creates a vast network of personal recommendations to increase sales and visibility for artists of all sizes."

1+1=3

My oldest son is a math wizard. Proud parent that I am, I posed the following equation: Scott, what’s one plus one? Two, dad, c’mon. Nope, sometimes it’s three. Remember the Jack Johnson tune, "Three is a magic number, yes it it, it's a magic number"?. You’re wrong, dad, and you’re nuts.

Nuts, yes. Wrong, no. Here’s why:

In business we practice musical, hopefully magical math, seeking scenarios where one plus one equals three (or more). Here are three examples:

  1. Solutions: The essence (or efficacy) of innovation is the combinatorial ability to merge two or more existing elements where the sum is greater than the parts. This added, or differential, value is the essence of your being. An example: Solar is an increasingly economically sensible and pragmatically desirable alternative energy source. Desalinization is the no-duh answer to the world’s potable water thirst, but the economics of conversion are cost-prohibitive. What if – this has gotta exist – a solar-powered desalination solution evolves? Simple math.
  2. Mergers: At last check, a majority of company consolidations fail. One plus one equals less than two. When contemplated (and when executed successfully), the proposition of merging two or more organizations makes sense: Value (the sum of the conslidation) is buoyed thanks to economies of scale, procurement economics, product/solution combos, industry leverage, and business development virtues. When it works, it's magic.
  3. Teams: My brother-in-law relayed (and I paraphrase) an apt analogy: If you’re going to run a marathon, it’s a lot harder to go it alone. Running a relay – teaming with others, be it managers, investors, advisors, or partners – is a heck of a lot easier, let alone efficacious. Think of the Advil you'll save too.
When 1+1=2, you’re playing with flash cards; the results are algorithmically predictable. When the sum of the parts is greater than the whole, the flip side of the card is yours to calculate.

++++++++++
Post-script (1/10/08): My comrade Redwood chimes in with a fact-loaded and metric-filled post about Affordable Desalination, along with a read-my-mind (full disclosure: Wood and I explored this over a few beers in December) article about Photovoltaic Desalinization. There's a there there and the math computes. What's missing?

Monday, December 3, 2007

POTW: Racing down the hydrogen highway ...

In the wake of my fail fast/better post, Andy Hargadon checks in with our post of the week. Andy gets it: He has an innate ability to teach innovation (is it an art or science?), bring business people and scientists together, and pragmatically filter theory and propaganda. (BTW, if you haven't read his book, How Breakthroughs Happen, procure an early xmas gift.)

Andy takes a provocative look at the residue and roadkill of failed technologies, evidenced by the contemporary tough times of ethanol and hydrogen. Quick take:

What interests me is the question of what happens when good technologies go bad--when promising technologies are brought to market prematurely, with too many promises made and too few kept. It happens in countless start-ups, when emerging technologies turn out to need twice (or more) the development time than their business plans promised and in large organizations, when the demands of Wall Street made it too tempting to accelerate the next generation technology.

When the inevitable disappointment comes, the technology becomes a pariah--outcast and shunned. Unfortunately, the scientists and engineers who worked their tails off trying to deliver on the unrealistic promises, usually get hit the hardest: "There goes ol' Burt--he worked on the Newton project. Hasn't been the same since." And another promising technology is set back decades (and the generation who pioneered it is lost) for no other reason that that very promise.

Fail fast. Fail better.

At Venture Lab we had a mantra: Create. Innovate. Accelerate. I can’t claim to investing much time in its creation – we probably had a gotta-make-t-shirts itch – but our employment of the mantra was acute. If Venture Lab was an embryo today, I might tender a new rallying cry: Fail fast. Fail better. Here's why:

In the midst of refining our investment thesis for a network of early-stage investment funds, we’re hammering through the why, what and how of our funds. The why is obvious: To generate superior investment returns, to build local economies and wealth, and to have fun. The how (for now/on paper/pre-implementation) is pretty algorithmic too: Blocking and tackling your way through scenario (portfolio allocation and investment timing) and structural planning. Boring but necessary stuff that MBAs inhale in their sleep.

It’s the what (the lens we’ll employ to [hopefully] advantageously source, make and manage investments) that’s interesting. Not the obvious stuff – invest early, often and diligently in capital-efficient, high-potential, differentiated companies and great teams – but, to quote derelict Donald Rumsfeld, the unknown unknowns.

A company’s likelihood of success is directly related to its ability to adapt. Companies that fail fast, frequently, and smartly are more likely to succeed than those that fail slow (and have trouble changing directions) or do not, as they sedentarily gaze at their navels, fail at all.

All companies fail, though most failures are not fatal. As the potential for returns increases, so too does the likelihood of opening the wrong door, or steering down an erroneous path, or hitting a wall. Think mass x velocity = momentum, where momentum can be good or bad. (If it costs seven figures to open a door and you have to open lots of doors, get used to being lonely in the dark.)

All companies begin with a reason for being: a business model or hypothesis of value. All companies – by virtue of being a company – start down a path. This path is most always the wrong path; the original business plan does not pan out.

One of the cool things about small companies is that they’re inherently nimble and thus can adapt and transform quickly. Take venture-backed companies: As the stakes increase (mass x velocity), the momentum of their failure intensifies.

Venture dollars are best spent in the practice of failing: Finding the right path, the right model, the gotta have value proposition. From there, scaling the business (allocating resources to most expediently maximize returns) is simple math. Risk is mitigated, the path is illuminated, and execution is methodical.

Getting there – failing fast and frequently – is the fun part.

++++++++++
Post-script (17 Jan. 08): Relevant satire in the Onion, spotted by the Great Andreessen, "confirming decades of Silicon Valley conventional wisdom":

In a stunning reversal of more than 200 years of conventional wisdom, failure—traditionally believed to be an unacceptable outcome for a wide range of tasks and goals—is now increasingly seen as a viable alternative to success, sources confirmed Tuesday.

"Americans have always been told that they should succeed at all costs," Emory University sociologist Dr. Lauren Hodge said. "But based on new evidence, this can no longer be called true—if, in fact, it ever was. As failure continues to dominate the American landscape, this mantra must be overruled."

"We have no choice but to revoke failure's non-optional status, effective immediately," Hodge continued. "Now all citizens will be able to step back, stare down the hardship and difficulty they will face in the pursuit of success, and say, 'Fuck that—this isn't worth it.'"

++++++++++
Post-script (29 Feb 08): Interesting take from Dharmesh Shah in OnStartups about why startups fail. Quick tease:
One thing I've been pondering this weekend is figuring out why startups fail. But, in order to figure that out, I had to first decide what constitutes failure. The more I thought about it, the more I realized that a definitive failure is when the startup simply stops trying. And, the only reasons to stop trying are that you run out of cash, or you run out of commitment -- or both.
++++++++++
Post-script (16 Mar 08): Unearthed a thoughtful post from the great Bob Sutton, Failure Sucks But Instructs. A taste:

There is no learning without failure. No creativity without failure. That is why Jeff Pfeffer and I argue that the best single diagnostic question you can ask about an organization is: What Happens When People Fail? ... Diego and I, in teaching our first d.school class on Creating Infectious Action, initially tried to put too pretty a face on failure. We talked to the class about treating everything as a prototype, which we believe in strongly. We preached bout failing forward, failing early and failing often, and used a a host of other pretty words to talk about the good things that happen when things go badly. Yet these is no denying that going down a failed path is still no fun, even if it is a short journey. So after out students --- under our guidance – were especially unsuccessful at promoting a hip-hop concert (despite trying very hard, look at this cool poster one team made), we realized that the most honest thing to do was to deal with our feelings of disappointment, to talk about how much it sucked to have such a lousy outcome, and then turn to the learning.

++++++++++
Post-script (17 Mar 08): A few relevant slices from Paul Graham of YCombinator on How Not to Die ...

The metaphor people use to describe the way a startup feels is at least a roller coaster and not drowning. You don't just sink and sink; there are ups after the downs.

Another feeling that seems alarming but is in fact normal in a startup is the feeling that what you're doing isn't working. The reason you can expect to feel this is that what you do probably won't work. Startups almost never get it right the first time. Much more commonly you launch something, and no one cares. Don't assume when this happens that you've failed. That's normal for startups. But don't sit around doing nothing. Iterate.


++++++++++
Post-script (03 Apr 08): Andreessen adds to the conversation r.e. the role of curiosity and failure (scroll to the bottom for the morsel):
… the lack of curiosity can be a huge danger to a startup in the following way: often, your initial strategy won't quite work, but you can learn as you go based on other things that happen in the market and eventually iterate into a strategy that does work. Obviously, insufficient curiosity can prevent you from seeing the new data and lead you to continue to pursue a losing strategy even when you wouldn't have to.