the art of business

POTW: How to Pickup a VC

2008-06-12T07:37:00.001-07:00

It has been a dozen or so weeks since our last post of the week. Thanks to The Great Kawasaki, we're back ... here is his chortle-filled take on how to pickup a fat head:

Many entrepreneurs ask me what is the best way to open a pitch to potential investors. I'll answer that question at the end of this posting, but first let me tell you the ten worst opening lines that you can use:

You say: "I'm bright and ambitious." Investor thinks: "That's a relief because I usually invest in stupid and lazy people."
You say: "I'm a blue sky thinker." Investor thinks: "You have no business model, and you don't know how to ship."
You say: "I don't know much about your firm, but I thought I'd contact you anyway." Investor thinks: "You're a lazy idiot--why are you wasting my time?"
You say: "I love to think of new ways to solve problems." Investor thinks: "Is this a high-school science fair?"
You say: "I have lots of great ideas, but I have trouble figuring out which one to try. Let me tell you about a couple." Investor thinks: "I want to know which idea you're going to kill yourself trying to make successful, not which ideas have crossed your idle mind."
You say: "I've always wanted to be an entrepreneur." Investor thinks: "I've always wanted to be a professional golfer. So what if you always wanted to be an entrepreneur?"
You say: "I'm sure you are aware of the growing need for security. Web 2.0, Open Source, whatever." Investor thinks: "If you're sure I'm aware, why are you telling me you're sure I'm aware."
You say: "If you sign an NDA, I'll tell you my idea." Investor thinks: "You are clueless. How can you not know that venture capitalists don't sign NDAs?"
You say: "The last time I contacted you, I..." Investor thinks: "I'm going to fire my secretary for putting this clown on my calendar again."
You say: "My goal is to build a world-class company." Investor thinks: "How about you ship and sell the first copy before we talk about world-class anything?"

Now you know what not to say. Here's what you should say:

"This is what my company does..."

It's that simple. What you're trying to do is get potential investors to fantasize about how your product or service will make a boatload of money. They can't fantasize if they don't know what you do. And they don't want to be your friend, mother, or psychiatrist until they understand what you do, so cut the crap and explain what you do.

Step on the gas

2008-06-12T05:35:00.000-07:00

In idle times this week, I have volleyed between surfing for a hybrid (to replace my hyper-consumption Landcruiser) and reading Natural Capitalism. It's a cerebral paradox; the latter read, in the form of environmental guilt, gas-at-$4.50-plus-a-gallon remorse, and plain common sense, feeds the former four-wheel reality.

Natural Capitalism engages readers to imagine an entrepreneurial conversation that took place at the end of the nineteenth century ... A group of powerful and farseeing businessmen announce that they want to create a giant new industry in the United States, one that will employ millions of people, sell a copy of its product every two seconds, and provide undreamed-of levels of personal mobility for those who use its products. However, this innovation will also have other consequences so that at the end of one hundred years, it will have done or be doing the following:

paved an area equal to all the arable land in the states of Ohio, Indiana, and Pennsylvania, requiring maintenance costing more than $200 million per day;
reshaped American communities and lives so as to restrict the mobility of most citizens who do not choose or are not able to own and operate the new product;
maimed or injured 250 million people, and killed more Americans than have died in all wars in the country's history;
be combusting 8 million barrels of oil every day (450 gallons per person annually);
made the United States increasingly dependent on foreign oil at a cost of $60 billion a year;
relied for an increasing percentage of that oil on an unstable and largely hostile region armed partly by American oil payments, requiring the United States to make large military expenditures there and maintain continual war-readiness;
be killing a million wild animals per week, from deer and elk to birds, frogs, and opossums, plus tens of thousands of domestic pets;
be creating a din of noise and a cloud of pollution in all metropolitan areas, affecting sleep, concentration, and intelligence, making the air in some cities so unbreathable that children and the elderly cannot venture outside on certain days;
caused spectacular increases in asthma, emphysema, heart disease, and bronchial infections;
be emitting one-fourth of U.S. greenhouse gases so as to threaten global climatic stability and agriculture; and,
be creating 7 billion pounds of unrecycled scrap and waste every year.

Now imagine they succeeded.

Karl Benz, Gottlieb Daimler, Ransom Olds, Henry Ford and a gaggle of comrades were the catalytic culprits. I presume their intentions were entrepreneurial (create a company to make money by building and selling great products that fill unmet needs), not harmful. They were prophets in a business sense, not an ecological nor societal damaging manner. The thrills and ills of their success -- in a sobering and enterprising way -- open a window to innovate the world's largest industry.

As Natural Capitalism opined nearly a decade ago, the contemporary automobile is embarrassingly inefficient:

Of the energy in the fuel it consumes, at least 80 percent is lost, mainly in the engine's heat and exhaust, so that at most only 20 percent is actually used to turn the wheels. Of the resulting force, 95 percent moves the car, while only 5 percent moves the driver, in proportion to their respective weights. Five percent of 20 percent is one percent -- not a gratifying result from American cars that burn their own weight in gasoline every year.

Ouch. My teeth grind and my frown protrudes as I gaze at my parked '88 Landcruiser, backed up to my wife's Volvo SUV. They're inefficient petro-pigs, a paradox of living in Davis (let alone on this planet).

Completely redesigning cars by reconfiguring three key design elements could save at least 70 to 80 percent of the fuel it currently uses, while making it safer, sportier, and more comfortable, Natural Capitalism's authors opine. These three changes (pyramids for entrepreneurs to ascend with their innovations) are:

making the vehicle ultralight, with a weight two to three times less than that of steel cars;
making it ultra-low-drag, so it can slip through the air and roll along the road several times more easily; and,
after steps 1 and 2 have cut by one-half to two-thirds the power needed to move the vehicle, making its propulsion system "hybrid-electric."

It's the last day of third grade for my eight-year-old son; he awoke at 5:45 (5:06, he claims) as I scribed the above. With no knowledge of what I'm babbling about herein (no joke), he said: Mommy, why do you guys like big cars? They're bad because they get low gas mileage and they're going to break down.

BeenUp2

2008-06-10T05:54:00.000-07:00

Invariably a conversation begins with, So, whatcha been up to? It's a good, extemporaneous test to gauge what's important to you, or what is top of mind. MySpace and FaceBook exist for this reason ... communities of people instantaneously keep track of what they and their friends are up to. Though I'm a member of neither, I think I get it: You can engaged in real-time communication with multiple people, an open window into your life and the lives of your friends.

I've been up to investing a mass of energy into The New California 100, a first of its kind event. We are convening and honoring the top-100 established companies in the Great Central Valley, showcasing 40 cool growth companies to a gaggle of private equity investors, and honoring the inaugural class of New California Hall of Fame members, seven Valley business legends. As events go, it's quite entrepreneurial ... coalescing the audiences, naming the top-100, creating and honoring the Hall of Fame. Should be fun, and it all goes down Tuesday, June 17.

What you've been up to also speaks to what you care about. I wrote a few months ago about the necessity -- when you're building a company or chartering a cause -- of getting people to care (about what you've been up to!), of creating relevance and stoking resonance about what you're doing. An excerpt:

What is relevance? To me, it’s getting people to care by generating value and interest and demand and intrigue and inspiration. It’s about creating and stoking a bonfire, one with ever-growing visibility and a desirability to participate. It's encapsulated in one of The Cluetrain Manifesto's theses: Companies that do not belong to a community of discourse will die. It’s hands down the paramount challenge CEOs face.

Relevance matters only in the minds of your constituents; it’s their perception, period, that counts. And, all stakeholders count: Customers, prospects, partners, shareholders, employees, analysts, competitors … your entire ecosystem. It’s doing something – a lot of things – to edge people to the front of their chair, to raise an eyebrow, to engage a phone call, to elicit an, “I’ve gotta do something -- invest, buy, partner, work, lead, support – with this company," action.

Fostering relevance is an (check that: the) ante to success. The rest – the blocking and tackling of business – is easy and boring. If you’re not relevant – if you can’t get key constituencies to care – move on. Treading water in an empty pool is painful for all involved.

My thinking was shallow; I missed a key point. It's not enough to get people (and yourself) to care. You also need to connect such interest to a stake (or outcome). As your level of care/commitment (emotional, physical, and professional involvement) increases, so too must your potential reward. If the latter does not follow suit, you're primed to either be disappointed or abort your efforts entirely. This is not worth it.

Back to my inspiration for this post: BeenUp2. Check it out, poke around, have some fun. I was introduced to the company a few weeks ago -- my first social network! -- and I think I'm hooked. Snap a photo with your phone and email it to BeenUp2 with a description; yesterday it was my kids lounging before school, today a shot of the remodeled hole in our house at sunrise. Instantly, it's shared with the community. People can see, absorb and comment on what you're up to.

BeenUp2's founders are cool and they have built a fun, simple and effective tool (check that: community!). The community (members are mushrooming) cares and procures instant gratification, and the company's business model is tantalizingly, Web 2.0y tasty.

Behavior

2008-04-25T19:38:00.000-07:00

A few what's-up? shots have been thrown by way, jabbing at my apathetic blog behavior. I'm guilty; no excuses, and I'll commit to change my behavior.

Part of the what's up is a cool campaign I'm incubating with a comrade to raise money for Davis schools. The school system's a mess, the politics brutal, and naysayers abound. It's tough being a volunteer.

A key tenet of our endow-the-schools program is to perpetuate programs that do not alter the behavior of beneficiaries: Raise money by getting consumers and businesses to do what they do, with an incentive to participate. Sounds great as I type, but in practice it's going to be an uphill bike ride through the mean streets of Davis.

Part of my inspiration -- aside from the obvious: I'm a product of Davis's public schools, and my kids are current beneficiaries -- stemmed from a Contrarian perspective. One of my idols, Tower Records' founder Russ Solomon, was interviewed a few weeks ago on NPR. (Here's a admiring piece I scribed about Russ last year.) Russ was a baron: He helped create the music business, selling 78s out of his trunk on the corner of 16th and Broadway in Sacramento. The music industry and its artists owe much to Mr. Solomon.

Back to the NPR interview. Russ was asked about the accelerating shift in consumer behavior, away from buying tangible products, crescendoing toward bits and bites (digital downloads). He opined a strong case for the virtues of CDs and vinyl: Sound quality, the ability (and desire) to collect, awesome artwork, etc. Okay, I buy it, though market metrics disagree. My mentor then slipped: He said what's needed is for consumers (kids) to "get it," to change their behavior. It's there responsibility, or so I heard, to visit record stores and "experience" buying music.

I disagree. Big time. It's the proprietor's (and the industry's) responsibility to create an environment and experience that's superior to buying tunes for 99 cents. Customer behavior dictates preferences ... a building bonfire of consumers prefer to buy music ala-carte, via their PC, in their boxers. When they want, where they want, how they want. Our needs are filled -- better, faster and cheaper -- electronically, versus making a trip to the record store.

Just as other tangible media -- newspapers, books and magazines -- will not perish, CDs and vinyl will not die. But, they're a few feet underground, descending deeper (dug by consumer preferences and needs) by the day.

Ubuntu

2008-04-18T19:53:00.000-07:00

Most lunch meetings are uneventful: Raw fish, small talk about kids, bemoans about fatheads, cut-to-the-chase business dealings, and cordial encapsulation and good-byes. Starched shirts, formal posture, firm handshakes. Necessary encounters, but not necessarily memorable. I killed a plate of sashimi with a new friend last week that flipped the coin.

We began with the normal (aforementioned) stuff, but quickly transitioned into an assault of corporate speak: The lack of meaning, the void of sincerity, the apathy of communicators in communicating their message. I tossed The Cluetrain Manesto's first assertion across my bowl of rice: Markets are conversations. She flipped; we bonded.

Most communication -- personal and broadcast/marketing -- is unauthentic. It's sterile and apathetic. People are lazy, and their communication shows. It reminds me of two sage thoughts:

Matthew Arnold: Have something to say and say it as clearly as you can. That is the only secret of style.

Strunk and White (The Elements of Style, Rule 17. Omit needless words): Vigorous writing is concise. A sentence should contain no unnecessary words, a paragraph no unnecessary sentences, for the same reason that a drawing should have no unnecessary lines and a machine no unnecessary parts. This requires not that the writer make all his sentences short, or that he avoid all detail and treat his subjects only in outline, but that every word tell.

Back to my lunch. We dug deeper into the authenticity of people, their actions, their sincerity, and their communication. My new friend -- a fellow Sacramento Entrepreneurship Academy Board member -- created a presentation for the SEA Showcase introducing and elucidating the African philosophy of ubuntu, which focuses on people's relations and allegiances with each other, and the authenticity of their interaction. She quoted Demond Tutu:

A person with ubuntu is open and available to others ... affirming of others ... does not feel threatened that others are able and good ... for he or she has a proper self-assurance that comes from knowing that he or she belongs in a greater whole.

A greater whole. I had lunch this week with a CFO of a Fortune 500 company. His grand compliment of an entrepreneur he backed was his combination of persistence and his all-about-the-company allocentric attitude. Big pie, small slice. The entrepreneur played, played hard, and it was all about the greater good, not his self interest.

My new friend's SEA presentation continued, quoting my dad's many moons ago commencement talk to the Academy:

You will only find both satisfaction and success if you play at the process.

My heart strung, her presentation continued (quoting my dad):

I ask that you join a team of artists. I suggest that you and this team of artists play at the art of business. Please play.

This sucks; I've gotta have it

2008-04-18T19:07:00.000-07:00

I've been awol for too many moons; big time remorse and no excuses. In a word, abandoning the blog sucks (though, of course, no one needs to have it). Which leads me to a cool story.

I enjoyed a thoughtful talk at UCD last week by Paul Hudnut, founder and director of Envirofit. Like most talks by accomplished, give-a-shit entrepreneurs, it was insightful and eye-opening. Among many sage observations, Paul opined that not every idea is a good idea, and not every opportunity is worth pursuing. Entrepreneurs who can distinguish an opportunity from a problem -- and, of course, act on it -- are, well, entrepreneurs. Good stuff.

Other meaningful morsels:

Make money by making meaning (quoting The Great Kawasaki)
Ask yourself: Are my goods good and do my services serve?
Create a company that, no matter how much it grows, it will be a good thing.
The average age of the founders of Google, Microsoft and Yahoo! was 23. Cool.

Paul believes great entrepreneurs are driven by two observations:

This sucks.
What are we going to do about it?

The former sans the latter means little -- it's easy to bemoan what "sucks" without doing anyting. As Paul emphasized, the combinatorial magic is to identify what sucks, and then create a team to act upon it. I agree, but I think a more lucrative combination is the ID of what sucks in concert with an understanding of people -- not artificial, bschool-esque segments -- who convey the magic words: I've gotta have it. When you hear this, bottle it and run. Fast.

Identifying what sucks is the ante to starting a company. Unfortunately, most entrepreneurs either do not act or apathetically sell to a want; many wants are perceived to be needs. The combinatorial trifecta is to figure out what sucks, identify gotta have needs, and then marshal a team to figure out the problem, fill the needs, and monetize the opportunity.

If you balk on one of the three, you're doomed for mediocrity (or a vocational exercise).

Who cares?

2008-04-07T10:13:00.002-07:00

I created a seminar this weekend for delivery tomorrow to Venture Island entrepreneurs, 90 minutes of blah-blah about creating a kick-ass sales and marketing strategy. I dusted off a few old presentations, reshuffled slides, customized the content for the audience, and wrapped it in a bow. Should be fun.

One of my slides erroneously opined a CEO’s primary job is sales: Customers, partners, employees, investors, etc. Makes sense, but I was off mark. The paramount responsibility and challenge for an entrepreneur (or anyone who’s trying to lead a cause) is to get people to care.

Everyone is solicited, every day. Buy this, go here, invest there, attend this, support that. Requests for our time, interest and participation. I received such an email from the Sacramento Entrepreneurship Academy this weekend, engaging board members to spread the word about the Academy's annual Showcase. Because I care about the organization -- I'm personally, emotionally, historically and benevolently committed -- it was a no-brainer; I acted.

Back in August we touched on the imperative of getting people to care in a post, Be relevant. A snapshot:

What is relevance? To me, it’s getting people to care by generating value and interest and demand and intrigue and inspiration. It’s about creating and stoking a bonfire, one with ever-growing visibility and a desirability to participate. It's encapsulated in one of The Cluetrain Manifesto's theses: Companies that do not belong to a community of discourse will die. It’s hands down the paramount challenge CEOs face.

Relevance matters only in the minds of your constituents; it’s their perception, period, that counts. And, all stakeholders count: Customers, prospects, partners, shareholders, employees, analysts, competitors … your entire ecosystem. It’s doing something – a lot of things – to edge people to the front of their chair, to raise an eyebrow, to engage a phone call, to elicit an, “I’ve gotta do something -- invest, buy, partner, work, lead, support – with this company," action.

Fostering relevance is an (check that: the) ante to success. The rest – the blocking and tackling of business – is easy and boring. If you’re not relevant – if you can’t get key constituencies to care – move on. Treading water in an empty pool is painful for all involved.

In another post, Ode to Arco, we shared a post-script from an interview Marc Andreessen did with one of his entrepreneurial heroes, Stephen Wolfram. Here's a taste:

People have different motivations, of course. A lot of people think the big thing with companies is money.
Yes, if you luck out, you can make a lot of money. But it's really rare that money carries people as a motivation.

You have to actually care about what you're doing.
For some people, like me, it's the actual creative content that they care most about. For other people, it's the act of building the company. For others, it's making deals. Or winning against competition.

But there has to be something you really care about.

Back to the Be relevant post. It was sparked by an over-a-beer conversation with a comrade about a local publicly traded software company. Here's a recap:

What’s up with them? Earnings are lagging. Stock price’s flat. Growth has stagnated. The CEO’s fried. A recent acquisition fell apart. The CTO bolted. They’re running out of cash. They’re too small to be public. The board’s unhappy. Analysts don’t care. It was a standard, morbid diagnosis of a limp-along company.

At the time, the stock languished in the low twos. Today, it's trading at $6.60. The company is relevant; people care. In this case (of a public company), results = relevance. If only I cared enough to buy the stock.

Downhill

2008-04-04T17:49:00.000-07:00

I do not remember the first time I rode a bike, nor my first coast on a skateboard. My memory of my first downhill ski experience – outside the wedge of my dad -- is vivid. Squaw Valley on a Saturday, tips pointed (snow-plowed) downhill, the exhilaration of mass*velocity, tears streaming and wind howling. It was cool.

Though I have not been skiing for a few years, I rekindled my first two-board experience yesterday during a meeting with an over-excited entrepreneur. The meeting/entrepreneur was not great, but not too bad. The not-too-bad: Zealous research, hyperactive intensity, ferociously competitive spirit. The not great: Unrealistic expectations, defensive attitude, incredible lack of focus (Emerson: Concentration is the secret of strength), loathe of VCs, his ferocious (to a fault) spirit, and a failure to commit. The analysis was superb, the paralysis paralyzing.

Today I met with a retired biotech exec who flipped the coin. He was so committed to his last company – in biotech, the more time you spend in the office, the less you get done – that he quit. Quality of life trumped weeks of biz dev on the road. He got out there, into the field, and made it happen, taking his company public and enriching its market cap.

The reddest of cardinal entrepreneur flags is commitment. Not in an emotional sense – most all entrepreneurs are passionate, curiously crazy and on-the-surface committed – but in a get out there and do it manner. Ilka Chase: The only people who fail are those who never try.

To be an entrepreneur, you must take risks; writing a plan, theorizing a model, raising money, and moonlighting a venture are stall tactics to doing it. You don’t know what you don’t know, and you’ll only find out once you get in the game. Your model will change, your strategy will shift, and your assumptions will waver.

Whether riding a bike, skating a skateboard, skiing downhill, or running a business, it’s much easier to change directions when you’re moving. Until you move, you’re practicing mental masturbation to the benefit of no others.

POTW: The Psychology of Entrepreneurial Misjudgment

2008-03-26T09:05:00.000-07:00

The Great Andreessen is at it again, tendering our post of the week: The Psychology of Entrepreneurial Misjudgment. Therein he adapts, for entrepreneurs, 25 biases identified by Charlie Munger, Warren Buffett's long-time partner and Vice-Chairman at Berkshire Hathaway. They're (we're) singing our (their) song. It's a worthy and meaty read ... take 10 minutes to dig in. In the interim, here's a digest of the biases posted by Venture Hacks:

1. Reward and Punishment Super-Response
Once you realize how much incentives influence human behavior, you need to assume their influence is even bigger than you think. Never think about something else when you should be thinking about incentives. Benjamin Franklin: “If you would persuade, appeal to interest and not to reason.”

2. Liking and Loving
Liking and loving something conditions you to (1) ignore faults of and comply with wishes of the loved, (2) favor people, products, and actions associated with the loved, and (3) distort other facts to facilitate love. Wanting to be liked by your teammates impedes you from firing people and making unpopular but good decisions.

3. Disliking and Hating
Disliking or hating something conditions you to (1) ignore virtues in the disliked, (2) dislike people, products, and actions associated with the disliked, and (3) distort other facts to facilitate hatred. Startups should focus on their customers, not their competition—whom they may dislike.

4. Doubt Avoidance
Execution is often better than further contemplation. George Patton: “A good plan, violently executed now, is better than a perfect plan next week.” Believing that something will happen, and convincing others that it will be so, makes it more likely to happen.

5. Inconsistency Avoidance
Have strong opinions, weakly held. New and correct ideas may not be accepted simply because they are inconsistent with existing ideas. Your existing ideas may be unknown to you. They may be hidden assumptions. We often make hidden assumptions about unknown unknowns. If existing customers in the market aren’t ready for a product that is inconsistent with their behavior, go after customers who aren’t in the market because they can’t afford the existing product or don’t have access to it.

6. Curiosity
Insufficient curiousity prevents you from learning. Hire curious people and discover your customer’s true needs—not what you think they need.

The clash of Kermit and Kleiner

2008-03-26T06:28:00.000-07:00

I met with a friend yesterday who is navigating the formative financing steps of a promising green-tech company. The venture is buoyed (big time) by an affinity angel, and they’re at a critical how-to-grow juncture. Our conversation harkened a terrific special section in Monday’s WSJ, ECO:nomics, Creating Environmental Capital (click here to peruse the Journal's new Environmental Capital blog). The 18-page pullout is loaded with thoughtful interviews, including one with Kleiner Perkins Partner John Doerr. A brain-buzzing excerpt:

So what’s very attractive about the green technologies is the markets are enormous. The Internet market, $100 billion or so; the energy market, $6 trillion. This is the mother of all markets.

Kermit the Frog, ever the contrarian (or lovable curmudgeon), chimes in (in my brain, not the article), amplifying the challenge environmentalists and ecopreneurs face:

It's not that easy being green
Having to spend each day the color of the leaves
When I think it could be nicer being red, or yellow or gold
Or something much more colorful like that

It's not easy being green
It seems you blend in with so many other ordinary things
And people tend to pass you over 'cause you're
Not standing out like flashy sparkles in the water
Or stars in the sky

Wait, Kermit, what gives with the outcast, Eyeore-like tone? Being green is contemporaneously cool and prospectively lucrative, a chance to do good and make money, en la madre de mercados grandes. Kermit’s melancholy rings of social alienation and the challenge of individuality.

Doerr counters:

But the wonderful thing about working in green technologies is you can do work that’s successful and also significant. You can help engineers and scientists build great companies that will innovate fuels or batteries or storage, or even more immediately, that can enable all of us to conserve, to be more efficient.

By now Kermit is catching on, swayed by the power and influence and green of Doerr the capitalist. He continues:

But green's the color of Spring
And green can be cool and friendly-like
And green can be big like an ocean, or important
Like a mountain, or tall like a tree

When green is all there is to be
It could make you wonder why, but why wonder why
Wonder, I am green and it'll do fine, it's beautiful
And I think it's what I want to be

Credere

2008-03-21T08:55:00.000-07:00

We are in the formative phase of launching an early-stage investment fund, as scooped by The Business Journal today. Like most everything in private equity, it’s far from benevolent: The purpose is to maximize investment returns for our limited partners, who invest because – primarily – the see the fund as a superior vehicle, vis-à-vis other investment alternatives, to make money.

Our fund, though, is a bit different. It is not a pure venture capital fund, nor a social capital variety. Instead, we’re seeking to organize and institutionalize the latency of individual investors and promising companies in overlooked markets.

Investors first: Individuals in our investment chapters (e.g., the greater Chico, Davis, Sacramento, North Bay and Monterey/Santa Cruz regions) have had few, if any, opportunities to invest in a diversified private equity fund, particularly one that focuses on their community. Companies in such communities have limited access to growth capital and resources. We bridge the market inefficiency by organizing and connecting growth capital with promising companies.

If we are successful in raising the fund and executing our investment thesis, a few cool things occur. First, wealth – that oftentimes is reinvested – will be created, both for our limited partners and the companies we back. Second, entrepreneurs will replicate. It’s trite to say, but success sires success and communities prosper. Dollars, entrepreneurs, investors and ideas will recycle. Trust too.

The formalized grassroots approach we’re deploying in overlooked markets is a bit old fashioned. In pre-Arthur Rock (one of the first VCs) days, companies raised private equity through relationships, via a handshake, and based both on the potential investment returns and the investor’s affinity for the entrepreneur’s endeavor. You have an idea and a commitment to work hard, I have money. Hand-scribbled terms on napkins, versus treatise-length term sheets, sufficed.

Which brings me to credere, the Latin phrase meaning, to believe or trust. As the WSJ shared a few weeks ago in an opinion piece, to have “credit” in a community meant that you could be trusted to pay back your debts.

Too often venture investing – viewed from both sides of the table – turns in to an us against them, adversarial relationship. VC firms have a responsibility to their LPs to maximize the return on their investment. Companies are committed to growing their enterprise. Sometimes (lots of times), dissonance over the direction of the company trumps trust. The same holds true for most any relationship, business or personal: opinions differ, communication dissipates, and trust erodes.

Back to our prospective fund. We will be as diligent and formal (legally) as any investor; ‘tis the proper thing to do, and we have a responsibility to our investors. Aside from playing the traditional game, I believe we have a sound opportunity to strengthen trust – and potential returns for all – between investors and entrepreneurs. This begins, of course, by aligning interests and motivations, and ensuring communication is clear, candid and consistent.

More importantly, the commitment theory will play a role in our alignment and connection of local investors with local companies. Trust is easier to breed and more difficult to break if and when it’s galvanized in your community. Bob the entrepreneur coaches Joe the investor’s son’s Little League team. They mingle Fridays at Rotary luncheons, bump in to each other at the local farmer’s market, and may work out at the same gym. The entrepreneur and investor are aligned professionally and personally.

The aforementioned WSJ piece profiled Muhammad Yunus’s microfinance venture, Grameen Bank. Though his is a different business than venture capital, there are parallels:

“I use to say this in my speeches: Look at the world, how funny it is. They took the word credit which means trust, and built a whole edifice of credit institutions, refined, very sophisticated, entirely based on distrust. [At Grameen] we went back to the original meaning of credit.”

Money on the table

2008-03-20T07:41:00.000-07:00

If doing statistics is like eating paste, pricing is analogous to chomping on Crayons. A bit tastier, but still sticky-mouth dry. While it’s easy to chomp on a few Crayons – my five-year-old son’s class is evidence – doing pricing (and doing it well) is hard. Very hard. My soiree through several dozen bplan presentations last week was evidentiary.

When companies build financial models they block and tackle through a great majority of their model building. It’s like math: Apply logic, assumptions and comparables into a template, with equations, and you’re set.

Pricing is different, and it’s confusing. Warren Buffett had a great line: Price is what you pay, value is what you get. Paradoxically, Buffett highlights the root of most company’s pricing strategy misfortunes.

Cost-plus pricing is the most common strategy. It costs me a quarter to make a bagel, I’d like to make 35 cents per bagel, and thus I charge 60 cents. Most companies do this, with a dash of comp-based pricing tossed in for good measure: If our competition is charging 60 cents, we’ll charge the same (or a few cents less). During last week’s myriad presentations, company after company took this approach.

Which is logical, but it’s an apathetic way to march forth. Smart companies employ a value-based pricing strategy. They understand value by focusing on what people are trying to do, not what they say they wish they were doing. They aim to master the current problems or critical priorities of their most viable (and underserved) customer segments. Textbook stuff, but it takes a lot of work.

Simply stated, your solution is worth what a customer is willing to pay. In B2B environments, it can be determined via a simple equation:

Worth (what a customer will pay)
=
Economic Gain
+
Strategic Value
–
[Perceived Risk]
+
Trust

Nail this algorithm and you will not only remove the Crayon crust from your mouth, but also ensure you do not leave money on the table.

POTW: An hour and a half with Barack Obama

2008-03-19T08:08:00.000-07:00

My friend Matt likes to raise a flag -- particularly in or on his way to a state of inebriation -- when any or all of the three P's (political, personal, philosophical) are tendered. In this humble forum, I've been a bit too personal, a tad philosophical, but rarely political; if our discourse surrounds creativity, entrepreneurship, and innovation, it's tough to bridge politics.

As of yesterday, I stand corrected thanks to Barack Obama's speech on race in America and a Post of the Week (of the year?) from The Great Marc Andreessen. Obama, to me, is an entrepreneurial, creative and innovative candidate. Here's a taste of Andreessen's An hour and a half with Barack Obama:

I've tried very hard to keep politics out of this blog -- despite nearly overpowering impulses to the contrary -- for two reasons: one, there's no reason to alienate people who don't share my political views, as wrong-headed as those people may clearly be; two, there's no reason to expect my opinion on political issues should be any more valid than any other reader of what, these days, passes for the New York Times.

That said, in light of the extraordinary events playing out around us right now in the runup to the presidential election, I would like to share with you a personal experience that I was lucky enough to have early last year.

Early in 2007, a friend of mine who is active in both high-tech and politics called me up and said, let's go see this first-term Senator, Barack Obama, who's ramping up to run for President.

And so we did -- my friend, my wife Laura, and me -- and we were able to meet privately with Senator Obama for an hour and a half.

Andreessen then details his meeting with Obama, encapsulated through four lasting impressions:

First, this is a normal guy.
Second, this is a smart guy.
Third, this is not a radical.
Fourth, this is the first credible post-Baby Boomer presidential candidate.

He then ties the tales together (read the entire post ... it's terrific):

Smart, normal, curious, not radical, and post-Boomer. If you were asking me to write a capsule description of what I would look for in the next President of the United States, that would be it.

Having met him and then having watched him for the last 12 months run one of the best-executed and cleanest major presidential campaigns in recent memory, I have no doubt that Senator Obama has the judgment, bearing, intellect, and high ethical standards to be an outstanding president -- completely aside from the movement that has formed around him, and in complete contradition to the silly assertions by both the Clinton and McCain campaigns that he's somehow not ready.

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Post-script (19 Mar 08): I apathetically did not share a sampling of Obama's oratory excellence ... here's how his speech commenced:

"We the people, in order to form a more perfect union."

Two hundred and twenty one years ago, in a hall that still stands across the street, a group of men gathered and, with these simple words, launched America's improbable experiment in democracy. Farmers and scholars; statesmen and patriots who had traveled across an ocean to escape tyranny and persecution finally made real their declaration of independence at a Philadelphia convention that lasted through the spring of 1787.

The document they produced was eventually signed but ultimately unfinished. It was stained by this nation's original sin of slavery, a question that divided the colonies and brought the convention to a stalemate until the founders chose to allow the slave trade to continue for at least twenty more years, and to leave any final resolution to future generations.

Of course, the answer to the slavery question was already embedded within our Constitution - a Constitution that had at its very core the ideal of equal citizenship under the law; a Constitution that promised its people liberty, and justice, and a union that could be and should be perfected over time.

And yet words on a parchment would not be enough to deliver slaves from bondage, or provide men and women of every color and creed their full rights and obligations as citizens of the United States. What would be needed were Americans in successive generations who were willing to do their part - through protests and struggle, on the streets and in the courts, through a civil war and civil disobedience and always at great risk - to narrow that gap between the promise of our ideals and the reality of their time.

This was one of the tasks we set forth at the beginning of this campaign - to continue the long march of those who came before us, a march for a more just, more equal, more free, more caring and more prosperous America. I chose to run for the presidency at this moment in history because I believe deeply that we cannot solve the challenges of our time unless we solve them together - unless we perfect our union by understanding that we may have different stories, but we hold common hopes; that we may not look the same and we may not have come from the same place, but we all want to move in the same direction - towards a better future for our children and our grandchildren.

The book

2008-03-14T14:16:00.000-07:00

I had a challenging meeting the other day with a team of 16 comrades seated in a semi-circle. We had a simple agenda, few rules, and one objective: Author, illustrate and publish a 32-page book. And, do it in Spanish. Eyes sparkled, hands rose, and questions were posed. Tasked with minimal direction – you can write about and illustrate anything you want -- the team scurried to their workstations and commenced work.

And work they did with nary a whine. Forty minutes later, we had the foundation of our product: Sixteen takes for the story’s introductory page, accompanied by a like number of brilliant illustrations. It was an amazingly productive and creative experience.

The coolest aspect was the lack of fear, particularly given the embryonic (to all) journey. The team put pencil and pen to paper and produced. In a few months through 15 similar sessions, a book will be produced. We will publish it and a team of 16 first-time authors will have a tangible product for the collaborative work. Not bad for a gaggle of eight- and nine-year-olds (my son’s third grade Spanish immersion class).

It was a wonderful yes, and …, non-conformist experience, and I chortle to think about a gaggle of adults embarking on a similar journey. Exception-ridden thinking would rule. I can hear Eyeore: We’re never going to get there. We’ve never created a book; we’re not authors, let alone illustrators. How are we going to orchestrate a story with 16 different authors? Where do we start? What are the rules? What if I can’t think of anything?

The kids were the opposite. Can I write about a purple dragon and a princess? What if I come up with two pages, not just one? How many characters can I have? My tribe of children had not been normalized to moan about how and why they could not do it; they just did it.

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Post-script (17 March 08): The book begins, thanks to eight-year-old Kyle's contribution (please excuse the lack of accents) ...

Habia una vez un niño. Este niño estaba en las oscuridad completa. Estaba soñando en su dormitorio. Era completamente negro. De repente, el suelo debajo de su cama comenzo a temblar. Las paredes comenzaron a romperse y a caerse. Muy pronto formo un hoyo alrededor de la cama del niño. El niño se desperto en panico. Se rompio por fin el suelo directamente debajo de su cama, y el niño se cayo tambien.

Now presenting

2008-03-12T08:00:00.000-07:00

I am drowning in business plan bake-offs and investor presentations this week. BigBang! (UC Davis' business plan competition) executive summary review Monday, Golden Capital Network's West Coast VC Conference (44 cool companies; participated in two investor panels) Tuesday, UCD's Center for Entrepreneurship/Graduate School of Management's Business Development Clinic (seven presenting companies) tonight, a two-hour session with 17 Venture Island Chico contestants tomorrow eve, and Saturday morning with the Sacramento Entrepreneurship Academy (six teams pitching their companies to the board). Cool stuff.

With visions of PowerPoints dancing in my head, a few observations from the Golden Capital conference:

Lens: The venture-capital-or-bust mindset of many companies (and most all investors) is not healthy. If there's a there there (a business), the question should not be, Can I raise venture capital?, but instead, What's the most effective way to raise money to grow my business? Build the business and the money will come.
Fatheads: When you play golf or hoop with someone who's good, their game does the talking. IBID for investors; I had the pleasure of sitting on panels with private equity pros from Blumberg Capital, Khosla Ventures, and The Band of Angels, among others. Good, genuine folk sans an air of self importance. The reverse is true for fatheads: VCs who hoist their nose in the air and speak in non-deserving, demeaning, if you only knew what I know because I'm a VC and you're not tone. As my friend Anthony observed (of one such FH): He's proud of something.
Presentations: Too much info, too little time, too few stories. It's predictable. A few echoes:

I don't know if you can see the chart ... (if the audience can't see/read/absorb it, do not use it).

This slide is a bit confusing ... (abort the slide if it's apt to confuse).

Our projections are conservative ... (if so, what are your true assumptions?).

I won't even try to go through this ... (they why even try/show the slide?).

The most effective (and memorable) presentations were (are!) those that commenced with a handful of key points (say, three-to-five), transitioned into a story (ideally employing analogies, metaphors, parables, visual aides ... anything that helped the audience relate and remember), and then wrapped with the three-to-five key points. Such companies talked about the hole they are drilling, not the drill they're creating, and how and why it's a gotta have for customers.

A few of my favorites/companies to watch: Insera Therapeutics (a medical device to cure strokes), HauteSpot Networks (wireless broadband for secure video delivery), Zero Motorcycles (quiet, light, cool dirt bikes), Vitalea (micro-dosing in humans for clinical trials), Pediatric BioScience (diagnostics for autism in children), BazuMedia (mobile messaging for races and events; awesome), and Gydget (a cool social marketing platform; we voted it "best of show").

Piece of cake

2008-03-02T19:26:00.000-08:00

It's been a few moons since I purchased a cake, probably an ice-cream variety for a kid's fiesta. And, it has been even more moons since I frequented a dessert diner. My last visit -- probably somewhere in the City -- was mostly immemorable ... can't recall where we went or what I had, but I do remember my Charlie in the Chocolate Factory wide-mouthed amazement at the selection. And, most memorably, the by-the-slice ability to please (tease) your palette without having to buy a whole cake. It's a mouth-watering business proposition.

Of course, selling and buying a piece of cake is not new nor novel. Selling and buying pieces of information (or entertainment) is an increasingly contemporary pleasure.

Think back five years ago. What is commonplace today -- buying music by the song -- was embryonic. The music industry was in the dumps, an archaic institution that lost track of the value they provided (what consumers desired). Music labels thought they were in the music business (correct), selling CDs (incorrect). Consumers thirsted music by the piece (track). iTunes and file-sharing services changed the game -- consumers got what they wanted, and the music biz extended its stay in the ICU.

Music is an obvious by-the-slice (versus whole cake) choice. Television shows too; why buy an entire season on DVD when you can instantly whet your appetite with a downloadable episode? Software: Why purchase an entire application when you can taste (rent) the modules you want (software as a service)?

The by-the-slice model has hit book publishing. Random House is selling individual chapters ($2.99 a pop) of books, commencing with (ironically, my current read; the whole cake is really tasty!) Made to Stick. From a WSJ story of a few weeks ago:

Customers will receive a digital link via email enabling them to download the chapter onto their computers. Random House expects that eventually users will be able to download chapters onto other devices, such as BlackBerries.
"We want to get our content out there in new and different ways," says Matt Shatz, vice president of digital at Bertelsmann AG's Random House Inc.

In theory, a broad variety of topics could appeal to readers on a chapter-by-chapter basis, including travel, cooking, technology and health.

The incremental cost to deliver morsels of information is minimal, and you can argue (as Random House has probably rationalized) that by-the-piece sales will not cannibalize whole cake purchases. With time others will follow, including businesses outside entertainment and content. Wanna ski for an hour or two (versus buying a half-day or full-day lift ticket)? Need a rental car for a few hours (instead of buying the whole cake/whole day)? Only have time to play a few holes of golf? In instances where people have a desire to pay for and experience a slice of something, the dim-summing products and services to fit consumer needs will continue to proliferate.

POTW: Freaky math

2008-02-29T19:04:00.000-08:00

I just wrote about how staid companies do math (proven, verifiable, secure, quantitative stuff) and entrepreneurs and innovative companies create (unproven, to-be-tested) algorithms. Math's easy; crafting a new equation is difficult.

Thanks to Freakonomics, for the moment I stand corrected. Here's a slice of a freaky leap-day post:

A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost?

A. $1.10
B. $0.10
C. $0.05
D. $1.00
E. $0.15

Ten cents, I calculated.

Wrong. I turned to my horizontal-on-the-couch eight-year-old son. Without looking up from the Kings game, he blinked: That's easy dad. The ball costs five cents.

Building castles

2008-02-29T17:33:00.000-08:00

Few things in life are more enjoyable than watching kids build stuff. Children are wonderful, imaginative creators. They need few materials, little motivation, minimal (check that: no) direction, and not too much time. Whether it’s a tree fort, a sand castle, a spaceship, or a backyard game, they create. (Think about the beginner's mind, which we wrote about here.)

What’s cool about kids – aside from their terrific creativity and lack of predisposition to norms – is their absence of fear, disdain for perfection, robust resourcefulness, and expediency. Entrepreneurs and companies can learn lots from children.

Successful entrepreneurs and prosperous companies creatively collect and connect dots without succumbing to societal norms. They are courageous, less than perfect, resourceful, and swift in their execution. They create, rather than perfect; they conceive (untested) algorithms, rather than doing math. They build forts first, iterate and create castles later.

Marissa Mayer, Google's VP of search products and user experience, credits her company’s success (in part) to, “innovation, not instant perfection.” She shared (with Fast Company) nine principles of innovation Google employs. A taste:

There are two different types of programmers. Some like to code for months or even years, and hope they will have built the perfect product. That's castle building. Companies work this way, too. Apple is great at it. If you get it right and you've built just the perfect thing, you get this worldwide 'Wow!' The problem is, if you get it wrong, you get a thud, a thud in which you've spent, like, five years and 100 people on something the market doesn't want. Others prefer to have something working at the end of the day, something to refine and improve the next day. That's what we do: our 'launch early and often' strategy. The hardest part about indoctrinating people into our culture is when engineers show me a prototype and I'm like, 'Great, let's go!' They'll say, 'Oh, no, it's not ready. It's not up to Google standards. This doesn't look like a Google product yet.' They want to castle-build and do all these other features and make it all perfect.

Reminds me a bit of a story -- Preparing to fish -- we shared many moons ago, along with our Fail fast, fail better post. Mayer continues:

I tell them, 'The Googly thing is to launch it early on Google Labs and then iterate, learning what the market wants--and making it great.' The beauty of experimenting in this way is that you never get too far from what the market wants. The market pulls you back."

++++++++
Post-script (1 March 08): Quick contribution from Tom Peters r.e. entrepreneurial spirit:

Fred Karl, designer of the Viking range and owner of that company said, "I was a weird kid—I began designing towns when I was 12." We all know that "weird" can be good, if we don't judge others through our lens ... Being weird increases creativity if we allow it to flourish. Fred Karl, founder of Viking Range, let his weirdness flourish abundantly.

Crowds

2008-02-25T20:18:00.000-08:00

I met with a young company a few weeks ago at a local coffee house. The company's name is catchy, a bit cavalier. What does [company name] mean? I asked. Well, it's this, and this, and this. Hmmm. To the embarrassment of the entrepreneurs, I turned to a few fellow caffeine heads: When you hear [company name], whadya think? Universally, they contradicted the company's perception.

Ask a similar sample of folks what they think of "crowds". Their response -- my perception -- would be negative. Who likes crowds?

As we explored here, here, here, here, and here, crowd-funding/sourcing/decision-making/ideation/company creation/most anything is hip. The common thread: Harnessing the opinion of many to collectively make an informed, cooperative, better-than-the-experts decision. It works and it's cool.

Josh Catone proffers a thorough overview of crowd-centric business models, Crowdsourcing: A Million Heads is Better than One. He evidences household examples (Google and Wikipedia, among others) -- and back-alley models (Cambrian House and CrowdSpirit). Catone's take:

Crowdsourcing can be looked at as an application of the wisdom of crowds concept, in which the knowledge and talents of a group of people is leveraged to create content and solve problems. The official definition from the term's originator, Jeff Howe, is "the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call."

Crowdsourcing can be broken down in to three categories:

1. creation (like Wikipedia);
2. prediction (like Yahoo! Buzz); and
3. organization (like Google).

A poignant example is PicksPal:

PicksPal is a sporting event prediction site that allows users to vote on amateur and professional sporting events. The site is set up like a game, allowing you to spend points to try and beat the odds makers - you win or lose points depending on the accuracy of your picks and how ambitious you are. PicksPal awards weekly prizes, like sports tickets and flat screen televisions, to the top performing players. PicksPal says they have over 100,000 users ...
PicksPal sells "genius" picks, based on the picks of their top performing members, to people betting actual money. So far the site is doing pretty well. As I write this, they have a 52% win rate against the spread for their last 25 picks, and they report a 63% win rate overall.

Catone asks: Can crowdsourcing be successful at creating products, predicting markets, or organizing data? He suggests four rules to help fuse success in tapping the wisdom of crowds:

Crowds should operate within constraints.
Not everything can be democratic.
Crowds must retain their individuality.
Crowds are better at vetting content than creating it.

To me the efficacy of crowd-based decisions and business models is based on the obvious (the wisdom of many) and the less obvious (the obscurity of participants). Individuals acting individually in a collective endeavor mitigate their phobia and distaste of crowds and maximize the returns of the collaborative. It's a contemporary cooperative with the reach of millions.

++++++++
Post-script (28 Feb 08): Interesting, relevant and timely Springwise post reviewing Kluster, a crowdsourcing platform. Quick take:

By offering a set of sophisticated project management tools, Kluster aims to enable crowds to develop new concepts. The system is currently being demonstrated at the TED conference in Monterey, where the event's attendees will be able to work together to create a product prototype in 72 hours. (Rapid prototyping machines and a team of modellers are standing by.) Kluster wasn’t developed just for tangible objects though. It can also be used to create brand identities, plan events or for any other project that would benefit from crowd input.

I love it, particularly their engage-and-reward participants model. Members can earn ‘Watts’ (the local currency) by helping solve problems (bringing new things to light?) or suggesting refinements or enhancements. They can also invest their Watts, and can cash out if a project is purchased by a third party. Investments grow along with a project’s value, and a member’s stake is based on how much he or she has contributed. Springwise wraps:

At the very least, using Kluster will let them interact with their most dedicated customers. Smaller companies, meanwhile, can use Kluster as an instant research and development lab, enlisting (and rewarding!) the community to help ‘flesh out’ ideas that they might otherwise not be able to develop.

The Giving Tree

2008-02-24T18:28:00.000-08:00

One of my favorite organizations, the Sacramento Entrepreneurship Academy, was founded based on a simple premise: Entrepreneurs replicate themselves. Over the past two-plus decades, the Academy’s Board (30 or so regional business folk who pay $1,200 a year to volunteer their time to train, educate and inspire [and replicate!] the next generation of entrepreneurs) has mentored 500 students. Board members give – of their time, money, expertise, and energy – and get (the gratitude of replication).

One of my favorite books, and a contemporary fave of my five-year-old son, is Shel Silverstein’s The Giving Tree. It’s a melodic gem; the message is paradoxical, at times inspiring and uplifting (the generous gifts of the tree), at times sad and perplexing (the emotion of the tree – “and then the tree was happy … but not really” – after the boy chops the trunk to create a boat).

Benevolent entrepreneurs are similar when they replicate, and you can draw parallels to Silverstein's genius. Here's the analogy I posed in an earlier post, comparing gardens and gardening to companies and entrepreneurship:

All gardens begin with site selection: A gardener selects an area and commences preparation. The gardener will then plant seeds. Seeds are fueled by water (not too much, not too little), sunlight (the more, the better) and artificial and organic pesticides. As we explored last week, our pollen-transporting friends, bees, play a role too. Given a week or two of nurturing, the seeds sprout and plants emerge. Given many more weeks of nurturing and fuel, the plants grow, blossom, produce vegetables, and collectively dispel inconvenient truths. Visitors visit the garden, chat with the gardener, and (perhaps) enjoy its products. As the garden grows, more gardeners and more fuel are needed; the simple joy of seeds, soil and water evaporates. And, gardeners oftentimes create and cultivate new gardens with new plants in different sites. Great gardeners love what they do. They sweat. They get their hands dirty. They are protective, even defensive, of their garden. They – with help from mother nature – make something out of nothing. Eventually, gardens (or the plants therein) die. Generally, they are replaced or replenished. Most gardeners enjoy the fruit of their labor (fresh fruits and veggies and flowers), and some even make money at it.

All companies begin with selecting and preparing an idea. The entrepreneur (gardener) then tests and incubates his ideas (seeds), fueled by seed capital, refrigerators full of Mountain Dew and Coors Light, and colleagues (team members, advisors, family). Given time, the company will sprout an embryonic (V1) product. Given more time and nurturing and fuel, the company matures, blossoming and producing worthy products (and perhaps propelling inconvenient truths). Visitors visit the company, meet with the entrepreneur and his fellow gardeners, and (perhaps) purchase products or add fuel (capital) to the company. As the company grows, more team members and more capital are needed; the simple joy of ideas, inspiration, and all-nighters evaporates. And, entrepreneurs oftentimes create and cultivate new companies with new products. Great entrepreneurs love what they do. They sweat. They get their hands dirty. They are protective, even defensive, of their company. They – with help from others – make something out of nothing. Eventually, companies (or their products) die. Generally, they are replaced or replenished. Most entrepreneurs enjoy the fruit of their labor (independence, pride, gratification, recognition), and some even make money at it.

Seed and fertilize. Tend and care. Nurture and grow. Harvest and profit. Give and take. Reinvent and replicate. Sounds like a fruitful path to prosperity.

The network is the innovation

2008-02-22T07:30:00.000-08:00

Building a better mousetrap is not a precursor of success. So shared my friend Andy Hargadon yesterday in a talk to the UCD Graduate School of Management’s Business Partners. Andy facilitated a sage, humorous, pragmatic, eye-opening talk about the myths and realities of innovation. It was terrific.

While the mousetrap is an ante, the key to fruitful (profitable!) innovation is creating a network that will make the mousetrap successful. Take Edison: He did not invent the electric light bulb. Rather, he developed the first successful network that brought light into homes. The idea/invention was part of the solution; success came from creating and cultivating a network to produce and deliver the outcome (light) consumers desired.

Henry Ford, as Andy relayed, is another cardinal example. Ford did not develop the first automobile, nor the first assembly line. He perfected the automobile assembly line – read: made new connections -- an adaptation of previous efforts and borrowing from automation in meat (meat=cars?) packing plans. Ford’s take on his role:

I invented nothing new. I simply assembled into a car the discoveries of other men behind whom were centuries of work...Had I worked fifty or ten or even five years before, I would have failed. So it is with every new thing. Progress happens when all the factors that make for it are ready, and then it is inevitable. To teach that a comparatively few men are responsible for the greatest forward steps of mankind is the worst sort of nonsense.

Back to Andy’s premise. Innovation, he asserts, is about connecting, not inventing; great leaps happen as networks converge (not when someone sires an idea). He proffered a five-step process (“NetStorming”) for companies and entrepreneurs to employ:

1. Identify your solution.
2. For 15 minutes, identify as many types of network partners as you can (e.g., customers, suppliers, regulators, etc.).
3. For 15 minutes, identify specific people or companies as potential network partners.
4. Find connections between the needs and resources of those different partners.
5. Identify how your solution can enable these connections.

In short, the efficacy of an innovation is based on its (the company’s) ability to connect and enable. Bravo. It reminds me of a passage from Harold Evans’ They Made America, amplifying the value of combinatorial creations, personal connections, and enabled networks:

Connections between innovators are ubiquitous -- one good innovation deserves another. LEO BAEKELAND corresponded with EDISON, the WRIGHT BROTHERS, FORD, WILLIS WHITNEY of General Electric, the DUPONTS and BELL. That the engineering potential of Bakelite might be greater than the chemical was ELMER SPERRY’S contribution. SAMUEL COLT was friends with SAMUEL MORSE. GIANNINI’S Bank of America took a risk by investing in WALT DISNEY’S early movies, including Fantasia in 1940. Disney hired the young BILL HEWLETT and DAVID PACKARD to build some of its first electronic equipment for Fantasia. THOMAS WATSON SR. was probably the first passenger in a car with an electric self-starter built by his friend CHARLES KETTERING, who needed Leo Baekeland’s new plastic for insulation. HENRY FORD used Bakelite for his fenders. Ford’s assembly lines were inspired by the beef and pork disassembly lines in the Chicago factories of the meatpacking innovators ARMOUR and SWIFT. ARNOLD BECKMAN backed WILLIAM SHOCKLEY who hired ROBERT NOYCE and GORDON MOORE whose circuits were used by NOLAN BUSHNELL, the founder of Atari, who hired STEVE JOBS, and TED HUFF, creator of the chip that made personal computers possible, worked for Intel, which called in GARY KILDALL, the most important innovator in computer operating systems, who was betrayed by IBM.

Junto

2008-02-21T20:28:00.000-08:00

It's not often that I participate in a meeting that goes as planned. People are people: focus wanes, discussions deviate, off-topic subjects prevail. While meeting objectives are typically nailed, the route to results is roundabout. I enjoyed such a meeting today, one that reminded me of Ben Franklin and his Junto club (also known as the Leather Apron Club).

As I praised in a previous post, Poor Richard was an entertainingly eclectic, curious, witty and enterprising spirit. He was the inventor and proprietor of much, and an acclaimed author and business strategist. Franklin lavished philosophical exchange; his cerebral vehicle was the Junto (Latin for meeting) club, which he formed when he was 21.

From his autobiography:

I should have mentioned before, that, in the autumn of the preceding year, [1727] I had form'd most of my ingenious acquaintance into a club of mutual improvement, which we called the Junto; we met on Friday evenings. The rules that I drew up required that every member, in his turn, should produce one or more queries on any point of Morals, Politics, or Natural Philosophy, to be discuss'd by the company; and once in three months produce and read an essay of his own writing, on any subject he pleased.

Our debates were to be under the direction of a president, and to be conducted in the sincere spirit of inquiry after truth, without fondness for dispute or desire of victory; and to prevent warmth, all expressions of positiveness in opinions, or direct contradiction, were after some time made contraband, and prohibited under small pecuniary penalties.

Franklin's curiosity drove the Junto's Friday evening meetings in Philadelphia. He devised a series of questions engaging a range of intellectual, personal, business, and community topics. These questions were used as a springboard for inclusive discussion and community action.

I've spent a lot of time herein trumpeting the value of asking questions. A selection of Franklin's Junto inquiries (remember he was a ripe 21 at the time) resonate:

Have you met with any thing in the author you last read, remarkable, or suitable to be communicated to the Junto? particularly in history, morality, poetry, physics, travels, mechanic arts, or other parts of knowledge?
What new story have you lately heard agreeable for telling in conversation?
Hath any citizen in your knowledge failed in his business lately, and what have you heard of the cause?
Have you lately heard how any present rich man, here or elsewhere, got his estate?
Do you know of any fellow citizen, who has lately done a worthy action, deserving praise and imitation? or who has committed an error proper for us to be warned against and avoid?
Do you think of any thing at present, in which the Junto may be serviceable to mankind? to their country, to their friends, or to themselves?
Do you know of any deserving young beginner lately set up, whom it lies in the power of the Junto any way to encourage?

Nearly three centuries ago, story-telling and question positing -- in an agenda-free, open-ended forum -- ruled. Long live juntos.

Tell me a story

2008-02-18T19:57:00.001-08:00

There’s something wrong with situations, real or simulated, where dreaming is frowned upon. Alter egos and Eyeores pragmatically vault you back to reality. Get real. Seriously. C’mon. Yeah, but. Dreamer. Life kicks you around in normalized ways.

It takes a while for kids to be normalized. We (parents) play along with their fantasies, chortling and rolling our eyes in a some day he/she will learn fashion. Kids absorb – and love to tell – stories. As we shared in Yes, and … (creative lessons from children):

Creative people are like kids: They question apparent facts by asking why, how and what. Plato believed -– though I do not think it’s as binary as he posited -- experience takes away more than it adds … young people are nearer ideas than old people.

I recently discovered an interesting and relevant @Google talk from economist Robert Frank where he amplified the narrative learning theory:

At its core, the narrative perspective holds that human beings have a universal predisposition to 'story' their experience, that is, to impose a narrative interpretation on information and experience.

Great experiences – dreams, fantasies, movies, fiction, entrepreneurial endeavors – are rooted in tales, stuff we remember. Stories are a vehicle to articulate and illustrate our aspirations, our newness, our creativity. Frank continues:

[children] ... turn things into stories, and when they try to make sense of their life they use the storied version of their experience as the basis for further reflection. If they don't catch something in a narrative structure, it doesn't get remembered very well, and it doesn't seem to be accessible for further kinds of mulling over.

Creators of all flavors – entrepreneurs, artists, authors, backyard-wandering children – live in a fantastical world, a place where people on the outside have trouble relating. Their perceived success hinges on their ability to craft and relay stories, to engage theretofore you-can’t-be-serious ferrets (or fat-headed VCs).

Think of two conversations. The first, and most common, is where you mundanely recount (and lament) facts with fellow-parent Fred during your kid’s baseball game. It’s a bobble-head drag about life's travails whereby you’re socialized to stutter forth. The second encounter is, say, with a new person, Melinda. Curiosity rules, attention heightens, a story is told, new circumstances pondered. It's a yes, and .... conversation. We forget Fred; we remember Melinda (and her story).

It’s trite to opine great things begin with a dream. Of course they do. The challenge is twofold: First, to dream, to think of things in new ways, to avert normalized thought; and, second, to craft and share a story, no matter how crazy or zany or wacky.

Creativity (collecting and connecting dots) breeds invention (new, combinatorial discoveries) that breeds innovation (commercial acceptance of an invention) based on the novelty and value of said innovation and – critically – your ability to relate to an audience. Well-told, relational stories get you there.

Treasure or trash?

2008-02-18T11:07:00.000-08:00

You may have a comrade like my friend Dave who has a penchant for siring ideas. Lots. Dave’s ideas – products to develop, companies to create, businesses to buy – come in flurries. All are interesting Why not? or What if? musings, most are of the don’t waste your time variety, and a few are gems. In his perpetual ideation, how does/can Dave separate treasure from trash?

Dave’s latest treasure hunt is a cool case study. He is pondering buying a business, an interesting cash cow of an annuity. The business sells to a stick-beholden proposition: Regulations require customers to periodically and consistently do what Dave’s prospective company does. And, the service is not a core competence of the customers; for regulatory and practical reasons, customers outsource the service. Finally, it's a large, established, and growing market.

Dave engaged me and a mutual friend, who runs M&A for an enterprise software company, to lend a few brain cells to his evaluation. What questions should I ask, and how do I value the business? he queried. The latter’s boring (to me), an algorithmic process with a half-dozen or so methodologies to quantify value and audit historical financials; while it’s an ante, there are more important considerations. Two bread-and-butter thoughts:

What is the need-to-have proposition (what and why do customers buy), and what are the economics? Herein I would probe to ensure it’s not a nice-to-have commodity.
Why is the proprietor selling the business?

Tactically – if I was Dave – I would:

Meet with a dozen or so current customers (and a half-dozen former clients) to evaluate the viability and efficacy of how, why, and how often they engage the company.
Contact and meet with a half-dozen competitors, under the auspices of a desire to acquire their business (and, therefore, learn more about the competitive environment).
Shadow the proprietor on a handful of sales calls.
IBID, but go solo: Meet with a collection of prospective customers to evaluate the points in #1.
Learn more about current regulations and regulatory forecasts, endeavoring to determine if the stick is made of mahogany or balsa.

If everything checks out quantitatively and qualitatively – it’s treasure, not trash -- two paramount questions remain: How does this opportunity compare to other opportunities (to either start or buy a business)? And, most importantly, an introspective navel gaze: Do I want to do this, and do I believe it will excite me? There are too many brain-dead, block-and-tackle ways to make money; discovering and pursuing something where you can profit financially and personally is the true treasure.

Alltop

2008-02-18T06:10:00.000-08:00

One of my favorite features of a good blog is their blog roll, or list of blogs I read. It's a virtual card catalog of similar subjects and thinkers. Marc Andreessen's is excellent (several dozen categorized sites), Freakonomics too. Such compilations appetizingly fill my thirst for at-the-ready, interesting information.

If markets are conversations, can conversations -- aggregated -- make a market? Poof. Guy Kawasaki's latest endeavor, Alltop, may brilliantly bake the cake:

We help you explore your passions by collecting stories from “all the top” sites on the web. We’ve grouped these collections—”aggregations”—into individual Alltop sites based on topics such as celebrity gossip, fashion, gaming, sports, politics, automobiles, and Macintosh. At each Alltop site, we display the latest five stories from thirty or more sites on a single page—we call this “single-page aggregation.”

You can think of an Alltop site as a “dashboard” or “table of contents” for your favorite topic. To be clear, Alltop sites are starting points—they are not destinations per se. The bottom line is that we are trying to enhance your online reading by both displaying stories from the sites that you’re already visiting and unveiling stories from sites that you didn’t know existed.

Bob Sutton introduced me to Alltop ... his take:

Alltop is a clean, spare, and remarkably user-friendly compilation of top stories in 12 different categories, from autos, to egos, to mac, to sports, to politics, and a lot more. After spending about 30 minutes clicking around, I found it much more efficient and fun than looking for news on Google or Yahoo or any other place that I know. Just click, for example, on the Green Alltop section, and in seconds, you can see what happening everyplace from Treehugger, to The Green Skeptic, to the The New York Times [and Ecoworld!]. I am no expert on interface design, but there is some user experience magic here. It kind of felt like I was speed-reading the web.

Alltop's genesis:

This is the true story of Alltop. If you hear anything else from us, it’s because we retroactively changed the story for marketing purposes. We are the creators of Truemors, a site that is “NPR (or CBC) for your eyes” in the sense that it contains unusual breaking news, stories, and rumors like what you’d hear on NPR. A bit after the site’s launch, our friend Thomas Marban included Truemors in his single-page aggregation of news and tech sites called popurls.

We noticed that popurls sends Truemors as much traffic as Google. Clearly, he was onto something: Aggregate and display a bunch of sites for people, and they will come. This got us thinking about other topics that (a) have a large readership and (b) hasn’t been aggregated in an elegant and efficient manner, and we came up with idea of a doing a popurls of celebrity gossip sites. Then one thing led to another: Why not other topics like gaming, sports, politics, Macintosh, fashion, etc.?

The egos, green and small business sections are most fruitful -- several dozen of the best blogs' latest takes. Dig in for a bite ... it's quite tasty. And, rumor has it that The Art of Business will soon reside in the small business cafeteria, alongside Fast Company, Kawasaki, Fortune and the NYT.

For immediate release

2008-02-15T06:03:00.000-08:00

I had a meeting last week with a collection of new business partners. Great guys (and firms). As our conversation evolved, we shifted gears to the marketing of our collaboration: Positioning, messaging, talking points, media outreach, etc. Basic blocking and tackling.

In practice organizations too often fumble -- tactically and strategically -- as they block and tackle their way through marketing. A myopic (company-specific) cause is typically an apathetic and erroneous focus on features and benefits. Companies like to sell drills; customers (who care and count and have $) want to buy holes. Great companies focus on the outcomes customers seek (the job they’re seeking to accomplish), versus trumpeting the whats and hows of their offering. It’s sad and all too common to see a company push attributes and pricing into a market.

Great marketing is conversational, a crescendo of meaningful interactions focused on fulfilling a “need to have” proposition. Conversations begin with an understanding of customer needs (outcomes), polished through positioning and illuminated through the company’s brand (the collection of perceptions in the minds of their constituents). If you’re good, you can craft and control the conversation and how constituents perceive your company.

Back to our meeting. As we bandied about the how, what and why of our collaboration, one of our partners tendered a thought: Why not create a mock press release announcing our relationship? Since we’re apt to create a real release, it’s a sage starting point, an opportunity to ensure we’re on the same page, singing the same song, commencing a series of meaningful conversations about the differential nature of our collaboration. I volunteered to take a first whack, harkening to bygone days as a journalist.

The mock release idea is brilliant, and its application is vast. Any time you do something meaningful – start a company, launch a product, hire a key employee, form a collaborative alliance, forge a new direction – craft a press release. In the process you can imagineer testimonials (from insiders and outsiders), refine your positioning, master your messaging, and orchestrate your song. It will be out of tune initially; that’s okay. The objective is to practice and polish before you preach. When you step to the public podium, the choir will harmoniously orate your message.

++++++++
Post-script (26 Feb 08): The Great Josh Morgan just shot me a relevant, read-my-mind post about the intrinsic value of press releases ... a taste:

... the most helpful part of the press release that still hasn’t changed for me is the process of creating it. Having a release as a concrete document you are creating helps focus internal audiences on what they really want to say and who they want to say it to. This is incredibly important for startups.

POTW: The Pitch Coach

2008-02-13T06:06:00.000-08:00

We have invested a good chunk of real estate herein (here, here and here are a few posts) exploring the virtues of telling stories and delivering clear, concise and meaningful pitches. In short: Most all entrepreneurs are smart. Most all are passionate. Most all are chaperoning good (or great) ideas. But, most all fall down when it's time to communicate.

Our POTW comes from Presentation Zen (the blog; I've skimmed, but have not fully inhaled, the book). Therein Garr Reynolds introduces David Rose, chairman of the New York Angels, aka "The Pitch Coach". David has strong, seasoned, and instructive thoughts about entrepreneurs and presentations:

The primary hallmark of an entrepreneurial fundraising pitch as opposed to other types of presentations is that the most important factor by far is you. Investors are going to spend the entire session attempting to determine if you are the person behind whom they should invest their money, and how you come across personally is often more important than everything else combined, including your business plan, and industry and financial projections. This means that fundraising pitches must be given by the CEO and no one else. The top ten characteristics that investors will be looking to find in you during your presentation are:
• Integrity
• Passion
• Experience (in starting a business)
• Knowledge
• Skill (in functional operating areas)
• Leadership
• Commitment
• Vision
• Realism
• Coachability
Concerning the flow of your presentation, the single most important thing in sequencing a presentation is that everything must flow logically from beginning to end, and require no prior knowledge on the part of the audience. You do not want the audience to have to "think" at all, which means you need to answer every potential question at exactly the right place, just before the audience would think to ask it. It sounds easy, but 99% of presentations don't do it.

Well said. Reminds me a little of a previous muse, The jockey, the horse and the track, and a lot of an experience I had raising money many moons ago. Parked in a conference room with a prospective investor -- questing to close a funding round -- I asked the would-be backer for his thoughts about our business plan. Haven't read it, he said. Deflated, I sank like a helium-less balloon. Who's in, how much have you raised, and how much more do you need? I perked up, answered his question. Okay, I'm in. Shocked, I almost popped. I want you to know -- eye-contact galvanized -- I'm betting on you. Gulp.

++++++++++
Post-script (14 Feb 08): Guy Kawasaki's a sage when it comes to pitches. Here's a terse summary of The 10/20/30 Rule of PowerPoint:

Ten is the optimal number of slides in a PowerPoint presentation because a normal human being cannot comprehend more than ten concepts in a meeting—and venture capitalists are very normal. (The only difference between you and venture capitalist is that he is getting paid to gamble with someone else’s money). If you must use more than ten slides to explain your business, you probably don’t have a business. The ten topics that a venture capitalist cares about are:

Problem
Your solution
Business model
Underlying magic/technology
Marketing and sales
Competition
Team
Projections and milestones
Status and timeline
Summary and call to action

Bang

2008-02-11T21:01:00.000-08:00

There’s something insanely sick (or sickenly insane) about partaking in a meeting with predictably eyeoring Eyeores, especially when such contrarians are new acquaintances. Perhaps it’s a seventh sense: An ability to eye and engage Eyeores. Today baked the cake.

My friend Mike is chairing the homecoming committee for UCD’s Centennial celebration; I’m his co-conspirator. One-hundred years, and we’re tasked with throwing a party. Not just any fiesta: A big, boisterous, memorable, pop-the-cork event. Sounds like fun; I volunteered and joined his committee.

We had our first formal meeting today and quickly proffered five Bs for our desired bash: Bang (fireworks), Bands (the Cal Aggie Marching Band-uh! battling with a few of their compatriots), Bonfire (a big, hairy one), Beads (Mardi Gras-esque parade through downtown), and Beer (lots). Basic ingredients of a 10,000-Aggie party.

Before we could imagineer the what and why, our alter-ego Eyeores took command of the meeting: I’m sorry to be a wet blanket (the Eyeore Creed), but how can we do it? (Eyeore: We're never gonna get there!)

Don’t worry about the how, we injected. Let’s design the biggest and best party, this side of Picnic Day, Davis has ever absorbed.

Our five B’s were countered with five roadblocks: Staffing, funds, permits, liability and logistics. Makes sense if you’re trying to cover your rear or protect your cheese (or perhaps think pragmatically), but it’s a buzz kill if you’re volunteering to create a celebration.

I’m not sure if, come homecoming (October 11, 2008), fireworks will blast, bands will blare, a bonfire will blaze, beads will fly, or beer will flow. But, I am certain that if we employ a yeah, but … mindset, if we spend time thinking about how it will not work, if we’re defeated from the outset, we will fail. The solution – whether you’re throwing a party, launching a product, or starting a company -- rests in employing a tabula rosa to craft the ultimate what and why (thinking in a yes, and ... manner), and then figuring out how to make it happen.

Selfless

2008-02-11T20:25:00.000-08:00

I met with a colleague today who is going through a divorce. We had calendared a chunk of time to brainstorm. Storm we did, but only after engaging more important stuff.

We talked about the selfless sacrifice of relationships, heavy stuff. And, we shifted gears to the immeasurable magnitude of giving yourself to your children, a subject that’s too important for this top-of-mind forum. It’s all about my kids, she shared. They are everything.

When you’re single, you are one. When you date, you become a pair. When you marry, you lean back toward one, but not quite; you become more allocentric, but maintain your self. When you have kids, you give and bear all. It is a cleansing and rewarding, exhausting and exhilarating, introspective and learning, patience-testing and fulfilling experience. It’s cool.

Flipping to the funny pages – less important stuff like entrepreneurship – building a company is similar, though with much less gravity. Successful enterprises are driven by selfless individuals. Ego plays a part, but it’s not the most important thing; team members park their self interests for the betterment of the cause. The company counts, not the accomplishments of individuals. Your slice of the pie may shrink, but it’s a larger and tastier pie.

I think you can be competitively, aggressively, and successfully selfless. When you help others succeed, you win; when you’re primarily concerned about yourself, you lose. Giving and sharing is a lot easier than taking and keeping.

Not only can we learn a lot from kids – in a creative, ideation sense – but we can garner much from the virtues of parenting. They are, as my friend expressed, everything.

Persist

2008-02-08T06:56:00.000-08:00

Over a beer with a friend this week, the subject of startups wearing blinders percolated. Some people never learn, she mused. They perpetually do the same thing and make the same mistakes. Failing fast and failing better is virtuous, I chirped, kicking myself for instinctively regurgitating the theme of a previous blog post. Yep, she agreed, at least they [startups] are persistent.

I gulped, relating like a bobble head to many personal and professional experiences, in addition to the previously cited, herein, characterization of insanity: Doing the same thing over and over and expecting a different outcome.

Persistence is, of course and to a degree, is good. Check the dictionary: A person who is persistent is one who continues to follow the same course of action, no matter what. A persistent person keeps trying and trying. A person or company’s ability to persistently emerge and adapt – versus repeating the same mistakes – is a barometer to success.

The happy hour conversation reminded me of a go-get-em encouragement from my dad many moons ago. I had hit a wall – where, when, why and how, I can't recall – and he shared a tattered, 3x6” chronology residing above his desk:

Abraham Lincoln, 16th President of the United States
Defeated when he ran for the Illinois House of Representatives in 1832.
Defeated for the U.S. House of Representatives in 1843.
Defeated for the Senate in 1855.
Defeated for Vice President in 1856.
Defeated for the Senate again in 1858.
Elected President of the United States in 1860.

Treasure hunt

2008-02-08T05:39:00.000-08:00

My kids love mazes and maps. There's something enchanting and engaging about starting at point A and weaving your way to point B. In particular, my boys (I sense) love the exploratory virtue of treasure maps; as the author and illustrator, I enjoy dreaming and charting their quest. Treasure hunts never get old.

Effectively communication and corporate strategy -- the route to build sustainable advantage in significant markets, as coined by my old strategy partner Paul -- is similar in its treasure-questing. Prophetic strategists are modern day cartographers.

From Wiki:

Cartography combines science, aesthetics, and technical ability to create a balanced and readable representation that is capable of communicating information effectively and quickly.

Whoa ... echoes/parallels thoughts herein (particularly here and here) about the virtue of clear, concise and cogent communication, along with creating a kick-ass corporate strategy. Wiki, please expand ...

The quality of a map’s design affects its reader’s ability to extract information, and to learn from the map. Cartographic symbology has been developed in an effort to portray the world accurately and effectively to convey information to the map reader. A legend explains the pictorial language of the map known as its symbology. The title indicates the region the map portrays; the map image portrays the region and so on. Although every map element serves some purpose, convention only dictates inclusion of some elements while others are considered optional.

Good stuff. Analogized, the quality of a person's communication affects its audience's ability to extract information, and to learn from the communication while engaging a sense of direction. Successful communicators portray their world accurately and effectively. They ground their communication, oftentimes pictorially, with meaningful symbols. Their title indicates their general theme; the substance (map and legends) provides support. Great communication is simple: Convention only dictates inclusion of some elements while others are considered optional.

Simple directions in the world of cartography vis-a-vis corporate strategy: Where to go (significant markets), how to get there (route), and what to do once you arrive (build sustainable advantage).

Now

2008-02-05T10:31:00.000-08:00

Caught Barack Obama on CSPAN late last night. He was in Boston, delivering a primary-eve talk to a raucous crowd. Amazing stuff; it defies logic that he can lose, but paradoxically it will be extraordinary if he wins.

Early in his speech Barack quoted Martin Luther King. Something about the urgency of now ... thirsting for more, I Googled the relevant passage from MLK's speech (4 April 1967 in NYC):

We are now faced with the fact , my friends, that tomorrow is today. We are confronted with the fierce urgency of now… We must move past indecision to action.

Tomorrow is today. The urgency of now. Moving past indecision to action. Redkindles several rants herein, including our Just Do It lament.

Moving beyond inspiring words to pragmatic actions, think of personal, professional and athletic experiences, memorable, meaningful and measurable accomplishments in your life. Could be a tennis tournament where you kicked it into sixth gear, acting with an uncommon urgency and purpose. Or the moment you decided you wanted to spend the rest of your life with your spouse; tomorrow, perhaps you mused, is today -- let's do this. Or, the point in time where you truly -- emotionally, professionally, personally and financially -- committed to start a company. The time was then (now), and you shifted from indecision to action. You pointed your tips downhill with a great sense of urgency and purpose.

The urgency of now is paradoxically inspiring and scary. Reminds me of Eleanor Roosevelt's challenge: Do one thing every day that scares you. Living in today, floating through indecisive moments, resisting change (now!) is comfortable. Shifting gears to tomorrow, to action, to now is the spark (or ante) to great things. And, it beats the pulp out of the apathetic, ambivalent alternative.

POTW: Giving birth

2008-02-04T05:59:00.001-08:00

It's Monday, early, and thus I feel a bit guilty and lazy dropping a post-of-the-week so soon. Too bad; couldn't resist. This week's is courtesy of Guy Kawasaki, based on an email pitch he received from an entrepreneur: “Everything you should know about me as an entrepreneur you could learn from my OB/GYN”. Here's the terrific email:

I am very good at conceiving an idea.
I can commit to something mind, body, and soul for at least nine months.
I have the ability to over come adversity, such as eating healthily while puking all day.
I can adapt quickly to changing and expanding situations.
I stay focused and motivated even with a lack of oxygen to my brain.
I am creative: Did you know with satin pajamas and satin sheets you can roll over in bed even with an extra sixty pounds.
I am patient—ever known anyone ten months pregnant?
I am cool under pressure: I gave birth to a ten-pound baby without a C-section or a properly functioning epidural and did not curse out my husband.
I am resilient: I went back to work at my company four weeks after giving birth.
I create meaning in the world! Even with all the trials and tribulations of becoming a parent I have chosen to do it twice so far because each new life gives hope and meaning to our world. Just like each new business.

I've enjoyed Kawasaki's tales about his kids and parenthood, vis-a-vis entrepreneurship and start-ups, in the past. He wraps with a few wonderful analogies: Children are the ultimate startup. And when they leave for college, it’s their IPO. And when they get married, it’s an M & A deal. And like most startups, these milestones usually take longer and cost more than you predicted. Parental success rates, however, are much better than even the best (seed-stage) venture capitalist’s.

Play ball

2008-02-01T09:57:00.000-08:00

My dog, Berkeley, had a tumor removed from his chest Thursday. The three-plus hour surgery went well, and he's recovering in canine ICU. Pre-operation, I asked the surgeons about the tumor: What kind (thymoma), has it metastasized (no), how large (the size of a baseball). Fortunately, it was encapsulated and they extracted the whole ball of guck.

I'm a baseball nut, have been since I could grip a ball. Baseball is the closest thing to a personal religion; there's something devinely romantic and intoxicating about the pop of a mitt, the crack of a bat, the tonic of a beer and hot dog, the smell of fresh-cut grass, and the melodious holler (Beer, cold beer here; Bag of nuts, big bag of nuts) of an aisle-prowling vendor. Spring training cannot come soon enough.

Baseball is metaphorically rich. As I shared in a New Year's eve post, I enjoyed a ripe story from Tom Wolfe illustrating his research of the life of contemporary college students:

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 is learning their partner's name.

Metaphorically, there are many parallels to draw between baseball and business. I engaged the value of metaphors back in October ... here's a refresher (excerpted from Metaphors We Live By):

We understand experience metaphorically when we use a gestalt from one domain of experience to structure experience in another domain.

Sports metaphors and analogies -- especially baseball ones -- are intrinsically apt for business. People moan that sports metaphors are cliche or trite. Yes and no. They're useful as shorthand communication levers because they are cliched and therefore everybody knows exactly what they are intended to mean (including the emotional connotations they are supposed to have), without ambiguity. If you are trying to make sure people get your point quickly and clearly, then the more cliched -- that is, standardized -- your metaphor is, the more efficiently it helps you communicate.

Which reminds me of a conversation I overheard in Scottsdale at a Spring Training game several moons ago, two guys lounging in the outfield bleachers, musing about ...

... Dude, let's start a company. Cool. What's the ball game? I dunno. But we've gotta swing for the fences this time. Okay, what's the roster look like? Joey for sure: He's a clutch hitter, total utility man; we need guys who can play all positions. Who else? Well, we need some horses. How 'bout Steve for sales? Not bad as a set-up man. Miles is the guy we need to pitch; awesome closer with the swing-for-the-fences mentality we need. Mark for IT? Brutal; he’s way in left field. Total screwball. We'd be lucky if he got us to first base. Alright. Adam? Dude’s been on waivers for too long … he’s walking around with two strikes against him; total rain delay. Sarah's a diamond; HR? Tough call. She plays major league hardball and could be on waivers. May need to pinch hit for her while she's in the bullpen. How about John for marketing? Good free agent, but risky. John’s totally off base, big league liability; he likes to play the field.

Quick change-up: Ballpark, how much do we need to open the gates? No clue, but if we wanna play in the bigs, we need to bust the salary cap; otherwise, we’ll get picked off and end up in the bush leagues. Okay. We’ve gotta act right off the bat if we wanna knock it out of the park. You game? Dude, you know my wife’s going to give me the hook; as much as I wanna play ball, I think I need a rain check. I’ll touch base in a few. Don't drop the ball on me. Keep me in the game in case you cross signals with your manager.

POTW: Serial-preneurs

2008-01-31T20:30:00.000-08:00

I have never worked for or in a big company, and have no desire to do so. Building great – hopefully, some day, big – companies makes me tick. In a perhaps sick way, I enjoy the uncertainty of creating and building versus the certainty of a paycheck. Prior to Crescendo’s growth – and my evolution from a founder into paycheck-procuring employee – I had gone 16 years without a job. I recall fondly the chuckle of my CFO at Crescendo when I asked (upon receiving my first paycheck): What’s all this FIFA and SDI crap they’re taking out of my pay? Big companyitis … could be the Peter Pan in me.

The emotional tonic of starting and building something is addicting. Once you’ve done it, it’s hard to get off the sauce; when you stray, it’s a lonely and frightening place. It reminds me of one of the Sacramento Entrepreneurship Academy's founding tenets: Entrepreneurs replicate themselves (and what they do). Security is morbidly scary.

I just unearthed a summer of 2007 article in the Journal, The Secrets of Serial Success: How some entrepreneurs manage to score big again and again and... It’s a navel-gazing story, loaded with meaningful morsels. A random taste:

More than anything, however, the greatest, and more crucial, challenge among repeat entrepreneurs is figuring out how to rekindle for future ventures the innocence, love and hunger that fueled their first enterprise...

So why do some entrepreneurs who strike gold once continue to start over? A general contractor might launch a business because he has certain skills, and then stick with it until retirement. Or a banker will work her way up the corporate ladder, happy with the security of a paycheck and benefits, and retire once she has saved enough. By contrast, serial entrepreneurs' main job is the act of creation -- and thus they keep creating new businesses, often after they no longer need the paycheck...

One of the hardest tasks serial entrepreneurs face is recapturing the drive and direction that fueled their first venture, without letting the first success overshadow or dictate what they do next. Sometimes, it's as simple as learning to let go...

Mr. Bricklin, who now runs Software Garden Inc. in Newton Highlands, Mass., says he feeds on the thrill of starting something new and untested. "It's like that sense of walking across a stream on the rocks -- sort of knowing where you're going, but sort of not." As for risk? "If you actually seen the ups and downs of a business, and your family isn't terrified, that makes it a lot easier to do yourself."

Having slipped on many rocks and stumbled through numerous streams, I love the metaphor. Particularly if you're doing so on your own dime and own time, venturing to a place uncertain.

Unternehmergeist

2008-01-30T08:40:00.000-08:00

I have read (some) and wrote (little) about Joseph Schumpeter, the economist who first theorized, in the early 1900s, about entrepreneurship and who predicted the attacks its very success might engender. A book review in today's Journal rekindled my interest in Schumpeter. The review recaps Scott Shane's The Illusions of Entrepreneurship. The book sounds interesting, though I'll probably pass. For now here's a Schumpeter-centric excerpt from the review:

For Schumpeter, entrepreneurs were change agents, not just creators of business enterprises. Their chief function in society was to challenge established ways of doing things. Schumpeter believed that such disruptive newness -- though it created wealth and economic dynamism -- would inevitably meet resistance, sometimes strong resistance. Thus the long tradition of vilifying entrepreneurs, still evident today.

Love the "disruptive newness" reference; reminds me of Victor Hugo's opine: Greater than the tread of great armies is an idea who's time has come. "Strong resistance" and "vilifying entrepreneurs" remind me of Eyeores. Intrigued, I dug a bit deeper ...

... in 1939, Schumpeter wrote that "the history of capitalism is studded with violent bursts and catastrophes" that, while ultimately bettering society, seem "like a series of explosions." He proferred this process, "creative destruction," in his 1942 tome, Capitalism, Socialism, and Democracy. A few bites:

[there is a] process of industrial mutation -- if I may use that biological term -- that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.

Schumpeter posited two theories. In the first one he argued that the innovation and technological change of a nation comes from the entrepreneurs, or wild spirits. He came up with the German word unternehmergeist, meaning entrepreneur-spirit. He believed that these individuals are the ones who make things work in the economy of the country.

Right on. Thanks, Joe, for the unternehmergeist.

Lights. Camera. Action.

2008-01-30T07:01:00.000-08:00

Entrepreneurs like to go it alone. Such is the Herculean, conquer all worlds, independent mindset of people who create. As we’ve explored, good entrepreneurs are generalists: They are very good at, and knowledgeable of, doing many things. Great entrepreneurs, though, embrace and employ the value of building a team – employees, advisors, investors, industry experts, contractors, suppliers, distributors, et al – in their quest to create a great company. Think of running a marathon versus a 5K.

Building a company is theatrically, artistically, collaboratively and tactically similar to making a movie. I was reminded of this over sushi yesterday with my friend Scott. One of his clients, Folsom-based Redwood Palms Pictures, employs a unique approach to cost-effectively and collaboratively finance, produce, market and distribute independent films. Redwood Palms leverages a crowd-funding model to raise funds, through Regulation D securities offerings, for its film slates. It’s a hybrid of the “experience investing” approach we championed at Crescendo: Marry an affinity (a desire to be involved in the production of a movie) with a sound financial investment to raise capital and engage investors. Very cool model.

So, you wanna be in pictures? Think of the myriad moving parts and participants: Actors, producers, directors, screen writers, investors, cameramen, location coordinators, stuntmen, set designers, costume makers, casting directors, make-up artists, soundmen … it’s a daunting list. And, the aforementioned players are married to simply (complexly?) create the product; getting it out there (monetizing the art through distribution, DVD sales, merchandising and the like) is the make-or-break imperative. And (II), if you’re like Redwood Palms, you fine-tune and replicate your model.

IBID for starting a company; consider the disparate and necessary elements required to develop a product. Once the sausage making (internal product development) is complete, selling and distributing and serving and enriching and complementing the sausage (product) is paramount; the rest is a necessary – an ante to being a company – navel-gazing exercise. It takes a kick-ass crew of internal and external cast members to make it happen. As CEO (or Producer), your job is to choreograph and optimize the actions.

A final thought: Great entrepreneurs seek to build great companies, or platforms, upon which they can create and deploy multiple products or services; it’s near impossible to run a marathon if you’re a one-product pony. Movie producers like Redwood Palms are analogous: It’s not enough to build a foundation and assemble a cast of characters to create one film. The true value – and returns – come from doing it again and again, better and better, leveraging and monetizing a production platform.

Cure

2008-01-29T06:15:00.000-08:00

Our Labrador Berkeley turned 13 Friday. We baked a massive, celebratory dog biscuit, a certain-to-bomb-the-gut concoction of flour, water, corn flakes, grape nuts and oats. No fear … Berk inhaled and lived to bark about it. Berkeley is an old man battling myriad ailments, including a recently discovered mass in his chest. He’s soldiering forth.

Prior to baking Berk’s bone, I caught the tail end of Science Friday on NPR, including a piece about Dr. Judah Folkman, who passed away earlier this month. Until his death, he was Director of the Vascular Biology Program at Children's Hospital Boston. A central theme of his research was the idea of angiogenesis, the formation of new blood vessels. More on Dr. Folkman in a second.

Later Friday afternoon Dr. Nordquist from the UC Davis Veterinary Hospital called with test results from an exam of Berkeley’s chest mass. Sobering news: He has cancer (thymoma). Good news: It has yet to metastasize and is operable. He’s going in this morning to have the tumor removed.

Back to Dr. Folkman and the timely NPR piece. In 1971, Folkman published a paper in the New England Journal of Medicine arguing that angiogenesis was a key component in the growth of tumors. If a way could be found to limit the growth of blood vessels servicing a tumor, he reasoned, the tumor would be unable to grow. The idea has been incorporated into many different fields, and has led to the development of drugs such as Avastin (Bevacizumab), an angiogenesis inhibitor developed by Genentech.

Prior to, and during, Dr. Folkman’s research, oncologists were intensely focused on the cancer cell being the problem -- 99.9% of research and the resulting drugs that treat cancer pursued this path. Dr. Folkman’s insight: It’s not just the cell, but its relationship to its environment. Dr. Folkman saw a phenomenon when he finished his assigned job too early, got some cancer cells and tried to grow them in a special apparatus where they were testing blood supplies for the Navy. All cells stopped growing at the same time: They can’t grow beyond a certain size for a reason. He realized that if they can’t get a blood supply, they can’t grow.

Dr. Folkman was a surgeon. Normally surgeons do not don’t venture in to the cellular level. However, he considered himself a surgeon scientist. His idea, in the eyes of cancer specialists, seemed too simplistic and naive.

Dr. Folkman was a physician, which shaped his thinking about science. Bigger theme: Contemporary science is very reductionist … take a complex phenomenon and remove singular components. He started with a phenomenon – and studied it religiously – which is not typical of contemporary science.

A lot of things seem obvious after they’re established. Above all, Dr. Folkman was an observer of connections. He sought out and collected dots from various perspectives and tried to connect them in unique ways. In Dr. Folkman’s case, he looked outside traditional (99.9%!) cancer research and discovered a cure. Like many great innovators, Dr. Folkman did not create something from ether; he flipped conventional wisdom and combined elements of disparate knowledge to solve a problem.

I took Berk for a pre-opp run late yesterday. Along a creekside path, Berkeley met an 18-year-old black lab who was carted in a wagon by his parents. Though Berk's new friend could not walk, he was full of energy and spirit. The canines exchanged a few sniffs and barks (and perhaps a few sage musings about growing old), prior to heading in opposite directions.

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Post-script (29 Jan 08): This is a bit off track, but somewhat relevant ... I'm immersed in Robert Sutton's Weird Ideas That Work. An excerpt:

The process of finding new uses for old things is not always intentional. Accidental discoveries sometimes enable firms to serve unexpected customers. Viagra and Minoxidil are examples of such happy accidents. The discovery that Viagra usage was associated with penile erections in some men was initially given little attention by researchers from Pfizer when this "side effect" was first noted in clinical trials. The drug was originally developed to be a treatment for hypertension, and after that failed, it was tested as a treatment for angina. Once again the drug failed. But this time Pfizer researchers followed up on the side effect from their earlier study. They ran clinical trials of Viagra as a treatment for erectile dysfunction, which led them to discover a new application for this existing drug. Similarly, Minoxidil was originally sold in tablet form as a treatment for high blood pressure. A side effect of the medicine was unwanted hair growth. So researchers from Upjohn started examining if it could be applied to the scalp to increase hair growth in balding men. Significant hair growth was observed in more than half the subjects who used it, and Minoxidil is now marketed in the U.S. by Upjohn as Rogaine. Researchers at both Pfizer and Upjohn didn't anticipate these side effects, but both groups were creative because they were observant and persistent enough to find a new use for an existing medication. In the right hands, nothing succeeds like failure.

Itz’s Pawn Shop

2008-01-23T18:20:00.000-08:00

I just finished an interesting book, Gang Leader for a Day: A Rogue Sociologist Takes to the Streets. The book relays a University of Chicago graduate student’s five-year immersion into the culture of a south-side housing project and its controlling gang. Life in the projects – and as a member of the gang – is sobering and simple.

The gang (the “Black Kings”) charters all economic activities within the project and neighboring community. It’s a diversified, multi-faceted conglomerate, engaged in illicit and legal businesses; the gang has its eyes and hands on everything that occurs. A few examples of the micro-economy:

Neighborhood shops pay a “security” fee to the gang, a monthly tax in consideration of the project’s residents shopping at their shop.
Need a room? The gang controls who stays where and for how much, whether you’re a long-term tenant or a one-hour brothel customer. (Prostitutes, of course, pay a fee too.)
The gang expertly manages – from supply procurement to manufacturing to distribution and in-field sales training -- the sale of crack, representing a lion's share of their revenue.
Tenants who sell candy and other goodies from their apartment revenue-share with the gang.
Need a new set of brakes? The gang manages auto repairs in the adjacent park.

Gang Leader for a Day is a telling portrait of inner-city life. What’s most revealing is the organized supply (or value) chain of commerce. No matter how disdainful the gang leaders are, their business skills are admirable, let alone their ability to manage and support a community. Read the book … it’s worthy.

The book reminded me of a recent (legal) eBay purchase of a used set of golf clubs. After winning the auction, I learned the seller would not accept PayPal; personal or certified checks only. Smelled fishy. I snail-mailed a few hundred bucks to the seller and, after a few weeks, the clubs arrived (mangled, BTW, in a bevy of boxes). The seller’s mailing label: Itz’s Pawn Shop, Deerfield, FL.

Two thoughts: First, a combination of guilt and remorse sank in as I gripped my new clubs. They were pawned, perhaps legally (desperately), more than likely illegally (stolen and sold). Bad karma; great economics (thought two). The seller opened my eyes to eBay’s value for pawn shops. There are tens of thousands of pawn shops in the U.S. (think of two Long Tail forces: democratize distribution [get it out there] and connect supply and demand [help me find it].). Pre-eBay, their market was regional, a small demographic and geographic segment of drive-up customers. With eBay, pawn shops can now sell their junk (and golf clubs) to a universe of millions -- distribution and sales are ubiquitous.

(Jaw-dropping anecdote: eBay boasts 220 million users who conduct 2.2 billion transactions per year, making it the world’s largest marketplace with the population of the world’s 5th largest nation. Almost three-quarters of a million Americans are considered professional eBay sellers, using their eBay sales as their primary or secondary source of income. Another 1.5 million Americans use eBay to supplement their income.)

POTW: 7 Reasons No One Likes Your Ideas

2008-01-22T10:37:00.000-08:00

I've been thinking a lot lately about the value of teaching, not preaching, whether you're evangelizing an idea, a cause, or a lesson. It's somewhat synonymous with the virtue of telling stories, of singing songs, of conversing and communicating (not speaking at or to) customers and markets. Thanks to Andy Hargadon for unearthing this week's post of the week that amplifies my thinking: 7 Reasons No One Likes Your Ideas, courtesy of Casual Fridays.

A few reasons ideas aren’t accepted:

1. You took a leap, but didn’t build a bridge.
2. Your idea had no tether.
3. You told a song.
4. You have no relational equity.
5. You tossed an egg instead of a bird.
6. Too many thorns around the rose.
7. You assumed you knew it all.

Read the entire (quick) post ... it's superb. And, embrace the tenets the next time you tender an idea.

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Post-script (23 Mar 08): Casual Fridays reports back with an amplification of their previous post, this time addressing the obvious: Your ideas are bad. Here are five signs of a bad idea:

1) It puts you in the wrong batter’s box.
In baseball, unless you’re a switch hitter, batting from the other side of the plate greatly reduces your effectiveness. If your idea doesn’t line up with strengths, consider whether there’s a better solution on the right side of the plate. You’ll hit more homeruns by focusing on your strengths.

2) It’s pie in the sky.
Is your idea disconnected from reality? Does it actually solve a problem, or is it just cool? Form follows function. This doesn’t mean your idea can’t be cool. Great design is a must today, but if isn’t purposeful then it’s useless. Be careful. This is very subjective. What you think is ‘pie in the sky’ may be a great idea that simply has to be reconnected to reality.

3) You’re trading flies for frogs.
Is an army of frogs your solution to a plague of flies? Congratulations! You just traded one problem for another (possibly bigger problem). Does your idea create a bigger issue than it solves? Then it’s probably not a solution. It’s just another problem.

4) Imitation is the greatest form of flattening.
I’m not talking about flat hierarchy or “The World Is Flat” thinking. I’m talking about flat as in no peaks or valleys. As in a flatline on an EKG. Flat without anything to grip or hold onto. Want a flat company? Copy your competitor’s ideas. You’ll lose anything that makes you different from the competition. Your products become flat. Your marketing will be flat. And so will your sales.

5) You never wake up from the dream.
I love to dream BIG. But if you never wake up from the dream and make it a reality, what good is the idea? There is a difference between creativity and imagination. Execution. CREATIVITY = IMAGINATION + EXECUTION (C = I + E). In order to be creative, you have to CREATE something. Dreaming big only gets you halfway there. Don’t be afraid to go the rest of the way. Your idea might be great, but no one will know if it’s never created.

Keep it real

2008-01-21T15:42:00.000-08:00

I've been thinking a lot lately about authenticity: What makes something or someone authentic, and why is it important (and why do I care)?

First, authenticity is not binary; it's not as simple as being (or not being) authentic. There are degrees. The authenticity of something or someone ebbs and flows with experiences.

To be authentic is to be genuine, credible, real. Probably most importantly, authenticity teeters based on the degree and validity of trust that's created.

Consider your acclimation to a new product or new acquaintance. You begin with a collection of perceptions that morph, through interaction, into impressions. These impressions are altered -- positively or negatively -- through experiences with the thing or person, fostering a variable degree of trust. The more positive, credible, genuine, and real the experiences, the higher level of trust (and thus authenticity). In short, perceptions >> interaction >> impressions >> experiences >> trust >> authenticity. In short (II): You can't fake authenticity.

Three examples to chomp on:

1. Politicians: I attended President Clinton's talk at UCD last week. He's good, and I side with most of his politics (but not his wife's). It was my second in-person experience -- my perceptions have solidified into impressions through somewhat real interactions. A pol's credibility and authenticity are magnified through such personal interactions. However, Clinton's authenticity was diminished through my interaction; he was less genuine, more contrived, a caricature. I guess I trust him less. Barack Obama, conversely, is authentic to me. I have not met him nor seen him in person. But, I trust him ... he's credible, genuine, human. Obama is real.

2. Products: A company's brand is, simply, the collection of perceptions it creates in the minds of constituents. Perceptions are staged and altered through the delivery of (positive and negative) experiences. People call this a "brand promise"; to me, it's the backbone of a company: the efficacy of the trust and rapport it builds with customers. When Apple unveiled the iPhone, it came loaded with a bevy of promises and potential. Early adopters trusted Apple -- probably due more to historically favorable experiences with the company's products (we perceived it was going to be cool and useful and functional) than the fulfillment of an unmet need -- and took a leap. To me the iPhone is authentic; through positive experiences, it has fulfilled my expectations.

3. People: We all have coaches, colleagues, teachers and friends who we trust. They're authentic, and their authenticity (our trust and belief) is earned through a combination of being candid and genuine, perhaps humble and non-defensive, relational and warm. Flip the coin and think of non-genuine, unauthentic counterparts. Initially through instincts and eventually through experience-born judgment, your trust wanes. We associate with and migrate to people we trust.

When you're voting for a candidate, keep it real. When you create a company or launch a product, focus on building trust and rapport (and thus authenticity) with constituents; by fulfilling a promise, loyalty will come. And when you're building a team, trust your judgment.

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Post-script (24 Jan 08): From today's WSJ Opinion page ("The Authenticity Thing"):

Political authenticity isn't easy to define. Some would say the words are mutually exclusive. Others say that authenticity is a matter of whether a politician operates out of something real inside or is making his politics up as he goeas along. Perhaps the easiest test for authenticity in an electorate of more than one million voters is the one Supreme Court Justice Potter Swewart applied to hard-core pornography: "I know it when I see it." ...

If we want a better understanding of the style of authenticity that people who vote are looking for, consider the real meaning of Barack Obama's controversial praise for Ronald Reagan. Sen. Obama was correct that Reagan caught the nation's need for a new direction, which is now the senator's claim. But Reagan's published letters and papers make clear that he believed in his political ideas for a long time. By 1980, they were deep and clear. They were authentic.

It's all about money

2008-01-21T06:11:00.000-08:00

My sons are in to Run DMC. Their affection to date is benign and limited: It's Tricky and My Adidas cap their personal jukeboxes. In the near future they'll acclimate to Grand Master Flash (my first and favorite rap band), and we'll reach a father-son moment of societal dissonance: GMF, in The Message, claims It's all about money, ain't a damn thing funny. I can hear it: Dad, you said money's not important!

Until that day, I spend a lot of time thinking about how companies can make money. 'Tis the purpose of the corporation; the fundamental challenge is creating a business model that can consistently and sustainably make money. The variables for most businesses are limited; for contemporary content/media/Web companies, (to quote Run DMC) it's tricky.

Fred Wilson primes the conversation:

If you are building a media oriented business, particularly one that has low marginal costs, meaning you build it once and the cost to serve an additional customer is negligible, then you have the unique opportunity to focus first and foremost on building your customer base or audience.
Most web apps will be monetized with some kind of media model. Don't think banner ads when I say that. Think of all the various ways that an audience that is paying attention to your service can be paid for by companies and people who want some of that attention.

If the marginal cost to service an additional customer is negligible, then you can wait to monetize. If it's not, then you are going to have to focus on your business model earlier in the life of your business. It's really that simple.

Chris Anderson adds fuel to the discussion:

Both media and most online businesses are based on "software economics", where the cost of creating something of value is relatively high but the marginal cost of distributing it to each consumer is very low. So you can look at the web as the ultimate extension of the media business model to a wide range of other industries.

My brother-in-law Curt is working with a company that creates and sells specialized information. Over the weekend in a cursory brainstorm of a person to help build out the company's consumer business, we scratched the surface of vehicles (models) to monetize information. Our list was terse; Anderson and friends proffer more than two-dozen possibilities:

CPM ads ("cost per thousand views"; banner ads online and regular ads in print, TV and radio)
CPC ads ("cost per click"; think Google ads)
CPT ads ("cost per transaction"; you pay only if the customer brought to you from a media sites becomes a paying customer. Here's an example.)
Lead generation (you pay for qualified names of potential customers)
Subscription revenues
Affiliate revenues (think: Amazon Associates)
Rental of subscriber lists
Sale of information (selling data about users--aggregate/statistical or individual--to third parties)
Licensing of brand (people pay to use a media brand as implied endorsement)
Licensing of content (syndication)
Getting the users to create something of value for free and applying any of the above to monetize it. (Like Digg or our own Reddit)
Upgraded service/content (ed: aka "freemium")
Alternate output (pdf; print/print-on-demand; customized Shared Book style; etc.)
Custom services/feeds
Live events
"Souvenirs"/"Merchandise"
Co-branded spinoff
Cost Per Install (popular with top Facebook apps who can help others get installs)
E-commerce (selling stuff directly on your website)
Sponsorships (ads of some sort that are sold based on time, not on the number of impressions)
Listings (paying a time based amount to list something like a job or real estate on your website)
Paid Inclusion (a form of CPC advertising where an advertiser pays to be included in a search result)
Streaming Audio Advertising (like radio advertising delivered in the audio stream after a certain amount of audio content has been delivered)
Streaming Video Advertising (like streaming audio but in video)
API Fees (charging third parties to access your API)

Great list. Returning to home, yesterday my wife procured a new pair of sneakers for our oldest. As he bounced the halls in his shiny Adidas, I awaited a Run DMC impersonation and his standard question: Mommy, how much did they cost? The question did not surface; if it had, we probably would have said, "Scott, don't worry, it's not (all about) money." Unless you're building a business, of course.

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Post-script (23 Jan 08): My friend Redwood, a wonderful journalist and proprietor of an invaluable site, chimes in:

First of all however thank you for enumerating the many ways to monetize a website audience. I am familiar with all of them. And here's the deal - other than creating a premium content product that people will pay for, sort of a virtual newsletter where clientele pay oodles for a few pages of brilliant, unique and strategically valuable information to which they get exclusive access - there is no way to make serious money under the methods described unless your traffic is massive. Bottom line - content online requires traffic, somewhere between 10x and 100x the audience size compared to printed content for the same revenue. And print content is dying. And here's the clincher - there is now an INVERSE relationship between the value of the content, and how much someone with an audience has to pay for it. Analysts at investment banks give away extremely valuable content in order to get their name out and find clients. But the local journalist who reports on events on their community for a local newspaper has to be paid.

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Post-script (03 Feb 08): Caught the tail end of Car Talk on NPR this morning. It reminded me of my dad -- he loved the show, but despised cars -- and this post. Here are a few ways Tom and Ray Magliozzi have created a community to monetize their content through their parody of all things auto:

Radio: Carried on 588 stations with, each week, more than 4.4 million listeners. Revenue: Licensing and sponsorship fees.
Cartalk.com: Advertising, particularly their relationship with cars.com and several affinity companies.
Merchandising: Name it, they sell it ("shameless commerce," they say), including CDs, books, calendars, swag, clothing, etc.
Television: A new animated show on PBS, Click and Clack's As the Wrench Turns.
Speaking appearances and events: These guys are good ... imagine they generated a nice bounty of speaking fees.
Other: I would wager they make a few bucks through licensing their brand, affiliate (click-through and other) relationships, subscriptions, lead generation, and the sale of information (user demographics and the like).

What an institution.

Wham-O

2008-01-18T07:39:00.000-08:00

Richard Knerr died earlier this week. He was 82. If you've ever hula'd a hoop, flung a Frisbee, slung a shot, sprayed Silly String, or slid on a Slip 'N Slide, you can thank Knerr.

From the LA Times obit:

With his boyhood best friend, Arthur "Spud" Melin, Knerr started the company in 1948 in Pasadena. They named the enterprise Wham-O for the sound that their first product, a slingshot, made when it hit its target.

A treasure chest of dozens of toys followed that often bore playful names: Superball, so bouncy it seemed to defy gravity; Slip 'N Slide and its giggle-inducing cousin the Water Wiggle; and Silly String, which was much harder to get out of hair than advertised.

When a friend told Knerr and Melin about a bamboo ring used for exercise in Australia, they devised their own version without seeing the original.

They ran an early test of the product in 1958 at a Pasadena elementary school and enticed their test subjects by telling them they could keep the hoops if they mastered them.

They seeded the market, giving hoops away in neighborhoods to create a buzz and required Wham-O executives to take hoops with them on planes so people would ask about them.

Wham-O soon was producing 20,000 hoops a day at plants in at least seven countries, while other companies made knockoffs. Within four months, 25 million of the hoops had been sold, according to Wham-O.

Knerr and Merlin did not conceive the hula hoop or flying disc. They remade/refined what existed, and marketed like maestros. Harkens two quotes:

- Aristotle: It is impossible that anything should be produced if there were nothing existing before.
- Edison: Make it a habit to keep on the lookout for novel and interesting ideas that others have used successfully. Your idea needs to be original only in its adaptation to the problem you are working on.

The evolution of the flying disc is fascinating. Wiki's recap:

The Frisbie Pie Company (1871–1958) of Bridgeport, Connecticut, made pies that were sold to many New England colleges. Hungry college students soon discovered that the empty pie tins could be tossed and caught, providing endless hours of sport. Many colleges have claimed to be the home of "he who was first to fling." Yale College has argued that in 1820, an undergraduate named Elihu Frisbie grabbed a passing collection tray from the chapel and flung it out into the campus, thereby becoming the true inventor of the Frisbee.
That tale is dubious, as the "Frisbie's Pies" origin is well-documented. Walter Frederick Morrison claims that it was a popcorn can lid that he tossed with his girlfriend (and later wife) Lu at a 1937 Thanksgiving Day gathering in Los Angeles that inspired his interest in developing a commercially-produced flying disc. In 1946 he sketched out plans for a disc he called the Whirlo-Way, which, co-developed and financed by Warren Franscioni in 1948, became the very first commercially produced plastic flying disc, marketed under the name Pipco Flyin-Saucer.

In 1955, Morrison produced a new plastic flying disc called the Pluto Platter, to cash in on the growing popularity of UFOs with the American public. The Pluto Platter became the design basis for later flying discs. In 1957, Wham-O began production of more discs (then still marketed as Pluto Platters).

Wham-O co-founder, Richard Knerr, in search of a catchy new name to help increase sales, and hearing of the colloquial name "Frisbie", gave the disks the trademarkable brand name "Frisbee" (which is pronounced the same as "Frisbie") on June 17, 1957. Sales soared for the toy, which was marketed as a new sport. In 1964, the first "professional" model went on sale.

And, I think they had fun (lots) while making money (some) and, building on yesterday's post, shuffling little paper. It's hard to conjure a company that has positively touched -- through the sale of products and facilitation of memorable experiences -- so many people.

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Post-script (19 Jan 08): From today's WSJ:

Spud and Rich, as they were universally called, liked to mix it up in the office with toy guns and Super Ball tossing contests.

From hoops to Frisbees to Super Balls -- each of which sold in the hundreds of millions -- Wham-O's biggest hits always were about active, outdoor fun. Its best products transcended trivial toys and verged on the profound. They were simple shapes -- a disk, a ring, a sphere -- that behaved in unexpectedly wonderful ways.

Shuffling paper

2008-01-17T10:58:00.000-08:00

Barack Obama is being railed for his candid admissions that he keeps a messy desk, is not good at shuffling paper, and lacks operational experience. Buttoned-up cynics, seeking any opportunity to derail his candidacy, trumpet his comments in making a case that he's not prepared to be chief executive. As ardently supportive as I am of Obama's quest, I've intentionally shied away from talking politics (or religion) here; that said, the contemporaneous pundit mumblings are hogwash.

Executives and operators keep clean desks. They're good at -- most enjoy? -- shuffling paper and churning wheels, dealing with known knowns. They shy away from chaos, contradiction, and confusion, the opportunistic ingredients of an entrepreneurs existence. A friend of mine who's a VC is similar: He's mechanically meticulous, a refined, robotic operator in a profession that's more art (free-form, creative), less science (methodical).

Entrepreneurs are different: They create, working in a grey, ambiguous, messy environment. Entrepreneurs despise paper (-work and shuffling). In general, they're poor managers and operators; they get shit done, but it's the big stuff (not methodical minutiae) that counts. Perhaps that's why most entrepreneurs fail as managers or operators.

To be creative (to succeed as an entrepreneur?), a task can’t be algorithmic (as operators desire). An algorithmic task is one where the solution is straight-forward and clear; a creative task is one sans a clear and readily identifiable path to solution so that a new algorithm must be developed before the task can be accomplished.

Once the algorithm is created and the path paved, operators take over. Entrepreneurs move on and do it again. And, I would hope a simple application of logic would amplify the need for an entrepreneurial and creative -- not paper-shuffling methodical -- leader of the free world.

Frontal lobotomy

2008-01-13T19:25:00.000-08:00

Took the boys to Arco this afternoon to see the Kings. The price, free, was right; it was an “open practice,” which we enjoyed with 10,000 or so Kings fans. For an ailing franchise that has limped through the season with nary a sellout, it was a smart marketing move (let alone an easy way to sell a few thousand $5 King Dogs, $8 beers and $5 Cokes).

I have been fascinated with professional sports for three-plus decades, and the business of pro franchises for more than half my life. Television contracts drive sports; putting buts in the seats is an important, but less consequential, contributor to a franchise’s bottom line. But – and speaking of buts – pro sports teams have generally been arcane in pricing their product.

Quick TV timeout: Think about variable pricing and its transparency. When demand exceeds supply (or, at a minimum, increases), the cost of a plane ticket, a hotel room, a round of golf, a concert ticket, or a person’s time increases. Basic math, eh? There’s a finite supply (of plane seats, hotel rooms, tee times, venue seats, or hours in a day), and thus the proprietor can – and should – charge more when demand intensifies.

Back to the game: Professional sports are just now grasping the concept. Bundling and packages have heretofore served as their solution: Buy a 10-game pack and you can see the Lakers; otherwise, you’re out of luck (e.g., you can’t buy a single-game ticket).

Until recently, the cost of a ticket to a Tuesday night Giants-Marlins game at AT&T park was the same as a Saturday Giants-Dodgers game. Demand for the said Marlins game was below capacity; demand for the Dodgers game greatly exceeded the 42,000-or-so folks you can pack into the phone booth at Third and King.

I enjoyed an ah-ha moment last summer in my quest to buy tickets to a game at Yankee Stadium. My schedule was fairly fluid – midweek, weekend, whoever was playing … I was ambivalent. But, the Yankees charge substantially more for a weekend game – let alone a Red Sox rivalry – than a mid-week contest. The same seat does not cost the same. (BTW, the Giants, alas, are employing a similar pricing strategy.)

If you are operating an airline, managing a hotel or golf course, promoting a concert, or chartering a professional sports team, your sunk costs are, well, sunk. Your inventory (supply) is capped. And, once the flight takes flight, the day ends, the concert commences, or the game takes place, your revenue opportunity vanishes.

Cynics would argue (check that: would Eyeore) that maintaining price integrity is paramount. Bullocks; such a practice is irresponsible if you bypass revenue opportunities. Two examples: A flight that’s half full costs (sans a few bucks for additional fuel) essentially the same as a three-quarter full flight. IBID for a ball game or concert, but with much larger revenue implications. In addition to the lost revenue from not selling a ticket, the venue loses a chance to park a car, sell memorabilia, or pour a beer, let alone the opportunity to deliver a sterling experience and create a fruitful relationship.

Think of other as-yet-untapped opportunities where supply is perishable and demand fluctuates. Restaurants could, during peak periods, charge more for food and booze. Movie theatres could do the same for gotta-see new releases. Accountants and lawyers could place a premium on their services during high-demand seasons. Bakers, butchers and candlestick makers too. Failure to do so is drunkingly foolish, reminding me of Grouch Marx’s opine: I’d rather have a bottle in front of me than a frontal lobotomy.

++++++++
Post-script (14 Jan. 08): From this morning's Bee:

The one thing the organization won't do is cut ticket prices. Gavin Maloof said he isn't keen on offering last-minute slashed rates, a technique the Boston Celtics have used.
NBA teams have access to software that provides live updates on how seats are selling and at what price. Halfway through the 2004-05 season, the Celtics began heavily using that technology, called StratTix, to offer last-minute ticket deals to sell out TD Banknorth Garden hours before tipoff.
Gavin Maloof said he feels such a strategy "devalues" the product.
"We've never been big on discounting," he said. "We feel we have spent the money on players; our payroll is right under the luxury tax. We feel … (discounting) sends the wrong message."

Quick math: The Kings are averaging 13,875 fans in a venue that seats 17,325. On an average night, 3,450 seats perish. At $10/seat (give them away!) and $30 in spending/fan (parking, concessions, memorabilia), the Kings are forgoing -- at no additional/marginal cost -- about $138k in revenue each game, or about $3.4mm for the remainder of the season, on top of the lost opportunity to increase their fan base/deliver a memorable experience.

POTW II: Crowdf(o)unding an eco clothing brand

2008-01-10T18:18:00.000-08:00

Here's a paradox for entrepreneurs: What if you could legally raise millions of dollars from thousands of people without selling a share of stock or debt, but with a trade off whereby such folks get to collectively "run the company"? Tough one, and a SoCal company is testing the model.

Launched in late 2007, nvohk (pronounced 'invoke') has created a crowd-funded, eco-friendly surf clothing company that's directed in large part by consumers. We shared a similar model -- MyFootballClub -- back in November. In less than three months the Club signed up 50,000 people willing to pay a GBP 35 membership fee to buy and manage a soccer team with a crowd of other dedicated fans. Love it (the marriage of an affinity and an investment opportunity), along with most any elaboration of The Wisdom of Crowds concept (which we wrote about here, here, and here).

nvohk is currently recruiting a minimum of 20,000 members (capped at 40,000), each of whom will contribute $50 in exchange for the chance to co-develop the nvohk brand. Members will make major business decisions including logo, web and product design along with advertising; they'll also receive 35 percent of nvohk's net profits in the form of points that can be redeemed to purchase products, as well as 25 percent off all nvohk goods.

Since they're selling a "membership," they skirt SEC regs and can legally raise the dough (let alone build an annuity [renewable memberships; annual fundraising sans dilution] and passionate base of likely-to-refer evangelists). Ditto with the fact that profits are not shared -- they provide "points" to members, redeemable for apparel. Brilliant, if it flies.

Click here to surf the Springwise post, or here to learn more about the company. And, if you're a sucker like me, you may throw your hat (and 50 clams) in the sea to get involved.

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Post-script: Oh-shit, expectation-lowering update (email) from nvohk today ... the ball's moving (remember their target of 20,000 suckers -- like me -- to close their initial round/membership, or a $1mm raise):

Over 1,550 future members and counting!!!

We are proud to announce that with over 1,550 future members to date, the movement continues to build momentum!

These are exciting times and we greatly appreciate your support as we collectively develop something that has never been done before... the first surf-inspired, eco-clothing company managed by the people who wear it.

In addition, because of the enthusiastic and positive response from our initial members, we are accelerating the member activation target to 5,000 future members. In other words, once we sign up 5,000 future members, everyone will be invited back to contribute $50/yr to officially launch, develop and manage nvohk. nvohk will continue to recruit and activate up to 40,000 members.

POTW: Combinatorial gluttony

2008-01-10T09:56:00.000-08:00

I have pretty much kicked fast food after a few decades of thrice-weekly visits to Taco Bell. Occasionally I will relapse and visit In-N-Out. Double-doubles (with grilled onions, of course) are tasty treats. What's most impressive, though, is In-N-Out's innovative menu (and its simplicity): Burgers, fries, cokes and shakes. That's it. Consistent in quality, efficient in delivery.

Fast-food companies profit (sometimes) and perish (most times) in their combinatorial cuisine pursuits. Jack in the Box is the cardinal sinner; their chaotic unveiling of new offerings is senseless. Click here -- no joke -- to build your own Jack in the Box meal. Gut bombs should not be that complicated.

Our POTW, A.V. Club Taste Test Special: The Bowl At The Howling Rim Of Famous-Ity, details an adventure in fast food. LA-based comedian Patton Oswalt daringly inhales a Famous Bowl. Quick taste:

Kentucky Fried Chicken had filled a bowl with gravy, mashed potatoes, corn, breaded chicken, and finally, cheese. Shut-ins, people afflicted with Prader-Willi Syndrome, and manic-depressives also do this. If you're trying to make a fortune in the food and beverage industry, those are the three demographics to shoot for—the Famous Bowl is one of the bestselling items on the KFC menu...

Great example of complicating something that's simple. Oswalt's parody continues:

...I drove the Famous Bowl home. It sat on the passenger seat next to me like a sullen runaway I'd picked up on the interstate...

The Famous Bowl hit my mouth like warm soda, slouched down my throat, and splayed itself across my stomach like a sun-stroked wino. It was that precise combination of things, and so many other sensations that did not go together. At all.

The gravy, which I remembered as being tangy and delicious in my youth, tasted like the idea of blandness, but burned and then salted to cover the horrid taste. The mashed potatoes defiantly stood their ground against the gravy, as if they'd read The Artist's Way and said, "I'm going to be boring and forgetful in my own potato-y way!" The corn tasted like it had been dunked in fake-corn-flavored ointment, and the popcorn chicken, breaded to the point of parody, was like chewing a cotton sleeve that someone had used to wipe chicken grease off their chin.

The cheese had congealed. Even in the heat and steam of the covered Famous Bowl, it had congealed. I stabbed it with the tines of my spork and it all came up in one piece. I nibbled an edge, had a vision of a crying Dutch farmer, and put it down.

Enjoy the read and laughs, but bypass the Famous Bowl.

If I ...

2008-01-10T09:02:00.000-08:00

One of my favorite books is Dr. Seuss’s If I Ran the Zoo. To refresh, the book features Gerald McGrew, a kid who, when visiting a zoo, finds that the exotic animals are "not good enough". He says that if he ran the zoo, he would let all of the current animals free and find new, more bizarre and exotic ones.

I wrote a sports column in college paraphrasing Seuss and personifying Gerald McGrew, opining the changes I’d make in sports, corny stuff like, “I’d tear out all the artificial turf, to the dump it would go, save a few knees and a couple of stubbed toes.” It was fun.

As I’ve lamented (here, here, and here, for three), too often people pass time in a yeah, but … brain-dead cloud, slogging through staid and unimaginative task after task. What’s more fun is to don your zookeeper-for-a-day cap and dream of (then act on) If I could… possibilities.

The great Mumbo Gumbo provides melodical inspiration in the aptly titled Anything:

If I could be invisible and have the world on a string
I could do, I could be, I could do anything

If I could be a movie star I’d put it all on the screen
I could do, I could be, I could do anything

If I could be a rocket man I’d fly away on a dream
I could do, I could be, I could do anything

If Gumbo’s not your taste, Jimmy Buffett offers an alternative recipe:

Oh, I could be anyone I wanted to be
Maybe suave Errol Flynn or the Sheik of Araby
If I only had a pencil thin mustache
Then I could do some cruisin too

The point? When you’re charting what to do with your life, within your company, or with a new product or service, it’s much more fun and rewarding to imagineer in an open-ended, all possibilities on the table manner. After all, you can be and can create anything you want to, which beats the pulp outta doing something you do not want to do.

The best

2008-01-04T21:53:00.000-08:00

My friend Craig and I killed a half-dozen plates of sashimi yesterday, belatedly catching up, ebbing and flowing between yesteryear and yet-to-comes, chortling between bites. After spending time with friends like Craig, I remorsefully kick myself: Where does time go, and why am I such a derelict friend? Great guy.

Craig played golf professionally for a few years. He was good enough to compete in a few mini tours and make a few cuts. Reality: There are 17,000-plus golf courses in the U.S. home to -- conservatively -- a scratch golfer or two each. Of the tens of thousands of domestic golfers who consistently break par (most of whom aspire along the way to turn pro), 100-200 or so make a living playing professionally. Brutal biz.

I asked Craig if he missed competing. Yes and no, he reflected; the get prepared, go out and compete rigor of trying to catapult a golf career was intoxicating, while reality -- quantified above -- was sobering. He's now living a full life, prospering professionally and enjoying as much time as possible with his wife and kids.

Is it worth it? Craig asked. Is what worth what, I replied. Being the absolute best at what you do.

In the hamster-wheel of life, the obvious answer is yes; pop and chill pill and jump off the wheel (i.e., enjoy life with your family and friends outside work), and the answer's even more obvious: No.

We talked about Tiger Woods, company CEOs and analogous top-of-their-field folks, the sacrifices and compromises they make in their ascension to and perpetuation at the top, the prosper or perish necessity to acutely focus and kick ass. Aspirational and admirable? Yes. Worth it and desirable? Nope. Would they (The Best) change it (if they could)? Silence.

I'm slated to chat with the Sacramento Entrepreneurship Academy's current class next weekend. Two "entrepreneur in action" hours of who knows what. If you can't compete, don't (Jack Welch). Work hard, and harder. Failure to commit is committing to fail. Typical helium of a talk with aspiring entrepreneurs.

In reality, being The Best is in the hands and mind of the actor, not the perception of the audience. The prototypical entrepreneur's rodent wheel beckons a diligent climb to the perceived pinnacle, which is not realistic. Being great at what you do, enjoying (loving) what you endeavor, and ensuring you live a full and relationship-rich life counts. You can control your success and fulfillment.

Chances

2008-01-04T21:04:00.000-08:00

I've played in one pro-am golf tournament, a few years ago during the local LPGA tour stop. We lucked out: Our partner was Rosie Jones, a great golfer and an even better person. You can learn a lot about golf, and more about life, walking fairways with Rosie.

After yet another unmemorable dead-left duck-hook, I turned to Rosie's caddy and deadpanned: Who's the best out here? Serious question, though I did not give it much thought. The looper incredulously replied: Anika. Of course, I thought, kicking myself like Chris Farley; how can you be so stupid!

Embarrassed, I pressed on. What makes her so good? I asked, expecting a technically athletic -- she's a great putter, a straight hitter, a whatever -- reply. His response: She gives herself more chances -- birdie putts inside 15 feet -- to score than anyone out here. Simplistic, logical and poignant.

It took me three years to analogize Annika's greatness and Rosie's caddy's wisdom with business. What makes a business (or a businessperson) so good? The competencies and assets of an organization or individual are obvious; they're antes for being in the game. Differentiation (and success) comes from maximizing the quantity and quality of chances you or your company have to prosper. Success crescendos when you knock it (your proposition or effort) close to the hole, often. The more short puts you have, the more likely you are to excel. The shorter the puts, ibid times two.

Making a 60-foot put is exhilarating, but it's a tough way to run a business or hack through life. Stroking a continuum of 10-footers -- better yet, tap-ins -- is a much more fruitful existence, and creating such chances is the root of prosperity. Better to be good than lucky.

Creativity and caucusing

2008-01-03T17:55:00.000-08:00

The holidays are a terrific time to do a lot of nothing and a little of something. The world slows, brains park, libations flow, waistlines widen. I'm guilty, particularly blog-wise over the past few weeks. (BTW, I just realized we generated exactly 150 posts in 2007 ... that's a lotta hot air.)

We're caucusing tonight. My eight-year-old just asked, What's a caucus? A few minutes into my confusing explanation, he got bored, shook his head and left the room, reminding me of one of my favorite quotes: Making the simple [a democratic election!] complicated is commonplace; making the complicated simple, awesomely simple, that's creativity.

About a month ago Dave Winer, one of (if not the) pioneers of weblogs, shared a collection of worthy thoughts about the creative process. Here are a few morsels:

I've been focused for the last 1.5 months on creating something new. It's amazing how much work it takes to do this. In the end you strive to make it look so simple and install so easily that it seems obvious and trivial. But after all that, if it worked, people are creating in ways they weren't before. That's the gratification available to creativity. These days it's rarely rewarded with money. Okay, that's the way it goes, and in some sense is the way it's always been. The reward of art is insight. The reward of achievement is the possibility of more achievement. Having done it once, you always want to do it again, the next time on your terms, but it never works out that way.

Creativity is a process like seduction. The idea has to be teased out, you have to come at it straight on, then from the side, then sneak up from the rear. It isn't until you understand all facets of a problem that the solution is revealed, and then, if it's really a solution, it reveals a whole new class of problems. (The joy of platforms.)

Smart post. The seduction reference is so true, and it's wonderfully relevant -- tease, tease, tease -- to my previous post about first dates. Speaking of first dates, go Barack.

First date

2007-12-31T22:18:00.000-08:00

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.

POTW: TripIt

2007-12-20T09:28:00.000-08:00

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.

Whiners

2007-12-19T17:00:00.000-08:00

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

BMF

2007-12-17T21:02:00.000-08:00

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.

POTW: That's what I'm talking about

2007-12-14T20:45:00.000-08:00

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

2007-12-14T20:32:00.000-08:00

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.

Panhandling

2007-12-11T08:20:00.000-08:00

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.

Fish wrap

2007-12-07T08:53:00.000-08:00

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.

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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.

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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.

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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.

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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.

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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.

Mix it up

2007-12-06T19:51:00.000-08:00

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

2007-12-06T19:29:00.000-08:00

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:

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.
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.
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?

POTW: Racing down the hydrogen highway ...

2007-12-03T19:58:00.000-08:00

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.

2007-12-03T19:41:00.000-08:00

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.'"

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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.

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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.

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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.

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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.

Wear sunscreen

2007-11-28T16:35:00.000-08:00

My oldest son met Ernie Ells several moons ago. He (Scott) was zero (not yet one; believe he was nine months old) at the time. Doubt he remembers it, but my wife and I share a fond recollection. Ernie approached us between shots -- it was a screw-around one-day exhibition at Lahontan -- and motioned to Scott, who was passed out on my back. "Is he wearing sunscreen?" Ernie inquired about our Scandinavian-skinned son. As first-time parents we quickly bi-nodded like two bobblehead dolls or chortling hyenas. "Good," Ernie surmised.

I mused back in May about Kurt Vonnegut's erroneously attributed commencement speech, which commenced as so:

Wear sunscreen. If I could offer you only one tip for the future, sunscreen would be it. The long-term benefits of sunscreen have been proved by scientists, whereas the rest of my advice has no basis more reliable than my own meandering experience. I will dispense this advice now.

Artrepreneur, a blog engaging the collision of art and business, reminded me of Kurt and Ernie this afternoon. The blog's author creatively and coolly parodies the "wear sunscreen" speech. Here's the start:

Ladies and gentlemen of the world of art and craft,

Stretch.

If I could offer you only one tip for the future, stretching would be it. The long-term benefits of stretching have been proved by scientists, whereas the rest of my advice has no basis more reliable than my own meandering career path. I will dispense this advice now.

The parody rolls from there ... here are a few good chestnuts for entrepreneurs and artrepreneurs alike:

Don't worry about the future. Or worry, but know that worrying is as effective as trying to solve a design problem by throwing a tantrum, or scrubbing a toilet. The real troubles in your life are apt to be things that never crossed your worried mind, the kind that blindside you at 4 pm on some idle Tuesday.
Do one thing every day that scares you.
Play.
Color outside the lines.
Maybe you'll prosper, maybe you won't. Maybe you'll be famous, maybe you won't. Maybe you'll be in a museum, maybe the Ugly Necklace contest is the only one you’ll ever win. Whatever you do, don't congratulate yourself too much, or berate yourself either. Your choices are half chance. So are everybody else's.
Enjoy your creativity. Use it every day, and in every way. Don’t be afraid of it or of what other people think of it. It's the greatest tool you'll ever own.
Turn up the music and dance, even if you have nowhere to do it but your studio space.
Accept certain inalienable truths. Costs will rise. Prices will fall. Some people will copy. You too, will get old. And when you do, you'll fantasize that when you were young, people bought craft, nobody copied, and everyone adored artists.

Living

2007-11-27T15:00:00.000-08:00

A friend of mine lost a family member recently. It reminded me of the morbid perpetuity of death. I do believe in celebrating a person’s life – especially when they’re with us – but I do not buy theological after-life, he/she’s in a better place musings. When you’re here, you’re here; when you’re gone, you’re gone. There’s no good way or good time to go.

But, when you’re here (and I presume there’s a here here, since you’re reading this), your vitality is in your hands. No excuses: You have a tabula rasa (Aristotle: What the mind thinks must be in it in the same sense as letters are on a tablet which bears no actual writing; this is just what happens in the case of the mind). How you live – what you do, who you interact with, what you create – is up to you.

Since you do have a choice, I tender you’d prefer to Live (like totally, to the max [to heist a quote from Valley Girl] with a capital, bold-faced L). To do what you want to do, to go where you want to go, with whom you’d like and when you desire.

Which saunters to my point: Play.

When I think of mentors -- people I endeavor to emulate -- there are two commonalities: They all play (do what they do because they want to, and enjoy it to boot, with little regard for how people perceive them), and they’re a little nuts. As Jimmy Buffett strums, there's a little bit of fruitcake left in everyone of us; my mentors have a lot of fruitcake in each one of them.

Mike Ziegler (CEO of Pride), Sally Edwards (founder of Fleet Feet and several dozen other athletic-centric companies), Buffett, and my late father play (and played). Life is a game they engaged with a childlike, curiously crazy, entrepreneurial enthusiasm. They are full of vitality. They are living. They proactively embrace life. Things do not happen for a reason; they happen because they make it happen.

Mark Twain opined that play and work are words used to describe the same activity under different circumstances. Play (thanks, Wikipedia) is oft defined as a frivolous and non-serious activity (think of those who prescribe such definitions; they’re working, not playing, for a living, reactively sleepwalking through life). Work is compulsive; play is natural and free, intoxicating and invigorating.

Back to Buffett for the wrap:

Oh, yesterdays are over my shoulder,
So I can't look back for too long.
There's just too much to see waiting in front of me,
and I know that I just can't go wrong
With these changes in latitudes, changes in attitudes,
Nothing remains quite the same.
Through all of the islands and all of the highlands,
If we couldn't laugh we would all go insane.

+++++++++
Post-script (17 Jan 08): Cool post from Seth Godin ...

A workaholic lives on fear. It's fear that drives him to show up all the time. The best defense, apparently, is a good attendance record.

A new class of jobs (and workers) is creating a different sort of worker, though. This is the person who works out of passion and curiosity, not fear.
The passionate worker doesn't show up because she's afraid of getting in trouble, she shows up because it's a hobby that pays.

+++++++++
Post-script (14 Feb 08): A morbidly humorous Dilbert take, Death by Frozen Poop, about mortality from Scott Adams. In its entirety:

I know there is something wrong with me because I enjoy reading stories about frozen waste from airplane bathrooms that falls to Earth and almost kills people.

http://www.cbc.ca/canada/calgary/story/2008/02/07/ice-roof.html?ref=rss

When I think of the ways I could die, almost all of them are better than being killed by flying poop. That’s the sort of thing that could erase a lifetime of accomplishment. I would instantly stop being the guy who created Dilbert and forever be known as the cartoonist whose head was crushed by a turd. If I die from frozen restroom waste, my friends and family would have trouble stifling a laugh. And who could blame them, really?

“How did he die?” someone might ask. “I guess you could say he got pissed off,” one of my ex-friends would reply, before laughing heartily.

It seems unlikely I would be killed by airplane waste, but it also seems unlikely a bird would crap exactly in the middle of my bald spot, and that happened. I don’t rule anything out. When I hear jet sounds, I stand under a doorway.

Imagine what would happen if I were doing a book signing, and the frozen waste from the plane missed me, but killed the guy standing in line waiting for my autograph. When telling the story later, would I be able to resist saying “The shit hit the fan”? I think not. And that is why I probably deserve to be killed by frozen poop.

No assholes

2007-11-27T08:51:00.000-08:00

I’ve never met Bob Sutton, but I think I like him. Dr. Sutton is a prof at Stanford, cofounder in the Stanford Technology Ventures Program, and a cofounder and active member of the new “d.school,” a multi-disciplinary program that teaches and spreads “design thinking.” He is also an IDEO Fellow and author of several (have yet to read any of them) books, including The No Asshole Rule. (If I had the talent and ambition to author a like book, it probably would be entitled The No Scallywag/Ferret/Fathead/Bozo/Eyeore Rule; that said, “asshole” is an apt label.) Sutton’s my kind of guy.

Sutton’s blog is bountiful and provocative. Dig around and you’ll quickly kill an enjoyable half-hour or three … a recent post, Realists vs. Idealists: Thoughts about Creativity and Innovation, is tremendous. Quick excerpt: … in innovation, the people who precisely quantify – or try to quantify – the risks of any new idea can often come up with excellent reasons why a particular idea is likely to fail (Eyeores!), and indeed, since most new ideas have a high failure rate, they are usually right when their logic – whatever numbers they assign – is applied to any particular new idea.

Sutton’s thinking is encapsulated in “15 Things I Believe,” a terse treatise for creators, entrepreneurs, innovators, and anti-assholes:

1. Sometimes the best management is no management at all -- first do no harm!
2. Indifference is as important as passion.
3. In organizational life, you can have influence over others or you can have freedom from others, but you can't have both at the same time.
4. Saying smart things and giving smart answers are important. Learning to listen to others and to ask smart questions is more important.
5. Learn how to fight as if you are right and listen as if you are wrong: It helps you develop strong opinions that are weakly held.
6. You get what you expect from people. This is especially true when it comes to selfish behavior; unvarnished self-interest is a learned social norm, not an unwavering feature of human behavior.
7. Getting a little power can turn you into an insensitive self-centered jerk.
8. Avoid pompous jerks whenever possible. They not only can make you feel bad about yourself, chances are that you will eventually start acting like them.
9. The best test of a person's character is how he or she treats those with less power.
10. The best single question for testing an organization’s character is: What happens when people make mistakes?
11. The best people and organizations have the attitude of wisdom: The courage to act on what they know right now and the humility to change course when they find better evidence.
12. The quest for management magic and breakthrough ideas is overrated; being a master of the obvious is underrated.
13. Err on the side of optimism and positive energy in all things.
14. It is good to ask yourself, do I have enough? Do you really need more money, power, prestige, or stuff?
15. Jim Maloney is right: Work is an overrated activity.

Reminds me a little of (paraphrased) Dr. Kilgore Trout (Vonnegut): Our purpose in life is to fart around.

Timequake

2007-11-25T20:26:00.000-08:00

Breezed through Vonnegut’s Timequake this weekend, a whimsical, esoteric, moralistic and funny page-turner. Two relevant (to this blog) morsels to share:

First, Vonnegut’s recap of an interaction with his alter ego (Kilgore Trout):

The first story Trout had to rewrite after the timequake zapped him back to 1991, he told me, was called “Dog’s Breakfast.” It was about a mad scientist named Fleon Sunoco, who was doing research at the NIH. Dr. Sunoco believed really smart people had little radio receivers in their heads, and were getting their bright ideas from somewhere else.

“The smarties had to be getting outside help,” Trout said to me at Xanadu. While impersonating the mad Sunoco, Trout himself seemd convinced that there was a great big computer somewhere, which, by means of radio, had told Pythagoras about right triangles, and Newton about gravity, and Darwin about evolution, and Pasteur about germs, and Einstein about relativity, and on and on.

“That computer, wherever it is, whatever it is, while pretending to help us, may actually be trying to kill us dummies with too much to think about,” said Kilgore Trout.

Next, more Trout:

Only after he had completed his own absorbing business, the story, was Trout at liberty to notice what the outside world, or, indeed, the Universe, might be doing now, if anything. And as a man without a culture or a society, he was uniquely free to apply Occam’s Razor, or, if you like, the Law of Parsimony, to virtually any situation, to wit: The simplest explanation of a phenomenon is, nine times out of ten, say, truer than a really fancy one.

Reminded me of Blink, along with myriad rants herein about simplicity. Intrigued by the nonfiction of Vonnegut’s creative nonfiction, I Wiki’d deeper:

Occam's razor (sometimes spelled Ockham's razor) is a principle attributed to the 14th-century English logician and Franciscan friar William of Ockham. The principle states that the explanation of any phenomenon should make as few assumptions as possible, eliminating those that make no difference in the observable predictions of the explanatory hypothesis or theory. The principle is often expressed in Latin as the lex parsimoniae ("law of parsimony" or "law of succinctness"): "entia non sunt multiplicanda praeter necessitatem", or "entities should not be multiplied beyond necessity".

This is often paraphrased as "All other things being equal, the simplest solution is the best." In other words, when multiple competing theories are equal in other respects, the principle recommends selecting the theory that introduces the fewest assumptions and postulates the fewest entities. It is in this sense that Occam's razor is usually understood.

Originally a tenet of the reductionist philosophy of nominalism, it is more often taken today as a heuristic maxim (rule of thumb) that advises economy, parsimony, or simplicity …

The Octopus

2007-11-25T19:41:00.000-08:00

I wrote last week about why, the imperative of focusing – personally and entrepreneurially – on the root, not the obvious activities, of your doing. It’s lazy and perhaps overly philosophical to offer such a thought, but I continue forth.

Beyond, or perhaps inherent within, the why are forces that drive activity. (Back in July we explored the virtue of opportune [obvious?] scenarios where demand > supply.) A primary example is demand: Once such a force, to whatever degree it may catalyze a person’s decisions or a company’s progress, emerges, grab its tail. Or, in tonight’s blog-a-blah blah, its eight legs.

Thumbing through The Literary Book of Economics tonight, I thumbed upon Frank Norris’s 1901 opine, The Octopus: A Story of California. Norris asserts individuals decide what they will buy and produce, but in many ways market forces for goods and services operate automatically and impersonally. My take: The what and how are less relevant; the why -- the forces -- count (i.e., drive market activities). His take:

You are dealing with forces, young man, when you speak of Wheat and Railroads, not with men. There is Wheat, the supply. It must be carried to feed the People. There is the demand. The Wheat is one force, the Railroad, another, and there is the law that governs them – supply and demand. Men have only little to do in the whole business. Complications may arise, conditions that bear hard on the individual – crush him maybe – but the Wheat will be carried to feed the people as inevitably as it will grow.

POTW: ScreenWritEntrepreneurs

2007-11-23T18:05:00.000-08:00

You may recall our buzz-buzz post about Mark Cuban's drive to democratize movie production and distribution. And, if you've enjoyed The Long Tail, you may savor the water torture-esque death of major movie studios (nothing like the amusement of listening to an arrogant industry/balloon whistle and deflate its way to limpness!).

Our post of the week amplifies, courtesy of the LA Times, Marc Andreessen's ongoing communique about the writers' strike ... here are a few quick takes (read the whole post; it's good):

Hollywood is a town awash in hyphenates. TV is loaded with writer-producers. The movie biz is full of writer-directors. There's even a legion of actor-filmmakers like Clint Eastwood and George Clooney. But as the writers strike enters its third week, I think the future belongs to a tantalizing new hyphenate: the writer-entrepreneur.

... "Writers who create something rare -- a story with great, original characters that movie stars will cut their price to play -- have a real value," says Mandate production chief Nathan Kahane. "But that value doesn't get unlocked in the studio system. If writers are willing to share our risk, then we're willing to give them a lot of control and share in the profits too."
This kind of entrepreneurial formula couldn't have existed in the era when the studios had a stranglehold on every facet of the business, notably talent, money and distribution. But those days are gone. The stars became free agents long ago. In the last few years, with billions of private-equity dollars flooding the business, the studios have lost their lock on financing too.
... "The world is about to change," Frank says. "Anyone with an Apple computer can make a movie now -- it's never been a more democratic medium. The studios should be very afraid. Once the independent financiers start going directly to writers, things could change really fast. I ask myself every week -- why aren't we all working with them? Look at the movies they've made. They are the new Medicis."

Tell me why

2007-11-21T07:08:00.000-08:00

I’ve had a collection of experiences of late – pitch meetings with entrepreneurs, strategy sessions with executives, daily conversations with my five-year-old – harkening back to my infancy as a journalism student. One of the first things you learn in copywriting courses is to dissect and construct a story, particularly in your creation of the lead, based on the five Ws (who, what, when, where, why) and one H (how). Articulate these and the remainder of your composition is blocking and tackling verbiage.

Here’s how the aforementioned experiences evolve: The discussions (an entrepreneur’s pitch is the most cardinal example) jump immediately to the what (they’re doing: their product, service, approach), how (they will do it), when (their plan), and the where and who (their market/customer segmentation; the team that will make it happen). All antes, particularly if you’re a get-shit-done entrepreneur; but, something’s missing.

Tell me why, I engaged my comrades, echoing a bad 80s pop band, Bronski Beat. Whadya mean, why, they asked. If my five-year-old son was present, he would have beat me to the punch: Why (fill in the blanks), daddy? he posits daily. (The what, when, where, who, and how have little relevance to inquisitive kindergarten pupils.)

I harkened back again, this time to the late Harvard marketing sage Theodore Levitt, who I wrote about back in May. Levitt: People do not want to buy a quarter-inch drill. They want a quarter-inch hole. It’s the result, the experience, the utility consumers desire. It’s your unique ability – your reason for existence – in generating such results/experiences/utility/holes that matters. At the end of the day, customers are ambivalent regarding the what, when, where, who, and how of your business; they do business with you because of the why.

Back to my contemporaneous experiences: The entrepreneurs and executives were, rightly so, donning blinders, intensely focused on doing it. They could smell and see the barn, soldiering forth on plan. After all, that’s what creators do: They create. Philosophers (and bloggers?) live in the land of contemplation, of theoretical why thinking.

But, execution is irrelevant – a waste of time/senseless opportunity cost – if you have not clearly defined and acutely focused on the why of your business, as viewed and valued through the lens of your customers. Makes it a lot easier to pitch a product or plan, let alone communicate with a five-year-old.

Ode to Arco

2007-11-17T17:26:00.000-08:00

We took the boys to see the Globetrotters Thursday night at Arco Arena. The kids (and we) loved it, but something was missing. Not in the on-the-court performance, but the arena. Acro is an aging, charter-less, stale venue. It oozes – from the banged-up plastic seats to the 80s-era concessions to the stale beer aroma to the ambivalent employees – an apathetic malaise. It’s a tired place.

Why and how do things and stuff tire? Think of a book that’s remorsefully halfway read on your nightstand. Or a relationship that drags. Or an environment that lacks spark, intrigue or energy.

When people sincerely care about something, someone, or some place, you can tell. There’s a there there, a genuine dose of helium. It’s the book to read, the person to interact with, or the restaurant to visit. It’s the job that doesn’t feel like work. When it’s missing, it’s obvious.

Companies – collaborations of people focused on accomplishing a mission and making a buck – are cardinal candidates too. When you encounter or help propel a company that has “it,” hop aboard. People are intrigued … they want to be involved, as a team member, investor, customer, supplier, distributor, partner, or advocate.

Flip the coin. Though it’s not binary, you can spot (sense?) a company that is tired. Work is, well, work. Stakeholders float through the motions, artificially pedaling the company’s day-to-day actions. The atmosphere is stale, the people emotionless. To quote Don Nelson, there comes a point where potential becomes notential.

When people care about anything – a book they’ve read and thereby share, a person they meet and want to introduce to others, or an establishment that is cool – shit happens. There’s a certain energy that’s contagious. When the energy erodes, move on. Life is too short to invest your time in tired stuff.

+++++++
Post-script (23 Nov. 07): The Great Andreessen shares an interview with one of his entrepreneurial heroes, Stephen Wolfram ... scroll down for a relevant thoughtbite:

People have different motivations, of course. A lot of people think the big thing with companies is money.
Yes, if you luck out, you can make a lot of money. But it's really rare that money carries people as a motivation.

You have to actually care about what you're doing.
For some people, like me, it's the actual creative content that they care most about. For other people, it's the act of building the company. For others, it's making deals. Or winning against competition.

But there has to be something you really care about.

POTW II: MyFootballClub

2007-11-14T20:13:00.000-08:00

Here goes the first violation of my Post of the Week policy: A second post of this week. Couldn't resist this one: MyFootballClub Agrees to Buy Team. Take a quick peek ... it's a wonderful democratization of an affinity, part Wisdom of the Crowds, part heretofore unthinkable micro-capitalism, part emotive-string-striking brilliance.

The scoop: MyFootballClub (in less than three months) signed up 50,000 people willing to pay a GBP 35 membership fee (quick math: 1.75mm pounds; $3.6mm) to buy and manage a soccer team with a crowd of other dedicated fans. MyFootballClub members will vote on player selection, transfers and all other major decisions.

Amazing. The crowd (the little guys) now own and control, with their 1/35,000th say, a soccer team. As shareholders, they voted on which club to acquire. As the crowd swells, the company/team can acquire better players and boost its probability of success: on the field, on the balance sheet. Or, they can acquire additional clubs. Or, buy the whole enchilada (the league).

Assuming you can bypass U.S. securities laws -- and presuming you're parked in the States; apparently it flies across the pond -- think of the possibilities: A mass of people with an affinity for (and a few bucks to back) anything, be it a Zoo, a professional sports team (think minor league baseball), a band or performing arts groups, a now-public golf course ... it's endless.

Have fun, be a fanatic, and -- perhaps -- make money.

+++++++++
Post-script (04 Feb 08): Crowdfunding's all the rage, and new derivatives are popping up everywhere. The latest: A professional Bulgarian basketball team is now looking for sponsorship from a crowd of fans.

Springwise: While MyFootballClub first collected enough money from its members and then selected a team to buy, ten-year-old Start is taking a pro-active approach by asking basketball fans to fund an existing team. Start is seeking a minimum of 10,000 people—in Bulgaria and elsewhere—who are willing to sign up before May 1st, 2008, pledging to pay BGN 40 (EUR 20 / USD 30) each if enough other members register to do the same.

Once the money has been collected, the team will organize a basketball camp and try-outs. Training sessions will be filmed and broadcast on nashiaotbor.com, allowing crowdfunders to help spot and vote for talented new players. Akin to MyFootballClub's setup, members will virtually manage the team, voting online on key decisions concerning players and coaches.

POTW: Cycle of a Fan

2007-11-14T07:07:00.000-08:00

Inspired by my Gator experience in Gainesville two Saturdays ago, I'm on a quest to enjoy, in person, a major college football rivalry or two each year. Michigan-Ohio State, Auburn-Alabama, Texas-Oklahoma, Notre Dame-SC and a half-dozen others populate my itinerary. I'm hooked.

Or, more aptly, I'm a fan. "Fan," of course, is a derivative of "fanatic":

fa·nat·ic (fə-nāt'ĭk)
n. A person marked or motivated by an extreme, unreasoning enthusiasm, as for a cause.

Which brings me to our Post of the Week, courtesy of Brains on Fire. Cycle of a Fan engages a person's emotional involvement -- the crescendo of extreme, unreasoning enthusiasm -- for a cause. Could be a football team or a sport. Could be a product or a company. Might be a philanthropy or university. Or, a person's advocacy for a cause.

Regardless, it's a provocative look at the logical steps an individual takes in their involvement with most anything. For me, it's a play-by-play CRC (customer relationship cultivation) guide -- the practice of ushering people through introduction, participation, adoption, evangelism, community, and ownership is invaluable. All companies have constituents in each of the six camps. The goal, of course, is to mature their involvement through the lifecycle -- ensuring your engagement moves beyond transient participation and simple adoption. As their involvement matures, so too does the likelihood and viability of their self-referencing.

Who are you?

2007-11-12T19:24:00.000-08:00

I’m stuck on a Delta flight listening to The Who on my iPhone. Roger Daltrey: Who are you? Apparently, he really wants to know.

I’ve never thought about it before and if someone posed the question – so, Chris, who are you? – I would probably smirk and take the Fifth. But, since you asked I would spit out demographic vitals, talk about my wife and our two boys, share that we live in Davis, confide that I went to Cal Poly as an undergrad and UC Davis for grad school, express that I love to start companies, exercise, attend sporting events, listen to music and read, and confess my soft spot for pretzels (Bavarian’s are the best), mini carrots, sashimi, Hot Tamales, and Coors Light. Whew. I guess that’s how I would self-reference.

Which is of no relevance to today’s conversation, except to reference the utility of understanding how people self-reference. If you seek to communicate with or sell to someone – anyone – you need to understand how and when and why and to what degree they self-reference. You’ve gotta understand the context of their personal, professional and social networks. I am like him is a great path to understand how the person will behave. After chirping about this – the power of self-referencing -- for more than a decade in my dissection and attack of markets, I experienced an ah-ha while reading Six Degrees, The Science of a Connected Age:

… people know each other because of the things they do, or more generally the contexts they inhibit. Being a university professor is a context, as is being a naval officer. Flying frequently for business is a context. Teaching climbing is a context. Living in New York is a context. All the things we do, all the features that define us, and all the activities we pursue that lead us to meet and interact with each other are contexts. So the set of contexts in which each of us participates is an extremely important determinant of the network structure that we subsequently create.

In the aisle seat to my left – got stuck; I’m the monkey in the middle – is a large man, a specimen who should pay double for a seat (two seats!). Thirty seconds in to our seatmanship I learned he’s a diehard Ohio State Buckeye fan. Sixty seconds later he volunteered that he’s from Canton, Ohio, and takes immense pride in Canton’s housing of the Football Hall of Fame, particularly that 15,000 folks pack the joint for a high school game. He just inhaled a two-pound chocolate bar (no joke) slobbered down with a can of Coke. His right bicep boasts a Fred Flintstone caricature tattoo. Personal hygiene is not a priority; he hasn’t showered for a few days (weeks?). And, he’s reading one of the Narnia books. Not sure what he does for a living, if he goes to church or bowls in a league, or if he’s in to NASCAR or Harleys or whatever. But I bet he relates well to people like him.

Who are you? Lots of people really wanna know.

Scallywag

2007-11-12T08:07:00.000-08:00

My friend Redwood can get a little red between the ears. He’s an excitable sort who’s furrowed brow comes with a sprinkle of a smile and a chortle or two, which makes it all the more amusing. Several moons ago, he tipped his pint and commenced a diatribe about a colleague, culminating in an eyebrow-crunching oration: Whatta scallywag, I’ll tell ya!

I froze. Not because of his emotion, but due to my discovery of a new take: Scallywag. Engaged, I dug deeper:

Scal-ly-wag [skal-ee-wag] – noun: a deceitful and unreliable scoundrel

Wood’s vent conjured a few similar personifications.

Ferret, for one. (I bump heads with a local, anything-but-allocentric character who half-lovingly reminds me of mustela putorius furo [a weasellike, usually albino mammal].)

Fathead is another. In the 70s, Fatheads were Grateful Dead-dancing listeners of KFAT in the Bay Area. Today, they’re egotists who have a supreme sense of professional being, shielding an insecurity of social interaction.

Bozo’s a good one too, with credit to Guy Kawasaki’s credo: Don’t let the bozos grind you down. Kawasaki contends there are two kinds of bozos:

The slovenly bozo with no credibility.
The successful bozo, which is the most dangerous since people tend to believe them.

Scallywag, ferret, fathead, and bozo thinking can be harmful if you employ an Eyeore mindset or if you lose site – through your engrossment with the said character – of the big picture. Think Scott McNealy and his Microsoft must perish quest that nearly killed Sun. (Not sure if McNealy ever referred to Gates as a scallywag, ferret, fathead, or bozo.)

But, I can think of numerous bury-the-scallywag, catch-the-ferret, deflate-the-fathead, or pop-the-bozo scenarios where such thinking was healthy (though, perhaps, too testosterone-ridden tribal?). A common rallying point is created, a target identified, collective motivation corralled. Which works if, in trying to prove the scallywag/ferret/fathead/bozo wrong, you accomplish your objective. And, most importantly, share a chortle or two along the way.

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Post-script (18 Nov. 07): Dug up the below from historian Ted Tunnell on the origins of scally/scalaway:

Reference works such as Joseph E. Worcester's 1860 Dictionary of the English Language defined scalawag as "A low worthless fellow; a scapegrace." Scalawag was also a word for low-grade farm animals. In early 1868 a Mississippi editor observed that scalawag "has been used from time immemorial to designate inferior milch cows in the cattle markets of Virginia and Kentucky." That June the Richmond Enquirer concurred; scalawag had heretofore "applied to all of the mean, lean, mangy, hidebound skiny [sic], worthless cattle in every particular drove."

The Fuzzy Tail

2007-11-09T07:21:00.000-08:00

I unearthed a terse, enjoyable post and slideshare presentation from David Armano, VP of Experience Design with Critical Mass. His takes:

Left brain? Right brain? Neither. Fuzzy people are "light-brainers" ... they are agile, inquisitive, adaptable, flexible, and pliable.
To bolster your fuzziness, forget you were ever an expert. At anything.
Unlearn. So you can learn again.

Armano continues in his poignant argument against the binary siloing of (my comparisons, not his) generalists and specialists, hedgehogs and foxes, right-brainers v. left-brainers, and scientists v. artists:

We can no longer afford to over-analyze our challenges. We must try to get things launched—learn from these experiences and refine. We must define ourselves and what we do more broadly while retaining the potency of our our crafts. It's about going from left brain to right brain and ending up on "light brain". We must become "fuzzy".
Being fuzzy as I outline in the deck is about unlearning everything we think we know—so we can actually learn and adapt. It's about less focus on rigid tasks and job descriptions and more focus on bringing our efforts together in the overlaps—where our skills compliment each other. It's about being more nimble and adopting "fuzzy" processes to compliment our tried and true methods that have served us well in the past.
The Fuzzy Tail is my way of saying "we won't become the blacksmiths of our time". It's about pushing past the commodity—the end product or service which can be outsourced. It's about putting aside egos, getting out of silos and mixing it up with each other—I mean really mixing it up. Planners who think like designers—designers who obsess about business—information architects who write—writers who act like strategists—project managers who can direct creative and creative directors who are willing to let them. People who are willing to let others play in their sandbox.

ing

2007-11-09T06:06:00.000-08:00

Karen and I enjoyed an event on campus last night honoring the “Chancellor’s Laureates,” individuals and institutions – several hundred benevolent entrepreneurs! – that have given $1mm+ to UCD. The vibe was terrific, hitting a high note when Margrit Mondavi stepped to the podium. Five-feet tall on her tip toes and in heels, she has the grace of a queen and a charm that’s contagious, amplified by a can-we-take-you-home-to-read-goodnight-stories-to-us Swiss accent. Margrit and her husband, Robert, catalyzed a significant transformation of the campus with their $50mm donation to create the Robert and Margrit Mondavi Center for the Performing Arts and the equally jaw-dropping and physically adjacent Robert Mondavi Institute for Wine and Food Science.

Margrit graced the crowd with an extemporaneous talk about creating, giving, doing, making, enjoying, and being. As she said something worth saying, visions of ings danced through my head. Whether you’re a baker who bakes, a candlestick maker who makes, an entrepreneur who creates, or an artist who relates, six maxims (personal challenges?) come to mind:

Be something worth being
Enjoy something worth enjoying.
Play something worth playing.
Give something worth giving.
Create something worth creating.
Do something worth doing.

While “something” and “worth” are subjective, the act of being, enjoying, playing, giving, creating and doing is the essence. It (the ing) is what counts; without it there is no something or worth of your ing-ing. It reminded me of three “as you embark of your walkabout and regenerate” morsels of advice shared by my brother James earlier this year:

Life’s too short to:
Do something you don’t enjoy, or
Work with people you don’t enjoy, or
Work in a location you don’t enjoy.

POTW: The Long Tailpipe

2007-11-07T20:07:00.000-08:00

I've been musing and prosing lately about the virtues of batteries (versus biofuels) and the when, not if (10 years? 20?), ubiquity of battery-powered vehicles. This week's POTW courtesy of FutureLab: Radically re-thinking the automotive business model.

[Former SAP executive] Shai Agassi’s new gig is called Project Better Place and its mission is to create a new platform and ecosystem for electric cars, and Agassi has raised $200 million to get it off the ground.
What Agassi’s Better Place wants to do is to separate the battery from the car, get automakers to standardize on a single battery type, and then set up a network of charging sites (run by Better Place) where cars can drive through and have their batteries changed. Agassi says that current technology allows for batteries that can power cars for 100 miles.

Under the model that Agassi is proposing, cars would be sold without batteries by the car makers (potentially bundled with batteries by the car dealers) and Agassi’s company would sell monthly subscriptions to consumers for swapping out their batteries at charging sites.

Bottle this

2007-11-07T19:56:00.000-08:00

It’s recycling day in south-northern Davis. I just discovered this completely useless factoid during a run, and I have evidence to prove it: I hurdled seven discarded plastic water bottles surrounding their former homes (recycling bins).

The bottles conjured two What ifs?

First, waste: Recycling plastic bottles is an example of doing less of bad. (FYI, check out this post, Coke's Message in a Bottle, assessing The Coca-Cola Company's goal "to recycle or reuse all the plastic bottles we use in the U.S. market".) Several – hundreds – of billions park in landfills and progress through recycling centers each year, let alone scour street corners and pollute oceans. What if you could create a biodegradable bottle? Or, develop a solution to satisfy the convenient, portable, at-your-lips thirst of consumers? Calling all materials scientists for a remedy.

Second, the bottled water biz. I met with two Sacramento Entrepreneurship Academy grads this morning to learn more about their startup. Great concept with some tread of its tires. It beckoned bygone presentations to the Academy where I would ask students: What if, say 15-to-20 years ago, you shopped a business plan with a simple idea: We’re going to put water in bottles and sell it at price points approaching soft drinks. Imagine the chortles from fat-headed VCs; you're going to do what?

I dug up the below excerpt from Who Has Time for This?, a VC’s blog. Therein the author relays his experience with Penn Jilette (of "Penn & Teller"), specifically his “Bullshit” performance wherein he debunks superstitions of all kinds, exposing how easy it is to scam people.

... my warm sense of intellectual superiority yielded to naked shame as I saw myself in the victims of the Bottled Water craze. I watched a cast member, posing as a "water steward" in a California restaurant, present the patrons leather-bound menus from which to select waters bottled in Alaska, the Sierras, the Swiss Alps, and Antarctica. As the patrons sampled the various vintages, they readily celebrated the properties of each water--the crisp Alaskan glacier, the sweet taste of France, and the smooth Sierra rainfall. The camera then filmed the kitchen, where the steward filled all the glasses from a garden hose.

I learned that bottled water is a good idea when traveling overseas, but it's a $22 billion scam in the US. It costs anywhere from 1,000 to 10,000 times the cost of tap water. Unlike tap water, there is virtually no enforcement of health and cleanliness standards, nor is there flouride to prevent tooth decay. The healthiest bottled waters are bottled from tap. And the bottles themselves pose an environmental disaster.

+++++++++
Post-script (17 Nov. 07): Interesting post here about biodegradable milk bottles. A start?

I want MyTV

2007-11-05T14:27:00.000-08:00

I went to a high school football game a few weeks ago. It had been 20-plus years; time froze – same splinter-beckoning bleachers, suds-soaked seventeen year olds, spiritless cheerleaders, stale popcorn, and semi-legible scoreboard. We parked on the top row, sandwiched between the band and a flock of parents, most operating hand-held digital video cameras.

As I type I’m soaring west somewhere above Kansas, returning to Sacramento after a weekend in Florida. Good: Took in my first “real” football game in Gainesville (the Gators rolled; SEC football is truly a religious experience, even for atheists [or agnostics] like me), and my brother James rolled me on the clay courts. Bad: Missed my kids’ soccer (four on Saturday; Ty’s team, the Green Gators, rolled too) and baseball (final game of the year) contests, along with the UCD-Sac State Causeway Classic and another Davis High game. The latter two are less important; missing the boys’ games stinks.

Back to the camera-toting parents and, relevantly, the three key tenets of The Long Tail. The Tail: Make it, get it out there, and, help me find it. The parents: Making it (recording the game). A parent or two at most any youth sports game – including the five I missed Saturday – or performance or birthday party: IBID. The tools of creation – video cameras – are ubiquitous.

But, it’s still tough – though technically feasible – to “get it out there” and “help me find it.” Hence, my dream: MyTV. When my niece Olivia performs in a play in Portland, when my nephew Grant plays soccer in Granite Bay, when my brother James plays in the finals of a tennis tournament in Florida, and when my kids do any and more of the above, I want to watch, share, and archive it. I want a non-commercial TV channel (a personal digital content service?) that’s about me, my family, and our interests, sprinkled with – obviously – commercial content. Mini social networks – with broadcast/streaming/storage capability – where friends and family and parents can share full-length videos.

Impediments: Gotta be bandwidth and storage, though the former is ubiquitous (and improving) and the latter gets cheaper by the day. Some day soon – perhaps it exists; I’m in the air and can’t google it -- MyTV will emerge, a personal TV channel for anyone, delivered for free and available anytime, anywhere. Can’t wait.

Where the money is

2007-10-29T19:01:00.000-07:00

I was cemented in a meeting the other day, volleying product, segmentation and pricing ideas to and fro. Enjoyable exchange, but our rallies (thinking) stagnated – where to go, what to sell, for how much, how to go to market, etc. As yet another thought hit the net (or soared beyond the baseline; I forget), I thought about a bank robber and his sage advice.

Willie Sutton liked to rob banks. Lots of them. In a career spanning from the late 1920s to Sutton's final arrest in 1952 -- with a number of prison terms in between – Slick Willie robbed more than 100 banks. When asked why he robbed banks, Sutton opined, "Because that's where the money is."

Sutton shared, with pride, how the medical profession adopted "Sutton's Law"--the idea of looking for the obvious, before going further afield, when diagnosing. The "law" was coined by a medical professor who recalled that Sutton, when asked by a reporter why he robbed banks, had answered with his famous line.

Except it never happened that way. As he later admitted:

"The irony of using a bank robber's maxim as an instrument for teaching medicine is compounded, I will now confess, by the fact that I never said it. The credit belongs to some enterprising reporter who apparently felt a need to fill out his copy...

"If anybody had asked me, I'd have probably said it. That's what almost anybody would say. ...it couldn't be more obvious.

"Or could it?

"Why did I rob banks? Because I enjoyed it. I loved it. I was more alive when I was inside a bank, robbing it, than at any other time in my life. I enjoyed everything about it so much that one or two weeks later I'd be out looking for the next job. But to me the money was the chips, that's all."

It couldn’t be more obvious. Back to our ideation. The answer – what to sell and to whom – crystallized. Follow the money.

SFOTW: H2O

2007-10-28T20:11:00.000-07:00

I seem to encounter more and more mouth-opening, head-shaking facts, mostly about the environment. Initially, my lens is remorseful – Wow, that’s too bad. Eventually (if I reread or re-ponder the thought/fact), my lens is opportunistic: That’s too bad … wonder what we can do to remedy it?

Hence, our SFOTW (sobering factoid of the week) commences with this post. My inspiration this week comes from Yvon Chouinard, founder of Patagonia. I just finished his autobiography (with thanks to my sister, Jess, for the gift), Let My People Go Surfing: The Education of a Reluctant Businessman. Before I get to the SFOTW, here’s an excerpt from the book encapsulating Chouinard’s mantra to “lead an examined life”:

I don’t really believe that humans are evil; it’s just that we are not very intelligent animals. No animal is so stupid and greedy as to foul its own nest – except humans. We are certainly not smart enough to foretell the long-term results of our everyday actions. The brilliant scientist or entrepreneur businessman who invents or develops a new technology is often incapable of seeing the dark side of his ideas, whether it’s atomic energy, television, or farmed salmon.

The problem is a failure of the imagination. In the sycophantic biography of George W. Bush, The Right Man: The Surprise Presidency of George W. Bush, by David Frum, the worst thing said about him is that he was “uncurious.” Uncurious people do not lead examined lives; they cannot see causes that lie deeper than the surface. They believe in blind faith, and the most frightening thing about blind faith is that it in turn leads to an inability, even an unwillingness, to accept facts.

He’s singing our tune; no wonder I love his gear and apparel. Which leads me to our sobering factoid of the week from Maude Barlow, National Chairperson, Council of the Canadians, one that tempts the thirst of examined life living entrepreneurs (unless you’re an uncurious, parched, fact-fearing Republican):

Global consumption of water is doubling every 20 years, more than twice the rate of human population growth. If current trends persist, by 2025 the demand for fresh water is expected to rise 56% above the amount that is currently available.

POTW: A New Prediction Market for the Masses

2007-10-28T17:08:00.000-07:00

Prediction markets are fascinating, real-life extrapolations of The Wisdom of Crowds. Of late -- inspired in part post-absorption of The Black Swan and Six Degrees: The Science of a Connected Age -- I've been pondering peer-to-peer, opinion-of-the-masses business models, be it through personal wagering, stock picking, or private company investment. There's a lot of there there, though I'm not sure where (yet). For this week's POTW, Freakonomics (again!) checks in with a thought-provoking post: A New Prediction Market for the Masses. Quick take:

For those of you who love prediction markets, there’s a new site that looks to be as vast, inclusive, and user-friendly as anything I’ve seen: Predictify.

Predictify is very compelling and quite powerful. You can either submit a question or predict an outcome. Poke around ... I think you'll enjoy.

Luck II

2007-10-28T16:49:00.000-07:00

I wrote about luck – reminiscing about my late grandfather Sody – back in June. Every accomplished entrepreneur I know cites luck as a tenet of their success. I believe things do not happen for a preordained reason; people and teams make it happen. Further, it’s tiresome when people lament, “He/she got lucky,” as if his/her success was not well earned. Those who bemoan luck are sedentary in their actions, staid in their thinking. Think Eyeore.

But, if entrepreneurs unite in their belief of luck, what is it, how does it happen, and how can you create an environment that permeates luck? Unsure, I turned to a few sages, eventually honing in on Marc Andreessen’s perspective, specifically Luck and the entrepreneur, part 1: The four kinds of luck. For starters:

Luck is something that every successful entrepreneur will tell you plays a huge role in the difference between success and failure. Many of those successful entrepreneurs will only admit this under duress, though, because if luck does indeed play such a huge role, then that seriously dents the image of the successful entrepreneur as an omniscient business genius.

Okay, but how and why and when? Andreessen references Dr. James Austin, a neurologist and philosopher who wrote an, according to Andreessen, outstanding book called Chase, Chance, and Creativity. Dr. Austin believes there are four kinds of luck, interchangeable with chance. First, his definition of chance:

Chance... something fortuitous that happens unpredictably without discernable human intention.

Dr. Austin then frames the four varieties of chance, escalating in their efficacy:

In Chance I, the good luck that occurs is completely accidental. It is pure blind luck that comes with no effort on our part. Chance I is completely impersonal; you can't influence it.

In Chance II, something else has been added -- motion. A certain [basic] level of action "stirs up the pot", brings in random ideas that will collide and stick together in fresh combinations, lets chance operate. Chance II favors those who have a persistent curiosity about many things coupled with an energetic willingness to experiment and explore.

Chance III involves involves a special receptivity, discernment, and intuitive grasp of significance unique to one particular recipient. Chance III favors those who have a sufficient background of sound knowledge plus special abilities in observing, remembering, recalling, and quickly forming significant new associations. [He provides a terse summary of Fleming’s accidental discovery of penicillin … great stuff.]

Chance IV favors the individualized action. Chance IV comes to you, unsought, because of who you are and how you behave. [It] favors those with distinctive, if not eccentric hobbies, personal lifestyles, and motor behaviors.

Andreessen wraps with his roadmap for getting luck on our side:

How energetic are we? How inclined towards motion are we?
How curious are we? How determined are we to learn about our chosen field, other fields, and the world around us?
How flexible and aggressive are we at synthesizing -- at linking together multiple, disparate, apparently unrelated experiences on the fly?
How uniquely are we developing a personal point of view -- a personal approach.

Radiofree

2007-10-22T19:57:00.000-07:00

I scribed last month about Chris Anderson’s upcoming book, Free. Hopefully the ink in his new tome’s not too dry to include a morsel or three about Radiohead’s new album (or is it CD, or music release, or digital delight? Not sure what we call contemporary music releases given the increasing lack of a tangible product …). As you’ve probably read – and hopefully experienced – you can download the entire album for whatever you’d like to pay. Nothing (me). Two pounds (my friend Craig; he called me a cheap bastard!). You choose. Go to Radiohead’s site for a taste.

Freakonomics has an interesting post here. Anderson checks in here, claiming early estimates put the average price paid at $5-$8, and approximately 1.2 million people have downloaded the album from the site and at least another 500,000 got it for free from BitTorrent.

If you’re a major label making a living manufacturing and distributing CDs and rights-protected digital downloads, whadya do when one of the (if not THE) major artists flips a double-Elvis (two middle fingers skyward) to you and your livelihood? Anderson:

Regardless of what the average consumer decides to pay, this is another example of a business model enabled by FREE. They only way Radiohead can enter into this with no idea of what people will pay is because they have a product whose marginal cost of manufacturing and distribution is close to zero.

Pretty cavalier. Radiohead vocalist Thom Yorke told TIME:

I like the people at our record company, but the time is at hand when you have to ask why anyone needs one. And, yes, it probably would give us some perverse pleasure to say ‘F___ you’ to this decaying business model.

Reminds me of a lesson I learned in my early 20’s, with thanks to the great Corley Phillips: It’s good to have f___ you money in your pocket. Radiohead: It’s gotta feel grand to have f___ you talent in tow too.

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Post-script (27 Nov. 07): Anderson engages five common confusions/questions about "free":

So nobody's going to make any money?
Does any of this go beyond simply paying for things with advertising?
You don't mean actually free, do you?
This is just online, right?
Is this some sort of trick?

Quality take, including: "You can make loads of money by giving things away. The key is who you're making money from."

The Laws of Simplicity

2007-10-22T19:28:00.000-07:00

Know the feeling when you see, sniff, hear, feel – simply sense – something that's cool (or, to paraphrase Outkast, Something cooler than being cool: Ice cold)? I opened my eyes tonight to John Maeda’s site, The Laws of Simplicity; given my rants about simplicity, clarity, focus and design, it resonated.

To steal from the Freakonomics folks, I bleg (beg via this blog) you to enjoy, absorb and apply Maeda’s 10 cooler-than-being-cool mantras. Here’s an encapsulation:

Law 1: REDUCE
The simplest way to achieve simplicity is through thoughtful reduction.

Law 2: ORGANIZE
Organization makes a system of many appear fewer.

Law 3: TIME
Savings in time feel like simplicity.

Law 4: LEARN
Knowledge makes everything simpler.

Law 5: DIFFERENCES
Simplicity and complexity need each other.

Law 6: CONTEXT
What lies in the periphery of simplicity is definitely not peripheral.

Law 7: EMOTION
More emotions are better than less.

Law 8: TRUST
In simplicity we trust.

Law 9: FAILURE
Some things can never be made simple.

Law 10: THE ONE
Simplicity is about subtracting the obvious, and adding the meaningful.

POTW: Go Sox?

2007-10-22T13:46:00.000-07:00

My good friend Craig is a rabid Red Sox fan, in addition to boisterously backing Michigan and the Vikes. (BTW, he grew up in Lodi, CA ... go figure.) Craig is also a quanthead finance pro. To wit, he'll get a chortle out of this week's timely -- given the Sox game-seven victory -- POTW courtesy of Freakonomics: Here’s Why Yankees Fans Aren’t the Only Ones Rooting Against the Red Sox.

The scoop: Earlier this year, a Massachusetts furniture chain unveiled a could-be-quite-costly marketing gimmick: if the Sox went on to win the 2007 World Series, all furniture sales made between March 7 and April 16 of this year would be refunded. No joke.

The chain, owned by Berkshire Hathaway, sensibly bought an insurance policy to cover the possibility (probability?) of a Sox victory. The full cost of the promotion -- total sales are somewhere in the $20 million ballpark -- reportedly amounted to the “license fee paid to the Red Sox to use their name, advertising spots, and a little bit of insurance.”

Talk about fanatical dissonance.

Ode to VC

2007-10-19T17:31:00.000-07:00

One of my best friends can't stand VCs. His judgment and character trump his VC sample size (one fat head); I trust his instinct. Our relationship has three challenges: symptomatically searching for a cure to my duck hook, constantly craving time to grab a beer and catch a game, and patiently tempering his temptation to smash the VC. The latter is similar to coaching Lenny in Of Mice and Men: Resist the urge to crush the mouse in your pocket. Unfortunately, the said VC is quite mousy; fortunately, my friend is smarter than the VC.

My amigo's temptation reminded me of a quote from one of my dad's best high-school friends, Joe West, circa 1964 in their days roaming San Carlos High School. "If you continue to have the audacity to doubt my veracity I will subsequently be compelled to horizontalize your perpendicularity."

Not sure if I ever met Joe West, but I do have a somewhat entrepreneurial, curiously creative story authored by my dad 13 Sept 94, Ode to Joey West, which reminds me of two pseudo groups we formed in college: the Cal Poly Coed Naked Lacross Club (created solely to sell CPCNLC t-shirts at Poly Royale; my friend Craig and I cleared nearly two grand in one weekend) and the San Luis Academic Regulatory Advisory Commission Authority (or SLARCA, fictitiously formed to mess with one of our roommates, Einstein, who was on the brink of expulsion).

Here's Ode to Joey West (grab a libation; this one’s meaty):

Joey figured that if we were going to start a new club, it had to have a catchy name. I don’t recall he saying why it had to have a catchy name; maybe he had read an article on marketing in Boys Life, the National Geographic, or the Harvard Business Review. He was the kind of kid who’s three-digit IQ drove him in strange directions; first, in high school, toward perilous albeit harmless deeds; later toward a plethora of felonious acts; but all of it rooted in an inescapable impatience which constantly festered into instantaneous boredom. When I first met Joey (we were sophomores; how we engaged, I can’t recall), we would go to his house after school and play chess. Well, actually he played chess and I moved the pieces around the board in a downward spiral of desperate defensive moves. So after a while, he would spot me a few pieces, and win. Then he would give me two moves to his one, and win. And for the final match at the end of the chess phase of our relationship, I think he started with only his King and half his Pawns, and gave me four moves to boot, and played blindfolded. We quit chess not because I was humiliated or beat into submission, but because he was bored. Big surprise.

The new club was eventually sanctioned by the high school authorities due to Joey’s clever use of some obscure section of the School District Regulations, and so it was listed in the Principal’s office right along with the Ski Club and the Glee Club and the Spanish Club. There must have been fifty clubs, all run by the appropriate authorities, each of whom was never able to join a club when he or she was a kid in high school. The authorities were, therefore, reliving those years of frustration in the spirit of full and complete retribution. Take the drafting teacher, Mr. Tomasio, the founder of the Drafting Club (I took two years of drafting, was quite good, and used this trade to successfully put myself through college; but I was unable to join the Drafting Club due to constant prior commitments) who was never admitted into his school’s Home Economics Club, the federal laws which would allow (require?) this, having been enacted only in quite recent times. Same with the Spanish Club, run by a guy who might have wanted to be in the Auto Mechanics Club in Costa Rica or wherever he was raised.

Well, this new club would not be run by a frustrated teacher seeking power and glory and the bylaws-given-rights to make up all the rules and administer the funds without audit and veto the admission of an applicant upon a whim. No, WE were going to do all those things and therefore appointed ourselves Generalissimo and Vice Generalissimo (Joey might have been in his two-hour Hemingway Spanish Civil War phase when we were discussing appropriate titles). You will correctly guess whom was who.

While the club was to have no purpose (and, proudly, it never did), it did have to have a name, and a snappy one at that, according to the Generalissimo. So we sat down one day at his house with a dictionary and created IBODINAE: the International Betterment Organization for Disestablishmentarianism And Epistemological Servitude. One of us thought up the words, and the other checked the dictionary. The other might have been me.

Next, we had to draft the Bylaws. Now, this took some time because Joey was faced with the dilemma of all organizations pre and post ours: how do you simultaneously get people to join, make them pay dues, and not let them do anything. We studied his family copy of Robert’s Rules of Order (Joey’s mom was President of the PTA), we researched through thick tomes on the family bookshelf, and we pondered and debated. In about 10 minutes, hitting the familiar wall of boredom, the Generalissimo decreed the following: (1) interested parties had to give me (I was the Treasurer, although Joe graciously kep the funds safely in his room in a miniature aluminum vault) one dollar, non-refundable, to become applicants; (2) applicants could move forward to full membership if they could correctly say, and then spell, the full club name; and (3) full members could move further forward into retirement (we should have entitled it “emeritus member”) by a majority vote of the Membership Committee, which consisted solely of we two. Needless to say, this club would not obtain 501c3 tax-exempt status from the IRS if it was formed today.

Finally, we had to hustle-up members. Using vague but persuasive promises that the dues would be pooled and invested prudently so as to earn interest equivalent to a case of Hamms Beer per Saturday night (doubtful math wizards were convinced the interest would compound at least into a case for every home football game), we sallied forth. If a guy had a buck but stumbled over the correct pronunciation of IBODINAE, we had the authority, as vested in us through the Bylaws, to make an exception. In fact, while it was not widely known (the Bylaws also required that no one except a duly appointed officer could read the Bylaws), we officers could meet our fiduciary responsibility to the Organization by admitting a member for less than a buck, and without the applicant ever getting past saying “IBO…”, and then even if he pronounced the “I” as if it was an “e”. That was one of the features of the club most successfully exploited in our marketing campaign: IBODINAE was very accommodating of its members’ needs and skills.

By Thursday lunch (I neglected to mention that the club was conceptualized, organized, named and officially by-lawed on a Wednesday afternoon), we had a full compliment of members eagerly awaiting the first club meeting, and anticipating the financial magic which the officers would perform, creating a case of Hamms out of interest only. Ben Franklin was a hero to us both, and he would have been proud of our liberal interpretation of his famous statement about the beauty of compounded interest.

On Friday night, the officers met in an emergency, closed session. Funds were counted, calculations were compiled, budgets were forecast. Alas, it appeared that the club was nearing a Chapter 11 Bankruptcy (Joey’s older brother, a first-year law student, was an invaluable consultant to the club) and we had but two legal options: return the members their dues or pay the founders and officers their due. As often occurred on Friday nights, the trusty trio of our pal Mike Smith, his phony ID, and the near-sighted liquor store owner were engaged, and Joey and me remarked how the Hamms had never tasted so good.

The IBODINAE club lived on, according to the official records in the Principal’s office, for the entire school year. The yearbook staff, faced with the absence of any members willing to stand on the gym steps for the traditional club picture, chose – wisely, I believe – to skip to the next club, which was – as I recall – International something. On the pre-bar advice of Joey’s brother, we had resigned the morning after the case of Hamms (OK, so it might have been late afternoon) as IBODINAE officers at an official IBODINAE meeting attended by all the members who had shown up after the requisite five-minute notice (via a written announcement posted on Joey’s bedroom door). I am proud to this day of the strict adherence to the rules that me and Joey showed. Them other clubs could have learned a few things from us, no doubt about it.

So that afternoon, the closing gavel still echoing through his house, Joey turns and says, “What-do-you-wanna-do-now?” And our minds were off and running into the next adventure.

Like I said, Joey’s brain went off and running a little too far later in life. Like in collecge, where scoring a case of Hamms with your (temporarily ex-) friend’s money was not much of a charge. Told me once that his fraternity used to drive to The City and roll winos for fun. Met him years later when he was dealing for some guys in South Shore, disguised as the executive director of a modest non-profit art center in Davis. Didn’t show up at the recent 30-year class reunion. Could be dead, could be brilliantly successful in some venture requiring impatience, high IQ (perhaps ameliorated for lack of completely functioning brain cells). In fact, he could be Hunter S. Thompson, the gonzo journalist. If not in fact, in awe.

I myself have a streak of easily obtained boredom, which I solve by modest imbibing and poor – but self-amusing – story writing. Maybe I should start another club: The Joseph West Memorial Association. Nope, it will need more vowels, how about The …

Stories v. facts

2007-10-19T16:58:00.000-07:00

Parked at a venture conference last week, I had a flashback. A good, vivid recall which resonated with the day's events (semi-committed entrepreneurs contemplating commitment in their quest for cash).

One of the conference presenters commenced his pitch with a story. It was not too long, not too short, just about perfect to engage the audience. While the preceding company pitches were littered with facts (noise), the aforementioned entrepreneur got it. He told a story, turning noise into signal. We -- the audience -- related; the frequency registered.

People love stories -- we remember them and they're effective. Unfortunately, the science of fact-telling is prevalent and apathetic, while the art of story-telling is dormant. It's easy to regurgitate lyrics, but tough to harmoniously sing a tune.

Which brings me to my flashback. For six or seven consecutive years we pilgrimaged to the AT&T golf tourney on the Monterey Peninsula. Our wives would troop around Spyglass and Pebble, typically battling inclement weather with a you owe me one roll of their eyes. Saturday night was their reward: Eastwood's joint (Mission Ranch), a mob scene, two-hour dinner wait in the sardine tin of a bar. An Andy Garcia siting or two helped pacify our better halves.

One year we bumped in to Chris O'Donnell, fresh off his pro-am round. My friend Nick's then girlfriend (and now wife), Kari, grew up with Chris. Following a round of cordial introductions and reminiscing, Chris asked Kari (and Nick): How long've been dating? Kari replied -- too long -- as Nick white-nuckled his libation. Reminds me of a movie I just finished called the Bachelor. It's about a guy like you who needs to shit or get off the pot.

Kari laughed. Nicked blushed (and guzzled). Chris moved on.

I cannot recall a single winner of the AT&T, nor a single round/score, six-to-seven years of facts. But I fondly recall the interaction (the story) at Mission Ranch, and the make-a-commitment-or-move-on moral resonates to this day.

++++++++++
Post-script (18 Feb 08): I just enjoyed part of a presentation by economist Robert Frank speaking at Google. Good stuff. In particular -- and somewhat related to the above post, but also tip-toeing on adolescent creativity -- he digs in to the narrative learning theory, with two most-compelling slides:

The Narrative Theory of Learning
"At its core, the narrative perspective holds that human beings have a universal predisposition to 'story' their experience, that is, to impose a narrative interpretation on information and experience."

[children] ... turn things into stories, and when they try to make sense of their life they use the storied version of their experience as the basis for further reflection. If they don't catch something in a narrative structure, it doesn't get remembered very well, and it doesn't seem to be accessible for further kinds of mulling over.

10-minute stand-up

2007-10-12T11:50:00.000-07:00

If I could impart one word of wisdom to an entrepreneur – let alone anyone endeavoring to get something done – it would be focus. Particularly in today’s always-on environment; time-killing, focus-waning distractions are candy-like, at-the-fingers temptations.

As an undergrad at Cal Poly, our school mantra was Learn by doing. At Venture Lab, our calling was Create, innovate, accelerate. We learned while doing and, along the way, made a lot of mistakes while accomplishing much.

One of my colleagues, David Hahn, instituted an amazingly simple and highly productive practice: Twice-daily stand-up meetings. Inspired in part by then entrepreneur Michael Bloomberg’s two meeting rules (no meeting shall last more than 15 minutes, and meeting organizers were required to create and follow an agenda), here’s how our stand-ups transpired:

Every morning we would corral the bleary-eyed team into a circle. No sitting down. Brevity ruled. Each team member had a minute or so to relay two things: Here’s what I’m going to accomplish today, and here is where I need help. We would then set out to, hopefully, individually and collaboratively accomplish what we preached. At day’s end – aided, if desired, by a 12-ounce libation – we would reconvene and carousel our accomplishments: Here’s what I planned to accomplish, this is what I accomplished, and this is what I need to get done. No notes. No agenda. No criticism. Full accountability and visibility. In short: A wonderfully productive and terse exercise to focus the individual and collective energy of the team to proactively do what’s important, versus reactively executing what’s apparent.

POTW: Making Sense of a Million Voices

2007-10-10T20:31:00.000-07:00

This week's POTW, Making Sense of a Million Voices, strikes a cord. It digs in to an emerging Web 2.0 company, Wize, and their democratization of Consumer Reports. I've yet to poke around the site, but the theory is wonderful: It's part Long Tail, part Wisdom of Crowds, part Paradox of Choice.

Wize gathers user and expert reviews to make product research easier, quicker and more relevant for you. At Wize you can research tens of thousands of products by price, brand, WizeRank and buzz.

As one of the most disdainful shoppers on the planet, amen.

Mining metaphors

2007-10-10T20:21:00.000-07:00

I’d wager that in the last week you've been engaged in a conversation that’s stuck in park. Could be a sales pitch, a company presentation, or a casual coffee-in-hand soccer game sideline chat. Regardless, you do not connect; to quote R.E.M., you can’t get there from here, and you don’t know what or where there is (if there’s a there there).

If there’s a there there, the e-brake can be disengaged with a metaphor, assuming the driver (communicator) can metaphorically communicate (unlock the brake). Several recent experiences reminisced a great read: Metaphors We Live By. A quick take:

We understand experience metaphorically when we use a gestalt from one domain of experience to structure experience in another domain.

Well said. It reckons the challenge entrepreneurs face in articulating their story. Most fail to break through – to effectively communicate, and therefore to accomplish their objective [e.g., make the sale, raise money, sire the partnership] – oftentimes because they fail to get their audience to relate. Back to Metaphors We Live By:

Metaphorical imagination is a crucial skill in creating rapport and in communicating the nature of unshared experience. This skill consists, in large measure, of the ability to bend your world view and adjust the way you categorize your experience.

Entrepreneurs are imaginative by nature. Great entrepreneurs – presuming they are harnessing, to paraphrase Scott Adams for the second time tonight, something rare and valuable – relate. They communicate through imaginative rationality. Metaphors We Live By:

It (imaginative rationality) permits an understanding of one kind of experience in terms of another, creating coherences by virtue of imposing gestalts that are structured by natural dimensions of experience. New metaphors are capable of creating new understandings and, therefore, new realities.

New understandings and new realities: Sounds like the de-park challenge for entrepreneurs who seek to foster rare and valuable propositions.

Garden capital

2007-10-10T20:17:00.000-07:00

I’m feeling kinda grey and green. Grey: Flurries of let’s go anywhere (San Luis Obispo, Ireland, Scottsdale, Black Butte) to celebrate our 40ths emails from amigos. Green: It’s the eve of the CleanStart conference at UCD. Alternative/smart/green/clean energy is, alas, heating up, which is kinda cool; it’s an opportunity to do good while fertilizing prospectively big and important companies. And if you can have fun doing it, you’ve nailed the (my) business triad: Have fun, make money, and do something important.

As I’ve explored in previous posts, companies and entrepreneurs are similar to gardens and gardeners. Venture capitalists – vis-à-vis gardening – may be a better analogy. Here’s how …

Gardeners spread seeds in fertile grounds to grow and cultivate plants in gardens. VCs spread money through investments in promising companies in fertile markets with similar ambitions (i.e., that products will emerge and prosper, and companies will be harvested to produce a return). The antes, or necessary elements, in gardening are seeds and soil, sunshine and water, fertilizer and fields, gardeners and their tools. For VCs, its ideas and embryonic companies, energy and capital, stewardship and big markets, entrepreneurs and execution.

Which leads me to Dilbert. Yep, Scott Adams’ brilliance: Capitalism rewards things that are both rare and valuable. Mechanical VCs mitigate risk and neuter harvest returns by investing in established gardens with mature plants and tendered by seasoned gardeners. What a bore; it’s not rare and the value is limited. Great VCs invest in seeds and as-yet-untilled gardens; they’re not sure if plants will crack the soil but, when they do, it’s a beautiful and bountiful thing.

I know a handful of plant geneticists and a few green capitalists, but I’ve yet to meet a true GC (garden capitalist), sans a handful of professional farmers. Sounds like a cool vocation.

POTW: Seth Godin on Finding the Long Tail

2007-09-27T21:47:00.001-07:00

Quick and terse POTW from Seth Godin. He chimes in about Finding the Long Tail (in stocks). I think he confused Long Tail with Wisdom of the Crowds. The latter encapsulates the accuracy and efficacy of collaborative, not silo-based know-it-all, decisions; the former is a brilliant take on the efficiency and mass of "tail" markets. Love them both.

Seth's post reminded me of two recent experiences, one a lunch with A VC friend, the latter a networked angel-fund-in-creation. My VC amigo is analogous to the analysts portrayed in Seth's piece: They're almighty, they know it (or most of it) all, and they know it. The fund is the opposite: It relies on the collective wisdom and input of non experts to make decisions. I'll bank on many minds any day. Especially when I'm banking my own money and time.

Pooh on entrepreneurship

2007-09-27T21:13:00.000-07:00

I just reminisced about my dad’s first book, The Waring Blender. Post post publishing, I rediscovered an excerpt that reminded me of our observations of a few weeks ago (e.g., if you throw something away and there is no away, where is away?). My page-turning discovery was similar to the feeling of slipping into a well-worn pair of flip-flops bleary-eyed in the dark. Here’s the chortle-packed and paradoxical-full prose:

LINES WRITTEN BY A BEAR OF VERY LITTLE BRAIN

On Monday when the sun is hot
I wonder to myself a lot:
Now is it true, or is it not,
That what is which and which is what?

On Tuesday, when it hails and snows,
The feeling on me grows and grows
That hardle anybody knows
If those are these or these are those.

On Wednesday, when the sky is blue,
And I have nothing else to do,
I sometimes wonder if it’s true
That who is what and what is who.

On Thursday, when it starts to freeze
And hoar-frost twinkles on the trees,
How very readily one sees
That these are whose – but whose are these?

The source? A.A. Milne’s Winne-The-Pooh, 1926. My dad continues (his prose, not Pooh):

One of the problems with scientists is that they always tell the truth. They answer questions with yes or no. They are ignorant of the value of the modifier called “adverb.” Their brains are tooled with concepts like cause and effect, hypothesis, statistical probability, absolute right and wrong, and other facets of what is generally known as “The Scientific Method.”

Reminds me that, nearly 100 blog posts deep, entrepreneurship is – for Pooh reasons and much else -- the art of business. Entrepreneurs question what is which and which is what, if those are these and these are those, if who is what and what is who, and if these are whose, but whose are these? Entrepreneurs are story (not truth) tellers, non-binary thinkers ambivalent of facts and probability and methods. Long live fairy tellers.

The Waring Blender

2007-09-27T21:08:00.000-07:00

My dad wrote a book in 1995 (his first of two) entitled The Waring Blender. My role was as a character, give-em-hell enthusiast, copy-editor, and publisher (designed it using PageMaker 3.0 or so on a Mac IIci [what a warhorse!] and printed [all 50 copies] via a bitchin new Apple Laserwriter). The Waring Blender was “a short novel about science and entrepreneurship.” It’s a classic, a creative-fictional piece of genius. Too bad you can’t find it on Amazon.

The Waring Blender opens with a flurry of quotations, including a few memorable ones. The first from Lewis Carroll’s Alice in Wonderland:

The White Rabbit put on his spectacles. “Where should I begin, please, your Majesty?” he asked. “Begin at the beginning,” the King said gravely, “and go on till you come to the end; then stop.”

The second memorable testament, this one from Jackson Brown’s song Rednecked Friend, circa my birth year or so:

I may not have an answer, but I believe I’ve got a plan.

Tonight I opened a new book, Six Degrees: The Science of a Connected Age. Not sure why I Amazoned it, but it reads like an interesting read, part Edward O. Wilson (Concilience: The Unity of Knowledge), part Malcolm Gladwell (Tipping Point). The preface opens with a likewise interesting quote from Douglas Adams, author of The Long Dark Tea – Time of the Soul:

“I rarely end up where I was intending to go, but often I end up somewhere that I needed to be.”

Which got me to thinking (which, paradoxically, is a scary thought): When you know where you’re going, stop. Change directions. The fun, the challenge, the uncertainty are gone. You know the end, you have both answers and a plan, and you’re going to end up where you plan to end up.

Efficient markets are, well, boring; they’re too predictable and commoditized, grey flurries of uncreativity. So too are efficient lives, the land of clones, head nodders and yeah, but thinkers. Inefficient markets are compelling, particularly when demand > supply. Inefficient lives are as well, presuming you can dip into efficient, balanced times to maintain your sanity and play the game.

Entrepreneurship is inefficiently unpredictable. It’s intoxicating because you rarely end up where you intend to go, but often end up somewhere you needed to be. It is invigorating because you begin with few answers (efficiencies or certainties or facts), but you do have a plan. And, to quote R.E.M. and Lewis Carroll, you begin the begin: You go on till you come to the end; the stop. Or, if you’re a true entrepreneur, you start over, reinventing and recreating.

Cha-ching, cha-Ning

2007-09-25T09:33:00.000-07:00

Marc Andreessen is backing up his personal Brinks van for yet another monster payoff. His latest company, Ning, has in cha-ching of two coins in your pocket become the clear and overwhelming leader in the business of enabling people to create new social networks. Nice work.

In the above-linked post, Andreessen lays out the logic of Ning and its resonance with users. It's a compelling take and I admire his clear, concise thinking. What does it mean to foster -- quickly -- and host 100,000 networks?

As you might expect, the 100,000 networks on Ning follow a power law curve for any metric you choose to apply: number of members, say, or number of page views.

Power law curve. Took a moment, but it clicked: Long Tail. Chris Anderson's elaboration:

Powerlaws come about when you have three conditions:
Variety
Inequality
Network effects (word of mouth, for example) to amplify the differences between them.

In others words, powerlaw distributions occur where things are different, some are better than others, and network effects can work to promote the good and suppress the bad. This results in what Vilfredo Pareto called the predictable imbalance of markets, culture and society: success breeds success, rich get richer and so on. Needless to say, these forces describe a good fraction of the world around us.

Andreessen continues with a head-spinning look at the two-pronged viral virtue/growth of Ning:

On a typical social networking service, users join a single large social network designed and run by the service's owner. Users then invite other users to join that same single large network -- this is the viral adoption loop by which the network grows.

On Ning, users both join existing user-created networks -- one of the 100,000+ networks that already exist -- and/or create their own networks. This is a double viral loop. Loop one is users being invited to join a network created on Ning. Loop two is some percentage of those users creating their own new networks and then inviting other people to join those new networks.

On Ning, these two viral loops feed one another: the more networks on Ning, the more users who are getting invited to join -- and the more users who join, the more new networks that get created, leading to even more users being invited to join. And the loops repeat over and over again.

And as a result, the key driver of this whole dual viral adoption cycle is new networks being created -- on average, existing networks continuously bring in new users over time, and those new users create new networks, which add to the base of existing networks bringing in new users, ad infinitum.

Think of the Network Effect on steroids (or, powered by the power law curve). Personalized, easy-to-use, customizable, permission-based software-as-a-service. For free. Jaw dropping stuff, even for guys like me who belong to nary a social network.

Free

2007-09-22T08:11:00.000-07:00

Chris Anderson, author of The Long Tail and editor of Wired, is working on a new book, "FREE". Intriguing title ... here are a few subtitles Anderson is toying with:

1) FREE: The story of a radical price (zero)

2) FREE: How $0.00 changed the world

3) FREE: How companies get rich by charging nothing

4) FREE: The economics of abundance and the marketplace without money

5) FREE: The past and future of a radical price.

It's easy to give something away for free. It's more difficult to do so while delivering "gotta have" value. And -- here's the grand test for companies, particularly social and business networks and other Web 2.0 plays -- transitioning a community of value-receiving participants who pay nothing to a group that will pay something is the trick. Think of all the start-out-for-free online communities that, when shifting gears from free to paid, carcassed on the roadside.

One of my Venture Lab comrades works at LinkedIn. I'm a fan of the professional networking site -- though I've yet to scratch the surface of its utility -- and an even bigger proponent of my colleague. He's a star. When he started at LinkedIn a few years ago, I queried: What are you trying to accomplish? His answer: Figure out how to make money. (Quite contiguous, eh, with the purpose of a corporation.)

Theretofore, LinkedIn had no revenue (advertising, subscription, etc.); thereon, they've become profitable through premium services, which provide improved search and contact options for recruiters, investment professionals, entrepreneurs, analysts, market researchers, sales people and business development professionals. Simplified: Those who garner the most value are paying to participate (they can afford to and would be foolish not to), while the rest of us benefit through the virtues of the network.

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Post-script (1/5/08): Anderson delivered a healthy, 45-minute or so keynote at Nokia World 2007, Free: The Past and Future of a Radical Price. He's siring a terrific, eye-opening, pragmatic thesis, building on The Tail. Invest the time ... it's well worth it (and it is free!).

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Post-script (04 Feb 08): Seth Godin relays an insightful, contrarian-to-free piece authored by Kevin Kelly. It elaborates eight ways two make something worth charging for (read the post for the full monty): immediacy, personalization, interpretation, authenticity, accessibility, embodiment, patronage and findability.

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Post-script (25 Feb 08): Anderson enlivens the discussion with a lengthy, gotta-read post in his Wired blog, Free! Why $0.00 Is the Future of Business. Here are the first two graphs:

At the age of 40, King Gillette was a frustrated inventor, a bitter anticapitalist, and a salesman of cork-lined bottle caps. It was 1895, and despite ideas, energy, and wealthy parents, he had little to show for his work. He blamed the evils of market competition. Indeed, the previous year he had published a book, The Human Drift, which argued that all industry should be taken over by a single corporation owned by the public and that millions of Americans should live in a giant city called Metropolis powered by Niagara Falls. His boss at the bottle cap company, meanwhile, had just one piece of advice: Invent something people use and throw away.

One day, while he was shaving with a straight razor that was so worn it could no longer be sharpened, the idea came to him. What if the blade could be made of a thin metal strip? Rather than spending time maintaining the blades, men could simply discard them when they became dull. A few years of metallurgy experimentation later, the disposable-blade safety razor was born. But it didn't take off immediately. In its first year, 1903, Gillette sold a total of 51 razors and 168 blades. Over the next two decades, he tried every marketing gimmick he could think of. He put his own face on the package, making him both legendary and, some people believed, fictional. He sold millions of razors to the Army at a steep discount, hoping the habits soldiers developed at war would carry over to peacetime. He sold razors in bulk to banks so they could give them away with new deposits ("shave and save" campaigns). Razors were bundled with everything from Wrigley's gum to packets of coffee, tea, spices, and marshmallows. The freebies helped to sell those products, but the tactic helped Gillette even more. By giving away the razors, which were useless by themselves, he was creating demand for disposable blades. A few billion blades later, this business model is now the foundation of entire industries: Give away the cell phone, sell the monthly plan; make the videogame console cheap and sell expensive games; install fancy coffeemakers in offices at no charge so you can sell managers expensive coffee sachets.

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Post-script (17 Mar 08): A thought-provoking slice from Anderson's new book ...

There is, presumably, a limited supply of reputation and attention in the world at any point in time. These are the new scarcities — and the world of free exists mostly to acquire these valuable assets for the sake of a business model to be identified later. Free shifts the economy from a focus on only that which can be quantified in dollars and cents to a more realistic accounting of all the things we truly value today.

Eying Eyeore

2007-09-21T08:02:00.000-07:00

I was doodling this week while parked in a meeting. Fellow chair sitters, in their absorption and assessment of a presentation, fell in to one of four camps:

Nay Say: Eyeore-esque naysayers living in a "yeah, but ..." world, cynically chirping, "we're never going to get there." Tough nuts (or donkeys) to crack.

Say Hey: The cheerleaders (or Tiggers) of the group, bouncing 'round the room like an unplugged helium balloon. They're on board, but the challenge is to corral and focus their enthusiasm.

Opaque: Placid, analytical (or bored?), I-have-no-clue-what-you're-thinking poker face postures. Could go either way. When they speak everyone listens. These are the sage owls of the group.

Say yeah!: Our champions who analytically and anecdotally help build our case, ward off Eyeores, covert Opaques, and focus Say Heys.

Our challenge coming in was to understand the audience and craft a story that resonated with the group. The challenge mid-stream/presentation was to interpret the group and adjust, to identify Eyeores and Opaque folks, to channel the energy of Say Heys, and to shut up when Say Yeahs speak. As a presenter, you're a puppeteer of your audience -- if you're effective, the puppets, with a little orchestration, will play their parts and help you accomplish your goal.

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Post-script (10/8/07): My friend and ex-roommate Will, who knows a heckuva lot more about the above than me and is ascending the ranks of Cisco's management, chimes in with a sage addition:

The eyeore piece was interesting I'm going to use it for my sales team, but as an emphasis for call, account and meeting planning. I think a big piece of the message is knowing the participants and knowing the position you need/want them to play. No different than any of the deals or teams you put together just on a smaller scale. Know what you need everyone to do, or not do and then which buttons to push to make them happen. Planning, planning, planning and knowing your audience. Of course, doing the work to understand what makes each of the people move is always the hard part.

POTW: Mark Cuban on taking your house public

2007-09-21T06:06:00.000-07:00

For this week's POTW, Mark Cuban chimes in with a thought-provoking why not: Solution for the Real Estate Market? Take Your House Public? It's a tidy, top-of-mind brainstorm about the illogical, binary approach to home ownership ... reminds me a little of our question posed a few months ago (liquidity for private company investments/real estate partnerships), but The Great Cuban has given it much more thought. Here's an excerpt:

Why not create a market or exchange where homeowners can sell equity in their homes ?

The rules could be very simple:
1. The house is appraised by a company approved by the exchange that lists the houses.
2. "Shares" are set with a Par Value of 10pct of the appraised value. For a 100k dollar house, there are 10 shares potentially available. However at no point in time can more than 40pct of the "shares" in a home be sold. We dont want the opportunity for "hostile takeovers".
3. The price of the shares will of course be set by the market. In a hot market it will be set above par, in a tough market like today, it will sell below Par.
4. All Proceeds from the sale of shares MUST be used to pay down any debt on the home.

This is the key element of this approach. By selling equity in a home, the buyer gets an asset based security that will move up and down with the market. If this market is big enough, there should be enough liquidity to move in and out of positions.

I like it. And, in the spirit of our inaugural post, Yes, and ..., instead of home-by-home IPOs, how 'bout bundling homes into an offering, analogous to the burgeoning consumer-back micro credit facilities/loans? You can do quarterly or annual appraisals (reporting) through a reputable third party, though the market value/stock price would be based on -- rightly so -- what an investor's willing to pay. Residential home equities. Pretty cool, especially in light of the credit crunch/mortgage meltdown.