Monday, December 14, 2009

A Tribute To Ranjan Das

Back in October, my good friend Ranjan Das, the Managing Director of SAP India, passed away of a massive heart attack. He was an avid exerciser, and had just run a marathon earlier this year.

I'd never lost a close friend before this year, and in the span of just a few weeks, I lost two, both classmates from HBS. (My other friend was Christian Checa, who will get his own blog post at a later date)

Tomorrow, SAP will be holding a memorial dinner for Ranjan's friends and colleagues in the Bay Area. SAP will be recording the event and presenting the video to Ranjan's family. They asked any friends who wished to speak to prepare a 1-3 minute speech. Here is the text for mine:

What I'll always remember about Ranjan is how he treated people. He was always kind and respectful, but a lot of people are kind and respectful. What really set him apart was how he gently, but firmly encouraged all of us to strive to be better.

I first met Ranjan back in business school, when he, Chris Wu, and I were elected to lead the high tech club. I was just a kid of 24 back then, and Ranjan had way more experience. But he never made us feel like we were kids. Instead, we became partners and friends, both in running the club as well as when we started our own companies that second year of b-school.

While we didn't share in any hoped-for IPOs, we did get to share many other happy moments. We became dads, twice, and celebrated together at our sons' birthdays. And after he joined SAP, we had many lunches in this very building, where I'd tell him about my latest crazy idea.

That's how you could know what kind of friend Ranjan was. A good friend encourages your crazy ideas. A great friend tells you how to make them sane. Ranjan was a great friend. Whenever I had a crazy idea, Ranjan would tell me, "Chris, that's a crazy idea. But here's how it might work. Let me introduce you to a friend of mine who can help."

I really miss him. Even now, when I think about Ranjan, I can still see him smiling, and I can hear his voice in my mind. He did so much for so many, and he made the lives of everyone in this room better. Aroon and Maanav, you already know this, but I want to tell you myself. Your father was a great man. He was a great friend. And I will miss him very, very much.

Goodbye, old friend.

Thursday, December 10, 2009

Quote of the Day: Gilbert Arenas on Tiger Woods

"Man, I don't know why everybody's sitting around here like it's something new. Tiger Woods is Tiger Woods! It's not like he looks like Seal. It's not like he's not going to have a whole bunch of women. He's Tiger Woods! I'm surprised 400 girls didn't come out. It's Tiger Woods y'all. It's Tiger Woods man. Did you think no women were going to come out? I was expecting at least 25 by the end of this week."

--Gilbert Arenas

I don't think Gil will be getting any Christmas cards from Seal this year.

Saturday, November 28, 2009

Your Way Or The Right Way?

We all like to think that we do the right thing.

But it's very easy to get lazy and reverse the causality--to believe that something is right because we do it.

White House Chief of Staff Rahm "Rahmbo" Emanuel famously said of the Great Recession, "Never allow a crisis to go to waste."

Yet pushing your own agenda in the face of facts is likely to end in disaster, whether your name is George W. Bush or Barack Hussein Obama.

Nor is this peril restricted to politics. How often in your company do you find yourself arguing for "your" position? Eventually, you may even forget why you decided on that position to begin with.

The young are often obsessed with being right. One talented young fellow I know argues with everyone, trying to prove his point. But "being" right is an oxymoron. You cannot "be" right. You can only choose rightly.

Forget about being right, or getting your way. Focus instead on finding the right way, and the hard work it takes to follow it through all its twists, turns, and dead ends.

Thursday, November 05, 2009

Line of the Day: The Ascendancy of Democracy

"Democracy, and the political freedom it almost always strengthens, is the least worst form of government (a fact that even recalcitrant, anti-modern regimes in Islamabad, Tehran, and Berkeley grudgingly acknowledge in at least symbolic displays of pluralism)."


Damn, I love a good Berkeley joke. Suck it, hippies!

Thursday, October 15, 2009

Come Meet Tom Campbell on November 3

59% of Americans consider themselves "fiscally conservative and socially liberal" (I'm one of them).

Yet here in California, a gerrymandered state results in rule by extremists.

Tom Campbell is one of the last FC/SL Republican politicians left in the state. I would argue that this brand of pragmatic beliefs and policy focus is the California GOP's best shot at regaining relevance, something that even non-Republicans should support, since a credible opposition party is a key asset for any democracy.

Despite facing a massive money disadvantage in comparison to his wealthy competitors, Meg Whitman and Steve Poizner, Campbell is running neck and neck with Whitman in the latest polls. Even more interesting, he's leading Whitman in voters 18-49, despite being (my apologies) a dorky white guy who is a policy wonk.

I've got nothing against Meg Whitman or Steve Poizner, who are successful businesspeople (and you know me--there's few people I admire more than successful businesspeople!). But this state is a mess, and needs someone with ideas AND experience.

Tom Campbell has a real shot in the GOP primary. But what he needs now is money.

That's why I've donated money to Tom's campaign, and will be co-hosting a fundraising event in Atherton on November 3.

I'd like to invite you as my guest. There's no obligation to donate, just to listen (though donations will be greatly appreciated).

If you're interested, let me know quickly--the invitations are going fast.

Wednesday, October 07, 2009

Line of the Decade: On Naked Athletes

From Rick Reilly's column for ESPN, on naked athletes:

One afternoon, Jenny Kellner, then of the New York Daily News, was covering the Jets. She entered the locker room only to find one of the team's stars buck naked. He walked up to her, pointed to his babymaker and said, "Hey, Jenny, do you know what this is?"

"Well," Kellner answered, with perfect aplomb, "it looks like a penis. Only smaller."

Jenny Kellner, you are awesome.

Wednesday, September 30, 2009

The Onion Nails Celebrity

"Media experts have been warning for months that American consumers will face starvation if Hollywood does not provide someone for them to put on a pedestal, worship, envy, download sex tapes of, and then topple and completely destroy."

Never has the tabloid-celebrity complex been better described in a more concise and biting way.

Tuesday, September 29, 2009

Paragraph of the Day: On Roman Polanski and Justice

"The point is not to keep 76-year-old Polanski off the streets or help his victim feel safe. The point is that drugging and raping a child, then leaving the country before you can be sentenced for it, is behavior our society should not -- and at least in theory, does not -- tolerate, no matter how famous, wealthy or well-connected you are, no matter how old you were when you finally got caught, no matter what your victim says about it now, no matter how mature she looked at 13, no matter how pushy her mother was, and no matter how many really swell movies you've made."

Kate Harding,

Monday, September 28, 2009

Angel Investing Q&A

I was interviewed for an article on angel investing, and I thought you might want to see my full responses. Will let you know when the article appears.

* * *

Q: How did you become an angel investor?

I began my angel investing career in 2005, when I invested in a friend's business. Since then, I've made a series of angel investments in technology companies. My typical modus operandi is to be the first outside investor in an emerging startup. If the company is already established, it's hard for normal angel investor to get in a deal; the key to getting the best deals is to get there first. Once I'm invested, I help the entrepreneurs position themselves and raise their first institutional round.

Besides the monetary benefits, angel investing has helped me get plugged even deeper into the startup ecosystem in Silicon Valley, and gives me access to far more information and dealflow than were I simply an entrepreneur.

Q: What's the smart way for a startup owner to approach an angel investor in

this tough climate?

The smartest way is to get an introduction from a successful entrepreneur. The next best is to get an introduction from another investor. The final way is to read that angel's blog/Twitter output, get to know him or her, and approach him with a highly customized pitch.

Q: What do angels look for in making decisions?

I can only speak for myself, but the two things I look for are great technology and determined entrepreneurs. I don't mind if the company has no clear business model; if the company can create value, I can help them find ways to harvest it. I don't do a lot of financial analysis or market estimates; I prefer to focus on opportunities where the value and upside are plainly obvious.

Q: Biggest three mistakes owners make?

First-time entrepreneurs always underestimate the amount of time it takes to raise money. Even when an investor says, "I want to invest," that's just the start of the process.

Entrepreneurs also have difficulties evaluating their businesses objectively. You have to be passionate about your idea, but you also have to be able to take an honest look at your product and say, "Here's how it needs to get better," not "Why can't people see what I can see?"

Finally, entrepreneurs shouldn't bother raising money before they have real traction in the marketplace. If an entrepreneur doesn't have the chops to get a prototype built and launched without raising money, he or she won't do much better when the money is there.

Q: What's the typical amt you or angels invest?

A typical angel investment ranges from $25K to $100K, though the full range is anywhere from $5K to $500K. Individual angels like me tend to invest less; microfunds like Jeff Clavier's SoftTech Ventures tend to invest more.

Q: How hands-on should owners expects angels to be?

I always describe investors as "employees who give you money." Certainly, some angel investors get meddlesome, but this is typically because the entrepreneur hasn't done a good job of providing transparency and homework. Keep your investors briefed on your progress, and let them know in very specific terms how they can help, and you won't have problems.

Q: how do owners know if there's a good fit?

Ideally, you should talk with other entrepreneurs an angel has invested in. It's hard to tell just from a few conversations how an angel goes about his or her business. Personality fit is probably more important than industry expertise.

Q: what happens if the relationship sours?

Angels don't have a lot of recourse, but if they are well-known in the venture community, you should expect the VCs to ask them their opinion. You should try to avoid antagonizing your investors.

Q: any kinds of businesses that simply aren't suited/appropriate for this

kind of investment?

Angel investments tend to be small, which means that capital-intensive businesses simply don't work with this model. You can't angel fund a semiconductor factory.

Q: what else should I know that I haven't asked?

Those are good questions! The last guideline I would provide is this: Don't bother raising money from angels unless you need at least $250K, but less than $1 million. Below $250K, and it's not worth the hassle. Above $1 million, and you should be raising VC.

Tuesday, September 22, 2009

Why Getting Social Is Necessary (But Not Sufficient) For Business

image courtesy of HubSpot

There's a lot of social in the air these days. I was chatting with Jeremiah Owyang of the Altimeter Group, and he said that there was even talk of scrapping the term "Enterprise 2.0" in favor of "Social Business".

While I do believe that social is necessary, it's definitely not sufficient, and the current craze for bringing social to the enterprise threatens to do more harm than good if companies don't recognize that social is only part of the picture.

A number of collaboration vendors are betting heavily on social business. The theory is that the consumerization of IT means that Facebook and Twitter for the enterprise will be a huge market. The problem with this overly simplistic view is that it fails to consider the difference between the consumer and enterprise environments.

Take Facebook, for example. I use Facebook to keep up with my friends, to organize events, and to snoop on people without their knowledge (whoops, did I say that?).

The essential purpose is to have a good time. Some might even say its purpose is to waste time.

Within the enterprise, the ultimate purpose of any tool is simple: to help get work done. Thus the approach that works so well for Facebook may not work quite so well within the business world.

The way I think about the market puts the focus squarely on getting work done. I call this the Collaboration Triangle, but it applies throughout the enterprise.

Getting work done is the ultimate goal, and to achieve this goal, we need to bring together the People doing the work, the Processes that manage the work, and the Product they produce, be it work-in-progress or final deliverables. Only by bringing together these three parts of the triangle can we get work done.

Social media helps with the People aspect of the triangle, but we must not forget that it is a means to an end (getting work done), not an end in and of itself. The work is what makes the technology relevant.

When we added social aspects to PBworks, at every step along the way, we tried to keep the focus on getting work done.

Over and over, we asked, "How will real users apply this technology to help them get work done?"

The result is a Social Collaboration release that takes the familiar social tools (networking, microblogging) and tweaks them for a business environment.

For example, the social networking-style profiles allow each company's administrator to set up custom fields that are useful for getting work done, things like product expertise, skills, interests, etc. The PBworks user profiles also integrate activity and tasks, so that everyone can see what each person has done, is doing, and plans to do--far more useful in the workplace than photo galleries or games.

The story is the same for microblogging. Because these status updates are intended for use largely during work hours, there is no need for Twitter's SMS integration, which means that we don't have to stick to a 140 character limit. And while the following mechanism is the same as for Twitter, we let you follow a user's complete activity stream, including edits, file uploads, task updates, etc., in addition to the status updates.

Social media technology will have a major impact on business, and will be extremely useful within the enterprise, but we have to make sure that the tail doesn't wag the dog.

Social media works in the enterprise only if it helps businesses and their people to get work done.

Sunday, September 20, 2009

Paragraph of the Day: "Time is more valuable than money"

"People often say, “I don’t have the time to…” Fill in the blank with whatever you like: exercise, make dinner, write a book, start a company, run for political office. What makes these people think that they have less time than anyone else? Of course they don’t. We all have the same 24 hours in each day and make real decisions about how we spend them. If you really want to get in shape, then carve out time to exercise. If you want to write a book, then pick up a pen and do it. And, if you want to run for president, then get started. It isn’t going to happen if you plan your day around your favorite TV shows or spend hours updating your Facebook page. These are entertaining distractions that eat up your irreplaceable time."

--Tina Seelig

Build Product, Not PowerPoint (Even If You're Non-Technical)

When I hear a high-tech entrepreneur tell me, "If I can just raise $250K to build a prototype..." I know he or she is never going to make it.

You used to be able to raise venture money based on an idea and a team, but those days are long gone unless your name is Ev Williams or something similar.

It's not that VCs can't make money by investing in ideas; it's that it's so much more efficient to invest in companies with traction. Don't waste your time (and that of us angels and VCs) trying to raise money before you get traction.

(And no, this doesn't contradict my remarks from earlier today on Vivek's "VCs Harm Innovation" post; there is a lot of risk remaining in a startup, even when it has traction. Both PBworks and Ustream (the two most prominent companies I've been directly involved with) had a ton of work to do after gaining initial traction. For both companies, the initial traction enabled raising seed money to get them to a traditional VC investment.)

As for the non-technical folks who wonder how they're supposed to start a company, I feel your pain. I can't code, and that's a major disadvantage. But great code, while necessary, is not sufficient for success. Building a better mousetrap is not enough; even getting TechCrunched is insufficient (though helpful!).

To overcome your impractical choice of college major (before you flame me, I freely admit that I have a degree in Creative Writing...not at the top of most VC wishlists) requires work, but isn't impossible. Get to know brilliant coders, build long-term relationships, and demonstrate that you can add value.

EtherPad (blatant plug--another investment!) recently hired Daniel Clemens as COO. Why? Because the founders had worked with him before and trusted him.

And if you can't code, and you can't get brilliant coders to like and respect you, you probably shouldn't be a high-tech entrepreneur. There's no shame in being aware of your own abilities and steering your career accordingly.

P.S. Bear in mind that this advice only applies to high-tech startups--there are plenty of great businesses where a CS degree is not an asset!

(Inspired by a post Seth Sternberg)

VCs Are Useless? That's Bullshit.

Vivek Wadhwa has a guest post up on TechCrunch, "What Have VCs Really Done For Innovation?" It's obviously meant to court controversy. Mission accomplished.

This post is my refutation. Wadhwa's post claims:

1) VCs have little to no impact on startup success, and in fact, may have a negative impact

2) Venture capital slows the innovation process

This is one of the most dangerous and wrong-headed posts that I have read all year. And I’m flabbergasted by the lack of critical thinking displayed in the comments section.

There is definite truth to some of what Vivek has to say. The NVCA’s estimates are bogus, because they equate investing in a company with being responsible for its success. This is an egregiously egotistical assumption.

It may very well be true that the venture industry as a whole trails index investing. It’s hard to pick winners. But so does the entire actively managed mutual fund industry.

But the statement that “VCs at best have little to no impact on these companies and at worst have a negative impact” is absurd.

First, there is a major survivorship bias problem with the data. By interviewing successful companies, the study fails to prove whether VC makes success more or less likely. All it says is that the majority of successful new businesses in the US do not rely on VC.

A number of commentators seem to be of the impression that VCs make easy money by investing in companies after all the risk has been removed by the entrepreneur. This is talking out of both sides of one’s mouth. If the VCs aren’t taking risks, then how can they be delivering sub-par returns? By definition, they must be taking risks.

Venture capital plays an important role in the startup ecosystem. It provides high-risk equity capital to startup companies. Not every company can be a bootstrapped consumer Internet company. Many important businesses (semiconductors, hardware, biotech) require significant up-front capital. If VCs went away, would there be enough funding for these business? Do you seriously think banks would start lending to these companies?

I also wager that most of the commentators pooh-poohing VC would be glad to accept funding for their startups.

This is not to say that I support a VC bailout. Screw bailouts. All bailouts do is support the weak and incompetent. There are plenty of VCs who are doing just fine.

On the other hand, having the government hand money over to startups is stark, raving mad. If you think VCs are incompetent at allocating capital, just wait until you start a government program to do so! While in principle, a tax break for entrepreneurs sounds good, the net result will be like cash for clunkers--a disastrous transfer of wealth to people gaming the system.

The three most important companies in Silicon Valley are Cisco, Apple, and Google. All were funded with venture capital before they became going concerns. Keep that in mind before you begin to discard the VC model.

Saturday, September 19, 2009

"The Referendum": Great Essay On Mid-Life Angst

I thought this New York Times article from Tim Kreider was one of the best (funniest, insightful) things I've read this week. Kreider discusses a phenomenon that strikes many of us as we get along in years: The tendency to evaluate the lives of our friends to ponder paths not taken. Some money quotes:

* * *

Young adulthood is an anomalous time in people’s lives; they’re as unlike themselves as they’re ever going to be, experimenting with substances and sex, ideology and religion, trying on different identities before their personalities immutably set. Some people flirt briefly with being freethinking bohemians before becoming their parents. Friends who seemed pretty much indistinguishable from you in your 20s make different choices about family or career, and after a decade or two these initial differences yield such radically divergent trajectories that when you get together again you can only regard each other’s lives with bemused incomprehension.

* * *

I recently had dinner with some old friends, a couple with two small children, and when I told them about my typical Saturday in New York City — doing the Times crossword, stopping off at a local flea market, maybe biking across the Brooklyn Bridge — they looked at me like I was describing my battles with the fierce and elusive Squid-Men among the moons of Neptune. The obscene wealth of free time at my command must’ve seemed unimaginably exotic to them, since their next thousand Saturdays are already booked.

* * *

Most of my married friends now have children, the rewards of which appear to be exclusively intangible and, like the mysteries of some gnostic sect, incommunicable to outsiders. In fact it seems from the outside as if these people have joined a dubious cult: they claim to be much happier and more fulfilled than ever before, even though they live in conditions of appalling filth and degradation, deprived of the most basic freedoms and dignity, and owe unquestioning obedience to a capricious and demented master.

I have never even idly thought for a single passing second that it might make my life nicer to have a small, rude, incontinent person follow me around screaming and making me buy them stuff for the rest of my life. [Note to friends with children: I am referring to other people’s children, not to yours.]

* * *

Watching our peers’ lives is the closest we can come to a glimpse of the parallel universes in which we didn’t ruin that relationship years ago, or got that job we applied for, or got on that plane after all. It’s tempting to read other people’s lives as cautionary fables or repudiations of our own.

* * *

I am blessed (or in to some, cursed) with accomplished, interesting, successful friends. It's very tempting to wonder what life would be like as a famous VC, an international guru and speaker, or Hollywood bigwig. But in the end, I am comfortable living my own life, and obeying my own capricious and demented masters.

Friday, September 18, 2009

21 Million Reasons For Mint To Sell

When I heard about Mint's sale to Intuit for $170 million, I never imagined that it would be controversial. I posted my congratulations to the friends who made money in the deal, and moved on.

It's been a busy week, and I haven't been keeping up with Twitter and RSS, so imagine my surprise to discover that 37signals founder Jason Fried had written an angry post entitled, "The next generation bends over," in which he described the sale as symptomatic of a "VC-induced cancer affecting the industry."

I'm sympathetic to some of Fried's arguments, and in a conversation with my buddy Ramit, we talked about the curious timing of the sale, given Mint's strong growth, and its recent VC round. But I concur with other investors who argued that it's unlikely that the Mint investors were responsible for the sale.

In fact, the difference between VC and founder economics practically ensures that the Mint sale was driven by the founders.

VCs take a porfolio approach to managing risk; individual company is largely irrelevant because of diversification effects. In fact, one of my portfolio companies was once rejected by Sequoia because, "You'll almost certainly build a nice $100 million business. But we'd rather have a riskier investment that either flames out or becomes a $1 billion business." Thus the key metric is expected value.

In contrast, as an entrepreneur, you're stuck with a one-company portfolio. The only way to manage your risk is focus on the risk-adjusted return.

In addition, the utility curve for money is non-linear. That first million dollars makes much more difference in your life than your one hundredth million.

To put it another way, Mint sold for $170 million. The company had raised around $32 million, and probably got participating preferred with a 1X liquidation preference. So the VCs probably got paid their $32 million first, leaving $128 million to be divided up according to the cap table.

Given that Mint had done five rounds of financing, it's likely that the investors owned 2/3rds of the company (take 20% of the company 5 times (0.8 to the 5th power), and you end up with a little over 66%). So the founders and employees had 42 million to divvy up.

If CEO Aaron Patzer owned 50% of that total, that's a cool $21 million.

Now I don't know about you, but I think $21 million is a lot of money. If Mint continued to execute well, got lucky, and ended up selling for $1 billion, Aaron would end up making around $160 million. That is a lot more than $21 million, but how many of us would turn down $21 million in the hand for the potential of $160 million in the bush?

One of my friends turned down a $300 million cash acquisition offer during the first boom. His company filed for bankruptcy 18 months later.

I have a family, with two small children. I have no doubt that were I in Aaron's position, I would take the money, and worry about changing the world with my next startup.

I agree with Jason Fried that Mint had a chance to be something amazing, but I'm afraid my family matters more to me than any vague sense of responsibility to a "new generation of entrepreneurs."

Disclaimer: I have zero inside information on the Mint sale.

Tuesday, September 15, 2009

Attend The Medici Experience San Jose on 9/24

My old friend Frans Johansson, the author of The Medici Effect, is working with the city of San Jose to bring his innovation workshop to the Bay Area next week.

The Medici Effect refers to the amazing innovations of the Italian Renaissance, sparked by the mingling of disparate cultures and experiences.

I went to Frans' last Medici event, the Medici Summit in 2008, and it was easily the best conference I've ever attended (and I've attended a lot). Fun activities, thought-provoking speakers, and brilliant folks from around the world.

To cap it all off, I've got a promo code that lets you get in for the $99 student rate instead of the $195 general admissions price.

If innovation and creativity matter to you and your work, you'd be crazy not to go. If you miss it, the next Medici Experience won't be until 2010, and you'll have to fly to Trinidad for that one!

Register online at the Medici Experience web site, and use the promo code "SJMEPROMO".

P.S. Frans is one of the most energetic speakers you'll ever get a chance to see. If you don't believe me, check out this video:

Frans Johansson electrifies audiences from The Medici Group on Vimeo.

In one day create a new product/service or find ways to operate more efficiently at The Medici Experience San Jose. Be a part of rebuilding the economic community of San Jose by networking across sectors and creating a new network of colleagues committed to the viability of California.

Attend: The Medici Experience in San Jose, CA
Date: September 24, 2009
200 E. Santa Clara Street, Wing 118-120
San José, CA 95113
9:00am - 5:00pm

The Medici Experience brings you together with people from diverse backgrounds but with one common purpose—to propel you and your organization forward through inspiration and ingenuity. During this intense, day-long workshop, world-renowned innovation expert Frans Johansson will guide you by using existing resources, assets, skills, and relationships to create groundbreaking ideas and to help you make those ideas happen!

This is an interactive live performance in a high-energy environment where you will be pushed to the edge of your creative capabilities, while connecting with people from different industries and companies in an intense explosion of new ideas. By day’s end, the Medici Experience will send you on your way with new tools and strategies for innovation and have you ready to face any challenge. More important, you will leave with specific ideas and the right outlook and plan to pursue them.

Register online at the Medici Experience web site, and use the promo code "SJMEPROMO".

If Startup Success Is All About Luck, Why Aren't You Starting More Companies?

Another TC50, another set of startups, and just like clockwork, the haters will come out and troll the comment boards.

"It's all luck," they'll rant. "Founders are just lottery ticket winners."

What a load of crap.

First of all, there's nothing wrong with being lucky. I'd rather be lucky than good. As I'm fond of saying, "No one ever says, 'Hey, there goes Chris the broke unhappy guy. Boy is he lucky.'"

Second, if you think founders get disproportionate rewards, why not work the system and start your own company?

But most importantly, if success really is all about luck, why aren't you starting more companies?

Logically speaking, either startup success is about skill, or it's about luck.

If it's about skill, you should start as many companies as you can, so you can learn from the process and increase your chances of success.

If it's about luck, you should start as many companies as you can, so by dumb luck alone, you'll increase your chances of success.

Either way, stop wasting your energy grumbling about luck, connections, or any of the other excuses people use, and channel all your effort into starting your next company.

Monday, September 14, 2009

There Is No Right Answer--And Smart VCs Know It

A hearty congratulations to Rob Hayes and the First Round team, Jeff Clavier, and Mark Goines--three friends, three great investors, who got a great result from their investment in Mint (acquired today by Intuit for $170 million).

Lost in the hoopla around the announcement was this very telling quote from Rob about the Mint team, which I want to highlight:

Hayes said CEO Aaron Patzer spent a year researching the company before approaching investors and thoroughly understood the space. Hayes also liked the fact that Patzer wasn’t afraid to say “I don’t know” when he didn’t have an answer. “He would say, ‘there are five ways that this could play out,’” Hayes said.

I can't emphasize this enough. I often work with inexperienced entrepreneurs who seem to believe that there's a right answer, and that they've figured it all out.

When these entrepreneurs encounter a skeptic, be it a VC or a business partner, their reaction is to dig in their heels and prove that they're right and the skeptic is wrong.

This is a terrible strategy. It's unlikely you'll change their mind, and they'll simply write you off as a rookie. (This is not to say that you don't correct investors when they are clearly wrong; you need to stand up for yourself. But acknowledge that in life, unlike problem sets, the answers are debatable)

The proper reaction is that of Mint CEO Aaron Patzer. When you say, "I don't know" and "Here are a couple of ways this could play out," you're establishing three important things:

1) You are aware of the limitations of your knowledge
2) But because you know your stuff, you have already thought through the possibilities
3) And you are confident enough in your judgment to expose your thinking to the investor

This is the kind of entrepreneur I want to invest in--knowledgeable, thorough, transparent.

Saturday, September 05, 2009

My Trip To The Cougar Convention

I recently had the pleasure (misfortune?) of attending the National Single Cougars Convention in Palo Alto as a journalist.

The resulting piece has been published. Here are some highlights (lowlights?):

"It's okay, let Mama Cougar do all the talking."

"I'm here to get laid. And you can quote me on it." When I asked how he'd found out about the convention, he replied, "My mom told me about it."

"Geeks make the best cubs," Maxi added enthusiastically. "They take direction well, and they don't realize that you're supposed take a break between orgasms."

The only sad thing is that Ramit wussed out and missed the party. His loss!

Friday, September 04, 2009

More Tales of Jason and Marissa

Recently, the kids have become obsessed with whether or not getting struck by lightning will kill a person.

I had to look up statistics that showed that over 2/3rds of people who get struck by lightning survive.

I also tried to convince them that the chances of getting struck by lightning were very remote.

"In fact," I told a sobbing Marissa, "If *anyone* in the family gets hit by lightning, I'll buy you a little car you can drive around in." (This is something she's always wanted that I've refused to buy)

All this is background to the following exchange, which took place today in the park:

Marissa: "Oh no, here comes a thunderstorm. We're going to be hit by lightning."

Jason: "Then I will be dead, dead, dead."

Marissa: "I guess that means I get a car!"

Monday, August 31, 2009

Write Stuff That Isn't Boring

Author and Time book critic Lev Grossman lets rip with a passionate editorial about the need for novels to NOT BE BORING:

The discipline of the conventional literary novel is a pretty harsh one. To read one is to enter into a kind of depressed economy, where pleasure must be bought with large quantities of work and patience. They have trained us, Pavlovianly, to associate a crisp, dynamic, exciting plot with supermarket fiction, and cheap thrills, and embarrassment. Plot was the coward's way out, for people who can't deal with the real world.

If you're having too much fun, you're doing it wrong.

Paradoxically, the financial decline of the publishing industry may actually be helping readers, by driving writers and editors back to WRITING STUFF THAT PEOPLE WANT TO READ:

The novel is getting entertaining again. Writers like Michael Chabon, Jonathan Lethem, Donna Tartt, Kelly Link, Audrey Niffenegger, Richard Price, Kate Atkinson, Neil Gaiman, and Susanna Clarke, to name just a few, are busily grafting the sophisticated, intensely aware literary language of Modernism onto the sturdy narrative roots of genre fiction: fantasy, science fiction, detective fiction, romance.

This is the future of fiction. The balance of power is swinging from the writer back to the reader, and compromises with the public taste are being struck all over the place. Lyricism is on the wane, and suspense and humor and pacing are shedding their stigmas and taking their place as the core literary technologies of the 21st century.

To which I can say, welcome to capitalism. Imagine that--a revolution that comes from giving people what they actually want.

For more on this topic, check out one of my classic posts from 2005, "Why Isn't It Fun To Read?"

As I told my classmates after reading "Best American Short Stories 1994," "After I finished the book, I felt like committing suicide. Man, what a downer!"

P.S. Apologies for the all-caps. I must have read too many Dave McClure posts recently.

Saturday, August 29, 2009

The Spoiled Under 30 Crowd

My older sister sent this to me via old-school viral marketing: The email forward.

Since I couldn't find a well-formatted version on the Web, I'm sharing it with you on my blog:

* * *

When I was a kid, adults used to bore me to tears with their tedious diatribes about how hard things were. When they were growing up; what with walking Twenty-five miles to school every morning...



BOTH ways...

Yadda, yadda, yadda.

And I remember promising myself that when I grew up, there was no way in hell I was going to lay a bunch of crap like that on my kids about how hard I had it and how easy they've got it!

But now that... I'm over the ripe old age of thirty, I can't help but look around and notice the youth of today.

You've got it so easy! I mean, compared to my childhood, you live in a damn Utopia!

And I hate to say it, but you kids today, you don't know how good you've got it!

I mean, when I was a kid we didn't have The Internet. If we wanted to know something, we had to go to the damn library and look it up ourselves, in the card catalog!!

There was no email!! We had to actually write somebody a letter - with a pen!

Then you had to walk all the way across the street and put it in the mailbox and it would take, like, a week to get there! Stamps were 10 cents!

Child Protective Services didn't care if our parents beat us. As a matter of fact, the parents of all my friends also had permission to kick our ass! Nowhere was safe!

There were no MP3' s or Napsters! If you wanted to steal music, you had to hitchhike to the damn record store and shoplift it yourself!

Or you had to wait around all day to tape it off the radio and the DJ would usually talk over the beginning and screw it all up! There were no CD players! We had tape decks in our car. We'd play our favorite tape and "eject" it when finished and the tape would come undone. Cause - that's how we rolled, dig?

We didn't have fancy crap like Call Waiting! If you were on the phone and somebody else called they got a busy signal,that's it!

And we didn't have fancy Caller ID either! When the phone rang, you had no idea who it was! It could be your school, your mom, your boss, your bookie, your drug dealer, a collections agent, you just didn't know!!! You had to pick it up and take your chances, mister!

We didn't have any fancy Sony Playstation video games with high-resolution 3-D graphics! We had the Atari 2600! With games like 'Space Invaders' and 'Asteroids'. Your guy was a little square! You actually had to use your imagination!! And there were no multiple levels or screens, it was just one screen... forever!

And you could never win. The game just kept getting harder and harder and faster and faster until you died! Just like LIFE!

You had to use a little book called a TV Guide to find out what was on! You were screwed when it came to channel surfing! You had to get off your ass and walk over to the TV to change the channel! NO REMOTES!!!

There was no Cartoon Network either! You could only get cartoons on Saturday Morning. Do you hear what I'm saying!?! We had to wait ALL WEEK for cartoons, you spoiled little rat-bastards!

That's exactly what I'm talking about! You kids today have got it too easy. You're spoiled. You guys wouldn't have lasted five minutes back in 1980 or before!

The Over 30 Crowd

Thursday, August 27, 2009

Wanted: Cougar Wingmen for Friday Night in Palo Alto

Perhaps foolishly, I accepted a journalistic assignment to cover the National Single Cougars Convention tomorrow night (Friday) in Palo Alto. So that I would not have to go by myself, I bought tickets for a few cougar-enthusiast friends.

Unfortunately, these friends who will not be named (at least by me) are chickening out, so I find myself with a few extra tickets for the event.

If any of my single friends are interested, I've got some free tickets with your name on them.

P.S. The very classy web site for the event notes that hotel rooms are available at a discounted $99/night. In case that helps make up your mind.

@jowyang and the Circle of Life

A hot news item out of Silicon Valley is that my old friend Jeremiah Owyang has left Forrester Research to form the equivalent of a rock supergroup by joining Charlene Li, Ray Wang, and Deb Schulz at Altimeter.

This is great news for all of those aforementioned rockstars, but it is also a classic example of the Circle of Life, at least as it applies to professional services.

When you first join an analyst firm like Forrester, the benefits far outweigh the costs. You get to leverage an established brand, which gives you tremendous access to the players within the industry. You have a sales force that takes care of the messy work of finding and squeezing money out of clients.

But over time, if you're good, you develop your own brand. And at some point, you start to wonder, "Hey, if I'm creating all this value for the analyst firm, why aren't I getting paid accordingly?"

Because while analysts make a decent living, the dirty secret is that a small number of stars generate a disproportionate amount of the value. Inevitably, the only rational move from a financial perspective is to leave the firm and hang out your own shingle, so that you can capture the majority of the value you create.

Jeremiah, Charlene, Ray, and Deb all built their brands thanks in part to their employers' platforms, but those same employers simply couldn't pay them enough to keep them on board. (But don't feel bad for the analyst firms; Forrester made plenty of money off of Jeremiah during the 2 years he was there)

The funny thing is that I've been around long enough to have seen the entire pattern happen before.

Back in the late 1990s, Forrester was riding high as the leading analyst of all things Internet, and two of its leading analysts were Julio Gomez (who was the big wheel on the online brokerage beat) and John Robb (who was an expert on e-commerce and platforms). Julio and John left Forrester, then teamed up with my first boss, Alex Stein, and formed Gomez Advisors.

Of course, over time Gomez Advisors grew into an analyst firm on its own, with its own analysts and associates, its own sales force, and its own support staff.

Because once you're on your own, the same economic factors inevitably lead you to the conclusion that the best way to leverage your brand is to expand your business, which eventually leads to hiring your own analysts and associates, who will someday develop their own brands and leave you.

That's the Circle of Life. And just because you know how the story turns out doesn't mean you can't enjoy the show along the way.

Tuesday, August 18, 2009

How To Make The Right Decision Without Seeing Every Option

Here's a fascinating little mathematical tidbit, courtesy of an entertaining article about the mathematics of gambling in New Scientist:

Suppose you are told you must marry, and that you must choose your spouse out of 100 applicants. You may interview each applicant once. After each interview you must decide whether to marry that person. If you decline, you lose the opportunity forever. If you work your way through 99 applicants without choosing one, you must marry the 100th. You may think you have 1 in 100 chance of marrying your ideal partner, but the truth is that you can do a lot better than that.

If you interview half the potential partners then stop at the next best one - that is, the first one better than the best person you've already interviewed - you will marry the very best candidate about 25 per cent of the time. Once again, probability explains why. A quarter of the time, the second best partner will be in the first 50 people and the very best in the second. So 25 per cent of the time, the rule "stop at the next best one" will see you marrying the best candidate. Much of the rest of the time, you will end up marrying the 100th person, who has a 1 in 100 chance of being the worst, but hey, this is probability, not certainty.

You can do even better than 25 per cent, however. John Gilbert and Frederick Mosteller of Harvard University proved that you could raise your odds to 37 per cent by interviewing 37 people then stopping at the next best. The number 37 comes from dividing 100 by e, the base of the natural logarithms, which is roughly equal to 2.72. Gilbert and Mosteller's law works no matter how many candidates there are - you simply divide the number of options by e.

So, for example, suppose you find 50 companies that offer car insurance but you have no idea whether the next quote will be better or worse than the previous one. Should you get a quote from all 50? No, phone up 18 (50 ÷ 2.72) and go with the next quote that beats the first 18.

Much of life is set up like this hypothetical marriage game. Opportunities come and go, and if you don't seize them immediately, you usually don't get a second chance.

In response, many of us freeze up, paralyzed by the pressure of choosing.

This is a great way to use math to defeat the paradox of choice--simply apply Gilbert and Mosteller's law, and act with confidence

Why Founders Reap Disproportionate Rewards

Mark Suster keeps knocking the cover off the ball with his posts about the startup ecosystem. Here's a key passage from his latest:

The fact is that most people lack the willingness, ability or nerve to start a company from the very beginning with just an idea or a desire to start a company. These same people will join you and your one other co-founder (maximum) 6 months later when you’ve established the company, done your Powerpoint deck, built a prototype or product and started fund raising discussions.

They’ll happily join for 5% or less and they’ll have options and not stock. That’s the difference between a founder and a non-founder. You’re the one who gets paid extra rewards for taking the extra risk and more importantly taking the initiative.

As I've remarked before, being a founder generally adds an extra zero to your shareholdings. They key is your own risk perception and tolerance.

If you think starting a company from scratch is really hard, you're unlikely to take the leap, regardless of the rewards. Thanks to a decade of experience as a founder, I view starting a company as a relatively low-risk process. Remember, focus on what's easy for you, but hard for others. Either that, or I'm just pathologically optimistic (also a good possibility).

When I start a company, my internal calculation is as follows:

1) Going without salary for 6 months
2) Working A LOT

1) 10X as much stock
2) Getting to tell people that you're a founder (sounds great at parties!)

Bottom line, if you have low expenses and you like to work, being a founder is a pretty compelling deal.*

* Note that I ignored my own advice to join PBworks. In that case, I saw a unique opportunity to work with old friends on both the management and VC side, and the chance to bringing in a number of other old friends to beef up the management team. Sometimes, the chance to have fun and work with great people (while tackling a billion-dollar idea in a hot space) is enough to override the usual considerations.

Monday, August 17, 2009

Becoming Self-Employed? You Already Are!

Zen Habits has a post up called "The Get-Started-Now Guide to Becoming Self-Employed"

As with most ZH posts, it's well-written and thoughtful, but that's not what I'm blogging about.

Regardless of what you think or what your W-2 says, you are already self-employed.

If you want to be successful, start thinking of yourself as a business.

Want to take a training course, but your boss won't pay? Evaluate the course as a business investment. If it pays for itself, why not pay for it out of your own pocket? If not, you shouldn't be surprised that your boss wasn't willing to pay!

Your employer is your customer. Sick of your job? Sounds like you need to find a new customer base. And if no one is buying your current product, better come up with one that will sell.

Before you run out and quit your day job for the joys of self-employment, try focusing first on the self-employment you already have.

If you can't make that work, I doubt that quitting your job will make a big difference.

Sunday, August 16, 2009

Why Moral People Vote Republican

Jonathan Haidt, the author of the excellent "The Happiness Hypothesis," has written an essay that explores what Democrats consider a fundamental paradox of American politics: Why do working-class Americans vote Republican, when their narrow economic interests would be better served by the Democrats' redistributionist policies.

Haidt, a self-professed liberal atheist, concludes that there are two fundamentally different approaches to building a moral society. The Millian (John Stuart Mills) approach imagines society as a social contract between individuals, invented for their mutual benefit. Here, the values of caring and fairness are paramount. The Durkheimian (Emile Durkheim) approach views society as a composed of nested and overlapping groups, where the individual is less important. Here, the values of self-control, duty, and loyalty are paramount (as opposed to self-expression, rights, and compassion for outsiders).

Haidt's research explored these five principles:

In several large internet surveys, my collaborators Jesse Graham, Brian Nosek and I have found that people who call themselves strongly liberal endorse statements related to the harm/care and fairness/reciprocity foundations, and they largely reject statements related to ingroup/loyalty, authority/respect, and purity/sanctity. People who call themselves strongly conservative, in contrast, endorse statements related to all five foundations more or less equally. (You can test yourself at We think of the moral mind as being like an audio equalizer, with five slider switches for different parts of the moral spectrum. Democrats generally use a much smaller part of the spectrum than do Republicans. The resulting music may sound beautiful to other Democrats, but it sounds thin and incomplete to many of the swing voters that left the party in the 1980s, and whom the Democrats must recapture if they want to produce a lasting political realignment.

In other words, Democrats appeal strictly to adherents of a Millian view, while leaving Durkheimians with the impression that they ignore the majority of what makes a society moral.

This ties in neatly with some of the thoughts Ben Casnocha and I have had about the secular church; specifically, that secular humanism needs a stronger foundation for expressions of self-control, duty, and loyalty than the small beer of lengthy philosophical discussion. Indeed, were the Democrats wise, they would try to create the equivalent of a secular church based on American patriotism, this providing themselves with both a moral foundation and the means to dispute the Republican monopoly on flag-waving.

Finally, while I continue to stick to my policy of avoiding political affiliations (remember, "Republicans buy shoes") I thought I would reward my loyal readers with a peek inside my moral world, courtesy of

* * *

In the graph below, your scores on each foundation are shown in green (the 1st bar in each set of 3 bars). The scores of all liberals who have taken it on our site are shown in blue (the 2nd bar), and the scores of all conservatives are shown in red (3rd bar). Scores run from 0 (the lowest possible score, you completely reject that foundation) to 5 (the highest possible score, you very strongly endorse that foundation and build much of your morality on top of it).

Saturday, August 15, 2009

Things I Would Have Tweeted...

...if Twitter weren't down.

Chris Yeh-ism of the day: "Revolution plays well to early adopters, but the mainstream is looking for solutions, not revolutions." (from a comment on Oliver Young's blog)

Great insights from Gil Yehuda: Same people plus same process yields same results. To get different results, you need different people, or a different approach to the problem. Since it's hard to change the people, work on changing the way they think.

How can we cure the income gap for black men in America? Have them take more math classes. Longitudinal study shows each extra required maths course raised the annual income of black males by 15%.

Another great quote: "Excellence is a form of deviance. You become excellent because you are doing things normal people do not want to do, by choosing a path that is risky, painful, and not appealing to others."

Why The Odds Are Stacked Against Entrepreneurship (vs. VC)

In a recent post on Growthology, Paul Kedrosky asks why so many B-school students that he meets want to be VCs rather than entrepreneurs. This is my response:


While entrepreneurship as a whole is a very positive ROI endeavor, the odds are stacked against the individual entrepreneur.

Even venture-backed companies only succeed about 1/10 times; it's the fact that those success deliver such outsized returns that make the VC model work.

(Note--by "success," I mean a major hit; the rule of thumb is that of 10 companies that get VC funding, 6 will go to zero, 3 will meander along as middling successes, and 1 will be a hit)

Let's say that an entrepreneur can start a new company once every 4 years, and has a peak period in his or her career of about 20 years (age 30-50). That gives you 5 swings at a home run.

If your chance of failure is 90%, after your career as an entrepreneur is over, you'll have a 59% chance that none of your companies ever succeeded.

On the other hand, thanks to the portfolio effect, VCs have a much better chance of recording a hit or two, and a nearly 100% chance of collecting 2-3% management fees on the capital they raise.

Now don't get me wrong...VC is a tough business, a fact most entrepreneurs don't appreciate, so the analysis above is a gross oversimplification. But it is true that while the average (mean) entrepreneur does better than the average VC, the median VC does a heck of a lot better than the median entrepreneur, who sacrificed his or her career to the greater good, and probably would have made a lot more money sticking to a corporate career.

Friday, August 14, 2009

How To Find Out What Google Thinks You Like

I've often said that there's no privacy anymore, and that Google knows everything about you.

Ever wondered what Google thinks it knows?

Just click to and you'll find out.

Here's what Google thinks of me:

Business - Advertising & Marketing - Marketing Services
Business - Management & Corporate Operations - Strategic Planning
Finance & Insurance - Investing
Internet - Web Design & Development
News & Current Events - Technology News
Shopping - Coupons & Rebates
Social Networks & Online Communities - Blogging Resources & Services
Society - Legal - Intellectual Property
Society - Social Science - Economics
Sports - Basketball

Wow, they've got me pegged to within an inch of my life. Though I'm mildly surprised that "Jessica Alba" didn't at least make a brief appearance.

Friday, August 07, 2009

How To Make Free Porn Pay

I like to joke that over the past few weeks, I've become the go-to guy for the three Ps: Porn, Prostitution, and Perversion.

What the heck, I guess it's better than being known as the guy who hates San Francisco.

Which is why I'm going to lend a helping hand to the porn industry by telling them how to make free porn pay.

Forbes has an article out about the difficulties that free porn sites are having with making money.*

Or more precisely, it's an article that features a ton of traditional porn studios complaining about how free porn sites keep *them* from making money.

That's the funny are the porn companies, who are usually the smartest operators around, and they're completely blowing the opportunity represented by the free porn sites.

Ironically enough, the winning model already exists, and is being used by one of the most backwards of industries--the music industry.

If you're a porn studio, and you think putting your content on a free porn site is going to lead people to click back to your paid site, you're as dumb as some of your on-screen talent. For the vast majority of porn users, porn has one single purpose. And you don't need a full-length movie to achieve that purpose.

Instead, do what the music industry has done--give away the easily pirated digital good, and sell the experience.

Live, interactive video with chat and voice integration is the killer app. You can't pirate live, especially when it comes to interactivity.

If I were a porn star (and despite the Internet rumors to the contrary, I'm not.**) I would build my business around subscriptions to live interactive video sex sessions.

For example, check out the site of porn legend Nina Hartley (NSFW, duh!). Every week, she provides a new live show, "60 Naked Minutes." It's kind of like Jay Leno, if Jay performed live sex acts on his guests.***

"Join Nina each week as she welcomes, interviews, and then f*cks the greatest lineup of adult stars on the planet."

Nina is a true master (mistress?) of branding, which may account for how she's still going strong at the age of 50. In addition to her live video shows, she also travels around the country conducting hands on sex classes.

For Nina, having pirated videos appear on free porn sites is a feature, not a bug.

For free porn sites, trying to upsell people on higher quality porn is a fool's errand. You don't need HD for the main purpose of the content. Instead, partner with and feature the porn stars themselves, and turn your pirated content into a marketing tool for the higher value interactive and in-person revenue streams.****

* A friend sent me the Forbes article. I guess that happens when you become the go-to guy for Porn, Prostitution, and Perversion.
** I was young, and I needed the money, okay? Geez.
*** Don't give NBC any ideas. Please.
**** I am available to consult with major free porn sites for a very reasonable rate. Call me.

Thursday, August 06, 2009

Ghosts (a play by Jason Yeh)

Here's the latest drama from the pen of my son, Jason Yeh.

* * * * *

Jason: There are no such things as ghosts.

Dunya: Aahhhhhhh!

J: Is that a ghose?

D: Yes!

Ghost: Whoooo!

D: Eeeeek!

G: Boo!

J&D: Aahh!

J: Run!

D: Panic!

Narrator: Jason and Dunya wasn't saved. Jason and Dunya died. THE END.

Thursday, July 30, 2009

Why Profit Motive Is The Best Way To Ensure The Public Good

My good friend Jackie Danicki has a great post up on why people who talk about "public ownership" are stark raving mad.

Lots of things are owned by the government or state - roads, schools, hospitals, etc. Just because they’re paid for by taxpayers does not mean we own them - coercing “investment” from the public is merely a guaranteed funding model carried out with legally-backed force. (That is to say, if you don’t pay for the government’s stuff, you go to jail and/or they take your money. It ain’t an opt-in payment mechanism.)

If you claim this mad arrangement is ownership, then you must also believe that we as individuals “own” our data on Google or Facebook. Or that we “own” our data through the TSA and other government databases.

I'd like to riff on the same topic, but rather than discuss why "public ownership" is bad, I'm going to focus on why the profit motive is the best way to ensure the public good. Gordon Gekko, eat your heart out.

1) The most direct way of earning profits is to create value for others.

At HBS, we learned that you create value by selling goods and services to a market whose willingness to pay exceeds your own cost to serve. Because commerce is almost always a matter of voluntary choice (unlike the government, legitimate businesses don't have the power to compel obedience through violence), businesses can only succeed if they serve the needs of others.

2) The value of a business depends on the long-term value it creates.

While there are many ways to value a business, the single best way is via a discounted cash flow analysis. This means projecting the future cash flows of a business and then discounting those flows to determine the net present value of the business.

This means that businesses that sell goods that harm their customers will generally be less profitable than those who sell goods that benefit their customers. The latter class of companies have a much easier time building long-term value.

3) The role of government is to provide the rule of law and account for externalities.

There are definite exceptions to the rules of thumb above. For example, the government can grant monopolies and compel consumption; these allow some companies to generate enormous profits even if they don't create value (e.g. Russian oil companies). That is why government should take a passive, rather than active role, focusing on providing a consistent and fair set of rules for commerce.

At the same time, economists admit that there are situations in which externalities arise that aren't accounted for in the buyer-seller relationship. This is the lesson of the Tragedy of the Commons. Things like pollution are externalities that need to be accounted for by a third party, such as the government. (My more libertarian friends would point out that this problem can also be solved by better assignment of property rights, but I'm not that eager to don an oxygen meter to pay by the breath.)


To sum up, the profit motive drives businesses to create value for their customers and consider the long term benefits of their goods and services. The invisible hand safeguards the public good far more efficiently and effectively than any government agency.

(Seriously, why would anyone allow the U.S. Congress to direct the U.S. economy? I wouldn't trust those jokers to run a hot dog stand without going to the taxpayers for a bailout in less than a month.)

The government plays an important role by providing a level playing field and accounting for externalities, but it needs to focus on playing referee rather than coach.

Embrace Your Human Limitations

(Photo courtesy of patrick h. lauke)

Limitless possibilities are a paradox.

On the one hand, the sense of limitless possibilities can be exhilarating.

On the other hand, it can be paralyzing.

Almost every choice eliminates certain options. Dan Ariely's work shows that we humans are irrationally predisposed to preserving options, even to our own detriment.

Telling someone, "You can do anything" may be a curse rather than a blessing. When they fail to achieve their (probably unrealistic) goals, they feel sad and disappointed.

Happiness results from wanting less than you have. Wanting it all inevitably leads to unhappiness.

Many of us don't like the idea that our possibilities are slowly dying off, but that's our predictable irrationality at work.

That our options decline with age is natural, even inevitable, since we ourselves decline with age, and eventually die.

That is the final reality. When we are born, the possibilities are nearly infinite. When we die, the wave form of our possibilities collapses to a single point. It is quite reasonable that a 40-year-old man halfway through his life feels like he has fewer possibilities than his young daughter.

Depressing? To some perhaps.

But I am an optimist. I believe that knowing and acknowledging the realities of human existence allows us to live better lives.

When we understand the arc of our lives, we can develop a happier mindset. And a realistic understanding of these dynamics makes us appreciate even more those heroes who risk their precious lives in defense of others, and makes their sacrifice all the more poignant.

We are human. We are limited. And that's what makes our efforts to transcend those limits worthwhile.

(Inspired by a post by Tim Taylor.)

P.S. For those who are still a bit down, consider the possibility that Kurzweil is correct, and that the singularity is near. Once we have achieved immortality, the possibilities really are infinite.

P.P.S. Still need cheering up? Some Richard Simmons ought to do the trick!

Wednesday, July 22, 2009

Quote of the Day: "Become so good they can't ignore you."

"If you’re itching to make your life something amazing, consider spending less time daydreaming about defying the status quo and answering the critics of your decision, and spending more time gearing yourself up for the challenge of becoming so good that they can’t ignore you."

--Cal Newport, Study Hacks

Sunday, July 19, 2009

The Heart of Education: Wanting To Learn

Here's an excerpt from a great talk by Sir Ken Robinson of TED fame. It's from the Union Square Ventures "Hacking Education" event.

Besides his take on education (which I completely agree with), note the clever technique he steals from Peter Brooke (who, in fairness, stole it from Plato, who used it in The Republic).

I call it "insight by subtraction":

There was a fantastic booklet a few years ago by a guy called Peter Brooke. He's a theater director, if you ever come across it. He wrote a book called "The Empty Space." And he asked himself this question. He said, What is the heart of the theater? And to get to it, he started the process of subtraction. He said, "What can you take away from it and still have it?"

And he said, well, you can take away the stage. Take away the script. You can take away the lighting. You take away the curtains, and you can take away the building. You can take away all the crew, and you can certainly take away the director. All of that is very easy. Take it all out.

The only thing you cannot remove from theater is an actor in a space and somebody watching. That's the heart of it. And if either of those parts is missing, there is no theater.You need a performer and an audience. Theater is that relationship.

And he said you should never add anything to that relationship unless it improves it. If it gets in the way, if it encumbers it, if it makes it more difficult, you shouldn't have it. And that's his problem with theater. Everything is a distraction from the main business.

And that's, I suppose, what I want to suggest here, that part of the conversation should be about what's the heart of education? What is the irreducible minimum? In public education, I think we've lost sight of it. The heart of education is what happens in the hearts and minds of individual learners. You cannot make anybody learn anything that they're not interested in learning, if they don't see and feel the relevance of it.

And what we've got now in this industrialized system is a multitude of distractions from this central purpose. The heart of it is falling out of it because kids aren't interested. What we have here is, an opportunity to really engage kids' imaginations by giving them education, using these technologies not to get in the way but to enhance and properly develop -- collaboratively and creatively.

Saturday, July 18, 2009

Why I Love Pornography

Pornography is like a Swiss Army knife--it's useful in many different ways, nearly everyone has owned it at some point, and it usually doesn't get the respect it deserves.

To paraphrase Gordon Gekko, "Porn, for lack of a better word, is good. Porn is right, porn works. Porn clarifies, cuts through, and captures the essence of the evolutionary spirit."

For example, it certainly drew your attention to this blog post, didn't it?

This essay discusses the different ways that pornography can be used outside the bedroom; if you were expecting a series of links to free porn, well, I'm afraid that you're going to be disappointed.

(Though you should stick around for the end of the post, where I link to the articles that have had the greatest impact on my understanding of pornography)

1. Sex sells; porn is a guaranteed attention grabber
The two most clicked links from the last few days of my Twitter stream are stories about how TechCrunch makes money from porn, and how a contestant on the Bachelorette suffered from on-screen erectile dysfunction. These got almost 10 times as many clicks as my tweets about politics and other "serious" issues. And that's no coincidence.

When I was watching my buddy Tim perform at a comedy club, all the biggest laughs came for jokes that involved sex, porn, or preferably both.

(Though I should mention that a medical student who built his routine on panda and cheetah sex bombed hard. I guess the lesson here is Porn = Laughs, Animal Sex = Uncomfortable Silence.)

Every time I turn on CNBC, they're showing their special on the porn industry, "The Business of Pleasure." And I'm still convinced that the Paris Hilton sex tape was leaked by Paris Hilton, the Fox Network, or possibly both, strictly to boost ratings and her career.

Heck, you're still reading this blog post, aren't you?

2. Porn breaks down inhibitions and boundaries
Once you've attracted that initial click, porn helps lubricate the conversation by breaking down the inhibitions and boundaries of the audience. Perhaps it's the sense of transgression which encourages people to open up; maybe it's just the effects of sharing an experience.

Whatever it is, I've found that my conversations about porn and the adult industry end up being particularly memorable and meaningful. Even over a decade later, I can still reduce my wife to helpless laughter by reciting the line, "There seemed to be a lot of slapping involved!", which came up in a conversation with some friends at a Cheesecake Factory.*

* The full story is this: My friend K was talking about the time she stayed with a friend, and discovered that he an extensive collection of gay porn, which she just happened to "accidentally" watch. She noted that there seemed to be a lot of slapping. The conversation then turned to why heterosexual men so enjoyed lesbian porn, to which my gentlemanly friend R replied, "It's double the good stuff." K responded with a shocked, "Even *you*?!" To which R responded, "Hey, what's *that* supposed to mean?"

** Maybe you had to be there.

3. Porn is the ultimate in capitalism; hardcore and stripped to bare essentials
I am a venture capital parasite. I convince people to give me money to start companies, which means I've never had to max out my credit cards or borrow money from relatives to make payroll.

Pornographers don't have this luxury; no one invests in porn, which means that almost every porn company bootstraps and self-funds. As a result, the porn industry is probably the most creative, aggressive, and capital-efficient industry other than crack cocaine distribution.

Plus, porn companies are dealing with all the same pressures as the regular media industry, plus the hatred of anti-porn crusaders, an unsympathetic legal system, and even more rampant piracy (Did you know that according to Alexa, is the 48th most popular site on the Internet, ahead of and the Apple website? And YouPorn is simply one of many such sites.)

To combat this, the industry has to stay at the forefront of technologies and business models, pioneering video, DVDs, the Internet, live video, and yes, even social media.

I continue to believe that anyone who runs a media business should carefully study and mimic the best practices of the porn world (but without the drugs). The emerging business model of individual porn stars building high-touch online communities with significant subscription revenues should be studied by any Internet entrepreneur.

If you doubt me, let me relate my own encounter with the industry. Back when I started my first company, my co-founder introduced me to a local porn entrepreneur he thought we could partner with. We chatted with him about our business model and agreed to the broad outline of a partnership.

He never returned my calls, and two weeks later, he announced a competing product which he developed by ripping off all of our ideas. He went on to rake in over $1 million in cash before he sold the business. He later owned 10% of AdultFriendFinder, which means he netted $50 million out of the Penthouse acquisition.

P.S. While most people don't invest in porn, I do. I am looking for investments in this area. Call me. Seriously.

* * *

Appendix A: Related Articles
The following articles have had a seminal impact on my understanding of the adult industry:

The Money Shot
, The New Yorker

A classic essay by feminist reported Susan Faludi. It takes you behind the scenes for what is an unsparing but ultimately sympathetic look at the lives and troubles of porn stars.

Sex Sells, Wired Magazine

One of the first stories to cover the business of online porn; I was fascinated by this portrayal of porn profiteer Seth Warshawsky, and talked about it with friends until I bored them silly. Ultimately, Warshawsky's house of cards collapsed; I think he's in Bangkok now. Seriously.

Battlebots in the Bedroom, Salon

A great example of how the Internet allows niche content to succeed. Plus, it's a local Bay Area success story. I also listened to a great podcast with the founder of the company, who was, I kid you not, a Mathematics Ph.D. at Columbia before he realized he could make more money filming women having sex with machines.

By the way, as you can tell from this later story, the company in question has done very well. Alas, I still have never made it up to the Armory for a visit, though I do have some friends who know people there. As many folks know, I plan to hold a conference there; I guarantee you that will build some buzz!

Fast Forward, Salon

A laugh-out-loud funny-but-true story from a writer who wrote a porn movie script as a lark, but had the misfortune to actually visit the set while it was being shot. Highlights include the receptionist asking him, "Are you here for the gangbang audition?", having a friendly chat with one of the stars who backed away in revulsion when she discovered he was the writer, and discovering to his chagrin that the scripted part of a porno is referred to by cast and crew as the "fast forward"--since that's what most viewers typically do--and is shot at the very end of a long day of shooting, after all the, er, "shooting" is done.

My pornography-related links on

(This post is dedicated to Jackie Danicki and Penelope Trunk, who probably believe that I spend all my time thinking about these topics. Just remember ladies, our beliefs about others are often a reflection of ourselves.)

Will Facebook Destroy The High School Reunion?

There's a fascinating post (with hundreds of comments) up at

Mark Chu-Carroll, a Ph.D. who works at Google, writes extensively and passionately about why he's not attending his 25th high school reunion.

Now it's twenty five years since I got out of that miserable fucking hell-hole. And people from my high school class are suddenly getting in touch, sending me email, trying to friend me on Facebook, and trying to convince me to bring my family to the reunion. (It's a picnic reunion, full family invited.) Even some of the people who used to beat the crap out of me on a regular basis are getting in touch as if we're old friends.

My reaction to them... What the fuck is wrong with you people? Why would you think that I would want to have anything to do with you? How do you have the chutzpah to act as if we're old friends? How dare you? I see the RSVP list that one of you sent me, and I literally feel nauseous just remembering your names.

And that's all that I want from you. Stay the fuck away from me. I don't want to hear about your lives. I don't want to know how you've changed since high school. I don't want to hear about your jobs, your spouses, your children. I've got a good life now, and I cannot imagine a reason in the world why I would pollute that world with contact with any of you.

Heavy stuff. Then again, some dude actually doused his lawn with gasoline and lit a burning swastika. I probably wouldn't forgive that either.

The comments on the post were generally in enthusiastic agreement, though a few chided Mark for not letting go of old animosities. (I think those criticisms are a bit unfair; it's not like he wants to hold on--it's just that people keep bugging him.)

But a bigger question is, in the Facebook age, is there any reason to hold a high school reunion?

Presumably you've stayed in touch with anyone you cared to maintain a relationship with (in Mark's case, nobody). Therefore, the only reasons to go to a reunion are:

1) To find out who went bald or got fat

2) If you've watched too many movies, and go in an ill-advised attempt to finally hook up with your former crush, who may or may not be a gay porn star

If we treat (2) as the inherently bad idea that it is, that leaves (1). Enter Facebook.

Younger generations will never have to wonder about who went bald or got fat; Facebook will document their decaying physiques in real time.

I graduated from high school in 1990, which means my 20-year reunion is coming up next year. Time to hit Facebook and see what Father Time has done to my old classmates!

Best post ever on the difference between business and government

Here's a real doozy from my old friend and fellow Stanford/HBS grad, Adam Nash of LinkedIn:

In every class, for every business case, the argument almost always broke down as follows:

The MBA Students:

Tell us what the rules of the game are, and we’ll tell you how to win the game.

The Government Students:

Tell us who you want to win the game, and we’ll tell you how to make the rules.

Needless to say, the conversations typically went nowhere. The business students always felt it was unethical to either change the rules mid-stream, or to create an unlevel playing field. The government students always felt it was unethical to set up rules that weren’t destined to generate the ideal outcome.

Hmmm, equality of opportunity versus equality of outcome? Sounds like the Kennedy School is the anti-HBS.

Saturday, July 11, 2009

How Fandom Killed Journalism (And Why It's A Good Thing)

Journalism is dead. Long live fandom.

Michael Wolff, an old-school journalist, provides the autopsy in his recent Vanity Fair profile of Politico, the site for political junkies and insiders:

The granular and focused and O.C.D. nature of Politico’s view of the world changes the language. Laymen can’t enter this conversation, and the people who are involved in it can’t leave it—can’t set aside so easily the shorthand of legislative, policy, and media talk or the thousand names of minor characters who become major for a 20-minute news cycle, or recalibrate the relative importance of Washington sound and fury against what most other people are thinking about.

Politico reduces the world to Rahm Emanuel and to the people who want to be Rahm Emanuel.

And yet, this is a passionate conversation among quick and deeply knowledgeable folk. The habit and, perhaps, necessity of traditional news organizations to reduce and simplify and attenuate and, in the process, make news flaccid and often wrong have been superseded by these over-informed motormouths. It’s the raw stuff, before the family paper or knuckleheaded network news has watered it down.

It is perhaps useless to argue whether this is good or bad. Rather, the world is as it is. And Politico seems like a pretty credible version of what the world will be: obsessives everywhere in their particular narrow-focused areas of interest (“silos” is the modern information term), flashing ever more information, ever quicker, in ever shorter bites—the shorter you can make it, the more information there can be—to all the ships at sea.

Politico is only the latest sign of the apocalypse for general-interest journalism. The fact is, serving the lowest common denominator in world of infinite choice is a recipe for disaster. The raison d'etre of journalists, summed up in the New York Times' famous motto, "All the news that's fit to print," is the death knell for their industry.

In today's world, it's up to readers, not journalists, to decide what's newsworthy. We vote with our clicks, tweets, and posts.

The relevant model for publishers isn't journalism, it's fandom.

Fandom is often mocked; think William Shatner telling Trekkers to "Get a life!" on Saturday Night Live, or the pejorative connotation of blind, dorky allegiance inherent in the term "fanboy". Yet the operative characteristics of fandom (passion, focus, and attention to detail) are the very qualities that we should admire.

Bill Simmons, the patron saint of fandom in sports journalism, often argues that he can do a better job of covering a sporting event by watching it on television than by attending it in person. This outrages traditional journalists, but what Simmons is really saying is that a close and careful analysis of the source material can provide more insight than allowing one's perceptions to be shaped by the face to face relationship you might develop with your subjects.

Fandom is all about breaking down the barriers of journalism (Press passes! Paying your dues!) and allowing the work to speak for itself. Moreover, rather than providing a purportedly objective conventional opinion, fandom lets the fan express passionate opinions and take sides in arguments that can never be resolved (Kirk or Picard? Batman or Superman?).

It's almost unfair. With millions of passionate fans producing highly specialized content, how is the poor journalist to compete? As we see in the case of Politico, it's to remake journalism in fandom's image.

And fandom does have its compensations:

Live long and prosper!

Tuesday, June 30, 2009

Best. Comic. Ever. (especially for old D&D hacks)

What would happen if "The Lord of the Rings" was a D&D campaign? How would real players react to the endless narration and exposition, the grinding monotony of fighting nothing but orcs, and of course, the utter lack of treasure?

"DM of the Rings" provides the answer. It's a 144-page webcomic, using screen captures from the Lord of the Rings as the source material. It is epic.

Be careful though, it's addictive. I ended up burning dinner and my wife yelled at me.

Wanted: Law School and Business School Students

One of the things I think PBworks might be useful for is coordinating a study group.

Back when I was at HBS, it would have come in handy; the members of my group could have set up a wiki page for each case, and we could have collaborated together on the analysis. We could also upload spreadsheets for running the numbers, and the whole thing would be searchable (which would come in handy when cold-called!).

But that was a long time ago, and now that I'm an aged wreck of a man, I need the advice of current students.

Heck, for all I know, HBS now teaches everything via direct neural implant.

If you think you can help, or know someone who can, comment or email me. Thanks!