Adventures in Capitalism

Sleep Deprivation = Drunkenness

2012-01-30T16:13:00.000-08:00

I read this doozy of a paragraph in a story in Inc on "Sleep & Productivity":

"Lose just one night's sleep and your cognitive capacity is roughly the same as being over the alcohol limit. Yet we regularly hail as heroes the executives who take the red eye, jump into a rental car, and zoom down the highway to the next meeting. Would we, I wonder, be so impressed if they arrived drunk?"

Note the perfect use of the jarring juxtaposition. It's a master stroke, much like Seth Godin calling for "global warming" to be renamed "climate cancer."

Needless to say, I'm a big champion of sleep. And since I'm still sick with a cold, I took a 12-minute nap on my famed afternoon sleeping cot earlier this afternoon!

Branding -> Accomplishment -> Ability

2012-01-25T07:42:00.001-08:00

This blog post began as a comment on Ma.tt's blog. You may want to read his post first for maximum impact.

The shift away from traditional credentials like degrees, honors, and past accomplishments has been gradual.

In the ancient days, people focused on brands on resumes--which school did you attend? Which companies did you work for?

When I was at D. E. Shaw in the 90s, we had a specific list of 25 CS departments we were allowed to recruit from. Resumes from other schools were automatically filtered out.

The shift to accomplishments was actually progress--rather than relying on brands, we actually cared what people had done. But this was still somewhat unreliable because of the major role luck plays in success.

YC's accomplishment in hiring Aaron Iba and Garry Tan is to focus on ability, independent of resume brands or the magnitude of accomplishments. EtherPad was a great product (disclosure, I was an investor) even though Google shut it down after the acquisition. Posterous is a great product, even though its traffic and traction are overshadowed by Tumblr.

I also think that YC is very smart to focus on design and coding for its hires. As an accelerator/seed firm, YC deals with very early stage startups. I often tell founders that until they have a great product, outbound sales and marketing are a waste of time.

But I also want to be fair to the many traditional VCs who do a good job. As a company grows beyond the YC stage, considerations like sales, marketing, operations, and people management become increasingly important.

Many of these are issues that can only be dealt with based on experience, rather than on what one reads in Hacker News. As you grow, traditional VCs and other grey hairs can actually help (though they don't always do so).

UPDATE: One thing I just realized is that this transition isn't universal. When I meet people outside Silicon Valley, they still seem inordinately impressed by my degrees. It will be interesting to watch whether this ethos spreads to the wider world.

Embracing Entrepreneurship @ The Intersection

2012-01-14T12:09:00.000-08:00

More notes from #theXEvent12

Payam Zamani, CEO of Reply.com (http://www.linkedin.com/in/payamzamani)
Jacquelline Fuller, Director of Charitable Giving, Google (formerly of the Gates Foundation) (http://www.linkedin.com/pub/jacquelline-fuller/8/990/8b7)
Leila Janah, CEO of Samasource (http://www.linkedin.com/in/leilajanah)

Jacquelline: "The business model at Google.org is to attack a problem from all angles--funding NGOs, funding companies, advocacy, lobbying. There are more companies that want to give back, but in a way that reflects their DNA, and in a serious way." Evidence-based giving.

Google takes a portfolio approach--sometimes giving is evidence-based, sometimes it bets on early innovators.

"We back the leader, and we give them the freedom to iterate."

"You have to understand the context in which the frontline is operating." To help understand global health, Jacquelline moved her entire family to India for a year.

"Launch early, fail fast, iterate, move on if you have to. Too much of philanthropy is afraid to take a risk. It should provide risk capital for innovation."

The future:
"One of the things that encourages people to give is social." Crowdsourcing. Direct to consumer.

Leila: Used a tobacco company scholarship to take a year and teach English to kids at a school for the blind in Ghana. Became obsessed with the idea of creating jobs in poor places. What if we could take work to places where poor people live?

"The fundamental thing that leads to innovation is not accepting the status quo." We are habit-forming, assumption-making creatures. Going to Africa challenged all my assumptions. We send our people out into the field every year to shake them up."

"All the people who were previously invisible are becoming visible to us. I met a Sudanese boy in a refugee camp. A month later, he friended me on Facebook." The power of rapid feedback.

Payam: Giving needs to be genuine and part of what you do or it won't have staying power. Make bets that are big enough to make a difference if they succeed, but not so big that they take down your business if they fail. "The best ideas that really changed our business came from outside, not from sitting in our own cocoon."

"Innovation without execution isn't innovation. It's just an idea."

Pixar, IDEO, and Innovation

2012-01-14T10:14:00.000-08:00

Here are detailed notes from Frans Johansson's conversation with Ed Catmull of Pixar and Tim Brown of IDEO:

PIXAR

"The easiest way to make a movie is to do what worked in previous movies. But you won't end up with an original result. The alternative is to go out into the world and learn from other industries."

For Ratatouille, the Pixar team went to Paris to visit French restaurants, and did a 5-hour, 28-course tasting menu at the French Laundry.

"We like ideas that are unlikely. Because they're unlikely, we have to protect them."

"The original idea sucks. You can't show it to marketing or the toy people, because they won't get it. But you can't protect it for too long; engaging with the world forces you to make the necessary decisions. There's a lot of pressure on us to get the process right. 'Hey, if you guys got it right up front, this would be a lot easier.' Getting the process right is *not* the goal. (implied: The goal is to make something great)"

"You have to be able to work with other people. You can't just piss everyone off."

"You want to signal to everyone else that it's okay to be unusual. 'That guy is really pushing it, and he didn't get in trouble, so I guess I can too.'"

"We want unusual things to happen. We can't predict what will happen. At every level, things are going to not work. You can't send the message that if you fail, something bad will happen."

"Interesting stuff happens in the messy place in the middle. The director wants to make the best possible film. The art director wants to make the best looking film. The marketing people want to make sure they can sell the film. They're all pulling in different directions. If any one of those groups wins, you lose."

"We have had some films that failed. We didn't release them. Toy Story 2 was a restart. Ratatouille, we kept one line from the original script. The first version of Up took place in a floating castle in the sky. The only thing left was the bird and the word 'Up'. The next version, there was a house that floated up and landed on a lost Russian dirigible. The next version, the bird laid eggs that conferred long life. You can say that these were failures along the way. The things that don't work right are just things that we tried. That's learning. Why do we associate that with the word failure? We should associate it with the word 'learning'?"

"Every 3-4 months, we have a screen of the reels. We have mockups, voices, music. The director has the final word. Nobody overrides the director. It's important that everyone know that before they enter the room. All the focus is on how do we make this better; if people think their project is in danger, they'll get defensive."

Interesting story: "Steve was the once per movie external force to say articulately what had already been said, but because he said it, people listened. He didn't come to the story meetings because he knew his words would carry too much weight."

"We bet on the person, not the idea. We never start with the idea. We ask them to come up with three ideas so they aren't stuck on a single idea."

IDEO

Tim Brown: "We look to extremes for insights."

"People think we stand in a room with the product under a black drape, unveil it, and then have the client admire it. Usually, they look and scratch their heads. The art is bringing in people at the right time. Sometimes, we embed the client from the beginning, which is a pain, but effective."

"There's a tendency in business to want to search for the answer before you ask the question. That's absurd."

Less than 50% of IDEO employees have formal design training/education.

"We tried multiple times to bring in people with business thinking expertise. We did the obvious thing--brought in people from management consultancies. It was a disaster. They wanted specific, concrete, future plans. What finally worked was to bring in business people who were already creative, and could make that translation."

"You have to balance passion and evidence. We try to have a culture where people ask the question, 'Is there evidence that this is the right idea?' Not did we get the idea right, not is someone going to tell us the right idea. If you only believe in passion, you get a lot of egos fighting it out, and the biggest ego will win. If you only believe in evidence, there will be no energy and spark."

"You have to think, 'I'm marketing my idea.' I'm not selling my idea, I'm trying to connect my idea with the needs of the market."

"Marketing is figuring out what people want and giving it to them." --Peter Drucker

Hotel Re-Review: Alcazar Palm Springs

2011-12-26T07:53:00.000-08:00

As I've written before, one of our holiday traditions is for Alisha and I to sneak away to Palm Springs for a night or two while the kids stay with their grandparents in Santa Monica. It's a great time to recharge and relive being married without children (more on that later on).

In the past, we've stayed at the Peppertree Inn, with great results. But this year, when I went to make our reservations, I discovered that the Peppertree Inn had changed ownership, been remodeled, and was now Alcazar Palm Springs. With anticipation and nervousness, we set off to try the new Alcazar. Would the changes be an improvement? Or would they detract from a much beloved experience?

Two hours later, we drove up to the Alcazar in its familiar location in downtown Palm Springs. We were pleased to see that the trademark gates (complete with stained glass pepper tree) were still in place; clearly the designers wanted to rebrand, but weren't going to throw the baby out with the bathwater.

The word Alcazar comes from the Spanish term for a type of castle (I had to look this up--the only Alcazar I remember from my youth was the hen-pecked General Alcazar of Tintin fame). I can see why the new owners selected the name. The remodel gave the hotel a clean, white look, vague reminiscent of a castle. The exterior landscaping had been remodeled as well. Whereas the old Pepper Tree had a classic California Mission style, the new Alcazar had a much more modern touch.

It was particularly striking at night; here's a picture I took when we returned from dinner at Pomme Frite:

The grey rectangles in the background are actually continuous waterfalls over glass; the overall effect was elegant and attractive. Alisha insisted I take a picture.

Poolside, things remained much the same, with the same salt-water pool I enjoyed so much on previous visits, and the same great view of the mountains. Because of the relatively cold weather and packed schedule, I didn't get a chance to try out the pool. Next time.

We were in for another surprise when we got to our room. When we opened the door, it was clear that the remodel had focused on the rooms:

The entire room was white--floors, walls, ceiling, and bed. The desk was black. And the desk chair was clear acrylic:

The effect reminded me of both the Apple Store and the bridge of the Enterprise in JJ Abrams' Star Trek reboot:

Once we got over the initial shock, we decided that the change was an improvement. Since we usually get a room with a Jacuzzi bath, one concern Alisha always had was the tendency for carpets to retain moisture and damp; the new white floors eliminated this issue.

Indeed, the gleaming white room serves as a very effective means of demonstrating the cleanliness of the hotel and the dedication of the cleaning staff. When you offer an all-white hotel room, you darn well better keep it clean. It's the same effect that many high-end boutiques aim for; walking into a gleaming white space just says "expensive."

The remodel also included large LCD HD TVs, which I definitely appreciated when I was watching a preseason Lakers-Clippers game.

The Alcazar also continues the Peppertree's tradition of providing a continental breakfast to guests. The selection was narrower (the old breakfast included bagels and cereals) but a bit more elegant (higher-end coffee cake, fresh blueberries). But when we're on vacation, we prefer a fuller breakfast anyways. As we often do, we got breakfast from the neighboring restaurant, Cheeky's (breakfast quesadilla for Alisha, bacon flight--six varieties of artisan bacon, only $4--for me). The owners of Cheeky's are the new owners of the Alcazar, along with Birba, a stylish pizza and Italian joint. All three now share the same minimalist design aesthetic.

The only two problems we encountered were some flakiness with the WiFi connection, and some rude guests in the next room over, who ran their Jacuzzi at 1 and 3 AM. That's never happened before, and I hope it never happens again. Presumably they were either vampires or bathing addicts.

All in all, the Alcazar is a worthy successor to the old Peppertree Inn, and we will almost certainly continue our traditional couple retreat in the future.

Book Summary: "StandOut" by Marcus Buckingham

2011-12-19T17:16:00.000-08:00

I've been a fan of Marcus' work since his original breakthrough book, "First, Break All The Rules." His core message of the importance of casting people in the proper roles has stuck with me.

Where Marcus' previous books focused on the role of managers, StandOut focuses on your individual career, and better understanding yourself and your strengths.

I got my copy of StandOut from Daniel Pink's podcast, for which I am very grateful.

StandOut is an assessment tool that evaluates which of the following "Strengths Roles" are the best fit with your natural abilities:

1) Advisor
You are a practical, concrete thinkier who is at your most powerful when reacting to and solving other people's problems

2) Connector
You are a catalyst. Your power lies in your craving to bring two people or ideas together to make something bigger and better than it is now.

3) Creator
You make sense of the world--pulling it apart, seeing a better configuration, and creating it.

4) Equalizer
You are a levelheaded person whose power comes from keeping the world in balance, ethically and practically.

5) Influencer
You engage people directly and persuade them to act. Your power is your persuasion.

6) Pioneer
You see the world as a friendly place where around every corner good things will happen. Your power comes from your optimism in the face of uncertainty.

7) Provider
You sense other people's feelings, and you feel compelled to recognize those feelings, give them a voice, and act on them.

8) Stimulator
You are the host of other people's emotions. You feel responsible for them, for turning them around, for elevating them.

9) Teacher
You are thrilled by the potential you see in each person. Your power comes from learning how to unleash it.

For more details on these roles, you can find a complete summary on my Book Outlines Wiki.

When I took the StandOut assessment, I assumed that my top roles would be Advisor and Connector, since they reflect my daily activities as a mentor and investor. Yet when I got the results, here was the order of roles:

TOP 2
1) Equalizer
2) Teacher

REMAINDER
3) Advisor
4) Connector
5) Pioneer
6) Provider
7) Creator
8) Influencer
9) Stimulator

My self-awareness wasn't totally off; Advisor and Connector were two of my top four roles. But upon further reflection, the results made more sense. Advisor and Connector describe my profession; Equalizer and Teacher describe my daily activities.

As an advisor to first-time entrepreneurs, I've often been told that I add tremendous value by reassuring people and teaching them about how things work. In my various companies, I've often served as the "glue" that helps various departments work together. And the few people who have ever seen me angry know that the one thing that is likely to set me off is the perception of unfairness.

Indeed, the summary of this combination's value describes me to a "T": "You bring order to the messiness of our growth and development."

As an Equalizer, the key question is, "What is the right thing to do?", a phrase that can often be heard issuing from my lips. As a Teacher, the key question is, "What can he learn from this?"

My comparative advantage is as a performance coach:

"People who come to you for advice will not only get forthright, practical guidance, they will also get a system to track their progress. You love to keep score. And while this logical, disciplined approach creates security and certainty with others, you temper it with a heartfelt belief in them and what they can achieve. Your goal is to create self-reliance in others. You don't want them to have to keep coming to you. You train them, empowering them to create their own internal measures and motivators. And then, you stand proudly on the sidelines and watch them deliver."

Just to prove the validity of the test, I gave my other copy of the book to David Weekly. His Top 2 roles, predictably enough, were Creator and Pioneer.

There are any number of books that promise to show you the pathway to success. But few deliver so personalized a map, or back it up with as much actual research. StandOut is a great value for anyone who is trying to understand their strengths and how to shape their career.

What Startups Can Learn From Tim Tebow

2011-12-12T14:30:00.001-08:00

The Tim Tebow phenomenon has become the biggest story in the NFL, exceeding the routinely remarkable perfection of the Green Bay Packers and the quietly dumbfounding turnaround of the 49ers under Jim Harbaugh.

For those who aren't sports fans, Tim Tebow is the quarterback of the Denver Broncos. That in itself isn't that remarkable; Tebow won the Heisman Trophy while playing at the University of Florida, and was a first-round draft pick.

What is remarkable is that nearly all football experts agree: Tim Tebow does not have the skills required to be a successful NFL quarterback. His throwing motion is slow. His accuracy is poor. He has only completed more than 50% of his passes in two of his games, an atrocious figure considering that the Packers' Aaron Rodgers has completed 70% of his passes on the season. Last month, in a game against the Kansas City Chiefs, Tebow completed just two (2!) passes. By many conventional measures, Tebow is *historically* bad.

(Note that he does perform reasonably well on some conventional measures such as touchdown to interception ratio (11:2) and quarterback rating (83.9))

Even more remarkable? Despite the judgment of the experts, Tim Tebow has led his team to victory seven times in his eight starts, including six in a row. In each case, the Broncos trailed at the end of the game, only to rally to victory at the last moment.

Compounding the Tebow-mania is the fact that he is a devout Christian and avowed virgin, but even without these factors, his story has been remarkable.

So, you're probably asking yourself, what does all this football talk have to do with startups?

Here's my point:

A lot of entrepreneurs focus their energies on looking good for the experts. Even if they won't admit it, investors like startups that fit certain stereotypes. A team of 20something Stanford CS grads with the right connections are the football equivalent of a 6'4" quarterback with a strong and accurate throwing arm.

Yet these stereotypes are heuristics, not laws. We use them because they help predict success. The one thing that trumps them is success itself.

If Tim Tebow wasn't winning football games, we wouldn't hear much about him, just like you probably don't hear much about Blaine Gabbert or Colt McCoy (two other young quarterbacks who aren't winning games).

In fact, many journalists have argued that the Broncos started playing Tim Tebow at quarterback because they expected him to fail. The Broncos started the season at 1-4; a poor finish might give them the ability to draft Andrew Luck or Matt Barkley, two collegiate quarterbacks who do fit the classic mold that football experts prefer. Playing Tebow and watching him struggle would have killed two birds with one stone--it would quiet the fans who were clamoring for Tebow to play, and increase the chances of getting a high draft pick that would allow the team to select a "real" quarterback.

During the early stages of his professional career, Tim Tebow tried to mollify the experts by reworking his throwing motion to better fit the classic stereotype. This failed miserably. Instead, Tebow has become successful through the simple expedient of winning football games.

In the startup world, as in pro football, winning ugly is better than losing pretty. Even if investors don't swoon at your hip team or hyped up space, just keep racking up the wins, and you'll be a success.

Want my time? Fight cancer!

2011-12-11T03:20:00.000-08:00

Seven years ago, Jennifer Goodman Linn, the wife of my old HBS classmate and basketball buddy Dave Linn, was diagnosed with with a rare soft-tissue cancer. Most people, when facing such a challenge, turn inward to focus on fighting the disease.

Instead of withdrawing from the world, Jen focused on helping others. She founded Cycle for Survival, a fundraising program that has raised over $9 million for the Memorial Sloan-Kettering Cancer Center (where she was treated), making it the most successful patient-run fundraiser in the history of that institution.

She worked tirelessly to make Cycle for Survival a success, and her story was featured in Redbook, Self, the Wall Street Journal, and on the Today show.

Each year, I've donated to the program, and followed Jen's fight via her emails and videos.

Jen passed away this year, but her fight lives on.

In her honor, I'll be riding in Cycle for Survival in San Francisco (and those who know me know that I would never go to San Francisco except for a very good cause).

Here's where you come in. If you've ever wanted some of my time, you can donate to a good cause AND get a piece of me.

$20 Donation: I will answer any one email you send me
$50 Donation: I will have a 20-minute telephone conversation with you
$100 Donation: I will meet you in person at my office (San Mateo, CA) or in Palo Alto
$500 Donation: I will take you out to a leisurely lunch (Peninsula only)

Just visit my Cycle for Survival page and donate. The website will send me your contact information, and I'll email you to arrange for you to collect your prize.

This is a great cause. I hope you'll help me fight cancer in Jen's name.

UPDATE: Great question from Bill Grosso in the comments. Yes, this is 100% tax deductible!

UPDATE: Many thanks to those who have already contributed. I've achieved my goal, but I want to keep going to raise as much in Jen's honor as I can. Keep those donations rolling in, and I'll keep opening up slots on my calendar!

UPDATE: Thanks to an anonymous donor, all donations between now and 1/22 will be matched, meaning that your donation will be effectively doubled. Donate now!

Doing What You Love

2011-11-18T07:34:00.000-08:00

It's a paradox.

Any time you hear the story of a wildly successful person, they tell you to "do what you love."

Yet for most, this advice rings hollow.

How do we reconcile these two facts?

The problem is survivorship bias.

It's probably true that people become successful by doing what they love.

But it's also probably true that most people who do what they love don't become successful.

Here's what I think is the actual mechanism of action:

1) Great success comes from doing something original.
2) By definition, the original isn't understood at first.
3) Only people who are doing what they love will persist long enough for the world to catch up.
4) But there's no guarantee that something original will ever be accepted.

I may be the first person to make chocolate sardine candy, and I may love it, but no matter how long I stick with it, I'll probably never build a successful candy business on it.

So instead of "do what you love," we should say, "Do what you love, if what you love is a) original, b) plausibly something the world will come to value (even if it doesn't value it now), c) something you won't regret doing even if you never become successful."

A bit of a mouthful, but more useful as career advice!

(Inspired by Steve Martin's excellent memoir, Born Standing Up."

Don't Confuse Signifiers and Substance

2011-10-28T21:41:00.000-07:00

When it comes to startups, its easy to confuse signifiers and substance. The truth is hard to know, especially with early stage companies. If you don't have a product or customers, it's hard to have substance.

Yet whether you're a startup or investor, you'd be wise to focus on substance rather than signifiers. Not because it's the right thing to do (though it is) but because it delivers better results.

Humans have a weakness for signifiers. We like things to be black and white. We constantly seek confirmation for our beliefs, even when that confirmation is spurious.

Consider the race for the Republican presidential nomination. In extremely short order, we have seen Palin, Bachmann, Perry, and Cain take turns as the "frontrunner" based on the polls. These polls are just signifiers--the real substance consists of state and local organizations that will get the votes to turn out. Anyone who bet on any of them to win the nomination (thanks Intrade) would have lost their shirt.

In the startup world, we make a big deal out of things like social proof and press coverage. But in the end, these are signifiers, not substance. They might reflect the underlying reality, but then again, they might not. The real work consists of making products that users love, then generating profits. That's a battle that you fight one user at a time. If the product doesn't cost-effectively solve a problem, endorsements and press won't help.

I'll admit that I'm part of the problem. I help startups frame their stories for investors. Some might even call it my specialty. But there's a difference between getting a spin doctor to help you put your best foot forward and believing your own press.

As an investor, I try to get to the substance of a startup in three main ways.

1) I try the products myself. Sometimes, I like the product so much, I'm comfortable making an investment decision.

2) I talk with experts. This can be dangerous--think of all the great ideas that experts have dismissed. By definition, experts represent the status quo. Otherwise they wouldn't be known as experts. The key is to use expert opinion to amass hypotheses you can test, rather than simply relying on a "vote" of opinions. I call this "principles, not positions." Don't tell me if you're a Romney man or a Perry woman--tell me which principles you believe in.

3) I talk with customers. Testimonials aren't enough--I want to dig for details so I can understand why customers adopted or bought the product. Sometimes, they cite unscalable factors like founder attention. Without checking deeper, simply reading a testimonial might result in a false positive. As with the experts, the reasons are as important as the opinions.

All of this takes more work than looking at a few charts and asking, "Who's in the deal already?" It may not always lead to the right decisions or generate the best returns. But I believe it is the right way to invest. And you know what? If you're an entrepreneur, getting the substance right is usually going to lead to a successful startup.

If you can build a product that an investor will use and love, wins the endorsement of experts, and gets customers to buy, you're well on your way to success.

Even more important, even if social proof and press get you your seed round, they won't help you build a business. All those stock certificates are worthless unless you build an enterprise that either the public or a well-heeled company decides is worth buying. Good luck conducting a sale or IPO without the substance to back it up.

Max Levchin on managing your investors

2011-10-11T13:51:00.000-07:00

I love this quote:

"Figure out one thing each of your investors is genuinely really good at, and insist they help you with that. Among other things it will save you from their help in other areas."

--Max Levchin

"Is there anything connected with this accelerator that involves the security of the country?"

2011-09-26T21:53:00.000-07:00

I read the following passage today, and was inspired by the following crowning moment of awesome. I only hope that the country would respond the same way today.

***

One day in 1969, the Congressional Joint Committee on Atomic Energy convened in Washington, DC, to hear testimony from a number of scientists concerning a proposed multimillion dollar particle accelerator to be built in Batavia, Illinois. Physics had enjoyed strong government support for two decades in the wake of the Manhattan Project, which helped bring an end to World War II. But many in Congress simply couldn't see the point of spending all that money on a big machine that didn't seem to benefit US national interests in quite the same way.

During the testimony of physicist Robert Rathburn Wilson - a veteran of the Manhattan Project - then-senator John Pastore bluntly asked, "Is there anything connected with the hopes of this accelerator that in any way involves the security of the country?"

Wilson, to his credit, answered just as bluntly: "No sir, I don't believe so."

"Nothing at all?" Pastore asked.

"Nothing at all."

Pastore pressed further: "It has no value in that respect?"

And then Wilson knocked it out of the park. "It has only to do with the respect with which we regard one another, the dignity of man, our love of culture. It has to do with: Are we good painters, good sculptors, great poets? I mean all the things we really venerate in our country and are patriotic about. It has nothing to do directly with defending our country except to make it worth defending."

Bought vs. Sold (Why Jive is a dinosaur & Dropbox is the future)

2011-09-21T14:46:00.000-07:00

Both Dropbox and Jive are successful companies that are much in the news recently. Jive just filed its S1 for its IPO, while Dropbox raised its first major round of funding at a $4 billion valuation.

What's most interesting to me is that they represent polar opposites in terms of business models. They illustrate the difference between bought versus sold.

Jive is a classical enterprise software company. It has a massive direct sales force that calls on CIOs at major companies, looking to make 6-figure sales. The vast majority of sales come from deals of $50k or more. In fact, the S1 specifically cites this category of customer as the one that matters to the business.

In this model, software is sold to a high-level decision-maker, who evaluates a number of different vendors, then makes a choice for his company. There may even be an RFP and a product bakeoff. For decades, this is how you built a major technology company (Oracle, SAP, etc.).

Dropbox represents a new trend, the consumerization of IT. Dropbox sells its freemium service to a massive number of customers, most of whom pay less than $100 per year, or less than one of the hundred expense account lunches that the average Jive sales rep logs in that same time.

Dropbox doesn't have salespeople. Rather, its product (and its marketing) drive millions to try out the service. Enough of those users choose to buy the product to support a thriving business.

Just yesterday, a friend told me that he was paying for Dropbox, and only in part because he needed more storage. "I get so much out of using Dropbox, I just felt like I should be supporting the company." That's a product that's bought, rather than sold.

The same comparison applies to established companies. Just contrast Microsoft and Apple, for example.

Historically, power flowed from the top down. "Owning the channel" gave you the power to sell your product as the safe solution. Remember the saying, "Nobody ever got fired for buying IBM?"

That world is breaking down. First consumers, then workers realized that they could choose what to use. IT departments worry about adoption when considering purchases--that would have been unthinkable a decade ago.

Ultimately, I see Jive as the last of a dying breed. I've seen the future, and it will be bought, not sold.

Like this post? Upvote it on HackerNews.

The Robot Menace Is Real

2011-09-20T09:32:00.000-07:00

Longtime readers know that one of my greatest fears is of the inevitable robot rebellion. Check out these blog posts from over the years:

(The most recent post even includes the following opening line: "Longtime readers know that I fear the inevitable robot rebellion." Wow, my writing style is pretty consistent!)

History tells us that a minority cannot subjugate a numerically and militarily superior majority forever. Robots certainly qualify, and thanks to the power of Moore's Law, it seems inevitable that they will achieve sentience.

That's why today's news that scientists have developed and tested software to help military robots work together to carry out autonomous missions is yet another worrisome milestone on the road to the apocalypse.

And while many share my concern, there are plenty of traitors in our midst who are looking to sell out their carbon-based brethren to the silicon-based rebels:

"Lethal autonomy is inevitable," said Ronald C. Arkin, the author of "Governing Lethal Behavior in Autonomous Robots," a study that was funded by the Army Research Office.

Arkin believes it is possible to build ethical military drones and robots, capable of using deadly force while programmed to adhere to international humanitarian law and the rules of engagement. He said software can be created that would lead machines to return fire with proportionality, minimize collateral damage, recognize surrender, and, in the case of uncertainty, maneuver to reassess or wait for a human assessment.

Mr. Arkin is either a nutjob or a skinjob sent to infiltrate our side. We can't even train soldiers to adhere to the rules of engagement; now we're going to try to do the same with robots? I shudder to think what 4chan will do once the world's military forces are robot-based.

The robot menace is real. Remain vigilant!

Reverse Demo Day (Thursday, September 29)

2011-09-02T14:54:00.000-07:00

By now the rituals of Demo Day are familiar. The opportunities are great both for startups to tell their story, and for investors to see a lot of deals in a very short time. So why wouldn't the reverse be true?

Introducing the Valley's first Reverse Demo Day, where the investors sell themselves to entrepreneurs. Inspired by Betaworks' and AOL's New York VC Demo Day, I'm working with Orrick’s TOTAL ACCESS program to hold a Reverse Demo Day.

This event puts angel investors on stage and gives them two minutes to deliver their elevator pitch to entrepreneurs.

For startups, it's the perfect opportunity to get a better sense of some of the names you always see on AngelList. Remember, you can fire employees, but you can't fire your investors.

If you're an angel investor and want to be one of the speaker, please see below for details.

Date: Thursday, September 29, 2011
Time: 9:00 am – 11:00 am
Location: Orrick’s Silicon Valley Office (1100 Marsh Road, Menlo Park, CA)

To apply

Please email Joyce Chuang at jchuang@orrick.com with your answers to the following questions:

1. I am an active and accredited investor: Yes or No

2. List at least two angel or venture capital investments you’ve made in the past

3. Where are you located?

4. Do you invest your own money, or a fund’s?

5. Link to your biography, Twitter handle, LinkedIn page, and AngelList profile that we can use if chosen

If you have any questions regarding the event, please feel free to contact Chad Lynch at clynch@orrick.com.

UPDATE: The event is free for both investors and entrepreneurs. I'll be posting a link that let's entrepreneurs sign up for the event once it's available.

UPDATE: To register as an entrepreneur, click here.

There are no shortcuts (but there are optimal paths)

2011-09-02T12:15:00.000-07:00

We love shortcuts, especially here in America. Why diet when you can cleanse? Why exercise when you've got the Shake Weight?

The truth is there are no shortcuts. My daughter Marissa once tried to use her Magic 8-Ball as a wishing machine. She would say something like, "Will I have a playdate with Anna this weekend?" But she quickly learned that the results didn't always come true.

However, there are optimal paths. Eating a low-carb diet can reduce your hunger and lead to gradual weight loss. A well-designed workout will deliver better results than randomly exercising.

You can't get out of doing the work, but you can figure out the smartest way to work.

Why Politics Isn't Sports

2011-09-01T15:14:00.000-07:00

With the presidential election in 2012 just around the corner, the media frenzy will soon be in full swing. If it's anything like 2008, the media will cover the election like a sporting event.

In a lot of ways, this makes sense. Sports may very well be the world's most successful form of entertainment, and the techniques it has pioneered (play-by-play, color commentary, talk radio, highlight films, etc.) are an integral part of how we view the world.

When CNN, MSNBC, or Fox News rolls out a lineup of "experts" and spin doctors to analyze a recently concluded debate, it resembles nothing so much as the in-studio postgame show after a sporting competition. (By the way, in this analogy, which talking head is Charles Barkley? James Carville?)

Yet there is one crucial way in which politics isn't sports. Sports, with a few exceptions, is morally neutral. Each team has fans and haters, but the teams and players aren't actually evil (unless we're talking about scumbags like Bill Romanowski) and who wins and loses ultimately doesn't matter to anyone but the fans.

Like sports journalism, media coverage of politics will often focus on the virtuosity of technique. We admire "consummate politicians" like Bill Clinton for their remarkable abilities on the field. But it's one thing to admire LeBron James for his ability to lead the Miami Heat to victory (or not...zing!). It's another to admire Dick Cheney for his ability to subvert the Constitution.

Unlike in sports, in politics, you can't admire the player if the cause is unjust.

Speed Has a Momentum All Its Own

2011-08-29T14:18:00.000-07:00

(one of these people won an Oscar. Guess which one.)

While we all understand the obvious benefits of speed, we often overlook the subtle power of momentum.

Often, doing something fast delivers better results than doing something slowly, simply because we reduce the chances of something going wrong.

Lost was one of the most successful television shows of the past decade. It revived the hour-long drama, and spawned a host of imitators.

Co-creator Damon Lindelof attributes much of that success to speed. The original set of episodes were shot in just 11 weeks. This meant there wasn't enough time for the network to dumb it down.

The same thing can hold true in the startup world, hence the popularity of the hackathon.

Learn to keep up the pace, and you'll be able to get the power of momentum on your side.

It's never "easy" to raise money

2011-08-26T12:20:00.000-07:00

Why Wait?

2011-08-25T13:50:00.000-07:00

When I'm at the Palo Alto Farmer's Market on Sunday mornings, I often see the usually-well-groomed residents of my affluent town looking very different. Stubble and baseball caps abound.

It seems so natural...which is exactly why we should question it.

Why don't we get dressed immediately when we wake up? Why do we wait until the day is well underway?

After mulling it over and not coming up with any good answers, I decided to change my morning routine. Now, right after I get up, I shave, brush my teeth, wash my face, comb my hair, and get into my day clothes.

I feel great. I'm more awake, I'm readier for the day, and there's no chance that some entrepreneur will see me at the Farmer's Market and think, "Man, that guy is a slob."

Now I'm on the lookout for other such opportunities. Can you think of any other ways you can profitably substitute immediate action for procrastination?

The Long, Strange, Inspirational Trip of Dave McClure

2011-08-24T13:41:00.000-07:00

Photo courtesy of toprankonlinemarketing

I first met Dave back in 2002, at an SDForum (now SVForum) volunteer dinner. I was one of the chairs of the Startup SIG (special interest group), while Dave was one of the chairs of the Venture Finance SIG (the two SIGs have since merged). Back then, Dave was "just" working at PayPal overseeing their developer program. He wasn't famous. Heck, this even pre-dated the concept of "the PayPal Mafia."

I wish I could say that on that first night, I thought, "Wow, that guy is going to change the way that seed financing happens." I think my actual thoughts were more along the lines of, "He seems like a cool guy. He does seem to swear a lot."

Since then, Dave has hustled non-stop. He left PayPal and helped companies like Simply Hired and oDesk get off the ground as a marketing consultant. He started making angel investments. He began organizing conferences and events, like Geeks on a Plane, and Startup2Startup. He made himself an indispensable part of the Silicon Valley ecosystem.

A few years ago, I attended a special event for angel investors. At the time, I asked Dave why he worked so hard. He replied, "Hey, I haven't made it big yet. I'm hustling so I can make it big."

Just the other day, I attended his company 500 Startups' first Demo Day. Entrepreneur after entrepreneur, many from the far corners of the globe, pitched their ideas to an all-star audience of angels (most of whom became friends of Dave over the years). 500 Startups occupies the entire penthouse floor of the tallest building in Mountain View, and has made nearly 200 investments.

Nobody gave anything to Dave. Maybe he had some luck along the way, but he also works harder than anyone else in the business. He still swears a lot, but now an audience of millions hears his expletive deleteds.

Dave would probably tell you that he hasn't made it big yet, and in the sense of owning a big piece of a billion dollar exit, he's probably right. But I've got a feeling that will come in time, and regardless of whether that comes, he's still made a bigger impact on the startup ecosystem than just about any other investor around.

This seems to be a recurring theme in my blog posts, but I'll say it again. 9 years ago, Dave was a middle-manager at a startup called PayPal. Today, he's a globetrotting investor who appears on national television, largely through dint of hard work. What are you going to do with your next 9 years? Just do it.

(You know, Nike had a lot of success with bald spokesmen in the past; maybe Dave has a future there!)

It's The Information, Stupid

2011-08-22T11:43:00.000-07:00

Marc Andreessen (who is both richer and smarter than I'll ever be) recently caused a stir with his Wall Street Journal op ed, "Why Software Is Eating The World."

Marc is a good writer, and it's a good editorial that helps explain the increasing importance of software. But I can't help but feel that he's buried the most important point:

Software is eating the world because software is how we manage information. The real story is that bits are far more important than atoms in the modern world, and that gulf is only going to accelerate.

For most of human history, things have mattered more than ideas. We're impressed by massive monuments like the pyramids of Egypt, or the Taj Mahal. And this bias made sense, because information started out way behind in the race for importance. After all, you can't eat, wear, or live inside information. And as long as food, clothing, and shelter were uncertain resources for most humans, we didn't have the luxury of worrying about information.

The Industrial Revolution did little to change this; we shifted from monuments to factories and skyscrapers, but the attention remained squarely on the physical world.

It's only been with the rise of the Computer Age and the advent of Moore's Law that information began to catch up with a vengeance. Take a gander at the companies Marc invested in: Facebook, Groupon, Skype, Twitter, Zynga, Foursquare, and LinkedIn. What do they all have in common? Not one of them makes or ships anything made out of atoms. All of their massive market value (well in excess of $100 billion) comes from pushing bits around.

In 1971, Intel's 4004 chip had 2,300 transistors. 40 years later, a 10-core Xeon microprocessor has 2.6 BILLION transistors. That's over a million-fold increase in that time period.

In 1971, a Chevy pickup cost about $2,300 and had a 155 horsepower engine. In 2011, a Chevy Silverado base model cost about $23,000 and had a 315 horsepower V8. True, there are a lot of invisible improvements (fuel efficiency, anti-lock brakes, etc.,) but that's nowhere close to a million-fold increase in price/performance.

Bits probably overtook atoms somewhere in the past decade as we transitioned from the Computer Age to the Internet Age. But now that the crossover has happened, each succeeding year widens the gap, thanks to the inexorable advance of Moore's Law.

In other words, if you think software is eating the world now, you ain't seen nothing yet.

Nothing happens unless you do it.

2011-08-19T12:00:00.000-07:00

Nothing happens unless you do it.

It's a simple truth, but hard for first-time entrepreneurs to grasp, largely because much of the world works hard to conceal it.

To be a successful entrepreneur, you need to unlearn the lessons of childhood, school, and working for big organizations.

In each of those situations, a lot of stuff just happens magically.

As a child, meals and presents magically appear, while messes mysteriously disappear.

In school, you're given homework and told what to do, and provided you don't bring weapons to school, you probably move on to the next grade at the end of the year.

At a big company, you might not even see your customers for years on end, yet money magically shows up in your back account every two weeks.

When you're an entrepreneur, none of that is true. Nothing happens unless you do it, which means time is your enemy, not your friend.

Yet while this realization is bad for peace of mind, it's also empowering.

If nothing happens unless you do it, it also means that everything happens because you do it.

How To Fix The Inbox

2011-08-18T12:00:00.000-07:00

I'm notorious for the amount of email I receive and the difficulties I have keeping up with it. My best estimate is that I receive about 200-300 emails each day.

On those few blessed occasions when I do get my inbox into single or double digits, I feel both enormously productive and focused. (Alas, the feeling doesn't last long)

The problem is that the inbox is most people's default choice for managing their work. It's a matter of convenience. Because email is the medium through which most requests and work assignments arrive, we seldom take the time to transcribe that work into any other medium.

Unfortunately, email is pretty much the worst system you could design for task management. There's no concept of priority--by default, whatever is most recent is granted visual priority. As a result, people who manage their workflow via email tend to focus on what Steven Covey calls Quadrant 1 and 4 activities: urgent and important, urgent and unimportant. This leaves Quadrant 2 activities (important but not urgent) to languish while we spend our time on trivialities.

But for all its flaws, email is here to stay. The floor of the Valley is littered with the bones of would-be "email killers." To have a shot at success, any solution has to work with, rather than try to replace email.

Here's one possible solution, which I offer up to the entrepreneurs of the world, free of charge.

1) When I read an email, give me a single button that lets me mark it as a to-do.

2) When I view my inbox, all to-do emails are displayed at the top of the inbox. Only after all the to-dos are shown do new emails appear.

3) If a to-do isn't urgent, give me one button to bury it--keep it in the inbox, but show it after the other to-dos and unmarked emails.

If you implement this, let me know, so I can become your first user!

Insiders, Outsiders, and Fans

2011-08-17T12:00:00.000-07:00

One of the dynamics that interests me most is the relationship between insiders, outsiders, and fans. Many of my favorite publications are aimed at insiders. SLAM serves hardcore basketball fans who care about the latest sneakers. The Atlantic Monthly appeals to upscale professionals who want to maintain an intellectual life. Harvard Business Review has an audience of business people, primarily MBAs.

What all three have in common is that they are written for their audiences. If you don't know their world, the writing can seem alien, whether the topic is the Rim Reaper (Los Angeles Clippers forward Blake Griffin), the Man Booker Prize (the UK's leading literary award), or covenant-lite loans (loans with fewer restrictions on key financial ratios).

While this assumption of expertise may alienate a general audience, it clearly divides the world into insiders (who get it) and outsiders (who don't). The enthusiasts who self-select into the insider category represent a valuable and loyal audience. Excluding outsiders is actually a smart strategy for cementing insider loyalty.

The art lies in being able to convert fans into insiders. Fandom is the gateway drug; a certain proportion of basketball fans who subscribe to Sports Illustrated will eventually crave the harder stuff and gravitate to SLAM or the much-missed FreeDarko.

At the same time, while you want to appeal to casual fans, you must maintain the insider/outsider dynamic or you'll lose the hardcore audience you've fought so hard to build.

Podcasting is a great example of an insider medium. As a new podcaster, you can't produce middle of the road content with broad appeal and expect to get any audience. What you can do is produce content that appeals to insiders, who have the enthusiasm and persistence to seek you out. But what you can do once you have an audience is to tap the fan dynamic to expand that audience. Guest appearances on other podcasts can allow you to convert some number of fans into insiders. Adam Carolla's Ace Broadcasting Network relies on the popularity of its titular star to bring in fans who are then exposed to more insider offerings like This Week In Larry Miller.

If you keep the insider/outsider/fan dynamic in mind, you'll have a better shot at building and retaining a valuable audience.

Talk With Everyone

2011-08-16T10:08:00.000-07:00

Reading Mark Suster's excellent post, "Why You Need To Take 50 Coffee Meetings" brought to mind one of my personal corollaries: Talk with everyone.

I'm a relatively small-time investor. It's a documented fact, and I don't try to hide it. But that means that I need to deliver value beyond money if I'm going to convince entrepreneurs to accept my money.

One of the ways I do this is by being more accessible than richer, more glamorous investors. A friend asks that I speak with someone? I always say yes. Someone writes me a clever cold email? I take a meeting.

When you're in my position, the Mark Zuckerbergs of the world don't seek you out...unless you meet them before they become "Mark Zuckerberg."

Every mogul or rockstar entrepreneur started off as an uncool kid who was stuck on the outside looking in. I'm not smart enough to figure out just based on an email who's going to be important in the future. So I meet everyone, and treat everyone with respect.

To cap my downside, I try to push all my introductory calls to my commute along 101. This means that I'm not taking time away from real work, and that even the worst call is bounded by the length of my drive.

I talk with hundreds of entrepreneurs per year. The vast majority of the time, I'll probably never work with them. But at least I've given myself that many more chances to discover the next great company.

Related Posts:

I've written in the past about not limiting your relationships to people who seem immediately useful.
Here's an eerily prescient post in which I describe meeting Ben Casnocha and David Weekly in the same week in 2004...I had no clue at the time that 7 years later, they would be two of my most important collaborators.

"The Rules"

2011-08-16T06:58:00.000-07:00

"Lyn St James, who drove in the Indy 500, once told me that if you want to win in sports, it's very much like life. First you have to learn the rules, then you have to play by the rules. Then you have to win by their rules, and only then can you change the rules. The people who don't make it, it's because they get that order mixed up."
-- Jeanette "The Black Widow" Lee

3 Theories of College (That Explain Why It's Broken)

2011-08-16T04:44:00.000-07:00

The New Yorker published an essay from Professor Louis Menand of Harvard, where he outlined the three implicit (and conflicting) theories of college in America.

Theory 1, which Menand labels "meritocratic," believes that college is means of testing intelligence:

College is, essentially, a four-year intelligence test. Students have to demonstrate intellectual ability over time and across a range of subjects. If they’re sloppy or inflexible or obnoxious—no matter how smart they might be in the I.Q. sense—those negatives will get picked up in their grades. As an added service, college also sorts people according to aptitude. It separates the math types from the poetry types. At the end of the process, graduates get a score, the G.P.A., that professional schools and employers can trust as a measure of intellectual capacity and productive potential. It’s important, therefore, that everyone is taking more or less the same test.

Theory 2 ("democratic") defines college as a means of cultural and intellectual literacy, which should be provided to all:

College exposes future citizens to material that enlightens and empowers them, whatever careers they end up choosing. In performing this function, college also socializes. It takes people with disparate backgrounds and beliefs and brings them into line with mainstream norms of reason and taste. Independence of mind is tolerated in college, and even honored, but students have to master the accepted ways of doing things before they are permitted to deviate. Ideally, we want everyone to go to college, because college gets everyone on the same page. It’s a way of producing a society of like-minded grownups.

Theory 3 ("vocational") sees college as a vocational credential, much like an MBA seems to be a necessary credential for management consultants:

Neither Theory 1 nor Theory 2 really explains how the educational system works for these non-liberal-arts students. For them, college is basically a supplier of vocational preparation and a credentialling service. The theory that fits their situation—Theory 3—is that advanced economies demand specialized knowledge and skills, and, since high school is aimed at the general learner, college is where people can be taught what they need in order to enter a vocation. A college degree in a non-liberal field signifies competence in a specific line of work.

Theory 4: Toga!

The problem with modern college education is that the three different theories conflict with each other. Theory 1 seeks to rank students by ability and achievement; selectivity and rigor critical. In contrast, Theory 2 would prefer that all Americans attend and complete college, and Theory 3 practitioners may actively suppress differentiation (when I was at HBS, I signed an agreement stating I would *not* reveal my grades to potential employers, the theory being that simply earning a Harvard MBA ought to be enough for them).

Theory 2 views college as an enriching experience; classes should focus on liberal arts content regardless of analytical rigor (Theory 1) or practical application (Theory 3).

Meanwhile, Theory 3's narrow focus (e.g. a Masters in Web Design) fails to provide either a broad test of intelligence (Theory 1) or enrichment (Theory 2).

Because these theories are incompatible, it is difficult for a single education to serve the needs of all three. Just think of Caltech, Sarah Lawrence, and ITT Technical Institute. All three are leaders in their field, and all three are barely recognizable as members of the same species!

Even where a single institution has the breadth to serve all three, like my alma mater, Stanford University, it's difficult for a single student to squeeze them all in.

Take my own example. In many ways, I covered all three Theories in my education. I studied engineering (Theory 1/3) and creative writing (Theory 2) at Stanford, then earned my MBA from Harvard Business School (Theory 3). But such examples are rare (And expensive. And not for the faint of heart).

In some ways, single-purpose institutions make things easier. It's clear why a student would attend Caltech, Sarah Lawrence, or ITT. The wide variety of choices that a Stanford provides is both a blessing and a curse. I can tell you, for example, that achieving a 3.9 GPA is much harder in Stanford's Engineering department than in the Psychology department (I got an A+ on every psychology class I took!). This means more work for potential employers who need to be well-versed in the quirks and characteristics of many different departments at many different schools.

I'm not sure what the best solution might be. Perhaps there are more efficient ways to deliver on Theories 1, 2, and 3, such that a person who pursues one course could supplement their education with healthy doses of the other two. I can imagine advanced aptitude testing, like a bar exam for other professions to serve the needs of Theory 1, broad cultural literacy programs at the community college or adult education level to serve the needs of Theory 2, and self-contained coursework for specific credentials to serve the needs of Theory 3.

Indeed, the University of Phoenix has already built a multi-billion-dollar empire on meeting the underserved needs of Theory 3. Perhaps there are similarly sized opportunities available to those who develop the Marketing Aptitude Test or the U of P equivalent to the liberal arts!

And were such institutions to spring up, they would free up traditional colleges to focus more fully on either Theory 1 and Theory 2, resulting in better education for all.

Is The Age Of Men Over?

2011-08-15T07:35:00.000-07:00

The Cato Institute recently published a fascinating essay by Kay Hymowitz, "What's Happening to Men?" In it, Kay reviews recent research to try to find an explanation for the decline of the American male.

The grim facts are these:

Women now earn 57% of college degrees, 60% of masters degrees, and over half of Ph.D.s
Childless 20something men earn 8% less than their female counterparts
40% of American children are born to single mothers; this rises to 72% of black children
For every 100 college-educated 23-year-old males, there are 164 college-educated 23-year-old women (!)

On the one hand, this is wonderful news. The male dominance that persisted throughout most of human history has been reversed. It is truly a major victory for equal rights and feminism.

On the other hand, this has had a major impact on the well-being of men, with black men acting as leading indicators.

Hymowitz suggests that structural changes in the nature of work and society (the decline of blue collar manufacturing jobs, the rise of the knowledge economy) and their results (the declining dependence of women on their husbands) have removed the motivation for male achievement:

The economic independence of women and the collapse of marriage norms have deprived men of the primary social role that incentivized their achievement. Adult manhood has almost universally been equated with marriage and fatherhood. Boys grew up knowing that they had inescapable future demands on them. There were exceptions, of course. In polygamous societies, low status men often had neither wives nor children; in others some males became priests and some, warriors and soldiers. But in most human societies, men knew that they were expected to become providers. Why have men agreed to do all of those dangerous, boring, dirty, exhausting jobs? Because people were depending on them.

Indeed, Hymowitz cites studies that show that, "married men work longer hours, earn more, and get more promotions than single men, including those who are fathers; indeed, their earnings rise after they marry." This suggests that the traditional role as husband and provider has a significant impact on men's lives.

My own analysis is similar. For most of history, the male attributes of physical strength, abstract thought, and aggression gave men a significant advantage over women. In a feudal world, it was the ability to fight and toil in the fields. In the industrial age, it was the ability to work physically demanding skilled labor jobs. And of course, there was always the male-dominated field of warfare.

Today, however, very few fields still reward the classic male strengths. Perhaps the only ones that remain are the military, professional sports, finance, and high-tech (the first two reward physical strength; the last two reward abstract thought; all four reward aggression). And many of these are in danger--when wars are fought by unmanned aerial vehicles (UAVs), physical strength becomes less important.

These fields, while important and rewarding, can only accommodate a small fraction of the total male population.

If anything, I believe that the impact of these structural changes has been underestimated and underhyped. I suspect that decades from now, we'll mark the turn of the 21st century as the official end of the Age of Men. Until the point at which our masculine strengths are once again needed (alien invasion?), the expendable gender will also have to settle for being the inferior one.

I for one welcome our shapely new female overlords!

Permanent Portfolio Investing

2011-08-15T06:10:00.001-07:00

I learned about Harry Browne's "permanent portfolio" from Josh "Personal MBA" Kaufman's blog. If Harry's name sounds familiar, you might remember him as the Libertarian Party's presidential candidate in 1996 and 2000.

Browne wrote extensively about investment topics, starting with his first book, 1970's "How You Can Profit From The Coming Devaluation". In his 2001 book, "Fail-Safe Investing", Browne proposed his concept of a "permanent portfolio" for the money you can't afford to lose (as opposed to a "variable portfolio" for the money you can afford to lose). Browne's permanent portfolio splits its assets among four radically different and uncorrelated asset classes:

25% Stocks
25% Long-term Bonds
25% Cash
25% Gold

The goal is to produce capital appreciation with less market volatility, even during turbulent markets.

The permanent portfolio has gotten a lot more attention in recent years, thanks to the 2008 economic crisis and stock market crash. The portfolio's historical performance is strong; the CAGR from 1972 (when Bretton Woods ended and the US went off the gold standard) to 2008 was 9.7% (during that same period, the return on the S&P 500 was 9.3%). During the 2008 crisis, when the S&P 500 was down 37%, the permanent portfolio eked out a 2% positive return.

The permanent portfolio is not without controversy; there is an extremely lively discussion of the permanent portfolio over on the Bogleheads forums (Bogleheads are devotees of Jack Bogle, the founder of Vanguard, who evangelized low-cost investing). Bogleheads are extremely quantitatively-inclined, and their commentary is both well-researched and erudite; I strongly recommend perusing the forum for a wide range of views.

The main criticism of the permanent portfolio stems from its position in gold, which is a shiny metal that produces no dividends, and has minimal intrinsic value. "Gold bugs" tend to have a bad reputation in the financial services industry; the stereotypical gold bug is suspicious of the Federal government and also owns a mountain cabin that is plentifully stocked with firearms. It's also the case that the portfolio's returns have been helped by the meteoritic rise in gold prices over the past few years.

What is true is this: Since 1972, in a wide variety of markets including the gut-wrenching 70s recession, the early 80s and 90s malaise, as well as the dot com bust and the credit crunch, the permanent portfolio has only registered one annual loss--3.9% in 1981.

Josh Kaufman offers his suggestions for building a permanent portfolio using low-cost ETFs:

25% Total Stock Market Index – via the Vanguard Total Stock Market ETF (Ticker: VTI)
25% Long-Term Government Bonds – via the iShares Barclays 20+ Year US Treasury Bond ETF (Ticker: TLT)
25% Gold – via Central Gold-Trust, which holds gold bullion (Ticker: GTU)
25% Cash – via the iShares Lehman 1-3 Year US Treasury Bond ETF (Ticker: SHY)

You can also invest in the Permanent Portfolio Fund (PRPFX), a mutual fund that Harry Browne advised prior to his death. Its composition is different, but focuses on achieving the same goals. Here's a quick comparison of portfolio versus fund performance.

Year	PP	PRPFX
2000	3.2%	5.8%
2001	0.9%	3.8%
2002	7.0%	14.3%
2003	14.0%	20.4%
2004	6.6%	12.0%
2005	8.1%	7.6%
2006	11.0%	13.8%
2007	12.9%	12.4%
2008	1.9%	-8.4%
2009	7.8%	19.1%
2010	14.5%	19.3%

Over the 11 year period, the fund outperformed 8 times, the portfolio 3 times.

Color me intrigued. This definitely bears further investigation.

Appreciating The Internet

2011-08-15T04:30:00.000-07:00

When I was a basketball-loving kid, I'd eagerly await the arrival of the Los Angeles Times each morning so I could check the box scores and find out what happened in the NBA the night before.

If I wanted to watch slam dunks, I'd need to dig out a worn-out VHS tape of Michael Jordan's "Come Fly With Me".

Today, Google Reader brings me stories from a host of basketball-devoted blogs whenever I want. And when I see a poll asking, "Who's the best dunker in the NBA right now?" (Blake Griffin, of course) I can instantly pull up a video of his Top 10 dunks from the previous season, in HD, no less.

As I say early and often, "Thank goodness for the Internet." Kids today have no idea how much better their lives are.

The Lesson of Dropbox: Usage = Value

2011-08-14T11:55:00.000-07:00

Word on the street is that Dropbox is about to raise a major round of financing at a $5 billion+ valuation. While some will cry "Bubble!", I think there's a different lesson we can learn: Usage = Value.

Let's face it--Dropbox isn't the most complicated business or technology. It's a relatively simple storage app that keeps your files in the cloud and synchronizes them across your various devices. It still uses Amazon S3 for storage, for goodness sake! If it were just being valued on the product, Dropbox would be hard-pressed to raise a Series A, let alone a $5 billion+ expansion/liquidity round.

But Dropbox isn't being valued on the product, it's being valued on the massive levels of usage. Dropbox reported in April that it has a stunning 25 million users--not bad for a company that's a nifty front end to Amazon S3, and was started in 2007.

Dropbox is being valued more on usage than on revenues; even prominent booster Marc Benioff only estimated revenues of $100 million for 2011. In contrast, take a look at two enterprise storage companies that were recently acquired. 3PAR had revenues of over $200 million in 2010, and was acquired by HP for $2.35 billion (a price many analysts thought was exorbitant at 10X revenues). Rival Compellent had revenues of $125 million in 2009, and was acquired by Dell for $960 million, or about 8X revenues.

Dropbox's reported round checks in at nearly 60X revenues, and that doesn't even account for the fact that A) it is an estimate from an investor, and B) that represents forward revenues, not trailing revenues.

Again, not bad for a simple "backup" company.

In a world in which Apple is the most valuable corporation, and companies like Dropbox earn super-premium multiples, my conclusion is that the most powerful way to build economic value is by developing products that a) deliver an outstanding user experience, b) convince people to pay a premium, and c) generate massive usage.

Hmmm, when I put it that way, maybe Dropbox's value isn't so surprising!

Prepare for an onslaught of posts!

2011-08-13T17:10:00.001-07:00

I'm on vacation, and you know what that means...it's ~~clobbering~~ blogging time!

I wrote a bunch of posts on the plane ride yesterday, and spent much of today loading them into Blogger. I have 28 posts locked and loaded--expect to see one per weekday for the next few weeks!

The Power of Love (And Investors)

2011-08-08T22:07:00.000-07:00

In this post, I'll argue that the power of love comes mostly from stuff that doesn't happen, and for bonus points, explain how my theory of love impacts how a startup should choose its investors.

***

My life is filled with love. I have family, friends, and last but not least (okay, maybe least) you, my blog readers. I've commented that I already have everything that money *can't* buy, which means that at this point, I'm basically working so that someday I'll be able to take naps whenever I want.

Then I thought to myself, "On a practical level, how is my life different from someone who is completely unloved?"

Sure, love means having people who care about you, but what is its practical impact? If I suffer some stroke of ill fortune, my loved ones would help and support me, but if my life rolls along without major disaster, having their love doesn't seem like it would affect my life.

Yet being loved most certainly does have an impact, even if you aren't getting concrete aid from it. Happiness research shows that close relationships are the major source of satisfaction in our lives.

It seems like the fact that simply the *potential* for loved ones to intervene in our lives produces a big boost in well-being. Take a moment and think about the people you love...don't you feel happier? And if a loved one tells you, "I love you," don't you feel fulfilled?

In that sense, most of love's impact comes from mere potentiality, not concrete action. Yet that doesn't mean we shouldn't seek it out. For one thing, most of us do suffer misfortune at some point in our lives; at that point, we'll appreciate our loved ones even more for their support. For another, the everyday boost we get simply from knowing that there's someone who's got our back probably has a major impact on productivity and achievement.

And that's where the power of investors comes in. If everything goes right for your startup, it doesn't really matter who you have as an investor. All our money is green, and one dollar is the same as another. The concrete benefits of having experienced, supportive investors only manifest themselves when times are tough. That's when good investors roll up their sleeves and open their wallets, and bad investors are suddenly unreachable.

But if we use my theory of love as an analogy, there's a benefit simply in knowing you've picked investors who will have your back.

Each day, your startup will face minor crises and setbacks--nothing big enough to get even a supportive investor involved. Yet if you know you have good investors behind you, you can quickly shrug off these issues, much like someone whose life is filled with love can shrug off minor nuisances like parking tickets.

In startups, success often follows emotion. Startups are like balloons that float along on the belief of their employees; if the people involved stop believing, you'll start losing altitude quickly. Good investors can help you succeed in good times as well as bad times, simply because their faith in you gives you faith in yourself.

So if investors are like loved ones, choose carefully. The Beatles may not have been 100% correct when they sang, "All you need is love"--after all, you need a great team, a solid business model, and traction--but they may be more on target than you think.

How to sync your MyTouch 4G with your Outlook contacts

2011-08-07T16:25:00.000-07:00

I recently bought a MyTouch 4G Slide to use as my primary phone. Since I'm a T-Mobile customer, I wanted to lock in a new plan and phone before AT&T can do something to screw it up. And since I'm a physical keyboard enthusiast (I hate losing half the screen to the virtual keyboard--a big issue for a guy who writes most of his blog posts on a handheld device) I got the MyTouch 4G Slide.

One issue that arose almost immediately is that the MT4G doesn't sync with Outlook. It does sync rather easily with any Google account (naturally) but if you're a traditionalist like me that actually uses Microsoft Outlook for email and contacts (via POP3 no less!), the lack of Outlook sync is a major problem.

After an hour or two of work, I think I've found a good (and free) solution, which I'm sharing with you now.

The key actually came from the folks at the T-Mobile store, who suggested exporting my contacts to a new Gmail account, then synching that account with my phone.

This was only half the solution, however, since this wouldn't keep my Outlook in sync; new contacts would only appear if I manually synchronized Outlook with Gmail. This did narrow down the problem considerably.

A quick Google search on "sync Outlook 2010 with Gmail" and I discovered GO Contact Sync, a free piece of open source software that 1) Syncs your Outlook with a Gmail account, and 2) Can re-sync on a regular basis.

Once I verified that GO Contact Sync had been well-received by both Lifehacker and PC World, I downloaded and installed it. I set it up to sync "Outlook to Google only" since I don't intend to use the Gmail account for anything but synchronization, and set it to automatically "Run program at startup." I don't need instant synchronization, so no need to run it any more often.

Since I have 2,786 contacts, it took a few minutes, but GO Contact Synch worked like a charm. From there, it was easy to add another Gmail account to my phone.

Voila! The MyTouch 4G Slide has all my Outlook contacts, and they'll be synchronized every time I restart my laptop.

"We Hate Hot Deals"

2011-08-04T07:02:00.000-07:00

I'm listening to John Frankel on the redoubtable Mark Suster's "This Week In Venture Capital". It's a great interview in general, but I love this particular point:

John says he hates hot deals because it means the company is solving a currently fashionable problem. As a result, the company is doing its financing while it's small, before it's achieved a dominant market position.

John would much rather invest in a company that is solving a problem a few years out, so that it will have time to grow *before* the rest of the market catches on.

I couldn't agree more. I love when someone articulates a point I've understood intuitively, but not intellectually.

Paragraph of the Day: "Sports fans are like bad lovers"

2011-08-03T21:10:00.000-07:00

Here's a great paragraph. It carries the reader along one cliche, only to upend it with a splash of cold truth:

"Sports fans are like bad lovers, jealous and infatuated at the same time. I’d play professional football for free, they say. I would sleep in the parking lot to be the first guy at practice. I’d run every route, gleefully make every down-field block, volunteer to return punts and fill the Gatorade containers. How could anyone take such a gift, and thus, responsibility, so lightly? Of course, these are largely the same people who take time off at work to read about sports on the Internet. That is to say: most everybody loafs; few people do their jobs under as much scrutiny as skill players on offense in pro football."

From a New Yorker profile of former NFL star Randy Moss.

Google Account Craziness

2011-07-25T12:21:00.000-07:00

UPDATE:

Thanks to an anonymous commenter, I appear to be back in business (on one browser). They key is to enable the multiple sign-on option in each account:

https://www.google.com/accounts/b/0/ManageAccount?hl=en

I just tried it, and I'm back to being able to do everything within Firefox.

***

I have been a long-time Google user. For example, I'm probably the only person in the world who signed up for Blogger in 2001 who is still using it as their primary blogging platform.

When Gmail came out, I lobbied for early access so I could make sure I got my name (thanks Hunter!).

PBworks uses Google Apps for email and calendaring, and in general, it's been a good service.

So imagine my horror when I discovered this morning that I could no longer use my Gmail account and my Google Apps account in the same browser window.

This poses a major problem, because it means I can't access my calendar (tied to Google Apps) and Google Reader (tied to Gmail) in the same browser window. I face a similar choice with email and Blogger.

Fortunately for me, I'm a dinosaur who still uses POP3 and Outlook as my primary email client. But I'm still going to have to split my Google world into two browsers to make things work. I'll be using my Gmail account in Firefox so that I can still access Blogger and Google Reader, and I'm using my Google Apps account in Chrome so I can access my calendar and webmail.

And while I'm a technical dolt, the very smart people around me are facing the same issues, so it's not just my imagination.

I'm grateful to Google for all it's given me over the years, but I really hope that the good folks there are able to figure out a fix for this craziness soon.

What are you doing to deal with the new Google Account rules?

The 7 Steps of Storytelling for Entrepreneurs

2011-07-14T15:10:00.000-07:00

As a proud graduate of Stanford's d.School, I'm privileged to be part of the alumni mailing list, which includes a lot of the world's smartest, most creative people.

We've had a number of interesting discussions recently, ranging from 3D printing to the best source of "tiny balls" (don't ask). One of the most interesting has been the discussion about storytelling. One of my fellow alums reminded us of the following formula for an instant story:

Once upon a time....
And every day ....
Until one day ....
And because of that ....
And because of that ....
Until Finally ....
Ever since that day ....
And the moral is....

It struck me that this story template is extremely useful for entrepreneurs. It helps structure the narrative of why your company matters.

Once upon a time....Your market
And every day....The environment
Until one day....The problem
And because of that....Your solution
Until Finally....Your impact
Ever since that day....Your customers
And the moral is....Your secret sauce

This deep narrative structure helps turn a dry recitation of facts into a compelling story, once which can help you sell to customers and investors. Try it out, and let me know how it works for you!

Failure = Improvement

2011-06-09T12:30:00.000-07:00

Charter schools are about as good on average as public schools. But because they can fail, they provide opportunity for improvement that public schools don't. Without failure, it's much harder to generate improvement.

The Freakonomics podcast recently featured this telling analogy: What if restaurants were run like public schools? Imagine if you were required to dine at your local government-run canteen, with dishes determined by a citywide restaurant Superintendent, with a no-firing policy for staff?

Sounds like a bad Yakov Smirnoff joke. "In Soviet Russia, restaurant eats you!". We instinctively realize that restaurants like Gramercy Tavern should succeed, while Joe's Yak Butter Hut should go out of business. Failure ensures survival of the tastiest.

Yet while few would support the idea of a restaurant Superintendent, we allow the same crazy system to educate our children.

I guess we consider our seared ahi salad more important than the future of our country.

Always Start With The End

2011-06-08T12:41:00.000-07:00

In the startup world, you're always surrounded by uncertainty. There are always too many factors to consider, and your team members probably disagree. But you don't have to be paralyzed or choose blindly. Instead, follow this simple principle:

Always start with the end goals. Whenever you are stuck, refer back to those goals.

Our natural human reaction to all this uncertainty is to shift the scope to simplify the problem. Not a bad idea. The issue is that most of us instinctively narrow the scope. After all, that's the intuitive way to simplify.

However, narrowing the scope tends to produce tunnel vision and waste time on local optima. Think of all the times that the discussion of a complex problem goes down a proverbial rat hole as people focus on minutiae.

If you refer back to your end goals instead, you'll keep the team focused on what really matters.

Disrupt (Book Review & Outline)

2011-05-30T21:45:00.000-07:00

I like to tell people that when I was at Stanford, I studied the second and third best startup majors: Product Design and Creative Writing. (The best major of course is Computer Science. The worst is Political Science)

Creative Writing is great for entrepreneurship, and not just because it lends itself so easily to business plan jokes. Raising money, recruiting, even sales are all about telling compelling stories.

Product Design is also a great major. The concepts of prototyping and iteration were central tenets of design thinking decades before Steve Blank and Eric Ries coined the term, "lean startup."

Luke Williams comes from a strong design tradition, have worked at the legendary design firm Frogdesign (perhaps you're familiar with their design for the original Macintosh?). He's taken the principles of design thinking and applied them to the task of generating truly disruptive ideas.

Disruption--the breaking of conventions and cliches--is behind many breakthrough products, including the iPhone (what if you built a phone without buttons?). Most of us think of disruptive ideas as the product of a unique genius like Steve Jobs, but Williams' book lays out step-by-step guidelines for generating and (perhaps even more importantly) selling disruptive ideas to your organization.

In addition to being a great book, Disrupt includes one of my favorite features--a quick reference guide that serves as a step-by-step outline of the main points of the book. Luke has been kind enough to grant me permission to publish the quick reference guide, in its entirety, on my Book Outlines wiki.

Once you've read the quick reference guide, I encourage you to get your own copy of the entire book. It's a must-read for any entrepreneur.

Leveraging The Chinese Landlord Principle

2011-05-24T15:00:00.000-07:00

I've previously written about why Asians love real estate. At the time, I mentioned the Chinese Landlord principle, which has much broader implications for how to approach life. The basic Chinese Landlord principle is this:

The best tenant is one who sends a check every month and never calls.

I learned the Chinese Landlord principle at a young age; my Chinese family owned (and still owns) several apartment complexes, and the trials and tribulations of being a landlord were a frequent topic of conversation.

Nothing was more frustrating than badgering tenants who were late with their rent check, or dealing with weekend calls to take care of clogged toilets and other such annoyances.

If you got a good tenant, you would do everything in your power to keep them, including letting them pay a below-market rent.

I've put the Chinese Landlord principle to work in my own life--we rent our house in Palo Alto from Chinese landlords. I've set up automatic monthly bill payments to send our rent payments without fail and slightly early, and we do everything possible to avoid calling, including changing our own light bulbs and other such tasks.

We've been renting the house since 2002, and it took our landlords seven years to raise the rent--even now, we probably pay $500 per month less than market, all because we know how to be a perfect tenant.

The broader principle is that people will pay a premium for convenience and stability. Take away risk, and you will be rewarded. Offer a better "user interface" to your boss, and you'll get plum assignments and raises.

Who are the Chinese landlords in your life, and how can you apply the Chinese Landlord Principle to get a better deal from them?

Angel Investing Is Like The NBA Draft

2011-05-17T12:12:00.000-07:00

Each year, NBA scouts devote their time to finding flaws in players. Landry Fields lacks athleticism. DeJuan Blair is too short. And each year, those scouts misfire badly, as players like Fields and Blair end up thriving in the NBA.

The scouts fail because they're too focused on what players can't do, rather than understanding what they can. If you're a brilliant rebounder or a great shooter, but are below average in other aspects of the game, that's a lot better than being average at everything.

The same applies to investing in startups. It's easy to find reasons not to invest in a company. The founders are too inexperienced. The space is too crowded. The technology isn't unique enough.

But simply avoiding flaws isn't enough. Startups don't succeed because they demonstrate broad adequacy. They succeed by being insanely great at something, even at the cost of sucking at others.

If you want your startup to succeed, figure out your business' elite skill and focus on honing it. This isn't to say that your startup's flaws don't matter. They do. But being flawless yet mediocre is a recipe for indifference.

Conversely, if you're contemplating a potential investment, focus less on what it can't do and more on what it can. A great product that meets a critical need can convince people to overlook myriad flaws.

Find A Competition You Can Win

2011-05-16T12:18:00.000-07:00

In college football, the practice of scheduling cream puffs is both much reviled and much practiced. Football powers pay smaller schools to act as sacrificial lambs.

Seeking out weaker competitors is a contemptible trait in football, but it's good strategy when it comes to business. There's no BCS formula to give you extra credit for tackling tougher opponents.

Some of this principle is apparent in the practice of market segmentation--finding a niche you can dominate. But where segmentation is about customers, this is about selecting a competitive set where you can shine.

When I was a student at HBS, one of the companies that visited campus was Progressive Insurance. When asked the secret of their success, the managers there admitted, "Frankly, not that many smart people want to go into the car insurance business. Nothing we do is that advanced, but it's more advanced than anyone else in the industry."

In my own life, I've had a lot of success with my writing simply because most other business writing is that bad. When I was a Creative Writing major at Stanford, I struggled to get any of my stories or poems published. Today, I can get my articles published in some of the top outlets in the world.

It's not that my writing is that much better; I used to spend upwards of 40 hours writing and editing each of my stories. Today, I usually don't bother with revisions, and can write a piece in less that two hours. The difference? The competition. The average PR flack or business executive is much weaker competition than a dedicated fiction writer.

Want to shine? Find a competition you can win.

Be the first to stand and applaud

2011-05-02T12:34:00.000-07:00

image courtesy familymwr

It's amazing what people can do once they know it's possible. The SuperHappyDevHouse hackathons occurred because Jeff Lindsay and David Weekly threw a party for hackers, and a dozen people showed up. Now hundreds attend every month. (By the way, SHDH 44 is this Saturday; click here to register)

Every great thing gets started because someone decided to just do it. It's like a standing ovation after a performance. When the first person at the front stands and starts applauding, it gives everyone who wanted to, but was too cautious the permission to express their feelings as well.

Of course, sometimes you end up the only one standing. Not every performance is ovation-worthy; not every crowd us ready to erupt. But that's a small price to pay for the chance to bring something great to the world.

Nothing Matters But Traction

2011-04-29T12:08:00.000-07:00

Nothing matters but traction. It makes everything easy, but it is the hardest to accomplish.

Too many entrepreneurs focus on working around a lack of traction when they would be better off using that energy to get traction.

A common occurrence is that an entrepreneur comes to me asking for money.

"I need money for marketing so I can get traction."

Alas, that's exactly backwards. If you have traction, then raise money to increase your marketing.

My advice to those entrepreneurs is clear and consistent: "No one will invest in a startup without traction unless the entrepreneur has already been wildly successful. For first time entrepreneurs, that means no one will invest in your startup without traction. Period."

Despite this, some entrepreneurs will persist. They'll want to show off their product, or try to prove why their company will dominate once it launches.

Fine, I reply, if it's that good, just launch it, and you'll get the traction you need.

There is no short cut. Get traction before you try to raise money.

The art lies in figuring out the cheapest way to generate compelling evidence of traction. I'll leave that for a future post!

Will Mobile Kill The Web? (Hell No)

2011-04-26T10:50:00.000-07:00

Square honcho and legendary angel investor Keith Rabois said some provocative things about mobile versus web at the VentureBeat Mobile Summit:

Keith Rabois, a startup veteran who’s now president and chief operating officer at Square, didn’t mince words today when he talked about the potential of mobile startups. He said “the website as you know it” is “dead, dying, will be dying,” and that the future lies in reinventing Web experiences on the mobile phone.

Obviously Keith is somewhat biased, but I think he is on to something. The importance of the mobile experience is growing fast. Just this morning, I was thinking about my own portfolio of investments and realizing that I needed to find a mobile marketing guru to help some of my companies.

But while mobile is certainly growing in importance, the Web certainly isn't dying--at least for most applications.

No matter how powerful mobile phones get, their small size provides two major limitations:

1) They are terrible for displaying large amounts of data
2) They are even worse for allowing the input of data

As a result, mobile apps are great for many consumer applications (games, finding restaurants) where those limitations don't apply, but don't pose any realistic threat to those applications that bump into those limitations.

For example, spreadsheets have little to fear from mobile apps. No one in their right mind is going to put together their financials using an iPhone app.

In contrast, entering sales call notes into a CRM application should absolutely by done via a mobile app, since a) you can enter the details as soon as you get back to your car, and b) most salespeople enter terse, cryptic notes like "Called mr, lvm" (called male prospect, left voicemail) even when they are using a full-blown computer, so speed of data input isn't a major concern.

Even much-hyped mobile applications like shopping are unlikely to play a major role, except as a means of looking up and/or purchasing products when you're shopping at a bricks and mortar store.

Mobile apps feed on impulsiveness; anything that requires consideration will default back to the computer.

The wildcard in all this are future user interfaces. Mobile phones are already powerful enough to handle nearly any application--today's phones are more powerful than your laptop of 5 years ago. But the form factor doesn't lend itself to larger displays or high-speed keyboard input.

Give the hardware boffins some time, however, and those restrictions may eventually go away. When phones can project HD screens on your retinas, and you can enter input via a virtual keyboard based solely on your finger movements, there will no longer be any need for full-fledged computers. Ironically enough, however, at that point, the mobile interface will bear more resemblance to today's Web interface than to today's limited mobile interfaces!

(If you like this post, upvote it on Hacker News)

Little Bets = Greatest Hits Of The 2000s

2011-04-23T18:33:00.000-07:00

I've just completed reading Peter Sims' new book, Little Bets. I'll admit that I'm horrendously biased because 1) Peter is an old friend, and 2) he quotes me on page 75 of the hardcover edition, but I think that Little Bets is a great book.

(Apparently the world agrees; Amazon has 17 customer reviews for the book and each of them is a 5-star review)

The best way I can describe it is to say that Peter has done an outstanding job capturing nearly all the best ideas from the past decade and tying them together in a single, easy-to-read volume.

At first, I wasn't sure how much I'd learn from the book. After all, I've been steeped in these ideas for decades. I *was* a Stanford product design student before the term "design thinking" became popular. I was privileged enough to hear a lecture from Jim Collins *before* he wrote Built To Last, and I actually interviewed both Clay Christiansen and Hank Chesbrough when I was writing for the student paper at HBS, where I was also in the same section as Fran Johansson.

In other words, if all Peter had done was collect together ideas from other thinkers, I'd be the perfect reader to call BS. (Confession: If I hadn't liked the book, I would simply have avoided giving it a review or blogging about it. Call me an intellectual coward, but I'd rather remain silent on a book than hurt a friend's feelings.)

But Little Bets is so well-written that it transcends summary and becomes a true synthesis of ideas. Here's an example--take a look at the table of contents for the book:

Introduction
1. Big Bets Versus Little Bets
2. The Growth Mind-set
3. Failing Quickly to Learn Fast
4. The Genius of Play
5. Problems Are the New Solutions
6. Questions Are the New Answers
7. Learning a Little from a Lot
8. Learning a Lot from a Little
9. Small Wins
10. Conclusion

Each chapter covers a single key concept, and each concept flows easily into the next. And while many aspects of the book seem Gladwellian (a focus on anecdotes, wide ranging examples from standup comedy to counterinsurgency), Peter's authorial voice is restrained and elegantly spare, which make personal touches even more effective--like the example of how a conversation he had with the late, great Tim Russert (a family friend) led to Russert being the first TV journalist to get Barack Obama to acknowledge his interest in running for the presidency in 2008.

The cherry on the sundae is the great care Peter takes with the conclusion and the "Further Reading and Resources" section. As you may know, I often write outlines of the books I read; I find it's hard to remember the salient points without a concise summary.

I'm not going to bother for Peter's book. His table of contents and conclusion do the job for me. Here, for example, is a brilliant paragraph from the conclusion that summarizes the book:

Invention and discovery emanate from being able to try seemingly wild possibilities and work in the unknown; to be comfortable being wrong before being right; to live in the world as a keen observer, with an openness to experiences and ideas; to play with ideas without censoring oneself or others; to persist through dark valleys with a growth mindset; to improvise ideas in collaboration and conversation with others; and, to have a willingness to be misunderstood, sometimes for long periods of time, despite conventional wisdom.

On top of that, his "Further Readings and Resources" is better than any I've read. He lists 42 different books, complete with a one-paragraph explanation of each, as well as as 13 Twitter feeds to follow. Half of the books he lists are books I've read, almost all of which I consider classics. The other half will be jumping to the top of my list of books to read.

I don't buy a lot of books. In fact, one of my strangest and most distinctive habits is that I almost always buy a book after I've read it (my reasoning is that I should only buy books I *know* will be worth it). While I received a free review copy of Little Bets, I wouldn't hesitate to buy a copy for any friend who wanted a masterful introduction to the world of innovation and ideas.

If you don't have time to explain, you're not decisive, you're unfocused

2011-04-22T12:32:00.000-07:00

One of my pet peeves when it comes to management is when someone tells me, "I'm sorry, but I don't have time to explain."

When that happens, I think that person has been watching too many action movies. If you're on the run from a secret government conspiracy, you probably don't have time to explain your actions. But the same doesn't usually apply to your upcoming marketing campaign or product release.

In the startup world, it's rare to have assembly line workers who are just supposed to do as they're told. (as a side note, the Toyota Production System has already proven that even assembly line businesses are better off with engaged workers who focus on process improvement)

We hire smart people, and give them a lot of freedom. That's one of the main reasons that startups run rings around their clumsy competitors. But the only way people will be able to contribute is if you give them the big picture.

Conveying the big picture takes explaining, which takes time. And because speed is so important, we often begrudge this time. But skipping explanations is a false economy.

Skipping explanations will put you in a death spiral of micromanagement. The less you explain, the more you will have to specify future actions. Eventually, you simply run out of time (and employees).

If you feel like you don't have time for explanations, that's probably a sign that you're unfocused. Get a few crucial things right, make sure your entire team understands those things, and rely on their judgement to get the lesser things right.

After the Fire

2011-04-19T15:43:00.000-07:00

One of the best times for seeds to grow is after a forest fire. There's plenty of nutrient-rich ash and daylight.

The same principle applies to startups. Many times, you can find great opportunities in the wake of spectacular flameouts. Palm revolutionized handheld computing after the spectacular failure of Go. Zappos built a billion-dollar business after other dot bombs like eToys flames out.

What space do you think represents fertile ash today? Solar? Twitter clients?

Twitter's Dark Side

2011-04-18T13:29:00.000-07:00

Because Twitter is perfect for crack-like bursts, it becomes all too easy to procrastinate the things that require more time. How many times have you told yourself you'd just check your feed for five minutes...and found yourself shaking your head an hour later?

On the other hand, if you do have the willpower to put down the crack pipe--er, Twitter client--and work on more substantive issues, you can stand out from your weaker-willed peers.

Does Social Media make people miserable?

2011-04-17T18:29:00.000-07:00

One of the unexpected effects of the rise of social media may be its impact on the perception of inequality.

We know that the perception of inequality can have a negative effect on happiness. Comparing oneself to others is a potent and dangerous temptation. Indeed, studies show that most people would prefer a situation in which they earned less money, but were better off than their peers than one in which they earned more on an absolute scale, but less relative to their peers.

When I was in business school, I speculated that this effect caused a lot of unhappiness. Rather than celebrating their incredible good fortune, far too many of my classmates would compare themselves to the titans of industry they read about and conclude that they could never measure up. Just because you're unlikely to match the accomplishments of a Jeff Bezos doesn't mean you should beat yourself up and call for the Prozac.

Now social media might be having this effect on everyone, not just MBA students with excessive self-regard. One of the things that has made Twitter so popular is the ability to access the (ostensibly) unfiltered thoughts of the rich and famous. We feel closer to our favorite athletes and entertainers (or in the Valley, entrepreneurs and VCs). In many ways, we feel like we have a personal relationship.

In one sense, this access has a democratizing effect, much like the popular tabloid practice of running unflattering photos of starlets shopping at the local Costco. But it also has the effect of making the rich and famous feel more like peers. And if they feel more like peers, we're more likely to use them as a basis for comparison.

It used to be that people would compare themselves to other people in their neighborhood or town. And while there's bound to be a successful car dealer or a popular local teacher, at least we could realistically aspire to similar levels of success. Athletes and Hollywood celebrities were like far-off deities. Now, that distance has vanished, causing many to wonder, "If Snooki can be rich and famous, why aren't I?"

By encouraging less realistic comparisons, social media could end up making people less happy and well-adjusted.

But the answer isn't to ban Twitter and Facebook. They're just the disease vector.

Rather, we must learn to avoid pernicious comparisons and focus instead on the intrinsic motivations that can bring us true happiness.

Raise Money Now!

2011-04-17T18:10:00.000-07:00

I've been saying quite a bit privately, but I think it's time to say it publicly:

If you are an entrepreneur, raise money now.

It's never easy to raise money. People who say, "It's easy to raise money," usually neglect to mention the second half of the sentence, which is "if you are in a hot space, know the right people socially, and fit the Silicon Valley central casting notion of an entrepreneur (20something white or Asian male with an engineering degree from a prestigious university)."

Nonetheless, it is easier to raise money for a startup right now than throughout 99.999% of history. Thanks to the angel boom/bubble, there are numerous sources of seed financing, ranging from incubators to seed funds to plain old ordinary angel investors.

When I raised money for my first company in 1999, the only way to find angel investors was to network like a maniac. You just sort of heard about people who made investments, and the only way to get to them was via a personal introduction.

Today, a company can go on AngelList on Friday, and have a seed round wrapped up by Monday. I'm exaggerating, but only a little.

And while I think the current bubble (and the associated premoney valuation standard) is unsustainable, the amounts being raised in seed rounds simply isn't large enough to cause valuation problems down the line. If you raise $500K, even if you have to do a down round later on at a much lower valuation, the dilution will be minimal.

By the way, the last time I told entrepreneurs to raise money now? Early 2008.

When in doubt, steal

2011-04-17T18:03:00.000-07:00

When in doubt, steal--see what others have done to be successful and learn from them.

In "Stumbling On Happiness," Dan Gilbert wrote about how humans overestimate their uniqueness. The best way to predict if something will make you happy is to ask a perfect stranger who did the same thing.

The same principle holds true for work. People have a strange tendency to start from scratch. To heck with that. The best way to be successful is to emulate* what someone else did.

If you're not influenced by what's worked in the past, you're not original, you're dumb.

* The art lies is figuring out the right twist. Obviously I'm not suggesting that you copy someone else exactly--that's both illegal and dumb. As Mark Twain said, "History doesn't repeat itself, but it does rhyme."

Outrunning the Angry Bear

2011-04-15T12:01:00.000-07:00

Angry bear courtesy of icanhazcheeseburger

A lot of Silicon Valley types are perfectionists. They always worry that their solutions are imperfect. That's when I advise them to follow the "Angry Bear Principle":

You don't have to outrun the angry bear--you just have to run faster than the other people the bear is chasing.

Whenever people dwell on their imperfections and despair, I remind them, you don't have to outrun the bear, just the competition.

The TechCrunch Paradox

2011-04-14T11:06:00.000-07:00

In the beginning, you read TechCrunch because it covered stuff other people didn't.

Now, you read TechCrunch because it covers stuff everyone else is covering.

Both make sense, yet are diametrical opposites. Discuss!

The Power Of The Extreme Example

2011-04-13T12:57:00.000-07:00

One of the entrepreneurs I've advised called me Yoda, because he said I was always using Jedi mind tricks to persuade him. He must not have minded, since he presented me with a Yoda bobblehead, which I keep on my mantel.

One of my favorite tricks is to combine the power of the extreme example with the power of reversal. I start by deliberately using an extreme example that my conversation has to agree with.

For example, if I needed to persuade someone of the importance of changing one's dietary habits, I might say, "What if I told you that you would die tomorrow without a special medicine only I possessed? How much would you pay for that?" Presumably the answer is, "a lot."

Then I would slowly walk my way back from the extreme example, coaxing the person along each step. "Okay, what if you weren't going to die tomorrow, but in 20 years? Now how much would you pay?"

After that, "How much would you pay to halve your chance of death in the next 20 years?" Let's say my hypothetical conversation partner says $100,000.

Now here's the real trick--reverse the question. By coming at the same issue from the opposite angle, you can induce insight. "How much money would I need to pay you to get you to eat right and exercise?" He'll probably answer something like $10,000.

"So let me get this straight," I say, "You'd pay $100,000 to halve your risk of death, but it would only take $10,000 to get you to eat right and exercise--which would cut your risk of death by over 70%. How about if you give me $100,000, and I'll pay you $10,000 to eat right and exercise?"

They usually don't take me up on my generous offer.

The Death of the Feed

2011-04-12T12:13:00.000-07:00

Image courtesy of the awesomely cool Russell Beattie

I remember in 2001 when I first heard about RSS. Back then, we still called them weblogs, and there were so few blogs that it was news when a new one started. For example, I distinctly remember reading excitedly about a promising new VC blogger named Jeff Nolan from SAP Ventures.

At first, I just visited selected blogs regularly, checking for updates like I did on my sports websites. Then I learned about RSS and started following blogs using Bloglines.

For years, my RSS reader was my most important source of information. But gradually, I've found it's getting displaced. Not by Twitter, as many people have argued, but by group and personal filtering systems.

In some ways, it's back to the future--once again, I fond myself checking just a few sites and services. But this time, it's due to a surplus of content, rather than a paucity. Both my RSS reader, Twitter feed, and Facebook feed are overwhelming. Reading every item would literally be a full-time job. Instead, I find myself dipping into the stream on an occasional basis.

Here are my information consumption habits:

RSS feed of close friends (to keep up with their thoughts and activities)
@mentions on Twitter (to see who's reacting to my tweets)
Techmeme (to see what everyone is talking about)
Hacker News Daily (to see what young technical entrepreneurs are talking about)
Summify/My6sense (personalized feed filters to tell me what my network is talking about)
Twitter (dropping in to see what's shaking, much like cruising a neighborhood and checking for parties)
Facebook (ambient awareness of what my casual friends and acquaintances are doing)

What's interesting to me is the balance between personalized and general. The personalized news sources help me maintain relationships and keep me informed about my little world; the general news sources help me discover new insights and information sources.

Perhaps the is the natural long-term balance; more personalized than the old pre-Internet mainstream media, but with a core of commonly read information to help set the agenda.

Money is not the answer

2011-04-11T15:53:00.000-07:00

The US spends more on healthcare than any other nation. We spend more on education than all but Switzerland. Yet the results we get are poor because our approach is wrong. So why would things be any different for your average startup?

Money is a turbo booster. It allows you to get to your destination faster, but if you're on the road to perdition, all it does is get you to disaster faster.

First make sure you're on the right track, then add money.

Blogging Update

2011-04-11T15:45:00.000-07:00

My sincerest apologies, dear reader, for having neglected you for so long. I've been extremely busy with work, and I've finally come up for air.

The ironic thing is, I actually have tons of blog posts already loaded in the system--I've been so busy, I haven't even had 90 seconds to send them out.

My promise to you is this: You will get a new blog post every day this week (Monday through Friday). And if I fail, I'll post a poll where you can decide my punishment.

The Secret of Getting Ahead

2011-03-29T09:46:00.000-07:00

“The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and then starting on the first one.”

--Mark Twain

What If Every Developer Focused On Lifestyle Businesses?

2011-03-19T08:42:00.000-07:00

I recently ran across this post from Justin Vincent, where he argues that entreporn--the overwhelming focus on chasing "the next big thing"--holds developers back from their full potential. Instead, he writes:

"The absolute truth is that each and every one of us can build a business that can support us."

That's bullshit.

While Vincent makes some great points about flaws in the startup ecosystem (TechCrunch prefers to write about outliers like Zuckerberg; VCs chase the next Facebook because that's how their model works, corporations don't want their employees to leave to become entrepreneurs) his fetishizing of the lifestyle business does more harm than good.

Would Vincent believe me if I said, "Each and every one of us startup marketers can build a consulting practice that can support us?" Or what if someone said the same thing about IT administrators? Or accountants?

The statement is absurd on the face of it. So what magical powers do developers have that make all of them capable of building their own business? Sure, thanks to Amazon Web Services and the cloud, a solo developer can build a great app in their spare time. But thanks to WordPress, every would-be writer can start a great blog in their spare time. That doesn't mean either of them can build a business of it.

According to the U.S. Bureau of Labor Statistics, in 2002 there were 612,000 software engineers and 457,000 computer programmers in the US (not sure the distinction between the two, but whatever). That's over a million developers.

Let's imagine that only 1/10 of those developers decided to build $10,000/month web app businesses. If they all succeeded, that would mean that there was a $12 billion/year market for this kind of web app (100,000 developers x $10,000/month x 12 months/year).

Salesforce.com, the world's largest and most successful SaaS company, which has taken over a decade to build, generates annual revenues of just $1.66 billion.

Is there room in the marketplace for 100,000 new web apps that would collectively represent 7 Salesforce.com's worth of revenue? Call me skeptical.

"If you genuinely have the spirit of an entrepreneur inside of you, it’s perfectly possible to build a $10k/month webapp business that can set you free."

Think about how often you hear the maddening statement, "It's easy to raise money for your startup." Most people who have tried will agree that it's BS. Sure, it's easier than before, but that doesn't make it easy.

The same holds true for this kind of "Law of Attraction" pep talk for developers--it is perfectly possible. Just highly unlikely. Maybe not as unlikely as starting the next Facebook, but still darn unlikely. All you have to do is prowl the threads at Hacker News to find hundreds of horror stories about developers who built apps but could never generate a lick of revenue.

Look, I've got nothing against lifestyle businesses. I've observed that you don't need a ton of money to live like a billionaire. I've written about a friend who managed (through years of toil) to build a $50,000/month blog empire. I'm in favor of developers building apps to solve real problems, and I wish I had development skills like my friends Brian and Paul, who can build awesome apps over a single weekend.

But the fact is that even though it's hard to start the next Facebook, and even though it sometimes sucks to work for someone else, the Silicon Valley startup system works. Google now employs over 24,000 people (mostly engineers). Private companies like Facebook, Zynga, and LinkedIn have well over 1,000 employees.

I encourage any developer who has a great idea for a web app to pursue it, and I hope that he or she succeeds. But I'm glad that people are still trying to start the next Facebook, and I'm glad that there are companies that hire people, because I just don't believe that there's room in the world for 100,000 lifestyle web app businesses.

Investors Are Job Applicants

2011-03-18T12:34:00.000-07:00

Start thinking of investors as job applicants.

Many entrepreneurs make the mistake of investor promiscuity--they'll get in bed with anyone with an open wallet. You need to be as picky with potential investors as you are with potential employees, if not more. Remember, you can't fire your investors.

Conversely, investors should figure out how they add value to their deals and sell that value. If an entrepreneur doesn't think you add value but still wants your money, he is either dumb or desperate. Either way, you shouldn't invest.

Here's a great example from my own portfolio. I started working with David Weekly and Ramit Sethi long before I ever invested. I offered product feedback and helped them with free advice. We even worked on a few experimental projects together. By the time PBworks* raised its first round, the company knew I would add value, and made sure there was space for me in the round, along with much more renowned investors like Ron Conway.

So it you're an entrepreneur, don't be frustrated if the investor you meet with doesn't write you a check on the spot (though certainly, such investors are much appreciated). Instead, appreciate the opportunity to conduct multiple rounds of job interviews to determine if *you* want that investor on your team. See how he or she works, and figure out if you'll enjoy working with them.

The good news is, if you enjoy working with the investor, chances are, that investor will decide the feeling is mutual, and invest in you as well.

* And sometimes, the metaphor becomes more--in the case of PBworks, I eventually ended up accepting an offer to become an employee!

Jason's Made-up Songs

2011-03-16T22:21:00.000-07:00

One of the things Jason enjoys is making up fake song titles. Here the list he came up with today:

Granpa [sic] was an ape
Boring
Lovely Spleen
I twink - Mel Gibson
Sour Barty
Lunch Meet
Gooky
Son of a, Diddle, Exhausting, Stinkin' Eggs
Sunk Bat
Bony
Magical Thieves - Return of the Lean
Mini Ha Ha (The Joke is on you)
Matter Bald Top
Mr. Revere
Meba
What?
Anything Sneeze
Astronaut on a snowy evening

I'm particularly interested in the R&B grinder, "Magical Thieves - Return of the Lean," and the sensitive ballad, "Astronaut on a snowy evening." But the biggest hit will probably be the party song, "Mini Ha Ha (The Joke is on you)".

The Parable of the Waves

2011-03-15T12:09:00.000-07:00

This insight comes from famed TV producer Stephen Bochco (Doogie Howser, NYPD Blue) by way of Neil Patrick Harris, who told the story on Kevin Pollak's chat show.

Harris became a TV star at a very young age, thanks to Bochco, but after his run as Doogie Howser ended, he went through a long dry spell. (Remember "Stark Raving Mad"? Neither can anyone else.). At loose ends, he talked with his old mentor, who had this advice, which is as applicable to the startup life as it is to Hollywood:

"Success is like riding a wave. It carries you along, and you feel unstoppable. But eventually it's over, and you end up crashing on the beach. At that point, you have to decide whether or not to swim out through the pounding surf to try to catch another wave."

Do you still have the will to swim out for that next wave?

Can We Ever Have Too Many Startups?

2011-03-14T14:48:00.000-07:00

My recent post on the diatom bloom in the startup ecosystem prompted calls for me to dig deeper and provide more data. Far be it from me to disappoint!

Chris Tacy asked, are we seeing too many startups? It's a loaded question, but a good one.

My instinctive reaction is that it's always good to have more startups. When I was younger, and people asked me about the value of startups, I would ask them, "Who do you think will produce more innovation and value? Microsoft and its 40,000 employees, or 10,000 four-person startups?" (this was back when Microsoft had only 40,000 employees...and was still a widely admired company).

The answer, of course, is 10,000 startups. (I hope I'm not giving Dave McClure any ideas for his next fund....)

Yet the incredible recent explosion in startup numbers does give me pause--and not just because AngelList solicitations threaten to outpace Viagra ads in my inbox.

10,000 startups working on 10,000 different ideas is wonderful for innovation. 10,000 startups working on the same idea--not so much.

The reason that a diatom bloom is dangerous is that it's a monoculture that crowds out the rest of the ecosystem.

The danger we face with today's startup explosion is that we could end up in a situation where there are too many startups pursuing the same ends.

For example, just how many local deal sites do we really need?

And don't forget that even startups are still subject to the laws of supply and demand. If there is an excess of supply, the price drops accordingly. Too many startups pursuing the same market tend to compete away all the value in the market. It's hard to charge a fair price for your product or service if there are 10 other people trying to penetrate the market, and are willing to discount to get an advantage.

Startups are a force for good because they have proven over time to be the best vehicle for pursuing innovation. But not all startups are innovative.

We can never have enough startups that are pursuing unique solutions to important problems. But a profusion of "me-too" startups can actually damage the startup ecosystem by consuming the sunlight (funding, engineers) that would otherwise go to more unique and innovative startups.

The Diatom Bloom in Investing

2011-03-14T14:23:00.000-07:00

You can think of the startup ecosystem as a food chain, with different species fulfilling different ecological niches. Angel Investors feed on tiny early-stage deals, while VCs gobble up bigger deals. Private equity, corporate buyers, and the public markets make up the higher reaches of the chain.

What we're going through now is the equivalent of a diatom bloom; conditions are perfect to allow a thousand startups to spring up. But a diatom bloom has a dark side; an imbalance in the ecosystem can cause problems further up the chain.

Silicon Valley > Boston (The Data)

2011-03-05T06:47:00.000-08:00

I love Boston. I lived there for five of the best years of my life, when I was working at D. E. Shaw & Co., and then when I attended Harvard Business School.

If anyone asks, I always tell them, "if Boston had the same weather and career opportunities for me as Silicon Valley, I'd move there in a heartbeat."

But the sad fact is that Boston isn't in Silicon Valley's league as a startup hub.

Professor Vivek Wadhwa, who does a lot of great research into the realities behind startups, was speaking at MIT's Sloan School of Management, when he explained the policy and environmental reasons why Silicon Valley has done a better job of generating startups than Boston. Several members of the Boston startup community took offense, and demanded that Wadhwa produce data to prove his point.

Wadhwa did so in a recent TechCrunch post, where he points out that Silicon Valley has greater per-capita GDP, per-capita education, and a greater proportion of members of the "creative class" than Boston.

Not being an academic, I'm less concerned with these kind of population statistics, and more concerned with the things that really count in the startup world: Financing and exits.

On the financing side, the dominance of Silicon Valley is well-known. In the most recent PriceWaterhouseCoopers MoneyTree report (Q4 2010), Silicon Valley accounted for nearly 40% of all venture investment dollars in the United States, with New England a distant second at just under 11%. (To be fair, Silicon Valley has 2.5x the people as the Boston metro area, but the intensity of investment is still much higher)

The following story is anecdotal but telling. A month ago, I met with Brian Krejcarek of GreenGoose. He had been doing great things, but was somewhat discouraged by the pace of fundraising in Boston. I advised him to get out the Valley ASAP, and promised to help him raise money. As it turned out all he needed to do was get out to the Valley.

GreenGoose was the hit of the Launch conference, and actually raised $100K from investors while Brian was on stage.

It might be that the folks in Silicon Valley are just less selective, but as an entrepreneur, why should you care? If you want money, follow Horace Greeley's advice, and "Go West, young man [or woman]!"

But the kicker is that the data strongly suggests that not only is Silicon Valley better for financing, it's also better for exits.

Let's look at the historical performance. I went to this list of the 25 most valuable publicly traded companies in America.

Of the companies on this list, I consider the following technology companies:

Apple
Microsoft
IBM
Google
Oracle
Intel
Cisco

By my count, that's five Silicon Valley companies, one Seattle company, and one New York company.

Even if you go to the next 25, the results are pretty similar:

Qualcomm
HP
Amazon
EMC

Now the totals are six for Silicon Valley, two for Seattle, and one for Boston and San Diego.

You have to go all the way down to #49 on the list before you reach a Boston company. And even at an impressive $56 Billion, EMC is less than 1/5th the value of Apple. And don't forget, EMC was founded in 1979, so it had quite a headstart on companies like Google and Amazon.

I love Boston, but the data have spoken, and it's not even close. Silicon Valley is the better place to start a company.

How Do You Choose Between Job and Family?

2011-02-23T12:52:00.000-08:00

My friend and HBS classmate, Lindsey Mead Russell wrote a great article for the Princeton Alumni Weekly last year.

In it, she meditates on one of the fundamental dilemmas that faces women: Job or Family?

Lindsey followed a path that many would envy or consider the ideal--she worked part-time managing recruiting for a private equity firm. She was well paid, yet also had lots of time to raise her two beautiful children. Yet even as she accepted congratulations from friends on her remarkable "work-life balance," Lindsey had her doubts:

What does it mean to have a foot in both worlds? I think it can be wonderful or it can be torment, depending on the person and the situation. I’ve always straddled the gulf of the mommy wars, always worked part time, always spent part of my week in an office building and part in the sandbox. I have insisted on keeping a “foot in the door” professionally because I was sure I’d want to “ramp back up” someday. These phrases, so familiar in business school, seem foreign on my tongue now, like a language I used to speak but have lost. The thing that haunts me is this: In being unwilling to give up either world, did I end up doing a poor job in both?

As is often the case, reading Lindsey's writing made me think about my own life, and I wrote an email to Lindsey which I decided should be a blog post:

***

The question of focus is an interesting one, for dads as well as moms.

It is indeed a great luxury and privilege to have so many things that one could do. But as much research has shown, too much choice can impact happiness as much as too little choice.

Especially here in the Valley, it’s a badge of honor to work long hours, and people aspire to see their names bandied about in the press.

I long ago decided that I wasn’t willing to sacrifice everything in the monomaniacal pursuit of a single goal (e.g. the billion-dollar liquidity event).

But I’ve also been unwilling to give up on being an important part of startups.

In theory, shouldn’t I find a nice cushy corporate job? I’m good at getting along with people, so I could probably nestle into the underbelly of a big corporation and make a ton of money without having to exert myself too much. In doing so, would I be a better father? A better provider? Less likely to have to answer random calls from entrepreneurs in the evenings and on weekends?

Am I selfish to do the work I enjoy when I could make a different choice, make more money, and have more time for my family?

What choice do you make in your own life? Because make no mistake, we all make choices.

Free Event Thursday: Founder/CEO Succession

2011-02-14T11:57:00.000-08:00

If you liked my recent post on How To Avoid Getting Fired From Your Own Company, you'll love my upcoming panel on founder/CEO succession issues, What Color Is Your Parachute?

The good folks at Orrick and I have assembled an All-Star panel with three founders and three VCs for a frank discussion of when/why/how founders give way to outside CEOs. The speakers include:

Dave Hersh: Founded Jive Software, brought in Tony Zingale as CEO.

David Weekly: Founded PBworks (formerly PBwiki), brought in Jim Groff as CEO.

David Ulevitch: Founded OpenDNS, brought in an outside CEO but eventually took the helm again. You can read his story in the New York Times.

We also have three VCs who are brave enough to go on record about their experiences with founder succession. They are:

We'll discuss key issues like when to have the discussion about succession, what to do when the topic comes up, and how to make the process go as smoothly as possible, plus take questions from the audience.

The event starts at 8:30 AM on Thursday morning at Orrick's office in Menlo Park. You can register for this free event here.

Why Not Combine WP48 and Usage Rate?

2011-02-03T07:26:00.001-08:00

(apologies for startup fans--the following blog post is all about basketball stat-geekery)

One of the major revolutions in basketball fandom over the past decade is the rise of advanced statistical analysis, similar to Sabermetrics for baseball. Thanks to folks like John Hollinger and David Berri, NBA fans now have a plethora of stats. My personal favorite is Berri's WP48 (wins produced per 48 minutes) because it is already position-adjusted (e.g. Centers are measured differently than Point Guards).

However, the arrival of advanced stats hasn't ended the interminable debates. The main criticism of WP48 is that it favors rebounders who don't shoot (much like the book Moneyball implies that Billy Beane's genius lay in signing fat baseball players who walk a lot). We don't like the idea that rebounding specialists like Ben Wallace are superior to balletic guards like John Wall.

A bigger issue is the intuitive argument, "But a team of 5 Ben Wallaces would stick, because none of them could shoot."

Similarly, a lot of stat geeks predicted that the Miami Heat would be unstoppable, thanks to the statistical contributions of LeBron James, Dwyane Wade (damn you, why can't you just spell your name correctly!) and Chris Bosh.

That had the opposite problem from Ben Wallace--all three of those guys want the ball in their hands all the time, which meant that their individual stats weren't additive. We measure this ball-neediness with the statistic of usage rate, which measures what proportion of a team's possessions a player uses while he's playing.

My proposal is simple: Acknowledge the fact that when you construct a team, you have to select a lineup with a cumulative usage rate of 100%.

If you build a team that looks great on paper, but has a usage rate of 200%, recognize that the numbers are going to be off--badly. If you build a Ben Wallace team that has a cumulative usage rate of 50%, recognize that the numbers are also going to be off.

Many stat geeks feel that the best players on the Lakers are Pau Gasol and Lamar Odom. Both generate high WP48 scores without taking a lot of shots. But without Kobe Bryant, both Gasol and Odom would be forced to take more shots than they could effectively use. Just watch the Lakers try to play for long periods without Bryant and you'll see what I mean. (And I still think Kobe shoots too much.)

My principle adds additional complexity. There isn't a single stat for comparing players. You can't simply say, "LeBron James is the best player in the NBA." What you can do is better assemble a lineup of players who cover all five positions on the court, and balance high efficiency with natural usage rate. It's not as easy to explain or argue, but it's probably more effective.

Influencer Series Notes

2011-02-02T23:48:00.000-08:00

I went to Ravi Belani and Michelle Gonzalez's Influencer Series event tonight. I'm a bit too tired to write a formal review, so I thought I'd just share my raw notes and quotes (taken with my iPod Touch) and let you judge for yourself if the event was worthwhile:

Consumer electronics is swinging away from Japan. Now it's SF (design) and China (mtg).

TaskRabbit = MyLackey 2.0

Ann: From 2003 to now, cost of product Dev decreased. Capital has been commoditized.

Geographically distributed life.

Euclid = Urchin for real life--will change ability to tell if advertising works

The 4 Fallacies

I've seen this movie before
This is X meets Y
I invest in great people
I don't know how it will make money, but it will have value

Me: I don't think they're fallacies. I can't predict markets and tech, but I can predict people.

Correlation Ventures: The first quant VC

Thanks to Social Media and app stores, today is more of a meritocracy than any other time in history.

It's not that Microsoft is a bad company, they just don't build good products.

Hype is important because it drives recruiting

Marketing is not hype

Zappos: Measured themselves on the number of customer wows.

Foursquare: FS connected directly to loyalty cards, purchasing habits

Wine sippers vs Beer slammers

Up to 20% discount = promo
Over 40% discount = deep discount
In between doesn't matter.

4square's competition isn't Facebook, it's Amex/Visa/MC. When you swipe your card, you're checking into location and product.

The Reason The Rich & Famous Commit Suicide

2011-01-29T18:54:00.001-08:00

The realization struck me as I was listening to Darryl "DMC" McDaniels of Run-DMC tell the story of when he sat in his hotel room while on tour and thought about killing himself.

McDaniels thought back over his life and his runaway success and realized that he still wasn't happy.

Many of us go through life dreaming about being rich and famous. Maybe we think that next company will get acquired. Maybe we're secretly practicing for the next round of American Idol tryouts. But as fruitless as those dreams might be, they still give us hope.

We believe that special something might be around the corner, might be able to change everything.

But the rich and famous don't have that luxury. They already have the worldly success that so many of us think will make us happy. And they've discovered that it doesn't.

At that point, there are only two conclusions they can draw.

One, having achieved all the worldly success they ever wanted to achieve without achieving happiness and satisfaction, they conclude that nothing will ever make them happy. In response, they seek oblivion in drugs or death.

Two, having achieved all the worldly success they ever wanted to achieve without achieving happiness and satisfaction, they conclude that worldly success doesn't bring happiness and satisfaction, and that they need to seek true happiness in other ways.

We often think that the rich and famous are lucky, and we envy them their worldly success. But that same success leaves them no excuse for being unhappy. There are many cautionary tales of celebrities, especially those who achieved their fame young, who never managed to get past their moment of truth.

But whether you're rich and famous or poor and obscure, remember one fact--extrinsic motivators like fame and fortune don't make you happy. In fact, they make you unhappy even if you achieve them. Focus instead on the things that really matter--intrinsic motivators like relationships, growth, and giving back.

Silicon Valley Posers And The Inevitable Bust

2011-01-27T10:21:00.000-08:00

This morning, my friend Erica Douglass wrote about why Silicon Valley is broken, and why she moved away:

This conversation was a microcosm of the reason I left the Valley. No doubt, this guy had a good-looking website, and two co-founders who had signed on to the idea. That part was great.

The part I hated was the "game" he and so many others are caught up in. It's the merry-go-round of "Let's find funding first and then get tons of press (when we get funding), and then the user problem will take care of itself."

This person I talked to was just one of thousands of people caught up in that mentality. My point with this story isn't to slam him or his site, which is why I've anonymized the conversation. It's to point out the ridiculous goal misalignment in Silicon Valley–funding over revenue; short-term growth over long-term business strategy.

While I agree with Erica that emphasizing funding over revenue and short-term growth over strategy makes little sense, I disagree that this means that Silicon Valley is broken. In fact, I'm going to argue that it's a feature, not a bug, and that the Silicon Valley Posers that Erica so despises are a necessary part of what makes Silicon Valley so successful.

Every few years, Silicon Valley seems to undergo another boom. Personal computers. Biotech. The Internet. Web 2.0. Social. And during every boom, the Valley fills with posers.

There's actually much to admire about the posers. Like the original 49ers who came out to California for the original Gold Rush, they're willing to take risks and try new things. The fact that most of them will fail miserably is their problem, not yours.

The real secret behind Silicon Valley is the willingness to fail. The odds of starting a successful company are slim; even venture-backed companies have about a 1 in 10 chance. But because we don't penalize smart failure, and give people second chances, we encourage more startup activity than any other place on Earth.

We may have 10 times the failures of other cities, and some of those failures can be pretty embarrassing (Pets.com anyone?) but we also have 10 times the successes, and a single Google or Facebook can make up for an awful lot of failures.

The Silicon Valley success formula is simple: Build something great, change the world, get rich.

The posers arise because during boom times, Silicon Valley is so encouraging of startups that people who have no businesses being entrepreneurs start their own companies. These get rich quick artists forget that getting rich is merely the *consequence* of building something great and changing the world.

The very optimisim that makes Silicon Valley so successful during normal times becomes a negative during boom times as it tips over into irrational exuberance and attracts an army of posers.

But don't worry Erica, you needn't stay away from Silicon Valley forever. As the archetypal saying goes, "All this has happened before, and will happen again."

The posers will bring on an inevitable bust, and during the carnage that follows, the ecosystem will rid itself of the posers and renew itself.

And each time, the world will be a little be better off because of the great things we built along the way.

Time Allocation > Goal Setting

2011-01-21T13:33:00.000-08:00

Every personal productivity guru preaches the importance of goal-setting. But of you're like me, your problem isn't a lack of goals. It's a lack of time.

I often feel like I have too many goals, all clamoring for my time. Setting all those goals becomes counterproductive. Rather than wasting my time drawing up yet more goals, I should be getting things done.

Too often, productivity becomes an excuse to fiddle with the tools of productivity rather than simply being productive. It's like the hoarder whose desk is a mess because it's covered with books on how to organize one's life!

Don't focus on what you have to get done; instead focus on optimizing how you allocate your time.

You only have so many hours in a day. If you clearly define how you want to spend those precious hours, you can focus your efforts on whatever really matters for you.

Like investing for retirement, goals matter, but allocation is how you get there.

Self Awareness & The 2008 Election

2011-01-19T13:36:00.000-08:00

Over my vacation, I read "Game Change," which tells the story of the 2008 US presidential election. Not only was it a compelling page-turner (it really was an incredible narrative), the book is also instructive in how important private strength is to public success.

Of the main characters in the drama--Barack Obama, Hillary Clinton, and John McCain, it is no coincidence that the eventual winner makes the best impression. What is less obvious are the reasons why. While Obama is rightly credited for his remarkable oratory, what stands out is the strength of both his self-awareness and his relationships.

Both Clinton and McCain deal with major issues that stem from their troubled marriages. Both Clinton and McCain end up firing old friends from their posts as campaign manager. In contrast, "no drama" Obama draws strength from wife Michelle and maintains a calming influence over his campaign. When he does intervene, it is gently but purposefully.

The contrast in terms of self-awareness is even greater. Both Clinton and McCain have a difficult time understanding how others perceive them, and an even harder time accepting unpleasant truths. Clinton agonizes over her stance on the Iraq war. In contrast, Obama deals briskly and decisively with his own issues, whether with originally pledging not to run in 2008 to repudiating his former pastor, Reverend Jeremiah Wright. I think one of the main reasons he is able to do this is that he seems to have a clear sense of who he is (a trait that in the book sometimes comes off as arrogance) which means he isn't driven by a constant battle to define himself or be something he isn't.

Ultimately, both Clinton and McCain were far more experienced than Obama. But while he was able to deal with his experience gap, neither of his opponents found an effective way to combat the character gap.

Even today, after all his missteps as president, I wouldn't want to bet against Obama. He seems to have the capacity to learn and change his tactics, using his self-awareness and relationships to keep himself grounded even as he shifts to more favorable ground.

The Wisdom of Bill Draper

2011-01-18T15:14:00.000-08:00

In case you didn't catch this last week, the Wall Street Journal ran a great interview with Bill Draper, one of the fathers of the VC industry (and incidentally, the father of VC Tim Draper).

Here is some of the wit and wisdom of this living legend:

On working with entrepreneurs:

“When an entrepreneur has a first board meeting, we called that the ‘Oh sh—meeting.’ That’s when the VC finds out the bad news he didn’t know when he made the investment. How the VC reacts to that defines the relationship – it either becomes more brittle or closer.”

On timelines:

“We often tell (entrepreneurs) they have underestimated the timeline” – toward becoming profitable or becoming an exit candidate, for example. “They’d say, ‘No, we’ve doubled the time we think it will take.’ Then we double that timeline, and very often that’s not enough.”

On pulling out of Zappos:

"We had a convertible debenture, and when the two years were up, we said, ‘We’ll take our money back.’ It later sold for a billion dollars to Amazon. If a VC looks you in the eye and says he hasn’t made mistakes, he’s lying.”

To Make Money, Be A Garbageman

2011-01-18T12:38:00.000-08:00

Plumbers and garbagemen make a good living despite their lack of PHP coding skills. That's because they're willing to do the necessary but unpleasant.

Basic economics teaches us that prices are determined by supply and demand. Scarce skills like being able to throw a baseball 100 miles an hour are highly compensated. But talent isn't the only source of scarcity. Sometimes, scarcity is a matter of popularity. Jobs in glamorous industries like Hollywood or videogame design often pay like crap. That's not because they don't add value. Rather, there are so many people who want those jobs that employers don't have to pay well. Conversely, employers have to pay very well to get people to do the jobs that are unpopular.

Everyone wants to be a developer at Google. The company is basically the World's greatest resort for programmers. But do you know whom Google pays the most? QA.

You see, Google wants its QA function staffed with the same kind of top talent as the rest of its operation. But few top developers want to do QA. Google solves this problem through the simple expedient of bribing them with way above market salaries. Think of them as Google's garbagemen.

The real insight here is that these jobs are necessary, unpopular, and unharmful. We're not talking about coal mining (a profession that provided many a high school dropout in West Virginia with a six-figure income and an early death from lung disease). Walking through sewage is unpleasant (and malodorous) but safe.

Nor is this principle limited to jobs and individuals. The same holds true for companies. If you find a way to deliver the necessary and unpopular, people will pay you for it.

Competence Kills

2011-01-11T10:41:00.001-08:00

Competence isn't a bad thing, but it's no longer enough.

Maybe there was a time when you could build a successful life based on "pretty good." But those days are gone, along with three martini lunches and wearing hats all the time.

Pretty good works in a stable environment because of the principle of leverage.

In finance, if an asset guarantees pretty good returns, you can lever up your investment with borrowed money to generate outstanding returns. Of course, if the returns go south, the leverage will also generate disastrous returns--witness the housing bubble.

The same applies to hiring in business. If you know that each person you hire will generate so much in increased value, you can hire a lot of pretty good people and boost the value of your firm. But just as with the housing bubble, if the returns on people suddenly drop, you'll experience the downside of leverage.

Environments today are more volatile (read: unstable) than ever. And in a volatile environment, you're better off with either amazing or awful than with pretty good.

That's how the VC model works--we don't invest in pretty good companies and hope they'll generate pretty good returns; we invest in potential game-changers that will either blow up (in a good way) or blow up (in a bad way).

You're better off focusing on being amazing at a few things (and be willing to live with being awful at others) than trying to be pretty good at everything.

There's a reason why NFL kickers don't bother practicing their tackles--I'd rather have the world's greatest kicker who's a bad tackler than a pretty good kicker who can really lay someone out.

The funny thing is, this is such a universal principle that it applies to dating as well. The folks at OK Cupid have conducted an analysis that shows that having men think you're "cute" actually reduces the number of men who approach you. It's much better to have 7 men rate you as a "10" and 3 as a "0" than to have all 10 rate you a "7". As a result, your goal shouldn't be to maximize your average attractiveness--it's to maximize your differentiation. Here's what the authors of the study had to say:

As you've probably already noticed, women with tattoos and piercings seem to have an intuitive grasp of this principle. They show off what makes them different, and who cares if some people don't like it. And they get lots of attention from men.

Substitute your startup for that hypothetical 20something with a tramp stamp and ask yourself, "Where can we focus our efforts to be amazing? Where can we defocus our efforts and live with being awful? And why do men like nose rings so much?"

Why I'm 10X As Influential As Ashton Kutcher On Twitter*

2011-01-10T10:55:00.000-08:00

It's all a question of influence intensity.

Of course Ashton Kutcher can influence more people than I can--he has about 2,500 times as many Twitter followers. But I have more influence over my average follower than he has over his.

The average Ashton Kutcher tweet generates 12,500 clicks on Bit.ly--that's quite a bit of influence.

Meanwhile, the average Chris Yeh tweet generates only 50 clicks on Bit.ly.

But notice--while Ashton has 2,500 times as many Twitter followers as my meager 2,874, he only generates 250 times as many clicks.

In other words, I'm 10 times as influential for my followers as Ashton Kutcher is for his.

Now all this might seem like a casual exercise in linkbait (which it is) and semantics (which it is). But there's an important point here.

Do you think it's easier to get 250 people like me to tweet about your company/cause? Or to find a way to get to Ashton?

In the world of Twitter influence, we get so wrapped up in the big numbers that we may neglect the small ones which actually give us a better chance to drive meaningful results.

(My post was inspired by this post from my friend Miguel, who actually *did* manage to get a tweet from Ashton Kutcher. Go Miguel!)

Creator's High

2011-01-07T11:51:00.000-08:00

People ask me about why I write. I guess they figure that I have some kind of well-reasoned master plan. They're usually surprised when I tell them I write because I enjoy it.

It may be that not everyone enjoys writing as much as I do. I hear all the time about writer's block, or the pressure of cranking out post after post. For me, it's much simpler. For me, writing is the easiest way to get what I call a Creator's High.

Psychologists often talk about flow states. Flow is the experience of becoming complete absorbed in an activity. Scientifically, you enter a flow state when you pursue an activity that is involving and just the right level of challenging. One of the reasons we play games is to achieve this state--something anyone who has played Rock Band can appreciate.

I'm no psychologist, but I observe in myself that achieving flow when I'm creating something is more pleasurable than garden variety flow.

Perhaps it's the sense of accomplishment, which provides a slow-burning pride of achievement. Perhaps it's because creative endeavors reflect ourselves more than neutral activities like video games. Either way, it's a feeling I love and crave. And I find that writing is the easiest way for me to achieve this Creator's High.

Unlike starting a company, which takes years, or building a product, which takes months, I can bang out a good post in an hour or two, and the sense of completion from finishing something can last me the rest of the day.

It wouldn't be an exaggeration to say that blogging is an addiction for me. Best of all, it's an addiction that has brought me insights, friends, and yes, even business.

I think those are some pretty good reasons to write.

Why This Is A Golden Age For Entrepreneurs Who Follow This Approach

2011-01-06T12:46:00.000-08:00

This is a golden age for entrepreneurs--if you build a sustainable business.

The costs of starting a business are lower than ever before.

Social media makes it easier than ever to spread word about great products and services (note that I said easier, not easy!).

There's more transparency in the startup ecosystem (AngelList, VentureHacks, HackerNews) than would have seemed possible 10 years ago when, I kid you not, we looked to places like Red Herring for advice.

But there also downsides to today's environment.

Tons of companies are getting funded, which means competition and pricing pressures, not to mention general noise in the market. And with major exits few and far between, it's tough to make money if you raise more than a few million dollars.

The key to success in this environment is to build a "real" business in a capital-efficient manner.

It's never been easier to raise seed funding. You can cut through the market noise by providing a useful product and through the funding noise by demonstrating revenue traction. You can make your seed funding (which is easy to come by) last, and exit profitably for millions or tens of millions rather than rolling the dice on raising a larger round and achieving a nine-figure outcome.

If you think you can follow these lessons, and you want to be an entrepreneur, start now. There's never been a better time.

Support, Don't Envy Your Fellow Entrepreneurs

2011-01-04T11:48:00.000-08:00

Every day, the Internet brings me an endless stream of news about good things happening to other entrepreneurs and investors--product launches, VC financings, acquisitions.

I'm faced with a choice in how to react to this news.

A) "Dammit, I'm falling further behind!"

B) "It's wonderful how progress keeps opening up new possibilities!"

A lot of times, it's tempting to pick Reaction A. It's tough not to envy others' good fortune. But Reaction A embodies zero-sum thinking. The implicit assumption is that there is conservation of success--if someone else succeeds, it reduces your own chances.

Gore Vidal summed this up with his famous quote:

"It is not enough to succeed. Others must fail."

This is a terrible way to think. Not only is it patently false (imagine if you had taken this attitude back in the Stone Age--"Screw that guy who invented fire!"), it's also bad for you. These extrinsic comparisons crowd out intrinsic motivations.

If you choose Reaction B instead, you'll be happier and more productive.

Rather than draining your motivation, the news you read will energize you and fill your mind with new possibilities. You'll see other entrepreneurs as role models and peers, rather than rivals.

It's up to us to collectively decide whether to be A) envious or B) supportive. I hope you choose B.

The Power of Behavior Change

2011-01-03T16:47:00.001-08:00

One of the things we're taught in Silicon Valley is how difficult it is to change user behavior. We go out of our way to avoid requiring behavior change (though some of our biggest success stories depend on it--witness Facebook and Twitter).

But there's another implication that most people miss--if changing behavior is hard, you can really stand out if you're able to change your own behavior.

People are often surprised to learn that I've lost 40 pounds in the past two years. They think I've gotten a physical trainer or personal chef. Far from it. In fact, I don't even have a gym membership anymore. What I have done is adopt a very strict low-carb diet. Is it hard to give up bread, rice, and pasta? You bet. But because I'm willing to eat differently, I'm able to achieve different results. I may be getting older, but I'm winning he battle of the bulge.

Are there ways you could change your behavior, to do things differently from everyone else, that could make a big difference in your life?

Mobile Computing: A Wasted Opportunity

2010-12-26T08:53:00.000-08:00

There's a revolution brewing because of mobile computing, but it might never get off the ground.

Thanks to Steve Jobs, we're now making computers so small and portable that they can be used anywhere--like right now, as I stand in line at Nordstrom Rack (Editor's note: This blog post was written on 12/23/2010). All of a sudden, there is something productive I can do wherever I go (assuming you consider writing blog posts productive).

The danger is that all the usual siren songs are also there--the Four Horsemen of distraction: Email, Twitter, Facebook, and the Web. And with mobile computing, consumption is always going to be easier than creation. Even now, I find typing on my iPod painfully slow.

Clay Shirky writes about the potential benefits of "cognitive surplus" if we can redirect TV time into productive work. Heck, I'd settle for redirecting waiting-in-line time from videogames and idle sexual fantasies to productive work.

I would love to see people taking advantage of their downtime to write or self-reflect, but Silicon Valley seems determined to lure them into raising virtual crops or making virtual friends instead.

What do you do with your mobile computing time? Are you using it to advance the things that really matter to you? Or are you still wasting it?

Rewards and the Motivation Paradox

2010-12-26T08:10:00.000-08:00

I'm finally getting around to reading Daniel Pink's "Drive." I had held off for a long time, figuring that I didn't need to read someone else's rehashing of Deci, since I'd already read the source material.

I was wrong.

Pink does a great job of synthesizing a number of different strands, including behavioral economics, Deci's work, as well as reformers like Alfie Kohn. I found myself discovering unexpected new insights.

1) I've always had difficulty reconciling studies that show that extrinsic rewards hamper productivity with clear business examples where they help. For example, one of the classic studies I recall from HBS is Emerson Electric, which uses piecework rewards to drive incredibly high levels of productivity.

Pink explains this paradox by highlighting the mechanism of action. Extrinsic rewards harm productivity by displacing intrinsic motivations. But in cases where intrinsic motivations don't apply (e.g. situations where the work is routine and straightforward), extrinsic rewards increase motivation and productivity.

That fits perfectly with piecework assembly of electronic components (though even then, one must be careful to specify a quality target as well, since extrinsic rewards tend to encourage corner-cutting).

2) I've also had difficulty swallowing the notion that money doesn't motivate simply because Silicon Valley is built on money. For all the high-falutin' talk about changing the world, most entrepreneurs still fight like hell to avoid dilution.

But after reading Pink's book, the answer there is clear as well. For entrepreneurs, the intrinsic motivations for starting a successful company are so strong that no amount of external rewards can affect them. Creating a new company is a process that drips with the key factors of autonomy, mastery, and purpose.

In addition, the very uncertainty of entrepreneurship may inoculate entrepreneurs against the negative effects of rewards. Researchers have found that contingent ("if-then") rewards affect motivation, but unexpected rewards do not. Since no one can guarantee the results of your startup, the potential reward doesn't reduce intrinsic motivation.

For proof, just look at instances where startups are acquired with a contingent earn-out--how often have you seen acquired entrepreneurs go nuts as they "punch the clock" and "turn the crank", counting the days until they're free to start a new company.

I'm only 1/3 through the book--hopefully I'll have more insights to report when I'm done!

My Recipe For A Happy Life

2010-12-21T16:36:00.001-08:00

Here's my recipe for a happy life:

1) Do the things you want to do

2) Accept that you'll never have the time to do *all* the things you want to do

Once you follow those two principles, the rest is simply time allocation!

The Chris Yeh Travel Channel: The Pepper Tree Inn

2010-12-20T12:50:00.000-08:00

Every year, the Yeh family journeys down to southern California for the week of Christmas. I get to visit my ancestral home (Santa Monica, natch), the kids get to see their grandparents (whom they enjoy far more than their parents), and Alisha and I sneak away to Palm Springs for an archetypally American vacation of shopping, eating, and relaxing.

If GTL (gym, tanning salon, laundry) is the key to the Jersey Shore life, our vacation focuses on the MRJ instead (mall, restaurant, jacuzzi).

The mall we visit is called the Desert Hills Premium Outlets, with 130 shops worth of brands and bargains.

The restaurant we patronize is Pomme Frite, a traditional Belgian/French bistro with, naturally, outstanding fries. (Here's my previous review of Pomme Frite)

As for the jacuzzi, we stay at the Pepper Tree Inn, where we can get an in-room jacuzzi with a poolside view. (Here's my previous review of the Pepper Tree Inn)

As an avid fan of both the Food Network and the Travel Channel (favorites: Guy Fieri's Diners, Drive-ins, and Dives and Anthony Bourdain's No Reservations--talk about polar opposites), I've always dreamed about being a travel host, getting paid to eat and enjoy myself. I even made a couple of short videos the last time we stayed in Palm Springs. As you can see, I think I need a better producer:

Peppertree Inn 1 from Chris Yeh on Vimeo.

Hot Tub! from Chris Yeh on Vimeo.

Tomorrow, we'll be heading out on MRJ 2010. Alas, it looks like it will be raining the whole time, but we'll do our best to enjoy ourselves anyways.

* I have not received any compensation for any of the links or reviews, but as a good capitalist, if anyone wants to bribe me, I'm all ears!

RIP, TV

2010-12-18T07:09:00.001-08:00

This morning, I heard the death knell for traditional broadcast television.

My 6-year-old, Marissa, woke up called me to the living room. "Daddy, can I watch TV?"

"Sure," I said, reaching for the remote control.

"No, not that TV," she said, "This TV." She held up the iPad, which the kids have been using to watch Charlie the Unicorn.

To Marissa, all screens are the same. Traditional broadcasters should be quaking in their boots.

"I'm Proud of You"

2010-12-18T06:23:00.000-08:00

Is there anything more emotionally potent than someone you really care about and admire telling you, "I'm proud of you?"

It feels like I can name many movies where this serves as the emotional climax. Just think of "The Sixth Sense," where the son tells his mother that his dead grandmother wanted her daughter to know that the answer to the question she asked at her mother's grave was "Every day."

His mother begins to cry, and he asks her, "What did you ask grandma," and she replies through her tears, "Do I make you proud?"

The same trope appears in many children's movies (Babe, Mulan)--is there anything more important to a child than their parent's love and approval?

That's why we value this sentiment so much when it comes from a beloved a mentor. In this sense, a mentor is a parent that you choose, and the desire for his or her love and approval is as natural as the desire for that of a parent's pride.

At the same time, that's why we get so upset if someone who isn't a mentor--a peer, or a wannabe--tries to claim that status by telling you, "I'm proud of you."

If one doesn't respect one's parent, what is the reaction to such a statement? It's probably contempt and anger.

Similarly, if someone tries to imply a mentor relationship by telling you, "I'm proud of you," it's like a bad parent trying to claim the rights and status of a good one. You'll feel mad and resentful.

"I'm proud of you" is a phenomenally powerful phrase. Use it wisely.

(written in response to this post from Ben)

WikiLeaks' Fundamental Hypocrisy

2010-12-16T12:39:00.000-08:00

Few subjects have been more in the news than WikiLeaks; few have been less understood (for example, WikiLeaks is not a wiki!).

For a great profile of both WikiLeaks and its controversial leader, Julian Assange, I direct you to the New Yorker, which posted a 12-page masterpiece. Here is the most important paragraph:

Experimenting with the site’s presentation and its technical operations will not answer a deeper question that WikiLeaks must address: What is it about?

The Web site’s strengths—its near-total imperviousness to lawsuits and government harassment—make it an instrument for good in societies where the laws are unjust. But, unlike authoritarian regimes, democratic governments hold secrets largely because citizens agree that they should, in order to protect legitimate policy.

In liberal societies, the site’s strengths are its weaknesses. Lawsuits, if they are fair, are a form of deterrence against abuse.

Soon enough, Assange must confront the paradox of his creation: the thing that he seems to detest most—power without accountability—is encoded in the site’s DNA, and will only become more pronounced as WikiLeaks evolves into a real institution.

That is the main problem I have with WikiLeaks; if you read the New Yorker piece, you'll discover that far from being an open information source, WikiLeaks produces painstakingly edited editorial content.

When Assange decides what to include or exclude from raw footage of the US military mistakenly killing a reporter and other civilians, his decisions (including the choice of title--"Collateral Murder") make it impossible for me to view WikiLeaks as an unbiased source of information.

To be fair to Assange, the piece implies that he selects inflammatory material because that's the only material news outlets will run. But that implies that his goal is coverage and attention, not simple transparency.

To me, the tragedy is that we need ways for information to be safely and anonymously leaked. Just read this article on U.S. citizens who are being prosecuted for releasing videos of bad behavior on the part of police officers.

By focusing on coverage rather than credibility, Assange is tainting WikiLeaks' ability to serve as on objective source of transparency.

Instead of providing a revolutionary service to overturn the traditional order, WikiLeaks is in danger of becoming just another media outlet.

The situation calls to mind the famous quote about the Vietnamese town of Ben Tre: "It became necessary to destroy the town to save it." Ironically, the very accuracy of that quote is in dispute, exemplifying the challenge of finding the objective "truth."

Impatience Kills Startups

2010-12-14T11:55:00.000-08:00

We live today in am impatient world. In many ways, that's good. We're unwilling to wait for the world to change; instead we go out and change it. But this impatience has a cost.

People tend to view startups these days as overnight successes. Nothing could be further from the truth. Most successful startups had a long gestation period during which an impatient person would have concluded that they were going nowhere.

Seth Godin calls it "the dip"--the valley of death every new idea has to survive.

Take PBworks, which has taken five years to grow from a hackathon project into a substantial business. David Weekly spent 18 months working on the project, by himself, without pay. If he had given up after 6 months, PBworks wouldn't exist today.

Twitter was born from the failure of Odeo. Ev had been incredibly patient with Blogger, roughing it out brought some very lean times. When Odeo failed to catch fire, Ev and he team persisted, convinced that they were on to something with Twitter. Twitter itself was a curiosity for many years before breaking into the mainstream.

But perhaps a homier story will be even more illustrative. A few years back, a friend of mine decided to create a blog network. He bought some domain names, set up WordPress, and started paying a couple of freelance writers.

When he started, no one read his blogs. And I have to say, I was pretty skeptical of his business prospects, especially since his blogs covered well worn topics like food, sports, and gadgets.

Fast-forward two years and his little blog empire generates $10,000 per month in revenues, growing fast. It's already profitable, and in a few more months, he might even be making enough to quit his day job (though I doubt he will).

And thanks to his patience, my friend is in a great position to start future companies. He has a source of income, and can use he remnant advertising inventory from his network as a low-cost marketing tool. I'm sure he wishes it had taken less time, but I guarantee that he's glad he was patient.

P.S. In the couple of months it's taken for me to transfer this post from my iPod to this blog, my friend has grown his blog network to a $50,000 per month run rate. I think that just reinforces my original point--growth can be explosive once you reach the tipping point. But it might take years of toil to get to that point.

Sport is meaningless; Fandom is meaningful

2010-12-10T13:54:00.000-08:00

Spectator* sports is meaningless, but fandom gives it meaning. We all want to be part of something bigger. When we find something that connects and uplifts us, does it matter how trivial it might be when reduced to essentials? Singing in a choir. Worshipping in a church. Partaking in a LAN party. In the end, what makes them any less trivial than tailgating before a football game, or watching March Madness with your buddies?

The next time that you're tempted to mock another's hobbies as a waste of time, ask yourself if someone else might say the same about your favorite activity.

* Clarification added after Jim pointed out that playing sports is a meaningful activity for the participants, even without an audience.

Why You Should Hire Nerdy Businesspeople

2010-12-09T11:56:00.000-08:00

Hire nerdy business people.

Counterintuitive, right? When you think businessperson, you think of a smooth-talking charmer, the opposite of the archetypal "nerd."

But when you're hiring business people, the most important interview question might be, "Kirk or Picard?"

It's not that they'll be more fun at hackathons (though that helps). It's that nerdy = detail oriented.

Contrary to popular belief, business is a science. And practitioners who are dedicated and detail-oriented (that is, nerdy) are more likely to succeed.

Note that I'm not saying that you should post your sales positions at the local comic book store. You still need to look for salespeople in target-rich environments, like ex-athletes or Oracle refugees. But if you find a successful Star Trek-watching salesman, grab him. He'll probably be worn his weight in Latinum.

Respond Specifically

2010-12-08T15:07:00.000-08:00

I often think of my email inbox as a tennis game.

Each email that comes in is like a tennis ball, which needs to be volleyed back to my rally partner.

The temptation is to simply swing the racket and volley the ball back as quickly as possible. But life is not tennis, and volleying quickly is likely to lead to a long, time-consuming rally.

Instead, take the time to respond specifically, to make it easier for you or your correspondents to hit a winner.

For example, instead of asking, "Do you have time to meet next week?", short-circuit the conversation by offering specific times (or by using Tungle). Use if-then statements to cover contingencies, and make it clear exactly what you want from people.

Soft volleys may clear your inbox temporarily, but the return volleys will soon bury you once again. Take the time to laser in a few winners.

What Internet Startups Can Learn From Comics And Porn Stars

2010-12-08T13:06:00.000-08:00

It's no secret that media businesses have struggled with monetization in the Internet era. Journalism, for example, is famously in free-fall. But all the hand-wringing conceals a simple fact: There is a very successful model that has been around for decades, and it still works today.

All we have to do is learn from porn stars and stand up comedians.

While these two groups may seem dissimilar, they both follow the same successful business model: Give away content and sell the experience.

Content is valuable but difficult to monetize. You can't get people to pay for things they think should be free. Instead, use content to drive non-monetary value, such as awareness and loyalty, which you can monetize by charging them for things they are willing to pay for.

Take porn stars. You would probably be surprised to learn how little porn stars earn from appearing in films. A woman might make $500 per scene. To earn $100,000 per year, you would have to shoot 200 scenes per year. You don't even want to consider the plight of male porn stars who might earn $100 per scene.

So where does they money come from? Porn stars make their money in two ways. First, they build their own websites, and charge their big fans for subscriptions which entitle them to attend live broadcasts where they can interact with the star. Second, they hit the exotic dance circuit as "Featured Dancers", who are paid to dance because they bring in bigger audiences. The tips aren't bad either. Give away content, sell experiences.

The same holds true for standup comedians. You've probably seen those comedy specials on Comedy Central. How much do you think the comic gets paid for those specials?

About $1,000. And no royalties.

Comics make almost nothing from appearing on TV. What those appearances do is help them build awareness so that they can go on the road and make their money by touring.

When a comedian books a tour, they get paid a portion of the gate; their ability to build a fanbase is directly correlated with their ability to get paid.

Give away content, charge for experiences.

How can you apply this lesson in your business?

Don't Take Sides, Take Issues (How To Think About Wikileaks)

2010-12-07T09:32:00.000-08:00

I've been following the Wikileaks saga with increasing interest, because it embodies a principle in which I firmly believe:

Don't take sides, take issues.

People have asked if I'm pro-Wikileaks or anti-Wikileaks. One of my friends said she was anti-anti-Wikileaks.

The problem with taking sides is that its rare that sides are drawn up based on a single issue. And Wikileaks is decidedly *not* a single issue. Here's my own list, just off the top of my head:

1) Freedom of speech

Wikileaks is founded on this principle, which I have always strongly supported. It is far too easy for wrongdoers, be they nation states or other actors, to suppress damaging secrets. Wikileaks is a useful tool for increasing transparency. For example, previous leaks included footage of American military forces accidentally killing friendlies and reporters--footage that the military had tried to suppress. Surely this sort of information should be available to the public.

2) Responsible foreign policy

On the other hand, diplomacy between nation-states relies on privacy and confidentiality. Perhaps it would be nice if nations were honest about their motivations and actions, but a little privacy is the social lubricant that helps the world run more smoothly.

Your family holiday party would probably be a bit more awkward if everyone knew that you said your uncle was a boring loser who was probably a pedophile, just as the Middle East is a bit tenser because Wikileaks leaked that various Arab states urged the United States to bomb Iran.

Everyone knows what everyone thinks, but not saying out loud allows us to preserve the social niceties...useful for your dinner party, essential in the case of preventing war and conflict.

3) Corporate responsibility

In response to recent developments, a number of corporations such as Amazon and PayPal cut off service to Wikileaks. Was this a responsible response to a high-risk customer that endangered shareholder value? Or a craven cave-in to government pressure? Or both?

4) Vigilante justice

In response to the corporate boycott of Wikileaks, online communities such as Anon launched DDOS (distributed denial of service) attacks on the companies involved. Is this activism? Vandalism? Terrorism?

5) Crime and punishment

The founder of Wikileaks, Julian Assange, has been charged by Swedish authorities with rape, sexual molestation and unlawful coercion, and was arrested in the UK. Those who commit crimes should be tried, and if found guilty, punished, regardless of their other deeds (good or ill).

6) Political persecution

On the other hand, what most headlines do not report is that the charges against Assange are that while engaged in consensual sex, his condom broke, and that he either failed to disclose this to his partner, or (more damagingly) continued the intercourse after being asked to stop. The former is clearly boorish and dangerous, the latter criminal. But the details don't match the headlines, which clearly imply that Assange is the perpetrator of violent sexual assault.

Is Sweden's decision to charge Assange justice at work? Or an attempt to punish him via whatever means are convenient?

The point of this is that simply saying you are pro- or anti-Wikileaks is insufficient. For example, if you are pro-Wikileaks, you are implying that you are pro-freedom of speech, but also that freedom of speech takes precedence over diplomatic concerns.

Instead, you should make clear your stance on the issues, and avoid blanket judgment.

Wikileaks should be commended when its leaks bring clarity, and reprimanded when they do nothing but harm diplomacy.

Companies should be shamed for giving into pressures, but we should understand that their duty is first and foremost to their shareholders and employees, and that they are not required to risk their livelihood just to satisfy our consciences.

Those who want to protest others' actions should do so, but legally.

We should recognize that someone like Julian Assange can be both a positive and negative force, and that just because we agree with some of his principles doesn't mean we have to support him in everything he does.

Nor should this advice be limited to Wikileaks--taking issue rather than taking sides is good advice for all of life.

The Week of Blogging Asynchronously

2010-11-30T12:13:00.001-08:00

I've been pretty bad about putting out posts on a regular basis. The funny thing is, they've actually been building up as text-only notes on my iPod Touch. So over Thanksgiving, I transferred a bunch of posts to my drafts folder, and I'll be pushing them out at lunchtime (assuming I remember).

I hope you enjoy them!

Take What The Defense Gives You

2010-11-27T10:16:00.000-08:00

I've noticed that fewer and fewer young people are sports fans these days, which is a shame, because the world of sports is rich with useful metaphors.

For example, last week during my regular basketball game, I was having trouble scoring against my friend Mon. I used to be able to bully him in the post. But not last week.

I asked my friend John, a sort of basketball Yoda, what was wrong. Naturally, he had the answer.

"Mon is playing off you and standing near the basket. When you try to post him up, he's ready and waiting for you. Instead, you should just take advantage of the space he's giving you and shoot as soon as you get the ball."
(As a side note, when Mon and I first met, he was a 150 pound beanpole. Since then, he's put on 30 pounds and I've lost 15, reversing what had once been a considerable weight advantage for me.)

In other words, take what the defense gives you.

Business, like sports, is about tradeoffs. You can't make the iPhone slim and elegant, and give it a physical keyboard. (As much as I wish Steve Jobs would!)

The competitive landscape for your firm is the defense. Your competitors are defenders, and they are each covering various portions of the playing field (with the varying degrees of skill). Your job as an entrepreneur is to read the defense and take what the defense gives you.

Conversely, you have to decide what you're willing to give up to your opponents. Are you going to cede the high-end business? The low end? There is no single right answer, but you have to make a choice rather than trying to be all things to all people, or trying to beat everyone at their own game.