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By dratner, February 20, 2010 5:10 am

I think the Fail Whale is prettier. Facebook doesn’t want me to like things tonight, I see.

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By dratner, February 17, 2010 8:51 pm

For all the buzz about Google Buzz you’d think they invented something new. But what’s disruptive isn’t the technology, it’s the 175m unique users already in the Gmail system that they may get to use buzz “for free”. That’s half the audience of FaceBook overnight.

After all, success in the social networking world isn’t really about features, interface or technology — take Twitter, for example, which outsources its interface to third party clients and could repopulate the cetaceans of the world on its own if only the fail whale could be taught to swim. For all the talk of a revolution, news feeds are just a hybrid of email with instant messaging. The new idea was making it multicast – email all of your friends at once with a semi-personal message rather than each one individually with a personal one.

Facebook seems to see the way the wind is blowing and has leaked that it is introducing email to supplement its still-flakey IM service. Google countered by adding social media feeds to email. But what it all comes down to is that these are just messaging platforms and will ultimately follow the same paths as email and IM companies of yore.

In the email world, all of the services integrate so a Gmail user can communicate with a Yahoo user or, likely, a CornerStoreEmail user if such a service existed (and in this great Internet world of ours it almost certainly does). The result of this is that email companies remain somewhat distinct – people select their email provider for the interface, convenience and tools and stay with them to avoid having to distribute a new address. While advertising may not be what it used to be, email remains a good business for site owners though there is no big email company that’s made it as a stand-alone company.

In the IM world, each service elected to keep a walled garden. AIM doesn’t talk to Yahoo which doen’t talk to MSN. If you have friends on multiple networks (and you almost certainly do), you create accounts on each but then you use a third-party client to administer it all (like Adium) or create your own private network with something like Jabber. The IM networks no longer have any contact with their users. Indexable, real-time content, yes, but no opportunity to brand, advertise or sell stuff to their “customers”.

Social media is no different. In the short term, companies will cash in on content and on hopes that they can aggregate and engage massive audiences, but over time the industry will fragment. Those that lower the walls and let in the barbarians should keep a piece of their businesses while those that keep up the walls will likely delegate their businesses to intermediaries. In a few years, will any of them be standalone companies? Not if the model of email or IM is a guide. The barriers to entry are low – companies with established audiences like Google can step in easily (you can imagine Yahoo and MSN are just a few steps behind).

It’s possible that social media is truly a new thing, but it feels perilously like we’ve seen this movie before.

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By dratner, January 26, 2010 3:37 pm

Jason Rexilius, a very good friend and fellow entrepreneur is preparing a creative and exciting project to help provide relief in Haiti.  Jason is working with Todd Huffman and Instedd to help support several relief organizations by providing them with actionable intelligence about what is going on across the country.

While Twitter feeds may be great for allowing people at home in the US to get a sense for the magnitude of the disaster, they don’t  provide organizations like American Red Cross or Project KID with the information they need to support their operations.  They need to know if a road is passable, if a well is operational or if a gang has set up a roadblock.  They need to know if an area is safe for relief workers and if supplies have reached their intended destinations.  And they need this information in a timely, accessible format.

That’s what this project is supposed to help with.  Instedd was active in revealing election issues in Afghanistan and Jason’s mobile software significantly enhances what they already have.  They can put smart phones into the hands of Haitians so they can take pictures and record audio messages which are uploaded to a server along with a timestamp and location information from the built in GPS.  The software stores the information until it finds a signal and can upload.  The server then feeds it directly into the data systems of active relief organizations.

With a few tweaks, the software can be translated into Creole and even made pictographic to be operated by people who aren’t literate (like more than 50% of Haitians).

However, to make it work, they need some funds – approximately $10,000.  Instedd is a registered 501(c)(3) and will collect the money to support the effort.  If you want to contribute, you can go to their web site, but you won’t be able to specify that the money is for Jason’s operation.  To do that, just fill in the form below after you contribute and tell me your name and how much you gave.  Instedd will then credit your donation to this operation.

For those of you in Chicago, there will be a fund-raiser on Wednesday, January 27 at English Bar & Restaurant in River North.  The event starts at 5:30PM and we have the space until approximately 7:30PM.  Jason will tell us more about the mission and we’ll be collecting donations – cash, checks, whatever you can do would be appreciated. Sorry for the short notice, but Jason hopes to deploy by the end of the week.

If you can’t make it or are considering a more significant donation, you can go to Instedd.org/donate and make a tax-deducible donation.  If you do that, please fill out the form below and let us know how much you gave so this project is allocated the funds.  You can also donate via check to:

inSTEDD

480 S California Ave, Suite 104

Palo Alto, CA 94306

If you do that, be sure to write “TODD-JASON-HAITI” on the comment line of the check and fill in the form below to let us know.

Here’s a little more information about the project:

Haiti Response Proposal

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By dratner, January 23, 2010 5:41 am

Motricity, Myxer, Sobees, ZocDoc, Rixty.  It sounds like another language and to some extent it is.  These are the names of the startups dotted among the voluminous postings about Google, Apple, Twitter and Facebook on leading tech blog TechCrunch today.

Why do these companies have such goofy names? Can you tell anything about them from their names? What happens if these names become common verbs like “to google”? I’m going home to myxer and sobees my friends tonight…

Chilling.

The reason for it is that corporate branding is now done by what domain names (and, in particular, what .com domain names) are available rather than by choosing something that moves, informs or resonates with an audience and premium domains still cost a fortune.  You can take it for granted that all common nouns and combinations of 1-5 letters and numbers were gone years ago and no little startup can afford them.  And most aren’t owned by companies – they are owned by speculators or those in dubious businesses of typo squatting or arbitrage.

While many recognize this problem, most of the calls to action surround either center around creating more TLDs (Top Level Domains – .com, .net, .org, .us, etc.) or in getting companies to spread out of the virtual class-A office space represented by a .com.  (Think del.icio.us or bit.ly, but I’m not sure either of those made things less confusing.)

But new TLDs are issued seldom and when they are, they are cherry-picked quickly and we’re right back where we started.  So how about an economic solution that might also do the government a bit of good? Tax ‘em.

Domain names and IP addresses are, for all intents and purposes, the real estate of the web.  We even call web sites “properties”.  So why not have a tax? Right now it costs just a couple of dollars a year to register or maintain a .com domain name so people save them for a rainy day or stick up a couple of ads on a portfolio of hundreds of thousands of domains earning just enough random clicks to support the registration cost.

But what if the government imposed a tax on .coms? Even if the proceeds were shared among several governments, the potential revenue is enormous as is the benefit to the internet.   While it’s recognized that we’re running out of IP addresses, it’s less widely recognized that .coms represent a limited asset.  There are only so many and when they are gone they don’t come back to the pool.  If a tax of, say, $100 / year was applied to every .com domain it would not have any appreciable effect on any real business out there, but it would force those in the business of speculation or squatting to release at least their less profitible domains and add to the pool.

I don’t know the precise number of .com domains that have been issued, but it is likely in the hundreds of millions.  Even if you assume that each business in the US has only one (there are some 28 million businesses in the US) and no one in any other country had one (clearly a silly assumption), you end up with more than $2.8 billion in tax revenue and do the world (or, at least, our language skills) a bit of good at the same time.

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By dratner, January 18, 2010 4:33 pm

Since Marco Polo, the west has moved towards progressively more and more virtual currencies.  Paper, plastic and ultimately a few bits in a computer somewhere have been used to make exchanges.  But that has left a hankering for something tangible, something of “true worth”.  Countries still accumulate or maintain massive gold reserves and, when economic times are tough, you can count on a spate of TV advertisements featuring guys with Cadillac smiles and used-car-salesman wardrobes telling us to buy gold and how it’s the only really sound investment.

Which is curious.  While gold has traditionally been used as a medium of exchange, it’s not because of some intrinsic “worth”.  It’s primarily due to scarcity – the same thing that makes it impractical as an industrial material in most cases.  We used gold because it’s pretty, shiny and reasonably rare like a clean, attentive college student.  But while clean, attentive college students may actually do work, gold just sits in a vault somewhere.  It has value only because it’s been used as a medium of exchange for perhaps 5,000 years of human history unlike the relative newcomers of paper or virtual money.

But this isn’t about slamming gold.  Others have done that far more eloquently that I ever shall, such as William Jennings Bryan in his seminal 1896 Cross of Gold speech advocating bimetalism.  It’s about the idea of a commodity as an intrinsic store of long-term worth and my personal favorite example – the diamond.

My grandfather grew up in eastern Europe during the pogroms, lived through the great depression and came out with the idea that having a store of valuables is a good idea.  He bought jewelry both as gifts for the ladies in the family, but also as a bit of a backstop in case something went seriously wrong.  Gold and diamonds will always command some value even when currency fails, right?

Perhaps.  But if a commodity’s value comes substantially from scarcity, what happens when that scarcity is undermined? A case and point happened in 1916 when the first harvest of cultured pearls was made.  Pearls went from being among the most valuable gems, often comparable in price to rubies or diamonds (Kublai Khan, among others, preferred pearls) to selling for a few hundred to a few thousands dollars for a nice strand.  Some people still seek out natural pearls with their orders-of-magnitude premium price, but they are few and far between.  The Mikimoto process essentially used oysters as bio-reactors and reliably replicated in industrial quantities a complex reaction that happens only occasionally in nature.  And, in the process, saved the lives of countless innocent pearl-less oysters.

The same change may be coming to diamonds.  It’s very hard to transmute one element into another (lead to gold, for example) since the reaction required is nuclear.  It’s relatively easy, however, to get atoms to form the stable molecular configuration of your choice, especially  the relatively simple pyramidal matrix we like to call diamond.  And the feed stock, pure carbon, costs very little.  One company, Apollo Diamond, can already make gem stones indistinguishable from mine diamonds.  Another, Advanced Diamond Technologies, is making industrial artificial diamonds for about the price of other less-exotic industrial coatings.

Apollo voluntarily laser-etches their diamonds so you know they aren’t mine diamonds.  Somehow, this makes old-fashioned diamonds companies breath more easily.  After all, if someone has to pick between natural diamonds and artificial diamonds, they’ll pick natural every time, right? Not so fast.  Pearls had a relatively light association with human and animal suffering in the process of harvesting them, but that was enough, along with price, to make cultured diamonds into a totally acceptable alternative.  Diamonds, however, have more blood on their metaphorical hands than anything other than gold.  They finance wars, dictatorships and mass exploitation.  Most men I know really struggle with the idea of buying diamond engagement rings for this reason.  Two of my best friends got over this by buying them from Apollo.

It’s a mantra of mine to never bet against technology.  With cheap feedstock and rapidly improving technology, companies like ADT and Apollo are poised to be disruptive in the diamond industry.  And while the same techniques don’t precisely apply to other gemstones, all of them are made from relatively cheap base materials stacked up in not-terribly-complex molecular arrangements.  They are still pretty, but the concept of intrinsic worth and scarcity will soon need another look.

You heard it here first – within 50 years and perhaps a lot less, diamonds will be as inexpensive as pearls.

Diamonds may be a girl’s best friend, but they may prove to be a fickle one.  Let’s Hope so anyway.

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By dratner, January 14, 2010 12:01 am

I’ve long held the theory that anything that has “science” in the name probably isn’t actually a science but is instead trying to stretch science’s brand to cover itself with a veneer of rigorous method, validation and the discovery of fundamental truths.  “Social science” is an example.  Perhaps the worst offender is the Academy of Motion Picture Arts and Sciences.  Real sciences have names like chemistry, biology, physics or economics.  Right?

Well, three out of four isn’t bad.  Economics isn’t science nor is what I’m about to write truly economics except to the degree that is relates to our life and times as economic entities in this grand society of ours.  It isn’t about any numbers or statistics I’ve compiled – it’s purely based on casual observation.  But I’m not looking for a Moody’s AAA rating, either.

I was thinking about this the other day when I was talking to friend who works for a major theater company that has barely kept its head afloat in the financial crisis.  He was bemoaning (well, more observing to be fair) that the musicians associated with the theater company had come close to striking this year since their union was demanding an increase in pensions, salary and benefits that they weren’t getting since it would have driven the company into the red.  This isn’t a post bashing unions, but it did seem to me that the timing was horribly out of sync with the state of the world.  I was explaining this to someone else, a successful web entrepreneur, when she asked me a rather unexpected question.  What’s a pension, anyway? Is it just a 401(k)?

This entrepreneur is only a little younger than I am, but she literally had no concept of a pension plan associated with a company.  Unlike health care, retirement plans became substantially disentangled from specific employers with the advent of the 401(k) and IRA and younger people outside the public sector and the oldest and most storied companies honestly have no idea what they are about.

The change from pensions is a reflection of the fact that most people will have 10 or 12 jobs in their career so carrying their retirement with them is important.  Actually, 10-12 is the current wisdom, but given the fluidity of the labor market, it’s likely to be higher.  That means people spend more time unemployed and eating into savings, something wage statistics don’t really address.  But more interestingly, what it really means is that people are no longer really employees – they really act more like contractors.

This may not sound like much of a revelation and I’m not sure that, on its face, it is.  However if you take it a step further it implies that no one is just part of a team building sustained value – each person will be individual reviewed for their fitness not just for promotion but for hiring a least a dozen times in their career.  It’s like applying to college a dozen times (actually harder – most good companies accept a smaller percentage of incoming resumes than the most selective colleges).

That means not only ongoing uncertainty (we wonder why we’re so stressed out all the time) but that the aggressive among us invest in those things that build our own brand and personal equity, even occasional at the expense of our companies and coworkers.  It’s now important to get your name on the paper, your place on the phone call, your card with the client even if you don’t intend to have a long relationship.  You need to connect with them on Linked In and you need to take credit for what you can.  You want to appear on interviews and you want to be there for your clients not just to serve them but to keep your options open.

In a sense, these behaviors are not new but the motivation is no longer self aggrandizement.  It’s professional survival.  Your personal representation to the world through all of these factors is what is going to make or miss the cut.  It’s your brand.  Rather than consenting to let someone else in the firm take the credit for purposes of internal promotion, you’re inclined to take it yourself since 11 out of 12 of the times you are reviewed will be by a different employer.

This is a shame.  It reflects something of a shift in companies’ priorities.  There have always been three constituencies – the shareholders, the customers and the employees, but today the emphasis in this list is strongly in descending order.  With any luck, enlightened employers will try to rebalance the equation.  In the meantime, those looking for work should start thinking about their brands.  It isn’t just your resume – it’s your network, your reputation and your whole body of work.

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By dratner, January 10, 2010 12:07 am

With great crisis comes great opportunity…may you live in interesting times…

When a system fails the first thing you need to do is damage control, the next thing you need to do is fix it and the last thing you need to do is to prevent it from happening again.  With the world banking system we may have gotten through the first stage, but we’re a long, long journey from the next two stages.  Hopefully, the scale of this disaster was such that people are willing to engage in some more creative thinking and question some of the “laws” of banking that have so ably gotten us where we are today.

It may be too late – the time for aggressive action was a year ago – but we can but hope.  Sales of the British game “Whack-a-Banker” (after all, what did a mole ever do to you?) remain brisk, indicating that national sentiment has not yet forgiven these people.  But rather than just beating them (satisfying though that may be), perhaps it’s time for some more constructive criticism?

Maybe constructive isn’t the right word.  What I propose for consideration is actually a bit of creative destruction.  In two words: eliminate collateral.  Get rid of it.  Don’t make it a part of lending decisions.

“What?” I hear you cry.  “Is he mad? Has his brain come unglued? Wipe the foam from his lips! If there’s no collateral backing a loan, doesn’t that make it even more certain it’ll be unsupportable and probably bad?” Though unintuitive, I think the answer is no.

I rest this conclusion on a bit of unattributed old wisdom.  What’s the best way to win a gun fight? Don’t get in a gun fight.

Collateral is the same way.  I don’t mean that a loan should have no security.  Far from it.  But the concept of collateral as practiced by today’s small business bankers is very industrial revolution in nature, not in keeping with our information society.  First of all, there’s a belief that collateral from a small business should be in the form of tangible, physical assets.  Those assets may be cars, computers, office real estate…wait – aren’t those all things that are illiquid and can lose value suddenly? Don’t cars and computers lose 30% of their value when they drive off the curb? Don’t computers lose practically all of their value within 3 years? Yes, it’s true.  Does the bank have a hope of getting 25 cents on the dollar for this kind of stuff in less than a year? Probably not.  If they resell the computers without some work, they may even be leaking confidential customer PII (personally identifying information such as credit card numbers) without even knowing it and opening themselves up to law suits.

And most information and services companies (including law firms and accounting firms as well as more tech oriented companies) don’t have a lot of these types of assets anyway.  Their products are intellectual, virtual or services.  But there are companies that do have these kinds of assets – restaurants, theaters, manufacturing companies – yes, the types of businesses that currently have the highest failure rate.

So while I can’t get a bank loan for an established web services company twice on the INC 500 list of fastest growing companies in America, in the time it takes to tell it the restaurant down the street got one, failed and the bank now owns its building and can’t sell it.

This is called an adverse selection bias.  In their desire to secure themselves, the banks require assets that are only possessed by companies that are greater credit risks to begin with.

So what’s the solution? Take a page from micro-lending.  The success of companies like Grameen is based in part on the fact that they don’t use collateral.  They use a very sophisticated form of relationship banking and revolving credit.  The pressure to repay the loan is primarily social at first, but the borrower gains credit and borrowing capacity as she borrows and successfully repays.  Each time she goes through the cycle she can borrow a bit more.  She meets her banker regularly to manage the loan and restructure it if circumstances require it.  No collateral, but a default rate so low it would make any Wall Street bank as green as a greenback with envy.

It comes down to the point about the gun fight.  The best way to secure a loan is not to have it default to begin with.  If banks could get over their preconceptions about collateral, develop long term relationships with entrepreneurs and aggressively invest in the businesses of the future, we’d all be better off.

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By dratner, January 8, 2010 3:41 am

Every CTO knows the old story – one moment you are in your office calmly reviewing the product backlog to prepare for yet another meeting and the next moment the schedule, the team and seemingly the world have been shattered and you are left feeling like Newton if his meditations had been interrupted by a concrete pylon rather than by an apple.  What has happened is that your star developer – your top producer – dropped by for a chat and told you that he’s getting a bit bored in his current role and would like to try something new – he’s thinking about becoming more of an architect.

It may seem innocent enough, but I call this problem the Siren of Scalability because, if wrongly handled, it will pull the organization, the developer and the product through the doldrums of non-productivity and onto the rocks of non-competitiveness.

This may seem like a gross overreaction, but think about it for a bit.  Everyone wants to grow, increase her skills, responsibilities and earning potential.  And it can usually be done in one of two ways – either becoming deeper in your chosen craft or by becoming a manager.  So each person thinks about what she could do to accomplish that.  In a startup there often isn’t a clear upward trajectory on the management track so that means your ambitious developer concentrates on perceived skills growth – the “hard” problems for which people get paid big bucks – scaling and architecture.

There are a few problems with this.  Only the very largest organizations really need more than one architect.  Imagine what your house would look like if was designed by a committee of architects.  Software can have the same problem.  It’s true that “architect” is actually a misnomer – what software architects due more resembled the tasks of a structural engineer that a true architect, but “software structural engineer” doesn’t have the same ring.  And you still don’t need more than one.

And if you believe the buzz about cloud computing – which in the long term is pretty hard to ignore – you actually may not need an architect at all.  If you build your system on a commercial or open source framework in the cloud, only the top few hundred websites are likely to hit scaling issues requiring this set of specialty skills.

What will always be useful, however, are top producers.  Alternative skills to hone are product and business-based since no one knows the product better than its developers and virtually every good developer is also a business analyst.  But that’s hard to explain when they come in with stars in their eyes and the Siren in their ears.

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By dratner, January 7, 2010 5:06 am

It is interesting that free market thinkers (often to the right politically) claim to be among the more fervent supporters of the institution of monogamous marriage whereas more leftist economic thinkers are more associated with free love.

While certainly not universal, to the extent this is true you’d expect the opposite.  Free market economics is about rewarding the efforts of society’s greatest contributors.  It accepts the idea of inequality as necessary for greater productivity.  Extending this to marriage, this would imply that the most successful people should be entitled to the most mates whereas the least successful should struggle to find a mate at all.  This bit of amateur eugenics or social Darwinism should result in a stronger, better human race.  Right?

Not so fast.  Those conservative thinkers really like the institution of family, right? (That is if you don’t count congress … in every possible sense of the term.)

But that’s leftist.  “To each according to his needs, from each according to his ability.”  Fundamental Marxism.  Distribute the wealth.  Make people as equal as possible while addressing their needs.  One mate for each person – it’s what you need and what society can provide.  It doesn’t take into account what you can support, your success in life or anything else, but it sounds a lot like monogamous marriage.

But are the lefties the free lovers? Maybe not so much there either.

This whole argument is admittedly trivial, but should be fun for annoying the doctrinaire among your friends (lefty or righty) at your next cocktail party.