Monthly Archives: February 2012

NYC’s Coming Square Fares

As kids, we learn that bad people use the cover of darkness to do bad things. Shining a light and illuminating the situation often takes care of the problem.

With its opacity and fat margins, the payments space represents a huge pinata of opportunity for entrepreneurs. Along those lines, I blogged, recently, about Dwolla, which appears to be a full-fledged attack on the current payment system.  Even staying within the current system, transparency and simplicity offer major opportunities to bring benefits to customers.  Some interesting news concerning Square today exemplifies this value.

Several years ago, credit card acceptance became mandatory in New York cabs. Reports say that this has driven both usage and tips higher.  But the 5% fee on credit card fares has infuriated drivers.  3.5% goes to the credit card processor.  And the garages and fleets that hold the medallions and lease out the cabs to drivers have taken a 1.5% cut for nebulous “overhead.”  The medallion holders have piggy-backed on and exploited the opacity around payments to grab their own cut.

Enter the experiment with Square, under which 50 cabs will be equipped with Square-equipped tablets if approved later this week.  Not only should it remove any justification for the 1.5% grab from the driver’s take, it presumably will lower the processing fee since even Square’s standard rate of 2.75% is lower than the incumbent processors.  This is great for the driver, putting a little more into his pocket.

And, as more than just an additional benefit, thankfully, it will return a little sanity back into the cab for both driver and rider by shutting off the ridiculous and useless television screen and replacing it with a tablet that should offer something more useful to riders.

Welcome to the Big Apple, Square!

#Oscars versus Oscars

Hollywood truly is one of America’s great exports, and one of the sources of the disproportionate impact we carry in the world.  Given that, it is astounding how uninspired a show that the Academy puts on for the Oscars.  It’s truly a snooze fest, that could have largely taken place unchanged decades ago, and reflects none of the dynamism and change of our networked, social economy today.

A big theme of this blog is about the superiority of content and culture when created by more of the rest of us, a bottoms-up process rather than a top-down system.  That is strikingly reflected in the contrast between the staleness of what was on television and the brilliance and humor of what was on Twitter in the commentary about the Oscars at #Oscars.  You would have had a far more entertaining night paying attention to the latter.

Just saying.

The Rent Is Too High Entrepreneurship

There is a thought-provoking essay on economic rents in the FT today.

In the author’s view, one description of economic rents is where asset owners are rewarded without continued endeavor, often through seeking some sort of legal protection such as intellectual property or governmental regulation or because of a lack of transparency in private transactions which allows principals to extract too much. Some examples of economic rents include too few taxi licenses, too long copyright, many aspects of the financial sector, and too high executive pay.  Often there is good logic at the starting point of the structure that creates the rent, but it’s then pushed too far, e.g., you need some regulation to solve issues with a taxi system, but when that regulatory structure is captured by the industry, it acts to protect the industry rather than allowing it to act in the most efficient way.

From an entrepreneurial perspective, systems where economic rent dominate keep out driven individuals who want to enter the industry — the article profiles a taxi driver in Milwaukee discussing how the bulk of profits are captured by the taxi license owners (primarily one family in Milwaukee) making it nearly impossible for many taxi drivers to own their own license and run a sustainable business, as those licenses are granted by the city on a permanent basis.  Similar analogies can be drawn in other industries, whether it is entrepreneurs kept out or individuals rewarded for behavior that isn’t innovative and doesn’t increase the size of the pie (such as lobbying).

This is one context in which to understand Uber.  It sees a huge opportunity in coming in and nudging the old system to break down, and by the opposition it elicits when it comes into a market, the howls of the existing rent seekers rising to save the old system.

But how do we distinguish economic rents from appropriate reward structures?  That can be challenging because judgments have to be made (should copyright be 14 or 70 years), but I think the article is right in that we tend to have the intuitive ability in many cases to distinguish:

Yet the public at large often seems able to distinguish rents from the creation of real added value, such as in information technology. “I don’t see a lot of anger at Steve Jobs,” Dean Baker, co-director of the left-leaning Centre for Economic and Policy Research, says of the late founder of Apple. “I think people do have an intuitive sense that they are getting ripped off by people who aren’t making a great contribution to society.” No politician is likely to use the term “economic rent” in this year’s elections – but being seen as someone who is fighting rather than creating that is likely to be crucial to victory.

The Cost of Haggling

People, and I’m speaking very generally, are not great at asking for things, in particular, in asking for discounts.  In this telling of the TrueCar story — and remember a lot of price information is already out there in the form of services like the Kelley Blue Book —  it appears that what the car industry is most afraid of is the promise of a guaranteed price or the end of haggling.  The dealers know that, in a battle of negotiations, they, and not customers, win.

Eliminating haggling as a business model.  This is a powerful insight for delivering customer value in other industries where haggling is common.  You just want to find an industry that is not as protected by state laws to the extent that car dealers are.

Mobile Price War

As illustrated recently and dramatically in the Facebook S1, no one has quote figured out mobile advertising.  Google and Apple have been trying, and Facebook and Linkedin are about to enter.  Sometimes without good ideas to solve the actual problem, which in this case, is that there is no clear magic yet to make the advertising effective, the resort is to price-cutting.  Both Google and Apple have just cut prices on their mobile advertising inventory to spur usage of their mobile advertising platforms in advance of the Facebook launch.  Given both companies have been working on the issue for two years, this latest move is an indication that this problem still has the big boys stumped  As the FT notes:

However, with many brands still unsure how to tailor their messaging for the small screen, available ad slots in apps and on mobile websites are often left unsold. As supply outstrips demand, the rates which mobile platforms are able to charge for an ad still lags behind the desktop web, a contributory factor in Google’s earnings disappointment last month.

To counter these issues, Google and Apple, as well as some independent mobile ad networks, are lowering their prices to lure more first-time advertisers on to the platform, hoping the incentive will lift overall volumes. “These changes will definitely make prices more attractive in the short term,” said Thomas Schultz, international chief executive at Somo, a mobile marketing agency. “We’re seeing the two big players go head-to-head to try to disrupt the market and secure those budgets.”

Their efforts come as Facebook plans to unveil advertising on its mobile apps in the run-up to its initial public offering. In addition, LinkedIn’s chief executive, Jeff Weiner, said last week that the professional network plans to run some tests for some of its marketing services on mobile, where its page views have increased by 350 per cent in the last year.

Jeremy Lin, CCTV, and the Enduring Soft Power of American Culture and Technology

This story regarding CCTV’s confusion in how to deal with the Jeremy Lin phenomenon says a lot about, on one hand, America, American culture, and American innovation and, on the other, China, the Chinese government desire for soft power, and the similarity of the Chinese and American people, as explained in my post on CCTV’s entree into the United States.

Jeremy Lin — a cross- cultural phenomenon transcending race that could only have arisen in America — is blowing up in China.  But CCTV is confused in how to deal with it given the Taiwanese connection — i.e., Lin’s Taiwanese heritage and the flags that show up at the games — as well as his expressions of his Christian faith, and CCTV resorted to not showing the live Knicks-Raptors game which ended with Jeremy Lin’s buzzer-beating three.  At the same time, the Chinese people, who know what they want and they want Jeremy Lin, have blown up Weibo, the Chinese Twitter clone, following Jeremy Lin.  A few lessons:

  • American soft power in the form of its culture, as exemplified by both Jeremy Lin and Twitter, endures, enabling things that cannot happen elsewhere.
  • American technology (through its Chinese version) enable the Chinese people to get what they want, which is very much, what us Americans want.
  • One and two have something to do with why America has soft power.
  • Good luck with that launch of CCTV in the US.

China’s Quest For Soft Power

Whatever exaggerated stories one might be spinning of American decline, one place where it’s clear we remain dominant is in “soft power” — our culture is the driver of world culture.  The world primarily looks at how we strut, sing, dance, tell stories, entertain ourselves etc.  In the news part of this, taking a cue from the unexpected success of Qatar’s Al Jazeera, China is attempting to tell its story directly in the US, as CCTV, the national broadcaster launches US produced programming.  While American television news has been on a quick spiral to the bottom in actually delivering news, the Chinese perhaps don’t get it if they think that a channel that is a propaganda arm of the Chinese Communist party is going to deliver the soft power that China lacks.  Nonetheless, it is an interesting story to follow, and perhaps it will shed light on the durability of US soft power.  Here is the story in the FT.

(An interesting footnote is how often other cultures become part of world culture when they fuse with American culture through the immigrant experience — think of the influence of Indian-American authors or a certain Taiwanese-American baller.)

Redrawing Market Boundaries

Finally able to articulate a problem that has been consuming me.

One, surely simplistic, way to look at things is through a market transaction/non-market transaction way of looking at things, particularly in the realm of services. So, I may need help with X thing – some medical, legal, financial, handyman, child care problem. I can purchase it by going to a third party or sometimes I can do it in a non-market way, I call a colleague or friend for advice or rely on a family member for a service. And sometimes they blend together: I may pay someone I know, and maybe I get something more valuable through the transaction than through a third-party transaction. In a world with a social overlay, shouldn’t we able to push more transactions from the pure market to the non-market or hybrid side of the line? Isn’t this a better model for customer efficiency and human satisfaction? Isn’t there a business that underlies this idea of making market transactions into non-market transactions?

(This is inspired by many things, including my thoughts on Dwolla (starting in this post) and the idea that a transaction with a known party — of which there are more in a social world — is fundamentally different, and should be treated as such, than a regular payment network transaction among unknown parties.)

The Sound of Perspective

A quick follow-up on the Kickstarter video that I mentioned in the last post. It’s worth watching to see how someone with a deep vision, that is deeply believed and deeply though through, sounds like. One of the comments on the AVC post says it well:

…it is very clear that Yancey has a perspective. A perspective that he has built into a company and built a company around.

It seems like we don’t talk about that enough when giving advice in the startup world. Go out and build a perspective, core values, inside yourself first. Then if you still feel that a startup is the best way to express that perspective, to realize it in the world then go found a startup.

Don’t just found a startup because it’s the path to wealth or because everyone else around you in a valley is doing that…

Maybe join a startup until you get your own vision and perspective instead.

Talent Authenticity Platforms, Part 3, Current Examples, Future Potential

(This is the third post in this series on Authenticity Platforms.  See Part 1 here.  And Part 2 here.)

I’ve been thinking about these ideas for a while, including as part of a company over a decade ago that tried to connect people to each other in a more authentic way.  Today, authenticity platforms look like they will thrive across many different domains: simultaneously enabling more producers to produce, including folks who were doing something different, providing their consumers better performance and more inspired or varied choice, while using a variety of different mechanisms to encourage production and support by consumers or the audience.  These platform emerge more authentic talent: both in getting more talent, and in allowing their product to be true to ourselves, which results in “out of the box,” truly innovative/creative solutions than those  that emerge when there are intermediate systems between user and creative that tame potential output.  Other than github and Pinterest discussed in the previous post, here are a few examples:

  • Kickstarter, described as the world’s largest platform for creative projects, helps creatives cut out the middle man, whether it is a venture capitalist, director, music executive, and go directly to the people to fund a creative project.  Platform has created a format that, for the producer, is stylish, easy, and encouraging of creativity, and for the user, provides a way to easily judge and support by opening his wallet.  It has a process, part producer-driven and part curated, for project designers to create and stoke excitement for projects, and it is coming off a remarkable week where it funded two million dollar projects (an ipod dock and a game project) among other triumphs as described in this exhilarating blog post.  Tim O’ Reilly tweeted this week that “Seems to me that Kickstarter is the most important tech company since Facebook. Maybe more important in the long run.”  (Updated Sunday am: Fred Wilson has a video this morning from a founder of Kickstarter worth watching to understand the creative dynamic that takes place.)
  • Kaggle takes data problems and infuses them with the competitive dynamics of a knock-out sports playoffs.  By offering prizes, in addition to the glory of solving hard problems, the platform attracts to the pool of participants those not traditionally working on such problems —  sort of the equivalent of holding an open tryout and finding that the warehouse stockboy is your Super Bowl winning QB.  By finding and harnessing overlooked talent, each of its competitions has improved significantly on existing solutions to the data problems.  Kaggle also shows that these platforms, which reimagine how problems are solved and solutions are created, work in situations that we might consider the duller (and bigger) industries — these data competition are often being held on behalf of insurance companies and health care providers.  Here’s a story from Businessweek on Kaggle.
  • Sidetour, from the recent crop of New York TechStar companies, has a platform that offers new experiences created by talented individuals, as an alternative to the prepackaged tourism or entertainment industries, whether double-deck tours of New York City or the weekend movie.  The experiences are consistently inspired, and presented in a compelling way, both through the pictures and descriptions, allowing the consumer to make a decision on whether it’s appealing or not.  There are no tour books or professional critics inter-mediating the discovery by the user or the promotion by the presenter.

All these solutions are drawing more folks in as producers, and creating better results (better performance and/or more inspired output) by more directly linking users and producers, and putting the focus on more raw output by disposing of the  various inter-mediating artifacts — credentials, associations, reputations, or third parties — that distort what producers create and users consume.  They also give the producers tools and processes to encourage and push them to refine their talents and resulting product.  As seen in the various domains and diverse ways in which this thesis is playing out, it’s powerful, including outside the consumer product realm.  Where I think this will be particularly exciting is taking these same forces and applying them to the various professions, including medicine, law, education, where the role of mediating artifacts is particularly strong, to pry them open with both a more direct link between service and user and a platform which emerges a broader pool of talent.  Those are kingdoms where crowns, thrones, and robes still carry power.

For those with a “down with the system” mentality, these are times of great opportunity!