Monthly Archives: June 2012

The Tech World’s “Flopping, Not Competing” Problem

In basketball, when you foul, you get penalized for it.  Recently, basketball has been plagued by “flopping” — players dramatically falling to the floor, pretending to be fouled, trying to fool the referee into calling a foul.  This has been recently recognized as a plague on the game.

When it comes to business, competition is a powerful conceptual framework.  We admire companies competing, generating better products for their customers, and producing rewards for founders, management, and workers.  We recognize that competition is sometimes rough and tough, and companies learn from each other’s innovations, trying to outdo each other.

In life, more generally, theft is another powerful conceptual lens.  You must not steal goes a Commandment.  We dislike people who steal.

In the last couple of years, in some important parts of the tech world, the framework of theft has trumped that of competition.

The most visible evidence of that is the princely and unexpected sums paid for the carcasses or the near carcasses of companies such as Nortel, Novell, and Motorola, whose products failed or were failing in the marketplace.  Despite the fact that the companies were not competitive as demonstrated by their performance among customers, other companies saw great value as they could hurt (or defend themselves against such actions from) their competitors through patent litigation and seeking royalties (i.e. tolls to play in an area).  The fact that a company’s value in death trumped its value in life, as a competitive force, suggests something very powerful.

This is upside-down.  For innovation, the framework of competition must sit above the framework of theft.

Of course, this is not to defend theft.  Instead, it is to say that to a great extent, the phenomena of companies claiming theft is both a strategic and tactical effort to ride the moral force of the concept of theft — the way we all understand it in the moral sense — to squelch competition.

The reality is much more complicated.  As just one example, the “property” that is at the heart of some of these cases is often not of great value in itself as a result of its innovative importance, but because of the position an industry standard setting has elevated it to.

Here is how Judge Posner explains it in the recent ruling I noted was coming in the smartphone litigation between Apple and Google (Motorola):

The proper method of computing a FRAND royalty starts
with what the cost to the licensee would have been of obtaining,
just before the patented invention was declared essential to
compliance with the industry standard, a license for the function
performed by the patent. That cost would be a measure of
the value of the patent qua patent. But once a patent becomes
essential to a standard, the patentee’s bargaining power surges
because a prospective licensee has no alternative to licensing the
patent; he is at the patentee’s mercy. The purpose of the FRAND
requirements, the validity of which Motorola doesn’t question,
is to confine the patentee’s royalty demand to the value conferred
by the patent itself as distinct from the additional value—
the hold-up value—conferred by the patent’s being designated
as standard-essential.

Judge Posner also quotes the FTC, in a recent third-party filing in a smartphone litigation at the ITC, to bolster this point:

High switching costs combined with the threat of an exclusion
order could allow a patentee to obtain unreasonable
licensing terms despite its RAND commitment, not because
its invention is valuable, but because implementers
are locked in to practicing the standard. The resulting imbalance
between the value of patented technology and the
rewards for innovation may be especially acute where the
exclusion order is based on a patent covering a small component
of a complex multicomponent product. In these
ways, the threat of an exclusion order may allow the holder
of a RAND-encumbered SEP to realize royalty rates that
reflect patent hold-up, rather than the value of the patent
relative to alternatives.

It is time for the moral force of competition to take its rightful place above the lens of theft.  In part, it’s through using antitrust more aggressively to discourage the abuse of patents.  In part, it’s through influential judges like Posner here, creating persuasive precedent and giving other judges the support to take similar actions.  But mostly, it’s due through a cultural change and for tech companies to stand down.

The Big Work

From Seth Godin:

Most of the day is spent in little work. Clerical, bureaucratic, meetings, polishing, improving, reacting, responding.

The obligation is to carve out time for the big work.

The big work that scares you, that brings risk, that might very well fail.

….

No need to wait for permission or the lightning bolt of inspiration. The big work is available to you as soon as you decide to do it.

Yin and Yang, Growth and Austerity

Growth versus austerity.  The war between the two ideas as a solution to our economic morass has defined the last few years in the US and Europe, and, in particular, with heightened urgency this year, as we approach the US presidential election and as the EU faces its “do or die” moment.

Austerity had growth on the mat, but currently, in Europe at least, the growth philosophy is back on its feet.  Like yin and yang, the seeming contradictions are actually complementary and part of an integrated ecosystem — both are necessary.

We need to spend wisely, but that’s not enough.  People need to make money as well.  If people don’t have money to spend, the economy cannot hum, and it eventually stills to silence, sometimes after destructively going in the opposite direction.  And with that, the larger society also starts to wither.

The fact that it has taken three years for this realization to happen (and only in a subset of Europe) shows the depressing state of our macro-policy thinking.

Macro-commentary aside, I also mention this because there are implications on the micro, entrepreneurial level.  You should make things better on both the customer (austerity, i.e., better prices) and supplier side (growth, i.e., a better living).

The better ideas disrupting talent markets will not only make things better for customers, but will also make things better for the supplier-side of the marketplace (but perhaps worse for the entire marketplace), treating suppliers with dignity and allowing them to make a better living than without the marketplace.  Grinding the supply side to penury is not inspiring, nor potentially sustainable.

For that reason, even though I think the customer side (50%-75% higher rates) is potentially a limitation, I admire Uber for the reported better livings that Uber drivers are earning.  As this article describes:

For its customers, Uber is a pleasant splurge, but for its drivers the service is a godsend, a ticket to a whole new standard of living…One San Francisco chauffeur estimates that the work he gets through Uber nets him more than $45 per hour, on average. Another says that his total earnings are now roughly $2,100 a week, with $920 of that coming from the service. Since the cars are already paid for and the drivers want to work, Uber is like found money for everyone: the drivers, the owners, and of course Uber itself, which takes 20 percent off the top of every ride.

The golden ticket lies in the idea that can give customers a better deal, along with the suppliers. These are markets where lower prices, more quality, and better livings can co-exist.

But isn’t this a contradiction?

Not where the existing talent is so entrenched that it’s providing service at a lower quality, but higher cost.  In other words, the existing supply is phoning it in, so that by empowering neglected talent, one can get better quality work for the customer, lower prices, as well as improving the lives of the supplier who participate.

As an example of such a market, think about high-end law. A partner at an elite firm can ride the firm’s reputation to bill well over $1000 an hour, while a more motivated younger lawyer, trained and doing the work for years, can in this shrinking market fall through the cracks such that she is earning $25/hour reviewing documents.  If you can empower this person to provide the service for $200 an hour, the customer could get a much better product at a much lower price, while the younger lawyer can make a much better living, both monetarily and in terms of job satisfaction.

That’s the yin and yang of growth and austerity.

The Solstice, Ruckus and Renewal

On this days of all days, this post today by Fred Wilson, channeling Seth Godin, just nails it.

Quoting Seth Godin:

It’s about the connection economy and the value created when we give up doing what we’re told (and avoiding what we fear) and start making art instead. The art of important work, of making a ruckus and of inventing the future.

And quoting Fred on the underlying point of it all:

[I]t is not the money that is the big payoff in the work that I do. It is the people and the ideas that enter your life and change your world. It is the art of important work, of making a ruckus and of inventing the future.

So, there’s doing what you are told.  And there is doing important work, causing a ruckus, and inventing the future.  These are different ways of seeing things, of conceptualizing the world.

In the last few months, I’ve figured out that the same thing, whatever it is, can fall into both categories.  Something that was not exciting and has become hum-drum, can become or at least seem a lot more interesting when you’re able to take control and try to re-transform it.  That’s when you move from doing what you’re told to do to being your own author.

But then you step back and realize that sometimes there is even a third option: an opportunity to create an even higher level of “ruckus.”  This is when there may be an opportunity to re-invent the entire game for everyone, not just yourself.

June 21st is the summer solstice.  The longest day of the year, and for some, a time of cleansing, renewal, and planting of new seeds.  For some of us, it’s the start of another year.  Here are lessons for the upcoming year:

Stop doing what you are told (or should do).

Start making a ruckus.

Re-invent the entire game.

Giving People Superpowers

A recollection of Dennis Crowley as a bonus from the Clay Shirky interview from the last post.  One of the things that stands out about Dennis is how he has been obsessed with the same issue forever, manifesting itself in two companies, one which is continuing to evolve.  Here is Shirky’s perspective on that.

Wired: Dennis Crowley was a student of yours at NYU. What do you remember of him?

Shirky: Dennis was on fire when he got there. I mean, most students I meet because they sign up and show up in one of my classes. Dennis I met because in the middle of his first semester there he built as part of a one-week long project for a class a database for students to characterize their interests and skills to one another. It was a full on social application built in 2001, 2002, prior even to the launch of Friendster.

So I said, “Who is this guy?” So I went and met him and we had coffee. It was clear that the guy was going to take whatever we had to offer and just use it in ways that were more interesting than the stuff we could have been thinking of ourselves. He has always been outgoing, he has always wanted to meet new people, he introduced people he knows to each other, and I think his native interest is in taking the social possibilities that adhere particularly in city life and making them work better. Dennis is in the business of giving people superpowers. You use, first Dodgeball, latterly Foursquare, to literally see through walls. I am standing here, and my friends are 55 yards in that direction. It’s hard now to remember, when mobile social software and geo-located X are all just part of the background noise of using our devices, but he built that shit in two thousand and three!

The Super PAC Election: The Attempt to Silence Social Media?

I wrote six weeks ago that:

The Internet, utilized correctly, should make politics passionate and alive; but, instead politics is largely becoming even more stagnant, even with the occasional examples of a refreshing oasis in the desert.

That post observed that the Internet was falling short of bringing authenticity into politics.  Like the space program, we seem to be going backwards with the internet and politics.

In a similar vein, NYU’s Clay Shirky observes this month in Wired:

Clinton used mailing lists in ’92, and every election since then — famously Howard Dean to Barack Obama — has involved considerably more imaginative use of social media. And this election has not. I’ve been quite surprised by that.

I had a student looking at Super PACs a while ago, and we said, “Let’s try and find out what the Super PACs’ social media strategy is.” As she came back about 10 days later, she said, “I think I know what the Super PAC’s social media strategy is: Don’t use it.” That’s exactly the whole point of being a Super PAC, to be able to spend unlimited money on the kind of media where no one has the right or the ability to respond, and to minimize transparency. This election feels to me, right now, more Nixon-Kennedy than Obama-McCain because television has become the tool of choice for the source of unlimited fundraising. Politicians like television better; nobody gets to yell back to you if you’re yelling on TV.

The New A-List

Another way to think about the talent side in the talent/infrastructure framework is prying open the high gates that demarcate the field, protecting it so that only established talent can play.

You open those gates and let the free agents enter and play.

If it turns out that the free agents are as or better skilled, responsible, and accountable and customers recognize that, then the infrastructure is established and you can go back and attract/drive/force the established talent onto the platform.

Widening the supply/talent side by linking the free agents with the established talent gets better results, whether in terms of quality or price (depending on the market).

A distant analogy — TV used to be the vast wasteland, while the film world was glamorous, and the best talent was in the latter.  Then you had Oz, the Sopranos, and now cable is where many stars want to work on and where the most innovative visual content is created, while film is sequels, reboots, and the lowest common denominator that will sell globally.  Today, the wasteland is now vibrant, and the old platform has lost some of its gleam.

While Game of Thrones was brought up as an argument to protect the existing infrastructure, it actually is an example of and guide to disrupting the existing infrastructure in an even more fundamental way.

Hipster Harvey Haddix

When I was a kid, I loved my baseball card collection.  I haven’t thought about it in years.  Today, I am more interested in innovation, especially the clash and resolution of “oil and water” ideas, or the insight that comes when someone looks at something with fresh eyes.

Connecting the dots of all that, in the most original way, is this story of Brooklyn-created artisanal baseball cards created by a French-born artist who picked up baseball as an adult.  Instead of the usual annual inventory of players that made up traditional baseball card sets, these are organized across whimsical themes including “Marvelous Mustaches,” “Bizarre Injuries,” and “Edible All-Stars.”

I’m posting in appreciation for the pleasure of making me remember for a moment why I once adored baseball and creating the bridge to my current passions.

Telling Your Story

Certainly one of the most crucial skills in life is storytelling, the skill at the heart of touching others’ emotions and then persuading them.  As in other things, this is true in entrepreneurship as well where you are selling vision to customers, investors, employees, and the world.

One of the greatest storytellers of our time is Pixar, maker of some of the best animated stories of all time, including my Pixar favorites Ratatouille,  The Incredibles, and Up.  Like it literally did in Toy Story, Pixar takes the inanimate and makes it deeply human.  And perhaps proving the connection, Pixar was nurtured into what it was in significant part by Steve Jobs, one of the greatest entrepreneurial storytellers of our time, and possessor of the reality distortion field.

Consequently, I found this listing of the 22 rules of Storytelling by Pixar’s Emma Coats worth sharing:

#1: You admire a character for trying more than for their successes.

#2: You gotta keep in mind what’s interesting to you as an audience, not what’s fun to do as a writer. They can be v. different.

#3: Trying for theme is important, but you won’t see what the story is actually about til you’re at the end of it. Now rewrite.

#4: Once upon a time there was ___. Every day, ___. One day ___. Because of that, ___. Because of that, ___. Until finally ___.

#5: Simplify. Focus. Combine characters. Hop over detours. You’ll feel like you’re losing valuable stuff but it sets you free.

#6: What is your character good at, comfortable with? Throw the polar opposite at them. Challenge them. How do they deal?

#7: Come up with your ending before you figure out your middle. Seriously. Endings are hard, get yours working up front.

#8: Finish your story, let go even if it’s not perfect. In an ideal world you have both, but move on. Do better next time.

#9: When you’re stuck, make a list of what WOULDN’T happen next. Lots of times the material to get you unstuck will show up.

#10: Pull apart the stories you like. What you like in them is a part of you; you’ve got to recognize it before you can use it.

#11: Putting it on paper lets you start fixing it. If it stays in your head, a perfect idea, you’ll never share it with anyone.

#12: Discount the 1st thing that comes to mind. And the 2nd, 3rd, 4th, 5th – get the obvious out of the way. Surprise yourself.

#13: Give your characters opinions. Passive/malleable might seem likable to you as you write, but it’s poison to the audience.

#14: Why must you tell THIS story? What’s the belief burning within you that your story feeds off of? That’s the heart of it.

#15: If you were your character, in this situation, how would you feel? Honesty lends credibility to unbelievable situations.

#16: What are the stakes? Give us reason to root for the character. What happens if they don’t succeed? Stack the odds against.

#17: No work is ever wasted. If it’s not working, let go and move on – it’ll come back around to be useful later.

#18: You have to know yourself: the difference between doing your best & fussing. Story is testing, not refining.

#19: Coincidences to get characters into trouble are great; coincidences to get them out of it are cheating.

#20: Exercise: take the building blocks of a movie you dislike. How d’you rearrange them into what you DO like?

#21: You gotta identify with your situation/characters, can’t just write ‘cool’. What would make YOU act that way?

#22: What’s the essence of your story? Most economical telling of it? If you know that, you can build out from there.

Keeping these in mind as you create and evangelize will help you breathe life into your product.

If Peyton Manning Couldn’t Get a Job?

Peyton Manning got a new job pretty fast.

Obviously he did, you say.  He’s an immense talent, and just because Indy had a reason (in its specific case, the luxury of Andrew Luck) to let him go, someone else, who could use him, grabbed him.  That’s how talent markets work: if there is objective talent that cannot be used on one team, it’s picked up somewhere else.

But what if it hadn’t worked that way.  What if no one took Peyton?  What if he missed his starting job because of a contingent circumstance, but no one else picked him up?  You might conclude that something is wrong in the market. One explanation might be that other QBs or someone else with an interest in keeping the supply of QBs low was acting to create the dislocation in the market.

Let’s return to our talent/infrastructure framework.  The conclusion there was that a new infrastructure is the route to disrupting a talent market.

One risk factor of that conclusion: what if you build it (the infrastructure) and they [the talent] don’t come?

We have the answer in this problem.  The way to get the talent onto the infrastructure is to identify the cast-aside Peytons of your market.  Get them onto your infrastructure, and give them the tools on your platform so that the market cannot ignore them.

The talent, that the existing infrastructure choose to ignore, but which you can find a way to verify and bring to light is the leading edge of the wedge on the talent side to disrupting the market.