Monthly Archives: November 2012

Young Voters: Online, Off the Hook

On Election Day, we noted that nothing beats personal appeals from trusted peers in getting voters to the polls.  Traditionally, the two trusted methods have been a phone call and a door knock.  The upstart method is social media.

An interesting insight from Business Week this week on lessons from this election on why social media may overcome the phone as a method of making the personal appeals:

This powered the “targeted-sharing” program that Messina and others believe was the true innovation that helped drive such surprisingly high turnout. The campaign’s Orwellian knowledge of the electorate—its deep understanding of precisely what, or whom, would motivate someone to act on Obama’s behalf—was such that it could get supporters to appeal to wavering or unreliable friends and acquaintances with individually tailored messages. “Politics is a direct-response business,” Goff says. “People do things if you ask them to do it, and for the most part don’t do it if you don’t ask.”

Often these requests were made through Facebook, mobile, or another online medium, which made it particularly effective for contacting young voters. “Of our turnout targets 29-and-under, half couldn’t be reached by phone, either because they didn’t have one or we didn’t have their number,” Goff says. “Yet we were able to reach 85 percent of them through targeted sharing. Almost everyone is on Facebook.” He estimates that 5 million voters were contacted this way—more than Obama’s margin of victory. “All of these things are characteristic of the way the next generation of social and mobile apps are going to evolve,” says Schmidt.

DISMANTLING EXCESS SCAFFOLDING

I have gone too long without posting the wisdom of the world’s archetypal Renaissance giant startup robot dinosaur, but this one is worthy of the delay.

Michelangelo famously described the process of artistic genius as one of liberation and paring back:

I saw the angel in the marble and carved until I set him free

Fake Grimlock, yesterday, dropped the version of this truth for innovation and startups:

MOST OF FUTURE IS DISMANTLE EXCESS SCAFFOLDING OF PAST TO ENABLE WHAT IT ORIGINALLY MEANT TO DO

(Update: As Fake Grimlock pointed out to me in a tweet, unlike Michelangelo, he does not speak in puny tiny letters!)

Spectrum In the Hands of Unreasonable Men

I have written before — on this site and elsewhere — about the sorry state of mobile broadband and how it threatens our entire innovation ecosystem.

The FCC has the typical bureaucratic blindness to this, not even understanding there is an issue.

So we’re lucky that we have two of the most unreasonable entrepreneurs alive who are going to make a run at disrupting the industry’s coziness.

The WSJ today has a story about the unconventional Masayoshi Son and his desire to revitalize Sprint:

When Mr. Son announced the deal last month in Tokyo, he didn’t mince words about his ambitions: “I’m a man, and I think every man wants to be No. 1.”

That is easier said than done. Sprint is struggling with an expensive network upgrade, a $15.5 billion commitment to subsidize iPhones for customers and a heavy debt load. Sprint also is well behind the market leaders in its so-called spectrum holdings—its right to use chunks of the airwaves to transmit phone calls, Internet traffic and other data. AT&T and Verizon Wireless—a joint venture between Verizon Communications Inc.  Vodafone—have the most valuable spectrum holdings in the U.S., with more than 100 megahertz each. Sprint holds 56 megahertz, a deficit that isn’t as bad as it looks given Sprint’s lower subscriber count. The company is using funds injected by Softbank to acquire more, including a deal this month with U.S. Cellular.

Softbank’s acquisition would inject $8 billion directly into Sprint and give the carrier more flexibility to buy spectrum or acquire smaller rivals. The money also could help Sprint to continue offering plans that let subscribers use as much data as they desire for a flat rate—the kind of appealing deal for customers that AT&T and Verizon have all but dropped.

At the same time, one of this blogger’s favorites, Charlie Ergen, the satellite tv gladiator, is looking to use his spectrum to create a terrestrial wireless competitor.

 

Paul Graham: Start With Something A Small Number of People Want A Large Amount

Paul Graham charts an epic trail to where good ideas and bad ideas emerge and diverge.

I hope to expand on some of his points over the next few weeks, but in the meanwhile here are some excerpts.  It’s definitely worth going back to the original piece, because different parts are relevant to different potential founders.  These excerpts are most relevant to me:

The very best startup ideas tend to have three things in common: they’re something the founders themselves want, that they themselves can build, and that few others realize are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way.

….

Why do so many founders build things no one wants? Because they begin by trying to think of startup ideas. That m.o. is doubly dangerous: it doesn’t merely yield few good ideas; it yields bad ideas that sound plausible enough to fool you into working on them.

When a startup launches, there have to be at least some users who really need what they’re making—not just people who could see themselves using it one day, but who want it urgently. Usually this initial group of users is small, or the simple reason that if there were something that large numbers of people urgently needed and that could be built with the amount of effort a startup usually puts into a version one, it would probably already exist. Which means you have to compromise on one dimension: you can either build something a large number of people want a small amount, or something a small number of people want a large amount. Choose the latter. Not all ideas of that type are good startup ideas, but nearly all good startup ideas are of that type.

….

Nearly all good startup ideas are of the second type. Microsoft was a well when they made Altair Basic. There were only a couple thousand Altair owners, but without this software they were programming in machine language. Thirty years later Facebook had the same shape. Their first site was exclusively for Harvard students, of which there are only a few thousand, but those few thousand users wanted it a lot.

….

But while demand shaped like a well is almost a necessary condition for a good startup idea, it’s not a sufficient one. If Mark Zuckerberg had built something that could only ever have appealed to Harvard students, it would not have been a good startup idea. Facebook was a good idea because it started with a small market there was a fast path out of. Colleges are similar enough that if you build a facebook that works at Harvard, it will work at any college. So you spread rapidly through all the colleges. Once you have all the college students, you get everyone else simply by letting them in.

Similarly for Microsoft: Basic for the Altair; Basic for other machines; other languages besides Basic; operating systems; applications; IPO.

….

So if you can’t predict whether there’s a path out of an idea, how do you choose between ideas? The truth is disappointing but interesting: if you’re the right sort of person, you have the right sort of hunches. If you’re at the leading edge of a field that’s changing fast, when you have a hunch that something is worth doing, you’re more likely to be right.

Being at the leading edge of a field doesn’t mean you have to be one of the people pushing it forward. You can also be at the leading edge as a user. It was not so much because he was a programmer that Facebook seemed a good idea to Mark Zuckerberg as because he used computers so much. If you’d asked most 40 year olds in 2004 whether they’d like to publish their lives semi-publicly on the Internet, they’d have been horrified at the idea. But Mark already lived online; to him it seemed natural.Paul Buchheit says that people at the leading edge of a rapidly changing field “live in the future.” Combine that with Pirsig and you get:

Live in the future, then build what’s missing.

That describes the way many if not most of the biggest startups got started. Neither Apple nor Yahoo nor Google nor Facebook were even supposed to be companies at first. They grew out of things their founders built because there seemed a gap in the world.

And when these problems get solved, they will probably seem flamingly obvious in retrospect. What you need to do is turn off the filters that usually prevent you from seeing them. The most powerful is simply taking the current state of the world for granted. Even the most radically open-minded of us mostly do that. You couldn’t get from your bed to the front door if you stopped to question everything.

Just as trying to think up startup ideas tends to produce bad ones, working on things that could be dismissed as “toys” often produces good ones. When something is described as a toy, that means it has everything an idea needs except being important. It’s cool; users love it; it just doesn’t matter. But if you’re living in the future and you build something cool that users love, it may matter more than outsiders think. Microcomputers seemed like toys when Apple and Microsoft started working on them. I’m old enough to remember that era; the usual term for people with their own microcomputers was “hobbyists.” BackRub seemed like an inconsequential science project. The Facebook was just a way for undergrads to stalk one another.

At YC we’re excited when we meet startups working on things that we could imagine know-it-alls on forums dismissing as toys. To us that’s positive evidence an idea is good.

….

The clash of domains is a particularly fruitful source of ideas. If you know a lot about programming and you start learning about some other field, you’ll probably see problems that software could solve. In fact, you’re doubly likely to find good problems in another domain: (a) the inhabitants of that domain are not as likely as software people to have already solved their problems with software, and (b) since you come into the new domain totally ignorant, you don’t even know what the status quo is to take it for granted.

Because a good idea should seem obvious, when you have one you’ll tend to feel that you’re late. Don’t let that deter you. Worrying that you’re late is one of the signs of a good idea. Ten minutes of searching the web will usually settle the question. Even if you find someone else working on the same thing, you’re probably not too late. It’s exceptionally rare for startups to be killed by competitors—so rare that you can almost discount the possibility. So unless you discover a competitor with the sort of lock-in that would prevent users from choosing you, don’t discard the idea.

You don’t need to worry about entering a “crowded market” so long as you have a thesis about what everyone else in it is overlooking. In fact that’s a very promising starting point. Google was that type of idea. Your thesis has to be more precise than “we’re going to make an x that doesn’t suck” though. You have to be able to phrase it in terms of something the incumbents are overlooking. Best of all is when you can say that they didn’t have the courage of their convictions, and that your plan is what they’d have done if they’d followed through on their own insights. Google was that type of idea too. The search engines that preceded them shied away from the most radical implications of what they were doing—particularly that the better a job they did, the faster users would leave.

A crowded market is actually a good sign, because it means both that there’s demand and that none of the existing solutions are good enough. A startup can’t hope to enter a market that’s obviously big and yet in which they have no competitors. So any startup that succeeds is either going to be entering a market with existing competitors, but armed with some secret weapon that will get them all the users (like Google), or entering a market that looks small but which will turn out to be big (like Microsoft).

Finding startup ideas is a subtle business, and that’s why most people who try fail so miserably. It doesn’t work well simply to try to think of startup ideas. If you do that, you get bad ones that sound dangerously plausible. The best approach is more indirect: if you have the right sort of background, good startup ideas will seem obvious to you. But even then, not immediately. It takes time to come across situations where you notice something missing. And often these gaps won’t seem to be ideas for companies, just things that would be interesting to build. Which is why it’s good to have the time and the inclination to build things just because they’re interesting.

Live in the future and build what seems interesting. Strange as it sounds, that’s the real recipe.

Expecting the Black Swan

Black swan events are extreme outlier (on a probability curve) events that play an outsize and consequential role in history or our personal lives because of their extreme magnitude.  Because they are outlier events, they are generally “unexpected.”  The idea was popularized by Nassim Taleb in discussing trading models on Wall Street.

We have lived through more than a decade of life-destroying tsunamis, once-in-a-century super-storms, stranger-than-fiction terrorist events and confidence-shattering flash crashes.  Since the turn of the millennium we have experienced 9/11, Sandy, Katrina, nuclear meltdowns.  We can go on.

The black swan is no longer unexpected.  It is the expected.

Why is that?

First, there are a number of fuses today to set off events that would have been truly unexpected in recent decades.  Climate change seems to have brought on more extreme weather events.  Terrorism and cyber-warfare are present and future threats.

Second, when these fuses are lit, there is an increased chance of big effects due to some factors.  We have shoddy, not-up-to-snuff infrastructure, yet we do not make adequate public investment to shore them up.  We live in a networked world that concentrates and can spread risk, increasingly proving itself as the flip-side to the usual expectation that networks distributed risk to create more resilient systems.  In the Western world, we expect a certain level of comfort and order to carry on.  Hurricane Sandy showed how fragile “order” is and how quickly it could devolve when basic necessities such as power and water are lost.

This requires a big change in orientation.  So what do we do?

As the worst case seems to become more likely, and its power to devastate us increases in the event of a worst case, we need a different orientation.  We have to take more of a black swan approach to planning in our personal, public, and business lives.

In our personal lives, that might be a permanent, on-the ready stock of backups to deal — an emergency storage locker — for when necessities disappear.

In our public lives, we need more investment in better and more secure infrastructure that withstands the specific threats above.

In business, “disaster recovery” has been a big market for decades whereby IT systems are backed up to be recovered quickly when things on.  Given for how long many businesses shut down in the Financial District, there is a big opportunity to deal with more frequent, regular, and longer disruptions that is more tailored to the disruptions such as climate disaster and cyber-warfare that we should expect to see going forward.

Help Wanted

There was a time in America where willingness to work hard was the foundation of an affirming middle-class life.  In the wake of the election, the Economist has a piece about poverty and the changed nature of the American economy:

A common lament is that, 40 or 50 years ago, motivated workers with little formal education, like Ms Dunham, would have been able to find factory jobs that paid a decent wage with benefits. But low-skilled and humdrum jobs, particularly in manufacturing, have gone overseas, or fallen victim to automation. Only low-level service jobs have been left in their wake (almost a third of the working poor are in the service sector). This is an oversimplification—manufacturing jobs are not invariably higher paying than service jobs—but there is some truth to it.

Wages for low earners have been largely stagnant for the past 40 years. Between 1947 and 1967, hourly wages of private, non-supervisory workers, who comprise more than 80% of American wage-earners, grew by an average of 2.3% a year. In the past three decades, however, hourly wages rose by a paltry 0.2% annually. From 2007 to 2011 average hourly wages fell for the bottom 70% of American workers, with the steepest drops for the lowest-paid.

Without forgetting it is quite impossible to live at all

Nietzche made that observation.

General Petraeus is not the ideal example for a few reasons.

Look, you can’t cheat on your spouse.  And, however relevant or not relevant that you think that it is to public life generally, in leading an intelligence organization, it’s more clear that there are legitimate concerns to such private matters because of the vulnerability to a threat of blackmail.

But, nonetheless, the Petraeus episode is illustrative that we live in a new digital world.  We have been living in it for a decade and a half and we still haven’t fully come to terms with it.

I’ve been delaying writing a post about this, and I will do one soon, but the short of it is that we live in a world where there fundamentally is no longer any forgetting and consequently there is no privacy because things will ultimately get out.  And when embarrasing things leak out — also because of our digital era — things become, as Drudge has said of this situation, a “four star circus.”

Society has until the digital age been premised on a certain degree of anonymity to live your life, the ability to ultimately keep certain things private, or have them fade from memory where that has failed.  This is no longer possible and we need to adjust.

In the world of governance, it’s going to be harder to get away with affairs, which is a good thing in many ways, and certainly to those people’s families.  But it also means that the talent pool of leaders will probably become more constricted if you believe that pool is even more prone to cheating.  FDR, JFK, one can go on and on with the list.

Lost in Translation

At the crossroads of American discovery and foreign language documents sits a vault of money:

Common Sense Advisory, a research firm, estimates that thworldwide language-services business is worth $34 billion and it is growing fast, at about 12% a year. No firm is big enough to dominate and most are privately held. The biggest, Mission Essential Personnel, boasted revenues of $725m in 2011; TransPerfect raked in $300m. Fees from legal work can be juicy.

TransPerfect worked for both sides in the case involving Apple and Samsung. When Panasonic, a struggling Japanese electronics-maker, bought Sanyo, another one, in 2009, America’s antitrust authorities required so much documentation before approving the merger that TransPerfect hauled in $25m in fees for translating around 100m words.

Big Box in Little Boxes

For whatever faults Walmart may or may not have, you have to give it credit for really trying with WalmartLabs, its ecommerce innovation group.

It  is now testing subscription commerce businesses, potentially as a means whether to put them on the retail shelves.  One of the first is goodies.co.  This is from its About Us page:

Food is personal. Food is social.

Goodies Co. helps you discover new foods you’ll love.

If you’re anything like us, you often find yourself thinking, “I’m so tired of eating the same old thing.” But branching out can be difficult. Why? Because trying new foods is expensive, time-consuming and risky. What if it doesn’t taste good? It’s money down the drain, not to mention a dull and very disappointing meal.

That’s no way to live.

And that’s where Goodies Co. comes in.

For just a $7/month subscription including taxes and shipping, the Goodies Co. box features 5-8 delicious new foods hand-picked and delivered directly to your doorstep. You get to receive a surprise every month, sample new foods and expand your palate without breaking the bank. We always try to include a wide variety of foods, from healthy, organic, artisan, and international.

Let Goodies Co. show you how good life can be.

Piles and Piles of Idle Cash

Many think that we live in a time of innovation bounty; Peter Thiel has famously argued the opposite:

Today when people say “tech” they think of a small cohort of computer-related companies rather than the continuing transformation of every industry that people envisioned back in the 1950s. On the campuses of Google and Apple, high-design bathrooms or espresso bars might look very different from the average non-tech company but their balance sheets show the same vast piles of idle cash you’ll find at Pfizer or Chevron. If we were living in an era of accelerating technological progress, Apple could reinvest its returns in new projects instead of fighting patent battles over old ones while moonlighting as the world’s biggest hedge fund.