With the crisis happening now, the words from Muhammad Yunus "capitalism is a half-developed structure" come back to mind.
And what he develops in the first chapter of his book "Creating a world without poverty - social business and the future of capitalism" resonate even more deeply:
"Capitalism takes a narrow view of human nature, assuming that people are one-dimensional beings concerned only with the pursuit of maximum profit. The concept of the free market, as generally understood, is based on this one-dimensional human being. Mainstream free-market theory postulates that you are contributing to the society and the world in the best possible manner if you just concentrate on getting the most for yourself."
The result is supposed to be a system that self adapts to situations and self corrects because people are dedicated to that one mission of maximizing profit.
The problem is that it does not work, as we can witness now on the financial markets.
Instead of self adjustments we get regular market failures, not exactly what the intent was.
What I see happening really is that creative mathematicians have invented financial products that generate big multiples out of nowhere and purely from speculation, allowing them to rip huge profit out off businesses or real estate properties regardless of the value they truly represent. Bubbles that end up blowing up.
If we are going to fix this system, I would like to follow Muhammad Yunus train of thoughts:
"The presence of our multi-dimensional personalities means that not every business should be bound to serve the single objective of profit maximization"
This is also what Bo Burlingham puts forward when he presents "Small Giants - companies that choose to be great instead of big".
When the sun goes down somewhere, it goes up somewhere else. This crisis is an opportunity, let's hope we learn to come back to the basics of what business should be about: adding real value on the ground, rather than maximizing financial ratios.
Tuesday, September 30, 2008
Monday, September 29, 2008
VCs and their relationship with the entrepreneur
I read recently from a VC on the GigaOm blog:
For a VC to write this is at the minimum an understatement, there is a HUGE conflict of interest between a VC and an entrepreneur:
- the VC is paid by investors (LPs) to generate for them as much of the value as possible from a given business. What matters is how much the return will be in the end.
- Meanwhile, the Entrepreneur is trying to generate value from the business for himself.
To say that you could work in the middle to keep both happy cannot be true: if you are a VC your job is to generate as much value as possible for your LPs and nothing else. Your duty goes to fulfilling the engagement made to the person who trusted you with his/her money, no choice if you want to keep the LPs trust and your job as a VC.
What is probably true is that they may try to make it as painless as possible for the entrepreneur, but this is a very different proposition. In the end, we know where the value generated goes when VCs are involved: LPs first, whether they are comfortable with it or not.
It does not mean that you should not work with them, but clearly you should know what you are getting into...
we are also working on behalf of our limited partners to provide a return on their investment and that, in some instances, can admittedly result in a conflict of interests between us and the entrepreneur
For a VC to write this is at the minimum an understatement, there is a HUGE conflict of interest between a VC and an entrepreneur:
- the VC is paid by investors (LPs) to generate for them as much of the value as possible from a given business. What matters is how much the return will be in the end.
- Meanwhile, the Entrepreneur is trying to generate value from the business for himself.
To say that you could work in the middle to keep both happy cannot be true: if you are a VC your job is to generate as much value as possible for your LPs and nothing else. Your duty goes to fulfilling the engagement made to the person who trusted you with his/her money, no choice if you want to keep the LPs trust and your job as a VC.
What is probably true is that they may try to make it as painless as possible for the entrepreneur, but this is a very different proposition. In the end, we know where the value generated goes when VCs are involved: LPs first, whether they are comfortable with it or not.
It does not mean that you should not work with them, but clearly you should know what you are getting into...
Saturday, September 27, 2008
Not everybody is loosing on Wall Street
From the New York Times:
That's $19.1 just to show up for the job. Congratulations for the negotiation skills!
In my book, you get money when you add value, but I am not sure where and how value can be measured in this case. From what I see, the real value was in getting the contract. But if you are good enough to convince people to pay you just for being involved, good for you. In the end the blame goes to whoever agree to granting you such a big gift with no restriction.
Despite the contract, I would feel bad about taking so much money when people at the bottom are struggling, but that's just me, and probably why I am not up there with the other guys, which is fine thank you :-)
Mr Fishman is not to blame, but his case is a striking example of how screwed up the system is. No wonder Wamu ended up where they are now...
And the sad thing is that I am sure there is a lot more of this going on around Wall Street.
Hopefully this crisis will allow us to really rethink how we do things on the financial markets. What is happening is no accident, more like the normal consequence to playing too much with the numbers to the point where what we do becomes completely disconnected from the reality on the ground. Somebody messed up with the modeling and the statistics, forgetting that there are real people and real businesses behind the spreadsheets.
Forget the kids out of business school, anybody involved with finance should spend some mandatory time working in a real business with a down to earth salary before they are allowed to do what they do. Maybe this will make a difference and allow then to keep their sense of reality when they get into playing with the big numbers.
From the layoff that are happening in New York, London and all over the place, a lot of the financial guys are getting the lesson now.
Too bad we have to learn the hard way...
Mr. Fishman, who has been on the job for less than three weeks, is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus, according to an analysis by James F. Reda and Associates.
That's $19.1 just to show up for the job. Congratulations for the negotiation skills!
In my book, you get money when you add value, but I am not sure where and how value can be measured in this case. From what I see, the real value was in getting the contract. But if you are good enough to convince people to pay you just for being involved, good for you. In the end the blame goes to whoever agree to granting you such a big gift with no restriction.
Despite the contract, I would feel bad about taking so much money when people at the bottom are struggling, but that's just me, and probably why I am not up there with the other guys, which is fine thank you :-)
Mr Fishman is not to blame, but his case is a striking example of how screwed up the system is. No wonder Wamu ended up where they are now...
And the sad thing is that I am sure there is a lot more of this going on around Wall Street.
Hopefully this crisis will allow us to really rethink how we do things on the financial markets. What is happening is no accident, more like the normal consequence to playing too much with the numbers to the point where what we do becomes completely disconnected from the reality on the ground. Somebody messed up with the modeling and the statistics, forgetting that there are real people and real businesses behind the spreadsheets.
Forget the kids out of business school, anybody involved with finance should spend some mandatory time working in a real business with a down to earth salary before they are allowed to do what they do. Maybe this will make a difference and allow then to keep their sense of reality when they get into playing with the big numbers.
From the layoff that are happening in New York, London and all over the place, a lot of the financial guys are getting the lesson now.
Too bad we have to learn the hard way...
Tuesday, September 16, 2008
How Brands and their evangelists should manage blogs
Just like with the internet websites of web1.0, companies are slowly getting into social media and web2.0: many companies today have blogs, and try to establish a presence in the blogosphere through them, with the help of evangelists who monitor what is going on and mix with the crowd to spread messages. As a sign of this, Inc Magazine reports that "31% of the CEOs of their Inc500 companies maintain a blog or social network and for the most part they love them."
Having a blog is a great step forward.
Having evangelists is even better.
The next thing is to try to manage this social media effort and retain within the enterprise the IP that is being created by the evangelists working for the company.
Because the thing with Social Media is that many people/companies have blogs, many people comment of other's people blog, and evangelists tend to have their own blogs in addition to blogging on the company website. Even regular employees (non-evangelists) have blogs, and they may also do great work for the company there. So the reality is that conversations are happening all over the place, and there is no real central place where the company can measure what is going on, and analyze the results of the work being done over time. And there is no point is trying to bring the conversations back into a central place, because it is not going to happen. People want to do what they do where they are, not where you tell them to.
So the next option is to at least gather in a central place references to all these conversations, thus allowing readers on the company website to travel from one discussion to another other easily. And because references to these conversations are kept in a central place, you can also measure what is happening: how many posts, how many comments in how many blogs, and how many visitors on these blogs. Data which accumulates over time to also show you the trends of your influence and your impact on the blogosphere.
Think about it as something like Delicious, except designed for blogs because bookmarks are not enough, what you want with blogs are the RSS feeds that keep the flow of posts going.
A service I use to do all this for my Entrepreneur Commons project is eCairn (www.ecairn.com - and as a disclaimer you should know that yes I am connected to this company).
Within eCairn, I started building a list of blogs that talk about entrepreneurs, VCs and funding in general. And I monitor this list on a regular basis, sometimes commenting on the blogs when it is relevant. When I do, I can tag that post, as a way to keep track of the fact that I did comment on this blog in case I want to go back.
(the RSS feed for these posts where I commented is http://conversation.ecairn.com/post/feed?key=Qf4X4Cxiw392Ri6oWewwulHfA4H6E9Nn&title=Get+the+filter%27s+RSS+feed&with_filter=49, and it is also exposed in a widget on this blog)
Doing this, I started participating in conversations happening here and there. I sometime receive replies to my comments, and I also reply to other people's comments. Everytime I do this, I add the person's blog to my list, because if they said something that was relevant to me here, they may do it again.
Over time my selection of blogs has grown from something that was based on the declared intent of the blog (blogs about entrepreneurship, VCs or funding) to a selection of blogs that includes more of the same, plus blogs from knowledgeable people who do not always blog about these specific subject, but have shown interest and some level of expertise on the subject at one point or another.
And this evolution can be tracked: I know how many blogs I started from, where I am today and how I got there; I know how many posts I found relevant through my browsing, how many I commented on, and how many new bloggers I got involved with (through their blog) from these conversations.
I can do this by myself, and I already get more than a regular RSS reader would give me, and I can include other people to do it with me: we are now several partners working on the Entrepreneur Commons project from within the eCairn service.
For any company I believe that it should be the next step forward, as a way to track what is happening on a given product, or what is happening with the brand in general. The value you get from being able to manage this process is huge, I see it as the real promise of Social Media delivered: the eCairn tool allows monitoring and engagement, the perfect backoffice tool for a marketing team.
Imagine for example that you launch a campaign:
- you can immediately measure the effect of that campaign in the blogosphere, you can reinforce the message by commenting as appropriate on blogs (or do damage control if not all goes as expected). And you can correlate the campaign to a measure of the buzz generated.
- you can do all this as a coordinated effort, with a complete team of people involved, so that you can handle as much as you want. And when people move on to another job, the info from what they have done stays with the company. They may control their own blog, and the audience around it, but you keep track of the relevant posts that were made, the bloggers that were engaged, etc...
Outside of specific campaign, you can also do on-going work of maintaining a presence in the blogosphere, and build up the audience through engagement with bloggers. You can measure how many blogs you engaged on, which is another great indicator of the work being done by the marketing team (who they talk to, who they know, and how influential these people are - from the traffic of their blog, which gives me a feel for my addressable audience).
As I commented recently on a post from Open Forum, in addition to what the author calls the Web triumvirate (website - blog - support discussion board or forums), companies should seriously consider now adding a fourth pillar: proactive Customer Service in the form of blog monitoring and bloggers engagement - call it Blogosphere Relationship Management
Saturday, September 13, 2008
The Now Web vs. Blogosphere Relationship Management
Just read a post on TheDeal.com talking about the Now Web
And the post mentions Twitter and Disqus as example of these services in the Now Web.
While I like the concept of Now Web, I believe that Twitter and Disqus belong to 2 very different worlds, at least for now.
I see Twitter as an equivalent of a virtual water cooler where people can come and discuss once in a while (even though some people seem to live there). Disqus on the other hand is a tool to manage conversations with the blogosphere and engage with bloggers. One is truly in the Now, the other is more in the "building over time".
When a blog is equiped with Disqus, or IntenseDebate (what I have on my blog), you can post comments, track replies but also get more info on the bloggers who commented, what other conversations they have other places, what blogs they publish on. With these tools you can accumulate over time records of conversations and connections with bloggers, you can build your personal intellectual property outside of your own blog and you can build a reputation within the group that emerges naturally from all these interactions.
And Twitter is a good complement to let the crowd now that you are doing all these things.
So for Disqus or IntenseDebate rather than Now Web, I would talk Relationship Management, and the good news is that if they can be categorized as such they are one step closer to the enterprise, and therefore one step closer to cash for the entrepreneurs and their investors.
No question in the end that both will make it to the enterprise, as Yammer demonstrated this week at TechCrunch 50. The way we function within and without the enterprise is changing, it will be interesting to see how far this goes...
And the post mentions Twitter and Disqus as example of these services in the Now Web.
While I like the concept of Now Web, I believe that Twitter and Disqus belong to 2 very different worlds, at least for now.
I see Twitter as an equivalent of a virtual water cooler where people can come and discuss once in a while (even though some people seem to live there). Disqus on the other hand is a tool to manage conversations with the blogosphere and engage with bloggers. One is truly in the Now, the other is more in the "building over time".
When a blog is equiped with Disqus, or IntenseDebate (what I have on my blog), you can post comments, track replies but also get more info on the bloggers who commented, what other conversations they have other places, what blogs they publish on. With these tools you can accumulate over time records of conversations and connections with bloggers, you can build your personal intellectual property outside of your own blog and you can build a reputation within the group that emerges naturally from all these interactions.
And Twitter is a good complement to let the crowd now that you are doing all these things.
So for Disqus or IntenseDebate rather than Now Web, I would talk Relationship Management, and the good news is that if they can be categorized as such they are one step closer to the enterprise, and therefore one step closer to cash for the entrepreneurs and their investors.
No question in the end that both will make it to the enterprise, as Yammer demonstrated this week at TechCrunch 50. The way we function within and without the enterprise is changing, it will be interesting to see how far this goes...
Wednesday, September 10, 2008
Inc500 statistics support Guy Kawasaki's plan B
I was happy to read yesterday that Guy Kawasaki is bringing some light on the realities of Silicon Valley, away from the hype and what the newspapers like to show on the front page.
And the timing is perfect, because this week I just received the special issue of Inc magazine where they give us some good statistics on what is happening in the trenches. The numbers give a good prospective on the relationship between VCs and Entrepreneurship - facts from their top 5000 (five thousand, no mistake here, this is what they give us):
- median amount of capital to launch the business $25K
- only 3% of the top 5000 received venture capital
Guy's plan B is right on: forget VCs if you can, this is expensive money anyway, and just focus on building the business with what you have.
Meanwhile I will keep working on the Entrepreneur Commons to help with the "Friend and Family" part, the initial funding that can make all the difference.
And the timing is perfect, because this week I just received the special issue of Inc magazine where they give us some good statistics on what is happening in the trenches. The numbers give a good prospective on the relationship between VCs and Entrepreneurship - facts from their top 5000 (five thousand, no mistake here, this is what they give us):
- median amount of capital to launch the business $25K
- only 3% of the top 5000 received venture capital
Guy's plan B is right on: forget VCs if you can, this is expensive money anyway, and just focus on building the business with what you have.
Meanwhile I will keep working on the Entrepreneur Commons to help with the "Friend and Family" part, the initial funding that can make all the difference.
Tuesday, September 09, 2008
The funding gap gets bigger
From TheDeal.com:
More money, less deals, the funding gap in the US is getting bigger. This is not going to help entrepreneurs trying to start their businesses, I see this as a flag that things are not improving when it comes to financing startups.
Meanwhile the same post mentions that the number of European deals only decrease slightly while the total amount spent is 5% less. So I assume from what I read (there is no number there on this) that the funding gap is decreasing in Europe, something good.
I wish we could see that trend in the US, it would certainly help entrepreneurship. With the economy as it is, it is time for the spreadsheet guys to give the entrepreneurs some room back...
$40 billion was invested in U.S.-based startups across all sectors during the past 12 months, compared to $36.2 billion during the year leading up to Aug. 31, 2007. The rounds got fatter, too, as there were 3,084 deals in the past year versus 3,219 in the previous period.
More money, less deals, the funding gap in the US is getting bigger. This is not going to help entrepreneurs trying to start their businesses, I see this as a flag that things are not improving when it comes to financing startups.
Meanwhile the same post mentions that the number of European deals only decrease slightly while the total amount spent is 5% less. So I assume from what I read (there is no number there on this) that the funding gap is decreasing in Europe, something good.
I wish we could see that trend in the US, it would certainly help entrepreneurship. With the economy as it is, it is time for the spreadsheet guys to give the entrepreneurs some room back...
Monday, September 08, 2008
Joost: a good example of what can go wrong when you have too many friends with too much money
Originally posted as a comment by mdangear on VentureBeat using Disqus.
Just commented on Venture Beat post regarding Joost:
The sad thing about Joost is how much money is being spent on an idea that as you say - "I found the idea of Joost to be compelling" - is just an idea.
It seems to me that we have here a typical case of too much money to people who belong to the VC club. They were successful, and therefore they were able to raise a lot of money on just an idea. And then they were able to spend that money without a real need to go and test it against the market until it was all built nice and fancy, with the money spent, only to discover that the market is not here. Not now, not for what they have to offer today. Oops.
Even better, after it did not take off, there were able to get even more money to try to fix the whole thing, in a typical human trait that when you have sunk in cost, you tend to spend more to make it right even when it does not necessarily make sense.
And this is the bad news when you have too many friends with too much money: easy get easy spend. No need to worry about paying the rent at the end of the month, no real need to be smart about your go to market (you have the friends - you have the doe - you have the buzz), just be happy with your idea and go build a nice desktop client that everybody will love. ..
Forgetting one detail: medium is content. So in this case it does not really matter that you have a client or something in the web browser, what matters is what type of content you are showing on a computer.
People are not necessarily interested in left overs from the majors, or old stuff that they agree to let you watch on the PC for free. The type of content that works on the PC has proven to be the 3mns short video, like you have on YouTube. Except that content on YouTube is all over the place, and it is hard to sort out the junk from the rest.
If they are going to spend more money, I believe it should be in producing quality content that works with the PC as a medium.
OR as you suggest, change the medium and go back to TV by becoming an equivalent of ActiveTV or a Tivo, allowing people to watch TV content on their TV, except that is would be coming from the Internet with some kind of box to make the connection.
Just commented on Venture Beat post regarding Joost:
The sad thing about Joost is how much money is being spent on an idea that as you say - "I found the idea of Joost to be compelling" - is just an idea.
It seems to me that we have here a typical case of too much money to people who belong to the VC club. They were successful, and therefore they were able to raise a lot of money on just an idea. And then they were able to spend that money without a real need to go and test it against the market until it was all built nice and fancy, with the money spent, only to discover that the market is not here. Not now, not for what they have to offer today. Oops.
Even better, after it did not take off, there were able to get even more money to try to fix the whole thing, in a typical human trait that when you have sunk in cost, you tend to spend more to make it right even when it does not necessarily make sense.
And this is the bad news when you have too many friends with too much money: easy get easy spend. No need to worry about paying the rent at the end of the month, no real need to be smart about your go to market (you have the friends - you have the doe - you have the buzz), just be happy with your idea and go build a nice desktop client that everybody will love. ..
Forgetting one detail: medium is content. So in this case it does not really matter that you have a client or something in the web browser, what matters is what type of content you are showing on a computer.
People are not necessarily interested in left overs from the majors, or old stuff that they agree to let you watch on the PC for free. The type of content that works on the PC has proven to be the 3mns short video, like you have on YouTube. Except that content on YouTube is all over the place, and it is hard to sort out the junk from the rest.
If they are going to spend more money, I believe it should be in producing quality content that works with the PC as a medium.
OR as you suggest, change the medium and go back to TV by becoming an equivalent of ActiveTV or a Tivo, allowing people to watch TV content on their TV, except that is would be coming from the Internet with some kind of box to make the connection.
Wednesday, September 03, 2008
The problem with LinkedIn
LinkedIn recently rolled out their forum functionality, and proved in doing so that they do not really understand (or do not want to understand) what is happening with the rest of the world:
- First this is a case of being too late. Forum functionality is nice, but conversations are happening mostly other places these days. Not that it is obsolete, but really there are many other places where we can talk, and they have waited so long that most of the LinkedIn groups I belong to already have forums setup some other place (Google or Yahoo).
- Then they keep ignoring the fact that we have now a technology called RSS that is very convenient to stay aware of things. Instead, LinkedIn gives me an email alert of email digest. Another thing of the past, which is also still very useful, but where is the RSS feed that should also come with it?
What this second point tells me is that LinkedIn keeps trying to be a destination website, they are stuck in the web1.0 world when they should instead open their system as much as possible with APIs, RSS feeds, widgets etc...
While they are forcing me as much as they can to go back to the site, with an attitude that is starting to feel almost like abuse, companies like Plaxo will let me sign in with my OpenID, and are giving all the RSS feeds I want, plus groups, messaging, etc... One big thing for exemple is that Plaxo does let me send messages to people I am not directly connected to. And now that I can also have the detail of my professional experience on my profile, it is starting to look as if I might as well switch to Plaxo to do the bulk of my networking.
The gap is closing between the 2 in terms of what I get from the services, and Plaxo is looking like a much better bet moving forward. Unless LinkedIn decides to wake up and catch up with the world with something better than forums...
Subscribe to:
Posts (Atom)
