Posts from December 2008

Things I Wish For In The New Year

No predictions for me. I’m done with that thanks to Brad Feld.

And I am also done with resolutions. I resolved to get off of Microsoft products in 2007 and failed miserably.

But I am looking forward to 2009 on this new year’s eve and so I am going to list some things I am hopeful for in 2009. These are in no particular order, they are listed as they came to me.

1) A gas tax – Tom Evslin made the case for a $1.50/gallon gas tax the other day and I totally agree with him. His proposal would be to immediately refund the gas tax in the form of a lower payroll tax so that it doesn’t actually take money out of the economy and people’s pockets. That’s a really good idea. But one way or another we are going to have to make using carbon energy more expensive so that alternative forms of energy and conservation can take hold.

2) An iTouch – I blogged about the iTouch recently. It’s funny because it’s now the number one search term driving traffic from google to this blog (other than my name and the name of this blog). I don’t want to get caught up in whether it can play music or not or whether it has a 9" screen or not. I just want Apple to come out with an agressively priced touch screen mobile computer that can be used to read books, blogs, watch movies, listen to music, and work as a home remote too. This is a huge opportunity for them and others too.

3) A cultural shift from cars to mobile devices – It’s already happening in Japan. Cars are no longer cool. Bikes, skateboards, scooters, trains, and subways are cooler and the coolest thing is mobile communication devices:

"Young people’s interest is shifting from cars to
communication tools like personal computers, mobile phones and
services,” said Yoichiro Ichimaru, who oversees domestic sales at
Toyota.

We need to follow suit in america. I realize we have a large suburban and rural population and not everyone can make the shift from a car to a bike or train. But even a 10-20% shift in the US would be huge.

OK, those first three are really the same thing. But this is a big deal. The world is changing. We must get on the train before it leaves the station.

4) The development of a real functioning secondary market for private companies – This is another thing I’ve written a lot about. The IPO market is dead. The M&A market is on hiatus for the most part and even when it works, many companies get bought and then slowly die inside the parent company. We need a way for founders, employees, and investors to get liquid on their investments or the whole startup ecosystem is going to get messed up. I am not talking about dumping our shares on widows and orphans. I am talking about a marketplace where seasoned, savvy, and qualified investors can transact in private company shares. The good news is that there’s already one well financed company operating in this space, called Second Market, of course. I am rooting hard for their success and also for anyone else who gets into this business. We need it.

5) An end to the housing slump – House prices are going to drop until they get to a sustainable price level. That price level will be determined by affordability levels (generally 30% of income), a rent vs buy analysis, the availability of credit for investors and/or homeowners, and the amount of foreclosures coming onto the market. It may well be that house prices in the aggregate need to drop another 15-20% before hitting bottom. And it’s also true that some markets are closer to bottom than others. But it’s the housing mess that got us into this economic crisis and I don’t think we can start getting out of it until housing bottoms. So I’d just like to see prices drop to sustainable levels quickly and be done with it.

6) Facebook gets profitable and cash generating – This is not a prediction, as I said, I’m done with that. This is a wish. I think Facebook is a great company and I witness my teenage children using it as I use outlook/exchange/blog/twitter/etc. They run their world on Facebook and I don’t see that changing anytime soon. Facebook now has 200mm unique visitors per month worldwide and it’s growth has picked up again in the US after being flat most of this year. They’ve launched a compelling new service in Facebook Connect. And there are a number of examples of significant new businesses being built on top of its platform. It’s accomplished most of what we’d agree that only the best internet businesses can accomplish. But it has one big dig against it. It’s not profitable and self sustaining. And so it taints the whole social media/social networking sector to some degree. I am hoping that 2009 is the year that Facebook gets serious about revenue, cost control, profitability, and ultimately cash generation. Once they do, I think the whole sector will benefit (and the whole sector should be doing the exact same things for the same reasons).

7) Google starts cutting products and services – This is a bit of the same wish as the last one. But very different in some other ways. Google can do almost anything they put their mind to because they have the engineering resources, the infrastructure, the balance sheet, and the huge revenue stream to support it. But that doesn’t mean they should try to do everything. As a shareholder, as a VC active in the internet market sector, and as a fan of the company, I think Google needs to "rationalize" their business in 2009. I don’t know how much cost they could cut if they really tried to get serious about a Jack Welch/GE style business unit analysis, but I know it would be significant. I wish they’d pick five to ten businesses they want to be number one or two in and invest heavily in them and forget about everything else.

8) Obama turns out to be a closet conservative – This one is fantasy of course. But Nixon went to china, LBJ brought us civil rights, Clinton eliminated welfare as we knew it, and FDR betrayed his "upbringing" and became the champion of the common man. Hell Sharon was close to bringing peace to the middle east when he was stricken. Anything can happen when someone realizes they work for everyone and everybody and have the world riding on their shoulders. In the case of Obama, I hope he realizes that the world is changing and not every company and industry can be saved, not every worker can keep their old job, and not every problem can be solved with money (money we don’t really have).

9) We all figure out how to do more with less – As I see it, about 40-50% of the world’s wealth was vaporized this year. It’s not even clear that we ever had that wealth. That’s the lesson I learned in 2000/2001 when the gotham gal and I saw 90% of our wealth vaporized. But the fact remains that most of us are a lot less wealthy than we were at the start of 2008. So we’ll just have to figure out how to do more with less. That will mean different strategies for different people, different countries, different regions. But I think that’s where we are a world right now. And I don’t think it’s a bad thing. We’ll adapt, change our ways, and move on. The important thing is we cannot dwell on the loss. You can’t change what you had for breakfast. So don’t try.

That’s it. I stopped at nine to be different. Happy new year everyone. 2008 was kind of sucky with a few notable exceptions. Let’s hope for a better 2009.

Mobile In/Mobile Out

I blogged the other day about how much I enjoy writing on my blackberry.

I may continue to post this way when I get back from europe because it allows me to sit back and think instead of lean forward and write.

But in the few days that have passed since I wrote that ‘quill pen’ post, I’ve had a number of interactions that lead me to believe that reading on the mobile device is a much bigger deal.

Of course mobile reading is a bigger deal because for every writer, there are tens or hundreds or thousands of readers. Writing is still something not everyone is predisposed to do. But reading is something everyone does.

And reading in lean back mode on the couch or in the coffee shop, on the train or in the plane, is more enjoyable and relaxing than the lean forward mode required by the computer.

I find myself reading more and more on my blackberry and its not even well designed for that experience. The iPhone is much better for that and the Kindle is another step beyond the iPhone. And we are just getting started with this whole mobile internet connected reading device thing. I expect we’ll see a ton of innovation in this area in the next couple years.

A reader named Scott commented the other day than "commenting on mobile devices" is an area that needs some focus. I agree with that and hope our portfolio company disqus can innovate in that area in 2009.

Its becoming more natural for readers to want to interact with the content they are reading. Computers have allowed this to happen and mobile devices need to support it. Its not just commenting, its tagging, sharing, reblogging, and a host of other interactions that make consuming content online a better experience than offline consumption.

It’s gotten to the point that if I can’t interact with content, I don’t want to consume it. When I read books, I underline certain passages so I can blog about them later. If I were reading on a connected device, I’d simply reblog on tumblr and be done. I don’t think I’m unusual in this regard but I do think I’m in the leading edge of behavior and that more and more people will feel this way.

In any case, this is an area where entrepreneurs should focus on. Reading on mobile devices is a big trend and reading is just the start of the content consumption paradigm in a connected world. There’s a lot to be done and its going to be done. So let’s get on with it.

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The Editor Dilemma

I have never spent much time trying to obtain perfect grammar, spelling, and wording. I write as I speak, for the most part. The words flow from the mind to the keyboard (in this case my bberry curve) and I leave them alone. I do go back over the post once I am done and read it and fix it a bit. But I focus mostly on the flow and readability. I’m not a perfect speller by any means. And I mess up/mix up its and it’s all the time. I went to an engineering school not a liberal arts school and it shows at times.

I’ve been offered editing services for this blog from time to time and have always refused. I like the immediacy of write/publish. I don’t want to wait for someone else to clean things up. And, honestly, I don’t want another person’s mind messing with my words. How will they know what I really want to convey?

But I also know that some of you find the mispellings, typos, and bad grammar off putting. I get comments to that effect on a regular basis. Some people can’t even take me seriously when I don’t capitalize and punctuate properly. They laugh at me and think I’m an idiot.

That’s fine with me. You can’t please everyone and you’ll go crazy trying.

But there is a solution that I’d love someone to build. If anyone could make basic edits to this post that don’t change the meaning, I’d love that. I don’t want an editor, but I am quite taken with the idea of audience powered editing. I get comments like ‘you said for when you meant from" and I cringe. It would be so much easier for the person who sees that error to just fix it. And fix the mispellings, bad grammar, and missed punctuations too while they are at it.

Its a tricky problem to solve because I would not want audience powered editing to impact the meaning of the words. I’d only want it to clean up and correct things. So any tool that attempted to do this would need to be able to determine the difference and mediate that.

Its tricky for another reason. Content management systems like blog publishing systems don’t allow anyone other than the author to mess with the content creation service. If such a tool were created, I’d have to permission the tool to have access to my content creation account. That’s a dicey proposition for sure. Security and hacking concerns are high for anything like that.

If anyone is tackling this problem, let me know. I’d love to be a beta tester of it. But short of allowing all of you to clean these posts up for me, I’m going to stick with my current approach. I hope you are OK with it.

A Visit to 25C3

25c3
My son Josh and I made a trip to the Chaos Communications Congress today (aka 25C3). It’s a hacker conference that takes place in Berlin in late December every year. Here’s the schedule of today’s talks. We had our choice of hearing about hacking rich internet apps, flying in unpowered aircraft, and exploiting the Symbian operating system. Josh was curious if he could hack into Facebook but we quickly realized that the hacking rich internet apps talk was way above both of us. The unpowered aircraft talk was easier to take in but it was mobbed and we couldn’t get a seat.

There were some cool things to play with. People were hacking locks in the cafeteria, there was a huge lego project in the back of the cafeteria, and a bunch of electronics projects to look at.

Josh_at_25c3
Josh was into the rotary phone that was connected to an old mechanical switch. When you dialed the phone, you could see how the old mechanical phone sytem worked. That was an eye opener for him.

Mostly, however, the conference was about hanging out with other hackers and working on stuff. I’ve never seen so many laptops opened at a conference before. I think Josh and I were the only ones there without one.

I was hoping to hang around long enough to see my friend Christophe who had suggested we go to 25C3 in the first place. But wihtout our laptops and some real hacking to do, we lost interest after about an hour and hopped onto the subway and to the Gendarmarkt for some lunch.

I’m a huge fan of hacking and hackers and it warms my heart to see so much passion and energy for "breaking and rebuilding things" as one of the presenters described the hacking phenomenon. I hope some of that rubbed off on Josh today.

Correspondence Is Making A Comeback

I was thinking of making a broader point in my "quill pen" post yesterday but ran out of time so I decided to do that with today’s post.

Before the telephone came along, correspondence mostly consisted of letter writing, like the Adams/Jefferson letters I mentioned in yesterday’s post.

The telephone changed all that and by the time I was born, in 1961, most people relied on the phone for their regular conversations. And in the process, we lost a bit of the art and pleasure of the written word. Writing became something authors, journalists and academics did and the average person didn’t do.

We also lost the ability to record these conversations for posterity. Being able to read Adams and Jefferson’s words almost 200 years after they wrote them is an invaluable resource for society.

The internet changed that, starting with email and chat. People started writing again. And the practice of everyman writing has picked up with texting, social networking, twittering, and most of all blogging and blog commenting.

I am excited about the power of blog commenting to bring ‘intellectual discussions’ back to the mainstream.  We’ve had forums on the internet for as long as I remember but they’ve been largely for a niche audience.

Blogging has brought a more mainstream audience to the idea of ‘discussions’ but the friction in the system is still too large.

Much of the friction is just inertia. I get so many comments that start out "long time reader, first time commenter". I try to reply to every single one of those because when they realize that leaving a comment is like starting an email discussion with me (and hopefully others), there’s a good chance they’ll be leaving more comments in the future.

The recent addition of facebook and hopefully other profile systems (google’s system, linkedin, myspace, yahoo, etc) to disqus and other commenting systems will help. Nobody likes having to create a new profile just to leave a comment. But when you can leverage your indentity that you’ve already created elsewhere to quickly and easily leave a comment, that’s going to bring more people into the discussion.

I was going through the comments to the ‘Bits Of Destruction’ post this morning and there’s this great back and forth between two frequent commenters about the bank panic of 1907 and JP Morgan’s role in it. That’s the kind of conversation that just didn’t exist for most people pre-Internet. You could get it in college dorms, bars and coffee shops in the right towns and cities to some degree, but certainly not late at night in your pajamas in your studio apartment.

I think we are becoming a more literate and conversational society because of the internet. And the tools aren’t there to fully leverage this activity. But they are coming fast. It is something I am passionate about and invested in. I hope you are too.

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My Quill Pen

My Blackberry Curves

Image by Ho0n via Flickr

As I was reading Steven Johnson’s Invention Of Air, I became fascinated with the art of letter writing that existed during the time Steven chronicles in that book (mid 18th century to early 19th century). The legendary conversation conducted by Adams and Jefferson in their final years was conducted entirely via letters sent back and forth. And, of course, they were written with a quill pen.

The other day, as we were walking thru one museum (I can’t recall which right now), my daughter Emily saw an antique ink fountain for a quill pen and said ‘I love these things, I want one". I guess she shares a fondness with me for the long gone art of writing with ink on paper.

Yesterday’s post, Bits Of Destruction, generated quite a few comments and many of you were surprised that I could compose such a long post on my blackberry. To one such comment, I replied that my blackberry is "my quill pen". I was only half joking. Though I like to write on a computer and mostly do, I really enjoy writing on my blackberry.

For the past several days, I’ve been getting up before everyone else (as usual – but at 8 or 9 am instead of 5am), going to the gym, and then getting a cup of coffee in the hotel lobby and posting with my blackberry.

I’m quite happy with the result. I’ve written longer and more thoughtful posts this week than has been normal and they’ve tackled a variety of subjects.

I don’t really know why writing on a blackberry brings out this side of me but it does. It could be the lack of distraction (hard to multi-task on a blackberry), it could be that I can’t link out so I don’t bother to be referential, or it could be something else entirely.

All I know is I feel very comfortable writing with blackberry in hand. Its my quill pen.

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Bits Of Destruction

The news is full of stories this year end about the impending bankruptcies of retailers, newspapers, auto manufacturers, banks, and a host of other businesses that have been the mainstay of corporate america for the past 100 years or more.

Clearly the economic downturn is the direct cause of most of these failures but I believe it is the straw that broke the camel’s back in most cases.

The internet, now closing in on 15 years old in its mainstream incarnation as the world wide web, is in many cases the underlying cause of these business failures.

Bits of information flowing over a wire (or through the air) are just more efficient than physical infrastructure.

I’m typing this on my blackberry in a hotel lobby in berlin, I’ll hit send, and it will be published and read by roughly 5,000 people today. Compare that to what it takes to get the Tom Friedman column ‘Time To Reboot America‘ which is sitting in front of me in the International Herald Tribune newspaper printed and delivered to me. Printing and distribution infrastructure cannot compete with bits on a wire and we are going to see that infrastructure end up in in bankruptcy a lot in the next 12 months.

Let’s look at banking. Money is information too and is increasingly flowing as bits. I can’t think of the last time I walked into a bank branch. I use a debit card wherever I can and I can’t wait until I can tap my blackberry when checking out like many people in Japan and Korea already do. These bank failures have more to do with risky lending and owning securities that are toxic than anything else but we also know that a bank today is very different than a bank 20 years ago and I am positive that we’ll see entrepreneurs reinvent what banking is in the coming decade and it won’t look a thing like Bank Of America or JP Morgan Chase.

And what about retailing? I had breakfast last week with a person who has been in retailing for more than 30 years and has been operating at the highest levels of the industry. He said that he expects every category to be winnowed down to one dominant retailer with all the others going by the wayside. This too has the internet as an underlying cause. comScore says that online holiday shopping this year has been flat with the year before and I’ve seen reports that offline retail is down 6-10pcnt. The fact is that consumers have finally come to the realization that shopping online is easier, cheaper, and often a better experience. Physical retail will survive, but it will be a smaller industry in the next decade and those that do survive will need to give consumers a very strong rationale to get in the car and come to their store.

The internet has also made the auto dealer model of distribution a questionable approach in this day and age. Consumers can research a car, use auto lead gen services to work one dealer against another, and totally commoditize the dealer channel. I remember back in 1998, ten years ago, the Gotham Gal and I bought a car that way over the internet and had it delivered to our house. We never even went to the dealer. I’m not active in the auto market and barely drive a car these days, but I have to believe the dealer based distribution system is not the most efficient model for getting cars into consumers hands any more. I hope that any restructuring of the auto industry that happens takes advantage of a newer more efficient distribution model.

I could go on and on but will stop here. If you want to get a longer riff on these ideas, get Jeff Jarvis’ book, What Would Google Do?, where he imagines Google operating in many different industries and thinks about how they would approach them.

This downturn will be marked in history as the time where many of the business models built in the industrial era finally collapsed as a result of being undermined by the information age. Its creative destruction at work. It’s painful and many jobs will be lost permanently. But let’s also remember that its inevitable and we can’t fight it. Technology and information forces are unstoppable and they will reshape the world as we know it regardless of whether or not we want them to.

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Thinking About Christmas

Christmas tree in Berlin, Germany

Image via Wikipedia

I stopped celebrating christmas a few years ago. My kids grew up and stopped enjoying it. We are raising our family in the jewish faith and christmas was always a bit of a ‘dad thing’ anyway

We’ve been doing these big two week trips to other parts of the world over the christmas/new years break and I haven’t been home for christmas in seven years. For a while we timeshifted christmas to early December and that worked well but probably led us down the path that ultimately got us to where we are now

I don’t miss christmas much to be honest. I certainly don’t miss the materialistic parts of it. I’ve been getting gifts that I don’t want or need since high school and it always bothered me. I am so much happier to be done with that. I don’t like material gifts very much anyway. And I hate shopping.

I do miss getting the tree, putting it up, and decorating it. I don’t miss taking it down and cleaning up the mess it made.

I miss the big family dinner and the excitement on the little kids’ faces. We don’t have any little kids in our family right now but when we do again, I’ll want to figure out how to get that back. Its the best thing about christmas in my mind

I also miss going to church on christmas. A few years back we were in Siena and I went to the Duomo for christmas mass. That was great. I don’t subscribe to any religion invented by man (which is all of them), but I do enjoy the sounds and smells of church on christmas. And it was better for me to go to church in a foriegn country where I didn’t understand a word the priest said.  I got to sit back and enjoy the spectacle of it all.

Even though I’ve given up celebrating Christmas, it still means something to me. Its a time of year when we stop doing what we do, take a break, spend time with our family, think about others, and give them gifts. That’s a pretty special list right there.

I’ve been very fortunate in life. I’m only 47 but have obtained most of what I’ve wanted out of life; a wonderful family and a work life that has been financially and intellectually rewarding. We’ve done this in our own way and on our own. We’ve been incredibly lucky and we’ve also worked hard at it.

I get gifts all the time like the bottle of wine sitting on my desk in the office or the box of chocolates. I honestly could care less about that stuff and getting it sort of annoys me. I’d love it if people stopped giving me stuff like that.

The gifts that matter to me are the emails I get from people sharing a personal story with me, or the comments on this blog and others that make me laugh, think, or cry. Or the contributions to Donors Choose you all made in October. Or the ideas you share with me about how we can work together to fix this broken world and make it better.

I’m going to spend this christmas with my family in Berlin, seeing art and history and then we’ll go to the Nutcraker this evening and finish with a family dinner. So I guess I’ve not given up celebrating Christmas entirely after all.

Merry Christmas everyone, including all Jews, Muslims, Hindus, Buddhists, and other faiths out there. Have a wonderful holiday and let’s share some gifts with each other that really matter this year.

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Facebook Users Can Comment On This Blog Using Their Facebook Profile

Disqus, the company that provides the comment system on this blog (and a Union Square Ventures portfolio company) has added Facebook Connect support. What this means is if you have not created a disqus profile but do have a Facebook profile, you can leave a comment using your Facebook profile and you do not need to register with Disqus.

I am sure for most of you this isn’t going to matter much since most of the commenters on this blog have already set up disqus profiles. But for new visitors, this is a nice feature. And it is the start of more Facebook integration for sure. The obvious next step would be to allow people who leave a comment with their Facebook profile to have that show up in the Facebook news feed. Daniel, the CEO of Disqus, as much announced that with this twitter reply last night.

I logged out of disqus and left a comment on an earlier post with my Facebook profile and it works great. If you want to add Facebook connect to your disqus comment system, this blog post tells you how to do it.

When will housing bottom?

I saw a chart in the european WSJ today on my flight to Berlin that showed housing sales are now lower than they were 20 years ago and with the recession in full swing, it appears they will go even lower.

That begs the question ‘when does it end?’

I’ve always liked to look at rent vs buy analysis to tell me when real estate is fairly valued. Rents can and will go up and down (likely down in this market) but its been my experience that rents, particulalry residential rents, are more stable than residential sale prices.

People need to have a place to live. They can make the choice of rent vs buy, but they have to do one or the other (I know that in tough times there are other scenarios for some on the lower end of the economic spectrum).

If its costs $2000 per month to rent a home for your family and the same home can be bought for $200,000, then it might cost less to purchase the home than rent it.

And even if the bad economy is forcing families to sit on the sidelines because they can’t come up with a down payment, they can’t get a loan, or they think prices will go even lower, there are real estate investors who will step in at some point and buy.

Let’s look at that home you can buy for $200,000 and rent for $2000 per month. If you assume carrying costs (real estate taxes and maintenance) are $6,000 per year, then you can get a net rental income of $18,000 per year on the rental. If you pay $200,000, that’s a 9pcnt yield. But if you can borrow (and that’s an if in the current credit market) $160,000 at 5pcnt per year interest only, then your net rental income is $10,000 per year on an investment of $40,000. That’s a 25pcnt yield.

I think that’s the next leg of the housing market. Smart investors will step in and buy homes and rent them. They’ll probably start in the distressed/foreclosure market so the impact of these buyers coming into the market will not be felt in the traditional real estate market for a while.

But there’s a price where the market clears and I think we may have already reached it in parts of the housing market. A rent vs buy analysis will tell you a lot. When its cheaper to buy than rent by a meaningful amount, then you know the market has overshot and a bottom is near.

I wrote this on my blackberry on the flight to Berlin and I’ve just added a link to the WSJ story (sorry they didn’t put the chart on the web). I apologize for any typos or math errors and if you find any, please point them out in the comments.