Tag Archives: business

Idea Soup, Sustainability

Farm in a Box

Freight-FarmsIf you’ve read my blog for a while you undoubtedly know that I have a rather jaded view of tech startup culture — particularly with Silicon Valley’s myopic obsession for discovering the next multi-billion dollar mobile-consumer-facing-peer-to-peer-gig-economy-service-sharing-buzzword-laden-dating-platform-with-integrated-messaging-and-travel-meta-search app.

So, here’s something refreshing and different. A startup focused on reimagining the production and distribution of fresh food. The company is called Freight Farms, their product: a self-contained farm straight out of a box. Actually the farm is contained inside a box — a standard, repurposed 40 ft long shipping container. Each Leafy Green Machine, as it is called, comes fully equipped with a vertically-oriented growing environment, plant-optimized LED lighting, recirculating hydroponic plumbing and finger-tip climate control.

Freight Farms may not (yet) make a significant impact on the converging and accelerating global crises of population growth, climate change, ecological destruction and natural resource depletion. But the company offers a sound solution to tackling the increasing demand for locally grown and sustainably produced food, especially as the world becomes increasingly urbanized.

Please check out Freight Farms and spread the word.

Image: Freight Farms. Courtesy: Freight Farms.

Business

Sharing the Wealth: Chobani-Style

Chobani-black-cherry-yogurtOK, so I am thoroughly addicted to yogurt (or yoghurt, for my non-US readers). My favorite is the greek yogurt Fage, followed by an Aussie concoction called Noosa. Chobani doesn’t even make my top 5.

However, Chobani did something today, April 26, 2016, that made me want to cheer. The company founder, and majority stockholder, gave 10 percent of the business to his 2,000 employees. On average, each will get around $150,000; some, based on length of employment, will gain millions.

Hamdi Ulukaya, a Turkish immigrant, founded Chobani in 2005. The company is privately held, but is estimated to be now valued at $3-5 billion. Chobani’s employees will reap their rewards when the company goes public in an IPO. In Hamdi Ulukaya’s words:

I’ve built something I never thought would be such a success, but I cannot think of Chobani being built without all these people.

Mr. Ulukaya is a role model for other business leaders, who would do well to follow his great example. Chobani offers us a vision that shows employer and employee working to win together.

I may have to revisit Chobani and my yogurt preferences!

From the NYT:

The 2,000 full-time employees of Chobani were handed quite the surprise on Tuesday: an ownership stake in the yogurt company that could make some of them millionaires.

Hamdi Ulukaya, the Turkish immigrant who founded Chobani in 2005, told workers at the company’s plant here in upstate New York that he would be giving them shares worth up to 10 percent of the company when it goes public or is sold. The goal, he said, is to pass along the wealth they have helped build in the decade since the company started. Chobani is now widely considered to be worth several billion dollars.

“I’ve built something I never thought would be such a success, but I cannot think of Chobani being built without all these people,” Mr. Ulukaya said in an interview in his Manhattan office that was granted on the condition that no details of the program would be disclosed before the announcement. “Now they’ll be working to build the company even more and building their future at the same time.”

Employees got the news on Tuesday morning. Each worker received a white packet; inside was information about how many “Chobani Shares” they were given. The number of shares given to each person is based on tenure, so the longer an employee has been at the company, the bigger the stake.

Read the entire story here.

Image: Chobani yogurt. Courtesy of Chobani.

Business, Idea Soup

MondayMap: National Business Emotional Intelligence

A recent article in the Harvard Business Review (HBR) gives would-be business negotiators some general tips on how best to deal with counterparts from other regions of the world. After all, getting to yes and reaching a mutually beneficial agreement across all parties does require a good degree of cultural sensitivity and emotional intelligence.

map-Emotional-Counterpart

While there is no substitute to understanding other nations through travel and cultural immersion, the HBR article describes some interesting nuances to help those lacking in geographic awareness, international business experience,  and cross-cultural wisdom. The first step in this exotic journey is rather appropriately, a map.

No surprise, the Japanese and Filipinos shirk business confrontation, whereas the Russians and French savor it. Northern Europeans are less emotional, while Southern Europeans and Latin Americans are much more emotionally expressive.

From Frank Jacobs over at Strange Maps:

Negotiating with Filipinos? Be warm and personal, but stay polite. Cutting das Deal with Germans? Stay cool as ice, and be tough as nails. So what happens if you’re a German doing business in the Philippines?

That’s not the question this map was designed to answer. This map — actually, a diagram — shows differences in attitudes to business negotiations in a number of countries. Familiarise yourself with them, then burn the drawing. From now on, you’ll be a master international dealmaker.

Vertically, the map distinguishes between countries where it is highly haram to show emotions during business proceedings (Japan being the prime example) and countries where emotions are an accepted part of il commercio (yes, Italians are emotional extroverts — also in business).

The horizontal axis differentiates countries with a very confrontational negotiating style — think heated arguments and slammed doors — from places where decorum is the alpha and omega of commercial dealings. For an extreme example of the former, try trading with an Israeli company. For the latter, I refer you to those personable but (apparently also) persnickety Filipinos.

Read the entire article here.

Map courtesy of Erin Meyer, professor and the program director for Managing Global Virtual Teams at INSEAD. Courtesy of HBR / Strange Maps.

Idea Soup, Technica

Design Thinking Versus Product Development

Out with product managers; in with design thinkers. Time for some corporate creativity. Think user journeys and empathy roadmaps.

A different corporate mantra is beginning to take hold at some large companies like IBM. It’s called design thinking, and while it’s not necessarily new, it holds promise for companies seeking to meet the needs of their customers at a fundamental level. Where design is often thought of in terms of defining and constructing cool-looking products, design thinking is used to capture a business problem at a broader level, shape business strategy and deliver a more holistic, deeper solution to customers. And, importantly, to do so more quickly than through a typical product development life-cycle.

From NYT:

Phil Gilbert is a tall man with a shaved head and wire-rimmed glasses. He typically wears cowboy boots and bluejeans to work — hardly unusual these days, except he’s an executive at IBM, a company that still has a button-down suit-and-tie reputation. And in case you don’t get the message from his wardrobe, there’s a huge black-and-white photograph hanging in his office of a young Bob Dylan, hunched over sheet music, making changes to songs in the “Highway 61 Revisited” album. It’s an image, Mr. Gilbert will tell you, that conveys both a rebel spirit and hard work.

Let’s not get carried away. Mr. Gilbert, who is 59 years old, is not trying to redefine an entire generation. On the other hand, he wants to change the habits of a huge company as it tries to adjust to a new era, and that is no small task.

IBM, like many established companies, is confronting the relentless advance of digital technology. For these companies, the question is: Can you grow in the new businesses faster than your older, lucrative businesses decline?

Mr. Gilbert answers that question with something called design thinking. (His title is general manager of design.) Among other things, design thinking flips traditional technology product development on its head. The old way is that you come up with a new product idea and then try to sell it to customers. In the design thinking way, the idea is to identify users’ needs as a starting point.

Mr. Gilbert and his team talk a lot about “iteration cycles,” “lateral thinking,” “user journeys” and “empathy maps.” To the uninitiated, the canons of design thinking can sound mushy and self-evident. But across corporate America, there is a rising enthusiasm for design thinking not only to develop products but also to guide strategy and shape decisions of all kinds. The September cover article of the Harvard Business Review was “The Evolution of Design Thinking.” Venture capital firms are hiring design experts, and so are companies in many industries.

Still, the IBM initiative stands out. The company is well on its way to hiring more than 1,000 professional designers, and much of its management work force is being trained in design thinking. “I’ve never seen any company implement it on the scale of IBM,” said William Burnett, executive director of the design program at Stanford University. “To try to change a culture in a company that size is a daunting task.”

Daunting seems an understatement. IBM has more than 370,000 employees. While its revenues are huge, the company’s quarterly reports have shown them steadily declining in the last two years. The falloff in revenue is partly intentional, as the company sold off less profitable operations, but the sometimes disappointing profits are not, and they reflect IBM’s struggle with its transition. Last month, the company shaved its profit target for 2015.

In recent years, the company has invested heavily in new fields, including data analytics, cloud computing, mobile technology, security, social media software for business and its Watson artificial intelligence technology. Those businesses are growing rapidly, generating revenue of $25 billion last year, and IBM forecasts that they will contribute $40 billion by 2018, through internal growth and acquisitions. Just recently, for example, IBM agreed to pay $2 billion for the Weather Company (not including its television channel), gaining its real-time and historical weather data to feed into Watson and analytics software.

But IBM’s biggest businesses are still the traditional ones — conventional hardware, software and services — which contribute 60 percent of its revenue and most of its profit. And these IBM mainstays are vulnerable, as customers increasingly prefer to buy software as a service, delivered over the Internet from remote data centers.

…

Recognizing the importance of design is not new, certainly not at IBM. In the 1950s, Thomas J. Watson Jr., then the company’s chief executive, brought on Eliot Noyes, a distinguished architect and industrial designer, to guide a design program at IBM. And Noyes, in turn, tapped others including Paul Rand, Charles Eames and Eero Saarinen in helping design everything from corporate buildings to the eight-bar corporate logo to the IBM Selectric typewriter with its golf-ball-shaped head.

At that time, and for many years, design meant creating eye-pleasing, functional products. Now design thinking has broader aims, as a faster, more productive way of organizing work: Look at problems first through the prism of users’ needs, research those needs with real people and then build prototype products quickly.

Defining problems more expansively is part of the design-thinking ethos. At a course in New York recently, a group of IBM managers were given pads and felt-tip pens and told to sketch designs for “the thing that holds flowers on a table” in two minutes. The results, predictably, were vases of different sizes and shapes.

Next, they were given two minutes to design “a better way for people to enjoy flowers in their home.” In Round 2, the ideas included wall placements, a rotating flower pot run by solar power and a software app for displaying images of flowers on a home TV screen.

Read the entire story here.

Art

Art and Money

Google-search-Damien-Hirst-Dots

The process through which an artist finds fortune and fame is a complex one, though to many of us — even those who have spent some time within the art world — it seems rather random and obscure. Raw talent alone will only carry an artist up the first rungs of the ladder of success. To gain the upper reaches requires and modicum of luck and lots of communication, connections, sales and marketing.

Unfortunately, for those artists who seek only to create and show their works (and perhaps even sell a few), the world of art is very much a business. It is driven by money, personality (of the artist or her proxies) and market power of a select few galleries, curators, critics, collectors, investors, and brokers. So, just like any other capitalist adventure the art market can be manoeuvered  and manipulated. As a result, a few artists become global superstars, while still living, their art taking on a financial life of its own; the remaining 99.999 percent — well, they’ll have to hold on to their day-jobs.

From WSJ:

Next month, British artist Damien Hirst—a former superstar whose prices plummeted during the recession—could pull off an unthinkable feat: By opening a free museum, called the Newport Street Gallery, in south London to display his private collection of other artists’ works, Mr. Hirst could salvage his own career.

Just as the new museum opens, an independent but powerful set of dealers, collectors and art advisers are quietly betting that a surge of interest in Mr. Hirst’s new endeavor could spill over into higher sales for his art. Some, like New York dealer Jose Mugrabi, are stockpiling Hirsts in hopes of reselling them for later profits, believing a fresh generation of art collectors will walk away wanting to buy their own Hirsts. Mr. Mugrabi, who helped mount successful comeback campaigns in the past for Andy Warhol, Jean-Michel Basquiat and Richard Prince, said he owns 120 pieces by Mr. Hirst, including $33 million of art he bought directly from the artist’s studio three months ago.

Other dealers, such as Pilar Ordovas, are organizing gallery shows that place Mr. Hirst’s work alongside still-popular artists, angling for a beneficial comparison.

New York art adviser Kim Heirston, whose clients include Naples collector Massimo Lauro, said she has been scouring for Hirsts at fairs and auctions alike. “I’m telling anybody who will listen to buy him because Damien Hirst is here to stay,” Ms. Heirston said.

If successful, their efforts could offer a real-time glimpse into the market-timing moves of the art-world elite, where the tastes of a few can still sway the opinions of the masses. Few marketplaces are as changeable as contemporary art. This is a realm where price levels for an artist can be catapulted in a matter of minutes by a handful of collectors in an auction. Those same champions can then turn around the following season and dump their stakes in the same artist, dismissing him as a sellout. Like fashion, the roster of coveted artists is continually being reshuffled in subtle ways.

Most artists with lengthy careers have seasons of ebb and flow, and collectors who sync their buying and selling can profit accordingly, experts say. Before the recession, Mr. Hirst, age 50, was an art-world darling, the leader of London’s 1990s generation of so-called Young British Artists who explored ideas about life and death in provocative, outsize ways. He is best known for covering canvases in dead butterflies and polka dots whose rainbow hues he color-coded to match chemical compounds found in drugs.

During the market’s last peak, collectors paid as much as $19 million at auction for his artworks, and he staffed multiple studios throughout the U.K. with as many as 100 studio assistants to help produce his works. Mr. Hirst is reportedly worth an estimated $350 million, thanks to his art sales but also his skill as a businessman, amassing an empire of real estate holdings in the U.K. and elsewhere. He also co-founded a publishing company called Other Criteria in 2005 that publishes art books, artist-designed clothing and prints of his works, as well as other emerging artists.

But his star fell sharply after he committed an art-world taboo by bypassing conventional sales channels—selling works slowly through galleries—and auctioned off nearly $200 million of his work directly at Sotheby’s in 2008. While the sale was successful and proved his popularity, it became his undoing. He irked his galleries and some longtime collectors, who felt he had flooded his own marketplace for a singular payout. These days, it’s “much riskier” to trade a Hirst at auction than it was a decade ago, according to Michael Moses, co-founder of an auction tracking firm called Beautiful Asset Advisors. Collectors who bought and resold his works since 2005 have mainly suffered losses, Mr. Moses added.

Read the entire story here.

Image: A collection of some of Damien Hirst’s “dot” works. Courtesy of Google Search.

 

Art, Environs, Idea Soup

Can Burning Man Be Saved?

Burning-Man-2015-gallery

I thought it rather appropriate to revisit Burning Man one day after Guy Fawkes Day in the UK. I must say that Burning Man has grown into more of a corporate event compared with the cheesy pyrotechnic festivities in Britain on the 5th of November. So, even though Burners have a bigger, bolder, brasher event please remember-remember, we Brits had the original burning man — by 380 years.

The once-counter-cultural phenomenon known as Burning Man seems to be maturing into an executive-level tech-fest. Let’s face it, if I can read about the festival in the mainstream media it can’t be as revolutionary as it once set out to be. Though, the founders‘ desire to keep the festival radically inclusive means that organizers can’t turn away those who may end up razing Burning Man to the ground due to corporate excess. VCs and the tech elite from Silicon Valley now descend in their hoards, having firmly placed Burning Man on their app-party circuit. Until recently, Burners mingled relatively freely throughout the week-long temporary metropolis in the Nevada desert; now, the nouveau riche arrive on private jets and “camp” in exclusive wagon-circles of luxury RVs catered to by corporate chefs and personal costume designers. It certainly seems like some of Larry Harvey’s 10 Principles delineating Burning Man’s cultural ethos are on shaky ground. Oh well, capitalism ruins another great idea! But, go once before you die.

From NYT:

There are two disciplines in which Silicon Valley entrepreneurs excel above almost everyone else. The first is making exorbitant amounts of money. The second is pretending they don’t care about that money.

To understand this, let’s enter into evidence Exhibit A: the annual Burning Man festival in Black Rock City, Nev.

If you have never been to Burning Man, your perception is likely this: a white-hot desert filled with 50,000 stoned, half-naked hippies doing sun salutations while techno music thumps through the air.

A few years ago, this assumption would have been mostly correct. But now things are a little different. Over the last two years, Burning Man, which this year runs from Aug. 25 to Sept. 1, has been the annual getaway for a new crop of millionaire and billionaire technology moguls, many of whom are one-upping one another in a secret game of I-can-spend-more-money-than-you-can and, some say, ruining it for everyone else.

Some of the biggest names in technology have been making the pilgrimage to the desert for years, happily blending in unnoticed. These include Larry Page and Sergey Brin, the Google founders, and Jeff Bezos, chief executive of Amazon. But now a new set of younger rich techies are heading east, including Mark Zuckerberg of Facebook, employees from Twitter, Zynga and Uber, and a slew of khaki-wearing venture capitalists.

Before I explain just how ridiculous the spending habits of these baby billionaires have become, let’s go over the rules of Burning Man: You bring your own place to sleep (often a tent), food to eat (often ramen noodles) and the strangest clothing possible for the week (often not much). There is no Internet or cell reception. While drugs are technically illegal, they are easier to find than candy on Halloween. And as for money, with the exception of coffee and ice, you cannot buy anything at the festival. Selling things to people is also a strict no-no. Instead, Burners (as they are called) simply give things away. What’s yours is mine. And that often means everything from a meal to saliva.

In recent years, the competition for who in the tech world could outdo who evolved from a need for more luxurious sleeping quarters. People went from spending the night in tents, to renting R.V.s, to building actual structures.

“We used to have R.V.s and precooked meals,” said a man who attends Burning Man with a group of Silicon Valley entrepreneurs. (He asked not to be named so as not to jeopardize those relationships.) “Now, we have the craziest chefs in the world and people who build yurts for us that have beds and air-conditioning.” He added with a sense of amazement, “Yes, air-conditioning in the middle of the desert!”

His camp includes about 100 people from the Valley and Hollywood start-ups, as well as several venture capital firms. And while dues for most non-tech camps run about $300 a person, he said his camp’s fees this year were $25,000 a person. A few people, mostly female models flown in from New York, get to go free, but when all is told, the weekend accommodations will collectively cost the partygoers over $2 million.

This is drastically different from the way most people experience the event. When I attended Burning Man a few years ago, we slept in tents and a U-Haul moving van. We lived on cereal and beef jerky for a week. And while Burning Man was one of the best experiences of my life, using the public Porta-Potty toilets was certainly one of the most revolting experiences thus far. But that’s what makes Burning Man so great: at least you’re all experiencing those gross toilets together.

That is, until recently. Now the rich are spending thousands of dollars to get their own luxury restroom trailers, just like those used on movie sets.

“Anyone who has been going to Burning Man for the last five years is now seeing things on a level of expense or flash that didn’t exist before,” said Brian Doherty, author of the book “This Is Burning Man.” “It does have this feeling that, ‘Oh, look, the rich people have moved into my neighborhood.’ It’s gentrifying.”

For those with even more money to squander, there are camps that come with “Sherpas,” who are essentially paid help.

Tyler Hanson, who started going to Burning Man in 1995, decided a couple of years ago to try working as a paid Sherpa at one of these luxury camps. He described the experience this way: Lavish R.V.s are driven in and connected together to create a private forted area, ensuring that no outsiders can get in. The rich are flown in on private planes, then picked up at the Burning Man airport, driven to their camp and served like kings and queens for a week. (Their meals are prepared by teams of chefs, which can include sushi, lobster boils and steak tartare — yes, in the middle of 110-degree heat.)

“Your food, your drugs, your costumes are all handled for you, so all you have to do is show up,” Mr. Hanson said. “In the camp where I was working, there were about 30 Sherpas for 12 attendees.”

Mr. Hanson said he won’t be going back to Burning Man anytime soon. The Sherpas, the money, the blockaded camps and the tech elite were too much for him. “The tech start-ups now go to Burning Man and eat drugs in search of the next greatest app,” he said. “Burning Man is no longer a counterculture revolution. It’s now become a mirror of society.”

Strangely, the tech elite won’t disagree with Mr. Hanson about it being a reflection of society. This year at the premiere of the HBO show “Silicon Valley,” Elon Musk, an entrepreneur who was a founder of PayPal, complained that Mike Judge, the show’s creator, didn’t get the tech world because — wait for it — he had not attended the annual party in the desert.

“I really feel like Mike Judge has never been to Burning Man, which is Silicon Valley,” Mr. Musk said to a Re/Code reporter, while using a number of expletives to describe the festival. “If you haven’t been, you just don’t get it.”

Read the entire story here.

Image: Burning Man gallery. Courtesy of Burners.

Idea Soup

Entrepreneur (Introvert) Versus CEO (Extrovert)

Conventional wisdom from the corridors of corporate power seems to suggest that successful CEOs tend to be extroverts. On the other hand, it also seems that many successful entrepreneurs come from more introverted stock. This divergence must put a great deal of pressure on the leader as a company transitions from a startup to an established business. Perhaps, this is another of the many reasons why around 90 percent of startups fail.

From WSJ:

A quiet, reserved introvert is probably not what first came to mind. Aren’t entrepreneurs supposed to be gregarious and commanding—verbally adept and able to inspire employees, clients and investors with the sheer force of their personality? No wonder the advice for introverts who want to be entrepreneurs has long been some form of: “Be more extroverted.”

Now, though, business experts and psychologists are starting to see that guidance is wrong. It disregards the unique skills that introverts bring to the table—the ability to focus for long periods, a propensity for balanced and critical thinking, a knack for quietly empowering others—that may make them even better suited for entrepreneurial and business success than extroverts.

Indeed, numerous entrepreneurs and CEOs are either self-admitted introverts or have so many introvert qualities that they are widely thought to be introverts. These include Bill Gates, co-founder of Microsoft, Steve Wozniak, co-founder of Apple, Larry Page, co-founder of Google, Mark Zuckerberg, co-founder of Facebook, Marissa Mayer, current president and CEO of Yahoo, and Warren Buffett, chairman and CEO of Berkshire Hathaway.

As entrepreneurs, introverts succeed because they “create and lead companies from a very focused place,” says Susan Cain, author of “Quiet: The Power of Introverts in a World That Can’t Stop Talking” and founder of Quiet Revolution, a website for introverts. This spring, she co-founded the Quiet Leadership Institute, a consulting firm with a mission to help companies harness the talent of introverted employees and to help introverts draw on their natural strengths. The company’s clients include General Electric, Procter & Gamble and NASA.

Another big plus, she says: Introverts are not interested in leadership for personal glory, and they steer clear of the cult of personality. Their emphasis is on creating something, not on themselves.

“By their nature, introverts tend to get passionate about one, two or three things in their life,” says Ms. Cain. “And in the service of their passion for an idea they will go out and build alliances and networks and acquire expertise and do whatever it takes to make it happen.”

Here are some of the traits common to most introverts that make them especially well-suited to entrepreneurship.

They crave solitude

Many people believe that introverts, by definition, are shy and extroverts are outgoing. This is incorrect. Introverts, whom experts say comprise about a third of the population, get their energy and process information internally. Some may be shy and some may be outgoing, but they all prefer to spend time alone or in small groups, and often feel drained by a lot of social interaction or large groups.

Extroverts—sometimes spelled “extraverts” in psychology circles—gain energy from being with other people and typically process information externally, meaning they prefer to talk through problems instead of pondering them alone, and they sometimes form opinions while they speak. (Ambiverts, a third personality type that makes up the majority of the population, are a mix of introvert and extrovert.)

Being comfortable being alone—and thinking before acting—can give introverts a leg up as they formulate a business plan or come up with new strategies once the company is launched.

Introverts not only have the stamina to spend long periods alone—they love it. “Good entrepreneurs are able to give themselves the solitude they need to think creatively and originally—to create something where there once was nothing,” says Ms. Cain. “And this is just how introverts are wired.”

Extroverts may find it hard to cloister themselves to think through big questions—what does the company have to offer, how will it reach its audience?—because they crave stimulation. Solitude drains them, and they aren’t as creative if they spend too much time alone, says Beth Buelow, a speaker and coach who is founder of The Introvert Entrepreneur, a website for introverts. So extroverts often take a “throw the spaghetti at the wall and see if it sticks” approach to solving problems, rather than think through possibilities.

While extroverts are networking, promoting or celebrating success, introverts have their “butt on the seat,” says Laurie Helgoe, author of “Introvert Power: Why Your Inner Life is Your Hidden Strength” and assistant professor in the department of psychology and human services at Davis & Elkins College in Elkins, W.Va. “An introvert on his or her own is going to enjoy digging in and doing research—and be able to sustain him- or herself in that lonely place of forging your own way.”

They don’t need external affirmation

Another important characteristic of introverts is that they tend to rely on their own inner compass—not external signals—to know that they’re making the right move or doing a good job. That can give them an edge in several ways.

For instance, they generally don’t look for people to tell them whether an idea is worth pursuing. They tend to think it through before speaking about it to anybody, and rely on their own judgment about whether it’s worth pursuing.

Read the entire story here.

Idea Soup, tD

The Pivot and the Money

Once upon a time the word “pivot” usually referred to an object’s point of rotation. Then, corporate America got its sticky hands all over it. The word even found its way in to Microsoft Excel — as in Pivot Table. But, the best euphemistic example comes from one of my favorite places for invention and euphemism — Silicon Valley. In this region of the world pivot has come to mean a complete change in business direction.

Now, let’s imagine you’re part of start-up company. At the outset, your company has a singularly great, world-changing idea. You believe it’s the best idea, since, well, the last greatest world-changing idea. It’s unique. You are totally committed. You secure funding from some big name VCs anxious to capitalize and make the next $100 billion. You and your team work countless hours on realizing your big idea — it’s your dream, your passion. Then, suddenly you realize that your idea is utterly worthless — the product looks good but nobody, absolutely nobody, will consider it, let alone buy it; in fact, a hundred other companies before you had the same great, unique idea and all failed.

What are you and your company to do? Well, you pivot.

The entrepreneurial side of me would cheer an opportunistic company for “pivoting”, abandoning that original, great idea, and seeking another. Better than packing one’s bags and enrolling in corporate serfdom, right? But, there’s another part of me that thinks this is an ethical sell-out: it’s disingenuous to the financial backers, and it shows lack of integrity. That said, the example is of course set in Silicon Valley.

From Medium:

It was about a month after graduating from Techstars that my co-founder, Lianne, and I had our “oh shit” moment.

This is a special moment for founders; it’s not when you find a fixable bug in your app, when you realize you have been poorly optimizing your conversion funnel, or when you get a “no” from an investor. An “oh shit” moment is when you realize there is something fundamentally wrong with your business.

In our case, we realized that the product that we wanted to create was irreconcilable with a viable business model. So who were we going to tell? Techstars, who just accepted us into their highly prestigious accelerator on the basis that we could make it work? Our investors, who we just closed a round with?

It turns out, our Techstars family, our friends, and the angels (literally) who invested in us became our greatest allies, supporters, and advocates as we navigated the treacherous, terrifying, uncertain, and ultimately wildly liberating waters of a pivot. So let’s start at the beginning…

In February of 2014, Lianne and I were completing our undergrad CS degrees at the University of Colorado. As we were reflecting on the past four years of school, we realized that the most valuable experiences that we had happened outside the classroom in the incredible communities that we became involved in. Being techies, we wanted to build a product which helped other students make these “serendipitous” connections around their campus?—?to make the most of their time in college as well. We wanted to help our friends explore their world around them.
We called it Varsity. The app was basically a replacement for the unreadable kiosks full of posters found on college campuses. Students could submit events and activities happening around their campus that others could discover and indicate they were attending. We also built in a personalization mechanism, which proactively suggested things to do around you based upon your interests.
A few months later, the MVP of the Varsity and a well-practiced pitch won us the New Venture Challenge at CU, which came with a $13k award and garnered the attention of Techstars Boulder.
The next couple of months were a whirlwind of change; Lianne and I graduated, we transitioned to our first full-time job (working for ourselves), and I spent a month in Israel with my sister before she left for college in Florida. We spent a good amount of our time networking our way around Techstars?—?feeling a little like the high school kids at a college party?—?but loving it at the same time. We met some incredible people (Sue Heilbronner, Brad Berenthal, Zach Nies, and Howard Diamond, to name a few) who taught us so much about our nascent business in a very short time.
We took as many meetings as we could with whomever would talk with us, and we funneled all of our learnings into our Techstars application. Through some combination of luck, sweat, and my uncanny ability to say the right things when standing in front of a large group of people, we were accepted into Techstars.
Techstars was incredibly challenging for us. The 3-month program was also equally rewarding. Lianne and I learned more about ourselves, our company, and our relationship with each other than we had in 4 years of undergraduate education together. About half-way through the program we rebranded Varsity to Native and started exploring ways to monitize the platform. The product had come along way?—?we had done some incredible engineering and design work that we were happy with.
Unfortunately, the problem with Varsity was absolutely zero alignment between the product that we wanted to build and the way that would bring it to market. One option was to spend the next 3 years grinding through the 8-month sales-cycles of universities across the country, which felt challenging (in the wrong ways) and bureaucratic. Alternatively, we could monetize the student attention we garnered, which we feared would cause discordance between the content students wanted to see and the content that advertisers wanted to show them.
Soon after graduating from Techstars, someone showed us Simon Sinek’s famous TED talk about how great leaders inspire action. Sinek describes how famous brands like Apple engage their customers starting with their “why” for doing business, which takes precedence over “how” they do business, and even over “what” their business does. At Native, we knew our “why” was something about helping people discover the world around them, and we now knew that the “how” and “what” of our current business wouldn’t get us there.
So, we decided to pivot.
Around this time I grabbed coffee with my friend Fletcher Richman. I explained to him the situation and asked for his advice. He offered the perspective that startups are designed to solve problems in the most efficient way possible. Basically, startups should be created to fill voids in the market that weren’t being solved by an existing company. The main issue was we had no problem to solve.
Shit.
250k in funding, but nothing to fund? Do we give up, give the money back, and go get real jobs? Lianne and I weren’t done yet, so we went in search of problems worth solving.

Read the entire story here.

Idea Soup

Chief Happiness Officer?

When I first read this story I thought it was a mistimed April Fool’s joke. But, I was wrong. The Chief Happiness Officer (CHO) is a growing trend within the halls of corporate America. And, of course, it is brought to you by those happy yet earnest gurus in Silicon Valley.

One wonders where this is likely to take us 10, 20 years from now. But, one thing is reasonably clear — for most, corporate happiness may be an unattainable or undeliverable paradox.

[tube]y6Sxv-sUYtM[/tube]

From the New Republic:

Happiness isn’t something you find, or work toward—it’s something you buy and have delivered. Or at least that’s the premise of one of the newest jobs over in the C-suite. Now, alongside the CEO, CFO, and their ilk, we have the CHO, or chief happiness officer. As the name clearly suggests, the CHO is responsible for the contentment of individual employees, sort of like an h.r. manager, but on steroids; the theory goes that happy workers are productive workers, so happiness turns out to be in the company’s best interest. Perhaps unsurprisingly, many CHOs reside in Silicon Valley—both at start-ups and more blue chip tech companies. But it’s starting to spread: Southern restaurant company Hopjacks created the position in 2012 and the Quality of Life Foundation, an education nonprofit, created one in 2010.

On a day-to-day basis, CHOs busy themselves with diagnosing the emotional wellbeing of their workers, as well as adjusting workplace policy and culture in order to create the conditions for happiness. This can involve distributing surveys that measure contentment, leading workshops on everything from communication skills to mindfulness meditation, and generally diagnosing the office atmosphere. The job can also mean out-of-office activities—or, in the case of Hopjacks, a “Serial Killer Secret-Santa Weapon-Exchange” (an event, according to CHO Jarod Kelly, “where all of us blindly ordered each other [weapons] gifts from www.budk.com.”).

The CHO’s rise may have begun with Chade-Meng Tan. Meng is Google’s chief happiness officer equivalent, officially known as the Jolly Good Fellow. According to his self-made job description, his goal is to “enlighten minds, open hearts, create world peace.” He began at Google soon after the company was born, and spent eight years in the engineering department, before switching to the company’s “People Development Team” in the mid-2000s. Meng was inspired to work happiness into Google after encountering studies on the 65-year-old brain of a Buddhist monk named Mathieu Ricard. Ricard, after earning a Ph.D. in molecular genetics, turned his back on science and became a Buddhist monk in 1972, with the aim of exploring happiness through meditation.

In a 2010 TED talk, Meng explains that Ricard “is the happiest man in the world,” based on brain activity in the left prefrontal cortex. Whether or not measuring happiness in an MRI machine holds water is beside the point—Meng liked what he saw, and aimed to spread Ricard’s cognitive tendencies throughout the Google community.

Google’s involvement in worker happiness set off something of a trend, with Zappos CEO Tony Hsieh releasing a book in 2010 called Delivering Happiness. The book, which covers strategies to increase happiness in corporate culture, was a New York Times best seller and spawned a consulting firm of the same name, devoted to, well, delivering happiness to companies around the world.

Delivering Happiness, according to CEO and CHO Jenn Lim, devotes its time to measuring the contentment of clients and to laboring to improve their working conditions. So how exactly does one create joy? “We take a snapshot of all the employees, and basically identify their happiness levels,” Lim says. “And using [the Happy Business Index], we can see, what are the key points of unhappiness?” (The Happy Business Index is a survey based off of “well-being researcher” Nic Marks’s Happy Planet Index, and scores how motivated and engaged employees feel in their workplace.) In an interview, Lim also explained that they look out for “how empowered employees feel, how much progress they feel they’re making, how connected and aligned they feel with the company.”

“Basically we’re able to derive actionable things that we recommend companies work on. I think of us as kind of a heart monitor,” Lim noted. CHOs not only monitor, but also calculate. Beyond the Happiness Business Index, the company uses a “happiness calculator” which is featured on its website and does little except tabulate how much money you stand to earn if you carry out a “happiness at work survey” (created by Delivering Happiness, of course).

Read the entire article here.

Video: Pharrell Williams – Happy (Official Music Video). Courtesy of I am Other.

Idea Soup

Anthropo-Fracking — Monetizing You

While not known as retail innovators banks started charging us all manner of fees for every minutiae some time ago: the bounced check fee, the monthly checking fee, the statement fee, the paperwork fee, the outgoing wire fee, the incoming wire fee, the secondary account fee, the document discovery fee, the check copy fee, etc.

Then airlines jumped on the bandwagon: their cunning ploy to awe us with low fares while simultaneously shocking us with all manner of “ancillary fees”: the checked bag fee, the excess baggage fee, the large baggage fee, the food fee, the drink fee, the ticketing fee, the wifi fee, the check-in early fee, the seat selection fee, the group fee, the fee-fie-fo-fum fee, etc etc.

So, while you may believe that you are a valuable and marketable brand of one, most enterprises actually look upon you something more lowly, but financially attractive — you are nothing more than a cow to be milked, or a landscape to be fracked, of fees. Sadly, this movement towards “personal-fracking” — the monetization and mining of you — has only just entered its early stages. So, hold on tight to your wallet.

From the Guardian:

Fracking. Could there be a more perfect model for how we’re getting rinsed by this current conspiracy of government and commerce? In a world turned upside down, “conservative” now means the absolute opposite of “leaving things as they are”. Conservative means changing everything. It means dismantling things and selling off the bits. It means drilling into our lives and extracting the marrow.

Conservatism and conservation are now about as far apart as it’s possible to get. Friends of Conservation are the ones protecting the countryside. The ones who stand around self-consciously in terrible fancy dress, holding passive-aggressive placards in praise of the noble, selfless badger. Or basically any mammal that looks good in a waistcoat.

Friends of Conservatism, on the other hand, are the ones who roll up on heavy machinery like a pissed Ukrainian militia. The ones who drill deep beneath that area of local countryside whose only “use” so far has been as a picnic site. And who then pump into the ground powerful jets of high-pressure hydrogunk, splintering rock as easily as a walnut. And who, having sucked up a sky’s worth of valuable gas through a massive crack pipe, then pack up and lumber off to fracture and steal someone else’s underground treasure.

Welcome to capitalism’s late late show. If you can power-hose the last drop of value out of something, you now have an amoral imperative to do it. Fracking is the chief inspiration for today’s entrepreneurs, those “heroic wealth creators” so admired by Andy Pandery Burnham and half the Labour party. Everything is up for grabs now. The age of the racketeer is over. It’s all about fracketeering now.

A gang of London estate agents has invented something called a “client progression feeHere is a recent example. A gang of London estate agents has invented something called a “client progression fee”. Yeah, ha ha, the cheeky peaky blinders are leaching an extra grand and a half out of buyers just for accepting their offer on a property. Imagine that. Charging people for agreeing to sell them something. Arbitrarily monetising something that customers are obliged to do anyway.

It’s almost as if the property industry is a pirate economy serviced by unscrupulous thieving bastards drenched in melancholy duty-free fragrances. Let’s face it, estate agents have pretty much perfected the art of taking the piss with a straight face. One former estate agent told me the other day he was always instructed to make admin fees “whatever you think you can get away with … go high, then drop as a favour”. Classic surcharge frackery.

I had decided that of all the agents – sports, double, biological – estate agents were definitely the worst. Then I asked people on Twitter how they had been fracked over lately and they reminded me about letting agents. And about how every single person I’ve ever known who has had any dealings with a letting agent has had to recalibrate their view of the human race as a result. Has anyone ever got their exorbitant deposit back in full without an exhausting argument pointing out that three years of normal wear and tear can’t be classed as catastrophic damage? I’ve been hearing about people being charged a £90-per-person “reference fee” when moving between two properties run by the same agent, “so that’s £180 to ask themselves how we were as tenants”. Or being charged £50 for printing six pages of a rental contract. “I asked them to email it so I could print it. They said no.”

The world of fracketeering is infinitely flexible and contradictory. Buy tickets online and you could be charged an admin fee for an attachment that requires you to print them at home. The original online booking fee – you’ve come this far in the buying process, hand over an extra 12 quid now or write off the previous 20 minutes of your life – has mutated into exotic versions of itself.

The confirmation fee. The convenience fee. Someone who bought tickets for a tennis event at the O2 sent me this pithy tweet: “4 tickets. 4 Facility Fees + 4 Service Charge + 1 Standard Mail £2.75 = 15% of overall £!”. Definitely a grand slam.

It’s amazing to think of a world that existed before the admin charge. It almost makes you nostalgic for a simpler and more innocent time, when racketeers would work out what it was we wanted and then supply it at an inflated price. You remember racketeers. Snappy dressers, little moustaches, connections to organised crime. Some of them did very well and went on to become successful publishers or peers of the realm. Quite a few old-school racketeers went into the “hospitality and leisure” business, where these days fracking is in full effect.

Read the entire story here.

 

Idea Soup

Bursting My Bubble

Google-search-bubble-wrap

Popping those squishy pockets of air in bubble wrap has been a simple pleasure for many kids (and kids at heart) for decades. Not any more. Sealed Air, the company that has been producing this wonder material since 1960, has invented a “popless” version called iBubble Wrap.

How could they do this? As we all know popping the bubbles is often much more fun than receipt of the actual object that the wrap protects. This is not progress; this is cultural regression.

From the WSJ:

Hate to burst your bubble, but there’s a new form of Bubble Wrap coming out — and this one won’t pop.

Sealed Air, which has sold Bubble Wrap since 1960, has a new version of its protective wrapping coming out called iBubble Wrap, according to the Wall Street Journal.

It’s sold flat and airless, making it easier to store and ship. A single truckload of iBubble Wrap can hold as much packaging material as 47 truckloads of the old stuff, the Journal said.

iBubble Wrap is inflated with a custom pump by the companies that use it as shipping material.

The air bubbles in iBubble Wrap are filled in columns, and the bubbles in each column are connected. Press on one, and there’s no cathartic “POP!” as in traditional Bubble Wrap.

Instead, the air just shifts around in the column of bubbles.

The North Carolina company told the newspaper it would still make traditional Bubble Wrap, and other companies will undoubtedly continue to make similar packaging material that pops.

But if the new stuff takes off, the Bubble Wrap we all know and love could become a lot less common… and eventually, all we’ll have left is Virtual Bubble Wrap.

Read the story here.

Image courtesy of Google Search.

Idea Soup

Sharing Only Goes So Far

Let’s face it humans are an avaricious lot. We stash, hoard, accumulate and collect. We’ve stored and saved ever since our ancient ancestors figured out the benefits of delayed gratification — usually to stave off the existential threat of starvation. But, we also learned to acquire and amass stuff because it increasingly conveyed status and social rank — presumably the more we had the more attractive we would be to a potential mate.

And, so the internet-enabled sharing economy presents a certain, counter-cultural dilemma: how much will be truly share? The answer is probably not as much as Airbnb, DogVacay, Snapgoods, Zipcar and TaskRabbit would have us believe. Dare I say it, but I have to believe that it’s more about disposable convenience than it is altruism.

From the Independent:

Rental services like Airbnb and Zipcar may have captured the public imagination but the so-called “sharing economy” will never become widespread because people have a strong psychological desire to own material goods, according to new research

The internet has led to the emergence of numerous sites that allow people to rent, borrow, lend, swap and share products rather than buying new ones.

However, such schemes will never replace purchase capitalism because people are culturally programmed to amass as many possessions as possible, says a new report by Nottingham Trent University, published in the Journal of Cleaner Production.

“The sharing economy is a credible way to help tackle today’s consumer society,” said Laura Piscicelli, a researcher at the university. “What we’ve identified in this study, though, is that people’s individual values may prevent ‘collaborative consumption’ from becoming mainstream,” she added.

Ms Piscicelli said ride-sharing and clothes swapping were on the increase, and some renting and second-hand retail websites had been successful. Other sites, like TaskRabbit, have enjoyed some success by allowing people to outsource household chores.

But the researcher said that most “sharing economy” websites had failed due to lack of interest – because they failed to satisfy out cultural craving to possess objects.

People’s psychological programming is not the only problem, according to co-researcher Professor Tim Cooper. He blamed manufacturers for opting to build disposable products – rather than long-lasting alternatives which could be rented or shared by many different customers.

“Most people want to own a washing machine so they don’t last as long as they ought to. The average machine lasts around 10 years – but you could easily make one these days that lasts 15 or 20 years,” Professor Cooper said. “But they don’t. And the reason for that is that companies are locked into this replacement cycle – they need the replacements to make money.

“One way to change that is to get people to rent it rather than buy it,” he said, adding that a whole range of “utilitarian” goods which lack a fashion element could be managed in that way.

“The problem at the moment is that the whole renting market is about appealing to a very narrow segment – people who can’t afford to buy, who aren’t credit worthy, paying ridiculous prices. No one in their right mind will rent unless they have to. So the market’s got to be transformed,” he says.

Read the entire article here.

Idea Soup, Technica

Professional Trolling

Just a few short years ago the word “troll” in the context of the internet had not even entered our lexicon. Now, you can enter a well-paid career in the distasteful practice, especially if you live in Russia. You have to admire the human ability to find innovative and profitable ways to inflict pain on others.

From NYT:

Around 8:30 a.m. on Sept. 11 last year, Duval Arthur, director of the Office of Homeland Security and Emergency Preparedness for St. Mary Parish, Louisiana, got a call from a resident who had just received a disturbing text message. “Toxic fume hazard warning in this area until 1:30 PM,” the message read. “Take Shelter. Check Local Media and columbiachemical.com.”

St. Mary Parish is home to many processing plants for chemicals and natural gas, and keeping track of dangerous accidents at those plants is Arthur’s job. But he hadn’t heard of any chemical release that morning. In fact, he hadn’t even heard of Columbia Chemical. St. Mary Parish had a Columbian Chemicals plant, which made carbon black, a petroleum product used in rubber and plastics. But he’d heard nothing from them that morning, either. Soon, two other residents called and reported the same text message. Arthur was worried: Had one of his employees sent out an alert without telling him?

If Arthur had checked Twitter, he might have become much more worried. Hundreds of Twitter accounts were documenting a disaster right down the road. “A powerful explosion heard from miles away happened at a chemical plant in Centerville, Louisiana #ColumbianChemicals,” a man named Jon Merritt tweeted. The #ColumbianChemicals hashtag was full of eyewitness accounts of the horror in Centerville. @AnnRussela shared an image of flames engulfing the plant. @Ksarah12 posted a video of surveillance footage from a local gas station, capturing the flash of the explosion. Others shared a video in which thick black smoke rose in the distance.

Dozens of journalists, media outlets and politicians, from Louisiana to New York City, found their Twitter accounts inundated with messages about the disaster. “Heather, I’m sure that the explosion at the #ColumbianChemicals is really dangerous. Louisiana is really screwed now,” a user named @EricTraPPP tweeted at the New Orleans Times-Picayune reporter Heather Nolan. Another posted a screenshot of CNN’s home page, showing that the story had already made national news. ISIS had claimed credit for the attack, according to one YouTube video; in it, a man showed his TV screen, tuned to an Arabic news channel, on which masked ISIS fighters delivered a speech next to looping footage of an explosion. A woman named Anna McClaren (@zpokodon9) tweeted at Karl Rove: “Karl, Is this really ISIS who is responsible for #ColumbianChemicals? Tell @Obama that we should bomb Iraq!” But anyone who took the trouble to check CNN.com would have found no news of a spectacular Sept. 11 attack by ISIS. It was all fake: the screenshot, the videos, the photographs.

 In St. Mary Parish, Duval Arthur quickly made a few calls and found that none of his employees had sent the alert. He called Columbian Chemicals, which reported no problems at the plant. Roughly two hours after the first text message was sent, the company put out a news release, explaining that reports of an explosion were false. When I called Arthur a few months later, he dismissed the incident as a tasteless prank, timed to the anniversary of the attacks of Sept. 11, 2001. “Personally I think it’s just a real sad, sick sense of humor,” he told me. “It was just someone who just liked scaring the daylights out of people.” Authorities, he said, had tried to trace the numbers that the text messages had come from, but with no luck. (The F.B.I. told me the investigation was still open.)

The Columbian Chemicals hoax was not some simple prank by a bored sadist. It was a highly coordinated disinformation campaign, involving dozens of fake accounts that posted hundreds of tweets for hours, targeting a list of figures precisely chosen to generate maximum attention. The perpetrators didn’t just doctor screenshots from CNN; they also created fully functional clones of the websites of Louisiana TV stations and newspapers. The YouTube video of the man watching TV had been tailor-made for the project. A Wikipedia page was even created for the Columbian Chemicals disaster, which cited the fake YouTube video. As the virtual assault unfolded, it was complemented by text messages to actual residents in St. Mary Parish. It must have taken a team of programmers and content producers to pull off.

And the hoax was just one in a wave of similar attacks during the second half of last year. On Dec. 13, two months after a handful of Ebola cases in the United States touched off a minor media panic, many of the same Twitter accounts used to spread the Columbian Chemicals hoax began to post about an outbreak of Ebola in Atlanta. The campaign followed the same pattern of fake news reports and videos, this time under the hashtag #EbolaInAtlanta, which briefly trended in Atlanta. Again, the attention to detail was remarkable, suggesting a tremendous amount of effort. A YouTube video showed a team of hazmat-suited medical workers transporting a victim from the airport. Beyoncé’s recent single “7/11” played in the background, an apparent attempt to establish the video’s contemporaneity. A truck in the parking lot sported the logo of the Hartsfield-Jackson Atlanta International Airport.

On the same day as the Ebola hoax, a totally different group of accounts began spreading a rumor that an unarmed black woman had been shot to death by police. They all used the hashtag #shockingmurderinatlanta. Here again, the hoax seemed designed to piggyback on real public anxiety; that summer and fall were marked by protests over the shooting of Michael Brown in Ferguson, Mo. In this case, a blurry video purports to show the shooting, as an onlooker narrates. Watching it, I thought I recognized the voice — it sounded the same as the man watching TV in the Columbian Chemicals video, the one in which ISIS supposedly claims responsibility. The accent was unmistakable, if unplaceable, and in both videos he was making a very strained attempt to sound American. Somehow the result was vaguely Australian.

Who was behind all of this? When I stumbled on it last fall, I had an idea. I was already investigating a shadowy organization in St. Petersburg, Russia, that spreads false information on the Internet. It has gone by a few names, but I will refer to it by its best known: the Internet Research Agency. The agency had become known for employing hundreds of Russians to post pro-Kremlin propaganda online under fake identities, including on Twitter, in order to create the illusion of a massive army of supporters; it has often been called a “troll farm.” The more I investigated this group, the more links I discovered between it and the hoaxes. In April, I went to St. Petersburg to learn more about the agency and its brand of information warfare, which it has aggressively deployed against political opponents at home, Russia’s perceived enemies abroad and, more recently, me.

Read the entire article here.

Idea Soup, Technica

Myth Busting Silicon(e) Valley

map-Silicon-Valley

Question: what do silicone implants and Silicon Valley have in common?  Answer: they are both instruments of a grandiose illusion. The first, on a mostly personal level, promises eternal youth and vigor; the second, on a much grander scale, promises eternal wealth and greatness for humanity.

So, let’s leave aside the human cosmetic question for another time and concentrate on the broad deception that is current Silicon Valley. It’s a deception at many different levels —  self-deception of Silicon Valley’s young geeks and code jockeys, and the wider delusion that promises us all a glittering future underwritten by rapturous tech.

And, how best to debunk the myths that envelop the Valley like San Francisco’s fog, than to turn to Sam Biddle, former editor of Valleywag. He offers a scathing critique, which happens to be spot on. Quite rightly he asks if we need yet another urban, on-demand laundry app and what on earth is the value to society of “Yo”? But more importantly, he asks us to reconsider our misplaced awe and to knock Silicon Valley from its perch of self-fulfilling self-satisfaction. Yo and Facebook and Uber and Clinkle and Ringly and DogVacay and WhatsApp and the thousands of other trivial start-ups — despite astronomical valuations — will not be humanity’s savior. We need better ideas and deeper answers.

From GQ:

I think my life is better because of my iPhone. Yours probably is, too. I’m grateful to live in a time when I can see my baby cousins or experience any album ever without getting out of bed. I’m grateful that I will literally never be lost again, so long as my phone has battery. And I’m grateful that there are so many people so much smarter than I am who devise things like this, which are magical for the first week they show up, then a given in my life a week later.

We live in an era of technical ability that would have nauseated our ancestors with wonder, and so much of it comes from one very small place in California. But all these unimpeachable humanoid upgrades—the smartphones, the Google-gifted knowledge—are increasingly the exception, rather than the rule, of Silicon Valley’s output. What was once a land of upstarts and rebels is now being led by the money-hungry and the unspirited. Which is why we have a start-up that mails your dog curated treats and an app that says “Yo.” The brightest minds in tech just lately seem more concerned with silly business ideas and innocuous “disruption,” all for the shot at an immense payday. And when our country’s smartest people are working on the dumbest things, we all lose out.

That gap between the Silicon Valley that enriches the world and the Silicon Valley that wastes itself on the trivial is widening daily. And one of the biggest contributing factors is that the Valley has lost touch with reality by subscribing to its own self-congratulatory mythmaking. That these beliefs are mostly baseless, or at least egotistically distorted, is a problem—not just for Silicon Valley but for the rest of us. Which is why we’re here to help the Valley tear down its own myths—these seven in particular.

Myth #1: Silicon Valley Is the Universe’s Only True Meritocracy

 Everyone in Silicon Valley has convinced himself he’s helped create a free-market paradise, the software successor to Jefferson’s brotherhood of noble yeomen. “Silicon Valley has this way of finding greatness and supporting it,” said a member of Greylock Partners, a major venture-capital firm with over $2 billion under management. “It values meritocracy more than anyplace else.” After complaints of the start-up economy’s profound whiteness reached mainstream discussion just last year, companies like Apple, Facebook, and Twitter reluctantly released internal diversity reports. The results were as homogenized as expected: At Twitter, 79 percent of the leadership is male and 72 percent of it is white. At Facebook, senior positions are 77 percent male and 74 percent white. Twitter—a company whose early success can be directly attributed to the pioneering downloads of black smartphone users—hosts an entirely white board of directors. It’s a pounding indictment of Silicon Valley’s corporate psyche that Mark Zuckerberg—a bourgeois white kid from suburban New York who attended Harvard—is considered the Horatio Alger 2.0 paragon. When Paul Graham, the then head of the massive start-up incubator Y Combinator, told The New York Times that he could “be tricked by anyone who looks like Mark Zuckerberg,” he wasn’t just talking about Zuck’s youth.

If there’s any reassuring news, it’s not that tech’s diversity crisis is getting better, but that in the face of so much dismal news, people are becoming angry enough and brave enough to admit that the state of things is not good. Silicon Valley loves data, after all, and with data readily demonstrating tech’s overwhelming white-guy problem, even the true believers in meritocracy see the circumstances as they actually are.

Earlier this year, Ellen Pao became the most mentioned name in Silicon Valley as her gender-discrimination suit against her former employer, Kleiner Perkins Caufield & Byers, played out in court. Although the jury sided with the legendary VC firm, the Pao case was a watershed moment, bringing sunlight and national scrutiny to the issue of unchecked Valley sexism. For every defeated Ellen Pao, we can hope there are a hundred other female technology workers who feel new courage to speak up against wrongdoing, and a thousand male co-workers and employers who’ll reconsider their boys’-club bullshit. But they’ve got their work cut out for them.

…

Myth #4: School Is for Suckers, Just Drop Out

 Every year PayPal co-founder, investor-guru, and rabid libertarian Peter Thiel awards a small group of college-age students the Thiel Fellowship, a paid offer to either drop out or forgo college entirely. In exchange, the students receive money, mentorship, and networking opportunities from Thiel as they pursue a start-up of their choice. We’re frequently reminded of the tech titans of industry who never got a degree—Steve Jobs, Bill Gates, and Mark Zuckerberg are the most cited, though the fact that they’re statistical exceptions is an aside at best. To be young in Silicon Valley is great; to be a young dropout is golden.

The virtuous dropout hasn’t just made college seem optional for many aspiring barons—formal education is now excoriated in Silicon Valley as an obsolete system dreamed up by people who’d never heard of photo filters or Snapchat. Mix this cynicism with the libertarian streak many tech entrepreneurs carry already and you’ve got yourself a legit anti-education movement.

And for what? There’s no evidence that avoiding a conventional education today grants business success tomorrow. The gifted few who end up dropping out and changing tech history would have probably changed tech history anyway—you can’t learn start-up greatness by refusing to learn in a college classroom. And given that most start-ups fail, do we want an appreciable segment of bright young people gambling so heavily on being the next Zuck? More important, do we want an economy of CEOs who never had to learn to get along with their dorm-mates? Who never had the opportunity to grow up and figure out how to be a human being functioning in society? Who went straight from a bedroom in their parents’ house to an incubator that paid for their meals? It’s no wonder tech has an antisocial rep.

…

Myth #7: Silicon Valley Is Saving the World

Two years ago an online list of “57 start-up lessons” made its way through the coder community, bolstered by a co-sign from Paul Graham. “Wow, is this list good,” he commented. “It has the kind of resonance you only get when you’re writing from a lot of hard experience.” Among the platitudinous menagerie was this gem: “If it doesn’t augment the human condition for a huge number of people in a meaningful way, it’s not worth doing.” In a mission statement published on Andreessen Horowitz’s website, Marc Andreessen claimed he was “looking for the companies who are going to be the big winners because they are going to cause a fundamental change in the world.” The firm’s portfolio includes Ringly (maker of rings that light up when your phone does something), Teespring (custom T-shirts), DogVacay (pet-sitters on demand), and Hem (the zombified corpse of the furniture store Fab.com). Last year, wealthy Facebook alum Justin Rosenstein told a packed audience at TechCrunch Disrupt, “We in this room, we in technology, have a greater capacity to change the world than the kings and presidents of even a hundred years ago.” No one laughed, even though Rosenstein’s company, Asana, sells instant-messaging software.

 This isn’t just a matter of preening guys in fleece vests building giant companies predicated on their own personal annoyances. It’s wasteful and genuinely harmful to have so many people working on such trivial projects (Clinkle and fucking Yo) under the auspices of world-historical greatness. At one point recently, there were four separate on-demand laundry services operating in San Francisco, each no doubt staffed by smart young people who thought they were carving out a place of small software greatness. And yet for every laundry app, there are smart people doing smart, valuable things: Among the most recent batch of Y Combinator start-ups featured during March’s “Demo Day” were Diassess (twenty-minute HIV tests), Standard Cyborg (3D-printed limbs), and Atomwise (using supercomputing to develop new medical compounds). Those start-ups just happen to be sharing desk space at the incubator with “world changers” like Lumi (easy logo printing) and Underground Cellar (“curated, limited-edition wines with a twist”).

Read the entire article here.

Map: Silicon Valley, CA. Courtesy of Google.

 

Idea Soup

Innovating the Disruption Or Disrupting the Innovation

Corporate America has a wonderful knack of embracing a meaningful idea and then overusing it to such an extent that it becomes thoroughly worthless. Until recently, every advertiser, every manufacturer, every service, shamelessly promoted itself as an innovator. Everything a company did was driven by innovation: employees succeeded by innovating; the CEO was innovation incarnate; products were innovative; new processes drove innovation — in fact, the processes themselves were innovative. Any business worth its salt produced completely innovative stuff from cupcakes to tires, from hair color to drill bits, from paper towels to hoses. And consequently this overwhelming ocean of innovation — which upon closer inspection actually isn’t real innovation — becomes worthless, underwhelming drivel.

So, what next for corporate America? Well, latch on to the next meme of course — disruption. Yawn.

From NPR/TED:

HBO’s Silicon Valley is back, with its pitch-perfect renderings of the culture and language of the tech world — like at the opening of the “Disrupt” startup competition run by the Tech Crunch website at the end of last season. “We’re making the world a better place through scalable fault-tolerant distributed databases” — the show’s writers didn’t have to exercise their imagination much to come up with those little arias of geeky self-puffery, or with the name Disrupt, which, as it happens, is what the Tech Crunch conferences are actually called. As is most everything else these days. “Disrupt” and “disruptive” are ubiquitous in the names of conferences, websites, business school degree programs and business book best-sellers. The words pop up in more than 500 TED Talks: “How to Avoid Disruption in Business and in Life,” “Embracing Disruption,” “Disrupting Higher Education,” “Disrupt Yourself.” It transcends being a mere buzzword. As the philosopher Jeremy Bentham said two centuries ago, there is a point where jargon becomes a species of the sublime.

 To give “disruptive” its due, it actually started its life with some meat on its bones. It was popularized in a 1997 book by Clayton Christensen of the Harvard Business School. According to Christensen, the reason why established companies fail isn’t that they don’t keep up with new technologies, but that their business models are disrupted by scrappy, bottom-fishing startups that turn out stripped-down versions of existing products at prices the established companies can’t afford to match. That’s what created an entry point for “disruptive innovations” like the Model T Ford, Craigslist classifieds, Skype and no-frills airlines.

Christensen makes a nice point. Sometimes you can get the world to beat a path to your door by building a crappier mousetrap, too, if you price it right. Some scholars have raised questions about that theory, but it isn’t the details of the story that have put “disruptive” on everybody’s lips; it’s the word itself. Buzzwords feed off their emotional resonances, not their ideas. And for pure resonance, “disruptive” is hard to beat. It’s a word with deep roots. I suspect I first encountered it when my parents read me the note that the teacher pinned to my sweater when I was sent home from kindergarten. Or maybe it reminds you of the unruly kid who was always pushing over the juice table. One way or another, the word evokes obstreperous rowdies, the impatient people who are always breaking stuff. It says something that “disrupt” is from the Latin for “shatter.”

Disrupt or be disrupted. The consultants and business book writers have proclaimed that as the chronic condition of the age, and everybody is clambering to be classed among the disruptors rather than the disruptees. The lists of disruptive companies in the business media include not just Amazon and Uber but also Procter and Gamble and General Motors. What company nowadays wouldn’t claim to be making waves? It’s the same with that phrase “disruptive technologies.” That might be robotics or next-generation genomics, sure. But CNBC also touts the disruptive potential of an iPhone case that converts to a video game joystick.

These days, people just use “disruptive” to mean shaking things up, though unlike my kindergarten teacher, they always infuse a note of approval. As those Tech Crunch competitors assured us, disruption makes the world a better place. Taco Bell has created a position called “Resident Disruptor,” and not to be outdone, McDonald’s is running radio ads describing its milkshake blenders as a disruptive technology. Well, OK, blenders really do shake things up. But by the time a tech buzzword has been embraced by the fast food chains, it’s getting a little frayed at the edges. “Disruption” was never really a new idea in the first place, just a new name for a fact of life as old as capitalism. Seventy years ago the economist Joseph Schumpeter was calling it the “gales of creative destruction,” and he just took the idea from Karl Marx.

Read the entire story here.

Idea Soup

The Free Market? Yeah Right

The US purports to be home of the free market. But we all know it’s not. Rather, it is home to vested and entrenched interests who will fight tooth-and-nail to maintain the status quo beneath the veil of self-written regulations and laws. This is called protectionism — manufacturers, media companies, airlines and suppliers all do it. Texas car dealers and their corporate lobbyists are masters at this game.

From ars technica:

In a turn of events that isn’t terribly surprising, a bill to allow Tesla Motors to sell cars directly to consumers in Texas has failed to make it to the floor, with various state representatives offering excuses about not wanting to “piss off all the auto dealers.”

The Lone Star State’s notoriously anti-Tesla stance—one of the strongest in the nation—is in many ways the direct legacy of powerful lawmaker-turned-lobbyist Gene Fondren, who spent much of his life ensuring that the Texas Automobile Dealers Association’s wishes were railroaded through the Texas legislature.

That legacy is alive and well, with Texas lawmakers refusing to pass bills in 2013 and again in 2015 to allow Tesla to sell to consumers. Per the state’s franchise laws, auto manufacturers like Tesla are only allowed to sell cars to independent third-party dealers. These laws were originally intended to protect consumers against the possibility of automakers colluding on pricing; today, though, they function as protectionist shields for the entrenched political interests of car dealers and their powerful state- and nationwide lobbyist organizations.

The anti-Tesla sentiment didn’t stop Texas from attempting to snag the contracts for Tesla Motors’ upcoming “Gigafactory,” the multibillion dollar battery factory that Tesla Motors CEO Elon Musk eventually chose to build in Reno, Nevada.

Speaking of Elon Musk—in a stunning display of total ignorance, Texas state representative Senfronia Thompson (a Democrat representing House District 141) had this to say about the bill’s failure: “I can appreciate Tesla wanting to sell cars, but I think it would have been wiser if Mr. Tesla had sat down with the car dealers first.”

 Apparently being even minimally familiar with the matters one legislates isn’t a requirement to serve in the Texas legislature. However, Thompson did receive many thousands in campaign contributions from the Texas Automobile Dealers Association, so perhaps she’s just doing what she’s told.

Read the entire story here.

Idea Soup

Hard Work Versus Smart Work

If you work any kind of corporate job it’s highly likely that you’ll hear any of the following on an almost daily basis: “good job, all those extra hours you put in really paid off”, “I always eat lunch at my desk”, “yes… worked late again yesterday”, “… are you staying late too?”, “I know you must have worked so many long hours to get the project done”, “I’m really impressed at the hours you dedicate…”, “what a team, you all went over and above… working late, working weekends, sacrificing vacation…”, and so on.

The workaholic culture — particularly in the United States — serves to reinforce the notion that hard work is actually to be rewarded and reinforced. Many just seem to confuse long hours for persistence and resilience. On the surface it seems to be a great win for the employer: get more hours out of your employees, and it’s free. Of course, recent analyses of work-life balance show that pushing employees beyond a certain number of hours is thoroughly counterproductive — beyond the deleterious effects on employees the quality of the work suffers too. But it turns out that a not insignificant number of wily subordinates may actually be gaming the 80-hour workweek. And, don’t forget the other group of hard-workers — those who do endless hours of so-called “busy work” just to look hardworking.

What happened to just encouraging and incentivizing  employees, and bosses, for working smartly, rather than just hard? Reward long hours and there is no incentive for innovation or change; reward smartness and creativity thrives. The current mindset may take generations to alter — you’ll easily come across the word “hardworking” in the dictionary, but you’ll have no luck finding “smartworking“.

From the NYT:

Imagine an elite professional services firm with a high-performing, workaholic culture. Everyone is expected to turn on a dime to serve a client, travel at a moment’s notice, and be available pretty much every evening and weekend. It can make for a grueling work life, but at the highest levels of accounting, law, investment banking and consulting firms, it is just the way things are.

Except for one dirty little secret: Some of the people ostensibly turning in those 80- or 90-hour workweeks, particularly men, may just be faking it.

Many of them were, at least, at one elite consulting firm studied by Erin Reid, a professor at Boston University’s Questrom School of Business. It’s impossible to know if what she learned at that unidentified consulting firm applies across the world of work more broadly. But her research, publishedin the academic journal Organization Science, offers a way to understand how the professional world differs between men and women, and some of the ways a hard-charging culture that emphasizes long hours above all can make some companies worse off.

Ms. Reid interviewed more than 100 people in the American offices of a global consulting firm and had access to performance reviews and internal human resources documents. At the firm there was a strong culture around long hours and responding to clients promptly.

“When the client needs me to be somewhere, I just have to be there,” said one of the consultants Ms. Reid interviewed. “And if you can’t be there, it’s probably because you’ve got another client meeting at the same time. You know it’s tough to say I can’t be there because my son had a Cub Scout meeting.”

Some people fully embraced this culture and put in the long hours, and they tended to be top performers. Others openly pushed back against it, insisting upon lighter and more flexible work hours, or less travel; they were punished in their performance reviews.

The third group is most interesting. Some 31 percent of the men and 11 percent of the women whose records Ms. Reid examined managed to achieve the benefits of a more moderate work schedule without explicitly asking for it.

They made an effort to line up clients who were local, reducing the need for travel. When they skipped work to spend time with their children or spouse, they didn’t call attention to it. One team on which several members had small children agreed among themselves to cover for one another so that everyone could have more flexible hours.

A male junior manager described working to have repeat consulting engagements with a company near enough to his home that he could take care of it with day trips. “I try to head out by 5, get home at 5:30, have dinner, play with my daughter,” he said, adding that he generally kept weekend work down to two hours of catching up on email.

Despite the limited hours, he said: “I know what clients are expecting. So I deliver above that.” He received a high performance review and a promotion.

What is fascinating about the firm Ms. Reid studied is that these people, who in her terminology were “passing” as workaholics, received performance reviews that were as strong as their hyper-ambitious colleagues. For people who were good at faking it, there was no real damage done by their lighter workloads.

It calls to mind the episode of “Seinfeld” in which George Costanza leaves his car in the parking lot at Yankee Stadium, where he works, and gets a promotion because his boss sees the car and thinks he is getting to work earlier and staying later than anyone else. (The strategy goes awry for him, and is not recommended for any aspiring partners in a consulting firm.)

Read the entire article here.

Idea Soup

Marketing of McGod

google-search-church-logos

Many churches now have their own cool logos. All of the large or mega-churches have their own well-defined brands and well-oiled marketing departments. Clearly, God is not doing enough to disseminate his (or her) message — God needs help from ad agencies and marketing departments. Modern day evangelism is not only a big business, it’s now a formalized business process, with key objectives, market share drivers, growth strategies, metrics and key performance indicators (KPI) — just like any other corporate franchise.

But some Christians believe that there is more (or, actually, less) to their faith than neo-evangelical brands like Vine, Gather, Vertical or Prime. So, some are shunning these houses of “worshipfotainment” [my invention, dear reader] with high-production values and edgy programming; they are forgoing mega-screens with Jesus-powerpoint and heavenly lasers, lattes in the lobby and hip Christian metal. A millennial tells his story of disillusionment with the McChurch — its evangelical shallowness and exclusiveness.

From the Washington Post:

Bass reverberates through the auditorium floor as a heavily bearded worship leader pauses to invite the congregation, bathed in the light of two giant screens, to tweet using #JesusLives. The scent of freshly brewed coffee wafts in from the lobby, where you can order macchiatos and purchase mugs boasting a sleek church logo. The chairs are comfortable, and the music sounds like something from the top of the charts. At the end of the service, someone will win an iPad.

This, in the view of many churches, is what millennials like me want. And no wonder pastors think so. Church attendance has plummeted among young adults. In the United States, 59 percent of people ages 18 to 29 with a Christian background have, at some point, dropped out. According to the Pew Forum on Religion & Public Life, among those of us who came of age around the year 2000, a solid quarter claim no religious affiliation at all, making my generation significantly more disconnected from faith than members of Generation X were at a comparable point in their lives and twice as detached as baby boomers were as young adults.

In response, many churches have sought to lure millennials back by focusing on style points: cooler bands, hipper worship, edgier programming, impressive technology. Yet while these aren’t inherently bad ideas and might in some cases be effective, they are not the key to drawing millennials back to God in a lasting and meaningful way. Young people don’t simply want a better show. And trying to be cool might be making things worse.

 You’re just as likely to hear the words “market share” and “branding” in church staff meetings these days as you are in any corporate office. Megachurches such as Saddleback in Lake Forest, Calif., and Lakewood in Houston have entire marketing departments devoted to enticing new members. Kent Shaffer of ChurchRelevance.com routinely ranks the best logos and Web sites and offers strategic counsel to organizations like Saddleback and LifeChurch.tv.

Increasingly, churches offer sermon series on iTunes and concert-style worship services with names like “Vine” or “Gather.” The young-adult group at Ed Young’s Dallas-based Fellowship Church is called Prime, and one of the singles groups at his father’s congregation in Houston is called Vertical. Churches have made news in recent years for giving away tablet computers , TVs and even cars at Easter. Still, attendance among young people remains flat.

Recent research from Barna Group and the Cornerstone Knowledge Network found that 67 percent of millennials prefer a “classic” church over a “trendy” one, and 77 percent would choose a “sanctuary” over an “auditorium.” While we have yet to warm to the word “traditional” (only 40 percent favor it over “modern”), millennials exhibit an increasing aversion to exclusive, closed-minded religious communities masquerading as the hip new places in town. For a generation bombarded with advertising and sales pitches, and for whom the charge of “inauthentic” is as cutting an insult as any, church rebranding efforts can actually backfire, especially when young people sense that there is more emphasis on marketing Jesus than actually following Him. Millennials “are not disillusioned with tradition; they are frustrated with slick or shallow expressions of religion,” argues David Kinnaman, who interviewed hundreds of them for Barna Group and compiled his research in “You Lost Me: Why Young Christians Are Leaving Church .?.?. and Rethinking Faith.”

My friend and blogger Amy Peterson put it this way: “I want a service that is not sensational, flashy, or particularly ‘relevant.’ I can be entertained anywhere. At church, I do not want to be entertained. I do not want to be the target of anyone’s marketing. I want to be asked to participate in the life of an ancient-future community.”

Millennial blogger Ben Irwin wrote: “When a church tells me how I should feel (‘Clap if you’re excited about Jesus!’), it smacks of inauthenticity. Sometimes I don’t feel like clapping. Sometimes I need to worship in the midst of my brokenness and confusion — not in spite of it and certainly not in denial of it.”

When I left church at age 29, full of doubt and disillusionment, I wasn’t looking for a better-produced Christianity. I was looking for a truer Christianity, a more authentic Christianity: I didn’t like how gay, lesbian, bisexual and transgender people were being treated by my evangelical faith community. I had questions about science and faith, biblical interpretation and theology. I felt lonely in my doubts. And, contrary to popular belief, the fog machines and light shows at those slick evangelical conferences didn’t make things better for me. They made the whole endeavor feel shallow, forced and fake.

Read the entire story here.

Book Reviews, Technica

Creative Destruction

Internet_map

Author Andrew Keen ponders the true value of the internet in his new book The Internet is Not the Answer. Quite rightfully he asserts that many billions of consumers have benefited from the improved convenience and usually lower prices of every product imaginable delivered through a couple of clicks online. But there is a higher price to pay — one that touches on the values we want for our society and the deeper costs to our culture.

From the Guardian:

During every minute of every day of 2014, according to Andrew Keen’s new book, the world’s internet users – all three billion of them – sent 204m emails, uploaded 72 hours of YouTube video, undertook 4m Google searches, shared 2.46m pieces of Facebook content, published 277,000 tweets, posted 216,000 new photos on Instagram and spent $83,000 on Amazon.

By any measure, for a network that has existed recognisably for barely 20 years (the first graphical web browser, Mosaic, was released in 1993), those are astonishing numbers: the internet, plainly, has transformed all our lives, making so much of what we do every day – communicating, shopping, finding, watching, booking – unimaginably easier than it was. A Pew survey in the United States found last year that 90% of Americans believed the internet had been good for them.

So it takes a brave man to argue that there is another side to the internet; that stratospheric numbers and undreamed-of personal convenience are not the whole story. Keen (who was once so sure the internet was the answer that he sank all he had into a startup) is now a thoughtful and erudite contrarian who believes the internet is actually doing untold damage. The net, he argues, was meant to be “power to the people, a platform for equality”: an open, decentralised, democratising technology that liberates as it empowers as it informs.

Instead, it has handed extraordinary power and wealth to a tiny handful of people, while simultaneously, for the rest of us, compounding and often aggravating existing inequalities – cultural, social and economic – whenever and wherever it has found them. Individually, it may work wonders for us. Collectively, it’s doing us no good at all. “It was supposed to be win-win,” Keen declares. “The network’s users were supposed to be its beneficiaries. But in a lot of ways, we are its victims.”

This is not, Keen acknowledges, a very popular view, especially in Silicon Valley, where he has spent the best part of the past 30-odd years after an uneventful north London childhood (the family was in the rag trade). But The Internet is Not the Answer – Keen’s third book (the first questioned the value of user-generated content, the second the point of social media; you get where he’s coming from) – has been “remarkably well received”, he says. “I’m not alone in making these points. Moderate opinion is starting to see that this is a problem.”

What seems most unarguable is that, whatever else it has done, the internet – after its early years as a network for academics and researchers from which vulgar commercial activity was, in effect, outlawed – has been largely about the money. The US government’s decision, in 1991, to throw the nascent network open to private enterprise amounted, as one leading (and now eye-wateringly wealthy) Californian venture capitalist has put it, to “the largest creation of legal wealth in the history of the planet”.

The numbers Keen reels off are eye-popping: Google, which now handles 3.5bn searches daily and controls more than 90% of the market in some countries, including Britain, was valued at $400bn last year – more than seven times General Motors, which employs nearly four times more people. Its two founders, Larry Page and Sergey Brin, are worth $30bn apiece. Facebook’s Mark Zuckerberg, head of the world’s second biggest internet site – used by 19% of people in the world, half of whom access it six days a week or more – is sitting on a similar personal pile, while at $190bn in July last year, his company was worth more than Coca-Cola, Disney and AT&T.

Jeff Bezos of Amazon also has $30bn in his bank account. And even more recent online ventures look to be headed the same way: Uber, a five-year-old startup employing about 1,000 people and once succinctly described as “software that eats taxis”, was valued last year at more than $18bn – roughly the same as Hertz and Avis combined. The 700-staff lodging rental site Airbnb was valued at $10bn in February last year, not far off half as much as the Hilton group, which owns nearly 4,000 hotels and employs 150,000 people. The messaging app WhatsApp, bought by Facebook for $19bn, employs just 55, while the payroll of Snapchat – which turned down an offer of $3bn – numbers barely 20.

Part of the problem here, argues Keen, is that the digital economy is, by its nature, winner-takes-all. “There’s no inevitable or conspiratorial logic here; no one really knew it would happen,” he says. “There are just certain structural qualities that mean the internet lends itself to monopolies. The internet is a perfect global platform for free-market capitalism – a pure, frictionless, borderless economy … It’s a libertarian’s wet dream. Digital Milton Friedman.”Nor are those monopolies confined to just one business. Keen cites San Francisco-based writer Rebecca Solnit’s incisive take on Google: imagine it is 100 years ago, and the post office, the phone company, the public libraries, the printing houses, Ordnance Survey maps and the cinemas were all controlled by the same secretive and unaccountable organisation. Plus, he adds, almost as an afterthought: “Google doesn’t just own the post office – it has the right to open everyone’s letters.”

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This, Keen argues, is the net economy’s natural tendency: “Google is the search and information monopoly and the largest advertising company in history. It is incredibly strong, joining up the dots across more and more industries. Uber’s about being the transport monopoly; Airbnb the hospitality monopoly; TaskRabbit the labour monopoly. These are all, ultimately, monopoly plays – that’s the logic. And that should worry people.”

It is already having consequences, Keen says, in the real world. Take – surely the most glaring example – Amazon. Keen’s book cites a 2013 survey by the US Institute for Local Self-Reliance, which found that while it takes, on average, a regular bricks-and-mortar store 47 employees to generate $10m in turnover, Bezos’s many-tentacled, all-consuming and completely ruthless “Everything Store” achieves the same with 14. Amazon, that report concluded, probably destroyed 27,000 US jobs in 2012.

“And we love it,” Keen says. “We all use Amazon. We strike this Faustian deal. It’s ultra-convenient, fantastic service, great interface, absurdly cheap prices. But what’s the cost? Truly appalling working conditions; we know this. Deep hostility to unions. A massive impact on independent retail; in books, savage bullying of publishers. This is back to the early years of the 19th century. But we’re seduced into thinking it’s good; Amazon has told us what we want to hear. Bezos says, ‘This is about you, the consumer.’ The problem is, we’re not just consumers. We’re citizens, too.”

Read the entire article here.

Image: Visualization of routing paths through a portion of the Internet. Courtesy of the Opte Project.

Idea Soup

Are Most CEOs Talented or Lucky?

According to Harold G. Hamm, founder and CEO of Continental Resources, most CEOs are lucky not talented. You see, Hamm’s net worth has reached around $18 billion and in recent divorce filings he claims to only have been responsible for generating around 10 percent of this wealth since founding his company in 1988. Interestingly, even though he made most of the key company appointments and oversaw all the key business decisions, he seems to be rather reticent in claiming much of the company’s success as his own. Strange then that his company  would compensate him to the tune of around $43 million during 2006-2013 for essentially being a lucky slacker!

This, of course, enables him to minimize the amount owed to his ex-wife. Thus, one has to surmise from these shenanigans that some CEOs are not only merely lucky, they’re also stupid.

On a broader note this does raise the question of why many CEOs are rewarded such extraordinary sums when it’s mostly luck guiding their company’s progress!

From NYT:

The divorce of the oil billionaire Harold G. Hamm from Sue Ann Arnall has gained attention largely for its outsize dollar amounts. Mr. Hamm, the chief executive and founder of Continental Resources, who was worth more than $18 billion at one point, wrote his ex-wife a check last month for $974,790,317.77 to settle their split. She’s appealing to get more; he’s appealing to pay less.

Yet beyond the staggering sums, the Hamm divorce raises a fundamental question about the wealth of executives and entrepreneurs: How much do they owe their fortunes to skill and hard work, and how much comes from happenstance and luck?

Mr. Hamm, seeking to exploit a wrinkle in divorce law, made the unusual argument that his wealth came largely from forces outside his control, like global oil prices, the expertise of his deputies and other people’s technology. During the nine-week divorce trial, his lawyers claimed that although Mr. Hamm had founded Continental Resources and led the company to become a multibillion-dollar energy giant, he was responsible for less than 10 percent of his personal and corporate success.

Some in the courtroom started calling it the “Jed Clampett defense,” after the lead character in “The Beverly Hillbillies” TV series who got rich after tapping a gusher in his swampland.

In a filing last month supporting his appeal, Mr. Hamm cites the recent drop in oil prices and subsequent 50 percent drop in Continental’s share price and his fortune as further proof that forces outside his control direct his company’s fortunes.

Lawyers for Ms. Arnall argue that Mr. Hamm is responsible for more than 90 percent of his fortune.

While rooted in a messy divorce, the dispute frames a philosophical and ethical debate over inequality and the obligations of the wealthy. If wealth comes mainly from luck or circumstance, many say the wealthy owe a greater debt to society in the form of taxes or charity. If wealth comes from skill and hard work, perhaps higher taxes would discourage that effort.

Sorting out what value is created by luck or skill is a tricky proposition in itself. The limited amount of academic research on the topic, which mainly looks at how executives can influence a company’s value, has often found that broader market forces often have a bigger impact on a company’s success than an executive’s actions.

“As we know from the research, the performance of a large firm is due primarily to things outside the control of the top executive,” said J. Scott Armstrong, a professor at the Wharton School at the University of Pennsylvania. “We call that luck. Executives freely admit this — when they encounter bad luck.”

A study conducted from 1992 to 2011 of how C.E.O. compensation changed in response to luck or events beyond the executives’ control showed that their pay was 25 percent higher when luck favored the C.E.O.

Some management experts say the role of luck is nearly impossible to measure because it depends on the particular industry. Oil, for instance, is especially sensitive to outside forces.

“Within any industry, a more talented management team is going to tend to do better,” said Steven Neil Kaplan of the University of Chicago Booth School of Business. “That is why investors and boards of directors look for the best talent to run their companies. That is why company stock prices often move a lot, in both directions, when a C.E.O. dies or a new C.E.O. is hired.”

The Hamm case hinged on a quirk in divorce law known as “active versus passive appreciation.” In Oklahoma, and many other states, if a spouse owns an asset before the marriage, the increase in the value of an asset during marriage is not subject to division if the increase was because of “passive” appreciation. Passive appreciation is when an asset grows on its own because of factors outside either spouse’s control, like land that appreciates without any improvements or passively held stocks. Any value that’s not deemed as “passive” is considered “active” — meaning it increased because of the efforts, skills or funding of a spouse and can therefore be subject to division in a divorce.

The issue has been at the center of some other big divorces. In the 2002 divorce of the Chicago taxi magnate David Markin and Susan Markin, filed in Palm Beach, Fla., Mr. Markin claimed he was “merely a passenger on this corporate ship traveling through the ocean,” according to the judge. But he ruled that Mr. Markin was more like “the captain of the ship. Certainly he benefited by sailing through some good weather. However, he picked the course and he picked the crew. In short, he was directly responsible for everything that happened.” Ms. Markin was awarded more than $30 million, along with other assets.

Mr. Hamm, now 69, also had favorable conditions after founding Continental Resources well before his marriage in 1988 to Sue Ann, then a lawyer at the company. By this fall, when the trial ended, Continental had a market capitalization of over $30 billion; Mr. Hamm’s stake of 68 percent and other wealth exceeded $18 billion.

Their divorce trial was closed to the public, and all but a few of the documents are under seal. Neither Mr. Hamm nor his lawyers or representatives would comment. Ms. Arnall and her spokesman also declined to comment.

According to people with knowledge of the case, however, Mr. Hamm’s chief strategy was to claim most of his wealth as passive appreciation, and therefore not subject to division. During his testimony, the typically commanding Mr. Hamm, who had been the face of the company for decades, said he couldn’t recall certain decisions, didn’t know much about the engineering aspects of oil drilling and didn’t attend critical meetings.

Mr. Hamm’s lawyers calculated that only 5 to 10 percent of his wealth came from his own effort, skill, management or investment. It’s unclear how they squared this argument with his compensation, which totaled $42.7 million from 2006 to 2013, according to Equilar, an executive compensation data company.

Ms. Arnall called more than 80 witnesses — from Continental executives to leading economists like Glenn Hubbard and Kenneth Button — to show how much better Continental had done than its peers and that Mr. Hamm made most or all of the key decisions about the company’s strategy, finances and operations. They estimated that Mr. Hamm was responsible for $14 billion to $17 billion of his $18 billion fortune.

Read the entire article here.

 

tD, Technica

FCC Flexes Title II

US-FCC-Seal.svgChairman of the US Federal Communications Commission (FCC) was once beholden to the pseudo-monopolies that are cable and wireless providers. Now, he seems to be fighting to keep the internet fair, neutral and open — for consumers. Hard to believe. But, let’s face it, if Comcast and other telecoms behemoths are against Wheeler’s proposal then it must be good for consumer.

From Wired:

After more than a decade of debate and a record-setting proceeding that attracted nearly 4 million public comments, the time to settle the Net Neutrality question has arrived. This week, I will circulate to the members of the Federal Communications Commission (FCC) proposed new rules to preserve the internet as an open platform for innovation and free expression. This proposal is rooted in long-standing regulatory principles, marketplace experience, and public input received over the last several months.

Broadband network operators have an understandable motivation to manage their network to maximize their business interests. But their actions may not always be optimal for network users. The Congress gave the FCC broad authority to update its rules to reflect changes in technology and marketplace behavior in a way that protects consumers. Over the years, the Commission has used this authority to the public’s great benefit.

The internet wouldn’t have emerged as it did, for instance, if the FCC hadn’t mandated open access for network equipment in the late 1960s. Before then, AT&T prohibited anyone from attaching non-AT&T equipment to the network. The modems that enabled the internet were usable only because the FCC required the network to be open.

Companies such as AOL were able to grow in the early days of home computing because these modems gave them access to the open telephone network.

I personally learned the importance of open networks the hard way. In the mid-1980s I was president of a startup, NABU: The Home Computer Network. My company was using new technology to deliver high-speed data to home computers over cable television lines. Across town Steve Case was starting what became AOL. NABU was delivering service at the then-blazing speed of 1.5 megabits per second—hundreds of times faster than Case’s company. “We used to worry about you a lot,” Case told me years later.

But NABU went broke while AOL became very successful. Why that is highlights the fundamental problem with allowing networks to act as gatekeepers.

While delivering better service, NABU had to depend on cable television operators granting access to their systems. Steve Case was not only a brilliant entrepreneur, but he also had access to an unlimited number of customers nationwide who only had to attach a modem to their phone line to receive his service. The phone network was open whereas the cable networks were closed. End of story.

The phone network’s openness did not happen by accident, but by FCC rule. How we precisely deliver that kind of openness for America’s broadband networks has been the subject of a debate over the last several months.

Originally, I believed that the FCC could assure internet openness through a determination of “commercial reasonableness” under Section 706 of the Telecommunications Act of 1996. While a recent court decision seemed to draw a roadmap for using this approach, I became concerned that this relatively new concept might, down the road, be interpreted to mean what is reasonable for commercial interests, not consumers.

That is why I am proposing that the FCC use its Title II authority to implement and enforce open internet protections.

Using this authority, I am submitting to my colleagues the strongest open internet protections ever proposed by the FCC. These enforceable, bright-line rules will ban paid prioritization, and the blocking and throttling of lawful content and services. I propose to fully apply—for the first time ever—those bright-line rules to mobile broadband. My proposal assures the rights of internet users to go where they want, when they want, and the rights of innovators to introduce new products without asking anyone’s permission.

All of this can be accomplished while encouraging investment in broadband networks. To preserve incentives for broadband operators to invest in their networks, my proposal will modernize Title II, tailoring it for the 21st century, in order to provide returns necessary to construct competitive networks. For example, there will be no rate regulation, no tariffs, no last-mile unbundling. Over the last 21 years, the wireless industry has invested almost $300 billion under similar rules, proving that modernized Title II regulation can encourage investment and competition.

Congress wisely gave the FCC the power to update its rules to keep pace with innovation. Under that authority my proposal includes a general conduct rule that can be used to stop new and novel threats to the internet. This means the action we take will be strong enough and flexible enough not only to deal with the realities of today, but also to establish ground rules for the as yet unimagined.

The internet must be fast, fair and open. That is the message I’ve heard from consumers and innovators across this nation. That is the principle that has enabled the internet to become an unprecedented platform for innovation and human expression. And that is the lesson I learned heading a tech startup at the dawn of the internet age. The proposal I present to the commission will ensure the internet remains open, now and in the future, for all Americans.

Read the entire article here.

Image: Official US FCC government seal.

BigBang, Technica

A Higher Purpose

In a fascinating essay, excerpted below, Michael Malone wonders if the tech gurus of Silicon Valley should be solving bigger problems. We see venture capitalists scrambling over one another to find the next viral, mobile app — perhaps one that automatically writes your tweets, or one that vibrates your smartphone if you say too many bad words. Should our capital markets — now with an attention span of 15 seconds — reward the so-called innovators of these so-called essential apps with millions or even billions in company valuations?

Shouldn’t Silicon Valley be tackling the hard problems? Wouldn’t humanity be better served, not from a new killer SnapChat replacement app, but from more efficient reverse osmosis; mitigation for Alzheimer’s (and all sundry of other chronic ailments); progress with alternative energy sources and more efficient energy sinks; next generation antibiotics; ridding the world of land-mines; growing and delivering nutritious food to those who need it most? Admittedly, these are some hard problems. But, isn’t that the point!

From Technology Review:

The view from Mike Steep’s office on Palo Alto’s Coyote Hill is one of the greatest in Silicon Valley.

Beyond the black and rosewood office furniture, the two large computer monitors, and three Indonesian artifacts to ward off evil spirits, Steep looks out onto a panorama stretching from Redwood City to Santa Clara. This is the historic Silicon Valley, the birthplace of Hewlett-Packard and Fairchild Semiconductor, Intel and Atari, Netscape and Google. This is the home of innovations that have shaped the modern world. So is Steep’s employer: Xerox’s Palo Alto Research Center, or PARC, where personal computing and key computer-­networking technologies were invented, and where he is senior vice president of global business operations.

And yet Mike Steep is disappointed at what he sees out the windows.

“I see a community that acts like it knows where it’s going, but that seems to have its head in the sand,” he says. He gestures towards the Hewlett-Packard headquarters a few blocks away and Hoover Tower at Stanford University. “This town used to think big—the integrated circuit, personal computers, the Internet. Are we really leveraging all that intellectual power and creativity creating Instagram and dating apps? Is this truly going to change the world?”

After spending years at Microsoft, HP, and Apple, Steep joined PARC in 2013 to help the legendary ideas factory better capitalize on its work. As part of the job, he travels around the world visiting R&D executives in dozens of big companies, and increasingly he worries that the Valley will become irrelevant to them. Steep is one of 22 tech executives on a board the mayor of London set up to promote a “smart city”; they advise officials on how to allocate hundreds of millions of pounds for projects that would combine physical infrastructure such as new high-speed rail with sensors, databases, and analytics. “I know for a fact that China and an array of other countries are chasing this project, which will be the template for scores of similar big-city infrastructure projects around the world in years to come,” Steep says. “From the U.S.? IBM. From Silicon Valley? Many in England ask if anyone here has even heard of the London subway project. That’s unbelievable. Why don’t we leverage opportunities like this here in the Valley?”

Steep isn’t alone in asking whether Silicon Valley is devoting far too many resources to easy opportunities in mobile apps and social media at the expense of attacking bigger problems in energy, medicine, and transportation (see Q&A: Peter Thiel). But if you put that argument to many investors and technologists here, you get a reasonable comeback: has Silicon Valley really ever set out to directly address big problems? In fact, the classic Valley approach has been to size up which technologies it can quickly and ambitiously advance, and then let the world make of them what it will. That is how we got Facebook and Google, and it’s why the Valley’s clean-tech affair was a short-lived mismatch. And as many people point out with classic Silicon Valley confidence, the kind of work that made the area great is still going on in abundance.

The next wave

A small group of executives, surrounded by hundreds of bottles of wine, sits in the private dining room at Bella Vita, an Italian restaurant in Los Altos’s picturesque downtown of expensive tiny shops. Within a few miles, one can find the site of the original Fairchild Semiconductor, Steve Jobs’s house, and the saloon where Nolan Bushnell set up the first Atari game. The host of this gathering is Carl Guardino, CEO of the Silicon Valley Leadership Group, an industry association dedicated to the economic health of the Valley. The 400 organizations that belong to the group are mostly companies that were founded long before the mobile-app craze; only 10 percent are startups. That is evident at this dinner, to which Guardino has invited three of his board members: Steve Berglund, CEO of Trimble, a maker of GPS equipment; Tom Werner, CEO of the solar provider SunPower; and Greg Becker, CEO of Silicon Valley Bank.

These are people who, like Steep, spend much of their time meeting with people in governments and other companies. Asked whether the Valley is falling out of touch with what the world really needs, each disagrees, vehemently. They are almost surprised by the question. “This is the most adaptive and flexible business community on the planet,” says Becker. “It is always about innovation—and going where the opportunity leads next. If you’re worried that the Valley is overpursuing one market or another, then just wait a while and it will change direction again. That’s what we are all about.”

“This is the center of world capitalism, and capitalism is always in flux,” Werner adds. “Are there too many social-­networking and app companies out there right now? Probably. But what makes you think it’s going to stay that way for long? We have always undergone corrections. It’s the nature of who we are … But we’ll come out stronger than ever, and in a whole different set of markets and new technologies. This will still be the best place on the planet for innovation.”

Berglund contends that a generational change already under way will reduce the emphasis on apps. “Young people don’t seem to care as much about code as their generational elders,” he says. “They want to build things—stuff like robots and drones. Just go to the Maker Faire and watch them. They’re going to take this valley in a whole different direction.”

Berglund could be right. In the first half of 2014, according to CB Insights, Internet startups were the leading recipient of venture investment in San Francisco and Silicon Valley (the area got half of the U.S. total; New York was second at 10 percent). But investment in the Internet sector accounted for 59 percent of the total, down from a peak of 68 percent in 2011.

Doug Henton, who heads the consulting firm Collaborative Economics and oversaw an upcoming research report on the state of the Valley, argues that since 1950 the area has experienced five technological waves. Each has lasted about 10 to 20 years and encompassed a frenzy followed by a crash and shakeout and then a mature “deployment period.” Henton has identified these waves as defense (1950s and 1960s), integrated circuits (1960s and 1970s), personal computers (1970s and 1980s), Internet (1990s), and social media (2000s and 2010s). By these lights, the social-media wave, however dominant it is in the public eye, soon may be replaced by another wave. Henton suggests that it’s likely to involve the combination of software, hardware, and sensors in wearable devices and the “Internet of things.”

Read the entire essay here.

Idea Soup, Technica

Silicon Death Valley

boo-com

Have you ever wondered what happens to the 99 percent of Silicon Valley startups that don’t make billionaires (or even millionaires) of their founders? It’s not all milk and honey in the land of sunshine. After all, for every Google or Facebook there are hundreds of humiliating failures — think: Webvan, Boo.com, Pets.com. Beautyjungle.com, Boxman, Flooz, eToys.

The valley’s venture capitalists tend to bury their business failures rather quietly, careful not to taint their reputations as omnipotent, infallible futurists. From the ashes of these failures some employees move on to well-established corporate serfdom and others find fresh challenges at new startups. But there is a fascinating middle-ground, between success and failure — an entrepreneurial twilight zone populated by zombie businesses.

From the Guardian:

It is probably Silicon Valley’s most striking mantra: “Fail fast, fail often.” It is recited at technology conferences, pinned to company walls, bandied in conversation.

Failure is not only invoked but celebrated. Entrepreneurs give speeches detailing their misfires. Academics laud the virtue of making mistakes. FailCon, a conference about “embracing failure”, launched in San Francisco in 2009 and is now an annual event, with technology hubs in Barcelona, Tokyo, Porto Alegre and elsewhere hosting their own versions.

While the rest of the world recoils at failure, in other words, technology’s dynamic innovators enshrine it as a rite of passage en route to success.

But what about those tech entrepreneurs who lose – and keep on losing? What about those who start one company after another, refine pitches, tweak products, pivot strategies, reinvent themselves … and never succeed? What about the angst masked behind upbeat facades?

Silicon Valley is increasingly asking such questions, even as the tech boom rewards some startups with billion-dollar valuations, sprinkling stardust on founders who talk of changing the world.

“It’s frustrating if you’re trying and trying and all you read about is how much money Airbnb and Uber are making,” said Johnny Chin, 28, who endured three startup flops but is hopeful for his fourth attempt. “The way startups are portrayed, everything seems an overnight success, but that’s a disconnect from reality. There can be a psychic toll.”

It has never been easier or cheaper to launch a company in the hothouse of ambition, money and software that stretches from San Francisco to Cupertino, Mountain View, Menlo Park and San Jose.

In 2012 the number of seed investment deals in US tech reportedly more than tripled, to 1,700, from three years earlier. Investment bankers are quitting Wall Street for Silicon Valley, lured by hopes of a cooler and more creative way to get rich.

Most startups fail. However many entrepreneurs still overestimate the chances of success – and the cost of failure.

Some estimates put the failure rate at 90% – on a par with small businesses in other sectors. A similar proportion of alumni from Y Combinator, a legendary incubator which mentors bright prospects, are said to also struggle.

Companies typically die around 20 months after their last financing round and after having raised $1.3m, according to a study by the analytics firms CB Insights titled The RIP Report – startup death trends.

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Failure is difficult to quantify because it does not necessarily mean liquidation. Many startups limp on for years, ignored by the market but sustained by founders’ savings or investors.

“We call them the walking dead,” said one manager at a tech behemoth, who requested anonymity. “They don’t necessarily die. They putter along.”

Software engineers employed by such zombies face a choice. Stay in hope the company will take off, turning stock options into gold. Or quit and take one of the plentiful jobs at other startups or giants like Apple and Google.

Founders face a more agonising dilemma. Continue working 100-hour weeks and telling employees and investors their dream is alive, that the metrics are improving, and hope it’s true, or pull the plug.

The loss aversion principle – the human tendency to strongly prefer avoiding losses to acquiring gains – tilts many towards the former, said Bruno Bowden, a former engineering manager at Google who is now a venture investor and entrepreneur.

“People will do a lot of irrational things to avoid losing even if it’s to their detriment. You push and push and exhaust yourself.”

Silicon Valley wannabes tell origin fables of startup founders who maxed out credit cards before dazzling Wall Street, the same way Hollywood’s struggling actors find solace in the fact Brad Pitt dressed as a chicken for El Pollo Loco before his breakthrough.

“It’s painful to be one of the walking dead. You lie to yourself and mask what’s not working. You amplify little wins,” said Chin, who eventually abandoned startups which offered micro, specialised versions of Amazon and Yelp.

That startup founders were Silicon Valley’s “cool kids”, glamorous buccaneers compared to engineers and corporate drones, could make failure tricky to recognise, let alone accept, he said. “People are very encouraging. Everything is amazing, cool, awesome. But then they go home and don’t use your product.”

Chin is bullish about his new company, Bannerman, an Uber-type service for event security and bodyguards, and has no regrets about rolling the tech dice. “I love what I do. I couldn’t do anything else.”

Read the entire story here.

Image: Boo.com, 1999. Courtesy of the WayBackMachine, Internet Archive.

Idea Soup

The Sandwich of Corporate Exploitation

Google-search-sandwich

If ever you needed a vivid example of corporate exploitation of the most vulnerable, this is it. So-called free-marketeers will sneer at any suggestion of corporate over-reach — they will chant that it’s just the free market at work. But, the rules of this market,
as are many others, are written and enforced by the patricians and well-stacked against the plebs.

From NYT:

If you are a chief executive of a large company, you very likely have a noncompete clause in your contract, preventing you from jumping ship to a competitor until some period has elapsed. Likewise if you are a top engineer or product designer, holding your company’s most valuable intellectual property between your ears.

And you also probably have a noncompete agreement if you assemble sandwiches at Jimmy John’s sub sandwich chain for a living.

But what’s most startling about that information, first reported by The Huffington Post, is that it really isn’t all that uncommon. As my colleague Steven Greenhouse reported this year, employers are now insisting that workers in a surprising variety of relatively low- and moderate-paid jobs sign noncompete agreements.

Indeed, while HuffPo has no evidence that Jimmy John’s, a 2,000-location sandwich chain, ever tried to enforce the agreement to prevent some $8-an-hour sandwich maker or delivery driver from taking a job at the Blimpie down the road, there are other cases where low-paid or entry-level workers have had an employer try to restrict their employability elsewhere. The Times article tells of a camp counselor and a hair stylist who faced such restrictions.

American businesses are paying out a historically low proportion of their income in the form of wages and salaries. But the Jimmy John’s employment agreement is one small piece of evidence that workers, especially those without advanced skills, are also facing various practices and procedures that leave them worse off, even apart from what their official hourly pay might be. Collectively they tilt the playing field toward the owners of businesses and away from the workers who staff them.

You see it in disputes like the one heading to the Supreme Court over whether workers at an Amazon warehouse in Nevada must be paid for the time they wait to be screened at the end of the workday to ensure they have no stolen goods on them.

It’s evident in continuing lawsuits against Federal Express claiming that its “independent contractors” who deliver packages are in fact employees who are entitled to benefits and reimbursements of costs they incur.

And it is shown in the way many retailers assign hourly workers inconvenient schedules that can change at the last minute, giving them little ability to plan their lives (my colleague Jodi Kantor wrote memorably about the human effects of those policies on a Starbucks coffee worker in August, and Starbucks rapidly said it would end many of them).

These stories all expose the subtle ways that employers extract more value from their entry-level workers, at the cost of their quality of life (or, in the case of the noncompete agreements, freedom to leave for a more lucrative offer).

What’s striking about some of these labor practices is the absence of reciprocity. When a top executive agrees to a noncompete clause in a contract, it is typically the product of a negotiation in which there is some symmetry: The executive isn’t allowed to quit for a competitor, but he or she is guaranteed to be paid for the length of the contract even if fired.

Read the entire story here.

Image courtesy of Google Search.

Idea Soup

An Ode to the Monopolist

Peter Thiel on why entrepreneurs should strive for monopoly and avoid competition. If only it were that simple for esoteric restaurants, innovative technology companies and all startup businesses in between.

From WSJ:

What valuable company is nobody building? This question is harder than it looks, because your company could create a lot of value without becoming very valuable itself. Creating value isn’t enough—you also need to capture some of the value you create.

This means that even very big businesses can be bad businesses. For example, U.S. airline companies serve millions of passengers and create hundreds of billions of dollars of value each year. But in 2012, when the average airfare each way was $178, the airlines made only 37 cents per passenger trip. Compare them to Google which creates less value but captures far more. Google brought in $50 billion in 2012 (versus $160 billion for the airlines), but it kept 21% of those revenues as profits—more than 100 times the airline industry’s profit margin that year. Google makes so much money that it is now worth three times more than every U.S. airline combined.

The airlines compete with each other, but Google stands alone. Economists use two simplified models to explain the difference: perfect competition and monopoly.

“Perfect competition” is considered both the ideal and the default state in Economics 101. So-called perfectly competitive markets achieve equilibrium when producer supply meets consumer demand. Every firm in a competitive market is undifferentiated and sells the same homogeneous products. Since no firm has any market power, they must all sell at whatever price the market determines. If there is money to be made, new firms will enter the market, increase supply, drive prices down and thereby eliminate the profits that attracted them in the first place. If too many firms enter the market, they’ll suffer losses, some will fold, and prices will rise back to sustainable levels. Under perfect competition, in the long run no company makes an economic profit.

The opposite of perfect competition is monopoly. Whereas a competitive firm must sell at the market price, a monopoly owns its market, so it can set its own prices. Since it has no competition, it produces at the quantity and price combination that maximizes its profits.

To an economist, every monopoly looks the same, whether it deviously eliminates rivals, secures a license from the state or innovates its way to the top. I’m not interested in illegal bullies or government favorites: By “monopoly,” I mean the kind of company that is so good at what it does that no other firm can offer a close substitute. Google is a good example of a company that went from 0 to 1: It hasn’t competed in search since the early 2000s, when it definitively distanced itself from Microsoft and Yahoo!

Americans mythologize competition and credit it with saving us from socialist bread lines. Actually, capitalism and competition are opposites. Capitalism is premised on the accumulation of capital, but under perfect competition, all profits get competed away. The lesson for entrepreneurs is clear: If you want to create and capture lasting value, don’t build an undifferentiated commodity business.

How much of the world is actually monopolistic? How much is truly competitive? It is hard to say because our common conversation about these matters is so confused. To the outside observer, all businesses can seem reasonably alike, so it is easy to perceive only small differences between them. But the reality is much more binary than that. There is an enormous difference between perfect competition and monopoly, and most businesses are much closer to one extreme than we commonly realize.

The confusion comes from a universal bias for describing market conditions in self-serving ways: Both monopolists and competitors are incentivized to bend the truth.

Monopolists lie to protect themselves. They know that bragging about their great monopoly invites being audited, scrutinized and attacked. Since they very much want their monopoly profits to continue unmolested, they tend to do whatever they can to conceal their monopoly—usually by exaggerating the power of their (nonexistent) competition.

Think about how Google talks about its business. It certainly doesn’t claim to be a monopoly. But is it one? Well, it depends: a monopoly in what? Let’s say that Google is primarily a search engine. As of May 2014, it owns about 68% of the search market. (Its closest competitors, Microsoft and Yahoo! have about 19% and 10%, respectively.) If that doesn’t seem dominant enough, consider the fact that the word “google” is now an official entry in the Oxford English Dictionary—as a verb. Don’t hold your breath waiting for that to happen to Bing.

But suppose we say that Google is primarily an advertising company. That changes things. The U.S. search-engine advertising market is $17 billion annually. Online advertising is $37 billion annually. The entire U.S. advertising market is $150 billion. And global advertising is a $495 billion market. So even if Google completely monopolized U.S. search-engine advertising, it would own just 3.4% of the global advertising market. From this angle, Google looks like a small player in a competitive world.

What if we frame Google as a multifaceted technology company instead? This seems reasonable enough; in addition to its search engine, Google makes dozens of other software products, not to mention robotic cars, Android phones and wearable computers. But 95% of Google’s revenue comes from search advertising; its other products generated just $2.35 billion in 2012 and its consumer-tech products a mere fraction of that. Since consumer tech is a $964 billion market globally, Google owns less than 0.24% of it—a far cry from relevance, let alone monopoly. Framing itself as just another tech company allows Google to escape all sorts of unwanted attention.

Non-monopolists tell the opposite lie: “We’re in a league of our own.” Entrepreneurs are always biased to understate the scale of competition, but that is the biggest mistake a startup can make. The fatal temptation is to describe your market extremely narrowly so that you dominate it by definition.

Read the entire article here.

Idea Soup

The Idea Shower and The Strategic Staircase

Every now and then we visit the world of corporatespeak to see how business jargon is faring: which words are in, which phrases are out. Unfortunately, many of the most used and over-used still find their way into common office parlance. With apologies to our state-side readers some of the most popular British phrases follow, and, no surprise, many of these cringeworthy euphemisms seem to emanate from the U.S. Ugh!

From the Guardian:

I don’t know about you, but I’m a sucker for a bit of joined up, blue sky thinking. I love nothing more than the opportunity to touch base with my boss first thing on a Monday morning. It gives me that 24 carat feeling.

I apologise for the sarcasm, but management speak makes most people want to staple the boss’s tongue to the desk. A straw poll around my office found jargon is seen by staff as a tool for making something seem more impressive than it actually is.

The Plain English Campaign says that many staff working for big corporate organisations find themselves using management speak as a way of disguising the fact that they haven’t done their job properly. Some people think that it is easy to bluff their way through by using long, impressive-sounding words and phrases, even if they don’t know what they mean, which is telling in itself.

Furthermore, a recent survey by Institute of Leadership & Management, revealed that management speak is used in almost two thirds (64%) of offices, with nearly a quarter (23%) considering it to be a pointless irritation. “Thinking outside the box” (57%), “going forward” (55%) and “let’s touch base” (39%) were identified as the top three most overused pieces of jargon.

Walk through any office and you’ll hear this kind of thing going on every day. Here are some of the most irritating euphemisms doing the rounds:

Helicopter view – need a phrase that means broad overview of the business? Then why not say “a broad view of the business”?

Idea shower – brainstorm might be out of fashion, but surely we can thought cascade something better than this drivel.

Touch base offline – meaning let’s meet and talk. Because, contrary to popular belief, it is possible to communicate without a Wi-Fi signal. No, really, it is. Fancy a coffee?

Low hanging fruit – easy win business. This would be perfect for hungry children in orchards, but what is really happening is an admission that you don’t want to take the complicated route.

Look under the bonnet – analyse a situation. Most people wouldn’t have a clue about a car engine. When I look under a car bonnet I scratch my head, try not to look like I haven’t got a clue, jiggle a few pipes and kick the tyres before handing the job over to a qualified professional.

Get all your ducks in a row – be organised. Bert and Ernie from Sesame Street had an obsession with rubber ducks. You may think I’m disorganised, but there’s no need to talk to me like a five-year-old.

Don’t let the grass grow too long on this one – work fast. I’m looking for a polite way of suggesting that you get off your backside and get on with it.

Not enough bandwidth – too busy. Really? Try upgrading to fibre optics. I reckon I know a few people who haven’t been blessed with enough “bandwidth” and it’s got nothing to do with being busy.

Cascading relevant information – speaking to your colleagues. If anything, this is worse than touching base offline. From the flourish of cascading through to relevant, and onto information – this is complete nonsense.

The strategic staircase – business plan. Thanks, but I’ll take the lift.

Run it up the flagpole – try it out. Could you attach yourself while you’re at it?

Read the entire story here.

BigBang

Defying Enemy Number One

Sir_Isaac_NewtonEnemy number one in this case is not your favorite team’s arch-rival or your political nemesis or your neighbor’s nocturnal barking dog. It is not sugar, nor is it trans-fat. Enemy number one is not North Korea (close),  nor is it the latest group of murderous  terrorists  (closer).

The real enemy is gravity. Not the movie, that is, but the natural phenomenon.

Gravity is constricting: it anchors us to our measly home  planet, making extra-terrestrial exploration rather difficult. Gravity is painful: it drags us down, it makes us fall — and when we’re down , it helps other things fall on top  of us. Gravity is an enigma.

But help may not be too distant; enter The Gravity Research Foundation. While the foundation’s mission may no longer be to counteract gravity, it still aims to help us better understand.

From the NYT:

Not long after the bombings of Hiroshima and Nagasaki, while the world was reckoning with the specter of nuclear energy, a businessman named Roger Babson was worrying about another of nature’s forces: gravity.

It had been 55 years since his sister Edith drowned in the Annisquam River, in Gloucester, Mass., when gravity, as Babson later described it, “came up and seized her like a dragon and brought her to the bottom.” Later on, the dragon took his grandson, too, as he tried to save a friend during a boating mishap.

Something had to be done.

“It seems as if there must be discovered some partial insulator of gravity which could be used to save millions of lives and prevent accidents,” Babson wrote in a manifesto, “Gravity — Our Enemy Number One.” In 1949, drawing on his considerable wealth, he started the Gravity Research Foundation and began awarding annual cash prizes for the best new ideas for furthering his cause.

It turned out to be a hopeless one. By the time the 2014 awards were announced last month, the foundation was no longer hoping to counteract gravity — it forms the very architecture of space-time — but to better understand it. What began as a crank endeavor has become mainstream. Over the years, winners of the prizes have included the likes of Stephen Hawking, Freeman Dyson, Roger Penrose and Martin Rees.

With his theory of general relativity, Einstein described gravity with an elegance that has not been surpassed. A mass like the sun makes the universe bend, causing smaller masses like planets to move toward it.

The problem is that nature’s other three forces are described in an entirely different way, by quantum mechanics. In this system forces are conveyed by particles. Photons, the most familiar example, are the carriers of light. For many scientists, the ultimate prize would be proof that gravity is carried by gravitons, allowing it to mesh neatly with the rest of the machine.

So far that has been as insurmountable as Babson’s old dream. After nearly a century of trying, the best physicists have come up with is superstring theory, a self-consistent but possibly hollow body of mathematics that depends on the existence of extra dimensions and implies that our universe is one of a multitude, each unknowable to the rest.

With all the accomplishments our species has achieved, we could be forgiven for concluding that we have reached a dead end. But human nature compels us to go on.

This year’s top gravity prize of $4,000 went to Lawrence Krauss and Frank Wilczek. Dr. Wilczek shared a Nobel Prize in 2004 for his part in developing the theory of the strong nuclear force, the one that holds quarks together and forms the cores of atoms.

So far gravitons have eluded science’s best detectors, like LIGO, the Laser Interferometer Gravitational-Wave Observatory. Mr. Dyson suggested at a recent talk that the search might be futile, requiring an instrument with mirrors so massive that they would collapse to form a black hole — gravity defeating its own understanding. But in their paper Dr. Krauss and Dr. Wilczek suggest how gravitons might leave their mark on cosmic background radiation, the afterglow of the Big Bang.

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There are other mysteries to contend with. Despite the toll it took on Babson’s family, theorists remain puzzled over why gravity is so much weaker than electromagnetism. Hold a refrigerator magnet over a paper clip, and it will fly upward and away from Earth’s pull.

Reaching for an explanation, the physicists Lisa Randall and Raman Sundrum once proposed that gravity is diluted because it leaks into a parallel universe. Striking off in a different direction, Dr. Randall and another colleague, Matthew Reece, recently speculated that the pull of a disk of dark matter might be responsible for jostling the solar system and unleashing periodic comet storms like one that might have killed off the dinosaurs.

It was a young theorist named Bryce DeWitt who helped disabuse Babson of his dream of stopping such a mighty force. In “The Perfect Theory,” a new book about general relativity, the Oxford astrophysicist Pedro G. Ferreira tells how DeWitt, in need of a down payment for a house, entered the Gravitational Research Foundation’s competition in 1953 with a paper showing why the attempt to make any kind of antigravity device was “a waste of time.”

He won the prize, the foundation became more respectable, and DeWitt went on to become one of the most prominent theorists of general relativity. Babson, however, was not entirely deterred. In 1962 after more than 100 prominent Atlantans were killed in a plane crash in Paris, he donated $5,000 to Emory University along with a marble monument “to remind students of the blessings forthcoming” once gravity is counteracted.

He paid for similar antigravity monuments at more than a dozen campuses, including one at Tufts University, where newly minted doctoral students in cosmology kneel before it in a ceremony in which an apple is dropped on their heads.

I thought of Babson recently during a poignant scene in the movie “Gravity,” in which two astronauts are floating high above Earth, stranded from home. During a moment of calm, one of them, Lt. Matt Kowalski (played by George Clooney), asks the other, Dr. Ryan Stone (Sandra Bullock), “What do you miss down there?”

She tells him about her daughter:

“She was 4. She was at school playing tag, slipped and hit her head, and that was it. The stupidest thing.” It was gravity that did her in.

Read the entire article here.

Image: Portrait of Isaac Newton (1642-1727) by  Sir Godfrey Kneller (1646–1723). Courtesy of Wikipedia.

Idea Soup

Life and Death: Sharing Startups

The great cycle of re-invention spawned by the Internet and mobile technologies continues apace. This time it’s the entrepreneurial businesses laying the foundation for the sharing economy — whether that be beds, room, clothes, tuition, bicycles or cars. A few succeed to become great new businesses; most fail.

From the WSJ:

A few high-profile “sharing-economy” startups are gaining quick traction with users, including those that let consumers rent apartments and homes like Airbnb Inc., or get car rides, such as Uber Technologies Inc.

Both Airbnb and Uber are valued in the billions of dollars, a sign that investors believe the segment is hot—and a big reason why more entrepreneurs are embracing the business model.

At MassChallenge, a Boston-based program to help early-stage entrepreneurs, about 9% of participants in 2013 were starting companies to connect consumers or businesses with products and services that would otherwise go unused. That compares with about 5% in 2010, for instance.

“We’re bullish on the sharing economy, and we’ll definitely make more investments in it,” said Sam Altman, president of Y Combinator, a startup accelerator in Mountain View, Calif., and one of Airbnb’s first investors.

Yet at least a few dozen sharing-economy startups have failed since 2012, including BlackJet, a Florida-based service that touted itself as the “Uber for jet travel,” and Tutorspree, a New York service dubbed the “Airbnb for tutors.” Most ran out of money, following struggles that ranged from difficulties building a critical mass of supply and demand, to higher-than-expected operating costs.

“We ended up being unable to consistently produce a level of demand on par with what we needed to scale rapidly,” said Aaron Harris, co-founder of Tutorspree, which launched in January 2011 and shuttered in August 2013.

“If you have to reacquire the customer every six months, they’ll forget you,” said Howard Morgan, co-founder of First Round Capital, which was an investor in BlackJet. “A private jet ride isn’t something you do every day. If you’re very wealthy, you have your own plane.” By comparison, he added that he recently used Uber’s ride-sharing service three times in one day.

Consider carpooling startup Ridejoy, for example. During its first year in 2011, its user base was growing by about 30% a month, with more than 25,000 riders and drivers signed up, and an estimated 10,000 rides completed, said Kalvin Wang, one of its three founders. But by the spring of 2013, Ridejoy, which had raised $1.3 million from early-stage investors like Freestyle Capital, was facing ferocious competition from free alternatives, such as carpooling forums on college websites.

Also, some riders could—and did—begin to sidestep the middleman. Many skipped paying its 10% transaction fee by handing their drivers cash instead of paying by credit card on Ridejoy’s website or mobile app. Others just didn’t get it, and even 25,000 users wasn’t sufficient to sustain the business. “You never really have enough inventory,” said Mr. Wang.

After it folded in the summer of 2013, Ridejoy returned about half of its funding to investors, according to Mr. Wang. Alexis Ohanian, an entrepreneur in Brooklyn, N.Y., who was an investor in Ridejoy, said it “could just be the timing or execution that was off.” He cited the success so far of Lyft Inc., the two-year-old San Francisco company that is valued at more than $700 million and offers a short-distance ride-sharing service. “It turned out the short rides are what the market really wanted,” Mr. Ohanian said.

One drawback is that because much of the revenue a sharing business generates goes directly back to the suppliers—of bedrooms, parking spots, vehicles or other “shared” assets—the underlying business may be continuously strapped for cash.

Read the entire article here.

BigBang, Technica

The (Space) Explorers Club

clangers

Thirteen private companies recently met in New York city to present their plans and ideas for their commercial space operations. Ranging from space tourism to private exploration of the Moon and asteroid mining the companies gathered at the Explorers Club to herald a new phase of human exploration.

From Technology Review:

It was a rare meeting of minds. Representatives from 13 commercial space companies gathered on May 1 at a place dedicated to going where few have gone before: the Explorers Club in New York.

Amid the mansions and high-end apartment buildings just off Central Park, executives from space-tourism companies, rocket-making startups, and even a business that hopes to make money by mining asteroids for useful materials showed off displays and gave presentations.

The Explorers Club event provided a snapshot of what may be a new industry in the making. In an era when NASA no longer operates manned space missions and government funding for unmanned missions is tight, a host of startups—most funded by space enthusiasts with very deep pockets—have stepped up in hope of filling the gap. In the past few years, several have proved themselves. Elon Musk’s SpaceX, for example, delivers cargo to the International Space Station for NASA. Both Richard Branson’s Virgin Galactic and rocket-plane builder XCOR Aerospace plan to perform demonstrations this year that will help catapult commercial spaceflight from the fringe into the mainstream.

The advancements being made by space companies could matter to more than the few who can afford tickets to space. SpaceX has already shaken incumbents in the $190 billion satellite launch industry by offering cheaper rides into space for communications, mapping, and research satellites.

However, space tourism also looks set to become significantly cheaper. “People don’t have to actually go up for it to impact them,” says David Mindell, an MIT professor of aeronautics and astronautics and a specialist in the history of engineering. “At $200,000 you’ll have a lot more ‘space people’ running around, and over time that could have a big impact.” One direct result, says Mindell, may be increased public support for human spaceflight, especially “when everyone knows someone who’s been into space.”

Along with reporters, Explorer Club members, and members of the public who had paid the $75 to $150 entry fee, several former NASA astronauts were in attendance to lend their endorsements—including the MC for the evening, Michael López-Alegría, veteran of the space shuttle and the ISS. Also on hand, highlighting the changing times with his very presence, was the world’s first second-generation astronaut, Richard Garriott. Garriott’s father flew missions on Skylab and the space shuttle in the 1970s and 1980s, respectively. However, Garriott paid his own way to the International Space Station in 2008 as a private citizen.

The evening was a whirlwind of activity, with customer testimonials and rapid-fire displays of rocket launches, spacecraft in orbit, and space ships under construction and being tested. It all painted a picture of an industry on the move, with multiple companies offering services from suborbital experiences and research opportunities to flights to Earth orbit and beyond.

The event also offered a glimpse at the plans of several key players.

Lauren De Niro Pipher, head of astronaut relations at Virgin Galactic, revealed that the company’s founder plans to fly with his family aboard the Virgin Galactic SpaceShipTwo rocket plane in November or December of this year. The flight will launch the company’s suborbital spaceflight business, for which De Niro Pipher said more than 700 customers have so far put down deposits on tickets costing $200,000 to $250,000.

The director of business development for Blue Origin, Bretton Alexander, announced his company’s intention to begin test flights of its first full-scale vehicle within the next year. “We have not publicly started selling rides in space as others have,” said Alexander during his question-and-answer session. “But that is our plan to do that, and we look forward to doing that, hopefully soon.”

Blue Origin is perhaps the most secretive of the commercial spaceflight companies, typically revealing little of its progress toward the services it plans to offer: suborbital manned spaceflight and, later, orbital flight. Like Virgin, it was founded by a wealthy entrepreneur, in this case Amazon founder Jeff Bezos. The company, which is headquartered in Kent, Washington, has so far conducted at least one supersonic test flight and a test of its escape rocket system, both at its West Texas test center.

Also on hand was the head of Planetary Resources, Chris Lewicki, a former spacecraft engineer and manager for Mars programs at NASA. He showed off a prototype of his company’s Arkyd 100, an asteroid-hunting space telescope the size of a toaster oven. If all goes according to plan, a fleet of Arkyd 100s will first scan the skies from Earth orbit in search of nearby asteroids that might be rich in mineral wealth and water, to be visited by the next generation of Arkyd probes. Water is potentially valuable for future space-based enterprises as rocket fuel (split into its constituent elements of hydrogen and oxygen) and for use in life support systems. Planetary Resources plans to “launch early, launch often,” Lewicki told me after his presentation. To that end, the company is building a series of CubeSat-size spacecraft dubbed Arkyd 3s, to be launched from the International Space Station by the end of this year.

Andrew Antonio, experience manager at a relatively new company, World View Enterprises, showed a computer-generated video of his company’s planned balloon flights to the edge of space. A manned capsule will ascend to 100,000 feet, or about 20 miles up, from which the curvature of Earth and the black sky of space are visible. At $75,000 per ticket (reduced to $65,000 for Explorers Club members), the flight will be more affordable than competing rocket-powered suborbital experiences but won’t go as high. Antonio said his company plans to launch a small test vehicle “in about a month.”

XCOR’s director of payload sales and operations, Khaki Rodway, showed video clips of the company’s Lynx suborbital rocket plane coming together in Mojave, California, as well as a profile of an XCOR spaceflight customer. Hangared just down the flight line at the same air and space port where Virgin Galactic’s SpaceShipTwo is undergoing flight testing, the Lynx offers seating for one paying customer per flight at $95,000. XCOR hopes the Lynx will begin flying by the end of this year.

Read the entire article here.

Image: Still from the Clangers TV show. Courtesy of BBC / Smallfilms.