The Problem of Money

Earlier this week, there is news about another reporter quitting eBay Founder Pierre Omidyar's start-up media organization, First Look Media. Pando covers this with more detail, as the larger story has been something that Paul Carr has been following for a while.

For me, there is another thematic thread here. If you think back to when they were building this organization -- the promises and the prospects -- it was kind of like the story of building a modern dream team of media players. Rock star investigative journalists all pooled together in one old-media crushing modern empire that would rewrite the laws of news and journalism. And the first thing would be to sign these all-star players to big fat new contracts.

As is often the case, fat money is a harbinger of doom. Whether you want to look at sports and the performance of athletes in a contract year versus the year after they sign their fat new contracts or those newly signed top draft picks that never actually turn out to be the next Michael Jordan.

But what's driving the mega-contract opening bid? After all, anyone who's ever bid on eBay knows that you don't open big; instead, you swoop in near the end in an effort to win by inches.

But there's a second part to this equation; what's going on inside of the head of someone that signs one of these huge contracts. On the one hand, as employees negotiating salary, it's often essential to try and get the most money that we can on the way in the door. If it's a long term hire, this number works as a base that will, most likely, be followed with a very low percentage incremental increase year after year. And if the opportunity has a short life span, it's well worth getting what you can from it while you can. That being said, the kind of hire we're talking about here is different.

Like many other Silicon Valley opportunities, when these media people are moving into this new venture, they are going start-up. They stand at the beginning of the road to building something. In the start-up world, this often translates into equity versus salary. Equity versus salary isn't just about money, it's about gambling whether money today is worth more that potential returns down the road. And that, fundamentally, is about belief in the idea, belief in the potential. To buy into return, you must see a future. This isn't like investing money. You have only one of you, one unit of your time and effort that you can commit at a time. Equity is a win or lose investment.

To that end, when you're in for equity, salary matters less because you've already bought in. You've drank the Kool-aid. Which brings us to the second question in this "all-star" relationship -- if you believe in the idea, why would you want or need fat money to make the move? And, more to the point, what does that huge offer say to you?

From the guy with the money to the guys signing on, I don't think that there was ever a shared Kool-aid experience. This has been about guns for hire and the offer you can't refuse. And when you find that kind of offer on the table in front of you, you probably don't want to refuse. Unlike a select few, most of us need an income. But when the fat money comes, remember, you're probably in for a short ride -- don't expect an in-flight meal and no need to bother with the Kool-aid.

Uber and the Business that Isn't That Business

Over the past couple of weeks, I've watched as the various Uber scandals have played in the media. Or rather, I should say, the latest big Uber scandal and it's various associated threads. Several times I've felt compelled to write about the it and the various things that we've either learned or had reinforced over the past two weeks. Here are a few highlights for me:

• Pando Daily gets my consistent reading attention because the writing and analysis is worth it.
• Uber's visible, vocal flaunting of legal and ethical frameworks reminds me a lot of that once-vaunted company, Enron. The market loved them and they could do no wrong when the money machine was rolling, but then it wasn't. The blow-back was Sarbanes-Oxley. Remember this part? 'Taken directly from the act, a code of ethics comprises the standards necessary to promote "honest and ethical conduct; full, fair, accurate, timely and understandable disclosure in periodic reports;" and "compliance with applicable governmental rules and regulations.' Can you imagine the incoming congress fixing anything? Perhaps as long as it includes the option to ignore them for personal or religious grounds.
• Ashton Kutcher. Really? Dude.
• And then there's this, one of the more interesting things that I read about why you might want to consider deleting your Uber app. I know. It's Android, but still.
• I think someone out there could write a long and eloquent post about the ludicrousness of a "sensationalistic" press writing about business

All of that being said, there's still a lot of discussion around how much money is sitting on table in this ridesharing market and whether, ultimately, that money supports an "end justifies the means" approach to business. Here's more analysis on "Why Uber Fights."

For me though, one thing that resonates is how Uber tries to play the "We're not THAT business" card. When facing cities and states with regulations governing taxis and limos, Uber says, "those laws don't apply to us. We're not a taxi company or a limo company. We're just facilitating connections between riders and drivers." And then, when it comes to the behavior of it's drivers, background checks, insurance or any of the other things that might cost money, the drivers are "not employees of Uber, we're just facilitating transactions between a driver and a rider."

Of course, this "outside of the lines of THAT business" approach stand in contrast to actual aspects of their business. For example, there's the blurred line between employee and contractor. Clearly, the goal of having employees be contractors is to escape many of the employer/employee relationship requirements. Similarly, while the company doesn't want to be categorized as a transportation company, a chunk of that investment warchest goes to fund a program where drivers can "borrow money" to buy Uber cars and the company can build out their fleet of "not Uber company" cars.

There are aspects of this approach that enable the company to grow faster, but you can rest assured that a significant percentage of their "not THAT business" approach is to skate between the lines and rules that bind the rest of the business world. It's as though they said, "this limit that says that a limo requires an advanced booking to pick up a passenger is wrong, so all rules are wrong". The reality is that there are reasons why many of these regulations and laws have made their way onto the books. And while the limits on booking a limo might have not kept up with the internet age and deserved disruption, that doesn't equate to all business laws, regulations and limitations being unbreakable.

Being a business that is "not THAT business" is a position that businesses take when they want to try and capitalize on a loophole. "Wouldn't it be nice if we didn't have to worry about this rule or that rule". Like ISPs not being liable for the content going through your broadband connection -- we don't have anything to do with what's going through the pipe until we realized we could make money inserting our ads to your content."

It may be that, by espousing a "between the ethical lines" strategy, a business can increase some short term profits. But in the long term, do these kinds of ethical gray areas pay off? Consider something like Silk Road, which probably adopted the notion of "not a drug dealer", instead just facilitating an online marketplace, a place where buyers and sellers could connect". Given enough government interest, it didn't really matter what gray area the people running it claimed, they were still arrested for criminal behavior.

Now it may be that there is not enough will within the government to "crack down" on these gray area definitions for Uber (the regulation bogeyman that conservatives hate), but that's just here in the states. As Uber expands into Europe and other international locations, some European governments are not as regulation-averse.

To date, Uber's approach has been to operate as though the on-demand ride has been an unjust barrier, then hoped that with enough adoption and positive public sentiment, they could overcome any regulatory barriers that were thrown up in their way. That approach is easier to execute upon when you're seen as a positive force, not a threat, a no-harm no-foul concession to technology changing the marketplace. But, as you push the envelope of legitimate business practices and people get threatened, hurt or feel ripped off, the tides can change.

Ethics, Morality, and The Mission Statement
It's one thing to look for exploitable loopholes. It's another thing entirely when that becomes the fabric of your business. Customers can understand and tolerate breaking a rule if that seems part of a bigger mission. Breaking one rule can make you seem principled. Break too many and you just seem slimey.

Ethics matter. Everyone jokes about Google's "Don't Be Evil" value, but consider -- despite many questions raised about aspects of their business, most people recognize that Google does good things with their products, technologies and practices. Or at least they try. Everything from free services to a loftier goal of scanning all of the books so that everyone has access to them -- these aren't things that are born out of a "how can I get leverage over the world" philosophy. And that's probably why people might be more likely worried about how Uber staff like Travis and his Bros might use their private data, where they wouldn't worry about Sergey and Larry in the same way. Sure people worry about what the ubiquitous Google is doing with their data, but it's unlikely that Google would publish their walk of shame/ride of glory.

Ultimately, if you look at the battle for this ride share market, there is this notion that the market is defined and it's just a matter of parsing the customer base. If Uber wins, it will own this market is the prevailing thought. I think what that seems to overestimate is our need for this service. Don't get me wrong, taxis and ride for hire has been around for a long time, but that doesn't necessarily translate to an automatic shift to Uber. While there are aspects of the taxi environment that we all may have encountered -- crazy drivers, unclean vehicles, and selective, sometimes limited support as examples -- there are still aspects of the service, like regulated fares, that have me choosing a taxi over Uber for many in-city rides.

But beyond that, there is this assumption that our need for a ride-share type ride outweighs any ethical limitations that might otherwise drive us to select an alternative. What happens when Uber drivers become like Internet fulfillment warehouse workers, run ragged on a barely minimum wage, indentured servants to the rider class. Will this ethical framework hold? Will there still be joy and enthusiasm in this service? Or will it be like Groupon, with unknowing shop owners leveraged into buy-one-get-one-free deals that drive a momentary customer boost at the expense of their quality, profits and reputation?

At some point, Uber will reach a tipping point, a time when it can no longer play the "not THAT business" card. In order to own it's quality, service and brand, it will need to become THAT business. Taking ownership would also mean taking ownership of it's management and it's ethics. Right now, it doesn't want to own anything -- it's not THAT business. But let's see how long that lasts.

Update: I stopped writing this post over the weekend and then I came across this piece on Pando talking about the differences between Uber and AirBNB. It's totally worth diving into.

Innovations in Horse Hockey - James Surowiecki Spins Uber Pricing

Unbelievable. Let me start by saying how shocked I am -- I've read James Surowiecki's The Wisdom of Crowds and I think it's awesome. It's on my recommended reading list. So imagine my surprise when I realized that this article that I just read on the MIT Technology Review site about Uber's surge pricing was, in fact, written by Surowiecki. Mind-blowing, and not in a good way.

The headline and subhead provide a pretty good synopsis of the theme here:

In Praise of Efficient Price Gouging
Uber’s most important innovation is the way it prices its services. But that innovation has not been unreservedly welcomed by customers. They’re wrong.

While he addresses the controversy around Uber's surge pricing including highlighting some of the public criticisms, Surowiecki eventually gets to characterizing this surge pricing model as similar to airlines, hotels, and happy hours -- all using variations on pricing to address demand at different hours. He then endorses the Uber position that their surge pricing helps put additional drivers on the road.

What this means is that in the case of Uber, surge pricing doesn’t just make rides more expensive (as is the case with airline tickets or hotel rooms at times of high demand). It also expands the number of people who are actually able to get a ride. Customers pay more, but they also get a ride that they otherwise would not have gotten. This is exactly how a market is supposed to work: higher demand induces more supply.

You know who else is a fan of Uber's surge pricing, "venture capitalist Bill Gurley, who’s an Uber board member." Surowiecki links to Gurley's blog post noting,

that when Uber first tested dynamic pricing in Boston in 2012, it was able to “increase on-the-road supply of drivers by 70 to 80 percent."

In Surowiecki's article and Gurley's blog post, much is made of this aspect of increasing supply as though multiplying the rate a customer pays mines black cars from empty space. It's as though price multipliers suddenly connect with the philanthropic aspects of humanity -- "my God, it's after 1:00am on a Saturday in Boston -- there are people who need rides in black town cars. Jeeves, bring the vehicle around. There is money to be made and riders to be saved." Or, "sure it's snowing and I'd rather be inside where it's warm, but there are desperate people out there willing to pay 8X the normal fare for a ride. I must help them."

The more nuanced reality is that there are only so many vehicles that are around in the first place. First and foremost, these drivers and cars that Uber is "putting on the road" with their surge pricing don't just appear from the clouds. We're talking about people who've signed up with Uber and met certain, rather specific vehicle requirements. Them "not being available" is not a question of not existing, instead it's a function of a free market where one side says, "you know, I have better things to do with my time than participating in the Uber system."

The way that the business is set up, drivers aren't Uber employees. This is a fundamental element of the problem. Uber can't make them stay on the clock, but it does "fix" the pricing. So instead they say, "suppose we change the system and give you license to gouge riders during these periods?" 

My favorite quote around this comes from the Gurley blog. In "Clarifying Certain Specifics Regarding Uber", Gurley says,

Uber is remarkably transparent about its dynamic rates. Ever since the company first encountered feedback about its pricing model, the company has gone out of its way to make sure that customers are aware of the policy and how it works.

The emphasis is mine. But that's one of the other elements that's missing from these surge pricing justifications. When Uber first rolled out surge pricing, they didn't even tell you it was in effect. Your first notice was when you received the bill. You can argue that those are the pains of a growing start-up, but I think it speaks to the company values.

Regulation. It's one of the words that the Libertarians and the followers of Ayn Rand hate. It's that thing that they're trying to disrupt, the thing that they claim is that's holding us all back. It's the rules and policies that govern the taxi industry and the limo industry. Somebody from Uber's PR team can probably tell you about all of the crazy rules that they impose...

But if you look around the world, there are places where you are warned about trusting the taxis. You're warned about getting ripped off, charged crazy amounts, driven on circuitous routes. Even here in the states, some cities offer flat rates from the airport to downtown so that you can feel comfortable about not getting ripped off as your welcome to the city. Taxis are part of our transportation infrastructure, and many aspects -- including the fare -- are part of the social contract that we set up with these companies in trade for letting them work that business.

While there isn't the existing software infrastructure to make the taxi experience equivalent to the Uber experience, there are certain things that you can count on with a metered taxi. When you get in, the metered rate will be the same, regardless of time of day or day of the week.

I Like Aspects of Uber, but...
Don't get me wrong. I've used Uber and I like aspects of their service. I think that, overall, the software interface for requesting a car, the detailed receipt, and the streamlined payment process are all excellent. Often, we'll choose an Uber ride because the vehicles are usually clean and and free of unusual or unpleasant smells. At the same time, many aspects of the way they do business offend me. And I refuse to use Uber when they run surge pricing.

Ethical existence is not as simple as supply and demand. As a society we frown on certain types of marketplace behavior like war profiteering or profiting on disaster. Surge pricing during floods and snow storms is an example of that same kind of bad behavior. But with their surge pricing, Uber's ethical lapse is more than just billing during disasters. The "multiplier" function that they use for surge pricing is particularly egregious. Not only does a multiplier make it more difficult to estimate what your final fare will be, it magnifies all of the negative aspects of the transaction.

There has already been a lot of digital ink spilled over Uber's surge pricing. What spurred me to write this post was not the overwhelming need to rehash those same points. Rather, it was Surowiecki's contention that, "Uber's most important innovation isn't a car service, it's a pricing algorithm". I call bullshit on that. There are of historical examples of dynamic and surge pricing. And profiteering. No, I don't see how this is innovative.

Innovative might be something like, an electronic pre-commitment to a tip amount as an incentive for a pick-up during "high-demand" periods. Innovative might be something like a capped price -- sort of a reference price -- with all rates discounted from that defined cap.

When I first read Surowiecki's article, my instinct was that this was an astroturf piece. That's why I was so disappointed when I realized who's name was on the byline. My biggest take-away from this is sort of a "please, say it isn't so..."

More on the Death of Foursquare

It's feels like a constant reminder whenever I visit a restaurant. I look at my phone. In my brain, there's a Pavlovian bell, "you should check in". And then, the rational part of my brain switches over and reminds me that I don't check in. Foursquare is dead to me.

After so many years of being wired to this behavior, it feels like such a loss.

But I'm not the only one. I came across this great open letter to Foursquare in this post on Pando. It echos a lot of my sentiments, but I didn't bother to download Swarm. And I won't bother. Nor have I opened the Foursquare app since they disabled check-ins. I don't really need a location discovery app.

As you look around the web at the passionate dissatisfaction with what the way that they've killed check-ins, you have to wonder -- if they'd moved location discovery to a different app, would their have been the same level of vocal complaints? While I'm not internal and I don't know user numbers or demographic size, I would be surprised if there was a "passionate location discovery user base" in the Foursquare community.

Like Michael Jordan deciding he should quit basketball to play baseball
This feels more like one of those internally driven decisions, the kind focused on answering a deluded team of managers or MBAs that are convinced that Foursquare should be something more than a check-in app, "if we were this location discovery space, we would be awesome." It's the kind of decision doesn't understand the real value that Pavlovian habit.

Meanwhile, back in the new location discovery app, "this place is popular with people who used to check in frequently..."

One day, Foursquare will be a great case study.

Ageism, Statistical Discrimination and The Lost Civilization of Silicon Valley

With all of the back and forth about the cost of housing, Google buses, economic class warfare and other symptoms of something horribly wrong with things these days, I want to pull together something that is sort of a synthesis of several items to help fill in a few more dots on the changes in Silicon Valley. You might call this Part 2 of my endless rant on Silicon Valley Lost.

As I spent time reflecting on why the culture has changes so much, I was reminded of how much aspects of age have changed around here. When I first began working in tech back in the 1990s, I was one of the younger members of the staff. Demographically speaking, the workplace was reasonably well distributed in terms of age; young workers just out of college, middle aged workers that had been in the workplace for ten years or more, and older workers that had been around for a long time.

These days, much of that has shifted. Consider this data from research by Payscale:

• While the overall median age of American Workers is 42.5, the oldest median age in the Payscale survey of technology workers was at Hewlett-Packard at 41 years.
• The other five companies with older workers, in descending order of median age, were I.B.M. Global Services (38 years old), Oracle (38), Nokia (36), Dell (37) and Sony (36). Note that from this list Oracle is the only business that's primarily here in Silicon Valley.
• The seven companies with the youngest workers, ranked from youngest to highest in median age, were Epic Games (26); Facebook (28); Zynga (28); Google (29); and AOL, Blizzard Entertainment, InfoSys, and Monster.com (all 30).
• According to the Bureau of Labor Statistics, only shoe stores and restaurants have workers with a median age less than 30.

You can look at that data and the companies and draw a lot of conclusions, but one that's noteworthy factor is that most of the companies in the youngest end of the rank are Internet and post-dot.com companies. Some of that probably goes back to a shift in thinking that took place back in the days of the dot.com era when part of the world wanted to invest everything in Internet clicks, and the brick and mortar world kept asking where the money was going to come from. Sure, some companies found ways to make money, but the conventional wisdom take-away was that the old guys just don't get it.

Perhaps, like this story about the economist on the dating site, hiring youth is more statistical discrimination than it is anything else. When I heard Stanford Professor Paul Oyer on the radio promoting his book, he also described some of the significant similarities between the dating world and the job market. To paraphrase something that he said during his KQED appearance, "like dating, both the employer and the job candidate must like each other and be interested in the relationship."

Whatever the reasoning behind it, working from a general recognition that today's emerging companies are less likely to hire older workers, you can draw some other conclusions; specifically, if there is a surging economy in the world of tech start-ups and if you don't belong to a specific demographic, then, like a Google bus, you're probably not getting on in. It matters little whether you are a nice person with a great personality, whether your interests are aligned, or even if you've been waiting at that public bus stop for a long time, you're not going to get on that bus.

Want to see what the impact of this trend has been? Here are a couple of links:

• Check out this dynamic infographic showing the relationship between "private shuttles in San Francisco" and businesses in the those same areas in the city. The Pando post describing it in more detail is here.
• Then there's this link to a map of evictions in the city. Here's another Pando post on this one.

What you can see is that there isn't nearly the kind of growth out in the Avenues and the Sunset, the areas that tend to be older, quieter, more families. In that way, this is not a story of the awesomeness and desirability of the geography of San Francisco. Instead, it really highlights the demographics of this economic surge -- and the bystanders, or casualties, depending upon where you find yourself in relationship to that trend.

Today's Silicon Valley is trending Logan's Run. It's an Amazing place. There's just one catch. You are only allowed so many technology cycles before you're replaced by an H1B visa, an Ivy League intern or perhaps someone with not less than 4.6692 Likes on Facebook. Then, it's carrousel. Or you can run.

Friday Reading Suggestions: Tech Jobs, $100M Businesses, and more

First, a couple of links from Pandodaily:
Here's an interesting story about how many more jobs are created by the high-tech sector and it's economic influence.
10 graphs that show how high-tech jobs are transforming the US economy

Here's another one from Sarah Lacy summarizing a study on businesses that have grown to be $100 companies. I like the 'where are the Web 2.0 companies now' aspect of the piece.
New study on companies worth $100M+ shows how much of a lie the Web 2.0 fad was

Here's one on hiring. Personally, when I read his hiring story, I have a hard time believing that an English Literature major wouldn't be able to speak to the books that he'd read. I would suspect that, rather than being an empty suit, the guy was probably not honest about his background. More to the point, my personal belief is that someone with a humanities background is more likely to be a rounded person with depth.
Losers exist. Don’t hire them

More on hiring. Here's Ben Horowitz with an interesting take on 'hiring old people' for your start-up. But you might not want to listen to him because he's an old guy, so you might question his motives. Seriously though, it's a thoughtful post and some good advice.
Hiring old people: The dangerous but necessary steroids of the startup world

Finally, here's an amusing read on venture firms winning a lawsuit against Best Buy for stealing the trade secrets of one of their portfolio companies. Good fun if you like to seeing karma come back to smack unethical behavior.
There is a lot of talk about being pro-entrepreneur. First Round and NEA show serious action

The Speed of Hype: Facebook and the Social Media Economy

Three years ago, there was a lot of excitement in the air around here. The Social economy was booming and the untapped potential of the mobile market seemed like another gold mine that was ripe for harvesting. And yet, for all of the potential, for all of the dreams, we now find ourselves in a bit of a malaise.

Over the past year, we've seen the Facebook IPO and a number of exits and pivots by long-running start-ups. Many of the businesses that were so full of promise have struggled to deliver consistent earnings. What was once a thriving Web 2.0 ecosystem of interconnected APIs has deteriorated into a series of platform wars as many of those same businesses have built walls and and grasped for monetization. If all of this were an action movie, this might be that moment in the movie when everything looks darkest, the moment before the hero manages to perform that amazing feat that turns everything around.

History may look back and mark Steve Jobs' passing as the end of that golden era of innovation, but I think that the real defining moment was the Facebook IPO. While some may attribute some of the current malaise to the Nasdaq, computerized trading, or the other problems in the Facebook IPO, the underlying driver goes beyond that. Sure, if the Facebook IPO had been a glorious event and our friends were all telling stories of the epic fortunes that they made on Facebook stock, some percentage of the industry might feel better. But, realistically, the issue runs deeper than that.

Prior to their IPO, Facebook was a massive reservoir of potential energy. It had tremendous wealth was stored in the possibilities. It was the platform for the future, the platform for everything. It was a changing how software worked. It was the next Google, and everyone tied to it was going to make a fortune. It was like a newly discovered treasure map or Al Capone's unopened safe, the perfect candidate for drawing people in to place bets.

These aren't just bets on Facebook, their bets on a platform and the entire emerging market. They are bets on the ecosystem that is linked to Facebook, bets on businesses and technology that use 'social' to sell their ideas, or anyone riding the wave of Facebook hype to sell a dream of an untapped future.

This is technology at the speed of hype. It's selling the idea that, in the same way that Facebook has built a market around sharing personal information with your friends, that market remains undefined when it comes to sharing information with your coworkers about the office supplies that you use -- and that exploiting that segment is inevitable.

Facebook's IPO shifted all of that potential energy into an unmetered system to one with a real ruler. Not only was it an opportunity for all of those speculators to pull out of their bets on who would win that initial spot in Facebook's market, it was an actual measurement on what the market thought that it was all worth. Fifty billion dollars? Perhaps not. Even if the actual value of Facebook was substantial, with the IPO, the size of the hype balloon that carried the dreams of all of those others shrank.

Looking back, it's easy to see aspects of the market that were oversold and dreams that were built on a foundation of hype. But remember, it isn't just social. When we saw the green technology boom, the valley was swimming in solar equipment companies. Same with mobile apps. Or telecom and broadband technology companies back in the days when we were building out the Internet infrastructure. This is normal market behavior surrounding technology at the speed of hype.

Social Classes in the Workplace

For me, one of the interesting aspects of the Frank Rich piece that I previously linked to was bringing together the idea of surprise over the great sense of mourning at the loss of Steve Jobs coming from participants in the #Occupy Wall Street protests. As noted in the Rich piece, some media figures characterized this as hypocritical.

Yet those demonstrators who celebrated Jobs were not necessarily hypocrites at all—and no more anti-capitalist than the Bonus Army of 1932. If you love your Mac and iPod, you can still despise CDOs and credit-default swaps. Jobs’s genius—in the words of Regis McKenna, a Silicon Valley marketing executive who worked with him early on—was his ability “to strip away the excess layers of business, design, and innovation until only the simple, elegant reality remained.” The supposed genius of modern Wall Street is the exact reverse, piling on excess layers of business and innovation on ever thinner and more exotic creations until simple reality is distorted and obscured. Those in Palin’s “real America” may not be agitated about the economic 99-vs.-one percent inequality brought about by the rise of the financial sector in the past three decades, but, like class warriors of the left, they know that “financial instruments” wreaked havoc on their 401(k)s, homes, and jobs. The bottom line remains that Wall Street’s opaque inventions led directly to TARP, the taxpayers’ bank bailout that achieved the seemingly impossible feat of unifying the left and right in rage against government—much as Jobs’s death achieved the equally surprising coup of unifying left and right in mourning a corporate god.

That bipartisan grief was arguably as much for the passing of a capitalist culture as for the man himself. Finance long ago supplanted visionary entrepreneurial careers like Jobs’s as the most desired calling among America’s top-tier university students, just as hedge-fund tycoons like John Paulson and Steve Cohen passed Jobs on the Forbes 400 list. Americans sense that something incalculable has been lost in this transformation that cannot be measured in dollars and cents.

Anti-Business, Anti-Capitalism, Anti-Success, Socialist, Communist and Un-American
Historically, and with particular energy during recent years, the political right has tried to apply a broad brush of anti-capitalism. During the Cold War, it was used to equate the values of the political opposition with the values of "the enemy." During the Obama administration, it's been used by the right as an avatar for "Obama is black" and to channel the political energy drawn from that. Rich's piece is, in part, an effort to debunk aspects of #OWS as they have been characterized in the media, with a key one being the idea that #OWS was anti-business.

What struck me about this was how it tapped into many aspects of workplace culture that we all deal with. For many people in the workplace, few things are more frustrating than managers or colleagues that receive accolades for not doing anything, collecting fat salaries and workplace kudos while skating by on the hard work and talent of others.

And while this perceived inequality may just be an aspect of our cultural DNA, the natural reaction of humans working in groups juxtaposed against the perceptions of self, there is also an underlying aspect that connects back to Steve Jobs versus Finance -- Steve Jobs did stuff. His success was built on the creation of things, not collecting money from some Bluto-style counting game (one for you, two for me, one for you, three for me).

Most of us have have little animosity toward those that work hard and to the success that comes through entrepreneurial efforts. This is part of what makes Tony Stark's character in Ironman likeable. Similarly, we have an established hero mythology for "the guy that rose up through the ranks to lead the organization" and it's implied understanding of the values and principles gained through participating in the mechanics of the business operation.

This is one of the more enticing prospective benefits of working in a start-up. While most organizations inevitably draw a certain amount of slackers and free-riders that surf the waves of bureaucracy, there's not really any room for dead wood in a start-up. It's also usually small enough that people can recognize strong contributors.

The Reality of Social Classes in the American Workplace
One point that I would counter the themes in Rich's piece is the notion of an absence of social class here in the US. Even here in Silicon Valley, there are entrenched social classes in the workplace.

Ask any admin if there is a hope of escaping their role. Try to find a job outside of the field or the industry that you have been working in and you will come face to face with an entrenched establishment. While social class may not be defined at birth, it's not far off from the career chip concept from Futurama.

In career social classes, your status typically doesn't advance more than 1-5% of your salary annually. Your class may be defined by token milestone adjectives like "senior", but realistic changes in your status tier often require changing companies. Often, attempting to break this career social class structure is real goal behind going back to school, relocation or changing jobs.

This is also the American Dream that lies at the heart of working at a start-up -- the opportunity to re-invent yourself, to escape the bounds of your existing career class and redefine yourself through your ability to respond to a new set of challenges -- the new frontier. One of the reasons that people like start-ups is that, because start-ups tend to have more needs than resources, there tends to be greater opportunities to expand the boundaries, to be entrepreneurial, to win success though initiative and innovation.

Hope Springs Eternal
As I noted in this previous post, it's unlikely that we'll see an Arab Spring in the business world. Nor is it likely that we'll see things go the way of the London riots. Don't expect a revolution or transformational class reform in the workplace. And while the odds are pretty good that, of the people dreaming of a more open career environment with less rigid social classes, few are anti-business. After all, the first step in the entrepreneurial dream comes from envisioning the possibility of a change, from thinking different.

Arrington Has A New Blog

There's not much point in speculating on the direction that it may go, but Michael Arrington's new blog, Uncrunched, has launched and the comments are totally worth a read.

Techcrunch, Soap Operas, Start-ups, Exit Strategies and Hunter Thompson - This Ain't The Bubble of Love

If you missed the news -- or failed to Tivo your soaps -- the drama surrounding the staff at Techcrunch has continued through the week and into the weekend. Sunday morning while going through my usual blog-reading ritual, I came across this story, TechCrunch Writer Skewers New Editor In Resignation Letter, over on Talking Points Memo. Anyone that's been watching already had some idea of where this was going, it was simply a matter of which writer.

Here's a link to Paul Carr's last post, I’m Leaving TechCrunch. Here’s Why. It's worth a read. If you're into the soap opera, you can also read Erik Schonfeld's, Paul, I Accept Your Resignation. The whole thing is probably the best example of a Silicon Valley gossip story since Valleywag was gobbled up.

Still, I found Paul Carr's piece interesting and inspiring on a number of levels. This post isn't so much about the current events at Techcrunch. Let's start with brief synopsis of the big picture story of the Techcrunch events:

• Guy founds start-up based on unique product and experiences unexpected success. 
• Start-up grows and grows, hiring people and expanding their audience.
• Eventually, a larger company sees that success and thinks that they need them some of that money.
• The big company eats the little company and two things happen:
  - The people at the little company realize that it is not a little company any more
  - The people at the big company run around saying, "Oh my god, oh my god, can you believe what they were doing? We have to fix this."
• Big company people try to fix, little company people become former, and the combination makes that which was acquired not be that any more. 

In essence, this is little more than a cycle of life in the world of start-ups and M&A. Within this cycle, you'll also see the people from the little company -- people who have lived and breathed the birth of the little company entity -- passionately morn the demise of the little company. These people have tasted the fire and have dreamed of changing the world. They have seen the world of possibility.

What Does It Mean When You Buy A Blog?
So what does it mean when you buy a blog -- do you buy a writer, do you buy a voice, do you buy an audience or maybe even a community? Is it similar to what News Corp. got when they purchased MySpace? Is it what Time Warner got in it's deal with AOL? Perhaps it's like buying a cast of puppets, dreaming of all of the new ways that you can use them to make money, then pissing off the puppeteer and pushing him to quit -- even if you own the puppets, do you really own the characters, the voices, or the show?

It's hard to fault the founders of a start-up for finding an exit strategy and a payout. Finally, there is a financial return on all that work, all of those hours invested. Perhaps it stabilizes the business, perhaps it brings the infrastructure that you need -- there are many reasons that it may be a good idea, strategic justifications for the choice. But for the big company with the fat wallet, the equation is different. I think that I would have a hard time recommending the purchase of a web media property or the idea of 'buying' a relationship. Sure there are a host of meta-justifications that you can use -- it will look good to investors, expand our market opportunities, open a whole new world of consolidated advertising options, etc. -- but you can't buy the audience.

Paul Carr's post opens with a quote from Hunter S. Thompson. Full disclosure, I've always been a fan of Thompson and invested in many of his published works. It goes without saying that I'm not the only fan of Thompson. As with successful start-ups, there have been many that have attempted to mirror Thompson's style, to clone his formula -- maybe make it gonzo journalism in the cloud or gonzo journalism for web 2.0 -- then expect success. A common formula for the Thompson wannabes is lots of drink, maybe some drugs, a dash of crazy, then maybe try to write something. But try as they might, it's never the same.

Like many start-up guys, I think Hunter Thompson carried a certain amount of loathing for the take-over and monetization of the culture that was before it was 'The Summer of Love.' As a cultural record, gonzo journalism like Fear and Loathing in Las Vegas is deeply nuanced. Much of the joy and the humor is only really available if you understand the history, if you understand the culture, if you are the audience. For the rest of the world, it's just some silly story about some crazy guy who takes a lot of drugs. Inspiration? Or perhaps it's similar The Man Show once Jimmy Kimmel and Adam Carolla left.

In life, in history, there are moments. They last for the blink of an eye and then they are gone. Even Bob Dylan is amazed by the things that he wrote when he was younger. But it's not a recipe. Sure, you can look around and find an amazing amount of genius cooking right here in the bay area -- the perfect environment to culture sourdough and free-form ideas -- but you don't get there just by being here. So while the world imagines a bay area like The Social Network or they dream of their dot.com 2.0 riches, perhaps they will sit back and think, "what we need is an office like Yelp with a beer keg and an Xbox room". We were just outside of Atherton when the VC funding kicked in...

Over the past day or two, I've found myself occasionally skimming through the Techcrunch headlines and bylines, looking for something... toothsome. Instead, what I've felt most strongly is a sense of absence. Something is gone now. Sure, I've seen a couple of posts from people who were theoretically in the drama, some from people who didn't appear to be involved -- but there is a meta-layer of energy that's gone.

And for Paul Carr, I wish him well and I'll probably follow him on Twitter. For Paul I would borrow this quote from Where the Buffalo Roam.

Well I guess if I had to swear one way or another, I'd say Lazlo wasn't insane. He just had very strange rhythms. But he stomped on the terra. Lord Buckley said that. It's hard to say he got what he deserved, because he never really got anything, at least not in this story. And right now, this story is all we have ... It's sad. But what's really sad is it never got weird enough for me.

Why Are People Shocked About Flip?

Earlier this week, Cisco announced a restructuring that basically eliminated the Flip camera group, a company that they bought for $590 million a few years ago. Following that announcement, I've seen a number of posts that reflect a sense of shock surrounding the death of the product. Me, I'm more surprised that people seem surprised.

When the iPhone 3GS was launched and included video capabilities, there were numerous articles and posts about how iPhone video would be the death of the Flip. Since that time, there's been a lot of innovation in mobile video on the smartphone platform -- Apple even added iMovie and basic video editing to the platform with the iPhone 4. Meanwhile, the Flip platform hasn't evolved. This leads to several questions:

• Was the acquisition simply a strategic blunder on Cisco's part?
• Was this a technology or other resource acquisition?
• Was this the result of a large organization being unable to provide the fertile environment needed by a start-up to prosper?
• Would a start-up version of Flip been able to innovate enough to remain competitive?

In the end though, this shift in the market has been going on for two years. I'm not really sure how that constitutes a surprise.

Whom you should hire at a Start-up: A Repost and An Obeservation

Earlier this week, there was an interesting post on Techcrunch. I always like these types of posts when I come across them. Whom Should You Hire at a Startup? (Attitude over Aptitude) by Mark Suster is another post from a VC and former entrepreneur on how to look at the problem of building a strong team in a start-up. It's a short, easy read and I recommend going through it before you move through the rest of this post.

The area that I wanted to explore is one that is touched on in his second and fifth recommendations:

2. Find people to “punch above their weight class”
5. Attitude over Aptitude

If you add up some of his statements like

It means that many management teams I know feel the need to hire people who have “done it before” and frankly many VCs encourage this. It’s a mistake. When you hire somebody too early who has already “done it” you often find somebody that is less motivated in tough times, less willing to be scrappy (as many startups need to be), more “needy” and less mentally flexible / willing to change their way of thinking...

You said, “Eff experience. I want to know whether you can deliver. If you can, you’re golden. You’ll go a long way. If you can’t – you’re toast. Are you up for it?” It’s Tristan Walker of FourSquare. They hired him when he was an MBA. He had no right asking for a senior biz dev role at one of the hottest companies in the US. But he was ready to punch above his weight class. And he pushed for it.

You might wind up with the take-away of, "don't hire tired experienced people, hire hungry inexperienced people." If that was your take-away, I recommend that you read his other post from his blog, Who Should you Hire at a Startup? This post presents a more comprehensive look at the role of talent, capability and experience, and provides some additional insights.

The Reality of Experiences That Make You Tired
While it's easy to see students coming out of school with a hunger and a naive sense of excitement, most of us that have struggled in difficult employment environments understand that there are a lot of pressures that can wear you down, weigh on your sense of enthusiasm, and make you a bit cynical. After all, if everything at work was exciting, challenging growth, you probably wouldn't be motivated to do something different. And when you interview, this is one of the challenges you often face in positioning yourself -- you don't want to seem like a grumpy curmudgeon that simply can't get along with the people you work with, but you need to position some clear reasons why you're considering this change. But regardless of how you present it, people want smiles in interviews and you're carrying frustrations.

So here you have the "Attitude / aptitude" issue wrapped up in a microcosm of perception. Perhaps the driver for your frustrations are the bureaucracies of your current employer or tired of being told that you don't know how to do your job because the organization doesn't follow your recommendations. Perhaps it's all driven by your frustrated desires to have a more senior role or more control of the process. It's even possible that you've tried to do more, only to be shot down as 'not getting it', too inexperienced, or not the right fit. In one sense, this might put you in the "punch above your weight class" group, but it also depends on the individual.

People react to adversity in different ways. As a long-distance cyclist, I've seen very tired people face hills near the end of a ride and get angry. I've seen them give up. I've also seen people who dig deep and continue to work, continue to push to get to their goal. In the case of people that you're considering for a start-up, while the environment that you're hiring them from may suck, I think that what you're looking for are the people capable of continuing to turn the pedals when the going gets tough. That doesn't mean someone who is happy to continue turning the pedals in a bureaucracy, but that's really back to the attitude question.


So What Do You Think?
Can somebody who is coming from an environment where they have been beaten down, told that they don't know what their doing or that they are doing it wrong be successful in a start-up? Can they succeed in an interview? Perhaps more to the point, if you're looking for a position where you can "punch outside of your weight class", do you really believe that a company will consider an "underqualified" candidate in today's job market? In other words, are you targeting a market where you have a realistic opportunity?

Surfing, Silicon Valley-Style: What is the Lifespan of Your Business?

When you travel and people hear that you're from California, they usually imagine Baywatch -- oceans, beach, and surfing. Here in Northern California, the ocean is cold and the surf is 30 minutes away or more, depending on traffic. Instead, most of us here ride waves of business driven by cycles of technology and the economy. From semiconductors in the 80s to the Internet era in the 90s and on to today's social, streaming, web 2.0 wave, you can see the rising forms grow, carry us, and finally break over time.

Once and a while I'm called on to help an MBA student work through some project assignment. Typically, the assigned case study projects require some historical analysis of a business decision at a select moment in time. The funny thing about history is that your knowledge of the broader story means that your decision can't really be unbiased. Imagine an example of a case study for a pen computing platform set back in the 1990s. Regardless of the actual issues presented, knowing that pen computing will fail, doesn't the smart decision include a common denominator of "take the money and run"?

Most companies have a lifespan. Often in calculating business strategy or imaging a business in theory, people tend to imagine the company as going on forever or at least having a lifespan similar to IBM. Here in Silicon Valley, it's easy to look across the landscape and see the empty skeletons of former titans, market leaders that were not immune to time and the evolution of technology. Whether it's the old Boreland campus in Scotts Valley, Sun Microsystems various campuses, or the once great empire of SGI that's now inhabited by Google, time has claimed all of these former corporate stars.

While it's easy to see exit strategy as an important factor in start-up strategy, what about more established companies? We keep seeing parts flying off of the Yahoo motor, yet it's still trying to race down the road. Remember when they were one of the blue chip Internet stocks? Think about all of that money that they've spent over the past ten years in failed acquisitions and technology development -- would they have done better pocketing the cash?

Companies that start to run amok tend to give off a dying vibe. You start to hear stories -- problems with the work environment, layoffs, crazy control systems and cost cutting measures. If the work and stress of building a start-up brings the excitement of growth, riding the wave of a company in decline is all about the stress of waiting for the wave to collapse on you. 

Having a sense of history about the lifespan of a business also bakes in a certain amount of cynicism. When you find yourself in an interview, you're always looking around trying to get a sense of where the company is in it's cycle of life. Are the people excited? Too busy to spend much time talking? Do they look they are having fun?

Just because a company seems like it's in decline doesn't mean that it's not potentially a worthwhile opportunity. In the same way that there are people who thrive in the chaos and excitement of growth in a startup, there are some people who are well suited to managing a company's end-of-life -- it's just that marketing pros are not usually in that group. Growth and marketing kind of go hand in hand. Typically, companies that in decline are looking for replacement followers of their existing strategies, not pivots. Of course, if you're brought in chartered with bringing transformation, then you may be able to turn that wave into an interesting ride.

While I'd like to wrap this up with some sort of exciting take-away thought, I think that the best way to leave this is with the same kind of feeling you might get at the beach, watching the waves form, move through space and time, then break. Big ones. Small ones. Waves of different shapes and different heights. Maybe the waves aren't as big as you expected. You should have been here yesterday.

Growth Hacker vs VP of Marketing

Just a brief follow up thought related to the idea of the growth hacker concept referenced in the link in my previous post. The core premise behind the growth hacker is that startups in earlier stages need to be focused on growth -- dynamic, agile, and even experimental. Often, when people think of qualifications for a VP of Marketing, they think grand plan, strategy, and years of experience in a specific industry. What this may also translate to is limited adaptability outside of a focus industry and correspondingly, a less agile, less dynamic engine for growth -- someone who just wants to replay the classic hits.

I suspect that the right fit actually falls somewhere in the middle. A good marketing pro doesn't just repeat the same formula. Every business, every situation, every moment is different. While the idea of a growth hacker relentlessly experimenting, trying to crack the growth nut is a compelling image that captures a sense of necessary urgency, for me it underplays the importance of fluency in a broader vocabulary of the practice. First and foremost, before you can ever begin to conceptualize and hack growth programs, you need to have a strong understanding of those same programs and the language that their constructed from. You can't play guitar simply by watching music videos and you can't hack a .php form by simply browsing the web a lot or even reading stories about code injection.

Beyond vision and program execution, there is an equally important aspect to having a grander vision -- an understanding that some growth vehicles have a dark side and not all hacking is white hat. Look at Zynga and some of the other social game companies profiled in the Techcrunch Scamville series. While Zynga was able to ride these questionable practices to an IPO and, theoretically, some operational reforms, several of the companies that used this approach got burned. The recent stories about JCPenney and some of the more noteworthy SEO manipulation highlight kind of issue. Understanding the risks and being able to weigh those against the potential benefits requires some conceptual understanding beyond simply figuring out an execution path.

Ultimately, whether you're a VP of Marketing or a Growth Hacker, the bigger problem is that often people simply want to repeat a lightning strike. Sometimes, beyond time and space, there is some luck involved. Just because Twitter took off at South by Southwest, doesn't mean that going there is a strategy. And yet, simply understanding how something like South by Southwest has impacted a number of social networking software startups should be part of your marketing vocabulary. In that way, I would thing that the job description should probably read something like, "creative, experimental problem solver with a broad marketing background and a solid vision of the big picture needed..." But somebody like that can probably also solve the problem of what title that they should have.

Are you a Growth Hacker?

I was doing some typical morning, poking around the web browsing and I came across an interesting topic that I thought I would share with you. I've been thinking about what to write on the topic, but I've got errands to run and a day to work through, so I thought I would start with sharing a quick link with you.

This is Find A Growth Hacker for Your Startup by Sean Ellis. Read and enjoy.

Motivations In The Workplace Animation

A friend sent over a link to this earlier this week, tucking into an NPR planet money post. In discussing, the presentation has been around for a while, but the animation is really what helps make this interesting.



There are more video presentations that have been animated using this whiteboard style of animation posted on YouTube, so check them out if you get a chance.

A Few Weekend Links You Might Have Missed

Here's a quick roll-up of some good reading you might have missed over the weekend:

Behind The Bidding War: The Real Reasons Why HP And Dell are So Desperate For 3Par - This is a nice overview of the quest to purchase 3Par.

Founder Institute: How To Launch In 10 Steps With Less Than $2,000 - A nice recipe for baking a start-up.

And some hiring / employment culture posts from Techcrunch:

Too Few Women In Tech? Stop Blaming The Men. - An interesting read from Michael Arrington on the lack of women who lead start-ups.

Silicon Valley’s Dark Secret: It’s All About Age - is an interesting look at the age and salary in Silicon Valley. It profiles a study out of UC Berkeley. The general take away -- don't expect to grow old as a code monkey.

Last but not least, there was this very cool gadget / artwork post -- check this one out:
An Interview With Japanese Steampunk Artist Haruo Suekichi

The Unexamined Life

For the past few weeks, I've been working with an intern from one of the local universities. I have to say that it's been a lot of fun for me -- I've always enjoyed teaching, analyzing things, and so much of the actual process that goes into marketing. For me, it's also always interesting to see the world through a new set of eyes, even on those days when I'm swimming in a sea of 'Oh My God!'s.

In the past week, there was an age discrimination case against Google that made it's way to the front of the news. Roughly, a senior director of engineering wound up leaving Google alleging that the work environment and his colleagues there discriminated against him for being too old and a fuddy duddy -- apparently, he was even struggling to chain at least two 'oh my god!'s together in a single expression.

For those of us who are neighbors of Google and Silicon Valley veterans, Google's culture and hiring practices can be a source of both amusement and frustration. It's amusing when you hear stories of the benefits that they offer their workers -- the cafeterias, on-site laundry, 20% time, and everyone pedaling around the Google campus on bikes -- it's the valley culture we know and love. The frustration comes from knowing aspects of their hiring practices -- like wanting to know your undergraduate GPA, an emphasis on hiring people with advanced degrees, and a focus on building a youth culture. Around the valley, we often hear anecdotal stories of people who leave Google because they felt too old.

But this approach isn't unusual. Many Internet / social network start-ups look at age when they're looking at hiring. It's like there's this unwritten rule that if you've been doing what you've been doing for more than 10 years, you can't understand the value proposition of social networking software. Or the cloud. Or location and check-in.

And the worst thing about it, this age-based mindset, is that these guys -- the ones who think that youth and GPA outweigh experience -- have no idea what they are missing. Sure, I'm a twenty-year veteran of the valley, but I actually get along better with the youngest guy in the office. We speak the same language of in terms of software, computer games, technology and culture. And while I may not share your love for Lady Gaga or Smirnoff Ice; maybe, if you try really hard, you might begin to share my appreciation for the culture of the valley.

And this brings me back to what I learned from the intern -- smart, entrepreneurial, hard working -- it doesn't matter. I can teach. I can tell stories. I can talk and explain through the next downturn. But at the end of the day, you can't just transfer years of experience like a document archive or a project folder. Practically, we all know this, but some people want to pretend that it's different. And that's why Google and some of these other start-ups will never see some very talented, experienced people -- they simply won't get a second look.

Po Bronson on Techcrunch TV

Here's a great collection of video interviews with Po Bronson, author of The Nudist on the Late Shift: And Other True Tales of Silicon Valley. Lately he's been focused on education and creativity. This post on Techcrunch features five video clips that are worth watching.

Techcrunch -- Po Bronson: “That’s why academics are so boring” [VIDEO]

Enjoy!

To MBA or Not to MBA, A Few Funny Thoughts About The Techcrunch Post

You know, there's a funny subtext to the MBA question referenced in the Techcrunch post that I linked to in this recent post. Simply, it's this idea that there's a set recipe for success, be it start-up or otherwise. In the formula, people are like eggs or flour or some basic protein -- add some basic ingredients, take them through a set process and presto, you have a successful entrepreneur.

How many students attend Le Cordon Bleu? How many students do you think that they turn out every year? One school, one city -- maybe twenty every four months? Let's aim low -- maybe twenty a year. Imagine those numbers mean on a global scale. Multiply that by all of the cooking schools in all of the cities. With all of these professionally trained chefs entering the work force every year, how come we are so often subjected to so much crappy, poorly prepared food?

Consider this: there are written recipes for much of the food that we eat -- formulas for an established, repeatable process; culinary schools teach the mechanics involved in precision execution of cooking processes; and, in contrast to an MBA program, a cooking school is focused on a single core curriculum as opposed to a broad-brush sweep across marketing, finance, operations, and more. All of that and yet, we still find ourselves eating crappy, poorly prepared food.

There are great restaurants out there. There are places that you can eat that can take you through transformational food experiences, tasting things in new ways, changing your relationship to an ingredient or a cuisine. And while you can probably extrapolate some common success points across the lot of them, if there was a simple recipe for success, none of us would have to suffer a bad meal.