A VC

Geographic Balancing

I am fond of saying that what happened in the US in the second half of the 20th century will take place in much of the rest of the world in the first half of the 21st century. The end result will be vastly more geographic balance of wealth and prosperity than we had at the beginning of this millennium.

Today, in a NY Times article on Toyota (TM)'s annual profit guidance to wall street, I came across this comment by Toyota's President Katsuaki Watanabe:

“Our profit structure has become more geographically balanced, with growing contributions from resource-rich countries and emerging countries”

The Times goes on to say:

Toyota, now in a dead heat with G.M. to be the world’s largest car company, said most of its recent profit growth had come in new markets like Brazil, China and Russia. It said the growth helped offset sluggish sales in the United States, traditionally Toyota’s largest and most profitable market, and other mature economies like Europe and Japan.

This is consistent with comments I heard at the hedge fund event I attended on wednesday. The BRIC countries (Brazil, Russia, India, China) and the middle east, are quickly attaining economic purchasing power parity with the United States and Western Europe.

I may have to amend the statement I started this post off with. It looks like it may not take 50 years for the balancing to occur. It's likely to happen in the first 25 years of this century.

Twittering A Hedge Fund Event

I went to an event yesterday that featured a number of people active in the hedge fund industry and the financial markets. Here is the series of twitters I sent during that event.

  Headed to the semi annual meeting of a hedge fund of funds. Expect to get some insights and will twitter them

  Observation: great hedge fund managers have come out of goldman, tiger, and michael price's firm

  Has the financial system crisis run its course? Most likely yes if banks and the fed keep doing what they are doing

  Has housing in the US bottomed? Maybe not, but the bottom is nearing. Watch for change in expectations, not prices

  What about the US economy? A tale of two cities. Not like past recessions.

  Inflation? Watch out, its here and more is on its way driven by massive global liquidity of capital

  Regional banks: look for a wave of regional bank failures. Fed won't bail them out

  To clarify that string of tweets and what follows: these are opinions I am hearing at a hedge fund event

Systemic risk is largely gone from the markets but economy risk remains. Market knows how to price the latter but not the former

  @tweetipFH oil (and food) prices are creating big problems in parts of the economy

Hedge fund manager singing the praises of aapl. He's right of course. But his framework is based on the world as it exists right now

  Had to leave the hedge fund event. I hope you enjoyed the twitters

Neil Young on Stage at Java One

I am going to get every one of his "dumps"

Triangulating For Insight

I am a huge fan of triangulating. I don't think anyone or anything can give you the insight you need to truly understand things. Whether it's visiting comscore, compete, alexa, hitwise, and quantcast to get a more complete picture of a web service's usage, or reading a conservative oped page and a liberal oped page to get a broader view of a political issue, or reading a wide array of tech blogs to make sense of the microsoft/yahoo breakup, triangulating is the best way I know to break the logjam in my mind and get to insight.

I've been subconsciously triangulating three posts for the past couple weeks;

1) Jeff Nolan's rant on incrementalism and the new thing:

As I survey the landscape of consumer and business focused software and service providers I am struck by how much incrementalism there is at the moment.

2) Tim O'Reilly's keynote at Web 2.0:

At the end he recites a poem called The Man Watching by Rainer Maria Rilke which contains this line

When we win it's with small things

3) Dave Winer's post on a decentralized Twitter in which he states:

I always work in bootstrapping mode, addressing the first big issue, solving the problem, then advancing to the next one. It's why so many of the ideas I've worked on have become popular modes of communication. Big-bang approaches always fail. I've spent decades arguing with people who want to reinvent the world in one stroke. They always try anyway and always fail. Bootstrapping is the only way that works.

Jeff is right, the web/tech world is full of incrementalism right now and that's why I am so bullish on  the sector and our portfolio which is stock full of incrementalism.

Tim makes a passionate argument for "tackling big hard problems" in his keynote. But Dave is correct in his assertion that the best way to do that is one step at a time.

Think about the way Linux was built and continues to be built. One step at a time. Each one looks trivial. Taken together it's awesome. Same with wikipedia. Or a social net like Facebook. Or the web itself.

We're rapdily reaching the adulthood of the web in a sense. The business architecture of the net now mirrors it's technical architecture. Massively distributed nodes that collectively create immense value, but if any one fails, nobody notices. Of course, it's not entirely true. If Google went down, or even S3, we'd be unhappy campers. But DNA of the web was set a long time ago and there's no fighting it. It's a sustainable network built on the principles of massive redundancy and no central choke point.

And because of that, at least on the web, if you want to tackle hard problems you are going to need to do it collectively and in bite sizes. We are not in an incremental phase. We are in an incremental system.

A Blast From The Past Quiz

Brad Feld posted a picture of him and a friend at MIT when he was 19 on his blog last week along with a quiz question. The minute I saw that photo, I thought "I should post the picture of us from Harvard Square in 1996." So here it is:

So here's the quiz. Name all six people in this photo. Hint: Five are active VCs and one is a retired VC.

The one rule is that nobody in the photo can participate in the quiz.

Extra credit - who is on the cover of Business Week in the magazine stand we are all standing next to?

The CBS Digital Radio Network

Yesterday I attended a launch event that really impressed me. As I watched it, I sent this twitter message:

          Watching a killer presentation on the cbs digital radio network. These guys have nailed it

I got a bunch of replies asking for more, but I've been offline for most of the past 24 hours and couldn't get around to posting about it.

Paid Content has a post on the event that does a good job of "play by play". But it really doesn't capture what went down.

Ad Age did a slightly better job with their coverage, but also missed the big point.

And that point is this. CBS has launched a single flash player that showcases all of their terrestrial stations' internet streams, all of their internet radio streams (like the new WNEW), all of AOL's internet stations (which CBS now operates for AOL), and best of all allows the listener to create their own custom radio stations that are also available on the player.

And that flash player can be launched whenever you visit a CBS radio station's website, whenever you play an AOL radio station, and whenever you play a custom station you or your friends create using the new CBS digital radio network.

Think about this. They have rolled out the entire spectrum of what radio might be on one single player. You want to listen to WFAN? You can do it on the player. You want to listen to AOL's indie rock stream? You can do it on the player. You want to create and listen your own station? You can do that on the player. I suspect it won't be long before you can listen to any last.fm stream on that player too.

And here's what really got me. When all of this audio content is being delivered in a single network, CBS can move you around the network when it makes sense. If you are listening to the AOL indie rock stream and Wilco is playing in the WXRT studio, the CBS digital radio network can alert you in the AOL stream and give you one click access to the Wilco live performance.

As my friend David Goodman explained, when the next Eliot Spitzer moment happens, you can go from the wonderful WNEW stream to 1010 WINS to get the news and then go back, all in a single state of the art flash player.

As I said in my twitter, these guys have nailed it.

What is this? [o:p][/o:p][/span]

I have no idea what those strings of HTML code do or mean (and I substituted [ for <), but they messed up my feed for the past couple days.

They got into my feed because I cut and pasted some text from microsoft entourage.

When I decided to figure out what was wrong with my feed, the clue was "did you edit your posts in MS Word?"

I learned a long time ago not to do that.

Now I know to avoid all Microsoft software when it comes to publishing on the web.

Distributed Polling

The poll I did yesterday on Yahoo!'s closing price has been taken almost 2,200 times in about a day. How did it get so many takers? By being distributed on many blogs at the same time. The poll has a share tab with embed code and I asked my readers to embed it on their blogs. And I left comments on some of the most popular blogs suggesting they do so. As of this morning here's the list of blogs that picked up the poll code and reposted it.

http://blog.hubdub.com/2008/05/05/what-price-will-yahoo-close-at-on-monday-may-5th/

http://gigaom.com/ http://gigaom.com/2008/05/03/microsoft-yahoo-bid-over/ http://hexia.net/frettavefur/technology http://laurent.pierssens.com/2008/05/04/microsoft-walks-how-low-will-yahoo-close-tomorrow/

http://mp.blogs.com/

http://seekingalpha.com/article/75643-where-will-yahoo-close-today

http://www.alleyinsider.com/ http://www.alleyinsider.com/2008/5/play_the_where_will_yahoo_s_stock_go_now_game_yhoo_ http://www.collierclan.net/mark/index.php/2008/05/04/yhoo-stock-price-poll/ http://www.contentmatters.info/

http://www.contentmatters.info/content_matters/2008/05/microsoft-ends.html http://www.stoweboyd.com/message http://davemartin.blogspot.com/2008/05/if-all-else-fails-immortality-can.html http://www.buzzya.com/2008/05/04/microsoft-to-yahoo-take-a-hike/ http://mojo-ramblings.blogspot.com/2008/05/microsoft-and-yahoo.html http://amaappendagy.blogspot.com/2008/05/spliced-feed-for-social-media_04.html

http://technology.nuovoportale.com/microsoft-to-yahoo-take-a-hike/ http://swik.net/Technology-News/GigaOm/Microsoft+to+Yahoo:+Take+a+Hike!/b4tv2 http://nobosh.com/s/play-the-where-will-yahoos-stock-go-now-game-yhoo/57824/ http://www.mybloglog.com/buzz/members/fredwilson/newwith/me/?eid=1209917398_17_48186561 http://aware11.com/play-the-where-will-yahoos-stock-go-now-game-yhoo/

I love this concept. We can work together to figure stuff out. Instead of each of us hosting a small poll on our blogs, we can collaborate on one large one. As for whether the poll was accurate, too soon to know. The wisdom of the crowd was around $22/share this morning before the market open. So I lobbed in a limit order before the market opened at $22 for the day. As of now, that order has not been filled.

We'll see if the stock gets to my $26 prediction. As of now, it's approaching $25. So much for the wisdom of crowds I guess.

Where Will YHOO Close Today?

I put up a poll on this blog yesterday and a number of other blogs picked it up or linked to it. The net result was about 1,800 responses as of 6am eastern this morning. You can track the responses (and the number of them) at this poll result page.

The wisdom of the crowd is the closing price today will be $22. I took the percent of vote at each price level and then multiplied them out to get that expected value. Here's the distribution of votes:

The look of this chart tells me that I should have let people vote for some lower prices and that $16 vote was chosen by a number of people who would have voted for lower prices. That would have brought down the expected price, but not by much.

So if my poll is correct, YHOO will be down almost 25% today and I suspect the biggest drop will be in the morning. That's $8bn of market cap lost.

As most of you know, I think Yahoo! made the right choice by walking away from Microsoft's bid. I think it was a wakeup call and they can and will deal with much of what ails them.

Yahoo! had about $2bn of EBITDA in 2007 before you add stock based comp charges. At $32bn ($22/share), Yahoo! will trade at 16x EBITDA and that's not including the impact of their cash, their Yahoo! Japan stake, and their Alibaba stake which together add up to $14bn of value or $10/share. If you back that out, Yahoo!'s a bargain at $22/share.

So if it gets there today, I'll be buying some. I still think it ends the day at $26/share, which was my vote that kicked off the poll.

Where Will YHOO Close At On Monday Afternoon?

Quizzes by Quibblo.com

I voted already and voted for $26/share. I think Microsoft has shown how much value Yahoo has and the market will reflect that once it thinks this through.

And please feel free to embed this poll in your blog. It's all one big poll so the more embeds the more votes we'll get.

My Thoughts On MSFT/YHOO

Reading the ms/yhoo news on my bberry via twitter. I know I'm in the minority but I think yhoo did the right thing. Great outcome

The Tow Pound

Its been about 20 years since I had my car towed. It happened today during my son's baseball game. The parking spot I used last sunday apparently is a tow zone the other six days of the week. A good reminder to check the signs every time you park

The tow pound is located on the west side highway at 38th street. It in the same place I went to get our mustang 20 years ago

Like many government run operations, its not particularly efficient. The line is long and full of pissed off people. No wonder the workers are behind bullet proof glass. It takes about 45 minutes from the time you arrive until you get your car back if you have all your paperwork. You must have your drivers license, your registration, and your insurance card if you want to get your car back.

It used to be you had to show up with $185 cash to get your car back. They take credit now. That's progress.

The coolest part of the tow pound is the pier full of cars and tow trucks. Its one of the biggest indoor parking lots I've ever seen.

And there are quite a few cars there which appear to have been there for quite a while. I thought the city took possesion after a short time and auctioned them off. Apparently not.

Ask For The Order

Words of wisdom from Steve Kane (actually Steve's dad):

btw, the best advice my old man gave, and the advice he drilled most emphatically and repeatedly was, ASK FOR THE ORDER. you'd be amzed how many people talk to customers forever and never actually say ask for the order...

I saw Steve's comment right after I read a long email from an entrepreneur (way too long, emails should be no more than three paragraphs) that went on and on about his business but never once asked us to consider an investment.

Ask for the order.

Listening To Your Customers Is Hard

My partner Albert says:

In building a business it’s generally considered a good idea to listen to your customers...  As it turns out though, listening to customers is a lot easier said than done.

And then he goes on to explain why that is so and what you can do about it.

And Who Do The Other 17% Think Will Win?

My other thought when looking at this chart was "if these were two stocks, what would people be doing with them?"

Why Can't Microsoft Close The Deal?

TechCrunch has another Xobni rumor this morning. This one says that Xobni walked away from a deal to sell itself to Microsoft:

But the deeper that Xobni got into the discussions, the less comfortable it felt about its eventual fate inside the Microsoft machine. The fear was that Xobni would end up nothing more than a feature of Outlook. Microsoft wanted the entire team to move up to Redmond, and was vague in its answers about what it had planned for that team, or the product. In the end, the body language just wasn’t there.

This rings true to me because I've seen this happen before. Microsoft has trouble closing deals because when developers and entrepreneurs see their future inside of Microsoft, it often isn't pretty.

It goes to the bigger question of the Yahoo! fight. Henry Blodget says Microsoft is willing to up it's offer a couple bucks per share. But here's something to chew on. If this was Google trying to buy Yahoo! (an impossibility for anti-trust reasons), this deal would have been done a long time ago.

Microsoft messed with the technology industry for a decade and it's image in the industry has never really recovered. When Google talks about "do no evil", who do you think they were talking about?

The Lessons of Rev Wright

Like many (but not all) of you, I've been attracted to Barack Obama's message of unity and inclusion.

I didn't vote for Barack because I was afraid of what has now transpired. I went for the devil we know over the devil we didn't. But I've been rooting for him.

The notion of a post-boomer political realignment around the challenges that face us instead of the issues that divide us is seductive and powerful

Of course, that message has now been tarnished and we (or at least many of us) are asking 'was it just talk?'

I don't believe it was just talk and I don't believe Obama is a snake oil salesman telling us what we want to hear so he'll get elected. I believe Barack Obama wants to lead this country to a new place and tackle the important problems that our nation is facing in the 21st century.

But the whole Rev Wright fiasco tells me that our country is not yet willing to move behind the racial hate and anger, the religious divisions, and the bitter resentments that cynical politicians play upon to attain and retain power

I am not sure even Shakespeare could have concocted such a potent tragedy. A good and kind man who attempts to unite a divided land is stabbed in the back by the preacher who married him and baptized his children. And then the man of god calls him a "a politician" just to throw some salt in the wounds.

I believe in god but not in relgion organized by man. And I think the men (and women) who have cloaked themselves in the name of god have often done great harm. Religion is not the root of all evil but the people who traffic in it sure can be..

And Rev Wright is just one more in a long line of them

Do You Ever Want To Temporarily Unfollow On Twitter?

I know that I have that urge all the time. I will not reveal the guilty parties. In fact, I may be guilty myself of over twittering.

In any case, here's a cool twitter app built by Union Square Ventures' very own Andrew Parker.

He calls it TwitterSnooze.

Go ahead an snooze me if you like. I won't take it personally!

Is "Social Enterprise Software" An Oxymoron?

I've been thinking about this since I saw the news on Monday morning that Jeff Dachis, one of the more successful NYC entrepreneurs in the first Internet wave, has partnered with Austin Ventures to "create an industry leading strategic consulting practice and an enterprise class Social Software-as-a-Service (SaaS) suite."

Jeff is a talented entrepreneur who has been working on the web for longer than most so it's a challenge he is certainly up to. But I still wonder if enterprise software can really be "social". It's something we have struggled with since we started creating our investment thesis for Union Square Ventures in 2003.

The term "social software" certainly means very different things to different people. I like the way Wikipedia defines it:

Social software is normally defined as a range of web-based software programs. The programs allow users to interact and share data with other users. This computer-mediated communication has become very popular with social sites like MySpace and Facebook, media sites like Flickr and YouTube, and commercial sites like Amazon and eBay. Many of these programs share characteristics like open APIs, service oriented (customizable), and the ability to upload (data, media).

Six web services are mentioned in that paragraph and none of them are enterprise oriented services. That, in and of itself, doesn't mean much. But when you think of terms like "open APIs", "customizable", and "upload data/media", the enterprise with its need for security and control doesn't really come to mind.

Certainly there have been some social software successes in the enterprise. Wikis come to mind. We use a wiki from Jot (now Google) to run our business. Other wiki providers like PBWiki and Socialtext have also been successful. And one can make the argument that Salesforce.com is at its heart social software.

And then there are the examples of consumer facing social web apps like delicious, linkedin, AIM, and skype that have been brought into the enterprise because they just simply get the job done better than many enterprise class applications.

But to me, the heart of social software is the community of users that forms around the software/service. The community provides much of, if not all of, the value of social software. What would twitter or facebook be without users? Nothing. Same with blogger, flickr, friendfeed, etc, etc.

And most enterprises don't want their employees to be active members of a community that it can't control, monitor, and moderate. So the software that tends to be adopted by the enterprise is usually hobbled by the needs of the enterprise and cannot get that magical lift that an unbounded community provides.

So I will be watching what Jeff builds with interest. He's always been at the cutting edge and I hope he will push the envelope in thinking about how the enterprise can successfully adopt social software. Because in my mind, the world of enterprise software has been awfully anti-social to date.

UPDATE: Here are some "related links" I found after posting this earlier this morning:

Where The F**ck Is The Enterprise 2.0 Market?

The Problem With Enterprise 2.0

Incrementalism and The New New Thing

Organizations and Scaling

My partner Albert has some good (and brief) thoughts on the relationship between organizational dynamics and scaling issues. He posted them on his tumblog this morning. Here's the lead in to his post:

There is a lot of information out there on various technical approaches to scaling.  What most of those leave out is the interaction between the choice of architecture and organizational scaling.

If you are thinking about scaling issues, I think it's worth the minute or less it will take to read.