Tuesday, September 8, 2009

Some Obvious but Awesome Tips for Customer Development Online

TechCrunch is out with a very interesting post by Nigel Eccles, co-founder and CEO of Hubdub Ltd, the company behind Hubdub, the news prediction game, and Fanduel, the daily draft fantasy sports game. The post, The Long Lost Formula for Start-up Success, centers around Eccles' experience developing his companies inside of the framework of Steve Blank's customer development driven product design methodology. While so much of what is recommended sounds obvious, the article is definitely worth a read and has convinced me to take The Four Steps to the Epiphany off of my wish list and actually start reading it.

There is something that turns sane men irrational when it comes to thinking about developing a business on the web. As if revenue, or more importantly cash flow cease to matter in the quest to build something people use. The framework provides a great reminder that the goal is always to make a product compelling enough that users would be willing to pay for it. Whether you charge or not is not necessarily the point, but creating something people are willing to buy should be. This forces you to think more critically about the real value and scope of the problem you are trying to solve.

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Wednesday, April 22, 2009

Our Legal System is too often a Tax on Innovation

Fred Wilson has a very thoughtful post from several months ago (and ongoing dialog) on his blog about how "patent trolls are a tax on innovation." In his words, the problem occurs "when [an] entrepreneur and the company he/she creates is hit with a baseless claim from a patent troll represented by lawyers working completely on contingency." The issue is that a lawsuit, regardless of whether it has any merit whatsoever, takes quite a bit of time and more importantly money to fight. This detracts from the start-ups ability to survive and focus on what is most important, innovation. What often ends up happening is that the start-up, if funded, ends up settling out of court to avoid a prolonged legal battle.

Early Woodward light bulb patent purchased by ...Image via Wikipedia

While the flip side of the patent protection argument here has to do with protecting small inventors, Wilson rightly claims that a "solo inventor who does not commercialize his/her technology does not bring nearly as much economic value (and jobs) to our society as the entrepreneur who actually takes the risk, starts the company, hires people, commercializes the technology, raises the necessary capital, and builds lasting sustainable value." This is a key point, that it is not necessarily about filing the patent or just thinking of the idea first but it has just as much to do with the implementation and realization of the idea on a scale relevant to society.

While I will not debate a topic so well covered on Wilson's blog I wanted to take his argument one step further, to say that it is the legal system, and not patent trolls, that are a tax on innovation. The problem isn't that there are companies rolling up patents and suing start-ups, the problem is that we live with a legal system today where lawyers work on contingency, courts ignore the notion of reasonableness, and more generally every company that tries to create something new subjects itself to endless amounts of litigation.

Having recently read about a court case involving a failed S&L suing the U.S. government claiming it was the cause of its failure, I can say that I have seen first hand how our legal system has created unnecessary bloat around legal process. From judges who can't keep their cases straight, to lawyers who bill by the hour on one side and bill by contingency on the other, to $1000 expert witnesses - I feel that we are held hostage to a system where those getting paid decide when, why and for how long trials will last. The plaintiff in these frivolous lawsuits is little more than an accomplice to a system that encourages such practices (read ambulance chasers).

I don't have an issue with lawsuits as they are an indispensable part of maintaining a thriving and fair free market, but my issue has to do with the complete lack of a reason when it comes to allowing such lawsuits to gain traction. It is as if there is no conscience or appeal to rationality by all the parties involved where lawyers can work for years on a case they know is frivolous, making the excuse that they are tools of the law, and the plaintiffs can sue without fear or cost as they are encouraged by lawyers willing to work on contingency.

Take for example this scenario: if I decided today to sue my former employer for sexual harassment they would have to spend hundreds of hours digging up every e-mail from anyone I worked with, interviewing everyone I interacted with, and documenting it all for a discovery process where lawyers billing at hundreds of dollars an hour would be needed. As a public company, moreover, the potential negative press would be further reason for my former employer to seek a settlement before anything were brought to court. This is why most companies have funds set aside for legal disputes as a necessary course of business.

It is hard to know what the total cost of these out of court settlements is, but it is safe to say that a significant portion of this cost is little more than a tax on those willing to put their neck on the line to innovate.

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Sunday, March 1, 2009

"Francisco's Money Speech:" Some Thoughts on the Financial Crisis

In times like these we fall back on overly simplistic cliches to describe what has happened to the world financial system, to vilify the Wall Street titans that we hold to blame for much of what is happening today. We reduce the entire problem to Gordon Gecko's "Greed is Good" philosophy and we blame it on the moral depravity of the "fat cats". But we each neglect to accept responsibility for our roles in the crisis. Whether it was from seeking more aggressive returns on our savings or prospecting on a new home or pushing our credit card debt to new heights, we helped give those institutions the fodder they needed to go out and commit incredible acts of greed.

The mistake is thinking it happened all at once, that at some point they, and we, made some explicit decision to look for shortcuts and seek easy returns on our money. It wasn't a moment at all, it was thousands of little ones by you, me, the press, regulators & Wall Street that somehow made us get to this point. It was by allowing, talking about and even envying the titans of Wall Street that this all came to be. Take for example an article I found from May 2006 that writes so deferentially about the outlandish salaries of major Wall Street movers:

"The highest paid chief executive in 2005 was Richard Fairbank of Capital One Financial Corp., who earned $249.4 million, according to Forbes...Simons, 68, of Renaissance Technologies Corp., more than doubled the $670 million he earned in 2004, when he ranked second among hedge-fund managers. His $5.3 billion Medallion fund's return after taking 5 percent of the fund's assets and a 44 percent performance fee was 29.5 percent in 2005."

The problem here is that we let single individuals take more money in annual income than most
large corporations bring in revenue and we congratulated them for it. The truth is how many of you, given the opportunity to make $400 million in a year for doing something on the surface to be benign wouldn't have done it? And we hide our acceptance for this greed under the thin veil of our system being a meritocracy. The same articles goes on to assert that "the founders and owners are taking the lion's share of the profit...these guys created firms and risked capital, [so] you can't say they don't earn it.'' Well they didn't earn it, just like you wouldn't have earned your return on Citigroup if it were now at $100. And just because the system lets you make a quick buck, it doesn't mean that you should or that you would be better off for it. Maybe its time that we all start thinking more about how much value we actually create rather than how much ability we have to consume.

Better said in the words of Ayn Rand, through the character Francisco d'Anconia in Atlas Shrugged:

"But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. Money is the scourge of the men who attempt to reverse the law of causality--the men who seek to replace the mind by seizing the products of the mind.

Money will not purchase happiness for the man who has no concept of what he wants: money will not give him a code of values, if he's evaded the knowledge of what to value, and it will not provide him with a purpose, if he's evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent. The man who attempts to purchase the brains of his superiors to serve him, with his money replacing his judgment, ends up by becoming the victim of his inferiors. The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money. Is this the reason why you call it evil?

Only the man who does not need it, is fit to inherit wealth--the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one, would not bring back the dead virtue which was the fortune. Money is a living power that dies without its root. Money will not serve the mind that cannot match it. Is this the reason why you call it evil?

Money is your means of survival. The verdict you pronounce upon the source of your livelihood is the verdict you pronounce upon your life. If the source is corrupt, you have damned your own existence. Did you get your money by fraud? By pandering to men's vices or men's stupidity? By catering to fools, in the hope of getting more than your ability deserves? By lowering your standards? By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment's or a penny's worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame. Then you'll scream that money is evil. Evil, because it would not pinch-hit for your self-respect? Evil, because it would not let you enjoy your depravity? Is this the root of your hatred of money?"

See the link here to the authorized reprint of the full excerpt of "Francisco's Speech."

Update: Just found a great video that helps explain the dynamics that caused the Credit Crisis in extremely easy to understand terms. Worth watching if you have ANY doubt about what actually contributed to the current crisis.

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Monday, February 23, 2009

The "Hole in the Wall" Experiment: Bridging the Digital Divide

What most people don't know about the 8 time Oscar winning movie Slumdog Millionaire is that it was inspired by a nearly 10 year old experiment dubbed the "Hole in the Wall." Vikas Swarup, an Indian diplomat, several years ago heard about this experiment and was so inspired that he wrote Q and A, the novel that later became the film.

So what was this "hole in the wall"? It was a study into how children of the slums could manage to teach themselves, with absolutely no instruction, how to use the web and eventually learn from it. After the brilliant Sugata Mitra installed a computer screen with a simple roll wheel mouse and click button facing the slums near his office, he observed that children all of the sudden started to figure out the rules of the device. Soon they were accessing websites, learning English, and using the computer to play games and read the news. While it sounds too good to be true, especially considering the fact that most of these children lacked any formal education or basic literacy, Mitra verified the results across dozens of different slums over the last 10 years. For a quick background on the project see Frontline's short piece (8 minutes) on the the results here.

While most would have just written off the discovery as little more than a curiosity, the polymath Mitra began to study the self organizing behavior of the children to understand how exactly they could manage to teach themselves. The result was a fascinating analysis of how several tiers of learning would result based on the child's proximity to the computer screen, where those in each tier would learn through differing ratios of participating vs. watching - depending on how far away from the screen they were (see minute 17 of the video above for a more precise description of how Mitra thinks this works).

By Mitra's analysis, about 300 children can learn basic computer literacy from 1 computer in just 6 months. His conclusion is a bold one, that children have the capacity to learn on their own and where necessary (because of a lack of teaching resources) tools such as the computer should be used to replace the broken educational system. Combine this assumption with Nicholas Negroponte's One Laptop Per Child campaign and a potentially explosive combination could soon hit the developing world. I expect we should be begin to see the first success stories of self taught students in the coming few years if in fact Mitra and Negroponte's view, that all you need to do is give a child a computer, is correct.

For more information see the the Hole in the Wall Website here.

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Saturday, February 21, 2009

What El Sistema Can Teach Us About Education

Jose Antionio Abreu was recognized this year at TED 2009 for his role as the founder of the hugely successful music education program El Sistema in Venezuela. Begun in 1975, there are now over 102 youth and 55 children's orchestras educating a total of more than 100,000 children. Most are from impoverished backgrounds, and Abreu's program has managed to create several internationally renowned musicians including the conductor Gustavo Dudamel and the bassist Edicson Ruiz.

While the program has obvious cultural and artistic benefits I was particularly interested in what Abreu said (see speech below) about music education's effect on the communities it reaches in Venezuela. By no longer allowing art to be the "monopoly of elites" El Sistema has allowed music to "become a social right" that anyone regardless of socioeconomic background could cultivate. As a result of children's being enrolled in the program they cultivate a sense of punctuality, constancy and pride. This pride, Abreu says, resonates throughout the impoverished families and communities where these children live. And it makes sense, by bringing this enormous feeling of pride and art into the home, and having the child practice alongside their mother or father, injects a sense of purpose and direction in these children's lives.

Contrast this to what we see so often today as the other side of the coin, where children and their parents are disjointed from the basic realization that with hard work can come reward. For many people this basic truth, that consistent work breeds skills, talent and education, has been lost in a web of excuses about the role of society, the "man," or the system. No longer is it believed that effort equals performance, and this is where I believe music can make the most difference. The underlying tenet of learning an instrument is that diligence, consistency and practice pay off can work wonders for any community where music education exists. Luckily Abreu and his program are getting the recognition they deserve and we should expect to see similar initiatives in many countries around the world in the coming years. Hopefully that will include the U.S. as well.

If you want to find out more see the links below or you can watch a socumentary done on El Sistema in 2004 called Tocar y Luchar and more recently there have been features in programs such as 60 minutes.

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Monday, February 16, 2009

Barry Schwartz's paradox of choice

In his book, Barry Schwartz talks about some of the reasons why modern Western societies suffer from ever increasing trends of depression and unhappiness. While the "grass is always greener" view of human nature is something we have all thought about and hold to be self evident, Schwartz takes this discussion a step further and makes his conclusions personal with simple examples of everyday situations that contribute to unhappiness in our lives.

In a speech he gave in 2005, Schwartz describes how even the simple act of buying salad dressing - of which his local grocery store has over 75 options - can become a source of stress or negativity if the wrong choice is made. It is this excess of options, this extreme freedom of choice in our lives, that creates a pressure to choose correctly and ultimately leads to an acute awareness of when we fail to make the right choice. By understanding all too clearly the opportunity costs of our decisions (which in large part is propagated by the marketer's goal to "inform" us the consumers - if interested in this topic read Buyology by Martin Lindstrom) we become critical of ourselves when the wrong choice is made.

Not only applicable to the trivial things such as choices in food or clothing in our lives, the paradox of choice extends to our decisions regarding career and social setting. From the ever present dissatisfaction that many have with their current jobs to wondering if you have chosen the right partner, it is our awareness of the alternatives that has corrupted our ability to be happy. In essence happiness is settling on something. Basically nothing more than an appreciation - based on ignoring everything else - of what we have over what we could have. Maybe this is why divorce is so prevalent in the United States today, because married people know that at the flick of a switch they can be single testing all of the options that are available to them.

The issue is one worth thinking about and meditating on because by all current measures our options our only going to continue to increase. Whether it happen to you while on a vacation or while sitting at your new job, it would be smart to stop yourself from ruminating over all of the other things you could have done. Although there is a fine line between optimizing your choices versus obsessing about your failures maybe just maybe you would be happier if you stayed put.
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Saturday, January 17, 2009

Do Schools Kill Creativity?

The British author and educational specialist Ken Robinson spoke at TED in 2006 and gave a great speech about the need for education reform. With great humor he argues that the current educational system is structured to punish non conformity and in the process wipes out much of a child's creativity.

Robinson just published "The Element Book", a study of some of the most influential academics, musicians, authors and performers of our time. He seeks to understand at which point "natural talent meets personal passion" and tries to highlight some of the conditions conducive to fostering creativity and innovation.

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90% House Re-election Rate

Larry Lessig is out with a new post that sheds light on one of the most important problems affecting our political system today. In a recent interview Lessig explained his decision to move from Stanford Law School, where he focused on copyright and trademark reform, to Harvard where he will now lead a new center to study and combat the problem of corruption.
In this NPR interview, he explained the move as stemming largely from his experience with Congress regarding copyright reform.

Nowhere does Lessig accuse Congress of being corrupt explicitly, but he argues that it is the perception of impropriety that is so damaging to both the effectiveness of Congress and its place in the eyes of the American population. As with a Doctor who accepts pharmaceutical company perks for prescribing a certain drug, it oftentimes isn't the action itself that is damaging or even wrong necessarily, but the conflict of interest question is what corrodes trust and support for such indispensable institutions.

Transparency International has done a good job of making this distinction, where its Corruption Perception Index rates the world's most corrupt countries. What they have realized is that the perception of corruption serves as a corrosive just as bad perhaps as corruption itself on the respect for and faith in a government's institutions.

So if you are wondering why I am mentioning Lessig think about this: Lessig has known President Elect Obama since their days teaching Law at the University of Chicago together and it is well known that they are friends. Let's hope that Obama's thinking regarding technology and corruption are influenced by Lessig's views and push for change. Perhaps this is why Lessig was not chosen to head the FCC as some had suggested, because Obama prefers to keep him as a behind the scenes adviser. We should be so lucky.

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Friday, January 16, 2009

Falling distributions costs will change the world

Chris Anderson, the curator of the TED conferences oftentimes referenced in my posts, recently wrote an interesting article titled "A Web-Empowered Revolution in Teaching". Here, he makes asserts that "throughout history, the vast majority of humans have not been the people they could have been." The obvious reference here is to the lack of resources that the majority of the population of the world has faced throughout history and how this has prevented the realization of full human potential. He argues that now, things are different, change has come, and the internet can now deliver some of the most important variables necessary for fostering human achievement. Anderson argues that it is the combination of knowledge and inspiration that shape what we do, and the cost of distribution for both of these has plummeted with the rise of ubiquitous web access.

Very much in line with Nicholas Negroponte's One Laptop Per Child Program, Anderson's argument stems from the underlying assumption that all people share an equal potential for becoming the next intellectual, political and spiritual leaders of our time. Given the right mix of knowledge and inspiration, anyone should be able to achieve anything. While I agree and hold this to require no further explanation, the reality is that many people do not share this view. In fact I would venture to say that in the United States, the majority of people do not think that everyone is born with such limitless potential. At the core of the argument is each person's view of education and the impact it can have on a child's life.

From being exposed to topics that inspire to having a mentor or role model - it is clear that being nurtured matters. More importantly, oftentimes the issue goes deeper, to the very heart of children's expectations about hard work and the resulting payoff. This is the aspect of education that seems especially damaged in the inner city's of the United States where there is often a lack of hope. Not only do most of these children lack adequate resources, but far worse they actually believe that the system is against them and that there is no reason to even bother trying.

As if the rules of the game were stacked to make them lose, many children don't even dare to pursue a topic they are passionate about. Here is the problem and this is where the internet might be able to help. If a child is interested in mathematics or writing for example, traditionally that child would have to find inspiration in his immediate surroundings. If that child lacked the encouragement or perseverance to follow their topic of interest even without encouragement (as most children tend to) then they might just move on and forget about it.

This is where the power of the web marks a significant shift from the rest of history: now a person can connect with even the most obscure of topics and find a community to particpate in, as long as they have a web enabled computer. You can tap any micro-niche in the world and begin to soak up endless amounts on that topic. Take me for example, I know nothing about calligraphy, and in under a minute I found links to all of the calligraphy institutes and online resources in the world, including online how to videos, downloadable samples, history, community and so forth. Clearly the power of the web extends to everything and anything I can imagine.

So two questions arise from this thought exercise: 1) How do we make sure children find what interests them? and 2) How do we convince these children that working hard and pursuing their interests can pay off? Chris Anderson through his TED Conference and the resulting video clips is working hard at exporting the inspiration and passion of its speakers to the web. Combe this with Negroponte's OLPC effort to get laptops out to children and initiatives such as M.I.T.'s Open Courseware program or Stanford's Engineering Everywhere initiative and children already have most of what they need to start thriving.

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