Tag Archives: Trends

Yes, It Is A Tech Bubble

Posted on June 14, 2011 | 5 Comments

We’ve seen lots of talk recently about whether there is another technology bubble going on, with LinkedIn’s super successful IPO, and shares of Facebook, Twitter, et. al. trading on secondary markets at multibillion dollar valuations. I lived through the first dot.com bubble in 1999-2001, and based that experience I am saying right here, categorically and emphatically, that we are definitely in another bubble. I will add some caveats at the end, but listed below are my top reasons for calling this a bubble. Every single thing I list below also happened in 2000, and made rational observers then realize that we were in a bubble. The more things change, the more they stay the same.

A) Insanely high valuations with no reasonable relation to the metrics (revenue, income) of the company (LinkedIn, Groupon)

B) Retail investor hunger for tech stocks. Back in 1999, we were all talking about Joe Kennedy’s famous line: “when you get stock tips from your shoeshine boy, it’s time to sell.” When the public is hungry to invest in a category, it’s a bubble

C) Farcical metrics. In the dot.com era we were supposed to look at eyeballs, not revenues. Now Groupon tells us that we should ignore marketing costs and look at “adjusted consolidated segment operating income”

D) The emergence and venture funding of many copycat businesses. How many flash sale or social coupon businesses do people need? And what about Color, which raised $41 million to launch yet another iPhone photo sharing service, and reputedly only shared 5 photos during the iPhone developers conference and had its president leave within months of launch?

E) Especially the emergence and venture funding of narrow vertical copycats. For example, Juice in the City is Groupon for moms, Pawsley is Facebook for dogs, Everloop is Facebook for tweens (who will, by definition, leave as soon as they are old enough to join Facebook), etc. Anyone who lived through the dot.com remembers “vertical portals.” That didn’t work out so well.

F) Society and entertainment figures or kids fresh out of Stanford and Harvard business school as entrepreneurs.  (Juice in the City, Rent the Runway, Ashton Kutcher.)

G) Venture funds you’ve never heard of leading rounds in vertical copycats (Juice in the City funded by HU Investments and Tandem Enterprises)

H) Companies you’ve never heard of buying prime time TV commercials (Peel)

I) Ridiculous and nearly identical company names (Buzzr, Socialzr, Apptizr  etc.)

J) Weekly launching of new “incubators,” in which people, some with limited experience, will mentor new companies in return for some equity (Growlab, Capital Factory). Or one incubator, 500 Startups, that funded two nearly identical companies: StoryTree and Vvall.

K) Putting a tech sheen on non-tech companies so that they can raise money at tech company valuations (The Melt)

L) Features posing as companies. A clever little web widget, even a useful one that gets a lot of users, might not be enough to support a viable company. And starting companies that you know can only succeed by being acquired is a classic bubble move. For example, StumbleUpon, Blippy. Actually, Blippy alone is enough to prove my bubble hypothesis. Only in a bubble could that company have even existed.

Now for the caveats, or counterpoints:

As many have noted, some of these companies, particularly the big ones (LinkedIn, Groupon) are generating real revenues. Back in 2000, revenues were a rare thing. However, I should note that neither LinkedIn nor Groupon are particularly profitable. Neither is Pandora. Twitter still doesn’t really have a revenue model. The random widgets and apps that are raising money? Not so revenuefull.

There are more customers now. With the spread of broadband and smartphones, an online business has a much larger base of potential customers than in 1999. That means that the same capital investment can, theoretically, be spread over a much larger revenue base.

This bubble is focused on consumer-facing internet businesses. Not all tech companies are being lifted by the bubble. Microsoft, Google, Amazon and the ilk at still trading at normal to relatively normal valuations.

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Questions and Comments About Words

Posted on June 11, 2011 | Leave a comment

Why is the word “emasculate?” Wouldn’t it be better if it was “demasculate?” And then you could reverse it, with “remasculate.”

And speaking of improving words, “nefariousness” is just a lame version of “nefarious,” which is a great word. My proposal: “nefarity” as the new noun version.

Final comment: “adequacy” is merely adequate. “Adequacity” is a much fuller and rounder way of describing the state of being adequate. And wouldn’t we all be better off if we were more accepting of things that are simply adequate?

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Posted in Pop culture

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The Newspaper of the Future (ie. Now)

Posted on May 27, 2011 | 3 Comments

The painful decline of the daily city newspaper is well chronicled by now, so much so that there is even an entire website dedicated to watching newspapers die. The causes are myriad (see the footnote below), but they can generally be tied to A) the internet; and B) changing patterns in the consumption of information.

Papers have tried a variety of approaches to counter these trends, with most of these approaches based on changing websites (paid, free, semi-paid!) and cutting costs. Few of these approaches, however, have even touched on content strategy. As regular Thoughtbasket readers know, I firmly believe that content is king.  My thoughts on what city newspapers should do are highly influenced by my reaction to my local news market, San Francisco. SF’s historical daily, The Chronicle is, and always has been, a terrible paper. The Chronicle’s website, SFGate, is even worse than the paper.

My advice is pretty simple: relentless focus on local journalism. Cover city hall, cover local issues, cover local teams. Big parade for Columbus Day? Cover it. District attorney owns a strip club on the side? Cover it. Downtown real estate prices dropping? Cover it. Cut costs by getting rid of all non-local coverage. A city paper doesn’t need any national or world coverage. License a few AP stories to give your readers the big picture basics, but certainly don’t have a Washington bureau. Maybe, if your city is big enough (ie. Chicago, LA and not much else), you have one reporter in DC to cover what your Congressmen do. In the same vein, maybe you have a reporter in your state capital, but purely to cover local issues. Leave broad coverage of the state capital to that city’s paper. If your readers want state, national or world news, they know how to find it: on the internet!

Do people care about local coverage? Absolutely. Think about the old axiom that all politics is local. Because people care a lot more about the pot holes near their homes than they do about Washington DC discussions of foreign aid. In my city, San Francisco, there are not one but TWO new papers that have launched purely to provide deep local coverage. Both are non-profits, it’s true, but they clearly sense a consumer need or they wouldn’t have bothered to raise the money required to launch. And that is in addition to the two local alternative weeklies, one of which has repeatedly (like the two stories summarized here) broken major stories about local politics that the Chronicle has missed. Plus you have AOL’s Patch, which provides hyper-local coverage. Moreover, the old afternoon paper, The Examiner, is still around, although kept alive through some payment deal with the Chronicle. The presence of all these local news sources tells you that people want to read local coverage. The question is why the big legacy local papers, who should own this space, don’t cover it.

Some people say that you can’t make money on local news because good local coverage will eventually cause discomfort to the powerful and wealthy in the community, who will then pull advertising. Certainly a strong local paper will, at some point, have to cause some pain to the city’s power brokers. Since most cities are run by a few wealthy families, a couple of businesses, and real estate interests, everybody knows what the sensitivities are. But it’s exactly those sensitivities – corrupt politicians, incompetent civil servants, venal and debauched businessmen – that readers crave. Readers want to know the truth about the powerful, and as long as a paper speaks that truth, it will have readers. And if a paper has readers, there will always be advertisers ready to pay to reach those readers.

Footnote with more specific causes of newspaper decline:

  • Craigslist
  • The end of the local department store
  • Decreased public acceptance of journalistic “authority”
  • Family dynasties seeking cash instead of a legacy (hello Bancrofts)
  • A generation that prefers screens to paper
  • Lower margins for car dealers

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Posted in Business, Trends

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More on Microsoft-Skype (Microskype?)

Posted on May 11, 2011 | Leave a comment

The NY Times did a nice summary today of what analysts are saying about the Microsoft/Skype deal. And I don’t think it’s nice just because it confirms a lot of what I said yesterday. I think it’s nice because the author does a good job of quickly capturing and explaining a variety of viewpoints.

FYI, if you are over your 20 article limit on the Times, just clear your cookies. Bing, got more Times!

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Microsoft + Skype = Winning

Posted on May 10, 2011 | 2 Comments

Here are some of my initial thoughts on why the Skype deal is a good one for Microsoft, presented in sections, like a good PowerPoint.

Cool features that won’t make much (or any) money, but might improve market share:

  • In game voice calls when using Xbox
  • Skype someone straight from Outlook
  • Or Hotmail, if anyone even uses Hotmail any more
  • Skypeout someone at any phone number that shows up in any Office application
  • Find a number in Bing and one click call it

Ways Microsoft might use Skype to make money from businesses:

  • Integrate features into Exchange server to enable enterprise VOIP
  • Better yet: integrate features into the suite of online apps for small business – they need the savings on phones more than enterprises and lack the skills to set up their own VOIP
  • Implement a “call me” feature for advertisers

Strategic plays:

  • Integrate Skype into their investee Facebook to help counter Google’s voice products
  • Continue to wall off Yahoo from anything business related, relegating the ‘hoo to being a consumer content company
  • If the SMB play works, leverage it against Zoho, Google docs and other productivity apps
  • Build relationships with phone carriers who are moving to IP networks and losing landlines as fast as Lady Gaga is losing fans

Where it won’t work, even though Ballmer thinks it will:

  • Microsoft mobile OS

Did Microsoft overpay at $8.5 billion? Definitely. But they’ve got about a zillion dollars in cash, earning about zero percent interest, much of it sitting untouchable overseas, where Skype is conveniently located. So what’s a billion or two between friends?

Of course, all of the above assumes that Microsoft executes, which is a big (BIG!) assumption. After all, if Microsoft were good at executing this stuff we would all be using Outlook Live instead of Gmail.

See here and here for NY Times coverage, here for TechCrunch and here for GigaOm.

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Links to Great Articles

Posted on January 14, 2011 | 2 Comments

Yves Smith on the macro effects of oversized Wall Street pay.

I normally don’t love Paul Krugman, despite his Nobel Prize, since he is too strident and preachy and predictable, but this take on what really separates Right from Left in America is pretty interesting.

John Mearsheimer on American foreign policy and realpolitik.

John Cassidy on whether Wall Street adds value to society. Hint: it doesn’t. This is from the New Yorker, so it won’t be available online forever.

Law professor David Beatty compares American constitutional jurisprudence to how they do it in other countries. I’m no expert, but I found it fascinating.

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Religion and Politics is a New Mix

Posted on December 3, 2010 | 3 Comments

I recently went to hear a lecture by Robert Putnam, a Harvard professor who is best known as the author of Bowling Alone, a book about the decay of civil institutions in America. Putnam has a new book out, called American Grace, about religion in America and its intersection with politics, and his lecture was a summary of that book. The book is based on both historical study and a large survey of US citizens, and has two main theses:

  1. The mix of religion and politics in America is new and massively polarizing
  2. American religion is so diverse and tolerant, especially among the younger generation, that the above polarization will likely moderate over time

This post is about Putnam’s first thesis; I will add another post soon summarizing his second thesis.

Putnam started his lecture by describing the rise of the religious right and how this is a new development in America. Of course the founding fathers were – mostly – deeply religious men; that’s how people rolled 250 years ago. But historically you could not correlate a person’s religious belief with their political beliefs. There were devout Christians who were liberal and secularists who were conservative. The Democratic and Republican parties each contained a mix of religious beliefs and commitments.

Things began to change in the 1960’s, with the rise of hippies and free love and drugs and rock & roll (all the stuff my parents dug, man). In reaction to this libertine environment, conservative people moved toward more bedrock values, generally in the form of evangelical Christianity. These people got more serious about their religion and then certain church leaders (eg. Jerry Falwell) saw an opportunity to turn that movement into political power. As the religious right gained power there was something of a backlash, and non-evangelicals moved further toward secularism.

Thus you have significant movement to the poles – the religious right and secularism – without any growth in the center. And now you have, according to Putnam, significant correlation between religion and politics. Putnam says the best way to understand how someone will vote is to ask about their church-going, or vice versa. This plays right into the polarization that we are seeing in modern American politics. Of course, Putnam’s theory of religious trends is not the only explanation for the rise of the religious right and political polarization. There were also geographic, economic and racial trends at work. But religion clearly played a role, and this is Putnam’s bailiwick, so I give his theories some weight.

An interesting side note: Putnam says that according to his research, if a person’s politics and religion don’t match, they are more likely to change their religion than their politics. In other words, conservative people move to more conservative churches and liberals move to more liberal churches or to none at all. Given that religion controls your soul whereas politics affects your pocketbook, this is surprising, but the surveys say what the surveys say. Another, less interesting, side note: the waves of religion and backlashes toward secularism described by Putnam could make for a classic dialectic, with their thesis and antithesis, but there is no synthesis. Instead, the movement trends apart rather than together. This is further proof of my pet theory that Hegel was an idiot.

Here is a photo of someone bowling, possibly alone:

Nixon bowls, possibly alone

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Posted in Philosophy, Politics, Pop culture, Religion

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Northern Budgets vs. Southern Corruption

Posted on October 1, 2010 | 1 Comment

Slate recently ran an article by Anne Applebaum claiming that the division that now matters in Europe is no longer east vs. west, but instead north vs. south. According to Applebaum, communist east vs. capitalist west no longer matters. The important division is austere northern countries that manage their budgets and affairs vs. profligate southern countries that spend like drunken sailors, hoping others will pick up the tab.

As Applebaum puts it:

“The South contains all those countries whose political classes have not been able to balance their national budgets, whose bureaucrats have not been able to reduce their numbers, whose voters have not learned to approve of austerity….The North contains the budget hawks”

After reading the Slate article, I read Michael Lewis’ article in Vanity Fair about the Greek financial crisis. Lewis describes Greece as less of a country than a national pool of corruption in which the entire populace knowingly plunders the government treasury.

Pairing these two articles really made me think about this dichotomy between governance and chaos, between bureaucrats who do their jobs and those whose job is merely a path to a bribe. And it’s really just a small leap from governance vs. corruption to civic good vs. selfishness and then to democracy vs. despotism. But once I started expanding Applebaum’s dichotomy into a broader range of behaviors, I started to wonder whether her north vs. south division could be expanded beyond Europe. I think it can be.

After all, the northern hemisphere is generally a lot better managed than the southern: Canada vs. Venezuela, Estonia vs. Syria. Of course, Russia is really far north, but it acts south. And North Korea vs. South Korea reverses the pattern. But I think if you were to average across the hemispheres, Applebaum’s north vs. south dichotomy holds. Germany is to Greece as Greece is to Zimbabwe? Even within the US, the southern states tend to be far more profligate than the northern, as in this awesome blog entry, or this table showing which states spend more federal dollars than they pay in taxes.

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Posted in Politics, Pop culture, Trends

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Why Football Trumps Soccer

Posted on September 23, 2010 | 2 Comments

In a recent post on why Americans don’t like soccer, I alluded to an overarching theory of sports which would provide a broader explanation. That theory is called the Hierarchy of Sports, and was originally promulgated by my college roommate Otis Hammer. The theory is really quite simple: the best athletes gravitate toward the sports that provide the most rewards. Different athletes may value different rewards, of course, but they will all play the sport that generates the most of their favored reward.

In high school, for example, where most athletes decide what sport to focus on, the reward is unlikely to be monetary. The potential for future money in a pro career may have some influence, but for the average 15 year old, the most powerful rewards are more immediate: the adulation of peers. In short, getting laid. What about the joy of playing, you ask, or the fun of teamwork? Yes, sure, those are great, but for most teens those ephemeral rewards pale beside the opportunity to have sex with one of your school’s hotties. If you are the top athlete in your high school, you will play the sport(s) with maximal potential for sex.

At most American high schools, this means football, basketball and baseball. Which, not coincidentally, are the big pro sports in this country. Here is a table from the US Census listing the most popular high school sports. Football, then basketball, then track, then baseball. Of course there are regional and economic variations. Lacrosse or tennis could be the big sports at some schools (Exeter) or swimming at others (Southern California). In some areas, football might trump everything else (Friday Night Lights and all). But generally speaking, if you are a good enough athlete to choose your sport, you’ll choose the one that will help you get some action.

Think I’m crazy? Don’t take my word for it. Listen to Zoltan Mesko, placekicker for the New England Patriots, who came to the US from Romania when he was ten. From a Wall Street Journal article: “A couple years later in high school, Mr. Mesko had to decide between playing soccer, which only parents watched, or football, which everyone watched, including cheerleaders. “No brainer,” Mr. Mesko says.”

The implication of this theory is that sports in the upper reaches of the hierarchy tend to attract better athletes. A great athlete will focus on high-reward sports rather than low-reward ones. Which again means, in much of America, the big three: football, basketball and baseball. Generally speaking, players in the big three are going to be better athletes than players in lower sports. If the guy on the high school tennis team had been a good enough athlete to join the basketball team, he would have, because it would have improved his social standing. Of course, international athletes have a totally different hierarchy, so comparing Roger Federer to LeBron James isn’t relevant.

But in America, the Hierarchy of Sports explains why pro athletes in the big three tend to be so good at other sports. For example, pro basketball player John Lucas was an All-American in tennis at University of Maryland, and even played a few pro matches. Or, going back a little further in time, pro football Hall of Famer James Brown was All-American in lacrosse at Syracuse.

Before you go all counterexample on me, of course this is a generalization. As noted above, how sports rank in the hierarchy can vary, and people can vary too. Maybe some great athletes loved tennis so much that they kept playing it even if playing basketball would have gotten them more action. And maybe the best looking girl in your high school dated the president of the chess club because she liked his brain. But this is a blog, so I get to generalize, and looking across the many data points of life I continue to claim that the hierarchy theory holds.

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On Sacrifice: Eliot Spitzer, Moral Leader?

Posted on June 4, 2010 | Leave a comment

Disgraced New York governor Eliot Spitzer has a great article in Slate about how Americans have lost their commitment to shared sacrifice, referencing Lincoln’s Gettysburg Address and the exhortation to all Americans to work hard so that the soldiers of the Civil War “shall not have died in vain.” I know it’s ironic to be lectured on sacrifice by someone who couldn’t even sacrifice his own orgasm for the good of his family and his state, but he makes some excellent points.

Spitzer talks mostly about taxes and energy, discussing for example how reading the Gettysburg Address makes  investment bankers arguing for millions in additional compensation seem petty. But I would go further than Spitzer; the need for all of us to sacrifice to solve some pretty big problems could be extended from investment bankers to union members. Shared sacrifice should apply to those who sue for millions when they trip in the grocery store, those who are always looking for a government handout, those who hate sharing. During World War II women stopped wearing stockings because the silk was needed for the war effort. My guess is that we all have a metaphoric stocking we can give up for the good of the country.

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