December 30, 2008
Thanks to Rick Smith at WRAL LocalTechWire for covering an interview we had last week about surviving what he is calling a “nuclear winter” in the business world. He also highlighted my advice for job seekers in his The Skinny column as well where I think he did a great job of capturing the urgency that I think job seekers should take to building their personal brands online before looking for that dream job. Thanks for the coverage Rick and Happy New Year!
December 26, 2008
I was at Macy’s on Tuesday December 23rd at a time when I’m usually doing my last minute Christmas shopping. Since my immediate friends and family and I decided not to exchange presents this year (we donated two water buffalo to the Heifer Project instead) I basically just used the day to visit the local mall to pick up some things I needed.
While walking through Macy’s at the top of my mind was a recent online presentation I watched called The Story of Stuff with Annie Leonard. I think my little younger brother Bryon was the one who sent me the link recently although I remember hearing about the Story of Stuff first about four months ago when my friend Katie and her husband Shawn linked to it from their wedding website. The Story of Stuff is a great discussion of the negative long term affects on American culture and the environment caused by the consumer products industry.
Essentially the process works like this:
- Companies rape the earth of natural resources through political and economic leverage
- Those resources are processed into products through chemical processes that add a number of harmful substances into our environment and the products themselves
- We ship the products around the globe and then buy them in large volumes
- Within three years 95% of those products are sent to waste processing facilities where some are burned which creates toxic gases and others are put into the ground in dumps.
Over time this process essentially cheapens the earth and leaves us with little value while big corporations make profits all along the way. The Story of Stuff seems to be quite anti-corporate in nature so the bias is obvious but the validity of the process cannot be denied, at least upon my analysis.
The Story of Stuff goes on to explain that the primary driver of demand for the high volume of products in this process a strategy put in place by big corporations called planned obsolescence. Planned obsolescence means strategically building and designing products in a way that they must be replaced within a short period of time. Annie explains that planned obsolescence was an important idea that entered the corporate scene several decades back and that it has worked very well for the corporations. Essentially if the big corporations can convince people that the products they currently have are not the newest and best products available or if those products become less useful for a variety of reasons then consumers will have to purchase the new thing. This keeps steady cash flow coming to the corporations over time.
Annie believes that American corporations have taken planned obsolescence a step further by advertising and marketing the act of frequent consumption as a type of success or exercise of personal freedom that is rightly American. She even cites George Bush’s plea to Americans to shop after the tragedies of 9/11 as if even our president wants us to remember that blind consumption is our fundamental right… a right that the terrorists threatened and that we should now flex in response. The point here being that if these corporate advertising and marketing campaigns have brainwashed Americans successfully then we don’t make buying decisions anymore based on fundamental needs. We instead make them based on fulfilling our psychological need to consume more and frequently.
I tell you all of this to return you back to my story of walking through Macy’s at Southpoint Mall in Durham earlier this week. After recently reading the Story of Stuff and having blind consumer consumption on my mind I saw a great sign above a table top of discounted jewelry. The sign was large and colorful and stylish and it was the only indication of what I might find on the table below. Instead of explaining some of the reasons that I might want to purchase jewelry (ie: show a loved one how much you care, or mark a special occassion) or highlighting the fact that discounted jewelry would save me money (ie: more money in your pocket, or same great product at a new lower price) it instead suggested I spend more through a trickily crafted message of consumption. The sign read “CLEARANCE EVENT” in large letters and then following in a festive holiday ribbon it said “if you get a good price on one, splurge on another.”
Could you imagine actually saying this to someone in person? What if you were telling this to someone who needed to purchase four new tires for his/her car? Sir, if you get a good price on these four tires, splurge an another. In this case the ridiculousness of it all is obvious. You don’t need five tires for a car so spending more because you can get a good deal just doesn’t make sense. On the other hand splurging on more jewelry totally defeats the value one would normally get from a clearance event in the first place but it isn’t quite so obvious. I’m reminded of the common advertising saying “the more you buy the more you save” which for years has dumbfounded me how this could possibly have any influence on people. It must since I continue to hear it being used in TV and radio messages for furniture stores across North Carolina every day.
So, in closing I’d just like to make my own plea of the American consumer. When you are shopping please, please, please use your logical brain to consider what advertising and marketing messages are trying to get you to go. Determine and understand their bias and don’t fall victim to the use of consumption motivation tactics that try to correlate your spending more with your fundamental rights and needs as an American. In my opinion real freedom probably has more to do with the ability to think for yourself than the ability to express yourself through consumption.
December 23, 2008
My business partner at iContact Ryan sent me the neatest thing in an email tonight. It’s called the Eco Cycle. it is an underground bicycle storage solution currently being used in Tokyo, Japan. It reminds me of those cart dispensers in airports where you can rent a cart to help you move your heavy luggage to and from baggage claim. But this is even better. This system not only accepts your own bike as input but it stores it neatly out of sight underground in a huge stacked cylinder. The system appears to be a whole lot less space efficient than the common side-by-side bicycle rack you can find on any street in a bicycle friendly city but it has several key advantages.
The first advantage is security. Bicycles can be expensive and at the end of the day finding your bike missing is not only a loss of money but also a loss of a ride home that may cost you dearly in a cab or on foot.
The Eco Cycle system is also much more visually appealing as it has a similar visual footprint as an ATM.
I would bet that the system also provides a benefit to the long term maintenance costs of a bicycle by keeping it stored in a dry environment out of the elements and the wear and tear and risk of frequent passers by.
Finally I think the advantage of using underground space instead of above ground space is exceptional. In busy cities where a high percentage of commuters move around via bicycle the space to park those bicycles along a sidewalk is a hindrance to pedestrians who use the sidewalk space to walk.
Considering the moderate failure rate of other automated systems we use every day like parking payment systems and drink vending machines I wonder what you would do if this machine ate your bike. Hopefully there is someone on site with a ladder and access to a hatch in the floor.
The Eco Cycle is a fantastic innovation and I love how it resolves an interesting problem in urban planning with a very creative solution. Has anyone seen one of these in person? It almost seems too good to be true.
December 19, 2008
Sarah and I had great seats tonight at the UNC game against Evansville at home in the Dean Dome in Chapel Hill. Our friends at Trust Company of the South provided us with a nice upgrade to our normal season tickets which are literally the four worst seats in the Dean Dome… an upper level corner section in row Y.
For this game I had a great vantage point five rows up from half court. I was able to shoot this video as Tyler Hansbrough scored his 2,292 point at UNC (make sure to click for the ‘high quality’ version once you get to YouTube) in a classic Hansbrousian shot through double teamed defense on the low post. When the shot went in off the bank the crowd erupted and Roy called a time out. Tyler thanked and waved to the crowd and shook hands with the team. Photographers rushed the court and piled up around half court to take pictures of Tyler who was shaking hands with Phil Ford.
The new Chancellor of UNC Holden Thorpe was sitting four rows in front of us. I never really thought about it before but he sure had great seats. Hey Holden, if you’re going out of town for any reason let me know and I’ll keep those seats warm for you. And one more question, did you know about those seats before you applied for the position? Well played sir!
December 19, 2008
The National Venture Capital Association is reporting the results of a recent survey of Venture Capitalists in which 60% of VCs believe that a drop of venture capital investments of 10% or more will occur in 2009. Also, the President of NVCA feels that 2010 will be a better year for Venture Capital as investments in private companies are expected increase alongside expecations of reopening IPO markets then.
Many VCs I’ve talked to recently feel like their industry is in real trouble but on the flip side just as many feel like now is a great time to get a deal on a struggling company. I guess one of those opinions will prevail based on how flexible entrepreneurs are willing to be with their company valuations. When Sequoia got their CEOs together a few months back in order to scare them profitable with pictures of pig carcases and economic graphs that would have put Alan Greenspan to sleep they clearly were warning against the risk of a down round if the companies burned to the bottom of their cash piles.
In the same way that the challenging economic environment right now will drive companies out of business across a wide variety of industries who rely on institutional investors, the VCs are also in this boat. They of course are just focused investment vehicles primarily for large endowments in the private and public sector. As those endowments miss cash calls (because of their recent losses in other investment categories) from the VCs some firms will not be able to properly support even their existing portfolio companies. As their portfolio fails so will the firm over time.
I know of a few small VC firms in real trouble right now. Many are essentially non-operational although still technically in business. Some of the larger VC firms are shedding associates right now to cut costs considering the typical job of turning up leads for dealflow isn’t really needed right now… because the firms aren’t planning on putting any money to work anyway.
Additional Note (1/2/2009): Forbes.com has a great article with more details on what they call “Venture Capital’s Coming Collapse.” At the very end of the article (on page three) is a point I think is very valid and reflects a bit of what may ultimately happen in the auto industry (whether right or wrong)… a mention that a consolidation of VC firms (ie: the demise of the lower performing firms) would lead to generally higher returns across the industry.
From the numbers it does appear that mediocre VC funds are not worth a 2% management fee or any management fee at all. A long term 5% fund gain is just terrible considering the risk. The Forbes article mentions that “the median return for all venture funds was just under 5%, or worse than what Treasury bonds would have given you.”
The Forbes article is also a bit unfair since it mentions lots of fund IRR (Internal Rate of Return) percentages for incomplete funds. VC funds, because of their risk, can be extremely upside down through a significant portion of the life of the fund. More interesting numbers here would probably be some trending information on the average length in years of funds (for which general knowledge is telling us that it has been extending in recent years and certainly currently with no IPO market) and also the average percentage of a good fund’s life (maybe defining a good fund as one with an IRR of 10% or greater at its close) that it spends with a negative IRR. Also the average negative IRR for those good funds during their negative IRRs phase (or phases possible?) would also help us evaluate this further. Based on my recollection I would assume that even the good funds have a negative IRR through at least 30% of their lifetime. Anyone have any of this data?
A few more articles came out today highlighting the low point in VC liquidity since 2003 (five years). One of them calls it the complete death of IPOs and the other calls it the lowest point since the tech bust. As an interesting aside the VC market doesn’t look that bad in this article where Mark Heesen of the NVCA mentions that although Q4 2008 venture fund raising was slow ($3.4 billion down from $8.4 billion from the previous quarter and $11.7 billion from Q4 2007) that many funds raised earlier in 2008 and in 2007 and thus because of cyclical timing in addition to economical timing the Q4 raise number is expectedly low.
Mark Heesen is shedding some light on the VC market’s long term gains today in a report stating that the 10 and 20 year VC gains remain around 17%. Right now is a good time to be quoting long term gains in any industry
December 16, 2008
Chuck Hester our Director of Corporate Communications at iContact forwarded me a great list of “irritating business phrases” for 2008 last week that he received from Shel Holz. Over the last few years I’ve been able to develop a vocabulary that I find common among business execs that includes many of the phrases on this list. Below I have listed a few of my favorite. Although some people find these irritating I still enjoy most of them quite a bit… but mostly from an entertainment standpoint. Every once in a while for a good laugh I compose an incredibly complicated sentence from a rather simple one just to practice my double speak skills.
- Leveraging synergies
- Best practices
- Reaching out
- Drilling down
- From a 50,000 foot level
- Net net
Our Board of Directors meetings certainly involve a good number of mentions of bandwidth (when referring to a person’s ability to accept more responsibility), net net (when requesting the final result of a topic or discussion), 50,000 foot view (when referring to a high level overview of something), and bio-break (when one needs to use the restroom).
Other common executive quips that I like include:
- Player-coach (a leader who is also a team player)
- Gray matter (someone with intelligence and experience)
- Best-in-class (a preferred solution and recognized brand)
- Cross-functional (an issue that spans multiple departments)
We have a Board meeting tomorrow so I’ll update this post with any new good ones I hear. Here are a few that came up in the meeting that I liked.
- Looking forward (something that is not yet having an effect)
- Haircut (a discount)
- Go a long way (something that is effective)
December 3, 2008
The Fall season has come and gone in what seems to be one overnight and now Winter is here in North Carolina. Since September I’ve stayed put in North Carolina for the most part with the exception of trips to California and Virginia.
Business has been more interesting and challenging in the last few months (September, October, and November) than it has ever been before. I’m learning more, sacrificing more, and honestly dreaming a bit more than I’ve done in several years. I’m busy in completely new ways than I was six months ago, some more detail level and some more high level but much less in between. It’s exhilarating and exhausting at the same time.
I’ll work to fill in some blog posts in the next few weeks to cover some of the fascinating things I’ve been involved in over the last 90 days. Some of what I’d love to share falls under competitive secrecy which makes something as simple and relaxing for me as a blog post just a bit more calculated and regretful for what I have to keep inside. Speaking of competition, three weeks ago I actually met the CEO of our single biggest competitor in person. Apparently the pleasure was all mine. The inventor in me hates being in the same industry as anyone else. The entrepreneur in me understands that competition means legitimacy. The winner will create a new industry I’m still convinced. The next 48 months will tell a lot.
The economic downturn has become a topic I almost cannot stomach to talk about. I heard a great parable a few weeks back about a man with a hot dog stand. The hot dog stand story is referenced in a more extended version in some places but the short summary is that a father with a successful roadside hot dog stand follows his educated son’s advice to cut back since the economy is bad. The man reduces the quality of his product and the effort he was putting into advertising and his business must eventually shut down as he reaches an outcome brought about by his false impression of the world around him. Furthermore, the economy may have been bad for everyone else but the economy did not destroy the hot dog stand business.
On the bright side I’ve been reached out to via LinkedIn and email and phone by a large number of friends and contacts who are starting their own businesses now. Unemployment in North Carolina is high and the number of unemployed people in North Carolina rose 50% in the last 30 days.
This level of unemployment is driving innovation by giving people a new perspective on risk. When you cannot trust that the company you work for will maintain your position through the end of the year going out on your own doesn’t look so bad. Or if you get laid off you may have no other choice. These new entrepeneurs have a tough road ahead of them but they will face similar challenges as those of us running companies already. These challenges can be overcome.
I’m trying my best to face the brutal facts and make good decisions in the midst of all the distraction. And that’s all most of it is. Distraction. The companies with the coolest heads will make it through and on the other side will be a lot of pent up budgets ready to be unleashed. Be ready, be still here.
Until then position your product as a cost savings not a time savings. Businesses have got plenty of time on their hands right now. And invest heavily in R&D, that’s what I’m doing. Hopefully when we emerge from this slump we’ll have left the market entirely behind us.