Thursday, April 9, 2009

Politicians: You All Look the Same to Us

When wielding a large regulatory hammer, sometimes everything looks like a nail.

In the quest to identify and regulate 'systemic risk' and increase the tax base, our politicians have decided they don't want to be in the business of defining 'what is a hedge fund, what is a private equity fund, what is a vc fund', etc. So they are seeking to apply a broad prophylactic that will only further damage a fragile dynamo of economic activity.

It has been written that venture capitalists, while representing something on the order of .02% of annual US GDP, have backed businesses that now represent nearly 18%. Whether that's a stretch or not I do not know; the point is, this is not about a small 'adjacent' asset-class that is simply collateral damage in the war on systemic risk, as some politicians would have us believe. It is a direct assault on the future industrial outputs of our nation. Competitor countries will not wait for us to discover how misguided these efforts are and reverse them; they will rush in and capitalize on the opportunity, filling the vacuum.

Far more than simply an issue of debt levels and systemic risk, the very nature of the venture business is fundamentally different than that of its 'cousin' enterprises in private equity, leveraged buyouts, and the hedge fund world. VC funds are small (rarely more than low to mid-nine digits and usually quite a bit smaller). Their partners do not get rich off of fees irrespective of ultimate outcomes. Funds do not have meaningful – or even measurable – debt leverage ratios. The companies in which they invest almost never have more than a handful of employees and negligable (or zero) revenue.

In sum, it is an industry that by definition exists on the left side of Schumpeter's curve; that is, the creation part of 'creative destruction', where job growth, tax roll contribution and economic output (including significant positive trade-surplus) curves move up and to the right.

Politicians fretting over falling victim to the 'game theorists' and thus avoiding the ‘definitions' conundrum are doing a great disservice to our country; unfortunately, by the time they realize - and reverse, amend or except - various policies, it may be too late.

Monday, March 23, 2009

Social Norms in Forever-Networks

How does one manage a (literally) virtual bouquet of electronic connections in a world that never forgets and has full access? Or to put it another way, how can I determine who can see what from whom within my electronic networks, and do so without the guilt?

I always think of this problem in a metaphor I call the 'three spheres'. It is essentially like a bulls-eye target. The center sphere - the core - is the smallest circle, and includes immediate family, relatives I feel close to, best friends and the like. The second sphere (a concentric circle around the first) includes people I work with, people I have known a long time and/or interact with frequently, etc., i.e. those I would describe as 'pretty close to'. The third concentric circle - and the largest - is for casual acquaintances, business contacts, folks I may have known during life's travels but were never really close with, etc. [I suppose for those with an online 'following', perhaps a fourth, perimeter circle might be appropriate to house people one has never (or barely) met but whom nonetheless fall at the edge of one's 'network'.]

Of course, online social networks offer a multitude of approaches, including 'friending', following', 'linking', 'joining', 'fanning', etc. They also offer a host of tools to determine interaction, but with the bluntness of an axe as opposed to the accuracy of a scalpel: 'ignore', 'delete', 'remove', or - my current favorite - 'archive' ( sounds so much more pleasant). At least one very smart fellow, Fred Wilson, found his solution in categorizing multiple social networks as either personal or professional.

To me, online social networks - and norms - need to evolve to permit easy management, and transference, of people into one of the spheres (and indeed across sphere's as relationships change). Facebook, for example, has rudimentary 'group' capability, but it is clunky and 'permissioning' is essentially non-existent today. Likewise, twitter - which relies on 'following/followers' - essentially a subscription model - provides even fewer choices.

There are in my view a number of societal and cultural social norms that need to change in an electronic, forever world, including loss of the guilt or stigma associated with 'ignoring', 'deleting' or otherwise classifying individuals (including into the spheres I refer to above). A world where people you meet are (quite literally) with you until death does them (or you) part - at least in an digital sense - requires a shift in mindset. I certainly want my children to be able to 'keep what (who) they like, leave what (who) they don't' as they live their lives, without such social limitations. I also want them to be able to easily decide who can see, hear or connect within those spheres.

Sunday, February 8, 2009

My early years in computing

My first computer was a Sinclair ZX-80, but it had no connectivity. I mostly just built loops and other useless apps in Basic. Network connectivity for me came in 1983 with an Atari 800 and a 300 baud modem. Would log into the National Weather Service, NOAA etc. Then joined TheSource, and upgraded to a 1200 baud Hayes smartmodem and an Atari 1200XL. Also had an Apple IIc and a TRS-80. Played Defender until my palms would literally bleed. Never failed to set the high score in numerous arcades around the country.

By 1984 I was using a Fortune Systems 32:16 (still have it!). Played games, logged into various government sites, and 'chatted' with others when I wasn't building rudimentary accounting software (a checkbook balancer and order-entry system) and unix shells for small office environments. Joined Compuserve, read news from The Columbus Dispatch (lived an hour down the road) and various other sources.

During this time I earned my Computer Science degree initially using a Honeywell system (punch cards!); later, a PDP-11. Had 'email' starting in 1983. Suffered through Fortran, LISP, some Cobol, and Assembler. Have done no programming since 1986, though I did teach myself html and built several websites in the mid-1990's.

Sunday, January 11, 2009

Why Kondratiev doesn't Compute

Kondratiev theorists always dust off the basic "innovation comes in long waves" argument when times turn. The new wave (or "tool") cycle has run its course; it'll be 50 years (or whenever ) until the next one. New tools? Try genomics (largely an effort in computational analysis -- not wet-lab stuff). Or nanotechnology (see above), or, semantic analytics, or human factors, or financial engineering (I know, bad words just now; just wait a couple of years). Wondering about Clean Energy? While I'm sometimes skeptical, algae and other oil substitutes offer promise. Want to solve the energy conundrum? Figure out how to put well-heads on a few "black smokers" under the sea. Tie that with distribution and a big part of the problem is solved. Paying attention to clean, potable water? You better be. What about space? Try quantum mechanics at zero-G, then talk to me about new tools.

The simple fact is, we have never lived in more exciting, promising times. And we would realize it if we weren't so glued to the 'disasters of the day'. I am as guilty as the next; too many train wrecks vying for our attention; easy to become disillusioned about our sorry state.

Still, technology is - and has always been - about the application of new tools to old problems, whether solving Maslow's hierarchy of needs, or anything else.

Think about it for a half hour, and you will come up with many more great opportunities. We're still a lot closer to the primordial swamp than we are to Star Trek, no matter how much we wish it were not so.