“Michi’s Minions” – On Respecting Co-workers

In my relatively short, but unusual, career I’ve heard the phrase “Michi’s minions” a number of times. People use it to jokingly refer to my staff. They say it in private, so I think some people might conclude it’s just a crass joke. Perhaps. For people that know my crude sense of humor, my offense to this joke probably takes you by surprise. Every time I hear that phrase, I immediately conclude the other person is not somebody I want to work for and that they have a naive understanding of professional relationships. History usually proved that conclusion correct.

To me, it indicates a certain condescending/naive attitude that the person has toward employees that is absolutely unacceptable. I once heard the analogy that management is like a rowing team. You’re the coxwain that helps keep the rowboat straight. Yet, when you think about it, you don’t lift a finger to help the results get done. If somebody gets tired or wants to quit, you can’t take out a whip and start cracking. At the same time, without the coxwain, the team will never make it to the finish line. You both need each other. All of my greatest accomplishments as a leader in an organization were because of the hard work the team put in. To forget that your staff were the ones furiously rowing is ignorant if not insulting.

When somebody thinks that “managing” equates to “having minions,” it’s not pretty to watch them get a little power. I’ve seen this a few times now and it had disturbing results every time. The usual trend is:

  1. They give their staff all the boring, dirty work
  2. They scold in public and praise in private (if at all)
  3. They say, “I don’t need to be liked as long as work is getting done”
  4. People start quitting

I want to address #3 really quickly. “Being liked” and “getting things done” are not mutually exclusive. A good leader will get both done together, every time. If you can’t create a work environment where people are happy, you aren’t qualified to be a leader. Think about the last job where you constantly went above and beyond. Did you like your boss? I bet you did. I am very confident in the importance of having a good relationship with those you work with.

This post isn’t about watching your language. It’s about watching your attitude.

You need your staff more than they need you.

Social Payments: the Future is Unified

Physical credit cards will soon be a thing of the past. Is the rest of the US startup industry ready?

The next real-world cash-replacement could be powered by Facebook, Google, Apple, Square, Intuit, Paypal, or some other company hiding in the wings.  There’s a few obvious names in there, and then there’s a few left-field ones to some people. This post isn’t about how those left-field plays could happen. I simply wanted to explain how the landscape is changing.

There’s a convergence happening right now between social, payments, and e-commerce. Imagine this predictable future:

You buy some coffee at Starbucks. You take out your phone and swipe it at the terminal. Your [insert phone app name here] Bucks (from here forth known as: “Phone Bucks”) are deducted from your account. Your purchase is optionally posted on your Facebook/Twitter stream. You get highly-targeted Groupon-clone notice for a Starbucks coupon redeemable online immediately. You decide to buy it using your Phone-Bucks — no signing in, no additional authorizations — by clicking a button.

We’re talking about a future where your online wallet (today, known as Paypal, Facebook Credits, etc.) follows you into the real world and ties directly into your mobile phone. This represents a single unified wallet. And it makes sense. That’s the future. That’s where we are headed now. I’ve been watching this trend happen for the past few years, and it’s exciting to finally see some big players waking up to this reality. Which players are the closest to achieving this? In this order:

1. Facebook – Due to its large install base (virtually all smart phones) and an existing currency platform (Credits), they are best positioned to move into the real world. And they recently made a huge move indicating a desire to do exactly this (creating a subsidiary is the first step in buffering liabilities that come with real-world payments).
2. Square (or Intuit depending on how things play out) – They would solve this from the other direction: they have a stronger real-world presence, and moving into the digital space might be easier than vice-versa.
3. Google – They will approach this from the platform (Android) by opening it (Google Checkout 2.0) up to developers and creating an ecosystem. They also recently stole a key exec from Paypal, so you know they’re serious.

It’s my belief that any startup entering the e-commerce landscape right now needs to make sure they are thinking about this convergence. To get big valuations, I think a startup needs to not only understand these trends, but be the first to market in the new paradigm that will be coming (really soon!). This convergence will create an opportunity for new players to emerge and destroy existing leaders. All mobile startups around commerce, Groupon, Paypal, and even the advertising arm of Google are probably already adjusting to these trends. Is your startup?

Think about it.

Did Digg Miss the Boat Again?

So Digg released a new layout the other day, and I feel like another boat was missed. They made a big splash about this and it was covered in numerous places (for example, TCMashable). The new layout is noticeably faster to load, which is a huge plus. They tout that this new version emphasizes a “My news” approach to Digg, where they personalize the Digg site based on what you dugg in the past. In practice, unless you’re a power user, your news ends up spammed with news from one or two blogs you frequent.

I feel they are addressing their threats in the wrong order. Their website wasn’t perfect, but it wasn’t their weakness either. Consider:

  1. The Like button is dominating right now. Virtually every blog has it.
  2. Facebook is a HUGE news traffic driver. Way bigger than Digg.
  3. A lack of personalization was never Digg’s problem. Plenty of news sites on the web are popular with no personalization functionality.

First, Digg needs to figure out a way to make article submission “fair” for the little guy (read: long tail of users). They should have fixed the fundamentally flawed “democracy” where certain users effectively had 1000 votes. Personalization is an approach to the problem, but it ultimately doesn’t stop popular individuals from heavily influencing all of their followers’ feeds (and thus accumulate votes). The main complaint was that only power users could effectively get articles to the front page. Perhaps the algorithm should better incorporate Digg-to-viewer ratios or weight Diggs from non-followers as greater. The point is, until this is fixed, Digg will never fully engage its non-power users due to a lack of incentive. This represents the vast majority of its user base.

Second, Digg needs to up readership engagement. They should really look at their Digg button and see how it compares against the infamous Like button. It needs to be as brainless as the Like button. Clicking on “Digg This” should instantly submit the article to Digg. No windows; no dialogs. This is how the Like button works, and its pervasiveness shows how simplicity can trump everything else. Of course, doing this might mean changing how article submissions work on Digg — no problem: let power users check a setting where they ARE prompted for a custom title or description. The point is, the process needs to have as few places as possible where a user can change their mind about participating in the Digging process.

The website, I think, was never the problem.

Incentives and the Related Dangers

Incentives are just as dangerous as they are powerful. I have the running theory that most incentives can actually do the exact opposite of the intended goal when executed wrong.

Let’s start with an example to illustrate. You’re in charge of a small company that picks up garbage after events like street fairs and parades. However, you just got an angry call from your customer (the city) that your company has been doing an increasingly poor job and they are threatening to cut your contract.

You can fire and hire people, but ultimately, you or some new manager will need to fix the culture of the team. Aside from the obvious choice of talking to your staff about goals and values, let’s assume that incentivizing performance ends up being the option you go with. It’s time to play with fire.

What are some obvious ways to incentivize good cleaning efforts? There are many, but I’ll focus on a really obvious one for this post: Tie bonuses to volume/weight of trash picked up.

Is this a bad incentive? Not necessarily. But if executed poorly, it can be disasterous.

Which is more important to pick up? The pile of 50 napkins or the four empty soda bottles? Under this solution, people would be incentivized to ignore napkins, ciggarettes, and plastic bags while encouraged to chase after bottles (bonus points for liquid content) and discarded food. In fact, once employees start realizing this, they might even start picking up rocks and dirt instead of actually cleaning — in effect making the situation worse.

The situation above is universal across all industries. In software, the oft cited “Dilbert” situation is when performance gets tied to lines of code written. The point is, any system introduced that attempts to incentivize a certain type of behavior can cause employees to focus on the wrong thing. If you tell your staff that closing bug tickets is tied to bonuses, your entire team will focus on that metric like a laser. This will be good at first until you realize that everybody is spam-fixing the “mispelled text” bug tickets and nobody is bothering with the REAL problems.

Down But Not Out… Sun on the Other Hand…

For a brief period, the site was down. I was moving to a more permanent host. Special thanks to Brian for hosting my sites all these years. =)

Anyway, yes, I do keep this site in mind. And for any of you paying attention, I hope it’s not the end of the (open source database) world that Oracle bought Sun. I think it’s funny that Oracle just bought Sun for a price that puts MySQL’s value at 1/7th Sun’s value. Maybe instead of buying up MySQL, Sun should have been focusing on their own business strategy. And they did it during the hardest possible economic times. Moronic.

Oh well. As they say, “when the tide goes out, you can see who’s not wearing shorts,” right? I do feel bad for MySQL though. They dodged the Oracle Bullet only to get caught under the Oracle Steamroller.

On the Web 2.0 Bubble

Everybody, listen. There’s a Web 2.0 bubble right now. I know it’s difficult for some people to acknowledge, and many people may even casually agree with me without actually believing the statement in full. But it’s true, and the quicker you realize this, the better it will be for your pocket books.

Lately, I’ve been doing stock trading, and have come to learn first hand about the energy and commodities bubbles that were slamming the market. And when that thing was going crazy, it helped deflate the banking bubble, which was a direct result of the housing bubble. And in many ways, the housing bubble was a result of the dot-com bubble bursting due to people exiting the stock market in search for a new investment. And everybody in the web industry likes to think they are wise to bubbles because they learned their lesson in the dot-com boom. But it is increasingly evident that this is not the case.

An Example Exercise

The problem here is that people are approaching this with the mind set of “this will be somebody else’s problem after I sell it.” It’s important we try to figure out what happens to the eventual owner of the startup.

  1. Take your favorite Internet 2.0 company. Decide how much you think that company is worth. $5 million? $10 million? $50 million? $500 million? The sky is the limit!
  2. Imagine now that you are going to trade your life savings for a current minority chunk in the company. If the company doubles up, so does your savings, but if it goes under, your savings are wiped out.
  3. Remember that number you threw up there in step #1? You aren’t allowed to cash out ANY PROFITS until the company is sold to a buyer.
  4. Your startup may not sell until it has reported a yearly net revenue of 10% of your purchase price.

That last part is the key because it effectively stops the hot potato game and forces you to examine if the company is truly viable. Some people would accuse that of being an unfair restriction, but I will show you why this is the key part in understanding why there is a 2.0 bubble.

Defining the Bubble

Let’s take a second to define a bubble:

An investment yields a return, much like a chicken can produce eggs, a savings account produces a yield, and a farm produces crop. This return is not always immediate, and is not always in the same terms as the input. Also, it is almost a law that returns are proportional to risk (some investments have negative returns). But ultimately, it is called an investment because it will (usually and) eventually generate more value than what you put in.

Now consider an investment that does not create a return. Such an example would be the web stocks of the dot-com boom. Back then, fundamentals like earnings, operating margins, and profitability were ignored when evaluating a stock. Companies that bled millions of dollars a year saw their stocks rising at record levels. This is because the investment – the stock – was being traded to somebody else for a profit because that next person believed they could trade it for an even higher profit.

A bubble is defined as a trend where merely owning something long enough to sell it is profitable. It is a giant game of hot potato. Everybody is essentially a middle man between the original owner and the eventual owner — adding to the price tag at every step. Eventually, people wise up and no longer want to trade the hot potato, causing the bubble to burst.

And most importantly, let’s define a bursting bubble:

A bubble is defined as bursting when the value of the traded item reverts to its true market value.

Understanding the Exercise

So let’s talk about the exercise again: if you thought the company was worth a paltry $50M, then your assets are stuck inside that stock until the startup can earn $5M in revenue AND be profitable while doing so. Why did I pick such restriction? Because those are reasonable things to assume when buying any other type of company. Why would another company offer to buy the startup if it failed to produce respectable revenues?

Given this extremely reasonable reality-check requirement, would you want to tie your personal investment to the startup being able to produce a profit? If the startup you chose has revenues and is profitable, then this article doesn’t apply to you. =)

Speculation Should Still be Grounded on Fundamentals

People aren’t investing for what 2.0 companies are worth today, it’s all about tomorrow. I agree that it is important that tomorrow’s profits are taken into today’s valuations, BUT isn’t this reasoning eerily similar to the reason people listed as to why they bought over-priced houses and profitless dot-com stocks? Both were purchases made while completely disregarding the fact that the *current* valuation of the items were negative.

But since that day of profitability is so far away into the future, you end up playing a giant game of corporate hot potato. Most people would agree that a profit of 10% is far better than a loss of 90%. So as soon as you find a sucker to pay 10% more than you paid, you bail. And of course that guy who bought your stake is thinking the exact same thing — sell this to somebody else for 10% profit before something bad happens. That’s a bubble, my friends.

In Conclusion

In 2001, the bubble was all about going IPO so that the general public could hold the hot potato.

Today, the bubble is all about selling to a big corporate entity that will hold the hot potato.

There is no difference.

If you are currently thinking about entering the 2.0 scene, think carefully about what your end goal is. If it isn’t “to be profitable”, then it’s likely just another bubble startup that will become completely worthless once the bubble pops. And believe me: given our current economy, that bubble is going to pop in the next year or two.

Finally, an extremely interesting speech about bubbles given in 2006 (gets good around part 2):

Part 1

Part 2

Part 3

Part 4

Part 5

Part 6

Google’s Real Goal Behind All Their Free APIs

Ever wonder why Google gives away so many web-developer tools? Tools that otherwise seem like complete money-and-bandwidth-pissing schemes (notice how most of these don’t directly show ads):

This is all about obtaining browsing behavior in a long term bid to increase ad efficiency. Nothing else.

  1. It is not about making things more “open”
  2. It is not about making web development easier
  3. It is not about making an online operating system
  4. It is not about competing with Microsoft
  5. It is not about making the Google brand more ubiquitous
  6. It is not about showing ads in new places

If any of these above things happen, they are a (likely planned) side effect. For example, if a particular API makes something easier, that is good because it will encourage other developers to adopt it as well. But as I will explain shortly, the commonly held beliefs about Google doing Good or Google making the web more open are simply not the reason for these initiatives.

If you notice, all of their APIs use JavaScript. This means all of their APIs have the ability to note what computer a given request is coming from. This means that on top of your search preferences, they can eventually begin to correlate your browsing habits based on the sites that you visit that use Google APIs.

For example, if my blog were to use a YouTube embed, it would be possible for Google to read a cookie originally placed on your machine by YouTube and correlate it as traffic coming from this site. This means they can unique track every YouTube video your computer has ever watched since the last time your cleared your cookies. YouTube is just an example because most of Google’s APIs are far less obvious to the end user. For example, the unified AJAX libraries could be used by a good half of the “2.0” web sites out there without impacting performance (and in many cases would make the sites load faster for the end user). But because everything is going through Google, it’s possible (although I’m not saying that are) for them to track which sites you visit.

If this isn’t extremely valuable information, I don’t know what is. Don’t forget that the AdSense API is, in itself, a means for Google to track every website you’ve ever been to that uses AdSense, and for a way for Google to know exactly which type of ads interested you in the past. Once they know what sites you visit, they can surmise what a given site is about, and then determine, for example, what sort of products would interest you.

It’s the classic advertising chicken and egg problem: If I knew what my customers wanted, I could sell it to them, but they won’t tell me.

…And Google found the chicken. For the time being, they haven’t started using this information (at least noticeably), but I am sure they will as market forces move to make competition in that area more necessary.

Say goodbye to privacy. =( Oh wait, I’ve been saying that for quite some time now.

My Thoughts on Microsoft Buying Yahoo for $44.6B

The big news of Friday morning was that Microsoft offered Yahoo $44.6 billion for the company. On a financial level, this is a sweet deal for Yahoo. It’s not the most financially sound investment Microsoft has offered, which is why their stocks dipped 6% on Friday. No reply has been made from Yahoo, but I can definitely see them taking this offer seriously. My thoughts are summed up in three bullet points:

  • Yahoo’s management will possibly accept the offer since it is so lucrative.
  • The purchase will piss off some of Yahoo’s top talent and cause them to defect, possibly probably to Google.
  • The purchase will help Google gain a greater lead during one of the most crucial eras since the Internet began: the rise of mobile computing.

The internal culture of Yahoo is not exactly friendly to Microsoft. Yahoo is seen as an ally to the open source community while Microsoft is exactly the opposite. Yahoo is a major contributor to open source (ex. PHP’s lead developer is on Yahoo’s payroll), has an open philosophy which has shown itself in their JS frameworks, Flickr, Pipes, and various other projects, and is a major user/contributor to the open source stack in general. Microsoft is clearly not on the same page.

I’ve read speculation that the looming recession will cause developers to stick around despite a take over from a boss they don’t like. However, my belief is that great developers aren’t scared to leave since they are in high demand no matter what is going on in the economy. Some of the very best and brightest at Yahoo will leave. Any sort of exodus of major talent would destroy the current internal direction. Worse, some of these great minds would likely go knocking on Google’s doors, which is straight up ironic considering Microsoft’s intentions. This leaves gutted, possibly begrudging or de-motivated teams, recipes for not producing innovation.

Which leads to my final point: Microsoft’s goal is to beat Google by merging with Yahoo’s resources. It is my belief that this move could ultimately prove counterproductive. The integration process of merging departments, axing un-needed employees, changing internal processes, shifting internal priorities, introducing new management, and replacing fleeing key talent will cause major stalls over in Yahoo… At Google’s benefit. Microsoft is no stranger to mergers and acquisitions, but Yahoo would be a major, major purchase with a sizeable employee count. Microsoft will have its hands full for months.

All this is going to happen during a period I consider to be a key moment in the rise of mobile computing. A large chunk of search traffic will begin to come from mobile browsers, and the web will shift to the mobile platform. During such a crucial stage of computing, this sort of disruptive purchase may help Microsoft and Yahoo miss the bus.

So while I wouldn’t be surprised if the floundering leadership at Yahoo took the offer, I also expect this to work out as the most counterproductive and costly purchase in Microsoft’s history.

iPhones Drop to $400, iPod Touch is Real, Apple Invents new Revenue Sharing Trick

Yesterday, it was revealed that the iPhone was the top selling smart phone in July. It beat ALL of its competitors.

Today, Apple announced they are dropping the 8GB iPhone price to $399 — a full $200 price drop! They’ve also completely phased out the 4GB model. Seeing as the iPhone is already destroying competitors, this price drop should have RIM, Motorola, and friends all soiling their pants. The new, lower price point will further expand the iPhone market closer to the general consumer, placing it – finally – in a reasonable price range that makes it directly competitive with other smart phones. AT&T must be popping champaign bottles as we speak. Just think: a 4GB Chocolate phone $200 or an 8GB iPhone for $400 — but the iPhone also has wifi, a full featured video player, a higher resolution screen, a non-crippled browser, and calendar syncing functionality. Pretty competitive, no?

Related to this development, the iPod Touch is a reality. This iPod will have wifi capabilities and will cost $299 and $399 for the 8GB and 16GB versions respectively. The new wifi capabilities means people will be able to purchase music without being on their home computer. Even more ground breaking: the iPod touch has Safari in it! Every single iPod user out there will become a Safari using, mobile Internet loving Apple drone. Microsoft is pissed. Web standards are going to explode. And this means mobile browsing will finally hit a full-fledged mainstream audience. Oh, and it has calendar and contact syncing with your computer. It’s a shame it didn’t come with a camera too — I suppose Apple didn’t want to complete too much with its own iPhone.

Lastly, Apple and Starbucks partnered up. This partnership is not too interesting on its own. Whenever you hear a song in Starbucks, you’ll be able to buy that song on your iPod/iPhone. While the integration itself isn’t that interesting, the application of wifi sharing is. Just imagine a year or two from now when Apple has partnered up with major groceries, restaurants, and department stores. How many times have you heard a song and thought, “Wow, I want that song, what is it?” Now, the location you hear that at might have an incentive to give you free Internet in exchange for revenue sharing. It means more wifi access for consumers, and more iTunes purchases for Apple. It’s genius.