happy chaos freedom machine

We do not think you’re different. We are not confident in your ability to establish strong relationships with companies. And we will probably not think of you when we need funding later on.

 Particletree » How Not to Pitch to a Startup .

For years I’ve talked to VCs when I’ve met them, and I have been uniformly unimpressed by them. It’s not surprising to me that the VC model is melting down. That model has been, as far as I can tell, the following:

1. listen to tons of startup pitches
2. look for the ones where the team seems the strongest and the business plan numbers mostly add up
3. invest in 10 strongest teams

That’s it. In the 90′s, the VC would then work to get one of the 10 to IPO, creating a massive return that would obliterate the losses from the other 9. After the dot-com bust, things got a little tighter with no public market exit, so they added another criteria to the evaluation of startups: would it be attractive as an acquisition for Microsoft or Google? Acquistions brought in smaller multiples, so they tried to get that exit quicker and with a larger proportion of their portfolio companies.  

My argument to the VCs I’ve spoken with over the years has been that adding a modicum of intelligence to the placing of the bets would marginally increase the percentage of “hits” in the portfolio and therefore give the firm an edge over the market of other VCs. Too much thinking required has been the usual response, an attitude well in evidence in the story quoted from Particle Tree’s blog, above. 

The problem has been that money has been too easy to make for the VC, and therefore there hasn’t been enough incentive to work hard for it. Outsize returns have a way of doing this in any market – witness the current mess in the larger financial market. People got lazy.

It’s time to overhaul the way tech startups get funded and nurtured and scaled up. We need a system that acknowledges that the barriers to entry have dropped dramatically, that not every great idea needs to generate a 10 bagger exit, and maybe it’s unreasonable to think that the guy in the slick suit who can connect money to founders should automatically be awash in riches.

My daughter has been hard at work on a webcomic based on the lives of the emperors who lead the transition from the Roman Empire to the Byzantine Empire. It’s funny. We collaborated on a web site where she’ll be publishing it, 2 pages a week, from next week onwards. The first 3 pages of the first chapter are up now for a “soft launch” this week. Check it out, The Emperors of Byzantium, you will definitely enjoy it!

Not sure why the fact that Jesus’ day of birth was likely in June is considered to be some kind of shocking revelation.  Newsflash: “Christmas” is a co-opted pagan festival, not the birthday of some charismatic Jew with disputed paternity. You don’t have to look particularly far back to find pre-Christian traditions, either. What is amazing to me is how comprehensive the scrubbing out of any other tradition has been.

There is a fascinating story of how the anti-authoritarian roots of the season were subverted in the 18th century in The Battle for Christmas but the “tradition” of one cultural force rejiggering the previous culture’s myths for their own use is a very old one, one of the originals. Remember Kronos and the titans, the ancestors of the ancient Greek Olympian gods? The whole story of succession is what remains of the conquering of the people of the region by marauding invaders from the north, who became the Greeks.

This is what is meant by “history is written by the victors” — those who gain and seek to retain control of a given society set about rewiring the rituals and stories of those they dominate. Now that’s the Christmas spirit!

It will be very interesting to watch Google’s Android play out in the market. The basic challenge faced by all those who want to eventually see useful, reliable, trustworthy mobile computing devices is a rewiring of the basic competitive landscape that delivers the services, the devices, and the connectitivity into our hands.

The wireless carriers are an extension of the telecommunications incumbents, the most intransigent, anti-competitive, obstructionist industry in history, to my way of thinking. They were handed a natural monopoly by government a hundred years ago and got very comfortable price discriminating along three distinct axes: duration, time of day and distance. In recent years us whippersnapper customers and pesky technologists have been asking them to step down their game a bit. A lot. Be dumb pipes carrying commodity bits indiscriminately using some lame protocol called TCP-what??? I don’t think so. 

When I worked for IBM, as part of the Pervasive Computing effort, I helped Nokia set up the Open Mobile Alliance. It was extremely instructional watching the roomful of delegates split into three camps of handset manufacturers, carriers, and IT companies. We, the IT companies, were clearly the pariahs. Some, like Cisco and Sun, had learned how to deliver functionality that met their bizarre requirements without over-stepping their charter, and were acceptable. Some were trying deperately to learn that dance so they could tap into the vast riches of the telco IT budget. Some had starry-eyed delusions about a mobile Internet where standards would allow any device to connect to any carrier and consume services from anywhere. Their rants seemed to amuse the handset manufacturers, who humored them because they could use the votes, but knew better, and annoy the carriers, who still needed them to write code. 

Then along came the iPod, the iTunes store, and finally the iPhone, with which Apple struck the first effective blow against the carrier hegemony. Only a market force as large as Steve Jobs’ effective monopoly of the MP3 market could force the hand of the weakest wireless carrier in the US, AT&T, to bend to Apple’s will. The phone is locked to AT&T’s network, but Apple controls the “services” delivered to the phone through the iPhone App Store. BTW, yet another sign that carriers exist on a different plane of reality from you or I — we call them applications, they call them services. The simple reason is that, to a carrier, an “application” is call waiting, *69, or Caller ID. When someone calls something like Monkey Ball on the iPhone an app the carrier feels funny inside.

In any event, the iPhone was a real crack in the wireless carrier’s armor. It put an IT company in control of the things people did on a mobile device. Now, here comes Android. With T-Mobile there is a clear desire to replicate the App Store model and allow ISVs direct access to the market created by their Android phones. However, every carrier will create its own business model around Android. How many will go the “app store” route, and how many will reinstate their ridiculous walled gardens on this new, potentially open mobile platform? For that matter, how long will T-Mobile’s magnanimity last? The early signs are very positive, and given T-Mobile’s last-place position in the North American mobile market, that’s not too surprising. However, if they see significant revenues being generated by those apps that circumvent their coffers, or even worse, if some type of VoIP or messaging app gets popular on Android phones, will they be able to resist the instinct to rein it in, brand it and put in the carriers’ familiar harness? 

 Virtualization is hot (or was, until VMWare’s stock took a beating — nevermind, it’s still hot in IT departments, where it counts), Web 2.0 is hot, and “Cloud computing” is hot. Together these trends must be sending cold chills down the collective spines of the giants of the IT industry.  This article on Forbes.com captures the challenge to the dominant business model.

Faced with a massive computational job, Zillow.com turns to Amazon’s EC2 service instead of buying their own servers and deploying commercial software. Instead of spending millions and taking 6 months to deploy the system and complete the job, they took 3 months and spent $50,000. They turned on 500 virtual servers in Amazon’s cloud, presumably installed their favorite LAMP stack on them, and cranked it up. The economic implication is a giant below-the-waterline hole in the S.S. Enterprise IT.

 The work of Duncan Watts, described in this article at Fast Company, has truly profound ramifications.

In the past few years, Watts–a network-theory scientist who recently took a sabbatical from Columbia University and is now working for Yahoo NASDAQ:YHOO –has performed a series of controversial, barn-burning experiments challenging the whole Influentials thesis. He has analyzed email patterns and found that highly connected people are not, in fact, crucial social hubs. He has written computer models of rumor spreading and found that your average slob is just as likely as a well-connected person to start a huge new trend. And last year, Watts demonstrated that even the breakout success of a hot new pop band might be nearly random. Any attempt to engineer success through Influentials, he argues, is almost certainly doomed to failure.

In essence,  what Watts is proposing is that trends, fads, adoption of any idea or product or behavior or other socially-transmitted trope depends not on the vector finding a highly connected and influential individual to adopt and promote it, but rather random “luck.” If this is true, the “Tipping Point” type theories of social trends and marketing are complete fabrications, the product of the human proclivity to retroactively create rationale for events.

If this is true, this not only means that the assumptions behind viral marketing and influencer-based marketing are false, but that our entire approach to complex systems are also flawed. It may in fact be that scientific predictability is limited to very simple systems. Drop an apple, it falls. Systems that cross some threshold of complexity in terms of the number of nodes, of actors, of variables become resolutely uncertain. Drop a leaf in a creek, try to predict what shore on which it will land. You can’t. The stock market, despite  all our various attempts to predict its behavior, is random. The economy — random.

Perhaps more psychologically important, especially in our capitalist society, is that fame and fortune are random. In one of Watts’ experiments, he created mini-societies of musical taste. Rankings were socially influenced and songs rose to the top, resulting in Pareto power distributions of rankings. All as one would expect, but what was not expected was the eight parallel taste societies he created all chose different songs to make famous. The implication? If one could rewind time to before an individual met with success and then play the events all over again, there is no guarantee the same individual would be successful again. Another individual could just as easily step into the shoes of any success story.  This is fundamentally at odds with the mythos of the capitalist system – that talent and hard word equal success. They may improve your odds, but in the end, it’s all just a roll of the dice.

So why the insistence that there is some reason why a product or web site or person becomes successful while another does not? To me this seems like an example of a primate bias – something in our basic psychological building blocks abhors randomness — if something happens there must be a reason for it. It makes sense, in evolutionary terms — how else would we have begun making tools, harnessing natural phenomena,  and mastering our environment without the nagging suspicion that things happened for some reason? Is there a term for when a beneficial evolutionary trait is taken to a point that is detrimental?

 Wired has this great story about the slow percolating return of vinyl records:

Vinyl May Be Final Nail in CD’s Coffin

As counterintuitive as it may seem in this age of iPods and digital downloads, vinyl — the favorite physical format of indie music collectors and audiophiles — is poised to re-enter the mainstream, or at least become a major tributary.

Interestingly, it is the “download and vinyl” release format that Radiohead just used that might actually kill CDs. Also interesting is the mention of the “loudness wars” — the urge to compress the audio when mastering to CD so that the volume can be increased — degrading the fidelity of the sound on CD. You can’t twiddle that knob when mastering to vinyl, so the sound ends up better. Amazing example of how it takes limitations to get a human to use creativity and produce quality.

Cory Doctorow nails my skepticism about the current crop of social networking site: How Your Creepy Ex-Co-Workers Will Kill Facebook

This is somewhat off-topic (as if I actually have a topic to stay on) but Stephen Colbert is a hero of mine, and this article is really quite fascinating. I agree with Jon Stewart’s comment in the article, about Colbert interviewing subjects while in character:

“[The whole show] depends on Stephen’s ability to process information as this other person,” says Stewart. “I’ve seen talk-show hosts who can’t do that for real.… And then you watch Colbert and it’s like the first time you use broadband: ‘How the fuck did that happen?’ He’s rendering in real time. He’s basically doing his show in a second language.”

The Man in the Irony Mask: Fame & Scandal: vanityfair.com

 Over at Mutating Pictures, Philipp Lensman started wit a pool of 1000 randomly created images, and is asking people to rate how much each image looks like a face. He put the site up yesterday, and look how far it’s come.

There’s also a forum at Google Blogoscoped, where technical details and the implementation  are being discussed.