A Response To ‘Being The United States of Idiocracy’

I recently wrote an article titled Did We Just Become The United States of Idiocracy?, which was published both on this site as well as Business Insider.  It is a poignant piece, treading lightly but on a topic that should be worrisome to Americans- the private investment sector giving more attention and money to trivial products and companies while education and healthcare continue to wither on the vine.  Here is thought provoking comment from a Business Insider reader I felt would be great to share.

Interesting article. I also have marveled at the amount of talent and energy being thrown at really trivial things involving the Internet or mobile phones or other toys. I attribute this to the precarious imbalance between investors and producers. The investors have never held so much power and been so dominant in determining the economy. Yet, that is an unstable position, since it is producers that are the real source of power and activity. For example, young working people are producers – they don’t have money to invest. People on pensions are investors; they don’t produce anything but live off of the production of others. The people in the streets in the Arab countries and Greece are the producers of those countries, and the power they are fighting is the investors.

Investors add value to a capitalist economy by directing productive activity in an efficient manner. The current world imbalance consists of a very large amount of investment capital, which is remarkable already, but even more remarkable for the stupidity of that capital. Capital is managed for the good of society not by a dictator but by the risks of investment. But our Fed in its infinite corruption has decided on a new mandate that no investor should ever lose money, no matter how stupid or inappropriate their investment.

Thus the fools who lent Greece money, which is a purely absurd loan that deserves to lead to poverty for whoever approved that loan, these fools will be bailed out. This makes today’s investor class the stupidest of such that have existed in recent history. There is no possible penalty to risk; the Fed has stated a world-wide policy of Too Big To Fail which seems to include all investors and all investments in its complicated web. Thus the traditional positive contribution of the investor class has flown out the window. Rather than rational distribution of production, they now produce irrational and foolish distribution of production. There is no down-side to risk, all risk is good risk, all investors big enough always win as the Fed bails out the stock market, the sovereign debt, the big corporations that have failed such as GM.

Net result is an entire generation creates silly toys for mobile phones or new Facebook games rather than productive work that could be of benefit to the general public or mankind. The interesting byplay is that the producers of the world are going to war with the bloated investment system, and that is World War III. It is not between countries, but between the controllers and the controlled.

The world of VC and startup is sort of a place where producers are lulled into collaborating with the world’s enemy, or at least their own natural enemy. VC is evil. It isn’t shades of gray. There isn’t a compromise. There isn’t a way you can enjoy being productive and the fruits of your labor and still get along with an investment system gone pyscho. That’s what this generation will need to work out. There is no compromise with evil, one must oppose it.

Steve Ballmer’s Lack of Real Leadership

 This post was originally published on BusinessInsider.com.

Around 1975, Microsoft Corporation and Apple Inc. were created, kicking off what would become one of the most fascinating times in modern history.   During this period both have been significant players in the PC revolution, although recently as businesses they appear heading in opposite directions.

One is accelerating to new heights and one is stalling out like it forgot to refuel at the last gas station.  I think something abnormal is going on here and believe it’s more than the general “great products” vs “not so great products” argument.   Below is a view of the stock price of each company dating back to 1986.  Here is Microsoft:

(images courtesy of Yahoo Finance).

And below is a view of Apple, again viewed with a long lens dating back to 1986.  On thing to note is the scale on the right.

The last decade has seen Apple explode in value, culminating in them becoming the largest technology company in the world.  During the same time frame, Microsoft was dethroned by Apple and has pretty much remained stagnant.  Indeed, there is something peculiar going on here and anyone looking to build a consumer brand should listen closely.  The difference between Apple’s success and Microsoft’s lackluster performance can be summed up in one word – Leadership.  It takes more than smart employees, good technology and market dominance to deliver great financial results.   It also takes a Great Leader.

JobsSteve Jobs understands Leadership, Vision, Inspiration and Branding are vital to business success.  He gets it.  He understands how to position his Brand in the soul of a human being, amazingly interweaving his devices into peoples identity.  This is accomplished by casting a vision and allowing a tribe of followers to form around it.  He also understands: it is first about the vision and only then the resulting products can come in to reinforce the vision with the consumer.  Users of Apple products gladly follow when they realize the vision and resulting products make them feel better.

Jobs’ vision is one where the terms “Think Different”, “Beautiful Creation” and “It just Works” are used in description.  And although difficult to put into words as a consumer, you just feel it – viscerally.  It’s almost magical.   Jobs inspires with every word – not in a flakey, shallow and inauthentic manner – but a genuine manner.  I understand no one is perfect, but he definitely gets how to move people.

Steve Ballmer is flat out not an inspirational leader nor a visionary.

BallmerWith more than ten years at the helm of one of the largest companies in the world, Steve Ballmer has obviously done many things right.  One thing he cannot do is accurately describe the deeper purpose of Microsoft or any of their products.  When he tries, it doesn’t get anywhere close to touching the human soul.  He lacks the innate leadership quality of Inspiration.  He can run and jump, scream and yell, and do Monkey dances on stage all day long but this is not leadership.  Nor is it inspiration.  (Can you even imagine Steve Jobs doing this?)

Unfortunately for Ballmer, Microsoft is stuck between so many business markets it’s almost impossible to tie them together coherently to form a strong brand identity.  Without a unique purpose and vision, there is no brand identity.  The latest Microsoft slogan urges me to “Be What’s Next.”  I am not sure what that means… consumers need to be able to viscerally understand the brand and why they should be using it.  Like it or not, this responsibility rests on the leaders shoulders.  Ballmer has failed to communicate these fundamental aspects of Microsoft on a level that connects with everyday consumers.  He just doesn’t get it.

Is it any coincidence the maxim of Microsoft’s value as a company (January 2000) is pretty much the exact date Ballmer stepped into the CEO role?  And incidentally enough, the first real growth in Apple’s market cap appears not long after Steve Jobs arrives for his second coming as CEO in 1996.  The Leadership difference between these two men has made all the difference in respect to their company’s results.

Looking back at Microsoft’s stock price you can notice a time of incredible growth, back in the 90’s.  Who was the leader at this time in their history?  Iconic founder Bill Gates, an inspiring visionary in his own right was in charge at that time.  He inspired the world with the vision of “a computer on every desktop” during the emergence of the PC and Enterprise Revolutions (and thus the software running on them became a hot market).  Indeed Gates vision expanded the perspectives of all employees and rallied them to become the largest technology company in the world for many years.  But things have changed and today consumer devices are the rage.  What’s the overarching, game changing, ever growing Microsoft vision now?  I don’t see this type of world changing leadership and inspiration radiating out of Redmond any more (and I live 15 miles away).  Suffice it to say Apple saw this New World Order coming and Microsoft didn’t.

People follow leaders who embody a sense of purpose that inspires those around them.  Notice how consumers wait in lines for hours just to have a chance to own an “i-whatever”, the newest product that will touch their soul.  People give standing ovations and watch streaming online video during Steve Jobs inspiring  keynotes speeches.  All these happen for Apple because of Steve Jobs and his Leadership.  They create a mystic aurora which parlays towards the next round of  product announcements.

All this became very apparent to me recently as I observed the response to both companies announcements – Apple’s at their WWDC conference and Microsoft’s at the E3 conference.  The world huddled around their screens in anticipation of an announcement regarding Apple’s next mobile operating system, the iOS5.  In fact, there were no less than 37 individual posts covering Apple on SAI alone, Monday June 6th, the day of the announcement and.  Also 17 posts covering anything that is Apple appeared on Techcrunch.  Alternately, Microsoft’s announcements were an afterthought, an oh-by-the-way-this-happened byline with 3 posts that same day.  Succinctly put, no one really cared.

This unfortunate reality for Microsoft is directly tied back to Ballmer’s lack of Leadership, Vision and Inspiration.  People would have cared about Microsoft’s announcements had the products touched their souls with a deeper purpose.  Right now, go to Apple.com and Microsoft.com and see what I am talking about.  I am like most, finding it impossible to put a finger on exactly what it is that makes Apple… Apple.  All I can say is Steve Jobs knows something Steve Ballmer doesn’t.

Don’t get me wrong, we are talking about a great company in Microsoft, one that still does more than $60 billion in yearly revenue and employs some of the smartest and most talented people in the world.  They hold dominant positions in numerous markets.  But it pains me to write these words and acknowledge the reality of Microsoft’s future.  I am a Seattle resident and appreciate the value Microsoft has added not only to the world but specifically to Seattle.  We owe much of our regional economy to Microsoft.  They have done great things and the enterprise software ecosystem they created is quite amazing.

Yet, I see a company waning at a time when they really need to figure out their guiding purpose.  When I look at Apple, I feel secure they know where they are going.  When I glance across Lake Washington to figure out what Microsoft is doing, I am at a loss for words.  And this is scary for me.  I can only imagine what it’s like for the employees and the executives.

Lessons for us younger founders and entrepreneurs:

  • Find a deeper purpose to associate with your products and business
  • Cast your vision with simple, strong and relatable words
  • Become (or find) a leader who can connect with people and continually inspire them toward action

I don’t know who it will be but Microsoft is in desperate need of a Leader, an inspirational visionary who can turn this boat around – NOW.

Disclaimer: I have no personal connection with either Steve Jobs or Steve Ballmer and this is in no way personal towards either one of them.   My opinions are purely anecdotal and from observations as both an entrepreneur and consumer.

Dear Advertiser: Please Do Better

This post was originally published on BusinessInsider.com.

 

Dear Advertiser,

We haven’t formally met but we have had an ongoing relationship for quite some time.  I am a consumer; you are an advertiser trying to sell me something.  Our Love/Hate relationship goes something like this: I love to use my internet but hate to be interrupted by you.  I know you are the one I should actually thank for my ‘free’ usage of all the websites and applications on the web, but deep down in my heart I am finding it hard to thank you.  You see, I just want to go about my day and easily use the mobile apps I enjoy, listen to my favorite music on Pandora, search on the topics I need to know about and read interesting articles.

But here is what I don’t think you fully understand.  You make my life worse.  You interrupt me in every possible way you can think of and believe just because you “got  in front of my eyeballs”, I will make a purchase.  The thing is, I cannot easily use my mobile apps, since you jump right in as I load it up and steal another 5 or 10 seconds of my time.  I hate this!  When I listen to Pandora, between every 2 or 3 songs you shout something I don’t ever pay attention to, so you are wasting your money.  I bet you didn’t know that as I listen to Pandora when drive I turn the radio off or the volume down for about 10 to 15 seconds so I don’t have to hear you freaking annoying voice for the 10th time this hour.  You are just an annoyance and I despise you more and more as this goes on.  When I search on Google, there you are… trying your hardest to sell me something I don’t want.  Even though when I search I type in a keyword, most of the time I am looking to be informed on a topic not buy it.  And what makes me the most frustrated is when you cover the screen the instant I hit a website like Forbes, basically witholding me from my very intent.

Do you realize how rude this is?  I don’t walk up to your desk as you are working and put my hand right in front of your screen, and hold it there for 15 seconds – smiling like I am doing something nice for you.  If I did, you would probably hit me.

I understand it is you who underwrites our “free” access to information so I am not blindly telling you to go away.  All I ask is please make my life better, not worse.

Know my preferences.  Better yet, let me tell you what I like and what I don’t like. 

All the spying, cookies and social data mining in the world will not come nearly as close to knowing me as good as I know myself.  Please allow me to tell you what I like and what I don’t like so when you do step in to talk to me I am actually interested in what you are saying.  (Would someone out there build a platform where I can input my 15 category interest and allow only those advertisers to reach me on every interactive media in the world?  Come to think of it, I just might.  If you are interested in helping, give me a shout.)

Know when I want to interact.  Never interrupt me.

Interrupting is one of the rudest forms of communication in the human race.  Maybe this is your problem: since you are not human you don’t realize you are committing one of the biggest faux pas out there.  If you were to start your strategic alignment with more of a human perspective you would better position yourself for me to receive your message.

Make my life better.  Add value to me and my life

Hindering my internet viewing, making me wait to watch a video or jumping in the middle of a conversation does no make my life better.  It only creates frustration.  Correct me if I am wrong, but I assume you want to create value for the brand or company you are representing?  Okay, if that is the case… I will value any company who makes my life better.  And since we naturally associate the Brand of the company with the mode of advertising … any Brand who rudely interrupts me is instantly placed in the LAME bucket.  Sorry, that is the truth.  On the contrary, any Brand who slides naturally into a position to add value to me and make my life better –  pure GOLD.  Loyal.  They got me for life.

Look, I know this is going to be a life long marriage so can you please start to see things from my side of the bed for once?  If you do, I guarantee you will get more than you ever imagined.

Be Iconclastic

Ever look at prominent figures in the world and wonder how they stand out from all the rest?  I believe it comes down to how they think.   I believe you can think like them too.  Or.  Not.  Like.  Them..?    At this point, you may not know what the word Iconclast means, but by the end of this post I hope you will be inclined to think a bit differently.

Gregory Burns talks about people who do things others say can’t be done in his book Iconclast – A Neuroscientist Reveals How to Think Differently .  He calls them Iconclasts.

He succinctly describes being an iconclast hinges on 3 things: perception, courage and social skills.

The successful iconclast learns to see things clearly for what they are and are not influenced by other peoples options.  He keeps his amydala in check and does not let fear rule his decisions.  And he expertly navigates the complicated waters of social networking so that other people eventually come to see things the way he does.

If you are like me you’ll want a shorter and easier way to remember the word:

Thinking different is so easy, yet it baffles me how many people do the exact opposite.  They think the same as everyone else.  For some reason they don’t want to be different.  They don’t want to separate themselves from the crowd for they just might have to form an opinion.   They think the same as their neighbor, their classmates, the same as their teammates and they even the same as their competitors.  To me this is just crazy and a recipe for averagism.

Seriously, when did it become generally accepted to think the same as your competitor?  I am pretty sure this type of thinking did not go on in the days of early civilization.  If someone did I guarantee they we’re quickly eliminated…  Thinking the same as the competition is what gets us all these copy-cat products that flood the market.  How many different Groupon competitors do we need?  How many different brands of ‘Bran Flakes’ Cereal is enough.  I could go on and on, but I won’t because I’m not here to inspire you to copy others.  My goal is to inspire you to think differently.  And since we all are capable of thinking… being an Iconclast is now up to you and your thoughts.

Perception

Berns describes in detail how our brains actually perceive thoughts.  Being too scientific for this post, I will only encourage you to buy and read the book for yourself.  But to paraphrase: because we learn from past experiences and past experiences shapes both our perception and our imagination, we tend to constrain our views on things as we grow older.  This is not good for much of anything, but most importantly you will begin lose your creativity.  As time goes on you start to see the same things as everyone else.  And if you see everything others are seeing, you are not to unique.  How are you supposed to be innovative when you see just the same as the others?  Berns suggests we continue to bombard to brain with new experiences.

I suggest running the exact opposite direction as everyone else.  I have always been attracted to uniqueness.  It doesn’t have to be anything eccentric, just being different.   Everyone staying in their safe job because of the recession…  quit yours and pursue your dream of building a company.  You will have a leg up since most others are going in the opposite direction.  Seeing a lot of other companies are offering “daily deals for X” and “social networking for Y”?  Why not have an original vision and do something different?   Most importantly, get out of the daily routine you have slipped into over the last 8 years.  Take Berns advice and change your life.  Create new experiences.  Iconclasts do this and succeed.

Fear

Plain and simple, humans hate fear and live everyday to avoid the feeling.  Fear prevents people from taking action, and even worse it changes the way they see the world.  The ultimate underpinnings of fear is failure, which is the strongest force inconclasts overcome.  Berns notes fear permeates any business and should only be taken as a warning sign.  Once the fear is recognized, it can be deconstructed and reappraised.  So there you go – everyone experiences fear.  Inconclasts dissect it and figure out what it is actually pointing to.  Then they act accordingly.

Here’s my take:  Most people in the world are scared, weak overgrown children.  Sorry to be so blunt, but this is what I have picked up over the years.  Just as we tried to fit in with the “cool” kids on the playground during recess, we go about our lives in constant fear of what people think.  Most people never live as an independent thinker because they are so worried of what other people will think about them.

I say “who gives a @#$% “and “Screw what they think“.  Why do you care what some random guy thinks about you or your idea?  Here’s the truth: One minute after you leave the conversation he will forget what his opinion of your idea was.  He has enough to care about in his life, why would he waste time thinking about you?

Here is Amazon’s Jeff Bezos, an Iconclast I have always looked up to referring to his willingness to be misunderstood.  He has no fear of failure:

If you invent frequently and are willing to fail, then you never get to that point where you really need to bet the whole company. AWS also started about six or seven years ago. We are planting more seeds right now, and it is too early to talk about them, but we are going to continue to plant seeds. And I can guarantee you that everything we do will not work. And, I am never concerned about that…. We are stubbon on vision. We are flexible on details…. We don’t give up on things easily. Our third party seller business is an example of that. It took us three tries to get the third party seller business to work. We didn’t give up.

My mind never lets me get in a place where I think we can’t afford to take these bets, because the bad case never seems that bad to me. And, I think to have that point of view, requires a corporate culture that does a few things. I don’t think every company can do that, can take that point of view. A big piece of the story we tell ourselves about who we are, is that we are willing to invent. We are willing to think long-term. We start with the customer and work backwards. And, very importantly, we are willing to be misunderstood for long periods of time.

I believe if you don’t have that set of things in your corporate culture, then you can’t do large-scale invention. You can do incremental invention, which is critically important for any company. But it is very difficult — if you are not willing to be misunderstood. People will misunderstand you.

Any time you do something big, that’s disruptive — Kindle, AWS — there will be critics. And there will be at least two kinds of critics. There will be well-meaning critics who genuinely misunderstand what you are doing or genuinely have a different opinion. And there will be the self-interested critics that have a vested interest in not liking what you are doing and they will have reason to misunderstand. And you have to be willing to ignore both types of critics. You listen to them, because you want to see, always testing, is it possible they are right?

But if you hold back and you say, ‘No, we believe in this vision,’ then you just stay heads down, stay focused and you build out your vision.

Social Networking

To be successful, it comes down to one’s ability to connect with other people.  Two aspects of social intelligence figure prominently in success or failure: familiarity and reputation.  Incidentally the two are interconnected, since in order to sell your ideas you must create a positive reputation that will draw people toward what is initially unfamiliar and potentially scary.  Familiarity helps build your reputation.  Simply put: to get their ideas into the mass market iconclasts must be able to connect with people.

Think about someone right now who you admire and feel they are a “success” in your eyes.  And now ask yourself this: “Are they good with people?  Do they know how to navigate the social waters?”  I guarantee they (or someone they are close to) understands this principal.  Being an iconclast, thinking different, changing your perception, and dealing with your fear will only get you so far.  I would argue being great in the people department completes the package and helps you rise to prominence.

If you have been reading the words Think Different and imagining a certain company, I am sure you are not alone.  It’s not a coincidence the largest Technology company and one of the most recognizable brands in the world adopted that phrase in most of their marketing.  Apple thinks differently.  I believe the Different Thinking of their founder Steve Jobs is the sole reason they are where they are today. I will leave you with a video that sends chills down my spine.  It is one of the early Apple commercials and the first one in which they used the term Think Different.  Enjoy.

 

3 Quick Thoughts For The Entrepreneur

Here are just a few quick thoughts to help you think clearer today.

1.  Most successful founders or entrepreneurs have failed many times before.  Just keep getting up.

2. Most successful businesses come from Blue Ocean Waters, not Red Ocean Waters.  Look for the open waters around you.

3. You are just one decision away from changing your life.  Make it.

Look at Them Apples

Apple is just HUGE.  Just think about it for a second… iphones, ipods, ipads, macbooks, itunes, they are everywhere.  Apple is now said to be lager than Microsoft and Intel, combined.   Below is a view of Apple’s stock for the last few years, up and to the right.  This has just been amazing to watch.  When will it end?

What Any Startup Can Learn From Starbucks

Update:  This post was republished on GeekWire.com

As I drove past the Starbucks headquarters today I glanced up at their big green logo.  Instantly I thought “man, what a iconic brand.”  I mean, when most people see a white coffee cup with green letters, they know it’s Starbucks Coffee.  Then I thought “how did they get there?”  Here’s what most forget: Starbucks was a startup at one time.   They had to start somewhere and work hard to establish this incredible brand.  Although I do not know Howard Schultz personally (someday I hope to), it’s obvious he understood a thing or two about creating an iconic brand.  Even if you do not wish to build a business to the size or likes of Starbucks, here are a few things to keep in mind as you grow your company.

Headstrong Founder

Howard Schultz is one of those entrepreneurs you read about in history (or Amazon) books.  He grew up in Brooklyn.  He was the first person in his family to go to college.  He started as a salesman selling Xerox equipment.  Interestingly, before he founded “his Starbucks’ he joined the a small coffee company named Starbucks.  Then after differences in vision he left to start his own coffee company, and as fate would have it he ended up buying the original company’s assets and ultimately named his company Starbucks.  The vision in question?  Changing the way coffee was enjoyed here in The States.  That is no small task and probably why the original Starbucks owners wanted no part in it.  You better believe he encountered and fought through more than a few obstacles along the way.  I will not list them here, but I would recommend reading his book Pour your Heart into it – it’s good.

Founders of startups need to, like Schultz, be headstrong.  It isn’t always going to be fun and roses.  In fact, based on your odds it’s down right impossible for you to take your nascent idea and build a fledgling company around it.   My opinion is most founders quit before they even get started.  Maybe you need to seek out more initial customer feedback?  Maybe you need keep trimming the fat to find your MVP (minimum viable product).  I don’t know.  But if Howard Schultz was sitting across the table from you right now, here’s what I think he would say:

You must be headstrong in your passion, desire, focus, product, marketing, communications, leadership, and recruiting.  In all those things, be headstrong and dead set on doing what-ever-it-takes to make your vision come true.  Anything less will be your company’s demise.

larger Purpose

Early on Starbucks set out on a journey with a larger purpose in mind.  Schultz realized very quickly the coffee industry, although a relatively large market in the US at that time, had become stale.  People were mostly consuming coffee in their home from a tin can.  Schultz knew they could take something familiar and transform it into something altogether new.  They wanted to create a third place.  Not the home.  Not the office.  But a third place.  Somewhere you could go to hang out, drink coffee, talk with a friend, have a business meeting or read a good book.

It was there, at this third place, they figured people would come to be a part of the community.  And drink coffee.  They made this purpose (the place) bigger than their product (coffee).  And it worked to the tune of a $27b market cap.  Go ahead, think about our world without coffee shops.  I am writing from one right now, and it’s all do to Starbucks.  Thank you Howard.

A startup – no matter their industry – needs to find their greater purpose.  “Why on earth are people going to use your application over the millions of other things to play with at this moment?” You must be able to make it clear and concise why their life will be better when they use your product.  I believe this comes together when the overall purpose of your product or service is greater than just making money (for you).   I can’t tell you what your purpose should be; it’s your job to find it.  I feel so strongly about this that if you can’t state your purpose in one sentence, I would recommend finding something else to do.  Because, if you can’t clearly state the purpose of your business how do you expect others to figure it out?

Always Get better

We all know the story, there’s a Starbucks on every corner.  With more than 15,000 stores in approximately 55 countries, it’s fair to say Starbucks won the game.  For a while there I think the executives were also saying the same words behind closed doors.  As the economy collapsed and things got tight, Howard has some decisions to make.  He closed some stores as well as doubled down on their core competencies.  He understood the notion that regardless of what you have done up to this point you need to always get better.  Yes, Starbucks was a successful corporation.  But if not careful, successful corporations are susceptible to failure due to their own hubris.  Howard nipped this in the bud and brought back the idea of continual improvement.

This doesn’t just happen to large corporations.  It’s all relative you know.  To be successful, startups need to continually learn new things and aim to get better as time goes on.  Launching a product and seeing a few million downloads is only the starting line.  What happens after people use your product once?  Ten times?  Two years? You need to get better.  Better analytics to study usage patterns.  Better customer service.  Better executives.  Better management processes.  I am sure there a lot more things to get better at, but whatever it is… just get better.

This is what I thought as I drove by the Starbucks headquarters today.  Hope it helps.

Bubbles and Golden Ages

Update: This post has been republished on www.businessinsider.com.

I once watched an interview where angel investor Fred Wilson offhandedly noted reading a book which transformed the way he looked at markets and the web in general.  I instantly went to Amazon and ordered it and spent the next week reading it front to back.  Whew… it changed my life as well.  I up and quit my job the next month.  Thanks Fred.

Technological Revolutions and Financial Capital by Carlota Perez is one of the greatest overviews of the incredible economic phenomenon known as the bubble.   What we are currently going though – recessions and expansions, bubbles and bursts, highs and lows, whatever you want to call them – they are inevitable.  In fact, the history of the entire world economy is one big cycle which repeats itself over a period of about 60 years.  I cannot do this entire book justice, just take my word for it, go buy it and read it yourself.  You will publicly thank me later just as I just thanked Fred now.  But I will introduce the general phases a new technology (paradigm) encounters so the “layman” technologist, marketer, social media guru or business person can start to see a clearer economic picture.

I hope I am not being too being blunt, but without grasping this concept you are swimming with your cap over your eyes.  You need to understand what is actually going on in this crazy economic world.

Irruption

As a new technology is developed and deployed into our society, it will enter a cycle of adoption.  Interestingly, Perez notes new technologies are created during the maturity phase of the last great technology expansion.  So although we are starting with the irruption phase, let us take for granted the specific technology has already been created and diffused through very early adopter communities.  During the irruption phase, we see a slowing or declining of the old industries and an early adoption of a new technology.  Carlota notes:

The very intense activity of the new paradigm carriers contrast more and more with the decline of the old industries.  A techno-economic split takes place from then on, threatening the survival of the obsolete and creating conditions that will force modernization.

Old print media anyone?  This irruption phase is started with a big bang (invention and initial diffusion) and will propagate within a small community of early adopters.  Note the image above, depicting very low diffusion, even to a point the general masses dismissing the technology altogether.  Amazingly it is contained within this tight group of people and industries for some period of time.  That is until a tipping point is hit.

Frenzy

Frenzy is a period of massive growth for a new technology.  It is a time of new market creation as well as for rejuvenating old industries.  Once a critical mass of consumers have been hit, the diffusion of the paradigm takes center stage.  Individualism rules the land, as does speculation, wealth creation and ultimately resulting in over-investment flooding the market.   

Frenzy is the later phase of the installation period.  It is a time of new millionaires at one end and growing exclusion at the other, as in the 1880’s to 1890’s, the 1920’s and the 1990’s.   In this phase, financial capital takes over; its immediate interests overule the operation of the whole system.

Notice the part about the growing polarization between the rich and the poor.  Sound familiar?  Capital investments soar during this time, creating a false sense of wealth creation.  This craze attracts more and more individuals wanting to get a piece of the action; so late frenzy is financial bubble time.

Turning point

At some point, the bubble has to burst.   Things that go up must come back down.  Interestingly, the turning point is neither an event or a phase, rather it is a process of contextual change. 

The turning point has to do with the balance between individual and social interests within capitalism.  It is the swing of the pendulum from the extreme individualism of Frenzy to giving greater attention to collective well being, usually through the regulatory intervention of the state and the active participation of other forms of civil society.

The turning point is a space for social rethinking and reconcidering.  It is, in fact, the time when the mode of growth that will shape the next few decades is defined.  I would argue we have been in this phase for a while, maybe starting 5-8 years ago After picking up the pieces of the crash of the early 2000’s we are now starting to see realignment in almost every industry known to man.  Name an industry that is not currently being touched by the internet?  Exactly.



Synergy

This is a time for production.  Since the foundations and infrastructures were laid out during the previous phases, conditions are there for dynamic expansion and economies of scale.   The diffusion of the new paradigm now reaches far and wide, is accepted as standard, and now governs supreme.  It is a time for promise, work and hope.  For many, the future looks bright.   

Synergy is the early half of the deployment period.  This phase can be the true ‘golden age’.  It is likely to be the closest the system ever comes to convergence within the economy of the core countries of the system.

Mary Meeker anyone?  She has identified this expansion phase quite eloquently, particularly in the mobile space.  I would argue we are still at the turning point but on the cusp of this synergy phase.  We should expect to observe massive expansion and economies of scale in almost every industry imaginable for the next few decades.  New industries and markets will emerge.  Old ones will finally die off.  Will it be all golden?  I am not so sure.  But if history is any indication, we shall see an expansion of scale only experienced once every 60 or 70 years. 

It was this exact point in the book which urged me finally jump off the fence and into my entrepreneurial pursuits full time.      

Maturity

Once again, the cycle continues.  Every paradigm has a shelf life and can only survive so long.  As it enters maturity, deep questions are asked about the system and the climate is favorable for politics and ideological confrontation.  Markets are saturating and technologies are maturing.  

Gradually the paradigm is taken to its ultimate consequences until it shows up its limitations... yet all the signs of prosperity are still around.  Those who reaped the full benefits of the ‘golden age’ continue to hold onto their belief in the virtues of the system and to proclaim eternal and unstoppable progress, in a complacent blindness, which could be called the ‘Great Society Syndrome’.

During maturity, the stage is set for the decline of the whole mode of growth and for the next technological revolution.  Since we are entering a synergy phase, I will not spend much time on maturity.  According to Perez, the next maturity phase should not be entered for quite some time and the decline of our current paradigm should not influence ones innovation or investment perspective.  Yet it is always smart to keep an eye on something like this.  Interestingly, it is in this period inventors and innovators are tinkering with what will eventually become the next great paradigm.  This begs the question:  What will supplant the internet?  I would suggest not worrying much about the answer to that question and take advantage of the current conditions.  According to Perez, it should be quite good for years to come.


Why I Cry During Horse Racing

I have always been a sports fan.  I like soccer, basketball, baseball, football, hockey, tennis, UFC.. you name it.  Although I was not raised around horses and the track, horse racing for some reason draws me in.  There is something about it that is so intriguing and attractive I cannot help but watch.  Today is the Preakness Stakes and I recently realized how similar horse racing and the startup ecosystem are.   Maybe now I am starting to understand why I am so attracted to this sport.

The winner is almost always a surprise

Once a year the Triple Crown tugs at the heart of the sporting community.  As sports fans, deep down we want to root for the underdog.  We want to see an upset.  When those 20 horses line up at the starting gate we have no idea which horse will actually step across the finish line before any of the other horses.  Yes, you can take the odds.  But how often do those odds actually play out accordingly?  I use this racing analogy because success as a startup is pretty much exactly the same as success on the race track.  Starting out, we have no idea who will emerge as the “winner”.  Talent, funding, product, iteration, attitude, economic climate all influence the outcome of the race.  It is always a surprise, isn’t it?   MySpace looked like the breadwinner only to have Facebook clean its shorts around the second turn of the race.   That’s incredible.  Who knew?  I guess that’s why we play the game.

The winner almost always has to adjust their tactics mid-race

If you watch any horse race, you will notice the race is actually won by the jockey, not the horse.  The jockey (the CEO) observes the dynamically changing environment, quickly calculates their options and immediately decides to direct the horse (the company and product) towards the best route for victory.   This is no small task and requires tremendous skill to perform under pressure.  They learn to Pivot at the best possible time.   The word pivot is probably used way to often to describe the transition from one strategy to another in an effort to move a business forward.  Yet I think it is such a great word and such an important tactic.  Great Leaders understand when conditions have become suboptimal, and possess the wherewithal to quickly make necessary changes in order to be successful.

The winner almost always has a storied past

One thing is for sure when I watch these events.  I will tear up.  I tear up more during “extraordinary feats of competition” than any Rom-Com (romantic comedy) that I must watch with a girlfriend.  Why would I tear up during a horse race?  I tear up because the obvious time and effort, blood, sweat and tears put in by the jockey, the breeder and the horse.  There is always a story of triumph over insurmountable circumstances.  And they didn’t quit.  I am so moved by extraordinary accomplishment, maybe because I hope I will one day experience the feeling.  And just as they put in this effort, so does the startup founder.   It is truly an amazing accomplishment to take a seemingly impossible idea and turn it into a network of over 600 million people.  Or leaving Russia as a child for the USA to eventually pursue your dream and become a successful entrepreneur.  Or, after almost 10 years of grinding away not being the darling of the internet, going public and watching your stock double the first day on the market.  For that matter, launching any product and achieving a profitability in-s0-much-as just enough to sustain your business operations.  Those are great stories worth a tear or two.

And I guess that is why I like Horse Racing.