Monday, September 30, 2013
Sunday, September 29, 2013
The Haiku of Finance for 09/29/13
Fill the hackerspace
Mix genius and hi-tech tools
Watch the makers work
Mix genius and hi-tech tools
Watch the makers work
New Venture Thinking and Old VC Equations at Hacker Dojo
Hacker Dojo is way more than a wide open space for Meetups on real-time marketing with Big Data. I walked around the space long enough to see that its past as a glass factory is long gone. Hackerspaces should be full of random building blocks and tools for original thinkers. You know you're in one when the sarcastic instructions in the restroom are written in computer code and the wall calendar is from 2600.
The meeting rooms looked underutilized late in the day but maybe the important action happens earlier. The library is full of appropriate titles on coding, business development, and DIY things that today we call "life hacking." Thankfully there is no fiction or pop psychology to distract serious thinkers from the hard work of new venture creation.
Hacker Dojo has its incongruous moments in the spirit of random assembly. Consider this photo of an aerialist in mid-climb.
Eager students can learn aerial acrobatics in some gyms and health clubs. Come to Hacker Dojo and you'll learn among dinosaur murals and a mock-up of Doctor Who's TARDIS. BTW, the blonde in the foreground was cute.
Consider this photo of an ordinary vending machine. Don't expect the same old snacks at Hacker Dojo.
The contents include Arduino boards and USB connectors. The guy at the soldering desk told me it's the most-photographed item in Hacker Dojo. I have a newfound respect for nerd culture.
I came across one book randomly positioned in a plug-and-play tech room, A. David Silver's Venture Capital: The Complete Guide for Investors. There's an old saying . . . when the student is ready, the teacher will appear. Books have always been my best teachers so this must have been my Zen moment. The publishing date in 1985 is not a liability. Some principles don't change even if the industries they track disappear.
I flipped to the chapter on metrics, in the spirit of the analytics revolution that has gripped new venture enthusiasts and their funders. Silver proposes the "Three Laws of VC:"
1. No more than two risks per investment.
2. V = P x S x E, where . . .
V = Valuation
P = Size of problem (the one painful thing the startup proposes to solve)
S = Elegance
E = Quality of entrepreneurial team
3. Invest in big-P companies because the market will give them high valuations irrespective of S and E
Silver believes the most efficient rating system for P, S, and E is 0-3, so the max value of V in this model will be 27. He later proposes that S = B x T, where B = the business plan or solution delivery mechanism and T = the existence of low-priced tech (presumably a resource input that makes the startup's task easier with fewer innovation hurdles to cross). The existence of two more variables means the max value of either B or T cannot be greater than the square root of 3, because when multiplied together they must allow S to be no greater than 3 itself. Otherwise the larger equation's V would be greater than 27 and the whole premise of controlling risk with a formula goes out the window.
The ratings in this model would have to be subjective. VCs in the mid-80s and before would not have had access to large sets of market data outside of proprietary sources. Big Data solves that problem today. High-quality granular data on anything is available for free on the Web or at a nominal cost from market research portals. HBR did a 20003 case study on the VC formula but I've seen these types of valuation metrics in my MBA coursework (also of early 2000s vintage).
I don't know the specific risk criteria that the Valley's most prominent VC firms use to score startups. The Drapers judged startups at beGLOBAL 2013 according to a scale of either "like" or "dislike" with no middle ground allowed. Scales that force VCs to make clear decisions early on help preserve investor capital by shutting out startups that are a poor fit for the VC's model.
Sooner or later, someone is going to pull one of those Arduino boards out of that vending machine and solder it to something that will make a VC swoon. They'd better have their equations ready.
The meeting rooms looked underutilized late in the day but maybe the important action happens earlier. The library is full of appropriate titles on coding, business development, and DIY things that today we call "life hacking." Thankfully there is no fiction or pop psychology to distract serious thinkers from the hard work of new venture creation.
Hacker Dojo has its incongruous moments in the spirit of random assembly. Consider this photo of an aerialist in mid-climb.
Eager students can learn aerial acrobatics in some gyms and health clubs. Come to Hacker Dojo and you'll learn among dinosaur murals and a mock-up of Doctor Who's TARDIS. BTW, the blonde in the foreground was cute.
Consider this photo of an ordinary vending machine. Don't expect the same old snacks at Hacker Dojo.
The contents include Arduino boards and USB connectors. The guy at the soldering desk told me it's the most-photographed item in Hacker Dojo. I have a newfound respect for nerd culture.
I came across one book randomly positioned in a plug-and-play tech room, A. David Silver's Venture Capital: The Complete Guide for Investors. There's an old saying . . . when the student is ready, the teacher will appear. Books have always been my best teachers so this must have been my Zen moment. The publishing date in 1985 is not a liability. Some principles don't change even if the industries they track disappear.
I flipped to the chapter on metrics, in the spirit of the analytics revolution that has gripped new venture enthusiasts and their funders. Silver proposes the "Three Laws of VC:"
1. No more than two risks per investment.
2. V = P x S x E, where . . .
V = Valuation
P = Size of problem (the one painful thing the startup proposes to solve)
S = Elegance
E = Quality of entrepreneurial team
3. Invest in big-P companies because the market will give them high valuations irrespective of S and E
Silver believes the most efficient rating system for P, S, and E is 0-3, so the max value of V in this model will be 27. He later proposes that S = B x T, where B = the business plan or solution delivery mechanism and T = the existence of low-priced tech (presumably a resource input that makes the startup's task easier with fewer innovation hurdles to cross). The existence of two more variables means the max value of either B or T cannot be greater than the square root of 3, because when multiplied together they must allow S to be no greater than 3 itself. Otherwise the larger equation's V would be greater than 27 and the whole premise of controlling risk with a formula goes out the window.
The ratings in this model would have to be subjective. VCs in the mid-80s and before would not have had access to large sets of market data outside of proprietary sources. Big Data solves that problem today. High-quality granular data on anything is available for free on the Web or at a nominal cost from market research portals. HBR did a 20003 case study on the VC formula but I've seen these types of valuation metrics in my MBA coursework (also of early 2000s vintage).
I don't know the specific risk criteria that the Valley's most prominent VC firms use to score startups. The Drapers judged startups at beGLOBAL 2013 according to a scale of either "like" or "dislike" with no middle ground allowed. Scales that force VCs to make clear decisions early on help preserve investor capital by shutting out startups that are a poor fit for the VC's model.
Sooner or later, someone is going to pull one of those Arduino boards out of that vending machine and solder it to something that will make a VC swoon. They'd better have their equations ready.
Social Intelligence Data Analytics Real-Time Big Data Marketing Disruption with Domain-Specific Use Cases
I attended a Meetup last week at Hacker Dojo in Mountain View. I gave this article the longest title in Alfidi Capital's history because that's the only way I could incorporate the concepts announced in both the Social Media Marketing Monitoring Engagement SF group and the Frontier Big Data Cloud Weekly SFBay group. The more Meetups I attend, the more content I absorb. This stuff crosses so many boundaries that only a handful of geniuses such as Yours Truly can track it all.
Chase McMichael from InfiniGraph gave his talk on how marketing intelligence can find use case data in social media. Check out his slides on SlideShare. He observed that data harvested from outside your own organization isn't "clean." Dirty data contains noise from inaccurate or irrelevant sources that IT managers must sort through a labor-intensive data cleansing process. Chase thinks large enterprises lack integrated plans for aggregating and sorting Big Data. His ideal business intelligence plan proceeds from reporting to analysis to monitoring with predictive analytics as the top layer.
Let's pause to reflect on Big Data integration. My use of Google Analytics and Webmaster Tools pales in comparison to the challenges larger enterprises face. IMHO DevOps people must increasingly design apps with data collection goals and analytics in mind. If this emphasis isn't embedded early in the software development cycle, the finished app won't produce clean Big Data that feeds an ERP. Big Data demands a redesign of CRM/ERP integration. CRM will generate data marketers can use to adjust Customer Development, and that CustDev must drive the predictive analytics that will become ERP resource use forecasts.
I'm getting ahead of myself here, so let's get back to Chase's wisdom from his seminar. He noted that Apple's app strategy gave its iPhone the edge over BlackBerry because the app ecosystem generated demand for the device's adoption. I kept thinking about how companies track these ecosystems to look for demand trends. Chase thinks that content marketing depends on trend discovery, a Big Data problem. I now think that scoring an ecosystem's engagement with your enterprise's content is a key part of a Big Data strategy. The real-time tracking aspect gets hard for companies that aren't savvy in social media. User interactions in social media leave data fingerprints and DevOps people should build algorithms that track them as use cases.
Chase argues that Big Data analytics mixes anthropology, social science, and statistics. His preferred "real-time marketing" reacts with relevant messaging to data derived from demand. Now I see his earlier point about the ineffectiveness of labor-intensive IT methods. Machine intelligence creates scalable data that does not require intensive human labor in its production. The automation of Big Data's demand-driven response is what makes it scalable.
I grok this concept of automated data-driven marketing responses but I also heard similar things back in the late 1990s when I was on active duty in the US Army. Military technology developers were excited about fielding the "Force XXI" suite of systems that were going to automate away all battlefield confusion. These systems are now mature but the fog of war is still present on the battlefield. Even the RAND corporation was skeptical about Force XXI's assumptions while the program was at its highest visibility. Uncertainty in a competitive environment never disappears because executing a strategy requires human judgment to ensure the OODA Loop has the correct orientation and that progress tracks the correct milestones.
Big Data has a role to play in automating the marketing data collection feed into analytics, just as it can play on the battlefield in automating intelligence data collection. IMHO, Big Data poses a knowledge management taxonomy challenge to large organizations once they've sorted the data streams. My point is that humans cannot ever be fully removed from the OODA Loop, especially those C-suite executives who are responsible for ensuring the Orientation correctly reflects the enterprise's strategic posture. Humans designing these systems can't just turn everything over to Hadoop and hope for the best. The end result in a private enterprise would be like the US's McNamara Line in Vietnam where dirty data corrupted automated decision-making. The human beings working on corporate CRM / Big Data / ERP integration task forces need clear guidance from the C-suite on a KM taxonomy that will prioritize the types of data that get automated. The strategic guidance should also name the program managers or geographic region managers who will own parts of the automated decision-making cycle.
Chase finished with some hints on Googling ".xls" and other terms to see just how much Big Data that corporations have released is already in the public domain. He thinks RSS feeds are a universal standard for content publishing (with visual content being especially powerful), and we should use them to collect content for scoring. He also thinks we should check out InfiniGraph's SMO portal. I think we should all check out IIA's Analytics 3.0 while C-suite folks should attend the Chief Analytics Officer Summit. Those resources will given enterprises a start on developing guidance for DevOps and KM integrators as they start automating data-driven marketing responses.
Well done, Chase. You got me thinking. BTW, these Meetups make it cool to be a technology geek. I saw several very attractive women at this Meetup, including one hot blonde Russian chick named Olga. Hey Olga, send me your phone number and let's talk about Big Data at your place.
Chase McMichael from InfiniGraph gave his talk on how marketing intelligence can find use case data in social media. Check out his slides on SlideShare. He observed that data harvested from outside your own organization isn't "clean." Dirty data contains noise from inaccurate or irrelevant sources that IT managers must sort through a labor-intensive data cleansing process. Chase thinks large enterprises lack integrated plans for aggregating and sorting Big Data. His ideal business intelligence plan proceeds from reporting to analysis to monitoring with predictive analytics as the top layer.
Let's pause to reflect on Big Data integration. My use of Google Analytics and Webmaster Tools pales in comparison to the challenges larger enterprises face. IMHO DevOps people must increasingly design apps with data collection goals and analytics in mind. If this emphasis isn't embedded early in the software development cycle, the finished app won't produce clean Big Data that feeds an ERP. Big Data demands a redesign of CRM/ERP integration. CRM will generate data marketers can use to adjust Customer Development, and that CustDev must drive the predictive analytics that will become ERP resource use forecasts.
I'm getting ahead of myself here, so let's get back to Chase's wisdom from his seminar. He noted that Apple's app strategy gave its iPhone the edge over BlackBerry because the app ecosystem generated demand for the device's adoption. I kept thinking about how companies track these ecosystems to look for demand trends. Chase thinks that content marketing depends on trend discovery, a Big Data problem. I now think that scoring an ecosystem's engagement with your enterprise's content is a key part of a Big Data strategy. The real-time tracking aspect gets hard for companies that aren't savvy in social media. User interactions in social media leave data fingerprints and DevOps people should build algorithms that track them as use cases.
Chase argues that Big Data analytics mixes anthropology, social science, and statistics. His preferred "real-time marketing" reacts with relevant messaging to data derived from demand. Now I see his earlier point about the ineffectiveness of labor-intensive IT methods. Machine intelligence creates scalable data that does not require intensive human labor in its production. The automation of Big Data's demand-driven response is what makes it scalable.
I grok this concept of automated data-driven marketing responses but I also heard similar things back in the late 1990s when I was on active duty in the US Army. Military technology developers were excited about fielding the "Force XXI" suite of systems that were going to automate away all battlefield confusion. These systems are now mature but the fog of war is still present on the battlefield. Even the RAND corporation was skeptical about Force XXI's assumptions while the program was at its highest visibility. Uncertainty in a competitive environment never disappears because executing a strategy requires human judgment to ensure the OODA Loop has the correct orientation and that progress tracks the correct milestones.
Big Data has a role to play in automating the marketing data collection feed into analytics, just as it can play on the battlefield in automating intelligence data collection. IMHO, Big Data poses a knowledge management taxonomy challenge to large organizations once they've sorted the data streams. My point is that humans cannot ever be fully removed from the OODA Loop, especially those C-suite executives who are responsible for ensuring the Orientation correctly reflects the enterprise's strategic posture. Humans designing these systems can't just turn everything over to Hadoop and hope for the best. The end result in a private enterprise would be like the US's McNamara Line in Vietnam where dirty data corrupted automated decision-making. The human beings working on corporate CRM / Big Data / ERP integration task forces need clear guidance from the C-suite on a KM taxonomy that will prioritize the types of data that get automated. The strategic guidance should also name the program managers or geographic region managers who will own parts of the automated decision-making cycle.
Chase finished with some hints on Googling ".xls" and other terms to see just how much Big Data that corporations have released is already in the public domain. He thinks RSS feeds are a universal standard for content publishing (with visual content being especially powerful), and we should use them to collect content for scoring. He also thinks we should check out InfiniGraph's SMO portal. I think we should all check out IIA's Analytics 3.0 while C-suite folks should attend the Chief Analytics Officer Summit. Those resources will given enterprises a start on developing guidance for DevOps and KM integrators as they start automating data-driven marketing responses.
Well done, Chase. You got me thinking. BTW, these Meetups make it cool to be a technology geek. I saw several very attractive women at this Meetup, including one hot blonde Russian chick named Olga. Hey Olga, send me your phone number and let's talk about Big Data at your place.
Saturday, September 28, 2013
Checking Out IBM SmartCamp Silicon Valley 2013
Last week I went down to the Computer History Museum to check out IBM's SmartCamp Silicon Valley 2013. Anybody who's anybody is running a startup accelerator these days and this is Big Blue's version. I was only able to attend the final round of pitches on Friday after the startups had gone through their clinics but it was still worth the trip. I make my usual pithy comments in italics.
The folks from IBM's Venture Capital Group led off with a description of their Global Entrepreneur Program. This is the kind of program I'd wish I'd jumped into instead of spending two years on a worthless MBA from the University of San Francisco. IBM's resident experts know what startups need to do to be successful. They have partners with VCs all over the world and the startups that went through their program have attracted $120M since 2009. IBM's clients want innovation and this program is the company's way of delivering entrepreneurial talent to a broader ecosystem and connecting its internal program managers with new technology. IBM's venture group does not invest its own money but that's okay. The judging panel from Silicon Valley Bank, Hummer Winblad, and Garage Technology Ventures brought plenty of their own financial power.
The VC panel had some thoughts to share before they started judging pitches. This is apparently a great time for startups with tremendous room for growth in APIs, open source, cloud, mobile, and smart sensors. I think it will be even greater for startups when the economy tanks and inefficient companies are forced to liquidate. Recessions and depressions are IMHO really the best times for startups because talent and assets can be obtained cheaply. Anyway, the panel thought the "open innovation" philosophy has transitioned from Valley-based companies to other global companies that are now more willing to bring startups into their enterprises. Startups that can solve corporate pain can get into sponsored development programs. Small companies now have access to analytical tools that big companies have traditionally used. Launching a startup is faster, easier, and cheaper than ever but that means competition is more intense. The speed of competition forces big corporations to be more careful about giving a firm commitment to a startup.
The VC panel liked gross margins as a KPI. That reminded me of what Guy Kawasaki shared at the Cleantech Open Academy this year: "Sales fixes everything!" One panelist mentioned "Analytics 3.0" as a the merger of Big Data with cognitive computing. The best source I have found is the International Institute for Analytics' description of the Analytics 3.0 concept. Successful entrepreneurs have passion and drive; they are focused and strategic; they find a beachhead and differentiate themselves. They key to success is whatever makes people fall in love with your product or concept. That just goes to show that even the smartest people in the room are non-rational! Human beings makes decisions with their emotions and then rationalize them afterwards by selectively fitting facts into their prearranged narrative. This is how dumb ideas get approved and why attractive-looking salespeople can get away with manipulating a client. The VC panel finished up by telling us to leverage our relationships with corporate partners that are willing to work with startups. This also makes me think back to what Guy Kawasaki said at the CTO Academy about startups who tout "partners" instead of results, i.e. sales. I suspect that corporations don't all think the same way as VCs. The VC way is to rapidly scale revenue to make 5x-10x ROI. Corporate metrics are probably less stringent because they are mainly after a technology they can acquire.
The startup pitches came next. I liked OnFarm the best because IMHO they have a very cool way to bring Big Data into agribusiness. They would definitely benefit from SARTA's AgStart program. I'll summarize the lessons the judges imparted as they considered the pitches. Know your competitors. Know the length of your sales cycle. I think the 10/20/30 format for pitches would have made a lot of sense for some of the startups in the program. They're welcome to use the sample pitch I put on my Alfidi Capital Special Reports page. Knowing your competitors' price points determines whether your product is cheaper. A go-to-market strategy means first knowing your ultimate customer. Regulatory risk (Obamacare, energy/carbon trading, etc.) provides paths to disruption. Knowing how your tech works means having third-party data validation, such as use case data or peer-reviewed scientific studies. Know the KPIs that will drive sales from an app or web portal. That means knowing how impressions become conversions and knowing the cost of each step in the sales cycle.
The judges retired to their deliberation chamber while another presenter from IBM introduced the rest of us to Design thinking. User-centered design is how technologists achieve differentiation from competitors' products. IBM thinks products compete first on availability, then price, then quality, and finally design. Okay, I get it, design is the ultimate value-added finishing touch for high-end products that do not wish to be mistaken for commodities. A startup's elegant design ethic can scale to meet the needs of an acquirer if it focuses on usability. It sounds like IBM just gave its small partners a big hint about what they need to create if they want to get into IBM's program. If you're not sure how to make it work, check out this video Jim Henson made for IBM in the 1960s before he created the Muppets. Cookie Monster eats that digital coffee machine like there's no tomorrow. If you get stumped on a project, just eat your coffee machine. Stanford's d.school does lots of design thinking, presumably without exploding coffee machines. I think even national security applications can benefit from good design. Palantir is a lot more user-friendly than DCGS-A even if it doesn't have immediate access to the entire suite of intelligence community capabilities. Most analysts in the field have made their preference for Palantir known.
The keynoter from Guidewire Labs gave us a version of the "go forth and do well" talk common at academic commencement ceremonies. Here it comes, paraphrased. Entrepreneurship is like a marathon inside a triathlon inside a decathlon. What about the pentathlon? LOL. VC-backed startups have a 1-in-10 success rate. Don't wait for someone to tell you what to do. Startups don't have time for the luxury of multiple mentors, so rely on your instincts instead. Do something every day to move your business forward. Take action. The Valley's "fail fast" mentality is okay if you stop doing what wasn't working. Examine failures for lessons. Live with integrity. Be honest and compassionate. Don't wait to do good; be good now with generosity and philanthropy.
I like those words of wisdom. Some entrepreneurs are sufficiently autodidactic to incorporate good advice from these conferences into their character. Most aren't, which is why most businesses fail. I keep my notes and blog about these events because I'm serious about success. Startups that get serious can join SmartCamp or use IBM's Social Business tool suite for enterprises. I use my own cheapskate tools because Alfidi Capital doesn't need to scale to IBM's size. If you can scale your own business, I'll see you at IBM's SmartCamp Silicon Valley next year.
Friday, September 27, 2013
Thursday, September 26, 2013
Alfidi Capital in Compliance With First Amendment in Social Media
I'll give my audience another reason why I don't give financial or investment recommendations to investors. Securities regulators take note of registered representatives' public statements and can use them to resolve complaints against reps. FINRA issued regulatory notice 10-06 to cover blogs and social networking sites with further guidance in regulatory notice 11-39. These notices ensure that registered reps do not make public statements that can be construed as investment recommendations lacking in suitability for an investor's specific situation.
These rules don't apply to me for several reasons, as I must enumerate below.
1. I am not a registered representative, securities firm, broker/dealer, RIA, or any such thing either as a human being or as my business entity Alfidi Capital. Read my AL-FAQ-DI and Legalistic Disclaimerism if you're confused.
2. I do not sell securities or investment products of any kind.
3. I do not originate or underwrite corporate finance transactions.
4. I do not maintain custody of client assets. I have no clients at all.
All I do is publish my opinions on financial topics and how those topics affect my own money. I can speak my mind on finance because the First Amendment protects freedom of speech. I use social media as much as possible to ensure the whole world has access to my genius. I have no interest at all in what anyone else on this planet does with their money. Anyone who does not understand this blog article is a stupid loser.
Wednesday, September 25, 2013
The Haiku of Finance for 09/25/13
Wider bid-ask spread
Chance for greater arbitrage
Not without some risk
Chance for greater arbitrage
Not without some risk
Placement Agents Are Mostly Useless
I was flipping through the marketing brochures of a corporate law firm when a fancy-sounding term caught my eye: "placement agent." What's that, I wondered? Is it like some kind of sports agent running around yelling "show me the money" like in Jerry Maguire? My impression was actually pretty close. A placement agent is literally some private party who finds investments for investors. The more I read about this unique function in the finance sector, the more it seems like a total waste of money for investors and a liability for fiduciaries.
Legitimate placement agents should have no permanent financial relationship with either party they introduce and should play no role in negotiating a deal or in subsequent operations. I just think that's obvious but not everyone in finance thinks like me. Greedy people will have a hard time living that philosophy. Some placement agents get sued and imprisoned for the damage they do to clients.
Placement agents can cause breaches of trust for fiduciaries and conflicts of interest for money managers. They may have a limited role to play by introducing two separate private parties but they can cause innumerable problems for retirement plan sponsors, endowments, and other fiduciaries who are subject to strict legal controls. Most of these agents are probably an unnecessary middle-person in the allocation of capital. They are quite different from business brokers who perform a needed function for privately held businesses seeking liquidation. Alfidi Capital is not a place for unethical placement agents.
Legitimate placement agents should have no permanent financial relationship with either party they introduce and should play no role in negotiating a deal or in subsequent operations. I just think that's obvious but not everyone in finance thinks like me. Greedy people will have a hard time living that philosophy. Some placement agents get sued and imprisoned for the damage they do to clients.
Placement agents can cause breaches of trust for fiduciaries and conflicts of interest for money managers. They may have a limited role to play by introducing two separate private parties but they can cause innumerable problems for retirement plan sponsors, endowments, and other fiduciaries who are subject to strict legal controls. Most of these agents are probably an unnecessary middle-person in the allocation of capital. They are quite different from business brokers who perform a needed function for privately held businesses seeking liquidation. Alfidi Capital is not a place for unethical placement agents.
Impressions From The Asian Art Museum's Annual Report
I attended the Asian Art Museum's Foundation and Commission annual meeting last night to hear about their operations. The top brass presented the museum's annual report, which oddly enough I cannot find online even though it is a public document describing a civic entity's operations. I did find their audited financial statements and donor report on the museum's governance page although the reports for 2013 aren't up yet.
I noticed two financial matters from last night's meeting. The first is that the museum's endowment has assigned over a quarter of its asset allocation, in both its restricted and unrestricted funds, to hedge fund investments. That is worrisome. Hedge funds tend to underperform their benchmark indexes over time and the fees investors pay for them are exhorbitant. My second concern is that the museum intends to reduce its unrestricted fund to zero as the debt incurred to pay off the museum's relocation from Golden Gate Park is paid off through 2040. They intend to commit the entire endowment to restricted use after that date. My understanding of the word "restricted" is that donor funds in that category can only be used for specific exhibits or programs. I know that some donors like to set restrictions when they grant gifts because they like certain programs. If it were up to me, some balance of any non-profit endowment would remain unrestricted to give the institution flexibility in addressing future needs. It's not up to me after all, until someday when I'm wealthy enough to donate at a level that will obtain a seat on San Francisco's Asian Art Commission.
I did a double-take when the annual report described the KPIs the museum uses to measure success. My bias as a private sector finance guy is to default to metrics like ticket sales, gift shop revenue, and donations as the primary measures of success. The museum weights its non-financial KPIs like event attendance and website visits as equivalent to its financial metrics. Their mission is to bring art to the public, not just make money. I respect a non-profit that can increase its attendance and program offerings while breaking even if its endowment's ROI is at least beating inflation.
The Asian Art Museum is one of The City's jewels. I wrote it into my will years ago and that's why some of the big-shots running the place like having me around.
I noticed two financial matters from last night's meeting. The first is that the museum's endowment has assigned over a quarter of its asset allocation, in both its restricted and unrestricted funds, to hedge fund investments. That is worrisome. Hedge funds tend to underperform their benchmark indexes over time and the fees investors pay for them are exhorbitant. My second concern is that the museum intends to reduce its unrestricted fund to zero as the debt incurred to pay off the museum's relocation from Golden Gate Park is paid off through 2040. They intend to commit the entire endowment to restricted use after that date. My understanding of the word "restricted" is that donor funds in that category can only be used for specific exhibits or programs. I know that some donors like to set restrictions when they grant gifts because they like certain programs. If it were up to me, some balance of any non-profit endowment would remain unrestricted to give the institution flexibility in addressing future needs. It's not up to me after all, until someday when I'm wealthy enough to donate at a level that will obtain a seat on San Francisco's Asian Art Commission.
I did a double-take when the annual report described the KPIs the museum uses to measure success. My bias as a private sector finance guy is to default to metrics like ticket sales, gift shop revenue, and donations as the primary measures of success. The museum weights its non-financial KPIs like event attendance and website visits as equivalent to its financial metrics. Their mission is to bring art to the public, not just make money. I respect a non-profit that can increase its attendance and program offerings while breaking even if its endowment's ROI is at least beating inflation.
The Asian Art Museum is one of The City's jewels. I wrote it into my will years ago and that's why some of the big-shots running the place like having me around.
Tuesday, September 24, 2013
Follow-Up on Tech Ecosystem for beGLOBAL Startups
I heard some of the entrepreneurs at this month's beGLOBAL 2013 conference drop hints about the network of information sources they leverage. I checked some of them out to see if they're useful for me as a blogger.
The Korean government maintains KOTRA Silicon Valley to help its native startups launch here. That is brilliant and it makes me wonder whether the US government funds its own satellite locations in hot foreign markets. The US Commercial Service supports periodic trade missions but I'm not aware of any permanent presence other than the commercial sections they staff at US embassies.
The Plug and Play Center is an accelerator one startup mentioned as something worth doing. I missed their Fall EXPO so I can't judge their results first-hand. They don't make equity investments in participants, unlike Y Combinator.
One guy mentioned Black Hat and its DEFCON event. I won't link them here because the spirit of that organization lends itself to elements I would not want in my circles. Suffice it to say that the leading edge of network security is always ripe for disruption. Security pros like Bruce Schneier would have a field day at DEFCON.
Angel Launch is a platform I've never seen before, produced by iHollywood Forum. Connecting pitch competitions from different sectors and regions is valuable to angel investors. Their Startup Venture Summit attracts the right kinds of investors but I'm too cheap to attend. Maybe they'll invite me to show up for free, just because I'm so awesome.
The participants got their market data from a plethora of research firms and apps. They threw around names like Localytics, Circa, Kantar, Ipsos, GfK, and IRI Worldwide. I can't vouch for any of their services but I like some of the articles on Circa's blog. I suspect that hiring an outside market research agency doesn't come cheap. I further suspect that the cost of obtaining market data from open sources is near or at zero. The US government's Data.gov initiative puts everything except classified stuff online. I think sharp DevOps people can build Data.gov's APIs into their apps and get all of the size-of-market data they ever dreamed of having from the US Census.
Have at it, techies. I'm not a hacker or DevOps dude so fielding this tech is up to you. I just want to invest in something that uses Big Data to disrupt my favorite sectors - finance, logistics, defense, and natural resources.
The Korean government maintains KOTRA Silicon Valley to help its native startups launch here. That is brilliant and it makes me wonder whether the US government funds its own satellite locations in hot foreign markets. The US Commercial Service supports periodic trade missions but I'm not aware of any permanent presence other than the commercial sections they staff at US embassies.
The Plug and Play Center is an accelerator one startup mentioned as something worth doing. I missed their Fall EXPO so I can't judge their results first-hand. They don't make equity investments in participants, unlike Y Combinator.
One guy mentioned Black Hat and its DEFCON event. I won't link them here because the spirit of that organization lends itself to elements I would not want in my circles. Suffice it to say that the leading edge of network security is always ripe for disruption. Security pros like Bruce Schneier would have a field day at DEFCON.
Angel Launch is a platform I've never seen before, produced by iHollywood Forum. Connecting pitch competitions from different sectors and regions is valuable to angel investors. Their Startup Venture Summit attracts the right kinds of investors but I'm too cheap to attend. Maybe they'll invite me to show up for free, just because I'm so awesome.
The participants got their market data from a plethora of research firms and apps. They threw around names like Localytics, Circa, Kantar, Ipsos, GfK, and IRI Worldwide. I can't vouch for any of their services but I like some of the articles on Circa's blog. I suspect that hiring an outside market research agency doesn't come cheap. I further suspect that the cost of obtaining market data from open sources is near or at zero. The US government's Data.gov initiative puts everything except classified stuff online. I think sharp DevOps people can build Data.gov's APIs into their apps and get all of the size-of-market data they ever dreamed of having from the US Census.
Have at it, techies. I'm not a hacker or DevOps dude so fielding this tech is up to you. I just want to invest in something that uses Big Data to disrupt my favorite sectors - finance, logistics, defense, and natural resources.
Monday, September 23, 2013
SEC Lifts Ban on General Solicitation to Turbo-Charge JOBS Act
Today the SEC lifted its ban on general solicitation. This is good news for startups who want to raise money under the JOBS Act if they can adhere to all of the required disclosures. Companies must now submit very detailed documentation of their fundraising to the SEC if they want to remain compliant. This is good news for securities attorneys and compliance consultants who will now be fully employed by startups requiring their services.
I tuned in to today's webinars from SeedInvest and Crowdfunder. The new implications of Reg D are massive. Investors need to know that merely claiming to have accredited status won't be sufficient to stay out of trouble. They need to document their income and net worth if they want to play with startups under the JOBS Act. Accredited investors could also have a third party (CPA, RIA, etc.) document their status. I'm still not clear on whether public events such as product demo launches, angel pitchfests, accelerator or incubator workshops, and business plan competitions will require presenting companies to file disclosures prior to appearing. I also wonder whether the SEC will pay a bounty for turning in "bad actors" who continue to abuse securities regulations. I would like to see these matters clarified on the SEC's JOBS Act page.
I am not at present an SEC-defined accredited investor, so I must of course adhere to SEC rules, FINRA rules, and crowdfunding portal rules to stay on the right side of the law. I have always had a clean record and I am going to keep it that way. BTW, this blog article does not in any way constitute legal or financial advice. Startups seeking legal counsel on raising capital need to talk to one of the overworked securities attorneys I've seen around Silicon Valley.
I tuned in to today's webinars from SeedInvest and Crowdfunder. The new implications of Reg D are massive. Investors need to know that merely claiming to have accredited status won't be sufficient to stay out of trouble. They need to document their income and net worth if they want to play with startups under the JOBS Act. Accredited investors could also have a third party (CPA, RIA, etc.) document their status. I'm still not clear on whether public events such as product demo launches, angel pitchfests, accelerator or incubator workshops, and business plan competitions will require presenting companies to file disclosures prior to appearing. I also wonder whether the SEC will pay a bounty for turning in "bad actors" who continue to abuse securities regulations. I would like to see these matters clarified on the SEC's JOBS Act page.
I am not at present an SEC-defined accredited investor, so I must of course adhere to SEC rules, FINRA rules, and crowdfunding portal rules to stay on the right side of the law. I have always had a clean record and I am going to keep it that way. BTW, this blog article does not in any way constitute legal or financial advice. Startups seeking legal counsel on raising capital need to talk to one of the overworked securities attorneys I've seen around Silicon Valley.
Financial Sarcasm Roundup for 09/23/13
This should add some flair to the finance sector. I know for a fact that the wealth management brokerage where I once worked would have been more intelligent if cats and dogs were running that show.
Greece and its lenders have agreed to falsify a budget surplus. Calculating a budget surplus before paying interest reminds me of the '90s era dot-coms who claimed they were profitable based on EBITDA. It's fiction, people! They're even going to falsify a joint economic growth forecast. The creditors and government officials who are party to this chicanery are committing frauds against the taxpayers of Germany and other European countries backstopping the troika bailout. This is infuriating to watch! Just imagine the Federal Reserve dollar swap lines underpinning the European troika bailout and how the never-ending Greek mountain of baloney piling up will eventually trigger their activation. Is it now obvious to everyone why I'm bearish on the euro?!
Give credit to Ireland for not following the Greek example. The Irish are sticking to austerity and Moody's upgraded its sovereign debt rating. Maybe Irish whiskey doesn't rot the brain as thoroughly as Greek ouzo. If they keep it up we can remove Ireland from the PIIGS acronym and just focus on the other four hair triggers of European insolvency.
US mortgage lenders are going for the subprime market again. They're just not using that label. I soon expect lenders to start accepting piles of manure as collateral. This is the end result of the Fed buying all the GSE-backed mortgage paper in sight. Banks will once again stretch for riskier income because the Fed creates moral hazard by absolving them of risk.
Washington is playing games with the nation's credit rating again. It may come to nothing if regulatory threats against the rating agencies frighten them into inaction. The markets won't be fooled for long. The change to the GDP calculation won't fool future historians.
Enjoy this stuff, folks. I put all of twenty minutes into making this so you'd better appreciate my hard work. Expect a lot more of this stuff in the future from Alfidi Capital. Finance makes me LOL.
Greece and its lenders have agreed to falsify a budget surplus. Calculating a budget surplus before paying interest reminds me of the '90s era dot-coms who claimed they were profitable based on EBITDA. It's fiction, people! They're even going to falsify a joint economic growth forecast. The creditors and government officials who are party to this chicanery are committing frauds against the taxpayers of Germany and other European countries backstopping the troika bailout. This is infuriating to watch! Just imagine the Federal Reserve dollar swap lines underpinning the European troika bailout and how the never-ending Greek mountain of baloney piling up will eventually trigger their activation. Is it now obvious to everyone why I'm bearish on the euro?!
Adding LOL Photos to Alfidi Capital
I'm always experimenting with ways to make the Alfidi Capital experience more phenomenal for my brilliant readers. That's why I'm going to start adding LOLcats and other such pics to my blog posts. Why LOLcats? Well, they're cute and popular. The Web is all about viral stuff and if one of these sarcastic kitties helps my stuff get seen then it's worth doing. Other images of animals, people, and bizarre scenes shall appear as I see fit.
The Cheezburger Network has an automated LOL builder with stock photos. I used it to create a photo that includes a haiku just for this inaugural occasion. The finished LOLcat should appear here on the Cheezburger Network. I don't know if it will stay up there forever so that's why all future LOL meme pics will appear here on the Alfidi Capital Blog.
LOLcat haiku here
Nothing to do with finance
Just more funny stuff
The Cheezburger Network has an automated LOL builder with stock photos. I used it to create a photo that includes a haiku just for this inaugural occasion. The finished LOLcat should appear here on the Cheezburger Network. I don't know if it will stay up there forever so that's why all future LOL meme pics will appear here on the Alfidi Capital Blog.
LOLcat haiku here
Nothing to do with finance
Just more funny stuff
Alpha-D Update for 09/23/13
It's that time of the month again. My covered calls on FXF expired unexercised and I renewed them for another month. I remain long GDX, FXF, FXA, and FXC as hedges against US dollar hyperinflation. I do not concern myself with recent wild fluctuations in currency values or the collapse of the gold mining sector. Cheaper assets make more attractive purchases.
I am still long a put position against FXE. The euro is toast and I don't need any dingbat currency traders from FX Invest West Coast to tell me it's poised for a comeback. The treasurers of multinational corporations with European operations have hedged their euro positions and moved bill-paying cash to other currencies. Hedge fund suckers who are long in euro holdings will eventually be left holding the bag.
I'm tempted to buy more GDX but I remember my sentiments from last year to wait until it eventually sold away. Gold is not as effective for hedging against inflation as a broad basket of hard assets. Given a choice between buying more GDX or conserving my cash to buy other hard assets, I'd rather sit and wait. The hard asset REITs I evaluated recently, specifically PSA and RYN, are more appropriate for me than more gold.
I also need to reiterate that none of this constitutes investment advice. I don't give investment advice and no one ever took my advice when I gave it anyway. My blog articles are only about what I do with my own money.
I am still long a put position against FXE. The euro is toast and I don't need any dingbat currency traders from FX Invest West Coast to tell me it's poised for a comeback. The treasurers of multinational corporations with European operations have hedged their euro positions and moved bill-paying cash to other currencies. Hedge fund suckers who are long in euro holdings will eventually be left holding the bag.
I'm tempted to buy more GDX but I remember my sentiments from last year to wait until it eventually sold away. Gold is not as effective for hedging against inflation as a broad basket of hard assets. Given a choice between buying more GDX or conserving my cash to buy other hard assets, I'd rather sit and wait. The hard asset REITs I evaluated recently, specifically PSA and RYN, are more appropriate for me than more gold.
I also need to reiterate that none of this constitutes investment advice. I don't give investment advice and no one ever took my advice when I gave it anyway. My blog articles are only about what I do with my own money.
Sunday, September 22, 2013
The Limerick of Finance for 09/22/13
Korea tech startups are hot
Word of mouth is how they hit the spot
Get cash from Samsung
Make it past the first rung
Incubators can give them a shot
Word of mouth is how they hit the spot
Get cash from Samsung
Make it past the first rung
Incubators can give them a shot
Alfidi Capital at Korea's beGLOBAL 2013 Conference in Silicon Valley
I haven't been to South Korea since early 2000 but recently South Korea came to my neighborhood. This month's beGLOBAL 2013 conference brought Korean hi-tech startups to meet Silicon Valley's leading lights in new venture investment. I attended because I wanted to get a flavor for the innovations that beSUCCESS and several Korean government agencies are supporting in Korea. Anyone who wants to go all the way to Korea should attend their beLAUNCH event. Check out my summary paraphrasing of the key participants' public comments below; as always, my own original observations are in italics.
I got to mingle beforehand with some of the entrepreneurs who would pitch their startups later that day. They were all social media and e-commerce applications. Those don't fit my portfolio but I was impressed that their technologies were mature enough for deployment.
The first panel made history with three generations of VCs in the Draper family - Bill, Tim, and Adam - on stage together for the first time ever. I got to shake Tim's hand while he worked the crowd and we chatted briefly on Korean geopolitics. The Draper family is quite media-savvy. I'd sure like to appear on Jesse Draper's Valley Girl Show about Silicon Valley. I'm sure my wit and charm would just bowl her over. I was disappointed that actress Polly Draper wasn't on hand. I fondly recall seeing her bare derriere in a racy swimming pool scene on thritysomething way back in my teenage years and I'll bet her caboose still looks nice. Anyway, my photo below shows the VC Drapers on stage together just after their panel concluded. I respect these folks way too much to ruin the shot with a LOLcat-type caption.
John Nahm from Strong Ventures moderated the Draper panel. John thanked Bill for his service in the Korean War, and Bill remarked that it was normal back then for young Americans in the Greatest Generation to expect a call to service that would interrupt their lives. I wish I could say the same thing today. My own calls to US military service have severely degraded my civilian career. Private sector employers viewed my background with disdain until I started Alfidi Capital. I should have told prospective employers that military veterans William H. Draper and Georges Doriot pretty much invented venture capital based on their wartime experiences in developing technology. Bill recalled his friendship with another Army lieutenant who was KIA during combat in Korea and said that his death was worthwhile now that South Korea is prosperous and free. He cited the book Nothing to Envy on the deplorable living conditions inside North Korea. I fully endorse Bill's assessment. I received nothing but thanks during my two active-duty tours in South Korea from Koreans who were old enough to remember the war. My only glimpse of North Korea was a visit to the UN Joint Security Area (JSA) at Panmunjom in December 1995. South Korea in the 1990s was one of the world's leading makers of automobiles, computer chips, and ocean cargo ships. Former President Kim Young-Sam's "segyehwa" policies saw South Korea embrace global culture and trade. Seoul's urban sprawl reminded me of Los Angeles and Pusan's hills reminded me of San Francisco. Only after moving to San Francisco did I realize that Seoul is its official sister city.
Tim Draper remarked that he had invested in a Korean venture fund that returned 1x in spite of the dot-com crash. He credits the exposure of virtual goods' value in a Korean video game as the factor that opened his mind to Zynga. Adam Draper said that Bitcoin is the closest thing now to a global currency, and his involvement in several Bitcoin startups made him proud to be the first Draper to receive a subpoena. His grandfather Bill then joked that he'd be the first Draper to go to jail. The Drapers concluded by saying that crowdfunding will change the LP/GP relationship in VC and that it allows entrepreneurs to accelerate their ventures. Hardware is now a hot idea again with VCs because crowdfunding makes it cheaper than ever to raise capital.
The Drapers judged the first round of startup pitches. Their comments were terrific fire-hose introductions to VC thinking. They wanted to see user traction, size of market, path to monetization, and differentiation from competitors. Tim Draper is skeptical of serial entrepreneurs because he thinks they tend to jump to competitors rather than stick with a funded startup. It's rare for me to hear such skepticism. I had previously thought that serial entrepreneurs were a success factor because they knew how to get to an exit event. Some VCs also dislike paying for the key-person insurance policies for serial entrepreneurs. One of the funniest moments was when Bill Draper asked one entrepreneur, "So we've heard about the company . . . who are you?" The pitch-person didn't tell the panel what their role was with the startup. I thought it was cute that one of the female Korean entrepreneurs demurely covered her mouth while giggling; that's a Korean cultural habit that still hasn't disappeared.
The next panel was Samsung's fireside chat about open innovation. Samsung invests in seed-stage ventures and uses its Open Innovation Center (OIC) as an accelerator. The Samsung rep thinks its accelerator gives startups access to Samsung's huge platform as a distribution channel. The OIC removes the administrative overhead burden so startups can focus on product development. Individual entrepreneurs can enter the OIC with employment agreements. Samsung Ventures invests larger amounts in Series B and later startups, while the OIC invests in seed to Series A and considers M&A to be an critical part of its business process. Samsung owns the startups they bring into their accelerator and pays entrepreneurs a full salary. If a mature product doesn't fit Samsung's ultimate strategy, they consider spinouts. Samsung sounds like an extremely generous benefactor. Selling out to a big global company provides entrepreneurs with a clear choice. They can sell out early and become wholly-owned employees or take their chances with later stage investors if they stay independent.
Other local VCs addressed the ROI of investing in Korea and Asia in the next panel. VCs think Korean entrepreneurs are passionate and driven. Korea has great Internet infrastructure, it serves as a gateway to other Asian markets, and the country's top education system generates talent. There also a few things VCs don't like about Korea. The notion of entrepreneurship is still alien to most Koreans; I believe it's because Asians generally fear that failure results in a loss of face. Exit events in Korea often have lower multiples than in the US mostly due to the smaller size of the Korean market for many products. US VCs still need to be convinced to invest in Korea; it's not always a given. Koreans also think the founder embodies the entire startup and that her/his departure ends the company. Contrast this with the US view that a startup CEO is a manager whom the VCs can replace.
The ROI panel thought many Korean executives lack marketing skills. Korean demographics are not diverse and are very concentrated. That's why word-of-mouth marketing is easier. The downside to this strength is that Koreans don't get to develop other marketing methods. US VC liquidation preferences are usually 1x for Korean investments. Some liquidation preferences may run afoul of Korean trade restrictions, and Koreans are unfamiliar with US liquidation preferences. The Korean government can make entrepreneurship socially acceptable and not just by providing funding. Korean-Americans have an untapped opportunity to find investments in sectors where both the US and Korea are strong. Customer acquisition cost is very low in Korea and that's why it's a great platform for early growth. This leads me to believe that future beGLOBAL events should focus on Los Angeles, home to one of the largest concentration of ethnic Koreans outside of Korea.
Dr. Jeanie Han presented her experience with the LINE mobile app as a case study of a successful Asian startup. I've never heard of LINE before because I don't do much mobile messaging and I don't have a smartphone. I think the originality of this app is its ability to brand individual text messages with known icons. Postmodern communication is now post-literate. These icons are all purely emotional, devoid of any intellectual content. I might use an IM app if the only character icon is a raised middle finger. Their success in Europe laid to rest internal concerns that their style was too Asian. Cute character stickers are a universal language with crossover appeal. Their avatar rooms are gateways to e-commerce with a focus on celebrity-endorsed virtual rooms. I avoid social media investments because they all share the same vulnerabilities. They have no barriers to entry from capital costs or switching costs, and thus they have no defensible economic advantage.
More angels and VCs ran the after-lunch panel on seed funds going global. BTW, the Four Seasons Silicon Valley provided an excellent lunch. There's no one-size-fits-all approach to seed funding. Investing styles must match an investor's strengths. Bingo! That's why crowdfunding platforms are so diverse. Many early-stage venture funds don't invest outside the US because they aren't sure how to add value. Speaking the local language and knowing the culture are the barriers IMHO. That's how you avoid getting ripped off. Successful startups need seed-stage mentoring to meet the gateways that will get them to Series A. That's the disadvantage of crowdfunding. Joe Six Pack may not have the high-quality operational knowledge to add value with his $500 investment. Working with great startups regardless of geography enables investors to share the best lessons with other startups closer to home. Investors sometimes overrate the quality of the advantage they think they can provide to a startup in another country. That's a long way to go for a learning experience. It's why venture investing works best when it's close to home. I learned right here in the SF Bay Area that no one wants to take a risk with me because of my military background. I didn't have to fly off anywhere else to learn that I "failed fast" by trying to convince people my military experience mattered.
The next fireside chat was about global entrepreneurship and paying it forward. The Meltwater Group creates a startup in a new national market it wants to enter. Check out their MEST project for training African software entrepreneurs. Pragmatic value propositions sell in the US for better/faster/cheaper products. Other countries have non-rational cultural barriers to overcome, where trust matters. Meltwater runs potential hires through workshops and exercises to assess their entrepreneurial attitude. The Meltwater guy talks about empowering African entrepreneurs because the region is growing, but IMHO he ignores the governance ecosystem and rule of law that make entrepreneurship viable in the US. Africa is growing because of Chinese investment in large infrastructure projects and the West's interest in natural resources. Those have little to do with our understanding of hi-tech entrepreneurship. Meltwater recommends bootstrapping your startup as long as possible to strengthen its DNA (culture, resilience, etc.) before going to VCs. Good hiring is crucial initially to get the right people in a startup. They will be senior execs when the company is much larger years later. Seeing the world through a positive mindset determines one's entire life trajectory and is crucial to a startup's success.
The Korean VC funds on the next panel discussed how they invest in Silicon Valley. Big Korean firms invest in Silicon Valley VC funds mainly to make money. Finding VC firms they like means they can find local partners. Investing in US VCs allows Korean firms to learn the US market. That's a lot more expensive than talking to local chambers of commerce or the South Korean embassy and consulates in the US.
Ben Huh and Emily Huh of the Cheezburger Network had an awesome title for their panel: "Entrepreneurial LOL, Fail, and Meme." Ben bought the "cheezburger" site at the beginning of the Web meme phenomenon. They had no grand plan but wanted to experiment with different ideas. They were willing to fail; they quickly learned from mistakes and moved on. Ben's most awesome quote went something like this: "Entrepreneurship is the difference between opportunity and the cost of risk." That belongs in every MBA course syllabus that discusses strategy and the cost of capital. Ben advised us to survive to fight another day by mastering one market first. Learn your lessons there, then apply them in a new market. Proving you can accomplish something attracts investor capital. LOL memes are popular in English-speaking countries but not in Asia. Humor is cultural. Use data analytics to motivate your people. It's very difficult for people to argue with metrics. Start every meeting with KPIs. That drives the point that everyone is in it together to drive progress in those metrics. Ben's observations were awesome. I'd work for this guy if I weren't so averse to working for human beings.
More "entrepreneurs from the east (coast)" populated the next panel, specifically Koreans who had launched successful startups. I haven't heard this many insights into Korean mindsets since I left that country years ago. Here they come for your benefit. Korean culture has a strong aversion to failure. Korean entrepreneurs who have experienced failure manage to overcome that aversion. Founders must get rid of that fear. Stop worrying about how you look in others' eyes. The US's strong bankruptcy protection laws enable recovery from failure. Koreans like to drink! "Liver equity" instead of sweat equity goes into deals because there's always a green bottle of soju handy. That's one Korean cultural trait that really helps. I remember back in 1999 when I was making the rounds of the GI bars in Songtan outside Osan Air Base. The Korean bar girls would charge different prices for the services they offered, and this one gal would . . . oh, well, you get the idea. The rest of my Korea drinking stories are reserved for an in-person audience that pays for my drinks. The panel closed with the admonishment to learn how other cultures use tech, and not to give up.
The final panel featured accelerators with "global" in mind. The panel said cross-border M&A is widely accepted and that smart, creative people are better off launching startups than doing internships. Startups join accelerators because they want access to networks. "Tech tourism" happens when founders and executives visit regions like Silicon Valley to learn local entrepreneurial culture. Korean startups venturing into Silicon Valley will be hard-pressed to keep some engineering capability in Korea, but they should do so if they're serious about building a global corporate culture that retains local market knowledge. An accelerator's key success metrics must include how much capital its mature startups can raise after graduating. Good mentors keep startups focused on their core functions: gaining traction, building products, getting sales. I must say that the best panelist by far was Jonathan Nelson of the Hackers / Founders Meetup group. Check out the official H/F site. His comments and Ben Huh's observations made this entire conference worthwhile for me. Jonathan said accelerator platforms will increasingly separate their advice function from their funding platforms. He believes that entrepreneurship is a craft we can learn from doing projects. Accelerator volunteers excel by referring participants to experts. His own goal is to move GDP. Jonathan thinks entrepreneurship is an illness and addiction. YES!! I totally agree. Founders just think differently from normal wage-earners IMHO because their brains are wired to process signals in a unique way.
This beGLOBAL conference rocked and so did the afterparty. I got to mingle with some folks who run professional mixers and roundtable groups for the Silicon Valley area. I can hardly believe my good fortune to be accepted as a peer among this crowd. It's more of a welcome than I got from most people in San Francisco. The Silicon Valley mentality is all about Horatio Alger self-made types bootstrapping themselves from rags to riches. The San Francisco mindset is about keeping the riff-raff like me out of the private clubhouse. I don't want to leave San Francisco because my resentment for small-minded preppies is a big part of my motivation. I'm spending a lot more time in the Valley these days because people there are still willing to stand behind a brand new thing from out of the blue, regardless of pedigree. That helps me stay positive whenever The City tries to turn me negative. Thanks, beGLOBAL.
I got to mingle beforehand with some of the entrepreneurs who would pitch their startups later that day. They were all social media and e-commerce applications. Those don't fit my portfolio but I was impressed that their technologies were mature enough for deployment.
The first panel made history with three generations of VCs in the Draper family - Bill, Tim, and Adam - on stage together for the first time ever. I got to shake Tim's hand while he worked the crowd and we chatted briefly on Korean geopolitics. The Draper family is quite media-savvy. I'd sure like to appear on Jesse Draper's Valley Girl Show about Silicon Valley. I'm sure my wit and charm would just bowl her over. I was disappointed that actress Polly Draper wasn't on hand. I fondly recall seeing her bare derriere in a racy swimming pool scene on thritysomething way back in my teenage years and I'll bet her caboose still looks nice. Anyway, my photo below shows the VC Drapers on stage together just after their panel concluded. I respect these folks way too much to ruin the shot with a LOLcat-type caption.
John Nahm from Strong Ventures moderated the Draper panel. John thanked Bill for his service in the Korean War, and Bill remarked that it was normal back then for young Americans in the Greatest Generation to expect a call to service that would interrupt their lives. I wish I could say the same thing today. My own calls to US military service have severely degraded my civilian career. Private sector employers viewed my background with disdain until I started Alfidi Capital. I should have told prospective employers that military veterans William H. Draper and Georges Doriot pretty much invented venture capital based on their wartime experiences in developing technology. Bill recalled his friendship with another Army lieutenant who was KIA during combat in Korea and said that his death was worthwhile now that South Korea is prosperous and free. He cited the book Nothing to Envy on the deplorable living conditions inside North Korea. I fully endorse Bill's assessment. I received nothing but thanks during my two active-duty tours in South Korea from Koreans who were old enough to remember the war. My only glimpse of North Korea was a visit to the UN Joint Security Area (JSA) at Panmunjom in December 1995. South Korea in the 1990s was one of the world's leading makers of automobiles, computer chips, and ocean cargo ships. Former President Kim Young-Sam's "segyehwa" policies saw South Korea embrace global culture and trade. Seoul's urban sprawl reminded me of Los Angeles and Pusan's hills reminded me of San Francisco. Only after moving to San Francisco did I realize that Seoul is its official sister city.
Tim Draper remarked that he had invested in a Korean venture fund that returned 1x in spite of the dot-com crash. He credits the exposure of virtual goods' value in a Korean video game as the factor that opened his mind to Zynga. Adam Draper said that Bitcoin is the closest thing now to a global currency, and his involvement in several Bitcoin startups made him proud to be the first Draper to receive a subpoena. His grandfather Bill then joked that he'd be the first Draper to go to jail. The Drapers concluded by saying that crowdfunding will change the LP/GP relationship in VC and that it allows entrepreneurs to accelerate their ventures. Hardware is now a hot idea again with VCs because crowdfunding makes it cheaper than ever to raise capital.
The Drapers judged the first round of startup pitches. Their comments were terrific fire-hose introductions to VC thinking. They wanted to see user traction, size of market, path to monetization, and differentiation from competitors. Tim Draper is skeptical of serial entrepreneurs because he thinks they tend to jump to competitors rather than stick with a funded startup. It's rare for me to hear such skepticism. I had previously thought that serial entrepreneurs were a success factor because they knew how to get to an exit event. Some VCs also dislike paying for the key-person insurance policies for serial entrepreneurs. One of the funniest moments was when Bill Draper asked one entrepreneur, "So we've heard about the company . . . who are you?" The pitch-person didn't tell the panel what their role was with the startup. I thought it was cute that one of the female Korean entrepreneurs demurely covered her mouth while giggling; that's a Korean cultural habit that still hasn't disappeared.
The next panel was Samsung's fireside chat about open innovation. Samsung invests in seed-stage ventures and uses its Open Innovation Center (OIC) as an accelerator. The Samsung rep thinks its accelerator gives startups access to Samsung's huge platform as a distribution channel. The OIC removes the administrative overhead burden so startups can focus on product development. Individual entrepreneurs can enter the OIC with employment agreements. Samsung Ventures invests larger amounts in Series B and later startups, while the OIC invests in seed to Series A and considers M&A to be an critical part of its business process. Samsung owns the startups they bring into their accelerator and pays entrepreneurs a full salary. If a mature product doesn't fit Samsung's ultimate strategy, they consider spinouts. Samsung sounds like an extremely generous benefactor. Selling out to a big global company provides entrepreneurs with a clear choice. They can sell out early and become wholly-owned employees or take their chances with later stage investors if they stay independent.
Other local VCs addressed the ROI of investing in Korea and Asia in the next panel. VCs think Korean entrepreneurs are passionate and driven. Korea has great Internet infrastructure, it serves as a gateway to other Asian markets, and the country's top education system generates talent. There also a few things VCs don't like about Korea. The notion of entrepreneurship is still alien to most Koreans; I believe it's because Asians generally fear that failure results in a loss of face. Exit events in Korea often have lower multiples than in the US mostly due to the smaller size of the Korean market for many products. US VCs still need to be convinced to invest in Korea; it's not always a given. Koreans also think the founder embodies the entire startup and that her/his departure ends the company. Contrast this with the US view that a startup CEO is a manager whom the VCs can replace.
The ROI panel thought many Korean executives lack marketing skills. Korean demographics are not diverse and are very concentrated. That's why word-of-mouth marketing is easier. The downside to this strength is that Koreans don't get to develop other marketing methods. US VC liquidation preferences are usually 1x for Korean investments. Some liquidation preferences may run afoul of Korean trade restrictions, and Koreans are unfamiliar with US liquidation preferences. The Korean government can make entrepreneurship socially acceptable and not just by providing funding. Korean-Americans have an untapped opportunity to find investments in sectors where both the US and Korea are strong. Customer acquisition cost is very low in Korea and that's why it's a great platform for early growth. This leads me to believe that future beGLOBAL events should focus on Los Angeles, home to one of the largest concentration of ethnic Koreans outside of Korea.
Dr. Jeanie Han presented her experience with the LINE mobile app as a case study of a successful Asian startup. I've never heard of LINE before because I don't do much mobile messaging and I don't have a smartphone. I think the originality of this app is its ability to brand individual text messages with known icons. Postmodern communication is now post-literate. These icons are all purely emotional, devoid of any intellectual content. I might use an IM app if the only character icon is a raised middle finger. Their success in Europe laid to rest internal concerns that their style was too Asian. Cute character stickers are a universal language with crossover appeal. Their avatar rooms are gateways to e-commerce with a focus on celebrity-endorsed virtual rooms. I avoid social media investments because they all share the same vulnerabilities. They have no barriers to entry from capital costs or switching costs, and thus they have no defensible economic advantage.
More angels and VCs ran the after-lunch panel on seed funds going global. BTW, the Four Seasons Silicon Valley provided an excellent lunch. There's no one-size-fits-all approach to seed funding. Investing styles must match an investor's strengths. Bingo! That's why crowdfunding platforms are so diverse. Many early-stage venture funds don't invest outside the US because they aren't sure how to add value. Speaking the local language and knowing the culture are the barriers IMHO. That's how you avoid getting ripped off. Successful startups need seed-stage mentoring to meet the gateways that will get them to Series A. That's the disadvantage of crowdfunding. Joe Six Pack may not have the high-quality operational knowledge to add value with his $500 investment. Working with great startups regardless of geography enables investors to share the best lessons with other startups closer to home. Investors sometimes overrate the quality of the advantage they think they can provide to a startup in another country. That's a long way to go for a learning experience. It's why venture investing works best when it's close to home. I learned right here in the SF Bay Area that no one wants to take a risk with me because of my military background. I didn't have to fly off anywhere else to learn that I "failed fast" by trying to convince people my military experience mattered.
The next fireside chat was about global entrepreneurship and paying it forward. The Meltwater Group creates a startup in a new national market it wants to enter. Check out their MEST project for training African software entrepreneurs. Pragmatic value propositions sell in the US for better/faster/cheaper products. Other countries have non-rational cultural barriers to overcome, where trust matters. Meltwater runs potential hires through workshops and exercises to assess their entrepreneurial attitude. The Meltwater guy talks about empowering African entrepreneurs because the region is growing, but IMHO he ignores the governance ecosystem and rule of law that make entrepreneurship viable in the US. Africa is growing because of Chinese investment in large infrastructure projects and the West's interest in natural resources. Those have little to do with our understanding of hi-tech entrepreneurship. Meltwater recommends bootstrapping your startup as long as possible to strengthen its DNA (culture, resilience, etc.) before going to VCs. Good hiring is crucial initially to get the right people in a startup. They will be senior execs when the company is much larger years later. Seeing the world through a positive mindset determines one's entire life trajectory and is crucial to a startup's success.
The Korean VC funds on the next panel discussed how they invest in Silicon Valley. Big Korean firms invest in Silicon Valley VC funds mainly to make money. Finding VC firms they like means they can find local partners. Investing in US VCs allows Korean firms to learn the US market. That's a lot more expensive than talking to local chambers of commerce or the South Korean embassy and consulates in the US.
Ben Huh and Emily Huh of the Cheezburger Network had an awesome title for their panel: "Entrepreneurial LOL, Fail, and Meme." Ben bought the "cheezburger" site at the beginning of the Web meme phenomenon. They had no grand plan but wanted to experiment with different ideas. They were willing to fail; they quickly learned from mistakes and moved on. Ben's most awesome quote went something like this: "Entrepreneurship is the difference between opportunity and the cost of risk." That belongs in every MBA course syllabus that discusses strategy and the cost of capital. Ben advised us to survive to fight another day by mastering one market first. Learn your lessons there, then apply them in a new market. Proving you can accomplish something attracts investor capital. LOL memes are popular in English-speaking countries but not in Asia. Humor is cultural. Use data analytics to motivate your people. It's very difficult for people to argue with metrics. Start every meeting with KPIs. That drives the point that everyone is in it together to drive progress in those metrics. Ben's observations were awesome. I'd work for this guy if I weren't so averse to working for human beings.
More "entrepreneurs from the east (coast)" populated the next panel, specifically Koreans who had launched successful startups. I haven't heard this many insights into Korean mindsets since I left that country years ago. Here they come for your benefit. Korean culture has a strong aversion to failure. Korean entrepreneurs who have experienced failure manage to overcome that aversion. Founders must get rid of that fear. Stop worrying about how you look in others' eyes. The US's strong bankruptcy protection laws enable recovery from failure. Koreans like to drink! "Liver equity" instead of sweat equity goes into deals because there's always a green bottle of soju handy. That's one Korean cultural trait that really helps. I remember back in 1999 when I was making the rounds of the GI bars in Songtan outside Osan Air Base. The Korean bar girls would charge different prices for the services they offered, and this one gal would . . . oh, well, you get the idea. The rest of my Korea drinking stories are reserved for an in-person audience that pays for my drinks. The panel closed with the admonishment to learn how other cultures use tech, and not to give up.
The final panel featured accelerators with "global" in mind. The panel said cross-border M&A is widely accepted and that smart, creative people are better off launching startups than doing internships. Startups join accelerators because they want access to networks. "Tech tourism" happens when founders and executives visit regions like Silicon Valley to learn local entrepreneurial culture. Korean startups venturing into Silicon Valley will be hard-pressed to keep some engineering capability in Korea, but they should do so if they're serious about building a global corporate culture that retains local market knowledge. An accelerator's key success metrics must include how much capital its mature startups can raise after graduating. Good mentors keep startups focused on their core functions: gaining traction, building products, getting sales. I must say that the best panelist by far was Jonathan Nelson of the Hackers / Founders Meetup group. Check out the official H/F site. His comments and Ben Huh's observations made this entire conference worthwhile for me. Jonathan said accelerator platforms will increasingly separate their advice function from their funding platforms. He believes that entrepreneurship is a craft we can learn from doing projects. Accelerator volunteers excel by referring participants to experts. His own goal is to move GDP. Jonathan thinks entrepreneurship is an illness and addiction. YES!! I totally agree. Founders just think differently from normal wage-earners IMHO because their brains are wired to process signals in a unique way.
This beGLOBAL conference rocked and so did the afterparty. I got to mingle with some folks who run professional mixers and roundtable groups for the Silicon Valley area. I can hardly believe my good fortune to be accepted as a peer among this crowd. It's more of a welcome than I got from most people in San Francisco. The Silicon Valley mentality is all about Horatio Alger self-made types bootstrapping themselves from rags to riches. The San Francisco mindset is about keeping the riff-raff like me out of the private clubhouse. I don't want to leave San Francisco because my resentment for small-minded preppies is a big part of my motivation. I'm spending a lot more time in the Valley these days because people there are still willing to stand behind a brand new thing from out of the blue, regardless of pedigree. That helps me stay positive whenever The City tries to turn me negative. Thanks, beGLOBAL.
Saturday, September 21, 2013
The Haiku of Finance for 09/21/13
Intern at big bank
Learn how to lie like the best
Rich dad pulled a string
Learn how to lie like the best
Rich dad pulled a string
Financial Sarcasm Roundup for 09/21/13
Here comes a late Saturday night sarcastic blast. I saw some fun headlines that I just can't ignore.
BlackBerry's new phone is a sales dud and the company's overall numbers are horrible. Last decade's must-have device at places like my previous employers is now unwanted. Forget the "Market Ticker" rave reviews of the Z10. Most smartphone users aren't hard core tech heads. They don't need an engineer's dream product because they really only care about texting LOLcat pics to friends.
Harvard plans to raise a record amount for its endowment. These things are planned years in advance but I can't help wonder about ulterior financial motives. The student loan bubble is bound to burst and upper-income parents will eventually tire of paying full tuition so low-income students can receive merit-based subsidies. Yes, folks, snobbery really does rule at these types of schools. The Ivys and other elite schools need to move fast to digitize their best courses and brand them for online distribution because the MOOC revolution is going to destroy most colleges' business models. The top-rung schools can survive if they focus on STEM laboratory work that can't be executed online.
The local tech community lends a hand to civic life through the San Francisco Citizens Initiative for Technology and Innovation. It's cool that techies want to reinvigorate education but redesigning K-12 curriculum needs to accommodate the MOOC revolution. See my rant about Harvard just above. Otherwise, we'll end up with a bunch of unionized teachers sitting around on their larded posteriors while their motivated students zip ahead through self-paced online courseware. Students can learn most of what they need online at home and commute to a magnet school once or twice a week to do STEM lab work.
BlackBerry's new phone is a sales dud and the company's overall numbers are horrible. Last decade's must-have device at places like my previous employers is now unwanted. Forget the "Market Ticker" rave reviews of the Z10. Most smartphone users aren't hard core tech heads. They don't need an engineer's dream product because they really only care about texting LOLcat pics to friends.
Harvard plans to raise a record amount for its endowment. These things are planned years in advance but I can't help wonder about ulterior financial motives. The student loan bubble is bound to burst and upper-income parents will eventually tire of paying full tuition so low-income students can receive merit-based subsidies. Yes, folks, snobbery really does rule at these types of schools. The Ivys and other elite schools need to move fast to digitize their best courses and brand them for online distribution because the MOOC revolution is going to destroy most colleges' business models. The top-rung schools can survive if they focus on STEM laboratory work that can't be executed online.
The local tech community lends a hand to civic life through the San Francisco Citizens Initiative for Technology and Innovation. It's cool that techies want to reinvigorate education but redesigning K-12 curriculum needs to accommodate the MOOC revolution. See my rant about Harvard just above. Otherwise, we'll end up with a bunch of unionized teachers sitting around on their larded posteriors while their motivated students zip ahead through self-paced online courseware. Students can learn most of what they need online at home and commute to a magnet school once or twice a week to do STEM lab work.
Friday, September 20, 2013
Learning PR at the Impact Hub San Francisco
I got to attend a free public relations workshop last week at the Impact Hub San Francisco. The space is unique among incubators because it supports non-profit startups and B-corporations. It's the latest manifestation of the social capital phenomenon. I'm all about free info and free support so I had to check this out. I must have looked out of place as the only dude there in a suit and tie but I had just come from a more formal engagement, so that's my story.
The speakers were all PR practitioners and journalists. The single most important thing I learned in the PR workshop was the importance of building relationships with journalists. They repeated that lesson over and over again; repetition drives a point home like nothing else. The social media space is pretty small but it can launch stories into the mainstream media. They key is to cultivate a targeted list of journalists covering your sector who can give a social media story traction if they trust you as a source. The story, of course, is your press release that touts something your business is doing.
The ever-awesome Hermione Way was the final speaker. She is even hotter in person than she looks in photos. Her "inside baseball" tips on media relationships were invaluable and I'll repeat a few right here. Never assume anything is off the record. Don't launch your PR at bad times (like when a big competitor has a major launch) or misunderstand a reporter's lead time for publishing. Retweeting journalists' articles gets their attention and sometimes high-powered people tweet back. One TV appearance is worth millions in ad spend. Drink booze with the press, because that's how journalists relieve stress. Got it, Hermione (BTW, it's pronounced "her-MY-nee"). Thanks for the tips and for being so incredibly hot. Now I just need to figure out where the financial press in the San Francisco area goes for drinks after hours so I can ply them with my awesomeness. I look forward to drinking with hot female media personalities like Hermione Way so they can marvel at my extreme genius while they push out my business PR.
Here come the hot media sites the experts mentioned. Help A Reporter Out (HARO) enables anyone with authority on some subject to get the attention of reporters. Muckrack aggregates the daily tweets of topics journalists discuss. TechCrunch likes entertaining stories.
Hey folks, I don't publish this stuff just for my health. I'm always looking for the hot angles that will give my business the edge. You betcha I'm using these strategies myself. Sharing a few tips with my audience makes me the go-to guy for business insights. Don't believe me? Just ask me.
The speakers were all PR practitioners and journalists. The single most important thing I learned in the PR workshop was the importance of building relationships with journalists. They repeated that lesson over and over again; repetition drives a point home like nothing else. The social media space is pretty small but it can launch stories into the mainstream media. They key is to cultivate a targeted list of journalists covering your sector who can give a social media story traction if they trust you as a source. The story, of course, is your press release that touts something your business is doing.
The ever-awesome Hermione Way was the final speaker. She is even hotter in person than she looks in photos. Her "inside baseball" tips on media relationships were invaluable and I'll repeat a few right here. Never assume anything is off the record. Don't launch your PR at bad times (like when a big competitor has a major launch) or misunderstand a reporter's lead time for publishing. Retweeting journalists' articles gets their attention and sometimes high-powered people tweet back. One TV appearance is worth millions in ad spend. Drink booze with the press, because that's how journalists relieve stress. Got it, Hermione (BTW, it's pronounced "her-MY-nee"). Thanks for the tips and for being so incredibly hot. Now I just need to figure out where the financial press in the San Francisco area goes for drinks after hours so I can ply them with my awesomeness. I look forward to drinking with hot female media personalities like Hermione Way so they can marvel at my extreme genius while they push out my business PR.
Here come the hot media sites the experts mentioned. Help A Reporter Out (HARO) enables anyone with authority on some subject to get the attention of reporters. Muckrack aggregates the daily tweets of topics journalists discuss. TechCrunch likes entertaining stories.
Hey folks, I don't publish this stuff just for my health. I'm always looking for the hot angles that will give my business the edge. You betcha I'm using these strategies myself. Sharing a few tips with my audience makes me the go-to guy for business insights. Don't believe me? Just ask me.
Thursday, September 19, 2013
The Haiku of Finance for 09/19/13
Extreme invention
Make gadgets with funny twist
Laugh on way to bank
Make gadgets with funny twist
Laugh on way to bank
Outlandish Innovations We All Need Now
I've spent more time down in Silicon Valley in the past few months than in the first 40 years of my life. That place is full of bona fide geniuses churning out untold wonders of technology. I'd like to throw out some sample high-tech ideas that I've been spinning around my noggin' just to see what sticks to the wall.
Solar-powered pants. I watched one guy charge up his smartphone by plugging into an outlet on a Muni train. If he had worn solar-powered pants he could have just plugged it into his . . . well, you get the picture. The size of this market is huge. Dude, everybody wears pants.
Baloney detector. I could have used this one while I was involved with military veterans' groups for a couple of years. It would have to look and work like a Star Trek tricorder so I could detect a range of scams, schemes, lies, and half-truths. It would also need modulation to differentiate between mild shades of embellishment and flat-out fabrications.
X-ray glasses. I'm not talking about the gag version of X-Ray Specs you can buy on eBay for a nickel. I'm talking about the real thing that will allow me to see into women's locker rooms and through the attire of the hot chicks I meet at business conferences. The ideal configuration would be an app that enables Google Glass to assess my momentary dream gal's measurements. Plug this thing into solar-powered pants and I'd be "energized" in more ways than one, if you know what I mean (and I think you do).
Pocket Death Star. The Death Star is a mighty battle station but it would be extremely costly to construct to scale in reality. The "pocket battleship" once carried heavy armament while adhering to lighter displacement. I would like to create a pocket-sized Death Star about the size of a tennis ball that I can use to painfully zap people I don't like in my vicinity. This low-powered, fun-size version of the Imperial battle station would fly out of my jacket pocket and use its non-lethal superlaser to scare the bejeezus out of anyone who triggers an alert on my baloney detector. Solar-powered pants would provide the energy source to make it go. It would also impress chicks that I'm checking out with my X-ray glasses.
I'd be willing to fund any and all of these inventions if a startup will grant me 100% equity and pay me all of the licensing income in perpetuity. I want someone else to do all of the work so I can take all of the reward. That's the American way and I'm all about pursuing my American dream. My technological mastery will make me overlord of all the induhviduals who stand in my way.
Solar-powered pants. I watched one guy charge up his smartphone by plugging into an outlet on a Muni train. If he had worn solar-powered pants he could have just plugged it into his . . . well, you get the picture. The size of this market is huge. Dude, everybody wears pants.
Baloney detector. I could have used this one while I was involved with military veterans' groups for a couple of years. It would have to look and work like a Star Trek tricorder so I could detect a range of scams, schemes, lies, and half-truths. It would also need modulation to differentiate between mild shades of embellishment and flat-out fabrications.
X-ray glasses. I'm not talking about the gag version of X-Ray Specs you can buy on eBay for a nickel. I'm talking about the real thing that will allow me to see into women's locker rooms and through the attire of the hot chicks I meet at business conferences. The ideal configuration would be an app that enables Google Glass to assess my momentary dream gal's measurements. Plug this thing into solar-powered pants and I'd be "energized" in more ways than one, if you know what I mean (and I think you do).
Pocket Death Star. The Death Star is a mighty battle station but it would be extremely costly to construct to scale in reality. The "pocket battleship" once carried heavy armament while adhering to lighter displacement. I would like to create a pocket-sized Death Star about the size of a tennis ball that I can use to painfully zap people I don't like in my vicinity. This low-powered, fun-size version of the Imperial battle station would fly out of my jacket pocket and use its non-lethal superlaser to scare the bejeezus out of anyone who triggers an alert on my baloney detector. Solar-powered pants would provide the energy source to make it go. It would also impress chicks that I'm checking out with my X-ray glasses.
I'd be willing to fund any and all of these inventions if a startup will grant me 100% equity and pay me all of the licensing income in perpetuity. I want someone else to do all of the work so I can take all of the reward. That's the American way and I'm all about pursuing my American dream. My technological mastery will make me overlord of all the induhviduals who stand in my way.
Wednesday, September 18, 2013
Alfidi Capital at SES San Francisco 2013
I attended SES San Francisco 2013 last week; the organizers archived the conference program for those of you who didn't attend. I couldn't resist this show because I need to discover the latest social media strategies that will bring Alfidi Capital to millions of investors starving for my incredible insights. My usual convention for discussing conferences still holds. I paraphrase speakers' content in regular text and add my own observations of their subject matter in italics.
The show started with SES's founder recommending Vivastream (an app for event networking), ClickZ (a social marketing knowledge base), and Search Engine Watch (monitors best practices for optimizing search engine appearance) for a social media marketer's toolbox. He admitted that quantifying social ROI is difficult. I think he just gave me a good blog topic, because creating innovative concepts and metrics is my natural talent.
The first day's keynoter was Jeffrey Hayzlett. He sounded mostly like a motivational speaker, but he did leverage his experience at Kodak into some action points. Jeffrey wants marketing leaders to drive change by being "clock changers" because C-suites like self-starters who take initiative to solve problems. He described five main mistakes in failing to drive change. Here they come.
1. Fear. Survival instincts inhibit change.
2. Tension. Healthy debate is good. Search for things that create cognitive dissonance.
3. Radical transparency. Own up to your shortcoming and ask your team for help.
4. Take risk. Push the envelope. Try multiple themes and methods. Radical transparency mitigates risk if your entire team is providing feedback.
5. Promises. Customers and providers are linked in an action cycle where satisfaction comes from promise fulfillment.
Jeffrey demanded we ask ourselves to find our "118," the equivalent of a 118-second elevator pitch. I don't know how many floors an elevator can traverse in 118 seconds. Most of the elevator pitches I've heard are confined to 30 seconds. He also wants us to find our passion and stand for something. I've heard this kind of talk from high school guidance counselors and Boy Scout troop leaders. I guess some people need to hear it from marketing motivational gurus. The professional speaking circuit must be quite lucrative if it pays keynoters for such penetrating (yawn) insights.
I spent almost the entire first day of the SES show in the Google seminars. They were mostly focused on getting people to use Google's products but I got a few hints on how that will drive my social media action to new levels of bonanza. Google also provided free snacks and soda. That must be one cool place to work. I've never sent them my resume because I'm certain I'm too old to fit in. I prefer that they come to me at these conferences.
Google's AdWords guru said that an advertiser's AdWords budget should be dynamic. Part of the reason is that search impressions vary by device, time of day, and geography. Bids rather than budget should drive the ad spend. This strongly implies that advertisers must flex their ad budget to target their product and brand key demographics by some constantly changing mix of device, time, and geography. There will never be a static optimal mix. Google's conversion tracker reveals click responses to ad buys, so assign a value to conversions from each device type. CPA changes may lead to dramatic step-ups in profitability. It's not just some trick to get Google's clients to spend more on AdWords. Google will publish this as a white paper in a few weeks or months. Google has tons of research papers available.
The next Googler talked about success in mobile apps. Here comes my stream-of consciousness narrative. Mobile barriers to conversions (i.e., ad impressions that lead to sales) are gone because mobile purchases are now accepted behavior. Sales success comes from ease of use, like one-click purchases. Engagement is more important than acquisition. Development teams can add Google Analytics' SDK to their apps. Power management is a concern for developers. Simplicity in apps is better than complexity. Google Analytics can parse use case data by small form factors across devices. Pay attention, mobile entrepreneurs. Once thing VCs want to see from mobile products is use case data. Build in Google Analytics and you've got a measuring tool. Universal Analytics can measure apps running in Google App Engine. Google Analytics can generate location reports down to some tiny level. Successful apps grow to cross many platforms, like Angry Birds.
I missed the next Google talk due to a business lunch I had to attend but the final Googler was not to be missed. This was a really hot chick who noted that Flash HTML 5 worked seamlessly across all devices. I was more interested in whether she worked on devices, if you know what I mean. She also said that keyword contextual targeting works in seasonal ad campaigns. You marketing folks will have to make sense of that. I'm just throwing it out there. The reception afterwards was nice of Google but their hot chicks were too busy chatting up other attendees to spend quality time with Yours Truly.
SES held an expert roundtable forum where other gurus held forth on helpful marketing topics. I hit the only table I needed: blog marketing. The dude I spoke with advised me to check Google Marketplace for my page rank and try to get it higher. Uh, that's their apps market. I may have failed to explain to the dude that I'm not an app developer, I'm just a content creator. He said PPC works but it's costly. That doesn't bother me because my ad budget is zero. Moz.com has domain authority metrics I can use. Getting inbound links really helps a Google page rank. Reaching out to other bloggers for links and retweets reduces bounce rate (when a visitor goes back to Google and does a related search to click somewhere else). Systematically building links is a serious project, so I will need to contact an expansive roster of finance bloggers to request links. Blogdash and other blogger outreach platforms exists; some require pay while others are free to use. I'm starting to see a theme developing. Relationships with other high-traffic bloggers and aggregators should help drive traffic to my blog. If that doesn't work, I can always post pictures of LOLcats with funny captions. Everyone on the Web loves LOLcats.
The second day of the show started with a keynote from Google's Patrick Thomas, who challenged us to design our own search engine just to see what kind of content we'd allow. Google deals with content problems across several domains, including copyright infringement and hate speech. Relevant search demands policy governance and the Internet's size demands search engine principles for controversial content. Solving for scale means limiting manual decisions. Search engines must also abide by country-specific laws on content. I imagine China and the Islamic world would be particular headaches. "Underground" information not readily found on Google still exists, like on the -chan series of sites. I haven't visited the Internet's underground since my college days, and I have no intention of having a look around that neighborhood. Using a "white list approach" of manually selected search results is difficult if you care about scale, and it was doom for AltaVista. Difficult search decisions include content farms like black hat SEO boards. Ahem, there's a big difference between black hat SEO and white hat SEO. Black hat tactics get a site banned from search engines. White hat tactics build a permanent audience for content. Google's Knowledge Graph helps it overlay real-world context onto web-based algorithmic results so they can decide what not to index into web searches. Google does write algorithms that drop the index rankings of bad merchants who get massive links simply because people badmouth them. That's why I include positive notes in even my most sarcastic articles, nyah nyah nyah. Google takes page speed loading into account in rankings because a faster speed provides a better user experience and is more deserving of a higher rank. It's a good thing I use Google's Blogger platform. The blog code must work wonderfully with the search code.
The only free seminar available to me, the free expo pass cheapskate, was the Page One Power talk on link building. Google likes it when relevant sites and blogs link to your site. There's that theme again. It may very well be true if so many SEO pros are succeeding that way. Get a strategy, find targets, and ask for links. Blogging is vital to white hat link building. I've got that one covered. I won't give away all of the tips I collected from Page One Power's free seminar and expo floor talk but I will share one relevant principle. A target link's value is based on two factors: its domain authority (from Moz.com once again) and its relevance to a keyword you're trying to drive with your marketing strategy. This is why links from professional associations matter in link building; they are highly relevant to a keyword. This is also why data tied to Google's API matters; it determines whether link building from a given site will be useful. Data from marketers showing search engine results pages (SERPs) for keywords shows which sites are hot and deserve link builders' attention. Oh, BTW, Page One Power founder Jon Ball noted me scribbling furiously during his talks and said, "Those are good notes." Yes, indeed they are. I publish the general notes on my blog and use whatever's left to develop my own proprietary ideas. See folks, the experts see me in action and admire my work.
I also want to address one more topic that I picked up from sitting through a couple of expo floor talks. Google+ profiles can register for Google Authorship and be recognized with top ranks for good posts on specific subjects. Use Google's guidelines for Authorship or their algorithm will penalize you. I've also seen some helpful tips from Google's Official Webmaster Central Blog. Experts at SES told me that I can enable it for a single blog article and even do so retroactively for articles published years ago. One attendee mentioned that some research somewhere shows Google Authorship to be more effective in driving traffic than link building. That settles it. I'm pushing Google Authorship first and link building second but both will be part of my SEO strategy now.
The expo floor was filled with SEO marketers and other vendors. They were fun to watch because I need to use some of the concepts they've mastered. I sat through one interactive talk where a web marketing guru gave out hard-hitting critiques of our websites. I let him critique my research website, Alfidi Capital. He said my big gray block in the middle makes people think it's broken. He thinks the whole site is cheesy and unprofessional and that people will click away. He says my fonts don't match and my logo is in the center of the page. He thinks it's really bad, and I told him I don't care at all. He said he assumed I wanted people to invest with me after seeing my site, and I told him that is not at all what I want anyone to do. I said my goal in business is to make people angry. He said I succeeded in making him angry. YES! Mission accomplished! I'm not changing a single thing about the Alfidi Capital main site because it looks exactly that way I want it to look. It looks fine on mobile anyway, and mobile is the future. The dude even gave me a free copy of his book on web page something or other. Maybe I'll read it, or maybe I won't. It can only help me if I can figure out how to make more people angry.
I made a few SEO resource discoveries on my own. Digital Marketing Depot and HubSpot have tons of free tips and white papers. Google codes its various algorithm updates as Panda, Penguin, and Phantom . . . mainly of interest to hard-core techies. I'm just a blogger. I don't care how code works. I just want to publish mind-blowing articles and force-feed my thinking to a planet starving for genius. SES San Francisco gave me what I needed to get there.
Full disclosure: No position in GOOG at this time.
The show started with SES's founder recommending Vivastream (an app for event networking), ClickZ (a social marketing knowledge base), and Search Engine Watch (monitors best practices for optimizing search engine appearance) for a social media marketer's toolbox. He admitted that quantifying social ROI is difficult. I think he just gave me a good blog topic, because creating innovative concepts and metrics is my natural talent.
The first day's keynoter was Jeffrey Hayzlett. He sounded mostly like a motivational speaker, but he did leverage his experience at Kodak into some action points. Jeffrey wants marketing leaders to drive change by being "clock changers" because C-suites like self-starters who take initiative to solve problems. He described five main mistakes in failing to drive change. Here they come.
1. Fear. Survival instincts inhibit change.
2. Tension. Healthy debate is good. Search for things that create cognitive dissonance.
3. Radical transparency. Own up to your shortcoming and ask your team for help.
4. Take risk. Push the envelope. Try multiple themes and methods. Radical transparency mitigates risk if your entire team is providing feedback.
5. Promises. Customers and providers are linked in an action cycle where satisfaction comes from promise fulfillment.
Jeffrey demanded we ask ourselves to find our "118," the equivalent of a 118-second elevator pitch. I don't know how many floors an elevator can traverse in 118 seconds. Most of the elevator pitches I've heard are confined to 30 seconds. He also wants us to find our passion and stand for something. I've heard this kind of talk from high school guidance counselors and Boy Scout troop leaders. I guess some people need to hear it from marketing motivational gurus. The professional speaking circuit must be quite lucrative if it pays keynoters for such penetrating (yawn) insights.
I spent almost the entire first day of the SES show in the Google seminars. They were mostly focused on getting people to use Google's products but I got a few hints on how that will drive my social media action to new levels of bonanza. Google also provided free snacks and soda. That must be one cool place to work. I've never sent them my resume because I'm certain I'm too old to fit in. I prefer that they come to me at these conferences.
Google's AdWords guru said that an advertiser's AdWords budget should be dynamic. Part of the reason is that search impressions vary by device, time of day, and geography. Bids rather than budget should drive the ad spend. This strongly implies that advertisers must flex their ad budget to target their product and brand key demographics by some constantly changing mix of device, time, and geography. There will never be a static optimal mix. Google's conversion tracker reveals click responses to ad buys, so assign a value to conversions from each device type. CPA changes may lead to dramatic step-ups in profitability. It's not just some trick to get Google's clients to spend more on AdWords. Google will publish this as a white paper in a few weeks or months. Google has tons of research papers available.
The next Googler talked about success in mobile apps. Here comes my stream-of consciousness narrative. Mobile barriers to conversions (i.e., ad impressions that lead to sales) are gone because mobile purchases are now accepted behavior. Sales success comes from ease of use, like one-click purchases. Engagement is more important than acquisition. Development teams can add Google Analytics' SDK to their apps. Power management is a concern for developers. Simplicity in apps is better than complexity. Google Analytics can parse use case data by small form factors across devices. Pay attention, mobile entrepreneurs. Once thing VCs want to see from mobile products is use case data. Build in Google Analytics and you've got a measuring tool. Universal Analytics can measure apps running in Google App Engine. Google Analytics can generate location reports down to some tiny level. Successful apps grow to cross many platforms, like Angry Birds.
I missed the next Google talk due to a business lunch I had to attend but the final Googler was not to be missed. This was a really hot chick who noted that Flash HTML 5 worked seamlessly across all devices. I was more interested in whether she worked on devices, if you know what I mean. She also said that keyword contextual targeting works in seasonal ad campaigns. You marketing folks will have to make sense of that. I'm just throwing it out there. The reception afterwards was nice of Google but their hot chicks were too busy chatting up other attendees to spend quality time with Yours Truly.
SES held an expert roundtable forum where other gurus held forth on helpful marketing topics. I hit the only table I needed: blog marketing. The dude I spoke with advised me to check Google Marketplace for my page rank and try to get it higher. Uh, that's their apps market. I may have failed to explain to the dude that I'm not an app developer, I'm just a content creator. He said PPC works but it's costly. That doesn't bother me because my ad budget is zero. Moz.com has domain authority metrics I can use. Getting inbound links really helps a Google page rank. Reaching out to other bloggers for links and retweets reduces bounce rate (when a visitor goes back to Google and does a related search to click somewhere else). Systematically building links is a serious project, so I will need to contact an expansive roster of finance bloggers to request links. Blogdash and other blogger outreach platforms exists; some require pay while others are free to use. I'm starting to see a theme developing. Relationships with other high-traffic bloggers and aggregators should help drive traffic to my blog. If that doesn't work, I can always post pictures of LOLcats with funny captions. Everyone on the Web loves LOLcats.
The second day of the show started with a keynote from Google's Patrick Thomas, who challenged us to design our own search engine just to see what kind of content we'd allow. Google deals with content problems across several domains, including copyright infringement and hate speech. Relevant search demands policy governance and the Internet's size demands search engine principles for controversial content. Solving for scale means limiting manual decisions. Search engines must also abide by country-specific laws on content. I imagine China and the Islamic world would be particular headaches. "Underground" information not readily found on Google still exists, like on the -chan series of sites. I haven't visited the Internet's underground since my college days, and I have no intention of having a look around that neighborhood. Using a "white list approach" of manually selected search results is difficult if you care about scale, and it was doom for AltaVista. Difficult search decisions include content farms like black hat SEO boards. Ahem, there's a big difference between black hat SEO and white hat SEO. Black hat tactics get a site banned from search engines. White hat tactics build a permanent audience for content. Google's Knowledge Graph helps it overlay real-world context onto web-based algorithmic results so they can decide what not to index into web searches. Google does write algorithms that drop the index rankings of bad merchants who get massive links simply because people badmouth them. That's why I include positive notes in even my most sarcastic articles, nyah nyah nyah. Google takes page speed loading into account in rankings because a faster speed provides a better user experience and is more deserving of a higher rank. It's a good thing I use Google's Blogger platform. The blog code must work wonderfully with the search code.
The only free seminar available to me, the free expo pass cheapskate, was the Page One Power talk on link building. Google likes it when relevant sites and blogs link to your site. There's that theme again. It may very well be true if so many SEO pros are succeeding that way. Get a strategy, find targets, and ask for links. Blogging is vital to white hat link building. I've got that one covered. I won't give away all of the tips I collected from Page One Power's free seminar and expo floor talk but I will share one relevant principle. A target link's value is based on two factors: its domain authority (from Moz.com once again) and its relevance to a keyword you're trying to drive with your marketing strategy. This is why links from professional associations matter in link building; they are highly relevant to a keyword. This is also why data tied to Google's API matters; it determines whether link building from a given site will be useful. Data from marketers showing search engine results pages (SERPs) for keywords shows which sites are hot and deserve link builders' attention. Oh, BTW, Page One Power founder Jon Ball noted me scribbling furiously during his talks and said, "Those are good notes." Yes, indeed they are. I publish the general notes on my blog and use whatever's left to develop my own proprietary ideas. See folks, the experts see me in action and admire my work.
I also want to address one more topic that I picked up from sitting through a couple of expo floor talks. Google+ profiles can register for Google Authorship and be recognized with top ranks for good posts on specific subjects. Use Google's guidelines for Authorship or their algorithm will penalize you. I've also seen some helpful tips from Google's Official Webmaster Central Blog. Experts at SES told me that I can enable it for a single blog article and even do so retroactively for articles published years ago. One attendee mentioned that some research somewhere shows Google Authorship to be more effective in driving traffic than link building. That settles it. I'm pushing Google Authorship first and link building second but both will be part of my SEO strategy now.
The expo floor was filled with SEO marketers and other vendors. They were fun to watch because I need to use some of the concepts they've mastered. I sat through one interactive talk where a web marketing guru gave out hard-hitting critiques of our websites. I let him critique my research website, Alfidi Capital. He said my big gray block in the middle makes people think it's broken. He thinks the whole site is cheesy and unprofessional and that people will click away. He says my fonts don't match and my logo is in the center of the page. He thinks it's really bad, and I told him I don't care at all. He said he assumed I wanted people to invest with me after seeing my site, and I told him that is not at all what I want anyone to do. I said my goal in business is to make people angry. He said I succeeded in making him angry. YES! Mission accomplished! I'm not changing a single thing about the Alfidi Capital main site because it looks exactly that way I want it to look. It looks fine on mobile anyway, and mobile is the future. The dude even gave me a free copy of his book on web page something or other. Maybe I'll read it, or maybe I won't. It can only help me if I can figure out how to make more people angry.
I made a few SEO resource discoveries on my own. Digital Marketing Depot and HubSpot have tons of free tips and white papers. Google codes its various algorithm updates as Panda, Penguin, and Phantom . . . mainly of interest to hard-core techies. I'm just a blogger. I don't care how code works. I just want to publish mind-blowing articles and force-feed my thinking to a planet starving for genius. SES San Francisco gave me what I needed to get there.
Full disclosure: No position in GOOG at this time.
Tuesday, September 17, 2013
Crowdsourcing Citizen Science Into Big Data KM
Nobel Prize winner Dr. Peter Doherty told the NorCal World Affairs Council tonight about "Disease in a Borderless World." He was there mainly to share excerpts from his most recent books but I picked up a couple of insights that I think can drive innovation.
Dr. Doherty mentioned that Audubon Society members' bird watching activity provides a useful data set to ornithology research. This is a perfect example of how crowdsourcing can support citizen science initiatives that engage the broader public. People may be more likely to believe scientific research if they helped assemble its supporting data. Crowdsourced scientific research can be a major driver of public policy if it can demonstrate public acceptance of a contested topic like climate change.
One of Dr. Doherty's claims tonight may have been incorrect. He said that infectious diseases make ineffective bioweapons. I beg to differ. The Biological and Toxin Weapons Convention exists precisely because infectious diseases can be weaponized. This 2003 EMBO report republished by the NCBI demonstrates that the world should be very concerned about bioterror from infectious diseases. I'm clarifying this matter to demonstrate how even the scientific community has gaps in its knowledge base.
The scientific community's knowledge gaps can feed poor practices in the private sector. Dr. Doherty said that breeding areas for chickens and water fowl should be kept separate because commingling the two can spread pathogens. Dumping chicken manure effluent onto rice paddies as fertilizer is a poor farming technique because water fowl land in those paddies and carry off diseases.
I'll outline the start of a solution to such knowledge gaps. Dr. Doherty mentioned the World Health Organization as one of the UN's most effective agencies. It already has a data repository on infectious diseases and a Global Influenza Surveillance and Response System (GISRS) that monitors data from a collection of national influenza centers. WHO's projects should be the knowledge management repository for the Big Data pushed from national organizations like the US Public Health Service, the National Institutes of Health, and the Centers for Disease Control. WHO's ultimate goal should be the creation of embedded data maps that work the way I described in my recent blog post about geojournalism. Embedded maps make knowledge management easy because data and analysis have a context that is specific to a given geography and time series. Crowdsourced research projects will get citizens involved in creating these embedded data feeds.
I considered posting this article on Third Eye OSINT but decided that its value as a business proposition was more relevant than its value as an intelligence product. The blending of GIS and text-formatted analysis creates a KM environment conducive to sharing among business and public policy analysts. No longer will agribusiness be a silent enabler of contagion if it could access geo-specific warnings on separating chickens from wetlands or rice paddies. The possibilities are endless. So is my own genius.
Dr. Doherty mentioned that Audubon Society members' bird watching activity provides a useful data set to ornithology research. This is a perfect example of how crowdsourcing can support citizen science initiatives that engage the broader public. People may be more likely to believe scientific research if they helped assemble its supporting data. Crowdsourced scientific research can be a major driver of public policy if it can demonstrate public acceptance of a contested topic like climate change.
One of Dr. Doherty's claims tonight may have been incorrect. He said that infectious diseases make ineffective bioweapons. I beg to differ. The Biological and Toxin Weapons Convention exists precisely because infectious diseases can be weaponized. This 2003 EMBO report republished by the NCBI demonstrates that the world should be very concerned about bioterror from infectious diseases. I'm clarifying this matter to demonstrate how even the scientific community has gaps in its knowledge base.
The scientific community's knowledge gaps can feed poor practices in the private sector. Dr. Doherty said that breeding areas for chickens and water fowl should be kept separate because commingling the two can spread pathogens. Dumping chicken manure effluent onto rice paddies as fertilizer is a poor farming technique because water fowl land in those paddies and carry off diseases.
I'll outline the start of a solution to such knowledge gaps. Dr. Doherty mentioned the World Health Organization as one of the UN's most effective agencies. It already has a data repository on infectious diseases and a Global Influenza Surveillance and Response System (GISRS) that monitors data from a collection of national influenza centers. WHO's projects should be the knowledge management repository for the Big Data pushed from national organizations like the US Public Health Service, the National Institutes of Health, and the Centers for Disease Control. WHO's ultimate goal should be the creation of embedded data maps that work the way I described in my recent blog post about geojournalism. Embedded maps make knowledge management easy because data and analysis have a context that is specific to a given geography and time series. Crowdsourced research projects will get citizens involved in creating these embedded data feeds.
I considered posting this article on Third Eye OSINT but decided that its value as a business proposition was more relevant than its value as an intelligence product. The blending of GIS and text-formatted analysis creates a KM environment conducive to sharing among business and public policy analysts. No longer will agribusiness be a silent enabler of contagion if it could access geo-specific warnings on separating chickens from wetlands or rice paddies. The possibilities are endless. So is my own genius.
Forgetting FX Invest West Coast 2013
I attended last year's FX Invest West Coast thinking I could benefit from the thinking of serious currency investors. The main thing I learned last year is that much of this finance sub-sector is driven by quant philosophies that have little to do with finding value in the real world. I tried to register several times this year but never got a final confirmation to attend. Maybe someone who attended last year took offense at what I wrote about stupid quant people wasting their time with Rube Goldberg trading mechanisms. I stayed away today but here's my blind-item critique of the FX Invest West Coast 2013 agenda. I have no idea what they actually said, or if they even showed up, because I wasn't there. My comments below refer to publicly available information that relates to the topics of the scheduled program items.
CalPERS had something to say as an opener. My blog article of what CalPERS had to say last year really laid into them so I can't imagine what they could have said today. CalPERS lost my respect ever since they switched from activist investing in undervalued companies to doubling-down on illiquid, leveraged products.
FRBNY spoke on PVP settlement and replacement cost. The New York Fed has all you need to know about their payment versus payment best practices in a 2010 white paper. The standard definition of replacement cost means little in currency investing unless it applies the BIS best practices for reducing foreign exchange settlement risk.
BlackRock was supposed to say something about currency beta and whether active or passive investing in currency matters. I just shake my head whenever somebody uses beta to measure anything other than a single security that belongs to a broad index. IMHO anyone who uses active strategies in currency is merely gambling, not investing. Currency is cash, and cash is for passive holdings until it finds an active use in some other asset.
A bunch of panels discussed BRIC currencies, ECB policies, and electronic trading platforms. Folks, I've discussed all of those things on my blog and no so-called "expert" can hold a candle to my level of thinking. I haven't blogged about swap execution facilities (SEFs) but I don't use them. I suspect that the wide use of SEFs will eventually reduce the alpha that active currency managers can generate by allowing more traders to arbitrage away pricing anomalies. It will be just like Reg D destroying the alpha available to managed futures traders. Kiss those big bonuses goodbye, quants.
The Indian rupee (INR) has done badly this year. No kidding. Quants need to stop trying to day-trade this currency and start looking at India's macroeconomic fundamentals. India's central bank is considering radical plans to play games with its gold reserves in an attempt to stabilize the rupee and India's current account deficits. Raising short-term interest rates is the right thing to do. You'd think quants would see that as a buy-and-hold opportunity, but quants don't think that way.
One speaker showed an interest in discussing emerging market currencies as an inflation hedge. I've discussed that on my blog but I only like currencies from countries with low debt-to-GDP ratios and a strong rule of law. Throwing emerging currencies into the mix just won't do it for me. You'll end up owning currencies from Argentina, Venezuela, and other places where demagogues confiscate wealth and hyperinflate the economy. No thanks. I would have been squirming in my seat if I had to listen to a formal talk on the glory of EM currencies.
The one topic I might have liked would have been currencies as alternatives to bonds. My currency ETFs are paying me a better yield than my US dollar cash holdings. Like I said above, only low debts and strong rule of law matter in finding currencies to use as hedges or income alternatives. Once hyperinflation destroys the US dollar, my currency ETFs will enable me to buy US dollar assets cheaply. Currency is cash, and foreign currency in a hyperinflated economy enables wealth accumulation.
This FX Invest West Coast conference is still in progress as I'm writing this article. I didn't miss much besides free food and coffee. It may be just as well that I sit this conference out if they can't have me as a speaker. I would probably offend everyone in the room with my strongly held belief in the limited portfolio role for currency strategies. Currency is cash, and cash is productive in only limited ways: investing in assets or paying expenses. Currency can also hedge cash exposures but those exposures must be committed to something serious. I have lots of cash sitting in my portfolio because not many assets in the capital markets are attractively priced and I have very few expenses to pay. I'm too cheap and too smart to be of use to many of the numbskulls in the professional currency investing circuit. It's their loss and they'll never know it.
CalPERS had something to say as an opener. My blog article of what CalPERS had to say last year really laid into them so I can't imagine what they could have said today. CalPERS lost my respect ever since they switched from activist investing in undervalued companies to doubling-down on illiquid, leveraged products.
FRBNY spoke on PVP settlement and replacement cost. The New York Fed has all you need to know about their payment versus payment best practices in a 2010 white paper. The standard definition of replacement cost means little in currency investing unless it applies the BIS best practices for reducing foreign exchange settlement risk.
BlackRock was supposed to say something about currency beta and whether active or passive investing in currency matters. I just shake my head whenever somebody uses beta to measure anything other than a single security that belongs to a broad index. IMHO anyone who uses active strategies in currency is merely gambling, not investing. Currency is cash, and cash is for passive holdings until it finds an active use in some other asset.
A bunch of panels discussed BRIC currencies, ECB policies, and electronic trading platforms. Folks, I've discussed all of those things on my blog and no so-called "expert" can hold a candle to my level of thinking. I haven't blogged about swap execution facilities (SEFs) but I don't use them. I suspect that the wide use of SEFs will eventually reduce the alpha that active currency managers can generate by allowing more traders to arbitrage away pricing anomalies. It will be just like Reg D destroying the alpha available to managed futures traders. Kiss those big bonuses goodbye, quants.
The Indian rupee (INR) has done badly this year. No kidding. Quants need to stop trying to day-trade this currency and start looking at India's macroeconomic fundamentals. India's central bank is considering radical plans to play games with its gold reserves in an attempt to stabilize the rupee and India's current account deficits. Raising short-term interest rates is the right thing to do. You'd think quants would see that as a buy-and-hold opportunity, but quants don't think that way.
One speaker showed an interest in discussing emerging market currencies as an inflation hedge. I've discussed that on my blog but I only like currencies from countries with low debt-to-GDP ratios and a strong rule of law. Throwing emerging currencies into the mix just won't do it for me. You'll end up owning currencies from Argentina, Venezuela, and other places where demagogues confiscate wealth and hyperinflate the economy. No thanks. I would have been squirming in my seat if I had to listen to a formal talk on the glory of EM currencies.
The one topic I might have liked would have been currencies as alternatives to bonds. My currency ETFs are paying me a better yield than my US dollar cash holdings. Like I said above, only low debts and strong rule of law matter in finding currencies to use as hedges or income alternatives. Once hyperinflation destroys the US dollar, my currency ETFs will enable me to buy US dollar assets cheaply. Currency is cash, and foreign currency in a hyperinflated economy enables wealth accumulation.
This FX Invest West Coast conference is still in progress as I'm writing this article. I didn't miss much besides free food and coffee. It may be just as well that I sit this conference out if they can't have me as a speaker. I would probably offend everyone in the room with my strongly held belief in the limited portfolio role for currency strategies. Currency is cash, and cash is productive in only limited ways: investing in assets or paying expenses. Currency can also hedge cash exposures but those exposures must be committed to something serious. I have lots of cash sitting in my portfolio because not many assets in the capital markets are attractively priced and I have very few expenses to pay. I'm too cheap and too smart to be of use to many of the numbskulls in the professional currency investing circuit. It's their loss and they'll never know it.
Monday, September 16, 2013
The Arrival Of Geojournalism
Tonight the Commonwealth Club asked "Does The Environment Matter?" I was there. It really should have asked whether journalism matters. Traditional news media have been in decline for years. Newspapers can't compete with the advertising reach of online media. I think too many journalists are still enthralled with old-fashioned media doing old-fashioned beat reporting. The new beats are all online covered by bloggers like Yours Truly. The number of full-time journalists has declined but the amount of informed commentary available online has exploded. Journalism is morphing into a concept that fuses data analysis, geospatial mapping, and time-series reporting. This is the realm of the "geojournalist."
The geojournalist uses GIS tools to embed text and data within photos and maps. This requires skills in data mining and content curation that aren't taught in journalism schools. I think an open-source knowledge management practitioner (ahem, Yours Truly once again) qualifies as a geojournalist. It also calls for some mobile media savvy. I noticed one hot journalist babe at this CW Club talk tonight use her smartphone to record one of the panelist's answers. Old-fashioned note-taking will soon give way to digital tablet notations for geojournalists who embed their stories into maps on the spot.
Some environmental media sites are doing geojournalism well. InfoAmazonia tracks reports by map location within the amazon rain forest. ClimateCommons adjusts US temperature data for anomalies like industrial emissions. Internews teaches social media techniques to aspiring geojournalists in developing nations. Interdisciplinary academic initiatives like the Yale Project on Climate Change Communication need to adapt geojournalist techniques if they want to be heard.
Other digital media can adapt to the new realities of crowdsourcing and crowdfunding. Journalists are IMHO too dependent on foundation grants and PBS money. I've seen some filmmakers pitching ideas for short films on crowdfunding sites. This could work for investigative journalists making documentary films that can embed into GIS maps if geojournalists think like entrepreneurs. They need an elevator pitch to get donors' attention and market data on the size of an audience for their project. Market data for short films is easy to find with view counts for similar content on YouTube. I say the Society for Environmental Journalists should teach startup thinking to geojournalists. Just ask me how to do it and I'll show you if the price is right.
The geojournalist uses GIS tools to embed text and data within photos and maps. This requires skills in data mining and content curation that aren't taught in journalism schools. I think an open-source knowledge management practitioner (ahem, Yours Truly once again) qualifies as a geojournalist. It also calls for some mobile media savvy. I noticed one hot journalist babe at this CW Club talk tonight use her smartphone to record one of the panelist's answers. Old-fashioned note-taking will soon give way to digital tablet notations for geojournalists who embed their stories into maps on the spot.
Some environmental media sites are doing geojournalism well. InfoAmazonia tracks reports by map location within the amazon rain forest. ClimateCommons adjusts US temperature data for anomalies like industrial emissions. Internews teaches social media techniques to aspiring geojournalists in developing nations. Interdisciplinary academic initiatives like the Yale Project on Climate Change Communication need to adapt geojournalist techniques if they want to be heard.
Other digital media can adapt to the new realities of crowdsourcing and crowdfunding. Journalists are IMHO too dependent on foundation grants and PBS money. I've seen some filmmakers pitching ideas for short films on crowdfunding sites. This could work for investigative journalists making documentary films that can embed into GIS maps if geojournalists think like entrepreneurs. They need an elevator pitch to get donors' attention and market data on the size of an audience for their project. Market data for short films is easy to find with view counts for similar content on YouTube. I say the Society for Environmental Journalists should teach startup thinking to geojournalists. Just ask me how to do it and I'll show you if the price is right.