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Showing posts with label innovation. Show all posts
Showing posts with label innovation. Show all posts
Wednesday, January 31, 2018
Friday, June 30, 2017
Alfidi Capital at TiEcon 2017
I scored access to several sessions at TiEcon 2017. The TiE people are some seriously accomplished entrepreneurs and are among the most well-connected people in Silicon Valley. I had to go check out the scene, absorb startup wisdom, and maybe score some free coffee. My readers know I'm all about free stuff. I just can't turn down free access, freebies, and free knowledge.
The govtech track was a good fit for my background. More techies now know about how the US Digital Service is changing the federal government's cultural approach to deploying tech, but not everyone knows that FITARA is changing how the government's CIOs do business. The entire software sector has tried to move from waterfall development to agile development and Uncle Sam is finally following through. I sometimes wonder whether the entire US government lives in a "cone of uncertainty," but that's what the private sector calls a trial stage for govtech projects developed with lean startup methods. I betcha there's an app for Scrum contractors. Federal government contractors are accustomed to long sales cycles with more predictable revenues. I think the US can look to other countries for examples of successful govtech adoption. Governments most likely to adopt agile govtech, automated documents, knowledge management, mobile stuff, and whatnot will have similar factors. Francis Fukuyama's high-trust cultural traits (like in Scandinavia), a high degree of 4G coverage, and widespread mobile adoption are my picks for those success factors. The Digital 5 effects with e-Estonia are the kind of template the US needs.
The social impact track showcased concepts that are all the rage among business people who want to harmonize themselves with the universe, or something like that. Large banks and wealth management firms are developing their own philanthropic programs and encouraging employees to volunteer in the community. I have no idea whether their salespeople are smart enough to leverage those functions into referrals from donor-advised funds and family foundations. Impact investors are following the herd of VCs into agtech and are using the UN's Sustainable Development Goals. Here's the UN Sustainable Development Knowledge Platform if you need to get started. Rich people and corporate big shots can use the SDG Philanthropy Platform to select the SDGs that will most enhance their brand images or social standing. A non-profit executive at TiEcon mentioned that using a "network effect" of social peer pressure validates an impact investment pitch with well-heeled people. Yeah, it's all about elite peer acceptance of the latest cool idea they can brag about at social events.
One social impact expert thinks that four key cycles are out of balance: carbon, nitrogen, hydrogen, and Gini. Whacked-out cycles imply investors will favor environmental projects that will help the poor. I have no reason to think any of that is made up, because it sounds like it's all super-advanced science and smarty-pants stuff. I have every reason to think that microloans for 3D printers, Arduino boards, and other small assets can enable a tidal wave of artisanal tech for disadvantaged people, just like microloans for aquaponics in urban food deserts. Crowdfunding platforms could support microloans for lots of small-scale impact projects. It will be tough to pull these things off without US support for the UN SDGs and Paris Agreement on climate change. It will be even tougher without USAID programs for development abroad and US HUD programs for people at home. Deconstructing the US government in a nationalist fit of rage has an opportunity cost of foregone future development.
The TiEcon youth track had tons of stuff that even a middle-aged guy like yours truly could use. I thought I heard one guy at TiEcon say that some Indian regional government entity sponsored a hackathon with 900 participants. That is way more people than I've ever seen the biggest US tech conferences attract. India and China have huge populations and lots of students studying STEM. Quantity has a quality all its own. The US urgently needs crash STEM programs so lots of people can handle distributed processing in machine learning and analytics, just to catch up with our major strategic competitors. IMHO scalable models like Rethinking Engineering Design and Execution (REDX) would get mid-career non-STEM experts pushing youth into STEM projects that quickly solve real problems.
One VC addressing the youth track said successful entrepreneurs have five superpowers: passion, charisma, speed, focus, and "flight" (i.e., mental agility and constant pursuit of increased competence). He's Joseph Floyd, and you can check out his amazing comic book at Silicon Heroes. I read the book myself and it rings every bell for tech entrepreneurs striving to make their mark.
Athletes speak the entrepreneur's lingo. Former NFL player Anthony Trucks spoke about how he put tremendous work into the game he loved before he even knew he would be successful, a great lesson in hustling for entrepreneurs. Olympic table tennis player Lily Ann Zhang shared her humility and passion, and wanted us to enjoy our journey to success. Wow, I'm so glad I stuck around for the inspiration. It pays to be young at heart.
Anyone into biotech should check out Open Source Pharma Foundation and Nutrition International (formerly the Micronutrient Initiative). The impact investors pushing these concepts help enable simple innovations like universal iodized salt that become UN-led policies. One cool idea I heard from these advocates was for a "social DARPA" enabling giga-scale open innovation for billions of people.
TiEcon 2017 was well worth my time. I scored all the free stuff I could find so I came out ahead once again. The TiE people still haven't invited me to speak at their conference. They are really missing out because I have plenty to say about innovation. I also like Indian food even though I'm not Indian, so I will eat anything they put in front of me when I'm the star attraction at a future TiEcon.
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| I check out the action at TiEcon 2017. |
The govtech track was a good fit for my background. More techies now know about how the US Digital Service is changing the federal government's cultural approach to deploying tech, but not everyone knows that FITARA is changing how the government's CIOs do business. The entire software sector has tried to move from waterfall development to agile development and Uncle Sam is finally following through. I sometimes wonder whether the entire US government lives in a "cone of uncertainty," but that's what the private sector calls a trial stage for govtech projects developed with lean startup methods. I betcha there's an app for Scrum contractors. Federal government contractors are accustomed to long sales cycles with more predictable revenues. I think the US can look to other countries for examples of successful govtech adoption. Governments most likely to adopt agile govtech, automated documents, knowledge management, mobile stuff, and whatnot will have similar factors. Francis Fukuyama's high-trust cultural traits (like in Scandinavia), a high degree of 4G coverage, and widespread mobile adoption are my picks for those success factors. The Digital 5 effects with e-Estonia are the kind of template the US needs.
The social impact track showcased concepts that are all the rage among business people who want to harmonize themselves with the universe, or something like that. Large banks and wealth management firms are developing their own philanthropic programs and encouraging employees to volunteer in the community. I have no idea whether their salespeople are smart enough to leverage those functions into referrals from donor-advised funds and family foundations. Impact investors are following the herd of VCs into agtech and are using the UN's Sustainable Development Goals. Here's the UN Sustainable Development Knowledge Platform if you need to get started. Rich people and corporate big shots can use the SDG Philanthropy Platform to select the SDGs that will most enhance their brand images or social standing. A non-profit executive at TiEcon mentioned that using a "network effect" of social peer pressure validates an impact investment pitch with well-heeled people. Yeah, it's all about elite peer acceptance of the latest cool idea they can brag about at social events.
One social impact expert thinks that four key cycles are out of balance: carbon, nitrogen, hydrogen, and Gini. Whacked-out cycles imply investors will favor environmental projects that will help the poor. I have no reason to think any of that is made up, because it sounds like it's all super-advanced science and smarty-pants stuff. I have every reason to think that microloans for 3D printers, Arduino boards, and other small assets can enable a tidal wave of artisanal tech for disadvantaged people, just like microloans for aquaponics in urban food deserts. Crowdfunding platforms could support microloans for lots of small-scale impact projects. It will be tough to pull these things off without US support for the UN SDGs and Paris Agreement on climate change. It will be even tougher without USAID programs for development abroad and US HUD programs for people at home. Deconstructing the US government in a nationalist fit of rage has an opportunity cost of foregone future development.
The TiEcon youth track had tons of stuff that even a middle-aged guy like yours truly could use. I thought I heard one guy at TiEcon say that some Indian regional government entity sponsored a hackathon with 900 participants. That is way more people than I've ever seen the biggest US tech conferences attract. India and China have huge populations and lots of students studying STEM. Quantity has a quality all its own. The US urgently needs crash STEM programs so lots of people can handle distributed processing in machine learning and analytics, just to catch up with our major strategic competitors. IMHO scalable models like Rethinking Engineering Design and Execution (REDX) would get mid-career non-STEM experts pushing youth into STEM projects that quickly solve real problems.
One VC addressing the youth track said successful entrepreneurs have five superpowers: passion, charisma, speed, focus, and "flight" (i.e., mental agility and constant pursuit of increased competence). He's Joseph Floyd, and you can check out his amazing comic book at Silicon Heroes. I read the book myself and it rings every bell for tech entrepreneurs striving to make their mark.
Athletes speak the entrepreneur's lingo. Former NFL player Anthony Trucks spoke about how he put tremendous work into the game he loved before he even knew he would be successful, a great lesson in hustling for entrepreneurs. Olympic table tennis player Lily Ann Zhang shared her humility and passion, and wanted us to enjoy our journey to success. Wow, I'm so glad I stuck around for the inspiration. It pays to be young at heart.
Anyone into biotech should check out Open Source Pharma Foundation and Nutrition International (formerly the Micronutrient Initiative). The impact investors pushing these concepts help enable simple innovations like universal iodized salt that become UN-led policies. One cool idea I heard from these advocates was for a "social DARPA" enabling giga-scale open innovation for billions of people.
TiEcon 2017 was well worth my time. I scored all the free stuff I could find so I came out ahead once again. The TiE people still haven't invited me to speak at their conference. They are really missing out because I have plenty to say about innovation. I also like Indian food even though I'm not Indian, so I will eat anything they put in front of me when I'm the star attraction at a future TiEcon.
Sunday, January 31, 2016
China's Shanzhai Economy Mocks Innovation
China has a long tradition of "shanzhai" knock-off goods. Companies shamelessly copying global brands without compensation or even attribution contribute to China's poor reputation for quality manufacturing and intellectual property (IP) protection. Shanzhai extends to more than just brand image. It permeates every aspect of China's allegedly miraculous growth, including real property and government statistics. Its persistence poses risks to Western investors who underestimate China's resistance to cultural change.
PwC republished Booz's 2009 report regarding shanzhai as an innovative phenomenon. It may have appeared innovative when China was trying to convince the West that its booming production would translate into what we would recognize as an advanced economy. Things never worked out that way. Breakneck production without the rule of law to protect innovation eventually turns off international investors.
China somehow managed to fool amateur observers into thinking that everything would be okay once it grew out of its wild frontier phase. The Atlantic in 2014 interpreted shanzhai as an evolutionary crowdsourced ecosystem for innovation. Silicon Valley would recognize innovation without IP protection or market share as an invitation to further piracy. The Wall Street Journal had a similar analytical lapse in 2009, more from a political and cultural standpoint. Astute observers integrate social and political trends into economic analysis if they understand those trends from a native perspective.
Native mainland Chinese have not developed the legal and political traditions the Anglo-West relies upon to protect property rights, including IP. Some Chinese innovator making shanzhai wearable tech is unconcerned with the product quality or global branding that leads to defensible market share. They're still in it for the fast buck because they cannot count on legal protection outside China or political protection within China. Western observers who cannot see shanzhai through Chinese eyes would find this inscrutable. Personal connections through "guanxi" matter more than rules and laws. The Chinese Commonwealth "bamboo network" diaspora matters more than sovereign trade agreements. The West continues to misinterpret these concepts by pretending to see in China what it wants to see in its own culture.
Shanzhai has metastasized beyond consumer goods into real property. Freakonomics noted in 2013 how shanzhai skyscrapers copy other popular building designs. Run a Google image search of China's property boom to see entire cities containing replicas of Paris' Eiffel Tower, quaint European town squares, and parts of Manhattan. China's government economic statistics have long been unreliable, according to descriptions of the Keqiang Index. Replacing that index with something the UNDP or WTO can audit would be a sound step. Instead, the WSJ reported in 2015 that China's State Council would replace the Keqiang Index with measures tracking quality of life. The state is acting in the spirit of shanzhai innovation, copying Western ideas wholesale without grokking how enforcing laws means breaking personal ties.
The shanzhai apotheosis is a huge red flag for US investors with exposure to China. Mainland China's economic growth is more mirage than reality, notwithstanding CSIS's "Broken Abacus" 2015 nonsense that China's economy is bigger than what it self-reports. Try reconciling national-level economic data with provincial-level data and see how China's national authorities guide subordinate governments into supporting its fabrications. Investors betting on US-traded instruments for Chinese stocks or ETFs are gambling that reality will eventually catch up to fantasy. Shanzhai's continued dominance of Chinese business culture makes that a poor gamble.
Full disclosure: No positions in any Chinese investments. BTW, I have corrected the spelling of "shanzhai" after publishing this article.
PwC republished Booz's 2009 report regarding shanzhai as an innovative phenomenon. It may have appeared innovative when China was trying to convince the West that its booming production would translate into what we would recognize as an advanced economy. Things never worked out that way. Breakneck production without the rule of law to protect innovation eventually turns off international investors.
China somehow managed to fool amateur observers into thinking that everything would be okay once it grew out of its wild frontier phase. The Atlantic in 2014 interpreted shanzhai as an evolutionary crowdsourced ecosystem for innovation. Silicon Valley would recognize innovation without IP protection or market share as an invitation to further piracy. The Wall Street Journal had a similar analytical lapse in 2009, more from a political and cultural standpoint. Astute observers integrate social and political trends into economic analysis if they understand those trends from a native perspective.
Native mainland Chinese have not developed the legal and political traditions the Anglo-West relies upon to protect property rights, including IP. Some Chinese innovator making shanzhai wearable tech is unconcerned with the product quality or global branding that leads to defensible market share. They're still in it for the fast buck because they cannot count on legal protection outside China or political protection within China. Western observers who cannot see shanzhai through Chinese eyes would find this inscrutable. Personal connections through "guanxi" matter more than rules and laws. The Chinese Commonwealth "bamboo network" diaspora matters more than sovereign trade agreements. The West continues to misinterpret these concepts by pretending to see in China what it wants to see in its own culture.
Shanzhai has metastasized beyond consumer goods into real property. Freakonomics noted in 2013 how shanzhai skyscrapers copy other popular building designs. Run a Google image search of China's property boom to see entire cities containing replicas of Paris' Eiffel Tower, quaint European town squares, and parts of Manhattan. China's government economic statistics have long been unreliable, according to descriptions of the Keqiang Index. Replacing that index with something the UNDP or WTO can audit would be a sound step. Instead, the WSJ reported in 2015 that China's State Council would replace the Keqiang Index with measures tracking quality of life. The state is acting in the spirit of shanzhai innovation, copying Western ideas wholesale without grokking how enforcing laws means breaking personal ties.
The shanzhai apotheosis is a huge red flag for US investors with exposure to China. Mainland China's economic growth is more mirage than reality, notwithstanding CSIS's "Broken Abacus" 2015 nonsense that China's economy is bigger than what it self-reports. Try reconciling national-level economic data with provincial-level data and see how China's national authorities guide subordinate governments into supporting its fabrications. Investors betting on US-traded instruments for Chinese stocks or ETFs are gambling that reality will eventually catch up to fantasy. Shanzhai's continued dominance of Chinese business culture makes that a poor gamble.
Full disclosure: No positions in any Chinese investments. BTW, I have corrected the spelling of "shanzhai" after publishing this article.
Tuesday, January 26, 2016
Regulatory Risks Of Leveraging Federal Lab Innovation
The Federal Laboratory Consortium is a gold mine begging for exploration. Technology gathering dust in lab basements and filing cabinets needs entrepreneurs to make it economically viable. The regulatory landscape has holes at the federal level that beg to be filled. Here are some Alfidi Capital tips for small and medium-sized businesses (SMBs) looking to make tech innovation work while avoiding regulatory traps.
The Brookings Institution published "Going Local" in 2014 about how DOE's labs should support regional economic growth. White papers are full of ideas that gather dust, just like great tech ideas without people implementing them. The lead time for processing a cooperative research and development agreement (CRADA) or a work for other agreement (WFO) may be too long for specific product development but just right for a basic tech demonstration. The SMB moving a tech concept out of the lab's basement may be suited for small-scale funding typical of the NREL's technical and analytical service agreements.
The President's Council of Advisors on Science and Technology (PCAST) report "Big Data: A Technological Perspective" from 2014 will set federal policy on data privacy for years. Government regulations crossing multiple agencies' jurisdictions has a way of guaranteeing a market for products. Large firms faced with the regulatory risk of meeting Big Data privacy mandates will need solutions. Small firms should factor privacy compliance into their product development milestones.
The American Academy of Arts and Sciences report "Restoring the Foundation" in 2014 recommended permanent Presidential attention to R+D spending. Federal tech funding as a GDP percentage cannot stagnate forever. Its eventual recovery will provide funding opportunities for SMBs ready to jump into grants and contracts.
Watching the slow progress in implementing all of these reports' recommendations is disheartening. Untangling the jumble of federal advisory committees shepherding regulatory reform is outside the private sector's control, unless the President appoints business-friendly people to run the process. American SMBs cannot wait for reform. They should master the funding application system now and gain experience working through the system.
The Brookings Institution published "Going Local" in 2014 about how DOE's labs should support regional economic growth. White papers are full of ideas that gather dust, just like great tech ideas without people implementing them. The lead time for processing a cooperative research and development agreement (CRADA) or a work for other agreement (WFO) may be too long for specific product development but just right for a basic tech demonstration. The SMB moving a tech concept out of the lab's basement may be suited for small-scale funding typical of the NREL's technical and analytical service agreements.
The President's Council of Advisors on Science and Technology (PCAST) report "Big Data: A Technological Perspective" from 2014 will set federal policy on data privacy for years. Government regulations crossing multiple agencies' jurisdictions has a way of guaranteeing a market for products. Large firms faced with the regulatory risk of meeting Big Data privacy mandates will need solutions. Small firms should factor privacy compliance into their product development milestones.
The American Academy of Arts and Sciences report "Restoring the Foundation" in 2014 recommended permanent Presidential attention to R+D spending. Federal tech funding as a GDP percentage cannot stagnate forever. Its eventual recovery will provide funding opportunities for SMBs ready to jump into grants and contracts.
Watching the slow progress in implementing all of these reports' recommendations is disheartening. Untangling the jumble of federal advisory committees shepherding regulatory reform is outside the private sector's control, unless the President appoints business-friendly people to run the process. American SMBs cannot wait for reform. They should master the funding application system now and gain experience working through the system.
Monday, January 18, 2016
Oil Slump Leads To Shale 2.0, The Great Crew Change, And COP21
The oil sector's bear attack shows no signs of abating. OPEC's Saudi-led push for huge overproduction is driving the US shale sector to the brink of collapse. The post-crash survivors can benefit from "Shale 2.0" technologies that keep their costs down. They will need every advantage they can get when the "Great Crew Change" makes finding human talent harder and the UN's COP21 protocols make hydrocarbon production less desirable.
High-sulfur US crude varieties are now so uneconomical that they command prices near zero or even negative in refining. You know your sector is in trouble when you have to pay customers to take your worst product away. Large US banks are strengthening their loss reserve allowances as loans to oil producers reach default thresholds. Thank the Federal Reserve for increasing required capital cushions. Some financial players tracking the oil sector have begun clamoring for a federal bailout. The energy sector's financiers did not get the memo that bailouts are political non-starters. Miscellaneous regulatory changes in Washington may make it easier for surviving drillers to market their product. Financial backstops for the entire sector are very unlikely now that regulators have learned lessons from the 2008 systemic crisis.
Oil drillers who survive the slump will contend with more favorable economics, and not just from an eventual rise in market prices. The Manhattan Institute's "Shale 2.0" study argues that Big Data will bring a revolution to oil drilling that dramatically reduces its cost structure. The think tank's longer study is worth reading for technical insights. Lower production costs across North America will make the continent's production less responsive to OPEC production changes.
Another factor working in the oil sector's long-term favor is the need for a "Great Crew Change" replacing the sector's retiring experts. OGFJ's coverage of the Great Crew Change reveals that hiring to replace experts is less of a priority when oil prices are low and producers shut rigs down. Hiring younger Big Data experts will bring the Shale 2.0 cost benefits to financially healthy producers first, giving them market power as they restart exploration. Only the financially healthiest producers can afford to both replace retired talent with new STEM hires and replace depleted fields with new exploration.
One other complicating factor facing oil shale producers is the finalization of the UN's Paris COP21 climate change protocols. The new regime will use both regulatory and financial incentives to discourage hydrocarbon production and favor renewable energy generation. The regime includes financial support for developing nations whose energy exports will suffer as their oil production is rendered uneconomic. US oil drillers who can afford to comply with COP21's controls may have a window of opportunity if some OPEC producers are deterred from production.
The oil sector's pain will pass at some point. US producers who are currently sour on crude (pun intended) will relish the economic advantages they can reap by being first to implement Shale 2.0 tech, first to hire younger engineers in the Great Crew Change, and firs to adapt to COP21 controls. The largest and least leveraged US oil producers should be first in line when the race begins again.
Full disclosure: Long position in USO.
High-sulfur US crude varieties are now so uneconomical that they command prices near zero or even negative in refining. You know your sector is in trouble when you have to pay customers to take your worst product away. Large US banks are strengthening their loss reserve allowances as loans to oil producers reach default thresholds. Thank the Federal Reserve for increasing required capital cushions. Some financial players tracking the oil sector have begun clamoring for a federal bailout. The energy sector's financiers did not get the memo that bailouts are political non-starters. Miscellaneous regulatory changes in Washington may make it easier for surviving drillers to market their product. Financial backstops for the entire sector are very unlikely now that regulators have learned lessons from the 2008 systemic crisis.
Oil drillers who survive the slump will contend with more favorable economics, and not just from an eventual rise in market prices. The Manhattan Institute's "Shale 2.0" study argues that Big Data will bring a revolution to oil drilling that dramatically reduces its cost structure. The think tank's longer study is worth reading for technical insights. Lower production costs across North America will make the continent's production less responsive to OPEC production changes.
Another factor working in the oil sector's long-term favor is the need for a "Great Crew Change" replacing the sector's retiring experts. OGFJ's coverage of the Great Crew Change reveals that hiring to replace experts is less of a priority when oil prices are low and producers shut rigs down. Hiring younger Big Data experts will bring the Shale 2.0 cost benefits to financially healthy producers first, giving them market power as they restart exploration. Only the financially healthiest producers can afford to both replace retired talent with new STEM hires and replace depleted fields with new exploration.
One other complicating factor facing oil shale producers is the finalization of the UN's Paris COP21 climate change protocols. The new regime will use both regulatory and financial incentives to discourage hydrocarbon production and favor renewable energy generation. The regime includes financial support for developing nations whose energy exports will suffer as their oil production is rendered uneconomic. US oil drillers who can afford to comply with COP21's controls may have a window of opportunity if some OPEC producers are deterred from production.
The oil sector's pain will pass at some point. US producers who are currently sour on crude (pun intended) will relish the economic advantages they can reap by being first to implement Shale 2.0 tech, first to hire younger engineers in the Great Crew Change, and firs to adapt to COP21 controls. The largest and least leveraged US oil producers should be first in line when the race begins again.
Full disclosure: Long position in USO.
Thursday, January 14, 2016
Non-Dilutive Funding Summits Offer Free Insights
I attend as many local finance events as possible. The week's JP Morgan Healthcare Conference 2016 brought out lots of supporting events to keep me busy. I attended the FreeMind 11th Annual Non-Dilutive Funding Summit because I need to know how startups can raise money without giving up eventual riches. I have no badge selfie this time so you'll just have to imagine me there. The speakers were tailored for a life science audience given JPM's presence this week. I'll share my own thoughts below based on what I learned.
The federal government's SBIR and STTR programs are big funders of projects that meet the government's program requirements. The Milken Institute's report “Estimating Long-term Economic Returns of NIH on Output in the Biosciences” shows how the NIH's non-dilutive funding has tremendous leverage on future funding and economic output. I don't know why some federal agencies cluster their awards in certain parts of the fiscal calendar. Maybe they just don't get enough interested applicants for a regular award cycle, or maybe they just procrastinate. It's good to know that small businesses owned by private investment funds are eligible for SBIR/STTR funding.
The US government is not necessarily the ideal target market for most pharma startups. The government's niche drug needs for low-volume doses do not offer the same scalability of a high-ROI commercial market. Furthermore, I suspect that the government's need to stockpile even large doses of drugs for emergency use requires only periodic replenishment every few years as stocks expire. Contracts for definite delivery of definite quantities do not offer private companies the same quality of earnings as regular sales through commercial channels. Startups targeting a government or military customer should use that non-dilutive funding to enable penetration of a larger commercial market if their solution has more than one application. Realistic startups will not get rich on DOD's need for bio/chem war countermeasures, but will instead recognize the useful partnership and validation that comes with DOD research funding.
I am pleasantly surprised to learn that FDA priority review vouchers can be sold in private transactions. Netting a few hundred million dollars for a voucher is a sweet deal. Perusing the FDA's Center for Drug Evaluation and Research (CDER) Small Business and Industry Assistance (SBIA) webpages reveals a whole bunch of tax credits and other incentives for drug developers addressing special situations. Here's a legal path to riches in drugs, kids. Stay away from the ghetto street dealers, earn your MD or PhD, and get Uncle Sam to fund your commercial drug lab.
The NIH's NIAID funds Phase I efforts and helps companies find a transition partner for Phase II. Centers of Excellence for Translational Research (CETR) are NIAID's academic research partners offering subject matter expertise for medical tech under review. The Bayh-Dole Act's procedures for determining exceptional circumstances (DEC) apply to tech transfer in the life sciences, just as they do to other government tech commercialization efforts. Small companies can use Bayh-Dole's leverage in a DEC to get funding if they commit to accelerating a technology's development.
Salespeople know that more frequent contact in highly targeted campaigns gets better results. Raising capital is a lot like selling a product. I will not listen to self-proclaimed experts who sell exorbitantly priced marketing solutions. Cheap or free marketing efforts are best. Scientists who have never left an academic research lab need a business partner who can sell. Just ask the Google founders. Startups staying in stealth mode longer than needed miss out on publicity and fundraising that they need to accelerate. The stealth aficionados need to get out more to see that tech ideas are more common than execution ability.
I want to see good definitions of the clinical research phases that describe the value-added things entrepreneurs can do before Phase I. Some private funders in venture philanthropy break down pre-Phase I tasks in different ways. Entrepreneurs need those things so they can leave stealth mode quickly. They also need good data on unmet needs in medical conditions to guide assessments of viable markets. I found some basic unmet needs descriptions of Parkinson's disease and multiple sclerosis with a Google search. The truth is out there.
It's really great to see the NIH National Cancer Institute's SBIR program offer an I-Corps pilot program. The popular biotech forums like BIO Innovation Zone and AdvaMed's MedTech Showcase are the kinds of places where life science researchers cam meet entrepreneurs. Once they start hanging out together, they can start commercializing government research and jump into I-Corps training. They can start by exploring NIBIB's Biomedical Technology Resource Centers (BTRCs) for data at the BTR Portal that supports a technology's commercial prospects.
Greedy business people can forget about buying influence with the US government. The interest of a powerful government patron means nothing at all in funding tech. Government program managers must follow rigorous guidelines and scientific evaluation criteria when awarding grants and research contracts. Contact with a senior government official may get a private company some feedback on the government's procurement interests, and nothing else. I have to laugh at companies like Theranos who stuff their advisory boards with prestigious former government people. Lobbying for influence is a waste of money.
The Milken Institute / FasterCures report "Fixes in Financing" from April 2012 is a much better guide to funding success than what any retired political hack could offer. It would be more useful for a life sciences startup to have an advisory board of grant experts, government contracting experts, and NIH subject matter expert reviewers than some Theranos-type board of clueless celebrities. Startups should also read NCBI's 2013 article "Estimating Return on Investment in Translational Research: Methods and Protocols" to appreciate how some government funding reviews incorporate ROI calculations into awards.
It's worth noting that SBIRs can have slightly less stringent requirements than STTRs. The SBIRs can also have broader objectives in socioeconomic development and keeping the industrial base warm. Government managers may just offer SBIR grants to generate some random innovation even if the result doesn't completely meet a procurement requirement.
I suspect that private companies seeking non-dilutive capital may have no clue how to describe a minimum viable product (MVP) using technology readiness levels (TRLs). I want any startup in my private equity portfolio to use those TRL milestones when they submit SBIR/STTR applications or develop cooperative research and development agreement (CRADAs).
Non-dilutive funding saves small company founders from giving away ownership too early in the life of their big idea. Only private industry can do large-scale manufacturing and distribution, so late-stage companies will have to seek dilutive funding for final commercialization. Taking the free money up front from government agencies and non-profit venture philanthropists is always a smart move.
The federal government's SBIR and STTR programs are big funders of projects that meet the government's program requirements. The Milken Institute's report “Estimating Long-term Economic Returns of NIH on Output in the Biosciences” shows how the NIH's non-dilutive funding has tremendous leverage on future funding and economic output. I don't know why some federal agencies cluster their awards in certain parts of the fiscal calendar. Maybe they just don't get enough interested applicants for a regular award cycle, or maybe they just procrastinate. It's good to know that small businesses owned by private investment funds are eligible for SBIR/STTR funding.
The US government is not necessarily the ideal target market for most pharma startups. The government's niche drug needs for low-volume doses do not offer the same scalability of a high-ROI commercial market. Furthermore, I suspect that the government's need to stockpile even large doses of drugs for emergency use requires only periodic replenishment every few years as stocks expire. Contracts for definite delivery of definite quantities do not offer private companies the same quality of earnings as regular sales through commercial channels. Startups targeting a government or military customer should use that non-dilutive funding to enable penetration of a larger commercial market if their solution has more than one application. Realistic startups will not get rich on DOD's need for bio/chem war countermeasures, but will instead recognize the useful partnership and validation that comes with DOD research funding.
I am pleasantly surprised to learn that FDA priority review vouchers can be sold in private transactions. Netting a few hundred million dollars for a voucher is a sweet deal. Perusing the FDA's Center for Drug Evaluation and Research (CDER) Small Business and Industry Assistance (SBIA) webpages reveals a whole bunch of tax credits and other incentives for drug developers addressing special situations. Here's a legal path to riches in drugs, kids. Stay away from the ghetto street dealers, earn your MD or PhD, and get Uncle Sam to fund your commercial drug lab.
The NIH's NIAID funds Phase I efforts and helps companies find a transition partner for Phase II. Centers of Excellence for Translational Research (CETR) are NIAID's academic research partners offering subject matter expertise for medical tech under review. The Bayh-Dole Act's procedures for determining exceptional circumstances (DEC) apply to tech transfer in the life sciences, just as they do to other government tech commercialization efforts. Small companies can use Bayh-Dole's leverage in a DEC to get funding if they commit to accelerating a technology's development.
Salespeople know that more frequent contact in highly targeted campaigns gets better results. Raising capital is a lot like selling a product. I will not listen to self-proclaimed experts who sell exorbitantly priced marketing solutions. Cheap or free marketing efforts are best. Scientists who have never left an academic research lab need a business partner who can sell. Just ask the Google founders. Startups staying in stealth mode longer than needed miss out on publicity and fundraising that they need to accelerate. The stealth aficionados need to get out more to see that tech ideas are more common than execution ability.
I want to see good definitions of the clinical research phases that describe the value-added things entrepreneurs can do before Phase I. Some private funders in venture philanthropy break down pre-Phase I tasks in different ways. Entrepreneurs need those things so they can leave stealth mode quickly. They also need good data on unmet needs in medical conditions to guide assessments of viable markets. I found some basic unmet needs descriptions of Parkinson's disease and multiple sclerosis with a Google search. The truth is out there.
It's really great to see the NIH National Cancer Institute's SBIR program offer an I-Corps pilot program. The popular biotech forums like BIO Innovation Zone and AdvaMed's MedTech Showcase are the kinds of places where life science researchers cam meet entrepreneurs. Once they start hanging out together, they can start commercializing government research and jump into I-Corps training. They can start by exploring NIBIB's Biomedical Technology Resource Centers (BTRCs) for data at the BTR Portal that supports a technology's commercial prospects.
Greedy business people can forget about buying influence with the US government. The interest of a powerful government patron means nothing at all in funding tech. Government program managers must follow rigorous guidelines and scientific evaluation criteria when awarding grants and research contracts. Contact with a senior government official may get a private company some feedback on the government's procurement interests, and nothing else. I have to laugh at companies like Theranos who stuff their advisory boards with prestigious former government people. Lobbying for influence is a waste of money.
The Milken Institute / FasterCures report "Fixes in Financing" from April 2012 is a much better guide to funding success than what any retired political hack could offer. It would be more useful for a life sciences startup to have an advisory board of grant experts, government contracting experts, and NIH subject matter expert reviewers than some Theranos-type board of clueless celebrities. Startups should also read NCBI's 2013 article "Estimating Return on Investment in Translational Research: Methods and Protocols" to appreciate how some government funding reviews incorporate ROI calculations into awards.
It's worth noting that SBIRs can have slightly less stringent requirements than STTRs. The SBIRs can also have broader objectives in socioeconomic development and keeping the industrial base warm. Government managers may just offer SBIR grants to generate some random innovation even if the result doesn't completely meet a procurement requirement.
I suspect that private companies seeking non-dilutive capital may have no clue how to describe a minimum viable product (MVP) using technology readiness levels (TRLs). I want any startup in my private equity portfolio to use those TRL milestones when they submit SBIR/STTR applications or develop cooperative research and development agreement (CRADAs).
Non-dilutive funding saves small company founders from giving away ownership too early in the life of their big idea. Only private industry can do large-scale manufacturing and distribution, so late-stage companies will have to seek dilutive funding for final commercialization. Taking the free money up front from government agencies and non-profit venture philanthropists is always a smart move.
Wednesday, October 07, 2015
Innovate Your State Moves Beyond Six Californias Plan
Famed venture capitalist Tim Draper wants more innovation in government. He created Innovate Your State and its Fix California Challenge to bring Silicon Valley's innovative spirit into the Golden State's messed up system. We have no time to waste. California ranks poorly on Forbes' list of the best states for business. Better governance will be good for business.
The venture capital community worries about more than just California's business climate. Tim Draper's plan for Six Californias did not qualify for the state ballot. The proto-state of Silicon Valley would have been the wealthiest and most educated of the six states. That plan reminds me of Tom Perkins' remarks at the Commonwealth Club about the rich getting one vote per dollar of wealth. Wealthy VCs would not mind if Silicon Valley became one giant gated community. I would not mind it so much myself if it meant new states in Southern California had to pay full market price for their water.
The Tim Draper philosophy of "venture governance" crowdsourced from highly motivated citizens allows good ideas to get traction. Like every new venture, opportunity also brings risk. Ideas like allowing constituents to simulate votes on Congressional or Legislative bills will probably force more real-time accountability between elections. It also risks annulling the electoral process if lawmakers start slavishly following the popular will instead of voting their conscience or brokering compromises. Too much innovation brings the kind of direct democracy the Founders wanted to avoid by designing a republic.
I don't see how digitizing democracy will bypass special interests. Well-funded lobbies can still run compelling social media campaigns, and those campaigns can decisively influence crowdsourced projects. The Founders warned about "factions" in the Federalist Papers. Placing governance into the hands of a wise elite whose wealth insulated them from outside pressure was the Founders' solution to factionalism. Lobbies targeting single issues make representative governance more difficult.
Devolving governance into crowdsourcing works best if it improves the machinery of government, like speeding the passage of bills or making regulatory compliance easier. The good news in venture governance is that bad policies can be undone when they lose public support. Markets work that way.
The venture capital community worries about more than just California's business climate. Tim Draper's plan for Six Californias did not qualify for the state ballot. The proto-state of Silicon Valley would have been the wealthiest and most educated of the six states. That plan reminds me of Tom Perkins' remarks at the Commonwealth Club about the rich getting one vote per dollar of wealth. Wealthy VCs would not mind if Silicon Valley became one giant gated community. I would not mind it so much myself if it meant new states in Southern California had to pay full market price for their water.
The Tim Draper philosophy of "venture governance" crowdsourced from highly motivated citizens allows good ideas to get traction. Like every new venture, opportunity also brings risk. Ideas like allowing constituents to simulate votes on Congressional or Legislative bills will probably force more real-time accountability between elections. It also risks annulling the electoral process if lawmakers start slavishly following the popular will instead of voting their conscience or brokering compromises. Too much innovation brings the kind of direct democracy the Founders wanted to avoid by designing a republic.
I don't see how digitizing democracy will bypass special interests. Well-funded lobbies can still run compelling social media campaigns, and those campaigns can decisively influence crowdsourced projects. The Founders warned about "factions" in the Federalist Papers. Placing governance into the hands of a wise elite whose wealth insulated them from outside pressure was the Founders' solution to factionalism. Lobbies targeting single issues make representative governance more difficult.
Devolving governance into crowdsourcing works best if it improves the machinery of government, like speeding the passage of bills or making regulatory compliance easier. The good news in venture governance is that bad policies can be undone when they lose public support. Markets work that way.
Sunday, October 04, 2015
More Thoughts On Launching API Startups
My experience at Integrate 2015 got me thinking about how APIs and other elements of the data supply chain can be stand-alone enterprises. I will throw my thoughts from our VC perspectives panel out on the Interwebs to see if any of them stick to entrepreneurs.
The successful API supports an app ecosystem. Other businesses in related sectors code their own apps to share affiliate revenue with the API owner for every transaction their apps process. Airlines and hotels build apps around Uber's API because their customers see value in having a short-haul transportation link. Uber's app ecosystem becomes a durable competitive advantage because the app owners would have to build a whole new app if another virtual taxi company tried to displace Uber. Digital infrastructure like apps impose some switching costs on partners, but those costs are probably not insurmountable for competitors.
One thing making APIs a core business model is the continuing integration of cloud, mobile, and Big Data solutions. Some parts of this convergence are coming along fine, like the analytics suites now part of most middleware. Other parts are not working because venture capitalists have wasted lots of money on startups with lame mobile concepts. Venture funds can force their portfolio companies to pivot from a mobile or cloud solution when something isn't working out. That's how they try to save their investments. Targeting APIs for venture investment means the least successful among them will be candidates for forced pivots.
I like startups that understand Customer Development, the Business Model Canvas, and Cloudonomics. Founders should download those white papers, hit the books, and work the equations. Revising the API business plan after working those three areas shows investors that they take de-risking seriously. Corporate development groups in particular carry marching orders form their enterprise mothership to fund startups that improve their internal KPIs and match their product lines. Startups can use Cloudonomics calculations to prove their APIs are a better investment. Cloudonomics is as compelling for IT as modern portfolio theory is for finance, because it offers a disciplined methodology for allocating limited capital among a potentially unlimited number of investment options.
I do not like startups that do not understand the new opportunities and risks of raising capital under the JOBS Act. The SEC continues to publish new rules defining what private companies can and cannot do to attract investment. Anything I blogged about in the past regarding crowdfunding will likely be obsolete by the end of 2015 as the SEC finishes its unfinished business. Startups will have to engage competent legal counsel earlier in their development process to understand JOBS Act compliance. Founders must meet all of the SEC's compliance requirements before they appear in front of pitch fest panels or hang pitch decks on crowdfunding portals. No one wants to be shut out of raising capital because they did something noncompliant.
Data sector startups can tell their stories more effectively by having a founding CEO who knows sales. It really is that simple. Technical founders love solving technical problems, but they may not know how to solve problems with financial or emotional components if they have never worked in sales. It goes back to the classic split in startup teams between the scientific co-founder who becomes the CTO and the MBA-type serial entrepreneur who becomes the co-founding CEO.
If I only had so much money to commit to a venture investment, I would prefer Big Data and cloud concepts over APIs or IoT. The industry standards for data and cloud are firmer than those for APIs and IoT, so the durable competitive advantages of a given business model will be clearer where standards are firmer.
No enterprise can ever indemnify itself by outsourcing risk. Trusting an untrustworthy partner brings a boatload of risk assumptions. Outsourcing an API means trusting someone else's coding with no supervisory input. If the API passes dirty or fraudulent data into analytics, the enterprise's compliance regime becomes a target for regulators. Don't ask for trouble by handing off mission critical API management to a third party.
Chew on all that stuff, API people. There's enough genius here for several weeks of boardroom discussions. Barriers to entry in API development are pretty low, just like in gaming, because the only immediate limit is a developer's imagination. The API businesses will be the next big thing in the mobile Big Data cloud.
The successful API supports an app ecosystem. Other businesses in related sectors code their own apps to share affiliate revenue with the API owner for every transaction their apps process. Airlines and hotels build apps around Uber's API because their customers see value in having a short-haul transportation link. Uber's app ecosystem becomes a durable competitive advantage because the app owners would have to build a whole new app if another virtual taxi company tried to displace Uber. Digital infrastructure like apps impose some switching costs on partners, but those costs are probably not insurmountable for competitors.
One thing making APIs a core business model is the continuing integration of cloud, mobile, and Big Data solutions. Some parts of this convergence are coming along fine, like the analytics suites now part of most middleware. Other parts are not working because venture capitalists have wasted lots of money on startups with lame mobile concepts. Venture funds can force their portfolio companies to pivot from a mobile or cloud solution when something isn't working out. That's how they try to save their investments. Targeting APIs for venture investment means the least successful among them will be candidates for forced pivots.
I like startups that understand Customer Development, the Business Model Canvas, and Cloudonomics. Founders should download those white papers, hit the books, and work the equations. Revising the API business plan after working those three areas shows investors that they take de-risking seriously. Corporate development groups in particular carry marching orders form their enterprise mothership to fund startups that improve their internal KPIs and match their product lines. Startups can use Cloudonomics calculations to prove their APIs are a better investment. Cloudonomics is as compelling for IT as modern portfolio theory is for finance, because it offers a disciplined methodology for allocating limited capital among a potentially unlimited number of investment options.
I do not like startups that do not understand the new opportunities and risks of raising capital under the JOBS Act. The SEC continues to publish new rules defining what private companies can and cannot do to attract investment. Anything I blogged about in the past regarding crowdfunding will likely be obsolete by the end of 2015 as the SEC finishes its unfinished business. Startups will have to engage competent legal counsel earlier in their development process to understand JOBS Act compliance. Founders must meet all of the SEC's compliance requirements before they appear in front of pitch fest panels or hang pitch decks on crowdfunding portals. No one wants to be shut out of raising capital because they did something noncompliant.
Data sector startups can tell their stories more effectively by having a founding CEO who knows sales. It really is that simple. Technical founders love solving technical problems, but they may not know how to solve problems with financial or emotional components if they have never worked in sales. It goes back to the classic split in startup teams between the scientific co-founder who becomes the CTO and the MBA-type serial entrepreneur who becomes the co-founding CEO.
If I only had so much money to commit to a venture investment, I would prefer Big Data and cloud concepts over APIs or IoT. The industry standards for data and cloud are firmer than those for APIs and IoT, so the durable competitive advantages of a given business model will be clearer where standards are firmer.
No enterprise can ever indemnify itself by outsourcing risk. Trusting an untrustworthy partner brings a boatload of risk assumptions. Outsourcing an API means trusting someone else's coding with no supervisory input. If the API passes dirty or fraudulent data into analytics, the enterprise's compliance regime becomes a target for regulators. Don't ask for trouble by handing off mission critical API management to a third party.
Chew on all that stuff, API people. There's enough genius here for several weeks of boardroom discussions. Barriers to entry in API development are pretty low, just like in gaming, because the only immediate limit is a developer's imagination. The API businesses will be the next big thing in the mobile Big Data cloud.
Thursday, August 13, 2015
The Informal Economy Needs Elite Guidance During Its Maturation
The informal economy is out there on the fringes of mass consciousness. It rears its head every so often when the mainstream media ask Burning Man attendees what they do for a living when they're not making art or smoking dope. Gray market transactions enter the official economy through financial sleight-of-hand when auditors and inspectors are distracted. There are many ways for underground entrepreneurs to go legit.
Wisdom Hackers seek philosophical explanations relevant to modernity. The Human Agency takes wisdom a step further, transforming it into brand new things. Social entrepreneurs outside large organizations can test-market their ideas with an Ashoka fellowship. The League of Intrapreneurs leverages the guerrilla skills of people already working inside established enterprises, in the spirit of the social capital movement. Ask Alexa Clay for examples of how an "Amish Futurist" would question technology.
The Anglo-American Establishment has taken note of the informal economy. Attempts to channel its energy for the benefit of the existing order are underway. OpenIDEO takes the open innovation concept out of its UC Berkeley birthplace and into the technology sector. Google Dot Org puts one of the world's most powerful brands behind tech ideas that can change the world. The Aspen Ideas Festival works like a TED Talk that morphed into a salon conversation with an agenda to make the world better.
Elite guidance is essential if the informal economy's youthful enthusiasm is to produce anything beneficial on a large scale. The movement's thought leaders have a penchant for multi-disciplinary thinking that risks becoming undisciplined. Throwing around buzz phrases like "bohemian, sharing economy, sense of place, artisans," etc. tends toward verbal decoration of things that lack practicality. I listened to one grown-up bohemian (a hot babe, I must say) wax on about how a small town is really an inherent company that resists outsiders and creates horizontal networks that scale across an entire country. That sounds a lot like neofeudalism to me. She didn't come out and say it but a member of the elite class will recognize the concept's future value in managing society.
Another buzz term is "pre-competitive collaboration." It reminds me of the misfit squatters I met when I wandered into their Freespace temporary autonomous zone back in 2013. Civic hacking needs room to experiment, and some experiments will fail. Hackers need not be skeptical of MOOCs just because they don't offer the "deeply immersive conversations" (another buzz term!) that educated them in ivory towers. Thought leaders hung up on wishy-washy thinking about the nature of the self, subjectivity, emotional intelligence, postmodernism, and cross-cultural metanarratives sound immature.
The "idea people" in social capital startups are prone to existentialist angst and alienation. They need to put down the Albert Camus collection at some point and hand the informal economy over to the Big Data people who can calculate a social enterprise's potential. The freethinking hippies and hard-core data nerds need each other provided they work with each others' strengths. Misfits are simply wired differently, with brain chemistry far into the outlier range of what neuroscience measures. They will not be found in the middle bulge of any normal distribution, and their ideas will thus be incomprehensible to most people. They also risk being victimized by remaining too long in the informal economy, where the hustlers in pirate subcultures will eventually confiscate their wealth. Get those open innovations out of the gray market and into the light of the above-ground economy's accelerators, where mass adoption and elite investment await.
We will hear a lot more about the informal economy in the years ahead. The real economy in developed countries gets more dysfunctional by the day. Underemployment is now a fact of life for Millennials with student debt. Their constrained incomes need augmentation from micro-scale entrepreneurial action. They will find profits in System D enterprises that deserve to be legitimized.
Wisdom Hackers seek philosophical explanations relevant to modernity. The Human Agency takes wisdom a step further, transforming it into brand new things. Social entrepreneurs outside large organizations can test-market their ideas with an Ashoka fellowship. The League of Intrapreneurs leverages the guerrilla skills of people already working inside established enterprises, in the spirit of the social capital movement. Ask Alexa Clay for examples of how an "Amish Futurist" would question technology.
The Anglo-American Establishment has taken note of the informal economy. Attempts to channel its energy for the benefit of the existing order are underway. OpenIDEO takes the open innovation concept out of its UC Berkeley birthplace and into the technology sector. Google Dot Org puts one of the world's most powerful brands behind tech ideas that can change the world. The Aspen Ideas Festival works like a TED Talk that morphed into a salon conversation with an agenda to make the world better.
Elite guidance is essential if the informal economy's youthful enthusiasm is to produce anything beneficial on a large scale. The movement's thought leaders have a penchant for multi-disciplinary thinking that risks becoming undisciplined. Throwing around buzz phrases like "bohemian, sharing economy, sense of place, artisans," etc. tends toward verbal decoration of things that lack practicality. I listened to one grown-up bohemian (a hot babe, I must say) wax on about how a small town is really an inherent company that resists outsiders and creates horizontal networks that scale across an entire country. That sounds a lot like neofeudalism to me. She didn't come out and say it but a member of the elite class will recognize the concept's future value in managing society.
Another buzz term is "pre-competitive collaboration." It reminds me of the misfit squatters I met when I wandered into their Freespace temporary autonomous zone back in 2013. Civic hacking needs room to experiment, and some experiments will fail. Hackers need not be skeptical of MOOCs just because they don't offer the "deeply immersive conversations" (another buzz term!) that educated them in ivory towers. Thought leaders hung up on wishy-washy thinking about the nature of the self, subjectivity, emotional intelligence, postmodernism, and cross-cultural metanarratives sound immature.
The "idea people" in social capital startups are prone to existentialist angst and alienation. They need to put down the Albert Camus collection at some point and hand the informal economy over to the Big Data people who can calculate a social enterprise's potential. The freethinking hippies and hard-core data nerds need each other provided they work with each others' strengths. Misfits are simply wired differently, with brain chemistry far into the outlier range of what neuroscience measures. They will not be found in the middle bulge of any normal distribution, and their ideas will thus be incomprehensible to most people. They also risk being victimized by remaining too long in the informal economy, where the hustlers in pirate subcultures will eventually confiscate their wealth. Get those open innovations out of the gray market and into the light of the above-ground economy's accelerators, where mass adoption and elite investment await.
We will hear a lot more about the informal economy in the years ahead. The real economy in developed countries gets more dysfunctional by the day. Underemployment is now a fact of life for Millennials with student debt. Their constrained incomes need augmentation from micro-scale entrepreneurial action. They will find profits in System D enterprises that deserve to be legitimized.
Monday, August 10, 2015
Resource Sector Companies Should Use FEL And PDRI For Innovative Planning
One of my pet peeves about tracking investment in the natural resource sector is the often amateurish approach some executives take when developing projects. Junior companies often mistakenly assume that completing a preliminary economic analysis (PEA) is a milestone in itself, without realizing the importance of planning their fundraising to fulfill the PEA's requirements. Fortunately, help is available for junior mining companies. Front-end loading (FEL) and the Project Definition Rating Index (PDRI) will make all the difference.
Process-oriented sectors use FEL stages to segment a project into deliverable milestones, with the hardest thinking up front. This is a key approach for successful project managers who complete projects on time, under budget, and with little degradation in net present value (NPV). Independent Project Analysis (IPA) has tracked project efficiency for decades, and their publicly available literature reveals how FEL adds value. The mineral sector is one of the least successful in delivering project value, according to IPA's research. I can totally see why after thinking about all of the junior mining company presentations I have attended.
Project planners using FEL should acquaint themselves with PDRI. The Construction Industry Institute has a very robust approach to scoring a PDRI. They are not alone. The US DOE has modified the PDRI to incorporate environmental management. Professional bodies have studied PDRI's value. The Project Management Institute notes how PDRI augments their body of knowledge. Managers building a project team should involve their auditors early in the FEL-1 gate and equip them with PDRI checklists.
Mining startups may lack the human capital to incorporate PDRI scoring into their first FEL stage. Experienced project geologists who become junior mining company CEOs are more likely to keep up on industry developments that exemplify FEL planning. I cannot recall ever hearing a mining company CEO with a background in banking or consulting who ever described their active projects in FEL or PDRI terms. All the hints they need are in their initial NI 43-101 reports. Properly sequencing those discoveries into development milestones is within a modern geologist's professional competence. Former investment bank analysts who take over as mining CEOs probably won't take the hints.
Large, well-capitalized companies in the resource sector have an easier time building a strong project team early in a mine's life cycle. Junior mining companies should do similar quality work at a smaller scale if they want their projects to show robust economics. Waiting until a bankable feasibility study is complete after several years of exploration is too late. Delays in determining project completion requirements adds risk and makes junior miners less desirable as acquisition targets. Small-cap mining companies that take FEL and PDRI seriously will demonstrate better long-term project economics and increase their chance of achieving an attractive valuation. Widespread adoption of FEL and PDRI concepts among junior resource sector companies would be a welcome innovation.
Process-oriented sectors use FEL stages to segment a project into deliverable milestones, with the hardest thinking up front. This is a key approach for successful project managers who complete projects on time, under budget, and with little degradation in net present value (NPV). Independent Project Analysis (IPA) has tracked project efficiency for decades, and their publicly available literature reveals how FEL adds value. The mineral sector is one of the least successful in delivering project value, according to IPA's research. I can totally see why after thinking about all of the junior mining company presentations I have attended.
Project planners using FEL should acquaint themselves with PDRI. The Construction Industry Institute has a very robust approach to scoring a PDRI. They are not alone. The US DOE has modified the PDRI to incorporate environmental management. Professional bodies have studied PDRI's value. The Project Management Institute notes how PDRI augments their body of knowledge. Managers building a project team should involve their auditors early in the FEL-1 gate and equip them with PDRI checklists.
Mining startups may lack the human capital to incorporate PDRI scoring into their first FEL stage. Experienced project geologists who become junior mining company CEOs are more likely to keep up on industry developments that exemplify FEL planning. I cannot recall ever hearing a mining company CEO with a background in banking or consulting who ever described their active projects in FEL or PDRI terms. All the hints they need are in their initial NI 43-101 reports. Properly sequencing those discoveries into development milestones is within a modern geologist's professional competence. Former investment bank analysts who take over as mining CEOs probably won't take the hints.
Large, well-capitalized companies in the resource sector have an easier time building a strong project team early in a mine's life cycle. Junior mining companies should do similar quality work at a smaller scale if they want their projects to show robust economics. Waiting until a bankable feasibility study is complete after several years of exploration is too late. Delays in determining project completion requirements adds risk and makes junior miners less desirable as acquisition targets. Small-cap mining companies that take FEL and PDRI seriously will demonstrate better long-term project economics and increase their chance of achieving an attractive valuation. Widespread adoption of FEL and PDRI concepts among junior resource sector companies would be a welcome innovation.
Monday, June 22, 2015
Friday, February 13, 2015
Bay Area Reinvention And Risk For History's Next Long Boom
Peter Leyden from Reinventors spoke today at the Commonwealth Club about how the San Francisco Bay Area is the origin of the next wave of multifaceted rejuvenation that's about to sweep the planet. It's a good sales pitch that makes me want to dive deeper into a lot of what drives this area's economic and cultural vigor.
It's easy to point to San Francisco's lifestyle diversity and the high valuations of our tech companies. Those are always highly visible because people with lots of money continually promote those things. It's harder to see what truly enables the area's innovative spirit. Mr. Leyden is correct to identify the region's cultural diversity as an enabler for collaboration and sharing ideas. I would also identify the region's strong research laboratories at Stanford and UC Berkeley, its record high density of advanced academic degrees per square mile, and history of strong government funding for technology development. Money flows to places where it gets the most work done.
We should also ask why the Silicon Valley ecosystem is replicated in other parts of the US like Boston-Cambridge and Raleigh-Durham-Chapel Hill, but not in other countries. The key is the strength of the rule of law in the US. We lose some of that strength with every forced automobile bailout and mandatory health insurance plan.
Mr. Leyden liked to note several bonanza periods in American history as precursors for the next "long boom" the Bay Area is supposed to lead. Okay, but let's remember that world history always moves in cycles and sometimes major socioeconomic disruptions force progress off its tracks. Nothing in history moves in a linear fashion. Wars, pandemics, and forced migrations often appear when long economic booms run out of steam.
Acknowledging generational differences was one notable part of Mr. Leyden's talk that I found encouraging. I don't know whether he's read Strauss and Howe's The Fourth Turning but some of his discussion covered intergenerational psychology. I had to leave his talk early due to a schedule conflict, so perhaps he has elaborated on generational cycles elsewhere in his body of work. Analysts who are serious about generational interaction acknowledge the recurrence of crisis periods that destroy progress and force drastic social changes.
I would not go down the path of trumpeting Bay Area tech leadership based on the valuations of a select group of publicly traded tech companies. The insane valuations of Twitter, Facebook, and Tesla Motors are probably fleeting. They have more to do with the Federal Reserve's monetary stimulus than any added value they offer. The same goes for the putative valuations of Uber and Airbnb; their freelance contractors are in for a rude awakening once they start paying for the insurance they'll have to carry. Building a valuation based on outsourcing all costs and liabilities is a free lunch that eventually turns into a banquet of consequences.
I also would not go down the path of touting Moore's Law as a predictor of unlimited capacity growth in everything forever. The most serious minds in the enterprise computing sector have been debating the potential end of Moore's Law for years. Any advance in quantum computing that will put power laws back on track for unlimited growth has still not jumped from laboratories to real products. Waiting for another Moore's Law in other sectors very dependent on material science, such as electric battery storage capacity, requires a similar quantum advance. Bring on those quantum dots and nanoscale manufacturers, because we need them to manifest ASAP.
I like hearing tech evangelists go on cheerleading benders for the Bay Area. I do it myself once in a while. Nobody does it better than the Global Business Network (GBN). They just need to acknowledge severe risks given humanity's penchant for messing things up. The difference between me and other local gurus is that I study a lot more of the downside than anyone else. I drink from a half-empty glass, fed by San Francisco's tasty Hetch Hetchy water system.
It's easy to point to San Francisco's lifestyle diversity and the high valuations of our tech companies. Those are always highly visible because people with lots of money continually promote those things. It's harder to see what truly enables the area's innovative spirit. Mr. Leyden is correct to identify the region's cultural diversity as an enabler for collaboration and sharing ideas. I would also identify the region's strong research laboratories at Stanford and UC Berkeley, its record high density of advanced academic degrees per square mile, and history of strong government funding for technology development. Money flows to places where it gets the most work done.
We should also ask why the Silicon Valley ecosystem is replicated in other parts of the US like Boston-Cambridge and Raleigh-Durham-Chapel Hill, but not in other countries. The key is the strength of the rule of law in the US. We lose some of that strength with every forced automobile bailout and mandatory health insurance plan.
Mr. Leyden liked to note several bonanza periods in American history as precursors for the next "long boom" the Bay Area is supposed to lead. Okay, but let's remember that world history always moves in cycles and sometimes major socioeconomic disruptions force progress off its tracks. Nothing in history moves in a linear fashion. Wars, pandemics, and forced migrations often appear when long economic booms run out of steam.
Acknowledging generational differences was one notable part of Mr. Leyden's talk that I found encouraging. I don't know whether he's read Strauss and Howe's The Fourth Turning but some of his discussion covered intergenerational psychology. I had to leave his talk early due to a schedule conflict, so perhaps he has elaborated on generational cycles elsewhere in his body of work. Analysts who are serious about generational interaction acknowledge the recurrence of crisis periods that destroy progress and force drastic social changes.
I would not go down the path of trumpeting Bay Area tech leadership based on the valuations of a select group of publicly traded tech companies. The insane valuations of Twitter, Facebook, and Tesla Motors are probably fleeting. They have more to do with the Federal Reserve's monetary stimulus than any added value they offer. The same goes for the putative valuations of Uber and Airbnb; their freelance contractors are in for a rude awakening once they start paying for the insurance they'll have to carry. Building a valuation based on outsourcing all costs and liabilities is a free lunch that eventually turns into a banquet of consequences.
I also would not go down the path of touting Moore's Law as a predictor of unlimited capacity growth in everything forever. The most serious minds in the enterprise computing sector have been debating the potential end of Moore's Law for years. Any advance in quantum computing that will put power laws back on track for unlimited growth has still not jumped from laboratories to real products. Waiting for another Moore's Law in other sectors very dependent on material science, such as electric battery storage capacity, requires a similar quantum advance. Bring on those quantum dots and nanoscale manufacturers, because we need them to manifest ASAP.
I like hearing tech evangelists go on cheerleading benders for the Bay Area. I do it myself once in a while. Nobody does it better than the Global Business Network (GBN). They just need to acknowledge severe risks given humanity's penchant for messing things up. The difference between me and other local gurus is that I study a lot more of the downside than anyone else. I drink from a half-empty glass, fed by San Francisco's tasty Hetch Hetchy water system.
Saturday, September 13, 2014
The Haiku of Finance for 09/13/14
Innovate that tech
Just make sure it fits a need
Don't look like a fool
Just make sure it fits a need
Don't look like a fool
Alfidi Capital at KPMG Technology Innovation Executive Summit 2014
KPMG held its periodic Technology Innovation Executive Summit this week in Silicon Valley. I scored an invitation because, hey, let's face it, I'm all about innovation and I'm totally executive material. The photo I took of my badge came out looking lame, so forget about seeing proof. My genius is all the proof anyone needs. I'll share my own observations instead of blindly recapping the summit.
The firm's newest Global Survey on emerging tech trends is due out very soon and we got a preview of the results. I won't repeat any specifics here, so read the full report when it's available. I didn't see any consensus on which tech would drive consumer spending. I got the impression that big enterprise clients in non-tech sectors are not super-savvy on spotting tech trends. I did not see any real consensus on challenges facing enterprise IT integration. The diversity of sectors canvassed in these types of surveys means different sized corporate clients have different IT needs.
Any enterprises that thinks digital currencies (aka Bitcoin and others) will significantly disrupt banking and payment systems needs to wake up. US-based enterprises have seen the most media exposure to Bitcoin and are aware of the IRS' regulatory response. Other countries are clueless about Bitcoin's uselessness as a currency. Maybe the rest of the world anticipates something better coming down the pike after Bitcoin, or maybe they're just ignorant.
I do not expect serious IoT monetization to come from verticals closest to the consumer. The next financial crisis will destroy consumer spending for years. That places me at odds with some enterprise thought leaders. They should look for IoT driving security and surveillance spending instead.
The KPMG panelists following the survey results were definitely thought leaders in mobile, cloud, and enterprise IT. The power budget limitations in IoT are obvious, which brings me back to my point above about IoT's limitations in an era where the consumer can't drive spending. I look forward to IoT devices that scavenge energy from their ambient environment.
Converging DevOps and the cloud drives a continuous process where every developer's code upload triggers a deployment of new enterprise tech. Security still gets lip service but no one is making the connection with this DevOps capability. CIOs must make it a continuous deployment priority.
I need to revisit Bitcoin enthusiasts in light of the panel's mention of cloud and document sharing. There is zero analogy between digitally signed documents and cryptocurrencies. The docs aren't governed by a blockchain that multiplies the computing resources needed for processing every time a new document is created. It is crucial that IT professionals make this distinction before they look like fools by claiming block ledgers add transparency or security.
I'll close with a quote from one panelist that really stood out: "Computer science students don't learn coding anymore; they just move objects around." There's a wake-up notification for all of the fad-chasers jumping on the coding literacy bandwagon. Moving objects around means symbolic logic and systems analysis take educational precedence over programming languages. Future CIOs should take note. I have no intention of restarting an entire educational cycle just to learn code. I'd rather keep coming to these thought leader summits, where I learn more anyway.
Friday, September 12, 2014
Thursday, August 07, 2014
The Haiku of Finance for 08/07/14
Tech change at high speed
Spend on capex and research
Stay at leading edge
Spend on capex and research
Stay at leading edge
Friday, July 18, 2014
How US R&D Stacks Up With Other Data
Analysts should not have to guess about a business's R&D spending. It's always in the financial statements for publicly held companies. Finding the numbers requires some effort because FASB's SFAS 2 requires R&D to be expensed as it is incurred, meaning R&D costs are usually considered to be operating costs rather than capex. Assembling a comparable number for the entire US is a different project because the data is scattered in several locations. Government data offers a starting point for the R&D component of spending.
The National Science Foundation has a couple of interesting data sets. Check out NSF's National Patterns of R&D Resources for a rundown of public R&D spending by source and sector. The National Science Board's Science and Engineering Indicators report includes a chapter comparing the US R&D commitment to international competitors. The NCSES InfoBrief for December 2013 has further breakdowns on multiyear R&D spending. The general conclusions of these three data sources all comport with each other. Their bottom line is that the US is losing its global lead in R&D spending. It is worth noting that business R&D spending far outpaces both federal and university spending.
I am intrigued by the US's R&D data because this spending helps determine the nation's future innovation capacity and thus its prosperity. I would like to explore whether a relationship exists between strong R&D spending and a normal US economy. I will have to define my terms carefully before I proceed. I do not yet have a firm definition of what constitutes either variable. "Strong" R&D spending may be what drives normal GDP growth, and a "normal" economy may be one in which Tobin's Q has a value of 1.0 at its equilibrium. The St. Louis Fed's FRED historial chart of Tobin's Q shows a big spike in the 1990s when IT spending for Internet connectivity took off. I would be very intrigued to discover whether a similar spike in national R&D spending contributed to that spike. It may of course be merely a reflection of the insane NASDAQ valuations for tech companies in that era. Perhaps a normal economy displays a "Warren Buffett Indicator" close to its historical average.
Be patient as I work through this research idea. I have other demands on my time.
The National Science Foundation has a couple of interesting data sets. Check out NSF's National Patterns of R&D Resources for a rundown of public R&D spending by source and sector. The National Science Board's Science and Engineering Indicators report includes a chapter comparing the US R&D commitment to international competitors. The NCSES InfoBrief for December 2013 has further breakdowns on multiyear R&D spending. The general conclusions of these three data sources all comport with each other. Their bottom line is that the US is losing its global lead in R&D spending. It is worth noting that business R&D spending far outpaces both federal and university spending.
I am intrigued by the US's R&D data because this spending helps determine the nation's future innovation capacity and thus its prosperity. I would like to explore whether a relationship exists between strong R&D spending and a normal US economy. I will have to define my terms carefully before I proceed. I do not yet have a firm definition of what constitutes either variable. "Strong" R&D spending may be what drives normal GDP growth, and a "normal" economy may be one in which Tobin's Q has a value of 1.0 at its equilibrium. The St. Louis Fed's FRED historial chart of Tobin's Q shows a big spike in the 1990s when IT spending for Internet connectivity took off. I would be very intrigued to discover whether a similar spike in national R&D spending contributed to that spike. It may of course be merely a reflection of the insane NASDAQ valuations for tech companies in that era. Perhaps a normal economy displays a "Warren Buffett Indicator" close to its historical average.
Be patient as I work through this research idea. I have other demands on my time.
Wednesday, June 18, 2014
Mobile Monday Knows Your Startup's Top Legal Mistakes
I attend Mobile Monday Silicon Valley events even though I don't work in the mobile sector's ecosystem. I keep my finger on the pulse of mobile action and meet the folks who put those fancy apps on your smartphone. The event this week was a chance for aspiring entrepreneurs to hear from attorneys on how not to make common legal errors. I did not make any errors when I wrote my nametag. It is truly a state of perfection.
The panel attorneys from Arent Fox and elsewhere handed out free wisdom like candy. There was also free candy available from the Tea Room where they infuse their chocolates with green tea, oolong tea, chai tea, and other stuff. I had my fill of chocolate and took the legal stuff seriously.
Following one's own privacy policy and assigning founder ownership stakes early are pretty basic things. The preponderance of lawyers with diverse specialties makes me think there's a disruptive opportunity for an online lawyer rating and referral service. Call it the attorney version of Yelp. It's too bad Yelp has such a poor reputation that even lawyers should be reluctant to use it.
I hate to admit that likability is a factor determining whether VCs invest in a startup. Investors believe in founders more than tech and will push them to pivot if Plan A doesn't work out. I learned long ago that physical attractiveness and pedigree are key to likability. The guest lecturer in my 2002 MBA venture capital class told us about how her high heels, fishnet stockings, and revealing cleavage helped her close several rounds of funding as a serial entrepreneur. I have told several female entrepreneurs that leveraging sexuality is a successful tactic. That's one reason many attractive women flock to me for wisdom, and other means of stimulation.
I liked hearing the tidbit about structuring owner and advisor equity stakes to align with those parties' fair time commitments. Linking the vesting of an advisor's shares to their fulfillment of agreed objectives is an acceptable practice. Setting term limits on an advisor's board participation is a helpful way around the discomfort of firing them for non-performance. I remember last year when a startup I was mentoring through an accelerator demanded that I violate the accelerator's rules on time commitments and complete all of their worksheets for them. I refused to violate the rules and the startup fired me as a mentor. They retained a former poet with no entrepreneurial experience as a mentor. That startup never made it through round one of the accelerator and the founder failed to commercialize any of his inventions. I don't think it's difficult at all for an advisor to perform well for an ethical entrepreneur.
I learned a little bit about the culture of Silicon Valley. The Valley ethos of "pay it forward" favors gratis introductions to build relationships. Any startup advisor who demands compensation in exchange for introductions to investors raises a red flag in the Valley. That alert must propagate through the Valley's networks like wildfire when it happens. I marvel at the persistence of some "pay-to-play" entities that knowingly flout this ethos. Their excuse is that many hopeless startups benefit from paid exposure to well-heeled groups even if no investment is forthcoming. The reality is that naive startups get fleeced by paying entry fees to pitch fests where no serious investors will be present in the audience.
Some top-drawer law firms do demand a cut in exchange for investor introductions, but they can get away with that because they have access to so many real venture investors who look to them for deal flow. I've also noticed that the top law firms will accept equity compensation from cash-poor startups. I say that's a fair way to comply with the Valley's culture of mutual helpfulness.
I'm not going to castigate the legal climate of California. I trust my state's business laws and I don't need a legal domicile in any other state that would subject me to an unfamiliar jurisdiction. I unwound my LLC structure and Alfidi Capital is now a sole proprietorship because incorporating just didn't benefit me. I don't know how California law treats employee non-agreements but plenty of Valley firms poach from each other constantly, so I suspect those agreements aren't worth much outside of something extraordinary. The attorneys present at this Mobile Monday panel viewed non-competes as a form of golden handcuffs enforceable during corporate acquisitions.
Startups can protect their IP with a "file patent, sign NDA" approach. Tech developers under contractual employment agreements may be tempted to leave early and take that tech to a competitor. Filing a patent on that tech keeps it with the startup that agreed to pay for its development. Requiring the contract engineer to sign an NDA clarifies their role as an employee hired to perform a specific service. The disclaimer language assigning IP ownership to the startup, and not to the employee, should be airtight. Don't ask me how to write it; I'm not an attorney.
I'll close with a video parody one of the attorneys liked. Check out an imaginary Nikola Tesla pitching Silicon Valley VCs. This never happened in history but some future super-genius will relate to the process. All of the Silicon Valley biases are there. Teams, lead investors, and pitch decks matter for any startup that isn't run by Nikola Tesla. Those self-absorbed VCs like teams. I don't like teams unless they leave me alone to do my thing. I think Nikola Tesla would have loved to speak at Mobile Monday.
Following one's own privacy policy and assigning founder ownership stakes early are pretty basic things. The preponderance of lawyers with diverse specialties makes me think there's a disruptive opportunity for an online lawyer rating and referral service. Call it the attorney version of Yelp. It's too bad Yelp has such a poor reputation that even lawyers should be reluctant to use it.
I hate to admit that likability is a factor determining whether VCs invest in a startup. Investors believe in founders more than tech and will push them to pivot if Plan A doesn't work out. I learned long ago that physical attractiveness and pedigree are key to likability. The guest lecturer in my 2002 MBA venture capital class told us about how her high heels, fishnet stockings, and revealing cleavage helped her close several rounds of funding as a serial entrepreneur. I have told several female entrepreneurs that leveraging sexuality is a successful tactic. That's one reason many attractive women flock to me for wisdom, and other means of stimulation.
I liked hearing the tidbit about structuring owner and advisor equity stakes to align with those parties' fair time commitments. Linking the vesting of an advisor's shares to their fulfillment of agreed objectives is an acceptable practice. Setting term limits on an advisor's board participation is a helpful way around the discomfort of firing them for non-performance. I remember last year when a startup I was mentoring through an accelerator demanded that I violate the accelerator's rules on time commitments and complete all of their worksheets for them. I refused to violate the rules and the startup fired me as a mentor. They retained a former poet with no entrepreneurial experience as a mentor. That startup never made it through round one of the accelerator and the founder failed to commercialize any of his inventions. I don't think it's difficult at all for an advisor to perform well for an ethical entrepreneur.
I learned a little bit about the culture of Silicon Valley. The Valley ethos of "pay it forward" favors gratis introductions to build relationships. Any startup advisor who demands compensation in exchange for introductions to investors raises a red flag in the Valley. That alert must propagate through the Valley's networks like wildfire when it happens. I marvel at the persistence of some "pay-to-play" entities that knowingly flout this ethos. Their excuse is that many hopeless startups benefit from paid exposure to well-heeled groups even if no investment is forthcoming. The reality is that naive startups get fleeced by paying entry fees to pitch fests where no serious investors will be present in the audience.
Some top-drawer law firms do demand a cut in exchange for investor introductions, but they can get away with that because they have access to so many real venture investors who look to them for deal flow. I've also noticed that the top law firms will accept equity compensation from cash-poor startups. I say that's a fair way to comply with the Valley's culture of mutual helpfulness.
I'm not going to castigate the legal climate of California. I trust my state's business laws and I don't need a legal domicile in any other state that would subject me to an unfamiliar jurisdiction. I unwound my LLC structure and Alfidi Capital is now a sole proprietorship because incorporating just didn't benefit me. I don't know how California law treats employee non-agreements but plenty of Valley firms poach from each other constantly, so I suspect those agreements aren't worth much outside of something extraordinary. The attorneys present at this Mobile Monday panel viewed non-competes as a form of golden handcuffs enforceable during corporate acquisitions.
Startups can protect their IP with a "file patent, sign NDA" approach. Tech developers under contractual employment agreements may be tempted to leave early and take that tech to a competitor. Filing a patent on that tech keeps it with the startup that agreed to pay for its development. Requiring the contract engineer to sign an NDA clarifies their role as an employee hired to perform a specific service. The disclaimer language assigning IP ownership to the startup, and not to the employee, should be airtight. Don't ask me how to write it; I'm not an attorney.
I'll close with a video parody one of the attorneys liked. Check out an imaginary Nikola Tesla pitching Silicon Valley VCs. This never happened in history but some future super-genius will relate to the process. All of the Silicon Valley biases are there. Teams, lead investors, and pitch decks matter for any startup that isn't run by Nikola Tesla. Those self-absorbed VCs like teams. I don't like teams unless they leave me alone to do my thing. I think Nikola Tesla would have loved to speak at Mobile Monday.
Thursday, April 03, 2014
EE Live! 2014 Comes Alive With Engineering Innovation
I attended EE Live! 2014 this week, another in a long string of UBM-promoted technology events that feed my addiction for knowledge. The technical sessions were appropriate for software engineers and electrical engineers who turn circuit board materials into full systems. I was there to understand how disruptive startups can make piles of money in systems engineering.
The first keynote on "killer apps" addresses safety failures of the US Army's Patriot missile, the Therac-25 anti-cancer radiation system, and a leading automaker's vehicle systems. Testing for errors in accuracy, calibration, and control must cover continuous use rather than brief iterations of activity. Turning something on briefly does not constitute a use case. Design engineers too often assume that thousands of hours of iterative laboratory testing are substitutes for real-world use that continually stresses tolerances. I was not surprised to learn that some government regulators lack the in-house software expertise to evaluate control system failures.
I talked my way into the International Engineering Consortium (IEC) Management Summit because frankly I'm the kind of guy who belongs at summits. Much of what the high-level participants discussed was off the record but my own opinions about system engineering are very much on the record. Get ready; here it comes. My vision of the Internet of things (IoT) is a biosphere of multiple ecosystems optimizing human processes that have never before been analyzed or controlled. Engineers shouldn't dream up IoT devices without input from their marketing team to determine whether some IoT-enabled thing will sell. There is a huge IoT opportunity in legacy pre-Internet physical infrastructure whose industrial control systems were never designed to use networks and embedded sensors. Young software engineers (20-30yo punks and whipper snappers) must converse with the retired mechanical and electrical engineers (60-70yo fogies and geezers) who designed those legacy systems. Intergenerational knowledge transfer will enable IoT systems to address those legacy facilities' gaps in performance and security.
I really liked Max "The Magnificent" Maxfield's morning session on the possibility of a robot uprising. This is what serious engineers spend their time preparing to handle. I said yes to the free breakfast (the program guide said so) but I didn't put on a tinfoil hat. Plenty of conference alumni wore their tinfoil hats, as you can see below.
I have no idea what the screenshot of giant singing jellybeans had to do with the topics of AI self-awareness and pervasive automation. The engineers present had no consensus on design protocols that could mitigate a spontaneous robot uprising. Isaac Asimov's Three Laws of Robotics should be the obvious solution given the attendees' penchant for revisiting their favorite science fiction stories.
The second keynote on open source hardware and embedded systems was from an MIT PhD nicknamed "bunnie." I didn't know genius hackers could have innocent nicknames but when you're Dr. Andrew "bunnie" Huang you can do anything you like. He discusses reverse engineering of common hardware on his blog. His insight into the slowing of Moore's Law opens longer product development windows for hardware. The last node of Moore's Law will not allow for further reductions in computing cost. We should welcome the end of planned obsolescence if it leads to bunnie's vision of repair and recycle cultures for legacy hardware. Open-source hardware enthusiasts like bunnie have as much fun cracking their own homemade PCs as open-source software developers have with free products like LibreOffice. Gearheads in tech can crowdfund their latest hardware hacks at Crowd Supply because the world needs more DIY solutions. It makes sense for bunnie to be a leader in the maker movement. I think makers should prepare for the coming of quantum computing, which will blow away the Moore's Law limiting nodes.
I spent much of day two at the Silicon Valley Open Innovation Summit. A lot of the presentations were sales pitches from larger firms and debut pitches from startups. It was enough for me to see new tech like flexible batteries. The lead sponsor proposed that common building blocks for innovation in a few key areas will cross all product lines. Okay, but please find academic support for that contention. MIT's Sloan Management Review found that innovation has more to do with human cultural attitudes than specific technologies.
I learned a bunch of new terms at this innovation summit. Metadesign should make collaboration easier. Someone mentioned "technology arbitrage" but I am unable to locate a definition; I take it to be the temporary advantage a niche maker possesses before competitors flood into a market with cheaper processes. IoT device makers and service providers are segmenting their markets into "brownfield" and "greenfield" parts, and the legacy infrastructure I mentioned above falls into the brownfield category. The sectors that have little coverage in research literature, like flexible and printable batteries, appear to offer first-mover advantages for startups.
The best show on the expo floor was the Fantastical Theatre of Engineering Innovation. The prevalence of cotton candy and popcorn enhanced the circus-sideshow approach of several exhibitors. Some of them were more performers than exhibitors, with crawling robots and flashing thingies scampering all over the place.
Max Maxfield's "beer and bacon" talk stole the show. I missed the bacon and I didn't need the beer. He's making progress on a prognostication engine that predicts women's emotions based on inputs from environmental influences and a man's decision points. Giver her flowers and a dial moves. Some dial lights up during a blue moon. Wow. This is how hard-core engineers spend their spare time. Max loves tinkering with Arduino, antique parts, and lighting fixtures. He'd be a cool guy to have as a hardware startup's technical advisor if entrepreneurs can get his attention.
I took away several conclusions from this show that are relevant to the financial sector. Concurrent hardware and software development should be an obvious practice, especially with Moore's Law slowing down. Synch those waterfall charts and show the C-suite how the capex budget accommodates both development cycles. Rapid prototyping requires embedded design, so firms that don't have a metadesign culture need to get cracking on building one. Failing to catch development errors quickly hurts product development. The new product development window (at least for the semiconductor sector) is three to four months long while Moore's Law still holds. Missing this window means losing the chance to deploy an entire product family. Finally, knowing your sector's product life cycle means knowing how to disrupt it, sort of like knowing how to disrupt a competitor's OODA loop. This stuff is pure genius. I'll share it with startups that deserve my early stage investments.
The first keynote on "killer apps" addresses safety failures of the US Army's Patriot missile, the Therac-25 anti-cancer radiation system, and a leading automaker's vehicle systems. Testing for errors in accuracy, calibration, and control must cover continuous use rather than brief iterations of activity. Turning something on briefly does not constitute a use case. Design engineers too often assume that thousands of hours of iterative laboratory testing are substitutes for real-world use that continually stresses tolerances. I was not surprised to learn that some government regulators lack the in-house software expertise to evaluate control system failures.
I talked my way into the International Engineering Consortium (IEC) Management Summit because frankly I'm the kind of guy who belongs at summits. Much of what the high-level participants discussed was off the record but my own opinions about system engineering are very much on the record. Get ready; here it comes. My vision of the Internet of things (IoT) is a biosphere of multiple ecosystems optimizing human processes that have never before been analyzed or controlled. Engineers shouldn't dream up IoT devices without input from their marketing team to determine whether some IoT-enabled thing will sell. There is a huge IoT opportunity in legacy pre-Internet physical infrastructure whose industrial control systems were never designed to use networks and embedded sensors. Young software engineers (20-30yo punks and whipper snappers) must converse with the retired mechanical and electrical engineers (60-70yo fogies and geezers) who designed those legacy systems. Intergenerational knowledge transfer will enable IoT systems to address those legacy facilities' gaps in performance and security.
I really liked Max "The Magnificent" Maxfield's morning session on the possibility of a robot uprising. This is what serious engineers spend their time preparing to handle. I said yes to the free breakfast (the program guide said so) but I didn't put on a tinfoil hat. Plenty of conference alumni wore their tinfoil hats, as you can see below.
I have no idea what the screenshot of giant singing jellybeans had to do with the topics of AI self-awareness and pervasive automation. The engineers present had no consensus on design protocols that could mitigate a spontaneous robot uprising. Isaac Asimov's Three Laws of Robotics should be the obvious solution given the attendees' penchant for revisiting their favorite science fiction stories.
The second keynote on open source hardware and embedded systems was from an MIT PhD nicknamed "bunnie." I didn't know genius hackers could have innocent nicknames but when you're Dr. Andrew "bunnie" Huang you can do anything you like. He discusses reverse engineering of common hardware on his blog. His insight into the slowing of Moore's Law opens longer product development windows for hardware. The last node of Moore's Law will not allow for further reductions in computing cost. We should welcome the end of planned obsolescence if it leads to bunnie's vision of repair and recycle cultures for legacy hardware. Open-source hardware enthusiasts like bunnie have as much fun cracking their own homemade PCs as open-source software developers have with free products like LibreOffice. Gearheads in tech can crowdfund their latest hardware hacks at Crowd Supply because the world needs more DIY solutions. It makes sense for bunnie to be a leader in the maker movement. I think makers should prepare for the coming of quantum computing, which will blow away the Moore's Law limiting nodes.
I spent much of day two at the Silicon Valley Open Innovation Summit. A lot of the presentations were sales pitches from larger firms and debut pitches from startups. It was enough for me to see new tech like flexible batteries. The lead sponsor proposed that common building blocks for innovation in a few key areas will cross all product lines. Okay, but please find academic support for that contention. MIT's Sloan Management Review found that innovation has more to do with human cultural attitudes than specific technologies.
I learned a bunch of new terms at this innovation summit. Metadesign should make collaboration easier. Someone mentioned "technology arbitrage" but I am unable to locate a definition; I take it to be the temporary advantage a niche maker possesses before competitors flood into a market with cheaper processes. IoT device makers and service providers are segmenting their markets into "brownfield" and "greenfield" parts, and the legacy infrastructure I mentioned above falls into the brownfield category. The sectors that have little coverage in research literature, like flexible and printable batteries, appear to offer first-mover advantages for startups.
The best show on the expo floor was the Fantastical Theatre of Engineering Innovation. The prevalence of cotton candy and popcorn enhanced the circus-sideshow approach of several exhibitors. Some of them were more performers than exhibitors, with crawling robots and flashing thingies scampering all over the place.
Max Maxfield's "beer and bacon" talk stole the show. I missed the bacon and I didn't need the beer. He's making progress on a prognostication engine that predicts women's emotions based on inputs from environmental influences and a man's decision points. Giver her flowers and a dial moves. Some dial lights up during a blue moon. Wow. This is how hard-core engineers spend their spare time. Max loves tinkering with Arduino, antique parts, and lighting fixtures. He'd be a cool guy to have as a hardware startup's technical advisor if entrepreneurs can get his attention.
I took away several conclusions from this show that are relevant to the financial sector. Concurrent hardware and software development should be an obvious practice, especially with Moore's Law slowing down. Synch those waterfall charts and show the C-suite how the capex budget accommodates both development cycles. Rapid prototyping requires embedded design, so firms that don't have a metadesign culture need to get cracking on building one. Failing to catch development errors quickly hurts product development. The new product development window (at least for the semiconductor sector) is three to four months long while Moore's Law still holds. Missing this window means losing the chance to deploy an entire product family. Finally, knowing your sector's product life cycle means knowing how to disrupt it, sort of like knowing how to disrupt a competitor's OODA loop. This stuff is pure genius. I'll share it with startups that deserve my early stage investments.
Thursday, March 20, 2014
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