Bitcoin irony
Fake digits with no value
Yet people buy it
Showing posts with label Bitcoin. Show all posts
Showing posts with label Bitcoin. Show all posts
Monday, March 29, 2021
Saturday, November 30, 2019
The Haiku of Finance for 11/30/19
Bitcoin is stupid
There is no point to blockchain
Get some better tech
There is no point to blockchain
Get some better tech
Thursday, February 28, 2019
The Haiku of Finance for 02/28/19
Laugh at Bitcoin fans
Cold wallets lost forever
Crypto-fork gets bent
Friday, November 30, 2018
The Haiku of Finance for 11/30/18
Bitcoin is crashing
Shake out all the dumb losers
Crypto-losses mount
Shake out all the dumb losers
Crypto-losses mount
Monday, June 12, 2017
Thursday, December 08, 2016
Monday, February 01, 2016
Financial Sarcasm Roundup for 02/01/16
It's time for caucuses in Iowa. If sarcasm were a Presidential qualifier, I'm certain that my name would be at the top of the ballot.
JP Morgan is jumping on the blockchain bandwagon. All aboard! You all know I've trashed Bitcoin many times but the blockchain tech that succeeds it may be worth a look. The SIFI banks doing this will have to completely own their particular blockchain tech and disallow developers from forking it. They will also have to reserve a significant amount of data center space in case the hashes get out of hand. I suspect the world's central banks will have to standardize some part of a blockchain's code for money transfers. The whole movement risks turning into spaghetti code if central banks don't get involved.
China wants more foreign banks to trade its currency. It's a fun way to celebrate the yuan's new IMF reserve currency status. More importantly, it's a clever way to entice foreign banks to pump fresh currency into China so the PBOC can postpone the economy's day of reckoning. A stronger yuan means less PBOC money printing and less immediate stress on China's currency reserves. Have fun while it lasts, Beijing. The game will be up pretty soon. Foreign banks won't be happy to find out that empty real estate developments and shadow wealth management products are their currency trading counterparties' collateral.
The OMB is ready to review the US DOL's fiduciary rule for retirement advisers. Well, that sure took long enough. I blogged about this proposed rule in 2015 and I am all in favor of tighter controls. The industry's claimed concerns about stronger rules forcing them to drop smaller, less profitable clients are baloney. Automation is reducing the cost of servicing small clients to zero. Robo-advisers can implement fiduciary rules automatically. I want OMB and the rest of the administration to turn the screws on the retirement plan sector and make greedy brokerages howl with the pain of fiduciary compliance. That will force them to fire more humans and accelerate the automation shift.
May the most sarcastic candidate win. That would be me, of course, in any election year. Always vote your conscience, America.
JP Morgan is jumping on the blockchain bandwagon. All aboard! You all know I've trashed Bitcoin many times but the blockchain tech that succeeds it may be worth a look. The SIFI banks doing this will have to completely own their particular blockchain tech and disallow developers from forking it. They will also have to reserve a significant amount of data center space in case the hashes get out of hand. I suspect the world's central banks will have to standardize some part of a blockchain's code for money transfers. The whole movement risks turning into spaghetti code if central banks don't get involved.
China wants more foreign banks to trade its currency. It's a fun way to celebrate the yuan's new IMF reserve currency status. More importantly, it's a clever way to entice foreign banks to pump fresh currency into China so the PBOC can postpone the economy's day of reckoning. A stronger yuan means less PBOC money printing and less immediate stress on China's currency reserves. Have fun while it lasts, Beijing. The game will be up pretty soon. Foreign banks won't be happy to find out that empty real estate developments and shadow wealth management products are their currency trading counterparties' collateral.
The OMB is ready to review the US DOL's fiduciary rule for retirement advisers. Well, that sure took long enough. I blogged about this proposed rule in 2015 and I am all in favor of tighter controls. The industry's claimed concerns about stronger rules forcing them to drop smaller, less profitable clients are baloney. Automation is reducing the cost of servicing small clients to zero. Robo-advisers can implement fiduciary rules automatically. I want OMB and the rest of the administration to turn the screws on the retirement plan sector and make greedy brokerages howl with the pain of fiduciary compliance. That will force them to fire more humans and accelerate the automation shift.
May the most sarcastic candidate win. That would be me, of course, in any election year. Always vote your conscience, America.
Wednesday, April 01, 2015
Momentum Blasts Off Fintech Founders Lab In April 2015
I blogged last year about Momentum's fireside chats in downtown San Francisco. Momentum has broadened its focus beyond mobile, as one can tell from their portfolio. The latest Momentum initiative is the Fintech Founders Lab, which I attended tonight. Venture investors and startup founders shared their experiences in tech land with those of us curious enough to learn. My comments below represent what I learned.
Many hurdles trip up fintech projects. Building relationships with regulators helps only if you can get out in front of potential problems by asking an agency to issue a "no-action letter" or its equivalent. Firms with dominant market size can crush competitors with marketing spending, but that won't be enough to destroy a startup that truly hits pay dirt and builds a large market. The big firms will then try intimidation through lawfare. Charles Schwab built his brokerage the old fashioned way and the big wirehouse firms hit him with lawsuits. Schwab survived legal challenges because the firm built undeniable financial strength. Poorly financed startups today would fold at the first "cease and desist" letter from a large competitor's in-house counsel. Regulatory arbitrage is an advantage for those fintech startups that pick only one jurisdiction. Competing in multiple geographic markets or in more than one vertical means getting approval from multiple regulatory regimes. Founders must think about how much insurance and how many securities licenses they will need before starting their roadshows.
Fintech founders have figured out Customer Development. The data they get from the first 100 conversations within their target market gives them a better business plan. Investors have also figured out fintech founders. I have reviewed the template due diligence checklists found on the leading VC and angel associations' websites. The checklists don't prioritize intangibles like founders' personal integrity or problem solving ability. Evidence for those qualities is always anecdotal but frequently on display in due diligence conversations. Conjuring a phantom pain point by making easily disprovable claims about merchant problems will make investors check the NO block on character.
Someone brought up Bitcoin, of course. The panelists showed maturity by putting the concept in its place. The earliest Bitcoin exchanges have flamed out after massive fraud and security breaches. VCs are getting smarter about looking past Bitcoin's "store of value" fallacy. Pivoting to a transaction framework makes the most of Bitcoin's open source ability. It also means more regulation is coming. I would like to see Bitcoin fans addresses the protocol's irreversibility. Consider that a fraudulent charge executed in Bitcoin after identity theft will leave the victim permanently damaged if a payment processor cannot cancel it.
Financial startups are not like gaming or messenger app startups. Business plan homework starts with regulatory research. Payment processing fintech must start with the FTC or CFPB. Banking fintech must start with the FDIC and Federal Reserve. Brokerage fintech must start with the SEC and FINRA. Startup teams will need a Chief Compliance Officer very early in their formation.
Heavy disruption is taking its sweet time in coming to finance. I concur with the expert panelists that personal creditworthiness metrics need a 21st century makeover. FICO scores are ripe for disruption with all of the Big Data the credit bureaus can access. The financial crisis of 2008 proved that mortgage origination and institutional credit rating agencies also deserve disruption. The biggest disruptions getting traction right now aren't in the heavily populated spaces like payment processing, where coders seem to land once their gaming startups flame out. The real winners now are the AI brokerages that will eventually eliminate the highly compensated salespeople and relationship managers earning the bulk of the compensation in finance.
All of these other "disruptive" ideas are great within finance verticals but they must ultimately be linked to the IoT revolution. A new POS terminal developed in isolation risks failure if merchants can't connect it to in-store IoT tools like beacons and video tracking. Merchants want a whole suite of software and hardware that will tell them in detail where their same-store sales came from down to the minute, dollar, and square foot. The systems integration opportunity will be enormous for vendors who can plug compatible IoT things together.
I have spent several years mentoring startups both on my own and through a couple of California-based accelerators. I want to see what a Business Model Canvas looks like for a finance startup. Fintech accelerators know where to reach me if their companies need mentoring. Alfidi Capital is all about hot finance action.
Many hurdles trip up fintech projects. Building relationships with regulators helps only if you can get out in front of potential problems by asking an agency to issue a "no-action letter" or its equivalent. Firms with dominant market size can crush competitors with marketing spending, but that won't be enough to destroy a startup that truly hits pay dirt and builds a large market. The big firms will then try intimidation through lawfare. Charles Schwab built his brokerage the old fashioned way and the big wirehouse firms hit him with lawsuits. Schwab survived legal challenges because the firm built undeniable financial strength. Poorly financed startups today would fold at the first "cease and desist" letter from a large competitor's in-house counsel. Regulatory arbitrage is an advantage for those fintech startups that pick only one jurisdiction. Competing in multiple geographic markets or in more than one vertical means getting approval from multiple regulatory regimes. Founders must think about how much insurance and how many securities licenses they will need before starting their roadshows.
Fintech founders have figured out Customer Development. The data they get from the first 100 conversations within their target market gives them a better business plan. Investors have also figured out fintech founders. I have reviewed the template due diligence checklists found on the leading VC and angel associations' websites. The checklists don't prioritize intangibles like founders' personal integrity or problem solving ability. Evidence for those qualities is always anecdotal but frequently on display in due diligence conversations. Conjuring a phantom pain point by making easily disprovable claims about merchant problems will make investors check the NO block on character.
Someone brought up Bitcoin, of course. The panelists showed maturity by putting the concept in its place. The earliest Bitcoin exchanges have flamed out after massive fraud and security breaches. VCs are getting smarter about looking past Bitcoin's "store of value" fallacy. Pivoting to a transaction framework makes the most of Bitcoin's open source ability. It also means more regulation is coming. I would like to see Bitcoin fans addresses the protocol's irreversibility. Consider that a fraudulent charge executed in Bitcoin after identity theft will leave the victim permanently damaged if a payment processor cannot cancel it.
Financial startups are not like gaming or messenger app startups. Business plan homework starts with regulatory research. Payment processing fintech must start with the FTC or CFPB. Banking fintech must start with the FDIC and Federal Reserve. Brokerage fintech must start with the SEC and FINRA. Startup teams will need a Chief Compliance Officer very early in their formation.
Heavy disruption is taking its sweet time in coming to finance. I concur with the expert panelists that personal creditworthiness metrics need a 21st century makeover. FICO scores are ripe for disruption with all of the Big Data the credit bureaus can access. The financial crisis of 2008 proved that mortgage origination and institutional credit rating agencies also deserve disruption. The biggest disruptions getting traction right now aren't in the heavily populated spaces like payment processing, where coders seem to land once their gaming startups flame out. The real winners now are the AI brokerages that will eventually eliminate the highly compensated salespeople and relationship managers earning the bulk of the compensation in finance.
All of these other "disruptive" ideas are great within finance verticals but they must ultimately be linked to the IoT revolution. A new POS terminal developed in isolation risks failure if merchants can't connect it to in-store IoT tools like beacons and video tracking. Merchants want a whole suite of software and hardware that will tell them in detail where their same-store sales came from down to the minute, dollar, and square foot. The systems integration opportunity will be enormous for vendors who can plug compatible IoT things together.
I have spent several years mentoring startups both on my own and through a couple of California-based accelerators. I want to see what a Business Model Canvas looks like for a finance startup. Fintech accelerators know where to reach me if their companies need mentoring. Alfidi Capital is all about hot finance action.
Friday, October 03, 2014
Alfidi Capital Debut Visit to SVIEF 2014
I attended the annual SVIEF conclave last week down in Silicon Valley, and it had a big Chinese flavor. It wasn't quite wonton flavor, but there you go. I delayed writing about it for a week because I was busy at Oracle OpenWorld this week. These things run together, you know. Here comes a blast of my wisdom. Some of you will not be able to handle the intensity.
The standard introductions from local politicians were notable for the mention of the EB-5 and EB-6 immigration visa programs. The EB-5 immigrant investor visa is for people who want to invest at least a million bucks here in the States. The EB-6 startup visa has been languishing in Congress for some time and is not yet a legal reality. I did not hear anyone mention the E-2 investor visa, which makes sense because China is not on the approved list and this was a China-centric conference. The US needs rich people to bring their cash here since rich Americans would rather buy yachts than invest. Plenty of investors from Canada, Australia, New Zealand, and Switzerland should know those programs exist for them to bring their hard currency here in the event of US hyperinflation.
I only have one thing to say about the Chinese Consul General's appearance at SVIEF. The People's Republic of China has declared a strategic goal of encouraging Chinese intellectuals and entrepreneurs to return to China. Every policy the Chinese government crafts to send Chinese academics here leads directly to technology transfer from our country to theirs, by any means necessary. This is clearly a matter of national security. Washington must pay attention.
Cleantech investment guru Ira Ehrenpreis gave a keynote on energy innovation. I liked the dude's graph showing how low-risk project finance and high-risk VC money still can't bridge a "valley of death" for unfunded energy concepts. I know a startup that is working on a solution to bridge that valley right now, but that's all I'm going to say for now. Crowdfunding can probably bridge some of that gap in small amounts. Ira's lurid descriptions of extreme weather were good fear generators for a cleantech sales pitch even though they were out of any data context. All of his stats assuming continued growth in energy set up his main point about China as a renewable energy growth market, but it sure took him a long time to get there. He loves grid storage but I think most VCs know little about material science in batteries.
Ira's speech was full of anecdotes, name-dropping, brand-name logos, and pedigreed universities. It was like a tech tent revival with little hard data. Give him credit for helping build Tesla Motors, but be prepared to take credit away if that company can't find a market larger than rich people who want green subsidies. Tesla's upper limit on gross revenue is defined by its market size (the number of urban, high-income drivers who can pay a higher price point for a car with limited range), the continuance of green rebates, and a very specialized supply chain (lithium, graphite, and cobalt). Good luck scaling up to produce for the middle class if even one of those three pillars is challenged.
The other keynote from Dr. Steven Chu was somewhat interesting. I did not expect him to mention his failed tenure as US Secretary of Energy. He was probably the smartest guy to ever lead the DOE but his lack of focus showed in the department's failure to identify the most promising areas for research. The unfortunate scandals over DOE-backed loans to failed cleantech companies showed the policy limits of picking winning companies instead of picking winning tech.
Dr. Chu mentioned some early mentoring relationships that inspired him to build ARPA-E on the concepts he learned at Bell Labs. He inspired me to construct an equation for greatness as a function of proteges who become better than their mentors. Here it is . . . the Alfidi greatness function . . .
f(G) = (P x P)(M)
where . . .
G = greatness
P x P = square of protege's value
M = mentor's value
Do you see how easy this genius stuff is? Well, it's easy for me because I'm a genius. I hope Dr. Chu would agree. Dr. Chu also said solar's cheapness below some "power law" bankrupted many companies. He may have meant Swanson's Law for the solar learning curve but he didn't say it, nor did he give any indication that US manufacturers can learn from it to make their PV panels cheaper. He couldn't just come out and say that China's dumping of cheap subsidized solar components on the market helped bankrupt US companies, or that failed companies like Solyndra were incompetent, or that DOE officials were too dumb to get their funding priorities straight.
Dr. Chu loves "systems integration" but ignores its Big Data component. I can totally understand how a policymaker can miss that given the tendency toward data-free analysis in Washington, DC. Here's something else we can't afford to miss. The on-board computer in a modern car constantly draws power from its battery. Battery life may now become dramatically shorter, requiring serious innovation. I want cleantech fans to discuss their plan of action for that problem besides praising Tesla's Gigafactory.
Steve Wozniak had a conversation with Steve Westly and got a free drone as a gift. I wouldn't give free stuff to a billionaire but that's just me. The Woz is a big thinker who excels at pushing divergent concepts. Entrepreneurs who are serious about growing a huge enterprise are just different that way. Woz's big lesson was to pilot lots of little money-making concepts. Scale up the one you like the best.
Woz's enthusiasm for small, powerful tech is at odds with how most humans use tech. Most people will keep taking selfies and listening to music no matter how powerful their smartphones become. Real innovations will still come from high-IQ people, not ordinary schmucks playing with their phones. I am convinced that people with IQs below the population's median should not try to innovate. Big Data can tell us which combinations of IQ and MBTI produce the most and best innovators. Let's collect the data on innovators' intellects and personalities before we make more malinvestments in small-scale tech.
I'm not getting off my soapbox about how Woz inspired me at SVIEF. He is a lifelong hacker, tinkerer, and maker. He likes 3D printing's potential to make new things, but he underestimates the human predilection for normalcy. I'm certain most humans will use 3D printing the way they use smartphones, not to do new things but to make the same things they always use.
My final observation about Woz is that no matter what questions the moderators asks him, he takes off and builds three or four related concepts into that question. That's how he succeeded in business, folks. Entrepreneurs set an agenda and drive it with a powerful personality.
Tim Draper spoke before the startup pitches kicked off. The organizers were disorganized and made him wait. He did not get impatient at all; instead he maintained his bearing and chatted up some folks in the audience while the show got its act together. I've seen Tim in action before and he remains humble and personable. Every VC should act that way.
Tim disappointed me by sharing his fondness for Bitcoin. I'll give him credit for paying attention to the fin-tech space but he's looking at the wrong tech if he thinks a blockchain is a currency. He bought Silk Road's Bitcoin from the government to help capitalize his own Bitcoin startup ecosystem. The dude lost me when he said Bitcoin transactions are secure, and have no fees or friction. I just LOL at people who predict this thing is going to be some supervalued supercurrency.
Tim also wants to disrupt education with Draper University. One urban survival tactic on his curriculum is for candidates to go from Silicon Valley to San Francisco and get any job offer at all in hand within a few hours. I object to the ethics of deceiving a potential employer just to secure a paper job offer, because turning it down the next day throws that employer's enterprise into further short-term turmoil. Yeah, Tim, that's disruptive alright. I guess it's okay for rich people to teach rich kids to prank small businesses hiring short-term manual labor, because those will be the targets of Draper University's time-sensitive job seekers.
I finally got fed up with Tim Draper when he went off on his Six Californias initiative, which has thankfully failed to qualify for the ballot. His analogies with pro-growth liberalization in Asian economies made no sense. If California is so anti-business, why not push for liberalization in Sacramento instead of breaking up the state into six enclaves that must then liberalize on their own? Some new proto-states may not go for Singapore-style reforms without prompts from Sacramento. Come on, dude.
I wasn't done with the Bitcoin stuff at SVIEF. I attended a panel discussion of Internet finance and Bitcoin. Let's just say that the former has been working fine for twenty years, and the latter will never work. The panelist dudes (yes, they were all male) were totally confusing currency with investment securities, claiming Bitcoin is both. They were just plain ignorant. Do these pro-China people even know that the Chinese government hates Bitcoin? Aside from its questionable legal status, even the panelists admit that Chinese vendors use Bitcoin as nothing more than a marketing gimmick. More gimmicks called "appcoins" are the next evolution of this stupidity. Even dumber is the virtual listing of appcoin startups that will go public without an IPO, or something like that. It's hard to describe the thought process behind such inanity without sinking to a child's level of ideation. Tim Draper said something similar in his talk about such listings allowing early investors to cash out their stakes in secondary markets without paying IPO-related fees. Yeah, right. The portals that make that work now don't accept Bitcoin but do accept SEC and FINRA regulation. The rule of law protects investors; Bitcoin protects no one.
I spent very little time with the panels on cloud and Big Data. They had nothing new to say. No one on those panels mentioned Cloudonomics or the data supply chain. I will listen to experts but I have enough expertise myself to know when to cut my losses. I was getting pretty disappointed at the inanity substituting for critical thinking from quite a few of these people. I did learn that "online to offline commerce," or O2O, is a cute buzzword.
I always sit through the VC panels at conferences and this one had a VC investment forum specifically addressing capital for the mobile Internet. I could find no evidence on the Web of their quoted "Zuckerberg rule" that human data doubles every year. One dude thought Chinese companies would keep investing in Silicon Valley. Wanna know why? I'll bet it's because their state-owned enterprises (SOEs) use that cover to acquire our tech. Someone finally admitted that the US and China have radically different competitive landscapes. Well, duh! The US has the rule of law and China has the rule of Party oligarchs.
The VC panel said something that made my head spin: "The Series A raise should reflect 18 months of cash needed in a worst-case scenario. Especially in this obvious bubble." I was disappointed that they think the purpose of an A-round is to survive until the B-round rather than immediately scale up the company to profitability. Maybe it's VC greed to keep participating in future rounds, dilute away founders, and raise their exit multiples with subsequent valuations going higher in each inflated funding. I'm very cynical. They did offer some helpful tips to audience members, like seeking out VCs who invest specifically in the sector, location, and stage of one's startup so time isn't wasted chasing the wrong investors. I would offer that crowdfunding portals can narrow the search to those VCs that will consider an investment.
The conference was primarily focused on Chinese-American entrepreneurs but they welcomed me anyway. I welcomed the chance to see some hot Chinese-American women, who invariably have really nice legs and hips. One hot woman manning an expo booth had the hottest idea I saw that day. Her company would 3D print a custom bra insert from a tablet scan of a woman's chest. Wow. I sure wanted to see her demonstrate the tech but she assured me it worked. I don't know if I'll return to SVIEF next year but I do hope more women, both Chinese and American, scan their goods into a tablet and share them with the world. Sharing is caring.
The standard introductions from local politicians were notable for the mention of the EB-5 and EB-6 immigration visa programs. The EB-5 immigrant investor visa is for people who want to invest at least a million bucks here in the States. The EB-6 startup visa has been languishing in Congress for some time and is not yet a legal reality. I did not hear anyone mention the E-2 investor visa, which makes sense because China is not on the approved list and this was a China-centric conference. The US needs rich people to bring their cash here since rich Americans would rather buy yachts than invest. Plenty of investors from Canada, Australia, New Zealand, and Switzerland should know those programs exist for them to bring their hard currency here in the event of US hyperinflation.
I only have one thing to say about the Chinese Consul General's appearance at SVIEF. The People's Republic of China has declared a strategic goal of encouraging Chinese intellectuals and entrepreneurs to return to China. Every policy the Chinese government crafts to send Chinese academics here leads directly to technology transfer from our country to theirs, by any means necessary. This is clearly a matter of national security. Washington must pay attention.
Cleantech investment guru Ira Ehrenpreis gave a keynote on energy innovation. I liked the dude's graph showing how low-risk project finance and high-risk VC money still can't bridge a "valley of death" for unfunded energy concepts. I know a startup that is working on a solution to bridge that valley right now, but that's all I'm going to say for now. Crowdfunding can probably bridge some of that gap in small amounts. Ira's lurid descriptions of extreme weather were good fear generators for a cleantech sales pitch even though they were out of any data context. All of his stats assuming continued growth in energy set up his main point about China as a renewable energy growth market, but it sure took him a long time to get there. He loves grid storage but I think most VCs know little about material science in batteries.
Ira's speech was full of anecdotes, name-dropping, brand-name logos, and pedigreed universities. It was like a tech tent revival with little hard data. Give him credit for helping build Tesla Motors, but be prepared to take credit away if that company can't find a market larger than rich people who want green subsidies. Tesla's upper limit on gross revenue is defined by its market size (the number of urban, high-income drivers who can pay a higher price point for a car with limited range), the continuance of green rebates, and a very specialized supply chain (lithium, graphite, and cobalt). Good luck scaling up to produce for the middle class if even one of those three pillars is challenged.
The other keynote from Dr. Steven Chu was somewhat interesting. I did not expect him to mention his failed tenure as US Secretary of Energy. He was probably the smartest guy to ever lead the DOE but his lack of focus showed in the department's failure to identify the most promising areas for research. The unfortunate scandals over DOE-backed loans to failed cleantech companies showed the policy limits of picking winning companies instead of picking winning tech.
Dr. Chu mentioned some early mentoring relationships that inspired him to build ARPA-E on the concepts he learned at Bell Labs. He inspired me to construct an equation for greatness as a function of proteges who become better than their mentors. Here it is . . . the Alfidi greatness function . . .
f(G) = (P x P)(M)
where . . .
G = greatness
P x P = square of protege's value
M = mentor's value
Do you see how easy this genius stuff is? Well, it's easy for me because I'm a genius. I hope Dr. Chu would agree. Dr. Chu also said solar's cheapness below some "power law" bankrupted many companies. He may have meant Swanson's Law for the solar learning curve but he didn't say it, nor did he give any indication that US manufacturers can learn from it to make their PV panels cheaper. He couldn't just come out and say that China's dumping of cheap subsidized solar components on the market helped bankrupt US companies, or that failed companies like Solyndra were incompetent, or that DOE officials were too dumb to get their funding priorities straight.
Dr. Chu loves "systems integration" but ignores its Big Data component. I can totally understand how a policymaker can miss that given the tendency toward data-free analysis in Washington, DC. Here's something else we can't afford to miss. The on-board computer in a modern car constantly draws power from its battery. Battery life may now become dramatically shorter, requiring serious innovation. I want cleantech fans to discuss their plan of action for that problem besides praising Tesla's Gigafactory.
Steve Wozniak had a conversation with Steve Westly and got a free drone as a gift. I wouldn't give free stuff to a billionaire but that's just me. The Woz is a big thinker who excels at pushing divergent concepts. Entrepreneurs who are serious about growing a huge enterprise are just different that way. Woz's big lesson was to pilot lots of little money-making concepts. Scale up the one you like the best.
Woz's enthusiasm for small, powerful tech is at odds with how most humans use tech. Most people will keep taking selfies and listening to music no matter how powerful their smartphones become. Real innovations will still come from high-IQ people, not ordinary schmucks playing with their phones. I am convinced that people with IQs below the population's median should not try to innovate. Big Data can tell us which combinations of IQ and MBTI produce the most and best innovators. Let's collect the data on innovators' intellects and personalities before we make more malinvestments in small-scale tech.
I'm not getting off my soapbox about how Woz inspired me at SVIEF. He is a lifelong hacker, tinkerer, and maker. He likes 3D printing's potential to make new things, but he underestimates the human predilection for normalcy. I'm certain most humans will use 3D printing the way they use smartphones, not to do new things but to make the same things they always use.
My final observation about Woz is that no matter what questions the moderators asks him, he takes off and builds three or four related concepts into that question. That's how he succeeded in business, folks. Entrepreneurs set an agenda and drive it with a powerful personality.
Tim Draper spoke before the startup pitches kicked off. The organizers were disorganized and made him wait. He did not get impatient at all; instead he maintained his bearing and chatted up some folks in the audience while the show got its act together. I've seen Tim in action before and he remains humble and personable. Every VC should act that way.
Tim disappointed me by sharing his fondness for Bitcoin. I'll give him credit for paying attention to the fin-tech space but he's looking at the wrong tech if he thinks a blockchain is a currency. He bought Silk Road's Bitcoin from the government to help capitalize his own Bitcoin startup ecosystem. The dude lost me when he said Bitcoin transactions are secure, and have no fees or friction. I just LOL at people who predict this thing is going to be some supervalued supercurrency.
Tim also wants to disrupt education with Draper University. One urban survival tactic on his curriculum is for candidates to go from Silicon Valley to San Francisco and get any job offer at all in hand within a few hours. I object to the ethics of deceiving a potential employer just to secure a paper job offer, because turning it down the next day throws that employer's enterprise into further short-term turmoil. Yeah, Tim, that's disruptive alright. I guess it's okay for rich people to teach rich kids to prank small businesses hiring short-term manual labor, because those will be the targets of Draper University's time-sensitive job seekers.
I finally got fed up with Tim Draper when he went off on his Six Californias initiative, which has thankfully failed to qualify for the ballot. His analogies with pro-growth liberalization in Asian economies made no sense. If California is so anti-business, why not push for liberalization in Sacramento instead of breaking up the state into six enclaves that must then liberalize on their own? Some new proto-states may not go for Singapore-style reforms without prompts from Sacramento. Come on, dude.
I wasn't done with the Bitcoin stuff at SVIEF. I attended a panel discussion of Internet finance and Bitcoin. Let's just say that the former has been working fine for twenty years, and the latter will never work. The panelist dudes (yes, they were all male) were totally confusing currency with investment securities, claiming Bitcoin is both. They were just plain ignorant. Do these pro-China people even know that the Chinese government hates Bitcoin? Aside from its questionable legal status, even the panelists admit that Chinese vendors use Bitcoin as nothing more than a marketing gimmick. More gimmicks called "appcoins" are the next evolution of this stupidity. Even dumber is the virtual listing of appcoin startups that will go public without an IPO, or something like that. It's hard to describe the thought process behind such inanity without sinking to a child's level of ideation. Tim Draper said something similar in his talk about such listings allowing early investors to cash out their stakes in secondary markets without paying IPO-related fees. Yeah, right. The portals that make that work now don't accept Bitcoin but do accept SEC and FINRA regulation. The rule of law protects investors; Bitcoin protects no one.
I spent very little time with the panels on cloud and Big Data. They had nothing new to say. No one on those panels mentioned Cloudonomics or the data supply chain. I will listen to experts but I have enough expertise myself to know when to cut my losses. I was getting pretty disappointed at the inanity substituting for critical thinking from quite a few of these people. I did learn that "online to offline commerce," or O2O, is a cute buzzword.
I always sit through the VC panels at conferences and this one had a VC investment forum specifically addressing capital for the mobile Internet. I could find no evidence on the Web of their quoted "Zuckerberg rule" that human data doubles every year. One dude thought Chinese companies would keep investing in Silicon Valley. Wanna know why? I'll bet it's because their state-owned enterprises (SOEs) use that cover to acquire our tech. Someone finally admitted that the US and China have radically different competitive landscapes. Well, duh! The US has the rule of law and China has the rule of Party oligarchs.
The VC panel said something that made my head spin: "The Series A raise should reflect 18 months of cash needed in a worst-case scenario. Especially in this obvious bubble." I was disappointed that they think the purpose of an A-round is to survive until the B-round rather than immediately scale up the company to profitability. Maybe it's VC greed to keep participating in future rounds, dilute away founders, and raise their exit multiples with subsequent valuations going higher in each inflated funding. I'm very cynical. They did offer some helpful tips to audience members, like seeking out VCs who invest specifically in the sector, location, and stage of one's startup so time isn't wasted chasing the wrong investors. I would offer that crowdfunding portals can narrow the search to those VCs that will consider an investment.
The conference was primarily focused on Chinese-American entrepreneurs but they welcomed me anyway. I welcomed the chance to see some hot Chinese-American women, who invariably have really nice legs and hips. One hot woman manning an expo booth had the hottest idea I saw that day. Her company would 3D print a custom bra insert from a tablet scan of a woman's chest. Wow. I sure wanted to see her demonstrate the tech but she assured me it worked. I don't know if I'll return to SVIEF next year but I do hope more women, both Chinese and American, scan their goods into a tablet and share them with the world. Sharing is caring.
Tuesday, August 12, 2014
Friday, August 08, 2014
Alfidi Capital at AlwaysOn Silicon Valley Innovation Summit 2014
I attended the AlwaysOn Silicon Valley Innovation Summit (SVIS) last week for the first time. This conference has a long tradition of sorting through the most promising startups in multiple hot tech sectors. My first taste of the show was the pre-opening social event, where remote operators entertained us with their mobile screen avatars. That's what Silicon Valley types do for fun. You can see one in action below.
I spent the next two days at the Computer History Museum receiving the wisdom of the Valley's all-stars. Tony Perkins has been tracking tech trends since the 1990s dot-com boom when he launched Upside and Red Herring. I still have a couple of hard copies of those mags in my archives. I also have hard proof that I attended the show, in my typical name badge photo. The bolded comments are my original action items, for any of you enterprise folks who are need a clue.
Satjiv Chahil let us all know that the world is not flat after all, as Thomas Friedman once wanted us to believe. His work with the American India Foundation develops the digital and physical infrastructure of rural India. The foundation uses street theater to advertise their developments in India in a native twist on Silicon Valley's guerrilla marketing styles. Satjiv advised innovators to think of the cost structures in the rest of the world. I think I know how that applies . . . cheap labor is everywhere but immature infrastructure complicates product delivery.
The discussion of new opportunities in data analytics covered the the changing real-time information that data fusion culls from formerly static sources. I agree that data users are starved for real-time info and I believe the proliferation of APIs allowing data manipulation is just getting started. I was not surprised to hear them say "Chief Data Officer" and "Chief Analytics Officer" are emerging enterprise titles. I suspect that the CDO/CAO should work with the CKO under the COO, not the CIO, which would cement BI as a KM function. Follow the acronyms to victory. These guys got me thinking about KPIs, which tends to happen when I hear something thought-provoking. IMHO those verticals that are the fastest adopters of real-time KPIs will be those that must integrate the most data streams. The sheer number of discrete data streams flowing into an enterprise will drive analytics solutions, rather than gross data volume.
The venture capital outlook for 2014 implied that current tech funding is a boom and not a bubble. I was stunned that most of the audience (82%) in the live poll thought startup valuations were not in a bubble. Come on, people, the Fed's ZIRP stimulus has made everything a bubble by driving normally risk-averse investors to seek yield in riskier assets. I would hate to be in some VC's shoes in a couple of years when they have to explain their cratering venture funds to institutional investors. Anyway, I appreciated the panel's assessment that the amount of capital needed to start a tech company is at a record low, but scaling it up requires a record high amount. High-valuation exits in some verticals like social media are easier because they're cheaper to scale. I did not know that the M&A market in tech is twice as big as the IPO market, mainly because big tech companies like to grow with acquisitions. These VCs are among the few I've heard who admit that the crowdfunding movement is on fire. I can't wait to see the crowdfunding portals with the largest numbers of accredited investors get acquired by brokerages.
Online education is at some inflection point, according to the next set of experts. MOOCs that assemble distributed content in playlists will resemble online music stores. The challenge to universities is clear, but I believe the panelists' expected shakeout of failing colleges will be delayed as long as low interest rates keep student loans widely available. Bad models can survive longer than they should even with poor content, but I agree with the panelists who expect distributed content to reign. They introduced the term "knowledge portfolios" defining the marketable skill sets people will port from more scalable education models. I see a role for the US Department of Education in helping to accredit MOOCs and develop universal standards that make their content portable, once said Department loses its rationale for funding soon-to-be-gone campuses. I see their optimism for course offerings favoring entry-level job skills with an immediate ROI, and I'll raise them the next step in educational innovation: disrupting state-run K-12 schools.
The "top company presentations" were actually pretty compelling at SVIS. A lot of such pitches at conferences leave me with little hope that entrepreneurs have a clue. That was not the case at SVIS. I'll offer up a few random observations as blind items, since much of what the presenters offered was proprietary. APIs allowing data collection and aggregation should be monetizable, especially since they show promise in replacing advertising servers and accelerating lead generation. Data-source agnostic computing is great but it must allow for virtualization, and virtualization in turn can solve a lot of cloud collaboration problems. Exchanging consumer rewards points on exchanges makes me think arbitrage will be possible. One app doing both visual messaging and photo sharing is not an elegant solution because those are two very different functions. I am very impressed with automated analytics that deploy results using visualization tools, because it's perfect for Peter Principle middle managers who would otherwise have to hire expensive outside consultants just to understand their own data.
Tony Perkins probed the CircleUp guy for crowdfunding insights. They discussed the higher IRR for consumer retail startups, which IMHO is counterintuitive given the earlier panel's observation that scaling up is costlier than ever. I would like to see consumer product startups address obvious gaps like urban "food deserts" underserved by grocery stores. I get CircleUp's model of charging startups a commission and taking part in their warrants, and I think other portals can tweak this by adding revenue streams from investors who participate in a raise.
Jay Samit gave a brilliant lunchtime keynote on decoding disruption. His mantra for cannibalizing one's business in favor of disruptive product development would be lost on Microsoft and other big firms notorious for product managers defending their turf. I was one of the audience members who chuckled when he sketched out the post-literate world's penchant for communicating with images. Wait until the images have embedded geodata, Jay, when they'll be more data-dense than ever. Jay thinks smart shoes are on the horizon because walking recharges batteries, and Apple does have a patent for shoe sensors. I will spend the next year or so examining tech startups through his social / location / mobile lens, which will probably bring me back to the geodata hint I dropped above.
Tony Perkins followed Jay's act with his own keynote. Alvin Toffler's "infobesity" means saving steps in what people already do will build billion-dollar companies. Got it, Tony, and lots of people working at Facebook agree with you. He pitched the AlwaysOn model connecting its subscribers to emerging trends, and it sure worked because, hey, I attended, and I'm "always on" hot trends. I like their crowdfunding platform concept . . . but I'm pretty sure they'll have to register it as a broker dealer given emerging SEC and FINRA rules. This will challenge their ownership structure and I'm not sufficiently knowledgeable of securities law to say whether this portal should be a separate entity. The business profiles they plan to publish for clients strongly resemble IPO "tombstone" ads, which are traditionally in the SEC's lane. I'm pretty sure they can iron out the legalese to fulfill Tony's vision of disintermediating venture investing from the human gatekeepers on Sand Hill Road.
The Big Data panel enlightened me on how in-memory computing is a huge leap ahead in database order processing by creating a new layer in the software stack. They admit that selling enterprise-level Big Data deployments is a challenge. I knew that from several previous conferences. It's a challenge because the solutions are pretty much the same price regardless of seat counts, which means the price doesn't scale along with the tech. The panel thought that opportunities also come from layering apps and and blending data science with business domain knowledge. I already knew that too, thanks to my attendance at Decision CAMP 2013, and you'll know it too once you read my blog article on that event. I say the KM / DM / BRMS confluence is still the ultimate Big Data opportunity. Cloudonomics calculations will validate the ROI of cost savings from business process improvements. The panel wants business analytics to replicate VCs' pattern recognition abilities to help identify winning business models. There's already plenty of historic data on startup failure for them to aggregate from the NVCA, National Science Foundation, and other sources. I must disagree with one panelist who said privacy concerns will be a future trend. I believe that people don't care as much about privacy as they say they do. The whole concept is an anomaly of the first two Industrial Revolutions and it will not survive much longer as Big Data erases anonymity.
The social enterprise panel reveled the audience's displeasure with the amount of time spent communications tech. One consensus point was that enterprise power users are in non-techie business domain functions who prefer simple tools. I'm pretty sure the growth curve in social enterprise solutions will slow if business domains can't prove these things generate results. Corporate treasuries aren't unlimited, people. Where are the CKOs and COOs in all this? Are they ever going to figure out that crafting enterprise KPIs is their job? I know it's hard in fragmented organizations but it's worth the effort to grab project leaders and shake out their team-level KPIs.
Bill Gurley demonstrated his genius in his fireside chat on the instant economy with Tony Perkins. His take down of the dot-com stock analysis algorithim was brilliant. No one should assume an implied CAGR over 100% for several years running. He also thinks it's a mistake to assume future bubble peaks will asymptotically match some previous bubble peak. Yeah, this bubble peak has already surpassed the previous several. The good news is that corporate VCs are the dumb money in the room, timing their investments poorly and ramping their buys prior to market highs. I'll be sure and tell any startups I meet to pitch to corporate VCs in the best of times. I learned from Bill that long-term, high square foot leases were a major reason for startup bankruptcies and recapitalizations in the 1990s dot-com bubble! Wow. That means the commercial real estate sector's health in major tech corridors is a pretty good leading indicator for tech bubbles. I now feel sorry for anyone working at a VC-backed tech startup with its own gourmet food court; those luxury amenities add unneeded costs to their leases. Here's a classic Gurley line: Discounting long term risk makes us comfortable, "like a boiling frog." Awesome! Imagine it spoken with the remnant of Bill's original Texas accent. Bill is amazed that privately held startups can raise $1B in capital without profits. I'm amazed that the Valley can see the same phenomenon and still think venture funding isn't causing another bubble. Bill also sees that startups launching variants of success stories is a sign of a market top, overfunding, and too much comfort with risk. He nailed the missing link in Big Data analytics: Pareto optimization.
I have to disagree with Bill Gurley on two points before I move on. I don't share his thoughts on Uber or the effects of market corrections. First, he said Uber's ease of use redefines its local driving use cases beyond the TAMs of the taxi and limo market historical sizes. Okay, but I still say Uber's TAM is still limited urban, upper middle class transport. The outsize use of Uber in San Francisco is probably a phenomenon of tech workers and their funded ecosystems (consultants, media people, nannies, gourmet cooks) living inside the new tech bubble! Secondly, Bill thinks the 2009 market correction wasn't as painful for startups and VCs as the 2001 correction. Hey Bill, the Fed lowered rates so quickly after the 2008 crisis that risky things looked a lot safer than in 2001. Hardly anyone in the Bay Area can see the Fed's bubble now . . . except me.
Here comes the wearables boom, according to the next crop of luminaries on stage. The panelists think software is the key to viable wearables, but frankly the ones I've seen at tech fests have no shortage of analytical horsepower. These things need to have physical and visual appeal just like jewelry, because ordinary folks will be proud to show off a status symbol. The coolest thing learned from these experts was about regulatory loopholes applying to consumers who take control of their own data. Medical privacy focuses on transmission confidentiality. Voluntary patient use of medical wearables IMHO opens up a an indemnification can of worms for health care providers even with the devices' obvious benefits.
The team from 451 Research crunched the numbers for a look back at last year's top 250 startup picks. The AlwaysOn SVIS show is one of the few conferences I've attended that holds itself accountable this way. Several of last year's top picks went to IPO at valuations over $1B. Apps, e-commerce, and mobility were the most active acquisition segments. Analytics was a big common denominator. Strategic buyers were the vast majority of acquirers. The most important conclusion is that AlwaysOn's companies have exit valuations at premiums (measured by multiples of trailing revenues, both average and median) to most startup exits.
Cloudera got a special fireside chat as the summit's company of the year. Their talent bench is pretty deep with people who worked at Google, Yahoo, Facebook, and Oracle. I agree with their CEO that a salesperson with a technical background can easily be seen as a client's trusted advisor. He's in the school of thought that startups raising lots of capital gain a flexible IPO date and create a secondary market for any early investors seeking an early exit. His observation that most popular management books merely restate common sense reminds me of my undergraduate days when "reengineering" and the "learning organization" were the hot ways for consultants to make a buck.
Tony Perkins kicked off the second day of SVIS with a segue from app and smartphone dominance into a keynote from Smaato. These guys are understandably fond of the freemium model for apps because it allows advertising penetration. Mobile ads have scaled rapidly, certainly beyond my own expectations. The latest hot term for big sites like Facebook is data management platform (DMP), which encompasses both users data and ad network data. The Smaato dude must be reading my blog or something, because he noticed that the smartphone is becoming a hub for other wearables. I've been blogging about that since late 2013. Wait until the smartphone becomes the power management hub as well as the data warehouse and connectivity platform for wearables. Here's another game-changer I'll throw at the world. New programmatic ad pattern buys can address bids for similar demographics in parallel. This means ad buyers pay more for precise demographic targeting, and users still get free content. Smaato is catching on to this potential by doing both RTB and SSP.
The next panel addressed the multi-billion dollar mobile ad opportunity. I get the difficulty of measuring how ad spending drives revenue, even for SMBs running location-based ads, and the integration of RTBs and SSPs into DMPs is supposed to make that seamless. I wanted to hear more from the panel about how shortening a sales cycle makes the ROI of ad spending instantaneous but they moved on pretty quickly. IMHO ad buyers are slowly recognizing the power of mobile ad spending combined with geolocated user data to drive campaigns that quickly clear out unwanted inventory. The panel thinks about 50% of brand ad spending is wasted but marketing analysts don't know how to identify that waste, thus they pay twice what they should to build brands in target markets. It wasn't always obvious (at least to me) that mobile ad gurus would figure out how to translate ad form factors from print to the various mobile platforms, but they have certainly succeeded.
Will cybersecurity really get worse before it gets better? The next set of experts on stage at AlwaysOn said the mobile threat landscape is small but persistent. I do not think making mobile OSs more secure will solve security problems at the user level as long as app developers are not building security into their apps. The three legs of security, convenience, and performance in mobile computing mean one factor must diminish if another is to be enhanced; so far this is a zero-sum game. Enterprises have methods to manage the risks of tradeoffs between these areas, and not just from a Cloudonomics perspective. I've addressed enterprise risk before and my readers know what I would do. Constructing a 2x2 matrix of severity versus probability allows plots of security incidents in each quadrant, and the risk profile for each quadrant should include Six Sigma estimates of their impact on operations. I can lead horses to water on this blog but I can't make them drink. Security is always an afterthought for product designers because they build for functionality first. Performance and convenience are the factors that meet market opportunities because "security" is only a pain point for a savvy subset of each market segment. The IT/OT convergence means security must catch up.
The "last-second economy" panel said Uber's success leveraged Bill Gurley's network multiplier effect, but I'm not sure the sharing economy qualifies as a back-end process. That philosophy is not some internal part of the enterprise, folks. It's common knowledge that Millennials are driving early adoption of instant economy concepts. We have not heard the last of sharing commodified services.
Bill Cleary was up next to address Apple's market dominance. He sounded like a pretty cool dude. I never thought of Apple's top brand as a compelling narrative on its own until Bill positioned it that way. The cool, hip ad images Apple uses are part of that narrative. Apple's genius is seeding its brand into pop culture channels so that it's not seen as solely a techie image. It was totally awesome to hear bill ridicule Google Glass, Amazon drone delivery, and driverless cars. Someone finally has some great insights into unworkable tech that gets undeserving praise. I offered my only question of the conference when I asked Bill whether Apple would make a 3D printer for the desktop manufacturing revolution. Bill said not yet because it's too early; Apple needs to focus on other things first.
Other panelists spoke on how growth companies can leverage the cloud. Customer demand for speed and performance means startups will have to go to the cloud to scale up. Delayed page loads cause incremental revenue losses and caching content in other time zones is not a universal solution. IaaS is a good solution for pre-populated caches. The next amazing developments we can expect in the cloud are hybrid cloud brokering, data security partitions by nation, and ubiquitous cloud services as reliable utility-type background activities. I repeat all of this cloud thinking uncritically because I want to see how it shakes out.
The Expensify dude easily had the best keynote of SVIS, with spontaneous applause. He ripped apart the financial metrics that so many tech followers throw around as conventional wisdom. If valuation is more than revenue and a multiple derived from a "vroom model," then ROI must be more than LTV divided by CAC. This made his point about the difficulty of attributing sources of both costs and revenues. Nouveau enterprise valuations are not quantifiable by traditional metrics. We need new economic concepts to replace unquantifiable estimates.
The video boom panel noted how online video is now a completely personalized experience. Every enterprise wants to create video because it is the most emotionally manipulative medium, but creation means nothing without distribution. I just don't see how video startups can succeed by incentivizing viewers to watch videos simultaneously with their networks of contacts, given the medium's personalization. No one wants to see their friends making faces on a screen while they're watching a movie. Viral videos are sharable because people watch them individually at their convenience, no communally. I'm pretty sure a whole bunch of venture investment money is about to be wasted on sharable video features that no one will use. Multi-channel networks (MCNs) are figuring out how to use YouTube to distribute content and capture shared ad revenue. The panelists made some bold predictions about how Google could enable video distribution in Gmail and how pervasive video will become in our lives.
The final panel covered one topic that provides me with no end of blog fodder . . . Bitcoin. Yes, the cryptocurrency I love to ridicule has a whole slew of experts ready to sing its praises and raise venture money. Listening to them gave me several OMG moments. So many things they claimed about Bitcoin were nonsense. Transactions are not at all frictionless given the market's illiquidity and the unreliability of Bitcoin exchanges. Bitcoin does not ignore national borders because some nations do treat it differently; look at China's outright bans and the US's IRS tax treatment rulings. Come on, people. I almost went slack-jawed when one guy said he was proud to accept Dogecoin with a straight face. Wow. The dude also praised Silk Road as a "great use case" for Bitcoin's privacy. Wow. In case you missed it (ICYMI), Silk Road was a online market for illegal drugs that the FBI shut down, and Bitcoin did not shield any of its particpants' privacy because they caught the "Dread Pirate Roberts" dude who owned the site. None of these panelists had any user advantages in mind. None could explain why Bitcoin transactions are a better value than national currencies. All of these thought leaders resorted to easily disproven claims and cargo cult wishful thinking about a "knowledge economy." I'll give kudos to one guy who debunked the power of the "network effect" to speed adoption.
Any of you who are unfamiliar with my thinking on Bitcoin must read my extensive blog history on the subject. Claims to marry cryptocurrency and trusted computing will always ring hollow. Device hardware securing a private key does nothing to restore a key if the hardware is stolen. Losing the hardware storing a private key means losing the Bitcoin if the private key isn't backed up. One dude told me during one of the breaks that he thought Bitcoin was the greatest thing he's seen in forty years of trading currencies. His rationale was that machines and bots could use it to trade with each other. Ooookaaaay. Folks, automated trading already happens in the hedge fund world with conventional currencies, and it adds zero liquidity to the global economy. People pushing for the Internet to have its own currency don't understand that the Internet is not a sovereign government. Using Bitcoin as a remittance mechanism for overseas expats makes no sense at all because Google Wallet already allows currency transfer as an email attachment. A lot of people pushing cryptocurrencies will learn some very hard lessons about the real world.
Those of you who need more than my very faithful paraphrasing of what these speakers said can check out the SVIS 2014 archived videos on the AlwaysOn network. This conference was a very valuable use of my time. They had real honest-to-goodness expert speakers who have actually accomplished important things in the tech sector. The lists of top 250 startups they keep generating are terrific coincident indicators of tech funding trends. I'll see them next year for the next 250 great things.
I spent the next two days at the Computer History Museum receiving the wisdom of the Valley's all-stars. Tony Perkins has been tracking tech trends since the 1990s dot-com boom when he launched Upside and Red Herring. I still have a couple of hard copies of those mags in my archives. I also have hard proof that I attended the show, in my typical name badge photo. The bolded comments are my original action items, for any of you enterprise folks who are need a clue.
Satjiv Chahil let us all know that the world is not flat after all, as Thomas Friedman once wanted us to believe. His work with the American India Foundation develops the digital and physical infrastructure of rural India. The foundation uses street theater to advertise their developments in India in a native twist on Silicon Valley's guerrilla marketing styles. Satjiv advised innovators to think of the cost structures in the rest of the world. I think I know how that applies . . . cheap labor is everywhere but immature infrastructure complicates product delivery.
The discussion of new opportunities in data analytics covered the the changing real-time information that data fusion culls from formerly static sources. I agree that data users are starved for real-time info and I believe the proliferation of APIs allowing data manipulation is just getting started. I was not surprised to hear them say "Chief Data Officer" and "Chief Analytics Officer" are emerging enterprise titles. I suspect that the CDO/CAO should work with the CKO under the COO, not the CIO, which would cement BI as a KM function. Follow the acronyms to victory. These guys got me thinking about KPIs, which tends to happen when I hear something thought-provoking. IMHO those verticals that are the fastest adopters of real-time KPIs will be those that must integrate the most data streams. The sheer number of discrete data streams flowing into an enterprise will drive analytics solutions, rather than gross data volume.
The venture capital outlook for 2014 implied that current tech funding is a boom and not a bubble. I was stunned that most of the audience (82%) in the live poll thought startup valuations were not in a bubble. Come on, people, the Fed's ZIRP stimulus has made everything a bubble by driving normally risk-averse investors to seek yield in riskier assets. I would hate to be in some VC's shoes in a couple of years when they have to explain their cratering venture funds to institutional investors. Anyway, I appreciated the panel's assessment that the amount of capital needed to start a tech company is at a record low, but scaling it up requires a record high amount. High-valuation exits in some verticals like social media are easier because they're cheaper to scale. I did not know that the M&A market in tech is twice as big as the IPO market, mainly because big tech companies like to grow with acquisitions. These VCs are among the few I've heard who admit that the crowdfunding movement is on fire. I can't wait to see the crowdfunding portals with the largest numbers of accredited investors get acquired by brokerages.
Online education is at some inflection point, according to the next set of experts. MOOCs that assemble distributed content in playlists will resemble online music stores. The challenge to universities is clear, but I believe the panelists' expected shakeout of failing colleges will be delayed as long as low interest rates keep student loans widely available. Bad models can survive longer than they should even with poor content, but I agree with the panelists who expect distributed content to reign. They introduced the term "knowledge portfolios" defining the marketable skill sets people will port from more scalable education models. I see a role for the US Department of Education in helping to accredit MOOCs and develop universal standards that make their content portable, once said Department loses its rationale for funding soon-to-be-gone campuses. I see their optimism for course offerings favoring entry-level job skills with an immediate ROI, and I'll raise them the next step in educational innovation: disrupting state-run K-12 schools.
The "top company presentations" were actually pretty compelling at SVIS. A lot of such pitches at conferences leave me with little hope that entrepreneurs have a clue. That was not the case at SVIS. I'll offer up a few random observations as blind items, since much of what the presenters offered was proprietary. APIs allowing data collection and aggregation should be monetizable, especially since they show promise in replacing advertising servers and accelerating lead generation. Data-source agnostic computing is great but it must allow for virtualization, and virtualization in turn can solve a lot of cloud collaboration problems. Exchanging consumer rewards points on exchanges makes me think arbitrage will be possible. One app doing both visual messaging and photo sharing is not an elegant solution because those are two very different functions. I am very impressed with automated analytics that deploy results using visualization tools, because it's perfect for Peter Principle middle managers who would otherwise have to hire expensive outside consultants just to understand their own data.
Tony Perkins probed the CircleUp guy for crowdfunding insights. They discussed the higher IRR for consumer retail startups, which IMHO is counterintuitive given the earlier panel's observation that scaling up is costlier than ever. I would like to see consumer product startups address obvious gaps like urban "food deserts" underserved by grocery stores. I get CircleUp's model of charging startups a commission and taking part in their warrants, and I think other portals can tweak this by adding revenue streams from investors who participate in a raise.
Jay Samit gave a brilliant lunchtime keynote on decoding disruption. His mantra for cannibalizing one's business in favor of disruptive product development would be lost on Microsoft and other big firms notorious for product managers defending their turf. I was one of the audience members who chuckled when he sketched out the post-literate world's penchant for communicating with images. Wait until the images have embedded geodata, Jay, when they'll be more data-dense than ever. Jay thinks smart shoes are on the horizon because walking recharges batteries, and Apple does have a patent for shoe sensors. I will spend the next year or so examining tech startups through his social / location / mobile lens, which will probably bring me back to the geodata hint I dropped above.
Tony Perkins followed Jay's act with his own keynote. Alvin Toffler's "infobesity" means saving steps in what people already do will build billion-dollar companies. Got it, Tony, and lots of people working at Facebook agree with you. He pitched the AlwaysOn model connecting its subscribers to emerging trends, and it sure worked because, hey, I attended, and I'm "always on" hot trends. I like their crowdfunding platform concept . . . but I'm pretty sure they'll have to register it as a broker dealer given emerging SEC and FINRA rules. This will challenge their ownership structure and I'm not sufficiently knowledgeable of securities law to say whether this portal should be a separate entity. The business profiles they plan to publish for clients strongly resemble IPO "tombstone" ads, which are traditionally in the SEC's lane. I'm pretty sure they can iron out the legalese to fulfill Tony's vision of disintermediating venture investing from the human gatekeepers on Sand Hill Road.
The Big Data panel enlightened me on how in-memory computing is a huge leap ahead in database order processing by creating a new layer in the software stack. They admit that selling enterprise-level Big Data deployments is a challenge. I knew that from several previous conferences. It's a challenge because the solutions are pretty much the same price regardless of seat counts, which means the price doesn't scale along with the tech. The panel thought that opportunities also come from layering apps and and blending data science with business domain knowledge. I already knew that too, thanks to my attendance at Decision CAMP 2013, and you'll know it too once you read my blog article on that event. I say the KM / DM / BRMS confluence is still the ultimate Big Data opportunity. Cloudonomics calculations will validate the ROI of cost savings from business process improvements. The panel wants business analytics to replicate VCs' pattern recognition abilities to help identify winning business models. There's already plenty of historic data on startup failure for them to aggregate from the NVCA, National Science Foundation, and other sources. I must disagree with one panelist who said privacy concerns will be a future trend. I believe that people don't care as much about privacy as they say they do. The whole concept is an anomaly of the first two Industrial Revolutions and it will not survive much longer as Big Data erases anonymity.
The social enterprise panel reveled the audience's displeasure with the amount of time spent communications tech. One consensus point was that enterprise power users are in non-techie business domain functions who prefer simple tools. I'm pretty sure the growth curve in social enterprise solutions will slow if business domains can't prove these things generate results. Corporate treasuries aren't unlimited, people. Where are the CKOs and COOs in all this? Are they ever going to figure out that crafting enterprise KPIs is their job? I know it's hard in fragmented organizations but it's worth the effort to grab project leaders and shake out their team-level KPIs.
Bill Gurley demonstrated his genius in his fireside chat on the instant economy with Tony Perkins. His take down of the dot-com stock analysis algorithim was brilliant. No one should assume an implied CAGR over 100% for several years running. He also thinks it's a mistake to assume future bubble peaks will asymptotically match some previous bubble peak. Yeah, this bubble peak has already surpassed the previous several. The good news is that corporate VCs are the dumb money in the room, timing their investments poorly and ramping their buys prior to market highs. I'll be sure and tell any startups I meet to pitch to corporate VCs in the best of times. I learned from Bill that long-term, high square foot leases were a major reason for startup bankruptcies and recapitalizations in the 1990s dot-com bubble! Wow. That means the commercial real estate sector's health in major tech corridors is a pretty good leading indicator for tech bubbles. I now feel sorry for anyone working at a VC-backed tech startup with its own gourmet food court; those luxury amenities add unneeded costs to their leases. Here's a classic Gurley line: Discounting long term risk makes us comfortable, "like a boiling frog." Awesome! Imagine it spoken with the remnant of Bill's original Texas accent. Bill is amazed that privately held startups can raise $1B in capital without profits. I'm amazed that the Valley can see the same phenomenon and still think venture funding isn't causing another bubble. Bill also sees that startups launching variants of success stories is a sign of a market top, overfunding, and too much comfort with risk. He nailed the missing link in Big Data analytics: Pareto optimization.
I have to disagree with Bill Gurley on two points before I move on. I don't share his thoughts on Uber or the effects of market corrections. First, he said Uber's ease of use redefines its local driving use cases beyond the TAMs of the taxi and limo market historical sizes. Okay, but I still say Uber's TAM is still limited urban, upper middle class transport. The outsize use of Uber in San Francisco is probably a phenomenon of tech workers and their funded ecosystems (consultants, media people, nannies, gourmet cooks) living inside the new tech bubble! Secondly, Bill thinks the 2009 market correction wasn't as painful for startups and VCs as the 2001 correction. Hey Bill, the Fed lowered rates so quickly after the 2008 crisis that risky things looked a lot safer than in 2001. Hardly anyone in the Bay Area can see the Fed's bubble now . . . except me.
Here comes the wearables boom, according to the next crop of luminaries on stage. The panelists think software is the key to viable wearables, but frankly the ones I've seen at tech fests have no shortage of analytical horsepower. These things need to have physical and visual appeal just like jewelry, because ordinary folks will be proud to show off a status symbol. The coolest thing learned from these experts was about regulatory loopholes applying to consumers who take control of their own data. Medical privacy focuses on transmission confidentiality. Voluntary patient use of medical wearables IMHO opens up a an indemnification can of worms for health care providers even with the devices' obvious benefits.
The team from 451 Research crunched the numbers for a look back at last year's top 250 startup picks. The AlwaysOn SVIS show is one of the few conferences I've attended that holds itself accountable this way. Several of last year's top picks went to IPO at valuations over $1B. Apps, e-commerce, and mobility were the most active acquisition segments. Analytics was a big common denominator. Strategic buyers were the vast majority of acquirers. The most important conclusion is that AlwaysOn's companies have exit valuations at premiums (measured by multiples of trailing revenues, both average and median) to most startup exits.
Cloudera got a special fireside chat as the summit's company of the year. Their talent bench is pretty deep with people who worked at Google, Yahoo, Facebook, and Oracle. I agree with their CEO that a salesperson with a technical background can easily be seen as a client's trusted advisor. He's in the school of thought that startups raising lots of capital gain a flexible IPO date and create a secondary market for any early investors seeking an early exit. His observation that most popular management books merely restate common sense reminds me of my undergraduate days when "reengineering" and the "learning organization" were the hot ways for consultants to make a buck.
Tony Perkins kicked off the second day of SVIS with a segue from app and smartphone dominance into a keynote from Smaato. These guys are understandably fond of the freemium model for apps because it allows advertising penetration. Mobile ads have scaled rapidly, certainly beyond my own expectations. The latest hot term for big sites like Facebook is data management platform (DMP), which encompasses both users data and ad network data. The Smaato dude must be reading my blog or something, because he noticed that the smartphone is becoming a hub for other wearables. I've been blogging about that since late 2013. Wait until the smartphone becomes the power management hub as well as the data warehouse and connectivity platform for wearables. Here's another game-changer I'll throw at the world. New programmatic ad pattern buys can address bids for similar demographics in parallel. This means ad buyers pay more for precise demographic targeting, and users still get free content. Smaato is catching on to this potential by doing both RTB and SSP.
The next panel addressed the multi-billion dollar mobile ad opportunity. I get the difficulty of measuring how ad spending drives revenue, even for SMBs running location-based ads, and the integration of RTBs and SSPs into DMPs is supposed to make that seamless. I wanted to hear more from the panel about how shortening a sales cycle makes the ROI of ad spending instantaneous but they moved on pretty quickly. IMHO ad buyers are slowly recognizing the power of mobile ad spending combined with geolocated user data to drive campaigns that quickly clear out unwanted inventory. The panel thinks about 50% of brand ad spending is wasted but marketing analysts don't know how to identify that waste, thus they pay twice what they should to build brands in target markets. It wasn't always obvious (at least to me) that mobile ad gurus would figure out how to translate ad form factors from print to the various mobile platforms, but they have certainly succeeded.
Will cybersecurity really get worse before it gets better? The next set of experts on stage at AlwaysOn said the mobile threat landscape is small but persistent. I do not think making mobile OSs more secure will solve security problems at the user level as long as app developers are not building security into their apps. The three legs of security, convenience, and performance in mobile computing mean one factor must diminish if another is to be enhanced; so far this is a zero-sum game. Enterprises have methods to manage the risks of tradeoffs between these areas, and not just from a Cloudonomics perspective. I've addressed enterprise risk before and my readers know what I would do. Constructing a 2x2 matrix of severity versus probability allows plots of security incidents in each quadrant, and the risk profile for each quadrant should include Six Sigma estimates of their impact on operations. I can lead horses to water on this blog but I can't make them drink. Security is always an afterthought for product designers because they build for functionality first. Performance and convenience are the factors that meet market opportunities because "security" is only a pain point for a savvy subset of each market segment. The IT/OT convergence means security must catch up.
The "last-second economy" panel said Uber's success leveraged Bill Gurley's network multiplier effect, but I'm not sure the sharing economy qualifies as a back-end process. That philosophy is not some internal part of the enterprise, folks. It's common knowledge that Millennials are driving early adoption of instant economy concepts. We have not heard the last of sharing commodified services.
Bill Cleary was up next to address Apple's market dominance. He sounded like a pretty cool dude. I never thought of Apple's top brand as a compelling narrative on its own until Bill positioned it that way. The cool, hip ad images Apple uses are part of that narrative. Apple's genius is seeding its brand into pop culture channels so that it's not seen as solely a techie image. It was totally awesome to hear bill ridicule Google Glass, Amazon drone delivery, and driverless cars. Someone finally has some great insights into unworkable tech that gets undeserving praise. I offered my only question of the conference when I asked Bill whether Apple would make a 3D printer for the desktop manufacturing revolution. Bill said not yet because it's too early; Apple needs to focus on other things first.
Other panelists spoke on how growth companies can leverage the cloud. Customer demand for speed and performance means startups will have to go to the cloud to scale up. Delayed page loads cause incremental revenue losses and caching content in other time zones is not a universal solution. IaaS is a good solution for pre-populated caches. The next amazing developments we can expect in the cloud are hybrid cloud brokering, data security partitions by nation, and ubiquitous cloud services as reliable utility-type background activities. I repeat all of this cloud thinking uncritically because I want to see how it shakes out.
The Expensify dude easily had the best keynote of SVIS, with spontaneous applause. He ripped apart the financial metrics that so many tech followers throw around as conventional wisdom. If valuation is more than revenue and a multiple derived from a "vroom model," then ROI must be more than LTV divided by CAC. This made his point about the difficulty of attributing sources of both costs and revenues. Nouveau enterprise valuations are not quantifiable by traditional metrics. We need new economic concepts to replace unquantifiable estimates.
The video boom panel noted how online video is now a completely personalized experience. Every enterprise wants to create video because it is the most emotionally manipulative medium, but creation means nothing without distribution. I just don't see how video startups can succeed by incentivizing viewers to watch videos simultaneously with their networks of contacts, given the medium's personalization. No one wants to see their friends making faces on a screen while they're watching a movie. Viral videos are sharable because people watch them individually at their convenience, no communally. I'm pretty sure a whole bunch of venture investment money is about to be wasted on sharable video features that no one will use. Multi-channel networks (MCNs) are figuring out how to use YouTube to distribute content and capture shared ad revenue. The panelists made some bold predictions about how Google could enable video distribution in Gmail and how pervasive video will become in our lives.
The final panel covered one topic that provides me with no end of blog fodder . . . Bitcoin. Yes, the cryptocurrency I love to ridicule has a whole slew of experts ready to sing its praises and raise venture money. Listening to them gave me several OMG moments. So many things they claimed about Bitcoin were nonsense. Transactions are not at all frictionless given the market's illiquidity and the unreliability of Bitcoin exchanges. Bitcoin does not ignore national borders because some nations do treat it differently; look at China's outright bans and the US's IRS tax treatment rulings. Come on, people. I almost went slack-jawed when one guy said he was proud to accept Dogecoin with a straight face. Wow. The dude also praised Silk Road as a "great use case" for Bitcoin's privacy. Wow. In case you missed it (ICYMI), Silk Road was a online market for illegal drugs that the FBI shut down, and Bitcoin did not shield any of its particpants' privacy because they caught the "Dread Pirate Roberts" dude who owned the site. None of these panelists had any user advantages in mind. None could explain why Bitcoin transactions are a better value than national currencies. All of these thought leaders resorted to easily disproven claims and cargo cult wishful thinking about a "knowledge economy." I'll give kudos to one guy who debunked the power of the "network effect" to speed adoption.
Any of you who are unfamiliar with my thinking on Bitcoin must read my extensive blog history on the subject. Claims to marry cryptocurrency and trusted computing will always ring hollow. Device hardware securing a private key does nothing to restore a key if the hardware is stolen. Losing the hardware storing a private key means losing the Bitcoin if the private key isn't backed up. One dude told me during one of the breaks that he thought Bitcoin was the greatest thing he's seen in forty years of trading currencies. His rationale was that machines and bots could use it to trade with each other. Ooookaaaay. Folks, automated trading already happens in the hedge fund world with conventional currencies, and it adds zero liquidity to the global economy. People pushing for the Internet to have its own currency don't understand that the Internet is not a sovereign government. Using Bitcoin as a remittance mechanism for overseas expats makes no sense at all because Google Wallet already allows currency transfer as an email attachment. A lot of people pushing cryptocurrencies will learn some very hard lessons about the real world.
Those of you who need more than my very faithful paraphrasing of what these speakers said can check out the SVIS 2014 archived videos on the AlwaysOn network. This conference was a very valuable use of my time. They had real honest-to-goodness expert speakers who have actually accomplished important things in the tech sector. The lists of top 250 startups they keep generating are terrific coincident indicators of tech funding trends. I'll see them next year for the next 250 great things.
Saturday, April 19, 2014
Recent Wisdom From Financial Fools
I have learned about as much from watching stupid people do dumb things in finance as I have from formal education and autodidaction. Fools are better teachers than they will ever realize.
Leveraged funds continue to use high-frequency trading strategies even though large institutions increasingly route their orders to negate the HFT advantage. All of the computational horsepower devoted to HFT will gradually lose its reason to exist as large block trades in dark pools go elsewhere. Math wizards earning huge sums in hedge funds will wonder where it all went. Hedge fund fools are not prepared for the next financial crisis.
Crypto-nerds still love Bitcoin even though its exchanges are collapsing. The myth of anonymity dies hard but the magical thinking of child-like Bitcoin fans is an impenetrable shield against real-world hardship. I really think a lot of these people live with their parents or have marginal careers. There is no other way they could have the free time to jerry-rig video cards that mine Bitcoins. Digital currency fools are not prepared for the real-world consequences of shady financial dealings.
Retail investors still love actively managed mutual funds. They ignore the preponderance of evidence for the advantages of low-cost index funds. The siren song of outperformance dies hard in the minds of people disinclined to think critically. Investing fools don't mind throwing money away on costly, underperforming financial products.
A handful of prominent San Franciscans still find the phony tales of a Stolen Valor con artist to be enthralling. Evidence and facts count for less than emotions when naive people commit their prestige to a charlatan's schemes. Google searches make due diligence easy but some business "leaders" would rather not take the time. I guess keeping up appearances at the City Club matters more than integrity. Elite fools will be blindsided by subpoenas even though they had plenty of warning.
I laugh at fools and I avoid making their mistakes. I love it when humans who have learned nothing make the same mistakes over again. It is too easy to outperform investors who play weak hands.
Leveraged funds continue to use high-frequency trading strategies even though large institutions increasingly route their orders to negate the HFT advantage. All of the computational horsepower devoted to HFT will gradually lose its reason to exist as large block trades in dark pools go elsewhere. Math wizards earning huge sums in hedge funds will wonder where it all went. Hedge fund fools are not prepared for the next financial crisis.
Crypto-nerds still love Bitcoin even though its exchanges are collapsing. The myth of anonymity dies hard but the magical thinking of child-like Bitcoin fans is an impenetrable shield against real-world hardship. I really think a lot of these people live with their parents or have marginal careers. There is no other way they could have the free time to jerry-rig video cards that mine Bitcoins. Digital currency fools are not prepared for the real-world consequences of shady financial dealings.
Retail investors still love actively managed mutual funds. They ignore the preponderance of evidence for the advantages of low-cost index funds. The siren song of outperformance dies hard in the minds of people disinclined to think critically. Investing fools don't mind throwing money away on costly, underperforming financial products.
A handful of prominent San Franciscans still find the phony tales of a Stolen Valor con artist to be enthralling. Evidence and facts count for less than emotions when naive people commit their prestige to a charlatan's schemes. Google searches make due diligence easy but some business "leaders" would rather not take the time. I guess keeping up appearances at the City Club matters more than integrity. Elite fools will be blindsided by subpoenas even though they had plenty of warning.
I laugh at fools and I avoid making their mistakes. I love it when humans who have learned nothing make the same mistakes over again. It is too easy to outperform investors who play weak hands.
Friday, April 11, 2014
Pure Internet Gold From The Minds Of Reddit Bitcoiners
I check out Reddit once in a while for random inspiration. It's a jungle out there and I like cutting through it with the brute force digital machete that is Alfidi Capital. I never know whether I'll find pearls of wisdom or juvenile ramblings. It's usually more of the latter but that's okay. Arrested development adolescents need to let their primal screams out somewhere. Better that they spew to Reddit threads than deface a bathroom stall.
The Reddit community on Bitcoin must be oodles of fun for people with no lives. It is the only corner of the financial world where overgrown infants, naive dreamers, and other cutting-edge crybabies can congratulate themselves for knowing nothing about money. They find a worshipful audience on Reddit. I've selected some of the best recent comments from the Bitcoin subreddit below in italics. Errors in spelling, capitalization, and other fundamentals of intelligible communication remain as their authors intended. I will not identify the perps because they may want to grow up someday. My own comments always follow.
So i should recommend to my 70 year old grandma to put all her savings into bitcoin (what's the easiest way to teach her bitcoin? took me years to teach her email/skype... think she might be dead before she's able to transfer funds on her own)? How will this stop the government from taking her tax refunds which are not in bitcoin? What happens if the price drops under the current 400$? I love bitcoin and what it stands for but you needa stop drinking the Kool-aid.
The Reddit community on Bitcoin must be oodles of fun for people with no lives. It is the only corner of the financial world where overgrown infants, naive dreamers, and other cutting-edge crybabies can congratulate themselves for knowing nothing about money. They find a worshipful audience on Reddit. I've selected some of the best recent comments from the Bitcoin subreddit below in italics. Errors in spelling, capitalization, and other fundamentals of intelligible communication remain as their authors intended. I will not identify the perps because they may want to grow up someday. My own comments always follow.
So i should recommend to my 70 year old grandma to put all her savings into bitcoin (what's the easiest way to teach her bitcoin? took me years to teach her email/skype... think she might be dead before she's able to transfer funds on her own)? How will this stop the government from taking her tax refunds which are not in bitcoin? What happens if the price drops under the current 400$? I love bitcoin and what it stands for but you needa stop drinking the Kool-aid.
Stop right there, dude. The apple didn't fall too far from the tree if grandma's tech learning curve is indicative of this Bitcoiner's abilities. Oh BTW, the government can and will assess the value of your Bitcoin for tax purposes since the blockchain is publicly available. I think the easiest way to learn Bitcoin is to watch a video of 1990s teens playing with "Magic: The Gathering" cards. That's kind of how the Mt. Gox Bitcoin exchange got started anyway. Kids using cards to pretend to be wizards is just like grown adults playing with digits and pretending to be bankers. See, it's really easy for granny and her quilting bee.
I bought about $1,000 worth just for the sake of holding on to it long term. It's a decent chunk of change for me but it's also an amount I'm comfortable losing. But this is exactly why I'm not discouraged over "losing" almost half of my $1k investment. There will be another spike at some point and I will either hang on until that happens or until I lose it all.
What was your cost basis for tax purposes? Can you prove it? The IRS will want to know and federal tax returns are due in four days. Oh, wait, I'm talking about a bunch of people who think they don't have to pay taxes. Never mind, idiots. Just hang on until you lose it all. It's funny that this person conflates "long term" with some point where they may "lose it all." This person is definitely not Warren Buffett.
Long term speculators don't create as much instability.
Say what? What exactly is a "long term speculator" anyway? That might be a conventional investor like me who performs a valuation analysis before committing to an investment, but to Bitcoiners I'm just another gambler. Moral equivalency is great when you don't have to account for cognitive deficiencies.
Bitcoin is way more influential than Dogecoin is. Marketing does matter, or else our dog-based coin wouldn't have gotten this far. DOGE is honestly a lot more style over substance but obviously style is important to people. I hope that Dogecoin will teach Bitcoin about style in the same way that I hope that our community looks towards Bitcoin for substance.
Dogecoin teaching style . . . means Bitcoin will need an animal mascot. Somebody already picked the honey badger. Bitcoin teaching substance . . . means Dogecoin will be based on nothing. Oh, that already happened. Maybe these Reddit people aren't as cutting-edge as I had assumed.
This sort of thing is baffling to me on the altcoins. A new business shows up and because it has an address, and an office there is immediate trust in them. We have seen large scale operations fail time and time again. We need businesses involved in the currency but we also need healthy skepticism when it comes to verification.
Dogecoin teaching style . . . means Bitcoin will need an animal mascot. Somebody already picked the honey badger. Bitcoin teaching substance . . . means Dogecoin will be based on nothing. Oh, that already happened. Maybe these Reddit people aren't as cutting-edge as I had assumed.
This sort of thing is baffling to me on the altcoins. A new business shows up and because it has an address, and an office there is immediate trust in them. We have seen large scale operations fail time and time again. We need businesses involved in the currency but we also need healthy skepticism when it comes to verification.
The above comment might be the all-time winner for far-out fantasy. It deserves a prize of some sort but Alfidi Capital has no prizes to give. Follow this one down the rabbit hole. A business with a known physical office and identifiable employees is somehow less trustworthy than a bunch of random hashes floating through cyberspace that hackers can steal and duplicate. Yeah, ooookaaaayyyy. This implies that the only thing more trustworthy than Bitcoin would be something completely unverifiable, like a fantasy land of fairies and unicorns. Wait a minute . . . that takes us right back to "Magic: The Gathering" again! Brilliant.
I just can't believe people would run scams as public figures, when it's so easy to do it in the Bitcoin crowd as anonymous figures. People around here are very trusting of anonymous figures.
OMG! OMG! Just when I thought there was an all-time winner, another gem falls out of the sky! Here's a Bitcoin fan admitting the ease of scamming the rest of the community. Anonymity is some kind of holy grail on Reddit. It allows emotional cripples and shut-ins to pretend to be knowledgeable. Anglo-Saxon cultures have long recognized anonymous communication as a form of free speech because it can shield unpopular authors from abuse. The downside is that the rest of us have to wade through Bitcoin garbage to find comedy.
In the bitcoin world embezzlement is indistinguishable from a hacker attack.
Exactly. They both come with criminal penalties in the real world. In the Bitcoin underworld, these things confer street cred. I expect the next crypto-coin fork to allow graffiti artist tags.
I still believe that bitcoin is the most regulated currency in the world. Criminals are way too vulnerable when using bitcoin.
This is awesome. Precisely one IRS decision covers Bitcoin, and that was all anyone needed to move Bitcoin into the "asset" column of a balance sheet. Calling it the "most regulated currency" ignores the wire transfer protocols, bullion holdings, transfer pricing agreements, and other facts that govern real currencies. Calling criminals "vulnerable" in Bitcoin insults the abilities of the thieves who busted Mt. Gox out of millions. They still haven't been caught. I know, Bitcoiners, facts are hard to understand. It's so much more fun just to make things up.
The bottom line on all of these Reddit commenters is that they are dumber than dumb. There may be some pseudo-intellectuals in there to give the Bitcoin community a natural ruling elite but they function much like wooden decoys on a duck hunt. They make it easier to identify the fowl that respond to hunting calls. Reddit brings out the worst in people who are too immature to be trusted with adult responsibility. Bitcoin will never be a currency but its advocates' stupidity is pure Internet gold.
Monday, March 31, 2014
Macworld 2014 Rounds Up Apple Fans And Tech Stars
My first computer was an Apple Macintosh I bought in 1995. I kept it for as long as I could until I had to switch to a Windows laptop in 2000. I rarely revisit Macintosh tech unless some high-profile event entices me. Enter Alfidi Capital into Macworld / iWorld 2014 at Moscone North last week in San Francisco. I had to go to see if I could score free food at the afterparties. Seriously, I went to see cutting-edge tech.
My free expo pass didn't get me into any of the supercharged intellectual conference sessions. Sooner or later the people running high-profile conferences are bound to recognize my extreme genius and put me on their speaking calendars. I shall prowl their expo floors and free sessions until those salad days arrive. The coolest thing I saw on this year's expo floor was the FLIR ONE infrared attachment for the iPhone. I asked the booth dude to take my picture with it, and the result is below.
I must admit that I look quite handsome even when I'm only visible on the infrared part of the spectrum. Women can't resist an infrared version of Yours Truly. I look like the enlightened Buddha or something similarly transformational. I first noticed FLIR ONE in some news report from the last CES in Las Vegas. I'm impressed that FLIR is branching out from the defense market. Now everyone can take infrared pics of their household pets and post them to Instagram. They'll all look the same and no one will care because yokels love novelties. The product may actually have some commercial uses besides physical security.
The "makers" on one of the free stages discovered some things that got me thinking about how quickly a manufacturing renaissance can happen. Form factors matter so much that third party accessory makers must have good OEM specs so their components properly fit those major items. The best synergies for smartphones, AI, and robots right now will come from routine tasks managed remotely (think Roomba). Ordering but not shipping keeps customers in limbo, but some makers think they can get away with such poor service. If it happens deliberately, consumers have a case for the Federal Trade Commission to investigate. Good companies constantly model demand versus their capacity, and plan expansion to meet demand.
The live Vector podcast from iMore was very much for hard core tech fans who think Wall Street tries to push Apple into doing bad things. I'm no fan of Wall Street either. Developers are passionate about Apple keeping its acquisition strategy focused on buying small companies that add to its tech base. They would be aghast if Apple ever pulled a headline-grabbing stunt like Facebook and Google's typical billion-dollar acquisitions. One panelist was skeptical about the total addressable market (TAM) for virtual reality (VR). He may have a point some humans naturally resisting immersive environments due to phobias and the limits of physiology. I think the TAM for VR will prove to be small but lucrative for niche players. A whole nerd subculture has grown up around gaming and they spend serious coin on tech.
The Macworld interview with Dr. Jeffrey Smith, CEO and founder of Smule, turned out to be a huge eye-opener. He figured out how to make apps that mimic piano chords and wind instrument effects. His most important discovery is the value of music as a shared activity. People are very happy to collaborate on musical performances over long distances. Smule apps make money when people share their music online. I first noticed the power of online musical collaboration when I saw a YouTube clip of Eric Whitacre's Virtual Choir singing "Sleep" a couple of years ago The choir shares Smule's philosophy of democratizing musical performance. Latency constraints degrade long-distance live performances but they are no problem in recorded performances. Dr. Smith's description of digital archives that collect millions of recorded music performances gave me a brainstorm. I am convinced that Big Data sets of amateur musicians now present a disruptive opportunity in the music industry. Data mining these performances for talent establishes a "Moneyball for music" set of baselines that can estimate a performer's marketability. This disintermediation of music from recording studios and performers' unions is the ultimate free-market end run around the music industry's traditional gatekeepers. You're going to hear more about this concept as I develop it in future blog posts. Thank you, Dr. Jeff Smith.
Live podcasts proliferated at Macworld. TechHive's Clockwise podcast discussed what home appliance Apple would make if it could. I vote for a clock radio, since Apple already knows how to put timekeeping on the iPhone and music in an iPod. Macworld's Pundit Showdown Live podcast featured the very attractive Susie Ochs of TechHive, who did cute dances in her chair whenever the host played some theme music. The pundits need me on their next podcast because I offer more than nerd references to Ars Technica. Tech I hate? Bitcoin. Myth I'd dispel? The need for all of us to learn coding. I got the vibe that the DECE consortium's UltraViolet digital library has a bad rap among Apple's fan base.
One panel of longtime Apple watchers debated the company's past, present and future. I think early adopters would love Apple wearables based on these guys' chatter. I grokked a consensus from several panels like this one that Apple doesn't pursue niche markets like gaming. I can't understand why they would cede the huge gaming market to Microsoft and Sony. Apple may be happy to grow its share of the desktop PC market by default as people turn away from Windows PCs and adopt tablets. Mobile isn't going to completely destroy desktops no matter what tech gurus like to say. Knowledge workers must still perform word processing and data analysis using the keyboard/mouse interface, so desktops and laptops have a future.
One of the last free sessions I could attend at Macworld 2014 was a Bitcoin Meetup. Yeah, right, I know what you're thinking, I went there just to stir things up, right? Well, I behaved myself except for the few loud snickers I uttered in the back of the room. These Bitcoiners repeatedly contradicted themselves. They claimed Bitcoin couldn't be destroyed by any government, but then said a few coders could change the algorithm to make it do something completely different. I spoke with a few of them afterwards to test their intellectual abilities. I told them that the IRS's recent ruling on Bitcoin meant that everyone who mined it since 2009 would have to file amended returns to report that mining as income. The scofflaws among them claimed that wasn't necessary. I then reminded them that the blockchain is publicly visible and FINCEN won't have much difficulty tracing Bitcoin owners through that chain so the IRS can gather a list of its tax evaders. My logic opened the eyes of a few curious people in the room who had not drunk the crypto-hogwash. These people were mostly schmucks disguised as coders. One guy was pitching some open-source contraption that was supposed to be a Bitcoin ATM running Raspberry Pi. It looked ridiculous. Someone would have to be really stupid to stick their ATM card in something that looks like a toolbox. These people are tools. Stupid tools love Bitcoin.
I'll end on a high note. I went back to the expo floor where one of the audio techs working the second stage's soundboard recognized me from other conferences. I didn't recognize him but I take this as a sign my reputation in Silicon Valley is growing if even the show floor operators know me by sight. He mentioned his desire to get involved in this whole startup scene himself. I related the story of David Choe, an artist who painted murals on Facebook's corporate walls in exchange for shares. His Facebook shares later proved to be worth a fortune. You don't need to be a software engineer or financier to strike it rich in Silicon Valley. The very first corporate treasurer, HR director, and night shift security supervisor at Yahoo, Google, and Facebook probably made out like bandits if they had stock options. Anybody who shows up at enough Meetups, seminars, pitchfests, and conferences with their specialty in hand stands a chance of landing a gig at a VC-backed startup. Bring your thing anywhere, even to Macworld 2014.
My free expo pass didn't get me into any of the supercharged intellectual conference sessions. Sooner or later the people running high-profile conferences are bound to recognize my extreme genius and put me on their speaking calendars. I shall prowl their expo floors and free sessions until those salad days arrive. The coolest thing I saw on this year's expo floor was the FLIR ONE infrared attachment for the iPhone. I asked the booth dude to take my picture with it, and the result is below.
I must admit that I look quite handsome even when I'm only visible on the infrared part of the spectrum. Women can't resist an infrared version of Yours Truly. I look like the enlightened Buddha or something similarly transformational. I first noticed FLIR ONE in some news report from the last CES in Las Vegas. I'm impressed that FLIR is branching out from the defense market. Now everyone can take infrared pics of their household pets and post them to Instagram. They'll all look the same and no one will care because yokels love novelties. The product may actually have some commercial uses besides physical security.
The "makers" on one of the free stages discovered some things that got me thinking about how quickly a manufacturing renaissance can happen. Form factors matter so much that third party accessory makers must have good OEM specs so their components properly fit those major items. The best synergies for smartphones, AI, and robots right now will come from routine tasks managed remotely (think Roomba). Ordering but not shipping keeps customers in limbo, but some makers think they can get away with such poor service. If it happens deliberately, consumers have a case for the Federal Trade Commission to investigate. Good companies constantly model demand versus their capacity, and plan expansion to meet demand.
The live Vector podcast from iMore was very much for hard core tech fans who think Wall Street tries to push Apple into doing bad things. I'm no fan of Wall Street either. Developers are passionate about Apple keeping its acquisition strategy focused on buying small companies that add to its tech base. They would be aghast if Apple ever pulled a headline-grabbing stunt like Facebook and Google's typical billion-dollar acquisitions. One panelist was skeptical about the total addressable market (TAM) for virtual reality (VR). He may have a point some humans naturally resisting immersive environments due to phobias and the limits of physiology. I think the TAM for VR will prove to be small but lucrative for niche players. A whole nerd subculture has grown up around gaming and they spend serious coin on tech.
The Macworld interview with Dr. Jeffrey Smith, CEO and founder of Smule, turned out to be a huge eye-opener. He figured out how to make apps that mimic piano chords and wind instrument effects. His most important discovery is the value of music as a shared activity. People are very happy to collaborate on musical performances over long distances. Smule apps make money when people share their music online. I first noticed the power of online musical collaboration when I saw a YouTube clip of Eric Whitacre's Virtual Choir singing "Sleep" a couple of years ago The choir shares Smule's philosophy of democratizing musical performance. Latency constraints degrade long-distance live performances but they are no problem in recorded performances. Dr. Smith's description of digital archives that collect millions of recorded music performances gave me a brainstorm. I am convinced that Big Data sets of amateur musicians now present a disruptive opportunity in the music industry. Data mining these performances for talent establishes a "Moneyball for music" set of baselines that can estimate a performer's marketability. This disintermediation of music from recording studios and performers' unions is the ultimate free-market end run around the music industry's traditional gatekeepers. You're going to hear more about this concept as I develop it in future blog posts. Thank you, Dr. Jeff Smith.
Live podcasts proliferated at Macworld. TechHive's Clockwise podcast discussed what home appliance Apple would make if it could. I vote for a clock radio, since Apple already knows how to put timekeeping on the iPhone and music in an iPod. Macworld's Pundit Showdown Live podcast featured the very attractive Susie Ochs of TechHive, who did cute dances in her chair whenever the host played some theme music. The pundits need me on their next podcast because I offer more than nerd references to Ars Technica. Tech I hate? Bitcoin. Myth I'd dispel? The need for all of us to learn coding. I got the vibe that the DECE consortium's UltraViolet digital library has a bad rap among Apple's fan base.
One panel of longtime Apple watchers debated the company's past, present and future. I think early adopters would love Apple wearables based on these guys' chatter. I grokked a consensus from several panels like this one that Apple doesn't pursue niche markets like gaming. I can't understand why they would cede the huge gaming market to Microsoft and Sony. Apple may be happy to grow its share of the desktop PC market by default as people turn away from Windows PCs and adopt tablets. Mobile isn't going to completely destroy desktops no matter what tech gurus like to say. Knowledge workers must still perform word processing and data analysis using the keyboard/mouse interface, so desktops and laptops have a future.
One of the last free sessions I could attend at Macworld 2014 was a Bitcoin Meetup. Yeah, right, I know what you're thinking, I went there just to stir things up, right? Well, I behaved myself except for the few loud snickers I uttered in the back of the room. These Bitcoiners repeatedly contradicted themselves. They claimed Bitcoin couldn't be destroyed by any government, but then said a few coders could change the algorithm to make it do something completely different. I spoke with a few of them afterwards to test their intellectual abilities. I told them that the IRS's recent ruling on Bitcoin meant that everyone who mined it since 2009 would have to file amended returns to report that mining as income. The scofflaws among them claimed that wasn't necessary. I then reminded them that the blockchain is publicly visible and FINCEN won't have much difficulty tracing Bitcoin owners through that chain so the IRS can gather a list of its tax evaders. My logic opened the eyes of a few curious people in the room who had not drunk the crypto-hogwash. These people were mostly schmucks disguised as coders. One guy was pitching some open-source contraption that was supposed to be a Bitcoin ATM running Raspberry Pi. It looked ridiculous. Someone would have to be really stupid to stick their ATM card in something that looks like a toolbox. These people are tools. Stupid tools love Bitcoin.
I'll end on a high note. I went back to the expo floor where one of the audio techs working the second stage's soundboard recognized me from other conferences. I didn't recognize him but I take this as a sign my reputation in Silicon Valley is growing if even the show floor operators know me by sight. He mentioned his desire to get involved in this whole startup scene himself. I related the story of David Choe, an artist who painted murals on Facebook's corporate walls in exchange for shares. His Facebook shares later proved to be worth a fortune. You don't need to be a software engineer or financier to strike it rich in Silicon Valley. The very first corporate treasurer, HR director, and night shift security supervisor at Yahoo, Google, and Facebook probably made out like bandits if they had stock options. Anybody who shows up at enough Meetups, seminars, pitchfests, and conferences with their specialty in hand stands a chance of landing a gig at a VC-backed startup. Bring your thing anywhere, even to Macworld 2014.
Tuesday, March 25, 2014
IRS Ruling Destroys Bitcoin's Usefulness As Currency
The IRS has ruled that Bitcoin is an asset, not a currency. Thank a government agency for some much-needed common sense. The sound you hear right now is the crying of thousands of techie wanna-bes who thought their precious sets of digits were legal tender. They'll be better off using seashells as payment.
The description of a Bitcoin transaction for coffee from that Bloomberg article says everything about how inefficient and stupid Bitcoin would be as a currency. Anyone using dollars to buy coffee - or any other good or service in the real economy - would never have to pay a capital gains tax. Using Bitcoin means realizing a gain or loss for part of one's Bitcoin holdings. No one outside of a primitive barter economy or a hyperinflating modern economy would exchange an asset for an asset but that's what Bitcoiners will have to do in the US.
Hard asset hedges against hyperinflation must be liquid and immediately verifiable in value to be useful. Bitcoin does not pass either of those tests with this ruling. This ruling does not in any way entice me to consider Bitcoin as a hard asset on par with other commodities like metals or energy. The difference with Bitcoin is that sharp coders can duplicate it in the blockchain. This renders its authenticity questionable. No one can duplicate oil in the ground, metal in a mine, timber in a forest, or inventory in a warehouse.
The clarification of Bitcoin mining as an income-producing activity is an awesome slap in the face to nerds who thought they could get rich for free. Taxing this "income" at the value of Bitcoin when it was mined means miners may suffer losses if the price of Bitcoin declines in dollar terms. Let me repeat that so nobody misses it. Bitcoin mining income is the only type of ordinary earned income that could potentially be subject to a loss greater than its earned value. Think about how this would destroy a nerd's wealth if the price of Bitcoin crashed. Tax accountants are going to laugh when a Bitcoin client shows them a mining record worth $600, producing a tax liability of around $150, and the remaining Bitcoin turns out to be worth a couple of bucks. Miners are going through a lot of effort creating Bitcoins at a peak price just to incur tax liabilities they won't be able to pay with their remaining loot.
The ruling will obviously create demand for an ecosystem that can record and verify crypto-currency transactions independent of a blockchain. Accountants won't sign off on a Bitcoin client's tax forms unless they can file something like a 1099 verifying its value. This destroys the libertarian fantasy of an unregulated anonymous economy but that's the only way Bitcoin users can stay out of tax trouble.
Bitcoin is now just another digital asset. Other digital assets like marketing data and intellectual property have real value because they can produce a tangible benefit for their owners. Bitcoin confers no such value. It is just another conveyance. The effort to produce it will be a nuisance at best and a tax loss at worst. Real currencies are so much more useful.
The description of a Bitcoin transaction for coffee from that Bloomberg article says everything about how inefficient and stupid Bitcoin would be as a currency. Anyone using dollars to buy coffee - or any other good or service in the real economy - would never have to pay a capital gains tax. Using Bitcoin means realizing a gain or loss for part of one's Bitcoin holdings. No one outside of a primitive barter economy or a hyperinflating modern economy would exchange an asset for an asset but that's what Bitcoiners will have to do in the US.
Hard asset hedges against hyperinflation must be liquid and immediately verifiable in value to be useful. Bitcoin does not pass either of those tests with this ruling. This ruling does not in any way entice me to consider Bitcoin as a hard asset on par with other commodities like metals or energy. The difference with Bitcoin is that sharp coders can duplicate it in the blockchain. This renders its authenticity questionable. No one can duplicate oil in the ground, metal in a mine, timber in a forest, or inventory in a warehouse.
The clarification of Bitcoin mining as an income-producing activity is an awesome slap in the face to nerds who thought they could get rich for free. Taxing this "income" at the value of Bitcoin when it was mined means miners may suffer losses if the price of Bitcoin declines in dollar terms. Let me repeat that so nobody misses it. Bitcoin mining income is the only type of ordinary earned income that could potentially be subject to a loss greater than its earned value. Think about how this would destroy a nerd's wealth if the price of Bitcoin crashed. Tax accountants are going to laugh when a Bitcoin client shows them a mining record worth $600, producing a tax liability of around $150, and the remaining Bitcoin turns out to be worth a couple of bucks. Miners are going through a lot of effort creating Bitcoins at a peak price just to incur tax liabilities they won't be able to pay with their remaining loot.
The ruling will obviously create demand for an ecosystem that can record and verify crypto-currency transactions independent of a blockchain. Accountants won't sign off on a Bitcoin client's tax forms unless they can file something like a 1099 verifying its value. This destroys the libertarian fantasy of an unregulated anonymous economy but that's the only way Bitcoin users can stay out of tax trouble.
Bitcoin is now just another digital asset. Other digital assets like marketing data and intellectual property have real value because they can produce a tangible benefit for their owners. Bitcoin confers no such value. It is just another conveyance. The effort to produce it will be a nuisance at best and a tax loss at worst. Real currencies are so much more useful.
Monday, March 17, 2014
Thursday, March 06, 2014
Monday, March 03, 2014
Financial Sarcasm Roundup for 03/03/14
Global tensions shall not deter me from being sarcastic about finance. Conflicts aren't funny but the foibles of the finance sector provide comic relief.
The European Banking Authority is just now waking up to the risks of digital currencies. Welcome to the party. It took the Mt. Gox bankruptcy to alert regulators in the largest economies. They should have paid attention since at least 2009 when it Bitcoin was obviously becoming a disruptive phenomenon in finance. Now it's too late for the hapless suckers who used Mt. Gox to change real money into fake money. It's not too late for "investors" in other non-coins once regulators decide that crypto-coins aren't real currencies. The difference after regulation is that crypto-nerds will have to live with the reporting and taxation requirements they thought they could escape. Techno-idiots can't get any dumber! They should go back to playing video games.
US GDP growth is getting another downward revision. Those of you who follow Shadow Government Statistics, like me, would not be surprised. Investors who do not understand the extent to which statisticians adjust official economic results deserve to get smacked upside the head really hard. I'd be happy to smack them but I'll let the markets do my dirty work for me. Market analysts react with a yawn because they know the numbers are gamed and that the slow US recovery is driven by exceptional forces - monetary stimulus, share buybacks, and other steroid effects. These forces are unsustainable. Analysts can't get any dumber! They should go back to goofing off during office hours.
One ECB board member is waking up to the risk in sovereign debt. It's too bad no one will listen. The phantom recovery in some parts of Europe tempts big banks to underwrite more government bond issues. Refusing to hold excess capital against these increasingly risky assets exposes European banks to destruction. The ECB's stress tests were designed to ignore sovereign credit risks. European bankers can't get any dumber! They should go back to drinking espresso, or whatever European folks drink these days.
European bankers should underwrite a Bitcoin-denominated sovereign debt issue that analysts could rate without even understanding it. Such a development would provide me with the ultimate basis for sarcasm. Lots of stupid people would lose money, but those idiots are losing money anyway betting on those constituencies separately. Rolling them all together into a big nonsensical blob just makes sense.
Wednesday, February 26, 2014
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