Alfidi Capital Checks Out NASA Frontier Development Lab 2017 Wrap-Up Event

I recently examined the public presentations of teams participating in a NASA Frontier Development Lab exhibition. The teams were selected to present tech solutions for NASA's space exploration challenges. The FDL held its 2017 wrap-up event down at Intel's Santa Clara auditorium, so I drove on down and lucked out finding a parking space. I had to see what kinds of space-related innovations apply to private sector use.

The presenters were graduate-level statistical modelers and astrophysicists. Explaining comet tracking and solar storm prediction is beyond the scope of this blog. The salient lessons lie in the statistical models and data science methods the teams used that may be available to the rest of us. Teaching a neural network to recognize patterns requires feeding it large amounts of synthetic data "training sets." Experts design those networks, but the most user-friendly open source networks are available for business applications.

Deep learning methods in the teams' work applied long short-term memory, random forests, and convolutional neural networks to compare data sets derived from deep learning methods. They used t-distributed stochastic neighbor embedding (t-SNE) to reduce high-dimensional data into scatter plots and DBSCAN to separate data outliers from clusters. Experts apply principal component analysis to discover eigenvector centrality, useful in tracking clusters of nodes of influence. All of these advanced techniques are useful additions to more prosaic forecasting methods found in MBA curricula. Time series forecasting models, for example, are useful for establishing baseline trends in naturally occurring data, but they miss anomalies and outliers completely.

Those of us who don't have post-graduate data science credentials can still employ useful tools. Google's Kaggle platform enables crowdsourced data analysis solutions. The Keras API enables open source experimentation with deep neural networks, and now it extends the TensorFlow open source library. Google Search results for "open source deep learning platform" show a growing number of tools and libraries available for use.

The US government's technology outreach programs offer valid paths to bonanza. Space tech AI and machine learning designed for celestial data sets could easily adapt to commercial use in mining, energy, and environmental remediation. NASA FDL exhibitions attract very smart people whose advanced data science skills are very valuable to startups building commercial solutions that process vast amounts of volatile, unstructured data. Count on Alfidi Capital to discover tech expertise that is out of this world.

How US R&D Stacks Up With Other Data

Analysts should not have to guess about a business's R&D spending.  It's always in the financial statements for publicly held companies.  Finding the numbers requires some effort because FASB's SFAS 2 requires R&D to be expensed as it is incurred, meaning R&D costs are usually considered to be operating costs rather than capex.  Assembling a comparable number for the entire US is a different project because the data is scattered in several locations.  Government data offers a starting point for the R&D component of spending.

The National Science Foundation has a couple of interesting data sets.  Check out NSF's National Patterns of R&D Resources for a rundown of public R&D spending by source and sector.  The National Science Board's Science and Engineering Indicators report includes a chapter comparing the US R&D commitment to international competitors.  The NCSES InfoBrief for December 2013 has further breakdowns on multiyear R&D spending.  The general conclusions of these three data sources all comport with each other.  Their bottom line is that the US is losing its global lead in R&D spending.  It is worth noting that business R&D spending far outpaces both federal and university spending.

I am intrigued by the US's R&D data because this spending helps determine the nation's future innovation capacity and thus its prosperity.  I would like to explore whether a relationship exists between strong R&D spending and a normal US economy.  I will have to define my terms carefully before I proceed.  I do not yet have a firm definition of what constitutes either variable.  "Strong" R&D spending may be what drives normal GDP growth, and a "normal" economy may be one in which Tobin's Q has a value of 1.0 at its equilibrium.  The St. Louis Fed's FRED historial chart of Tobin's Q shows a big spike in the 1990s when IT spending for Internet connectivity took off.  I would be very intrigued to discover whether a similar spike in national R&D spending contributed to that spike.  It may of course be merely a reflection of the insane NASDAQ valuations for tech companies in that era.  Perhaps a normal economy displays a "Warren Buffett Indicator" close to its historical average.

Be patient as I work through this research idea.  I have other demands on my time.  

The Haiku of Finance for 07/05/14

Change labor data
Stop unneeded adjustments
Use the raw numbers

The Trustworthiness Of BLS JOLTS Data

Understanding the US economy requires access to good data.  It's temping to rely on the BLS Job Openings and Labor Turnover Survey (JOLTS) products.  I am not one to give in to temptation.  Analysts cannot merely assume that government data sets such as JOLTS are reliable.

I looked at the JOLTS ten-year data set for the quit rate.  That's the percentage of people who voluntarily leave a job in a given month.  The quit rate bottomed out in 2009 and has been climbing ever since.  A climbing quit rate should be a sign of a healthy economy as employed people trade up to better jobs.  The hires rate and turnover rate within JOLTS also track this trend.  The caveat is that BLS uses seasonal adjustment factors for this data, and the effects of later adjustments are summarized in BLS's revision tables.  The effects are typically small but they will matter in some sectors where employment forecasts matter.  Retailers who hire seasonally should be very interested in whether BLS seasonal adjustment factors create positive feedback loops in their own business models.

Shadow Government Statistics has reconstructed the nation's unemployment rate without the government's birth-death assumptions and other adjustments.  Using raw, unaltered numbers probably yields a more accurate understanding of the job market than using adjusted numbers.  Government economists should be very concerned with keeping the trust of the business community.  They can do so by jettisoning artificial adjustments from their statistical methodologies.  

Natural Language Queries Are Different In Finance

Kensho's "Warren" wants to be a Siri-like AI for the finance sector.  It's cool that they're reaching for innovation.  I think finance can benefit from AIs provided they are deployed in relevant ways, and as long as their human operators know their limitations.

The sample question about energy shares, oil, and Middle East instability strikes me as a no-brainer.  Energy stocks benefit from oil price shocks of any kind.  Deep data mining of the history of energy prices and share price movements is within the reach of existing data subscription services, so I don't see how this "Warren" AI would add value.  I don't buy the argument that highly specialized quants need hours of coding to find a satisfactory solution.  That's a crutch hedge funds use to justify their enormous fees.  A good analyst can use data to make an intuitive leap from experience.  I do that all the time.  The quality of that experience matters because it processes judgments about human nature.  Natural language queries in finance must incorporate real-time effects of other humans acting on events.

The qualitative differences between the financial body of knowledge and the medical body of knowledge are extremely relevant to the utility of financial AIs.  IBM's Watson can give consistent answers to medical queries because it can reference a body of knowledge validated by centuries of scientific experimentation.  The available data points don't change after interacting with observers.  Financial data behaves differently.  Markets change because human decisions move them, and published interpretations of those changes move them further.  This complex feedback system is similar to Heisenberg's uncertainty principle, and George Soros' The Alchemy of Finance discusses it in detail.  My point is that a finance AI confined to interpreting historical data misses the real-time changes wrought by human interaction.

Mastering the effects of uncertainty, observer interactions, and black swans implies finance AIs need a different computational approach.  Quantum processing may be the correct solution.  If human observation of random events has quantum effects, a quantum computer driving an AI can deliver a more robust interpretation.  This is all pretty far-out stuff.  I look forward to seeing what the next generation of finance AIs can deliver.  

Getting Straight Data on Trade and FDI for Revealed Comparative Advantage

I recently read the Asia Society's report on Chinese Direct Investment in California and perused the Rhodium Group's China Investment Monitor.  Both products are excellent rundowns of where Chinese investors find the US economy to be most attractive.  Both of these sources got me thinking about the relationship between trade data and FDI in the US.  

Trade data should be easy to compile if sources agree on computation methodologies.  I'll forgo the US Census Bureau's USA Trade because it charges a subscription fee.  The stats at USITA's TradeStats Express are free and meet my needs.  The UN Comtrade Database purports to be a comprehensive source of worldwide merchant trade data but I don't know how reliable it is for developing countries.  

Figuring FDI for any country ought to be straightforward.  After all, you'd expect a single country to report the same data sets to every international organization in which it holds membership.  The difficulty comes when those international organizations change their definitions of FDI and end up with different methods of collection and assessment.  The OECD has good stats on FDI and the IMF has a complex methodology for defining FDI.  The UN Conference on Trade and Development harmonizes the IMF and OECD approaches to measuring FDI.  I looked at the BIS stats page but found nothing obvious for FDI.  

I mention these sources because I want to discover whether trade data determines a revealed comparative advantage (RCA) that will attract more FDI.  The World Bank has a handy-dandy RCA calculator called WITS and UNESCAP has a good RCA definition.  I suspect there is a relationship between a country or region with a high RCA and a high inflow of FDI, presumably because sophisticated multinational investors want to invest in a region that has a disproportionately high share of the world market for a given set of goods.  I can't prove this yet with data, so I'm thinking out loud to signal the start of my research effort.  I plan to use the US as my test case and start with an analysis of my favorite sectors - defense/aerospace, logistics, renewable energy, and natural resources - to see if this relationship holds in my home country.  

Foreign ownership of US Treasury securities has long been a vote of confidence in the US economy.  I want to discover whether the FDI demand for the US's trade RCA justifies this confidence.  Watch this space for the official Alfidi Capital special report, coming whenever I get through the rest of the stuff I have to write about.

The Arrival Of Geojournalism

Tonight the Commonwealth Club asked "Does The Environment Matter?"  I was there.  It really should have asked whether journalism matters.  Traditional news media have been in decline for years.  Newspapers can't compete with the advertising reach of online media.  I think too many journalists are still enthralled with old-fashioned media doing old-fashioned beat reporting.  The new beats are all online covered by bloggers like Yours Truly.  The number of full-time journalists has declined but the amount of informed commentary available online has exploded.  Journalism is morphing into a concept that fuses data analysis, geospatial mapping, and time-series reporting.  This is the realm of the "geojournalist."

The geojournalist uses GIS tools to embed text and data within photos and maps.  This requires skills in data mining and content curation that aren't taught in journalism schools.  I think an open-source knowledge management practitioner (ahem, Yours Truly once again) qualifies as a geojournalist.  It also calls for some mobile media savvy.  I noticed one hot journalist babe at this CW Club talk tonight use her smartphone to record one of the panelist's answers.  Old-fashioned note-taking will soon give way to digital tablet notations for geojournalists who embed their stories into maps on the spot.

Some environmental media sites are doing geojournalism well.  InfoAmazonia tracks reports by map location within the amazon rain forest.  ClimateCommons adjusts US temperature data for anomalies like industrial emissions.  Internews teaches social media techniques to aspiring geojournalists in developing nations.  Interdisciplinary academic initiatives like the Yale Project on Climate Change Communication need to adapt geojournalist techniques if they want to be heard.

Other digital media can adapt to the new realities of crowdsourcing and crowdfunding.  Journalists are IMHO too dependent on foundation grants and PBS money.  I've seen some filmmakers pitching ideas for short films on crowdfunding sites.  This could work for investigative journalists making documentary films that can embed into GIS maps if geojournalists think like entrepreneurs.  They need an elevator pitch to get donors' attention and market data on the size of an audience for their project.  Market data for short films is easy to find with view counts for similar content on YouTube.  I say the Society for Environmental Journalists should teach startup thinking to geojournalists.  Just ask me how to do it and I'll show you if the price is right.

Entrepreneurs and Innovators Need Ninja Action and Customer Development

The Commonwealth Club invited Steve Blank and Gary Shapiro to talk about "Startups, Entrepreneurs, and Ninja Innovation" last night.  I've heard Steve Blank talk previously at the first-ever Veterans Hackathon in 2012 and I got an autographed copy of his book The Startup Owner's Manual.  I definitely had to hear what these two tech dudes had to say about ninjas.  There weren't any ninjas on hand to demonstrate proper throwing star techniques.  The bottom line was that ninjas were flexible, stealthy, and able to win against overwhelming odds.  Entrepreneurs should behave the same way.  My recollections of what they said are interspersed below with my random thoughts thrown in for flavor.

I wanted to hear more about Steve's advocacy of the Customer Development methodology and how it led to Eric Ries' Lean Startup Movement.  Steve writes about it at his site and there are plenty of other references in the public domain.

I agree with these guys that big companies don't reward risk very well.  There was an oblique mention of Steve Jobs starting some secret development group with Apple.  I've never heard of that one.  I have heard of the text book case of how 3M developed sticky notes pretty much by accident after they thought a weak adhesive was a product failure.

It's cool that companies are recognizing the importance of innovation by establishing senior "VP of Innovation" titles.  I am skeptical of our two panelists' assertions that new market creation is more important than market share.  I've written before that an "innovation premium" based on forecasts of future growth is an unsatisfactory way to assess the value of innovation.  IMHO the ability to innovate is an important part of a SWOT analysis, along with factors external to the firm like barriers to entry and switching costs.

The panelists also think that following other innovative companies is a bad strategy.  Really?  I think Samsung is doing a heck of a job developing cheaper tablet computers that will eventually take market share from Apple's iPad.

These guys are totally correct that even lean startups need to master a knowledge base of business skills.  That's why it's great to see so much open-source material on customer development and lean startups.  I also think Gary is onto something by pushing for the serendipity of attending trade shows to learn an industry's structure and make connections.  I have learned tons of things from attending investment conferences and trade shows in Northern California.  I have not attended Gary's Consumer Electronics Show but if it means I get to see some Las Vegas showgirls then I'll mark my calendar.

I like the comment that vaporware head fakes constitute a ninja-esque tactic.  Microsoft did this a lot in the 1990s with announcements of phantom products that never made it to store shelves.  It works if it induces a competitor to spend precious R&D money and market research time to counter a product that doesn't exist. Marrying this with the panelists' admonition that entrepreneurs should hire people who complement their weaknesses begs an interesting question.  What would happen if an startup CEO hires a "VP of Innovation" just to churn out vaporware, while the real innovation gets done in a secret product development group?  Media attention would focus competitors on the high-profile VP while the real products get developed under the radar.

The panelists were skeptical of stealth-mode startups because they deny developers the input from the customer development process that makes the final product work.  Okay, I get it, customer development creates a feedback loop.  IMHO some things may have to be developed in secret, but if they don't work they might be good candidates for the vaporware cover story.  BTW, the US military has a hard time learning that troops who use new equipment should be involved in development from the start.

I found it very interesting that the panel thinks patents may be inhibiting innovation if they engender lawsuits.  Wow, somebody from inside the startup priesthood finally calls out patent trolls who buy patents just to sue other innovators out of existence.  I agree with them but it's hard to take financial incentives out of lawfare while still protecting IP under the law.  Getting rid of patent control regimes needs a cost-benefit analysis.  The benefit is a revolution in open-source innovation, with people copying designs everywhere for their home 3D printers.  The cost is a dearth of large-scale capital formation because successful innovators will have no economic moat behind which they can accumulate capital.

Steve and Gary noted that VCs push out founding CEOs in favor of COOs because they want someone who creates repeatable business processes that will drive growth.  I don't think that's all bad.  The founding CEOs should accept this reality and recognize how it frees them to start another enterprise.  Serial entrepreneurship is wealth creation.  I lament together with our panelists that large VC funds' "2 and 20" compensation makes them apathetic.  Okay, just get rid of the 2% annual management fee for undeployed capital.  Institutions like CalPERS can police up their multi-strat philosophies to weed out the VCs who just sit in cash without investing it.  Something tells me that won't happen voluntarily.  The success of crowdfunding could be the big change that forces VCs to wake up and compete for dollars.

I also think Steve and Gary have inadvertently discovered a business opportunity by remarking that VCs are supposed to be good at recognizing patterns of successful entrepreneurs.  If VCs are so terrible at articulating this pattern recognition skill set, there's a data mining opportunity for startups that develop knowledge management interfaces.  Attention startups!  Grab NVCA's membership list and offer custom-tailored deep dives into their deal histories that map technology life cycle S-curves for each enterprise and array them against sector growth, founder personalities, and other factors.  You heard it here first.

I need to hang out with more people like Steve and Gary.  That means more hackathons, trade shows, conventions, and Commonwealth Club appearances are in my immediate future.

Paying Attention at Cloud Connect 2013 in Santa Clara

The annual Cloud Connect conference in Santa Clara is a can't-miss event on my calendar.  Last week's version for 2013 was no exception.  I only attend the keynote addresses and the expo floor because those are free and I'm extremely cheap.  My readers need to know that I'm not an IT expert, so I attend to expand my knowledge.  As usual, the speaker's summarized comments are in normal text and my own interpretive comments are in italics.

Steve Wylie kicked off his intro with an announcement of Cloud Connect China coming this fall.  Great, another opportunity for Chinese state-sponsored companies to pirate Western technology without attribution.  The conference engaged Everest Group to conduct market research on their audience of cloud users.  One bottom line that emerged is that cloud solutions purchasers expect more from their systems than cost reduction.  Several of the speakers this year addressed the ROI of "cloudonomics" enhancement to an entire enterprise.

Alistair Croll spoke on "End to End Lean IT."  He sees the shift to cloud as part of a view that IT is no longer scarce.  I learned a new term at this conference called "DevOps" and several speakers developed it further.  His interpretation of DevOps is the simultaneous coding of infrastructure, data, and apps all at once so they can expand and contract as the enterprise's agility demands.  Agile coding builds out from the waterfall model, which emphasized sequential completion of development steps.  Concepts like lean, agile, DevOps, and cloud aren't new on their own.  IMHO integrating them is the new "lean" IT gold standard.  Alistair drew an analogy to "holons:"  Our biological components act on their own while we live as integrated human beings, so IT efforts should build organizations into living organisms.  I'll buy that, but an organism can't shut down or upgrade its living systems (organ transplants, hip replacements) without taking the whole organism out of action for a while.  It's a worthwhile analogy if IT systems are self-diagnostic and can schedule their own repair cycles, the way living cells repair themselves with new proteins.  He thinks overnight shippers like FedEx act like logistics "clouds."  I do know something about logistics, and I buy his analogy here.  FedEx's tracking process is like a transparent SaaS providing real-time system diagnostics.  He gave 3D printing a brief mention, implying it enables cloud manufacturing.  Lean IT components can't be built piecemeal but organizations will resist the change from a big integrated solution.  Sounds like IT people need a PMP-qualified change champion who can sell lean IT up the org chart.  He mentioned scale as a durable competitive advantage and touted Daniel McCallum's Civil War-era railroad management technique of assigning one person to monitor every 50 miles of track as the basis for the management of modern organizational scale.  He also noted that the Israeli military optimizes for resiliency, not scale, with a command structure that enables fluid replacement of key positions in combat.  The bottom line is that lean IT must build for resiliency in its components, not scale.  This sea-change in what constitutes a durable competitive advantage will be hard for the largest organizations because it implies that much of their scale will be made redundant once 3D printing, outsourced logistics, and other developments cut out big parts of their operations.  

Lew Tucker is the cloud dude at Cisco.  He said apps are narrowcast and designed for a single purpose, but a network must respond to the needs of apps.  Huh?  I don't know what he means, so I'm glad I don't work in IT.  He named four broad changes driving IT innovation:
1.  Internet of Everything (is it a Cisco trademark? seems like an evolution of the Internet of Things)
2.  Software Defined Network (SDN)
3.  Big Data
4.  Cloud Platform
BTW, if you dislike my heavy use of Wikipedia definitions, you can buzz off.  Wiki sources vary in quality but they are preferable to a branded corporate definition and their links are more or less permanent.  Lew said that SDN allows software to interact dynamically with a network, all on its own.  SDNs now have APIs enabling optimization.  An "app-centric net" merges what were several different IT layers.  This demands integrated policies governing enterprise IT.  Dynamic control of IT parameters and layers aligns supply and demand, not just for internal IT services but for deployment of resources across the whole enterprise.  I interpret this to mean that procurement and deployment of modules for an ERP system architecture require extreme flexibility, and cloud apps augment this flexibility.  There are other interpretations, of course, but the non-IT manager will interface the cloud using whatever ERP API their work group uses.  The PMP change champs will make sure that the API resembles Facebook.  Lew contends that IT pros need to revisit old subject like control theory and statistics; I take this to mean that there are time-tested methods for ensuring APIs and their governing policies are valid for large numbers of cases.  His bottom line is that disrupting the traditional IT cycle with those four numbered changes creates opportunities for startups to add value to this new virtual cycle.

Michael Barrett is the Chief Information Security Officer guy from PayPal with a British accent.  Maybe he's the only guy there with a British accent.  He predicts the imminent obsolescence of passwords as infosec barriers.  Yes!  I'd welcome that if it means biometrics can make online ID verification more secure.  He advocates considering alternative authentication methods that won't hurt the Internet's growth.  Password cracking is easily scriptable.  Most people use the same password for their email accounts and financial service providers.  Poor passwords and reusing passwords often are dumb.  The IT security manger's "sweet spot" is where high usability meets high security in a matrix that pays homage to a Gartner Magic Quadrant.  Michael leads the FIDO Alliance push for open standards in fully integrated authentication.  Commonplace biometric devices will encourage deployment of new protocols with stronger two-factor authentication.  Cloud adoption, better authentication, and federated identity combine in a perfect storm.  Biometrics should be stored on local devices because that's the user interface; this enhances cloud adoption without risk of putting biometric data into the cloud itself.  I find it difficult to add anything to Michael's vision other than applause.  Biometric devices and protocols have been around for decades and privacy arguments should not stand in the way of implementation.  A biometric print is the ultimate non-counterfeit authentication.  

William "Bill" Ruh from GE spoke on "Clouds, Big Data, and Brilliant Machines."  The coming of the "Industrial Internet" will transform IT with modeling, analytics, and deep signatures.  IMHO this impacts production with 3D printing sourcing designs from everywhere and routing them to production anywhere.  Unlocking value means fundamentally changing data collection and analysis.  Allow me to segue a bit here while paraphrasing one of his salient points.  Selling IT solutions like cloud on their own merits is less effective than linking IT solutions to productivity.  Link IT changes to efficiency gains, cost savings, revenue generated, project NPVs and ROI.  Bill said GE's gas turbines have 20 sensors, and one turbine generates 500 GB of data per day.  This includes predictive analysis of blade failure.  I recall attending a USF business plan competition several years ago where a startup pitched a sensor solution like this to a VC audience.  They made a bunch of sense to me but now it looks like the big firms have their own turbine sensor solutions.  The IT needs of health care and aviation are very different, so their cloud use will be different.  Applications and partner choices are not trivial.  I'm now concerned about whether anyone is considering SCADA vulnerability of cloud-to-machine connections.  Sending data from sensors and controls to the cloud means a hacker who breaks into the cloud can monitor and destroy SCADA, similar to the Stuxnet worm.

Kit Colbert from VMware had stuff to say about "Changing the Mindset of IT."  Apparently, IT still runs on a central planning mentality.  Yeah, especially in the U.S. government.  Try doing BYOD without an explicit exception to policy from three levels up and your personal device will be confiscated, without reimbursement.  Kit wants to virtualize resources behind IT's background interactives.  The app layer can present user with a menu of services and their costs of use.  Sounds like IT a-la-carte.  IT should provision capacity before users arrive, then enable users' requests.  It should work like FedEx's internalization of a self-service logistics model.  There's that FedEx model again.  IT pros envy FedEx's business model and financial analysts consider it to be a bellwether stock.  FedEx is doing something right to earn that much attention.  Is Berkshire Hathaway a FedEx shareholder?  Just sayin'.  Policy governance of user actions should enable user preference for virtualization of services.  Analytical tools give IT pros data on trends, capacity, and user choices that will aid decisions on system growth and governance.  My non-IT interpretation of this stuff is that the new IT mindset must internalize preferences for enabling broad infrastructure choices.  

Dave McCrory from Warner Music told us all about the "Origin of Data Gravity."  He invented the concept of data gravity and blogs about it regularly.  His theory starts with the observation that a spectrum running from lower latency to higher bandwidth offers a tradeoff for closing gaps between apps and data.  There's an accelerative effect as an app moves closer to data due to lower latency.  Terminal velocity is a point of location for data where gravity adds no value.  I believe he's doing innovative work with this theory, but one part of his presentation I disagreed with was when he displayed a linear depiction of what the knowledge management community calls the cognitive hierarchy.  He connected them with cybernetic feedback loops but giving cognition a linear structure becomes chaotic if you don't build it in layers.  The pyramidal cognitive hierarchy's layers imply the use of controls and filters to sift data into understanding.  This IMHO is a more valid model than cybernetic feedback loops.  He moves from one state to another by reducing uncertainty, which is precisely analogous to moving up the cognitive hierarchy.  He matches the OODA loop to each of his four steps and even throws in a concurrent PDSA cycle.  Picture this . . .

Data / Information / Knowledge / Action
Observe / Orient / Decide / Act
Plan / Do / Study / Act

I note that Dave replaces "Understanding" with "Action" in the cognition steps.  That obliterates the need for decision makers to understand before they act, and if you want action there's enough of it in the OODA and PDSA progressions without going for a perfect match in all three schemes.  IMHO matching things like this is too simplistic.  OODA and PDSA are non-linear processes that lead back to their beginnings at the end of a cycle.  I want to develop the proper relationship between OODA and cognition, so watch my special reports page on my main site.

Dave's thesis is that data gravity shrinks gaps between each of those four phases, accelerating cycle time and shortening cybernetic feedback loops.  I like the guy's theory and I plan to link it to existing theories.  Like I said, watch this space.

Jim Davies from Mitel had something to say about "Cloud Formations:  A Framework for Cloud Decision Making."  The big hype around cloud transitions hinders rational planning.  He argues for keeping answers independent when answering framework questions; this preserves your flexibility.  He suggests asking three questions:
1.  Does the proposed app meet requirements?  (his most important question)
2.  How do I want to deploy the app?  (not a one-time decision)
3.  How will I pay?
Jim visualized those questions as three axes of a Rubik's cube.  Don't get locked into one block.  Build contracts so you can move from one area to another.  View your IT choices with an engineer's eye to an independent variable problem.  You can't outsource accountability for making these choices even if you outsource execution of cloud components to third-party vendors.

The final Wednesday speaker was a guy introducing Cloud Connect China.  I could tell by his brief topic introductions that cloud philosophies in China are radically different from those in America.  He mentioned that there were five "cloud model cities."  Designation of those cities and articulation of the national cloud plan are all centrally-planned ideas!  Read back up into my synopsis about the shortcomings of centrally planned IT.  The People's Republic of China will never allow fully articulated IT structures to grow in their country because it would weaken the regime's control of information.  That need for control will retard China's competitiveness in everything it does.  The Chinese guy also made a point about China encouraging small and medium enterprises to use public clouds.  I must presume that these public clouds all have back doors installed so the Chinese police state can monitor internal data traffic.  No way would I want to be a medium-sized American business that opens a Chinese subsidiary if surrendering control of IT architecture is the price to pay for market access.  China just doesn't understand the cloud except as another means of social control.  

Now I'll cover the Thursday keynotes, all of which were free of charge once again.  Steve Wylie and Scott Bils discussed the Everest Group research results in more detail.  Users clearly prefer private clouds for all workloads.  Uh-oh, that's bad news for those China central planners who want everything in a public cloud.  Call the Politburo and tell them they won't be getting business from the Fortune 500.  Buyers tend to be unaware of IaaS services in public clouds.  They're also probably unaware of Chinese back doors in those public clouds, if you know what I mean.  You'll have to read the rest of those research results yourself.  My own need for cloud services is very limited anyway.

Thursday's panel was titled "Are Clouds the Gateway Drug to a Quantified Society?"  I had to wonder at the choice of title given some audience snickers.  Is there an unspoken, underground tradition of drug use in the general IT community, and Silicon Valley in particular?  I can see how repeat customer service nightmares can drive an IT pro to drink but harder drugs are a serious matter.  Maybe the title is some inside joke at the expense of Silicon Valley types who cross over into the rave scene or go to Burning Man.  I'm not part of anything like that, so it's a mystery to me.  Whatever.  Ann Winblad from Hummer Winblad moderated this gaggle of tech stars.  Here comes the stream of consciousness version of the panel's insights, without specific attribution.  Business success is increasingly determined by access to real-time data.  There are no API substitutes.  API provides the agility required to turn organizations into organisms.  Fully integrated "cloud of cloud" infrastructure requires certain decisions.  Enterprises must have open sources and open standards to use clouds.  Ouch, more bad news for China!  Open source solutions can solve problems that proprietary systems can't solve, because you can reassemble system components quickly.  IMHO proprietary platforms will only have niche appeal once open source dominates the cloud.  Consumers don't care if a downloaded app is from an open source or not.  It only matters at the enterprise level if the choice of open versus proprietary affects productivity.

Cloudified apps that facilitate data flows from devices (mobile, SCADA, smart grid IMHO) will drive the connection of billions of devices to enterprise clouds.  This implies VCs like Hummer Winblad should buy cloudified startups.  "Elastic" is not as descriptive as "adaptive" when evaluating public versus private infrastructure choices.  System flexibility determines how much an enterprise builds out.  The whole panel was a big fan of Amazon's build out of cloud as "shadow IT."  They admit Amazon's pricing model is a benchmark for competing vendors of cloud solutions.  Amazon's AWS revenues aren't segregated but the panel estimated them at several billion dollars.  I think Amazon can get more future growth from public cloud services than B2C goods transactions.  Security means keeping your "attack face" small.  I can't find a good definition of "attack face."  It sounds similar to what the military might call a vehicle's silhouette or radar signature.  The best practices in cloud security are still undefined.  That's exactly why American-hosted systems will be increasingly vulnerable to Chinese hackers until we get our stuff squared away.  Vendors must design security into systems during development.  Security isn't the only risk in the cloud.  The lack of knowledgeable operators means it's hard to extract full value from quality systems. DevOps is both a cultural movement and a technical shift.  DevOps and IT can benefit from closer alignment.  IMHO fielding a cloud implies a KM effort to ensure whole enterprise knows how to benefit from its components.

Nathan Day from SoftLayer told us that "Performance is Not a Commodity."  Automobile performance depends on speed, miles per gallon, cost, etc.  Performance means different things to different people.  Think about what matters to your organization.  "Bare metal" pure horsepower isn't possible in virtualization.  Tradeoffs are inevitable.  Don't trust vendors' claimed benchmarks.  Hire third party testing, or test against your own existing benchmarks.  Use standard deviations to assess consistency of performance when scaling up potential system build-outs by size.  Virtualization is a tool, not a requirement for cloud.  I don't have much to add here, so this stuff is published for the sake of completion.

Margaret Dawson is the VP of public cloud stuff at HP.  She asked us all to stand up and yell "Grizzly!"  I sat and remained silent.  I don't mind watching other people display enthusiasm for life but don't expect any enthusiasm from me.  Margaret wanted to tell us about "Fear and Loathing in Corporate IT."  The era of "Gonzo IT" blurs the lines between enterprise-wide IT strategy and the shadow IT of multiple services.  She gave us some options:  Ignore it, tolerate it, police it, or  . . . take control.  IT must control cloud utilization in partnership with business' larger strategy.  You know, after attending enough of these enterprise and cloud conventions over the years, I get the distinct impression that IT pros need to be hectored over and over again that they need to be an integral part of a for-profit strategy.  I wonder what the cultural imperatives are among IT people that inhibit so many of them from thinking like business people.  The same could probably be said about other professions in back-office functions.  She has an eight-step model for IT folks.  Good for her; I had an eight-step model in the Army to plan training events.  Know what data you already have and decide how much of it is mission-critical.  Shut down processes that don't matter.  Review non-IT departments' key performance indicators (like marketing's lead conversion ratio) and adapt them to IT processes.  IT people should own the ROIs of shared KPIs.  She peppered her talk with references to what's hot at HP, like open stack architecture.  Cool.  HP will be around for a while because people like Margaret can talk about business metrics in an IT vocabulary.

Lisa Larson from Rackspace was up next.  She said IT pros' jobs are jeopardized when other business units go out and buy their own solutions as shadow IT not governed by enterprise policy.  IT pros are passionate about playing with leading edge tech but their time is consumed with managing existing infrastructure.  Good infrastructure empowers an enterprise's users with self-service tools so they don't have to buy their own shadow IT.  The IT pros are then freed from daily system management routines and can spend time innovating.  CIOs should not have to build new data centers if they adapt to clouds.

Joe Weinman was the final keynoter.  He is the author of Cloudonomics, the first comprehensive study of how the cloud delivers real business metrics.  He asked us rhetorically why we're doing all of this cloud stuff and where we think it's headed.  I know where I'm headed; straight to the public library to check out a free copy of his book.  Hard metrics are indispensable.  Cloud benefits include a capex to opex translation, and the reduction of unit costs through scale.  The correct IT strategy is cost optimization because IT is now a commodified service.  Cloud combines a pay-per-use, on-demand model with scalable enterprise IT services that have heretofore existed separately.  He mentioned that the Jevons paradox really mean the price inelasticity of demand; I won't spoil the explanation here, so I need to go read his book.  He referred to Nicholas Carr's book, Does IT Matter?, and answered it with NO because it's non-strategic and non-differentiated.  That's why the correct strategy is cost optimization.  He referred to fixed effects models of firm profitability that show the ROI of IT investment.  This is heady stuff!  Now we're getting somewhere serious.  Goldcorp crowdsourced its mining data, which amazes me because I didn't think miners understood IT except as a repository for geographic modeling tools.  I really think Joe's CLOUD acronym and its supporting equations are brilliant.  He finished by arguing that a hybrid cloud is the optimal solution.

The expo floor was full, for the first time in a couple of years.  That's anecdotal evidence of the enterprise IT sector's financial health.  I scored some free T-shirts but didn't win any of the giveaway prizes.  I didn't score any phone numbers of attractive women, but frankly I wasn't trying.  Cloud Connect is a nice break from my normal routine on the circuits for the natural resource sector and financial community.  See you next year, cloud people.

Quick Peeks at IMF and NBER Data on US Business Cycle

I've added one more link to my Analytical Tools widget (scroll down my blog, on the right side) to illustrate a point.  The IMF Data and Statistics page has tons of stuff useful to serious financial analysts and economists. I used it find a time series data on GDP growth for the United States because I wanted to compare the IMF's numbers to the stats prepared by NBER on the business cycle.

The IMF's percent changes for US GDP from 1995 through 2010 do not show a recession after 2000, but merely a slowing in growth.  Refer to the NBER's confirmation that a recession began in the U.S. in March 2001 and ended in November 2001.  The IMF's annualized data broadly comport with the NBER's series on the U.S. business cycle.  The lesson for country-specific analysis is that analysts looking for nuances and turning points need data from more than one source.  Those sources must account for national-level activity over shorter periods that global organizations like the IMF sometimes aggregate into larger data sets.

The Haiku of Finance for 03/15/13

Data mining pro
Use free, easy Web sources
Superior brain

More Alfidi Analytical Tools Add Up in March 2013

My search for good statistics and decision tools never ends.  I'm throwing some more at you this month.  Find the new ones in my analytical tools widget in the far right-hand column.

Esri Thematic Atlas is a downloadable app that links demographic and economic data to geography.  I can see urban planners and municipal development officials using it to make zoning decisions but its power goes far beyond that application.  I plan to use it to track regional energy use and other economic activity.

USGS LandSatLook Viewer is free data on human use of land.  It's not directly related to financial markets but it can provide useful background info on tradeoffs between economic development and environmental preservation.

Cass Freight Index tracks shipping activity in the U.S.  I consider it to be a concurrent indicator of turning points in the broader economy as measured by GDP.  It's also indicative of sustainable activity in the domestic trucking sector.

The Baltic Dry Index is published by the Baltic Exchange.  It amalgamates measures of ocean freight into a general barometer of the global shipping sector.  I consider it to be a concurrent indicator for turning points in the global economy.

The Association of American Railroads statistics page is an excellent source on activity in U.S. Class I railroads.  I consider the weekly data on railcar loads under Rail Time Indicators to be a concurrent indicator for the U.S. economy.  Their other stats are very useful in comparing railroads' traffic to their financial results.

One more addition for this month is the Callan Periodic Table of Investment Returns.  It compares the returns of several asset classes in a graphic format that resembles the scientific community's periodic table of elements.  This format allows for an easy demonstration of how portfolio diversification works.  Mean reversion is all that matters in diversification by asset class.  I use it very simply to determine which asset class is undervalued in a given year.  An undervalued asset class is a far more worthy addition to my own portfolio than a class that has outperformed and now trades at a premium.  In simple terms for an indexed strategy, the class at the bottom is the most likely "buy" and the class at the top is the most likely "sell."  In real terms, I haven't bought any of these classes in recent years because the liquidity-induced bubble in all of them is bound to burst.

All of these tools give me source data for my blog articles.  Some of them will help me determine what to buy as the economy heads for its inevitable reckoning with reality.  Don't bother copying my strategy or actions, because those are for me only and not intended for anyone else.  You might get a kick out of watching me do what I say I do.  Stupid people like Notre Dame grads and Mickey Ronin won't get it and that's awesome.

Adding a Few Analytical Tools

The financial analyst must have tools.  I search far and wide for the data sources that make this blog worth reading.  Check out the widget to the right that says "Favorite Analytical Tools" to see the latest additions to my toolbox.

The World Bank Logistics Performance Index ranks countries on the quality and efficiency of their logistics infrastructure.  In a macro sense, it's useful for evaluating whether trade flows for a given country will have structural friction, i.e., a country with poor infrastructure will have a hard time growing its exports.  In a micro sense, I can use it in conjunction with the Transparency International corruption index and Heritage Foundation economic freedom index to assess the risk of a company's investment in a resource play.  I will stay away from hard asset prospectors in countries that score poorly in all three data sets.

The OECD Statistics are an analyst's dream.  I first used them in my MBA program to compare regional business conditions.  The data sets can be mixed and matched in endless combinations.  For example, compare the inflows and outflows of foreign direct investment to see the world market's snap judgement on which countries are considered to be hot investments.  Once again, the multiple reports on transportation infrastructure investment show me which countries are serious about making their economies attractive.

The Federal Reserve's economic research and data is useful for those patient enough to wade through it.  The most relevant basic data for analysts is the "Z-series" Flow of Funds Accounts report, which summarizes changes in U.S. credit markets.  I've also been subscribed to the San Francisco Fed's regular email announcements of published reports for over a decade.  The Fed's longer reports aren't as boring as what you'll find in most academic journals.  Then again, they're not romance novels either.  Maybe the Fed could spice up its reports with some hot action.

The ICI Research and Statistics pages show us what investors are doing in the public capital markets.  The most instructive data for me is in the Weekly Estimated Long-Term Mutual Fund Flows (on the Statistics page).  The downloadable data set says it all.  Retail investors have been pulling money out of actively managed mutual funds and piling into bond funds for quite some time.

I've used these sites and others intermittently over the years but sticking them in a widget makes it official.  Delving into these types of portals is how I spend my time here at Alfidi Capital.  I don't expect professional portfolio managers to keep up with me because I'm so much smarter than them.  They pretend to use hard data to make decisions but they really just copy other firms that succeed in selling hot ideas.

The Haiku of Finance for 02/02/13

Finance data set
Present it the way you like
Numbers must add up

Notes From E2 Innovate in Nov. 2012

I did it again.  I got to attend another conference with a free expo pass, specifically E2 Innovate in Santa Clara.  I only had time to attend the morning keynote addresses on the first day due to some pressing engagements in the afternoon.  I made it worth my while anyway by taking notes on whatever it is the tech sector is up to these days.

I arrived way too early because I'm just so driven to be the first to register at conferences.  While I was catching up on some reading I noticed a wonderful opportunity over by the coffee stand and continental breakfast table.  This whiteboard at the E2 Innovate Conference and Expo was a blank slate just begging me to cover it with sarcasm. The organizers suggested that each breakfast table have "topics" but it fell to me to cause a ruckus with some real innovation.

Here's the transcription in case my writing isn't legible.
Topic 1:  Bonanza!
Topic 2:  How to Avoid Getting Owned/Pwned
Topic 3:  David Petraeus Goes "All In" With His Biographer
Topic 4:  Cloud Software Piracy for Fun and Profit
Topic 5:  UFOs:  Fact or Fiction
Topic 6:  The Fiscal Cliff and Your Mother-In-Law
Topic 7:  Reducing Drunken Antics at E2 Innovate

The freelance media guy at my breakfast table was doing some interviews and wanted me on camera.  The attention hound in me said that was a-okay.  He asked me how I innovate and I gave an extremely poor answer; I think I said something really garbled about how I go to these conferences to listen for people's "knowledge gaps" and then respond.  Man, was I dumb.  I should have said that I listen for people's lies so I can ridicule them and make people angry.  Alfidi Capital admires innovators but this isn't some experimental tech lab where I'm designing the next wonder widget.  I innovate by thinking up weird things to say.

Alright, it's time to find out whether I learned anything from the illustrious speakers.  Paige Finkelman introduced each one.  In case you haven't been following my musings, she introduced the Enterprise 2.0 Conference I attended last year.  I'm glad she's still around.  She showed some slides on the history of the lawnmower but the end result of every lawnmower innovation was still a thing that cuts grass.  Likewise, her point was that the end goal of every innovation in business is still to make money, so enterprise software should leverage more meaningful experiences for customers.

First up was Ben Fried, CIO of Google, talking about "Google on Google."  What a conundrum!  It's simple enough to avoid tautology but demands some thought.  I just Googled "Google" and came up with Google this and Google that.  What could this mean?  Only Google knows, so let's get back to the guy's speech.  He said two factors drive enterprise technology:  the rise of global-scale consumer web services, and the rise of tech-savvy workers even before they enter the workforce.  I learned a new term called "peripheral self-service distribution systems," which respect workers' ability to get a job done.  These things are bins and shelves where people can check out the tools they need and drop them off when done.  Google's bins are often full at the end of the day because responsible adults bring items back.  Wow.  That is a revelation for me.  My experience with large workplaces has led me to believe that such personal responsibility is impossible.  The military never trusted me with equipment unless I signed detailed hand receipts for everything right down to a computer mouse.  Large investment firms trusted me with paper clips but senior people were rewarded for stealing whatever they could grab out of my hands.  Google's culture sounds too good to be true.

Mr. Fried shocked me with more revelations about his colleagues' maturity.  Googlers can choose Windows, Mac, or Linux systems plus whatever personal productivity tools they need.  Their monthly "tech bill" shows the cost of what they select.  That is incredible.  I'll have to see it to believe it.  Somebody get me a tour of Google's campus.  Mr. Fried said this user choice reflects respect and empowerment, and users help to minimize costs.  I was stunned taking all of this in.  I really think it helps that leading tech brands like Google have the prestige to attract the best talent.  It must be great to hire only smart people in the first place.  Irresponsible people get weeded out in the hiring process.  Working with nothing but superstars is a luxury I would have loved in my formative working years, but then I wouldn't have developed the bitterness that caused me to launch Alfidi Capital.

Mr. Fried said IT departments shouldn't skimp on tech buys for workers; yeah, that's easy to say with all of the money Google makes.  He gave up a classic quote:  "Enterprise software is a racket, and we are all the suckers."  Once again, that's easy for him to say because Google sells the enterprise solutions that suckers have to buy.  He closed by endorsing cloud computing because it saves money through metered cost of usage; unused time for support systems thus incurs no cost.  Hey, that's a hidden plug for Google Docs.  I love reading between the lines.  I also love Google.  Their Blogger platform is the host for this blog and their AdSense program makes me money.  Google rules the interwebz because it's just so darn good at figuring out what people do with information.  I should have bought Google stock years ago.  I like this guy's money quote:  "Innovation can't be installed."  Maybe not, but installing Google Chrome may be the next best thing.

The nest speaker was Michael Fauscette, talking about the next generation enterprise platform.  His initial thesis was that connectivity matters throughout economic, social, and technical domains.  Connectivity enables a platform shift to smart things in meters and systems.  Businesses must be flexible and adaptable because knowledge sharing is the new power in enterprises.  I like what the guy's saying, but his thesis that people find value and respect in a decentralized, transparent enterprise applies mainly to knowledge workers, not the semi-skilled labor that predominates in many sectors.  I guess I come from such a deprived background that hearing people talk about respect and trust in a workplace is a severe culture shock for me.  The guy said something about how transactions turn into decisions that build relationships, and IT people must build systems to enable this flow. Well, I don't have any relationships here at Alfidi Capital, and the only decision I make is about how often I run my mouth.  Whatever transaction that becomes is between Google and my advertisers.  BTW, this dude is brilliant but my world is oriented backwards from his description.

Mr. Fauscette said that aging core systems behind corporate IT can't be replaced but a "social layer" can be overlaid to enable collaboration.  Great idea; it sounds like a market opportunity for someone who can make a scrolling message feed run on code translated from FORTRAN.  He also said cloud services will be granularized and modularized, not like big-box software, and the must be context-aware to think of what the user wants.  He endorsed "sense and respond" as the new business model and thinks every app is a system of relationships.  That IMHO poses a challenge to app developers who focus on games and other solipsistic apps that have little to do with connecting to other people to get things done.  Collaborative apps, like the Google Apps that Mr. Fried liked so much, are probably the hot market for developers.

Next up was Kevin Cavanaugh from IBM, talking about participation with activity streams.  The only real participation I do with activity streams is challenging my Facebook friends with weird news items so maybe there's an insight here I can use to be even more provocative.  This guy says we should measure ROI in terms of an underlying process like product delivered or sales generated.  He said a major Mexican cement producer cut its time to market by moving expertise to where it was needed instead of moving material.  He eventually argued that worker productivity can be enhanced by analyzing activity streams that enterprise apps measure.  IT pros should have analytics for the social use of systems.  Mobile capability is the design point for social systems and their embedded transactions.  Okay, if I understand this correctly, IT people need to find ways to mine employees' activity to show their bosses how they add enterprise value.  I think the IT community is reinventing itself beyond being a corporate cost center and into something the C-suite relies upon to make business decisions.  I'm more interested in the IT enablers for business intelligence and knowledge management but the whole cultural change is a breath of fresh air.  I'm pretty sure the IT community will always need socially inept geeks and misanthropes at the bottom rungs of coders and techies but their managers need a real business mindset.

I had no idea that the next talk on "new walled gardens" by Fritz Nelson and David Berlind would be the best one I heard that day.  They gave a rundown of some recent enterprise tech acquisitions and said that more big companies are buying ventures that develop social and communication tools built for clouds.  Companies have figured out that having competitors' apps on their platforms hurts their sales of apps and mobile platforms.  The walled garden is a tech company's self-contained ecosystem of platform, apps, and cloud services.  Tech companies want to provide more services to get you addicted to staying in their walled gardens.  Whatever device they sell is merely a front end to the cloud-based enterprise apps in the garden.  They taught me another cool new term:  "personalized digital cloud," or PDC.  I guess that's the suite of cloud apps whenever you log on to your mobile thingy when you're outside wandering around.  I hope people don't do that while they're driving.

These guys then compared the "signal strength" of Apple, Google, Amazon, and Microsoft.  They all have infrastructure for app stores, storage, devices, search, commerce, and other popular tools.  I noticed that Yahoo wasn't even on their scorecard!  Yahoo tried to be the original walled garden but their core offering never got beyond search.  They mentioned it afterwards as a potential partner or acquisition target for another media company that may build out its own walled garden.  They said the IT corporate workforce eventually won't be able to manage the complexity of several walled gardens.  Business users will eventually pick one comprehensive solution, and the lack of a walled garden approach will eventually doom minor tech platforms.  They expect acquisitions to fill gaps in the "signal collection" of search and commerce.  Consumers themselves will be forced to choose a walled garden.  This is all pretty heady stuff.  I'm a non-mobile holdout with simple tech needs so I have the luxury of keeping my tech options open.  I think marketers can profit by figuring out what a consumer's tipping point would be for complete adoption of a single walled garden.  Ease of use?  Security from identity theft?  Sheer number of options available?  IMHO the greatest incentive will be to erect switching costs for users who defect from one model.  Right now there is very little cost for someone who abandons Google for Microsoft or vice versa.

Now we get to the VC panel on venture money for red hot enterprises.  The moderator was Christina Farr from VentureBeat.  She introduced the partners from various VC funds.  Here's my recollection of what they all said, interspersed with my sarcastic comments.

Startups are now thinking up consumer-oriented tech that helps people do their jobs better; I wish they'd think up some tech that would keep stupid people away from me so I could do my job better.  Tech ecosystems have made it much easier to start new companies that offer niche enterprises; I think that's a kind way of saying that overengineering big ERP systems provides job security to subcontractors.  Deep enterprise software capability is now blending with consumer-oriented expertise, and consumer distribution metrics are now being used in enterprise-wide architecture.  I take that to mean ERP buttons now have to be pushed by non-programmers who grew up on first-person shooter games.  Time card punched yet?  Ka-pow!  Budget report submitted?  Ka-boom!  Low conversion rates require enormous uptake from millions of users to make a viable business, so think hard about price points after free adoption. Yeah, tell that to Zynga, where 95% of their gaming audience never converts to paid games.  They'll probably go down the tubes after people who pay to play their sorry games on Facebook get hooked on the next free thing.  There are still many messy problems in enterprise IT:  data management, business processes, middleware.  Startups can unlock ROI with solutions for those problems but that will take a long time due to companies' inertia.  Here's my solution:  Create an app that C-suite execs can use to send automated nagging alerts to their CIOs demanding they convert legacy systems ASAP. I'd call it the Nag-O-Matic.  A startup in a hot, trendy space doesn't necessarily entice VCs to invest.  VCs want entrepreneurs who have precise insights into their market and have a defined path to cross the chasm.  A series of execution steps matters more than a hot product.  VCs are really smart and hard to deceive, at least compared to the fools who threw money away in the 1990s on Internet startups.  There are vertical opportunities in health care, education, engineering, and government due to lack of progress since the client/server days, and this means opportunities for vendors.  It also means special opportunities for vendors owned by underrepresented demographics.  Those big old-school employers often have supplier diversity programs that buy from entrepreneurs who are veterans, women, and minorities.  They recommend reading Aaron Ross' Predictable Revenue describing the software sales process.  They also warned that entrepreneurs shouldn't think they can "sell vitamins as aspirin."  IT customers are sophisticated and know what they want.

Well, this concludes another exciting adventure at an enterprise conference.  It didn't take me long to walk around the expo floor because there were only about two dozen exhibitors.  I had to make like a tree and leave because I had a bunch of other work to do that I couldn't do from there; like I said earlier, I'm still a tech dinosaur in some ways and I don't need a whole bunch of mobile gizmos just yet.  I do need to figure out how to get tech women appreciate the extreme manliness that I exude.  Call me, babes, and let's do some innovation together after hours.

Observations From Enterprise 2.0 Conference 2011 Santa Clara

I have long had an interest in the intersection of knowledge management and business intelligence.  I attended the Enterprise 2.0 Conference in Santa Clara this week to find out what, if anything, those two areas had to do with social media.  I went for the free Expo-only pass because I'm far too cheap to pay for special access programs.  I'll be speaking at those seminars anyway someday.  It is my destiny. 

The Tuesday keynotes were full of practical tips from people who walk the enterprise collaboration talk in the real world.  Paige Finkelman introduced two themes with imagery borrowed from Dr. Seuss: unlocking internal value that can be expressed in business metrics, and technical aspects of software and infrastructure that would appeal to a geek IT architect.

Adam Graff and Andy Wang of Genentech talked about how difficult it is to see technology vendors' plans more than a few months out because the speed of innovation simply destroys any long range enterprise IT strategy.  I take that as a warning to product developers at these 2.0-type conferences not to burden their corporate customers with bulky legacy systems.  These guys mentioned how off-the-shelf applications from Ning and Yammer eventually displaced the blogs and wikis developed in-house.  Their Genentech IT developers had built those initial platforms and walked away without considering the lifecycle of the technology.  I surmise that the off-the-shelf solutions added value when the original custom stuff couldn't adapt to changes.  I also learned about a new career field called "enterprise anthropologist."  This must be a fancy term for the Groupaya consultants who mapped out Genentech's social dynamics to figure out why some groups excelled at collaborating.  I wonder how an enterprise anthropologist spends their days . . . deciphering Dilbert cartoons posted in cubicles . . . digging through piles of year-old meeting announcements . . . ah, what an enriched life.  Their final admonition against treating cute new tech solutions as a field of dreams is worth remembering.  If you build it (a platform), they (users) won't necessarily come without a strategy and the dedicated attention of change agents.  It also means that ghost baseball players won't understand IT. 

Rachel Happe of The Community Roundtable said continuing adaptation is required just to stay in place.  That made me think of the old adage that a shark always has to keep swimming or it will die.  That in turn made me think about YouTube clips from cheesy shark horror movies so I had to snap my brain back to the lecture hall before I missed something else important.  Ms. Happe said people are the weakest link because they (and the culture they create) change more slowly than tech, so gap analysis should figure out how people can be strategic differentiators.  You said it.  Some of the people I've worked with at large investment firms must have fallen through those gaps, so gap analysis may not find those fools unless it looks all the way to the volcanic vents on the ocean floor. 

Ms. Happe's other insights came in rapid fire.  Customer forgiveness is a "Web PR disaster avoidance" phenomenon that raises margins (and all this time I thought it was just the result of customers not paying attention to extra fees a sales force is charging).  Strong relationships with internal peers and external customers give rise to their offers of help (which I think is preferable to screaming "I've fallen and I can't get up!").  "Competitive lockout" adds revenue . . . uh, pardon me, what is that?  Is that when you get first mover advantage?  Or is that something that happens when you rush to the restroom stall before everyone else after the coffee break at Enterprise 2.0?  I guess that's another newfangled term but I have no idea what it means.  She finished by saying that social media can sustain a relationship but building one requires direct engagement.  I can only think of one way that a remote relationship can be initiated without meeting someone physically:  prison pen pals.  Anything else means you have to shake hands first. 

Next up on Tuesday's keynote lineup was Tim Young, who sold his firm About.me to VMware and became their VP for Social Enterprise.  Good for you, Tim!  Guys like him tend to get restless at a big company, so I'll be interested in hearing about any future startup he has planned.  Mr. Young's insight was that a single-page hi-res photo was a simple way to communicate personal identity.  His message of simplicity will be lost on Facebook.  I've noticed the increasing frequency of changes Facebook's engineers make to the ways people tag, like, and share stuff.  All of those bells and whistles require constant engineering attention, and constant tinkering will eventually frustrate users.  Tim's About.me grew its user base much faster than Facebook because it was so much simpler to use.  Twitter works the same way.  Tim's lesson is that all of the additional investment that firms put into tools for larger communities will lead to decreasing marginal returns because more complex tools are less attractive to users. 

Tim's latest work adheres to the simplicity meme.  He creates simple metrics about how employees feel about their day so managers can be better coaches; they can compare this data across work groups for insights into groups' relative health.  In the U.S. Army, we call this a Command Climate Survey but all the Army units I've served in only measured this metric once every year.  I truly believe the Army could benefit from a simple metric, measured daily, that commanders could use to evaluate how effective a unit is performing under the stress of combat.  Yes, folks, the Army does knowledge management too.  The Army is also trying to find ways to field smartphones with apps tailored to combat operations.  Hmm . . . a soldier logs on to his squad's smartphone in Kandahar province . . . launches the app tracking his patrol's effectiveness . . . rates it plus or minus (a Six Sigma method) for that day . . . the battalion TOC collates the data and the S-3 briefs the commander on the unit's daily self-assessment.  Now the commander finally has some situational awareness on how quickly he's moving along a logical line of operation toward an objective.  Folks, I think I'm on to something here.  Tim Young, your lecture may save American lives someday. 

Kevin Jones, a consultant, was another keynote speaker.  In case you're wondering, I really did take notes on all of them because I take knowledge acquisition pretty seriously.  According to Kevin, failures can be pandemic, catastrophic, or intrinsic.  The intrinsic failures are the ones you want to have because they enable growth.  I'll remember that the next time I lose at poker in Las Vegas; my failure wasn't pandemic (Las Vegas odds favor the house) or catastrophic (I bet my life savings and lost my shirt) but intrinsic (I need to develop a poker face instead of grinning like an idiot when I pull a royal flush). 

The end of the Tuesday keynote series was heralded by a panel moderated by Sameer Patel with guests Tom Kelly and Jonathan Schwartz.  I don't know any of those dudes but they must be pretty renowned in tech to be on this panel.  Stream of consciousness highlights follow . . . social media content isn't limited to a traditional audience . . . CEOs are slow to participate but those who do can become rock stars . . . a big pharma maker drove down its supply chain costs by using social tools to rapidly discover and broadcast solutions.  Good job, guys.  Put that stuff into an e-book and sell it. 

I made a beeline for the expo floor after I ate a sandwich that was too expensive but readily available.  One of the first people I met was a Benedictine priest.  What was he doing at a tech conference?  God only knows.  I should also mention that attractive women were typical staffers at the well-attended booths.  Vendors absolutely must have a stable of attractive-looking employees staffing their booths at trade shows, along with copious amounts of free pens and candy, to have any hope of getting attendees to stop by long enough to hear a sales pitch.  The only booth that had none of those things was a booth for the human resource community staffed by two frumpy old maids with no candy, pens, electronic displays, or even personality.  It was times like these that reminded me just how my utterly worthless bachelor's degree in HR from Notre Dame was the single biggest mistake I had ever made in my life.  I'm only grateful that I made this mistake early in my career so that I never had the misfortune to work with frumpy old maids in HR.  I gravitated to finance, where the women are much hotter.

Speaking of hot, the hottest booth at the show belonged to Spigit.  These guys went nuts with a mascot dressed like a giant green eraser and a display case full of cold, hard cash (my favorite thing in the world besides booze and chicks).  Photographic proof is below.

In case you need a reminder, the remarkably handsome fellow giving the thumbs up with the Spigit mascot is yours truly, Tony Alfidi.  I know how to party.  I party like a rock star with giant green erasers. 

The vendors I liked most were ionGrid for their Nexus secure document access platform, Actiance for their apps that enable financial services compliance departments to review social media content, Bunchball for their gamefication (another new term to learn!) of social media usage, and NationalField for their recap of how social media plugged into KM played a role in the 2008 presidential election.  The seminar (okay, it was really a disguised product pitch session) from Bunchball's Steve Patrizi revealed that tapping basic human motivators for achievement, status, and rewards can incentivize social media users.  I had no idea that LinkedIn's profile completion progress bar was the single most important factor driving users to adopt that platform.  I came away convinced that simple blog widgets that incorporate game mechanics can help build a blog following.  I'm going to test that theory ASAP. 

I noticed that many of the vendors' platforms looked a whole lot like some melding of Facebook and Microsoft SharePoint.  That's the whole point.  Collaboration tools like Facebook's walls and news feeds motivate people to find and share the work products displayed in SharePoint.  How about that.  The products all seemed to be plug-and-play solutions that could easily be grafted onto an existing enterprise-wide IT architecture, irrespective of whether the host is an all-encompassing behemoth like SAP or a mix of smaller tools. 

Thanks Enterprise 2.0!  I couldn't make it back for the Wednesday sessions but what I learned Tuesday made it worth my while.  I want UBM TechWeb to invite me to be a keynote speaker next year.  I promise I'll make the experience memorable.  ;-) 

Full disclosure, 08/11/2015:  I edited this article to remove several sentences and one photo that were irrelevant to the content of the event.  The removed content did not add value to my discussion.  My editing streamlined the paragraph that mentioned the priest and the HR community.