Monthly Archives: February 2011

27 de Febrero

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The 5th largest earthquake in history (8.8) struck Chile one year ago, today. La Tercera is doing a bunch of one-year anniversery coverage, including a blow-by-blow that begins at 3:34 AM with a 30 second video of security camera footage. Captures the feeling well. Here's an article in English about the recovery effort a year later in the hardest hit areas.

I just spent an hour reading some articles, looking at old photos, and reflecting on the earthquake and my time in Chile more generally. For a second I couldn't remember the names of either of the main newspapers in Santiago. It's not the first instance I've found myself forgetting details, memories, or Spanish words that I used to know so easily. It's sad to notice memories slipping away. But no matter how much time passes, I know I will never forget el veintisiete de febrero, 2010.

Good Marketing is Good. Bad Marketing is Bad.

Fred Wilson blogged about marketing:

I believe that marketing is what you do when your product or service sucks or when you make so much profit on every marginal customer that it would be crazy to not spend a bit of that profit acquiring more of them (coke, zynga, bud, viagra).

Brad Feld piled on with a post titled: Why a Start-Up Shouldn't Have a Marketing Budget. Brad says when he hears the word "marketing" he vomits in his mouth a little.

But, Brad's not anti marketing. He's anti bad marketing. He actually says every one of his start-ups spends money on marketing. It's just that the marketing efforts are "wired into the DNA" of the product and company.

And Fred, after dismissing the importance of "marketing," endorses a bunch of activities from his portfolio company that could easily be called marketing.

The word "marketing" encompasses a bunch of good activities and a bunch of bad activities; a bunch of useful philosophies and un-useful philosophies. The question is which specific marketing activities and philosophies are productive and useful and which are a waste of time and money.

And that depends on the specific company, product, industry. We can all agree throwing $10k to a social media consultant to "promote" a product on The Twitter is a waste. But usually it's more complicated. For example, Fred noted he was referring only to consumer internet companies and not enterprise SaaS companies. That's a crucial distinction. Another example: manning a booth at an expensive trade show like CES may be a good marketing expense for Orbotix, but not a good marketing expense for other companies.

Marketing is neither good nor bad, neither a waste nor a necessity. It's both; it depends. This sounds obvious, and maybe it is, but it seems worth keeping in mind when reading broad-brush posts like the one Fred wrote this morning.

Understanding Your Customers, Brazil and Senior Citizen Edition

Proctor & Gamble wasn't selling enough diapers in Brazil. So they took a closer look at the cultural dynamics of the market:

In America, when parents buy nappies they often demand fussy add-ons (think nappy flaps, subtle scents, biodegradable material and so on). But in Brazil, babies often sleep with their parents, and many families are poor. Thus what consumers really care about is keeping the baby (and parents) dry all night. So Procter & Gamble eventually launched a cheap, ultra water-tight nappy in Brazil, without fussy details – and sales soared. Many parents are happier now, they are getting more sleep,” one industry leader observed with a chuckle, at a recent debate at the World Economic Forum

Other cultural mistakes of western companies entering international markets:

…western multinational companies have repeatedly tried and failed to sell breakfast cereal in India; apparently this is because local families want hot breakfasts, and most western cereal cannot survive contact with hot milk. Similarly, I also heard a story about how a US car company tried to sell a cut-price version of its bestselling car to India – and removed the rear-seat electric window controls to save costs. That also flopped since the Americans had failed to notice that while the rear seat is low-status in the west (since that is where kids sit) it is high status in India (since wealthy families have chauffeurs).

Makes sense.

Understanding your customers also matters when selling to a demographic in your own country that may have unique needs. GE's industrial design team emphasizes "empathy" when its engineers try to design products for the booming Baby Boomers segment:

We hold empathy sessions to help our designers understand what the aging population goes through every day — we tape their knuckles to represent arthritic hands, put kernels of popcorn in their shoes to create imbalances, and weigh down pans to simulate putting food into ovens. We have a moving-parts kitchen that helps us build products like our wall oven, which is at a height where people don't have to stoop down or stretch awkwardly over the stove to take that turkey out of the oven.

Literally putting yourself in the shoes (and clothes and environment) of your customer. I love it.

Sometimes It’s Faster to Do It Yourself

When it comes to delegating or outsourcing small tasks, the question always is, "Would it be faster if I just did it myself?"

I was struck by this thought when I saw the following picture of Barack Obama editing his remarks on a laptop before addressing an audience at Northern Michigan University in February. Yes, even for the POTUS, despite his legions of speechwriters and aides, sometimes it's faster to sit down and just do it yourself.

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The White House flickr stream is kind of fun to flip through. Here's a photo of Obama and crew watching Mubarak's speech on television. Yep, they're watching the same thing we're watching!

Kicking the Kid Down the Road

Since "kicking the can down the road" is a cliche, Andrew Biggs proposes a replacement phrase for use when discussing America's federal budget: kicking the kid down the road.

After all, it’s our kids, not cans, who will feel the boot as multiplying debt forces future taxpayers to do even more with even less.

Along these lines, Matt Yglesias cries foul at possible social security cuts that would exempt current beneficiaries (i.e. older folks today) yet cut payouts for future beneficiaries.

You frequently hear of the need to exempt everyone over the age of 55 from any possible cuts. That’s nice for them and encourages them to go right on complaining about out of control spending. But the average 55 year-old will still be alive and collecting benefits in 2035 so the long-term budgetary implications of this “let the geezers keep their full benefits while they whine about how Democrats are bankrupting the country” are actually pretty significant.

As Matt says, we have a large and loud class of older folks calling for fiscal austerity measures — which is good — but the pain should be spread evenly, and certainly not unduly shouldered by the kids and grandkids of today, who, besides, had nothing to do with creating this mess in the first place.

The Four Types of Entrepreneurship

Not all entrepreneurship is the same. Steve Blank clearly describes four different types:

1. Small Business Entrepreneurship
Today, the overwhelming number of entrepreneurs and startups in the United States are still small businesses. There are 5.7 million small businesses in the U.S. They make up 99.7% of all companies and employ 50% of all non-governmental workers.

Small businesses are grocery stores, hairdressers, consultants, travel agents, internet commerce storefronts, carpenters, plumbers, electricians, etc. They are anyone who runs his/her own business. They hire local employees or family. Most are barely profitable. Their definition of success is to feed the family and make a profit, not to take over an industry or build a $100 million business. As they can’t provide the scale to attract venture capital, they fund their businesses via friends/family or small business loans.

2. Scalable Startup Entrepreneurship
Unlike small businesses, scalable startups are what Silicon Valley entrepreneurs and their venture investors do. These entrepreneurs start a company knowing from day one that their vision could change the world. They attract investment from equally crazy financial investors – venture capitalists. They hire the best and the brightest. Their job is to search for a repeatable and scalable business model.  When they find it, their focus on scale requires even more venture capital to fuel rapid expansion.

Scalable startups in innovation clusters (Silicon Valley, Shanghai, New York, Bangalore, Israel, etc.) make up a small percentage of entrepreneurs and startups but because of the outsize returns, attract almost all the risk capital (and press.)

3. Large Company Entrepreneurship
Large companies have finite life cycles. Most grow through sustaining innovation, offering new products that are variants around their core products. Changes in customer tastes, new technologies, legislation, new competitors, etc. can create pressure for more disruptive innovation – requiring large companies to create entirely new products sold into new customers in new markets. Existing companies do this by either acquiring innovative companies or attempting to build a disruptive product inside. Ironically, large company size and culture make disruptive innovation extremely difficult to execute.

4. Social Entrepreneurship
Social entrepreneurs are innovators who focus on creating products and services that solve social needs and problems. But unlike scalable startups their goal is to make the world a better place, not to take market share or to create to wealth for the founders. They may be nonprofit, for-profit, or hybrid.

The happiest entrepreneurs I've met are the small business ones, not the scale / conquer-the-world ones.

Tom Friedman from Cairo

There are so many awesome Charlie Rose segments. A couple days ago Tom Friedman was on the show in Cairo. I watched the first 20 minutes. I had two reactions.

1) Friedman's enthusiasm for the revolution in Egypt is absolutely contagious.

2) His use of metaphor and imagery to convey points is so effective. Listen for "you never wash a rented car" or "they're going to have to pay retail, not wholesale." He's the king of metaphor in his writing. Seeing him deploy metaphors so effectively in real-time lends further credence to the idea that one can train to think in metaphors, not just write or speak in metaphors.

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The Opposite of Love is Indifference

Many opposites are not nearly as different as they first appear. For example, as Nobel Peace Prize winner Elie Wiesel observed, the opposite of love is not hate, but indifference; for at a minimum, to love or hate someone is to have intense emotions toward them. We see how the similarities between love and hate often outweigh the differences when one is transformed into the other, a phenomenon that literature — from Gilgamesh to Shakespeare to Harlequen Romances — has exploited and explored for millennia.

The psychological proximity of love and hate is part of the hard wiring of the human psyche. Dan Gilbert explains, in his book Stumbling on Happness, that the same neurocircuitry and neurochemistry triggered in response to stressful events ("fight or flight") are also triggered in response to sexual arousal. As a result, when we are stressed in the presence of a person we find sexually attractive, we have a tough time telling what we are responding to: are our passions inflamed (hate) because of a stressor, or are we aroused (love) because of the attractive person?

In the 1994 movie Speed starring Keanu Reeves and Sandra Bullock, Bullock's character, Annie Porter, appeals to this possible confusion when she notes, upon finding herself in the hero's arms after several near-death experiences, that "relationships that start under intense circumstances, they never last."

Call it an "emotional paradox": two very different dispositions — loving and hating — can have far more in common with each other than a seemingly intermediate state.

— Michael Raynor in his business book The Strategy Paradox. His thesis is that the strategies with the greatest possibility of success also have the greatest possibility of failure.

The Best Books on Start-Ups for General Reader

Tyler C., a loyal reader of many years, asks in an email:

What is the best book on start-ups?  Not a how-to book, but a fun book for the general reader.

Another way of putting the question: What is a good book that conveys the fun spirit of start-ups that’s not an explicit how-to?

I replied:

1. Founders at Work by Jessica Livingston is a collection of transcripts with start-up founders from companies like Flickr and PayPal and Google. No editorializing, no analysis, no conclusion. Just long Q&As with founders that give a surprisingly good glimpse of what it’s like to build world-changing technology companies. The lack of narrative spine may make it hard for non-insiders to get into it, though. And there’s no sugarcoating the long, hard slog.

2. Startup by Jerry Kaplan was the classic book of this genre for a long time. It tells his story of developing a pen-based computer. Written in 1994, it’s a bit dated (pre-internet), but still good. I remember reading this several years ago and feeling inspired by the journey.

3. The MouseDriver Chronicles is very fun. Two young Penn grads start a company that develops a computer mouse in the shape of a golf club / driver. Company ends up failing but super entertaining.

4. eBoys by Randall Strouss is a fun book about venture capitalists. It follows Benchmark Capital as they invest in Webvan and eBay during the dot-com boom. Gives a sense of the era.

I think the best how-to book on entrepreneurship, by the way, is Richard White’s The Entrepreneur’s Manual. Amazingly, it’s out of print. Amazon has used copies.

Guilt-Free, Pain-Free Solitude When Abroad

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At a recent dinner with American friends who I met in Chile but who are now back in the States, we went around the table and each of us said what we miss and don't miss about that skinny, long beautiful country in South America.

I said I missed the cheap, plentiful lunch menús; the physical beauty and diversity; the on-time metro in Santiago; the challenge of a foreign language. Most of all, I miss the immense stimulation of day to day living in another country. Just walking down the street most days taught me something.

I said I didn't miss the lack of ethnic diversity; how far away the country is from everything else; the challenge of a foreign language; the lack of English language media and books; the poor customer service in companies. I don't miss sticking out so much — so obviously being from somewhere else. (Though, that also had its attractions.)

One person said something interesting. She said she missed "the loneliness of Chile." She explained.

When you're in a place where you don't know anyone and where you're not expected to know anyone, it's easier to enjoy your own solitude. If you don't want to do anything on the weekends, you don't have to — you aren't getting many incoming calls or text messages. If you don't have anyone to hang out with on the weekends when you do want to, well, that's okay, because after all, you are a million miles away from your home base.

When you're in the city or state or even country where you grew up and speak the language, you're expected to have vibrant relationships, wonderful friends, constant companionship. If you want to be alone, you likely have to deal with inbound social requests or feel guilt about not reaching out to your friends. If you want to hang out with others, but have no one to hang out with, you'll feel lonely. If you want to hang out with others, and do, but find your friends underwhelming or distant, you feel even lonelier. Essentially, when home, your expectations for relationships are higher than they would be when abroad, and it's easier to feel disappointed.

I thought that was the most interesting insight of the dinner.

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To be sure, too much solitude over the long run isn't a good thing, and it's a common problem in long-term expats, I think. See my post Urban Nomadism: The Sources of Unhappiness of Serial Travelers.