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Uber, The Rashomon.

By - April 26, 2015

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Our industry loves a rashomon, and in the past year or two, our collective subject of debate has been Uber. Perhaps the fastest growing company in history (its numbers aren’t public, but we’ll get to some estimates shortly), Uber has become a vector for some of the most wide-ranging arguments I’ve ever had regarding the tech industry’s impact on society at large.

It’s not that Google, Facebook, Apple, or Microsoft didn’t evoke great debate, but all those companies came of age in an era where tech was still relegated to a sideshow in the broader cultural conversation. Microsoft was taking over the computer industry in the 1990s, Google the Internet in the early 2000s, Facebook and Apple the mobile and social world in the late 2000s. But Uber? Uber is about a very real and entirely new approach to our economy, a stand in for the wealth divide festering in the US and beyond, an existential rorschach testing your values around the role of government, the social contract, and the kind of society we want to become.

When an Uber glides to its appointed pickup point, what do we see? Do we see an innovator hastening the inexorable shift to a new information-based economy? Or an arrogant bully using cheap capital, greed, and a dangerous, misogynist culture of convenience to consolidate a trillion dollar market?

Or do we see both?

Yes — that’s a cop out, but it’s also an honest answer. I know people who work at Uber, and I know some of Uber’s investors as well. They are in general a well intentioned group — and many of them have reservations about Uber’s unbridled success and its mixed reputation.

Uber’s success is breathtaking. Consider: Uber’s most recent round valued the company at over $41 billion — $15 billion more than Google’s initial public market cap of $26.4 billion. At a conference I attended last month, an Uber executive mentioned the company was clocking more than one million rides each and every day. If you (conservatively) estimate each ride at $10, that’d be gross revenue of $10mm a day, or $3.65 billion a year. Uber takes roughly a quarter of that revenue (20% is the widely reported number, but when I ask drivers, they tell me it’s 25–28%), or just under a billion dollars. And their costs are….well, assume about 2,000 employees (I’ve heard estimates of 1200 to 2500), for $250mm or so in labor costs. I’m pretty sure they’re not spending another $750mm on marketing and platform costs. So the company is most likely quite profitable already.

And my figures are conservative. Business Insider claims the company is on track to do $10 billion in gross revenue this year, and CEO Travis Kalanick last year claimed revenue is doubling every six months. In five years, Uber has expanded to 57 countries. So, yes, this company is astonishingly successful.

And yet…I’ve not met a single person in this industry who doesn’t express reservations about Uber. Certainly the company stepped in it terribly with the whole Lacy debacle, but the ambivalence goes deeper still. I’m sure pure Uber defenders exist, but the truth is, most of us are worried about the sheer expression of capitalistic force that the company represents. Privately, many are heartened by the regulatory counterforces that are stemming the company’s march through worldwide markets — Germany, Holland, India, Korea, Canada, Spain, France, New Zealand, and many other countries have banned Uber’s services either nationally, or through local city regulations.

Uber is the poster child for our global conversation about the role of work in our society, and about the kind of company we want to create, work at, and celebrate. And that conversation is deeply political and cultural in nature. On the one hand, the “1099 Economy” is providing hundreds of thousands of flexible, living wage jobs for those who might otherwise be marginalized or underpaid. On the other, it represents the systemic dismantling of our labor laws by rapacious, profit seeking monopolists.

If you want to hear an unalloyed economic takedown of Uber, head over to Robert Reich’s blog. And if you want to hear a reasoned defense of the company as an innovator, read what Suster has to say. But anyone who read Sarah Lacy’s passionate story has to wonder — if we didn’t have Uber now, wouldn’t the Valley just end up creating it? Certainly that’s Lacy’s conclusion — Uber is the collective creation of the Valley’s deep arrogance, its heartless celebration of high valuations and killer exits, and its male-dominated, aggressive philosophy of “breaking things fast” and “asking for forgiveness rather than permission.”

Put another way, Uber feels inevitable — a uniquely of-the-moment company, a mirror held up to the Valley’s aggregate psyche. And as we all look into that mirror, we are both fascinated and appalled.

All of this was at front of mind a month ago when an email from a site called FounderDating popped into my inbox. FounderDating is a LinkedIn-like service that connects entrepreneurs, and it sports a lively Quora-like Q&A forum. When interesting new threads emerge, the service notifies you. “Is Uber A Social Impact company?” was the question of the day, and it immediately sparked a strong debate, as you might expect. Lydia Eager, the thread’s originator, opened with this:

A lot of people love to hate uber because of their aggressive tactics, but the fact of the matter is that they are creating 20K new driver jobs/month and the median uberX driver income in NYC is $90K/year. Feels to me like they do way more good than harm and I’d consider them a social impact company. They are having a much bigger impact than say a non-profit trying to create jobs.

Do you have to have set out to have a major social mission to be considered a social impact company?

From there a diverse group of folks, myself included, chimed in with 50 or so thoughtful replies, touching on the importance of purpose- and mission-driven business, the role Uber plays in destroying living-wage jobs in the taxi and livery businesses, the actual economics of driving for Uber and similar businesses, the positive impact Uber has on carbon emissions, congestion, and drunk driving, the inevitable future where driverless cars and automation make workers irrelevant, the positive competitive response Uber has created in the taxi business (better customer service, competing apps, etc), stories of questionable competitive business practices, stories of rape and kidnapping (on both sides — taxies and Uber), debate over the meaning of “social impact” at its core, debate over the role of local and national regulation, debate over consolidation of power and money in markets and society, debate over libertarian political philosophy, and much, much more.

I hear these questions debated every time Uber comes up at a party, an industry event, or just between friends shooting the breeze. Back in 2013, when we were starting NewCo, we had the same debate when we were considering which companies to invite to our first full-fledged NewCo festival in San Francisco. We asked ourselves whether Uber was really a NewCo — an engine of positive change in our society. We couldn’t make up our mind and ended up kicking the can down the road. This year, we have to once again tackle the question. And I’m still not sure where we’ll land.

Like it or not, Uber is now our rashomon for understanding the impact technology is having on our culture. The company is showing signs of “growing up” — as all fast-growing tech companies do over time (you have to love Facebook shifting its motto from “Move fast and break things” to “Move fast …with stable infrastructure”). Uber’s stance to local regulators has shifted from a siege mentality to one of engagement (necessarily, I’m sure). Its CEO (and the offending exec) apologized, sort of, to Lacy, and has shifted its public voice to highlight its positive impact on the world — the first image on its site today is of a woman, with the headline “Her Turn to Earn — Creating 1,000,000 jobs for women by 2020.”

Is this all just calculated PR spin, or might it represent a real shift in the company’s culture? I think I know where Lacy stands on this one — she was personally targeted by a senior Uber executive, and she’s in no mood to give the company a second chance. But for most of the rest of us, the ambivalence — and the broader debate — continues. I personally believe that companies can change over time — Walmart, Unilever, and many others are now champions of sustainability — yet one could reasonably argue they played huge roles in creating the unsustainable world in which we currently live. But does that mean we shouldn’t celebrate and encourage their corporate change of heart?

If we dismiss these glimmerings of change as mere greenwashing, we are handing corporations an excuse to continue past practices. Instead, we should hold them accountable. For Uber — and all of us — that journey has just begun.

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Your Network Transcends Time – Care For It

By - February 12, 2015

Every year around this year I fly to Arizona and attend the IAB Annual Meeting, a confab of 1000+ executives  in the interactive media business. Yes, it’s a rubber-chicken boondoggle – what ballroom-based warm-climated event in February isn’t? – but I go because I get to catch up with dozens of colleagues and friends, and I usually connect to a handful of interesting new folks as well. I hate the travel and despise most hotel rooms, but on balance, well – I keep going. (And yes, I think the NewCo model is even more productive, but more on that in another post).

I find the best connections happen over dinner or drinks – perhaps that’s my own convivial nature, but I sense I’m not alone. So I want to tell you a story of a chance meeting at a bar, because it evokes a larger lesson in business:  you’re only as good as your relationships – and those relationships often exist outside traditional boundaries of time and space.

If you’re scratching your head, stay with me. I hope to clarify.

Monday night I was at the bar, chatting with old friends in the industry. The room was filled with happy half-tipsy industry types, the pleasant din of convivial glad-handing was well underway.  At one point I looked to my right and saw a young man who caught my eye and lit up with recognition. “John, my man, how are you?!” he proclaimed, extending his hand for an enthusiastic shake.

Now here’s where I need to admit something. I’ve been in this industry for nearly 30 years, and for 20 of them I’ve been relatively well known in this small circle of digital publishing – I was on the Board of the IAB for six years, and I’ve graced the stage of the annual meeting several times. The net of it is this: At places like the IAB, a lot more folks remember my name than I do theirs. It doesn’t help that I suck at remembering names to begin with, and it’s only gotten worse as I’ve careened toward middle age and beyond. (I’m not alone in this, I just love this TED talk from David Hornik – I’m not dyslexic, but I sure feel that way when it comes to names).

All of which is a long way of saying I didn’t have the faintest idea whose hand I was at present shaking. He looked familiar – maddeningly so – but I could not remember the connection. I am afraid this happens to me far more than I’d like to admit.

Usually when presented with this dilemma, I employ a strategy of conversing my way to enlightenment – hoping for a high order bit that might remind me of our connection. Alas, the man was enveloped in his own bubble of conversation, and after his friendly overture, he returned to his group. I doubt he knew I was struggling to recall his name – I’ll admit, sheepishly, that I displayed recognition as I returned his warm greeting.

Now, I could have written that exchange off, not given it another thought. But these things vex me – I hate not knowing who’s reached out to me with obvious awareness and good intent. It tugged at me the rest of the evening, until hours later, at dinner, it dawned on me who the fellow was. Turns out, he’s a quite successful investor and entrepreneur, but it had been a few years since I’d seen him in the flesh, and I just didn’t make the connection in the moment.

I was pleased with my recall, even if it was late. It closed an otherwise unfulfilled loop – I hate potential lapses in relationships, even if the other party had no idea I had failed to remember their name.

The next day provided a perfect example of why this matters. While waiting for my flight at the Phoenix airport I took a call from an old college friend, a man who has built a great career in banking and venture capital. He wanted to talk about a particular firm – a very well respected company with which he had potential business. And by now you can probably figure out whose company that was – it was the company where my mystery man worked.

“Ah, I just saw him last night,” I could truthfully tell my friend on the phone. “He’s a great guy, and his firm is top rate. I’d be happy to provide an introduction if you’d like.”

I have no idea if my two colleagues will end up doing business together, but that’s not the point. In business, the network is always on – even across the axis of time. The night before, I had no idea I’d be presented with a chance to introduce two great people. But if I hadn’t taken the time to close that open relationship loop, I’d have lost the chance to provide a truly warm introduction – one that might have strengthen the fabric of not only my own network, but of theirs as well. And that’d have been a shame.

Tend to your network, and do your best to return the favor of a warm greeting. You never know when it might come back to you.

Apple and Google: Middle School Mean Girls Having At It

By - January 20, 2015

THE-DRAMA-YEARS(image) I’m the father of three children, and two of them are girls. And while my first was a boy, and therefore “broke me in” with extraordinary acts of Running Headlong Into Fence Posts and Drinking Beer Stolen From Dad’s Fridge Yet Forgetting To Hide The Bottles, nothing, NOTHING, prepared me for Girls Behaving Badly To Each Other Whilst In Middle School.

Those of you with girls aged 11-14 know of what I speak: Middle school girls are just flat out BADASSES when it comes to unrepentant cruelty – and they are almost as good at forgetting, often within a day (or an hour) the rationale or cause of their petty behaviors. On one of my daughter’s wall is a note from a middle school friend. It says – and while I may paraphrase, I’m not making this up – “Hey Girl, I’m so glad we’re best friends, because I really hated you before but now we’re best friends right?!” And my daughter *pinned this* to her wall – her ACTUAL wall, in her bedroom!

Anyway, every so often girls in middle school end up squaring off – and the result is an embarrassment of small-minded but astonishingly machiavellian acts of cruelty. Little lies are let loose like sparks on a pile of hay, and soon a fire of social shunning rips through the school. Invitations are made, then retracted vigorously, and in public. Insults are veiled as compliments, and a girl’s emerging character strengths – a penchant for science perhaps, or a love of kittens for God’s sake – are expertly turned against her.

But this post isn’t really about middle school girls. Because we all know middle school girls – with love, patience, and copious wine (for the parents) – eventually grow up and out of such behavior.

Apple and Google? Not so much. And as an avid consumer of both these company’s products, I’m tired of it.

It’s the little things that pile up, the unnecessary lies and petty inconveniences. Like the fact that you need to install a javascript or browser extension to make Gmail the default mail application on your Mac. Because, you know, everyone knows how to do that. Or that you need a third party app (and a degree from General Assembly) to make music and movies purchased on Google Play work in iTunes, or vice versa. Or that Apple won’t let Google index apps in the iTunes store, because, you know, that Google mission of making the world’s information useful and accessible sounds suspicious, right?

Or – and yes, this is the one that pushed me to write this post – that you have to follow an utterly convoluted five-step process just to make group texting work between iPhones and Android users – only to learn it doesn’t really work every time, and in fact, if you’re expecting an important text from someone with an iPhone, well, you better just man up and buy a f*cking iPhone too, loser.

I’m not even scratching the surface of the bullpucky these two companies are putting us through to create “user lock-in” and discourage consumer choice. I mean, we gave up on the easy stuff, like, oh I don’t know, a universal power cord that can charge any phone. Because, you know, why have standards when you can take forty bucks from some poor loser every time he misplaces his charger? Or, if you wanted to change your default browser to Chrome, you had to root around in Safari to do so (Google has since gotten around this)? And don’t get me started on Apple Contacts and Calendar…and getting them into Google’s universe. Yeah, it’s supposed to work. And no, it really doesn’t, not so much, and not so well. I’m six months and thousands of dollars into trying to make that work. Um, Google – tell me please why there’s no Google Calendar app for iPhone? Is it because…you know, Apple’s not cool anymore? Gah.

I bet I’ve missed tons of examples, but given the state of diplomacy in the Apple and Google worlds, I’m not expecting a solution anytime soon. The two companies clearly don’t want to play nice – Apple’s DNA is to lock you into their pristine, walled garden user experience, and Google certainly isn’t eager to encourage Android users to interact with iOS. Apple has kicked Google out of the default position for mapping in iOS, and many expect search to be next. The walls are getting higher, and the middle school girl behavior is likely to get worse.

To Apple and Google, I say simply this: For the sake of folks who love both of your product lines: Grow up. Please!

The Three Golden Rules of Naming Something

By - January 06, 2015

10645727_s(image) I love being part of naming something. It’s probably the flat out most fun you can have legally with your clothes on – but for many folks, including entrepreneurs, it’s the source of endless consternation.

It doesn’t have to be. Here’s how I think about coming up with a name for something – a company, a new product, even a project you might be working on.

Rule #1: Don’t Overthink It. A name means nothing till those using it make it mean something.

So be willing to consider non obvious, even crazy names. Google? I mean, really, Google? And….Yahoo?! Alibaba? APPLE?

In other words, don’t overthink the literal meaning of a name too much – a brand is nothing more than a cup you fill with meaning later – a vessel to hold what your brand ultimately becomes. (That cup metaphor, by the way, I stole from somebody famous at some point over the past three decades, and I can’t find the original source. Any help?!)

Rule #2: Narrative. The best names have a story behind them that evokes the purpose and mission of the thing being named. Google was a riff on a mathematical term that was almost unimaginably large (a googol, or 10 with 100 zeroes after it).  Big enough to tell the story of Google, which aimed to swallow and rationalize the entirety of the Internet. We gave my current company the name NewCo because it tells the story of how people are always striving to create new approaches to company creation, to do new things with companies – and often they call those things “NewCos” until they come up with a proper name. Sovrn was given its name because we wanted to evoke the idea of sovereignty on the Internet – our publishers are sovereigns over their particular domain, and our tools help those publishers be in control of their own fate.  And so on…. A name is just a word till it means something, and stories are how we give things meaning.

Rule #3: Find your Entendre. It helps when a name has a clever wink or nod to another meaning, an inside joke that your core community can believe in (and evangelize). Wired had this – it worked as an imperative “Get Wired!” – and it worked as a badge for insiders – “I’m Wired, are you?!”  The Industry Standard had at its core a goal of providing rigorous, high quality journalism to an industry overwhelmed with mainstream hype – so the name evoked old school newspaper naming conventions. Federated Media was so named because it told the story of federating many quality web sites together so as to have the power of one large site (Rule #2), but it also shortened to “FM”, which evoked the album-driven rise of quality rock’n’roll stations of the 1970s – and as founder, I always thought of blogs as the rock’n’roll bands of the Internet.

I could go on and on, but honestly, I think if you run a brainstorming session with these three rules in mind, you’ll find your name pretty quickly. Maybe in a subsequent post I’ll outline how to run these kind of brainstorming sessions. I still do at least half a dozen of these each year for friends and colleagues, and it’s a total hoot. The latest is a new publication called “Tincture.” More on that soon!

Predictions 2015: Uber, Google, Apple, Beacons, Health, Nest, China, Adtech…

By - January 04, 2015

1-nostradamus2015. My eleventh year of making predictions. Seems everyone’s gotten onto this particular bus, and I’m now late to the party – I never get around to writing till the weekend – when I have open hours in front of me, and plenty of time to contemplate That Which May Come.

There are several keys to getting predictions right. First, you need to pay attention to long term secular trends – big changes that have been in the works for a while. Second, you need to call the timing – will those trends break into the mainstream this coming year? Last year, for example, I predicted that 2014 would be the year that the Internet would “adopt the planet as its cause.” I think I was right on the secular trend, but utterly wrong on the timing.

Third, you need to pay attention to patterns that have yet to emerge, but have a high probability of breaking out in the near term. A good example of this is my declaring that Twitter would become a major media platform three years ago.

So what might happen in 2015? The year to come feels clearer to me than 2014, which I labeled “A Difficult Year To See.” Plenty of interesting technology, Internet, and media trends seem poised to break out in 2015. Here’s my cut at them.

1. Uber will begin to consolidate its namesake position in the ” The Uber-ization of everything” trend. When we think of Uber, we think of black cars, of getting around from one place to another. But Uber has the brand permission to expand its brand to mean more than transportation. If you think of Uber as a company that takes a previously expensive, complicated, and inefficient process and leverages the Internet, mobile devices, the 1099 economy, and logistics to create a 10X better offering, there’s no reason the company won’t identify and pick off one or more similar markets in 2015. Uber is already making moves in delivery, a natural adjacency, but I imagine the company may either buy or build its way into markets that feel – at least initially – a bit further afield.

2. Related, Uber will be the center of a worldwide conversation about the impact of tech and business culture on the world. Put another way, Uber will replace Google, Facebook, and Apple as the centerpiece of a debate around the change wrought by the powerful tincture of technology and capitalism. This has already begun, of course, but 2015 will be when it comes to a dramatic head. I’m not quite sure how, but it’ll be obvious when it happens.

3. Google will face existential competition from Facebook due to Facebook’s Atlas offering, to the point where Google will find a way to connect its search and personal data to its Doubleclick asset. This will require changes to long-held pillars of its Privacy Policy – and thanks to legal complications from its search near-monoply, these changes will be tortured and painful. But in the faec of Facebook’s superior personalization capabilities, Google will have no choice. Google has long owned web advertising through its consolidation of a universal adtech stack. It’s the default platform for both publishers and advertisers, the 900-pound gorilla of ad serving, measurement, and delivery. But Facebook is attacking Google head on here with a rebuilt Atlas product that allows advertisers to target users of its ubiquitous service across the web. It will take time for Atlas to grow into meaningful market share, but advertisers love high quality personalization, and that’s what Facebook offers. Google’s in a difficult position here  – its privacy position was crafted for a world where there was no meaningful competition in web advertising. Now there is. The phrase to watch is this one: “We will not combine DoubleClick cookie information with personally identifiable information unless we have your opt-in consent.”

4. The Apple Watch will be seen as a success. I know, I know, I’m wandering into a morass here, as many others have already predicted that the watch will or will not work in 2015. But the use case, to me, is simply too strong to ignore, and I believe Apple will be first to prove it. I think Fred’s post was misunderstood, he didn’t say Apple’s watch won’t succeed, he just said it won’t be an iPod, iPhone, or iPad. And he’s right – no way will Apple sell as many units as those hits. We’re talking fashion here, and not everyone wants an Apple on their wrist. But I think we’re all ready to stop pulling out our phone every time we get a new text, email, or social media update. And for a significant number of folks, the Apple Watch will be how we change that behavior.

5. And Apple Pay will not. Apple Pay is slick, and it works, according to those I’ve talked with (I don’t use an iPhone, so I am certainly at a disadvantage here). But I’m basing this prediction on my sense of market need – does the market need a new way to pay? I’m not certain the current system – credit cards, cash – is so inefficient that it will motivate consumers to switch en masse this year, and for Apple Pay to be a success, I think that has to happen. I’m not saying the service won’t show good uptake and growth, it most likely will. But until there’s an orthogonal reason to use it that gives us all a much stronger value proposition, I don’t think Apple Pay will take over the world. In five years, I’d say the reverse will be true, but by then, we’ll have universal expenditure tracking and integration with a larger ecosystem of financial management tools, an ecosystem that is still underdeveloped and fractured at the moment.

6. But Beacons will re-emerge and take root. Remember iBeacons? They created quite a fuss when launched some 18 months ago, but since then, no one’s really paid them much nevermind. That will change in 2015 as ambient intelligence starts to be part of the fabric of everyday life. By year’s end, beacons will be a red hot market, and a platform for many a startup funding round.

7. Google’s Nest will build or buy a scaled home automation service business. Nest is a home automation business, but it’s also invested in rolling trucks to help its consumers install its growing suite of gadgets. Why stop there? The modern home is now a complicated mess of mismatched technology – there’s spotty wifi that works in one room but not another, dumb phone systems that don’t integrate with anything, and AV systems that break down more than they work. Shouldn’t someone 10X the home technology platform? Yes! And Nest is the brand with permission to do just that. It won’t hurt that by becoming the best home system integrator in the world, Nest will sell a shit-ton of its own devices.

8. A breakout healthcare startup will emerge in the consumer consciousness. Hard to say which one, as there are a ton of them, but the time is ripe for a startup to breakout that changes how we view our relationship to health data and services. One such startup will become the darling of the press and the exemplar of how healthcare services “should work.”

9. A breakout mobile startup will force us to rethink the mobile user interface. The time feels right for a new approach to mobile interfaces, and tons of startups are busy rethinking the space (see my posts on the subject here). I’m not predicting that the “chiclet-ized” approach to apps and OSes will break down in 2015, that’d be too much change to happen in one year. But as with healthcare above, a startup will break out that opens the industry’s eyes to new ways of interacting with our mobile devices. It’s about time.

10. At least one hotly-anticipated IPO will fizzle, leading many to declare that the “tech correction” has begun. Will it be Box, Dropbox, or Square? Spotify, Pinterest, or even Uber? I don’t know, but with so many deeply funded startups in the IPO zone, and our current tech boom entering its fifth year, the cycle is poised to pendulate. And yes, I just used “pendulate” for the first time in my writing life.

11. China will falter. This may be controversial, but again, using my keys of “secular trends, timing, and emerging trends,” it strikes me that China is due for a correction of its own. The US tech markets have a complicated and fractious relationship with China, and now that Alibaba is public and reportedly acquisitive, all manner of issues will be forced to the front burner. The Valley is anticipating a flood of Chinese tech competition and lucre in 2015, and I can’t imagine this comes without policy ramifications. Used to be, China regularly spied on US corporations, and we shrugged it off. No more. China is widely understood to have a brittle, centrally controlled, and deeply corrupt power structure. I expect this mix of illegal behavior (the spying and corruption) and easy money will cause powerful companies in the US to lobby Washington for relief, and I expect Washington will be willing to take action. One to watch, to be sure.

12. Adtech comes back. Adtech, a sector that took a beating this past year, will once again be seen as a strong, investable market. The sector has matured, and is no longer dominated by one-note business models dependent on a culture of fraud. This trend has already begun to play out with acquisitions in 2014 – LiveRamp, Datalogix, Blue Kai come to mind. With major players like Oracle, Salesforce, Facebook, Adobe, SAP, IBM and Google battling it out over marketing automation, it’ll be a very good year to be a differentiated adtech startup.

Well, there’s a dozen predictions for you, and I feel like I could do another twelve. But I think I’ll leave it there, and leave it to the fates to see how I did in one year’s time. Happy New Year everyone, and here’s to a great 2015!

 

Related:

Predictions 2014

2014: How I Did

Predictions 2013

2013: How I Did

Predictions 2012

2012: How I Did

 

Thoughts On Alibaba

By - September 21, 2014

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(image WSJ)

A caveat before I think out loud, quite possibly getting myself into a running battle I know I can’t win: I’m not a public market stock investor, I’ve never been one, and take the following ruminations at the price they’re offered: IE, free.

But this Alibaba stock debut doesn’t smell right to me, and it’s not the company- which is certainly a huge success story inside China, driven by a scrappy founder with a laudable (if manicured) personal narrative.

That said, Alibaba’s star turn smells of collective greed, with a hefty side of whistling past the graveyard.

I wouldn’t be writing this post if I didn’t have some knowledge around the deal, at least as it relates to the culture of access enjoyed by those with relationships to investment firms. I’ve missed a TON of great deals over my career, mainly due to my being a journalist (or acting like one, as it relates to holding stock) for a large percentage of my working life. But over the past few years I’ve carefully gotten into investing, mainly in early stage startups. I don’t look to invest in IPOs, but every so often, about twice a year, they get offered to me.

This is what happened with Alibaba. I was given the opportunity to – possibly – invest a small sum in Alibaba about a month ago. I figured it was a no-lose deal, so I said “sure” and I didn’t give it much more thought.

But as the IPO drew near, I reconsidered that decision. Not because I thought the stock was going to tank right after the IPO  – I knew there was far too much money at stake, at least in the short term, for that to happen. No, I second guessed myself because I realized I honestly don’t understand the company, or the powers that control it. I pinged the fellow who had offered me the chance to invest, so as to recant my investment. But in the end, it didn’t matter. His fund didn’t end up getting an allocation of precious “at the open” stock anyway.

I can only imagine what it must have been like running that allocation, deciding who amongst all the wealthy, connected individuals and firms would get Alibaba stock at the opening price. It’d be like doling out rigged lottery tickets – everyone’s a winner! One thing I am sure of – it wasn’t a fair process, and I almost ended up benefitting from it by happenstance. So here’s why I am concerned about Alibaba, in no particular order:

1. Greed. The company was considered, by everyone I’ve spoken to, a “sure bet” that would “pop at the open” just like the Internet stocks of old (and it did!).  And yet, everyone that I have spoken with also believes that Alibaba is an offering that encourages the kind of negative Wall Street behavior none of us really want to see happen again. The book closed early. The stock priced above its initial range and moved up by nearly 40% on its first day of trading. Financial institutions, uncertain if they were going to get the allocations they wanted, started currying favor and hustling and pleading and whining. There was a frenzy of money making activity going on, and it felt like…pure greed. Alibaba is the ultimate insider’s stock – pedestrian retail investors did not get access to shares at the opening price, and most likely they will be the sheep to whom the wolves of Wall Street quickly sell (if they haven’t already). Insiders – wealthy people with access to early distribution of IPO shares at the open, have already made their fast buck. And the ultimate insiders have made a huge killing: a consortium of big banks poured $8 billion into Alibaba this June at a $50 price, a quid pro quo if ever there was one for giving a Chinese company access to the US markets. This kind of behavior adds questionable value to our society. I don’t doubt that everyone who held pre-IPO or at-the-IPO shares will make money, in fact, I’m sure of it. And that smells of a rigged game.

2. Shallow understanding. If you’re reading this, and you bought the stock at $93 (roughly the price of its first public trade, up from $68), tell me – have you ever used Alibaba’s services? Do you really understand the company? I doubt it, because Alibaba is a Chinese company. Most of us here in the US don’t speak Chinese, or have a reason to use Alibaba’s services. But for some reason we all seem willing to buy into the “Chinese eBay,” or the “Chinese Facebook,” as if throwing those successful public companies’ reputation over Alibaba’s frame somehow equates to quality. It’s a “bet on China,” as most of the press puts it. Certainly that sounds good, given the country’s growth and early stages, but it leads me to wonder… will most analysts who are covering the stock have done core due diligence on Alibaba – the kind where you go to the market in question and talk to customers, suppliers, and regulators? That would mean they have access and understanding of the culture that controls Alibaba, and I’m pretty sure that culture will not ever allow such diligence to occur (more on that below). What bankers and analysts will tell you is they’ve run the numbers that Alibaba has given them, and they are fantastic. Then again, so are the numbers on Chinese GDP growth – and most well informed people I’ve spoken to say those numbers are unreliable. (Oh, and by the way, if you think the $81 billion China just injected into its own economy was a shrug, I guess you should buy Alibaba without concern). Which leads to…

3. Controlled by a corrupt government. Do you know how China works? I don’t, but I’ve talked to enough folks who have lived and worked in China to get a pretty clear picture: The economic and government culture does not hew to US standards, to put it mildly. And like every other company in China, Alibaba is ultimately controlled by the whims of the Chinese government. It’s something of an open secret that Chinese corporate culture is definitionally corrupt by US standards. So…does listing it on the US stock markets change this fact? I could be wrong (see my caveat at the top), but I don’t believe it does. At least when companies are corrupt in the United States, we have a free and open press, and a democratic rule of law, to keep them in check.  One could reasonably argue that it’s a supreme proof of our capitalist system that now Alibaba is public in the US, so it will now have to play by US regulations. I wish I could buy into that narrative, but I sense all we’ll really get is a company well versed at playing our game, rather than a company that is an active builder of value in our society and in other free markets.

Let me put this another way: Here are a list of Internet leaders who decided to forego China, because the government has made it nearly impossible for them to do business in the way that built our capital markets: eBay, Yelp, Twitter, Google, Facebook….and that’s just off the top of my head. So by buying into Alibaba, we’re buying into a system that has, through government fiat, denied innovative US companies growth in the world’s largest market, then capitalized that fiat into a stock it’s now selling back to us. Again, that just seems wrong.

4. Hazy growth outside core markets. Many observers are expecting Alibaba to come into the US and other large markets, and either buy or compete its way in, so as to fuel its long term growth. This I find to be difficult to believe, on many levels. Sure, Alibaba could try to buy…Yahoo!, Yelp, Twitter, hell, maybe even Box or Square or one of the other heavily funded “unicorns.” But…does anyone really believe it can *manage* those companies to success post transaction? To get a sense of how odd that sounds, imagine Google or Facebook buying a slate of Chinese companies and then managing them well. Sounds pretty risky to me.

Anyway, I’ve gone on long enough, and undoubtedly I’ve managed to piss off any number of friends and colleagues across multiple industries. So let me repeat: I’m no expert in Chinese markets, nor am I a professional public market stock investor. I’m just an industry observer, making industry observations. Caveat emptor.

A Print Magazine Launch? What?!!! California Sunday Is Coming

By - September 15, 2014

CaliforniaSundayMag_Logo_JPEGA year or so ago Chas Edwards, a colleague, pal, and member of the founding team at Federated Media, came to my office for a catch up. I had heard he was cooking up a new venture, but I didn’t know the details.

Little did I know what Chas and his new partner Douglas McGray had up their sleeve – a new *print* magazine built specifically for California.

But…print is dead, right? Apparently not. Chas and MacGray have a thesis that California is ready for a well-written, beautifully designed print publication, and all that was standing in their way was the cost of circulation, a major impediment in today’s market. They solved that issue with a clever hack of today’s newspapers – California Sunday is distributed free inside selected California newspapers. In essence, they’re piggybacking the launch of their brand, adding a valauble new product to what is a staid and attenuated newspaper brand.

But that’s not the only asset the team is bringing to bear. California Sunday also has a successful event strategy – it’s folding McGray’s popular “Pop Up Magazine” series into the company as well. And it has built a studio to help brands execute content marketing inside the magazine’s pages. Oh, and it has some of the best talent in the state, from Michael Pollan to Farhad Manjoo, as contributors.

Back in 1991, I prototyped a magazine called “The Pacific” based on similar goals to California Sunday. Ten years later, I taught a course in magazine publishing with Clay Felker, the late publishing legend who retired to Northern California and always dreamt of creating a pan-state publication (he tried, and failed, with New West). Now Chas and Douglas are giving it a go, and I think they have more than a fair shot at making it work. And yes, I’m an investor!

California Sunday launches October 5. You can read more about the publication here, and follow its Twitter feed here.

Life Break: Go See “Take Me To The River”

By - September 10, 2014

It’s rare I write about things not directly related to the Internet industry, but the film Take Me To The River, a multi-year project helmed by my friend and colleague Martin Shore, is certainly worthy of a detour. If you love music, any kind of music, this film is a must.

Martin first told me about this project more than five years ago, back then, it was going to be an album bringing together R&B legends with emerging rap artists from the Memphis area. But as he began to produce the tracks, a film emerged, one that not only tells the extraordinary musical stories, but also the story of America itself, an America that still struggles with issues of race and inequality.

Memphis is the heart of American music, from its fertile and conflicted soils have sprung some of the most influential artists in rock and roll – from Elvis to Britney, Al Green to Isaac Hayes, Booker T to the Staples Singers. But Memphis is also a network, an ecosystem, and a feeling – a place that created Stax Records, the Royal Studios, Zebra Ranch, and “the Memphis sound”, and a place where America experienced the most jolting pain of its ever-present race issue – the murder of Martin Luther King, to name only the most poignant milestone in Memphis’ history.

But if you are concerned the film might be preachy or dull, you’re entirely mistaken. Instead it is uplifting and emotional. If you ever wondered how Snoop Dogg gets his chops on, you’ll see it in this film, as he executes an impromptu duet with legend William Bell on Bell’s classic “I Forgot To Be Your Lover.” And you meet deeply soulful characters like Skip Pitts, one of the most celebrated blues guitarists in the world, as he interacts with Little P’nut, a young rap star. The result is both funny and touching, I choked up when the film noted Skip’s passing just months after recording that final session for the movie. In fact, several other Memphis legends passed away in the year between the film’s shooting and its final cut. Driven by an internal urgency that I could always sense each time I saw him over the past few years, Shore has managed to capture a piece of American music history that will live forever. The final scene – a collaboration between quintessential blues/gospel singer Mavis Staples and the genius talents of young musicians Luther and Cody Dickinson, is just brilliant and joyful. It left me happy to be alive.

Take Me to the River is debuting in San Francisco this Friday, and from there it opens across the States. Every once in a while a film comes along that reminds us why we care so much about human connections. This is one of them. Highly recommended.

 

PS – For a taste of the Zebra Ranch, here’s notes from my only visit to the place, with Martin, back in 2007. 

NewCo Sizzle Reel, SF Sked Are Up!

By - July 30, 2014

It’s hard to describe what it’s like to attend a NewCo till you’ve been to one, but this video, below, should certainly help. It comes right on the heels of NewCo’s SF schedule going up, which for those of you who’ve never been is like announcing the lineup at Bonnaroo for those of us in the NewCo world. In SF, companies opening their doors include Medium, Carbon Lighthouse, ACT, IFTTT, the melt, Lit Motors, Salesforce, Bloomberg, OpenTable, Scoot, NextDoor, and 100+ more.

Here’s a post announcing the schedule going live – companies fill up fast, and the only way to ensure you’ll get in is to get a VIP or Reserved ticket. But if you can’t pop for the $90 (Reserved) or $295 (VIP, including kickoff party), never fear. NewCos are always free to the public after Reserved and VIPs pick their schedules.


On Media, Ro Khanna, the NSA, and the Future of the Internet: Bloomberg Video

By - July 02, 2014

I had a chance to go on Bloomberg today and co-host with Cory and Emily, which was fun. They asked me about my post on Monday, and I answered thusly:

I also got to help interview David Medine, who chairs the privacy task force for the Obama Administration:

And Ro Khanna, who is running for Congress in the heart of Silicon Valley:

And lastly, I got to opine on the future architecture of the Internet: