Archive for January, 2012

Economy: The media’s “improving economy” this election year exists only in Democrats’ talking points. A new congressional report shows that joblessness is underestimated, while debt skyrockets.
Thirty-six pages into the Congressional Budget Office’s “Budget and Economic Outlook: Fiscal Years 2012 to 2022,” released Tuesday, is the news that “the unemployment rate in the fourth quarter of 2011 would have been about 1 1/4 percentage points higher than the actual rate of 8.7%” once the “unusually large decline over so short a time” in labor…

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Follow Yahoo!’s The Daily Ticker on Facebook here! Home prices continue to fall and the trend continued in November, as prices dropped more than expected. The latest S&P Case-Shiller 20-city composite index of home values showed prices were down 3.7% from the same period in 2010 and down 0.7% from October. Economists had predicted a [...]

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Follow Yahoo!’s The Daily Ticker on Facebook here! Mitt Romney is back, at least for the moment, after a double-digit loss to Newt Gingrich in the South Carolina Republican Primary over a week ago. Two polls released ahead of Florida’s Tuesday primary show Romney now with a double-digit lead over the former Speaker of the [...]

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Once again, the regulators in California have decided to lead the nation in terms of vehicle emission standards, proposing to require that 15.4 percent of all vehicles sold by 2025 must be electric cars, plug-in hybrid cars, or (currently non-existent) fuel cell cars.
In case you’re wondering why this all sounds familiar, it’s because California is re-running the same delusional program that it ran in 1990 (Yes, 22 years ago) when “Specifically, the Air Resources Board (ARB) required that at least 2 percent, 5 percent and 10 percent of new car sales be zero-emitting by 1998,…

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By now Americans have heard just about every idea on how to fix our dismal economy, and we’re only half way through the presidential election campaign. Much of the talk has centered on seemingly technical issues: the best tax policy to create jobs, the right design for programs to retrain those out of work, the best ways to measure and improve our schools in their jobs of educating the next generation of worker.
A worker’s economic fortunes, however, aren’t solely a function of his training and intelligence, or of the opportunities around him. They are also the product…

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Back in August Marc Andreessen wrote an article in the Wall Street Journal explaining why Software is eating the world. His main observation was that the fastest growing companies in almost all industries are betting their future on software. He gave several examples of which the best two from a breadth of industry perspective are Amazon and Disney/Pixar:

Perhaps the single most dramatic example of this phenomenon of software eating a traditional business is the suicide of Borders and corresponding rise of Amazon. In 2001, Borders agreed to hand over its online business to Amazon under the theory that online book sales were non-strategic and unimportant.

Oops.

Today, the world’s largest bookseller, Amazon, is a software company—its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary. On top of that, while Borders was thrashing in the throes of impending bankruptcy, Amazon rearranged its web site to promote its Kindle digital books over physical books for the first time. Now even the books themselves are software.

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The best new movie production company in many decades, Pixar, was a software company. Disney—Disney!—had to buy Pixar, a software company, to remain relevant in animated movies.

The ‘software companies win’ trend is highly visible in many other industries as well – e.g. entertainment (Netflix, Zynga), music (Spotify), direct marketing (Groupon), telephony (Skype), and recruitment (LinkedIn).

I’m thinking about this today after attending a one day session of the Singularity University (SU) in Rotterdam yesterday. The Singularity University was founded by Ray Kurzweil and Peter Diamandis to “assemble, educate and inspire a new generation of leaders who strive to understand and utilise exponentially advancing technologies to address humanity’s grand challenges”. That’s a big vision and yesterday was an inspiring day. Kudos to Yuri van Geest for putting it together.

“Exponentially advancing technologies” are the three most important words in the SU vision. The most famous exponentially advancing technology is computer processors whose power doubles every 18 months (Moore’s Law) but many other industries are now progressing at similar rates. The folk at SU have done a lot of work on this and it turns out that once an industry becomes digital then it jumps onto an exponential progress path and stays there. Computer processing power has been improving exponentially for over 100 years now.

Before I go on I want to take a moment to dwell on the implications of exponential progress. The physical world in which we evolved operates linearly and our brains are hardwired to think accordingly, and because we extrapolate linearly we routinely under-estimate the impact of technologies that are growing exponentially. Global phone penetration is a good example of technology that grew exponentially and analysts routinely made projections based on linear extrapolations and saw the market come in ahead of expectations. I need to look at the data, but it seems to me that the same thing might be happening to mobile advertising now. Underestimating a market generally means missing an opportunity.

I think there is a link between software eating the world and digital industries enjoying exponential growth. Software is digital, and industries that are dominated by software will innovate and grow faster, and, most importantly, the players within those industries that move towards software first will out-perform the laggards.

We spent a lot of time at SU yesterday discussing how biology and healthcare are becoming digital industries. The cost to sequence a human genome is now around $1,000 and is falling by up 80% a year and there are new technologies for synthesising and manipulating DNA which are abstracted from the physical process. Innovation in healthcare is moving from being expensive, lab based, and rooted in manual process, to inexpensive, office based and rooted in digital process. In other words it is becoming software oriented and will move onto a path of exponential improvement. This is tremendously exciting from the perspective of startups, and of world health ) . The applications will be both medical (better, more targeted drugs) and health oriented (e.g. diets customised to your genetic profile, low carbs for one, low fat for another). This is still futures, but it is no longer too far out.

3D printing was also prevalent on the agenda, because 3D printing makes industries digital. We saw details of a conceptual design of a 3D printer that prints houses – one ever 1.5 days. Similarly printers for meat and even human organs are in the works.

Back to the bigger picture, if biology can be understood, modelled and manipulated digitally, and 3D printing advances as expected then almost every industry is vulnerable to digitisation and innovation will become software based. The importance of software will be even more widespread than Marc Andreessen imagined.

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Follow Yahoo!’s The Daily Ticker on Facebook here! After months of breathless anticipation, Facebook is finally preparing to file documents in preparation for an IPO. According to reports, the company will file a prospectus with the SEC this Wednesday. This document should lay out the company’s financials and business in extraordinary detail and start the [...]

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“I’m telling you that the cure is the disease. The main source of illness in this world is the doctor’s own illness: his compulsion to try and cure and his fraudulent belief that he can. It ain’t easy to do nothing, now that society is telling everyone that the body is fundamentally flawed and about to self-destruct.” The Fat Man, The House of God, by Samuel Shem, p. 215
When doctors are asked what novel best describes what it’s like to work in a hospital, Samuel Shem’s 1978 classic, The House of God, is frequently the answer offered up. Though television…

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“Save yourself - some money.” Those were William Shatner’s last words as Priceline’s “Negotiator.” The discount-price travel booking site apparently killed off the television and movie legend last week in a TV advertisement. In the commercial, which has been airing nationally and will also be shown during the Super Bowl pre-game show, Shatner’s character saves [...]

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NPR and ProPublica released an explosive report Monday that found government-owned mortgage giant Freddie Mac betting against the very homeowners it is supposed to help. According to the news article, the investment division of Freddie Mac (or as Henry calls it, Freddie’s “gambling desk”) placed billions of dollars of bets against homeowners who were trying [...]

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Follow Yahoo!’s The Daily Ticker on Facebook here! The late 2011-early 2012 rally is facing its first real challenge amid a string of negative headlines coming from (you guessed it) Europe. European stocks tumbled and yields of Portuguese debt surged to Euro-era highs Monday as EU finance ministers gathered for their first meeting of the [...]

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Follow Yahoo!’s The Daily Ticker on Facebook here! In his State of the Union address, President Obama called for Congress to pass a mysterious, miracle plan that would allow all Americans under water on their mortgages to refinance, saving around $3000 a year each. The next day, Ben Bernanke talked about “problems in housing finance” [...]

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Provided by Business Insider: I spoke with Yale professor Robert Shiller in Davos earlier this week. Shiller has correctly identified (in advance) two major price bubbles in recent decades—the stock market bubble of the late 1990s and the housing bubble of the late 2000s. One of the key attributes of most bubbles is that, when [...]

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It seems that every other startup we see these days espouses lean principles.  I’m not always sure that there is a thorough understanding of what that means though.  Partly for this reason I recently wrote a post about how Path and Flipboard are seemingly abandoning lean startup principles which, combined with discussion in the comments, raised a few interesting questions about the implementation and applicability of lean startup principles.  We have now put those questions to Eric Ries, who was in town last week for the launch of his book Lean Startup – The Ultimate Guide to Lean Startup.  The questions and answers are presented below.

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(Nic) At companies like Path and Flipboard they believe that high design values are a key part of the value they provide to consumers.  According to lean principles they should test that hypothesis as quickly and cheaply as they can, but delivering a high quality well designed user experience takes time and fast learning may not be possible.  How should companies like this approach product development?

(Eric) It’s a great question, the two things are not necessarily mutually exclusive. Even great design can be tested. Often, customers care less about the things that you think they will. At IMVU for example, we set out with some very high expectations about the quality of what we wanted to deliver but using Lean Startup principles we discovered something very interesting. We wanted our avatars to move around virtual environments in a very ‘real’ way. We wanted to build physics engines into the system that offered a very high degree of realism. This was really, really, hard to do. We tried a very clunky, simple approach to the problem instead. Our avatars moved instantaneously from where they were, to where they wanted to go. Inelegant and simple. Customers loved our ‘Teleport’ feature. The cost of delivering the solution we wanted to just didn’t make sense after that.

(Nic) Short iteration cycles and rapidly validating learning are key tenets of the lean approach.  These can be challenging on mobile given the time it takes to get new versions of apps approved and live in stores.  Is ‘lean’ therefore less applicable on mobile?

(Eric) It certainly makes it harder to do continuous deployment! The feedback that you can get from even a relatively small set of customers/testers though is always going to be helpful in focusing your development activity on the things that matter. The feedback you can get, even from a relatively small number of test users should be enough to give you real insights into what is valuable to people if you know what questions to ask and are honest about what you learn. Releasing a version of an App with new features that then becomes more popular, does not necessarily mean that those features are the reason that the app has become more useful. You need find ways to understand what customers are actually doing. Given the constraints of App Store approval, you also need to be able to see what customers are doing with the new app. Find some users that you can observe in the wild. Sometimes, the qualitative information that you can get from observing 10 or even 20 users will be as valuable to you as a bigger dataset of 1,000s.

(Nic) Does producing a minimum viable product in advance of a company having a commercially viable product just tip competitors off to what we are doing?

(Eric) This is a question I am always asked. People always overvalue their ideas and it is natural for people to want to protect their IP. Entrepreneurs should always try to find a way of socializing their ideas and getting feedback from real people – your friends are always going to be encouraging! Try this experiment to see how unlikely it is that someone will steal your idea. Take your second best idea for a business and try to get someone to steal it. Even if you sat down the lead product management people in the biggest company in the world and offer them a solution to a problem they have had forever, it is almost inconceivable that the idea will be ‘stolen’. (Note – Eric seems to have answered a different question here – i.e. will launching an MVP get my idea stolen?, rather than will launching an MVP damage my brand?)

(Nic) Most of the discussion around lean relates to consumer services where the cost of failure is minimal. Are lean principles equally applicable to startups with who are building products their customers will rely on for mission critical systems (e.g. banking systems, security software, some healthcare services) or which require significant capital investment (e.g. semiconductors, some cleantech)?

(Eric) There are always situations where lean startup ideas will be less important – frankly, if you know you can develop a successful cure for cancer, you don’t need to spend too much time validating the idea. In this situation the risk is in technology development and execution, not in the addressable market. For large scale, long term projects however, there is almost always a case for a company to remain focused on the important stuff. Organisations should not be afraid to change direction in the light of market feedback and that can come from iteration between the business and technology people. Let’s say you are building a piece of hardware that enables simple, high quality video conferencing and it will take two years to go from idea to market ready product. If you are not constantly aware of what the market is doing, you could easily end up with a product that is well designed and beautifully coded, but is just redundant as other products are bought to market. I think one of the most important things for the organization to understand is that just because someone has spent hours building something, it doesn’t make it right. If an engineering team has invested 5 person years to develop a solution that still requires 2 more years of work to finish, and the problem is solved elsewhere, how responsible is it to continue that development?

You can also find ways to test and prioritize your development on long term projects. That video conferencing startup for example could build web sites or landing pages that offer elements of their solution to the market and then observe which ones get the most interest. This might not be perfect data, but it is likely to be more useful than no data  at all and a long list of unprioritized features.

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