Only a few weeks ago, there was rampant speculation in the financial community that the Financial Stability Oversight Council (FSOC) - the super-group of regulators established by the Dodd-Frank Act to prevent future financial cataclysms - was on the threshold of designating Metropolitan Life as the third insurer (after AIG and Prudential) to be “systemically important.” This would have meant that the Fed would have been able to impose potentially tougher capital and supervisory rules on the company than state insurance regulators currently do.But the FSOC didn’t act as expected (though it…

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The American Enterprise Institute-Heritage Foundation China Global Investment Tracker follows Chinese investment all over the world. Through June 30 2014, and excluding China’s gigantic holdings of American treasury bonds, the U.S. had received over billion in Chinese investment. This is the most of any country, and much more could be on the way.What Has HappenedChinese (non-bond) investments in the U.S. range from minority stakes in large financial enterprises, to outright purchases of small medical companies, to the building of office towers in major cities. Last year saw a record…

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It’s a common refrain that the process by which apps are found or discovered is broken. Discovery and hence download volumes are driven more than anything by ‘app store placement’ and by being ‘featured’, both of which seem to be more down to the whim of Apple and Google than the merit of the app. What we need is an equivalent of Google’s Page Rank, but for apps. That way good apps would float to the top and discovery would be more meritocratic. That would be better for startups who often have great products but lack the resources or the networks to curry favour with Google and Apple.

The current discovery process isn’t completely broken, in that Apple and Google do take the quality of the app and it’s popularity into consideration, but it isn’t right. Consider these stories. Two similar stage startups that we are close to have recently been playing the App Store game with Apple. They both networked hard to get close to the right people at Apple, developed features that Apple suggested they should and then held back release of those features in the hope of getting promoted. One got promoted in a big way (Stylect) and the other got only a low placement in an App Store category with little traffic. Neither knew until the day of the promotion. That can’t be the best way to do things.

However, Apple and Google are both heavily invested in the status quo. Their app stores earn them a lot of money and are a protective moat for their mobile phone businesses. So I’m not expecting things to change quickly. Thus I was surprised to read this morning that app store competition is increasing. Tomasz Tunguz has found that app store volatility has increased substantially over the last twelve months which indicates that new entrants are doing better and that discovery is getting less broken.

That’s a little bit of good news for startups in an area where they don’t usually get much. I like to think that one day we will have an open system on mobile, but until we do life will be harder for young companies than it needs to be and we will get less investment and innovation in mobile than we could.



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President Obama’s new “Fair Pay and Safe Workplaces Executive Order” requires federal contractors to disclose labor law violations for the past three years to the government before their contracts can be approved. Violations of 14 labor laws, including the Fair Labor Standards Act, the Occupational Safety and Health Act, the National Labor Relations Act, and the Family and Medical Leave Act, must be reported to the contracting agency, and repeat violators will not receive contracts.
The executive order, signed on July 31, leaves the administration with enormous discretion for enforcement and…

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In recent years, a growing wave of economic populism has heralded the clawback as a useful check on the misdeeds of corporate managers. Generally, a clawback attempts to regain previously conferred monies following a triggering event, usually involving some change in circumstance. In its simplest form, the clawback is a mechanism to recoup compensation paid to an executive if it turns out that things were not quite as rosy as they first appeared.
Clawback provisions were included in both the Sarbanes-Oxley Act following the collapse of Enron and the American Recovery and Reinvestment Act…

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Any discussion of the top hotels in Washington, D.C. always includes the Four Seasons, which is situated at the eastern edge of Georgetown. There are arguably better ones in the District today, the new ones a function of D.C. experiencing a boom with money taxed away from its subjects in the fifty states, but even amid a great deal of hotel growth on the very high end, the Four Seasons remains very much part of any conversation about the best.
This is worth bringing up in light of a visit there last week. Precisely because it’s such an impressive hotel, the Four Seasons’ lobby and other…

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At Forward Partners we invest in early stage companies in the ecommerce ecosystem, often from company inception. Much of the time, then, there are no customers who have bought the product, and often there isn’t even a prototype we can look at. We have to evaluate the idea and conversations with potential customers are one way of doing that.

Everyone understands, by now, the importance of talking with customers to validate business ideas. However, few entrepreneurs do it well, and recently I’ve noticed that companies are asserting the quality of their customer discussions based on the number they’ve had rather than the quality. A typical conversation might go like this:

  • Me: That sounds like an interesting idea. Have you spoken with any potential customers?
  • Entrepreneur: Yes! We spoke with 150 customers.
  • Me: Mmm, that sounds like a lot. What did you learn?
  • Entrepreneur: That they totally want our product.
  • Me: Ok, but why, and what have they done in the past that suggests they will make the effort?
  • Entrepreneur: We didn’t ask that question.

I recently blogged about the customer discovery process at our portfolio company Lexoo. Daniel van Binsbergen, the founder, spoke to 20 customers and including the time to set up the conversations and write them up afterwards it took pretty much all of his time for two weeks. Those 20 conversations taught Daniel an incredible amount about his business and his answer to my ‘what did you learn?’ question would have been more detailed and much stronger (read this post for details).

Talking to customers should be a discovery exercise, not a tick box exercise, and hence a small number of high quality conversations is much better than speaking with lots of people. With quick and poorly constructed conversations It’s easy to get lots of falsely positive validation (people who are nice and poor at predicting what they will do saying they will buy your product). I’ve said it at least twice on here now, but The Mom Test is an excellent guide on how to do it well. We’ve also found that it’s helpful to have someone from outside of your company join the discussion as they are able to listen impartially and avoid confirmation bias.

 



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Call it the great “slack” debate. For nearly six years, the Federal Reserve has held short-term interest rates near zero to boost the economy. Is it time to consider raising rates to preempt higher inflation? The answer depends heavily on the economy’s slack: its capacity to increase production without triggering price pressures. Although economists are arguing furiously over this, there’s no scientific way to measure slack. Economic policymaking is often an exercise in educated guesswork, built on imperfect statistics, shaky assumptions, incomplete theories and political preferences. This is…

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Income focused investors are in danger. The conventional wisdom is that the older one gets the more bonds one should own, because bonds are less risky. Although U.S. government bonds MAY not have default risk, today they have enormous interest rate risk. In fact, we think bonds are among the most risky asset classes. Since 1981, interest rates on 10-year U.S. Treasury bonds have fallen from 15% to 2.5%. Since bond prices move inversely with interest rates, U.S. government bonds have enjoyed a 30-plus year long bull market. So too have other bonds that price off of U.S. Treasuries,…

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In all the talk (and little action) on tax reform, repeated voices have been lamenting how U.S. corporate taxes appear to be the highest in the developed world both on paper and in reality (the actual average rate usually being far below the stated 35 percent). While almost all parties acknowledge the anti-growth aspects of the current corporate tax system, at least a good number of those who will need to support tax reform hate to give away any tax revenue. The best possible compromise would be to eliminate all federal corporate income taxes while simultaneously ending the preferential…

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Last week, on July 30, the Republic of Argentina was declared to be in default for the third time in 30 years.
Let’s put that into perspective. If you were a bank officer who offered a 30-year mortgage to the Government of Argentina in the early ’90s you would have spent nearly the entire life of the loan in a perpetual nightmare of refinancing. You would likely be not only fired from your job, but a pariah in the entire industry. This is what Argentina’s international creditors and domestic citizens have faced in real life. At the time of writing this article S&P has downgraded Argentina to…

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Neel Kashkari, the Republican candidate for governor of California, just recounted in the Wall Street Journal his week on the streets of Fresno posing as a homeless man looking for work. At the end of his op-ed, Kashkari lamented that he didn’t need a higher minimum wage, paid sick leave, or a health-care plan. What he needed was a job.
And Kashkari made the important point that all those government benefits, especially extended unemployment benefits, are work disincentives that may actually block job creation.
To be sure, there are signs that employment in the country is rising more rapidly…

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…but the hustle is sold separately. I love this picture that was doing the rounds on Twitter this morning.

Dream Is Free

In English-English we would say something like ideas are cheap, and execution is everything. This is soooo much better. Dreams are more exciting than ideas and ‘hustle’ captures the work of startups much better than ‘execution’, particularly at the early stages.

One of the things that has worked well for many of the day-zero/solo-founder investments we make is to launch a concierge MVP where products are sold and manually delivered. That’s pure hustle. Hustle to find customers, to sell them, and then to deliver. Sometimes this place is buzzing with hustle as people work the phones. The learning that comes from that is immense and I love it.



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Tomorrow is an auspicious anniversary largely unknown to even confident observers of the panic period, with events of that date changing the very character of the financial system irredeemably. To dryly observe what happened understates the severity of the event, as London trading for “dollars” saw an inordinate discrepancy that cannot be fully comprehended by mere factual recollection. On August 9, 2007, 3-month LIBOR rose from 5.38% to 5.50%; a trivial number at first glance. But in the context of global dollar flow, it was an immense tremor that kicked off the spate of “emergency”…

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We’ve all been there before. Waiting endlessly for a taxi the dispatcher said was en route, but that never actually showed up. Standing in the rain on a street corner during a crowded rush hour, waving at one taxi after another, only to give up after realizing the effort was futile. Meetings were missed and opportunities were lost. But those who had cars? They arrived at their destination. Those with money to spend on limousine services? On time and in comfort.
Then came Uber, the ultimate market maker between passengers and drivers. Harnessing technology and recognizing the inefficiencies…

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