Talking about Others

I was shocked but pleasantly surprised when Jason Calacanis’ post, Note to self: stop promoting, start thinking again (or “Scoble’s Law”) came across my SMS feed.

It’s really hard when you’re excited about what you’re working on to not talk about it. Especially on your personal channels like your blog, Twitter account, and Facebook page. Over the past month I’ve tried to stop talking about my day job and latest project and focus 100% of my talking at conferences and most of the talk on my blog/Twitter account on general topics related to technology and business.

Robert Scoble, Jason Calacanis, Chris Pirillo, Dave Winer, and so many others have been my virtual guides through the blogosphere. While I have been involved with internet and web social networking since I purchased my first 2400 baud modem in elementary school, the blogosphere challenged me because I didn’t have virtual barriers protecting what I say from the Google search machine. Humbled by historic instances where I used my words as inauspicious instruments against my peers and competition, I viewed the blogosphere as a springboard to start over. Unfortunately, the behaviours that Jason is denouncing in his above post were prevalent, and my approach of only talking about others was misconstrued as being corporate and fake. But I continued on, blogging about the products I tried out and enjoyed.

Several video services are available on the web, but Viddler and Justin TV are two communities offering content produced by individuals. The former allows its community members to provide self-made content and tag it similar to a DVD. The community is also involved tagging video with subjects, comments, and video responses. Also, Viddler relies on its members to help remove copyrighted material, which mitigates the risk of a copyright lawsuit similar to what YouTube faces. The latter follows two people, Justin Kan and Justine Ezarik — also known as iJustine, who continuously broadcast video over the internet regardless of location. This service has a similar feel to The Truman Show and EDtv, offering a voyeuristic view into their lives.

The Future of Mobile Video and Television

When I started this blog, it was because I had a lot of ideas and I wanted to organize them. For a few months I had been keeping my thoughts offline in a journal and realized that if I published them, I would have an opportunity to help others and not just myself. The secondary benefits of this website have been to search engine optimize (SEO) myself as well as create a living, interactive resume. This is especially important to me because I was switching positions and have to ensure my online “brand” is professional. Appreciation goes out to Alex Hillman; a friend of mine from college, who helped me find hosting and setup my blog.

With the necessary infrastructure in place, it was time to fill the site with content. I chose to focus primarily on real estate because that is where my experience is concentrated. I started with basic ideas and have begun moving towards ideas that go into further depth. While updates have slowed slightly, it is due to a position change and updates will resume shortly. My new position will allow me to continue talking about real estate, and enhance my knowledge of commercial and industrial (C&I) lending.

Immediately I noticed the importance of Technorati and it’s tagging system, which is used to continuously index blogs. Within a days of posts, a search for my name in Google came up with this blog and my “about me” or resume page. I have also noticed that once my blog was filled with content, it was being accessed by a number of customers across the country. With my primary and secondary goals on track, I started to look into the numerous web applications available to help make my life more efficient.

Emurse is an online resume tool that allows you to create and store your resume online. A great feature of the site is that your resume is easily viewed with an option to download in a number of formats including rich text, pdf, and Microsoft Word format. Emurse also has a great profile section, which can be viewed from your resume page.

Twitter is a a mini blogging tool that asks one question: What are you doing? The service allows you to follow users or be followed. Posts are short; 140 characters to be exact, and can be sent or received through the web, standalone programs like Twitterific, text message, or the AIM instant messaging client. The service has been used in a number of manners including posting articles, documenting trips / events, and letting your friends in the area know where you are.

Netvibes was introduced to me this weekend by my friend Brad Levinson, and offers its users the ability to cater the web to their needs through RSS feeds. Content pages are organized by tabs and the pages are customizable from one to four columns.

Blogging and the Web: How it’s Helped Me and can Help You.

I came across trulia while completing market research for a potential customer. The site puts together a myriad of data in an easy to use format, that was previously difficult to find. Although the focus is for retail customers, there are a number of tools to aid your search of a potential investment property. My personal favorite is the “heat map” feature which compiles popularity trends on a state level to the neighborhood level for select cities. Data; whichincludes both actual prices and year-over-year percentage changes, can be sorted by average listing price, average sales price, median sales prince, price per square foot, and search popularity.

Buying a property? Need to do market research?

But I digress. Reflecting on Jason’s conversation, these are my four quick-hit tips on how I participate in conversations online and off.

Understand the concepts:

I have learned that details constantly change depending on the audience, and think of conversations as a pyramid. The top or “point” is a broad topic and the base expands exponentially with ideas, people, and continued conversation. This emphasizes a mindset that discards pre-conceived notions and focuses on progressive change.

Listen:

Listening is a simple form of feedback that provides an opportunity to learn from every conversation that you participate in. I listen by engaging my audience with consistent eye contact and ask questions about what they discuss. What I have found most difficult is reserving my personal opinion until I am asked, but find it refreshing to have productive conversations while saying as few words as possible.

Know your audience:

How you receive and provide feedback requires an understanding of the audience you are speaking with. Adaptability to a situation provides an open forum where both parties can build a continued two-way discussion of words and ideas. This open-mindedness allows for better management, products, and relationships between two parties; however, all feedback should be constructive.

Know where you add value:

Understanding your industry, art, product, and etc allows you to have the right conversations. Collaborate with those that have different strengths than you, ask the right questions, and the results will be positive. In addition, you create new contacts when questions arise in the future.

When utilized together, the preceding will help you participate and lead future conversations.

Technorati Tags: conversation, organic, coworking

Coworking: A Disruptive Innovation

During the tedious parts of my work day, I have been listening to the HBR IdeaCast Podcast. One of the recent topics was Disruptive Innovation, a discussion lead by Scott Anthony, who writes the Innovation Insights Blog at HarvardBusiness.org.

Disruptive innovation is using simplicity, convenience, and accessibility to transform existing markets and create new ones. Unlike sustaining innovation, which takes an existing idea or product and makes it better, disruptive innovation is achieved by thinking outside the box and changing the game. The everyday improvements to the web’s standards and technologies are a collective sustaining innovation of the internet, while the coworking movement and its embrace of technology to create a virtual office anywhere in the world, is a disruptive innovation to corporate america. The coworking movement has hit its stride due to a myriad of dedicated technology “geeks” that were tired of working thankless jobs in America’s corporations. Coworkers are a niche group of writers, developers, and other independent contractors that pool together their resources and share a common office space. These spaces are non-traditional work spaces offering a fun and creative culture for coworkers. According to the coworking wiki, there are locations throughout the United States and the world, including Europe, Asia, and Africa.

And to coworkers, with technology making communication easier and less reliant on distance, there is no better time then now to go out on your own. According to an industry report on Computer Systems Design and Related Services in the US; otherwise known as IT Consulting, 65% of revenues are derived from the business sector. This is further broken down to the banking, finance, and insurance industries comprising 40% of revenues. These traditional businesses are employing outside consultants to build software solutions to fill industry specific and cross industry needs. Fortunately for opportunistic entrepreneurs, IT Consulting has a low barrier to entry with approximately 84% of the companies operating as “micro entities”; or companies with fewer than 10 employees. These micro entities are the model that many coworking hot spots and their individual members utilize. This business model allows for an efficient company with low overhead, and infinite scalability for any project. What sets one company apart from another are three things; the ability to identify customers’ needs, pricing your services competitively, and quickly scaling your workforce to complete the project.

I have already encountered one company which uses a similar business model to fill a niche market in the banking industry. Beth Hamlin; one of the instructors from my credit training, is the Executive Vice President of Caliber Commercial Corporation, which provides credit analysis and training services to commercial lending institutions. This service fills a position banks need, while eliminating the expense of hiring and training internal personnel.

But it is important to caution all current and future entrepreneurs, to be wary of the micro entity model. Trying too hard to build a firm that is light weight and easily scalable, may possibly burden the firm with core and overhead costs that surpass the savings from being a scalable firm. The Undercover Economist Tim Harford passed along a coherent essay by economist Michael Munger on the theory of the firm.

Then one day, in one firm, one manager, perhaps on a whim, outsources the computer services or janitorial services or the legal advice. Not to India or Ireland but simply to another company across town or across country. The boss signs a contract, after taking bids from several companies that provide similar services. These companies are forced by the scolding winds of market competition to provide excellent service at low cost. By looking at the different prices in the bids offered in this competition, the boss learns something. He learns how much the service costs to provide. And he learns how much money he saves by laying off the employees who used to provide the service in-house.

It’s hard to fire employees, particularly since most employees are smart enough to work hard enough to get acceptable performance reviews. The boss also has a hard time motivating the in-house staff, because watching each employee is expensive and tiresome. But it’s easy to fire contracted employees, because you just sign a new contract with a competitor. Why not let the market system do your motivation work? Let’s suppose that our outsourcing boss sees the company’s profits rise dramatically, and the stock price goes up 18% in six months. Life is good, for the boss.

Hypothetically speaking, lets assume that Generic Firm; a mid-sized corporation, decides to redevelop their enterprise IT framework and outsources a portion of the web development needs to their local coworking office via a three month contract. It’s a beneficial deal for both parties because Generic Firm will save money on its head count (the number of people they employ) by outsourcing part of the project to a local company, and the coworking office receives a solid contract that can help keep the lights on for an additional three months. But the pressure now lies on the coworking office. Can they scale quick enough to accept the contract and cheap enough so the contract can earn a profit? The difficulty with a coworking workforce is that independent contractors are traditionally working on their own projects, and may not be available to work on Generic Firm’s larger project. Additionally, coworkers may expect a certain level of compensation which may not be in line with the monetary value of Generic Firm’s three month contract. If these difficulties are not addressed by the coworking office’s leadership, they may lose Generic Firm’s contract and future referrals from Generic Firm’s customers and vendors.

But I digress. Coworking takes advantage of an identified need for independent contractors to work with like-minded individuals. The business model has made office space simpler, cheaper, more affordable, and easier for independent contractors to access.

.info: economist

the dweezel info: how to create a budget

Every day that you open your mailbox, chances are there is at least one credit card offer waiting for you. Tempted by the gimmick of music, electronics, and air travel and we apply for the low interest rates and free balance transfers. We open up Pandora’s Box with the first swipe of the plastic.

debt dweezel info

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Spotlight: Friends for Sale

A picture is worth a thousand words…

Spotlight: MyFirstPaycheck.com

A few weeks ago at the Facebook Developers Garage in Philadelphia, I met Austin Lavin who is the young CEO behind MyFirstPaycheck.com; a website that provides suburban high school students with assistance in finding their first job.

Myfirstpaycheck.com was created by Celeste, a 16-year-old sophomore at Lower Merion High School and her older brother Austin, with the help from friends and family members. As Celeste set out to find her first job, she realized that she didn’t even know where to begin. The whole job world was open to her, which was a bit overwhelming and even intimidating. She sought help from her older brothers who have earned paychecks doing everything from mowing lawns to serving ice cream, but soon expanded her questioning to a broader circle of acquaintances.

MyFirstPaycheck.com - About Us

If you were a high school student, would you use Austin’s service?

How to be an online executive.

“To be humble to superiors is duty, to equals courtesy, to inferiors nobleness.”

Benjamin Franklin

Have a good weekend everyone.

- the bootstrap economist

.INFO: confidence, economist, humility

Microsoft and Facebook to Strengthen Strategic Alliance

As a progressively conservative businessman, I take an objective approach in my analysis of pending transactions, looking for value and risk that others may not see. One of the stories to hit the newspapers and blogs last week was the $10 billion to $15 billion valuation that Facebook is seeking from Microsoft. In an article at AllThingsD, Kara Swisher discusses her conservative view on the expenditures coming out of Silicon Valley and how they relate to Facebook.

Today, The Wall Street Journal follows up on my story by adding more interesting details, including the fact that Microsoft is seriously considering an investment offer that would value the company at $10 billion.

(Google might be in there too, according to the story, but I think it is just there to annoy Microsoft.)

In any case, this was the ludicrous price once floated by Founders Fund’s Peter Thiel, Facebook’s first investor, which was widely derided at the time he uttered it.

More laughable still is that Facebook, according to the Journal story, might be holding out for a $15 billion valuation.

Why? Because I believe Silicon Valley can now be considered to be at Delusional Level Red. Or green, given all the cash that is being shoved in Facebook’s direction now.
(Full article here)

In the shadow of the sub prime real estate crisis, I understand the fear about overvaluation and how it further stretches this bubble. The difference between this deal and to a certain extent the outright purchase of 3COM, is the amount of debt that is assumed by the investors. From what I understand about Microsoft’s investment, they are injecting their own cash which bypasses the leverage risk associated with most private equity investments.

A typical PE deal involves buying a company for 4-5x cash flow or EBITDA (earnings before interest, taxes, depreciation, and amortization) and injecting 20-30% of its own equity. The remaining equity would be borrowed from the banks and the debt would become part of the acquired company. This allowed investors to make small improvements to the acquired companies to improve performance and recuperate their investment.

However, over the past few years low interest rates made borrowing funds cheaper for the PE investors, and they began to overpay for companies. Prior to the subprime crisis, investors were paying upwards of 15x EBITDA for companies and did not have a viable plan to create value out of their investments. These overpayments increased the debt needed to complete the transaction, and while rates were low, interest payments were too high for companies to sustain themselves.
(http://www.techcrunch.com/2007/09/28/private-equity-eats-avaya-for-82-billion-and-3com-for-22b-burp/trackback/)

David Kirkpatrick, a Senior Editor at Fortune weighs in on the transaction, discussing the disruptive advertising effect that Facebook will have on Google and the Internet as a whole.

This matters in business terms because the Internet is rapidly moving toward a world in which advertisers are able to target their messages to those most likely to be responsive.

While this is often painted as an invasion of privacy, in fact it is a service. If these future systems work the way the ad industry expects them to, the ads we see will quite often be ads that convey information we want. If software algorithms can help marketers identify what sorts of goods and services we are most likely to buy, it is a benefit, not an intrusion.

Facebook may be the best place yet for marketers to experiment with these new techniques. Unlike its bigger rival MySpace, Facebook’s individual profile information is intended to represent a real person precisely and accurately. So by investing in Facebook, Microsoft - or Google or another intrepid company -may be buying access to a tremendously valuable testbed for the future of web advertising.
(Full article here)

Google’s approach to advertise the global internet landscape has caused them to lose focus on how to stay within their niche. Instead of focusing on being a top-tier search engine, they are trying to take Microsoft and Facebook head on by offering competing productivity software and social networks respectively — which are already saturated with competition. The problem is that they are following an acquisitive growth model and aren’t allowing their portfolio to take root with the company. This has in my humble opinion created an overvaluation of the company in the global capital market.

In comparison, Microsoft is valued at 1/20th of the price, pays a 1.50% dividend, has no debt, and a boatload of cash. They have tangible products in their software and consumer electronics divisions and have been planning their investments carefully. While I agree that Facebook’s valuation may be high, Microsoft is spending $500MM to buy a 5% equity stake in a web platform with 40MM+ users.

What I don’t understand is why the technology community keeps focusing on Facebook as just another “social networking website” that provides cute gimmicks to bubbly students. In my humble opinion, members of this community do not see the true value of Facebook’s growth because they joined the site three years after its start when the doors were opened to the public.

I first joined Facebook in September 2004 when it became available to my University. I was told about the site — which at the time was located at http://thefacebook.com, by my friend Sara who had used the site at WashU. Facebook’s strategy was to follow an organic growth model, building its user base by slowly expanding across college campuses. This created two effects: College students had an easy way to connect with each other and maintain relationships post graduation, and an opportunity to reconnect with people from their past.

Facebook was created to focus first on people we knew, not people we thought looked cute a-la Myspace. This is why the growth that Facebook sees now is sustainable until they mature, and why Myspace is increasingly losing its market share. A prime example of someone using Facebook against its intended use is Robert Scoble, who is proud that he hit Facebook’s limitation in connections. This attitude, which I find to be prominent in the technology sector, is that the internet is a popularity contest and they dilute the value of their friends / followers / connections / etc. Most sites on the Web maintain this attitude because it is their belief that the more eyeballs they have, the more money they can make through AdSense revenue. Eventually, we are going to reach a point where Google becomes too saturated with advertising partners that it will no longer be a strong source of revenue generation — a model that many new technology startups use.

Furthermore, the community is focused on Microsoft’s past ills and they forget the sheer amount of philanthropy generated by the Bill & Melinda Gates Foundation. Microsoft’s investment in Facebook gives Bill Gates an opportunity to act as an advisor to a young visionary, helping him avoid the mistakes that he made in the past with Microsoft. Together, Facebook and Microsoft can build an online business and entertainment platform that will revolutionize how the online landscape is monetized.

School: commerce, drexel

Banking in the United States - Why Regulation Works

I found this article through Netvibes and it ties in well to my series on Banking in the United States.

Online bank NetBank closed by U.S. regulators
FDIC to oversee customers’ access to insured funds
By Robert Schroeder, MarketWatch
Last Update: 6:11 PM ET Sep 28, 2007
WASHINGTON (MarketWatch) — U.S. banking regulators shut down a Georgia-based online bank on Friday due to high levels of mortgage-related losses.

The Office of Thrift Supervision closed down NetBank Inc. (NTBK) , a thrift with $2.5 billion in assets, and appointed the Federal Deposit Insurance Corp. as receiver.

The OTS said the bank experienced significant losses beginning in 2006 due to defaults on loans sold, weak underwriting, poor documentation, a lack of proper controls and failed business strategies.

It was only the second bank failure in the past three years.

It reminds me that we shouldn’t let new technology fuel our arrogance to reinvent the wheel. While the Banking system in the United States has flaws, the leadership in this country went through one humbling experience after another to get it right.

When the United States was still a colony, the financial system here was a complete mess. Unregulated, both the colonies and private institutions could issue paper money at will. Since there was absolutely no regulation, there was a likely chance that the institution would fail making your money worthless. Caught in the Revolutionary War without a way to finance it, the Continental Congress began printing its own currency. However, they saturated the market causing inflation; when too much money follows too few goods, making the money worth 1/100th of its face value.
Banking in the United States - Colonization to the Civil War

After the Civil War, it took nearly fifty years to create the Federal Reserve System — which is the dual control central Banking system that we have today. The National Banking Act was a step in the right direction, but it had its problems.

The National Banking Act was the seed that created the Federal Reserve System we have today, but the road was rocky. After The Civil War and up to World War I, 100 years of financial insolvency had severed the trust that that citizens had with their banks. This period of growth was tough because banks were still failing, the stock market was down, currency was disappearing, and people were panicking. The fear that financial institutions would fail became a self-fulfilling prophecy and for every step forward the country took two steps back.
Banking in the United States - The Civil War

The moral of the story is that before we consider sites such as Prosper and Lending Club as the saviour to central Banking, we need remember why we have this system in the first place. I read here that Lending Club is going to take on the United States banking system.

Lending Club also aims to be to the lenders rescue, positioning itself as offering investors “the ability to gain higher returns than those offered by CDs and savings accounts” while “benefiting from an asset class whose performance is more predicable than stocks and is not correlated to the stock market”

Without deposits, you lose stability and create a financial institution that has a greater chance of failing. The United States banking system has a deposit reserve in place that ensures its customers that if there is a widespread financial crisis, they won’t lose all of their money. While FDIC insurance only insures deposits up to $100,000, it is a start to rebuild your wealth.

The Banks will evolve and become net-friendlier, but will never be replaced by P2P lending.

School: commerce, drexel, economist

Banking in the United States - The Civil War

In the midst of the Civil War, banking in the United States was chaotic and unruly. With no central regulation by the states there were thousands of financial institutions and no confidence by Americans because they didn’t know if their Bank would be open the next day. In today’s financial market, it was the equivalent of banking with venture capitalists. In 1863, the National Banking Act privatized all national banks and created the Office of Comptroller of the Currency (OCC) for regulation. This created a check and balance system between private industry and the government to make the country’s money more secure. All the bank notes issued by these financial institutions were backed by an interest in the U.S. Treasury which created a transparent picture of the money supply in the country. Although State chartered banks remained, they were not a part of the U.S. Treasury and were more likely to fail than the national banks.

The National Banking Act was the seed that created the Federal Reserve System we have today, but the road was rocky. After The Civil War and up to World War I, 100 years of financial insolvency had severed the trust that that citizens had with their banks. This period of growth was tough because banks were still failing, the stock market was down, currency was disappearing, and people were panicking. The fear that financial institutions would fail became a self-fulfilling prophecy and for every step forward the country took two steps back.

School: commerce, drexel

Banking in the United States - Colonization to the Civil War

When the United States was still a colony, the financial system here was a complete mess. Unregulated, both the colonies and private institutions could issue paper money at will. Since there was absolutely no regulation, there was a likely chance that the institution would fail making your money worthless. Caught in the Revolutionary War without a way to finance it, the Continental Congress began printing its own currency. However, they saturated the market causing inflation; when too much money follows too few goods, making the money worth 1/100th of its face value.

To cure inflation, the First Central Bank of the United States was started in 1791 and was fully backed by the United States government. Any bank notes printed by the First Central Bank were redeemable in coin, which has tangible value. The bank was politically controversial and its charter (or authorization) was not renewed in 1811. Without a central bank, the states returned to authorizing their own bank notes and over-saturated the market again. With inflation running rampant, the Second Bank of the United States was started in 1816 to help finance the war of 1812. It faced the same political pressures as the First Central Bank and its charter wasn’t renewed when Andrew Jackson was elected president in 1832.

Through the civil war, the financial institutions in the united states were in a chaotic state. These banks were chartered and supervised by the states and were not heavily regulated. This created an opportunity for any institution that wanted to to print its own currency. At the peak, the United States had over 10,000+ variations of paper money making counterfeiting simple and hard to trace. As the Banks started to fail and consumer confidence dropped, the government needed a central system that worked.

School: drexel, commerce