Monthly Archives: June 2008

Twitter worth 1 billion in a year? No, make that 1.5 billion? Only in Silicon Alley.

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With apologies to Nate who sounds like a sharp and nice guy….

Today’s “only in the Silly Silicon Alley” post comes from Nate who is a new entrepreneur in residence at Rose and therefore really deserves more respect I suppose, but his idea, parroted over at Silicon Alley Insider sure sounds dumb to me – too dumb in fact to make it through the Silicon *Valley* peer review needed since the most important Twitter folks…live there.    Nate is seriously suggesting that Twitter could be quickly turned into a payment system which would immediately gain widespread use and respect in the tech community and thanks to all that use would give Twitter a valuation of … wait for it …  ON BILLION DOLLARS!  Just a moment, just a moment…. over at his own blog Nate’s making that valuation 1.5 billion.   Hey, what’s half a billion in the bubble economy, anyway?

The idea is, I suppose, OK as an out of the box thinking experiment, and it’s true people would jump from PayPal in a New York Minute because they are so usurous with fees, but I think it’s dumb for about a billion reasons.   Here are 3.5 of them:

* Nobody trusts Twitter to stay up, let alone handle their money, protect their checking accounts and credit cards, etc.

* Nobody sends a few bucks here and there very often –

* C’mon Nate, you can’t develop a billion dollar website 1.5 billion dollar website based on people sending a few bucks back and forth.

* The short symbolic chatter at Twitter will not be a comfortable way for most people to send money, even those that *are comfortable with* symbolic chatter.    Moving money is important and you want some checks and balances on your own quick activity.   Paypal has it’s problems, but it’s secure and intuitive for most transactions (though not all – I’d be thrilled to see some competition from Google checkout in this space).

Facebook, Facebook Get Ya Facebook Shares at 80% off

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TechCrunch is reporting that an insider at Facebook is shopping his shares at 80% off the normally quoted (and probably absurd) 15 billion dollar valuation.   TechCrunch is also suggesting that even Mark Zuckerberg is willing to sell shares at a price consistent with a 6 billion valuation for the company.

Like Arrington, I’d also like to take one share of Facebook.  For me please add a Coke and a Cheeseburger.

The 15 billion never made any sense, and as it becomes clearer that social networking won’t monetize well their perceived value may quickly drop below a billion, though that would still be one heck of a payday for Mark Z and the gang.

No VC for you! Zero IPOs in Q2 2008

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The New York Times is noting that there have been no VC funded IPOs in this second quarter of 2008, which appears to be the first time that has happened since 1978. I haven’t done enough research to suggest this is a huge anomaly but I think it is another mildly ominous happening in the world of US business economics. Last night on Charlie Rose a key guy a Llyods of London Insurance was suggesting that in his view the mortgage crisis here in the USA is not at all over, and also noted how business things are blooming and booming in Asia and India while they appear to be wilting here in the USA and Europe.

In my opinion the best we an hope for is a fairly soft landing as China, India, Vietnam, and other parts of the developing world take their (rightful) place as players in the global economy. We’ve had it pretty easy for the past 60 years after WWII reconstruction rescued many economies from post-war ruin. Unfortunately that beneficence has been long forgotten (and it helped our economy along anyway).

So tighten up that belt and start spending less, because business isn’t what it used to be and it’s not going to be back anytime soon – perhaps forever.

Twitter less?

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Seems to me that Twitter is, in fact, a very important issue with far too much discussion about downtime and not enough about why Twitter appears to be replacing blogging, Facebook, and email as the communications paradigm of choice for the digital elites, which often means  the rest of the online world will soon follow.

Twitter’s system failures have become so common that several of the silicon folks like Mike Arrington are suggesting that people should be moving  to other services – most noted is FriendFeed which now allows “room” conversations as a way to sort noise from signal and talk with a group about specific topics.   I think if they’d come along at same time FriendFeed would be winning the war for the hearts and minds of the legions of twitterers, but Twitter has such a foothold as the microblogging / communication tool of choice it’ll be hard to unseat Twitter unless their services fail to improve over the coming months.   Improvement is likely given their recent Venture capital injection which effectively valued Twitter at about 100 million – enough that money will  soon pour in as needed to beef up their shaky infrastructure.

Why is Twitter important?   It’s really a form of A.D.D. blogging – fast and furious with links out to full treatments which can be read only if they really look interesting.  Because Twitter caters to short attention spans and also throws everybody in regardless of laptop color or digital creed, it’s going to keep catching on fast with the business and tech crowd.   I am NOT convinced it’ll be a big hit for grandma or even Nascar dads, who will see Twitter for the time waster it tends to be…

Yikes.. my Twitter Deficit Disorder makes me think a blog post of more than 143 letters won’t generally get read anyway, and makes it harder to write.

Yahoo Announces Reorganization Plan which is sung to the tune of the Who’s “Won’t Get Fooled Again”

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Yahoo’s plans for reorganizing their reorganization have now been announced.  Kara seems to have the best scoops on this.

Meet the new boss Sue Decker, same as the old boss.

I am paraphrasing somewhat, but IMHO this is the gist of the Yahoo reorganization, sung to the tune of the Who’s: “Won’t Get Fooled Again”:

Yahoo’s fighting on the screen.
Over revenues unseen.
All the money that we worship will soon be gone.

And the Yang who spurred us on.
Sits in judgement – Ballmer’s wrong!
They decide and the board all sings the song.

I’ll tip my hat to Yahoo constitution
Take a bow for Yahoo revolution
Smile and grin at the change all around me
Open my laptop and play
Just like yesterday
Then I’ll get on my knees and pray
We don’t get fooled again

[scream guest appearance by Carl Icahn: YAAAAAAAAAAAAAAAAHHHHH!]

Disclosure: Long on YHOO.

Buy before the rumor, sell before the news?

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One of the really intriguing aspects of the blogOspheric chatterfest is how the big markets tend to react to rumors from key business related blogs.    When TechCrunch reported yesterday that talks between Microsoft and Yahoo had resumed Yahoo stock increased, only to fall after several other blogs reported the rumors as false or weak.

Although I have no reason to believe that Mike Arrington or Henry Blodget are trading options based on their market-moving blog reporting, I’m not at all clear it would be illegal for them to do so as long as they were reporting “real” rumors.

Henry answered at his blog that posting a false rumor to manipulate for investment purposes would likely be seen by SEC as a violation but this leaves a lot of gray areas open for an aggressive options trader/journalist. 

Here’s what I just asked Mike Arrington over at TechCrunch:
Mike just to set the record straight the ValleyWag poster “Mike Arrington”, who claims to have made 10k trading on Yahoo rumors, is fake … right?

More importantly I’m very interested in your views on legality/ethics of trading Yahoo options based on the rumor mill. Let’s say you heard a solid rumor that MS was about to offer $37 for Yahoo and Yahoo was going to sell. Could you legally trade on that before you posted it? One second after?

What if you emailed *me* right before you posted, I think I could legally trade based on current SEC rules, right?

P.S. What kind of Single Malt Scotch do you like? : )

Although I have no plans to manipulate any markets, it is reasonable to assume that if a market can be legally manipulated it *will be* manipulated, and soon. 

Venture Capitalists: Not Gangsters, but Gamblers

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Thanks to a very thoughtful comment by Fools Gold in an earlier post, I’m again really wondering about the math of the VC biz.    Venture Capital for startups appears to be a game that is generally misunderstood by most as a sort of insider mafia “cash machine” for the rich when I think the evidence would support the idea that startups are a losing bet on average and are for the most part the product of honest dealings rather than back room gangsterism.  

After a Don Dodge article I think it was Jeff Clavier who told me that only about a fourth of VC firms were delivering positive returns – that was about a year back I think and I know Jeff was doing very well with a lot of winners – he was NOT talking about his own great results.   Fred Wilson was also getting very positive returns for his firm, though I remember he was giving enough information about the time frames to get a good sense of how good the returns were.     A key filter of course is the fact that firms with negative returns are hardly going to be blogging much or advertising that fact.

How to derive valuations?  For new companies it is close to anybody’s guess.   I think the market makers are driving pricing in very unnatural ways that look more like casino gambling than thoughtful investment. As I’ve noted before most VCs actually appear to *lose* money on average.

The game is certainly not “rigged” the way many think it is and my working hypothesis is that VC for startups is sort of like Arabian horse farms – it loses money for most but is a very fun hobby for many who effectively build relationships and contacts that help maintain their wealth and control over things indirectly. Sounds ominous but this is actually a pretty functional environment because it keeps the best innovators well fed and productive even as their startups mostly fail at the expense of people who can afford to lose a few million here and there in exchange for the fun of an infrequent big payoff.

Computer Reads Minds, World Yawns

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One of the fun parts of hanging out in the technology world is getting a good sense of the next big thing before folks really tune into how significant the next big thing will be.   I remember about 12 years back –  in the early days of the commercial internet – when it became clear to me that a huge shift was happening that would send virtually everybody online.   No amount of explaining or describing or showing people cool stuff could get most people to understand the massive transition they were about to experience.    As with so many technological innovations, the commercial internet had to be experienced by people at their own pace – often a painfully slow pace if you were watching this happen.   Few who loudly proclaimed their luddite pride ten years ago would admit this today – most are using email and internet, often with the same enthusiasm as the relatively small number of super early adopters in the tech and commercial communities who helped make it all happen. 

I did want to note why I’m talking about “commercial” internet vs “internet”.    Contrary to what is often claimed the internet is a pretty old structure, begun by the military after WWII and then adopted by academia where it pretty munch languished for about 30 years.    I would argue that cheap computing and ISP and online services (thank you Prodigy, Compuserve, AOL, more) then combined with graphical browsing (thank you Marc Andreessen and Mosaic friends) to create the backbone of the current “commercial internet” that has exploded onto the global scene as the key communication medium of all time. 

So, what is the *next* big thing?    Why, conscious computing of course!   And it’s not just *big* like the internet.    It’s super duper gigantic and earth shaking, and it’s coming soon to a planet very near us all.   Experts disagree about *when* conscious computing will happen, though I think very few who are paying much attention would suggest we won’t have it within 50 years.  However many experts, and I think the body of current projects such as Blue Brain, suggest that we will have conscious computers that exceed human intelligence within 20 years and perhaps even 10.    What happens *after* a machine becomes conscious is quite a new thought ballgame and it is very hard to speculate about how that machine will evolve and perhaps more importantly how they will view other machines and …. us.    Will the conscious machines get smarter slowly or almost explosively fast, surpassing all of humanity within months or even minutes of first attaining consciousness?

A simple way of understanding what many AI researchers are talking about in this respect is to simply recognize that the conscious machine is likely to be “recursively self improving” which means it will be able to build and/or program better versions of itself soon after consciousness, probably in something analogous to the way we humans improve our intellects and skills but much, much faster.   Humans pull this off as well.  I’m proud to say my wife and I have managed to create and program two impressive organic intellects who are now able to program themselves and we love them dearly.   However we were constrained by human organic evolution, so took us many years to do this.    Artificial intellects will likely be able to reproduce quite a bit faster and more effectively (no offense to any of you expectant parents intended).

Ironically for me, several of my favorite programming experts do not seem to conscious computing as something we can expect to happen anytime soon.   I’ve puzzled over this because they certainly know the mechanics better than I, but I remain convinced that they are putting too much faith – sometimes literally – into the idea that humans are somehow … fundamentally different …. from other physical manifestations of the world.    I’m confident we are not all that different, and in that light consciousness is probably best viewed more as a sort of tangential aspect of our lives than a key component. 

And speaking of tangents, this whole post was going to be about this Carnagie Mellon AI project where the computer was reading people’s minds.   Simple words, yes, but still a rudimentary form of  mind reading based on EEG output:  http://www.cmu.edu/news/archive/2008/May/may29_brainmeaning.shtml

 

Carl Icahn: Blogger

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There’s a new guy in blog town and he’s shooting from the hip about the defects of the corporate governance models we’ve all come to know and hate over the past decades. His name is Carl Icahn and his blog offers great insight into the mind of one of the most successful corporate raiders in history.

Although it is obviously favorable to Icahn’s bottom line to maintain how incompetent boards are leading to the decline of western economic civilization as we know it, I’m hardly going to disagree with the notion that corporate governance, especially in the technology sector, often seems out of whack with shareholder interests.

It is important not to confuse Icahn’s critiques with the whacky ones of many who suggest the corporation itself is a bad model and should be replaced by outmoded socialistic and centralized approaches that brought economic ruin on an entire generation of eastern Europeans and helped bring genocidal regimes into power in asia.    On the contrary Icahn’s point is more that we need to make sure the corporation model can thrive by insisting on better governance for struggling companies.

In the case of Yahoo, Biz Doctor Icahn’s prescription is to buy up a huge share, then throw the corporate board bums out and sell the company to Microsoft.  The stakes here are so high for Icahn (he could see over a billion in profit if his plan works), that he’s hardly in a position to entertain alternatives that might be better for Yahoo, but I think most shareholders already are rooting him on in the hopes of salvaging the $11+ per share lost when Microsoft withdrew from the bidding for Yahoo last month.

Disclosure:  Long on YHOO