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August 29, 2008

Ethics and Efficacy

Another parallel I've seen between politics and business is in the two big things I look for in leaders:  ethics and efficacy.

Not to get off on too much of a political rant, but we've been awfully short on both of these for the past eight years in Washington.  It's clear to me that the country didn't get the full story on Iraq before we were led into war, and war should always be our last resort.  War should never be undertaken capriciously.  Besides the ethical violation, this war has also wasted thousands of lives and hundreds of billions of dollars.

Beyond that, the Bush adminstration hasn't demonstrated efficacy ("capacity or power to produce a desired effect").  Think of both the abominable handling of Hurrican Katrina, but also the inefficient and slow rebuilding effort.

Luckily, I am much more comfortable with the ethics of both of the Presidential contenders.  It's probably not a surprise that I favor Obama over McCain, but I do believe that McCain wants to do what he thinks is right for the country.

It's impossible to judge efficacy.  Both come from legislative backgrounds where you have little ability to really get things done.  I don't count getting legislation passed as being comparable to building teams and running large organizations.  Both campaigns seem to be run very well and both candidates overcame some long odds in order to get their nominations.

The key to efficacy is building and managing the right team.  Experience can help with this, but it comes down very much to personal characteristics.  I think that a leader seeking efficacy must surround themselves with the strongest possible team, listen to all points of view, remain open-minded when faced with problems, rely on their own ability to make a final decision, and be willing to admit mistakes and make changes.  I remember reading in a management book a long time ago:  "give credit, take responsibility"

Contrast that with "Brownie, you're doing a heck of a job"

No more predictions

I am out of the prediction business when it comes to sports.  Good thing I don't gamble...

In 2007, I waved the white flag on the Yankee season too early.  They made a big comeback, almost won the division, and made the playoffs for the 13th straight season.  This year, shortly after the All-Star break, I predicted that the Yankees would pass the Red Sox for the wild card.  Wrong again.  The Yankees have had too many injuries.  But, the fault lies with their star players who haven't come through in clutch situations.  I'm talking about you, A-Rod...

So, the white flag of surrender goes up again.  Maybe it will get them to make a miracle turnaround.  But, instead, my focus goes to the Patriots and hoping that they aren't as bad as they have looked in preseason...

Belated: Geezeo on CNBC

As I mentioned back on August 11, my friend, Pete Glyman of Geezeo, was on CNBC recently.  Geezeo covered this in their blog here.  Pete's video is here.  Nice job, Pete!

Getting Real

Hard to believe that another week has zoomed by without having time to post something.  Luckily, things slow down before a long weekend, and I have time to finally post a few thoughts that have been rattling around my brain this week.

A lot of my thinking about business lately has been colored by what is going on in the political arena.  No surprise that politics are dominating the news as we are in the middle of the national conventions.  But, there are some lessons to be learned that also apply to business.

I remain mystified by the Hillary Clinton supporters who feel so wronged that they would rather vote for John McCain than Barack Obama.  I've seen varying reports on the real number of Hillary's backers in this camp, but the whole concept doesn't make sense to me.  If you liked Hillary's positions, you can't be too disappointed with Barack Obama's positions.  They are almost the same, and much different than McCain's. 

I thought that Hillary should hang in there until she was really elminated from contention.  Anyone getting that close would do the same.  And, perhaps the media didn't treat Hillary fairly because she's a woman (as well as being Bill's wife).  No one said that running for office was for the faint of heart or for someone with thin skin.  In the end, Hillary capitulated.  And, I thought her speach at the Convention was quite good.  She has little choice but to be a good soldier going forward.

Her supporters who continue to be defiant are in an alternate reality.  This was a race, and she lost.  When it's over, you have to move on.  I've seen this in companies, too.  The management gets stuck in the past and keeps fighting last year's fight.  I am a strong believer that you have to deal with reality in business.  Putting your head in the sand doesn't serve anyone.  I think it was Harold Geneen who called this 'unshakable facts'.  He insisted that his managers make their decisions based on facts, not opinions and emotions.

There are a lot of mature companies today that need to move on to their next fight.  Instead, they continue to fight the last one.  This causes them to squander resources and miss out on new growth opportunities.  The lack of objective, outside, and yet constructive input is one reason why companies can't see this problem themselves.  As an entrepreneur or a company leader, you need to make sure that you are looking at the company's situation as objectively as possible.

On a lighter note, Jon Stewart showed a healing program for Hillary supporters who are stuck in the past.


August 20, 2008

A123 post in the Boston Globe

The post I wrote last week on the A123 S-1 was picked up by Scott Kirsner in the Boston Globe.  Although I was skeptical about the company's prospects due to their financial performance, a lot of people took my criticism as being stronger than it was.

I guess some VCs can't take any negative criticism of their companies.  Anyone on the Board of A123 has to ask themselves the same questions I did -- is the company ready to go public in today's market?  The company has obvious exciting potential, but the market can be tough on companies that primarily have potential and not results.  We'll see how things work out, but you would think that some VCs would have thicker skins.

Back online

Yahoo Web Hosting had a major glitch with my blog.  They had to rebuild everything.  Until they did, I couldn't post.  And, with my schedule, today was the first day I could wait on hold for the 45 minutes I did before I could speak to someone.  Unfortunately, they never replied to my email support requests.

So, I can post again, but I am not a happy Yahoo hosting customer.

Update:  I have spoken to soon.  The blog doesn't rebuild and new posts don't show up!

Furhter update: After being down for days and days, the Yahoo support guy seems to have fixed things for me.  I haven't spoken to him today, but things now seem to be working.  At least I can post!

August 11, 2008

A123 -- Ready for an IPO?

Disclaimer:  Although I am not an investor in A123, I am on the Board of Boston-Power, a battery company that does not currently compete with A123, but may in the future.

Last week, A123 filed their S-1 in preparation for a potential IPO.  A123 is an innovative company that spun out of MIT.  They have battery technology that is currently used today in DeWalt power tools.  They are also working on projects for hybrid electric vehicles and other applications.  The company has raised at least $133M of venture capital and has generated lifetime revenues (through March 2008) of about $72M.

I've spent a lot of time over the past year looking at public companies.  Although A123 looks exciting for the long-term, I have my doubts about their ability to either go public or, in the near-term, be a successful public company.  Their business just hasn't developed enough to sustain value in the public markets.

If you study their financials, you'll see that they have approximately zero gross margins.  That means that their selling costs don't quite cover their material costs and manufacturing overhead.  Low gross margins are not surprising for early stage manufacturing companies.  They are not yet selling at high volume and are investing in manufacturing capacity for the future.  But, it's disconcerting to me that even at $10M in revenue per quarter that they have slightly negative gross margins.  On top of that, the company has a significant rate of spending for engineering, sales, marketing, etc. at $13M in the March 2008 quarter.

Clearly, A123 is trying to go public based on their future potential.  And, that potential could be very high.  But, I find the public markets to not be very forgiving of these types of companies.  In fact, it could be tough to go public at all right now.  Now, perhaps the company has some additional deals and information up their sleeve that they would only release when they update their S-1.  Perhaps they are the rare company that can pull off a high-promise IPO in this environment.  If they do go public, they'll have to convince investors on an ongoing basis how they will build into a sustainable business.  Any missteps along the way will likely result in significant stock price punishment.

Ultimately, I wish A123 the very best.  If they can go public and sustain their value with this type of profile, it will bode well for Boston-Power, too.  But, don't be surprised if they proceed with caution toward an IPO.  The market is not a forgiving as it has been in the past, even for companies with interesting technology in a hot space.

Geezo on CNBC Tonight!

My friends from Geezeo, represented by co-founder Pete Glyman, will be on CNBC's On The Money tonight, beginning at 8 PM.  Hope you can check it out!

August 05, 2008


As someone who has often done a cannonball into the deep end of the pool (literally and figuratively), I couldn't resist today's F Minus comic.

August 04, 2008

Baseball Home Stretch

As a Yankee fan in Red Sox country, I tend to be more quiet than usual in discussing baseball.  But, this season is entering the home stretch, and it will be interesting.

In recent years, the Yankees and Red Sox seemed to be the strongest teams in the American League heading into the playoffs.  This year, that isn't the case.  These two teams aren't even leading their division.  The Tampa Bay Rays are hanging in there.  They lost something like seven in a row before the All-Star break, falling behind the Red Sox.  But, they have been the best of the three since the break and have re-established a lead of a few games.

Both the Red Sox and Yankees were active before the trading deadline.  The Yankees made a series of movies, trying to recover from their significant injury woes.  Three of their five starting pitchers from the beginning of the season (Wang, Hughes, Kennedy) remain out, and two of their All-Star position players (Posada, Matsui) are out for the year.  Other players have missed significant time.  Every team has injuries, but the Yankees have been hit the hardest of the teams still contending.  I think that Brian Cashman did a great job shoring up their roster without giving up anything significant in the near term and very little in terms of long-term prospects.  He doesn't get enough credit as a GM because the Yankees spend so much.  Look for that to change after this season when many overpriced contracts finally expire.

The Red Sox had to dump Manny Ramirez.  This was sad, as I enjoyed watching him play.  But, I don't think they had a choice.  Manny is capable of causing a lot of distraction, and hopefully their clubhouse will be more stable without him.  Even though Jason Bay has gotten off to a good start in Manny's place, no one thinks that he can replace Manny's presence in their lineup (if Manny is trying).

Consistency has been a problem for all three of the leading AL East teams.  Surprisingly, both the Red Sox and Yankees go through dry spells on offense.  With their lineups, scoring runs should rarely be a problem.  The Yankees pitching has come through pretty well, considering their injuries.  Their bullpen has been particularly strong.

I think that the Red Sox pitching hasn't been as strong as people thought at the start of the year.  Obviously, Schilling is out for the year.  Beckett hasn't been as good as last year.  Matsuzaka has been great, but still walks too many people..  Lester has been impressive, but the bullpen, other than Papelbon, has been very inconsistent.

The Rays have played well, but everyone still expects them to cave under the pressure.  We'll see.  In any event, having a three-way race makes the AL East more exciting than it ihas been in years.

In the AL overall, the Angels are the class of the league.  They are the most consistent team, and hare pretty well balanced.  Maybe this is their year.  On the NL side, I am rooting for the Cubs.  It would be horrible for them to go more than 100 years without winning the World Series.

Baseball is a great sport to follow because you can do so casually.  The game goes well on the radio, in the background of your summer.  The games are every day, so you don't feel like you have to watch them all (unless you are my 15 year-old son).

My prediction:  Rays win the AL East (Yankees are the Wild Card).  But, the Angels win the AL.  However, the Cubs win the World Series, which should tide their fans over until 2108.

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