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March 27, 2009

We're still the same company we've always been...

Click through for a funny cartoon (I didn't want to steal it from The New Yorker):

“We’re still the same, great company we’ve always been, only we’ve ceased to exist.” (The head of a company speaks to a large group of employees gathered in his office.)

Nantucket Conference

For any of you interested in entrepreneurship, venture capital, and meeting some of the most successful people in those communities, you should attend this year's Nantucket Conference (April 30 - May 2, 2009).  One benefit of attending this conference is that you'll get a chance to meet one of my favorite CEOs, Christina Lampe-Onnerud of Boston-Power.  Another benefit is that the rest of the speaker lineup is equally strong.  Based on my previous visits to the conference, it should be a fun and interesting time.  Also, if you haven't been to Nantucket, you're missing out on a lovely setting.

Scott Kirsner tells me that there are still a small number of spots left, so make sure you check it out today.

March 25, 2009

Maybe we need to quiet the angry mob

I've been as mad as anyone about the AIG mess and the bonuses paid to executives there.  Clearly, without our bailout money, there would be no money paid to anyone there, bonus or otherwise.

But, an op-ed in today's New York Times is giving me second thoughts.  The op-ed is a resignation letter from Jake DeSantis, an executive vice president in AIG's infamous Financial Products Unit to Edward Liddy, CEO of AIG.  In the letter, Mr. DeSantis describes his work in AIG's commodity division which had nothing to do with credit default swaps.  In fact, he says that "no more than a handful of the 400 current employees of AIG Financial Products were involved in credit default swaps and that most of those who were involved had already left the company.

Where Mr. DeSantis's letter gave me pause is when he described agreeing to work for a salary of $1 in addition to the promised bonuses, while turning down other more stable jobs.  It sounds like he's been working hard to sell off a division to UBS to generate cash needed to repay us taxpayers.  Although it's staggering to read that Mr. DeSantis's bonus, after taxes, was $742,000, it's also hard for me to say that he wasn't entitled to something that he had been promised multiple times and had given up his fixed salary for.  Certainly, this guy doesn't sound like someone who should be villified.  Perhaps we're just envious that someone who graduated from MIT in 1992 can make so much money at his job.  Never forget the value of a technical education!

The problem is that paying Mr. DeSantis to help raise cash for AIG is a sound business decision, but a poor political one.  In politics, the baby is thrown out with the bathwater on a routine basis.  The media hype drowns out the details and subtleties of a story.  Unfortunately, Mr. Liddy, the CEO of AIG, didn't have the ability to do what Mr. DeSantis did -- tell an individual story that changes how you look at a situation.  The only people at AIG that we really should be mad at are the ones who built up their credit default swap business, or others who took similar risks.  If we believe in capitalism, we have to let the rest of AIG run their business in the way they see fit so they can try to return some or all of our money.  Let's just send the angry mob after the bad guys, if we can figure out who they are.

Speaking of angry mob, Jon Stewart unleashed them last week.

 

The Daily Show With Jon StewartM - Th 11p / 10c
The Notorious AIG - Scorn in the USA
comedycentral.com
Daily Show Full EpisodesEconomic CrisisPolitical Humor

March 18, 2009

This guy's a glutton for punishment

AIG CEO defends bonuses as public fury mounts

I know that AIG needs to run as a business in order for the taxpayers to have a hope of getting something out of our $170B bailout (I refuse to call it an investment).  But, the CEO we brought in to run it should also have the guts to tell the management that they need to forego their bonuses to buy some patience from the taxpayers.  Giving in to their greed is what got us into trouble in the first place.

Greater than money

Dave Brodwin's post on the Emerging Enterprise Center blog today made me think about one way to pick out businesses that will thrive for the long term.

Entrepreneurs are usually in business for something greater than money.  I'm not taking the financial gain out of the equation.  I think that's a critical component.  All entrepreneurs take risks and make sacrifices.  It's hard to justify that without the financial reward.  But, rarely is the money the only thing.  Most entrepreneurs have some sort of vision -- seeing their technology adopted by the masses, creating a new market segment, enabling a new business model that changes how a market works, changing people's perception about how a certain business works, or even 'just' building a growing business that can employ a lot of people in good jobs with good compensation.  I put the 'just' in quotes because I don't want to minimize the importance of doing that alone.

It's that mission for something greater than money that really drives entrepreneurs.  Maybe having fun is a critical part of that mission, as Dave suggests.  But, I think that having fun is a byproduct of being on a mission for something greater than money.  Most entrepreneurs want to have an impact and know that their own personal reputation is on the line.

One CEO I know has started a company in a big market that is really a small community.  The technical people in this community are very tight and have a conference every year with just a few hundred attendees.  Reputation in this community matters alot, as it does in most technical forums.  Despite having a very well positioned and growing business on their hands, this CEO has much more at risk reputationally.  If the technology fails or the business goes bust, they'll lose a lot of the reputation that they have built up over 20+ years.  As an investor, this makes me think that this CEO is going to focus on building a sustainable business and not just a quick hit.

Contrast this with the financial products group at AIG.  They are under fire for taking big bonuses despite having their division sink the company.  Without the $170B government bailout which bought us 80% of the company, AIG would be bankrupt and these guys would have received nothing.  And yet, they have no shame about taking their bonuses for 2008.  They must be worried about their reputations because the company won't release their names.  If they were doing something to be proud of, they wouldn't hesitate to get their names out there.

For someone doing it right, look at Paul Levy from Beth Israel.  He appealed to employees to forego salary increases, their 401K match and other benefits to save 450 jobs that would have otherwise been cut.  Paul set the example and got the employees to follow.  They believed that saving the jobs was the best way to achieve their mission of delivering great health care.  They voted against their own pocketbooks in order to achieve something greater than money.  I think I'd be happy to be treated at Beth Israel, but I certainly don't want to buy my insurance from AIG.

Maybe if we all use criteria beyond just money when we make our decisions and buy our products, we'll reinforce the right behaviors and punish those that are just purely greedy.

March 16, 2009

Get your batteries here!

It's always fun to mark a milestone at a company I'm involved with.  Today, Boston-Power and HP are formally shipping the Enviro battery pack which works in 70% of HP's notebooks.  You can check out Enviro at the HP online store.  Aftermarket batteries (purchased after you already bought your laptop) are expensive.  The Enviro battery is only $20 more than the standard battery for these same models.  But, the Enviro battery has a 3-year warranty vs. a 1-year warranty on the standard battery.  Judging by the comments the standard battery has received on the HP site, it seems like the $20 premium is a very modest extra cost for the 2 extra years of warranty.

The Boston-Power battery addresses the cycle life problem with Li-ion batteries.  The battery does not lose capacity over time and through charge cycles.  It also has a fast charge feature which allows it to get to 80% charge in 30 minutes.  And, since it is not made with hazardous chemicals and has a very long cycle life (you won't have to throw it away when it loses capacity), it has received the Norid Ecolabel for environmental friendliness.

If you own one of these HP laptops, you should consider the Enviro for your next battery:

HP Pavilion dv4, dv5, dv6; HP HDX 16; HP G50, G60, G61, G70, G71; Compaq Presario CQ40, CQ45, CQ50, CQ60, CQ61, CQ70, CQ71

And, if all goes well, you'll soon be able to order an Enviro battery with a new laptop purchase or buy one at a local HP retailer.

Congratulations to Boston-Power for becoming the first US vendor to get a battery certified by a major laptop manufacturer!

March 15, 2009

This could be you!

Update - these tickets have been claimed.  Thanks to everyone for your interest. 

Whenever I don't want to use my Celtics tickets, I usually don't have trouble finding someone who wants to buy them from me at face value.  But, for some reason, the game on Monday, March 23rd at 7:30 PM vs. the LA Clippers is the exception.  So far, I don't have any takers.  If you want to sit where I was during Game 6 of The Finals last year vs, the Lakers, let me know.  The seats are in Loge Section 22, Row 1.  Face value, including prepaid premium parking, is $349.

March 13, 2009

Who Do I Blame?

There was a lot of hype this week about the 'battle' between Jon Stewart (of the Daily Show) and Jim Cramer (of CNBC's Mad Money)Jon Stewart had been pointing out that CNBC was a cheerleader for Wall Street on the way up and failed to point out the risks that led to the bubble bursting.  In particular, he picked on Cramer for recommending that people buy Bear Stearns stock before the company went bust.  Like everyone, Stewart is looking for someone to blame for our economic mess.  He wasnt' saying the Cramer and CNBC were primarily responsible, but they had a chance to point out the risks and didn't.

You can watch the unedited interview here.  This is the link to part 1, and parts 2 and 3 follow.  I don't recall any previous Daily Show guest getting so much time.  And, although very interesting, this isn't as funny as most Daily Show interviews.

To Cramer's credit, he mostly agreed that CNBC could have done a much better job.  In today's 'who do I blame?' environment, I fully expected Cramer to blame someone else for missing the risks (he did point out that some CEOs lied to him).  There are so many people at fault in this economic mess -- Democrats, Republicans, Bernanke, Paulson, Phil Gramm, the SEC, the banks, Wall Street traders, AIG, and on and on.  We can't focus on whose fault it was, unless you can find people who broke the law.  Instead, we have to focus on how we are going to change to make sure it doesn't happen again.

We need a culture of transparency.  If we add regulations, they should be in the area of forcing people to open their books and show what they are holding and how it's valued.  I don't want to limit what kind of deals people can strike.  I just want all investment firms to have to show what they're holding.  If the level of risk is clear with an investment, you can judge whether the firm holding it has sufficient capital to weather that risk.

We also need a culture of responsibility.  The Boards of all the big banks and AIG should be holding the executive teams accountable for putting the company at risk.  If that's not an offense worthy of being fired, I don't know what is.  And yet, most of them are all still in place.  I guess they blamed someone else for the mess.  And, the shareholders should hold those directors responsible and consider voting them out at the next shareholder meeting.

Joe Nocera's column in today's New York Times covers the same subject.  He writes about the Madoff scandal and that the victims want some sort of compensation.  If Madoff can't come up with the money, some want a government bailout.  What a minute!

Surely Madoff was the master liar.  He fooled a lot of people, and managed to hold off or fool the SEC, too.  But, there are also many examples of people who actually tried to do some diligence on Madoff and walked away.  Quickly.  In fact, people's own greed is the reason why they were wiped out by Madoff.

I still tend to believe that many of his investors had an inkling that he was doing something wrong.  But, as long as it was working in their favor, they didn't ask questoins.  I am sure that none of them suspected that it was a gigantic fraud.  But, perhaps he was front-running the trades of his other customers to benefit these select customers.  In any event, it was 'don't ask, don't tell.'  As long as the returns (seemed) to keep coming, they left well enough alone.

But, that doesn't excuse people from giving Madoff most or all of their money.  Even the most inexperienced investor understands that you have to diversify.  Why?  Because you don't know for sure what investments will perform well in the future.  And, you don't want to lose too much if one of your investments is a total failure.  So, as Nocera points out, the victims who were wiped out because they gave Madoff all of their money, can only blame themselves.  Surely Madoff is at fault for losing the money they gave him.  But, they are at fault for giving Madoff all of their money.  And, it was only greed that led them to do so.  They assigned zero risk to the Madoff investment, which justified giving him everything.  Shame on them.

I've made plenty of mistakes in my investment career.  I have been wrong on technology, on markets, and on people.  But, in each case I was the one who gathered the inputs and made the decision.  So, I have no one to blame but myself.  And, I wish that we could develop a culture where we stop trying to blame others for our decisions and try to understand how we got it wrong ourselves.

March 09, 2009

And there it goes...

See this post from Bailout Sleuth.

It details a report from a House committee on TARP oversight.  Here's some places where our bailout money has gone:

The transactions included a $2 billion repurchase by Goldman Sachs Group, Inc. of its own company stock. Goldman Sachs Group received $10 billion in TARP funds on October 26, 2008.

The subcommittee said it identified the questionable transactions through testimony from
Dow Jones & Co., the business information firm.

Also singled out for scrutiny were an $8 billion loan from
Citigroup Inc. to public sector entities in Dubai; a $1 billion investment by J.P. Morgan Chase & Co. in the development of cash management and trade finance solutions in India; and a $7 billion investment by Bank of America Corp. in a Chinese bank.

Hopefully now that there is more scrutiny on this, any bailout money that is given out will be put toward its intended use.  The transactions above just show that the 'urgent' TARP wasn't really so urgent to keep the US economy going.

Lessons from the Atari Age

An article in Sunday's Boston Globe reminded me of some lessons learned early in my career.  The interview with Nick Montfort discussed the early days of home video games, specifically the Atari 2600 game system.  This was the first mass market home video game system.  It used software cartridges for each game, leading to quite a large market for game sales.

Right out of MIT, I worked at a company called General Computer Corporation, now GCC Printers.  The company had struck a deal with Atari to develop home versions of popular arcade games.  As Nick Montfort mentioned, the graphics system of the Atari 2600 was very crude.  If you look at the original games developed by Atari, such as Pac Man, you'd be disappointed.  The graphics, the game play, the sounds, and the whole experience was unsatisfying.  Obviously, having limited hardware made it very challenging to develop a great game.

But, the first lesson I learned at GCC was to question everything I had learned before.  At college, we learned structured programming, which basically means "follow the rules."  It certainly works well and is the right thing to do.  But, it only works when the hardware has the resources to support it.  With the Atari 2600, the hardware resources were incredibly constrained.  It sounds almost prehistoric to say that the system had 128 bytes (not kilo- or megabytes, just bytes) of RAM to store the state of the game.  The cartridges generally had 8K 4K (and later 16K 8K) of ROM to store the game code.  An empty Word document is bigger than this.

When faced with incredible constraints, we had to innovate.  Here's a screenshot from Pac-Man, developed by Atari:

And, a screen shot from Ms. Pac-Man, developed by GCC (not me).

You can see that Ms. Pac-Man had more detail to the characters and the 'fruit' prizes.  And, the main character would rotate when it moved in different directions.  Now, these both pale in comparison to the types of graphics done today.  But, those two games were developed on the same hardware.  The difference wasn't that our engineers were smarter.  It was that we we willing to question all the assumptions.  There was documentation that Atari wrote that described how to use the graphics chip in the 2600.  The early games they wrote took that as gospel.  We took it as a challenge to be overcome.  We looked for tricks and hacks that would let us work around the limitations of that hardware, rather than being limited by it.  It was the most fun I've ever had with a computer!

By the way, Nick Montfort gave a tight schedule as one reason why the original Pac-Man game was poorly done.  Our typical game development time for a 2600 game was 2-3 months with 2 engineers, plus graphics and sound designers.  Time was just another constraint to overcome, mostly with caffeine.

The lesson for today is that we are again in a time of resource limitations.  It's a time to question the assumptions and to use that resource limitation as an opportunity rather than a barrier.  You can do a lot with a little if you think outside the box.  And, that's where the biggest wins will come from.

(Note: GCC had a great team of engineers that I was proud to be a part of.  We worked hard, had fun, and achieved a lot.  The original team inspired me to work harder than I ever did in my life.  Thanks to them, I had many opportunities.  For those of you who are curious, the primary game projects I worked on at GCC were (for the 2600): Phoenix, Jungle Hunt, Battlezone, and Joust (better screenshot here), and for the 7800, Desert Falcon.)

(Second Note: These old games are still popular today because of their simplicity.  Sometimes, you just want to play a basic game that you can walk away from.  You kind of already know how to play, and a game is over in a few minutes.  The casual games are one reason why older people, like me, are back into playing computer games.)

Updated to fix broken Joust links.  Also, my former colleagues confirmed that I was wrong about the cartridge capacity in my original post.  Now corrected.

 

March 05, 2009

The value of work

I enjoy the talks on TED.com.  Here's one from Mike Rowe, the host of Dirty Jobs.  He talks about the value of work.  He knows first hand about people who do real, honest to goodness work.  Work with their hands.  The beginning of the talk may gross you out, but carry on if you can.  I like one of his sentiments:  Innovation isn't worth anything without imitation.  It doesn't matter if you invent something if you can't get it built and deployed into the market.  He cites the iPhone -- you had to be smart to design it, and to design all of the components in it.  But, without the people working in the factories, the delivery trucks, etc., you couldn't have one.

I started my work life long ago with menial jobs.  I delivered newspapers.  I worked in a grocery store.  This kind of job made me appreciate the opportunity I had to go to college and work with my mind instead.  But, I've never forgotten the hard work that most people do every day.

 

March 03, 2009

MP3 Deal of the Day - U2

I've long been a fan of Amazon's MP3 download service.  They have DRM-free MP3s at attractive prices.  And, their downloader makes is seamless to add these downloaded tracks to iTunes.

Today (and today only) they are offering the new U2 album, No Line On The Horizon, for just $3.99.  I haven't heard it yet, but, at that price, it was worth it for me to buy it since I'm a U2 fan.

Here's the link to buy it today.

March 02, 2009

Let The Chips Fall

Today, the Obama administration released the secret anti-terror memos from the Bush administration.  Nothing infuriated me more about the Bush administration than the trampling of our civil rights.  I fundamentally believe that we can fight a war and battle terrorism  without compromising the rights that make us free.  Having the government illegally eliminate our rights is a victory for the terrorists.

This quote from the article bothered me the most:

...following the Sept. 11, 2001, terrorist attacks, the Bush administration determined that certain constitutional rights would not apply during the coming fight. Within two weeks, government lawyers were already discussing ways to wiretap U.S. conversations without warrants.

This rapid move to attack our rights makes it seem that Bush was looking for a reason to trample on our civil rights.  I understand the need for domestic surveilance, but the FISA courts already provided a mechanism to get a rapid wiretap when justified.  Why was this one of the first things to consider?

I have mixed feelings about the level of prosecution we should pursue against Bush administration officials about potential illegal activites they engaged in.  On the one hand, I don't think that this level of illegality should go unpunished.  But, in light of all of the crises we have going on, do we really need months and months of explosive government testimony that takes our eyes off of other problems?  Maybe a Truth and Reconciliation Commission would be better.  Let's get all of the illegal activities in the open and shame those who committed them.  But, pushing further into criminal proceedings seems like it will take it that much further.

Maybe you can't separate the two.  All this happened so recently, and the Republicans will have a lot of political fallout if things are really as bad as it looks for the Bush era.  And, a lot of people are angry enough to put some folks away.  At least Bush didn't pardon everyone before he left office.  I give him credit for that.

The fallout from Bush's wrangling around the Constitution is going to have alot of fallout -- lawsuits, exposing torture, potential obstruction of justice from destroying evidence, etc.  In the end, we should let the legal chips fall where they may.  I love our system, despite its faults.  Let's let it work...

March 01, 2009

Tainted with the tag

The big news in Boston sports yesterday was the Patriots trading Matt Cassell to the Kansas City Chiefs.  The Matt Cassell story last year was a great one.  He hadn't started a game since high school.  Brady gets hurt in the first game of the season.  Cassell comes in, plays very well, and leads the team to 11 wins.  They just missed the playoffs, but a weakened defense and not Cassell's play was the primary reason.

Cassell's contract was expiring.  If the Patriots just let him go, they'd receive a compensatory pick at the end of the third round of the draft.  So, they franchised Matt Cassell, guaranteeing him  $14.65M in salary for next season.  If the Patriots madea mistake, it was in not signing Cassell to a contract extension coming into 2008.  But, he played poorly in the preseason and almost got cut.  No one foresaw that he'd play as well as he did when givn the chance.

When the Patriots traded Cassell and veteran linebacker Mike Vrabel to the Chiefs for their high second round pick (#34 overall), many fans howled.  How could the Patriots get so little for Cassell and Vrabel?  But, I think of the trade as Vrabel and that end of the third round compensatory pick for the #34 pick in the draft.  That's not bad.  #34 is where the best value is.  High talent, but not a big contract.  The Patriots have four picks in prime range: their late first round pick (#23), the Chiefs pick (#34), as well as a 2nd round pick from the Chargers and their own second round pick.  This should help them shore up their defense.

There was no way the Patriots were going to keep Cassell.  He had a chance for a multi-year contract with a lot of guaranteed money, which the Patriots couldn't afford to do for a backup.  So, they franchised him to maintain control.  This, however, lowered Cassell's trade value.  But, in the Patriots' mind, he wasn't anything other than that end of the third round pick, which is all they would have gotten had he departed without the franchise tag.

Money drives everything in the NFL.  Matt Cassell with a $14.65M contract isn't as valuable as just 'Matt Cassell'.  Maybe the Chiefs will sign him to a multi-year deal.  But, with the 'uncapped' season coming up in 2010, Cassell is guaranteed to make 110% of $14.65M in 2010.  It's going to take a big contract to tie him up for longer than that.

Good for Matt.  It's nice to see a great guy like him get the big bucks and a chance to lead a team going into the future.  Let's just hope that Brady is healthy for 2009.

When Business Becomes Political

Fred Wilson wrote today about something I've been thinking about, too.

When the government becomes an investor in a business, that business becomes political.  We can't criticize a bank for advertising for new customers.  How else will they stay in business?  Why can't an insurance company reward its top salespeople with a trip?  That always motivated sales people before.

But, when these companies take our money, they become political targets.  Now, instead of a bank running an ad, it's like a government agency advertising on the front page.  Instead of the insurance company motivating its sales people, it's a political junket.  And, it's why Congress worries about the cost of an auto executive taking a private jet when we should be worried about how they'll spend the billions we are handing them.

I wouldn't want to be a politician.  I don't want to live under a microscope.  Most business people also don't want that level of scrutiny.  Unfortunately, they're getting it with the government bailout.  I really wish we could provide some level of support for the most crucial businesses without becoming an equity investor.  Too late for that now.

Shrink It Must

I've written before about the overfunding of the VC business.  The fundamental problem is that high-tech entrepreneurship doesn't scale with more money.  There are limits to the number of deals that deserve high-tech venture capital each year.  These limits are based on the number of sound teams and ideas that exist, as well as the amount of new technology you can push onto customers at once.  I've felt that, for the long-term, VC funding can't grow much faster than GDP.  And, with a shrinking GDP, that highlights the VC over-funding even more.

Scott Kirsner wrote about this in today's Boston Gobe, including a quote from me.  He also includes this quote:

"Last year, our industry raised about $28 billion in new investment capital," says Michael Greeley, chairman of the New England Venture Capital Association and managing director of Flybridge Capital Partners in Boston. "I think we'll raise between $8 billion and $12 billion this year, nationally. That's a dramatic reduction. My sense is that the average fund size will be cut in half, and they'll have to cut the number of partners who work for them as a result."

I think it will take a while, but this sort of shrinkage in the VC business will be a good thing.  The best ideas will still get funding, although it will be tougher.  And the weaker ideas that may get funding now, will not.  This will lower the noisy competition for the better ideas and allow them more time to flourish in a capital efficient manner.


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