Blended Profit’s GameChanger series

Self promotion mode on:

I did an interview on Blended Profit on Impact Investing.  You can find it here.

My goal is always to be pithy and quotable, so you don’t need to listen to all 20 minutes to either laugh or yell at me.  Highly opinionated and a little grouchy about Impact Investing.

Some quotes that they pulled out in their PR, just for flavor:

“I am the Gordon Gekko in the room. Equity in a failed business is charity.”

“Most of the VC’s in silicon valley have investments in their portfolio that have impact. But they would never show up to an impact conference.”

“We need private sector compliant financial products. Impact investing of the future can’t have a Sally Struthers story behind every transaction.”

“The top two assumptions in the impact investing space:  1) We’re poised for growth and 2) We all need to decide whether its OK to make money or not.

Self promotion mode off:

Lance Armstrong cheated. He’s not the first

Lance Armstrong, one of my heroes, has decided not to fight charges of doping leveled by the United States Anti Doping Agency (USADA).  Bummer.

Here is the bigger bummer.  There have been 15 winners of the Tour de France since 1996 that are no longer active (Cadel Evans and Bradley Wiggins, winners the last two years, are still racing.)  Of these 15 winners, how many have been convicted of doping, admitted to doping, or have accepted the doping allegations against them?   Take a guess, I’ll wait.

Of 15 previous winners, 14 have cheated at some point in their career. Only one did not–or did not get caught.  Double bummer.

Sport is meant to take us away from the vagaries and confusions of life.  The rules are simple, the good guys and bad guys are chosen by your rooting interest, and the winners win.  It’s simpler than work rules — it’s confusing figuring out who won that confrontation in the conference room.  Now, sorting out the winners is harder than trying to understand the needs of my wife.  Did Barry Bonds set the home run record or not?

In some Tour de France years, seven of the top ten finishers have subsequently tested positive for doping.   It’d hard to figure out how to retroactively give the yellow jersey.  If you thought you finished twentieth, you may find out you won ten years later.

Finally, the lies that go around cheating are extreme.  Floyd Landis raised legal defense funds from fans he had duped.  Tyler Hamilton claimed that cells in his bloodstream that proved to be from another human were from his “reabsorbed fetal twin”.

I didn’t feel sorry for Jason Gatlin, the 100m runner that lost his gold medal after testing positive for drugs.  In his “Up Close and Personal” exposé during this year’s Olympics, when he said “it was hard to maintain my focus during those four years.   Definitely.” I didn’t feel sorry for him like some cancer victim.  This wasn’t a story of overcoming adversity. It’s a story of cheating.

So I don’t feel sorry for Lance, my hero.  Nope.  I feel sorry for me.

USA Loses the Olympic Medal Tally.

We Americans love to compare ourselves to other countries — and win.  So we count medals at the Olympics and gloat over our tally.  Note we don’t count how our children’s education compares to the world. (Let’s just say we rank behind South Korea, Canada, Estonia, and most of Slovenia.)

Here’s the education rankings, for example:

But back to the Olympics.  We win!  We win!  USA!  USA!  We won 104 medals, crushing China and their paltry 88 medals.

But then again, maybe we didn’t win.  We won 104 medals because we are the most successful world economy, with the best standard of living.  And if you ever read Guns, Germs, and Steel, you realize that high standards of living allow for leisure and specialization.  For example, the leisure and specialization of spending your entire life (and an incredible amount of hard work) to become the best athlete you can.

So the real question is, how do we compete on GDP per medal.  That’s an indicator of how well we’re spending the leisure and good life that we’ve built in the US.

The answer:  We suck.

We’re 66th in GDP per medal out of 81 medal winning countries.  But don’t worry, China is only 54th.  Russia is 35th.  The top spot belongs to that Olympic powerhouse:  Grenada.  They have just $820m in GDP for their one medal.  For comparison, the US is at $150 billion per medal.

Jamaica, Mongolia, Georgia, and Kenya round out the top 5.  Is it possible they are less lazy than we are?  I doubt it.  It’s perhaps that Olympic glory is one of a narrow set of possible means of attaining glory.  Their best athletes don’t go to the  NFL, NBA, MLB , or even the very tempting league of Wall Street.

More data on GDP per medal here.

70% of all stocks traded are held for 11 seconds and other BS

I admit I’m an NPR listener, and recently I heard something astonishing.  70% of all stocks traded are held for an average of just 20 seconds.  Really?

In the title of this blog I quote Peter Cohan at AOL Daily Finance, with an 11 second average.  Sure the numbers are different, but whether it’s 11 seconds or 20 seconds, this is astonishing.  The NPR  story and Peter Cohan were describing the high frequency computer trading programs (HFT for short) that are increasingly used by some traders.

But I doubt this number is correct.  The first reason is the word “average”.  The average of all held stocks would include stocks that are held for 10 years.  We can’t calculate those holds until they sell. Maybe we want the “median” anyway, on the assumption that the distribution is not a normal distribution.  But whatever, statistics are boring.

The other reason I have doubts about these quotes is that the answer is unknowable.  The data is not reported or tracked by the exchanges.  In the stories I’ve found online, there is no backup data.

But I did find this off-the-cuff comment quoted in in the New York Times:

These are short-term bets. Very short. The founder of Tradebot, in Kansas City, Mo., told students in 2008 that his firm typically held stocks for 11 seconds. Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said

Look familiar?  11 seconds.  As a fellow professor I can tell you:  don’t rely on off-the-cuff comments of classroom guest speakers.

Oh wait, another quote in the Financial Times:

I know of one HFT firm operated out of the west coast of the US that boasts its average holding period for US equities is 11 seconds

Whaddya know.  11 seconds.  “Boasting” 11 seconds, actually, not “confirming” or even “announcing”.

In this day of seemingly infinite fact checking at our fingertips, of WikiLeaks, and of every comment/gaffe living forever on YouTube, I had hopes that Interesting-But-Fabricated data could be easily identified and ignored.  The equivalent of noisy chaffe in our signal of wheat.

I was wrong.  We’re as gullible as ever.  And so, apparently, is NPR.

If only we had an education system that would help us out.  Instead, according to Gallup polling one in five Americans:

• Believe President Obama is a Muslim.
• Believe the Sun revolves around the Earth.
• Don’t know that the US gained it’s independence from the country of England.

The business model decision – advertisers as customers

As a follow-up to my post about VC becoming like the movie business, there is one big business model decision that most companies need to make.  It’s a decision that even non-profits need to make.

The decision is:  do we want to get paid by our customers or by someone else?

Product companies and service companies get paid by their customers, typically.  Apple Computer and McKinsey and Co. provide a thing for people and those people buy it from them.  Seems simple, doesn’t it?  Well, not for others.

Facebook makes money from folks that want to advertise to their users.  TV stations, too.  And non-profit organizations — their users typically don’t pay for their services, instead the services get paid for by third parties.  It makes it hard to really know whether your users want your product.  In fact, I’ve had to say “users” instead of “customers” here, because the revenue comes from different folks than the users, so it’s hard to label any one group as “customers”.

This is a fundamental decision.  There is tension in the “free to customers with advertising”.  Your customers don’t really like those ads, and the advertisers don’t really care about your free product offering.  Tension, tension, tension.  That’s why Facebook gets in trouble for privacy issues, and Google gets in trouble for manipulating their search results to please advertisers.

So if you have a business supported by advertising, the more options you provide for customers, the more they will feel like customers rather than merely eyeballs.  Let them pay fees to remove advertising.  Let them select which ads to receive.  Be creative.

I’m tired of neon Nike shoes and Oakley sunglasses on every American Olympic athlete.  I’d pay to see athletes that aren’t being used for advertising, but I’m not given that option.

Paul Ryan a historically risky choice for Romney

With the Olympics over, I turn to politics, and see that Romney has tapped Paul Ryan for running mate.  And it’s not because they use the same hair stylist:

No it’s risky because, according to The New York Times, the last time a Republican Congressman was on the winning Presidential ticket  was when William Howard Taft picked James S Sherman.  To save you from looking it up, that was in 1908.

The other risk is that he’s going to be polarizing, rather than appealing to the center.  According to DW-Nominate, which tracks the voting records of Congress, Ryan is as conservative as Michele Bachman, and is more conservative than our last Republican Vice President, Dick Cheney.

 

 

 

 

Venture Capital is officially like the movie business

I had said a few years ago that the Venture Capital business was becoming like the movie business. Instead of investing in an interesting technology idea that needs development, we’ve been investing in media properties that aggregate audiences.

Instead of the pitch being “this search engine will make it easier for people to find information (google)” we’ve had our head turned by “we have lots of users clicking on things (zynga)”. Moreover, the pitches include sentences structured like this “It’s like Terminator meets Driving Miss Daisy” and “we’ve already got Harrison Ford and Sandra Bullock interested.” Well, sort of like that.

And now the conversion is complete. Courtesy of this week’s Venture Capital Dispatch:

Venture capital firms are betting that AwesomenessTV and other popular YouTube channels have the potential to eventually become global media companies.  In the past two weeks alone, two YouTube channels, AwesomenessTV and BalconyTV, have received funding from venture capital firms.

It may even make money for the investors, it’s always hard to tell.  But at this point in the evolution of venture capital, it’s tempting to say that innovation is not the growing investment thesis — it’s media.

Expect the next hit reality TV show — whether it’s singing, dancing, or watching everyday people that don’t realize how ridiculous they are — to be funded by what we used to call venture capital.  If only we had the weather and surfing of LA here in Silicon Valley, we could complete the transition.  Just to stay current, I’m off to watch “The Producers“.