Paul Roales
The awkward teenage years for the internet and startups…

Interesting thoughts throughout, and good commentary on/by an author, Evgeny Morozov, I hadn’t heard of before but an individual who will become more prevalent after his latest book release. Also interesting to see the link between internet/big data entrepreneurship and the likes of Jane Jacobs. Even though this is ripe fodder for the gray haired techno scared who are likely to misinterpret it and while I don’t agree with everything here, I think it is very helpful to listen to the critics of the culture that is sometimes more then the task or outcome of startups today.

"Solu­tion­ism is ultimately cen­tral planning by another name. The arro­gance of the urban plan­ner reap­pears as the arro­gance of the agent-based mod­eller and the Inter­net entre­pre­neur: the plan is still mono­lithic, but now takes the shape of a network.”

"When Brian Chesky of AirBnB com­plains that there are 30,000 dif­fer­ent cities in which he wants to oper­ate, and that it’s just not prac­ti­cal to nego­ti­ate with each one, he is not design­ing a bottom-up solu­tion, he is impos­ing a top-down net­work. He is demand­ing that cities become “leg­i­ble” in James Scott’s ter­mi­nol­ogy, to his over­ar­ch­ing (and sim­plis­tic) algorithms."

http://tomslee.net/2013/03/evgeny-morozovs-to-save-everything-click-here.html

"Jean-Paul Sartre, the existentialist philosopher who celebrated the anguish of decision as a hallmark of responsibility, has no place in Silicon Valley. Whatever their contribution to our maturity as human beings, decisions also bring out pain and, faced with a choice between maturity and pain-minimization, Silicon Valley has chosen the latter — perhaps as a result of yet another instant poll."

"But smart glasses could do so much more! Why not edit out disturbing sights that haunt us on the way to work? Last year the futurist Ayesha Khanna even described smart contact lenses that could make homeless people disappear from view, “enhancing our basic sense” and, undoubtedly, making our lives so much more enjoyable"

"Such predisposition makes it harder to notice that not all problems are problems, and that those problems that do prove genuine might require long and protracted institutional responses, not just quick technological fixes produced at “hackathons” or viral videos to belatedly shame Ugandan warlords into submission."

"The ideology of solutionism is thus essential to helping Silicon Valley maintain its image. The technology press — along with the meme-hustlers at the TED conference — are only happy to play up any solutionist undertakings. “Africa? There’s an app for that,” reads a real (!) headline on the Web site of the British edition of Wired. Could someone lend that app to the World Bank, please?"

http://www.nytimes.com/2013/03/03/opinion/sunday/the-perils-of-perfection.html?pagewanted=all

"The French philosopher Michel Serres is right: ‘Neither information nor a drug fix ever gives any happiness when you have it, but will make you miserable when you don’t.”

http://www.nytimes.com/2013/03/10/opinion/sunday/morozov-the-surreal-side-of-endless-information.html?hp
 
Also good from the same author:
 
"In his brilliant essay ‘In Praise of Inconsistency’ published in Dissent in 1964, the Polish philosopher Leszek Kolakowski argued that, given that we are regularly confronted with equally valid choices where painful ethical reflection is in order, being inconsistent is the only way to avoid becoming a doctrinaire ideologue who sticks to an algorithm. For Kolakowski, absolute consistency is identical to fanaticism."
One Sliver of the Economic Reorganization of the World…

Incredible article on one corner of the new economic structure of the world that is emerging in Wired this month.

From that article this amazing statistic -
"small, illegal, off-the-books businesses…employ fully half the world’s workers. [These businesses are] unregistered, unregulated, untaxed, but not outright criminal—I don’t include gun-running, drugs, human trafficking, or things like that.”

There is a lot that has been written about how long of a process it is to start a business legally in a lot of foreign countries and how it often takes many bribes along the way. Should the US support foreign unregistered businesses as a matter of policy, because they are less immoral, then a legal business who paid a slew of bribes to corrupt politicians?

These unregulated markets are also not just selling fake purses or sustenance goods, increasingly they are responding to market needs not met by Western corporations -

"Chinese phones were the first to offer dual-SIM-card capability, for example. It was a reaction to a need that wasn’t being met by the formal market… Nokia makes one now, but the underground Chinese manufacturers had them back in 2007. Chinese manufacturers didn’t figure out that a dual-SIM-card phone would be a really good thing. Some folks from Africa and elsewhere said, ‘Hey, this would be a popular product. We want it.’ And the Chinese were happy to make it.”

Increasingly it is clear that the future of world commerce and innovation will not be driven by onerous patents or other forms of highly protected corporate intellectual property, but will instead be driven by countries/economies that can get innovative, market responsive products to market the quickest. While the US preaches IP law to China, the Chinese seem to be making huge strides ahead of the US in this new IP-free section of the world economy -

"If someone wants something made—even if that person isn’t licensed—a Chinese factory will make it. It’s also easy to deal with China. You can go to the local Chinese consulate and get a tourist visa within a couple of hours. You can’t say the same about coming to the US. So African importers, for instance, travel to China and commission Chinese firms to make goods for them to sell in Africa.”

I think the emergence of this new unregulated sector highlighted in this article might be similar to the academic concept of “food deserts” where a bunch of economists from the Midwest (Purdue) sat in their office and went “oh my! Poor people in urban areas cant get healthy food! They can only get junk food from the local 7/11! Look there is not a Kroger Foods or Walmart anywhere near them!” When really, there is a fresh fruit and vegetable cart that is setup on
nearly every major corner in Queens/Bronx/etc.  Some with permits, many without.  The economists were wrong in their conclusions because they only took data from their experiences with where they bought fresh fruits and vegetables at big box normal grocery stores and tried to apply it to the question and had no clue about the realities of the market regulated and unregulated on the ground in urban areas.

Similar to this food desert issue, many are worried about how Western designed goods are not appropriate or ill designed for international markets, specifically Africa.  While there are likely many products that are poorly regionalized, or wholly missing from the market for other regions, but maybe this issue will simply take care of itself. The businesses and consumers in those countries may simply go around the Western corporate system and source the products that are fit to their region and culture directly from manufactures, or maybe major Western corporations will learn to adapt:

"Procter & Gamble, for instance, realized that although Walmart is its single largest customer [informal markets] when you total them up, actually account for more business. So Procter & Gamble decided to get its products into those stores. In each country, P&G hires a local distributor—sometimes several layers of local distributors—to get the product from a legal, formal, tax-paying company to a company willing to deal with unlicensed vendors who don’t pay taxes. That’s how Procter & Gamble gets Downy fabric softener, Tide laundry detergent, and all manner of other goods into the squatter communities of the developing world.”

The rise of China and other emerging economies, is not simply a rebalancing of economic or political prowess but is a dramatic shift in the order of the world that will have numerous, many yet to be known, effects on how business is done and lives are lead.

The Different Types of Elected Officials

I served on the West Lafayette, IN City Council for just about two years.  That may seem like a relatively limited amount of experience as an elected official, but like any job, you learn the most in the first few months on the job.

One of the lessons I did not anticipate but learned very quickly, is that not everyone runs for office for the same reasons, or even any of the reasons elected officials would list off if questioned.

Yes, certainly, some elected officials run because they want to make a positive impact, want to move forward a certain issue, or want to make sure a certain view point is represented.  Others, run because they are bored, retired, and feel like it is something they should just do.  Others, run so that the guys in their golf league will think they are cool and respect them.  There are lots of reasons, why people are motivated to run for elected office, they are not always the ones we were taught in School House Rock.

These varying motivations lead to issues like the ones Doug Masson noted today in his blog post If You Want It Bad, That’s How We’ll Give It To You about his interaction with state lawmakers while helping them draft bills.

On the local level, West Lafayette Councilor Ann Hunt is someone who I may have disagreed with on many issues but who always read every word of every Ordinance, double checked, triple checked and cross referenced every change. She strove to understand the impact of every word on a diverse population of constituents. 

I won’t mention the Councilors who were more inclined to read the title of the Ordinance, get a gut feel on the debate, and just be happy to go ahead and vote, but there always seem to be quite a few of them in every legislative body, certainly at the local level – and probably at the national level too.

The worst part about the whole interaction, was that often times when someone like Councilor Hunt was asking questions, trying to check that the details were all right. That the um “less concerned” Councilors would get visibly upset with the delay, the time spent checking the details over. They would want to rush through the agenda, and get out of the meeting room as soon as possible.

They would often not object on the record, but they would make it clear with sighs or eye rolling that they were annoyed that someone else was “wasting” their time doing a complete, and through job. They would be annoyed that someone was spending the time to properly architect laws that would affect thousands of people and families.

Disagree on policy sure, that is fine, but get in the way of a motivated elected official from fully upholding their responsibility to voters, simply because you want to go home early? Despicable. Actively block, an elected official who is motivated to do a good job, for the right reasons, because you already got what you wanted out of office - to look cool in front of your drinking buddies? Destructive. The worst kind of elected official. Actively ignoring a solemn duty.

Now sure, there is no need to drag out debate and dialog when all the parties are informed and all the language has been exacted, but I will share one outrageous example of the behavior I’m talking about.

While I was on the City Council, the friends of a fellow elected official would give him/her a word before each meeting. “Platypus” or “Hyperbole” for example. The friends would watch the meeting, and bet with the elected official on if he could fit the word into the debate at some point.  Instead of focusing on honest, discovery and debate, they had made a game out of the City Council meetings. 

Unfortunately more often then not it is very hard for a voter to tell the difference between an hard working, conscientious Ann Hunt and a lazy eye rolling elected official. Often times the press does not even care enough to get to know, or expose, the back stories behind the debate and figure this out either.

While on the Council, I had the pleasure of working with great reporters like Mike Malik, a guy who got to know you personally, dug into individuals motivations and back stories. I also worked with reporters who could care less, and were on and off of the City Beat after only a few stories.

I don’t have a solution for fixing this issue, or how to get more of the good guys in the seats, but from my time on the Council I will always remember that there are many different types of elected officials, not just the Republican/Democrat axis we all know and pound on.

I have seen and know good Democrats and lazy Democrats, good Republicans and bad Republicans, and ideological issues aside, their behavior, their approach, and their motivation can make a tremendous difference in the lives of thousands of individuals.

Please Don’t Call Your Elected Official - Seriously Don’t

"do everyone a favor and call your elected officials in Washington" it is a common refrain, and one repeated this morning by top VC blogger Fred Wilson, but I disagree.

Don’t call it does nothing. Zero, zip, nada, nothing

We think it does, because every advocacy group out there pounds it into our head: “call, call, call” But they are doing this not because they think the call itself will create change, they are telling everyone to call because if a supporter participates in an action, even a small insignificant one, they are more likely to be hardend in their support. Someone who picks up a phone and calls an elected official is more likely to donate next time they get a email, a supporter who calls is more likely to show up and actually vote on election day, a supporter who calls is more likely to talk to friends.

The elected official in question is NOT more likely to vote in line with the caller.

I have had a number of former congressional interns and staffers on my payroll and many of them will tell you that 1. its an intern who really does not care answering the phone and that 2. the tally of the calls often does not even get recorded and certainly does not get passed along to the member. No tally, no report. The only result from your call to an elected official is 5 minutes of your time, and 5 minutes of some capital hill interns time is now gone.

Let me repeat that: Almost all members of congress do not even get a tally of who called on what side of what issue. They don’t care. As they should not..

Should we really be making complex, hard, detail riddled public policy based on who is cranky enough and with enough free time to pick up their phone and yell at a congressional intern for a few minutes? No we should not.

So don’t call. Don’t do it. Instead, write a check. Write lots of checks. When you write that check make sure the campaign staff knows why you are writing that check. Write a lot of checks and very soon elected officials will start calling you asking for checks. When they do, write them a check, do it right after you tell them about the issue you support and care about.

Vote. Get out and actually vote.

This is the system we have today. It is not the system we all learned about in grade school, but it is the system we have today. Yes, it would be great if over time, voters stood up and moved our country into a different system more responsive to voters. But, this is the system we have today.

But don’t call, its dumb, its a waste of everyone’s time…

West Lafayette Electoral Predictions

Local elections are different from national elections, in that they are in reality often decided long, long before Election Day.  In local races, there is rarely enough money spent, effort put in, or media coverage to really change the race in any meaningful way, so elections are often decided by the strengths and weaknesses of candidates the moment they sign up to put their name on the ballot.

Based on that notion, along with some early primary data, here are my predictions for the City of West Lafayette elections, some 9 months from today. 

Bottom Line: Council will have a 5-2 Democratic veto proof majority and will have the leverage necessary to achieve far more then in the previous term.

Mayor -
John Dennis (R) turned in about 10% more votes then the two other leading Republicans who were on the city wide ballot. This likely means he pulled a number of cross-over D votes.  While this data is not convincing, incumbents with even a small cross over showing are usually very hard to beat unless some dramatic new dynamic is injected into the race.  Winner: Dennis (R)

Clerk-Treasurer - 
Unopposed - Judy Rhodes (R)

District 1 - 
Results from last night were simply to small to be meaningful, but with even a few months of incumbency and a better network having been a more recent student, Eddie VanBogaert (D) is very likely to take the District 1 relatively easily. Winner: VanBogaert (D)

District 2 -
Peter Bunder is unopposed in the general and since the Republican/Landlord lobby put up their challenger in the primary its unlikely they will field another candidate against him. Winner: Bunder (D)

District 3 - 
I would say it is extremely unlikely that the Republicans put up a candidate to challenge Ann Hunt. Winner: Hunt (D)

District 4 - 
This is going to be the race to watch, and probably the real battleground for control of West Lafayette politics.  The tipping point on a veto proof Democratic majority on the council. Vicki Burch (R) had a rough first term, took a couple of controversial votes and made a number of controversial statements. So Burch has some liabilities but its unclear if Diane Damico will be able to capitalize on them in this down ballot local race that wont get much if any press coverage. Winner: Damico (D)

District 5 - 
Rod Forbes (D) appeared to be a very strong challenger to long term incumbent Gerry Keen (R) but the vote total from the primary was so lopsided in favor of Keen, that it appears that it will be very unlikely that Keen will be challenged in any serious way. Winner: Keen (R)

At-Large (two seats) - 
What is interesting in this race is that Gerald Thomas (D) got more votes then the Mayor. If nothing unusual happens he should walk into reelection, along with Dietrich (R).  Hass may really make this race interesting if he decides to spend out of his personal funds lavishly as he has done in two previous electoral attempts, but even then I would say the results are unlikely to change: Winners: Thomas (D), Dietrich (R)

City Judge - 
Unopposed  - Lori Stein Sabol (D)

Separating the Trends from the Bubble

This morning Fred Wilson, posted about the megatrends going on in the VC world right now, and then argued that the current exuberance is ok because a lot of value will be created. I disagree that the two are linked here is why:

I agree with the two main points of this post, that this is a frothy time and that there are major “megatrends” going on - what I disagree on is that the two are related.

The demand for startups to invest in and the supply of startups have nothing to do with the logical megatrends this time around and here is why:

There is a flood of new investors into the startup scene for three reasons all completely unrelated to any of the megatrends. 
- Successful founders becoming investors - unrelated to megatrends. 
- Cost of startups down so now your local doctor is an investor - unrelated to megatrend
- Startup investing becoming trendy and cool - unrelated to megatrend
This is not smart, logical, thematic investing, this is “me and my golf friends all think this is cool, and I sold one chain of carwashes for $1M so now Im an angel and I want in”

The supply of startups matching up with this investor demand has nothing to do with the megatrends you mentioned either. The supply of startups is coming from a few unrelated sources as well:
- Every media outlet chanting “startups are the jobs” - unrelated to megatrend
- Every university chanting “we want the startups” - unrelated to megatrend
- Every Chamber or City EconDev Group chanting “startups YAH!” - unrelated to megatrend

So what we have here is a whole lot of people who got into it for the wrong reasons and should probably not be investors, matching up with founders who got into it for the wrong reasons and who should probably not be founders.

To say: “nothing great has ever been built without irrational exuberance.” is very bad pattern matching - and assumes that because irrational exuberance happened before and whole lot of value came out of it that every time irrational exuberance happens anywhere near a startup land that a whole lot of value automatically comes out of it.

This is simply not the case. 

The drivers here are different this time, this is not 1999 all over again. The frothyness is almost in a completely different channel separate then the megatrends (which are valid) that you mentioned, talk about, and invest in.

So where is the frothyness separate from the megatrends that are actually viable VC/angel sectors? They are in the 10,000th daily deal one off, they are in music, they are in -shrinking- markets like online dating, they are in platform derivative companies, on and on… those companies, their founders their investors are not contributing to some great creation of value under a bubble, no they are just some sideshow that will get wiped out hard.