Amusingly (and presumptuously), today’s report claims to define “True Twitter users” as active.  They say that a True Twitter User has at least 10 followers, follows at least 10 people, and has tweeted at least 10 times.

Why should we accept this definition?  Analyses like this often come from a position of functional ignorance.  I believe that only the company can have a “Truly” meaningful definition of “active” users, and there are often good reasons that the company shouldn’t waste time debating this definition with external observers.

This is especially true when a company has an evolving revenue model.  In those cases, “active” is only meaningful in the context of a business model cycle that some people call “Startup Metrics For Pirates” because of the acronym AARRR:  Acquisition, Activation, Retention, Referral and Revenue.  ”Active” is the second “A” here, and what matters in the definition is that customer acquisition efforts lead to active users, who participate in activity that they want to repeat and tell their friends about, which ultimately results in the company getting paid.

So if Twitter had zero customer acquisition costs, and tweeting was both addictive and viral (obviously, none of these things are strictly true), then the only definition of “active” that would matter is “user who tweets once.”  Or, if Twitter charged only users with 100K followers, and only users who had 100 followers in the first month ever get to 100K followers in their lifetime (again, not true), then the active user definition might be “user with 100 followers in first month.”  My dumb revenue models here are not the point; the point is that “active” only has meaning in context, and only the company understands that context, especially in a pre-revenue company.

Twitter, rather famously, has not publicly settled on its revenue model.  Undoubtedly they have dozens of ideas, and so they have many dozens of potential definitions of “active” – and they’re not obliged to share any of those ideas with you or me.  They don’t need to waste time with ignorant and disinterested people (myself included):  it’s no use picking over these definitions with people who are not deeply invested in the business (as employee or investor), and who therefore lack the information and commitment required to contribute productively to the discussion.

I call this the Chinese Menu approach (“Pick one from Column A, one from Column B . . .”): Group blogs together by thematic category, and then read only one blog in each category. Every once in a while, I’ll change up the one that I pick in each category, so I don’t get sick of the same meal time after time.

I add and drop blogs from categories all the time, and some blogs could be in multiple categories.  But the key is to just read one in each category.  This approach works well for me.  Switching up the meal selection once in a while helps keep me open to different perspectives.  I never miss anything truly essential, as great posts tend to be cross-linked extensively, or come to me by other means.  Incidentally, the same approach works ok for Twitter (though it’s not ideal).

In the startup world, failure is a badge of honor.  An honest postmortem of mistakes made along the way is greatly appreciated by the community.  For example:

• Eventvue
• Lookery
• Untitled Partners
• neotis wissensmanagement GmbH
• GameClay
• BricaBox
• MyCarpoolStation
• [unfunded idea]

The comments on each of those posts are overwhelmingly sympathetic, admiring and supportive.  Celebrating failure in context is a distinguishing aspect of our business culture versus many other countries.

In contrast, when the President of the US admits mistakes, the national and international coverage seems to imply that the admission itself its newsworthy and perhaps unwise.  Comments are largely vitriolic and incoherent.

Now, I think that failure can be overrated as an indicator of future success.  But I firmly believe that the openness to failure in business is one of the things that makes this country truly great.  It’s ironic and sad that this cultural gem does not extend into our political arena.

Everyone suspects himself of at least one of the cardinal virtues, and this is mine:  I am one of the few honest people that I have ever known.

There are so many reasons why Nick’s ’suspicion’ here is probably false, even though it is an assertion about himself.  He’s an unreliable narrator:  self-admittedly distracted, occasionally drunk, absorbed in his own career and love life and ego.  His statement is boastful no matter how mild the language, and immodest claims of high character are usually false.

But of all the reasons to doubt Nick’s self-assessment, I’ll highlight this one:  He’s only a few days shy of his 30th birthday.  That’s too small a percentage of an expected lifespan to judge one’s own possession of a cardinal virtue.  Think about the changes that people make in the years after 30:  wild partiers become sedate homemakers, stable careerists become out-of-control addicts, atheists find a higher power while the devout renounce their gods.

We can’t know yet whether Nick deserves to stand with the few honest people in the world. We don’t have any reason to believe that he’s ever been tested, and we have every reason to believe that the final judgment of his character will take many more years to make.

Finally (and pedantically), honesty isn’t even one of the cardinal virtues . . . which I suppose should have been the first thing to tip us off to Nick’s (self-)deception.

Privileged access is a weighty philosophical matter that is popularly stated as a question of whether a person has special access to his or her own thoughts that other people do not have.  An intuitive answer is, “Of course I know my own thoughts better than anyone else does!”  But this isn’t simply a question of what you are thinking at any given moment; it’s about whether what you think about yourself is more accurate than what any other people think about you.

Here’s a thought experiment:  Do you know what you would do if you found a paper bag containing $10,000?  What amounts would lead to a different decision, and why?

I think I would keep it. I would rationalize this action (which is probably illegal) by noting that there is almost never a legitimate reason to carry around that much in cash in a paper bag – this is almost certainly drug dealer money, and why should I give drug dealers a chance to recover it?

I would definitely keep, say, five dollars – maybe I would give it to a panhandler, maybe I would buy a sandwich, but I wouldn’t leave it on the ground.  Unless someone nearby might have dropped it, I wouldn’t consider trying to find the owner, or turning the money in to the police – no one will ever come to claim $5.  In contrast, if I found $100,000, I would definitely turn it in.  When that much money gets lost, someone will look for it hard enough to make me uncomfortable – I don’t want to end up in jail, or worse, facing the guys who stole this money before I did (these guys would give up on $10K, but they would seek $100K with violent diligence).  Even more complicated, I think that I would turn in $5000.  There are plenty of legitimate reasons that a law-abiding person could be carrying that amount around, and I would want that person to have every opportunity to recover that money.

So in short, I think I would make a risk and fairness assessment, and act with a mixture of pragmatism and greed.  (Don’t get me wrong – none of this is what I want to do.  I want to believe that I would ignore any amount too small to turn in, and turn in any amount too large to ignore.  But I’m not so self-deluded to think that I always live up to my ideal self-image.)

This thought experiment has one more part:  If you polled a dozen people who know you best on the same questions, what would they say you would do?  Who is likelier to be right, them or you?

I think the majority of this group would say I would turn in the $10K.  In fact, I would guess that a plurality of people would say I would keep or ignore any amount under $100 and turn in any amount over $1000 – their assessment would be closer to my own ideal self, which I feel quite certain is not accurate.  Their reasons for my choices would vary broadly, much more broadly than the pragmatic greed I expressed, and would include reasons that I would not expect.

Is this group likelier to be right about me than I am myself?  I can’t answer that with an intuitive “I know my thoughts – I know myself – better than anyone else.”  There have been too many times when I have been surprised to discover that someone was a better predictor of my actions than I was.

Now, I don’t think that I have particularly poor self-knowledge.  In fact, as this post perhaps deplorably illustrates, I can examine my own navel to exacting excess.  But where does that leave me if the fact that I know myself particularly well only means that I am especially aware that I don’t know myself any better than other people do?  Makes my head hurt.

‘It takes two to make an accident.’

Here is the page where we really get to know Jordan Baker, the other woman at the center of the novel.  Daisy is the one who has become legend, the unforgettable golden girl for whom all was dreamt and all was lost.  But I always liked Jordan better, not least because she is revealed here to be an incurable liar.

When Nick scolds her for being a careless driver, she first lies that she is careful, then lightly insists that she doesn’t have to be careful since other people are.  Nick points out that she’ll be in trouble if she meets someone as careless as herself, and she deftly turns the conversation to their relationship, declaring her affection for solid, careful Nick.

Nick knows this lovely girl is a liar, but ‘Dishonesty in a woman is a thing you never blame deeply – I was casually sorry, and then I forgot.’ Is a thing truly forgotten if it’s remembered well enough to write down later?  Jordan’s not the only one with a loose concept of the truth.  It takes two.

At the risk of Streisanding the hell out a minor comment, I’ll talk about something I’d rather censor.  Noting the rather dated news of my departure from my prior company, an anonymous commenter to an anonymous blog post recently said:

Thank goodness they finally got rid of this guy. He was the worst hire the company ever made.

Here’s what I have to say about that:  I like to think it could very well be true.

I like the idea that there are some people who took a good hard look at the history and said, ‘Yep, this guy was terrible, he almost destroyed the place, good bye and good riddance!’ Because that would mean that I was in a position to make some important decisions, and that I made decisions at the risk of being unpopular – that I did much more with the opportunity than just quietly collect a paycheck.

Now, please don’t misunderstand this:  I’m not saying that the critics are wrong, that they don’t understand, that I was both righteous and right.  Even my own review of my Linden tenure welcomes ambiguous judgment.  Obviously, I think and I hope that I did good things, but I could certainly be wrong, I could certainly be delusional.

But the one thing I don’t want to be is simply in the middle.  I don’t want anyone’s assessment to be, ‘Well, he was neither among the worst nor among the best, he was just there and he didn’t do a damn thing.’ To me, that’s a lot worse than being the worst.

So, if you had any opportunity to think about my work, and you thought I was the worst, then I thank you.  Let me give you my special gift in return:

Simple enough, yes?  Forget Streisand, I call this the Safety Dance.

And you can act real rude and totally removed
And I can act like an imbecile

Watching the gyrating reports on the price paid for Apple’s purchase of music streaming service LaLa reminds me that acquisition prices are widely misreported and often misunderstood even when correctly reported.  Some people only want to know one number – the price paid – without caring about the many other numbers that are relevant to understanding who got what:  the company’s cash on hand, outstanding debt, financing history, and other numbers relevant to the capitalization of the company.

Even the best reporting often misses one important element of the analysis:  newly issued options (or other equity) shortly before the deal.  I like to call this the “options icing” – and it’s a very important concept for understanding what really happened.  For company founders, management and especially employees, it can mean the difference between a happy and tragic outcome for their startup.  The “icing” is both icing on the cake for employees, and also a good way to ice a bad cap table.

The options icing doesn’t come into play very often, but it is more common when the acquiror is a large, sophisticated tech company that historically rewards employees with equity incentive.  This kind of acquiror understands that the future success of the acquired product is less about the technology and more about the personnel continuing to prosper in the big company environment.

Let me make up an example.  A big company has got a problem if the market value of a 50-person company they want to acquire is only $20 million, while the investors have already put in $35 million into the company.  Typically, the investors have to be paid back first before anyone else gets paid, which means that employees would get nothing, which means that the big company would spend $20 million and get a bunch of seriously disgruntled employees, who will probably leave the company pretty soon after the deal. Even if the investors agree to restructure their liquidation preference, say by half, you still have very little left over:  $17.5 million to investors, $2.5 million for employees.  Let’s say that 1/2 of the employee stake is owned by 2 founders, and then you’re down to only $1.25 million for 48 other employees.  Nobody is happy with that outcome.

Here’s where the options icing comes in.  The company could issue a huge pool of options to employees who would be critical to carrying the product forward (in any scenario, whether acquired or not).  Say they issue $10 million worth of new options.  The magic here is that a smart acquiror will be willing to pay for some or all of those new options.  Even though the company is still only worth $20 million, the acquiror could be happy to pay $30 million if the options are issued to the right folks with the right terms.

The “right terms” include typical vesting terms, so the employees receiving options are incented to do great work for the acquiror.  From the employee’s perspective, this is fair because it is a whole lot better than the stick in the eye they would have been getting under the $20 million scenario.  From the acquiror’s perspective, this is a good deal because rather than flushing $20 million down the toilet, they are making a rational $20 million purchase, with a nice $10 million compensation package that addresses the compensation disadvantage that big companies face in competing with startups.

One of the key reasons that people work in startups is that you can really move the needle for the company’s value.  In financial terms, if you are part of a startup that creates, say, $100 million in value, then it’s a pretty neat feeling to have made nothing into $100 million, and you can get rewarded handsomely for that.  But if you are in a big company that is worth $100 billion, nobody will really notice, or even be able to tell, that you added $100 million in value – it certainly won’t make much of a difference in the stock price.  And that creates a compensation disadvantage for big companies that are trying to motivate their employees with equity grants.

But in the scenario above, the big company can pay for $10 million in stock grants to motivate a relatively small number of employees to execute on a product they clearly understand.  If these employees can turn that $20 million business into a $100 million business, they will be rewarded for it in a manner comparable to their rewards if they had remained an independent company.  That kind of compensation is generally not possible to award in a big company other than in this scenario because of internal “fairness” issues.

The beauty of all of this is that it is one of the few situations in this rotten ol’ world that deal dynamics favor the rank-and-file employees.  Most corporate dynamics, especially in big deals, have a tendency to screw the little guy.  But in order for this situation to be a good outcome for everybody, the rank-and-file employees have to be rewarded in a fair manner.  Coming back to my example above, the options icing can be win-win-win all around:  The investors can get a little tip for agreeing to the restructuring and the new equity; let’s say they get $18 million, just a bit more than they would have made otherwise.  That leaves $12 million for the employees – say the two founders take $3 million, more than twice as much as they would have made under the $20 million deal.  The other employees get $9 million, more than 7 times as they would have made.  The acquiror paid $10 million more, but as described above, this is money that really makes sense to spend, and it’s more like incentive compensation than it is acquisition consideration.

And this deal gets reported as a $30 million price paid.  But really from the right perspective it should be regarded as a $20 million deal.  Now, I am not saying that anything like this is what happened in the Apple-LaLa deal – actually the discrepancy in the reported numbers is too large to be explained by options icing alone.

most affectations conceal something eventually, even though they don’t in the beginning

Here’s another casually sharp insight into human nature.  From time to time, everyone pretends to be something they’re not.  And sometimes this pretense is just a costume, worn as if for a holiday party, to be discarded and forgotten after the festivities of the moment expire.  But sometimes the pretense is aspiration in disguise; the costume turns out to be not a drapery over skin, but a layer emerging from underneath.

A little while ago I suggested that online privacy concerns are best addressed by free market solutions, not governmental regulation.  I’ve discussed the topic with quite a few entrepreneurs, investors and professional marketers, and the overwhelming view in that group is that regular consumers just don’t care about online privacy.  ”They” say:

• privacy is too complicated a topic for consumers to understand
• no one reads privacy policies
• consumers can be distracted from privacy concerns with the offer of just about any shiny object

Much of that might be true – but I also took the time to talk to a bunch of “regular” consumers.  And these things are definitely true:

• consumers know that their privacy is being compromised by many online services
• consumers do not like being taken for granted
• consumers will avoid services that abuse their information, and will seek services that use their information properly

These two sets of “truths” are not mutually inconsistent.  To me, they add up to:   Online services can gain a competitive advantage by giving consumers the most sensible default choices along with the right advanced options for privacy – make it simple, but make it right.  I think Facebook believes this, and that’s why they keep tinkering with their policies.  They understand that a lot of their initial attraction was a result of making different privacy assumptions than more open services like FriendFeed and Twitter.  They know that even if no one ever reads their privacy policy, if they make the wrong choices about privacy, they will lose users.  As they saturate their available audience, they have to figure out how to strike the right balance among their different demographic bases, all the while competing with the advantages that more open services have.

These are extremely nuanced choices, but getting them right makes the barrier to competitive threat all the more defensible.  And these are product choices; this is something that many I’ve talked to misunderstand:  people think that this privacy stuff is just legal mumbo jumbo or regulatory mishmash.  That’s plain wrong – laws and regulations are just the cart behind the horse.  In a social product where community is paramount, policy choices are product choices.

I even had a short affair with a girl who lived in Jersey City and worked in the accounting department but her brother began throwing mean looks in my direction so when she went on her vacation in July I let it blow quietly away.

Nick reveals a lot about himself by how little he explains about his life outside his own definition of the story.  On this page, he’s trying to convince us that his summer in New York wasn’t dominated by all things Gatsby.  A short “affair” (whatever that means, in his day) might be cause for several pages or even a chapter in a more conventional account of Nick’s life.  But this sentence is all he says about the girl, because he isn’t here to tell you about himself, the ostensible story is supposed to belong to Gatsby.

But I’m curious.  Just what does an affair mean to Nick?  What sense of honor or cowardice allows a “mean look” to alter his pleasurable pursuits, whether frivolous or serious?  Is the description “blow quietly away” an accurate account from the perspective of our Jersey girl?

None of this gets any exploration.  Instead, later down the page Nick devotes a substantial narrative to an aimless fantasy of following a romantic woman in his mind’s eye.  She’s a New Yorker – he begins his account with a statement familiar to all transplants to the big city:  ’I began to like New York, the racy, adventurous feel of it at night and the satisfaction that the constant flicker of men and women and machines gives to the restless eye.‘

As he goes on to imagine what it would be like to spot a woman in the crowd on Fifth Avenue and follow her home for nothing more than a smile, we realize that this romantic fantasy captures the essence of what he wants but didn’t get from Ms. Jersey City.  He gave the real “girl” a cursory sentence, and devoted a fulsome paragraph to a fantasy woman – and in that contrast told us more about himself with omission than he could have with description.

The tech-über-alles crowd would have you believe that “de-indexing” from Google would be suicide for any publisher.  The assertion there is that Google drives the majority of web traffic, so if you’re not findable through Google, you might as well not be on the Internet.

But that assertion flies in the face of another observation from the technoscenti – social media like Facebook and Twitter are becoming increasingly important as traffic drivers (though this importance may be overhyped).  We may be heading towards a future where the links are shared through social media are more valuable than search links.

More importantly, and against the prevailing wisdom in some circles, content still matters.  People use media services because of the content on it.  Other factors are important too:  the features must be complete, the UI has to be easy, the price has to be right, yadda yadda yadda.  But would any of those other factors make up for terrible content?  No, content is, if no longer king, still the jewel in the crown.

If Bing is able to be the exclusive search partner for the right content, Google is dead.  Of course, what’s “right” can vary quite a lot from person to person.  For me, it’s as simple as two publications:  If the New York Times and Wikipedia are de-indexed from Google, I’m going to stop using Google in favor of the search engine that has those two.  I might think it’s unfair, I might think it’s a triumph of soulless MBAs over tech heroes, I might think it’s the desperate grasping of dying empires.  But I want the content I want, and those principles aren’t enough to prevent me from switching.

Bing doesn’t have to make deals with every content provider, just a dozen or so critical ones that will cause another 40% market share gain (they’re at 10% now).  Sure it’ll be expensive to acquire the best content, but Microsoft’s got more cash than Google.  Once it’s 50/50, it’s anybody’s ballgame but the advantage goes to the one who has the content.

I’m pretty sure that Google is not going to sit back and smugly assume that Murdoch’s gambit will fail.  They’re going to get involved, they’re going to try to start locking down their own partnerships.  If I were them, I’d start with Wikipedia, one of the most important search result destinations on the web – it’s in the top five results of just about any search you do.  Sure, they’re a non-profit, but non-profits need money too.

A sudden emptiness seemed to flow now from the windows and the great doors, endowing with complete isolation the figure of the host who stood on the porch, his hand up in a formal gesture of farewell.

I love the energy ascribed here to emptiness, a concept that is ordinarily quiet and passive.  Here the emptiness is a kinetic force that fills the house and overflows out the windows and doors, so powerful that it blankets Gatsby in a protective cocoon.

Another wild party is over, and the host stands in the doorway alone, with his true mission still incomplete – the girl of his fevered dreams didn’t come.  He’s chased her across years without seeing her, other than in his boundless imagination.  Now she’s just across the bay, and surely she must see his mansion alight with festivity, night after night, a beacon calling to her to come and join him at last.  But she doesn’t come this night, and all the people and music and laughter that evening have only fed the emptiness which now fills the house and his heart.

In the very first minute of the decade, we found out that the looming Y2K disaster wasn’t real.  Then the dot-com bubble burst, proving that vast paper fortunes weren’t real.  Most of us voted against GWB for president in 2000, but he took office anyway, showing that popular democracy isn’t real.  The September 11 attacks seemed too horrible to be true, and we began a War on Terrorism with no real evidence that our target was involved in the attacks.  But the real illusion turned out to be the hope that “nothing will ever be the same again” – we quickly returned to ironic humor and emotional distance.

The Web 2.0 bubble came and went without a meaningful public company being created.  Massive investments in complex financial instruments that ultimately had no real basis for valuation led to a worldwide financial crisis.  A nation that stands as the apotheosis of capitalism turned to massive government bailouts, ultimately saving at least one sector of the economy:  big banking, whose leaders rewarded themselves handsomely for work they didn’t do.

Yep, the Age of Illusions it is.  Naughty Aughties, don’t let the door hit you on the way out.

I was born in New Jersey, grew up about 45 minutes outside of the city, and went to school and started my career in NYC.  I’ve been out in the San Francisco bay area for over a decade now, and I’m firmly rooted here with family and career, but the thought of going back to The City (the one and only “The City” – pretenders begone!) still occasionally buzzes in my head like a bee in a speeding car.  However, on a trip back to New York last week, I realized that one of the things that prevented me from moving back is my own very New York attitude.

Over the past few months, a few New York based technoscenti have carried a conversation about NYC as a startup environment.  Chris Dixon said conditions are ripe for a new NYC tech revival, Fred Wilson and Charlie O’Donnell agreed but noted that NYC has been a strong tech scene for years, and Dixon and Wilson came together to agree again that the NYC startup sector is special.  All this caused me to reflect on why I left the city that I love to pursue a tech career in Silicon Valley, and why I’d do it again.

It all goes back to why I went to NYC in the first place.  I was learning the law, I wanted to be a dealmaking lawyer.  And while there’s law and lawyers all over the world, the pinnacle of the practice is in New York.  Routine transactions in New York would be considered fantastically complicated almost anywhere else, and complex transactions in New York are so far above other places that they can’t be considered the same category of endeavor at all.  So if I was going to be a lawyer, I had to try to do it in the belly of the beast.

And it was a great time, but after a few years I realized I wanted to be more connected to the creation of something from nothing, rather than the financial engineering of something into vast amounts of money.  That meant working in startups, because startups aren’t about money but about value creation (a distinction often lost on New Yorkers).  So I shifted the path of my journey, but I retained that New York attitude of wanting to play on the biggest possible stage, and in the startup world, that meant going to Silicon Valley.

There are other great startup scenes in the world, and New York is certainly a special startup environment.  But if you’re a stage actor, you don’t go to New York dreaming of playing Off Broadway; you dream of your name in lights on the Great White Way.  Because I grew up as a New York dreamer, dreaming of a startup career meant leaving New York for the biggest and baddest startup scene in the world.

It’s all a bit ironic, and I’m not saying this “big stage” attitude is right.  In fact, it’s almost certainly not a healthy way to live.  A healthier attitude would be less entranced with the size of the stage, and more focused on the production and your role within it.  I think that’s the attitude held by Chris, Fred and Charlie, and I really look forward to seeing those guys continue the public conversation (and private work) about making New York into one of the great startup locales in the world.  For those interested, Elie Seidman is another good new voice in the thread, and of course Joel Spolsky is a longtime stalwart for software engineering in NYC (or anywhere).

‘But I wasn’t even trying,’ he explained indignantly.  ’I wasn’t even trying.’

The character ‘Owl Eyes’ has two odd little interludes in the novel.  In the first, Nick and Jordan encounter him as a drunken visitor to Gatsby’s library during a party.  After that same party, departing guests come upon a car gone off the road, wrecked in a ditch.  As the crowd gathers, Owl Eyes stumbles out of the car, and the bystanders begin to berate him for his wreckless driving.  But he wasn’t even trying – he wasn’t trying because he wasn’t driving.  The crowd gasps as the actual driver stumbles out of the car.

As the narrator, Nick must be the eyes of us, the readers.  But he’s not us – he is his own complex character, a famously unreliable narrator.  Owl Eyes is us.  He’s a nameless party guest, stumbling around the library, surprised to find that the books are real but cynically concluding that they are still a facade.  He’s careening around the property, but he’s not even driving, he doesn’t even know how to drive.  That’s us readers, we’re just along for the ride.

I joined Craig’s firm in Menlo Park a few years after beginning my career in New York.  In the large Manhattan firms, the partners have big offices with spectacular views of the city.  Craig opened Venture Law Group in a modest suburban office park, and he liked to change his own office location from time to time, to dispel the office politics around a physical locus of power.  At one point soon after I joined, he occupied the small office right next to mine, making me a very lucky neophyte to Silicon Valley.  He was always kind and generous with his time and advice.  There are two bits of his wisdom that I particularly remember:

Timing and sequence are as critical as any other factors in building a successful venture. People tend to obsess over having the right idea, and building the right pieces to pursue those ideas.  And undoubtedly, it matters greatly that you pursue the right idea, building the right pieces, with the right people.  But all of those things can be right, and you can still fail if you start at the wrong time.  And more subtly, even being in the right time is not enough – you have to do things in the right order.  Attention to timing and sequence requires extraordinary strategic focus and discipline.

You are an undiversifiable piece of human capital.  This advice grows out of the notion that we are all investors in our own careers.  And one of the first principles of good investment management is portfolio diversification – by distributing your investment across asset classes with varying risk profiles, you can maximize your return while minimizing overall risk.  But as a human being with one life, you have a limited number of opportunities to diversify your career portfolio.  Life is about risk in a deeper way than rational investments.

Craig inspired us with his humility and gentle wisdom.  He carried his great experience lightly, with a twinkle in his eye at the chance to share a new thought with you.  Most of all, I’ll remember the boyish enthusiasm he always had for helping new ideas become realities.  Rest in peace, Craig Johnson.

So here is the rule of the Iron Quadrangle:

Friends, family, work and health are the four most meaningful areas of pursuit in life.  The very best that most people can achieve is to be outstanding in two areas, mediocre in one, and barely tolerable in the last.

Be wary of any advice that rigidly proclaims to know which combination is best for everyone.  For example, a lot of well-meaning homilies put family and health above all other values.  But the Iron Quadrangle means that all four values are connected; activity in any one informs all of the others.

Keep in mind that health includes physical and mental health; and that work includes all vocation, whether in pursuit of profit or pursuit of a cause.  Meaningful and lasting friendships are a critical contributor to lifelong health.  Pursuit of your true calling in work should be both emotionally enriching and intellectually revitalizing.

So maximizing your pursuit of family and health, to the exclusion of full effort with friends and work, can limit your achievement in the areas you would want to advance the most.  Would you have given all that you could to your life partner and your children if you never tested your mettle with the greatest challenges at work, or failed to develop rich friendships outside of your family?

Some will try to argue for picking work and family, or friends and family, or health and friends.  Some would claim that the limitation to two outstanding areas is false.  But in my experience and observation, the Iron Quadrangle is pitiless and brooks very few exceptions – and what exceptions I have seen are more a result of extremely fortuitous circumstances than the result of thought and effort.

This isn’t a pessimistic message, but rather a reflection on avoiding regret.  Many high-achieving people in every area look upon their accomplishments with regret for the areas in which they did not excel.  I think regret is only appropriate where people made choices while lying to themselves about the consequences for the other areas.

The shocked reaction misses an important point:  Everyone believes that investments in companies like Twitter are likely to fail, including the investors in Twitter.  For the most part, people who invest their money in companies like Twitter are not putting their life savings into a single company; they are investing their portfolio (or an allocation of it) into high-risk, extremely-high-return-potential companies.  For that high-risk portfolio, it could be rational to invest in companies with a 90% chance of failure, if there is sufficient return for the other 10%.

Now, there aren’t many actual portfolios that are (intentionally) structured with any allocation to a class of investment with a 90% failure rate.  But it would be completely typical if every single non-employee investor in Twitter made their investment from an allocation that has a greater-than -50% failure rate.  In other words, most Twitter investors believe that it’s likelier than not that Twitter will fail.  (Here, “failure” means that the investment will fail to reach the modeled return, not that the company will completely go out of business.)

It’s easy to say that Twitter will probably fail, but how many critics are confident that there is a less than 10% chance at a 10X return?  Investors in Twitter don’t bank on Twitter, they plan that either Twitter or one of the other companies in that allocation of their portfolio will make an outsized return.  Many of those investors have been right time and time again about their projected portfolio performance, which means that as a reward they will continue to invest in companies that are likely to fail.

But these people seem to talk on and on about privacy with some seriously flawed assumptions.  They assume that everyone agrees on what privacy is, and that everyone wants privacy in exactly the same way.

I’ve become enamored of the comparison between privacy and religion.  Even without being religious scholars, most people have a basic notion of what the word “religion” means.  And most everyone understands that different people can have very different views about how to practice their religion, or whether to practice any religion at all.

Privacy is the same way, isn’t it?  There is some shared understanding of what the term means, but the specifics of the meaning and practice of privacy can be very different among different people (especially across generations).  Some people don’t believe privacy is important at all, choosing to live without it.

Both religion and privacy deserve the protection of our laws, and for very much the same reason:  the practice of these matters according to one’s own belief is essential for building and maintaining a sense of meaning in life.  In simpler terms, a personal view of these things are required elements of the pursuit of happiness.

Our laws protect religion (and atheism) without saying that “religion” must include a single deity, or prayer at sunset, or robes or hats or ritual.  It’s a mistake to think we should protect privacy by defining exactly what data people should consider private.

Breaking my tradition of linking privacy posts to ’80s songs, because this early ’90s song has perfectly apt lyrics:

Every whisper
Of every waking hour I’m
Choosing my confessions
Trying to keep an eye on you
Like a hurt lost and blinded fool, fool
Oh no, I’ve said too much

The New York Times thinks so:  just since I’ve been paying attention, I’ve noticed – 1 2 3 4 5 6 7 8 – eight articles about the threat to consumer privacy posed by increasingly effective online behavioral ad targeting.

Jeremy Liew is concerned that the recent public interest push for privacy regulation will threaten startup media companies, suggesting that the ad networks should band together to lobby against online privacy regulation.  He says “While it is always hard to argue against privacy, the impact of this level of restriction would be enormous for companies relying on online advertising.”

It’s not that hard to argue against privacy, it’s just . . . delicate.  And I think simply saying that a lot of money is at stake isn’t enough of an argument.  So I’ll try to make a better argument for why privacy legislation of online advertising is likely to cause more harm than good.

I’m actually a huge fan of the Electronic Frontier Foundation and Consumers Union, and I think their hearts are in the right place on this.  I’m generally in favor of legislation that protects consumers from predatory practices in the marketplace.  But although privacy is a special value, it is not something that is well served by detailed regulation.

The problem is that privacy means many different things to different people, so everybody’s expectations can be quite different in terms of both substance and process.

The substance of privacy is the content of what you want to keep private.  Some people don’t care if you know whether they are male or female, but they don’t want to reveal their age.  Some are ok with gender and age, but not job and income – etc, etc.

The process of privacy is about the availability, collection and use of the information.  Some people want to opt-in to every interaction, some prefer to have opt-out control.  Some are ok with information used in the aggregate but not the individual, or even vice versa.  Some are ok with information being used by private parties, but not the government, or for a day or a month, but not a year or a decade.  Etc ad nauseum.  Few of us are ever thinking about exactly the same thing when we think about privacy.

Privacy may be a fundamental right, but it’s more like the right to freedom of religion than the right to trial by jury.  The latter is a specific procedural right, which we want everyone to have in a very clearly defined way.  The former protects an abstract and highly personal set of values, which each person may regard in a different way.

In the US, we don’t protect religion by telling people what it means; we protect it by saying that the government won’t promote any particular form of religion, and people can exercise any form they choose.  The failing of the public interest proposal on online privacy is that it presumes to define privacy for everyone.  That’s a dangerously unsophisticated view of a standard that varies from person to person and evolves across generations.  A time-traveler from before the Internet would not recognize what the average Facebook user calls “privacy.”

So how do I think privacy concerns should be addressed?  Well, by the market, of course. Don’t get the wrong idea:  despite my love of entrepreneurism and therefore capitalism, I don’t believe that the market is infallible, nor do I believe a free market must be unregulated.  But where you have complex consumer preferences and an infinite variety of potential solutions, a market is often the best way to satisfy the most people.  Think again back to religion:  people basically make their religious choices in a free market as well.

Consumers should have a large variety of choices about how their personal marketing-relevant data is collected and used by advertisers.  The role of governmental regulation here should be limited to traditional consumer protections about clear and full disclosure, contracts of adhesion, and anti-competitive practices.

The government just needs to make a level playing field.  People do care about privacy, and companies that can address those concerns correctly and creatively will make a lot of money.   And that matters not just because it’s a lot of money, but because it’s a case where consumer interest and the pursuit of money can be aligned.

[Apparently I've decided that my posts on online privacy must be titled by reference to 80's hits.]

But my thinking about this whole conversation is best summed up by the immortal (and surprisingly moral) William Munny:  Deserve’s got nothing to do with it.  People talk about venture capital compensation as if there is some moral justification for what they make, or conversely a moral reason why they shouldn’t make their money.

Now, I don’t belong to the amoral school of thought that says that people “deserve” whatever the market will pay them – sometimes the market is wrong, sometimes the conditions are unfair, so sometimes there are outcomes that are morally unjust.  However, this is not one of those times.

Venture capitalists negotiate their compensation terms with extremely sophisticated investors.  Those investors are willing to pay VCs an amount that still gives the investment portfolio an expected return that is correct at the time of projection.  Sometimes the investor projects incorrectly, but that’s not a moral misjudgment, it’s just people not being good and/or lucky at their jobs.  And if the VC sector underperforms expectations, compensation will get adjusted over time.  Deserve’s got nothing to do with it – this is a case where the market is perfectly capable of taking care of itself.

Dixon emphasizes that the most important thing about equity grants is the percentage of the capitalization granted, and Wilson adds that the implied valuation of the grant (number of shares times share price of most recent financing) is also useful.  While these things are true, my objection is that the probable audience for this advice is composed of prospective startup employees, and the use that they will make of this advice is to try to choose a job based on the value of the equity grant.

This is a bad idea for two reasons.  First, valuing an equity grant is only secondarily about determining the percentage of the company – it is primarily about determining the exit value of the entire company, an exercise at which professional investors in the field routinely fail. (Fred himself will tell you that 2/3 of venture investments in a successful fund will break even or lose money.)  If you are thinking about joining a startup, and you have 2 choices, you are very unlikely to have any rational basis for believing that 0.1% of one startup will be worth more or less than 0.2% of the other.

Second and more importantly, if you want to work in a startup, you should not choose where to work based on compensation.  You need to pick the project and the people that get you most excited, period.  Without a belief in the mission and an authentic fit with the team, you will not be successful anyway, so any compensation will be a waste of your time and their money. If you have other employment options, you should explain that to the place you want to join, and if they want you they will make the comp work within their range, and you should accept.  Or, if you simply want to work at the place where you will be paid the most, you should not work at a startup. (Don’t be offended, this isn’t a test of character or a judgment of your soul – if you’re not a startup person, that doesn’t make you any worse or better than the people who are.)

Dixon actually gives really good advice in his post, for those who are paying attention:  ”If management tells you the number of shares and not the total shares outstanding so you can’t compute the percent you own - don’t join the company!”  As I’ve said before, the reason to have a detailed conversation about equity comp with your manager is to test management’s clarity and forthrightness in general – not because you have any hope of making a correct equity valuation.

I would be willing to bet that neither Dixon nor Wilson has ever made a choice of company to join or invest in based on equity percentage.  They made their choices from their interests in the market, the product, the team – and then later, after a decision to join/found/invest has essentially been made, they did some optimization around the equity.  Choosing the other way around is about relying on luck, not successful choices and preparation.

[Bully for you if you know the reference for the title of this post!]

But the parallels are too strong in watching Twitter make a controversial attempt to trademark the term “tweet,” bringing them into a cycle of uncomfortable conflict and limited accommodation with their own developers.

Second Life faced exactly the same issues – a passionate and well-meaning developer community using many terms associated with Second Life that the company hoped to protect as trademarks.  We ultimately came up with a comprehensive policy that was and remains a subject of derision in the SL community (see comments to the linked blog post).

It can be very difficult to engage in a productive conversation about trademark law, because even the basics are hard for nonlawyers (and some lawyers) to absorb, and yet because we’re just talking about using the English language, it seems like anyone who speaks English good should be able to comment intelligibly.  [Yes, the usage error in that sentence was intentionally ironic.]

I think everyone – the company and the commentators – could make better progress by ignoring the legal issues, and just focusing on the marketing questions.  Now, marketing is another one of those disciplines that requires a lot of expertise, and is nonetheless discussed with fervor by anyone who has a couple of IQ points to rub together.  But I think the marketing questions here are simple enough even for me to understand.

1st question:  Is there a name for the product or service that the company should be able to control?  The answer to this question is almost always yes for at least one name – companies are generally better off when they control the primary name for their offering.  Once you reach that answer, following trademark law in order to implement that answer is a straightforward process, and having good customer communication around that process is a requirement.

2nd question:  When there are words associated with the product or service that facilitate the use or adoption of the service, is that facilitation improved or hindered with greater company control over those words?  Marketers and lawyers almost always have the same bias for control (though for different reasons).  The bias itself is always wrong – I don’t mean that it’s always wrong to have that control, I mean that it’s always wrong to approach this question with bias.

Does it really do any good for Twitter to own the word tweet?  Some brand marketers and lawyers will raise the specter of genercide (basically, losing control over your brand name), but this fear should not be the primary analysis unless we are talking about the primary name.  When we are talking about those strongly associated words that help spread the gospel of the company, the analysis should not be of the law and certainly should not come from a place of fear.

The analysis should dispassionately examine whether unrestricted use of the words will help spread that gospel.  And it will often make sense to have less control over these words, not more.  If religion were a business, it would probably make sense to trademark “The Holy Bible” – but trademarking “Christ” would probably make for a lot fewer Christians.

Of course not, you can’t tell from a slideshow how a company really operates.  Employee comments are helpful, but not conclusive – Netflix has public reviews at Jobvent, Telonu and Glassdoor, which show a mixed approval rating.  But from the outside you never know if the complainers are malcontent underperformers, or if the fans are deluded Kool-Aid drinkers.

At Linden Lab, we spent a lot of time on company culture, creating and periodically revising the Tao of Linden.  That document was similar to the stated Netflix culture in emphasizing a high degree of both choice and responsibility.  I loved the culture we built, as did many employees, but I can’t say that it’s a culture that works for everyone.  And I won’t say that there’s any single best way to run a company (though there are many undeniably wrong ways).

I’ve worked in some centralized, command-and-control environments, and cultures based on internal competition and depersonalization to the point of dehumanization.  And I’ve had plenty of fun in most of these places.  I’ve come to believe that the single most important thing about a company culture is whether or not management truly believes the culture matters.

Every management team will give at least some lip service to company culture.  The companies that stop at mere lip service end up with hollow words engraved in the lobby – these are the truly miserable places to work.  The companies that put real time and thought into their culture, in the firm conviction that a great culture is required for enduring success – these are always great places to work, almost independent of the actual values of the culture.

Commitment to the culture, a genuine determination to fight the good fight to make the company a place with a certain cultural identity – this always leads to a great place to work for some set of people.  A culture of choice and cooperation works well for certain kinds of people.  A culture of command and competitiveness works well for others.  Even a culture based on greed and amorality can work, depending on the industry.

Which is not to say that anyone can work in any culture – in fact I’m saying just the opposite:  you should understand what preferences and constraints your own personal values carry, for this determines what kinds of cultures you will enjoy.  And then it will be easy to identify the companies that express your cultural values.  The hard part will be determining whether the leadership is really committed to fighting the good fight.