so drunk

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p. 66:

Snell was there three days before he went to the penitentiary, so drunk out on the gravel drive that Mrs. Ulysses Swett’s automobile ran over his right hand.

We are in the midst of two full pages in which Fitzgerald does nothing but reel off the guest list for Gatsby’s summer parties.  The first few times I read the novel, I barely skimmed these pages, not understanding the impact Fitzgerald was delivering with the sheer volume and baroque detail of the list.  Sprinkled throughout the fanciful names, there are these phrases that contain whole worlds, stories within stories, mysteries, comedies and crimes.  Why would a man’s hair turn “cotton-white one winter afternoon for no good reason at all“?  A man came “only once, in white knickerbockers, and had a fight with a bum named Etty in the garden” – did he come just to fight? What was a bum doing at this fancy estate party? How does it feel to have a brother so notorious that you can only be referenced as “brother to that Muldoon who afterwards strangled his wife“?

But of course, my featured one-sentence story here involves jail, drunkenness, and maiming.  There is something very subtle here that shows Fitzgerald knows about passing out drunk:  writers without experience in this matter would describe what the man was doing just before he passed out.  Fitzgerald, being an unrepentant drunk himself, knew that a drunk never knows what he was doing in those moments.  He only knows the next day about the consequences, and only knows that because he was told by witnesses who are only barely more reliable than himself.

the nature of their game

~ ginsu ~ 3 Comments

Pleased to meet you
Hope you guess my name
But what’s puzzling you
Is the nature of my game

Facebook may be overplaying its hand, but do we really understand the game they are playing?

We’re mad at Facebook because we feel like helpless pawns in an environment we need but don’t control.  Even though I’m included in that “we,” I have some sympathy for Facebook because I was once on the other side of a similar divide between the consumer and the company.

At Second Life, we (this time I mean we-the-company) had a seemingly omnipotent grip on the environment our users needed.  In theory, we knew our users intimately, knew who their friends were, knew where they went and what they did.  We owned their means of payment and communication, we set policy for their leisure and commercial activities.   This is a level of control that Facebook dreams of, not in a virtual world but for the entire Web . . . and it’s scary that they actually seem to be on the path to getting there.

Some of our most devoted customers were also our most vocal critics, because they were so deeply invested in the world they helped create – and every change in the service affected their lives deeply.  A few critics assumed that since our every change seemed to hurt some users, it should be easy to build a competitor that would satisfy all users.  But Second Life “killers” and open-source alternatives never gained traction, while Second Life continues to grow long after the hype cycle forgot about virtual worlds.

One lesson in all of this for me was that most critics and competition never really understood our business.  Our operation was so multifaceted and complex that every competitor only focused on the one or two things that they believed were important, and individually or collectively they never assembled a cohesive whole that could challenge our market dominance.

I’m seeing the same thing today with Facebook’s critics.  Competitors who think an open (source or otherwise) alternative to Facebook will bring down the giant simply fail to understand the business they are competing against.  Open identity, open interests and open social graphs are very difficult to grow and support without an overriding service reason to spur adoption and use:  People have an online identity and social graph because of the services they use, not the other way around.

Facebook and the end of the Web

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This week Facebook released a barrage of announcements that reveal a stunning level of ambition.  You have to ask, are they really the next Google, but with evil?

I can’t speak to the question of evil, but I do have a mental benchmark for the next Google, and it isn’t simply about being the next giant tech company.  The next Google would have to create an entire sector of economic activity, keeping a dominant position worth many billions of dollars while also creating many billions of dollars of value for other companies.

Before Google, the commercial Web was motley mix of emerging media, with some interesting economic opportunities in portals, ecommerce and auction.  Google created and dominated search advertising, but the utility that search brought to the Web was a major driver in the overall economic growth of all advertising on the Web, including display advertising.  Today the entire commercial Web runs on advertising, and Google helped create many more billions of dollars than it captured for itself.

If Facebook merely becomes the world’s best ad network, they would not be the next Google.  They would simply be the biggest winner in the economy that Google helped create.  They could even suck all the oxygen out of Google’s room and thereby kill Google, but that wouldn’t make them the next Google any more than John Wilkes Booth was the next Abraham Lincoln.

I think Facebook’s ambitions go far beyond advertising.  I’ve got no crystal ball showing the future, but the analogue from the past that seems relevant to me is television.  TV was once a wondrous new technology, giving rise to a new world of entertainment and news media.  Businesses quickly hooked the economic engine of advertising to the media of television, and decades of fantastic growth followed.  It once seemed a given that television would hold a central place in our media lives forever, and that it would always be free.

And then cable TV came along.  You might not remember this personally, but cable TV was initially a terrible affront to consumers.  People had become accustomed to getting a huge amount of media for free, and now these horrible new companies wanted outrageous fees every month for the same kind of media.  This could be very painful for a consumer with devotion to a particular kind of content, for example a sports fan seeing important sporting events disappear into the hole of paid TV.

Could the same thing happen to the Web?  An entire generation has become accustomed to Web media as free media, and assumes that will be true forever.  But cracks in that assumption have appeared recently.  We’re seeing a new wave of paid content efforts on the Web.  More importantly, we’re seeing platform owners make good money from Web-like content, like Amazon with Kindle and Apple with iPhone/iPad.

Amazon and Apple have shown that you can make money from digital content if you own all the important parts of the value chain, from digital content rights to an ecommerce store to a payment service to a physical device.  Facebook could be about to find out whether you really need the last link of that chain.  They might not need control over the physical device, because they have something even better in the social graph and identity management.

Facebook knows who you are and knows who your friends are, and they own that information in a way that no one ever has before.  Add in the right content relationships, a payment system, and a universal interest indicator, and that becomes a complete enough platform to enable more paid content on the Web.  A hidden key may be that their payment system is a prepaid credit system, which allows small transactions that would otherwise have burdensome costs and usability barriers.

That may sound a little abstract, so I’ll offer up this fanciful example:  I go to visit Pandora for music, and Facebook and Pandora immediately know it’s me.  They know what kind of music I like, and they know what kind of music my friends like, so they are able to recommend some really great music for me.  Right there I have already participated in a content transaction:  I have offered my valuable tastes and contact information to Facebook, who handed that info over to Pandora – you have to think that Facebook gets paid for that.

And Pandora was glad to pay, because I really like that music they recommended.  In fact, I liked it so much that now I’m going to sign up for a Pandora subscription.  I’m about to reach for my credit card when I realize, hey, I can pay for this with Facebook credits!  Oh, I see I’m a few credits short.  No problem, I’m going to go this this Facebook game, SheepWorld, and rack up the extra FB credits I need – then back to Pandora to pay.

A bunch of little transactions happened in that scenario, and none of them actually involved me pulling out my wallet.  In fact, it seemed like fun, it didn’t seem like I was paying at all.  I was able to participate in a new economy because I’m a Facebook user, and now I’m getting used to paying for premium content.  And when the New York Times puts up its paywall, I’m not going to care so much because I’ll be paying with Facebook, which separates the media consumption experience from the payment experience.

Sound a little farfetched?  Could be.  But there was a time when I couldn’t imagine paying for TV.  Both free broadcast and paid cable television still bring in a lot of money, but cable is a much better business.  If Facebook enables new revenue opportunities on the Web for content creators, they will enrich themselves and enrich others even more.  I won’t like it, just as I didn’t like it when I started paying for TV.  It would be the end of the Web as we know it.

subtle tribute

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p. 65:

the subtle tribute of knowing nothing whatever about him

Nick reels off a list of over 70 names of people who came to Gatsby’s house that summer.  Both narrator and author sense that the sheer volume of names will give more color than any generalities of crowd description.  These visitors descended upon Gatsby’s lawns and gossiped about their host while getting drunk on his hospitality, they came to be part of the scene, they paid him a subtle and damning and damnable tribute in caring more about the idea of Gatsby than about the actual person.

burn this

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Newspapers are dying, as any media observer could tell you.  But I don’t get the strident call to “burn the boats,” as Cortés supposedly did when he conquered Mexico for Spain. Never mind that the legend never happened, this advice doesn’t make sense in light of the beliefs of the people saying it.

Boat-burning advocate Marc Andreessen understands disruptive innovation as well as anyone.  At the very core of the startup culture that Marc helped create is a belief that small companies in the aggregate have a huge advantage over incumbents for bringing disruptive innovations to market.  A big company can’t become a small startup simply by destroying its current revenue model and firing all its employees – that would only result in a burned out shell, not a new startup.  A new startup can only be formed by innovators coming together to form a new company.  I realize there are exceptions to these statements, but they are very few and far between.  So “burning the boats” is statistically likely to be an exceptionally bad strategy for newspaper companies.

Tech writer Erick Schonfeld says it’s hard to watch the newspaper industry die slowly, noting that it could take decades for the newspaper industry to dwindle from $30 billion dollars a year down to nothing.  But Erick’s been covering startups for over 15 years, he’s seen successful startups kill the dinosaurs time and time again.  Like all of us in the startup world, he celebrates the success of startups against incumbents.  I don’t get the lamentation here – is it because the bedside deathwatch is comprised of relatives of the victim?  Who is burning the boats supposed to help, the dying incumbents or the anguished observers?

Given that the startups are going to beat the incumbents anyway, there’s nothing wrong with newspapers dying slowly.  Twenty years of slow death isn’t preventing innovation – all the innovators are outside the incumbents anyway.  But inside the incumbents are real people, hundreds of thousands of people who depend on their dying jobs to feed their families, many of whom aren’t going to succeed on the other side of the disruption.  Is there something wrong with letting those people eke out another twenty years of dead-end jobs?

This isn’t soft-hearted humanitarianism.  My heart’s hard enough to admire a capitalist system that sometimes causes individual misfortune.  But my point here is that the slow death of newspapers is an example of capitalism working correctly.  Big-footed incumbents are supposed to lose to startups.  Large companies are supposed to cling to their dying revenue streams while nimble competitors bring innovation to market.

Investors in those large companies have already “priced in” slow death – the stock price reflects the conventional wisdom that these companies will slowly go out of business.  The stock price for public newspaper companies most certainly does not price in a “burn the boats” strategy, which would result in irresponsible destruction of shareholder value, as well as damaging all those jobs and lives.

This is actually a place where brutal capitalism and soft-hearted compassion have common ground.  Newspapers are dying and no one is going to do anything about it.  For the love of humanity and capitalism, just let ’em die a slow death.

twitAARRR

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People are talking about a report that Twitter has a low proportion of “active” users.  I saw a similar debate rage a few years ago around the definition of users of Second Life.

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.

chinese menu of startup blogs

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Last summer I mentioned some of the best startup blogs for entrepreneurs.  Since then, there’s been a notable proliferation of great startup blogging, so I wanted to note my current approach to keeping up with all the useful content.

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.

Column A:  General Startup News

 Column B:  Venture Capital
Column C:  Startup Advisors

 Column D:  Coaches
Column E:  Founders (currently starting new business)

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).

mistakes were made

~ ginsu ~ 3 Comments

Compare and contrast –

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:

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.

UPDATE 4 Oct 2010: Here’s a great list of the 25 best startup postmortems.

the few honest people

~ ginsu ~ 2 Comments

p. 64:

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.

know thyself

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I am fascinated by a concept I recently came across in Eating The Dinosaur.  Author Chuck Klosterman and documentary filmmaker Errol Morris discuss whether people have “privileged access” to their own minds.

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.