Growth5 Blog

Thursday, May 28, 2009

Micropayments: Publishers' Online Savior? Facebook's Revenue Catalyst?

Will you pay the Wall Street Journal a penny or two, or even less per article you read? They are hoping you will adopt their micropayment system. I already worry that the WSJ articles I forward to people won't be able to be read if the recipient doesn't have a subscription, never mind if they have to pay for it. Putting walls up around content can be a dangerous proposition, especially if the end user can get similar content somewhere else for free.

Additionally, "passed links" (in an email from you to me) have a much higher click thru rate than traditional search, paid search, banners, etc... as they are "vetted" links. I trust that you would send me something clickable (most of the time). I'm not sure it's a good idea for the WSJ to set up a system that will stop us from sending their links around.

Based on declining ad revenue, Contenture has developed a proprietary system to collect micropayments from users of content based on their monthly usage. They are trying to consolidate online publishers (magazines and newsapers) in one central location so the user can have one user name / password and only pay for what they read in very small increments. A freemium-based monthly subscription has a better chance of working if the pricing is done right. We'll see if this catches on in the publishing industry.

What are micropayments?

Micropayments are "a means for transferring very small amounts of money, in situations where collecting such small amounts of money with the usual payment systems is impractical, or very expensive, in terms of the amount of money being collected."

Since credit card companies charge 25 cents or so per transaction (tiered by volume), selling transaction that are pennies or less is not doable. That is why iTunes sweeps your account periodically instead of on a transaction-by-transaction basis.

MMORPGs (online gaming) have used micropayments very successfully. Allowing users to buy large chunks of "credits" in advance ($25 worth for example) and then using the credits to purchase items that cost credits equivalent to pennies / fractions of pennies.

Awhile back, we talked about the world's first billion dollar social network - China's Tencent - attributing a big chunk of their revenue from virtual sales of micropayment-size items. It looks like Facebook noticed.

Facebook just received a $200 million investment (that they say they didn't need, hmm) from Russia-based Digital Sky Technology (DST). In the press conference announcing the deal, "Facebook CEO Mr Zuckerberg pointed to the fact that a number of companies in DST’s portfolio have found ways to make money from micropayments."

It sounds like a revenue plan. I wonder if we'll see similar micropayment options popping up on MySpace, Twitter, et al. here soon.

Interesting side note: DST's investment in Facebook was $200 million for 1.96% - a $10.2 billion valuation. A bargain compared to Microsoft's October 2007 investment of $240 million for 1.6% - a $15 billion valuation. The $15 billion valuation Facebook got from Microsoft's investment came "at the absolute peak of the market," Zuckerberg said.

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Wednesday, May 27, 2009

CIGAR: The Apgar Test for Websites

In 1952, Dr. Virginia Apgar invented the "Apgar Test" to evaluate the health of new born babies. Until then, doctors assumed that new-borns were in good health and sent them off to the nurseries, where many died.

Dr. Apgar's test, which is free and easy to perform, measures five characteristics, which another doctor turned into a mnemonic that spells her name (Appearance, Pulse, Grimace, Activity, Respiration). It's estimated that tens of thousands of babies' lives are saved each year because doctors apply the test all over the world.

I am pleased to report that I have developed a similar test that you can apply to your shiny new website to see if it will survive in the cold cruel world of the web. I call it CIGAR:
  • Content. Is there anything of value in your site?
  • Interesting. Is there anything interesting -- to somebody other than you and your mother -- in your site?
  • Grabby. What's in your site that will "grab" people and get them to come back for more?
  • Attractive. Is your site easy and fun to look at, well designed without too much text on each page and plenty of pictures?
  • Relevant. Is your site relevant to its target audience?
In other words, if you can't answer the question why somebody would hit your site, well, NO CIGAR.

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Global Wind Power Increased Nearly 29 Percent in 2008

Earlier this month we wrote about energy search engine reegle. Their RSS feed has been an excellent resource for energy news.

In this recent feed, wind energy data for 2008 was reported. The highlights:
1. Global wind capacity increased an estimated 27,000 megawatts with cumulative installations up almost 29 percent in 2008, ending the year at 120,000 megawatts, according to a new report from Worldwatch Institute.

2. ...for the first time last year, wind power represented Europe's leading source of new electric capacity with 8,900 megawatts (MW) added, well ahead of natural gas at 6,900 MW and coal at 760 MW.

3. By the end of 2008, wind power accounted for 8 percent of EU power capacity, enough to generate 4.2 percent of the region's electricity in a normal wind year.

4. The United States led in new installations, surpassing Germany to rank first in wind energy cumulative capacity and electricity generation.
It's great to read that the US led in new installations across the world. Reducing our dependence on foreign oil should be one of our country's highest priorities.

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Tuesday, May 26, 2009

Raising Capital as a First Time Entrepreneur

Earlier this month, Dave Lavinsky of growthink interviewed Brad Feld of Foundry Group about advice for first time entrepreneurs raising capital. Three takeaways:
1. Your VC firm is your partner
2. Angel Investors are the friend of the first-time entrepreneur
3. Don't look for investors who are not a good fit
Excellent points. Let's start with #2, Angel Investors. We've been meeting with entrepreneurs who started with seed/family/friends money and then are trying the VC route immediately following. They are frustrated they are getting nowhere. There are lots of reasons for this, one of them is that they are usually not ready.

Angels have experience that entrepreneurs should take advantage of. Like, "wow, the way your business is set up, you're going to have a real hard time getting VCs interested. We can point you in the right direction to get that cleaned up." We've been promoting Angel Investors regularly, they are an excellent resource. Use them.

#1: VC firms as partners. We won't work with entrepreneurs unless it is a partnership, therefore we pick our entrepreneurs very carefully. We HAVE to be able to work together. Don't make the mistake of viewing VC firms as just a group that is investing capital into your company. You will be working with them very closely, so make sure it's the right fit.

#3: Wasting time looking for investors that are not a good fit. If you have a list of 100 VC firms you hope will be investors, don't waste your time trying to convince all of them to invest in your firm. Find the five best "fits" on that list and focus your time on them. The article points out three important criteria for your search:
a) geography: many VCs will only invest in certain geographic regions
b) sector: for example, Foundry Group simply doesn't invest in Clean Tech; no matter how exciting the company looks
c) stage: many VCs focus on companies at specific stages (e.g., some only want post-revenue companies, etc.)
If you are not sure where your startup should be looking for capital, give us a call.

[You can read the full article and listen to the Feld interview here.]

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Friday, May 22, 2009

What If You Marketed Fearlessly?

In his book, The Last Campaign: Robert F. Kennedy and the 82 Days that Inspired America, Thurston Clarke makes an astonishing claim. He contends that, when Bobby was killed in California, there was dismay, horror and disappointment among those traveling with him. But, he says, no one -- not even Kennedy himself -- was surprised. Everyone, including RFK, expected that he would be shot before the campaign ended.

One of the key arguments of the book is that, despite that expectation, Kennedy campaigned fearlessly -- reaching out to sometimes unruly crowds, riding in open convertibles, and shunning the cautious warnings of his closest advisers. Whether you consider that foolishness or courage is beside the point.

In his brief campaign, Kennedy catapulted to a front-running position, pressing his points, winning over supporters, and inspiring the country. Dangerous, but effective work.

Kennedy's tragically short campaign is a reminder of what we can do if we believe in our message and if we're not afraid to say so.

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Thursday, May 21, 2009

Getting Out of Your Rut

Seth Godin recently posted a list of 45 items to get you/your company out of its rut.

Here are the items we are working on amongst our various teams:

11. Start a blog
14. Go on tour and visit your best customers in person
15. Answer the customer service line for a day
16. Learn to be a killer presenter
18. Delete your website and start over with the simplest possible site
21. Listen to audio books in your car instead of the radio
23. Find more products for your existing customers to buy
31. Find every project that is near the danger zone (in terms of p&l or deadlines) and cancel it, no appeals
33. Get an RSS reader and read a lot more blogs
45. Do the work.

#14: it's so easy to fall into the rut of doing great work for your clients month after month, quarter after quarter, without ever really talking with them, listening to them. Deadlines seem to always take precedent.

Our organization is making a concerted effort to "go on tour" and listen to our clients about what's working, what's not and find out what they need. Even though this almost always turns into more work, we definitely don't do it enough. We need to get better at listening, and making the time to do so. Probably a decent idea with the non-client humans in our lives as well.

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Wednesday, May 20, 2009

Energy Savings For Your Car

MIT is developing shock absorbers for your car that will turn the wasted heat of the shock's vertical motion into power to charge your battery and power the headlights and stereo. This will reduce the load of the gasoline-powered alternator.

The technology has proven most effective in larger vehicles / trucks so far. MIT estimates their shocks in Wal-Mart's fleet would save them $13 million a year.

For smaller vehicles, MIT hopes to combine their shocks with other energy-saving technologies that already exist:
"Regenerative braking converts the car’s motion into electricity as the vehicle comes to a stop, and BMW and Honda are designing devices that recover heat from engine exhaust. The ability to capture vehicle energy creatively is not limited to the car itself: London and Israel plan to embed generators in roads to harvest energy dissipated by the traffic running over them."
Look for more of these type of technologies to emerge as smart people pinpoint areas of our every day life where these type of energy-harvesting technologies can be applied. If you know any of these people or startups that need funding or some startup guidance, let us know.

Read more at Discover and MIT.

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Bluegill Marketing

Whenever I'm feeling a little down, I just go light-tackle fishing for bluegill. I march down to my favorite fishing spot (see above), tie a cheap fly to the end of my line, and cast the little lure under an overhanging tree branch.

Splash! In a few minutes, a nice fat bluegill is fighting for all he's worth at the end of my line. On my delicate rod, he feels like a tarpon. It's very satisfying. After a short battle, I release him so he can fight again another day.

And there will be another day. Bluegill are dumb. They have no memories. In a week, he'll gulp down the very same fly, hook and all.

I am amazed by the marketers who are still bluegill fishing. They serve up the same old message, event, promotion, sale, product or service and they expect customers to bite -- just like they did in the old days. And some do still bite, of course, convincing the marketers that they are right.

But they are not. Gradually, the sales revenues get smaller. Market share narrows. Competitors strengthen.

Customers are not bluegill. They learn. They remember. And they choose more tempting bait.

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Tuesday, May 19, 2009

Do CEOs Matter?

Tom Marsden sent me this article from The Atlantic entitled, "Do CEOs Matter?" - the answer in the vc world is "yes, a lot, obviously." A better title would have been "Do CEOs of Large Companies Matter?". The article is interesting nonetheless as it points out that the smaller groups in a large organization (with a startup size and startup leadership dynamic) are what make the difference in large corporations.

Some highlights:
1. Scholars have spent the last 40 years figuring out what influence a CEO has in large organizations. Theories range from 4.5 to 14.5%.

2. "...people simply don’t feel allegiance to large entities like corporations, no matter who’s at the helm. Their loyalties are far more localized...

Small groups perform best when they operate collaboratively, and not merely as drones subordinated to a leader. The team leader’s job is to establish the conditions that enable team members to collaborate competently; the leader needs to spell out exactly where teams should end up, but not dictate the step-by-step process of getting there. Leaders who act boldly and intelligently can make significant differences in teams’ effectiveness—but no matter how the leaders act, teams become less effective as they grow in size...

Ideal team size is about six people; performance problems increase exponentially as team size increases beyond that, and the impact of leadership becomes quickly diffused."

3. "Paul Osterman, a professor at MIT’s Sloan School of Management, contends that middle managers are neither “victims,” robbed of the ability to act independently by some faceless bureaucracy, nor “villains” like Dilbert’s Bozo-haired boss, too clueless to do anything but gum up the works. In Osterman’s view, the middle manager is the secret hero in the large corporation’s rise to social and economic dominance. That rise “depended on middle managers,” he says, “because you just couldn’t achieve the scale that we have without people doing the kind of planning work that they do.” As “craft workers,” middle managers value their task, sense its importance to the larger cause, and feel great loyalty to the people they work with."
Start your business, see what size team works for you, then repeat that size team over and over as opposed to creating a sprawling ineffective super-size organization.

Interesting side note: Do you think current GE CEO Jeffrey Immelt is tired of former GE CEO Jack Welch complaining about what a horrible job Immelt is doing? Immelt is quoted in this article as saying, in the 1990s, “anyone could have run GE and done well. Not only could anyone have run GE in the 1990s, [a] dog could have run GE. A German shepherd could have run GE.” Ouch.

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Don't Give Up So Easy...

It was every bicyclist's nightmare: you're riding blissfully along out in the country and...the crank that holds your pedal snaps. Bad luck.

It's especially bad luck if you're in the middle of West Virginia mountains and there isn't even cellphone service. It's even worse if you're just 50 miles into a 250-mile bike ride. That was my story last weekend.

My riding partners shook their heads and made jokes about a one-legged man in a butt kicking contest. I figured I was done, but I one-pedaled along for a couple miles until I got to the only house on the road.

Then, suddenly, my luck changed.

The homeowner, Dorman Parker, smiled and said, "I think we can get you back on the road."

He ushered me into his garage, where he drilled a new hole in the crank below where it had broken. He tapped threads into the hole. And, because my fancy racing pedal wouldn't screw into them, he took an old pedal off his son's bike and -- presto! -- I was back on the road.

Of course, I had two different pedals and the cranks were different lengths, so I couldn't stand and pedal. But thanks to Dorman's kindness to a perfect stranger, I finished the last 200 miles (including 100 in the dark).

Dorman taught me a lesson that day: a little generosity, ingenuity and perseverance can make all the difference. Don't give up too easily!

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Monday, May 18, 2009

Space Shuttle Crosses the Sun

In the 0.8 seconds the Space Shuttle Atlantis took to cross the sun, French astrophotographer Thierry Legault snapped this picture using a solar-filtered Takahashi 5-inch refracting telescope and a Canon 5D Mark II digital camera.

The shuttle is 121 feet long and has a 29 foot wingspan. It was traveling 17,500 mph at 350 miles above the Earth's surface. The sun is 91 million miles away.

The following photo was taken on May 12.

The next day Legault got a stunning shot of the two spacecraft together, right before Atlantis reached out to grab Hubble in a mission to replace one of Hubble's cameras.

Image credit: Thierry Legault, via NASA

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Sunday, May 17, 2009

T. Boone Pickens on Oil, Debt & Stimulus Money For Alternative Energy

Energy expert, investor & philanthropist T. Boone Pickens spoke at the ACG InterGrowth 2009 conference and then was interviewed by Fox Business (link below; couldn't embed).

Some of what Pickens had to say (including a joke about economists):

1.Pickens predicted a coming government-sponsored windfall (it's all about wind with him ;-) for alternative energy: "Obama has gone for wind, solar and the 21st-century grid. That's in the stimulus package"

2. The U.S. currently imports 68% of its daily oil needs -- an all-time high: "This is more than half the trade deficit [and] has far-reaching tentacles and influence over what goes on in this country, where it has not been exposed or even explained to anybody."

3. Oil imports from Venezuela, the Middle East and Nigeria: "This is absolutely insane, that this country is dependent on supplies (from countries) as precarious as Nigeria for instance or Venezuela... Look at Saudi Arabia: They produce 9 million barrels a day. What we import is greater than what Saudi Arabia produces."

4. Oil prices: "I promise you this is going to get tight, very, very quick. You're going to be back to $75 oil by the end of the year" -- and $200 per barrel within five years." Ouch.

5. Economists: "I'm not an economist. You know what an economist is? That's the guy who didn't have the personality to be a CPA."

6. US Debt Levels: "If it (debt) isn't sold, we know what's going to happen: We have to buy our own debt again. If that happens to us in the fourth quarter, I think we'll have real problems on our hands. When you look at who owns our debt, the Chinese, the Japanese and the Saudis are the biggest owners of our debt. I wouldn't want to owe those three guys anything."

You can see the post-talk interview here.

I recently blogged about Pickens' latest book.

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Saturday, May 16, 2009

Startups: Choose Your Attorney Carefully posted this article on what to look for when picking an attorney for your startup.

My thoughts on the 4 C's discussed:

1. Competence: just because your aunt is an attorney, doesn't mean she knows the ins and outs of startups, financing, etc... Find someone who is an expert in the space, especially if intellectual property is involved.

2. Chemistry: very important. Have lunch with your prospective attorney, find out how you get along. Also find out if they will be "quarterbacking" your account with other members of the law firm, or if they will be doing most of the work themselves.

3. Collaboration: the relationship with your attorney often lies in how well you both handle the gap between business decisions (you) and legal issues (them). Remember, you run your business, your attorney can't possibly know all of the factors involved in your decision-making, so listen to their experiences, but stick to your guns when it comes to matters that you know need to happen a certain way. Similarly, let them be the expert on the legal issues. If you are not sure which is which, ask them, "is this a business decision with a small legal issue we can work out, or is this a huge legal issue where we need to change our business approach?"

4. Cost: DO NOT pick the cheapest attorney because they are the cheapest. Shop around. Find the attorney with the most experience in your industry that has dealt with startups. Ask them for references of firms they have helped that were once where your firm is now. If you can find an attorney/law firm that knows your space, has a track record of guiding startups from the beginning and is someone you think you can work well with, does it matter a whole lot how much they are per hour? I would argue you can't afford to NOT use them.

Not having a competent startup attorney in your corner as you get going is a mistake. They will help you avoid many of the pitfalls entrepreneurs experience when they get their businesses going. If you need a referral, let us know.

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Friday, May 15, 2009

The National Venture Capital Association Has a Plan to Restore Liquidity

National Venture Capital Association (NVCA) outgoing Chairman Dixon Doll has been gathering research on the capital market crisis and has come up with a 4-part plan to fix it. Here is a portion of the NVCA press release about the initiative:

During the last decade, the number of initial public offerings (IPOs) by venture-backed companies has declined to alarmingly low levels, culminating in the 2008 drought when only six companies entered the public markets. Given the proven contribution of venture-backed companies to America’s economic growth, the NVCA sought analysis and recommendations from leaders throughout the capital markets ecosystem over the last several months. The resulting set of proposals looks to the venture capital industry, investment banking, accounting professions, law firms, stock exchanges and the government to enact measures to restore a vibrant IPO environment once the overall economy stabilizes.

I have embedded the NVCA's presentation at the bottom of this post. If you don't have time to flip through it, here are some highlights:
1. VC-back companies create jobs faster than non-vc backed companies. 1.54% to .48%.

2. 92% of job growth in vc-backed companies occurs post-IPO.

3. From 1992 - 2000 there were 1,776 IPOs. From 2001 - 2008 there were 392 IPOs. See #2 above.

4. NVCA's 4-Pillar plan to restore liquidity:
a) Ecosystem Partners: More entities willing to take small to mid-size companies public.

b) Enhanced Liquidity Paths: develop pre-IPO private market platforms

c) Tax Incentives: incentives like lower capital gains to stimulate IPOs

d) Regulation: keep regulation effective, easier - Sarbanes Oxley expensive for small companies
Out of these four, I believe the idea of Enhanced Liquidity Paths has the best chance of working. Secondary markets currently exist, but they need to be improved. If IPOs are not going to be there, this secondary market could serve as a great alternative for smaller vc-backed firms that wouldn't get the necessary attention trying to go the "traditional" IPO route in a decent economic environment, never mind the current one.

Enhanced Liquidity Paths would also create liquidity for larger private firms. For example, I hear you can get Facebook stock via the secondary market at a price that values them at about $4-5 billion. Could be a bargain compared to their future IPO.

Details on the 4-Pillar plan in the presentation below.

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Thursday, May 14, 2009

iPhone Apps: A Viable Marketing Platform

The iPhone is a phone, music player, camera (barely), mini-computer, app store, etc... This Fast Company article points out that the app store has become a viable marketing platform. Even if your firm doesn't have a specific functional iPhone app solution to augment what your site/software does, you should consider putting together an iPhone app for marketing purposes.

From Fast Company:
1. The Wall Street Journal reports industry execs expect the iPhone to push overall mobile-ad spending to $200 million this year (doubling last year's $100 million), excluding search ads and ads sent via text. Remove search and text, and essentially apps are where the money is, at least if you're Madison Avenue.

2. Several companies are now offering ads thinly disguised as apps (what iPhone user doesn't have the Virtual Zippo Lighter?) that go beyond a simple brand message by adding some kind of amusing function. Burger King launched a full-screen, interactive Valentine's-themed ad in February that had a mini-game embedded, and users interacted with the ad 14% of the time, compared with the average 1% for a Web banner ad.

3. Lionsgate Entertainment recently bought the rights to a popular app called Stun-o-matic and hired media-strategy firm Initiative to retool the game to tie in with the release of Crank: High Voltage. The result: 2 million downloads and 800,000 trailer views from an app that took less than a month to redesign.
At the end of the day, it all comes down to getting the right brand in front of the right people and delivering something they want. As you're developing your marketing strategy, consider an iPhone app as one of your channels. If the idea of developing an iPhone app scares you, click on the Growth5 link to the right of this post and shoot us an email, we'll point you in the right direction.

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Wednesday, May 13, 2009

Don't Forget About the Angel Investors

This article from the May issue of Entrepreneur is a good reminder to consider Angel Investors when raising money. Sometimes entrepreneurs get it in their head that they are either too early or too late to pursue Angel Investors. Or, in this economic downturn, they think Angels aren't as interested in investing. Which I haven't found to be true, they're just more selective. So what, tell a great story.

I would recommend letting the Angels decide if your startup is at the right stage for them. Like Wayne Gretzky said, "You miss 100% of the shots you never take." Seek out Angel groups, pitch to them. If for nothing else, it's great practice, and who knows you might find the right Angel at the right time.

Here are some highlights from the article:
1. Resilience is rewarded. Dealing with rejection is nothing new for most entrepreneurs. When I raised money from angel investors in the last recession, I was turned down twice as often as I was encouraged to have a second meeting with an investor.

2. Persistence is rewarded. It’s also important to have a systematic approach for dealing with investor objections. For example, the most common form of objection in today’s market environment is some variation of “I don’t want to liquidate my stock market investments to invest in something new,” or, “This is not a good time for me to make investments.” A good response would be, “Are you convinced each of your stock market investments will outperform an investment in my startup?”

3. Patience is rewarded. Building your investor pipeline over several months is critical to raising money under these conditions. Many entrepreneurs don’t like to raise money, and they don’t think about it like prospecting for new clients. The truth is that it’s very similar. You need to make a prospect list, manage it with a contact management database and send periodic updates to investors to deepen the relationship over a period of months. It takes time to raise money, and entrepreneurs are usually in a rush.
If you are looking for Angel Groups, Angelsoft is a great place to start. From their site: "Since 2004, Angelsoft has been building tools to help Startups and Investors communicate more effectively. Today, 449 Angel Groups and VCs, 17,270 Angel Investors, and 3,500 new Entrepreneurs a month use our tools to take the first step toward building the best new companies of the 21st Century."

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Monday, May 11, 2009

Data Search Engine WolframAlpha Will Complement Google Nicely

Next Monday, 5/18/09, a new search engine called WolframAlpha will be launching, you should check it out. Why? It sounds like it will be an excellent complement to Google, Yahoo, Microsoft or whatever search engine you are using, as it has been built to answer research questions.

For those of you writing reports, presentations, proposals, etc... this could be a fantastic tool.

In a recent demo:

  • Wolfram did a search on the GDP of France and got a plot of the GDP history and some history. The next search had the GDP of France divided by the GDP of Italy and Wolfram/Alpha delivered an answer.
  • The weather in Lexington, Mass. as a search term delivered a summary of the temperature and plotted it as a function of time.
  • A search on “medical LDL 180″ dove into a public health study showing that level of cholesterol put someone in the 95.9 percentile in the U.S. Further refinements of the search—like “male age 40″—will yield a chart for life expectancy.
WolframAlpha calls itself a "Computational Knowledge Engine." The search engine was developed by physicist Stephen Wolfram. "Our goal is to make expert knowledge accessible to anyone, anywhere, anytime, said Mr Wolfram. Like interacting with an expert, it will understand what you're talking about, do the computation, and then present you with the results."

From this CBS News article:
1. "The WolframAlpha engine is a Web service designed to process data from controlled, vetted sources of data - many not on the Web - then present the results in a way that lets people dig deeper into the subject. It's something of a cross between a graphing calculator, repositories of scientific data, and a system to interpret questions posed in human terms."

2. Alpha has four main components:

a)Data curation. Wolfram Alpha uses public and licensed proprietary data sources, and the company uses automated processes and human choices to prepare the data. "At some point you need a human domain expert in front of it," Wolfram said.

b)Algorithms. Alpha must pick the right computational processes to present its results. "Inside Wolfram Alpha are 5 million to 6 million lines of Mathematica code that implement all those methods and models," he said.

c)Linguistic analysis to understand what a person typed. "I thought one of many things could have gone wrong was that short, lazy things would (have) huge amounts of ambiguity," for example figuring out whether "50 cent" had to do with musical artists or money. "That turned out to be not nearly as much of a problem as we expected."

d)Presentation. "There are tens of thousands of possible graphs. What do you want to show people?" Wolfram asked.

Wolfram hopes the tool will help researchers perform scientific chores that before were possible but not necessarily worth their time.

-Google announced a data-centric service of its own recently.

-Technology Review conducted an interesting side-by-side search analysis between WolframAlpha & Google. You can check it out here.

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Warren Buffet / Berkshire Hathaway First Quarter Losses

Berkshire Hathaway lost $1.53 billion in the first quarter. It seems like whenever this happens, there is noise about whether or not anyone should be listening to what Warren Buffet has to say because we're not sure if he is brilliant or just lucky.

I get the argument that Buffet was lucky to have been born in the perfect era to match how his brain is wired, he's said so himself, but shouldn't that mean we have more of a reason to listen to him than not?

With a 20.3% annualized return since 1965, here's three points that make the case against luck:
1. Brilliant: Buffet buys businesses that he understands and that have a sustainable advantage in areas that have a great chance of being relevant for a long time: razors, furniture, candy, etc... Not fancy, but reliable. When he can get these businesses at a great price all the better. When he can purchase these businesses privately, he doesn't have to worry about the volatile market getting around to recognizing their value. He can just take their profits and re-invest elsewhere, and then repeat the process.

Luck: investing in businesses or derivatives or trends you don't understand. See the Internet Bubble or the more recent Derivative Meltdown that has brought the economy to its knees.

Buffet didn't invest in Yahoo in the late 90's because he didn't understand how it would make money or better yet didn't believe that the P/E multiple it was trading at could be met as it would have meant that Yahoo's business would eventually have to be larger than the US GDP at the time.

Berkshire Hathaway (BH) has spent the last couple years unwinding the 20,000 derivatives held by their subsidiary General Re.

And yes, part of BH's first quarter losses were having to take paper losses on derivatives that won't mature for another 15-20 years. But Buffet points out that BH holds the cash backing those derivatives and invests it elsewhere to hedge against potential actual losses 15 years from now (much like he invests insurance "float"). Furthermore, these derivatives are based on where the markets will be 15-20 years from now, a topic I think we can agree that Warren Buffet does understand.

2. Brilliant: Buffet has a "buy and hold forever" philosophy. This avoids worrying about timing an unpredictable market at the exact right time, every time.

Luck: timing the market on a consistent basis.

3. Brilliant: keeping it simple, knowing what works and sticking it to it. In the market, for example, Buffet believes you should be fearful when those around you are greedy and greedy when those around you are fearful.

In March we blogged about Buffet's most recent shareholder letter, in it, he says, "Beware of geeks bearing formulas."

Luck: depending on complex algorithms that very few understand, are not transparent and don't allow for environmental changes: like, oops, we didn't factor in the fact that housing prices could go down, our bad.

See: Collateralized Debt Obligations, Credit Default Swaps and all sorts of other derivatives that investors around the world lost money on. You've all heard squawking from global markets blaming the US for putting these derivatives together in the first place. Which is exactly like blaming Vegas because you put $5,000 on the Patriots winning the Super Bowl when they were undefeated. We, the US, just put these derivatives on the board. World: you knew the risk or maybe you didn't because these derivatives had been so good to you for so long.

Either way World, I would argue you would've been better off listening to Warren Buffet about keeping it simple, greed & fear, geeks with formulas, etc...
Mr. Buffet, please keep sharing. It is highly improbable that you have been lucky for 44 years. I'm going to go out on a limb and predict that you actually know what you're talking about.

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Saturday, May 9, 2009

Microsoft Layoffs & Sales Decline... Windows 7 Better Deliver

It's been a tough couple weeks for Microsoft. For the first time since going public in 1986, year-over-year quarterly revenues have declined -- probably the only way $13.65 billion in quarterly revenues could be seen as anything but fantastic. Year-over-year quarterly net income declined 32% to $2.98 billion.

Then the announcement came that Microsoft had another round of layoffs this week as they push to layoff a total of 5,000 employees worldwide by the end of the year.

Three or so thoughts:

1. Windows & Office will not sustain Microsoft's profitability forever. This is something Google has also known about their main source of revenue --search -- for awhile. Yet, even with cash of $17 billion for Google and $25 billion for Microsoft they have struggled to come up with ways to diversify away from their main products.

Perhaps this is why Microsoft has sought Yahoo so vehemently. When they saw Google flat line at about 63% search market share, they saw themselves and realized they could capture growth by purchasing Yahoo and their search advancement.

2. Windows 7 better deliver for Microsoft or they can expect further trouble. After spending billions online in the last decade trying to keep pace with Google (see #2 above) and failing miserably, they are back depending on what got them where they are in the first place, operating software. Only this time they are relying on three terms that you usually don't hear to describe Windows: "simplicity, reliability and speed." Good luck with that. Simple and faster, maybe. Reliable? I doubt it.

Perhaps Windows 7 can bridge the gap until Ray Ozzie figures out how to make Microsoft money with cloud computing.

3. When announcing their latest round of layoffs, Microsoft said they hoped to create another 2,000 to 3,000 jobs this year in "high-growth" areas. Why don't they take some of there $25 billion or the $290 million they are writing off as layoff costs and train their current staff to be effective in these "high growth" areas. You made $3 billion last quarter. Yes, the wheels may be slowing down, but they haven't fallen off. We get that having the right 90,000 employees to get where you need to be is a challenge but you must have hired these folks because they added value to your firm (about $3 billion last quarter), I bet they could be valuable doing something else for you.

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Thursday, May 7, 2009

"It Takes a Long Time to Go By..."

In 1971, I joined the staff of The Wall Street Journal in Detroit. General Motors was the biggest company in the world. Gasoline on Woodward Avenue cost 25 cents a gallon. And, at a lunch with the head of Buick Division, he sniffed at the comparatively tiny import cars and declared proudly that, "When a American passes you on the road, it takes a long time for him to go by."

That arrogance vanished rapidly when the first energy crisis depressed sales of his hulking Electra 225s and boosted sales of the venerable Beetle. But few realized that was the first major crack in the clay feet of the Detroit giants.

Now, almost four decades later, Chrysler is bankrupt and GM is facing a similar fate. It has taken a long time for the Detroit iron to go by.

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Wednesday, May 6, 2009

Renewable Energy Search Engine: reegle

If you seek renewable energy information, the reegle search engine site could be for you.

Does the search engine have breadth and depth? Not yet, but search engines take time to develop, so please be patient. Visit reegle for their other functionality which I think you will find helpful:
-a catalog of leading clean energy stakeholders;
-a news feed that collects stories from 10 leading environmental, energy efficiency, and renewable energy news sites; and
-a slew of widgets that let users track their carbon footprint, calculate savings from using eco-friendly paper products, and more.
One of reegle's best features is its search-able global map. You can click on the map to find out the latest news, events and clean energy developments in that area.

Reegle is brought to you by the Renewable Energy and Efficiency Partnership (REEEP) and Renewable Energy Network for the 21st Century (REN21).

I recommend at the very least using reegle's news feed, it has proven to be a decent source for varied renewable energy news.

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"Ole" is Good for The Grand Ole Opry

It's no accident that the seats at The Grand Ole Opry look like church pews. If you look around the audience at a performance, you see the reverence that the Opry inspires. When it comes to country music, this is High Church.

Although the crowd is unmistakeably gray, many are just kids when it comes to the performers at the 80-year-old institution. There are plenty of wrinkles on the stage under the makeup. As the performers march across the stage to do a number or two, some would seem to be as comfortable with a cane as a guitar.

Yet the energy is unmistakable. The singers bring an inner spark that ignites each song, even though they have done it hundreds, perhaps thousands, of times. It's captivating, especially for the awestruck audience.

The entertainment industry has always demonstrated, and The Grand Ole Opry proves, a principle that we too often forget. Performance isn't about age -- it's about energy. If you think you're too old to do your thing, think again.

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Tuesday, May 5, 2009

Do You Project a Sense of Urgency?

Sometimes I think we are worried about projecting a sense of urgency because it might make us look like we are desperate or panicked. And other times we actually don't have a sense of urgency, and it shows.

Looking back on some of the "easier" sales I've made over the years, I probably projected a high sense of urgency because I really felt we could help the prospective client and I wanted to get started so they could get where they needed to be. By having this mentality, it allowed me to recognize the prospect's reservations, get though them quickly and get the deal signed.

Whether you're in sales or not -- if your business is getting either internal or external people to do something -- having a well-placed sense of urgency is critical. If you give someone the opportunity to not act, they will usually take it. That's why you "ask for the sale" or ask for a commitment from a colleague.

The May 2009 edition of Entrepreneur contains this article on 'urgency'. Here are some highlights:
1) Urgency is what gets top sellers up in the morning and keeps them fired up all day. Their attitude is, “If it’s to be, it’s up to me, and I determine my own success or failure.” They’re constantly asking themselves, “What do I need to do next to move this sale forward? What actions do I have to take to get it done?” It’s about putting your ideas and strategies in motion.

2) ...when there’s real opportunity, top sellers are relentless. A voice inside them keeps saying, “Don’t let customers miss the many ways they can truly benefit from you and your service.”

3) To sell well, we need to prioritize specific goals for all of our activities and then act on them with confidence, conviction and a desire to move things forward.
Replace the word "sell" in #3 with whatever it is you do and there's a great chance you will be more successful.

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Monday, May 4, 2009

Solar Tower in Spain Powers 10,000 Homes

From Reuters: Abengoa Launches World's Biggest Solar Tower. The new 20 megawatt PS20 solar power tower plant in Spain will produce enough energy to supply 10,000 homes and avoid the emission of approximately 12,000 tons of CO2.

What's amazing to me is how it works. The PS20 consists of a solar field made up of 1,255 mirrored heliostats designed by Abengoa Solar. Each heliostat, with a surface area of 1,291 square feet, reflects the solar radiation it receives onto the receiver located on the top of a 531 foot-high tower, producing steam which is converted into electricity generation by a turbine.

According to this VentureBeat article there are already plans in the works for similar towers in the US:
The Spanish solar companies’ recent success isn’t limited to Spain, or even Europe. They have been making a real dent in North America as well, giving U.S. rivals a run for their money. Perhaps the most recent example is Arizona’s new 200-megawatt plant announced last week, to be built by Bilbao, Spain-based Albiasa solar. The project represents $1 billion for the company. But this is nothing new for the state, which already has a 250-megawatt Abengoa plant in the works as well.
10,000 homes here, 10,000 home there. Every bit will help. The faster we can get rid of our foreign energy dependence, the better off we'll be.

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