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Friday, April 30, 2010 SAD AND DISTURBING, BUT NOT SURPRISING
Without fanfare, the United Nations this week elected Iran to its Commission on the Status of Women, handing a four-year seat on the influential human rights body to a theocratic state in which stoning is enshrined in law and lashings are required for women judged "immodest." (more here)
"Not surprising," because this is the kind of thing that we have come to expect from the UN.
Wednesday, April 28, 2010 THE POLITICS OF ECONOMIC DESTRUCTION
About 3 weeks ago, I wrote about Senator Christopher Dodd's proposals for increased regulation of venture capital and angel investing and why these are very bad and damaging ideas. WSJ (4/22) makes several points about this proposed legislation:
Amazon, Yahoo, Google and Facebook all benefited from angel investors, who typically target companies under five years old...such firms are less than 1% of all companies yet generate about 10% of new jobs. Between 1980 and 2005, companies less than five years old accounted for all net job growth in the U.S. In 2008, angels invested some $19 billion in more than 55,000 companies.
Mr. Dodd's bill would change all this for the worse. Most preposterously, it would require that start-ups seeking angel investments file with the Securities and Exchange Commission and endure a 120-day review. Rare is the new company that doesn't need immediate access to the capital it raises, and a four-month delay is the kind of rule popular in banana republics that create few new businesses.
There's a lot wrong with Dodd's ideas on VC and angel investing; see my earlier post and the WSJ article for more details. There's plenty more to be concerned about in the current approaches to financial regulation being devised on Capitol Hill.
...today, Obama faces the wreckage of every aspect of his Middle East policies. And largely as a consequence of his policies, the region moves ever closer to war.
In Iraq, Obama’s pledge to withdraw all combat forces from the country by the summer has emboldened the various forces vying for control of the country to set it ablaze once more.
In Afghanistan, Obama’s surge and leave policy has left would-be US allies hedging their bets, at best. And it has caused the US’s NATO partners to question the purpose of their deployment in that country.
Then there is Iran. Last week’s report by The New York Times that this January Defense Secretary Robert Gates penned a memo to National Security Advisor James Jones warning that the Obama administration has no effective policy for dealing with Iran’s nuclear weapons program exposed the bitter truth that in the face of the most acute foreign policy problem they face, Obama and his crew are out to lunch.
President Shimon Peres’s announcement last week that Syria has transferred Scud missiles to Hizbullah in Lebanon was a sharp warning that Iran and its underlings are diligently preparing for war with Israel. It also demonstrated that the Obama administration’s attempts to use diplomacy to coddle Syria away from Iran have failed completely.
Note particularly chart #27. The amount of time spent reading books has actually increased since 1999...newspapers and magazines, not so much. Total time spent on all print media combined, though, doesn't come anywhere close to the time spent watching TV.
Execs in the periodicals industry are desperately hoping that iPad and similar devices will save them. I think that many if not most of them are going to be disappointed in this hope.
Person-to-person communications media...letters, telegrams, telephone calls...have long played a role in popular music. Just for some weekend fun, here are some songs, ranging from the light-hearted to the very sad, in which various forms of communication make an appearance.
General Motors CEO CEO Ed Whitacre made a big deal this week about GM's repayment of the $6.7 billion in loans that the company got last year from the U.S. and Canadian governments. (GM press release here.) However, as this article points out, GM still has the $52 billion it got that was classified as equity rather than as debt. That money won't be repaid unless and until GM does an Initial Public Offering which is large and successful enough to sell the government-owned positions at a price high enough to net $52 billon for the 73% of the stock owned by these two governments. For comparison, the total market capitalization of the Ford Motor Company is $48 billion.
Anne Mulcahy became CEO of Xerox Corporation at a very dark time in the company's history. The general consensus--with which she disagreed--was that the company should be immediately put into Chapter 11 bankruptcy, and the pressures on her were enormous:
One day I came back to the office from Japan and found it had been a dismal day. Around 8:30, on my way home, I pulled over to the side of the Merritt Parkway and said to myself, 'I don't know where to go. I don't want to go home. There's just no place to go.'
There by the side of the road, she listened to her voicemail, and among the messages was one from the company's chief strategist, Jim Firestone:
This may seem like the worst day, but we believe in you. This company will have a great future.
Even the strongest leader occasionally needs a little emotional support. By having the empathy to recognize this and act on it, Jim Firestone also demonstrated an important kind of leadership.
Mulcahy story is from Bill George's book True North.
The last hundred years or so have seen the introduction first of silent movies, then of sound movies, followed by television and color television. Moving images have great emotional and iconic power, and these technologies have had great cultural and economic impact.
We're now seeing Internet-based video moving into the mainsteam. Netflix, for example, offers portions of their library for instant viewing, either on a PC or on a TV set (with adapter offered by several manufacturers.) Ventures, such as Snag Films (Ted Leonsis, Steve Case, and friends), have arisen to focus on Internet distribution of particular forms of content. (Documentaries, in Snag's case.) Other ventures are focusing on enablement of Internet video for mobile devices. Improvement in wireline and wireless bandwiths makes it all feasible and affordable, and devices such as the iPad will make it increasingly convenient.
I'd like to discuss the emergence of Internet video from the standpoints of: Its impact on the structure of various industries, the investment opportunities and risks that it may create, and most of all its potential effects on culture and on the political environment. For starters, a few hypotheses:
1)Cable TV companies are going to have some issues, as Internet video encourages subscribers to buy only the Internet "pipe" and not the high-margin a la carte channels and channel bundles. The planned acquisition of NBC Universal by Comcast surely reflects in part a reaction to this prospect by Comcast CEO Brian Roberts.
2)Cable news channels, especially CNN with its massive and irritating presence in public places, are going to have more and more problems unless they get very, very creative.
3)There will be significantly increased distribution opportunities for new and lesser-known film-makers. Will making a film become as popular as starting a band?
The above are just for starters, and not particularly well-thought-out. Have at it!
A Philadelphia-area man, working as a cabinet maker, expanded his business to include the refurbishing/remodeling of elevators. (One company, strangely enough, wanted the interior of its elevators matched to its reception desks!) In doing these jobs, he found the standard practice of removing the entire elevator cab to do the work to be overly complex and time-consuming, and in 1996, came up with his own system of interlocking panels, making the task simpler and faster. With $65,000 in borrowed funds, he patented the system and incorporated a company. It now employs 30 people and booked revenues of $6.1MM last year. More here.
Innovation is often thought of a something that applies mainly in areas like software and biotech, but in actuality innovation is possible--and critical--in every industry. Our fate, dear Brutus, is not in our SIC codes but in ourselves. (SIC code=standard industrial classification code)
Politicians and their advisers, generally speaking, do not understand the economic and cultural importance of this kind of entrepreneurship, and tend to think of "innovation" in terms of "whatever is fashionable at the moment."
At a board meeting last week I watched as the young startup CEO delivered bad news. "Our current plan isn’t working. We can’t scale the company. Each sale requires us to handhold the customer and takes way too long to close. But I think I know how to fix it." He took a deep breath, looked around the boardroom table and then proceeded to outline a radical reconfiguration of the product line (repackaging the products rather than reengineering them) and a change in sales strategy, focusing on a different customer segment. Some of the junior investors blew a gasket. "We invested in the plan you sold us on." A few investors suggested he add new product features, others suggested firing the VP of Sales. I noticed that through all of this, the lead VC just sat back and listened.
Finally, when everyone else had their turn, the grey-haired VC turned to the founder and said, "If you do what we tell you to do and fail, we’ll fire you. And if you do what you think is right and you fail, we may also fire you. But at least you’d be executing your plan not ours. Go with your gut and do what you think the market is telling you. That’s why we invested in you." He turned to the other VC’s and added, "That’s why we write the checks and entrepreneurs run the company."
Wednesday, April 14, 2010 PAYING HIGHER TAXES CAN BE VERY PROFITABLE (rerun)
(I originally posted this on Jan 2....given that today is April 14, it seems like an appropriate time to run it again)
Chevy Chase, MD, is an affluent suburb of Washington DC. Median household income is over $200K, and a significant percentage of households have incomes that are much, much higher. Stores located in Chevy Chase include Tiffany & Co, Ralph Lauren, Christian Dior, Versace, Jimmy Choo, Nieman Marcus, Saks Fifth Avenue, and Saks-Jandel.
PowerLine observes that during the election season, yards in Chevy Chase were thick with Obama signs--and wonders how these people are now feeling about the prospect of sharp tax increases for people in their income brackets.
The PowerLine guys are very astute, but I think they're missing a key point on this one. There are substantial groups of people who stand to benefit financially from the policies of the Obama/Pelosi/Reid triumvirate, and these benefits can greatly outweigh the costs of any additional taxes that these policies require them to pay. Many of the residents of Chevy Chase--a very high percentage of whom get their income directly or indirectly from government activities--fall into this category.
I've been meaning for a while now to write about this very courageous woman (who is better known by the anglicized version of her name, Christine Granville)...the tragic events in Poland make this seem like an appropriate time to remember a Polish heroine.
Previously, I've posted about two women--Violette Szabo and Noor Inayat Khan--who worked for the secret British WWII organization known as Special Operations Executive...whose mission it was to organize resistance and sabotage activities in occupied Europe. Krystyna Skarbek also worked for SOE during the latter part of her WWII career, during which time she was partnered with another SOE agent named Francis Cammaerts, who led resistance operations over an extensive area in southern France. I spent some time with Mr Cammaerts during a trip to France in 2001, and will be writing about him in a future post.
Skarbek was born near Warsaw in 1908: her father was a bank official and a member of the nobility, and her mother was Jewish. She became an avid horsewoman and skier, and also a beauty queen (#6 in the Miss Poland contest for 1930.) When WWII broke out, Krystyna was living in Ethiopia with her second husband, who was the Polish consul there. She immediately went to London and volunteered to work as a secret agent...I believe her first assignment was with the Secret Intelligence Service (spying) rather than with SOE (sabotage.) She first traveled to Hungary, from which she planned to ski into Poland...while in Budapest she met Andrew Kowarski, who was to become her great love. In early 1940, she went over the Tatra mountains to begin her first underground assignment, in which she organized a network of courier to bring intelligence reports from Warsaw to Budapest. She also located her mother, who was doubly in danger because of her aristocratic connection as well as her Jewish background, and warned her to leave the country...but her mother refused and was later arrested and never heard from again.
Here's a guy who ignored the fashion for offshoring and decided to keep his business--textile manufacturing--in the United States, and in a fairly high-cost area at that. Read this well-written article to learn why he did it and how the decision is working out.
San Francisco in 1906, a few days before the great earthquake and fire. This film was shot through the front window of a cable car traveling on Market street...more information here. Note that most of the automobile traffic was staged to make the street scene appear even busier than it really was.
Weekly Standard: "That is one of Obama's favorite questions, according to Game Change, the bestselling (and definitive) book on the 2008 presidential campaign. He usually aims the question at advisers in anticipation of their telling him the idea was his and had proved to be a good one."
If correct, this is just pathetic, and demonstrates Obama's complete lack of the instincts necessary for success in an executive position.
A good executive does not need to always be the smartest person in the room. A good executives does not engage in status contests with his subordinates. A good executive takes as much or more satisfaction in an idea coming from one of his team members as from an idea of his own...because he understands that his job is to cultivate and grow those subordinates, not to act as the source of all brilliance.
Peter Drucker once asserted that if a person doesn't hold signficant management responsiblity before he is 30, it's unlikely that he will ever develop into a really good manager. There are certainly individual exceptions, but in general this is correct...one reason being that he will not have developed the instincts to focus on the performance of the team rather than his own individual performance.
The cited Obamian behavior is very revealing, and is entirely consistent with his top-down-control attitude toward the American economy and American society as a whole.
Tuesday, April 06, 2010 THE FIVE-POUND BUTTERFLY REVISITED
Several years ago, the WSJ wrote about the tendency of many companies to do hiring based on a long string of highly-specific (and excessively-specific) requirements. One person interviewed remarked that "Companies are looking for a five-pound butterfly. Not finding them doesn't mean there is a shortage of butterflies."
Since that article was written, the five-pound butterfly effect has probably gotten worse rather than better in the business world. But hunting for five-pound butterflies also seems to be increasingly affecting other areas of life, including college admissions and the search for love and marriage.
First I'll talk about the five-pound butterfly effect in a business context and then develop its applicability to other areas. The WSJ article mentioned a company that makes automobile bumper parts and was looking for a factory shift supervisor. They eliminated all candidates who didn't have a BS degree, even though many had relevant experience, and also insisted on experience with the specific manufacturing software that was in use at the plant. It took six months to fill this job (during which time the position was being filled by someone who wouldn't ultimately be chosen for it.) Another company, Wabtec, which makes components for railcars and buses, insisted on knowledge of a specific version of the computer-aided design system it uses, even though the differences between that version and the earlier version were not all that great.
And as the article (which focused mainly on engineering jobs) didn't mention...there were certainly talented salespeople who didn't get hired this week because they lacked specific experience with the particular sales automation or customer resource management system being used..knowledge that they could have easily picked up during their first week or two on the job.
WAS ISLAMIC TERRORISM CAUSED BY SQUARE DANCING AND LADY GAGA?
In some quarters, it's popular to blame the rise of Islamic terrorism on economic factors (poverty) and geopolitical factors (Israeli "settlements," American troops in the Middle East.) Bret Stephens argues that a far more important driver of terrorism is rage at the freedom--and especially the sexuality--of Western women. At the link, Stephens cites the horrified reaction of Sayyid Qutb, who is considered the intellectual godfather of Al Qaeda, to his experiences during his visit to the U.S. in the late 1940s. Qutb was particularly repelled by what he called "the American Temptress."
Stephens doesn't mention it, but--Qutb formed his vision of the American Temptress while observing a square dance at a church social!
The point about the connection between sexual fear and hostility on the one hand, and Islamic terrorism on the other, is by no means new with Stephens, of course, but he describes the case well and uses it to explain why the growing fashion of casting Israel as the root cause of terrorism is a ridiculous one.
Link via psychiatrist Dr Sanity, who adds extensive commentary.
The recently-released video of an Apache gunship strike gone horribly wrong reminds Neptunus Lex of an attack mission...also in Iraq...in which he participated:
My air defense suppression work was executed early in the flight, and no Iraqi MiGs chose to come out and play that day, so I had a little time to watch the strikers do their work between the hot and cold legs of the Barrier Combat Air Patrol. I heard them push in from the Initial Point behind me and, although it wasn't my target for the day, I acquired the building with my forward-looking infrared pod. I was dead solid certain that I had the target acquired---a non-trivial challenge back in the days before GPS-aided FLIR designation. So it was with shock and dismay that I saw a different building than the one in my cross-hairs go up in smoke.
Good guys on that strike, doing the best that they could. They hit the wrong target, the wrong people died. It happens. The strike leader probably carries it around with him still.
Democratic Senator Christopher Dodd wants to impose some changes on the way that financing for new ventures works in America:
First, Dodd's bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the SEC to review their filing. A second provision raises the wealth requirements for an "accredited investor" who can invest in startups -- if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.
Here's Keith Rabois, an early PayPal employee who is now a VP of Slide and an angel investor:
Anyone still need more evidence that Obama and the Democrats intend to destroy Silicon Valley and the dreams of entrepreneurs?
Note that while government seeks to protect individuals without a certain level of assets & income from participating in the economically-essential and often profitable activity of venture investing (even though some of these individuals may be highly sophisticated in their understanding of finance and of the relevant markets), it also seeks, via elaborate advertising campaigns, to lure people of all income levels--in practice, especially the poor--to "invest" their money in state lotteries.
Disclosure: I have investments in venture capital.
Luke Johnson on failure. Johnson, a serial entrepreneur and investor, is writing about failure in a business context, but some of his advice is also relevant to recovering from other kinds of setbacks.
The crusader's hymn ("Fairest Lord Jesus), usually considered an Easter song. . Historical information about this beautiful piece of music here.