Pure Genius

Star Trek II condensed into a 90 second Italian opera, via Robot Chicken.

Incidentally, the first time I searched for this, I couldn't find it (I forgot the title was in Italian). This was the error message.

Keeping a Casual Eye on ASUR, Part IV

The stock soars on news that the interim CEO picked up 500k shares. So far, so good for Sandberg and associates. The stock is now higher than the cash-out offer. The gamble of small holders to turn down the 36 cents per share in cash may yet work out.

We'll keep an eye on this, for reasons I mentioned in previous posts.

Star

A comment on Fred Wilson's blog about Jim Carroll's recent passing reminded me of the Cult song that was featured on the film version of Carroll's The Basketball Diaries. I didn't know there was a video for the song, but here it is, via YouTube. The silver-clad model is supposed to evoke the Lady Liberty, I suppose, but she reminds me a little of the robot from Metropolis.

Template Concept for New Blog

This template combines elements of the logo with another image and a semi-custom Wordpress theme. Feel free to share your feedback in the comments.

The Secret to Making Money Online

37 Signals again. Here's David Heinemeier Hansson, the partner who created Ruby on Rails, giving his take on how to make money online. This is from last year, but it's new to me. Maybe it's new to you too.

37 Signals Satirizes Freeconomics

37 Signals founder Jason Fried's take on the current wave of venture capital interest in Internet-based companies that aren't making money, "PRESS RELEASE: 37SIGNALS VALUATION TOPS $100 BILLION AFTER BOLD VC INVESTMENT". Excerpts:

CHICAGO—September 24, 2009—37signals is now a $100 billion dollar company, according to a group of investors who have agreed to purchase 0.000000001% of the company in exchange for $1.

Founder Jason Fried informed his employees about the new deal at a recent company-wide meeting. The financing round was led by Yardstick Capital and Institutionalized Venture Partners.

In order to increase the value of the company, 37signals has decided to stop generating revenues. “When it comes to valuation, making money is a real obstacle. Our profitability has been a real drag on our valuation,” said Mr. Fried. “Once you have profits, it’s impossible to just make stuff up. That’s why we’re switching to a ‘freeconomics’ model. We’ll give away everything for free and let the market speculate about how much money we could make if we wanted to make money.

[...]

A $100 billion value for 37signals is “not outlandish,” says Aanandamayee Bhatnagar, a finance professor and valuation guru at Grenada State’s Schnook School of Business. Bhatnagar points to a leaked, confidential corporate strategy plan that projects 37signals will attract twelve billion users by the end of 2013.

How will the company overcome the fact that there are only 6.8 billion people alive today? “Why limit users to people?” said Bhatnagar.

In order to determine the valuation of companies, Bhatnagar typically applies the following formula: [(Twitter followers x Facebook fans) + (# of employees x 1000)] x (RSS subscribers + daily page views) + (monthly burn rate x Google’s stock price)2 and then doubles if it they use Ruby on Rails^[1] or if the CEO has run a business into the ground before.

I wonder if Fred Wilson, venture capitalist investor in Twitter, among other Internet businesses, will respond to this on his blog. If so, it should lead to a spirited discussion in the comments.

^[1]Ruby on Rails, the web framework my developers use, was created by one of the partners in 37 Signals. My web developers mentioned this to me when I asked them if they had read the book Getting Real by 37 Signals, which I had first heard about from this video blog post from Tim Ferriss's site.

The Ear Inn

We met family friends for dinner last night at a historic dive in SoHo called The Ear Inn (pictured above¹). Last week, I had seen a Guardian article on the "50 best things to eat in the world"; number three on that list was the burger at a New York City restaurant called Little Owl. George, an old friend of my parents, enjoys a good burger, so I invited him to join us. It turned out that Little Owl doesn't offer burgers for dinner, so George suggested the Ear Inn. An old man, he enjoys visiting old places. His son Jimmy joined us.

The family loves meat: Jimmy mentioned he was taking a charcuterie class at the French Culinary Institute in town. He wants to learn how to age his own steaks. He made an interesting point about burgers -- an obvious one, in hindsight, but an interesting one nonetheless: places that cook all their burgers well done (e.g., Five Guys, In-and-Out Burger, etc.) ought to be considered in a separate category from restaurants where you can get burgers cooked to order. That's a distinction Matt and I didn't make when we listed our top five burger places². Jimmy also noted how difficult it is for restaurants to do something seemingly so simple: consistently cook a burger to order. I mentioned that celebrity chef Bobby Flay's Burger Palace doesn't seem to be able to do this. His stated M.O. is to cook the burgers medium but you have good odds of getting your burger bloody or overcooked instead. The Ear Inn cooked our medium burgers the way we ordered them. Good burger, but no fries: there's no fryer in the cramped kitchen.

¹The writing on the wall in the photo, next to the arrow, says that the blue line represents the water's edge of the island as it was in 1766.

²Matt's been too busy to post regularly on his eating blog, thanks in part to Launching Innovation, but if he reads this post, he'll have another two burger places to check out when the dust settles.

Logotherapy II

My design agency's takes on my initial chicken scratch concept are below. Feel free to offer your opinions in the comment thread.

KSW Claws Back

Long time readers may recall that we noted that shares of KSW Mechanical Services (Nasdaq: KSW), Inc. plummeted last December when two projects comprising about 40% of its backlog were put on hold in the same week. On Monday, KSW announced that the larger of those two projects has been resumed.

Readers may also recall this post from March, where we noted that KSW's corporate counsel Jim Oliviero mentioned the company was competing for a World Trade Center project. Yesterday, the company announced it had been awarded this contract. The company predicted in its press release that its backlog would total $129 million as of the end of this quarter. Before the drop last December, the company's backlog totaled $139 million.

Hell's Kitchen isn't a DMZ

Last Friday, Cheryl and I went to see The Cult at Terminal 5, in Hell's Kitchen, and then went out for burgers afterwords at Five Napkin Burger, in the same neighborhood. Great show¹, great burger².

Twenty years ago The Cult mentioned this neighborhood in their song "New York City", describing it as "a DMZ", a "Disneyland trash can", and, "a crazy place". That was back in the pre-Giuliani days though. Hell's Kitchen is pretty gentrified these days.

¹Before the show, venture capitalist Fred Wilson mentioned in a comment thread that Terminal 5 was "too up and down", i.e., that it's got steep staircases. True, but not really an issue if you stay on one level, as we did. With a bar and bathrooms on that level, there wasn't any need to wander up and down.

²Coincidentally, when Binging for "Five Napkin Burger" while writing this, I found this post by Fred's wife, where she gave the place a thumbs up.

Mohnish Pabrai: A Super Salesman, not a Super Investor

Mohnish Pabrai is clearly savvy at self-promotion (as I noted elsewhere last year) and a consummate salesman, judging by the hundreds of millions of dollars of assets he's gathered. I think it's clear by now though that he's not a great investor. If it's not, these notes on Pabrai's 2009 Chicago investor meeting, compiled by Miguel Barbosa of Simoleon Sense may be instructive. Reading them, you'll be reminded that Pabrai used to use shares of Berkshire Hathaway as a "placeholder for cash", which made absolutely no sense; that he ignored his own advice about avoiding retailers (not to mention his alleged preference for small caps) when he invested in Sears; and that he has belatedly realized that a highly-leveraged, subprime lender (Compucredit, on which Pabrai took a 72% loss¹) might not do well during a credit crunch.

A couple of years ago, I sent a copy of Pabrai's book, The Dhando Investor², to a friend of mine who works in the Southern California office of a firm that was initially established as the family office for a Gilded Age family, and now handles the finances for other wealthy families. At the time, I figured my friend's firm might be interested in looking at Pabrai as a candidate for its stable of outside investment managers, but now I think a better role for Pabrai would be as a salesman for a wealth management firm (though perhaps one with a lower minimum asset requirement than my friend's firm).

If I were Pabrai, I would quietly approach some leading wealth management/family office firms about them absorbing Pabrai's assets under management and bringing Pabrai on to gather assets for the firm from affluent Indian Americans. Pabrai could probably add more value to his wealthy clients as an excellent salesman than as an investor.

¹Pabrai also doubled down on a subprime mortgage lender, Delta Financial Corporation, after the securitization market seized up in August of 2007. He held his stake until that company went bankrupt.

²Pabrai's brief book actually contains some interesting stories about entrepreneurship (Pabrai was an IT entrepreneur before becoming a hedge fund manager), but Pabrai himself ignored some of the lessons in those stories. For example, Pabrai wrote about the ethnic Indians whose businesses were expropriated by Idi Amin, and despite this, Pabrai invested in an oil company based in Hugo Chavez's Venezuela.

Alloy Steel, Altman Z-Scores, China, and Vertical Branding

Connecting the dots between some recent topics:

- Alloy Steel International (Nasdaq: AYSI.OB) is the sort of company that is benefiting from China's New, Self-Propelled Economy.

- The Altman Z-Score model can be used by equity investors to evaluate current long holdings for signs of financial distress, as we did with Alloy Steel most recently back in May. When the model predicted that the company was not at risk of bankruptcy at that point, we added more to our position (at about 23 cents per share), despite the weak quarter the company had just announced.

- The Altman Z-Score model can also be used to look for potential short ideas, as in the previous post re BAGL. We'll see how that one works out.

- Vertical Branding (Pink Sheets: VBDG.PK), retailer of such fine, made-in-China products such as this,



is an example of the sort of company associated with China's pre-self-propelled, more export-dependent economy. When China's exports of these sorts of products started to drop precipitously as the global economy sunk into recession, one of the concerns pundits raised was the plight of the migrant workers from China's rural West who were getting laid off. China decided to address this via its stimulus package by increasing investments in Western China, including job-creating infrastructure projects there. Infrastructure requires steel, and to make steel you need iron ore. Companies that mine for iron ore need wear plates to protect and increase the efficiency of their mining equipment. Alloy Steel International makes best-of-breed wear plates.

New Short Position: BAGL

I mentioned this in a previous comment thread, but I shorted a few shares of Einstein Noah Restaurant Group (Nasdaq: BAGL) earlier today at $13.78. This company has an Altman Z"-Score¹ of -3.2. A score below 1.1 suggests a company is at risk of bankruptcy within 1 to 2 years. It wouldn't be the first time an Einstein Bagels went bankrupt; a previous iteration of Einstein/Noah Bagels went bankrupt nine years ago. Insiders have been selling BAGL this year. The company also has negative working capital, over $117 million in total debt, less than $4 million in cash, and it's had a big run-up this year that doesn't seem to be justified by fundamentals.

On the other hand, David Einhorn, one of The Guru Five, is the largest investor in BAGL², so bear that in mind. For my part though, I'm not going to let a guru's ownership of a stock keep me from shorting it. I did that last year, when I was bearish on USG, but didn't short it because Warren Buffett owned it. These guys put their pants on one leg at a time like the rest of us, and they often have different considerations than the rest of us do with these sorts of positions.


¹Z"-Score is the designation for the modified, four-term version of the model recommended for publicly-traded (non-financial) non-manufacturing companies.

²Einhorn appears to have acquired his stake when he helped recapitalize the company after its bankruptcy, so his average cost here is probably very low. I don't have the energy to look up the exact figures, but feel free to do so yourself if the spirit moves you.

Logotherapy

My design firm is going to start with this bit of chicken scratch from me and turn it into a professional logo.

China's New, Self-Propelled Economy

A few months ago, we mentioned James Kynge's 'China Continental' thesis. In that post, we excerpted an essay Kynge had written in the Financial Times explicating his thesis for China's continuing growth in the wake of declining exports. This was the excerpt we quoted from Kynge's essay:

China is going continental. Just as the US during the 19th century underwent a transition from export-oriented growth to a greater reliance on inner dynamism, so China is looking inwards for the engine to drive its economy.

In China’s case it is still early days, but evidence suggests the conventional view of an export-dependent, river delta-driven economy no longer matches the reality. The argument here is not that trade has somehow become unimportant to China, but rather that the energy generating the world’s fastest economic growth rate this year is increasingly coming from within.

A series of indicators reveals the shift to “China Continental” – the transition of the world’s most populous country into an increasingly self-propelling economic force.

A couple of items that appeared earlier this week in the Financial Times suggest that Kynge's thesis may have been correct. This item from Monday's Lex column, "China's Stimulus" is one, and Martin Wolf's column from Monday's FT, "Wheel of fortune turns as China outdoes west", is another. Here are a couple of brief excerpts from both.

Lex:

There is no precise breakdown of stimulus spending by geography. But $366bn falls under the heading of infrastructure and post-quake recovery; another $113bn under public housing and rural development. Only a small slice – $54bn to stimulate “technological innovation” – seems to explicitly favour developed regions. Output in 12 western provinces grew an average 8 per cent in the first half – a whole percentage point better than 11 provinces in the east.

This structural shift was evident in first-half figures from ICBC, China’s largest commercial lender. Its year-on-year percentage increase in operating income in the Yangtze and Pearl river deltas fell, but rose in central and western regions. In short, China would rather finance roads in Chengdu than sweatshops in Guangdong. Many private, export-led companies in coastal areas, lacking collateral in the form of land or government relationships, are still struggling for funds. Trade data on Friday showed exports and imports falling for the 10th month, year-on-year. Weak external demand is not the only cause; this is an unabashed internalisation of growth.

Martin Wolf:

China has emerged as the most significant winner from the financial and economic crisis. At the end of 2008, many questioned whether China would achieve its growth target of 8 per cent in 2009. Who now dares to do so?

Cushioned by its more than $2,100bn (€1,440bn, £1,260bn) of foreign currency reserves, huge trade and current account surpluses and a robust fiscal position, Beijing has been able to deploy all its levers over the financial system and the economy.

[...]

Three immediate questions arise. How has China responded to the crisis? Is its resurgent growth sustainable? How far will its recovery help the world economy?

The answer to the first question is: astonishingly. According to data reported at the end of last week, industrial output expanded 12.3 per cent in the 12 months to August, up from a 10.8 per cent increase in July. This is the fastest growth for a year.

[...]

Is this growth surge sustainable? In a word, yes. Inevitably, the torrid growth of bank credit and money is spilling over into asset prices, particularly equities. But there is little danger of excessive inflation in an economy with an appreciating currency, fully embedded in a world economy still threatened more by deflation than by inflation, at least in the near term. Moreover, the government is solvent. As premier Wen Jiabao noted in Dalian, "we . . . kept budget deficit and government debt at around 3 per cent and 20 per cent of the GDP respectively". Should bad loans increase, China is well able to recapitalise its financial system.

This is good news, of course, for companies selling raw materials to China, for vendors to those companies (e.g., Alloy Steel International), and, more broadly, for countries such as Australia and Brazil that export significant amounts of raw materials to China.

Norman Borlaug Passes Away

The AP reports the Nobel laureate agricultural scientist and Texas A&M professor's passing at the age of 95. Borlaug remained active in the field until recently. I recall reading this Wall Street Journal article seven years ago, about his work in Africa at the time. From that article, this African's prayer came to mind when I read that Borlaug had passed away:

His successes have made the white-haired Iowan a household name in parts of Africa. "He's our hero," says Mr. Boateng, the secretary of the Fufuo Growers Association, who fondly recalls Dr. Borlaug sitting with the villagers and husking corn. "Every time we pray, we pray for Dr. Borlaug: 'Lord, we know he's elderly. Please extend his life.'"

R.I.P.

Alive in Jo'Berg

Hat tip to a commenter on Ta-Nehisi Coates's Atlantic blog for bringing this to my attention. Here's the six minute short Neil Blomkamp made in 2005, four years before the release of District 9:

Jim Hake Reflects on 9/11

As I mentioned in a post last year, I had the pleasure of meeting the entrepreneur, philanthropist, and patriot Jim Hake, founder of Spirit of America, several years ago, and what he's accomplished with SoA has been impressive. Here he reflects on the eighth anniversary of 9/11. Worth reading.

Ordinarily, I'd post an excerpt here, but after an hour of trying to format the HTML properly, I gave up. Please click over to the SoA site. I don't think you'll regret it.

An Interesting Investment Strategy from Goldman Sachs

I just found this by accident while searching for something else: US Hispanization: Long/short strategies. That PDF was dated October 23, 2007. Below are a few excerpts from it:

The Trend Continues... In November 2004, our report The Hispanization of the United States provided a context and investment framework to assess the growing influence of Hispanics in the US economy. Three years later, the theme retains its relevance, and we offer a long/short investment framework.

[...]

For domestically-focused investors and companies, gaining exposure to the rapidly growing US Hispanic population offers the best prospect for sales and earnings growth over the next three years.

See the graphic below, which comes from this PDF. Note the suggestions for Housing and Financials, and remember, this was published two months after the subprime crisis became obvious in August of 2007.

Does Goldman Sachs have two levels of clients -- one level that gets this advice, and a higher level that gets offered the opposite advice?

USEG on the Move

For those who missed it, this post, contains some notes on my recent conversation with USEG management, where the management team described several of the irons the company currently has in the fire.

Incidentally, I mentioned USEG, along with AYSI.OB, and DSNY.OB on David Merkel's Aleph Blog last week when he solicited stock ideas. I noted that these companies are probably all too small for his purposes, but perhaps they might be of interest to some of his readers. Judging from the lack of comments there, apparently not. I'm guessing his readers tend toward investing in larger cap companies.

Nature Versus Nurture

Hat tip to J.K. for these two items.

First, this article on Barry James Sanders, 14 year old star high school running back and son of NFL Hall of Fame running back Barry Sanders. Excerpt:

"There are a lot of similarities especially in the way they cut," [BJS's High School Football Coach Andy] Bogert said. "Some of the plays - you could probably superimpose them running together, and they'd look really similar."

Those similarities are inherited rather than learned.

Barry Sanders says he has focused on being a father instead of a coach to his son. He views Sanders hanging out with good peers and continuing to avoid negative influences as a far more important goal.

"I can't think of anything I've given him advice on as far as (playing) ball," Sanders said.

"There's going to be a lot of advice he's going to need, and probably the thing that he'll need the least help with will be football.

Here's a clip of Barry James Sanders breaking one the way his Dad used to:



Next we have this article on Moshe Kai Cavalin, an 11 year old who just graduated college with a degree in astrophysics. Are his smarts inherited, as the author of the previous article writes Barry James Sanders's running back skills are? Young Moshe (pictured below) demurs:

"I don't consider myself a genius because there are 6.5 billion people in this world and each one is smart in his or her own way," Cavalin told Wood TV.

[...]

Cavalin's parents avoid calling their son a genius. They say he's just an average kid who enjoys studying as much as he likes playing soccer, watching Jackie Chan movies, and collecting toy cars and baseball caps with tiger emblems on them. He was born during the Year of the Tiger in the Chinese zodiac.

Cavalin has a general idea what his IQ is, but doesn't like to discuss it. He says other students can achieve his success if they study hard and stay focused on their work.

As J.K. facetiously noted in the comment thread of a previous post, both boys clearly have a lot of grit.

The Power of Positive News

Earlier this year, when Alloy Steel CEO Gene Kostecki complained to me via e-mail about short sellers shorting his company's stock, I noted in a post ("Run Silent, Run Deep") that the best way for a company to foil short sellers would be to release positive news. Alloy Steel International (AYSI.OB) did just that today when it issued this press release about an hour ago, announcing it landed a huge long-term contract to supply its proprietary product to BHP Billiton, "Alloy Steel International Signs Supply Agreement With BHP Billiton". From the release:

PERTH, AUSTRALIA--(Marketwire - 09/08/09) - Mr. Gene Kostecki, Chairman and CEO of Alloy Steel International (OTC.BB:AYSI - News), today announced that Alloy Steel Australia (Int) Pty Ltd a wholly owned subsidiary of Alloy Steel International Inc. has signed a long term strategic supply agreement with BHP Billiton to supply Arcoplate Wear Resistant Super Alloy Wearplate for iron ore mining operations in Western Australia.

The initial product taken will be for the multi-million dollar expansion of their operations in the Pilbara area of Western Australia. The first product releases issued by BHP have been for value in excess of $5 million in the past 7 weeks. It is anticipated that over the next five years the value of Wearplate could be in excess of $50 million.

Since the announcement in August 2009 of Alloy Steel's successful commissioning, the increased level of interest in the new production mill shown in Arcoplate has been outstanding, according to Mr. Kostecki. Most of the major iron ore miners in Western Australia have enquired about booking production time for their own expansion programs and maintenance programs and are expected to order the full range of Arcoplate thicknesses.

Since commissioning the new Arcoplate mill, it has been working at full capacity satisfying the demand for the new 3/4 inch or 20mm material whilst the other Arcoplate mill has been fully utilized with the ongoing demand for the thinner overlay materials.

As a result of the increased level of interest in Alloy Steel's Arcoplate product by local and international mining companies, the Directors of Alloy Steel are planning for a further two production mills with substantially increased capacity to come on line in early 2010.

An Entrepreneurial Prodigy

Rob Walker's column in today's New York Times Magazine describes a clever business called Quirky. For a $99 fee, Quirky lets users submit product ideas. The Quirky community votes on them, and the Quirky team manufactures the winning idea, after taking into account input from the community. The inventor earns a licensing fee, and community members who made valuable contributions to the design earn a small fee as well. Below is a video from Quirky's site in which Ben Kaufman, its 22-year old founder, describes how he started his first company (Quirky is his third) with $185k of seed money his parents got from re-mortgaging their house, and how his first two companies gave him the idea to start Quirky.

District 9

We saw this movie earlier tonight and I highly recommend it. It was the best movie I've seen in a while. I was going to post a trailer for the film below, but the trailers I saw give away too many plot points, in my opinion (and the one that features interviews with the principals is more tendentious than the movie). I'm glad I didn't see them before I saw the movie, and I'd recommend you don't see them first either.

One nice thing about the movie, incidentally (don't worry, no spoilers follow) is that I didn't recognize any of the actors, who I assume are all South Africans. That enhanced the movie's documentary style. If the Peter Jackson (or whoever produces the inevitable sequel) is smart, he'll resist the temptation to stock the sequel with marquee name actors (I bet Charlize Theron's agent is already making calls). I doubt it though.

Extreme Job Hunting

On his blog, Joshua Persky links to this breezily written Wall Street Journal article in which he is featured, Lessons of Extreme Job-Hunting. Below is a brief excerpt, followed by a comment by me and then a more pointed comment by a WSJ reader.

Joblessness transformed Joshua Persky, James A. Williamson III and Peggy Greco into experts about extreme job-hunting tactics.

Mr. Persky, an investment banker, handed out his résumé while wearing a sandwich board that read, "Experienced M.I.T. Grad for Hire." Mr. Williamson, fresh out of business school, taped his résumé inside the cab he began driving when he couldn't land a marketing post. Ms. Greco printed a T-shirt touting her availability for private-duty nursing, then wore it during bicycle rides around wealthy neighborhoods.

The unorthodox gambits failed these job seekers—but taught them plenty about finding work, and could provide a playbook for countless unemployed Americans. Mr. Persky learned to become a multi-faceted entrepreneur. Mr. Williamson discovered why personal networks matter. Ms. Greco recognized the importance of targeted marketing.

I've already censured myself for my previous commentary about Persky (See this post: "I have been too Harsh")¹, so I'll skip over his example. Regarding the Williamson fellow, the job he ends up with after his efforts is as an insurance agent. I'm surprised that a Wall Street Journal reporter doesn't know this, but those jobs are pretty easy to get. The initial training and stipend costs are usually a good investment for the insurance company for a simple reason: most applicants may not have the sales skills, persistence, and contacts to build a viable career as an insurance agent, but most will at least bring on some family and friends as clients before they give up. My guess is that the revenues generated by sales to those family and friends generally considerably outweigh the initial costs of the new hire.

A WSJ reader named T. Sawczyn weighed in in the comments:

Superficially obsequious and potentially self-serving compliments like the one from the recruiter above notwithstanding, I trust that the most important thing each of the profiled job-seekers has learned is the value of TARGETING their efforts to the need at hand.

I would think twice before hiring a personal nurse who rode a bicycle around "affluent neighborhoods" in a T-shirt that says "Hire me." Likewise, I question the intelligence or focus of an investment banker who thinks the best way to find a job is to wear a sandwich board. Finally, a taxi driver in a marketing job search is probably meant to be, a...taxi driver.

People, target your efforts and your job search to the correct audience. Network, direct your inquiries and make yourself a big fish in the small pond of your chosen specialty, not in the big lake of public exposure. This article and these efforts are further proof that what reigns in today's culture is narcissism and media exposure, no matter that the result of said self-exposure is nothing more than 30 seconds of fame.

Yes, none of these people was successful in their "job-search." Is anyone surprised?

¹I did also recently offer him the chance to bid on a small project I placed on Elance, but didn't hear back from him.

Van Jones, Green Jobs Czar

Longtime readers may remember this post about Van Jones from last fall ("A Green New Deal?"). At the time, I didn't know he'd be picked by the Obama Administration to be a 'green jobs czar', but I figured his ideas would have some valence with team Obama. Now he has gotten into trouble for some past statements and actions unrelated to his green jobs advocacy (See The New Republic: "Is Obama's Green Jobs Guru In Trouble?". HT: Ta-Nehisi Coates). In a way, this is unfortunate, because it detracts attention from the weakness of his "green collar economy" thesis. How can a robust, job-creating economy be built on winterizing homes and installing more expensive sources of energy?

Another Take on Social Media

Via the Un-Marketing Blog:



David Silver agrees with the point about product sales being driven by recommender communities versus advertising, but I imagine if he saw this video he'd reiterate that all the big numbers for the general-purpose social media sites haven't translated into profits.

Social Media: The New Public Access TV?

This analogy came to mind earlier this week when reading a post on Fred Wilson's blog about Virginia Heffernan's article in the Sunday New York Times about users leaving Facebook, The Medium - Facebook Exodus. Wilson, a venture capitalist investor in social media (e.g., Twitter), disagreed with Heffernan's column, and noted that the number of subscribers to both Facebook and Twitter are still rising. In the comment thread of Fred's post, I wrote something along these lines:

I don't get the enthusiasm about Facebook or Twitter either. Is the drop off rate analogous to that of blogging? I.e., anyone can start, and lots of folks do, and the prospect of connecting and sharing your thoughts with countless people over the Internet is enticing. And then most people find out that no one is listening to them.

It seems that active (i.e., roughly daily) blogging is becoming mostly the province of a relative handful of professional bloggers or bloggers who (like Fred) see a value in blogging related to their business. Might the same be happening with Facebook and Twitter?

Public Access television, too, gave regular folks a chance to broadcast their content. For a small handful of them, it led to bigger and better things (I can only think of two, both one, which happens to be food-related, off the top of my head -- Rachel Ray² and Isa Chandra Moskowitz¹, of the Post Punk Kitchen -- but I wouldn't be surprised if there are a few others). But for everyone else, the deafening silence mocking them from the aether caused them to drop off.

I'm reading a book now (The Social Network Business Plan) by an angel investor in social media named David Silver, who has a take on this that seems to be orthogonal to those of Wilson and Heffernan. Silver is enthusiastic about social media, but not about general purpose sites such as Facebook and Twitter. He writes,

You can forget about the sustainability of MySpace, Facebook, and other general-purpose online social networks. They aren't sustainable businesses. Their business model, based on advertising, is not demonstrably economically justifiable. Very few of their members look at the ads, and billions of dollars are being wasted trying to reach them. These social networks will continue to attract younger people who, ironically, lack spending power.

Silver's thesis, in a nutshell, is that the real revenue opportunities are in communities geared toward a particular product, service, or interest. E.g., a community that rates airlines on service, reliability, cleanliness of their planes, etc. Airlines might pay for access to anonymized conversations from this forum, to use as a means of quality control.

¹I don't know if Rachel Ray's public access shows are available online, but ICM's are. Here is the first episode of her Brooklyn-based public access show with her pal Terry Romero (HT: Cheryl). ICM has since moved out to Portland, OR, where she has become something of a local celeb there, appearing on the local morning show. She's also published a few vegan cookbooks.



²My crack research staff informs me that Rachel Ray's first shows were on a local TV station, not public access.