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December 2003

December 30, 2003

New Toy

Olympus C-5060 Wide Zoom

Has the widest view of any digital camera on the market, works great for close-ups and panoramas alike, a good mid-priced multipurpose tool. Has a unique "direct" histogram to tell you which parts of the image will be under or over-exposed before you shoot with little blue and red squares.

Here's a detailed DCRP Review that clinched it for me. Only drawbacks so far is the relatively large form factor and distribution of controls throughout the body that I may simply haven't gotten used to yet.

December 29, 2003

Cheesegeek Factory

Great time tonight. Posted some photos in my Events album. Some great people showed up, despite the rain and mid-holiday timing:

Enjoyed some really good conversations. Thanks to Niall Kennedy for passing his gizmo around to collect the list. And thanks to Scoble for making this whatchamacallit happen.

Cheesecake Tonight

Looks like we will have a full house of geeks and bloggers at tonight's dinner in Palo Alto. Many more RSVPs than I expected mid-holiday.

Good thing the Cheescake Factory's reservationless system can accommodate the burst. You can have your cake and eat it too. Just means that the more people that show up, the longer the wait until our beeper(s) tells us to get out of the Apple Store or Borders or Bar. We'll take a last headcount at 6pm and take it from there.

December 28, 2003

Uncivil Liberties

What's most troublesome about Bush signing the Patriot Act II when Sadam was captured is that it takes civil liberties away from us without allowing civil debate.

John is right, this is a very big deal. This law has been missed by the media, broadens search beyond probable cause, hides the trail of infringement and is perhaps unconstitutional.

Snoliday

Spent a few days after Christmas skiing in Lake Tahoe and stayed in a dome. Three feet of fresh powder, snow angels and cliff jumping to warm the soul.

The dangerous thing is I got a camera for Christmas, so expect long downloads when viewing this blog. Maybe my new toy means I have to give up on my personal policy to avoid posting about the kids to protect their privacy, 'cause they are so darn cute. But on the other hand, the policy is just because I can't forsee the social norms or their personal preferences.

December 25, 2003

All You Share Comes Back to You

Judith Meskill:

actionable sense...

and so i wish for you this holiday
a heightened sense of all that lights your fire
for passion is the thing that, come what may,
will help to manifest your deep desire.

so thank you for your praise of my tech prose
and in your heart please know that all you share
comes back to you and often overflows
with that for which your heart has steadfast care.

and as we find that 'sense in action' counts
with blogs and wikis in a 'socialtext'
we'll see that interest in our action mounts
as we with knowledge fill our 'social decks.'

twas lilia inspired here this prose
to actionable cohorts' - this 'sense' flows...

Behind the Beard

Christmas feels like its already come and gone at our place. I was lucky enough to marry into a different holiday tradition, as Estonians celebrate Christmas Eve. We awoke to stockings filled by Elves, called the relatives, took a nice walk, and cooked (well, I helped) a big honkin Goose.

I dress up as Santa in a hand sewn costume to ask my daughter if she has been good and deliver the presents. I might be the skinniest guy to do it, takes several pillows to fill the hand-sewn costume, but its my daughters favorite part (not just because of the big bag of plastic crap). I bumble in with a ho ho ho, try not to give away my face, give a big stuffed hug and be on my way.

She's Seven now and this year is the first where she seemed to see through it, commenting: "Santa sure sounds a lot like daddy." Sure hope this dream continues for another year or two, but she's on to it, and it may be time for a stunt double.

Tomorrow we get to start all-over. For now, the kids are sleeping on the most peaceful of nights.

December 23, 2003

The Bottom-up Net Society

Bambi Francisco blogs about the bottom-up Net society and points to Socialtext and others as an example of social software while discussing the bottom-up movement we all know so well:

Just as storylines evolve based on the interactions of the people that make up reality TV, the Internet is a channel where ideas, processes, political agendas, or Web sites are less scripted, presented and disseminated in a top-down format, but rather discovered and given merit in a real-time show of virtual hands...

"People are finding that they can self-organize," said Mark Pincus, founder of Tribe Networks, a San-Francisco based start-up focused on bringing people together to, among other things, form so called tribes around particular interests.

This is particularly useful in political campaigns, said Pincus, who calls the bubbling up of ideas on the Net, "The Revolution of the Ants."...

"The Net is ideally suited for a grassroots movement," said Pincus. "That's what our generation wants -- a voice."


Mark Pincus further elaborates on his blog how Tribe was used for political self-organization to support the Green Candidate for Mayor in SF and how he felt personally empowered:
The difference was that it was the first election i've ever voted in where i actually felt like i was making a conscious choice for something i wanted and had a voice in, rather than a depressing and pointless process of rubber stamping some big machine candidate who we all know represents the guys who paid for the TV which convinced us all that this was the only guy who could win anyway.

Mark believes the process is the platform and wants to form an eParty. While I disagree with the politics of supporting a 3rd party candidate without due cause and believe momentum makes movements (Dean), this is another great case study of emergent democracy activating the lost constituency by making politics participatory.

Blogger/Geek Dinner

Ran into Robert Scoble and his son at Palo Alto's Cheescake Factory last night (which opened this Wednesday). He was geeking out at the resturant's POS and hosting system. I had to get back to my table before I started to geek to hard, so we forked the conversation to dinner next week. Robert suggested a blogger dinner and I could help counter-balance the Microsoft thing, something I said I can help with anytime.

So: Blogger/Geek Dinner Monday the 29th at 6pm at the Cheesecake Factory on University Avenue in Palo Alto. Let Robert or me know if you are in town and can join us for a little festivity amidst the festivity.

December 22, 2003

Return of the King

Took my daughter to see the Lord of the Rings: Return of the King. Ubermovie, 'nuff said.

As Mike points out, people go to movies for the social experience, despite in this case the movie being available online.

What's different about the LOTR series for us is the accompanying games on the Playstation2, which we started playing before seeing II and III which is rich in cinematic clips, but doesn't spoil it. Playing the game after seeing the movies is just the kind of social fix you are after when you can't get middle earth out of your head.

PCs stink at having shared social experiences with people in the same room. That's a big part of why people still watch TV, go to Movies or play games. If there is a PC in your living room, its probably there to cue up other media.

Beginning with Playstation, gaming consoles have reached a point of immersive richness on par with video. Games modelled after movies are ideal for the storytelling genre. But its also interesting to note that because games are on par, their design goals are set to match other media. Take the sports genre, of which EA is the clear leader. Madden and other games seek to emulate the experience of controlling TV, not actually gameplay, which is great except for sports that you play in real life. Now, of course, the Playstation is for the kids ;-).

December 20, 2003

RSS Winterfest 2004

RSS Winterfest is a free two-day Webcast augmented by Socialtext Eventspace on, you guessed it, Internet Syndication and standards like RSS and Atom. We're also presenting alongside some good folks.

Dean's Difference

A NYT article Napster Runs for President explain's Dean's difference is embodying emergent democracy:

The elusive piece of this phenomenon is cultural: the Internet. Rather than compare Dr. Dean to McGovern or Goldwater, it may make more sense to recall Franklin Roosevelt and John Kennedy. It was not until F.D.R.'s fireside chats on radio in 1933 that a medium in mass use for years became a political force. J.F.K. did the same for television, not only by vanquishing the camera-challenged Richard Nixon during the 1960 debates but by replacing the Eisenhower White House's prerecorded TV news conferences (which could be cleaned up with editing) with live broadcasts. Until Kennedy proved otherwise, most of Washington's wise men thought, as The New York Times columnist James Reston wrote in 1961, that a spontaneous televised press conference was "the goofiest idea since the Hula Hoop."...

"The term blog is now so ubiquitous everyone has to use it," says the author Steven Johnson, whose prescient 2001 book "Emergence" is essential reading for anyone seeking to understand this culture. On some candidates' sites, he observes, "there is no difference between a blog and a chronological list of press releases." And the presence of a poll on a site hardly constitutes interactivity. The underlying principles of the Dean Internet campaign "are the opposite of a poll," Mr. Johnson says. Much as thousands of connected techies perfected the Linux operating system's code through open collaboration, so Dean online followers collaborate on organizing and perfecting the campaign, their ideas trickling up from the bottom rather than being superimposed from national headquarters... It's almost as if Dr. Dean is "a system running for president," in Mr. Johnson's view, as opposed to a person....

With each generation technology some try to implement it as the previous one. This decreases the risk of a behavioral change, but at the cost of change itself.

December 17, 2003

Vonage and Groxis Extensions

Two of my favorite products just announced major extensions, making them truely great products.

Om Malik gets the scoop that Vonage will provide Softphones for your PDA or Laptop (PC or Mac). But being able to take your land line with you anywhere you get Wifi without tool charges. This is the death of captured audience pricing so common in hotelrooms and airport lounges. Perhaps this is in response to the take-up of Skype, who will face greater barriers bridging circuit and packet networks. But more likely this is a pre-emptive strike against the rapid entry of incumbent telcos by the Internet telephone company. Worth the $15/month and you don't have to lug around either your ATA or incumbent.

Groxis, the search visualization company, announced a Google plug-in. This lets you cover more of the web in a way you can make sense of it. Damn, Google needs to buy this company. You should buy its product for $50 to see what you are searching for.

Open Letter of Apology

Dear Friends and Colleagues,

Please accept my sincerest apology for not responding to your email. Maybe it was blocked by my ISP or yours. Maybe it was filtered by my client. Maybe it was scanned and disappeared below the fold without being flagged. Luckily there are so many maybes that its now a social norm to resend email that was not responded to. Please do this. Such is life these days, but I do apologize for the inconvenience.

Yours in ping,

Ross

Augmenting Social Interaction

The best tools and services can do for real world interaction is to simply augment it. It can't be replicated nor replaced. Now that we have a critical mass of people using the Internet as a facet of everyday life, there is a rich spectrum of methods for augmenting social interaction to explore. One key dimension is how tools and services compensate for how the medium isn't relatively rich.

Remote and In-person Collaboration

Over the past few days I spent a great deal of time with remote members of the Socialtext team. Inter-personal communication is more than talk. Its made up of verbal and non-verbal cues. With a distributed organization you have to make up for the lack of cues, which has costs and benefits. When we get together it makes the difference between real world interaction and augmented remote interaction even clearer.

What we have found through augmenting our remote collaboration with our tool, IM and phone is a productive way of working that de-emphasizes emotion. Its almost like how when someone looses a sense they make up for it with the remaining five. You become more attuned to cues on calls: pauses, inflections, grunts, etc. But what really makes it works is a heightened sense for when an issue becomes emotional, something natural when you are passionate about your work, and mediating differences as soon as they arise.

We largely work within wiki, a medium that begets trust by giving up control. It also de-emphasizes personality and focuses on the substance of written content. When we get together in person, we have a rich body of shared understanding to draw from, but positions and background are revealed. This helps not just to augment meetings, but pacify them, so we seek to get the business part of the meeting quickly so we can simply enjoy each other's company.

If you blog publicly you have had similar experiences when you meet blog buddies. So much shared understanding puts to rest portions of the conversation and provides a productive basis for higher bandwidth exchange.

Frontiers of Understanding Cues

Researchers have long understood the primacy of cues. Our brains process facial cues them quicker than spoken word. Now researchers are using MRIs to reveal the same is true for body cues. Follow that link to the new Loom blog and a story that begins with Darwin's study of the expresions of emotions. For more on the study of emotions and how we are augmenting our capabilities to control them through neuroscience, see Brainwaves.

Emotions and Relationships at Distance

Beyond Smilies :-), many technologies attempt to help convey emotion at distance. One of the more interesting approaches is 3dme, which allows you to convey mood entered along eight dimensions through an avatar. What works about this approach is it provides a representation of facial cues that is open to interpretation. It doesn't explicitly codify an emotion nor transmit it with perfect clarity, but that's okay, the point gets across.

Conveying emotions is similar to the concerns people have about conveying identity and relationships in social networking. Of course these services do not capture the essence and facets of identity. Of course they don't capture the varying degrees and facets of relationships. I don't think they try to either. They are simply games that provide iconic profiles and proxies of ties -- much is left open to interpretation. Similar to how a price in a transaction represents a shared understanding of value between two parties at a moment in time even through the two parties have different understandings of underyling value or utility. The price doesn't capture all aspects of exchange, but agreeing to one speeds the transactional relationship.

Text is an amazingly rich medium for expressing emotion and fostering relationships, but it isn't as efficient as other modalities. Bloggers who are accustomed to the dedication and relatively slow pace of building relationships post-by-post often find social networking too transactional. Different networks will require different approaches (e.g. personal, dating, cultural and business networking), each with its own balance of rich modalities and transactional proxies. Of all the social networking services, because of the network it seeks to serve, Tribe is perhaps at the golden mean within this rich spectrum. Meetup is at the rich end and LinkedIn accels at proxy.

A Walk Through the Woods

To understand the future you can shape it, but also look to our children. What's fascinating about the Netgeners is not just how connected they are, but how they have discrete modes of being on and off. The other way to understand the future is watch what Joi does.

Disconnecting for a while helped me realize the strong difference between on and off and how we need both. Similarly we need time for F2F and M2M, but its less binary. The spectrum of richness that our modalities afford is gradually skewing towards augmenting F2F in increasingly mobile ways. I don't fear this change because we have a profound ability to adapt and compensate. Whether in making up for a lack of social cues or an abundance of information.

December 16, 2003

Breather

Had a great completely disconnected weekend. Well, not completely disconnected. Just connected to people near me. Good to experience the life of distance.

December 11, 2003

Consolidation

One consistent theme I picked up on at the Red Herring conference was consolidation. Most of the speakers were either CEOs of very large companies or VCs and the line of questioning was very oriented towards public markets (the format didn't allow audience participation). If you are a market leader, admitting the prospect of consolidation is in your favor. A good party line is that customers are demanding a smaller set of potential vendors. There is the prospect of competitors that haven't flushed out their fundamentals. But when companies start buying technology for competitive advantage again, disruptive technologies create room for new players. Consolidation is inevitable discounting disruption.

Almost every single presenting CEO said they were in an acquisitive mode. Most mentioned an appetite for mid to small-sized companies because of integration risks. Combine this with an open IPO market and its a relatively healthy sign.

VCs historically lag the NASDAQ by one year in valuation and deals done. Venture is a lagging indicator. In the VC sessions, they all agreed that consolidation in their industry is inevitable and it was even said that it simply hasn't happened yet. Its well known that many of the funds raised during the boom simply have raised more money than they can generate a return for. Expect this quarter's aggregate investment to be tremendously active, but the coffers remain. The best hope for this consolidation is for it to be driven by limited partners. The problem is in a low-yield environment venture is an attractive asset class and available capital becomes abundant.

Most every industry has dealt with the pain of restructuring, save venture capital. Given the following nature of the venture business -- the pain most industries we have felt will be evenly distributed.

Decentralization Under Attack

Fears of a Net of Control are well founded. I was truely aghast at the comments by Verisign CEO Stratton Sclavos at the Red Herring conference. Crystallized why ICANN matters -- this is a battle of control and profiteering. From an article (reg. req.):


“SiteFinder will come back,” vowed Stratton Sclavos, CEO of VeriSign in an interview at the Red Herring Fall conference in Monterey, California, although he did not give a specific relaunch date. “A group of 200 technical zealots were against it and they got all the headlines,” said Mr. Sclavos. “Did they misinterpret it? Of course. We're not going to let this go.”

...Mr. Sclavos took the opportunity to take a swipe at ICANN: “It is time for the industry to grow up. The Internet is the infrastructure running the economy for the next three to four decades. We should not have ICANN volunteers running the policy of the Internet naming scheme.” He noted that he may be the only CEO in history to ask the federal government to regulate his industry because federal regulation would trump ICANN’s powers.


See Mitch's notes for further transcription, but this was the line that cut my ear:

We have to move the complexity back into the center of the network and remove it from the edge.

This is a genuine threat to the very decentralized nature of the Internet. Its a stupid network, and those who try to make it smart do it for greed. Druming up fears may lead us to the scenario of the Imprimatur where freedom is curbed for sake of unjustified security. There is only one company positioned to serve certificates for every session, and I cannot help but assume that's the direction we are headed. And on that note, its the 35 Anniversary of the Tragedy of the Commons.

Health and Medical Weblogs

Use of weblogs by health care professionals and patients is a positive trend. Such as here, here, here, and here. Sharing best practices, contextualizing medical advances and building support networks advance medical practice. Health policy and practice is one of greatest issues in the US, something that impacts us as certainly as taxes. But we don't have medical bloggers in the A-list, the thrust of a recent article in the San Antonio Express.

"I'm disappointed (health blogs) weren't able to cover anything new on the Medicare drug benefit debate," says former Wall Street Journal reporter Donald E.L. Johnson, whose The Business Word, gets between 500 and 1,000 hits a day. "We asked questions, speculated on the politics, but nobody (online) was breaking any news."

That will eventually change, predicts Ross Mayfield, CEO of Socialtext, which sells so-called "social software" for business applications.

"We haven't had a big enough story to take these blogs to the next level," he says. "I hesitate to say it, but it will probably take something like an epidemic, like SARS, for that to happen."

Donald is absolutely right that there has been some very big news in the medical sphere that merits more conversation than we have given it. Beyond bad policy we could at least take interest in pork. Part of the problem is these issues require domain expertise and time to sort through and we don't want to deal with health issues unless they directly impact us. Conversations on health, like most blog conversation, is fundamentally local. A conversation between doctor and patient. Discussions of the latest viruses that impact school or work. Conversation between employer and employee about benefits afforded.

Lately, I found that medmusings is actually an emergency care practitioner at my clinic. Where I found out that the clinic has run low on flu vaccine amongst other things that pertain to me and my family. I have also had blog friends impart their health issues to receive support, advice and encouragement in return. Heck, health is greatest reason I respect Dave, for his courage to openly quit smoking and stick to it.

When SARS broke a year ago, I worried about the cold Joi caught while reports were streaming in. Jerry lived in Hong Kong at the time and recommended the Wikipedia page on SARS as the best coverage of a fast-changing distributed story. Much like how blogs cover fires and hurricanes, but providing a more consistent shared understanding of meaning.

Medmusings the locality of health:

I don't think that people are googling or feedstering to find as much health info online as they are depending on emails to each other. Take as a point my local example:

When i look around for the most active groups of seekers of online medical info locally, i find the Palo Alto Menlo Park Mothers Club email list. [disclosure: i'm the moderator of the PAMP dad's email list and coordinator of their Dad's night out meetings] It's a group of a thousand moms who spam each other daily with a few dozen emails asking for tips, stuff to sell, and where to buy or seek care. Yup, they ask each other who are the best pediatricians or family practitioners aound, and if you get on their bad side, they'll lob you a long treatise of how they've suffered.

A recent dialogue between club members and a local group ended amicably after a few members complained about the services provided, mostly about the lack of sensitivity to the members' fears during the procedure, and the lack of enough communication during and afterwards. It's amazing to see how powerful electronic communications can be used to leverage change in an organization, and it gives me hope that patients are gaining more power to advocate for better treatment.

You can imagine the value this group would gain from using weblogs or a service like Tribe. But beyond the local level, something needs to happen to bring health issues to top of mind. Whenever we have a very big story. like Iraq, a new voice emerges to represent it. A year ago we had less than 1 million blogs, but since SARS, something has changed:


The availability of free and low-cost blogging software has, over only the past year or so, caused an explosion in the blogosphere. In June, Phil Wolff of blogcount.com estimated there were 2.6 million to 2.9 million active blogs worldwide.

"But this was before AOL and Yahoo at least their Korean subsidiary introduced blogging services for their members," he says, adding that he expects the number to reach 10 million by the end of 2004.


So I wonder if when the next SARS happens if some local conversations will go global, health researchers will mine them for intelligence, practitioners will share practices and perhaps a new voice will emerge that can take very complex health issues and help us relate to them. Or maybe we just need to care more.

io

The one piece of schwag I picked up was a Logitech io Digital Pen. The pen uses an optical sensor to capture what you are writing, you plunk it in a USB connector and it uploads what you write or draw. Here's a handscribed blog entry. The demo provided by Accenture Labs didn't use character recognition to convert it to text.

The form factor is a little thick, but its biggest drawback is you have to use a special paper with 0.3mm spaced dots. Of course, they sell this paper, Post-IT notes, etc. with this proprietary pattern. Should be said that another iteration of pen computing is worthwhile as its an interface some prefer. But the main application will probably be forms in work place settings.

December 10, 2003

Red Herring: (Anti) Social Software

So Im blogging my own panel. Sitting alongside me is Reid Hoffman from LinkedIn, Allen Morgan from the Mayfield Fund (investors in Tribe.net) and Ben Smith from Spoke. Mark Mowrey from the Red Herring is moderating.

Mark: Called it anti-social to get people to attend and to get us to speak, but he doesnt think of it as anti-social

Ben: social networking, relevant search and web services technologies leveraged to create solutions for enterprise.

Reid: professional networking for individuals, each individual has the value of the network

Allen: hear wearing the hat of a VC and as an investor in Tribe.net. Tribe is building a tried and true business while using a new technology. Craig's list meets Yahoo Groups.

Me: Enterprise Social Software that adapts lightweight web-native tools for enterprise use in collaboration, communication and publishing.

I won't do the notes justice while on the panel, see Mitch's notes

Red Herring: Irwin Jacobs

Rambling paraphrase from a presentation by the CEO of Qualcomm...

Introduced as being as powerful as Microsoft is for software within the mobile. IMT-200 standard supporting 3G -- 2Mbps in fixed or in-building environments, 384k in urban, 144k in wide area mobile, variable data rates in large geographic area systems. Over 62M reported 3G CDMA subsribers. 3G WCDMA at 1.75 million subs, mostly Do-Co-Mo and growing over the next year. Vertical apps. Instant Multi-Media (IMM) combining best of video conferenceing and group services. Video telephony with QoS. Gaming with two and three dimensional displays. Strange BREW.

Didn't capture this session well, see Mitch's notes.

Red Herring: Lawrence Calcano

Rambling paraphrase of a presentation by the co-head of technology group of Goldman Sachs...

The average person swallows 12 spiders while sleeping. Who thought to measure that and why? Couldn't find out from Snapple, who had it on their bottle-cap, because they outsource it.

Current climate in the equity market is Happy Holidays -- the markets are open. 2003 stock rally, NASDAQ up 52%. Positive indicators: CEO Confidence Index, GDP, IT Spending and International Revovery. Now large cap valuations for tech are under discussion, but more legs to go in the rally.

IPO Market is open. 14% of equity issuence is IPOs, 16% is tech. Issue is maturity of the company. Median $80m rev. Takes: proven business model, profitability, barriers to entry, products supplying immeadiate returns, differentated product, expanding gross and operating margins, strategy for growth and monetization and management team (sound's like a VCs laundry list except for margins). High tech companies are also actively using the high yield market.

New research rules. The research settlement mandates the seperation of banking and research (can't even send an email between them). Research decides what to cover and can't co-participate in pitches. Research will be less critical for entreprenuers in selecting banks than previously.

M&A volume of total equity is below average (4% compared to the average 8%)Median deal is $113m with a 32% premium, 1.6x revenue multiple of past 12 months, market reacting positively with 2.4% increase in stock price within 60 days. Volatility decreased lately -- 13 days per quarter with >2% change -- which helps get M&A done. Consolidation in tech expected.

Some Internet companies are emerging with good metrics ($100m rev, $30-40m EBITDA) despite the negativity associated with the sector. More IPOs in 2004, say 50.

Red Herring: Guy Gecht

Rambling paraphrase of a chat with the CEO of EFI...

Electronics for Imaging is a core printing business. Printing is a $320b US indusrry (3% of GDP), the fourth largest behind petro, auto, semi-conductors, ahead of pharma. 1.86 trillion pages in 2006. Campagne costs $147 per liter, Chanel No. 5 $1,470, printer ink is $3,497. A gas tank of printer ink is $175,000. Internet increases local printing which has increased volume, paper is on and offramp. For customers, helps cut printing cost while improving productivity and cut outsourced printing cost.

Security, wireless and information lifecycles are the hot areas. On security, paper leaves a trail, secure print manager holds print jobs until an authorized employee is able to get it from the printer. 66% of workforce will be mobile by 2006, 42 million people will be using mobile devices by 2006.

EFI will build its brand over time, but the emphasis hasn't been at the corporate identity level. Firey, the product brand of their number one product is more well known than EFI.

$750m in cash reserves, looking towards mid and small acquisitions, but generating cash through business more than from acquired companies.

UPDATE: The SCO helps EFI's business by delivering its source code to IBM on 1 million sheets of paper

Red Herring: Gary Bloom

Rambling paraphrase of a talk and chat by the CEO of Veritas....

World's largest storage company. $1.5B Rev, 6k employees, 41% GAGR. Moved into the big leagues of competing with large players and moving faster than ever. Difficult macro-economic conditions, increased scrutiny on OpEx. The urst wasn't a spending problem, it was a budget problem -- if IT leaders spent their budgets they wouldn't have had a downturn (.coms an exception). Managing through this by investing during the downturn, expanded product, platform and geographically. Now seeing benefits, market cap at $16.4B -- fourth largest software company in the world.

Customers are trying to release usable dollars, shifting their budgets from operations (infrastructure) to development (of apps that provide value). From 1999-2003: decreased headcount by 47% and unit cost for backup reduced by 30% in a customer case study.

Disaster recovery now needs to cover diverse scenarios post 9/11, blackouts exceeding backup systems, earthquakes in Japan disrupting power. Not just Sarbanes-Oxley: legal risks, regulatory compliance and corporate governance require auditable processes for retention, retrival and reporting. Thinks CIOs will have to certify their operations in the same way CEO/CFO signoff of financial processes is required today.

Compliance, hetero-IT and budget constraints needs availability, performance and automation at the app, server and storage levels. Thinks industry consolidation in tech is accelerating and will take a long time to run its course. Acquisitions can be a benefit or a detriment depending upon integration. Shift to Utility Computing driving availability, performance and a shared infrastructure. Acquisition will not get them into a hardware agenda (e.g. with EMC).

New categories or adding features to existing solutions are acquisition targets. Company should always be in transition (e.g. sales model). Look at strategy through the eye of the CIO. CIOs are trying to develop their own utilities.

Looking to move up the chain by focusing on growth. Not looking to knock Microsoft off, but incrementally grow by building capacity and allowing macro-trends help drive advances. Top 3 will have to have a failure because fo their size.

Had a CFO he worked with that had misrepresented their background (faking a Stanford MBA) and dealt with it. Other companies learned from the process and now background checks are common.

Open source and Linux is an opportunity. Heterogeneous, needs management. Cost of software has overtaken the cost of hardware -- and the biggest category of spending is labor. As long as you decrease this cost you have a proposition. It took unix years to proliferate and it will take linux to do the same. Sees open source as just another variety.

December 09, 2003

Conference Scene

What people are saying on the stage is often less than half the story of a conference. So far, its a good content-oriented event, but very one-way. After the first session, they seemed to forget that the audience might have a question. Its great that almost every session is of the fire-side chat variety instead of presentations and the moderators are asking good questions, its just a limited dynamic. Especially because this audience full of very interesting people, mostly executives and a couple of vcs, that have as much to say and do as the folks on the stage.

What I enjoyed the most about the first day was some of the insights shared by successful execs on key learnings. The only newsish thing that came out was Versign's aggressive positioning against the very basis of its business. That and I saw a sea-otter.

Im off to have a hallway conversation. Oh, and there is something about cocktails and jellyfish that must be investigated.

Red Herring: Robert Thomas

Rambling paraphrase from a chat with the CEO of Netscreen...moderated by the Chairman of their main competitor...

Neoteris wanted to be acquired by us. You can compete against a company that is more profitable (Checkpoint 65% net margin vs. their 26%), in fact its a reason to compete and invest in R&D.

Consolidation in security needs to happen for customers. If they focus on security the can compete against network guys like Cisco. We loose to Cisco when the buyer doesn't have firm requirements or doesn't do a direct comparison. SMB buys simplicity and ease of use, large enterprises buy best of breed.

Went public in a drought of IPOs and combined with good fundamentals was well received. Pick a competitor, measure progress against them, provides a great rallying point for a company. Biggest danger we face is complacency and arrogance. There are lots of great small competitors that may place a threat. Have a great deal of respect for Fortinet. Very paranoid about competition.

They fine salespeople $100 if they look at the stock price during the day.

Learned while running intercontinental business for Sun: incredible no-lose attitude, never account lost, maybe delayed, but stick at it. Be agressive, never say die. Best practices that came from a large company were implemented early (e.g. don't change your ERP system at the end of the year, which almost took Sun down, instead build infrastructure ahead of the curve).

Went for the high-end, abandoned SMBs, changed engineering effort and salesforce to go after high-end hosting with their 1Gig firewall...the major turning point for the company Got them into large enterprise and service providers and taught them about reliability.

Red Herring: Stratton Sclavos

Rambling paraphrase from a chat with the CEO of Versign...

Security as a growth market. Innovation isn't invention, he thinks its integration. Microsoft, Verisign and all the telecom carriers are trying to prepare the country so it can thwart a digital 9/11 event. Need early detection systems. If Microsoft is made more secure, that just means that Linux or something else will be the next target.

(just then the PC that was projecting a title slide in the background crashed and rebooted)

The Internet is inherently insecure, we will create layered approaches and what remains is a risk model.

How can you write off $14b and still be on the job? The NSI acquisition was done all for stock when the price was high to acquire an asset that generates 65% of their revenue. They sold the retail storefront, but kept the rest, the core of complex infrastructure. They run 10 billion network interactions a day. Certificates, directory services, telecom business (25% operating margins) all being put on this infrastructure. In the last 90-days, four ILECs issued RFPs for VoIP -- carrier world is about the change. They are looking to serve this market.

On ICANN: I am the only CEO in the history of technology to have gone to the government and asked them to regulate it. Well meaning charter, poorly executed. Now stability and security is the most important thing about the network. The UN voted down the ITU initative, a victory for the private sector. But this isn't my father's Internet...you have to be kidding me that we have volunteers running portions of the network. Commerce, not consensus is the way to drive the network.

On Verizon site-finder: There are 400 million plus users, majority like it, 200 people are against it and got the press against it. Was a way to monetize DNS lookups.

We have to move the complexity back into the center of the network and remove it from the edge.

My ears are starting to hurt. This is a fundamental mischaracterization of how the Internet actually works and has been able to scale. Mitch has better notes on this session

Red Herring: Venture Panel

Nothing new here. Investment picking up, venture industry contraction expected.

Mark Jensen of Deloitte & Touche had some good advice for entreprenuers:
* You will be amazed how much progress you can make with no capital and how little you can make with capital (the message is hold off on taking capital as long as you can)
* You know who is going to invest in you...its someone close in your network or you have a working relationship with

Red Herring: Speedera

Speedera provides an overlay network for Internet delivery as a utility service. What they call "edge hosting" but they cannibalizing regular web hosting. They are growing like gangbusters and have 70% margins.

CDN industry will be dead in 3 years, so they are moving caching ($235m) to streaming/whole site delivery ($500m) to distributed on-dpemand applications ($5b market). Broadband is driving their market (Nielsen projection of 60% penetration by 2005). Profitable, cash-flow positive, about $50m in Rev, seeking $100m in Rev as their next milestone within the next two years. Differs from Akamai by being profitable, debt free, 1/4-1/2 the price with better management and reporting tools.

Will be the first company to do inter-planetary streaming (from Mars), coool.

Red Herring: Lunch Panel

Philippe Courtot, Qualsys
Zvi Alon, Net Manage
Tim Koogle, Yahoo

Came in late for this session...

Tim Koogle: The people who take the biggest risks either have nothing to loose and a lot to achieve. Some have no fear of failure and do what they do because someone said they cannot.

Biggest failure was when bootstrapping and he couldn't make payroll, a hard experience. Got out of it the next day by telling the employees and they agreed to march on. Learned about undercapitalizing a company, passion, loyalty and leadership.

Philippe: Having money doesn't really change how he does business. If you are going to be involved you cannot do so half-way. Im lucky my work and my hobby are the same.

Tim: Still trying to learn how to give myself a license to take time off.

Zvi: At the end of the day you have to do something you are committed to.

Alex's summary:
1) you have to be committed
2) don't try to change the system, work within it
3) focus on solutions, not problems
4) always have a backup strategy (options)
5) having money isn't the end goal
6) working hard is part of the DNA of being an entrepreneur
7) too much capital makes bad habits, too little capital is risky
8) you have to believe tomorrow will be a better day

Red Herring: Mitchell Kertzman

Rambling paraphrase of a talk with Mitch Kertzman of Hummer Winblad...

Decided not to run for governor to perserve a shred of self respect. Politics has become a war of raising money and spending it on negative ads, something you don't want your kids to hear about and he spent the better part of the 60s filling his closet full of skeletons.

Joined HumWin because of the focus on software and his experience working with them (they funded Powersoft). Agrees that there will be a shakeout and consolidation within the venture industry. Generic problem of having too much money, but over the past few years a good discipline returned. Two kinds of firms, those that have been around (have discipline, and returned to it quicker) and those that bubbled up during the boom -- which are looking at their funds as a business, putting money to work to be able to raise more. Entreprenuers are smart about this and are concerned about long-term relationships.

For a few years the venture business has been in shock and virtually all of them have been saddled with a large number of troubled portfolio companies. Now the troubled portfolio has been largely worked out, less in triage and more in building mode. So they have more time to think through investments.

In Social Networking we are seeing a micro-bubble, have not pulled the trigger on an investment in this space because they haven't seen the revenue model. But that said, using Search as an example, just because you can't see a revenue model today doesnt mean that their won't be one, but that doesn't mean there will be one.

Companies he knows that are doing business with Google all report they are easy to deal with, upfront and not arrogant. Sergey and Larry have resisted the demand for prognostication. A good attitude that will carry them far. Eric is great, good combination. Market caps are set by buyers, not sellers, to its potential valuation is not such an issue. A large market cap is actually a downside, hard to grow into, but they will be less distracted by this than most.

There are a lot of interesting new companies out there, from his new seat in venture capital. Real companies with real technologies solving real problems in significant markets. This year there is a year-end rush in venture capital, driven by companies. Because they are at the earilest of stage, their activity is not driven by potential exits, but the opening of the IPO market has some effect.

Further you get from the Bay Area the better the deal has to be, but they would go anywhere in the world for a great company. Now software companies have to go global early because when something new happens, it leaks globally. More are starting up with outsourcing because they are part of the outsourcing communities, not as a calculated cost reduction strategy.

Today if you are a public company, the best thing you can do is to say nothing to the market. The same thing will happen with increased transparency in the private market. The result will be less disclosure.

Has a bias for venture capitalists with operational experience, but it depends upon the individual (e.g. John Hummer). People who have made mistakes are valuable, but its not universal.

The shrinking of the vc industry needs to be driven by limited partners. In a low-yield environment, however, venture as an asset class is even more attractive -- which makes him less optimistic that this change will happen. But discipline is increasing and the Darwinian nature takes its course.

Red Herring: Sachio Semmoto

Rambling paraphrase of a conversation with the CEO of eAccess...

He previously founded KDDI (2nd largest telecom in Japan behind NTT and ahead of Japan Telecom, last time I checked), now has created a $1b broadband company which had an IPO on October 3rd that is giving hope to Japan's troubled markets.

Japan is 17.7% of Glkobal 46 million ADSL Market, world's largest, about 10m -- growth almost all over the past year -- 2m on 3/2002 to 10m in 9/2003. CATV is only 18% of market total. FTTH small but growing. Why? Because its the fastest and cheapest in the world: Max speed is 40Mbps at 2,800 yen ($26 flat monthly charge); compared to 0.5Mbps at 4,100 yen in the US. eAccess 13-14% market share, but is the first profitable broadband company.

Deregulation over 2000-1 is a major cause: nationwide colo, colo cost reduction, NTT provisioning improvement, unbundling of fiber, line sharing and unbundling of modems. Value added services: VoIP, Wireless LAN, Content. Wholesale provider that distributes to local ISPs, including AOL. 100% revenue growth.

Not worried about NTT, but Softbank/Yahoo is a real threat but has incurred great losses ($1b a year for the past three years) that shouldn't be sustainable. Expense may have to do with marketing, perhaps $200/subscriber in customer acquisition by giving away modems.

When starting the second company, his wife said he shouldn't loose his status or position. But he saw the broadband revolution and a slow moving incumbent. Wants to be the number one broadband data company, content is a part of this puzzle that he isn't ready to talk about.

Red Herring: Guerrino De Luca

Rambling paraphrase of a conversation with the CEO of Logitech...

Apple will more than survive, it will set the pace for the industry. While there, he learned the cost of being arrogant and the enormous importance of products. Consumers don't care about technology, they care about products. Key ingredient of what we do is the context of a consumer, not technology. Brand is an accessory for the product.

20% of business in Asia, China is their fastest growing market. We are profiling the Chinese, our cost-structure is Chinese, but we must innovate (seems to be a common theme of the speakers...we must do X & Y tough things, while innovating, but the innovation isn't the main thrust of what's presented or discussed).

We are highly profitable company when compared to consumer electronics, but not compared to software (e.g. Microsoft).

Connecting with platforms such as PlayStation, gaming is going back to its roots, always been a social activity, personal gaming made it isolated, online brings it back. Gaming demographics are changing: girls and families being targeted by Sony. Gaming is consolidating and being dominated by big players.

Software is one angle for differentiation. Success is the ability to understand who you are and what you do. More than half of our products sold are not mice, 50m branded products. We are the last inch. Understanding our base allows us to invent and re-invent. Entering the software market isn't in line with this approach, never thought of entering it. $2b market cap, 18-20x earnings, expects to be in the average of market multiples and for growth to come from consumers. Never tried to buy Microsoft's mouse business. The presence of two strong brands has grown the category. A prudent acquire, most acquisitions don't work, two recent ones did, prefers a medium size company with mutual value exchange, has a couple in mind as prospects.

Red Herring : Tom Weisel

Tom Weisel is working the Powerpoint. Tremendous leverage in earnings (18% growth proj. for 2004). Margins in tech are 1/3 of what they were at the peak. IT spending projected to be 7% growth. Market is worried about interest rates and if they hiked too high there would be a severe correction, but won't happen until after the election. China is the only other engine of growth in the global economy, is undergoing an industrial revolution of their own, provides growth for industrials. Small and Mid cap relatively underpriced. Since earnings have increased across the board, the market isn't as expensive as many people say. 65% of NASDAQ doesn't have analyst coverage, 25-40% decrease in analyst coverage as investment banking contracted.

50 IPOs this year (5 a month, lowest since the 70s). Venture capital overhang in funds must be distributed, their investment will continue. Explosion of IPOs in 2004 (2-300 compared to 4-500 in the 90s). Not tech or internet-centric. Within tech, shifting from defense last year to semiconductor and software. Median revenue of issuing company less than last year but greater than 2001, but earnings are up. PIPES are an active market (1,200 this year), half have been in the health care sector.

Regulatory reforms haven't changed much except the ability for analysts and bankers to communicate and decreased communication between company and analyst.

Shank TWP from 800 to 500 people. Big change over his career for the industry is increased institutionalization of pooled capital, but services for emerging companies hasn't changed. Dozen small research banks in SF filling the void of the four horsemen, but won't look to acquire.

Applying Moneyball into the cycling world (with their sponsorship of the USPS team). Plans on never retiring.

Red Herring: Sanjay Kumar

Rambling paraphrase of the CEO of Computer Associates...

Macro environment is getting better, but not bullish on tech recovery -- its a buyer's market. How to cope with the invigorated buyer? Security is a macro-opportunity, customer thinking/regulation. Wireless as a problem for enterprises. Micropayments and digital are hot! (snicker).

High-end buyers have a GE syndrome, starting conversations with 10% cut before determining what should be ordered. Can't count on renewals, SMBs are an opportunity but volume is not that big (resellers important). Outsource for the right reason, not organizational stimulus or giving away responsibility for political reasons. Business Process Outsourcing as significant implications and is bigger than what people think. Buying a small hot company exposing it to their channel and growing is more likely than large acquisition. Interest in Linux and Security.

Firm believer that the industry will move to a subscription model for software and utility computing. Longest contract is 3 years (cost-certainty model) and they book revenue monthly today. On demand is analogous to client-server, a similar philosophical shift to match supply and demand more efficiently. Month-to-month as a option is preferred for new products or new customers.

Subscription model was an agent of organizational change to not go elephant hunting, continually serve and give people what they want. Commitment by management to go through short-term profit hit and required sales compensation plan (which cut the new product sales cycle in-half, renewals don't change but you get better money and give away less).

Industry consolidation due. Some innovation is coming from large companies. Good time to be an entrepreneur, a different kind, blocking and tackling. Bad time to be a mid-sized company.

Software is another utility and important to productivity. For $100 we sold last year we assume we will sell at $95 and will aggressively undercut competition. As a business mode subscriptions bring 13-15% more revenue than a long-term license. Have to innovate and invest in R&D, which means the back end of the business has to be unbelievably efficient.

Innovation at an all-time high to create and enable the utility model, but then operations must be efficient. We don't give away products, especially new ones, but do compete aggressively on the installed base. More of us are willing to bundle partner products. There has to be a huge amount of innovation to make utility work, but it still requires aggressive business management.

(BTW, I won't keep up this transcription pace, just had too much coffee while driving in this morning. Mitch is here, but I think that's it from blogspace.)

Red Herring: Alex Serge Vieux

Rambling paraphrase from the introduction by the Red Herring CEO...

Red Herring was never in bankruptcy, bought from Broadview under bid. The industry cannot continue without having a large media group at its service, focusing on business and technology by being rigorous and global. Was an investor and advisor to Tony Perkins. Innovation and finance goes beyond startups to mid-caps and more. If there was one mistake that was made, it was not expanding to larger companies and globally, but you become a cottage magazine for a cottage industry if you just cover Sand Hill Road. Charging for archive? Humility is a virtue.

Trying to build an event around content, in this case around:

Red Herring Top 10 Trends for 2004

  • Advertising: Ad infinitum -- Madison avenue is waking up to limitless opportunities in digital media
  • Communications: Making the triple play -- The battle for voice/video/data subscribers gets nasty
  • Health: Fat chance -- Obesity becomes a big problem and a big business
  • Computing: On the cheap -- Low-cost everything is the order of the day
  • Regions: China syndrome -- Multinationals will have to be quick learners to stake a claim to China's high-tech bonanza
  • Culture: DIG, Digital Immeadiate Gratification -- In the move to all things digital, consumer electrionics are changing the way we live -- and think
  • Intellectual Property: Copywronged -- Hollywood fends for its meal ticket as consumer appetite for content grows
  • Venture Capital: Back to the bootstrap -- Angel investors are back, funding the small startups that will be tomorrow's giants
  • Security: Fear Factor -- In a dangerously unstable world, security gets smarter and more tightly integrated into the fabric of networks and machines
  • Management: Outsourcing backlash -- Once popular with cost-conscious IT execs, outsourcing has been shown to be full of security holes

Obviously, this is a pretty conservative set of trends and only DIG is controversial. We'll see how these trends are woven into the sessions.

December 08, 2003

Red Herring Conference

Attending the Red Herring Fall Conference Tuesday and Wednesday in Monterey. Let me know if you will be there. Will blog a little about it.

December 04, 2003

Editor's Choice

Socialtext Workspace Receives
PC Magazine's Editor's Choice Award:


Socialtext Workspace


Socialtext Workspace wasn't released until near the end of our evaluation period, but it already had over 100 beta users. As the price suggests, this is a serious collaboration service for business. It offers a free 30-day trial, as well as a public workspace. The service runs on Socialtext's own Kwiki implementation of the wiki standard. Each Socialtext account gets 1GB of storage per member and has no bandwidth limit. Socialtext's practical editor uses structured text, with a handy pop-up syntax window. New pages are created using brackets rather than classic WikiWords. It's easy to attach files, though slightly less easy to put an in-line image on a page. The resulting wiki is crisp and professional-looking.

One interesting twist: You can assign one or more categories to each page and view all the pages in a category as a blog. Members can e-mail new pages to the wiki, optionally specifying categories. By the time you read this, each Socialtext account should able to launch as many different wikis as needed and invite the appropriate team members. Bear in mind that each member adds to the monthly bill.

Thanks for the encouragement Joi "Pop" Ito and Clay!

Its a great thing to gain recognition for all the hard work our team as put into making a great product. PC Mag went through a rigorous feature-by-feature comparison of our BETA product, which V1.0 simply blows away (especially with the ability to create and manage multiple spaces -- the easiest group forming tool available). Being compared on a feature basis doesn't really do us justice as we pride ourselves on the absence of features, following the wiki ethic of doing the simplest thing that could possibly work. Its also difficult to compare us to wikis alone because Workspaces are a blend of the best of Enterprise Social Software.

December 03, 2003

Existential Strategy

James Oglivy, cofounder of GBN, tells us in the winter 2003 issue of Strategy+Business What Strategists Can Learn from Sartre.

He begins by imparting how he helped create the SRI VALS system for segmenting markets by lifestyle types. At the time this stereotypographyl was quite an innovation in forecasting, but then it broke down as consumers lifestyles became more dynamic. He attributes this to an existential awakening in which personal freedom was realized. The philosophy of Existentialism begins with personal choice to effect the future, in constrast to Essentialist theory that the future is predetermined fate.

Unfortunately, he doesn't explore how this trend shapes marketing pratices and instead shifts to some wonderful insights on strategy. Existentialism provides a framework for how market segmentation fails, a clueful insight. But the nature of people and firms making decisions to shape their future only implys dynamism of markets -- because the focus of analysis is on nodes rather than connections and what they transmit. When viewing the environment from the perspective of a node there is an infinite decision tree which choices governed by probabilities. It does not provide a systemic view of how localized decisions relate to result in emergent patterns or how these patterns shift.

But what Existentialism does give us is a perspective of time in context and the possibility of shaping it. There are moments of relative stability and of punctuated equilibrium. Booms and busts. Recongizing that punctuations in time create moments of urgency means we should prepare for them, his argument for undertaking scenario planning when you have time for it.

Because we have the opportunity to create our own lives and our own conscious sense of responsibility, he suggests the role of managers should not be to dictate order, but instead define morality and its consequences for the organization. This is similar to the argument of In Search of Excellence: Lessons from Americas Best-Run Companies that the job of the manager is meaning making. This challenge to make meaning in an otherwise meaningless environment is itself made to order for