Digital Lockdown

Yesterday I wrote about Malcolm Gladwell's The Sure Thing his most recent New Yorker piece. While, writing about it, I was surprised to find that I could not access the article on the New Yorker website without first registering for an account, using my hard copy subscription number. What this means is that the New Yorker content is locked away behind a pay wall, unaccessible to all but those who pay for a subscription.

While I have written previously, supporting Rupert Murdoch's attempts and plans to better monetize online content, I found the New Yorker pay wall amazingly inconvenient. In light of last week's announcement that the NY Times will charge non-subscribers for visiting the site frequently, I started to wrestle with this content question again.

What I have concluded is that putting content completely behind a pay wall is counter productive. It will stop bloggers, social influencers and everyday internet users from linking to you and generating traffic. However, I am totally sensitive to the need to better monetize content. Which is why I think the NY Times plan (which follows the model of the Financial Times) is actually quite a good one. People can link to the article and those browsing the web will (usually) be able to view the content. But frequent viewers of your content will have to pay. As I have said in previous posts from the NY Times to TechCrunch to the Wall Street Journal, I am happy to pay a subscription price for quality journalism because I consume so much of it.

Fred Wilson has got a more detailed analysis of this problem here that is definitely worth a read.

Not a Sure Thing

Upon my return to the U.S. I had tons of reading to catch up with. There were two copies of The Economist, BusinessWeek and a new subscription to Foreign Policy. But, at my Dad's recommendation, the first article I read was The Sure Thing, by one of my favorite author's Malcolm Gladwell. You can read the whole article here (if you have a New Yorker subscription - more on this later).

For those of you without New Yorker subscriptions, the article goes through a list of wildly successful entrepreneurs - from Ted Turner to Sam Walton to John Paulson - and argues that none of them are risk takers. Instead Gladwell points out that like most successful entrepreneurs this list of billionaires got wealthy precisely because they are risk averse. Gladwell's profiles the successful entrepreneur as constantly "hedging his bets and minimizing the risk of failure." These "predators," as Gladwell calls them, use proprietary information and their unique position in the market as leverage to close transactions that turn into billions in profits.

Gladwell's analysis, as usual, is compelling, insightful and a bit lacking. He completely ignores the "rags to riches" entrepreneur of American folklore, pointing out that all of the men he profiles either started with large family inheritances (Turner), married into money (Walton) or had enough money left over from their previous career success (Paulson). The article implies that it is impossible for those without capital to succeed as entrepreneurs.

For an entrepreneur without capital (like me) this is incredibly disheartening:

"New-business success is clearly correlated with the size of initial capitalization. But failed entrepreneurs tend to be wildly undercapitalized...Writing a business plan is a must; failed entrepreneurs rarely take that step. Taking over an existing business is always the best bet; failed entrepreneurs prefer to start from scratch."

Reading this my stomach churned. We started TaskUs with $20,000 that Jaspar and I had saved from throwing all age nightclubs in college. Having written an extensive business plan for a previous business that never got off the ground, we decided there was simply no point in putting pen to paper to write down ideas that were sure to change as we iterated through the various phases of the business's existence. We started the business from scratch - an idea that came to me while working at the investment bank, a name that came to me while lying on my floor and a dream that drove us to work tirelessly toward success.

Returning from the Philippines I felt closer to success than ever. But reading Gladwell has never left me feeling so depressed.

**** > *****

In the Philippines I stayed at two hotels - Traders Makati and Shangri La Cebu. These hotels are part of the same company, Traders being the cost-conscious little brother of the luxurious Shangri La brand. As such, Traders is a four start hotel and Shangri La is very much a five star experience. On this trip I was fortunate enough to have a client pay for my stay. Free from the worries of the price of a bottle of water or the breakfast buffet bill one would assume the Shangri La would provide the best experience. But on this trip I was shocked to realize that I prefer four start hotels to five star hotels.

The reason, I realize now, is simple - the atmosphere. The bottom line is at five star hotels everyone is uptight. The greetings seem forced and scripted. The guests all appear to be impressing and one uping one another. And no one smiles! At Traders everyone knows my name. I've made friends with the staff, from Karla and Arjie and the front desk to my new favorite massage therapist Anne. The atmosphere is casual and relaxed, and people aren't aghast when I go to dinner in my pajamas. It feels like home.

I think that this philosophy can be applied to a lot of things in life. From consumer products to women, it is often wiser and more rewarding to go for good than "great".

The Biggest PR Stunt of All Time?

Being in Asia during the start of the Google/China war has been an interesting experience.

I have been reading local publications to keep up with the story, and am shocked by the difference in coverage I see on the western blogosphere. For one thing the idea that China itself was behind a large scale hack of dissident Gmail accounts has been played down here, where it has become widely accepted as a practical certainity in the West.

But what really fascinates me in the coverage of this conflict is the exploration of Google's motivations. Western bloggers from Robert Scoble to Fred Wilson have hailed Google's move as an impressive example of the company's moral philosophy. In response TechCrunch bloggers Paul Carr and Sarah Lacy have argued that Google's decision to leave China was motivated by pragmatism and self interest, not the companies "Don't be evil" motto.

Carr and Lacy are right. Google isn't doing this because of its companies (or founders) moral philosophies. In fact Google's threat to pull out of China may just be the greatest PR stunt of all time.

Here are the facts - Google's search market share in China is small. The market is dominated by Baidu which gets over 77% of the search volume in mainland China. In China Google is more like Yahoo or Bing than Google. While, Google's market share was increasing, the Chinese market made up a sliver of the companies worldwide profitability. In fact, the company earns less than one percent of it's profits from its Chinese operations. In recognition of all this, Google's leader in China - Kai-Fu Lee - left the company last September, telling Tech Crunch's Sarah Lacy that "one reason he left Google was that it was clear the company was never going to substantially increase its market share or beat Baidu." So the prospects for Google in China were bleak.

Then in December the Chinese government hacked Gmail. They straight up broke into the Gmail boxes of scores of Chinese dissidents. At this point the Google guys made a rational calculus between two clear options:

Option 1: Stay in China - a relatively tiny part of the global search giants success, a place where its prospects for long term success were bleak - and face the wrath of the globe when the story broke that the Chinese government could hack into anyone's Gmail and that there was nothing Google could do about it.

or

Option 2: Ditch china in a triumphant stand against censorship and oppression!

No less than a month ago the same bloggers who are praising Google today were questioning the power of its monopoly. By leaving China and spinning it as a huge sacrifice of future power and profit, Google is winning back the support of the masses who had begun to doubt its benevolence. Perhaps Google really believes in a world without evil.

In reality Google has made a shrewd calculation that leaving China provides a net benefit for the reputation (and thus long term power and influence) of the company in all other (far more profitable) parts of the world.

Wrestling with Fortune

"Some day we will be powerful enough to come and stay at a resort like this," I said to Tom as we lay out on the beach in Cebu.

"We're here right now," Tom laughed.

Over the past two weeks I have been spoiled by the impeccable service that is unique to Asia. Staying at Traders Hotel in Makati and now the Shangri La in Macatan Cebu are luxuries reserved for the wealthy and powerful of the world, a group that I have long desired to be a part of. And yet now, sitting on the gorgeous white sand beach of Cebu, eating the finest food at every meal and having in room massage service just a phone call away, it all feels a bit surreal. I haven't accepted that this is what the hard work of the past two years has earned me, that in building a BPO operation in Manila and social media marketing company in Santa Monica, I may have snuck into the top three percent that control the globe. Whether this is the case or not, I can't help the guilt I feel being where I am right now.

On the other side of the world, in Haiti 100,000 people have died this week and over a million more will go to sleep tonight without shelter, food or water. The food I routinely leave heaped up on my plate, the free water bottles I demand and consume without a thought could literally save the lives of an entire Haitian family that will die tonight from dehydration. Texting a five or ten dollar donation seems trivial to me, an attempt by those in the developed world to feel like they have done their part...

Mind of an Entrepreneur 006

In the future there will no longer be Point of Sales systems at supermarkets or convenience stores. Self identifying technology (most likely in your cellphone) will allow you to walk into a market fill up you basket and then walk out. As you leave you will pass through sensors that will identify each of the items in your basket by the RFID chips embedded in the packaging and charge the credit card stored in your cellphone for the items.

Besides solving the problem shoplifting and ending long lines at the supermarket this trend could potentially turn the retailing on its head. Currently retailers by from wholesalers, marking the prices of goods up 10 to 250 percent. The markup is the gross margin. Retailers also make money by charging brands fees for prime space - generally about eye level - on their shelves. In the case of gas stations and convenience stores many brands will go as far as to come in an stock there own products, ensuring that they are always stocked in the right place and done so neatly. In this model the gas station or convenience store really only provides the brand with two things - physical real estate that reaches customers and a staff and POS that rings up transactions.

So what happens when all that matters is the proximity to customers? Undoubtedly most stores will be located in the same locations. But the model becomes much more like that of a vending machine than a super market. In this model it is possible that brands will simply pay the owner of the location to rent shelf space. The owner will earn this rent and nothing more. Gone are the retail profit margins. All of this money will be earned directly by the brand or distributor themselves. This will likely lead to more unified pricing for products across all vendors. Although the cost differential to rent shelves based on the expense of the underlying real estate will have of occasionally be accounted for.

Where's the business opportunity in this? I'm not sure. The only thing that is (almost) certain in this whole shift is that some one is going to make millions by providing the hardware and software to power POS-less, cash-less, card-less transactions.

Great Customer Service

This post was written a week and a half ago on my way back from New York.

Today I had two amazing experiences with

customer service. First as I was hurrying to pack my bags I got a call from American Airlines to let me know that my flight was an hour and a half delayed. I've been flying American pretty religiously since I was seven years old and this was the first time that this has ever happened. The difference in time afforded me an hour to meditate and a calm commute, both of which I am truly thankful for. I hope they do this again in the future.

Next I read online that to get to Newark by train I had two options - Amtrak and New Jersey transit. The post I read online mistakenly said that Amtrak would take 20 minutes, where NJT took 90 minutes. I didn't have 90 minutes to spare so I bought an absurdly expensive ticket on Amtrak. Before I boarded the train I asked an Amtrak ticket agent if the price was correct and he openly asked, "you sure you want to travel with us. New Jersey transit is less than half the price."

"Yeah but it takes ninety minutes," I said.

"Actually it takes about thirty."

"So why would anyone ever travel with you?"

"For this trip, I don't know," he honestly replied.

The best businesses admit when someone else is superior and refer there customers elsewhere. In so doing they earn their customers trust for life. As an overzealous startup TaskUs tried doing all sorts of things. We even took on tasks that required a considerable amount of remedial work to be done in our U.S. offices. In almost every case we ended up loosing money of the work and in every case we pissed our customers off. I learned a valuable lesson from this - learn what you are good at fast, then get great at it while referring everything else to the competition.

Four Best Things About New York City

1) Meeting people - Despite its reputation, I've found New York to be one of the most open and friendly environments in the world. Be it on the subway, on the street or in an elevator you are bound to strike up conversation with strangers.

2) The Restaurants - Nowhere else that I have ever visited has such an eclectic mix of excellent food that is always available. From dim sum in Queens to dinners in the East Village to 3 Star French fare by Ducaisse, Troundle and Boulud (my personal favorite) New York is foodie paradise.

3) Central Park - Words can't really do justice to this one. Central Park is an urban gem. Jogging the perimeter or walking around the reservoir are amongst the favorite experiences of my life.

4) Public Transit - While technically lacking, the New York subway is amazingly pragmatic, reliable and efficient. It can take you anywhere you want to go in Manhattan in 30 minutes or less 24/7, with almost no exceptions.

9 Seconds in Manilla

New York, New Years

As I write this I am flying back from spending New Years in New York. I'll be on the ground in LA for less than 11 hours then it's off to Manilla by way of Tokyo.

I love to travel and it looks like I am going to get to do more of it this year than ever before. There is something magical about flying. Part of this is the shock of hoping between cities and cultures in hours of time. This morning I woke up in New York, I'll go to sleep in LA and this time tomorrow night I'll be in Tokyo. Blows my mind!

The other part is possibility. I have not yet been blessed with satisfaction in the status quo. I'm constantly striving for better in both my personal and professional life (...this is not always constructive). Traveling brakes the routine, suddenly anything possible and I find myself more hopeful than usual.

No sooner had I boarded my flight from LAX to DFW than I met an amazing girl. We chatted the entire way to Dallas and exchanged info, texting back and forth through the New Year. The next morning (post DFW to LGA) I got up and went to the first of a series of yoga workshops with Vinnie, my guru from LA. After class I ran into another awesome girl who I had only just gotten to know when she left Santa Monica to get her MBA in New York eight months ago.

I spent New Years at a loft in Brooklyn. It was a fun party, in which I haplessly attempted to negotiate some semblance of a New Years kiss. Instead the highlight of the night came when I wandered into a Puerto Rican party a few floors down and used my broken Spanish to endear myself to the host family. Within five minutes I was drinking Hennasy and Cranberry juice and dancing salsa with the Grandmother of the family.

The next morning I woke up and took the train out to Connecticut to visit Rich. On the train ride out, in classic New York style, I struck up a conversation with a young hedge fund manager heading back to his parent's place in Westchester to recover from the previous night's debauchery. I arrived in Danbury and was promptly taken to Tony Pham's restaurant for a four course Vietnamese meal, which was followed by a visit to Patty (Rich's cousins) house for the New Year's day (hangover) stew. We ate and talked - two of my favorite activities.

One-on-one conversations with Rich are simply amazing. There are so many similarities in the way we approach and deconstruct the world around us and yet we come from very different backgrounds and are in entirely different businesses. Rich comes from a traditional Dominican family. I come from a confused, alternative, rebellious WASPy family. Rich runs the toughest brick and mortar business - quick food service. I run two online businesses and haven't a clue about the brick and mortar world. Rich inherited a thriving businesses from his father's brilliant business mind and has improved it considerably. I've started a business that neither of my parents understand. What's tragic for me is that Rich is probably the best living partner I'll ever have, and now that he's moved back to Danbury I doubt if will ever get an opportunity to live together again.

That night I headed back into the city. This morning I woke up and did another amazing Vinnie class. Took the yoga girl to lunch. Packed. Meditated for an hour and then took the New Jersey transit out to Newark airport and here I am - up in the air.

2009

This time last year I had just finished throwing what would be my final of seven consecutive New Years Eve parties. Once again, I made a lot of money but had destroyed bits and pieces of my social life in the process. Preston hated me for forcing him to promote the event to his friends. Courtney hated me for being too busy to stop and give her a New Years kiss. And everyone else was indifferent having forgotten the festive ridiculousness in a grey haze of alcohol and drugs.

This time last year I had just launched TaskUs to the public. Having completed the full web interface, and hired one (just one) full time assistants from a call center in Manilla. Her name was Marie and she was amazing. We worked together tirelessly completing the tasks that slowing began to trickle in. We had a business, if only just.

This time last year I thought I would have moved out of my parents house by this time this year. I'm not sure where I thought I would go, but I definitely didn't think the process of building financial, career and domestic freedom would take this long.

This time last year I had written this blog for 8 months. In which time I posted more than I would in all of 2009. Let's hope this trend doesn't continue. But I can't help but wonder...

Where will I be this time next year?