Barry Schuler's Synapsis

SOPA is not about Piracy, it's loss of gatekeeper status

Those of us in the tech community who are celebrating the temporary victory on SOPA/PIPA need to exhale and take a step back.  The traditional media industry has dealt with piracy for decades. Napster freaked them out in the 90s, but they now understand how much revenue leakage there is via the Internet and it is manageable. The fact is piracy is just a facade for a much deeper issue troubling Traditional Media.  Its the same issue that led Eastman Kodak company to bankruptcy: Disruption 

The Traditional Media model depends upon distribution choke points such as broadcast channels and movie theaters.  For decades, they have thrived as gatekeepers. The Internet has been tearing those barriers down via the disruption of "free and convenient" We have very effectively commoditized content. Newspapers, magazines have been gutted.

However, all is not rosy for the new generation of content creators either.  How many bloggers make a living at it? The tech industry hasn't been nearly as innovative in developing new business models to support sustainable content creation. All of the focus has been on grabbing eyeballs. Frankly, banner ads, pre-rolls, and flyovers just don't cut it. They produce pennies. As a result, the value of content has dramatically dropped for everyone.

Think about it: Huffington Post has been the high bar of Internet content value creation, sold to Aol for $300M+.  During the same period HuffPo was being built (with blood sweat and tears), so was Facebook - likely valued at $100B.

There is an old media saying that content is king but distribution is emperor. To Hollywood, the Internet is nothing but a Death Star.  So, devoid of a real willingness to reinvent themselves, the entertainment business turns to its best weapons of mass destruction: litigation and legislation.  

Rather than slug this out on Capital Hill, I'd rather see us all innovate healthy new media models. On that front, we have lots of work to do.

Should entrepreneurs try to profiteer from education innovation?

The good news is that a lot of great minds are thinking about the current challenges in education.  The biggest misconception with my Silicon Valley colleagues is that education is a “market” and schools are like a “product” whose features need to be fixed or entirely disrupted. Our current system is neither.  Think about it, computers have become integral to every facet of society in the last 30 years except schools. Why? Because technology companies think of Education as a vertical market.

There are great innovations going on at organizations like Kahn Academy and New Tech Network and they are achieving traction because they are great programs and not-for-profits.  There is also much interest in the venture community in for-profit models.  I hope they are patient investors because change comes very slowly and education is a very very local affair.  Many people still think it is a terrible idea to even have computers in schools at all.

I would love to see all of the talent and energy of young entrepreneurs focused on helping education unfettered by the pressure to produce Venture Capital-like returns.  At least in Public Schools. For-profit Universities are fair game.

Imagine if we gave elected officials focal reviews

Most employees have the distinct pleasure of a yearly performance review.  In large companies this is often a formal process with detailed evaluation forms. Typically the form will contain the employees' annual goals and the review session with their superior will rate their performance on each goal. It's generally a painful tedious process for all involved but it does require thought and reflection. A good executive will also allow the employee to give them feedback on how they can improve as managers. When practiced well the employee, supervisor and company all benefit.

The current dysfunction in the Federal Government got me thinking about the utter lack of accountability in our system. What would a yearly review look like for our representatives? Technically our vote is the definitive review, but we all know that system is rigged by the corrosiveness of fundraising, party machines etc.  Wouldn't it be a fascinating if we actually provided a yearly evaluation to our elected officials? Here's some of what I'd love to see:

Attention to legislative duty: what percentage of your time was spent on legislation and regulatory oversight vs.fund-raising? 

Lobbyists: How much money did you take from registered lobbyists, PACs or Super PACs – how did you advance legislation or vote on their specific issues?

Your District: How often did you meet personally with citizens you represent (who have not contributed to your campaign or outside of a fund-raising event)?

Partisanship: How often have you socialized with members of the opposite party? How often did lead an effort to creatively compromise? How many times have you voted against your party's position if you felt it was not consistent with your constituents.

Country first: Please provide specific examples of you putting the best interests of the country above your party, or the special interests you have taken money from.

Truth: How often do you use Public Relations specialists to "test" answers to tough questions vs. telling the truth as you know it? Do you use focus groups to test your policy positions?

Ethics: Have you ever hit on a staffer or intern? - Nah strike that one. President Clinton demonstrated you can be a very effective elected official and a lecher at the same time.

On second thought such a review process would be a huge waste of time.  Politics today is all about blame. It's not about who actually gets things done, it's who has a better excuse. Never mind.

Modernist Cuisine Planked Omlete

This recipe requires 6 fresh eggs, 3 Anacona and 3 Rhode Island Reds. They must have been laid within the last 12 hours else the protein structure of the albumin will begin to denature.  If you have the appropriate equipment, rooster eggs would produce the best results (refer to Book 4 Chapter 5 on genetically transgendering poultry).

The eggs must be planked on 5 year aged beechwood.  Beech floorplanks will suffice, they should not however be fininshed with any waxy polish.

Care must be taken for the application of the egg to the planks.  They should not be cracked first and spilled as is normally done. Rather the whole egg should be tossed exactly 2.7 meters into the air and allowed to fall naturally.  This will properly oxygenate the egg and gravity will apply exactly the correct force to blend the yolk and albumen to the desired consistency.  Do not be concerned about the shells, their natural calcium will help to catalyze the reaction between the Beechwood cells and the protein chains.

Allow the eggs to plank for 3 hours then test the dynamic viscosity (brookfield engineering is an excellent source of this equipment) which should be 1.5 on the Stokes scale. Plank longer if necessary to achieve desired viscosity.

Gently collect the egg mixture into a vacuum bag (now remove the shells) and seal. Place into a sous vide at 140 degrees for 20 minutes. Garnish with chive oil caviar and truffle snow (see Chapters 2 and 3 in Book 3). Shave pink Himalayan salt to taste.

You will never eat a traditional omlete again.

Author's note: inspired by the epic work of Nathan Myhrvold - Modernist Cuisine

Happy Chanukah? Skip it please

Hey I don't want to be a Jew-Grinch or anything but an important note to all of my friends of other faiths: Chanukah really isn't a big deal.  In fact in the scheme of Jewish tradition it doesn't even make it to "Holiday" classification (Rosh Hashanah, Yom Kippur etc.).  It is considered a Festival, a time to have a bit of a good time.  It is a celebration of a battle victory, where like so many times, outnumbered Jews attack and evict the bad guys.

I guess it could also be considered a celebration of the first energy crisis because a small vial of oil (enough for one day) meant to light the eternal flame in the Holy Temple, miraculously kept alight for eight days until a fresh supply of oil could arrived.  A cynical view might be that the Jews of the era read the miracle incorrectly.  They were likely being tipped off that the Promised Land was close, but no cigar when it came to oil, and they should resettle wherever the eight days away was. But instead we celebrate for eight nights, lighting an additional candle each night, and of course gifts to the kids.

Chanukah's religious significance pales in comparison to the birth of Jesus in Christianity, which is a very holy day. Yet somehow Chanukah has been elevated to that status.   Perhaps, a kind of "political correctness" existed long before it was hip, and our secular society didn’t want to exclude Jews from all of the holiday fun. But a cynic might say Jewish merchants saw opportunity in convincing everyone to join in the gift buying bonanza, thus driving up sales. 

Rather than over-thinking, let's just consider this as a time to be with family, have good tidings and try and be charitable for those less fortunate. But for me, you can skip the "Happy Chanukahs" today.  I revel in being a cynic.

PS:

For the 10 things you didn't know about Chanukah, you can read this Time special (thx@malibumuffie)

What the Occupy Movement Should Demand

I am happy people have taken to the streets.  We need to broadcast signals that search for evidence of intelligent life in our government.

Many years ago as a high school senior, I witnessed construction workers beating on hippie protestors marching in NYC.  Every hardhat had a little American flag on it.  The protesters wore peace signs. The brawl was over US involvement in the Viet Nam war. 

It was a very contentious time that led to student protesters being gunned down by American soldiers at Kent State University.  At the time it was unclear who were the patriots, the protestors or the leaders trying to maintain civil order.

In hindsight it has become crystal clear.  Our Federal Government had lost its way and people took to the streets to communicate their anger in the only way they believed it would be heard: the old fashioned American way.

At that moment in my life, and for the next 25 years I was one of the 99%._­ Now I am one of the 1%, but I'm just as frustrated as the 99%, maybe more.

Here is why:

Our Federal government is a huge mess.  I have experienced it up close and personal.  While there are many very dedicated, brilliant people there, they are imprisoned in a dysfunctional and sometimes corrupt system.

 There is good reason to be angry with greedy bankers.  But the greed spreads far beyond Wall Street. Wall Street’s behavior is driven by the pressure to produce ever-growing returns on investments.  Some of their biggest investors are the pension funds of Organized Labor.  Yes that is correct, The Unions have their hands dirty with greed as well.

 The Obama Administration has not taken decisive action to regulate the kind of derivative investments that were responsible for the meltdown.  There are other reasonable regulations that should be considered. Nothing has happened. No accountability.

Fair taxation? I would happily pay more taxes if we overhauled and simplified the tax code and legislated a balanced budget.  The problem today is that the Government wastes so much money mismanaging existing programs, that more taxes would further support the current dysfunction. It would also reduce the motivation to clean up the mess.

What is our biggest problem? Denial. The Government simply is in La-La land.  We all have to live within our means.  Yes we can have a little credit as long as we can make the payments.  The Feds have been spoiled by a world economy willing to lend us all the money we want to borrow.  Those days are coming to end.  Then what?  It’s like being told by the doctor to eat right and exercise more and you dismissively say “yeah, yeah I have plenty of time for that.”  Then one day you have a heart attack. 

Occupy Wall Street is exhibiting displaced anger.  Everyone should converge on Washington DC.  If a crook stole your car and was never caught and punished, you’d be better served by hassling the police, not the crook. All of this energy needs to be moved to Capitol Hill and the White House.

To those who revile the 1% please note: “The 1%” is a broad generalization. Yes there are thieves like Bernie Madoff.  But most are people who have actualized the American Dream: They had aspirations, got educated, work hard and made our dreams come true. Some of us also believe we owe something back to the system that made the dream possible.  My cause is education.  I work hard at it and put my money where my mouth is (doing things our government should be doing if it was functional).  Many of the 1% give back as well.

The big issue is not the 1% it’s the ability of the 99% to pursue the American Dream and become part of the 1%.  The system is showing signs of breaking.  We can’t give our kids a proper education.  We don’t have jobs for them when they graduate.

Now for the big question: what is the solution? What should the Occupy Movement be asking for? As yet there is no coherent single answer that appeals to all factions of the movement. But I think there is one.

The answer is simple and elegant: outlaw “Blame” in the political discourse.  We should demand that our politicians only talk to us with proposals and solutions.  They should keep the finger pointing and fighting behind closed doors.  We don’t need to see the sausage making. If they can’t produce solutions. Vote them out.  Forget about party politics, vote for anyone who gets things done.

I am not suggesting passing actual legislation that outlaws blame, but we should demand it by firmly communicating that we will vote against any official that uses blame as an excuse for not doing their job.  Including the President.  Bring us solutions. Make tough decisions and compromise. And for the love of our ideals, please stop the incessant partisan politics.

Accountability without Blame – demand it, and enforce it with your vote.

Kindle Fire: Ready, Aim, Cloud.

Quite a lot of buzz today in Silicon Valley (nerd Hollywood) over yet another entry into tablet market. The technorati are all atwitter over what it means; who gets hurt? Apple? Google? Netflix? Time will tell for sure.  But there is a bigger story here: Amazon beat Microsoft, Apple and Google to the punch. Today, Amazon ushered in the Consumer Cloud Era, nothing short of the third chapter of the Internet has now begun.

In Silicon Valley we consider the notion of "The Cloud" as common knowledge (yes, we should get a life).  But for the benefit of normal humans, Cloud refers to all of the computing power and storage that resides in the giant data centers you connect to via the Internet, to do all of the wonderful things you do these days on the Web. The technicalities are not particularly important, with The Cloud and fast broadband connections more of what you did on your desktop computer can be done "in the Cloud." 

So what you might ask? Here's why you care. Most people now live in a multi-device world. Laptop, Smartphone and increasingly tablets.  So, for example if you want to show someone that great picture you took on the weekend, if it is on your hard drive at your desk you are SOL.  But if it resides in the Cloud on a service like Flickr, or Picasa, voila! you can access it from anywhere.  Perhaps you already use a Cloud product like Dropbox, Box.net or Evernote.  You already enjoy the benefits. 

This is not a new idea, in fact AOL was the first service to introduce Cloud services to consumers, back when you had to hide from Velociraptors on your way to work.  Now for a variety of reasons, the technology has matured enough to cause a sea change in the way everything works.  And it will be a tsunami of change. Everything, including the huge Microsoft franchise will be up for grabs.

This is not lost on Microsoft nor Apple who are busy re-engineering for the Cloud, but Jeff Bezos an under-appreciated visionary has already taken Amazon there. For the last few years Amazon has made their own vast network infrastructure available for "rent" to other websites.  They have now become a very big provider of Cloud services, in fact many of your favorite sites are hosted by Amazon.  By doing this they have polished up their capabilities and in the process, created everything they need to deliver the first fine-tuned, consumer grade Cloud Computer: the Kindle Fire.

What does that mean for you?  A slick speedy device that will let you read books, watch movies and TV, and play games.  And if you were watching a movie at a friends house you can pause it and resume watching on your phone, or laptop or Internet connected TV.  It's the way everything in the future will work.

So now the race is on. Microsoft, Google, Apple and a host of new companies will be innovating at breakneck pace.  Who will win? The forecast for Amazon is cloudy indeed, only in this case it's the best forecast ever.

Note to geeks: for a video on the details of Amazon's exciting new Cloud Browser called "Silk" watch this video:

Google is not a monopoly.

We are such a fickle society.  We love a success stories because they define the American Dream. We insist on freedom of choice. We thrive on competition and a fair fight.  But oddly, the instant a person or company achieves big success, we just love to tear them down.  

So in the historical backdrop of protecting consumers from businesses that become so successful they start playing dirty, the Antitrust Sub-committee of the Senate Judiciary Committee took Google Chairman Eric Schmidt to task today.  I have had the esteemed pleasure of testifying before various agencies of the Federal Government and must confess that Eric was far more patient than I, as I have little patience for unprepared bureaucrats with low IQs.

There are a lot of misconceptions around antitrust and monopolies, so here is a short tutorial. Strictly speaking there is are legal criteria for what constitutes a monopoly, and it is often ultimately a matter of judge's decision.

Being deemed a monopoly in itself is not illegal, it does triggers certain corporate responsibilities. It was quite clear today that many of our Senators are not well versed in this area since they seem to believe a monopoly is solely defined by having attained a huge market share.  

In reality, a monopoly is largely defined by a company's ability to control pricing because a consumer has no choice, or has a very high switching cost. For example prior to to deregulation you could only buy telephone service from your local Bell Company. Or prior to Satellite TV, you could only get Cable TV from your local Cable Franchise. Hence these became regulated monopolies.

Microsoft established a monopoly in PC operating systems and ran into anti-trust trouble by muscling other companies. The trick there was that there really was no viable alternative to a Windows PC 10 years ago. You were stuck with Microsoft. And they set the price. But it's a completely different set of issues with Google (a nuance that seemed to allude former comedian/writer Al Franken, who was doing his best imitation of a Senator at today's hearing).

The old rules just don't apply to Google.  While they do have very large general search-term marketshare, consumers get the service for free and there are several alternatives easily available. Much noise was made about Google's clout in e-commerce yet the dominant e-commerce search engine today is actually Amazon by a wide margin.  

Most of the Senatorial banter was focused on whether Google favors their own content and services in page ranking. Are they bypassing or gaming their own algorithms to hurt the competition? The seemingly obsessive line of questioning originates from the legacy of the Cable TV business.  When Hollywood Studios started merging with regulated Cable Companies, the FCC insisted that the Cable Cos could not unfairly favor their content.  So it is the idea that Google reminds them of the old "distribution + content" problem that gets the Senators' undies in a deep wedgie.  But the analogy is a bad one. 

It's also likely an irrelevant issue.  Antitrust laws are meant to protect consumers and if consumers don't like the results they get from Google, Bing and Yahoo are just a click away. So what's the beef?

The Beef is led by companies like Yelp and Nextag, whose CEOs both testified against Google today.  Their business models depend on Google's audience and they fear the idea of Google competing with them.  They would like to See Google blocked from being in the content business. I'm not sure I understand how that kind of government meddling would benefit consumers. 

These guys would be better served by teaming up with Facebook and Twitter, who now represent a very credible threats to the Google search model. Seeking shelter of Federal Regulation is an indication you have run out of ideas. Frankly they both sounded pretty whiney. 

All of this is not to say the Government shouldn't be taking a good hard look at Google but the far more important issue was barely touched: privacy and the use of consumers' personal data. Cookies, super cookies, geo-tracking, mapping, street view – these are the family jewels that we consumers trade with Google in return for their free services.  

It is Privacy that requires some thoughtful investigation, but it will take people with real knowledge of the issues to tackle it. That was the bullet Eric dodged today. I suppose they will haul Zuckerberg up for that one. Facebook better send Sheryl Sandberg.

Note to Tim Cook: No black Shirts

Giant shoes to fill. Tim Cook is a skilled operator who is every bit as responsible for Apple's big comeback as Steve Jobs is. They are a team. Every big thinker needs an operational genius to help them bring their vision to reality. These kinds of folks generally enjoy the background role. Quiet power. Velvet stiletto. 

Now Tim will take center stage. Apple is in good hands, but Tim needs a different script. If walks into the Moscone spotlight and tries to pull off the "just one more thing" Columbo act he will look like Rich Little on the Ed Sullivan show (kids: you'll have to Goog them). And the adoration foisted upon Steve's Apple will lose it's lusty appeal like so many 40-something pole dancers.

There is no replacement for Steve, but that doesn't mean Tim can't do the job in a different way. He is just going to need a different act. His own voice. Or maybe hire Noah Wily for the product launches.

IPO Window closing? Maybe it doesn't matter

Already pundits are speculating that the freshly-minted IPO window will now abruptly close.  Maybe.  But if it does, it may accelerate a growing phenomenon - Secondary Markets.  Twitter recently raised $800m at an $8+B valuation via late-stage institutional investors.  That itself was a huge IPO-scale funding by any measure. Yet they don't have the reporting and regulatory overhead of being public. They are free to build their business without the short-term focus being public imposes.

Facebook is a private company whose stock actively trades in the $70/share range on secondary markets. It exchanges hands of sophisticated investors willing to bet that someday Facebook will be valued at $200B or more.

The secondary markets really caught fire after the last big crash when the IPO window abruptly slammed shut. Money managers needed to put their capital to work and they found a way to do it without the NYSE or NASDQ. The SEC has looked at the process and seems to be A-OK (for now).

There is always a lot of money looking for great companies (some say $1T right now).  And there are always great companies looking for growth capital.  Innovation never ceases even in the midst of government dysfunction and market chaos.

Perhaps the public markets with all of their broken-down ratings agencies, and less-then-credible analysts will surrender their status as the go-to destination for financing of young emerging companies.  The histrionics may be too unsuitable for growth capital.  Particularly when necessity has invented a growing alternative.