Mr. Dodd's bill would change all this for the worse. Most preposterously, it would require that start-ups seeking angel investments file with the Securities and Exchange Commission and endure a 120-day review. Rare is the new company that doesn't need immediate access to the capital it raises, and a four-month delay is the kind of rule popular in banana republics that create few new businesses.
The legislation also removes a federal pre-emption that prevents start-ups and investors from being subject to 50 different state regulators. The North American Securities Administrators Association, which represents state regulators, argues that federal pre-emption contributes to fraud. But angel investors don't use broker-dealers and other middlemen linked to recent investment scandals. Nascent companies often seek financing from multiple investors in different states, and a state-by-state regulatory regime would mean higher compliance costs and more legal risks.
If this provision passes, it would be devastating. And even if it doesn't it's more proof that the folks in Washington DC just don't get Silicon Valley or entrepreneurialism. Where is the compelling interest for the SEC to impose this kind of hurdle in front of start-ups?
]]>I would rather see the White House and Congress work on a pro-growth and pro-jobs agenda first and foremost that would include lowering, not raising taxes and less, not more intervention in private industry. While I feel better about the short term than I did six months ago, since we were then facing the possibility of Armageddon, I am now more pessimistic about the long-term outlook.
Here's the unabridged version:
I think many in Silicon Valley would like to see the administration pursue more pro-growth policies. The start-up, angel investor and venture capital industry has helped build companies that have created a huge amount of jobs and with unemployment moving towards 10% it's an industry that should be encouraged and supported. While the Obama campaign said it would eliminate capital gains taxes for start-ups, instead the industry is looking at substantial tax increases on business, income, capital gains, and carried interest -- not to mention the energy and healthcare taxes now being debated in Congress -- and the administration has suggested it might force VC funds to register with the SEC. This is not what the Valley needs in order to resume being an engine of job creation.
There is real concern here that spending has been excessive and not been used wisely, and may in fact be crowding out private investment. I've heard anecdotes of companies in the telecom, energy, and healthcare industries holding off on investments because they are waiting to see if they can get bailout money.
On the issue of free trade, the "buy American" provision of the stimulus bill was probably unhelpful to the cause, and I'm concerned that agreements with the likes of Colombia and South Korea may be stalled. When it comes to the issue of H-1B visas, this is still important to the Valley, but with such high-unemployment I doubt there will be any political will to raise caps.
My concern is that while we may have avoided the worst of it, unemployment keeps rising and the danger of a double-dip still looms. It seems as though the Obama Administration has moved on from the economy and is focusing more on its healthcare and energy agendas. While those are important issues, I would rather see the White House and Congress work on a pro-growth and pro-jobs agenda first and foremost that would include lowering, not raising, taxes and less, not more, intervention in private industry. I am very concerned that the tax and spend policies of this Administration will result in very slow growth for the foreseeable future. While I feel better about the short term than I did 6 months ago, since we were then facing the possibility of Armageddon, I am now more pessimistic about the long term outlook if the heavy taxing, spending, and intervention into private industry doesn't abate.
The car industry today is as vertical as the computer industry was before the PC. However, the simplicity of the electric car combined with the standardization of certain components may cause the automobile industry to shift to a horizontal structure. The Internet is already emerging as a key marketing medium for automobiles and is easily adaptable to a horizontal structure.]]>
Ex nihil nihilo: out of nothing, nothing comes. It is as though corporations could work their way to greater wealth by making stock dividends to their shareholders. One might as well increase the size of a cherry pie by increasing the number of slices.]]>
SGI's high-performance, highly-proprietary, computing systems fell victim to the spread of cheap Linux boxes hooked up together with massive redundancies.This from Red Herring, September, 1995 in an Open Letter to Ed McCracken, CEO of Silicon Graphics:
In 1992 you bought MIPS, the microprocessor designer and manufacturer, because you were its last major customer and needed to guarantee that SGI could continue to use MIPS chips. Now you rely completely on that technology. In the meantime, Intel and Motorola/IBM/Apple have each spent a billion dollars on their Pentiums and PowerPCs--Intel will spend $3.5 billion in capital investments and $1.3 billion on research and development for 1995 alone! And this investment will only grow. In 1994, Intel-based systems doubled in price/performance. With volumes in the tens-of-thousands, not in the tens-of-millions, how can SGI compete? And stiff competition is just around the corner: a Windows NT system with multiple P6s on the motherboard will compete with your high-end machines at a fraction of the cost.This seemed obvious in retrospect, but it wasn't obvious at the time, and I think we were the first magazine to really call attention to this trend. I'm actually quite proud of this article and remember being quite nervous about it. After all, who were we to openly challenge the brilliant minds at one of the Valley's hottest companies? I was 25 at the time and had zero direct experience in the industry that would qualify me to make a sound judgment on SGI's strategy.
Don't Alienate Your CustomersSGI's response to our article was telling. Rather than following our advice, they invited us to their offices, loaded the room with some of the smartest people I'd ever met, and tried to convince us why we were wrong. They had convinced themselves that they COULD in fact compete with the wintel price/performance trend and I guess they thought that if they could convince us that their strategy was sound, we would in turn convince their customers through our writing. But that fundementally misunderstood our role at Red Herring. SGI customers influenced US more than we influenced them -- so SGI didn't get how the patterns of influence worked. You don't change customers minds through PR, you change their minds by listening, engaging, responding, and adjusting.
Regardless of the strategy you choose (or may have already chosen), we urge you to work closely with your customer base and announce your long-term plans--or the grumbling masses of graphics professionals who depend on SGI will mutiny, and turn to Intel and Microsoft for leadership. We realize that abandoning your MIPS-based systems will threaten short-term sales, but, right now, the greatest thing SGI has going for it is its momentum. Don't spoil that by alienating your loyal customers.
This is important to internalize because maximizing earned media requires a much more fundamental shift than just "embracing social media." Setting up shop on Facebook is the easy part. Developing the brand business processes that increase odds of advocacy or favorable earned media is quite a different thing, but it's essential. If, in fact, the manner in which employees treat customers does more to drive online love (or venom) than your best advertising campaign, we have a fundamentally bigger challenge (and opportunity) on our hands.who refers to Fred Wilson...
Earned media is media you don't buy but earn the hard way. PR is an example of earned media. Word of mouth is another. Earned media has been around forever. But it has now gotten a lot easier, thanks to the Internet and social media, to earn media for your brand, product, or self.who refers to Jerry Solomon:
The first step is to stop the monologue and begin a dialogue. Start listening and responding. Marketers understand TV, radio and print. They remain effective but no longer as dominant. No need to abandon them. However, brands need to become equally adept at mastering the language of social networking, blogging and online content. This begins with investment in new business models. Accept more will fail than succeed. Unfortunately the only method of determining the ones that work is by putting the resources and will behind them. The brands that invest in unlocking the code will develop genuine relationships with their customers, as well they should. They earned it.]]>
Brands aren't simply brands anymore. They are the center of a maelstrom of social and political dialogue made possible by digital media, said Unilever Chief Marketing Officer Simon Clift, who warned that marketers who do not recognize that -- and adapt their marketing -- are in grave peril.Conversations happen. The world where brands can shape their identity merely through one-to-many advertising alone is over. Opinions and ideas on virtually everything (politics, sports, technology) are being shaped, formed, and solidified through social media, and brands are no exception to this.
"No matter how big your advertising spending, small groups of consumers on a tiny budget might hijack the conversation," he said. "So this internet thing is much bigger and more interesting than just finding successors to TV advertising."
The great upheaval the news industry is going through is the result of a perfect storm of transformative technology, the advent of Craigslist, generational shifts in the way people find and consume news, and the dire impact the economic crisis has had on advertising. And there is no question that, as the industry moves forward and we figure out the new rules of the road, there will be -- and needs to be -- a great deal of experimentation with new revenue models.Andrew Anker has more coverage of the Great Upheaval at Quid.Pro. I like Clay Shirky's description of an industry unwilling to confront reality:
But what won't work -- what can't work -- is to act like the last 15 years never happened, that we are still operating in the old content economy as opposed to the new link economy, and that the survival of the industry will be found by "protecting" content behind walled gardens.
When reality is labeled unthinkable, it creates a kind of sickness in an industry. Leadership becomes faith-based, while employees who have the temerity to suggest that what seems to be happening is in fact happening are herded into Innovation Departments, where they can be ignored en masse.So how do you move forward without obsessing on the past? Well, ironically, learning from history may help.
The Journal had to change. Technology increasingly meant readers would know the basic facts of news as it happened. He announced, "It doesn't have to have happened yesterday to be news," and said that people were more interested in what would happen tomorrow. He crafted the front page "What's News -- " column to summarize what had happened, but focused on explaining what the news meant.You often hear professional media dismiss blogs and other new media because, it is claimed, the latter can only do opinion, and not "real" news. First, this is simply untrue, as attested to by the emergence if hyperlocal media. But second, this attitude may have compelled the media industry to focus too much on a misperceived comparative advantage -- news -- when they could have been innovating more on the analysis side of things.
"Kilgore's first critical finding," Mr. Tofel wrote, was "that readers seek insight into tomorrow even more than an account of yesterday." This "may only now be getting through to many editors and publishers." Indeed, at a time when print readership is declining, The Economist, with its weekly focus on interpretation, is gaining circulation. The Journal continues to focus on what readers need, growing the number of individuals paying for the newspaper and the Web site.Professional media have tended to view the world as a cascade, starting with their news, and trickling down to the blogs that, sometimes parasitically, feed off of them. One wonders whether the future will looks inverted from this past -- with media companies focusing on their brand advantage, and the trust that many of them still earn, by aggregating and analyzing the news that is now becoming so plentiful across the Internet.
James Freeman gets it:The Obama administration wants to regulate venture capital firms to prevent systemic risks. Silicon Valley residents are scratching their heads and asking: What risks? The rest of us should ask why Washington is targeting a jewel of the American economy that had nothing to do with the housing bubble.
The confusion began when Treasury Secretary Timothy Geithner recently told Congress that large venture capital (VC) firms should be forced to register with the Securities and Exchange Commission (SEC), and submit regular reports on their investors and portfolios. Data collected by the SEC would then be shared with a new risk regulator to ensure that VCs aren't "a threat to financial stability."
Since then, venture investors have been trying to solve the mystery of how they could possibly threaten the financial system. Their work involves very little banking. Venture firms raise equity from wealthy investors to buy ownership stakes in small companies. The VCs and the companies in which they invest use little or no debt.
I'm hoping Geithner's comment is born of ignorance, not calculation, for if it's the latter then we're in trouble.If our economic system is to thrive, venture capital is exactly the place where we have to encourage risk. In pursuit of innovations that will enrich themselves and the world, employees at start-ups accept low pay and reputational risk, while well-heeled investors accept the possibility of losing every nickel of their investment.
Attempts to limit risk pose a systemic threat to American technology. Venture capitalists, mainly veterans of the tech industry, are deeply involved in the companies they back, often helping to recruit each of the key employees at a start-up. This hands-on feature of venture investing means that innovative companies and their backers tend to cluster in areas like Silicon Valley. If the VCs move offshore, that's probably where the next generation of companies will be born.
The measure would have created a government agency to track and punish those who pirate music and film on the Internet. Analysts said the law would have helped boost ever-shrinking profits in the entertainment industry, which has struggled with the advent of online file-sharing that lets people swap music files without paying.So a department of Internet monitoring and censorship, empowered to cut of your Internet connectivity with the full force of the French government, would be established to help boost a flagging industry. How long before the censorship agency would be used for other sorts of control over Internet freedom?
Legislators and activists who opposed the legislation said it would represent a Big Brother intrusion on civil liberties -- they called it "liberticide" -- while the European Parliament last month adopted a nonbinding resolution that defines Internet access as an untouchable "fundamental freedom."I am very sensitive to the rights of copyright holders, but let's remember that it is not a natural right, such as freedom of expression or even physical property rights. It is a man made right -- an artificial monopoly created by government fiat to provide a limited economic incentive for creators to produce.
Beyond the specific points of factual dispute, Dyson has said that it all boils down to "a deeper disagreement about values" between those who think "nature knows best" and that "any gross human disruption of the natural environment is evil," and "humanists," like himself, who contend that protecting the existing biosphere is not as important as fighting more repugnant evils like war, poverty and unemployment.Lost in much of the discussion about climate change and energy policy is a true accounting of the benefits of low cost and plentiful energy from the humanist perspective. We may take plentiful energy for granted in the West, but others around the world, such as the Chinese who are confronted with need to lift millions out of poverty, simply cannot afford to do the same.
When, in 1986, cell-phone makers and public safety agencies asked the Federal Communications Commission for a shot at using scores of idle TV channels, politically powerful TV stations quashed the idea. They hurriedly hatched a reason: extra frequencies had to be reserved for "advanced television." America, then reeling from Japan's emergence as a consumer electronics powerhouse, needed to develop its own cool video application and dominate the world. ...
In extending life-support to DTV signals that hog hugely valuable frequencies, consumers lose hundreds of billions worth of wireless service. The bandwidth available to iPhones, Blackberrys and GPhones and other emerging technologies would double were TV air waves to accommodate mobile apps as requested in 1985. ...
But here is the bottom line: the most valuable air waves on God's Green Earth will continue to be occupied by digital TV signals that few watch and none need, to provide a prop for a cosy deal between policy makers and broadcasters. That is the worst way to use radio spectrum in the Information Age.