22. March 2008 by Martin Suter.

Yesterday, I started reading Susan Jacoby’s new book, "The Age of American Unreason". Many of the statistics she cites have been cited elsewhere, but it was her aggregation of these, and the discussion of the implications, that I have found sobering. This has led me to ponder whether America has any chance of remaining the greatest country in the world, or whether any forward motion is strictly a function of momentum from previous generations’ effort, or perhaps through the sheer strength of a very small subset of society. I would wager that to these "Atlases", the US is getting very heavy indeed.

The examples Jacoby uses provide quantitative measures that reinforce what I (we?) see manifested on a daily basis but all too often choose to ignore:

"Nearly two-thirds of Americans want creationism…to be taught alongside evolution in public schools. Fewer than half of Americans-48 percent, accept any form of evolution, even guided by God, and just 26 percent accept Darwin’s theory of evolution by means of natural selection. Fully 42 percent say that all living beings, including humans, have existed in their present form since the beginning of time." (1)

In another section, she points out that, in a 1998 survey by researchers from the University of Texas, "one out of four public school biology teachers believes that humans and dinosaurs inhabited the earth simultaneously." (2)

This can’t be a shock to anyone who watched the early Republican debates, where fully 7 out of 11 candidates came out as Christian fundamentalists, falling over each other in their attempts to prove their religiosity exceeded that of their opponents. Not intelligence, not competence or experience, but how strongly they believed that the Bible was the inerrant word of god was their primary qualification for running for President of the United States.

How have we allowed this to happen? How have we become so intellectually neutered so as to allow "political correctness" to supersede intellectual debate and discourse?

In his song, "None of Us Are Free", Solomon Burke sings "If you don’t say it’s wrong, then that says it’s right". The intellectuals of this country have been the silent minority, and as a result, are equally complicit in the sorry state of US society today.

In Atlas Shrugged, the intellectuals of the world went on strike, removing themselves, their capital and their productive capabilities from society and physically relocating to a world of their own. Today, it is not just the exodus of intellectual horsepower, but capital flows and competitive advantage as well that threaten this country. In an information/knowledge based world, how is it possible for the US to be competitive with such a pervasive, systemic abdication of reason? And perhaps more importantly, what are the prospects to pull out of this dive?

As in Atlas Shrugged, the US is being held aloft by a disproportionate few - intellectuals, engineers, entrepreneurs. In a flat world, where ideas, capital and people can move with relatively little friction, it will not be surprising if these few "shrug". Wouldn’t you?

That’s my .02!

Martin Suter
(martin.suter@iplicensing.net)

(1) "Public Divided on Origins of Life, August 30, 2005, Pew Forum on Religion and Public Life

(2) George E. Webb, The Evolution Controversy in America (Lexington, KT, 1994), p.254

Posted in Objectivism, Ayn Rand, Education | Print | 2 Comments »

19. March 2008 by Martin Suter.

In Ulysses, Tennyson wrote, "I am a part of all that I’ve met". As I drove back today from Anne Lummis’ funeral, I began to fully understand what a profound statement this truly is.

I didn’t know Anne, having only met her briefly at a few social occasions with her husband, Gordon. But I had the privilege today of seeing how many friends came out to pay their respects, and to hear the tributes to her during the eulogies by her husband, and their three children.

One of the descriptions of Anne’s life that stuck with me today was that "She wrote her own book." This is something that we all get to do, and how it reads is entirely up to each of us.

Those who know me, would attest that I am proud of my accomplishments. But when all is said and done, those closest to us - our family, friends, colleagues will gather in a room to remember us. No one in that room will care that "He was a great business development guy…He exceeded quota…He signed big deals", etc. It’s not what we’ve done, but who we are and how we’ve lived our life that matters to those closest to us at the end of the day.

We make choices in our actions and interactions every single day, consciously or subconsciously. We choose to act rationally or irrationally, with integrity or not, with compassion or not. When we become that "part" of those that we meet along the way, what "part" of them will we become? If we strive to leave the best parts of ourselves when we cross paths with people, the world will be a better place for our having passed through it.

By all accounts, Anne Lummis left only the good parts with all whom she met, and, as a result, the world is, indeed, a better place.

We could all aspire to as much in our own lives.

Posted in Uncategorized | Print | 1 Comment »

12. March 2008 by Martin Suter.

I find it fascinating that many market disruptions are not technological, but rather business models enabled by technology. What happens when there are no barriers to entry? What happens in a world with no friction? What happens when customers can interact directly with sellers?

Dell shook up the PC industry by first selling direct to end-users. Google has gone from a Search engine to the dominant force in advertising, and along the way has figured out how to do "free" very well. eBay brought the garage sale to the world. And finally, recording artists are realising that there’s money to be made selling direct to your fan base, without compromising your artistic integrity.

Nine Inch Nails just released a collection of 36 songs, called "Ghosts I-IV". MSNBC.com suggests that "2008 may go down in history as the beginning of the end for the recording industry." I beg to differ. It’s been like watching death by 1000 cuts in slow motion. 2008 is hopefully the year where the final nail is hammered into the coffin, a nine inch nail.

Where did it all go wrong for the music industry?

Record companies are licensing companies. What is a "record deal", if not a license granting rights to an artist’s intellectual property to a record company along with the rights to make or have made physical product, the rights to distribute and sell this IP in return for a royalty rate paid to the creator of the IP. For decades, they held the keys to the kingdom. Barriers to entry were high…Studio time, production and mixing equipment, analog master tapes were expensive, manufacturing, promotion to radio stations, and distribution channels…The studios had a wonderfully integrated system, but it was a closed system. The only way that an artist could get a record on somebody’s turntable was to play within the system, by their rules.

Video may have killed the radio star, but digital is what killed record companies.

The shift from analog/vinyl to digital was the first nail in their coffin. Cheap, ubiquitous broadband was another nail. Napster got people used to downloading content and not having a physical instantiation of the music (i.e. a CD) and was another nail. MySpace and other social networking sites facilitated the viral promotion of artists; another nail. YouTube further helped them distribute music videos and concert footage; another nail (This one in MTV). Apple bundled GarageBand with the MAC, enabling anyone to produce decent quality music quickly and cheaply; yet another nail. iTunes and the iPod gave us a means of storing and cataloguing our music, eliminating the need for a home stereo system or physical form factors; another nail. iTunes gave us a means of purchasing music that no longer required a trip to the mall; the eighth nail in the coffin.

And in the past year, major artists like Radiohead and now Nine Inch Nails selling direct to their fans. Hopefully, the ninth and final nail.

In his book, The Long Tail, Chris Anderson articulates how in a world without friction (i.e. the Internet), even those with the most arcane tastes, can find something they want, growing the overall size of the market. He posits that there is more money to be made across the entire breadth of the market, as opposed to a narrow, deep market as the music industry used to be.

The music industry isn’t dead, record companies and MTV are.

But have we, as consumers, ended up winning or losing in this deal? I would suggest that we’ve won big-time.

Trent Reznor, from NIN comments on Ghosts I-IV: "The end result is a wildly varied body of music that we’re able to present to the world in ways the confines of a major record label would never have allowed…"

The probability of my selecting a Nine Inch Nails CD and paying $15.95 to see whether I liked it or not would have been pretty small. Or Radiohead for that matter.

But give me a chance to experience and experiment with new tastes in a low-risk way, and I’m all over it. Does it get any better?

That’s my .02!

Martin Suter

(martin.suter@iplicensing.net)

Posted in Music, Disruptive Technology, Internet, Licensing | Print | No Comments »

11. March 2008 by Martin Suter.

About four weeks ago, I blogged about Microsoft’s bid for Yahoo (849: Is that miles or light years?). One of the key points that I tried to make was that the anti-Microsoft culture in the Valley is so deeply ingrained that it borders on the religious. There was a great article in today’s Times (Hostility Has Its Rewards) that also touches on this same point, by an unnamed VC, no less:

"Yahoo is “under attack from Darth Vader” one venture capitalist told me."

The Dark Side. The Borg. Microsoft.

The Valley, and by extension Yahoo, will resist assimilation. It’s in their water supply. It’s in their DNA.

The article quotes Larry Ellison extensively and credits him with legitimizing and validating the hostile approach to takeovers. It goes on to suggest that he’s even cheering for Microsoft to prevail. Of course he is!

Your biggest competitor is spending $44 billion and untold senior management cycles moving into a completely different sandbox than you’re playing in. With Microsoft’s time, attention and money diverted from the enterprise and business applications markets, Oracle laughs all the way to the bank.

"You go, Steve!" Wink, wink, nudge, nudge…

That’s my .02!

Martin Suter

(martin.suter@iplicensing.net)

Posted in Oracle, Yahoo, Microsoft | Print | No Comments »

5. March 2008 by Martin Suter.

I love the web and am constantly amazed at what one can find or learn from others skilled in the art.

I recently came across a very interesting piece in Marc Andreesen’s blog: "The Moby Dick Theory of Big Companies", in which he suggests that "There are times in the life of a startup when you have to deal with big companies." He then builds a very interesting metaphorical case for SmallCo as Captain Ahab and BigCo as Moby Dick. It’s an entertaining and enlightening piece, but I will endeavour to go a few steps further and try to delve into the psychology driving the players in this game.

Marc makes some interesting points about a BigCo’s behavior being inexplicable when viewed from the outside. He suggests that there are some many moving parts and agendas, that the dynamic of decision making is highly unpredictable. While I tend to agree at a macro level, it’s my experience that people (and a company is an aggregation of people) will react most predictably to fear. I think it was Intro to Psych class where we are all introduced to the concept of "Fight or Flight" and that it applies equally to business psychology.

SmallCo’s are used to talking about the opportunities created by their disruptive technology: new markets, huge revenue, vast market share, value creation. This is a natural side effect from their creating business plans and pitching investors on how compelling the opportunity is.

Once they’ve convinced themselves and their investors that the opportunity is huge, they will often go out and try to convince one or several BigCo’s of the same thing. Getting funding or landing a whale require different stories, but usually SmallCo re-uses their investor pitch in trying to get BigCo’s attention. You may get nodding heads in meetings and even hear that they agree with your assessment of the opportunity, but all too often BigCo inertia takes over and nothing happens.

I first experienced this in a big way shortly after being recruited from a start-up into the Disruptive Technology group at Nortel in Q3/2000. MeshNetworks had just emerged from stealth mode with a classic, highly disruptive story that had the potential to impact many incumbent technologies and R&D programs in the wireless space. Nortel was heavily invested in 3G, having made a major UMTS bet, and I was advised to identify a new market opportunity created by this emerging technology rather than positioning it as a disruptor to 3G. So, I began the exercise of focusing on a net new commercial opportunity that this technology could enable for Nortel. It was a billion dollar opportunity in 3-5 years, yadda, yadda. I got the nods in meetings and the "Atta boy" from my boss at review time, but there was no sense of urgency to act.

Frustrated by this, and deciding to win big or die trying, I spoofed a news story using the San Jose Mercury News banner and inserting quotes from John Chambers and industry analysts. The banner read: "Cisco Leapfrogs 3G and Goes Right to 4G; Acquires MeshNetworks for $400m". I then printed off my mock-up and put it on the fax machine, sending it around internally. Within 5 minutes, my phone began to ring - "Holy shit! What the hell just happened? How could we have let this happen?!?"

Basically I then told them that we have a do-over, that this didn’t really happen (yet). But I then asked whether this was a version of the future that we were prepared to accept. If so, not acting was a reasonable course of (in)action. If we couldn’t contemplate this version of the future, then we needed to act urgently.

What did I takeaway from this?

BigCo’s are largely risk averse. Status quo rules the day and that having a team of singles hitters internally is easier to manage than going to the free agent market and bringing in the guy who will either hit it out of the ballpark or go down swinging. Unless that home run hitter is also talking to another team in your division which could lose you more games. The threat of him landing with a competitor usually changes the way in which you look at his availability as well as what you’re willing to pay to get him on your team. It’s the competitor pre-emption premium.

Winning vs. not losing. Opportunities or threats. Two different ways of framing the discussion.

After 20 years of dancing with 800lb gorillas, or hunting the great white whale, my experience is that BigCo action is catalysed more often from perceived threats than from potential opportunities. My hunch is that this is an 80:20 relationship, although I have no quantitative data to support this.

What happens inside companies when presented with a perceived threat? The Fight or Flight instinct kicks in. Corporate DNA is pre-disposed to fighting (they don’t call it "competition" for nothing), while fleeing is anathema to most BigCo’s. Status quo is not an option when under threat of attack.

You’ve decided, for whatever reason, that you’re going to go hunt the big white whale. You’ve got a disruptive technology, well it’s called disruptive for a reason. Change the lens through which you have them view you. Build your story around the threat to their status quo and you are more likely to get them to act with a sense of urgency.

But be careful what you wish for. You might just end up harpooning the whale and you then have to answer the "Now what do I do?!?"

That’s my .02!

Martin Suter

(martin.suter@iplicensing.net)

Posted in Nortel, Strategic Alliances, Disruptive Technology, Cisco, Wireless, Start-ups | Print | No Comments »