Category Archives: business

It’s Raining Money in the AI World!

Some rather clever folks proposed a while back that the 21st century may be rather different than its predecessor. That might seem strange to us, living now in 2017.  We have not seen these differences just yet. But one of these changes is apparent. That change has to do with access to capital.

There was a time when only governments could afford to make large capital investments, like wars. But the amounts needed to fund transatlantictic exploration dwarfed what governments could offer. New legal tools enabled private capital to enter the market and the world took a turn that shocked many. Still, access to capital was limited. Investing was a game for the rich and powerful. The rest of us relied on salaries to find the good life.

But in the late 20th century things started to change. In the digital world, it costs a lot less to starup a new venture that might scale. And while the risks of investing in these starups are huge, the potential gains are as well. I am reminded of the story of an early internet investor who put money into 100 firms. 99 went bust. The 100th was Google. Enough said. Welcome to the wonderful world of venture cpaital and angel investing.

It was not so obvious back in the 1990’s that this was just a starting point. Expectations that clever folks can come up with new ideas to add enormous value are rising faster than a Dubai high-rise overloaded with Pakistani construction workers. And so, folks are expanding access to capital to encourage those explorations. Google, Microsoft, IBM, and Amazon all have established investment funds to do so.

And this is not the end point either. We are about to see yet another extension of this access to capital. E tokens make it possible for just about anyone to set up markets for new ideas  You might think of each token as a tradable share in a concept.

Since the beginning of the year, 65 projects have raised $522 million in these offerings, according to Smith & Crown, a research firm focused on the new industry.

It is, as they say, a “frothy” market. That means you can easily loose your shirt by putting your money in these vehicles and many will. If this interests you, check out this podcast where William Mougayar offers his thoughts on where things are headed.

BTW, the same cautionary tales were told about web IPO’s, Kickstarter and AirBnB. There were and are scams galore in each. But they thrive despite them.

So where is this headed? My guess is that the real innovatoin here will be far better platforms where ideas are discussed and shared so that they can be turned into inventions that add value. These new platforms — that don’t yet exist — will enable high value conversations to instantly generate investment funds.

And where will that lead us? Instead of kids fighting over wheter they can get a high paying job at a bank, kids will be fighting over whether they can elbow their way into these high value added conversations.

Over time, this will reduce the risk of early stage investing. That means we will once more dramatically reduce the cost of innovation. And in turn, the 21st century will generate value added that we can only dream about now in 2017.

Hold onto your hat! Things are going to speed up!

George Clooney Just Pulled a Paul Newman!

Not all news that makes it to print is bad news. Sometimes the good guys win. I think George Clooney is one of those good guys and boy, did he ever win this time!

Geroge has been on a roll in life, with his marraige and kids. And now his tequila company was just sold to Diego for around —- $1 billion-.

Wow!

When you read the story, it is hard not to remember how Paul Newman did something similar with his salad dressings. Paul made high quality products, and got his name connected with them. They sold like hot cakes.

Of course Paul never sold his company, and Paul donated his profits to charity. I am sure George will be generous as well.

But to the point, this is a classic life style business success story. George and his friends love sipping tequila together, decided to make their own, their own way, and there you go.

I am sure that they are celebrating. And more power to them!

Making a Car Every Six Seconds?

This is a post about automation, a topic that we hear a lot about these days. We hear that automation will take over a lot of jobs, and it probably will. We hear less about whta broader effects this may have on global economies.

This aspect of automation becomes a bit more clear when one takes a closer look at Elon Musk’s vision for Tesla. Cringely lays it out. Elon Musk is working on a robotic system that will drastically speed up the production of Teslas on a given assembly line.  The result? Check this out

Ford has 23 global assembly plants that built 6,651,000 cars and trucks in 2016. … Elon Musk can imagine a single Tesla factory producing 5.25 million cars per year per assembly line (remember the Model 3 is coming from a new assembly line built in the same Fremont factory). Were Tesla able to sell that many cars, they propose duplicating Ford’s entire global production capacity from one factory.

That may be hyperbole. But if it is not, and Tesla can sell its cars, Tesla will become insanely profitable. Ford, GM and the rest will be stuck with huge excess factory capacity and will be in the crapper for years as they retool.

Generalizing from this, factory design that incorporates automation in ways that drastically speeds up production may be the mother of all growth markets over the next years.

Stay tuned.

Figuring out Grocery

Food distribution saw a major reorganization in the 2oth century with the rise of large, multi-product venues. Shoppers could not go just to one food outlet for just about everything they wanted at low prices.

Image result for Giant Food

But the new system is not perfect. The large sellers tended to treat food as a commodity which lowered the possibility of raising quality. And as the local first idea tood root, food chains that are obviously not local look a bit old fashioned. Moreover, because these brands are competing mainly on price, they do not hve a lot of flexibility in adapting to changing tastes.

Meanwhile, in Estonia, we have seen the opposite. The rises of chains like Selver, Consum, Rimi, Prisma and others has radically upgraded access to higher quality products from the 1990’s to today. And other European food chains are more quality oriented.

But back to the US —The problem with quality created an oppotunity for new brands to disrupt the market. Perhaps the most obvious one is Whole Foods. It was originally a niche offering, catering to well to do neighborhoods. But Whole Foods has grown, and you see Whole Foods stores just about everywhere.

Image result for Whole Foods

But Whole Foods is expensive. Comapnies like Amazon look at the turmoil around making grocery both affordable and high quality and see an enormous oppotunity.  After all, it is a huge market. But so far, they have not figured grocery out.

As Steve Galloway points out, there is no huge surprise therefore that Amazon would buy a brand like Whole Foods — even if the price tag is very, very high —  in order to jump start its exploration of the grocery market. The question is how Amazon will try to merge its ecommerce approach to distribution that lowers costs in radical ways, to Whole Foods location based approach, which raises quality.

Not everyone is thrilled by this. Amazon has enormous market power and that can trnslate into forcing suppliers to accept lower prices. That may not be good for local growers. And Amazon leverages its prime service to get customer loyalty. Extending a loyalty service like prime into grocery might give Amazon unfair advantrages over its competitors.

On the other hand, there is a trend to “personalizing” grocery shopping. In other words, I may want to partner with my grocery store to track what I like to buy (and why) with prices, comparisons and new ideas that link to recipes and diet advice. That would empower me to be a better shopper, chef and diet manager. It might also give me core information about my personal health needs. From this perspective, a location and ecommerce alliance makes perfect sense. And yes, I would consider signing up for prime if that was part of the deal.

Stay tuned!

The 1% Problem Versus the Iron Institutional Rule

The odds are that you will find a solution to a problem faster if you have more people working on it. That makes sense and it is the thinking behind competitions like the X Prize.

Of course, it also requires a coherent platform for the larger number of people to do meaningful stuff at the same time. This is a “scaling problem” that Sutton and Rau talk about in their book “Scaling for Excellence“. But assuming that you can get the scaling right, you should be able to harness the power of the masses within and between institutions.

As Greg Satell writes, some folks are doing this. And they get great results. Amazon, for example, scales the product review process and the product recommendation process which opens the door to better and more fun buying.

So why can’t we do this more broadly? Why can’t institutions automatically re-formulate themselves to scale problem solving? One of the reasons is the so called “Iron Law of Institutions“. That law goes like this

“the people who control institutions care first and foremost about their power within the institution rather than the power of the institution itself. Thus, they would rather the institution ‘fail’ while they remain in power within the institution than for the institution to “succeed” if that requires them to lose power within the institution.”

In other words, institutional arrangements that offer power positions do not necessarily maximize how people working with those institutions can be organized to work together. Power can corrupt the process.

I will be meeting with some business leaders this afternoon to discuss this problem in the context of a single firm and see if we can generate some ideas to test out.

BTW, a se cond problem is that our networking platforms are just starting to format messaging in ways that facilitate cross-discipline discussion. We are still stuck in knowledge silos, but less so than we used to be.

Stay tuned!

ICO as marketing

We are in the fist stage of ICO adoption. A few brave souls are using ICO’s as part of their business models.

Kik did it with Kin.

And now Brave is doing it with their Basic Attention Token. Hmmm … basic attention token?`Not a great name. Why not Bravo? Get it? Brave and Bravo?

Ah well. Whether the Basic Attention Token is a good name or not, it is a great strategic move for Brave. Why? Brave is trying to pitch a new type of browser that gives you more privacy and speed. This is not something that is at the top of the agenda for lots of folks. But when Brave pitches its Basic Attention Token as a way to reward publishers that you like with micro-payments, things get interesting.

And that is what Brave is doing.

It is obviously a great step for this type of platform. It is a new function. And it adds value in ways that cannot be achieved easily in any other way.  And it gets attention. Here is their pitch

It is so obvious that we are likely to see an explosion of ICO’s.

Stay tuned!

Going Mad over ICO’s

We are in a frothy period where a new idea — the ICO (Initial Coin Offering) — is starting to look like the next big thing to a lot of people.

Before I saw anything more, full disclosure. I am very excited about ICO’s and I am talking with some partners about how to use iICO’s.

At the same time, we should keep repeating this “ICO’s are not the answer to everyone’s prayers”.  They will not replace the VC market. Nor will they replace securities markets. Nor are they printing presses for capital.

The truth is that relatively few people understand how ICO’s can be used to supplement a business model. That will change. And when it does, tokens will be as commonplace as ad-driven revenue streams are now. But we have a way to go before we get there.

And as we go forward, we will see lots of ICO disasters. Strap on your helmets. This will be a bumpy, albeit exciting ride.