Mon, Aug 06, 2007
Warren Buffett on Evaluation
#
I read this great quote from WarrenBuffett in last week's
Economist: (MHB)
You only find out who is swimming naked when the tide goes out. (MHC)
It's from his BerkshireHathaway
chairman's
letter in 2001. (MHD)
It reminds me of one of my shocking revelations when I worked in the
publishing industry. There were a lot of publishers who were, shall
we say, less than competent. Or as my former boss used to say, they
were "dumber than a bowl of soup." (MHE)
How had they achieved their positions of lofty import? They were
lucky enough to sell ads when times were good, and they got promoted
as a reward. When times were bad, they would point to their sales
numbers to show how qualified they were. Of course, those numbers
weren't even an accurate assessment of their sales ability, much less
their understanding of the industry or their ability as publishers. (MHF)
Lest you believe I'm biased towards the editorial side of the
business, there were plenty of incompetent editors, too. They didn't
usually have the benefit of irrelevant quantitative metrics to hide
behind, though. (MHG)
/business |
Posted at 9:04pm
Tue, Oct 31, 2006
Google Acquires JotSpot
#
Congratulations to ScottMcMullan and the rest of the folks at JotSpot!
His commute just got a bit longer, but a whole lot
easier. (LGF)
/business |
Posted at 9:29am
Thu, Aug 10, 2006
The In-N-Out Test
#
EstherSnyder, the founder of In-N-Out
Burger,
passed away last Friday. (See the LosAngelesTimes
obit.) For those of you who haven't heard of In-N-Out, it's a
legendary burger joint that originated in California, but that's now
all over the western UnitedStates. I'm from LosAngeles, so In-N-Out
is part of my blood (literally -- I've eaten tons of their burgers),
but it also served as an interesting business thought experiment when
I was founding BlueOxenAssociates. (L1I)
On August 14, 2002, TheNewYorkTimes published an
article on
In-N-Out, one that had me asking several colleagues, "Would you rather
have founded In-N-Out or McDonald's?" (L1J)
Here's the tale of the tape: (L1K)
- They were both founded in LosAngeles in 1948. (L1L)
- In-N-Out remains privately owned. McDonald's is a public company
with franchises world-wide. (L1M)
- In-N-Out did an estimated $160 million in sales in 2001, meaning it
has grown in revenues 10 percent a year. McDonald's did $40.6
billion in sales in 2001. (L1N)
- According to a FastCompany
article
last year, In-N-Out is now a $310 million company. In-N-Out does
very little advertising. McDonald's spent $1.5 billion on branding
in 2004, yet its per-store revenues are only slightly higher than
In-N-Out's. (L1O)
- In-N-Out's menu is largely unchanged over the past 50 years. (L1P)
- Even EricSchlosser of Fast Food Nation fame endorses In-N-Out. (L1Q)
I started asking a bunch of my colleagues this question, and the
responses were interesting. The most interesting response in favor of
McDonald's was that McDonald's has had a positive systemic effect on
society by giving millions of people their first introduction to the
working world and management skills. (L1R)
Can you guess my answer to the question? What's yours? (L1S)
/business |
Posted at 3:45pm
Wed, Apr 26, 2006
Venture Capitalist Parable
#
From DavidBatstone's WAG, one of my
favorite newsletters, comes this
parable about a fisherman and a VC: (KHE)
A venture capitalist was vacationing at the pier of a small coastal
village. A couple hours before lunch time, he noticed a small boat
with just one fisherman docked nearby. Inside the small boat were
several large yellow fin tuna. The VC complimented the fisherman on
the quality of his fish and asked how long it took to catch them. (KHF)
"Only a little while," the fisherman replied. The VC then asked why
didn't he stay out longer and catch more fish? The fisherman said he
had enough to support his family's immediate needs. So the VC asked
what he did with the rest of his day. (KHG)
The fisherman said, "I sleep late, fish a little, play with my
children, and take a siesta with my wife. Some nights, I stroll into
the village and play guitar with my amigos. We entertain the children
with stories and songs." (KHH)
The VC offered, "I have an MBA from Harvard and could help. You should
spend more time fishing and with the proceeds, buy a larger boat. With
the proceeds from a larger boat you could buy several more
boats. Eventually, you would have a fleet of fishing boats. Instead of
selling your catch to a middleman, you could sell directly to the
processor and open your own cannery. With my advice on marketing, you
would ultimately control the supply of product, processing, and
distribution." (KHI)
"How long will all this take?" the stunned fisherman asked. (KHJ)
"Perhaps 10 to 15 years," the VC said. (KHK)
"What then?", the fisherman asked. (KHL)
"Then you could retire," the VC replied, "move to a small coastal
fishing village where you would sleep late, fish a little, play with
your kids, take a siesta with your wife, and stroll to the village in
the evenings where you could sip wine and play guitar with your
amigos." (KHM)
/business |
Posted at 10:30pm
Tue, Sep 13, 2005
eBay, Skype, and Out-of-band Community Building
#
RossMayfield
makes a
really good point about eBay's
acquisition of Skype: (JSU)
Pierre Omidyar once explained to me that one of the smartest things
he did when starting eBay was to not constrain communication around
his market -- by publishing email addresses. He was suggesting to me
that we open the Socialtext Customer Exchange, but the core insight is
more valuable. Back when I was running a B2B exchange, this was
considered a contrarian move. After all, it let buyers and sellers
circumvent your transaction fees in some cases. But letting go of
control fosters liquidity. Especially when you couldn't possibly
structure communications to fit all transactions. Today I would
venture that most of the communication on eBay's transactions are
out-of-band. Other communities with emergent liquidity such as
Craigslist succeed by enabling even further out-of-band communication. (JSV)
(This doesn't explain the valuation, but I'll leave that to the
analysts to sort out.) (JSW)
This is a core component of BlueOxen's long-term strategy to build a
learning community centered around the field of collaboration.
Lock-in completely defeats the larger purpose of such a community, and
it doesn't work anyway. The hard question is, what does it mean to be
a "member" of such a community? With commerce-centered communities,
the answer is easy: Transactions. For knowledge-centered communities,
the answer is less clear cut. (JSX)
/business |
Posted at 2:18pm
Thu, Dec 30, 2004
Self-Deprecating Venture Capitalists
#
From my buddy ScottFoehner: Check out BessemerVenturePartners'
anti-portfolio. Excerpts of some
funny (and painful) missed opportunities: (GFB)
eBay: "Stamps? Coins? Comic books? You've GOT to be kidding,"
thought Cowan. "No-brainer pass." (GFC)
Federal Express: Incredibly, BVP passed on Federal Express
seven times. (GFD)
Google: Cowan's college friend rented her garage to Sergey and
Larry for their first year. In 1999 and 2000 she tried to introduce
Cowan to "these two really smart Stanford students writing a search
engine". Students? A new search engine? In the most important moment
ever for Bessemer's anti-portfolio, Cowan asked her, "How can I get
out of this house without going anywhere near your garage?" (GFE)
Gotta appreciate VCs with a sense of humor. (GFF)
/business |
Posted at 10:31pm
