Andrew Lisy's Blog

22 May 2012

The Long Tail of Entrepreneurship

Pick up a newspaper (ha, what an antiquated expression!) these days, and you'll read about the growing gap in wealth between the upper class and lower class. Comfortable middle class jobs are disappearing, yet the number of billionaires is growing at an staggering rate. Politicians give all sorts of reasons for this disparity, but the true cause has nothing to do with policy, education, or haves and have nots -- the true cause is technological leverage.

Telecommunications advancements have made it trivially easy to take a good idea and send it around the world. An earlier post in this blog features a wedding program that I made using the typesetting language LaTeX -- I posted it because I had been looking for a good template to use (custom-printed wedding programs are hideously expensive), but the Internet failed me in my search. Now, a year later, I still receive hits and questions from all around the world, from people I don't know, asking about it. I never meant to create the template for a Buddhist wedding in Thailand (they'll probably have to take that cross off of the front page), but since there aren't a lot of other LaTeX templates out there, mine is the one that the world finds. If somebody makes a better one tomorrow, mine could easily fall off of Google. Such is life.

The "winner take all" game we play, fueled by worldwide technology leverage, ultimately pushes entrepreneurs out along the bell curve (you could make the argument that it's not a bell curve at all, but a fractal distribution as devised by Benoit Mandelbrot and popularized by Nassim Taleb). When my grandfather started his conveyor business many decades ago, it was risky, but not winner-take-all. If he executed perfectly, and the market conditions was absolutely perfect, he could possibly hope to expand to several states and build an empire slowly over many decades. If he executed very well, and the market was good, he could hope to make a good income that would allow him to live comfortably and raise his family. Of course, if the market was bad or he wasn't good at running the business, failure was still an option.

Some businesses still look like this -- restaurants and stores are prime examples. But the telecommunications landscape has changed the prospects for entrepreneurs. For many businesses now, most people that venture on their own will fail, and a few will hit the ball out of the park and create products that become worldwide standards. This isn't inherently a bad thing -- it means that consumers can now use the best products from people all over the world instead of simply the products that are available in their immediate vicinity. On the other hand, it means that entrepreneurs need to compete with the world market if they are to launch a successful business. No longer can "very good" execution in a good market provide a relatively good, lasting income -- the absolute best will win out.

Overall, this is a positive thing, and simply means that entrepreneurs will need to rely on creativity and innovation, and not geographical isolation, in order to win. Even more exciting, the world market means that creativity and innovation can come in tight niches that rely on global audiences to become profitable. The new "stable entrepreneurship" is avoiding the "me too lottery" and finding a space that has yet to be disrupted by technology, and creating a solution that people love to use. A tight niche will likely have fewer competitors because of the smaller pie, so an entrant has a better chance at capturing it. Even more risk can be put on or taken off by judicious use of funding, both in sheer dollars and in timing.

Ultimately, although the safe entrepreneurship environment isn't quite what it used to be, a person looking to start a business today without the make-or-break, swing-for-the-fences outlook has options. Choosing a smaller market size and taking more funding earlier will reduce risk and reduce payout. Attacking a large market and bootstrapping as long as possible will result in a more binary outcome. Either way, technology leverage is a necessary partner in the process, and should facilitate any choice along the spectrum.

16 May 2012

The Cloud Falls Short

The cloud provides tremendous leverage for individuals and companies that don't have a lot of extremely sensitive data or laws around their data handling. But for a growing number of businesses in fields like health, defense, or financial services, the cloud simply isn't an option, due to strict regulation on data storage and handling. For example, any company that engages in financial trading is required to preserve much of the information generated daily -- like emails and trading records -- for anywhere from a year to indefinitely. Without the ability to monitor and house this information on company-owned servers, businesses in these fields do not have the option of using managed services that live on faraway computers.

Yet clearly, these are some of the businesses most in need of disruption. I recently sat on an airplane next to a COBOL programmer that worked for a large insurance company. COBOL -- a programming language first devised in 1959! However, guys like this are still around to manage the legacy systems, likely more than 20 years old, owned by this insurance company. Instead of focusing on innovation and operational optimization, companies with huge legacy systems are instead simply trying to stay afloat on entrenched systems. Sounds ripe for disruption! But without the ability to gain the leverage possibly by managing large numbers of users centrally, startups simply won't be attracted to the problem or the industry.

The solution is what I'll call Environment as a Service (EaaS). The idea is relatively simple -- providers produce software that they then package in a turnkey software environment image. The images can then be dropped into any computer with some minimum specifications -- either a physical box or [more likely] a virtual machine set up with the required resources. The client companies would own the physical computers, and would be responsible for low-level functionality like hardware and connectivity. The providers, on the other hand, would be responsible for everything else -- ensuring software functionality, security, and updates. Services could be knit together through well-understood interfaces to ensure easy swappability -- imagine an internal microblogging EaaS that wrote out all storage needs to a Dropbox EaaS. To swap out one microblogging EaaS for another (eg, the Twitter EaaS for the Yammer EaaS), you'd simply have to ensure they could understand each other's data, and point them to the proper storage EaaS.

The beauty here is that the clients now own (as in, physically hold) their own content. If they want to erase it, they can do so simply by reformatting their own box and destroying their own backups (or destroying their Backup EaaS box) -- they don't need to worry about the compliance policies of a third party cloud vendor. They can control their own security -- choosing arbitrary firewalling or access procedures -- without worrying about a startup that might not have the same security priorities. Finally, and most importantly, they can reap the benefits of off-the-shelf software solutions without installing applications (just images), worrying about operating system compatibility, or troubleshooting security patches.

The benefits of this arrangement to the client are clear -- the advantages of the cloud with the peace of mind and regulatory compatibility of "on site" data and computing. For the providers, creating a plug-and-play, turnkey solution that would allow their app to easily function offsite would open up new revenue lines in industries that were previously untouchable. The intermediate solutions today, such as the Google Search Appliance, are a step in the right direction, but fall short on a number of goals, such as open APIs and ease of deployment. The emergence of a well-documented, industry standard EaaS system would mean thousands of new, deep-pocketed customers for the providers, a rush of development and cutting-edge innovation for the clients, and better systems and products for the people that depend on these services.

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16 Jan 2012

Life Needs Randomness

I've been thinking a lot about filter bubbles lately -- and not just the internet kind. The people around me every day are a filter bubble of their own -- chances are they drive similar cars, wear similar clothing and have similar hobbies. Since people tend to cluster around people that are like them, and then subsequently attempt to fit into that group, our lives tend to keep us pretty firmly within our comfort zones. We don't get a lot of randomness.

This post was originally about curation on the web, which is a solution specific to the filter bubble problem online. Curation, while not a new concept in real life or online (we've long had DJs and social bookmarking services), is picking up steam as people realize that there is value in assembling interesting and unique collections. Sites like Gilt, Pinterest and Restaurant Bucket List all deal in curation (Gilt employs people to do it, the others crowd source it) and let visitors stray outside of their algorithmic recommendation circles to find new and unique areas or things to try out.

But there's more to breaking out of filter bubbles than just changing what sites you go to online -- there's a big bubble in the real world too, and breaking out of this one is even more difficult. The solution is not to set out on a quest to find new interests -- you don't know what you don't know, so you probably won't find it. The trick is to increase randomness. When I think of a typical week, I don't get that many opportunities for serendipity -- the people I know and the places I go are generally pretty predictable.

I don't have a perfect solution -- there probably isn't one. However, there are some interesting prospects that I'll be watching and thinking about. A few standouts on the web to help increase real-life randomness are Meetup and GrubWithUs. Meetup is focused on informal meetings for any groups of people that want to assemble, and GrubWithUs bills itself as a way to "Eat with Awesome People". Another interesting avenue is volunteering -- in the past, I've found that the perspectives gained from volunteering are as outside-the-box as any I've found elsewhere.

Serendipity is an important ingredient to success -- not just financial, but in life. We can all think back to chance encounters that ended up making a big impact on how we think, act or relate -- and often they happen because of a new person or experience outside of our normal comfort zone. The more steps we can take to actively expose ourselves to new ideas and people, the more interesting people we will become, and the more success we will have.

19 Dec 2011

Good Enough

I just finished reading an article in the New York Times blaming the high cost of law school on the onerous requirements set by the sole ratifier of legal qualifications, the American Bar Association. In an hour or so, I will head over to a CVS walk-in clinic to get a diagnosis for some (likely cold related) chest pains I have, and hopefully some accompanying medicine.

JulyAug 2008 - Lawyers Rule; Doctors Drool - balance drawing

The law profession and the medical profession are two extremely high cost fields. Students of either discipline must spend hundreds of thousands of dollars and untold apprentice hours learning the intricate details of their trade. When they finally are deemed fit to practice, they are licensed by a central body and allowed to "serve the public", again at an astronomical cost.

The irony is that many of the needs that the public are much simpler than the complicated licensing procedure leads one to believe. Just as I don't need a brain surgeon to bandage my stubbed toe, I probably don't need a fully licensed lawyer to prepare basic divorce papers. Unfortunately, however, there are few gray areas when it comes to medicine and law. The intentions are good -- given what's at stake (life and liberty) the licensing bodies want to make sure that the public gets fully qualified staff.

Inevitably, however, this "one size fits all" approach needs to change. The legal and medical professions, in order to keep costs down and best serve the world, need to develop a pyramid structure where basic issues can be dealt with by people with less (and less expensive) training, and more complicated situations are escalated to better-qualified (and more expensive) specialists. We already see the beginnings of this happening in both fields -- walk-in clinics staffed by nurse practitioners licensed to write some prescriptions can efficiently handle fevers and aches without involving a doctor. Online services like LegalZoom can sell boilerplate documents for certain basic legal structures and situations. As a result of these initiatives, thousands more have access to basic care and eager entrepreneurs have one less cost and barrier.

As our country faces escalating health care and tuition costs, as well as a widening gap between classes, the solution isn't adding more laws and limits or fixing prices. The solution lies in the question "what is good enough?", and allowing both suppliers (eg, medical and legal professionals) as well as consumers decide the level of specialization they need.

21 Aug 2011

What is the Cloud, Anyway?

In the last 9 months, it seems like just about everyone I know has gotten a new job. They still work at the same companies, calling on the same customers, designing the same equipment. Nine months ago, they would have described themselves as sales representatives, data center engineers, or software developers. Today, they all work with "the cloud".

What's interesting is to hear different definitions of "the cloud" as it pertains to different areas of business. To a storage engineer, the cloud means bigger datacenters, hungry for hard drives and bulletproof RAID systems. To a telecommunications salesperson, the cloud is a way to hold meetings across the US or even the world without physical presence or expensive dedicated lines. To a scrappy entrepreneur, the cloud is a way to scale an exponentially growing web application on-demand as more users require increasing resources faster than even the best purchasing staff can get hardware spun up and on-line

While these definitions are all convenient in their domains, my favorite definition, which has yet to fail me, is simple: the cloud is about rental. Rental is a powerful concept: it allows people or organizations to use products or services on an as-needed basis, without owning them yourself. Cars, apartments and DVDs all benefit from separating owners and users.

The cloud is simply an extension of the rental business to all things computing. For the first 50 years of computer history, anyone that wanted to use computers needed to purchase expensive hardware and maintain complicated networks. [Mainframes changed this a bit for some of history but lost favor to cheaper, commoditized hardware. But that's another post]. Companies that wanted a presence on the internet needed to buy servers and try to efficiently balance cost, obsolescence, and load. Users that wanted to get all the benefits that come with PCs -- word processing, storage, internet -- needed to buy relatively expensive desktop boxes that required frequent updates. The three converging factors of cost, obsolescence and load created a game of hot potato such that nobody wanted to take the risk inherent in renting out computing services, because owning and renting out to others was a dangerous proposition.

In the last 3-5 years, the confluence of commoditized hardware, network connectivity, and interconnecting software has made the idea of renting computer services possible. As a result, big companies that are experts at managing some aspect of computing such as storage, software, or processing, can take the responsibility of "owning" the necessary hardware or service and allow others to access their systems for a recurring fee. For many users, renting in this manner is an extremely attractive proposition, because it brings with it enormous flexibility. Individuals can rent space to store pictures, videos and music online, which relieves them of the hassle of backing up and transferring. Entrepreneurs can rent network connectivity and processing power, which allows them to "try out" a new business without the enormous capital commitment of building a datacenter and support staff. Established corporations can simplify their IT organization by renting everything from CRM systems to productivity software to entire operating systems. The cloud means that nearly any user can get the benefits of centrally and expertly managed products without the cost of actually owning and maintaining those products themselves.

It's exciting, because it represents tremendous leverage. Just as mortgages put ordinary people into great homes (some might say too great, but again, another post), cloud computing brings great services to ordinary people and businesses. Allowing a college freshman access to hundreds of computers in an Amazon datacenter for pennies per computing hour has the potential to spawn more businesses than venture capital ever did. Although "the cloud" might be a popular buzzword, it's also a truly transformational concept that will be around for the long haul. Understanding it for what it really is -- a rental business -- helps cut through the newspeak and lays bare the tremendous implications.

4 Aug 2011

Move Over, Wal-Mart

We just moved into a new apartment in downtown Chicago, and are in the mildly unpleasant packing stage. Yesterday, my mother- and father-in-law came over to help us move some boxes and organize. No sooner did we get our kitchen table unpacked that we realized we needed a square bit for the screws in the table. With no local hardware stores open at 7pm, I decided to just order a bit set from Amazon Prime with local express delivery for a total cost of just over $10 ($7 for the bit set and $3.99 for shipping).

Fast forward, 9:45am today, the package comes from UPS.

Wow! There are few companies that have transformed their markets as much as Amazon (and I'm not even talking about their cloud businesses). Think back for a second, ten years ago. Before Amazon, shopping online meant doing a Yahoo! search, coming up with some sketchy looking web site that wanted a credit card on an unsecured connection, and then paying $12 to ship the product. Hopefully I'd get it in a week or two.

Now, to the chagrin of other online (and perhaps local) merchants everywhere, I can't tell you the last time I ordered from a site that wasn't Amazon. For $16/year ($80 for Prime shared among 4 other people), I get free 2-day shipping and $3.99 overnight shipping on a huge chunk of items they carry. To put this in perspective, $3.99 is less than I'd pay to take any type of public transportation to a hardware store, and I get the item almost as fast. Unlimited free 2-day shipping means that I can order just about anything I want, as much as I want, and get it fast -- typically orders placed Monday at 11pm will be on my doorstep early Wednesday.

What does this mean for Wal-Mart, the undisputed king of retail in the US? Why do people even need to go to a store anymore? Wal-Mart has built their business (a $175B market cap, as of this post) on low prices and efficiency. But Amazon ($93B) is pretty efficient themselves, and a lack of sales tax in many states means potentially even lower prices. They don't need physical stores, or greeters, or cashiers -- just robots and warehouses. While $3.99 next-day shipping isn't necessarily available to every geography in America, overnight and 2-day UPS does hit a lot of customers out there. While there's still a big barrier to online shopping for most people in the world, it is eroding fast.

Innovation in the retail goods space is going to be key for either (or any) company that wants to be "king of retail" in the next 10 years. RFID tagging, local drop shipping, in-store pickup and more are all going to change the way consumers purchase basic staple goods. Wal-Mart is no slouch themselves when it comes to innovation, particularly in the supply chain, so it will be an interesting battle. The big winners, fortunately, are the consumers, so we can sit back, watch, and vote with our dollars -- or maybe our one-click purchase credit card clicks.

If you're interested more in this topic, check out this excellent Amazon vs. Wal-Mart Infographic at Minyanville

28 Jul 2011

Customer Service 2.0 - The Web Meets the Helpline

What percentage of your customer service questions are reliably answered with a phone bank or automated system? Perhaps one in 20 times I end up getting some sort of satisfactory resolution from an automated system, but most of the time I end up screaming "OPERATOR!" into the phone while simultaneously mashing "0" in the hopes of getting a person. After 5 or more minutes of navigating menus and entering account numbers, someone finally picks up. Their first question? "Hi, what is your account number please?"

Infuriating, and vastly inefficient.

Instead of the silliness of using an inherently slow, linear information system like a phone to attempt to gather information only to place the customer on an interminable hold, why not offload some of the gruntwork to the web? A simple login to the company's site followed by a form where I describe my problem would make getting the correct information to the company much easier. More important for me, it would make *entering* that information much easier and more efficient. After clicking the submit button, the page could give me a useful estimate of my hold time and then the backend system could call my phone and connect me with a real person as soon as one was available. For me, no waiting with the phone to my ear; for them, less wasted time repeating information means less customer service costs.

Amazon is on the right track already (surprise!) -- they have a help option that allows logged in users to request a call. But you still end up spending some time in menus, and there is very little information that you add before they call you. Such a change shouldn't be terribly difficult -- companies like Twilio and open-source software like Asterisk make phone-computer bridging relatively easy. Perhaps somewhere, somebody does this perfectly already -- but why not everybody?

6 Jul 2011

It's Gotta Be Open

I'm continually amazed at how effectively cloud services like Dropbox, Amazon S3, Amazon Cloud Player and Google (well, just about Google everything) have eliminated my dependence on any given computer or device. I take tons of pictures and save lots of contacts on my phone, but if I were to lose it, I could remotely wipe it with no loss of data whatsoever. Same thing (mostly) goes for any of my computers -- they're all basically interchangeable. It's great to throw stuff into a Dropbox folder or Cloud Drive playlist and not have to worry about syncing files yourself.

However, perfect interchangeability relies heavily on open standards. Today, as I was transferring some songs from my laptop to Cloud Player, I was reminded of the dangers of DRM (copy protected) files when it reminded me that my copy-protected iTunes files* were unable to be uploaded. Since I rarely listen to music on my computer, and my Android phone doesn't support iTunes DRM, this effectively means my files are now useless. Luckily it's only 20 or so songs (and I knew they were eventually going to be useless when I bought them), but for people with big libraries, it's definitely a pain. The lesson going forward is to always avoid DRM, unless you're OK with losing the file in the future. Books on my Kindle, for instance, are basically gone if I ever get a different device, since they're heavily locked down.

The lesson is -- devices don't matter any more. What matters is interoperability. Dropbox, to their huge credit, focused on wide support from the very beginning -- they had a Linux client early on, and they have mobile versions for iOS, Android and Blackberry. It's a pretty safe bet that they'll support just about anything out there going forward. iCloud, on the other hand, is firmly entrenched in the Apple ecosystem. It works great if you've got a Mac at home that you connect to your iPad and iPhone. You can even throw Windows 7 in there without too many issues. But what about some of the exciting devices coming out from the other guys? Apple certainly doesn't have too much interest supporting their arch-rival Google's Android OS, and they won't be bothered to support Blackberry or WebOS. You can put all of your stuff on iCloud, but moving later when the next shiny tablet comes from someone other than Steve Jobs won't be pretty. There's always going to be some other cool toys, and vendors are always going to try to lock you into their platforms. Stay with the guys that let you take your data anywhere you go -- it's the only way to really be future-proof.

* Recognizing the problem, iTunes has since dropped DRM on files that you buy, and you can remove the DRM from your existing files for $0.30. It's not worth it to me really, but if you have a big collect that you don't want to reassemble, it might be the easiest move.

2 Jun 2011

8 Ways to Lock Down Your Digital Life

Locking down your digital stuff is more important today than it's ever been. Tracking is easy, data breaches are coming up every day (today it's PBS, Lockhead Martin and RSA), and we do everything online. Lately, I've been looking a lot into ways to get better security on my mobile, desktop, and browser. Here are 8 relatively easy ways you can turn your security up a notch without driving you crazy jumping through hoops.

Use LastPass to create super-strong passwords. LastPass is a password manager that lets you create different passwords for every site that you use. Those passwords are then stored encrypted both online and on your local computer (which means that even if the LastPass servers are hacked, your info is safe). Whenever you want to log into a site, simply type your master password, and LP fills in the rest for you. It's far better to use strong, unique passwords across the web than to use fluffybunny1 on everything. LastPass works with everything -- browsers, phones, desktops -- so it's super-easy.
Install BugMeNot (Firefox, Chrome extensions) to give you quick throwaway accounts. BugMeNot lets you log into many sites that require registration by providing you with a dummy account, so you don't give them any info.

Read the rest of this post »

15 May 2011

Own Your Data(base)

It's been a terrible month for user data security. Epsilon and Sony, both high-profile and data-rich companies, have been breached and revealed sensitive personal data to hackers. In Sony's case, the 77 million users affected weren't even notified that their names, addresses and potentially credit card data were compromised until six days after the attack. Many speculate that in the rush to get out new product features, Sony neglected to carefully think through their security model for protecting the valuable user data they they stored. Clearly, the current system of data storage and retrieval is broken. As today's New York Times reports, there is currently no U.S. federal law regulating data theft, penalties, and notification requirements, so states are left to determine their own protocols. Companies have little downside to collecting troves of information, since the penalties for losing it are unclear while the benefits to having it are potentially great. Meanwhile, consumers have little or no control over what happens to the increasing amount of personal information that they give or leave as they interact online and in person with well connected businesses.