Down the Start-Up Staircase

[ViC78]

Re: Down the Start-Up Staircase

The bottom line, is that Protectionism is at it's heart a tax... a particularly bad one because it negatively impacts the free flow of goods that makes capitalism work. And taxes always slow things down...

True free market capitalism entails competition on a level playing field, and this field is far from level as you yourself point out with the labor and environmental regulation advantages which China has. I think that people of a nation should be put first rather than an ideology. Real wages for average americans have now been stagnant for a couple of decades and this is especially true for the blue collar workers. Sure, we would pay more for goods/widgets, but at least, we keep the dollars circulating in our economy. America is the demand engine for the world and surely we can sustain a home grown industry. Things were not bad until we started outsourcing low skilled jobs which afforded a lot of americans a chance at a middle-class existence. Americans were sold the promise of transitioning up the food chain by becoming "knowledge workers" , where high paying, high skill jobs would be available for everyone. However, as it is evident now, even these jobs have been rapidly outsourced to countries like India.

Is this efficient? Yes. However, is this good for America? I kind of doubt it. I think there is a rapid Brazilification of the economy happening, wherein the 10% of the people will be very wealthy with a vast underclass living on subsistence jobs.

[reggie]

Re: Down the Start-Up Staircase

Sorry if this has been posted on this forum previously. Given the direction of this thread, I believe this is relevant here.

[MarkL]

Re: Down the Start-Up Staircase

True free market capitalism entails competition on a level playing field, and this field is far from level as you yourself point out with the labor and environmental regulation advantages which China has.

Yes, it is far from level. The average Chinese person makes a fraction of what the average American does, has had no realistic chance of owning their own home, probably has never driven a car, has very little chance of saving to start a business, never HEARD of the term Venture Capital, and probably spends over his/her LIFE what an average American spends in a year. Is that a level playing field for those people? Their quality of life, health care, food quality, opportunity to travel, etc etc are all incredibly minimal compared to the average American. And THEY have the advantage?

Actually they do. Know what it is? It's motivation. Since they don't have the good things in life they are prepared to strive to get them. THAT is their biggest advantage.

Even the average entrepreneur in China has minimal access to capital, substantially less freedom than we do, and a legal and regulation system that is unstable, sporadic and subject to the changing whims of government officials. I have friends who are Chinese entrepreneurs and they have it every bit as difficult as we do... albeit in very different ways and in a very different culture. Chinese entrepreneurs have problems like getting access to pure water, figuring out how they can save a sick workers life, a permit process that is undocumented and protecting themselves from government officials that impose non-documented taxes on them.

Our entrepreneurs and companies have the advantage of being able to go over to China and build our factories and leverage their low labor costs to the benefit of the American consumers. Is this a level playing field? I know the world doesn't think so! The world thinks we're screwing the 3rd world countries out of both their human and physical resources. It's substantially harder for the Chinese to start a company and learn to market to America... but it's happening and will continue to... Lenovo is a great example. But mostly they sell to OUR companies who rake in the lion's share of the profits. Who owns Walmart? Target? Apple? Dell? Payless Shoe Source?

Yes, they have the "advantage" of emerging from a 3rd world status while we have the "advantage" of having a 1st world infrastructure that's having to struggle to maintain it's 1st world status.

I certainly know which "advantage" I would rather have.

I think that people of a nation should be put first rather than an ideology. Real wages for average americans have now been stagnant for a couple of decades and this is especially true for the blue collar workers. Sure, we would pay more for goods/widgets, but at least, we keep the dollars circulating in our economy.

Oh isn't that terrible. Oh my oh me. Our 1st world real wages have been stagnant for a couple of decades. It's all those greedy unfair cheatin' Chinese's fault. Go get to work and be grateful that you have fresh water, can breathe the air, own a car, that a hospital will serve you if you walk in the door bleeding AND the wages that are many times higher than most of the world. And when you do, remember that America has cheated the world a helluva lot along the way.

Sure... keep the dollars circulating in our economy and watch our inbreeding corporations get even farther behind in their ability to compete, followed by Hyperinflation as the world doesn't want our dollars because it doesn't want our products. Watch the DXY skyrocket until our dollars can no longer buy the oil and other necessary goods at the CHEAP prices it can today because we can no longer leverage the international resources, trade, and human advantages that have given us our quality of life.

America is the demand engine for the world and surely we can sustain a home grown industry. Things were not bad until we started outsourcing low skilled jobs which afforded a lot of americans a chance at a middle-class existence.

America became the demand engine of the after it first became the primary producer to the world. Today we are living off of debt that is created from our former greatness. We are owed NOTHING because we are the demand engine of the world...and in fact WE OWE A TON OF DEBT BECAUSE WE LIVE BEYOND OUR MEANS.

Americans were sold the promise of transitioning up the food chain by becoming "knowledge workers" , where high paying, high skill jobs would be available for everyone. However, as it is evident now, even these jobs have been rapidly outsourced to countries like India.

Whoever is losing their programming job to India needs to get off their butt, grow up, and learn to compete in THE REAL WORLD. Get your government to lower your taxes and stop blowing your hard earned money out it's @ss. Figure out how to program better than somebody on the other side of the world, or learn how to leverage the other side of the world yourself! Figure out how to leverage your geographic advantages and compete!

I think there is a rapid Brazilification of the economy happening, wherein the 10% of the people will be very wealthy with a vast underclass living on subsistence jobs.

I have 50 billionaires that live within an hour drive of me, that didn't start rich. Some of them (like Facebook) just started within the last few years. Others like Ebay, Apple, Google, Salesforce.com, Siebel, on and on and on all started within my career. For every one of those folks, there are 1000 millionaires in Silicon Valley and for every one of them 1000 happy suburbanites. America is still a land of opportunity. Yes, global corps are doing everything they can to gobble up the world, but our Gubment, Obama's healthcare and other programs are a STRONG counter-current. The Brazilification and Steal-from-the-Rich forces will continue to fight each other... neither is steam rolling our country yet.

The average American needs to stop whining about his disadvantages, turn off his TV and XBox, put down his Frappuccino, get off his butt and reeducate himself. The internet makes this easy. But while the rest of the EAGER HUNGRY populaces of the world are leveraging this new technology to learn and grow by studying tremendous hours per day... our citizens beg our government for unemployment extensions, go on two job interviews a month, and whine about all the advantages the Chinese have and how if they were employed, their wages would have stayed the same for years.

With that said, there are lots of good hardworking folks in this country that are starting companies, helping invent the green revolution, pushing back against our gubment and making money. I speak about a lot of American's in the above paragraph, but not all of them!

[MarkL]

Re: Down the Start-Up Staircase

You are missing the main thrusts of Grove's article: "productionizing" an innovation (moving it from prototype to full scale volume production) is both (1) a massive driver for job growth, (2) a crucible in which further innovation -for the next generation of whatever product- is forged. The top manufacturers know this; certainly the top manufacturers in Japan know this.

I certainly agree with this. Often US companies are involved with productionizing in Asia resulting in feedback to US design. I think the Apple products are a great example of that. With that said, if your point is that we are letting our technology bleed into Asia by outsourcing... that's certainly correct.

Japanese auto and consumer electronics manufacturers charge more for their locally sold products than those sold in foreign markets. Moreover, in the case of automobiles, tax laws make it very expensive to retain a used automobile for more than a couple of years. So consumers have to buy new models pretty often. The result is that the Japanese consumer subsidizes the overseas competitiveness of Japanese manufacturers. This brilliant idea helps destroy overseas competitors.

I agree with this. Our companies have the same abilities to do this. Competitive positioning and pricing strategy are very important elements in a strategic plan. But the root reason (IMHO) Japan's car industry killed the US industry is primarily quality. I think lots of American's would prefer to "buy American" even at a 10% premium. However, I for one, am NOT willing to sacrifice going through years of repairs.

It's tough to compete with near-slavery-level wages, yes.

The problem is they aren't "near-slavery-level" in China. They're very good wages for that country which is why China has seen the greatest migration in human history from the countrysides of China to the cities. These wages are not "unfair competition" on China's part... it's just the normal differences between 1st world and 3rd world incomes. One that capitalism will naturally leverage...that's what capitalism does eh?

Re: 'movie and software knockoffs increasing'; where have you been? At least 97% of the software in China is stolen. I don't happen to know the figure for music, but guess it is close to the same figure. It is very easy to compete when you systematically steal as much IP as possible.

Where have I been? ...reading June 2010 BSA testimony before Congress that Chinese piracy was down to 79% last year. USA is estimated at 58%. The world is changing. There have been government campaigns and arrests and in general Chinese are more law-abiding than US citizens so now that this is becoming truly illegal and enforced, most think piracy in China will continue to drop. China is working (and succeeding) at becoming a better world business citizen.

"Steal as much IP as possible" is an out of date and arguably prejudiced perspective. Just as Japan stopped this in the 70's, China is more than 1/2 way towards stopping this now. China has been actively and successfully soliciting international investment and this comes with requirements they are meeting. In addition, as happened with Japan, China is now graduating to becoming an innovator. Remember... companies in all countries steal IP. Microsoft stole Windows from Apple. Apple stole it from Xerox.

While all country's leverage their advantages, China is not playing the game much more unfairly on the international stage than the USA is. Yea, there are some currency issues... but we're playing those too by printing dollars out the wazoo. The real root of the USAs problem, is that 1. China is a serious competitor with a huge natural resource of cheap people and 2. That we have been living above our means at every level for 20 years.

[MarkL]

Re: Down the Start-Up Staircase

Given that I actually had posted links whereas you had not, at least I showed the sources of my data. Yes, Facebook now generates "tens of millions" of unaudited profit from revenues of $700 million to $800 million. Placing the $200M Digital Sky investment into a 10 year bond would have yielded $6M even today.

Yes, you showed your data but it was out of date.
Thanks for at least acknowledging my data was current and accurate.

So Digital Sky's investment is making more money just on Facebook first profitable year! This doesn't even count their multi-hundred-million dollar share of the company itself. Were you implying that Digital Sky made a bad investment? I think hilarity would ensue if you suggested that to them.

And again, Facebook already has a huge presence. How will they increase their profitability?

Gosh I don't know... better ask Google. They had a huge presence a few years ago too. I remember arguing with people that there stock was going to be worth much more than $85.00 because of their eyeballs.

I'm sorry you don't believe in Social Media. At Google they consider Facebook their single biggest threat. Here's a video that might help. Oh by the way... all the impressive statistics in this video are out of date and grossly LOW now.

All those other things about Garbage men and Teachers... I didn't say that. But unemployed manufacturing folks as Andrew Grove started this convo with? Yea... reeducation in a hot new market is a good idea.

I'm gonna bow out of this conversation now. I'm comfortable with what I've written and you can have the last word if you like.

[c1ue]

Re: Down the Start-Up Staircase

As is true for all of Hollywood, theme parks, the largest part of the book industry, television, the music industry and about 80% of all retail consumer purchases. They are all profit generating and longstanding industries nonetheless.

All of the above are profitable, and were profitable.

A huge difference vs. Facebook and its social networking cousins who are all uniformly black holes for capital. If they can't make money with 10M users, and can't make money with 100M users, just when will they make money?

However, some of them succeed and our world is changed. This is obviously true of both Internet 1.0 and 2.0. Ebay and Google are two of the largest employers in the valley. Salesforce.com (arguably one of the earliest to adopt 2.0 program via the internet technologies) is also. Facebook is hiring like mad. iTunes is a 2.0 technology.

Ebay was profitable almost immediately. Google ditto was a minimal investment with a very high profitability, and had a clear business profit model. Salesforce.com also had a clear business profit model.

The social networking? Not so.

Facebook has consumed massive capital and is only valuable because of the redux of 1999 eyeballs. iTunes succeeds primarily by disabling the music industry's capability to reharvest profits for its IP for new platforms. Sure, there are some examples of small bands that make it big via solo online promotions, but the reality is that the vast majority of songs passing through the iTunes system are from CDs into users iPhone and PCs/Macs.

Where before you had to buy a new 8-track to replace vinyl, and a new cassette to replace 8-track, and a new CD to replace cassette, or a replacement if you damaged your existing copy, now you just use your iPod/iPhone.

The music industry made a huge error enabling this to occur.

Not defending their business model - the reality is that there is no more need for thousands of $100K salary music industry execs any more than MBAs in other realms, but it is equally foolish to think that iTunes is a technology or business model triumph as opposed to what it really is.

You implications that innovation isn't occurring and that ALL of Web 2.0 has no value is simply wrong.

Sorry, but you are being defensive. I am dispassionately examining the business aspects of Web 2.0

The reality is that the business model of Web 2.0 is identical with that of Web 1.0 in most of the visible cases: accumulate vast numbers of users in a money losing fashion and get lots of investment.

Billion dollar employers with thousands of employees each have already been created and far more jobs via numerous smaller employers.

Again, you confuse market valuation with value creation. Where are all the high flying billion dollar startups now? Friendster? MySpace? GeoCities? InfoSpace? Boo.com?

Just because idiot VC money is going into feeding Eyeballs 2.0 frenzy, doesn't mean the outcome is going to be any different.

Personal business-wise it makes plenty of sense to participate: why not take your shot when you can make millions from getting bought out in return for 2 or 3 years of your time?

But very few of the Web 2.0 startups even have a prayer of ever being profitable. Exit strategy is identical to before: get big, get bought, get out.

Investing in proven successful startup teams doing new tech is "reharvesting"?

If you're a janitor, or an entry level engineer, having some idea and running off to form a startup is most likely a truly different vision.

If you're an architect, the question of fiduciary duty comes into play.

As a principal technical contributor, it can be argued that your ongoing vision of an ongoing stream of development is exactly what you are paid to do.

When you leave your existing company and form another creating a product servicing the exact same market, it is quite clear that you were holding back.

Of course, the previous company would have used your new wrinkle to reharvest with their customer base as well, but then again the only differences between the 2 acts are the split of the take and the web of responsibility between employer and principal employee.

I would argue that it is the disfunctional nature of the modern corporation as well as the corporate involvement with disfunctional IP laws which are the source of this problem.

Nonetheless a spade is a spade. An architect leaving to recreate a tool he was responsible for is no different than a sales executive leaving with his customer 'book': both are breaches of fiduciary duty.

I know this segment a bit, and the Intel ICE I worked on 30 years ago isn't ANYTHING like the tools available today. Even the tools of 5-6 years ago are quite antiquated by 2010's comparison!! So... innovation is occurring in this process.

I don't know about 30 years ago, but I do know that all 3 tools put out by the 3 EDA companies in software test are written by the exact same guy.

So again, you fail to comprehend my point. I never said innovation didn't occur, I said it was the same guy reselling his capabilities to 3 different vendors. Had he stayed in 1 place, it is just as possibe that the same evolution would have occurred.

You only mention you could "probably" put out a competitive tool... but not a better one and "probably" isn't very confidence building.

I say probably because I am neither arrogant nor trying to sell anything to anyone.

My conclusion remains... startups create jobs. Is America pricing itself out of the Knowledge worker market? Certainly and fixing that is critical. But it's still the best path we have! Many good "3 folks" exist here that don't exist overseas and we should leverage them to build more startup employers as quickly as we can. The capital and VC infrastructure exists here and frankly what alternative do you propose for America? Bringing back mfg against the price and environmental advantages of China is unlikely to succeed (except maybe via startups in robotics) and would be painful and have a negative impact on US quality of life.

So to your point, let's reduce the burden on US overhead so this process is accelerated instead of slowed as it is by excessive HR, OSHA, Taxes, Lawsuits, Healthcare, regulation, etc. And to mine, let's educate more people to be entrepreneurs and train more of the creative "3 people" that enable the hundreds of jobs that is the final remaining functional piston in the engine of the US economy.

Unfortunately you are fully bought into the technotopian vision.

Not everyone can or should be in startup mode all the time. There should be value in society for those who merely maintain the roads, stock the grocery shelves, pick the fruit, do dry cleaning, etc etc.

To say that the ongoing deterioration of the middle class is simply due to its inability to innovate in the 'new' economy is exactly the argument a bankster makes:

I make more money than you, therefore what I do is more valuable.

I do not agree.

Secondly reducing the tax burden isn't actually what I see as the issue. Again, if you actually are interested as opposed to trying to justify your own beliefs, I recommend reading some of Dr. Michael Hudson's work.

[MarkL]

Re: Down the Start-Up Staircase

A huge difference vs. Facebook and its social networking cousins who are all uniformly black holes for capital. If they can't make money with 10M users, and can't make money with 100M users, just when will they make money?

Sorry to be so blunt, but you're quite out of touch my friend... Facebook is expected to make 1-2 billion this year and be tremendously profitable. YouTube is already profitable for Google. Linked In has been profitable for 2 years. The other "cousins" you refer to are the losers... excepting perhaps Twitter which is still on it's growth curve and could go either way.

Oh, and they all employ quite a few folks as well... and I guarantee you will employ more in future years.

Ebay was profitable almost immediately. Google ditto was a minimal investment with a very high profitability, and had a clear business profit model. Salesforce.com also had a clear business profit model.

Actually, no... both Ebay and Google took years to get profitable and required several rounds of funding... "The first funding for Google was an 1998 contribution of $100,000 from Andy Bechtolsheim, co-founder of Sun Microsystems. On June 7, 1999, a $25 million from Kleiner Perkins Caufield & Byers and Sequoia Capital.^[35] Google's initial public offering (IPO) took place which gave them 1.25 billion to work with.

...the reality is that the vast majority of songs passing through the iTunes system are from CDs into users iPhone and PCs/Macs. It is equally foolish to think that iTunes is a technology or business model triumph as opposed to what it really is.

Ah, I see the 4 billion dollars that Apple makes from iTunes is a failure. The 2700 people Apple employs to this end aren't "real jobs." The 70% of the Premium download market and 25% of all music sales they've accomplished is meaningless. No "business model triumph" there. Nope.

Where are all the high flying billion dollar startups now? Friendster? MySpace? GeoCities? InfoSpace? Boo.com?

Those are the losers of the race my friend. (Actually two of those were wrapped into larger companies).

Just because idiot VC money is going into feeding Eyeballs 2.0 frenzy, doesn't mean the outcome is going to be any different.

No, the outcome won't be any different. Many companies will lose and a few will emerge tremendously profitable and create tens of thousands of jobs.

But very few of the Web 2.0 startups even have a prayer of ever being profitable. Exit strategy is identical to before: get big, get bought, get out.

Actually that's true. For every 20-50 startups funded only a few will be sold profitably for millions and only 1 will have a prayer at becoming a billion dollar powerhouse like Apple, Ebay, Google, Facebook and others. But the conclusions you draw that the industry doesn't work is all wrong. The plan is Innovate, and sell your innovation to a larger company that has the capital and global spread to leverage and spread it more effectively (which typically means more jobs!).

As a principal technical contributor, it can be argued that your ongoing vision of an ongoing stream of development is exactly what you are paid to do. When you leave your existing company and form another creating a product servicing the exact same market, it is quite clear that you were holding back.

Having lived in Silicon Valley all of my life, I can tell you personally that the reality is that Corporations don't have the wisdom to catch new waves. That's why Oracle couldn't spawn Siebel despite millions spend on the objective. That's why Siebel couldn't spawn Salesforce.com despite multiple recommendations from dozens of people that over YEARS left the company to join the Cloud computing revolution. That's why Microsoft, to this day, has never gotten the internet, and didn't spawn Google or Cloud Computing. Big Corporations usually, at best, play catch-up.

Rarely....RARELY a company like Apple comes along that can continue to innovate. And frankly... when Steve was gone it floundered for years. And the vision in that company is led and championed by the startup visionary who saw the PC in every house LONG before IBM even had the slightest inkling it was possible.

I would argue that it is the disfunctional nature of the modern corporation as well as the corporate involvement with disfunctional IP laws which are the source of this problem.

YES! You have a clue! THIS is why VC works, and why so many great employers have been created over the decades.

So again, you fail to comprehend my point. I never said innovation didn't occur, I said it was the same guy reselling his capabilities to 3 different vendors. Had he stayed in 1 place, it is just as possible that the same evolution would have occurred.

He sounds like quite a guy... I'm glad we finally agree innovation occurs in this process!! However, you still fail to understand the motivations of capitalism if you think a person at an 8-5 boring job is going to do what an entrepreneur does who has a shot at millions. And as you've said yourself, "the disfunctional (sic) nature of the modern corporation" makes it unlikely they would have had the necessary vision to make the leap.

There should be value in society for those who merely maintain the roads, stock the grocery shelves, pick the fruit, do dry cleaning, etc etc. ...I make more money than you, therefore what I do is more valuable. I do not agree.

You are a socialist. Capitalism is the best and most successful system man has yet tried and while as is true with all of man's institutions it has many major flaws, it works and works well. I am a capitalist and will not agree that someone "stocking grocery shelves" provides the same value to society as Steve jobs whose technologies have transformed our lives and whom directly employs over 10 THOUSAND people and indirectly employs many many more.

[c1ue]

Re: Down the Start-Up Staircase

Sorry to be so blunt, but you're quite out of touch my friend... Facebook is expected to make 1-2 billion this year and be tremendously profitable. YouTube is already profitable for Google. Linked In has been profitable for 2 years. The other "cousins" you refer to are the losers... excepting perhaps Twitter which is still on it's growth curve and could go either way.

Sorry to be blunt, but your statement above is flat out wrong.

Revenue isn't profit. Facebook was looking at all of $500M revenue as of September 2009 and was not expecting to be profitable on a cash flow basis until this year.

http://www.businessweek.com/the_thre...itability.html

On Tuesday, those concerns were momentarily quieted as Facebook announced that it’s now free cash flow positive.
This doesn’t mean the social network is a profitable operation yet. Rather, the cash it generates from advertising and other forms of revenue now exceed the cost of servers and other capital expenditures required to keep Facebook running. One-time costs, like the reported $50 million acquisition of Friendfeed last month, and operational expenses like personnel, are not included in this equation. Outside investments in the company, like the $200 million it raised from Digital Sky Technologies in May, are not accounted for either.

http://blog.facebook.com/blog.php?post=136782277130

We're also succeeding at building Facebook in a sustainable way. Earlier this year, we said we expected to be cash flow positive sometime in 2010, and I'm pleased to share that we achieved this milestone last quarter.

Being profitable on a cash flow basis is itself not necessarily profitable, especially if Facebook's 9 digits of invested capital is taken into account.

Similarly your assertions about Youtube are also wrong:

http://www.webpronews.com/topnews/20...-profitability

The bad: YouTube, almost four years after Google spent $1.65 billion on it, still hasn't turned a profit. The good (if you believe it): the site is supposed to be in the black before long.

LinkedIn is profitable, but how much? As a private company it is impossible to say just how profitable it actually is. Certainly growth has slowed considerably.

Actually, no... both Ebay and Google took years to get profitable and required several rounds of funding... "The first funding for Google was an 1998 contribution of $100,000 from Andy Bechtolsheim, co-founder of Sun Microsystems. On June 7, 1999, a $25 million from Kleiner Perkins Caufield & Byers and Sequoia Capital.^[35] Google's initial public offering (IPO) took place which gave them 1.25 billion to work with.

Again, the facts contradict your statements.

Ebay was profitable in 1999 - 1 year after going public and less than 3 years after incorporation:

http://investor.ebay.com/releasedeta...eleaseID=15257

The Company generated net revenues of $34.0 million in the first quarter of 1999, a 469 percent increase over the $6.0 million reported for the same period last fiscal year. Gross profit margin decreased to 85 percent for the quarter from 89 percent a year ago. Net income for the current quarter was $5.9 million, or $0.05 per share on a fully diluted basis.

While $213M was raised for Paypal, this was well AFTER Ebay was a profitable operation.

Similarly Google received investment in 1998 and 1999, but was profitable in 2001:

http://news.bbc.co.uk/2/hi/business/1476805.stm

Monday, 6 August, 2001, 23:01 GMT 00:01 UK
Google profitable, new chief says

Internet search giant Google has joined the elite number of dot.com firms to be running at a profit, the company's new boss says.

Eric Schmidt, who while at Sun Microsystems "led the development of Java", said the company had operated at a profit for the last two financial quarters. "We are quite profitable," Mr Schmidt said. "We are not talking about 1%."

In neither case was hundreds of millions or billions of dollars invested.

Ah, I see the 4 billion dollars that Apple makes from iTunes is a failure. The 2700 people Apple employs to this end aren't "real jobs." The 70% of the Premium download market and 25% of all music sales they've accomplished is meaningless. No "business model triumph" there. Nope.

If I were to create a company in Zimbabwe focused on selling pirated DVDs and CDs, and built it into a billion dollar revenue company, would that be a triumph of business model?

Again, you simply fail to understand what I said.

What I said was that iTunes doesn't generate value from selling $0.99 songs.

iTunes generates value by disintermediating music companies from the media by which they sell their music. This includes both future sales as well as reharvest. This in turn reinforces the Apple hardware brand.

The music industry is no angel either, but iTunes' success is entirely due to a mistake on the music industry's part.

Those are the losers of the race my friend. (Actually two of those were wrapped into larger companies).

Given that these were the 'front runners' in the Web 1.0 - and several were build/sold/get out, it is hard to reconcile that this generation is any different.

Or is it "different this time"

No, the outcome won't be any different. Many companies will lose and a few will emerge tremendously profitable and create tens of thousands of jobs.

An assertion with no proof

Having lived in Silicon Valley all of my life, I can tell you personally that the reality is that Corporations are big monoliths that historically don't have the wisdom to make the investments to catch the new waves. That's why Oracle couldn't spawn Siebel despite millions spend on the objective. That's why Siebel couldn't spawn Salesforce.com despite multiple recommendations from dozens of people that over YEARS left the company to join the Cloud computing revolution.

You failed to answer my point: a new person or company which evolves a new product is one thing. The same person evolving the same product is not.

He sounds like quite a guy... I'm glad we finally agree innovation occurs in this process!! However, you still fail to understand the motivations of capitalism if you think a person at an 8-5 boring job is going to do what an entrepreneur does who has a shot at millions. And as you've said yourself, "the disfunctional (sic) nature of the modern corporation" makes it unlikely they would have had the necessary vision to make the leap.

And again, you miss the point.

Do you even understand what fiduciary duty is?

It isn't that the corporation is always wrong, nor that the individual is always right.

You are a socialist. Capitalism is the best and most successful system man has yet tried and while as is true with all of man's institutions it has many major flaws, it works and works well. I am a capitalist and will not agree that someone "stocking grocery shelves" provides the same value to society as Steve jobs whose technologies have transformed our lives and whom currently employs over 10 THOUSAND people.

Is this the strongest commentary you can contribute?

A sophomoric recitation of the 'Capitalism is Good', 'Greed is Good' mantras? Plus some ad hominem?

Unlike you, I recognize that there is value in what others do who don't play the venture capital casino game.

Your vision is frankly simply a technotopian version of the Bankster's motto: I make more money therefore what I do is right.

Or put another way: A technorati saying: "Let them eat cake"

[MarkL]

Re: Down the Start-Up Staircase

Sorry to be blunt, but your statement above is flat out wrong. Revenue isn't profit. Facebook was looking at all of $500M revenue as of September 2009 and was not expecting to be profitable on a cash flow basis until this year.
http://www.businessweek.com/the_thre...itability.html
http://blog.facebook.com/blog.php?post=136782277130 Being profitable on a cash flow basis is itself not necessarily profitable, especially if Facebook's 9 digits of invested capital is taken into account.

Umm. Your links are from Sept of 2009! Let's go with 2010 eh?
http://www.theregister.co.uk/2010/06...d_2009_profit/
http://techcrunch.com/2010/03/03/facebook-revenue-2010/

Really...can't you even spend 5 minutes getting facts from the current year before responding?

Similarly your assertions about Youtube are also wrong:
http://www.webpronews.com/topnews/20...-profitability
LinkedIn is profitable, but how much? As a private company it is impossible to say just how profitable it actually is. Certainly growth has slowed considerably.

Ah, you got me. The published facts and your link do indeed state that YouTube is "imminently" profitable. I know some things that I shouldn't have typed. But the distinction is irrelevant and the point is still the same. Google spent billions on this thing and they're still makin' (almost) money. You agree Linked In is profitable. Social media is NOT a failure.

I notice you conveniently omit Salesforce.com. Is it because they've created thousands of jobs and are profitable?

Again, the facts contradict your statements.
Ebay was profitable in 1999 - 1 year after going public and less than 3 years after incorporation:
http://investor.ebay.com/releasedeta...eleaseID=15257 Similarly Google received investment in 1998 and 1999, but was profitable in 2001: In neither case was hundreds of millions or billions of dollars invested.

Yes, after 3 years in each case. Did I say it had to take longer? Ebay is a successful Silicon Valley Employer. 6.7m in venture capital was turned into a tremendous number of jobs. Google is a successful Silicon Valley Employer... tens of thousands of jobs created. Did I say it took hundreds of millions?

iTunes generates value by disintermediating music companies from the media by which they sell their music.

Yes! THAT is exactly what they did! Met the consumer's digital needs and took out the middleman! Leveraged the internet!

Instead of characterizing it as a "mistake" on the music industries part, I'd consider it a failure of them to leverage the clear and obvious direction of the world. The music industry created and funded numerous digital download services that failed. Digital music was taking the world by storm and for awhile it was easier to steal than it was to buy a CD and as a result the music industry was failing! ITunes has enabled the honest consumer to again buy and utilize their music in the way they want and Steve was successful where the entire music industries corporate millions were not!

You failed to answer my point: a new person or company which evolves a new product is one thing. The same person evolving the same product is not.

I didn't need to. You agreed that "innovation occurred" and thus it is not the same product. However, to hit on your point, if the new company becomes profitable and employs people with the "same product" they must have done something else to earn their customers away from their bigger competitor who had the early mover advantage. Perhaps it was better services or marketing. Perhaps they recognized their former employer wasn't absorbing the lower end of the market or the higher. All valid insights for which he deserves to be rewarded.

Unlike you, I recognize that there is value in what others do who don't play the venture capital casino game. Your vision is frankly simply a technotopian version of the Bankster's motto: I make more money therefore what I do is right. Or put another way: A technorati saying: "Let them eat cake"

The question was regarding whether there was equal value. I absolutely agree there is value in what others do.

The overall thread started off regarding jobs. So because these companies make money AND provide jobs AND provide value to the consumer... they're good and right, yes.

I would phrase it as I originally did.. "Let them reeducate themselves and work."

Sorry you don't like capitalism!

[c1ue]

Re: Down the Start-Up Staircase

Umm. Your links are from Sept of 2009! Let's go with 2010 eh?
http://www.theregister.co.uk/2010/06...d_2009_profit/
http://techcrunch.com/2010/03/03/facebook-revenue-2010/

Really...can't you even spend 5 minutes getting facts from the current year before responding?

Given that I actually had posted links whereas you had not, at least I showed the sources of my data.

Yes, Facebook now generates "tens of millions" of unaudited profit from revenues of $700 million to $800 million. Placing the $200M Digital Sky investment into a 10 year bond would have yielded $6M even today.

And again, Facebook already has a huge presence. How will they increase their profitability?

It clearly isn't going to be via getting more users.

Ah, you got me. The published facts and your link do indeed state that YouTube is "imminently" profitable. I know some things that I shouldn't have typed. But the distinction is irrelevant and the point is still the same. Google spent billions on this thing and they're still makin' (almost) money. You agree Linked In is profitable. Social media is NOT a failure.

I notice you conveniently omit Salesforce.com. Is it because they've created thousands of jobs and are profitable?

LinkedIn's unknown profitability is only useful in context with its $113M in investment.

Youtube's imminent profitability also must be in context with its $1.65B purchase price.

Will Youtube generate $100M or more a year in profit? Anything is possible but frankly I do not see a mechanism.

So it all depends on what your definition of failure is.

Starting up a hype company and selling it for hundreds of millions or billions - is that a success or failure?

How about creating the means for enabling digital piracy worldwide? Is that a success or failure?

As for Salesforce.com - sales management software/contact management software has existed for decades - see ACT. The innovation Salesforce.com promulgated was to move it online and change from a capital expense software purchase to a service model.

Nice job, but hardly earthshaking. I did TBL license conversions (Time Based Licenses from perpetual licenses) in the late '90s. BFD.

Yes, after 3 years in each case. Did I say it had to take longer? Ebay is a successful Silicon Valley Employer. 6.7m in venture capital was turned into a tremendous number of jobs. Google is a successful Silicon Valley Employer... tens of thousands of jobs created. Did I say it took hundreds of millions?

So you're trying to say that Facebook is similar to Ebay or Google?

I think not.

Both Ebay and Google have clear profitability channels: 1 was attacking the classified ad revenue stream and the other was attacking the traditional yellow pages revenue stream.

What revenue stream is Facebook attacking? The private detectives hunting for the long lost high school stalkee? The lunchroom cliques getting together to reminisce about glory days?

Yes! THAT is exactly what they did! Met the consumer's digital needs and took out the middleman! Leveraged the internet!

Instead of characterizing it as a "mistake" on the music industries part, I'd consider it a failure of them to leverage the clear and obvious direction of the world. The music industry created and funded numerous digital download services that failed. Digital music was taking the world by storm and for awhile it was easier to steal than it was to buy a CD and as a result the music industry was failing! ITunes has enabled the honest consumer to again buy and utilize their music in the way they want and Steve was successful where the entire music industries corporate millions were not!

This statement is goofy in so many ways.

According to you, if there is a need for free/cheaper Operating Systems, then Microsoft should sign up with Asus to allow automatic porting of OS's into new computers via the Asus FlashDisk.

Why doesn't Microsoft do that?

And while iTunes may make it easier to buy music - of less popular genres - the reality is that music revenues are declining. And the decline is accelerating.

So it is far from clear just how beneficial iTunes has been for the music industry.

Surely you aren't going to say that the iPod and its ilk would be where they are WITHOUT the legal ability to rip?

I didn't need to. You agreed that "innovation occurred" and thus it is not the same product.

Fiduciary duty. Still haven't answered the question.

I absolutely agree there is value in what others do. The question was regarding whether there was equal value.

The overall thread started off regarding jobs. So to characterize my point more accurately because these companies make money AND provide jobs AND provide value to the consumer... they're right.

I would phrase it as I originally did.. "Let them reeducate themselves and work"

And again, you are expecting everyone to act as you do.

Because society functions just great if everyone is technorati.

All the teachers should drop their classes in order to become mobile app developers.

All the garbagemen should quit and become Cocoa programmers.

All the bus drivers should switch into software sales.

You're just repeating the same thing: "Let them eat (digital) cake"

A thought experiment: If I asked you for $100,000 to create an app called iFart, would you give it to me?

[MarkL]

Re: Down the Start-Up Staircase

Given that I actually had posted links whereas you had not, at least I showed the sources of my data. Yes, Facebook now generates "tens of millions" of unaudited profit from revenues of $700 million to $800 million. Placing the $200M Digital Sky investment into a 10 year bond would have yielded $6M even today.

Yes, you showed your data but it was out of date.
Thanks for at least acknowledging my data was current and accurate.

So Digital Sky's investment is making more money just on Facebook first profitable year! This doesn't even count their multi-hundred-million dollar share of the company itself. Were you implying that Digital Sky made a bad investment? I think hilarity would ensue if you suggested that to them.

And again, Facebook already has a huge presence. How will they increase their profitability?

Gosh I don't know... better ask Google. They had a huge presence a few years ago too. I remember arguing with people that there stock was going to be worth much more than $85.00 because of their eyeballs. Worked for my portfolio.

I'm sorry you don't believe in Social Media. At Google they consider Facebook their single biggest threat. Here's a video that might help. Oh by the way... all the impressive statistics in this video are out of date and grossly LOW now.

All those other things about Garbage men and Teachers... I didn't say that. Quit trying to put words in my mouth. But unemployed manufacturing folks as Andrew Grove started this thread with? Yea... reeducation in a hot new market is a good idea.

"Let them eat cake?" More of your words, not mine.

I'm kinda tired of the out-of-date facts and false words being put in my mouth so I'm gonna bow out of this conversation. I'm comfortable with what I've written and you can have the last word if you like. -MarkL

[c1ue]

Re: Down the Start-Up Staircase

So Digital Sky's investment is making more money just on Facebook first profitable year! This doesn't even count their multi-hundred-million dollar share of the company itself. Were you implying that Digital Sky made a bad investment? I think hilarity would ensue if you suggested that to them.

Again, you fail to acknowledge what was said.

Any business investment must consider the alternatives.

Facebook, as the so-called winner in the social networking arena, is slightly profitable after 6 years of operation.

Digital Sky's investment thus far looks safe, but equally so all of the other hundreds of millions invested in social networking - including Friendster, MySpace, etc etc have clearly not panned out in terms of the ability to generate profit...ever.

The ability to generate money by getting bought out via the VC lottery, on the other hand, there's no question.

So, continue with your fact-light responses.

Gosh I don't know... better ask Google. They had a huge presence a few years ago too. I remember arguing with people that there stock was going to be worth much more than $85.00 because of their eyeballs. Worked for my portfolio.

And again, your arguments all boil down to the same thing: the stock is worth a lot, therefore the value must be high.

I've already noted that Google has a fundamentally different business model - it attacks the yellow pages business which generated over $28B worldwide in 2004:

http://www.kelseygroup.com/press/pr050615.asp

“The global Yellow Pages industry is a powerful economic force,” said Charles Laughlin, program director, The Kelsey ReportŪ, and lead author of GlobalYP™ 2005. “The industry employed more than 73,000 people worldwide in 2004, and generated revenue of US$28.9 billion, according to our research.”

So where's the social networking revenue stream to come from?

You've still failed to answer the question.

All those other things about Garbage men and Teachers... I didn't say that. Quit trying to put words in my mouth. But unemployed manufacturing folks as Andrew Grove started this thread with? Yea... reeducation in a hot new market is a good idea.

You say that by explicitly ignoring that there MUST be other services in the world besides Internet Entrepreneurs, much as Banksters ignore that their activities impact the real world as well as is dependent on real world activities at some juncture.

Knowledge based jobs are fine, but there are hundreds and thousands of other job types which must exist in order for society to function.

The reduction of the influence of the FIRE economy including some but not all segments of Venture Capital - is what is necessary so that the entire economy can survive and prosper.

I'm kinda tired of the out-of-date facts and false words being put in my mouth so I'm gonna bow out of this conversation. I'm comfortable with what I've written and you can have the last word if you like.

I'm happy to see you wander back to your own solipsistic reality.

I've put clear questions and situations in front of you, your responses have been thoroughly jingoistic without actually answering any of the questions.

[reggie]

Re: Down the Start-Up Staircase

So where's the social networking revenue stream to come from?

Gotta look into future society. Yochai Benkler, who I have referred to in this forum, gives insight.

Society is undergoing a fundamental restructuring right now. The RAND Corp book on Networks & Netwars provides further insight into the shape of that restructuring, and will help explain why a social network is going to be to key to our future social structure, and therefore so valuable.

Current forms of societal organization no longer apply.