A Literacy of the Imagination

a deeper look at innovation through the lenses of media, technology, venture investment and hyperculture

Filtering by Category: new economics

Sorry Jason Calacanis, Google Isn't the Only Game in Town (The Amazon Principle)

Next month, I'll be delivering a keynote at TruEffect's Brand Partner Summit in Boulder, Colorado, on the topic of storytelling and advertising. I've talked a bit about the future of ads in general, in particular as a service industry.

The real context I'd like to address right here -- and what will serve as the backdrop for my talk in Boulder -- is what is actually driving the media ecosystem and respective information systems as a whole.

Right now, Google seems to have the upper hand. But this won't be the case for much longer.

As you may recall, late last year Jason Calacanis wrote a really interesting piece entitled "#googlewinseverything".  The post generated quite a lot of buzz in technology and venture circles for obvious reasons. In the piece, Calacanis provides a list of truisms about Google, saying rather emphatically:

"In truth, the 10 ‘facts’ I’ve outlined above are not mine; these are the opinions I’ve collected over the past year asking intelligent folks, ‘So what do you think about Google?’ These are the 'facts' as the people see them. Although, I haven’t found anyone who disagrees with these 10 facts – do you?"

Well, I'm not going to disagree with Calacanis per se (he has access to a lot more inside info than I do and I have lots of respect for him as an entrepreneur and investor), but I am going to challenge the list of assertions he provides within context.

Here they are, point and counterpoint.

1. No company has as many smart people as Google. -> Define 'smart'. In a 'wicked' complex world, creative intelligence (or 'EQ', emotional quotient) is just as important as quantitative or purely scientific chops.

2. No company is as ambitious as Google. -> Define 'ambitious'. Do you mean to say that a host of companies without Google's market cap or footprint aren't taking on significant cultural mores, or attempting to create massive social change (for the better) -- like Amazon?

3. No company is working on as many hard problems as Google. -> Define 'hard problems'. Defer to counterpoint #2.

4. No company makes as many big bets as Google. -> What kind of bets? With what intentions? Defer to counterpoint #2.

5. No company is willing to make as many crazy acquisitions as Google. -> Maybe so. But there are lots of companies that don't have to acquire as much in order to 'push the envelope' as it were (i.e. market ownership is not the same as market creation...). Defer to counterpoint #2, with the caveat that Amazon is buying a lot in order to strengthen its infrastructure and market positioning.

6. No company has more data than Google. -> Perhaps. But is it all the right/best kind of data? (i.e. Is it clean? Can it be parallel processed? Is it behavioral? Does it seamlessly connect to the knowledge/social graphs? Is it scalable through reference/inferential databases? etc.). Defer to counterpoint #2.

7. Few companies understand how to play the government better than Google. -> Probably the case. But in Google's position, and given backdoor surveillance (as just one example), is that a good thing? More importantly, is Google really influencing policy in the best interests of us (its users)?

8. No company has more global influence than Google. -> Right now, probably true. But that won't remain to be the case. Defer to counterpoint #2.

9. No company is as ruthlessly efficient as Google. -> From my own experience working with Google (Google 'proper' and YouTube), that's simply not true. Great company and great people, yes, but 'ruthlessly efficient', no.

10. Only one CEO is more ambitious than Google’s Larry Page.* -> Jeff Bezos?

As you might've gathered, I have a thing for Amazon. Don't get me wrong, I think the world of Google, but Amazon is a special kind of dark horse (if you can even call a company that big a 'dark horse'). This Atlantic piece, which came out right around the time Calacanis wrote his post, was a really good, balanced take on how Amazon is making seismic moves.

The basic premise -- and my firm belief -- is that any company which thinks the way Amazon does long-term, to include massive financial risks, will 'win' long-term.

Now of course, pundits will say that Google has always thought long-term. That's debatable. Per the (counter)points above, Google has thought long-term about experimental domains like artificial intelligence, quantum computing, sustainable cities and transit, but I would assert that it actually hasn't thought that way about its own $28bb+ core search/ad business.

Here's why/how.

Amazon has just about every asset in the new commerce toolkit, and it's only a matter of time before its search product catches up with its capabilities in content, storytelling (journalism especially), publishing, purchasing, production, cloud/quantum computing and network distribution (private, social and virtual).

Bottom line: with its advanced ecosystem, Amazon doesn't need ads or impressions to rule the web like Google does currently.

If you'd like more validation on this position, check out a wonderfully curated thread my friend Alex Schleber put together in early February -- he poses a great list of questions (probably better than those I did here), and there's lots of contextual grist to explore, replete with great data-points.

The 'battle' between Google and Amazon, as it were, will likely produce cultural tensions that will push all of us to think differently, consume differently, produce more thoughtfully and tell stories with more of a bent towards real social utility. As a result, I think we will see the emergence of a truly co-opetitive economic landscape, in which ecosystems amplify these tensions and create amazing new ways to improve our world.

It will be exciting to watch and participate.

A New Venture Model: '5 and 15'

A couple of buddies of mine (Mike McCracken and Miles Gerson) and I are exploring a new kind of funding model that disrupts the traditional '2 and 20' model. Here are a few main reasons why we've been compelled to do this:

- VCs tend to invest way later stage and are good at sourcing and structuring, but tend to struggle with (or ignore) operational efficiencies. We've known this for a while, but things have come to a head given that a lot of early stage companies that are in revenue are also lacking support in their critical growth stages. Many of these same companies are coming to us for that support, along with help in raising strategic capital.

- Incubators and accelerators have done a great job of helping get startups off the ground, but have significant challenges of scale. At K5, we've been exploring ways to partner better and network the investments for startups we take to the seed through A series raises.

- Corporate venture arms are exploding; I've mentioned P&G-backed Cintrifuse in other posts (a fund of funds model that Mike helped develop through Ernst & Young), but there are many others coming onto the scene, such as this new $100mm fund from Siemens. That said, many of the corporate venture groups we've talked to still lack visibility to new startups 'on the ground' and also have challenges with vetting them. As important, we've seen and heard about lots of acquisitions and early exits go south because of poor integration with corporate business units or as units managing their own operations and P&Ls.

- Family funds are also changing face; some of the family offices we've spoken with are pivoting towards more operational roles inside of their portfolios; much of this has to do with a need for investment transparency and stronger vetting processes.

- On the capital front, crowdfunding is and will continue to transform the business landscape, and the equity crowdfunding space, specifically, is very interesting in terms of accredited investment. We'd like to develop ways to hybridize capital and equity requirements so as to make funding scenarios more flexible and extensible.

So the central idea here is that we can provide operational value to early stage companies. Mike has deep experience running companies and financing them (with UGO entertainment, for example, he raised 13 rounds of funding before they exited), while I have a lot of experience building platforms, developing products and taking them to market, and I've done this both on the corporate side and at the startup level. Miles has solid experience managing a fund, vetting and structuring deals, and has been building up his network on the corporate venture side.

The funding structure itself is still nascent and frankly a little messy, but the notion of '5 and 15' (5% management fees and 15% carry) rests on the premise that we can generate fees from active management of the companies in which we invest. Some VCs we've spoken to have actually said that the trend is dipping below a 2% management fee, but with the caveat that the LP (limited partnership) model is still in place.

I'll share more as we progress with this...

Socially Conscious Investing, Work & World-Building

Happy New Year! 2014 has already proven to be quite fruitful and full of new roads for discovery.

As a follow-up piece to previous posts on conscious capital, co-op investments and discovering value in the age of bitcoin, I thought I would share a video of my talk in Grasse from October. Some of the corporate examples of sustainable innovation you're probably familiar with, but it goes a bit more into how these kinds of efforts can scale in a global marketplace. Many companies are still hesitant to invest in sustainability efforts, and I believe that's because disciplines like CSR are more about good branding than good business models. But that's all changing.

The real emphasis is on how people can transcend their roles and responsibilities at work and in everyday life to become progenitors of change. This has been the core philosophy behind the innovation experiments we've been running around the globe, and it involves much more than good technology and fancy methodologies (although those elements are, of course, important).

In this case -- enabling executive stakeholders in the cosmetics industry to imagine a different world through their products -- we were able to spend four days developing creative muscles, nurturing personal and group awareness, as well as running through role-playing scenarios. The participants literally built worlds or ecosystems that reflected ecological and emotional connections to their companies, and the economy itself. One CEO even remarked that in doing so, she envisioned a new world without economic bubbles.

(*sidenote* we're editing a documentary film of the whole experience which we plan to distribute in Q3...)

Related to 'anti-bubble' economics and scale, Marc Andreessen was featured in an insightful piece in the Wall Street Journal a few days ago. That said, I thought the interview with him below is a terrific view into the immediate future (what I call the 'Future Now'). In particular, it's interesting to hear his thoughts on globalization and how value is created in competitive markets through an entrepreneurial mindset. I wish that he and other innovative investors would address more of the 'human problems' we face (Mr. Andreessen does touch upon on it in spots), but their intentions seem to be headed towards more of a socially conscious approach to investing, alongside of building sustainable companies and economies.

As I've mentioned in other posts, the concept of work is completely transforming, and not just as a by-product of repatriation, disintermediation and other production or transactional efficiencies (which are becoming more and more obvious). Passion and empathy are co-opting 'work' as a cultural edict and a form of social responsibility that embrace the complexities of human discourse. People want to change the world -- they need to, and they're figuring out how to make it happen for themselves and their communities.

And what a wonderful thing that is to see.