Ayn Rand & Tech Entrepreneurs

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Feb 152012
 

“Achieving life is not the equivalent of avoiding death.”

I think Ayn Rand would be happy with the entrepreneurial attitude pervading the NYC tech startup scene. Admittedly, I’m only on the periphery of the startup culture; however, in taking a number of Entrepreneurship classes at Stern, I’ve heard my fair share about lean startups, minimum viable products, poking the box, and the mantra, “start by doing.” With such low barriers to entry, aspiring entrepreneurs are encouraged to try something, fail at something, just get off your ass and go do something.

Stop retweeting, stop sharing links, and start creating. Build a product, write a book, make some music, contribute to society, etc…

I’m now taking a class entitled, “Ready, Fire! Aim” – and the goal of the class is to come up with an idea, and execute on it (group project). The idea doesn’t matter; the important bit is doing something more than just analyzing a problem.

This slide drives the point home:

Just thought I’d share.

Digital Media Marketing @NYUStern

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Dec 132011
 

So, as it would turn out, my Digital Media Marketing class was much more of a term-long case study in Entrepreneurship than a course in Marketing. Our guest list proved to be a Who’s Who of Yahoo alums and big industry players, and hearing their stories, seeing their presentations, having the opportunity to ask them questions, and being encouraged to follow up with any of them (for good reason) is an unparalleled use of 3 Stern tuition credits.

In addition to the speaker series, throughout the term, teams of students conceived and expanded digital ideas into business plans, culminating in pitching to Paul Berry, CTO of the Huffington Post. Paul gave a brief presentation, and one of his most salient points was to avoid coding by specification. He argued that specs stifle innovation. It takes minutes to come up with an idea, but it can take months for a developer to implement it; the developer lives with an idea while breathing life into it. Forcing developers to conform to a spec is a surefire way to limit morale, motivation, and creativity.

My team pivoted on our idea, oyez (the interjection traditionally used by town criers), four or five times. (I’m purposefully not divulging the idea in case one of my teammates wants to take the venture to the next level.) Once we honed in on a concept, we bounced back and forth multiple times on a revenue model, how to market, the best first target vertical, etc… Surprisingly, nothing was too obvious. In any case, our oyez logo shall live forever on my blog, along with these records of some of the more memorable lectures:

Sunday Nights & Sex Toys: Entrepreneurial Addendums

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Nov 292011
 

Tonight’s Digital Media Marketing discussion at NYU Stern was the penultimate class of the term. On one hand, this is really cool, because I so rarely have a reason to use the word ‘penultimate’ in context – and really, I’ll take what excitement I can get; on the other hand, I’ve enjoyed our guest lecturers and it’ll be rough switching from this entrepreneurial environment to Business Communication, batting cleanup for my Winter term.

Tonight, we heard from Foursquare‘s CEO, Dennis Crowley, and LearnVest‘s CEO, Alexa Von Tobel. Like many prior classes, the focus this week was on how the kernel of an idea came to be, and how it was microwaved into a salty and buttery pop of corn (possibly my first metaphor on this blog). I’d actually already heard Dennis speak, at NYU’s Entrepreneurs Festival a few weeks back, though this evening he was much more open and candid on certain topics with the promise that the class wouldn’t tweet anything labeled as off-the-record. Alexa’s backstory was also unique, having dropped out of Harvard to self-fund a prototype of LearnVest, which she described as Weight Watchers for Personal Finance.

It was especially interesting to hear the contrasts between Dennis’s and Alexa’s approaches to pitching their ventures: Dennis said he pitched Foursquare with 80 slides discussed in 20 minutes, whereas Alexa had a very focused and thorough ~10-slide deck. Both approaches tell a story, but in very different manners.  Story-telling as a means of pitching or presenting has remained of relevance throughout the entire term, and tonight’s addendum emphasized the importance of telling your story in your own voice, else risk it seeming disingenuous.

Which brings me to Sunday nights and sex toys. Another common theme we’ve seen with our guest entrepreneur lecturers is a tremendously energetic spirit. These folks are really friggin passionate about what they do, and not just because they’re pysched about running cool businesses, but because they’re solving problems they want to or even have to solve. Alexa elaborated, saying that one should only start a sex toy business if you’re really passionate about sex toys, and come Sunday night, if you have a pit in your stomach about having to go to work Monday morning, then you should question if you’ve found the right sex toy (paraphrased) (euphamism). It’s clear that Alexa and Dennis love what they do, and that type of visible energy is motivational and contagious.

How to Fix Yahoo, Stern Style

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Nov 162011
 

Another action packed evening at my Digital Media Marketing class at NYU Stern: after presentations by former Yahoo COO Dan Rosensweig and former Yahoo CEO Terry Semel, and with them, VC guru and former Yahoo board member Eric Hippeau, and former CEO of NBC Universal Jeff Zucker in the audience, we the class presented (in teams) our solutions for “fixing” Yahoo.  Dan and Terry spent half the class telling us their stories, walking us through their careers, and some of the honest truths about their Yahoo tenures (only after the class promised not to Tweet any of the secrets).  Not surprisingly, the morals of their stories are exactly the same as those observed during this past weekend’s NYU Entrepreneurs Festival: passion and persistence.

Terry recounted his Warner Bros. career, detailing how he started out selling WB movies to theaters in Cleveland, eventually making his way to becoming WB chairman.  Terry’s poignant advice was to take risks, accept all offers, and don’t always listen to your wife!  Terry also told us how he recruited Dan to Yahoo – every other day Terry would call Dan and say something akin to, “do you want to someday be an 80 year old Jew waiting his days out in Scarsdale, or do you want to come with me and change the world?”  Of course, Dan eventually gave in, and in fact, his footnote to the night was, “whatever you do after graduation, follow your passion. Otherwise it sucks.”

The really great part of tonight’s class, however, was when us students got to propose solutions for how we’d fix Yahoo if we were CEOs to Terry, Dan, the rest of the class, and the other random and nameless people who seem to audit the class each week.  The solutions were creative, well thought-out, and generally well-received; however Dan definitely had criticisms for all of us, though expectedly so!  While most groups proposed fixes to certain Yahoo portal or Yahoo property features, Coleman, Dan et al were really looking for a bigger picture solution.  I was reminded of this scene from Adam Sandler’s movie Anger Management (not a WB title, as far as I’m aware) – just substitute Dan’s “but how would you fix Yahoo?” for Nicholson’s “but who are you?”

Nevertheless, the class did have some interesting suggestions (I think I’ve captured something from each group), including:

  • Make the portal more “sticky” via social optimizations and more personalized content.
  • Make sharing stuff more intimate a la Google+ circles – “start your day knowing what your friends are doing.”
  • Become a data platform and use an expertise in data to increase the number of logged-in users by improving the logged-in experience.
  • Create a professional services wing and use that as an internal form of promoting innovation.
  • Simply build more content.
  • Wait a few years, and then sell the firm.
  • Focus on mobile, and in particular develop a specialization in mobile content aggregation and distribution.
  • Acquire all sorts of stuff – anything of interest that the Board will approve, and start a VC fund.

My team’s suggestion was that rather than focusing on an external thing to fix, Yahoo should focus on internal issues first.  Our argument, and what I pitched to Terry and Dan, was that talent begets talent, and if talented people keep walking out, it will only get worse.  No amount of feature primping will staunch the corporate wounds that are currently hemorrhaging talent at Yahoo – the internals need to be fixed first (though it wouldn’t hurt if Yahoo realized it doesn’t have to send me Netflix ads given one tab over I’m streaming Weeds).  Software engineers (and as one myself, I’m permitted to speak on behalf of all per Seinfeld episode, The Dentist), especially top-tier engineers or talented compsci majors at top-tier universities are looking for one of three jobs: a tech start-up with awesome potential and permission to create cool stuff, a hedge fund that will pay a crap-ton of money (for giving up the freedom to create cool stuff), or a middle ground firm like Google, which has a reputation for having an innovative culture, but also pays a decent salary.

Yahoo is no Google.  Yahoo does not have a reputation for having an innovative culture; or, it may have such a culture, but we don’t know about it.  Yahoo needs to grab its top smart people, and give them a budget and carte blanche to innovate across Yahoo’s top properties, such as Flickr and Yahoo Finance.  Even if these teams fail, that failure demonstrates Yahoo is willing to take a risk on creativity – that failure will create buzz and interest.  People will check out an interesting failure, like Google’s Wave (assuming that link still works when you read this..).  Most importantly, however, is that such risks will reposition Yahoo as a technology company, and not as an advertising distributor or a “premier digital media company” (what’s that even mean?) – a distinction that needs to be made if Yahoo hopes to remain relevant in the decades to come (in my opinion).  I believe Dan and Terry agreed with my and my team’s conclusion, but with the caveat that unconstrained freedom to innovate would not necessarily lead to anything of use or interest; instead, the innovation needs direction, whether that be mobile, social, or local, as suggested by the earlier groups, or something new entirely.

All in all, it was a very interesting night and highly unique experience.

NYU Entrepreneurs Festival, part 2

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Nov 132011
 

The themes of passion and persistence from Day 1 of the NYU Entrepreneurs Festival carried throughout the panels of Day 2. There were some great anecdotes told during the Serial Entrepreneurs panel (moderated by my Digital Media Marketing prof Greg Coleman), and you’ll find no shortage of interesting snippets on Twitter under #NYUEF. For example, Fadi Chehadé, founder of Vocado, CoreObjects and Rosetta Net, compared starting a company to having a child: there are those great moments like after completing an IPO when it smiles at you, but it mostly just pees and poops a lot. He added that being a VC is like being a grandparent. Jack Jia, founder of Baynote and Interwoven, gave his perspective on work-life balance: it’s important. Jack described how he realized that physical exercise was critical to his ability to break down blocks to innovation – taking the break and doing something active was necessary for his thought process. Coleman then extended this thought to work-life balance in general.

Another topic that kept recurring was the issue of finding a technical cofounder. There are a lot of people with great ideas, but who lack the technical competency for implementing those ideas. This touches on what was noted regarding the importance of minimum technical literacy; however, a common proposed solution to finding a technical cofounder was to hang out at the engineering school. If NYU’s computer science or engineering schools are anything like Dartmouth’s, where I got my undergraduate degree, then you’ll only look like a techie stalker hanging out at the engineering school. The computer lab at Dartmouth was not a place for social networking – most people working there were focused on getting homework done, not on meeting people. Abstractly, however, this is a good idea: hang out where technical people hang out and you’re more likely to meet those people. When Chris Dixon spoke at the NYU VC Conference, he discussed how he’d attend every techie event he could find. I’d suggest looking at the technical Meetup groups, as engineers do attend them and those engineers are more likely than not going to be interested in startup development.

The Festival concluded with an interview of two founders of The Knot, who told the story of their firm’s conception and inception. They also told the audience about a presentation they’d recently seen about how to fix the currently broken wedding planning industry. This was an unexpected topic for The Knot given the brand thinks that it has already fixed the wedding planning industry, they “didn’t realize it was broken!” However, they noted that “we didn’t realize Quicken was broken until Mint came along,” and perhaps we’ll realize Salesforce is broken once Nimble gains traction. In other words, it’s very possible that The Knot could be superceded by a more relevant, current, or innovative platform or solution, and so even nearly two decades out, they’re still constantly improving things for their customers, and still constantly innovating the brand.

In summary, I’m very impressed with what NYU pulled off with this weekend’s Festival. The turnout and support from alumns and staff was very encouraging, and it helped remind me, a part-time student from Westchester, that there is a huge community and network beyond the classroom, something that I haven’t seen much due to my own demands on time. More importantly, however, though there was no impromptu showing by Mayor Bloomberg, this event reaffirms that NYC is to become a force to be reckoned with in the global startup scene.

NYU Entrepreneurs Festival, part 1

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Nov 122011
 

One doesn’t decide to become an entrepreneur, but rather one is an entrepreneur.

At day 1 of the NYU Entrepreneurs Festival, many panelists and moderators noted that you can come up with ideas, identify opportunities, and build businesses, but there’s a sense of passion, a spark, (a “genetic defect” in the words of marketing professor Jeffrey Carr), or an infatigable sense of energy that seems to come with identifying one’s self as an entrepreneur.

It’s not just about solving a problem, but solving a problem that’s been internalized, that’s bothersome day in and day out – the need to create a solution, to build something, is what drives these folks. Persistance was voted as the number one quality that distinguishes a successful entrepreneur. We heard this message repeatedly throughout the day, albeit in different forms.  Panelists discussed how they couldn’t envision doing anything else; opting for building a product or a firm wasn’t a decision, but a need; that some people just have to make something, and these people are called entrepreneurs.

Dennis Crowley, founder of foursquare noted, instead of waiting around for someone to build what he wanted, he could just build it on his own. The alternative products either were broken, or Crowley could do it better. He acknowledged that Facebook or Google could disrupt or take over the foursquare model, but that shouldn’t disrupt the vision or confidence to execute held by a passionate (though well-grounded) entrepreneur. For years, Crowley worked on the concept of foursquare, debuting the dodgeball service, working other jobs, and revisting the concept. Rather than moving along, Crowley stuck with his idea until society and requisite technology was ready for his application.

Another theme that we heard throughout the day was the importance of basic technical literacy amongst founders.  Crowley wrote an initial version of foursquare in crappy PHP which was later re-written by a formally trained engineer. Fred Wilson pointed out the popularity of recently funded CodeAcademy, a site dedicated to bringing programming education to the masses. Steinhardt professor, Aaron Cohen confirmed with similar thoughts, and concluding speaker Don Katz, CEO of Audible, noted how even he, originally a journalist, learned COBOL back in the day. The primary argument is that technical literacy permits non-technical founders to avoid getting screwed by over-paying for software development, and allows for having more meaningful conversations when talking to engineering staff.

Personally, I wish I took a foreign language in college (though I did take Latin in high school). Whenever I go to Europe, I always wish I was fluent in something other than English, and I’ll always spend a good chunk of time studying the language of wherever I’m visiting so I can ask for the best dessert or a beer. During my recent trip to Germany, I spent a few months taking busuu lessons, for example, and was conversant enough to make it through a meal; however, I’m fluent in several non-linguistic languages, including various programming syntaxes, as well as music. I’m often approached by non-technical friends for thoughts on their ideas from a technical perspective, and having a minimal technical background will absolutely provide access to all sorts of opportunities.

Further, however, I think that the introductory lessons taught within the study of computer science should be covered in high school, and not just in the AP class. Things like algorithms, creating a web page, or customizing an Excel spreadsheet are useful things to understand regardless of career. (Some of this isn’t even covered in the college programs.) Programming literacy is no less relevant than Earth Sciences or Astronomy (I’ll grant that Bio/Chemistry/Physics is perhaps still more critical), and software development should be viewed as a tool, like essay construction, and taught early in schools. Arguably, the problem solving and analytical thinking skills that come with understanding how to sort data or structure a normalized schema are more useful in adult life, on average, than Calculus. I remember back in elementary school playing with Logo, moving a turtle around the screen drawing pictures. The whole class enjoyed the computer lab with this programming exercise, but it only lasted up until third grade. I think there’s room for improvement here.

What do you think?

Check out my notes from Day 2 of the Festival.

MBA Notes: Living Social > Groupon

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Nov 082011
 

For those of you who may have read my post on Groupon, you’ll know I think the daily/group deals market is relatively untapped and the model is only going to improve as businesses learn how to adopt the platform properly. That said, following last night’s presentation in my Digital Media Marketing class at NYU Stern by Living Social’s SVP of National Sales, Mitch Spolan, I’m a Living Social convert: I believe the Living Social value proposition is one of quality, whereas that of Groupon is one of quantity.

Both platforms are about time shifting the decision to buy.  Mitch proposed that we’re all creatures of habit.  We settle comfortably into routines.  We buy the same sandwich for lunch each day, because we know that it works.  These daily deals sites time shift the buying decision.  When you buy a voucher for lunch at that new restaurant online, you’re taking an action that will preempt your routine: rather than buying that same sandwich, you’re incentivized by having that voucher to try the new restaurant down the street, for example.  Mitch emphasized the power of this movement – these daily deals have the power to make you turn left, instead of the usual right, because the decision to turn left is made at some other, earlier time, outside of that routine.

However, Living Social differentiates from Groupon in several ways.  First, whereas Groupon generally focuses on “things” (pole dancing aside), Living Social focuses on “experiences,” such as adventures and escapes.  As a result, Living Social claims that its audience is both more affluent (on average earning 150k salaries or more), and more educated; Lee Brown of Groupon would argue the statistcs are skewed because Living Social has only a fraction of market share as compared to Groupon. Regardless, Living Social has ownership of a very specific and targetable segment, one which has significant buying power. Second, Living Social is (supposedly) seeing much greater success with bigger national deals. The recent Whole Foods campaign was wildly successful, with 1 million vouchers sold. (It was around this time in the presentation that Groupon’s Lee called up to say “fuck you” to Mitch in class – it’s ok, though, it was in jest as they’re best friends, having worked at Yahoo together for over a decade.)

The result of the Whole Foods campaign was that the top trending terms on Twitter, the most shared items on Facebook, the top search keywords on Google, and the headline news for that day were all around Whole Foods and Living Social. Capturing all these mediums is a significant achievement, as they’re not channels that are explicitly for sale.

The biggest difference in my opinion, however, is in frequency of deals pitched. Living Social emails out 1 deal per market per day, whereas Groupon is doing 7-8. The lesser frequency combined with a focus on experience translates to, as Mitch noted, deals that are “special.” The deals are high quality, not targeted, and are in turn shared and redeemed with great frequency. These deals have a premium-esque feel to them.

Mitch provided arguments against the arguments against group buying. One common concern is that consumers have no loyalty to a deals site. Effectively, Mitch agreed – this is why, rather than using gimmicks to keep customers, Living Social is focusing on high quality deals of interest. Another argument against is that companies view such deals as eating into margins. Mitch noted that yes, deals can be viewed as eating into margins, but a more realistic perspective is to view deals as a marketing expense. And not just a marketing expense, but the most efficient of marketing expenses. Consider: with a $15 million investment ($10M for consumers and $5M for Living Social), Whole Foods was able to own social media, search, and more for that day, plus, they got 1 million customers in the door, most of whom likely spent more than the $20 voucher covered. Remember, none of these channels are for sale.

Another argument against daily deals relates to customer loyalty. Both Lee and Mitch agree on this one: the news only reports what it wants to on this subject, and in fact customers are more loyal than one would expect. In the case of Living Social, the firm’s observing ~67% customer return/retention rates. Mitch did note, however, that though deals can get customers in the door, it’s still on the company to deliver the goods, and get customers to return. With Living Social only running a deal once or twice per year for a given firm, they’re not in the business of managing customer loyalty; rather, they’re facilitating sharing quality experiences with the (affluent and well-educated) masses – the delivery is on the company providing the deal. Also of interest is that customers are encouraged to share with friends with the Me + 3 program, whereby if 3 of your friends purchase the deal, you get yours for free.

Lastly, and perhaps most interestingly, Living Social has embraced using their platform for explicit brand marketing. Consider this Boardwalk Empire deal. At most, only a few hundred of these can be sold nation-wide. The underlying purpose of this deal is to create brand awareness and get people talking about the HBO show. Frankly, this is a brilliant move, and I think Living Social’s decision to build a reputation of focus on quality rather than focusing on price or volume of deals is what will allow for brand-focused plays. Unfortunately, I don’t think Groupon can get away with something like this, as they seem much closer to commoditization of group buying.

So, in summary, I think both Groupon and Living Social should be afraid of the day when Google and Amazon get their shit together. Until then, both firms have their place in the daily deals market. Personally, as much as I found Groupon’s Lee Brown’s presentation interesting, particularly given its pre-IPO timing, I must say that Living Social’s Mitch Spolan wins. Mitch’s presentation was just as good, but more importantly, it got me interested enough in his firm to want to check what Living Social has to offer, and sign up to see what sort of special deals are available in my neck of the woods.

MBA Notes: Groupon’s Pre-IPO Secret*!

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Nov 012011
 

Groupon, the crowd-funded daily deals site, and the fastest growing company in the world, ever, is set to IPO this Friday at a supposed valuation upwards of $10 billion.

That’s a huge number - I mean, you can buy a whole lot of pole dancing sessions with $10 billion.

It’s also nearly twice the valuation (at the conservative 10B estimate) that Google bid for Groupon earlier this year, which probably included an acquisition premium. In turn, the Groupon IPO has a lot of critics, such as Henry Blodget of Business Insider.

The argument is that Groupon’s recent changes in accounting practices, the somewhat unexpected reduction in marketing expenses, combined with the increasingly competitive landscape comprised of main competitor Living Social and up-and-comer potential behemoths Google Offers and Amazon Local, doesn’t add up to $10 billion.

Oh no, I’m not even done yet.

Studies have shown the switching cost from one daily deals site to the next is very low, so throwing Google or Amazon into the mix seems like a pretty ominous thing for Groupon. There is also no shortage of reports such as this June TechCrunch article, “Groupon Was ‘The Single Worst Decision I Have Ever Made As A Business Owner’.” Other studies have shown that group buying does not lend itself to loyalty or repeat purchases. In other words, many businesses have struggled to turn a profit from their Groupon affairs, and, just because you used a Groupon to buy from your local deli this week doesn’t mean you won’t buy from the deli down the street next week. Lastly, Groupon’s international success doesn’t appear to be so successful, according to this TechCrunch article.

So, even despite only releasing about 5% of float with this IPO, how can Groupon really maintain a $10 billion valuation? Well, I’ll tell you how.

In tonight’s Digital Media Marketing class at Stern, our guest lecturer was Groupon’s SVP of National Sales, Lee Brown, and he told us what’s what. Unfortunately, he asked that we not share the secret stuff*, but what I can write is still pretty interesting.

Brown highlighted two relatively new Groupon features: Groupon Now and Groupon Rewards. Now is a location-based real-time deals platform, accessible via mobile app. It’s a different sort of revenue model in that it will attract a different type of consumer or mindset. Rewards is a platform for attracting repeat customers and incentivizing customer loyalty – it works via opting-in for sharing credit card transactions, which could be a ball of worms with regards to privacy, but it addresses one of the big Groupon complaints, that there’s no loyalty to stick with the program. It’s been noted that Now hasn’t been terribly successful thus far; however, the possibilities of personalized and user-curated deals could be huge, and having a stable platform ready and waiting seems like a good thing.

Brown also discussed the firm’s yield management analytics, a whole suite of stuff to help companies understand how to make best use of the platform – Groupon recognizes that their model is new, and it wasn’t going to be perfect from the get-go. As the company continues to experiment, it will share the benefits of those experiments with its customers and help optimize Groupon deals and deployments. Also, according to Yipit, Groupon has twice the market share of Living Social.

So, in summary, there are skeptics and there are possible pitfalls, but all in all, I think Groupon has some solid potential. Stories of the company culture remind me of an earlier Google, so one could expect that encouraging the sparks of innovation follows suit. Maybe the IPO is over-valued, but Groupon is doing new and interesting stuff, and is well-positioned for significant growth at least in the near future. As this Dealbook article notes, there are a lot of similarities between Groupon now and Amazon a decade ago, so only time will tell if the parallels continue as Groupon grows post-IPO.

*Note: no actual secrets were divulged, Groupon is after all in its IPO quiet period…

MBA Notes: Thoughts on Business Plans

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Oct 182011
 

At last night’s Digital Media Marketing class, one of our guest lecturers, JB Rudelle, serial entrepreneur and current CEO of criteo.com, gave his perspective on startup business plans: they’re good for two things, self-assurance, and convincing other people to leave their comfy jobs and join your cause.

This sentiment very much reflects the presentation given by Eric Hippeau a few weeks back – the pitch that intrigues Eric is simple, understandable, answers a few basic questions, and that’s it. With regards to disruptive innovation, it seems perhaps there’s a paradigm shift with respect to the use of business plans.

A startup’s business plan is supposed to detail the vision, value proposition, revenue and expense models for the next 5+ years, competitive (SWOT) analysis, management team resumes, and operational details that when combined define how a new company is going to launch.

In my limited experience (case studies and Stern group projects), the business plan is a fairly lengthy and involved document. It’s one of those reports where you fudge the margins and flood with diagrams in a hope it then meets the minimum page requirement.

The business plan is often used to support a pitch for venture capital financing, for example. Yet, as noted, it seems that more often than not, common wisdom dictates that the business plan is a tool for the entrepreneur, more than anything else. Writing a comprehensive plan requires answering the tough questions, and having such a plan is evidence that those questions have been considered, even if the answers might be crap. Consider noted entrepreneur Steve Blank’s comments on business plans: “they’re a waste of time.” Stern Marketing Professor Jeffrey Carr once noted to me that having a business plan is all well and good, but having it just allows for checking off that box that says you have it – that you, the entrepreneur, have done your homework.

I wonder whether things have changed since 2005, or whether this perspective is held by just a minority of the VCs in the industry. There’s so much literature and in the news as of late similar to Ready, Fire, Aim, that maybe in the new attention deficit era of modern technology, taking the time to write or read a lengthy business plan is too disruptive to the idea itself; that is, by the time the analysis is done, someone else who skipped the writeup has already beaten you to market (though whether it’s a with a better product is a different but very much related question).

MBA Notes: The Virtue of Selfishness, and Net Neutrality

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Oct 102011
 

In a recent NYU Stern class (Economics of Social and Other Networks), we covered the economics of net neutrality, “a principle that advocates no restrictions by Internet service providers or governments on consumers’ access to networks that participate in the internet” (wikipedia).

The idea here is that users should have the freedom to decide what information they view – this shouldn’t be decided by the government, the cable companies or the Internet Service Providers (ISPs): if service providers could charge a toll for access to content, then microblogging and other small scale sites would be unable to pay, and competition and innovation would dry up.

Further, it’s been argued that enabling a persistent net of neutrality would thus require FCC involvement and regulations. Consequently, opponents of net neutrality argue that government regulation of information distribution steps on 1st amendment rights, amongst many other points (all available on wikipedia).

In this class, however, we looked at the topic from an economic perspective. Sparing the specifics of the argument (it took 3 hours to work through – there’ll likely be some informed research papers on the economics here, such as this paper), the crux came to the fact that when the ISPs and not the consumers decide what content to consume, the overall “wealth” or utility of the system is less than if the ISPs stayed out of the game of content filtering, leaving those decisions to the consumers. Or in other words, the economic models support net neutrality. Or in other, other words, the economic models seek to maximize individual utility – selfishness – by suggesting individuals should have the freedom to pick and choose the content of their own choosings.

So, as a libertarian, this seems a bit of conundrum. On one hand is the fact that net neutrality seems to imply more government regulation; but on the other hand, net neutrality maximizes my selfish desire to pick-and-choose content of my own choosing, rather than letting corporations decide on my behalf. Would unregulated capital markets result in enough ISPs to permit easy access to all the content floating in the ethers, or would things like network effects, and barriers to entry (due to limited bandwidth) restrict in absolute terms the set of content available for consumption. The Ayn Rand Center argues that if ISPs have technological innovations that can distribute information faster or more efficiently, they have a right to charge more for that service. In contrast, as noted in the Economist, with limited bandwidth, if a few wealthy folks (dare I say the 1%?) are able to pay those premiums, it could hog the digital road, leaving the rest of us with slow downloads and limited access.

As important as I think unhindered access to the web is, if bandwidth is in fact a limited resource, like oil or gold, it seems unfair to price it like a limitless commodity. Unfortunately, I can’t imagine what would happen if content providers started having to pay for the right to distribute content, or if consumers had to pay on a per-site-visited basis. I think I might be one of the cool techno-pundits (that’s right, I said cool), so labeled by the Ludwig von Mises Institute: I strongly believe the government should not be regulating the Internet – it’d be just the first step down a libertarian’s nightmare road that leads to book banning and 1984-style Big Brother televisions; but I don’t believe corporatism as it stands will lead us in a much better direction, especially given the economics around staying competitive in the digital distribution world.

I think for now, I’m not sure on this one. I do know, however, if there was a premium to publish or view the content on this micro-blog, I’d probably be watching Weeds instead of typing up this post.

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