Ideation on social media, venture capital and startups

I am re-posting a few paragraphs from my friend Michael Karnjanaprakorn’s most recent post: A New Path.

Michael’s doing some exciting stuff with All Day Buffet and I wish him the best!

…A couple of weeks ago, I had breakfast with Annie Duke (professional poker player) who told me a great life lesson and story around sunk costs.  In the most basic terms, the concept is used in making good decisions (which is the secret to the success of professional poker players).  Wikipedia defines sunk costs as “costs that cannot be recovered once they have been incurred.”

So, for example, if you’re waiting in line at the grocery store, and the line next to you moves faster, most people won’t hop over to the faster line because of the time they “invested” in their current line.  This makes absolutely no sense as anything invested in your past shouldn’t influence your future.  Another example revolves around relationships.  Most people stay together because they’ve “been together for the past five years.”  Again, people shouldn’t make decisions based on past investments.  And if you’re wondering how this applies back to poker.  Once you make a bet and put your chips in the middle, that money is no longer yours (so you shouldn’t make bad decisions on getting it back).

Instead, you should look toward the future and look at all the different paths, opportunities, and possibilities presented to you right now.  The sky is the limit.  Everything in your past gets you to this point but it’s up to you to make the best possible decision on which path you want to go down. And that’s where gut intuition, happiness, and the rest of my cliche life principles come into play.  Because at the end of the day, if you make the right decision for yourself, there’s no way that it’s a bad one!

So true.

Update: More on Sunk Costs by Seth Godin

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This past week TechCrunch jumped on the stream meme. Erick Schonfeld published an article that generated some noise, citing a recent post by John Borthwick.

Playing with Facebook this week got me thinking more about the role of data within streams. Specifically, I have a few follow-up thoughts to my last post on the value and consequences of real-time information. At a basic level, streams are flows of objects, with each object containing unique metadata. However, this metadata can be abstracted to create parallel streams layered one on top of the other. I think we’re about to see a rise of what I’d call ‘data abstraction layers.’

Facebook’s stream already provides a glimpse into what an abstraction layer might look like. Individual inputs enter the stream, but they often have significantly more value when threaded together to produce a synthesis unrecognizable if only viewed separately. Think about the assumptions/conclusions that can be drawn and delivered from disparate data: the sum is often truly greater than the parts. In a minor way Facebook already has created a data abstraction layer delivered in the form of Facebook Notifications: birthdays and relationship updates are sent to users as synthesized data, not as individuals inputs. Stating, “Six of your friends liked this link” is a synthesis of six friends individually clicking “like.”

With relatively little effort, Facebook could take this a step further. Many of my friends constantly change their profiles and thankfully Facebook doesn’t alert me about each of these changes. Yet, if my friend Sally adds a new favorite movie and that movie overlaps with one listed on my profile, Facebook could easily deliver the synthesis: “Sam: you and Sally have a favorite movie in common!” Another example: the fact that I publish a status update geo-tagged ‘Austin, TX’ could ping my Facebook friends living in Austin, “Sam Huleatt is traveling is Austin. You should look him up!” These are just a couple examples of synthesized data acting as a layer (another stream!) sitting on top of my Facebook stream of individual inputs.

As a last thought — these parallel stream layers could be also be exponential; each subsequent layer produces its own synthesis of the data inputs and patterns residing underneath it.

Hmm.

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Real-time is the new black. Everyone from Facebook to the New York Times is pumping any feature they can slap a real-time label on. While I’m a big proponent of the real-time movement, the media’s incessant focus on the *consumer web* has failed to probe the consequences of what it means to manage real-time information and derive actions or produce consequential decisions.

In my opinion real-time at the consumer level is considering real-time only at the highest levels: discovery and creation. Platforms (Twitter, Facebook, etc) allow us to publish content in real-time, and a nascent market of applications allows us to aggregate, filter and parse that content (Tweetdeck, Friendfeed, Summize, etc).  However, these products focus almost exclusively on *taking information in* but not on leveraging that incoming signal to derive subsequent action. Humans can create content much faster than they can effectively process it, and thus, while our technology systems can be automated to pull and parse information in real-time, information is only valuable when we are able effectively interact with it. Thought about from an enterprise standpoint, the consequences of real-time information management take on increased importance.

Here are several areas where I see real-time innovation needing to emerge:

Real Time & Awareness

Now that we have so many channels available, a long tail of information is developing. On the consumer side, tools like Freindfeed are attempts to aggregate signal and provide awareness over multiple channels. How is the approached at the enteprise level and what are the key channels providing signal?

Real-Time & Attention

In true long tail form, real-time information is likely to follow the 80/20 rule. While we may have 100% awareness, it’s likely that only 20% of that information is truly valuable and where we should invest our attention. In my mind there is a substantial difference between ‘awareness’ and ‘attention’.

Real Time & Action

Not only does incoming information require our awarness and subsequent attention, but information at an enterprise level also requires action. While it may be fine to sit back and play voyeur on real-time information about a baseball game, when it’s real-time information about a brand, someone needs to respond.

Real-Time & Expected Response Rates

While real-time information may mean an ability to take in greater volumes of information (and faster), real-time interactions also carry the expectation of real-time responses. Consider the difference between email and IM. While IM has certain advantages, real-time interactions usually require deeper levels of attention (even if in shorter bursts). Instant messaging carries the expectation of immediate responses. Is this scalable? Consider the difficulty of being truly engaged in more than two simultaneous chat sessions.

Conclusion:

In the end, information is valuable when it arrives with a combination of speed and accuracy. We have done a good job so far in delivering information with speed and decent job of addressing accuracy.  However, the next turn of the crank is innovating around how we best leverage better and faster information to produce consistently superior outcomes: that is where the true ROI of real-time exists.

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From day one Workstreamer has been very focused on the process of Customer Development. We’re competing in a very large market filled with a variety of legacy products as well as an increasing number of new entrants looking to re-segment and disrupt old ways of doing things. In a highly competitive or burgeoning market it can be disarming to see new entrants burst onto the scene or read about incumbent competitors scoring large new rounds of financing. At Workstreamer have the good fortune to believe that our approach and features (yet unannounced, but currently in heavy beta usage) provide us a true competitive advantage over the competition. However, we are very cautious to avoid a common trap: becoming complacent by planning for the competition’s reality rather than its vision.

What do I mean? When a startup first conceptualizes a product, the team normally has a vision for what problem they’ll be solving and how they will solve it. This vision is often large in scale and hugely ambitious. However, Rome wasn’t built in a night. Thus, executing on this vision becomes a game of engineering small chunks, launching, getting feedback and then engineering some more. Achieving a vision is an iterative process and as the environment changes, so to will that vision.

Un-launched startups enjoy the ability to be small and hugely agile. However, once customers enter the mix, the scope and the build cycles (i.e. executing on the vision) are slowed dramatically as customer usage leads to a whole new set of variables. As a result, a trap (or shadow belief) for un-launched startups is to assume that the competition is light-years behind, lacks some insight, ingenuity or innovation simply because they don’t currently have a particular feature or approach. As an un-launched startup it’s all too easy to find one’s self executing on a road map that only assumes a competitor’s reality (their current product offering and features). Such assumptions are lethal; startups must assume the competition is always a day away from launching the same thing.

Emerging startups (ourselves included) must remember that the competition also has grand visions. While we may think we have a competitive advantage in terms of an ability to rapidly execute and gain first mover advantage, the reality is that incumbents enjoy the true trump cards: a user base and a track record. At the end of the day ideas are worthless in our space. To be a true innovator involves not only having a great idea, but having the ability to execute on it. To remain a step-ahead, startups must plan and execute against the competition’s vision.

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I really liked Dave Winer’s recent analysis of what he calls the “continuous bootstrapping effect” of social media platforms.

Twitter is the current holder of the baton in a series of social media bootstraps, each of which built on what came before. It is not Google, which is a search engine, rather it is what came after MySpace and captured its growth. Extrapolating, something will come along and do to Twitter what it did to MySpace.

It would be foolish to believe that Twitter will not have a successor. And I’m pretty sure it’ll grow faster than Twitter because word of its existence will spread on Twitter. That’s why all this is a bootstrap. You can use iteration N to spread word of N+1.

Google is a search engine. A completely different beast. I don’t buy that Twitter is search. Most of the stuff that you see on Twitter isn’t worth finding. Try searching for something in the news and see if you don’t agree. It’s easy to conduct an experiment.

Dave then presents the following diagram:

Some thoughts of my own:

• I’d definitely put MySpace and Facebook in below Twitter to make it more complete
• While ‘the next’ social platform may grow more rapidly than ever, the overall stickiness of follow-on platforms is in question. Just because something grows faster, doesn’t make it any more engaging or valuable: Twitter is undergoing such scrutiny right now. In the end it’s all about sustainable attention: I don’t think an entire business could be built on one viral video (for example). Also interesting to note that the bottom position in Dave’s diagram — blogging — has also had the best long-term sustainability.
• I agree that Google is a different beast, but the Google platform itself is a masterful model of ‘internal bootstrapping.’  Gmail made significant gains thanks to Hotmail, and Hotmail, thanks to AOL. All follow-on Google products obviously leverage the other pieces of the Google platform.
• I’m still surprised we haven’t seen a viral app spring-up around voice. The voice social graph is powerful and more personal than text (IMO). Could that be next?

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Years back a professor drew me a diagram of what he called the most powerful model in all of business:

Tonight while I was thinking about business models, the web, some friends ideas and workstreamer I pretty much decided he was dead right. Anytime you can add structure to the unstructured you’ve got yourself a sweet opportunity.

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I continue to read post after post after post about how the newspaper industry is going under and what can be done to resurrect it using various new distribution models and monetization strategies.

While I absolutely agree that the physical manner in which people consume news is changing, I believe there is an even bigger pressure point for the news industry: publishing news that people care about. At a high-level news is simply new information. Newspapers have long held the vaulted position of being able to dictate what is important, focusing on publishing content on politics, war and economics. Although I constantly read articles suggesting that young people don’t read newspapers, I’d bet anything that the average person under 35 actually consumes more news than ever before — it’s just not the news of our parents’ generation.

News Is About Attention

The content of traditional newspapers has an increasingly difficult time competing for people’s attention. Whereas newspapers were long the only distribution source for emerging information (and thus able dictated what the news was), the web has essentially created an entirely new news marketplace. The long-tail enables information availability on virtually any person, place or thing worth keeping tabs on. As a result people have begun to allocate their attention to those news items they find most interesting and can relate to best.

And what do people relate to best? Local, me-centric and celebrity content. For example, if you were to compare new US Weekly subscriptions in the last five years against new subscriptions to the The New York Times I would bet that they’d be inversely correlated. And — the New York Times understands this. The most popular content newspapers have is made available by simply viewing the most emailed or viewed stories (see image below). These popular stories are rarely about global issues like Darfur and instead are usually focused on self-help, movie reviews or technology. To further prove that news ‘in general’ is not in danger, just consider the explosive growth of ESPN over the last decade. With long-tail accessibility, the plight of traditional news makes perfect sense – people will allocate their attention to the information that directly affect their lives, less so to issues affecting them indirectly. The fact that a teenage girl knows some new detail about Ashton Kutcher and Demi Moore probably does have more impact on her life than reading about Abu Ghraib. The ability to talk sports with co-workers can be a ticket to a promotion or making friends.

Are We Really More Connected, or Simply More Accessible?

Many assume that globalization and the internet bring people together in a much more connected way. However, from what I have observed, just because we have the ability to access something does not mean we truly have any greater interest in or connection to it. There is a difference between connection and accessibility. In term of news, our access to information may actually sever to disconnect us in a a sense. Access can now serve as an excuse for not staying informed due to the ease and obvious nature of accessibility (ex: “Oh, I can just go read about it onWikipedia or Google it”).

Contrast that with what it means to feel connected. After World War II, there was a very real and clear sense of how the events in far-flung countries could collectively impact the world. This sense of inter-connectedness led our grandparents’ generation to place a great importance on news in the traditionalgeo-political and economic sense; what happened overseas could truly impact everyday Joe plumbers. However, in a world that hasn’t experienced such levels of global dependence and connection, the priority has returned to keeping current with the things, people and places that we encounter everyday. Me-centric news is powerful. For example, if you’re diabetic and have an aging parent, the most valuable news to is specific to your particular situation. And the more of it, the better! My guess is that celebrity news is so popular, in part, because we engage with these celebrities regularly, listening to their music and watching their movies and television shows.

Understanding Demand: Customer Development

To survive in this day and age, leading news sources need to prioritize their content offerings based on what garners their audiences’ attention. Readers may say they want traditional news (politics, economics, etc), but where they spend their attention speaks differently. As private companies, newspapers need to figure out a way to increase their relevancy not only at a distribution level (how do people want to engage with content?) but at a content level (what type of content do they want to engage with?). How can they do this? First, I believe that newspapers need to increase their relevancy by embracing amateur publishers and gaining more long-tail content. The New York Times should sponsor and pay certain bloggers, offering distribution and credibility in exchange for targeted andmonetizable content. Second — and though it pains me — I believe that newspapers need to embrace tabloid and popular consumer news. The New York Times should consider acquiring sites like TMZ.com, along with new distribution platforms like Twitter. It may sound crazy, but it really isn’t. If the Times applied its years of experience and strategy to more popularized sites [using different branding perhaps :) ] it could easily create multiple newmonetization channels. Take as an example the success of NPR. One of the most archaic communication mediums, raido, is flourishing thanks to a maniacal focus on customer-demanded content. Newspapers desperately need to read Steve Blank and engage in customer development. There is still time to right the ship.

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The countdown to Web 2.0 San Francisco is on! I wanted to highlight a couple of sessions that I am really looking forward to.

Also, if you have not done so already, be sure to submit a quick anecdote, personal experience, or hack on the theme “how to do more with less” and you could be awarded a free ticket from LeveragingIdeas, courtesy of the great folks at O’Reilly Media and TechWeb. You can email me or submit a comment and I’ll be sure to publish the resulting advice and thoughts next week. Deadline is Friday.

Situation Normal, Everything Must Change.
(Simon Wardley, Canonical Ltd)

I couldn’t agree more that we’re shifting to a service based economy. Everything old is becoming new again. Especially in a world that is inundated by products with cool features and slick interfaces, the companies that will really stand out and succeed will place a high emphasis on understanding and supporting the customer.

There are many companies that implement web 2.0 applications and believe overnight their business processes will transform. Web 2.0 to a great extent is about sharing and participation, attributes that are rooted in the DNA of a company and the makeup of its individuals. My post yesterday about Context, Timing and Perception is very relevant here. A holistic approach must be taken to get adoption and buy-in for full potential to be realized.

I also have a number of friends with great panels I wanted to highlight:

• W3C Geolocation API — Adding “Where” to Web Applications (Ryan Sarver)
• Beyond Buzz: On Measuring a Conversation (Kate Neiderhoffer)
• Why Social Media Marketing Fails - and How To Fix It (Peter Kim)
• Economics 2.0: Highly Effective Strategies for Putting Your Business on a Recession Diet (Dion Hinchcliffe)
• The Open Enterprise: How Web Tools And Culture Are Remaking Business (Stowe Boyd)

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I am running a five question collaboration survey.

Thanks in advance if you’re willing to spend two minutes filling it out. I’m happy to share the results.

You can take the survey here

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