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The Blog

12

Aug

Labor vs. Capital, when technology’s involved

For a recent project, I spent some time talking to executives in an industry about what new technologies they would like to see. Labor-savings were a priority for (1) safety (some  jobs were dangerous or injury-prone) (20 labor availability (varying degree of  mechanization / labor shortages) and (30 cost savings. [1]  The problem wasn’t unions, but that no one made the kind of new equipment these companies wanted.

Management Consultants are agents of Capital. We are generally hired by, and work for, senior management and other corporate stakeholders. But that doesn’t mean that we are in constant opposition to Labor: all situations are more productive if management  puts down their copy of  The Expropriator’s Handbook for a bit and focuses on improving the company as a whole. But it does further emphasize the socioeconomic and demographic divide that alienates many from labor forces and unions. I was thinking about this recently when reading commentary online about the transit strikes in the SF Bay area. [#]

Read more…

10

Jul

Global cities, global citizens: Plutocratization vs. the rest

“Our great, global cities are turning into vast gated citadels where the elite reproduces itself”

Simon Kruper writes in “Priced out of Paris” (FT) that after gentrification, the world’s most prosperous and desirable cities are now facing the prospect of plutocratization: first the lower classes were displaced, and now the middle class is being squeezed out, too.

This is bad, for a variety of reasons. But the most dangerous reason, to Kruper, is that the world’s great cities – New York, Hong Kong, London – are becoming incestuous domains of privilege, taking the lion’s share of wealth and power. And, crucially, they are keeping others away from that wealth, power, and attendant mobility.

It is very unfortunate for a society when its elite stultify and seek to preserve their position at the expense of new competitors. The same forces that keep the non-elite / non-nobility / plebes / 99% from attaining success and influence also lead the entire society into stagnation. In the long run, the 1% are getting X% of a smaller pie instead of Y% of a larger one.

(Relatedly – what does it mean when, today, the global elite is almost its own trans-national country? That, ironically, the people who come closest to achieving a Marxist ideal of cosmopolitan, global citizenship are the ultimate Capitalist Class?)

I think it is sad and harmful for communities and geographies to stratify in this way. I think a mixing of classes is as essential as a mixing of any other demographic quality for the intellectual, cultural, political, and ethical health of a place. But what should we do about this trend? Read more…

05

Jul

What is behind Snapchat’s valuation? Networks.

Fortune’s Dan Primack wrote a post a few weeks ago asking, “what is behind Snapchat’s valuation?” in a recent round that pegged it at $800M pre-money. He was perplexed by the seeming lack of good, non-generic reasons for an investment from IVP.

I’m not surprised IVP didn’t precisely explain their reasoning – but it isn’t hard to figure out their logic.

Snapchat is worthwhile not because “we love LA” or because it’s “mobile first” (reasons 8 and 1, respectively offered by IVP’s Dennis Phelps). Snapchat is interesting for three principal reasons:

  1. It’s growing really, really, really fast
  2. It’s a new, different kind of communication
  3. Because of (2 + 1), it is or can become a powerful network and communications medium

That’s all you need! (1) would be enough for some – momentum VC! – but (2) provides a philosophical justification and (3) the economic one. Let me explain this reasoning a bit.

[1] It’s growing really, really, really fast

I won’t go into a lot of detail here – you can find public metrics to help support this, and see also Mary Meeker’s Internet Trends report from a few months ago which had good slides on Snapchat.

Key points: >100% Month/Month growth seen this year; more sharing users than Instagram; ever-growing share of total # of photos uploaded as well.

[2]  It’s a new, different kind of communication

Other photo sharing services are based on the premise of either (a) photo curation / memory preservation or (b) experience sharing. But  in all instances, photos are meant to preserve something.

Snapchat is ephemeral by nature and as such it enables photos to be used in ways they could not or were not used before. The medium is different and the constraints push people to interact in new ways. Snapchat is not the same as Facebook, or E-mail, or Texting, or whatever else.

[3] It is or can become a powerful network and communications medium

Because it has a large userbase with increasing penetration, Snapchat can easily end up in an Instagram-like position of having an accidental, but important, social network. At time of acquisition by FB, Instagram didn’t just have a killer ‘feature’ in the form of great photos and photo-sharing: it had a killer potential, in the form of its social networking functions and innate connections.

Because it is qualitatively different as a way to communicate, Snapchat can have the same features but have them be less immediately fungible. There can be platform lock-in. If you have a lot of people together, and you control how they communicate… that starts to look like a pretty good place to be, whether you’re a social network or another sort of provider. Manning the crossroads, you can usually find a way to collect a toll or otherwise cover your rent.

So what?

But that only explains why Snapchat is interesting, and why it might have some future platform to make money. It doesn’t really explain in any monetization logic how the present value of its future (etc.) is $800M today.

To do that, you have to use a bit of VC and Silicon Valley logic and pixie dust… its value is what the market will pay, and right now there are those who will pay reasonable well for a potent, sticky social network. The trick is to be able to make enough money on your own to choose your fate – whether to try to build a business or to accept a fair market premium from a hungry, behind-the-curve suitor.

Primack also missed the obvious market opportunity – reveal that Snapchat never deletes Snaps, and start a ‘premium Snapchat’ model where you have to pay to keep any blackmail-worthy shots from being revealed!

I don’t know that $800M is the right price for Snapchat, but if someone else wants to put money there, I’m interested to see where it leads. There are worse places on the investment continuum between Angry Birds for Dogs and ventures providing water filters to villages in Africa.

14

Jun

Why Google’s payments strategy isn’t working

Google has been trying to make waves in payments for a long time now. Google Checkout was launched in 2006; Google Wallet in 2011. Businessweek did the numbers and found Google spent ~$300M acquiring different payments startups in recent years. But for all the product launches and engineers, there isn’t much traction to show for it – in terms of market share, or profits. Why?

In my estimation, Google’s strategy is failing because its tactics (promote new payment system) are misaligned with its real strategic goals (get access to super-valuable payments data). Its missteps are confusing by any measure, but make more sense when looked at this way.

Let’s look at four questions:

  1. What is Google trying to do?
  2. Why does Google care about payments?
  3. Why is it failing?
  4. How could it do better?
Part One

What is Google trying to do?

Google is trying to promote the adoption of Near-Field Communications (NFC), a technology that lets you use your mobile phone to pay for things by linking it to your credit card, bank, or a digital wallet. This is supported in Android and included on many millions of Android devices. Today, the technology has a 2% share of mobile payments, expected to reach 5% by 2016. [1]

However, instead of NFC, most people are using credit cards, cash, barter, etc., with no signs of quick change. People who do use mobile payments, are more likely to be shopping online, conducting bank transfers, etc., than they are to use NFC. Hence, this explanation…

Read more…

28

Jan

So… about the blogging

As should be apparently to those with a strong sense of chronology, I didn’t end up putting out weekly or biweekly posts on consulting or business strategy. As it turned out, the interesting things I wanted to say kept proving too confidential, and the non-interesting ones… self-explanatory.

Perhaps instead I’ll devote some time to writing on other subjects that are both pertinent to my life, and likely-to-be-written, such as food and travel and tech in a broad, general sense. (Thankfully, from a regular-human rather than consultant perspective).

To you, non-existent-internet-readers, I apologize for any untoward expectations, and will hope to share some better updates soon. They’ll be back to the old pattern of write-about-anything-I-feel-like and maybe things will gel on something new.