The Latest from TechCrunch

Now In 20 Cities, Startup Grind Aims To Inspire The Next Generation Of Global Entrepreneurs
Outside Lands Wins The Internet — And Mobile, Too
Visual Marketing Is Here – 5 Ways You Can Use It To Sell Your Ideas
How Something You’ve Never Heard Of Is Changing Your World
Dispelling The Eureka Myth: Big Ideas Take Time And Space
Facebook: A Fate More Similar To Yahoo Or Google?
Facebook Groups Let You See Exactly Who Has Viewed Your Photos, Too
Facebook Is The Ant; Zynga Is The Grasshopper
TechCrunch Makers: Inside The Thermovape Factory
In ‘Bittersweet’ Deal, Digital Ad Company AppNexus Acqui-Hires Fantuition
Is Modern Portfolio Theory Dead? Come On.
Dejamor Keeps Your Sex Life Sexy Every Month
Stacked Ranking

Now In 20 Cities, Startup Grind Aims To Inspire The Next Generation Of Global Entrepreneurs

Posted: 12 Aug 2012 09:00 AM PDT

“Silicon Valley doesn’t have a monopoly on brilliant entrepreneurs and founders,” Derek Andersen tells me over coffee, “so we want to find them wherever they live, give them a stage and an opportunity to share their hard-won experiences with those who need it and might benefit from it.” That mission statement sounds like it might have come from one of the founders or mentors of Y Combinator, 500 Startups, DreamIt, AngelPad or Seedcamp. But Andersen isn’t a venture capitalist, nor is he building yet another accelerator or incubator. He’s not even interested in equity.

It sounds crazy, right? But Andersen is talking about Startup Grind, an events-based community for entrepreneurs he founded in 2010. For those unfamiliar, the company grew out the casual, episodic meetings Andersen had with friends and fellow entrepreneurs in his office in Mountain View, in which they’d gather at night to brainstorm, give feedback on ideas and business models and talk about being an entrepreneur. The meetings were productive, so Andersen decided to make them a monthly thing.

Startup Grind had its first event in February 2010 with nine people in attendance and the numbers have grown steadily since. It launched its first chapter outside of Silicon Valley in LA in December 2011. Seven months later, Startup Grind now has monthly events in 20 cities worldwide (Austin, Los Angeles, New York, Seattle, Toronto, Ottawa, Baltimore, Singapore, Tel Aviv, London and Sydney — to name a few) and the founder wants to be in 30 by year’s end.

But what does “being in” these cities entail? Andersen says he thinks of Startup Grind as being TED for startups and founders. Or one might think of it as an entrepreneurial Elk’s Club or a national, self-sustaining of local affiliate networks … a la Fight Club.

That means Startup Grind hosts monthly meetups in each of its affiliate cities, in which any and all entrepreneurs and founders can participate. These groups talk about the startup hustle, network, share notes on investors and partnerships, all of which is framed around keynotes or interviews given by local veterans, who share their knowledge and advice with the community. The founders of Pinterest, Digg, About.me, AngelList, Zaarly, Meetup, along with names like Jeff Clavier, Steve Blank and Dave McClure have all spoken at Startup Grind events in Silicon Valley.

Naturally, Andersen wants the Steve Blanks and Dave McClures of the world to be speaking at events in every city. So, initially, he and team would launch Startup Grind in nearby cities themselves, but entrepreneurs began taking the initiative themselves and now anyone (in any city can apply).

But that doesn’t mean everyone is getting accepted. Says the Startup Grind founder: “We’ve turned down the majority of requests to start new chapter. We’re very picky about making sure we find the best possible people in local markets to represent our community. We’ll start in just about any city, as long as we find the right person.”

If accepted, each city’s “Local Chapter Director” manages and runs their local network and community, organizing events and recruiting speakers. The team wants events to be the same everywhere, meaning that attending a “Fireside Chat” in Toronto should feel just the same as it would in Timbuktu, with an emphasis on “building meaningful relationships,” Andersen says.

That sounds great, but idealism only goes so far. There are a lot of valuable entrepreneurial communities and networks developing around accelerators, hacker events, and more. Andersen says that they really want to “keep it real,” acknowledging that everyone fails and struggles when building a company, no matter what level. Even the founders of Pinterest, or Steve Blank, have had moments of brilliance and despair, and Startup Grind wants to give equal value and voice to both sides.

When asked about the value for his city, Toronto Chapter Director Michael Caley said,

We saw an opportunity to connect the scene in Ontario to other hubs and the hottest topics in Silicon Valley. Startup Grind is a chance for us to crawl up out of the trenches and survey the whole battlefield. Having that perspective makes everyday at our startup more meaningful. Startup Grind Toronto has delivered a series of events to highlight the shifting context of early stage finance. In order to compete, Toronto needs to take these stories to heart.

So, while accelerators and incubators are known for accepting only a tiny percentage of startups that apply, Startup Grind provides a networking and educational venue for the other 97 percent. It doesn’t charge “dues” to its local affiliates, and the founder says that the team is trying to recruit the same people who help educate Y Combinator and TechStars companies, only instead prompting them to share their experience and knowledge with the local startup ecosystem.

The company brings on sponsorships for each event (like Bing, Google, local law firms, and others) and charges at its events, which the team believes can help create a more resolute crowd for networking. Startup Grind offers a rev-share deal for its local communities, but Andersen says the majority of money the events make goes to the organizers, who put it towards future costs and recruiting. Today, the company has a small staff and is profitable.

Communities like Startup Weekend, AngelHack and Lean Startup Machine are all providing great ways for founders and hackers to collaborate, learn and help build networks in their communities — and the more, the merrier. The world is a big place, and not all innovation is (or should be) happening in or around the Bay Area.

Says Andersen:

We’re hoping to build a community that acknowledges that, even in Silicon Valley, where the startup grass is always greener, building a startup is hard and can rattle the self confidence of even the most rugged lone wolf — and that can be a serious comfort and motivator to entrepreneurs all over the world.

Startup Grind at home here.

Outside Lands Wins The Internet — And Mobile, Too

Posted: 12 Aug 2012 08:00 AM PDT

There are a few different music festivals in San Francisco and nearby — like the annual (FREE) Hardly Strictly Bluegrass festival and Treasure Island. But my favorite has to be Outside Lands, which just happens to be taking place this weekend. In part, that’s because beyond just having a great lineup, Outside Lands wins at providing an all-around great experience on the web, through various social networks, and on mobile devices.

On mobile

The best part of Outside Lands might be its mobile apps, which are designed to help users get around. If you’re going to Outside Lands and you somehow haven’t downloaded the official iPhone or Android app, correct that now. It’s pretty invaluable.

It’ll provide you with maps of the different stages, as well as various food, beer, and wine options. Users can also create their own lineup of bands they want to see, and the apps send push notifications when the schedule changes, as it’s wont to do. It also has built-in GroupMe messaging, so that users can connect with their friends and coordinate where they’re meeting. Outside Lands also has a mobile web experience for users who don’t have one of those fancy smartphones with apps.

On Twitter

The Outside Lands app is just one part of its strategy, though. Outside Lands also has a pretty substantial social profile on Facebook and Twitter. On Twitter, the official @sfoutsidelands is manned by Ranger Dave, who posts Instagram photos, scheduling changes, and witty anecdotes, all in the third person. Ranger Dave has almost 18,000 followers, which is pretty impressive when you consider that the festival will probably draw more than 60,000 attendees each day.

ranger dave is ready for round two. rise and shine people.

— Ranger Dave (@sfoutsidelands) August 11, 2012

On Facebook

The Outside Lands Facebook page, which has amassed more than 100,000 likes, is also an informative one-stop shop for schedule changes and highlights from each day of the show. It’s also got a pretty awesome Q&A thing going where fans can submit questions to their favorite bands at the show, and the Outside Lands team will get answers. How cool is that?

On Instagram

What would a music festival be without pretty pictures? If you’re in SF, your Instagram is probably blowing up with photos from the show, but it’s also worth following the official feed, which has some pretty awesome photos.

Basically, this is how all music festivals should be… And increasingly, it’s what visitors have come to expect. That’s true not just for the weekend of a show, but also to keep fans interested year-round.

Visual Marketing Is Here – 5 Ways You Can Use It To Sell Your Ideas

Posted: 12 Aug 2012 06:00 AM PDT

Editor’s note: Iris Shoor is co-founder and VP Product Marketing at Takipi, a service for managing software downtime in the cloud. Before that, Iris was co-founder and VP Product at VisualTao, a B2B web and mobile service acquired by Autodesk.

For a long while I thought about marketing as wordsmithing – putting an abstract idea into a sentence, picking just the right words. But then things started to change – less text please, more graphics – we'd rather see it than read it. This year more than ever, visual content is going mainstream. Pinterest is using imagery as its main content, and within a few months hundreds of different websites have adopted a 'Pinterest like' design. Companies are switching to Tumblr instead of traditional blogs, with little text and lots of imagery. Facebook is making your profile more visual with the Timeline and the new image gallery, not to mention Instagram. There's a change in the air and this time you don't need to smell it – you can actually see it.

I have to admit that I started using visual marketing not because I identified a trend but because as an architect by trade that's the way I think – visually. I founded two companies (you can read more about our journey from 0 to 10M downloads here) where visual marketing is used as a main marketing strategy. To make things more interesting, both companies are as far away from being visual as you can possibly get – a B2B app for engineers and a Cloud/Big Data tool for developers. Here are 5 ways you can use visuals to increase traffic, get more buzz and reach more users:

"Say Cheese" – How A Team Picture Helped Us Get Better Reviews On The App Store

After every update to the App Store/Google Play we used to send a newsletter to our user base, highlighting the newest features and asking to review the version. On one release, after sending the newsletter we got 3X more reviews than usual (although there was nothing extraordinary about that version). It took us a while to figure out the reason. For that release we placed a picture of the team – the engineers who worked on the app right next to the 'review us' link. While traditional marketing uses people's faces for just about everything (why do you always see smiling faces next to cheese, cars or real estate?), startups tend to restrict their team pictures to the 'about us' page. People are immediately attracted to human faces and react to action, when they feel it is called for by real people.

Want People To Remember Your Product? Look Different

When introducing a new product to a market, one of the main challenges is to have users remember your product and easily tell it from others. You want potential users to remember reading about your product two months ago, or recall seeing it being used by a colleague. Using a memorable image or a unique visual language is a great way to do just that. MailChimp is bringing their brand to life using a humoristic visual of a mailman monkey. DropBox is using childlike illustrations as a visual language, and by doing so differentiate themselves from other storage services. Heroku is using Japanese elements from Origami to Japanese mythology, so people would remember and emotionally relate to their product (which BTW has nothing to do with Japan).

[DropBox and Heroku using memorable visual styles]

Reality Check – Show Your Product In A Real World Context

Look at a screenshot of your product. Now take a step backward and look at the full picture. What does the user look like? Is the product being used at the office, at home or outdoors? Is it daytime or nighttime? When the product is displayed in context users can understand much more within seconds. This method is also more credible, as once you see a product used in a real world scenario it makes it harder to doubt it. For example, on Square's homepage the main content is an image of the product being used in a farmers' market. This picture is the main message and they're not backing it up with text. With just a glimpse users can understand how the product works, where you'd likely use it and eliminate the 'who needs it' reaction.

Having A Hard Time Getting To Bloggers? Great Visuals Might Help

There's no magic trick when it comes to getting media coverage. A great product and a trendy market surely help, but so do beautiful and funny images. A common mistake is to send bloggers product screenshots. Most screenshots don't capture the essence and magic of a product. In fact, you're asking the reader to work pretty hard to understand your product by looking at a screenshot. When placed in a minimized/cut version it will most likely become a 'generic' screenshot, looking like any other app or website you've seen before. Here's an example from our first product where we tried to capture the essence of a localization feature with visuals, and without screenshots -

“Ouch, That Looks Painful” – Explain The Pain Using A Visual Analogy

Explaining the pain is always a main challenge when introducing a new product – no one really wants to hear what's wrong with the way they work now. You can probably recall numerous videos of new products where almost half of the video is dedicated to telling you how much your life is a mess. With our second company, Takipi, the pain we're trying to present is complex software debugging – looking for the source of a problem in the code. We're not telling developers what they do today is wrong or difficult, but rather use a fun analogy for debugging and the pain they're experiencing every day.

[Developers - know this feeling?]

How Something You’ve Never Heard Of Is Changing Your World

Posted: 12 Aug 2012 02:00 AM PDT

Editor’s Notes: John C. Zolper, Ph.D. is the Vice President of Research and Development at Raytheon, an American corporation with core manufacturing concentrations in weapons and military and commercial electronics. So yeah, neat stuff.

I've got a riddle for you. What do Blu-ray disks, military radars and LED light bulbs have in common? Chances are, if you work outside of the defense or electronics sectors, you may not easily make the connection. But the common thread is a little-known technology called Gallium Nitride (GaN for short). GaN is evolving rapidly behind the scenes to transform many aspects of modern day life, while also serving vitally important roles within our nation's military.

GaN is a wide band gap semiconductor material with special properties that are ideal for applications in optoelectronics, and high-power, high-frequency amplifiers. Aerospace and defense innovators have long recognized the critical competitive advantages GaN represents for high frequency electronics – including significant cost, size, weight and power reduction capabilities – and have spent years refining and continuously pushing GaN technology to new limits. For example, GaN is playing an integral role in developing more reliable military radars that can be five times more powerful than traditional systems or only half the size. In recent years, technologists across a number of commercial industries have taken notice of these pioneering innovations for the military, and have started putting GaN to work to power every day technologies in ways that significantly reduce energy costs and environmental impact.

Take the Blu-ray disc, for example. The next generation DVD is changing the way the world watches movies. Blu-ray discs store video and audio data packets in "pits," or tiny grooves, which are about half the size of those in traditional DVDs. The tiny, highly accurate Blu-ray laser beam – powered by GaN-based violet laser diodes – can precisely read these hyperfine pits. This enables closer spacing of data packets and up to five times the storage capacity of a traditional DVD (roughly 27 GB of data). GaN technology enables higher resolution for the crystal clear imagery modern movie buffs have come to expect. With support from two of the world's largest PC manufacturers, HP and Dell, Blu-ray technology is poised as the next-generation optical disc format – with potential to increase PC data storage exponentially in the coming years.

You've likely seen the light bulb revolution that's taking place, but may not have known gallium nitride is at the center of it. As traditional, century-old incandescent bulbs are slowly phased out by federal mandate, LED light bulbs represent the future of the lighting industry. A GaN-powered LED light bulb can easily outlast traditional bulbs by several years, while consuming a tenth of the power and reducing CO2 emissions by 90 percent. The Department of Energy recently commended Philips Lighting for creating a LED bulb that would last more than 20 years – an innovative design with the potential to save Americans a combined $3.9 billion in annual energy costs and reduce U.S. carbon emissions by 20 million metric tons. A number of young companies, including startup Sorra, remain focused on driving innovations in cost-effective LED lighting for the masses.

And LCD televisions, backlit by GaN-powered LED lighting, are thinner, lighter and up to 40 percent more energy-efficient than those using CCFL backlighting. In an effort to reduce the price point for consumers, pioneering companies such as Sony are now introducing the next wave of LED televisions, which will use edge-lit LED as the TV’s light source, reducing the number of LED lights required as compared to first generation LED televisions.

For mobile users, GaN can help ensure an affirmative answer to the old question, "Can you hear me now?" The efficiency and resistance to heat and electronic interference of microwave amplifiers built with GaN enables broader, more reliable cellular coverage, while eliminating the need for power-sucking cooling fans required by older cell phone tower technologies. RFHIC Corp of Suwon, South Korea, which makes GaN-based radio frequency and microwave components for telecommunications and broadcasting industries, estimates U.S. carriers could save approximately $2 billion per year by using GaN technology for their wireless infrastructures. Large carriers, including Sprint, have already launched GaN-powered towers in several markets.

While GaN-powered technologies quickly evolve to alter many aspects of modern day life, GaN electronics are expected to play an increasingly more important role within our nation's military systems. Raytheon has been awarded a contract by the Defense Advanced Research Projects Agency (DARPA) to develop next-generation GaN electronic devices bonded to diamond substrates, which is expected to triple current GaN circuit capabilities. The application of a markedly more efficient GaN-on-diamond material is expected to significantly benefit next-generation radar, communications and electronic warfare systems that employ GaN-based radio frequency devices.

When you think of how much technology is empowered by a tiny microchip, it's not hard to imagine how GaN will rapidly accelerate innovation across numerous industries in the years ahead. Undoubtedly, future innovators will find new ways to apply GaN technology to our iPads and smartphones, bringing the networked world to consumers' fingertips more quickly and effortlessly. Companies from start-ups to larger enterprises looking to revolutionize their industries would do well to consider how GaN can drive innovation within their business models. In the meantime, rest assured, innovators, investors and military engineers are already hard at work, staging the next technical revolution.

Dispelling The Eureka Myth: Big Ideas Take Time And Space

Posted: 11 Aug 2012 10:00 PM PDT

Peter Arvai at the Plugg Conference in Brussels 2010 2

Editors Note: Peter Arvai, CEO of Prezi, is passionate about helping people create and communicate big ideas. Peter is a serial entrepreneur, prior to joining Prezi, he established healthcare startup omvard.se and was part of creating the first mobile news reader.

Big ideas fuel the entrepreneurial spirit. An idea passionately pursued through a labyrinth of "what-ifs" can be the launch of the next great company, the new skyrocketing startup. Apple, under the leadership of Steve Jobs offers an example of a company built on a foundation of big ideas. With a storied reputation of innovation, Jobs and Apple seemed to have captured the magic of having the right idea at the right time over and over again.

But this magic is misleading. We applaud the genius of those like Steve Jobs for big ideas that transform our perceptions about what is possible. However, we fail to recognize the work that got him there. For every 'Steve soundbite' we remember today, there were weeks of intense development, preparations and actual rehearsals – all that just to present the idea. It was never the right idea at the right time but an idea that was thoroughly explored and improved over a period of time.

This is the most important lesson aspiring startups and entrepreneurs can learn from Jobs and other big thinkers: how to give space and time to discover, explore and convey big ideas.

We live in a world where people are sharing more ideas than ever. We have more status updates and instant pictures than we can possible consume. But just as the rise of fast food gave rise to slow food, what will the reaction be to a world summarized in 140 characters? We're producing more updates at an increasingly rapid rate, but at the same time, where does this leave our ideation process?

All businesses, but startups in particular, are under enormous pressure to deliver a continuous flow of big ideas to maintain a competitive advantage and meet economic goals. In fact, as businesses continue to outsource standardized business processes, the ability to think creatively is crucial to moving up in the value chain. An express example of this is printed on the back of your iPhones: "Designed by Apple in California. Manufactured in China".

While there is a demand for big ideas, flawed approaches fail to give space to truly out-of-the-box thinking. We often associate the big idea with a singular moment in time when an ethereal concept lurking in the subconscious finds its way to our conscious mental understanding. It is the "eureka!" moment when scattered pieces coalesce to give birth to an idea. But the "eureka" moment is a myth; big ideas need space to breathe, and develop.

The background for many great ideas is the culmination of work done over a number of years. It is being passionate about a set of questions coupled with an insatiable thirst for following unchartered territories that gives life to the big idea. Far from a moment of brilliance, big ideas are the result of vetting between alternatives and making connected concepts come alive. While the spark may hit unexpectedly, it takes time and space to grow the spark into a full fire of an idea. Even great ideas that are developed “by accident” come to light because the idea generation process allowed space, both literally and figuratively for idea exploration. As Louis Pasteur famously said, "chance favors only the prepared mind."

The idea creation process is then followed by a great deal of rehearsal for the presenting or communicating those ideas to an audience.

Street artist JR is probably one of the most celebrated artists of recent times. His mission is to change the world with art and he has been working towards this over the course of his career. In a recent year-long photography project he set out to humanize historical events by showing people left behind. He recounted this endeavor at TED upon winning the TED 2011 prize. For a project that was years in the making, he communicated it to the audience in six minutes.

So if there is a demand for big ideas what can we do to come up with them? It turns out there is a science. We need space to think big, metaphorically and physically. The role of space is essential to creative exploration and free thought. In fact, cognitive neuroscience studies have demonstrated that a sense of location helps us to make connections and remember details. The ancient Greeks provided an illustration of how space can help us to plan the communication of big ideas. They memorized speeches by laying things out in their living rooms. Moving between the kitchen table, chair and the sofa helped them understand relations and recall information. Through arranging ideas in one space and illustrating them via a cinematic walkthrough, they could connect ideas in a memorable fashion and design talks that stuck with their audiences.

Today some of the world's best ideation companies like Duarte Design, Gensler and IDEO use space to form connections and determine how to tell the story effectively. By adopting a modern take on the Greek's method of Loci, these companies use big surfaces like walls, tables and whiteboards to walk through ideas. The canvas allows creative freedom to explore ideas and enables a story to develop without the constraints of preconceived templates. For audiences it the big space that gives context, a sense of where we're coming from and where we're going.

In an age of bite sized communications, the big idea stands out. But it doesn't have to be one or the other. Entrepreneurs can tap the power of compact, instant updates to ignite the questions that can lead to deeper exploration. Short form communication can satisfy our very real need for social interaction, but leave room for ideas with deeper meaning, ideas that may that lead to the next Apple, Facebook or Amazon. A real-time flow of updates only increases the demand for food-for-thought and the development of big ideas that will have impact and be remembered.

Facebook: A Fate More Similar To Yahoo Or Google?

Posted: 11 Aug 2012 07:00 PM PDT

Editor's note: David Cho is CEO and co-founder of Sidebark, the private photo and video sharing service. Prior to founding Sidebark, he was a leader in Bain & Company's digital media practice.

How much more valuable do you think Facebook is than Yahoo? Let's say I gave you 1% of Facebook's stock. How much of Yahoo would I have to give you to part with that share? 5%? 10%? More? (Or would you just move to Singapore and renounce your U.S. citizenship?)

What about Google stock? Would you make a 1% for 1% trade? What about 0.5% of Google for your 1% Facebook stake?

Well here's what the stock market thinks: Based on market cap, Facebook is closer in value to Yahoo than it is to Google. After sliding under $20 per share, just two and a half months after going public at $38, Facebook’s market cap hit $45B, closer to Yahoo’s $20B than Google’s $210B.

The two companies represent two possible future states for Facebook. Google: Thriving, a colossus in digital advertising with a stranglehold on search, the kind of company that creates billion dollar businesses out of secondary products. Yahoo: Shrinking, trying to find its identity with a revolving door of CEOs, while seeking ways to improve monetization of its still massive user base.

These two companies pretty much represent heaven (Google) and hell (Yahoo) for Facebook. Or to steal from Dante’s Divine Comedy (no, not this one, this one), Paradiso and Inferno.

Right now, according to Wall Street, Facebook is edging perilously close to Inferno. So what gives? Is Wall Street right, and more importantly, can Facebook find salvation?

By virtually any measure, Facebook runs a fabulous business. With a billion (!) engaged users, Facebook recorded $1.2B in revenue and $300M in profit in its most recent quarter and has $10B in cash to invest in the business.

But the stock market does not reward current performance. Stock prices reflect investors' expectations about a company's future performance, and particularly for stocks like Facebook, growth.

This is partly why Facebook's stock price took a beating after its most recent earnings announcement, even though it met the earnings guidance that it had set for itself. The problem was that many analysts believed that Facebook was "sandbagging" its numbers. The stock price reflected that expectation, and when Facebook merely met its earnings guidance, the stock took a tumble.

So what should we expect for Facebook's growth? Facebook will almost certainly start to create separation from Yahoo ($1.3B revenue in Q2 2012). But do we think it can eventually grow to Google's size ($11.0B), nearly 10x bigger than Facebook today?

To get a sense of Facebook's growth prospects, we can start by breaking down Facebook’s revenue into its component parts: number of users; mix of those users; and average revenue per user (ARPU). Let's look at each piece individually.

Number of Users: This is all about product, and Facebook has obviously crushed it here. They have added 250M users in each of the past three years, and these users are becoming ever more engaged on the site. But how much growth is really left? In the US, its most mature market, Facebook grew its user base just 5% in April vs. the same time last year. In many other markets, Facebook appears to be hitting saturation as well. While some headroom still remains, Facebook is rapidly approaching a point where hyper-growth – driven by growth in users – will plateau.

Mix of Users: What do I mean by mix? Not all users are created equally. A U.S. user is more valuable than an international user, and a web user is more valuable (today) than a mobile user. As has been well-covered, however, engagement is rapidly shifting to mobile, and most of Facebook's user growth is coming in developing markets. Both factors will serve to mute the impact on revenue that arises from continued growth in users. In other words, even if you believe that Facebook can grow its user base by, say, another billion users, revenue will not necessarily double.

Average revenue per user (ARPU): This one is all about business model, and it is here that Facebook will need to generate consistent growth to find Paradiso. This in turn will come down to two factors: How well it leverages its competitive advantages of scale and data to attract large-scale brand advertising, and how successfully it grows new monetization models like payments.

On the first, Facebook has done well in attracting small and medium businesses and other so-called "performance advertisers" to the platform, but the game will be won or lost based on attracting the billions of dollars that brand advertisers like GM, Proctor & Gamble or AT&T still spend offline. While online advertising has grown to nearly $40B per year, offline advertising (TV, print, radio, etc.) is still a ~$140B market. Facebook's scale will help in attracting these dollars, but they have hit bumps along the road in doing so.

To help land these brand advertisers, Facebook will also need to continue to be aggressive in how it uses user data to deliver strong ROI. We've already seen Facebook experiment here with sponsored stories, using your friends' likes to insert ads into your mobile feed. I expect we'll see many more experiments in the future as Facebook uses what it knows about us to improve ROI. In fact, Sidebark, the company I co-founded with Nick Stanev, was founded in part in anticipation that privacy concerns will get worse, not better, on Facebook.

The second factor of finding secondary sources to monetize the user base is a wild card. Facebook has been successful building payments as a meaningful revenue source, and many pundits have offered other adjacent businesses that Facebook should enter (Facebook phone, anybody?) But I think it's hard to rely on the discovery of new business models to project Facebook's growth.

So where does that leave us? Decelerating growth in users, unfavorable change in user mix, and a question mark in ARPU. In the short term, Facebook is certain to grow, but the question of Inferno vs. Paradiso will take quite some time to sort out. In order to catch up to Google and find Paradiso, Facebook must be aggressive in driving strong ROI for its customers, the advertiser. But to avoid Inferno, they must not kill the golden goose – their amazingly engaging product – through overly aggressive use of user data or otherwise sullying the user experience. It's a fine balance, so for now, I'll hedge my bets and say that Facebook is in Purgatorio and take my 1% to Singapore.

What do you think?

Facebook Groups Let You See Exactly Who Has Viewed Your Photos, Too

Posted: 11 Aug 2012 06:16 PM PDT

In July, Facebook rolled out a new “seen by” feature for groups, which let people know who has seen a post or announcement in that group, and when. And, although Facebook didn’t make much of a song and dance about it at the time, it looks like it is actually offering this feature on photos, too.

As you can see in the screenshot below, the “seen by” feature in photos works just like the “seen by” feature for other group posts: someone who posts a photo to a group can see how many people in that group have viewed it, who those people are, and what time it was that they viewed the photo. And that information is not exclusive just to the poster, either — others in the group can see who viewed a particular picture, too.

The “seen by” feature on a photo was first brought to our attention by Christo Wilson, a computer science PhD student at U.C. Santa Barbara, whose professor, Ben Zhao, was the one who first noticed it appear on a photo of his daughter that he posted to a group of users.

Zhao told TechCrunch in an email that he first noticed it on Friday. “I have a lot of friends who visit a group page we created for my baby daughter, and the first timestamp showed up last night,” he said.

I joined Zhao’s daughter’s page as well, and I could also see the names of all the users who had viewed each photo. This feature doesn’t seem to be appearing on other Facebook groups that I am in, yet.

It’s unclear whether Facebook would ever extend the “seen by” feature to photos that appear on all users’ accounts, not just those of groups.

On the one hand, Facebook has clearly been growing the number of places where people can view who has viewed their content. In May, Facebook added “seen by” details to messages between individual users and groups. Then in July, it appeared on group posts. In that context, it makes sense for it to extend to group photos, and possibly more.

Zhao notes this could be ”a phased rollout and something that will be coming for other more broader contexts as well.”

On the other hand, making something like this more widely used could be viewed as Facebook encroaching too far into how it monitors — and reports — on how the social network gets used. Photos have a more personal nature, and as Josh pointed out when Facebook launched the group “seen by” feature, it would be unlikely this could be used for general photo browsing:

Facebook spends a lot of time fighting spam and scam hawking "profile spy apps" that would supposedly let you see who has viewed your profile. It's repeatedly stated that no app can do this, and I'd say it's highly unlikely to ever show who looked at photos. I mean, people might be a lot more apprehensive to browse photos, especially of romantic interests, if they knew other people could see their activity.

But in any case, if privacy concerns and apprehension deters users from looking at photos, that would run counter to Facebook’s bigger strategy to get people using photos more, part of how it hopes to keep people engaged on its platform.

If a feature like this, which basically will tell someone when you have looked at his/her photographs, feels uncomfortable now, there may well be a time when it feels less so. Facebook could be the one to usher in that change.

As Zhao notes, it’s “just another step in the ‘Zuckering’ of our social norms, slowly eroding what most people consider to be over the line from a privacy perspective.” (In his work, Zhao happens to specialize in “large-distributed networks and systems, data mining and modeling, security and privacy, and wireless / mobile systems,” with current projects focused on “querying, modeling and mining massive graphs, analysis of social networks and online communities, and wireless systems and protocols.”)

In groups, that discomfort in any case should be less so — the picture has been sent to a group you are in, so of course you might look at it. That’s slightly different from visiting another user’s (say an ex-boyfriend’s) set of photos and browsing through them all.

And it puts Facebook more in line with Path, which also lets users know who has viewed their “moments.” That alone could be a sign of how Facebook is trying to better tailor its service for those who want to use it in these more personal, traceable ways.

We’re reaching out to Facebook about this feature and will update as we learn more.

Update: Facebook confirmed both that photos posted to groups have been included in the feature since launch, and that the “seen by” feature is only for photos that are part of a group post, not others. “We have not announced plans to extend the seen by feature to other products beyond Messenger and Groups,” the spokesperson said.

Facebook Is The Ant; Zynga Is The Grasshopper

Posted: 11 Aug 2012 03:30 PM PDT

Editor’s note: Adam Rifkin is co-founder and CEO of PandaWhale, an online network of interesting things and people. He has never owned Facebook or Zynga shares. . You can follow him @ifindkarma.

Facebook and Zynga have experienced similar roller coaster-like devaluation from their peak stock valuations, and they’ve been partners for years, which is why MarkZ and MarkP often get lumped together in the same sentence by fearful investors whose stock is underwater: “Facebook and Zynga (insert analysis here).”

Such bundling masks a deeper structural truth. The reasons that the two companies have tanked in the market could not be more divergent, and more indicative of the character and strategic vision of the startups’ respective founders. Forget any analysis that lumps the two companies together, and instead find lessons in Aesop’s fable that are important to every startup founder.

Zynga is the Grasshopper in Aesop’s fable, playing and trying to get others to play. The fundamentals of Zynga’s business – even when it was working perfectly – are to ensure a steady stream of new games (often via M&A), to grease the user acquisition machine via advertising on other venues (largely Facebook), and to incent users to rope in their friends (via in-game promotions). This strategy depends on playing with copious amounts of capital to buy companies, ads, and promotions, and yet Zynga’s IPO and secondary seemed less concerned with raising capital for Zynga’s corporate coffers. After all its financings, BusinessInsider estimates that Zynga has about $1 billion in pro-forma cash on hand.

Grasshoppers just want to have fun. In March, Zynga’s founder Mark Pincus enriched himself and a few other large shareholders with giddy abandon; the goal of their secondary offering was to provide liquid exits to several existing shareholders. A longer-term thinker would NOT have cashed out a lot of his stock, but Pincus did. In fact, Pincus sold 15% of his ZNGA stock.

A lawsuit against Zynga contends that Zynga executives were selling even though they knew the quarterly numbers were weak. Long-term-focused management does not sell its stock in blocks of 15%; it sells cautiously in tiny amounts scheduled regularly over many years. Examples include Bill Gates, Larry Ellison, Pierre Omidyar, Larry Page, and Sergey Brin.

Facebook is the Ant, stashing resources for the winter with grim determination, regardless of which interest groups might be hurt in the short term (among them: investment bankers who were squeezed down to 1% commissions and retail investors who bought high). Mark Zuckerberg’s goal for Facebook’s record-breaking $16 billion IPO was to put as much as possible into Facebook’s corporate coffers, not his own; through financings to date, Facebook now has over $10 billion in liquid assets.

In retrospect, it’s extraordinary to think about Mark Pincus selling $200 million of Zynga stock and $38 million of Facebook stock to enrich himself, while Mark Zuckerberg only cashed out barely enough to pay his tax bill. Let that fact sink in for a few moments, and then compare how Zynga employees feel with how Facebook employees feel about their respective stock prices going down.

Ants work hard, driven by a higher cause. Mark Zuckerberg truly believes that Facebook’s mission – to make the world more open and connected – is the biggest and most important in Silicon Valley. I’ve heard stories that even his relationships with close friends have suffered if those friends chose to sell Facebook stock on the secondary markets or otherwise showed a lack of faith in the long-term mission of the enterprise. His motivations are far closer to messianic zeal than most investors (and David Fincher’s Social Network movie!) recognize… and simple pattern-matching shows us that the greatest companies in technology are started and sustained by founders like him, who live for the mission.

Mark Pincus, by contrast, seems obsessed with his wealth. With some of his early stock gains, Pincus bought a posh 11,500 sq ft, $16 million mansion on the Gold Coast. He has been living large for years, with multiple homes. Zynga evidently spends $1.37 million a year for Pincus’s personal security – in the top 3 of all public companies behind Lockheed Martin and Oracle. Pincus’s stock obsession was first demonstrated by his attempt to claw back stock grants (extra classy touch to do it during the “quiet period”!) from loyal long-term employees — a move so audaciously selfish that I heard entrepreneurs muttering about the long-term damage to the entire startup ecosphere if early employees started thinking their stock could be taken away within weeks of an IPO.

Compare that with Mark Zuckerberg, who lives more like Larry Page than Larry Ellison. He has a single Palo Alto abode that is biking distance from Facebook HQ. His wedding was a backyard affair for fewer than 100 guests with “catering” that appeared to consist largely of tacos, followed by a honeymoon that was newsworthy largely for the money he DIDN’T spend (no tip on a $40 dinner! lunch at McDonald’s!). He lives a life that allows him to focus his energy on Facebook.

Zuck’s goal is to deploy Facebook’s giant war chest and tremendous talent to build a “social utility” that will outlast his lifetime, like Walt Disney and Steve Jobs before him. Pincus, on the other hand, is so out of ideas that Electronic Arts is suing Zynga for copying them too much. Perhaps he’ll get lucky and online gambling will become legal in America soon. But even the gambling-will-be-legalized wager is a demonstration that he’s willing to bet the company on something that MIGHT happen, and lose. Zynga may still have $1 billion in its coffers, but the actions of Pincus do not demonstrate that he knows how to prudently employ that capital. If Zynga fails, whatever, at least he got rich in the process. If a Game-of-Thrones-like Winter is coming, it will be game over for Zynga as they burn their remaining cash and run out of resources.

If Mark Pincus wants to demonstrate that he’s in Zynga for the long run, he will deploy the $200+ million from his March payout, to buy ZNGA shares on the public market the way Netflix CEO Reed Hastings just did with FB stock. A great poker player demonstrates commitment by going “All In”.

The values of startup founders are baked deeply into the DNA of their startups, from inception on. A founder’s character, attitude, and strategy contribute significantly to the corporate culture, so it’s interesting to compare the “culture of play” with the “culture of making the world more open and connected.” To understand the two Marks is to appreciate how they’re making choices now that affect their companies’ future prospects profoundly. Zynga is having fun, like the solo Grasshopper, because times are good. And Facebook, like an army of Ants marching, works tenaciously and tirelessly towards its vision of a better future every single day.

TechCrunch Makers: Inside The Thermovape Factory

Posted: 11 Aug 2012 01:33 PM PDT

It’s not often you get to interview a nuclear engineer and a physician who run a tiny vaporizer factory out of an oversized garage outside of San Francisco so today is your lucky day. Two weeks ago we spent some time with the guys from Thermovape, a homegrown, self-funded hardware company that just happens to produce some of the coolest and most effective vaporizers I’ve seen.

For the uninitiated, the product is called the Thermo Essence Thermovape, a smoking cessation tool and “botanical vaporizer.” It’s designed for vaporizing the essentials out of botanicals like pot and tobacco as well as and oils. It’s not smoking – the convection vaporizer pulls everything important out of the materials, leaving behind desiccated leaves.

Founded by best buds Noah Minskoff and Nathan Terry, the company has about ten employees, including a pro machinist. The pair turned to vaporizers when they saw that the market was wide open. More importantly, Noah’s mother died of lung cancer and he was looking for a simple way to help people stop smoking. The Thermovape offers the nicotine dosage of a cigarette without the carcinogenic byproducts.

Whatever your take on drug use, these guys are real hardware entrepreneurs on a mission. They are completely self-reliant and haven’t accepted any funding, partially because the VC world is wary of these sorts of businesses. But, as Minskoff pointed out, this isn’t a bong factory. It’s a precision machine shop that uses some amazingly complex and expensive tools to make a product that lasts.

You can see how the pair work on their vapes in this episode of Makers and look for more hardware startups coming up in the next few weeks. If you have something cool you want to show us, don’t forget to email me at john@techcrunch.com with the subject line MAKERS.

In ‘Bittersweet’ Deal, Digital Ad Company AppNexus Acqui-Hires Fantuition

Posted: 11 Aug 2012 12:11 PM PDT

Just as the tech press was busy talking about the first academic paper on acqui-hires, another acqui-hire deal closed, with online ad company AppNexus acquiring fantasy sports startup Fantuition.

Co-founder and CEO Pat McCarthy announced the deal in a blog post that also recounts some of Fantuition’s history and discusses McCarthy’s feelings about being acqui-hired (or, as he spells it, “acqhired”, because no one can agree on the spelling of this awkward, awkward word) — in other words, getting acquired by another company just so that they can hire your team, while your product gets shut down.

McCarthy says the terms of the deal aren’t being disclosed, though he does answer the question, “Did anyone get rich?” in the following way: “The answer for almost every acqhire deal we've seen in the tech space over the last few years is ‘No, at least not yet.’” That last caveat is thrown in because the deals usually include equity, which could turn out to be very valuable down the line.

The Fantuition website, meanwhile, uses some blunt language to announce that the service has been shut down: “Your slow climb up the leaderboards truncated. Your records and trophies nullified. Your prediction results erased. Game over.” (That’s a softened a bit by the next sentence: “Thanks for playing and we appreciate your support.”)

As described by McCarthy, Fantuition is a pivot from an earlier local recommendation startup called GuideMe. McCarthy and co-founder Michael Walrath both worked at online ad company Right Media (Walrath was CEO), which was acquired by Yahoo, where they then held executive positions. GuideMe/Fantuition raised money from WGI Group (where Walrath is a manager), SV Angel’s David Lee, Marker LLC's Richard Scanlon, Yext CEO Howard Lerman, and AppNexus CEO Brian O’Kelley, who was previously CTO at Right Media.

In explaining the rationale behind the deal, McCarthy says that the startup’s momentum had “stalled”, though it still “had enough cash left to consider a bunch of options,” such as building an iPhone version. At the same time, O’Kelley suggested an acqui-hire, and while McCarthy was initially skeptical, he eventually came around: “I wanted to be a part of something bigger. I wanted to change the game like we did with Right Media, but to do it on a bigger scale and in new ways.”

Reflecting on the deal, McCarthy doesn’t take the bland, celebratory route of most acqui-hire announcements. Instead, he admits that there’s a “bittersweet” feeling among the team and the investors, concluding:

Even though it is painful to shut down our product, I'm extremely pleased to be joining one of the best technology companies in the world while also managing to continue to work with our team and live up to our investors' expectations.

Consider this a story to be continued…

Is Modern Portfolio Theory Dead? Come On.

Posted: 11 Aug 2012 12:00 PM PDT

Editor’s note: Paul Pfleiderer is the C.O.G. Miller Distinguished Professor of Finance at the Stanford Graduate School of Business and co-founder of Quantal International.

A few weeks ago, TechCrunch published a piece arguing software is better at investing than 99% of human investment advisors. That post, titled Thankfully, Software Is Eating The Personal Investing World, pointed out the advantages of engineering-driven software solutions versus emotionally driven human judgment. Perhaps not surprisingly, some commenters (including some financial advisors) seized the moment to call into question one of the foundations of software-based investing, Modern Portfolio Theory.

Given the doubts raised by a small but vocal chorus, it's worth spending some time to ask if we need a new investing paradigm and if so, what it should be. Answering that question helps show why MPT still is the best investment methodology out there; it enables the automated, low-cost investment management offered by a new wave of Internet startups including Wealthfront (which I advise), Personal Capital, Future Advisor and SigFig.

The basic questions being raised about MPT run something like this:

Hasn't recent experience – i.e., the financial crisis — shown that diversification doesn't work?
Shouldn't we primarily worry about "Black Swan" events and unforeseen risk?
Don't these unknown unknowns mean we must develop a new approach to investing?

Let's begin by briefly laying out the key insights of MPT.

MPT is based in part on the assumption that most investors don't like risk and need to be compensated for bearing it. That compensation comes in the form of higher average returns. Historical data strongly supports this assumption. For example, from 1926 to 2011 the average (geometric) return on U.S. Treasury Bills was 3.6%. Over the same period the average return on large company stocks was 9.8%; that on small company stocks was 11.2% ( See 2012 Ibbotson Stocks, Bonds, Bills and Inflation (SBBI) Valuation Yearbook, Morningstar, Inc., page 23. ). Stocks, of course, are much riskier than Treasuries, so we expect them to have higher average returns — and they do.

One of MPT's key insights is that while investors need to be compensated to bear risk, not all risks are rewarded. The market does not reward risks that can be "diversified away" by holding a bundle of investments, instead of a single investment. By recognizing that not all risks are rewarded, MPT helped establish the idea that a diversified portfolio can help investors earn a higher return for the same amount of risk.

To understand which risks can be diversified away, and why, consider Zynga. Zynga hit $14.69 in March and has since dropped to less than $2 per share. Based on what's happened over the past few months, the major risks associated with Zynga's stock are things such as delays in new game development, the fickle taste of consumers and changes on Facebook that affect users' engagement with Zynga's games.

For company insiders, who have much of their wealth tied up in the company, Zynga is clearly a risky investment. Although those insiders are exposed to huge risks, they aren't the investors who determine the "risk premium" for Zynga. (A stock's risk premium is the extra return the stock is expected to earn that compensates for the stock's risk.)

Rather, institutional funds and other large investors establish the risk premium by deciding what price they're willing to pay to hold Zynga in their diversified portfolios. If a Zynga game is delayed, and Zynga's stock price drops, that decline has a miniscule effect on a diversified shareholder's portfolio returns. Because of this, the market does not price in that particular risk. Even the overall turbulence in many Internet stocks won't be problematic for investors who are well diversified in their portfolios.

Modern Portfolio Theory focuses on constructing portfolios that avoid exposing the investor to those kinds of unrewarded risks. The main lesson is that investors should choose portfolios that lie on the Efficient Frontier, the mathematically defined curve that describes the relationship between risk and reward. To be on the frontier, a portfolio must provide the highest expected return (largest reward) among all portfolios having the same level of risk. The Internet startups construct well-diversified portfolios designed to be efficient with the right combination of risk and return for their clients.

Now let's ask if anything in the past five years casts doubt on these basic tenets of Modern Portfolio Theory. The answer is clearly, "No." First and foremost, nothing has changed the fact that there are many unrewarded risks, and that investors should avoid these risks. The major risks of Zynga stock remain diversifiable risks, and unless you're willing to trade illegally on inside information about, say, upcoming changes to Facebook's gaming policies, you should avoid holding a concentrated position in Zynga.

The efficient frontier is still the desirable place to be, and it makes no sense to follow a policy that puts you in a position well below that frontier.

Most of the people who say that "diversification failed" in the financial crisis have in mind not the diversification gains associated with avoiding concentrated investments in companies like Zynga, but the diversification gains that come from investing across many different asset classes, such as domestic stocks, foreign stocks, real estate and bonds. Those critics aren't challenging the idea of diversification in general – probably because such an effort would be nonsensical.

True, diversification across asset classes didn't shelter investors from 2008's turmoil. In that year, the S&P 500 index fell 37%, the MSCI EAFE index (the index of developed markets outside North America) fell by 43%, the MSCI Emerging Market index fell by 53%, the Dow Jones Commodities Index fell by 35%, and the Lehman High Yield Bond Index fell by 26%. The historical record shows that in times of economic distress, asset class returns tend to move in the same direction and be more highly correlated. These increased correlations are no doubt due to the increased importance of macro factors driving corporate cash flows. The increased correlations limit, but do not eliminate, diversification's value. It would be foolish to conclude from this that you should be undiversified. If a seat belt doesn't provide perfect protection, it still makes sense to wear one. Statistics show it's better to wear a seatbelt than to not wear one. Similarly, statistics show diversification reduces risk, and that you are better off diversifying than not.

Timing the market

The obvious question to ask anyone who insists diversification across asset classes is not effective is: What is the alternative? Some say "Time the market." Make sure you hold an asset class when it is earning good returns, but sell as soon as things are about to go south. Even better, take short positions when the outlook is negative. With a trustworthy crystal ball, this is a winning strategy. The potential gains are huge. If you had perfect foresight and could time the S&P 500 on a daily basis, you could have turned $1,000 on Jan. 1, 2000, into $120,975,000 on Dec. 31, 2009, just by going in and out of the market. If you could also short the market when appropriate, the gains would have been even more spectacular!

Sometimes, it seems someone may have a fairly reliable crystal ball. Consider John Paulson, who in 2007 and 2008 seemed so prescient in profiting from the subprime market's collapse. It appears, however, that Mr. Paulson's crystal ball became less reliable after his stunning success in 2007. His Advantage Plus fund experienced more than a 50% loss in 2011. Separating luck from skill is often difficult.

Some people try to come up with a way to time the market based on historical data. In fact a large number of strategies will work well "in the back test." The question is whether any system is reliable enough to use for future investing.

There are at least three reasons to be cautious about substituting a timing system for diversification.

First, a timing system that does not work can impose significant transaction costs (including avoidable adverse tax consequences) on the investor for no gain.
Second, an ill-founded timing strategy generally exposes the investor to risk that is unrewarded. In other words, it puts the investor below the frontier, which is not a good place to be.
Third, a timing system's success may create the seeds of its own destruction. If too many investors blindly follow the strategy, prices will be driven to erase any putative gains that might have been there, turning the strategy into a losing proposition. Also, a timing strategy designed to "beat the market" must involve trading into "good" positions and away from "bad" ones. That means there must be a sucker (or several suckers) available to take on the other (losing) sides. (No doubt in most cases each party to the trade thinks the sucker is on the other side.)

Black Swans

What about those Black Swans? Doesn't MPT ignore the possibility that we can be surprised by the unexpected? Isn't it impossible to measure risk when there are unknown unknowns?

Most people recognize that financial markets are not like simple games of chance where risk can be quantified precisely. As we've seen (e.g., the "Black Monday" stock market crash of 1987 and the "flash crash" of 2010), the markets can produce extreme events that hardly anyone contemplated as a possibility. As opposed to poker, where we always draw from the same 52-card deck, in financial markets, asset returns are drawn from changing distributions as the world economy and financial relationships change.

Some Black Swan events turned out to have limited effects on investors over the long term. Although the market dropped precipitously in October 1987, it was close to fully recovered in June 1988. The flash crash was confined to a single day.
This is not to say that all "surprise" events are transitory. The Great Depression followed the stock market crash of 1929, and the effects of the financial crisis in 2007 and 2008 linger on five years later.

The question is, how should we respond to uncertainties and Black Swans? One sensible way is to be more diligent in quantifying the risks we can see. For example, since extreme events don't happen often, we're likely to be misled if we base our risk assessment on what has occurred over short time periods. We shouldn't conclude that just because housing prices haven't gone down over 20 years that a housing decline is not a meaningful risk. In the case of natural disasters like earthquakes, tsunamis, asteroid strikes and solar storms, the long run could be very long indeed. While we can't capture all risks by looking far back in time, taking into account long-term data means we're less likely to be surprised.

Some people suggest you should respond to the risk of unknown unknowns by investing very conservatively. This means allocating most of the portfolio to "safe assets" and significantly reducing exposure to risky assets, which are likely to be affected by Black Swan surprises. This response is consistent with MPT. If you worry about Black Swans, you are, for all intents and purposes, a very risk-averse investor. The MPT portfolio position for very risk-averse investors is a position on the efficient frontier that has little risk.

The cost of investing in a low-risk position is a lower expected return (recall that historically the average return on stocks was about three times that on U.S. Treasuries), but maybe you think that's a price worth paying. Can everyone take extremely conservative positions to avoid Black Swan risk? This clearly won't work, because some investors must hold risky assets. If all investors try to avoid Black Swan events, the prices of those risky assets will fall to a point where the forecasted returns become too large to ignore.

A third and arguably pathological response to the Black Swan problem is to say that nothing is safe. An extreme event could significantly reduce the value of any asset ("We may not have seen it, but this doesn't mean that it couldn't happen"). I doubt anyone has gone to this nihilistic extreme, and I mention it to make it clear that being aware of the potential for unknown unknowns is useful, but not at the cost of decision-making paralysis.

Of course, if you are that privileged investor with a reliable enough crystal ball, by all means use it. The problem lies in knowing whether it is reliable enough.

Although unknown unknowns and Black Swan events make evaluating investment risks more challenging, they don't change the value of diversification and controlling the risks we do know about.

It's particularly important that young people at the beginning of their investing careers understand why the sloppy arguments against MPT are so dangerous. With its insights about diversification and controlling risk, MPT provides the best foundation for developing low-cost portfolios like the ones being used by the Internet startups to "eat the personal investing world."

Dejamor Keeps Your Sex Life Sexy Every Month

Posted: 11 Aug 2012 11:00 AM PDT

Keeping things spicy in the bedroom can be tricky. Maybe you exhausted all your tricks early on in the game, or perhaps the sheer exhaustion that comes with balancing kids, a home and your work has taken its toll. But fear not, lovers of the world, for a new startup has entered the scene that may be the answer to your sexy prayers.

It’s called Dejamor, and it originally started out as an app. But once founder Rodrigo Fuentes realized that the engagement and input required with an app was only adding work to people's lives, he realized a subscription service was a better fit. Dejamor sends you a box every month with all the ingredients for a special, romantic moment with your significant other, and instructions to make sure you don't screw it up. It's as simple as that.

Think Boinkbox, but classier. And for couples.

When you receive your package, you'll see a box marked "His Eyes Only," and a box marked "Her Eyes Only." (If you're in a same sex relationship, obviously they both say His or Her.)

The starter His box contains bubble bath, a package full of rose petals, and a piece of paper with a clear canister. The instructions tell you to wake up earlier than your girlfriend, wife, whatever, and sprinkle rose petals in a path to the bathroom, where you've run a bubble bath and let a note (a message in a bottle, if you will) float along the top in that canister. Then start making her breakfast.

The lady's box is a bit different. It comes with a lace sash, with which you're told to tie up your man and let him undress you with his teeth. It's not entirely original, for either party, but the results should be pretty phenomenal.

The next month, you'll both get another surprise. Fuentes tells me that Dejamor will continue to learn more about you as you give feedback for each box, and each month should only get better and better.

Click to view slideshow.

Stacked Ranking

Posted: 11 Aug 2012 09:26 AM PDT

Doc Searls captures something valuable on the occasion of his 40th birthday. No, he’s not 40. He’s 65. But when you’re lucky enough to reach that time, you discover a version of what you learned at 40, namely that you feel remarkably like that time long ago when you first started acting your age.

Namely that age is invisible until you look in the mirror, and even then if you look into the eyes. They see you the same way, full of hope and arrogance and doubt and everything all wrapped together. The eyes are the giveaway to 40, and 65, and 12 for that matter. All of which reminded me of something when I read about Microsoft in Vanity Fair.

The usual obvious stuff was there: Microsoft was the richest failure of the modern age, all dressed up with nowhere to go as Google and Apple and Amazon and whatnot sucked up all the juice and left nothing but rind for Redmond. But what wasn’t so obvious was the carefully constructed attack on the Windows company’s ability to compete. Stack ranking, it turns out, is a cancer eating away at Microsoft’s ability to save itself.

What happens when you pit executives against each other for promotions, bonuses, and what used to be called Bill-time, is that every action the company takes is predicated on preserving some version of the status quo. There’s plenty of that in the Redmond DNA, what with the wildly successful Windows, Office, and Server Tools groups, both status and quo. Steve Sinofsky saved Windows from the Longhorn/Vista debacle by shipping something that promised and delivered. Coming from the Office group and its success at wiping out both WordPerfect and Lotus productivity suites, Sinofsky is now the putative heir to the throne once Ballmer fades.

But the undercurrent of the Vanity Fair analysis is that the toxic anti-innovation culture of the company trumps even Bill Gates’ unlikely return to the throne. Unlike a salesforce.com where each passing day engenders innovation as a way of validating the subscription model, Microsoft is a victim of its own success at the hands of its most successful. According to the article, executives withhold just enough vital information to maintain their own position of unique value. Where social is a requirement in a system that lives on innovation, Microsoft is forced to go against the grain to share in realtime.

Even its brilliant head of communication Frank Shaw finds it oddly difficult to work his way out of the box they’re in. He debunks the article with big numbers and the promise of Xbox, Kinect, and by implication but not direct attribution the Surface Tablet. He doesn’t answer the logical followup, wondering how much more innovation there could have been if the culture hadn’t crushed so much of the opportunity in the first place.

Instead, Frank’s data points have the opposite effect of reinforcing the central thesis of the article. If the Vanity Fair author got the context of C# wrong and understated the company’s growth through the so-called Lost Decade, Shaw left unchallenged the central logic of the article and its implications moving forward. Even more tellingly, the very tone and audacity of the article, its mainstream non-tech audience, would never have occurred in the past. Microsoft presented such momentum, clout, and inevitability, along with serious ad dollars, to make such a negative attack very dangerous to the health of media companies.

With October looming large as the locus of a shipping Windows 8, Surface Tablet, and Windows Phone, there should be plenty of marketing dollars in the pipeline. Why aren’t the media companies afraid of rocking the boat? Probably because Microsoft needs them more than the other way around, what with new product coming from Apple, Google, Amazon, and possibly social players. And analysts have to be careful not to overestimate Microsoft impact in the marketplace should miscalculation come back to haunt them the way Ballmer’s predictions about the viability of the iPhone did him.

What does Microsoft see when it looks in the mirror? Surely the bluster from Ballmer comes from that same well of hope, arrogance, and doubt, the confidence that Windows and Office and the Server division will finance eventual success in the innovation race. But the legacy revenue is an albatross difficult to shake off, with its devastating impact on the new thinking required to understand the new realtime mobile world.

Windows 8 may well stem the mind share drain brought on by the iPad, but subtle clues suggest otherwise. When Bill Gates pushed tablets into the marketplace 10 years ago, OneNote, the one application that took advantage of the interface, was hamstrung by the failure to provide a free runtime. It’s ironic but not surprising that OneNote today is the only Office application shipping for the iPad. The implementation was not perfect, but the underlying innovation was on target. The economic imperative of the Microsoft tax prevented the synergy of hardware and software from being realized.

As I type these words on a Bluetooth keyboard propping up an iPad, my 11-year old daughter asks me what I’m writing about. Microsoft, I say, and cool, she says. She means, yeah, Dad, whatever. She hasn’t and doesn’t use “Microsoft”, but rather “Apple.” Actually she does use Microsoft, as in XBox, and Skype as in her main communications channel while playing Mindcraft. And Google to research “everything.”

And in another post, Doc Searls broaches the idea of using Wikipedia as a ubiquitous storage point for blog posts, a place we can feel confident of persisting as a result of its canonical and increasingly authoritative momentum. Google honors it at or near the top of searches, taking the “everything” of a 12 year old to its next logical conclusion, and in the process skipping right over Microsoft’s window into the next generation. My 18-year old daughter is reported to be actually using email to communicate with a workgroup in college, but Exchange and Outlook it’s not. Gmail and GTalk video are merging into Google + and Hangouts. Facetime is the competition; Microsoft is odd man out.

Young at heart. Experienced at mind. It’s at the intersection of passion and wisdom where innovation occurs. As Vanity Fair provoked, the numbers don’t lie but they may not tell the truth. No matter how cool the Surface may be, and cool it is even in my vernacular, what’s cooler is smaller as the Nexus 7 is, and enterprise-ready as iPhone/iPad is, and push notification as Android and iOS are. As each platform matures, they move toward the center where notifications live.

On the next Gillmor Gang, I ask the musical question, “Can we predict the success or failure of tech companies and their products?” Can we look at RIM in the context of the iPhone and iPad double whammy and predict failure? Yes we can. Can we look at the Nexus 7 and predict growing success for Google +? Yes we can. Can we see the DNA of Microsoft undermining great products, huge revenue, and a legacy of inevitability? No we can’t. But stacked ranking is another story, one Ballmer can’t afford to let linger.