The Other Side of the Next Big Thing

The Wall Street Journal listed top 50 startups. This is the third year WSJ releases the listing. These startups range from communication, health care, money management, and Internet. These 50 are picked out of 5900 candidates, i.e., about 1% (heard the saying 99% startups failed? probably where the number came from). They are based in the U.S., have received an equity round of financing in the past three years and be valued at less than $1 billion, as the aim is to identify lesser-known start-ups.

Picky readers already pointed figures on the list: Tabula Inc, whose started in 2003, still the Internet Bubble Age, is on the list. Maybe only the VCs investing with them want to give it another "push" after almost 10-year ride. 37 out of 50 are from California, the balance from largely other high tax blue states, New York, New Jersey, Illinois. Texas. Therefore, the credibility of the list is questionable. The previous list might have also included renewable energy, which is dead this year.

So indeed, startup is a fad business and sometime, sexy to some. Extending a startup is an IPO. Startup cofounders now enjoy buzz among investors as an initial-public-offering candidate. They are getting daily invitations to baseball games, lunches with investment bankers and fancy society dinners.

For the past few years, the tech frenzy has concentrated on young-gun Web guys including hoodie-wearing Mr. Zuckerberg and Groupon Inc. Chief Executive Andrew Mason, who run easy-to-grasp companies touching millions of consumers. As the social networking IPOs struggle, tech companies that make harder-to-understand products for businesses are snagging attention with stellar IPOs and strong growth. The tech guys often wear conservative dress shirts and slacks instead of the Web uniform of shorts and flip-flops. Some drive 10-year-old Honda Civics. Many are downright ancient by Silicon Valley standards—at least in their mid-30s.

What is behind the tech turning trend? The capitalists. When startups are getting offers for free luxury box seats from bankers, venture capitalists, potential auditors and business partners to San Francisco Giants' baseball games. WSJ reports that a venture capitalist David Sze at Greylock Partners, who invested in Facebook and LinkedIn Corp., says he felt the change last month in meetings with engineers and tech executives to discuss future projects. Mr. Sze says everyone politely asked what he was up to—before revealing that what they were really interested in was technologies for businesses. Early investors who had eye-popping IPOs are hot commodities. Everyone tries to grab their attention.

High flying stock prices is easier for companies to get talents as a significant income is from stocks and options in tech world. In the capital chain that investors pay the talent bill and get fantastic stock return, the risk of a broken chain is that either the supply (i.e., capital) or demand (i.e., high stock price) can't follow. Problems often emerge when the flow grind to ground. Investors need to be aware this problem by looking at the balance sheet and zoom into the stockholders' equity to detect problematic signs.

But in the end, this is a tech bubble ready to pop. You can either catch the pop or catch the burst.

From Zen and the art of motorcycle maintenance

When someone recommended the book "Zen and the art of motorcycle maintenance", I wasn't very impressed by the title. Zen is a Buddhism branch that originated in China during the 6th century as Chan. From China, Zen spread south to Vietnam, to Korea and east to Japan. Zen is the name used in Japan. Even though the name started in China but all Buddhism were essentially from India. I didn't believe the book is about Chan or Zen as if that is the case, it may better to look somewhere else. According to the introducer, the book is about philosophy of engineering. That sounds cautiously interesting. Philosophy is an art that never ends, where correctness always evolves. Still, I borrowed the audio book, with doubts.

The book starts normal but makes a hit when it came to express a seemingly truth about human research intensity versus knowledge. The point is that if we research some topics with increasingly intensity, from experience, current knowledge in that topics would become outdated sooner than before when we're lack of supporting knowledge. The reason it made a hit is that, it sounds correct. We are transformed by technologies and science everyday, with even faster speed than before. When we know more, we can learn even more and faster, isn't it? This is the plus. But it also sounds skeptical because, can we image that soon we would understand our body or the globe? It has remained an X for a long time. The idea just sounds too rosy. This is the negative. But the plus is still inspiring.

Keeping listening to the book until it hits another point that may be able to explain the negative. There is a section about teaching schools whose main function is teaching rather than researching. As days passing on teaching the same materials year after year, people gets dull and loses student's respect. That is a bing: We know more but we become duller along the path. it is true that we have known more, but we've also seen more such that we're used to them. Unless we are willing to change them we will have incentives to break them. This is not easy in all field. For instance, When Greenspan summaries the reason why capitalism works, one of his reasons is that capitalism encourages "constructive destruction". When things become outdated and not fit to the market, it is gone, even we memorize them. Examples like Eastman Kodak or maybe Research in Motion. The driving force is corporation survival. This is in economy and financial field. Even in society science, it is not easy either. We still try to find out precedent bounds to understand our past.

Even though with these thoughts, the book sounds worth chewing. At least, it makes people to think two sides. 

Sales incentives at ...?

I tried to buy a wireless USB connector from BestBuy. Before I went to the closest BestBuy, I had checked online that it had the connector on stock. But I only found more expensive items on the shelf. So I asked the sales associate. He replied politely that those on the shelf were all they had. If I would like, he could help me order the less expensive model online but it would need about a week to arrive. Without option, I had to buy the more expensive one.

This just passed without much to say until a New York Times essay on sales incentives at Staple. My experience pretty much backs everything said in the article. It appears a common experience that retailers are fetching customers in by bogus ads and try to sell more expensive goods.

The NYT article starts with this story: a mattress company would place a full-page newspaper ad at every weekend with deep discount on one particular mattress. The unspoken rule among sales reps, when coping with customers coming with the ads, is that whoever sale that mattress will be fired. It sounds ridiculous at the beginning: then why placed the full-page ad? Answers came from a customer experience with the Staples. The customer tried to buy an Acer computer for $499 but rejected a PC protection plan from a sales rep and manager. Unexpectedly, the once on stock Acer computer then became out-of-stock. This was a three-year old customer complaint but now it is revealed by a Staples manager. She explained that Staples tracks sales staff by a system called Market Basket. The chain requires sales reps sell average $200 add-on, or no sale at all, i.e., not items not on stock. If this number is not reached, store managers are gone with the wind. Letting customers leave hands empty is a jargon in sales reps called "walking the customer". A nice name. Walking the customer is an update from a tactic that was known as “bouncing the customer,” she said, which entailed sending a customer to another Staples store. But that practice was abandoned because so many stores were bouncing so many customers that it was creating ill will among consumers. Now, staffers who don’t want to walk customers have another option: they can escort them to an in-store computer and tell them how to place orders online. “If they buy it online, we lose the sale,” said the Staples manager, “but we don’t have the Market Basket problem.”

Staples official declined this report.

Given that, I may just order another USB wireless connector online at BestBuy, that particular priced connector and return the higher price one.