Comments Have Cooties

The NY Times — especially Bill Leller — just can’t stop throwing rocks at Ariana Huffington and her Post. Jeff Jarvis spends some time analyzing this — a good read — but I can abstract the argument using just one phrase buried in his piece:

Jeff Jarvis, Who’s afraid of Arianna Huffington?

Comments have cooties.

All the tired arguments being kicked about by the Church of Journalism about their reason to exist, why we need them, and why we should pay them to do what is most comfortable for them really don’t address the deep motivations of people online.

We have invented the web to happen to ourselves, and to the extent that the NY Times staff and owners wise up to that, they can benefit from it. We are not here to be informed, or be part of the public that they want to address.

The central problem at work here is not paywalls, but simply that conventional, old school journalism doesn’t want to share the podium with us. They don’t even want us nattering in the comments, really. The leaders of The NY Times — arguably in favor of liberalism — are really not willing to accept the basic premises of the social revolution, and will definitely not reshape what they do to support it.

Comments have cooties because we, the people, have cooties. We have unwashed ideas, dirty minds, and bits of social rhetoric caught between our teeth.

Huffpo is not going to up end the media world, necessarily, but it has accepted more of what is hotting up the social mess online than the NY Times does, and so Huffpo is gaining community while the NY Times is losing readers. There is more of us in Huffpo than in the NY Times, and with the exception of our money, that seems to be the way Bill Keller and company like it.

Entrepreneurial Journalism?

CUNY to Offer Master’s in Entrepreneurial Journalism

The Graduate School of Journalism at the City University of New York wants to capitalize on some of the shifts that have rocked traditional journalism — and traditional journalists — with the creation of the Tow-Knight Center for Entrepreneurial Journalism and a new master of arts degree in entrepreneurial journalism, which the school will announce on Monday.

Entrepreneurial journalism, broadly speaking, simply refers to pulling journalism, business and technology closer together. CUNY already offers a course in entrepreneurial journalism, and this new master’s program will extend the traditional degree program to two years from 18 months. The courses in the program will focus on the business of managing media, and the study and creation of new media business models, and it will offer students apprenticeships at New York City start-ups.

“We’re all very concerned about sustaining quality journalism, and we think the future of journalism is going to be entrepreneurial,” said Stephen B. Shepard, the founding dean of the school and a former editor in chief of BusinessWeek.

I agree that the statement ‘we think the future of journalism is going to be entrepreneurial’ does undercut the authority of the speaker and gives the feel that its a bubble-inspired gamble of some sort.

And the reference to ‘quality journalism’ is a codeword for the implied sinking standards of the top dogs online, like TechCrunch, Politico, HuffPo, and so on.

If the world of journalism continues the rate of change of the past decade in the the next decade we won’t be talking about entrepreneurial journalism, but something else completely. The challenges of the future aren’t about being entrepreneurial, as some rebalancing of the role of journalism in society. The media empires that control news and its meaning are devaluing ‘journalism’ as they invest in entertainment, games, sports, and politics, directly, instead of the media who are supposed to make sense of it for us.

Fox News is a great example of directly making politics — not that I agree with their right wing lunacy — but it is working: it is entrepreneurial, since they are making money using the tools of media.

So I hope we can shift to a different blending of concepts.The focus on technology is perhaps the smartest move, since the successful media companies of the future will be more like software companies that magazines or newspapers.

I guess it would have been too much to call it ‘The School Of Media Technology’, because these guys still think the web is just another pen or a printing press. By ‘technology’ I mean a collection of skills, or the study of a body of knowledge, not just the hardware and software underlying modern media: not just the iPad or content management systems, but the knowledge of how to apply all these tools and techniques in the context of the new world we are entering. And if you teach people about that, they will figure our the business model, so you don’t have to put ‘entrepreneurial’ in front of every thing else.

Yes, it’s great that Jarvis is spawning new media start-ups, but I don’t think being a launchpad for start-ups should be the basis of a school dedicated to the future of ‘journalism’. It has to be something larger than that. So I am going to start talking about the future of media technology in this more general sense.

Related articles by Zemanta

• New York university to create new centre for entrepreneurial journalism (newstatesman.com)
• New Journalism Degree to Emphasize Start-Ups (nytimes.com)
• The Center for Entrepreneurial Journalism (buzzmachine.com)
• Is ‘journalizing’ the future of journalism? (petewarden.typepad.com)
• Q + A with Adam Westbrook (journalism.co.uk)
• NYC J-Schools Take Divergent Paths on Training, Hyper-Local (pbs.org)

More Objectivity Mumbo Jumbo At The NY Times

Will the freshman j-school seminar on objectivity never end at The Times? http://nyti.ms/cml0nM

Jeff Jarvis

(via Twitter)

Jarvis cuts off the new Public Editor of the NY Times, Arthur Brisbane, at the knees.

Brisbane is yowling about the decline of objective journalism, citing a large number of annoyed readers who would like the tooth fairy to take control of the swirling opinions that are permeating the news. He quotes Dan Gillmor, who sees no conflict between “having a worldview and doing great journalism”, but he doesn’t countenance the psychological and philosophical basis of human consciousness: it is impossible to report on the news, or to even decide how much to say about various ‘sides’ of the news, without making judgments about where the hypothetical ‘middle ground’ is.

There is no way to make sense of the world — or to help others do so — without being grounded in beliefs about what is true, what is false, and the values what animate our beliefs. It’s impossible.

But apparently we have yet another advocate of the impossible, which is simply the silent and unexamined acceptance of a set of beliefs about objective journalism.

Brisbane seems intend on wagging his finger at all this new-fangled gonzo writing and the retreat from the high and noble principles of old school journalis, as in this:

When I asked Matt Bai about his Aug. 12 “Political Times” column on Representative Paul Ryan — the one Mr. Johnson criticized — he said: “I guess my column is part of a broader effort to take some chances in the paper and explore different formats for a new era. I think that represents a great and exciting trend for the paper; none of us can afford to think in old rubrics for new generations of readers.”

Bai’s editor, Richard Stevenson, the deputy Washington bureau chief, elaborated on how The Times is navigating the new norms. “We are still exploring how much of a voice you can have … what kinds of conclusions you can draw when it comes to politics,” he said.

A news-page column like “Political Times” carries the “freedom to reach a reported conclusion,” he said. Not to “throw opinion around,” but to “express in a restrained and fact-bound way a conclusion about something.”

Mr. Stevenson’s careful language draws a line between a Times news-page column and the kind of material one looks for on the Op-Ed page. I acknowledge the distinction in theory but think it is a very fine line, one that is easy to miss and easy to transgress. And one that readers often can’t see.

(via In an Age of Voices, Moving Beyond the Facts)

He characterizes what the NY Times is trying to do as playing in a mosh pit, so we can assume that Brisbane will be returning to this theme again and again.

Jeff Jarvis on The Hunt For The Elusive Influencer

Jeff Jarvis is right when he makes the point that those with the most followers may not be the most influential; but he misses the fact that some people might still be more influential than others:

Jeff Jarvis, The Hunt For The Elusive Influencer

[…] trying to find the big influencer with big audience is really just old mass marketing in a cheap dress. Old mass marketing (go with the largest numbers … and breasts) isn’t economical; neither, it turns out, is marketing to just one or a few powerful people — the mythical influencer. That brings us to a new hybrid to mass marketing, which is what I think Watts is suggesting: Target many people who at least have some friends who’ll hear them. (Disclosure: This was a key insight in the development of the company 33Across that made me invest in it.)

Or to put this question in the current argot: Is there more influence in the tail than in the head? If you talk to 100k people who talk to 10 people each, do you get more bang than talking to one person who has 1m followers? (Watts did also say that a combination of mass and tail marketing is effective.)

Just because the most popular people are not the most influential does not mean that no one is influential. Jarvis seems to fall back to a position that there are no influencers:

So the message spreads not because of who spoke it but because the message is worth spreading. What makes us spread it? First, again, we spread it if it resonates and it is relevance; it has value to us and we think it will have value to others. Second, trust or authority is a factor. If I see Clay Shirky or Jay Rosen or Kevin Marks tell me to click on a link I’m more likely to do so because I respect them and trust their judgment and I’ve found in the past that clicking on their links tends to be worth the effort. They give me ROC (return on click). But if I followed Miss Kardashian (I don’t) and she told me to click on a link, I’d be less likely to, both because I don’t put her in the same intellectual corral as my other friends and have no relationship with her and because I have seen that clicking on her links gives me lousy ROC. Is trust or authority or experience influence? In a small circle of actual friends, I don’t think so. And in any case, having only a small circle of friends isn’t the one-stop-shopping influence marketers are seeking.

So abandon the hunt, marketers. You’re not going to bag the influencer. She doesn’t exist (well, one did but she quit her TV show).

The flaw in his argument is that popularity is not the only way to weight nodes in a social network. Jarvis mentions authority, but doesn’t go very far with his analysis. However, I think authority is a red herring, too. It is looking at the transmission of messages int he context of an individual’s value judgments, as if we decide what to be influenced by, day by day.

But influence is actually a sort of dark matter: a force that surrounds us without us really being aware of it, like gravity.

In recent posts, I have explored these ideas at some length (see It’s Betweenness That Matters, Not Your Eigenvalue: The Dark Matter Of Influence and Social Scenes: The Invisible Calculus Of Culture), so I will simply reprise some of the recent research about social influence and what it means to us, as individuals.

The number of followers a person has is an indicator of a sort of connectedness in a social network, but it is not a good predictor of influence. Even when you weight the value of each link based on the rank of each person connecting to someone, like Kim Kardasian, it doesn’t line up with influencing others. That weighted measure is — to use technical terms for a second — called the eigenvalue, and while it is a measure of ‘centrality’ — a degree of connectedness in the network — centrality isn’t the measure of centrality that best aligns with influence.

Another form of centrality is to look at where an individual sits in the network relative to subnetworks. For example, a person who has solid connections in the tech community and a number of deep connections in the art world is likely to act as a bridge between those communities, and carry new ideas from art to tech and vice versa. This is called ‘betweenness’. To the degree that people that traverse different social scenes are rare, and if these communities benefit from this cross-pollination, then such bridgers will have an inordinate influence of both communities. But it is insufficient to simply measure the number of social scenes that an individual touches, just as it is inadequate to simply count links to a page to determine its page rank: you have to weight the links by the ranking of the pages that link. That’s the core of Google’s PageRank algorithm. However, in the case of this sort of bridging across social scenes, the individual’s betweenness has to be calculated based on the sum of the betweenness of all those that she connects to. In this way, one person’s betweenness is a function of the betweenness of all of her connections.

This seems intuitive: people who have many connections into diverse social scenes will act as the conduit for ideas to spread. And if I am connected to many others who are likewise connected to diverse social scenes, then I am even more likely to spread ideas: I am a better idea vector to the extent that I have more of these kinds of connections: more betweenness.

The conclusion here is that betweenness is a good predictor of influence, because influence is strongly linked with exposing people to new ideas, trends, or culture, while eigenvalues are not. The most popular person in a social scene may not be the one speanding a lot of time in other social scenes; on the contrary.

And the final piece of the puzzle is that we are all embedded in social scenes that are larger than we know. For example, I am connected to hundreds of friends, who are influenced by tens of thousands of their friends, some of which I may know, and more of which I could encounter. However, the friends of my friends are influenced by the third closure, the social scene of millions of people, a scene so large I cannot possibly know all those involved.

Recent research has shown that it is this social scene scale that influences our weight, our health, our smoking habits. This dark matter — the third closure — influences us like an atmosphere: we don’t notice it, but it is filling our lungs, and pressing against our skin. We meet some friends who mention a new sort of club music, and a few hours later you hear some on your favorite radio station. The next day, at a friends’ house, she’s playing the same band on her stereo, and that night you hear it again at your favorite bar.  That’s because in your corner of the galaxy, some number of people with high betweenness, floating around in the third closure, dragged this new music into the tech scene from the art scene, and turned a bunch of people onto it, and a year later it’s on the pop radio channels.

So, people need to bone up a little on network research to get the differences between different sorts of centrality, and to unthread popularity from influence, mathematically and anthropologically. Just because popularity isn’t a good predictor of influence doesn’t mean nothing is.

Betweenness and the dark matter of the third closure are the keys to understanding — and potentially directing — how influence flows though social networks. There’s a lot to research yet, but these will likely be the starting points of influence science going forward.

Things Fall Apart: Edge Economics And Crisis

There are a lot of folks suggesting that the Econolypse might lead to something more than a recession and a rebound. Jeff Jarvis suggests that we are headed to a ‘great restructuring’ of our economy, with great parts of it (print media) perhaps completely wiped out, or crushed to a fraction of their former size. Umair Haque has suggested we are in a ‘compression’ rather than a recession, where value is being brought down to ‘real’ values from perceived values.

I think something much larger is at work.

Things are falling apart. The world order of the post-cold war era is falling to bits. Some of that we have been discussing for years as edge economics: people’s loss of self-identification though affiliation with large organizations, like the federal government, corporations, world religions, and so on.

We have thought about this as a media phenomenon, and then a social one. What about now, when we are in the maelstrom of an unprecedented economic downturn? Will this edgewards movement of people continue, or will we snap back into something else? What are the forces operating?

The past fifty years of growth-oriented, unsustainable business practices have created such complex and interconnected economic systems — and largely unregulated ones — that we simply don’t know how they work. Even the folks dreaming them up — like the people who structured the sub-prime mortgage mess — really didn’t understand the implications of connecting things together, to this degree and extent across the entire globe.

One thing we do know from other economic downturns is that the effects of market hiccups are amplified at the end of supply chains. So, in the past, when there is a small drop in car sales, distributors take a little hit, manufacturers a slight larger hit, the outsourced parts manufacturers a larger hit, and a bunch of machine tool companies go bankrupt. The so-called whipsaw effect snaps hardest on the player at the end of the supply chain, away from the buyer.

We have made our supply chains much, much more complex and distributed all over the world. So a downturn in retail clothing is devastating for various retail chains, but leads to hundreds of thousands of people out of work in the sweat shops of Asia, and the collapse of the market for cotton. A downturn in the tech sector leads to thousands of PR people learning how to teach high school math.

And we have elaborated these chains — in services, clothing, food, metals, energy. and electronics — on a worldwide basis.

The growth of globalization has led to the end of any real social bond between most companies and their employees. Companies retain no real margins against downturns, especially not downturns of this magnitude: so they immediately cut staff.

The reason that we can contemplate the rise of soft socialism in the US as the outcome of the Econolypse — socialized medicine of some sort or other, nationalizing the banks, possibly nationalizing GM, and so on — is because there is no social contract between workers and their place of work. Millions of workers have been fired or laid off, and there are no safety nets.

We have backed into a system where effects are being magnified at the end of the supply chains, and the result is that the pretense of security and safety inherent in living the 20th century working lifestyle has completely fallen away. People aren’t working half time in the office, and growing crops in the afternoons. We have committed ourselves to an industrial lifestyle, so we have no margin but our savings.

We are going to go through a dramatic reworking of our social polity, and the results may be nothing like we anticipate at this time.

I gave a series of lectures last year that were very downbeat, predicting some really frightening possibilities, based on my conviction that globalization would lead to both a widespread economic downturn of unprecedented proportions, and that this would be followed by food and ecological challenges so severe that they threaten civilization.

What may emerge — by plan or by reflex — is a world that is drastically slowed, with increased protectionism and regionalization of production and investment. Germany this week drew back from helping Hungary with its own banking crisis, and we will see the idea and reality of of the EU change very quickly under the populist pressures in each country for government to take steps to alleviate the crisis in their own countries, and only then to consider what is happening over the mountains. We will see increased strikes from truckers, farmers, and others who are the first to feel the impacts of wildly oscillating prices based on currency fluctuations.

(Farmers worldwide are having trouble getting the capital to buy seeds and fertilizer, which is going to lead to price spikes in food. Worldwide drought will also contribute to food costs: Schwarzenegger announced that the California drought would lead to some areas of prime agricultural land not getting any water this year at all. This is another manifestation of the whipsaw effect, although in this case the crisis causing the problem is drought, not credit.)

The United States’ actions to bail out our banks, auto companies, the steel industry, airlines, whatever, is inherently protectionist. We will see the rise of regulatory barriers that will slow and increase the costs of investments oversees, international production and transport of goods, and so on. These may not take the form of direct tariffs, but the results will be the same.

And the core premises that may change, at the heart of our society, are these:

• Unbridled, ‘liberal’ trade and banking policies of the past, that have led to our economic systems (including food and energy) being so tightly interconnected, will be questioned instead of being blindly accepted as good for all. On reflection, these policies may turn out to have only been good for industrialists, or for developed nations in a time when others could provide services and goods cheaply.

  (We may think is is good, for example, to have low cost food, but not if the food is unsafe, or if the practices that make it cheap are unsustainable and contribute to global warming, based on low cost oil. And especially not if it makes us insecure in the face of growing droughts in many of the world’s richest agricultural zones. It may be better to pay more for food, where the true costs are all tallied, and food safety and security are factored in. Note that the most obvious paths to food safety and security are inherently protectionist: buy your food locally, from those you know.)
  
  

• The notion that markets are inherently self-correcting will fall from its primacy in the discussions of policy and economics. It may be true in some theoretical sense, but the carnage may be unacceptable, especially if you are one of the people being smacked by the whipsaw.
  
  
• The State has as its first duty the safety, health, and security of its citizens, and that may no longer be a laissez-faire sort of arrangement, where the government maintains an army, the schools, the courts, and the interstate highway system. It may be much more socialist than that: a new social contract where the government promises to provide a college education, lifetime health care, and much greater social services — job retraining, apprenticeships, federal work programs, housing — than now contemplated.

  I can’t summon the optimism that many others seem to have, that we will have a quick landing in this crash, and sometime in 2010 things will be back to where they were status quo ante.

  I do believe that good can come of the dark lessons we are learning, but it may require a lot longer for the full whipsaw to snap, and a lot longer for any stimulus to moderate the oscillations that are damping down production and consumption.

  We may well come out as a very different world: where people do with less, that work is harder and money scarcer, and where our affiliation to the government is much more localized, more regionalized.

  This is why the push of Obama’s administration to create a new and deeper bond between the state and the individual seems inevitable: since there seems to be no one else to turn to. Religious institutions and philanthropic organizations are in financial troubles of their own, and people are increasingly divorced from social capital-rich involvement in community-oriented organizations in general.

  However, moving from federal stimulus to actual local action may take years to get into place.

  Robert Putnam pointed out that the only light at the end of the tunnel in our growing dissolution from social involvement is the rise of the Internet. The web is an alternative that has led to the growth of social involvement at a time when we seem to need it more than ever. It remains to be seen how well the government uses the web, or how long it will take to have the web become an effective aspect of government.

  But if the government fails to move quickly enough, and if its actions have too little effect — for example, if we have millions more homeless living in tent cities, or the total collapse of social services — other sorts of affiliations could emerge to fill the power vacuum. Who knows what those could be: old style criminal organizations, that loan people the wherewithal to stay alive, but demand unflinching loyalty and enormous pay back? Or will Obama be hiring millions into a modern Civilian Conservation Corps, to reboot the economy and rebuilt mass transit?

  The econolypse is hastening the die off of those businesses and industries that were already weakened, but also the restructuring of our social contract. That will take a lot longer to play out than a few quarters, and we won’t see it in the barrage of ticker symbols going by. It will have to be built up one neighborhood at a time, one job at a time, one new urban farm plot at a time.

Jeff Jarvis Calls For An Open Ad Marketplace

Jeff Jarvis is calling for an open source-based movement to instrument the blogosphere so that everyblogger can particiapte in advertising revenue, and cut out the intermediaries, like Google:

[from BuzzMachine � Guardian column: Open ad marketplace by Jeff Jarvis]

It is just too difficult today for advertisers to join in the exploding world of blogs, podcasts, citizens’ media, and the mass of niches. It’s hard for them to find the best and most relevant blogs, to know how big they are, and to make sure that they’re trusted. It’s harder still to get to the authors to negotiate rates. Though some blogs are in ad networks, they may not be the ones the marketers want most. And some networks, such as Google’s AdSense, may place ads on blogs that advertisers would rather avoid. Finally, placing the ads is a technical headache for both advertiser and blogger.

Yet I hear advertisers dying to reach customers via influential blogs and I hear bloggers dying to get their money. What to do? I propose an open ad marketplace that would allow advertisers to find the best blogs and bloggers to find the best ad deals.

He goes on to detail what he thinks is needed.

This is exactly what I have been talking about: the shift of control from the new center — Google and other giants that dominate the Web 1.0 generation of online ad revenue — out to the edge. I don’t know if an open source movement is the only way to get there. Consider new, emerging solutions like SocialRoots (website coming), that allow bloggers to simply register their interest to sell posts (using the x:posted sevice), or to accept ads from advertisers using the system. [Disclosure: SocialRoots is a client, in which I have a financial interest.

More action on Advisory Capitalists

My recent post, Advisory Capital: A New Basis For Strategic Involvement, drew a range of commentary and critique. One theme I saw many times is that this is not an innovative idea, many people are doing it already. Indeed, several folks stated that this is the business model for their companies. Maybe I just the first to articulate it the way I did. Maybe it’s just timing.

I have read a dozen or more responses, and here I am pulling out the ones that strike a chord:

Fred Wilson of Union Square Ventures wades in:

[from Advisory Capital]

I think Stowe is right that advisors have a growing role in the startup equation for many of the reasons that he articulates. But I think it isn’t possible to completely replace the role of the VC for a couple of reasons.

1 - Unless you have capital at risk or some other form of “skin in the game” like sweat equity, you cannot and will not feel the thrill of victory and agony of defeat that binds the VCs and entrepreneurs in startups. Capitalism works for a reason. Greed and fear are powerful forces. I have worked with many “independent directors” over the years. And they are often incredibly good directors who add value in all sorts of ways. But they don’t feel it in their gut the way the entrepreneur does. VCs, particualarly the best ones, do feel it in their gut. And so they are there for the entrepreneur when they need it most, joined at the hip with the risk/reward belt.

2 - There is a growing market of angel money that is sophisticated and acts a lot like VCs. There are even “super angels” like Pierre Omidyar, Mark Cuban, and the like who can invest as much or more than most VCs in a deal they like. These angels bring most of what a VC firm can bring to the table if they so choose and can write smaller checks. I’d suggest before entrepreneurs give equity to advisors for no cash, they think about angels instead.

The bottom line for me is that cash at risk is a critical part of the relationship between the entrepreneur and their VCs. It provides the foundation for all the other roles that the VC plays - advice, oversight, connections, etc. Without it you won’t get close to what you get with a VC.

I agree with Fred about “skin in the game,” and that’s why I push my clients to step up their typical advisory board stock grant from 0.25%-0.5% to something larger, so that the stake is enough to make a difference in my future. Regarding the cash, many times the founder themselves are not putting in hard cash: they are forgoing pay in order to invest sweat equity. That’s why I provide a 50% or more discount of my consulting rates when working with Advisory Service clients. I am investing the difference.

If entrepreneurs can get the knowledge, connections, and experience that an advisor like me brings to the table from an angel, great! Take the deal, take the money, and strap that angel to the harness. In the meantime, I play more of the role of a part-time founder.

Jeff Jarvis makes the best counter to Fred’s arguments:

[from The VC Olympics]

I think the point of Stowe’s post is that equity gives advisors the sense of material involvement in a startup that is better than consultation, and that by making such arrangements, one can get advice, connections, and expertise from people who are, in many cases, at least as qualified as the people who happen to have money.

Or here’s another way to put it: Money is a commodity, nobody’s is better than anybody else’s. But knowledge and connections are uniquely valuable. And in an time when startups need less money, then the relative value of knowledge increases.

Note that this is precisely the example that Publicis’ new Denuo is following. Now in their case, Publicis is a giant company that could, indeed, also invest capital. But so far as I know, Stowe Boyd isn’t filthy rich (yet). And yet his advice would be very valuable to many startups and they should find the way to get it without requiring him to invest.

The larger story here is that venture capital is not escaping the explosion of business models that is also hitting media, advertising, retail, and many other industries. So VCs, too, need to explore new models. Perhaps they need to find ways to involve — and compensate — networks of advisors to bring that knowledge to startups and to spread their own work and risk in finding and helping and managing relations with companies, so they can get involved with more companies at a smaller scale than they can afford to today. If you can no longer bring $5 million to 10 companies but can’t afford to manage 50 $1 million investments — because it stretches your real assets, which are attention and time — then maybe the way to scale is via Stowe’s model.

Fraser Kelton read my post and Fred’s response, and thinks we are both missing the middle:

[ from Advisory Capital? Not When VCs Do It Better]

Stowe argues that VCs can’t/won’t support start-ups with incubator-like services. Fred claims that VCs are vital for reasons other than nontraditional VC value-adds. (Fred, you don’t explicitly discuss your thoughts on a VC adding non-traditional VC value to a firm, which is the underlying idea of Stowe’s arguement. Where’s your mind on that?).

Why can’t an innovative VC firm compete, and gain a competitive advantage by realizing this trend in tech start-ups and adjust their service offering to fill the gap?

[…]

David Hsu, from The Wharton School, published a paper in the Journal of Finance, in August 2004, titled “What Do Entrepreneurs Pay for Venture Capital Affiliation?”. It’s an academic article - here’s the summary:

In the minds of entrepreneurs working to grow their fledgling technology companies, the intangibles brought to the table by their investors – experience and contacts – often are worth more than money itself… David found that offers from more reputable venture capitalists are three times more likely to be accepted by entrepreneurial companies and that, on average, these favored investors acquire start-up equity in the companies at a 10-14% discount.

“Reputation” is defined as the intangibles brought to the table by the investor, and are mainly limited, with respect to the study, to experience and contacts. Fair enough.

Personally, I think VCs are not the only ones in the world with social networks. A good advisor brings that to bear, as well.

Over at Cyclical, we are told that ideas are cheap:

[from Advisory Capital: Forgetting That Ideas are Cheap]

Having been both a consultant, a founder of several businesses, and heavily involved in startups, I have to say that I disagree with some of Stowe Boyd’s analysis of Advisory Capital. Stowe’s description of how a good advisor (or consultant to the business) should operate is bang on, but his expectations for reward with respect to ownership are way off.

Put simply, advisors or consultants who are working for salary (or a slightly reduced salary) are not taking significant risk in their role, and therefore should not expect much participation in the upside. Stowe writes:

A consultant is unlikely to want to part with a strategic concept that could make a client into a $100M player, potentially, in exchange for a per diem and the possibility of some downstream consulting, maybe, if you’re lucky.

IMHO, in a world where ideas flow extremely quickly and first-mover advantage is truly rare, simply having an idea or concept is worth little. If the ideas are that brilliant and worth that much and the advisor wishes to truly participate in the upside, then he or she should either work for deeply discounted rates (or for free), or start their own company to pursue the idea. Ideas are cheap, execution is the tough part. Quite simply, risk = potential reward.

I was trying to contrast the short term kind of relationships that I have experienced in the past, where clients seemed to want two days of intensive consultation — vetting their product, helping them lay out a go-to-market approach, assessing competitors’ products — rather than a long-term investment on both sides, which is what I think is the basis of advisory capital. They wanted a $100M dollar insight for a few thousand in consulting fees.

Nearly all the critics of the model I propose stress the need for investment, and that’s exactly what I am pushing for, as well: the long-term investment of the advisor’s attention to the challenges of the company.

Peter Caputa notes that the AC approach may solve a different problem in VC:

[from comments on the initial post]

The AC concept may be able to eliminate what has been a structural problem with the VC model: that the desires/needs of the VC are not aligned with those of the founders when it comes to cashing out. Paul Graham, and others have written extensively on this.

http://paulgraham.com/paulgraham/venturecapital.html

The cause is in large part due to areas unrelated to the founders or the start-up but rather to the business model of the VCs: their need to have a certain rate of return so they can continue to raise funds and the model where they expect the returns from one or two super star performers to in effect pay for the losses or mediocre results of the rest of their portfolio.

yes, the AC and the client — once the deal is struck, anyway — have the same interests, and the same payoff.

[Update: 27 Feb - I managed to miss an articulate detractor, Bernard Moon, who howls in his ADVISOR CAPITALISTS?… 1% OR MORE? HELLS NO!

Being cynical at times… well, a lot of the time, I see Stowe’s post as part of his pitch to drum up business in advising startups and position himself in a better light. After reading his post, I really don’t see much of a difference between an “advisor capitalists” and a regular advisor.

If I was building an advisory board, why would I give someone like Stowe 1% or more and others the typical .2%-.5% worth of equity (initial equity structure)? This can create a disincentive for the other advisors to put in their sweat since there would be such a large gap between an “advisor capitalist” and themselves in terms of equity but probably not in terms of time and effort. I’m speaking from my own experiences with advisors. As I posted before, some advisors you get to sit and be pretty on your board while others you have to play an active role in building your startup.

Even in my current role as an advisor to a mobile social networking play, I received the typical amount of equity (.2%-.5%). I communicate at least once a week with this startup, active in introductions, and active in their strategic development. Should I ask for more equity? No. From my own experience with advisory boards, I don’t think such activity warrants more equity. Stowe goes as far to state:

I believe we will see this boosted 5X, 10X, or more, to attract and retain powerful ACs.

Again I see this as positioning, and I also see this as crazy. Why would I give any advisor 2.5%-5%+ of my initial equity? Maybe if a contract was created where this advisor devotes 20+ hours per week. Even then would I sign up someone like Stowe who doesn’t have significant capital raising experience? Who cannot advise me on deal structure and provide their personal insights into the capital raising process? Hells no!

Yes, you are cynical. But, yes, I have significant capital raising experience: directly involved in raising over $20M since 1988, and indirectly, much more. Regarding the disencentives to other traditional advisors, I proposed that companies would increasingly have a small number of more involved advisors. If the existence of other players with more stock is a disencentive to advisors, then the differential between their tiny slice of stock and the monster shares of VCs and founders might be the reason that companies generally get so little out of them.

I also overlooked Tom Evslins exuberant posts on the subject. In the first, he agrees with the concept, and in the second recaps some of the debate swirling around it. And here’s a first: he has created a Wikipedia entry for advisory capital, saying

I created an entry in wikipedia for advisory capital because I think the discussion following Stowe Boyd’s introduction of the term is interesting and that wikipedia provides a good place to agree on a definition and draw out the distinction between advisory capital and venture capital on one hand and advisor capitalists and advisory board members on the other. This is also a good place to record either existing examples of advisory capital and/or future developments.

Jeff Jarvis on Revolutionizing the Conference Business

Jeff Jarvis, of BuzzMachine, wants to revamp the conference business, because we pay too much to get too little.

[from Exploding the conference business by Jeff Jarvis]

Too many conferences suck. They’re too expensive. They are filled with boring panels. They are all about speeches and not about conversation and argument and learning and meeting. They don’t capture the expertise of the crowd. They enrich the organizers at the cost of both the “talent” and the “audience” (a distinction that is usually random, meaningless, and essentially insulting). They are filled with commercial pitches. The large-scale conferences are too obvious; the high-end conferences are too often too safe. There are exceptions and conferences I do like attending because of the people they attract or because they are provocative. But often, the problem is that the interests of those who make conferences work — the people who fill it — are not aligned with the interests of the money behind conferences — the organizers and sponsors.



The conference business is ripe for revolution. If newspapers, TV, magazines, books, reference works, telecommunications, entertainment, retail, real estate, recruiting, and countless other industries are exploding thanks to the internet and the direct connections it enables, then so should conferences. Why shouldn’t we organize our own better conferences on our own terms?

He dissects the finances of a typical conference, and makes a case for speakers getting a piece of the game — which some high-flying keynoters may get, but the majority of speakers do not. But that is just one slice of his argument, and not the center of it. A redistribution of the income is not what Jeff is calling for: he wants something more radical.

Although Jeff doesn’t use disintermediation to describe what he intends, he does suggest that the unconference may be the answer, like the various “camps” that have sprung up organically as an abreaction to conference doldrums and excesses, such as last fall’s BarCamp and TagCamp, and the upcoming MashupCamp.

[…]

The emerging Camp model has several parts, but basically can be thought of as an ‘open source’ conference model:

• low-cost or no-cost, subsidized by various sponsors, explicitly based on a non-profit mindset.
  
  
• the principle that all attendees can be presenters if they want to be: a self-selection process, rather than a centrally controlled program.
  
  
• self-organization by an ad hoc group of organizers who are not in the business of running conferences.
  
  
• tightly focused agenda, on a well-defined topic of interest to those involved.

[…]

Just as tech conferences are rebounding, based on a dynamic period of investment and innovation, we will see the emergence of very new, very different approaches to what a conference is supposed to be, what it is supposed to deliver, and how we will measure the value and success of conferences as a whole, and individually.