Here's O'Reilly's video of the keynote I gave at web 2.0 NYC yesterday, titled The New York Internet Industry, 1995 to 2008, From Nascent to Ascendant
44 posts from September 2008
Here's O'Reilly's video of the keynote I gave at web 2.0 NYC yesterday, titled The New York Internet Industry, 1995 to 2008, From Nascent to Ascendant
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Fifty to a hundred thousand high paying jobs are going to go up in smoke in NYC before this is all over. It's a mess for this city, tax revenues are going to be down, real estate prices are going to be down, restaurants will fail, etc, etc. We'll get through it for sure, we always have, but it's going to suck for a while. As my friend Mo said, "I sure wish Bloomberg would get another four years because we are going to need him"
But beyond all that, is this really that bad? I've been thinking a lot about what Howard said on tech ticker last week (roughly 3:35 min into the video).
"the brokerage business is changing, this is what's going on, ..... the stock broker as we know it is gone, hedge funds are making markets, we are witnessing the destruction of an industry"
Those of us who work in the tech business are used to this sort of thing. Capitalism is darwinism and technology driven darwinism has impacted the tech industry more than any other. Where is DEC now? Where is Wang now? Where is Novell (not dead yet)?
But technology driven darwinism is hitting every industry these days. People tend to think of the newspaper or music business when they think of industries that are being destroyed by technology, but we have to admit the same thing is happening to the traditional investment banking and brokerage industry.
Andy Kessler, a former wall streeter who moved to silicon valley and never looked back has it right when he wrote this the other day:
Analogies only go so far, but Wall Street got caught in the same wringer (as airlines). Deregulated since 1975, balance sheets grew and grew as money got thrown at the profitable business of trading stocks and bonds, investment banking and money management. In the cheap-money period of 2002 to 2007, Wall Street’s thirst for capital saw no limits.
Inevitably, too many players and a bit of technology in the form of electronic trading squeezed the profitability of Wall Streets bread-and-butter businesses.
... With profits fading in baseline businesses, firms discovered the trick of using their huge capital to borrow short term cheaply and lend long in the form of subprime mortgages.
Traditional banks can get away with this because they borrow short term from their depositors, who are usually loyal and lazy, happy to keep their money in the bank, under-earning, in exchange for perks like free checking and ubiquitous ATM machines.
Investment banks have no such luxury of stupid people to borrow from. Instead, they borrow from one another and from institutional investors: all short-term paper. When the subprime "easy money" loans turned toxic, the short-term facilities fled for safer ground. Hence the flushing sound you are hearing all over Wall Street.
So now Wall Street consolidates. Should you care? Not even for an instant. I spent 20+ years on Wall Street, competing against scores and scores of firms, always wondering what they all really did. E.F. Hutton. Shearson, Drexel. Heck, I even worked for PaineWebber in my early days (daze?) on the Street. All gone. And nobody misses them.
The true money-makers all find jobs elsewhere. The worker bees in the middle tier see disruption, but are eventually absorbed into the reconstructed Wall Street. The bottom tier goes to work at Foot Locker.
That last bit about footlocker is harsh but maybe true. The rest I totally agree with. Hedge funds are taking over more and more of the asset management and trading business. Technology is taking over more and more of the sales and clearing businesses. The brokerage business is being redefined, rebuilt, and reorganized.
So let's not flip out too much about this brokerage bust. It's going to hurt in the short term here in NYC and the effects will be felt on main street and even in the venture business. But in the long term this is all good. That's why we need to be careful with all of this bailout activity. It's not just moral hazard, it's propping up bad businesses that need to fail so talent and capital can move to more productive efforts.
I remember my speculative markets professor at Wharton used to say that you can't make money doing the same thing everyone else is doing. That made sense to me and I've had a contrarian bent ever since. My friend Howard (happy birthday Howard) likes to buy stocks making all-time highs. It's a tried and true methodology and it works well for him and that approach was the basis for Howard's Wallstrip show.
But I've never been able to get my head around doing the same thing everyone else does. You have to invest in a way that makes sense to you. One of the comments I got on my google post last week (i think it came via email because I can't find it and quote from it) suggested that you can't make money being long in this market, that this is a time to be making money on the short side. But I've never shorted stocks and I am not going to start now.
When I look at the carnage in the markets (the DOW is down 9% in the past 30 days), I think that I should buy something. And the thing I've got my eye on is google for all the reasons I outlined in that post. If it gets to $400, and it just might happen with another day like today, I will start buying.
The way I look at it, things are bad out there, particularly for financials and companies with bad balance sheets who are over-leveraged and have near term liquidity needs. You can't buy those stocks in this environment. But there are plenty of companies out there with stock prices 10-15% lower than they were a month ago where the fundamentals of the business haven't changed. And my gut says it's time to start nibbling at them.
Our good friends at First Round Capital are always thinking. A couple years ago, they hacked the web 2.0 conference. Now they are cleverly taking advantage of the misery on wall street to find talent for their startup companies in NYC. They've launched a website called Leave Wall Street, Join A Startup where they list all the jobs that their portfolio companies in NYC are trying to fill.
Though we at Union Square Ventures were not that clever, we too have been trying to hire from Wall Street in the past month. In particular, we are looking for "quant jocks", people who have degrees in economics and/or advanced math who know how to code algorithms. These kinds of people have been very valuable on wall street in areas like program trading and risk management. But they are also incredibly valuable in areas like advertising optimization, search optimization, social media optimization, semantic analysis, auto tagging, etc, etc. We need such people in almost every single one of our companies, no matter where they are located.
We also have plenty of other jobs in our portfolio and here's a search results page on Indeed that lists them. At the bottom of that page, you can enter your email address and get alerted via email anytime one of our portfolio companies lists a job.
First Round says on their "leave wall sreet" website:
With Bear Stearns laying off over 7,000 employees, Lehman Brothers rumored to layoff over 20,000 employees, and Merrill Lynch expected to layoff thousands after their sale to Bank of America, we're on track to see over 150,000 people lose their jobs this year.
That's terrible news for the people involved and the NYC economy. There is no way that the tech startup sector in NYC is going to fill all of those jobs. But we can fill some of them and we will. So if you are leaving wall street (forced or otherwise), please consider joining a startup. The pay probably isn't as good, but the equity can be valuable, and I promise that the work environment is more enjoyable and that our companies don't operate at 30x leverage.
If you are interested in a quant jock position in our portfolio and have the skills and experience to do it well, send me an email using the contact link on the upper right of this blog.
I wrote this post for the Union Square Ventures blog and it will go up there today, but in the meantime I'll post the news here.
Union Square Ventures has invested in a number of blogging related applications and services; Adaptive Blue, Delicious, Disqus, FeedBurner, Outside.in, Twitter, and Tumblr. We've been attracted to this sector for a number of reason; because an increasing amount of content is produced with these kinds of tools and services, because traditional media is increasingly adopting these tools and services themselves, and because our personal usage has given us a deep understanding of these tools and services.
Today we are announcing yet another investment in this sector, a small company in Slovenia and London called Zemanta. Zemanta is a service that's focused on helping the blogger/content creator make the process of creating their content simpler and easier. As you write, Zemanta processes all of your text (like a spell checker in a word processing program does) and suggests things to you. Currently, Zemanta suggests stories/posts/research you might want to read as you compose your post, images you might want to include in the post, words you might want to hyperlink out with, and tags for search engines and other services to use to discover your content.
A number of us at Union Square Ventures have been using the Zemanta service for several months and we universally like it and have found that we feel less equipped when we try to blog without it. I used the Zemanta service to add the related links at the end of this post and several of the links in it. Currently you can get the Zemanta service as a free plugin for the following applications and services; Firefox, Internet Explorer, Microsoft Live Writer, WordPress, Moveable Type, and Drupal.
Like many of the services we invest in, Zemanta's initial value proposition is significant and has allowed them to reach a critical mass of bloggers. But the potential for Zemanta goes way beyond recommending links, images, and tags. If you think about it, Zemanta is "adwords for content creators". And we are eager to see them open up this contextual recommendation engine to other web apps and services that content creators might like to add into their posts at the time of creation. The obvious things would be monetization services (affiliate links, text ads, and even graphical ads), widgets and badges, video, quotes, and music. But honestly the potential for this sort of thing is quite significant and we certainly cannot know for sure where it will ultimately lead.
We were invited to join existing UK investors Eden Ventures and The Accelerator Group (TAG) as seed investors in Zemanta. Zemanta was the winner of last year's seedcamp program in London, which is kicking off again this week in London. We are very pleased to be joining a couple of top notch early stage investors in London in this deal and we are equally excited to add a seedcamp company to our portfolio.
This is our second investment in Europe and it is possibly the first investment in a Slovenian tech company by a US venture capital investor. So we are making a bit of history here and that's exciting too. The founders of Zemanta, Boštjan Špetič and Andraž Tori, are leading members of the Slovenian tech community and have built an amazing team of developers. Our investment will fund the development of a US-based business development team and we are looking for candidates in the bay area and metro NY to join the company. If you are interested, please let us know in the comments or via email.
The New York Times has a story today about American Airlines' new in-flight internet service and the fact that they are blocking VOIP services like Skype.
I was an early investor in VOIP in the late 90s and am a big fan of services like Skype that allow people to make calls over their internet connections. We use a VOIP service in our home and have bypassed the traditional phone network for the most part.
But there are certain places where I don't think phone calls make a lot of sense. I certainly would not want someone sitting next to me on a cross country flight to be making business calls the whole way. I also would not want to ride in a NYC subway car filled with people talking on their phones. And though I don't commute via train, I am sure that those that do don't want people talking on phones on their morning and evening commute.
But one of the great things about the internet is that it's gotten incredibly easy to communicate without using your voice. Our family talks constantly via blackberry's messenger service but we rarely talk to each other on our mobile phones during the day. People travelling via air, train, or subway can use tools like IM, twitter, and web to sms to "talk" while in transit. And that's a great thing.
I very much want to have broadband internet on all flights, all subways, all forms of mass transit. But I don't want voice on them. I want the "no voice" internet in these places.
I've been working on the presentation with a young man named Jeremy Bogdan. Jeremy read my post seeking a graphic designer to help me with my presentation. Although he did not meet the test of someone who had lived through the past fifteen years of NYC's Internet scene, I could not resist his energy and enthusiasm for the project.
Before I had even made a decision on who to hire (building the presentation for me is a paid gig), he was sifting through the wiki page and sending me slides. He just wanted it more than anyone else and so I hired him.
We've been working on the presentation pretty much every day for the past week and a half and it's up on Jeremy's flickr account for anyone to see. We have a few more slides to do and a couple are in there as placeholders but I'd say its at least 90% complete.
The slides are designed to be "background music" for the talk I am giving. If you don't see something you think is important in the presentation, there's a good chance it's in my talk but just didn't make it onto the slides.
That said, if you think we missed something big, please let me know in the comments.
Finally, I'd like to thank everyone who helped by contributing to the wiki. I am not sure I could have done this without your assistance. If you aren't going to make it to the web 2.0 NYC conference, I hope you will still be able to see my talk because they are filming it and I will ask them to allow me to post it.
....... Normally I do not go to this level on blogs like this. Blogs that are supposed to be about business, finance, technology, etc. You really should have posted this thread on a political blog. You lost cred Fred and I will no longer follow your blog.
I decided to try Yammer yesterday, but never got the confirmation email (I am sure it got stuck in one of my spam filters), so at this point, I haven't yet tried it. I am sure it's very good because it won the TC50 top prize and that's an impressive feat.
Mark Evans says that many bloggers have been "hammering yammer" for not being innovative or unique. If that's true, and I've missed those posts, then I agree with Mark. Taking a new mode of communication (microblogging) and retooling it for the enterprise certainly seems like a good move.
However, I am not sure that's such an easy thing to do. As my friend Charlie pointed out to me in a private twitter exchange yesterday, there have been many "enterprise IM" solutions over the years but employees have resisted the desires of their employees to determine what IM solution they use and most have continued to us AIM or to a lesser exent Yahoo! and Microsoft's IM offering, often via a third party client.
The same is largely true of blogging services. Though there are plenty of "enterprise focused" social media solutions, most corporate blogs are built on wordpress or typepad or even blogger.
This is one of the reasons we've struggled so hard to invest in "enterprise 2.0" at Union Square Ventures. We have tried pretty hard to find companies that we can invest in that bring the new web technologies to the enterprise, but often we've found what happens is that consumers (ie employees) bring the web technologies they use every day to work and they prefer that.
I guess time will tell whether Yammer is a better way to talk inside an organization versus a third party service built on twitter (or possibly a private groups feature in twitter although I have no idea if that's coming). But recent history suggests to me that it's not a slam dunk. And so I commend the Yammer team for trying something that is not easy, that is not simple, and that if they get right, will be very valuable.
I am leaving the political conversation for now. If people want to continue to talk about my post this morning, they can have a go at it in the comments, but I've spent all my energy I can today on that.
It is worth noting that today is September 11th. I've tried to write on this blog about that day on its anniversary every year. It gets harder and harder to do that as the memories fade and time passes.
But my friend Tom Watson has penned a good post about that day and the aftermath and I thought I'd share some of his words with you all today along with the obligatory link.
Many bloggers were born in those long hours. You could feel the biological need to self-expression, and the parallel desire for more information than the traditional media could provide. You could almost feel the old web creaking, the html bending. I am absolutely convinced that some of the energy and drive to create our socially-empowered web was provided by those horrible events on a gorgeous September morning.
This blog wasn't born on September 11, 2001, that happened a few years later. But it was very much inspired by those, like my friend Jeff Jarvis, who did turn to the web to find meaning in that terrible experience. And so I agree with Tom that we will look back at 9/11 in the years to come and we will see things that came of it that we now view as an important part of our every day life. At least I do.