Category Archives: Economic Miracles

Passion, Ethics and Artificial Leather

Oh wow. Artificial leather! I am not saying that I don’t have mixed feelings. To be honest I am relieved that I don’t have to ethically judge about this topic. Still, very fascinating,  this TED talk from Andras Forgacs. It’s on the one hand very inspiring to see how immensely passionate Andras is about this technology and the dream he’s been following for years. On the other hand, though, you can see even him returning several times during his speech to the ethical foundation of why he is doing what he does – as if somehow his work is constantly forcing him to think about the moral legislation. It’s just an assumption but I think Andras chose to have one of the toughest jobs out there. Imagine yourself in a lab creating artificial leather and I assure you that you’ll be confronted with ethically and morally doubts and questions you’ve never had before. Wow, this TED talk is powerful in so many ways and not only because humans can now grow artificial leather.

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Dear Facebook, Wall Street is not your problem. Your ego is.

Facebook is in the news again. And as so often after its IPO, it’s not good news because Wall Street plays strong. But also more than fair.

Facebook’s user base is declining in countries where it reached a penetration rate of 50% or above. Consequently, in sight of growing market saturation, Facebook stock dropped. Again. What’s happening right now is basically what I questioned already in January. It seems I wasn’t that wrong about how Wall Street would behave in sight of a company which has reached market saturation in most of the more lucrative world markets, especially the US. Facebook clearly seems to be clueless about this new situation and it’s a pretty new situation to them. They’ve been investors‘ darling ever since because their story was just too good. Existential criticism is totally new to them.

Today, it’s a different game with different rules. And I am not sure yet if Facebook realized this. The new shareholders are investing for one of two very special reasons – earnings per share or increase in total share value. Facebook’s previous investors poured money into Facebook because of the outlook of a positive IPO itself. That’s two totally different motives.

While Facebook did considerably well raising the IPO hopes, it is very bad at playing the Wall Street game now. And unless Facebook’s strategy shifts towards accepting this new reality and honors the new ownership by increasing (or just starting to create?) real company value and not hopes, I believe Facebook stock will continue to see only one direction – down. Some people at Facebook, those with all the shares at least, cry when they see the current stock performance and some might believe this is just not right. But it is not about right or wrong. It’s about Facebook’s ego which is still just too big. And the good story is partly to blame for that. But sooner or later Facebook needs to face the new reality. It seems to me sort of a self-fulfilling prophecy that Facebook’s valuation will continue to decline as long as their ego is so big and they continue to think that playing to the rules of venture capitalists will get them through. But Wall Street investors like big pension funds and financial institutions think differently. As it seems now, Facebook still hasn’t realized the urge to shift from a venture capitalists’ darling to a company with a management that is serious about company value.

It’s time to wake up, Facebook. You voluntarily chose to play this new game so now you have to do it. Don’t hate the players.

Image (c) by http://www.flickr.com/photos/mknott/

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Belief and trust melts digital divide for the Warrior King

Image (c) by http://www.flickr.com/photos/geezaweezer/

LinkedIn is in some kind of trouble these days with 6.5 million passwords being stolen, but to me LinkedIn is a hero. Because it was thanks to LinkedIn that I discovered something incredible today: The Meltwater entrepreneurial school of technology or MEST in Accra, Ghana. This school is a NGO spin-off from the Meltwater Group, a highly successful software company founded in 2001 in Norway – started with just US $15,000, a trusty coffee machine and a really exciting vision:

“The Meltwater Group enters growth markets where new technology enables outsiders to challenge existing business models and market leaders sleeping in class.”

Today, over 800 employees in 55 offices work for the Meltwater Group. This is impressive and still, they took it to the next level with MEST. Not only do they invest money in new start-ups and entrepreneurs in Ghana, which means ‘Warrior King’ , just in case you wondered about the title of the post. But they provide training, mentoring and education in this region. And this is in my opinion even more important. Having started his own business with little capital as well, Meltwater’s CEO John Lyseggen, who developed the MEST concept, probably thinks the same way and consequently follows his belief that talent is everywhere and that people can achieve great things everywhere with the right support and guidance.

There seem to be a few more initiatives of this kind  in Africa already. It looks to me, as if these are mostly limited to financial funding and don’t share the same belief and trust in people. But in general and for Africa in particular, the combination of financial investment and altruistic training, mentoring and education is the winning formula. And I am so glad to see this happen with MEST.

Thank you, John and Meltwater. Your MEST NGO is melting the Global Digital Divide.

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The value of a Twitter follower? Possibly as much as $30 per year…

Image (c) by http://www.flickr.com/photos/soldiersmediacenter/

Hm, it seems I wasn’t so wrong after all after I wrote about the ‘value of users’ in a different context here.

Today I read in the news that a man by the name of Noah Kravitz was really successful in the past while working, tweeting and blogging as an employee for Phonedog, a popular mobile phone site. He managed to accumulate the impressive number of 17,000 Twitter followers during his time at the company . Now, he is being sued for keeping these followers also after he left Phonedog. There are various versions explaining more in detail what has been going on so I won’t comment on moral, ethics and ownership of these followers as, well, a court will rule on that in the future. But what is very interesting to see is the value that Phonedog attributes to each of their Twitter followers – it is as much as $30 per follower and year.

This is really impressive and ridiculously unrealistic. It is also right and wrong at the same time. Let me explain.

The suing company actually states that their ‘damage’ is as high as $2.50 per follower and month which would end up to a theoretical value of $30 per follower and year. Of course this is just a theoretical value. As there is no court ruling yet, we don’t even know if this claim holds true and if the court really applies this or a similar value for a user. But, if two parties fight in court over Twitter followers (or any other followers of social media sites), this shows that they are fighting over something definitely valuable and this confirms my thesis made previously.

To continue, let’s just assume a more ‘moderate’ price of $15 per follower and year. By the time I wrote about Ashton Kutcher’s Twitter followers, he stood at 8,070,032 followers – which would correspond to a value of $121,050,480 – over a hundred million dollars! While I am writing this article, his Twitter followers are closer to 9 million (8,913,879 to be exact) which means he’s accumulated another 843,847 followers in the last two months alone, a value of over $1,000,000 per month! You see that these figures are ridiculously high. All that is just hot air for the moment but of course one cannot deny that there has in fact been created value here. So even if they settle for a fraction of the $2.50 per follower and month, let’s say for 25 cents, Ashton Kutcher would be several million dollars richer than he already is and can grow his ‘follower wealth’ by approximately $200,000 per month.

It is kind of crazy when you consider how much work it takes to bring home $200,000 per month. I don’t expect the court to accept a figure anywhere near that area but the good news is some way or the other we will learn how much a Twitter follower is worth. At least to Phonedog and poor Noah Kravitz.

A Black Swan making the world green…

Black SwanNo, I am not color-blind.

Yes, the headline is still logically correct.

I’ll explain.

“Green” in this context is used as a synonym for “more energy-efficient” or “less CO2-consuming”, whatever you prefer.  A “Black Swan” here is not the bird in the image, but the phenomenon of a highly improbable, totally unexpected event with a huge impact on an  existing market or industry. Nassim Nicholas Taleb coined the term in his book  “The Black Swan: The Impact of the Highly Improbable”.

So, why is this important?

While the financial industry had its “Black Swan” in 2008 with the crash of Lehman Brothers, by then one of the most important banks in the world, with all its negative consequences on the world, we just witnessed another “Black Swan” in a different industry and this time, it is actually good that it appeared.

In the storage industry, that is the IT hardware manufacturers producing all the hard disk drives ending up in our computers, an unwritten rule was that prices for these disks fell continuously due to increased demand. As the world saves more and more data, companies in this industry could still make profit, despite falling prices and low margins. Falling prices required more and more economies of scale to remain profitable. Over time, this resulted in high barriers of entry for potential new companies and more and more concentration within the industry itself. This led to a de facto oligopoly where the remaining players in this industry felt comfortable – too comfortable in fact to innovate which is why we still use basically the same disk  technology from 30 years ago, just with more and more capacity.

Now, a “black swan”, a highly improbable event with a major impact, has occurred to this industry, in form of a severe flooding in Thailand, where the majority of disks are produced. The result is a externally-driven shortage of supply for hard disk drives and a consequent extraordinary price increase for the same. The “unwritten rule” completely flipped and the oligopoly’s old-fashioned, non-innovating companies find themselves suddenly out of their comfort zone. On a sidenote, the managers of these companies probably collected a lot of bonuses over the years, just by sticking to the “unwritten rule” of falling prices for hard disks while demand increases and are now completely “surprised”. Well, that is a black swan.

But this black swan, as uncomfortable as it is for the industry itself, is great for the world and offers a huge opportunity –  that is the big difference to the Lehman Brothers’ black swan and its extremely negative impact. Here, a non-innovating industry can be forced to innovate again through this external shock and produce better, more energy-efficient and maybe revolutionary products. At the same time, the other side, the consumers of hard disks or better disk space, can, in sight of rising prices, be forced to become more aware of how much and what to consume and also contribute to more efficient use of data by eliminating waste.

A “greener” world after a black swan arrived. I really like that idea.

I am deeply impressed, Dropbox!

When Dropbox officially confirmed the other day, that they got $250m venture capital (that is $250,000,000.00), I wasn’t impressed. It is a very big number, ok, but as I mentioned in one of my earlier posts, numbers can be hollow.

When I read a bit more about the company and found out that Drew Houston turned down an offer from Apple about 2 years ago, that didn’t really surprise me either.

There seems to be an invisible energy that constantly pushes the company forward, that of a true entrepreneur. I am almost convinced that there is this guy who really wants to build something big and enjoys every moment what he is doing – otherwise he would’ve taken the money and said good-bye.

That entrepreneurial energy is what deeply impresses me in this story. That absolute will to give birth to this disruptive product and the intelligence to market it successfully. The passion to find the right trigger and overcome one of the top challenges – successfully marketing a disruptive product. They could have taken some VC money and spent it on Google to attract users. If the product is good, just burn enough money and your user base will grow. But they didn’t. Dropbox recognized very soon that buying users via Google AdWords isn’t working because their product solved a problem people weren’t aware of. Without awareness for a problem, people are not going to search for a solution and therefore spending marketing dollars on Google is not very smart.

Dropbox stayed focused on making a superior product, stayed lean, agile, flexible and still found a way to find almost 50m users for their disruptive product – this is really impressive.

But the next challenge will come and it will be a totally different one. The growing threat from Apple’s iCloud, Microsoft, Google and others. All of them have in common that they have much more money available than the $250m Dropbox just raised. They are the late followers building on the still small but already existing market. A market that Dropbox created with its entrepreneurial intelligence and vision. If they understand the consumer, these giants will use all the power they have to go after their share of this market now and as the market grows even more so in the future. They will use their monopoly-like market position and they will show no respect for Dropbox. $250m dollars won’t help Dropbox much in this fight. What will help them is their entrepreneurial energy, vision and intelligence they already showed so far. So they could continue to be a market creator. I’d like to see that happen, it would be better for this world.