Search for Balance

Too Big To Bailout?

So GMAC gets $6 Billion, too.  Awesome.  Every time I think that these bailouts have reached absurdity there is yet another.

For all the Too Big To Fails (TBTF) you hear about every day now, you’ve got to wonder when we’ll finally come across a Too Big To Bailout.

If the concept of TBTF argues that the repercussions of failure are worse than the costs to prevent it, at what point can we reasonably say that we can’t even afford prevention?  Can something be Too Big To Bailout, or will the fear of the ruinous effects of the failure create a self-fulfilling prophecy as we destroy our country by trying?

As of yet, it doesn’t seem the government is even considering affordability when making these decisions.  Maybe we’re already there.

Sick, Vacation, Etc. Etc. Etc.

Just wrapping up a vacation in which I was sick the entire time, finally recovering on the last day to catch something new.

I plan to resume my schedule ASAP.

Value over Pain

One thing you’ll see everywhere reading about starting a business these days is how you need to address a customer’s “pain point”.  This never sat well with me.  Of course, it is completely understandable that if a customer has a legitimate pain that your product solves, that they will pay you for your product.  I simply wasn’t convinced that is the best way to think about this problem, nor a universal.

The other night this week I went to the NWEN ThinkTank event and saw Nick Hanauer speak about creating a truly transformational force in business.  He’s got first-hand experience with this, most notably with Amazon.com.

While he didn’t explicitly say that the “pain point” thesis is wrong, he spelled out his equation for building a business: creating value.

His equation is fairly simple, the sum of the benefits of your product divided by the sum of its costs, all over the value ratio of the alternatives.

V= ( benefits(your product) / costs(your product) ) / ( benefits(alternatives) / costs(alternatives) )

For example, if you have a product that lasts 10 years and costs $1, and the alternative is something that lasts 5 years and costs $0.50, your value ratio is 1, which is “zero value creation”.  V = (10 / 1) / (5 / .5)

You can have negative value (your product is worse, say lasts 10 years, costs $2) or positive value creation (your product is better, say lasts 10 years, costs $0.50).

To have truly transformational value and have a real breakthrough idea, you should look to have at least a 10x value creation.  He asserts that no real breakthrough idea has delivered less.

I like this method because it (at least to me) better explains things like why a particular video game is better than another.

Left 4 Dead is a great game and I want to buy it, not because I have a “pain point” of not enough zombie games in my life, but because the value it creates is at least incrementally better than what I currently have.

Another area this equation helps me better understand is the replacement of substitutes or creation of new markets.  Value can be created for people in ways they never expected or by simply replacing something they are completely happy with — until you show them your product.

Too Small To Fail

One of the big things we have going for us at MarketOutsider is that we are too small to fail.  Right now, the economy is bringing down some hefty pressure on start-ups from (primarily) two directions: scarcity of funding, and grossly smaller valuations.

While it would be awesome to be able to keep going at the same speed, we’ve come to the conclusion that until things improve we neither want to spend extended amounts of time seeking money, or settle for a miserable valuation that funding might entail right now.

This means, for the moment, we are decelerating our efforts.  I’ve taken a position (at Marchex) that will enable me to keep a roof over my family’s heads, and will be cutting down to evenings and weekends on MO.  I am thrilled I was not only able to quickly find a job given all of the recent layoffs, but I found something that will be interesting and let me hone some skills that will be beneficial for MO.

My co-founder at MarketOutsider, Colin, will be able to stay full-time for a while longer, but will also soon be getting at least part-time work and have to cut some [of] his time.

As I said above, though, one thing we do have is the luxury of an effectively zero burn rate.  We can indefinitely slow MarketOutsider without any outside pressure to shut it down, or worries about making payroll or going bankrupt.

We feel we’re in a great place with the company right now and have some exciting developments on the horizon.  Our future is bright, we’re just making what we feel are necessary adjustments to the economic environment.

Phone-tag2.0

Last night my wife commented that she thought it was funny I couldn’t “just call” anyone anymore, that I almost always email them first to make sure they are available or set up a time to call.

For me this is just the process of expecting, but optimizing “phone-tag”.  Email, twitter, and SMS have made coordination frighteningly efficient.  Certainly more efficient than voicemail.  If I can expect ~80-90% of the calls I need to make to end up in phone-tag, why not take a much smaller hit for every call and significantly improve the experiece for the 80-90%?

I’m interested to see how technologies like these that optimize communication in non-obtrusive ways will change other parts of our lives.

Soon…

I have a few posts queued up, just need a day with more than 4 spare minutes to finish them up and post.

• T-Mobile G1 Android phone review
• Machine Learning/Data Mining book list
• Depression 2.0
• Why I’ve been so damned busy the past few weeks

What a week…

What I really need right now is a vacation, unfortunately I won’t be getting one… at this point, I’d settle for just some sleep.