Month: November 2015

Something about the Y Combinator thing reminded me of the Republican presidential race – those half-dozen “unicorns” that have yet to go public or be acquired, just sitting there hoovering up VC money on business that may or may not ever turn to standalone profit.  And when you look at it that way, of course there are still fourteen candidates in the race. Rick Perry and Bobby Jindal and Scott Walker couldn’t cut it, but it’s not as if Mike Huckabee or Rick Santorum or Jim Gilmore – or Carly Fiorina or Ben Carson or Donald Trump, for that matter – are any more plausible or serious or qualified candidates.  But when the pie is chopped 14 ways, if you can get to 10% share of the vote, you’re probably in the top 5, so where is there any incentive to drop out so long as your backers are willing to keep putting up money?

The difference is, unlike high tech, there’s going to be an IPO for these candidates whether they like it or not. One in Iowa, one in New Hampshire, and ultimately on March 1 when pretty much the entire SEC goes to the polls. By March 1, we’re going to know for sure that at least a half-dozen of these candidates are sufficiently no longer viable that their backers and donors will not be willing to dip into the wallet one more time, and their candidacies will come to a swift and ignominious end. I mean, I had completely forgotten that George Pataki is even in this race. None of the second-tier debaters have ever yet been promoted except for Carly Fiorina, in a move by the RNC that every single candidate would be screaming to decry as “affirmative action” had it happened on the Democratic side.

People can caterwaul all they like about government being more like a business, but at least in 2016, government has a deadline to shit or get off the pot.  It’s more than you can say for Silly Con Valley.

Last week’s Economist included an article about one of the neighbors. Y Combinator is an incubator/startup boot camp/venture capital provider in Mountain View that has become the poster child for people who think entrepreneurship can be reduced to a simple process capped with the standard rich and famous contract at the end.  Go read the article, I’ll wait.

Back? Good. Let’s go:

1) I find it singular that of the half-dozen “unicorns” the article cites, not one has gone public or been acquired.  These are all privately held companies whose valuation is based on what some entity was willing to pay for a percentage. In 1999, the exit strategy for your company was to go public and cash in with a breathtaking IPO. In 2009, the exit strategy was to sell out to Google, or Facebook, or Apple, or maybe Amazon or Microsoft, or if you’re really desperate, Yahoo.  Now, in 2015, the goal seems merely to be to get the highest possible valuation by enticing one VC firm or another to give you the most money for the smallest percentage, thereby “valuing” your company at some astronomical sum.  The problem is, not one bit of that is liquid.  AirBnB is the highest-valued of these companies, and it certainly seems to have a viable business model and generate revenue from same (legal issues around people using it to go into the hotel business notwithstanding*). But the question becomes: who, if anyone, is going to pay $25.5 BILLION dollars to acquire them? And if they go public,  are they really going to offer a hundred million shares at $255 a share on opening day?  There are an awful lot of unicorns, so-called, whose expansive valuation almost certainly could not survive exposure to an open market.

2) We’ve defined the tech-sector down to “anything that has an app.” AirBnB is a short-term rental company. Instacart is a food-delivery logistics company.  Stepping outside the Y ecosystem, Uber – maybe the poster child for the current bubble – is a taxi company desperately trying to pitch itself as actually being Tinder for cars rather than a taxi company. It’s been said before and better by smarter people than me, but the current model really seems to be one of “think what your mother doesn’t do for you anymore” -> replace all normal communication/commercial infrastructure with smartphone app -> SWEET SWEET FILTHY LUCRE FROM THAT DICKHEAD ANDRESSEN. Nice work, if you can get it.

3) Way way WAY too many of these ideas are a product of regulatory arbitrage, loophole-seeking, and sheer bloody-mindedness.  AirBnB is NOT your hotelier. Uber (and Lyft and Sidecar and Gett) are NOT taxi companies. WeWork is NOT a commercial real-estate company. DraftKings and FanDuel are NOT wagering. Instacart and DoorDash are NOT in the food business. If you get work via Uber or GigWalk or Fiverr or TaskRabbit or (fill in app-based task-driven contract-labor service HERE), you are NOT their employee, you just happen to have contracted with this other private party. So we have a bunch of companies which are worth way more than the sum of their profit and assets, surviving on the steady intravenous drip of VC money, dependent on a workforce of people who are absolutely not their employees.  How the hell is this supposed to be a viable economic model?

And in the meantime, here is Y Combinator, which the article openly says that “aspiring entrepreneurs clamor to attend…as much for what they learn there as for the stamp of approval and network they can claim when they leave.” As much? Y Combinator has managed to out-Stanford Stanford, and an industry that supposedly scoffs at legacy ideas of credentials and old ways of thinking about pedigree now instead throws an automatic seal of approval behind whoever comes out of this particular three-month boot camp.  And it’s desirable enough that two guys from Brazil will spend thirty hours in transit – each way – for the sake of the single ten-minute interview that determines whether or not they will get accepted into the ranks of the Elect. Ten minutes. My scholarship interview for a no-account liberal-arts college in the Deep South took longer than that. But that magic Y is now so coveted that it’s worth spending two and a half full days, round-trip, for the sake of ten minutes to see if the golden finger will bless your idea.

If that isn’t a bubble, I’ll kiss your ass.

 

 

 

* AirBnB is one of those things where they keep pushing the original model, i.e. “let out the spare room and meet people while making a little extra scratch.”  We have actually done this. It has worked out well. The problem comes when somebody buys a building, evicts all the existing tenants, and turns it into what is functionally a hotel administered via AirBnB. This was a big part of the backlash that manifested as a couple of voting propositions earlier this month in San Francisco, and I expect it to continue to be an issue in any market where housing supply is constrained and former private accommodations are converted for AirBnB use full-time.

There used to be a bookstore, a music store and a tobacconist in every mall.  Frequently more than one book or music store, at a time when they weren’t lumped together (it’s singular to me that I have seen the beginning and the end of the all-in-one media store, whether it be Borders or MediaPlay or the local likes of Bookstar or Davis-Kidd). In high school it was Musicland and Sound Shop at the Galleria, along with B. Dalton and Waldenbooks. By the time college came round, you could roll the sports-wear stores in there too: Foot Locker and Champs both in every mall. (I hesitate to say “sporting goods” because for the most part, those stores didn’t actually sell bats or gloves or balls or helmets.) And toward the end of graduate school, cell phone stores were of equal interest.

All of that has changed.  Finding a tobacconist in a mall in California is like trying to find a rack of pork ribs at a mosque. Amazon did for the mall bookstore, and Apple largely managed to do for the music store and the cell phone store alike – sure, every carrier has a shop at the mall and a few kiosks besides, but you only go in there if you need to buy a phone on a legacy contract, not to check out the new hotness. And at my age, there’s precious little you want from the likes of Foot Locker. 

In so many ways, that sums up how different life is. The mall as a point of interest was barely hanging on when I got here in 2004 – it was a short hop from Apple to Valley Fair, the principal temple of competitive commerce in the South Bay, and I dutifully did the rounds there if only for the sake of “this is how I orient myself in a new place,” just as I’d wandered through Cool Springs and Rivergate and Green Hills and Hickory Hollow and Bellevue in Nashville or through Ballston Common and Tyson’s Corner and Pentagon City and Fair Oaks in Northern Virginia.  But it didn’t really last.  I don’t know that I ever saw a music store or a bookstore in that mall, the tobacconist of those early cigar-smoking nights is long gone, and even the Apple store isn’t a draw any longer.

All of this came to mind in the wake of going through the AT&T store to replace my wife’s phone – she is still carrying a legacy foundation account plan which is damn near theft, so the corporate store is the only way to go.  It’s the same AT&T store where I reluctantly acquired an iPhone 3G in 2008 after damaging my original model. That’s very literally the last time I’ve ever bought a cell phone in a carrier store – everything since was direct from the manufacturer or through work. Aside from the occasional glance at the new hardware, I don’t ever go in an Apple Store anymore, and I basically never go in a cell phone store (which is why it was such a jarring experience to wait over an hour for no service on Halloween. Everybody wants to be AAPL but nobody wants to put the resources into it).

And looking back, that makes perfect sense. If you need to sum up what’s changed in the last 10 years or so, make it this: the Internet is where you buy things. If I go to Santana Row, the most I’m liable to splash out for is a cup of coffee at Peet’s or maybe a pen. If I go to Valley Fair, I might go nuts and get a pretzel or maybe some Coldstone – if it’s even still there and I can’t swear it is. The only destination at a mall for me for as long as I can remember is to get that ham-and-cheese-and-pineapple sandwich from Steak Escape and that’s a special occasion sort of thing. Clothing? Ordered online. Phones? Bought from work or off the manufacturer’s website. Caps? Ballpark or online. Jackets? Japan, New York, or online. Watch? Apple Store or online. Socks? Books? Flask? Steel tumblers? If it isn’t food or drink, the odds are strong that it’s coming straight to my house or office in a UPS or FedEx box.

Which is a shame, in its way. Going to the mall was an event – maybe the defining social event of the 80s, although it came to me quite literally in a dream that walking the mall with your friends would be an ideal pastime before I was ever aware that the culture was way ahead of me. It was a heavy lift for me until well into high school, just because I was a half hour drive from the nearest mall, but eventually I sort of got there – and when I had to get off campus in college, the first stop was the mall, pretty much always. The malls at the points of the compass were my orientation and anchor in Nashville. The mall was on the way to work and on the way home for the first year and a half in Arlington. And now, a decade on, the mall has evolved into – at best – some place to quickly return the stuff you bought online and maybe a place to grab a bite if you’re in the neighborhood. Maybe.

And thus does the mall become one of those things we just don’t do anymore. 

The phrase is Japanese. Wikipedia calls it “a Japanese term for the awareness of impermanence, or transience of things, and both a transient gentle sadness (or wistfulness) at their passing as well as a longer, deeper gentle sadness about this state being the reality of life.” One of Barry Eisler’s characters in A Lonely Resurrection calls it “the sadness of being human.”

National Geographic Partners is a joint venture owned by the National Geographic Society and 21st Century Fox. As of earlier this year, NGP has basically taken over all the functions of the Society – publishing, content, brand, the whole enchilada. Much like Google and Alphabet, only in this case the non-profit NGS has created a mechanism to essentially sell three-quarters of itself to Fox. There are a number of levels on which this is dismaying, especially vis-a-vis the media properties of Fox in the United States. But one of them hits extremely close to home – and that is the inevitable takeover of back-office operations by 21st Century Fox. Marketing, finance, and of course IT – all being replaced with the economy of scale that comes from a major media corporation’s existing structures.

Basically, my old job is ceasing to exist. And all my old colleagues are being laid off.  There will probably be packages, there will be an as-yet-undetermined date final for them, and they will go their separate ways for good.  Maybe some will get re-hired in local roles, but I wouldn’t count on it – this is, in many ways, an end altogether for the old firm.

They were seven odd and turbulent years, to be certain, and the first year and a half were traumatic in the extreme. But it was where my life was rebuilt from scratch. The old crew went to work on me when I was dangling by a thread with my career in ruins and no future – when the black hole of the past had opened up all the way to the tiptoes beneath me – and rebuilt me smarter, surer, better than I had been before. You could argue that much of my troubles the last few years have revolved around trying to figure out who I am and where I’m going and what is to be done with my life. If there’s one thing I can say with absolute certainly about my time in the DMV working with my gang under that yellow rectangle, it’s this: there was never a sliver of doubt about who I was or what I could do.

So much has changed since those days. Some people out of my life altogether. Some scattered to the four winds. The old pub gone, and now the very jobs themselves gone. The place we worked is no longer the same place, and what seemed like a fixture of American life – that non-profit magazine publisher dedicated to knowledge of the world and all that is in it – is now just another media property lumped alongside the likes of Joe Buck, Bill O’Reilly and Family Guy.

I’ve said it before – treasure the things you love, because you never know when they’ll be taken from you. But that includes your memories, because sometimes the ground shifts beneath the past and the things you remember are themselves altered. This, though, is a fact, and it is indisputable: from 1997 to 2004, I had the privilege of being a giant standing in a forest of giants, and I’ll take that to my grave.  There’s sadness in its transience, to be sure, but there is glory in its having happened.