I’ve been closely following the debate about the culpability of MBA programs in the recent financial crisis. How could I not? I’m $75K deep into an investment that - depending on who you talk to - may not, in fact, be the key to world domination. [SIGH].
Harvard Business Review, Business Week and various other publications have been going at it now for months - publishing articles with catchy and histrionic titles like “MBAs Cheat. But Why?“; “MBAs: Public Enemy No. 1?“; and “Who Taught Them Greed Is Good?” that argue that MBA programs should bear some of the blame for the ongoing financial crisis.
Here’s where I - typical and current b-schooler that I am - stand on this issue. I have experienced first-hand the negativity and suspicion that comes my way when I tell people I’m in business school. There’s this seemingly inevitable distrust that is tangible, whether it’s people thinking I want to “network them” or steal their technology or somehow make money off of them in one way or another.
It’s depressing that this is the general impression of MBAs, but I won’t say it’s undeserved. We have a special, albeit tongue-in-cheek, award at school for networking (video here!) and many of my classmates, myself included, have a deep appreciation for the art of arbitrage (buy low, sell high!) that started at a young age.
That said, I just can’t agree with the argument that the business school curriculum “indoctrinates [students] with half-baked management and finance theories, along with an unshakeable belief in their own talents, before sending them out to earn ill-deserved fortunes” (from 8 March 09 article in the Guardian). If anything, I have become more wary of power and question deeply the way I interact with others and the implications that will have for my future employers/employees.
One of the central themes in my first-year of classes has been that band-aids (of the Enron + Lehman variety especially) won’t hide deep systemic issues for very long. The premise that you need to build respectable companies geared toward long-term success is definitely embedded in the MBA curriculum - the gap, I believe, lies in teaching students how to abide by those principles outside of the classroom, when shareholder/investor pressure mounts and they don’t have a supportive peer group to look to for guidance.
If we must play the blame-game when discussing the origin of the financial crisis, we’ve got to tie in modern corporate culture, market economics, George W. Bush and a host of other factors, the MBA curriculum included. However, clinging to the idea that business schools are factories pumping out Objectivist, Faustian, schmooze-machines is short-sighted and not particularly accurate.
**”Scarlet Letters of Shame” quote here
Larry Page says web users love “real-time” information. Television brainiacs see a future of all on-demand all the time. Even data mining is becoming more real-time.
People love new. New toys, new trends, new methods, new clothes. And the shift to a more real-time web plays into this well - it allows us to constantly quench our desire for “what’s new”.
Kevin Kelleher posits that the advantage of the real-time web is its ability to enable discovery as opposed to results. I agree - guided discovery is a totally awesome part of real-time applications. I worry though, that this constant reinforcement of the new marginalizes even further the opportunity to discover anything that’s *not* new.
Historical discovery was hard enough before the real-time web. When flipping through channels on television, I would stumble on old shows by chance and watch them. Now with all on-demand content consumption, I only watch what I want. I would read the encyclopedia yearbooks in my living room to learn about years before my time, though now, I barely touch websites that don’t add new content every single day.
Old content on the web gets buried WAY fast. Sure, chronological archiving helps, but the trend toward real-time content delivery has made it possible to avoid old content almost completely - one doesn’t stumble upon dated stuff in the same way.
I hope that the idea of discovery on the web doesn’t become synonymous with new, as often some of the most satisfying and interesting finds are the ones you missed the first time around.
Thanks to Flybridge Capital, I was able to attend the AlwaysOn Venture Summit East today at the Mandarin Oriental in Boston.
I am not exactly a veteran of VC get-togethers, so I am subtitling this post “confessions of a VC conference newbie.”
Highlights:
1. Widespread and unabashed optimism. I watched probably 5-6 panels and despite the pervasive and hard-charging recession going on for everyone else, many panelists said they believe it’s a “great time to start a company.” I’ve heard that phrase now so many times at so many different events and conferences that I wonder why my friends haven’t quit their steady jobs to become cloud experts (see next topic!).
2. Love of the cloud. I had not heard the phrase “pay-by-the-drink” before (shame on me) to describe cloud computing - though apparently Bezos has been throwing it around since at least 2006 and probably way before. It makes sense and is catchy, so I am excited to welcome the phrase into my lexicon of buzzwords. For those of you not hip to cloud computing catch-phrases, “pay-by-the-drink” refers to one of the most compelling parts of the cloud business model: dynamic/horizontal scalability and the customer’s ability to pay for only what they use.
Example - server space. You could buy an entire server for your startup and use some of it or all of it. When you get that spike in traffic that you were hoping for (viral social media marketing success!) your server might crash, negating any benefit that might have come as a result of the traffic spike. OR, you could sign up with a nifty “cloud” service like Amazon Web Services (AWS), Rackspace or Mosso. They charge based on how much server space you use. When you need a lot, the capacity is there and they just charge your credit card - see the “SmugMug” case study for more info.
There’s a lot of momentum surrounding cloud computing and “software as a service” and additionally, these businesses generally fit the capital-efficient + huge upside potential model that VCs look for, so it’s not surprising that talk of “the cloud” was so pervasive.
3. Quality of deal-flow is better. One quote I wrote down: “There are a lot of people who want to start companies, but they’re not necessarily entrepreneurs.” When VC money was more free-flowing (ahem, 2000) many of these wantrepreneurs got funded and the “noise” level became unmanageable. Now, the combination of tighter VC wallets, folding funds and newly unemployed former entrepreneurs has resulted in an increased number of serial entrepreneurs getting back in the game and putting together quality early-stage companies.
4. The importance of angel networks. My favorite panel of the conference was about the state of Angel and Early-Stage investing moderated by Michael Greely from Flybridge. The panelists were John Landry (Lead Dog Ventures), Elon Bloms (LaunchCapital), Bijan Sabet (Spark Capital) and Paul Maeder (Highland Capital). A surprising amount of VC deal-flow comes from Angel networks. This shouldn’t be too shocking - how many people are there in any one city with piles of cash (their own or others’) to invest in startups? My point: it seems like many startups seek VC funding too early - take advantage of the Angel groups in your city first and if you’ve got a winner that will likely lead to VC anyway.
5. Changing the VC model. There was also much chatter around the idea that huge mega-funds are on the decline and the VC model will move toward smaller funds and continue to favor capital-efficient business models (ie it doesn’t cost you $1m a month to stay in business). YouTube-type exits simply are not the norm; average VC exits are around $70 million. One of the panelists on an afternoon panel suggested reading a memo about the formation of Valhalla Partners. I found it on the Valhalla website and although it’s dated May 2002 it’s surprisingly relevant to the current pains in the venture industry and definitely worth a read.
Overall - good energy at AlwaysOn. Now if you’ll excuse me, I’m going to get back to writing my world-changing cloud-computing business plan.
One thing I’ve learned after serving as an organizer for the MIT $100K: great entrepreneurship competitions offer more than just prize money.
Sure, $100,000+ is an awesome carrot (and actually, the most any team could win in the 2009 $100K is actually $340,000), but startups need more than just cash to succeed. I now completely understand why VCs demand (and rightfully deserve) board seats - navigating how cash is spent and how to actually run a business is a different skill set from raising money or developing a cool technology.
As an MBA student, I get asked semi-frequently whether I believe entrepreneurship can be taught. Here’s my stance - you can’t teach passion, hustle, drive and attraction to risk. Entrepreneurship to me is like dancing - there’s the technical part and the “other”.
The technical part is teachable - financial statement analysis + accounting, basic business law and capital structure. I am NOT someone who believes it’s valuable to learn these lessons the hard way. It’s totally tragic when a perfectly viable and compelling business is driven into the ground because of accounting naivete, in-fighting or massive lawsuits over IP.
What I’ve learned after getting an insider’s look at the $100K is that the value for the teams comes in the lead-up to the final awards ceremony; all semi-finalist teams meet with industry, legal and VC mentors to refine their plans and attend workshops on negotiating term sheets, properly assessing market opportunities and refining their product.
One thing that surprised me was how many entrepreneurship competitions globally are modeled after the $100K. Now in its 20th year, the competition has produced companies like Akamai, Harmonix, Brontes Technologies and Visible Measures. And I don’t think any of these companies were $100K winners (they were either finalists or semifinalists) - just by participating in the process they were able to get their companies off the ground. It’s not about the winners - it’s about the ecosystem.
I am so excited for this year’s finale - this year’s ideas are kick-ass and it’s going to be a great show.
Hope you can join us –
The MIT $100K finale is next Wednesday, May 13th at Kresge Auditorium in Cambridge, MA. There will be a showcase at 6pm highlighting all the semifinalist teams and the awards show will start at 7pm. It is open to the public and no tickets are necessary - seats are first come, first serve.
My relationship with TV is starting to remind me a lot of my relationship with AOL around 1999. The applicable buzzword here is “walled garden” - after years of an insane love affair with AOL (because yes, we ALL had one) I found I was only using the browser + AIM and was sick of the other features that mostly served to slow down the browser. I quickly stopped using AOL altogether - though my parents continued to pay for it until 2007.
Lately, I have felt the same way about TV. Perhaps it’s the Social Television class I’m taking at the MIT Media Lab, but I find myself more and more frustrated with my TV. I’m annoyed that I have to settle for whatever is on and I find that the enjoyment I used to get from watching TV is nearly matched online. I say “nearly” because the internet still lacks the ability to replicate the “lean-back” experience that one gets from watching television.
The relationship between MSOs and content providers is what I like to call “cushy”. MSOs have deals with each network and pay the networks to carry their content. What I’m not quite sure about is if this number is a flat rate or a percentage based on the number of subscribers. If it’s a flat rate, then I think the MSOs will stick around a lot longer and deal with lower profits in exchange for continued market domination. If it’s a percentage of subscribers that’s a better sign for the rest of us - the content providers will start getting less and less cash as people unplug their cable and might choose to entertain options to provide content through other platforms.
I think about trends in technology the same way I think about neighborhood gentrification. There’s a very specific time-line with tangible indicators. Example: my mother, a fourth-generation Flatbush Brooklynite, told me that no one would ever want to live in “the dump” that was Williamsburg. Now it’s almost as expensive as Manhattan. The series of events went something like this: first the artists and musicians moved in because it was cheap, then the young just-graduated-but-still-poor yuppies came for the cool music, art, and coffee shops and they paved the way for the Booz Allen consultants who are now snapping up those fancy new condos.
I believe the same thing will happen with television. Early adopters are sick of the walled garden - they are unplugging their cable and buying Apple TVs, Rokus and are excited for Boxee to come out with its own set-top box.
Once Comcast, TW, Cox, etc. start to see enough of a drop in subscriptions they’ll pick fights with the content providers and some of the stronger content providers could start offering their content a la carte across multiple platforms (and I mean ALL their content - not just what’s currently online). Content providers with huge followings will be the big winners here - MTV, ESPN, HBO, Food Network, etc. Should they choose to offer their content directly to their customers these networks could potentially rake in even more money than they’re currently getting from the MSOs.
People will get to the point where they will be willing to pay for Hulu. Despite the fact that Gen. Y-ers love “free” we’re also pragmatic enough to know that one has to pay for quality.
For now, though, I am telling Comcast in September that I don’t want cable TV anymore. I’ll probably pay just as much for internet (gotta love bundling) but that’s not the point - it’s symbolic: I’m breaking out of yet another walled garden.
Fall class selection time - sweet.
There’s a certain art to putting together one’s class schedule. I try to make sure I have a few reasons to love every class I sign up for even before the semester starts (great prof, cool topic, endorsements from trusted sources, etc.) and I pay very little attention to the recommended classes that one “should” take while in business school.
I’m bummed because there are 4 classes I was WAY excited about and all 4 are scheduled in 2 time slots. Boo.
Here’s what I’m taking in the fall:
1. New Enterprises - Think of an idea and spend the entire semester writing a business plan, then present to VCs and get feedback.
2. Early Stage Capital - Strategies for raising capital, valuation, market norms
3. M + A - Valuation as it related to mergers and acquisitions
4. Power and Negotiation - Simulation-based class on negotiation techniques, BATNAs, etc.
I have heard great things about the class “Economics of Information” taught by Erik Brynjolfsson, the director of MIT’s Center for Digital Business, but it doesn’t fit in my schedule. Still looking for a 5th class, but I’m sure I will find something before September.
