Chicago Beta

Chicago start-up Humanized is launching something new this week, Songza (www.songza.com).

All CB readers are invited to the launch party this Thursday, Nov 8th, from 5:30 to ~9. It’s at Elephant & Castle on N. Wabash.  Free beer provided by New Belgium (the Fat Tire people).

I’ll be there, should be a good time.

It’s been awhile since I’ve posted. I’ve been in state of reclusion that immediately follows starting a new company. JobCoin is still going well, but I’m cooking up something new. I’ll share more details as the team materializes.

But today, I’m here to bless you with someone else’s ideas rather than my own. An acquaintance of mine sent an e-mail about the all-to-common refrain criticizing “income inequality”, the “gap between the rich and the poor”–pick your wording, I’m sure you’ve heard it before.

His response to these remarks:

What’s the matter with the other segments of the population? Why aren’t they doing their part, as the top percentile is doing so superlatively, to create wealth?

Well put!

Update 11/4:

I don’t know all my readers, but I was surprised to receive a negative reaction to this. The focus of this blog has always been around business, starting businesses in particular, so I assume my readers share a common context with me. However, I do admit that the context this statement was building upon is not obvious, and it’s not correct for me to assume it so let me elaborate to make the full meaning clear.

Let me apply the idea of income inequality to a different scenario, I think that will make things more clear. Imagine sitting in a theater listening to listening to a superb piano player, the person next to you turns and remarks, “That person is just too good. Look at them, it’s like they aren’t even trying, that music is just flowing from their fingers. Now that this person is on the scene they have just widened the gap between amazing piano players and the rest of us novices.”

I mean someone really saying this, not as a joke, but with a touch of viciousness about the issue–that this person being good is making the rest of us look bad. One could respond, “This person isn’t ‘too good’, there is no such thing as ‘too good.’ If you want to criticize anyone, you’d have to criticize you and I for not being ‘good enough’. We should be celebrating this person’s ability, not grumbling at the supposed ‘gap’ it creates between us and them.”

Now of course, it is wrong to criticize the people of average ability than it is to criticize the people of superb ability, but the response is showing just how absurd the commentator’s view is by emphasizing the opposite of it.

Now back to the original quote. The context I mistakenly assumed about business, which I will state explicitly now, is two-fold. First, that value is something that is created by people and the act of creating it is a skill. Just like playing piano, some people are better at creating value than others. And just like playing the piano, creating value is a skill that can be learned and improved upon, but like any skill, there are limits to one’s potential to improve. Some people are so naturally gifted at creating value that even with a lifetime of practice, I’ll never be able to catch up.

And second, value creation is not a zero-sum game. All this talk about “income inequality” and “gap between the rich and the poor” assumes that the more value–wealth–that I create, the less of it that is out there for someone else. But this idea is just not true. Anyone who has started a business, who created something new to the world where simple raw materials existed before–cannot evade the fact that value is literally created, there is no limit to how much of it we can have and we all benefit the more of it that is created.

To summarize, this is the context I keep in mind when I hear people talk about “income inequality” and grumble at the superb value creating abilities of a small number of people and complain that this is somehow a bad thing. I remind myself of all the amazing conveniences of modern life that this small minority of people have helped to create for all of us–my iPhone, wireless internet, free phone calls around the world, portable movie players–and I don’t damn them for making me look bad, I remark to myself with admiration, ” Imagine what the world would be like if we were all that good!”

Update 11/5:

I’m not interested in engaging ad hominem responses so I have closed the comments.

Uloop is hiring a sales & marketing manager:

Uloop is looking for bright, energetic sales/marketing managers to join our team. Manage approximately 20 Campus representatives at 10 universities; Analyze data from each school and adjust on-campus marketing efforts; Create campus-specific marketing campaigns; Visit campuses multiple times during the semester/quarter

New companies on my radar:

• KnowledgeBid A new start-up by Rob Webb recently launched a new product/site, Analysts Edge. It provides user generated news for the financial community. It’s a well done site that was launched on a very quick turn-around. Rob has a good blog too.
• Cardways is an interesting start-up that allows you to send old-fashioned paper greeting cards to your friend directly from their website, fully personalized, and include a gift card from the retailer and cash amount of your choice. I’m not sure how long they’ve been around but I just learned about them and that they are here in Chicago.
• Network Blackbox has created a network-attached automated backup device.
• I recently developed a Facebook app, Grow-a-Gift, with a couple other people. Currently it’s one of the fastest growing apps on Facebook. Over 150,000 users have installed it in the last 10 days! If there are any other Facebook developers out there send me an email, I’d love to hear about your experience.

I waited in line for a few hours yesterday and purchased an iPhone. I avoided the Apple store on Michigan Ave and instead found a small AT&T store near me that wasn’t that bad with the wait. After playing with the phone for half a day now, I’m still saying WOW.

I’m on the fence about replacing my Treo with this as my phone. Most things I love about the Treo the iPhone does poorly: composing an e-mail, keeping my contacts, calendar, email synced and updating all of those items on the go. But the iPhone does a TON of new things incredibly well that the Treo can’t touch: browsing the web, music, photos, video, and checking voicemail. And most of all, I’m amazed how how fun it is to use. Even though this is a gadget with buttons and a screen, surprisingly, it has the fun-factor of a mechanical puzzle. In every single application: flicking, stretching, pinching, and sliding the interface is just plain fun.

There are a lot of great reviews (Pogue’s and Mossberg’s), but aside from the issue of whether to purchase an iPhone or not, there are some really interesting software design lessons to take away from what Apple has done. And even though this is a hardware “gadget,” 90% of the brilliance is in the software.

Every truly great piece of software I’ve used was great because it focused on a very specific need and it addressed that need incredibly well: the “less is more” philosophy. At first, when you see the list of features, it seems that the iPhone is the antithesis of this approach. But unlike most focused software, the iPhone’s focus is horizontal rather than vertical. Yes, it has a lot of applications, but in each application they only cared about half of the usual functions–in every application the focus is on retrieving information, not entering it. It’s an interesting design decision and it works surprising well.

This is most evidence in the biggest hardware decision: 100% screen, 0% keyboard. Screens are for retrieving information, keyboards are for entering information. I think the only reason they even included the on-screen keyboard is for the simple inputs like entering an address into Google maps, entering a URL into the web browser, etc that can’t be avoided when you’re trying to retrieve. In fact, 75% of the time I use my Treo it’s to read email, check and appointment, retrieve driving directions. However, one common task I perform on my Treo is when someone emails me a time to meet, and I copy and paste their address and phone number into a new appointment. There is no copy and paste anywhere in the iPhone, copy and paste is for entering information, not retrieving it.

Take away: You can narrow the scope of your application by focusing horizontally rather than vertically.

The second interesting take away: I knew interfaces could be poorly designed and confusing or well design and easy to use. The iPhone has elevated interface design to a new level; interfaces can be made fun. It’s hard enough to design an interface that is easy to use, and I would have thought the extra effort to take it beyond easy into the realm of fun would not be worth it. With any product you hit a point of diminishing returns when you are trying to improve a particular aspect of it, I would have thought “fun” would be in the realm of diminishing returns. But I’m amazed how much the “fun” adds.

Over the years I’ve noticed one of the biggest differences between “expert” users of computers and “novice” users is their willingness to explore a piece of software. Novices memorize a series of steps to get the computer to accomplish a desired tasks. Experts explore the software and come to intuitively understand the underlying mental model governing its design, this enables them to teach themselves new uses of the program. There is an analogy in mathematics: novices memorize the steps to apply a certain formula, experts understand the underlying meaning of the formula, they can apply this knowledge in ways beyond just the simple steps.

Take away: What does “fun” have to do with this? If an interface is “fun”, even novice users will be motivated to explore it and “accidentally” develop a deeper understanding of it, and hopefully get some of the same benefits that experts do from using it.

Dick Costolo had a great post recently about companies’ customer service (Customer Service - Foundation over Platitude).

The airline’s website and official customer service language are all about lines like ‘the customer comes first’, ‘you are [airline name]’s most valuable asset’, etc. The hotel’s website and official customer service language are non-existent. I couldn’t find anything on the site that explicitly mentioned customer service. Of course, the actual customer service experience was first-rate at the hotel and miserable with the airline.

Dick talked about the importance of transparency. How even bad situations can be made significantly better by informing the customer of what the problem is, rather than just leaving them in the dark.

It reminded me of an experience I had the last time I visited IKEA. The principle of transparency can be used by companies, not only to right a wrong, but also as a competitive advantage–by explaining the reasons behind seemingly unacceptable behavior.

IKEA has built an amazing business by providing high quality products at incredibly low costs. I can attest, every time I go there I buy much more than I ever plan to because the products look fantastic and the prices are so unbelievably cheap. Trash cans, pictures, champaign glasses, “I know I don’t really need a new dish scrubbing brush, but this suction cup thing is so cool, and for 50 cents, what the hell.”

But saving money can require cutting corners, and cutting corners isn’t always acceptable to customers. On my last visit I noticed a number of signs posted around the store. (I couldn’t find pictures online, so these are from memory):

In the restaurant/cafeteria:

Please bus your own dishes. This allows us to have less staff on hand, and keeps our prices low for you.

Throughout the store:

Why s it hard to find help at the store?  Not having lots of staff, and not having commission sales people, allows us to keep our prices low. Look around for one of the information booths and someone will be happy to help you there.

In the loading area when you pick up the pieces of your furniture:

Why do you assemble furniture yourself? Having someone in a factory assemble furniture would make our prices more expensive. Although it can be difficult to assemble yourself, it means you get the furniture right away, and for less cost.

Etc…  The cafeteria one struck me the most. When I read it, as I was carrying my tray to the dish bin, it gave me a sense that I was participating in the business model. What would have normally been an unpleasant activity, gives the customer a small sense of pride.

In my own business, I make sure I don’t make the mistake of assuming things have to be a certain way. IKEA gave me evidence that customers will jump through a lot of hoops, and be happy about doing so, if you can give them something they really want. Don’t be too quick to assume, “But the customer wouldn’t like that…”

Roger Bannister was the first man to run a mile under 4 minutes. Records hovered around the 4 minute mark for years, never being broken. Many thought 4 minutes was a physical impossibility for the human body. Some speculated a man’s heart might even explode if he tried. Roger Bannister thought otherwise. Through systematic training and repeated attempts, in 1954 he broke it: 3 minutes, 59.4 seconds. His achievement is amazing, but what’s fascinating is what happened after it. Within a month, John Landy broke his record. In the years following, so did hundreds of others. What prevented all these people from breaking 4 minutes in all the years before Bannister?

Think about it, how much easier is it to persevere when you know others have done what you’re trying to do. Law school, bar exam, medical school, all of these goals are challenging, but hundreds of thousands of people before you have done it. There is no question if it’s possible, you just have to put in the work.

But how often is the barrier to achievement an imagined obstacle? How many people would have argued that Wikipedia was impossible before seeing it done? If Jimmy Wales had presented the idea to you before launching, would you have argued that thousands of people would never contribute their time and energy to write those articles. Most people won’t even run the race if they’re not sure there is a finish line.

Once you’ve seen what’s possible, its much easier to imitate. This pattern is repeated time and time again. Peggy Fleming won the gold in Olympic figure skating with double jumps. Today, it’s expected that top figure skaters will do triples, or even quadruples.

It was inconceivable that a deaf and blind child could be taught language before Hellen Keller. I’m not sure if it’s commonplace now, but wow.

Edison tried thousands of different filaments for his light bulb before finding one that worked. Why didn’t he conclude after the first thousand that the material he was searching for may not exist?

The common thread in all these examples is that people persisted without any good evidence to think that what they were trying to do was even possible. They persisted in the face of perfectly reasonable doubt.

“Throughout the centuries there were men who took first steps down new roads armed with nothing but their own vision.” - From “The Fountainhead” by Ayn Rand

…This thought is half-finished. I’ve been sitting on this post for a week and I’m honestly not sure what to conclude from these examples. But I’m throwing it out there anyway.

SitterCity (profile) is hiring a Director of Technology

Sittercity.com, one of TIME’s 50 Coolest Websites, is looking for a Director of Technology to oversee and drive development of our site and management of our internal development team.

LimitNone is hiring a Web Programmer (contract or permanent)

We are looking for a Web programmer (must know HTML, XML, Javascript and any programming language). Should be an energetic guy/gal who is interested in getting involved in some big opportunities around Google Gadgets and Google API’s.

Emmi Solutions (profile) is hiring a Java Web Developer

To develop and maintain Emmi Solutions J2EE-compliant Internet applications utilizing JSPs, Servlets, Design Patterns, …

CleverSafe (profile) is hiring a Senior Software Architect

To provide architectural and big picture oversight for new commercial open source products …

Mediafly is hiring looking for an “exceptional” Senior C#/ASP.NET Developer and “the best UI developer in Chicago“

Seth Godin has impressed me enough with his ideas that I’m willing to wake up at 6:30am to hear him speak. About 150 other people joined me at Maggiano’s this morning to hear about his new book, The Dip. I’ll recap:

If the goal that you’ve set for yourself is not one that you can be the best in the world at, stop wasting your time. Pick another goal.

Identify all the projects you have on your plate, and cancel all of them that aren’t getting any better. Free up your resources to pursue the one you can be the best at.

That’s my summary, not a quote. He said a lot of things that didn’t tie together coherently, but this point is valuable enough it’s worth highlighting (it’s articulated much better in the book Now, Discover Your Strengths).

The point for entrepreneurs: if your business cannot be #1 in the category you’re competing in, pick a new business OR re-define the category. The first person to fly across the Atlantic Ocean solo: Charles Lindbergh. Who is the second? No one remembers. But the first woman to fly across the Atlantic solo: Amelia Earhart. That is an example from The 22 Immutable Laws of Marketing (cheesy title, but great book!)

The challenge is creating a category that is meaningful to your customers.

Remember five years ago when start-ups would pay their customers cash to use their product?  I admit, I signed up for PayPal because they paid me $5 and used some advertising-loaded browser bar because I got a check each month. To think I could be bought so cheaply… The technique worked to generate customers, but it was just expensive.

I’ve noticed a new trend which is equally as powerful, and much cheaper to execute: give away your traffic. These days, traffic is currency. Thanks to Google AdSense and all the other ad networks, if you have a website that receives traffic, however small, you can convert this traffic into cash. Sure CPM rates vary based on the type of traffic you get, where you place the ads, etc. But the fact that you can reliably convert traffic to cash makes traffic as good as money. Can you give your customers traffic for using your “product.”

The ultimate examples of this today are Digg and TechCrunch. Start-ups are climbing all over each other to get a mention on these sites, but how can you use this technique without turning your website into a news portal?

Justin Chen recently told me about a creative example of this:

Each time a foodie blog reviews a new restaurant, at the bottom of the blog post they put a widget that links to this restaurant’s homepage on Urban Spoon. Urban Spoon detects this incoming link and automatically adds the blog’s review to the restaurant’s page (scroll down to the section, “Blog Reviews of …”).

Despite the fact that Urban Spoon needs some work as a site, this idea is fantastic. It’s a huge incentive for all these foodie blogs to link in.

One more example. I see the MyBlogLog widget on almost every blog I go to these days. Apparently one of the reasons that bloggers add this, and keep this, on their site is because of the incoming traffic that it generates. If you click one of the faces, you’re taken to that person’s profile page and you see all the other sites they are reading… and you probably click one of the sites.

As soon as bloggers start to notice a lot of referring traffic coming to them from MyBlogLog, Urban Spoon, or your site,  you’ve probably hooked them for life.

A good friend gave me this piece of advice about choosing your next career move or business to start:

When you’re playing pool, there are always a number of shots you can sink on any given turn. To win, you have to not only pick a shot that you can sink, you have to pick the shot that puts you in the best position to sink the next shot.

Pick a job or a business by thinking about what you can do well and learn something from, but more importantly, think about where it’s going to lead you to.

I heard Jamie Dimon give essentially the same advice in a different context. He said:

Every time I took a new job, the first thing I did was identify who my replacement was going to be. I then proceeded to work myself out of that job and eliminate the need for myself.

I’ve thought a lot about the tradeoffs of starting an internet company in the Chicago vs the Bay Area. Of course I love living in Chicago, but I want to have a good understanding of what, if anything, I’m missing by not being in SF to know if it could ever justify moving there.

I just heard one of the most interesting answers to date. I was listening to an interview with Scott Rafer, CEO of Feedster and MyBlogLog. Toward the end he touched on what he thinks makes the bay area unique for entrepreneurs.

I’m paraphrasing from memory:

In San Francisco, social pressure is on your side. In other cities, if you are involved with a start-up, you’re a bit of an outcast. People often think your crazy before they even hear the business idea because the very concept of starting a company is out of the norm. In the Bay Area, on the other hand, there is an immense social pressure towards start-ups. Lots of people working for big companies are made to feel that they’re “missing out.” And when it’s the norm rather than the exception, people give you the benefit of the doubt. Nearly everyone has heard some business idea that sounded crazy and ended up making it big.

I think this really gets at the essence of the culture. It’s a great explanation as to why you see a lot of what you see out there. I have experienced this “culture” every time I visit, but I had not identified it and put the words to it. It’s this “benefit of the doubt” that makes it easier to convince others to join you, raise money at early stages, convince your spouse/parents/relatives that it’s okay for you to quite your great job and give this idea a chance, etc. It’s like your swimming downstream.

One caveat, I think this social pressure is a consequence rather than a cause of all the start-up activity over the years. There is something more fundamental about the geography or the culture that originated the phenomonen in the first place.

Paul Graham has a great essay on why Silicon Valley came to be.

Personally, I’m still not sold on SF over Chicago. Notice I’m still here. The jury is still out for me, I love Chicago.