Sunday, November 08, 2009

Wall St Keeps Paying Out

In previous blog posts, I discussed my disappointment at how banks and Wall Street were continuing to pay themselves excessively. Bonuses keep getting paid at super high levels - there are articles in Time, The NY Times, Newsweek and BusinessWeek. All of this because of the need to retain talent. I'm sorry, I went to school with a lot of these folks. They are good, but not worth millions more than execs in companies large and small who have cut salaries across the board to prevent layoffs.

It is clear that the taxpayers saved the hide of these folks. Currently cheap money is keeping these companies profitable. Yes, there is taxpayer self interest because we want to be paid back, but large bonuses take away from paying us back.

George Will had it right when he said that no financial institution with taxpayer support should make more than the equivalent government position - about $150k. And yes, that includes firms like Goldman Sachs that have a Federal Reserve backstop. So if they can't police themselves, it is time for the people to step in. I hate to say this, but it is time for a massive tax increase on the wealthy. This kind of stupidity creates massive inequality - the kind of stuff that starts revolutions.

Anyone making above $1 million in salary should have to pay a total of 50% in income taxes with no deductions. It comes right off the top with no income tax refund or return. Capital gains are excluded with the exception of anyone who profits off of carried interest (like hedge funds). On top of this, we should have a transaction tax on all financial transaction. This should go into a G20 global financial stability fund to prevent further excesses from bringing down the system.

I understand that many may call this liberal, but that's a silly label. Entrepreneurs and legitimate businesspeople are taking real risks, while these financial folks are not showing the kind of restraint and forbearance that they should after almost destroying our financial system. Many of these folks are fighting tooth and nail against regulatory reform which harmonizes rules in a way that benefits consumers and create a level playing field It's time to rebalance the system of risk and reward. A privileged few not be allowed to control our system to their sole benefit.

So fix yourselves or the people will fix you.

Sunday, August 16, 2009

Healthcare: Where's the Obama Marketing Machine?

The news reports discuss boisterous town halls and death panels. "Government is taking over healthcare," say those who peddle fear. There's the 35 year old middle class woman who worries about fairness for the insurance company. Healthcare, an issue that Obama and Clinton ran on, has gotten away from him.

As much as the disinformation campaign has wore on, Obama's campaign machine has not shown much luster. Sure, he's doing well on his Facebook and Twitter page, but his folks are not reaching out. Obama acts like he has a coherent message. He is one of the best communicators ever, but his answers are long and complex. Rarely does he break it down as well as he did with his campaign about Change and Hope. The Yes We Can slogan on every bumper in California.

Here's a response from the Smerconish interview on August 2oth on the whether Secretary Sebelius misspoke on the public option. First, Obama addressed her statement. Then, he began to discuss his plan:

"We have consistently talked about the need for health care reform because family premiums are going up three times faster than inflation and wages. The costs of Medicare and Medicaid will bankrupt this country if we don't reduce the cost inflation of health care. You've got families who can't get health care because of preexisting conditions or they bump up against some lifetime cap if a family member gets really ill.

So what we've said is there are a number of components of health care. One is that for people who already have health insurance, they can keep their health insurance, but we're going to have some consumer protections to regulate how insurers operate. For example, they can't prohibit people from getting it, health insurance, because of a preexisting condition. They can't have lifetime caps or yearly caps that prevent people from getting the care that they need.

We're also going -- for people who don't have health insurance -- to set up a system similar to what Congress has, where you can buy into a bigger pool, get better rates, have better protections around you. You would be buying that insurance from private insurers."

Wow, that's a mouthful, and I'm just quoting a section of the response. President Obama clearly knows what he's talking about, but there are far too many messages. There are far too many words. There are no human interest stories. Too few questions and answers. Then there's no repetition of a few key slogans.

There's just no marketing.

Imagine if Obama broke down his American Healthcare Security Program into 3 components: Access for All, Lower Costs, High Quality. He could deliver a message that is appealing to the needs of each group and then overall to everyone:

  • Access for All: Everyone gets healthcare. No one is left out in the cold, forced to fend for themselves when emergencies strike or when diseases take their toll. Tell a story about the underemployed family at risk of losing healthcare for their sick kid. The breadwinner is working his out, but is scared of layoffs and not having enough money to pay for his family. If every advanced country in the world can get healthcare, so can we.
  • Lower Costs: Americans aren't getting raises because rising costs are forcing businesses to put your raising into exploding healthcare costs. That's money out of your pocket. If everyone has it, then we can get care at a lower cost. Right now, Americans with healthcare are subsidizing those without care. Those who don't have care go to the emergency room for smaller problems that could have been taken care of with a doctor's visit - like a fever or back pain. Or they have an expensive heart surgery when they could have been treated earlier with cholesterol medication and a change in diet. Imagine putting $2,500 in every families pocket because everyone is covered.
  • High Quality: America has the best medical technology in the world. We have the best trained doctors and nurses. We have the best information technology. People all around the world come here. Then how come people around the world are living longer than us? Some of you have choices. Most of you don't. You have to take one of a few plans offered by your employer. Many times, you can't go outside your designated provider network. This plan delivers high quality by opening up choice for plans. You can choose one that makes sense for you.
Then you can get into details like greater choices through healthcare exchanges, a public option backstop, keeping your current plan, electronic records, saving Medicare, etc. But keep using the benefits over and over. Keep talking about healthcare security and the need for change.

Use real people, not policy wonks. Americans were captivated by "Joe the Plumber." Find people who represent real stories and bring them with you. Use their stories and videos to create an emotional connection to the need for reform. Create novellas on each problem and how they would be solved by the 3 features of the Healthcare Security Plan.

Right now on, Obama has a cool Reality Check section. However, the problem is that the answers are by policy wonks in the White House staff. Why not have Obama Ambassadors who look like the people asking the questions, answering questions via video? Go a step further, and have a 24 hour chat response line. I'm sure many of the questions would be repetitious, but imagine the how comforted people would feel by getting their individual questions answered.

Then, there would be button to press to inform your Senator or Representative of your support. They would be overwhelmed.

President Obama, this is a game you could win. Just go back to those marketing principles you mastered during your successful campaign. And go back to the 3 features and benefits. And pound it until you drown out the din.

Saturday, July 04, 2009

California Budget Crisis

Every day I find myself captivated over the California Budget Crisis. It is an incredible showdown. 3 parties going at each other - the governor, the Democrats and the Republicans. They are tied in a knot over this with no compromise or reform in sight. $26 billion and growing caused by a $20 bil+ drop in income and sales tax revenues. When you rely on stock wealth to drive a majority of finances, there's a price to pay. When the rich lose money on the stock market and have their salaries cut, the state suffers. It is supposed to be about progressivity, but instead it creates boom and bust cycles. People say Proposition 13 is the culprit with the essential freeze on property taxes: the need for a 2/3rds vote in 2 house for a budget to make it's way to a government, and the same 2/3rd vote required for tax increase. The idea was to limit fast growing government. Instead it has caused paralysis. Critical reforms never get made. Proposition 13 had great wisdom at the time. It needs to be changed, but it's not the only reason the California budget is a mess.

There are gerrymandered districts that ensure the most liberal Democrats and most conservative Republicans get elected. There are term limits that essentially prevent legislators from getting experience in government. Special interests get stronger.

Voters then throw in propositions to carve out more and more of the budget. They throw in one to force the state to carve out a % for education. Of course, we love that cause. Then there's one for after school programs to get underprivileged kids off the street. We love that, too. Well then there's tougher sentencing. We got to be safe, so let's build more prisons. Then transportation related fees can only go for transportation projects. That makes sense, doesn't it? Then there's bonds for affordable housing, water projects, hospitals, roads, community colleges, universities and more. All of them are advertised as not requiring more taxes.

At some point, we need to make choices. When the rich aren't making as much. When people are losing their jobs and not spending as much, it affects people. Schwarzenegger has made choices - education, cut welfare, child healthcare, elderly homecare and, of course, our parks. He and the legislature did throw those propositions out there to pay for the budget deal - the one with the $15 bil deficit - but no one could understand them, so we voted no.

Democrats have tried to put a budget together which cuts $11 billion, raises some taxes, and uses some accounting gimmicks to balance the budget.

Republicans refuse to raise taxes saying, well, get $26 billion from the budget. That's a 25% decrease over last year's budget. There may be waste, but is there that much? It's hardly responsible.

Now California is issuing IOU's so it doesn't run out of money. In a recession, this is going to hurt more and result in higher interest on future bonds. We end up paying for 0 benefit.

The Federal government, acting all cocky and responsible, says it will not help. "Get your act together," they say as they create a $1.7 trillion deficit. So much for the stimulus. What the Feds giveth, the state taketh away.

This sounds like a mess with everyone playing a high stakes game of chicken. Someone's going to blink, just not me. They discuss having a Constitutional Convention, but what will they decide on then. Where will the courage come? If it's not here, then where will it come.

Well, in my own budget game on the LA Times site, I got to balance with $14 bil in cuts and $12 bil in tax increases. I spared much of the poor for more than sympathy - a desperate person can cause harm to himself and others. But there are real cuts across the board. They will hurt. I'm against taxes solely on the wealthy. If people think something is worth paying for, everyone should pay even if the wealthiest ones pay more. With climate change and the need for more efficient cars, we should be taxing gas a lot more. If people want better education, they should let property taxes rise to pay for it. If we want to get out of the constant LA gridlock, we should pay for usage and build mass transit. However, most people run away when they learn there's a cost for what they want.

In tough times, governments are supposed to live off their reserve budgets. Operating deficits enable those who are having tough times from going desperate. They keep schools operating and highways humming. However, that's not reality. In flush times, people spend more or offer tax cuts. They don't use the extra revenue to pay down debt or build a savings.

The state is ungovernable with all the issues described. It is too diverse. Northern California is far more liberal than the rest of the state. Inland Empire is very conservative. The LA and Orange county area is a mix. Central Valley is a different region altogether. The reason for all these crazy paralyzing rules is because no one trusts each other. In Palo Alto, we can get parcel money for schools and a bond passed for the library. It's because we see the impact. County-wide transportation taxes have passed, because we drive these roads. However, people don't see the personal and collective impact of a lifting of Prop 13, something that would bring greater financial stability.

So the showdown continues. Schwarzenneger has until 2010. While there probably are more skillful legislative executive, we chose him. He's decided to push for reform with this crisis. Here are some of my thoughts:

This Year's Budget
- Go for balancing the budget with no gimmicks or clever accounting tricks
- Cut half of the $13 billion across programs, sparing the poor and elderly
- Increase taxes to make up the difference: especially gas taxes and auto fees, whatever taxes are raised should be across the Board with progressivity towards the wealthy

Future Reforms
- Benchmark against other states: California should have economies of scale that others do not have. We should not have the 6th larget tax burden in the country.
- End Prop 13, let money raised go directly to school districts. Let locals their own show. Drop the crazy 2/3rds vote. There are 2 houses and an executive veto for a reason.
- Every proposition must be paid for through taxes or cutting something. Even better would be to eliminate mandated carve outs for programs regardless of how much we love them
- Enact tolls throughout the highway system to pay for mass transit infrastructure. I love my car but I'd love to get around with better transit.
- Create a $1 gas tax with 25 cents phased in every year over a 4 year period. Have it improve infrastructure. Long term this drives new business to the state
- Push for a better balance of Fed money vs. today's outflow. There's always the threat to break the state into pieces to get more Senate pull. A break up would enable more responsive government.

It's unlikely that compromise will be reached. More likely are IOU's, potential bond default, and a Constitutional Convention. It would not be beyond the pale for California to break into multiple states to enable more responsive government. This may be the best solution of all...

Sunday, June 14, 2009

Position2 - New Logo, New Site, New Solutions

On Monday June 15, we will be releasing the new Position2 logo, site and solution set. We've been working hard on our technology development and will release a new suite of products based on our Surround and Intent Marketing methodology. These offerings grouped as Online Brand Solutions, Customer Acquisition Solutions and Technology Solutions.

Thanks to our current clients who helped us get to this point. Thanks to the Position2 team for burning the midnight oil to put all this together while taking good care of our clients.

From Brand Defender to Performance Leads to our Autobid Engine, our suite of products will encompass everything a marketer needs to enable continuous growth in a flat economy. Our offerings are data driven and encompass best-in-class technology developed through real life customer experience. Social Media Marketing, SEO, PPC, media planning & buying, creative and technology are all ingredients to these customer focused solutions. They are baked in together rather than separate activities.

So this Monday, feel free to let us know what you think.



Friday, June 12, 2009

Preview - Lyris Social Media Marketing Webinar: CPR for Email Marketing

This Wednesday, June 17th, I will be speaking at a Lyris sponsored webinar: Social Media Marketing: CPR for Email Marketers in a Challenging Economy. For all those interested in viewing the webinar, I thought I'd give you a preview of the talk. We will focus on the integration of Email Marketing and Social Media Marketing (SMM) in a flat economy. Email marketing is a powerful tool to drive customer acquisition, however there's been a significant impact by increased mailbox sizes, spam filters and the explosion of messaging. We will go beyond the typical examples of how Twitter or a Facebook app can drive people to your site. Rather, the discussion will center around the phenomena of social networks, the rapidly expanding usage, and how email and social media can work together. No, social media will not replace email. With all the different types of messaging, email usage keeps increasing. And it works... how many newsletters do you subscribe to?

There will be specific steps, guidance and case examples of this integration in 4 areas: brand building, customer acquisition, customer retention and product launches. The idea is to demonstrate how business of all sizes can achieve continuous growth using both as a means of building and enhancing customer relationships. As customers delay decision cycles, it enhances the brand to surround them with your messaging wherever they goWe will not just discuss the big brands, rather how any business can use this cost effectively to get ahead of their competition. At Position2, we enjoy sharing some of the techniques we've seen and integrated into our solutions.

Erick Mott of Lyris will discuss how the Lyris uses social media to enhance their email marketing efforts. He gives an excellent behind-the-scenes look on how Lyris got this webinar to have the largest registration size ever. Let's just say in the thousands. Any company would be happy with that result.

Karen McNaughton of In-Touch Survey Systems will describe how her company uses the Lyris platform to manage her email and social media efforts. It's pretty interesting on how it comes together.

We'll take questions as well, so feel free to ask away. As long as you don't ask about how Twitter and Facebook will monetize their efforts, we are happy to answer :). Our objective is to show you how your company can deal with challenging times and dramatically improve their email marketing with SMM to achieve continuous growth. So sign up - the hour will be well worth it.

Saturday, May 09, 2009

2009 Running The Relay for Literacy in India

This was my second year in running The Relay, a 200 relay marathon from Calistoga to Santa Cruz. I ran it on May 2-3 to raise money for the India Literacy Project, an organization that funds literacy and social development programs in India. Given my current job, I did not have the time to raise money like last year, but my friends and family came through in the last minute. We beat my goal. They were incredibly generous. Thanks to them before the run and some after (yes, you still can donate), it made the whole weekend even more fulfilling.

18 miles may feel like a lot to most people. For a person who considers that a marathon training run, it doesn't seem all that hard. The difference is the hills. There are lots of them, some fairly steep. Then there's the element of time. You want to run it quickly. You want to pass people. You want to help your team win. You may may say, how can you win at 192nd place. Well, we were in a friendly competition with the other ILP teams. And if we were ahead on time, then we wanted to actually pass them at the finish (they had earlier starts). There's very little sleep over the 33 hour period and there's lot of time spent supporting your team and driving from place to place.

We were in Van #2 of Literally Running, so we did not have to drive up Friday night. We got together at 7am at Rina's house. She was our team organizer. Luckily for us, she is uber organized. We didn't have to worry about anything - van, food, water, sleeping arrangement, pain relievers - Rina had it all set up. Plus, she brought her laptop with projected finish times for all of us. Interestingly enough, we were within 15 minutes of her 33 hour projection.

Kumar and I knew each other. Other than Rina from last year, I never met the other guys - Raj, Hari and Vinay. It turned out that everyone got along well. It didn't hurt that we had plenty of space in a 15 person van. We were all into the fun of the run and camaraderie of the cause. In 30 short hours, we would get to know each other really well.

We got to the First Baptist Church in Napa where we would make the exchange with our Van #1 group. We learned that they were running ahead of schedule. We were as well. We got there at 10 for a 1 pm exchange. That left us with lots of time to hang out, eat cookie and have a spaghetti lunch. I even took a short 15 minute nap on the floor mats.

Here's a shot of some of us inside the church with all those delicious donated cookies in the background:

It was fun to get going, but I was running leg 12. That means I would get to finish the race, but it also meant a long wait. It was raining all morning and into the day, so I was hoping for a light rain. Luckily the time passed quickly as we would stop and root for our team members. It kept it interesting - stopping every couple of miles, taking pictures and handing off drinks.

I got lucky in running leg 12 in Petaluma. It was around sunset, so I got the rolling vineyards of Napa Valley just as the rain cleared. Since I was concerned about the wind and relative chilliness, I went with the long sleeve shirt. This leg was considered hard. Not as hard as leg 10 for Hari - very hard, but it had climbs up to 500 feet over the 5 mile leg. I enjoy hills. I love the burn as you grind up a hill. For some reason, there's a sense of fulfillment when you can power up without walking or stopping. I'm more torque than speed - not the fastest in the flats, but give me a good hill any day, and I'm game.

Here are a few shots of my first leg - leg 12:

After the handoff at the Marin French Cheese Company, we got out of there quickly to grab dinner at San Francisco. We had a few hours until 12:30 am to get the hand off from Van #1 on the other side of the Golden Gate Bridge for our am run. Here's a picture of our team with the Van #2 team of the 3 R's team at the Pasta Pomodoro in SF:

We then went to the Golden Gate bridge to run our next leg. For some reason, I couldn't sleep, so I ended up doing some driving and a lot of support for my teammates. Here's a shot of a handoff between Vinay and Raj at Ocean Beach in SF:

I got to make my run right around sunrise. I couldn't see any sun as it was a fogged in, cloudy, misty morning. But I was fired up to run the 6 miles of leg 24. This was a moderate course that ran along Crystal Lake around the San Mateo area. Even though the wind was blowing, I was fairly warm and just ready to go. I really enjoyed the rolling hills of this one to Canada College. There a great team of women who rooted for me every mile. They were following one of their runners and went to town for me. It's one thing for your team to pull for you. It's another when its just a random group doing it out of the goodness of their heart.

Unfortunately, I don't have any pictures of that run. I'm sure some of the guys were taking naps. The support was still great. As usual, I got to sprint the finish and hand off to Smita from Van #1.

After that, we were close enough to home to eat and sleep at Kumar's house. I got to take my first shower in 24 hours and 2 runs. Then, I took a nap for an hour before we left to the next handoff point up by Skyline for the run through the Santa Cruz mountains.

At this point, we were ahead of all the other teams in time, but not in terms of finish. Due to Vinay's amazing run down the hill, we actually had a shot of passing Chai Latte. That would mean beating them by 30 minutes. That became the challenge. To a group that liked having something to shoot for, we now had our goal. As Rina was running, Kumar and I decided we could catch them. Given that Hari was fast, he would set it up. Kumar had leg 35, a hard course through the hills, while I had leg 36 a mostly downhill chase to the finish. Since I enjoy running up hills and have run with Ajit (my friendly competitor at Chai Latte), I felt I could come close. We figured he would run all the way through the first 4 miles, then walk up the last couple where the hills were steep. Then Kumar could close the deal.

I did as much as I could. I did well on the first hill. After that, I was surprised at how steep down it went. I passed a number of folks, but I became uncomfortable. I don't usually like to go that fast because I don't want to burn out too early. It's all about conserving energy. Still I let gravity guide me. Maybe it was the rain or some other glitch, but my running meter was off. This time on the low side. I had no idea how much longer I would go down or what my real speed was. I use this typically to slow myself down and prepare for the hills. These sorts of things play with your head, but I tried my best to put it out of my mind. I finally hit the hills, and it was even harder than I thought. I tried to run all the way up, but had to walk. It was simply too steep. My team was very supportive all the way through. They told me everyone was walking up. In the past, I would still want to run up, but this time, I just said to myself to do what I could do and conserve energy. Don't get overly obsessed. There was a ways to go and it was more important to enjoy the ride rather than beat some silly time. So I walked as long as it made sense and took in the amazing scene. It was like walking the misty woods in New Hampshire - only with redwoods instead of pine. Then I ran after I caught my breath. And I was able to make my normal sprint to the finish to hand off to Kumar. Here are some shots.

After the handoff to Kumar, we made our way to the finish. The excitement of the race overtook him. As a fellow overachiever, Kumar ran way too hard on the downhill, and fought his way to the finish. Hari and I ran with him for the last half mile to cross the finish line.

After 33 hours, we finished. It was an amazing adventure. It was full of all kinds of challenges. We met all sorts of folks and enjoyed ourselves. Doing something like this is always fun with a dedicated group of people. You train harder and get to know interesting people. Most of all, you get to help a great cause.

Here are some finish line pics of Van #2 and the whole Literally Running Team. Someone else got the whole group.

If anyone wants to join us next year, let us know. And yes, you can still donate.

Monday, April 27, 2009

Sponsor Rajiv's Run for Literacy

This is my second year running the The Relay, a 199 mile, 12 member team run from Calistoga to Santa Cruz. My cause is literacy, specifically the India Literacy Project. I had such an amazing time last year running 18 miles that I just had to do it again - along with 59 of my running friends. Please help me make a difference.

Why am I doing this?

Beyond being a glutton for punishment, I am volunteering for the India Literacy Project (ILP), an organization that promotes literacy in India. My goal is to raise more than we did last year because the need is greater and impact is tremendous.

Literacy is a powerful tool of personal and community development. If you can take one child and teach them to read and write, you can change their world. That child does not have to live a life of hard labor or be blind to all the amazing books that he or she can read. She can learn on her own, teach her kids and make her life better than her parents. She may even be the next great scientist or entrepreneur.

Look at this ILP sponsored project. ILP is funding a mass scale literacy project touching thousands of children in 225 villages. This will be done for $40k or $200 per village! How often can you have so much leverage to make a big difference? It truly shows how every contribution helps - large or small.

The literacy rate in India is less than 60%. Projects supported by ILP include: educating kids forced into child labor, providing vocational training to unskilled youth and building functional skills for illiterate adults. Over the last eighteen years, ILP has distributed over $1.5 million benefiting 100,000 women & children.

Make a difference
Please join me in helping the India Literacy Project. So drop in that credit card and pour your heart out. When you do, I'll even go out of my way to thank you publicly :).

Click here to sponsor. Scroll down when you reach the page.

And yes, your donation is 100% tax deductible.

Thank you!

Monday, April 20, 2009

Taking the Plunge

In honor of the title of my blog, I've decided to quote every article that has "take the plunge" or a close derivative. Think of this like a drinking game. If you find an article, send it to me and take a shot of Petrone.

First, the definition from

take the plunge Informal
To begin an unfamiliar venture, especially after hesitating: After a three-year engagement, they're finally taking the plunge.

Now the articles:
* The Governor's Mr. Fix-It - NY Times editorial - July 9, 2009
"We don’t know yet whether it was legal, but Gov. David Paterson of New York was right to take the plunge and name a lieutenant governor in an effort to break the increasingly damaging stalemate in Albany."

* Take the plunge at amusement parks - Detroit Free-Press - May 17, 2009
"Beware the Diamondback, the new steel roller coaster at Kings Island that plunges at 80 miles per hour into the Lagoon of Doom." Almost literal.

* Astronomers take virtual plunge into black hole - - April 27, 2009
New word - "spaghettification." That's what happens if you fall in one, seriously.

* Obama sees signs of better Cuba and Venezuela ties - April 19, 2009
"Obama took a plunge into Latin America ... We created a new way of viewing each other and of overcoming our differences by debating them," Lula (Brazilian President) told reporters."

* Despite Challenges, Doctors Take Digital Plunge - - March 25, 2009
Despite these concerns, she (Dr. Fishman) and her partners have decided to take the plunge. "As of May," she says, "we will no longer have paper. If anything is on paper, it will go on computer."

Sunday, April 12, 2009

7 Steps to Wealth While Killing Startups

I know this entrepreneur who has made himself wealthy while his companies have never caught fire. In fact most have or will die - not necessarily because the idea is bad, but because this entrepreneur unconsciously kills the company. People live their lives in patterns and this person is no different. So for my friend who asked me to send this as an email, I will instead put it into a post:

7 Steps:

1. Ideation: come up with an idea that matches some current or emerging trend. Talk it up with the network. Get a bunch of people excited.
2. Pre-funding: get angels in or put some of your money in. This is critical for the next step.
3. Funding: get friends and angels to push a fund to put significant money in. Critical to this transaction is to take "some" of your money off the table to "allow" the fund to buy in.
4. Buildup: hire management, build up the product or service. In fact, keep hiring "better" because it keeps existing people literally on their toes.
5. Slash back: as soon as the concept is ready in beta form, slash back - cut people and spending. The buildup was excessive, the released product is not ready or the pricing needs to be slashed - pick one or multiple - even use the "economy." Then, put in significant constraints on whoever is left in the company. Definitely do not invest in any significant marketing.
6. New Ideation: the previous idea did not take hold, not enough people are using it, the trend has passed. Kill it while talking up the new new idea.
7. Rinse and repeat, but do it fast enough so people don't wonder what happened to your previous concepts. Each time you are making money, so judging success or is difficult.

Do you know anyone like this? This person is always into the new thing. His or her superbright mind is always churning. They are uber salespeople and networkers, but not necessarily ones that can create successes. Since we all tend to stay within existing patterns, I'm sure there are many. Please share your story.

Thursday, April 02, 2009

G20 Adopts Obama Marketing

Have you noticed the signs Obama administration talks? When Treasury Secretary Geithner presents anything there's the blue banners with words like "Reform," "Recovery," "Stability." Check out the recent G20 meeting. Not only do they want you to know about the subject of the meeting, but they also want you to know that they are about "Stability," "Growth," and "Jobs."

You have to love how good our President is in marketing himself when the world adopts his methods. You have to love a marketing oriented president.

I think I'm going to have a placard when I speak at events - Rajiv Parikh, CEO - Amazing, Sharp, Buy.

Saturday, March 28, 2009

VC Saga: A New Beginning

In an entrepreneur's life every day is truly a new day. Yesterday may have been a disaster, but today can bring a new high. Well, for my friendly entrepreneur, yesterday was a fabulous day (see article one and two of this saga). Though rejected when the groom did not show at the altar, this entrepreneur kept right on pitching. She was rewarded with a new term sheet - a new lease on life! It was a time to celebrate anew, especially in a tight credit market where investors are scared to touch anything new (we're celebrating tonight).

It is a credit to my friend and her team that they found a way to draw inside themselves to keep moving on. The engineers and scientists did whatever they could, working in garages and donated laboratories to move the technology along. She had done this before. There was a whole group of folks that weren't going to give up because one VC acted like an idiot. If virtual paper pitch was not good enough, at least they could show technical progress. The more progress, the more likely things would work out. Not only did they make progress, some of the new discoveries are brand new to science. Yeah, it's that cool. It will solve a significant medical testing issue that can impact every budding family.

It's a new VC this time. This one is truly early stage that is associated with a much larger one. They have a strong, supportive track record. Given that the entrepreneur shamed the previous VC to pay legal costs for not coming through (a first), there's even a little upside in the process.

Now, this is not over yet. A term sheet does not mean money in the bank, and lightning can strike. However, if you truly believe and make the right connections, eventually you're company will get off the ground. It won't be the fairy tale that the press likes to dream up (like the silly pez dispenser stuff), but you'll get there. Even in a down economy!

Monday, March 09, 2009

Optimism and the Economy

For those who are looking for some good news, this is a great little opinion piece on the bright side of the economy by Justin Fox of Time Magazine. It's called "Call Me Mr. Sunshine." Since the magazine has sliced up the article to force you to look at 6 pages of ads, here's a little summary below (with some of my thoughts)

1. The stock market is no longer overpriced.
Justin says that because stocks are way down, they have essentially priced in the ugliest economic scenario. Stocks are fairly priced or "downright cheap." He's right there are stocks like Cisco with a P/E ratio of 10 or GE at 4.8. They may fall, but the prospect for a turnaround is great now than ever. Having the falling knives dulled? You might want to play with modest amounts priced in over time, or wait. I like the idea of wedging in.

2. The government is on the case.
"Don't laugh." Compared to the Great Depression or Japan's Lost Decade, the US authorities are taking action. Depending on how you look at it, there's over $2 trillion on stimulus from the US alone. That does not include lower gas prices and the diplomacy dividend from being friendly to rogue governments.

3. Consumers are adjusting to the new economic reality - and fast.
Americans are adjusting quickly. Savings rates have gone from negative to 5% in January. Eventually, people will buy things. When you go from buying 16 million cars a year to 10 million, eventually your car will break and you'll have to buy a new one. The bottom line is when a contraction is rapid, there's a greater chance of a bounceback. Having a savings rate is actually a good thing in the long term as is staying within your means. Now, I've heard many arguments about how because of the credit and foreclosure crises, that somehow this one is different. I also remember hearing in 2000 how the internet was the end of the business cycle.

4. Reinvention and change are what the US is all about.
This is a distinctly American strength - the flexibility of people and the economy. Americans are willing to be retrained, to relocate, to try something new. We have moved from manufacturing to services. While real estate and financial services were prominent before, it does not mean success comes only through those fields. Something new always springs forth. Fox points out that the unfair advantage of the US is the strength of the dollar as a reserve currency.

5. OK, so I couldn't think of a fifth reason. Maybe you have one to spare?
Fox doesn't have a fifth, other than to say he was a pessimist in 2007 and 2008. I would say there are some other encouraging signs - the reemergence of commercial paper, GE's ability to issue bonds, WalMart same store sales going up, and the support of the new administration. For the latter, it shows that Americans are optimistic about their new leader. The value of one party in power is that the rules tend to be known. From a policy and regulatory standpoint, there is less of the normal back-and-forth. When there's certainty, businesses will find a way to make money.

And optimism is what gets money flowing again....

Thursday, February 26, 2009

Creating a Culture of Responsibility

After listening to years of happy talk, it is great to see that Pres. Obama is confronting America's problems in a straightforward way with honest solutions to address them. I especially appreciate his 10 year budget which includes costs for wars, health care and bailout money. He includes the sunset of tax cuts for those families over $250k and additional increases. The Bush administration loved to have it both ways - have a tax cut with all sorts of "unanticipated" expenses like the continual supplementary authorizations for the war in Iraq or spending on hurricane relief while lowering the overall perceived deficit even though they wanted the tax cuts to go on forever. It was a mirage designed to fool Wall Street and Main Street.

At the same time, there is still a ways to go. Social Security tax surpluses are still included in the budget "reducing" the perceived deficit by over $100 billion. This trick was put in during the Johnson administration and needs to be removed. We also need to account for all the risks taken on with things like the Medicare, bank, pension and farm insurance. If we expect companies to account for future liabilities today, we should be honest with ourselves of the cost of them and account for them appropriately. If we plan to put execs in jail for deceptive accounting, our government officials should be accountable as well.

Americans want universal health care, infrastructure spending, and carbon caps to reduce greenhouse gases. We want the best military in the world with presence all over the world to promote our agenda. We want the best educational system as well as investments in cutting edge R&D. We want to get out from foreign oil dependence and we want to build new transmission lines to remotely sourced renewable energy.

At the same time we want to reduce taxes on working Americans while taxing wealthy Americans and corporations. This may make sense as a balancing act, but it still produces massive deficits. We need to bring in a new culture of responsibility. There's no such thing as something for nothing.

If we want to spend on infrastructure while improving efficiency, we need to increase taxes on oil. CAFE limits are interesting but they are really a dodge. Nothing works better than higher gas prices to push people to buy more fuel efficient cars or use mass transit.

If we want renewable energy, we need to tax carbon emissions and push for renewable energy minimums. That will cost more for users of energy now to build solar and wind farms as well as the transmission capacity. However, it will incent us for energy efficiency now, net future reduction in foreign oil imports and slow the impact of climate change.

If you want universal health care and be more competitive as a nation, saddling businesses with the cost of health care only pushes companies to go to lower cost countries. And yes, that includes Canada where businesses do not have to worry about that burden. Americans pay for healthcare one way or another - in the form of lower wages, higher product costs and higher taxes to cover those who use "free" emergency care. The money has to come from somewhere. If we increased our personal taxes and eliminated this cost to companies, more companies would set up operations in the US. They may pay workers more. With health insurance costing $8k per family, if a worker makes $40k per year, that's 20% on top of at least 10% in Social Security, Medicare and other benefits. Simply because it is "hidden" to the worker does not mean it is not there. All businesses factor that into decision-making on personnel compensation cost and in terms of where to locate. We know we need more preventative care to reduce overall costs and the only way to get there is to make it universal. It will cost more now, but will pay off in the future. We just need to make it more transparent because there is no such thing as free care. Not only that, the current system confers advantages to large companies over small ones because their health care cost per worker is lower. It is nothing to do with product or service innovation. If we want to encourage entrepreneurship because it is the greatest source of new jobs, we need to equalize some of the advantages of scale.

If you want free universal preschools, lower class sizes, better teachers, then we all should pay for it. We want college for all those who can afford it. We know that in the long term we all win by having a more educated and innovative workforce, so we should be willing to pay. This would also encourage knowledge intensive companies to locate here because they want to access clusters of well-educated workers. And we should be open to giving visas to immigrants who get higher education degrees here. They help to raise the bar for all of us.

We are spending over $500 billion on base defense costs in 2009. This does not include another $140 billion for the Iraq and Afghanistan wars. We spend far more on defense than the world combined. Our troops and ships are in over 100 countries and in every sea. This an invaluable contribution to world peace and commerce. But isn't it time for other countries to pay their fair share. We should be the best in technology and ability to fight, but do we really need to be buying F22 fighter jets at $350 mil a piece? Especially since they require so much maintenance that they are only available 60% of the time.

Obama has been offering Americans straight talk, but we need to pay for the things we want. A $8 reduction in weekly tax per worker reduced taxes by $250 billion. $8 a week is not a lot of money. Maybe, it buys a couple unhealthy meals at McDonalds. Do we really change our spending behavior based on this? Wouldn't we be better off in increasing our taxes by the $8, so we can pay for all of these initiatives. Aren't these investments going to net us great benefits for the future?

As I travel the world, I see other countries ahead of the US in infrastructure and education. In Europe, mass transit is a dream - it's clean and efficient, no need for a car. In Singapore and Thailand, you should see the roads and buildings in big cities. The airports in China, Japan and Korea are awe-inspiring. In India, there are gleaming corporate centers filled with super smart hard working people willing to work all day and night.

If we want to continue as a prosperous nation, we need to get out of the something for nothing mentality and start realistically investing in our future. Obama has taken an amazing first step. He has the gift of speaking in a way that is realistic while inspiring hope. Now, I hope he will now take us all the way.

Saturday, January 31, 2009

Time to Bring Financial Wizards Back to Earth

When you read today's Wall Street Journal about the outrage over Wall Street bonuses, there's a telling quote at the end:

"From 2002 to 2008, the five biggest Wall Street securities firms paid an estimated $190 billion in bonuses. Those companies churned out $76 billion in combined profits during the same period. Last year, the companies had a combined net loss of $25.3 billion, yet paid bonuses of roughly $26 billion."

That means securities firms would have broken even had they done what most responsible firms would do - rein in controllable expenses. When you are burning investor cash, you need to find a way to make a profit, not overpay people who are losing money for you. However, Wall Street doesn't work that way, they think they actually deserve multi-million dollar bonuses for their work. They say they work a tremendous amount of work and have specialized knowledge. Well, given the unbelievable damage they have caused the world economy, that specialized knowledge was not so valuable after all.

I know I'm going to get in trouble here as a number of my friends have made fortunes on Wall Street. I have a lot of respect for those in the investment banking and financial field, but it's about time the field gets called out for its abuses.

In one of his famous letters to shareholders, Warren Buffett discussed how financial executives were not creating value with derivatives and hedge funds as much as they were simply moving money around and taking more for themselves. First came the financial advisor, then the mutual fund manager, then the hedge fund manager. At at stage, the financial manager, would move around the same investments, continually taking more for himself. Derivatives were extreme forms of this practice as they were highly leveraged to supercharged returns with little clarity of the underlying risk.

I will acknowledge that efficiency reduces interest rates by providing greater transparency and assessment of risk. However, as an electrical engineer who used to take electives like multidimensional calculus of imaginary number for fun, even I had a hard time understanding the models. I have a feeling that these folks used complex spreadsheets that spit a decision without knowing what they were doing.

There was so much money to be made that instead of going into electrical engineering, our top minds went into financial engineering. When I heard that 1st year Harvard MBA's were going paid $350k to go into hedge funds, you knew there was a problem. Real engineers create new products and technologies that transform our lives. Financial engineers move money around - valuable - but its not like creating the next generation solar array or the Dreamliner. For a while there, people thought that becoming the financial and retail center of the world was the way to go. The last year has shown us how dangerous that is.

Financial supermarkets like Citibank and Bank of America have been widely discredited. Lehman Brothers, Merrill Lynch, and Bear Stern has shown the disaster of overleverage. AIG - that's $150 billion of taxpayer money - and still going.

Obama labelled executive bonuses as, "Outrageous!" It is my hope that this is the beginning of a new era. We will reconsider our devotion to these financial gods who create exotic ways of manufacturing money out of whole cloth.

My message to you: No, you do not deserve extraordinary compensation when you need a taxpayer bailout. You failed and must be held accountable. Saying that, "Nobody saw this coming," is a lame excuse. For years, you've been claiming millions of dollars in wealth for working for brand names while shifting money around. You've demanded accountability from the companies you invest in. It's time to take some of your own message. You too, Robert Rubin. I love your service for the Clinton administration, but you sat by at Citibank allowing the firm to use diversification to create even greater risk.

I love Sen McCaskill's new bill limiting bailout executive compensation to beneath Pres Obama's pay. That's no more than $400k in overall comp. As mentioned in my previous blog, it should be lower - like $200k. These corporations are riskless. They have the US government as a backstop. It's hard to argue that the CEO of Bank of America is worth more than the Defense Secretary. Robert Gates is responsible for America's security. Kenneth Lewis runs one of many big banks. It's a bank that needs to be broken up. One bad decision and we all pay. Maybe we should use the bailout money to seed fund the start-up of new banks. Maybe they will actually lend with reasonable underwriting standards.

John Thain is a true fraud. Earlier, he saved the NYSE, but decided to cash in at Merrill. He attempted to ensure traders and execs got bonuses while Merrill lost $15 bil in a quarter. Let's not even talk about the $1 million in furnishing his office. And who is backstopping these losses - not Bank of America - it's the United States of America.

Since Obama did not take money from corporations and PACs, he can truly lead a change of culture. Move away from crony capitalism where the richer can lobby and pay their way to get richer. Move to a culture where real innovation is rewarded and excessive pay is diminished. Rather than putting limit on compensation, bring back high marginal tax rates. For income over $1 mil/year bring back the 50% marginal tax rate. You made that money because the US system gave you an advantage. There are soldiers around the world protecting your ability to make wealth. Your access to government officials enable you to get special tax and business breaks. You have a legal framework to ensure that contracts are actually enforced. It's your responsibility to pay for the system that provides you that benefit. I'm not talking about capital gains on a startup - those investors and management create real value without government officials bailing them out. I'm talking about the proponents of the supposed death tax.

The free ride is over - it's time to change.

Tuesday, January 27, 2009

Update to the Position2 Team

In the spirit of openness, I wanted to share an email I sent to the Position2 team. It's been edited a little to protect confidentiality and add context. Given the market uncertainty, I wanted my team to understand my thoughts. We have realigned our focus and have made cuts. And the same time we are adding business and people. Sound confusing? Well, read on.

Position2 Team,
Many of you heard from your manager about the recent changes at Position2. I wanted to update you on what is occurring in the company, especially in terms of what we see in the market.

The Market Storm
Everywhere you read, everywhere you look, the news is ugly. Banks in trouble, companies laying off or slashing payrolls, consumers not buying, foreclosures up, venerable auto and retail firms at risk of bankruptcy or liquidation. It does not matter if it’s in the US, Europe, India, Russia or the Bahamas – it’s everywhere. The global economy has not diversified risks. It has only magnified them. It used to be fun every morning to read the Wall Street Journal. Now, I read a book about something else as every news article is a rehash the same thing. We discussed this when I was in Bangalore. It has definitely impacted Silicon Valley. Companies are not getting funded. Many are just being cut off by their backers. You can go to my blog to read about a personal saga of an entrepreneur I know well. There are storms and there are storms. This one is one of those once every century ones.

Impact on Us
Our market is impacted. Online ad spend has been projected to slow its growth, however the reality has been quite different. Even those who have successful campaigns have cut back (with some notable exceptions). The constant stream of bad news has caused businesses to pause and cut back in one of the easiest (though not smartest) places – marketing and vendors. We have been in various talks with firms looking to break their arrangement with us. Luckily, our agreements were well written enough and performance strong enough to provide a strong defense and favorable resolution. Many of the deals we were going after either slowed or stopped decision-making altogether. We are not out of the woods completely, but it is stabilizing. We do have a strong client base that is mixed across a variety of industries, because of our performance, there are growth opportunities with them especially as the market stabilizes.

Aligning our Cost Base
In this market with limited funding opportunities and uncertainties in the market, we needed to be solidly in cash flow positive. To get there we have instituted an x% pay cut with a new bonus program. In this program, for every cash flow positive quarter our team will receive y% of the net positive cash flow in a proportionate manner. This will be paid on a quarterly basis and replaces all other bonus programs. While many companies have simply cut at greater levels, we believe that this will allow us the ability to work together to not only earn back our pay, but exceed it.

We have also realigned our sales and marketing effort. The team is a little leaner, but more effective. Our team has identified and are pursuing a number of significant opportunities.

These moves keep us solidly in cash flow positive territory. This is a shift from our previous focus on faster growth through direct clients. That does not mean will not hire or spend money – we definitely will. We need certain hires to support client or company development initiatives. We need to improve our infrastructure to increase productivity and communications internally and externally. It simply means we all need to be careful about how we spend our money and aligns all of our collective interests.

Future Outlook – We Will Flourish
Because of our cost base and our diversification, we have excellent prospects for the future. With a strong investor in Accel, we are getting excellent leads. We continue to market across our network. Given our search and social media marketing experience and company infrastructure, we are focusing more strongly towards agencies. In the past, many of the agencies we worked with too small and unsophisticated about this space. Now, we are reaching larger players who know this space, have hiring freezes and margin pressure. Recently we closed major internet brand for search marketing services. We also closed on a major project with a significant search marketing agency. We are also engaged with other large agency players. Online advertising and marketing services is a relationship-based sale. You cannot simply advertise reputation, features and prices as in traditional marketing, people need to know you. It’s our job to enhance that through programs that help people understand who we are and how we think. That’s where Position2 marketing comes in – we all need to be engaged in it: blogging, social networking, speaking at conferences, participating in industry forums, etc. One person can’t do it all, we all have to help.

The best news now is the US has a President who has broad support the world. The best thing Obama can do is instill confidence in the future, so that decisions can finally be made. There are some signs of a turn in a stabilizing stock market, increases in home sales and a large worldwide stimulus package. I personally have raised money during the 2000 tech bust and have seen recessions where US unemployment, interest rates and inflation were at double digits - even worse than today. Just as oil prices could not go up linearly forever, nor will people and businesses continue to withhold purchasing and stop innovation. Great companies were started in previous downturns – GE, Cisco, Microsoft, HP and Disney. There's no reason to believe that this recession will be different

We certainly can flourish – and we will.

Go Position2!