cdixon's posterous http://cdixon.posterous.com Most recent posts at cdixon's posterous posterous.com Tue, 31 Jan 2012 19:44:00 -0800 if history repeats itself... (post Facebook IPO predictions) http://cdixon.posterous.com/if-history-repeats-itself-post-facebook-ipo-p http://cdixon.posterous.com/if-history-repeats-itself-post-facebook-ipo-p

If history repeats itself, the Facebook IPO will mean:

- a bunch of second-tier social media companies go public to satisfy
investor demand for "social media allocations"
http://cdixon.org/2011/06/16/allocation-investing-and-the-social-premium/
(facebook's reportedly small float of 5b will make this more likely)

- high private valuations for social media companies will last at
least another year

- the press will write thousands of breathless stories that make it
seem like the future of western culture depends on new facebook
revenue streams (see coverage of google's business model post-IPO)

- facebook will continue to do small talent acquisitions until they
have their "Google Video" moment and then like all mature tech
companies will start acquiring real businesses for 1b+ valuations. see
last paragraph of
http://cdixon.org/2011/12/10/three-types-of-acquisitions/

- facebook will - in the eyes of the press - go from darling to "evil"
over the next 5 years. (again, see google coverage).

- the next 1-2 years will mark the end of this "patternson cycle" (see
http://www.quora.com/What-are-the-underlying-reasons-for-The-Patterson-Cycle-...
after that, really interesting innovation will start gestating for
the next cycle.

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Sat, 21 Jan 2012 19:54:51 -0800 programming tools tested lately http://cdixon.posterous.com/programming-tools-tested-lately http://cdixon.posterous.com/programming-tools-tested-lately python (love - still getting used to indentation and other syntax but
love the library support)
twitter search api - works great. wish they'd specify what the rate
limit is and let you put query strings in quotes for exact match.
historical searches would be great but guessing they don't have the
technical ability / business desire to do so.
mongodb (love - first time i've done nosql and it's liberating)
pymongo - made mongo+python super simple
osx brew installer (great, worked where downloading dmg's didn't)
matplotlib (looks great but overkill for my graphing needs)
mailgun (free version) - really nice smtp webservice/wrapper
textmate - great mac osx code editor, well worth the price
stackoverflow - again and again found the best code samples there
(disc: i'm an investor)
various cronjob UI's for mac - didn't work. ended up just having
scripts sleep for a while and not bothering with cron jobs.
mongohub - found this and other mongo front ends lacking but perhaps I
need to try more.

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Sun, 27 Nov 2011 23:04:22 -0800 point of clarification: vested vs unvested options http://cdixon.posterous.com/point-of-clarification-vested-vs-unvested-opt http://cdixon.posterous.com/point-of-clarification-vested-vs-unvested-opt There have been lots of articles about the Zynga "taking away employee's options" brouhaha (another one today in the NYTimes). One thing that bugs me is that many of these articles don't seem to distinguish between vested and unvested options. The difference is VERY important.

When you work at a startup, think of it as you get paid bi-weekly or monthly in two ways: cash (your salary) and options (the options in your option plan that vest that month).  In theory you could actually get option certificates issued to you bi-weekly or monthly the way you get cash sent to you for your salary, but that would create a lot of extra paperwork. So instead someone invented the idea that the employers tells the employee "you get N options over 4 years and they vest every month" or something like that.  Maybe to make things clearer they should have said "you get M options every month you work here" (where M would presumably be 1/48th of N).  This, however, would create a planning complications for the CEO, who needs to carve out options from the "option pool" which usually involves lots of negotiations with the VCs.

So if an employer comes to you and says they want to take away *vested* options, that's like saying they want you to return salary already paid to you. I don't think they could do it even if they wanted to and if they wanted to I think we'd all agree that was highly sketchy behavior.

If, however, an employer comes to you and says they want to take away *unvested* options that's like them saying they want to reduce your salary going forward.  That might be lame and unfair, and if anyone did it to me I'd probably quit, but it's very different than if someone tried to take away vested options.

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Thu, 24 Nov 2011 23:39:15 -0800 The defensibility of network structures http://cdixon.posterous.com/the-defensibility-of-network-structures http://cdixon.posterous.com/the-defensibility-of-network-structures
Metcalf's law states that the value of a network is proportional to the square of the number of nodes in that network. This is true of networks where every node is connected to every other node. A more generalized formulation of Metcalf's law would be: the value of a network is equal to the number of connections (also known as edges) in that network. (An even better definition would try to incorporate a measurement of the value of each connection - e.g. two people who communicate a lot probably value that connection more than two people who don't).

It is widely understood that the resilience of chemical molecules or architectural structures is a function of not just their materials but also their structures. The same is true of information networks like social networks, marketplaces, and communication networks. Two networks with the same number of nodes (e.g. users) and same number of edges (e.g. relationships of Friending or Following) might have very different levels of resilience or - as is it's normally called in business contexts - defensibility.


Suppose we define the defensibility of a networked web service as:  The minimum number of users a competitor needs to capture in order to capture 80% of the value of the service.

I picked 80% somewhat arbitrarily. To measure defensibility more precisely you'd want to plot the distribution where one axis is number of users and the other axis is the number of edges each user has (I attempt this superficially here). Also note I am simplifying what Twitter and Facebook have evolved into as services. On Twitter, there are explicit edges (Following) but also lots of "soft edges", e.g. when someone @ replies a user she doesn't follow. Facebook has evolved from being a purely "undirected graph" (Friending) to being a hybrid network with the introduction of Liking and Following.

Networks like Facebook tend to have a low variation in the number of connections (Friends) per user compared to networks like Twitter where some people have many millions of followers but most people have less than 100. Academics would say Twitter is a far more "centralized" network than Facebook.

In that sense Twitter is far less defensible than Facebook. If a rival can capture, say, ten thousand of the top Twitter users, they might be able to capture 80% of the value that followers of those users get from the service.


Recently someone in charge of Google+ tweeted: "We’re about to pilot a ‘suggested user’-like mechanism on Google+. If you’ve got more than 100k followers on Twitter, DM me – lets talk!". This is a smart strategy that recognizes the primary vulnerability in Twitter's network structure.

Services competing with Facebook are better off trying to exploit clusters (e.g. geographic, demographic, interests) versus going after more "central" (popular) users. 

I am far from being an expert on the academic literature on social network analysis but from my research I haven't found anything that looks at the structures of networks from a business point of view. Interesting topics might be: the strength and weakness of various structures, strategies for attacking and defending those structures, historical case studies on how networks grew or decayed, and so on.  Perhaps someone can point me to relevant research if it exists.

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Fri, 04 Nov 2011 14:57:24 -0700 computer science majors by year http://cdixon.posterous.com/computer-science-majors-by-year http://cdixon.posterous.com/computer-science-majors-by-year
Figure7

from http://www.cra.org/resources/crn-archive-view-detail/undergraduate_cs_degree_...

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Fri, 07 Oct 2011 20:19:10 -0700 "silicon alley" http://cdixon.posterous.com/silicon-alley http://cdixon.posterous.com/silicon-alley People who have done tech in NYC for a long time think of the phrase "Silicon Alley" as referring to NYC during the dot-com bubble, from roughly 1995-2000. If you hear someone use the phrase to refer to today's NYC tech scene, you can be pretty sure they know very little about the topic.

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Wed, 05 Oct 2011 09:35:00 -0700 Client-side mobile speech recognition http://cdixon.posterous.com/client-side-mobile-speech-recognition http://cdixon.posterous.com/client-side-mobile-speech-recognition

Imagine if on your iPhone you had to type a whole paragraph, and then wait a few seconds for it to get sent to Apple's server, and then get the text back to see if any words were mistyped or miscorrected. 

That is how speech recognition today works on mobile devices. It is all done server side (to try out a state-of-the-art example, download Dragon Dictation app on your iPhone, or try the built-in speech rec on an Android device). Perhaps Apple's Siri will improve this (I hope!). But until speech recognition gets to be very close to 100% accuracy, the best way to improve the user experience will be to show each word and sentence as you speak and let you correct as it goes without waiting for the back-and-forth to web servers.

Open source projects like CMU's PocketSphynx seem to provide sophisticated client side mobile speech rec. My understanding is that modern mobile devices don't have the resources (processing/memory) to allow client-side speech rec to get nearly the accuracy levels as you can on the server side. At least not yet.

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Fri, 30 Sep 2011 14:07:00 -0700 Amazon http://cdixon.posterous.com/amazon http://cdixon.posterous.com/amazon

To understand Amazon as a business/stock, it is important to understand it is at least two almost completely different businesses.  

-Media, which accounts for ~45% of revenue and is growing ~10% y/y, and is going through a massive transition to digital goods where the main competition is going to be Apple, Google, Netflix, cable companies, etc.
Screen_shot_2011-09-30_at_5
- Everything else (known as "EGM" - "Electronics and General Merchandise") which accounts for ~52% of revenue, is growing ~24% y/y, and where Amazon is mainly competing with specialty e-commerce sites and (primarily) offline retailers like Walmart.
Screen_shot_2011-09-30_at_5
The stat I find surprising is how much room there is to grow.  Amazon's share of (global) e-commerce is ~8.3%.  E-commerce is only ~6% of global retail.  Hence Amazon's share of total global retail is ~0.5%.

 

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Tue, 20 Sep 2011 18:21:00 -0700 Notes from a Skillshare class on "Defensive Finance" http://cdixon.posterous.com/notes-from-a-skillshare-class-on-defensive-fi http://cdixon.posterous.com/notes-from-a-skillshare-class-on-defensive-fi

Tonight I taught a Skillshare class called "Defensive Finance".  My colleague Eric Stromberg was kind enough to take notes.  These notes are a bit dry because I didn't want to publish the real-world anecdotes I used to illustrate them. But perhaps they will be somewhat useful.

Defensive Finance

Vesting vs. Exercising 

  • Most companies have 4-year vesting
  • Vesting - occurs while working for a company
  • Exercising - If you leave and have vested a portion of equity, you have the right to exercise.
    • There is generally a 90 day exercise period before losing options. 
    • Standard advice law firms give is to not inform employees. So have to pay the strike price to own the common stock.
  • Founders get actual common stock. Use lawyers from one of big 4 startup firms (Gunderson, Fenwick, Cooley, Wilson Sonsini)
    • Founders buy shares at a nominal price, like $100
      • So, they never have to spend money on strike.
      • Get long term capital gains treatment
  • Single biggest mistakes is to omit founder vesting.
    • Many cases in venture capital where investors would look at cap table, and a big owner of the company would be someone who did not work there anymore, because he/she was a founder that left early. But founders vested immediately, so the long-gone founder owns a large chunk of the company
    • The argument for immediate vesting is that some worry is that if investors push you out its good to have stock vested, but this is rare.

Acceleration on Change of Control

  • Single Trigger- Vesting acceleration on acquisition
  • Double Trigger- Refers to getting acquired and fired. Have to have full acceleration in case of double trigger.
  • These are both things that founders should try work into the term sheet. Also good to get them for employees (especially double trigger).

Founders Contributing Capital

  • If some of the founders are contributing capital, separate labor component from their monetary component. If under ~$200,000, make it a convertible note. 
  • Have the note convert at next round of financing, or some discount to it. 
  • Cash equity should vest immediately at next financing, whereas sweat equity should not should not.
    • The document usually says something to the effect of “I give $50,000 at 5% interest rate to be converted to equity at the next financing.”

Liquidity Preferences

  • Need to know what % of company you own - total number of shares is a meaningless number.
  • Founder, Employee and Investor Shares
    • Founders have common shares
    • Employees have options on common shares
    • Investors have preferred shares
  • Let’s say a company raised $500 million on a $3 billion post valuation and investors were given 1X straight preferred. This means in the event of a sale, the investor gets the max of $500 million or the percentage ownership they bought 
    • So if  the company then goes down in value and sells for $1 billion, if you are the investor, which are you going to take? The $500 million.
    • If you are a founder and you thought you had 10%, instead of getting 100 million get 50 million because you get 10% of the remaining $500 million.
  • In last down market, companies took higher valuation in return for 2-4x preferences. This can be troublesome, especially for employees who think they have a certain percentage, but may not get anything after the liquidation preferences play out.
  • 1x is standard in this market, particularly in seed deals

Misaligned incentives

  • If have investors with different class of stock, can have misaligned incentives
    • One thing popular in entrepreneur friendly environment is uncapped convertible note.
    • Problem is that if I am an investor, my incentive is to get you a low valuation in the next round
    • You have investors who are (in theory, economically) trying to make the company worth less
  • A company had two acquisition offers. One was for $20 million in cash. The other $20 at hot private company at hot private company (for example, Twitter or FB)
    • Investors want the hot private company stock, because higher variance bet
    • Said to the founder: “if you sold the company for cash, would you take every dollar you made and invest it in the hot company?”
    • In some cases, may see founder get cash and investors stock

Board Issues

  • There is part of the term sheet is clause called “Board of Directors”
  • Control and ownership are generally negotiated separately. Control has to do with board seats.
  • Seed Structure
    • Most common structure is either just founders or something like 2 founders and 1 investors
    • Means that the founders control the board
  • Post-Series A Structure
    • Investors want more control
    • 1 founder, 1 investor , 1 mutually agreed upon independent
    • Or 2 founders, 2 investors, and 1 mutually agreed upon independent

Protective Provisions

  • These are additional rights that investors have that can override a board vote
  • Sometimes, in addition to board control rights, the investor has additional blocking rights, for example a the right to block a sale or financing
    • Some are reasonable, like founders can’t distribute more than $100,000
    • Others may include blocking rights on sale below, say, 3x of the valuation at which the investment was made
  • Bad investors will use things like blocking rights to not just block the sale, but to get more of the company
    • For example, saying the need 30% of a $100 million sale instead of 20%, because that’s the number they have to hit to have the deal make sense. 
  • Series B investor preferences are sometimes senior to Series A preferences
  • So, If a Series B investor puts in $5 million, and A puts in $2 million and the company sells for 5 million, the series B investor gets 5 million while the series A investor gets nothing.
    • It’s very common for series A investors to have blocking rights to a senior security. So that, for example, a series B investor can’t put a 1000X preference on top of the series A investor.
    • Try to avoid giving investors blocking rights on non-senior (parri passu) investments.

Additional Notes

  • Shares to advisors generally vest over, say, 2 or so years, and it is nice to give vesting at change of control
  • Every venture backed company is a C corp. LLC’s are very difficult for venture investors because of tax write-off
  • If there is a 50/50 split between you and your cofounder, you probably haven't thought about equity split enough
  • 83B election is something you want to get immediately when you for a company
    • If don’t get it don’t get long term capital gains, and the clock starts ticking 12 months from when you file 83b
  • If someone else was helping you out during the early stages of a company, make sure they are in or they are out. And if out, make sure they sign a release.
  • Investors want to see founders that have enough remaining vesting that it can get you to the next milestone. At least a couple of years. 
    • Generally, start vesting founder equity at a reasonable milestone like when you left your job, not when you first came up with the idea.
  • Typically A round post option pool for employees is 10-20% (more often 10% lately)
    • Size of option pool has significant impact on founder ownership, and is something founders often under weight when they raise money, instead simply focusing on the dilution they will see from the investor.

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Sun, 18 Sep 2011 11:28:00 -0700 bitcasa and convergent encryption http://cdixon.posterous.com/bitcasa-and-convergent-encryption http://cdixon.posterous.com/bitcasa-and-convergent-encryption

People have speculated how the new startup bitcasa can both encrypt files client side and dedupe files server side.  The CEO says they use a method called "convergent encryption."  This encryption method uses the file being encrypted to generate the encryption key. That way only people with the unencrypted file can generate the key but the same files unencrypted will be identical encrypted (and therefore de-dupable).  It is believed by the security community to work as advertised, with two possible vulnerabilities:

1) "confirmation-of-a-file attack" - someone who gains access to your files can confirm whether you have a certain file.  For example, someone could verify you have a certain movie/music file or leaked document.

2) "learn-partial-information attack" - in certain cases (from what I've read those cases haven't been strictly defined) an attacker could learn some information from a file if the attacker already knew other information in the file. Examples might be a government form where a lot of the text is known but some sensitive text (e.g. your social security number) isn't.

I'm a fan of client-side encryption, and even with these "vulnerabilities" it seems to me what bitcasa is doing is a good idea and should be adopted at least as an option by other storage companies.

One big limitation that comes with encryption is the inability to do operations like searching text on the server side. This can potentially be addressed through a method called "homomorphic encryption."

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Fri, 16 Sep 2011 11:01:00 -0700 B2B, B2C, B2B2C, and B2S http://cdixon.posterous.com/b2b-b2c-b2b2c-and-b2s http://cdixon.posterous.com/b2b-b2c-b2b2c-and-b2s

In the startup world, "B2B" and "B2C" are familiar terms that were coined in the 90s:

B2B = startups whose customers/users are businesses
B2C = startups whose customers/users are consumers

Lately I've been hearing "B2B2C" which although a bit clumsy sounding is useful:

B2B2C = businesses who partner with other businesses to reach customers/users who are consumers

Finally, I propose the term "B2S" to refer to an especially risky type of startup that usually emerges in markets where VC money is plentiful:

B2S = businesses who sell only or primarily to other startups

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Thu, 18 Aug 2011 13:41:17 -0700 Disruption of the video game market, illustrated http://cdixon.posterous.com/disruption-of-the-console-video-game-market http://cdixon.posterous.com/disruption-of-the-console-video-game-market

A core idea in Clay Christen's disruptive technology theory is that incumbents eventually "overshoot" the needs of customers by adding excess performance, complexity etc. This creates room for disruptors to go after less demanding customers by creating simpler, less expensive and less technologically advanced products.

John Madden Football has sold over 70 million copies and is perhaps the most iconic video game of the last decade.  

Here are the controls you need to learn to play Madden's most recent version:

CONTROLS
COMPLETE CONTROLS
EA SPORTS ARCADE CONTROLS OFFENSE
BEFORE THE SNAP QB CONTROLS
A Button snap ball
B Button (Hold) coach cam
1 Button call your shots
D-Pad Left or Right switch controlled player
- Button call timeout
DURING THE PLAY QB CONTROLS
Control Stck or D-Pad move player
Flick Wii Remote Down Lightly = throw ball lob (gesture based passing)
Flick Wii Remote Down Quickly = throw ball bullt (gesture based passing)
Point Wii Remote At Plyaer + A Button (Tap) = throw ball lob (point and bass)
C Button (Hold) + Flick Wii Remote throw away (gesture bases passing)
Point Wii Remote Off Screen + A Button throw away (point and pass)
DURING THE PLAY RUNNING WITH THE BALL
Control Stick or D-Pad move player
A or B Button stiff arm, juke, spin
Shake Wii Remote power move
Drum Wii Remote break tackle
DURING THE PLAY CATCHING THE BALL
Flick Wii Remote Up catch the ball
AFTER THE PLAY
A Button (Hold) no huddle
B Button (Hold) spike ball
- Button call timeout
EA SPORTS ARCADE CONTROLS DEFENSE
DURING THE PLAY CONTROLS
Control Stick or D-Pad move player
Flick Wii Remote big hit
Flick Wii Remote + D-Pad Down (Hold) low hit
Flick Wii Remote Down swat ball
Flick Wii Remote Up jump, intercept
Swing Wii Remote Left or Right rip, swim, spin
BEFORE THE SNAP CONTROLS
Point Wii Remote At a Player + A Button or D-Pad Left or Right switch controlled player
B Button (Hold) coach cam
DURING THE PLAY EA SPORTS ARCADE CONTROLS DEFENSE
Point Wii Remote At QB + A Button (Hold) sack the qb
Point Wii Remote At Runner + A Button (Hold) stop the run
Point Wii Remote At Receiver + A Button (Hold) defend the pass
CONVENTIONAL CONTROLS OFFENSE
BEFORE THE SNAP QB CONTROLS
A Button snap ball
Z Button (Hold) coach cam
Point Wii Remote At Player + B Button qb pre-play menu
2 Button quick audibles
B Button quick qb audibles
D-Pad Left or Right switch controlled player
Z Button (Hold) + D-Pad or A Button lock-on (gesture based only)
1 Button call your shots
- Button call timeout
DURING THE PLAY QB CONTROLS
Control Stick move player
B Button (Hold) sprint
Flick Wii Remote Down throw ball (gesture based only)
Point Wii Remote At Player + A Button throw ball (point and pass)
D-Pad + A Button lock-on (gesture based passing)
Point Wii Remote At Player + Z Button (Hold) lock-on (point and pass)
Control Stick Left or Right precision passing (while throwing the ball)
Z Button (Hold) + Throw the Ball pump fake (gesture based passing)
C Button (Hold) + A Button pump fake (point and pass)
C Button (Hold) + Throw Ball throw away (gesture based passing)
Point Wii Remote Off Screen + A Button throw away (point and pass)
Shake Nunchuk qb avoidance
C Button (Hold) dive (when past the line of scrimmage)
C Button (Tap) slide (when past the line of scrimmage)
DURING THE PLAY RUNNING WITH THE BALL
Control Stick move player
B Button (Hold) sprint
D-Pad Left or Right stiff arm
Z Button juke
Z Button + Control Stick Left, Right or Down directional juke
A Button spin
C Button (Hold) dive
Shake Wii Remote power move
Drum Wii Remote break tackles
DURING THE PLAY CATCHING THE BALL
Flick Wii Remote Up catch the ball
DURING THE PLAY BLOCKING
Push Wii Remote Forward impact block
D-Pad Down (Hold) + Push Wii Remote Forward cut block
AFTER THE PLAY
A Button no huddle, hurry up
B Button spike ball
- Button call timeout
C Button + Z Button instant replay
1 Button bring up playcall (only with gameflow activated)
CONVENTIONAL CONTROLS DEFENSE
BEFORE THE SNAP CONTROLS
Z Button (Hold) coach cam
Point Wii Remote At Player + B Button pre-play menu
B Button lb pre-play menu
Point Wii Remote At Player + A Button or D-Pad Left or Right switch controlled player
1 Button call your shots
- Button call timeout
DURING THE PLAY CONTROLS
Control Stick move player
B Button (Hold) sprint
A Button control defender nearest to the ball
D-Pad Up or Down pass, run commit
C Button dive
Z Button (Hold) strafe
Shake Wii Remote big hit
Shake Wii Remote D-Pad Down (Hold) low hit
Flick Wii Remote Down swat
Flick Wii Remote Up jump, intercept
Shake Wii Remote Left or Right rip, swim, spin
D-Pad Up strip ball
Drum Wii Remote + Drum Nunchuk tackle boost
KICKING
Point Wii Remote Down + A Button (Hold) + Swing Wii Remote Up kick the ball
KICK RETURNING
A Button (Tap) switch players
Hold Wii Remote Up and Wave Left and Right fair catch

In contrast, Farmville's controls consist simply of the clickable buttons you see on the screen here:

Fv1

And Angry Bird's controls consist of simply clicking, dragging and releasing birds:

Angry-birds-windows-control-guide-banner

Console games kept adding feature after feature to please their most demanding customers. Meanwhile, social and mobile games came along that were playable by the other 95%+ of the population.

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Thu, 11 Aug 2011 10:37:31 -0700 U.S. national debt under recent presidents http://cdixon.posterous.com/us-national-debt-under-recent-presidents http://cdixon.posterous.com/us-national-debt-under-recent-presidents
Screen_shot_2011-08-11_at_1

from http://www.gmo.com/websitecontent/JGLetter_Pt2_DangerChildrenatPlay_2Q11.pdf

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Sat, 06 Aug 2011 06:10:00 -0700 The role of credit agencies in the financial crisis http://cdixon.posterous.com/the-role-of-credit-agencies-in-the-financial http://cdixon.posterous.com/the-role-of-credit-agencies-in-the-financial

To understand just how destructive credit rating agencies like S&P, Moody's, and Fitch are, an excellent starting point is an op-ed in the NYTimes by Michael Lewis and David Einhorn:

Everyone now knows that Moody’s and Standard & Poor’s botched their analyses of bonds backed by home mortgages. But their most costly mistake — one that deserves a lot more attention than it has received — lies in their area of putative expertise: measuring corporate risk.

Over the last 20 years American financial institutions have taken on more and more risk, with the blessing of regulators, with hardly a word from the rating agencies, which, incidentally, are paid by the issuers of the bonds they rate. Seldom if ever did Moody’s or Standard & Poor’s say, “If you put one more risky asset on your balance sheet, you will face a serious downgrade.”

The American International Group, Fannie Mae, Freddie Mac, General Electric and the municipal bond guarantors Ambac Financial and MBIA all had triple-A ratings. (G.E. still does!) Large investment banks like Lehman and Merrill Lynch all had solid investment grade ratings. It’s almost as if the higher the rating of a financial institution, the more likely it was to contribute to financial catastrophe. But of course all these big financial companies fueled the creation of the credit products that in turn fueled the revenues of Moody’s and Standard & Poor’s.

These oligopolies, which are actually sanctioned by the S.E.C., didn’t merely do their jobs badly. They didn’t simply miss a few calls here and there. In pursuit of their own short-term earnings, they did exactly the opposite of what they were meant to do: rather than expose financial risk they systematically disguised it.

This is a subject that might be profitably explored in Washington. There are many questions an enterprising United States senator might want to ask the credit-rating agencies. Here is one: Why did you allow MBIA to keep its triple-A rating for so long? In 1990 MBIA was in the relatively simple business of insuring municipal bonds. It had $931 million in equity and only $200 million of debt — and a plausible triple-A rating.

By 2006 MBIA had plunged into the much riskier business of guaranteeing collateralized debt obligations, or C.D.O.’s. But by then it had $7.2 billion in equity against an astounding $26.2 billion in debt. That is, even as it insured ever-greater risks in its business, it also took greater risks on its balance sheet.

Yet the rating agencies didn’t so much as blink. On Wall Street the problem was hardly a secret: many people understood that MBIA didn’t deserve to be rated triple-A. As far back as 2002, a hedge fund called Gotham Partners published a persuasive report, widely circulated, entitled: “Is MBIA Triple A?” (The answer was obviously no.)

At the same time, almost everyone believed that the rating agencies would never downgrade MBIA, because doing so was not in their short-term financial interest. A downgrade of MBIA would force the rating agencies to go through the costly and cumbersome process of re-rating tens of thousands of credits that bore triple-A ratings simply by virtue of MBIA’s guarantee. It would stick a wrench in the machine that enriched them. (In June, finally, the rating agencies downgraded MBIA, after MBIA’s failure became such an open secret that nobody any longer cared about its formal credit rating.)

The S.E.C. now promises modest new measures to contain the damage that the rating agencies can do — measures that fail to address the central problem: that the raters are paid by the issuers.

Remember that the ratings agencies receive special status from the SEC. Many funds (e.g. pension funds) can only buy bonds that the "official" agencies give high ratings. So the agencies aren't neutral messengers. They are unelected regulators who are paid by the corporations they regulate, with no appeals process, and an abysmal historical track record of corruption and incompetence.

The whole article is well worth a read: The End of the Financial World as we Know It.

 

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Thu, 04 Aug 2011 10:26:31 -0700 Wired on iPhone factories in China http://cdixon.posterous.com/wired-on-iphone-factories-in-china http://cdixon.posterous.com/wired-on-iphone-factories-in-china
Screen_shot_2011-08-04_at_1

Wired magazine had a sensationalist cover earlier this year:

1 Million Workers. 90 Million iPhones. 17 Suicides. Who’s to Blame?

In the article it says these 17 suicide occurred over the "past half decade" - implying a suicide rate of 3.4 per million people.

According to Wikipedia, throughout China the suicide rate is 66 a tragic people per year per 1M people:
http://en.wikipedia.org/wiki/List_of_countries_by_suicide_rate

If anything, the numbers would suggest, gadget factories are saving lives.  

(I don't actually think that's the case, but I do think the Wired cover headline is wildly misleading).

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Tue, 02 Aug 2011 23:18:00 -0700 IRL checksum http://cdixon.posterous.com/irl-checksum http://cdixon.posterous.com/irl-checksum

Why Van Halen demanded that brown M&M's be removed in all their venue contracts for their concerts:

That way, the band could simply enter the arena and look for a bowl of M&Ms in the backstage area. No brown M&Ms? Someone read the contract fully, so there were probably no major mistakes with the equipment. A bowl of M&Ms with the brown candies? No bowl of M&Ms at all? Stop everyone and check every single thing, because someone didn’t bother to read the contract. Roth himself said:
“So, when I would walk backstage, if I saw a brown M&M in that bowl . . . well, line-check the entire production. Guaranteed you’re going to arrive at a technical error. They didn’t read the contract. Guaranteed you’d run into a problem. Sometimes it would threaten to just destroy the whole show. Something like, literally, life-threatening.”


Not sure what to call this.  Kind of like a checksum.  Different goal but reminiscent of watermarking.  Probably a better technical term for it.

Full article (was) here.

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Wed, 20 Jul 2011 14:20:45 -0700 bitcoin mining rig http://cdixon.posterous.com/bitcoin-mining-rig http://cdixon.posterous.com/bitcoin-mining-rig
Index

from http://www.bitcoinminingaccidents.com/

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Mon, 18 Jul 2011 22:40:00 -0700 recent media consumption http://cdixon.posterous.com/recent-media-consumption http://cdixon.posterous.com/recent-media-consumption

Caanoo is definitely the best hand-held device ever made for playing retro arcade games. NES, Mame, and Amiga emulators all run great. Problem is that every time I play retro games they aren't as fun as I remembered. Perhaps a failure to manufacture nostalgia?  Although I will say NES version of Punch Out is still fun, as is Mame Sinistar.

As a user, I continue to love Twitter and just simply fail to understand the value of Facebook. Facebook is sometimes fun for going back to look back at old friends but otherwise just feels like a bunch of spammy disconnected tweets. Obviously i'm missing something since the rest of the world loves the damn thing.

Best iPad games:  Words with Friends (you knew that), 7 Little Words (you might not have known that), Helsing's Fire (you didn't know that... really, if you are going to play one iPad puzzle game this is it).  Toss in Juice Belts and Sopilskier if you have time.  Incredible Machine == Incredible Disappointment (bring back the old version!!).  Ticket to Ride - I want to love you but why can't you support asynchronous games with my friends a la Carcassonne and Words with Friends??

I really like the New Yorker iPad app. The only problem is you have to manually download issues, but it sounds like this will be fixed in iOS 5. NYTimes iPad app has gotten better but still miss the feel of the physical paper. I was subscribing to The Economist on my iPad but after that stupid tech bubble article have just found it intolerably stupid and need a few weeks cooling off to go back to it.

Nintendo 3DS: Want to love it.  Blown away by screen technology.  In the end, the 3DS - like life - just gives me a headache.  Wow, Nintendo has gone from brilliant back when they launched the Wii to kind of irrelevant now.

Books:  Reading The Lean Startup (great, even though I've already read almost all of Eric's blog posts), Tempo (@ribbonfarm is a super smart guy), Cosmopolis by Don DeLillo - a bit precious but still interesting.  My favorite DeLillo books are White Noise and End Zone.

At the risk of being accused of talking my book, I've been basing all these choices on Hunch.  It is working better every day.  Right now you have to rate a bunch of stuff to get it working really well.  The onboarding will be fixed soon to make this smoother.

Finally: Python, I love you but " ".join("a b c") syntax is bringing me down. And: Node.js - we all love event-driven web servers (e.g. Tornado) but the idea that using Javascript on the backend will somehow unite front-end and back-end programmers overestimates the similarity between the two jobs and the importance of language syntax.

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Mon, 18 Jul 2011 19:42:23 -0700 excellent startup realtime stats screen http://cdixon.posterous.com/excellent-startup-realtime-stats-screen http://cdixon.posterous.com/excellent-startup-realtime-stats-screen
Photo

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon Wed, 08 Jun 2011 19:16:11 -0700 good way to understand cryptocash http://cdixon.posterous.com/good-way-to-understand-cryptocash http://cdixon.posterous.com/good-way-to-understand-cryptocash From Future Imperfect:

Low-Tech ECash

I randomly create a very long number. I put the number and a dollar bill in an envelope and mail it to the First Bank of Cybercash. The FBC agrees –in a public statement –to do two things with money it receives in this way:
1 If anyone walks into the FBC and presents the number, he gets the dollar bill associated with that number.
2 If the FBC receives a message that includes the number associated with a dollar bill it has on deposit, instructing the FBC to change it to a new number, it will make the change and post the fact of the transaction on a publicly observable bulletin board. The dollar bill will now be associated with the new number.

Lets see how this works:

Alice has sent the FBC a dollar, accompanied by the number 59372. She now wants to buy a dollar’s worth of digital images from Bill, so she emails the number to him in payment. Bill emails the FBC, sending them three numbers: 59372, 21754, and 46629.

The FBC checks to see if it has a dollar on deposit with number 59372; it does. It changes the number associated with that dollar bill to 21754, Bill’s second number. Simultaneously, it posts on a publicly observable bulletin board the statement “the transaction identified by 46629 has gone through.” Bill reads that message, which tells him that Alice really had a dollar bill on deposit and it is now his, so he emails her a dollar’s worth of digital images.

Alice no longer has a dollar, since if she tries to spend it again the bank will report that it is not there to be spent – the FBC no longer has a dollar associated with the number she knows. Bill now has a dollar, since the dollar that Alice originally sent in is now associated with a new number and only he and the bank know what it is. He is in precisely the same situation that Alice was in before the transaction, so he can now spend the dollar to buy something from someone else. Like an ordinary paper dollar, the dollar of ecash in my system passes from hand to hand. Eventually someone who has it decides he wants a dollar of ordinary cash instead; he takes his number, the number that Alice’s original dollar is now associated with, to the FBC and exchanges it for a dollar bill.

My ecash may be low tech, but it meets all of the requirements. Payment is made by sending a message. Payer and payee need know nothing about the other’s identity beyond the address to send the message to. The bank need know nothing about either party. When the dollar bill originally came in, the letter had no name on it, only an identifying number. Each time it changed hands, the bank received an email but had no information about who sent it. When the chain of transactions ends and someone comes into the bank to collect the dollar bill he need not identify himself; even if the bank can somehow identify him he has no way of tracing the dollar bill back up the chain. The virtual dollar in my system is just as anonymous as the paper dollars in my wallet.

With lots of dollar bills in the bank there is a risk that two might by chance have the same number, or that someone might make up numbers and pay with them in the hope that the numbers he invents will, by chance, match numbers associated with dollar bills in the bank. But both problems become insignificant if instead of using 5-digit numbers we use 100-digit numbers. The chance that two random 100-digit numbers will turn out to be the same is a good deal less than the chance that payer, payee, and bank will all be struck by lightning at the same time.

Now get rid of the central bank (make them peering nodes) and encrypt the envelops it receives so the bank can do its jobs without actually knowing the secret numbers involved.

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]]> http://files.posterous.com/user_profile_pics/392508/zD5-3942343._f250_250.png http://posterous.com/users/3sy8nuEcH7j3 chris dixon cdixon chris dixon