JustinIdea - Justin Ricaurte's Personal Blog

It's a Marketing Problem

This past Sunday I went to Mind Camp 4.0 at the Tukwila Community Center, and I had an absolute blast at it.  The day was set-up as an open conference, where people post what they would like to teach others and each individual chooses what they would like to listen to for each one-hour segment.  There were some really great discussions there.  Some of the ones I went to involved where can you take web 2.0 next, what you need to take into account when starting a company, advertising rates for websites, and education in the State of Washington. 

At the event, there was no loss of good ideas.  One of the cool one's that I saw was NoonHat, where you post the place you're at and the radius within which you would like to catch lunch.  The site then pairs you with others that want to catch lunch in the same vicinity and time.  Another was Uncluttr, which makes finding books on Amazon a lot more intuitive and simple.  If you want inspiration for some new ideas, something like Mind Camp is a great event to attend.  I think the discussions helped to spark about a dozen ideas in my head during the 12 hours I was there.

The one thing I saw missing from a lot of the discussions was the business side.  It's great to have cool little technologies and demo them for others, but it's another discussion to find ways to make money off of them, and sadly a lot of the ideas didn't have a concrete monetization model.  Another area was business risk, which is something that came up in talking about where to take web 2.0 next.  With ~90% of the people being more tech-oriented, ways to lower business risk that have been used in other areas of the economy weren't brought up until I started to chime in.  Then how do you gain your users?  Working off your initial network will only take you so far, so quickly.  To gain a large user base quickly, you'll need to find other ways to market it to increase user adoption and understand what type of scaling problem you have with respect to your users. 

Without a strong business model, most of these cool ideas will flounder or allow their creators to make a few dollars a month off of Google Adwords, and they won't become widely adopted.  The plummeting costs to develop web applications has thrown out the technical problem when developing 98% of web applications, a site like Farecast being in the 2%.  It's easy to copy and paste someone else's code or make a social networking site with one new "killer" feature.  Even when the technical problem is eclipsed for those 2%, what you're left with is a marketing problem, and solving that problem requires a different mind set than developing the cool feature did.

Investment Bubbles Build America

In case you missed it, CNN Money had a great article on how investment bubbles have built America by Daniel Gross, the author of Pop! Why bubbles are great for the economy.  His arguments make a great deal of sense when you analyze American history.  From the telegraph in the 1840s-50s to stocks and credit in the 1920s to internet and telecom in the 1990s, where would America be without a bunch of evangelists at each turn of the way promoting the next big investment craze?

Applying this, what new bubbles could help build the infrastructure America needs to promote its further economic growth?  A few cool ones would be quantum computing, nanotech, sustainability, and space.  With massive investment bubbles in any of these, America could reap huge rewards and benefits after the smoke cleared.  A quantum computing rush could yield us computers the size of cell phone with the computing power of the Googleplex.  A nanotech rush could give us a fabulous array of new materials from which we could build more environmentally friendly products that are more efficient, less material intensive. and recyclable.  A bubble in sustainability could give us an infrastructure for distribution of clean fuels and excess capacity of clean energy creation and energy-efficient buildings.  A space bubble would give us the infrastructure to travel beyond Earth for cheap.  Excited yet?! :-)

Won't a lot of people in the mean time lose a lot of money?  Sure!  And that's the beauty of it.  With the risks American investors are willing to take, America booms and busts and booms all over again.  People strike it big and others lose out, but in the end our country grows by leaps and bounds and the rising tide lifts all boats.

SEC Rules on "Accredited Investors"

While doing some research on angel investors, I came across an SEC rule that made me wonder how useful it actually was.  Rule 501 of Regulation D regulates who is able to be labeled an "accredited investor" so that a company raising private capital does not need to register with the SEC.  When looking through the requirements, I was surprised to find the income and asset limits the SEC places on companies that take capital on the private market.  Using these requirements, neither of my parents would be able to invest in a company I create without being first affiliated with the company as a director or employee.

Considering one of the best sources of capital can sometimes be friends and family initially, if you want to give equity to them instead of taking out a personal loan, I wonder how many people run into the problem of not knowing anyone rich enough to invest in them.  For example, if someone were to try to raise the money from a group of friends and family without naming all of them directors, they would have to register with the SEC.  With small investments such as this, the majority of the population is kept out of private equity investments in firms started by friends and family.

Not only is the average person barred from investing in their friends' business without a directorship or employment, but they are barred out of the another high-return asset class, hedge funds.  I agree with the comments in the article that just because you aren't a millionaire doesn't mean you should be disqualified from investing.  Having an asset threshold seems a bit arbitrary, more arbitrary than say one based-on IQ or education-level would be (not that I would advocate for one). 

Even with its intentions of protecting the average investor, the government isn't protecting the rest of the investing public though by having "accredited investor" rules.  It's merely ensuring that the average person will not have access to the asset creation vehicles that the rich have access to.  With so much debate over the rich-poor income/asset divide, you would think politicians would want equal access to investment products for every American.  If every American has access to all wealth generation products, then they should achieve the same returns on average, allowing the average person who is financially responsible to keep pace with their wealthier counterparts.

2-Day Trip to the Bay Area

I went to the bay area the last two days, and it was a blast!  On Thursday, I met everyone from NUSEA (National University of Singapore Entrepreneurs Association) at their Rainmakers Live! event.  Shao Rong and Eugene were great hosts and introduced me to everyone there.  The challenge Mint put on was a bit intense.  We had 30 minutes to solve a hypothetical problem for the company.  The thirty minutes flew by.  I'm used to 5-hour meetings and 42-hour case competitions, haha.  At the end of the night I was finally able to meet Noah and Aaron of Mint.  They're a couple of great guys and love what they do.  I can't wait until they allow members of the public to try their service!

Yesterday morning, I went back to up to Berkeley and met Yuki from the Lunar Society for bubble tea.  He's also really passionate about being able to make flying to space (and especially the moon) more economical.  Its awesome to meet people that are really passionate about what they do.  Yuki and I are now working on putting together a national team to find a way to make going to space more economical.  If you're interested, shoot me an email at justin [at] justinricaurte.com.  We need both engineers and business people.

After meeting with Yuki, my friend Brenda showed me around Berkeley.  They have some great architecture there.  My favorite building by far was the Haas School of Business building.  It's beautiful!  I forgot to take my camera, but here are a couple pictures I found online, here and here.  There is also a great view from the big C behind the campus, photo found here (San Francisco is in the distance and the Golden Gate bridge is to the right). 

That was my trip in a nutshell.  I didn't want to make you read a novel. :)

The World is Round?

Valeria Maltoni wrote about a very interesting article she ran across by Pankaj Ghemawat in Foreign Policy about why the world isn't flat (a free pdf can be found here), contrary to the thesis put forward by Thomas Friedman in The World is Flat.  One of the most interesting statistics Ghemawat showed was that when looking at cross-border transactions, a best estimate can be that only 10% of everything, from cash flows to immigration to trade, crosses national borders.  Only 10% of telephone revenue comes from cross-national calls, and 20% of trade and only 3% of migration crosses borders.  Another interesting point comes from the fact the previous peak of international integration was in the early 20th century.  It was only in the last 10 years that we passed the peak, and in some cases, we still haven't.

By viewing a localized world as a problem that needs to be solved, there are three areas that can potentially make a lot of money.  Finding a way for people, capital, and products to move relatively freely between countries are gold mines for entrepreneurs to go after.  With respect to people and products, some of the problem stems from government protectionism, but finding a way to transport people and goods at 10% of the current cost could radically change the global playing field.  What if a ticket to fly to Shanghai or London cost only $100?  How many more people would jump at the opportunity to travel?  I'm guessing the price of a ticket to California would drop to $15 and to New York to $20 each way. I would definitetly be traveling more at these kinds of prices. :D

Thought Experiment - Would a 90% decrease in travel costs further push a greater adoption of English around the world as the lingua franca?  Or would Mandarin start to edge it out as more middle-class Chinese were able to travel longer distances?

Entrepreneurs as Idealists

Wednesday in my entrepreneurship class, my professor asked the class what they thought drove entrepreneurs to start their own businesses.  I was surprised when half of the people who spoke-up said it was purely for profit.  Now why does this surprise me?  Because entrepreneurs (or at least the most successful ones) tend to have an ideal/vision of what they want the world to be like and use business to change the world to fit the vision.  Gates wanting every desk to have a computer; Walton wanting to save low-income, American consumers money; Dell wanting to drive down the cost of computers; and Brin+Page wanting to make an algorithm that is more efficient at finding things on the Internet.

Personally, I want to use business as a vehicle to help improve their places in the world, whether it's through education, finance, or an industry yet to be created.  I want everyone in the world to have the opportunity to enjoy an American standard of living.  Why not teach a person to fish and get paid for it?  Both are better off, and the more people you teach to fish, the more money you make in the end.