Category: Tech news

Illustrations by: Cooee (Leon Dijkstra)

Last weekend, I attended Myojo-Waraku 2011 [JP] in Fukuoka/Southern Japan, a three-day tech and creative festival highly inspired by SXSW. Much like the event in the US, the idea for the counterpart in Japan (the first ever) is to bring together people from different fields, namely movies, music, games and interactive. More information about Myojo-Waraku 2011 can be found here.

In the interactive part, a few hours of the program were reserved for the so-called Startup Showcase, which gave a total of eight startups from Japan, Hong Kong, and Singapore the chance to demo their services on-stage.

Here are thumbnail sketches of all the startups that presented at Myojo-Waraku 2011:

Gluecast [JP]
Gluecast is a simple video communication tool that lets users video chat through the browser (no download or registration required). The idea is to make it as hassle-free as possible to communicate with friends via video for a limited amount of time, for example during a sports match that’s shown on TV or a livestream on the web. Users can create “one-time chat rooms” and invite others to join via Facebook in seconds.

Oooi [JP]
Oooi is a yet to be released smartphone application that was voted best product at the Startup Weekend Matsuri Taikai (Fukuoka chapter) in Japan a few weeks ago. With the app, a group of friends can share items like locations, pictures, or text and voice messages in a specific time window. Users form a group with Bump and can then start sharing information with other members as long as required, for example during a short trip or an event.

Switcheroo
Switcheroo is an iPhone app that’s available in 17 languages (including English). Users can exchange “items and services” with others in their network in three ways: by offering something to trade with another item or service, by requesting something, or by suggesting a trade between two items or services.

One Sky:
This translation management platform from Hong Kong promises “painless translation” for site and app owners. OneSky customers can choose between different sources after feeding their text or string files into the system, for example simple machine translation, professional agencies and/or crowd-sourced translation (files can be uploaded to OneSky or handled by the platform’s API). OneSky “dynamically” detects new or modified strings for translation and updates the site or app in question automatically. The startup currently counts Skype alternative Viber (12 languages, crowd-based network of 1,000 translators) and Chinese game developer Lakoo among its customers.

Sageby
Singaporean startup Sageby wants to give smartphone users a way to monetize the 45 minutes or so every person spends per day waiting for something (according to the presenter). The idea is to let users complete mobile surveys to redeem rewards while they are being idle in a queue or driving in a cab, for example. Clients like merchants or market research companies can use Sageby to collect data directly from end customers: all that users need to do is to scan a QR code, fill out the survey on their phone, send the results to Sageby, and redeem the reward instantly (a discount in the cab they are currently driving in, for example). Sageby is run by a team of students at Singapore Management University and eyes a soft release next month.

Innova Technology
Rick Tan, currently a student at Singapore Management University, presented a mobile anti-loss solution specifically geared towards travelers. When two items, for example a bag and a passport, are sufficiently separated from one another, the owner’s smartphone will emit a warning sound so they can take action. Tan says his company’s Bluetooth-based solution is scheduled to launch in December or January and will support Android and Blackberry devices first (iOS is to follow a few months later). The app will be offered for free, while the hardware will cost money (Tan is currently looking for distributors outside Singapore).

Crowsnest
Crowsnest is a powerful Twitter-based social news reader that’s available in English and Japanese. The service ranks content based on the number of corresponding links on Twitter and can be personalized in a number of ways. For example, it’s possible to let Crowsnest only crawl tweets from friends (instead of Twitter as a whole) for interesting URLs or add tabs to the menu (on the screenshot below, you can see the TechCrunch tab I added to my reader). Maker Kaisei Hamamoto says his service can generate personalized news feeds (in real-time) by indexing and analyzing over 10 million tweeted URLs per day.

Zusaar [JP]
Zusaar is a social event platform that lets users register via Twitter, Facebook or Japanese social network Mixi. The service makes it possible to create, search, sign up for, and pay for events in minutes. Users can also request specific events or suggest new event ideas.

Myojo-Waraku 2011 counted a total of 1,250 attendees for its first event. You can view videos from the event here and pictures here.

Jim Breyer, the star venture partner at Accel, is a very busy man. He sits on the boards of Facebook, Walmart, News Corp, and Dell, among others. I caught up with him last week at the Techonomy conference, where he talked about what areas Accel is investing in. In Part I of my video interview above, he explains his interest in the “intersection of media, technology and consumer commerce.”

Accel’s focus these days is very much social, mobile, and global. “We have more partners in China than Palo Alto,” he tells me. Brazil is huge also.

He is also intrigued by “next-generation social TV” and how mobile and social will change entertainment consumption. “What gets us excited as venture capitalists is how the video experience is intersecting with social and changing consumption,” he says. But most media startups don’t quite yet fit the bill. “We see 10,000 media business plans a year, and we invest in about ten,” he notes.

One of those is Angry Birds, which he considers a media company and Accel just invested in (through partner Rich Wong). He hints that Accel invested in Angry Birds because of what they saw in its pipeline, as much as for what it’s already built.  I came away from this interview feeling more strongly than before that the future of media is very much mobile and social, like all good things on the internet.

Facebook’s Open Graph is ushering in a monumental shift in how we curate what we share. Curation used to mean opting in to sharing. You found or did something you thought your audience would care about, and you went to the trouble of sharing it. This worked when we didn’t have so much content at our finger tips, but as more news and media consumption moves online, the friction of constantly opting in exhausts us and we don’t bother to distribute what others might enjoy. That’s why I believe we are entering the age of curation through unsharing, and it will force us to change.

Some believe “frictionless sharing” via Open Graphs will be the death of curation. That signal will be drowned out by noise as the content we consume but that’s not worth the attention of others is automatically published to our friends and followers. This is a big problem for curation, but it is temporary. It stems from a lack of understanding of curation through unsharing by both the users and developers of Open Graph apps.

Users still expect to have to actively share something in order for it to reach their audience. That’s no longer true. Instead we’ll need to learn to filter out the noise in reverse, opting out when we don’t want to share instead of opting in when we do. That’s a huge behavioral realignment that will take time and won’t come easy. If learned, though, we’ll be able to dance across the web from one piece of great content to the next, sharing it all effortlessly, and only having to stop when something deserves to be struck from the record. And as algorithms improve to show us what’s most relevant, we won’t have to unshare as often.

I love listening to music and reading news, and I love helping my friends discover songs and articles. But before Open Graph apps, I had to actively share each piece of content to the news feed. To my audience, there was no distinction between what I really wanted to highlight, and what was enjoyable but not necessarily crucial. This is why Ticker is brilliant. It creates a channel for casual opt out sharing of high volumes of content, a distinct complement to the channels for explicit opt in sharing we’ve always known.

This granularity allows for more curation, not less. I can still take a song that touches me and opt in to posting it directly to the news feed, where Facebook intelligently gives it more visibility. But through the Ticker I can also share hundreds of songs, all that I enjoy to a lesser extent, and give people who respect my taste a way to discover vetted content.

To make this work, though, we’ll need the app developers to cooperate by making it easy for us to mark an article as unread, remove the last song we heard from the Ticker, etc. I reviewed the sharing controls of all the major news reader apps, and some like The Washington Post and The Guardian are doing their part by providing simple unsharing options.

Unfortunately, some developer like Newscorp with The Daily app are trying to maximize virality by not offering unshare options. They are overemphasizing the short-term, and not thinking enough about being apps that facilitate the new model of curation — apps people will want to return to. We need to pressure them to provide unsharing options by telling them so and not using them if they don’t.

Until we have both learned to unshare and have the capability to do so, this will indeed be the dark age of curation. But we have the power to set the norms. Go read a ton of articles using a responsible app, unshare from the Ticker each one you wouldn’t recommend, and explicitly post links to the news feed to those you think are must-reads. If you see low-quality content shared to the Ticker, tell your friends to utilize the unshare button.

This isn’t natural. Often the best product design is translating existing behavior patterns to new mediums. But the proliferation of content, in both volume and access, requires a brand new conception of sharing and curation. Together we can bring about a golden age.

Editor’s note: James Altucher is an investor, programmer, author, and entrepreneur. He is Managing Director of Formula Capital and has written 6 books on investing. His latest book is I Was Blind But Now I See. You can follow him @jaltucher.

When I was reading Walter Isaacson’s biography on Steve Jobs it suddenly brought back memories of the FBI repeatedly hitting the buzzer for my apartment rather forcefully ten years ago. Isaacson mentions that Steve Jobs and Dr. Larry Brilliant were best friends. Flashback to ten years ago, Larry Brilliant calls the FBI and tells them I might know something about where Osama Bin Laden keeps his money. True story.

The next thing I know, someone is ringing my buzzer, “The police! We need to come up.” Then when we let them in (after I briefly considered running down the back staircase) they flashed their badges “FBI”. They said, “we had to say “police” because we didn’t want to scare anyone on the street by saying ‘FBI’. “

Uhhh. Do you really think that is the difference between inducing fear and creating a feeling of calm?

Let’s hold off on that for a second. Three other things come to mind, maybe four, when I think of Larry Brilliant.

A) First off, what a great name. It’s like he’s a mad scientist in a Flash Gordon movie (the old black and white ones, not the one where Freddie Mercury is singing while they are flying on these weird metal wings).

B) Second, when Larry was running Google.org I had an idea for him and after all we went through (the FBI?) I thought he would respond but he didn’t

C) The most valuable thing I learned from Larry Brilliant was when we were taking a break in 1999 from looking at an ancient coin collection being held in the World Trade Center. Everyone there knew Larry and from booth to booth we were sifting through the ancient Israeli coins, coins with Alexander the Great carved beautifully into 2000-year-old silver, coins that I didn’t know the history of but Larry patiently explained.

It was beautiful, interesting, and tiring, so we grabbed a coffee , sat down at a table and I asked Larry, for lack of anything else to talk about: what is the key to great negotiation? Larry was the CEO of some public company then. A company that two years later I would help the new management liquidate but that’s another story.

The reason I asked is because I consider myself a good salesperson. I don’t have many skills, but there’s always a point with each person, on each topic, where they will say “Yes” to something. So many girls said, “No”to me in high school I had to dig deep and understand where that “yes” point was so I didn’t have to go through as much agony as an adult. [See. “7 Things I Learned from my 8 Greatest Teachers”].

Negotiation is all about boundaries and finding where to put the fence so both neighbors are happy. But when you train yourself to be too eager for the “Yes” then it becomes very hard to put up a boundary where you are saying “No”.

But negotiation is almost as important as sales. By the way, it’s not as important. Much more important to get the foot in the door (the first “yes”) then have the door slammed in your face. But once the foot is in the door you have to make sure it’s not chopped off. This is negotiation.

So I had to learn negotiation the hard way. In some cases by being out-negotiated. In some cases by observing people negotiating on my behalf (which involves more divisions in profits when you can’t negotiate for yourself) and in some cases by having a guy like Brilliant give me some tips which I remembered.

How to Negotiate:

A) Have more points to discuss than the other side.

Larry said to me that day, “most people in a negotiation think it’s just about the money. If you are selling a product it costs “X”. if you are selling a company, it costs “Y”. But that’s just a small part of a negotiation. Before you sit down for a negotiation make a list of all the things that are important to you. If you are selling a company there’s issues about salary, vacation, how long are you locked up (if it’s a stock deal), who do you report to, what your title is, how long is the employment contract for, how can you get more money if your division becomes more profitable than anyone thought, how your employees will be treated, how will your business expenses be treated, what responsibilities you have, and so on and so on. Really spend time coming up with your list, depending on the negotiation.”

Then, to make his point he reached into his pocket, in the middle of this ancient coin show, and he pulled out a dime and a nickel.

“This way,” he said, “if you have more points to discuss. You can give up the nickels.” He pushed the nickel towards me. “And keep the dimes.”

B) Have a mathematical formula. In 2007 I was negotiating the sale of my company, Stockpickr.com to thestreet.com. I was negotiating “against” Steve Elkes, who was previously COO of iVillage and managed to sell ivillage to GE for $500 million where it was never seen or heard from again. [See also, “The Day Stockpickr was Going to Go Out of Business – a Story of Friendship“]

It was only later that I realized how genius Steve was at negotiation when he used this one simple trick. Before we started negotiating he came up with a simple formula that was so simple and made so much sense that it was easy for me to say “yes” to it as the basis of the negotiation. Only later did I realize what had happened.

He said, “Look, thestreet trades for 20x earnings. So the Board will agree to something half of that so the deal is immediately accretive.” I nodded my head. Made sense. I said, “let’s use next year’s earnings.” He agreed. Seemed simple. Steve said, “So we’ll take all of your ad inventory, take your expected users based on your current growth, use our CPM (cost per thousand impressions) since we will fill up your ad inventory, and then subtract out your expenses, which is really just your salary, and there we have your earnings and we’ll multiply that by 10.”

Simple formula. I nodded my head. He had already used one simple sub-trick against me which is not worth an entire bullet point but worth a mini bullet: “THE BOARD”. So suddenly it wasn’t me negotiating against Steve – he had an invisible backup in a worst case scenario. He put the element of fear in me. Some mysterious force, “the Board” could be erratic or foolhardy at the last minute so he would help me by coming up with this simple formula that the mysterious, and perhaps dangerous, board, would easily agree to.

So, the formula sounded like it made total common sense. Particulary since it seemed like he was on my side against “the Board”. I agreed. I immediately started adding up my numbers and thestreet’s CPM was common knowledge in their SEC filings. We agreed to meet in a couple of days while he “researched” what the CPM was and looked at my traffic numbers. All negotiators act dumb at first and as they “increase their knowledge” you inevitably get screwed.

We met again in a couple of days. This time he had the head of ad sales with him. Steve said, “I don’t know all these numbers myself but Tom can explain them.” This is another sub-point, ALWAYS ACT STUPID and defer to experts that everyone agrees is an expert. In other words, you are outsourcing the hard parts of the negotiation so you can remain “friends” with the other side.

Tom said, “The SEC filings say we get a $16 CPM but that’s wrong. We give away a lot of free ad inventory and we have sponsorships on specific sites so you have to subtract that from the $16. It’s really more like a $7 CPM.” Since I had already agreed to the “formula” that was the basis of the negotiation I was stuck trying to figure out if that $7 was real or if he was BS-ing me. But we spent an hour looking at it in every which way and $7 CPM was the number.

So I had to nod my head again.

Then Steve said, “and you really have other expenses: we’ll provide an office, insurance but let’s just focus on your salary as the expenses.” Uh-oh! He was giving me nickels to take the dimes! But he got me to feeling a sigh of relief to set me up for the fall.

“And some of your traffic growth simply comes from us sending you traffic so if we didn’t buy you, you wouldn’t have that growth. We would just send that traffic elsewhere. So we have to discount that slightly.”

By this point I was so eager to just agree to anything. I just wanted to plug the right numbers into the formula we had decided on. All the calculations I had been doing on my own went right out the window.

“So I guess the number is X”, he said.

And X it was. Since that’s what the formula spit out. About 1/3 of what I thought I was going to get but I had agreed to the formula. Touché, Steve.

The good side of that negotiation is that from that point, the entire deal closed in a week. The fastest I’ve ever seen a deal close. So I felt good about that. [See also, “10 Things I Learned from Jim Cramer”]

But the key I learned was:

• Have everyone agree on a mathematical formula to value an asset or service.
• Then when you start plugging in the variables, that’s where the real negotiation is occurring and if you know in advance that those numbers are going to be lower than thought, then you will win the negotiation and everyone will be happy when it’s over. It is always key for both sides to be happy at the end but since everything started off on a point of agreement, it is much easier to keep both sides happy at the end even if there is disappointment along the way.

C) Alternatives. This is obvious. But pulling it off is often difficult, particularly when you actually don’t have alternatives. You have to have guts and know how to make the other side feel fear.

In late 1999 I was negotiating with several partners on starting a venture capital firm. The firm was going to be called 212 Ventures.

Investcorp faxed us a term sheet. $100mm to start the fund, a good sized management fee and a good sized performance fee (I actually forget what they were, but assume it was the usual 2 and 20), and they would help us raise another $100mm. I immediately got down on my knees, clasped my hands together and started crying while begging Mark K (then at CSFB, now at DB) “Accept before they change their minds!”

And he, correctly, said, “just hold on a second. I want to spend a few days thinking about this.” We had no other real choices. And having a $200mm VC fund could mean a lot of money per year. Having zero VC experience it seemed like a miracle that anyone would offer me this opportunity. I couldn’t sleep that weekend, I so badly wanted to take the offer.

Mark didn’t like the deal. He again used the nickel and dime thing. He wanted us (versus Investcorp) to have more control over how decisions were made, he wanted more expenses paid for by the fund, he wanted a higher performance fee, etc. He had a list of demands much bigger than theirs.

He said to them, “listen, these guys have every private equity fund calling them. Every private equity fund realizes they missed the Silicon Valley boat and now wants in. I can’t stop them from choosing another fund but if you agree to these things, I can get them to agree.” He said again, “every single one of your competitors is calling these guys”. They weren’t but he correctly assumed they wouldn’t fact-check that.

Back to the sub-point from above, he used us as his “Board” to scare them and he also scared them with the fact that we were considering alternatives when I was on my knees and praying to god that he would just accept the offer.

Then he ignored them. They tried calling a few times. He didn’t call back. They emailed. He didn’t email back.

They capitulated on every one of his terms. We accepted. The rest of that story didn’t turn out so well. But that’s perhaps the topic for another article.

He used another trick in this: “no news” is actually “bad news” in negotiation. If someone is not responding to you, it means they are likely going to say “no” to you. He used that to his advantage to convince them that we really did have alternatives. So they became eager to capitulate.

If I had been in charge of that and just said an immediate “yes” things would’ve turned out much worse a year or so later when Investcorp was sick and tired of us (of me). [See, “My Worst Decisions as a Venture Capitalist – and 10 Unusual Things I didn’t Know About Google“]

As for Dr. Larry Brilliant, who cured Smallpox in India in the 70s, was Steve Jobs best friend, ran Google.org, and now runs Jeff Skoll’s charitable holdings, and the story of the FBI, “UBL” (as the FBI referred to Osama) and the mystery of UBL’s money, I will eave that for another story. This one has gone on long enough.

Photo of Larry Brilliant by Joi Ito

Hi children of the world, I actually don’t have 5000 Facebook Credits to give to each of you. I’m sorry about that, I wish I did. But before you get upset, let me explain.

A few years ago, back when I was at VentureBeat, I wrote a post about an early version of Credits that Facebook had been testing out. It wasn’t the virtual currency payment system that you use in FarmVille today, it was an experimental social reputation currency. You could do things like give people Credits for status update that you thought were smart or useful. Accumulating lots of Credits indicated you had a good reputation with your Facebook friends.

Fast forward to this past August. My long-forgotten Facebook author page started getting dozens of Wall posts from Facebook users — mostly children — from around the world. Every one of them was pleading with me to provide the 5000 free Facebook Credits that they claimed I’d promised them. Annoyed, I turned off Wall posts. They resorted to commenting on my profile picture.

I couldn’t figure it out. I have definitely never promised anyone free Credits. I mean, I’m a tech blogger. I give people free coverage if I think they deserve it, and that’s it.

After continuing to delete comments day after day, I started asking other writer friends to see if they were experiencing anything similar, and I posted on my page Wall asking what exactly was going on.

The answer came in two parts. MG reminded me about the post, and some of the Credit-seekers directed me to the following Blogger site: http://free5000-game-credits.blogspot.com/

There, I discovered a page with a doctored screenshot from my old post. Instead of the original image showing me giving MG “+10″ Credits “at 4:41pm April 3rd,” the image had been Photoshopped to say “+5000 #FacebookCredits,” with instructions to “Please confirm you would like 5000 free Facebook credits by typing #FacebookCredits in the comments box below. (Your browser will automatically redirect you after [to my author page].”

As of when I took the screenshot below, the web page had accumulated nearly 55,000 Likes and more than 18,000 comments.

What are the key takeaways from this major tech news story?

– Children of the world, don’t believe every free giveaway on the internet, especially if it’s in the form of a horribly designed web site with flashing animations that asks you to provide your Facebook information in exchange for an absurdly large gift. I’m not quite sure what the site owner is doing with all your likes, but possibilities include selling the data they gather through the button, or using the publishing feature to push other scams to your news feed. Seriously, Facebook Credits scams are a big problem.

– This is my first weekend at TechCrunch, and if MG posted about the Google goats right after joining (which is an environmentally sound idea, in my opinion), then it’s only proper that I post something this silly

– Whoever made the free Credits page sucks

– If you publish to the internet, watch out for how your content might get abused by unscrupulous parties

– Whoever is running the scam appears to have recently moved on from misusing me to tricking users into sharing an awful video; hopefully Blogger will shut this account down soon

– Become a fan of my Facebook page AND YOU TOO CAN RECEIVE FREE 5000 #FacebookCredits!!!!!

I’m an author, but thankfully I’m not a member of the Authors Guild, that “not-for-profit American organization of and for authors”, who a few days ago issued a statement that first lauded publishers for not signing on to Amazon’s new Kindle book-lending program for Amazon Prime members, and then condemned those few publishers who did agree, citing a bizarre and convoluted argument that authors aren’t protected by such an agreement.

That argument concludes: “[Publishers should] not decide for themselves how to step into this brave new world of subscription models without solving all this before they receive their first dollar. My guess is that most publishers, when faced with the complexity of the problem and the unlikelihood of finding a solution that makes everyone happy, will decide it’s just not worth the trouble. And that, perhaps, would be the best outcome of all.”

Oh my. The stupid, it burns.

Memo to the publishing industry: recent history strongly indicates that subscription models are what your customers–you know, the people who read the books you publish–want. They want Hulu for television, Netflix for movies, Spotify for music. Do you really think they don’t want a similar model for books? (When in fact, history shows it’s what they’ve always wanted?)

Here’s a very simple proposition. Treat your customers well, and they’ll treat you well. Treat them like thieves, and they’ll steal from you. If you fear the future, if you fear change, then your fear becomes a self-fulfilling prophecy. Do you really think “refusing to give your customers what they want” is anything other than a stunningly self-destructive business model? Have you learned nothing from the RIAA?

I suppose not. “Learning” doesn’t seem to be something the publishing industry appears to be good at. Take the e-book market, which according to the Authors Guild is “the lone bright spot for the industry.” Are big publishers like HarperCollins fanning the flames of that spark, by making their e-books as good as possible?

Well, let’s take a quick look at the evidence. In September the new Neal Stephenson novel, REAMDE, came out. Neal Stephenson! The perennial worldwide bestseller beloved by techies everywhere! Anticipation was high.

If there was ever a surefire e-book success, REAMDE was it. So of course HarperCollins went out of their way to make it the best, classiest, most beguiling e-book edition of all time, right?

Speaking as someone who’s had two novels published by HarperCollins: how incredibly embarrassing. Well, that was just a freak one-off, right? Weird mistakes happen. It’s not like they make a habit of butchering beloved books… oh, wait.

It’s just depressing. How can we expect the publishing industry to adapt, evolve, and thrive in the digital world when, four years after the Kindle was introduced, they still haven’t even figured out how to format e-books correctly?

It gets even worse at the bookseller level. After Amazon negotiated a deal with DC Comics for the exclusive digital rights to some graphic novels, Barnes & Noble and Books-a-Million stopped selling those books in their stores. (Full disclosure: I’m also the author of a graphic novel for DC’s Vertigo imprint, though I don’t think it’s part of this deal.) Ah, the old “angrily depriving our customers of the ability to buy stuff they might want” business model. Strange how that never seems to work.

Readers are unhappy. They complain about inflated ebook prices, which publishers set; indeed, a class-action lawsuit alleging ebook price-fixing by publishers was filed a few months ago. No wonder Amazon is increasingly becoming a publisher in its own right, as is its competitor Kobo. They seem to have decided that if they can’t find any smart, competent publishers to deal with, then they’ll have to become one themselves. The existing publishers have responded by, um, offering online sales data to their authors, for the first time. Wow, that sure changes everything, eh?

What would a smart and reasonable publisher have done? They would have realized that sticking their fingers in their ears and hoping the future doesn’t come is not an intelligent strategy. They would have noted that, as the Authors Guild said, Amazon is especially eager to make their lending library aka subscription service a success right now, in the face of increasing competition from Kobo, the Nook, and iBooks. And they would have used this leverage to negotiate a short-term, test-the-waters subscription licensing deal with both Amazon and their authors. (Hopefully one that treats the latter group better than Spotify treats musicians.)

Time is not on their side. As authors — including Neal Stephenson — jump ship to Amazon and Kobo, and as subscription services increasingly become treated as inevitable rather than revolutionary, the negotiating leverage held by traditional publishers (and the Authors Guild) will steadily decline. Now was the time to take a bold leap into the future. Instead they sat down, closed their eyes, and hoped it wasn’t coming. Good luck with that.

Editor’s note: Guest contributor Eric Ries is the author of The Lean Startup.  Follow him @ericries.

Unless you’ve been living under a rock, you can’t have missed the recent dust-up over race and Silicon Valley. Like almost every discussion of diversity and meritocracy in this town, it turned ugly fast. One side says: “All I see is white men. Therefore, people like Michael Arrington must be racist.” The other responds, “Silicon Valley is a colorblind meritocracy. If there were qualified women or minority candidates, we’d welcome them.”

I’d like to say a few words about this, but I want to do so under special ground rules.

I want to make an argument, step by step, that I hope will convince you to care about this issue, but that doesn’t presuppose that you already agree that diversity is important. And it will explain how it is possible for both sides to be mostly correct – and that we still have a problem.

So the rules are:

1. No political correctness. Let’s speak the truth no matter where it leads.
2. You don’t have to believe that diversity is an end in itself. In fact, I will argue that is important as a means to an end.
3. Meritocracy is a good thing. Whenever possibly, people should be judged based on their work and results, not superficial qualities.
4. We should use science, whenever possible, rather than anecdotal evidence.
5. No hand-wringing. There’s no point discussing this problem if we can’t do anything about it.

So – no hippies, no whiners, no name-calling, and no BS. If you want to make Silicon Valley – and startup hubs like it – as awesome as possible, pay attention.

What accounts for the decidedly non-diverse results in places like Silicon Valley? We have two competing theories. One is that deliberate racisms keeps people out. Another is that white men are simply the ones that show up, because of some combination of aptitude and effort (which it is depends on who you ask), and that admissions to, say Y Combinator, simply reflect the lack of diversity of the applicant pool, nothing more.

The problem with both of these theories is that the math just doesn’t work.

It’s a fact that the applicant pool to most Silicon Valley startup schools and VCs is skewed. Could this be the result of innate differences between white men and other groups? The math simply doesn’t hold up to support this view. Think about two overlapping populations of people, like men and women. They would naturally be normally distributed in a bell curve around a mean aptitude. So picture those two bell curves. Here in Silicon Valley, we’re looking for the absolute best and brightest, the people far out on the tail end of aptitude. So imagine that region of the curve. How far apart would the two populations have to be to explain YC’s historical admission rate of 4% women? It would have to be really extreme.

There is some research on the differences between men and women, and it has shown some differences in both average aptitude and the standard deviation of aptitude (i.e. that men have more extreme outcomes in both the positive and negative direction). But these differences are extremely small, nowhere near large enough to suggest a region on this curve with all men and no women on it. If you’d like to examine the math involved, check out this excellent slide deck courtesy of Terri Oda:

What is true for aptitude is also true for interest. Some populations are more interested in science, in math, in business, and in taking risks than others. But all of the research I am aware of suggests that these differences are extremely small – not nearly big enough to explain what we’re observing in places like Y Combinator.

This is why I personally care about diversity: it’s the canary in the coal mine for meritocracy. When we see extremely skewed demographics, we have very good reason to suspect that something is wrong with our selection process, that it’s not actually as meritocratic as it could be. And I believe that is exactly what is happening in Silicon Valley.

There’s plenty of good research on the subject of team performance that shows that diverse teams outperform homogeneous teams on many different kinds of tasks. The problem is that this research doesn’t argue for demographic diversity, but rather for a diversity of perspectives. So, again, racial or gender diversity is not an end in itself. But we have to ask ourselves: if teams are consistently being put together with homogeneous demographics, what are the odds that they also will contain a diversity of perspectives? Shouldn’t we be worried that the same selection process that produces homogenous results in one area might be accidentally doing the same in the area that we care about (but that is harder to measure)?

Does that mean that the racism theory is necessarily correct? I don’t think so. I’ve certainly heard my share of sexist and racist jokes in Silicon Valley, but hardly enough to believe that people like Michael Arrington or Paul Graham are lying when they say that they are colorblind. I think that – in the absence of any counterevidence – we should take them at their word. Besides, we don’t need racism to explain these results. Now that we’ve clarified the question to be “how do we build a meritocratic selection process?” we can look at a wealth of research that has been done in this area.

And there’s good news here. Wherever selection processes have been studied scientifically, errors have been found. These errors are called “implicit bias” in the research literature, which causes a lot of confusion, because the word “bias” connotes malevolence. But let’s leave that connotation behind – we’re entrepreneurs, scientists and engineers, for goodness’ sake. We can talk about bias like grownups.

And what the grownups have discovered, through painstaking research, is that it is extremely easy for systems to become biased, even if none of the individual people in those systems intends to be biased. This is partly a cognitive problem, that people harbor unconscious bias, and partly an organizational problem, that even a collection of unbiased actors can work together to accidentally create a biased system. And when those systems are examined scientifically, they can be reformed to reduce their bias.

The most famous example of this comes from the world of musical orchestras. Until the 1970s, almost every professional orchestra in the world was all-male. All experts in the musical world agreed on the reason: male performers had superior aptitude to female performers. They gave all kinds of explanations for why, that had to do with men’s allegedly superior skill, hand-eye coordination, interest in music, and their willingness to sacrifice so much to become a professional musician. And yet, by the 1990s, these ratios had changed dramatically. No conductors went to political correctness anti-bias training camps. No hand-wringing was needed. They hit upon a solution – by accident – that practically changed orchestra selection overnight: they had performers audition behind a physical screen, so that the judges could not see their race or gender while they played. When rating performers anonymously, it turned out that men and women played equally well, on average.

If you’ve seen the movie Moneyball recently (or read the book), this should sound familiar. The whole premise of Moneyball was the triumph of science, data, and reason over the gut feelings and beauty contests of baseball scouts. Think of the famous scene in which the scouts are sitting around a table debating which prospects had “the right look” – and Brad Pitt and Jonah Hill are calling BS. Which side of the table sounds more like the admissions process to a Silicon Valley startup school, where they are often “looking for people like us?”

According to the research on implicit bias, our selection processes are making some huge, obvious mistakes. The Y Combinator partners conduct short ten-minute interviews where they make snap decisions about candidates on the spot – sometimes in as little as sixty seconds. This process, while efficient, is the exact opposite of musical performances happening behind a screen. They are even moving towards video interviews – which would bring this visual bias even earlier into the process.

Now think about the countless VC pitch meetings and “get to know you” mixers and coffees and lunches. These are all opportunities for VC’s to use their vaunted pattern recognition to try and spot promising entrepreneurs and companies early. But pattern recognition is just a fancy word for bias. And if you look at the research on implicit bias, you will find that bias is a necessary consequence of using pattern recognition, it’s part of how the brain works. We literally think faster when we see something that matches the pattern, and have to slow down to process something that doesn’t match. I think Michael Arrington provided a fascinating first-hand account of this cognitive process in action, when he described his experience struggling to name a single African-American entrepreneur. He couldn’t come up with one on the spot, but not because he’s a racist.

None of this is meant as a criticism of Y Combinator, VCs, or anyone else. It’s meant to point out that even though our current selection process is pretty good, and pretty meritocratic, it still contains bias. We can do better. And, if we do, we will make all of Silicon Valley more successful.

So how can we do better? I believe there are several relatively simple changes we could make right away.

I previously described on my blog one simple change I made to the hiring process at my last company. I asked all of our recruiters to give me all resumes of prospective employees with their name, gender, place of origin, and age blacked out. This simple change shocked me, because I found myself interviewing different-looking candidates – even though I was 100% convinced that I was not being biased in my resume selection process. If you’re screening resumes, or evaluating applicants to a startup school, I challenge you to adopt this procedure immediately, and report on the results.

Startup schools are an exceptionally good laboratory for testing these ideas. In fact, if anyone out there wants to put this idea to the test, I suggest the following experiment: for your next batch of admissions, have half of your reviewers use a blind screening technique and the other half use your standard technique, on your first screen (before you’ve met any applicants). Compare the outputs of both selection processes. I predict they will show different demographics.

Of course, this doesn’t address the whole problem. Remember, part of the defense against the racism theory is that the applicants are already skewed before any selection is done. Once again, this sounds like something you can only throw your hands up about: if it’s not a problem with innate differences, it must be a problem with our education system or some other “pipeline” problem.

So let’s take a look at this problem, too.

I once spent time with a promising entrepreneur who was not a white man. Because their startup sold a product that a lot of tech entrepreneurs buy, many of their customers were graduates of Y Combinator. So I asked if they were planning to apply. Their response: “oh, no, it’s a waste of time. Y Combinator doesn’t accept people like me.” Where did they get that idea? Surely not from YC’s partners, who as far as I can tell are scrupulously fair in their dealings with entrepreneurs. Rather, they got that impression by inferring that there is probably implicit bias in YC’s  admissions process, and that they’d be better off spending their time doing something else other than applying to YC.

We all know there is a huge gender gap in computer science. But that gap means that women receive only about 30% of degrees in CS. But 30% is a lot larger than 4% – and that’s a big math problem for advocates of the pipeline theory.

Imagine that you were a professional musician thinking about which orchestra to audition for. You have a choice between an all-male orchestra that conducts interviews out in the open, and a mixed-gender orchestra that conducts auditions behind a screen. Which would you choose to apply to? Wouldn’t your answer be different if you were a man or a woman?

I think thought experiments like this are helpful for suggesting an alternate hypothesis to the pipeline problem: that there are qualified minority applicants who are choosing – rationally – to invest their time and energy elsewhere. I am not aware of any scientific study that proves this hypothesis is correct. But I have seen enough existence proofs to believe it is likely.

For example, I have been a mentor for several years in the Founder Labs program, which was originally created by Women 2.0. It’s a pre-incubator program, that helps potential founders figure out if they should become entrepreneurs. They created it as a way of encouraging women to apply to startup schools and create companies. But they took a novel approach to this problem. They did not advertise the program as being about diversity. Instead, they adopted a minimal rule: each founding team had to have at least one woman, and they privately reached out to talented women in their networks and encouraged them to join.

I remember the first time I spoke to the Founder Labs teams. I kept asking: who are you and where have you been? It was unlike any other audience I’ve seen at any other startup school: 50/50 men and women, with a surprising amount of diversity. The participants included chip designers and hard-core engineers, the kind of people that have the aptitude but don’t apply to most startup school programs or pitch most VCs. I believe the reason they came to this program was that they believed its selection process would be more meritocratic.

Groups that make a conscious effort to become more meritocratic are able to make meaningful changes in the diversity of their participants. One of my favorite examples is the San Francisco Ruby Meetup, which spent a year making the effort to improve the number of women who participate. The steps they took required effort, but not rocket science. They didn’t have to get sixth grade girls interested in programming. You can read more about it here.

There’s one last piece to this puzzle that science can help us with. It goes by the rather unfortunate academic name of stereotype threat. But a confusing name doesn’t make it any less real. It turns out that when people are in a situation that defies stereotypes, reminding them of the stereotype diminishes their performance. In one study from NYU, students were given a math test. Asking men and women questions about their gender beforehand increased the performance gap substantially. “Priming” students with questions about other aspects of their identity, did not. This result has been replicated in many, many studies.

I think this helps explain why asking more minorities to apply to these programs doesn’t work. Consciously thinking about proving a stereotype wrong impairs performance. So it’s entirely possible that a completely objective assessment of the performance of candidates in an application process will show minority candidates doing worse, because they are literally cognitively impaired.

And this brings me back to the no hand-wringing rule. Most people interpret this finding as bad news, but I think they have it backwards. It’s actually really good news. If you look at the studies, what they show is that the performance gap between groups can be mostly erased, if candidates are primed in a merit-focused way. Explicit diversity programs have the solution exactly backwards. What we need to do is to build meritocratic selection processes, and then go our of our way to tell people about them. We should emphasize the objectivity of the selection process and our efforts to weed out all forms of bias. I believe this is why certain programs, like Founder Labs and 500 Startups, that boast of their meritocratic “moneyball” approach to admissions have more diverse applicants – and participants.

When it comes to meritocracy and diversity, the symbolic is real. And that means that simple actions that reduce bias, such as blind resume or application screening, are a double win: they reduce implicit bias and they help communicate our commitment to meritocracy. As a startup ecosystem we are in the meritocracy business. This is the path towards making Silicon Valley – and every other startup hub – even more awesome.

Photo credit: Daviniodus

A few of the most forward thinking European watch designers have come together to bring the quirky and highly forward-thinking brand called Ochs und Junior. The brand offers watches that combine ease of telling the time with minimalism – and they are available in literally any color combination you can dream of.

With a name like “TNT” what would you imagine a watch collection to look like? The Pierre DeRoche TNT collection of timepieces combines independent Swiss watch making with aggressive sporty looks and open mechanics.

As a pricey 40th anniversary gift, Audemars Piguet has given itself a limited edition of 40 pieces Royal Oak model called the Extra-Thin that features a solid platinum case and impressive skeletonized movement and dial.

A review of the Bell & Ross BR02-94 Marine Chronograph reveals that it is a solid tool-watch with a designer spirit from the popular French brand. Unique to the BR02-94 is the barrel-shaped case design and large, yet comfortable size on the wrist.

Leave it to the Italians to produce a watch that is specifically designed to match your Lamborghini. You choose the colors among a few available exotic materials and Adriano Valente will build you an incredibly ostentation AV-L001 watch for your budding ego to expose to the world.

Click to view slideshow.

Editor’s note: The following guest post was written by Ashkan Karbasfrooshan, founder and CEO of WatchMojo, a video publisher.

Venture capital is flowing into video ad networks: Brightroll recently raised $30 million, Yume raised $12 million.  Tremor Video’s raised over $100 million.

But not everyone’s buying the hype: “it’s just not a big enough market for all the money invested, there can’t be six or seven category leaders”, argues Will Margiloff, chief executive officer of Ignition One, a unit of Japan’s Dentsu.  Some have raised more money than their revenue potential.

Not all of the top 100 marketers even buy video advertising, but those that do frequently repurpose a 30-second TV ad spot and run it as a pre-roll, seeking massive scale.  Investors are betting that ad networks can provide that scale.  Meanwhile, while marketers continue to shun user-generated content and traditional media companies (TMCs) scale back free, ad-supported distribution, VCs don’t seem willing to start investing content plays.  I asked a panel of VCs at Vator TV’s VentureShift if they planned on backing content startups; I might as well have asked the question in Swahili.

This would be fine if VCs were returning abnormally high returns to their limited partners, but they’re not.

Difference Between Text Publishers and Video Producers 

Unlike content producers who publish articles, get indexed by search engines and generate millions of pages with as many ad impressions, video producers fail to properly index on search engines and tend to rely on a distribution-over-destination strategy.  From 2007 to 2010 the number of producers that maintained their own-and-operated site fell from 57% to 18%.  Assuming they have the right to sell ads against their content, producers have to weave through a byzantine workflow where they distribute their videos.

Meanwhile, YouTube has marched to a dominant position with 47% of views and 80% of users in the U.S.  Barclays reported that YouTube could generate as much as $1.6 billion in revenue this year.  This, despite the fact that much of YouTube’s content is UGC or lacks full rights to maximize monetization.  U.S. video advertising is expected to hit $2 billion this year with global revenues weighing in at $3 billion according to the same Barclays report.

The Online Video Ecosystem is Broken at Worst and Inefficient at Best…

YouTube generates 3 billion daily video views; while there is an endless amount of video ad inventory, very little is being monetized even though advertisers are demanding more inventory than ever.

Exacerbating matters is that the majority of video advertising has actually been delivered in-banner (where a video ad is delivered in a banner ad unit) according to Accustream.

… and Ad Networks are Killing It as a Result

Brightroll is on pace to gross $50 million in 2011.  If you tally the revenues earned by all video ad network, you’re looking at $300 million in aggregate global revenues.

Display ad networks like Undertone and Specific Media have entered the space via acquisitions (Jambo Media and BBE respectively).  Others, like Collective, have simply started to sell video ads, too, realizing that while less than 40% of video campaigns come at the expense of TV, 43% comes from display ads.

Adding another $100 million in video ads from display networks and you’re now looking at $400 million globally and $300 million in the U.S. (or 15% of the $2 billion U.S. video pie)

Giving more credit where it’s due, most ad networks have paved the way by embracing VAST, or Video Advertising Serving Template, which allow preroll and companion ads to dynamically rotate without having to traffic the underlying assets, saving time and money.

Capping preroll ads to one per 7 minutes, YouTube has hitherto shunned both ad networks and VAST tags (not a bad strategy).  So while Barclays pegs YouTube’s 2011 potential revenues at $1.6 billion, that is global and includes text links, display banners, overlays and prerolls.

How Much Video Advertising Do Non-Content Owners Generate?

If you extrapolate YouTube’s video revenues to about $750 million (of the $1.6 billion) and add:

– $400 million from video and display ad networks,

– Hulu’s $500 million in revenues,

– and round up other aggregators’s (DailyMotion, Metacafe, Break Media) revenues,

Then about $1.7 billion of the total $3 billion pie is booked by aggregators and ad networks while $1.3 billion is spent with publishers.  However, with the aggregators and ad networks paying out 50% (or $850 million) of their revenues to content owners, then about $2.15 billion (or 72%) is spent with content owners, albeit mainly the TMCs.  Nonetheless, the vast majority of VC dollars keep flowing to ad networks and aggregators even though new media content creators have a legitimate shot of disrupting TMCs and eating away ad dollars.

Difference Between Video and Display Ad Networks

Display ad networks grew as a result of there being too much unsold inventory supply on web properties; video ad networks have grown by capitalizing on there being too little quality inventory supply on each site, thereby selling across thousands of websites, where each individual publisher lacks the scale marketers seek.

The Specter Haunting Ad Networks and Publishers

Adding to the intrigue is the rise of demand or supply-side ad exchanges like Rubicon, Adap.tv, Appnexus, Invite, Turn, Pubmatic, LiveRail; complicating matters is how some ad networks like Brightroll have dove into the space by launching their own exchange.

The quantitative approach is striking a chord with marketers: Razorfish has doubled spending on the exchanges while reducing the number of publishers it works with directly, from 1,832 in 2007 to 598 in 2010.  Investors should be wary, though.

Valuation Concerns

History repeats itself in many ways.  Same way that video networks have emulated the growth of display networks, we have seen a rise and fall in valuations of display networks, with the zenith coming in the period covering the exits of Advertising.com, BlueLithium, Right Media, aQuantive and Doubleclick (though all of these firms were more than mere ad networks, granted).

Yahoo! and Google paid 10 and 20 times revenues when they bought RightMedia and Doubleclick respectively. Essentially, the buyers agreed to pay 10 and 20 dollars for each dollar of revenue.  But they also implicitly argued that they would – ceterus parabus – be willing to wait 10-20 years before recouping their investment, an eternity in tech.  Meanwhile, with content having a longer shelf life and being a less risky investment, you have to wonder when VCs will be forced to pivot into taking content more seriously as a lucrative segment to back.

They say insanity is doing the same thing and expecting a different outcome, the only question is who’s more insane, the VCs or me.

What is it?
Is it a messenger bag? Is it a briefcase? How about both? Chrome’s Anton laptop bag is equal parts business and play. It comes in both green and black and has a real military feel to it, at least in army green. It may not have the most pockets, or be the lightest bag I’ve toted around, but I can’t help but love it. You can tell the user was in mind during the design process, as proven by swiveling shoulder strap hooks and the cross pattern of the Velcro. It is, after all, the little things that count.

Made of nylon and military spec wax-coated canvas, the Anton is heavy duty enough for a tornado chaser. I got stuck in a downpour yesterday and was really worried about my laptop, but it was safe and dry thanks to the Anton. When the bag is full, it takes on a very boxy shape much like a brief case. When packed with a couple knick knacks, it sports a much more casual look.

The Anton Laptop bag won me over with simple design choices. They mean seem minute, but they make a big difference over time. For one thing, shoulder straps always seem to get twisted around on my bags, making them annoyingly uncomfortable. The Anton’s shoulder strap sports rotating hooks, so no matter how twisted you may find yourself it’s super easy to get settled again, without ever taking off the bag.

Then there’s the cross pattern Velcro that holds the front flap down and closes off the main compartment. This seems reasonless, but I assure you there’s thought behind the madness. The flap itself sports vertical Velcro, while the inside of the bag where the flap connects has horizontal Velcro. That way, when you’re trying to pull the bag open, you don’t have to yank as hard as you would if the Velcro met on both sides all the way across. Just a small patch of Velcro is stuck together. Similarly, there’s a lot of real estate there for the Velcro to attach, so you don’t have to be as precise when closing the bag.

Some other little accents were also apparent, like the inclusion of a slot for a wheelie bag handle. If this is, in fact, to be used as a briefcase then you can bet a wheelie bag will be involved at some point. Just don’t think that it’s a full-fledged pocket like I did at first and try to slide your phone in there.

The bag offers a lot of space — enough to pack everything I need in a day and then some. The laptop sleeve can fit up to a 17-inch MacBook Pro, though if you’re packing a full 17-incher and a lot of other stuff the bag becomes a little heavy in briefcase mode. Overall, however, I found the Anton to be very comfortable and useful.

Who is it for?
This bag would be perfect for the guy who’s a businessman during the week and a fan of the great outdoors on the weekend. It’s heavy-duty enough to pack tools in and take through the woods or on a hike, but has enough sophistication to easily pass at the office. It’d also be a great day bag for anyone who travels heavy, as I really didn’t have trouble carrying around a ton of stuff with this bag.

Do I want it?
You bet I do. The Anton is a bit of a throw-back in terms of style which I appreciated, and I really liked how rugged it was. It’s comfortable, durable, and sports two entirely different looks depending on what you’re carrying/if the strap is connected. The little things won me over, and the bag in general had no trouble maintaining that impression. I give it an A+.

Click to view slideshow.

Check out the rest of Bag Week 2011 here.

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Review: Saddleback Leather Thin Briefcase

Bag Week Review: Timbuk2 Swig Backpack

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The Big Bag Week Giveaway: An HP OfficeJet Printer, An HP Laptop, And, Obviously, A Bag