Tag Archives: Wall Street

Disruption Daily: Early Thoughts on Facebook Graph Search

Peter Drucker dies at 95

Big tech news today with Facebook announcing its new Facebook Graph Search.  Wall Street apparently didn’t like the news, sending FB down -2.74% on a day the rest of the market was pretty sharply up.  I might need to lean in and pick some up.

I think it is a big tech story for 2013.  I agree with David Weekly’s initial observation that this is a serious ongoing threat to Google.  It’s a pretty obvious step for Facebook and I think its going to pay off for a few basic reasons.

First, it starts to highlight in a very mainstream way how Facebook has, in effect, become the internet for many people.  People are spending so much time on Facebook that it makes sense that FB would invest in convening a “Dream Team” of Google Search engineers to do some semantic forking and NLP stuff to make Facebook the place you go for search.  It makes all the more sense when you consider that Facebook content isn’t really searchable via Google–I can’t go to Google and search for that status update, photo, or meme you posted.  Just doesn’t work.  So an obvious strategic move.

Will it succeed?  I’m bullish.  It’s one of these strategies where Facebook’s chocolate meeting the peanut butter of search seems to fit really nicely.  Certainly it seems a lot smoother of a fit than Google trying to veer into social with G+.  (With Marissa Mayer taking her talents to Yahoo, I think Google’s push into social is perhaps even more at risk, as her fingerprints in terms of user experience and design were so pervasive.)

Second, I think that there are a variety of scenarios where FB search could be quite disruptive in the shorter term–with local in particular.  We are all connected to friends through Facebook, and I’d bet that a lot of accounts have a huge portion of friend connections who are nearby.  The next time you need to know whether that new Chinese place is any good, are you really going to go to Yelp or Google, or would you like to see that 6 of your friends had “Liked” the place on Facebook.  Local is a big kahuna market, and FB has a nice route to going after it.

Third, it’s a winning move in that FB is growing engagement and retention, and search (along with mobile) gives it a new avenue to continue driving this lift.  Surely there’s an opportunity to go for the jugular over time with Google, and this is good for the industry.

A final point on Facebook’s capacity to disrupt Google in a major way… I remember reading an interview of Peter Drucker in 1997 or 1998, around the time that the Department of Justice was lining up to take on Microsoft for anti-trust violations.  The interviewer asked the father of modern management what his opinion was on the anti-trust case. His answer, basically, was that in the case of the technology industry, the market moves too quickly.  When a company becomes as big as Microsoft  the seeds for obsolescence are in a sense already planted.  He forecast that based on Microsoft’s size, some small, disruptive company that no one had yet heard of would step up to take on Microsoft in relatively short order.  Though there’s no reason to think Drucker had ever heard of them in 1998 when the interview happened, it’s pretty clear that he was prophesizing Google.

Now certainly we’ve all heard of Facebook, so this time around is a little different.  But at the same time, it’s not lost on me that in the same week that the Department of Justice announced it would not pursue action on Google after 2 years of investigation–the true sign of being a tech behemoth–Facebook announced its Facebook Graph Search.


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Silicon Valley is Stupid

David Weekly is in terrific form with his post today on GigaOm Silicon Valley is Stupid Which is Why it Works.  It is a delight to read his writing–David’s energy, intelligence, wit, and wattage come shining through.  The article itself is spot on, and is really a must read, particularly for groups trying to build more of the Silicon Valley ethos into their region, town or country.

One additional element to Silicon Valley that I think is important, at least based on my own experience, is the openness and general inclusiveness of the community.

In most places, the existing social hierarchy–where one went to school, whose kid you are, whether you have friends in high places–exerts a huge influence and can be a huge help (or barrier) depending on where you fit.  Of course, Silicon Valley has an element of this–certainly being on a first name basis with A-listers like a Ron Conway, Mark Zuckerberg or John Doerr would likely confer a some benefit to you: who you know matters.

It’s not as much who you know, it’s what you’re doing.  In my experience, two elements really balance this out.  First, here in Silicon Valley, the core arbiter is really around what you’re doing and what you’re building.  This focus on what you’re doing (and the quality of the people you’re doing this with) overshadows, in my view, whomever you might know.  For example, I’ve talked to people who claim they were the right hands to Larry (Ellison) and then went built businesses for Steve (Jobs) whom I thought were complete yo-yos.  At the same time, we’ve funded successful companies where the founders were basically unknown and unreferenceable, as they had so few LI connections or prior real work experience. Put another way–if you had the choice of being an awesome team working on awesome projects with no network versus being super networked but working on a meh project with a meh team, you’d take door #1 in a second.

Silicon Valley is more open.  The second element is that the Silicon Valley network is as open as I think you’ll find anywhere in the world.  Not only are the most seasoned and experienced investors or executives generally findable and reachable, but the vast majority of them operate with an ethos that they’ve always got to be growing their networks.  This is not to say that barraging them with a spray and pray email form letter is going to get a response, of course.  That style blows and you won’t get far.

But broadly speaking, if you want to connect with anyone, and you work at it thoughtfully, you can get it done.  Concretely, visualize Bud Fox (Charlie Sheen) in the movie Wall Street, who’d chased his prey, Gordon Gekko (Michael Douglas).  You may have to work at it to connect with someone, but with persistence, creativity, and quality, you should to connect to them.

My own experience in Silicon Valley over these last 5 years is evidence of this.  I moved to Palo Alto from Tokyo, Japan, where I’d spent nearly 4 years working for Microsoft in its Japan subsidiary.  Although I’d really enjoyed my time at Microsoft, I really felt that in the tech industry, so much growth and innovative thinking was occurring in SV that I had to get there.  I knew that I wanted to stay in tech, and I knew I wanted to get involved in smaller companies (an easy threshold to meet, given that when I left MSFT had more than 90,000 employees).

In any case, when I showed up in Palo Alto, other than some former Microsoft colleagues who’d moved here, I effectively knew no one.  I had a network of zero, basically.  From day 0, however, I found that I got great opportunities to meet great new people, that vast majority of them were interested in helping me find my way.  This ethos was quite broad, and time and time again, I was struck at how helpful and thoughtful people were in helping me out when there really wasn’t much upside for them.

Nowhere is this more clear than how I actually met David Weekly.  When I lived in Tokyo, working for Microsoft, I was getting really serious about leaving MSFT to head into the great unknown of Silicon Valley.  I was reading about Silicon Valley, and surfing around LinkedIn to learn about people.  I stumbled onto an article about the SuperHappyDev House events that David was hosting at the times.  (They’ve since mushroomed into something much bigger and more broad.)  These were apparently all night hackathons at some house he was retngin up in Hillsborough.  And what struck me was that his LinkedIn profile had an Endorsement from a police officer who had come to, I guess, break up one of these parties.  I remember thinking to myself, “I’ve *got* to meet this David Weekly guy!”  (I also became a user of PBWiki, a great product, btw.)

Anyway, fast forward 3 or 4 years, and I’ve got myself here, helping out at the FounderInstitute, Adeo Ressi‘s global startup incubator.  Adeo and I were basically neighbors when I moved to Silicon Valley, and he couldnt have been more helpful and fun to get to know.  He was getting the FI rolling, and he was kind enough to give me opportunities to speak, facilitate, and at times just help out.

Anyway, I was moderating an evening’s events at the San Francisco FounderInstitute, and there as one of the guest speakers, was David Weekly.  I introduced myself like a total fanboy, though I’m not sure that I asked for an autograph.  :)  I introduced him to the FI founders with my Tokyo story.

A culture where people are most honed in on what you’re building and what you’re doing.  An environment that’s really open, where people tend to want to just be helpful to others in getting out there and building cool stuff.  Those are two more of our additional stupidities out here that make this place so very great.  Thanks David for the great article!


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Can You Beat the Box? Getting Hired by Machine

This morning’s Wall Street Journal covers a growing trend in which companies are using software and algorithms to make hiring decisions, cutting out the traditional job application and in person interview processes.

It is a fascinating read.  It also reinforces the notion that there really are no limits to what software can disrupt, where software can make an impact.  It was also interesting to me, because, little known fact about me, based on a multiple choice test, I was once declared not qualified to become a junior stock broker trainee.  More on that below… :)

I will be interested in watching this trend evolve.  In particular, I’m interested to watch and learn how  prospective applicants react to this.  Potentially in a bad job market, people are more willing to take a test and try to ‘beat the box,’ relative to what they might have done in the past.  I’d love to see whether sites pop up where applicants try to share information on how they answered questions during the test, and what worked.  Gaming of a system always happens, and in this realm, I’d assume that’ll happen too.  I’m going to figure as well that job placement firms and job coaches / counselors etc. will in time evolve to help job seekers how to “Look Your Best, When Taking the Test.”  This all sounds a little silly when I think about it, but in a very real and serious sense, as you shift this behavior to software, you start to realize that all sorts of second order behavior will change along with it.

For my own part, though I was always really good at test taking, I’m really glad that (hopefully) I won’t have to do this to get a job.  Very early in my 20s, some good friends of mine got me a job interview at one of the big stock brokerage firms in Boston.  The opportunity was to join the training program for stock brokers, basically to start cold calling.  I knew next to nothing about the stock market, but that didn’t really seem to matter.  What mattered to those I interviewed with was that I could connect with them, was a good communicator, clearly worked hard, etc.

On the basis of the first day of human interviews, the feedback was that I’d done great, and they were hoping to make me an offer.  I was waiting tables at the time, so I felt like I was getting a lead on working on Wall Street.  I envisioned Michael J. Foxx in the movie The Secret of My Success, Charlie Sheen in Wall Street.  That was me, baby.  I’d arrived!

The one step between that first day of in person interviews and getting an offer was a basic test that they wanted me to take.  Reflecting back on it, I think this test was something like a Myers-Briggs profile.  It asked questions like, “if you have a free evening would you rather read a book or spend it with friends?”  Things like that: no wrong answers.  As someone who’d made a lifetime of crushing standardized, fill in the bubble type tests, this was a breeze.  I was in and out in about 30 minutes.  Didn’t think a thing of it, shook hands with everyone on my way out as I envisioned weekends on Nantucket and lying in a solid gold bathtub filled with dollar bills.   We were all fired up–they were excited for me to start, and I thrilled to have a real job and not have to wait the breakfast shift at the Hyatt Regency in Cambridge (where I was working at the time).

A few days later, I got a phone call.  That phone call said, Jay, we’er really sorry but based on the results of this test, we don’t think you’re really someone who’s a great long-term fit as a stock broker.  Bummer, nho gold-plated bathtub for me!

I’d forgotten all about this until my brother in law reminded me of it a few months ago.  We had a huge laugh about it–and I can barely contain laughter as I think about it now.  Though I’d been deemed unfit to be a stock broker, in all honesty, not beating the box that day was probably the best thing that ever happened to me.

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Thoughts on the JPMorgan Chase loss

JPMC, bitch!

JPMC, bitch! (Photo credit: Matt Stratton)

I suspect that at some level, JPMC’s CEO, Jamie Dimon, is thinking, ‘Geesh, we can’t even do a bone-headed trade anymore without everyone making a federal case out of it!’  And it turns out, he’d be right, as today surfaced reports of the FBI beginning an inquiry into JPMC and its $2B trading loss.

No one is going to miss an opportunity to pile on to Wall Street broadly and JPMC in particular, and this is especially true for our ruling class in Washington when so much is at stake with the financial regulation/Volcker rule, etc.  We’re re-writing the rules, and JPMC’s loss is a great exhibit as to what can go wrong.

At the same time, JPMC has and should continue to point out the following…  First, it made over $27 billion in revenue in Q1, with over $5B in profit.  So this loss is a little less than one week of revenue.  Second, JPMC has nearly $60B in cash on its balance sheet.   Granted, you’ve got to assume that its not sitting with a toxic set of loans and other assets on its balance sheet–no small feat–but assuming its managing its roughly $2.2T in total assets reasonably well, they’re plenty profitable and cushioned from this fumble.  Not something you want to see happen again, if you’re an investor or employee, but certainly recoverable.

Which brings me back to where we go from here.  Is increased regulation from Washington the answer, or should we just let JPMC continue on its way?

In my view, we need a Volcker rule that works.  In other words, if you’re a bank and you’re getting an explicit or implied guarantee from the government–either by taking government insured deposits or by becoming too big to fail–then you’ve got to divest out of proprietary trading.  I think this makes sense.

In the case of JPMC, they are likely too big to fail and they have retail deposits.  For them, in the event of a larger calamity and downside, its never as simple as just telling them that we’re just going to let you fail–this is too difficult, too many retail accounts get hit, too negative a fall out politically as the debt markets would freeze, etc.

But how to square this with my more libertarian tendencies?  I square it with the poker table.  At poker, a central tenet is that if you bust out and can’t put another chip in front of you, then you’ve got to leave the game.  You don’t get to draw for free.  If you can’t take downside, then you really can’t take any upside.  Very simple.  It makes every player accountable, and it works fine.  Same thing should be true with trading on your account.  If you’re trading, then you need to be able to shoulder whatever losses you undertake.  And if you’re in a situation where we can’t just let you fail, then sorry, you don’t get to play.



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