Jared's Blog

Too Big To Fail

Andrew Ross Sorkin’s Too Big To Fail is a fantastic read for anyone with an interest in better understanding what happened to the financial industry and economy in 2008-2009. The book is not intended to vilify Wall Street or the government, and it doesn’t try to explain the complexities of crazy financial instruments like CDS and CDOs. What it does is synthesize thousands of hours of interviews and millions of pages of documents to create a 500 page chronological account of exactly what happened amongst the key players in the financial world from the time Bear Stearns collapsed to the initiation of TARP.

The average person feels far removed from Wall Street. Only a small group of individuals know what really happens there on any given day.  Too Big To Fail gives the average American an insider’s perspective into Wall Street. It humanizes banks and their leaders. It portrays them in their darkest and most intimate moments - in their offices, in the Fed, and even in their homes - and provides a glimpse into the smoke-filled rooms where billion dollar deals were orchestrated. We see interactions amongst the CEOs of the biggest financial institutions in the world from their most dire and desperate of situations to trivial brick breaker tournaments (no joke).

The most intriguing aspect of TBTF is that we really get to know the most influential people running the US financial system: Hank Paulson, Tim Geithner, Jamie Dimon, Lloyd Blankfein, Dick Fuld, John Mack, John Thain, and Ken Lewis. The attention paid to these personalities helps us understand the egos and forces at play behind the major decisions in the 2008-2009 crisis. We see bold moments like Mack literally telling Geithner and Paulson to “get fucked” as his firm’s (Morgan Stanley) survival was on the line. We also see sad and sympathetic moments when Lehman Brothers’ Dick Fuld breaks down crying in his office when he realizes no one - no bank, government, or individual - will help save his firm. It’s glimpses like these that make the events of the financial crisis, which have always seemed to take place behind closed doors, so relatable and understandable to everyone.

In TBTF, we interestingly see the financial crisis through different perspectives: that of the government (ie Paulson and Geithner), and that of the banks and their leaders. It’s a dynamic juxtaposition. Sometimes we see everyone’s interests aligned, other times we see blatantly forced and unwanted government intervention, and many times we see instances of complete chaos and confusion.

Given its recency, there aren’t many pieces of literature about the financial crisis so comprehensive or informative.  The access Sorkin had to the country’s top CEOs and government officials is unprecedented.  This is a rare glimpse into the inner happenings of Wall Street.  For the first time, Main Street is given complete access to the back channels of the nation’s most powerful financial institutions and government, and that alone makes TBTF worth the read.

Social Streams

Geoff Cook, CEO of myYearbook, wrote a thoughtful piece about the future of social networks in a world dominated by Twitter and Facebook.  He has a unique outlook on the future of social networks and the various forms they take.  Presently, the dominant form is the stream.  Facebook pioneered it with their News Feed and Twitter capitalized on its simplistic presentation and ease of use.  There’s no doubt that Facebook and Twitter are the 800 pound gorillas in the room, but I think there’s more space to innovate than Cook acknowledges.  In his article, he comes to the following conclusion:

There are at least two ways forward for social media in a stream world – even in a stream world dominated today by Facebook and Twitter. You can dedicate yourself to creating applications that play well in the stream, or you can try to come up with a new way to shape the stream itself.

I agree that one way forward is focusing on applications that “play well in the stream.” Zynga is the quintessential example of a company focused on creating applications that successfully leverage the social stream.  Others like Playfish and Playdom have also followed suit.

However, I disagree with Cook’s claim that you need to find a new way to shape the stream itself.  The stream is here to stay.  It’s not going anywhere over the course of the immediate future.  It’s by no means a permanent fixture in the world of social networks, but it’s proven to be a successful model for delivering and consuming information.  Revolutionizing or reshaping the stream in its entirety is a lofty goal, and I don’t think it’s necessary right now.  If it ain’t broke, don’t fix it.

There’s plenty of room for innovation when it comes to the stream.  Facebook is compromised by the fact that the stream is really a flood.  There’s too much information from too many people on the fringe of my social graph.  I just don’t care about 80% of the information I see in my News Feed.  It’s overwhelming and irrelevant a majority of the time. That’s not to say that everyone feels this way.  175 million people log into Facebook everyday.  That’s a huge number or people who derive utility from their News Feed or other stream applications on a daily basis.  However, Facebook’s stream is primarily focused on providing updates in the form of text and photos for your immediate social graph.  They’ve left plenty of wide open spaces to play around and innovate.

Twitter’s stream is much different.  They’ve proven that a model focused on brevity (140 characters) and an open following system (versus Facebook’s mandatory reciprocated following system) can scale.  With Twitter, I can better control the information in my stream by selectively following content providers I find interesting. This helps to provide a much more useful and personally relevant source of data.

Twitter is just one successful iteration of the stream.  Tumblr is doing something unique in the space as well by leveraging the open follow system while creating a platform focused on the curation of mixed media. (Disclaimer: I work for Tumblr.)  It allows for a different type of interactive experience, more engaging on an emotional, aesthetic, sensory, and personal level.  The Tumblr stream, or Dashboard, has become a place for people to socially curate and consume the things they love.

There are plenty of other ways to leverage the stream.  Hot Potato is successfully providing a platform for creating social streams around live events.  Foursqare is focusing on personal activities.  Plancast is trying to do the same thing for future plans.  There’s a rapidly growing segment of emerging startups focused on taking streams and using them to leverage different verticals.  There’s also a handful working on rearranging the presentation, functionality, and applications used to interact in a stream.  The immediate future and growth of the social stream is not about revolutionizing its functionality or interface, but on leveraging niches that provide value to an engaged user base.  As Facebook surpasses 400 million users, it grows increasingly difficult to target and leverage verticals within its ecosystem.  People will gradually move towards streams they find personally appealing and consist of peers who share a common interest (Facebook recognizes this and has brilliantly fostered Facebook Connect as a mechanism to stay relevant and connected).  What’s really interesting is thinking about the unique economies, diverse monetization opportunities, and interactive mechanisms for these streams, but I’ll save that for another post.  It’s an exciting time for the emergence of social platforms, especially those focused on providing unique and relevant utility.

The Online Hub

The job application process for graduating college students is antiquated and inefficient. A majority of interviews and hiring is done through college career services and HR/recruiting departments from various firms.  Students submit a copy of their resume and cover letter through email, or whatever online service their college uses, and the HR people at these respective firms get to work filtering through stacks of resumes, which for the most part, all look the same.

This past weekend I was talking to some friends about the hiring practices at their firms. They’re first year analysts at a top-tier management consultant firm and investment bank, and listening to their stories about college applicants was a little disturbing.  Part of their job is filtering through applications from their alma mater, weeding out the riff raff, conducting interviews, and making hire decisions for summer analysts and incoming first-years.  On paper, a majority of applicants look the same: 3.7+ GPAs, a quantitative or analytical major, a couple extracurriculars, maybe some relevant background experience, and that’s about it.  I asked them how they decide who gets the job and who doesn’t.  Obviously, successful applicants make a good and lasting impression in an interview, but they also have other unique traits like “food adventurer,” or “fluent in German, Japanese, and Tagalog.”  These are the deciding characteristics.  It matters if you have a passion for exotic cuisine or if you’ve helped build houses and plant trees in the middle of Indonesia.  All in all, the whole hiring process is tedious, and it’s inevitable that some of the best applicants are overlooked.  It’s easy to make mistakes when you’re looking at thousands of black and white pieces of paper, all of which look almost exactly alike.  It’s an archaic system.

There has been a growing sentiment in the tech community that if you’re serious about your work, you need to establish an online presence.  Chris Dixon talks about it all the time.  USV hires their analysts by asking for a link to their online hub.  The URL is replacing the standard resume.  It’s a growing practice and it carries significant merit. I’d argue that this approach to hiring and establishing an online persona should be extended to all industries.  If you’re applying for a job, you’re going to be Googled, and when someone Googles you, they should find something you’re proud of.

Everyone should get serious about establishing an online hub you can proudly point to. It can take countless forms: LinkedIn, a blog, Facebook, Twitter, online portfolio, etc. I’ve chosen to make my blog my hub with spokes reaching out to Twitter (where I pass along articles I like) and LinkedIn (somewhat of a formal profile).  I can confidently point to my blog and say that you’ll get a glimpse into what I’m really like as a person. You can see the way I think, the things that interest me, and get a topline idea of what I’ve done throughout the years.

Most hiring practices are impractical.  Some allstars are overlooked, and some undeserving people land gigs.  A step towards rectifying the situation is pointing to an online destination that helps show who you are.  If you’re an exotic food junkie, prove it!  Show me a picture of the seahorse your ate, or the blog entry about the time you cooked rattlesnake.  If you love film, I want to hear about your favorite westerns. Resumes are too easy to bullshit.  (You can argue it’s easy to bullshit an online hub, but if you’re putting information out to the public that isn’t true or doesn’t reflect who you really are, someone is going to inevitably call you out on it and it won’t be pretty.) Creating an online identity that represents who you are as a person is more useful than one page of paper listing your GPA and past internships.  It also provides an opportunity to show, not tell, what really gets you going.  You don’t need to be tech savvy to establish you’re online hub, you don’t need to be a programmer, and you don’t need to have artistic design chops.  The tools are out there and they’re easy to use (Tumblr, LinkedIn, and Twitter are SIMPLE!). I think if more people approached hiring, job searching, and resume creation by establishing an online hub, they’ll be much happier with the end result.

Can Twitter Trending Topics Really Tap Local?

Twitter recently introduced Local Trending Topics to tap into the pulse of your city.  It’s a step in the right direction for curating and displaying information that’s relevant on a local scale.  However, if you browse through the different local options, you’ll notice that the trending topics don’t change much.  They also don’t provide much insight or relevancy to their respective cities. For instance, the New York City trending topics don’t really tell me anything unique about NYC, and they’re remarkably similar to those of San Francisco and Chicago.  (Obviously Apple’s iPad announcement yesterday is helping drive these similarities - #itampon appears in every local trending topic.)

Twitter does a great job on tapping the pulse of the nation, but it’s difficult to tap the pulse of a specific geographic region.  Right now all trending topics are national and global issues: Haiti, the iPad, State of the Union, celebrity deaths, etc.  When there are enough tweets to create a trending topic, chances are they’re focused on a larger-than-local topic.

I think there are several actions Twitter can take to help local trending topics become useful:

• Achieve greater scale (duh) and focus on its active user base - the more information the better
• Local curation - it wouldn’t hurt to add an editorial and curated component to help organize local trending topics
• Better algorithms that skim off the popular national and global trending topics and hone in on local-specific data

Local has presented itself as the internet’s next frontier.  There’s a gradual shift from focusing on the general “What’s happening” to the more relevant “What’s happening that’s important to me.”  Twitter has proven to be valuable for breaking news, but they clearly have work to do in breaking local news. They’ve got the momentum and they’re clearly thinking about it.  I think it’s only a matter of time and effort before they figure out the right equation.

Why I’ll Get the iPad

Do I need it?  No.  But I’m going to get it and I’ll use it everyday.  Here’s why:

• It’s affordable.  $499-$829 with or without a 3G data plan is an astonishingly low price point.  I was worried about a $999+ price range.
• Reading - I need a device I can read on the subway everyday.  I like to read the WSJ and NY Times in the morning and I can now do that with the iPad.  I won’t be using this as a conventional eReader like the Kindle.  For me, nothing will replace the feel of a real book.  It’s just my personal preference.
• Travel - I can hop on a plane with and iPad and leave my laptop and iPod at home. From what I can tell, this is the quintessential traveler’s device.
• Entertainment & Gaming - I’m not an iPhone user (I refuse to use AT&T), but I do use my iPod touch for entertainment.  My only gripe with the iPod is the small screen size.  iPad solves that.
• Web-browsing on the couch, in bed, and everywhere else - I bet 1.5 pounds feels a lot better than a hot laptop sitting on my lap.

That’s it.  If I can do all of these things on a slick device and interface for $499-$829, then I’m sold.  This won’t be my primary email or work device, but it will enable me to consume content to my hearts delight.  And that’s all I want from it.

Buffett Investing

I recently finished Roger Lowenstein’s Buffett: The Making of An American Capitalist.  As far as biographies go, it’s one of the best I’ve read.  The most intriguing thing about Buffett is his business genius, and this book does a good job focusing on it.  For a more detailed story of his personal life, I hear The Snowball is the way to go.

What I find most interesting about Buffett is his ability to breakdown complex problems and explain them in simple terms.  I also found striking similarities between Buffett’s investment style and USV’s approach to venture capital, particularly slow capital.  (Granted, Buffett wouldn’t be happy with the rule of 1/3’s.)  There’s a lot of overlap in understanding businesses, the people who run them, their respective markets and competitors, and focusing on one’s area of expertise.

Here are some of Buffett’s guides to picking stock:

• Pay no attention to macroeconomic trends or forecasts, or to people’s predictions about the future course of stock prices.  Focus on long-term business value - on the size of the coupons down the road.
• Stick to stocks within one’s “circle of competence.”
• Look for managers who treated the shareholders’ capital with ownerlike care and competence.
• Study prospects - and their competitors - in great detail.  Look at raw data, not analysts’ summaries.
• When you have conviction about a stock, show courage and buy a ton of it.

A lot of these points seem intuitive.  Do your research, know your shit, trust your gut, and go for it.  The book covers a lot more minutia in his approach to investing - working with CEOs, hands-on approach, field research, relationships with business and political leaders - but these are the prevailing themes and they should be applied to more than just picking stock.

Live Events: Power to the People

I went to Webster Hall last night to see Röyksopp.  The show was great, it sold out and then some.  Since you couldn’t move (or see) from the floor, I chose the view from the balcony.  There, I noticed something rather peculiar.  At any given moment there was a minimum of 30 people on the floor with their phones or cameras in the air, taking photographs and filming.  No exaggeration, 30+ people at all times.  This isn’t anything new.  People are doing this all the time.

I personally prefer to enjoy a show with my eyes and ears, not through the lens of my camera or phone.  I’ll snap a photo here and there if I have a good shot and the lighting is just right, but that’s about it.  I think it’s a bit weird that people choose to wave their phone in the air for the entire duration of a show, but it’s just going to get weirder.

There are two types of people who are taking pictures and video during shows: those who post immediately to Facebook or Twitter, and those who take their shots home, edit them, and upload them to a portfolio or SNS of choice.  I’d venture to say that the first category of uploaders is growing faster.  People want to be the first to break news, share with their friends, and be the premiere source of a live story.  Everyone wants their time to shine and provide that golden nugget of information.

There’s a lot of room for building applications around live events.  Hot Potato is doing this right now, enabling people to converse and create metadata on a specific topic in real-time.  There’s plenty of room to explore and there’s a definite need for these services.  We’ve seen successful executions of this such as CNN and Facebook Connect’s coverage of the Presidential Inauguration, but there are very few tools that empower individuals to create their own streams around an event of their choice.  Tumblr is especially useful for this (spend some time in the tag channels and you’ll be amazed by all the quality content you find).  I can take a video of a performance with my iPhone, tag it, and immediately post it to my blog in a matter of seconds.  More importantly, it’s immediately discoverable in everyone’s dashboard.  It’s the platforms which empower people to create and disseminate information they’re interested in that are most influential.

Hot Potato

The mobile service Hot Potato launched at the RealTime Crunchup earlier today.  My first impression is that it’s a local and mobile version of Facebook Connect.  This is a good thing.  Similar to the way Facebook lets friends and strangers communicate around live events on major networks (e.g. Presidential Inauguration on CNN), Hot Potato enables people to communicate in real-time around local events (e.g. concerts, parties, etc.).

It’s another iteration of local applications. You can check into places just like you would on Foursquare, but the features don’t just stop there.  You can write messages, post photos, and communicate with fellow attendees.  Essentially, it behaves like a multimedia mobile chatroom.  TechCrunch describes it quite nicely:

Hot Potato uses events as its primary filter, and adds a social and geo layers on top. You sign in with your Facebook account so you can connect with existing friends easily. You can also add your Twitter account. When you send out a note or put up a photo, it can be shared on Facebook, Tweeted out, or shared via email with a link back to the original content. The link goes back to a Hot Potato website where all the links are hosted. Or you can simply share your Hot Potato status (attending, watching, following).

There’s a ton of hype around local and mobile applications right now, and I think Hot Potato is poised to make some noise.  I’ll be following this one closely.

Que Pasa?

Two big things happened today in Twitter land: the Retweet feature was implemented across the site, and their call to action was downsized from “What are you doing?” to “What’s happening?”  Here’s my take on the matter…

The new Retweet feature needs some work.  People don’t like changing something they’re comfortable with, and the Retweet button is far off from the original user-developed Retweet functionality.  The fact that you can’t insert your own text into a Retweet is very discouraging.  Part of its original appeal (at least to me) was that it empowered people to put their own spin on someone else’s tweet (just like a Tumblr reblog).  I also am peeved by the influx of people I don’t follow into my dashboard.  It’s a bizarre feature, not to mention a startling invasion of my private space.  I follow the people I follow because I choose to.  I was happy with the old RT and Lists for finding new people to follow.  I don’t need them to infiltrate my dashboard without permission.

Evan Williams explains Twitter’s logic behind the new RT here.  He acknowledges that it’s a different type of RT:

People understandably have expectations of how the retweet function should work. And I want to show some of the thinking that’s gone into it. I’ve been a big proponent of this particular design internally at Twitter, because, while it won’t serve every use case, I think it offers something new and powerful.

His reasoning makes sense (it’s essentially a cleanup job intended to increase visibility around attribution), but from a user’s perspective such a drastic shift in functionality doesn’t make sense.  I think it would have been universally embraced if all it did was eliminate the copy/paste procedure by adding “RT” to the text box.  Then Twitter could iterate until they were happy with RT.   I would have been much happier with the rollout if it slowly progressed to where it is now instead of taking a giant leap.  Oh, and the RT button is Tumblr’s Reblog button rotated 90 degrees :-)  I like that.

Then there’s the shift from “What are you doing?” to “What’s happening?”  It’s not a seismic shift in functionality, but a shift in philosophy.  Biz Stone eloquently discussed the change:

The fundamentally open model of Twitter created a new kind of information network and it has long outgrown the concept of personal status updates. Twitter helps you share and discover what’s happening now among all the things, people, and events you care about. “What are you doing?” isn’t the right question anymore—starting today, we’ve shortened it by two characters. Twitter now asks, “What’s happening?”

This is much more in sync with Twitter’s “Pulse of the Planet” goal.  The new call to action won’t change the way people use Twitter, but it demonstrates a fundamental shift in the way Twitter thinks about Twitter.  It’s a movement from Twitter as a vanity tool to Twitter as a multi-purpose communication and reporting tool.  This isn’t new information, but it does mark a definitive and conscious change of focus for Twitter.

It’s been a big week for Twitter.  We’ve seen them take something the community created and change it as they saw fit, and we’ve also seen them embrace the way users utilize Twitter and let it change them as they saw fit.  It’s a prime example of understanding and adapting to user behavior.