What we are doing to our kids' education

So, I’m not the overtly political type. In fact, my wife often gets frustrated because I voice views that sit both sides of the party fence and in her opinion I should be neatly standing within the confines of a single political party. From this stance, you can consider me a lost ‘pigeon’ looking for a ‘hole’ (between you and me, i have no desire to find one).  Now that we’ve got that out the way, I can begin.

Reading an article this morning about how school districts are increasingly looking at moving to a four day school week to save money was incredibly disturbing to me. Doesn’t this set alarm bells ringing with you? OK, some argue that time is made up by lengthening the school day to compensate but this is not the point. The point is that bit by bit we are eroding our kids’ future by continually chipping away at what we invest in them. We shouldn’t be coming up with justification as to why it’s OK to reduce their education, we should be engaged in conversation about how we are spending more on their futures. I view many things in life like running a business and this is no different. We are disinvesting in an asset – our kids – at a time when we should be investing. In corporate speak, we are laying kids off, making them redundant; we are downsizing their future.

Let’s give some context to this situation. This is where i want to avoid being political and keep things to an economic debate. I’m not trying to have a discussion about whether we should or shouldn’t have gone to war in Iraq, I’ll leave that to others. I’m using Iraq as data point. So, let’s lay out the facts.

The government has just committed to plow $4 billion into education to help fix things. Given there are about 50 million school kids in the U.S., that equates to an investment of $87 per child. Now for a comparison: The total amount spent and committed to the Iraq war so far is $900 billion. If that money had been directed into education instead, it would equate to an investment of $18,000 per child.

Some other tidbits…

• Amount of spend per child on U.S. kids from Obama’s new education initiative is $87 ($4bn  / 50m = $87 )
• Amount of spend per child on U.S. kids if the all the Iraq war spend had been directed to education is $1,800 ($900bn / 50m = $1,800)
• 10 billion is the number of kids that could be educated if we took the Iraq money and spent $87 on each of these kids ( i.e. it assumes the same level of additional investment currently being made by the government on U.S. kids).
• Given there are only 560m school age kids in the world*, we could reach FIVE planet earth’s with the Iraq money ($900bn / $87 = 10bn kids)
• $1,607 is the the amount that could be spent on EVERY school kid in the world if the Iraq budget had been redirected into education ($900bn / 250m school kids in the world = $1,607)*
• The annual total amount spent on U.S. school education is $500bn, so the Iraq money could have educated the entire country for 2 years.
• The total annual education spend on the 29 top countries in the world is $1.1 trillion. The Iraq money would have educated the entire world for nearly a year (and this excludes virtually all the 3rd world countries).

So, we can preface all these facts and figures with the disclaimer that I am no statistician but they do give an order of magnitude. And yes, this may be info overload, but if you look at all this like a business the ROI in educational terms is dire and the sooner we get our priorities right the better.

*There are 2.2bn children in the world. Remove 28% (ages 1-5), gives the number school age kids in the world = 560m (yes, rough figs).

I like stories…

Using Tales For Business

These traditional Tales from The Market have been handed down and treasured for generations. Each story has outstanding analytics and has been rated AAA (”a super-good read”) by Shotzy’s Tale Rating Service.

One of the wise elders from the town of Greenwich tells this first tale, introducing us to the magic of The Market:

A fox and a hound waited in a copse outside of a farmer’s henhouse.

“Ooh, I can hear those chickens clucking from here,” said the hound. “Let’s go in there and snatch them all!”

“Not so fast,” said the fox. “If we take them all at once we can’t ever return. But if we take just one, then perhaps the farmer won’t notice and we can keep coming back night after night to get more.”

“That’s a good idea,” said the hound.

The two entered and went to work quickly. The fox grabbed as many chickens as he could, emptying the henhouse.

“Hey,” said the hound. “I thought you said we were going to take only one chicken.”

“That is what I did,” said the fox. “I limited myself to one chicken.”

“Forgive me, my friend,” said the hound, “but that is not accurate. I saw you take at least seven chickens.”

“The one chicken was my limit,” said the fox.

“And the other six?”

“Ah,” said the fox with a smile. “The other six were the bonus I gave myself for staying within my limit. And a very nice bonus it was indeed.”

The moral of this story? In The Market, a bonus doesn’t count. That’s why they call it a bonus.

•

The mouse king needed a ride to the other side of the river, so he called on a large alligator for help.

“Can you take me to the other side of the river?” the king asked. “I will pay you $20 billion from my coffers.”

“That’s a lot of money, even if it is in mouse dollars,” said the alligator. “I’ll take your offer.”

So they set out on the river, which was very shallow, allowing the alligator to crawl more than halfway across. Then they hit a deep spot and started to sink.

“Help!” cried the king. “I can’t swim.”

“Neither can I,” said the alligator.

“But you’re an alligator,” said the king. “Surely all alligators can swim.”

The alligator explained that he had once been able to swim. But the river was so shallow and so rich with fish to eat that he had grown plump and lost the skill.

“What do we do now?” cried the king.

At this point the subjects of the king who were watching from the river bank recognized what was happening. Many began paddling furiously to the sinking alligator. They used their little mouse legs to prop him up and propel him to the other side. Most did not survive the task.

When he was safe on the other side, the mouse king asked, “Why did you accept my offer if you couldn’t swim?”

The alligator said, “I will be honest. I did it for the money. I figured we would somehow make it to the other side. And sure enough, we did make it. You see, I was right.”

“But what about all of my subjects who drowned in the river?” asked the mouse king.

The alligator shrugged. “Hey, risk is a part of every transaction,” he said.

With that, they went to dinner at the restaurant on the other side of the river and shared a very nice bottle of wine. And forgot about the whole thing.

Daniel Greenberg is a writer in New Rochelle. He wrote this article for The Washington Post.
Read more: http://www.timesunion.com/AspStories/story.asp?storyID=901120&category=opinion#ixzz0gT08UYDY

Some what related to my post yesterday about raising money, these guys, Venture Hacks, are worth following – Nivi (bio) and Naval (bio). Their advice is succinct and born from good experience and a strong network of people in the know.

It's Gotta Be A Good Deal

Unquestionably, raising money for your business is a time consuming and often traumatic event for many. I’ve found myself wearing these shoes on many an occasion but i do fairly frequently find the shoe being worn on the other foot. There’s not a whole lot of businesses i invest in; I’m certainly no serial angel, since I’ve usually put money into the businesses where I’m personally involved. But all said and done it’s gotta be a good deal that makes sense.

Last year, one business did capture my interest. It was going to be  a passive investment for me and it had good cash flow prospects – nothing huge but a good solid return from a niche advertising play. Many of check marks were there, addressable market, previously inefficient management team (it was an acquisition play),  a young, hungry and articulate guy to run it, another investor willing to put in money and so on.  The window to buy the business was short (14 days), so the question was, could i complete  the due diligence in time.

Eventually, i chose not to investment but it was a close call. And here’s the interest for me. Why didn’t i invest?  The short period available to size up the business was good in a way because it forced me to concentrate on what was important.

Distilling it all down, there were 3 reasons why i didn’t invest and i think these are useful to any small business trying to raise money. Taking this from the point of view of why i didn’t investment puts a slightly different slant on things.

So, here’s the 3 reasons why your small business will not be able to raise money. Ignore them at your peril.

• The end-customer is missing - the business in question, was an advertising play based around public transport (not sexy but very interesting). A good part of it’s revenue strategy involved getting local government ad dollars and hitting up local businesses along the transit routes. I was put in front of ad agencies who said they could sell this space for sure, politicians who said this was a no-brainer because the sector was so undeserved and sales reps who were sure they could sell the space. At the end of the day, i want to hear from the horses mouth. I wanted to hear from the government media guy that he had dollars and this was a good place to spend them; i wanted to hear from businesses along the route who would switch their spend to this new network. The people i talked were all one step removed from the customer. Show me these case studies or put me on the phone with them and I’m starting to reach for the check book.

• There not enough cash to ramp the business - the business plan called for $230k in cash to take things to break even. It was all too tight for me, as one of the investors. After my information gathering, I hacked away at the spreadsheet and ended up with a figure of $375k-$400k (this would give a 12 month ramp, with virtually zero revenues). If the business ran out of money, i didn’t have the time to fix things or the desire to put in more money myself (remember, most investors are passive and have other things – many things – going on. It’s the old adage for building a business – “it’ll take twice as long and twice as much as you think”). The result of this, was we needed more investment partners but we didn’t have enough time to find one. It’s a shame because if this was recognized earlier i don’t think we would have had a problem finding one. If we had had a third partner, i would have been reaching for the check book.

• The corporate structure was made of Swiss cheese – the paperwork for the NewCo entity that was to purchase the assets wasn’t ready for review. The term sheet with was missing some pretty significant terms. All of this could have been sorted out with some work on my part but that’s not what an investor wants to walk into. When you’re looking at a car to buy, you want it clean with a good polish before you hand over the cash for the keys.

Beware: your dance confidence is in danger

I was listening to BBC radio yesterday, getting in holiday mode, and I was flabbergasted to learn that my propensity to want to dance is in it’s descendancy. Apparently, my confidence  in shuffling my feet and swinging my hips- aka my “dance confidence” – is at a low and it’s going to get worse. All is not lost, the minute i hit 65, i transform back into JT and my life becomes an all round Saturday Night Fever. Naturally, these revelations led me to ask, how is going to affect my business because obviously it has to – think of the impact on VC pitches or customer presentations.

Research conducted by Dr Peter Lovatt from the University’s School of Psychology on the BBC Radio 4 Today Programme’s website asked people to imagine they were at a party dancing with other people and then asked them to rate how good a dancer they thought they were compared with the average person of their own age and gender.

Almost 14,000 people filled in the Dance Style Questionnaire and the results show that although up to the age of 16, men lack confidence in their dance moves, after that their dance confidence rises steadily with men over the age of 65 having higher ratings than men between the ages of 55 and 60.

Women, on the other hand display immense confidence up to the age of 16, experience a drop between then and 20, and then confidence levels rise steadily up to 35 and then drop steadily between 55 and 65.

We all remember Elaine

Dr Lovatt, who conducted this research as a follow-up to conducting an experiment into the links between genes, physical attraction and dance, believes that the discrepancy in dance confidence between men and women lies in their genetic make-up.

“Up to the age of 15 or 16, girls quite often validate their moves through dance classes which give them more confidence than boys when it comes to dancing,” said Dr Lovatt. “Then after 16, they improvise and show their hormonal and genetic make-up when they dance. Men seem to be more comfortable in their genetic make-up and in tune with their natural biorhythms and therefore feel more confident when they dance.”

The next question that Dr Lovatt wants to answer is “Why do you dance?” or possibly more pointedly “Why don’t you dance?”

“We need to know if people’s reasons for dancing change as they get older,” he said. “We know despite our research findings that lots of men don’t dance and we wonder why this is. It may be that they perceive it as a non-macho activity and if this is the case, we need to find ways to introduce it as a fun vital health measure.”

When "mini" is good

I’m immersed in the throws of getting Openstudy (@openstudy) out the door and it makes me realize, once again, how important it is to work the smart and effective way with a limited amount of resources – especially, when you’re in major start-up mode. We subscribe to the Agile development methodology for building  a product, which lets us get things done quickly in small bite sized pieces. While this is a good way to get a product out the door quickly, the approach is also remarkably applicable to running a small business.

The essence of this approach, is that your business will develop and grow through an ongoing series of mini-changes, not one big step change or an all in one redesign. Since these changes are driven by your customer requests and involve all your company, marvelous things will start happening.

If you take a blue print for this process – I like the way the guys at Aardvark lay it out – you can easily see how this can be applied more broadly to a small business (you might want to read through the Aardvark blog post on this topic to get a better reference point). Here’s what it looks like . . .

If you overlay this thinking onto the more general aspects of a small business you get the following.

• Learn from users – Choose a part of your business you want to improve. Talk to your customers in a structured and detailed way. Set up an interview time. What do they think? Gather ongoing feedback  from Twitter, blogs, people in your company etc, the key word here is ‘learn’.
• Design – take the what you’ve learned and design a very narrow and well defined response (involve your whole team). This may take the shape of a new twist on an existing product -or improving the way your do something, like adding a new way to respond to customer complaints. Set up a smaller group responsible for working out the details, they should come up with some alternative options and settle on one. Sketch things out, no design agencies needed, this is down and dirty.
• Sanity check with users – time to take your ideas back to your customers. Try and ’simulate’ the solution you have worked out in your Design and see how people react. Make this down and dirty, you’ll still need to refine it so dont spend too much time on ‘making it pretty’ at this stage.
• Design Review with Team – take what you have found back to the team and make refinements.

Now you need to make it happen . . .

• Implementation notes – the team responsible for implementing the new change, prioritizes it in the context of the changes from the last few weeks that are already being worked on and creates some brief implementation notes. Since everyone, had been involved in the process there’s no big surprises or need to ‘educate’ people on what is being done.
• Implement – Push out the changes and let your customers know what you have done. Start gathering their feedback and continue the learning cycle.

Remember, this process is continually happening within your business. Positive change comes from continually making small refinements, derived by listening to your customers and involving everyone in your company.

Apparently, God is worth $587,496.20 to Facebook. Comparing that to my worth of $52.40, it makes the man in charge 11,212 more valuable than me.  While this is hardly going to explain the mysteries of religion, it is an interesting statistic given the source. Adam Penenberg (the guy who wrote Viralloop – a book worth a read) created a Facebook widget that measures your personal value to Facebook. He claims it’s purpose is to conduct a social experiment on his ‘viral loops’, which it is but it’s also a great way for him to promote his book (which is good as well) – you can calculate your worth to Facebook at the bottom of this post.

The guy with the highest value to Facebook, outside the celeb gang (God’s classed a celeb), is Jason Calacanis, CEO of Mahalo, a human powered search engine. Here’s an exert from Penenberg’s interview with Calacanis. I like the hard case facts behind social media success.

PENENBERG: What social networks do you use and what are their respective advantages?

CALACANIS: Ninety-percent of what I do is on Twitter because it’s the most lightweight and quickest. I also get the highest click-through-rate on Twitter (1 to 2% will click on a link, for example, sending 500 to 3,000 folks to a story). I syndicate my Twitter activity to Facebook, but I get very little traffic from it. Whenever I go to a city I try and host an “Open Dim Sum,” which I promote to my Twitter, Facebook and email lists. My email list gets 60% of the RSVPs, 30% from Twitter and maybe 10% via Facebook. I find very few folks are watching their Facebook feed, some are watching their Twitter feed and all of them are watching their email box. So, while social networks are nice, email is still the killer application.

PENENBERG: Do you ever feel too connected and want to run over your iPhone or Blackberry with your car?

CALACANIS: The only time I felt a little too exposed was for a week then I started life-streaming for a couple of hours a day on Qik and Ustream. It became very much like the film “We Live in Public.” I started to feel the need to feed the audience… which basically made me into low quality, cheap fast food. I prefer to be a high-end steak…. and that comes in the form of my email newsletter (”Jason’s List,” with 17,000 subscribers), “This Week in Startups” (my weekly podcast) and TechCrunch50 (my yearly conference with Mike Arrington). I’m feel better when I’m being consumed in my finest form…. no soylent green wafers.

PENENBERG: There are viral characteristics to Mahalo. Can you pinpoint a few of them?

CALACANIS: We pull in questions from Twitter via our @answers and @questions accounts. Just put either of those words at the end of your question and your question will be added to Mahalo Answers and you never have to visit our site (or create an account!). It’s fairly magical to Tweet a question and have quality answers just start flowing in.

[full interview is on Fast Company]

See what you’re worth to Facebook (click here and then select ‘Widget’ from the menu at the top of the page) created by Penenberg, it’s pretty interesting. You can work out if you are worth as much as God.

I’m looking for a marketing person who is strong on the social media side. it’s for a start-up called OpenStudy. Pretty cool space.

Download the job description if you want to know more.

Marketing Manager Job Description – OpenStudy.com

Measure your business

Someone (thanks Ashwin) forwarded me some notes from a presentation on why measuring your business is so important. It was a good reminder on how true this and a good reminder on how we forget about it. Here’s the jist of it, complements of a talk by Chris Klaus from Kaneva :

1). Use a “lean startup” approach. (Google “lean startup”)

2) Focus on “metrics” from day one. The best 5:

• Acquisition – what is the cost per lead to the site? In his experience, Google ads are best, but do a range of things.
• Activation – once users get to the home page, how many actually engage in your activity. MUST do A/B testing. It is built in to Google analytics.
• Viral coefficient (referral / word of mouth marketing) – what percentage of users invite others X what percentage of invitees accept and become users? If viral coefficient > 1.01, the site is growing by itself. (Most aren’t). Paradigm shift: spend $0 on marketing focus on improving viral coefficient.
• Retention: once users visit the site, how many come back, how often, find out why. At Kaneva, the #1 thing users say will attract them back more often is more games.
• Revenue: how to monetize. He likes freemium best, but it may not always apply

You MUST collect these numbers to validate the model, no matter how early or small the site is. e.g., if viral coefficient > 1.01 and retention = 40-50%, nothing else matters, he will invest in it. We’re just kicking off things at Openstudy and we really need to focus on how students are using our platform to study with each other. It’s something – metrics that is -  we do have in place but this reinforces maybe not enough.

Vocalocity's Customer Testonial Channel

One of my old companies, Vocalocity, took a simple idea and blew it up into something very creative and effective.

Premise. Send out a cheap video camera – like the Flip – to a handful of your best customers and ask them to record a testimonial. Provide a stamped addressed envelope for them to return the camera and there you a go, a low budget real life video to use in your sales pitch. Now recycle the camera and send it to another customer. Believe it or not, people do send the camera back as a rule. If the camera only costs $150 and 5 customers recycle it before it’s swiped or gets busted, that’s only $30 per testimonial, not bad!!!. Try giving that budget to a full service production company.

The Voclaocity guys took the concept a step further and built an entire video channel around the testimonials called Vocalocityflix. Great idea. They could take it one step further by allowing others (like resellers) embed the videos on their web site , increasing SEO and reach even more.

Link to their video channel – http://vocalocityflix.com/

Some of the benefits:

• More effective – the low production value plays to your favor. Prospects see it as real and genuine and therefore more believable.
• Better customer loyalty – the customers who participate in the testimonials love it. It’s all about engagement
• Great sales tool – instead of sounding all sales like on the phone, just get your prospect to watch some testimonials within you online while you have them on the phone.
• Build SEO – the video site builds great SEO for your web site.
• Increase ad response rates – the video channel makes a great landing page for ads.