Blog has been Moved

My blog has been moved to sergekass.tumblr.com. All updates from this point forward will be there. This blogger account is inactive.

Failure and What It Means

Three years ago at the All Things D Conference, Steve Jobs had an amazing quotation about his past failures. Its something I constantly try to remind myself when looking forward.

"There’s a lot of things that happened that I’m sure I could have done better when I was at a Apple the first time and a lot of things that happened after I left that I thought were wrong turns, but it doesn’t matter. It really doesn’t matter and you kind of got to let go of that stuff and we are where we are. So we tend to look forward.

And, you know, one of the things I did when I got back to Apple 10 years ago was I gave the museum to Stanford and all the papers and all the old machines and kind of cleared out the cobwebs and said, let’s stop looking backwards here. It’s all about what happens tomorrow. Because you can’t look back and say, well, gosh, you know, I wish I hadn’t have gotten fired, I wish I was there, I wish this, I wish that. It doesn’t matter. And so let’s go invent tomorrow rather than worrying about what happened yesterday."

Today, Chris Dixon (who has become one of the most respected new tech minds in NYC) posted the following about  his past failures and everything he has gotten from them (http://cdixon.org/2010/09/12/getting-rejected/) It reads as follows:

"If you aren’t getting rejected on a daily basis, your goals aren’t ambitious enough

My most useful career experience was about eight years ago when I was trying to break into the world of VC-backed startups. I applied to hundreds of jobs:  low-level VC roles, startups jobs, even to big tech companies.  I got rejected from every single one.  Big companies rejected me outright or gave me a courtesy interview before rejecting me. VCs told me they wanted someone with VC experience.  Startups at the time were laying people off.  The economy was bad (particularly where I was looking – consumer internet) and I had a strange resume (computer programmer, small bootstrapped startups, undergrad and masters studying Philosophy/mathematical logic).

The reason this period was so useful was that it helped me develop a really thick skin.  I came to realize that employers weren’t really rejecting me as a person or on my potential – they were rejecting a resume.  As it became depersonalized, I became bolder in my tactics. I eventually landed a job at Bessemer (thanks to their willingness to take chances and look beyond resumes), which led to getting my first VC-backed startup funded, and things got better from there.

One of the great things about looking for a job is that your “payoff” is almost always a max function (the best of all attempts), not an average. This is also generally true for raising VC financing, doing bizdev partnerships, hiring programmers, finding good advisors/mentors, even blogging and marketing.  I probably got rejected by someone once a day last week alone. In one case a friend who tried to help called me to console me. He seemed surprised when I told him: “no worries – this is a daily occurrence – we’ll just keep trying.”  If you aren’t getting rejected on a daily basis, your goals aren’t ambitious enough."

What I find so interesting thing about both of these messages is that they touch upon what I see as the two most important aspects of failure: 1)Don't dwell on the past and look to the future (Jobs) 2) Failure helps you mature and learn (Dixon). Putting these two perspectives side by side make each more powerful together (ha, the sum of the parts is stronger than them standing alone). These views on failure can be valuable to anyone, whether in your personal or professional life. And if you don't fail, well, I guess you are a robot (I could not think of a better insult).

And since I like to add a video to everything. Here is what I believe is Steve Jobs' most inspirational moment (but note, I am biased):

Pirates of Silicon Valley

Its been about ten years since I last saw Pirates of Silicon Valley (back when I was still in college).  I know a lot of the truth in the movie has been stretched a bit, but I still love the movie. I watched it again today and its amazing to me how the same basic ideas and arguments around innovation still hold true. Both Apple (which is now a very different company in Steve Jobs' second tenure) and Microsoft were trying to build platforms for consumers/enterprises. Apple did it by building the largest closed platform or walled garden. They wanted their software to be exclusive to their hardware (which they still do now, but in a much more open lenient way by allowing others to create software and apps for their hardware). Microsoft tried to create the biggest open platform for software that would work on any hardware. The movie depicts Gates stealing Jobs' UI (which Jobs stole from Xerox) and using it on an NEC, IBM, etc.  


If you look at the tech world now, a similar war is going on between Google and Facebook. Google is the open web that serves ads (and drives CPMs) based on everything on the web. On the other hand, Facebook is the closed platform or walled garden (which Google does not have access to), using the information that is created by its users to serve its ads (I have no doubt Facebook will create a larger ad network for all websites using Facebook connect). The question is which is more valuable to advertisers? The closed information that Facebook has or the open (which can include transactions) information that Google optimizes.


Here is a fun clip from Pirates of Silicon Valley:

SoundCloud: Kanye West Power Remix

I love the SoundCloud service. I am constantly getting send awesome remixes and indie stuff on it. Last week, Kanye announced that every Friday he will be releasing a new song. I hope they are all as good as this Power Remix (every remix needs to have Jay-z on it!!!) and I hope they will all be put up on SoundCloud legally (I assume Kanye's team is leaking them here). Its actually a great place to put up remixes that are not masters on albums. If you know anything about this, please let me know. In the mean time, enjoy this kick ass song:

  Kanye West feat. Jay-Z & Swizz Beatz - Power (Remix) by uristocrat

Twitter vs. Facebook Trailer

This is awesome. Compare the Facebook "The Social Network" Movie Trailer (real) to the Twitter Movie Trailer (fake) by Rated Awesome. Fun stuff:

How To Become a Rainmaker

Having been surrounded by MBA's and MBA type A people over the course of the last several years, it is abundantly clear that their goal in the long run is to be a rainmaker of some sort. A leader in whatever industry they choose where they make decisions that have impact,  become thought leaders and executives in that field and earn a lot of money. This can be true for start-up executives, media people, investment bankers, consultants, private equity guys, venture capitalists, hedge fund investors, brand managers, etc. One could even extend this to doctors, to lawyers and to any professional services.  They want to be "the man" in their field (fyi, women can also be "the man"). I have a theory of how you get there just through the people I have met and those who I have observed to be successful. You need to do one of three things:

1) Have a Career Path and Move Up-This seems obvious but it is much easier said than done. When you join an investment bank or consulting firm, there is a very clear career path. You work for x number of years get promoted along the way, become partner and boom you are a rainmaker (I know that is oversimplifying it but you know what I mean). The same can be said for corporate jobs in the right situation. However, for this to work, it takes a lot more than just moving up the ladder. You need to be good at the job, you need to like the job and the business has to be able to accommodate this path (through growth, changes, expansion, lack of attrition).  A lot has to go right and timing may play a role. However, I do believe that longevity can get you there in the right situation.


2) Start Something on Your Own-Everyone automatically equates this to a tech start-up, but it can  be anything: internet site, restaurant, hedge fun, shoe store, perfume brand. If you are the first or an early team member of something that is being built from the start and is successful you can quickly become successful.  Obviously, there are a lot of challenges with this, including market factors, timing, execution, team dynamics and competitive forces. However, if you build something and it grows, you can hit the home run. You can do this internally at a big company as well. Start a product or a group. Expand into a new market. There are endless possibilities. I think Google is the best at fostering internal start-ups.


3) Have a Great Senior Executive Mentor Who Takes Care of You-When you look at some of the most successful executives, they have aligned themselves with senior people and have followed them around from place to place. They basically will do anything for them (writing speeches, putting together board presentations, even getting coffee) just to keep them appeased and build trust. In return, these senior executives invest in the careers of the junior people and help them become a senior executive themselves, granting them access to their unlimited Rolodex. The senior executive grooms them and helps them grow professionally, providing access to lessons and positions that would have never been possible without this relationship. The junior person follows the senior person from job to job and gets more senior with each role.

So my advice to everyone looking to pick a job or career path. Think it over and make sure you have one of these three things met. On the flip side, you may be quick to dismiss your current job as not meeting these three criteria and that would be the wrong attitude. You can make it happen at your current job. Look for that mentor or try to start something internally that you can take ownership over and grow. It is always possible.

The Facebook Currency!

A lot has been made about the privacy settings on Facebook after they opened the site up to the web and linked profiles with external sites. What does this mean? and why would they make this decision? About four years ago, Facebook implemented the newsfeed and everyone was up in arms because of privacy concerns. Alas, it has become the most popular Facebook feature.

That being said, I think the recent decision to open up the web to Facebook just unlocked the magic of how Facebook can be a $100B plus company. There are two primary ways to make money on the web: advertising and e-commerce. Clearly, advertising is not an issue for Facebook as CPMs continue to rise for the company (or I assume they do as they get more demographic information and build out their ad sales team).

However, there is no dominant e-commerce platform on the web. Users go to different sites for consumer electronics, groceries, virtual goods, toys, shoes, etc. Each time you go to these sites, the biggest inhibitor is putting in your credit card information, logging in and looking for a product you actually want. Another inhibiting factor, which goes understated, is knowing when the product actually comes to market or even exists. A Facebook currency solves all these problems. People buy Facebook dollars, lets call them "Pokes," and Facebook creates the first universal currency for the entire web. Whenever a store advertises on Facebook or you visit the store's site, anyone can buy with facebook dollars ("Pokes," i think i just like saying that). People start recommending products they are buying (tickets, shoes, music) on their facebook profiles, even generating themselves an affiliate fee. Facebook takes a small piece of every transaction just like a credit card company.

Users win because they buy things that their friends recommend and discovery and purchasing becomes easier. Retailers win because significant barriers to purchase on the web are removed. Facebook wins because it becomes the biggest ecommerce platform on the web.

Fast forward 5 years from now. Using the logic above, could you see people using their mobile devices as debit/credit cards to purchase in person using their "Pokes?" Not out of the question, especially if you believe that every retailer will have a marketing campaign on Facebook and will be somehow registered on the site.

Hmmmm, makes me think that I should have bought Facebook secondary shares at that $15B valuation. I am definitely going to regret walking away from that opportunity.

Playoff Time-What Lakers need to do to succeed

Today marks the beginning of the post season for the Lakers. The team is entering the playoffs struggling and with lots of injuries. Here are the five things that the team needs to do to make it back to the finals (i.e. win the west). Once they get that far, I will reassess depending if they play the Cavs, Magic, Hawks or Heat (no chance the Celtics get there).

1. The Big Guys Need to Dominate- Bynum needs to play much better than last year. In the west, no one has two big guys like Gasol and Bynum. In a year when guard play has improved dramatically in the west (this is where the Lakere are weakest), they need to exploit the two big guys.

2. Farmar needs to Double His Steal Average-Farmar is the most inconsistent player on the Lakers bench and also can provide the biggest spark. The most value he brings is when he pushes the ball and speeds up the pace. The Lakers are most successful when the bench runs.

3. Artest Needs to Average Less Then Ten Shots a Game-Artest's value to the team is how well he shuts down the Carmelos, Durants and Ginoblis. In order for that to happen he needs to commit his energy to the defensive end. Artest is getting older and over the course of the season, his defense has lagged in games that he shoots too much (i.e. gets tired).

4. Walton, Brown or Vujacic needs to play the Role of Shooter-Every championship team has a 3 point shooter (last year was Ariza). This year no one has stepped up in that role. During the playoffs, 3 point shooting is that much more important. One of the guys needs average over 2 threes a game.

5. Kobe Needs to Average 6 assists a Game- The Lakers are best when Kobe is a distributor and his teammates are getting their shots. Most importantly, his teammates need to be confident in themselves and hit big shots down the stretch. Kobe will average 25-30 ppg, but the most important thing will be his assists.

Hulu's profitability=bright future for digital media

Last week Hulu announced that it is now profitable on just $100M in revenue . This is huge news for technology companies that are trying to enable digital media and traditional media companies who want to prove they can create real businesses online (beyond marketing).  There is a cultural precedent also being set. Big media is proving it can launch start-ups/successful joint ventures. To think that rumors are that Facebook (the darling of all web 2.0 start-ups) is cash flow positive on $800M in revenue means Hulu did something very right (with only $100M in revenue). Everyone doubted Hulu and thought costs would be too high to create a sustainable business. No one questioned it could attract audiences because of the premium content, but wondered whether it could make money.

Now if Hulu is truly profitable as they claim, here is my guess on a few of the factors that influenced it (please note that I dont have any first hand knowledge):

1) High CPMs and Sold Out Inventory- Advertisers want to be on Hulu. They believe in the audience and CPMs must reflect that. In addition, the ad sales teams must have the relationships from their previous media lives to be able to drive CPMs up, by likely convincing clients that online viewing is as important as TV viewing. The advertisers are also major brands that buy inventory in bulk. If the inventory is selling out, the CPMs are being driven up.

2) Favorable Terms-Since media companies created Hulu, terms must be favorable on licensing fees. Maybe there is a variable content license based on how high CPMs are sold at? Thrid parties have always had difficulties paying content licensing fees because margins are so low and it takes a huge amount of traffic for overhead fees to be overcome. Its a different story when the content owners (NBC and NewsCorp) have their own skin in the game. They want favorable terms that will incentivize both sides.

3) Exclusive content/premieres-Hulu is incentivizing audiences to come to the site by providing content that is only on Hulu. This includes everything from premieres to secondary material. This in turn drives up ad spending and allows Hulu to introduce new functionality and push other content on its users. They are also influencing user behavior, which will drive an important aspect of future Hulu: premium  paid services. If users are regularly visiting Hulu and are accustomed to watching content on there, what will happen when content is available but they cant watch it? They will pay a nominal fee to be able to watch their favorite shows.

What does this all mean? Digital media works and an ad based model can be successful. Traditional media companies use online channels as marketing tools with an added benefit of incremental revenue. Hulu shows that online channels can be much more than that.

Retrans Fees and Why They are Bad

Every broadcast channel has had their share of fights to get retrans fees from the cable providers. For those who dont understand, historically, broadcast tv channels (nbc, abc, cbs) generated their revenue from broadcast for free and selling ads. As ad dollars decrease a because of dvr, broadcast is looking to charge the cable service providers and anyone who carries their channels much like the cable channels. Here is Disney's Recent Fight. Much like the record industry tries to squeeze out revenue with advances from music sites, broadcast is trying to save their industries through retrans fees. However, if ad spending disappears, these fees will not sustain the business.

The risk is what it can do over the long run: debundling. As these standoffs continue to occur with the large cable providers, one of these games of chicken will result in someone pulling content and trying to distribute it independently (through premium online content). The first few efforts will be successful as people would pay $2-3 a month for abc so they can have lost and other content (assuming its pulled off the web and integrates local advertising). However, the first domino will cause more content providers to provide premium online only content creating a price war and potentially reducing the power of the cable providers (especially with the advent of wireless televisions). However, over time, pricing competition for premium channels and online ads will shrink the size of the market, for it will lack power of forcing price on the consumer.  All because of the initial fight on retrans fees.

Mashup! Mashup! Mashup!

If you have ever been to my place, you know I love to play music and especially mashups. Last spring break, my section from HBS went to Panama for spring break and we were at this resort , pretty much the most beautiful place i have ever been to my life (credit Sofia Berger for taking us there). While hanging out there, I put on a mashup from Girl Talk (Feed the Animals) and was surprised to see how many of my friends knew nothing about Mashups. We ended up playing the Girl Talk, Danger Mouse, Z-trip, Bootie and RJDJ albums for most of the trip. In 2005, my buddies Nick Soman and Noel Rosencranz first introduced me to the live Bootie mashups which happen every other Saturday in SF at DNA lounge and since I have been hooked. Check out this clip from Bootie SF Mashup Shows. If you are ever in SF, try to go. Also, a good explanation on what Mashups are:

I have experimented a bit with it but mine are terrible right now, so I will share if I ever get good. In the meantime, I thought I would share some of my favorites of all time. Click below to play and enjoy:

Party & Bullshit (In The USA) (Notorious B.I.G. vs. Miley Cyrus)

Work It Out (Beyonce vs. Dave Matthews vs. Jurassic 5 vs. Deee-Lite)

Dec. 4th, Oh What A Night (Jay-Z vs. Frankie Valli & the Four Seasons)

Z-Trip Mama Said Knock You Out

Q-Unit If I Can't Be A Champion

Q-Unit We Will Rock You In Da Club

Also, here are some links to where you can download some of these albums:

Best Of Bootie

Z-Trip

Girl Talk

Q-Unit Greatest Hits

Is Big Media Doomed?

The media industry as a whole is shrinking. Consumer spending in this market is inevitably going to decrease dramatically and not just in music, but also film, broadcast and cable. Everyone wonders, well wont advertising make up for it? Inevitably, the marketing budgets of corporations are not going to change and overall media ad spending will not increase because its tied to corporate budgets (the aggregate of online and offline wont change).

Google's recent announcement on ultrafast internet services is the scariest thing yet for the media industry. What has happened to music will also begin to happen to video and inevitably all large files (games, software, etc). This trend threatens the sustainability of any paid model. Media has been built through three monetization sources: advertising, subscription services (cable, print circulation, etc.) and individual purchases (download, physical, etc.). As broadband gets faster and more content becomes ad supported, consumers are going to spend less on both subscriptions and purchases, which had been the cash cows of the media industry. Fewer consumers will buy cable services, online debundling of channels will occur and fewer people will see movies as they can pirate them as quickly as they can a song today. Sure, all the media companies can provide free ad supported content, but there is only so much corporations can spend on ads and ad spending will never make up for the lost revenue because marketing budgets are not big enough.

So what is the solution? Freemium models and upselling the user experience. People will always pay for the best experience (bigger TVs, quicker access, improved features). Media companies need to make sure that consumers do not cut their budget for media spending. That spending will shift from buying and owning the content to experiencing the content.  Spotify has been very successful at this in Europe, providing a free ad supported service for music that does not include mobile adaption and has fewer features (no caching for example). They then hook the users on the experience and make them want and need the better product and pay a premium subscription fee to access the service with no ads and on their mobile devices. Once users like a service, they dont want to shift away if it gives them everything they want. Its time for media companies to innovate and focus on providing the best media experience and realize that content may not be king any more and something that broadband has commoditized. Marketing, delivery and user experience should now be the focus.

What Google Products are Successful: Google Buzz Out Today

Today Google launched Buzz to compete directly with Twitter, Facebook, Friendfeed, etc. It got me to thinking, how do people differentiate between services and what is the stickiness necessary for users to come back. Everyone assumes that no matter what Google does, it will always create a successful product and it is the ultimate threat to a start-up. “Oh-oh, Google entered your space, so you will inevitably be out of business in a few months.” Well this clearly is not true as we saw with Froogle, Dodgeball, Google Video, Google Answers, Google Video and Orkut (I know it has a huge following in Brazil, but it does not touch Facebook) and the jury is still out on Google Voice (I don’t particularly like it yet and the voicemail scribing is terrible). So how do we judge if Buzz will be successful (since Google will not release any negative user metrics)? 2 ways: 1) Does it differentiate itself from existing services 2) does it have the stickiness for people to come back.

1) Differentiation: How different is it to Facebook and Twitter? Will people stop using Facebook or Twitter because Google Buzz has come along? People did not stop using YouTube when Google Video was launched, and we know how that ended. Facebook and Twitter also have open platforms (allowing it to link to other services), so reach is not an issue, which Google utilizes to launch new services. Google is not fundamentally a social interface, but used as a utility to find and store information. Facebook and Twitter are social interfaces that have differentiated themselves from similar services (Facebook was better than Friendster because it was focused on affinity groups and Twitter was better than blogging because it was short and simple and allowed people to provide a proper stream of consciousness). I still can’t figure out what Google Buzz does to differentiate itself beyond being linked to the rest of your Google accounts. Historically that has not been enough as evidenced by Google’s failed products. When I first used Gmail, I immediately saw the functionality that made it so much better than other services. Buzz does not differentiate itself in the same way.

2) Stickiness: I think this relies on how easily people initially pick up functionality and whether it is compelling enough to come back. Second Life from Linden Lab (a company my old firm invested in) was initially successful because it was compelling enough to come back but growth stopped because it took too long to understand how to use it: on average, users picked up functionality in 45 minutes (way too long). The same thing has happened to Google Wave (I still can’t tell you what to use it for and from what I hear it is very innovative). I think the Google Buzz is very intuitive (a status update that ties to your Google profile and all your other Google aps including gtalk updates). I doubt it provides a product that is compelling enough to come back, partly because Google as a product is not used to broadcast what one is doing but rather a utility to find information. Google reader is a successful product but a very small percentage of people share information on there or even interact what others post. I also think that gchat will be a detriment to Buzz because it is a competing status update (and I know they will be integrated), but it will only contribute to confusing users who don’t know where to go to change their status (while in Google). Although simple to use, I ultimately don’t think Buzz has a compelling enough product for people to keep coming back.

I ultimately don’t think Buzz will be a success. This begs the question, if Sergei and Larry want to provide people status updates, why don’t they just go ahead and buy Twitter with their massive pile of cash they have on the balance sheet. It should only cost the $3-4B.

6 months in NYC: An Empire State of Mind

Its been about 6 months since I first moved to NYC. All my life, I have wanted to move here. Much of my family lives here. I initially wanted to go to college here. I then wanted to move here after college. It never happened. When I was looking for a job after business school, I made one prerequisite that it had to be in NYC. I realized that if I did not move here now, it would never happen. My interests/profession will naturally pull me to Silicon Valley/Bay Area, given how much I love technology and start-ups, but it was incredibly important to me to resist and try to build my career in NYC. I have no idea if I want to be here for the rest of my life, but I have been enjoying it a lot. NYC is a tricky place and its not for everyone. Here are a couple of things I have learned (with a video for each).

1)Stay away from Murray Hill! Its full of meat heads and tube top girls Here is a special video on Murray Hill (a friend of mine use to date this guy):




 

2) The melting pot of people is unparalleled. I have met many people from different countries, cultures and perspectives. It is easy to make a diverse group of interesting friends with distinct backgrounds. Everyone is eager to meet new people, be out constantly and know the ever changing social scene here in NYC. The energy in the city cannot be replicated anywhere in the US (I have lived in SF, Boston and LA, and no where has the same energy). There is no city with more compelling people, neighborhoods and things to do:


 

3) People love speakeasies. In order to make a place cool in NYC it has to be a secret location underneath or above an old store or office complex. These are the best places to get drinks and food in NYC! (I know a clip from Better.tv is girly, but that is all i could find):

4) The boozy brunch is great. I have been to several brunches at restaurants and at people's apartments. It just seems like a much bigger event in NYC. My cousin Mikey came to visit and he claimed that the highlight of his three week stay was brunch. Essex Lounge and Tre are my two favorite spots. Many places offer a meal and all you can drink champagne for around $20. Pretty good deal and a great way to start the day:

5) Start-ups and entrepreneurs thrive! I have been surprised to meet so many people who do consumer internet/technology/digital media work here. As the gap between traditional media and technology closes, New York will grow as a technology hub. Also, I have been impressed to see many people who were bankers or worked in finance in other capacities take there big bonuses and try to start new companies with them. Props to the original Silicon Alley entrepreneur Jason Calacanis:


 

It has been a great 6 months! A lot of people suffer with the "grass is greener" syndrome when they live in a city. They wonder what it would be like living somewhere else and complain about where they live. I have never been in a situation that I can say with more certainty that the grass on the other side can't nearly be as green. I love this city.