Archive for the ‘tech’ tag
Hackathons are the new hot thing. We’ve done a few at General Assembly, and we’re planning to host more — such as Lean Startup Machine this April.
But there’s a gap in our hackanthology. Specifically, almost all of these hackathons employ “lean” or “agile” development tactics, a vague and unproven yet trendy fad. Thus, I make a modest proposal: that we may have a Waterfall Model hackathon, showcasing the best that 1960s-era manufacturing process theory has to offer.
Getting it together is simple enough. All you need is a group of consultants to come up with business ideas, a handful of business-oriented “product people” to design specs, a bunch of developers — but only for a few hours given our constrained development timeline — and an expert QA team. Here’s my proposed schedule:
Friday 6PM: Consultants assemble to brainstorm project ideas. Ideas are evaluated on size of market and apparent complexity of the end product. Consultants must have no prior relationship with anyone participating at any other stage in the process and only a rough, high-level understanding of the industry behind “hacked”.
Saturday 8AM: Business teams assemble. Projects are assigned to business teams through a process of drawing straws. For the next 12 hours, the business teams will begin the grueling process of writing and assembling spec docs. As with the consultants, business teams must have no prior relationships with the people involved at any other stage in the process, especially the previous day’s consultants. Preference is given to MBAs.
Saturday 8PM: Developer recruiting dinner. Business teams sit down with hackers over wine at a pricey yet mediocre Midtown steakhouse.
Saturday 11PM: Implementation phase unofficially begins. Although developers have five hours on Sunday (plenty of time) to complete the projects defined earlier in the weekend, no one will complain if they start work a bit early.
Sunday 9AM: Implementation phase officially begins.
Sunday 2PM: QA Handoff. Developers hand off their completed work to a crack QA team assembled of NYU students and the homeless.
Sunday 8PM: The main event! Final products are judged on the following criteria:
– Adherence to the spec document
– Apparent time it took to develop from the perspective of a non-technical person
– Number of lines of code
– Resumes of consultants who came up with the original idea
So who’s with me?
General Assembly is an urban campus for technology, design and entrepreneurship. I founded it last year along with Adam Pritzker, Jake Schwartz and Matthew Brimer.
As you go deeper into the technology community, it gets harder to remind yourself that the global economy is struggling. Every startup in New York and the Valley has open positions that go unfilled for months. Salaries for developers and designers continue to rise, and entrepreneurs are creating real businesses with real revenue.
It’s all too easy to forget that our nation still has the highest unemployment rate many of us have ever seen, especially among young adults. Over 15% of people aged 20-24 are without a job, the highest in more than a generation. Students graduate from college and often times spend their days fruitlessly emailing their resumés to deaf corporations. Clearly, there is a mismatch between what we are teaching our newest citizens and what they need to succeed.
Critical courses are absent from the state curriculum and given only token acknowledgment in higher education. Design and software development, two of the most relevant 21st century skills, are glossed over throughout our educational system. It’s in this context that we’re launching General Assembly, a new kind of campus to educate designers, engineers and entrepreneurs.
That said, an education is only meaningful in the context of an environment that reinforces its message and provides a community to stimulate ideas and growth. This is why we built General Assembly on the model of a campus. We’re crafting a curriculum and have created a physical space in the heart of Manhattan for hackers and designers to work, collaborate and learn. We’re trying to tackle a big problem, and we certainly can’t solve it alone. But we have to try, and I hope you can join us.
I love seeing people join startups, and it usually makes a lot of sense for everyone. Young tech companies tend to have great cultures and incredibly smart people from which to learn. And lots of startups are very generous with salaries and options — in many cases, enough that an employee can maintain a close-to-market salary and keep the lottery ticket too. But there’s one situation in which it doesn’t make sense to join an established startup: you actually want to start your own company.
As I’ve written in the past, many people who go into startups aren’t necessarily looking for the salary, lottery ticket and cool culture, as much as they may publicly say so. They’re looking to gain independence, establish themselves as leaders and self-actualize. They’re looking for the things you get from founding your own company and believe that joining a startup as an employee will be the quickest way there. But that’s a poor strategy, especially for non-developers.
That tactic mistakenly applies a corporate model of advancement — in which one starts in low-level jobs and wiggles into a management position over the years — to entrepreneurship. You aren’t going to get promoted to founder by spending a lot of time working for founders. You become a founder by starting your own company. Yet over the past year I’ve seen a number of people fall into “the non-founder trap”, which goes something like this:
1) You decide you want to get into a startup. You don’t feel that you have enough [intelligence/confidence/experience/money/ideas] to start your own company, so you search for a job within an established startup.
2) After several months of searching, you take a job in the business development / marketing department of a 10-person company. While your last job paid you $100,000 per year, you accept $60,000 and 0.3% in options.
3) While you occasionally advise on high-level decisions, 95% of your job is emailing potential clients and taking sales meetings — the same stuff you were doing at your last job. The fundraising, investor relations, and personnel management is done by the CEO.
4) After a year or two you would like to leave, but unfortunately your $60K per year salary hasn’t let you save up enough to quit your job and start something of your own. You also don’t feel that you have a good sense of how to raise money or manage the earliest days of a startup. So you begin searching for another job at a small company and return to step (1).
There are plenty of counter-examples. I know a number of people who fell in love with startup life and founded their own companies after working as an employee of a startup. But it’s not a great path for people who really want to be founders, who will struggle to be happy at their jobs and fail to save enough to go out and build their own business. If you want to be a founder, go out and start something. The inspiration, confidence and experience will come.
There was an interesting New Year’s Day post on TechCrunch about something we’ve all noticed: for certain keyword phrases, Google is entirely spam. A search for a high-value keyword like “online degrees”, for instance, turns up little more than affiliate directories run by spammers with a solid grasp of SEO. So many people are gaming Google that it has lost much of its value.
But — contrary to Wadhwa’s implication — this isn’t a special failure on the part of Google’s engineers. Rather, it’s a fundamental characteristic of dominant technologies. Through market dominance, a technology can become the sole target of those who wish to exploit: an easy ROI for scammers, marketers and anyone else out to make a buck. Rather than building and optimizing for multiple competitive technologies, system gamers must only target one.
This is of particular concern for monopoly technologies, or borderline monopolies. Microsoft ran into the same problems fifteen years ago and continues to suffer the fallout. Hackers and virus creators knew that they only had to optimize for one operating system — Windows — and could target a massive share of the market. They ignored Unix and Mac OSes, giving those systems a reputation of relative security and safety against viruses and hackers. But have no doubt that if, say, Mac OS gained sufficient market share and corporate adoption, malware creators would see a new opportunity and begin writing viruses and malware for Macs. Suddenly, finding exploits in OS X would become orders of magnitude more important than it is today.
And thus Wadhwa’s conculsion (“We need a new Google”), makes no sense. We don’t need a new Google, an overwhelming search monopoly. We need a diversity of competitive search engines. Blekko’s engineers are no better than Google’s. And even if they were better, creating a search engine that is immune to gaming is fundamentally impossible, with increasing difficulty as the search engine’s market share increases. Blekko is simply not spammed because it’s not worth the spammers’ time to figure it out.
Display advertising is a great counter-example of a market with diverse technologies, protocols and big players. While display isn’t totally immune to gaming — click arb and ads that launch malware, for instance — it doesn’t fundamentally challenge the value of the technology as overzealous SEO does to search.
When a technology is in a constant arms race with competitors, users win. When it is a black box inside a giant monopoly, the internet’s underbelly rolls up its sleeves and gets to work.
When someone at a tech event pitches me on a nonprofit, I have a tendency to tune out. It’s not because I’m a terrible person. It’s because small nonprofits often combine the professionalism and scale of early-stage startups with the stakeholder motivation and agility of Fortune 500 companies.
The nonprofit model has its place. The structure works for charities, for instance, where the entity doesn’t need to do much beyond raising and distributing money. But it’s a poor fit for entrepreneurs who are trying to scalably effect social change by building a socially-motivated enterprise.
It shouldn’t be this way — after all, most founders who structure their companies as 501(c)(3) nonprofits are simply trying to change the way something works for the better. Usually they have backgrounds in large corporations or academia rather than startups. Thus, they don’t necessarily think about economic incentive — one of the most critical aspects of starting a successful company. The 501(c)(3) model removes economic incentives by eliminating stock and setting market-driven salary caps for employees and board members, preventing anyone associated with the organization from earning meaningful returns.
Sure, people are motivated by things other than money — such as the potential to do good in the world. But successful businesses are able to quantify success, and most measures of social good are difficult to quantify. The social enterprises I have seen accomplish the most are able to align their profitability with social good, which gives them a far more tangible target. They can also give their employees financial incentives for hitting targets that are aligned with the organization’s social goals, a double whammy of motivation to get things done.
Combine all this, and the nonprofit model makes it difficult for companies to recruit top-tier talent. Unlike top-quartile workers ten years ago, employees today understand equity, options and other incentives. They know the value of their time. An all-star developer might volunteer on the weekends for a nonprofit but is unlikely to choose it as a full-time job over a position at a startup or big company. The inability to score top talent is a positive feedback cycle, as a new potential hire is unlikely to want to join an organization filled with mediocre, unmotivated people.
Ultimately, companies are measured by the social good they accomplish, not their tax structure. It makes no sense for a social enterprise to let the latter limit the former.
Say what you want to about law firms, but some of them have nailed a great branding hack: they have taken a stodgy service provider offering and “startupized” it by customizing and branding their work to appeal to founders. Of course, this isn’t just a branding task, there’s often real substance behind it — a solid startup-savvy lawyer can be one of the most critical partnership decisions a CEO makes. But the mere fact that so many first-time founders understand the value of a great law firm is pretty remarkable. 83(b) elections, for instance, are now common knowledge in the startup community, and it doesn’t take most CEOs more than five minutes to track down some publicly-released template seed funding documents.
These firms aren’t simply generous — cultivating a client pool of top seed-stage startups can be a huge win down the road for a service provider when those companies get bigger and pay bigger fees. But as far as I can tell, the path that startup-friendly law firms blazed hasn’t been followed by other service providers, even ones with a similar relationship to entrepreneurs. Who is the Wilson Sonsini or Gunderson of the accounting world, for instance? There isn’t one, but funded startups still pay for outside tax and bookkeeping work. I’ve spoken with several VCs who believe that the lack of startup-savvy accounting and CFO expertise is a talent crisis only exceeded by the deficit of hackers.
This is a branding problem that certain law firms have solved and other service providers haven’t. Because some firms have established thought leadership, savvy founders –even first-time founders — know what law firm they want, and they find an intro to that firm. The discovery process for (say) accountants is totally different, as there aren’t any branded, aspirational accounting firms that appeal to founders. Rather, many founders simply use a friend of a friend or family member to do their tax and accounting work or get a poorly-researched referral from another entrepreneur. This is a huge missed opportunity for everyone, especially the service providers.
Accounting firms aren’t the only ones missing the boat. Here are a few others, although I’m sure there are more:
PEOs and Payroll Providers: I’ve never met a founder who has enjoyed working with a PEO or payroll provider. Dealing with payroll, workers’ comp, insurance, taxes, health coverage and similar headaches is a huge pain, and the PEOs and payroll providers I’ve seen have punted on every opportunity to make it easier. Rather than crafting a unique value prop for startups and charging appropriately, these firms make the mistake of treating startups as “small versions of large companies”, assume that every startup has a dozen departments, charge too little and deliver way too little.
Wealth Management: I’m writing in more detail on this topic in this week’s letter.ly. But in brief, I think wealth management organizations — despite their traditional sales-heavy tactics — are missing a huge opportunity by not developing a savvier brand that can appeal to founders. Of all the wealth management groups, I figure at least one of them would acknowledge the lessons of the Bay Area finance revolution and focus their specialization on risk mitigation and alternative asset classes like P2P lending and real estate.
Office Hardware: The traditional office copier leasing process is miserable for entrepreneurs — which is a shame, because there are a lot of benefits to leasing a machine rather than maintaining your own. Have an office with a mix of Macs and PCs or fewer than two years of tax returns? Good luck.
All of these industries are ripe to be disrupted by savvy service providers that are willing to craft brands and offerings that appeal directly to founders. It’s easier than ever to start a company, and there are far more startups and founders today than there ever have been. So who will tackle the new market?
I had the opportunity to spend Thanksgiving week in Costa Rica, which was a welcome change in scenery from Manhattan. I’m not much for hanging out at the beach, so I found some time to talk to a few people involved in Costa Rican real estate and finance while I was traveling around the country. I was particularly curious about the startup community, which seemed to be totally absent throughout the country.
The difficulty I heard from everyone in Costa Rica was the same: while the country is one of the world’s oldest democracies and most stable Latin American nations, its legal system is frustratingly unfair and unpredictable. Property laws are Byzantine, and squatters have powerful — albeit vague — rights. Costa Rican citizens are explicitly favored in all legal disputes. Tax law is complicated and seems to be made up as you go along. Despite Costa Rica being the most developed country in Latin America, the uncertainty injected into the system by needless legal complications has made technology innovation extremely difficult.
Reports of the United States’ death as the startup capital of the world are greatly exaggerated. Our embarrassing lack of startup visas, bureaucratic burdens and high cost of labor are small inconveniences in comparison to the quality of the States’s legal system, which is largely fair and — most importantly — consistent. In the United States, I have a pretty good idea of what will happen in almost any legal situation. If my company goes bankrupt, there are centuries of precedent governing what creditors can and cannot do. If I want to sue someone, I know the costs and risks. Insurance is available for everything imaginable — mostly because our legal system is so sound.
Consistency is the most underappreciated driver of success in a product or service. This isn’t just about legal structures. Great brands are built through the delivery of consistent and predictable experiences as much as PR, pricing and growth strategy. As a consumer, Apple, Starbucks, Wal-Mart, McDonald’s and dozens of other successful brands will each give me exactly what I’m expecting to get from them. I simply don’t have to worry about the risk of getting something different or unexpected. Humans are naturally risk-averse creatures, and we’d much rather take something guaranteed than something that might be 25% better or 25% worse.
By removing the uncertainty around business law, the state of Delaware has prospered, generating over $750 million in revenue in 2009 from corporate services alone. The majority of entrepreneurs I know send Delaware a sizable check every year for doing nothing other than having less uncertainty around corporate law than other states — and anywhere else in the world. If this isn’t an example of a brilliant hack, I’m not sure what is. For doing something without any fundamental cost — providing a consistent legal framework — Delaware has created a massively successful business.
Ironically, having a stable, un-disruptable legal system around our entrepreneurs gives them the power to disrupt industries and aging business models. Until other countries develop the kind of legal infrastructure that will give innovators the certainty to know that their creations and profits are protected from corrupt officials, greedy politicians, populists and nativists, the United States will continue to produce and host the vast majority of innovative, billion-dollar companies and entrepreneurs.
Jason Cohen has a great post on unfair advantages. One of Cohen’s differentiators — personal authority — is the most useful to first- and second-time entrepreneurs.
So the question arises: how do you build strong and scalable personal authority?
I’ve heard blogging come up often, but I don’t think this is the way to go for most people. Blogging is hard. Rather, building personal authority through blogging is hard, and at the very least it’s total feast-or-famine. Unless your blog heavily incorporates a recognizable brand — like Chris Dixon or Fred Wilson — most people will probably lump your content into the “read it somewhere” bucket and forget that you had any association with it.
Events are different — when you run an event, you’re in front of the crowd. You get to send out regular emails to a large group of people, and the inbox is vastly more powerful than a RSS feed (this is also why I’ve moved some of my content over to letter.ly). In short, events are typically a much better tactic to gain the kind of personal authority that Cohen praises.
Starting an event series is daunting, but it’s actually quite a bit easier than it seems. I get asked about events a lot, so I’ve sketched out a basic strategy to building personal authority through an event series. I try not to be too servicey here, but I think this strategy is too important not to be spelled out:
1) Pick a topic. It should be big enough to potential draw a crowd of hundreds but not so big that you’ll lose focus (and high-quality people). And it goes without saying that this should be something in which you’d like to gain thought leadership. Competition and geography is also important — there probably isn’t room for another general “tech” event in New York right now, so most new events focus on specific verticals, processes or technologies. Over the past two years, I’ve helped create recurring events around gaming, marketplaces, and failed entrepreneurs, all of which fit in the sweet spot.
2) Build your promotional tools. Create a group page on Meetup.com, setting everything to “public” right off the bat. Meetup will actually promote your first event to its membership, which can be significant if you don’t already have a big email list. Create social media pages and an online landing page if you have the technical skills.
3) Find content. This usually means (a) a keynote or (b) some panelists for your first event. Pick the biggest names you can reasonably get in the room. Don’t get too cute or tricky — people are attracted to speakers they recognize and trust.
4) Find 2-3 solid venues. Good places to look include law firms (they love the attention of hosting tech events for free), bars with A/V and desperate restaurants. If you have great relationships with people at each of these types of places — which isn’t that hard to do — you will instantly be one of the most popular people in the small community of tech events organizers.
5) Make sure you have great attendees. Personally email people with leadership roles and deep rolodexes in your topic area. You need these people to show up, and you need to work to get them there. If you don’t, your event will easily become a mixed bag of job seekers, service providers and wannabes. Don’t let it.
6) Play up your social benefit to maintain great content. Because you are providing education to the community and helping entrepreneurs, people will want to help you. You’ll be able to land meetings with awesome people because you are running a community event, and they’ll often be honored to speak. Keep a steady stream (at least one per month) of events happening. I’m pretty agnostic on the “charging” topic, although I usually encourage people to keep their events free if they can. It’ll just make your life easier since attendees are less likely to get upset about all the little things that invariably go wrong at live events — and keep in mind that your goal is to build personal authority, not start a niche events business.
7) Leverage your membership to run events for you. By now, there will be many people approaching you for access to your membership. Your job now shifts from promotion to curation. Learn to distinguish between the self-promoters and the innovators. Pick people who will run awesome events and enable them with venues and promotion. Retain control of the branding and means of promotion (e.g., send the emails yourself, don’t sell your list) and dole out spotlight as you see fit.
The last point is especially critical — events die when organizers feel the need to exert too much control and burn themselves out. If you’re running an event series that regularly gets >50 people per event, it’s very likely that you have smart, well-connected people in the audience that would love to share the stage in exchange for doing almost all of the work.
I hear a lot of business ideas. The uninitiated may think that there’s a great diversity in thought here, and I’m constantly being exposed to new concepts. To some extent, this is true — I meet more smart people than I’ve ever met before, for instance. But I’m also exposed to a lot of the same business concepts over and over again.
Some — like group buying or fashion e-com — are simply trendy, and winners will emerge.
But some ideas have been brought to me for years, repeatedly, as new entrepreneurs encounter the same problems and come up with similar solutions. Yet none have succeeded. Those industries are graveyards, where many have entered and none have come out alive — yet.
This doesn’t mean these businesses can’t work. How many people stumbled around the idea of building a social network before Facebook blew it out of the park? But I thought I’d share a few examples of “graveyard” businesses I’ve encountered regularly. I’m sure there are more, and I’d love to see some in the comments.
Social/Management Tools for Conference Attendees. “Idea guys” love conferences, and conferences love idea guys. In my completely unscientific experience, one thing most idea guys have in common is a huge slate of conferences they travel around attending. This is a logistical challenge, but it is fairly unique to the type of person who goes to five or more conferences per year. A fairly small market that tends to attract novice entrepreneurs.
A Portal for College Students. Like the previous concept, this one meets the need of a lot of potential “idea” entrepreneurs — in this case, socially active college students — but few others. Growing a product college-by-college is extremely problematic due to the dramatic differences between colleges and the relatively small market in each college, problems I came to know well at GoCrossCampus. CollegeOnly probably has a better model, which can’t really be described as a “portal” as much as a network or set of tools.
Cash Tournaments on Console Games. Surprisingly few people realize that chance games (such as the games played in casinos) and skill games (such as pretty much everything else) are covered by a totally different set of rules, and it is completely legal to let users bet on their performance in skill-based contests. This seems like a gold mine to many entrepreneurs. Unfortunately, this business is fraught with non-legal issues. Skill balancing is a near-impossible challenge, and it is critical for gaining new players — if a user’s first experience with your product is being badly beaten at Madden and losing $10, you’ve probably lost that user forever.
I do like what some companies here are doing, especially Playhem. Would love to see someone get this right.
Honest Hetero “Hookup” Tools: Of all the businesses on this list, I have the least hope for these. Honest heterosexual hookup apps suffer from all the problems of a double-sided marketplace — one side is a lot easier to convince to join than others. If you make the app “honest” — that is, you report an accurate assessment of the market’s characteristics — you are unlikely to succeed. Here’s a rule of thumb: If you see a man on a hookup service, he’s real. If you see a woman, she’s fake. “Hookup” apps that make money follow the (dishonest) FriendFinder model — get the men to pay, fudge the women.
Anything in the Music Industry: A bit of hyperbole here, but not much.
I’ve struggled with the right way to use Letter.ly for a while. I don’t want to move Startup Adventures onto Letter.ly. The social value I get out of my blog exceeds the social + monetary value I would get from a comparable newsletter. Still, I’ve always been a fan of the exclusive / high-quality content network that Letter.ly is creating.
So I decided to do something different with it. I present: The Most Interesting Meeting of the Week. Every weekend, I pick out the single most interesting meeting I had over the previous week and write about it. For this service, I am charging $1.91 per month ($0.48 per interesting meeting!).
Obviously, I won’t disclose confidential information, and if a meeting is so filled with confidential information that it would be pointless to feature, I’d pick the second-best. Still, there’s a lot of value here. One of the most common questions I hear — especially from investors — is seeking information on the most interesting things in the tech/startup community happening right now. Typically, this is deal-related, although my writings won’t be exclusively focused there.
This is a social experiment. My end goal is not to make $0.91 per month. Rather, I’m very interested in social capital hacks, a topic I’ve written on before. Interesting Meeting of the Week (IMOW) is adding some simple game elements to my professional life. Every weekend, someone I have met with over the past week will get the title of “Interesting”, which will be communicated to all my newsletter subscribers. Whether this turns out to be a desirable title or not — and further, whether this changes the dynamics and quality of my meeting requests — is the experiment. Should be fun. Sign up here and see how it goes.
I’ve been stewing over this post for a while. It gets a little bit closer to being written every time I meet with an “idea guy” who is looking to find a hacker to build his or her (but typically his) dream site. Interestingly, a lot of these guys spend a decent amount of their spare time at an analogous task: picking up women.
I’ve always wondered why they don’t see the natural parallels. For some reason, the principles that apply to meeting women are a lot easier for people to intuitively grasp than the same principles applied to meeting developers. Unfortunately, most of these guys happen to live in NYC, where there are way more available women than available technical cofounders. But the same ideas apply:
Go into their world. If you’re looking for single women, you probably need to venture outside of sports bars. Go to a more female-friendly club or volunteer for a cause. Go anywhere single women congregate. Similarly, I meet way too many “business guys” who only hang out with people like themselves — other business guys — and stick around events and meetups that are dominated by folks who think pointers are the handheld lasers you use to give Powerpoint presentations. If you want to meet the technical co-founder of your dreams, you need to find the places they hang out — technology-specific meetups and user groups, Hackers and Founders, et cetera.
Understand their motivations. Or alternatively, “Don’t assume their motivations are the same as yours.” In the dating scene, this is obvious — not everyone wants the same thing from the evening’s encounter. And as many of us know, variations in motivation and interests can lead to some pretty awkward situations. Similarly, developers often have very different motivations than non-technical entrepreneurs. First of all, many (most) developers aren’t entrepreneurs. Given that entrepreneurship can be a bizarre and irrational pathology, this can make for a pretty big delta in motivations, perspectives and interests. Money, for instance, may or may not be a big motivator to an engineer — in fact, I’d say a plurality of engineers I’ve met would say that making a lot of money would be “nice, but definitely not necessary.”
This is a generalization, and above everything it’s important to understand the motivations and interests of the individuals you’re talking to, not the generalized category “developer”.
Show your value. Unemployed, balding 40-somethings have a much harder time picking up women than rich, balding 40-somethings. Truly smart, well-connected business co-founders aren’t easy to find. Be that person and demonstrate it early and often.
Speak their language. The number of “idea guys” who don’t even attempt to understand the basics of web development is hugely frustrating, both to me and most startup developers. Even if you can’t code, take some time and learn the basics. But don’t take learning the basics to mean that you actually know anything about making high-level development decisions — it just shows that you care. And like women in bars, technical co-founders appreciate it when you care.
Don’t try to fuck on the first date. Pretty self-explanatory. Get to know someone first, then seek a deeper relationship.
We need more hackers building startups and fewer writing black boxes for hedge funds, so I’m being honest when I say I hope more non-technical folks can use the skills they have to recruit talented developers into the startup world.
We are in the middle of one of the largest and fastest macro shifts in world economic history — the development of a social capital infrastructure analogous to the financial infrastructure built over the past five hundred years. Led by the growth of social networks, the value we are building in our personal relationships is becoming more and more comparable to “true” currency. In fact, social capital is coming closer to fully adopting the three core characteristics of money:
Medium of Exchange: It is far easier to reach all of my friends today than it was ten or even five years ago. More importantly, this communication has clear, quantifiable value that I can exchange for other goods. This has never been the case without insane transaction cost in the past.
Store of Value: I can now much more efficiently build, store and display my social capital. Twitter followers do not deteriorate as quickly in value without maintenance as real-life friends.
Unit of Account: The units of social capital have become far more standardized and concrete. Ten years ago it was meaningless to say you have “300 friends”. Today, the Friend (or the LinkedIn connection or the Twitter follower) is a far more meaningful unit of account.
I had the pleasure of joining Emily Hickey and Michael Yavonditte of Hashable for a demo of their product last week. In brief, Hashable turns the transactions of the social capital economy — introductions, breakfasts, lunches, coffees, beers, et cetera — into a game. I get points when I make an introduction or log a meeting in their system, for instance.
Given its check-in and gaming features, It’s tempting to refer to Hashable as “Foursquare for people”. But I think that’s missing the bigger opportunity — a Mint.com for social capital. Social capital isn’t a game any more than my bank account is a game. Sure, it has some game-like elements — it goes up and down in accordance with how well I “play” the game of life — but ultimately it has its most significant meaning outside of the context of any game framework we put around it. And that is where the real world-changing products will be made.
The next generation of successful social products will acknowledge that our social capital is a currency. They will provide tools to enhance our social capital’s functionality as a store of value, a medium of exchange and a unit of account. They will replicate the deep feature set at our hands to deal with money — banking, tracking, exchanging, investing, et cetera — for our connections and relationships. Over the past five years, social networks and the decreasing cost of bandwidth and storage have lowered the transaction costs of social capital exchanges by orders of magnitude. Now, the race is on to provide the best tools and infrastructure around this new currency.
Putting everything in the context of a game is a good way to get quick user traction among a competitive tech community. But social capital isn’t a game, and the biggest companies in the space five years from now will have grown by providing fundamentally useful functionality that helps everyone earn, save, exchange and optimize social capital.
Special thanks to Sam Lessin for helping shape my thoughts on this stuff. If you don’t subscribe to his letter.ly, you are missing some of the most thought-provoking writing in tech today.
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