"
Give a man a fish, he’ll eat for a day. Teach a man how to fish, he’ll eat for a lifetime."
  — Chinese proverb (surprisingly not a biblical quote as I believed)

You would have to be living in a cave not to notice the seismic change in people’s attitudes and interests in helping others, especially the plight of the poor in developing countries. As I have tried to get my own compass and strategy set, I have posted on a variety of "social entrepreneurship" ideas and topics to get my own thoughts organized. My wife and I set up a foundation about 14 years ago, originally focused on early childhood development since children are often so far behind the 8 ball by age 5 that they never catch up. This is a wonderful area for philanthropy and in need of significant funds. However, I have also been looking to find a way to blend my day job with our philanthropic activities.

The light bulb went off for me while reading a recent Fortune article, "Saving the World One Cup of Yogurt at a Time." It describes the latest chapter in Muhammad Yunus’s efforts post his Nobel Prize for his revolutionary work on Microcredit. His core tenants revolve around the notion that self-sufficient entrepreneurship, rather than charity, is the solution to poverty. This has lead me to defining a personal focus on giving around "encouraging and teaching entrepreneurship to tangibly alleviate poverty." My interest is more in teaching the fishermen themselves, but there is also another credible area around running entities for the benefit of charities. One of my readers, Bob Musser, at Auction Inn, is an example of this later model.

Yunu’s initial work dramatically changed the landscape of the microlending world. He started off by lending $27 to people in need, particularly women, so that they could start small businesses (usually farming related). Through relying on social pressure versus collateralizing assets, he has enjoyed a 98% repayment rate which is higher than traditional banking. The borrowers would rather hit up relatives & friends to make payment rather than failing in front of their peers. You see this notion in the US inner cities where Korean immigrants will pool their capital and award it to one "winner" who starts his/her business with it and pays back the loans from proceeds. I have been surprised that this model has not been adopted by other poor groups in the very same neighborhoods.

Yunus started the Grameen Bank over 30 years ago and the microlending world has exploded to over $9B. As the article points out, this is sorely needed since over half the world’s population is living in poverty while the richest 2% control more than 50% of the wealth. Yunus, Gates and others have pointed out that capitalism is the most efficient & effective market system around but that it can often leave entire populations or sectors behind in the Darwinian war. Charity has sought to address this through redistribution of the wealth, but it often just keeps the recipient fed for the day. He believes business and not government is the solution to many of these poverty issues and claims that 5% of Grameen’s borrowers escape poverty each year, resulting in Bangladesh’s poverty reduction rate rising from 1% to 2% each year.

Yunus has launched another revolutionary program with Danone yogurt in which returns are measured by both 1) self-sufficiency and 2) by return on "social capital". Taken to full fruition, they are talking about having companies issue "social stock" which is tracked not solely by bottom line profit but rather on social good. Investors would look at the pharma company based on lives saved by certain drugs or food companies based on "children rescued from malnutrition." People would buy and sell based on comparative results.

With Danone, the company will invest $500,000 into a new plant in the developing world (India?). It would make yogurt, fortified "to curb malnutrition" and priced to be affordable (7 cents). It would employ local people, it would use Grameen vendors for supplies like milk and would sell through through normal channels as well as through Grameen microvendors going door-to-door. It would also check the boxes on environmental issues like solar panels, biodegradable cups and such. The company would take proceeds back from this to pay back their initial investment.

This creates a win-win-win for everyone. The company can move more assets from pure charity that is often misused or wasted (say targeted already at poverty or training) to this self-sustaining model. It gains new market share in the yogurt wars in a shunned market and it gets significant good will and PR for its efforts. Local inhabitants gain employment (at the plant, selling finished product and supplying inputs) as well as address nutritional issues.

As the article concludes, now this is a BIG New, New Thing to get excited about!

This Krugman piece, The Big Meltdown, appeared recently in the NY Times. As I have said before, there is a lot of irrational behavior going on in both the public and private markets. Debt remains high, all asset classes have seen big rises and investors, hungry for the rush of another "hit", stretch further and further up the risk curve seeking yield. Until last week, the VIX (index of market volatility) was pinned down at 10, which is excessively low by historical standards. Risk has become a thing of the past and complacency reigns supreme.

Unfortunately, it is impossible to predict when the chickens will come home to roost. In Chaos theory, you can determine that a system has entered an unstable period, but it is usually an unexpected, non-linear factor that bumps the market to its next steady state. As long as equilibrium remains in the "Goldilock" economy with all parties agreeing to do their part, this could stretch on for some time.

That said, the sudden drop in the China market, followed by all other global markets falling show that the law of physics still exist and that our global systems are intricately connected.

I believe that the blood will start to flow in the Web 2.0 world this year as the 10 other plays in each space that were not acquired will struggle to gain revenue and funding. Furthermore, as more and more companies come onto the market with an "advertising based" revenue model, running a successful advertising network or revenue flow will become increasingly difficult. Too many ad sales guys pounding on the doors of the besieged ad firms.

Boring and focused is what works here. Opportunities to apply new technology/architectures to existing old processes and industries is the name of the game. If you can do it in a capital efficient manner, you can gradually scale the business without having to change much human behavior.

Buckle up for an interesting year…

March 2, 2007
Op-Ed Columnist
The Big Meltdown

By PAUL KRUGMAN
FEB. 27, 2008

The great market meltdown of 2007 began exactly a year ago, with a 9
percent fall in the Shanghai market, followed by a 416-point slide in
the Dow. But as in the previous global financial crisis, which began
with the devaluation of Thailand’s currency in the summer of 1997, it
took many months before people realized how far the damage would spread.

At the start, all sorts of implausible explanations were offered for
the drop in U.S. stock prices. It was, some said, the fault of Alan
Greenspan, the former chairman of the Federal Reserve, as if his
statement of the obvious — that the housing slump could possibly cause
a recession — had been news to anyone. One Republican congressman
blamed Representative John Murtha, claiming that his efforts to stop
the “surge” in Iraq had somehow unnerved the markets.

Even blaming events in Shanghai for what happened in New York was
foolish on its face, except to the extent that the slump in China —
whose stock markets had a combined valuation of only about 5 percent of
the U.S. markets’ valuation — served as a wake-up call for investors.

The truth is that efforts to pin the stock decline on any particular piece of news are a waste of time.

Wise analysts remember the classic study that Robert Shiller of Yale
carried out during the market crash of Oct. 19, 1987. His conclusion?
“No news story or rumor appearing on the 19th or over the preceding
weekend was responsible.” In 2007, as in 1987, investors rushed for the
exits not because of external events, but because they saw other
investors doing the same.

What made the market so vulnerable to panic? It wasn’t so much a matter
of irrational exuberance — although there was plenty of that, too — as
it was a matter of irrational complacency.

After the bursting of the technology bubble of the 1990s failed to
produce a global disaster, investors began to act as if nothing bad
would ever happen again. Risk premiums — the extra return people demand
when lending money to less than totally reliable borrowers — dwindled
away.

For example, in the early years of the decade, high-yield corporate
bonds (formerly known as junk bonds) were able to attract buyers only
by offering interest rates eight to 10 percentage points higher than
U.S. government bonds. By early 2007, that margin was down to little
more than two percentage points.

For a while, growing complacency became a self-fulfilling prophecy. As
the what-me-worry attitude spread, it became easier for questionable
borrowers to roll over their debts, so default rates went down. Also,
falling interest rates on risky bonds meant higher prices for those
bonds, so those who owned such bonds experienced big capital gains,
leading even more investors to conclude that risk was a thing of the
past.

Sooner or later, however, reality was bound to intrude. By early 2007,
the collapse of the U.S. housing boom had brought with it widespread
defaults on subprime mortgages — loans to home buyers who fail to meet
the strictest lending standards. Lenders insisted that this was an
isolated problem, which wouldn’t spread to the rest of the market or to
the real economy. But it did.

For a couple of months after the shock of Feb. 27, markets oscillated
wildly, soaring on bits of apparent good news, then plunging again. But
by late spring, it was clear that the self-reinforcing cycle of
complacency had given way to a self-reinforcing cycle of anxiety.

There was still one big unknown: had large market players, hedge funds
in particular, taken on so much leverage — borrowing to buy risky
assets — that the falling prices of those assets would set off a chain
reaction of defaults and bankruptcies? Now, as we survey the financial
wreckage of a global recession, we know the answer.

In retrospect, the complacency of investors on the eve of the crisis seems puzzling. Why didn’t they see the risks?

Well, things always seem clearer with the benefit of hindsight. At the
time, even pessimists were unsure of their ground. For example, Paul
Krugman concluded a column published on March 2, 2007, which described
how a financial meltdown might happen, by hedging his bets, declaring
that: “I’m not saying that things will actually play out this way. But
if we’re going to have a crisis, here’s how.”

While I am on a productivity tear here, I will also recommend another of Merlin’s post at 43Folders called "Becoming An Email Ninja". It has a series of links to his classic email productivity posts for both receiving and composing emails. One of his most emphatic suggestions is to turn your "check for new email" preference to an hour. This helps to prevent you from living continually in your inbox with messages hitting you every minute. Email has truly become a ball and chain from a time management perspective since people can generate and fire off emails with little effort and, since it is so easy, don’t truly think through things like brevity, need for even sending it, replying to "all", and such. As usual, a good post from Merlin, which explains why he has over 100,000 daily readers of his feed.

“If time be of all things the most precious, wasting time must be the greatest prodigality.”
      — Benjamin Franklin

Like with the weather, everyone talks about productivity & time management but few do anything about it. Over the past year, I have found that I have increasingly less control over my day and seem to achieve less of my "bigger" goals than in the past. It has been a gradual erosion. Unfortunately, I am not alone in this experience. In coming across several interesting blogs on "productivity" and "quality of life", I have decided to add another category to my blog, "Productivity", and will torture my poor reader base with an occassional gem when I come across it. One of the great sites for this is 43Folders.

One of Merlin Mann’s most popular posts in 43Folders is Building a Smarter To Do List which I highly recommend you click on if this is of interest to any of you. He pulls many of his ideas from the book Getting Things Done which you can get at Amazon (link on title). One of the key points he starts off with is that we all fail to differentiate between tasks and mini-projects. His definition of what consistitutes a task (and hence should be on the list) is:

• it’s a physical action
• it can be accomplished at a sitting
• it supports valuable progress toward a recognized goal
• it’s something for which you are the most appropriate person for the job
• (more on this in his post "Does this next action belong"

I have found my to do list getting bigger and bigger as I have a growing number of to do’s that are so monumental in scope (do due diligence on ethanol) that I procrastinate and do the shorter items. At the end of the day, I still see these items on my to do list (and their number is growing) and I feel that pressure that I failed to accomplish my to do’s that day and have that much more anxiety the next morning when I have to face this "undefeatable" list.

I have now pushed these larger "mini-projects" over to Omnioutliner (you can use Word or any other application) where I have each project and have broken each into specific clear tasks. Each morning, I pull specific tasks over to my main to do list. Ironically, my to do list has shrunk and I end each day having gotten through most of the items…a pseudo victory.

There are a host of additional insightful recommendations and thoughts in these posts (he has Part I and Part II) which capture how to decide how to filter items to reduce both the Project and To Do lists.

When I was in college, a friend of mine had three pirahna he kept in his dorm room. Over the course of a year, Blinky ended up eating Zero and Fatboy. He then looked very lonely. My friend used to say that he "had trouble feeling sorry for someone who just ate his two friends."

Well, just so you don’t think that VC’s only pick on entrepreneurs, every once and a while, VC’s class heads in public. One of the stranger encounters was captured today in PE Week in a piece called Random Ramblings: Sequoia v. ComVen:

"The VSP Capital Memorial trophy is awarded each year to the venture capitalfirm that most effectively turns itself into a punching bag. The 2007 front runner is ComVentures.

First came the recent FilmLoop flap, in which ComVentures engineered the sale of one portfolio company to another. Now comes another troubling development: While ComVentures was working to sell FilmLoop last December, it also was being sued by Sequoia Capital for copyright infringement. ComVentures says the case has since been “resolved amicably,” even though no resolution has yet appeared in the court’s online records system. Neither Sequoia nor its attorney returned request for comment or confirmation (download all relevant court filings here).

This is a bizarre story for two reasons. First, because of how obstinate ComVentures seems to have been. Second, because such cases generally get resolved long before they reach court dockets (credit to VC Litigation Reporter for first spotting this).

According to court documents, both Sequoia and ComVentures redesigned their websites last year. Sequoia went first with an August 30 launch, and even took the unusual step of registering the site as an original work of authorship with the U.S. Copyright Office. Soon after, the firm’s servers began “to detect significant and prolonged access to the site from someone sharing the IP address for, and presumably within, the ComVentures network.” A printout of Sequoia’s server logs were filed with the court, and can be downloaded below as Docs 2. In all there were 373 recorded visits.

Six weeks later, ComVentures unveiled its own redesign. The new site had a number of striking similarities to the Sequoia site, in terms of both setup and style. For example, check out this ComVentures page and this Sequoia Capital page. Pay particular attention to the geography and company-stage navigation bars.

Had the complaint stopped here, I would have assumed that some ComVentures lackey/designer had simply made a mistake in not knowing that you can’t rip off someone else’s site. He/she was told that the ComVentures brain-trust admired the Sequoia site, and took that to mean “copy it.” After all, the first question any web designer asks when building a new site is: “What other sites do you like?”

And maybe that’s exactly what happened. But what happened next is bizarre. Sequoia’s Mike Moritz allegedly called ComVentures chief Roland van der Meer to complain on at least two separate occasions. Sequoia’s outside counsel also formalized the request in a letter to ComVentures’ outside counsel. The complaint alleges that ComVentures agreed to make “certain changes,” but then that the only real changes made were that the offending pages were not directly linkable from the ComVentures homepage. In other words, the alleged copyright infringement remained, but was just a bit harder to find.

Again, I would like to think this was a slip up (sometimes hard to find all legacy pages) – except that the offending pages are still online nearly three months after the suit was filed. Maybe there was concern that full retreat would be perceived as admittance of guilt, but ComVentures isn’t willing to get into that level of detail with me (not that I blame them).

Sequoia had been seeking both real and punitive damages, and I do not know if any money changed hands via the apparent settlement. But I do know that this is just one more headache ComVentures did not need right now…

Two other quick thoughts: (1) It is important to note that it is difficult to judge a legal complaint’s allegations without also getting the defendant’s point-of-view. In this case, ComVentures does not seem to have filed any documents. (2) Sequoia picking on ComVentures is a bit like Iron Mike picking on King Hippo, and I’d certainly agree that Sequoiaseems to takeitself a bit too seriously. But, that said, no one knows the value of copyright — or patent — protection better than a VC firm, and it makes total sense that they’d want to protect what they feel is theirs."

"Go for a business that any idiot can run – because sooner or later, any idiot probably is going to run it."
              – Peter Lynch

I have often thought that I could do well managing public company investments based upon the experiences, perceptions and fears of our early stage companies interacting with them. During the Carly era, none of our companies had any kind of rational interactions with HP. Everything was mired in bureaucracy and crazy decision making. In came Hurd and things changed almost overnight.

Well, I have been waiting for this to happen at Yahoo. They have an amazing franchise with an incredible subscriber base and yet Semel can’t get out of his own way. Google is running rings around him. TechCrunch commented on a recent Seeking Alpha story laying out Semel’s dismal performance and his excessive compensation ($550m over 5 years is outrageous). When Semel gets the boot, get ready to buy Yahoo stock as it will move big-time…

"Seeking Alpha
has a long story outlining Yahoo CEO Terry Semel’s failings since his
hiring in 2001, and basically calls for his head on a platter. The
bottom line: Google has grown its shareholder value 21 times more efficiently than Yahoo during the time Semel has been at the company.
Semel supporters point out the Yahoo did buy Overture, keeping them in
the game, but others note that Semel had the opportunity to buy Google
instead for $3 billion or so in 2002 (Yahoo also didn’t buy YouTube or
MySpace when the opportunity came up). The article also mentions
Semel’s total compensation over the last 5 years – $550 million.

Panama is off to a brisk and surprisingly strong start
(more on this in an upcoming post). Forgetting Semel for a moment, it
may be the single most important factor keeping Yahoo an independent
company in the near term. It also might be the product that allows
Semel to keep his job, or at least make a graceful exit later this year."