Gov 2.0? What to Do About Aaron Swartz & the Officials You Don’t Get to Vote On

Aaron Swartz: RIP

I never met Aaron nor do I use Reddit. Once in a while I ran into JSTOR online – the database he is accused of hacking - and I do appreciate his involvement in RSS. In other words, I am an indirect beneficiary of the people like him who shaped the Internet. I am part of the Internet “crowd.”

To us this story matters – but much more profoundly than your average politician understands. I say this because politicians want to amend the law they used to go after him - a felony with a 35 year sentence for a relatively harmless computer crime. That’s a good start but not what this is about.

Aaron ran afoul of the one group where the crowd couldn’t matter less - political appointees. The US Attorney General had every legal right in the world to go after him. There are always more pressing issues but if you want to make a name in a tech town like Boston you go after a highly visible tech crime. They had a specific law on their side but with their unchecked discretion they can always find some law and unless you a rich and powerful you’re in trouble. 

Homeland Security might call this asymmetrical warfare. The Feds have unlimited resources and you have your piggy bank.

This is the gray area of politics where the real work is done. The feedback loop of the Internet has yet to penetrate this world. Both Democrats and Republicans use this and it is really part of the PermaGov – a combination of unreachable Civil Servants and government appointees that do the real work of government outside the easy reach of the voting public.

This is why bankers responsible for the housing crash never wind up in jail. Yet, I sat in a jury where 4 Federal agents and a prominent Federal judge put a street corner hustler away for conning $18,000 out of the mortgage system. The bank that made millions selling its junk to Lehman actually got to testify against him. This is why Henry Paulson earmarked $60+ billion of TARP money to AIG just so it could pay its debt obligation to his alma mater, Goldman Sachs.

You didn’t get to vote on any of that. 

So the real issue is, when will the “crowd” get to penetrate those sacred enclaves of government?

This is part of a Social Contract drawn up before there was mass media, let alone the Internet. Smart politicians who know how to work this system know this is where democracy can be sidestepped. It is part of what allowed politicians like Nancy Pelosi to make a fortune through legalized insider trading.

So, if Aaron is to count and you are willing to confront real power, this is where it starts. You petition every government agency to be exposed, open to public review and approval. 

Think of what happened when the Journal News published the names and addresses of every gun owner in the lower Hudson Valley. Now imagine what would happen if the public got to vote on the prosecutorial discretion of the DOJ?  Or that the function and decisions along with the salary and performance of government officials were part of the public feedback loop?

That would just be the beginning and it would make Occupy Wall Street look like a picnic. It would also be a fitting response to the sad demise of this pioneer.

If Aaron Swartz is a martyr - it is to Government 2.0.

Why we need to rethink our fears of Crowdfunding.

Is fraud really the big issue in equity crowdfunding? According to this article, the SEC thinks so. As a result JOBS Act regulations allowing equity crowdfunding is being delayed by as much as a year.

NY Times: Equity Crowdfunding Delayed

Yet it exists – quite successfully, apparently – in Europe.

The problem is culture clash – regulators can’t imagine a crowd regulating itself.

They are not alone. Having sat on a panel with certain VCs I have found that some influential investors - including one facing a lawsuit for allegedly stealing an entrepreneur’s business plan – feel exactly the same way.

Yet none of these players have any idea how hard it is to get money out of the public when you don’t have the implied endorsement of a major brokerage house. So entrepreneurs have to go a long way to prove their bona fides, which is part of what makes them honest. Also, the amounts of money are laughably small – around $2,000. Besides which, people who invest in crowdfunding aren’t looking to make a killing so much as they are looking to be part of something they identify with. It’s a very different mentality. If on the other hand, they do want to make a killing they will be forced to diversify across deals, which is not a bad thing either.  

The SEC and the public should be more concerned about the return of implied endorsements that organizations like Fannie Mae or Moodies gave the mortgage industry that sank our entire economy. Or the $500 million of worthless stock Goldman Sachs for which sold the Dragon Systems (and now, arguably the basis of Siri). And let’s not get started on the amazing rip-off of the Mutual Fund and 401K system where you are being handcuffed on investing and hammered with fees.

Clearly, there will be problems with equity crowdfunding but far fewer and far less devastating than they think.

Unfortunately, these are bureaucrats and they probably don’t “get it” at the core. Also, there is regulators bias against the small and the relatively helpless. They tend to respect giants and lash out against the small. We all know that none of the scammers who undermined the economy ever went to jail. But as someone who sat on one the very few Federal juries for mortgage crime – I can tell you it was the little guy who “stole” $18,000 that got convicted while the bank that was clearly in cahoots and ripped off millions got to testify against him as if they had been victimized.

As much as I hate to see another bureaucracy emerge, Crowdfunding needs to be regulated by a new breed of or not at all for the same reason that Clayton Christensen wrote the “Innovator’s Dilemma”: you have to be willing to kill your own in order to innovate.

Bureaucrats don’t do that and so we need something that does.

Season's Greetings from your Fundable Friends at Convean: iBreakfast/iEvening.

We wish you all the best for the New Year.

Keep your ideas brewing - we will be back with Funding opportunities on January 17 at Loeb & Loeb.


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How We Weathered the Storm - and the Coming Energy Policy Battle.

Thanks to a generator and a smartphone-turned hot spot, we got back on the road again. This is the new survival!

Note the covering. Not pretty, but it allowed us to use this in the rain. Who knew that generators are not supposed to run in the rain or heavy snow?

The drama began during the storm when the high winds of Superstorm Sandy knocked down trees like this.

So we stopped by at Home Depot to see what our options were and saw this line of anxious people with carts. The were waiting for a truck full of generators to unload

Seeing an opportunity, we joined the line.

These could have been the last generators ever!

As it happens, the next day you couldn't get gas and so generators magically appeared on the market again.

What's Next?

As talk turns to recovery - the big question in the non-flood areas with will be what to do and can we afford it?

Guess what - the Energy business has been raking billions off unsuspecting consumers for years.  Neither the media nor the public watchdogs have done a thing to protect them. This is money that could have been used for infrastrucure.

Expect to see sparks fly in the coming months.

Energy's Maginot Line

While Governor Cuomo's Energy Highway plan addresses issues of renewable energy and wholesale generation of power - the inability to deliver it reliably to millions of consumers puts us in a 3rd World category.

What we still need are innovative technology solutions for producing, delivering and safeguarding energy. The Everything we have so far from generators to powerlines strung from poles is completely out of date. If you read the Energy Highway plan, you'll be amazed to find that billions are about to be spent that really don't address these issues.

The old is new again!

Why Netanyahu's Bomb Image Matters - Regardless of Your Politics

 Just when I thought everything that could be written about Netanyahu’s “Bomb” graphic at the U.N. had been written, a local pundit had to apologize for discussing this topic to his audience. Talk about PC gone awry!

Netanyahu at the UN

Whatever you think of Middle Eastern politics, the fact remains that the image made a point and got picked up worldwide. It stole the limelight from his opponents as well virtually every other speaker at the UN. 

From a presenter’s perspective there is something to be learned here.

It is arguably the most significant use of an infographic since the infamous witness "rap" chart that earned mobster John Gotti an acquittal on murder charges in the 90's. That bare bones chart, which simply listed the convictions of all the witnesses against Gotti, made the point that none of their testimony could be trusted and so he got off. 

This chart has been a staple of the infographic case studies. Does it mean that murder or organized crime is being endorsed?

The look of Acquittal 

Whatever that tells you about Middle Eastern politics and the anti-Israel lobby - and it says a lot! -  from a presentation perspective there is a real dilemma here. The bomb made a point, got picked picked up worldwide and the message was embedded in the headlines. Any presenter should be so lucky. 

On the other hand, the image was also criticized as cartoonish - thereby undermining credibility. Some experts claim it was an inaccurate representation of the data but the rationale is almost certainly above the heads of the general public. Because it was so crude - it is arguably an issue that speaks to the unconscious. 

This addresses the kind of real challenges a business presenter faces. Primal images - like this simplified bomb - really work, but they can have negative residual value, and once its out there you really can't retract it. So, finding the visual that truly represents you is very big challenge. 

As for the unconscious resonance, studies that test subliminal response tend to use crude graphics because they are most easily picked up by subjects in tests. How this was interpreted is worthy of a separate discussion, but you can be pretty sure that it was there for a reason. My guess is that the history of anti-semitic imagery from the Protocols of Zion to Nazi propaganda all the way up to cartoons in the Arab press are equally crude and they were making a parity statement - "as in we can match you."

It is quite common for a company's logo to create an unintended negative resonance. I have a client whose logo, while seemingly good, also screams "emergency!" It is not always a image - it could be a name like Oldsmobile (could it ever win the youth market?) or even a color (many shades of green suggest poison in foods). Much of this is cultural but there known core elements that are universal such as facial expressions - so be wary if your logo has a fake smile.

The only way you really know - aside from experience - is through testing. The problem however, is that very few people can articulate their responses and so the researcher has to be able to interpret indirect statements. It is easy to be wrong, misled or just defensive. 

There are two schools of thought in this field, Edward Tufte’s precise data representation vs Nigel Holmes’ eye-catching visuality. What Netanyahu had was early Holmes. Highly visual, primary image and imprecise but nevertheless convincing data. Had it been Tuftean, it would have been pure chart and may never have made the headlines. Since the impact of these images can be so powerful the rhetorical battle between the two schools can get mightt heated.

Tufte: Beauty to a Broker

Compare an example of Edward Tufte’s precise data representation to Nigel Holmes’ eye-catching visuality. Tufte's work is so precise that if you use his tables and charts you can only love the elegant utility he brings to them.

Holmes at Work

However, to the casual viewer, it is dry and even forbidding. Worse, it does not inspire the imagination. On the other hand, the very selection of an image invites bias, opinion or even propaganda. Some of Holmes' earlier work like the notorious "Uncle Sam over an oil barrel" is very hard to find on the internet probably because it became highly politically incorrect.  Some, like the Diamonds Were a Girl's Best Friend are still out there but probably not going to discussed at the Harvard Business School. 

For technologist, the implications of this battleground become really clear when you apply it to the limited space of a SmartPhone. Images really matter. But other media matter too: Voice mail is an informational nightmare. If you try to buy a train ticket at an MTA kiosk you will know how critical that interface is if you are stuck behind a newbie while your chances of catching the next train slip away..

I’d be glad to hear your thoughts about the proper use and the misuse of graphics, images, apps, logos and user interfaces.

Two Visions of Disaster: Tufte's Fave "Napoleon's March into Russia" vs. Holmes "Monster"

I also hope to share some of the case studies I had done for clients and companies I work with.

  

For those who don’t know, marketing semiotics is my background and I have a book on tobacco industry semiotics, Cigarette Seduction and a couple of graphic novels under my belt. As a journalist I had the rare pleasure of interviewing the heads of the two basic thought categories in this space, Edward Tufte and Nigel Holmes. My next book, Are You Fundable? is a really a kind of semiotic explanation of the Entrepreneur/VC space.

Why Pixable is Worth $26.5 Million vs. Pinterest's $1.5 Billion

It is not often that you get an inside look at the critical moment of a company’s development - and then a chance to see the outcome. Now that Pixable has been sold for 26 million while an arguably similar company, Pinterest, is now valued at around $1.5bn - we have a rare moment to make a comparison.

Back in 2010 we developed a unique program called “Job Generation.” It was a kind of “Shark Tank” in reverse, where we invited senior executives to pitch Start-Ups for the job of running their companies.

Pixable was one of our first participants. Andres Blank, one of the founders, sat in the catbird seat as a former Kodak executive, Harry Falber, pitched him on running the company.

At that point, Pixable was far less evolved and presented itself as a company that helped you gather pictures from Facebook to create albums. Falber did not profess to have great knowledge of the technology but he did make this one point: as a Kodak exec, he knew from research that the customer in this business is overwhelmingly female and so the product should follow their interests.

In theory, Harry was a winner who got a “job” with Pixable. In practice, nothing like that happened. There was some follow up but no relationship actually formed. Pixable went about its own way, as a company run by some really smart guys who kept thinking up newer and cooler features. They raised $6.6 million and then sold out for $26 million. This will enable the founders to pay off their student loans, buy Teslas and enjoy lives as minor millionaires. The investors made some money but not the kind they were looking for – think of scratching off a $2 win on your lottery ticket. It keeps you in the game but that’s not why you bought the ticket.

So what really happened?

These were guys whose board of advisors were other guys and they had no inherent sense of their true marketplace: females. They did find a marketplace, guys who want to stay in touch with the coolest pictures but not the females who live by the images that illuminate their live's interests. That is what Pinterest does.

Whether Pinterest got lucky and stumbled upon that or had it planned, who knows. To quote Bo Peabody of Tripod, lucky is often better than smart. What does matter, is that companies usually take on the groupthink of a few key people and they will tend to follow what they care about rather than what the market wants. Granted, being authentic as a company is good - it is just worth 1/60th less than finding and serving an authentic market. At least, it appears so, in this case. 

As for Job Generation, we learned that one of the reasons young people start companies is because they really don’t want to listen to older guys. Maybe they should. Or maybe the older folks should be their own start-ups. They won’t get any Angel money (another controversy we'll discuss) but at east we know that in theory – and in the right context – their input can be worth as much as 60x.

Apple’s Dilemma – Find the Next Jobs or Rest on his Laurels?

Some thoughts following Apple's lawsuit and questionable iPhone 5 features.

Whenever the Dalai Lama passed on in Tibet, the Lamas went out in search of a reincarnated soul.

Should Apple consider the same thing?

Face it, Apple without Jobs looks a little less magical by the day. Like the Teflon peeling off an old pan, without the talent and charisma of this one man, you see what’s beneath the surface and it looks pretty base.

The iPhone without Google Maps is deficient since it is one of the most used features in smartphones with its turn-by-turn directions. Apple aficionados will work around it just as they accepted 3G when everyone else had 4G. The thing about genius is that it has certain trajectory – as long as people think breakthroughs are still coming, they forgive everything.

So it is with Jobs’ legacy. For now.

When Apple sued its competitor, Samsung, for infringement, the Apple devotees cheered. Closer examination showed these were not utility, but the weaker, design patents, and a hometown jury handed Apple a big victory over such laughable innovations as a “rounded rectangle.” 

With Jobs at the helm, his followers would have seen this as the ultimate validation. Jobs had made clear his willingness to undertake “thermonuclear war.” But we can expect years of appeals and with a phalanx of lawyers and generally anonymous executives in command, Apple is starting to look like any other corporation rattling its proprietary saber.  All this in crowdfriendly, open source world.

To make matters worse, Apple lost Jobs’ creative alter ego, Jonathan Ives, partly one supposes because Jobs treated him as his vessel in the creation of the iPod and the iPhone, and not as his partner. As for being a successor, that never came up. The British, of course, see him differently: he is now Sir Jonathan Ives. But now he designs for the Android world.

The man running Apple, Tim Cook, truly was Jobs’ vessel. He perfected Apple’s supply chain and lives a near-monastic lifestyle keeping this marvelous temple of American ingenuity alive.

Now that we are beginning to see the implications of the post-Jobs world – it is worth asking what really is to become of Apple? Is that a temple to grow innovation or one that will mostly remember it?

Let’s face it, Jobs was like no other exec in America. I have met him personally and you can be sure he was different from a CEO – any CEO – as a dictator is from an elected president. Running for office – of any kind – was not part of his agenda. In fact, by inventing the future, Jobs was free to act like a mid-eastern potentate from the Sheherezade or a kind of Howard Hughes of tech. His style was abrasive, his utterances unedited, punishment could be drastic and the next result was debilitating to most underlings. He never had to deal with labor unions and he found a way to set his own pricing standards with margins that astounded competitors. If this were anyone else, we would be talking about a price gouger. But somehow, he was a saint.

The Jobs we know, was an icon in the religious sense of the word. Thanks to Walter Isaacson’s biography, we know he considered himself special and that normal rules did not apply to him.

He fit the mold of a Biblical prophet - founding an industry that changed the world as profoundly as any religions while still in his twenties, only to be sent out to the wilderness by the man he hired, John Sculley. Then you had the amazing second act where he was invited back 10 years later to save the company as it was faltering.

This might as well have been the second coming as far as his followers were concerned and they stuck to him just as if they had joined a cult, which indeed they had. Like any cultist, they accepted sacrifice in the name of their leader and they forgave him when he overcharged early adopters on the iPhone – only to suddenly drop the price on them. They overlooked the flawed the antenna of the iPhone 4, the unchangeable batteries, the bad MobileMe and so on. They camped out for days just to buy these products and they would probably have walked on hot coals if he'd asked.

Clearly, the fanaticism lingers. But without Jobs you have to wonder if there isn't a certain deja vu - a revisiting of the era when Apple was run by a bunch of sue-happy, no-name executives who knew their stuff but had no magic?

Back in the 80’s when Jobs was first put to the sword, the former Pepsi exec he hired, John Sculley, took over at Apple. He was a quick study who realized that he needed to show his creative chops while also being a true corporate exec. He was polished and mature where Jobs was the irascable child. Sculley sued Microsoft for stealing the Mac interface. He won some victories but you have only to look at any computer to see how that played out.

Sculley also created a concept product called the Knowledge Navigator which became the Newton – arguably the futuristic prototype of the iPhone. However, he did so at the expense of Apple’s real business – usable computers, lightweight laptops and customer growth - and eventually he lost his job.

Apple without Jobs has a history of faltering – not at first – but inevitably because the kind of creative spirit it required is not a product of any Business School or Technology Institute. However, you could not work for Apple at that level unless you had qualifications from institutions like that. So let’s not wait for the next Jobs to show up at Apple’s Human Resources department anytime soon. His or her resume may be in the mail but it won't be read.

So there’s the dilemma, should Apple look for an innovator who is willing to risk being a bad exec but a charismatic technology leader, or pick a qualified CEO who will sacrifice good governance in pursuit of innovation?

Or should Apple find a reincarnation of Jobs?

Hint: he or she, is out there - but probably starting their own company.

Question: if Apple discovered them, would they try to hire them or put them out of business?