Stepping Up

The media reports that many of the States in the United States are experiencing budget problems. While causes and deficit amounts vary, workers’ pensions appear to be a significant and common issue.

State government and workers’ responses are escalating from debates to protests. Who knows what may follow, but compromises seem inevitable (perhaps reduced collective bargaining rights, or higher contribution requirements, or increased retirement ages, etc). The compromises, while probably well intentioned, will likely treat people disparately. What’s more certain is that some groups will be disenfranchised.

Where difficult situations arise, and probable solutions will likely be unpopular, it’s a spectacular occasion for leaders to emerge. Rather than watch similar scenarios play out over and over in each State across our nation, and potentially result in numerous groups feeling (or worse, exhibiting) ill will towards their local State (or municipal) governments, this occasion is an opportunity for President Obama and Congress to step up and enact legislation addressing the situation.

Would a federal approach be more fair to each constituent? Probably not. More popular? Unlikely. But it has the potential to address the situation efficiently, uniformly, and importantly, remove tension between State governments and workers. Why would our federal government want to take responsibility by bringing the burden of that difficult decision upon themselves? That’s what leaders do. In this case, perhaps, in order to form a more perfect Union.

The Best Reward

It’s really a privilege to work with entrepreneurs and early-stage companies. There are so many rewards…creating and executing a vision, learning about new ideas and meeting new people, challenging conventions and disrupting industries, helping entrepreneurs and teams realize dreams, providing valuable goods and services to constituents and communities, creating jobs and improving the economy, financial success…the list goes on.

To me, the best reward occurs when teams create amazing work environments. Last week Crain’s listed the Best Places to work in NYC.  Two of our portfolio companies made the list: ZocDoc ranked #1, and Conductor ranked #6. Three other very good friends, who are founder/CEOs, also made the top 50. Congratulations to all those who were named, as well as to all of the companies around the globe who work hard to create leading environments! Below is the email I wrote to congratulate and thank the founders at ZocDoc…here’s wishing everyone the same congratulations and thanks.

Team ZocDoc,
While your astonishing growth is truly remarkable, I consider recognition like Crain’s Best Place to work in NYC one of your most impressive accomplishments. Lots of companies can create vision and work their teams hard to achieve success. Doing so in a healthy and inspiring way requires thoughtfulness and effort which is rare. Thank you all for taking time to build more than a successful company, but a company that demonstrates leadership for all industries to emulate.  Thank you, Doug

Dunbar Never Smoked Hash(able)

“Dunbar’s number is a theoretical cognitive limit to the number of people with whom one can maintain stable social relationships. These are relationships in which an individual knows who each person is, and how each person relates to every other person. Proponents assert that numbers larger than this generally require more restrictive rules, laws, and enforced norms to maintain a stable, cohesive group. No precise value has been proposed for Dunbar’s number. It lies between 100 and 230, but a commonly used value is 150.

Dunbar’s number was first proposed by British anthropologist Robin Dunbar, who theorized that “this limit is a direct function of relative neocortex size, and that this in turn limits group size … the limit imposed by neocortical processing capacity is simply on the number of individuals with whom a stable inter-personal relationship can be maintained.” On the periphery, the number also includes past colleagues such as high school friends with whom a person would want to reacquaint himself if they met again.” http://en.wikipedia.org/wiki/Dunbar%27s_number

Given the limited technology tools at the time and the reliance on the neocortex, Dunbar’s theory seemingly held true for years. But technology has evolved, and with it a new way to manage and expand the number of stable social relationships available to an individual.

Enter hashable, a relationship management utility. Today hashable released it’s iphone app (it is also available at www.hashable.com). The utility allows users to introduce people as well as log and retrieve every social interaction. In addition, hashable’s archives dispenses with the need to share or save business cards. Hashable also records your relationship strength (ie. how connected you are with other people…and places, brands or things) and the frequency (or absence) of your interactions.

Each of these utilities provides hashable users with ability to more effectively manage their relationships, which in turn allows them to expand the number of stable of social relationships. It will be interesting to see the effects of that expansion of an individual’s social capital, productivity, efficiency, enjoyment and other areas of society and social interactions.

Is Deflation the Next Business Model?

Media coverage abounds with whether the United States is entering an inflationary or deflationary period.

Within the category of consumer retailing, one of the topics receiving considerable attention is the proliferation and growth of online discount retailers and coupon companies.

The reported revenue growth of these companies is staggering; for example:

Groupon $350 million

Gilt Groupe $500 million

(Compare France based Vente-Privee $1+ billion)

While their aggregate revenue is currently tiny relative to US retail monthly sales of about $300 billion (ex-autos) , their impact may be more pronounced. First, their sales are growing fast. Second, their traffic is growing faster. Third, and more important, an increasing number of merchants are offering discounts to vie for increasing sales through these online companies.

If an increasing number of consumers are exposed to discounts, it seems likely more consumers will search for and perhaps come to expect discounts prior to purchasing. And if an increasing number of merchants realize greater sales by offering discounts, it seems likely more merchants will participate in discounting more frequently. The combined impact could have a deflationary effect on the US economy.

A Mint.com for Social Capital

by Brad Hargreaves

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.

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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.