Archive for the ‘Twitter’ Category

4 Reasons Why the “4 Reasons Today’s Tech Scene Differs from the ’90s Bubble” Aren’t Really Reasons

03/29/2011

I hope that the title of the article didn’t scare you. Yet I felt compelled to share with you the same confusion many in the social media world are currently going through with regard to company valuations.

I got to the article “4 Reasons Today’s Tech Scene Differs from the ’90s Bubble” through the article “Buffett Declares Social Media Valuations Overpriced“, in which Buffett, in eerily similar fashion to the Tech Bubble 1.0, claims “it’s extremely difficult to value social networking site companies” and that “some will be huge winners, which will make up for the rest.”

As a student of investor sentiment I love to point out when investors’ hearts jump far ahead of their minds. One of my favorite books of all-time is “Extraordinary Popular Delusions and The Madness of Crowds” in which Charles McKay journeys through the greatest examples of herd-mentality people’s money has been subject to.

I’ve become quite keen of bubbles. Both finding them and pointing out false ones. Tops are more fun than bottoms, simply because bubbles are so much more entertaining.

It’s a funny thing money, because it’s something we work our whole lives for and yet it can drive us completely insane. We gamble when we have everything to lose and we shy away from the greatest of opportunities.

Back to the article.

If you insist that Facebook is worth $85 Billion today you deserve to be made fun of. Let’s begin.

Alexander Hotz is a freelance multimedia journalist and public radio junkie based in New York City. Currently he teaches digital media at Columbia University’s Graduate School of Journalism.

So now we have a case of Buffett vs Hotz. Who do YOU think is going to win? That’s right. The 80 year old investor or some young “public radio junkie”. Sorry, Alex but my money’s on Buffett.

We currently have the following valuations:

Quora $1 Billion

Twitter $10 Billion

Facebook $85 Billion

Alex mentions 4 reasons why “this time is different”.

1. Startup Costs

“[In the 1990s], when you started a company, more money was pumped into office space, servers and equipment,” said Mimeo.com Founder Jeff Stewart. “Today, when you build a company, you don’t own a server — you might even have mobile office.” With so much infrastructure now in the cloud, entrepreneurs can focus more on the product than they could in the past. For their part, investors don’t need to invest as much, so at least in comparison to the 1990s, oftentimes the risk is less. Bottom line — it costs less to start a company today.

There are 3 immediate issues I have with that paragraph.

a. It’s not true. Yes infrastructure costs have lowered significantly yet other costs and other distractions have taken its place. Today, marketing, lead generation, code writing and technical expertise have taken the front seat – aspects just as time consuming as taking out the trash or actually selling product.

b. This doesn’t help us. If startup costs have dropped that means that the incentive for other competitors to compete has risen. What stops some potential college drop-out from spending his night writing better code than your oh-so-genius team?

c. This isn’t a reason. So let us assume that you do have a patent-pending for your state-of-the-art tech-savvy game-changing app. How do you make money? If there’s no money, there’s no valuation. Period. I’ll write that again because it will recur throughout this article. If there’s no money, there’s no valuation.

2. Public vs Private

In the 1990s, tech companies raced to secure a lucrative IPO. When the bubble burst in March 2000, those who got burned weren’t just angel investors and VCs, they were less experienced investors who had jumped on the tech bandwagon.

Today, younger companies aren’t in a rush to go public. Think Facebook’s “special purpose vehicle” with Goldman Sachs. What’s more, today’s public tech companies are market stalwarts. “You can’t call Amazon or Google or Apple overvalued,” said OrganizedWisdom CEO Steve Krein. “[In the 1990s] you could have called DoubleClick, Amazon and Yahoo overvalued.”

Krein agrees with Fred Wilson that the startup world has some “frothiness” or excess capital, but comparisons to the 1990s don’t take into account where the investors are coming from.

Firstly, investors are investors. And history has proven the astute “experienced” investors to be the ones who are often the most foolish ones. You may insist that small investors won’t get burned this time and, I agree, that’s a good thing. But that doesn’t in any way validate the stupidity of the affluent who we know spend millions of dollars on other stupid stuff like art, CDOs and credit default swaps.

I have no doubt that if the small guy could get in on this mayhem, he’d buy Facebook faster than he bought Enron and Pets.com 12 years ago.

Then he mentions Google, Apple and Co., which makes my head spin. Of course Google wasn’t overvalued in 1999. It didn’t exist! So while investors were piling into Yahoo and Juno their ultimate rival wasn’t even a prototype!

The second mistake is a bit more complex. You can’t use the survivor to prove the challenge. You can’t take the 1997 Bulls and claim that the Michael Jordan draft pick was a home run. Apple has come a long way since 1999. Jobs had just joined the company again after 10 years of struggling profits and a stagnant share-price.

3. Hubris

A less tangible difference between the 1990s and today’s startups is the dynamic between the up-and-comers and the established titans. “[In the 1990s] there was a sense of confidence that the new companies would knock off the old companies,” said MeetMoi.com CEO Andrew Weinreich. “Imagine Time Warner, the most venerable of media companies, literally giving away half of itself to an Internet startup AOL. If you were in a startup, you really thought that you would knock off existing players.” Today, the big players are the survivors of the dot com era.

I have to give it to him. He had the substance of a real argument until the last line. Which survivors are we referring to? When people talk about Google being taken over by Facebook, what does that say about hubris?

Finally, since when does hubris a necessity for a valuation bubble. All we’re saying is that investor aren’t discounting anything for the future. Webster’s  defines a “Bubble” as “a state of booming economic activity (as in a stock market) that often ends in a sudden collapse”.

When VCs are throwing (literally) money at these new tech startups there is a definite chance of a sudden collapse in economics activity, at least in Silicon Valley.

4. The Bubble Isn’t a Profitable Joke

In 2000, entrepreneur Philip Kaplan created the satirical website FuckedCompany.com (a take on Fast Company), lampooning the absurdities of the startup world. “When you have a profitable business built around making fun of the bubble, that’s an indicator,” said Stewart. The site made some serious money off the woes of the floundering dot com world. Today, while satirical blogs and social accounts are plentiful, none of them come close to the profitability of lampooning the last bubble.

Do we really need jokes to prove investor insanity? Mind you, every child knows that (bubblegum) bubbles take time to grow, but only an instant to pop. Investors should bear in mind the same. That one day there will be a joke, the next it won’t be so funny.

So is there a bubble?

No.

Guess you weren’t expecting that answer. The fact is that if investors are going this crazy now, it’s due to continue for some time. True, there are no jokes, there are no naysayers (and thus stark advocates) and it’s not the hottest topic on CNBC. Most of all, there aren’t enough people claiming it’s a bubble (yes, a bubble needs a conscience). Not yet at least. But once the IPOs start rolling out and the small investors do get wind of what’s going on, it will end, and badly.

Wait I say.

Wait for the “Facebook taking over Apple” articles.

Wait for the momentum, when volatility increases.

Wait for the young and inexperienced investors to sit on the set of CNBC and tout the reasons for their madness.

Wait until earnings become paramount, while balance sheet quality, cash flow from operations are ignored.

Wait until these “low cost” startups begin to run low on the mountains of cash they acquired.

Wait for when the accounting seems compromised, when large amounts of earnings stem from accruals rather than cash flow from operations.

Wait for the article that say “This time is different”, “P/E ratio’s don’t matter” and “If you don’t invest now you’ll die a broke old man”.

When Buffett said that he “didn’t get tech,” he didn’t mean that he didn’t understand technology; he just couldn’t understand how technology companies would earn returns on equity justifying the capital employed on a sustainable basis.

Favorite Tweets #8

05/14/2010

Some Tweets worth “ReTweeting”. Enjoy!

  • I once met a Billionaire and made him feel like a million bucks. I didn’t realize I had insulted him.
  • The sweetest words any entrepreneur can hear: “I know a guy…”
  • Ever seen what a trillion dollars looks like? http://ow.ly/1bEKS
  • My father asks me “So when do you plan to settle down”. My response: I’ll only settle up, not down 🙂
  • “The Law of the Alibi: If you tell the boss you were late for work because you had a flat tire, the very next day you will have a flat tire.”
  • If caring for a baby is a “full-time job”, then how do mothers take care of twins? Time is what you make of it.
  • Comic: Life before Google http://bit.ly/a9r0Gy
  • Whether you become famous, drunk, overwhelmed or exhausted, Remember: ABC – Always Be Conscious.
  • I wonder who the genius was to first figure out that it was worth it to accept credit card transactions for less than $10… and why can’t the above mentioned genius figure out a more efficient airport drop-off/pick-up system?
  • How to be Luckier in Life ~ http://bit.ly/a7FsX5
  • “The problem with America is stupidity. I’m not saying there should be a capital punishment for stupidity, but why don’t we just take the safety labels off of everything and let the problem solve itself?”
  • The Hidden Art of Achieving Creative Flow http://bit.ly/9cDRQp
  • Sometimes you’re so into what everyone thinks of you, that you forget what everyone thinks of you.
  • You’ve got to have a million ideas. 100,000 you can try. 10,000 that fail. 1000 that succeed. 100 that inspire many. 10 that can help millions. And ONE that changes the world!
  • Condensed philosophy of the Samurai: “Win beforehand.” Brilliant.
  • Genius in the 21st century is all about knowing how to identify the information that really matters and being creative enough to combine the best ideas.
  • A Great Story About Motivation: http://bit.ly/boBbhw
  • I spent the earlier years of my life trying to become an expert in the things that in the more recent years of my life I realized I could easily pay some other expert to do.
  • There’s what you do for money, what you do with your time, and who you are as a person. Never confuse them.
  • “The only useful banking innovation was the invention of the ATM” ~ Legendary Fed Chairman, Paul Volcker
  • What’s the MOST positive thing you can think of that will enhance your life in every way? Go get it!
  • “The desire to master others is born of a failure to master oneself” (Thanks Yitz)
  • Stress is caused by trying to balance too many things at once. Focus and do the ONE thing that MUST be done, by YOU, right NOW.
  • Words that everyone loves to hear “I think you’re awesome!”

Twitter: What It Takes To Get ReTweets

03/25/2010

A Friend Recently Asked Me

I’m wondering if busy people are really busy, how do they find time to tweet, and so then it must be they’re not soooo busy, but in that case why is it that when you RT @ them they don’t RT back? Are they busy or not? I just hate when I RT them and they don’t RT or reply back, any ideas as to how that works? Do I also have to be as important as them in order to get RT’d?

My Thoughts

Very busy people are busy with the things they do best. They choose how to be most effective and stick to those tasks. Tweeting falls in such a category, since each Tweet may go out to 1000s, or even 100,000+ followers. Conversely, when you RT or @ someone, it’s a one-person one-time response, only worth their busy time when you’re interesting enough to pass onto their followers. (Note: Many “major” Tweeters rarely even check responses).

From a marketing perspective, the proof to how interesting you are is directly proportionate to how fast you rack up new followers – and keep old ones. It’s tough grabbing attention, but at least when you do increase your followership, by say 10% in a single week, you KNOW you’re doing something right, and you should endeavor to repeat whatever you did to inspire that.

Sometimes you will experience a random spurt of followers, only to be disappointed a few days later when they all leave you. Welcome to Twitter! People WILL leave you. The objective though is to be gaining followers much faster than you lose them.

Twitter accounts that have something to the effect of 5 million followers are rarely due to the value they provide, but rather the name that the account boasts. It’s like why we buy brand names, just because, they’re brand names!

Additionally, just because people do not ReTweet you or respond to you, does not mean that they don’t appreciate your thoughts. I guess it’s social etiquette, or lack thereof. (Some people don’t respond to email either. It annoys me, but that’s life).

So what does it take to rack up a fan club?

The Objective

a) Be interesting! Everyone knows just by glancing at your Twitter page whether you’re interesting enough to follow. There are millions of people on Twitter and everyone is looking for something different. The best leading Tweeters are the ones who provide value and insights to their followers.

b) Interact with your audience. Get to know them and respond to their questions. Develop a relationship with them and provide them with additional value. Respond when YOU think THEY were interesting. Not everyone will reciprocate the favor, but many will. It’s simple etiquette: If they say something nice, say something nice back!

c) Be yourself! Although it’s important to provide value to your followers, you should never get lost trying to be like everyone else. Just tell them what you found interesting, in a most interesting way. As the saying goes: “Tweet like nobody’s following!”

Happy Tweeting!

Recent Tweets

09/23/2009
  • Finally have all my unimportant emails going directly into labeled folders. My primary inbox has been empty for over 3 days. Kinda Freaky!
  • RT @LeadershipNow Change the world: Begin as band of madmen welcoming other crazy ppl who want 2 be part of something bigger than themselves
  • Keys to Productivity: What’s required of me that no one else can do? What offers me the greatest return? What’s most rewarding for me?
  • You cannot underestimate the unimportance of practically everything. Know what to overlook.
  • Enjoy this hilarious video http://bit.ly/hdIyI
  • RT @guykawasaki 10 Common Mistakes That Startup/Small Companies Make | Whatever it Takes | Fast Company http://om.ly/?IsBP
  • Master Your MasterMind (@ebenpagan) http://bit.ly/BDz0s
  • “Success is something you attract by the person you become” Jim Rohn
  • Tom Hopkins: The Customer’s Biggest Fear http://bit.ly/12EL0G
  • Comedian and Impersonator, Frank Caliendo http://bit.ly/ivkoP
  • “The’re 3 reasons why we survived: No money, No tech, No plan. Every $ we used very carefully” Jack Ma, Alibaba.com Founder (read it again)
  • When U think, think Big Picture, how it effects everything in your life. When U do something, live in moment, focused, with consciousness.
  • RT @MichaelEGerber If you care to, you will dare to. And nothing else will be required of you, other than the will.
  • Think about yourself: Do you desire achievement and accomplishment or do you desire to be appreciated?
  • Next time you dread sitting thru long red-lights to make a left turn, Make a right turn instead, then an immediate U-turn. Its often faster!
  • Listening to “Dale Carnegie’s Leadership Mastery”. Highly recommended for enhancing your #leadership skills on any level.
  • “For the next week, smile at the first 5 people you see in the morning… a genuine smile” Dale Carnegie

Follow me at http://Twitter.com/my1ambition

This Week’s Tweets

08/30/2009

(just in case you missed them…)

  • Picture of a molecule! (1 million times smaller than grain of sand) http://tinyurl.com/knhsmt
  • Success = Focus. To do what you do 100% and constantly strive to increase your skill, knowledge and expertise in your particular field.
  • All of life – success and failure, ease and challenge, logic or emotion – all boils down to one simple question: Are you happy?
  • “Very hard work gets in the way of thinking” ~ Jeremy Grantham.
  • Some kids are just talented! 8 year old jamming – http://tinyurl.com/lwpu6p
  • If you want to make a short-term killing: Invest in stocks right now and raise your trailing stop. (The blow-off is always the greatest).
  • All leaders: I came across a great blog today. Let me know if you enjoy it! http://tinyurl.com/dxs3xd
  • “Evolution of a Dance Party”. This is how marketing (and dancing) is supposed to work. One word: Contagion. http://tinyurl.com/n3ll5b
  • My final consensus on the economy: The casino isn’t closing but your chips aren’t going to be worth as much.
  • Is it possible to be focused and conscious at the same time?
  • “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” ~ Mark Twain
  • The Keys to Life are… Running and Reading! (Will Smith). http://bit.ly/KS1WX
  • How to Backup your life – http://tinyurl.com/lifebackup
  • 1999 World Champion of Public Speaking: Craig Valentine- http://tinyurl.com/kugj6o

Join me on Twitter at http://Twitter.com/my1ambition

Join me on Twitter

08/23/2009

Join me on Twitter

http://twitter.com/my1ambition

I reserve Twitter for posts that are too short or irrelevant for blogging purposes. The one-liner type of thing that many enjoy.

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From Tim Ferriss: How to Use Twitter Without Twitter Owning You – 5 Tips.