Planet VC

Mauboussin and Surowiecki

2010-04-05T16:45:29+00:00

An aside — why am I reading bunches of PDFs?

2010-04-05T15:23:30+00:00

I finally officially matriculated last fall as a part time grad student at UW and am studying nanoengineering. For the moment I am sited in the mechanical engineering department tho I could just have easily been in the electrical engineering department, materials science department, chemistry, physics, or several other places. And in fact I am taking no traditional mechanical engineering courses, but am entirely focused on nanoscale problems and technology.

My long term interest is in industrial-scale production of nanoscale devices. Many great things have been made in the labs, but to scaling up to industrial scale production requires discovery of methods to automatically produce and assemble nanoscale devices, accepting the inherent error levels in these devices. Photolithography has been an amazing technology for creating computer chips but is a top-down approach — the entire chip is exactly designed and then carved out of silicon. The next wave of devices at the nanoscale will be organically assembled bottoms-up and there are whole new classes of problems to solve.

I’ve been reading a ton on nanowires and carbon nanotubes and the manipulation of them via various methods. And also thinking on the side about chip/circuit architecture based on these inexact, nondeterministic elements. Just got a pointer to RelXLayer which is a nice launch point for thinking about.

The iPad and PDFs — conclusions for now

2010-04-05T15:12:40+00:00

Several comments have asked for my recommendations. After two days of tinkering, here is what you should do if you’d like to use your iPad to read and annotate PDFs.

get the iAnnotate app. Its UI needs a lot of work, downloading and uploading are clumsy, but it does a fine job of letting you read PDFs and annotate them, and those annotations are usable back on your Mac/PC.
install the iAnnotate PDF service on your Mac or PC. This is a lightweight server that passes PDFs back and forth between your desktop and the iPad. Just point it at the directory where you have your PDFs on your desktop.
on the iPad now in the iAnnotate app, you can connect to the desktop machine and download PDFs. Unfortunately one at a time. Please Ajidev, add batch transfer capability.
Annotate away on the PDF. Personally I use the highlight tool to mark a section, then select the highlight and add a note.
When done annotating, upload the annotated version back to your PC. This is where the UI really blows. With the doc open in iAnnotate, hold your finger on the doc name in the upper left for a while. You will get no visual feedback. Lift your finger and a properties dialog will appear with an upload option. Upload away.
Back on your mac/pc, your annotated doc will be in your pdf directory with the words “annotated” appended to the name.

This isn’t bad. It is all very functional. I’ve done 15 papers already and it is becoming natural. How can it be better?

Integration with Web of Science or other paper sources. The Papers app on the iPad promises to let you download papers directly from WEb of Science and others (tho I can’t make it work with the UW ezproxy settings). This would be very nice.
Integration with endnote??? I don’t know about this. I use Endnote Web within Web of Science and that works fine, I don’t know what else I need.
Integration with Pages. Would be awesome to be able to slurp annotations and citations into the Pages app.
Integration with Papers on the Mac? Don’t know, I’ve just installed Papers, and while I like its organization features, the lack of annotation capabilities makes me wonder if I will ever bother with it.

Discouraging a Cadillac Plan

2010-04-05T14:52:05+00:00

I wrote a series of posts a while back about the skyrocking costs of municipal employee health insurance in Massachusetts and the impact it was having on town budgets. These were triggered by a series of articles by Sean P. Murphy of the Boston Globe. Well, Sean is at it again.

Today's story points out that starting in 2018 these 'Cadillac' health plans will be subject to a new tax as part of the health care bill. This tax is aimed at discouraging companies from offering very high-end health care plans. According to Sean's article, a family health plan that costs more than $27,500 would be subject to a 40% tax on every dollar over that threshold. The hope is that employers will stop offering such high-end plans as they are excessive benefits that go way beyond what a typical market-level benefit is. Unfortunately, if towns continue to offer these plans to their municipal employees, these taxes will further eat into stretched municipal budgets. Note that these thresholds may increase between now and 2018, depending on the rate of medical cost inflation.

And, changes to these plans must be agreed to by collective bargaining. The unions in the article point out that they have given up other things, including higher salaries, in exchange for these benefits. I haven't done a salary analysis of municipal workers, but I think it is time for them to give up some of these excessive health benefits.

Amazingly, one town in the article, Framingham, has a cost of $40,475 per year for one of its health plans. I can't imagine how rich that plan must be. In order to get a sense of cost, I went onto the Massachusetts Health Connector site to see how expensive a plan can be. If you aren't familiar with it, this is the exchange set up by the state where indviduals can buy health insurance from private insurance companies. All the plans are compared on an 'apples to apples' basis. They have Gold, Silver, and Bronze plans. As an individual, I buy health insurance for my family through this exchange. We pay the market rates, and I find it all very easy to use. Like in the new US plan, in Massachusetts, you can't be turned down for pre-existing conditions (they never asked when I signed up), but everyone must purchase insurance or face a penalty.

I went onto the site today to price out a 'Gold' plan for my family. We have two late 40s adults and two teenage kids. A Gold plan on the MA site has the following characteristics:

No annual deductible (the health plan starts paying for everything from dollar one), $20 copay for doctor visits, $15 generic prescriptions, $75 copay for emergency room visits and $150 copay for hospital stays. Other than these copays and the premiums themselves, there is no out of pocket costs for health care under this plan.

I am pretty sure that's better than the health plan that all of us have. There are two providers for this plan, Neighborhood Health Plan and Blue Cross Blue Shield. Neighborhood is relatively inexpensive at $1534/month. Blue Cross Blue Shield, the same insurer that most of the municipal employees have, charges $2172/month. Both of these are below the $2291/month threshold where the 40% tax kicks in. Imagine what those folks in Framingham are getting for $3373/month!

I am fine with municipal employees getting a Gold-level plan. But, let's not make it Gold dipped in Platinum with a Palladium finish. Unless you live in a town like mine (Bedford) that has already successfully dealt with this issue, you need to force your town government to work out an arrangement with the town unions to lower the health care costs. This will help the town avoid the 'Cadillac' plan tax and free up municipal tax dollars for more police, fire fighters, and teachers. And, urge your state legislators to support a bill on Beacon Hill that gives the cities and towns the flexibility to change their health care coverage independent of collective bargaining, as long as their plan is no worse than the state employee health plan (wonder what that costs?).

And, this doesn't even deal with the very high percentage of premium costs that are paid by the town vs. the town employee, the fact that many towns don't force their retirees onto Medicare, and that it doesn't take a long stint as a town employee to earn free health benefits for life. See some of my previous blog posts and Sean Murphy's articles for more background on the overall issue.

Today's article has a ton of comments already on boston.com. Many of them rail against the health care bill, citing the tax as a bad thing. I view it differently -- I think that excessive benefits like this are Ok to be taxed, just like progressive income tax rates. When you earn more, you should be able to afford higher taxes. And, the threshold is so high that it isn't any sort of hardship for union members to get their plans back down into the tax-free zone.

The White Stripes - We’re Going To Be Friends

2010-04-05T10:00:00+00:00

The White Stripes - We’re Going To Be Friends

Beautiful weekend

2010-04-05T00:53:51+00:00

Light blogging this weekend. It was gorgeous here and we made the most of it.

Finished today off with a family bike ride.

James Grant vs. David Rosenberg on Treasuries

2010-04-04T20:49:02+00:00

Good debate between James Grant and David Rosenberg on U.S. Treasuries. Click to watch/download, but biiiiig file.

Late Bloomers in Science, Engineering, and Entrepreneurship

2010-04-04T20:45:57+00:00

Thought-provoking and cautionary reminder from David Galenson:

Late Bloomers in the Arts and Sciences: Answers and Questions

Recent research has shown that all the arts have had important practitioners of two different types — conceptual innovators who make their greatest contributions early in their careers, and experimental innovators who produce their greatest work later in their lives. This contradicts a persistent but mistaken belief that artistic creativity has been dominated by the young. We do not yet have systematic studies of the relative importance of conceptual and experimental innovators in the sciences. But in the absence of such studies, it may be damaging for economic growth to continue to assume that innovations in science are made only by the young. [Emphasis added]

Growing Up [Flickr]

2010-04-04T19:19:04+00:00

jurvetson posted a photo:

Nurse-nap- mêlée… Nurse-nap- mêlée…

Their cyclic hedonism is an inspiring metronome for the day.

More below.

Playing Possum [Flickr]

2010-04-04T19:11:50+00:00

jurvetson posted a photo:

The Siamese kitten we call Scratchy because he seems to be claws-out and pouncing most of his waking hours.

And each time, Stripes has to takes him down.

Fierce kitten battle sequence below… =)

Padding [Flickr]

2010-04-04T18:36:10+00:00

jurvetson posted a photo:

Just had to go feed the feral kittens in HMB again this weekend.

(I really like the Canon S90 pocket cam - first photos from it)

Readings: iPad, Termites, Frugality, Rome, Bonds, etc.

2010-04-04T18:21:22+00:00

A few links from my weekly Weekend Reading roundup:

Munster: Apple sold 600-700 thousand iPads the first day (Source)
Inside the iPad: Samsung, Broadcom snag multiple wins (Source)
Termite gangs tunnel into third French bank (Source)
The Age of Frugality takes a holiday (Source)
U.S. Decline, Sloth Look a Lot Like End of Rome (Source)
A special report on America's economy: Time to rebalance (Source)
Corporate Bond Default Risk: A 150-Year Perspective (Source)

La Binchoise Spéciale Noël Reserve

2010-04-04T17:13:02+00:00

Today’s beer posting brought to you by Tracy DeCicco, whom came to my office hours last week and brought me a bottle of beer.

(Clearly it was the best meeting of the day).

This was a really nice beer. I had never heard of it, but better late than never. There were a couple of things that were really special about it.

First, if you like orange in your beer, this is for you. It’s not overpowering at all, but really nicely tucked into the body of the brew and is both front tasting and lasting. While it’s a Christmas brew, I could easily picture drinking it on a warm day.

Secondly, while a very nice amber color, it has nicely balanced hops and is still very accessible. Moreover, it’s really perfectly balanced with its carbonation, which seemed less than most beers, but perfect for this effort.

Overall it’s a unique and yummy beer. Thanks Tracy!

Mendelson Rating: 8.5/10

iPad Day 2 — PDF reading and annotating

2010-04-04T16:42:37+00:00

One of primary use cases I am testing out on the iPad is reading and annotating PDFs. I am in the process of reviewing 200-300 papers on nanowire/nanotube manipulation via electric fields. Printing them all out would be horrendous and unwieldy — I did print the first 30 and it was a 2 inch stack of paper.

If I could replace 20 inches of paper in my bag with an iPad, that would be awesome. Obviously I need to be able to annotate, extract annotations, etc. Major pluses would be easy downloading from Web of Science searches, and integration with Endnote.

Attempt 1: iAnnotate PDF from AjiDev on the iPad. To make this work, you install a little server app on your Mac/Windows machine and point it at all your PDFs (which you downloaded previously from Web of Science, no integration with, sigh). Then on the iPad, you pull all the papers over (1 at a time, yuck) in the iAnnotate app (the developers say they hope to improve this once they have more time with the iPad). You can then annotate, and upload the annotated papers. Pros: this all actually works, I have done my first 5 papers, I can see living with this. Cons: no integration with Web of Science or EndNote, no integration with Pages on the iPad (that would be killer). And the UI of iAnnotate is incredibly obtuse. Dialogs, toolbars, ribbons, popups, with key commands sprinkled through them all with no rhyme or reason. Figuring out how to upload my annotations took forever (when you have an annotated doc open, hold your finger on the doc name for a while, when you let up a properties dialog will appear, and there is an upload button there).

Attempt 2: Papers by mekentosj. OK this looks so freaking promising but I have been dashed on the rocks. Papers has direct integration with Web of Science and many other paper search tools, and I have tried to set up access. Access is tricky because Web of Science access is limited to subscribing institutions, so you have to go through an institutional proxy, in my case UW. I can configure the logon correctly and see the Web of Science webpage in the app and do searches in the webpage etc. But I can’t get the ezproxy setup right which allows the Papers UI to do searches and downloads. This would be so awesome but I am failing. Apparently if I buy Papers for MacOSX it will automagically sync my collection so that is up next.

UPDATE: OK so I bought Papers for MacOSX and now have tried that. The good news — sync between Mac and iPad is great, much better than iAnnotate. The Mac Papers interface is very nice for organizing PDFs, tagging them, keeping track of read/unread, etc. HOWEVER you don’t seem to be able to markup PDFs in the Mac app or in the iPad. You can add global comments to a paper but no highlighting etc. This is a major downer.

Eric Wiesen

2010-04-04T13:27:39+00:00

I didn’t preorder an iPad, nor did I line at 6:00 AM at the Apple Store to get one, but as it turns out, Apple knew a lot of people were going to want them and the stores were well-stocked. At 4:00 yesterday afternoon I walked into the Upper West Side Apple Store and picked up a first-generation 16Gb Apple iPad.

When the device was first announced I (like many) had an initially underwhelmed reaction. “It’s a big iPod Touch”, I thought. “I already have a Macbook Pro, an iPhone and a Kindle – why do I need this?”

I woke up about two days later and realized that this was the wrong question. First of all, NEED is rarely the right frame for a new gadget anyway. But aside from that, what I realized is that the iPad would do most of the non-telephone things my iPhone did (web, video, games, ineracting with data via native apps) but better. And now that I have one, that’s my early observation. It is, in fact, basically a giant iPod Touch. And that’s pretty awesome.

A few initial observations and things that seem likely to be either big deals or medium deals to new iPad owners:

Apps are more expensive. I think developers realized that getting trapped in a consumer expectation that apps cost $0.99 is avoidable. Most of the apps are $5. Many are $10 or even $15. And yet the nature of the iPad is such that I suspect people are going to pay, because one’s ability to interact with some of these apps might have felt trivial on a phone but not here. A good example is MLB At Bat, which is $15. As a big fan of a non-local team (SF Giants), this app is like Gamecast on Steroids, plus I can actually watch the games streamed. That’s a big deal to me and easily worth $15. Lots of other apps will engender similar anlyses.
You will need a film and a case for this. It’s a magnet for smudged fingerprints and the form factor is (as originally criticized by early commentators) awkward enough that you might drop it at some point.
Netflix for the iPad (and video in general) is a big deal. As someone who, ahem, rarely tries to open a macbook pro in a coach airline seat, the notion of video on the iPad is highly significant. Netflix on demand is compelling.
I’m still not convinced this is serious tool for work. Apple is trying to push their office productivity apps, but even with a keyboard and a stand color me somewhat skeptical that this emerges as a real use case. As a side note, however, it’s really something to see word, spreadsheet and presentation apps being sold for $10 given what Microsoft continues to charge for desktop versions of Office.
And a question mark – the iPhone-using world is crazy for location-based services right now. I’m fascinated to see how (and if) this translates to the early iPad user community. My instinct is that apps that are more about single-purpose actions (like checking in) will continue to exist more on the mobile devices, whereas apps that encourage more interaction with data or other users (games, conversations) will migrate rapidly to the iPad.

My early conclusion is that this is a really cool device. I’m going to love watching video on it, playing the occasional game, browsing the web and interacting with data in much the same way I do on my iPhone but better. And, having said that, I strongly suspect that a subsequent post 45 or 60 days in will go on to describe all the things I’m doing with this device that I hadn’t thought of the day after I bought it.

Filed under: Uncategorized

Immigration Reform And The Jobs Bill

2010-04-04T12:47:38+00:00

Last month congress passed and the President signed an $18bn jobs bill "providing tax breaks for businesses that hire previously unemployed workers and extending funding for infrastructure and transportation projects."

While I can't argue too much with the idea of using tax breaks to spur hiring and investing in infrastructure, I think smart immigration reform might be a better way to create jobs in this country. Tom Friedman agrees and in today's NY Times, he writes:

“Between 1980 and 2005, virtually all net new jobs created in the U.S. were created by firms that were 5 years old or less,” said Litan. “That is about 40 million jobs. That means the established firms created no new net jobs during that period.”

and

“Roughly 25 percent of successful high-tech start-ups over the last decade were founded or co-founded by immigrants,” said Litan. Think Sergey Brin, the Russian-born co-founder of Google, or Vinod Khosla, the India-born co-founder of Sun Microsystems.

It is not surprising that new companies are creating the jobs in this country. Most businesses don't last forever, they start, grow, hire, eventually get fat and happy, stagnate, and then fail or are sold off. Add to that assertion that technology is changing things and that companies based on older technologies are likely to suffer and decline, and you come to the obvious conclusion that new company formation is the key to job growth.

That second quote from Friedman's piece is about tech jobs, but I would bet that immigrant led business creation is not limited to tech companies. The "fat and happy" thing is unfortunately true about many US citizens. But immigrants are rarely "fat and happy" so they work hard, start businesses, hire employees, and build companies. That's the american way. To quote again from Friedman's piece:

What made America this incredible engine of prosperity? It was immigration, plus free markets. Because we were so open to immigration — and immigrants are by definition high-aspiring risk-takers, ready to leave their native lands in search of greater opportunities — “we as a country accumulated a disproportionate share of the world’s high-I.Q. risk-takers.”

We need smart immigration reform in this country. We are not inviting many of the world's "high-IQ risk takers" to come to America any more. And worse, we are asking many of them to leave. That must change.

Regular readers of this blog know that I'm a big fan of the startup visa idea and have been working to get it made into law. That is a small, but important, part of the bigger challenge. We need comprehensive immigration reform in this country. We have always been open to immigration in this country. It is fundmental to what this country is. We cannot change our approach and expect to continue to have a prosperous country.

Mauldin: Is This a Recovery?

2010-04-04T00:06:57+00:00

John Mauldin’s latest:

Is This a Recovery?

Last week I wrote a letter to my kids trying to explain what Greece meant to them. Reader Ken V wrote: "Great letter, John. Now you should write one for the adults who are retired and don't have the long future your kids do. If the US becomes Greece, things won't recover in time for much of the rest of my life to be more than one grim, dreary period. What is your investment advice for those with roughly a 10-year horizon, not 30-40-50 years?"

A very good question Ken, and one that was asked more than a few times. So today I will touch on that thorny issue, as well as look at the employment numbers for what we see about the potential for an actual recovery.

First, let me say that what I am not doing here is giving you, gentle reader, specific advice. To be able to do that I would need to have specific knowledge of your situation, assets, location, needs, health, etc. But what I will try to do is give you a general assessment of what I see for the economy over the next few years and what the investment climate might look like. I am also going to refer to a lot of previous letters I have written, for those of you who want to do further research.

iPad day 1

2010-04-03T19:59:33+00:00

Really really slow on first sync. I’ve purchased a ton of iPhone apps over time and the iPad insists on installing all of them, even crappy ones that I have uninstalled.

Kudos to: The calendar app is gorgeous. The Book app is beautiful but so what, I’ll still read most books on the Kindle, and the Kindle app looks good. Zillow looks nice. Wordpress app has been nicely rewritten. Soundhound looks good. Wolfram alpha looks good and at the new pricing, is now a reasonable buy.

Yawns: The Mail app, blah, nothing really new. Maps, disappointing, nothing new.

Disappointments: almost all games, few have been ported: Civ Rev and Catan, this is your chance. 2 across, I may have to find a new nytimes crossword app. Facebook?

Need a great texting app, the first two I tried sucked.

I am working now to download a bunch of PDFs to evaluate the device as a PDF review/annotation tool. iannotate from ajidev is the tool.

How to stay on top of iPad news

2010-04-03T17:45:20+00:00

We’ve certainly got iPad covered. First, here is a compilation of reviews of Apple’s new wonder gizmo. Second, here’s iPad.Alltop which is dedicated to ongoing coverage of it.

Eric Wiesen

2010-04-03T17:26:26+00:00

The old adage about building a retail business was that the three most important considerations were “location, location and location”. This made sense – while offline businesses like restaurants or retail stores rarely thought about “customer acquisition” in the same way that online businesses do today, the dynamics are analogous – you needed to build your operation in a way that enabled you to acquire customers profitably. Put another way, you needed to be able to attract customers without spending too much money and you needed to be able to charge them enough that they were worth that cost. Having a good location was demonstrably critical – you had to be where people either already were in large numbers, be somewhere that was already a destination for the right segment of people to whom your business appealed, or be convenient to complementary businesses for your target demographic. Thus, location location location.

Online businesses don’t have to worry about location (I’m going to sidestep the analogy between location and domain names, not because it’s illegitimate, but because it’s a separate point). Online businesses live on the web, where location is dimensionally irrelevant. So the question becomes, if offline businesses distinguish themselves fundamentally by location, how do online businesses accomplish the same distinctiveness?

Several of my friends have blogged on the topic of customer service over the past few weeks (see Josh Kopelman’s two posts on the subject, as well as Sarah Tavel and Eric Friedman’s related posts on ecommerce and customer service excellence). As I’ve observed my own use patterns over the past few years as a consumer, I’ve concluded that truly amazing customer service has replaced location as the single point of greatest leverage for online commerce (side question – can we retire the term “ecommerce” please?)

Zappos is a great example, and is always everyone’s first comment on this topic because they have done a superb job not only of creating a great customer service culture, but of promoting how superb their customer service culture is. I think the dynamic goes well beyond Zappos. In fact, while enumerating some of the early best practices that have come out of some of the pioneers in next-generation customer service is interesting and illustrative, for my money thinking about the underlying competitive dynamics is more interesting and ultimately more powerful in the long term.

As with most questions of business strategy, this analysis will ultimately hinge on competitive advantage (or lack thereof) amongst competitors within a segment. As always on this topic I refer back to Bruce Greenwald, from whom I learned most of my fundamental understanding of the sources of competitive advantage and the best ways to maintain and expand those. Location location location goes beyond the accurate but ultimately superficial explanations I gave in the first paragraph. Brick and mortar businesses that got location right built competitive advantage in their industries, particularly the larger, multi-location brands that at a core level became as much about having the right real estate as having the right product.

Consider the book business – prior to the internet, you’d talk about Barnes & Noble, WaldenBooks, Borders or B. Dalton. What were the distinguishing characteristics of these companies? You could cite little difference other than the footprint they held – who held the prime spots in the right malls? Alternately, who was building superstores elsewhere that upended the mall model? Either way, you were talking about strategies built on location, distribution and ultimately supply chains to feed the beast. Consider the book business now. Amazon owns it. And why wouldn’t they? They have every title at all times, give free shipping to just about every purchase, take things back easily and have good prices. Some of these elements are more obviously customer service than others, but I’d put all the non-price benefits under the same basic umbrella (particularly free shipping and easy returns).

Now consider Amazon as a builder of competitive advantage. Location is irrelevant, so the hundreds of millions or billions of dollars spent on retail distribution infrastructure and storefronts is sunk. Without location, how does a seller of a true commodity create competitive advantage? I believe the only answer is consumer habit, and the only real generator of that habit is superior customer service. That means considering the sources of habit and stickiness as core drivers. So what do you do if you’re Amazon? This is the genius of Amazon Prime. People love free shipping, so you get them to pay up front for free expedited shipping on everything they buy. Once you’ve spent the $79 on Amazon Prime, that free shipping benefit will draw you to Amazon whenever possible. It’s sort of the commerce equivalent of frequent flyer miles. I’d argue that this analogs of this dynamic can be found across all areas of online commerce where new entrants are using new sources of consumer retention to build lasting relationships with those consumers.

Ultimately, the demise of location as a differentiator amongst businesses seeking to sell to consumers destroys much of the competitive advantage present in these markets. I posit that in this newly-level playing field, customer loyalty can be obtained only by superior customer service. We’re going to see this thesis play out over the next few years, particularly as next-generation approaches to online commerce continue to gain scale (e.g. private flash sales, group buying platforms, subscription commerce, etc…). One possibility that I will allow for, both as an investor and as a consumer, is that the web actually is a true leveler – that there are no real sources of competitive advantage in commerce and that this will be a margin-destroying scrum that will lead to only the leanest of businesses surviving. If this is the case, operational excellence will become the determinant of winners and losers.

My thesis today, however, is that there is an opportunity for online merchants to build a sort of brand relationship with consumers, and that this opportunity hinges on stellar customer service. Those online stores and retailers who engender the trust of consumers should, under this thesis, obtain a measure of loyalty from those consumers. This thesis will be easy to test – if it’s true, the merchants who succeed will be able to charge higher prices than those who fail. If, on the other hand, Zappos and those like them, are exactly price-competitive with the field, then the correct conclusion will be that great customer service is actually a red herring. As a consumer, I certainly hope this isn’t true, and as an investor I hope the same thing, since I continue to look for online commerce businesses that have an opportunity to build something truly defensible over time.

Filed under: Uncategorized