Startup Standouts: Runnable

RUNNABLE

Runnable is attempting to create a one stop, searchable library of full stack code for discovering, running, editing, embedding, and sharing code blocks -  in any language, for any developer.

Location: Palo Alto

Website: http://runnable.com/

Size: < 10 people

Funding: $2M Seed

Founders: Yash Kumar (CEO/Founder) 

Why it stands out: 

- attempts to make modular / plug and play programming much more accessible and prevalent
- an organized, searchable, testable environment potentially makes programming faster for professionals, hackers, and possibly  even amateurs
- seems ideal for helping intermediate level programmers move beyond the entry level skills taught on most educational programming sites
- founder's experience in collaborative software and extensive background in all sides of web development bodes well for user experience and core product

Guns, Germs, And Steel: Book Review

Author: Jared Diamond 

Length: (425 pages, plus a 15 page afterword)

What is It: Guns, Germs, And Steel is a theory on the evolution of society - not in terms of biological or evolutionary differences but in terms of geographical and sociological differences. GGS attempts to answer the question: "Why did history unfold differently on different continents?" The author goes beyond proximate forces like trade, technology, and societal organization to uncover what he defines as "ultimate causes".  Diamond does this by exploring a broader view of world history (beyond Europe, The Middle East, and North Africa), by studying smaller time scales (hundreds to thousands of years instead of the last 13,000) and by analyzing natural experiments (history of the Polynesian migration) in order to better identify, isolate, and understand these ultimate causes on a global scale.

What's Said: Geographical differences in the local availability of wild plants and animals were key driving forces in societal development. The orientation of the continental axes (east to west like in Euroasia is better than north to south like in The Americas & Africa) created stark differences in climate, biodiversity, and idea diffusion. Human migration led to the mass extinction of domesticable animals on most other continents besides Euroasia. The caloric efficiency of food production was the source of the gradual shift from hunter-gathering to farming. Farming affects population density by requiring settlement, necessitating storage, providing seasonal downtime, and supporting higher birthrates. Excess food production contributed to the permissibility of specialization, innovation, and kleptocracy. Bureaucratic organization becomes necessary because of limits to communal decision making, inefficiencies in pairwise economic exchange, increasingly difficult conflict resolution, and resource constraints. Writing was created to record food production and to protect systemic administration - not to support public expression. Religion and patriotism provided the shared ideology and motivation for citizens to sacrifice their lives and self interests on behalf statehoods, which was a radical break from the human social contract. Euroasia's conquest of much of the world (and not the other way around) was due to the separate trajectory of all these causes and evolutions.

What's True: Euroasia is the world's largest landmass and one of its most ecologically diverse landscapes. Localities distributed across latitudes are very similar in terms of seasons, time, temperature, habitats, and diseases compared to longitudinal axes. The efficiency of farming is 10-100 times that of hunter-gathering. Food production (wheat, pea, olives) arose the earliest in Southwest Asia (Near East/Fertile Crescent), around 8500 BC. Only a very small minority of wild plants and animals have been domesticated for food. A dozen plant species account for over 80% of the modern world's crops, and less than 15% of wild animals are domesticable (18% Euroasia, 4% in America, 0% in Africa). Domesticating animals depends on their diet, growth rate, disposition, social structure, and captive reproduction. Domesticating plants depends on fruit size, dispersal mechanism, taste, fleshiness, oiliness, yield, fiber length, and reproduction. Eurasian culture likely yielded more calories and organization per person on average than Native American culture. Large scale deadly diseases (smallpox, measles, flu) evolved through the mutations of germs during animal domestication and is almost exclusive to large dense populations of social animals like humans and livestock. More Native Americans died from Eurasian germs than European guns and swords (over 95%). Archeological evidence suggests that North America was occupied by 20M local natives upon Columbus' arrival rather the 1M often cited. 

So What: The writing in Guns, Germs, And Steel is cumbersome at times, but given the breadth and depth of the material and the objective this can be forgiven. GGS paints a new picture of global civilization that is completely independent of the need for one race to be superior than another other - an astounding theoretical feat. This is not just an academic exercise, however. GGS is instead, a practical and political guide to the driving forces behind many of the historical legacies that still shape our geopolitical landscape today. The approach that Diamond takes is methodical, and I agree that more work should be done to adapt the methods of hard sciences into the study of history.

Final Word: Very Enlightening Read

On Intelligence: Book Review

Author: Jeff Hawkins (with Sandra Blakeslee)

Length: 235 pages (plus an 8 page appendix of predictions)

What is It: A comprehensive theory on the inner workings of the brain (memory, intelligence and creativity), including its relevance to building intelligent machines. Hawkins starts with a brief history of artificial intelligence and neural networks, but openly challenges them as design foundations. He then presents his memory-prediction theory as a more comprehensive and accurate representation. He ends On Intelligence with a sketch of the future based on his model and a series of testable predictions.

What's Said: Theories of the brain should be based on i) elapsed time, ii) feedback loops and iii) complete architecture. The brain is not a computer; it is a memory system. It distills incoming sequences of patterns (eg: letters of a word in a speech) into invariant forms [snapshots of constantly changing details], passes this delayed pattern up its hierarchical structure (eg: from letters to words in this analogy), repeats that process at each of its six levels (eg: words to phrases, phrases to sentences...), and links all those sequences together through auto association for retrieval later (eg: remembering that speech by recalling just a word/phrase/sentence in it). Detailed predictions using this system are the essence of intelligence. The brain predicts by combining its knowledge of invariant forms from higher brain levels with current details from the senses, and lower levels. This algorithm is the main function of the brain and is exactly the same everywhere (i.e. the primary senses are fundamentally no different from each other). Correct predictions result in understanding, incorrect predictions result in confusion.

What's True: There are 10 times as many feedback as input connections in the brain. Human intellectual superiority is explained by size of the neocortex and its hierarchical levels of sophistication (ability to handle more abstraction, and longer temporal patterns than animals). The Turing Test is misguided because intelligence cannot be accurately measured by external behavior (computational output), it is an inner brain function (understanding does not require action). The memory-prediction framework distinctly separates intelligence from human form and emotions (which negates "rise of the machines" scenarios). Intelligence systems are customized machines that can excel where human intelligence is disinterested or human senses are inadequate. Hawkins is clear and transparent in OI. He not only lays out his theory, he addresses rebuttals, and willingly points out potential flaws in the model. Even if his theory is correct however, capacity (the brain has an estimated 8 trillion bytes of memory) and connectivity (one brain cell connects to an estimated 10 thousand other brain cells) will still be challenges. 

So What: Hawkins' theory has significant implications for the development of intelligent machines. It means that design thinking centered on faster computing, larger memory, and behavior driven output is absolutely misdirected. It means newer innovations like big data (inputs and discovery) and machine learning (pattern recognition and prediction) should be not be explored separately; they should be studied as components of a single intelligent system. For individuals, On Intelligence provides new insights on the way humans think, why we think like we do, and how thought is connected to itself and behavior.

Final Word: Very Enlightening Read

Some Best Practices: Crowdfunding

I have been asked on numerous occasions now from friends and acquaintances whether or not they can leverage the power of donation based crowdfunding for their ideas and if so, how to go about doing it - sounds like that is worth a blog post. Here are my thoughts.

Choosing Crowdfunding

Product
Some ideas are better suited for crowdfunding at this stage of the industry's development. The defining market tie is consumer focus. Products and projects that are relatively simple to understand and use work well - creative variations on familiar form. Physical, philanthropic and artistic projects have historically seen the most successful fundraising. Yes, technology/software has had the largest, most advertised wins, but they are not the current market norm.

Platform
Choosing a platform is a nuance of your product/idea. Kickstarter has the largest brand and more internet traffic, and is particularly selective and creative oriented. Indiegogo has a flexible process, an international scope and accepts a broad range of campaigns. Each has its advantages and disadvantages depending on your project. Other platforms are specialized around industry or product. No matter which one you choose, choose one platform and focus your efforts.

Payment
The business model for crowdfunding is still evolving. Make sure you read the terms, conditions and pricing parameters. Some platforms are all or nothing campaigns, others are progressive, where you  keep any portion of your raise. Also payment processing fees may be included in or in addition to platform transaction fees. These parameters are the difference between raising $100k and having up to $15k of it sliced off in total fees or all of your raise "returned" to donors. Finally, be sure that you are satisfied with all of the payment options available to potential campaign contributors.

Managing Crowdfunding

Networking
A successful campaign requires you to be ready to leverage your network - before you even add a project to a platform. Find a couple of friends or donors that will commit to your campaign in order to build momentum from day one. Organize and notify all of the people in your network and in your team's network to set up your campaign for success. In this sense, you can see how it is better when more than one person is involved.

Presentation
Take the time to put together an executive summary of your idea or product, but then distill it to the key points. Use this to create a concise presentation. It should highlight the uniqueness of your idea, its funding schedule, product timing, relevance to the market, the expertise of your team, and passion. A video is a necessary media touch. It is the quickest way to inform, educate and connect with potential donors. I recommend making it about 2-3 minutes. Use it to amplify and personalize the project.

Rewards
The most successful crowdfunding campaigns are donation based right now, but most offer something in return. If you choose one of these platforms, put time and effort into determining attractive rewards for potential donors. Do this before you launch your campaign. Think about your budget in terms of time and money. How much time will it cost you to organize and create these rewards and how much money will they cost? Be creative from a consumer perspective, what would you want?

Social Media
Crowdfunding works well as a social media funnel. You need to actively use it to draw attention to your campaign and keep it in front of potential contributors. Build and use connections to bloggers and journalists to help boost your signal. Entice them with stories on big wins for your campaign or project, and be sure to give your followers on Facebook, LinkedIn and Twitter updates on progress.

Choosing and managing a crowdfunding campaign takes a fair amount of work - as it should. Asking for external funding is a serious undertaking. Take the time and the effort to make sure that your product is right for the market and that you make right moves. Good luck.

Startup Standouts: ZooZ

ZOOZ

ZooZ is a complete and secure in-app checkout solution that makes it easier for mobile application developers to accept payments.

Location: Israel
Website: http://www.zooz.com/
Size: < 10 people
Funding: $1.5M Seed
Founders: Oren Levy (CEO) / Ronen Morecki (CTO) / Eyal Kotler (Product) / Nir Zohar (R&D) 

Why it stands out: 

- ZooZ is a mobile first payments solution; no traditional online commerce focus here

- Product works/links payments across multiple mobile applications (in the ZooZ network)

- Platform is an open solution with broad range of payment options (credit cards, PayPal, Dwolla, Stripe)

- Very developer friendly: built for multiple languages and mobile operating systems (including HTML5) 

- One of the few payments startups with an international team, location and product

Startup Standouts: Startup Genome

STARTUP GENOME

Startup Genome makes software that allows startups to benchmark and compare themselves to others similar in progress and type. The tool collects data and helps startups identify key performance indicators and make data driven decisions.

Location: San Francisco
Website: https://www.startupcompass.co/
Size: < 10 people
Funding: Seed, N/A
Founders: Bjoern Lasse Herrmann (CEO) / Max Marmer (CSO) / Ertan Dogrultan (CTO)

Why it stands out:

- Quality industry and geographical research reports and frameworks based on data collected from a myriad of startups

- Takes the lead on building much needed risk and performance tools for entrepreneurs

- Historical combination of academics and practitioners involved, as founders, employees, and advisers
- Systemizing and synthesizing startup data across the globe is vital to the future of entrepreneurship

Mobile Is The New New Internet

Ok. That title is not really saying anything that has not been said before, but wait a second, we can go further. What does a mobile future look like? Now that requires some critical thinking and creativity. Well then maybe we can get somewhere new new.

The future of mobile is:

More Passive 
Mobile at the moment requires a considerable amount of attention and focus. Think about screen face - at the dinner table, driving in the car, walking on the street. The future of mobile is software that increasingly requires secondary effort from the user. It suggests instead of prompts. It learns instead of asking. It more than merely exist for your usage, it does. It is an experience that on net, does not subtract from human interaction. (1)

More Personal
Mobile is physically personal. You move your tablet around with you more than your laptop. You carry your smart phone with you more than any other device. The future of mobile is software that makes your phone as personal to you as the decision you made to always have it. Right now you do the tailoring, but the future of mobile is an experience tailored to you. (2)

More Practical
The explosion of mobile has been primarily social. The internet was driven by enterprise first, social really came later. The future of mobile looks more balanced too. This is more software that helps solves every day problems. This is more software that helps businesses get work done. This is more software that helps educate people. It is an alternating push forward on the productivity front. (3)

More Explorative
The mobile you is active. It is about going and doing. The future of mobile means more knowledge about what you are doing and where you are going. And as a result it is more information about what you could be doing and where you might be going. It is a richer experience layered on top of the real world, on standby for when you are ready to do and go. (4)

More Open
Yes, in the long run we are all dead, but in the long run open wins. It does not look that way now, but there are too many moving parts and too much at stake for it not too. Mobile to too big and unruly. It is sorting out the timing that is the difficult part. That aside for now, the future of mobile is platforms that put control and flexibility in the hands of developers and users the way the internet has done with information. (5)

More Central
Mobile right now is mostly an isolated experience, but there is no reason for it always to be. The future of mobile is seamless integration with other technology devices in your home, your car, your office. This means that other stationary devices start to get applications as well. This would allow you to control your immediate experience here, and your future experiences elsewhere. (6)


Footnotes
1. [This may manifest itself with personal trackers and cross communicating applications. Some current examples include Foursquare's new feature suggesting places based on your likes, Chronos analyzing your time passively based on where you've been*.]
2. [This may manifest itself through the centralization of identification into personal/private clouds and algorithmic learning functions based on your activity. This is our mobile learning curve.]
3. [This is already manifesting itself. Some current examples include getting on the move with Uber, synchronizing your thoughts on Evernote.]
4. [This may manifest itself with augmented reality. Google glasses is a major player effort in this direction.]
5. [This may manifest itself with Android or some other as yet to be developed platform eventually beating iOS. Think about the history of the web/internet with AOL and the browser.]
6. [This may manifest itself through the internet of things and low cost tagging. Examples include applications for your television, home security system or refrigerator.]

* Full disclosure: I know the founders of Chronos.

Startup Standouts: CB Insights

CB INSIGHTS

CB Insights is a financial services firm that collects private company information (including startups) to power data driven analytics, insights, tools, and statistics for those same companies and the general/investing public.

Location: New York, NY
Website: http://www.cbinsights.com/
Size: < 10 people
Funding: $650k in NSF grants
Founders: Anand Sanwal (CEO) / Jonathan Sherry

Why it stands out:

- Value proposition: aggregates often hard to find/get data on private and early stage companies 

- Provides simple, frequent, digestible data insights at the industry level

- The most consistent and comprehensive private company funding data flow that I've seen anywhere

- Hard won, slow built reputation topped by partnerships with Forbes and Silicon Valley Bank

Shooting Technology Across the Bow

This is a warning shot.

There appear to be many cultural behaviors creeping into Technology that surprisingly look like common practices from Finance during its days as master of the main deck. Here are a few.

Free Agency
You can clearly see this when major players from the hottest firms jump ship to the latest hottest firms, particularly with the more visible companies like Google and Facebook. The discerning question is: what is the motivation? Are these sharp shooters compelled to move because they want to face the next challenge and reap the equity returns or are they being lured because of a good deal on trading up responsibility and a bigger paycheck? If it is more of the latter, beware.

Opaque Screening
Here are the symptoms: Requiring x years experience for a position whose category only came into existence less than x ago. The catch-22 demand of industry specific expertise, when effectively the whole team is learning on the job. Downgrading front door applicants because they did not come through the side door (connections). The lack of clarity or communication on final decisions after interviews. These are all the little details of elitism - a good way to build yourself at odds with the general public.

Mishandled Talent
This is in partial a root cause of the first observation, but deserves to be separated. There is massive demand for engineering talent in the Bay Area, and fierce competition for it. As a result, the perqs and pay have gotten misaligned with contribution - but the ability to code is only worthwhile in the context of other talent. This atmosphere creates a culture where every other skill is devalued or grossly undervalued in the startup context. See: treatment of engineers in east coast finance. As a result you end up with the free agency problem and a talent-inflation problem.

Hollywood Interest
Granted this is a bit more on the frivolous side, but every time finance seemed to get a little heady, Hollywood got a little ahead of itself with a TV show based on the industry. Remember: The $treet, Wall Street Warriors or Traders? Of course not. They got canceled. Bravo now has a reality television show based on the startup life called Silicon Valley. That will get canceled too, but not before reputations and public impressions get formed. You get the point.

How will Silicon Valley hold up against these early encroachments on its collaborative and innovation culture? Let us hope it does much better than Wall Street did over the last three decades.

Startup Standouts: CircleUp

CIRCLEUP

CircleUp is an equity based crowdfunding platform which connects individual and small institutional investors to private consumer product/retail companies with existing products that have national scope or potential. 

Location: San Francisco, CA
Website: https://circleup.com/
Size: < 10 people
Funding: $1.5M seed
Founders: Ryan Caldbeck (CEO) / Rory Eakin (COO)

Why it stands out:
- The highly industry-relevant backgrounds and complementary skills of the co-founders, plus team

- Smart, strategic direction focused on consumer products, accredited investors and revenue generating entities

- Quality of platform: screening by professional investors, revenue minimums, 2% acceptance rate

- Significant partnerships that extend its reach (e.g. SoMoLend [debt], General Mills [exits])

- Clayton Christensen, the voice of disruptive innovation himself, is notable as an early investor

Startup Standouts: Wallaby Financial

WALLABY FINANCIAL

The Wallaby Card lets you carry just one piece of plastic, through which it can maximize the cash back rebates, merchant discounts, frequent traveler rewards, etc on all your credit cards (based on your preferences) every time you swipe. It is as the company says - one card to rule them all.

Location: Pasadena, CA
Website: http://www.walla.by/
Size: < 10 people
Funding: $1.1M seed
Founders: Matthew Goldman (CEO) / Todd Zino (CTO)

Why it stands out:
- Steps towards consumers with a practical use case without significantly changing their current behavior
- Adds next level value by minimizing consumer data overload and simplifying financial decision making
- Great positioning to collect real time, transaction based spending data
- Founders Fund is notable as a seed stage investor

Startup Standouts: SmallKnot

SMALLKNOT

"Smallknot lets you invest in the small businesses in your community in exchange for goods, services, special perks and benefits."

Location: New York City
Website: http://smallknot.com/
Size: < 10 people
Funding: $118k incubation
Founders: Jay Lee (CEO) / Ben Rossen (COO) / Jason Punzalan (CTO)

Why it stands out:
- Fills a very specific and necessary crowdfunding niche by focusing on small businesses
- Really leverages the crowd by taking a geographically local approach to the crowdfunding model
- Beautifully designed product with a fluid user experience
- The quality (and coolness) of the small businesses actually using the platform
- Founding team dominated by lawyers, which should be very useful given crowdfunding's legally gray area
- Had the screening and future benefit of Tech Stars NYC incubation

A New Series on Startups

In a quest to find the next phase of my career that will merge passion with ambition, I have been doing research on a number of startups - mostly in the crowdfunding space but also more broadly in Fintech. Here and there on simmserely so far however, I have written of broader thoughts on the intersection of finance and technology. Today I thought I would add a series that takes a specific look at some of the more interesting startups that I have come across along the way - because why not? I am calling this new series: Startup Standouts. First one after the post, but stay tuned for more.

Le Cousins Dangereux: Coding vs Modeling

I spent a fair amount of time modeling as a banker, sometimes in long enough stretches to see the next day's Wall Street Journal delivered. By comparison, I spent just a few months programming in graduate school. During that same period however, I also enrolled in a financial modeling class as a refresher. By my count I would guess there are relatively few people who have been on both sides of that fence. In doing so, I formed some thoughts on the similarities and differences of coding vs modeling - the two have more in common than at first glance.

Similarities
- the sweet sweet triumph of tracking down an error
 (damn you #REF, //error, etc.)
- the negative correlation between time spent debugging and error quality
- the decomposition of a problem into manageable/blocks before compiling
- the importance of details such as:
(keys, color coding, naming cells, using macros vs documenting, definitions, descriptive variable names, building functions)
- late nights and irregular schedules
- a disproportionate amount of time spent alone compared to the genpop
- copious amounts of food/drink (or the $$ to buy it) if you're on the job
- the increased potential of poundage from being sedentary
- a significant amount of time spent bent over a laptop with screen-face
- the blissful satisfaction of getting a model or program built right
- highly competitive and well paid jobs on their respective coasts
- the true significance of planning and thought in how a model is built
- the high level of intensity and focus required to get things done
- the building of a very specialized skill set

Differences
- a focus on building in coding versus analyzing with modeling
- the high variability of quality in models depending on external inputs
- the exposure of a model once built to manipulation beyond your control
- more human interaction in modeling as it is usually built across teams
- the customary practice of linear logic in modeling vs modular in coding

Make no mistake, we are definitely talking cousins here. That should not be so much surprising as it is revealing. Just be careful, unlike me, that you do not cross them both at the same time. It is not a pretty sight.

Venture to Crowdfunding: "You Can't Disrupt This."

With a quick Google search using the right keywords, there are numerous articles describing crowdfunding (CF) as disruptive to venture capital (VC) or at least potentially so. Many take for granted the reader's knowledge of the term and its logic, but it is a lot harder to put together than it may seem. Here is a look at the very specific definition of the word, along with a few supporting arguments that might lead one to draw that conclusion.

Let us start out by clarifying what disruption is not. Disruption of an industry does not cover change (even if it is radically different from the status quo) which improves upon the existing industry product. This is a sustaining development (examples*). Disruption, in the Clayton Christensen sense of the word, defines a change that brings with it (in the form of a product or a new market) a very different value proposition than had existed or mattered previously (examples**). It trades off performance for either convenience, accessibility, affordability, simplicity or some combination thereof and its key often lies in the use case as opposed to an advancement in technology.

Examining the case for crowdfunding using the characteristics of Christensen's definition as a guide:

The value proposition of disruptive innovation is materially different, yet its performance trajectory exceeds market needs.
The main value proposition of venture capital is "smart money", i.e. connections and advice through a filtered loop. Its performance is measured by return and rolodex. Crowdfunding instead is "cool money". Its main value proposition is broad access through social media. It is ranked foremost on other dimensions - the type of entrepreneurs on the platform and their success in raising funding. It would perform poorly on a traditional scorecard based on established market needs, but there is a window. At the lower end of the funding curve (seed stage) venture capital overshoots the market. It provides more at a higher cost than is needed to build a minimum viable product (MVP). Arguably, crowdfunding appears to be on the way to figuring out its shortcomings at that very end of the spectrum. With market needs stable and MVP cost still falling, all that is required are a couple of sustaining technologies to cover the gap. Add a few more over time and crowdfunding could start its ascent upmarket to traditional VC territory. That sounds pretty disruptive.

Disruptive innovations are typically simpler, cheaper, more reliable, and convenient than established technologies.
Crowdfunding is nothing if not incredibly convenient. It allows entrepreneurs to leverage and manage their fundraising efforts through one channel point, turning the venture model on its head. It is cheaper as well. The flat fee or percentage of round being charged by most reward or donation based platforms are significantly cheaper than venture equity stakes and maintenance fees. Crowdfunding has not simplified the process of raising funding however - the basic preparations are still required (plan + pitch + perform + pass). Instead it has simplified access to capital for the average entrepreneur who may not know the intricacies and intimacies of silicon valley. Despite these, crowdfunding is not nearly as reliable. There are still major trust and fraud concerns, important themes regarding brand and quality. Moreover, venture has less capital volatility because of its funding structure. Placing more weight on cost (because of its implications) than the other characteristics, CF still looks pretty disruptive though.

Disruptive innovations are typically not rational or feasible investments for incumbents.
It has already been noted that current revenue streams associated with crowdfunding are not as lucrative as those of venture capital. There are no performance fees based on equity returns (which typically produce the bulk of VC profits) and neither are there any maintenance charges. The business models are fundamentally different. Crowdfunding is transaction based instead of equity based. Transaction based models are powered by volume, and with few exceptions are tied to lower profit margins, which favor low cost operations. These characteristics are uniformly unattractive to or typically unattainable by incumbents. Venture capital is no different. The implication is that the disruptive market will likely not look attractive enough until it is too late. Again, CF looks well placed to be disruptive.

Articles calling crowdfunding disruptive based on similar analysis seem right to draw such conclusions, so perhaps crowdfunding's response to venture's "You can't disrupt this" should be "You're wrong. It's hammer time."

-------------
*Sustaining examples: HD over digital, Blu-Ray's attempt on DVD, DVR over TiVo, Google's search algorithm over Yahoo's, carbon fiber bike frames over aluminium, ipad over the iphone, voicemail over answering machines, CD/DVD over tapes.
**Disruptive examples: digital over chemical photography, Google AdWords over direct advertising, the iphone over laptops, fast food disrupted restaurants, netflix disrupted blockbuster, skype is disrupting telephony, nintendo wii is disrupting xbox/playstation, online brokerages disrupted full service.

Finance is Dead, Long Live Finance

There is a change happening in finance. Lines are being drawn. The regulatory and public acceptance ones have been clear, but here is another. There are a growing number of startups using technology to cross the line into traditional finance territory, populating an emerging area called FinTech.  Most of these firms are setting up in niches - the equivalent of a bowling pin strategy. Get the first pin right, and it increases the likelihood of clearing everything else out, including the incumbents. All the elements are here for disruption and arguably that disruption is happening right now.

Finance has for the last twenty years built up a war chest of talent. It has been incredibly selective, sometimes suffocatingly so, about screening applicants, perfecting the art of enticing bright young students with the promise of money and prestige. In recent years however, there has been a mass exile and exodus of that talent, who, unlike new graduates, are wiser for the knowing. No matter where you look in the wave of industry unemployment you will find a significant number of highly educated, battle tested survivors - with the capacity and motivation to challenge the status quo.

Finance has also long been protected by formidable regulation, but in the past few years, this barrier to entry has been weakened on the back of public dissent and pioneers. Waves of negative publicity over wall street compensation turned from perennial ground powder into the primer for a powerful first strike. Organized public outrage followed, culminating in the swift movement and strength of Occupy Wall Street. Then, helped by the focused interests of forward business thinkers, change went straight for the law books and with bi-partisan congressional action enacted the passage of the JOBS act. This progress has not come without casualties  of course, but it has resulted in an unprecedented encroachment into traditional finance territory.

Both of these elements trace their roots in part to the financial crisis, which is just the point. It has demanded an enormous amount of time and resources from incumbents. The volatility of that breaking point has fallen off its peak, but psychologically the industry is still very preoccupied, and aftershocks like the LIBOR scandal make solid footing a struggle. Meanwhile, waves of financial innovation ripple outward and lap at its heels. FinTech startups are using the power of technology to compress business models, embrace mobile, leverage the crowd, simplify investing, refocus on consumers, integrate social, streamline payments, and tackle a stream of long static issues in the industry. It is still very early, but these startups are slowly prying the door open to a new era in finance.

Talking About My Generation

We've all had this conversation at one point or another with friends - both marveling at and judging the lack of internet savvy by our parents. I just had another one this morning. I can basically summarize it to: Why is it so difficult for them to send emails? I couldn't say what number this particular conversational occurrence was, but it's well into the double digits. It wasn't until recently that I exchanged the first text with my mother (Although in fairness, she lives internationally, or technically, I guess I'm the one that does.) and it's been a struggle to get both of my parents to see the use of and need for communicating over the internet that way. It seems like moms always say, "Why not just pick up the phone and call?" It set me to wondering out loud what would be the advancement in technology that sets my generation apart from the one that follows. 

One of my friends quickly pointed out that it would not be just the one, and then we both set to begrudgingly admitting that disruption was probably already here in the resistance we both feel for social media. It was not a good feeling. I certainly liked to think that I'd be much better at technological adaptation than my parents. I was seduced by the idea that because I am apart of the generation that came online as teenagers with the internet - arguably the most defining advance in technology for the past two generations - that I would be predisposed to such flexibility. After getting shoved off that elitist plateau, I readily admit to not taking a deep liking to social media. I've never questioned myself as to why that is though. The default answer has been that I'm more private than most. Just the mere thought of sharing what I'm thinking with friends is already a bit much for me (sorry loved ones!), let alone sharing these thoughts publicly. Still, the privacy answer seems commonplace and superficial. 

If I dig deeper there's probably some form of vulnerability I feel in starting over, of recreating a hard earned identity in real life for an online one. It's a realization of the effort and time that takes. It's also a bit of the classic: why change anything that's working? None of that is so surprising I guess. You wouldn't be a very astute student of human nature if you didn't predict inertia and resistance in response to such a significant change. If I fight past those reflexive defenses, however, I can see the value of social media (sharing, connecting, bolstering ties, etc). Ironically, I see it most clearly in a business context (probably because I'm in the middle of a job search...). What better way have we discovered to judge people over time than by what they think and produce? A resume seems grossly deficient in this day and age. I would rather be judged by the content and merit in my thoughts, projects and actions online than have those assumed in my absence after a one hour encounter over one sheet of paper. The more information we have the better decisions we can make. And if I am diligent enough I can control my own chunk of big data.

I'm sure that just begins to peel back the layers, but whatever the reasons I feel such a resistance, as a direct result, I was most certainly a late comer to Facebook, this is technically my first blog post (under my real name at least), and I have only just signed up for a Twitter account (also the first under my real name @simmserely). I guess we'll see where this goes. Don't judge me if I relapse.