Let us say I love conspiracy theories surrounding Aliens. I am scrolling through Facebook and I see an article mentioning the existence of aliens and I click on it. Facebook will make a note that this is something that generated “Engagement”. Then it will over a course of time show me another and if I click it again, their algorithm gets reinforced. The reason I click these links is that I hope Aliens exist
As this reinforcement takes place, Facebook algorithms will work hard to surface more such content and posts so that I would click. Then they will show me an ad to a site that talks about aliens. Facebook needs engagement, it needs me to spend more time on their site. Why? The more time I spend on their site, there is an increased probability that I might interact with an ad which in turn generates revenue. Facebook at the end of it all is a business. When you click anything that is sponsored they make money.
Slowly and steadily my feed is filled with news and posts of UFO theory and alien visitations. Facebook would say they are just catering to my interest. Yes, they are. But also they are suppressing other posts which may tell me correctly that there are no UFOs out there. Because their algorithm knows that does not generate “engagement”
Slowly and steadily I will end up in an echo chamber where it feels like there something Alien happening every day and all the people around me are delusional and ignorant. What started as HOPE has slowly become a REALITY.
What people hope for is not always positive, sometimes they are required to fall in line with what is right according to society.
I hope that I am not required to work and just paid money that the government appropriated from the rich. Society determines that there would be no incentive left for people to work hard and succeed if this was the case. So I fall in line. What if my Facebook feed kept reinforcing my thoughts and said it was right? Would I be willing to raise a voice for it? Fight for it? Kill for it?
Facebook and Freedom of Speech
Mark Zuckerberg said Facebook cannot be the arbiter of truth. True. But it cannot be a peddler of lies either.
Which is what these algorithms have made it become. Let us look at this another way. I run events for a living. I use Facebook to broadcast these events to a large number of people who follow me. I have 5000 friends on Facebook and normally if I post something all 5000 should be able to see it. I would be surprised if even 100 see this post. Why? Algorithms limit the distribution based on “interest”. Also if broadcasting was that easy who would buy ads?
There is an argument to be made here that Facebook is suppressing the “freedom of speech” which most democratic constitutions guarantee. You are not letting me broadcast to all the people I am connected to. As a platform, I suppose it is the least you should be able to do. The pursuit of money has meant that they are culling freedom of speech. This has resulted in companies like Mighty Networks and Circle which are building social networks so you would be able to talk to your followers.
Facebook the Arbiter
Now, since Facebook is determining what we can see, they are already playing an arbiter. An arbiter of interest that would like to think. But as can be seen from the example above, you can push someone down the wrong rabbit hole very quickly in the process.
If a friend was to send you a message on WhatsApp, and Facebook decided not to show it because it is not in alignment with your interest or does not produce engagement would that be fine? No. But this happens every day and has been happening for the last 7 years on Facebook. Everyday!
As a platform, you have no business telling me what I should read and should not read. I have cultivated my friends because there are things that I like and hate about each of them. Let me hear what they have to say. Who the hell are you to determine what I get to see and what I do not?
So long as Facebook feeds are run by algorithms, they have taken upon themselves the responsibility to the arbiter. If you have taken up that responsibility at your own volition so that you make money, at least do a good job of it. Or stop doing it altogether and remove your algorithms. It has to be one way or the other.
Every Saturday, I publish this series called ‘Learning by Proxy’. It is a capsule of some of the stuff that I found interesting over the week along with some context to it. I hope you enjoy it.
I was planning to follow-up on some of the topics that I had written the last time. But the geo-politics of it is so interesting, it almost turned into an essay in and of itself. I lost the politics section to it.
Chris Voss is a former CIA negotiator and the author of the book ‘Never split the difference’. The premise of the book is – when you are negotiating for the life of a hostage you can’t agree to split the difference. You have to get it the way you want it. One of the lessons therein – When negotiating, always give your adversary a way out. If you corner them – expect the unexpected.
Some context first
China had started down the path of world dominance a few years ago. They decided to use the American (actually British) play of economic dependence = political dominance. They announced this thing called One Belt One Road, which was to be second coming for the Silk Route. They engaged over 130 countries and poured in hundreds of Billions to create infrastructure such as Road, Ports, Airports, etc. Every continent apart from North America was involved. India refused to be a part of it.
Now let us see the corner China has been painted into.
Hong Kong was an itch which has been hard to scratch for the last 3 years. In addition to that Trump and his trade wars had made life difficult.
The Coronavirus put a new spin on things. Many of these countries that China has lent to are poor Asian and African nations and with Coronavirus ripping up their economies, they have requested loan waivers and renegotiation.
As the coronavirus spread around the globe, Pakistan’s foreign minister called his counterpart in Beijing last month with an urgent request: The country’s economy was nose-diving, and the government needed to restructure billions of dollars of Chinese loans. […]
With each request, China’s drive to become the developing world’s biggest banker is backfiring. Over the last two decades, it unleashed a global lending spree, showering countries with hundreds of billions of dollars, in an effort to expand its influence and become a political and economic superpower. Borrowers put up ports, mines and other crown jewels as collateral.
Pakistan was supposed to keep India in check. They are now broke. The Middle-East is in a financial crisis of its own with oil prices at historic lows. This implies very limited options available to finance terrorism. Therefore, Trump is not going to give money away to Pakistan as liberally as Obama did.
Further, not agreeing to the cries of the poorer countries will make it seem like it was an engineered Virus. The optics of it all are terrible!
Trump called it the ‘China Virus’ and has been pressuring WHO to investigate them – WHO acquiesced. India supported the probe into China. China grudgingly agreed.
A pretty deep corner you see. Now for the push back.
China put an end to Hong Kong by passing a law that forever ends Hong Kong’s democracy – at least the way we knew it. With Pakistan now being rendered incompetent, they had to take matters into their own hands. They started trouble in Ladakh and Sikkim. India pushed back. Both sides said they will protect their sovereignty. All good distraction. But then…
Chinese President Xi Jinping on Tuesday ordered the military to scale up the battle preparedness, visualising worst-case scenarios and asked them to resolutely defend the country’s sovereignty.
Then Trump tweeted offering to arbitrate between India and China. China changed course and figured this was one more thing they would want the American to stay out of.
On Wednesday tensions between the two nations seemed to de-escalate as China took an apparently conciliatory tone by saying that the situation at the border with India is “overall stable and controllable.”
While there is a change of tone, satellite pictures show artillery build up on the Chinese side of the border. The US in the meantime is preparing to pass a law rescinding Hong Kong’s trade status.
It was a couple of editions ago that I had mentioned that the truth about the actual economic state of India will emerge post-COVID when nobody is paying attention. It is happening.
Bank lending to MSME collapsed after 2016 as per RBI data. This during a time when the government claimed to have 7.2% GDP growth rate. Many of the MSMEs are critical suppliers to large industries how could they not want loans? If they saw an opportunity, they would have taken loans to grow.
While large industries saw their credit expand by Rs 1.73 lakh crore, or at an annual growth rate of 1.9 per cent between April 2016 and March 2020, micro and small industries saw their credit expand by only Rs 10,335 crore, or at a 4-yr CAGR of 0.69 per cent during that period.[…]
The decline in demand for credit by the industry, however, coincides with the decline in the demand in the economy and falling capacity utilisations. The RBI’s Order Books, Inventories and Capacity Utilisation Survey (OBICUS) for the October-December 2019 quarter shows that the capacity utilisation declined to at least 12-year low of 68.6 in the quarter ended December 2019.
The interest rate is an instrument that is used to stimulate the economy when the times are good, expectations form the future are clear and risk can be estimated. When none of this is clear – the Interest rate becomes merely a number. If you play with it unnecessarily, you diminish your power. Modi placed a historian at the head of the RBI to act as his puppet and the bankers are giving him a lesson. RBI dropper repo rate (the rate at which banks borrow) once again to 4%. An all-time low.
“When a heightened level of risk aversion exists among banks, lower cost of capital alone incrementally will not translate into higher lending in the current situation,” said Sreejith Balasubramanian, an economist at Mumbai-based mutual fund IDFC AMC. “Banks make lending decisions based on their risk appraisal and appetite which is currently low.”
In a world that is locked inside their homes, connectivity is a very valuable resource. It is the only thing that preserves a certain degree of sanity and allows for commerce in whatever form to thrive. Connectivity is unlocking its value.
A couple of editions ago, I had mentioned how Reliance has used Jio to free itself of debt. Also last time I had shared the surprise upswing that Airtel had registered. Airtel is now borrowing a trick or two from the Reliance Playbook. They have raised over a Billion dollar through a stake sale and reduced their debt burden.
Bharti Airtel’s promoter firm Bharti Telecom raised Rs 8,433 crore on Tuesday, selling 2.75% stake in the telecom major to institutional investors through an accelerated book-building process in the secondary market. With this, the Sunil Bharti Mittal led-Bharti Airtel’s promoters are ostensibly looking to go ‘debt-free’, a path similar to the one chosen by Reliance Industries’ Mukesh Ambani. Bharti Airtel share price traded flat on the BSE on Wednesday. After the sale, the promoter group will continue to own 56.23% in the company.
Also, rumours are that Google is planning to buy into Idea-Vodafone.
Not to be upstaged – Jio Platforms as it continues to raise its Billions announced Microsoft as one of the suitors willing to throw in USD 2 Billion. And they also announced their wishes to list on an international stock exchange.
Post bagging multi-billion dollar deals from marquee investors in the last one month, Billionaire Mukesh Ambani’s Reliance Industries is said to be now considering an overseas listing of Jio Platforms, according to people aware of the development.
Social media is an echo chamber and that echo chamber has resulted in far too many countries in the world having right-wing governments. India included. Life is good so long as you are on the right side of the line – White in the US – Hindu in India and so on. Facebook knew what it was doing and why it was wrong. An explosive and incriminating report exposes the upper echelons of the company brushing aside genuine concerns.
“Our algorithms exploit the human brain’s attraction to divisiveness,” read a slide from a 2018 presentation. “If left unchecked,” it warned, Facebook would feed users “more and more divisive content in an effort to gain user attention & increase time on the platform.” […]
But in the end, Facebook’s interest was fleeting. Mr Zuckerberg and other senior executives largely shelved the basic research, according to previously unreported internal documents and people familiar with the effort, and weakened or blocked efforts to apply its conclusions to Facebook products.
The person who made this presentation was the head of the ‘Integrity Team’ at Facebook. The company has none of it.
Twitter has been a haven for trolls permitting harassment at an unprecedented level. It came as a huge surprise when Twitter which is in part responsible for Donald Trump being president decided to flag this tweet at false.
There is NO WAY (ZERO!) that Mail-In Ballots will be anything less than substantially fraudulent. Mail boxes will be robbed, ballots will be forged & even illegally printed out & fraudulently signed. The Governor of California is sending Ballots to millions of people, anyone…..
The move, which escalates tensions between Washington and Silicon Valley in an election year, was made in response to two Trump tweets over the past 24 hours. The tweets falsely claimed that mail-in ballots are fraudulent. Twitter’s label says, “Get the facts about mail-in ballots,” and redirects users to news articles about Trump’s unsubstantiated claim.
The president threw a fit on Twitter about Twitter. Then announced on Twitter that he would be releasing an Executive Order against Twitter.
In the meantime, Kellyanne Conway his “Counselor” went on a rant against – guess who? – the head of the Integrity Team of Twitter; Yoel Roth. He has been subjected to a lot of trolling by Republicans and Trump supporters – where else – on Twitter.
The Indian Government is using drones to chase away locusts.
These are designed to spray 10-litre of chemicals, along with creating a sound that would disperse the locusts into different areas. “It has successfully contained the movement of locusts in an open area and on the foothills where it was not possible for the usual tractors to make it reach. A detailed assessment of its impact is being studied by the field officers,” said Om Prakash, commissioner, state agriculture department.
The Democrats are using the Republican playbook – GOD. Only God can save them now. God is peddling conspiracy theories on Trump!
Donald Trump killed his personal assistant, Carolyn Gombell, in October 2000. He strangled her because he’d gotten her pregnant and was threatening to tell the press. Then he bribed NYPD Police Chief Bernie Kierik to cover it up. IT’S TIME TO INVESTIGATE. #JusticeForCarolyn
There is a lot happening on this planet. Due to the attention that COVID-19 is getting, there are many things that politicians are able to get away with. When the dust settles all this will matter. This is the fourth edition of ‘Learning by Proxy’
Using the distraction of COVID-19 as a cover, Pakistan took 1000’s of terrorists off their terror list. That list is an eyewash and does not mean much anyway. But still.
Pakistan has removed thousands of names from its terrorist watch list in what the country says is an effort to meet its obligations ahead of a new round of assessments by a global anti-money-laundering watchdog.
The so-called proscribed persons list, which is maintained by Pakistan’s National Counter Terrorism Authority, or NACTA, is intended in part to help financial institutions avoid doing business with or processing transactions of suspected terrorists.
At the other end of the world, Trump is using the current situation to force a ban on immigration into the US. For now, he could only as far as to stop the issuance of any Green Card for the next 60 days.
A major category of people who are banned is those seeking green cards through a family member of an American — a parent, an adult child or a sibling.
The order temporarily bars green card holders from sponsoring a spouse or child for permanent residency.
It also stops individuals from receiving green cards to enter the U.S. through other means, such as employment or the EB-1 “extraordinary ability” category.
One of the biggest problems that India has been faced with over the past couple of years has been – Electricity. And contrary to your expectation, we have too much of it. The electricity business has two players – Production companies and distribution companies (known as Discoms). Over the past 5 years, production has heavily ramped up in India with the addition of several renewable power plants. While production is centralised and easy to scale; distribution is a tricky business and there needs to be enough demand for the supply coming in. Setting up distribution in villages is not a profitable undertaking given that their consumption is low but the cost of infrastructure is high.
Anyway, more to the point. Distribution companies have contracts with producers to draw from them and pay a fixed price for the energy. At the same time, they depend on contracts that they have with large buyers – industries, to draw a certain amount from them. COVID-19 has triggered Force Majeure and they are not able to sell the power coming to them. Ironically, they stand powerless and losses are mounting.
Following the lockdown and revenue from a major chunk of industries and businesses—call them, milch cow—touching almost nil, discoms have been pushed to the brink. Forget clearing the past dues, going forward they won’t have money to pay for the power they buy for catering to essential services such as healthcare viz hospitals, isolation wards/quarantine facilities, ventilators and so on. Can discoms invoke force majeure to avoid making payment? That may not stand legal scrutiny.
The Power ministry’s proposed amendments to the Electricity Act of 2003 have received a thumbs up from the industry with players welcoming the proposed push for cost-reflective tariff, simplification of tariff structure and reduction of cross-subsidies.
Companies and industry experts applauded the proposed amendments for creation of Electricity Contract Enforcement Authority with powers of the civil court, the single selection committee for appointments to the appellate tribunal and regulatory commissions and ensuring payment security mechanism in the sector.
The world found out that even oil, yes oil; for which the US has turned the middle east into its national battleground, can end up selling at a negative price. Flights are not flying; Trains are not plying; Cars are not driving, and; the world is producing oil as if nothing has changed.
The consequences to this are quite political, this will be greatly destabilising to the middle east and all of the kingdoms that have been able to thrive because of the oil money. On the other hand, terror funding might see a decline.
When the daughter of Roy Disney, the older brother of Walt and the Co-founder of ‘The Walt Disney Company’ skewers the company for laying off 100,000 workers while at the same time paying the top executives salaries and bonuses equivalent to USD 1.5 Billion, there has to be some soul searching that the Board needs to do. She says the 100,000 could have been paid for 3 months if the executive had avoided taking the salaries and bonuses. Bob Iger, Chairman of the Board received USD 62 Million in 2018. He could forego awards but instead decided to forego only the salary and not the bonus. She used the words – ‘What the F***?’ in the thread. Just incredible!
OK, I’ve been holding my tongue on the theory that a pandemic is no time to be calling people out on anything other than failing us in a public health sense. I thought it might be a moment for peace and reconciliation. But I feel a thread coming on….1/ https://t.co/G1mUq7RmAV
Or how Masayoshi Son chose to squander the Vision Fund.
When the WeWork debacle let loose last year, the Indian entity that is run under franchise by the Embassy Group proudly proclaimed their plans were separate and they would make it though. Now it looks like they will make sure a few startups perish in the process.
Earlier this month, WeWork India, which is run by Bengaluru-based real estate company Embassy Group, said its existing customers need to pay only 30% of the rent throughout the lockdown period that started on March 25. But in reality, instead of allowing clients to pay just 30%, WeWork is offering to give a credit equivalent of 70% to their existing contracts.
This means that customers will have to continue paying the entire rent each month even though they are not using the space. At the end of the lockdown, WeWork will add extra days to their existing contracts equivalent to 70% of the rent for the days its offices remain shut.
These guys have been in business long enough to know its all about the cash-flow. Giving me back 70% of the rent when my contract ends will do nothing for me. In the meantime, homegrown co-working players such as 91Springboards and BHIVE have waived the rent considering this a force majeure event.
Jio – Facebook
Earlier this month as rumours swirled, I had written a post about why Reliance needs Facebook to invest in Jio – Badly. Facebook tried bringing its Facebook basics service to India and was chased out of India as fast as it arrived. It was against the principles of net neutrality. By making certain services free, they can make users prefer one over the other and kill the competitors. Reliance was dying under a mountain of debt and their plans to sell 20% of Reliance to the Saudis also fell through. They needed a lifeline. Facebook needed a partner who can twist the law to its will, has political clout and enough penetration.
Match made in heaven.
“This investment by Facebook values Jio Platforms (at) Rs4.62 lakh crore pre-money enterprise value ($65.95 billion, assuming a conversion rate of Rs70 to a US dollar),” RIL said in a statement. “This is the largest investment for a minority stake by a technology company anywhere in the world and the largest FDI in the technology sector in India,” RIL said in a statement. “The investment values Jio Platforms amongst the top five listed companies in India by market capitalisation, within just three and a half years of the launch of commercial services.”
So what is the problem you ask? Facebook owns WhatsApp and Jio owns the pipes. If you want to pay a bill in China, you turn to WeChat. If you want to buy a movie ticket in China you turn to WeChat. If you want to check the news in China, you turn to WeChat. iOS and Android do not matter in China because the Operating System of China is WeChat. Reliance and Facebook want to do something similar in India. It is sinister and diabolical.
Did you think the weather forecast was always shit? I always thought so. Well, it is going to get worse. Flights used to contribute a lot of data to help model weather patterns. Since flights have reduced drastically since the pandemic began, the data available has sharply declined. This may lead to worse weather forecasts.
Observations of temperature and wind routinely collected by commercial aircraft are routed to government weather agencies and other users around the world through the Aircraft Meteorological Data Relay (AMDAR) program, operated by the World Meteorological Organization.
The number of AMDAR reports has risen from about 7,000 per day in the early 1990s to more than 800,000 by 2017, according to a recent overview of forecast improvements published by the American Meteorological Society and led by Stanley Benjamin (NOAA Earth System Research Laboratory).
I had written a blog last week about how new technology adoption will get accelerated in these times. Africa is leading the way with their homegrown drone startups getting a huge push.
In Ghana, rural health facilities send their coronavirus tests to the distribution centres. On Friday, Zipline ran four flights to Accra, transporting 51 COVID test samples and making each trip in under an hour. On Saturday, it started service to Kumasi. Now, Rinaudo says, the company is ramping up service, looking to deliver as many samples as needed every day.
In addition to shipping test-kit flights, Zipline is using drones to ferry unused tests, protective equipment like gloves and masks, and supplies including vaccines and cancer drugs from its distribution centres to the rural health facilities. The idea, Rinaudo says, is to make it easier for people to get what they need without going to a hospital, where they could be exposed to the coronavirus and take up scarce resources. The company is doing similar work in Rwanda.
The space shuttle was the NASA workhorse that for years made ferrying the astronauts to the ISS possible. This came to an abrupt end when NASA retired the Shuttle in 2011 in the hope that United Launch Alliance backed by Boeing would deliver on the rocket that they were building. 10 years and several Billion dollars later, nothing has been delivered!
In the meantime, NASA has been totally dependant on Russia for any space transport. Especially of man and material to the ISS. Even during the Ukraine crisis, they were needed to go back to Russia! SpaceX is finally about to deliver; bringing the capability to launch a man into space back to the US.
The entire social media business has been premised on selling your private data to actors who have the money to buy it. But what happens when those actors are not looking to just sell you goods; but an idea – That your country is going to the dogs!
It creates the possibility that entire elections can be manipulated using the very same data that allows a company to sell you baby wipes because you have a young one that has arrived recently.
For better or for worse we are irrational beings who can be influenced to make decisions based on our emotional state. Data allows for this manipulation.
The Cambridge Analytics story is more than a year old, you can find the original Vice post here.
To act as if this happened yesterday is ignorant and stupid.
The reaction at the bourse has been swift.
But if there is anything that I have learnt, it is that we have the collective memory of a butterfly and money can make most governments look the other way.
As they say – You cannot make someone understand something if their income depends on not understanding it!
There is a deep corrlation between trust and profit.
It is often hard to see this correlation at work when things are going good. By the time you are in a place to realise it, the ship has sailed or rather sunk!
Facebook has been blamed for manipulating elections and propogating fake news for financial gains. They let advertisers run whatever messaging they wanted without any checks or balances in place. Just as long as the cash tills kept rolling. I read a couple of news reports yesterday that emphasised this further.
The New York Times Company posted expectation-beating earnings, bringing shareholders surprisingly high profits. The news sent Times’ stock up more than 10%, valuing it at more than $24 a share, a level it hadn’t seen since the summer of 2007.
Also, the greatest of all surprises – Twitter turned a profit! For the very first time since it listed in November 2013.
The social network reported its fourth-quarter earnings today, Feb. 8, and as expected, the company posted a modest profit, pulling in $91 million on $732 million in revenue. That’s a jump of 2% on the revenue it posted in the same period last year. It attributed the small rise to increased advertising revenue, stemming from the myriadupdates it made to its product over the last year, as well as video ad sales. (Annual revenue for the company was slightly down in 2017, however—it generated $2.4 billion, versus $2.5 billion in 2016.)
The advertising money is moving. And by the looks of it, it is moving fast. As the image of a company tarnishes, people start to move away from the company.
Facebook has an image problem and the numbers are reflecting that. The question is how far away are they from outright loss of trust.
In life the things that you do depend on the degree of certainty.
A few days back Salma mailed this image and asked me which company seems to have the best revenue split.
The instinctive answer was to say – Microsoft. They seem to the most diversified. They are not dependent on any one stream of revenue for their survival. Facebook seems the most skewed; If anything was to disrupt advertising altogether, their business would be in turmoil.
Yesterday, I was reading Zero to One by Peter Theil and he made a very pertinent point in there. If you had the opportunity to do something that you knew would not fail, would you put all of your efforts behind it or would you diversify and pursue multiple opportunities. Most successes are a result of determined people acting with belief and putting all of their efforts behind it to make it a success.
He defined the category of people as:
Definitely Optimistic – Is certain of a great future and works towards it
Definitely Pessimistic – Is certain of failure waiting around the corner and is always bracing for it
Indefinitely Optimistic – Is unsure of the future but thinks it will all work out fine
Indefinitely Pessimistic – Is unsure of the future but thinks there is a surprise waiting around the corner
Now using this categorisation when you look at the above graphs, the one thing that becomes clear is Facebook is Definitely Optimistic – They are certain about their plans and they think they know what is about to come and are ready for it.
At the same time Microsoft is a clear example of confusion. Given that it is an American company I would say that they are Indefinitely Optimistic. The graph is a clear representation of the fact that they do not know which segment is going to be their cash cow. They are doing everything and hoping something will go on to become big. At the same time they lack the conviction to say which one and focus more on it. If you make a graph for Microsoft of the early 2000’s, I am sure it would not resemble this. Windows and Office were the flag bearers for Microsoft and they put all of their efforts behind it.
Google and Amazon still have a high skew towards one of their revenue channels because they are Definite about it. Apple looks diversified but a large portion of their services revenue is all thanks to the iPhone that their users use every day. If you look at it from that perspective in all the three cases almost three quarters of their revenue comes from one thing that they do very well.
As a startup it is even more important not to diversify into too many revenue streams since it is very hard to be great at too many things. Be great at one thing and expand that revenue stream as rapidly as you can. You may undertake support activities but a majority of your income will come out of one or two things you do really well. This is also referred to as Pareto Principle – 80% of the effect comes from 20% of the cause. In business 80% of the income comes from 20% of the clients
Would you put all the wood behind one sharp arrow or many blunt ones?
A lot of ink has been spilt on the many mistakes made by Yahoo. How the company refused to buy Google or Facebook when the opportunity existed. Yahoo might in fact be a story of many missed opportunities. But those misses did not really define the failure. Yahoo failed because of a series of poor decisions and a company culture that did not permit it to move forward.
The implicit assumption in all of the criticism is that Google would have certainly gone on to become the company that we know today. Yes, perhaps there would have been one less competitor to deal with.
Those of us who adopted and started using Google did so because its simplicity and precision. Do you really imagine that Yahoo! which was always a portal, would have purchased Google and retained a blank white page with a box?
Yahoo failed because of the things that made it successful to begin with. It was launched as a directory service and then went on to adopt the portal model. For whatever it is worth, it worked very well for them in the late 90’s.
The linked post on stratechery which talks about the development of culture.
Culture does not beget success but it is the product of it
When a company does something and it works out for the company, it becomes a formula. The people who join the company hear the same stories and do the same things.
An employee who joins Marriott hears stories of awesome customer service which helped them retain customers, got someone promoted. The formula to get ahead becomes, providing awesome customer service.
Yahoo was a portal and wanted to continue to survive in that paradigm. It was just much easier to sell the idea to advertisers and generate revenues through multiple channels. Google went with income from ‘Search’ only. Honestly, the good boys at Google did not want to do even that! Eric Schmidt had to wrestled them into advertising.
Yahoo’s culture did not allow them to adjust to the changing nature of the web. Much like Google finds it hard to adjust ‘search’ to the demands of smartphones. Facebook by comparison found it extremely comfortable adapting to mobile.
Mergers and Acquisitions
Yahoo may not have bought Google or Facebook, but they bought often and bought a lot. Here is a list of all of the M&A that Yahoo has been engaged in over the years. You may notice that there are a list of 114 companies there. In the space of 18 years, that is an average of 6 per year; or one every alternate month! Number deceive in the absence of context; they made 23 off those in 2013 alone. An additional 19 were acquired in 2014.
Yahoo made big acquisitions in the 90’s that did not pay off. GeoCities, Broadcast.com (founded by Mark Cuban) and Overture Services were all multi-billion dollar acquisitions which went nowhere. Flickr still survives and could have easily been Instagram, but is not.
I am sure had they acquired Google and Facebook, they would have been equally lost in the quagmire that was Yahoo. Throwing everything into a portal and melding it into one was not what was needed, but Yahoo could not help but do that.
Marissa Mayer kept deflecting criticism by acquiring one company after another. She closed 5 deals in Jan 2014 alone. When Steve Jobs went back to Apple he figured out the soul of the company and let go of everything else. Marisa Mayer did exactly the reverse in the case of Yahoo, kept everything and added more garbage.
So what is the upside?
For starters thank Yahoo that they did not acquire Google for $1 Million, you would probably be using bing today! Also, you might have been using Google+ had they ended up acquiring Facebook.
Yahoo redistributed 10’s of Billions of dollars to many startup founders through acquisitions. These founders went on to invest in other startups and created the startup eco-system that exists today. This is by far the most critical contribution that Yahoo made. This alone contributed significantly towards changing the trajectory of investments in startups.
Yahoo by itself might not have been a hugely successful business. A combination of cultural undercurrent and poor leadership ran the company into the ground. Having said that, Yahoo has made contributions that are valuable.
Not buying Google and Facebook are one amongst them.
Facebook spent a whopper to buy WhatsApp. Well whopper is an understatement. They spent $19 Billion, off which only $3 Billion is subject to shares vesting. So let us first put that number in perspective
Facebook bought a small company with a team of 32 engineers for $19 Billion. Let us compare this with the market value of some well known companies.
I have read countless reports of how the user base that WhatsApp has is important. Reports say Facebook is spending this much money to make sure that they acquire these users, this point is irrelevant. Facebook has the largest and the most global user base in the world. They do not need to buy another company to acquire users. In most probability 90% of Whatsapp users would already be Facebook users!
We are in the mobile age and the day is not far when the only things that the mobile networks will be selling would be data! Even today we rely more on messaging apps and Internet telephony apps to send messages and make calls. It also helps us overcome the high costs of telephone calls and messages. This wave began with Blackberry, which had the BBM built into its phones, which has since become a cross-platform app. Apple has been for long, baking iMessage and FaceTime into its phones. Viber, Skype, Line, WeChat and WhatsApp are all attempts at doing the same thing.
Making voice and text communication possible through the use of data.
When mobile networks becomes fast enough across the world to make calls over the internet. Everyone will switch to only data connections. People would no longer use voice calls or text offered by network providers. At that point, the company with the strongest and most connected text and voice communication app will have the greatest sway on the mobile industry.
People are going to need to send text and talk on phone. The only thing that is going to change is the orifices through which these communications pass. WhatsApp is present on the most number of platform (they even have an app for the Nokia Symbian phones). As a result of this they have the greatest market share when it comes to this space.
Its about controlling all communications in the years to come.
WhatsApp probably has the strongest positioning for controlling this communication going forward. There will be more aggregation within this space going forward. I do not think Apple will try to control this space beyond its own eco-system. They will focus on making their hardware and software the most secure and use that as a marketing tool to sell more hardware. Blackberry has thrown the hat in the ring and in my opinion BBM is the only card they have got left. Skype has lost its sheen after its acquisition by Microsoft. I think Viber is the only other contender in this game apart from WhatsApp. The others will get acquired or will die a slow death.
Now when you look at it like this, you get a real understanding of the value and the potential of WhatsApp. Its not that Mark is using ‘Zucker-opoly’ money to buy companies (he has to answer to a board!); its just that his vision is clear.
Every moment, every thought, every communication that you ever share, Facebook would be a part of it. That is the idea!
Yesterday, a small company called Little Eye Labs, which helps optimise Android apps got acquired by Facebook. Normally, not a lot of press would be extended to such an acquisition, since the company being acquired is rather small; but the media in India exploded with this news.
This acquisition is the quintessential, ‘One small step for man, is a giant leap for mankind’, moment for the Indian startup eco-system.
Typically, investors look to invest in startups because they have the ability to grow faster than established firms, simply because they start from a lower base. So, if you asked anyone; What is the kind of business would an investor seek to invest in? They would say, there should be a strong team, the idea should be great, you should solve a real problem, it should be scalable, there should be barriers to entry, large addressable market, etc.
The fact that most miss out is that an investor seeks to enter a business that he can profitably exit. Exit being the keyword here. For most small software product businesses, scaling the business to its full potential can take a decade or longer. Acquisition is a very attractive exit for investors. Up until this point, Indian startups had not been acquired by US technology firms. This one deal has opened the doors for many such deals to be explored in the future.
What does this mean for Indian startups? Well, the confidence on the part of the investors would be on a whole different level as such deals begin to materialise. Moreover, the exposure that the Indian startup eco-system would begin to get as a result of this is going to propel things forward.
This one step for one Indian Startup is a giant leap for the Indian startup eco-system!
Many of the people that I meet, who have an idea that they wish to work on seem to face a huge problem. Their biggest complaint seems to be that they find it hard to generate seed funding for their projects/startups. The key issue is that most people do not understand what seed funding is.
So the entry in Wikipedia suggest – The term seed suggests that this is a very early investment, meant to support the business until it can generate cash of its own, or until it is ready for further investments.
Normally, Seed Money is a very small quantum of finance needed to get the ball rolling in terms of a venture. This may include getting the incorporation done, getting the basic banking setup in place and also some of the basic requisites for starting off with the venture. In some cases, this may include travel, computers, space and the sort depending on the business that one is embarking on.
Normally, the best means of raising this funding is through accumulated savings, friends and family. Now taking money from friends or family is stigmatised in India, I don’t seem to understand why? Even Mark Zuckerberg took seed capital from his friend Eduardo Saverin to start Facebook. I do not see what harm exists in taking money from people who know you best.
An investor invests in a business based on his judgement of the promoters and their ability to execute. If as an entrepreneur, one cannot convince family and friends about ones execution capabilities, is there any reason to pursue entrepreneurship?
It is important to look at the people that you know, are comfortable with and who have a good capability of making a judgement on you. If these people believe that you have the capability to execute and put money on you, not only their money but also their goodwill will carry you forward.