Interesting PEN event

I had the pleasure of attending a black tie awards ceremony organized by PEN last night. PEN is a not for profit organization dedicated to advancing literature and defending free expression. They are the oldest international literary and human rights organization. Last night, they gave three awards celebrating the freedom to write, the international freedom to publish and literary service.

The crowd at the event, a combination of writers, critics and other literary intellectuals, was fascinating. I had fantastic conversations on a wide range of topics and was impressed by the number of people who spoke perfect French. I got to compare the lives of historical figures with the biographer sitting next to me. I also discussed the irony of Madame de Stael’s life with her most recent biographer. Madame de Stael would have traded all her accomplishments, her intellect, for good looks! Moreover, after seeking passionate love her entire life, it bored her when she finally found it!

The awards ceremony was a letdown relative to the quality of people in attendance. While I am a fervent supporter of the freedom of speech and deplore the imprisonment of writers around the world, I felt the comparisons between the Tibet and China today and Nazi Germany and concentration camps were a bit farfetched. Moreover, when one of the dissidents complained that 40 writers, thinkers and poets were in Chinese jails today, I thought that 40 out of a population of 1.2 billion did not seem that high. I bet we have over 40 writers, journalists and poets in jail in the US today…

That said, I loved the event and am glad to see the enthusiasm and passion showed by people in book publishing. They are doing their best to survive in extremely difficult times. As an avid book reader, I sure hope they succeed in finding a way to save their industry!

Bureaucracy in Action

I had the unfortunate experience of living Parkinson’s Law first hand. Parkinson posited that because people within bureaucracies make work for each other if only to feel important and get more subordinates, dealing with bureaucracy becomes increasingly complex and employment in the bureaucracy keeps increasing irrespective of the variation in the real amount of work to be done.

I am trying to open a company in India. It all started as expected: filling many forms, getting tons of passport photos and getting many documents notarized by public notaries in the US. The final step was to get one document notarized by an Indian notary at the Indian consulate in New York. I showed up at opening time this morning. After waiting in line for 1 hour, the lady tells me, I first need to get an Apostille from the New York State Department of State (yes, that’s the official name!) at 123 Williams Street all the way downtown. Foolishly believing it would be easy, I headed there. After filling a few forms and waiting in line, I was then told I first need the document to be notarized by an American notary and have that notary verified by the County Clerk. Someone in the waiting room helpfully suggested I head to room 141 at the basement of the New York Supreme Court at 60 Centre Street where they should be able to help me.

After a brisk walk there and another 30 minute wait to go through security to get into the building, I find room 141B. After yet another line, I am told they only do the certification and that I would need to get the document notarized elsewhere. I hunt down a notary (almost all bank branches have one), wait in line again both to get back into the Supreme Court building and to get the certification, only to be told that the specific notary I selected could only be verified by a different county clerk. Helpfully, they give me the direction to the nearest appropriate notary 15 blocks away.

After yet another walk and yet another wait in line first to get through security and then to get the certification, I was told to wait into yet another long line to pay the $3 fee and pickup the document. At this point both the New York State Department of State and the Indian consulate are closed (they close at 3:30 pm and 12:30 pm respectively).

Bureaucracy: 1 – Fabrice: 0

This is completely insane! I must have seen over 100 people pushing paperwork around and doing busy work who not only do nothing productive for humanity but also sink other people’s productivity. Does anyone truly think any of this is increasing human welfare and creating future wealth for society???? If this is what my taxes are paying for, I want my money back!

To the extent some paperwork is needed, it would be nice if they had the forethought of making everything easy by having the documents you need jointly signed to be in the same building with similar office hours.

I am not optimistic in our ability to fix this. Bureaucracies have a way of surviving even when their founding mandate becomes obsolete. Moreover, the crisis will only increase bureaucratic nightmares as people think the government needs to do more and the government hires a lot of people to counter the fall in private sector employment.

Ah well, from now on, I will just try to limit my interactions with bureaucracy as much as possible!

Work smarter and harder

I just came across a fantastic blog post by Jeffrey Kalmikoff who is the entrepreneur behind Threadless.

Love what you do and do what you love. If you love your job, it’s not work. With regards to hours worked, I have a similar perspective – just do what makes you happy… For some it’s 100 hours a week, for some it’s 40 or less…

The value of positive advisors

When you create a startup there are many people to discourage you. The most common refrain is “this idea will never work”. It was by far the most common thing I heard when creating Aucland and Zingy.

For Aucland, the French online auction site, their theory was as follows:

“Online auctions will never work in France. We don’t trade beanie babies like those crazy Americans. We don’t have a garage sale culture like you do in the US. Here people would not trust each other to send the right item. Besides, the Internet will never take off in France, we have the Minitel. Even if all of these barriers were miraculously removed, you could never make money because no one would ever pay by credit card online.”

For Zingy, it was similar: “Only those crazy Europeans and Asians buy ringtones. I can’t conceive of anyone using a ringtone, let alone paying for one.”

In both cases, the ideas panned out – with local variations. The categories that truly took off on Aucland were somewhat different than those which succeeded in the US – wine for instance was much more popular than beanie babies 🙂 For ringtones, the idea also succeeded in the US, however a B2B approach (providing content to the carriers) ended up being the dominant approach for lack of premium SMS in the early stages of the market. In Europe, the B2C players dominated the market.

My friend Marc Simoncini faced similar concerns when he created Meetic, the equivalent of Europe. In 2001 people kept telling him: “online dating is for losers. I would never be caught dead on a dating site.” A few years later over a third of French singles were on the site.

And all three examples were ideas that had already been proven to work in other countries! Imagine what it must have been like for Sergei and Larry back in 1998: “Does the world need another search engine, we already have Yahoo and Alta Vista?” or for Steve and Chad: “There is no market for short form video” or even for Mark: “Social networks are useless – why would I want to be on one?”

The reality is that we humans have a hard time imagining circumstances or things we are not familiar with. As such we are not very good at predicting how we will react to new product or service. Given how inexpensive it has become to create a startup these days (both direct costs and opportunity costs have fallen), ignore the negative advice and just do it. Throw it on the wall and see if it sticks! Worse comes to worse, you will have had fun, tried something you wanted to do and learned a lot.

While it is key to mostly ignore negative advisors, it might be just as important to have and to listen to positive advisors. As entrepreneurs, we are often so busy dealing with the day to day operations, that we can miss the big picture. That’s why it’s great to have smart advisors to help you out with strategic decisions. They may be part of a formal structure – by being on your board or advisory board – or just friends or mentors whose opinion you value.

In 2003, after 2 years of toiling at Zingy, I considered selling it for $8 million. With Aucland, I had been working 100+ hours a week for 5 years in a row. I had 100% of my wealth tied up in the company – I could barely pay my personal rent. I was exhausted from dealing with stubborn music companies and cell phone operators who did not even understand it was in their best interest to sell ringtones. I had doubts about how defensible margins would be for intermediaries in the business. I had over 50% of the company and figured that making $4 million was not bad at 28.

It would have been a huge mistake. The company was on the verge of explosive growth, but after years of fighting in the trenches, I could not see it. Fortunately, my dad had kept abreast of our developments enough to see our progress and was far enough removed from the operations not to be bogged down by the operational difficulties we faced. He implored me not to sell the company. He went as far as to call my lawyer to tell him to delay the paperwork. His strategy worked. As I took a step back to look at things from his perspective, new buyout offers kept coming in. Ultimately I put all of them on hold until, 6 months later, an offer too large to refuse came along. I sold Zingy for $80 million. I was 29.

Thanks dad!

More recently, our board members at OLX, also urged Alec and I to take step back. The entire board meeting had been about what we had done in the past few months and what we planned to do in the coming months with all the glorious execution details. It only took one sentence to get us in the proper frame of mind: “Take all of the execution as granted. What will be the true driver of value?” The discussion that ensued might yet be the most valuable conversation we ever had.

Over the years, I have seen many great companies fail, while lesser ones were sold successfully. The difference between the two often came down to smart strategic decisions by those who were sold successfully. They read the market well, prepared themselves accordingly and timed their exit perfectly. By no means does this mean you should ignore execution. Executing well is both the single hardest thing for entrepreneurs to do and the greatest creator of competitive differentiation. However, make sure you have smart advisors to help you out on strategic decisions. They may make the difference between a good exit and a great exit!