My table tennis coach is going to the Olympics!

New York is amazing this way: you can really find amazing things! A friend of mine was looking for tennis clubs in New York on Yelp and came across Wang Chen’s Table Tennis Club

This amazing little club is in Harlem on 100th and Broadway. The place does not look like much, but the players are first rate. You can get an hour’s lesson for $40 with up and coming junior players and sometimes with Wang herself. Keanu Reeves and John McEnroe both play there.

Wang never made the Olympics for the Chinese team – she was ranked 4th in the world in 2000 and the Chinese team sent the top three players. Now a US citizen, she will finally go to the Olympics.

Renaissance Week-End is phenomenal!

I had the pleasure of attending Renaissance Week-End ( over President’s Day Week-End. Renaissance Week-End is a gathering of interesting people from all disciplines who basically meet to talk about everything and anything in a structured environment. I attended fascinating sessions on topics ranging from love to astronomy!

This was my first Renaissance Week-End and I was impressed by the quality of the people there – deans of famous schools, former governors, extremely successful businessmen… – all of whom were doing something interesting. A hedge fund guy who had made his money shorting the subprime market was sponsoring a bill to help homeowners; someone else was helping reform the British school system – there were essentially as many worthy causes being furthered as participants!

It’s interesting how in many ways it felt like school – I moderated a panel, spoke on 3 panels and had to make a 2 minute recommendation to the presidential candidates in front of the audience (250 people or so at this event) – and this was very typical of what everyone was signed up for based on their interests and backgrounds. As for sessions I attended, they were uniformly interesting!

The structure worked very well: we had sessions from 8 am to 3 pm or so, the afternoon off, and sessions from 7 pm to around midnight. Given that the event took place in lovely Santa Barbara, I used to time off to explore the gorgeous little town (especially the court house), bike alongside the ocean and most importantly beat the local tennis pro 🙂

It’s not often that I get to be both one the youngest and least accomplished person in the room and it was humbling and illuminating! I hope to become friends with many of the people I met. One interesting socio-demographic comment: the most common traits of all the participants were that almost all of them were still married after 30+ years, had kids and were openly religious. Most also came from humble origins and a surprisingly large number had been orphans.

I went to the event with one of my best friends which only made the trip better. I had the time of my life catching up, walking around the property, talking about life and giving each other brain teasers! It made me realize how much I had missed her. It’s amazing how happy and meaningful our friendships are and yet how much we take them for granted! I know this is going to sound cliché, but we really need to make time for our friends. We keep saying we should see each other again soon, but never do. So go ahead and make that call to catch up or even better schedule a trip together!

On a somewhat related note, there were two memorable lines from the event. The first one was from a drunk cleaner (who was not a part of the conference) hanging out on the terrace of the hotel who captured the essence of many of the discussions by “eloquently” saying: “If you have a foot in the past and a foot in the future, you are pissing on the present!”

The conference on love also yielded a memorable line as one of the participants who was making the point that you must love yourself to be able to love others memorably said: “You are the person your dog thinks you are!”

I will be back!

Making economics relevant again

I just came across a great article in the New York Times. A few decades ago, economics mattered greatly with John Maynard Keynes and Milton Friedman directly influencing policy decisions. In the last few decades, the increasingly technical math has made economics more rigorous at the cost of losing its grand ideas.

The only practitioners who have been getting public attention are those studying relatively cute subjects. David Leonhartd went about finding the next great economist. He did not find the new Keynes, but did come across an interesting team who work at the Jameel Poverty Action Lab t MIT led by Esther Duflo and Abhijit Banerjee. They rely on randomized trials to assess the efficacy of various aid programs to make sure the money is well spent.

Read the article at:

Free Sex :)

With the growth of online advertising, many businesses are evolving from paid business models to free ad supported business models. The Economist had an interesting article on the topic in “The World in 2008” special edition: Freenomics – Online, there really is such a thing as a free lunch.

I just came across an interesting take on the concept: Big Sister. Big Sister is a brothel in Prague where customers can use the women’s services for free, subsidized by paying Internet viewers!

You can learn more about the company on Wikipedia at:

Policy recommendation for the candidates

I am an economist by formation and at heart if not by trade and I am appalled by the terrible quality of the economic policy recommendations from essentially all candidates from both parties.

The time has come for a new paradigm where we ditch ideology in favor of focusing on how best to achieve the socio economic outcomes we seek. With the economic tools now at our disposal there need not be a tradeoff between efficiency and equality. We can preserve incentives and opportunities for growth while providing equality of opportunity and help for the needy – in essentially all domains including health care and education.

Two specific gripes: taxation and health care. Taxes are a means for the government to collect funds to spend in line with its policy objectives. Taxes should not be used as a policy tool. It is much more effective to create specific policies to help the needy than to burden the tax code with exemptions and deductions.

With regards to health care there are a number of ways to reach the outcomes both parties claim they seek. For instance, individuals could have to buy market provided mandatory health care insurance, focusing on preventive care and catastrophic care paid directly by the individual for those who can afford it with partial or full payments by the government for those who cannot afford it.

And so this is my recommendation for the candidates: ditch populism for effectiveness because leadership is not telling people what you think they want to hear, but telling them what is right!

Startup Valuations

Many of you have written asking how you should value your startup during the fund raising process. There is no easy answer. I will start by telling you how your startup is NOT valued. To the disappointment of finance types, valuations of startups are not done via net present value of future cash flows. From a theoretical sense that should be the valuation, but the future cash flows are really completely unknown. From my experience, financial models you write before your business has launched are not worth the paper they are written on in the startup world. They might be helpful to you to understand your gross and net margins and the scalability of the business, but beyond that their revenue and profit predictability is so low that you cannot base your valuation on them.

However, there are a number of elements that will come into play:

  • Market size:
    The larger the potential market size, the easier it is for VCs to justify a higher valuation.
  • Capital requirements:
    From a purely theoretical perspective capital requirements should not come into play, but in reality the more cash you need, the higher pre-money valuation you are able to ask for. Note that this is true of cash you need (to build the product) much more than cash you want (which would be nice to have to grow the business faster).
  • Team track record:
    Especially for the early stages before the product has taken off, the team’s track record will have a disproportionally large impact on the valuation. This abates as the company actually starts to show results.
  • Team ambition:
    If you are looking to build a multi-billion dollar company, it will be a lot easier for a VC to commit to a higher valuation than if you would be happy to sell your company for $20-100 million. If it’s your first startup, this compounds with the lack of track record to lead to a lower valuation because the expectation is that you should be more willing to sell in order to put money away. Once you have made it, you should be more willing to swing for the fences.
  • Results:
    In the very early stages you will be evaluated on your progress to date. Have you been able to get the product out of the door with minimal cash before raising money? If the answer is yes, you took away a large component of execution risk and should be able to get a higher valuation than you otherwise would have. I would actually recommend starting to raise money only AFTER the initial product is out of the door and you have a few customers. You can build sites for extremely little in this day and age! Beyond this very early stage, you will be evaluated on your performance. Note that that evaluation might very well be non-financial in the first few years: traffic, customers signed, etc. It all depends on the expectations you set. Make sure you set realistic expectations, not to set yourself up for failure at the next round!
  • Supply and demand:
    Fundamentally, your valuation is going to depend on the attractiveness of your project on the market. If you are the only team with this type of project and many VCs are fighting over it, your valuation is going to be a lot higher that if multiple teams are going after the same market and you are able to garner the interest of only one or two investors.

Remember to try to anchor the price you want early in the discussion such that the negotiation is around that price, but be realistic (if on the upper bound of the realistic range) and remember that VCs like to own at least 15% of the companies they invest in.

Good luck!

Fun with personality types

Somehow all my Princeton friends started taking personality tests a week ago to see if they had changed over time so I decided to join them. I took:

When I started college in 1992 I was an INTJ, then became an XSTJ (ISTJ/ESTJ) and now am an ENTJ. The transition correctly reflects my switch from a shy introvert to a confident extrovert.

Here are a few descriptions of ENTJs that seem broadly on target:

The Portrait of the Fieldmarshal (ENTJ)

Of the four aspects of strategic analysis and definition, it is marshalling or situational organizing role that reaches the highest development in Fieldmarshals. As this kind of role is practiced some contingency organizing is necessary, so that the second suit of the Fieldmarshal’s intellect is devising contingency plans. Structural and functional engineering, though practiced in some degree in the course of organizational operations, tend to be not nearly as well developed and are soon outstripped by the rapidly growing skills in organizing. But it must be said that any kind of strategic exercise tends to bring added strength to engineering as well as organizing skills.

As the organizing capabilities the Fieldmarshal increase so does their desire to let others know about whatever has come of their organizational efforts. So they tend to take up a directive role in their social exchanges. On the other hand they have less and less desire, if they ever had any, to inform others.

Hardly more than two percent of the total population, the Fieldmarshals are bound to lead others, and from an early age they can be observed taking command of groups. In some cases, Fieldmarshals simply find themselves in charge of groups, and are mystified as to how this happened. But the reason is that Fieldmarshals have a strong natural urge to give structure and direction wherever they are — to harness people in the field and to direct them to achieve distant goals. They resemble Supervisors in their tendency to establish plans for a task, enterprise, or organization, but Fieldmarshals search more for policy and goals than for regulations and procedures.

They cannot not build organizations, and cannot not push to implement their goals. When in charge of an organization, whether in the military, business, education, or government, Fieldmarshals more than any other type desire (and generally have the ability) to visualize where the organization is going, and they seem able to communicate that vision to others. Their organizational and coordinating skills tends to be highly developed, which means that they are likely to be good at systematizing, ordering priorities, generalizing, summarizing, at marshalling evidence, and at demonstrating their ideas. Their ability to organize, however, may be more highly developed than their ability to analyze, and the Fieldmarshal leader may need to turn to an Inventor or Architect to provide this kind of input.

Fieldmarshals will usually rise to positions of responsibility and enjoy being executives. They are tireless in their devotion to their jobs and can easily block out other areas of life for the sake of their work. Superb administrators in any field — medicine, law, business, education, government, the military — Fieldmarshals organize their units into smooth-functioning systems, planning in advance, keeping both short-term and long-range objectives well in mind. For the Fieldmarshals, there must always be a goal-directed reason for doing anything, and people’s feelings usually are not sufficient reason. They prefer decisions to be based on impersonal data, want to work from well thought-out plans, like to use engineered operations — and they expect others to follow suit. They are ever intent on reducing bureaucratic red tape, task redundancy, and aimless confusion in the workplace, and they are willing to dismiss employees who cannot get with the program and increase their efficiency. Although Fieldmarshals are tolerant of established procedures, they can and will abandon any procedure when it can be shown to be ineffective in accomplishing its goal. Fieldmarshals root out and reject ineffectiveness and inefficiency, and are impatient with repetition of error.

Napoleon, Margret Thatcher, Carl Sagan, Bill Gates, Golda Meir, Edward Teller, George Bernard Shaw, and General George C. Marshall are examples of Rational Fieldmarshals.

Here is another one:

“I don’t care to sit by the window on an airplane. If I can’t control it, why look?”

ENTJs have a natural tendency to marshall and direct. This may be expressed with the charm and finesse of a world leader or with the insensitivity of a cult leader. The ENTJ requires little encouragement to make a plan. One ENTJ put it this way… “I make these little plans that really don’t have any importance to anyone else, and then feel compelled to carry them out.” While “compelled” may not describe ENTJs as a group, nevertheless the bent to plan creatively and to make those plans reality is a common theme for NJ types.

ENTJs are often “larger than life” in describing their projects or proposals. This ability may be expressed as salesmanship, story-telling facility or stand-up comedy. In combination with the natural propensity for filibuster, our hero can make it very difficult for the customer to decline.

TRADEMARK: — “I’m really sorry you have to die.” (I realize this is an overstatement. However, most Fs and other gentle souls usually chuckle knowingly at this description.)

ENTJs are decisive. They see what needs to be done, and frequently assign roles to their fellows. Few other types can equal their ability to remain resolute in conflict, sending the valiant (and often leading the charge) into the mouth of hell. When challenged, the ENTJ may by reflex become argumentative. Alternatively (s)he may unleash an icy gaze that serves notice: the ENTJ is not one to be trifled with.

Here is a last one: The Executive

As an ENTJ, your primary mode of living is focused externally, where you deal with things rationally and logically. Your secondary mode is internal, where you take things in primarily via your intuition.

ENTJs are natural born leaders. They live in a world of possibilities where they see all sorts challenges to be surmounted, and they want to be the ones responsible for surmounting them. They have a drive for leadership, which is well-served by their quickness to grasp complexities, their ability to absorb a large amount of impersonal information, and their quick and decisive judgments. They are “take charge” people.

ENTJs are very career-focused, and fit into the corporate world quite naturally. They are constantly scanning their environment for potential problems which they can turn into solutions. They generally see things from a long-range perspective, and are usually successful at identifying plans to turn problems around – especially problems of a corporate nature. ENTJs are usually successful in the business world, because they are so driven to leadership. They’re tireless in their efforts on the job, and driven to visualize where an organization is headed. For these reasons, they are natural corporate leaders.

There is not much room for error in the world of the ENTJ. They dislike to see mistakes repeated, and have no patience with inefficiency. They may become quite harsh when their patience is tried in these respects, because they are not naturally tuned in to people’s feelings, and more than likely don’t believe that they should tailor their judgments in consideration for people’s feelings. ENTJs, like many types, have difficulty seeing things from outside their own perspective. Unlike other types, ENTJs naturally have little patience with people who do not see things the same way as the ENTJ. The ENTJ needs to consciously work on recognizing the value of other people’s opinions, as well as the value of being sensitive towards people’s feelings. In the absence of this awareness, the ENTJ will be a forceful, intimidating and overbearing individual. This may be a real problem for the ENTJ, who may be deprived of important information and collaboration from others. In their personal world, it can make some ENTJs overbearing as spouses or parents.

The ENTJ has a tremendous amount of personal power and presence which will work for them as a force towards achieving their goals. However, this personal power is also an agent of alienation and self-aggrandizement, which the ENTJ would do well to avoid.

ENTJs are very forceful, decisive individuals. They make decisions quickly, and are quick to verbalize their opinions and decisions to the rest of the world. The ENTJ who has not developed their Intuition will make decisions too hastily, without understanding all of the issues and possible solutions. On the other hand, an ENTJ who has not developed their Thinking side will have difficulty applying logic to their insights, and will often make poor decisions. In that case, they may have brilliant ideas and insight into situations, but they may have little skill at determining how to act upon their understanding, or their actions may be inconsistent. An ENTJ who has developed in a generally less than ideal way may become dictatorial and abrasive – intrusively giving orders and direction without a sound reason for doing so, and without consideration for the people involved.

Although ENTJs are not naturally tuned into other people’s feelings, these individuals frequently have very strong sentimental streaks. Often these sentiments are very powerful to the ENTJ, although they will likely hide it from general knowledge, believing the feelings to be a weakness. Because the world of feelings and values is not where the ENTJ naturally functions, they may sometimes make value judgments and hold onto submerged emotions which are ill-founded and inappropriate, and will cause them problems – sometimes rather serious problems.

ENTJs love to interact with people. As Extroverts, they’re energized and stimulated primarily externally. There’s nothing more enjoyable and satisfying to the ENTJ than having a lively, challenging conversation. They especially respect people who are able to stand up to the ENTJ, and argue persuasively for their point of view. There aren’t too many people who will do so, however, because the ENTJ is a very forceful and dynamic presence who has a tremendous amount of self-confidence and excellent verbal communication skills. Even the most confident individuals may experience moments of self-doubt when debating a point with an ENTJ.

ENTJs want their home to be beautiful, well-furnished, and efficiently run. They’re likely to place much emphasis on their children being well-educated and structured, to desire a congenial and devoted relationship with their spouse. At home, the ENTJ needs to be in charge as much as he or she does in their career. The ENTJ is likely best paired with someone who has a strong self-image, who is also a Thinking type. Because the ENTJ is primarily focused on their careers, some ENTJs have a problem with being constantly absent from home, physically or mentally.

The ENTJ has many gifts which make it possible for them to have a great deal of personal power, if they don’t forget to remain balanced in their lives. They are assertive, innovative, long-range thinkers with an excellent ability to translate theories and possibilities into solid plans of action. They are usually tremendously forceful personalities, and have the tools to accomplish whatever goals they set out for.

The power of unintended consequences

The road to hell is paved with good intentions! In public policy above all else, I have often found that some of the best intentioned laws end up having the opposite effect and hurt the very constituencies they were supposed to help.

For instance when laws prevent banks from charging high interest rates to relatively poor people (to compensate for higher default risk), they end up removing their access to credit altogether and sending them to loan sharks. Even more morally controversial and ambiguous, I recently read a report showing that in very poor countries, when child labor is banned, a large percentage has to become child prostitutes to support their families.

Stephen Levitt and Stephen Dubner, who wrote the highly enjoyable Freakonomics and write great articles for the New York Times (, just analyzed the impact of three laws respectively meant to help the deaf, poor borrowers and red-cockaded woodpeckers. In all three cases, the laws spectacularly backfire.

Read the article at:

Be grateful you live in the US!

The mother of an OLX employee called 911 in Argentina to report a robbery in progress across her street. The police did not answer, but played a “helpful” message: “If you are in danger, try to avoid the danger”!

Non sequitur: It’s interesting how many countries are now using 911 as their emergency response number because their citizens got used to using that number after seeing it in use in so many American movies and TV shows.

The power of great people (why “good enough” won’t cut it)

While on the topic of hiring, my friend Auren just wrote a great article as to why great people are so much more valuable than good people, especially for engineers.

As Auren puts it: “In markets characterized by winner takes-all – increasingly true in a globalized world – you need the very best; “good enough” will no longer cut it when against intense competition. These are the people that build great and lasting companies. Companies that are lucky are built on the backs of good people.”

Read the full article at:

The art of hiring

A lot has been written about the science of hiring: finding candidates through referrals, having multiple interviewers, getting references from potential recruits’ bosses, etc. In fact, I would recommend you all sign up for the free tips from Smarttopgrading ( and read Jack Welsh’s many articles on the topic.

However, there is another side to the equation an intangible “X Factor” that can change everything. It is that indeterminable “je ne sais quoi” that is making me more open minded. One of the candidates we recently interviewed was loved by everyone, came extremely highly recommended and presented extremely well, but I could not help feeling that he was too bureaucratic and therefore would not fit well in the organization and would slow us down. In light of all the positive reactions everyone had, I decided to give it a try. I have been very pleasantly surprised. He brought processes and organization without slowing us down.

More often, the opposite happens, a candidate meets all of the criteria and “feels” right but once in the company, it just does not work. There might a cultural difference or even just a personality conflict with someone else that cannot be resolved and brings the productivity of the entire team down. When that happens, you must move decisively in realizing it does not work and letting the person go.

In both cases, my conclusion is now the same: if the candidate seems great give it a shot. If it works great! If not, end it sooner rather than later.

In many ways, this is similar to my approach to entrepreneurship: 9 rigorous business selection criteria to choose the business. Once in the business try lots of things through trial and error and back it up with decisive action to take advantage of opportunities or correct mistakes (of which there will be many given the approach).

Google’s Loss is Murdoch’s Gain

A few months ago I described the “Grinda Hypothesis” where I posited that social networks would be hard to monetize (Advertising on Facebook and MySpace: the “Grinda Hypothesis”). It seems that Google is coming to the same realization: they are losing more money on their deal with MySpace than they expected (

Maybe I should add a time element (correlating improvements in demographic targeting on social networking with ad value and ad space) and make the Grinda Law 🙂 Then again, I should keep the “Grinda Law” for something more meaningful 🙂

My take on the Microsoft – Yahoo deal

I would very much like the deal to go through and actually succeed! For the sake of innovation, the Internet needs the search and online advertising business to be competitive. If you are in the direct to consumer world, Google probably accounts for the vast majority of your traffic, revenues and marketing spend. The dependence is scary!

Unfortunately, two mediocre companies merging usually make a larger mediocre company – not a better one. I can see why Google dominates the online advertising market. AdWords is so much easier to sign up for, use and optimize campaigns against. The sign up is much harder on both Yahoo and MSN. On Yahoo there is no way to buy traffic globally – you need one account per country and they all use different platforms! The US uses Panama, Brazil an older version of Panama and many other countries older versions still! It’s extremely difficult to get accounts, reporting is a mess and it’s hard to optimize. Sometimes Yahoo is actually cheaper than Google on a ROI basis, but it’s so painful to buy campaigns we don’t bother anymore! Even Panama – while better is still not as good as Google’s solution.

If the deal goes through, they have their work cut out for them: unify the media buying and selling platform across all companies for all their properties on a global level and then we will be talking!

I hope they succeed, the Internet needs it!