Tech Crunch

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We are experiencing a tech boom during a financial crisis. Not just a mere slump but what threatens to be a continuation of global financial meltdown that started with sub-prime mortgages in the US and now concerns sub-prime countries in Europe. According to people who are not prone to hyperbole, like the governor of the Bank of England, we’re in a period worse than the Great Depression of the 1930s. But in San Francisco, at least for some, everything is swell. Twenty year old college dropouts are once more raising millions armed with nothing more than a PowerPoint presentation. As people around the world are protesting banks, people in flip-flops, t-shirts and jeans that look like they would normally be protesting banks are embracing the world’s purest form of capitalism.

People are just starting to call the top of this latest wave in tech, however, in the Wall Street Journal AngelList reports valuations are nearly half what the were six months ago. As someone who was very much a participant in the last tech bubble, I feel I’ve seen this movie before, and maybe there’s something to learn from a quick recap of the prequel.

The dotcom bubble was a form of mass hysteria. By the beginning of 1999, if you were working in technology in the Bay Area, you never needed to buy a drink, the SFGirl website listed which dotcom parties to crash, on a daily basis. These parties were often lavish affairs, such as Ask Jeeves’ in April 2000, where Elvis Costello played. A variety of networking events, such as Drink Exchange were replicated around the world, First Tuesday, a European Internet cocktail party sold for $50million.

This mania wasn’t entirely unfounded it was driven by the realization that the Internet was going to fundamentally change the way that businesses work, that connecting people together via a many-to-many communications network rather than a one-to-many broadcast system, would lay the foundation for a something that would dis-intermediate many of the middle men in business, from music companies to newspapers.

Middle men act where where there is a lack of information or a network disconnect, where the buyer does not know how to find a seller a middle man jealously guards a few contacts and profits. The Internet was about the free flow of data, information liquidity, it promised to replace armies of brokers, trade secrets and hidden contacts with software which connects buyers and sellers or finders and seekers, directly. The dotcom bubble burst when people applied the increasingly over-optimistic belief in people to instantly deliver on the promises of this revolution to mundane things like pet food. They forgot about the how, rather than the what, imagining that you could point a magic wand at any market and Internetify it. Meanwhile a separate group of people that were interested in products rather than markets were figuring out how to make anyone contribute or publish to the Internet, rather than just browse, through the seemingly trivial world of online diaries, weblogs. This would turn the web into a truly two way medium, where people could communicate and be social.

After the crash, both the hipsters and the corporates who were pretending to be geeks quickly moved on, but people like the bloggers remained. People, like Evan Williams of later Twitter fame, had moved to SF during the dotcom boom but had been involved in the web since its inception. The eventual model for today’s social networks came when blogging was reduced to its absolute minimum combining the aggregated feed – a reverse chronological list of all your friend’s updates with the weblog, a reverse chronological list of your own updates publishable with the ease of using a search box. Although much of the innovation and confidence surrounding the web came back during this phase, the Web 2.0 era, what was missing was money, access to capital had somewhat dried up as people questioned the VC model and VCs looked to fashionable areas such as clean tech.

It wasn’t the appearance of Facebook as a clearly huge company that inflated the bubble (although investments would later cluster around ‘social’), Paypal or Google, were post dotcom crash companies that didn’t create a new boom. What created the new mania was the 2008 crash which made some people very rich and some rich people with nowhere to put their money. Artificially low interest rates, money printing and risk deleveraging meant that normal market forces were not at work, people with money to invest had few options of where to put it to earn a decent return and so the high risk, high return world of venture funding was a more attractive than normal for a small portion of that wealth. This money went towards ‘angel funding’.

There are far fewer Venture Capital funds than during the late 90’s, with a quarter of the money, funding twice the number of startups, largely because the fixed cost funding required to launch a startup is far less. During the dotcom era, startups would buy expensive hardware from companies such as Sun, enterprise level hosting from people like Exodus and database software from Oracle. Scalable hardware and hosting which used to cost several hundred thousand dollars upfront, have been replaced by cloud services such as Amazon’s EC2 which until you have lots of traffic, costs very little. For startups, proprietary software such as Oracle’s has been replaced by open source LAMP stacks which are as good. Newer document based systems which scale much better for social networks are actually better than what you can buy. What used to require more than a million dollars has been replaced by free.

The fixed costs of creating a startup have become low enough that they can be initially supported by individuals who inject small amounts of capital at the seed stage, business angels. The angel money has been pooled into quasi VC vehicles, from the more esoteric forms of incubators to the super angels, from 500 Startups to Floodgate to Seedcamp to Angel Pad which take a relatively large percentage (up to 5%) for a token investment (as low as ($20K). This acts more like a competition prize than a real investment, an endorsement that makes series A funding more likely (the prestige value of the trophy is worth more than the cash). The stake is in the form of a share IOU, a convertible note that can be exchanged for a percentage of the company at the point a significant amount of money is raised, demanding a proper capital structure and at a discount to the later guys. In other words, at the initial stage these aren’t really proper companies, angel funding is based on a wing and a prayer. This is a gigantic game of musical chairs – with places to sit representing Series A and the people dancing around them being the angel funded.

The benign view of this is that the angel funding has created a rich variety of new pool of species of company where the environment is evolutionary, is constrained and only the fittest will survive. But this is a matter of degree, the startup environment has always been market driven and Darwinistic, this is not the world of state funded arts or military contract cronyism. What we have now is a very large number of companies with a tiny amount of angel funding that either have to be profitable very quickly of they will die, it will be less of a winnowing out than a mass extinction event. This may not be a good thing for anyone, regardless of what will happen to the individual companies, for the ecosystem as a whole, the immediate aftermath of a mass extinction doesn’t showcase variety.

Because this is an ecosystem the startups aren’t the only type of species in the food chain, angels are one step up and there is equal change of a mass extinction there. If investors start seeing poor results from the incubators and the super angels, individuals driven by the fashion for this kind of investment will quickly be put off investing in them and they will become deeply unfashionable. This is largely what Fred Wilson points out and although it may look like he’s talking up the professional VC model out of self interest, I suspect he’s just spot on in predicting that those that come out best from all this will be those at the top of the food chain, the top tier professional VCs and the handful of companies that are never left under funded.

Whether the increased role of the angel or incubator works in the longer term relies on two things: (a) the idea that a primordial soup of experimentation will produce more companies with massive potential than would otherwise emerge and whether that potential can be spotted and (b) that many of the other ideas can turn into sustainable businesses with little extra funding.

Regarding a) I would argue that the potential for companies to be massive is rarely seen before the end of a significant series A round. Most web companies suffer from a chicken and egg problem – to have value you need users and to get users you need value. Money is needed to seed systems with value – and this is particularly true with social networks. For a company like Yelp which I worked on in the incubator it was launched from, half a decade before this bubble, the potential was only really seen after several million and a couple of years, even by its initial investors.

As for b) Its certainly true that the Portfolio of VC’s like Index’s (which I pick just because I recently looked through it) reflects a wide variety of businesses, some of which could see a lowish risk 10x return on little investment and other on a higher risk 10x return on a much larger sum. However, companies that are based on ad revenue and social models will need lots of cash and are competing in an environment where the big social galaxies are already in place. Part of this bubble is distinguished as being all about social, and that’s the part that is most vulnerable.

Today’s Internet boom is a refinement of the original promise rather than a paradigm shift. It is based on the crystallization of the many-to-many model not as portals which were a legacy of the broadcast infrastructure and dominated the dotcom boom but as social networks, platforms for self-emergent non-hierarchical networks. At the same time it’s based on the extension of the Internet from when we are sitting down to when we are moving around, via mobile devices such as smart phones and, in future, ubiquitous health and environment based sensors. All this stuff is real and exciting and providing the feeding ground for the innovation that is the only way out of the financial mess we are in. But the funding cycle is by definition cyclical and while the overall trend for Internet technology is still towards secular growth, we are in a bubble which will burst, leaving the seeds of the next great thing in its gooey mess.

Choosing a Wood Burning Stove – If you are a designer

Posted by | design | 3 Comments

[ Aside from the fact that this directly contradicts the item about glass area, below, I love this stove and its bizarre arrangement of vents on top. A stove is all about the channeling of hot air and the design of this suggests that this presumably is doing something very involved without it looking fake ]

I say designer here because I was tempted to buy a stove purely on aesthetics – and by aesthetics I don’t just mean what the stove looks like, but what the fire is like – I want to see, smell and hear a wood fire, its something archetypal. So here are the minimal criteria that seem to matter and those to ignore.


Efficiency: This is heresy, but you can largely ignore the efficiency providing the stove is based on newer technology when air is vented properly. A wood stove will be twice as efficient as a fire and log burning ones typically have efficiencies that vary less than 10%. You can increase the efficiency by going for wood pellets, but I personally think the benefit is mitigated by the aesthetics (unless you are talking about a boiler with an auto feed mechanism) and the fact that where I live logs are a ‘greener’ option, coming from small local suppliers. Further, and I don’t have actual number on this, but if you choose to hide the exhaust pipe (venting out the back, into a pipe in the wall) then you lose more heat than having a super efficient stove. I like the pipe to be vertical and exposed, this is what a stove is about, its not a fireplace.

Look at

Log Size: This one is kind of important, but it majorly affects the design choices for some reason – in Switzerland or France (where I get logs) they come in half meter or meter lengths as standard. Most of the more elegant stove designs take logs that are a max of 35cm, so this is one area where you are wise to cramp your style.

Glass area: I like the maximum glass to see the fire, and prefer 3 sided glass options over stoves that rotate so you can see the fire. Note however that this will be more work – self cleaning glass has a limited ability to live up to its name when you produce charcoal next to it. I also like to be able to leave the door open occasionally (not efficient, but sometimes nice) and you can’t do this with all stoves (I don’t know why and would love if someone could clarify).

Thermostat Control: Most modern stoves have some sort of burn control but not all, so look out for it. A wood fire wants to burn quickly and fiercely, so having some control over this is a really good idea – my advice would be to only go with stoves that have a proper thermostat.

Heating Volume: This gives you one number to concentrate on, based on a combination of efficiency and Wattage and related to something that directly relates to the design of the building you are putting it in.

Double skin insulation: If you have kids you probably want something where the sides won’t burn them if they touch it.

The Big Apple

Posted by | ipad, Uncategorized | 15 Comments

[ The final touch in creating the world’s best company ]

Commissioning Norman Foster for Apple’s HQ may be Jobs’ perfect, grandiose, finishing touch to building the world’s best company. For years Apple’s design perfection has been visible at every scale from headphones to the monumental, crystaline, Kaaba that is Apple’s flagship store on 5th Avenue, but the Apple campus itself has been a visible let down. The ‘Apple Core’ has the opportunity to be its superlative product, because Jobs has picked the architect that is in many ways his spiritual twin and whose career has invisibly skirted and influenced Apple for more than a decade, its disc shaped design is where the stories of two of the world’s greatest design influencers comes full circle, literally.

[ Perfect Credentials, Norman foster with Buckminster Fuller ]

[ Apple’s Core The design images will probably be less ‘cheesy’ than this once it gets through the planners ]

Above all Jobs’ legacy at Apple has been about design. But it has clearly also been about business. Creating the worlds largest company, from one that Michael Dell rather disingenuously said he should shut down and give the money back, is a hardly an historical footnote. The business side of design is tricky to combine with its artistic one and design businesses are not usually scalable if they are too ‘arty’. The most successful architects, such as SOM in the 60s created a style that appealed to big businesses, via an aesthetic that matches, say, a bank, because banks traditionally needed expensive, well made looking buildings rather than the latest intellectual ‘ism’ that passed through architecture schools, in order to convey an image of stability and security.

[ SOM’s Bruce Graham Foster took Graham’s American version of modernism back to Europe and Apple are re-re-importing it. Confused? ]

The design of a bank is what made Norman Foster. After returning to Britain from Yale, he was inspired by American modernism and SOM in particular and re-imported modernism back into Europe via a style that was compatible with business, High-Tech. Foster made High Tech an art form, and designed a series of beautiful sheds, everything from houses to offices to art galleries with the physical form of a hangar but the sophistication of a jet fighter.

[ Foster’s Sainsbury Center, 1977. A beautiful shed, the physical form of a hangar with the sophistication of a jet fighter ]

His big break came when a bank, HSBC, commissioned him to design their Headquarters in Hong Kong, with the simple but historic brief to build the world’s best building. I joined the practice shortly after the Hong Kong Shanhai Bank HQ was finished and it was clear that the company was experiencing the kind of rapid growth that is more characteristic of the technology startups that I later worked for in the Bay Area. But the culture of Foster and Partners (as it was then called) was different from firms in Silicon Valley with one notable exception – Apple, the place that combined geek business inventiveness without its reputation for poor aesthetic sensibility. Perfecting the model of selling design that is compatible with big business, Foster simultaneously grew one of the largest architecture practices in the world while still winning awards for design excellence. The secret was to design buildings like the limited edition, invite only Porsches that Foster drove and fellow Porsche drivers would commission them.

[ Foster made buildings and Apple made computers like Porsche made cars ]

Jobs went further, however, he managed to create products that were designed like Porsches and made them available to everyone, via High Tech that transcended stylistic elements. An Apple product really was high technology and its form followed function, it went beyond the Porsche analogy by being truly fit for purpose in a way that a Porsche couldn’t, being a car designed for a speed that you weren’t allowed to drive. Silicon Valley capitalism had arguably delivered what the Soviets had dreamed of and failed, modernism for the masses. An iPhone really is the best phone you can buy at any price. To paraphrase Andy Warhol: Lady Gaga uses an iPhone, and just think, you can have an iPhone too. An iPhone is an iPhone and no amount of money can get you a better phone. This was what American modernism was about.

[ An iPhone is an iPhone and no amount of money can get you a better phone ]

The idea of American modernism for the masses arose from an ideology that was the opposite of the European one, the ideology of extreme individualism that epitomizes Silicon Valley, libertarianism, a watered down version of the kind of stuff that Nietzsche wrote about. Steve Jobs may or may not be a libertarian but his story and Foster’s and of uncompromising design are an intrinsic part of the culture that has emerged at the heart of the Mecca of technology and which defines it.

The image of the architect in the vein of Nietzsche superman is epitomized in Ayn Rand’s Nietzsche-light novel, the Fountainhead which depicts a modernist architect who struggles for success by being utterly uncompromising. There is even a Fountainhead-like novel directly inspired by Foster. Philip Kerr adapted Foster as the thinly disguised lead character of his high-tech thriller Gridiron which depicts the designer as a selfish monster who is crushed to death by his own building.

[ Gridiron – The Fountainhead with a Norman Foster based protagonist ]

If you speak to people who work for Jobs or Norman Foster the rumors that circulate would seem to hold up this idea of an Ayn Rand style control freak. That Steve simply cannot ever, ever let it drop as regards Gizmodo publishing the leaked iPhone 4, an ultimately trivial event that had as large an impact on the Twitto-blogosphere as a revolution or Coup D’Etat or that Norman fired someone on the spot after specifying the wrong door handle (not by Elementer), something that is literally akin to a Fountainhead. But these rumors are just that, they are to some extent what people want to believe as much as what they pretend not to want to glorify, that the boss wears black leather gloves and sits in a room full of shark tanks stroking a white cat, like a diabolical Bond villain.

The truth is more complicated, Foster and Jobs perhaps distance themselves from personal relationships with their employees in the way that does enable a certain amount of ruthlessness but perhaps this is proof that the human side exists. Foster grew up poor, loved his wife who died of cancer more dearly than anything in the world and adopted a friend of his son’s to give him a better life. Jobs was himself adopted, has suffered and battled heroically against his own cancer and has championed what matters in life beyond material wealth as eloquently as anyone, most notably in his Stanford Commencement speech.

[ Steve Job’s iconic 2005 Stanford Commencement Speech – have a dream ]

Apple appears to operate in a similar model to an architectural practice and Jobs’ involvement seems similar to the mode in which Foster operates. In a big organization the leader cannot do everything, so needs to delegate and this is achieved through a hierarchy and chain of command. But in a model which is based on creativity and attention to detail, how do you see the details if you are miles away from them at the top of a hierarchy. How do you keep control over the design of the fountainhead or the door handles or the color of the headphones?

The answer is what might be called the sand pile model and it operated at Apple and Fosters, the boss sits independently from the structural hierarchy, to some extent, and can descend at random on a specific element at will. The boss maintains control of the overall house style by cleaning up the edges at the same time as having a vision for the whole, like trying to maintain a sand pile by scooping up the bits that fall off as it erodes in the wind. This is the hidden secret of design firms or prolific artists, the ones where journalists or historians agonize whether a change in design means some new direction when it just means that there was a slip up in maintaining the sand pile. For example, there was an architecture competition entry from Foster that the Guardian Architecture critic thought represented a new style, when the reality was that Foster was on vacation when the office produced it, the first time he saw the design was on the private jet he took to present it.

So does that mean that Foster is a fraud – absolutely the reverse. This is the exception, as they say, that proves the rule. The absolutely stupendous thing is that Foster managed to maintain a level of artistic integrity by being involved in so much of the artistic output of the office by popping up randomly and quizzing unsuspecting employees about what they were doing. This is where the ‘getting fired over the wrong door handle’ myth comes from, and it parallels the accounts of Jobs at Apple where Steve Jobs’ hand written notes passed to a blog editor about his website design on the iPad create the myth of god like omnipresence because they assume that Jobs is present for all involvement like this all the way up the hierarchy. This myth creates the impression that Jobs is author of absolutely everything Apple.

Its a flaw of human nature to assume that revered individuals are authors of everything they touch. When historians argue over whether a Rembrandt is authentic, they miss the point, no Rembrandt was truly authentic, they were painted by a team that included Rembrandt himself to a greater or lesser degree, to maintain the house style. And there is one great anecdote that nails this myth of authorship – the famous Walt Disney signature. Walt Disney had really bad handwriting and someone else in the office created the recognizable version. When stills from Snow White were auctioned those that bore his actual signature fetched less than those with the iconic one. True authorship is a myth and this applies to Jobs.

[ Disney had Mickey Mouse hand writing, his signature wasn’t his ]

The influence of Foster on Apple’s design goes beyond the abstract, the core elements of the Apple stores themselves lead indirectly to several famous architects but Foster in particular. The 5th Avenue store owes more to IM Pei’s Louvre pyramid for example, but its a later version of the prototypical version which is best represented by the first Manhattan one in Soho. The Soho store is a box with a central rooflit void containing a translucent glass stair. This is an identical description of Foster’s Mediateque in Nimes in France where such glass stairs were perfected.

Nîmes (30)
[ Foster’s Mediateque in Nimes, 1993, which perfected the glass staircase that became the iconic component of Apple stores ]

Foster is at his best creating buildings that exist as perfect diagrams, the Sainsbury center is a bubble chamber, a U-shaped tunnel with an oblique entry and a spiral, the Reichstag is an inversion of oppressive classicism, an open fishbowl for a new democracy and Stanstead is an attempt to put all the crap in an airport out of sight to create an airport that contains mostly air. The less good buildings, such as the Gherkin which are part of the Dubai influenced trend of funny shaped towers with rather ordinary floor plans weren’t really designed by him (Ken Shuttleworth was primarily responsible for the Gherkin), and as he moved to Nyon a few minutes away from where I live, near Geneva, perhaps Foster is no longer as involved in the London based firm’s designs. But I hope that with the Apple campus he is, it’s a perfect diagram, a squashed glass Apple the size of a town and with a layout like Burning Man. Unlike the Gherkin and despite what people say for the benefit of planners (it’s a giant spaceship) the shape isn’t that unusual or important, but its simple enough to allow for the attention to detail, in beautiful, giant curved glass swathes, that epitomizes Apple.

[ A squashed glass Apple the size of a town and with a layout like Burning Man ]

It would be a fitting cap to an illustrious career and the achievement of a long term goal that Fosters never quite pulled off (even if you include the Hearst Tower in NY) to re-import his quintessentially American style from Europe, repeating what Jonathan Ive did for product design under Jobs, and to produce something that becomes an American cultural landmark, something which Silicon Valley lacks.