The Power of Perspective

I'm reading a fantastic book, Managing the Equity Factor. One of the key tenets of the book is that communication changes people's perceptions of reality. This anecdote from the book is so compelling that it warrants its own blog post. For context, this is a letter written from a freshman in college to her parents:

Dear Mom and Dad

Since I left for college I have been remiss in writing to you. I am really sorry for my thoughtlessness in not writing before. I will bring you up to date now, but before you read on, please sit down. You are not to read any further unless you are sitting down. Okay?

Well, then, I am getting along pretty well now. The skull fracture I got when I jumped out of the window of my dormitory when it caught fire shortly after my arrival here is well healed. I spent only two weeks in the hospital, and now I can see almost normally and get those sick headaches only once a day.

Fortunately, the fire in the dormitory and my jump was witnessed by an attendant at the gas station near the dorm, and he was the one who called the fire department and the ambulance. He also visited me in the hospital, and since I had nowhere to live because of the burnt-out dormitory, he was kind enough to invite me to share his apartment with him. It's really just a basement room, but it's kind of cute.

He is a fine boy, and we have fallen deeply in love and are planning to get married. We haven't set the exact date yet, but it will be before my pregnancy begins to show. Yes, Mother and Dad, I am pregnant. I know how much you are looking forward to being grandparents, and I know you will welcome the baby and give it the same love, devotion, and tend care you gave me when I was a child.

The reason for the delay in our marriage is that my boyfriend has a minor infection, which prevents us from passing our premarital blood tests, and I carelessly caught it from him. But I know that you will welcome him into our family with open arms. He is kind and, although not well educated, he is ambitious. Although he is of a different race and religion from ours I know your often-expressed tolerance will not permit you to be bothered by that.

Now that I have brought you up to date, I want to tell you that there was no dormitory fire,. I did not have a skull fracture. I was not in the hospital. I am not pregnant. I am not engaged. I am not infected, and there is no boyfriend in my life. However, I am getting a D in History and an F in biology, and I wanted you to see these grades in their proper perspective.

The TV OS Of The Future Will Decouple Video And Software

I was at the Formula 1 US Grand Prix a few weeks ago. It was pretty awesome, even though I couldn’t see the cars travel the entirety of the 3 mile track due to the hills. To mitigate this, I used the F1 iOS app to track driver standings in real time. While I repeatedly shifted my glance between the track and my iphone, I realized that there should be drones hovering over the entire track, and that the camera feeds from the drones should be select-able from the app so that I can focus on a particular hairpin turn with replay controls. And that I should be able to follow a particular driver through the track from the various drone cameras.

It was a cloudy day, so I thought about enjoying that same experience at home on my couch. And then it occurred to me that the new Apple TV should enable the experience I had just imagined. Indeed, Apple is envisioning exactly the type of experience I just described as evidenced by their close work with the MLB. They recognize the opportunity of interjecting software into a video feed.

The MLB demo, as awesome as it is, demonstrates the single greatest problem with the Apple TV: content providers need to decouple video feeds from apps. To be fair to Apple, they can’t control this, but it will adversely impact app quality and innovation on the platform, ultimately to the detriment of consumers.

So what specifically is wrong with the MLB app that Apple showcased? It’s great to be able to see the scores for all of the games, and then jump into a game. I’m sure the product management team for the MLB recognized this as low hanging fruit for baseball fans. This isn’t the problem. Rather, the problem is that I may want my MLB experience to be highly integrated with Twitter and fantasy league(s) that I’m in. As the a hypothetical consumer that pays for MLB all access, I probably follow quite a few baseball-related twitter accounts, and I probably play a lot of fantasy sports across a few leagues.

Or maybe I want to see exact flight path of the ball in slow motion compared against the last 3 balls thrown by the same pitcher. Or the guy on 1st base creeping off to steal 2nd base, even if the main camera isn’t showing it.

The possibilities are endless. The MLB could theoretically build all of these functions, but they won’t. Depending on the “use case” for watching baseball, viewers will want to layer in different content and watch the game in different ways. The MLB will never accommodate everyone’s desires.

The solution is to decouple the video feed from the MLB app. If ABC/NBC/FOX/CBS were to provide all of the camera feeds from a game as an API for Apple TV, 3rd party developers could implement those feeds to create unique experiences for every kind of fan - the data junkie, the selfie-aholic, the fantasy nut, etc.

Just imagine the endless possibilities to make live football smart. I should be able to switch to any camera in the stadium, rewind any play, draw the flight path of the ball, the running path of the receivers, mark up the play with with my own X’s and O’s, etc. As the NFL layers in sensors into player’s pads and helmets, I should be able to see the force exerted in a particular hit, and Tweet a video of my buddy sitting next to me spill his beer in awe from the camera that’s built into my TV.

The official apps from the NFL and the broadcasters will never provide the ultimate experience for any fan. The only way accomodate everyone’s “use case” for watching football is to decouple the content from the app itself. This will empower 3rd party app developers to layer software into the video-consumption process in a way that accommodates any use case.

Although the new Apple TV has launched with official apps from most of the major networks and sports leagues, the apps are universally primitive UIs to select particular video segments and highlight reels. I expect that this will be the case for a while. But at some point, it will become clear that content and software should be separate.

First Time Entrepreneurs Should Avoid Hot Sectors

I like shiny new objects. Pristine was birthed out of my draw to the shiniest of new objects at the time, Google Glass. Most first-time founders are drawn to shiny new objects too. As such, it’s easy for first time founders to be drawn into hot sectors that receive media attention.

First time founders should avoid shiny new objects and sectors that receive too much media attention. This seems counterintuitive, but it’s purely rational.

As investors begin to recognize a hot sector, they’ll talk with one another and with seasoned entrepreneurs who have tangential experience. The problem that first time entrepreneurs face is that seasoned entrepreneurs with 9-figure exits under their belts recognize the same patterns and have connections to the investor community. The seasoned guys will always raise more money than first timers, attract better teams, know how to achieve product/market faster, and scale faster while making fewer mistakes.

In simple terms, if it seems obvious to you, it’s obvious to someone else who can out-execute you.

So if you’re a first timer, you should avoid spaces that are getting lots of attention. As of Q4 2015, that would include spaces including drones, bitcoin, and the on-demand economy.

There are exceptions to this rule. You should ignore this rule if you have deep domain expertise in a field. For example, if you and 4 MIT buddies have been studying aerial propulsion for 5 years and have built a drone that gets 3x the length of flight of DJI, it’s worth raising VC money for.

As a first time entrepreneur, you’re better off focusing your efforts in spaces that aren’t generating too much attention. Examples in Austin include WPEngine, Aceable, and TrendKite.

Innovate Myopically

Everyone loves to talk about innovation these days. Big companies are setting up “innovation labs” in droves. Startups in particular love to innovate. After all, who doesn’t love to innovate?

Innovation is generally a bad idea.

Innovation is hard. Really hard. Innovation requires lots of money, resources, time, and luck. Startups have none of the above. So startups should innovate as little as possible.

Most startups should only innovate in their product offering to serve their customers’ needs, and avoid all other forms of innovation. Moreover, since most startups are application layer companies (and not deep tech companies), they should abstract all material engineering challenges. They should focus exclusively on application layer problems - UX, features, stability, etc.

Outside of product innovation, startups should copy as much as they can. There is generally no need to innovate on any of the following, unless that particular area is the focus of the startup and the management team has deep expertise in the area:

Legal structure
Job descriptions
Invoicing and accepting payments
Internal communications
Investor relations
Org charts
Goal setting and planning
Enterprise selling
Inside selling
SEO/SEM
Sales training
Cold calling
Onboarding
Cap table management
Accounting
Budgeting

You should seek to actively commoditize every aspect of your business that isn’t your locus of innovation. Everything else should be emulated.

Thoughts on Drones

I’ve been thinking about drones a lot lately. Obviously the technology component is really cool, but more importantly, drones shatter some fundamental assumptions about business. Below are some thoughts on drones in no particular order:

Amazon will unveil Amazon Drone Services (ADS) that will allow anyone to ship anything (within ADS size/weight constraints) anywhere in a given geography in X minutes. This will change local commerce, and will have huge implications for the current crop of food focused startups (Favor, Doordash, Postmates, etc). Aggregators such as Instacart will be better positioned to manage this transition as they provide specialized value beyond raw delivery.

There will be a convergence in “form factor” for the most important use case: delivery. There will certainly be drones of various sizes for carrying different payloads varying distances, but the underlying designs will likely converge, and the software that powers the drones will be shared.

There will be unique use cases - such as oil pipeline inspections and maintenance - that may require unique hardware that ADS will not accommodate. There will be niche markets to accommodate these use cases. The technology vendors building these solutions will offer a unique combination of integrated hardware and application-layer software focused product for specific industry verticals. For these niche use cases, hardware and software will be provided by a single vendor, though the vendor will probably use open source technology like AirWare.

Once drones converge in form factor, then there’s no reason why Amazon or Google won’t become the dominant infrastructure provider of most drone-based intra-city logistics. It seems very unlikely that any startup today - even the largest drone manufacturer, DJI - could muster the capital and resources to compete directly Amazon or Google head on. Given the roaring success that has been AWS, Amazon’s very public work on drones, and Google’s aggressive robotics research and acquisitions, it’s clear that Amazon and Google are going to fight to the death to become the dominant drone-logistics providers for cities. Startups simply won’t be able to compete.

This also means that the tech giants will drive most of the innovation in drone operating systems - computer vision, collision detection, wind management, electronic virtual highways, etc. Amazon and Google will open source their drone OSes to drive standardization in hardware around their respective software defined ecosystems, just as Google has done with Android. Startups won’t have much of an opportunity to drive innovation here in the long run, though there could be some significant early exits to tech giants. AirWare could be a notable example of this.

There are certain parts of the supply chain that Amazon probably won’t get into, such as on-demand medical rentals (rent an X ray when you break your arm for use by consult by DoctorOnDemand), fresh-baked bread (will Amazon build a bunch of ovens?), and pharmacies (too much regulation for Amazon). There will be unique opportunities to reshape many of these businesses by leveraging ADS.

The businesses most likely to be reshaped are those that have historically been very local and fragmented - such as bakeries and meat delivery. There could be an enormous opportunity to disrupt Sysco by rethinking the SMB supply chain through drones.

Because drones will reduce the cost of transportation by 10-100x, restaurants may choose to order materials “just in time” rather than every 1-2 days. This can improve profit margins by reducing waste, and by freeing up significant working capital. Drones will reshape the entire food supply chain, and will in the process create opportunities to launch new companies at every layer of the food value chain built around drones. Drones reduce the need for working capital by enabling just-in-time everything. Drones are complementary to Bitcoin.

Bitcoin and drones go hand in hand. By reducing the cost of physical transportation 10-100x, there will be a need for a low friction, instant, low-transaction fee payment system for small transactions. Bitcoin is the obvious solution.

Drones will open new opportunities in “space arbitrage,” just as the Internet has enabled labor arbitrage by empowering Indian labor to take care of white collar American tasks. The use case that most immediately comes to mind is an infinitely large, virtual closet for people who live in big cities with small closets - think NYC or SF. I can see a future in which you can pick out your clothes for the day and have them delivered in the morning, freshly washed / dry cleaned. Or better yet, you’ll be able to rent clothes Friday at 8pm and have them in your hands at 8:15pm. This naturally lends itself to interesting businesses in clothing rental. There will be other opportunities in "space arbitrage" built on this idea.

There are an enormous number of drone applications in construction, architecture, agriculture, and oil and gas. These are fairly obvious applications today and have the potential for immediate ROI. Most application-layer drone investments today are focused on these verticals because the end-users can achieve near immediate ROI.