Getting to "yes" in a world of "no"…

I had a nice coffee today with an old friend from my schooldays who sold his decent-sized company not so long ago: it didn’t take long for the conversation to turn to business angels and pitch meetings, something which we both have had a lot of exposure to (though largely on opposite sides of the same wonky-legged table).

On the one hand, in order for startups to get past angel gatekeepers to pitch, they have to kid both themselves and others that in 3-5 years’ time they will multiply an given investor’s stake by at least 10x: this is the modern pitch template, the model that startups are required to replicate in order to be considered “credible” (But of course nobody has that kind of control over the future, however smart you are).

Yet on the other hand, my experience of rapidly growing companies is that they are structured in an open way to allow external serendipity to play a very significant (if not actually a near-majority) part. In fact, I suspect the real growth of such companies would best be charted in a bar graph with “Years” along the bottom and “Lucky Breaks” up the side. (Note that I don’t believe anyone has ever put such a graph up in front of potential investors, except perhaps with some kind of satirical point in mind.)

What struck me most forcefully was the sharp contrast between these two startup “models” – between the PowerPointy pretence of control and the (actual) near-total absence of control. The whole startup discourse has become a slave to the MBA-ified cult of the jut-jawed CEO hero making dramatic bets against the market’s groupthink, all the while the realpolitik of business has grown more diffuse and collaborative, where opportunities more often arrive as partnership outcomes than as snatched moments of solo market brio.

I don’t know: as I’m typing this, I’m feeling the hopelessness of the whole situation – as though angel investors and their groups have, by steering the ‘model’ to such foolish extremes, become 10x more of a hindrance than a genuine help to the whole sector. Add in the triple-whammy cargo cults of the ‘killer deck’, ‘elevator pitch’, and ‘executive summary’, and you have a pervasively dysfunctional setup to deal with.

Right now, I have this huge urge to stand in front of a room of business angels and just, I don’t know, tell them the goddamn truth. You know, that business is hard, arbitrary, strange, but collaborative; that what genuinely differentiates proper startups from, say, window cleaners is they take a certain combination of ambition, drive and scalability and aim it all at a fat (but wobbly) market; and that if I could tell the future as well as angels apparently need me to, I’d be betting on Lucky Boy in the 2.30 at Haydock Park, not standing in front of them.

But most importantly I want to tell them that it is their shared model that is killing startups: that if they had the guts to invest in startups without having them go through that stupid ritual of pretending to have sufficient omniscience, omnipotence, and precognition to guarantee insanely good ROI, then maybe they’d get the kind of returns on their investment they wanted.

Really, do I honestly think there’s even a 1% chance many will stop punting their miserable pin-money stakes into social me2dia shutdowns (i.e. the opposite of startups) anytime soon? No, of course not, not a hope. But that’s the view I get from here, make of it all what you will.

It’s a while since I made a proper web-log blog post, so here are some interesting JavaScript postcards from the edge that I found while trawling the web. Enjoy!

* Best link there is: Essential JavaScript Design Patterns by Addy Osmani – great little ebook (and free!)

* Peter Michaux’s Early and Late Mixins

* What is the length of a JavaScript array?

* JavaScript declaration hoisting – great for job interview tests, terrible for real code

* It turns out that you the JavaScript delete operator can never delete objects (only properties of objects). Just so you know!

* How to have a JavaScript function return undefined.

* A neat JavaScript chess programme called GarboChess. I like it!

I recently wrote (and indeed published on Amazon) a nicely interactive chess ebook (Chess Superminiatures, based around more than a hundred real-life chess games all under ten moves long). As a result, my exposure to all things ebook-related and ebook-business-model-related has spiked sharply in the last month or so.

But when it comes to VAT and ebooks, even I didn’t see this one coming.

It’s like this. The basic business model for ebook publishing is as an Agency arrangement, so if you buy a Dorling Kindersley ebook on Amazon, you’re not buying it from Amazon, you’re actually buying it from Dorling Kindersley with Amazon ‘merely’ acting as an Agent. (Yes, even though Amazon does the hosting, selling, customer transaction, billing and money collection, and then gets to sit on the money for 60 or so days before passing it on to DK.)

All the same, at this point any underlying business model differences are merely semantic as far as a customer is concerned: if you’re buying an ebook, you don’t particularly care whether it was Amazon or DK that sold it to you. You know that it ultimately came from DK, the rest is just meh.

…except if you want a VAT invoice for your purchase. Because unlike normal books, the price of ebooks (potentially) contains a VAT component (i.e. if the seller is VAT registered). Did you know that? But… how would you get a VAT invoice for an ebook?

This is the point where it gets fuzzy and legalistic.

Because it is acting as an Agency, Amazon itself doesn’t charge VAT on the sale, because the transaction is between the customer and the ultimate publisher. So whether or not there is VAT on the transaction depends on whether the ultimate publisher is VAT registered, and that is not actually made clear on the Kindle product screen.

But all the same, you would have thought that an Amazon-mediated transaction between a customer and a VAT-registered publisher would necessarily generate a dated VAT invoice of some sort, as just about every other VAT-rated transaction in the EU is required to do, right?

Wrong! Amazon sidesteps this entire issue by sneakily insisting in its Terms & Conditions that Kindle content is only ever for “personal use”. With this single stroke, they (seem to) remove the need for VAT invoices, because someone buying a book for “personal use” would not have any explicit need for a VAT invoice, because they would – as an individual – be unable to claim back VAT.

So that’s the end of that… or is it? Frankly, if I was an EU commissioner tasked with dealing with Amazon, I would be spluttering with fury into my latte every time this topic came up, because Amazon plainly sells a whole host of business-oriented content for Kindle readers, and the wave of ebook titles swells ever higher each year.

This “for personal use only” in the T’s and C’s is without any doubt nothing more than a gigantic hack: as I wrote elsewhere a few days ago, the person who first devised this trick is probably still chortling into their hand years later. In fact, it’s such an epic business model hack that I think it genuinely deserves its own Wikipedia page – give credit where credit’s due!

So, to be truthful, the line should say something like “possibly includes VAT if the ebook publisher is VAT registered (irrespective of Amazon’s own VAT accounting), not that you can claim it back because only personal use of Kindle content is allowed within Amazon’s current T&Cs”.

Way back in 2002 or so, I devised the idea of “gamification”, a clunky (but useful) way of proposing that electronics devices of all sorts would be vastly improved by taking on board the lessons games companies had had to learn. My position was simply that the games industry was the ‘cradle’ for the major technology waves that were just about to break, and that tech people needed to get their heads around that.

The people at Apple certainly did: in terms of how I personally describe gamification, I’d say that the iPhone, the iPad, the iTunes Store and the App Store are prime examples – near-frictionless interfaces coupled with a games-industry-informed platform-centric way of doing business. And that certainly has done the company nothing but good.

Websites, too, were something that concerned me greatly back then: when I looked (and still look) at websites, the thing I look for more than anything else is a kind of ‘authorial voice’, an online corporate presence in a rather more literal sense than the phrase usually connotes. You also find this in packaging copy and TV voice scripting (e.g. Innocent Smoothies have a great ‘voice’, Shakeaway usually pitches it right, More Than has become pretty good, Orange used to nail it but has lost its way, Apple comes and goes, Coca Cola sucks terrifically, Macdonalds is even worse these days, etc).

In retrospect, what subtly linked my twin obsessions from back then was what I now call the notion of psychological distance – for if authorial voice is the process of ‘humanizing’ a company to the point that it can actually talk to you in a language that you can almost accept as human, then gamification is very much the process of using technology to reduce the psychological distance between you and it – bringing you emotionally closer to it.

The example I like to give to show the limits of gamification is the whole idea of a government tax website: though it would make sense to tune users’ flow through the tax website, the idea of using gamification techniques to bring the user psychologically closer (and somehow more emotionally aligned) with The Taxman would seem somehow alien to a lot of people.

But even though this seems like a kind of counterexample to the whole gamification-is-universally-good gospel, maybe – just maybe – you could make a positive difference here. All the same, you’d have to start your design process from a radically different corner to normal… that of psychology and empathy.

The most basic ‘empathy hack’ would be to add a changing sidebar showing simple top-line statistics about what your tax money does for people – education, healthcare, etc. Tax shouldn’t be presented in a stark, oppositional way, when it is actually the backbone of how a civilized society functions. Tax is how we get money fairly from the people who make it to the people who need it – and illness or changing personal circumstances can rapidly alter which side of that whole equation you happen to be sitting on.

My point here is that by reducing the empathic distance between the website user and the website owner as a first step, we are already oiling the conceptual wheels in a very direct way. By adding this kind of touch, we’re giving The Taxman a believable human voice (rather than a cartoon bowler hat, *sigh*). Only then can we start to think about anything so fancy as gamifying the interface – in sales terms, you need to answer the “who cares?” question long before you try to close the deal.

Beyond that, it’s an open question about what the tax website people would need to do: but my larger point is that gamification is hugely dependent on a collaborational mindset having first been invoked or engineered. Without a proper appreciation of psychology (and how things like authorial voice can to a large degree help), gamification isn’t really a lot of use.

I think it was Gartners who claim that 85% of current gamification projects are likely to fail: my point here is that without actively trying to reduce the empathic distance first, many such projects would never have a chance of working at all.

More generally, in these days of customer-centred design, I’d contend that interface design is fast becoming an exercise more in psychology than in programming. But I’m not sure if even a single current CompSci course has this as a design precept, not even the computer games courses. The world is changing fast, that’s for sure…

Infographic suckage…

I’m sorry, but even for the purposes of satire I couldn’t bring myself to click on the [add patronizing rows of little jelly-baby men] button. Really, nothing highlights the suckage, banality, and information underloadedness of most infographics better than infographics themselves…


Yesterday I had bad hay fever and a headache: so I decided to throw myself at one of the countless books in my in-tray, Michael Lewis’ (2010) “The Big Short”. 24 hours later, and I found that I’d accidentally read the whole book: it’s certainly an engrossing read. :-)

I already knew a fair bit about the causes of the 2007 / 2008 financial market collapse and how it played out: but Lewis foregrounded the people not so much at the eye of the storm, but rather encouraging the storm to get on with it and smash everything up. (Basically, because they’d each found ways of taking a huge short position against the stupid, mad, exploitative system that had rapidly been built atop an unsustainable industry selling mortgages to people who could barely begin to afford them.)

But then Lewis got a big detail wrong (something which I happen to know about), and I think that throws his overall judgment sideways. He writes (p.78):-

“Wall Street’s newest technique for squeezing profits out of the bond markets should have raised a few questions. Why were supposedly sophisticated traders at AIG FP doing this stuff? If credit default swaps were insurance, why weren’t they regulated as insurance? Why, for example, wasn’t AIG required to reserve capital against them?”

This is where Lewis drops the ball. As I understand it, the reason Joe Cassano (“a guy with a crude feel for financial risk but a real talent for bullying people who doubted him”, [p.86]) ran AIG’s operation from London was because, compared to the US, the UK had unbelievably lax rehypothecation rules – the rules that should stop you borrowing a hundred times over against the same collateral asset.

It’s true that Cassano’s group was sold one of the biggest pups in history by companies gaming the ratings agencies in ways that were, from my perspective, completely unethical. But what gave AIG the ability to insure the repackaged subprime tranches at all was simply that because they were operating out of London, they could do whatever hypothecation they f*&king well liked.

Ultimately, Goldman Sachs and the rest may have encouraged AIG to pull the trigger, but it was London’s lax rehypothecation rules that loaded AIG’s submachine gun. Without a gigantic sucker insurer to sit on the other side of the trade who just happened to have the means to scale it up, the subprime market would surely never have happened in the first place.

So was London no more than a passive passenger in the meltdown, one hijacked by those nasty old US investment banks; or did its (lack of) rules actively help derail everything? I suspect the latter… but you’ll have to make up your own mind.

What scares me most is that, thanks to the ridiculous bailouts that ensued, nobody involved seems to have learnt anything. Rehypothecation in London remains infinite. What will trigger the next meltdown?

I just read a clip-quotes-together-and-number-them article supposedly on why the VC model sucks. It annoyed me enough to want to answer my own question: right now, what in Startup Land really sucks?


Well… Venture Captal as an asset class does indeed currently suck, it’s quite true.

But the way that wannabe entrepreneurs flood VCs with pathetic app-centric slideware designed more to wrap around the VC business model than around real customer needs, that also sucks.

And the ridiculous way that journalists and bloggers write about VCs and startups sucks too. I mean, what is the point of reading an article in TechCrunch about how insanely clever startup X’s founder is to have got VC funding, when the odds are at least 9:1 that it’ll all turn brown and runny inside 12 months?

Oh, and the way that business angels claim to be liquid (when nearly all their actual worth is tied up in a whole myriad of tax avoidance schemes): and so spend most of their time wasting entrepreneurs’ time doing meetings when they have an actual business to run: that sucks as well.

And really, don’t get me started on how ridiculous cargo cults such as The Lean Startup waste startups’, angels’, and VCs’ time by encouraging entrepreneurs to design their companies around processes that can almost never be funded or scaled. Because that sucks.

Even so, despite all that pathetic sucking, right now the maximal suckage in the whole train-wreck startup ecosystem is simply this: 95 or more out of every 100 people who currently want to be an entrepreneur are just f^&king kidding themselves.

Jeeez, so you lost your job as a mid-ranking software project manager at Acme Corp: does that automatically make you an entrepreneur? No. So you think you’d like to write a cool app, does that make you an entrepreneur either? No. In fact, do just about any of the half-baked excuses people put about for being an entrepreneur actually make you an entrepreneur? No, they don’t. They really, honestly don’t. And the more I hear them, the sadder it makes me.

Back here on Planet F^&king Earth, being an entrepreneur actually involves two things: (1) not spending money while still moving forward, and (2) selling like the biggest sales monster ever seen. Almost all of the current demented crop of entrepreneurs act as if these are two skills they can somehow get by without having to acquire or use: but they’re wrong, ridiculously and riotously wrong.

In fact, anyone can knock together a business plan based around spending someone else’s money (a Fantasy Startup game a child could play), but the real world is the cruel antithesis to such self-indulgent reveries. It is the immovable rock on which all such plywood dream ships get brutally shattered. You don’t like this? Well, sorry, but welcome to my world.

So… you want to be an entrepreneur, do you? Ever wondered whether you might actually be part of the problem?


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