Blog - Page 2 of 9 - Assert Digital Ventures

MBAs “Sprint” to Solutions for The Wall Street Journal…

April 28, 2021April 28, 2021
by Andy

One of the product management class offerings at NYU Stern we’re experimenting with. Really enjoyed this class and thanks to Lauren Acquista and Helen Hewitt for the amazing support.

The class went even better than expected and the students learned not only about the design sprint approach, but also went much deeper in finding insights than most other consulting type projects would. We pushed them and they delivered things even the clients weren’t expecting (including some direction to completely change where a product was heading).

https://www.stern.nyu.edu/experience-stern/news-events/mbas-sprint-solutions-wall-street-journal-and-rocket-mortgage-with-innovative-new-tech-solutions

Finance

Announcing the Buy Build Fund

March 8, 2021March 8, 2021
by Andy

I am pleased to announce the Buy Build Fund. A new acquisition partnership, micro private equity fund formed along with my partners Cliff Sirlin and Kingchih Fan.

Entrepreneurship is all about high-growth startups, right? Take your genius idea, clear out your garage, raise some angel/VC capital and you are off to business stardom. While the promotion of billion dollar tech entrepreneurship has grown substantially in the past 20 years, the original entrepreneurs — small business owner-operators — are still the vast majority of entrepreneurship successes. These are not high-profile nor receive the headlines but are the greatest wealth creator in the US economy.

In the past 30 years, a variant on this small business owner-operator model has emerged: Entrepreneurship through Acquisition (ETA). ETA takes an SMB that has achieved some level of product-market fit as well as financial stability and acquires the company putting a new CEO — oftentimes a newly minted MBA — in place to drive growth and optimization. Since many SMBs are run as “lifestyle” businesses, the owner has little incentive to grow them beyond what meets their personal financial needs. This has a dual effect of a) suppressing acquisition multiples (typically 3-6x EBITDA) and b) creating ample opportunities for immediate financial impact under professional management. All this adds up to an attractive asset class which, over the past 10 years, has achieved 3x the returns vs. traditional mid-to-large private equity (PE) and venture capital (VC).

Interestingly, even with this historical performance, ETA is off the radar of institutional investors. Why, you might ask? Because you have to clean-up and operate these businesses and, on the outside, it does not appear to scale. Those in the search fund industry know otherwise. Even as more search funds have come online in the past decade, there is still ample room to play. There are ~7m non-sole proprietor small businesses in the US. In the next decade, as the Baby Boomers retire, over 4m SMBs will seek new ownership representing $10.8 trillion in asset transfer.

Thus, there is an alternative to the corporate ladder and startup-in-a-garage approaches to realize your dream of running a company: acquire some else’s successful SMB and grow it. Whether your goal is to grow and exit at the next level (typically 8-12x EBITDA) or run it in perpetuity, there are several models that work for investors who understand the opportunity.

We are seeing our first set of Acquisition Entrepreneurs so if you think this might fit your interests, please reach out. We are also still accepting investors to fill out the fund.

Media

Your competition is different in the attention economy

February 12, 2021February 12, 2021
by Andy

Many people err in seeing their competition as like offerings. Those are not irrelevant, but, these days, you might be competing with a wide swath of things attempting to get your customer’s attention. Certainly true if you are in the gaming, social and media/entertainment arenas. Reed Hastings (Netflix founder) presciently said that his real competition was not other media offerings but anything grabbing for your idle time. Here’s a good origin article on the man who predicted this.

Visualization

Tesla’s rise visualized

December 13, 2020December 14, 2020
by Andy

Pretty amazing when you’re valued as a tech company vs. auto. Great visualization BTW.

If you haven’t seen this video yet, then check it out 🤯 @elonmusk pic.twitter.com/vWmXYkKXdk
— Tesla Owners Mexico 🇲🇽 (@co_tesla) December 11, 2020

Policy

A Solution to Big Tech Monopolies: Open Source them

November 23, 2020November 23, 2020
by Andy

There’s been much discussion around the big tech platforms and whether they constitute monopolies that should be broken up. With the US government now scrutinizing this (and have even launched a case against Google) as well as EU regulators taking a critical stance, I thought we should consider how this might come about. In my 25+ years in tech, I’ve worked with, on and against pretty much all the big four (Google, Amazon, Facebook, Apple) as well as studied their practices in detail for my teaching at NYU Stern.

First, I’m not a lawyer but do my best to study those arguments. Most conclude that US antitrust law is not well equipped to address this issue. Antitrust precedent has mostly been based on harm to consumers due to inflated prices from lack of viable competition. Most tech companies give away a huge amount of value in their platform offerings for free (e.g. Google search). Thus, Google can, and has, made that argument. The recent case filed by the US Attorney General made other arguments for anti-competitive behavior but appears to be treading in unprecedented grounds to avoid this element of antitrust law.

The remedy offered by some is to simply break up the tech firms. Breaking up any company at this scale is complex but that is even more so with tech. The reason big tech has been so acquisitive and reaching further into consumers lives is because properties with large, locked-in user bases can be leverage their platform gaining tech network effects. Their products are technically intertwined at multiple levels but, most importantly, with identity. Identity ownership is a powerful tool and most new startups eschew their own proprietary login to use one or more of “login with Google, Facebook, etc”. For the startup, this lowers friction for new user sign-up and security management. For the big tech firms, it deepens their entrenchment at the center of the tech universe.

Besides the complexity, breakup is not necessarily the best remedy to actually drive the outcome sought: more competition in the key tech arenas to drive vs. stifle innovation. Take Facebook for example. The most cited breakup plan is to separate Facebook the social network and Messenger app from WhatsApp and Instagram. While that would lessen Facebook proper’s reach, each of those companies would still be dominant in their lane of digital social. While there is some overlap across those properties, each of them is distinct and doesn’t really compete with one another on core value proposition and thus wouldn’t suddenly create a multi-horse race.

There is some precedent around tech monopolies and lock-in from the 1990s US DOJ case vs. Microsoft and browser bundling. In that case, MS was giving away a valuable tool, the browser, with their dominant OS locking out other browsers which people had to install (and the third party browsers did not have lower level OS API access). It took many years, but MS was finally forced to unbundle the browser and offer alternatives. Ironically, by the time the case was settled nearly a decade after it started, a startup named Google had already created a viable competitor in Chrome which was rapidly taking share from MS IE. It was simply a better product.

Interestingly, Google Chrome is quasi-open source. Its core was and continues to primarily be developed by Google. As sort of a good will (or good legal strategy post-MS remedy), Google open sourced the code base. This allowed for external developers to understand the workings and improve it…with Google’s blessing. This has mostly benefited Google in keeping the broader community invested in improving Chrome. Few have challenged its supremacy be it open source (Firefox) or commercial (MS IE). And in one of the great turns of irony, Microsoft announced a few years back that their new browser, Edge, would be based on Chromium, the open source Chrome core. At the end of the day, Google maintains some level of control, but the issue of commercial lock-in and platform dominance has largely subsided in the browser arena due to Google’s wise move to open source it. And it was a wise business move as Google, at the time, did not make operating systems. Instead of trying to compete with MS in that arena, it created an open layer on top of Windows which correlated with the explosion of the consumer internet. Microsoft was bogged down from innovating in IE due to the DOJ lawsuit and trying to use it as a wedge to maintain their Windows + Office francise.

This case is instructive for my recommendation on how to deal with the current big platform monopolies we have today. They are the gatekeepers for most consumer commercial internet ventures. If you build a new app, you need to get it approved and pay Apple (App Store) and Google (Play Store). If you want to get traffic to your new website, you need to pay Google (Adsense) and optimize for their search engine (SEO). Alternately, if you want to reach that audience in social you operate on Facebook’s platform. Current estimates are that google has 50%+ of digital ad spend with Facebook at over 25%. That’s concentration of audience. And if you have a product you want to sell, you can build your own .com and deal with the aforementioned digital ad duopoly or sell under Amazon’s ever shifting and arcane platform rules which represents over 50% of e-commerce spend in the US. I should know. I operate several small digital businesses that depend on most of these platforms. You simply hope not to offend your king.

How do we change this? Let’s start with Google as its the one I’ve thought most about and is currently the most advanced from an antitrust standpoint. The solution is to open source its search and ad placement algorithms. The algorithms are a tightly held secret and rumor has it that even search/ad engineers at Google don’t know all the component parts so as not to walk out the door with it (kind of like the Coke formula). Knowledge of this would give advantages to those who want to rank and advertise so its understandable why its closely guarded IP.

By making these key algorithms open source, you level the playing field for access kind of like what Google did with Chrome 20 years ago. Google could remain a shepherd of them like it does Chromium, however, others would be able to implement it and thus have Google search-like results without the requisite commercial relationship (see Apple-Google search payments). First, this increases the algorithm’s impact and refinement (if you can imagine that) but lessens Google’s commercial influence and sole decision making which has, at times, biased toward their other properties (or whomever is paying them the most).

Second, the APIs by which ads are placed against that search algorithm would also be open source and available to other platforms. Currently, Google is the only entity able to place ads against its algorithm. They are the gatekeeper and extract a fee. By opening that up, others can offer placement services and compete for ad space. There is already a large ecosystem of DSPs and other agencies who do this and would be happy to move on step lower in the stack. However, today, they all have to get Google’s blessing (and pay their fee) to place an ad. Moving this to open source ultimately reduces the “cost” to consumers as the Google fee is removed (NOTE: some small fee would have to apply for running the infrastructure but multiple infrastructures could be run).

That said, one major area here that has to be dealt with is setting the rules of the road including content moderation for advertising. Unfortunately, there are these grey and black hat actors out there who try to use this access for nefarious purposes. The good news is that the open source community already has practices in place to deal with this at the code level. Since everything is out in the open and multiple, independent parties, must agree to accept contributions, this dissuades and monitors for insertion of bad things at the technical level. However, how do we do that at the content level? My proposal is to follow the open source model and leverage the existing ad rule setters like the IAB to guard this. A lot more thought needs to go into the details than I will cover here, but there is structure in place. Content moderation in advertising is easier than for consumer posts on social networks since you tend to be dealing with entities vs. anonymous consumers. Yet, I’ve offered one model for that. A foundation, similar to those that guard Linux, could be created for this and even be quasi-governmental.

Google’s argument against this will be about fairness given the billions in R&D they put toward developing this. Well, that’s really what happens in antitrust as they’ve made many times more those billions in the fees they’ve extracted over the years. Ironically, they are the innovator here who created the model here with Chromium (and, to a degree, Android) so they already know how to operate a thriving commercial entity in this manner. Plus, there are many other instances of successful businesses being built around open source (see: RedHat for one).

Besides browsers, there are already other examples of the open source model being a natural regulator against tech platform dominance:

Linux in server operating systems
Email in being distributed with a well-defined open, standard API
W3C for web standards (http, etc)
Android in mobile operating systems

And several other smaller ones.

Biden administration, I’m available if you’d like to talk further 😉 Let’s combine legal minds with unbiased tech operators to get to the best outcomes.

NOTE: This is just scraping at the surface of the complexity but we need a frame of thinking to deal with that complexity. I’ll be thinking about how this approach applies to the rest of the big 4 and a potential macro framework that the US gov’t and others should create to use this going forward for future posts.

Innovation

How Apple Is Organized for Innovation

November 11, 2020November 11, 2020
by Andy

Interesting article on the contrarian org design that Apple maintains even at the scale of well over 100,000 employees: functional instead of divisional. The argument is made that this is somewhat unique due to Apple being in a rapidly evolving, highly technical competitive space. Experts need to lead experts to stay ahead:

It’s easier to get the balance right between an attention to costs and the value added to the user experience when the leaders making decisions are those with deep expertise in their areas rather than general managers being held accountable primarily for meeting numerical targets. Whereas the fundamental principle of a conventional business unit structure is to align accountability and control, the fundamental principle of a functional organization is to align expertise and decision rights.
https://hbr.org/2020/11/how-apple-is-organized-for-innovation

Part of the success at scale is a focus on a few core leadership principles.

Ever since Steve Jobs implemented the functional organization, Apple’s managers at every level, from senior vice president on down, have been expected to possess three key leadership characteristics: deep expertise that allows them to meaningfully engage in all the work being done within their individual functions; immersion in the details of those functions; and a willingness to collaboratively debate other functions during collective decision-making. When managers have these attributes, decisions are made in a coordinated fashion by the people most qualified to make them.
Apple is not a company where general managers oversee managers; rather, it is a company where experts lead experts. The assumption is that it’s easier to train an expert to manage well than to train a manager to be an expert.

Economics

The GOP used a Two Santa Clauses tactic to…

November 8, 2020November 8, 2020
by Andy

This summary really makes you understand the structural political and social conditions we’ve seen in the past 40 years.

The Republican Party has been running a long con on America since Reagan’s inauguration, and somehow our nation’s media has missed it – even though it was announced in The Wall Street Journal in the 1970s and the GOP has clung tenaciously to it ever since. In fact, Republican strategist Jude Wanniski’s 1974 “Two Santa Clauses Theory” has been the main reason why the GOP has succeeded in producing our last two Republican presidents, Bush and Trump (despite losing the popular vote both times). It’s also why Reagan’s economy seemed to be “good.” Here’s how it works, laid it out in simple summary: First, when Republicans control the federal government, and particularly the White House, spend money like a drunken sailor and run up the US debt as far and as fast as possible. This produces three results – it stimulates the economy thus making people think that the GOP can produce a good economy, it raises the debt dramatically, and it makes people think that Republicans are the “tax-cut Santa Claus.”
https://www.salon.com/2018/02/12/thom-hartmann-how-the-gop-used-a-two-santa-clauses-tactic-to-con-america-for-nearly-40-years_partner/

Data

Nassim Taleb calls Nate Silver totally clueless about probability:…

November 4, 2020November 4, 2020
by Andy

Good summation of the onoing Nate Silver/Nassim Taleb battle in this article. However, the main point is an important one applicable more broadly than elections when talking about predictions: certainty. The problem and valid criticism with Silver’s forecasts is that there is no certainty given with them. A margin of error is not a replacement for that. That, coupled with daily changes that, at times, can be dramatic when looked at on a broader time series, makes it misleading.

Whenever you or someone around you is forecasting something, ask for their prediction and what their level of certainty is. For example, if you’re a product manager with a B2B sales team and one of the sales people is trying to influence your product plan by telling you they could land a $10m account if you added this one, otherwise obscure, feature, ask them their level of certainty. If its 80%+, then it probably should be high on the list based on their ROI analysis. If its 50% or lower, maybe not. And make sure they know their name is going to be next to that certainty %.

To paraphrase Taleb, if I tell you an event has a 0% chance of occurring, I cannot change my mind and tell you tomorrow it now has a 50% chance of occurring. Otherwise I shouldn’t have told you it has a 0% chance in the first place. Probability and confidence are inextricably linked, and the number a pollster predicts should encapsulate both. To go to the other extreme, if the uncertainty is extremely high (and therefore confidence low), it does not matter what the polls today are saying. I should give both candidates a 50% chance of winning, because I am admitting the extremely likely possibility that an external event will happen that will invalidate today’s polls. To put it in technical terms, maximum uncertainty implies maximum entropy, and the maximum entropy distribution on the [0, 1] interval is the uniform distribution, which has a mean at .5. The following figure (from this paper) shows the relationship between probability (x-axis) and volatility (y-axis) under a specific option pricing formulation.
http://quant.am/statistics/2020/10/11/taleb-silver-feud/

Culture

Ten Reasons Why Big Firms Stick With Obsolete Management

October 14, 2020October 14, 2020
by Andy

A useful overview of what many of us have been talking about (including in MBA programs) in how changing the culture is the first step is moving away from legacy management strictures. Tech has mostly led this but large tech firms have created their own entrenched bureaucratic cultures.

The criticism of the Business Round Table (BRT) “head fake” statement in 2019 where major company CEOs said that maximizing shareholder value was no longer their sole focus is apt:

Since the declaration was issued, researchers have found no indication of significant change in corporate behavior. Harvard Law Professor Lucian Bebchuk and colleagues found that few of the signatories obtained the approval of their boards to sign the announcement. Nor has there been any apparent effort to change the many processes and practices that reinforce the goal of maximizing shareholder value. And in cases where the firm has had to make a clear choice between shareholders and other stakeholders, these firms have invariably chosen shareholders ahead of other stakeholders. Massive share buybacks that benefit shareholders, particularly executives, continue to flourish, even where there has been a collapse in profits. Bebchuk concludes that the BRT statement was signed “mostly for show.” Indeed, the declaration may be serving as a cover for an even tighter focus on shareholder returns. According to Professor Rajan, “Recent evidence even suggests that the corporations that [signed on to BRT statement] have been more likely to lay off workers in response to the pandemic, and less likely to donate to relief efforts.” The BRT declaration thus appears to have been a head fake, designed to deflect the negative press that 20^th Century management engenders. While the senior executives may use public statements to deflect criticism, their staff can see that all the old processes supporting shareholder value are still in place. So the safest thing for them to do is to go on acting as before.
https://www.forbes.com/sites/stevedenning/2020/10/11/ten-reasons-why-big-firms-stick-with-obsolete-management

MBA program curricula criticism is also appropriate. Most programs are still bathed in 20th century management thinking. This is partially due to their legacy of being stamps of certification for large companies. That has been changing over the past decade as there are fewer company sponsored students. Freethinking around corporate culture change and responsive organizations is happening as we’re doing at NYU Stern but, given academia’s non-hierarchical structure, it takes time to change that culture as well.

We need more business leaders not only saying these things but putting them into practice.

What's tech?

What’s Tech?

September 18, 2020September 18, 2020
by Andy

I’m proud to announce that the Tech Product Management program we’ve been building at NYU Stern was formally announced recently. Lots of work put in and much more to come as we expand. Exciting to be the first TPM degree granting program that I’m aware of.

AI researchers use heartbeat detection to identify deepfake videos

September 5, 2020September 5, 2020
by Andy

The war in creating and detecting deepfakes continues but this is an interesting approach using biological markers to detect them vs. digital ones.

Existing deepfake detection models focus on traditional media forensics methods, like tracking unnatural eyelid movements or distortions at the edge of the face. The first study for detection of unique GAN fingerprints was introduced in 2018. But photoplethysmography (PPG) translates visual cues such as how blood flow causes slight changes in skin color into a human heartbeat. Remote PPG applications are being explored in areas like health care, but PPG is also being used to identify deepfakes because generative models are not currently known to be able to mimic human blood movements.
https://venturebeat.com/2020/09/03/ai-researchers-use-heartbeat-detection-to-identify-deepfake-videos/

Product Management

NYU Stern launches Tech Product Management specialization

September 2, 2020September 2, 2020
by Andy

I’m pleased to announce that our Tech Product Management specialization as part of Stern’s MBA program is now officially launched. This program builds on Stern’s roots in strategy, technology and marketing to be, what we believe, is the first MBA program of its kind in the country. Students go deep on product management techniques and real world scenarios as well as tap into the deep well of digital coursework already offered at Stern. Our graduates are well prepared to use user-centric, iterative PM techniques whether in a tech firm or a more traditional industry transition to the tech model.

https://www.stern.nyu.edu/portal-partners/academic-affairs-advising/specializations/tech-product-management-specialization

Blockchain

Blockchain, the amazing solution for almost nothing

August 24, 2020August 24, 2020
by Andy

I started getting asked about blockchain 5+ years ago. My observation then is the same as it is now: it is fundamentally interesting technology looking for a problem. For most of the proposed solutions, its overkill…by 10x. When simple API integrations and even old fashioned contracts can enforce something just fine, why add all this complexity?

For the cases where blockchain might be justified, it has a major hurdle: all participants must agree, adopt, deploy and maintain a significantly complex piece of software that few understand. How is that attractive? And this is not even touching on those with entrenched interests (read: revenue) dependent on the existing, inefficient system that distributed trust attempts to break down.

I don’t think blockchain is a fancy tech fad but is in the “trough of disillusionment” phase of the hype curve. It will be useful…but in 10 years.

I’m sure I wasn’t the only one who thought: but what is it then, for God’s sake, this whole blockchain thing? And what’s so terribly revolutionary about it? What problem does it solve? That’s why I wrote this article. I can tell you upfront, it’s a bizarre journey to nowhere. I’ve never seen so much incomprehensible jargon to describe so little. I’ve never seen so much bloated bombast fall so flat on closer inspection. And I’ve never seen so many people searching so hard for a problem to go with their solution.
https://thecorrespondent.com/655/blockchain-the-amazing-solution-for-almost-nothing/86649455475-f933fe63

Can data poisoning thwart face recognition systems?

August 4, 2020August 4, 2020
by Andy

Application of data poisoning for ML face recognition systems. Interesting approach. Could this be practically scaled for seamless use by everyone?

Fawkes isn’t intended to keep a facial recognition system like Facebook’s from recognizing someone in a single photo. It’s trying to more broadly corrupt facial recognition systems, performing an algorithmic attack called data poisoning. The researchers said that, ideally, people would start cloaking all the images they uploaded. That would mean a company like Clearview that scrapes those photos wouldn’t be able to create a functioning database, because an unidentified photo of you from the real world wouldn’t match the template of you that Clearview would have built over time from your online photos.
https://www.nytimes.com/2020/08/03/technology/fawkes-tool-protects-photos-from-facial-recognition.html

However, is it already too late to do via technical means and only legislation can regulate this?

But Clearview’s chief executive, Hoan Ton-That, ran a version of my Facebook experiment on the Clearview app and said the technology did not interfere with his system. In fact, he said, his company could use images cloaked by Fawkes to improve its ability to make sense of altered images. “There are billions of unmodified photos on the internet, all on different domain names,” Mr. Ton-That said. “In practice, it’s almost certainly too late to perfect a technology like Fawkes and deploy it at scale.”
https://www.nytimes.com/2020/08/03/technology/fawkes-tool-protects-photos-from-facial-recognition.html

What's tech?

What’s Tech?

July 18, 2020
by Andy

I’m using the summer to dive deep into a couple of new business pursuits:

Launching a line of tick-repellent, comfortable and fashionable clothing called Unbitten with partners. We’re currently transitioning out of our problem-solution fit research into development and hope to have a first run market experiment by Sept.
Taking my MVP of the product management simulation tool that was tested in my spring class and turning into a real SaaS tool that can be used to train and hire product managers more generally. Its called Product Mastery.

Both have tested well.

This is in addition to running two other businesses, teaching and my personal projects and kids needing attention being home all the time.

Those who know me might wonder if I’m violating two of my key rules: a) staying focused and b) keeping it simple. I’ll take the 2nd one first. Both these ventures have had substantial research leading up to them using a solid lean, iterative process knowing that either could be pivoted or killed at any point (and still could be). Each one has clear, simple goals for their early experiments as we deepen time (and dollar) investments.

Focus is a more complex item. I pondered sequencing them. I didn’t because I knew each one would be bursty with times of intense work and times where others were pushing them forward. The main issue would come if they burst at the same time and I said that the apparel business took precedence given there is seasonality for that product.

The reality has been manageable but it reminded my why focus is so important: the ability to have depth of focus for a period of time. Sometimes you just need to sit and think. Having so much to do makes you task oriented. But there are times, especially when researching or experimenting, to glean insights or solve tricky UX, business or build issues.

In addition, personally, I cannot just designate a time to go deep on something and assume I’ll be able to jump into that mode. Context switching and distractions are difficult to overcome. I find that weekends or times when you can have 3 hours with no distractions are best. But you have to be in the mood and mode and that doesn’t work on a planned schedule. August is a big focus month for me so we’ll see how I do.

If you’re looking for an interesting “what new tech will be born out of the work/learn-at-home movement” discussion, try this article about what comes after Zoom. While Zoom has burst upon the scene for a wider audience, this period also showed how limited the UX is. There is interesting stuff being worked on with the most compelling from mmhmm.