Monthly Archives: August 2002

Who Makes Money Here?

It was difficult to come off a month of sitting in Starbucks with my laptop and my wireless broadband connection, working as efficiently as if I were in my home office. Wi-Fi networks are fast, efficient, and ‘best of all’convenient, and I wish more public places had them.

That’s one of the joys of having spent July at the beach only 30 minutes from either San Francisco or the Bay Area.. While I was comfortably away from the Arizona heat, I was able to work with very little loss of productivity. Perhaps one of our clients would have liked to see my face, but I suspect they were just as glad to be rid of me for a while.

I’ve had a wireless network in my home ever since my friend Louis Couto put it in for me (for about six months now), enabling shared Internet connectivity and file-sharing among my three machines. While I like wireless in the house, I *love* it on the road. At home it’s just a way to avoid pulling cable through walls and under carpeting, but in Starbucks it’s a way to liberate one’s self from associating work with any sense of a specific place. To me, that liberation from a place makes the concept of knowledge workers in an information society real.

The wireless service in the Bay Area Starbucks is provided by a company called T-Mobile.T-Mobile, which is actually the Voice Stream network and is owned by Deutsche Telecom, had a press conference last week to announce its rollout. Once again, I guess I was a beta customer, because the launch was August 29th, and I was on the service in July. As of now, there are 1200 wireless ‘Hotspots’ on the T-mobile network, slated to be 2000 by the end of the year, all in Starbucks.

To take advantage of the Starbucks service, I had to become a T-mobile Broadband subscriber. You can pay as you go, for $2.99 a session, or enjoy an unlimited access for $29.99 a month. T-mobile has only deployed in a few cities, including Austin and Boston, rolling out its products in what are generally considered the tech centers. I wonder whether Phoenix or Miami will be last on the list to get broadband in Starbucks’behind, say, Boise.

As convenient as it is, I don’t want to get hooked on this service, because I am afraid ‘they’ (the business model fairies) will take it away from me. I don’t know if they can make any money on these Hotspots as they are now set up, and I remember Ricochet, the wireless modem that attached to your laptop about five years ago. Everyone who used it loved it. But not enough people though it was worthwhile, and the company went under. Although Ricochet never got started in Phoenix, and thus I was never able to get addicted, all my Bay Area friends suffered withdrawal when the network went down for the last time.

Each T-Mobile Hotspot requires a T-1 line into a Starbucks. While this makes the network fast, it also makes it expensive. Doing the math isn’t my strong point, but even a rank amateur can figure this out. Given the current cost of a T-1, each Starbucks would have to have a couple of dozen regular users of the network to make it cost effective. Over 2000 Hotspots: this means you would have to have 50,000 users. The problem is that the same people are on their laptops in Starbucks all the time. I, for instance, would go from a Starbucks in San Jose to one in Pacifica to one in San Francisco all in one day. For my $29.99, I’d get my money’s worth. But I wouldn’t be a new user at each different store.

It will take a long time to get people to pay for wireless access on their laptops, as well as on their cell phones. That’s why HP is also part of the rollout; their PDAs are, theoretically, the device of choice. This is going to be a tricky ‘convergence’ issue, because the cell phone providers are trying to put data on phones while the wireless ISPs are trying to connect your laptop or PDA. It’s a race to capture the customer, because very few are as foolish as I am: I’ve got cable modem, dial up, cellular, and T-mobile. (That’s why you hear from me when I’m in Costa Rica, in mid-air, in Starbucks, and even in the hot tub.)


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Smart Mobs

In the last five years the world has witnessed
simultaneous digital media and Internet revolutions.
It has also begun to understand the impact of media
and telecommunications convergence. The promise of
digital media, internet and mobile communications
has captured the imagination of the public, and
solid business opportunities have been created. No
one would like to go back to the way things were
before; in fact, people eagerly await things like
broadband in their neighborhoods, wireless networks,
and streaming video. People in China are sitting in
Internet cafes chatting with people in Chicago.
People in New Zealand are sending products to
Phoenix. In Europe, teenagers are sending instant
messages to each other over cell phones. Over 800
million teenagers and young adults have been born
into the highest video and audio standard ever
known. Their power to communicate and interact with
us and with each other is enormous. One writer has
labeled this huge wired network as a “smart
Most traditional educational systems fail to
engage smart mobs. American teenagers have to be
told to shut off their cell phones in class, because
what’s happening outside of class, whatever it is,
is always far more important (to them) than what’s
happening inside. And almost no one is studying
these days without headphones, listening to music
while doing math, and perhaps also watching TV.
Despite all the talk about education reform, little
is understood about the convergence of education,
entertainment and technology and how it could work
for us rather than against us, as I believe it is
now.The education sector spends billions of dollars
a year on IT and the significance of digital media
in education is growing. Educators fight about
whether computers really enable education, even as
states like Arizona try to connect every school to
the Internet with broadband. Once bandwidth is
really solved and memory leaps to multiple squared
capacities from what now exists, will we have
ubiquitous video streaming? Will it take the place
of the classroom? It already has. We are
inadvertently spreading information over the
Internet that is much more compelling than what is
taught in our schools: how to make bombs; child
pornography; race hatred — they are all out there
being taught to the global audience of teenagers and
young adults who are willing to listen and learn.
For the past six years, my friend and mentor Paul
Elsner has led a dialogue called The Sedona
Conferences,at which he has tried to gather
educators, Hollywood types, and technologists to
discuss the issue of how education, entertainment
and technology are converging, and what we should do
about it. While the discussion is often in Sedona,
it has also been in Barcelona, and this fall will be
in Dublin, Ireland.
Why Ireland? Because Dublin is creating a Digital
Media District, which includes the Liberties
Learning Initiative, a digital media showcase
demonstrating synergies between learning,
creativity, innovation, technology and community.
Confimed attendees include Europeans, Americans, and
delegates from the United Arab Emirates. They are
coming because in our age, education is not a local
issue of school boards and school books; it’s a
global issue of what philosophical and analytical
systems we want future leaders to embrace. If we
want to make bombs and kill ourselves and each
other, as we seem to be doing in the Middle East,
the current global education system inadvertently
promotes this by failing to offer anything more
compelling to our young people. Institutionalized
education cannot and does not compete with
entertainment and technology, and thus it is
fighting a losing battle for mindshare of the young.
I’m not saying that everyone should hop a plane to
Dublin this October for the Sedona Conference
(although many people probably should); I think I
*am* saying that we need to consider more carefully
what education really *is* in the twenty-first
century, and–�hopefully–�what it *can* be.



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We are on the Carribean side of Costa Rica

We are on the Carribean side of Costa Rica, at a nature retreat called Samasati, on 250 acres of rain forest. It was built four years ago, and is now for sale: $2 million. It’s a steal if you like the weather in Panama, which is just to the south. Panama’s weather , like Costa Rica’s, is good for the skin and requires no moisturizer. When you wash your hair, you don’t need conditioner, either. The makeup would run right off your face if you were foolish enough to wear any. It’s cheap to live here. One of our drivers told me that an American is building a fancy house not far from the beach, with special wood out of the rain forest, and the entire thing cost $100,000.

Good place to retire.

There is no such thing as silence in the rain forest. Someone is awake and speaking at all times of the day. At 6:30PM it’s this bird that sounds like the ones storybooks for children have. “Tweet, tweet,’ he says, “tweet, tweet, tweet.” Right out of Fun with Dick and Jane. Right in the middle of meditation. I meditate on the noise.

In midday the lizards sit in the middle of the paths, defying you to cross. After the rain, it’s the orange frogs (poisonous).

The first night we were here, there was a grasshopper on my bathroom counter. Large and green, he showed no signs of leaving, so I ignored him. Not much I could do about him anyway; he was here first.

Costa Rica itself seems very cheerful, although a native told me that they have just had a new election, and he is waiting for the new president to start fixing the roads. The new president will award a paving contract to his friend’s company. The friend then waits until the roads get really full of potholes, almost impassible, and then he begins fixing them, because he makes more money if the roads are bad. In addition, the contractor gets a percentage up front, which my new friend told me is a disincentive to do a good job. It’s as if he got paid by the pothole.

We do two yoga classes a day, one in the morning and one in the evening.They are highly meditative; both teachers are very thoughtful and very present. This morning David said the next few days would be difficult for us, because we have now seen the jungle and will long for amenities. He wished for a TV, a pizza, and the Diamondbacks. Outside of email, I don’t really miss amenities. As long as I can get somewhere for an hour a day to connect, I’m happy. Yesterday when I checked email, one of my daughters was on IM. It was as if she were in the next room.

This little laptop is the best machine I have ever had. He goes to sleep at night with the push of a button , and comes on in the morning without having to reboot. He has a digital camera built into him, so he automatically takes pictures when I want him to and stores them on the hard drive without any downloading. The software that accompanies him lets me email photos, make take movies, make slide shows, and edit. And the little guy only weighs two pounds. Of course he’s a Sony; a Picturebook. He weighs less than two pounds and has a 20gig hard drive and 256 mb of RAM. The Japanese are so artful at miniaturizing.

The rain is hard and constant. Every now and then there is thunder. The howler monkeys have not spoken yet this morning. However, during a break between hard rains, I heard one bird say to the other “is it over yet?” The other one answered “no,” and then they both went back to sleep.

My good time comes from going to town, talking to the locals, and reading email. We’re on the Carribean side of Costa Rica, which is much less developed and touristy. Only surfers and adventurers come here; the Pacific side has the European influence and the four star hotels. We have Rastafarians and wave seekers. Drugs and prostitutes. Apparently I could rent a guy if I wanted to.

I like Max, the guy who built this place. Max is burned out and wants to go on to something else, but he is a man who has lived in dozens of countries, including Afghanistan before the Russians came in. He thinks he will still use Costa Rica as a base and travel to places he has never seen, like New Zealand. He likes living in Costa Rica, however, because it is politically stable and a good place to do business.

Lucky for me it has been raining at night, hard enough to keep me awake,because it allows me to write this journal. However, it has now rained so much that the road between here and San Jose – the airport – is washed out. If you want to go to the airport, you must take a bus to the washed out part, which is about 30 meters, and then go by boat to the other side, where another bus meets you. This takes some fancy planning. Max says that the road often washes out during the rainy season. Once when he absolutely had to go to San Jose, he paid a guy with a backhoe to carry him over the washed out portions of road in the shovel of the backhoe. He thought it was fun. It will be quite an adventure if we have to do it.



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Ha ha! I hooked you with that title. You thought this piece was going to be an elegy for the stock market slide and what it has done to everyone who had faith in it for the last five years, or a definition of what�s happening in the economy. Or perhaps you thought this would be about my own mood.

Actually, I�m reading a book called Noontime Demon: An Atlas of Depression by Andrew Solomon. I usually try to read the National Book Award and Pulitzer Prize-winning books every year, because it�s the only way I pay homage to my education as a literature major. Andrew Solomon happens to have written this year�s National Book Award winner. In addition, he writes for The New Yorker, a magazine I�ve subscribed to for the past forty years, also in homage to my past. (Grew up in Manhattan � couldn�t you tell?) I was curious what he could have to say about depression, a subject usually left to high school students, poets, and shrinks.

Here�s what he has to say in a nutshell: �we have made but small advances in our understanding of depression at the same time that we have made enormous advances in our treatment of depression. Whether treatment can continue to outstrip insight is hard to say, since that kind of development depends to some extent on luck; and it will take a long time for knowledge to catch up with what we can already do.�

That�s comforting. Everyone who is depressed is a live animal experiment. Especially Andrew Solomon.

Andrew Solomon has done the most courageous thing imaginable: he has taken seriously the Zen proverb �the way out is through� and has studied not only his own depression, but the entire subject and mechanism in the most thorough, readable fashion imaginable. He begins by dissecting his own depressions, and expands out, like a stone that causes ripples in a pool, to the broadest possible focus.

I�ve not finished the book yet, but there are many tidbits worth sharing:

–Although everyone knows SSRIs (Prozac, Zoloft) work, no one knows exactly how. Serotonin levels are a complicated issue, because simply raising or lowering them doesn�t necessarily plunge a person into depression. It�s a much more complicated issue than that, one involving neurotransmitters. One of the worst things about SSRIs is that different people respond to them differently, and often severely depressed people have to try four drugs before finding one that works.

–Everyone knows St. John�s Wort works, too, but since it can�t be patented, there are no controlled studies.

–Talk therapy works as well as medication, but HMOs don�t want to pay for it. Ultimately, pills are cheaper. All therapists are not alike, either. Solomon describes with rich irony his search for a therapist, from the ones who told him to �snap out of it� to the one who covered all her furniture in Saran Wrap and who seemed crazier than he was.

–Dogs with low serotonin levels can become aggressive randomly. All primates can suffer from depression and mask it with anger, just as humans do.

–Each time a person (and probably a dog) goes into a major depression and comes out, he/she is a little more likely to repeat the experience. Depressions �lift,� but people who are really severely depressed are never cured.

–Although in general women are twice as likely to be depressed as men (or to report the fact), Jewish men and women have relatively equal rates of depression.

–Men who beat their wives are often found to be depressed.

–Most SSRIs interfere with REM sleep. Too much REM sleep, or going in and out of it for short periods, is thought to be a factor in depression.

–All SSRIs interfere with sexual function. Most common side effects are loss of libido, impotence, and delayed orgasm. People routinely go off them for this reason, fall back into their depressions, and are harder to cure the next time. Doctors are now prescribing Viagra regularly with SSRIs.

–In Senegal West Africa, there is a ritual treatment for depression called �ndeup,� which involves making a sacrifice to placate the spirits by covering one�s self with the mixed blood of a cock and a ram, dancing to drums, being rubbed in millet by old women, and chanting �leave me be; give me peace; let me do the work of my life and I will never forget you.�

Solomon actually went to West Africa, took part in this ritual, and found it to be quite useful. He thought this was because it involved intimacy, exercise, prayer, and the uplifting of the senses.

The Noontime Demon: An Atlas of Depression is worth reading -�not just for Solomon�s description of trying to carry the live ram in the trunk of a taxi on the way to the ceremony (the cost was lower if you supplied your own ram),and for his version of the ram�s odors,–but for his willingness to try anything.


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The new Sarbanes law

The new Sarbanes law, hurriedly passed by Congress this week to stop the stock market slide, will make it much less comfortable to be a CFO or a CEO, especially in a public company. No longer can companies make loans to directors or executive officers, even to purchase stock in the company. And if a company restates as a result of any misconduct, the CEO and CFO must give back any bonuses they earned during the year following the restatement period and any profits earned from the sale of stock � even if it�s founder�s stock, even if you had no fault in the restatement. A good example is that of a salesman who issues a side letter, which later forces the company to restate. The CEO never knew about the letter, but he�s still responsible.

It will be even less comfortable to sit on the board of such a company. And early stage companies who think they might ever want to go public should begin to act like public companies as soon as possible, forming boards that behave like public company boards– according to a distinguished panel of Silicon Valley attorneys and accountants with whom I breakfasted the day after the law passed.

Board members often used to be �friends of the company,� internal and external executives who almost always rubber-stamped management�s decisions and got to play a few rounds of golf in return.

It�s all different now, especially on boards or committees of boards that deal with audits or compensation. The Sarbanes-Oxley bill says you either have to have an audit committee, or a board that is entirely independent. Companies must have senior financial code of conduct, and there also must be whistleblower procedures in place.

There is an even finer line than ever between how much an audit committee member should know and how much they can rely on management. Average amount of time for audit committee meetings will double to about 20 hours a year, about 7x a year (3 telephonic).

Being on a corporate board, especially on an audit committee, will thus cease to be a sinecure for retirees and become a time-consuming job in which financial literacy is required. Audit committee members must understand and evaluate internal controls and determine whether they are appropriate to achieve the company�s operating, reporting, and compliance objectives. Moreover, audit committees will approve all fees paid to external auditors, which will put them in the position of policing the external auditor.

Better memorize Warren Buffet�s three questions to auditors: If you had prepared these statements, what would you have done differently? If you were an investor, would you consider these statements adequate information to judge an investment? How would you have prepared these statements if you were the CEO?

As a board member, you will now be required to be diligent, be proactive, and ask
tough questions about financial reporting practices � how aggressive or conservative are they? Do the reporting practices put the company at risk? Advice to management is to
demonstrate through words or deeds a commitment to the highest levels of ethics and sound financial reporting practices; integrate risk management into decision-making across the entire company; respond diligently to potential risk indicators; and
understand the effect of the company�s extended enterprise on risk management.

Okay, says the panel, so you have avoided the audit committee, but you are on the compensation committee. Well, here�s what you are faced with: America now hates stock- based compensation, perceiving it as dissociated from long term shareholder interests. Class action lawsuits by institutional investors are settled by putting into effect new compensation and corporate governance rules. That�s why Silicon Valley companies, against their better judgment, will move toward expensing options. They can�t stand the criticism, which comes from old line companies who compensate executives with cash because they have it.

For early stage companies compensation will be a huge problem: how do you attract CEOs and CFOs to this high risk under-compensated position? If you decide to compensate your executives with stock, you must now articulate the justification for it, and every year you must hire compensation consultants and review the CEO�s compensation. But the point will soon be moot: in this market, everyone will want compensation in cash. And although the current scandals are largely not a Silicon Valley phenomenon, the SV model is being penalized in favor of cash-rich old economy companies.

What�s the takeaway from all of this? There will be a lot more paper work, a lot more due diligence on all sides, and a lot less motivation to innovate. And will we stop the few people who want to defraud investors? No way. It�s like airport security. It inconveniences you and me, who get wand-searched six times while the next suicide bomber checks his unscreened bag.



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