Miles To Go.

How long can Ben float?

Years ago I got my start on Wall Street and was assigned to read business plans for a tiny investment banking boutique named Beuret & Co. I saw a lot of crap, but nothing near what the deficit “super committee,” must be analysing this week.

I didn’t have any financial background aside from a knack for knowing what added up and what didn’t, in a spooky kind of way. By my own count, people had wheeled in something like 10,000 plans, which I digested and, in many cases called the hapless entrepreneur and told them why it wouldn’t work, IMHO of course. One habit that I had been to take a little 3×5 piece of scrap paper and staple it to the cover of the plan with some basic facts, just to rememebr what plan I was talking about. What industry. Problem and solution. Stage of development. Unique properties. Raise and use of capital. And profit and loss basics. When I was asked about this deal or that, I had a handy reference, but later in life I realized that, once you get it you rarely needed more than those basics. (See my many references to investing like a child). When asked later in life how I came to read plans so quickly and asses a companies prospects in a flash, my only explanation was that when you see 10,000 of anything wrong by process of elimination you begin to know what is right.

Which is why, when I read this balance sheet and income statement on USA Inc. from Mary Meeker at the end of her Mobile Update, I nearly cried.

It came at the end of her regular update on digital media, now done under the auspices of Kleiner Perkins. She has routinely walked through the basics of income, expense, assets ans liabilities much the way I would have done it sitting in my little cubicle on Wall Street. As an American citizen, listening to this deadpan presentation is a must-do.

“By the standards of any public corporation, USA Inc.’s financials are discouraging,” she writes in an introduction to the report. “True, USA Inc. has many fundamental strengths. On an operating basis (excluding Medicare and Medicaid spending and one-time charges, the federal government’s profit and loss statement is solid, with a 4% median net margin over the last 15 years. But cash flow is deep in the red (by almost $1.3 trillion last year, or ~$11,000 per household) and USA Inc.’s net worth is negative and deteriorating. That net
worth figure includes the present value of unfunded entitlement liabilities but  not hard-to-value assets such as natural resources, the power to tax or mint  currency, or what Treasury calls ‘heritage’ or ‘stewardship assets’ like National Parks. Nevertheless, the trends are clear, and critical warning signs are evident in nearly every data point we examine.”

If the United States of America was a start-up, no one would give it any more money. More likely we would just take it out back and shoot it.  Luckily, USA is not a start-up, but unfortunately it still takes a boatload of faith and capital to run the thing. While unlikely to actually go out of business, the cost of keeping the lights on gets higher and higher as the faith goes lower.

This does not bode well for us. But we can do something about it. If we really try.

More likely, it will get kicked to 2012 instead.

Stay in the chair

I got this from a recent sermon. It works for start ups. Belief is only really real when true or false means life or death, or similar consequences.

Think about this story: a boy is asked to prove a theory to his class and he chooses the pendulum. He rigs up a baseball and a string and ties it to a pivot on a whiteboard. He explains that, because of the effects of friction and gravity, once the pendulum swings, it will never return higher than its original point and eventually, because of those same forces, it will find rest in equilibrium at the middle. Does the class agree? Yes, of course, everyone has studied this and knows it to be true. And so he begins, swinging the ball and watching in move back and forth until yes indeed it settles as expected. Theory proven. Teacher impressed.

But wait, he says… true or false is easy with no stakes.

So, he takes down another pendulum set, this one strung high into the rafters, containing a giant chain and a 30 lb cinderblock capable of crushing a skull if moving at any decent speed. He asks the teacher to sit in a chair very still and measures out the chain so the block comes just shy of the teacher’s nose. And he repeats the theory. The class unanimously agrees, the pendulum won’t swing further than its prior apex. The teacher is less resolute, checking all measurements and possibilities. He reluctantly agrees and sits there motionless as the block swings with a whooshing sounds across the room and crests just shy of the wall opposite his chair. It begins to retrace its path, building momentum and force as it passes the equilibrium point and continues toward him.

The teacher ceases to believe what he himself has taught. He bails out, to the boos of his students.

To test the depth and breadth of your Belief, consider the absolute of True or False means Life or Death. Do you believe in your start-up enough to sit in the chair? Do you belive in your marketing plan? Your next hire? Your big acquisition? Your next partner? Your logo? Your next shareholder loan in order to make payroll? Your ability to pivot?

Before you make your next big start-up step, ask yourself… how long can I stay in the chair?

Errmm, all's well here...

The beatings will continue until morale improves…

That about sums up the Assad’s family strategy for dealing the outbreak of “Arab Spring” in Syrian towns as it continues into “who’s next to Fall, this Fall”.  I think it is a country worth keeping an eye on, though it is very difficult with limited social media permitted.

Fellow Americans know so very little about the little country wedged between Lebanon and Iraq. I know just enough to be dangerous: my trek through the country with Tad Jones gave us a very unique perspective and continues to be the influence for our singular effort to inform our kin with our in-development play, A Line in the Sand. As we’ve said before, the region may look differently if TE Lawrence used twitter. We have tried piecing together Syria’s history enough to understand its future. But we’ve only been noodling it for five years, while they’ve had centuries to create the puzzle. Here’s a few pieces:

First: Syria is a key domino in one of the four big tectonic changes that will define the next generation: access to oil. While they have little oil themselves, they have long been a keystone in the strategic interests of the region, crossing both ethnic and geographic ties. Many of the current conflicts in the region lead back to Damascus, one way or another: Baghdad, Tehran, West Bank, Golan, Beirut, Israel proper, the Palestinian question, etc. etc. The entire region has a long history of being tribal, and Syria has exploited those gaps for centuries.

(for the other three, and a lot more eloquent grasp of geo-politics, see Thomas Friedman and the world’s four ruling bargains): 1) The world’s oil tap is deposing its old regimes, 2) Europe is unravelling as PIIGS spend and Germans save, 3) China’s deliberately undervalued currency and export-led growth keeping the Communist Party’s in power by providing rising living standards, and 4) In America, a credit-consumption-led economy, whereby we maintained a middle class by using steroids (easy credit, subprime mortgages and construction work) and less muscle-building (education, skill-building and innovation).

Second: It’s strategic. because of this  position, the region has been fought over for centuries. Long before there was oil, there were the Crusades whereby the Catholic church essentially invented the jihad, IMHO. Teutonic Knights were promised eternal gratitude and absolution in advance for re-taking Jerusalem and slaughtering anyone that stood in the way. This generally meant Muslims. In support of the thousands that made their way to the Holy Land, huge logistical challenges were met as Hospitallers literally paved the path from France to Palestine with roads, castles, and supporting infrastructure provisions (and became rich in the meantime).  I have personally visited Krak de Chevaliers in Homs and I can attest to the awesomeness of the work as well as the brilliance of the positioning. It was clear the spot was very important and was not going to be given up easily.

Third: Syria is the ultimate state controlled, exterior influenced, family business. Bashar al-Assad is the current president, and was preceded by his father Hafez al-Assad. Bashar’s prior occupation was ophthalmologist, so it was likely his family connections that got him the job. With very few natural resources and de-minimus GDP (#67 thank you, just beating Oman) sometimes it seems like the whole country gets by playing two rivals against another, or one against the middle. Iran and Russia have deep ties, obviously. The former a result of Cold War support, the latter more like neighborly politics. Syria has been under Emergency Law from 1962, effectively suspending most constitutional protections for citizens, and its system of government is considered non-democratic. Many citizens I know live between terror and resignation. If the Arab revolt continues, hope will replace resignation, but terror will continue.

Fourth: Syria has stunningly rich history. The near future is likely to take inspiration from its past. I had the good fortune to tour just a bit of it, including Jerash which was one of the great Roman outposts and remains today one of the finest of Syria’s 50,000 archeological sites. The Crusaders rolled through a thousand years later and left an amazing collage of castles and fortifications. The French have stuck around for the past millennium in the Levant, and it shows. In this century, Lawrence of Arabia organized the tribes of the dessert into revolt against the Turks by promising Damascus as the prize upon victory. For a people raised in the sands of the deserts, there was no more fertile green imaginable. The bait worked, for at least as long as Lawrence’s promises weren’t already undercut by French-English back-handedness. The West is still reaping what was sown in post WW I Syria it’s no wonder Lawrence is called by one biographer ”A Prince of Our Disorder”.  

So, far as I can see, the beatings in Syria will likely continue. It will not fall easily because we have little leverage, outsiders are too interested in the status quo, and the insiders are not interested in anything short of carrying on. Change will depend on those who see the benefits and are willing to risk to consequences of the process. In the meantime, I wish my Syrian friends their safety, peace and a better place than yesterday.

PS: the best damn rose petal jam in the world is served with the french croissants at the Biet al mamlukkka hotel.

There’s been a story circulating among the Funda-gelical crowd that the world is ending on May 21. Sounds about right, based on my week so far.

Anyways, I’ve lived through a few end-of-the-world scenarios [remember Y2K?] and what interests me is the number of ways people come up with businesses to deal with the problem! I’ve heard that people focus best when they are terrorized, (which would explain my ability to make up airtight cover stories, even as my father pulled the Olds ’88 into the gravel driveway). But couple the End of the World with American entrepreneurship and you get brilliant solutions to addressing post-Rapture administrative chores. Here a few of my favorites:

There’s one company that offers to care for the pets of the newly-raptured after they go to heaven…. but please note, “Unfortunately at this time we are not equipped to accommodate all species and must limit our services to dogs, cats, birds, rabbits, and small caged mammals. Please note: we can now offer rescue services for horses, camels, llamas and donkeys in NH,VT, ID and MT”.  Anyways, all caregivers are confirmed atheists, so there is no chance they will be called up when you are. Part with $135 per pet, and you’re covered, not matter what happens. No refunds.

There’s also a handy guide to navigate the post-rapture as well, pulled to gether by Kurt Seland. I looked up Money (there was no section on venture capital: I guess angels take over after the rapture?). Anyways, according to Kurt, hard currency will become obsolete. Currency and coin is expensive to produce, lends itself readily for drug trafficking and, with high tech equipment, is too easily counterfeited. The debit card will become the tool for all personal financial transactions. However, at some point after the rapture, probably right after the two witnesses are killed, everyone will be required to get a mark on their right hand or forehead in order to buy and sell. Do not, do not, do not under any circumstances participate by receiving this mark. All those who receive this mark known as “The Mark of the Beast” are doomed for eternity.

That’s one man’s opinion, anyways. You can probably pick up the book for cheap sometime after May 21st, depending on how things work out.

My point is this (other than getting great SEO on May 21st): people are always coming up with ideas to make a buck. I respect that. See you on the 22nd.

.

Huana AKA Sugar loaf

I was in Deer Valley recently for a Pelion LP meeting and the topic turned to high- altitude climbing. Entrepreneurs that I work with know that I constantly use the experience as an analogly for building companies. (I have analogies for everything, some more crazy than others.  At least, that’s what I’m told).

The basic premise is that, as you get to higher  altitudes, your mind and body play tricks on you. Cognitive powers are altered. Moving carefully and deliberately is important, but so is having a guide to help you move quicker and avoid mis-steps. For a look into real-world mountain climbs, there’s a great book called Into Thin Air by Krakuer that covers it well. (and the rebuttal by Anatoly Bukareev is just as good). As for entrepreneurship, there are very few books about a company’s pending danger and death; most focus on reaching the top. I wrote a bit about that aspect in a prior post called Let ‘em Crash. I personally have been to what I define as” high altitude,” both in climbing and entrepreneurship. (Over 10,000 and over $100M+ in valuation, respectively.) Here’s a hairy story from one climb: entrepreneurs, see if you can pick out the analogie(s).

A trip to Peru brought me to the Machu Picchu lodge and my altitude adjustment was fully set, having begun the trip in Cusco at 11,000 feet. I had climbed Huana Picchu earlier that day, at dawn. I saw the most spectacular sunrise, as many Inca priests had before me (hint, these would be VC’s), and marveled at the symmetry of the Sun Gate and the other temples in the complex. I returned to the lodge for late breakfast. It was there we began talking about Cerro, the peak I had seen obscured by mist from Huana, with a giant flag fluttering at the top. I did some quick calculations and decided I could make it by sundown.

Cerro is the highest immediate peak above Macchu Pichu, but there’s nothing technical about it.  Like most of the Inca trail, .ost of the path is carved rock.  A little slippery at times, and occasionally requiring pull-ups, but mostly the climb is a mental one. I say this because the Urabumba River roars on three sides of the peak, and the drop is about 1,000m, sometimes straight.  After a few thousand feet, the mist socked me in. All there was in front of me were stones, laid by Incas many hundreds of years ago, and vines. And the sound of the river. It became my navigation.  As I heard it down and to my left, I knew I was on the west face; at it switched to my right, I knew I the path had traversed to the west. Half way up, I met two Japanese who were on descent. You alone?, they asked. Yup. Even that small exchange heartened me, not for the guidance, but for the fact someone else would know where I was on the mountain if things got bad. As it was, their estimate was a bit off.

 Ninety minutes later, I came through a skree field of snakestone (awesome green stuff that looks like malachite, but softer) and arrived at a gate of carved rock. It was the first clue I was entering a holy place. From there, I experienced my closest-to-divine moment. The path became flat, and the mist enveloped my feet, such that only my footfall revealed the path in front of me. I was on the spine of the peak, so the sun, or what was left of it, made the way brighter. I noticed orchids, which grow wild at that altitude. And hummingbirds which fluttered around like some  Natural History Museum display. Summit euphoria was taking over, as I heard the flag flapping in the wind in front of me. As I reached it I sat still for twenty minutes, precious time given the daylight. It was total peace. (Have you guessed? This is an exit!) 

When I turned to go, I notice the river roaring about me not on my left or right, but on three sides. With the dimming sun, the mist, the flowers and birds it was truly heaven. The euphoria lasts through the first fifteen minutes of descent, as I passed markings I had made in my mind during the ascent. I allowed myself to gain momentum, feeling free, and frankly as good as a teenager in springtime. Then I mis-stepped. In an instant, I was hurtling down one side of the face, when I instinctively grabbed on of the vines hanging from the face. It caught me, and I quickly recovered, with not a small amount of briars — and a pulse suddenly 2x. I kept rolling, and reached the main Inca village by dusk.

Llamas get around without Merrils

At dinner that night back in Macchu Pichu, one of our guides, Juan —- asked if I had walked or crawled on the spine of Cerro. I told him, and he was surprised. Most people crawl, he said. The spine is only 2m wide, and the drop to the river there is about 800m on the right side, and 1,200m (4,000 feet) on the left. Well, I walked the whole thing… maybe leaning a bit to the right to compensate for the difference…

But the most interesting thing about that climb was what it taught me about the entrepreneurial climb: the height of the ascent is an optional objective… but the return is mandatory!

» Monastario-Cusco
» Machu Pichu Lodge
 and ask for  Juan and Lourdes Sotomayor

Gerry Rafferty, rockin' the 70's thing

and  I don’t know what it is I should do…

Gerry Rafferty had it right, bless his soul. There is less and less in the middle these days, and of course, if you’re a “self made man” as the song says, someone is bound to hit you up, knock you down, or both (full lyrics below for the 70′s lovers).

This song was playing in my head as I was having monthly breakfast with NAE’s Bo Cutter, et al  and listening to MIT prof David Autor reflect on what happened to the middle of America, jobs-wise. This phenomenon, which also takes place in Europe, can be explained by the automation of routine tasks (thanks innovation!) and by patterns of educational attainment: (his words below).

1. The economy is adding jobs at the high end of the wage scale (managers, professionals and technicians) and at the low end (food service, security and personal care workers).
2. The economy is subtracting jobs in the middle of the scale, both white-collar (administrative, sales) and blue-collar (production, fabrication and repair).
3. “Middle-wage, middle-skill” jobs were decimated during The Great Recession (2007-2009) while employment at the ends of the scale held steady (high) or increased (low).
4. Jobs in the middle of the wage scale are characterized by routine tasks. These jobs are easily automated, computerized or performed in other countries. Rapid decline in costs of technology drives automation. Offshoring is properly considered a subset of automation since it involves the same technologies.
5. Jobs at the ends of the scale are difficult to automate. High earners need advanced education, intuition, analytical and persuasive skills. Low earners need adaptability, mobility and language skills.

News that Watson wiped the floor with all prior Jeopardy legends would seem to support the theory of what’s sure to come: machines gut the middle class jobs. But perhaps the most fascinating of all this is the irony. We as entrepreneurs are exhorted to innovate, create jobs, create wealth, and hopefully invest it back into the economy (net of taxes). But  David’s data suggests that innovating and creating high-skilled jobs will, in the long run, serve to marginalize the skills in the middle, which are easily automated.

His policy recommendations were:  Encourage higher education and begin preparation early. Emphasize re-training programs to boost skills in the low wage sector. Invest in R&D and infrastructure to create new jobs.

I would add to that: Learn to learn, because with the speed of innovation it doesn’t take much to feel old and useless.

Here’s the rest from Gerry Rafferty and Steelers Wheel:

Yes I’m stuck in the middle with you,

And I’m wondering what it is I should do,
It’s so hard to keep this smile from my face,
Losing control, yeah, I’m all over the place,
Clowns to the left of me, Jokers to the right,
Here I am, stuck in the middle with you.

Well you started out with nothing,
And you’re proud that you’re a self made man,
And your friends, they all come crawlin,
Slap you on the back and say,
Please…. Please…..

Megan... got me thinking

Not long ago, I was in the animal hospital with the last and most lively of my Rottweiler gang, Megan.

She was closing in on the happy hunting grounds and I was there to say when. Balancing dignity with a finances, even for canine care, is not easy. With each deferral of the inevitable came the bill; in this case about $1k a day for superior care and technology (I could have opted for more technology and cost, but kept it practical, at least I thought). When it was over, we spent more in the final four days of care than we did in the preceding 11 years. For virtually the same result. A wonderful experience with a great dog that gave us a ton of happiness and four days of pain.

Thats when this came across my smartphone:

The New York Times Prime Number 197: The amount, in thousands of dollars, that the typical married couple at age 65 should expect to spend on uninsured health care costs over the rest of their lives, according to the Center for Retirement Research at Boston College. This total includes insurance premiums, out-of-pocket costs and home health care costs, but it does not include nursing home care. Including the cost of nursing home care, typical lifetime health care costs shoot up to $260,000, the center estimated.

Ok, people are not dogs. And vice versa. For one thing, people have a say in their care when conscious, while dogs can only rely on the incredible messages in their eyes. But for me, it leaves a good lesson in dong what is right, responsible , and sensible.

So whats it all about? In a word, hospice. For dogs and people.

It’s the ability to realize end of life and deal with it in dignity and balance. To live lives that are not based on the number of breaths we take, but the number of times our breath is taken away. And to not selfishly chase the “miracle “of a few more days at the cost of a lifetime of savings wasted. There is a wonderful hospice movement that continues to grow in scope and service in the US. I think it is important and deserves support and fostering.

Look, I know well the incredible boil of issues that is healthcare in America today. This is just one stab at a part of the problem. But it’s a good stab I think. Love to know what others think…

A uniformed military officer is approaching me quickly in the Jeddah, Saudi Arabia airport thrusting an A-4 envelope in the air and speaking way more Arabic than Rosetta Stone has managed to teach me so far. Our local agent is gesturing at me, but I can’t quite make out why. I stand my ground and try to keep my cool. I notice his weapon is holstered, his beret is pretty cool looking, and he is sweating in the 72 air conditioning.

Twelve hours later, I am in a London café having tea and shisha with a new friend named Ahmed, and the smile in the photo pretty much says it all.

What was said and done in the interim says a lot for what I have come to believe in about our world and its people. Basically, the message is this: if people are willing to do a teaspoon of good when they can, one day, quite unexpectedly, the scale will tip the right way. Here’s the rest of the teaspoon?

Mohammed was an Air Force officer, but I chose not to ask him why he was here. He asked the first question, and in the interest of time I’ll use the kings English instead of trying to re-create the pigeon Arabic/English/hand gestures we were using. Will you take this envelope to London with you? Oh boy. Heathrow hasn’t exactly been on low threat level lately. And I’m walking in with what? Well, turns out these were the passports for a small young family. Saudi law requires a woman to be accompanied by a man to enter the country, or prove she is a family member. So, if she comes to visit for the holidays before he does she must bring his passport with him. Problem is, if dad wants to follow before fedex can deliver, he’s outta luck.

So, on the spot, as the last passenger to board the flight for London I had to make the call. My downside appeared to be some punishment for bringing passports into London. Or worse, demonstrating my lack of trust in plain view of a local business associate when one of his countrymen was in need. It had to boil down to the simplest base terms: do a teaspoon of good or turn my back.

My actions would likely shocked 99% of Saudis (that I would even bother) and 99.9% of Americans (that I would have the guts), but amidst all the noisy conflicts covered so completely by the media on our shrinking globe, it’s the people that make peace. And personally, the best way to prove that to yourself is to go meet a few. Spending a few minutes with Ahmed seemed to prove that rule once again.

Note: Many of you know of our journey through the Middle East in April, and some know of our plans to return and expand the franchise of what we have learned (or been taught) there.