Niall Ferguson in Davos on Credit Crisis

Live-blogging transcript from a video I watched of Niall at Davos regarding the credit crunch and the future.

Crisis not due to simple "bankers are greedy", much more complex and nuanced than that!

The crisis had 6 dimensions:
1. Monetary System became comprimised by the excessive leverage on company balance sheets.  Investment Banks were leverage 25 to 1 (debt to capital)

2. Contamination of Bond Market: fatality corrupted by series of financial inventions.  Synthetic credit and collateralised debt obligations: only 12 AAA rated institutions prior to credit crisis, yet 64,000 AAA investement vehicles.  Defaults in subprime exposed the fraudulence in creidt derivative market.

3. Monetary Policy: Fed kept federal funds rate (short term) at below 1% while housing was increasing by 20% year-on-year.  Greenspan believed his own press.  "Fed doesnt need to worry about assets prices" argued economists.  Fed should focus on core consumer inflation.  "Markets will regulate themselves".

4. Corruption of Insurance:  Exposion of Credit Default Swaps allowed companies like AIG an opportunity to build businesses in uncertainty, not risk, is what they were good at.  False sense of security

5. Over-hyped House Push: both parties liable for pushing this agenda.  Politicians to blame.  They regulataed Freddie and Fannie

6.  Chinmerica: rleationship between China and Amercia.  Chinese did saving, US spending; chinese exporting, US importing; China all the invetsing, US all the consuming.  If it hadnt been Chinese accumulation of US debt $2tn, the bubble wouldnt have been so severe.

So why didnt this cause another "Great Depression"?
By some measures it was actually worse but it was prevented because of:
i) Monetary Policy - Fed doubled size of its balance sheet by buying toxic assets (Niall thinks this one is most important)
ii) Fiscal Policy - Treasury increasing deficit in true Keynesian

Krugman reckons its deficits that saved the world, Niall thinks it might sink the global economy.  Makes the agurment that deficits of 90% of GDP could slow growth and increase risk of inflation.

Public debt run up is unprecedented in peace time.  CBO say debt will 90% of GDP in 2039 (optimisstic) and 2021 (pessimistic).

Key question: how will bond investors react to explosion of debt?  China has put a floor on the price of treasuries in last 2 years.  Will they continue to do this.  If bond market sentiment on US treasuries changes and yields rise, it will start crushing US recovery.

UK and Ireland at sever risk of this already.  Greek, Portuguese, Spain already"basket" case.  Thus, the Eurozone will likely keep bond traders from moving out of US debt any time soon.

Developing nations look well poised to benefit from this Anglo Crisis.  It remains to be seen which developing nations these will be.

Excessive debt is worry, crisis in Eurozone because of debt, slowdown in China and clash of civilisations between West and Islam nations is still very real, and could send a geopolitical shock greater than the financial crisis.

SxSW - Fire Alarms, Billionaires, Porn, Crowdfunding and Public Speaking (Part One)

Right, two days in and I am super happy with this conference thus far.  Here is what has been happening in the 3 days I have been here, in no particular order:

1.  the first session I went to was #battleforyourtv - this was an awesome verbal battle between Mark Cuban (sold his broadcast.com for almost $6bn, now runs HDNet) and internet legend Avner Ronen (founder of Boxee).  Essentially, Cuban asserted there is no business model for HDTV across the Internet - a post-event blogpost summarising his points well.   It had been brewing for about a year via blogposts between the two.  The argument got heated at times with Cuban resorting to Argument by Dismissal (by being richer - Cuban made the point that Avner hasnt made any revenue yet).  To his credit, Avner stayed cool (are all Israeli's this calm?) and won the crowd over.  But as Cuban said, the crowd was pretty self-selective (internet nerds), so they were likely to side with Avner's point of view (free TV)... Half way through there was the fire alarm and this classic tweet by Andy Volk (@downtempo):

Needless to say, we sat still.  Good reviews here and here.

2. Then there was the Battledecks session fed back to me by Ivo.  As described by SxSW, it is:

Battledecks is a fast-paced, fun, laugh riot where "contestants" have to put together a presentation on the fly as slides are randomly projected for their confusion and the delight of the audience

It sounds like something we should do back in SA.  Maybe at a 27Dinner.   I loved this porno tweet about battledecks, forwarded to me by Sarah Blue (@superblue):

3. We then had our panel on CrowdFunding, set up by the indomitable Eve (@eved).  We had almost 60 people there and of those we had about 10 questions from 6 people.  A presentations success is measured in terms of its interaction in my view, and 10% is very high, so hopefully that meant it was successful.  There was a nice review of it written here by Dan Oshinsky (@danoshinsky).  Although it was Heather Ford who spoke of the "ubuntu" meaning, not me.  That would be ironic:  Aussie tells crowd about South African ubuntu.

4. The Public Speaking session with Tim Sanders (@sandersays) was excellent.  He spoke of the "deliverables" (he gives these all the time, great MO in my view) on how to become a $15k-per-gig public speaker.  He mentioned there we two ways to get into this league: write a book taking a contrarian view on something or being very skilled at one niche' topic and write about it in a fresh manner.  (He rightly pointed out you cant orchestrate a tier 1 $60k-a-gig plus career a'la Clinton, Gladwell, Seinfeld, unless you have a blockbuster).  Bottom line: you need to write a book to get into this league.)  He did mention you can publish a serialised blog on a popular topic in place of a book and even get published this way, but it is very rare.  Other things you need: a 5 to 20 minute DVD that is done professionally of you speaking at a gig.  Podcasts are a good part of a CV and easy to do, he said.  You need to the register with a "Bureau" (translation: talent scouts that put together speaking arrangements for events - not sure what they are called in South Africa).

History Repeats: Economic Surges of Modern Times

"When you go back and read contemporary accounts of life in the 1880s and ’90s, you could replace the words steamships and telegraph with computers and Internet and the text would sound completely modern" Carlota Perez

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The first surge was the classic Industrial Revolution that started in 1771. It brought mechanization, factories, and canals. The second, centered in Victorian England, began around 1829: the age of steam engines, coal, and iron railways. The third was the age of steel and heavy engineering. Civil, electrical, chemical, and naval engineering developed impetuously then.

Around the mid-1870s. That was when cheap Bessemer steel made possible transcontinental railways, major tunnels and bridges, and rapid steamship lines. Those, along with telegraphy, led to the first great globalization — which, by the way, was coordinated by the British Central Bank and the City of London. With those technologies, Argentina, Australia, and others in the Southern Hemisphere could send grain and meat in refrigerated ships to the northern winter markets.

In the fourth surge, which started with Henry Ford’s Model T in 1908, the center of gravity shifted to America. This was the age of oil, mass production, and the automobile. Our present, fifth, surge, the age of information technology and telecommunications, began in 1971 with Intel’s microprocessor. If the historical pattern holds, this surge still has 20 to 30 years left to realize its potential.

I could guess that the next wave will involve biotechnology, bioelectronics, nanotechnology, and new materials. But those are still in gestation, just like the transistor of the 1950s represented the microprocessor in gestation

Investment Banker to The Valley gives his outlook - Frank Quattrone

So what was Quattrone’s market outlook for 2010?

—Quattrone told the venture capital partners in the audience, “Guys, if you were a stock, I’d short you.” While the mid-1990s were good years for technology IPOs, he said too many venture-backed companies that went public after 1998 have cratered. “Basically every [VC fund] vintage since 1998 has been negative,” Quattrone said. If you’re a limited partner investor, such as a university endowment, that’s invested in a post-1998 venture fund, Quattrone said, “This is not an asset class. This is a train wreck.”

—Because of the dismal record of IPOs after 1998, Quattrone said, there’s a perception that venture-backed companies have to be much bigger and more mature before registering to go public. If a venture-backed company could previously go public with $100 million in annual revenue, Quattrone says now it has to be $150 million to $200 million. Deal size also must be much bigger. “IPOs were done all the time for under $40 million in the ’80s and ’90s,” Quattrone said, “but nobody wants to do that any more.”

—”The whole approach to marketing and allocating IPOs has to change,” Quattrone said. “The mutual funds that are committed to being long-term holders of the stock—the T. Rowe Prices and the Neuberger Berman Guardians who really understand tech—should get more.”

—The IPO market has been closed for so long that hundreds of venture-backed companies are waiting to go public, “so there is an enormous backlog,” and Quattrone said he expects to see a stampede among the less-attractive companies to go public as soon as possible. “The very best are not the ones that rush to get out,” Quattrone said. The logical implication, which Quattrone didn’t say explicitly, is that disappointing debuts in the first wave of new IPOs could end up tainting the market. But then, aren’t the bankers supposed to have some responsibility for that?

the full story, plus interesting comments from the interviewer are here: http://bit.ly/brXlwa

Gold's three "M's"

Gold's three "M's"

By Freeman from Human Action

I’m still amazed by how little people understand of gold. 

It is clearly a massive indication on just how effective the government propaganda machines have been in the era of worthless, backed-by-nothing paper.  But gold is now starting to stand up and speak for itself.  Gold prices expressed in paper currency terms will keep rising, occasionally suffering sell-offs, but marching steadily higher nonetheless.  Can we reach $10,000/oz?  Yes.  Can we go even higher than that?  You bet.  Voltaire said in the late 18th Century that all paper currency eventually tends to its intrinsic value, zero, and when the US dollar’s debt metrics finally topple over, the 80-year experiment with un-backed pieces of paper will come to an end.

To fully understand gold and why its price expressed in paper currencies must keep rising, you need to know gold’s three “M’s”: Money, Manipulation, and Misunderstanding.

Money
Gold is money and money is gold.  That’s the first M you need to get because it really is everything – the beginning and end of any discussion on gold.  The other two M’s follow from this fact.  Not only is gold real money, but all other forms of money used in history have been a distant second.  Fiat paper currency is at best a money substitute, but nowhere close to real money.

Why is real money gold, and not stones, seashells, cattle or paper notes?  Gold (and silver) has been proven by history and thousands of years of trial and many errors to be the best substance to fulfill the role of a medium of exchange, store of value, and unit of account.  People have tried to use cattle, but it was not divisible, and neither was it uniform, durable, or portable enough to withstand the rigorous demands of the market for money.  They’ve tried seashells, until someone figured out that a trip to the beach was lucrative and destroyed its value.  Governments tried to mint less precious metal such as copper or other alloys, but could never ensure enough scarcity of supply to maintain value, rid the system of forgery, or concentrate enough value in the coins to make the money conveniently portable.  Governments have tried paper, but it was too easy to print out of thin air and countless regimes from the Weimar Republic to Mugabe’s Zimbabwe have utterly destroyed paper’s value.

Throughout this process of men, leaders, empires and governments ignoring gold as real money, vast wealth has been destroyed, transferred or confiscated unjustly, particularly as the state has tried to foist its chosen form of money on the people.  Time and again, year in year out, century in century out, millennium in millennium out, the people choose gold as money.

Manipulation
Because gold is real money, it is the prime target of state, government or central bank manipulation.  “Give me control of a nation’s money” Mayer Amschel Rothschild famously said in the 18th Century, “and I care not who makes her laws.”

From Roosevelt in the 1930’s to Nixon’s supposed final nail in gold’s coffin in 1971, the state quickly took total control of money, fully unhinging it from any solid backing, and embarked on total manipulation of gold.

The market’s verdict was swift, and by the end of the ‘70’s the gold price expressed in US dollars and other currencies was exponentially higher than the $35/oz in 1970.  By 1980 the situation had become untenable.  The only way for governments to ‘prove’ that their money was good enough was to raise interest rates in a Draconian fashion (US interest rates jumped to 20% under Regan/Volker), making the opportunity cost of holding gold prohibitive to doing so, and selling or leasing their vault gold into the market.

The period 1981 to 2001 was such a time of manipulation as governments tried to restore the perception of paper currency, and diminish the perception of gold.  Since 2001 gold has broken out of its manipulative shackles, and now central Banks have far less gold in their vaults while individual gold ownership is climbing.  The scope for manipulation is fading, but people have to understand that governments will always try to manipulate, control, and monopolise gold because it is real money.

Misunderstanding
Lack of knowledge and understanding of the first two “M’s” is why gold remains the most misunderstood good.  Financial analysts, investors, fund managers, shop keepers and paupers all have a similar understanding of gold – next to nothing.  If they claim to understand the metal, it’s usually a misunderstanding.

Most people I engage with on the subject usually dismiss gold as a barbarous relic, think buyers of gold are silly, and think the current bull market is driven simply by sentiment.

Wrong. 

Gold’s current bull run is no less than the market’s fundamental verdict on failing paper currency.  It is mankind’s perpetual and ancient vote for real money.  It is the ever-approaching triumph of market over state.  It is a quest for sound exchange and a just, accurate store of value.

That so few people realise this still means that the gold price expressed in paper currency has a lot further to climb.



See HumanAction website for more insights like this

Elements of Successful Startups

Elements of Sustainable Companies

Start-ups with these characteristics have the best chance of becoming enduring companies. We like to partner with start-ups that have:

Clarity of Purpose
Summarize the company's business on the back of a business card.

Large Markets
Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop.

Rich Customers
Target customers who will move fast and pay a premium for a unique offering.

Focus
Customers will only buy a simple product with a singular value proposition.

Pain Killers
Pick the one thing that is of burning importance to the customer then delight them with a compelling solution.

Think Differently
Constantly challenge conventional wisdom. Take the contrarian route. Create novel solutions. Outwit the competition.

Team DNA
A company’s DNA is set in the first 90 days. All team members are the smartest or most clever in their domain. "A" level founders attract an "A" level team.

Agility
Stealth and speed will usually help beat-out large companies.

Frugality
Focus spending on what's critical. Spend only on the priorities and maximize profitability.

Inferno
Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower.

Source: http://www.sequoiacap.com/ - one of Silicon Valley's most successful venture capital companies

Eric Schmidt - Gartner Symposium/ITxpo Orlando 2009

I was referred to the above video of Eric Schmidt interviewed at a recent Gartner Conference by friend Brian Pinnock... he also kindly summarised the 45 minute video for the GMs at IS.... here are his notes:


Main key point is that Google is going to be a major competitor for ISPs in desktop-to-cloud apps especially e-mail. They are just going to get incrementally better at this.



Enterprise Story
• CIOs are trapped in inflexible 1980s architectures.
• Inherited from previous CIOs
• Vendor support of these architectures is good but internal customers are complaining that they cant get stuff done particularly mobile devices
• This inflexibility hampers their ability to provide seamless experience especially for mobile-to-fixed apps
• Consumer solutions are more flexible and provide better user satisfaction.
• Browser based solutions are inherently insecure – but Chrome allows each tab to be in its own address space
• Address space separation improves security.
• Certificate replication & other security features will make google apps more secure outside the firewall than traditional apps.
• Consumer wants a seamless experience but very hard to secure
• Old architectures just cant be secured in the same way as new architectures
• Enterprise is a huge priority for Google.
• Unlimited hiring budget for engineering in this space.
• Its the next big business that Google is looking at along with their new display business.
• Prices are $50 per person per year not advertising driven
• This is because of tiered support and SLAs
• But enterprises don’t want advertising supported enterprise apps
• Expect more features in the calendar space.
• Google Wave move from consumer to enterprise focus
• Wave aimed at corporate collaboration space
• Chrome OS is free and delivered on Intel and ARM platforms (not just for netbooks which are only the initial target)
• Idea is to bring total cost of ownership hardware and software costs way down
• In less than a year enterprises could bring costs for (at least some) of their internal customers down by a factor of 5x by using Netbooks + ChromeOS + Cloud apps + Hosted/Virtual for core apps
• “Couple of million” companies using google apps now
• Biggest is 35,000 seats but rest is mostly small and/or universities
• Google Q3 earnings = $500 million from this space
• Core revenue in enterprise is growing faster than advertising revenue!
• Gmail’s growth is gaining share from everyone else
• Google eats their own dogfood so use their own apps and e-mail
• Enterprise sales call....

1. price is a non issue because google is always cheaper
2. migration is the issue (but there are migration tools now)
3. sometimes lack of features is an issue (but they have a roadmap)
   

• Enterprises want sophisticated document management, storage, replication etc.
• Not all supported by google today but will be
• Both Wave and ChromeOS not “shipping” yet but will be available in a year
• Netbook = pure cloud computing model because there’s no hard drive


Cloud Story
• Cloud can make things cheaper because of scale
• Cloud can also do scale way above what Enterprises can achieve on their own
• More control of unstructured (on hard disk data)
• HTML5 = standards version of Google gears i.e. Offline/local caching
• Need this to solve the airline problem i.e. Netbooks are sometimes offline
• Trust architecture is crucial in order to solve security issues
• Google will have a generic trust architecture
• 3rd parties are likely to solve the legal architecture problems e.g. HPPA, PIC etc
• Need to build bridges between clouds (Data Translation)
• Don’t trap data in clouds - “Data Liberation Front”
• Lots of scope for 3rd parties to add value to Google cloud


Internet Story
• Internet will be more non English. Will be Chinese.
• Mobility will be dependent on uptake of mobile access.
• 5 years is a factor of 10 in Moore’s Law
• In 5 years BB networks will be well above 100Mbps in performance in western world
• Technical distinctions between TV, radio and internet will disappear
• Huge volume of high quality content on YouTube
• Twitter, Facebook etc realtime search needs to be part of Google.
• Google can do that but its hard to rank realtime info ala pagerank (Twitterrank)
• Most people information will be gotten from other people rather than traditional sources

How do you rank positioning information? Google can.

What is this Twitter thing?

I was asked to write an insert for Brainstorm a while ago on "what twitter means for me", and just recently I have some really smart people ask me too. Like lots of completely new tools it is sometimes hard to articulate on the fly. Here is the Brainstorm post, hopefully it helps...

Like most tools, it depends on how you use it. Many people use it as the ideal timewaster in the name of communication. This I call “noise”. Noise, like spam, can ruin the experience of twitter. I spend a great deal of time policing whom I follow to ensure my “signal to noise” ratio is very high. As such, twitter is invaluable to me. It has replaced my RSS feed (a web feed with writers and websites I wanted to hear from) and I have been able to opt out of most of the email subscriptions. The net result is that the amount of noise coming into my inbox is much, much less. This is a good thing, if only to help manage work anxiety.

But it is more than this. It is also a valuable tool to receive good information because it is qualified, by people I value, with an attached, albeit implied, referral. Thus the information has this other dimension of value. And referrals are the most powerful form of marketing.

Lastly, twitter is a great networking tool. Again, at a more subtle level, the people you follow are a vote for that person in most cases. Yes there are those that follow everyone in return for followers themselves. This kind of popularity quest is actually a good sign that you shouldn’t follow that person as they don’t value the real power of twitter, by implication are likely to be "noisy". Those that follow fewer people generally have a more powerful voice and it is these that implicitly pass on a more powerful referral when they speak.

Books I am loving...

Was asked by a friend what the top 5 books I have recently read are, so figured I would publish the response (I only have 4 for now):

1. Managing Humans - by Michael Lopp - aka @rands on twitter. Every single person who has to manage people should read this book. You can read about 50% of it on his blog, but I recommend a purchase and keeping it on your bookshelves for reference.

2. Second is Nothing - by Alan Knott-Craig - a riveting read from a guy I never particularly liked nor respected prior to reading this. This is a fascinating account of how the mobile telephone industry in South Africa was born.

3. How the Mighty Fall - by Jim Collins - Jim is a really smart guy and this book stems for some very good research. very timely. did you know Jim spends 50% of his time being "creative" - he literally blocks out that amount of time to think, apply his mind, and introspect. If you are tight, this is a pretty good review in businessweek: http://bit.ly/zn6SX


4. Snowball - the Warren Buffett biography by Alice Schroder. This is a fascinating account of the greatest investor of all time. Alice, a former Morgan Stanley MD was entrusted by Buffett after they conducted research together. Interestingly, he has not spoken to her since the release of the book! Here is a short clip from Alice on the book: http://bit.ly/1FEJCT

Did You Know 4.0

Social Media and convergence

Internetix: Voice Everywhere

Presentation I gave at this year's Internetix, Internet Solution's flagship client conference that discusses tech and trends.

Voice Everywhere

View more presentations from Justin Spratt.

Justin Spratt -- Animated Summary #internetix

kudos: Roy Blumenthal, Internetix

Financing Startups

I presented at the AltConference, organised by Paul Jacobson on Saturday, at the weekend. Below is the presentation I gave.

In a nutshell:
1. South Africa has the right factors for internet startups;
2. Tech startups are the best way for social upliftment in SA and
3. Incubators for startups appear to be the best way to help with this

We set up ISLabs to this affect.

Altconf - Financing Startups

View more documents from Justin Spratt.

Leadership

Abraham Lincoln: One of the greatest leaders of the modern world. Highly recommend reading about this guy if leadership interests you.

I just had to write to someone about what I though leadership was about... It is a work in progress and would love feedback, but here are my initial thoughts:

1. People: Hiring the right talent - if you get this wrong, none of the rest matters. Leadership is all about people
   
2. Alignment: Getting that talent both strategically (long term) and tactically (short term / operational) aligned
   
3. Enabler: creating the environment for that talent to perform – setting in motion processes that allow employees to do less administrative tasks and more value enhancing work. Also soft issues, like allowing them to fail
   
4. Protector: protecting them from unnecessary noise (politics, process issues, escalations, etc.)
5. Candour: Being as candid as possible. Most leadership manifestos disagree with this, but I am a firm believer in even sharing the bad news because that wins trust. Also, dont be a robot - wear you heart on your sleeve
   
6. Wins: Acknowledge the wins / "smell the roses" – this is important because it sends a powerful message that this is what we are all aiming for
   

Do you like Bacn?

Not the bacon we eat. Although I do enjoy that too, just not as much as Denis Leary on Letterman! Email Bacn is what I am talking about.

[Non-Geeks: Right, so for those who dont know bacn is a form of email that you really want to read (solicited / subscribed to), but are not time critical, actionable emails (read: work related).]

So once a week I try and grab some time and catch up on my Bacn, essentially subscriptions to Wall Street Journal, Economist, TechCrunch, WebWare, MIT Tech Report, Garr Reynolds Presentation Zen, et. al. All really edifying stuff.

So here is some stuff I learned in my weekly bacn session:

1. "The Medium is the Message" - relationship by which the medium influences how the message is perceived, ie, the form of the medium embeds itself in the message. This is really interesting when you consider the new forms of medium we use to communicate, not least of which is Twitter.

The above was coined by Marshall McLuhan, who also coined the interesting term "global village", describing how the world has contracted due to electric technology.


2. Milton Friedman (Economic God and one of my personal heroes) said this about government institutions: "If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand."




3. Read this really interesting piece on Y-Combinator (Paul Graham incubator): http://www.newsweek.com/id/34734/output/print

4. Quote from Paul Buchheit (founder of Gmail, Google's "do no evil", FriendFeed), regarding start-ups: "it's better to make a few people really happy than to make a lot of people semi-happy"

5. Joe Kraus (founder Excite): "Merely measuring something has an uncanny tendency to improve it"

Daniel Hannan MEP: The devalued Prime Minister of a devalued Government

"toughest Argus in history"

"toughest argus in history" according to David Bellairs, co-director of race. Only 25,000 of 35,000 entrants pitched to ride.

you know you have problems when you are getting blown off your bike in the first 50 metres! Wind gusts of up to 140kms, average wind speed of 60kms and head and cross winds for 70% of race.

Scaffolding, toilets and marquees blown over. The number of serious injuries increased to 71, with 35 of those entrants having to be hospitalised. Carnage defines the 2009 race.

My fall came on chappies, about a third of the way down. Scary stuff.

Outilers - Malcolm Gladwell (book review)

David Brooks of the NYT sums the book up fairly well, albeit discounting the massive amount of time required to be "successful" - one of MG's central precepts: "Seems at first glance to be a description of exceptionally talented individuals. But in fact, it’s another book about deep patterns. Exceptionally successful people are not lone pioneers who created their own success, he argues. They are the lucky beneficiaries of social arrangements."

Gladwell deals with the topic of success in this book. His thesis is that success is more about opportunity and less about talent than we think. His book talks about this opportunity and hard work that is requisite for success, as well the nuances in between.

As much as we as humans love the story about the single person, who against the odds, rose up and conquered, Gladwell contends that this is rarely the case. In MBA parlance this is called the fundamental attribution error - oversubscribing success to one or few factors.

As a corollary, he also dispels the myth that genetics play a large role in a person's success. He highlights examples of IQ; date of birth; Asian math ability, amongst others.

The first rule of success he uncovers is the "10,000 hour" rule. He describes that all so-called virtuosos have in fact done at least 10,000 hours of practice or work in their given field, equivalent to roughly 10 years (about 1,000 hours a year). He cites Bill Joy (wrote one of the better versions of unix, then co-founded Sun and later wrote Java) and Bill Gates.

(I cite one of my own rules of success here: "Sustained Focused Attention" - those that can keep focused while amongst a mass of stimuli, will inevitably have a greater chance of success in that given field.)

On IQ, he argues that anything above 120 is mostly irrelevant and proceeds to outline the story of Christopher Langan, introduced as America's "smartest person", who has a tested IQ of almost 200, someone who seemingly should have seen immeasurable success, yet is still working on an as yet unpublished theory at age 50, after having done blue collar work much of his life. He was kicked out of varsity and struggled to fit into society's strictures that would have allowed him to shine. Gladwell talks about his lack of social awareness or "practical intelligence" as the reason for his inability to thrive. So although IQ smart, he was lacking an essential ingredient needed to be successful in society. The takeaway here is: any IQ of 120 or above is "smart enough" to be successful.

(Interestingly, most estimates put heredity of IQ at only around 50%.)

Also interesting, Gladwell goes onto discuss the study of genius by a Lewis Terman, who was inspired to study genius by a "diamond in the rough" called Henry Cowell - an unschooled youth who taught himself the piano and wrote incredible pieces of music while working as janitor at school where the piano was housed.

Terman went on to produce "Genetic Studies of Genius" (thick red volumes) and the geniuses he studied went on to be called his "Termites". His thesis was that we should look to these gifted individuals as the leaders of our society and that advance science, art, and so on. Much of Terman's ideas remain central to way in which we view success - Google and Microsoft's hiring tests are examples of this.

Unfortunately for Terman, by the time the fourth volume of his study came out, the results were damning. There was almost no correlation between achievement and intelligence above a certain threshold. What ended up mattering was the person's family background - kids from wealthy and middle class families fared better over the period of the study.

Other (random but interesting) precepts:
1. Middle class and wealthy families have parents that are more engaged in their child's life, and this is the reason for seemingly easier path of kids born into these families - read: better opportunities. (Findings show that community is also very helpful - as is extended family.)

2. The well-to-do kids mentioned above also are engaged by people (parents, doctors, etc.) as if they have a sense of entitlement to do things - this seems to help be successful in our type of society, ie, the belief that they have the ability to change things that influence them

3. MG talks about demographic luck and cites two examples: being born in the 1930's (less competition in workforce due to war) and 1950's for birth of technological age - Gates, Jobs, Joy all came out of school and varisty at the perfect time.

4. The Roseto Mystery: research found that this community had much greater life expectancies than the norm, because of being a strong community. They were healthy because of the strong bonds of community.

Interesting video featuring Gladwell:
http://www.aiga.org//content.cfm/video-gain-2008-gladwell

Other interesting references:
http://bostonreview.net/BR34.3/fischer.php

Nandos Charity Ride - 2008

http://nandosmad2008.blogspot.com/

This started off as a great day. Slightly overcast, not too hot gradual undulating hills. Nothing too tough until the last third of the ride. Before that, we pulled into our first two stops with not much pain. From there though the ride got tough climbing out of Kynsna, then out of Plett (thanks Deano, even though you were a little late - had to ride my fat ass up two thirds of that hill with a headwind - einah!), and then the coup de grace, kaaimans river pass.

F**k me that was a ball breaker to say the least. I looked at this thing after doing 150 kms and said "not a f**k"... thanks to the King of George he talked me into doing it, helping me up the first two thirds of the hill with our diminutive leader picking me up for the last third of the hill.

To put this into context - he weighs 70kgs and I weigh a feather-lite 100kgs! Cesar was pushing almost 50% of his body weight EXTRA up the hardest climb of the entire ride from PE to CTN. (Dean and Cesar - send me your bank details!). It was so tough that Cesar had sworn all the top riders to secrecy so the beginners didnt give up.

When I eventually got to the top I almost up-chucked and couldnt really see much. I had properly snapped in two (admittedly large pieces). Luckily the rest of the ride was only another 5kms of flat into Dean's restaurant.

Capitalism has Failed!

It did. Temporarily. But not in the way that most people believe however.

In my view, Capitalism had a bad couple of days at the office but it is still easily the model for a prosperous future. It did fail temporarily because it didn't do two very important things, in my view:

1. Prevent the government from getting involved when things got ugly (TARP)
2. Regulate itself, both leading up to the fallout and at the onset (my expectation was that a quick readjustment would be forthcoming)

Unfortunately it appears that the greed was so endemic that it prevented both of these important capitalist functions from happening.

Let me be clear: greed is not "rational self interest". Many people confuse the two and irritatingly use this misperception as the reason why capitalism has failed. Greed is the failure of rational self interest, not capitalism.

Like every other crisis, it appears Greed (it deserves proper noun credentials because of its evil power) has been the ultimate winner, at the expense of Capitalism. It has been the winner since every financial crisis since records began, from the deflationary years of the 1870's (post the American Civil War) through to The Great Depression of the 30's, the S&L crisis of 80's; emerging market crises of early 90's; dot com bust of 2001 and now the credit crisis of 2008.

Be careful though, don't assume these failures are a failure Capitalism - again, my belief is that it is of people - instead of rational self-interest, people become greedy. We must remember that Capitalism still stands head and shoulders above any other socio-economic models that have graced the ages. We have experienced more freedom and prosperity because of capitalism than at anytime, ever in history.

Right, so capitalism is still economic model of choice. Even the most left-leaning tree-hugging liberals generally agree on this too. What then do we do to tweak the system to prevent future crises?

Nothing.

Unless we can keep the key variable in the system - people - rational, we will never prevent such occurrences from happening. Ever. And while humans are emotional, desire driven life forms this will never change.

What will not help is Post-fact regulation. All it does is put a further burden (read: tax) on business in the future for almost no benefit. Greedy people will always be smarter than the smartest regulator. The Greedy only need one small gap in regulation to exploit, the regulator needs to be able to anticipate every potential gap that regulation might bring to bear. Regulation is undeniably affected by The Law of Unintended Consequences. Each piece of regulation opens up myriad potential gaps for exploitation. So the argument that regulation will solve financial chaos is non-sequitur in my opinion. (This differs from oversight from bodies like the SEC, which i believe there is certainly a need for, even if it is only the perception that all is in order.)

So what do we do then?

Nothing.

Remain rational. Keep your head while others are loosing theirs. By being contrarian, you will be far more immune from the vagaries of Greed.

Viva le Capitalism!

Three great links on the crisis:
Wall Street Lays Another Egg - Niall Ferguson
The End - Michael Lewis
Risk Management - Joe Nocera

----------
First 10 minutes are brilliant (great info) by Juan Enriquez (harvard nerd):


Juan Enriquez (2008) Pop!Tech Pop!Cast from PopTech on Vimeo.

Net Neutrality

new post on labs blog: http://labs.is.co.za/justinspratt/2008/11/net-neutrality

"Net Neutrality" is the push by lobby groups to keep the internet "open" by regulation. "Open" means any traffic can traverse any network. (Interestingly, network neutrality movement started on telegraph networks and was first promulgated back in 1860. The latest internet push started in 2000.)

The opposing side are the carriers and ISP's who want to charge toll fees for certain types of traffic that traverses their network, through a method called "Deep Packet Inspection". Essentially some of the carriers want to create gated internet communities that they control. Very horrible scenario indeed.

The rationale behind it is simple: content providers and web sites are making revenues from traffic that is sent across the carriers "expensive networks" and the carriers therefore believe they should get a cut of the revenues generated.

My view is that it wont be as bad as people think or say. Most of the lobbyists are blowhard, tree hugger types, which really doesnt help the cause. Interestingly, they are funded (clearly - tree huggers dont have jobs) by some big names, not least of which is Google.

But there is significant public pressure (for now) to keep the carriers and ISP's in check – Comcast tried this for instance, then revoked and toned down what they were trying to do. Vodacom also tried it here in South Africa by blocking MXit - the latter winning a high court ruling.

So these gated communities are highly unlikely in my view.

The "Black Swan" (rare outlying event) however, would be if the global macro economic deterioration is so bad the carriers start going broke... They would then have a strong argument to boost revenues using this toll gate method. If this does happen, then clearly this will be a significant impediment to innovation on The Net.

---
recent news:
WSJ article on Google wanting special treatment - "we want a fast lane for our services"

Rebuttal from Google - "we merely want to build a CDN (content delivery network)"

And separately, Microsoft Corp. and Yahoo Inc. have withdrawn quietly from a coalition formed two years ago to protect network neutrality. Each company has forged partnerships with the phone and cable companies. In addition, prominent Internet scholars, some of whom have advised President-elect Barack Obama on technology issues, have softened their views on the
subject.

Internet Entrepreneurship talk at GIBS

http://labs.is.co.za/justinspratt/2008/09/internet-entrepreneurship-talk-gibs

Summary:

From my experience with Vottle and IS Labs, I think the five most important things in a web startup are:

1. Money cannot be your prime motivator

2. Work with smart people (that should be your reward - everything else should be a bonus)

3. Get it out quick and iterate continuously based on user feedback and metrics

4. Don't be shy to copy good ideas - Vottle.com looked to Craigslist for inspiration and ISLabs looked to Paul Graham's Y-Combinator

5. The smaller innovations have been the bigger winners (eBucks & Skype were ground breaking for Vottle, but are perhaps still a little too early)

Fooled by Randomness

Just finished book by Nassim Taleb - "Fooled by Randomness" - despite the intermittent intellectual snobbery (which leads to a little verbosity) I think this is an absolute must read for any person with an interest in high finance, economics and math.

Taleb's site: http://www.fooledbyrandomness.com

Review:
This book is about the influence of luck on life, and how as humans we often over ascribe luck to our skill and under ascribe bad luck to our poor performance.

A quote in the book, "Machiavelli ascribed 50% of the success in his life as luck" describes Taleb's precept aptly. His view that most people encounter this statistic, but don't ascribe that higher degree of luck to their successes. I know I am guilty of this, albeit unintentionally.

Another quote regarding "legendary traders": "It is very likely that a large enough sample of traders that one of them will have an inordinately lengthy lucky streak".

In his vernacular this luck is known as "randomness" and he suggests we need to be much more cognisant as it could equally apply to bad luck, and therefore the downfall of people's lives and well being. None more so than in the trading world of high finance. He defines this "outlying" events as "Blackswans" (his subsequent book is titled as such) - very rare events that are game changing and almost always not accounted for.

Taleb's thesis (for me at least) is that despite the belief that we can be rational 100% of the time (he has a considerable go at the neo-classical economists - which I agree with), we are not genetically designed to do so, hence we cant. We should therefore we should plan accordingly. Our emotions will always try and play a part in our decisions, is his assertion. His solution is to develop tricks to bypass the emotional component as much as possible. He lays these tricks out in the book.

There is good reason for us being innately programmed to use emotion because it is what "energises us to act" he says. This makes a lot of sense if you think about it too...

He details how human's suffer from biases or heuristics that are based on limited proof. One example is "survivorship bias" - exaggeration of performance. It makes a lot of sense for us to have this ability because it quickly allows us to interoperate with our environments, e.g., "tiger looks dangerous, lets run" - whereas to validate that rule one would probably die in the process.

The last interesting thing he puts forward (for me) is that human brains are not designed for non-linearity, ie, more than two variables impacting an outcome (aka multivariate analysis). Yet in reality, this is exactly how stuff works. As such, our minds tend to "smooth" out these mutli variability, framing it in x and y axis model.

A nice way of explaining this is the learning of a sport. One doesnt usually become constant incrementally good at something. It is more staccato - you will be bad for a while, then all of a sudden you "click" and can start doing "that" move or swing or play. So improvement is punctuated by short sharp upward successes rather than a constant linear progression... yet our minds perceive it is a constant trend.

I wonder how Taleb would view the latest "blackswan" (financial meltdown)?

IS Labs - tech incubator

http://labs.is.co.za/justinspratt/2008/07/how-labs-was-labed

Telco Giants catch up at Internetix

so I just sat in on a very interesting discussion between the telco heavyweights in South Africa (absent was a representative from Cell C and MTN unfortunately).

Panel: Ajay Pandey (Neotel); Thami (Telkom - September was meant to be hear); Knott-Craig (Vodacom); Paris Mashile (ICASA) and Angus MacRobert (Internet Solutions).

Highlights:
- Knott-Craig: telecom penetration high at 90% but internet is very poor at only 10%
- Gus: we are actually seeing less liberalisation... companies are consolidating because so few vendors will be allowed to self provision
- Gus: VANs are selling out or moving into Africa, which is less regulated than South Africa
- 1.3TB of international bandwidth coming with launch of Seacom
- In response to the 20MHz Wimax allocation issue... Paris: vendors must use it more efficiently... Knott-Craig: 20MHz is not good enough, its that simple - it is globally accetped that 30MHz is a minimum to get an adeqaute ROI
- Knott-Craig: regulators need to contain themselves... let the free markets work (Ed: ironic?)
- Gus: Altech's high court injunction is slowing down the liberalisation... the process has been going on for 4 years, why do they try to be a part of this process now?
- Greg Hatfield (IS GM) to Knott-Craig: how do you justify the margins on cellular minutes when the price point is so far off the cost point? Are you just a capitalist entity or do you actually consider the country too?
--> Knott-Craig's reponse: we are a capitalist entity (big smiles from everyone)

Nutshell: was a great discussion but there was a general feeling that we seem to be having the same conversation every year... we need progress, enter stage ICASA and policymakers. exit: the pretenders like Altech

(Ed: this has been done on the fly, realtime, so forgive the grammatical and spelling errors)

I have the Sheds!! [Load Shedding]

I am an Australian living in South Africa and have been doing so fulltime for the last 4 years. I guess people would qualify me as one of the few "skilled" people to moving to South Africa – the complaints about South Africa are usually followed by an exodus out of this beautiful country. I love this country and have no plans to return to Sydney, where I was brought up... well, I didn’t until last week.

Euphemistically called "load shedding", power cuts have been afflicting South Africans for over a year now. But nothing warned us citizens of the Tsunami of Darkness that swept through greater Johannesburg and much of the country last week.

For four days last week I had three, 2.5 hours of zero electricity - morning, lunch and night-time peak times affected... for two of the remaining three days there have been "only" two blackouts per down.

Clearly this if far from acceptable and hardly befitting the economic power house of Africa that Johannesburg and South Africa claim to be; a city that boasts first world banking and technology infrastructure.

See by-line!

For years we have been complaining about the monopolistic malevolence of Telkom for keeping broadband prices at a thousand times higher than the cheapest in the world... how ironic this appears to be now?

The state of affairs is anything but amusing however. There has been very little communication from the inept power supplier Eskom, and none of it useful and all of it post-fact. We read now that we need to reduce our national consumption of power by 20%... Why are we only hearing about this now? Where is the pre-emptive communication by our government officials asking for our help and warning the smaller businesses to prepare for it? Or asking for our understanding and detailing the situation?

I am not sure how effective either of these institutions is, but both the South African Human Rights Commission and the Public Prosecutor are asking serious questions. Let us hope they get some answers.

And it is not just the electrification of the country. The power is merely the icing on the cake. Mbeki has taken this country backward, favouring spending his time being an "African Visionary" (read: engaging in Machiavellian pursuits to thwart Zuma, someone so tarnished, possibly corrupt and also inept, yet vastly more popular than he!). The policing is in a shambles at the moment – strange, because it is kind of hard to believe it could have got any worse with one of the worst crime rates in the world.

I understand that there were several geo-political machinations that helped exacerbate the current crisis, not least of which the moth-balling of nuclear energy production. I also realise that pre-1994 policy didn’t factor in a large chunk of the population - or at least, not with an urgency. But nothing can excuse the last 13 years of mismanagement, and especially not the last 9 years of Mbeki's "government". Nothing can excuse the lack of national response and communication to the citizens that pay the salaries of these so-called providers of basic human needs.

Cosatu (ironically) sums it up best…

Eskom was not to blame for the crisis. "They warned the government years ago that they needed money to invest in new power stations, and applied to the government for this. "But the government refused to provide the money, which President [Thabo] Mbeki has now admitted and apologised for," said Craven.

Too little to late for Mbeki as more cuts are expected in the coming week. Here’s wishing for some new, younger leadership to keep this country on the road to reaching its potential. In spite of all of this, I am still absolutely passionate about South Africa and it is going to take a great deal more pain to make me leave.

The Tasmanian Devil is in the Detail

They say Tasmania (the island state of Australia south of Victoria), with its population of just half a million, has the highest rate of interfamily breeding in the country. I have to say that after spending the last six days here – for a mate’s wedding in the middle of the state and in Hobart for New Years – that it is not obvious that brothers and sisters have a high predilection for mating each other. In fact, people look pretty normal here and I must say I have been pleasantly surprised… sure, perhaps they are not as glamorous and made up as in Sydney, Paris or New York, but that is to be expected for a smaller city.

There a couple of interesting facts about Tasmania:
1. It has the deepest landlocked water body in Australia - Lake St Clair by Cradle Mountain
2. The oldest brewery in Australia – The Cascade Brewery – just on the outskirts of Hobart
3. Two animals that are unique to Tassie – the Tasmanian Devil (endangered) and the Tasmanian Tiger (Extinct, although some crackpots claim citings)
4. Port Arthur was the place the convicts were held upon settlement of the Australian Colony… sadly, this was also the place were a deranged gunman shot 27 people about 10 years ago
5. The second greatest cricketer of all time – Ricky Ponting
6. David Boon - The batting mainstay of Alan Border’s side and world record holder for drinking 52 beers on a flight from Sydney to London - http://www.geocities.com/topaussieguide/Page1.htm
7. Eddie Jones – the greatest technical rugby coach of all time

In Hobart, we spent most of our time at the Taste Festival, the annual wine and food tasting exhibition. Wine was very good, food was average, but it served our purposes well.

We stayed in Montgomery’s "Hotel" (read: youth hostel), which was two blocks from the finishing marina for the Sydney to Hobart and three blocks from the Taste festival. After the initial hiccup of being overcharged and given the wrong room, the stay rate was good value for money and the proximity a bonus.

Overall, I would give Taswegia a thumbs-up and say it is well worth a visit.

To Buy or not Dubai...

Everyone talks about Dubai as this amazing city that grew into a mega-metropolis overnight. This is true, but it is a bit like saying a women with tummy-tucks, butt-sucks, false breasts, botox and collagen infested lips is beautiful. She may be pretty, but is it real and what psychological issues does she bring with this?

My view of Dubai is that it is a plastic city, born not out of the fractious Invisible Hand of Adam Smith, but from the false economy of Petro-Dollars. The only thing capitalist about this dynamic is the scarcity of the black stuff relative to global economy’s insatiable demand.

From talking to the locals, almost all the projects and capital spend are "state" sponsored. It is relevant to define the Emirate state as this point: A family owned monopoly of the black sludge pumped from beneath the desert.

Fortunately for the Emirates, the West has provided a good trading mate - both with Western technology pulling the black gold out of the dirt and then its insatiable demand for the stuff. Lucky for us, our dependency is decreasing - in the 1970's, almost half the economy was dependent on it in some fashion - today, according to the Economist there is only around a 20% dependence (Interestingly, this is why Oil has been able to push to the $100 level without causing the shock it did in the
1970s... but with the Sub-Prime crisis and credit drying up like spent Arabian oil field, the Global Economy may yet see the recession the doomsayers have been predicting since the bubble of the late nineties).

But I digress... so Dubai is amazing, yes. And the Maktoums (Dubai family that is The State) did have the foresight to “open” their economy (open relative to other Arab nations). They are building the tallest building in the world (Burj Dubai) and I personally counted almost 50 super cranes in the sky, each building a separate high rise. You can also buy anything you ever wanted in Dubai. It truly is the shopping capital of the world. Oh, and they also have a land reclamation project where they are building islands that represent the countries of the world – yep, an archipelago of the globe! Things are happening in Dubai and there is no doubt a lot of money in the city. But from an economist’s point of view, you have to ask yourself how this occurred and is it sustainable?... And to me, it doesn’t really add up.

In summary, the "capitalist" framework of Dubai can be put forward as follows:
Pull black sludge out of the sand -> as a member of OPEC, limit demand -> price of oil increases (magnified on the back of the global resource and commodity boom – read: Chindia) -> countries pay stupid amount for the stuff (current cost of pulling it out of ground is around $23 - Economist) -> make gazillions of dollars -> take that cash, and spend absurd amounts building a city that has the history of Vegas and the style of the shotgun wedding venues in the said city . This creates the artificial demand, draws people and resources hoping to cash in… All in the hope that the increasingly dry oil wells of Dubai are supplanted by a real economy one day.

So then next logical step is to sit back and think about whether this artificial stimulus has worked anywhere else in the world. My first point of call is Keynes’ theory of Aggregate Demand and Government spending, proselytised post WWII - the West loved it. Well, it failed. Being generous, I guess you can say it did succeed in pushing up price levels (read: inflation) while simultaneously creating no jobs... which lead to the stagflation days and an economy so brittle it buckled under the pressure of the two oil shocks in the 70's. Right, so that didn’t work... where next? Well, the extreme and most obvious example of this kind of fiscal depravity was the "Commanding Heights" of the Soviet Union - clearly that didn’t work either, and with the added bonus of costing some 20 million lives... In the pursuit of objectivity, I then find myself floating around all the countries of the world and can’t think of one where artificial demand created a sustainable economy. Perhaps there is someone out there that can tell me otherwise.

The last curveball for Dubai is the illegality of any foreign company or person owning a majority stake in a company in Dubai, nor own land for that matter. Foreign nationals are given demarcated areas they can live, and even then, the land is given to them on leasehold. As for companies, you need to have a Dubai national owning at least 51% even if they add nothing to the business (and this is often the case). This sounds like economic apartheid to me.

So my bet is that Dubai will become an economic ghost town within two decades. My logic: oil money is basically finished in Dubai. General prices are not cheap (just chatting to the cab drivers and guy who served me in the suit shop attest to this - all are moving back to their native countries in the next year they say) and prices are rising - inflation is a serious problem as the bulk of the population are foreign nationals barely able to afford to live - apparently rents at the lower end have gone up “100% in two years” - and unable to send any money home to their families, which is (was) the attraction to Dubai in the first place.

I may be wrong and several macro forces may play out in Dubai's favour. If so, these will emanate from two strengths: a relatively open and functioning society (I say relatively, because laws are arbitrary and subjective based on the whims of the royal family - but out of the whole Middle East, Dubai is like Woodstock Hippies) and the fact that it really is a "central trading hub" between Europe and the Far East.

One thing for my mind is certain, expect a massive price bubble implosion, making the asset price deflation of Japan in the 90's look like the Roaring Twenties early 20th century.

[Ed - 26Dec09 - and so the prediction appears to be coming true.  The latest on the asset price implosion from Wall Street Journal: Dubai: A High Rise, Then a Steep Fall]

Web 2.0 Bubble

wbe 2.0 bubble: brilliant sketch on youtube... worth a watch

Seeing the Wood for the TreesThe Seqouia Venture Capital Visit

“Venture Capital in the United States contributed 17% of GDP over the last 35 years and 10mn jobs,” according to Roelof’s presentation to us today. In contrast, venture capital represents only a tiny portion of private equity raised – 0.2% in 2006 (Venture Impact 2007, Global Insight). Clearly, this type of investment class is highly effective. From a financial theory perspective, it debunks the returns relative to risk postulate. For every dollar invested, venture capital in the USA created $5.45 in revenue over the same 35 years. A phenomenal achievement by any standard.

Meeting Roelof, a senior partner at Seqouia (a coniferous tree, a name given to the company in the hope that it would outlive any individual partner), was inspirational for all of us in the venture group. A South African, Roelof spent some time at McKinsey in both South Africa and Ireland, before coming to America to attend Stanford’s GSB (http://www.gsb.standford.edu/). While at Stanford doing his MBA, he was forced to start working with the rand depreciation (around the R10 to one time) and his savings falling in toe.

Ironically, this was quite fortunate because he started working at a then small internet payments company called PayPal (http://www.paypal.com/), later acquired by ebay (http://www.ebay.com/) for $1.5bn. He was the CFO before and throughout the buyout and this exposure, plus some new found wealth, opened a door to a partner role at Seqouia, where he now works along with 6 other partners. Seqouia was an early stage venture capital investor in PayPal and arguably reigns as the leading Venture Capital company in the internet space, if not the entire country.

Some of the Sequoia Investments

The presentation gave many of us food for thought on how we can do this in South Africa. Clearly there are many obstacles, most of which are camped in the Portarian theory of competition and clusters. The US government involvement at the enablement level is superb – infrastructure, pro-company laws (bankruptcy especially), education, tax incentives, and so on – while at the same, keeping actively uninvolved. The positive economic externalities of this enablement flow into the technology space in Sillicon Valley and result in a turbo charged economic engine. Once established, clusters like this provide a virtuous symbiosis, reinforcing the positive elements that established it. It appears to us that the South African government should scrap the expensive MIDP and similar government meddling and spend its time, money and effort at the enablement levels. Until such time, it would appear that a replication of a Silicon Valley in South Africa is Herculean task at best. A couple of us will probably give it a try though, which should be fun.

Speaking of fun, we spent time in San Fran yesterday seeing Alcatraz (1576 prisoners over 29 years), after our Ideo (http://www.ideo.com/) visit; the Bay areas, the famous Lombard Street, before stopping in the city for a couple of drinks, close to Union Square. Today we also went to Stanford University.

Prior to San Francisco we were in Seattle. There we visited University of Washington, a serial entrepreneur Bill Bryant, Boeing, Pike Place market, a Seattle Mariners game and the Space Needle.

Tomorrow morning we are off to New York.