Life in the age of transparency

I’ll let the professional journalism-watchers figure out the historical significance of Michael Arrington’s post on TechCrunch about the closure of Edgeio. Explaining what’s taking place is too complex for me to tackle today. It’s like a wheel within a wheel — except the wheels are made of glass.

Quote:

“Edgeio, a company I co-founded in 2005, had a final board meeting this evening and made the decision to shut down operations of the company. We are putting it into the TechCrunch DeadPool.

Envy as a motivator, or how to know the end is near

For a long time, I’ve been saying there is no “bubble” with the collective innovations lumped together in a giant strange heap called Web 2.0. The vast majority of startups are little more than features, or means that add new functionality to old features. Or clever ways to tie-together disparate parts of the web, or to help people find that which is already here — other people, content that’s not text, free stuff. After a decade of fooling around with Flash and XML and Asynchronous JavaScript, clever programmers have finally found some uses of the web that ordinary users can intuitively understand and find simple to use.

There is that moment where real innovation happens. Where the great stuff occurs. That spark usually ignites immediately after the point at which someone says, “Gee, look what happens when you take this from over there and do this over here with it.”

For a business to succeed, into the mix must come those who understand how to connect that gee-whiz result with an unmet need and how then to generate profit from that connection. But with really great stuff, that’s the easy part. It’s sailing with wind at your back. It’s skiing downhill on a well-groomed slope. In fact, it is so easy, others look and say, “Man, that is easy, I think I’ll do it too.”

Unfortunately, those people rarely start out at the same place as the true innovators, the Gee, look what happens when you take this from over there and do this over here with it.” They start at the “envy” place. The me-too spot. The “I can do it the same way, but with rounded fonts” place.

I believe it is good for technologists to be following their entrepreneur urges. I think it is great that VCs flush with rich-people’s money will throw that money at early, unproven concepts as they know the odds and risks. But I think it will be tragic if public financial markets follow in this madness. As long as widows and orphans and people and pension funds and individuals who invest with IRAs will stay away from this marketplace, only fools with lots of money will crash and burn — and the “bust” will not be sad for the innocent.

Great innovations are happening all around us. Really business-altering ideas. But I doubt many of them will be led by someone who says to a New York Times reporter something like, “There’s still time for me to be a billionaire before I turn 40.”

Update: Bonus link: Rich Karlgaard (Forbes.com): “But if Web 2.0 is inflating to bubble status…it’s isolated. Valuations for older tech companies, such as Microsoft, Cisco, Intel, Hewlett-Packard and Oracle, are not high.

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Daylife dawns

Via an “exclusive” from PaidContent.org: “After a year of mostly veiled references and speculation fueled by the involvement of Jeff Jarvis as an adviser and Craig Newmark as an investor, Daylife, the distributed news platform founded by Upendra Shardanand, is about to see the light of day—funded by roughly twice as many investors as it has employees.”

Not merely the number of investors, but who they are, makes this worth watching. I consider several of them friends and others are people I admire. But you never know until you get something out in the marketplace whether or not it will work.

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Fortunately, it’s not just myopic VCs who invest in the web

In a breath-taking display of deja vu commentary (how many times were versions of this written in 1999-2000?) Randall Stross, a professor of business at San Jose State University, argues that the “20-minute rule” of tech venture funding still holds true: “if a start-up company seeking venture capital is not within a 20-minute drive of the venture firm’s offices, it will not be funded.” His point: That’s why Silicon Valley is still the place to be if you want venture funding for your tech startup.

Does the Silicon Valley Chamber of Commerce make up this stuff?

Fred Wilson, a New York-based VC who invests in “web 2.0” deals, points out that 2/3rds of capital is being invested outside the Valley. Indeed, there is little statistical evidence in Stross’ commentary that supports his argument. However, it sure seems intuitive and easily backed up with quotes from Silicon Valley VCs and startups.

To me, this is just one more display of what I blogged about yesterday: homophily. That need we apparently have to hang out with others who believe and act and speak exactly as we do. And, apparently, to live near those same folks, as well. It’s a mythological, but comforting, belief to feel your chances of snagging easy VC money will increase if you move somewhere else. But the true research necessary to determine whether or not Stross’ premise is correct cannot be found in his essay. What are the actual odds of you receiving VC funding at all if your tech startup is in the Silicon Valley? Remote. Staggeringly so. However, what are your odds of getting Silicon Valley funding if your startup develops a a cult following but, oh-no, you’re based in, say, Chicago? Very high.

Fortunately, not every investment in the web is from VCs. Over the past couple of days I’ve been reading about the MacArthur Foundation funding a $50 million effort to study digital media over the next five years. One of the first “exploratory” grants went to a study that a team including Mimi Ito (Joi’s sister) is involved with to learn more about “digital natives” — those (like kids growing up today and old geeks who shall remain nameless) who have a more natural affinity with technology due to its ubiquity in their lives than those who have adapted technological tools but use them in ways they perceive as analogous to what they’ve learned in their analog world (I apologize for what I’m sure is a mischaracterization of their work, but I think I’m close).

I believe the best ROI on money being invested in the web will be by the MacArthur folks — rather than VCs throwing funds at companies they can reach in a 20-minute drive. (Talk about an analog world!) As much as I am a capitalist and business-focused, I find it more significant to seek an understanding of what’s taking place in our culture as we become more populated by digital natives, than to try to figure out how to make money from ajax-enhanced displays of user-generated-content, or whatever elevator pitch Michael Arrington will hear next week. Intellectuals like Ito will carry forward the foundational thoughts of others who have peered into the future and pondered where all of this is taking us: Marshall McLuhan, Teilhard de Chardin, etc.

As for me, I don’t know where all of us will lead us, but of this I am certain: Place is no longer defined by physical proximity. If someone chooses to limit ones reach to that which can only be driven to in 20 minutes, there is a world of opportunity and wonder outside his or her grasp.

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