Small beats big – some thoughts on digital infrastructure

Some friends of mine are starting a small business soon. It’s a really cool idea, and I plan to help out with it as I can. As we talked about it on a hike this morning, it occurred to me that a lot of key factors that make the venture viable would not really have been possible until very recently. By taking advantage of free or very low-cost technology services (primarily in regards to distribution, marketing and commerce), they will be able to bring this awesome new product to market. Who knows where it could go?

roadsI’ve actually been thinking a lot about infrastructure lately. Public infrastructure, as one example, has always been a hobby horse interest of mine. We have tragically under-invested in public infrastructure here in the U.S. over the last few decades, which is directly harming our national competitiveness and economic growth even as borrowing costs are at historic lows… but others have written much more eloquently than I can about the importance and challenges of public investment in roads, bridges, ports, telecommunications, etc., so I won’t go into that here.

Infrastructure socializes costs and allows users to privatize most of its benefits (minus obvious costs in the form of taxes). In this way, much infrastructure is inherently more valuable to smaller constituents than big ones. If you could afford to build your own road to bring goods to market, then a public road is still a useful option as a cost-savings measure, but maybe not a must-have; but if you’re a small producer, then a public road is likely the difference between bothering to produce (or invest) in the first place or not. Good infrastructure makes critical steps in value creation easier and cheaper.

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Measuring up – on evaluating performance

I have seen numerous performance evaluation systems throughout my career. Few, if any, of them have struck me as very effective. Most seemed to lack basic fairness or a meaningful connection to anything outside of the evaluation system itself. More often than not, they were motions we went through because someone said we were supposed to.

Old school #measure

Old school #measure

In business school, you learn that the way most companies do performance evals is completely bonkers. There are many reasons why. A big one is that most humans just aren’t very good at evaluating others’ performance, particularly on intangible tasks (which, of course, defines many knowledge workers’ jobs). It also turns out that most people are extremely uncomfortable evaluating others at all – let alone in person, and least of all for people with whom they frequently interact. Psychology research is legion with repeatable examples of how tiny, random environmental influences – “priming” – can dramatically change people’s perceptions and moods. (Protip: have an annual review coming up? Arrange it somewhere bright and yellow.) Humans simply cannot escape our psychology, which makes us notoriously unreliable.

Yet despite all this, performance evaluations exist, as they should. Some employees do contribute more than others. Companies need a way to identify and reward top performers and help lower-performing ones improve (or leave). Inevitably, compensation and promotions are involved as well, making fine distinctions about who contributes what, and how much, highly desirable. And of course, you can’t forget the role performance evaluations have as legal CYA when it comes to disgruntled employees.

Figuring out how to accurately measure, forecast and improve employee performance in a complex organization is incredibly difficult. Virtually no one has solved it – certainly not me. Yet drawing the right conclusions about performance is the difference between rationally managing your company’s precious resources, versus relying on emotional whim and political wrangling.

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Why Users Aren’t Customers

You can always count on the New York Times to sell eyeballs with Serious Opinions about the chattering class’s moral panic of the day. True to form, they published a red meat op/ed today on how internet platforms like Facebook, Google, Instagram and Twitter are diabolically making money with their users’ data, thereby corrupting democracy and otherwise destroying the world. Instead, says UNC’s Zeynep Tufekci, “Internet sites” should all build direct subscription options for their users that would allow them to opt out of “tracking,” enable encryption and be treated as a customer, not just a “user.”

This idea is completely unworkable. But understanding why requires you to understand what Facebook – and other social platforms – really are, and what they aren’t.

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Reddit’s growing pains

alienReddit is sort of the weird little sibling of the social web. Founded by two University of Virginia alums (wahoo-wa!) in the same two or three year span that gave the world Facebook, LinkedIn and Twitter, reddit (first letter is properly uncapitalized) has achieved both notoriety and semi-cultish status among the young and techie crowd, but has struggled to gain mainstream adoption. It has also been mostly a failure financially – the company has never been profitable.

Reddit faces some huge problems that will threaten its continued relevance as a major social platform very soon. The biggest issue is not, in fact, that the company doesn’t make enough money. The company’s shareholders don’t really seem to care about that anyway (though if they’re waiting for reddit to become a fount of profitable growth, they seem to have buddha-like patience). Rather, what threatens reddit more than anything is its lack of innovation in the user interface and format of the site, its poor leadership, and how it pursues its mission. Though at some point, they also have to figure out how to eventually make more money than they spend.

In short, the era of being the web’s cutest niche message board site is over. Reddit needs to grow up.

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Why Etsy does the right things

Where else can you buy embroidered Lady Gaga toilet paper?

Where else can you buy embroidered Lady Gaga toilet paper?

Etsy IPOed this week to much well-deserved fanfare. Their original share price of $16 doubled in value almost immediately after going on the market, valuing the company of about 700 employees at over $3 billion. This was probably, in part, a calculated move – though it may have also been an indirect result of capping retail investors’ stock access to $2,500 apiece, in an effort to increase the number of subscribers. Whatever it was, it speaks to the tremendous value the market sees in Etsy’s unique two-sided marketplace business model for people to find “authentic,” hand-crafted goods from individual “makers.”

One of the most interesting aspects of Etsy’s emergence to me is its identity as a newly public “B-Corp.” In case you’re not familiar with the concept, B-Corps are companies that have chosen to undergo certification by the nonprofit organization B-Lab for adherence to a list of environmental and social accountability measures. Etsy is only the second B-Corp ever to go public, and by far the most important (the first was a tiny Canadian vertical farming company in Vancouver).

Etsy’s mission-driven identity, however, is going to be fundamentally challenged as a public company. While I love many of the ideas behind the B-Corp certification – and Etsy itself – I’m pretty skeptical as to how they truly affect policy at a public technology company. The social and environmental policies it supports might, in the end, be mostly a marketing effort that are at odds with the growth opportunities Etsy now faces. Here’s why.

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