By James Santagata
Principal Consultant, SiliconEdge


Yesterday I came across what I felt to be a provocatively brilliant quote by Elon Musk which I subsequently posted into my LinkedIn Update and Facebook Status feeds.

"The reason I haven't taken SpaceX public is the goals of SpaceX are very long-term, which is to establish a city on Mars."
-- Elon Musk

The next day, I awoke to find this little gem of a comment from my friend Chikako Uchinami of synopsis.TODAY below it:

"Elon is instructive of the principle of Divine Right.
He's not always right, but when he is he is the most interesting man in the world.
You can't inherit Divine Right- you take it."

-- Chikako Uchinami

Besides being incredibly insightful, Chikako brilliantly articulated the concept and application Divine Right

Divine Right.

And that's what it is. 

It 's not given. It can only be taken. The right can only be asserted.

Think about the power of those statements. 

Now think about the power and effectiveness of any leader (including you) who not only understands but lays claim to and assertively wields Divine Right.

By James Santagata
Principal Consultant, SiliconEdge

The Sun Also Rises (陽はまた昇る ||  Yō wa mata noboru), starring Ken Watanabe (foreigners will know him from his appearances in The Last Samurai and Inception) is a riveting drama that captures the development in Japan of the nascent and soon to be ubiquitous VHS video format.

Starting as a stealth or more accurately, an unapproved Skunk Works projects within JVC (Nihon Victor Corporation) it culminated in 
the development and release of the new VHS standard to the industry.

On top of that, JVC's new format was royalty-free and competed directly against Akio Morita and his uber-powerful Sony Corporation (when you think of Akio Morita, think  about Steve Jobs before  Steve Jobs was even on the scene) and their Betamax.

Lots to takeways from this movie in terms of government pressure and cronyism in the form of MITI (Ministry of International Trade and Industry / 通商産業省 / Tsūshō-sangyō-shō) officials who had backed Betamax and, therefore, wanted JVC to deep-six their VHS format. 

Other key takeways:
- Intrapreneurship
- No Box Thinking
- Technical Innovation 
- Market-Focused Feedback Loops to ferret out new Use Cases
- Tenacity / Being Relentless
- True Leadership
- New Business Models (royalty-free industry standard)

In summation, this docu-drama really demonstrates Japanese business ethics, working styles, attention to detail and cultural expectations.

By James Santagata
Principal Consultant, SiliconEdge


"October: This is one of the peculiarly dangerous months to speculate in stocks in. The other are July, January, September, April, November, May, March, June, December, August, and February."
- Pudd'nhead Wilson's Calendar


There is no doubt that the stock market can be a very unforgiving institution but does the SEC's tactics if not self-described mandate of breaking the legs of Entrepreneurs and rolling over little Retail Investors make it any safer?

This is highly doubtful as the SEC has arguably become a poster child for the economic concept of regulatory capture, having moved from their initial role of investment information disclosure in the 1960's to their current role of supposedly "protecting investors" since the 1990's. There is also the issue that the existence of the SEC and what I term to be their "SEC-anointed" stocks injects moral hazard into the system.

But who, prey tell (spelled as intended), is the SEC protecting? 

Surely it isn't the little retail investor who has had to contend with the like of SEC-anointed fraud stocks and scammers like Enron, Global Crossing, the Steve Jobs Options Backdating Scandal and, of course, the Big Daddy himself, Bernie Madoff.

What's most amazing about Bernie Madoff's fraud is not just that he got away with it, but that the SEC had no intention of stopping him!

That may sound like an outlandish or unsubstantiated allegation until one considers the documented facts. Starting in 2000 then again in 2001, and 2005, a forensics accountant by the name of Harry M. Markopolos repeatedly notified the SEC of Bernie Madoff's fraud both verbally and in writing.  Markopolos provided detailed supporting documents only to be ignored by the SEC again and again.

Here is Markopolos' complaint to the SEC regarding Madoff where he identifies 29 Red Flags:

• The World's Biggest Hedge Fund Is A Fraud (slideshare)
  

Now it appears that the SEC is continuing their assault on both individual investors who want better returns than are available through the retail market or whom just want to invest their own money as they see fit (if they can blow their money in Vegas or on penny stocks, smokes or state sponsored lotteries why not stocks?) as well as entrepreneurs looking to raise funds for their companies.

The SEC is doing this by considering to raise the financial requirements for being designated an accredited investor. Currently, an individual accredited investor is defined as follows: 

1. a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;



2. a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or

Apparently, too many Americans have now become cashed up and have too easily overcome this financial hurdle. In the last go round, the  SEC changed the rules so that an individual's home was excluded but apparently that wasn't enough to keep out the amount of new individuals looking to invest wholesale (as opposed to retail).

To remedy this our  "protectors", the SEC,  now want to index the SEC's individual accredited investor's  financial requirements to inflation. 

Here is a comparison of the current requirements and what the future requirements would mean:

An individual accredited investor is now defined as someone with $1 million in net worth, minus the value of their primary residence, or with annual income of $200,000 in each of the two most recent years and with a reasonable expectation to bring in the same income level in the current year..

The inflation indexed requirements would be about $2.5 million of individual net worth while the annual income requirement would rise to $450,000.

The SEC is offering some protection no doubt, but for whom? It seems this protection is more likely to benefit fraudsters and incumbent wholesale investors than entrepreneurs looking to raise money and the little retail investor.

http://m.bizjournals.com/sanjose/news/2014/05/20/more-than-half-of-angel-investors-could-be-barred.html

By James Santagata
Principal Consultant, SiliconEdge


This is a quick update to an earlier post I made: 
(So Where's The Next WhatsApp & How Did The Tech Cheerleader Press Miss It?)

As the Silicon Valley Cheerleader Tech Press continues to desparately look for the next WhatsApp, it's apparently been found....in China....and it's called Alibaba.

But China is apparently too far away from Sand Hill Road.  

And most Valley VCs don't do China....sure they dabble, but they don't do China...

http://www.businessinsider.com/american-investors-missed-out-on-alibaba-2014-5

By James Santagata
Principal Consultant, SiliconEdge


With Apple's rumored acquisition of Beats Electronics for up to $3.2 billion USD it begs the multi-part question:

Is this something that Steve Jobs would have done during his tenure, is this good for Apple or does it suggest that Tim Cook is simply a corporate lackey?

Looking at the M&A transaction history for Apple, even when adjusted for inflation, we see that Apple has never made an acquisition approaching this size, not even the acquisition of Next Computer.

Why is this?

Well, for one, Steve Jobs had massive business acumen, he apparently understood that in these large acquisitions there are two main risks.

First, is the integration risk of corporate cultures. 

Second is the fact that in many cases companies are just paying for goodwill that never existed or quickly evaporates once the acquisition is completed.

$500 million USD is a good chunk of change. $3.2 billion USD is even larger. With that kind of money, a stud like Steve Jobs could have built something from scratch and then owned the market.

Evidently, Tim Cook can't create or drive organic growth; he seemingly can only acquire and focus on accretive growth.

Nothing wrong with that, if it works and that's Apple's new "strategy" but it would be a massive departure from Apple under Steve Jobs since firms like Google and Microsoft are the ones who buy billion dollar businesses; Steve Jobs is the one who creates them.

And what exactly makes Beats Electronics so valuable to Apple? This reader comment found on the Register website didn't seem to think there was much there:

By James Santagata
Principal Consultant, SiliconEdge


After Facebook's massive $19 billion USD acquisition of WhatsApp,  two question have arisen.

The first is my question. How exactly did the Tech Cheerleader Press miss out on WhatsApp? That is, after countless posts over the years pimping Quora as "it", Twitter and others, where was the love for WhatsApp? This is actually a rhetorical question so no reason to answer it.

The second question is now coming from the Tech and even Business Cheerleader Press.

"Where's The Next WhatsApp", they ask.

Take a couple seconds now and do a quick search on that phrase and you'll be greeted by almost a dozen recent articles that are predicting or searching for the next WhatsApp. 

You'll also find that these articles specifically target audiences ranging from the tech community to business folk, ad agencies and the general public.

That is to be expected, of course, when such large amounts of money such as $19 billion USD are thrown around. I can live with that. In fact, I expect that from the Cheerleader Press. It's just par for the course.

But here's the part that no one or at least very few will tell you.

The next WhatsApp is already out there and it's running fine. It may even be LINE for all I know.

But it doesn't matter, because whatever it is, the Cheerleader Press probably won't find them until they make it and even if they did, they wouldn't understand them due factors such as trait ascription bias.

Further, just like WhatsApp, the future WhatsApp may be running their operation out of a moldy warehouse and they probably aren't or won't be at Launch or Disrupt or any other events.

Why? 

First because many of these startups have very little capital reserves and they are more concerned about eating and keeping the lights on. It's prioritizing capital outlays vs expected returns.

Second, even if they have the funds, they are most likely focused on building and refining their product while engaged in customer acquisition, retention and growth, perhaps employing Lifetime Value analysis or a traditional RFM model.  Going to conferences takes not only time but energy. It's draining. And what again, is the ROI?

That's just the way it is.

And that's why people are or were like, "Hey, who the hell are the WhatsApp guys?"

Where did you guys come from? How did you build this thing? Why haven't we heard about you?

And now, suddenly they are treated like rock stars, as they should be.

And yet the Cheerleader Press will never get it,because they are victims of drinking the Kool-aid cocktail of social proof, the halo effect and various cognitive biases while subscribing to the standard Myths and Memes.

By James Santagata
Principal Consultant, SiliconEdge


That Japan like any country, be it developing or developed, has her share of problems is not in the least bit surprising or at least it shouldn't be.

However, what has surprised me over the years is how many foreign "Japan watchers" and "Japan pundits" always seem to miss the crux of what's really going on on the ground in Japan and more importantly what's going on in the mind of the Japanese.

When articles are written or comments made about the supposed dearth of Japanese startups, the author or speaker almost always boils this down to several factors such as Japan's Shima-guni mentality (Island Nation / 島国), the so-called Galapagos Effect (which as I've continually pointed out is really just a misnomer for an industry or marketplace rife with ossified, rent-seeking incumbents and regulatory capture), Japan's supposed lack of talent, Japan's supposed lack of diversity and Japan supposed lack of creativity.

In the past, I've written about and either fully debunked these myths and memes or I've put them into a context in which they are far better understood.

With that said,  there is another popular myth and meme that comes up regarding the lack of Japanese startups and that is the idea that the Japanese have an almost in-born fear of failure.

I'm not here to argue that Japanese don't have a fear of failure because they do. We all do. Just as most other peoples around the world do, including those in the US and even including those working in Silicon Valley.

People fear failure. 

But to hear the pundits tell it, "Japanese need to get over failure and embrace it". These pundits act like the fear of failure in Japan is simple a psychological construct* like it is in parts of the West like in the US.

(*For the record, even in the US failure is more than just a psychological construct, there are still real financial, social and psychological penalties, set backs and damage that can and do come with it. But this is so much less than what is faced in Japan)

Now I am here to tell you, that in Japan this "fear of failure" is not simply psychological but real. Depending on the failure level there are material penalties that can accrue or hit one hard and if you are to strike out on your own or with a small group of friends, launch a company and it fails it is not like Silicon Valley where you can walk down the street and pickup a paycheck at a top firm while your lick your wounds, get on your feet and start again or even just resume your pre-startup career.

In Japan, the damage and risks include and span the following:

• Career risks
  
• Social risks (personal and romantic relationships and prospects; access/membership to business clubs, etc.)
  
• Psychological risks (depression, self-hate, loathing)
  
• Financial risks (immediate and long term)
  

There are huge differences in how societies views failures and how you move on in terms of romantic prospects and relationships, platonic relationships and friendships, how your family views you, the support groups you have and, most importantly, the career risks which translate, in the end,  to money - to financial issues.

Although much has changed in Japan over the last 8 years, especially in the last 4 years or so, it is still no where near the levels of what we see in the West regarding some issues such as Mid-career hires.

Now let's step back in time, to say 1995. In the US, for instance, much of the economy was still coming out a bad recession from a couple years earlier where housing prices were pummeled - in fact, I remember many saying they wouldn't buy a home again.

As one specific example, I'll pick Silicon Valley as just one example, even in that economy, a person could have a massive failure and if they learned something and could present themselves well, they could easily land a similar or even better job by leveraging it. Even if they were fired.

Conversely, even if they didn't learn anything, they still could land a similar job. Even if they were fired.

People hired with a very open mind based on what the candidate could produce.

In Japan, the idea of mid-career hires, although changing now, was really non-existent unless you had super skills, super connections or worked at a foreign firm (gaishikei), like Microsoft, Oracle, etc. who needed talent and hired among themselves.

I can tell you, as just one example, when I met with Fuji-Xerox HR group back in mid-2008 to discuss their domestic hiring needs, although they were very polite and professional, it was made extremely clear they wanted new grads only and that they weren't set up to recruit mid-career hires.

Did that mean that mid-career hires didn't happen at Fuji-Xerox?

Of course not. 

But it did mean and it does mean that mid-career hires (a)  were rare and (b) a special case.

Which again leads to this risk factor of damage to one's career and so on.

Coupled with this was a employee/candidate ethos that often considered working for a direct competitor "dishonorable" while on the company side, such a candidate applying for a position from a direct competitor would be seen as "suspect" or "suspicious". 

Again, I want to emphasize this has been changing for the better over the last 8 years and specifically the last 4 years or so but this hiring mentality exists and so does the economic and career damage fear among workers.

I can also share with you some examples where I took top talent from various gaishikei firms (in this case, in the network & information security industry) and introduced the persons to other top companies, both domestic and gaishikei.

Often what I heard was, "They are a job hopper".

My thought: "Are you insane" or "What an idiot, can you not see how talented this person is to fill the position you've had open for the last 4 months...."

My reply, "Uh, no. They aren't a job hopper. And regarding their changes, the last company they worked for went bankrupt and the other two companies before that, that the candidate worked for got acquired by huge multinationals. They left because they preferred a smaller work environment."

The reply?

"Well, that shows bad choices on their part."

A bad choice? To know the firm would go bankrupt? To work at a startup or a company working in emerging markets or developing nascent technologies?

This actual conversation took place in 2008. And I've had numerous conversations like this, from the mid 1990's, skipping through the dot com boom of 1999 to 2001 (in the US, the dot com bomb died out with the 2000 Nasdaq crash but Japan trailed about a year) to around early 2009. Then it thawed a bit. 

I should note that in the dot com bomb, Japanese firms were so scared by the hype and activity happening online that they did hire mid-hires and they did bring in foreigners, even non-Japanese speaking. Fear of the firm failure, spurned positive changes. In other words, competition is good.

I should also add that this was within the fast moving, dynamic tech industry. I've also done work in very static sectors like industrial chemicals, and as late as 2008, it was not uncommon to have a HR manager or even the hiring authority (even the country manager) characterize a person who had stayed at each job less than 5 to 10 years was seen as a job hopper and also undesirable.

Wrapping this up, it's not so much that Japanese have a greater fear of failure than, say, Americans, it is simply that the economic cost of a failure in Japan is much higher - financially, socially, psychologically.

Once you understand, all the pieces begin to fall into place.

By James Santagata
Principal Consultant, SiliconEdge


Former Wall Street Journal technology reporter Yukari Iwatani Kane has published a new book entitled, "Haunted Empire: Apple After Steve Jobs" and I'm here to posit, that without even having cracked open one page of this book she is spot on, at least with regard to her provocative title.

"But wait, what? How could she be right?" 

"How could that title be right?"

"How can you, James, be such a pompous ass to think you know anything about Apple let alone judge Kane's book by its cover?"

"Doesn't Apple create magical products? It's true that Steve Jobs has passed on but the same great staff, the same great workers remain!"

And all of that is true.

However, to understand why the title of the book is right and why I'm right we need to honestly and objectively understand who Steve Jobs was and what made him so successful and Apple so successful under his leadership.

And leadership is an operative word here.

At the same time, we need to understand that competition doesn't operate in a vacuum so we must ask, "What made Apple's and Steve Jobs' competitors so timid? Why didn't they respond and counterstrike?  Better yet, why didn't they create the iPhone type phone, the smartphone first?!"

And the answer is simply it goes back to the structure and dynamics of office politics and power within a company. The real shock should not be that Apple, with zero experience within the mobile phone industry, built and released the blockbuster iPhone but that none of the incumbent handset makers did!

Where was Nokia and their smart phone? In fact, where were the rest of the handset makers?

And that is the real shock. Not that Apple made a smartphone but that the 800-pound Gorillas gave them an opening and then didn't pounce and kill or even defend their territory.

However, if you've taken one of our related coaching or training sessions (How To Beat Silicon Valley's (and other) Fast-moving Startups At Their Own Game) or just intuitively understand Office Politics and Power (aka Organizational Politics & Power - OPP) this not only comes as no surprise but rather it both predicted and expected. And once you understand Office Politics and Power, you can quickly see and understand why and how Apple under Steve Jobs beat Sony to the next iteration of the Sony Walkman which became known as  the Apple iPod. 

It helps one also understand why and how Larry Ellison discussed the Net PC (in the mid-1990's) but Apple built it (the iMac), and why Apple could add some basic design features and colors to it to make a hit while intra-company rent-seeking behavior at the competition prevented them from responding or competing let alone getting that to market first.

OPP also explains why and how Jobs could do the same with Pixar while a former Disney employee, John Lasseter, who suggested as much years before Jobs ever thought about animation or rendering farms was let go (or summarily fired depending on the source one references) from Disney, only to have it all come full circle again with Disney acquiring Pixar. 

Go figure! 

And, of course, it explains some of the biggest daddy ball drops in history such as Xerox PARC and their full blown PC and related projects (which later became reflected in industry leaders like Apple, Adobe, SGI and 3Com) and Kodak with their digital camera years before the competition had one...that all went to waste...

I've talked about that in detail here, about the Myths About Steve Jobs and how is personality and ethos, while celebrated within Silicon Valley (and beyond) is actually completely anathema to traditional Valley ethos.

Reference: Steve Jobs: The Man Who Broke Every Myth & Meme In Silicon Valley & Become A Legend

The problem then, is that a company (any company, including a post-Steve Jobs Apple) needs a strong leader who is unafraid to break eggs to make omelettes and unafraid to slaughter sacred cows for burgers or even just for fun. They also need a leader who is not just unafraid but actually enjoys and even thrills in steamrolling the competition and taking the troops straight up the middle as Alexander the Great did to Darius during one the Macedonian-Persian wars.

As a further piece of evidence, one only needs to consider that the Akio Morita, the founder of Sony, was Steve Jobs while Steve Jobs was still in diapers. Moreover, Akio Morita was extremely aggressive, even actively counterattacking industry special interests who tried to have the courts block the Sony Betamax recorder. Morita was successful in defending this and in ultimately escalating this to the US Supreme Court  with Sony (and consumers) coming out as the victor.

• U.S. Supreme Court: SONY CORP. v. UNIVERSAL CITY STUDIOS, INC., 464 U.S. 417 (1984)
  
• U.S. Supreme Court decides Universal v. Sony, as VCR usage takes off
  

Tim Cook being the nice great guy and "steady, paint by number operator" he is (certainly he's the first guy that I would hire or consult with to determine what color doilies to lay out for my dinner party), shares none of those characteristics with either Steve Jobs or Akio Morita.

So now lets move on to more questions regarding Job's selection of Cook as his successor.

• Did Jobs not know what made Jobs so successful?
  
• Did Jobs think that Cook had what Jobs did to keep Apple thriving? 
  
• Did Jobs think that Apple now needed a "steady, paint by number operator"?
  
• Did ego get the best of Jobs and he wanted to forever ensure and enshrine his legacy by making sure that his successor could only perform to a level that would make people wish that and wonder what Steve Jobs would have accomplished or would be accomplishing if he were still alive?
  

By James Santagata
Managing Director, Career OverDrive! / SiliconEdge

I dug up and finally got around to putting up a presentation I gave on cloud computing entitled, "Cloud Computing": What It Is, What It Isn't, Why It Matters" for Tokyo 2.0 which was held at Super Deluxe in Nishi-Azabu. 

We had a great turnout for the event with over 200 people attending.

It was almost 5 years ago yet a number of the main themes and issues I addressed have come to pass.

You can watch the video,  link to the original or see the full presentation PDF by clicking on the button below.

By James Santagata
Principal Consultant, SiliconEdge

Well, if you haven't heard the news yet the Valley M&A buying spree continues unabated, this time with Facebook snapping up mobile messaging company WhatsApp for a hefty $16 to $19 Billion USD (depending on which news source you reference).

• Facebook Enters $16 Billion Deal for WhatsApp (New York Times)
  
• Facebook Buying WhatsApp For $19B, Will Keep The Messaging Service Independent (Tech Crunch)
  

There are many lessons and takeaways from this acquisition but allow me to focus on just a few.

1. Ignore The Cheerleader Tech Press:
WhosWhat? WhatsWho? WhatsApp! Personally, I wasn't aware of WhatsApp before this acquisition as I don't use the app and I'm mostly a user of Viber and Skype so I can be forgiven. However, within the Silicon Valley Cheerleader Press, especially Tech "Apple-Twitter-Quora" Crunch and even Pando Monthly and VentureBeat, I'm sorry but even as frequent if not habitual reader, I just didn't see the coverage. How could this be, how could they miss it, a huge multibillion dollar company? 

The answer is simple: Why would you expect the Cheerleader Tech Press to get it?

2. Companies Can't Pick Top Talent: 
It turns out that before co-founding WhatsApp, Brian Acton formerly worked at Yahoo in a quite senior / important position. After over a decade at Yahoo, he left to take some time off and then applied for a new position landing interviews with at least a few major valley tech companies such as Facebook and Twitter. However, he was rejected at both. Perhaps these rejections were due to Action being incompetent. Or perhaps Action interviewed poorly and no communication skills? Or is it perhaps more likely that these companies or at least the hiring authorities at these companies either (a) don't know how to select top-shelf talent and/or (b) allow office politics and threats to an incumbent employee's ego or career path to dictate who gets hired and who doesn't? Examples are where a senior person with top skills scares a younger or less experienced manager from making the hire -- doubt that? It happens all the time. All the time. And it costs companies millions if not billions per year.

Oh and it makes you wonder, if Facebook had hired Acton, would they have gotten him to build WhatsApp for a lot less than the $19 Billion USD they paid for it? Or would WhatsApp never be built and fall into the "Innovation Lost" point below?

3. Leaderless Rather Than Leadership and Innovation Lost:
Perhaps the biggest lesson is why Yahoo, which had him onboard for over 10 years didn't extract this value, this innovation  It's possible that Yahoo was simply so completely leaderless and rudderless that they didn't even know what to have him do. Or perhaps he tried to be innovative and got his hands slapped.  Whatever the reason, it's clear that Acton had some innovative ideas inside of him and more importantly he had the confidence and motivate to start and execute. But it's clearly not just a shame but a multi-billion dollar tragedy that Yahoo had him on the payroll all those years, had him suited up and yet would let him get in the game and swing for the fences.

If you can create a company with the proper culture that has strong leadership, embraces innovation, empowers employees and hires top talent or solid talent, especially talent that either scares other firms (because it's too good) or is good inside but is a bit dinged on the outside, you're firm will do very, very well.


http://techcrunch.com/2014/02/19/how-things-change/