Digitization And Its Discontents

A quick post to refer you to this outstanding article in the New Yorker, entitled Future Reading: Digitization and Its Discontents which covers the history of libraries and archiving, an overview of the Microsoft and Google digitization projects, the information explosion problem (e.g., “scholars have to deal with too much information for millennia”), and several other topics.

Excerpts:

The Google Library Project has so far received mixed reviews. Google shows the reader a scanned version of the page; it is generally accurate and readable. But Google also uses optical character recognition to produce a second version, for its search engine to use, and this double process has some quirks. In a scriptorium lit by the sun, a scribe could mistakenly transcribe a “u” as an “n,” or vice versa. Curiously, the computer makes the same mistake. If you enter qualitas—an important term in medieval philosophy—into Google Book Search, you’ll find almost two thousand appearances. But if you enter “qnalitas” you’ll be rewarded with more than five hundred references that you wouldn’t necessarily have found.

[…]

The supposed universal library, then, will be not a seamless mass of books, easily linked and studied together, but a patchwork of interfaces and databases, some open to anyone with a computer and WiFi, others closed to those without access or money. The real challenge now is how to chart the tectonic plates of information that are crashing into one another and then to learn to navigate the new landscapes they are creating.

[…]

And yet we will still need our libraries and archives. John Seely Brown and Paul Duguid have written of the so-called “social life of information”—the form in which you encounter a text can have a huge impact on how you use it. Original documents reward us for taking the trouble to find them by telling us things that no image can. Duguid describes watching a fellow-historian systematically sniff two-hundred-and-fifty-year-old letters in an archive. By detecting the smell of vinegar—which had been sprinkled, in the eighteenth century, on letters from towns struck by cholera, in the hope of disinfecting them—he could trace the history of disease outbreaks. […] Marginal annotations, which abounded in the centuries when readers usually went through books with pen in hand, identify the often surprising messages that individuals have found as they read. Many original writers and thinkers—Martin Luther, John Adams, Samuel Taylor Coleridge—have filled their books with notes that are indispensable to understanding their thought.

[…]

Sit in your local coffee shop, and your laptop can tell you a lot. If you want deeper, more local knowledge, you will have to take the narrower path that leads between the lions and up the stairs. There—as in great libraries around the world—you’ll use all the new sources, the library’s and those it buys from others, all the time. You’ll check musicians’ names and dates at Grove Music Online, read Marlowe’s “Doctor Faustus” on Early English Books Online, or decipher Civil War documents on Valley of the Shadow. But these streams of data, rich as they are, will illuminate, rather than eliminate, books and prints and manuscripts that only the library can put in front of you. The narrow path still leads, as it must, to crowded public rooms where the sunlight gleams on varnished tables, and knowledge is embodied in millions of dusty, crumbling, smelly, irreplaceable documents and books.

Wow, the folks at The New Yorker can write.

The Death of E-Mail: Greatly Exaggerated

This Slate story, entitled The Death of E-Mail, has been getting a lot of attention in the blogosphere of late. I felt compelled to comment because the story was published so close in time to our launch of the MarkMail service for getting intelligence from e-mail archives.

If e-mail were doomed, one thinks, perhaps MarkMail was a mistake. Then again, perhaps not, for two reasons:

  • The article is largely based on a 2005 Pew study that says teenagers prefer to chat over instant messaging (IM) than over email. Heck, I prefer to chat over IM, too — but I don’t use e-mail primarily for chatting.
  • MarkMail is actually as applicable to IM as it is to email. So even if email were to fall beside IM in popularity, MarkMail could easily be recast as “MarkMessage” and aimed at IM archives instead of (or in addition to) email ones.

The Slate story talks about Facebook status updates and Twitter tweets as email replacements, but I think it’s off-base. At 100-something character limits, neither Twitter nor Facebook status updates replace email. However, Facebook messaging/mail is a valid replacement for email and while it’s primitive today it wouldn’t surprise me if the future looked like:

  • Everyone has a corporate email for work use
  • Everyone has a Facebook email for private use

And Tweets are replaced by Facebook status updates (which desperately need a better name) and your Yahoo and Gmail personal accounts get replaced by Facebook. But, from a MarkMail perspective, that future’s fine, too.

For more cogent comment on the Death of E-Mail meme, I’d direct you to Scott Karp’s post on his Publishing 2.0 blog, entitled simply E-Mail is Not Dead.

Forget BI: Go With Your Gut

Newsweek recently published an article that should be sending shock waves through the business intelligence (BI) market, populated with vendors like Business Objects, Cognos, and MicroStrategy.

BI tools help business people get access to information in corporate databases and data warehouses, so they can make better business decisions. In fact, if you looked at the tag lines for these vendors over the years, they consistently played off the theme of knowing more and therefore making better decisions:

  • Better decisions every day
  • Now you now
  • The power to know
  • Business intelligence: if you have it you know
  • [Mumble, mumble] something about insight [with lots of black] (poking fun at BOBJ’s “margeketing”)

My interest in this implicit premise led me to research how people made decisions, enjoying books like Decision Traps by J. Edward Russo, its newer sequel Winning Decisions, and Smart Choices by John Hammond. After all, in the BI world, if we were in the business of providing better information for making better decisions, maybe we should learn something — and perhaps try to help improve — the next step down the line.

But what if the premise were flawed? What if more information didn’t help improve decision quality? I remember asking J. Edward Russo (who is both a psychology and business professor) what people would most likely do with increased access to information? His answer: selectively filter the information to justify already made decisions. Hum.

In the end I concluded two things:

  • Selling “better decisions” wouldn’t work because most people — particularly executives — don’t think they have a problem. “I’m a great decision maker; look how far I’ve gotten in my career.”
  • If that weren’t enough, given my reading, I felt that the first thing companies could do to improve organizational decision making would be to systematically record votes on major decisions and periodically review the decisions and who voted which way. When I proposed we do precisely that at Business Objects, executives scattered faster than cockroaches with the lights turned on.

Clearly, while there was a big market for “more information,” demand for “better decisions” seemed lacking.

So what does Newsweek have to say? Almost in the Blink school of thought, there’s a new book out called Gut Feelings that argues our subconscious can do a pretty good job filtering and processing information.

Excerpts:

Hunches, gut feelings, intuition—these are all colloquial English for what Gigerenzer and his colleagues call “heuristics,” fast and efficient cognitive shortcuts that (according to the emerging theory) can help us negotiate life, if we let them.

[…]

Gigerenzer calls such decision making “satisficing,” as in “satisfying” enough to “suffice.” Satisficers don’t feel the need to know everything, in contrast to “maximizers,” who do want to weigh every detail imaginable in making even minor life decisions. Interestingly, studies have found that satisficers are more optimistic about life, have higher self-esteem, and are generally happier than maximizers.

The whole story reminds me a humorous moment in my marketing career. We were running the BI Summit, a top-end executive event in the UK. We had Michael Heseltine, a member of parliament, secretary, prominent UK politician and businessman as our keynote speaker. We were donig Q&A in an interview format and the interviewer — on ear-bud prompt by our UK marketing director — kept asking increasingly leading questions about the power of information in making decisions.

And then he pressed once too far. It was many years ago, but as I recall it went something like this:

Interviewer [building in hyperbole]: Well, then, would you say that some of the best decisions you ever made in your life were based on data and analysis?

Heseltine: Well, in fact, no. No, I wouldn’t. I remember when we decided to start [magazine X] just having a flash of intuitive brilliance in looking at a newsstand and realizing there was no publication in the [X] space. In fact, well, I think I’d say that some of the best decisions I’ve ever made have been based on pure instinct and intuition. No data at all, really.

There’s a lesson on decision-making in there. And one on over-reaching as well.

A Bottom-Up Education in Venture Capital

Everybody has some understanding of what venture capitalists do, right?

  • They sell money
  • They invest in [technology] startups hoping to get 10x returns
  • They invest in people, not technology or companies
  • They invest in market segments, not companies or technologies
  • They take risk hoping to yield superior returns
  • They eliminate risk by systematically isolating it
  • Yes, they invest money, but the real value they provide is in support

Well maybe it’s not so clear. :-)

By the way, personally, I’d argue there is some truth in all of the above statements. But that’s not the purpose of this post. While the popular adages appeal to the big picture intuitive side of us, they leave one feeling rather empty when you want to understand VC at a more mechanical level. How do the deals work? What’s binding when? What shape to liquidation preferences and/or dividends take? How about anti-dilution? Just to mention a few of the items one runs into on a “term sheet.”

To help people better understand the rubber-meets-the-road mechanics of venture capital, I’d recommend carefully reading these template documents conveniently posted on the website of the National Venture Capital Association.

For example, you can find a sample term sheet, a sample stock purchase agreement, and a sample investor rights agreement, among others. This stuff isn’t for the faint of heart. But if you want to get a concrete sense for how these deals are structured and how some of the variously Draconian terms (e.g., full ratchet anti-dilution) work, then take a look at these documents.

New Conglomerates: After the Deluge

I found an interesting post on SandHill.com by Ken Bender of the Software Equity Group, entitled After the M&A Frenzy: What’s Next?

One of my recent memes is that the mega-players in enterprise software are becoming new conglomerates. They seem more driven by size for size’s sake than by driving the synergies of integration. When you talk to people in different divisions of Oracle they sound like they work in different companies. The same is true for SAP, despite its much more organic growth. It’s undoubtedly true for people who work with Inxight within Business Objects within SAP.

While everyone seems to think Oracle is on track to become General Motors, maybe they’re actually on track to become ITT.

What happened to the conglomerates? Well, realizing that there were no real synergies to be had by combining such a broad range of businesses, many companies were spun out. The bizno-fashion pendulum swung from size to focus.

I think the same thing is likely to happen in enterprise software, and the recent SandHill blog comes to a similar conclusion. Excerpts from the discussion of large software vendors (bolding mine):

What will be the likely impact of a mild recession on the software industry? Enterprise customers will markedly reduce their IT capital spending, as they have in prior downturns. Consequently, software company growth will slow, and investors will increasingly turn their attention to profitability and net income. It’s almost a law of nature.

Larger software companies, in response, will turn their attention to cost-cutting, re-examining spending priorities, paring headcount, and enhancing the productivity of those who remain … Particular attention will be paid to products acquired during the M&A frenzy of the past few years.

After conducting these product line, operational and financial reviews, we fully expect a good number of public software companies will shed non-performing and incongruent product lines and business units in an effort to cut development, support and marketing costs.

They go on to discuss the impact on private equity (PE) owned software conglomerates as well:

… Private equity-owned platform companies now own a host of acquired assets they’re attempting to understand, manage, integrate and leverage. In good times, when IT budgets are healthy and growing, there’s little impetus to cut costs, especially after the first year following an acquisition.

But when growth slows, private equity firms will be very disciplined in assessing their acquired assets. They’ll really have little choice. The debt leverage on these acquired companies assumes continued economic expansion and continued growth of recurring revenue and operating income …

After taking a very hard look at their portfolio companies, … many PE investors will opt to shed non-core business units that are not providing the strategic leverage, accelerated growth or incremental revenue anticipated at the time of acquisition.

Seems like someone should create a company to buy all these units at fire-sale prices as they’re spun out of the new public mega-player and private equity conglomerates. All I ask is a board seat in return.