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Today I had the pleasure of watching Tony Hsieh, the CEO of Zappos.com, speak at the INC 500|5000 conference. Above is a video and below is the transcript from his speech - a must-watch/read for any entrepreneur. You can also see Tony's slideshow here
Here's a transcript of Tony's speech:
Good morning and welcome to the 2009 INC 500/INC 5000 conference. You know, yesterday, I was reading the newspaper. And I read that according to certain economic indicators, we're getting to the end of the recession. Let me say when I look out at this crowd, I think maybe we are at the end of the recession. Many of you asked me last night how many attendees were here. I'm happy to say that this is the biggest conference that we've ever had, 1,700 people, and I would like to thank all of you for coming--our sponsors, our INC 5000 [...] team, and the great team of the conference organizers. During this conference, you'll be hearing from a number of entrepreneurs, many of them who've been in the magazine before. For instance, our first speaker, Tony Hsieh, was on the cover just a few months ago. So in a sense, this conference is kind of like INC live. You'll also, of course, be meeting each other, talking to each other, and seeing some people. Also on stage, who've been on this list before, which I think is particularly pertinent to the people here. I would like to just tell you about a few of the people on the list. I mean, I could go on and on, because as I read the profiles as our reporters delve into your stories, one is really more fascinating than the next. So I just pulled a couple out, and I just wanted to tell you about these people. I need my glasses for this.
Note: Video may take 30 seconds to start playing. Today I had the pleasure of watching Tony Hsieh, the CEO of Zappos.com, speak at the INC 500|5000 conference. Above is a video and below is the transcript from his speech - a must-watch/read for any entrepreneur. You can also see Tony's slideshow here Here's a transcript of Tony's speech: Good morning and welcome to the 2009 INC 500/INC 5000 conference. You know, yesterday, I was reading the newspaper. And I read that according to certain economic indicators, we're getting to the end of the recession. Let me say when I look out at this crowd, I think maybe we are at the end of the recession. Many of you asked me last night how many attendees were here. I'm happy to say that this is the biggest conference that we've ever had, 1,700 people, and I would like to thank all of you for coming--our sponsors, our INC 5000 [...] team, and the great team of the conference organizers. During this conference, you'll be hearing from a number of entrepreneurs, many of them who've been in the magazine before. For instance, our first speaker, Tony Hsieh, was on the cover just a few months ago. So in a sense, this conference is kind of like INC live. You'll also, of course, be meeting each other, talking to each other, and seeing some people. Also on stage, who've been on this list before, which I think is particularly pertinent to the people here. I would like to just tell you about a few of the people on the list. I mean, I could go on and on, because as I read the profiles as our reporters delve into your stories, one is really more fascinating than the next. So I just pulled a couple out, and I just wanted to tell you about these people. I need my glasses for this. Number 17 on the list is P3S Corporation, the daughter of a Mexican immigrant mother, and an American father, Mary Ellen Trevino grew up in Port Isabel--a town on the Texas-Mexico border--under difficult circumstances. Her father was a stroke victim and unable to work, so Trevino studied hard in high school, earned a scholarship, and attended college at St. Mary's University. She went on to get her MBA and began a career in the federal sector. She started P3S Corporation in 2005 to provide a variety of business solutions to the federal government. P3S is the highest-ranked female-owned company on this year's list. Congratulations, Miss Trevino. On number 225, was raised by blue-collared parents in Niagara Falls, NY. Gregory Celestan wanted a ticket out of town and needed a way to pay for college. He was accepted at West Point Military Academy, a great way to get a way to pay for college. He became a Foreign Area Officer, studying the language in culture of a region for military intelligence, specialized in Russian. In 2004, Celestan retired, having served 20 years and reached the rank of Lieutenant Colonel. He recalls watching large defense contractors at work and thinking, "I can do better". So after the end of his service, he founded Celestar, which provides intelligence support to government organizations. The concept of "I can do better", how many of you looked at something and thought, "I can do better"? Number 1507, Liberty Tire Recycling has kept a hundred million rubber tires from landfill; of the equivalent 25% of the country's annual scrap tires. Thank you, CEO Jeffery Kendall. Thank you, Jeffery. And last, I'd like to mention my old friend, Kingston Technology. Kingston Technology was started by Taiwan immigrants, David Sun and John Tu, in 1987 and became the number one company on this list in 1992 with $141 million in revenue and a growth rate of--dig this--117,000%. It has shown up three times since then, which means, it has kept growing and growing and growing. If you wonder who's at the, toward the bottom of the 5000 list, well, you can look at Kingston Technology at number 4445. It is $4 billion in revenue and 4,500 employees. Of course, all these companies are much more than a series of impressive numbers, but the INC ranking is at its heart a celebration of numbers. The list is not about what's cool, or who the editors like, or the result of some kind of squishy methodology. The list is about the revenue growth, and we know from publishing this list over the years that revenue growth often leads to people getting hired and great things getting done. And I'm not the only who thinks so. A friend of INC's really wanted to be here; and when he found his own conference was scheduled at exactly the same time, he asked if he might say a few video words instead. Given that he's a very smart man--some might say brilliant--and that he's highly articulate, and that he's extremely accomplished and knowledgeable, I said, "Yes, please. Thank you." Could we roll the videotape? [...] 30 year history, many of the household name company, things we know today, like Microsoft and Oracle. Once we're found on this list is the nation's 500 fastest growing privately-owned companies. Congratulations to this year's INC 500 and 5000 honorees. Your accomplishments including accurate revenue of $214 billion dollars and immediate 3-year growth rate of 126% were impressive and particularly inspiring, given the challenging economic climate we face this year. I'm proud of the record-level prosperity that America experienced when I was President. And while I believe the government's policy is at a critical role at playing in creative conditions for economic growth and rewarding innovation and hard work. I never forget that the heavy lifting of the American economy doesn't take place in Washington DC. In factories, labs and offices all across America run by people like you who turn ideas and products and services make the impossible possible and work hard to make sure their companies can compete. In addition to creating the jobs that are important in turning our economy around, a lot of you also know as I do, about the importance of giving back to your communities. Many of you participated yesterday in INC's day of service. I encourage all of you to make public service a regular part of your lives for the opportunities that are found everywhere. For example, I'm pleased to have INC as a part of my foundation's Clinton Economic Opportunity this year. Through this partnership, we've created the Entrepreneurial Mentoring Program, which pairs entrepreneurs learning how to grow companies in intercity communities, was successful business leaders in entrepreneur mentors, like INC's own Norm Brodsky and Jake Owens. The current program is working with businesses in Oakland, Chicago, New York and Newark. We're building programs in several more cities across America, including Philadelphia. I look forward to continuing to work with INC to reach more entrepreneurship, and I hope some of you will agree to service and prepare mentors as well. Thanks for letting me say a few words today. And I hope you enjoy the conference. Thank you, President Clinton. We're grateful that the President's so passionately interested in entrepreneurs, and I hope that some of you will consider joining the mentoring program. I understand that a day of service yesterday was an incredible success. Many of you went out to do that, and perhaps, some of those who were inspired to do that would also be inspired to be a mentor. There's an explanation of the mentoring program in your bag, and I hope you will take a look at it. And now, here to introduce the first speaker is Richard Quigley, President of Chase Business Cards. Thank you very much for coming. President of Business Card for JPMorgan Chase. We're thrilled to be here today with you to celebrate your inclusion on the INC's 500/5000 list; but maybe even more, as Jane said to celebrate the fact, that you've been incredibly successful in these very difficult economic times. And I think JPMorgan Chase, we've been so inspired by your resiliency and your resourcefulness through this difficult period. In fact, we've been so inspired by the energy and passion of small business owners that just yesterday, we launched something called INK from Chase, which is a suite of new business cards that are especially designed for small business owners. The other thing we did just recently was ask all of you to participate in a survey, and it has some pretty interesting results from this survey where you gave your opinions about your business strategies. And one of the things that you said, which was very striking I thought, was how important customer engagement is to all of you. In fact, 54% of you said that customer engagement was critical to your business strategy going forward getting more revenue from your existing customers. And I think nobody exemplifies that notion of customer engagement more than our first speaker today, Tony Hsieh, CEO of Zappos. They've done an absolutely amazing job of building a brand that's really all about catering and service to [...] customers. Zappos, if you don't know, is a 10-year old company. Tony started in 1999; and in that brief period of time, they've gone from having $1.6 million dollars of gross merchandise revenue to today over $1 billion dollars. I, myself, live in a Zappos household and my wife is an avid Zappos customer. I think she thought it was just amazing that instead of having to actually go to the shoe store, the shoe store would come to you--and we've made a substantial contribution to his $1 billion dollars in sales. Another thing, which I think is an interesting evidence of Tony's connections with his customers is that if you were to go to his Twitter page, there's 1.3 million people who've followed Tony and what he has to say on Twitter every day. I think it's on that level that he has this disengagement and this relationship with his customers, which is truly amazing. So please join me in welcoming a really extraordinary entrepreneur, Tony Hsieh. So, I wanted to do a quick survey first. How many people have heard of Zappos prior to this? And how many of you have actually shopped with us before? OK. So normally, when I do the survey, the ratio of people that have shopped with us is about 2:1 women to men; and a lot of the men tell me that they themselves have not actually shopped in Zappos, but their girlfriends or wives have. I ask this same question about a year ago to a record executive from one of the major record labels. He was turning our offices in Las Vegas--and by the way, I'll give information later on about the tours there. They're actually open to the public, so next time any of you are in Las Vegas, I would definitely recommend coming for a tour. It's a lot of fun and takes about an hour. And so he was walking through the merchandising area when I asked this question, and then, I took him upstairs to our customer loyalty team--and that's our name for our call center--and as he was walking by, I asked if he had shopped from us. He said, "No," but he suspects his wife has because these white boxes keep showing up, but then they disappear, and he doesn't know whether his wife actually bought the shoes or returned the shoes or what was going on. And anytime he asked his wife what was going on, she just refused to tell me. So, he sat down next to one of our customer loyalty team reps and forced her to pull up his wife's account. And discovered that she had spent over $62,000 in her lifetime; and so as far as I know, they're still not divorced. Anyways, I definitely recommend coming for the tour. So before getting into Zappos, I wanted to talk a little bit about what led me to Zappos, and the story actually begins with pizza. I was running a pizza business in college with a college roommate and was hiring the workers and dealing with suppliers, occasionally making the pizza myself. And this guy named Alfred, who's actually our CFO and COO today at Zappos, would stop by every night and order a large pepperoni pizza from me. And it wasn't that weird. I didn't think anything of it at the time 'cause in college, we actually had a couple of nicknames for Alfred. We would call him either the 'human trash compactor' or 'monster,' because anytime we went out to a Chinese restaurant--there would be like 10 of us--and he would literally finish everyone's leftovers, and he just really enjoyed eating. And so, he would stop by every night, buy a large pepperoni pizza; but then sometimes, he would come by a few hours later and buy another large pepperoni pizza from me. And I thought to myself, "OK, this boy can definitely eat." Well, I found out a few years later, Alfred was taking the pizzas upstairs and selling them off by the slice so, I guess that's why he's our CFO and COO today. So after the pizza business, the same guy was running the business with, he and I started a company called LinkExchange, and we grew that to about 100 or so people and ended up selling that company to Microsoft in 1998. But what a lot of people don't know is actually the reason why we ended up selling the company. I remember when it was just five or ten of us; it was a lot of fun. We're working around a clock is kind of like you're typical .com back in the day--had no idea of what day of the week it was--sleeping underneath our desks, showering occasionally. And then, we didn't know any better to pay attention to company [Pulitzer]; and by the time we got to 100 people--like I remember, I, myself, tried getting out of bed in the morning and that was kind of a weird feeling 'cause this is a company I had cofounded in--if I, myself, didn't look forward going into the office, then how must the other employees feel? And so, we ended up selling the company to Microsoft, and then Alfred and I got together and formed an investment fund. And we invested in about probably 20 or so different internet companies and Zappos just happened to be one of them. But over the period of the next year or so, I realized just sitting on the sidelines and investing what was pretty boring, and I really missed building something and being part of building something. So I joined Zappos full-time within the year, and I've been with Zappos ever since. And then also, actually, back in July we announced Amazon--the deal hasn't actually closed yet, we're expecting to close before the end of the year--but Amazon just announced that they're going to acquire Zappos. And so we're pretty excited about that in being able to build Zappos brand under the Amazon umbrella. So at a glance, most people think of Zappos as a footwear, online footwear retailer, and that's actually how we started. But internally, we think of Zappos brand very differently. We're actually hoping ten years from now, people won't even realize that we've started selling shoes online. In fact, today we sell a lot more than shoes. We sell clothing, beauty products, kitchenware, housewares; and really, we just want Zappos brand to stand for the very best customer service and customer experience. And we even have customers email us and call us and ask us if we would please run an airline or start or run the IRS. And you know, we're not going to do either of those things this year; but 20-30 years from now, I wouldn't rule out a Zappos Airlines. That's just about the very best customer service with the best customer experience. So one brand we look to for inspirations sometimes is Virgin. They're in a whole bunch of different businesses: music, airlines, and so on. The difference is that the Virgin brand is more about being hip and cool whereas we just want the Zappos brand to stand for the very best customer service. So we've gotten a lot of recognition--especially this year--but the one that we're actually most proud of in terms of publications is making the Fortune 100 Best Companies to Work For. We actually were the highest ranking newcomer to the list this year, and that was a goal that we had set out earlier on because we wanted to make sure that we didn't make the same mistake that I made at my previous company. So we're all pretty happy about that. So in terms of our focus though, a lot of people think that the way you need to get more customers is to focus on marketing and always think about how to market to new customers. Our focus is really on how do we make the customer experience better and better. We have a little over 11 million customers; and on any given day, about 75% of our orders are from repeat customers. And our philosophy is take most of the money that we would have spent on marketing; and instead, put it into the customer experience, and then let our customers do the marketing for us through word of mouth. So over the past ten years, we basically grown from no sales in '99 to over a billion dollars in gross merchandise sales, up in 2008; and then the number one driver of that growth has been through repeat customers and word of mouth. So what is customer service? Well, it starts with our policies. We offer free shipping both ways, so a lot of customers will order 10 pairs of shoes, and we'll ship all of them there to where they're living for free. And then they'll try them on with 10 different outfits and then ship back the ones that they don't like or that don't fit. We have a 365-day return policy for people that have trouble making up their minds or committing, and we have a 1-800 number that's at the top of every single page of our website. And that's pretty different from most websites. Most websites--it's very hard to find any contact information, it's normally 30-like, 5-links deep--and then it's an address that you can only email once. And we take the exact opposite approach. We actually want to talk to our customers. It's funny 'cause sometimes I'll speak at branding or marketing conferences, and there's a lot of discussion about consumers being bombarded with thousands and thousands of marketing messages everyday. How do you get your messages to stand out? How do you get your brand to stand out? And as kind of unsexy and lo-tech as it may sound, the telephone is actually one of the best branding devices out there. You have the customer's undivided attention for 5-to 10-minutes; and if you get the interaction right, what we found is that the customer remembers it for a very long time and tells her friends and family about it. And so, what we've also found is that most customers that call us actually does not result in immediate sale. So, we're not there trying to up-sell people or try to convert every call into a sale. In fact, we run our call center very differently from most call centers. There's no scripts; there's no call times. We actually just found out that our longest phone call just happened about a month ago. It was 5 hours and 57 minutes 'cause customers sometimes call; they just call for all sorts of reason. Maybe it's the first time going through the return process or maybe there's a wedding this weekend, and they just want some advice on what to wear and, sometimes they call just 'cause they're lonely and want to talk to somebody, and we're happy to help them out. The other interesting thing is even though we sell online, but what we found on average every customer calls us at least once sometime during their lifetime. So most of what we focus on though is what happens after the sales been made. There's a lot of websites where you can order something; and maybe a day later or a week later, that we get a message back saying, "Oh sorry, that items actually on back order; it's out of stock and not available," so for us, we decided to go with the philosophy of actually only showing on our website what we knew was physically in our warehouse. Our warehouse is located about 15 minutes from the UPS Hub; and because we run the warehouse 24/7, which is actually not the most efficient way to run a warehouse. The most efficient way is to let the orders pile up; and then when the picker has to go pick all the items, they don't have to walk as far. But we decided we're going to sacrifice some efficiency in order to make the customer experience better. And so a lot of customers will order as late as midnight Eastern--and because we're so close to the UPS Hub, because we run our warehouse 24/7, and because we will do surprise upgrades to overnight shipping for a lot of our customers--and they receive their order on their doorstep eight hours later and actually raise that whole "wow" experience for the customers and generates that word of mouth. And a lot of people ask us, "isn't that expensive to do, to upgrade to overnight shipping?" And it is very expensive for us, but for us, we really view that as our marketing dollars because that's improving the customer's experience and that's what's getting our customers to talk about us to their friends and family, and really trading an emotional connection with the customer. The other thing we do is when the customer calls and let's say they're looking for a pair of shoes, and we're out of stock with a certain size, everyone's trying to actually look on at least 3 other websites; and if they find the shoe there to direct the customer to the competitor's website. And yes, we obviously lose that sale, but we're not trying to maximize every single transaction. We're trying to build a lifelong relationship with our customers. So I talked about all these different things that we do on the customer experience side, but our number one focus out of the company is actually not customer service. Our number one focus is company culture. Our whole belief is that if we get the culture right, then most of the other stuff, like building a long-term [...] brand or delivering great service will happen naturally on its own. So we actually do a lot of different things to make sure that not only does our culture not go downhill as we get bigger and bigger, but our culture actually scales and gets stronger and stronger as we grow. And it starts with the hiring process. We actually do two sets of interviews. Our hiring manager, the hiring manager of his or her team will do this standard within the team, relevant experience and technical ability and so on; but then our HR department does a separate set of interviews, purely for culture fit. And they have to pass both in order to be hired. So we've actually passed on a lot of really smart, talented people that we know will make an immediate impact on our top or bottom line; but if they're not a culture fit, we won't hire them. And the reverse is true, too. We'll actually fire people, even if they're doing their specific job function perfectly fine, if they're doing something that's not living up to our core values and is bad for the culture. And our performance reviews are also 50% based on whether you're living our core values, or if you're a manager and inspiring the core values in others. The other thing we do is everyone that's hired in our headquarters in Las Vegas--it doesn't matter what position you're in, you can be in accounting or lawyer, software developer--you go through the exact same training as our customer loyalty reps or our other call center reps. And so we go over our company history, our philosophy about customer service, [...] customer culture, and then you're actually on the phone for two weeks taking calls from customers. And the reason we do that is because if we really want our brand to stand for the very best customer service, then our philosophy is that customer service shouldn't just be a department, it should be the entire company. And during our busy season, and Q4 around the holidays, it's great because people from every department has had training, they can jump on the phones as well, so we've found that's been very helpful. The other thing we do is during that training process which is a 4-week processing in Las Vegas; and then we also send you to Kentucky for a week, which is where our warehouse is. And you do all the warehouse functions picking, packing, and receiving, and so on; but while in Vegas at the end of the first week, we make an offer to everyone in the class. And the offer is this: we will pay you for the time you've already spent working and being trained plus a bonus of $2,000.00 to quit and leave the company right now. And it's actually a standing offer 'til the end of training, and we actually just extended it even further so that the last couple months after training. And the reason for that is because we don't want people at Zappos just for a paycheck. In Las Vegas, there's plenty of other call centers--and $2,000.00 is pretty significant amount of money--and starting pay that is $11.00 an hour. And we really want people that believe in our long term vision and want to be a part of our culture, so these are some of the things that we do in order to help protect our culture and make sure it gets stronger and stronger. So for 2009, in terms of how we're thinking of the Zappos brand, we're really thinking about going the three C's. Really, we think of this in terms of the life cycle of the customer. If you've never heard of Zappos before, we want to make sure that you understand that we have a large selection of clothing and shoes. If you know about that, then we want to make sure that you understand that we're about the best customer service, and that's not something that we say, so much that people experience when they get that surprise upgrade to overnight shipping or when they call and talk to one of our call center reps. And for people that know that, we want to make sure that they understand our culture and our core values because that's the platform that makes everything possible. So we've actually had customers email us and tell us that Zappos is happiness; and above this, that excitement they feel when they get that perfect outfit or the perfect pair of shoes. So whether it's the happiness they feel from getting that perfect item or the happiness that customers feel from dealing with someone that's a real person on the other end of the phone, we feel the customer service, or the happiness the employees feel by being part of a culture that they really believe in, the thing that ties all of this together for us at Zappos, is that Zappos is really just about delivering happiness. Whether it's to customers or employees, and we also apply that same philosophy to vendors as well. So what is the Zappos culture? Well, for us we came up with a list of ten core values, and this is something where we approach it a little differently. We didn't go and just have a few people go on a retreat somewhere and say, "Oh what should our core values be?" We actually emailed the entire company and asked them, "What do you want the Zappos core values to be?" And the keyword here is actually committable core values because a lot of companies have things called--they might call them core values or guiding principles or so on--but the problem with most of them is that it usually reads like a press release, like a marketing department put together, it's very lofty sounding. And maybe you learn about it on day one of orientation, but then it just becomes this meaningless plaque on the wall, and we wanted to make sure that it didn't become meaningless. And so by committable, it means that you're actually willing to hire and fire based on those core values. And so these are our ten core values at Zappos, and we actually have interview questions for each and every one of these. The probably one that trips us up the most is actually number ten, be humble, because there's a lot of smart, talented people out there that are also egotistical. And at Zappos, we interview someone that's really egotistical, no matter how smart or how much they can contribute to the company in the short-term, we won't hire them. It's not even a question, whereas at most companies, probably the conversation afterwards would be, "Well, this guy can add a lot of value to the company, and he might be annoying and rub you the wrong way occasionally, but he's going to add a lot of value so we should hire him." And I think that's why company culture start going downhill at larger companies because that one hired isn't going to break or wreck the company culture, but making compromises like that over and over and over again is what eventually brings the company culture downhill. So we have different interview questions, just as an example for number three, create a fun or little weirdness. One of our interview questions is actually on the scale of one to ten, how weird are you? If you're a one, then you're probably a little bit too straight-laced for the Zappos culture; if you're a ten, you might be too psychotic for us. But there's no actual number that we're looking for. Our belief is that everyone's a little weird somehow and really, this is just a fun way of saying that we recognize and celebrate each person's individuality. And we want their true personalities to come out in their interactions with employees as well as their interactions with customers over the phone. Number four: be adventurous, creative, and open-minded. So one of the questions we ask is on a scale of one to ten, how lucky are you in life? One is, "I don't know why bad things always seem to happen to me." Ten is, "I don't know why good things always seem to happen to me." Well, we don't want to hire the 'ones' because they're unlucky, and they would bring bad luck to Zappos. We don't want bad luck to bring to Zappos. But actually, this was inspired by a research study that I read about a few years ago where they actually asked the exact same question to random groups of people. And so they got answers all over the board; and then they asked the participants to do a task, and the task was to go through a newspaper and count the number of photos that were in that newspaper. Now what they didn't know was that it was actually a fake newspaper; and sprinkled throughout the newspaper were these headlines that would say things like, 'if you're reading this headline now, then you can stop, the answers 37 and plus and collect an extra hundred dollars for seeing this headline from the researcher.' And what they found is that people who considered themselves unlucky in life, generally, never noticed the headlines. They went through the task at hand; and eventually, got the right answer. But the people that considered themselves lucky in life, generally, noticed the headline, stopped early and collected the extra $100 dollars. So the takeaway isn't so much that people are inherently lucky or unlucky, but that luck is really more about being open to opportunity to beyond just the task or the situation as it's being presented. And so that's why we ask that question for core value member for him. One of the other things that one of our other core values about being open and honest, and we've really found that committing to transparency, whether it's with employees or with vendors, or customers has really been something that we really believe in and has had a lot of benefits. So we have a lot of different ways we commit to transparency. If you go to Twitter.Zappos.com, we have 400 employees that are on Twitter. And we actually just aggregated all of their tweets together, and you can get a good sense of what our culture is like by going there. For our vendors, we have an extranet, where they can log in and see the exact same information our own wires can see. They can view on-hand inventory, sales and profitability, markdown and so on. We did ask sometimes, like aren't you worried about that information getting out in the hands of the competitors? And realistically, I'm sure some of the information does get out there; but on the flip side, we work over a thousand different vendors. And for us, it's like having an extra thousand pairs of eyes helping us co-manage the business, and we've just found out the benefits far outweigh any perceived cons or risks to it. We also have a Zapposinsights.com where we really, it's a video subscription service. And we really just share anything and everything about how we run our business; so with anyone that's a member that can go in and ask a question about recruiting. Or for our interview questions, for example, then we'll have the head of recruiting answer that question. And we also have a live event where companies from all over the world come in, and we really just open our doors and share how we do everything. So this is a common response that we get, "That's great." "Happy, you have a nice culture Zappos, but it would never work at my company." Well, I know Jim Collins is speaking, and he's written several great books butGood to Great is one of our favorites at Zappos. And what he's found is that actually it doesn't matter what your core values are or what your culture is as long as you commit to them. The most important thing is alignment. The other book I would also highly recommend is Tribal Leadership, which also looks into this aspect; and actually, if you go to Zappos, you can download the audio version of Tribal Leadership for free. That's something that we do just to help out other entrepreneurs and businesses. The other thing I wanted to talk about is vision. When we started out, our vision was 'let's just sell a lot of shoes.' And then three or four years later, we sat around one day and asked ourselves, "What do we want to be when we grow up?" "Do we want to be about shoes or do we want to be about something more meaningful?" And that's when we decided we really wanted the Zappos brand to stand for the very best customer service and customer experience. And so, when we made that decision and announced it to the company, what we found is that so many employees were a lot more passionate about the company. And when customers call up, they can sense the other person on the other end of the phone, really truly care about delivering the best service; and when vendors came, they could tell that 'wow,' like they can really sense the passion of the employees. And so for us, it was kind of an accidental thing. But what we found is that when we expanded the vision where it wasn't just about profits or revenue or being number one in the market, that suddenly just the whole business seemed to move forward. So I get asked sometimes, "What's a good market to go into?" by entrepreneurs. And I would say, actually, think about what you're actually passionate about and believe in and is meaningful to you. And don't just chase the money directly. Now I like to say is chase the vision, not the money. A movie called Notorious came out awhile back; and actually, Puff Daddy says to Biggy Smalls or Notorious PIG, "Don't chase the paper, chase the dream." I just wanted an excuse to put this slide in here. I know there's a lot of entrepreneurs here. I would challenge you to think about what would you be passionate about doing for ten years, even if you never made a dime? And if you have employees, what's the larger vision and greater purpose in the work beyond just money or profits or being number one in the market? You know there's a big difference between motivating employees and inspiring employees. And our whole philosophy is don't worry so much about the motivation part of it; but if you can inspire the employees to a larger vision, that's meaningful to them--that you yourself are passionate about--then you can accomplish so much more through inspiration instead of motivation. So, this is kind of the evolution of how we thought of the Zappos brand. We started out with just wanting to be about a selection of shoes, and then we evolved to customer service, and then we started thinking about our culture and core values more. And then in terms of customer service, how do we want to do it? We wanted to do it through a personal and emotional connection; and then this year, the thing that ties all of it together is really, it's just about delivering happiness to employees and customers. And that's really what we want our brand to be about. Wanted to tell another pizza story. This was two or three years ago in Santa Monica. I was at a Sketcher's Sales Conference and a bunch of us, after the conference, decided to go bar hopping in Santa Monica. And I never really been out in Santa Monica before, so there was a few of us from Zappos and a few of us from Sketchers, and we went out to the first bar and ordered a round of drinks. And then someone--I'm not actually sure who ordered a round of shots--and so, we took the shots and finished the drinks. And we went to the next bar and ordered another round of drinks; and then someone else ordered a round of shots, and we had to drink the shots because you can't let the alcohol go to waste. And so we drank the shots, and then we went to the 3rd bar; and someone ordered a round of drinks, and then I'm not sure how many shots were ordered after that. But what I do know is that we ended up basically, going from bar to bar and eventually last call in Santa Monica's 2am; so eventually, we finished and wound up and started walking back to the hotel. And during this walk to the hotel, one of the Sketchers girls that we were with kept talking about this pepperoni pizza that she had seen on the room service menu; how she was looking forward to like eating the pepperoni pizza as soon as we got to the hotel room. Like she was going to call room service and order the pepperoni pizza, and it was only a 5 minute walk, but it seemed like it was much longer with her constantly talking about it. And so we eventually wound up in the hotel room, and she ordered and calls room service; and unfortunately, learned that room service doesn't deliver hot foot after 11pm. So she was dejected, and she's like, "Oh, I was so looking forward to this pepperoni pizza. I was thinking about it all night." And I'm like, "I know." And so the rest of us from Zappos--in our inebriated state--said, "Call Zappos, call Zappos." Like to us, it was literally the funniest thing that we could have in the world, really. And so, she put it on speaker phone, took us on our dare, called Zappos and said, "I'm like in Santa Monica, and I've been thinking about this pepperoni pizza all night, and I tried calling room service. Room service doesn't deliver after 11pm; but they do, but they don't deliver hot food after 11pm. And like, is there anything you can do to help me 'cause I heard you're about the best customer service.'" Well first there was an awkward silence. And the rep said, "You know you called Zappos, right? Like, we sell shoes. We sell clothes, but we don't sell pizza, yet." She was like, "Yes, but I've just been craving this pizza all night and so..." "Ok, hold on" and came back two minutes later with a list of the five closest places in the Santa Monica area that were still open delivering pizza at the time. Now I hesitate a little to tell this story because I don't want all of you to start calling Zappos ordering pizza. But I just think it's a fun story to illustrate that obviously we don't have a proper procedure for this; but if you get the culture right and make sure everyone understands the long-term vision of the company, then most of the other stuff like delivering great service, billing or brand will just happen naturally on its own. So I have a few minutes left, so just wanted to take a quick step back and ask you guys to think about...forget the business of it, just think about what is your goal in life? And think about what it is you actually want to accomplish out of life. What's interesting is if you ask different people this question--and I want you guys to actually think about what is your personal goal in life--you get all sorts of different answers. Some people say they want to grow a company or get a job, find a boyfriend/girlfriend, and then, you ask, "Why?" And then you say, "Oh, I'll find a soulmate or retire early." And then ask yourself, "Why again?" "Then, I can get married, spend more time with family"; and if you keep asking, "Why" enough times, and I would keep encouraging you to keep asking yourself "Why" for whatever goal in life that you have. Actually, eventually everyone gets the same answer. And what's interesting is that people are doing whatever they're doing because they believe that it's actually what's going to bring them happiness. So, a few months ago, actually about 12 months ago, I started getting interested in this whole field called, that's basically about the science of happiness. And prior to 10 years ago, 11 years ago, this field didn't even exist. Today it's called, Positive Psychology because psychology used to be about, you know, looking at people that have had something wrong with them, trying to make them normal, but no one ever studied normal people in making them happier. And one of the things that came out of the research is that people are actually very bad at predicting what will actually bring them long-term happiness. Most people think once I get this, then, I'll be happy; or once I achieve this, I'll be happy. But there's been so many studies of lottery winners, for example, you look at their happiness level right before winning the lottery; and then look at their happiness level a year later, and it's usually the same or lower. So I thought that was pretty interesting; and then I thought about, OK, I'm so focused on Zappos, and there's a science behind the lotto stuff; business that I'm doing. And Zappos for me is very exciting; but in terms of the business, I'm looking at the science of conversion or direct marketing or repeat customer behavior. And I thought, "What if, and I don't know the right percentage, but what if you spent just some of your percentage of your time, just studying and learning about the science of happiness? How much happier could you be, if you applied some of those concepts to not only your personal life, but to your business? To your customers? To your employees?" You know, people go through life trying to achieve all these different things. You know a lot of them actually never even make it to the happiness stuff; but if the eventual goal is happiness, what if just by trying to understand some of the research that's already been done out there on happiness, you can basically take a short cut and go straight to the happiness and avoid a lot of the stuff in between that might be unnecessary. So, I thought that was interesting. I'm actually running out of time, so I'm going to make this presentation, but I want to give all of you information; but just a few different frame works, you'll be able to look through the slides of happiness that's come out of the research. And one is that happiness is really just about perceived control, perceive in progress, connectiveness, and vision--or meaning being a part of something bigger than yourself--and if you have those 4 things, then what the research is showing is that that's actually all you need for happiness. Another one is Maslow's Hierarchy. There's a book called Peak, by Chip Conley that basically takes Maslow's Hierarchy, and then condenses it to three levels and applies it to customers and employees and investors. So as an example, for employees, the three levels would be job versus career versus calling; and for us at Zappos, that's really our focus for our employees is really for them to get to think of their work, not as a job, not as a career; but really, as a calling. And then the other framework is that there's actually three types of happiness: pleasure, engagement, and meaning. And what the research have shown is that the first type of happiness--which I like to call the rock star type happiness--it's all about chasing the next high; and it's great if you can constantly find that source of stimulant that gives you the next high, but the problem is that it's very hard to maintain. So as soon as the source stimuli goes away, then your happiness drops right down to where it used to be so it's very hard to maintain unless you're a rock star, basically. The second type is, there's a book called Flow, but it's got those times when you're so engaged in something that, it seems like 20 minutes have passed, but really 3 hours have passed; and so for some people it might be running, for other people, it might be painting. For professional athletes, they refer to it as being 'in the zone' when peak performance meets peak engagement; and this is the 2nd longest type of happiness. And then the 3rd type that they've found through the research is actually the longest lasting type of happiness, and when part of something that's bigger than yourself. And so for some people, for example, might be volunteering for your favorite charity that they really believe in. So what's interesting is most people go through life, chasing after the first type of happiness with the thought that once I achieve that; then I'll work on the 2nd type of happiness. And then if I ever get the time, then I'll work on the 3rd type based purely on the research and data. The proper strategy is actually to focus on the 3rd type of happiness, and then later on, the 2nd type, and then, the 1st type, which would be icing on the cake. So, I would encourage you to learn more about the science of happiness.Happiness Hypothesis, great book, one of the most impactful books I read in the past five years, and you don't need to write down any of this information. Basically if you want this presentation, you can just email me, tell me at Zappos.com. Also, we have something that we put out once a year, we ask all of our employees to write a few paragraphs about what the Zappos culture means to them; and except for typos, it's unedited. And I'm holding it right here. It's a physical book; and so basically, it's like customer reviews you might find on websites except their employee reviews. So I need your physical mailing address if you'd like a copy of that. I'd be happy to send out for free. And if you're ever in Las Vegas, you know, tours at zappos.com to schedule a tour. And we'll pick you up from the airport, drop you off at the hotel. So just wanted to leave you with thinking about if the ultimate goal when your life is happiness, what percent of your time do you want to spend learning about the science of happiness? I compare it to training because it's like training for a marathon. We all instinctively know how to run, but there's certain things about training for a marathon that they've done research. And there's certain metaphysics for marathon that are actually better and some are kind of intuitive to what you may normally think if you're not a marathon runner. So just think that how can the science of happiness help yourself, your business, your brand; and if the research shows that on the company's side that companies that have a higher purpose and a bigger vision that has meaning end up doing better as shown through books like Good is Greater,Tribal Leadership. And then to parallel to that, if focusing on your personal happiness, if having a higher purpose leads you to personally be happier, then think about what is your company's higher purpose and what is your own personal higher purpose. You know, I'm not up here trying to sell another pair of shoes; but hopefully, through this presentation you've been inspired to deliver better service to your customers and make customers happier, or you've been inspired to focus on company culture to make your employees happier. Or you just been inspired to learn more about science happiness and make yourself happier than I'll have done my job in helping us at Zappos accomplish our higher purpose, which is all about delivering happiness to the world. Thank you very much. Hello. I'm Dan Farrar, [...} of INC. Thanks, Tony. INC's story about Randall Grahm was cut-titled, The Do Over. Randal took his $30 million dollar company, Bonny Doon Vineyard; and essentially, stopped doing the things that made him comfortable and successful, no half-measures just stopped. Randall had built a reputation as a good winemaker and a great way witty marketer. At a certain point in his life, he realized he got the equation wrong. What he really wanted was to make brilliant wines, whatever the cost, his bottom line, which is why as the story says, he renounced his magical powers. He's going to talk today about how he remade his business and his life. Please welcome Randall Grahm.
Today I had the pleasure of watching Tony Hsieh, the CEO of Zappos.com, speak at the INC 500|5000 conference.
Following him was Randall Grahm, the founder of Bonny Doon vinyard. Randall had a very sincere message of trying to downsize his winery so he could focus on what he loves, and the successes and challenges he's faced in doing so. Audio is below.
Today I had the pleasure of watching Tony Hsieh, the CEO of Zappos.com, speak at the INC 500|5000 conference. Following him was Randall Grahm, the founder of Bonny Doon vinyard. Randall had a very sincere message of trying to downsize his winery so he could focus on what he loves, and the successes and challenges he's faced in doing so. Audio is below.
Here's another excellent Deloitte TVC "Legends" session, put together by Ellen Mundell, with Doug Humphrey, the founder of Digex, Cidera and Colocation. Doug tells it like it is, with a refreshing perspective on his experiences taking Digex public in the late 90's.
Here is a transcription of the event:
Legends Series: Doug Humphrey, founder of Digex, Cidera & Colocation
Here's another excellent Deloitte TVC "Legends" session, put together by Ellen Mundell, with Doug Humphrey, the founder of Digex, Cidera and Colocation. Doug tells it like it is, with a refreshing perspective on his experiences taking Digex public in the late 90's. Here is a transcription of the event: Legends Series: Doug Humphrey, founder of Digex, Cidera & Colocation Dated: September 22, 2009 [...] (3:22) For those of you who don't know me, I'm Chuck Carr. I'm a partner at Deloitte; I lead our, what we call our, early stage drug practice in the greater Washington area. On behalf of Deloitte and all our Tech Metrocenter sponsors, we want to welcome you all here this morning. This kicks off our fall season of the Technology Venture Center. We're very fortunate to the kickoff the Legend with Doug Humphrey. Basically what we do for these types of events is it's very open-ended; it's a lot of Q and A; Doug will speak a little bit about the companies he's been involved with back in the late 90s, and those of you who were in the area, I'm sure know Doug. He was quite visible during that timeframe. He went into hiding a little bit here. I retired, but I'm done with that now. He's back. And, sort of kicking off being back, I guess, we are so fortunate to have Dough here, and...I'll turn it over to Doug now. Ok. I see ex-business partners here! ... you know who that is. Well, thank you very much. I will refer to notes occasionally so I don't get too far off track...Everyone turn off your phones, etc. and I will try to remember to tell you to turn them back on when this is all over because that's the problem with turning your phones off; you'll be wandering around saying "god, everything must be going great. No one's calling me." And then you're like, "oohhh, nooo!" and you turn on your phone and you can't believe. I turned on my phone one day, and somebody said, "how's it going?" and I said "we'll find out!" And I turned it on...and it went BLEEP every time a text message came in, and it sits there and starts dancing around on the table. BLEEP BLEEP BLEEP BLEEP BLEEP. And, I was like "Oh no." Anything more than, like, eight bleeps and the day's done. So, thanks to Deloitte, which is, congratulations on being a survivor. I had to check yesterday, on a conference call, what is it, a big what now, and they were like: four. I said, "ok, good." When I retired I think it was between like five or six wasn't sure; I remember the phrase "Big Eight" when it wasn't a college. [laughs] You guys remember that? Anyone here old enough to remember that? Yeah, thank you. You make me feel better. And, then Cooley Godward [Kronish LLP], who is my favorite law firm. I think my law firm...I'm nominating Carl Grant [Sr. VP of Business Development] as the majority whip [laughs] because, I mean, none of you guys would be here if it wasn't for the fact that:" ah, I can't, I've got to get up early or else I'll piss Carl off." So, Mr. Grant knows how to whip 'em and drive 'em, so we're very happy for him. And, I did see Corbus down there and my old friend Esther Smith...So, I was told past/present/future or something like that. Every story has an arc. So, I'm going to keep it very simple. My story arc. Dry erase marker; important. I will say this. Immediately, I'm off to a long story. Past. Present. Future. I gotta start thinking. I'm thinking story arc, like on a TV show or something like that, a story arc has a start and an end at a stable point. But, nope. As we know in our industry, I'm a start-up guy, a serial entrepreneur, God help me!, that's what I am. And in my world,I have to get back to this mindset,in my world, everything goes up, so whether that's totally true or not, we'll see. Let's see, very early (I have note that says 'very early'), in junior high school I started a company, which was doing model rocket transmitter, tracking transmitters out of G. Harry Stine's The Handbook of Model Rocketry, which was copyrighted in 1950-something. And, I had my first, it was very educational, because there was a schematic...and I thought: I can do this. I made them, and they didn't work. The schematic was wrong. So I was like "screwed by the engineering department again!" Well, not again, but for the first time, but not the last time! And, so I had to actually then learn what the damn circuit did. And, then, you know, so it was no problem, I figured it out...the value of this was...it was going to work better. And then I sold like three of them. I ran it one on EBay, I don't know, about five years ago,...transmitter or something like that, PI....Corporate, which wasn't even a corporate. They just put it on there because it sounded right. And it was this thing, I went "oh I have to buy this" and so I bought back my own transmitter. [laughs] I did, for more than I probably made on all the transmitters that I owned. But it was in junior high school, so it's ok. So, I have that safely ensconced away so that after I die, my kids will go: "what's this piece of crap?" and throw it away. [laughs] I was at a yard sale,this is so sad,some old guy all his hand...tubes and stuff, and I mean they were going to trash them. Literally, it was this huge box that was going to go in the dumpster. So I walked up and said "what, I'll give you $20 for it," and I send them as Christmas presents to all my friends. Lasers and high energy physics... I send them as Christmas presents to all my friends, and I remember senior year I had old physicists crying...[laughs] There's no profit there. So, let's see: past, present, and future. The past, eh, starting companies wasn't my first startup; my grandmother gave me hell when I was a little kid--I was living in Georgia, so I must have been a really little kid,maybe 1st grade, they bought me this big package of assorted cracker packets. You know, it's like 12 different kinds of crackers. And, so I immediately opened up a little stand on the porch and started selling them. I got yelled at for that. That was probably my first entrepreneurial experience. In '92,'90-'91 I was at a company called Candum Computers, a big, full power matrix systems, and we had a nice clientel: NY Stock Exchange, all sorts of people at NASDAC, and it gave me an appreciation for something that has served me forever, which is no single point of failure, fault..., critical engineering, and everything I ever do in the end comes down to that because there are only 193 people on the entire planet that have that clue; that clue is preserved, conserved, there are no more being made. When one does, a new one isn't like it. It's like Buffy the Vampire Slayer or something. And what you get is, most people think they understand, but most people have no freaking idea. And so there are only a certain number of people who seem to 'grock,' and you do, actually. So, after...is one of my partners here and a million square foot collocation facilities. It's kind of a weird thing, but it's served me well. In '92, I started an Internet Service Provider called Digex. It was way early, so we were driving around putting flyers under windshield wipers saying there's this thing called an Intranet and you need to be on it. It was way pre the World Wide Web or any of that. And, it was started really because I saw my kind of peer group was people who graduated from college. In college 75% of--they were on the Arbornet slash early, early Internet. And 75% of their social lives was over the net; I mean, email and you know...email was the killer app. Email today, right now, it's still the killer app. Everybody goes: "Oh, what's the next killer app?" It's like, it's email! You know, I mean, the second killer app kind of changes and moves around. It's not Twitter, it's email. People Twitter about things that don't matter. You know, people still email about things that do matter. But, um, I notice that all my friends would get out of school and go "aaaah" because they couldn't get Internet access. It's just the end of the world for them. So, we were like "huh." So I got an old Sun...360, 18...base machine; a couple friends of mine, like Bob Stratten, a guy name Rob Seastrom, help me config it up. It was running on Fujitsu Eagles; I don't know if anyone remembers 470 meg, 470 pound, 470 amp, 470 kilowatt heat Fujitsu Eagles sitting on a carpet in my townhouse. When we sold that townhouse, there were two Fujitsu Eagle shaped indentions in the carpet [laughs], and where the heat, since it's sort of, you know, a poly-whatever carpet,if it were wool I'm sure we would have been ok, but then the place would have smelled like lanolin [laughs],but truly, it had the combination of...and the heat had change the...of the carpet, and no amount of physical work was going to get this done. One day I walked somebody through, and they were looking at it and said "what the hell's that?" and I said "Take a guess. I used to have a ... " he said "Fuji Eagles!" and I said "oh my god, you're one of us!" [laughs] Shoot yourself now. But anyway, so, I walked into a party and said, "who needs an email account?" we were CUUP-feed. We weren't even on the Internet, it was still T-1 lines. So that was the bottom line. That was early '92, '93, in '94, I think, I was out raising venture capital and a thing to note, raising VC in '94 was like crawling over broken glass, this was tough. I mean, no one has an official number: 40, 45 presentations. We started that and found a boutique firm, Armada Partners, which was Bob Stewart and George Rich. They put a little bit of seed money in. My law firm at the time was Reed Smith Shaw McClay, which is a great law firm, don't get me wrong, but not a venture firm. And that's my talk that I give at Mike Lincoln's UVA Law School thing all the time: get yourself a venture firm, a firm that knows venture if you want to do ventures, because if you get a litigating firm to do your venture deal, [inhale] it gets a little litigious, and then you don't want to be there. But, they were very sharp people and very good. So, literally, we went to Boston, so I could blow up all the VC in Boston and make...because every time I did our pitch we'd get destroyed, absolutely shredded. There are some other phrases I'd use, but I'll be polite here. And, if you've ever read Mike Lewis's A Liar's Poker, you'll know some of the phrases in there that I really do like. He doesn't like the French for example. I'd go to a meeting and get destroyed, but the cool thing was my two guys from Armada, and this is the important thing, when you go get yourself a boutique consulting firm, whatever, to help you with this, and you're doing your pitch, if they're in the room watching you give the pitch, fire them immediately; bullet to the back of the head. Gone. No discussion. That's not their job. But if they're sitting at the table, one on each side, watching the people you're pitching to and making notes, they should know your pitch by now for God's sake, they can give your pitch in their sleep, in your sleep to [laughs]. I mean, believe me, if you get this close with people, it's sort of a wife-husband relationship, but much closer, you know what I mean? [laughs] None of the benefits from any distance at all. But truthfully, they need to be watching from the other side of the table and taking notes because when you say something, they need to know who liked it, did it work, did it not. Read the body language. Read it. See how it goes. And you need to be tuning this with your pitch. It's back to the hotel to rewrite the pitch. We do a pitch, and ok, back to the hotel, rewrite the pitch: boom, boom, boom. 'Harry McCants' old...guy at Blalock in Boston. The word "autopsy" is almost correct here...to me. I mean, my spirit was in the corner of the room, watching myself get torn into little pieces and admiring the skill with which I was getting torn into little pieces. And at the very end, as we were leaving, he walked up to me, shook my hand, and said, "Listen, nothing personal on that; just thought you needed some...." I said, "I cannot thank you enough." And, when I got funding from...and Grotech and Massey Burch, when I closed my round, I sent him a bottle of champagne, and I said, "Of all of the pain I suffered, yours was the best." [laughs] I know he understood; I know he got that. I completely know he got that. So, we went up to Boston pitched all over the place. Got blown up, crashed and burned. Boom boom boom. And, they came back to where we wanted to score because the truth is a VC wanted to do a local deal. You really don't want to be far, far away. They want to be able to come stand on your desk or you to come stand on their desk with their questions, whatever. Distant VCs tend to follow, which a lead VC tends to want to become a local. I think that hasn't changed. This is a good point here. I've been Rip Van Winkle at it for six, seven, eight years,I don't even know, I'm afraid to really figure it out,so there's this hole in here, and what I am doing is trying to fill that hole. And trying to truly get my situational awareness up; that's why I'm meeting with everyone I know. You'll say, "what are you going to do?" I'll say "I have no idea." I mean, right now, you know, from there to there, what field are you going to be in, I don't know. What kind of position are you looking for? I don't know, you know. I mean, even I don't know, I don't know. So, by the end of the year, maybe I'll have some of this filled in. I don't know. But I can say that the VC world has changed a lot. Now I remember it, though, before it was easy money, before the go-go days. So I do recognize a lot of it, I'm not just wandering in saying "holy shit, where're the VCs? Oh my god!" I'm sort of like going "hmmmm, in 1994...a little bit, but worse." So, that's where we are. So, we IPO-ed in 1997. That worked out pretty well, and in fact, we offered to sell the company to Verizon, back when they were Bell Atlantic for $50million, way back when, and they were like, "what are you talking about? Internet? Huh? What? What's that?" I mean, it was really hilarious. They had no clue. And, if you go to digex.net now, it will push you over to a Verizon website because Digex went public, they went private with a company called...who got bought by MCI, no got bought by WorldCom,remember Bernie? He's still in prison, isn't he?. [laughs]...and, they bought by MCI, then MCI got bought by Verizon. Or close, I don't even keep track of them all. 1998, a company called SkyCache, and this is an interesting thing: the lesson with SkyCache is when you take venture capital money,I get this a lot, people say do you want it,when you take VC money, you're getting on a train that's on a set of rails. That's going to happen. You are limited your options, choice, etc; you are also opening up a gigantic world. I'll tell you my Reed Smith story. I go to sign on the deal for Digex, the first $6million, right? $2million from Grotech, $2million from 'Benrock,' $2million from Massey Burch. By the way, that sounds like a strangely pity deal, but that was a standard deal back in '94. that was a fuckin' lot of money, pardon me. Especially when I already had like $3million of it spent already. My God that was a lot of money. No seriously, back then, a $15million fund was a good sized fund; $100million fund was a big fund. Ok, and besides, the first two they're putting in is a commitment; there's another 2, 3, even 4 million...There's another...behind that too. On their books, they're budgeting that out. So, truly when you're getting a $6million deal, they're $18million in the universe somewhere that's kind of getting earmarked over into your direction. So, that's big. And, we go to the final bing, and my lawyer says to me, who's a litigator, says "you can't sign this deal." It's a horror show; I mean, I'm locked up personally forever, oh it's just terrible, non compete...It's fine, though. You can't sign this because you're getting screwed. So, we went into a little room and she repeated it, and I said "you're not getting this. I'm here to be screwed. I want to be screwed. That's why I'm here. I'm getting screwed." And what do you think is happening to the guys who are putting $6million down on the other end of the conference table? You think any of that is ever going to be seen, ever again? Gone, baby, gone! Half of it's already gone. [laughs] I mean, I just scheduled to get married a month after our close. And at the close, just before the close, they were negotiating: how much of a salary do you want? I mean, we had nothing. And, I said, "I don't know, $120?, whatever, I don't know." And, they said, "yeah, ok, that's reasonable." And I said, "ah, request from my wife: I have a little problem. I've got a wedding to pay for. My own in about a month. We've got like $5 in savings." And to their, to Frank's credit, they got up and said "why don't we just make your pay retroactive to Jan 1." I said: "thank you." So, there's a certain magic to the big-money world, you know. I went home and said, "honey, the wedding's paid for, and I'm employed." And she said, "ehhh." [laughs] 'Cause out of college, she had made a thing that said: "I'm not too picky, but in order to date somebody, they have to be employed." She made an exception in my case. [laughs] Um, the Digex lesson there was, this is not a normal transaction. You can't cover your ass, I mean, this is a big leap into the void, but the good new is that someone is giving you their parachute to leap in the void, so that's quid pro quo. SkyCache...a satellite company in '98. What I was saying about getting on the rails; interesting lesson: on the napkin, and this time we actually wrote it out on a napkin because we knew that everyone was always talking about writing the business plan out on a napkin, so we actually jokingly by a guy who was going to do marketing, Greg Money,..."whoa, whoa, you're going to write some shit on here, on a napkin? God, you're already looking forward to the 'here's a picture of the actual napkin.'" I said, "man you're looking forward." And that's what...I mean, he was good at that: marketing, discussions. We said, listen, what we're going to do is the cutting edge internet, R and D that all the satellite companies are too slow; they're all too stodgy. They're like networking x25. We're like, no, Internet world! So, we did all that work, but we figured we're going to do this, do this, do that. We'll sell it out for like $50million 'cause we'll sell it to the logical buyer, which will be one of a satellite companies. They're going to look at it and go, "damn, you've done all the R and D that we didn't even know we needed to do, but now that we look at what you've done, you know, wow, that's really great!" And, we did, except we didn't because we had taken a VC partner and, there you go, we had taken a VC partner and they were just one of say...a very good one, they owned a piece. You know, what happened was, it went...when the Orion guys showed up [names] all walked in, and we showed them what we were doing, and they looked at me in the conference room and said, "wow, you guys have done all the research work, dadadadada." I mean it completely repeated my preamble to my [illegible noise], and I was like, "God, you haven't even seen the business. This is great!" And, they said, "look, we'll give you $50million for your company right now." Which is exactly the number we were talking, and it was exactly $2million for each person in the company. Now, we had a VC involved, etc., etc, but I was pretty sure I could turn to every member of the company and say, "listen, here's the deal. We're going to get bought by those guys. We're going to turn into a stodgy satellite company. You're going to hate this. But, here's suitcase for a quarter million dollars. here's suitcase for three hundred thousand dollars." Boom boom boom boom boom. And, we'd make everybody feel good. Well, except, once you got the VC in there, it's not your decision. And, the VC said, "wow, if they're willing to pay $50million for it right now, think about how big this is going to be when we IPO." So, that didn't end up working out. But, you know you're in trouble,the only other anecdote would be-- you know you're in trouble when in your D round, the Bank of Kuwait calls you and says, "we need to be in your deal. Whatever it is. Whoever you are." and sends a representative. I didn't even meet with him; I, by then, in both of my companies, I replaced myself with another CEO to go public. And in this case, we had reds, boxes of red herrings to use as kindle wood. End of the market. But, literally the Bank of Kuwait showed up, didn't understand what we did, and gave us $3million or so to be in the D round. And, even sent up, I remember Rick came out of a meeting, I didn't even sit in this one, I don't consider the D round the one I raised, I just wasn't involved, but he came in and was like, "ok, random banks from the Middle East are showing up and shoving money at the deal." And I said, "what's the amount?" and he said "they told us 'whatever we wanted.'" Ah, ok. That's your sign that it's over, I just want you to know, that's your sign that it's over. It's like your cabbie giving you stock tips. You're like, "ehh. Sell everything." So, anyway, that didn't work out so well. But I did have the joy of taking over a company that was crashing and try to soft-land it for two years. And, firing 200 people in one day. And a bunch of other, so remember with the good, comes the bad. Firing 200 people in a day is...they were all really understanding. They really were. They were very nice. I was shocked. I figured I'd have to shoot three of them, but they were like, "dude, I understand. Sorry. If there's anything..." Almost all of them, a few of them just walked out, most of them came up to me and said, "listen, you know, just 'cause I'm not getting paid, doesn't mean I won't work for you, so if you need anything, you call me, and I'll do it." I do still have a cadre of about 100 people who'll drop whatever they're doing and come follow me into hell, which I'm very, very lucky to have. I tell those people, "Don't do that. You have kids now." So, I'll have to figure out some other way to do that. When'd we start Core? '99 '99, yes., that's what I thought. In 1999, in a totally separate direction, and this is sort of what I do. At the UVA Law School picnic, they said "what do you do?" and I said, "the best way I can tell you is I'm a synergist. I'm not the guy who invents the next formula or the next whatever." I have a physics background, which actually serves me very well, because if you understand physics, you kind of 'grock' the physics of any situation, even if it's a business situation. The physics of the situation is simply the stuff that it is and cannot change. And if you can figure that out, it's easy to figure out the rest of the situation. What I do is try to look for large forces moving in different directions and go, ok, the deal is you're a surfer, and if you want to catch the real wave, you've got to figure out where it's going to be long before it is there. If you see it happen, you're late to the game. So you need to be paddling out, and if everyone on the beach says, "you're out of your mind." well, maybe you're out of your mind. But, if everybody on the beach except one or two people you respect, everybody thinks you're out of your mind, but maybe you see a couple people not saying that, then you're probably right. And you're paddling out to where the waves can happen. Almost nothing in life happens for a single event; almost everything is a confluence of events. Almost everything is multiple events coming together. So, one day, I had a good real estate relationship with the Ezra Company, which.... And, they were my real estate guys, so whenever we would start a company, whatever, you and Mike would come on out, or your dad you know, and we would hook up and they'd find me real estate; they're real estate reps, you know. It's a nice business, a nice staid business. But I always knew these guys were entrepreneurial. They've got huge drive. So what I said was, "hey, I talk to them, they talk to me, the opportunity was in what's called collocation. So, collocation in a nutshell is where all the servers are now. The internet used to be, here's the internet tree and it has a branch and off the branch is another branch and a leaf, here's a leaf. And in the original internet model, the leaves talk to each other. There's no smarts, no storage. There's really no computers in the tree, it's just routers. And that worked for awhile, but what happens is, what happens if it's like AOL where seven million leaves are all trying to talk to AOL. The problem is, you can see the branches get pretty thin here. If 7 million leaves here are all trying to talk, there's something...it's just easier and should go some place where there are multiple carriers like ATT, Sprint or MCI and...and where you have big bandwidth available. And where you have generators and infrastructure and everything all together. And that's what collocation basically came from. It was actually a serious shift in how the internet architecture was used....well up until now they'd all the internet colos have really been like telecolos. But telecolos were all about telephone traffic, they weren't computers...no, and orders of magnitude...energy heating and cooling...in downtown DC, a telecolo could be this room, on 20 and L Street, maybe three of these rooms. And that was it, I mean, you put a bomb there and you take out ½ the telecom in Washington DC for awhile, right? We were going to do a calendar, which was just going to be Ryder trucks of different kinds parked in front of critical infrastructure locations, and it would look to anyone who didn't know like it was a Ryder calendar, right? Here's the little truck and the big truck...but anyone in the know would be like, "Here's a Ryder truck parked in front of 55 Market Street in San Jose? Here's a Ryder truck parked in front of Pearl Street station in New York City. Here's a Ryder truck parked in front of the May East." You know, we thought it would be a great calendar. After 9/11 we scraped plans [laugh] 'cause suddenly there were a lot of people who would get it and would not; I will say this, I have a singular credit, a buddy of mine, at an agency/job that shall not be mentioned, faxed me a page, he said, long story short, he said it was the cover page of a report generated by people I can't talk about to people I can't talk about, I had nothing to do with it, except that several years ago I edited a picture that, Federal Express has a service called Custom Critical, which is their super duper high-end service, I used to do nuclear physics and there's a thing called Prompt Critical, and Prompt Criticality is sort of this thing that happens [snap] just before a nuclear explosion,a lot of controversy over it,, very technical but anyway, so I PhotoShop-ed the word "Prompt" over the word "Custom" right? And it was the lead cover item on a top secret report that someone had searched off the internet and put it on this report and it said "Our Biggest Fear." A Fed Ex truck marked Prompt Critical. Well, I didn't intend it to be that joke, but the guy was actually like, ok I've got to scrub all this stuff off but it's just your picture...'cause I didn't have a credit on it, so I was like, "How did you know that was my picture?" and he was like, "I can't talk about that." [laughs] ack, well, thanks a lot, I'll order pizza the next time I talk on the phone. So, what we did at Core Location was we identified these trends. We suddenly realized that if all the servers are in the middle of the internet,and we weren't the first guys, there were bigger colos, I mean you guys were seeing it, where the Ezra guys would try to find office space in some building and like "this is a rinky dink piece of crap building. Why are we paying $40/square foot for this stuff?" The answer was a telecom building. Right? So they were in on this anyway. I went...we talked it over and what we decided was to go look for big white elephant buildings, and we got million square foot buildings for really cheap and we'd go out mega-data-centers, huge things, and it worked really, really well. So we were very happy, very profitable. Carlisle Group was our partner on that; Carlisle put up a lot of money. Morgan Stanley. Morgan Stanley. I mean there was a whole list, but actually Carlisle gets the lion's share of the credit with all of us 'cause we were in the front taking the risk. Big risk. And then, following behind us, when they saw what was going on, Morgan Stanley and all those guys swoooshed. And it was a big industry until the crash. But we got out long before the crash so we're happy now. So that's good. So, that was Core Location. It's not really much known because truthfully it was a small team of people...there was no dilution, no PC model, it was, what that was was a collision between the internet and real estate. And this industry worked in a certain way. And it didn't understand this industry. It worked in a totally different way. And it didn't understand that industry. And truthfully if you had to boil it down, we understood both industries. I mean, that was it. You put you guys and he guys in the room, we all sat around bullshitted and talked about it, and very, very quickly, we grocked both industries. And in doing that, bingo, you identify where the wave is going to happen. In this case, you get there by buying up million square foot buildings which you can buy for a song because nobody used them anymore. And leasing them. And leasing them, yes. And then what you guys did. Buying them was the hard part. It's just like the VC world, you've got the fundraising, then you've gotta go do it, and in your case, you guys, they leased a million-plus square foot building up at what...months. Unbelievable. I couldn't believe it. So, the core exist was 2001. I got my numbers right. Then Cidera crashed. I did two years of trying to [groan] solve...and somewhere along the line, I got out. I said, "ok, boss. That's it. We're going to go have babies. I have a 4 year old, an 8 year old, they're fabulous, so I'm out." My eight year old is named Juniper, which is really funny. Not after the networking company; we liked the name. But I do have a dog named Cisco; and he is named after them. He's a sheltie, we call him Cisco the Router Dog. You know sheltie is the...[laugh] so he's a herding dog, but he will rout you. He's getting old now, but back then, he'd take off and try to run you in a straight line. Now everyone knows if you have herding dogs, they see anything going in a straight line, they need to catch and eat it...not for any reason. It's just DNA. So, um, the first VC was tough; then there were the go-go years. I mean, in NASA they refer to the go-go years, you know, the go-go years were great. The Golden Age of PC, I call it. Just like NASA the go-go years, I was telling...fabulous stuff, you're doing great things, but could get money. I mean the VC would stalk the halls looking to put VC...I will say that it's happened and still happened...out of VC world. You'll find the old line firms and going to make it because they have foundation, infrastructure, deep pockets, or anyone who's going to invest, who you going to trust? An EVC or ...NEA. I think you're going to turn to those guys....I think I'll invest in your fund to 12; I don't think I'll invest in this fund 1, you know? So, that's going to be a big scrub out, and it's already happened a lot but I think it's not done yet. Note that things tend to run in 10-year cycles and we're just coming up on the. Nobody in the VC world has made any money since '01. and if you pull one or four or five or eight deals, big deals, out of the equation, that was '01. so, either you reached your last fund in '00 or, well, we're coming up. And when you send your guys out in 2010 to try to raise your next funding, it's going to be very interesting to see how that's going to happen. So that'll clean up. Yeah, it was a time of excess. I bought a warship. I had two kids; they weren't excesses, they'll pay off eventually...yeah, we should take everybody out for a ride. I'll send you the website 'cause it's up for lease or for sale, people kept calling and contacting me saying, "we want to lease your warship, we want to go fight pirates." The whole piracy thing? It's ready to go, I mean, it's the only...stamp ready to go, armed up, warship, ready to go, just turn on the engines, and go, 50 caliber machine guns...30 side arms, she still has all of her armor plating, the whole nine yards, and except for the hottub that replaced the front gun now. But it doesn't look like it with the covers on...I got an email, there's photos on the web, from a guy who served on it for like 8 years. It's an old British navy boat, and he sent me an email, he's like, "these are a blast. The picture in the buggies, OMG, 'cause it's got buggies, you know strollers...storage for two 50-caliber machine guns, a thousand rounds of ammo, four strollers." So, we're set, we're all good....Everyone wants to lease this thing, sail it halfway around the world, where it will cost a half-million dollars to get it back, and you'll run it into a war zone where there's no insurance. No. cash in the barrel-head or go away. I mean, if you really want it, that's how much it is, write the check. And if you can't write the check, call me when you can 'cause there's just no way. Ok, me? Ok, now we're to the present. Retirement. Me and retirement, not so good. I've been on the beach for a long time; I love everyone I'm on the beach with. A friend of mine called me looking for a job; you getting divorced? Nooooo. Stop that right now. My kids are great; my wife is great; my daughters are great; I have a great life. We're just on the beach, that's all. So, me and retirement, not too good. My eight year old is into horsies now, so daddy has to go get a new job because we all know about horses. Uuugh my god. Also, the economy is also in a weird place. But also, let's look at this ramp thing. What entrepreneur truly worth his salt; I mean, what you always look for is the knee in the curve, and this is for everything in life. Linear things are not interesting. If you put one dollar in and you get two dollars out; if you put a hundred dollars in and two hundred dollars out, not interested. I mean, interested in doubling your money, but you know what I'm saying. Not that interesting. Why is this not that interesting? 'cause if you know that, everybody else knows it. Secret knowledge is what makes it worth doing. Linear things, everyone knows about linear things. Stock market performance: a dollar in a dollar out. Terrific. I know, nobody here lots any money, I know. I know...I think the key is, what you're looking for, is the knee in the curve where things are not linear. You put a dollar in, you get two bucks out; you put $10 in, you get $30 out; you put $100 in, you get $1,000 out. And that's what the VC look for; it's what anyone looks for. That's what you look for at the Stop-n-Save. That's what you look for at the car dealership. Why do you not go shopping for your BMW three days into the quarter? Because they've got quarterly numbers. 'cause there's no knee in the curve, baby, it's all linear. 20 minutes before midnight, you know, on the last day of the quarter, especially if your friend called you and told you that at whatjamagiggyBMW they're way under quota, ahh, there'll be a knee in that curve. It's where you get some leverage. So, you're always looking for this, and if you really think about it, where is the economy today? Now is the time to get in. Now, I could be completely wrong. Understand this, I am wrong many times...but I'm not. So, now's the time. So, the present is, I'm looking around to see what's going on, what I want to do, and I don't know, I mean, someone said "do you want to do a Bears startup?" and I'm looking at some of those; I mean, maybe, you know. I'm talking to professors who are doing things, and that's the bear-est of the bear. That's called get your suit on and suck it up for money. You know, that's the bear-est of the bear. There's also some things you'll see in here like companies that need their second CEO. To quote Jimi Hendrix, "I have tire tracks all up and down my back." So, if you see knife handles sticking out, I know the names and I know how they got there. So I'll try not to do that again. But the reality is, a company that needs its second CEO, I've replaced myself before. I'd like to be a good guy to replace somebody; I mean, I might be a little more gentle this time. I have a friend of mine who called me up and said "I have a 200-person division, I could put you in for your clearance now, and no one will ever hear from you again." And I said, "appealing in some ways, maybe not so much in others." So, I don't know at all the format of any thing....I've talked to some very interesting biomed, biomedtechnology people. Very interesting stuff going on. Part of this is trying to figure out where the future waves are. That has to sort of inform this. What is the future? Boomer warehousing. Everybody's going to get old; you've got to have places to stick 'em. Ok, boomer warehousing. Boomer repair. People repairing boomers. They're all going to need to get fixed before you throw them out eventually, so. Boomer disposal. Betcha not going to be able to fix 'em anymore. At Cisco, there's a phrase for products, EOL: end of life...it's like: what happened to Bob? Oh, he's EOL. Umm, that's now. If you have any suggestions. And, the future. Well, we talk about the VC guys. What are hot areas? Security stuff is hot; christ I can't talk to anybody about anything without the whole security thing popping up. But I'd like to hear from you guys. Why don't we do Q and A? Based on what you described at the...traditional web posting, what I'm hearing in our company is that... Well, clown computing is, in fact, the same thing. Completely the same thing. The only difference in clown computing is 1) whoever owns whatever it is, so in the colo world, you put your hardware in, you own it, you have to run it, etc. and in clown computing, someone else is putting all that gear in. I mean, you couldn't tell by looking at a colo whether that was clown computing or someone's dedicated computing. You couldn't tell by looking at it; the physical is identical. It's a question of who owns it, who manages it. Ah, clown computing, as usual with any sort of thing, clown computing will be very profitable; it's an outsourcing thing. It will be very profitable for the small/medium sized user, and if you get big enough, you'll eventually come around to where you'll want to...stuff. If you're really huge, you're paying someone else's profit and not getting that much better...but, what's happened is that there's enough management software out there now; people have done the work...to manage clown computing things because in your small organization you get the advantage of fully distributed things; you might actually get a couple of extra nines for liability and that sort of thing. So, yeah, clown computing is a great idea...it usually, it started out as Yahoo! and all those other guys, who have lots of spare 'zoobs;' they've got 50,000 spare machines deployed all over the place, and 80% of the time, the machines are doing this. That they were like, "why don't we sell some of that capacity off?" The new CIO for...CIO and CTO are really high on this? Yeah, and they may be really high too, but that's a different...to give you an example, I mean, this is, ok, key things to take away; the knee in the curve; the things that transcend just what we're talking about: there's always, everything in life is cycles, managed, not managed. You get through that, switch. Then, this, that. Those guys love clown computing because clown computing allows them to offload responsibility. The problem is the federal government always gets burned when it offloads responsibility. There used to be dedicated emergency responder networks, going back to the 60s, 70s, 80s. and then everybody realized, that from an economics perspective, your cell phone, why do we need to pay for this huge, freaking dedicated, big, heavy Motorola blah blah blah. Oh my god. Everybody got a cell phone. It's all good. But, in an emergency everybody picks up their cell phone; all of a sudden, the emergency responder cell phones don't work. So, shared infrastructure, dedicated infrastructure that's the back and forth that you see there. The government has always had dedicated infrastructure. It's very expensive. But, on the other hand, you can control your fate. Now they're going " oh wow, oh wow, we're ... bucks." Shared infrastructure, while it's fabulous until it bites you in the ass. I'm not necessarily saying it's a bad thing; I'm just saying the truth is somewhere in the mix of these things because denial of service attacks, you know, if you're really, really, really clown computing, you don't even have control over it, you're counting on Yahoo! or whoever your vendor is to not get 'swacked' in the...the first time that happens and wipes them off the face of the map and then Homeland Security or whoever the hell it is...contracted...is going "ooooh my god!" so, "we must control our destiny!" you'll hear that line. What was your thought on the fact that iPhone, SmartPhone, GooglePhone has come out; what is your thought on the next computing device from PC ...? What I want, the best thing, what I want is I want my iPhone to magically go 'whoop, whoop, whoop', with a bigger screen, to be all touchy, and then go 'whoop, whoop, whoop' and go back into my pocket. That's a little ways away, but if Apple came out with a smaller, Apple will do it and everyone else is in their dust. They're just totally in Apple's dust. I don't even know why anymore. It's not the Steve Jobs' reality distortion...which I've experienced and it's fabulous. [laughs] Steve Jobs. Anyone here ever met Steve or dealt with Steve? Bottom line. Bill Clinton, who I've met twice, and I mean I meet, you know, we worked together, I mean I was at a guy's party who had him there, and I was like... Ronald Reagan had an RDF, a reality distortion field. Bill Clinton's was even more powerful, was different that Reagan's, but he had an RDF. But Steve Jobs bent, is hard to describe when he's in the room. And, it didn't affect a friend of mine, Don Hopkins. And we were at this Apple roll-out event at...and Don Hopkins was like, "watch this." So he goes over to the cruditÃ©s stand and gets a decorative green pepper...and Steve Jobs is in this receiving line. And I mean, he's in complete rope-off mode, and he says "hi, how are you?" and sprays a thousand miles. The RDF really isn't even turned on though. It's just like coasting. But he's like, "ah, you can't have this tie on you." He's been doing this for probably a thousand people. Don steps up; Steve goes, and Don takes the thing and goes, "earth man, give me your seed." [laughs] And Jobs' face! We all watched Steve Jobs reboot. [laughs] It crashed him, completely crashed him. He went...[laughs] you saw the little thing go...[laughs] And, then he went, he just started laughing his ass off; he grabbed Don and hugged him, shook his hand, Don moved on down the line, but it was right, I mean. He crashed. I watched Steve Jobs have to reboot. But I mean, he was a million miles away. And, but the reality distortion field...is a huge connection. I don't know what to tell you. I mean, Apple bleeds it all. Apple will be a leading edge. So, iPhones, iTunes store, the Iapps,revolutionary, completely changed everything. Caught every other cell phone manufacturer asleep, dead, buried, and they're all still trying to climb out of the grave. Ah, here's the Google, dadada, this will be free. Fuck free. Nobody wants free. Because free isn't it. I don't mind paying $0.99 for an app that works; I really don't. I'm good with that. The little slum of people who won't do it because it's $0.99, you really want them as customers anyway? I mean, are those the guys you're really trying to figure out how to get the money out of their pockets? I don't think so. Now, Steve and company, they have it right. I would guess, if they expand their touchscreen to a tablet touchscreen they'll grow continuously for another ten years...I'm not the...guy here, right? I would say that that's set and will I buy one? Will my wife buy one? Are you serious?! Absolutely. No question. If it costs a few thousand bucks? Yes. Related to that, you talked about the boomers. And this is fast...but I see a disconnect between me and the next 30 years and my parents. We just came back from a trip and I wanted to email my mother some pictures. My mother is 89. She cannot figure out... Get her a Mac. Get her a Mac. Her biggest problem is that she's sitting in front of a PC. And I'm not trying to be a ...here, I'm not kidding. My mom, who recently passed away, I bought my mom a Mac, and she was online. I mean, she was truly, even at the end of her days, did not have a huge appreciation for what was going on under the covers, but she was emailing. I asked her, you know what I did, I got her a Mac and this will sound very weird. I got her a Mac, and I got her an AOL account. Took care of everything. I never had to do...the only time I had to a little support call was literally when the phone line wasn't working or something. I guess what I'm asking, though, is actually a little bit bigger question, though, which is: it seems to me that there's a fairly big market who people haven't, you know, bought an iPhone because it's just, kinda, too hard. Well, ahhh, right. And, you know what? Those people will be solved by time. [laughs] EOL. Didn't we discuss EOL? That's...problem. I'm not trying to make...a friend of mine, a friend of mine, we were talking about racism, bigotry. And, look, my grandmother was racist, you know. She grew up in the South; that was her world. And, you cannot judge the past by the standards of today. I mean, you can judge it a little bit, but you've gotta, without the context, the data doesn't make sense. In the context of when she grew up, was the context of when she grew up. She wasn't a bad person, but those were her views. Am I going to get into it with her and try to change her views? Do I need to beat this into my grandmother's head? No. she was smart enough to know; she never said it in public; she never said it to anybody. She maintained politeness; she was a Southern woman. I knew what she thought. It's ok; I didn't think it. Some things get solved with time. Technology uptake, you know to add documents? print them out. On what paper? ...the feel of paper. So, the paperless office, it's just the funniest concept in the whole world to me. I have this shredder, I mean an Oliver North signature model, turns it into dust. This shredder I got at NSA at an auction. Only pushed hard for a few years. Only shredded on Sundays for the...agency or something. But, if I'm editing a real document, I print it...I edit it up. I work on it. Somewhere along the line I go back; I change a version number; I put my edits in. I don't do it online. I've got a $2,000 laptop; it's more powerful than all the computers in the world 25 years ago all combined, right? I edit on paper 'cause I can see it. Just works for me better. But, I'm not trying to say that that's bad or good, but I'm doubting that I'll be editing not on paper on my deathbed, you know what I mean?; it's sort of, it's my MO. It's the way I work. Right. Where I was headed, actually, was thinking of all this biomed stuff and the degree to which if we change the healthcare system... Oh, yeah! That's going to be huge! Ok, ok, I'm type 2 diabetic, right? Although that's weird because I've changed my diet and I'm not anymore, but the underlying lack of basal substance is still there, right? So. If I go in there and chew down a whole, all sorts of carby things, then I'll get my blood sugar level up. But the point is you know I test, I have a little thing, I go boom, I bleed, you know. Right now if I squeeze my finger, I just bleed. A friend of mine tests himself in the middle of his hand; I'm like, "dude, it's like stigmata! What are you doing?" 'cause one day he poked himself, first off, that's like the most, I'm like, you're a masochist, right? You're a ... there's just no question. Because, dude, you like pain far too much. That's gotta be the worst place to hit yourself, and he hits himself right there. And one day, it didn't just close up automatically, so he's doing work on stuff and leaving little bloody, bloddy prints everywhere. I grabbed his hand, turned it over, and...stigmata...no, no, ok. You're ok. But, um, all of this is arcane. I've got an iPhone right there, what do I do? I test myself and I send myself an email with my iPhone that says BG whatever it is in the subject line. And then my mail system takes it out and sorts it and shoves it...it's all good. Ok, wait a minute. There's something wrong with that. This is, like, way back when, when a buddy of mine got a Motorola pager and two Motorola cell phones. He got paged by the Motorola pager, look at the phone number, pull out the Motorola cell phone [laughs], and call. Tell me there isn't somebody who hasn't thought of the idea that you should be able to go...hi, Bob, you know? So so protocol. I'll give a medical device history that will blow you away. A friend of mine is at the highest, highest, highest, highest, highest, highest level as a contractor, but I mean, highest policy levels of National Security Agency. She really is. Having lunch with her...two people standing by the front door at the restaurant...just hanging out....so I had lunch with her the other day. She just had a spine implant done, and she showed it to me the other day...and, um, it's literally a spinal stimulator. It's a row of three by 24 electrode diode thingies and it's implanted in her spine now. I said, "Oh, TSA is going to love you!" and, then we're talking, I said, "oh, you have another problem, what does the office of security at the fort think about this?" And she said, "yeah, didn't have much..." I mean, this has a wireless remote control. No, but she's walking in the spaces at NSA, skiffs...it's like, this thing logs data. You know, when she goes to the doctor, he goes booop and wirelessly downloads stuff from her! She's bionic! I said, "do they have a policy on that?" and she said, "nobody in the entire community has a policy on this." She said, "this has caused, like, waves of trouble throughout the intelligence community." Because, who would have ever thought about this? I mean, you're not supposed to walk in there with a wrist watch, and she's walking in with a wireless data-logging system that's got an...[laughs] I mean, I'm like, you better be careful, someone's going to walk up to you and they're going to, like, Bluetooth and exploit and something like...excuse me...[laughs]...exploit your spine, you know? And, she's like, "that's what they're scared of." Medtronic, that's it, Medtronic. Thanks. I'm just like, "holy shit!" so guess what?...but as everyone gets older, that's the thing to look for. The confluence of events. What is, what will all the, I mean, this is just selling, it's just marketing. What will all these people need as various markets collide? Health care, I mean, I won't go into details, but, I mean, you know, this is a looming disaster that is so big that actually no one will actually, everyone is just diverting the days...ok. And, the only way to solve it is not policy, it's not denial of care, or this or that, it's not beating the 20 or 30%, even if you, ok, even if you got beat 20% profits and 30% in efficiency out of the whole system and cut the costs in half, we are screwed, I mean, we aren't just sort of screwed. We are completely screwed. The only way to solve this is with technology. The only way to solve this is that instead of it being a wrist watch, here that I have, that when I get to be 65 or 50 or whatever the hell it is, I put on the Metronic blahblahblah wrist watch. And the blahblah wrist watch would...allow me to do anything, report my blood sucrose, reports my blood sugar, my blood pressure, and does this and does that, and monitors a zillion things so that without any effort, ie any cost, there's ...eye running somewhere that looks this whole thing over and goes: hey, unit number 7763, I don't know, I am not a man, I am a number...has this problem and we have to take a look and they solve this thing easy because the only other alternative is that three-quarters of us get hit by a bus so the only thing the system has to do is pay out $3000 for burial. But if every single person in the, all of us, everyone in this room, expects someone to spend $3million to get your butt to live six months more at the end of every single life, the math doesn't work. The good news is we're the people who are going to solve the problem. So, other than that, you're question is not interesting. [laughs] One last question. One more, one more. Come on guys, come on. But not you Dennis...financial guys. They aren't going to talk to you anymore. Yes. Just to fill the last question: a guy who was a Chief Information Security Officer at Intuit, and he says 10% of the computers in the US have been botted by guys who will download stuff so they can use it. And he said the only good news is 5%, 10% of the bots here are in this bot herd, and 10% are in this bot herd, and once you're in a bot herd they will make sure you don't get other viruses. Oh yes, each bot herd had very good internet security. Yeah, absolutely. The fear he has, of course, is that these are being orchestrated by foreign governments and... Well, they're being orchestrated by whoever can write the check, but yeah, yeah. So, the point being that stopping that is actually a critical thing to the United States. You can completely blame Microsoft for this. So, fixing it, is that an area of interest? That's the question. It's an area of huge interest. Gigantic. The problem with it is, um, we have now, we have what's called the curse of the installed base. All of us have this problem. As a service provider, look at Microsoft right now. What is it, Microsoft, the browser, for whatever, it's one of old or seven ... I'm a Mac guy. I tell people I know nothing about Microsoft. And that way I don't have to fix their computers. Um, do you know something about...the bottom line is once you let a piece of software out there, it's out there. And, to your point, now you got your mom. What's going to happen when you've got your mom working on something and it turns out she gets owned by a bot 'cause it's an old version of whatever, and she doesn't know how to update her security things, and lalalala. Well, we're going to get mom to upgrade the software? You're out of your mind. You can't get us to upgrade the software. Mom's not upgrading the software. Enterprises solve this by getting an iron fist on the machine. I'm just saying, look you use it, you're not running it, you're not controlling it. There are certain downsides to this, but it's not...example: a buddy of mine works for a data security company. This is good. He lives down here...he had to explain this to me 'cause I'm not a Windows guy but I am a crypto guy sort of. I quickly got it once he got to the crypto part. All the stuff on his PC is encrypted, and it's all encrypted to registry serial numbers of his machine. Someone at headquarters, and his machine is part of the local network of their machines, someone at headquarters in an upgrade shifted their system over from all the machines control their own keys to their crypto off the registry to their crypto off the...all this makes sense except when they pushed the button, it then erased the keys from all the local registries never to...again. But now replacing them with the keys from this central registry, which of course don't work, now he said any new work he does is encrypted under the new keys. And he has sent them his old harddrive with a note that says "Everything I've ever done for you [laughs] is on this harddrive. There are various data places and various agencies that might bust it for you, although I would note that corporately you opted for very strong encryption. So here's a harddrive. Have a nice day." So, there was a little bit of trouble. And management in Toronto said, "well can't we just undo that?" ... so that does happen. Uum, you've got a point, systemic problems, when Microsoft first puts stuff out, they tore all the security out of the baseline stuff because the theory was it's a personal computer, it doesn't even allow for multi-level, multi-user security. When something comes into my map, it tries to do something nefarious, the first thing that happens is that I get asked for the root password. Well, if I don't like what's going on, I type in the password, and guess what, nothing happens. So, that isn't an option on any of your older Microsoft operating systems, they all...boom, someone's telling me to do something, I should do it. It's not multi-level security stuff. Now, the new ones do, and if Microsoft could push a button; they'd pay a million bucks for a PC if they could push a button and make the past go away, know they'd do that. You know they'd...billions of dollars for the...but they can't... Just a simple question for a crypto-expert, super techno... Oh no. Do you shop online? Oh, all the time! All the time! All the time, for sure! I bought my boat on the...server. I will say this, but I have a separate credit card. I have, like, four Visa cards, and they are dedicated to different things, and I have one of them that's my online card, so that not when,not if, rather--but when random charges start showing up, I'll...the damn thing, which they do once in a blue moon. They're not even panicking my other card, and every once in a while I will cancel that card. I mean, literally, I, if anything's funny I call the credit card company and say, "those two charges look bad." And they go, "ok." And I say, "turn it off and send me a new card." I literally, I can't even remember, but I get my bill and I go, "Amazon. Yeah, they have my thing. And these guys, eh, I'll go change my card." And trust me if someone tries to buy something, they will tell me. They're gonna..."We feel unloved." But I do have it on a separate card in general principle. I mean, you know, you can't be too paranoid. I have friends who live in Israel.
I'm often asked what it's like to be an entrepreneur, and how to get started.
Although this entire blog is dedicated to helping entrepreneurs, this post is where i'll send people who ask for a starting point.
So, budding entrepreneurs, here's what I recommend you do first:
Read all the essays by Paul Graham
Read this blog post by Meebo founder Seth Sternberg
Many of you may know that I'm the founder of a real estate company, DROdio Real Estate, Inc..
As our traffic has gone from less than 10 visits per day in '06 to 6,500 visits per day today, we've gotten serious about A/B website conversion testing. The video above is the most amazing video I have ever watched on YouTube, and it's about A/B Conversion testing.
Also, here's a deck that talks about going from 2% website conversion rates to 40% (!!!). A picture of our traffic growth on www.DROdio.com is below - I'll keep you updated as to how the A/B testing goes.
Many of you may know that I'm the founder of a real estate company, DROdio Real Estate, Inc.. As our traffic has gone from less than 10 visits per day in '06 to 6,500 visits per day today, we've gotten serious about A/B website conversion testing. The video above is the most amazing video I have ever watched on YouTube, and it's about A/B Conversion testing. Also, here's a deck that talks about going from 2% website conversion rates to 40% (!!!). A picture of our traffic growth on www.DROdio.com is below - I'll keep you updated as to how the A/B testing goes.
Augmented Reality is coming, and in a big way. Above is a video sent to me by a buddy in Japan using a technology called "on the fly". There is also some great augmented reality work being done on the iPhone - PointAbout profiles some of it here.
We are analog beings, which of course means we can't "see" the Internet that is swirling around us all the time, wherever we are. Think of Augmented Reality as a "sixth sense" that lets humans dip into the Internet wherever they are, either through their iPhone, or by using a regular piece of paper with markers on it, as above.
If you're like most people, you probably haven't heard much about augmented reality yet, but trust me, you soon will!
Augmented Reality is coming, and in a big way. Above is a video sent to me by a buddy in Japan using a technology called "on the fly". There is also some great augmented reality work being done on the iPhone - PointAbout profiles some of it here. We are analog beings, which of course means we can't "see" the Internet that is swirling around us all the time, wherever we are. Think of Augmented Reality as a "sixth sense" that lets humans dip into the Internet wherever they are, either through their iPhone, or by using a regular piece of paper with markers on it, as above. If you're like most people, you probably haven't heard much about augmented reality yet, but trust me, you soon will!
La Familia Odio
The Odio family originally immigrated from Italy to Cuba in the 1700's, and then made its way to Costa Rica.
This amazingly detailed 225 page synopsis of the Odio family by Emilio Obando Cairol follows the family and its descendants over a span of 300 years.
There is also a Facebook group called the "Loveable Odios" with more information on the family.
Emilio's genealogy study is above.
La Familia Odio The Odio family originally immigrated from Italy to Cuba in the 1700's, and then made its way to Costa Rica. This amazingly detailed 225 page synopsis of the Odio family by Emilio Obando Cairol follows the family and its descendants over a span of 300 years. There is also a Facebook group called the "Loveable Odios" with more information on the family. Emilio's genealogy study is above.
I've often written about how great it is to transcribe your content for Search Engine Optimization (SEO) purposes. Now I'm going to give you the "secret sauce" about how to find someone to do it for you for 25 cents per minute of audio, or less (i've gotten people for as little as 15 cents per minute). Here's an example of what the finished blog looks like, with the transcription below the audio or video.
The first thing you want to do is place an ad in the Craigslist Gigs section, seeking someone to do transcription. I placed an ad and received 130 responses to my ad (yes, 130!). In the ad I placed, the ad title was "SEEKING: Transcription of audio (Anywhere - remote OK. We are in DC.)" Then in the body of the ad, just state that you have lots of content you need to get transcribed.
You'll probably get just as many responses as I did. The next step was to find people who will give you a competitive rate (25 cents per minute of audio or less) and send them a small audio file to be transcribed (or a long audio file, and just ask them to do a piece of it). This is just to test the candidates out.
Your goal should be to get 3 to 5 people that do a good job. Then start sending them work - chances are that some of the candidates will wash out.
One tip is to offer to buy them (or ask them to buy) a kit from Amazon.com that makes the transcription process easier, by using a foot pedal.
I've often written about how great it is to transcribe your content for Search Engine Optimization (SEO) purposes. Now I'm going to give you the "secret sauce" about how to find someone to do it for you for 25 cents per minute of audio, or less (i've gotten people for as little as 15 cents per minute). Here's an example of what the finished blog looks like, with the transcription below the audio or video. The first thing you want to do is place an ad in the Craigslist Gigs section, seeking someone to do transcription. I placed an ad and received 130 responses to my ad (yes, 130!). In the ad I placed, the ad title was "SEEKING: Transcription of audio (Anywhere - remote OK. We are in DC.)" Then in the body of the ad, just state that you have lots of content you need to get transcribed. You'll probably get just as many responses as I did. The next step was to find people who will give you a competitive rate (25 cents per minute of audio or less) and send them a small audio file to be transcribed (or a long audio file, and just ask them to do a piece of it). This is just to test the candidates out. Your goal should be to get 3 to 5 people that do a good job. Then start sending them work - chances are that some of the candidates will wash out. One tip is to offer to buy them (or ask them to buy) a kit from Amazon.com that makes the transcription process easier, by using a foot pedal. And then you're off to the races! Good luck.
Below is a great post by Dharmesh Shah on building a startup sales team. You can read the full post here.
"Your sales force if your company's lifeblood. No matter how good your product is, it won't sell itself, no matter how much you believe otherwise. Establishing a competent, effective team to draw customers is often challenging for entrepreneurs, though, who would rather focus on research and development or chase VCs.
First off, a few disclaimers: I've never been a sales person. I've never even played a sales person on TV. All the points below have been pulled from startup sales teams that I think work pretty well (including the team at my marketing software startup).
1. Don't hire sales people too early. In the early days, the founders should be able to sell (and should be selling).
2. You don't need sales people, you need sales. Don't think VP of Sales - think "Revenue Engineer". (Not the greatest analogy, but just like you won't hire a development "manager" as one of the first 5 people in a startup, you shouldn't hire a sales "manager" either). Don't get caught up in fancy titles - focus on dollars in the door.
Below is a great post by Dharmesh Shah on building a startup sales team. You can read the full post here. "Your sales force if your company's lifeblood. No matter how good your product is, it won't sell itself, no matter how much you believe otherwise. Establishing a competent, effective team to draw customers is often challenging for entrepreneurs, though, who would rather focus on research and development or chase VCs. First off, a few disclaimers: I've never been a sales person. I've never even played a sales person on TV. All the points below have been pulled from startup sales teams that I think work pretty well (including the team at my marketing software startup). 1. Don't hire sales people too early. In the early days, the founders should be able to sell (and should be selling). 2. You don't need sales people, you need sales. Don't think VP of Sales - think "Revenue Engineer". (Not the greatest analogy, but just like you won't hire a development "manager" as one of the first 5 people in a startup, you shouldn't hire a sales "manager" either). Don't get caught up in fancy titles - focus on dollars in the door. 3. Don't hire several sales people at once. Your goal is to figure out the "pattern" of what kinds of people are best based on what you're selling and who you're selling it to. You need some feedback from the system so you can continue to iterate on your hires. 4. If you've never hired or been around sales people before, be prepared for a bit of a shock to the system. They're not bad people, they're just different. If you're an introverted geek like me, it's helpful to remember that your startup needs to sell stuff. 5. Resist the temptation to create complicated compensation plans. If it requires a spreadsheet to figure out the commission, it's too hard. You'll have plenty of time to confuse sales people later - start simple. 6. Agile methodologies can work in sales as well. Iterate! Refine your demo script, your slides, and any other collateral information. Capture the lessons learned by the best-performing people and spread it to the rest. 7. Sales people will generally act in mostly rational (but often surprising) ways based on incentives. The rules of the game define the behavior of the players. You were warned. 8. Always connect incentives somehow to ultimate customer happiness. If you reward just "deals getting done", you'll get deals - but at too high a price. You might get push-back that sales people don't control/influence customer happiness, but they do. They "pick" customers. They set expectations. And they control the degree of "convincing" applied. 9. Make sure you understand the economics of your business. Figure out your total COCA (Cost of Customer Acquisition). This includes sales people, marketing people and marketing campaigns. Quick example: Lets say you paid a sales person $10k, a marketing person $10k and you spent $5k on Google AdWords (for a total of $25k) last month. If you sold 10 customers last month, your COCA is about $2,500. Different businesses have different needs in terms of sales vs. marketing spend. Make sure neither is too far out of whack. 10. Your life-time-value (how much revenue you expect to generate per customer) should be higher than your COCA. (No, I did not need a degree from MIT to figure that out.) Once your LTV is a multiple of your COCA, you're ready to start turning the knob and scaling the business a bit (hiring more sales people). But, if your LTV is way lower than your COCA, proceed with caution. If there is no hope for LTV getting higher than COCA, you've got a problem. Don't try to hire additional sales people until the economics sort of make sense. If the car is pointed towards a brick wall, hitting the accelerator is not a good idea. 11. Track data maniacally (even if it's just in a spreadsheet). Information you will want includes: What was sold, who sold it, when, for how much, etc. This data will be invaluable later as you start to scale. For example, you should be able to answer the question: We had 14 customers cancel last month - who sold those customers? Is there a pattern? In the early days, you likely won't have the volume (or the time) to analyze the data - but you should at least capture it for future use. 12. Your pricing should be in line with your sales structure. For example, you can't expect to have an outside sales force (that meets with customers in person) if your average deal size is only $10,000. The math won't work. 13. Once you get beyond three or so people, running your sales in a spreadsheet will become painful. Start looking at CRM systems (like Salesforce.com). 14. Start watching the shape of your "funnel" as early as possible. How many leads are you getting a month? How many turn into opportunities? How many of those convert into paying customers? Once you understand your funnel, you can slowly start tweaking your system to fix the "leaks". That's all I've got for now. For those of you that have built early-stage sales teams, what are your ideas and insights?"
I recently found Balsamiq, a $79 program that beats the pants off more sophisticated (and expensive) systems like Protoshare for doing website/iPhone mockups.
The designer, Peldi, has an unwavering eye towards simplicity and ease of initial use. Over time you discover powerful features, like image importing, that are a delight to behold.
At left is a quick mockup I literally made in 3 minutes using Balsamiq. Watch the video above to see how I did it.
I recently found Balsamiq, a $79 program that beats the pants off more sophisticated (and expensive) systems like Protoshare for doing website/iPhone mockups. The designer, Peldi, has an unwavering eye towards simplicity and ease of initial use. Over time you discover powerful features, like image importing, that are a delight to behold. At left is a quick mockup I literally made in 3 minutes using Balsamiq. Watch the video above to see how I did it.