Shifting Gears: Are entrepreneurs crazy idiots?

My Entrepreneurship seminar instructor asks, “Are entrepreneurs crazy idiots?” His answer is, “Not necessarily, but some of them are.” It’s basically a risk vs. rewards calculus – if you have little to lose and much to gain, you probably should take the plunge, but if that’s not you, you probably should not. I think that sounds right – I co-founded two businesses after college, and it was the right time – I had little debt and few expenses, so an abject failure was not likely to upend my life too badly. Fortunately, Topsail Consulting is still alive, after more than 5.5 years, and Safe At Hand turns four this month. I may not own or be involved in either, anymore, but it’s nice to know they didn’t fail out of the gate. The point, however, is this: there’s a right time for such efforts and a wrong time; be sure you know which time it is, and act accordingly.

Have you started your social network yet?

Or rather, 230,000 of them? That’s the promise (and achievement) of Ning, the latest effort by serial entrepreneur Marc Andreessen. The principle is simple: let people create their own social networks, for whomever and whatever reason. The results are amazing: the site is growing at 0.4% per day and aiming to host 4 million networks by the end of 2010, with billions of daily page views. That is a lot of users and a fortune in potential revenue.

Now, this is all information you could get elsewhere, like this excellent article from Fast Company. Andreessen is arguably the greatest entrepreneur of our generation, maybe of the entire Information Age to date (John Rodkin, my Business of Entrepreneurship for Lawyers seminar lecturer, thinks so). He is not the richest, of course, but Andreessen has a remarkable string of entrepreneurial successes. He co-founded Netscape (with Jim Clark, one of the founders of Silicon Graphics), which went public and was later purchased by AOL for $4.2 billion. He then founded the web hosting services company Loudcloud, which went public, sold a division, and was acquired for approximately $1.6 billion. That’s quite the record. Ning now has a valuation over half a billion dollars. Taking that into account, Andreessen has a simply amazing record.

Part of the reason for Andreessen’s success is his use of “viral expansion loops” (like viral marketing, but on crack). From the Fast Company article:

Here’s something you probably don’t know about the Internet: Simply by designing your product the right way, you can build a billion-dollar business from scratch. No advertising or marketing budget, no need for a sales force, and venture capitalists will kill for the chance to throw money at you.

The secret is what’s called a “viral expansion loop,” a concept little known outside of Silicon Valley (go ahead, Google it — you won’t find much). It’s a type of engineering alchemy that, done right, almost guarantees a self-replicating, borglike growth: One user becomes two, then four, eight, to a million and beyond. It’s not unlike taking a penny and doubling it daily for 30 days. By the end of a week, you’d have 64 cents; within two weeks, $81.92; by day 30, about $5.4 million.

Viral loops have emerged as perhaps the most significant business accelerant to hit Silicon Valley since the search engine. They power many of the icons of Web 2.0, including Google, PayPal, YouTube, eBay, Facebook, MySpace, Digg, LinkedIn, Twitter, and Flickr. But don’t confuse a viral loop with viral advertising or videos such as Saturday Night Live’s “Lazy Sunday” or the Mentos-Diet Coke Bellagio fountain. Viral advertising can’t be replicated; by definition, a viral loop must be.

Ning takes this a step further with “double viral loops;” a social network, by definition, is a kind of viral loop (think Facebook, MySpace, etc.), while a network of (or platform for) social networks gives each user the opportunity to create their own viral loop. Thus, the double viral loop, perhaps the most fiendishly clever marketing device yet thought of, is born.

Andreessen is probably as good a model as the enterprising web geek could want. If this is interesting to you, I strongly recommend checking out Andreessen’s blog and soaking it all in. Meanwhile, think you can build a community around your obscure hobbies? Ning has you covered.

The Big Switch

As I mentioned before, Sarah and I are in Randy Picker’s Tech Policy Seminar, which has so far produced three weeks of really good discussions. The last two weeks were spent discussing Nicholas Carr’s The Big Switch: Rewiring the World, from Edison to Google. It was a very interesting and provocative read. While I think much of Carr’s concern is misplaced, I think many of the concerns he expresses are real cause for concern.

Check out the discussion at Picker Tech Policy Seminar.

Minor Site Tweaks, More to Come

As promised, a few little changes have been going on behind and before the scenes, today. First, the blog software has been upgraded. More noticeably, I added a LinkedIn button and the AddThis bookmark dropdown menu. Want to add one of my posts to your Digg, Facebook, MySpace, or other link list? Click away – it’s all right there for you!

Meanwhile, if you’re on LinkedIn and a contact of mine, please remember to add me to your network!

View Ed Cottrell's profile on LinkedIn

What’s next? A slightly better layout, my links, and a slew of new posts. Stay tuned (and thanks for your patience)!

Life = Insanity

I have not been posting too much, lately. One key reason for this: Sarah tore a tendon out of her ankle and then proceeded to get terribly sick, on top of it. (She’s okay now – has an air cast, needs physical therapy, and is still congested, but is decidedly on the mend.) Of course, I got sick as well, though not as severely. Throw in a couple of other things I had to be working on and, well, blogging and the like fell by the wayside.

But! Stay tuned, today – several site changes are underway.

Favorite Spam of the Day

I love this person, because he or she is incompetent in the most amusing way. One would hope that such blazing incompetence renders such people inept in their efforts to harm others, though for every con there is probably a gullible enough mark out there…

Subject: 2007 Fiscal Activity – $2839,49 Refund
From: “”<service>
To: [my address]

After the last annual calculations of your fiscal activity we have
determined that you are eligible to receive a tax refund of $2839,49.
Please submit the tax refund request and allow us 3-9 days in order to
process it.

A refund can be delayed for a variety of reasons.
For example submitting invalid records or applying after the deadline.

To access your tax refund, please click here

Best Regards,
Tax Refund Deparment
Internal Revenue Service

© Copyright 2008, Internal Revenue Service U.S.A. All rights reserved.

If you’re going to try to commit fraud, doing so as a fake IRS site is not the smartest thing ever. If you still want to try that, at least get local conventions regarding numbers right.

P.S. The actual URL linked to happened to be a DynDNS address; in other words, the guy was running the site on his own computer somewhere, probably a laptop or desktop he owns, and has, no doubt already been shut down (the server is offline as I type this) and is quite possibly on his way to an indictment. Idiot.

Tech Policy Seminar

Both Sarah and I are going to be blogging and commenting at Professor Picker’s Antitrust & Intellectual Property seminar blog (called, for some reason, the Tech Policy Seminar blog) this quarter. The current topic of discussion is Jean-Noël Jeanneney‘s Google and the Myth of Universal Knowledge, translated from the French Quand Google défie l’Europe: Plaidoyer pour un sursaut (“When Google Challenges Europe: A Wake-Up Call”) by Teresa Lavender Fagan. This paranoid little work of eighty-nine pages from the now-former president of the French Bibliothèque Nationale was written less as a “wake-up call” to Europeans than as an assertion of the importance of Europe in the face of its declining influence on the world. Nonetheless, the blog features some interesting discussion.

Grilling Oil Executives

I am, I admit, a paleocapitalist and (mostly a) paleoconservative. That said, I do not think oil company executives – or any other corporate executives – should have to defend their company’s profits, unless illegally gained. For that reason, this meddling strikes me as ridiculous. Lest we forget, oil is among the most volatile and fragile commodities markets, and one in which extremely large players necessarily dominate (at least on the transportation and distribution sides, if not necessarily in exploration). Large companies + large demand = large profits + large risks. There is always the risk, if not the certainty, that much of the profits major oil companies set aside today will disappear tomorrow due to actions by OPEC or Chavez, diminishing supply, or some other forces beyond any executive’s control.

Part of living in a capitalist society means accepting this state of affairs as generally good. We allow – even embrace and reward – those who are willing to take risks and build socially productive enterprises, because they reduce inefficiencies in a given market in ways that governments, time and time again, have been proven incapable of doing.

Meeting a demand with a legally obtained supply at a legally determined price the consumer is willing to pay is called being a good business person. That never should require defending one’s rational actions to the government.