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Continuing our MBA Mondays series on The Managemet Team, we are deep into the guest post phase. This guest post comes from AVC regular Phil Sugar. I've never met Phil, but his comments here at AVC tell me that he's a very experienced entrepreneurial manager. And so I reached out to him to ask for a guest post. And he responded with this post below. There are so mant great lines in here, I'm tempted to reblog a bunch of them.

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In his recent article that appeared in Counterpunch, Paul Craig Roberts, tells the story of the American economy as it really is.–t.h.g.

February 01, 2012

by PAUL CRAIG ROBERTS

Last Friday (January 27) the US Bureau of Economic Analysis announced its advance estimate that in the last quarter of 2011 the economy grew at an annual rate of 2.8% in real inflation-adjusted terms, an increase from the annual rate of growth in the third quarter.

Good news, right?

Wrong.  If you want to know what is really happening, you must turn to John Williams at shadowstats.com.

What the presstitute media did not tell us is that almost the entire gain In GDP growth was due to “involuntary inventory build-up,” that is, more goods were produced than were sold.

Net of the unsold goods, the annualized real growth rate was eight-tenths of one percent.

And even that tiny growth rate is an exaggeration, because it is deflated with a measure of inflation that understates inflation. The US government’s measure of inflation no longer measures a constant standard of living.  Instead, the government’s inflation measure relies on substitution of cheaper goods for those that rise in price. In other words, the government holds the measure of inflation down by measuring a declining standard of living. This permits our rulers to divert cost-of-living-adjustments that should be paid to Social Security recipients to wars of aggression, police state, and banker bailouts.

When the methodology that measures a constant standard of living is used to deflate nominal GDP, the result is a shrinking US economy. It becomes clear that the US economy has had no recovery and has now been in deep recession for four years despite the proclamation by the National Bureau of Economic Research of a recovery based on the rigged official numbers.

A government can always produce the illusion of economic growth by underestimating the rate of inflation. There is no question that a substitution-based measure of inflation understates the inflation that people experience. More proof that there has been no economic recovery is available from those data series that are unaffected by inflation. If the economy were in fact recovering, these date series would be picking up. Instead, they are flat or declining, as John Williams demonstrates.

For example, according to the government’s own data, payroll employment in December 2011 is less than in 2001. Meanwhile, there has been a decade of population growth. The presstitute media calls the alleged economic recovery a “jobless recovery,” which is a contradiction in terms. There can be no recovery without a growth in employment and consumer income.

Real average weekly earnings (deflated by the government’s CPI-W) have never recovered their 1973 peak. Real median household income (deflated by the government’s CPI-U) has not recovered its 2001 peak and is below the 1969 level. If earnings were deflated by the original methodology instead of by the new substitution-based methodology, the picture would be bleaker.

Consumer confidence shows no recovery and is far below the level of a decade ago.

How does an economy recover without a recovery in consumer confidence?

Housing starts have remained flat since 2009 and are  below their previous peak.

Retail sales are  below the index level of January 2000.

Industrial production remains  below the index level of January 2000.

To repeat, the only indicator of economic recovery is the GDP deflated with an understated measure of inflation.

The US economy cannot recover, because the US economy depends on consumer expenditures for more than 70% of its activity. The offshoring of middle class jobs has stopped the rise in middle class income and caused a drop in consumer spending power.

The Federal Reserve under Alan Greenspan compensated for the absence of US consumer income growth with a policy of easy credit and a policy of driving up home prices with low interest rates. This policy allowed people to refinance their homes and to spend the inflated equity in their homes that Greenspan’s policy created.

In other words, an increase in consumer indebtedness and dissavings drove the economy in the place of the missing growth in consumer incomes.

Today, consumers are too indebted to borrow, and banks are too insolvent to lend. Therefore, there is no possibility of further debt expansion as a substitute for real income growth. An offshored economy is a dead and exhausted economy.

The consequences of a dead economy when the government is wasting trillions of dollars in wars of naked aggression and in bailouts of fraudulent financial institutions is a government budget that can only be financed by printing money.

The consequence of printing money when jobs have been moved offshore is an inflationary depression. This catastrophe could begin to unfold this year or in 2013. If Europe’s problems worsen, flight into dollars could delay sharp rises in US inflation until 2014.

The emperor has no clothes, and sooner or later this will be recognized.

PAUL CRAIG ROBERTS was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury.  His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached through his website

A few weeks ago, I spent the day at NYU ITP at the Womens Entrepreneurs Festival. This is a one day event put on by The Gotham Gal and her friend Nancy Hechinger who is on the faculty at NYU ITP.

In its second year, the WE Festival features a day of panels and talks featuring women entrepreneurs. Men can attend and do, but the stage is filled with women all day long. It's a very different experience from the typical startup/tech event and I highly recommend it to anyone who is eager to see more women doing startups.

My favorite panel was called Makers and featured five women who love to create things and have started companies to pursue their passions as makers. Here's a video of that panel. The video is 90mins, but the presentations are the most imporant part and they only last for about 35mins. The audio isn't great. I suggest you put on headphones and turn the volume up.

What these five women make clear is that anyone can be an entrepreneur and that women are natural makers and innovators. It is also interesting to see how each of them is using the Internet and technology more broadly to innovate around a product that is physical. There's a lot to learn from what they are doing.

My oldest daughter, who is a junior in college, was in attendance that day. She was inspired by these women and came away with a sense that the world is full of possibilities for women. That's the whole point of the WE Festival.

This is the kind of thing that happens in the age of the Internet and Kickstarter. My daughter Emily told me one of her friends was involved in opening an art gallery and they are using Kickstarter to raise the funds to make it happen.

In their own words, the "Teen Art Gallery is an organization run for teens by teens that features young artists, ages 12-19, in New York City galleries."

If you go about 2mins into this video below, you will see that the teenagers have built an entire organization, filled with themselves, to run this business. Entrepreneurship in action!

They are raising $10,000 to fund two gallery shows this spring in NYC. They've raised almost $4000 so far and have 25 days left. So it's crunch time. The Gotham Gal and I have funded this project and I thought some of you out there might want to join us.

It's youth, art & entrepreneurship all wrapped up into one. And that's a good thing.

It's fun friday again. And because this weekend brings us the big game, I figured we'd talk about it.

I'm rooting for the Giants. They were 7-7 and going nowhere and then something happened and they have got a winning attitude and are surging going into the big game. As a Jet fan, there is no team I dislike more than the Patriots, so a Giants win would make me very happy.

I think the Patriots are vulnerable on defense and the Giants defensive line is going to get to Brady and make him rush. Giants 27 Patriots 10.

As for commercials, which are the main event anyway, I'm hoping for something special from the E*TRADE baby and am praying that none of our portfolio companies are running ads.

And I'm sure Madonna will give us a G rated halftime show. I'm not even sure I'll watch that.

Please leave your predictions for the game in the comments and pick the winner in this Quipol.

Quipol

Back in early December 2011, I wrote a blog post about Engagio, a new web service launched by our very own William Mougayar. For those who didn't read that post, Engagio is a service that aggregates your comment activity across many of the major social platforms and gives you a gmail style dashboard to see them and reply to them.

A lot has happened in the past 45 days since that post and I wanted to bring everyone up to speed on this project.

First, and most importantly, Engagio is now open to everyone. Every few days, I'd send an email to William saying "you have to open it up". And he'd reply, "we can't scale it yet". Now they think they can scale it, so it's open to everyone. If you didn't or couldn't check it out back then, you can now.

There are a bunch of new features, large and small. Most of them are pretty useful. A good example of that is social profiles. Here's Fake Grimlock's social profile, for example.

There is even a "fred wilson feature." At Disqus, the "fred wilson feature" was the ability to get an email for every comment and the ability to reply to the email and post it to the comment thread. At Engagio, the "fred wilson feature" is the ability to "mute a site." I get so many comments on AVC that my Engagio inbox is filled with them and I see nothing else. When I mute AVC, I see all my other commenting activity on the web, at Twitter, at Foursquare, at other blogs. This single feature has made Engagio way more useful to me. To "mute a site", you go to the Sites page via the left nav section, and click on the icon next to the site name.

Finally a disclosure. Engagio did a small seed round to given them runway to execute the "build the user base" stage of the business. My wife and I made a small angel investment in this round. I've been encouraging William to do this project since he first mentioned it to me in the fall. It seemed only right to encourage with both words and capital.

Please let William and me know what you think of the progress Engagio has made since it launched 45 days ago in the comments.

On Monday, I trained it up to New Haven to meet a Yale professor named Dina Mayzlin and talk to her class. I thoroughly enjoyed talking to Dina's class as it allowed me to work on some new material in a comfortable setting. But the talk Dina and I had over breakfast before class was even more thought provoking.

Dina got her PhD at MIT's Sloan School a decade ago, before she started teach at Yale. Her thesis looked at TV shows being talked about in the social media of that time, newsgroups, IRC, Usenet, etc, etc.

What she and her colleagues found out was that volume (number of mentions) was not a good predictor of popularity. Volume was more of a trailing indicator than a leading indicator.

But Disperson, or what Dina calls Entropy, turned out to be a very reliable leading indicator of popularlity of a TV show. The wider and broader the discussion of the TV show went within online social media, the more likely the show was to become popular.

By coincidence, the material I am working on in my public talks right now is about the fragmentation of social media. And so as I talked about fragmentation with Dina's Yale class, I started to weave her work, which was still rattling around in my brain, into my fragmentation thesis.

I am totally convinced that the world of social media is not consolidating around one "winner takes all" social platform. Instead, the world of social media is fragmenting into dozens of social platforms that are best of breed for a certain kind of social engagement. If you are building a social media strategy today, you absolutely need to address Facebook, YouTube, Twitter, and Tumblr. And you should also consider Foursquare, Instagram, Pinterest and Path. If you are in the music business, you need to consider SoundCloud. If you are in the book business, you need to consider Wattpad. If you are in the TV business, you need to conside GetGlue. And so on and so forth. Many of the companies I just mentioned, but not all of them sadly, are USV portfolio companies.

That's the thesis I spent thirty minutes on in front of the Yale class. But near the end of the talk to Dina's class, it occured to me that disperson/entropy can be gained by engaging on multiple social platforms. The number of likes on Facebook or tweets on Twitter is volume and is likely to be a trailing indicator of popularity. But if you track the essential social gestures across the fragmenting landscape of social platforms, likes, tweets, tumbls, checkins, pins, etc, then you get a measure of dispersion that may well be a leading indicator of popularity or the slope of the popularity curve.

That's the theory anyway. I'll leave the research to Dina and others. I hope someone will run the numbers to see if it works.

Twitter is one of the most misunderstood companies I've ever worked with. When you are in the inside, or close to the inside, and you see what people write, it makes you shake your head.

Yesterday Dick Costolo, CEO of Twitter, was interviewed by Peter Kafka on stage at the D: Dive Into Media conference. Here's a 13 minute edit of that interview that I watched this morning. I think Dick does a great job of addressing much of the misinformation that has been written about Twitter this past few weeks.

I've worked with Dick since he was the co-founder and CEO of our former portfolio company Feedburner. I worked closely with Ev Williams to convince Dick to join Twitter and I am incredibly happy and also quite proud to see how good of a job he is doing running Twitter.

I helped RHD set up their Equal Dollars currency back in the late 90′s. Here is a recent report about it from CNN. Sorry about the annoying commercial at the beginning.–t.h.g.

How I buy groceries without cash – Video – Personal Finance.

Next up on our guest posts on the subject of The Management Team is AVC community regular JLM. For those that don't know, JLM runs a public company and before that built and sold a large real estate operation. He's also written one of the best guest posts ever on AVC. With that intro, here's what JLM has to say on the topic. I love the way he ends the post.

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Congratulations, you have built a prototype.  Got it to work.  Debugged it.  Even sold a few copies.  Have some real customers.  Now you are ready to scale up and make some real money.

You have crossed that Rubicon from having an idea to having a product and customers.  Now you have to build an organization, a real company, to manage the entire process.  Or your fledging little company has to evolve from crawl to walk to run.

You may look yourself in the mirror and say --- “Well, I know a lot about my product, even its market and competitors but what the heck do I really know about building a company?”  Can I do this?

The simple and truthful answer is “Yes, you can!”  If you don’t think so, here are some tips to take you from the garage to the executive suite.

Bad news --- your generation did not invent sex.  It does not have to invent the crafting of companies either.  Someone else has also done this before.

Create a clever and insightful graphical representation of the business model which will become your company.

1. Identify who the customers are and why they will pay money for your product.  This is the revenue side of the model.

2. Identify the elements which must be incorporated into your product to create it.  This is the expense side of the model.

3. Identify all the management functions which are necessary to transform the ingredients into the product and to educate the customers and to make the sale and to manage the money.

4. Identify the competitive forces that are lurking in the darkness wanting to destroy you --- the ones that are real and the imaginary ones.

Make a drawing of all of this on a single very large piece of paper and then marvel at what you have done.  Do it about ten times until you have perfected it.  It keeps getting better each time.

This is the company you will have to create.  The one that can operate this business model.  The one which can deliver your product to the marketplace and make a buck in the process.

Make an organization chart which shows each of the functions that are necessary to operate the business model.

1. Make it a functional chart and don’t worry that it turns out very close to what every company ever created looks like.  That is good.  Remember, you did not invent sex.

2. Identify the functions which are “essential” and those which are “nice to have”.

3. Now identify what you can afford and what you can stretch to afford and those which are simply out of reach for the time being.

You have now identified your immediate, short term and long term organizational imperatives.

Take the business model and the organization chart and color code it to identify your own personal strengths and weaknesses.  If you have a co-founder, put his up there also.  Now you have identified those elements of leadership and management that you can provide and those you will have to hire from the outside.  Be tough on yourselves; don’t undertake a task you hate just for the ego enrichment of it all.

Be prepared to hire people who are fabulous in their fields.  Hire a Chief Financial Officer you cannot possibly afford and tell him he is the “financial conscience of the company”.  Meet with him weekly and never miss a meeting.

Now take the business model and the color coded organization chart and create a schedule of how you will build the organization.  Which functions will be added first and why?  The business model will tell you what and the color coded organization chart will tell you who and the schedule will tell you when.

That is really all there is to it but you will want to consider the following considerations:

1. It will not be perfect out of the chute.  You will do some stuff that does not work.  Just re-engage and do it over.  It’s going to be OK.  Really punish yourself --- just kidding.  Learn to laugh at yourself.

2. Understand that everything in life is iterative.  You do something.  Get better at it.  Get better at it some more and one day you laugh to remember how naïve you were when you started.  Ever learn to ski or snowboard?

3. Do the formulaic and fundamental stuff and get it done but only do what you really believe.

Vision, Mission & Values

1. Vision --- big dreams and little dreams all cost the same, so go with the big ones so that if you only accomplish fifty percent, it will still make your Momma proud.

2. Mission --- simple, direct and jettison every extra word.  The mission of the Infantry --- “Find ‘em. Fix ‘em.  Kill ‘em.”

3. Values --- sweat this one because you will have to live this one.  If you are going to take risks and run with the bulls, this is where you let everyone know.  Don’t be afraid to say that “frugal” is a value.  I like frugal.

Every new employee hears the values part of the company from you and only you.  Wear a suit and a crisp white shirt and a tie and tie shoes.  Do it in the first five minutes of their employment.  They will never forget that.  Don’t discuss them, tell them.  Difference between a tattoo and magic marker.

1. Job descriptions --- don’t hold out for a Pulitzer but put some thought into it.

2. Copy the absolute best exemplars you can find out there.  They are out there.  Be a copy cat.  Read Drucker.

3. Make all your decisions about equity upfront and don’t be afraid to say that you have to “earn” it.  Understand that equity is an element of compensation and sometimes it is not even in the top three.  

A good comp plan includes: 

1.     Salary;
2.     Benefits;
3.     Short term incentives (measurable performance based bonus);
4.     Long term incentives (equity); and,
5.     Something special (work from Colorado two weeks per year).

1. Develop a philosophy of management.  Write it down.  Try it out on some folks whose wisdom you admire.  Put it to work.  Live it.

2. Get a mentor, a rabbi, a gray haired eminence who is willing to work with you.  Golfers get swing coaches but great swing coaches work on the golfer’s head as much as his back swing.  Get a professional coach.

3. Do not be surprised that everyone in the company does not share your passion.  That is the curse of being an entrepreneur --- you see and care about things other people don’t even know exist.  I would rather be a Captain of a rowboat than the second in command on the QE II.

4. Do not make changes, conduct experiments.  Nobody can resist an experiment.  Experiments that work well have a thousand fathers and mothers.  It becomes their idea.

5. Brainstorm at least once a month.  Honest to God, uninterrupted brainstorming.  There are no bad ideas.

6. Learn to critique yourself.  Learn to talk yourself down off the ledge.  Be thoughtful.  Take the lowest echelon of the company to lunch once a month.  And then talk to them.  Listen to them.  Make one change they came up with and you will become a legend.

7. In any organization, you rarely receive power.  You take power.  You wield power.  The most powerful people will things to be done they don’t order them to be done.  That is real power.

I've been to a bunch of 3D movies now. It seems to be all the rage in the movie theaters these days. I have to say that I am not a fan. I have yet to go to a 3D movie where I didn't want to take the glasses off and watch in 2D. That doesn't work, but I sure wish it did. And I've been to the films that people say are the best of the 3D medium (Avatar, Hugo). So it's not that I haven't been to the right films. I just don't think 3D improves the experience in any meaningful way.

What's worse is that 3D films cost more to see in the theaters than 2D films so you get a worse experience for more money. And judging by trailers I've seen in the theaters recently, it seems that Holywood is using 3D as an excuse to reissue some old favorites with a 3D facelift. 

I feel like 3D is a gimmick. One the other hand the new HD display technologies like OLED and quad-HD are getting us to crisper and higher definition displays that produce some of the same effects of 3D without the gimmicky stuff.

I'm hoping 3D will turn out to be a fad and that wearing glasses in the theater (and god forbid at home) will be something we look back on in ten years and say "did we really do that?"

What is it that enables less than 1 percent of the population to control, dominate, and exploit the rest of us? Some will say it’s ignorance and fear, other will say it’s laziness and irresponsibility. There is probably just enough truth in all of that to enable the 1 percent to justify their actions.   The fundamental question remains: Are the people capable of self-government?

I think we are, so now it comes down to deciding the best strategies for enabling the necessary massive power shift.

A recent article by George Lakey provides some food for thought. It tells the inspiring story about  How Swedes and Norwegians broke the power of the ‘1 percent’

Here’s the bottom line:

Although Norwegians may not tell you about this the first time you meet them, the fact remains that their society’s high level of freedom and broadly-shared prosperity began when workers and farmers, along with middle class allies, waged a nonviolent struggle that empowered the people to govern for the common good.

Now read the rest of the story: How Swedes and Norwegians broke the power of the ‘1 percent’.

It may not be desirable or even possible for us to apply the precise tactics of 20th century Scandinavian, but the basic approach remains valid: non-violence, social solidarity, and organization in pursuit of the common good.

I was at a meeting yesterday regarding the ongoing online piracy discussion and the conversation turned to search as a source of traffic to sites with pirated content. I stopped the conversation and noted that search isn't what it used to be and pointed out that many websites get more traffic from social than search.

Here at AVC, it is no contest. Here's the top ten traffic sources to AVC in the past thirty days:

Google/organic is search. Direct and feedburner are regular visitors. Everything else (Stumbleupon, Twitter (t.co), Hacker News (news.ycombinator), Techmeme, google/referral, Facebook, and Linkedin are social. So if we break the top ten into three categories, direct is about half of the top ten's traffic, social is 40%, and search is 10%.

This blog isn't normal in a few ways. The fact that Twitter generates 13x Facebook in traffic is one example of that. And the very high level of direct/regular readers is probably a bit unusual too.

I'm curious if anyone is aware of a broader study of traffic sources on the Internet and how search and social compare these days. I suspect that they are neck and neck across the entire Internet or possibly that social has surpassed search. But I have not seen that data and I'd love to.

Yesterday Techmeme launched a redesign. I like it. Nicely done Gabe.

I thought I'd use this news as a jumping off point to talk about my favorite feature on Techmeme. When a news event happens, I like to see various pundits' take on it without having to click thru and read every post.

Techmeme has always done this better than any other news service. Let's take this news that Twitter can now comply with local censorship laws and takedown notices without taking down a tweet globally (good news in my mind).

It looks like this in Techmeme:

But if you click on the down arrow on the left of the news item, you get a "blown out" version of the news story which looks like this:

Granted that these are only headlines and they can't and don't give you a full sense of the take that each of these writers has on the news. But a quick scan of the tone and tenor of the headlines will tell you quite a bit. And when you've got 30 seconds to take a quick look at what's going on in the tech world, that's worth a lot.

I use this feature often. At least once a day. Many times way more than that.

For tech news, I've tried pretty much everything new that comes along, and for the past four or five years now, nothing beats the duo of Techmeme and Hacker News for me. Each has its benefits and together, you can get a great sense of what is going on in tech in real-time all the time. Thanks Gabe and Paul for building these services and maintaining them.

I don’t take seriously the words of politicians, nor do I pay much attention to the quadrennial presidential election charade. The outcome is decided well in advance of the presidential primaries by the power that be. The mainstream media coverage becomes almost laughable when you notice how the networks contort themselves to make an establishment puppet look like a viable candidate while ignoring anyone who might represent popular interests and real change. That is ably illustrated by this video:

And this article by Patrick Martin helps us to read between the lines of Obama’s speech and understand the dismal state of American government. It is clear that whomever occupies the White House next term, and whichever party controls Congress, WE THE PEOPLE will get no help from Washington. In fact, as David Stockman told us about a year ago, the federal government has become “a fountain of harm.” It is up to WE THE PEOPLE to rebuild American democracy and take back control over our lives, working from our communities on up.–t.h.g.

Obama’s State of the Union address: War and wage-cutting

By Patrick Martin, 25 January 2012

The State of the Union Speech delivered by Barack Obama Tuesday night was memorable only as a further milestone in the decay of American democracy.

While billed in advance by the White House and media pundits as a “populist appeal” by the Democratic president, effectively kicking off his reelection campaign, there was virtually nothing in the speech that even acknowledged the acute social crisis in America, let alone offering any solution.

The annual presidential addresses to a joint session of Congress have taken on an increasingly empty and ritualistic character—the same empty phrases, the same perfunctory ovations, the same gimmick of individuals placed in the First Lady’s box to serve as cameos, the laundry list of proposals, either insignificant or overtly reactionary, the sickening appeals to national unity and militarism.

Four years after the official onset of recession, three years after the biggest financial collapse since the Great Depression, the US economy remains mired in slump and the world economy is rapidly approaching a new cataclysm. Yet neither Obama nor his Republican opponents can acknowledge the overriding fact being experienced by hundreds of millions of working people: the desperate crisis of the capitalist system.

The Wall Street crash of 2008 plunged the country into a social crisis: mass unemployment, increasing poverty, the collapse of local and state government budgets, the shutdown of public services, the spread of hunger and homelessness. Yet for both Obama and the Republicans, the only solution proposed is to increase the profits of American corporations at the expense of the working class. Every so-called “job-creation” measure proposed by Obama was, in reality, a tax break or government subsidy for corporate America.

Obama’s speech not only glossed over the causes and consequences of the 2008 collapse, but entirely avoided any mention of the mushrooming financial crisis in Europe, which threatens to break up the euro zone, with incalculable consequences for the US and world economy.

The axis of Obama’s speech was his invocation of the auto bailout as the greatest vindication of his economic policies. “This blueprint begins with American manufacturing,” he said. “On the day I took office, our auto industry was on the verge of collapse… In exchange for help, we demanded responsibility. We got workers and automakers to settle their differences.”

By “responsibility” Obama was referring to the White House demand that auto workers take a 50 percent pay cut, along with the destruction of tens of thousands of jobs, major cuts in pension and health benefits for retired workers, and a ban on strike action, cementing the role of the United Auto Workers union as the company police force inside the plants.

While auto workers paid the price, the auto bosses reaped the profits. “Today, General Motors is back on top as the world’s number one automaker,” Obama boasted, “the American auto industry is back.”

He continued with the following extraordinary words: “What’s happening in Detroit can happen in other industries. It can happen in Cleveland and Pittsburgh and Raleigh.” This statement should be taken as a threat to the jobs, living standards and democratic rights of every worker in the United States.

While Obama invokes the success of “Detroit,” the city is bankrupt, with poverty and unemployment over 50 percent, widespread foreclosures and utility shutoffs, and a city government committed to scrapping entire neighborhoods and returning large sections of the former manufacturing capital of America to farmland.

The state government is contemplating the installation of an emergency manager who would suspend local government, rip up union contracts and rule by decree. Detroit has become a synonym, not only in America but worldwide, for urban collapse and social misery. This is what Obama offers to workers in “Cleveland and Pittsburgh and Raleigh.”

Besides these remarks, there was much political boilerplate and ballast. The section of the speech described as “populist” in the corporate-controlled media amounted to a few paragraphs out of an address of more than one hour. Obama declared, “We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”

He made a brief reference to the 2008 financial crash, admitting that the banks were to blame, mainly for the purpose of excusing himself and his administration of responsibility. The president then announced that he had just ordered the attorney general—four years after the fact—to “expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.” This election-year stunt will likely send no Wall Street CEOs to jail. It will fool only those who want to be fooled.

Obama emphasized that his social policies on education and health care were based firmly on the capitalist market and reiterated his commitment to further drastic cuts in social spending. He cited the deal he reached last summer with House Speaker John Boehner to slash funding for Medicare and Social Security in return for slightly higher taxes on the wealthy, which was derailed by opposition from the House Republican caucus.

Equally ominous and reactionary were the brief opening and longer closing sections of the State of the Union speech devoted to foreign policy. Obama began and ended the speech by invoking what he clearly regards as his trump card, the assassination of Osama bin Laden by a team of US Navy Seals.

Obama hailed “the courage, selflessness, and teamwork of America’s Armed Forces.” He continued: “At a time when too many of our institutions have let us down, they exceed all expectations… They focus on the mission at hand. They work together. Imagine what we could accomplish if we followed their example.”

The president repeatedly beat the drums for economic nationalism, focusing particularly on China as an alleged practitioner of predatory trade practices.

In the course of a long paean to American military strength and foreign policy “successes” like the overthrow and murder of Libyan ruler Muammar Gaddafi, Obama cited “the enduring power of our moral example.” Actually, under Obama even more than Bush, America is identified with a policy of global thuggery and murder, carried out by drones, death squads and hired assassins.

In his conclusion, Obama returned to his vision of a society run along military lines when he again invoked the raid that killed bin Laden. For Barack Obama, the cohesion of a team of trained assassins is the highest form of human solidarity.

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Blog polling widgets have been around a long time. I've tried out a few of them on AVC over the years. And polling has never taken off as a major form of engagement on blogs (as has commenting, liking, tweeting). I'm curious why that is so.

I met with a young man named Max Yoder yesterday who has built yet another polling widget. He calls it Quipol. I figured I'd give it a test run with the AVC community. And let's get right to it with the question of the day:

Quipol

Let me know what you think of Quipol and blog polling widgets in general in the comments.

According to the Associated Press, federal negotiators are close to concluding a deal with major banks that would essentially forgive them of crimes committed in connection with the mortgage crisis. You can read the story here, and a critique of the proposed settlement here: Obama Is on the Brink of a Settlement With the Big Banks—and Progressives Are Furious.

I read something today that I wish I had written. So I am going to cross post it. This post comes from Noah Millman and it is about the lame textbook thing that Apple launched recently. With that intro, I'll shut up and let you read Noah. The original post is here. If anyone knows how to reach Noah, I'd like to email him and tell him how much I liked his post.

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I see that Steve Sailer and Matt Yglesias are both wondering why Apple’s iPad textbook initiative is so lame. Sailer wonders why Apple isn’t exploiting the interactive possibilities of the tablet to make textbooks much more effective. Yglesias wonders why Apple (or the Gates Foundation) don’t just give textbooks away for free, and thereby both increase the appeal of the tablet and reduce costs to hard-pressed school districts.

The answer is: Apple is a big company, and the Gates Foundation is a huge philanthropy. Large institutions are not the places to turn to, generally, for disruptive innovations.

Apple has no reason to go head-t0-head with textbook publishers, any more than it has any reason for going head-to-head with music labels or book publishers. It’s a much sounder business strategy for Apple to coopt these complementary businesses and make them dependent on Apple. Which is precisely the strategy that Apple has pursued.

The Gates Foundation is a somewhat more complicated story. In their case, I’d say the complementary relationship is between the foundation and the foundation’s clients – and their clients are education reformers, not education professionals. Simply giving textbooks away for free would upset an incumbent that the reformers are not particularly targeting, and would not put in place any structure for the creation of new textbooks. And incubating new products really is beyond the scope of what the foundation does.

Within the world of regular public school education, educational professionals have distinctly limited ability to express any kind of preferences – and the Bush-era education reforms have reduced this scope even further. The target market for textbook publishers is the politicians who set the curriculum for the nation’s largest school systems where that curriculum is set statewide: California and Texas. It matters very little what an individual teacher in Houston or Oakland wants or needs – or thinks their students need.

If you want to see disruptive change in the textbook market, then, you’d need to identify both a potential supplier of the product with no stake in propitiating the incumbents, and a buyer of the product for whom the product solves a problem.

My suspicion is that your best bet would be to have the supplier and the purchaser be, in some sense, the same entity. And I can think of two parts of the educational landscape where that situation might obtain: the KIPP network of high-performing charter schools and the home-schooling movement.

KIPP has the advantage of having a centralized structure and access to funding to implement a strategy. They already create their own curricula. Creating their own textbooks would be the logical next step. If the educational advantages Sailer sees as the potential in tablet-based study really exist, KIPP – which is already very data-driven in its approach to education – would be ideally placed to realize them. Similarly, if the cost advantages exist – initially, reduced spending on textbooks; over the longer term, reduced spending on teachers, as highly interactive tablets made it possible to stretch teachers over larger groups of students – KIPP actually has the incentive to realize these as well. One downside might be that KIPP would have an incentive to retain intellectual property in anything they created – but if it was successful, it would probably spur other charter networks to respond, and the smaller networks would be well-advised to work together rather than independently, simply for reasons of scale, and therefore to do something more open-sourced.

The home schooling movement, by contrast, has no access to funding nor any decision-making structure – but it has the advantage of having a much larger network of individuals potentially capable of committing resources to the project. One could imagine a Wikipedia-style process of textbook creation, where hundreds of thousands of home-schooling moms and dads donate a small portion of the time they already spend on teaching their kids to producing or editing material for the virtual textbooks they all use. You would, of course, need some kind of central structure to handle the programming – but even much of this could be relatively decentralized once the essential framework was in place.

Working either through the charter movement or the home schooling movement would enable a tablet textbook project to start small, yield immediate returns to participants, and scale easily, while largely ignoring the interests of incumbent institutions. And it wouldn’t require the sponsorship of an Apple or a Gates Foundation. Working through the regular public school system, which would certainly require some kind of megadollar sponsorship, would start big, would have to coopt the interests of incumbent institutions, and would make it difficult to impossible to actually yield quick returns to the most important participants: the teachers and students in the classroom. Which, unfortunately, has been the fate of all too many big-think reform proposals for the regular public schools. Much more sensible to build something in more natural laboratories for innovation, and then figure out how to “port” an already proven solution to the regular system.

This past Sunday afternoon I had the pleasure of being on the judges panel at the NYC Cleanweb Hackathon at NYU ITP. There were thirteen hacks presented to the judges. Of them, probably half had incorporated the "green button" for getting your utility data into their app.

The Green Button is an initiative promoted by Aneesh Chopra, the CTO of the United States. In a speech last fall, he challenged the utility industry to come up with a simple way to allow consumers to access their utility data. Last week, three big California utilities announced they had made the Green Button available on their websites.

And by sunday, the green button was in a half a dozen web and mobile apps that had been created over the weekend. This is the kind of innovation that gets me excited. The Green Button is like OAuth for energy data. It is a simple standard that the utlities can implement on one side and web/mobile deveopers can implement on the other side. And the result is a ton of information sharing about energy consumption and in all liklihood energy savings that result from more informed consumers.

The Green Button follows on the success of the Blue Button, a similar initiative that allows veterans to get at their medical data.

I'm a big fan of simplicity and open standards to unleash a lot of innovation. APIs and open data aren't always simple concepts for end users. Green Buttons and Blue Buttons are pretty simple concepts that most consumers will understand. I'm hoping we soon see Yellow Buttons, Red Buttons, Purple Buttons, and Orange Buttons too.

Let's get behind these open data initiatives. Let's build them into our apps. And let's pressure our hospitals, utilities, and other institutions to support them. I'm going to reach out to ConEd, the utility in NYC, and find out when they are going to add Green Button support to their consumers data. I hope it is soon.

Now that I've completed three posts on The Management Team over the last three MBA Mondays, it's time for four or five guest posts on this topic. The first one is from Matt Blumberg, CEO of our portfolio company Return Path. I've been on Matt's board for over a decade and I've watched him develop into one of the finest managers I've had the pleasure to work with. Here are Matt's thoughts on this topic.

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When Return Path reached 100 employees a few years back, I had a dinner with my Board one night at which they basically told me, “Management teams never scale intact as you grow the business.  Someone always breaks.”  I’m sure they were right based on their own experience; I, of course, took this as a challenge.  And ever since then, my senior management team and I have become obsessed with scaling ourselves as managers.  So far, so good.  We are over 300 employees now and rapidly headed to 400 in the coming year, and the core senior management team is still in place and doing well.  Below are five reasons why that’s the case.

1.       We appreciate the criticality of excellent management and recognize that it is a completely different skill set from everything else we have learned in our careers.  This is like Step 1 in a typical “12-step program.”  First, admit you have a problem.  If you put together (a) management is important, (b) management is a different skill set, and (c) you might not be great at it, with the standard (d) you are an overachiever who likes to excel in everything, then you are setting the stage for yourself to learn and work hard at improving at management as a practice, which is the next item on the list.

2.       We consistently work at improving our management skills.  We have a strong culture of 360 feedback, development plans, coaching, and post mortems on major incidents, both as individuals and as a senior team.  Most of us have engaged on and off over the years with an executive coach, for the most part Marc Maltz from Triad Consulting.  In fact, the team holds each other accountable for individual performance against our development plans at our quarterly offsites.  But learning on the inside is only part of the process.  

3.       We learn from the successes and failures of others whenever possible.  My team regularly engages as individuals in rigorous external benchmarking to understand how peers at other companies – preferably ones either like us or larger – operate.  We methodically pick benchmarking candidates.  We ask for their time and get on their calendars.  We share knowledge and best practices back with them.  We pay this forward to smaller companies when they ask us for help.  And we incorporate the relevant learnings back into our own day to day work.

4.       We build the strongest possible second-level management bench we can to make sure we have a broad base of leadership and management in the company that complements our own skills.  A while back I wrote about the Peter Principle, Applied to Management that it’s quite easy to accumulate mediocre managers over the years because you feel like you have to promote your top performers into roles that are viewed as higher profile, are probably higher comp – and for which they may be completely unprepared and unsuited.  Angela Baldonero, my SVP People, and I have done a lot here to ensure that we are preparing people for management and leadership roles, and pushing them as much as we push ourselves.  We have developed and executed comprehensive Management Training and Leadership Development programs in conjunction with Mark Frein at Refinery Leadership Partners.  Make no mistake about it – this is a huge investment of time and money.  But it’s well worth it.  Training someone who knows your business well and knows his job well how to be a great manager is worth 100x the expense of the training relative to having an employee blow up and needing to replace them from the outside.

5.       We are hawkish about hiring in from the outside.  Sometimes you have to bolster your team, or your second-level team.  Expanding companies require more executives and managers, even if everyone on the team is scaling well.  But there are significant perils with hiring in from the outside, which I’ve written about twice with the same metaphor (sometimes I forget what I have posted in the past) – Like an Organ Transplant and Rejected by the Body.  You get the idea.  Your culture is important.  Your people are important.  New managers at any level instantly become stewards of both.  If they are failing as managers, then they need to leave.  Now.

I’m sure there are other things we do to scale ourselves as a management team – and more than that, I’m sure there are many things we could and should be doing but aren’t.  But so far, these things have been the mainstays of happily (they would agree) proving our Board wrong and remaining intact as a team as the business grows.