Ready, Fire, Aim! - Mihail's Public Blog

We're becoming so LA. A friend was just saying this in reference to the scene at a fundraiser this past Sunday on the terrace of a hip new SOMA loft with a couple of Hollywood stars. Now this:

You can't know what a relief it is to me that the San Francisco Whole Foods Market now offers valet parking on weekends. "We knew that drivers were frustrated by the congestion in the parking lot," explained the store's Wade Williams.

Frustrated! Terrified might be a better way of putting it. For some time I have been willing to risk starvation -- or eating nonorganic food; I haven't quite decided which of these options is, scientifically speaking, more harmful -- rather than brave the rage-filled pit that is the lower-level parking lot during peak weekend hours.

In this great Business 2.0 column titled tongue-in-cheek as Barely Managing, Thomas A. Stewart writes about how you can never be too sure when predicting a market demand.

The prophets of video-on-demand overlooked something about "demand" -- namely, whose demand it really is. You don't create demand; you obey it. You can lead demand to water, but you can't make it drink.

Demand wasn't always so demanding. When markets are cartelized (one phone company, three automakers) or regulated (mandated rail- and airfares, interest rates, brokerage commissions), supply has more sway...Plans are great, till they gang a-gley. In the 1970s and 1980s, the heyday of strategic planning, big companies put their best and brightest to work in enormous planning departments. Like generals who finally perfect a war plan at the same moment that new technology makes it obsolete, strategic planners rose just in time for the demise of the business environment that planning was designed for. Globalization, deregulation, and information and communications technologies have cracked cartels and broken up orderly markets -- the only company I can think of that's safe behind monopolistic walls is Microsoft (MSFT).

...When demand is running around loose, smart leaders don't make too many plans. Instead they make hypotheses, then adjustments. They plan only for the foreseeable future, much like a motorist who takes care not to drive so fast that he can't stop within the range of his headlights. For the rest -- for the future darkness toward which you are hurtling -- you set a goal, a destination; you measure progress toward that goal; and you arrange your investments and operations so that you can, with relatively little pain, adjust, change lanes, accelerate, brake, take an alternate route, honk, improvise, or compromise.

Guy Treby of the New York Times finds his way to the famed French Laundry restaurant in Yountville, in California's Napa valley, which will soon also be home to an inn, spa and boulangerie designed by Antoine Predock and part of the growing French Laundry empire.

The joke was going to be that in order to get into the French Laundry I had to get a job there. And like a lot of wisecracks, this one contained more than a kernel of truth. Despite what one reads about the dot-com debacle, the Silicon Valley money that helped transform this one-time mining, timber and prune growing region into a viticultural wonderland still seems immune from what most Americans would consider economic reality. For the moment, at any rate, there is no apparent shortage of lotus eaters willing to spend the $300 or so that dinner for two can easily cost at Thomas Keller's celebrated Yountville restaurant.

...It is no secret that Mr. Keller was not always renowned for his finesse, and that his highly pitched scale of standards was often expressed with performances not notable for their delicacy. "I don't explode anymore," he once told a reporter. "I let it out in different ways."

That was in 1996, two years after Mr. Keller first assembled nearly 50 limited partners and the $1.2 million it took to purchase the original French Laundry from its longtime owners, Don and Sally Schmidt...Since that time the trajectory of this chef with no formal training has carried him... [all the way] to his 1997 award from the James Beard Foundation as the Outstanding American Chef.

He's ba-a-ack! In 1999, [Scott] Blum sold his controlling interest in buy.com, the discount e-tailer he founded, to a Japanese investment bank for $230 million. "I got ridiculed for selling," he says, "but I felt the market was getting out of control. The company was trading at a $5 billion market cap." The bubble soon burst, and in late 2001 a deep-pocketed Blum (see Easy Come, Easy Go) was able to buy the now-profitable company back for a mere $26 million.

Yahoo's competitors include MSN which partnered with Verizon in June according to News.com:

to create a "new kind of DSL service" aimed at giving subscribers services and content with high-speed Internet access, according to a statement by Microsoft CEO Steve Ballmer. That service is expected to launch in early 2003 and cost $39.95 to $49.95 a month, depending on a subscriber's location.

Microsoft also offers its MSN broadband service for $49.95 a month in partnerships with SBC, BellSouth and Qwest Communications International.

Meanwhile, AOL struck a deal this month with troubled broadband provider Covad Communications to buy wholesale DSL services...AOL High Speed Broadband service over cable modem is $31.05 a month, in addition to a monthly $23.90 fee for unlimited AOL dial-up, plus taxes and other service fees.

Yahoo is rumored to be launching its broadband service next week in cooperation with SBC. Yahoo will receive a percentage of the DSL subscription revenue and will share advertising revenue sold on the service with SBC.

...Last quarter, Yahoo reported 1 million registered paying customers, many of whom purchased additional offerings for e-mail, personals and data storage. The changes have reduced Yahoo ad dependence from some 90 percent of revenue in 2000 to 60 percent this year.

...Creating a monthly billing relationship with customers could also make it easier for Yahoo to market incremental services, impulse buys and "micropayment" transactions that are more difficult to sell if customers are required to enter credit card account information each and every time.

Yahoo has not disclosed new details of the partnership. But in past announcements, the company has said it would include a DSL connection with a co-branded, customized Internet Explorer Web browser, as well as fee-based premium services. Some of the services bundled could include extra e-mail storage, extra photo storage and a revamped version of Yahoo's Launch Web radio player.

The story of Lu Chuanzhi and how he built Legend into a $2B company by parlaying a $25,000 investment he persisted in getting from Beijing:

At first the government resisted--there was already one state computer company, so surely there was no need for another. Eventually Beijing caved in, giving Liu a license and about $25,000 to set up shop in Hong Kong, initially to distribute foreign-made computers and then, in 1990, to make PCs.

Liu ran the place with an iron fist. "I was a very authoritarian manager," he says. "It was top-down all the way." But he was also smart enough to know what he didn't know. Liu struck deals to distribute Hewlett-Packard and Toshiba products on the mainland, then set about learning from the U.S. and Japanese giants. He sucked up everything he could, he says, "about how to organize sales channels and how to market. HP was our earliest and best teacher."

...Even as he was learning from HP and the rest, Liu had no intention of working for them forever. His vision was to take on the foreigners that then dominated the Chinese market--IBM, Compaq, and HP--by building the capacity to make low-cost PCs, then selling them through the retail network Legend had already built.

The Fortune 40 under 40 issue is out.

With a net worth of $16.49 billion, Dell Computer founder Michael Dell leaves the other members of the 40 in the dust: He's richer than all of them combined. To see how his vast wealth affects the average worth of the 40 over time, see the chart below.

Average Wealth of the 40 Under 40

From Fortune.

WiFi (wireless fidelity) has two advantages over 3G (third-generation mobile): It exists now, and it is cheap to deploy. But no one knows how to make money on either.

...Rene Oberman, T-Mobile's European chief of operations [T-Mobile just signed a wide-ranging deal with Starbucks], says WiFi should generate revenues "a quarter or two" before the company starts seeing returns from the $15 billion it spent on 3G licenses. T-Mobile isn't alone. Spain's Telefonica Moviles has deals with hotels and coffee shops in Spain and Germany. France Telecom's Orange hopes to offer WiFi not only in travel and retail spots but also in corporate offices. There's "a land grab to establish exclusive agreements," says Donald Longueuil, an analyst at In-Stat, a Scottsdale research firm.

WiFi uses radio waves to offer Internet access within a few hundred feet of a fixed transmission point. Inside that "hot spot," anyone with a laptop or PDA outfitted with a WiFi card can surf the web, send e-mail, and otherwise carry on a happy online existence. That makes it ideal for airports, hotels, coffee shops, and offices, where peripatetic surfers come and go. WiFi is taking off in the U.S.--about 1,200 public hot spots already exist in America. But it has been hobbled in Europe as national authorities debate standards before giving companies access to radio frequencies.

That's beginning to change, and European mobile operators are starting to worry that WiFi could become a 3G substitute. "WiFi could capture some part of the mobile data traffic," says Barbara Dalibard, vice president of corporate and business marketing for Orange, citing analyst predictions that it could take 2% to 15% of the market. That works out to between $1 billion and $9 billion a year, small change compared with predictions of 3G voice and data revenues as high as $500 billion. But 3G still requires billions in investment to build transmitters across the continent, while a WiFi hot spot can be set up today for as little as $250. No wonder the mobile operators want to grab their share right away before somebody else eats their lunch.

News.com on what made VC Promod Haque reinvest in a company after sinking a large earlier investment.

Haque, a managing partner with Norwest Venture Partners, was lead investor in Ethernet services company Yipes Communications. All told, Norwest invested more than $50 million starting in 1999. But this past March, Yipes filed for Chapter 11 bankruptcy protection, leaving Norwest owning a lot of worthless ownership certificates.

Haque might have closed the books on a bad investment at that point and just walked away. Instead, Norwest led a syndicate of investors in July to acquire Yipes' network operations and other assets through a newly formed company, Yipes Enterprise Services. Norwest, along with the other investors, funded the new company with a $40.8 million infusion.

What would drive a venture capitalist to reinvest in a company that once wiped out its original investment? CNET News.com recently talked with Haque about why he thinks things are going to work out better the second time around and whether there are any lessons he can share with prospective investors in other start-ups.

Microsoft is acquiring XDegrees, a maker of security software, to address ongoing concerns about Microsoft products security.

XDegrees, a small company based in Mountain View, Calif., makes products to secure information access across computer systems installed in large companies. The company plans to relocate to Redmond, Wash. Financial terms and the number of employees involved in the deal were not disclosed.

"It's a way of making a shared file system more accessible and more useful," said Laura Koetzle, an analyst at Forrester. "You are also potentially improving security since you are making everyone use the same access point for the shared files as opposed to all accessing it from different doors. It's a good move."

Forrester Research, in "Downloads Save the Music Business," predicts that downloads will generate $2.1 billion for labels by 2007. According to this Fortune article:

Currently, of course, downloads generate nothing but headaches for the Big Five record companies. RIAA numbers show the number of albums sold sank 10.3% in 2001 and have sagged another 7% this year, "decisively debunk[ing] the theory that stealing music online is somehow good for the music business," says the organization. It could get worse. If you believe the data from now-defunct Webnoize, pirates downloaded 3.05 billion files a month from the top four sites alone in 2001. Assuming that there are ten songs per album, that's more than the number of CDs sold worldwide in 2001 (2.5 billion). In fact, the only thing propping up the industry might be laziness. "People find it surprisingly difficult to do simple things," says professor and intellectual-property expert Stanley Liebowitz, author of the forthcoming Rethinking the Network Age. "As it gets easier to burn a CD, you could see more of a negative impact on sales."

So what's with all the savior talk? Forrester predicts that after one more year of depressing sales, labels will supply more content on the cheap; the story goes that by 2007 this will create a downloading wave of tsunamic proportions that will wash all this additional money onto the music industry.

...Even if the new wave of services are perfect, will people pay at all? Some analysts think the price needs to drop to 25 cents to draw significant traffic. But if even a portion of downloaders cough up that much, suddenly the music business doesn't look so bleak.

I headed to Pacbell Park this afternoon (thanks to Julie Landry for the tickets) to watch the Giants play against the Dodgers with my good friend David Lasker. A lackluster game (we left early; the Giants lost 3-7) but a good distraction from the media blitz -- in fact, I'm just watching TV for the first time this evening. It was pretty emotional though to watch as,

...players walked in a line and surrounded the infield dirt to salute a huge flag that covered nearly the entire outfield. It was held by police officers and firefighters. "America The Beautiful" played as the flag was unveiled.

We decided to stop by the San Francisco City Hall which I'd only seen from my place on Alamo Square, as it changed throughout the day, from been washed in sunlight to slowly being engulfed in fog to sparkling with lights at night.

Today was sombre as scores of people streamed into the main rotunda and up the steps to the landing where six stacks of of 2' x 3', I think, loose leaf sheets waited for each person's signature. The sheets will be combined into one bound copy that'll be presented to New York city mayor Bloomberg. San Francisco may be the only city doing this. It was a small gesture but I'm very glad we went in and did it.

In a McKinsey Quarterly article (subscription required):

Who would have expected the retail sector to be a big part of the new-economy story in the United States? Retailers seemed to have been left out of the technological and operational improvements that transformed US manufacturing. Yet retail-labor productivity growth more than tripled after 1995, contributing roughly one-quarter of the national productivity acceleration of 1995–99. The reason can be explained in just two syllables: Wal-Mart, whose operational innovations—including the "big-box" format, "everyday low prices," electronic data interchange with suppliers, and economies of scale in warehouses—forced competitors to adapt.

ONE-SIZE-FITS-ALL NO MORE Three of Gulfstream's new business jets -- the G150, G300 and G500: MODEL BASE PRICE (millions) PASSENGERS RANGE (Nautical Miles) G100 $11.5 6–7 2,700 G150 12.5 6–8 2,700 G200 19.5 8–10 3,600 G300 25.5 11–14 3,600 G400 32.25 11–14 4,100 G500 37.5 14–18 5,800 G550 44.75 14–18 6,750 Source: the company

From the Wall Street Journal (subscription required):

During past decades, business jets remained the province of the wealthy and famous. But the stock-market boom of the 1990s combined with the increased inconvenience of commercial-airline service made these aircraft a mainstay of American corporations. Sales peaked at about $11 billion in 2000. Since then, the market has contracted, turning up pressure on aircraft manufacturers to differentiate themselves to win sales from a smaller pool of customers.

Bill Quick has a good estimate of the number of warblogs in the blogosphere and a complete list of names.

We really don't have a way to measure all this with any accuracy, but the Myelin blogging ecosystem has been measuring linkages on a daily basis on more than 8300 blogs for some time now. I picked the top hundred off that list, and then discarded the group type operations like slashdot, which don't really strike me as blogs so much as usenet groups updated for the web.

...I think this challenges the notion that the new Warblogger faction is a trivial part of the entire blogosphere. I would wager that these top eighty blogs, which make up less than one percent of the 8300+ sampled, garner eighty percent of the traffic, and nearly half of that goes to the upstarts.

According to the Wall Street Journal (subscription required):

American consumers bought an amazing 1.7 million automobiles in August, 13% ahead of last year. Just one startling auto-sales fact among many: Two years to the month after the Ford Explorer-Firestone safety scandal exploded in the national media, Ford sold 51,000 Explorer sport utilities -- a record for any single SUV model, any time, anywhere. So much for the gurus who pronounced the Explorer brand dead (and so much for the safety and environmental advocates hoping to shame us all out of SUV Fever.) Show America a five-year, 0% financing deal and all is forgiven.