SOPHISTICATED FINANCE

Social Entrepreneurship--Where's the Entrepreneurship?

I have written here many times on social entrepreneurship. What always interests me on the topic in the writings of others is that the focus is always on the "social" and rarely on the "entrepreneurship".

There are approximately 6 million tax filing corporations in the U.S. and over 1.5 million non-profit foundations. What these statistics indicate to me is that our love of small businesses in the U.S. carries over to a love of small foundations. The proliferation of small foundations most likely reflects the limitations of individual donors. In other words people set up foundations to match the size of the personal resources they can contribute and typically must prefer not to combine efforts with others to create larger foundations. I am not making a value judgment here but merely presenting a bit of logical deduction. (I am sure Africa or South Asia would welcome 1.5 million small foundations).

The proliferation of non-profit foundations appears to carry over to social entrepreneurship, where many organizations target smaller objectives. However, one of the fundamental concepts of entrepreneurship is to target large market opportunities. It is this focus on large opportunities that separates entrepreneurship from small business management or self-employment. In the case of social entrepreneurship the large opportunity is a large social need.

A simple rule may help to determine if the organization is pursuing a sufficiently large opportunity to warrant the label "social entrepreneurship". If a reasonably sized for profit corporation, say $50 million in revenue or more, could finance the project out of cash flow, then the project is probably not social entrepreneruship. Any company this size could finance a very worthy project, such as a soup kitchen for the homeless in Miami...all they need is the will. Probably no single company could finance the eradication of Malaria in Africa. This project requires a disruptive approach so common in entrepreneurship and a  cash flow that does not include a return to shareholders.

I am not criticizing or discouraging people from doing smaller social ventures--every bit helps. I am just encouraging people to address the big problems, use social entrepreneurship as the model and put your 80 hour work weeks into big problems. It is yet to be proven that social entrepreneurship can significantly address a big problem, but I am betting that it can.

Note: there are other characteristics required for a project to meet the definition of "social entrepreneurship", but today I am just addressing the "large market opportunity".

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Why the Kindle Will Survive

I have said many times here that computing is moving to specialized devices, such as the Garmin GPS, the iPod and the Kindle. The iPad may be another example, serving the "Internet for Dummies" market or more politely people that want to use their computers basically for Internet, music, watching video and chat. The iPad offers a book reader but the further development of this feature (application) will not likely drive the sale of iPads. Therefore, I do not see the iPad book reader evolving much and therein lies the future opportunity for the Kindle and other book readers.

Books have evolved little since the time of the invention of the printing press by Gutenberg. Much as computing has spurred innovation in education, e-books have many opportunities for enhanced features. An example of this opportunity is demonstrated by the Kno, which is an e-book reader targeting the text book market. I expect that the Kindle will continue to add new features based on its wireless connectivity to provide additional reference sources beyond a dictionary and links to Wikipedia. Recently the Kindle added a new sharing feature and I hope that soon I can save excerpts of books to Evernote. When the Kindle starts to propose other articles, books or lectures on the subject of a paragraph based on semantic search, we will be closer to where I see e-book readers going.

The following statistics from Amazon show the robustness of the e-book market, which bodes well for the further evolution of the feature set in the Kindle and other book readers.

You will notice in the data above that my new book, Billion Dollar Company, has not yet sold 500,000 copies as an e-book. The simple reason must be that it is not yet available on the Kindle. If you click through to the Amazon link, read the book review and please click on the button to ask the publisher for a Kindle version. A complete website for the book will be available next week and will be announced here.

The Science of the Brain May Define Customer Need

This weekend I attended an education conference sponsored by One Laptop Per Child. One of the presenters made an interesting comment “we know how to educate children...the technology (computers) is satisfying different needs". Traditional education begins worldwide at five years old and focuses on memorization as the principal methodology. Why do we start at five years old? At that age the brain is capable of reading, as discussed by Stanislas Dehaene in Reading in the Brain. Basically our experiences showed us when humans could begin to read and science confirmed this conclusion about four thousand years after we started reading.  

The next speaker up talked about teaching and the fact that humans are the only animals capable of teaching. In fact humans demonstrate teaching skills at 2-3 years old, as confirmed by scientific research described by Antonio Battro. We learn to teach before we learn to read. This development path suggests that in teaching young children we should perhaps be focusing on their own abilities as teachers more and rely less on their ability to read.  

If you think about the true objectives of teaching they are arguably to encourage creativity, foster better reasoning and develop collaboration skills. This method of teaching is what OLPC develops through the use of its computers. The computer is satisfying the higher level needs of creativity, reasoning and collaboration of the young "teachers" which may go unsatisfied in a memorization approach to learning. Now for the big inter-disciplinary leap…at least for me...to entrepreneurship.  

Many of us traditionally focus on science and technology as a means to satisfy a customer need. However, as the example above shows, science highlighted the human need. The research on the human brain shows that teaching abilities precede reading abilities. We have built an education system to satisfy a need perhaps based on the wrong premises, as shown by the pure science. Education should be encouraging the teacher in all of us more and the reader less (or maybe later).  The point here for entrepreneurs is that with the continued research into the human brain, science will be defining or at least giving us new insights into understanding the customer need. Now we should be following this science of the brain not only for its application value but also for its value to give us more profound understanding of the customer. Effectively, understanding customer need has now moved beyond an emotional or psychological approach to include the development of the human brain.

Note: (1) One technique for finding breakthrough ideas is to look at where different disciplines intersect. The three disciplines examined here are pure science (biology), education and entrepreneurship. I do not assume that there are any great thoughts here but the post may illustrates the potential power of the methodology; (2) for parents with children that have reading and dyslexia issues Reading in the Brain may be helpful.

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A Real Blog

Most of us in the U.S. are far away from the inhumanity of man. Most of us erroneously think we have control over our lives. Occasionally a hurricane, an earthquake or a loved one serving in Afghanistan or Iraq bring us closer to reality. The occasional blog can help us to gain perspective.

One such blog is Dusengiyumva's Blog, written by Sam Dusengiyumva. Sam is a Rwandan survivor of the genocide in that country. The genocide took place in 1994 and 800,000 people were killed in 100 days. Sam's blog retells his stories from that period. Sam is the only survivor in a large family.

Sam runs the One Laptop Per Child project in Rwanda, which only goes to show the incredible humanity of this man.

The Eight Commandments of Management

Recently I started reading a blog called FaST Surgeon (in Afghanistan). The blog is written by a U.S. Army doctor on the front lines in Afghanistan. The writing is exceptional and the photography only adds to the story telling. Today's post included the NCO Creed, which explains the behavior of non-commissioned officers (basically sargeants). Excerpting from the Creed, the following points apply to management (regardless of occupation):

1. The two basic responsibilities are "accomplish the mission" and "look after my people"
2. I will strive to remain technically and tactically proficient
3. All employees are entitled to outstanding leadership; I will provide that leadership
4. I will be fair and impartial when recommending both rewards and punishment
5. Superiors will have maximum time to accomplish their duties; they will not have to accomplish mine
6. I will exercise initiative by taking appropriate action in the absence of orders
7. I will not compromise my integrity, nor my moral courage

"Accomplish the mission" is probably the idea most overlooked today in management with many focused on self-advancement and money. However, my favorite is number 6--take initiative in the absence of orders. This is a key to building a great company.

Morality was covered in the Ten Commandments. The U.S. Army reduced management to only eight. Finance is probably three ;)

Note: FaST-Forward Surgical Team; the full NCO Creed is in the post referenced above.

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A Strategy for LinkedIn

My recent post on LinkedIn's strategy was the most popular post ever here at SF, with about 4,000 readers on the first day. This post surpassed the former record holder post "Microsoft Yahoo Makes Little Sense" which analyzed Microsoft's proposed acquisition. (The fact that both articles were strategic analysis does suggest I should do more posts on strategy.) Many readers wrote in to ask what I thought LinkedIn's strategy should be, which is the subject of today's post.

In thinking about a strategy for LinkedIn we should, of course, think about what is the user need and how the satisfaction of that need should motivate the user to re-visit the site (e.g. FaceBook), to enrich or add to their content on the site (e.g. Issuu) and to view the archiving of this content as yet another benefit (e.g. Flickr). Furthermore, we need to recognize that people have already committed to social media in terms of their daily time usage and almost nobody uses LinkedIn as an alternative to Twitter, FaceBook or email. Therefore, in considering strategic alternatives for LinkedIn we cannot tinker on the edges with blog posts or Tweets on a profile. We need to create real value for the user, who is a business person, in terms of their career, promoting their professional services or by providing quality content that is not easily available elsewhere (such as Hacker News for technology).

My thinking on a strategy for LinkedIn would include two new basic ideas:

1. The "Ask a Question" feature on LinkedIn allows a member to post a question in one of over 20 topics in business, management and career, with most topics being more finely defined through sub-topics. The answers to most questions include 2-3 very insightful responses to the question and the answers are rated by readers to identify "best answers" and the number of best answers by a particular respondent in a category. By consistently providing good answers in a category one documents one's expertise. My idea for LinkedIn is that they should take this entire database of questions and answers and make it available on a separate website for everybody to benefit from. If you want to post a question or an answer you would still need to be a member of LinkedIn (another way to increase members), but much more important such a public database would allow members to promote themselves and their expertise across the whole web easily. This database might very well be the largest database on the web with good answers to business related questions. This feature might be a real benefit to members, would bring them back to the LinkedIn website more frequently to answer more questions and would help to satisfy the members need to promote themselves. For LinkedIn this second database might have tremendous revenue potential just in terms of ad revenue, given the size, quality and attractiveness of the database.
2. The second feature I would add to LinkedIn is a Hacker News for business. Hacker News is a very simple site where people post the best posts on technology from a wide range of sources including blogs, corporate media (e.g. NYT) and white papers. The content is not moderated but the users create such rich content that I sometimes think that if I had only one RSS feed to read every day it would be Hacker News. A "Business News" on LinkedIn would bring readers to the website more often to post articles, would over time probably produce a better source of business information for the members than the automated sites such as Google News or Yahoo News and again could be a new revenue source for LinkedIn through ad revenue.

My two ideas have several points in common:

1. It provides a reason for members to come to the site regularly and to promote themselves by answering questions
2. It creates two new revenue sources
3. It further promotes LinkedIn to new members through the database of answers

In the simplest terms, what LinkedIn needs to do is recognize the quality of the people on the site, leverage that asset and give something back to its members. Today the site gives very little back.

My post is not a completely new strategy but I think it would be a step in the right direction.

NOAA--Oil Serious Threat to SE Florida

NOAA, the U. S. government agency that produces the very accurate hurricane path forecasts, has just released a model showing the areas most probably affected by the Gulf of Mexico oil spill. As shown in the chart below, the outlook is grim for southeast Florida.

Especially disconcerting is that the model was released the day before a 3-day holiday weekend when people are less likely to be following the news.

Just Fun

A short fun post is in order. It's the 4th of July weekend in the U.S. TweetPsych analyzes your Tweets compared with others. My profile is shown below. You will have to visit the site to read the interpretation, but it was quite accurate. Try it for yourself....or use me...@rhhfla on Twitter.

A Different View of Leadership

William Deresiewicz has published a recent speech he gave to the plebe class at West Point in this month's The American Scholar. Mr. Dereesiewicz is a former professor at Yale, one of the most prominent literary critiques in the U.S. and often controversial in his writings. In the American Scholar article "Solitude and Leadership" he shares some very thoughtful insights on leadership, thinking and bureaucracies. His major points are summarized below:

1. The best people in a bureaucracy (not a pejorative term for WD) are stuck in middle management and the senior people who lead got there because they could get along with other people and not rock the boat.
2. Such leaders have created a complacent U.S. with a "crisis of leadership" regardless of the institution where they are in charge, e.g. the U.S. military, General Motors, etc. American leaders today, trained to succeed in bureaucracies, think about how to do things and do not question often enough the value in doing something or the implicit moral values underlying an objective.
3. What the U.S. lacks today are thinkers, people with vision who think things through for themselves and then act on their conclusions.
4. Multi-tasking, the great pursuit of youth, interferes with quality thinking; a recent scientific study not cited by WD confirms this point.
5. "...by concentrating, sticking to the question, being patient, letting all the parts of my mind come into play", that's what produces quality thinking; the ideas of others obtained through media, whether it be social media, television or newspapers, probably corrupt this process.
6. Time alone is probably the best way to achieve quality thinking.

I have written in this blog several times about leadership and multiple times about thinking. I never drew out the relationship between the two concepts as well as Mr. Deresiewicz. Maybe I need to spend more time concentrating on my blog posts and not worry about the regularity of posts. Read the article. Don't let the magazine name The American Scholar scare you away.