SOPHISTICATED FINANCE

Morality and Capitalism

I believe that social entrepreneurship is a temporary form of entrepreneurship and that over time we will no longer need the adjective "social" to differentiate a form of entrepreneurship. With education companies will come to serve a wider range of stakeholders and provide more "social" benefits. Should such a realization be achieved, perhaps that will quiet the critics of capitalism. Such critics claim that capitalism is immoral.

The Institute of Economic Affairs has a well written defense of the morality of capitalism in "Free market capitalism and morality". The article has some excellent citations from Adam Smith's writings. If I could figure out the legal issues, this is the first article in eight years of writing this blog where I would just reprint the article.

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Funny Twitter Marketing

I received this email from Twitter promoting people to follow.

I would like to thank Twitter for the marketing support, but I already follow Robert Hacker. 

 

Understanding Digital Business Models

BCG.Perspectives has a very interesting new article, "Navigating a World of Digital Disruption". The article focuses on how the BCG clients (F500) can be disrupted and how they can position strategically and tactically to improve their performance. However, I found the more valuable parts to the article to be:

1. A new perspective on why Amazon has succeeded
2. A new way to look at the business model for digital companies 

I really liked the graphic below. One point to note, I think you can only strategically focus on one "architecture" at a time for an line of business. For example Amazon uses communities to do book reviews, but the Amazon strategy is a platform strategy for its original business. I THINK A LOT OF STARTUPS TRY TO COMBINE PLATFORM AND COMMUNITY AND THAT IS WHY THEY DO NOT GET FUNDED. YOU CAN ONLY BE ONE.

The article also has an interesting proposal for how NGOs and multi-laterals could re-organize agriculture to be more sustainable and effective through big data.

This is an article worth reading slowly and not speed reading. Thanks to @John_Menenzes for the heads up.

 

 

 

 

 

@john_menenzes 

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Thoughts on eMerge

I spent yesterday at the eMerge conference in Miami. While there was a nice list of speakers, I spent most of the day talking to the early stage companies exhibiting and catching up with people in the entrepreneurship community in Miami. 

My takeaways from the conference:

1. About ten of the companies exhibiting are working in the HR (human resources) space with all kinds of software and platform offerings. Not a space that interests me but apparently very popular.
2. Despite the cluster emerging in early stage medical devices and healthcare in SFL, I saw very few such companies exhibiting.
3. The portfolio companies of Medina Capital were the best looking collection of companies, with all of these companies reminding us what "high tech"  means. Talking to these folks reminded me of discussions I used to have with people at MIT Media Lab.
4. Several good looking companies were bootstrapping with no capital raising desired. They were characterized by a step by step caution in developing the business that is somewhat refreshing.

 

Entrepreneurship Clusters

In a recent post in Marginal Revolution Tyler Cowen states:

"Some economic sectors are distributed everywhere, like every city has its dentist[s], and other sectors are quite clustered. Banking is pretty clustered — New York, London, Hong Kong. Tech has been evolving in a pretty clustered way; I don’t mean simple software support, which is more like dentistry, but big, grand projects — the next Google, the next Facebook, Uber. We see those come out of quite a small number of places, so Skype coming from Estonia is quite the exception. Even then, it was improved by people in the clusters.

I think any location, not just Canada, has to ask itself, ‘are we going to be one of those clusters or not’? And the correct answer may be ‘no’. It may also be the sector evolves so it’s less clustered and more like dentistry, and then everywhere including Canada would partake. But maybe the future is Canada will have a knowledge sector doing small-scale things like software design for local projects but not anything like its own Silicon Valley. I guess at this point that seems likely — that Canada will not be a huge innovative part of the knowledge economy."

While the Internet Age floats all boats and the standard of living improves in most U.S. cities, not all cities will be centers of entrepreneurship. Critical mass is important, but some comparative advantage is also required to create an entrepreneurship cluster. It is the failure to focus on developing comparative advantage which will undermine the popular entrepreneurship efforts in many cities. 

Where can Miami find comparative advantage:

1. Medical and healthcare (the number of promising early stage companies is much greater than most people realize and we have two medical schools as resources)
2. Environmental science (a very dispersed market with no leading city; Miami has Rosenstiel and the FIU Engineering College where a lot of research on the subject is being done)

Such a targeted view looks a lot like the "investment thesis" approach of many VCs. Must be a coincidence :)