5 Things I Learned from Nuclear Winter

Nuclear Winter. It’s the time period after a holocaust that can last for hundreds of years, making the surrounding landscape around ground zero uninhabitable due to radiation.

It is the death of life and the birth of a new holocaustic life. We’ve never actually had an actual nuclear winter on a global scale, though the threat is there as more and more nuclear weapons proliferate the globe. Many science fiction stories have been built around the concept of a nuclear holocaust and life after.

Although it’s a dark time, sometimes proverbial nuclear winters are necessary. They are the times when you throw away everything you know and begin from scratch. A chance at a new life. A rebirth. It’s a time to correct all that is wrong and hopefully get on the right path over the long haul. Economists call it “corrections”. Historians call it the “end of an era” or the “decline of an Empire” – depending on the context.

As someone who is not experienced in an actual nuclear winter, let me describe a few things that I’ve learned from proverbial “nuclear winter”

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Photo by nogoodreason

1. All Assumptions are False

In a nuclear winter, life is not as you expect. Landmarks are gone. People you know are no longer in your world. You can no longer go to the grocery store and instead have to live off the land.

If you’re in a business that is facing massive layoffs, you cannot assume that the way things always have been will still exist in the world post-layoffs. You cannot assume that, even if you retain your job, your “new” job will remain as it was. You will likely end up giving up responsibilities due to business strategy objective shifts and maybe doing some new work due to the need to backfill for laid off colleagues.

You cannot assume that, because we’ve lived in a world of thriving internet startups, that you the lay of that land will remain the same in an economic holocaust. You can’t. It’s just not a safe assumption. Ask Seesmic.

2. Live Off the Land

In a nuclear winter, as described earlier, you simply can’t go to your Whole Foods and buy your hipster organic food. The reality is is that even if you could go buy organic food, it’s likely tainted from the fallout in the water, ground and air. No, you live off the land. You find the bugs and plants that carry an innate immunity to radioactivity or that have evolved enough to live and thrive in a nuclear landscape. Because you have to survive, and that’s more important than getting your Venti Soy Chai at Starbucks (that don’t exist).

More and more companies that continue to emerge these days are bootstrapping. Companies like AwayFind, who launched the other day, are bootstrapping and not taking angel investing or venture capital to stay alive. They are not taking a devaluation just for the infusion of cash. They are succeeding the old-fashioned way – a method that might take a lot more runway, but that ensures that 100% of the value of the company is retained by the principals. If you can live off the land, do it. It might be awhile before you find yourself a Starbucks in the nuclear wasteland.

3. There is Always a Remnant

During any nuclear winter in any story, you’ll always find a remnant. It might just be a small village of survivors that are doing their best to build a community and survive. They may have built a wall of scrap metal around their community to keep raiders away, but they are surviving.

At critical times where the status quo is challenged, the companies that are the hardiest and most cost-efficient are the ones that survive. While companies like AIG require an infusion of cash (or, as I call it, a crutch) to stay afloat they continue to splurge on non-necessities. Companies like this are doomed to failure.

While the auto-industry, built around an inefficient union mentality that, at one end, limits innovation because it de-incentivizes that innovation, and at the other hand overpays under-qualified individuals to do jobs that are worth half of their paychecks, struggles to figure themselves out, they will eventually have to declare bankruptcy. During that bankruptcy, they will be forced to cut, by some estimates, 50% of their workforce while updating their approach to union labor to ensure survival. There will be a remnant, and that remnant will figure out what needs to happen to survive the wasteland.

4. That Bridge Used to be the 14th Street Bridge

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I’ve been playing Fallout 3 recently, which is set 200 years after a nuclear war between the United States and China. The setting is a region called “The Capital Wasteland” and is, in essence, the Washington, D.C. metropolitan region.

Throughout the game, you can find indications of what used to be. I recognized, in my wandering around the Capital Wasteland, a landmark that could only be the 14th Street Bridge. I would not have recognized it from anything other than geographical position. There were no distinguishing features and it was largely destroyed and falling into the isotope-filled Potomac River, but I knew it was the bridge.

Practices will change throughout life, but principles and patterns remain the same. It is the essence of the Chaos Theory which states that though the universe appears to be full of chaos and disorganization, it is entirely made up of fractals and patterns at an atomic and sub-atomic level. More simply, there are patterns and principles that remain true, though practice, execution and manifestation of those principles change.

In the communications, newspaper, and television industries, as well as many large businesses, people are wrestling with how to do business in a world that is dominated by the internet and then, only recently. They see chaos, where they should see patterns. The principles of public relations is to communicate effectively with the public. The practices of public relations, however, are shifting and the ones that adjust are the ones that will survive that nuclear winter.

5. Know Your Immune System

In a nuclear winter, there’s no one looking out for survivors except the survivors themselves. If there are doctors, they are few and far between. If there is a support community, you have to look hard and not trust anyone. It’s the nature of the new dog eat dog world that such a holocaust causes.

Companies right now are scrambling to figure out “what’s up”. They are looking at their profit margins, cash in hand and extending their runways as far as they can extend them. Investors are reassuring their portfolio companies that there should be a way to survive if they are smart and proactive, but the reality is that in a nuclear winter, no one really knows.

Even if a portfolio company manages to get that C-round and the $15M investment they need, it will be on a down valuation. In layman speak, that means it becomes, in essence, a high-interest loan where the company gets the cash they need but give up a larger stake in the company to make it happen.

The big banks are getting bailout money, but giving up controlling stakes in their companies in some cases. Rollups are likely with smaller companies needing an infusion of cash. People are being reassured that they will retain their jobs, and being laid off the week after. You can trust no one in a winter except yourself. I reiterate my recommendation from a few weeks ago, though. If you have a stable job, stay in it. If you are an entrepreneur, don’t seek shelter in a stable job. Survive, survive, survive…. then rebuild.

Non-Competes in a Down Economy

I keep inching and inching into the beat of my colleague, Ray Capece of Venture Files, but I think it’s pretty important and weighty times for web professionals and small business owners alike. Unlike anytime in our history, the uncertainty of the future of our world and country are great.

Everyone is speculating about what the economic downturn bodes. Some Evangelicals I’ve talked to think that the investment of the Federal government into banks represents something akin to the fulfillment of end-time prophecy regarding the mark of the beast.

Others more focused on geo-political analysis believe we are seeing the end of the American Empire.

All of this is speculation and may or may not have merit. We simply don’t know. However, what we do know is that people are losing jobs, including in the web industry. We do know it’s hard for people to sell their homes without walking away still owing a mortgage. We do know that the impending baby boomer retirement wave just got pushed back.

A lot of companies, particularly smaller ones, like to use non-compete clauses to ensure that good help doesn’t go to a competitor when that help leaves. But what does that employee do when they are laid off and still have a non-compete?

While I will give my disclaimer that I am not a lawyer, I will say that anecdotal evidence suggests that non-competes are mostly unenforceable. Most laws are drafted in such a way that non-compete only have grounds when trade secrets are in play but countermanding court rulings suggest that no company can restrict someone from making a living.

Talk to your lawyer if you are unclear. At the end of the day, I suggest staying in a stable job if you can at least for a year or so until we put some distance between now and then. If you absolutely must leave, you probably don’t have to worry about non-competes with the economy the way it is. Take the job you can. Just don’t go sharing the information specific to the company you left with the company you are joining. That would be competitive and would probably be enforceable.

Also, if you can, honor your non-competes because it will speak better to your character. Sometimes it’s not possible. I get that. But all things being equal, if you can honor your non-compete, do so. When I left b5media, I was under a non-compete. In fact, I still am for another month or so. After my announcement, I had a number of blog networks approach me asking me to come work with them and I turned every one of them down because I made an agreement that I very well could stand by. So I did.

Hints at an $800 Apple laptop, Bloggers Report, Stock up 4 points

It was quite interesting to watch the market swing yesterday. Apple (AAPL) took a 20% hit on the market last week when it was expected that consumer spending on “bling” would be reduced. “Bling” stocks like Apple, Starbucks (SBUX) and other companies representing consumers “living the life” mentalities tanked with futures projections.

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And then yesterday came. Duncan Riley had an exclusive reporting the imminent release of an $800 laptop from Apple, the first sub-$1000 machine ever in the line of Apple products. From there, well read blogs like VentureBeat, MacRumors and Gizmodo – to name just a few – ran with the story.

Later in the day, Engadget reported an October 14th event where Apple would announce their new laptop line. Former Engadget editor, Ryan Block, 9 to 5 Mac and Digital Daily – again, to only name a few – ran with the story.

The result was fascinating. The DJIA is currently down over 300 points indicating yet another bloodbath on Wall Street. However, Apple stock is through the roof, up almost 5 points at this moment.

I am in no way suggesting people should go about trying to manipulate the market by creating stories or otherwise fabricating false positive pressure on the market. That is a crime. However, it’s important for blogger to recognize their ability to affect the market for the positive or negative.

And the pressure remains on the top-tier bloggers to use that power wisely and recognize that their words matter. If ever there was a “responsibility” at the feet of these bloggers, it is now.

It's the Economy, Stupid

Wow, so two weeks ago I wanted to write about technology and business. And I still do (and will). However, there comes a time when an adjustment needs to be made, and for me that time is now.

The economy is in the tank with no end in site. Asian markets dropped 9% overnight and the European markets took a battering until the coordinated move of central banks moved to adjust interest rates around 4am this morning.

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Banks are closing left and right and the government is bailing not only the banks out, but also commercial entities. In the last few days, no fewer than three people I know have lost their jobs.

People are scared, and rightly so. This is the darkest hour in recent history, rivaled only by 9/11.

Last night on FriendFeed, my friend and colleague Robert Scoble was fretting about the downward spiral. Scoble, to his credit, was trying to work the fear out of his system. Some people felt he should step up and be a leader and inspire confidence, while others felt his pain and lamented with him.

For my purposes, I’m scared as hell, but I’ve chosen to be confident. This is not a false confidence. This is a confidence based in reality and historical context.

Look, folks. Things are going to get worse before they get better. I like Jason Calacanis’ point in in one of his most recent newsletters entitles (The) Startup Depression:

Depending on your DNA, getting your ass kicked is either complete
torture or deviantly rewarding. Truth be told, I like getting my ass
kicked because it makes me angry, motivated and focused. If I look
back on the couple of moments of success I’ve been lucky enough to
have in my life, they all seem to come after a good ass-kicking.

The darkest hour is”“in fact”“right before the dawn.

I’ll also never claim to be an economist, but I read and listen to smart economists and money-people. I look at evidence they provide and I run it through my bullshit filter and what comes out the other side gets stashed in my collective. I reconcile conflicting data and try to understand those conflicts.

Here’s what I (think) I know.

Human nature is all about patterns. When a pattern changes abruptly, it takes us out of comfort zones and can sometimes induce panic. It happens when you lose a job. It happens when you meet your girlfriends parents for the first time. It happens when you transfer into a new school. And it happened when the market started selling off at 500 points a pop.

In the case of the market, 500 points looks big – and it is – and the ramifications for someone like me or you who are not traders and don’t understand the nuances of the market are psychologically intimidating.

Fear breeds a lack of confidence. A lack of confidence breeds fear.

Because humans are a people of patterns, after a few weeks of major drops on the market, a pattern and a cognitive comfort level sets in. Investors begin to see opportunities instead of challenges. Bargain buyers go thrift shopping and a rebound begins.

In my investment armchair, I see the end in sight. We are not there. We are going to see lots more before it turns up. But, my instinct tells me we are nearing a bottom. That doesn’t mean things turn around overnight.

In fact, I expect a lot more people to lose their jobs. The web sector has been largely immune, but will probably get walloped hard too. I spoke yesterday of staying in a self-employment situation if you can and staying in a stable 9-5 if that’s where you are now.

Which brings me full circle. We need leaders. We need people who are going to step up and instill confidence. Fred Wilson did this yesterday and I want to see more from a fiscally minded individual like him (he’s a VC). Scoble is still trying to process it all, and that’s expected, but I hope he will come to grips and start inspiring people at some point.

All of the proverbial A-listers need to step up their games right now and be leaders. In the days to come, I’m likely to write a series of posts on leadership. In the months to come, I’ll also take a much bigger look at the economy in the web space and outside. In World War II, homemaking women went to work in the factories to support the men in battle. It’s our responsibility to take the positions we have and do good in the economy and for our space.

So, though I’ll continue to write about the web, business, technology etc – I’m also going to be talking economics. I don’t know everything, but what I learn I hope to pass back. We will get through this because we have to.

Sucks to be a Blog Network These Days

Having come from the blog network space, I have a mostly unique understanding of the difficulties encountered when running a content business. There is always a war between traffic and community, profitability and loss, long term projections and short term realities. It’s not an easy business.

It’s even more challenging when you’re a blog network. Unlike more traditional style content companies like Newscorp (owners of MySpace, AskMen.com and FoxSports.com) or the New York Times, blog networks attempt to take a relatively new medium, a blog, and lump it together with other relatively new media – blogs. There’s no counter-balance of strengths and weakness. They are all blogs, possessing the same inherent strengths and weaknesses.

One of the core problems with the “traditional”, if there is such a thing in the space, blog networks – and really any online media – is that the business model almost always comes back to advertising models of revenue generation. Historically, the advertising market has come and gone in a predictably cyclical way.

As expected, the advertising model is taking somewhat of a hit during these difficult economic times and only in the past two days, two major media players in the blog network space have had to cut pay, create layoffs or otherwise cut costs due to an impending, or in some cases already present, decline in online ad revenue.

Gawker Media, the second largest blog network and home to industry favorites Gizmodo, Gawker, Valleywag and Lifehacker has announced a restructuring of staff – laying off 60% of Valleywag staff, as an example, and increasing the staff on their flagship properties. Consolidation is the name of the game in this case.

Likewise, b5media (with whom I worked for several years), had an internal memo leaked (and TechCrunch published) describing a complete revamp of their compensation system “to reduce costs”. Many bloggers are taking significant pay reductions as the company streamlines their burn rate.

This on the heels of AOL/Weblogs Inc layoffs and pay reductions a few months ago and the very public walk-out of Profy staff when pay was to be reduced shortly thereafter.

Let me be clear. If you’re in the content space, you are dealing in a non-tangible asset. Therefore, the economic rules of asset valuation do not apply. There is no “market price”. There is no assessment value. There is no depreciation. If anything, content can appreciate over time. Typical rules do not apply and in a market where investors, advertisers and publishers are trying to identify concrete ideas and assets that they can count on as a sure investment, non-tangible assets will always take a hit.

Publishers, particularly publisher networks, have to look around and identify means to continue to generate non-tangible assets cheaply (yet fairly), and I imagine some models might end up looking to non-tangible compensation (such as community benefits) to acquire new publishers and content.

Problem is, bloggers have this idea that they can be rich by blogging. Some are smarter and think they can simply “make a living” by blogging, without ever uttering the rich word. Truth is, unless you’re a few important people in the world, it’s not happening. It won’t happen. There are other meaningful ways to benefit from blogging, and most of them are non-monetary.

East India Wall Street

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The company was booming. It was harvesting tea from Asia and selling throughout the empire. Times were good and tycoons were fat and wealthy. Times couldn’t be better as the government subsidized East India Company collected record profits from the subjects throughout the British Empire.

In Parliament, and with an economic need for further subsidization for a sprawling empire, Great Britain passed tax levies on East India Company tea that affected colonists throughout the empire. With little or no influence in Parliament – certainly no representation – John Hancock of Massachusetts Bay Colony began a black market operation to bypass British tea, instead choosing to import from the Dutch who levied no such taxes.

The year was 1773, and the actions initiated by Hancock and others in the Thirteen colonies culminated in a Continental Congress and a Declaration of Independence three years later.

Several hundred years later, a different economy exists. Again, business was booming as traders and bankers invested in assets with unlimited potential. In fact, the only limit of value on the assets was that which the imagination could merit.

Money flowed freely, encouraged implicitly by Congress and central banks across the globe. Indeed, the age of the American Empire extended and exported its wares in the form of the dollar far and wide across the globe, affecting Asia, Europe and points in between. Times were golden and assets gained steam.

When the market realized an over-inflation of prices and assets, it was too late. As Parliament realized that a dying industry required economic infusion, and passed an import tax that resulted in the revolt and the beginning of the end of economic dominance for the British Empire, America faces a similar scenario.

Does it infuse and, by proxy, prop up an economic policy that has reached its potential limit, and by doing so ignore the history that can teach them so much? Or does it allow an economic recession to happen, recognizing that one mans loss is another mans profit?

I’ve been given grief, even by my own people here at Technosailor, for covering content that is not directly social media related. That is not the point of this blog. We cover the technology, business and trends of the day to help readers understand the landscape.

These are difficult times, and people are losing money hand over fist. It’s going to happen. It has to happen. The American empire is not about territory. It is about the Dollar and the economy of America is the economy of the world. It needs correction and, like Parliaments actions of 1773 resulted in the ultimate death of the British Empire, the meddling of Congress in markets affected by failed policies of the same, will ultimately result in the death of the American Empire.

Of course, the death of the American Empire is not entirely bad either. The U.S. could use a little bit of humility, but to do so will hurt for many many people… not just Americans.

$56B is a Much More Reasonable Number

The way I figure it, a body with an 8% approval rating should get about 8% of what they are asking for.

That would be $56B.

These guys cannot be trusted to make a $700B decision with no hearings and no explorations when they created the problem through a complicit wink-wink-nudge-nudge economic policy over the last 70 years (Fannie Mae was created as a federal subsidized lender in 1938).

That is all.

Not Everything is Quite as Important as You're Making it Out to Be

If our lives only involved this world of technology, then life would be a much better place. If life was as simple as simply going to Google and clicking “I feel lucky”, then we might not have the heartache that is in the world and the social media space could just get along by whispering sweet nothings to each other in 140 characters or less.

Let me say I’m really proud of Robert Scoble lately. He is the only one in the group formerly known as the Techmeme crowd who is demonstrating how much he “gets it”. The other day he broke from his normally socially interactive groove to talk about politics and he made a strong case for the abandonment from Palin-focus and instead pleading people to write about issues that are important to them.

Ironic because only days before, my friend Erin and I were talking over IM and discussing how the momentum of the race flows unequivocally toward the McCain campaign as long as the focus, positive or negative, stays on Sarah Palin. I didn’t blog it because… you know… it’s not what I write about.

But there’s a greater story here, and one that everyone needs to get. You all need to hear this loud and clear. This is September 2008. It is the boiling point of the Presidential election. Debates are a week away and we will know who our next president is in 45 days or so.

What are the political discussions on the blogosphere today?

Let’s not forget the flap last week about lipstick.

Backdrop all this by Bloody Monday on Wall Street where stocks crashed 500 points, or 4.4% on YAFIF, or Yet Another Financial Institution Failure. Actually, two YAFIFs today. Lehman Brothers filed for bankruptcy and Merrill Lynch was absorbed into Bank of America as the parade of failed high level financial institutions continue behind Freddie Mac, Fannie Mae, Countrywide, Bear Stearns and others.

As a practical sidenote, the Great depression began as a series of double digit percentage drops on the market and the Black Monday crash of 1987 was a 22.5% decline by itself. The downturn of today may be large, but is a far cry from the entire volume of the market. Also, every system goes through a self-cleansing period where junk is cleaned out to make room for new and solid product. The market is just self-correcting at the moment and historically shows remarkable resiliance.

But my point is this: quit worrying about everyone else and worry about yourself. Take care of your families, jobs and responsibilities. Go and vote on issues, not personalities. Remember, we have to live with whoever we vote into office in November. There are much bigger things to be concerned with during this very difficult time than lipstick and moosehunting.