Revenue By Any Other Name Is Still Revenue

There was a short rant in the National Post on Monday that I found interesting. It makes a very good point, that whenever the government hands out money it distorts the market. There are of course a great deal of issues with all such programs -- political, economic and philosophical -- which inspire a lot of heated debate. Rather than argue the fine points of all these programs, which usually translate into tax credits or similar corporate incentives, let's look at it from the perspective of a typical business.

First, we have to deal with an ethical dilemma: is it right to apply for and receive funds from the government? In most cases, the applying company has nothing to do with getting the government program created; it does happen (think GM) but those tend to be the exception, not the rule. For most of us out in the real world trying to make our businesses successful, there is no need to feel guilty, or at least no more than if a store advertises a sale -- where you benefit from making a purchase at large discount -- should you feel guilty about the loss accruing to the store's owners.

Therefore, ethics aside, what is a business owner to do? The program and the money are there, and whether or not you choose to apply for funds (assuming your business qualifies and the application is honestly made), the program will continue to exist and the funds will be disbursed. If not to you, then some other more or less deserving business, and quite often your competitors.

If you have ever worked in company and have been within sight of the finance department's activities, you will know that these government programs are on every CFO's radar. I have even been roped into helping write some of these program applications in more than one company. When I was younger I was somewhat bothered by what I was doing even though it was all perfectly legal and above board: I was never asked to tell any untruths. Later on, having gained more business maturity, I stopped worrying about it. I did so for good reason.

When we think of company revenue it is natural to think of sales; that is, money from paying customers. This is too narrow a perspective. What matters to a company's financial health, and therefore the shareholders' interest, is more money coming in than going out (net positive cash flow). There are no asterisks put against a dollar residing in a company's bank account. No matter where that dollar came from, it is an equivalent asset. It is certainly true that the dollar can have an attendant obligation, such as rolling out a product based on R & D subsidized by a grant, but that is true of every incoming dollar. For example, dollars from customers obligates the company to deliver and support product, and dollars from investors obligate the company to deliver on specified financial and business objectives. These sources of dollars may not be called revenue, but the bank balance increases identically, dollar for dollar.

A company is obliged to acquire every profitable bit of revenue it can if it is to fulfill the prime objective of any private corporation: to deliver the best possible return to shareholders. In other words, a CFO who declines to apply for legitimate government funds on the basis of ethics or other personal beliefs deserves to be fired. I don't remember seeing any CFO fired for this reason, and that's because they always made the right decision.

The proper way to deal with government money (that's our money) going to corporations is to take it up with the government, not private businesses. If it's bad policy -- and it very often is -- tell the government to stop, through the ballot box if necessary.

You Can't Not Invest

With the conclusion of RRSP season on the way, there is a lot of information and misinformation floating about in advertising and in the media. The big question is about whether to invest or use the money to pay debts or for some other purpose. The thing is, there is a false dichotomy pervading the discussion. No matter what you choose to do, or not, with every dollar, is an investment activity. I wonder how the government's attempt to increase financial literacy will deal with this.

Take the simplest case: there is cash in your pocket and you decide to keep it there. First, if you can avoid the temptation to spend it on something transitory -- with no enduring or resale value, like a Sens ticket -- the value of the money is continually in flux. Even if your intent is to spend the money on goods or services, the price of those goods and services will change. Manufactured goods that are imported will at the very least change with the loonie's exchange rate; domestic goods with foreign inputs will similarly see price shifts. If you think our dollar will increase in value, parking the cash while you delay your purchase is a form of investment.

The other big impact on cash is inflation. Since cash is completely unshielded from inflation, as the dollar declines in value all cash move downward an equal amount. The effect today is mild but that is not assured to continue for long. Unfortunately and for the same reason, putting the money is a chequing or savings account is no better since the interest rate you earn may be zero or negligible.

That's about all you can do with cash, if your objective is to hold on to the high liquidity of the wealth that cash represents. There are other ways to invest cash without losing a lot of liquidity, such as GICs and T-bills, but there is the friction of buying and selling, and there may be transaction costs associated with early withdrawals. This will be a common theme in cash investments, that higher interest rates are offered if you cede some or all control over those funds for a period of time. Like anything in life, there's no free lunch: if you want more, you have to give more, even if the 'more' is an intangible item.

The above investments, or any investment vehicle, can be done on a cash basis or as part of a government-recognized plan that has certain tax implications. This is where RRSPs and other programs enter the scene. These programs are neither better nor worse than cash investments, just different. Assessing those differences is key to deciding if they are beneficial to each individual. All I can say about this if you are unclear on how to decide whether to invest via one of these programs is to suggest that you visit a professional financial planner.

Then there's the debt option, where you use that cash to reduce the principle and, in consequence, future interest charges. In general, the interest on debt is always higher than savings. This is no surprise since this is how banks base much of their business: the charge more on the money they lend than they pay on the money they borrow (from you!) to cover operating costs, risk (some proportion of loans go bad) and profit for shareholders. If you are both a saver (e.g. RRSP) and a debtor (e.g. mortgage) you can only win at this game when the interest rate is changing rapidly, and in your favour. I think that it is arguable that no consumer should attempt this game. In any case it's pointless now since interest rates are static and likely to remain so for a time.

The usual argument for choosing between paying off debt and investing in an RRSP is if you can accurately forecast the long-term wealth differential between the two. This can be very difficult. Many assumptions must be made, which include but are not limited to: job and income security, inflation, comparison of current and future tax brackets and rates, investment risk, likelihood of family tragedies, and so on. For example, while it's true that if you use the cash to reduce a mortgage there can be a large difference in the long-run cost of the mortgage, if there is any chance that you might need that cash in the not too distant future, you will either have to renegotiate the mortgage or take out a loan: both can be financially injurious. That's just one example of a difficult investment decision and, make no mistake, it is an investment decision: you are deciding where to place a portion of your total wealth to best serve your future needs, or, more simply, to achieve the largest possible future return on that wealth.

Non-cash investments are most often found in the stock market. When you buy a share in a company, whether directly or via a mutual fund, you become a part-owner of that company and subject to the same risks and potential returns of any business owner. That risk, which is rarely quantified with any accuracy or under your control, is inseparable from returns that can be very high in comparison to predictable returns of cash instruments. Even if you choose mutual funds -- as most do, especially for RRSPs -- equity investing requires a strong stomach and a firm hand. Every day you should be asking what a stock, fund manager or financial advisor has done for you today. Be ruthless about it; loyalty to a company or a manager is folly. It's your money and your future at stake.

Of course you can always live for today and spend the cash in your pocket, and let tomorrow take care of itself. This is not necessarily a bad thing if it fits with your lifestyle, provided that you don't rue tomorrow what you did yesterday, or if you have dependants. Hedonism and allowing oneself to be blown about by the winds of change are investment strategies that do work for some people. Even pessimists can benefit by this if they truly believe that disasters that await us in the future will render any investment worthless. If this philosophy works for you, reading blog posts about investing is a waste of time: get out there and have some fun with your money.

Nortel Patents Still Have Legs

It seemed that the last time I wrote about Nortel and their wireless patents that I'd never again have reason to mention that company. They are after all in the process of being dismembered and disbursed to others. I saw little reason to think that the patents would still have any independent life apart from being parcelled off with the business lines. I was not the only one to think that.

Now I see that the situation was not quite as simple as I thought. If this article is correct, Ericsson agreed to short-term rights on a patent portfolio that would appear to impact on their business assets purchase.

"According to sources, wireless giants such as Nokia Corp. and Telefon AB LM Ericsson have privately expressed interest in acquiring the patents to protect their purchases last year of various Nortel wireless assets. It is believed that the new owners have short-term licensing rights to the patents."

On the surface, this situation would appear to confound the calculation of the price Ericsson paid since it would be uncertain how much they would have to separately pay over the long run for those patents to get the value out of the products they now own. I can only conclude that I simply do not know enough about the dynamics that are playing out in this never-ending saga. However, I can make a guess.

When there is carrier business on the table, vendors with the requisite technology and products jockey for position to win the business. The wireless sector is hot so there is a lot of money at stake, so every vendor wants the lion's share of the business. The carriers, all of which are pretty sharp at this game, do all they can to avoid single-sourcing, either by explicitly demanding a multi-vendor solution or citing standards compliance in the RFP, and often both; keeping two or more vendors on the hook is used as leverage to negotiate lower prices and more features.

This is a game that has played out many times in the telecommunications business, and I've been a part of it more than I care to remember. When there is no urgency to roll out services, this game can go on for years. When there is urgency -- when the carriers feel compelled, for whatever reason, to roll out services quickly -- the game proceeds much faster since vendors avoid spending time and resources fighting each other when there's big money on the table. How it all plays out generally looks something like what follows:

1. Each vendor has its own unique technology and patent base that it promotes as the best. They try to have the carriers write their RFPs in such a way as to favour their own technology.
2. The carrier points to an industry forum or standards body to hash out a common technology base and feature set, which they would then reference in their RFP. Carriers with similar interests will typically cooperate under the auspices of that forum or standards body to the extent that they all push vendors in the desired direction.
3. Vendors work hard to skew the standard to incorporate their own technology's features, hoping to slow their competitors' ability to bring their own products into compliance. If they are successful, they can also hope to reap patent licensing royalties from other vendors, either directly (if those vendors successfully win bids) or indirectly (by making their competitors' products too expensive to win bids).
4. Vendors and carriers block adoption of standards -- they're typically consensus bodies -- until the company holding relevant patents agrees to sensible royalty rates or waives them entirely. Many standards bodies make it a condition of participation -- legally binding, usually -- that this must be done.

In the case of wireless infrastructure equipment, including LTE, relevant patents are held by all of the largest vendors. Since these same companies often enter into global or sector-specific bilateral cross-licensing agreements among themselves, there may not be a serious issue with which of these vendors ultimately buys this batch of Nortel patents. Even if Nortel were to stay in business as an NPE (non-practicing entity) -- licensing patents as its primary business -- there may not be an issue; however this latter scenario is unlikely since creditors rarely agree to take an equity position in the bankrupt company, preferring to sell and put the proceeds towards the debts. Where the matter gets interesting is if the patent portfolio is sold to a company that is not one of the cabal of wireless infrastructure vendors.

For example, if the patents go to RIM, since they are not in that infrastructure business today, they have no incentive to cross-license and would most likely choose to build a royalty business or litigate against LTE vendors. From, say, Ericsson's point of view, they may not value the portfolio highly if it were to go to Alcatel-Lucent -- where by high value I mean make a higher-priced bid for the portfolio -- but they might do so if RIM were to bid. Either way, I doubt that the federal government will get involved if a non-Canadian company bids on the patents.

While I have no idea if this is the way it will play out, it seems to me a likely outcome in comparison to some others. The situation is interesting enough that I'll pay some attention to see if I've gotten it right.

Common Mobile App Platform

This is the week of the Mobile World Conference in Barcelona. With mobile technology having become so dominant, this event has become a major venue for carriers and vendors to trot out the latest gadgets and to announce new deals. The press releases have been coming fast and thick since the weekend.

One curiosity is the Wholesale App Community, an alliance of phone vendors and carriers around the world, to jointly build a vendor-independent platform for software app development. This would allow an app developer to write an app once and it will successfully run on any smart phone OS platform, on any mobile device and on any network. This is no mean feat, which any app developer knows, since they're the ones that have to write and rewrite app software if they are to run on iPhone, Blackberry, Android, and other platforms, and also deal with the diverse form and features of mobile devices using each of those platform. Here it is in the words of this new alliance:

"For the developer, particularly small developers, the alliance will create an environment in which they can flourish and create applications in a straight-forward and effective manner. Today, the route to market for developers is challenging requiring them to approach multiple operators. The alliance will provide a single gateway for developers to access a vast potential customer base (over two billion with limited cost to the developer and this in turn will provide the maximum possible return on investment for them.

In addition, the alliance will utilise existing technical standards, rather than creating new ones to allow developers to access operators’ assets, for example network capabilities or API’s (Application Programming Interfaces) more easily. In practice this means that developers will only have to create one version of their application and this can be used on multiple types of devices and operating systems (such as Symbian, Android, Windows etc) which is not the case today."

Sounds great, although the details are at best sparse. The announcement itself is unsurprising since it's been telegraphed by many of the alliance members for quite some time. The thing is, is it feasible? Technically, sure it's feasible, but it is more important to ask how they will go about it and whether it will gain market traction. An example of a similar success is the world-wide web, courtesy of standard HTML and compliant browsers; it can be done.

As to how they'll do it, that will be interesting to see. One of the important reasons to have native apps -- those that are tuned to a device platform's OS and environment -- is to make use of all the services and technology that is local to the phone: GPS, accelerometer, orientation sensor, audio streams, camera, file system, and so on. A successful alliance initiative would need to achieve a common platform while providing local access to many device features. The challenge is increased by rapidly-evolving smart phone technology; a too-static common app layer will fail if it can't keep pace with the underlying mobile device feature set.

Can a common app development layer diminish the preeminence of the platform decision when developers produce an app? Certainly there will be a shake-out among mobile platforms since there are too many. This is going on even now with the announcement that Moblin and Maemo will be merging, reducing the number of Linux-based variants; this will not be a typical outcome: each of the rest will either survive or die. This, too, could happen to the alliance's initiative.

After a few moments of thought, I have an idea what a common app layer needs to achieve if it is to have the kind of success the web browser has achieved. In fact, it may be a variant of the web browser.

• HTML5-based app language that can run within a browser, providing a common user interface
• Cloud (server) APIs to access carrier-provided network services
• Javascript virtual machine to execute app code on the device
• Javascript APIs to access mobile device features

This is pure guesswork and probably wrong. I just want to give a flavour of what is needed. Others are guessing as well, and it does seem that games must stay native for now. The carriers will have full control of the network APIs, but need device and platform OS providers to cooperate on the device side software. The browser will become so heavyweight that it may take another generation of mobile phone technology to make it run well, but that will be no impediment if the initiative is planned as a long-term strategy.

I wish the alliance luck, even though I will not hold my breath. Then once it gets into the wild, my bet is that we'll see the first serious malware, designed specifically for the new app platform, appear within one week.

Musketeer as Entrepreneur (Part 7): Conclusion

In the previous installment, I left D'Artagnan and his newly-formed team at a port on the English Channel as they prepared to start their venture. It is a long, convoluted and entertaining story that has some parallels to the typical life of a tech startup.

Early in the story, I mentioned that one of three musketeers, Athos, would be a competitor to D'Artagnan's efforts to restore Charles II. They don't encounter each other until mid-way through the adventure at a time when Athos was in peril of losing his objective and also his life, and D'Artagnan was sure he had failed and was not assured of his own safety.

In the case of D'Artagnan, the reason for this low point was that, while he and his team brilliantly achieved the first objective of making off with Monk, Charles II did not respond to the "gift" as he expected. In other words, the customer wasn't buying what he was selling, despite its obvious great value. What startup hasn't dealt with this very problem? Despite feeling in his heart that the customer was making a grave error, he had little choice to behave as if the customer was right -- and they're always right, or so it's said. Instead of accepting the "product" D'Artagnan wished to sell, Charles instead demanded that D'Artagnan provide a custom "service". Products and services are very different things, and D'Artagnan knew this, but he needed to salvage something or risk losing his and Planchet's capital.

I am being deliberately vague on what actually transpired since I don't want to give any spoilers to those who might want to read the book. Suffice it to say, that the service D'Artagnan was asked to provide was successful, and much to his surprise he did eventually generate revenue that was in line with his revenue plan. That last fact alone tells us that this story is fiction; no startup meets its revenue plan, missing either on the low side, getting the time-frame wrong or, in the minority of cases, exceeding their wildest expectations. But getting it exact? No way.

Planchet's faith in the D'Artagnan was amply rewarded, and so both investor and entrepreneur did quite well in the venture. The employee mercenaries did well, too, according to their modest expectations, but then D'Artagnan never did reveal just how much the venture actually netted. He made sure that none of them were around when he collected and then carried home the cash. This, too, is typical. No, not the secrecy, but that employees do not get rich in startups; the salary they earn is in lieu of risky equity. Founders and investors also conspire to keep the lion's share of the winnings.

So with that I'll end this lengthy series. I'll leave you with a passage from Dumas that sums up the qualities of D'Artagnan and Planchet. Perhaps he did so as counterpoint to the comedy he made of their behaviour and interactions in telling their story, and from which I liberally quoted in this series. Dumas gets the last word.

They who have pronounced Don Quixote mad because he rode out to the conquest of an empire with nobody but Sancho his squire, and they who have pronounced Sancho mad because he accompanied his master in his attempt to conquer the said empire, - they certainly will have no hesitation in extending the same judgment to D'Artagnan and Planchet. And yet the first passed for one of the most subtle spirits among the astute spirits of the court of France. As to the second, he had acquired by good right the reputation of having one of the longest heads among the grocers of the Rue des Lombards; consequently of Paris, and consequently of France. Now, to consider these two men from the point of view from which you would consider other men, and the means by the aid of which they contemplated to restore a monarch to his throne, compared with other means, the shallowest brains of the country where brains are most shallow must have revolted against the presumptuous madness of the lieutenant and the stupidity of his associate. Fortunately, D'Artagnan was not a man to listen to the idle talk of those around him, or to the comments that were made on himself. He had adopted the motto, "Act well, and let people talk." Planchet, on his part had adopted this, "Act and say nothing." It resulted from this, that, according to the custom of all superior geniuses, these two men flattered themselves, _intra pectus_, with being in the right against all who found fault with them.

Musketeer as Entrepreneur (Part 6): Building a Team

In our previous installment, Planchet and Co. was formed with pen to paper, recording the term sheet and shareholders agreement between our Musketeer entrepreneur (D'Artagnan) and co-investor (Planchet). Since so much was accomplished and the hour was late, D'Artagnan retires to the room Planchet provided. However, our CEO was restless; there was a lot on his mind.

"..This is it," said he, sitting up in bed, supporting his elbow on his knee, and his chin in his hand; - "this is it. I shall seek out forty steady, firm men, recruited among people a little compromised, but having habits of discipline. I shall promise them five hundred livres for a month if they return; nothing if they do not return, or half for their kindred."

Having been a leader of men for many years and due to his gregarious and generous nature, D'Artagnan had built an extensive network among the nobility and also among the lesser lights. Since he must be stealthy and the enterprise, despite its noble goal -- the restoration of Charles II to the throne of England -- is one that many magistrates would frown upon, he must recruit his employees with care.

Not only is stealth required, the enterprise is difficult. D'Artagnan must choose exceptional, if unrecognized, talent. They should not be difficult to find since what engineer -- sorry, I mean soldier-mercenary -- would turn down an opportunity to join a startup with a celebrity founder, and the chance to redeem and challenge themselves, or at least to make some good money. Yet, how many people are truly exceptional and not merely aspirational?

"...Supposing that among my forty warriors there should be found at least ten stupid ones - ten who will allow themselves to be killed one after the other, from mere folly? No; it is, in fact, impossible to find forty men to be depended upon - they do not exist. I must learn how to be contented with thirty. With ten men less I should have the right of avoiding any armed encounter, on account of the small number of my people; and if the encounter should take place, my chance is better with thirty men than forty. Besides, I should save five thousand francs...Ah! stupid wretch that I am!" continued D'Artagnan, "I want thirty horses. That is ruinous. Where the devil was my head when I forgot the horses? We cannot, however, think of striking such a blow without horses..."

"...Three bands - that necessitates three leaders; there is the difficulty."

We see here that D'Artagnan has realized that not only does he need many good men, he will need managers. So he sketches out an organization chart in his mind and realizes the difficulty of running an enterprise. He is also coming to terms with his limited funds, which while substantial are not unlimited. Many a dot-com was too eager to spend their capital to build a large organization -- like the one the founders came from! -- and founder on the pyre of an excessive burn rate. D'Artagnan, accustomed to large armies, recognized the trap and deftly avoids falling into it.

"..._Mordioux!_ what things patience and calculation are! Was I not going to embark with forty men, and I have now reduced them to twenty for an equal success? Ten thousand livres saved at one stroke, and more safety; that is well! Now, then, let us see; we have nothing to do but to find this lieutenant..."

"...Yes, but a lieutenant must have my secret, and as that secret is worth a million, and I shall only pay my man a thousand livres, fifteen hundred at the most, my man will sell the secret to Monk. _Mordioux!_ no lieutenant. Besides, this man, were he as mute as a disciple of Pythagoras, - this man would be sure to have in the troop some favorite soldier, whom he would make his sergeant; the sergeant would penetrate the secret of the lieutenant, in case the latter should be honest and unwilling to sell it. Then the sergeant, less honest and less ambitious, will give up the whole for fifty thousand livres. Come, come! that is impossible. The lieutenant is impossible."

The larger the organization, the more impossible it becomes to know the hearts and minds of the entire staff. For D'Artagnan this could too easily prove fatal. He quickly assesses the flaws of his original plan and decides to proceed with a much smaller team, one composed of star players and with little maneuvering room to surprise their leader by going rogue.

"...A single corps - _Mordioux!_ a single one, and that commanded by D'Artagnan...

"I reduce myself then to ten men; in this fashion I shall act simply and with unity; I shall be forced to be prudent, which is half the success in an affair of the kind I am undertaking; a greater number might, perhaps, have drawn me into some folly...

"Fifteen thousand livres saved - that's superb - out of twenty!"

...Thus fortified by his laborious calculations, D'Artagnan stopped at this plan, and determined to change nothing in it. He had already on a list furnished by his inexhaustible memory, ten men illustrious amongst the seekers of adventure, ill-treated by fortune, and not on good terms with justice. Upon this D'Artagnan rose, and instantly set off on the search...

There you have it: a low burn rate and a small, crack team. Back in the 17th-century D'Artagnan discovered the winning formula that still eludes so many technology startups. It would be interesting to see how such a man would get on as the CEO of 21st-century startup. He will of course -- to the relief of his employees, I'm sure -- have to leave the sword and musket at the door. Except, perhaps, in Texas.

We will now skip right along and proceed to the sea port where he has asked his chosen few to meet for the company's first all-hands meeting. He chose to not inform any of the ten of the identities of the others, giving them no opportunity to share and compare stories, or to plan any side adventures. Now the team meets in an isolated spot, free of unwanted observers.

"Approach," continued D'Artagnan, "and let not the bird which passes over our heads, the rabbit which sports on the downs, the fish which bounds from the waters, hear us. Our business is to learn and to report to monsieur le surintendant of the finances to what extent English smuggling is injurious to the French merchants...The thing which puzzles me is taking with me a crew of stupid fishermen, which crew will annoy me immensely, whilst if, by chance, there were among you any who have seen the sea - "

"Oh! don't let that trouble you," said one of the recruits; "I was a prisoner among the pirates of Tunis three years, and can maneuver a boat like an admiral."

"See," said D'Artagnan, "what an admirable thing chance is!" D'Artagnan pronounced these words with an indefinable tone of feigned _bonhomie_, for he knew very well that the victim of the pirates was an old corsair, and had engaged him in consequence of that knowledge. But D'Artagnan never said more than there was need to say, in order to leave people in doubt. He paid himself with the explanation, and welcomed the effect, without appearing to be preoccupied with the cause...

D'Artagnan, not to create any jealousy with the others, made the rest go forward. He kept his two selected ones, clothed them from his own wardrobe, and set out with them.

It was to these two, whom he seemed to honor with an absolute confidence, that D'Artagnan imparted a false secret, destined to secure the success of the expedition. He confessed to them that the object was not to learn to what extent French merchants were injured by English smuggling, but to learn how far French smuggling could annoy English trade. These men appeared convinced; they were effectively so. D'Artagnan was quite sure that at the first debauch, when thoroughly drunk, one of the two would divulge the secret to the whole band. His game appeared infallible.

D'Artagnan not only keeps the secret of the enterprise from becoming widely known, he shrewdly even keeps his own staff in the dark. The above passage demonstrates his skill with people by preying on their own natures to ensure that the secret is not even sought for by his band. This goes beyond what most startups must do to remain stealthy although it is not uncommon for a stealth effort to be only partially disclosed to most staff on a need-to-know basis. After all, if you don't know, or if what you do know is a lie, you can talk all you want and never violate the NDA, which is difficult to enforce at the best of times. Trust becomes unnecessary.

This has been the penultimate chapter of the musketeer as entrepreneur series. It is not my intent to recount the entire story as cleverly crafted by Alexandre Dumas. For those interested, I suggest you read it yourself; the link to the Project Gutenberg text (free) was given in the first installment. In the next and final post, I will tie up a few loose ends.

Musketeer as Entrepreneur (Part 5): Legalities

Our heros, when we last left them, had come to a verbal understanding of the enterprise, its risks and its potential for financial reward. Now they must get into the details of recording a contract. Since both D'Artagnan and Planchet are honourable men and would be content with a handshake on the deal, they are agreed that a written contract has advantages.

No startup would or should do business this way, even in the rare cases where investors and founders are as close as Dumas' characters. Not only that, they do it without lawyers. Of course they lived in an age when there was no contract law and disagreements between gentlemen were often resolved with sabres in dark courtyards, and courts were hardly the impartial venues we rely upon today. In other words, a contract was frequently of little import in their world. So why are they going through with this? We'll come back to this point after we listen in as the contract -- a combined term sheet and shareholders agreement -- is drafted.

"...We shall, like two lawyers' clerks, draw up together an agreement, a sort of act, which may be called a deed of company."

"Willingly, monsieur."

"I know it is difficult to draw such a thing up, but we can try."

"Let us try, then." And Planchet went in search of pens, ink, and paper. D'Artagnan took the pen and wrote: - "Between Messire d'Artagnan, ex-lieutenant of the king's musketeers, at present residing in the Rue Tiquetonne, Hotel de la Chevrette; and the Sieur Planchet, grocer, residing in the Rue des Lombards, at the sign of the Pilon d'Or, it has been agreed as follows: - A company, with a capital of forty thousand livres, and formed for the purpose of carrying out an idea conceived by M. d'Artagnan, and the said Planchet approving of it in all points, will place twenty thousand livres in the hands of M. d'Artagnan. He will require neither repayment nor interest before the return of M. d'Artagnan from a journey he is about to take into England. On his part, M. d'Artagnan undertakes it to find twenty thousand livres, which he will join to the twenty thousand already laid down by the Sieur Planchet. He will employ the said sum of forty thousand livres according to his judgment in an undertaking which is described below. On the day when M. d'Artagnan shall have re-established, by whatever means, his majesty King Charles II. upon the throne of England, he will pay into the hands of M. Planchet the sum of - "

"The sum of a hundred and fifty thousand livres," said Planchet, innocently, perceiving that D'Artagnan hesitated.

"Oh, the devil, no!" said D'Artagnan, "the division cannot be made by half; that would not be just."

"And yet, monsieur, we each lay down half," objected Planchet, timidly.

"Yes; but listen to this clause, my dear Planchet, and if you do not find if equitable in every respect when it is written, well, we can scratch it out again: - 'Nevertheless, as M. d'Artagnan brings to the association, besides his capital of twenty thousand livres, his time, his idea, his industry, and his skin, - things which he appreciates strongly, particularly the last, - M. d'Artagnan will keep, of the three hundred thousand livres, two hundred thousand livres for himself, which will make his share two-thirds."

D'Artagnan understands the value of sweat equity, although Planchet is reluctant. Planchet had hoped to get 50% of the post-money valuation, but he must be satisfied with less since D'Artagnan will be awarded immediately-exercisable options on achieving the agreed milestone.

"Very well," said Planchet.

"Is it just?" asked D'Artagnan.

"Perfectly just, monsieur."

"And you will be contented with a hundred thousand livres?"

"_Peste!_ I think so. A hundred thousand for twenty thousand!"

"And in a month, understand."

"How, in a month?"

"Yes, I only ask one month."

"Monsieur," said Planchet, generously, "I give you six weeks."

"Thank you," replied the musketeer, politely; after which the two partners reperused their deed.

"That is perfect, monsieur," said Planchet; "and the late M. Coquenard, the first husband of Madame la Baronne du Vallon, could not have done it better."

"Do you find it so? Let us sign it then." And both affixed their signatures.

There you have it: a shareholders agreement with terms, and an exit strategy to liquidate the firm's assets among the two shareholders. There will be no ESOP (employee stock option plan), just performance-based salaries for the employees -- sorry, mercenaries -- D'Artagnan will hire. In the end he will wisely implement a profit-sharing plan as incentive to keep mouths tightly shut among his unsavoury helpers, however that episode will not be shown in this series of blog posts.

"In this fashion," said D'Artagnan, "I shall be under obligations to no one."

"But I shall be under obligations to you," said Planchet.

"No; for whatever store I set by it, Planchet, I may lose my skin yonder, and you will lose all. _A propos - peste!_ - that makes me think of the principal, an indispensable clause. I shall write it: - 'In case of M. d'Artagnan dying in this enterprise, liquidation will be considered made, and the Sieur Planchet will give quittance from that moment to the shade of Messire d'Artagnan for the twenty thousand livres paid by him into the hands of the said company.'"

This last clause made Planchet knit his brows a little, but when he saw the brilliant eye, the muscular hand, the supple and strong back of his associate, he regained his courage, and, without regret, he at once added another stroke to his signature. D'Artagnan did the same. Thus was drawn the first known company contract; perhaps such things have been abused a little since, both in form and principle.

Ah yes, the disposition of shares and assets should a shareholder pass away before the milestone is reached is a necessary part of any shareholders agreement. Today's entrepreneur will be most familiar with it and many pages of similar clauses. Most contracts, and shareholders agreements are no different, spend most of their time on dealing with the cases where things go wrong.

Lawyering is a lot like software design: much of the code must deal with exceptional conditions rather than what the application is ostensibly for. Bad code, like a bad contract, is unwittingly optimistic and thus useless.

In our next installment, the newly-minted CEO of Planchet and Co. will immediately take steps to launch operations. His first step will be to hire a team: the company's employees.

Musketeer as Entrepreneur (Part 4): The Financial Plan

In the previous installment, we left the point in mid-conversation where D'Artagnan -- our entrepreneur -- has just completed his business plan presentation to Planchet -- the investor -- in an upper floor room of Planchet's small business. He plans to slip into England and abduct General Monk from within the encampment of his armies. Monk, he has correctly ascertained (and confirmed by history, as Dumas certainly knew), is his main obstacle to returning King Charles II to the throne of his father, Charles I, who was deposed and executed by Cromwell.

Planchet wishes to know how taking Monk will deliver the promised return. That is, where the money will come from and how probable it is that the entrepreneur's financial projections are reliable. Let us listen in as D'Artagnan and Planchet continue their discussion.

"In the first place, I shall set a ransom on him."

"Of how much?"

"_Peste!_ a fellow like that must be well worth a hundred thousand crowns."

"Yes, yes!"

"You see, then - in the first place, a ransom of a hundred thousand crowns."

"Or else - "

"Or else, what is much better, I deliver him up to King Charles, who, having no longer either a general or an army to fear, nor a diplomatist to trick him, will restore himself, and when once restored, will pay down to me the hundred thousand crowns in question. That is the idea I have formed; what do you say to it, Planchet?"

"Magnificent, monsieur!" cried Planchet, trembling with emotion..."

With the investor placated and the presentation at a conclusion, D'Artagnan wastes no time in proceeding to close the deal. Speed at this point is critical since an investor with too much time to think will only worry and dream up hypothetical problems that will only delay or, worse, scuttle the entrepreneur's careful preparations. This must not be allowed to happen.

"...Now, do you find the business good, and the investment advantageous?"

"Too much so - too much so."

"How can that be?"

"Because fine things never reach the expected point."

"This is infallible, Planchet, and the proof is that I undertake it. It will be for you a tolerably pretty gain, and for me a very interesting stroke. It will be said, 'Such was the old age of M. d'Artagnan,' and I shall hold a place in tales and even in history itself, Planchet. I am greedy of honor."

"Monsieur," cried Planchet, "when I think that it is here, in my home, in the midst of my sugar, my prunes, and my cinnamon, that this gigantic project is ripened, my shop seems a palace to me."

"Beware, beware, Planchet! If the least report of this escapes, there is the Bastile for both of us. Beware, my friend, for this is a plot we are hatching. M. Monk is the ally of M. Mazarin - beware!"

"Monsieur, when a man has had the honor to belong to you, he knows nothing of fear; and when he has had the advantage of being bound up in interests with you, he holds his tongue."

Mazarin is King Louis XIV's Prime Minister, who holds the true power of the realm and keeps the young king weak and isolated. D'Artagnan knows Mazarin well, and though he despises the man he does not underestimate his intelligence or his long arm. This venture requires stealth, in France as in England. Stealth mode is a common attribute of modern, innovative start-ups and was also clearly necessary in D'Artagnan's venture.

They were not so wedded to the idea of employing lawyers in the middle of the 17th-century, so there were no formal confidentiality agreements or NDAs, but D'Artagnan knew he could rely on his investor's discretion: they were both honourable men, and their word was as good as gold. All he had to do was make Planchet understand the need for discretion.

In our next installment, Planchet and D'Artagnan will incorporate the company, write up the elements of the term sheet, and tie it all up in a shareholders agreement.

Musketeer as Entrepreneur (Part 3): The Business Plan

In the previous installment, Planchet (the prospective investor, or venture capitalist) is getting the pitch from his former boss, D'Artagnan (the entrepreneur, and until recently the Lieutenant of the King's Musketeers). His presentation -- all spoken, since this is long before the arrival of PowerPoint -- is rich in emotion and carefully spun to play on Planchet's inner desires.

From their many years together in times past, D'Artagnan knows his audience well and has tuned his proposal accordingly. He is also a great wit and he takes the opportunity to tease Planchet, who has perhaps gotten a little too comfortable in his new career. This humourous aspect of their conversation is not only entertaining, it demonstrates that D'Artagnan keeps control of the agenda; it is important for an entrepreneur to never let a potential investor wrest away this control.

We have now reached the point in the presentation where D'Artagnan must open the kimono and reveal his venture's objective and business plan. It is a grand one, and of great historical significance. Dumas is a master at twisting the pages of history so that he can weave his characters into the narrative while simultaneously making it credible that these same characters fail to appear in the historical narratives of later ages.

"Planchet, I have an idea."
...
"I wish to replace upon his throne this King Charles II., who has no throne..."

It would be an understatement to say that this is an insanely improbable venture. For one man, even one as accomplished and skilled as the inestimable D'Artagnan, this is truly audacious. Despite his complete confidence in his former master, Planchet is rightly concerned. He must carefully probe into the business plan since there are considerable obstacles. D'Artagnan must address these if he is to get a term sheet.

Planchet made a prodigious bound in his chair. "Ah, ah!" said he, in evident terror, "that is what you call a restoration! ...But have you reflected seriously?"

"Upon what?"

"Upon what is going on yonder."

"Where?"

"In England."

"And what is that? Let us see, Planchet."

"In the first place, monsieur, I ask you pardon for meddling in these things, which have nothing to do with my trade; but since it is an affair that you propose to me - for you are proposing an affair, are you not? - "

"A superb one, Planchet."

"But as it is business you propose to me, I have the right to discuss it."

"Discuss it, Planchet; out of discussion is born light."

"Well, then, since I have monsieur's permission, I will tell him that there is yonder, in the first place, the parliament."

"Well, next?"

"And then the army."

"Good! Do you see anything else?"

"Why, then the nation."

"Is that all?"

"The nation which consented to the overthrow and death of the late king, the father of this one, and which will not be willing to belie its acts."

"Planchet," said D'Artagnan, "you argue like a cheese! The nation - the nation is tired of these gentlemen who give themselves such barbarous names, and who sing songs to it. Chanting for chanting, my dear Planchet; I have remarked that nations prefer singing a merry chant to the plain chant..."
...
"I say that I borrow twenty thousand livres of M. Planchet, and that I put twenty thousand livres of my own to it; and with these forty thousand livres I raise an army."

Planchet clasped his hands; he saw that D'Artagnan was in earnest, and, in good truth, he believed his master had lost his senses.

"An army! - ah, monsieur," said he, with his most agreeable smile, for fear of irritating the madman, and rendering him furious, - "an army! - how many?"

"Of forty men," said D'Artagnan.

We now come to the competitive analysis part of the discussion. D'Artagnan has already given the matter some thought and is ready to answer the investor's pointed questions. His competitors are large, well-financed and comfortably established. Or so it seems to Planchet. D'Artagnan through his own research and greater insight into the industry -- the business of ruling England -- remains confident and able to respond to the investor's concerns.

"Forty against forty thousand! that is not enough. I know very well that you, M. d'Artagnan, alone, are equal to a thousand men; but where are we to find thirty-nine men equal to you? Or, if we could find them, who would furnish you with money to pay them?"

"...I shall fight no pitched battles, my dear Planchet," said the Gascon, laughing.
...
"We have set aside the nation, which prefers singing merry songs to psalms, and the army, which we will not fight; but the parliament remains, and that seldom sings."

"Nor does it fight. How is it, Planchet, that an intelligent man like yourself should take any heed of a set of brawlers who call themselves Rumps and Barebones? The parliament does not trouble me at all, Planchet."

"...Well, this M. Monk, who has England ready-roasted in his plate, and who is already opening his mouth to swallow it - this M. Monk, who says to the people of Charles II., and to Charles II. himself, '_Nescio vos_' - "

"I don't understand English," said Planchet.

"Yes, but I understand it," said D'Artagnan. "'_Nescio vos_' means 'I do not know you.' This M. Monk, the most important man in England, when he shall have swallowed it - "

"Well?" asked Planchet.

"Well, my friend, I shall go over yonder, and with my forty men I shall carry him off, pack him up, and bring him into France, where two modes of proceeding present themselves to my dazzled eyes."

"Oh! and to mine too," cried Planchet, transported with enthusiasm. "We will put him in a cage and show him for money."

"Well, Planchet, that is a third plan, of which I had not thought."

"Do you think it a good one?"

"Yes, certainly, but I think mine better."

"Let us see yours, then."

Our entrepreneur is doing well so far. He has quelled the investor's concerns about the competition with a business plan that has as one of its key features the intention of operating by stealth rather than meeting his formidable competitors on their ground. That is a wise approach. He has also deftly deflected the less-knowedgable investor in his attempt to meddle with the business plan. This, too, is important since having a micro-managing investor underfoot would only imperil the venture. D'Artagnan sticks to his plan just as he should since he, not the investor, has the expertise to develop a workable business plan and put it into action.

In the next installment, we'll continue the dialogue between Planchet and D'Artagnan and see the final part of the business plan and how D'Artagnan has arrived at his forecast of revenue and ROI (return on investment).

Musketeer as Entrepreneur (Part 2): Co-founders and Investors

Picking up from where I left off in the first installment of this fictional story of medieval entrepreneurship, I am going to omit a lengthy though important account of D'Artagnan's travels. What he does after resigning from the King's service is to attempt to build his A-class team of co-founders. These are the infamous three musketeers of the Dumas novel of that name: Athos, Porthos and Aramis -- the noms de guerre used by them while in military service to keep their true identities vague.

D'Artagnan has not seen any of these, his good friends, for many years and now goes to seek them out, rightly reasoning that the four together are a formidable force. In short, he could not pick a better team to accomplish his outrageously ambitious venture. In Dumas' hands, our hero is doing exactly as any entrepreneur should: choose a top-notch team that can not only execute better than any other but are certain to work well together and terrify anyone who would foolishly try to oppose them in any endeavour.

Regrettably for D'Artagnan, he can find none of them. The reader of the novel will know at this point that one of the three -- Athos -- has unintentionally become a competitor, while the other two do not play any role in this particular adventure. Now, before our entrepreneur can proceed to build a team that does not include his first choices, he needs to consider money. Indeed, lots of money will be needed, and he cannot self-finance on his modest savings from the military life. What D'Artagnan understands is that while his ex-musketeer friends would have joined him without any consideration of immediate funds, he is compelled to go with plan B and hire others. These others -- being mercenaries or employees, if you will -- will demand money as compensation for their efforts. That is why he is now in urgent need of an investor.

D'Artagnan knows where to find his ideal investor. He chooses Planchet, his former lackey (commoner servant). Planchet is flush with funds (of which D'Artagnan is aware) from his years spent as a successful small businessman since leaving D'Artagnan's service and also that of the military. D'Artagnan is well aware of this fact and, having invested his savings with Planchet, knows his man's financial acumen and greed. Further, these two men who are of similar age though of different classes know each other well and have many times had the other's life in their hands. They have never failed each other. In other words, here is a potential investor who knows D'Artagnan's qualities and can (perhaps) be persuaded to finance a very risky venture by his former master.

Therefore, D'Artagnan travels to Planchet's shop in Paris. Let's listen in as D'Artagnan makes his pitch:

"Ah! Planchet, it is very long and very hard to speak."

"Do speak it, nevertheless."

D'Artagnan twisted his mustache like a man embarrassed with the confidence he is about to make and mistrustful of his confidant.

"Is it an investment?" asked Planchet.

"Why, yes."

"At good profit?"

"A capital profit, - four hundred per cent, Planchet."

Planchet gave such a blow with his fist upon the table, that the bottles bounded as if they had been frightened.

"Good heavens! is that possible?"

"I think it will be more," replied D'Artagnan coolly; "but I like to lay it at the lowest!"

"The devil!" said Planchet, drawing nearer. "Why, monsieur, that is magnificent! Can one put much money in it?"

"Twenty thousand livres each, Planchet."

We see here a businessman who (as we learn) is accustomed to lending out his ready funds to needy clients at usurious rates, and he has become avaricious enough to want to do even better. This is an ideal venture capitalist for D'Artagnan's purpose: one with the necessary funds and ready to take on substantial risk for out-sized returns.

Now that the entrepreneur has explained the profitable exit for the investor it is time to speak about the business plan. It is an audacious one as you'll see in the next installment of this series.

Musketeer as Entrepreneur (Part 1)

Much has been written about the proper steps to starting up a venture-backed technology company, taking the new entrepreneur from the idea phase through to launch and execution. There are great many steps involved, yet some take to it like a fish to water while others stumble about, unable to master the process. It is true that some entrepreneurs are born that way, but for the rest of us, well, we need to learn how to do it.

Yet even without native talent, it is possible to learn how to be a passably-effective entrepreneur, and indeed many other skills we assume must have native talent as a prerequisite. To give an example, years ago I took a learn-to-draw class that promised that even a total incompetent can be taught how to draw. This promise intrigued me enough to give it a shot. Up until then my drawing ability was limited to barely recognizable stick figures. It wasn't easy, but with some diligent effort and paying close attention to the instructor I did manage some surprisingly decent portraits by course's end.

The purpose of this little sidetrack is that if a drawing incompetent like me could accomplish this small victory, surely we can all learn to be entrepreneurs. All we need is role models, good observational skills and a lot of hard work. This brought to mind an interesting role model, a historical but heavily-fictionalized character brought to life by the 19th-century French author Alexandre Dumas. The character is D'Artagnan, the fourth member of the group known as the three musketeers.

This set of several adventure novels -- collectively known as the D'Artagnan Romances -- follows this fellowship from the time that D'Artagnan, an unknown 18-year old son of a minor and impoverished Gascon aristocrat, entered the scene to make his fortune, through many adventures they had both together and separately, until the end of their lives. If you are at all interesting in adventure novels with accurate period depiction and strong character development, you should take the time to read the entire set. The plot lines are highly-tortured historical fiction that catch the essence and issues of the times that manage to illuminate true historical characters and events. The torture part comes from the extreme license Dumas took to weave his fictional characters and adventures into the historical record.

The selection of these books I will focus on comes from The Vicompte de Bragalonne -- in particular Chapters XIV through XXI -- which begins with D'Artagnan who, at the age of 54 is Lieutenant of the King's Musketeers and responsible for the security of a youthful Louis XIV, decides that after 35 years of service, much of it quite uninteresting and beneath his considerable talent (all very true), decides that it time to set out on this own to find his fortune elsewhere.

This is much like talented career junior executives in a company like Nortel who, while comfortable and making a decent living, are afraid that life and the road-less-travelled is passing them by. Unlike most, this particular junior executive has decided to act. The last straw was seeing his master humiliated by his own Minister -- Mazarin -- who hold the real power and wealth that by rights belongs to the king. Louis, barely twenty, like many ineffectual CEOs, sheltered from real power all his life, does what his Minister tells him to do since he is, as they say, without a clue. D'Artagnan, no longer willing to wait for Louis to grow up and assert his power (and thereby elevating D'Artagnan, or at least making his role greater than that of a babysitter), forces an interview with Louis. His objective is to tender his resignation. This is easier for you and me to do than it was for him since it is no easy matter to quit the king's service. Let's listen in to some key passages from our hero's side of their conversation.

If I were vain enough to believe only half of your majesty's words, I should consider myself a valuable, indispensable man. I should say that a servant possessed of such brilliant qualities was a treasure beyond all price. Now, sire, I have been all my life - I feel bound to say it - except at the present time, appreciated, in my opinion, much below my value.
...
For five years together, I was a hero every day; at least, so I was told by persons of judgment; and that is a long period for heroism, trust me, sire, a period of five years.
...
Oh, sire! what a word! - later! Thirty years have I lived upon that promising word, which has been pronounced by so many great personages, and which your mouth has, in its turn, just pronounced...So I change my formula, sire; and when any one says to me 'Later,' I reply '_Now_.'

Here we see that D'Artagnan, pushed beyond his limit, is prepared to walk out of a sure sinecure into the unknown. However he has known poverty before, and so does not greatly fear the loss of his salary. He also has some small savings, and friends, on which he can rely upon to get him by for a time, and which could finance whatever he might turn his energies toward. D'Artagnan is embracing the risk of an uncertain future since he has no clear plan as yet although he has developed a passion for an audacious idea that had come to him only minutes before his interview with the king.

That is another attribute of a entrepreneur: speed. Notice how he gets the idea, an insanely-difficult one at that, decides that he has what it takes to make the attempt, and acts immediately to begin his adventure. He does not dawdle and, importantly, does not spend the time to first develop a detailed business plan before leaving his employer; he has seen the market opportunity, is confident in his abilities and he now needs his freedom to apply his full energies to the problem.

Having achieved his freedom to act, in the next of several installments to this long blog post we will follow D'Artagnan as he attempts to recruit co-founders and approaches an investor with the funds to finance his nascent enterprise. We will also learn what his enterprise will attempt and how he expects to earn a return on investment.

iPhone is Doomed!

No, actually it isn't, or at least not yet and not for a long time. My headline is simply a parody of so many of the superficial articles I see these days (a few examples here, here and here) that try to categorize the smart phone competition between Apple, Blackberry, Google, Palm, Microsoft and others as a winner-take-all horse race, and then often proclaim which one is likely to win. Reality doesn't work that way.

It is entirely possible for some or even all to succeed in the market, presuming that we understand that "success" has an appropriate definition. If the product or product line is either profitable or its losses are more than compensated by pull-through sales and profits of associated business lines, it is successful. Some of these smart phone product lines will be more successful than others, while some may hit a wall and get MD'd (manufacturer discontinued). It is interesting to speculate whether iPhone or Android will eclipse the other, but that does not determine success. I think it should be clear by now that both are likely to be long-term successes.

The economist John Maynard Keynes once said about placing too much confidence in long-term investments: "in the long run, we're all dead." The same is true of products and companies. If history is any guide, I can confidently predict that in the year 2100 there will be no iPhone, and probably no Apple Corporation. I can go further and predict that there will be no Android or Google, no Windows or Microsoft, and probably no IBM, Chevron or a host of other of today's large, established enterprises.

So, yes, the iPhone is doomed. However until that happens, iPhone will continue its string of market successes, and that makes it all worthwhile for Apple and its shareholders and customers. Similarly, in the end you and l are dead, but until then life is worth living. Immortality for successful products, companies and people isn't a necessary attribute.

Perils of Poor Web Design

Perhaps you've noticed what I've noticed. An increasing number of web sites, both blogs and the more mainstream media, are taking to banner article rotation using Flash. For example, GigaOm, The Economist and (to pick an especially guilty local example) Ottawa Business Journal, and regrettably this is a small subset of the sites with which I am familiar. I dislike this fad in web design. In fact, I absolutely detest it. Let me tell you why.

First, many of these require that you sit there like a stump and wait for the headlines to do their sometimes slow, sometimes fast rotation to see the full set of headline articles. This is a throwback to TV culture that is contrary to the web culture. On the web I want to see what you've got so that I can click on any article that interests me or I can move on to the next site. I suppose I could use an RSS feed for all of these sites, but for my purposes there are too many to make it convenient. As part of my routine each morning, I flip through a number of sites to see what's new -- many news sites are updated with new articles in the early morning -- and I do not want to be forced to sit on my hands while some site demands that I sit on my hands and, at their pleasure, endure their slow reveal.

Second, I often do this navigation on an ancient 5-year old XP machine that bogs down on these Flash-rich sites. This is main reason I installed Ad Blocker on Firefox, to get rid of Flash ads that do this very thing. Now the content is doing the same. At least I can skip video/Flash articles without choking my computer (which I despise in any case since watching them takes too long and the information density is too low) but with the main print articles doing this, it seems I must either endure this torture or find other sites with similar content quality. Even after I've perused the site I must either navigate away or close the tab if I want my computer to perhaps better than a 386sx of a bygone era.

Third, it is a fad and I dislike fads. I dislike them because web sites are only doing this because others are doing it, and they are doing it without regard for their audience. This is similar to an all too common trait of web design in the 1990s -- when the web was still fairly new -- that assaulted us with a wild palette of garish colours, blinking text, and pointless graphics. It's a shame to see that self-indulgent web design is still with us.

As with the writing of prose or the writing of software, the writer makes a choice: to serve the needs of the writer (coder) or to serve the needs of the reader (user). Rotating Flash headlines do not serve me well, and that's why it's bad design. Hopefully this fad will soon pass into history.

Ad Blockers and Chrome

Today is Groundhog Day, a day when we drag these cute and evil rodents out of deep hibernation to tell us what we already know: "It's damned cold out and it's going to stay that way so leave me only so I can get a couple more months sleep!" That's about as far as I can get worked up about groundhogs this time of year, other than to clarify what I mean by "cute and evil": they're cute at a distance but evil when they're up close and on your property.

Instead let's talk about a different evil -- web ads -- and the company whose motto is "do no evil". This way I can hammer on Google for two days running. No offense intended of course. Really.

Ever since Google released the Chrome browser it was remarked by many that despite coming with a large stable of add-ons (which have grown substantially in number since then), they did not provide the most common of add-ons favoured by those of us with Firefox: the ad blocker. To my knowledge, Google has maintained some laudable neutrality on the topic despite having an understandable interest in the subject. They do after all get the bulk of their revenue from web advertising; this business strategy is not likely to change any time soon.

While Google did not publish their own ad blocker, neither did they discourage others either before or after the fact. There are ad blocking add-ons for Chrome and Google continues to do nothing. So far, so good. The thing is, does Google benefit from the goodwill engendered by this hands-off approach or should they be concerned that their business interests are potentially threatened?

It has been speculated by some that their neutral stance is driven by a realization that those who use ad blockers, on any platform, are those who are least likely to click on ads. The truth of this is unproven. There is also the fact that ad blockers still have only a moderately-low penetration among browsers, and this is despite the majority of people claiming to either hate or to mildly dislike web ads, and especially ads that are garishly visible or obnoxious (i.e. GIF and Flash).

Outside the web, people hate a couple of other types of advertising even more: unsolicited commercial email (spam) and telemarketers. It's the rare internet user who does not use a spam filter (or rely on one provided by their ISP), or telephone users who will view with suspicion any Caller Id that is unfamiliar or missing entirely, or has not registered their numbers on a do-not-call list. Yet like web ads, spam and telemarketing continue apace.

The reason for the continuance of these practices -- irrespective of almost everyone claiming to hate them and not responding favourably when they are confronted by these types of ads -- is that they work. By "work" I mean that the revenue they garner is greater than the cost expended to flood us with all this unwanted communications. Indeed, the same profitability motive applies to postal advertising and even the mass of flyers that get dumped into my home mailbox every week.

I suspect Google knows all this and will therefore maintain their silence and tight little smiles when the subject is raised. As the LA Times article linked to above notes, people will often disable ad blockers when they're shopping online because they want the ads and will click on them. I have myself done this very thing.

Google is neither evil nor stupid. Ad blockers are fine and so are web ads. People will shop and they will click, and Google will continue to earn a living. The noisy debate may continue as well, but it will remain irrelevant.

Advising Google on Their Android Market

There is a veritable industry of unasked-for advice that is freely offered by trade insiders and media commentators to all of the major technology companies. Google is no exception. I am particularly attuned to the stream of articles on how Google should (or must!) improve the Android Market because of my own involvement with Android. This latest article fits the expected pattern, raising no new issues but providing a fresh outlet for app developers to vent their frustrations.

I won't bother to recap these Android Market issues since they are already so well known: you can search out the articles if you wish, and I have even addressed the topic more than once in this blog. What I want to talk about today is, why does anyone bother to rehash these same points and -- perhaps smugly -- give unasked-for advice to Google. Do people believe that Google, with all of its commercial might and talented workforce, is missing the obvious? This is not credible.

We must accept the fact that Google understands very well what it is doing with the Android Market, and that it is doing so intentionally. After 16 months they have had every opportunity to introduce incremental improvements and have chosen to only make a few minor tweaks. They could add more resources, use 3rd-party products, integrate with their search products, and do so much more. They have not because they choose not to. Of course with all the secrecy on their Android-related activities I could look like a fool tomorrow since they could turn around and announce Android Market 2.0 that addresses every concern raised and goes even further. It's unlikely, but I have to acknowledge the possibility.

For all the noise about alternative app stores -- which, unlike with Apple, is perfectly acceptable to Google -- they are not a solution. The only app stores that matters when it comes to addressing the mass market of Android device users are those that come pre-installed on the devices; the vast majority of users will not look further than what the device provides out of the box. This will continue to be true regardless of preaching by well-meaning and intelligent Android champions because the app developer community is fragmented, consisting of small or sole-proprietor shops that have neither the time nor the ability to overcome this massive obstacle. Like it or not, to the majority of the market -- both developers and consumers -- the Android Market is a force of nature that you can either accept or reject. Rejection almost inevitably means departing from the Android ecosystem.

That is my approach: I accept the Android Market for what it is and I do not hope for changes. Since hope is not an acceptable business strategy, we look elsewhere to pursue our business.