You have of course noticed the increasing amount of coverage in the media, especially traditional media, of the US presidential campaigns. Perhaps like many Canadians you are paying attention to it and find it interesting. I am not paying attention except insofar as I can't avoid it whenever I turn on the radio, click on a news site, or on the odd occasions I find myself in front of a television.
I don't pay attention because I consider it all quite unimportant. Certainly it is of importance to Americans, but I would argue it is unimportant to Canadians. Yes, it is entertaining, if that's the sort of thing that turns your crank. It can also be titillating, if you enjoy the questionable tactics often employed. But does it matter? I say that it does not.
To my way of viewing US politics, the only event in this campaign that matters is the election result. Everything up to that point is time-sucking noise. I am not a US voter so the campaigns help me not at all. Apparently it isn't even important to the large proportion of Americans who will not vote.
Even the result of the election is of only moderate importance to this Canadian. Regardless of who wins, the impact on trade and foreign relations won't differ a great deal. The forces underlying those themes, the only ones of particular interest to non-Americans, are greater than any president. The US administration will have some sway, mostly in the way of minor adjustments to the greater forces of the country's economic and political interests.
So if you do like to watch the electioneering, go ahead. Just don't deceive yourself that anything of great moment is occurring or that it will impact you to any degree. The US will continue to be broadly open to trade, with selected barriers due to security concerns and industry pressure groups. The US will find a way to get of Iraq, no matter which candidate wins. Petroleum policy and security will continue to be priorities if only because the entire country believes in their importance. There may be bigger internal changes, such as in their approach to health care, but that does not affect us. As usual we can learn from their policy experiments, both the successes and failures, and perhaps emulate or expunge them in our own institutions.
If there is a federal election of our own this fall, I will pay close attention. That, to me, is truly important since it affects my life and my country.
Tuesday, August 26, 2008
Friday, August 22, 2008
Perils of Timestamps on News
A while back in my series on internet news (still not complete!) I criticized using relative time stamps on news articles. Those are the type that tell you that news is from, say, 3 hours ago. I have since discovered another problem with this method of time-stamping news.
As I mentioned then, I use myYahoo for market-oriented news. On their home page, but not on pages specific to stock portfolios or individual stocks, they use these relative timestamps on all news, including those fed via RSS feeds. Their system has been misbehaving recently.
From the symptoms of the problem it appears that the time-stamp is not relative to the time the article was published. Instead it is relative to the time the article arrived via the feed. If the feed mechanism misbehaves the timestamps are wrong.
As examples, news articles for stocks and from RSS feeds are periodically disappearing. Okay, so problems do happen. The bigger problem is that when they fix the problem and the news is refreshed, the timestamp is relative to the time the news was refreshed! That's not good. I am seeing, for example, news for thinly-traded stocks (which tend to have few news articles) showing up as from 2 hours ago that were in fact published weeks ago. That ain't news.
One more reason these service should stick with clock times for time-stamps.
As I mentioned then, I use myYahoo for market-oriented news. On their home page, but not on pages specific to stock portfolios or individual stocks, they use these relative timestamps on all news, including those fed via RSS feeds. Their system has been misbehaving recently.
From the symptoms of the problem it appears that the time-stamp is not relative to the time the article was published. Instead it is relative to the time the article arrived via the feed. If the feed mechanism misbehaves the timestamps are wrong.
As examples, news articles for stocks and from RSS feeds are periodically disappearing. Okay, so problems do happen. The bigger problem is that when they fix the problem and the news is refreshed, the timestamp is relative to the time the news was refreshed! That's not good. I am seeing, for example, news for thinly-traded stocks (which tend to have few news articles) showing up as from 2 hours ago that were in fact published weeks ago. That ain't news.
One more reason these service should stick with clock times for time-stamps.
Thursday, August 21, 2008
Elimination of Corporate Tax
The author of this Globe and Mail article, Neil Reynolds, asks an old question: would we be better off to eliminate all corporate income taxes? Without his being too explicit, he certainly leans toward saying yes, we would be better off. I also believe that is the right answer. However, the devil is, as always, in the details. Mr. Reynolds does describe some of the advantages to our economy of the zero-tax regime, but does not address how we can get from here to there without causing havoc. Fair enough, since that wasn't his intent. While I don't have all the answers I do have some thoughts on an implementation plan that would minimize the pain while accentuating the gain, and therefore might be politically feasible.
Before that I want to first make a point that is often lost in the noise of any discussion on this topic. Corporations are not people. It is true that the word itself comes from the Latin word for body, corpus, yet it is simply a legal fiction intended to erect a firewall between a business entity and its officers, directors and owners that, if they adhere to certain rules, protects their personal assets in the case of business failure and permits profiting from the business in a controlled, and taxable, fashion. It is not meaningful to talk of corporate profiteering since corporations don't run out and buy big houses, gamble and live hedonistic lifestyles. Pieces of paper don't do that.
So then, what happens if you eliminate corporate income tax? The immediate (first order) effect (assuming the corporation is profitable, which many are not!) is that the corporation will have more cash. Since cash is an asset the corporation's book value increases. That's it. The money did not vanish into thin air and did not end up in someone's pocket. On the larger stage there is a rebalancing occurring, since provincial and federal coffers will be lighter by the same amount. This is a concern since if you implement the tax elimination plan in one fell swoop there would be pain in the financing of our public institutions, which includes all government-sponsored programs. The solution is to not implement corporate tax cuts in this way.
Instead let's suppose we reduce corporate taxes a small amount so that profitable corporations have a little more cash in hand, and governments have a little bit less. A cynic might claim that greedy and unethical corporate actors will line their pockets with that extra cash. In some cases that may in fact happen. However, if it does it's because those same bad actors already do so. Corporate tax policy does not change this type of misbehaviour; corporate taxation is not an instrument of law enforcement or ethical policing. It is a matter of corporate governance and enforcement of existing laws and securities regulations. That can be done today as it entirely distinct from taxation. Therefore such an argument is a red herring.
If that concern is allayed, what is the likely impact of a padded corporate bank account? If kept in the bank, the company's value will increase by the same amount. Public companies will, on average, see their share prices rise. The amount of the rise is easy enough to calculate: divide the cash by the number of shares. If nothing more is done, your retirement plan (assuming you hold mutual funds or directly own stocks) increases in value proportionately. This includes the CPP which hold shares in Canadian corporations.
Companies are not inclined to hold onto excess cash since it does little work other than generate a small amount of interest and, if allowed to grow too far, can attract predatory and hostile takeovers from larger entities that want access to that ready cash. No, competent managers put the money to work to increase the company's value or distribute it to shareholders by increasing dividends (which, by the way, generate tax revenue for government) - this is a secondary effect of a tax cut. There are many ways for companies to put cash to work, some of which are listed below, along with tertiary effects.
I am also realistic is seeing that despite the positive potential the risk of failure must be faced. Perhaps the biggest risk is that a down tick in the economy due to exogenous factors could well be blamed on the initial tax reduction, even if a careful analysis shows that the tax reduction reduced the economic distress. There will also certainly be nay-saying from parties in opposition (just because they're the opposition!) that may get a sympathetic ear even if the overall experiment is working. These politicians would only have to highlight one or two examples of negative impacts on a group of people or companies that may, or may not, be directly attributable to the tax reduction. Politicians live by public perception so the pro and con forces will work hard to sway opinion, regardless of the success or failure of the experiment.
Okay, so this has been an interesting thought experiment, but can it actually be made to happen? Sure, but possibly not in our present political environment. There are politicians who would certainly be willing to act, even as a matter of principle or ideology. A competent politician, which is one who is in tune with the electorate, will not do it today since it is unlikely to be supported by the people. It is more likely to result in political death. Leadership is risky. Despite this situation I would still like to see one of the parties, at either level of government, start talking about it so that it can be seriously contemplated before many more years go by. The entire country could benefit from making our companies more globally competitive.
Before that I want to first make a point that is often lost in the noise of any discussion on this topic. Corporations are not people. It is true that the word itself comes from the Latin word for body, corpus, yet it is simply a legal fiction intended to erect a firewall between a business entity and its officers, directors and owners that, if they adhere to certain rules, protects their personal assets in the case of business failure and permits profiting from the business in a controlled, and taxable, fashion. It is not meaningful to talk of corporate profiteering since corporations don't run out and buy big houses, gamble and live hedonistic lifestyles. Pieces of paper don't do that.
So then, what happens if you eliminate corporate income tax? The immediate (first order) effect (assuming the corporation is profitable, which many are not!) is that the corporation will have more cash. Since cash is an asset the corporation's book value increases. That's it. The money did not vanish into thin air and did not end up in someone's pocket. On the larger stage there is a rebalancing occurring, since provincial and federal coffers will be lighter by the same amount. This is a concern since if you implement the tax elimination plan in one fell swoop there would be pain in the financing of our public institutions, which includes all government-sponsored programs. The solution is to not implement corporate tax cuts in this way.
Instead let's suppose we reduce corporate taxes a small amount so that profitable corporations have a little more cash in hand, and governments have a little bit less. A cynic might claim that greedy and unethical corporate actors will line their pockets with that extra cash. In some cases that may in fact happen. However, if it does it's because those same bad actors already do so. Corporate tax policy does not change this type of misbehaviour; corporate taxation is not an instrument of law enforcement or ethical policing. It is a matter of corporate governance and enforcement of existing laws and securities regulations. That can be done today as it entirely distinct from taxation. Therefore such an argument is a red herring.
If that concern is allayed, what is the likely impact of a padded corporate bank account? If kept in the bank, the company's value will increase by the same amount. Public companies will, on average, see their share prices rise. The amount of the rise is easy enough to calculate: divide the cash by the number of shares. If nothing more is done, your retirement plan (assuming you hold mutual funds or directly own stocks) increases in value proportionately. This includes the CPP which hold shares in Canadian corporations.
Companies are not inclined to hold onto excess cash since it does little work other than generate a small amount of interest and, if allowed to grow too far, can attract predatory and hostile takeovers from larger entities that want access to that ready cash. No, competent managers put the money to work to increase the company's value or distribute it to shareholders by increasing dividends (which, by the way, generate tax revenue for government) - this is a secondary effect of a tax cut. There are many ways for companies to put cash to work, some of which are listed below, along with tertiary effects.
- An increased asset base allow the corporation to take on more debt or make a secondary stock offering (or IPO it is not yet public) on attractive terms to fund expansion to research and new products and markets, thus ensuring future success and growth.
- Reduce prices to competitively bid on new business, while maintaining similar levels of profitability. The company will be able to grow its business, especially in foreign markets, thus growing the Canadian economy and increasing personal wealth. Governments benefit by a greater tax base due to economic growth, which can then better fund public institutions and social programs.
- Attract superior talent with higher salary and stock offers, which will increase the quality of products and services while also innovating on new markets and products. Other tertiary effects are the same as those in the previous point.
I am also realistic is seeing that despite the positive potential the risk of failure must be faced. Perhaps the biggest risk is that a down tick in the economy due to exogenous factors could well be blamed on the initial tax reduction, even if a careful analysis shows that the tax reduction reduced the economic distress. There will also certainly be nay-saying from parties in opposition (just because they're the opposition!) that may get a sympathetic ear even if the overall experiment is working. These politicians would only have to highlight one or two examples of negative impacts on a group of people or companies that may, or may not, be directly attributable to the tax reduction. Politicians live by public perception so the pro and con forces will work hard to sway opinion, regardless of the success or failure of the experiment.
Okay, so this has been an interesting thought experiment, but can it actually be made to happen? Sure, but possibly not in our present political environment. There are politicians who would certainly be willing to act, even as a matter of principle or ideology. A competent politician, which is one who is in tune with the electorate, will not do it today since it is unlikely to be supported by the people. It is more likely to result in political death. Leadership is risky. Despite this situation I would still like to see one of the parties, at either level of government, start talking about it so that it can be seriously contemplated before many more years go by. The entire country could benefit from making our companies more globally competitive.
Wednesday, August 20, 2008
Diversification for Canadian Investors
Because I follow the markets, I am occasionally asked by those I know of my opinion on how or where to invest. Invariably I deflect those questions since I know enough to know that I am not qualified to give that sort of personal and critical financial advice. Also, my track record is modestly good but far from stellar. I know enough to know I don't know enough; at least when I trade for myself I am somewhat comforted that my mistakes affect the fewest possible people.
A common and often very good investment strategy is diversification. The idea here is to spread your investment dollars across a broad range of sectors (mining, financial, technology) and investment classes (equities, fixed income) so that you reduce volatility. This protects you on the down side when one sector drops precipitously, such as the recent financial meltdown or more recent fall in commodities, even though it also limits your near-term gains on the upside. If you are not an active investor and simply want to invest and forget, diversification is your friend, with the caveat that there can never be certainty of positive returns.
One technique for diversification that many use is to buy index funds or cross-sector mutual funds. It's simple and seems to meet the criteria for the casual investor. However, if you're a Canadian investor you should perhaps think again.
The Canadian economy is not diversified and neither are broadly-based investment vehicles that focus solely on Canadian markets. Many of you are likely familiar with the cliche that Canadians are "haulers of wood and drawers of water", yet some fail to take that into account in their investment choices. The TSX Composite index, as a prime example, is heavily skewed toward commodities and raw materials. While the numbers do fluctuate wildly, one estimate has the current index almost 50% basic materials and 18% manufactured goods, which is almost the reverse of the far more diversified US markets. We are also prone to bizarre situations like in 2000 when Nortel itself was about one-third of the total Canadian market capitalization.
The message here is that if you do want diversification, and you want to stick with Canadian investments, you will have to be more active with your investment. I do not mean you have to pick stocks, but you should at least select sector-specific mutual funds and take the trouble to rebalance your holdings every one or two calendar quarters. By doing this you avoid the heavy weighting inherent in the broader Canadian markets. With the loosening of foreign holdings in RRSPs you can of course diversify to US and other markets, but keep in mind that when you do that you are engaging in currency speculation. Since the loonie's value does tend to reflect the domestic economy's strength, which remains raw materials, this can run counter to any diversification strategy.
A common and often very good investment strategy is diversification. The idea here is to spread your investment dollars across a broad range of sectors (mining, financial, technology) and investment classes (equities, fixed income) so that you reduce volatility. This protects you on the down side when one sector drops precipitously, such as the recent financial meltdown or more recent fall in commodities, even though it also limits your near-term gains on the upside. If you are not an active investor and simply want to invest and forget, diversification is your friend, with the caveat that there can never be certainty of positive returns.
One technique for diversification that many use is to buy index funds or cross-sector mutual funds. It's simple and seems to meet the criteria for the casual investor. However, if you're a Canadian investor you should perhaps think again.
The Canadian economy is not diversified and neither are broadly-based investment vehicles that focus solely on Canadian markets. Many of you are likely familiar with the cliche that Canadians are "haulers of wood and drawers of water", yet some fail to take that into account in their investment choices. The TSX Composite index, as a prime example, is heavily skewed toward commodities and raw materials. While the numbers do fluctuate wildly, one estimate has the current index almost 50% basic materials and 18% manufactured goods, which is almost the reverse of the far more diversified US markets. We are also prone to bizarre situations like in 2000 when Nortel itself was about one-third of the total Canadian market capitalization.
The message here is that if you do want diversification, and you want to stick with Canadian investments, you will have to be more active with your investment. I do not mean you have to pick stocks, but you should at least select sector-specific mutual funds and take the trouble to rebalance your holdings every one or two calendar quarters. By doing this you avoid the heavy weighting inherent in the broader Canadian markets. With the loosening of foreign holdings in RRSPs you can of course diversify to US and other markets, but keep in mind that when you do that you are engaging in currency speculation. Since the loonie's value does tend to reflect the domestic economy's strength, which remains raw materials, this can run counter to any diversification strategy.
Tuesday, August 19, 2008
The Fine Line Between Marketing and Hyperbole
The greatest salesman I have ever had the pleasure to work with made an observation to me that I've always remembered. It was one of those little pearls of wisdom that sticks with you because it is so true. The original context was about selling telecommunications equipment, yet it is applicable throughout all aspects of business, politics and life in general. His message was this:
The process is to use promotions to gain an audience. Once you have gotten in the door and you have an audience let your product (or service, concept, business proposition, or whatever you are pushing) do the talking for you. Once they're paying attention, stop marketing and start helping them benefit from the product. If it's any good to them they'll let you know. If you can't back up your promotion with a product that delivers value to the customer, or you have left a trail behind you of broken promises and unhappy customers, no amount of marketing can save you or your company.
Success comes when the customer tells you how great your product is and how they are able to benefit from it, whether by solving a problem better than their current solution or how they can do useful things they couldn't do before. Many of these customers will agree to be references. This will help you win over new customers, and also investors if you are a startup. This is the source of building a good reputation and credibility, and true commercial success.
There are corollaries to this rule. For example, do you like to name drop? That's when you try to impress someone by relating that you know important person 'X'. It is instead far more impressive when person 'X' knows you. Do you primp and preen before an important date, wash the car and pick an expensive restaurant? That's marketing, and there's nothing wrong with that provided you can back it up. It's what comes out of your mouth and in your casual behaviour that tells the truth about the product, you, not the packaging.
To close this off post I will note that my MP, John Baird, has started filling my mailbox with one-sheet flyers extolling his and his government's virtues and accomplishments, suitably simplified and inflated. There's nothing particularly wrong with that considering that an election is increasingly probable - it's marketing - if they can show they know where to draw that line between promotions and delivering the goods. My vote will depend on what I really believe he and they actually accomplished and what that indicates for the next term, and if they show wisdom in letting their record speak louder than the message.
"The more you have to tell someone how great you are, the less they believe you."It's a good rule that I try to follow, even though I don't always succeed. Despite my background in technology, many years of promoting products and ideas have moved my approach more towards sales and marketing where promotion is fundamental. The trick is in knowing where to draw the line between promotion and hyperbole, and also knowing when to stop it entirely.
The process is to use promotions to gain an audience. Once you have gotten in the door and you have an audience let your product (or service, concept, business proposition, or whatever you are pushing) do the talking for you. Once they're paying attention, stop marketing and start helping them benefit from the product. If it's any good to them they'll let you know. If you can't back up your promotion with a product that delivers value to the customer, or you have left a trail behind you of broken promises and unhappy customers, no amount of marketing can save you or your company.
Success comes when the customer tells you how great your product is and how they are able to benefit from it, whether by solving a problem better than their current solution or how they can do useful things they couldn't do before. Many of these customers will agree to be references. This will help you win over new customers, and also investors if you are a startup. This is the source of building a good reputation and credibility, and true commercial success.
There are corollaries to this rule. For example, do you like to name drop? That's when you try to impress someone by relating that you know important person 'X'. It is instead far more impressive when person 'X' knows you. Do you primp and preen before an important date, wash the car and pick an expensive restaurant? That's marketing, and there's nothing wrong with that provided you can back it up. It's what comes out of your mouth and in your casual behaviour that tells the truth about the product, you, not the packaging.
To close this off post I will note that my MP, John Baird, has started filling my mailbox with one-sheet flyers extolling his and his government's virtues and accomplishments, suitably simplified and inflated. There's nothing particularly wrong with that considering that an election is increasingly probable - it's marketing - if they can show they know where to draw that line between promotions and delivering the goods. My vote will depend on what I really believe he and they actually accomplished and what that indicates for the next term, and if they show wisdom in letting their record speak louder than the message.
Monday, August 18, 2008
To Google: All (or at least most) Is Forgiven
It was only a week ago I wrote a post haranguing Google about the delays in getting a more complete and unimpaired Android SDK released, and today they've done it. This blog obviously has tremendous influence - uh, right.
The enhancements to the telephony module seem to be just about what I was looking for, and there are associated additions that are particularly useful to the applications I have in mind. I can't go in to specifics about what I am up to, but telephony integration in Symbian doesn't meet my needs. I have not looked at LiMo or iPhone or Blackberry to the same level of detail so I can't comment on those.
I have only quickly skimmed the other changes in the 0.9 SDK beta, but what I've seen does indicate that that it is as advertised - close to production release.
Some things I want to do still require an actual Android phone, which I would have preferred to see in the emulator. I can live with that if the phone can be tested here, in Canada, on a actual network. I am less hopeful about that occuring anytime soon, though I'd be happy and relieved to be proved wrong.
I am feeling a bit more positive about selecting Android as a basis for prototyping mobile applications that require telephony integration. I haven't made an actual decision yet, but the new features and now firm schedule for Android appears likely to tip me in that direction.
The enhancements to the telephony module seem to be just about what I was looking for, and there are associated additions that are particularly useful to the applications I have in mind. I can't go in to specifics about what I am up to, but telephony integration in Symbian doesn't meet my needs. I have not looked at LiMo or iPhone or Blackberry to the same level of detail so I can't comment on those.
I have only quickly skimmed the other changes in the 0.9 SDK beta, but what I've seen does indicate that that it is as advertised - close to production release.
Some things I want to do still require an actual Android phone, which I would have preferred to see in the emulator. I can live with that if the phone can be tested here, in Canada, on a actual network. I am less hopeful about that occuring anytime soon, though I'd be happy and relieved to be proved wrong.
I am feeling a bit more positive about selecting Android as a basis for prototyping mobile applications that require telephony integration. I haven't made an actual decision yet, but the new features and now firm schedule for Android appears likely to tip me in that direction.
Sunday, August 17, 2008
Which Country Controls the Arctic Ocean?
This isn't the sort of topic I had intended to address in this blog, but after reading, first, an article in the Globe and Mail this weekend about our non-existent presence on the northern ocean and its implications to our claims in the area, and then a second in the New York Times decrying how the lack of US ice breakers is imperilling their own interests, I simply couldn't resist.
Our hand wringing over Arctic sovereignty usually focusses on the US. While they do have a massively larger navy and coast guard they are almost as badly off as Canada when it comes to navigating through ice. That surprised me.
It turns out that the real power in the Arctic is Russia; they have a large ice breaking fleet, an advantage which will continue for another decade at the very least. Considering the renewed tension between the Russia and the US (and us via NATO), rapid opening of the northwest passage, or at least an increase in open water, oil and gas exploration, and claim staking by all countries bordering the Arctic Ocean, there could be some incidents over the coming years.
Canada will be seriously challenged to defend its Arctic interests as our more powerful neighbours jockey for position. Our economic capacity to patrol and defend the Arctic, and our claims, pales in comparison, no matter what we do or what our politicians say.
Our hand wringing over Arctic sovereignty usually focusses on the US. While they do have a massively larger navy and coast guard they are almost as badly off as Canada when it comes to navigating through ice. That surprised me.
It turns out that the real power in the Arctic is Russia; they have a large ice breaking fleet, an advantage which will continue for another decade at the very least. Considering the renewed tension between the Russia and the US (and us via NATO), rapid opening of the northwest passage, or at least an increase in open water, oil and gas exploration, and claim staking by all countries bordering the Arctic Ocean, there could be some incidents over the coming years.
Canada will be seriously challenged to defend its Arctic interests as our more powerful neighbours jockey for position. Our economic capacity to patrol and defend the Arctic, and our claims, pales in comparison, no matter what we do or what our politicians say.
Friday, August 15, 2008
Patents: Enabler of Investment and Startup Success
The writers at TechDirt have a lot to say about patents and patent reform, and I sympathize with many of their points. Here is a recent article of theirs on the topic that prompted me to write this post.
I have worked in technology startups and I have patents issued and pending. I would prefer to avoid the patent process entirely since it is time-consuming and expensive, with no certainty of bankable benefits. Yet they are still necessary; we live in an environment where it would be foolish to avoid the acquisition of patents. I have some thoughts about why they remain important for technology startups, regardless of my personal feelings on the matter.
Prospective investors treat patents, even those that are still pending, as company assets. They provide some assurance, though imperfect, of a company's ability to build a sustainable competitive advantage. Without that, they are primarily investing in the team's ability to execute in getting to market first and successfully. This is not a readily defensible strategy (e. g. Vonage) since others with the same idea could execute better. There is also the bitter reality that if the startup fails, whether by poor execution, market timing, or funding availability, and if the patents have enduring value, the investors have something of value left other than desks, chairs and keyboards. You need only look as far as domestic companies like MOSAID and Wi-LAN to see how investors can profit from patents rather than (failed) product-based businesses. This may be distasteful to some, but it is the current reality.
While you may not believe in the value or expense of patenting, that does not hold true of competitors. It is typical that two or more people people will think of the same innovation around the same time since the underlying thought process is often driven by evidence for the need from the surrounding society and economy. If you don't file a patent, it is likely someone else will. With the common failure of the patent office to properly notice and credit prior art, even if you were first your enterprise will be in jeopardy. If you end up in court be prepared to lose. Even if you do not intend to litigate if another company utilizes the claims in your patents, you must defend your company from those who would litigate against you.
Less concrete, yet still arguably valuable, the cost and effort of filing a patent application tests the entrepreneur's belief in, and viability of, an innovation. When you must spend hard effort to document in detail the workings of your innovation and then pay your own hard-earned cash to a patent agent and the patent office, you naturally question if this is merely a whim or an investment. That is, whether you realistically expect the patent filing to attract outside investors and create a competitive advantage contributing to the enterprise's eventual success. You must also believe you can execute quickly on the innovation since 18 months later your patent application will be public and therefore open to viewing by your competitors and customers.
Today's litigious environment in which entrepreneurs must play may change in the future. Now, however, it is not prudent for an entrepreneur to avoid the patent game, painful and uncertain as it is.
I have worked in technology startups and I have patents issued and pending. I would prefer to avoid the patent process entirely since it is time-consuming and expensive, with no certainty of bankable benefits. Yet they are still necessary; we live in an environment where it would be foolish to avoid the acquisition of patents. I have some thoughts about why they remain important for technology startups, regardless of my personal feelings on the matter.
Prospective investors treat patents, even those that are still pending, as company assets. They provide some assurance, though imperfect, of a company's ability to build a sustainable competitive advantage. Without that, they are primarily investing in the team's ability to execute in getting to market first and successfully. This is not a readily defensible strategy (e. g. Vonage) since others with the same idea could execute better. There is also the bitter reality that if the startup fails, whether by poor execution, market timing, or funding availability, and if the patents have enduring value, the investors have something of value left other than desks, chairs and keyboards. You need only look as far as domestic companies like MOSAID and Wi-LAN to see how investors can profit from patents rather than (failed) product-based businesses. This may be distasteful to some, but it is the current reality.
While you may not believe in the value or expense of patenting, that does not hold true of competitors. It is typical that two or more people people will think of the same innovation around the same time since the underlying thought process is often driven by evidence for the need from the surrounding society and economy. If you don't file a patent, it is likely someone else will. With the common failure of the patent office to properly notice and credit prior art, even if you were first your enterprise will be in jeopardy. If you end up in court be prepared to lose. Even if you do not intend to litigate if another company utilizes the claims in your patents, you must defend your company from those who would litigate against you.
Less concrete, yet still arguably valuable, the cost and effort of filing a patent application tests the entrepreneur's belief in, and viability of, an innovation. When you must spend hard effort to document in detail the workings of your innovation and then pay your own hard-earned cash to a patent agent and the patent office, you naturally question if this is merely a whim or an investment. That is, whether you realistically expect the patent filing to attract outside investors and create a competitive advantage contributing to the enterprise's eventual success. You must also believe you can execute quickly on the innovation since 18 months later your patent application will be public and therefore open to viewing by your competitors and customers.
Today's litigious environment in which entrepreneurs must play may change in the future. Now, however, it is not prudent for an entrepreneur to avoid the patent game, painful and uncertain as it is.
Thursday, August 14, 2008
Finviz
The Finviz web site entered my bookmarks a week ago and it is now one of my favourite financial resources during the trading day. If you actively trade, or at least monitor the markets closely, you should check it out.
The home page alone is terrific eye candy. At a glance you have charts of the major US market indices, heat map, stocks hitting highs/lows and actionable technical indicators, top commodities and more. Dig further and you find stock screeners, news feeds, and charts already marked with trend and support/resistance lines.
I don't know anything more about the site or where they intend to take it, but I like what I see. One unfortunate point is that like many popular services it only covers US markets. This is somewhat compensated by the stock screener that makes it easy to filter on Canadian companies that trade on US exchanges. Despite this, you, too, may soon find Finviz on your favourites list.
The home page alone is terrific eye candy. At a glance you have charts of the major US market indices, heat map, stocks hitting highs/lows and actionable technical indicators, top commodities and more. Dig further and you find stock screeners, news feeds, and charts already marked with trend and support/resistance lines.
I don't know anything more about the site or where they intend to take it, but I like what I see. One unfortunate point is that like many popular services it only covers US markets. This is somewhat compensated by the stock screener that makes it easy to filter on Canadian companies that trade on US exchanges. Despite this, you, too, may soon find Finviz on your favourites list.
News: If It Isn't Online and Accessible It Doesn't Exist
Earlier I started a series on internet news, then took a hiatus part way through. I will be getting back to that later. Today I want to write a brief opinion piece on news items on the internet, specifically on what is accessible. It's something I run into every day.
If your news is not on the internet or if it is but is behind a pay wall, or any type of wall, it doesn't exist.
Keep in mind I am talking about news, not other types of content. News is time-sensitive and quickly loses its value, except, perhaps, to some future historian. That's why I spent so much time talking about timeliness in previous posts. When you delay or otherwise impede my access to that news it rapidly descends to zero value. Let me explain by means of some methods many publications continue to use:
Do they believe their truncated article will prompt me to leave my office and look for the print edition? That's asking a lot. They won't even profit if I do it. Further, I know the article is old, perhaps a week or more, since it had to go through the paper publication process. Their strategy fails to win me as a reader. Not only that, they are training me to believe they are unreliable as a source; why bother to check their articles when they may abruptly end in the middle. Annoyance, lack of timeliness and increased distribution friction are poor marketing strategies.
Returning to the larger issue of news, any publication that demands I rush out to buy the paper edition or pay to pass a pay wall is marginalizing themselves. Nowadays I can almost always get equal or better content on the internet, with links conveniently located alongside theirs. Competition is imperilling them. Like that old cliche, the internet routes around failure; if I click on your article and don't get what I want when I want, I click elsewhere. And I may never return to try again.
Others have said it better than I could, that publications must make their news available, in full, immediately and with wide internet distribution. They will have to adapt to their business models to the new medium. Many publications are working to make this happen, and are beginning to see some success. This is an exciting and interesting time for the consumers of news, even if we occasionally grow frustrated at the barriers we encounter.
If your news is not on the internet or if it is but is behind a pay wall, or any type of wall, it doesn't exist.
Keep in mind I am talking about news, not other types of content. News is time-sensitive and quickly loses its value, except, perhaps, to some future historian. That's why I spent so much time talking about timeliness in previous posts. When you delay or otherwise impede my access to that news it rapidly descends to zero value. Let me explain by means of some methods many publications continue to use:
- Publish a teaser on the internet then direct readers to the full article in their print edition.
- Publish a teaser of headline on the internet then ask readers to pay for the chargable online edition.
- Delay publication to the internet site.
Do they believe their truncated article will prompt me to leave my office and look for the print edition? That's asking a lot. They won't even profit if I do it. Further, I know the article is old, perhaps a week or more, since it had to go through the paper publication process. Their strategy fails to win me as a reader. Not only that, they are training me to believe they are unreliable as a source; why bother to check their articles when they may abruptly end in the middle. Annoyance, lack of timeliness and increased distribution friction are poor marketing strategies.
Returning to the larger issue of news, any publication that demands I rush out to buy the paper edition or pay to pass a pay wall is marginalizing themselves. Nowadays I can almost always get equal or better content on the internet, with links conveniently located alongside theirs. Competition is imperilling them. Like that old cliche, the internet routes around failure; if I click on your article and don't get what I want when I want, I click elsewhere. And I may never return to try again.
Others have said it better than I could, that publications must make their news available, in full, immediately and with wide internet distribution. They will have to adapt to their business models to the new medium. Many publications are working to make this happen, and are beginning to see some success. This is an exciting and interesting time for the consumers of news, even if we occasionally grow frustrated at the barriers we encounter.
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