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Friday, January 7, 2011

Making Money on the Internet

Business cycles and the essence of long-run economic growth are distinct issues. Preventing recessions is not the key to growth, as these are regrettable but unavoidable companions to an economy directed by a capital allocation process that is susceptible to systematic failure. Preventing the last failure is pretty irrelevant, because the next systematic failure will be different. Last I checked, only the US government is offering low-down payment loans, and no one offers no-documentation loans, so our government is not really helping here. As for creating growth via something new, if centralized governments could do that, the Soviet Union would still be around.

That decentralized, self-interested, people can collectively make such large errors seems irrational or corrupt to many, but they should remember that growing economies require people to be making things better, which means, new ways of doing things. New ideas are often wrong. Economics has gone onto intellectual cul-de-sacs many times (socialism, Keynesian macro models, input-output models, Hilbert spaces in finance, Arbitrage Pricing Theory, Kalman-filter macroeconomic models, etc.). Other scientific disciplines have their own mistakes, and political mistakes--stupid wars--are also common. These are rarely conspiracies, but rather, smart people making mistakes because the ideas that are true, important, and new, are really hard to discern, and tempting ones are alluring when lots of other seemingly successful people are doing it.

My Batesian Mimicry Theory posits that recessions happen because certain activities become full of mimics, entrepreneurs without any real alpha who got money from investors looking in their rear-view window of what worked and focusing on correlated but insufficient statistics. For example, people assumed a nationally diversified housing prices would not fall significantly in nominal terms, because they had not for generations; people assumed anything related to the internet would make them rich in the internet bubble, conglomerates would be robust to recession in 1970, that the 'nifty fifty' top US companies had Galbraithian power to withstand recessions in 1973, that cotton prices would not fall in 1837, etc.

As in ecological niches, there is no stable equilibrium with when mimics arise to gain the advantages of those with a real, unique and costly, comparative advantage. Every so often there are too many mimic Viceroy butterflies, not enough real poisonous Monarch ones, and a massive cataclysm occurs as predators ignore the unpleasant after-effects and start chomping on all of them. The Viceroy population grows until this devastating event occurs, a species recession. Next time, it won't happen in butterflies, but rather, among frogs or snakes. They key is, some ecological niche is always heading towards its own Mayan collapse (distinct from the 2012 Mayan apocolypse).

The key to wealth creation is doing less with more--destroying jobs at the micro level and creating jobs at the macro level by reallocating capital and labor to more valuable pursuits. The computer got rid of things from typesetters, secretaries, to engineers working with slide-rules, but these people didn't stay unemployed, they did something else, making the economic pie bigger. This is antithetical to government and unions who think creating a permanent 'job' creates productivity--stability at the micro level and stagnation at the macro level. Wealth is created by having decentralized decision-makers focused on simple goal of making money, which means, they oversee transactions where revenues collected are greater than expenses paid. If externalities are properly priced (I know, most liberal think this never happens), this implies value is created. The continual improvements in method (ie, productivity, wealth creation) merely maintain profits in a competitive environment; to do nothing would see their profits eaten away by competitors would could easily copy what they did and just undercut their prices.

The key to this is having managers who keep their workers focused. A good example is a story I heard second-hand about a football player for Minnesota Vikings in the 1970s. Coach Bud Grant called this marginal player into a meeting, and said, 'Here's what I need you to do...'. The player, an articulate fellow quite confident in himself, interrupted with an explanation of why he wasn't doing better and suggestions about how to correct it, mainly focused what others were doing wrong. Grant cut him off: 'You don't understand. This isn't a negotiation. Do what I'm telling you, and you have a role here. Otherwise, you don't.' Hierarchies only work well when people have clearly defined goals, and managers who manage their direct reports singlemindedly.

Private firms can do this much more quickly and often than government, and are rewarded with investment and retained earnings to the degree they do it well. When the government wants to do something, like build a light-rail system, it instead satisfies all its stakeholders who have no financial downside, only veto power, and so the cost/benefit calculus is almost irrelevant. The probability that benefits will outweigh costs when not prioritized is negligible, as highlighted by the fact that companies have to work very hard to make this positive when all those other considerations are ignored.

Thus, Minneapolis's light rail, at the cost of $1.1B for 12 miles of track, takes me longer to go downtown than a car because it stops 19 times at places no one wants to go because these 'hubs' were then sold as development opportunities, and an unusual number of ex-city councilmen are part owners of coffee shops and stores near these stops. Ridership does not even cover their marginal costs. It could have worked if they had an express train that went non-stop from end to end, but doesn't because it was not designed with the goal of making money, only the hope.

Good companies like Facebook, Apple and Google, have this sense of really understanding their users. Lots of simple things that making going to their sites and getting what you want. Their inferior competitors are relatively ugly, cluttered, and clunky. These generally weren't genius ideas like the ideas needed to create the first transistor, or Cantor's diagonal argument, in that there competitors had similar raw competence in these field, but it did take people looking to do things better than others, and decisive people who could empathize with their customers created really great things.

Robin Hanson had a neat article about the Myth of Creativity, where he criticizes Richard Florida's vision of bohemian lead productivity:

This is a Star Wars vision of innovation: "Feel the force, Luke; let go of your conscious self and act on instinct." And it is just as much a fantasy as that celluloid serial. Innovation is no more about releasing your inner bohemian than it is about holding hands, singing Kumbaya, and believing in innovation.

In truth, we don't need more suggestion boxes or more street mimes to fill people with a spirit of creativity. We instead need to better manage the flood of ideas we already have and to reward managers for actually executing them.

Sure, it's good to punish fraudsters, and be wary of the stupid ideas that were passed off as brilliant in the prior cycle (eg, Angelo Mozilo winning the American Banker's Lifetime Achievement Award in 2006, celebrated by politicians on the right and left, prized by Fannie Mae, and Harvard, is now an example of the 'unregulated predatory private sector'). But this is like learning not to put one's hand on a hot stove--good to know, but old news to most. Our priority at the top level should be to get out of the way, and so government should focus on its essential but limited perennial tasks as opposed to creating some new engine of growth. Leave that for the millions of people making sure millions of small changes are constantly made to daily procedures. Such changes do not require vision from politicians, subsidies, or tax breaks, but are rather the natural by product of people trying to make a buck. It's the standard Hayek/Friedman view of macroeconomics, and it's still the best description of how the complex adaptive system of our economy works.

California’s SB 1411, which adds a layer of criminal and civil penalties for certain online impersonations, goes into effect starting today. The consequences include a fine of up to $1,000, and/ or up to a year in jail. So don’t go and do something crazy like impersonate Google CEO Eric Schmidt on Facebook. There may be consequences.

The full text and a summary of the bill are below. There’s a good overview and analysis of it as well, on ZDNet. The state has created a new crime, and a new section is being added to the penal code.

There has to be intent to harm, intimidate, threaten, or defraud another person – not necessarily the person you are impersonating. Free speech issues, including satire and parody, aren’t addressed in the text of the bill. The courts will likely sort it out. Hopefully without my direct participation.

SB 1411, Simitian. Impersonation: Internet.

Existing law makes it a crime to falsely impersonate another in

either his or her private or official capacity, as specified.

Existing law also makes it a crime to knowingly access and, without

permission, alter, damage, delete, destroy, or otherwise use any

data, computer, computer system, or computer network in order to

devise or execute any scheme or artifice to defraud, deceive, or

extort, or wrongfully control or obtain money, property, or data. For

a violation thereof, in addition to specified criminal penalties,

existing law authorizes an aggrieved party to bring a civil action

against the violator, as specified.

This bill would provide that any person who knowingly and without

consent credibly impersonates another actual person through or on an

Internet Web site or by other electronic means, as specified, for

purposes of harming, intimidating, threatening, or defrauding another

person is guilty of a misdemeanor. The bill would, in addition to

the specified criminal penalties, authorize a person who suffers

damage or loss to bring a civil action against any person who

violates that provision, as specified. Because the bill would create

a new crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local

agencies and school districts for certain costs mandated by the

state. Statutory provisions establish procedures for making that

reimbursement.

This bill would provide that no reimbursement is required by this

act for a specified reason.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 528.5 is added to the Penal Code, to read:

528.5. (a) Notwithstanding any other provision of law, any person

who knowingly and without consent credibly impersonates another

actual person through or on an Internet Web site or by other

electronic means for purposes of harming, intimidating, threatening,

or defrauding another person is guilty of a public offense punishable

pursuant to subdivision (d).

(b) For purposes of this section, an impersonation is credible if

another person would reasonably believe, or did reasonably believe,

that the defendant was or is the person who was impersonated.

(c) For purposes of this section, “electronic means” shall include

opening an e-mail account or an account or profile on a social

networking Internet Web site in another person’s name.

(d) A violation of subdivision (a) is punishable by a fine not

exceeding one thousand dollars ($1,000), or by imprisonment in a

county jail not exceeding one year, or by both that fine and

imprisonment.

(e) In addition to any other civil remedy available, a person who

suffers damage or loss by reason of a violation of subdivision (a)

may bring a civil action against the violator for compensatory

damages and injunctive relief or other equitable relief pursuant to

paragraphs (1), (2), (4), and (5) of subdivision (e) and subdivision

(g) of Section 502.

(f) This section shall not preclude prosecution under any other

law.

SEC. 2. No reimbursement is required by this act pursuant to

Section 6 of Article XIII B of the California Constitution because

the only costs that may be incurred by a local agency or school

district will be incurred because this act creates a new crime or

infraction, eliminates a crime or infraction, or changes the penalty

for a crime or infraction, within the meaning of Section 17556 of the

Government Code, or changes the definition of a crime within the

meaning of Section 6 of Article XIII B of the California

Constitution.

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Thursday, January 6, 2011

Making Money Advertising

or if you aim big you can even advertise with Google Adwords and pay only if someone clicks your add:http://google.com/adwords4. Consider me your real business friend and start your first link exchange with my blog: ad my link to your blog or website and I shell do the same adding your link over here on http://realbucksonline.blogspot.com/ Also consider that I will post a new method of making real bucks online every week so stay connected here via bookmark or RSS feed.
Ok: I am just a average guy like you, who aims to make a real buck on the net.
Now let*s face it: it is hard enough to put cents on cents in a few ptc sites and expect to earn a decent living by that. Plus that all this so called business to be payed to click it*s like rolling the dice: you*re never sure finally you get the money. So what*s the catch with this game?
The most important thing in it is to get referrals : directly or rented ones. And the second important thing is to relay on the most trusted and stable sites. This is like betting on the most probable winner with a Team of Betters behind you.
Now,the first rule in business is to MEAN it. Not necessarily to be mean but to be serious about it. So if you think to make a living online you must be serious, hard working and learn it every step of the way. By all means you will get to SUCCEED IN TIME. With the second important thing, related to paying and stable sites you can get help from average experience or custom search on the net for top paying sites on Google. The really heavy duty thing is to build a Team of Referrals. According to this, the most affordable approach is to rent them with the amount of money you already earned on a site. The difficult part is to convince a direct referral to join in your downline and be active on every day. This is like direct-sales in the real world: 50% chances (or less) to make them buy something which is more a game than a business. The rest of 50% is advertising or make believe (super-fantasizing) that something is useful and generates a sort of monthly real income. This fantasies go from promises of other great deals to even promises of 10(ten!) dollars per click:) And believe me, there are sites which ”offer” more than that, even the moon from the sky, just to get you join their scam. There are two kind of experiences related to this ”make believes”: one is to be a realistic guy by nature and the second is to try things until they prove lies. Everyone is preferring the first category except the advertisers, who are preferring the second one. Well, if you want to really be in the first category, and play this ptc game, you have to discern between a real buck and a promised one, in Neverland. You may say that each and every dime is just a promise in the ptc virtual world, until that dime profs it*s real in your pocket. It*s true but that does not mean you stop discerning reality from dreams. You must keep your goal to make real money online, gather experience and build a system that really works keeping you satisfied with your decent earnings and little, indecent losses.
That is why I thought of a system for everyone to get referrals. Scroll down and find out how much you will pay for it!
(just kidding Stay tuned on this site and you will found it soon. Have a winning day everyone!

We don't have enough public market acquirers to sustain the start-up ecosystem.
That was the real back story that explains why Google failed to close a deal to buy
Groupon. Groupon wanted to
sell to Google for $6 billion. Of course they did, that is a huge amount of money – real cold hard cash – for a 2 year old
venture. Do you really think they turned that down for the vague possibility of
making more from an IPO in the distant future? Yes we all hear the stories of
visionary entrepreneurs who are such bold risk-takers and some of that is true but
most entrepreneurs don’t love risk, they love eliminating risk on the way to
building a venture. The real story is that Groupon only backed off due to worries that the deal
would fall into AntiTrust
hurdles.

If we only have a handful of acquiring companies (basically today it is Google,
Amazon and Microsoft, now that eBay and Yahoo are wounded), the AntiTrust hurdle becomes more real. Even
if there is no AntiTrust
issue, Google, Amazon and Microsoft simply cannot buy all those venture-backed
companies.

So we need Groupon to go public and use their public
currency to buy other ventures working on local advertising/ecommerce. That will be
good news for lots of ventures. And a Groupon IPO success
will spur on other ventures that are getting ready for IPO.

I don’t know if Groupon really have the solid
financials to go public. We won’t know until they issue their prospectus to the
SEC. Until then we only have rumor and speculation. But if I were a betting man, I
would bet on Groupon being able to go public before
Twitter. And, this will be more controversial, before Facebook. But that as they say is another story. I am not trying here
to compile an actual list of ventures that could IPO in 2011. This is more about the
general environment for IPOs.

This has been what Steve Blank calls the “lost
decade” for tech IPOs. So why do I think that 2011 will be the year this
changes? There are 5 reasons:

Private
markets are under SEC scrutiny. This takes away the easy option of getting
liquidity without either selling or going public. If you have more than 500
shareholders you have to make your financials public, it is the law.

There is a
backlog of great companies that have the financial strength to IPO. The IPO market
has been pretty well closed for a couple of years (some notable exceptions prove the
rule). So the companies that have the potential to IPO have had more time to grow and
get their act together.

Investors
are hungry for growth outside emerging markets. GDP in America and Europe seems to
have a ceiling at 3% and the Chindia and BRIC stories of
emerging markets growing at 8-10% has created too much capital flowing to those
markets (generating fears of a bubble). So investors want companies in the developed
markets that can grow at really fast pace (at least 30%, ideally 60% plus) from a
base of at least $100m revenue for a long time to come. That has to come primarily
from tech/media ventures.

The
macroeconomic picture is improving. Yes, there are always worries and another
crash is always possible, but "markets always climb a wall of worry" and the general
trends seem positive. But cycles don't last forever, so the people making these
decisions (Boards and their Investment Bankers) will look at 2011 as a good window of
opportunity.

The bean
counters have figured out how to live with Sarbox. For a long time, Sarbanes Oxley ("Sarbox") regulatory overhead has been seen as a reason why you cannot
run a public company. Baloney, as they say in Brooklyn. It is a simple bit of
operational overhead, a rounding error for a great company.

IPO is still the golden ticket. Real entrepreneurs want to IPO. Getting acquired
is a great way to build capital, but it is not the dream of the really driven,
talented entrepreneurs. There are logical reasons for this. The valuation at IPO is
usually (not always, plenty of exceptions to this rule) higher than you can get from
an M&A exit. And more importantly for the
entrepreneur, it is actually often easier to manage public market investors than a
bunch of VC with different agendas. But logical reasons be damned, an IPO is simply
the big badge of honor for the entrepreneur and the investors who back him/her.

It is not clear what we will call the decade that starts in a few days time
– the “teens” maybe – but it will possibly be one where we
get a sustainable IPO market for tech ventures. By “sustainable” I mean
that it cannot be a return to the Dot Com bubble years. Only great companies with
really solid financials will get through the IPO gate. And the valuations will have
to remain grounded in reality (short sellers will ensure that is the case).

Here’s hoping. Happy New Year folks.

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