:: The Park Paradigm ::

Markets for the Digital Generation

Anyone who has ever had the occasion to name a new company or venture knows that for the vast majority of us, it is annoyingly hard. Especially as we look enviously at all the great company names out there already. How did they come up with them? Worse, just when you think you’ve cracked it, you rush to Google and find ten plus companies have beat you to it… Or, especially if you are trying to be a bit clever or fanciful, you realize the product of your inspiration means or sounds like something let’s just say…”less than flattering” in seven other languages.

So as we prepare to emerge from our ‘incubation’ phase, we can no longer prevaricate and need to settle on a name for our new venture. Given the number of great people and ideas I have discovered via the Park Paradigm, I thought it might be interesting to ask for suggestions from ‘the crowd’ and discover what wisdom lay within. So we are open to suggestions - but not committed to adopting any of them - from all of you. Brainstorm away: comments are open!

Here is the brief:

[We are] an investment company established by Sean Park and Amy Nauiokas to provide vision, strategy, leadership and capital to growth-stage companies with innovative business models at the intersection of financial services, markets and technology.

Our core proposition is to deliver exceptional financial and strategic returns to our investors through our ability to identify, source and nurture investments in companies with “disruptive” business models or technology.  We do this by combining our expertise in strategy and operational execution with our network and experience for the benefit of our portfolio companies.

We help our investors and portfolio companies succeed in a world increasingly shaped by accelerating technological change and the inevitable accompanying transition to a new paradigm in financial services and markets.

Building off the work of Carlota Perez and her fantastic work - Technological Revolutions and Financial Capital - one of the key elements of our investment thesis is the idea of anticipating and participating in the ’sixth (techno-economic) paradigm’; it’s a neat metaphor for looking forward and seeking to understand how technological progress will drive disruptive innovation and a ‘new paradigm’ in our industry. For practical reasons, we have been using this as our working name for the company. While we will almost certainly keep the name to use in various ways, for a number of reasons we didn’t feel it was the best name to use for the company itself. So this is where you come in. Help us come up with something better. We are of course seriously considering Nauiokas Park as a classic and solid option, but would also love to consider something a bit more original. Maybe it doesn’t exist. We haven’t come up with it in a few months of thinking about it, so we figured why not give a few more people a crack at it before we settle on one of the ones on our current short list.

To make it more interesting, if we end up using a name you come up with, we’d be happy to buy you dinner (you wouldn’t of course be obliged…), either in New York or London. And a bottle of champagne to the person that comes up with the most creative or funny or clever plausible name, even if we don’t end up using it. Of course this is entirely subjective and up to our discretion. To avoid grumpiness - this will not be awarded unless a minimum quality threshold is surpassed. (I’m hedging in the case that maybe only one or two people will reply… )

Share This

I’ve heard a lot of things about him over the years. How could you not - he’s an extremely successful and high-profile financial executive. But not just from the press, also from people I know well and respect and who have or do work for him. And these people have always painted a universally positive picture of the man: as a banker, a manager, a leader and a person. Is it an indictment of modern corporate governance and organizational politics, that the pillars upon which his has built his success and reputation: transparency, truth, forthrightness, conviction, humility, passion, empathy…are seemingly the exception and not the rule? Perhaps I am too forgiving and too harsh at once. Hmmm. Perhaps you would be justified in calling out my hubris, but from what others had told me of him, I suspected we might get on famously; in particular he seems to share a similar intellectual curiosity and thirst for knowledge, which to be frank was - in its all too frequent absence - probably my single biggest source of disappointment in an otherwise very rewarding and enjoyable 16 year career in investment banking.

In any event, when I heard a couple days ago that he’d done an interview with Charlie Rose, despite being flat out on 16+ hour days, I made sure I carved out an hour to watch it, which I did while eating my lunch today. I had never heard him speak before. He didn’t disappoint. Take a look:

It certainly made me smile when he said the first thing he did after being fired from Citigroup was to go buy 10 or 20 books. And his comment about one of the sources of disagreement with Mr. Weill:

…remember I had been fighting with them for years…we set up an organization at Citi…now don’t ever do this ok? And if I ever do this at the job I’m in, just shoot me… we had tri-heads and co-heads reporting to co-heads. Globally. I told them early on it’s crazy…

(Ahem)..yes, well, moving on…

I’m sure the shareholders and his colleagues at JPMorgan would be annoyed, and I’m sure there are a million reasons why it would never happen, but watching him gave me an idea for what just might be the ticket to beat all tickets: Obama/Dimon ‘08. Talk about shoring up your weak flanks. Wow. If this ever came to pass I might even go long dollars. Well, at least close my shorts…

Share This

I have to admit it’s always exciting to see validation points for strongly held convictions. As you know I firmly believe that the confluence of technology and emerging - or in the new jargon more precisely ‘frontier’ - markets will generate significant and exciting new innovations and opportunities, and I remain convinced that fundamentally new and robust business models will emerge as a result. The fact that this might improve the human condition in some of the world’s heretofore least fortunate corners is of course icing on the proverbial cake. And so I was happy to read that Google, for example seems to share (at least some of my) sentiments on this:

We believe that the Internet is a transformational force for societies. And it’s making us all much more powerful as individuals, regardless of whether one is in New York, Stockholm, Bujumbura, Ouagadougou, or Cape Town. Regardless of background, education, social status, gender, age or economic situation, online access to information enables people to create opportunities for themselves. Seeing a student in a cybercafe doing his research using a search engine, a businessman chatting with a colleague abroad with instant messaging, or a young woman posting her photos to a social networking site - it’s clear the extent to which academic, business and social life is fundamentally changing all over Africa.”

At the same time, a couple of days ago, a very interesting article in the NYTimes also leant support to my thesis that the infrastructural constraints and challenging business environment of sub-Saharan Africa would engender innovative and resourceful approaches and a unique approach to harvesting the potential of information and communications technologies:

Still, Nairobi is home to a digital brew that invites optimism about its chances for creating unusual innovations. The city has relatively few wired phone lines or networked personal computers, so mobile phones are the essential digital tool. Four times as many people have them as have bank accounts. Text messages are far more popular than e-mail. Safaricom, the dominant mobile provider, offers a service called M-pesa that lets customers send money with text messages. Nokia sells brand-new phones here for as little as $33.

While engineers in the United States lavish attention on expensive phones that boast laptoplike features, in Kenya there are 10 million low-end phones. Millions more are used elsewhere in Africa. Enhancements to such basic phones can be experimented with cheaply in Nairobi, and because designers are weaned on narrow bandwidth, they are comfortable writing compact programs suited to puny devices.

“Applications are heavy in America,” says Michael Wakahe, a Nairobi code writer. “Here we have to make them light,” because simpler hardware requires smaller programs. These can have advantages in wireless systems…

…The prospect of marrying low-end mobile phones with the Internet is earning Nairobi notice from outsiders, who wonder whether the city might emerge as a test-bed for tomorrow’s technologies. One intriguing possibility is broadcasting local television programs on mobile phones.

In Nairobi’s highest-profile validation, Google opened a development office here last September. “Africa is a huge long-term market for us,” Eric E. Schmidt, Google’s chief executive, said by e-mail. “We have to start by helping people get online, and the creativity of the people will take care of the rest.”

One of the most obvious - yet no less powerful or potentially transformational for it - themes is the combination of mobile communications, internet and geo-location technologies to disseminate information and increase connectedness from the bottom up. This emergent collective intelligence is all the more remarkable, given the typical history of entrenched ‘top-down’ politico-economic structures in place in these countries. Much of the early innovation is centered around information gathering and crisis management with tools like Ushahidi (quickly developed in response to the post-election political unrest in Kenya earlier this year) and FrontlineSMS being quickly adopted by citizens and NGOs and having an immediate positive impact on the ground. It doesn’t take much imagination to start dreaming up additional - more commercial - potential applications for these kinds of platforms. Ken Banks, the man behind FrontlineSMS describes his view as developing the ‘long-tail’ of mobile applications as the right approach for not-for-profit “social mobile”:

low-end, simple, appropriate mobile technology solutions which are easy to obtain, require as little technical expertise as possible, and are easy to copy and replicate. From my own experiences the number of NGOs present in this space is by far the greatest, making it the area to focus on if we want to create the highest amount of mobile-enabled social change. Add up all the value here, and it easily outweighs the rest along the higher (more lucrative) parts of the tail.

I would suggest that this approach might work equally well to enable commercial, for-profit, applications as well. Indeed on the other side of the continent you find Mark Davies esoko/TradeNet: Africa’s first mobile2mobile peer2peer trading platform and market information network:

…designed to provide the very latest agricultural market information to stakeholders. Accessed via SMS, fax, web, PDAs, farmers and traders can get daily price information, download video/audio files, access research documents, post buy/sell offers to the community, and contact other market participants. The concept is to make african markets more transparent and efficient, improve intra-regional trading, and provide stakeholders with enough recent and accurate information to make better decisions on bringing products to market and at what price.

I’m sure it won’t be easy or without enormous challenges but the opportunity is vast. Africa: it just might be the new new new thing.

Share This

I’m not sure how many emerging entrepreneurs are amongst my readers, but if you are in the midst of starting up the next great disruptive soon-to-be-huge (don’t worry we’ll give you 2-3 years to get to the huge part…) then perhaps you should be considering throwing your hat in the ring to try to win one of the highly prestigious and extremely valuable invites to seedcamp 2008:

Seedcamp is where Europe’s top young founders can come together in one place.

From securing funding to developing the right network, young entrepreneurs in Europe face challenges in building globally competitive technology businesses. Through the provision of seed capital and a world class network of mentors, we want to provide a catalyst for Europe’s next generation of entrepreneurs.

Applications for Seedcamp 2008 are open!

We’re now ready to accept applications for Seedcamp Week 2008, have opened the gates to our online application system, and are anticipating another great pool of entries. For additional information, and to review the questions prior to applying, you may download our 2008 application guide. We’ve also posted milestones on our key dates page. We encourage you to think through each question carefully and also to apply well before the August 10th deadline. You really don’t want to be trying to submit the application at 11:59pm with 100 other people!

As noted before Seedcamp Week is set for September 15-18 2008 in Central London at UCL.

For those of you that are unaware, seedcamp was launched last year to provide a focal point for the start-up community in Europe. Realizing that one of the key strengths of Silicon Valley is the broad and deep ecosystem supporting start-ups and new ventures - human capital, specialist financial capital, legal and other operational support, etc. - and that all these elements existed in Europe but tended to be geographically dispersed and somewhat ‘hard to find’ for an aspiring entrepreneur, Saul Klein came up with the brilliant idea of creating seedcamp. Last year was the first year, and despite an extremely short gestation period and steep learning curve, the week was extremely successful and enriching for all that attended: investors, mentors, suppliers, and of course entrepreneurs. This year I’m sure it will be even better, building off the lessons learned last September and a year of hard work by Saul and CEO Reshma Sohoni and her team. To give you an idea of what goes on and why attending is actually more important than winning (seedcamp invests in a small number of the start-ups judged ‘best in show’), think of it as an extremely intense 5 days of Entrepreneurship University: if you go in with an open mind (and no fear of sleep deprivation) you’ll come out with an education and network worth (dare I say) more than a year at Wharton or LBS. My company, sixth paradigm llp, is proud to be a founding investor in seedcamp alongside some of the giants of European venture capital - and as a start-up ourselves, it’s even more fun to participate - one minute giving advice, the next minute taking notes!

Last year saw a predominance of consumer-oriented internet business ideas, I know one of the hopes for this year is to garner a broader and more heterogeneous group of applicants. Speaking selfishly, I’d love to see one or two killer idea in financial services, markets, data and identity fields.

So what are you waiting for? Dust of that business plan, spruce up that website, and hopefully we’ll see you in September! And to whet your appetite, here is just a tiny taste of the profound advice that surrounds you at seedcamp(!):

Share This

Thinking about information streaming and aggregators, JP writes:

Subscribe aggregators are subscriber-centric. Publish aggregators are publisher-centric. Both types of aggregators, at least in their current form, are backward-looking.

I cannot help but feel that there is a VRM-related innovation to come. Both publish aggregators as well as subscribe aggregators will start dealing with intent, at which point we have digital butterfly markets. Doc, Sean, what do you think?

(For those of you not familiar with the jargon, VRM stands for “vendor relationship management” with the premise being that the traditional producer to consumer paradigm gets flipped to a consumer to producer paradigm - ie consumers ‘advertise’ their preferences and desires to producers who can choose or not to fulfill them. If you are curious to learn more the ProjectVRM blog is a good jumping off point.)

I don’t know if ‘digital butterfly’ markets is the right name (sounds like something out of a William Gibson novel…) but I imagine what JP is driving at is that with all these rivers of data being published and subscribed to, surely embedded in these flows are the ‘fish’. Real, actionable, intentions ready to be fulfilled. I’m not an expert in artificial intelligence, and the little I know (enough to be dangerous) about natural language processing, pattern recognition and semantic search suggests to me that this is not a trivial engineering project. Furthermore the more obvious (ie tractable) use-cases don’t seem to really merit the effort. On the other hand, intuition suggests that the spaghetti theorem should hold (throw enough spaghetti at the wall and some is bound to stick.) Whether or not “We’re pretty sure something cool, unexpected, useful, etc. will emerge” is enough to justify spending millions mucking about is less obvious - certainly with most traditional sorts of capital and organization; but we’ve got Google and open-source, so maybe traditional capital won’t be needed.

I guess what I’m trying to say, is that I’m pretty sure there is a ‘there’ there. But I don’t know yet what it is. I think of it as (information) signal amplification. The current generation of web tools - call it Web2.0 for lack of a better shorthand - are the first generation of amplifiers. What I mean by signal amplification, is that I am able to consume, process and distribute an order of magnitude more information than say was possible a decade ago. Adjust for cost (ie resources) and I’m certain the difference is even greater. The consequences are however profound - they create a new paradigm. The result is not ‘only’ being able to do the same thing only 10 times more productively, the result is that you can do things that simply weren’t possible previously. The business model for our company would not hold up without this substrate. So the next phase, what I think JP is hinting at, is the next order of magnitude of information signal amplification. And you know that’s got to throw up its own universe of possibilities. That’s the thing about power laws. They are like Cracker Jacks. A prize in every box.

Share This

Having coffee with a common friend and TEDster Juliana, I had the pleasure to meet David McQueen this afternoon. He does a lot of work - counseling, mentoring - with young people in London, and said something that really struck a chord. He said that one of the biggest issues he faced when trying to help these teenagers was a lack of aspirations, or aspirations unnecessarily (and unrealistically) narrowly defined: model, footballer…big brother housemate…

as*pi*ra*tions - a hope or ambition of acheiving something.

I’m not suggesting this is some incredible non-intuitive insight, but it made me think. Because it was so obviously true. Because it is so obviously sad. Because it only takes a second to realize that without aspirations, the world takes on a completely different hue. Our society, our world is built on the assumption that its citizens aspire to achieve in some way, in some context. It doesn’t work otherwise. Alienation is a logical outcome. Think of everything you do, every day. Now ask your self how these things make sense devoid of your own aspirations. Exactly, they don’t.

I’m not an anthropologist but I suspect that a child’s aspirational abilities are not predicated on genetic pre-disposition, but are shaped by their environment, especially their parents. It’s unsurprising that there doesn’t seem to be any easy, obvious, scaleable solutions to fixing bad parents (based on a long history of governments trying to find such a solution and so far failing…) But I wonder (I hope) if perhaps there are ways to use the power of the web, social media, ubiquitous and cheap communication to open previously closed horizons to young people who haven’t had the good fortune to be born in the right place, to the right parents. To afford them the self-evident right to have ambition. To dream. To allow them to discover possible futures beyond ‘footballer’ or ‘model’ or bust. To swim in the sea of possibilities that surrounds us constantly but - unlike for readers of blogs like you - is invisible, seemingly unknowable to these kids. To let them discover the dignity of a job well done, no matter the job. Aspirations should naturally be a “long tail” distribution, not an all-or-nothing ultimatum. And yet it seems that for many children, this is what they see.

As JP would say, this is a very provisional post: unfortunately I don’t have any clever ideas to illustrate my thinking.

But I can’t wait until I do.

Share This

Those that aren’t prediction / event / outcome market affectionados, might not have realized that the CFTC recently asked

…for public comment on the appropriate regulatory treatment of financial agreements offered by markets commonly referred to as event, prediction, or information markets.

During the past several years, the CFTC has received numerous requests for guidance involving the trading of event contracts. These contracts typically involve financial agreements that are linked to events or measurable outcomes and often serve as information collection vehicles. The contracts are based on a broad spectrum of events, such as the results of presidential elections, world population levels, or economic measures.

As you might have expected my immediate reaction was - it’s about bloody time! (Or more cynically, that the CME had finally figured out / got around to working out how to monopolize compete in these emerging markets.) The deadline for comment was July 7th and although I haven’t had the time to look closely at many responses (available here from the CFTC), I was heartened to read John Delaney’s (InTrade CEO) contribution thanks to Chris’ posting of it at Midas Oracle (incontournable for keeping up with all the latest news and gossip on the subject of prediction markets.) It’s too bad the CFTC’s website doesn’t have a Digg/Shashdot-type mechanism* for people to vote up (or down) contributions. If it did I would certainly have endorsed this contribution - well crafted, robust, articulate and (imo) stating the blindingly obvious (which btw is a good thing in this Kafka-esque context.) My thoughts as to the contradictions implicit in the increasingly anachronistic US regulatory system are on record, and I hope this first baby step by the CFTC is a prelude to more great modernization to come. Jed - another good source of event market news and analysis - thinks it will happen only very slowly if at all. I wonder if we can get Obama’s staffers to put this in the ‘Yes We Can’ column!

Share This

Of course all of you would have seen that Mr. Bloomberg’s blind trust bought out their minority partner Merrill Lynch’s stake in Bloomberg LP, putting a $25bn valuation on the company.

I don’t know why but I keep getting this image of him calling up the trustees, steam coming out of his ears, screaming: “You paid what!?!?!!?”

Actually, given that he already owns the rest, putting in a high print wouldn’t in itself be such a bad thing, especially if one day he decides to sell the whole thing (which now becomes a much more viable and simple option.) I would be very surprised if his trustees don’t get a few incoming exploratory calls on a quarterly basis from now on.

And who else noticed that Merrill’s market cap this week is hovering around $25bn. Love the symmetry.

Anyhow, Mr. Bloomberg was twenty years ahead of his time. He knew… One word: data.

Share This

Today Silicon Alley Insider reports that Monitor110 has closed down:

The company had raised $20 million, including an $11 million round in 2006. Last month, we reported that the company had cut a third of its staff and was trying to sell itself to Reuters. Carley subsequently told The Deal that he was looking at several options: “So while we have been looking for investment and distribution, we are open (given the right terms) to an outright sale of the company as well, and several parties have expressed that kind of interest.”

From the start, back in September 2006, when they burst on to the scene with much fanfare, while I wholeheartedly agreed with the concept (of helping traders vastly broaden their information horizons by tapping into the exponentially growing alternative sources emerging on the web,) I was politely sceptical as to whether or not Monitor110 had the right approach. To be clear, beyond what was available on their website, I didn’t know much about their technical approach or even get to see what their product looked like. So that’s not what put me off. Rather, what made me uneasy was that they seemed to be taking a very traditional Wall Street approach - business model, budgeting ($20mn !!!???), even look & feel - to what for me was clearly a non-traditional proposition. It may be cliched but successful solutions in this space will have much more of a Web2.0 feel about them. (I know this is oversimplifying.) One company that I think may be on the right track for example is Skygrid. But there are many others. And given the cutting-edge nature of this space, even good ideas well executed, with really smart people like Roger might not succeed. At least not on the first try.

I guess the point is that opportunity abounds in this space and I would not be put off by Monitor110’s demise. I would however take away the lesson that selling information services using the traditional model (a la Thompson Reuters) is very hard unless you are the incumbent or you have a data-set that is immediately and obviously unique and valuable. Start-up companies in the emerging unstructured information/AI space have neither and so need to take a more creative approach to their business model and a more cautious approach to their burn-rate. Artificial intelligence, semantic search, natural language processing, trust(reputation)-based filtering, etc. etc. all will continue to grow in importance and relevance to all the various players in the financial services industry (and for that matter any industry where finding, organizing and synthesizing information is core to value creation.) Indeed this is very much the context for my interest in Powerset for example.

So I hope other budding entrepreneurs and technologists looking at this space will not be put off by this. And I hope to have invested in one or two of them by this time next year!

Update:

If you haven’t seen it already, please read Roger’s excellent post-mortem analysis of Monitor110. There are a number of lessons that are universal (to start-up ventures) - two key factors being money (yes, you can have too much) and leadership (clarity clarity clarity)… to give you a taste, here are his “Seven Deadly Sins” (for a start-up):

1. The lack of a single, “the buck stops here” leader until too late in the game
2. No separation between the technology organization and the product organization
3. Too much PR, too early
4. Too much money
5. Not close enough to the customer
6. Slow to adapt to market reality
7. Disagreement on strategy both within the Company and with the Board

Share This

It has come to my attention that in at least one large European bank, access to The Park Paradigm is blocked. I wasn’t sure whether to laugh or cry. After the initial 5 seconds of paranoia, it dawned on me that (despite my ego wishing it was otherwise) this was most likely due to my blog running foul of some generic web-content filtering software that the bank in question is running. Although my direct experience of such things is now a couple years old, these filters were pretty dumb / blunt and needed to be over-ridden continuously.

As a (somewhat geeky) MD, I (a) knew of this problem and (b) wouldn’t give a second thought to firing off a quick email to IT security to get whatever website I needed to see ‘unblocked’. (And no this did not include dodgy non-work related sites…) The problem is that the vast majority of (non-IT) employees (a) don’t know that the filters are known to be blunt/fallible and exception requests are perfectly reasonably, and (b) if they do know, are put off by overly-complex (ie more than 60sec) form filling and/or time-lags for unblocking. As a result, it is not surprising that most bank employees when faced with a (I might add usually very scary) message stating “ACCESS DENIED. THIS WEBSITE MAY CONTAIN INNAPPROPRIATE MATERIAL”, fail to pursue the issue further.

Why does this matter? It means that they can’t access information and opinion that is outside the mainstream ‘channels’. It means that serendipity is unlikely to pay them a visit. It means that they are at risk of being flatlanders in a 3-dimensional world. It means that they are cut-off from a rich stream of ideas, data and opinions. This is pure conjecture, but I suspect that the probability of The Park Paradigm (or any other blog) being blocked at a hedge fund is much much lower than the probability of it being bocked in a big bank… Just saying. Draw your own conclusions…

“All of this because they can’t read your blog???” (I hear you groaning.) No, not my blog. All blogs. All non-traditional infomedia? It would be nice (for my ego) to think in this instance that I had been singled out, but sadly I doubt that is the case; I’m sure this site has just been generically lumped into some undesirable category or another, probably algorithmically. (Love the irony.)

So in the interests of some market research, please let me know if access to The Park Paradigm is blocked where you work (no not oxymoronic, assuming you read this at home) or where you used to work, and if you know why that is/was. And thanks for reading, although I’m sure you’ll enjoy it even more now that you know you are reading ‘banned’ material! (Getting that meme around will do wonders I’m sure for site traffic!)

Share This