Thanks to my buddy Alex Iskold at Adaptive Blue for my new t-shirt.

$DO || ! $DO ; try

try: command not found

That describes my marathon and life philosophy perfectly.

It’s summer time and I’ve once again been powering through a bunch of books.  Amy and I are heading to our place in Homer, Alaska tomorrow where I’ll likely continue my pace of at least a book a day.  Look for regularly updates and quick reviews here.  In the meantime, here’s the latest set from the last week.

The Turnaround Kid: What I Learned Rescuing America’s Most Troubled Companies: This is the autobiography of Steve Miller, a well known turnaround executive.  He started his career at GM and progressed to be part of Lee Iacocca’s turnaround team at Chrysler (he was the CFO).  After Chrysler, he has been involved in a number of turnarounds including Federal-Mogul, Morrisson-Knudson, Bethlehem Steel, Waste Management, and Delphi.  Miller is a guy that’s not afraid of a Chapter 11 filing and appears to have skin as thick as the steel that Bethlehem Steel produced.  Good business history, especially if you enjoy reading about difficult situations.

Marathon: The Ultimate Training Guide: This is an update of Hal Higdon’s classic.  I picked it up at the Grandma’s Marathon Expo and wolfed it down.  I got a few new ideas from it – if you are a marathoner – especially a beginning, or aspiring, one – it’s definitely worth reading.

In Defense of Food: An Eater’s Manifesto: I read this one on a trip last week to Raleigh Durham (started on the flight out; finished on the flight back).  As I ate my Balance Bar on the plane, I realized that everything that Michael Pollan was saying rang gigantic bells in my head.  The first half of the book describes the devolution of "food" from "food" to "nutrients" and has a scathing analysis of how the food industry and our government have completely screwed the American diet.  The second half of the book tells you what you can do about it.  Eat food.  Not too much.  Mostly plants.  That’s what I’m going to do for all of July – let’s see what happens when I combine that strategy with > 40 miles / week of running.

My Life on the Run: The Wit, Wisdom, and Insights of a Road Racing Icon: A few weeks ago Dan Gannon at Newmerix told me to start running Yasso 800’s to get my marathon times down.  At Grandma’s as I was wandering around the Expo (apparently buying books) I ran into Bart Yasso.  I mumbled in a semi-star struck way something about Yasso 800’s and bought his book.  I also bought a copy for Dan that he should have by now.  Yasso is a fucking running maniac / hero / star.  I have a new running idol.  The book is a great story for anyone that likes to run.

Masters Running: A Guide to Running and Staying Fit After 40: Yeah – I picked this up at the Grandma’s Expo also.  I’m 42 so the subtitle (something about running over the age of 40) appealed to me.  This book was a no-op – Higdon seems to have slapped this one together and didn’t really do anything substantive.  I got nothing from it.  Oh well – two out of three ain’t bad.

Fear & Greed: After all the running books, I needed some mental floss.  I can’t remember when / why I bought this book (or maybe someone sent it to me) but it had reached the top of the infinite pile of unread books.  I got to page 100 before I quit – it should have been called "Dumb & Stupid" with a subtitle of "Poorly Written Mental Floss".

Today’s Wall Street Journal has an article titled Tech Giants Join Together To Head Off Patent Suits.  It describes the efforts of a new organization named Allied Security Trust who’s goal is to "buy up key intellectual property before it falls into the hands of parties that could use it against them."  The named companies that have joined Allied Security Trust are Verizon, Google, Cisco, Telefon, Ericsson, and HP.

Allied Security Trust appears to be an example of the emerging construct of a "patent commons".  There are already a number of existing patent commons such as the Patent Commons Project aimed at protecting open source software.

There are two types of patent commons – offensive and defensive.  So far the folks that have been putting together patent commons for potentially offensive purposes have kept a very low profile and often have denied publicly that they will use their patent portfolio’s offensively.  However, I’ve heard directly from a number of people involved in some of these organizations that the long term goal is to aggressively license the patent commons once it is large enough.

I’m not a fan of the offensive patent commons.  However, I am a huge fan of the defensive patent commons. As I’ve written in the past, I strongly believe that the entire ecosystem around software patents is completely fubared.  The courts – especially in the US – are poorly equipped to deal with the software patent issues and the USPTO has demonstrated that it’s either not up to the task or unable structurally to change the way things work.  Our government – especially Congress – has demonstrated that it lacks the political will to address the situation.  And, while the Supreme Court has finally waded in with a few key decisions, it still has an extremely long way to go if it really wants to address the underlying issues.

Having studied this for the last few years, it’s my strong belief that the software / computer industry has to solve the problem.  Recently, I’ve been advocating the idea of defensive patent commons – ones that are organized by clusters of large companies – but open to all that are interested.  There are lots of challenges in organizing this, including determining who can join, what the price of admission is, and what the ongoing costs of supporting the organization are, but these are solvable issues if the broad construct is adopted.

I’ll reserve judgement on the Allied Security Trust until I learn more about it, but it seems like it’s a step in the right direction if the brief description in the WSJ is accurate.  A key indicator to me will be whether organizations like Allied Security Trust vow to only use their patents defensively.  The absence of this will always raise suspicion that it’s a veiled effort to create a mega-patent-troll or that unintended consequences might result from future activity. 

Ultimately, a defensive patent commons is analogous to the idea of patent insurance, which is also starting to emerge.  I think a defensive patent commons is ultimately going to be a more powerful mechanism if organized correctly, but the analogy is a useful one to understand better how a defensive patent commons might operate.

Month 1 of this year’s TechStars program is over.  Andrew Hyde captures the sights and the people of TechStars in a fun three minute video.

While you are at it, if you were a Lego fanatic take a ride down Lego Memory Lane.

Finally, in the continued emergence of the Kindle as a serious thing, Princeton University is now publishing Kindle textbooks.  No more giant backpacks full of books and lecture notes.

I feel like bitching about FAS 157 today.  I was at the annual meeting for one of our LPs yesterday and there was a long discussion about the impact of FAS 157 on both the buyout and the venture capital business.  Once again everyone was in violent agreement that this was yet another accounting rule – promulgated by the accounting industry – to generate more fees for the accounting industry while burdening companies, especially entrepreneurial ones, with additional regulations that have no real impact on reality.

If you aren’t familiar with FAS 157, it’s officially known as the "fair value measurement" rule and unofficially known by some as the "mark to market" provision.  Before you ask, "wait – isn’t mark to market the thing that got Enron in trouble and started this whole wave of SOX regulatory stuff", I’ll simply answer "yes" and let you ponder that.

Like our dear friend 409A, FAS 157 has come out of the latest efforts by accountants to create more transparency in financial reporting.  Like 409A, I’m sure these are well intentioned ideas although my cynical side envisions an accountant in a sub-basement of a building NY with green eyeshades and a little green desk lamp sitting around dreaming up ways to torture entrepreneurs while accomplishing his accounting bosses goal of generating more work (and fees) for themselves.  Oops – sorry – back to the main story.

Since the beginning of the VC business, valuation methodologies were generally consistent and straightforward.  They were usually some variation of:

1. Value your investments at your cost.
2. If a financing happens at an increased valuation and is led by a new investor, write your investment up to the new price per share.
3. If a financing happens at a decreased valuation regardless of whether or not there is a new investor, write your investment down to the new price per share.
4. If bad things are happening, you can take a discretionary write down based on your best judgement.
5. If good things are happening, you should not take a discretionary write up.  Only write things up in case #2.
6. If the company is public, use the publicly traded price but discount it due to illiquidity (usually 25%).

Pretty straightforward.  Very conservative.  This almost always understates the value of a VC portfolio, which presumably is a good thing since it’s illiquid and the only fund performance information that should ultimately matter to a VC (and their LPs) should be the one linked to cash flows (draw downs from their LPs and distributions to their LPs.)

FAS 157 blows this up completely.  Under FAS 157, VC’s now have to mark all of their portfolio company values to market (er – "fair value measurement") qualify for GAAP (which is a requirement for every VC firm – our investors require we have audited GAAP financial statements.)

It gets worse.  Our LPs (who typically invest in multiple VC funds – in some case many multiples) also have to adopt FAS 157.  So they also have to mark their portfolios to market.  It used to be the case that they could simply rely on the VC valuations.  To comply with FAS 157, they theoretically have to look at all of the underlying assets in the VC portfolios and make an independent judgement on the values of those underlying assets.

Some VCs (and LPs) are just starting to implement FAS 157.  Ironically, some accounting firms wanted 2007 as the start year; others seems to want 2008 as the start year.  Many VC firms are viewing this as an annual exercise even though they report to their LPs quarterly.  Some VC firms (like us) have already built it into our quarterly reporting cycle (our accountants told us we needed to comply in 2007).  Yeah – it’s all over the map. 

But that’s not the real problem.  I’ll get to the real problem(s) in my next post on our new friend, FAS 157.

I heard a "superb" cynical statement today.  I have no idea if it is factually correct, have no data (empirical or anecdotal) to support it, but it is such a great potential example of unintended consequences that I thought it was worth putting out there.

The statement was "While hybrid vehicles make us feel better, they actually do more harm than good because they result in more driving." 

The follow up thought is that for hybrid cars to really work (at today’s efficiency levels), people still need to modify their behavior and drive less (e.g. relying on public transportation or carpooling.)  However, once you’ve bought a hybrid, you suddenly feel like you are doing your part and subsequently drive more!  This additional driving adds up across the system and increases total system fuel (and other resource) consumption.

Ponder that the next time you get in your hybrid.

I’ve got three great posts for you this morning to interrupt the long essays that my marathon addled brain has been pumping out.

First Mover vs Fast Follower – Who wins? Don Dodge reprints a story he wrote three years ago about whether being first wins or being a fast follower wins.  He adds some useful nuances for any entrepreneur (or VC) that is obsessed with the "we have to be first to market to win", "#1 takes most of the market, #2 takes the rest, and #3 to #n don’t matter", and other such cliches.

The Downturn Is a Rounding Error: Since I’m not a macro guy, I didn’t notice we were having an economic downtown.  I guess I noticed that the price of gas was higher, but as Amy is fond of saying, "don’t bother me about it until a gallon of gas costs more than a gallon of milk."  Oops – getting close (I think Amy meant "organic milk.")  Plus, our government is telling us that there is no "core inflation" (where "core inflation" doesn’t include fuel or food.)  Tom Peters helps us understand what he thinks really matters.

You gotta start somewhere: David Cohen posts an email to his business partner David Brown dated 2/08/06 that was the origin of TechStars.  I checked my calendar and the first time I met David was at 4pm on 6/06/06.  I find history to be fascinating.

There is a great Bill Gates email from January 2003 titled Windows Usability Systematic degradation flame that is making the rounds on the web.  I love a good rant and even though this one is dated, Gates says in great detail what a large number of Windows users have summarized over the years as "shit – why won’t my damn computer do <blah>."

I’m a heavy computer user and have some variation of this thought on a daily basis.  One of my special talents is finding bugs and breaking things – just ask any of the companies that I’ve invested in who their most "useful" (where useful is a euphemism for "annoying") alpha tester is.  Think of me as helping improve software quality on planet earth.

Now – software quality is a complicated thing to measure.  Not all bugs are overt ones.  Let me give you an example of a particular pernicious Microsoft one that no one seems to ever prioritize to fix (no – I’m not going to pick on Windows Calculator again, although I could.)

I use a Windows Mobile-based Dash.  I expect I’ll try the iPhone again on July 11th now that it actually syncs with Exchange, but until then I’m tethered to my Dash.  I love the form factor and have trained my muscle memory to deal with having to press multiple keys to do things that I should be able to do with one keystroke – mostly due to design flaws in Windows Mobile.  I’ve used some variant of Windows Mobile for the past eighteen months (I think starting with Windows Mobile 5; I’m currently using Windows Mobile 6.1.)  If I were Mr. Windows Mobile UI Designer, I’d change a bunch of things, but it works well for what I need it for, which is primarily email, calendar, tasks, contacts, phone calls, IM, and twitter.  And sync.  My data needs to transparently sync with my Exchange server without me having to do anything.  Oh – and my BlueAnt bluetooth headset.  And I’m sure there are a few other things.

Here’s the problem – the sort algorithm on contact lookup is terrible.  I have a large contact list (5048 as of today).  Searching for "Stan Feld" should be immediate since that’s how it’s listed in the address book.  Progressively typing S then T then A then N should bring up "Stan Feld" immediately.  Typing "Stan Feld" into the To: field on the email program should be immediate.

Nope.  The delay is anywhere from 10 to 30 seconds.  At some point I decided to try to figure out the underlying algorithm.  My guess is that it’s doing a full table scan of first_name + last_name for each letter typed.  There doesn’t appear to be an index – either fixed or dynamic – and as a result the time for most searches is approximately linear based on the number of letters typed.

Now – if this problem was in Windows Mobile 5 but fixed in an update, I’d let it slide.  I’ve done at least three (I think four) major updates of the software since I’ve had my Dash.  There has been virtually no improvement in this feature.

Whenever someone asks me about my Dash / Windows Mobile, I tell them that I generally like it except for this one thing.  I then describe the thing. Occasionally I’ll show the thing.  And then I feel stupid that I’m still using this phone since I spend so much time looking up contacts or completing names in email fields.

Having written my share of sort algorithms, I expect this is less than 50 lines of code regardless of which language it is written in.  It is sophomore in college computer science type stuff, not PhD stuff.  Optimizing this to improve performance by 10x – 100x is maybe a day or two of a single programmer’s time.

This is not a Microsoft-specific problem.  I could have picked on anyone.  I’ve got a long list of Apple issues like this, plenty of Google issues including some remarkably silly ones, and – well – don’t get me started on the Yahoo ones.  All of the companies I invest in have problems like this.  It’s just an endemic part of software.  And one that users shouldn’t have to put up with.

It’s also not limited to software.  When filling up my car recently, the gas pump clicked off at $75.  I’d noticed this happening periodically, but now it was happening every time.  Gas is now over $4 / gallon.  Each of my cars has a 20+ gallon gas tank.  $75 doesn’t fill up the tank in any of them (and in at least one it doesn’t come close.)  There was a point in time when I’m sure someone decided that a way to mitigate credit card fraud at the gas pump was to limit the amount of each transaction to $75.  Now all that does is inconvenience a large number of customers with a mysterious cut off point.

If you develop products (especially software) for a living, never forget that people remember the little things.

One of this year’s TechStar’s companies – Devver – is building web-service tools for Ruby developers. They are taking the tools that Rudy developers already use and putting them into the cloud, adding benefits like faster execution, easy setup and configuration, and change management.

Devver is currently looking for feedback from Rubyists on the types of tools that would be most useful. You can help them out by filling out their survey.

They’re also interested in talking to Ruby teams in the Denver/Boulder area. If you’re willing to talk to them and interested in getting an early look at what they are working on, send them email to set up a meeting.  The Devver guys are also going to be in the bay area on July 16th so if you are a bay area Ruby developer, they are interested in meeting you.

I haven’t shopped at J.C. Penney – well – ever.  I imagine my mom bought me some clothes from there since I grew up in Dallas (J.C. Penney’s headquarters).  If you’ve missed it, the best J.C. Penney Ad ever is making the rounds on the Internet.

I heard about it this morning on my drive in on NPR (right before, or right after something about Dow Chemical raising all prices 25% this month due to inflation).  I couldn’t stop laughing when I heard that "executives at J.C. Penney are furious about the ad" and are trying to get it removed from the Internet.  Good luck with that.  Oh – by the way – great ad – especially in a family values election year.

I’ve been keeping my eyes out for one of these.  I hope my friends at Microsoft have been also.  Apparently the New South Wales Department of Education and Training (that would be Australia) just dumped Microsoft Outlook/Exchange in favor of Gmail.

Before you say "ho hum – it’s only Australia" or "it’s not enterprise – it’s only academia", let’s look at the numbers.

• 1.3m seats
• Previous cost to implement Outlook/Exchange: $33m ($AU) over three years
• New cost to implement Gmail: $9m ($AU) over three years
• Outlook/Exchange storage/mailbox: 35MB
• Gmail storage/mailbox: 6GB
• Weekly emails sent: over 300k

That’s a non-trivial install.  (via TechCrunch)

Here’s an interesting stat.  The Rocky Mountain News states that Boulder ranks No. 2 among ‘cybercities’ with 230 high-tech works per 1,000.  This is according to a study by the American Electronics Association.

The top five are:

• San Jose/Silicon Valley: 286
• Boulder: 230
• Huntsville, AL: 188
• Durham, NC: 156
• Washington: 132

It’s a strange list, especially since San Jose/Silicon Valley isn’t actually a city!  Just more proof that you can come up with a list for pretty much any measurement you want.  I wonder if this counts all the folks on laptops hanging out all day at Trident.

Having been an entrepreneur and VC for over 20 years, I’ve now seen plenty of economic cycles – both at a macro level and specifically in the areas I invest in.  As a result, I smiled when I received three conflicting pieces of information today from two people I know and like and one person that I don’t know but know is respected.

Matt McCall at DFJ Portage calls the current VC cycle "dead" as of Q2 2008 in Rough Ride Ahead: Buckle Up & Get Your Money Now (if you can).  He says it with conviction, although he does acknowledge that he hopes he is Peter the Wolf.

Fred Wilson at Union Square Ventures asks (and answers) the question Am I Bored With “Web 2.0”?  Fred is heading off to Europe for a month with his family "to see how the web is changing the world and I want to see how entrepreneurs who are operating with a different worldview are thinking about the power and potential of the web. I could do the same thing in Asia or some other part of the world, but Europe is particularly easy place to do this because of the range of cultures and countries within a couple hours plane ride from each other."

Merrill Lynch’s chief strategist Richard Bernstein in "Some thoughts on alternative investments (6/23/08)" says "The growth in alternative investments seems linked to the growth of the credit crisis" but then goes on to say "There may be two areas of alternative investments that seem relatively attractive in the current financial environment.  In both cases, these are areas that might benefit from the tightening of global credit.  The first is early-stage venture capital.  … If return-on-investment does indeed tend to be higher when capital is scarce, the significant tightening of traditional credit funding to smaller companies seems to make early-stage venture capital strategies more attractive."

While Bernstein’s definition of "early stage venture capital" is mostly likely different than mine (given my interpretation of his assertion), knowing how sound bites work, the three tag lines are "VC is dead", "I’m bored of Web 2.0 and need more meaning in my investments", and "early-stage VC is attractive again."

Like Fred, I also am about to embark on a month outside of my normal context.  Amy and I are about to head to our house in Homer, Alaska for the month of July.  I’m looking forward to going to a place where the Supreme Court rules Homer voter initiative invalid and thinking big (but not big box) thoughts.

I spent the weekend in Duluth, Minnesota with Amy knocking off Marathon #11 in my quest to run a marathon in all 50 states.  #11 was Grandma’s Marathon, consistently one of the best regarded marathons in the US.

After a couple of frustrating marathons, including a steadily escalating personal worst, I put some effort into training for Grandma’s.  My goal was modest – break 5 hours.  Since my PR is currently 4:05, this felt achievable. 

I started off strong.  Too strong.  Rule #1 of the marathon is to hold plenty back at the beginning so you have it left at the end.  I went through the halfway point (13.1m) at 2:20 which put me on track for a sub 4:45.  I lost it a few miles later – tightening up at mile 15.  I slowed it down a notch and thought I still had a shot at sub 5:00.  At mile 19 I went down another notch and was now slogging through 13 minute miles.  At this point I knew I wouldn’t break 5:00 and my goal shifted from "break 5 hours" to "finish this fucking thing."  I did in 5:09:21.

While I didn’t beat my time goal, I’m pleased with the result.  Finishing is always my key goal (I’ve finished every marathon I’ve entered – no DNF’s yet.)  While 5:00 would have been nice, the course was tougher than advertised (it’s known as a flat course; I’d describe it is "a mild undulating hill for most of 26 miles.")  It was also on the warm side – this eventually took its toll on me. 

I saw Amy cheering me on just as I crossed the finish line.  I was completely used up so I was a little confused about where to find her since they shunted the marathoner finishers off in a direction away from the crowd.  I stumbled around for a few minutes until I luckily ran into her.  I was claustrophobic and a little freaked out feeling so I missed the finisher food and water as I rapidly (as rapidly as I could manage) headed out away from the crowd.  We’d covered about 200 yards when my left calf cramped up and I went down hard on the ground.  Amy was great – worried – but patient with me as she worked out the knots.  Someone passing by gave me a Coke which helped a little; we were in front of a Subway so Amy went in and got some more Coke and some potato chips while I laid on my face on the sidewalk.  While I was lying there, the other calf started cramping, resulting in me thrashing around like a hooked fish as people wandered by.  A few stopped to help, which was nice, although fortunately none of them knew how to perform a leg amputation which was what I imagine I was crying out for.

We eventually made it back to the hotel (a 10 minute walk took us about an hour) after which I slept the rest of the afternoon.  Mexican food for dinner, a very chilled out day today (e.g. lots more napping), and Indian food for dinner tonight has me mostly back to normal, albeit with two very sore calves.  Once again, Sherpa Amy was phenomenal to have along.

My big (yet obvious) lesson is that I just haven’t been doing enough long runs.  I consistently do 14 to 16 mile training runs, but I’m not doing enough 20+ training runs.  My next marathon is the Mesa Falls Marathon in Ashton, Idaho on August 23rd – I plan to do at least three runs of 20+ between now and then.  I’m ready to set my goal for Ashton, ID at 4:45 – if it has been a little cooler, I’d held back a little more in the first half, and had done a couple of 20 mile runs, I’m confident I would have been under 5 hours yesterday.

We’ve had fun in Duluth – it’s a cute little town at the very west end of Lake Superior.  Grandma’s Marathon is apparently the biggest event of the year in Duluth; by Sunday evening there was nothing going on in downtown on Superior Street.  We did – however – manage to find a good Indian restaurant.

Every time I see a cool Roomba-related thing (including the Roomba itself) I remember torturing Colin Angle when I was his pledge trainer.  Too bad I didn’t have the foresight to invest in iRobot early on (oh well).  Today, Colin sent around a new song by Mr. Pitiful titled "Brand New Friend" – the Roomba prominently stars in it.

I also received a note from my brother Daniel that the new StillSecure web site is up and he stars in it.  Hilarious and well done.  Yes – it was inspired by the awesome Slingbox web site.