Where is the High Tech?

In response to Paul Graham's essay: How to Be Silicon Valley.

Paul Graham basically says it takes two things to make an area Silicon Valley, money, and nerds. He says money goes where good weather and cool people live, pointing to New York, Boston, and Silicon Valley. And geeks go where top comp sci schools are, again pointing to Silicon Valley and Boston. Plus geeks like to have good public transit, a great social life, and friendly people.

His whole premise is based around the world of Paul Graham. Paul Graham likes cities. Paul Graham lives in Boston. Paul Graham likes public transportation. He then kind of draws all his conclusions around that world. One of the first problems with his premise is that Boston is not a Silicon Valley. It seems to have a decent amount of tech jobs according to Monster.com, but I don't know if I can think of a single big start up or tech company from Boston.

He notices a couple of big holes in his theory like LA and NYC, but quickly writes those off as "too mainstream". I don't know if i've ever heard a nerd reject a job because a city is too mainstream, and many nerds I know wish NYC was a better place for startups.

He seems to miss the obvious fact that Seattle is a tech center, not because of U of Washington or Seattle itself, but because of Microsoft. If Microsoft had stayed in Albequerque, I get the feeling New Mexico would be more of a tech hub. Paul Graham, and Joel Spolsky both assume most programmers want to live in a big city. That may be true with kids straight out of college, but what about older people or more introverted people? Can there be a startup in say, Burlington, VT or Madison, WI?

It seems to me the reason most tech hubs are where they are because of a large company's presence there. Microsoft goes to Seattle, gets big, and then groups of the original members form their own companies, that have their own sucess, who's members then create their own companies. AOL goes to northern Virginia, and original team members go on to form thier own Northern VA companies.

But does it matter where you start your business? In these days, where person-to-person contact is less necessary, I don't think so. I think the factors that do matter are time zone, and cost of living. These two things are the only factors that really effect a small IT business's bottom line. If you have a business based in Honolulu, you're recruiting efforts may bring in some great people, but the overhead to your business and the weird hours your support folks have to work may effect how well you do. Some of the other things Paul mentions are favorable tax codes. This would make Las Vegas or Delaware a prime place for IT startups, but that doesn't appear to be the case. In fact Massachusetts, California and Washington have some of the least friendly tax codes for small business.

Location may matter a little more once you start trying to recruit people. But then, it will matter what kind of people you are trying to recruit. Joel Spolsky seems to want only straight out of college programmers. Perhaps these are best suited to be trained in his business practices, are more likely to put in longer hours etc.. Young people generally like big cities and don't mind renting a 1-bedroom with 3 other people. But will those programmers stick around when they are 30? Or will they form their own companies in Connecticut? It would be interesting to me to see a company market their ruralness to lure in developers.

.Crash 2.0?

Dharmesh Shah has an article up today about Web 2.0 and it's scary similarities to the first .com bubble. What I am wondering is are we about the repeat the "cleansing" process of the first .com crash?

I am seeing a few of the signs... the Nasdaq is flirting with going under 2000 today, Amazon.com had a single day drop of 22% today after reporting earnings, repeating Yahoo's similar 20+% single day drop a few weeks ago, and Microsoft's wipe of 30 billion off of it's market cap in a single day a few months ago. Many tech stocks are around their 52 week low. Yahoo dropped on things as silly as their new search engine being delayed a quarter, as if Yahoo releasing a new search engine will have any realistic impact on earnings in the short term.

Some people argue that most of the 2.0 businesses won't go under this time because costs are so low, and at least they are not going public. That's true in theory, but people forget what negative sentiment does to the idea of small business. I remember after the last crash all I wanted was a steady job, and of course now I'm back on the Startup bandwagon. What do you think? Temporary lull or big time crash? If you are in the lull camp, buy YHOO stock now, its a steal!

I really hate blogger. Now my rss feed seems randomly blank. Any other free blogging services out there? MSN Spaces is decent, at least from a programming point of view, but has it's own problems.

Well I'd been going back and forth on this in my head, but I've decided to release my latest pet project to at least my blog viewing audience. This is completely non affiliated with SearTech, and is something i've been working on in my spare spare time for the past month or so.

For the longest time people have been bugging me to get a copy of my wife's budget. She is the Queen of Excel, and has made a kick ass budget that tells where every dollar we spend goes, and can even figure out if the escrow on our mortgage is off by a single penny. It tracks Net Worth, freedom funds and all sorts of other complicated gobilty gook (sp?). Anyways, it's too complicated for most people to use, but EVERYONE I know at least WANTS to do a budget, so I figured i'd put on together and make it web accessable. The result is BudgetSimple (http://www.BudgetSimple.com).

I still consider it beta and forsee lots of things changing on it over time, but since I got to this point i've been kind of stalled and figured more feedback from strangers might be helpful. Hopefully some of you can use it. I couldn't believe it when BenjiSmith posted his second idea as Budget Buddy, as I had just finished the first rough version of this at the time, and actually had BudgetBuddy as a working name (Domain is taken)! Hopefully that's not what he'll choose as his business, because I promise I didn't copy.

Also I should mention that I am offering this completely free. Forever. For all Premium, Plus, Super Duper versions. I'm really too busy with all my other projects to try marketing this, and besides there are already plenty of pay budgets out there. That was the main problem I saw. Either a budget cost money and was slick (too slick), or it was free and sucked. I hoped to make a decent budget and offer it for free, because I personally believe people in America need more savings, less bling, and much less debt. It's in our national interest. So as long as this isn't drawing crazy traffic I plan on keeping it free. The only forseeable revenue I may add would be targeted TRUSTWORTHY ads, kind of like The Deck does. I wouldn't want Google Ads, because they serve up all manor of sketchy stuff, and I'd feel terrible if someone used my program to try and get out of debt but winded up with some shady debt consolidation company...

Anyways, I'd love your feedback, the final thing I should point out is the primary goal here is simplicity. It will not link to your bank account. It will not do your taxes for you. It purposely rounds off to the nearest dollar. My idea of internationalization was not using dollar signs anywhere. Simple simple simple was my goal here. It WILL track where you spend your money. It will also help you track your debt progress, your savings, your goals, and even has some neat calculators for figuring out debt strategies. There will be more coming such as vacation budgets, small business budgets etc, but I hope to always keep the basic program simple. Hit me up at ryohki98ATyahooDOTcom if you have any suggestions.

Two Approaches

It's been interesting to me to read all the hype behind Google's products lately. Everything that comes out is a XXX-killer. mISV's freak out, Microsoft freaks out, "Google will destroy our business with its free product!". The only problem? No one uses these products. No one knows about these products. Ask ten non-techy people if they've used Google spreadsheets and see if they don't look at you as if lobsters are crawling out of your ears. Do you know how few people even use Google maps? In my opinion, this is probably the best product Google has ever made, and yet people still use MapQuest (What's taking them so long to switch to AJAX btw? It doesn't seem that difficult...). Gmail is growing slowly, but still is way way behind in use compared to Yahoo, MSN, Juno and AOL. Google finance is not even a glimmer in the rear view of Yahoo finance, and Google news is also unknown outside of the tech community. But a large majority of the searches on the Internet are performed with Google, why arn't these products taking off? Clearly the answer is advertising. Google refuses to plug their products on their front page like Yahoo does.

One of the best examples of this is Google Answers. Two years ago or so Google launched Google Answers. The premise was that you could bid for a researcher (selected by Google) to answer a question for you. It could be virtually anything. If the person gave an acceptable answer, you paid them, and Google got a cut. The only problem is, after the much hyped launch (in the tech media), even Geeks forget about this service. Google answers is almost as obscure as any other random site on the internet. Just recently, however, Yahoo! launched Yahoo Answers. The difference? Well, anyone can answer the question, and it costs nothing to users. But the real difference is that Yahoo promoted this service big time. They even have guests like Bono and Stephen Hawking asking questions. Overnight, the site is already filled with more helpful answers then Google Answers has had in two years. From mundane things like "How do I make my Hydrangeas grow blue" to "Where should i live in Chicago" there is wealth of random people answering these questions. The biggest difference is that Google has some paid person that is always going to provide an intelligent answer, while Yahoo lets any of the unwashed masses throw their two cents in. But in the end, the question asker can pick the best answer, and that will remain at the top for future searches.

Another great example is Google Video. It could have been the next great thing, but again, YouTube trumped it by allowing a more open system (Google has to pre-screen every one manually), and by marketing, YouTube now far outstrips the popularity of Google Video.

My point? My point is that once again, marketing is everything. Google has created for itself quite a few catch-22s. People like Google because it's simple, but the simplicity keeps it from leveraging its traffic. So mISV's really should not fear when Google comes out with it's next product, because outside of the tech community, Google is just search. Once the initial hype fades away, very few of their ideas seem to survive.

Old School Typing Speed Test

http://labs.jphantom.com/wpm/

I don't think i'd done one of these since I applied at a temp agency in college. I got 107.94 with two mistakes on my first try, how about you?

Don't Quit Your Day Job.

So often this question comes up on the BusinessOfSoftware discussion boards. "Should I quit my day job? I have X great product, but I'm having trouble getting it out because I work X amount of hours a week. I'm pretty sure if I can devote my full day to it, i'll get it to launch soon."

Well... first lets go over the advantages of a mISV over a traditional business.

1) Cost to launch business extremely low. Varies from $5-2000 depending on how incorporated, insured, server setup you decide to go etc...

2) No physical presence necessary

3) No physical marketing necessary

4) No salarys to pay

5) Risk extremely low, if you make $10 or $10,000 you still have your day job. Growth can occur slowly.

All of those basically relate to number one. Now if you quit your job, how does this change the MicroISV equation?

1) The cost to launch is now the money you make from your mISV minus the amount of money you would have made at your job. So even if your mISV is a huge sucess, if it takes 3 months to develop, and you make $80k a year, you've lost $30k in salary to start your business. Just to get dollar one. You may also need to eat into savings to pay the bills, add that to the startup costs.

2 and 3 don't really change

4) You now need to pay your OWN salary before you pocket a single dime. Even if your signficant other/parents support you, you're still $80k in the hole from where you started.

5) Risk is now extremely high. 90%+ of businesses fail. Your idea for a Web based stop watch may not look like such a good business plan when your out of savings. You are now in a sink or swim situation, if your business isn't profitable in say 3 months, you may have to shut down. What if month 4 was where your business would have taken off? I can tell you that the 10% that do succeed usually don't do it by their 3rd month.

I also think the idea of being able to get more work done by quitting is largely a myth. If you don't have the dedication to put in an extra 40 hours a week for your mISV while your working a job, it's unlikely you'll be able to be more productive with the stress of the above added to the mix.

To me, the idea of a mISV has always been about low risk, low investment, with either the additional pocket change or the ability to work for yourself being the end goal. By quitting, you're no different then a traditional business. Given the above scenario, it could take basically $50k to make your first dollar. If you invested that in stocks, you have a much higher probability of making a profit then with your business. You could take a $50k loan to startup a traditional retail business and probably still have better odds of making a few bucks or breaking even.

Cut back in hours, take a vacation, find a job that requires less of you. But don't quit your job until your mISV can survive without it.

My Experiment with Google AdSense...

Well for the three of you reading my blog, you're probably familiar with my critizism of AdSense. After the owner of PlentyOfFish.com posted a picture of a check for two months revenue showing almost a million canadian dollars (which is almost on par with the US dollar now), I was more convinced then ever that it's the biggest Ponzi scam of the century. I am a firm believer in the risk or hard work = reward model. I've seen many many examples in my life where this is true. A safe investment returns a small reward, and a high risk investment returns a much larger reward. Whenever someone comes up to me with a "get rich quick scheme" it usually ends up in a bunch of people losing money. AdSense, in theory goes against this philosophy. With absolutely no risk, investment, or hard work on your part, the promise is that money will start rolling in. I was convinced there was an unseen risk here somewhere. Maybe all the fraud people are talking about... maybe Google goes belly up overnight? Well, this is how I tested that theory.

One weekend I showed my wife that million dollar check blog.

Phil - "Can you believe this nonsense? I don't know anyone that clicks these AdSense ads".

Wife - "What ads?"

Phil - "Those ads...that you see everywhere, like on the side of search results...and right there, in that forum you're reading"

Wife - "Oh, i never really noticed those were ads"

Phil - *Jaw dropped*

If my wife, who is much smarter then me, never realized these links were ads, surely a large proportion of the rest of the world may not either. Maybe all those clicks to AdSense are legitimate after all? I decided to put this theory to the test. As I have mentioned before, I've been running one MicroISV for over 10 years now, one of the highest ranked classified sites on the internet, Used Cars On-Line. Highest ranked, according to the search engines that is. At one time it was #1 on yahoo and google and almost every other search engine when you search for "used cars". It's dropped down, but as of the weekend I described above, it was on the front page of Google for that search, so it gets a lot of hits.

Currently, all of the site's money was coming from classified ads, and a few advertising deals. So it more then paid for it's expenses, but I wasn't retiring anytime soon. Since I was already making money from sellers (maybe 5% of our traffic), I started thinking maybe I am missing out on revenue from the buyers... the traffic pattern was basically that someone would come in, look for a specific car, and if they did not find it, leave. Whether they stayed or left, I wouldn't make any money from them. So I decided to stick some AdSense ads up for a week. I knew I wouldn't click them, so that ruled out one type of click-fraud. And I figured it would take at least a day or two if not more for competitors would realize the ads were there, so that would rule out the other type of click fraud. So that Sunday afternoon, I realized I could have a pure test of the reality of people clicking Google ads. I figured maybe I would make fifteen cents, a dollar on monday perhaps.

I put the ads up, and that evening checked my balance. $107 on a Sunday afternoon. I put in 3 minutes of work, spent $0, watched some World Cup, and suddenly I was on a pace to add $35k to my income. After all the hard work I'd been putting into my other ISV, it was almost frustrating that this money was sitting there all that time! I was laid off once for 2 months while i've had this site, I worked in a nightshift in an unairconditioned warehouse in the summer one year, when the site was getting TWICE as many hits as it does today. If AdSense was around then, I could have technically not worked at all. This is unreal. And the clicks seem to be legit! After three weeks of data, a very consistent 10-12% of my audience clicks the ads they see. The only odd thing about the whole scheme is that Google pays you a completely different amount for each click, so there is no realistic planning for the income. One day I got twice as many clicks, but made half as much money. It's wacky. The really astounding thing to me is that Google has got to me making 200% more then they are giving me. Just when one little ol' website like me signs up, they make enough to hire another Phd. How many others signed up that day?

I may give Yahoo ads a shot now to see if they pay more (I've heard they do). The only big negative i've seen so far, and I'm not sure if it's a coincidence or not is that I've now dropped back to the second page of Google. Certainly they couldn't be punishing me for using their service?

I'm not sure what the moral is here. On the one hand, it seems like an entirely new liberating way for people to make money for their content. I'm still convinced that there is no easy money, and something will happen to dry this up. If not, maybe one day in the future we'll all just be typing blogs like this during the day and clicking ads for products we want at night... If ads are appropriate for your site, and you havn't added any yet, give them a try.

PS - I can't believe the blogger spell check does not contain the words "Google" and "blog"?!!!