It's the debt, Stupid!

This week I got into a debate on Facebook (if you can call it that) with a friend-of-a-friend and I found myself trying to explain a few basic economic principles. Long story short, once the guy realized he was playing checkers, while I played chess, he shut up. I’m told he went on to post his own status saying, "I just love people that are under 25 and think they fully understand how the world works just because they've had a few college level economic classes..." All I can say is thanks for believing I'm under 25 and I hope you live in a great state like South Carolina where we have enough smart voters to cancel you out.

This got me thinking. Do some people really believe this government spending won't affect their pocket book? Do they think it must be good for them because they don't have to pay for it??

First, if you believe that, you're either stupid or ignorant. I still haven't found a cure for stupidity but we're all ignorant from time to time so I’ll try to help with an example of why excess government spending is bad for everyone.

President Obama's administration has doubled our annual deficit to over $2 TRILLION. This staggering figure represents nearly $7,000 for every man, woman and child in America. Once you figure only about a third actually pay taxes, this is over $20,000 PER TAXPAYER in excess what you already pay.

The government can't levy enough taxes in the short-term to cover this deficit without crippling our economy. Therefore, in addition to tax hikes, the Obama administration is flooding the market with record amounts of government debt (bonds). This is really not much different than you and I borrowing money, which brings me to my point.

When we borrow money an investor ultimately holds our debt. When we pay it back, he collects the principle along with interest. The interest rates we pay are driven by the investor’s appetite to hold our debt and the new government bonds will compete with our next loan for investors’ dollars. As the government over saturates the market, bond prices will fall which drives yield up. Let’s look at a simplified example of what this means.

Let’s assume the government issues a $100 one-year bond at 5% interest, but investors are only willing to pay $90 due to excess supply. When that bond matures the investor will still receive $105 (the $100 face value plus 5% interest). That’s a $15 return on a $90 investment. When the price fell, it drove the yield to 17% ($15/$90).

If an investor can buy government bonds at a yield of 17%, which they could in the early 80's, why would they ever buy our loans at 6%? To make our debt more attractive to investors the rate has to go up...way up!

This impacts all consumer debt from mortgages to credit cards. Excess government spending will drive up our cost to borrow money, which for most Americans represents their largest household expense.

For those smart enough to connect the dots, the next place this leads is inflation. That loaf of bread you're paying $1.99 for today might cost $4.00 in a few years. A $35,000 car becomes $70,000. Again, we saw inflation like this in the early 80s and given the unprecedented magnitude of current government spending I believe our next round of inflation could be even worse.

The national debt will impact all of us for years to come. We must take a stand. The time to control spending is now. I'm not saying it will be easy, but American families balance their budget every day and it's time for the government to do the same.

Next up is this MASSIVE health care reform Obama is trying to cram through congress. Please, let your voice be heard. Write or call your representatives and tell them we just can't afford it.

Stepping down from the soapbox,

Jeff French

When will Yahoo and Microsoft do something?

I just don't know how much longer Yahoo can hold out on forming a strategic partnership with Microsoft. I'm sure the recent release of Bing has Microsoft chomping at the bit to serve search results to Yahoo's audience.

I couldn't help but notice the favorable review Carol Bartz gave to Bing on today's Yahoo Q2 earnings call. It sounded pretty scripted and my gut tells me this deal is close.

Rumor has it Yahoo still wants to sell the farm but Microsoft is not interested. Given the current state of the economy I think that's likely true but I think both companies understand they need each other to take on Google long-term.

I predict we will see a formal search partnership between Yahoo and Microsoft on the search front within the next 90 days and I think these companies eventually come together down the road once the broader economy sorts itself out.

We'll see.

On a side note, our team is looking closely at Bing's API and we may also be adding it as a search alternative on Startlike. The reviews continue to be favorable and I've also found it to be a solid product.

3 secrets of great presentations

Startlike is close to being ready for prime-time and I just started pulling together some thoughts for a few upcoming presentations.

I've done pitches for just about every type of audience ranging from angel investors and private equity firms to potential clients, partners and employees. Presentations differ based on your audience, but whether it's Peter Thiel or your mom, every product presentation must clearly answer two basic questions: 1) What does it do? and 2) Why do I need it?

In my younger (and dumber) years I've had my share of presentation missteps. In fact, I would pay good money to have videos of myself giving the original PriceJester investor pitches back in 2000 just to see it all again through wiser eyes. Let's just say I'm pretty sure I've come a long way and I'd like to share a few pointers so others can learn from my mistakes.

Here are 3 of my must follow product presentation tips:

1) Show the product in the first 60 seconds. A politico friend once told me that politics are about 3 things; the candidate, the candidate and the candidate. As obvious as it might seem, a product presentation is also about 3 things....you can guess what they are.

2) Tell the audience how your product solves one of their problems. During your presentation, set the problem on a metaphorical tee and use your product demo to knock it out of the proverbial park. Your product does solve a real problem, right?

3) Finish your demo in 5 minutes and move into Q&A. If you can't do it, go back and iterate to simplify your product until you can. I'm not saying you should be able to cover every detail in 5 minutes flat, but you should be able to clearly explain the core features and solve the problem. Trying to cover too many things will lose the audience. If your product is good, and you explain it well, the Q&A will allow you to explore more features in response to specific questions. Good Q&A engages the audience by forcing them to think and ask insightful questions. If they don't have any questions you've either a) struck oil (stop drilling) or b) struck out (better luck next time).


I really don't think you can go wrong with these tips. Good luck on your next pitch.

Time to market as a predictor of success

Over the years I've been privileged to work on many new products. Some have been quite successful while others have been....well, not so much.

I recently realized that I can't name a single project I'd consider a success that took more than 1 week to develop into a functional prototype.

For the purpose of this thought exercise, "success" means it went on to generate more than $1 million in revenue or attracted at least 1 million users.

So, I'm able to think of 9 things that meet the criteria above and 100% of them, a full 9/9, were prototyped in about a week. Just to clarify, they all required continued support and development but I could touch and feel each one in 7 days.

I have tried many projects that took longer for the first pass. Some were very ambitious with development schedules of 6 months or more. I just added up 10 such projects and stopped counting because these are painful memories. I literally don't have a single one that managed $250K in revenue or 250K users, let alone the criteria listed above.

I think there is a lesson here.

-Jeff

5 rules to start-up success

I'm keeping this post short because I want you to read it.

If you're a start-up founder following these rules will increase your odds of success.

Be Simple.
Strive for simplicity in everything you do.

Focus.
Your current iteration is the only thing that matters.

Adapt.
Every failure brings you one step closer to success. Be willing to change course quickly and efficiently.

Be Frugal.
It's all about finding an iteration that works before you run out of money. Every dollar you save makes the runway a bit longer.

Be Happy.
Your company and products feed off of you. Find balance in your life and stay happy.

Some Valley down side...

I'm not posting this to bash the Valley (or California) but sometimes the rest of us are made to feel a bit "location inadequate" for our web start-up. This post by Nolan Bushnell speaks to the dark side of California's business regulations and why it's not the same place to start a company today that it once was. It's worth a read and will probably make you appreciate your home state a little more.

In addition to his commentary on California, the following excerpt deserves special attention:

It is often said that as goes California, so goes the nation. The passage of Sarbanes-Oxley--which has not brought to justice any new bad guys, but has cost American business billions of dollars and kept many of them from going public in the U.S.--is a sign to me that California-style regulation may be taking root at the federal level. When the laws governing business become nothing more than wasteful harassment, and companies are punished simply for doing business, everyone becomes poorer. Government, whether at the local, state, or federal level, must provide the framework for the best life for its people.

California has many great features but few entrepreneurs put the state's business code and tax structure on the list. We must all be on the lookout for what Busnell calls "California-style regulation" at the local, state and federal levels. We must do our part to keep America pro-business.

For what it's worth, if anyone is looking for a new place to call home, we'd love to have you in sunny South Carolina.

Follow @JeffColumbia on Twitter

Ok, I admit it, I was wrong about Twitter. I setup an account long ago to test it out (I was definitely an early adopter) and I just didn’t think it would go mainstream so I stopped using it. I can’t remember my original user name or the email address I used to sign up….oh well, we all miss a few here and there right?

I have always had a lot of respect for Evan Williams and Biz Stone (Twitter founders formerly of Blogger start-up fame) and they have done another great job here…kudos guys. That said, it’s time for me to fire Twitter back up.

I figured I’d do a quick post on what you can expect by following me.

Web Entrepreneurship – I did my first "real" start-up when I was 24. I’ve had a few wins and many losses. My newest company is called Startlike. I’ll tweet about business and web start-up life away from Silicon Valley. I’ll be sure to feature businesses I think won’t make it…like Twitter ;-)

Sports – I enjoy following sports and I tend to run my mouth about it.

Fishing & Golf – I am an avid outdoorsman and I enjoy playing golf. I’ll probably use Twitter to tell some lies.

Yeah, it’s an eclectic mix and I’m sure there will be other golden nuggets of wisdom…lol.

So…Follow me on Twitter (@JeffColumbia).