Which got me to thinking – what would I do as the Yahoo! CEO (even if just for a day – though really it will take years to revitalize Yahoo! if it is even possible to do so)?

First the full disclosures

1.  My resume is messy. I don’t have a college degree (I entered the University of Chicago in 1991 as part of the class of 1995, but in 1994 I took a year off  - I was 19, on track to graduate at the age of 20 and had just had a very rough year emotionally as my then girlfriend left me for another woman, that year off during which I wrote a play and parts of two novels, turned into many more years as I was able to first start a business selling collectibles that paid extremely well and then started a series of computer consulting jobs that just kept paying more and more, in 1998 and 1999 I returned to school while also working full time, wasn’t able to negotiate a leave of absence to finish my degree so quit but instead of finishing completely took a better job offer – after seeing my clients through the Y2K transition and after not getting paid commissions on the nearly $2M in renewals and new sales I had negotiated I left in early 2000 to start my own company. Since 2000 I’ve worn many different hats at various times – as an entrepreneur, consultant, conference organizer, writer/blogger, advisor to startups and more – none of my various startup ideas have resulted in big successes and at times have overlapped – so yes, my resume is “messy”).

2. At present I’m not a direct Yahoo! shareholder (though mutual funds my wife and I own likely hold some Yahoo! stock) but I have all kinds of personal conflicts of interest. Lots of friends who were at one time employees (and even senior leaders) at Yahoo!, plenty of friends across Silicon Valley (and indeed the world) who are investors in competitors to Yahoo! in one form or another, have sold companies in the past to Yahoo!, are building companies that compete with Yahoo! or who work at competitors to Yahoo! including Facebook. I also have a number of consulting clients, including some in whom I have small equity stakes that may compete with some division of Yahoo! now or in the future. For that matter I’ve personally tried ventures that would have competed with some part of Yahoo!.

But all that aside here is what I would if I were offered the chance to help Yahoo! turn around.

Step 1. Immediately halt the patent trolling lawsuits & apologize to the tech community for the lawsuits (including to former employees whose works were used as part of these lawsuit.

The lawsuits even if there is a chance of “winning” via a large settlement (or judgement if the case makes it to trial) of money from the flush with cash post-IPO Facebook would be at best a Pyrrhic victory – the cost in future trust, in diminished ability to hire the best and brightest or to retain those who remain at the company would be immense – making any future hope of innovating out of the current mess difficult to achieve (at best).

Step 2. Repair relationships with Alibaba and SoftBank. 

See this article from February to see what I’m referring to if you aren’t familiar. According to a more recent report a new deal without SoftBank may be in the works. Clearly this is one of the best remaining assets that Yahoo! has which could be divested to generate cash to fund reinvigoration efforts for the rest of Yahoo! However while taxes matter, Yahoo! also needs to repair the underlying relationships with two major Internet giants (Alibaba and SoftBank) if Yahoo! wants to remain a powerful and viable global Internet company. I don’t know what it would take to repair these relationships – but if I were CEO doing so would be a very high priority.

Step 3. Clean house with the Yahoo! board.

Somehow the Yahoo! board has presided over the long, painful to observe from the outside, decline of what was once one of the most innovative online companies to one that is while still important decreasingly relevant. The board has dickered, fought founders and shareholders alike and generally underperformed in a huge way. Of course, if I were appointed CEO (for that matter this is true of nearly any new CEO) I would likely “owe” the board for that appointment – but this is in part one of the problems. As the founders have departed there seems to be a big leadership and vision gap at Yahoo! Perhaps a smaller and newer board, refreshed by a mix of outsiders, former insiders and even a critic or two would be able to help guide the company into a new direction.

See http://specials.yahoo.com/forward/ for what the current board and revitalization effort looks like. Given the current scandal I don’t think it is working as intended.

Step 4. Define a clear vision for Yahoo!

Go read the new CEO’s Strategic Vision for Yahoo!. Don’t worry I’ll wait – though I do recommend you have a large shot of espresso first…

Can you summarize his vision? Not sure that I could.

And I think that’s the problem. Yahoo! sees itself as being so many different businesses (and has grown so large that it really is) that it no longer has a clear vision about what Yahoo! does (or should do) or what value Yahoo! offers to others. Is Yahoo! a technology company? A media property? An advertising platform? A search engine? A portfolio of Internet services and properties? Something else?

Yahoo! needs a clear, concise, simple vision that dictates everything that Yahoo! does – something that every employee, partner, client, customer or site visitor would get immediately and understand. This is HARD.

I can’t claim to have it fully – but I think it should be something like:

Yahoo! makes the web personal.

Okay perhaps that needs work – but listen to my logic. When Yahoo! launched years and years ago and as they grew the crown jewel of Yahoo! was not any specific website or part of Yahoo! – it was the user profiles that Yahoo! had for every user (and they had millions at a time when few sites had over 100k users) which they were able to extend to nearly every new property or site they launched. These user profiles meant that you could add a new service that Yahoo! created without needing to create a new username and password, user profile and more.

Now this seems like a minor achievement – Yahoo!’s profiles have been overtaken for more web users by their Facebook accounts (or their Twitter accounts) which are the login tool that millions of people use to access other services beyond Facebook or Twitter. But done well it is still an opportunity for Yahoo! – and one that starts to help inform what Yahoo! should focus on (and what they may want to forget about).

It is also a question of what is Yahoo!’s identity and offering to companies that will partner with Yahoo! or which will generate revenue for Yahoo! in some manner (most probably via purchasing advertising through Yahoo! in some capacity – currently limited mostly to Yahoo!’s own properties). If Yahoo! were to focus on making the web personal – making it relevant and interesting and useful to every user of Yahoo! – across whatever service(s) and platforms (including sites and services not created or owned by Yahoo! potentially) this would be challenging – and would require that Yahoo! take the side of the individual user over the advertiser – but in exchange the advertisers would get a more valuable placement and likely see far better results when they do (since Yahoo! would in theory only show ads when they were really targeted and of interest to a given user).

In today’s Internet this would also require that Yahoo! focus on building products and services that cross ALL platforms and forms – not just the web but mobile, touch, TV and more. Find ways to expose their services and properties that made them available on every platform – including making advertiser’s campaigns available and relevant to the given form factor. This would be hard, this would be challenging, this would require rewiring/rewriting/reinventing most of Yahoo! currently. It would also require renewed interest in building products and services for non-Yahoo! developers to leverage (Yahoo! just a few years ago was on the forefront of building open APIs and hosting Hackathons to encourage developers to build on top of Yahoo! platforms but I think they never fully committed to this and never made it a strategic priority). I would encourage Yahoo! to explore directions that included revenue sharing with outside developers – potentially putting Yahoo! in the middle of a vibrant mobile development future. Yahoo! would also need to explore lots of service offerings that instead of relying on advertising and mass scale rely instead on subscriptions and direct payments by users – again including pass through payments to outside developers in many cases.

Would this be enough to “fix” Yahoo!? 

I don’t know but it would be a start.

And there is, of course, “one more thing…”

Yahoo needs to streamline and eliminate as many layers of management and approval processes as possible. Likely this means a lot of transitions for current employees and a total rethinking of their current workforce. This might not be easy or painless but I would start by carving out small entrepreneurial teams within ALL of Yahoo!. Teams that would have full authority to spend a given budget in whatever manner they require – with encouragement to be creative – and few requirements that they wait for a committee to approve everything. This would of course work best if a unified, simple vision can be shared by every employee – something would make it easy to answer the question of “would this new …. further the big picture vision for Yahoo!?” – would it help make the web more personal (for example). As much as possible I would look at models from innovative firms such as Valve to attempt to flatten the structures of Yahoo! as much as possible. This is, of course, challenging in a global, large public company – but it isn’t impossible.

YouTube subscriptions – I’ve only added one in recent months, the fantastic Geek and Sundry  Felecia Day, The Guild, Dark Horse comics, Wil Wheaton – yup, my kinda video series and perfect for watching via my Apple TV when nothing else is on cable (i.e. most of the time)

Podcast subscriptions - I’ve added a bunch of new shows, not sure I’ll stick with all of them but I’ll give them at least a few episodes before I make that decision, but shows that I’ve added in the past few weeks which I’m really enjoying include:

• Ze Frank’s A Show (http://ashow.zefrank.com/) - Ze is back and in a big awesome way. Great videos though watching them via subscription in iTunes may be less than ideal as the show notes and comments and community are probably more fun even than the just the videos…
• Mac Power Users (http://macpowerusers.com/) – a bit long but really interesting discussions about how a bunch of people use their Macs – a great reminder to me about how little I actually leverage the great applications and technologies of my devices – macbook, iPad and iPhone. Good inspiration to get back to using tools I really should be leveraging to get more work done, write better (and more often) and get more out of my tools.
• 3.5 Private Sanctuary (http://www.35privatesanctuary.com/) – okay I confess I’m a geek and in the past few months I’ve gotten back into actively playing paper RPG’s (playing Pathfinder Society games most Monday nights and at occasional gaming conventions). 3.5 Private Sanctuary is actually a bunch of different podcasts all interesting and all a reminder of how much fun playing RPG’s can be (and a reminder of just how old many of us have gotten…) It is always good to connect, even if just via listening to a podcast, with folks who share your love of a specific niche.

I still haven’t found a great tech podcast – surprising but I don’t really want to listen to a long winded discussion for many hours – I want something which is focused, engaging and interesting – which covers news I may have missed and/or offers a perspective and summary of news I’ve seen but may not have explored fully (i.e. I can only try a few of the many new applications and technologies that launch every week).

What podcasts (or videos) do you make time for every week?

Ugh. Sometimes I’m depressed by the idiots. Tonight is one of those nights.

see http://www.missionmission.org/2012/05/01/how-exactly-did-paint-bombs-and-anarchy-signs-escalate-to-smashed-windows/ as well as many related posts

for coverage of the depressing actions in the Mission this evening – storefronts of some of the best businesses in SF were smashed & paint bombed, many people’s cars were smashed and general stupidity reigned.

Thankfully I wasn’t in the Mission this evening – but I plan on spending money at some of my favorite Mission businesses in the coming weeks to show my support for them in the simplest way possible – and I encourage you as well to not let stupidity win.

I suspect that tomorrow will be an ugly day in SF alas (okay technically today will be an ugly day) *sigh*

What I will be doing this week and what I encourage you to do as well is simple – support local small businesses affected by tonight’s actions by voting with your dollars – and if you can’t go spend money (and show support) for local businesses in San Francisco at least help promote them to folks who can in turn send business to them.

I have been planning an event where I would take visitors interested in learning about Innovation and how to build successful, sustainable businesses on a tour of innovative businesses here in the Bay Area. While this tour would include many well known technology and Internet firms, it will also include a tour of the many neighborhoods throughout San Francisco where small, locally owned and run businesses are building amazing businesses the “right” way. These are businesses that respect their employees (and pay them well), that source responsibly (and frequently from other local merchants) and which are building focused and successful businesses in tune with their local communities. Frequently these are businesses that are highly focused – offering fewer items for sale than many businesses throughout the country and frequently not seeking to compete for business via a race to the lowest price.

Instead these are businesses that seek to sell non-commodity goods and services are fair prices that inspire repeat business. Retailers throughout the Mission (and indeed all of San Francisco) face challenges few other cities place upon their local businesses – high minimum wages, high regulatory burdens, high CA state business minimum taxes and fees and that’s just the beginning. Often retailers face months (or even years) of struggles to get their stores approved and opened in the form they desire (frequently battling complex licensing and zoning requirements) all the while trying to build a retail business in a down economy in one of the most expensive cities in the country. And yet the past five plus years I’ve lived in San Francisco I’ve seen (and had the pleasure of frequenting as a customer) some amazingly creative and great businesses open up throughout San Francisco. Businesses that get back to the basics of what makes a great business – selling what the customers want (and often didn’t know they wanted before they entered the store) and doing so in a manner that encourages repeat business and customer referrals.

As a resident of San Francisco I’m saddened by today’s actions and I can only hope that the communities of San Francisco come together to support local businesses and individuals who were impacted by today’s actions.

If this was associated with the Occupy movement it is yet another in a long string of black marks on that movement (there seems to be a lot of debate but it appears that there is some connection with the Occupy Oakland movement – though defining who is/isn’t affiliated is rather impossible. I’ve mostly stayed out of the Occupy movement debates – last year I was preparing for my wedding, this year I’m focused on building a business and helping many other startups across the country build their businesses. I also plan on being as involved as I can be in getting President Obama re-elected. The businesses that were targeted tonight in SF are about the farthest possible thing from the big “evil” corporations that the Occupy movement claims to be against. These are local businesses that are owned locally, that employ dozens of local residents, that buy from many other local businesses and which are building businesses that are succeeding while also behaving in responsible manners (paying more than fair wages, offering benefits, paying attention to environmental issues, etc. All while competing with both large corporations sourcing globally and Internet distribution channels in many cases.

note – if the comments on this post take an ugly turn I will simply turn off comments. This is my personal blog, if you want to rant do so on your own blog. If you want to add to the conversation and can do so without ranting or being vulgar please do so but I will be approving all comments from new commentators

So there is a lot of huff & puff at the moment across the Internet about the EULA for the new Apple iBooks Author software which they released early this week. The software itself is getting mostly rave reviews for making the process of building a solid, good looking, engaging, modern multimedia eBook and especially a electronic textbook designed for tablets, really easy and open to far more people.But at the price of agreeing to only “sell” the resulting ebooks in the Apple iBooks application (so only for the iPad and other iOS applications since at least currently iBooks does not have a version for the MacOS).

However the EULA also allows for the FREE distribution of those books in any way you want – it just requires that commercial use be limited to via Apple (and subject to a separate agreement with Apple – i.e. they will pick and choose which books they distribute).

So below a few ideas which people should explore – whatever your feelings about the EULA. (and if you refuse to sign it – don’t forget that you can just not use the iBooks Creator and just write your book via more traditional tools – though this may require that you work with someone with the right (and often expensive) software and the skills to lay out the text, images etc. And building an immersive application or electronic version is yet another skill set).

1. Use iBooks Author to layout PUBLIC DOMAIN resources (see http://www.gutenberg.org/ for one) adding layout, public domain illustrations – or CC licensed works with the right licenses and credits. Then make these works available (for FREE) via Apple’s iBooks app. But also make the files available outside of that app (and perhaps explore whether Apple’s HTML5 output can be converted to another eBook format and/or rendered inside of a standards compliant HTML5 aware browser as a webpage.

2. Use iBooks Author to create updated textbooks for use by online educational offerings such as Khan Academy (http://www.khanacademy.org/) perhaps even including the appropriate videos from Khan Academy inside of your work. Again make these available for FREE – submitted to Apple for the iBooks store but also via downloads and if conversion is possible in other apps as well as perhaps as HTML5 webpages.

3. Leverage the fact that iBooks Author is a FREE application and use it to create a new form of globally collaborated upon book. Perhaps use a service such as Dropbox to share you files with co-authors across the Globe and use the free software to collaborate on writing an authoritative work on a subject upon which you and your collaborators are experts. Here if you like sell this (limited to the Apple iBooks store and possibly subject to agreements between the co-authors about the distribution of income etc) but also consider making these works FREE – and both submit them to the iBooks store but also make them available in other apps and online.

You might as “why go through all of the effort to make an iBook only to give it away?”

Consider two scenarios.

Scenario 1

You and your co-authors are talking with a prospective client. They want to see how you work and what you think about. You suggest that they go to your website, fill out a request form and download one of your “White Papers”. A 64+ page, text (and limited black & white illustrations) PDF file. They do so but barely can keep their eyes open past page 3, don’t have easy access to a printer (since they are on the road and working from their laptop) and you don’t hear back from them.

Scenario 2

You and your co-authors are talking with a prospective client. You send them an iTunes Gift which is of your book (should work whether or not the book is free). They open up iBooks, download the book and are greeted with an interactive and highly modern textbook on your area of expertise. It opens with videos of you (and your co-authors) and the text is in modern fonts and in full color with illustrations. The client reads your textbook on their next plane flight and when they land send over a contract.

Yes, “white papers” aren’t always dry and dull but these days if you are going to be giving away your content to sell your services (the model of countless consultancies) why not take a look at iBooks Creator as a possible tool to integrate content types and as a way of creating a more compelling and actionable content.

And if you are thinking about selling that content then sure you could sell it on your website (lots of tools for that) but if you have to spend the time (and money) but mostly time managing an ecommerce website you have to sell a great number of white papers. Sure 30% adds up (and if you as I might recommend sell your book not for $9.99 but for 10-40x of that amount) the percentage is all that more meaningful. But in the end if you just gave the book away you likely will make more from a single consulting project than you will from the book.

If not your consulting rates and project scope is vastly too low

Okay if you are +Tim Ferriss consider disregarding this advice (Tim’s third “4-hour” book The 4-Hour Chef (seehttp://www.amazon.com/gp/product/0547884591/ref=as_li_ss_tl?ie=UTF8&tag=jigzawinc-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=0547884591
is now available for pre-order on Amazon – and he’s almost certainly on his way to yet another NYTimes Bestseller. But even Tim might have some non-NYTimes bestseller content that might make a good free book – compilations of blog posts + videos from his blog or video series with +Kevin Rose for example might be one idea. Go see his FOUNDATION video interview when you have some time)But for the rest of us non-NYTimes bestselling authors Apple has just given us a fantastic tool. A tool to help possibly spread education and a tool which savvy professionals may use to stand out from a sea of similar consultants.

(originally posted to my Google+ stream)

1) not renewing any print magazine subscriptions & deciding on a case by case basis was print publications to subscribe to for 2012. I’d like to have 3-5 magazines a month – considering The Atlantic Monthly, Monocle and possibly a few others – what would you suggest? (serious news, politics, tech or non-serious games, rpgs, science fiction or fantasy are all options)

2) unsubscribing from the 300-400+ blogs I currently get via Google Reader and adding back just the ones I actually miss not reading. I’d like to ADD a lot of ones I don’t currently read – especially looking for good, unique perspectives on Business – technology & non-tech with a strong focus on design and innovation. But equally I want to read some great political blogs, some great gaming (not just video games but also paper RPG’s and boardgames) blogs, some blogs on writing – especially science fiction, and some “geek” blogs. As well as the still active blogs of friends of mine

3) Unsubscribing from many of the podcasts I currently subscribe to (especially the ones that have remained mostly unlistened to for many months). I’ll keep a few of the gaming podcasts that I keep up with, the comics podcasts I listen to but would like to add some great (but focused) tech podcasts (audio preferred to video) and possibly some political or general interest/geek podcasts?

4) unsubscribing from still more email lists – especially the ones that have remained mostly unread and/or which I rarely engage with these days. I’d also like to add a few new ones IF I can identify really interesting & active communities (and/or exceptionally currated content sources)

5) Picking a few online communities to really engage deeply with this year. I’ve never “gotten” Reddit but folks I really respect love it deeply. Clearly there is something worthwhile happening there. Equally I haven’t “gotten” into either LiveJournal or Tumblr and both might be worth really engaging with in 2012.

6) Creating my own content. Starting with posts here in Google+ but also writing on my personal blog(s) and soon our new corporate blog (more on that in a few days) but not ending there. I’d like to write more guest posts for other media outlets, write some articles perhaps for magazines or other publications and by the end of 2012 I’d like to have at least one book if not published then in the works.

Suggestions for great content I should consider adding to my media diet in 2012 are welcome – especially if you know me well and have some unique suggestions…

thanks!

What changes are you planning for 2012?
Filed under: Entrepreneurship, geeks, personal ]]> http://shannonclark.wordpress.com/2012/01/03/im-thinking-about-pushing-the-reset-button/feed/ 5 Shannon Clark http://shannonclark.wordpress.com/2012/01/01/looking-back-on-2011-and-forward-to-2012/ http://shannonclark.wordpress.com/2012/01/01/looking-back-on-2011-and-forward-to-2012/#comments Sun, 01 Jan 2012 08:00:04 +0000 shannonclark http://shannonclark.wordpress.com/?p=1274 ]]> 2011 ends in just minutes as I write this and it has been a year of highs and lows, perhaps too many lows. In any case I am looking forward to 2012, the first full year of marriage for me – I was married this past Fall – that’s definitely a major highlight of my year. But as well there have been some major lows – sudden deaths, professional disappointments (both my own and those of close friends) all in all 2011 has been a rough year and one that can’t end too soon.

Every year however I look back on the last year and forward to the next and wonder what I will be doing this time next year, what will have happened in the year to come and what will seem so common by the end of year that I can’t even quite imagine as the year begins.

Last year at New Years Eve I would not have guessed that this year I would end the year a married man, sitting at home watching local tv with my wife – very very happily doing so. The new year will start with a day of home chores – laundry and house cleaning and then the week begins with work.

A few years ago I spent New Years Eve at a friend’s house – at the time I was single – there was a tradition in that household (I think) where you wrote down one word that would be your theme (and goal) for the year to come. My word that year was “companionship”.

In 2011 I more than got that and I enter 2012 with the best companion in the world – my wife.

I love you Usha.

This weekend I am getting married!

It is a big “change of life event” to use the HR terminology – more importantly and more accurately it is an important next step in my life and relationship to my soon to be wife. The next few days will be a blur of family and friends – and lots of last minute details to be sorted (and client projects to finish) but it will all be worth it when we say our vows in front of family and friends.

Our ceremony will be a short one, it will draw upon our family backgrounds but it will not be a religious ceremony. Neither my soon to be wife nor I are religious (I’m an atheist, she’s perhaps less certain about atheism than I). A friend of ours will be the officiant and the ceremony is one that we have written along with our friend. It will have elements of the Hindu traditions, it will have elements of the Jewish and even some hints of my Irish-Catholic family. But mostly it will be short and will focus on the new family and partnership we are creating together – a relationship of equals (though like many smart men I admit that most of the time I’ll be wrong…)

The weekend will have a few events and we hope our love of great, local food will shine through – as well as our intention of welcoming our friends and family and celebrating along with them. We chose to be married over Thanksgiving Weekend because it is my favorite holiday of the year – a celebration of good food and our family and friends. As a couple we have hosted Thanksgiving meals (not always on Thanksgiving Day) at which we have invited both family and friends. For me Thanksgiving is a time to invite everyone over – not just immediate family but also the family that we have made for ourselves. It is a time to share

My main thesis is that if you are building a business you are in the business of selling something (at a price and in a volume that is sustainable and ideally scalable and growing over time).

If, in contrast, you are selling your business you are still in sales just now of equity not your actual product – and if you are great at that you likely won’t be great at your actual sales of your actual product.

Yes this is in contrast to the Silicon Valley mythos built up around press attention around each (hopefully larger) round of funding at progressively bigger and bigger valuations. Those are often examples of founders (and senior management) who are expert salesmen (and the occasional though perhaps to occasionally but that’s another post women) selling themselves, their brand and their “vision” over actual sales.

In contrast the Kickstarter model forces three key elements that are far more likely to lead to a successful business than if the model was instead focused on selling equity (as far far too many people IMHO keep proposing SEC regulations and opportunities for fraud be dammed).

1. Selling your vision quickly and succinctly The forcing effort of a great, short video along with a well written description (plus ongoing engagement) should not be discounted. I would guess that a majority (a large majority) of the founders I talk to are unable to sell their vision in a short, succinct and compelling message. They ramble, they sell themselves not their product, they talk about the vision for their business over the vision for a specific product. In contrast success on a site such as Kickstarter is in a very large and real manner dependent on presenting a compelling vision about what you are going to make (and what you are offering to supporters) which is so compelling that enough people want to see the final product (and in most cases get it or a copy of it for themselves).
2. Selling to actual customers something compelling enough to part real money from them The perks and stuff you offer on a site such as Kickstarter are really important, but notably the most successful projects often have very few levels of support. They aren’t trying to offer lots of levels with lots of unique perks, instead the successful projects tend to offer three distinct levels of support. A very low level that is just a few bucks and offers just credit/thanks or perhaps a digital only product (typically <$10). A middle level that offers the first production copies of whatever is being funded (typically $25-75 depending on the object often with a US and an International shipping option). This level doesn’t have to be complicated – offer the product you will be making (the very first ones to supporters) and some small (but next to no cost to you) extra as thanks. And a third level often $500 or higher that offers a limited number (typically) of unique special perks – original artwork, dinner with the founders etc. These levels however also don’t have to be complicated – keep it simple and focus on the actual product is the recipe many of the most successful kickstarter campaigns I’ve studied have followed.
3. Promotion with a side of hustle and more promotion Key to successful Kickstarter campaigns, the ones that grow beyong a small number of friends and family are the active and compelling promotion of your campaign. You have a limited timeframe and a discret success metric (funded/not funded) which helps force entrepreneurs to keep promoting actively and often. Hustle wins here. Social media is likely important but equally (and perhaps even more important) is knowing which social media channels, especially which small niche channels will lead to success for your specific product. Knowing this is another thing that a majority of entrepreneurs I work with fail to know – they have an idea of who their customers may be (often very broadly defined – more than you would like to see say “everyone on the planet/Internet could be my customer…”) but almost never do they know where those customers are active online – their variations, niche site (podcast, blog, magazine, video series) loyalties etc.

Since the 1990′s I’ve been seeing proposals for sites that would allow for the crowdfunding of businesses – for the “democratization” of capital (and/or access to “IPOs” as it was deemed in the roaring 90′s) but all that attention to raising money all too often misses the real goal of a successful business – creating sustainable value.
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Filed under: geeks ]]> http://shannonclark.wordpress.com/2011/10/10/selling-stuff-on-kickstarter-is-better-than/feed/ 0 Shannon Clark http://shannonclark.wordpress.com/2011/09/19/when-did-millionaire-shift-from-assets-to-income/ http://shannonclark.wordpress.com/2011/09/19/when-did-millionaire-shift-from-assets-to-income/#comments Mon, 19 Sep 2011 18:50:02 +0000 shannonclark http://shannonclark.wordpress.com/?p=1260 ]]> This is a political post – if you want to leave comments great but I have moderation turned on and I will delete any comments that are personal attacks or otherwise offensive.

When did millionaire shift from a measure of assets to a measure of income?

These are far from the same thing. Growing up I recall that a “millionaire” was someone who was worth over $1M dollars. This was notable and still fairly rare but it could and did include a lot of people who didn’t have a lot of income just, for example, the fortune to own a home in a state with high property values such as California.

But in the past few years, I’m not sure when this started, millionaires has started to be used to denote people with a yearly INCOME of greater than $1M. This is a very small number of people (though apparently the number of people in this category has grown in recent years as the very wealthiest people in the country have prospered even as nearly everyone else have not). But increasingly public policy is being dictated by folks who seem to think that changes that impact this small and exceptionally wealthy group of individuals are more important than policies that impact the majority of households. One party, the GOP, seems nearly entirely focused on preventing any tax increase of any form on anyone even as they simultaneously work to prevent a continuation of a tax break on most working families (the inherent contradiction in this position seems to have escaped them).

An individual or family earning over $1M a year is earning 20x the median income (roughly) of the typical American family. In fact they earn in a month what few families in the US earn in the entire year. When you are earning on that scale you likely have a mix of earned income (i.e. salaries) and capital gains (i.e. earnings on investments or things deemed by quirks of the tax law to be investments – such as VC’s earnings from their funds even though most of the money in those funds is investors’ money not most VC’s own personal funds). While most people don’t have a lot of control over when they get their salary (unless they quit their job) entrepreneurs, investors and money managers have a great deal of control over when they realize capital gains – since this occurs when they sell an investment at a profit or when their investments pay out a dividend (which in the case of many very high net worth individuals may be something they have enough control over that investment to dictate when and if that happens). And in many cases there are legal means to defer recognition of capital gains via reinvestment of those gains in similar investments or via offsetting losses (this gets complicated and I’m neither a lawyer or an accountant – in the case of real estate investments there are exchange rules that can come into play, in the case of financial investments investors may be able to sell off assets that have lost value when they also sell off assets that have gained value which does make sense as a legal means of offsetting gains but also allows investors to time and control how much income to recognize in a given timeframe)

But all of that complexity aside the question I’m curious about is when did millionaire become a term for folks earning $1M or more a year and why hasn’t this change been more emphasized in popular discourse and debate? It seems fundamentally different to earn $1M in a year than to be worth over $1M. The likely average net worth of individuals earning $1M (or more) each year is vastly greater than $1M – for example to earn $1M in interest payments would require assets of nearly $25-30M (3-4% interest earnings though with higher risk investments higher interest might be available but Treasuries pay even less than that at the moment). To earn $1M in rents from properties even in the current depressed real estate market would likely require $10M (or more) worth of properties and for that $1M to be income not gross rents would require even more (after paying for the upkeep of the properties, for real estate taxes, for professional management and all the other fees and costs with running such a large series of rental properties).

Very few small businesses have over $1m in gross annual sales, let alone have incomes of over $1M (where “income” is roughly defined as being gross income after costs of the goods/services sold by the business). Few businesses have gross margins greater than 30% – for gross income to be $1m implies gross sales of over $3M (roughly $3.3M actually). If someone is the owner of such a business they have a lot of legal means to control how (and if) that $1m in gross profits flows through the business to them as the owners. They can pay a portion of that as earned income, they can pay out much of it as a dividend (getting capital gains rates not income tax rates on that portion) and they can reinvest much of it into the business (or potentially other businesses) without having to pay personal taxes (or potentially much corporate taxes) on it. Though the details on all that depend on the legal structure of the business, the state they do business in and many other factors.