graylightning

A blast in Jaipur; Can We Not Leak these from Our Midsts?

Another set of 6 bomb blasts hit India yesterday, killing 80 people, this time in Jaipur, the capital of Rajasthan, India's largest state and a famous stopping point along the Golden Triangle for tourists and jewelry and gem shoppers.

The Dawn had a write-up putting the event in political perspective given other increasing tensions between India and its rival Pakistan in the last several weeks.

I've been to Jaipur several times. II've shopped in Johri bazar where several of blasts occurred yesterday.  I still know people who live in the city. This seems personal in a way to me.

Is there not a way for technology, capitalism or some web-based clearinghouse for leaks and information to make a dent in halting these kinds of senseless tragedies?  Whenever a plan like this gets hashed in a country as populous as India or Pakistan, I always think of how many people must learn about it ahead of time, there must be a dozen people not directly involved in a plot like this who learn or know about it ahead of time. 

Supposing I'm right, and that such community or outsider knowledge exists prior to such events, is there better way to give these people a channel (or an incentive) to leak information before its too late?

Surely some people who learn about these plots have had hesitation or guilt about knowing what acts were about to transpire and if they don't agree with them, they still stay silent for fear of their own lives if they expose acquaintances.  And of course citizens of foreign countries would not trust the CIA or FBI (or in many cases their own police forces) enough to report terrorist plans to those authorities.

Is there not then, a more easily conceived central and international repository on the web for leakers to expose terrorist events anonymously before they happen?  Could Wikileaks serve such a purpose?

Trends and Outcomes

Two distinct sets of facts & trends have been gathering in my head over the last few weeks, all from disparate conversations and websites, more than a few from Anup Shah's blog, but coming together in my mind this week as things best considered in conjunction with each other.

First: The continuing dire straits of life in the developing world:

- Half of the world — just less than 3 billion people — live on less than two dollars a day;
- The GDP of the 40 most heavily indebted poor Countries (567 million people) is less than the wealth of the world’s 7 richest people combined;
- Nearly a billion people entered the 21st century unable to read a book or sign their names;
- 1 billion children live in poverty (1 in 2 children in the world);
- 640 million live without adequate shelter, 400 million have no access to safe water.

In China, 800 million people do not have adequate access to credit; 300 million people live below the poverty line; and 400 dollars is the annual income of a rural inhabitant;

In India, between 60-70% of the people do not have formal access to credit, even less than that have access to secure savings, and over 200 million people live below India's poverty line

Second: The amazing possibilities being created by the proliferation of technology around the world.

- Global mobile phone penetration hit 50% last Nov. and is projected to reach 75% by 2011; 
- There are now over 3 billion mobile phones in the world. Putting this into context, there are only 800M cars, 1.5B TVs and 1B PCs around the globe today. Given how revolutionary those inventions were and how long it took to reach those numbers, its amazing how quickly we have gotten to 3B+ phones and what this number means for the potential impact on global communication and access to information.
- Although global Internet penetration is only 20% on average, or 1.4B users, somewhere around a third of those users access the Internet primarily from mobile phones or shared devices like Internet cafes (in total, over 750M people access the mobile Internet today).
- As Smart phones proliferate and replace feature phones, global Internet accessibility, particularly in countries with poor PC and wireline infrastructure, could skyrocket. Mobile phones have already replaced PCs in China as the dominant Internet access point.
- China now has more Internet users than any other country in the world and the rest of the BRIC, India, Brazil and Russia, are all in the top 11 countries in terms of % penetration
- In the mid-1990s two-thirds of Internet users were in the U.S., today the U.S. accounts for just 20%

Much of the world is still poor, under-financed, under-educated, malnourished, and ruled by corrupt and undemocratic regimes.  But just as a flood of information about the outside world from TV and cable networks helped bring down the USSR two decades ago, I believe the proliferation of weapons of mass communication hold similar promise for citizens of the developing world...with one big caveat, when people look out into the world from the tiny screen on their shiny new mobile phones and see all the things that their countries have been missing for generations, they might not just be anxious to work hard and buy stuff, they might also be angry enough to violently act out.

Stay the Course?

Last night I went back and watched the first episode of John Adams on HBO which I had recorded but not seen before watching the rest of the series.

I also took a long hike yesterday in Marin County and thought about how beautiful the spaces where I was walking were and how quickly they will continue to disappear from the earth if man kind continues to pollute the world at its current pace.  I especially worry about developing countries where there are fewer strong state and local leaders like those of California and Marin to defend long-standing green spaces.

The sacred Yamuna river which runs through New Delhi is now toxic and unusable, as are major parts of China's seven largest rivers, two of which (the Yangtze and the Huang He or Yellow River) are among the largest in the world. Hemingway's Snows of Kilimanjaro will soon be reduced to dry rocks.

As I thought about the enormity of this task; trying to stop and reverse this pace of environmental destruction, I saw parallels to the story I was watching about old white men in the late 1700's. 

The American Revolution was essentially guided and launched by popular, good-timing, successful and wealthy businessmen, doctors, lawyers and plantation owners in the colonies.

These men were not poor. They had great fortunes to risk, and were better-suited to overcome or wait out dire British economic policies, including taxes and port blockades than the average American. Simply put, although their money-making endeavors were being impacted by the worsening status quo, they had a lot to lose by challenging it, a LOT more than the average colonial commoner.  So why were they willing to give it all up to wage revolution, with a British navy anchored in New York harbor no less, ready to hunt them down?

I'm less interested in trying to answer that question than I am in trying to answer whether today's wealthy Americans are as up to the task of halting the environmental destruction and related climate that threatens the fate of our planet, and indeed that of the humans in general.

I don't know why each of the Americans who originally signed the Declaration of Independence decided to wage "[their] lives, [their] fortunes and [their] sacred honor."  But they did, and they forever changed the world.  And they did this with no certainty of victory and almost certain death upon failure. 

Do we Americans, the modern day privileged of the world, have it in us to lead the change demanded by our current course?

Green as We Want to Be

There is nothing I agree with Thomas Friedman on more than the need for the United States to become a leader in the next industrial revolution: the creation of a global industry producing, transmitting, storing, selling and trading clean and renewable energy.

As Friedman argues so lucidly in his column this week, this is the next area of global economic competition that America must take the lead in, lest we not only deepen our dependence on foreign sources of energy, but also miss out on the potential economic opportunity in creating domestic alternatives.

The story Friedman shares about Toledo, Ohio-based FirstSolar building their next thin-film solar modules plant in the former East Germany rather than here at home can be dismissed as anecdotal, but it is an obvious example of what could continue to happen, and why we should be spending our money and our brains figuring out solutions to the energy crises rather than coming up with band-aids like tax credits for motorists. You can't avoid reality forever, and the longer we do, the more this generation is borrowing against the next. I could write a book on how I feel about this subject, but thankfully, Friedman's already doing it for me. His next release, "Green: The New Red, White & Blue," is due out this summer.

Above, Virginia's blue ridge mountains.

When the Ad becomes the Content

This has all been done before, in fact, every year it's done during the Super Bowl. Ads so good, so relevant, or just so funny that they become part of the content you are consuming.

As the economy shrinks and advertising continues to move into measured media (online) and web-based businesses continue to depend more and more on advertising to finance their applications, publications or third-party content, that's where I think advertising will continue to trend.

Whether its companies that can scrape your facebook profile and serve you ads about the movies, music and books you care about in a form or format that actually engages and entertains you, or companies that allow you to provide your preferences up front about what types of ads you want to see and where and when you prefer to be advertised to, or even whole markup languages that store your preferences and make them available to advertisers on the fly around the web (is this scary or just really helpful?) I think we will continue to see a deeper convergence of advertising and content.

Some prominent recent examples?
- Scarlet, the new LG campaign for its series of tvs (not tv series)
- The Will Ferrell-Jackie Moon commercials which cross-promoted a movie, a beer and under-arm deodorant all in the context of an SNL-like skit
- Every facebook, myspace and social networking widget

This convergence also happens to tie in with Chris Larsen's declaration last month that the future of everything is free - if that's true, then advertising is going to have to be inserted into a lot more places a lot more often, and if I'm going to accept that as a user and not turn off my tv, unplug my pc or turn off my radio and go outside to throw a Frisbee, than that advertising is going to have to continue to become much, much more relevant to me.

It doesn't make any sense that as a regular facebook user I often get served ads in the left margin that have zero relevance to my profile info.

That's a pathetic commercial use of the very personal (and very valuable) information I've handed over. They could be serving me clips of Chevy Chase movies, links to Pearl Jam music, ads for surf boards, golf clubs or travel info - all of which I've told advertisers I'm passionate via facebook and my other socnet apps, and all of which i have a much higher chance of clicking on than ads for "hair loss reversal" or "30+ singles."

Alas, people are figuring this all out - and my thoughts of seamless personal and contextual advertising around the web are not that far off in the future - I just wonder which companies will be the ones who pull it off?

Blodget's Tree has Money Growing On It

Lots of chatter on the web today about Silicon Alley Insider's Top 25 most valuable digital private startup's of 2008.

While I think there are plenty of points to argue in this list, and initial comments have not hesitated to offer their "fire and brimstone" as Henry Blodget describes, I applaud SAI for taking a shot at some of these, and I offer only two criticisms.

1. Organizations like Craigslist and Wikipedia can not be valued accurately in their current form. To change these community-created and oriented websites into strict for-profit models would fundamentally disrupt the user experience and therefore the user/contributer bases. Because these sites' value is created by their users (not their engineers), changes in the business model would ultimately change the nature of the products. Measuring them on earnings multiples based on hypothetical advertising or paid listings revenues makes about as much sense to me as judging a football player by how many home runs he might be able to hit if he switched to baseball.

2. Some of the higher prices listed should be swallowed carefully.  Many of these companies are still pre-revenue or even pre-business model, as Henry states of Twitter. Therefore, I would expect many of them to be valued closer the "Twitter" level rather than the "Ning" level.

Confucius say: 'One careless VC over-paying, a valuation, does not make.'

Fun stuff - I wonder where the real-time moving index will go.

AdTech, NBC responds to Digital Disruption

This week's AdTech parties kept me groggy enough on Thursday morning not to post on time, but I had a great time meeting lots of heady entrepreneurs still anxious to change some piece of the Internet and busy building their ad networks and publisher tools businesses despite the rumblings in the economy and rumors that Silicon Valley as gone cold to Web 2.0.

AdTech's Keynote speech on Wednesday from NBC Chief Digital Officer George Kilavkof gave us an insight into how the big networks are thinking about the brave new world of digital media distribution.  They're trying to catch up with the YouTube's of the world by finding technology partners for online, on-demand distribution (i.e. Hulu) and speeding up the placement of live programming to keep them up to pace with viewers who record the shows at home and place them online immediately after (Saturday Night Live).

Adam Lashinsky from Fortune magazine did an excellent job of questioning Kilavkof at every turn (do they talk to Fox regarding Hulu content and encryption? Are they still talking to Apple about a return to the iTunes platform? What impact will the Tibet issue have on NBC's handling of the Olympics broadcasts this summer?)

Kilavkof alluded that discussions with Apple over a potential return of NBC TV episodes to iTunes continue but he was hard-pressed to handover any strategic details of NBC's dealings with other companies.

When it comes to opening your mouth in public, there is a major difference between being a start-up in this world and being a public incumbent as the conversation on Wednesday morning reminded me.

George did as good a job as anyone could expect answering pointed questions about NBC's long-term ability to respond to disruptive web 2.0 distribution business models and ad-skipping technology in front of a geeky audience on the edge of their seats hoping for a public company slip-up.

But you could not help but see how a young entrepreneur would have approached the questions differently. Would a start-up be afraid to disclose dealings with another large player (Apple)? Probably not, more likely would proclaim them. Would a start-up be hard-pressed to dodge a question of Tibet? Much less likely, might even take it as an opportunity to grab headlines.

I wouldn't trade my spot in a venture firm or a conceivable spot in a start-up for the rigors of commercial-speak and political correctness that must come with a public company straight-jacket.
Life is short. Much more fun to be disruptive.

Sushi and Curry and Food for Thought

Two weeks have gone by and I've been missing from the blogosphere.

As goes for Brad Feld's blogging habits generally goes for me, absence usually means I'm busy at work or traveling. Right now, its the former. Lots of thoughts on what's going on in the Valley and in my favorite categories, mobile, financial services, and social enterprises which I'll try to post more about this week. AdTech starts tomorrow and I plan on stopping by the exhibition to see what's new in the world of ad networks. And despite Russel Beattie's departure from Mowser today and claim that "mobile [web] traffic just isn't there...and it won't be," I still think there's lots of interesting long-term potential for mobile browsing, particularly in places that don't have, or for people who don't typically use, PCs during the day. These markets may not be as exciting as the lucrative full-fledged web, but they might be sizable markets nonetheless.

But something else caught my eye today - Brad Feld's mom, Cecilia Feld, has an exhibition with photos from trips to Japan and India, two countries on the top of my mind this week after conversations with a friend who's spent a good deal of time in both places.

As she describes it, the countries strike a foreign observer as almost complete cultural opposites. The first being such a calm and methodically organized place, the later, a pressure cooker full of chaos and spontaneity.

Looking to history for the roots of such drastic differences, I would guess Japan's isolation and relative independence from the recurring land conquests for South Asia offer one explanation. India's geographically far-flung populace and centuries of division under alternating foreign occupiers meant it was never really one country but rather always hundreds of splintered groups. What a difference an ocean makes.

And somehow, I'm not sure I'd trade the excitement of India for all the spotless austerity of Japan...food for thought.

Widgets! And the Distributed Web

I added several things to my blog this weekend in keeping with the increasing trend of distributed content and applications, the simplest version of which being widgets, which I think will continue to define how people use the web and how advertisers find their targets. In the future, which website you are on may not matter as much as which content or application you are engaging with, because any piece of content or application might be spread seamlessly across the web so that you can find it, or it can find you, no matter where you are.

To make it easier to find blog posts with specific topics there is now a category bubble-list at the top of the page, where you can click on specific categories with which I've tagged individual posts. The larger categories have received more clicks from readers.

I've also included a search bar from Lijit so you can search my site instantly, along with links to my StumbleUpon content, my del.icio.us tags, and my facebook profile.

I've added an updated map so readers can see how many people are visiting each day and where they're coming from.

And finally, I've republished the posts from my bankerInIndia blog here on the graylightning site under archives, so now you can click on the months from before January 2008 to find and read those old posts, rather than having to go to the bankerinindia page.

I hope it's easier to enjoy the content now, scattered as it may be across this domain. And feel free to give suggestions on how to make it better or easier to find.

Is Microfinance a Hedge to the Credit Crunch?

So one of the interesting arguments made in favor of microfinance as an asset class has been how decoupled it is from mainstream economic  trends and traditional financial markets.

The argument goes, Microfinance borrowers are typically so far outside of the financial mainsystem that, save for inflation, borrowers (at least rural ones) often do not see or feel the impacts, positive or negative, of economic swings.

The logical conclusion is that investors seeking new forms of hedging can look to microfinance to shield their money from prevailing economic fluctuations.

But is this true? I recall from my own experience talking with Indian bankers last year that as the bigger microfinance organizations in India (SKS, Spandana, BASIX) started raising larger and larger debt tranches ($5M or more), they started bumping into ICICI's risk management policies limiting the firm's exposure to sub-prime and unsecured borrowers. But is microfinance really sub-prime? Or is such a designation a gross oversight of the historically high repayment rates that microfinance borrowers have shown globally through the Grameen model?

First of all, Microfinance lending is not without risks. As the March 2006 crisis in Andhra Pradesh and the Bangladesh floods of 1998 showed, political moodswings and natural disasters create enough uncertainty in MF lending to necessitate that banks demand a significant premium on their microfinance debt investments, particularly because when write-offs do occur, there are no assets left to repossess. In 2007 that premium in India was been between 7.5-8.5% over 10-year US Treasuries (which were at 4.75% most of the year).

But these microfinance risks (political corruption or overwhelming floods) are very different from the risks faced by US sub-prime mortgage holders. Nonetheless, when interest rates rise as a whole, and credit becomes more expensive for borrowers in rural North Carolina, it also becomes more expensive in rural India. That is systemic risk, and when your microfinance organization is big enough, a 1% increase in US treasuries will translate into at least a 1% increase in your microfinance org's cost of borrowing.

So is microfinance indeed decoupled from the world economy?

Maybe the answer is yes and no.

Microfinance is subject to the same systemic risk that pervades the mainstream credit (and equity) markets, so to suggest that it provides a natural, or perfect hedge to mainstream equity or debt securities (in the way that gold is a hedge to the U.S. dollar) is not entirely accurate.

But investing in the debt or equity of microfinance institutions does allow investors to further diversify their holdings and shed incremental unsystematic risk. It's just that the market isn't exactly liquid right now. It's limited by size and international controls on investment flows. But if you could create this kind of liquidity, wouldn't that be interesting to investors? That's just what funds like GreyGhost Antares are attempting to do by creating a secondary market for microfinance securities...

Okay, Lots of news in Microfinance these last few months:

There was another investment in SKS ($37.5M!!) this time led by Silicon Valley Bank, Reliance is getting into Microfinance (it was only a matter of time), mobile-payment vendor Eko has launched its 5,000 person pilot in New Delhi, SKS's CFO S. Dilliraj thinks MFIs and moneylenders can get along, Intellecap is hosting its next Srijan MF business plan competition, and a new report by CGAP states that the recent boom in microfinance investment has been driven by social investors (but avid readers of my bankerinindia blog knew that already).

And I just found another great site for microfinance news, DripFin, how could I have missed this one for so long?!