• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Innovation Footprints Logo

Innovation Footprints

What if . . . ?

  • Home
  • Blog
  • #FounderFuel – #NYCTech
  • Hack Your Startup
    • Founder Anxiety
    • Learn
    • Design
    • Pitch
    • Accelerate
    • Protect
    • Negotiate
    • More
  • #BeYourOwnMentor – Independent Study
  • About
    • About Me
    • Terms
      • Ethics Statement
      • Community Guidelines

Intellectual Explorations

#CountDown: 9 Days To #TNYSCM05 – Bringing The Blockchain From The Lab And Into The Real World

April 16, 2018 by Brian Laung Aoaeh

A cross-section of the audience at #TNYSCM02, January 2018.

We’re now just a little over a week away from The New York Supply Chain Meetup’s fifth gathering. The purpose of this post is to outline our plans for that event, and preview what we expect to do in May and June 2018 . . . We’re still in the early days of building this community, so much of this is subject to change, especially as we go through the process of recruiting sponsors.

Our Mission

To nurture and grow the world’s foremost open, global, multidisciplinary community of people devoted to building the supply chain networks of the future – starting in NYC.

The New York Supply Chain Meetup is powered by Particle Ventures, a seed-stage fund in New York City that invests in Supply Chain & Industrial Intelligence. Particle is built by the same team that launched KEC Ventures.

#TNYSCM05 is sponsored by Work-Bench, an enterprise technology focused venture capital fund in New York City. Work-Bench supports early go-to-market enterprise startups and helps scale customer acquisition with community, workspace, and corporate engagement.

 

[maxbutton id=”1″]

 

Logistical Details: #TNYSCM05

  • Date: Thursday, April 26, 2018
  • Time: 17:30 – 20:30
  • Location: Work-Bench, 110 5th Avenue – 5th Floor, New York, NY 10011. Please register by following the link above.

#TNYSCM will feature two panel discussions and a keynote presentation. The keynote presentation happens between the panel discussions.

Agenda

5:30 PM – 5:55 PM: Pre-event Networking
5:55 PM – 6:00 PM: Welcome Remarks (#TNYSCM, Work-Bench)
6:00 PM – 6:50 PM: Panel Discussion I (40 minutes), Q&A (10 minutes)
6:50 PM – 7:30 PM: Keynote Presentation (30 Minutes), Q&A (10 Minutes) 7:30 PM – 7:35 PM: Break
7:35 PM – 8:25 PM: Panel Discussion II (40 minutes), Q&A (10 minutes) 8:25 PM – 8:30 PM: Closing Remarks

MC: Daniel James (@daniel_r_james)

The panel discussions will be moderated by Rob Bailey (@RMB). Rob is CEO & Co-founder of MState (@mstatelabs), a growth lab for enterprise blockchain startups. Rob’s experience is in scaling enterprise startups – Kustomer, DataSift, SimpleGeo, and eScene, which he scaled from pre-launch to fast-growing revenue between $1M and $25M. In addition he has raised, or helped raise, $200M in venture capital. My friends Ed Sim and Eliot Durbin of BOLDstart ventures are each a co-founder and advisor respectively of MState.

The important and difficult job is never to find the right answer; it is to find the right question.
– Peter Drucker

Panel Discussion I

Tanjila Islam is the CEO and Founder of TigerTrade, an international B2B marketplace and supply chain solution for companies buying and selling excess inventory worldwide. TigerTrade’s customers include the largest off-price chains and brand outlets in the US, Latin America, the Middle East, Europe, Asia, and Australia. As an end-to-end solution for the global trade of excess inventory, TigerTrade manages the entire supply chain, from vendor verification merchandise authentication to payments and shipping. Prior to founding TigerTrade, Tanjila was an international trade and economic development expert, designing and managing large-scale economic growth and trade promotion programs in developing countries, including Indonesia, Afghanistan, and Bangladesh for organizations such as the U.S. Agency for International Development and the World Bank. She is also an Adjunct Professor at the Fashion Institute of Technology, where she teaches courses on International Trade, International Business Transactions, and Global Sourcing. Tanjila is an avid traveler and adventurer and speaks Arabic, Bengali, English, and Spanish. She holds a B.A. from Columbia College, and M.A. in Near Eastern Studies from NYU, and an M.I.A. in International Economic Policy from the Columbia School of International and Public Affairs.

Todd Scott is VP Blockchain Global Trade at IBM. In this capacity Todd has the responsibility for the Go To Market strategy and execution for the JV between IBM and Maesrk. He also owns building the new sales, enablement and operations capability for IBM as the main reseller channel for the JV. Prior to his current role Todd was the IBM VP and Managing Director for PepsiCo, and Southwest Airlines. Todd’s present role caps a 30-year IBM career that began as a client executive in Greenville, South Carolina. He then moved to the Mid-Atlantic area where he managed a team of sales and technical staff who provided integrated solutions for mid-market customers in Virginia, Maryland, and Washington, D.C. In addition, during his tenure at IBM, Todd has managed regional sales teams covering various components of IBM’s business including Systems Technology Group, Channels Group, Media and Entertainment, Retail and Consumer Products. One thing he accomplishes in each of his roles is a clear understanding of the customer’s business. This enables him and his team to make credible and highly valued recommendations. Those recommendations included global SAP implementations to the design of new business operating models to implementing IT data center and business process outsourcing initiatives. Todd attended Davidson College and graduated in 1987 with a B.A. in Political Science.  At Davidson, Todd lettered every year as a basketball player and was a member of the 1986 team that participated in the Men’s Division One NCAA tournament. He lives in North Texas with his wife Norma. They have four children.

Nolan Bauerle is Director of Research at CoinDesk. Before joining Coindesk in early 2016 he conducted research for the Senate Banking Committee in Canada. He is a serial entrepreneur, a techno-optimist, and also writes science fiction. He holds an LLB from Université Laval.

Scott Carlson (@Scottophile) is Chief Information Security Officer at Sweetbridge. He is using his 20 years of experience gained from position at Cargill, Schwab, PayPal, and elsewhere to guide security policy as Sweetbridge transforms how the world thinks about asset backed loans, supply chain finance, and wealth building. Scott’s focus in the past has included Information Security, Data Centers, Cloud Virtualization, and Systems Architecture. He is a top-rated speaker and contributor to RSA, Gartner, Kuppinger Cole, OpenStack, and VMworld. He holds a B.S. in Computer Science from Moorhead State College.

 

[maxbutton id=”1″]

 

Keynote Presentation

Some researchers argue that building on existing blockchain and DLT frameworks is a mistake, because they are fundamentally unsuited for large-scale, real world applications. They argue that new DLT frameworks must be built to meet real-world demands. Our keynote speaker will offer one perspective on that topic.

Silvio Micali (@silviomicali) is the Ford Professor of Engineering at MIT’s Computer Science and Artificial Intelligence Laboratory. He has been a member of faculty of the Electrical Engineering and Computer Science Department at MIT since 1983. His research interests are cryptography, zero knowledge, pseudo-random generation, secure protocols, mechanism design, and distributed ledgers. Silvio is the recipient of the Turing Award in Computer Science, the Gödel Prize in Theoretical Computer Science, and the RSA prize in Cryptography. He is a member of the National Academy of Sciences, the National Academy of Engineering, the American Academy of Arts and Sciences, and the Academia dei Lincei. His presentation will focus on Algorand (@Algorand) a scalable, secure, and decentralized digital currency and transactions platform. Algorand recently announced that it has raised $4 Million in a seed round of venture capital funding.

 

[maxbutton id=”1″]

 

Panel Discussion II

Samantha Radocchia (@SamRadocchia) currently serves as Co-Founder and Chief Marketing Officer at Chronicled (@ChronicledInc) which leverages blockchain and IoT technologies to deliver smart supply chain solutions. Prior to serving as CMO, she led product development and architecture as Chief Product Officer for 3 years. She is also a Co-Founder at Better Kinds, which fosters everyday practices of conscious consumption and responsible production by empowering people to make better micro decisions that lead to better macro results. Recently named to the Forbes 30 Under 30 List, Sam is a thought leader in the blockchain sector and the founder of Machine Elf Consulting, an emerging technology and product development consulting firm based in Brooklyn, NY. Founded in 2012, the firm focuses on blockchain, IoT, and additive manufacturing advisement to enterprises and individuals. Sam has an entrepreneurial background that spans several technology companies. She became interested in blockchain as a mechanism to facilitate trusted interoperability, a challenge she sought to overcome leading her first two companies. Before joining Chronicled and Better Kinds, she previously served as the CTO of Huckabuy, a consumer product metadata aggregator and standards company and Founder and CEO of Stunable, a provider of inventory management and marketing software utilized by consumer products brands to integrate e-commerce sales with cross-channel interactions. Sam attended Colgate University, earning a BA in English and Anthropology – specializing in Critical Theory, Linguistics, and Symbolic Systems. She continued her academic pursuits at King’s College in London where she studied Management & Entrepreneurship and at the London School of Economics where she studied organizational culture. Samantha graduated from NYU Summa Cum Laude in the spring of 2013 with a MA in Media, Culture, and Communications, focusing on the socio-political analysis of emerging technologies. On the personal side, Samantha is an avid risk-taker and daredevil, attaining her pilot’s license at the age of 17 and accumulating over 700 jumps as a competitive skydiver.

Alex Mashinsky (@Mashinsky) is CEO and Founder of the Celsius Network. He is also one of the inventors of VOIP (Voice Over Internet Protocol) with a foundational patent dating back to 1994 and is now working on MOIP (Money Over Internet Protocol) technology. Over 35 patents have been issued to Alex, relating to exchanges, VOIP protocols, messaging and communication. Alex is a serial entrepreneur and founder of seven New York City-based startups, raising more than $1 billion and exiting over $3 billion. Alex founded two of New York City’s top 10 venture-backed exits since 2000: Arbinet, with a 2004 IPO that had a market capitalization of over $750 million; and Transit Wireless, valued at $1.2 billion. Alex has received numerous awards for innovation, including being nominated twice by E&Y as ‘Entrepreneur of the Year’, in 2002 & 2011; Crain’s 2010 Top Entrepreneur; the prestigious 2000 Albert Einstein Technology medal; and the Technology Foresight Award for Innovation (presented in Geneva at Telecom 99). As one of the pioneers of web-based exchanges, Alex authored patents that cover aspects of the Smart Grid, ad exchanges, Twitter, Skype, App Store, Net ix streaming concept and many other popular web companies. Additionally, Arbinet’s fundraising story was featured as a case study in 2001 by Harvard Business School. Alex holds a Bachelor of Engineering in Electrical Engineering from The Open University of Israel, and a Bachelor of Science in Economics from Tel Aviv University.

Juan-Jose Ruiz is a global Strategy and Business Development executive with experience in technology, financial services, and media/information industries. He is currently leading IBM’s Blockchain business development efforts across several verticals with particular focus on Global Commerce. Prior to IBM he filled a number of strategic and operational roles at Thomson Reuters based in Europe, Asia, and the Americas including leading Strategic Alliances efforts for the Scientific division worldwide. Juanjo started his professional career as a software engineer in Spain developing some of the early web-based vertical b2b marketplaces. He holds a Computer Science and Engineering degree from the Universidad Autonoma de Barcelona, an MBA from Mannheim Business School, and got his Chartered Financial Analyst accreditation from the CFA Institute. In his free time, Juanjo is an active start-up mentor in the NYC area and volunteers in local youth sport organizations.

Sharad Malhautra is a Senior Manager at EY Enterprise Blockchain, where he leads digital transformation initiatives for enterprise clients focused on digital and emerging technologies, specifically Blockchain and Distributed Ledger Technologies. He has gained more than 13 years of experience spanning engagements in the United States, Europe, and Asia. Among other accomplishments; He evangelized and led the sales and engagement for the first Blockchain Advisory Project for EY globally, he led a blockchain engagement on price verification and negotiation for a leading CPG company, and led an event-management track-and-trace Blockchain engagement  to enable visibility across the network for a leading logistics company. Over the years he has earned a reputation for; leading complex global business initiatives, being a trusted c-suite advisor on emergent technologies, a willingness to accept a high degree of uncertainty, and successfully scaling businesses. He often speaks at industry events on Enterprise Blockchain. Sharad holds a B.E. in Computer Engineering from the University of Pune, and an MBA from Rice University. Beyond his work at EY, he is a strategic advisor to BillionBricks, a non-profit organization that works with homeless and displaced communities in India and South East Asia.

 

[maxbutton id=”1″]

 

He who knows all the answers has not been asked all the questions.
– Confucius

Preview — #TNYSCM  in May & June

Here is what our team of organizers is working on, between now and June.

  • May 24: A showcase of startups in Fashion, Apparel, and Retail supply chain. THIS IS GOING TO BE BIG! I am excited about the plans our team is putting together. Don’t wait. You can sign up for #TNYSCM06: Convergence Across the New Fashion & Apparel Supply Chain.
  • June 21: A Sourcing 101 workshop for startups building physical products. More details coming soon. I have been told; “THIS IS GOING TO BE BIGGER!”

Other Upcoming Supply Chain Events

  • Transparency18: This is the flagship event series started by the founders of the Blockchain in Transport Alliance. It follows BiTA’s Spring Symposium, a members only event that occurs on May 21, 2018. I will attend both days of Transparency 18 on May 22 and May 23.

Filed Under: #TNYSCM, Case Studies, Communities, Computer Science, Entrepreneurship, Innovation, Mathematics, Supply Chain, Technology, Venture Capital Tagged With: #TNYSCM, Blockchain, Cryptocurrencies, Distributed Ledger Technologies, Early Stage Startups, Entrepreneurship, Innovation, Logistics & Supply Chain, Logistics and Supply Chain, Technology, Venture Capital

#ChainReaction: Who Will Own The Age of Cryptocurrencies?

March 4, 2018 by Brian Laung Aoaeh

Brian + His Pencils

Notes:

  1. This blog post represents my opinions only.
  2. My first blog post in the #ChainReaction Series is #ChainReaction: Notes on Centralized, Decentralized, and Distributed Systems.

As I read The History of Money, I have started understanding the monetary and currency systems of the past. It is becoming clear to me that we are inevitably going to transition from the current age of paper money and into the age crypocurrencies. It’s just a matter of time. I also think, the move towards a decentralized cryptocurrency regime will give way to a more centralized system because the alternative would lead to socioeconomic chaos and disorder which would be too destabilizing to society. So fiat cryptocurrencies are the future. This still leaves plenty room for privately issued digital tokens that are used to fulfill various other functions in global trade and commerce, just not as a decentralized substitute for what we consider money today. The social engineering behind money is a centralized function. To get to the age of fiat cryptocurrencies we need cryptography that is so easy to use that “even a caveman” could use cryptocurrencies without even having to think about it. So regulations, social psychology, and technology have to move well beyond the current state of the art. I am thinking a lot about this because trade finance is a massive pain-point in global supply chain networks, and distributed ledger technology offers a promising way to attack some of the issues that cause trade finance to be a choke-point for global trade and commerce.

If the history of commercial banking belongs to the Italians and of central banking to the British, that of paper money issued by a government belongs indubitably to the Americans.

– John Kenneth Galbraith, From The History of Money

Who will own the age of cryptocurrencies?

Filed Under: #TNYSCM, Finance, History, Investment Themes, Organizational Behavior, Psychology, Sociology, Supply Chain, Technology, Venture Capital Tagged With: Applied Cryptography, Blockchain, Cryptocurrencies, Decentralization, Distributed Ledger Technologies, Software, Supply Chain Finance, Technology

#ChainReaction: Notes on Centralized, Decentralized, and Distributed Systems

February 18, 2018 by Brian Laung Aoaeh

Brian + His Pencils

This blog post is the first in a series of blog posts I will write as part of my effort to take an inventory of what I am learning about supply chains, digital tokens, and distributed ledger technologies.

I expect these blog posts to be frustrating for most people to read because I suspect they will come-across as disorganized, and confused. That is a reflection of the complexity of the topics I am trying to learn.

If you feel I have got something completely wrong, please do not hesitate to let me know. As Marcus Aurelius puts it;

If anyone can refute me—show me I’m making a mistake or looking at things from the wrong perspective—I’ll gladly change. It’s the truth I’m after, and the truth never harmed anyone.

First, some context; I am a seed-stage VC who has been studying supply chain for sometime. I believe that the greatest technological shifts of the next 3 or 4 decades will happen at the intersection of supply chain, industrial processes, data and analytical decision-making. I believe this shift will transform the way global supply chains function in many different industries.

If you follow technology and business news then you know what some of the trends are that will lead to the kind of shifts I believe we are about to witness. They are; increasing efficiencies in industrial automation, exponentially faster, more powerful, and cheaper computing technology, the proliferation of electronic sensors capable of capturing large amounts of data in almost any industrial or non-industrial setting one can imagine, software that is capable of analysing huge troves of data in order to aid people in making decisions about complex processes and systems, and ubiquitous computing. The list goes on. A more recent addition to any list of ground-breaking technological developments is Bitcoin and its related technologies, including the Bitcoin blockchain, as well as other cryptocurrencies and their accompanying blockchains or distributed ledger technologies.

There is currently a lot of ongoing enthusiasm, and perhaps, even hype, about Bitcoin, the Bitcoin blockchain, other cryptocurrencies or digital tokens, and their accompanying blockchains or distributed ledger technologies. Mainly, the excitement is around the belief that this group of technologies has the potential to “disrupt” any number of existing business or social structures. Personally, I agree with the following statement by Marco Iansiti and Karim R. Lakhani;

True blockchain-led transformation of business and government, we believe, is still many years away. That’s because blockchain is not a “disruptive” technology, which can attack a traditional business model with a lower-cost solution and overtake incumbent firms quickly. Blockchain is a foundational technology: It has the potential to create new foundations for our economic and social systems. But while the impact will be enormous, it will take decades for blockchain to seep into our economic and social infrastructure. The process of adoption will be gradual and steady, not sudden, as waves of technological and institutional change gain momentum. ((Iansiti, Marco, and Karim R. Lakhani. “The Truth About Blockchain.” Harvard Business Review. February 17, 2017. Accessed February 04, 2018. https://hbr.org/2017/01/the-truth-about-blockchain.))

If you agree with the preceding statement, then you should also agree that, perhaps, before one dives into the intricacies of digital tokens and distributed ledger technologies it is useful to study centralized and decentralized systems in a broad, general sense. Therefore, though I will ultimately migrate to discussing centralized systems, decentralized systems, and distributed systems in relation to information technology systems, at the outset I am thinking more broadly in terms of social structures that exist in economic, political, and cultural organizations.

At the end of this process, I hope to have developed a good frame of reference for understanding why and how digital tokens and distributed ledger technologies will combine with other prevailing advancements in technology to cause the transformation in global supply chains that I believe is upon us. I hope this helps me see what is coming next – in a manner of speaking, and that the knowledge I will develop in the process helps me make better investment decisions.

If you have read any articles that discuss Bitcoin and its accompanying technologies, then you will recognize the recurring themes of centralization versus decentralization. So perhaps the place to start is in understanding when centralized structures should be desired and maintained versus when decentralized structures should be desired and maintained.

The following discussion is motivated by, and borrows heavily from, “Centralization and Decentralization: The Compunications Connection” by Stephen H. Lawrence. ((Lawrence, Stephen H. “Centralization and Decentralization: The Compunications Connection.” Accessed February 4, 2018. http://www.pirp.harvard.edu/pubs_pdf/lawrenc/lawrenc-i83-2.pdf. I am basically paraphrasing pages 6 – 26.)) In that paper there’s a quote from “The Computerization of Society”, a report prepared for the French Government by Simon Nora and Alain Minc;

It allows the decentralization or even the autonomy of basic units. Better still, it facilitates this decentralization by providing peripheral or isolated units with data from which heretofore only huge, centralized entities could benefit. Its task is to simplify administrative structures by increasing their effectiveness and improving their relations with those under their jurisdiction. It also allows the local municipalities more freedom. It reinforces the competitiveness of the small and mid- size business vis-a-vis the large enterprises.

Centralized Systems

A centralized system is a system in which a master-node makes decisions or performs systemwide functions on behalf of all the other nodes within the system – subordinate-nodes. Subordinate-nodes only follow instructions issued by the master-node. It should be obvious that centralized systems depend on a reciprocal relationship of trust between the master-node and every subordinate-node. Centralized systems are also described as command-and-control systems.

Advantages of Centralized Systems

  1. Returns to Scale: Centralized systems generally benefit from increasing returns to scale, meaning that the system generates outputs at a rate that is proportionately greater than the rate at which it consumes inputs. More specifically, the value of a centralized system’s outputs should be proportionately more than the value of the inputs consumed by the system. This happens because resource-intensive decisions and functions can be performed by the master-node only, without burdening the entire system with performing those same functions. As a result, as the system grows, the per-capita system costs can decrease substantially. Increasing returns to scale are generally closely associated with increasing efficiency.
  2. Optimization: It is easier to optimize the outputs of a centralized system given a set of inputs because the effort that goes into optimizing the system’s output need only be expended by the master-node and not by every node within the system. As a result, in a centralized system optimization contributes to the system’s overall efficiency.
  3. Standardization or Uniformity: The hierarchical structure of centralized systems makes it easier to maintain standardization or uniformity within the system. Such standards are determined at the level of the master-node, and then they are implemented and enforced at each subordinate node according to rules established and maintained by the master-node. Standardization and uniformity ensures that the entire system operates as one unit, rather than as a collection of disparate, non-uniform, non-standardized entities. In certain instances, standardization and uniformity may be especially useful qualities if the system is to serve its intended purpose.
  4. Criticality or Importance: A centralized system is preferred when there is a disproportionately high cost associated with the commission of errors or mistakes at the level of a subordinate node. In other words, centralized systems are prefered when the weight of responsibility for avoiding mistakes is high, and the costs of this responsibility are borne by the master-node.
  5. Coordination & Interdependence: Centralized systems perform better when one must account for economic externalities. An economic externality is a positive or negative consequence that is borne by an entity which did not participate in taking the actions that led to that outcome. In other words, it is easier for the master-node in a centralized system to also account for systemwide externalities before choosing an action that is implemented by all the subordinate-nodes in the system.

Disadvantages of Centralized Systems

  1. Information Overload: Centralized systems can experience breakdowns in systemwide performance if the master-node experiences an information overload.
  2. Compulsion: Centralized systems are associated with bureaucracy and lack of freedom – from the perspective of subordinate-nodes. For example, centralized systems do not freely admit new nodes to the system unless such nodes are first approved by the master-node.
  3. Lack of Flexibility: Centralized systems are characterized by an inability to respond with agility and flexibility in the face of changing conditions. This can make centralized systems more fragile in the face of threats to the entire system.

Decentralized Systems

By contrast, a decentralized system is one in which there is no single master-node issuing systemwide instructions that subordinate-nodes must follow. Rather, in a decentralized system every node is responsible for its own decision-making and, is capable of taking whatever actions its independent decisions require it to take relative to agreed systemwide goals. It should be obvious that the trust-relationship in a decentralized system differs from that in a centralized system in an important way.

A decentralized system is one which requires multiple parties to make their own independent decisions.

– Rohit Khare

Advantages of Decentralized Systems

  1. Impartial Standards: Decentralized systems are better suited when the emphasis is on effectiveness rather than efficiency. As a result decentralized systems tend to exhibit standards that stress the results that each node in the system produces and how those results contribute to overall system wide goals rather than how each node accomplishes the desired results.
  2. Initiative/Innovation: Since each node in a decentralized system is free to independently experiment with an eye towards maximizing system wide outputs, there tends to be a higher degree of innovation within decentralized systems. Once a superior method of accomplishing systemwide goals has been identified by one node within the system, other nodes will quickly copy that method if it increases their wellbeing. All else equal, this will lead to a higher level of system wide output.
  3. Responsiveness: In decentralized systems, individual nodes are more responsive to local conditions. This is because each node in the system is free to determine local priorities on an ad-hoc basis given information available to that node even if this information is not available to other nodes within the system. It is not difficult to see how this quality of decentralized systems contrasts with the standardization/uniformity quality that is present within centralized systems.
  4. Simplified Decision-making: Decentralized systems exhibit a simplified decision-making relative to centralized systems. This is because for a given situation, decisions can be made by only the relevant subset of nodes within the system while  non-relevant nodes conserve system resources. In such a situation, simplified and localized decision-making is an advantage of non-relevant nodes are not adversely affected by the decisions that have been made, and the resulting actions that have been taken, by relevant nodes.
  5. Minimize Information Resource Requirements: A decentralized system could be designed such that each node only processes information relevant for its role within the system. This way, systemwide resource requirements can be minimized since each node conserves resources by focusing only on information and activities relevant to its specific functions and does not concern itself with matters outside that sphere of relevance.

Disadvantages of Decentralized Systems

  1. Duplication of Effort: Decentralized systems can be designed such that each node within the system attempts to solve similar problems as other nodes in the same system – leading to duplicated effort. It is easy to see how this can lead to more waste than one would observe in a similar, but centralized system.
  2. Suboptimization: In decentralized systems, a single node or a subgroup of nodes, might decide to pursue activities that increase their own well being at the expense of the well being of the entire system. Trade-offs have to be made within a decentralised system to ensure that suboptimization is minimized by keeping incentives between all the nodes within the system aligned with one other, and with the entire system as a whole.
  3. Less Amenable to Standardized Change: Since each node is responsible for making its own decisions and taking actions independent of a master node, standardization takes a much longer time to diffuse through, and become adopted by the nodes within a decentralized system. As a result decentralized systems characterised by a lack of uniformity, whereas centralized systems are characterized by systemwide uniformity.

In a quest to find examples of decentralization in action within organizations that I am somewhat familiar with, I went looking for a book that discusses the topic. I found that in The Starfish And The Spider: The Unstoppable Power of Leaderless Organizations, a book by Ori Brafman and Rod A. Beckstrom, where they  introduce us to the major principles of decentralization; ((Brafman, Ori, and Rod A. Beckstrom. The starfish and the spider: the unstoppable power of leaderless organizations. Portfolio, 2006.))

  • When attacked, a decentralized organization tends to become even more open and decentralized.
  • It is easy to mistake a decentralized organization for a centralized organization because we are far more accustomed to centralized organizations. It is also easy to vastly underestimate the power of decentralized organizations.
  • A decentralized system does not have central intelligence; the intelligence is spread throughout the system. As a result the best information and knowledge is located at the edges of the organization, close to where things are actually happening.
  • Decentralized, open systems can easily mutate.
  • Decentralized organizations can seemingly appear out of nowhere because they can mutate so quickly, and because they are easily overlooked at the outset.
  • As decentralization takes hold within an industry, overall profits decrease.
  • The power of decentralization comes from the phenomenon that when people are put into a decentralized system they automatically want to contribute, and their contributions are usually remarkably of a high quality relative to what one might find in a centralized system.

So far I have not said much about distributed systems. Think of a distributed system as a hybrid between a fully centralized system and a fully decentralized system. Businesses that blend the best of both types of organizational architecture in their business model are not that uncommon, and when they do so successfully the results can be overwhelmingly successful . . . But, we can discuss that another time.

In my next post, I will more directly delve into cryptocurrencies and distributed ledger technologies. Till then, you may delve further into this topic by reading Chris Dixon’s “Why Decentralization Matters“.

Filed Under: Computer Science, How and Why, Innovation, Organizational Behavior, Sociology, Startups, Strategy, Supply Chain, Technology, Venture Capital Tagged With: Blockchain, Business Models, Cryptocurrencies, Distributed Ledger Technologies, Early Stage Startups, Innovation, Supply Chain, Supply Chain Finance, Supply Chain Logistics, Supply Chain Management, Technology, Venture Capital

Update #01: White Paper | Towards A Supply Chain Operating System

October 21, 2017 by Brian Laung Aoaeh

 

This update identifies areas of supply chain technology that will be sufficiently well served by existing relational database management systems, and enterprise resource planning systems. It also outlines areas of supply chain that distributed databases or ledgers are more suited for.

Lastly, to avoid confusion Nahum Goldmann’s contact information is provided at the end. I have been helping him think about this, but as I explained in the original post I am not personally an investor in DLTArray, nor is KEC Ventures an investor in DLTArray.

The update is based on feedback received from people who read the earlier version of the white paper.

Link to updated white paper: DLTSupplyChainPlatformWhitePaper20171017

This is an update to: White Paper | Towards A Supply Chain Operating System. That post has more background related to this.

Link to Nahum Goldmann bio: NGbio

Update #1: Tuesday, October 24, 2017 at 15:40 EST.

  • Rearrange links to reduce confusion about what people should read first, etc.

 

 

Filed Under: Business Models, Computer Science, Innovation, Intellectual Explorations, Investing, Investment Themes, Investment Thesis, Lab Notes, Long Read, Mathematics, Organizational Behavior, Startups, Supply Chain, Technical Brief, Technology, Uncategorized, Venture Capital Tagged With: Business Models, Business Strategy, Early Stage Startups, Innovation, Startups, Technology, Venture Capital

White Paper | Towards A Supply Chain Operating System

August 26, 2017 by Brian Laung Aoaeh

Note: This article does not necessarily reflect the opinion of KEC Ventures, or of other members of the KEC Ventures team.

Supplying the world with nearly everything is an enormous and complex job: there are things to discuss. 

– Rose George (2013-08-13). Ninety Percent of Everything: Inside Shipping, the Invisible Industry That Puts Clothes on Your Back, Gas in Your Car, and Food on Your Plate (p. 142). Henry Holt and Co.. Kindle Edition.

In December 2014, I started monitoring a startup that I hoped KEC Ventures would invest in later, when they raise a round of financing. It was building and marketing compliance software for the freight trucking industry. I got to work learning about the trucking market. Ultimately, we failed to close that investment – despite our best efforts and the eagerness of our team to lead the round about a year after I first began to track their progress. I still feel let down by that founder . . . But, that’s a story for another time.

What I had learned about the trucking industry led me to ask myself; “If this is what’s happening in trucking, I wonder what the shipping industry is like?”

Some of what I have learned is chronicled here;

  1. Industry Study: Freight Trucking (#Startups)
  2. Updates – Industry Study: Freight Trucking (#Startups)
  3. Industry Study: Ocean Freight Shipping (#Startups)
  4. Updates – Industry Study: Ocean Freight Shipping (#Startups)

After I published the 4th article on that list, I got an email from a gentleman named Nahum Goldmann. I was intrigued by his email because even before I read his bio, I could tell that he knew A LOT about the topics I had been exploring – all the activities that have to be undertaken to get stuff from a supplier to the ultimate customer – supply chain.

So what exactly is supply chain? I will delve into that in another post more fully, but before then, perhaps this will help. A Supply Chain is;

A network of connected and interdependent organisations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users.

– Martin Christopher, Logistics & Supply Chain Management: Creating Value-Adding Networks, 4th ed, Pearson Education Limited 2011, page 4.

Supply chain comprises;

  • Supply Chain Management (SCM),
  • Supply Chain Finance (SCF),
  • Supply Chain Logistics (SCL), and some people include
  • Supply Chain Execution (SCE).

The world is a supply chain.

I spoke with Nahum via skype on July 14, 2017. During the call we discussed a number of topics, among which was an observation I made in my update on the shipping industry; “One product that it appears the industry would gravitate towards is a system of record that connects all participants in the supply-chain, from end-to-end. This would be a platform into which various shipping industry data could be input, and other data can be obtained as outputs . . . Probably most input data would come from other platforms and data repositories, while output data would be fed to different counterparties based on their access rights and information requirements. It seems to me to be a problem suited for a cryptographically-secure, lightweight, multi-tenant, cloud-based ledger or database of some sort that can also provide anonymity for market participants who wish to maintain some level of secrecy from other counterparties with whom they interact through the platform. One can imagine that governments around the world, for example, would want special access rights in order to keep tabs on the movement of goods and people from one place to another.”

As luck would have it . . . I was describing an idea Nahum and other people with whom he has been collaborating have been working on.

Since then, I have helped him to distill their work into a white paper which you can read below. Also, there’s a link to Nahum’s bio.

A few days ago, on August 23 to be precise, I decided that I ought to start attending the supply chain meetup in New York City. To my utter shock, there was none. So I am fixing that. I have launched The New York Supply Chain Meetup (TNYSCM). Within 3 days, we had grown to 55 nodes. ((A member of TNYSCM is called a “node.”)) My vision is that TNYSCM will become a multidisciplinary community of practice that brings together the wide array of people and disciplines whose full participation it will take to build the global supply chain networks of the 21st century.

By Nahum’s estimates supply chain inefficiencies create a 15% – 20% drag on global GDP. The 2017 projection for global GDP is approximately $80 Trillion. This is a big problem. One of the things I will attempt to do in subsequent research is try to get gather more data on the economic and financial size of the problem.

But . . . Less I get distracted. Here’s the white paper. Also, here’s Nahum Goldmann’s bio. We want your input. My email is at the end of the whitepaper. Hopefully there will be more news to share soon.

For clarification; KEC Ventures is not yet an investor in Nahum’s startup – DLTArray. I am not a personal investor in DLTArray. My involvement is on a purely voluntary basis at this point and is based on my desire to see a large scale supply chain operating system that tightly integrates all the core components that make supply chain networks function come into existence. However, KEC Ventures is an investor in Gem, which is building an enterprise blockchain operating system, with supply chain applications.

Update #1: Sunday, August 27, 2017 at 06:38 EST.

  • Disclose investment relationships involving KEC Ventures, Gem, DLTArray.
  • Clarify my personal involvement

Filed Under: Business Models, Computer Science, Intellectual Explorations, Investment Themes, Investment Thesis, Lab Notes, Mathematics, Operations, Organizational Behavior, Startups, Technical Brief, Technology, Uncategorized, Venture Capital Tagged With: Early Stage Startups, Innovation, Logistics & Supply Chain, Technology, Venture Capital, White Paper

#NotesOnStrategy: Mental Models About Demand, Supply, and Markets For Early Stage Technology Startups

July 19, 2016 by Brian Laung Aoaeh

View Over The Manhattan Bridge
View Over The Manhattan Bridge

Alternate Title: An Exhaustive Introductory Guide To Demand, Supply, and Price Theory; For First-Time Tech Startup Founders.

To know that we know what we know, and that we do not know what we do not know, that is true knowledge.

– Henry David Thoreau

Introduction

I am always surprised when I am speaking with founders and come to the realization that they lack any understanding of the fundamentals of demand and supply. I do not think everyone should study economics – I avoided economics in college because I felt I could teach myself the basics outside school if I needed to. However, success as an entrepreneur is so dependent on those concepts that I expect founders to have made some effort to grasp the basics. This post is the outcome of what I have learned about economics since college, and how I apply that knowledge daily as I assess early stage startups.

Why do entrepreneurs need to understand the fundamentals of demand and supply?

How a startup’s customers/users think about a product affects how demand for that product might develop. Not understanding the fundamentals of demand puts founders at a disadvantage because it means that the way they talk about what they are doing to potential investors, potential customers/users, and the market, could be incongruent with the reality that is unfolding in front of them.

The target audience for this post is first time founders who have no prior exposure to introductory micro or macro economics. Ideally, they would be building a software-focused technology startup. Also, they should feel that a brief survey of some of the fundamental concepts of microeconomics will help them get a better grasp of the reality they are confronting as they try to raise capital or as they go about generating traction for their product/service. For these founders, this should serve as a comprehensive, but introductory survey of the relevant topics, and enkindle the desire to learn more about the topic.

Before I delve further into the discussion, an important caveat; I am not an economist. The majority of what I know about economics has been acquired through teaching myself. I am less focused on theory, and more focused on applications in the real world. Having said that I believe that practice without theory is the precise definition of bullshit. Also, this post will focus more on the qualitative aspects of the discussion . . . I think the quantitative aspects of these topics will be several levels of granularity too deep for this purpose.

I hope to raise more questions than I answer.

Motivation

Although I have been thinking about this topic for a while, the motivation to write this post did not crystallize until I read the July 14, 2016 issue of Dan Primack’s Term Sheet, a newsletter published by Fortune.

Instead of trying to paraphrase his words, I’ll let Dan speak for himself:

So far this year in the U.S. there have been over 500 children unintentionally injured or killed by a firearm. Last year, over 200 American adults were unintentionally shot by a child using a gun, with more than 80 fatalities. There also will be more than 10,000 suicides by firearm, often by teens or young adults who use a gun owned by their parents.

These are the sorts of tragedies that I know upset a lot of venture capitalists. Not only because VCs are human, but also because I see many of the social media posts whenever one of these horrors gets widespread public attention. Very often those posts include some sort of plea for gun control ― sometimes mild reform, sometimes outright repeal of the 2nd Amendment.

But here’s what I concluded yesterday, after our session on smart-gun technology during Fortune Brainstorm Tech: VCs are unintentionally complicit in this epidemic.

There currently are many entrepreneurs working on smart-gun technologies that could take a giant chunk out of teen suicide and unintentional firearm deaths. Some are working in fingerprint technologies, which would primarily be used by target shooters and the like. Some are working on RFID technologies, which would prevent a gun from being fired by anyone not carrying the proper token (such as in a watch or a bracelet or even inserted surgically just under the skin). Some are working on smart-grip technology, which can recognize the “proper” user.

The trouble, however, is that almost no venture capitalists have interest in funding these entrepreneurs. “It’s about investment,” said Margot Hirsch, president of The Smart Tech Challenges Foundation. “It’s very hard to create a real technology company on just grant funding.”

To be sure, the preferred VC metric of TAM (total available market) is not an issue here. There are going to be around 15 million firearms sold in the U.S. this year, and surveys have shown that many buyers would purchase a smart-gun, were it to be both available and reliable (to date, no smart gun has ever been commercially available in the U.S.). But smart gun entrepreneurs get a nearly-universal cold shoulder from VCs, some of whom cite regulatory risks that don’t seem to bother them when investing in Uber or Airbnb or a pharmaceutical company.

Legacy firearm manufacturers are not going to do the R&D here. Namely because they view the politics as too tricky, with many of their most loyal customers viewing smart guns as backdoor gun control (which it needn’t be). As always, real technological disruption will come from somewhere else, financed largely by venture capitalists.

Or it won’t. And more kids will die.

Before I explain why I think Dan and the founders he’s speaking about are mistaken in the way they have chosen to think about this specific issue, let’s dive headlong into Economics 101. We’ll come back to this at the end. However, Dan’s comments echo comments I have heard from numerous other founders who are struggling to understand why investors do not see “the opportunity” in the same way that the founders see it.

Economic Goods, Demand, Supply, Types of Economic Goods

What is an Economic Good? An economic good is any good or service that is scarce in supply and commands a price on the open market, satisfies a need or a desire, and provides utility to its purchaser. In the remainder of this discussion I am thinking of a specific good/service . . . not all goods/services in an economy or market. I will also typically speak in terms of an individual consumer, but the reader should interpret that as synonymous with any entity, individual person or business, which pays for a good or service.

What is Demand? Demand is the term economists use for the amount of a good that a market of buyers wishes to consume. When demand at a specific price is discussed, the term Quantity Demanded is used instead. Aggregate demand refers to the sum of demand for the good at every available price. Demand is often analyzed using a demand curve. The demand curve is usually depicted as a downward sloping line, which conforms to the law of demand; the quantity demanded of a good varies inversely as the price of the good. In other words, the quantity demanded decreases as the price of the good increases.

What is Supply? Supply is the term economists use for the amount of a good that a market of suppliers are willing to produce in order to satisfy demand for the product. At a specific price, the quantity supplied refers to the amount of the good that suppliers are willing to produce. Aggregate supply refers to the sum of supply for the good at every available price. Supply is often analyzed using a supply curve. The supply curve is usually depicted as an upward sloping line, which conforms to the law of supply; the quantity supplied of a good varies directly as the price of the good. In other words, the quantity supplied increases as the price of the good increases.

How is Price Determined? The price that the average consumer pays for a good is determined by the interaction of supply with demand. Analytically, we look for the point at which the demand curve and the supply curve intersect. That combination of price – plotted on the vertical axis, and quantity demanded – plotted on the horizontal axis, is the price at which every unit of demand is satisfied by a unit of supply.

What is Opportunity Cost? An opportunity cost is the potential loss in utility from an alternative action that a consumer might have derived, because of a decision to consume a specific good or service. Put another way, it is the potential benefit that a consumer forgoes because of an actual choice to consume one good good/service instead of another. We care about the opportunity cost of the best alternative that is available to the individual consumer because we assume that is the choice they would have made in the absence of the one they have actually settled on.

What is utility? Utility is a measure of the satisfaction or benefit that a consumer derives from consuming a good/service.

So far, so good. There’s nothing to this. Right? It all seems really straightforward.

Things get a little less straightforward when we start to categorize goods by their types. What does that mean? I will explain.

Remember my use of “. . . satisfies a need or a desire . . . ” when I was defining a good. Well that turns out to be quite important. Why that is the case will become clearer as we continue our exploration below . . .

Types of Economic Goods

  • Inferior Goods: An individual consumer demands less of an inferior good as that consumer’s income increases. In other words, they trade-up as they become wealthier.
  • Normal Goods: An individual consumer demands more of a normal good as that consumer’s income increases.
  • Luxury Goods: An individual consumer’s demand for a luxury good increases by a higher percentage than the percentage increase in the consumer’s income.
  • Complementary Goods: These are goods that yield the highest utility when they are consumed together.
  • Substitute Goods: These are goods that are normally not consumed simultaneously because they satisfy the same need or desire.
  • Veblen Goods: An increase in price induces consumers to consume more of a veblen good. Usually, this is an indication of strong brand power.
  • Public Goods: These are goods that are nonexcludable and nonrivalrous. They are nonexcludable because denying people who have not paid for the product from enjoying its benefits is prohibitively expensive. They are nonrivalrous because people who have not paid for them can consume them without any impact on the utility enjoyed by consumers who have paid for them. Public goods suffer from what economists term the free-rider problem.
  • Merit Goods: These are goods whose benefits are underestimated by consumers.
  • Demerit Goods: These are goods whose disadvantages are underestimated by consumers.
  • Free Goods: These are goods that can be consumed with no opportunity cost to the consumer.
  • Giffen Goods: An increase in price leads to an increase in the quantity demanded. Giffen goods are considered rare.

Elasticity of Demand, Substitution and Income Effects

Elasticity of Demand is a measure of the responsiveness of the quantity demanded to a change in some other variable on which quantity demanded is dependent, all other things held constant. This is equivalent to measuring the percentage change in the quantity demanded due to a one percent change in the other variable, assuming that everything else is held constant.

Price Elasticity of Demand is a measure of the responsiveness of the quantity demanded to a change in price of a good/service, all other things held constant. Equivalently, it’s a measure of the percentage change in quantity demanded due to a one percent change in the price of a good/service, all other things held constant. Generally, price elasticity of demand is negative, in conformity with the law of demand.

Income Elasticity of Demand is a measure of the responsiveness of the quantity demanded to a change in the income of the user/customer, all else held constant. Equivalently, it’s a measure of the percentage change in the quantity demanded due to a one percent change in the income of the user/customer, all else constant. Income elasticity of demand can be negative, positive, or zero.

Cross-Price Elasticity of Demand is a measure of the responsiveness of the quantity demanded of one good, X, to a change in the price of another good, Y, all other things held constant. Equivalently, it is a measure of the percentage change in quantity demanded of X due to a one percent change in the price of Y, all else equal. If X and Y are complements, this value will be negative. It is positive if X and Y are substitutes.

Comments about Elasticity of Demand: One can measure elasticity of demand in relation to changes in any variable that one chooses as long as one has the data required to perform such analysis. For example; suppose a startup is investing in paid SEO and SEM efforts, then it ought to be able to measure what may be called its “SEO/SEM Elasticity of Demand” which would be the percentage change in quantity demanded of its product/service per one percent change in its investment in SEO/SEM. Another example; A startup that is offering promotions as a means of generating traction and virality could measure a “Promotion Elasticity of Demand” which would measure the percentage change in quantity demanded of its product/service per one percent change in its investment in promotions. How this startup measures “quantity demanded” is a separate question that needs to be answered to perform the analysis. If you have a product in the market it might be a worthwhile exercise to think about what “quantity demanded” means for you specifically. Is it time spent engaging with the app? Is it number of in-app purchases? Is it something else? Is it the amount of advertising purchased by advertisers wishing to reach the audience/community that you have built?

Measuring Elasticity of Demand: The most accessible and convenient approach for most people will be to perform a regression analysis using a spreadsheet package like Microsoft Excel, or something more sophisticated. Unless the founders have enough training to do this themselves, it probably makes sense to get some help crunching the data. An extensive treatment of regression analysis is beyond the scope of what I feel is necessary right now . . . Founders can get a directionally accurate sense of what’s happening by using simple “back-of-the-envelope” calculations that require nothing more than a pencil, some paper, and perhaps a calculator.

Factors That Affect Elasticity of Demand: Quantity demanded and aggregate demand behave the way they do in response to numerous variables. The purpose of the kind of analysis I am describing is to isolate the handful of variables that affect quantity demanded disproportionately in order to reduce their impact – if it is negative, or increase their impact – if it is positive. The following factors are worth considering;

  • Do substitutes for your good or service exist? How do they compare to yours in terms of price and quality? Here the substitution effect might come into play; The substitution effect occurs when consumers shift consumption between substitute goods/services because of a price change for one good relative to its substitute, all else held equal.
  • How are you defining your good or service? If your definition is too narrow you’ll wind up with analysis that is meaningless . . . . . . This is often a concern when a startup founder says something like “No one else is doing this at all!” If your definition is too wide, you still may wind up with analysis that is meaningless.
  • What budgetary constraints do your users/customers face? This is particularly relevant if you want to measure price elasticity of demand. Here the income effect might come into play; The income effect occurs when consumers shift their consumption patterns due to a real change in income, all else held equal. Sometimes the income effect is similar to the substitution effect.
  • Is the price change permanent or temporary? If it is permanent, users/customers can seek an alternative if switching costs do not keep them locked in. If it is temporary, then they might forgo searching for a substitute, and so demand may hold steady or perhaps increase.
  • How strong is your brand? High brand affinity will cause users/customers to stay after an increase in prices. Low brand affinity will cause users/customers to leave.
  • How important is your product/service to your users/customers? I often smile when I am speaking with a founder who cannot understand why ” . . . no one else can see how important this app is . . . ” To that I often respond, your data refutes your assertion that this app is important to your users/customers. In one case the founder had stopped bothering to keep up with the daily, weekly, or even monthly numbers because they were so dismal, but was trying to convince investors that all he needed to solve the problem was a capital infusion of $500,000 or more. How potential users/customers react to a startup’s product is the ONLY VALIDATION THAT IS WORTH ANYTHING TO INVESTORS. Everything else is guesswork and hand-waving. One product might start out looking like a toy. Then users/customers extend the applications of the product, and it suddenly becomes integral to their day to day lives.  Another product starts out seeming like the most important thing in users/customers lives. Then it becomes clear that it is not robust enough to do more than one small thing among the multitude of things they want to get done using that product or one of its alternatives. All else equal, we should expect the latter product to experience more demand elasticity than the former. This is why investors usually will ask about a startup’s product roadmap as the founders think about what subsequent rounds of financing might look like.
  • Who is the startup’s customer? Who is paying? How are they paying? In the age of business models that are supported by advertising this can be a complex issue to untangle. Am I paying Facebook in units of privacy, personal data, and attention? If so, at what point do I become less willing to continue using Facebook? Am I Facebook’s customer? Should Facebook even think about that issue? Or, should it focus all its attention on the advertisers who pay it cash in order to direct advertising and marketing messages to me? Definition: A customer pays for a product/service by exchanging something of value for the right to use/own the product/service. For some consumer-facing startups every customer uses some form of the product – every customer is a user, but not every user of the product is a customer since not every user pays for the product with something that user considers valuable in conventional terms. For example; Facebook’s customers are businesses that want to sell advertisements to its 1.5 billion users. The product they are paying for is the attention of the users Facebook has amassed. The product its customers use to reach its users is a flexible advertising platform that serves large, medium, and small businesses alike.

Interpreting The Data for Own Price Elasticity of Demand

  • Absolute value of Elasticity > 1; Demand is elastic, and changes by a proportion that is greater than the percentage change in price. Demand is relatively responsive to changes in price.
  • Absolute value of Elasticity < 1; Demand is inelastic, and changes by a proportion that is less than the percentage change in price. Demand is relatively unresponsive to changes in price.

Paging Professor Clayton Christensen – The Jobs To Be Done Framework

Another way to think about your product/service is using Professor Clayton Christensen’s Jobs-To-Be-Done framework. Prof. Christensen is the management theorist responsible for popularizing the concept of disruptive innovation.

The keys to this framework are;

  • Understanding the “job” your users/customers are “hiring” your product to do for them, and
  • Understanding the alternatives your users/customers would consider hiring to do that job, and finally
  • Understanding what you need to improve in order to be the first product/service your potential customers think of when they need to hire a product/service to do that job for them.

The JTBD framework helps you understand why and how people hire your product.

For example, a founder I was chatting with once thought she was building a chat app. Yet it seemed to me that the handful of users she had used her app to organize informal groups of friends to do things. For example one use case was a group of friends who used the app to get together after work to play pickup basketball in Manhattan or Brooklyn. Another use-case was a hairdresser and makeup artist who needed to let her customers know where and when they could meet here during the weekend. As it turned out, the hairdresser was the most engaged, most active user of the app. The problem? The founder up to that point did not think of this hairdresser as her typical user, and had never spoken with the hairdresser to find out what features were important and needed improvement, and which ones could be cut.

Was she building a chat app? I don’t know . . . However, none of the use-cases that she described to me sounded like what I think of when I think of a chat app. Instead it sounded like people were using her app to organize groups to get together and do something. Chat seemed like a by-product. It did not seem like chat was the main thing. I suggested she go back and find out what it was about her app that the folks using it the most liked and why.

Wrapping Up and Connecting The Dots

Let’s think about Dan’s rant about venture capitalists’ disinterest in funding smart gun technology startups. We can flip that issue; should those founders even be pitching to venture capitalists, or would they be better off seeking alternative sources of capital?

How would you categorize smart gun technology? Is it a normal good? Is it a veblen good? Is it an inferior good? What is it?

Smart gun technology is a public good; it is non-excludable and non-rivalrous in nature . . . That places a cap on how much value the startups working on smart gun technology can extract from the market in exchange for the value that they create for that market. For an investor focused on financial returns that is a non-starter.

How public goods get financed can change based on changes in regulation, but usually such goods are brought to market with funding from sources that are not focused on financial returns.

Dan Primack’s rant was misguided. The founders he describes who are pitching venture capitalists are misguided too. Dan should know better. The founders working on smart gun technology should also know better than to be pitching venture capitalists. In this specific case, venture capitalists are not the problem. Ignorance is.

The startups I am thinking of build software-centric products/services. For such startups the supply side of the equation is a relatively simple issue to figure out. Startups building relatively complex hardware products have to worry more about the supply side of their business than their software-focused peers. Software startups have the advantage of building a product once, and being able to sell it many times over without incurring significant costs.

Understanding the basics of supply, demand, and price theory will not solve all the problems a startup founder faces. However, a firm grasp of the basics will help founders understand why consumers/customers behave in certain ways. Understanding that is priceless.

References

  • Managerial Economics And Business Strategy – Michael R. Baye, 5th Edition.
  • Price Elasticity of Demand, Wikipedia.
  • Public Goods, Library of Economics and Liberty.
  • Different Types of Goods, Economics Help.
  • Note: Price Theory and Applications by Steven Landsburg is my favorite introductory textbook on microeconomics.

Filed Under: Critical Thinking, Innovation, Management, Operations, Strategy, Technology Tagged With: Demand, Early Stage Startups, Markets, Micro Economics, Price Theory, Startups, Supply, Technology, Venture Capital

  • Go to page 1
  • Go to page 2
  • Go to page 3
  • Go to Next Page »

Primary Sidebar

Search Innovation Footprints

Archives

Tag Cloud

#MarketVoicesAtFreightWaves #TNYSCM #TWSCF Behavioral Finance Blockchain Business Model Canvas Business Models Business Strategy Community Building Competitive Strategy Conferences Cryptocurrencies Disruptive Innovation Distributed Ledger Technologies Due Diligence Early Stage Startups Economic Moat Entrepreneurship Industry Study Innovation Investment Analysis Investment Thesis Investor meeting Logistics & Supply Chain Logistics and Supply Chain Long Read Network Effect Ocean Freight Shipping Persuasion Pitching REFASHIOND Ventures Startup Communities Startups Strategy Supply Chain Supply Chain Finance Supply Chain Logistics Supply Chain Management Switching Costs Team building Teamwork Technology Value Creation Venture Capital Viral Marketing

Footer

Calendar

February 2021
S M T W T F S
 123456
78910111213
14151617181920
21222324252627
28  
« Oct    

Categories

Meta

  • Log in
  • Entries feed
  • Comments feed
  • WordPress.org

© 2021 · Innovation Footprints. All Rights Reserved.