We started the course at eToro after 40 employees (out of 200) asked to join. I had to split the team into Winter and Summer sessions. I made sure the group included programmers, product guys, marketers, sales people and players from every other department. Some companies’ CEOs would run a sales course. In this company I run a course teaching people how to dream and disrupt.
We opened the original course notes Class 2: Party Like it’s 1999? Everyone in class was able to edit and add comments as we went along. Prior to the course I’d asked the students to read the course notes and add one comment.
This second class deals with the Dot-com bubble, and implies that in order to understand the current (social) boom you need to understand the past. We started the class with the funny video Here Comes Another Bubble . We continued with a quick overview of the ’90s. One of our employees who was born in East Germany told us that until the Berlin Wall fell they had never seen a telephone, TV set or computer that this technology on the other side of the wall was mind-boggling.
Then the mania started: September 1998 – March 2000. I remember those days. I was 17 and had started trading in the biggest bull market in history. Everyone believed that the “New Economy” would replace the old “brick and mortar” economy and a lot of people started believing we were entering a brave new world. Check out this amazing CNN Special Report on dot.com Bubble of 1999 .
The PayPal mania specifically is really interesting, in that PayPal’s original idea involved beaming money to people over PalmPilots and other PDAs. It was voted one of the worst 10 business ideas of 1999, which is saying a lot. Their salvation was simply giving away $10 for opening an account and for each referral, and the rest is history.
Then the bubble burst, destroying a lot of companies and leaving a lot of scars for people who were once, if only for a short while, rich or ultra rich. I learned my lesson during this time, having lost most of the money I made. Once I was able to repay all my loans I took to trading options on the NASDAQ, and kept some profits for the coming winter.
Everyone in technology was devastated. Their world had collapsed. Outsiders largely proclaimed, “We told you its a bubble!” and went on to create a much worse real estate bubble, and we all know how that played out in 2008. But the interesting long-lasting effect was on the Silicon Valley, where the old beliefs of thinking huge and building big were replaced with cautiousness, practicality, leanness, avoiding advertising budgets and a focus on viral coefficient, computer experiences rather than human interactions (which changed when Facebook started), 100% product focus and reinvesting. But the most horrific lesson by far was :
“Finally—and this was the overarching theme—you shouldn’t discuss the future. That will just make you look weird and crazy, and, well, you just shouldn’t do it.”
I think it’s just a matter of time until a new generation starts dreaming again, thinking and talking about the future and changing the world. When that starts we will see the new economy emerge, this time for good, with a focus on replacing old values of P/E and operating efficiency with great products that focus on social interaction and openness.
In one of my previous blog posts, I wrote about Peter Thiel‘s “Last Course You Will Ever Take”, after which I actually opened the course and had 40 people from eToro sign up. We began with 20 students, and we’re committed to begin the next course early next year. I opened a shared presentation and shared notes for the course, which people in eToro can access. I will soon open the files to public viewing. Anyone who wants access outside eToro may contact me.
We began the first class with a short introduction from each of the 20 participants. Programmers, IT guys, online marketers, sales people and developers from all around the company were really getting to know each other for the first time. We then went over the course notes. We talked about the happy Dot-com bubble days, and were surprised that some people in the room don’t even know what we were talking about: it’s been 12 years, and the youngest programmer in the room is 21 (he was 9 when the first bubble burst).
We continued with the first class notes by Blake Masters, titled “The Challenge of the Future”. We went over the main topics and shared our insights into each topic. We started with the History of Technology and mentioned great book – Yuval Noah Harari’s A Brief History of Humanity. Following that we covered The Case For Computer Science and, more generally, The Future for Progress, and why using computer science to progress virtually and abstractly allowed us to progress much faster. We discussed the great example of going from 0 to 1 as opposed to 1 to N, and how ‘real’ startups try to create 0 to 1 solutions: not simply scaling a known solution but finding a new one.
We gave several examples of how scaling traditional businesses might be good business, but not necessarily a true startup. The Problem of 0 to 1 is similar to the EXPONENTIAL VS the LINEAR (1 to N) problem. There is an Educational and Narrative Challenge when trying to solve 0 to 1 problems, since education and “planning” by definition are tailored to solve known problems. The geeks and philosophers in the room understood the Determinism vs. Indeterminism similarity, and how solving indeterministic problems always include a heuristic or statistical model. In other words, to succeed as a start up you need statistics on your side, or just good luck.
While talking about exponential growth and 0 to 1 we mentioned the general theories of rapid growth, whether The Future of Intensive Growth will be convergence (which means growth will decline), cyclical theory (growth will decline and then quicken its pace again) or the beautiful Creative Destruction theory and Singularity.
We then tried to understand why startups usually start as small, for-profit companies, Why Companies drive progress instead of governments (not really Coase Theorem), and why Costs Matter and are lower when you are small. There is actually a simple answer to the question of Why Do a Startup? The only pure motive should be the desire to change the world, an internal fire that leads an entrepreneur to change something, as opposed to a way to make money.
In a wholly competitive society, a talented person will make more money doing 1 to N while working in certainty rather than uncertainty; it is actually harder to make money as an entrepreneur.
So Where to Start? Read the course notes (my short version or Blake’s) and think where YOU can add value as an eToro partner. 🙂
I recently asked Lior Hakim, a friend and colleague, for help in relearning programming. It’s been 2-3 years since I last compiled anything, and I wanted to learn how to code on the web. Funny thing is I originally taught Lior to program 8 years ago, using a Borland Delphi (wow, that seems old now).
What?? 10 years ago no one would ever have said this. I remembered Macs as being the least user-friendly computers for programmers. Macs were the first choice “If you want to design…” or “If you want to edit movies…”, but programming was all about Unix or Microsoft environments, never Mac.
And then I realized what happened. Apple released Mac OS X in 2002, and ended the Microsoft-Intel duopoly, since OS X was based on UNIX and therefore connected to the open source community. Those two relationships, Intel-Apple and open source-Apple, brought an end to the Microsoft Dogma. Once open source programmers and web programmers started using Macs, it was just a matter of time before the web would adapt and adopt Mac standards.
The paradigm shift came with a lot of help from Google (Where Steve Jobs was a director until the Android killed that). Today Google gradually replaces the enterprise dependency on Microsoft. We @eToro never installed a Microsoft Exchange, and today with 200 employees we use Google Apps as our main email, and gradually shifting to Google Docs as our main document collaboration software, and soon enough G+ as our intranet. Without that Microsoft would still at least own the enterprise.
Next I’ll also install the new Microsoft Visual Studio IDE, and try to compile something. I wonder how things have progressed since I became too corporate to program. I wish that the next time I learn how to program, the environment will be completely web-based and will not require for me to install anything, a full-featured programming platform in the cloud.
I think it’s awesome because it’s driving an entire industry to f***ing innovate. Hats off to Eric and Jim (and all the rest) for making it happen, and for giving us an opportunity to rise above ourselves and surprise not only the audience at Finovate, but ourselves.
The first time I saw the release product we launched was on stage. I learned about what we were going to present only days before leaving for London, and a month before the show we didn’t even know what we are going to present. That’s what innovation is all about, letting people surprise you. It’s not about telling people what to do, but letting them show what needs to be done.
Every finovate we are making sure to have fun, last finovate I left the stage after 60 seconds shouting (the video)“BOOM – thank you very much”, and yesterday.we go the line of the day :
Billy Robins @WARobins #Finovate @eToro “you have a gift card under your chair … No, we’re not Oprah.” line of the day + great demo
We are on the verge of the next web. Very few people realize what web 3.0 is going to be about financial innovation. It will be consumer oriented social and global and it’s already awesome. It’s not about payments or PFMs any more than Google is about advertising. It’s about a new type of companies which constantly innovates, changing the rules again and again and refusing to adhere to traditional rules of business.
Simply f***ing innovate. That’s how you disrupt and scale.
After my last post on Bar Refaeli, I noticed a jump in visits, it seems people like to click on pictures of women in Bikini’s more than geek talk, lead me to think how big is the porn industry. It reminded me of the best Broadway show I’ve ever seen called Avenue Q, its a puppet-based musical comedy. I couldn’t stop laughing. The most memorable song is called “The Internet is for Porn“, in which a woman sings of the greatness of the internet, while a monster constantly shouts “For porn!”. It really is a must-see Broadway show, featuring fun songs like “If You Were Gay” and “Everyone’s a Little Bit Racist”.
Is porn still such a big part of the Internet? A study by Extremetech estimates that 30% of Internet traffic can be attributed to pornography:
“According to Google’s DoubleClick Ad Planner, which tracks users across the web with a cookie, dozens of adult destinations populate the top 500 websites. Xvideos, the largest porn site on the web with 4.4 billion page views per month, is three times the size of CNN or ESPN, and twice the size of Reddit. LiveJasmin isn’t much smaller. YouPorn, Tube8, and Pornhub — they’re all vast, vast sites that dwarf almost everything except the Googles and Facebooks of the Internet…a single porn site accounts for almost 2% of the Internet’s total traffic. There are dozens of porn sites on the scale of YouPorn, and hundreds that are the size of ExtremeTech or your favorite news site. It’s probably not unrealistic to say that porn makes up 30% of the total data transferred across the Internet.”
Why is porn is such a driving force, leading the tech industry’s progress much like it lead the VHS revolution? Why isn’t isn’t any one of the 28 genres listed on IMDB as disruptive ? Maybe the producers of pornography tend to adopt newer, more efficient forms of distribution because there is very little context in porn. For example, if you used to buy porn magazines and later discovered video, there would no longer be a reason to buy magazines; video killed the magazine star. In contrast, printed papers are still a big part of news reading,which video has been unable to fully replace. Why? Because people are used to reading the news in a specific way, such as that “seeing” the news on TV is complementary, while new distribution methods in porn become alternative methods and not complementary.
Internet porn has a very fast adoption rate, by both producers and consumers. It has little to no product/brand loyalty towards the context, it can claim 40%-70% of the online population as potential users (depending on whether women watch porn or not) and the shift towards new products is very fast. The only factor left to compete on is user satisfaction. It seems user satisfaction in porn is more technical than anything else, its not about the quality or context of the content (for most) but about an efficient way to deliver it, and maybe that’s why technical advances are so efficient in porn.
There are more amazing stats on porn: its a $100B industry, the top 3 Porn grossing countries are China, South Korea and Japan, and “every second $3,075.64 is being spent on pornography. Every second 28,258 internet users are viewing pornography. In that same second 372 internet users are typing adult search terms into search engines. “
I’ll end with a great geek joke from the comments on extremetech :
Work as an intern at a porn company = awesome.
Work as an intern at a porn web company = SQL database maintenance, SQL database maintenance everywhere.
My favorite model, Bar Refaeli, caused a lot of buzz with the recent launch of Mycheck, an Israeli based payment app for iOS, Android and Blackberry smartphones. This is a brilliant move by Refaeli, an attempt to leverage her status as an international super-model in order to get involved with start ups.
Mycheck enables you to pay your restaurant bill and leave without having to wait. The idea resembles the great business model of corporate restaurant cards. Israeli based 10Bis and Cibus, for example, issue companies ‘charge cards’ that are given to employees who can use them at participating restaurants. Both companies are doing great locally.
High-tech companies can give incentive to employee’s dining expenses and employees benefit from ‘free’ lunches at multiple locations. Corporate restaurant card companies charge 8%-10%, much more than a regular credit card from the business, but businesses are somewhat obligated to participate, especially those who cater to hi-tech areas, otherwise employees simply won’t go there. Furthermore, restaurant card companies aren’t considered a payment provider or credit card company so they are more flexible with businesses. It really is a win-win-win product. The IT workforce in the USA, a market of 5-10M, and an average of $10 lunch for 200 days is not bad at all; with 5% charges, 1M users a year and an average $2000 spent this could become a $100M revenue business. Implementing this business using an app instead of cards is simply a modern way to do it.
The biggest hurdle will be getting businesses and users to accept this new payment system. There are many tactics to get mass markets (1M+) to use this, focusing on either B2B or B2C. Bar can probably help a lot with B2C, for example a free photo book available exclusively in-app.
This is a brilliant move by Bar because she is leveraging her buzz across different industries. I am almost certain my post will get more clicks because of her name (and attached picture), and the same is true for the companies she works with. The 5-10 startups she will be involved with will have a have higher chances of success, similarly to Ashton Kutcher’s recent investments.
Finally, in case this post gets to Bar, it’s been a long time since you attended my pool parties when we were 16. Since eToro is the leading social investment network in the world, and we are both passionate about startups, technology and finance, I would love to see how we could get involved, professionally. You would look great with an eToro designed dress 🙂
As the CEO of eToro I’ve been thinking a lot about the opportunities and challenges of the shift from e-commerce to social commerce. It is a necessary shift, the shift from enabling commerce over the internet to making smarter decisions. Moving from how to buy X, to why should or shouldn’t I buy X.
While having lunch with two friends from the Internet industry, Ido (aka Gingi) who works at Outbrain, and a friend who works at Google, we discussed the problem of the search industry today and how Google could use its existing ecosystem to take over social commerce. The problem with the current search model is very simple: it promotes low-cost (higher margin) supplier solutions rather than the better valued (viral) solutions.
Imagine two Limousine services operating in NYC. The first uses cheap limos driven by underpaid drivers, resulting in high profit margins. The service pays $2 CPC, Click to Lead of 10% means CPL is $20 and conversion rate from lead to ride of 66% means $30 CPA. Calculating a passenger fare of $70 and total driver/limo/gas cost of $30 yields a margin of $10 per ride.
The second limo service has spent an additional 33% on better vehicles and better drivers. Consequently, buying CPC on Google is simply not profitable for that particular service. It needs to pay the same $30 CPA, but its cost is $40 which results with zero margin. The service is therefore unable to scale its business using Google.
Is Google really interested in promoting the cheapest and least valuable products? The latter service can still have a great business, possibly a better one than the first. They have no Google Adwords campaign, and must therefore rely on other channels and word of mouth for referrals. The social commerce shift is about bringing the offline word of mouth online, and being able to analyze, monitor and optimize accordingly. We are still far away, but here are three steps that would take Google the right direction:
- Give significantly higher quality score for companies’ Google+ pages in search results and AdWords, in order to discount AdWords PPC cost toward a social funnel.
- Optimize conversion funnel toward socially-connect lead generation through Google+ pages (website optimizer version for G+ pages)
- Enable simple viral coefficient tracking in Google analytics, i.e for a keyword in a campaign count the amount of 1st tier, 2nd tier, etc. of social connections impacted.
In the solution I suggest, the driver would direct the clicks to a G+ page, seeing reviews of his friends, the history of the service and its quality. He would register using Google+, enabling him to return later and the service will remember his ride history. This page will optimize the context and social history of the page, the better product will get a discount on the Adwords (either explicitly or because of the higher quality score), the better product will now have better CPA and better conversion, since its reviews will be better, and since any visitor will see his friends’ reviews or usage of the service. This page can be optimized towards the acquisition, with smart tools and experience from Google. I am certain that any Google+ landing page with social context and a fast G+ connect to user email (and phone number) can be more efficient than the dozens of tools today for landing page optimization.
Google already optimizes organic search results for Yelp and Google+, why not optimize paid results as well ? Google should take advantage of the monstrous search business to push Google+ toward becoming the first scalable use of performance social marketing.
Facebook is too personal, which is why advertising doesn’t scale there yet. Facebook needs to shift how people think of commerce in order to scale their current model. G+ just needs to become the ‘Facebook for business’, the place to see what your friends are buying, and for how much. It should be more than just personal, but rather commerce oriented.
I believe eToro products would convert better with social context, as the leading social investment network we are a social service by definition and every social service is based primarily on its users’ satisfaction. We would experiment with social search and spend all of our Google Adwords on Google+. All we want is a good discount 🙂 .
I wrote the framework below, as a several elements that needs to be proven in order to manifest a new more efficient economic framework, It captures the essense of 3 main points :
- A form of non goverment digital currency (such as bitcoin, I wrote this before the formation of bitcoin) is a more efficient for of money, and therefore makes money cheaper by reducing friction costs
- Ideally a digital form of currency will be socially connected, to base the trust of the currency on the existing social connections and infrastructure. i.e – to create Attached Money you simply connect bitcoin to twitter
- Once a digital currency is formed, and is socially connected, then monetary policy becomes visible, and there are simple solutions to decrease inequality (social interest), which is the biggest problems of the economy today.
While I don’t think this work is done, I prefer it to be public and potentially inspire someone somewhere to help make the world a better place (and I lost my laptop and had to recover this, never again)
Thesis – New Money Market (Yoni Assia, 2008)
- Suggest a new money system that is based on only Money Proper (cashless system), is not governed by state and cannot be printed without addition of underlying commodity (as opposed to current money which includes Acknowledgement of debt as addition to the money). The new money system will be fully transparent and all representative money will be attached via electronic means to entity (I.e – individuals, corporations, academic institutions etc.). This money can be considered Attached Money (or People Money if only connected to individuals).
- Suggest an exchange rate model for the currency of the new money system.
- Co-exist with current currencies and money
- Define exchange rate mechanism to existing floating currency rates, depending on other currencies as underlying commodity.
- i.e – In order to buy goods using cash, the new money must be converted via exchange to existing cash money or commodity (gold, oil etc.).
- Suggest an interest rate model detached from base currency, as a sub set of the base currency. The intrinsic interest rate of the currency would then be 0%.
- Suggest a banking/lending model that can only lend the new currency based on deposits (reserve rate > 1), thus eliminating the addition of money to the market
- Prove that under perfect market model, the new currency can be analyzed as a giffen good (Not sure this is the right term/analysis). This giffen goodcauses continuous pricing deflation of commodities, labor and other currencies. This deflation is of an opposite trend to currency. Characteristics of the giffen good:
Thesis – Good Money Market – The visible Hand (Yoni Assia, 2008)
- Suggest 3 interest rate models to determine interest rate policy of the issuer (State):
- Capitalism – positive interest, independent of holding entity, independent of deposit size
- Socialism – Positive interest rate, increased rate for individuals and social entities (culture, Academic), decreasing interest rates on larger deposits
- Marxism – Negative interest rate, increased rate for individuals and social entities (culture, Academic), decreasing interest rates on larger deposits
Impact – From each according to his ability, to each according to his need
The more negative interest rates become, all assets value will diminish (hyper deflation).
- Prove that in a democratic, free market (not necessarily perfect market) the only difference between capitalism, socialism and Marxism is the attached interest rate to currency. In addition, since in a perfect market inequality should decrease to increase production, the transition between 3 interest rates models is directly connected to the macro economic growth and production of the market.
- Prove that the money market and interest rate model together could replace all taxes, tariffs and regulation with a differential democratic interest rate model where interest rates connect to corresponding entities and the interest rate is determined by an electronic voting system – Thus making the invisible hand Visible
- Build framework to show that current markets (especially China and the west) are already on the path to convergences:
- Western interest rates reach 0 in developed countries (Japan, US,EU)
- China regulates a socialist/communist economy, becoming the largest producer of commodity in the world.