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Paul Kedrosky
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Paul Kedrosky Articles

Superstar CEOs Suck - Click To Read Article
Compensation, status, and press coverage of managers in the United States follow a highly skewed distribution: a small number of “superstars” enjoy the bulk of the rewards.

Front-Running in Domain Bids
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I wonder why Wall Street didn’t think of this first? Front-running taken to the domain name market:

"You're an idiot if you don't start an Internet company right now"
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The following comes from my friend James Altucher\'s latest TheStreet.com Internet Review (subscribers-only) newsletter. He quotes a highly successful non-Internet entrepreneur friend recently saying to him as follows:

You Have No Frame of Reference Here, Donny
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I pity taxpayers wandering into the credit crisis story at this point. It is absurdly complex, and centers on a subject that most people neither care about nor understand. And the last time they looked in they were told this was about subprime and housing, which it no longer is -- at least not in large part.

Why We Worry About the Wrong Things, Part II
- Click To Read Article
I mentioned it earlier in a round-up, but I really want to draw people's attention to Time's cover article this week. The magazine has done some very good work lately, and this week's cover is another example. It painstakingly gets underneath our human penchant for getting possibilities, probabilities, and likelihoods all messed up, worrying over the least likely things, and being oblivious to the things that have a high chance of killing us.

Why are People Never Taken to Task?
- Click To Read Article
Tonight I was trying to get a sense of what signals were missed earlier this year, so I got to reading comments from various well-known buy-side sorts. Here is a sample from March of 2008:

Why Aren't Blogs Like Mine Worth Anything?
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I get emails all the time telling me that I'm #1 in this list of financial blogs, #3 in that one, and so on. My response is always the same: That's nice, but I'd rather you bought me. But no-one does. Buy me, that is.

Why China Saves So Much Money
- Click To Read Article
Great post by John Hempton on the real roots of China's penchant for savings: Its one-child policy.

What Sequoia Capital Looks for in Startups
- Click To Read Article
Elements of Sustainable Companies Start-ups with these characteristics often foretells the success of a business and the likelihood of it becoming a sustainable, enduring company. We like to partner with companies that have:

What All VCs Share
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In my PE Week column a while back I said that there no best practises in venture capital. A long-time industry veteran emailed agreement, but said that the best VCs do share two characteristics.

Welcome to L.A.
- Click To Read Article
Am in a line in L.A. and some guy just stopped by and tried to sell me "bio-energetic endpoint healing".

Want to Start a Virtual World? Be Sure to Play Hockey
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After the Club Penguin news today, a colleague of mine sent me the following entertaining note concerning the top five kid-centric virtual worlds (based on Hitwise data):

WallStreet.com Up For Auction: Is Money Worth More Than Sex?
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Ah, the age-old question: Is money worth more than sex? We get the latest test tomorrow, with the WallStreet.com domain going up for auction, a scant six months after porn.com sold for $9.5-million. Moniker, which is handling the auction, claims to have a $4 to $5-million reserve.

Venture Capital & Picking vs. Poking
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There is lots of partner tribalism in venture capital, but one worth noting is the schism between pickers and pokers.

Updated: The Age/Entrepreneurship Myth
- Click To Read Article
I pretty much entirely disagree with Fred Wilson's implication earlier this week that age is an obstacle to entrepreneurship. It may be an obstacle to a particular kind of entrepreneurship -- venture-backed companies where you give up equity to parental figures with money -- but implying anything broader than that is silly and counter to the facts.

U.S. TV Networks: This InterWeb Thing is Not a Fad
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Apparently the major TV networks have conceded this InterWeb thing may not be a fad after all:

Video Killed the Video Star
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In my mind and in my car, we can't rewind we've gone too far Oh-a-aho oh, Oh-a-aho oh Video killed the radio star. -- "Video Killed the Radio Star", The Buggles

Venture Capital & Recessions
- Click To Read Article
Lots of talk in the venture business, as everywhere else, about the impact of recessions on the business. In general, recession vintage venture funds have been among the better-performing funds. Here are some related points:

Trimming Startups, One Inscrutable Position at a Time
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From Lucy Kellaway in the FT, a rule that I'm going to apply at more startups:

Two Cows and Venture Capital
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Some very funny stuff in a Mark Gilbert column today on Bloomberg wherein he explains most of modern finance using "two cows" metaphors. Maybe you have to be a finance geek, but he had me laughing hard:

The Trouble with "Out of the Box" Thinking
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In an interview in Fortune magazine, writer Michael Lewis nails something important about the current ardor for innovators and entrepreneurs:

The Temporal Dependence of a VC's "No"
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If Marc doesn't stop writing such great posts I'm going to personally hunt him down and unplug his Macbook. It's making the rest of us look like unthinking layabouts.

Things That Tell You To Stop Reading a Finance Paper
- Click To Read Article
At least as important as knowing which finance papers to read is knowing early which papers to stop reading. Here is a dead giveaway on the first page of an otherwise interesting-looking paper.

The Trouble with Theme-based Venture Investing
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Pithy comments from Sequoia's Moritz on his trouble with theme-based venture investing:

The Twitter Lesson: No Business Plans Please
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Seeing that Twitter closed a funding round, and spotting the associated incredulity about Evan's company not having a business plan, reminded me of something: Whatever your feelings about Twitter, business plans are overrated, and profits perhaps even more so.

The Venture Capital Capital Calamity Thing
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Yo, BusinessWeek, the Trouble with VCs is not a new story. And Web 2.0 is not a "legitimately exciting frontier". Nevertheless, it is good fun reading this wildly bearish piece about the venture capital business. It touches on some legit issues, and will get attention. The VC industry is at a crossroads, no question, but things also look way worse than they are if you look at the VC biz solely through an IT lens.

The Trouble with Beta Invites
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I get a lot of invites to trial new beta program/services/products, etc., and I only have time to try a subset of them. It amazes me, however, how many people invite me to try something, without actually having a succinct, benefit-driven way of telling me why I should bother.

The Right Real Estate Offer
- Click To Read Article
Which of the following would make you more excited about the outlook for a hypothetical real estate market?

The Rise of the People-Less Business
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Some fascinating data out in a new Intuit/IFTF study on small business. One factoid that caught my eye right away was on the rise of "personal businesses", the kind of one-person shows that helped drive the adoption of Ebay, Adsense, etc.

The Myth of the Management Myth
- Click To Read Article
On a plane yesterday I read a truly awful new article in The Atlantic. Called \"The Management Myth\", it is nominally about how management theory is a waste, MBAs are dangerous, philosophy rules, and consultants are nasties.

The "Oh Shit" Board Meeting
- Click To Read Article
Peter Rip has a funny (and painfully familiar) comment about the near-inevitable "Oh shit" moment that comes at the first board meeting of a newly-financed early-stage company:

"The New Deal"
- Click To Read Article
If you aren't reading or tracking Keith McCullough of ResearchEdge's musings, you really should be. He is thoughtful, flexible, and practically-minded, all valuable traits in deranged times like these. Here is part of today's missive:

The Mustard Seed Problem
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Just to unburden myself of something that has been bothering me, people promoting economic "mustard seeds" need to be a little more careful in their metaphors. Here in southern California mustard is an invasive species, one that was uncommon fifty years ago and is now everywhere, crowding out indigenous plants, like wild flowers.

Teachings of the Wii Generation
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Nice post from DailyTech on the democratization of technology, and what we can learn from the surprising success of the Wii game system. It is easy to forget how many people thought the wildly successful Wii was set to fail.

The 2006 Beloit Mindset List
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The 2006 Beloit Mindset List is out, and it\'s a great reminder of how fast the culture changes, and how little you have in common with people beside you on the bus. Essentially a list of cultural and historical touchstones for the incoming class of 2010, it is fascinating reading, especially for those of us pretending to be capable of investing in things with appeal to this generation.

Ten Rules for Being a Good Conference Panelist
- Click To Read Article
Having moderated many conference panels, and participated on many more of same -- and suffered through even more as an audience member -- I\'ve decided to share some words of advice, even if it\'s mostly intended to give me something to point panelists to the next time I\'m a moderator.

The China Bubble Thing
- Click To Read Article
These two factoids won't settle the debate as to whether China's stock markets are currently in a bubble, but I thought it was worth putting them out there -- one bullish, one bearish:

Surviving the “Contained Depression”
- Click To Read Article
Interesting David Levy piece in the current issue of Institutional Investor. Here is the money ‘graf(s):

The Bank Blame Game Again
- Click To Read Article
We're back doing the bank blame game, and I really wish it would stop. Can't we go back to beating up on credit rating agencies? That was more pleasurable, and much cheaper. We didn't have to spend billions to feel bad -- we could just cold-cock them on principle.

The Coming U.S. Crackup
- Click To Read Article
Clive Crook on something that has been on many people's minds lately, the sense of a coming U.S. crackup:

Stealth Market Research & Google Movies
- Click To Read Article
I love stealth market research -- that is, unusual ways of figuring out what companies and competitors are doing. There are all sorts of ways of doing this sort of thing, from counting cars in company parking lots on outward. But there is no denying that technology continually creates new ways of ethically observing companies, and therefore new kinds of stealth research.

Staggering Data on Growth in Chinese Markets
- Click To Read Article
The growth in Chinese stock markets -- and the Chinese economy in general -- continues to be fairly staggering:

Sports and Raising/Lowering Your Game
- Click To Read Article
nteresting NBER paper looking at peer effects in the workplace. While fruit pickers, grocery scanners, etc., become more or less productive in correlation with their coworkers skill level, professional golfers play roughly according to their abilities irregardless of their playing partners' skill levels.

Subprime is Survivable, But ...
- Click To Read Article
While I'm carrying all the negative news, I might as well point to this fairly dire piece in the FT today. The subject is the state of the U.S. economy, and the author makes some compelling arguments that subprime is survivable, but it's what comes after that spells trouble for the U.S. economy:

Solving the Peter Principle? One Word: "Darts"
- Click To Read Article
There is a fun new working paper out from some Italian scientists that models the Peter Principle. The principle says, of course, that people climb in an organization until they reach their level of maximum incompetence.

Smoking and the Representativeness Heuristic
- Click To Read Article
A great example of the representativeness heuristic at work:

Self-Help: How a Ph.D. and Three-Pin Juggling Can Save Your Life
- Click To Read Article
For some non-apparent (at least to me) reason, I get a lot of emails of the what-should-I-do-with-my-life sort. People seemingly think that, given a few professional and personal facts from a stranger, I can tell them how to proceed in their careers. I usally beg off politely, pointing out the impossibility of answering the question, even when you know the person well.

Seven Years of Bad Luck, or Bad Growth, or Something
- Click To Read Article
From the latest Gary Shilling effort (as sent around by John Mauldin):

Riding the Blue Highways
- Click To Read Article
A summary of a new Jeff Rubin of CIBC report on the excess capacity in the U.S. auto industry: The U.S. is producing too many vehicles, according to a new report from CIBC World Markets, and sales already at a 34-year low will likely drop another 30 to 40 per cent and may never recover to previous levels.

Recognizing Genius: Rubber Bands and Dresser Drawers
- Click To Read Article
Gene Weingarten has an interesting anecdote in the weekend Washington Post on how violinist Joshua Bell's parents recognized his talent at the very young age of 4:

Random Ghana Company Factoids du Jour
- Click To Read Article
I’ve been following for a few years the surprising resurgence – and I use that word advisedly -- in the Ghana economy. After being in effective collapse for some time, inflation has been declining, banks becoming more healthy, and GDP growing nicely in this resource-rich, entrepreneurial and (relatively) stable African country.

Poker, Unpredictability, and Going on Tilt
- Click To Read Article
I had an interesting experience tonight playing Texas Hold\'em Poker. Despite having virtually no poker experience, I ended up winning a decent-sized pot. The morals of the story:

Peter Bernstein on Amaranth: Better to be Wrong Than Too Right
- Click To Read Article
Peter \"Against the Gods\" Bernstein has delivered the most choice quote so far on the Amaranth hedge fund meltdown:

Phrase du Jour: Venture Tourist
- Click To Read Article
Here is my venture capital phrase of the day, complete with definition:

Privacy, Investing Alpha, and the CEO's Mother-in-Law
- Click To Read Article
Much of investing is a search for hard-to-get data that can give you an edge, or alpha. That quest for alpha via better data is one of the themes of my Money:Tech 2008 conference, and it is the topic of an unusual and fascinating article in Wednesday's Wall Street Journal.

Outlook: Want to See Something Really Scary?
- Click To Read Article
This week was an important one in the capital markets. There were many reasons, but most important was that the market stopped being afraid of the same things as usual.

Offline is the New Online is the New Offline
- Click To Read Article
Funny how these things go. For a while we all happy with disconnected apps, tools like Word, Powerpoint, Access, and Excel that were PC-only software. And then it was cool to discover online apps that could do many of the same things, or at least useful variants, like Gmail, Writely, etc.

More Roundtable Musings: The IPO Problem
- Click To Read Article
At one point during the VCJ roundtable there is some spot-on musing about the effect of the absent IPO market for venture-backed companies. As a panelist pointed out, the last five years have shown why the venture market is not scalable: The amount of money being put into venture-backed companies has soared, while the IPO market remains flat (or down, depending on where you put your start point). At double the current IPO rate it will take 50 years to get the exits LPs are implicitly expecting. Ouch.

Mobile TV's Messed-Up Marketing
- Click To Read Article
For reasons unbeknownst to me (okay, almost certainly hoping I\'d say nice things about their phone and service), Sprint bestowed on me a freebie phone some time back, as well as a full-service package of voice, video, and data. I\'ve cheerfully taken advantage of having a second mobile phone -- it comes in useful when in the car on long conference calls and needing to order take-out pizza -- but I have to confess that one aspect of it has surprised me.

Moment of Good Financial News Zen: Shark Attacks Down
- Click To Read Article
Here is your moment of good financial news zen, or maybe we should call it optimism porn:

Mark Cuban Hates Suits
- Click To Read Article
Mark Cuban and I have something in common, other than our fondness for rants. Rants about suits!

Kodiak vs Battery: Adventures in VC Culture
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Lest anyone think all venture firms are the same, here are some interesting comments from a Kodiak-based venture guy on how the culture there differs from the one at Battery:

Information Externalities, Car Dealers, and Spaghetti Osteopaths
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Why do some competing stores locate near one another, while others don\'t? In National City, south of San Diego, there is a stretch called the \"Mile of Cars\". I dont know if it\'s a mile or not, but it\'s pretty much an endless strip of car dealers, from Hyundais to Hondas, and everything inbetween. There are similar areas in most reasonably-sized cities, whether a cluster of car dealers, a car strip, or just a bunch of dealer generally clustered around one another.

Is Canada the New China for VCs? Or Just the New Colorado?
- Click To Read Article
Granted, it's a tiny market, but with the disappearance of most of the tax-advantaged venture capital firms from the Canadian market it's interesting to see that U.S. venture firms are increasingly driving things. There was 21% growth year-over-year in Canadian venture investment, but that was largely a function of the growing dominance of U.S. VCs in the Canadian market, with such firms now accounting for more than half of investment spending in Ontario, Canadian's largest venture market.

Insufficient Innovation: Where are the New Products?
- Click To Read Article
Interesting piece by Michael Mandel making a case I've made idly in the past -- that maybe a cause of our current predicament is insufficient innovation. Really.

I Need to Fly More in India and Korea
- Click To Read Article
I need to fly more in India and Korea. Carriers from those two countries lead the world in in-flight entertainment. Who knew?

If You're So Dumb, Why Aren't You Rich? Part II
- Click To Read Article
About a year ago I cited a study showing the weak -- okay, nonexistent -- connection between wealth and intelligence.

If You're So Good, Stop Thinking So Damn Much
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Call it the "Nuke" Laloosh rule: People who know what they are doing should just stop futzing about and get on with things. The preceding is the main finding in a fascinating golf-driven (!) new paper in The Quarterly Journal of Experimental Psychology:

Holiday Books on Finance and Entrepreneurship
- Click To Read Article
A list of recent books (partially via NDE) of possible interest to entrepreneurs and investors. To be upfront, the only ones on the list that I have read are the first two -- Schramm's and Fisher's, which are both excellent -- and so with the rest you're on your own:

Hey, What if the Founder Gets Hit By a Bus? Nada
- Click To Read Article
One of the questions investors in early-stage companies -- both private and public -- often ask is this: What if the founder gets hit by a bus? It is, of course, an investor's way of saying, "How much of this company's continuing success requires this man/women at the helm?"

Hedge Fund Job: Must Understand Benford's Law
- Click To Read Article
The folks over at Valleywag are having fun with a Craigslist posting for a hedge fund job. In addition to looking for someone with all the typical quant skills, the ad asks applicants to do the following

Go to Africa, Young Investor
- Click To Read Article
While frontier markets in Africa are not yet the new Brazil, let alone the new South Korea, there are ample reasons to be optimistic about the economic resurgence in many African countries.

Google's Retention Problem?
- Click To Read Article
I had someone recently tell me that they were seeing more and Google people exiting the company after shorter periods of time. Assuming that's true, and it is anecdotal empiricism, has it gotten that much worse to work at Google, given its size, or is something else going on?

Former VCs Discover Entrepreneurship is Hard Work, and VCs are Assholes
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Funny article in the SJ Merc about VCs turned entrepreneurs newly discovering that a) startups are hard work, and b) many VCs are clueless assholes. Nothing like being whacked in the head by reality to learn things that the rest of the startup world knew a long time ago.

For Sale: Most Expensive VC Home in Country
- Click To Read Article
Here's one way to sidestep having to raise money from LPs: Sell your house for $76-million.

Five in Finance for iPhone
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There are oodles of financial apps for iPhone, but most are weak. Here are five free ones that aren't weak, and that I find myself using regularly (search for them in the App Store in your iPhone):

First Quarter Ad Spending: Internet Up 16.7%
- Click To Read Article
The first quarter 2007 numbers are out for ad expenditures, and they are solid, if largely unimpressive. By way of context, they are skewed by last year's Olympic advertising and they show a fall off in non-Internet areas. The latter category, however, kicked ad ass, with online display advertising (CPM) up a smashing 16.7% year-over-year.

Five Questions that Will Let You Spot a VC Bluffer
- Click To Read Article
Many -- okay, most -- VCs aren't paying attention during pitches. Either they've already decided they don't like the deal and haven't told you, or they are distracted by email, or something else, but the upshot is the same: They are bluffing, so they start spewing non sequitur questions.

Fire Steve Ballmer. Or hire SuperNanny. Or Both.
- Click To Read Article
Is no news good news? Most people expected something on the MSFT/YHOO front over the weekend, and such folks are generally reading the absence of information as bad news.

Everything I Know About Business I Learned from Colonel Flagg
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Everything I know about business I learned from M*A*S*H's Colonel Flagg:

Extreme Value Theory and Jeff Smith
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There is a intriguing story in today's San Diego paper about one Jeff Smith, a resident of Escondido, California. His house was about two miles from the further advance of the recent wildfires here -- and it was gutted by fire.

Entrepreneurship, Innovation, and Psychopathologies
- Click To Read Article
This has been said before and in different ways, but I was reading Eric Hoffer on mass movements this morning and I came across this gem of an epigram:

Entrepreneurs, VCs, and Peeing on a Burning Bush
- Click To Read Article
Many surreal things have happened to me as I hang with entrepreneurs (including the time a runaway golf cart ran me over, but I digress). A recent incident, however, just joined the pantheon.

Entrepreneurship and the Money Myth
- Click To Read Article
There are many myths in the venture business -- I alluded previously to the myth of U.S. VC value add -- but I was reminded of another one today. The myth? That access to money matters.

Evaluate Traders by Their Stories
- Click To Read Article
Emanuel Derman relates a Fischer Black observation on trading from 1994 that is worth pondering.

Day in Life of a VC-Backed CEO
- Click To Read Article
A day in the life of a VC-backed CEO, via PE Hub. Oh, ouch.

Credit Cards, Preference Reversals, and Debt
- Click To Read Article
My friend Herb argued in a recent column -- and I'm paraphrasing here -- that "debt is high and the end is nigh". I cordially disagreed with him on CNBC during one of our twice-weekly on-air visits, in part because I'm more sanguine about debt, about people's general competence to make basic financial decisions, and about changes in the economy that have made it rational for people to have more debt than they did in the past. I'm also considerably less convinced about the quality of the NIPA data (it overstates expenditures, and understates income) etc.

Death, Public Speaking, and Seniors' Homes
- Click To Read Article
Lots of us like to blithely retail the cliche about people being more afraid of public speaking than death, but I was caught up abruptly by an analogous finding in scanning some market research today on senior citizens in America:

Dear Richard (Posner), Love Richard (Thaler)
- Click To Read Article
There is a nice note from behavioral economist Richard Thaler to law & economics sort Richard Posner out. The former takes the latter to task for his WSJ OpEd criticizing his support of a Consumer Financial Protection Agency.

Companies Mutate or Die
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One of my favorite points with young growth companies, whether private or public, is that I focus on the people because the company almost certainly won't end up building what it says it will, so I better like you guys. That point -- i.e., companies mutate or die -- is less understood than it should be.

China's Boomtowns
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The current National Geographic has a fascinating feature on capitalism in China's boomtowns, cities like Lishui that are growing so fast that city planners have razed 108 hilltops to accomodate the runaway growth.

Calculating Carbon-Levered Earnings
- Click To Read Article
In thinking about higher oil prices today, and in scanning an interesting related story at Institutional Investor about proxies demanding more information on public company carbon usage, I got to wondering about something:

California's Not a Big Entrepreneurship State
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In playing with Google Insight I started checking trends on entrepreneurs and entrepreneurship. Has that sort of thing become, you know, passe, since the dot-com bubble burst and the Web 2.0 thing is waning? Or is it growing, at least as evidenced by people's search behavior on Google?

Booming IT Spending in Middle East & Africa
- Click To Read Article
Impressive stuff on IT growth in the Middle East & North Africa, all contained in a new IDC report:

Building the Perfect Board Package
- Click To Read Article
Some companies do a great job of putting together package for board meetings -- it's empirical, concise, and focused on measures that matter and that can be influenced -- while other companies leave their boards more confused after the meeting than before.

Better Off Now Than Five Years Ago
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I normally disregard these "Are you better off now than you were X years/months/minutes/seconds ago"? surveys. They are usually selective, small sample, tough to generalize, etc.

Bernie Madoff -- A Cynic's Take: Frauds within Frauds
- Click To Read Article
Over the weekend as a host of reasonably intelligent people and organizations 'fessed up to having been weakened by Bernie, a colleague of mine posited the following plausible take on the Madoff fraud:

Bees, Nesting and Markets
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Fascinating piece on bee nesting behavior, with some obvious implications for how we should think about independence and interdependence in functioning markets:

Business Book of the Year?
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The FT has out its "long list" of nominees for the FT/Goldman Sachs Business Book of the Year. The picks aren't too surprising (despite being forced to leave out the FT's own Gillian Tett's excellent Fool's Gold), with a cross-section of financial crises and management self-help books, leavened by one peak-oil text and a few internationalization works.

Be It Resolved, Analysts are Worthless
- Click To Read Article
The following email from the head of global equity research at HSBC (my long-ago employer) to London analysts is being called, at least in the U.K., crass and demotivating. I have to confess, I don\'t actually find it all that troubling: More than a few analysts that I used to work with could have used some tough talk:

Angels? Sure. VCs? Sure. But Not Both.
- Click To Read Article
This paper's result makes me think we need to augment the martini model of venture investing with a martini and olive model:

Be it Resolved: Venture Capital is an Attractive Nuisance
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Venture capital, as an institutional asset class, is pretty much dead.

Always Steal from the Best
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I'm a big fan of all things to do with the creative process, so the following unsurprisingly struck my fancy. It is from a fascinating BBC documentary on the origins of the original BBC version of The Office.

Advice du Jour: Do Whatever Gets You Tenure
- Click To Read Article
I was recently talking to a CEO friend of mine who is having trouble with his board. He thinks there is a very good chance that he will soon be fired.

A Proposal for the Thanksgiving Non-Holiday Holiday
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It's holiday anarchy the day after Thanksgiving here in the U.S. Some people are on holidays, some people aren't, and most of us have no idea how to know which things & people will be open vs. closed. You're open? You're not? Whaa?

Altucher: College is "Abhorrent"
- Click To Read Article
I love my friend James Altucher dearly -- and not just because his hair makes mine look half-decent, nor because he pitched in and helped last week at the Money:Tech conference -- and his column in yesterday's FT is another reason why. Blunt, smart, contrarian, empirical and irreligious, those are James's calling cards.

10 Rules for Being a Great Panel Moderator
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Having moderated many conference panels, and participated on many more of same -- and suffered through even more as an audience member -- I've decided to share some words of advice on moderating a panel (I offered rules for being a panelist in a prior post). Being a moderator is nowhere near as easy as people seemingly think, and most people are crummy at it.


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