Wednesday, July 27, 2011

How IPO Founders Keep Their Taxes Low

Via a popular way of going public, founding partners can enjoy whopping capital gains without the usual tax bite. Investors may be less than happy about it, though.
Robert Willens -
July 26, 2011

When a partnership goes to the public market for funding, and the offering is successful, the founding partners can enjoy a huge capital gain. …

By means of a popular going-public technique called a tax receivable agreement (TRA), however, the founding shareholders can enjoy hefty tax benefits. … For their part, though, investors may find it hard to factor the effects of TRAs into their calculations of the price of the offering.

TRAs are often used in combination with an "Up-C structure." The Up-C structure enables companies to acquire assets by issuing operating partnership units. Those units may make it possible for the founding owners from whom the company acquires assets to defer recognizing taxable gains until the company disposes of those assets. For example, among many other entities, DynaVox employed this structure in connection with its initial public offering last year.

When a partnership transforms itself into a corporation to make a public offering of ownership interests, the newly formed corporation often becomes a partner in the "operating" partnership. The remaining units in the partnership also continue to be held by the founders of the business. In such cases, the founders will be awarded "high-vote" stock in the corporation — equity that enables them to maintain voting control over the corporation's affairs. For their part, public investors will acquire low-vote stock.

Sometimes the IPO's proceeds will be used by the corporation to buy partnership interests from the founders. In addition, the founders will typically acquire an "exchange right" entitling them to trade partnership interests for low-vote shares issued by the corporation. When these exchanges are separate from the incorporation, they're taxable to the founders because immediately after the exchange the founders aren't in control of the corporation.

But the founders can gain a tax benefit through the use of a TRA. Each time the corporation buys a partnership interest in the partnership, or acquires an interest in a taxable exchange for its stock, the corporation's taxable income derived from the partnership will be diminished (because the purchase increases the amount of amortization and depreciation deductions the purchasing partner will enjoy) and, correspondingly, its tax liabilities will be minimized.

… But the TRA, which is almost standard operating procedure in these types of incorporations, shifts the tax benefits to the persons who transferred the partnership interests to the corporation.

The … TRA … provides that ". . .we will enter into a TRA with our existing owners (the founders) that will provide for the payment by [the company] to our existing owners of 85 percent of the (tax) benefits that [the company] is deemed to realize as a result of the current tax basis in the intangible assets of. . . (the partnership) and the increases in basis resulting from our purchases or exchanges. . . ." The corporation goes on to say that these payments will be "substantial."

TRAs may be fully legal; however, the entire import of these agreements in the price of an IPO might not be fully appreciated by all investors. To the extent the TRAs are not taken into account by such shareholders, they may lead to market inefficiencies.

Robert Willens, founder and principal of Robert Willens LLC, writes a biweekly tax column for
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Monday, July 25, 2011

The 18 Mistakes That Kill Startups

Paul Graham's web page
Image representing Paul Graham as depicted in ...Image via CrunchBase
October 2006

In the Q & A period after a recent talk, someone asked what made startups fail.

… If you have a list of all the things you shouldn't do, you can turn that into a recipe for succeeding just by negating. … It's easier to catch yourself doing something you shouldn't than always to remember to do something you should. [1]

In a sense there's just one mistake that kills startups: not making something users want. … So really this is a list of 18 things that cause startups not to make something users want. …

1. Single Founder
…What's wrong with having one founder? To start with, it's a vote of no confidence. It probably means the founder couldn't talk any of his friends into starting the company with him. That's pretty alarming, because his friends are the ones who know him best.

… Starting a startup is too hard for one person. …[You] need colleagues to brainstorm with, to talk you out of stupid decisions, and to cheer you up when things go wrong.

The last one might be the most important. The low points in a startup are so low that few could bear them alone. When you have multiple founders, esprit de corps binds them together in a way that seems to violate conservation laws. Each thinks "I can't let my friends down." This is one of the most powerful forces in human nature, and it's missing when there's just one founder.

2. Bad Location
Startups prosper in some places and not others. Silicon Valley dominates, then Boston, then Seattle, Austin, Denver, and New York. After that there's not much. …

It's an interesting question why cities become startup hubs, but the reason startups prosper in them is probably …: that's where the experts are. Standards are higher; people are more sympathetic to what you're doing; the kind of people you want to hire want to live there; supporting industries are there; the people you run into in chance meetings are in the same business. …

3. Marginal Niche
… If you make anything good, you're going to have competitors, so you may as well face that. You can only avoid competition by avoiding good ideas.

I think this shrinking from big problems is mostly unconscious. …Your unconscious won't even let you think of grand ideas. So the solution may be to think about ideas without involving yourself. What would be a great idea for someone else to do as a startup?

4. Derivative Idea
… If you look at the origins of successful startups, few were started in imitation of some other startup. Where did they get their ideas? Usually from some specific, unsolved problem the founders identified.

It seems like the best problems to solve are ones that affect you personally. …

…Instead of starting from companies and working back to the problems they solved, look for problems and imagine the company that might solve them. [2] What do people complain about? What do you wish there was?

5. Obstinacy
In some fields the way to succeed is to have a vision of what you want to achieve, and to hold true to it no matter what setbacks you encounter. Starting startups is not one of them. … Startups are more like science, where you need to follow the trail wherever it leads.

So don't get too attached to your original plan, because it's probably wrong. Most successful startups end up doing something different than they originally intended—often so different that it doesn't even seem like the same company. …

… Switching to a new idea every week will be equally fatal. … If in each new idea you're able to re-use most of what you built for the previous ones, then you're probably in a process that converges. Whereas if you keep restarting from scratch, that's a bad sign.

Fortunately there's someone you can ask for advice: your users. If you're thinking about turning in some new direction and your users seem excited about it, it's probably a good bet.

6. Hiring Bad Programmers
…So how do you pick good programmers if you're not a programmer? I don't think there's an answer. I was about to say you'd have to find a good programmer to help you hire people. But if you can't recognize good programmers, how would you even do that?

7. Choosing the Wrong Platform
A related problem (since it tends to be done by bad programmers) is choosing the wrong platform. …

Platform is a vague word. It could mean an operating system, or a programming language, or a "framework" built on top of a programming language. It implies something that both supports and limits, like the foundation of a house. …

How do you pick the right platforms? The usual way is to hire good programmers and let them choose. But there is a trick you could use if you're not a programmer: visit a top computer science department and see what they use in research projects.

8. Slowness in Launching
… It takes an effort of will to push through this and get something released to users. [3]

Startups make all kinds of excuses for delaying their launch. Most are equivalent to the ones people use for procrastinating in everyday life. …

One reason to launch quickly is that it forces you to actually finish some quantum of work. Nothing is truly finished till it's released; you can see that from the rush of work that's always involved in releasing anything, no matter how finished you thought it was. The other reason you need to launch is that it's only by bouncing your idea off users that you fully understand it.

Several distinct problems manifest themselves as delays in launching: working too slowly; not truly understanding the problem; fear of having to deal with users; fear of being judged; working on too many different things; excessive perfectionism. Fortunately you can combat all of them by the simple expedient of forcing yourself to launch something fairly quickly.

9. Launching Too Early
Launching too slowly has probably killed a hundred times more startups than launching too fast, but it is possible to launch too fast. The danger here is that you ruin your reputation. You launch something, the early adopters try it out, and if it's no good they may never come back.

… We suggest startups think about what they plan to do, identify a core that's both (a) useful on its own and (b) something that can be incrementally expanded into the whole project, and then get that done as soon as possible. …

The early adopters you need to impress are fairly tolerant. They don't expect a newly launched product to do everything; it just has to do something.

10. Having No Specific User in Mind
You can't build things users like without understanding them. I mentioned earlier that the most successful startups seem to have begun by trying to solve a problem their founders had. Perhaps … the problems you understand best are your own. [4]

That's just a theory. What's not a theory is the converse: if you're trying to solve problems you don't understand, you're hosed.

And yet a surprising number of founders seem willing to assume that someone, they're not sure exactly who, will want what they're building. Do the founders want it? No, they're not the target market. Who is? Teenagers. … Or "business" users. What business users? Gas stations? Movie studios? Defense contractors?

You can of course build something for users other than yourself. … But you should realize you're stepping into dangerous territory. …

… When designing for other people you have to be empirical. You can no longer guess what will work; you have to find users and measure their responses. …

Diagram of the typical financing cycle for a s...Image via Wikipedia11. Raising Too Little Money
Most successful startups take funding at some point. Like having more than one founder, it seems a good bet statistically. How much should you take, though?

Startup funding is measured in time. Every startup that isn't profitable (meaning nearly all of them, initially) has a certain amount of time left before the money runs out and they have to stop. …

Too little money means not enough to get airborne. What airborne means depends on the situation. Usually you have to advance to a visibly higher level: …It depends on investors, because until you're profitable that's who you have to convince.

So if you take money from investors, you have to take enough to get to the next step, whatever that is. [5] Fortunately you have some control over both how much you spend and what the next step is. We advise startups to set both low, initially: spend practically nothing, and make your initial goal simply to build a solid prototype. This gives you maximum flexibility.

12. Spending Too Much
It's hard to distinguish spending too much from raising too little. … The only way to decide which to call it is by comparison with other startups. …

… The classic way to burn through cash is by hiring a lot of people. This bites you twice: in addition to increasing your costs, it slows you down—so money that's getting consumed faster has to last longer. …
We have three general suggestions about hiring: (a) don't do it if you can avoid it, (b) pay people with equity rather than salary, not just to save money, but because you want the kind of people who are committed enough to prefer that, and (c) only hire people who are either going to write code or go out and get users, because those are the only things you need at first.

13. Raising Too Much Money
…  The problem is not so much the money itself as what comes with it. … If VCs fund you, they're not going to let you just put the money in the bank and keep operating as two guys living on ramen. They want that money to go to work. [6] At the very least you'll move into proper office space and hire more people. That will change the atmosphere, and not entirely for the better. Now most of your people will be employees rather than founders. They won't be as committed; they'll need to be told what to do; they'll start to engage in office politics.

Perhaps more dangerously, once you take a lot of money it gets harder to change direction. … After taking VC money you hire … The more people you have, the more you stay pointed in the same direction.

Another drawback of large investments is the time they take. The time required to raise money grows with the amount. [7] … VCs never quite say yes or no; they just engage you in an apparently endless conversation. Raising VC scale investments is thus a huge time sink—more work, probably, than the startup itself. And you don't want to be spending all your time talking to investors while your competitors are spending theirs building things.

We advise founders who go on to seek VC money to take the first reasonable deal they get. If you get an offer from a reputable firm at a reasonable valuation with no unusually onerous terms, just take it and get on with building the company. [8] …

14. Poor Investor Management
As a founder, you have to manage your investors. You shouldn't ignore them, because they may have useful insights. But neither should you let them run the company. …

Pissing off investors by ignoring them is probably less dangerous than caving in to them. … If the founders know what they're doing, it's better to have half their attention focused on the product than the full attention of investors who don't.

How hard you have to work on managing investors usually depends on how much money you've taken. …
If things go well, this shouldn't matter. So long as you seem to be advancing rapidly, most investors will leave you alone. But things don't always go smoothly in startups. Investors have made trouble even for the most successful companies. One of the most famous examples is Apple, whose board made a nearly fatal blunder in firing Steve Jobs. Apparently even Google got a lot of grief from their investors early on.

StartupImage via Wikipedia15. Sacrificing Users to (Supposed) Profit
… Because making something people want is so much harder than making money from it, you should leave business models for later, just as you'd leave some trivial but messy feature for version 2. In version 1, solve the core problem. And the core problem in a startup is how to create wealth (= how much people want something x the number who want it), not how to convert that wealth into money.

The companies that win are the ones that put users first. …

It is irresponsible not to think about business models. It's just ten times more irresponsible not to think about the product.

16. Not Wanting to Get Your Hands Dirty
Nearly all programmers would rather spend their time writing code and have someone else handle the messy business of extracting money from it. …

There's nothing like users for convincing acquirers. It's not just that the risk is decreased. The acquirers are human, and they have a hard time paying a bunch of young guys millions of dollars just for being clever. When the idea is embodied in a company with a lot of users, they can tell themselves they're buying the users rather than the cleverness, and this is easier for them to swallow. [9]

If you're going to attract users, you'll probably have to get up from your computer and go find some. It's unpleasant work, but if you can make yourself do it you have a much greater chance of succeeding. …[10] …

If you want to start a startup, you have to face the fact that you can't just hack. At least one hacker will have to spend some of the time doing business stuff.

17. Fights Between Founders
Fights between founders are surprisingly common. …

A founder leaving doesn't necessarily kill a startup, though. Plenty of successful startups have had that happen. [11] Fortunately it's usually the least committed founder who leaves. …

Most of the disputes I've seen between founders could have been avoided if they'd been more careful about who they started a company with. Most disputes are not due to the situation but the people. … And most founders who've been burned by such disputes probably had misgivings, which they suppressed, when they started the company. Don't suppress misgivings. …The people are the most important ingredient in a startup, so don't compromise there.

18. A Half-Hearted Effort
… Statistically, if you want to avoid failure, it would seem like the most important thing is to quit your day job. Most founders of failed startups don't quit their day jobs, and most founders of successful ones do. …

Does that mean you should quit your day job? Not necessarily. I'm guessing here, but I'd guess that many of these would-be founders may not have the kind of determination it takes to start a company, and that in the back of their minds, they know it. The reason they don't invest more time in their startup is that they know it's a bad investment. [12]

I'd also guess there's some band of people who could have succeeded if they'd taken the leap and done it full-time, but didn't. I have no idea how wide this band is, but if the winner/borderline/hopeless progression has the sort of distribution you'd expect, the number of people who could have made it, if they'd quit their day job, is probably an order of magnitude larger than the number who do make it. [13]

… Most startups fail because they don't make something people want, and the reason most don't is that they don't try hard enough.

In other words, starting startups is just like everything else. The biggest mistake you can make is not to try hard enough. To the extent there's a secret to success, it's not to be in denial about that.

[1] This is not a complete list of the causes of failure, just those you can control. There are also several you can't, notably ineptitude and bad luck.

[2] Ironically, one variant of the Facebook that might work is a facebook exclusively for college students.

[3] Steve Jobs tried to motivate people by saying "Real artists ship." This is a fine sentence, but unfortunately not true. Many famous works of art are unfinished. It's true in fields that have hard deadlines, like architecture and filmmaking, but even there people tend to be tweaking stuff till it's yanked out of their hands.

[4] There's probably also a second factor: startup founders tend to be at the leading edge of technology, so problems they face are probably especially valuable.

[5] You should take more than you think you'll need, maybe 50% to 100% more, because software takes longer to write and deals longer to close than you expect.

[6] Since people sometimes call us VCs, I should add that we're not. VCs invest large amounts of other people's money. We invest small amounts of our own, like angel investors.

[7] Not linearly of course, or it would take forever to raise five million dollars. In practice it just feels like it takes forever.
Though if you include the cases where VCs don't invest, it would literally take forever in the median case. And maybe we should, because the danger of chasing large investments is not just that they take a long time. That's the best case. The real danger is that you'll expend a lot of time and get nothing.

[8] Some VCs will offer you an artificially low valuation to see if you have the balls to ask for more. It's lame that VCs play such games, but some do. If you're dealing with one of those you should push back on the valuation a bit.

[9] Suppose YouTube's founders had gone to Google in 2005 and told them "Google Video is badly designed. Give us $10 million and we'll tell you all the mistakes you made." They would have gotten the royal raspberry. Eighteen months later Google paid $1.6 billion for the same lesson, partly because they could then tell themselves that they were buying a phenomenon, or a community, or some vague thing like that.
I don't mean to be hard on Google. They did better than their competitors, who may have now missed the video boat entirely.

[10] Yes, actually: dealing with the government. But phone companies are up there.

[11] Many more than most people realize, because companies don't advertise this. Did you know Apple originally had three founders?

[12] I'm not dissing these people. I don't have the determination myself. I've twice come close to starting startups since Viaweb, and both times I bailed because I realized that without the spur of poverty I just wasn't willing to endure the stress of a startup.

[13] So how do you know whether you're in the category of people who should quit their day job, or the presumably larger one who shouldn't? I got to the point of saying that this was hard to judge for yourself and that you should seek outside advice, before realizing that that's what we do. We think of ourselves as investors, but viewed from the other direction Y Combinator is a service for advising people whether or not to quit their day job. We could be mistaken, and no doubt often are, but we do at least bet money on our conclusions.

Thanks to Sam Altman, Jessica Livingston, Greg McAdoo, and Robert Morris for reading drafts of this.
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Friday, July 22, 2011

Seven Signs You Need a Break from Your Business

Whether it's a two-week vacay or regular breaks during your workday, you need to find time to chill.

Entrepreneur magazine
By Gwen Moran   |   July 21, 2011   |  

… Only 46 percent [of U.S. business owners] plan to take a vacation this summer, down from a high of 67% in 2006, according to the May American Express OPEN Small Business Vacation Monitor. Busy work schedules (37%) and affordability (29%) are the top reasons. But vacations and breaks can be what you need to increase productivity and come up with new ideas to make your business run better, says Jon Gordon, a Ponte Vedra Beach, Fla.-based motivational speaker on business productivity and author of The Seed: Finding Purpose and Happiness in Work and Life (Wiley, 2011).

Do you need a break? Here are seven signs it's time.
1. Loss of joy. If you're beginning to dread going to the business you once loved or find yourself chronically unhappy, it's likely a signal you need to take a break. "Often, it's when we think we can't take a break, during those very busy times, or when business is slow, that it's most important to do so," says Gordon.
2. Lack of focus or creativity. … Greg De Simone, founder of FocalPoint, a Mansfield, Mass., business coaching firm … says he routinely sees clients return from vacations operating at a higher level of productivity or with newfound solutions to problems that had dogged them.
3. Constant feeling of overwhelm. If you're reacting rather than taking control, it's a clear indicator you need to take a break, says De Simone. If you think you can't spare the time, consider that you're losing it anyway by being ineffective, he says….
4. Irritability. … Irritability can be a sign of stress, depression, or other maladies, says Gordon. …
National Institutes of Health logoImage via Wikipedia5. Insomnia. …The National Institutes of Health says that regular exposure to outdoor light is important for the circadian rhythms that direct your sleep. If you're stressed and sunlight-deprived all day, you're dealing a double blow to your ability to get a good night's rest.
6. Health issues. Drive yourself too hard and it's likely going to take a toll on your health, says Gordon. …
7. Warnings from friends and family.

How to Recharge
A break from your business doesn't have to be a week vacation to help recharge your batteries and regain focus, says productivity expert Jon Gordon. It can be a day off or even regular walks or times to meditate and relax.
Find something you love to do -- from running to jigsaw puzzles -- and carve out ways to fit it into your schedule. Even an hour or two a week can make a difference.
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Wednesday, July 20, 2011

10 Tips for Easing Information Overload

By Wayne Turmel | July 18, 2011

Photo by flickr user chrisinplymouth CC 2.0

… Handling all the email, messages, memos and stuff coming at us is like trying to drink from a fire hose. ...

In his new book “Overload-How Too Much Information is Hazardous to Your Organization”, author Jonathan Spira says it’s not just personal productivity that suffers. Too much information to handle effectively costs the US economy $900 Billion a year in bad decisions, delays and wasted time.

… Here are 10 tips he offers in the book for gaining some measure of control in your worklife.
  1. Don’t email someone, then immediately follow up with an Instant Message, a phone call and a tweet.
  2. Don’t combine multiple themes or requests in a single email.
  3. Make sure the subject of your email actually says what your request or information is about.
  4. Read your email over for tone and clarity before sending it out.
  5. Don’t overburden people with unnecessary replies like “Great!” and “Thanks”. And for heavens sake don’t reply to everyone unless everyone needs to know.
  6. Don’t get impatient if people don’t respond right away. They may be, you know, busy.
  7. Keep your status up to date on IM and email.
  8. Recognize that the intended recipient of your email or message isn’t a mind reader.
  9. Recognize that typed words can be misleading in both tone and intent. Strive for simplicity and clarity in your communication. This means we can even forgive an emoticon or two if it helps set the right tone :-)
  10. Understand that as overwhelming as information overload is for you, it’s no easier for anyone else.
You can hear a full interview with Jonathan Spira on The Cranky Middle Manager Show podcast by clicking here.

Wayne Turmel Wayne Turmel is obsessed with helping organizations and their managers communicate better, even across cyberspace. He's a writer, a speaker, the president of, and the host of one of the world's most successful business podcasts, The Cranky Middle Manager Show, where he helps listeners worldwide deal with the million little challenges and indignities of being a modern manager. His book 6 Weeks to a Great Webinar: Generate Leads and Tell Your Story to the World is the leading web presentation book on Follow him on Twitter @greatwebmeeting.
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Tuesday, July 19, 2011

Finally, Raises Make a Comeback

By Kimberly Weisul | July 18, 2011

Image courtesy flickr user AMagill

Salary increases are slowly starting to move back to pre-recession levels, according to a recent survey of the members of WorldatWork, a professional association whose members work in human resources and compensation departments, mostly  at big U.S. companies.

… Specifically:
  • A percent sign.Image via WikipediaThere is some money for raises. Salary budgets increased by 2.8 percent in 2011. They’re projected to rise by 2.9 percent in 2012. The figures for Canada are almost the same, even though Canada has largely escaped the housing bust that crippled the U.S. economy.
  • Most employees are getting raises. In 2011, 88 percent of employees got a raise to their base pay. In 2009, only 80 percent did.
  • Salary freezes are almost gone. Only 3 percent of employers say they’re planning across-the-board salary freezes this year, compared to 43 percent in 2009.
  • High performers get 4.0%.  In 2011, the average “high performer” at a company got a 4.0% raise. The “middle performers” got 2.7%, and the “low performers” got 0.7%
Evidence of falling wages
These numbers would appear to conflict with data from the latest unemployment report, which shows that wages are falling. The WorldatWork data, however, applies to people who already have jobs and will be in that same job next year. If an employer cuts a senior level position and hires a mid-level person to take on those responsibilities for less money, that’s essentially a drop in pay. It would be reflected in the government figures but not the WorldatWork ones.

I know times are tough.  But can bosses really expect to keep their best people by giving them raises that are, on average, only 1.3 percentage points more than the mediocre folks are getting? …

Kimberly WeisulKimberly Weisul is a freelance writer, editor and editorial consultant. She was most recently a senior editor at BusinessWeek and founding editor of BusinessWeek SmallBiz, an award-winning bimonthly magazine for entrepreneurs. Follow her on @weisul.
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Equity compensation program risk on the rise

Equity compensation program risk on the rise - Articles - Employee Benefit News

New conditions, such as the fusion of International Financial Reporting Standards with U.S. GAAP, are likely to increase the complexity of stock-based compensation programs in the future, including options, restricted stock awards, and other types of stock compensation.

The most important thing that a company using equity as a form of compensation can do is to know its plan and review it often. The dynamism of the markets, your company, and the economy require nearly continuous evaluation and monitoring of your stock compensation programs.
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Monday, July 18, 2011

Digital Oxytocin: How Trust Keeps Facebook, Twitter Humming

Internet users--Facebookers most of all--are a trusting bunch. Why? Because we are wired to build relationships around trust.

Fast Company
BY Adam PenenbergToday
MacBook Pro users kissing[Image: Flickr user Capitan Giona]

The most surprising takeaway from the recent Pew Research Center study, "Social Networking Sites and Our Lives," … [is] the idea that the Internet, in particular social networks, engender trust, and the more time you spend on them the more trusting you become.

Image representing Facebook as depicted in Cru...Image via CrunchBaseAs the report put it, "The typical Internet user is more than twice as likely as others to feel that people can be trusted," with regular Facebook users the most trusting of all. "…

Enlargement of the 20-dollar bill. Enlargement...Image via WikipediaThis has significant implications, because … trust goes to the heart of our economic and social systems. Neuroeconomist Paul J. Zak, a professor at Claremont College and author of the forthcoming book, The Moral Molecule: Vampire Economics and the New Science of Good and Evil, says that trust is the lubricant that makes economic transactions possible. … While it may say "In God We Trust" on every dollar bill, what we are really trusting is that this piece of paper or coin--nowadays often a digital representation on a screen--is worth what we all believe it's worth.

In his own research, Zak and a co-researcher found that nations with higher levels of trust (Sweden, Germany, the U.S.) have stronger economies than those on the other end of the spectrum (the Congo, Sudan, Colombia). …

… We humans are hard-wired to commingle with one another offline and on-, and the web and its platforms like Facebook and Twitter make it more efficient than ever. …

chemical structure of oxytocin with labeled am...Image via WikipediaZak has traced much of our behavior to oxytocin, a single neuropeptide he's dubbed "the moral molecule" because it appears to shape much of our better nature. Also referred to as the "cuddle hormone," oxytocin is the same chemical that forges that unshakeable bond between nursing mothers and their babies. … [In] a spate of experiments spanning a decade Zak has linked oxytocin to all manner of human behavior--from empathy to generosity to trust. And when we believe that someone trusts us, we trust them back, and this alters our behavior: It makes us more generous, for one. Ultimately, oxytocin is, Zak says, the "social glue" that adheres families, communities, and societies while simultaneously acting as an "economic lubricant" that enables us to engage in all sorts of transactions.

Image representing Twitter as depicted in Crun...Image via CrunchBaseI wrote about Zak last year in a feature titled "Doctor Love" for Fast Company, and in addition to participating in a series of studies he conducted, I had him gin up one just for me. … I theorized it would also affect a person engaging on Facebook and Twitter. … So Zak took my blood, I got on Twitter for 10 minutes, then he took it again, then compared to the two samples. In those intervening 10 minutes my levels of oxytocin had risen 13.2%--as much as a groom at a wedding. (My wife: "That's pathetic.")

Subsequently Zak traveled to Korea and redid my tweeting experiment, this time with three journalists using Facebook. The result: They all demonstrated increased levels of oxytocin. …

I Am Majid Social Media CampaignImage via Wikipedia… [The] Pew study found "little validity to concerns that people who use [social networks] experience smaller social networks, less closeness, or are exposed to less diversity." On the contrary, Americans "have more close social ties than they did two years ago," and "are less socially isolated."

And it all comes down to trust. For this, you can thank the oxytocin in your brain.

Adam L. Penenberg is a journalism professor at NYU and a contributing writer to Fast Company. Follow him on Twitter: @penenberg.
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Friday, July 15, 2011

How to Become Ubiquitous

Harvard Business Review wordmarkImage via Wikipedia

Harvard Business Review
8:04 AM Thursday July 14, 2011
by Dorie Clark | Comments ( 22)
This post is part of the HBR Insight Center Marketing That Works.

… I steeled myself for the onslaught: replying to the hundreds of emails that had built up while I'd been on a luxurious 12-day vacation to Spain. Like many professionals, I have a complicated relationship with holiday — coveting the idea of relaxation, while dreading the idea of being out of touch. …

Sea side of Marbella
The trip had been incredible — the best of Barcelona, Madrid, and Marbella — but I returned feeling guilty and slightly panicked. … And that's when I spotted Mimi, one of the most connected players in town. She smiled and walked over to my table. "How's it going?" she said. "You're everywhere."

In that moment, I realized you don't have to be present in order to be ubiquitous.

Ubiquity, of course, is a major marketing goal. You want to be top of mind for your customers, so they're calling you (not your competitors) … .  Here are four strategies to consider:
  1. Schedule your social media presence. … Every few months, I'll lock myself away for an afternoon and come up with a few hundred nuggets to post on Twitter. You can schedule them weeks or months in advance via services like Hootsuite or Tweet Deck. … Similarly, you can use Wordpress or other services to schedule upcoming blog posts.
  2. Respond quickly when it matters. … If you have a corporate assistant, ask him or her to monitor your email and call you if anything urgent arises. If you're a solo practitioner, shell out for a virtual assistant through a service like Elance. …
  3. Enlist messengers. Perhaps the best way to seem like you're everywhere is to get other people talking about you. … Specifically ask for referrals (which "forces" people to talk about you), cultivate reporters, attend networking events, and create a robust portfolio of content, from blog posts to white papers. …
  4. Go somewhere cool. Sometimes, inevitably, you'll miss something important because you're away. … You may never make [your suitors] happy — but you can at least intrigue them. "I'm on vacation" is a fairly boring, lazy-sounding excuse. But — "I apologize for the delay in getting back to you; I just got back from Puerto Rico"… is a fascinating conversation starter. So consider this your permission to go somewhere fabulous and make the best of it.
What are your strategies for becoming ubiquitous? And how do you ensure the people who matter are talking about you?
Dorie Clark
Dorie Clark
Dorie Clark is a strategy consultant who has worked with clients including Google, Yale University, and the National Park Service. She is the author of the forthcoming What's Next?: The Art of Reinventing Your Personal Brand (Harvard Business Review Press, 2012).
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Wednesday, July 13, 2011

Forget Your Elevator Pitch — What's Your Dumbwaiter Pitch?

Harvard Business Review wordmarkImage via Wikipedia

Harvard Business Review
12:01 PM Tuesday April 20, 2010
…Today, elevator pitches are the economic equivalent of speeches at a beauty pageant: predictable, often vapid, always bland.

…Try a Dumbwaiter Pitch instead. … Its goal? To strip an organization right down to its bones, and see how compelling it really is.

What's the one-word description of your business? …The most common answer is: hmming, hawing, and silence. The second most common answer is an imaginary benefit. The third most common answer is a raw product… . All three answers reveal a business with whose foundation, its economic concept, is confused, muddled, and perhaps even nonexistent. …

What's Twitter's Dumbwaiter Pitch? I'd say: "alerts." And that's powerful in a roiling, seething world where risk and volatility are vastly amplified. Information that alerts you to possibilities and opportunities matters more than ever before. … Twitter is one of the few companies in the economy with a solid, compelling Dumbwaiter Pitch.

In simplicity lie the seeds of explosively powerful propositions. In complexity, only confusion, incoherence, and uncompetitiveness.

Reductive, simplistic, restrictive? Think again. Nearly every disruptive business, in fact, has a Dumbwaiter Pitch as pure, simple, and powerful as Niagara Falls. Google? Search. Apple? Beauty. Lego? Creativity. …
The Dumbwaiter Pitch is so powerful because it cuts through the obfuscation, glad-handing, and double-talk … and asks them to get straight to the real point. And, of course, like the sharpest of scalpels, it reveals where there never was any meat on the bones to begin with.

Only businesses with a razor-sharp, laser-focused vision — and a disruptive economic concept — can craft a Dumbwaiter Pitch. Do you have what it takes? What's the one-word description of your business?

Umair Haque
Umair Haque
Umair Haque is Director of the Havas Media Lab and author of The New Capitalist Manifesto: Building a Disruptively Better Business. He also founded Bubblegeneration, an agenda-setting advisory boutique that shaped strategies across media and consumer industries.
Umair Haque
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