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James Hong

Wednesday, October 01, 2008

blah blah blah

It’s been a long time since I blogged anything meaningful. When I first started this blog, it was primarily for HOTorNOT communication. Once we sold HOTorNOT, I didn’t really have anything to write about. Truth is, I’m not sure anyone even reads this blog anymore since I moved it off of HOTorNOT’s servers and to a different address. If this post seems less coherent than previous ones, it's because I used to write and rewrite and rewrite. For this one I am just writing rants in a cafe.

Anyhow, this morning I loafed around in bed, doing emails and watching the stock market obsessively. By the time I got out of my pajamas around 2pm, I started feeling a bit bad that I’m not really doing anything (but really, why do we all feel pressure to be productive all the time anyway?), I decided I would at least update my blog today.

Since this is a bit forced, I have no particular topic, but just a bunch of random assorted thoughts and announcements.

1. I’m engaged!

Yes it's true. The last of the 2 HOTorNOT guys has finally found true love. I finally have something to put on this domain.

2. Palin

Come on.. SERIOUSLY?!?!?!

The most depressing thing about her interviews with Couric is that if you watch them side by side with Tina Fey’s parody, after a while you can’t really tell which one is the joke. I guess they both are.

Couric couldn’t get any straight answers out of Palin, not even what sorts of materials she reads to learn about foreign policy. “You know, I have lots of sources that I read. Yea, but which one specifically? Yea, well, umm, you know, there are lots of sources out there to read blah blah blah”

Not that all politicians don’t evade the most basic of questions, but for God’s sake, show me that you’re smart by at least doing it well.
And I thought W was oblivious!

3. The Economy / Bailout

The first thing I have to say Is that I’m amazed the guy charged with fixing this issue (Paulson) is one of the guys who helped create the problem. Paulson is reportedly worth over $500MM, and he certainly profited from the regulations that got us where we are today.

Ideologically, I don’t like the idea of a bailout. But I also understand that if there is no bailout, the economy might collapse faster and harder than we can deal with. I agree that we need to do things to slowly ramp things down to avoid massive shocks, but we can’t put a bandaid on things and hope to just go back to business as usual either.

Our economy is fundamentally in trouble right now because we Americans have gotten fat and lazy. Over the past few decades, banks and other credit lenders have had every incentive to get people to spend more and owe more. When deregulation happened that enabled the credit originators to securitize debt and sell the risk to someone else, the credit originators had even more incentive to SELL SELL SELL credit cards, mortgages, etc.. to you and me, the American public.

The worst part of it all is that not only did we collectively sign up for more and more credit, we got used to it. And now like a salesman with a large expense account who just got fired, we have to live with the fact that all we can REALLY afford is ramen.

To be honest, part of me feels that a depression is exactly what this country needs. . because just like a drug addict who has to go through withdrawal the hard way before becoming well again, we can’t expect things to be easy. We’ve been living large for decades now, and unfortunately it’s time to pay the piper. But don’t worry, it’ll be just the wakeup call we need. We’ll wake up poor, start working hard and smart again, and rebuild ourselves. We’ve done it before, we’ll do it again.
So accept the bailout, but accept the fact that our markets are also still probably inflated and let it drop, and depression may be headed our way no matter what.. because bailout or not, I don’t see credit loosening anytime soon.

4. Why it can be GOOD being an entrepreneur in a shitty economy

So the economy is going to get shittier, and housing has only just begun to crash. (In reality, If you look at housing prices outside the top 20 MSAs, I think median housing prices may have actually have risen over the last year.. so in many cases, it has not even begun to crash, but trust me, it will)

Must be a crappy time to be an entrepreneur, right? Charles Cooper seems to think so, in his latest article about how the Freemium model must be in trouble.

With all due respect, because I have been reading him for a long time and respect his writing very much, I think Charles is missing something here. Most of the cool companies that made a lot of money out the ashes of the last dotcom crash, many of them relying on freemium models, were never on the edge of not making payroll. They were all flush with cash in fact. Why?

A. He makes the statement that “The idea is predicated on the assumption that you'll be around long enough to collect”. Is this true? No. Most people who convert on the web through freemium models convert quickly. The vast majority of HOTorNOT users who ended up paying paid within heir first week. In other words, most models that work on the web work quickly. And when you are starting at zero, it doesn’t matter if the economy is crap.. when you are starting at zero and have nothing to protect, any compelling model looks and feels good. And if you have a good model, because costs are so low, it won’t be long before you are able to hire and pay your employees.. with CASHFLOW, not funding.

B. Startups in a downturn are run a lot more efficiently. You don’t have to hire designers turned coders whose definition of coding is HTML, CSS, and a tad of javascript, for $150,000 a year. No, instead you can hire top CS grads from Stanford and Berkeley for $75k. Half the cost, 5x the productivity. (note: you don’t have to go to school to be a good coder, and going to a good school doesn’t mean you’re a good coder. Interview and test all types rigorously). And this is even if they hire at all.

The smart startups will start small, perhaps never hiring anyone at all until they are profitable and able to afford employees. In a nutshell, Charles is wrong because he presumes the traditional, increasingly outdated way of starting a company: raising institutional money and hiring lots of people, then hoping to have enough money to pay them. In a world where computing and network resources are increasingly cheap , and where the only REAL cost is that of the programmer, 3 guys in a dorm room can do a LOT… and they can probably do it faster and better than the well funded startup trying to do the same thing.

C. In a downturn, smart startups either raise a SHITLOAD of cash to weather the storm and buy other, undervalued, desperate startups on the cheap (Slide, Ning, etc..), or they raise nothing and grow off cashflow. Or sell.

The truth is, it’s never a bad time to be an entrepreneur, but it’s often easier when times are bad, if you can handle the pain of eating ramen and keeping your personal expenses at a minimum (which is why I also think the best time to start a startup is when you are 21, not 41).

Hiring is cheaper, office space is cheaper, everything is cheaper. Employees don’t get pissed off because you decided not to stock “microkitchens” with Odwalla, and when you DO stock them, they actually appreciate it and think of it as a perk, not a privilege. And best of all, there are fewer competitors, meaning less noise. .. and by the time things turn around and people start wanting to invest again, guess who will already have been doing it for the last 3 years?

So if you recently graduated from college and might lose your job, or maybe you were never able to find one to begin with.. instead of continuing looking, maybe you can figure out a way to spend the next few years eating ramen with a couple of buddies and going for it. You are maximizing your chance of success by doing it now not later.. and even if your venture does fail, I promise you, you’ll have the time of your life.


Find the Perfect Engagement Ring !

8 Comments:

Blogger Cory Levy said...

Great post! (i'm still reading this blog - keep writing ;)

6:54 PM  
Blogger Paul Capestany said...

I'm really fascinated by the HotOrNot story (specifically the fact that you guys bootstrapped it all the way), and I agree with Cory that you should keep the blogging up... rant on =)

8:20 PM  
Blogger Mukund Mohan said...

Hey welcome back from the hiatus. I still have your blog on RSS. How was the downtime BTW?

I have to agree both on Palin and also the downturn and startups.

Its the best time since there's so little competition compared to the good times.

8:41 PM  
Blogger Mukund Mohan said...

Maaaan, I had to read it again. Congratulations on the engagement. Sorry, I missed it the first time. (Doh!)

9:01 PM  
Anonymous Anonymous said...

i read your blog! i just moved here to the Valley... keep posting, you have a faithful reader here.

11:11 PM  
Blogger Kharatos Xens said...

I agree with the above, don't stop blogging, I just started reading! Thanks for coming to Berkeley and giving that talk, it was really great. As a CS student struggling with the deadlines of all the assignments, your positive attitude towards things gave me a much-needed boost and courage to keep going. Good work, don't give up!

9:42 PM  
Blogger rob said...

Dead on for startups IMHO. We've never been able to find such good talent AS INDEPENDENTS part time. It's like Manna from heaven for startups going the elbow grease method (self funding and giving a ton of time).

Blog on when you feel like it..

Congrats on the engagement...

4:30 PM  
Blogger Simply Me said...

Congratulations on your engagement James! :)

There are some HoNers still around to read your blog occasionally.

As for Sara Palin...when she talks, I cringe. She speaks to us like we are on Romper Room.
Or...remember the cartoon Bobby's world? (Howie Mandel) She reminds me of his cartoon mom! Oh, now then yet Bobby(or Joe), for corn sakes and crying in tha mud. ugh.

3:50 PM  

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