The Coming Chinese Internet Tsunami

I have begun to think and write about China more and more lately; there is such an incredible opportunity across the Pacific that seems largely unobserved by a majority of Americans. The Chinese economy and population base is so large and modernizing so rapidly, and has transformed from 3rd world to 1st world in a matter of decades (that same evolution took us hundreds of years here in America). As you can see in this chart from Google, China’s internet adoption has blown past the United States, both in terms of growth rate and sheer number of users. And they’re still at only 20% internet penetration. Mobile phone penetration is actually higher than internet penetration, approaching 60% depending on what study you read – that’s over 500 million mobile phones. This in itself is an interesting dynamic, as it seems that in China the mobile phone (rather than the PC) is the primary method of internet use and communication. As I understand it, this is a result of the relative difficulty and expense of getting a computer and home internet line installed – particularly in rural China, which does not yet have the widespread and developed communications infrastructure that we enjoy in the United States. Coupled with pervasive and cheap mobile phone service and a proliferation of advanced smart phones, the mobile internet has become the single point of connectivity for millions of Chinese. However you measure China’s growth, it doesn’t take an economist or venture capitalist to see that the pace of technological change, adoption, and transformation in China is unlike anything experienced in America or anywhere else.

I saw a statistic the other day that by the end of 2010 China will have more mobile internet users than there will be people in the United States. That’s staggering. There are countless companies with tons of VC hype and astronomical valuations climbing all over each other to try to capture even a sliver of the ~90mm user U.S. mobile internet market. And yet there is a Chinese market that is orders of magnitude larger and remains relatively unaddressed by America’s top online properties.

For example – Facebook has experienced tremendous user growth outside of the United States, adding almost 10 million global users in March 2010 alone. Below you’ll see a top 10 table of Facebook’s growth by country in March – millions of users were added in Asian countries like Indonesia and the Philippines, and according to Facebook nearly all of those new users access the service exclusively on mobile devices (wow). And yet despite the obvious resonance with Asian consumers, Facebook remains conspicuously absent from China due to a near total blockage by the Chinese government.

Not to say there aren’t very significant and well established Chinese social networking players (including Tencent Inc., which is debatably the largest social network in the world) but I just find the under representation and seeming indifference of so many American Web 2.0 properties to be surprising. So many of today’s startups seem laser focused on attacking the United States mobile market, and are at the same time so haphazard in their Chinese strategy.

I do understand that there are significant regulatory and cultural hurdles to clear when moving a U.S.-based service into the Chinese market. In addition to censorship and restrictions on foreign business ownership, there is no guarantee that a product that has been successful in the United States will resonate with Chinese consumers. Many of today’s social media and self publishing centric products and services simply aren’t workable in a country that does not allow the free flow of information or exchange of ideas that we enjoy here in America.

It seems that the swell of Chinese internet users (on mobile devices especially) are like a tsunami being held back by poor access to broadband and isolated by the dam of government censorship. Though there are millions of users already climbing over and around the dam (with things like proxy servers and other methods of circumventing the “Great Firewall of China”), I expect that the real wave will come over the next several years as the government finds it increasingly difficult to censor its citizens, and increased broadband penetration plugs more and more Chinese into the web. As China comes online in a bigger and bigger way, it’s going to be harder than ever for American startups and social media players to compete without confronting the tsunami head on.

A Study of Infographics

I wrote earlier about the increasingly visual nature of media and news in today’s society. The prior post focused mostly on photography, but there is another visual technique that has risen dramatically in prominence in recent years, particularly online – the infographic. Infographics aim to make complex data sets easy to digest and understand. An entire newspaper has risen to prominence due to the quality of its infographics. There are whole blogs dedicated to the subject. A good infographic can pack a lot of data into a small space and help the viewer to draw out a pattern or conclusion. However if the infographic is poorly or deceptively constructed, that conclusion may not be the same one you’d see if you examined the underlying data. While there are many great and useless infographics out there, I’d like to take a bit of time to focus on a couple deceptive ones.

Deceptive Infographic #1: The Heathcare Vote

The first infographic I want to highlight comes from the otherwise excellent Political Math Blog. The diagram aims to portray the House of Representatives vote split for the recently passed healthcare reform legislation in comparison with the vote splits for other major social reform. It is an interesting diagram because it illustrates how objective information can be displayed in a manner that influences your perception of the data.

In the first three vote blocks, the dividing line between “Yay” and “Nay” is drawn down the middle of the “split” party, indicating that there are party members on both sides of the debate. However, in the final vote block on heathcare reform, the creator of this diagram has specifically arranged the colors such that the Yay/Nay dividing line runs directly between the parties, with the dissenting Democrats hidden off to the right side. This increases the contrast between the parties, and makes the Heathcare Reform vote appear more partisan and divisive than it actually was.

When viewing an infographic (or any seemingly “objective” data), make sure you consider whether or not the designer is trying to “lead” you toward drawing a specific conclusion or feeling a certain way by presenting the data in a certain manner.

Deceptive Infographic #2: Household Income vs. Debt

I originally found the next graphic on Digg, where people were whipping themselves into an outrage about how unfair life is, how capitalism is broken, and how America is headed to hell in a handbasket. Except this graphic is totally flawed (click for a full size version).

The graphic compares the trend in average household income (the green bar) with the trend in total household debt (the red bar), and reaches the “nightmare” conclusion that the latter is quickly outpacing the former. The problem in this graphic is that comparing annual income to total debt is apples to oranges. Suppose I make $50,000 a year and owe $250,000 on my mortgage. Is this necessarily a Bad Thing? No. Here’s why:

This comparison completely neglects the other side of the household balance sheet – assets. You borrowed $250,000 on that mortgage to buy the house, so you also own an asset (the home) worth $250,000 (putting aside the housing crash for a second). You also have likely saved some of your income each year, which is building up as an asset in your bank account. Both of these assets can be liquidated to eliminate the debt. The debt is only dangerous if it is not matched by an asset of equal or greater value.

In addition, the diagram assumes you never use any of the income you earn in the time between each bar (several years) to pay down any of the debt, yet you continue to borrow. If that’s the case, the prison is of your own making. I could go all day, but the bottom line is, this is a completely flawed comparison. Debt is not inherently a Bad Thing. Irresponsible debt (debt that is not counterbalanced by assets) is a Bad Thing.

The lesson here is that you should pay attention to context and the validity of comparisons before drawing conclusions, especially when data visualization is involved.

In Summary

Infographics are incredibly useful for conveying a lot of data at a glace, and draw the eye with bright colors and interesting shapes. Often an infographic is the best way to communicate data to a relatively unsophisticated or novice audience. However, when you come across a flashy data visualization, sure the author didn’t create it to tell a specific story. Always take some time to envision the data behind the chart – would the data table create the same reaction that the infographic elicits?

Update: Here is a great infographic that was sent over to me today by my friend Vanessa – it depicts the magnitude of the recent Deep Water Horizon oil spill that occurred last week in the Gulf of Mexico. It does an excellent job putting the magnitude of the spill in context with other well known spills (Exxon Valdez, Amoco Caldiz) and also illustrating just how much oil was spilled relative to the world’s daily consumption. Check it out. Even better, they make the underlying data available here.

Go East Young Man

In the 19th and early 20th centuries, the American “Wild West” was a place of great opportunity and great adventure – rapid development, gold rushes, land grabs, and a booming population provided an opportunity for enterprising young men and women to strike out on their own and “grow up with the country”, as the famous quote goes. The West took on an almost mythical aura as a place where anything was possible and success was limited only by ambition.

Even after the American West had been developed, the United States has remained the epicenter of the world’s economic growth and a proverbial “land of milk and honey” for immigrants from across the globe. The best and brightest students from countries the world over aspired to one day travel to America to make their fortunes and pursue the “American Dream” – and countless many have done just that. However, while the western world has been the place to be for the past 150 years, I’m beginning to think that the next 150 may see a stark reversal of the compass needle.

Take a look at the picture that accompanies this post (click for a striking full size version). That’s Shenzhen, China – the biggest place you’ve never heard of. With some 14 million residents, it’s far bigger than New York City and remains the fastest growing city in China. Not only is Shenzhen exploding, it’s young, smart, and hungry. It’s estimated that 20% of China’s PhDs work in Shenzhen, and the average age of its citizens is less than 30. Thanks to billions in foreign investment, it’s young and educated population, and its status as the first of China’s Special Economic Zones, Shenzhen is also the #1 export center in China, accounting for 22% of the country’s total. All of this is particularly striking when you realize that less than 30 years ago, Shenzhen was nothing more than a sleepy fishing village with a population of 30,000 (that all of this growth has coincided exactly with the establishment of the special economic zone and a capitalist economy is best left for a separate discussion). Shenzhen has also developed as a manufacturing powerhouse, and is the origin of nearly every shiny consumer gadget you own with “Made in China” stamped on the bottom. And if you’re reading this on a Mac, iPhone, iPad, Thinkpad, Dell, Kindle, or HP (among many others), that includes the hardware your browser is running on right now.

John Biggs from CrunchGear spent several weeks in Shenzhen and wrote an excellent series entitled “CrunchGear in China: Where Tech Sausage is Made”, which explores the massive consumer goods (mostly electronics) manufacturing industry that has catapulted Shenzhen to prosperity and global prominence. CrunchGear paints an incredible portrait of the Chinese culture and the efficiency with which they conduct their manufacturing. If you have some time to read through them, they provide some awesome perspective on the seething, dirty, and ruthlessly effective economic powerhouse that’s growing up in the East. The articles are here: Introduction, China the Factory, Getting from There to Here, The Ex-Pats, Shanzhai.

So for all the reasons laid out above (and even more that I’ll elaborate on in a future post), I see the East as having many of the same characteristics that made the American Wild West so appealing – rapid development, a population boom, and a modernizing economy. And although the modern day Chinese gold rush has already begun, I can’t help but think there is still a vast opportunity in East Asia for those willing to make the leap and “grow up with the world”.

The Increasingly Visual Nature of Media

I’ve been thinking a lot recently about the changing way in which our society consumes information. In the past, most of us absorbed information in primarily text based formats. Newspapers are a perfect example of this phenomenon – front pages were far more text heavy than they are today, and authors tended to write longer form articles with in depth arguments. People would sit down and read the newspaper for long stretches of time to get their news for the day. However, with the rise of the internet, full color photography, and brilliant LED screens, we have all become a far more visually oriented. Today, we all prefer to consume our news in vivid technicolor, with accompanying visuals and photographs. To see this transition in action, let’s compare the front page of the New York Times after two similar landmark events – the Pearl Harbor bombing (Dec. 7, 1941) and the World Trade Center attacks (Sept. 11, 2001). Both major tragedies, both on American soil with American casualties. Compare the New York Times front page presentation of both events – click for the full front page image:

The contrast is clear – the front page from 1941 is extremely text heavy, with only a single graphic and no photographs. The newspaper from 2001 is dominated by dramatic full color photographs, and text occupies less than 50% of the page. The photographs draw the reader in and convey much more emotion than the text alone. An interesting contrast, and a testament to both improved printing technology and our increasingly visual nature.

But the trend doesn’t stop with newspapers. I’m writing this post in the midst of “iPad mania” – Apple’s much anticipated tablet computer will be released in just 48 hours. I think that much of the hype around the iPad is due to the fact that so much of the experience Apple has designed is centered around consuming rich media – movies, comics, photos, and video. Even the vanilla e-book as been re-imagined – one of the launch titles is an illustrated guide to the periodic table, aptly titled The Elements. Instead of simply text and pictures, The Elements contains three dimensional samples and photos of each element: a nugget of gold (Au), an ingot of coal (C), a manganese crystal (Mn). You can touch and rotate them with your fingers. Tap to stream related videos from the internet or pull up the current market price of silver. What was once words on a page is now alive with information and rich media.

This kind of rich, visual media is definitely going to revolutionize not only textbooks, but literature of all types. Imagine a medical journal with anatomy models that rotate and zoom, or engineering manuals with diagrams that explode to show each and every part inside a car engine. As we discover ways to communicate more and more information visually instead of simply through text, I think the future is going to be a very exciting place to be.

The Urgent vs. Important Matrix – Handling Interruptions

As a former investment banker, I have a very, well… unique relationship with my email. For those that aren’t familiar with the life of a banking analyst – email is treated as IM, text messaging, and a pager all rolled into one, with a 24/7 expectation of response. I once had an actual nightmare about that blinking red light on my Blackberry. Accordingly, I developed somewhat of a compulsion about checking email at all hours of the day and night, an affliction I feel is shared by many in corporate America. Many of us keep our Outlook open all day and our Blackberries at hand all night, just waiting to be interrupted by that little “New Mail” popup or blinking red light. Not only is that stressful, I think it’s killing our productivity.

A study by Microsoft showed just how lethal interruptions are to productivity. The researchers taped 29 hours of people working in a typical office, and found that they were interrupted on average four times each hour. Sounds like a day at most offices. Here’s the kicker – 40% of the time, the person did not resume the task they were working on before the interruption. The more complex the task, the less likely the person was to resume working on it after an interruption. That means most of us are getting derailed from our work four times each hour, maybe more if you work in a high email traffic office.

So how do we get back on track? The answer lies in a concept called the “Urgent vs. Important Matrix“, which I was reminded of (and inspired to write this post) when I read fellow Coloradan Devin Reams‘ excellent post entitled “Instant Email is Good for Nobody” (agreed). Most of us have grown up considering “urgent” and “important” to be the same thing, but that is not always the case. An issue can be both urgent and important (a heart attack), urgent but not important (a telemarketer is calling), important but not urgent (that big project you’re working on), or neither (surfing the web). As such, we need to develop the ability to quickly identify urgent and important interruptions that need to be dealt with right now, and file the rest away to be dispatched at regular intervals when they will not interrupt us from the tasks we are focused on completing. Be particularly wary of “urgent but not important” tasks – these often masquerade as top priority items and steal attention they don’t deserve.

In Tim Ferriss’ fantastic “4-Hour Workweek” he discusses his method for handling email interruptions. Tim checks email once at 11am and once at 4pm – that’s it. It’s called batching, and it helps not only to reduce interruptions, but also decreases the time spent switching between tasks (28% of your day, according to the Microsoft study).

Since I’ve left banking and been working at Hosting.com, I’ve tried to turn over a new leaf in email management. I’m no Tim Ferriss, but I try to only check emails once an hour and I completely turn off the alerts on my iPhone during things like dinner, movies, and social time with friends. Not only has it made me more productive, it’s drastically reduced my stress level. Additionally, people learn that email is not a viable option for getting ahold of me instantly. If something is both urgent and important, I get phone calls, which are totally fine and welcomed. My boss operates on the same principle, and it actually creates a great work dynamic in our office – urgent/important things get personal phone calls or face to face conversations, while non-urgent items get dropped in our email boxes for handling at the appropriate time. We both know that if our phone is ringing, the other has considered both the importance and urgency of the task before dialing the number. If you can get everyone in an office or on a team working under this principle, it really does dramatically increase efficiency and decrease stress – I highly recommend it.

30 by 30

I travelled back to my hometown for Christmas this year and took the time while I was there to enjoy the company of old friends over drinks in familiar pubs. I spent one such night with a former colleague and great friend whom had always provided me with a sounding board and personal “level” during our time together in banking.

As we sat alternating rounds at one of our old haunts, he described to me a renewed outlook he had developed over the past several months of particularly long hours at work. He had come to the realization that in addition to professional success, personal zest for life was an equal contributing factor to one’s happiness. Accordingly, he resolved to inject some life back into his waking hours, and that began with a definition of what living meant.

When he sat down to define the things that made him happy, it became apparent that so many of us think that happiness is defined by “having”. That is to say having a 56″ TV, having a nice car, having an arbitrarily high account balance. What my friend realized is that “having” is a poor substitute for “doing”. Thinking back, I realized he was right. The happiest times in my life have not stemmed from things I had, but from things I did. The state championship my senior year of high school. The spontaneous overnight drive with roommates to Florida for a weekend in college. A wild weekend in New York City with my brother and a close friend. Experiences pay dividends far richer than possessions.

So, rather than medicating with shiny toys, my friend resolved to spend his money “having” remarkable experiences with friends. He told me he sat down to write out 30 things he wanted to experience while he was still young and relatively unencumbered by family, mortgage, and age. We made plans to accomplish at least three of them in 2010 together. His list is titled “30 by 30″, and these are the things he wrote down.

1. Travel to Las Vegas and witness a title fight from the good seats.
2. Learn guitar well enough to play cover songs for tips one night in a bar.
3. Ski the back bowls at Vail without falling.
4. Headline the local paper just once, for something positive.
5. Get lost for a summer weekend in the Rockies with only a tent, sleeping bag and camping stove.
6. Chop down a tree for firewood.
7. Soak up the tropical weather and several mojitos in Miami.
8. Learn mixed martial arts.
9. See the Sox play at Fenway, curse at visiting team with local Bostonians.
10. Travel through Europe for several weeks without a defined itinerary.
11. Become “first name basis” friendly with a celebrity I admire.
12. Climb to the peak of a mountain tall enough to be an accomplishment (more than a day hike).
13. Attend a Hollywood party – with an invitation.
14. Pick up a girl who is way out of my league.
15. Rent a Ferrari and drive the Northern California coast.
16. Learn to snowboard.
17. Live like a king for a week in Buenos Aires.
18. Become a recognized expert in a topic of my choosing, however narrow.
19. Grow a real, outdoorsman-caliber beard.
20. Sail for a week in the Bahamas, on a rented boat, without a guide.
21. Become a good enough sailor to achieve #20.
22. Attend a party at a rooftop bar with a view in New York City.
23. Climb to the top of the Eiffel Tower.
24. Experience the neon and culture shock in Tokyo.
25. Become a regular at a local bar. Enjoy free drinks.
26. Beat one of the old men in the park at chess.

See the following bands live, from up close:

27. Billy Joel.
28. Journey.
29. John Mayer.
30. The Goo Goo Dolls.

An ambitious list for sure, and one that will probably not end up fully marked off by his 30th birthday. However, if even half of the items do get accomplished, they should provide some excellent fodder for reminiscing next time we share a pint at Christmas. To those following along at home – what things would you put on your “30 by 30″ list? If you’re over 30, what are some things you still want to experience before retirement (i.e. things you don’t want to put off)?

Also, if this is a topic that interests you, make sure to read Paul Graham’s essay “Stuff” which discusses the “over-stuffing” of America. Take the money you would spend on “stuff” and spend it on something that’s actually going to increase your happiness level – life experience.

New Beginnings at Hosting.com

This post is slightly overdue since most that know me have already heard the news, but several months ago I left investment banking and joined Hosting.com as Integration Project Manager. In my new role I’ll be focusing on the integration of acquired companies, as well as internal strategic projects as needed between acquisitions.

I went into finance after college because I recognized that while I had some hands-on entrepreneurial experience building a startup company, I still had a lot of learning to do when it came to the way larger established companies were run, financed, and sold. If I wanted to grow into a successful investor or to repeat my entrepreneurial success on a larger scale, I needed develop my financial skills and experience a variety of industries and companies. I got all of this experience and more during my time working with the many bright people at Edgeview Partners. Having a ringside seat next to our partners and clients gave me a great appreciation for all the considerations and work that go into corporate finance and dealmaking. In addition to intense hands on financial experience I got, the many late nights hardened and groomed a messy college senior into a stronger, more polished young adult.

However, in time, I realized that I really missed being around technology every day and working with a team to grow a business. Additionally, many of the most talented entrepreneurs and investors I’ve met and spoken with are also great operators, and I knew that I still had a lot to learn in that regard. I wanted to get back to growing a company. Last year’s turmoil and uncertainty in the financial industry provided the final push that I needed to break out of my routine, take some risks, and seek out something new. I connected with a long-time family friend who was able to point me to what would turn out to be the perfect combination of all the things I was looking for – Hosting.com in Denver, Colorado.

When I arrived in Denver to interview, I spent the entire cab ride from the airport to Hosting.com headquarters with my face pressed against the back window – the snow-capped Rockies, brown high plains, and expansive western sky were an arresting contrast to the rolling green hills of Charlotte. I met with several executives, and after a few hours discussing the job, my qualifications, and the quarterback woes of the Buffalo Bills, I knew Hosting.com was a place I could come to make a difference, gain some hands on experience in a growing company with great people, and (maybe most importantly) to get excited about work everyday.

Today, I’ve been here for just over three months, and each day has been interesting and educational. Hosting.com has been a great fit for me because it provides an opportunity to combine the financial and deal-related skills I learned in investment banking with my entrepreneurial drive and interest in technology. It’s also been extremely refreshing to “get on the bandwagon” after so much transactional work and actually focus on the long term success of the company. Everything I’m working on is directly focused on scaling our business, improving efficiency, or serving customers – it’s great to be able to get involved on an operational level. Being on the inside of a world-class datacenter/hosting company has given me a new appreciation for the massive network infrastructure that runs our modern internet. It’s also exciting to be on the cutting edge of much of the cloud computing architecture that will run the internet of tomorrow.

All in all, it’s been a great move for me, and I’m very glad to be back in the technology industry and back in a hands-on role. Wearing jeans to work isn’t too bad either.

PS – I’ve also made a commitment to update this blog more frequently in 2010 now that I’ve got a little bit more time available to write. You’ll still see plenty of posts in the “Finance and Economics” category, but also expect some more fleshed out content under “Technology” as I try to write more about cloud computing, applications, and internet infrastructure in general.

On Chrysler, Private Equity and Bailouts

The auto industry’s recent troubles have shoved normally secretive private equity firm Cerberus Capital into the spotlight, as its portfolio company, Chrysler, heads to Washington to ask for a bailout. Much has been written decrying Chrysler’s audacity, claiming Chrysler is less deserving than Ford or GM because it is privately held, or with headlines like “If Cerberus will not invest further in Chrysler, why should the taxpayers?”

I strongly disagree with this argument, and the general one that just because Chrysler is not public, it is less deserving of a bailout than Ford and GM. You may be surprised at the actual ownership of Ford and GM – the majority of their shares are held by investment houses similar to Cerberus.71% of Ford’s outstanding equity is institutionally owned, and in addition, 40% of its voting rights are controlled by the Ford family. GM is 78% institutionally owned.

Also, why is the public not aghast that Ford and GM cannot raise additional equity from their existing shareholders? If Ford and GM cannot float additional equity on the public market, why should the taxpayer invest? The answer is that none of the Big 3 can raise additional equity because their market cost of capital is astronomical. This is why the government has to step in – neither the private nor public markets are willing to make any sort of further bet on these companies.

In addition, Cerberus has agreed to forfeit any profit it may make on its Chrysler investment if it receives government money. Ford and GM’s public shareholders have clearly made no such promise.

To be clear – I am in no way in favor of a bailout for any of the Big 3. These are sick companies, and they need to die. However, discriminating against Chrysler because they are privately held is really inappropriate.

The Magic of Facebook Ads

I had an amazing experience tonight on Facebook that I thought I would share.

Barack Obama is coming to Wake Forest tomorrow. Limited tickets were available for free on a first come, first serve basis to the student body. Unfortunately, I wasn’t quick enough, and didn’t get a ticket, and neither did my two roommates. After four years at Wake, I’ve missed the chance to see a number of big name political speakers, and I wanted to make sure I got to see at least one before graduation.

I tried emailing my fraternity’s listserv to see if anyone had any extra tickets they weren’t using – no luck. I emailed the president of the campus College Democrats – no tickets left, the event is sold out. However, I was determined to get a ticket, so I turned to the best medium I knew to contact as many college students as possible – Facebook.

At 11pm tonight, approximately 10 hours before the doors were scheduled to open for Obama’s speech, I created a Facebook ad offering $25 to anyone with extra tickets. I was easily able to target it to all students at Wake Forest (though I could have customized it further – by interests, class year, major, and many other criteria). I chose to pay per click, and set a maximum budget of $5. After I pressed “Create my ad”, it was a matter of minutes before Facebook had shown my ad over 6,000 times. Within the hour, I received messages from 4 separate people offering to sell me their tickets. The entire thing cost me $4.97 – that’s only about 8/100ths of a cent per impression. (As a side note – this is incredibly low as far as online advertising goes – a problem for Facebook that has been mentioned before as one of their biggest weaknesses)

Tomorrow morning both of my roommates and I will see Barack Obama speak in a sold out coliseum that I didn’t even have tickets to until less than 10 hours before the event.

Now that’s the power of the internet and social networks – and it’s those kinds of results and precise targeting that make Facebook worth $15 billion (though I do think that’s a bit high, considering their monetization difficulties).