Hiya all,

One part of the Cambrian House model we are keen on pursuing is crowdfunding. Crowdfunding is where community members are able to invest in people and ideas within the community on commercial ventures. Say an entrepreneur in the community is looking to raise funds to pursue their idea. Why not allow other community members to invest in micro-funds or payments?

Going forward, IdeaWarz will continue to focus on helping people raise their idea’s profile within the community. But we may also have another competition whereby entrepreneurs pitch their business ideas to community members for funding (we don’t have a name for this yet but we are thinking of BusinessWarz).

In the meantime we are going to continue the $1000 prize and authentic Jessye Cook designed t-shirt for IdeaWarz winners but will be dropping the $9000 in community spending (as this will be handled through crowdfunding).

From 1983 to 1998 investors experienced one of the greatest bull markets in stock market history. From this golden era, three mantras emerged to become accepted as conventional wisdom:

• buy and hold
• the market always goes up
• you can’t time the market

As someone who used to subscribe to these truisms, I will explain why this conventional wisdom no longer holds and how following them in today’s market will lead to financial ruin.

Building the myth

While the myths themselves have been with us for several generations, my generation first came in contact with them during the bull market of 1983 - 1998 (note: by market I am referring to the Dow Jones Industrial Average).

Anyone who in invested $1000 in 1983 would see their money multiply almost 9 times by the time 1998 rolled around. This bull market gave investors an annual average return of 15.7% over 15 years.

Helping entrench these myths were the mutual fund companies. It dovetailed nicely with the industry’s rallying cry at the time - asset accumulation. Marketing a fund became just as important as managing the money.

With graphs, charts, and lots of historical data, mutual fund companies painted a pretty compelling picture for why investors could count on the market to go up. And when the inevitable bumps did come, the market always recovered which made timing the market moot.

But perhaps the greatest reason people subscribed to these myths was that they worked. For this market, buy and hold gave people a great rate of return for doing absolutely nothing.

It was the doing nothing that attracted a lot of investors. They didn’t have to think. With history and the numbers on their side, it was easy to abdicate responsibility and have faith that the market would always go up. And for over 15 years it did.

All myths are local

There is nothing wrong with conventional wisdom. As Jerry Seinfeld once said, ‘Sometime the road less traveled is less traveled for a reason.’

Unfortunately, conventional wisdom breaks down when applied outside of the context and boundaries from which they were formed. This is especially true of financial markets. There are no rules that work in all cycles.

Investors get in trouble when they apply one set of market myths to a completely different market cycle. When you look at markets over 100 year periods, the trend is indeed up. When you look at markets in 10 to 20 year cycles however, things look quite different.

For one, the market doesn’t always go up. From April 1930 - July 1932 the market lost 86% of its value.

Secondly the market can go side ways and deliver no returns for upwards of 20 years. Look at the returns investors received over these market cycles of the last century.

For many 20 year periods the market returned little no capital appreciation. Not only would buy and hold have put peoples capital at undo risk, they would have lost the opportunity to put that capital to use else where. The market does not always rise, nor are you guaranteed a return of 11% per annum.

If you think these crashes are things of the past, ask Japanese investors how the felt buying and holding stocks on the Nikkei index from 1989 - 2003.

It took 14 years for the bear market to bottom after a market peak in 1989. And this is Japan - one of the most prosperous, hardworking, industrialized nations of the world.

What does this all mean?

I don’t want to give the impression that people should not invest in the stock market. I believe the stock market is a wonderful vehicle of investment. And when treated with respect, it is a wonderful way for people to get a decent return on capital.

But as someone who grew up applying these myths, I was jarred when I read Maggie Mahar’s excellent book, Bull! A history of the boom and bust, 1982 - 2004, to learn that not only were these myths not always true, but that applying them in today’s market could be disastrous.

Does this mean a crash in the stock market is pending? I don’t know.

But I do know that the strategies that served us so well for the last 20 years will require changes for the next 20. With the market recently punching through an all time high of 13,000, the real estate market beginning to cool, and consumer debt at one of its highest levels, many wonder if the market can go much higher.

While it is certainly beyond most of us to predict, we can make educated guesses. And after enjoying one of the great bull markets in history, the tide may be heading out.

Hiya all,

One question I get a lot from people when they first join Cambrian House is how to get started. While there is no one way to kick-start your venture, I thought I would share Christine’s top 10 list.

#1. Submit your idea

How do you know whether your idea is any good? Or if it has ever been done before? Once you’ve submitted your idea, community members will be able to give you some good critical feedback. They can tell you whether it’s any good, and possibly even show you ways to improve it.

#2. Refine your idea

Under My Profile/Ideas, click Refine this idea further. Here you can add an elevator pitch and logo. Even your own commercial or video. This gives your idea more prominence in the community and qualifies it as a potential contender for the monthly IdeaWarz tournament where you can win money to start your business.

#3. Promote your idea

We believe that you shouldn’t become emotionally attached to any one idea. Test, don’t guess. Get as much feedback on your idea as you can before investing more time/money into it. Invite your friends and family to review your idea and give you feedback. Plus the more people who rank your idea, the more chances you’ll have to get into the next IdeaWarz tournament.

Just go to: invite your friends and add the URL of your idea into the message body.

#4. Convert your idea into a business

Once you’re ready to start executing your idea, you’ll need somewhere to work on it. Under My Profile/Ideas, click turn this idea into a business. This will create an instance of your very own wiki, forums and code version repository.

#5. Tag your business

Tags are one word keywords that describe your business. This is how members will find your business when they’re looking for opportunities to work on other projects. Tag your business with useful keywords so members can find it.

#6. What is your business plan? (Update your wiki)

Your wiki is your online collaboration space. Start by creating a new page outlining your business plan so that other members can get an idea what you’re up to. Consider answering questions like:

• what’s new about what you’re doing?
• what do you understand about your business that other companies just don’t get?
• how will you make $$$?
• who are your competitors? (Hint: there is always a competitor)
• what companies would be most likely to buy you?
• why would your business be hard for someone else to duplicate?
• is this idea patentable?
• what might go wrong?
• how will you structure your incentive program? Cash? Royalty Points?

#7. Fill the job jar

Need a logo? How about help designing your web site? You can ask for help by clicking on the Jobs tab when editing your idea. Soon we will have compensation models in place to help you describe what’s in it for them. Until then be really nice.

#8. Introduce yourself

Before people will rally to your cause, you need to tell them a little bit about yourself. Who are you? What makes you tick? Mac or PC? You get the idea. You can do this by completing your profile.

#9. Rally the troops

Invite members and friends to work on your business by using the Promote your business link on your business page. Or if you know what sort of skills you are looking for, use the Search under the main navigation bar and invite members by sending them a private message.

#10. Have fun

Here are a few ideas more or less doing many of the things mentioned above.

FilmChamp

Prezzle

Robin Hood Fund

I know there are many more. Be sure to tell us about any other good ideas you see out there in the commmunity.

That useful euphemism the 80/20 rule doesn’t apply when it comes to measuring participation on the web.

Last week, at Web 2.0 Expo, Bill Tancer of Hitwise shared some hard numbers on how much participation is actually occurring at some of the most popular web 2.0 sites.

• YouTube – 0.16% (visits to upload video)
• Flickr – 0.2% (visits to upload photos)
• Wikipedia – 4.59% (visits to edit pages)

Out of all the traffic YouTube and Flickr get, 0.2% of people actually upload videos or share photos. Wikipedia kind of surprised me with 4.59% of people editing pages.

This is a profound reminder for companies and startups building online communities. A very small percentage of your members are highly relevant. The 99.8% of casual observes in the community cannot overshadow the 0.2% providing content, or the magic will disappear.

Bill also reminded us how precarious any leadership position is in the web 2.0 world. As an example, he showed how YouTube came out of no where to pass Yahoo and Google over 3 to 6 week periods respectively in video search. This hyper-rate of adoption has got to be scary executives, knowing that over the course of a holiday they could lose their market leading positions.

For those who believe that English will sweep aside all other languages on the web, think again.

According to Dave Sifry (CEO of Technorati), Japanese is the most popular language of choice claiming 37% of the blogosphere, while English comes in second at 33%.

While Dave admitted some languages were under represented (like Korean and French) he said English was definitely second in popularity and more and more people are blogging in Japanese every day.

These and many other interesting bits of fact and trivia were shared by Dave last week during a one of the keynotes at Web 2.0 Expo.

Question #2: What is the fastest growing blogging language in the world today?

Answer: Farsi.

1% of the world’s blogs out there today are written in Farsi, coming out of Iran. I found this to be very inspirational, knowing that even in repressive regimes, blogs and other web 2.0 tools are giving people a real voice and they are using it.

Question #3: Out of the most 100 linked to sites on the web, how many of them are blogs?

Answer: 22%.

Dave had a wicked graph showing all the big name media companies like the New York Times, BBC, Wall Street Journal at the top, with popular blogs sites like Engadget, and The Huffington Post starting to nip at their heels.

This was an increase of 10% from only 6 months ago. The trend is obvious - blogs matter and are disrupting traditional media more and more every day.

Other interesting blog stats:

• 120,000 new blogs are created every day
• There are 1.5 million new posts every day
• Out of 15.3 million active blogs, 21% are active.

While the creation of 120,000 every day seemed high, the message was clear - blogging is alive and well on the web.

Dave wrapped up by sharing some tips for up-and-coming bloggers on who to raise their profiles in the blogosphere.

1. Post frequently

• most magic middle bloggers (about 3 million people) post about once per day
• highly influential bloggers post twice per day

2. Stay at it

• most influential bloggers have been at it for 1 – 2 years

3. Don’t be intimidated

• 88% of the Technoarti Top 100 is different than one year ago (it’s fluid and changing)

Overall, I found Dave’s talk to be one of the most interesting of the conference. I had no idea Japanese was the most popular language, or that Farsi was the fastest growing. I hope these stats were of as much interest to you, as they were to me.

Toast to D4V for the pictures.

The customer is always right has been a business mantra for close to a century. So what would cause del.icio.us to ignore this sage advice, and ignore customer requests.

Well last week at Web 2.0 Expo, I heard Joshua Schachter share a few good stories of where ignoring customer requests made sense for the del.icio.us community.

Joshua described how some customers wanted del.icio.us to publicly share a definitive list of the top tags used in the community. This seems like a simple request. In today’s age of openness and transparency, why wouldn’t del.icio.us want to share this data?

Well it turns out that the reason del.icio.us works, is because people tag for themselves and not others. If del.icio.us were to publish a definitive ranked list of the top tags, people could game it so their articles are marked with the most popular tags. This would diminish the usefulness of tags, and dilute the overall site experience.

Another example of not listening to the customer was not allowing media companies to pre-tag articles. Joshua doesn’t like pre-tagging because it defeats the intent of how del.icio.us was meant to be used. It skews the tagging accuracy and relevancy.

Whether you agree with Joshua or not on how del.icio.us works isn’t important. What is important is understanding that customers can be wrong, and you need to keep the big picture in mind when adding features to your software.

I agree with Joshua. Listening to customers is an art. They can give you valuable feedback, but you can’t follow their advice blindly.

The blog is the new resume

Remember when bloggers were warned that their weblog may negatively impact their current or future employment? Well the medium is now so mainstream that the trend has flipped 180°, now it could be detrimental not to have a blog, especially in the face of competitors who do.

eBay buys StumbleUpon

eBay has purchased StumbleUpon, a popular web discovery tool that was originally developed in Calgary. The same day the announcement was made Google also announced that they are launching a very similar tool.

GigaOm launches a new blog focused on startups

Combining startup news, useful tips, questions & answers and more, Found|Read targets the startup and entrepreneurial market with the expertise of the Giga Om network.

VisiblePath challenges LinkedIn with superior network analysis

Connections can’t be made simply by emailing and requesting to be added to a person’s network. Instead, connections are established by ongoing communication, meetings, etc, and the site automatically adjusts the strength of the connection based on recent activity. No more collecting contacts just to have more contacts, instead you can focus on those you truly interact with.

Second Life goes even more open-source

Linden Labs has opened up the back end of Second Life, allowing for the expansion of the virtual world by third parties. This leads to some interesting questions about how Linden Labs can best generate income from their increasingly open world.

YouTube offers 50/50 revenue split with users

Talk of revenue sharing has been circulating for a while, but it is now rumoured to be happening as early as next week.

Why your online community needs moderators

Whether to moderate our community or to allow them to self-police has been (and still is) an ongoing discussion at Cambrian House. While this article doesn’t reflect our stance, it does contain some interesting commentary on the role of a community moderator.

Here are the results from RND2 of the Friendly Giant folks:

* the numbers in brackets = percentage of votes Another close round! Congrats to our all contestants who made it to the final 4! Don’t wait till next Wednesday noon to get your votes in. VOTE NOW and help decide which idea is worthy of the title Friendly Giant. May the best idea win! Special thanks again to the good people at 42squared.com for their financial support of this IdeaWarz Tournament.

Hiya all,

A great session here at Web 2.0 Expo had Reid Hoffman (LinkedIn) discussing the good, the bad and the ugly of social networks.

One of the discussion points was around various exit options for startups. Reid said there were three.

1.The early exit ($5 - $50 Million)

You have an interesting product someone else is ready to take to the next level, or the acquirer just likes you and buys you purely for your team.

Your product or service already has great traction in the market place. You have gone through several iterations or growth and funding, potentially have more than one product or service.

3. Billion dollar boys club (> $1 Billion)

You are committing to world domination, requiring lots of humans, and are in it for the long haul.

Reid recommends startups keep all three options open because which ever way you go, it’s the same amount of work. You are not going to be working any less with the $10 Million exit than the $1 Billion.

So execute as if you are in it for the long haul. That million dollar company just might be a billion dollar company and at the end of the day it’s the same amount of work.

At least that’s how Eric Schmidt (CEO of Google) sees things.

Yesterday at Web 2.0 Expo Eric announced that the circle is now complete. Very shortly Google will be releasing a Power Point clone to round out their office suite of applications (Word and Excel).

Of course Eric doesn’t see these tools competing with Microsoft’s Office Suite. For one MS Office is much more feature rich and Google’s tools don’t compete on functionality. Secondly these tools are much more focused toward online collaboration and not the desktop.

This of course is all poppy cock. Most people use 1% of MS Office features and you can bet Microsoft is adding web connectivity to their offerings.

John challenged Eric on this point and said that he remembered interviewing Eric way back in 2002 and how pleased Eric was to be working for a small software startup that didn’t have to compete with Microsoft. Times have definitely changed.

Also covered in the key note were comments around the DoubleClick acquisition, the Viacom lawsuit and the importance of net neutrality.

While Eric wouldn’t confirm that Google got into a bidding war with Microsoft over DoubleClick, he did make it very clear that Google is committed to offering an end-to-end one stop shopping experience for advertisers on the web.

The DoubleClick deal compliments the YouTube acquisition as a way for Google to own more advertising streams on the web.

What Eric thinks Google brings to the table is the science behind the art of advertising. By that he means that while DoubleClick requires human interaction to help add relevancy to adds, Google can automate a lot of that.

As far as Viacom suing YouTube over DMCA issues, Eric feels this is a negotiating tactic. Eric’s point on DMCA is that both parties need to participate in regulating improper use of video content and material. For their part, Google is working on adding tools like Claim Your Content (CYC) to help people sort this stuff out.

Eric believes Google is doing their part here. As an aside Eric, commented that as soon as the Australian Broadcasting Corporation (ABC) contacted them regarding infringement on their material, Google immediately took the offending videos down. Little did they know at the time that the letter was actually sent by a 16 year old impersonating the ABC. Gotta love kids.

Also discussed was Eric’s role on the board of Apple. While he very clearly needs watch what he says and does (as Apple also has an Office Suite to compete now with Google) he has nothing but respect and admiration for what Apple has done, and enjoys gaining insight into one of the worlds most innovative companies.

Eric and John wrapped things up by sharing a few thoughts on net neutrality.. Eric made the point that net neutrality is necessary to continue the innovation, and creativity that we are seeing in the web today. While rich companies like Google could afford to pay for better services that gets their traffic ahead of everyone else’s, he thinks it would be a terrible day if net neutrality went away.

Ahem.

At the end of the day, I can’t help but like Eric Schmidt. His image is definitely Mr. Rogers. He is friendly, polite, unassuming, and never puts anyone down. He is navigating Google through some very complex waters, while trying to maintain the culture that has made them so successful. No small feat.

I get the sense Eric and Google want to do the right thing, because they are under no illusion as to how much power they possess (with all that data), and how easily it would be to abuse. For their part I think they are doing their best to do the right thing, while many other companies would have succumbed to the temptation.

Bonus material: Here is a video of some of the key note. Eric discussing the release of Google Power Point.