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David's Macro Blog

Analysis and commentary on business, economics, real estate, financial markets, and other fun topics


Category: Innovation

Over the next five years almost every major product vertical will be rethought to be social. GET ON THE BUS!

The bottom line we found was that you make something social and that rethinks the whole space. The social version of anything can always be much more engaging and outperform non-social versions.

There are just a few amazing business minds in every generation and Mark Zuckerberg definitely is at the top for his generation. His answers are truly amazing for a 26-year-old technologist.

Mark Zuckerberg Interview at Web 2.0 Summit


(quotes are Mark Zuckerberg unless otherwise noted)

We don’t really use it (email) that much… because it’s too slow. ..What they (HS student) meant was it’s (email) too formal. – MZ talking to a high school student about what they use to communicate

The approach you’re taking is right; we’ve got to go push the boundaries and figure out where they are, because if we set rules too early we won’t figure it out. We just won’t — we’ll stay in the past. – Tim O’Reilly

I think that in the five years most industries are going to get rethought to be social and designed around people.

A few years in, a couple of engineers at the company branched off and said we’re going to build new products. We got photos, the first version of groups, and events. At this phase, all these projects had the same thing in common; groups of 2 or 3 people competing against whole start ups that were out there… we had these teams of just 2 or 3 people building just over a couple of months very simple versions of these products… but the thing that it had was it was very deeply, socially integrated. You uploaded a photo and it went immediately so that all your friends could see it… and it turned out that that social feature was more important than every other feature put together. And very quickly our photos product became the most used photos product on the web, same thing with groups, same thing with events.

The bottom line we found was that you make something social and that rethinks the whole space. The social version of anything can always be much more engaging and outperform non-social versions.

There have been four game companies that have been built almost entirely on top of Facebook: Zynga, Playfish, Playdom, and CrowdStar.

Games have been the first big vertical to tip, that have gotten completely rethought to be social. That’s actually true on most platforms. On the iPhone and iPad, games were some of the first major things that took off. Even if you got back to the first PC, one of the things that got people to bring PCs into the home were games.

Anything that doesn’t have to be built by us, we’d rather have it not be built by us.

We are a pretty small company, we have a few hundred engineers. (crowd laughter) I think its small.

Over the next five years almost every major product vertical will be rethought to be social. GET ON THE BUS!

There are five values we have and two I’d hammer home right now are: move fast, and be bold – take risks.

Technology companies are interesting because a lot of companies get strong with scale. With Coca-Cola, the bigger it gets, the bigger its distribution network gets, the stronger it is. Technology companies have some scale advantages but also they just tend to get slower. Then they get replaced by smaller companies that are more versatile. One of the things I think about every day is how can I make this company operate as quickly as possible.

A lot of that is about encouraging people to move quickly but a lot of it is just about building out really good infrastructure that enables people to move quickly on top of solid abstractions we’ve built.

Really good people (employees/engineers) have this way of seeking out what is the most impactful position for them to be in.

The lead designer on the project joined us as an intern. We always do these management presentations where interns do these management presentations about what they did that summer. I asked him some questions and he just went off on me and had all these awesome points about why I was wrong on my criticism of his project. I was like this guy’s awesome — we’re definitely hiring him when he graduates.

I’ve made many mistakes running the company so far. Just about any mistake you can think of I’ve made – or will make in the next few years. The Facebook story is that if you are building a product that people love, you can make a lot of mistakes. The lesson from that is focus on building something that people really like and that is valuable.

A lot of enterprise software gets developed from the mindset of a feature checklist rather than what is really good to use.

What social applications have is that they are much more engaging.

The first chapter has been building out Facebook the application, the site people use every day. But long term… will be that the vast majority of the social ecosystem will not be Facebook, but we’ll help those businesses get built… That I think is a bigger long-term opportunity.

I like this map you have up here but my first instinct was that your map’s wrong. Because the biggest part of the map has got to be the uncharted territory. One of the best things about the technology industry is that it is not zero sum… of the best things is that we are building real value in the world, not just taking value from other companies.

My Notes

  • Mark thinks of Facebook as a platform for inspired entrepreneurs to rethink whole industries (e.g. movies, music, news) and develop new content and distribution. That’s a huge vision.
  • Facebook’s plan to dominate the internet is to build low-level social media infrastructure that enables entrepreneurs to build on top of it (like Zynga, worth a few billion as of this recording). This is the same as Microsoft’s vision during the PC era. Now Facebook will be able to generate streams of income from these apps in ways Microsoft never could. Scary. Maybe Facebook really is worth over $100 billion (as of mid-2011 when the company is still private).

Could one guy making free education videos in his closet alter the entire multi-billion dollar educational landscape forever?


Salman Khan left his lucrative hedge fund career in his 30’s to spend full-time making educational videos for Khan Academy. Now with grants from entities like Google, Microsoft, and Kleiner Perkins, his short-term goal is to cover K-12 education in 10 languages.

Khan Academy’s Mission

Our goal is literally to be a free classroom for the world — give a world-class education to anyone anywhere.

Khan Academy’s Motto

Watch. Practice. Learn almost anything for free.

Authors @ Google – Salman Khan

Best Quotes

It’s as though he had more fun teaching me than I had learning from him.

He’s reaching 2 million unique viewers per month, the UC system is reaching 10 times fewer. This is with his own efforts and free hosting like YouTube and AppEngine that let people build incredibly useful things for free.

(In other words, Khan basically disrupted and disintermediated the whole education system)

One thing that happened was teachers started adopting it on their own. We started getting letters from editors saying, “Hey, you’ve already given the lecture so we’re using those to flip the classroom. So instead of me giving the lecture, me the teacher – , I’m assigning your lectures as homework. And then what used to be homework, I’m having the students do in class.” And it’s a very simple concept, but it really changes what a class is all about then. Now all of a sudden, instead of you literally have 30 people silent and completely passive, most of them zoned out, a teacher having to give this one-size fit-all lecture, even a great teacher, they’re losing probably 2/3 of the class, now that happens at home. You don’t have to be embarrassed and rewind something you might have missed, or fast-forward if you are bored, or pause something ten times; you don’t have to interrupt the whole class. And now, when you actually go to class, you actually have all your peers, you actually have the teacher to help you out. And it’s interesting. One thing I had mentioned in the TED Talk, “that’ll work for motivated students, but what about the students who aren’t going to do that?” And I was like, “Well, if you’re not going to do anything at home, period, it’s still better that you’re doing the exercises in the classroom, because that’s, frankly, where you’re doing to do most of your learning and if you didn’t do it, watch the video in the classroom, too. And so the paradigm is where you really learn stuff and where you’re really getting your head around something, you want other people to be around you. When you’re actually tying to solve the problem. But when you’re trying to listen to a lecture, you don’t want people around you. You don’t want people around you.

Our goal is literally to be a free classroom for the world — give a world-class education to anyone anywhere.

The best way to get people to do the homework is just to track it.

How to increase student usage – “gamifying”. Giving badges, points, stars.

The delivery cost is actually zero (cost of the education).

“How do you dance around the issue of copyright?”
“I have a very loose interpretation of fair use.” – SK

A lot of people are not self-motivated because they have these gaps in their knowledge that traditional education can’t address… And if you allow them to re-mediate without feeling embarrassed and they can do it in a game framework and they get points and badges, that actually solves a lot of the actual motivation problem.

There are a lot of studies, double-blind control studies and the learning style is kind of a myth; there is actually good instruction and bad instruction.

I think for everyone in this room, if you were a school teacher, this would be a more fun way to teach. You get to go into a room. You don’t have to prepare. And you get to be a mentor for these students.

One thing I hope we can do, in a non-touchy-feely way, because a lot of people say “No grades,” it sounds very touchy-feely. It’s the opposite. We actually want people to master — everyone should be an A+ student. Everyone should have a hundred percent mastery if they really want to get to some future level.

My Notes

  • Khan started out by teaching his cousins. His first video was on division.
  • The cousin’s first feedback was that they preferred him on YouTube than in person.
  • He created a Javascript based website that generated math problems to solve, which included his suggestions. At one point he got too many users and since he was paying $50/month he just turned it off. Bad idea for a start-up!
  • KA model turned costly and time-intensive self-paced learning into a low cost model.
  • KA doesn’t penalize you for not getting it right away by just moving on. You don’t advance until you get 10 questions in a row. Fast learners aren’t held back and slow learners aren’t penalized for the rest of their lives. (Customized economy)
  • Google funded Khan Academy with $2 million, half for translating existing content into 10 languages and the other half to complete the knowledge map: all of K-Calculus (300 modules).
  • How do you help traditionally not self-motivated? Gaming is a huge thing to help them.
  • 3 ways to learn: lecture (video), problem solving, peer interaction

Salman Khan Talk at TED 2011


Our model is, learn math like you’d learn anything, like you’d learn to ride a bicycle. Stay on that bicycle, fall off that bicycle, do it as long as necessary until you have mastery. In the traditional model it penalizes you for experimentation and failure, it does not expect mastery. We encourage you to experiment and fail, but we do expect mastery.

(All the Khan Academy courses) fit into this knowledge map.

We can teach everything (every subject to mastery) that can be taught in this type of format (video lesson, computer generated quizzes).

We don’t view this as a complete education, it frees up time. This is the blocking and tackling.

Our paradigm is to really arm the teachers with as much data as possible. Data that in almost any other field is expected if you are finance, or marketing, or manufacturing. That teachers can actually diagnose what’s wrong with the students so they can make their interaction as productive as possible. Now the teachers (and parents) know exactly what the students have been up to, how they’ve been spending every day, how many videos they’ve been watching.

When flipping the classroom, the teacher time is now 100% personal interaction with students. No more lecturing or grading papers. Using technology to humanize the classroom. (paraphrase of long quote)

What’s emerging is this notion of a global one-world classroom. That’s essentially what we are trying to build.

I think you just got a glimpse of the future of education – Bill Gates

Khan Academy on PBS NewsHour


I want to do everything, I want to do history, grammar, literally every subject (on Khan Academy).

If the US education system is Waiting for Superman, have we found him?

Startup businesses are often toughest on the owners because they have to overcome so much adversity on the road to eventual success. Online shoe retailer Zappos, led by Tony Hsieh, endured about a decade of failures before its successful acquisition by Amazon Inc.

Success is the ability to go from one failure to another with no loss of enthusiasm.
-Sir Winston Churchill

Inc. Magazine’s “10 Steps to Zappos’ Success” highlights Zappos’ struggles and eventual success:

  • Being in a bad business with a track record of failure.
  • Running out of money multiple times.
  • Tony selling his San Francisco home to pay for a distribution center.
  • Tony taking an annual salary from $24 to a high of just $36,000.
  • Rejecting Amazon’s first buyout offer of $370 million.
  • Eventually selling to Amazon after a decade of hard work for $1.2 billion and being able to remain as CEO and keep the company independent.

For entrepreneurs, even the path to success is filled with mostly failure after failure.

To learn what makes such a great company, listen to CEO Jeff Bezos talk about its recent acquisition of Zappos, innovation, and customer obsession.

Everything Jeff knows seems to be a very short list.

#1 – Obsess Over Customers

Put customers first because ultimately they’ll make or break your business.

Jeff doesn’t clearly state this, but it seems that the main reason for Amazon’s acquisition of Zappos is the fact that both companies (and CEOs Bezos and Tony Hsieh) share similar values, starting with customer obsession.

#2 – Invent

“Don’t accept either/or thinking”, instead invent your way out of any problem. 

Invent solutions on your customer’s behalf. You can invent your way out of any box if you think you can.

#3 – Think Long Term

For any company to be innovative or focused on customers needs, it needs to think long term. Some ventures will take 5 to 7 years to pay dividends. New inventions take time to be understood.

Applying the principle to think long term might pay dividends for customers BEFORE benefiting shareholders.

Note: Jeff candidly admits that Amazon has made a lot of mistakes along the way, with the result being Amazon has learned something.  You don’t get to know much without trying lots of things and making a lot of mistakes.

“Failure is only the opportunity to more intelligently begin again.”

— Henry Ford

“If you want to succeed, double your failure rate.” 

— Thomas J. Watson

It’s important to note that innovation isn’t the result of focusing on next quarter’s earnings and short term gains.

In summary, if you want to innovate in your business, you need to obsess over your customers and invent new solutions for them, knowing that you’ll make a lot of mistakes along the way.

For more reading on Amazon’s innovation, visit: Whiz Jeff Bezos Keeps Kindling Hot Concepts

Please comment below – I’d love to know what you think.

Biz Kids is a public TV series where kids teach kids about money and business by experimenting and solving real world business problems.

ht – AS

Our current school system is woefully inadequate at teaching kids about the basics of money, business, entrepreneurship, and how the real economy works (hint: it isn’t an equation with greek symbols).

One thing I noticed was that most of the kids involved had these 2 characteristics:

  1. They didn’t give up when one method didn’t work.  Being kids, they just tried something else without getting stuck in failure.
  2. They learned to plan, budget, and value the money they earned and spent.

Now that we are in the Great Recession caused by excessive debt and poor financial planning, wouldn’t those skills have been good to learn?

“I like running my own business because it helps me learn what business is really like.” – Zoe Stewart (age ~8)

Now this is a class I would have loved to take in school!  In fact, I’d like to see entrepreneurship taught at all grade levels in our schools.  Why do our schools need to end at 2:15pm everyday when we are competing in a real-time global economy where a good or (virtual service) can be produced in any country?

A few of my favorite episodes below.  All of these are a MUST watch, so enjoy!

  • 103 – How Do I Get Money – Kelsey Angel Chocolates & Young Americans’ Bank
  • 105 – Money Moves – Kitsap Credit Union (buying a piglet, raising it, and selling for 4x!)
  • 106 – Bea’s Beauty Bars (hand made soap; she uses QuickBooks to track her business!!! Sounds like the next Burt’s Bees)
  • 122 – Sell, Sell, Sell – Alex sells over 1000 Girl Scout Cookies per year
  • 201 – Have a Plan, Stan! – Zephry Productions
  • 207- The World is a Risky Place – Serve it Up (tennis lesson profits)
  • 210 – Secrets to Success – Circestreem (performing pays for college!)
  • 211 – Marketing Mix – Stocked Skateboards ($250,000/year selling skateboards online!)

Do you think kids would learn supply and demand better from a textbook or their own business?

Comment below and let me know what you think about this show and any of these episodes.