A VC - Latest Comments in Bits Of Destruction

Re: Bits Of Destruction

Dan Auito — Tue, 27 Jan 2009 23:37:51 -0000

You got that right. Stand by to be eliminated if you can't get with the times and fast!

Re: Bits Of Destruction

Axemedia — Mon, 05 Jan 2009 14:31:47 -0000

I wrote a piece a couple weeks ago about the auto industry and what will likely happen to the dealership business model.

Link is here http://stever.ca/local-inte...

Yes, creative destruction at work.

Reading some of the other commentators I see some mentioning dealerships are protected by laws that prevent the manufacturers from selling direct. It does not need to be direct from manufacturer, dealerships just need to par down to a small office with a computer and a few models on hand for test drives. No need for millions of dollars in inventories sitting on their lots. People can order online from home or have their hand held by a rep in front of the computer terminal at the "new kind of dealership" office. Vehicles are made to order then delivered. Still need a local service department for repairs and warranty work too.

Re: Bits Of Destruction

fredwilson — Wed, 31 Dec 2008 07:54:09 -0000

Maybe, but I think the lack of distractions and being able to ³lean back² is
more important

Re: Bits Of Destruction

josh guttman — Tue, 30 Dec 2008 20:57:11 -0000

Great post Fred. This sounds inspired by perspective that can only be gained from traveling abroad.

Clearly, we're moving from the industrial to the information age and many businesses that were once titans of their industry will become smaller or irrelevant. As some of the comments above indicate, this is sometimes systemic, but I think often management-inflicted through failures to adapt and/or poor decision-making. Toyota, a beacon of operational efficiency, just announced their first unprofitable quarter in ages, so clearly its an industry-wide event, but Toyota will emerge from this a strong company, while I don't believe GM, Chrysler or Ford will, largely because their management has failed to adapt. As it relates to distribution strategy (the one area where they're affected by the information age), they still manage 9,000 dealerships, despite plans dating as far back as 1995 to reduce this figure. Their distribution network needed to be cut in half for competitive reasons alone, irrespective of the internet effect. They've failed to adapt.

As for retail, I grew up in a retail family so have closely watched the ups and downs of the industry. I think great retailers that offer unique merchandise and/or a unique shopping experience will survive. Average retailers that do not and/or have failed to adapt to market conditions - ie Circuit City - will fail. Still, I think it's as much to do with management failures as it is with systemic changes. It reminds me of my friend Mickey Charles at The Sports Network, which began as a wire service for sports scores and today, is one of the largest syndicators of sports content online. They're original business certainly is obsolete, but they adapted. This upside, in my mind, is that this economic downturn will accelerate the process separating the wheat from the chaf and have a Darwinian effect on the market that will reward the strongest businesses and managers.

Re: Bits Of Destruction

Brian Paul — Tue, 30 Dec 2008 14:59:53 -0000

Re: Bits Of Destruction

markslater — Mon, 29 Dec 2008 18:35:01 -0000

this is a great comment. I struggle with the gulf between what ...say...English find social meaning in and what Americans do. As an English person living in America i sometimes feel surrounded by social and emotional Zombies here. everything from the sense of humor, to ability to conduct and hold meaningful conversations, to expressions of emotion seem lost or distinctly absent when i compare with my country. It could just be me, and its not leveled as criticism, i just wonder if my life would be so much more socially and emotionally fulfilling were i to move home. Sometimes i feel that consumerism has bankrupted this country socially, emotionally, and financially.

Ofcourse there are pluses, like marrying a beautiful american woman and experiencing what i believe to be unparalleled opportunities in my work life.

Re: Bits Of Destruction

markslater — Mon, 29 Dec 2008 17:42:29 -0000

surely a chapter is the only realistic way to get this started? No one is going to address this while loans and bailouts are made. Such a dramatic shift requires a direct threat to the solvency of the industry. (yes, yes i know its already insolvent). Laws wont get changed otherwise.

Re: Bits Of Destruction

markslater — Mon, 29 Dec 2008 17:34:29 -0000

A chapter will fix that.

Re: Bits Of Destruction

alexander alaric — Mon, 29 Dec 2008 13:20:06 -0000

These are great points to think about...especially taking tactics and ideas which are working smashingly well in 1 industry and asking "How can I apply these to my industry?"

Anything which makes things better, more efficient, and reduces marketplace friction is better for humanity despite the temporary pain CHANGE almost always causes.

Re: Bits Of Destruction

Democratic Strategist — Mon, 29 Dec 2008 09:22:13 -0000

Entrepreneurs depend on wealth-destroying VCs! And good 3nd-tier suppliers depend on GM and Cerberus. And great Soho restaurants depend on Wall Street CDO originations. And talented actors depend on Viacom and CBS. Lots of worthy people have been helped by too much capital going to the wrong places. They'll all suffer as the capital surplus turns into a deficit. Bad for entrepreneurs and auto parts suppliers.

Re: Bits Of Destruction

leigh — Mon, 29 Dec 2008 05:40:48 -0000

Truthdig is a great site ... thanks for the share

Re: Bits Of Destruction

leigh — Mon, 29 Dec 2008 05:36:02 -0000

Did a bunch of strategic marketing work with a major Canadian video retailer years ago - when we started talking about threats to their business that they need to do future scenario planning about - we went into depth about Netflix. What were the responses of most of the Sr. executives (except our client who was a genius) - Hey, whose side are you on anyhow? It's strange how pple just don't want to see it and they prefer to shoot the messenger. After all, if they see it, they have to do something about it and besides, most companies focus on the short term. And why not? Their bonus structure and pay outs aren't about long term health and viability of the business. When the CEO/CMO's tenure is 2 years and focused on short term shareholder value then the strategic non-thinking tends to be on that same 2 year horizon....

Re: Bits Of Destruction

leigh — Mon, 29 Dec 2008 05:31:12 -0000

Saw a great documentary on Hermes - the Saddle company that was going to be destroyed by the automobile - Did they hang on to the horse and buggy for dear life? Nope. Reinvented themselves into one of the most successful hand made leather bag companies. Reinvent or die. That should be most retailers (and auto companies) mottos.

Re: Bits Of Destruction

slowblogger — Mon, 29 Dec 2008 03:46:47 -0000

A truly insightful comment. Made me think about the offline in a new perspective. Thank you.

Re: Bits Of Destruction

slowblogger — Mon, 29 Dec 2008 03:31:27 -0000

Yes! Give freedom to entrepreneurs and we will make the world better!

Remove required capital (which is huge) to start a new bank. The worst regulation of all is "barrier entry regulation". Allow a guy with an idea and little money to start a new "different" bank. The government officials (at least in Korea) did not grant a license even if you do have the initial capital, saying they need to protect the financial stability. This is non-sense. Small banks won't create the dilemma of "too big to fail".

And, add "Art" to your list. I am working on it.

Re: Bits Of Destruction

fredwilson — Mon, 29 Dec 2008 02:28:11 -0000

Damn guys, this is great conversation. I am so proud to see this level of discourse on avc!

Re: Bits Of Destruction

Guest — Mon, 29 Dec 2008 00:32:23 -0000

geo geller:
As provocative your thoughts are, I have already read much of what you wrote in an article by Pulitzer Prize winner Chris Hedges:

http://www.truthdig.com/rep...

Friedman is a wanker. He was wrong on Iraq and his writing is mostly generic. Krugman is a much better seer, however, Hedges is the true visionary. Here's what he said in 2003 re: the War in Iraq.

“we are embarking on an occupation that, if history is any guide, will be as damaging to our souls as it will be to our prestige, power and security.”

When I read "The Idiots Who Rule America", my initial thought was: "this guy has gone off the reservation", but then I remembered that I would had probably thought so about his 2003 views, too. Now I see people communicating a similar vision on a weblog and am thinking, "damn, this is going to be a massive tectonic shift in the coming years!" And just to think of it, in 1991 when I moved to America I was buying the Fukuyama "end of history" meme and believing that the fall of communism was gonna be it for my lifetime in terms of "history"...

Re: Bits Of Destruction

terra210 — Sun, 28 Dec 2008 15:41:06 -0000

Here is a link to the intraday chart, as the content in the one above has changed:
http://martalyall.typepad.c...

Re: Bits Of Destruction

fredwilson — Sun, 28 Dec 2008 12:12:13 -0000

Great comment and I love the connection to anna karenina

Re: Bits Of Destruction

GlennKelman — Sun, 28 Dec 2008 11:38:29 -0000

Very gratifying Fred! Loved that post too!

Have you ever read Anna Karenina? I read it in high school just before email became popular, and was amazed at how many notes -- 5 - 10 per day! each delivered by a smirking servant! -- Anna fired off to Vronsky. And I thought to myself that the 19th century was filled with these literate, compulsively expressive freaks -- a way we'll never be.

Enter email. Enter twitter.

When I was tutoring high school kids many years later -- they could hardly write -- except on their MySpace page. The number of words the average person writes each day, often in semi-artistic and certainly emotional ways -- has probably increased by an order of magnitude in the past three years, and not just by the Russian aristocrats, but by their servants too! I never thought it could happen again.

Re: Bits Of Destruction

Carl Wimmer — Sun, 28 Dec 2008 10:35:11 -0000

Physician, heal thyself.

It is all well and good musing about the trouble other industries have but I just read that the VC industry has had a negative return to its investors over the last 7 years.

Why not muse about the broken VC business.

The trouble may not seem to surface because, by definition, you still have money and so ... the intellectual bankruptcy of the VC world may not reflect into a financial one for some time.

But the rot seems to be in the structure.

Good luck to you if you seek a solution and the "best of luck" to you, if you don't.

Re: Bits Of Destruction

fredwilson — Sun, 28 Dec 2008 10:10:07 -0000

Carl

I¹ve written on that topic a lot. I don¹t tag my posts well enough to
surface them in one easy search, but it¹s a topic that I¹ve probably written
as much about as anything.

The biggest problem with the VC business is that only about 20% of the firms
are really worth investing in. they are the ones that have the best
reputations, understand the technology and markets they invest in the best,
and thus generate the best returns. For them, nothing is really broken.

But if the other 80% went out of business, it would be terrible for
entrepreneurs. So it¹s not entirely clear what is the best outcome less
VCs or the current status quo

Re: Bits Of Destruction

davidjwbailey — Sun, 28 Dec 2008 09:42:17 -0000

12 years ago, I made myself very unpopular when working in a large accountancy firm by suggesting to a large client that the internet would turn the high street (US: main street) we know into grassy areas for recreation before my kids had kids of their own. This is only the beginning of the shift away from retail. The limitation on internet shopping now is more about how we use the screen to interact with inventory (it is still quicker to flick your eyes down a row of CD's in an HMV / Virgin than it is to browse through Amazon). There are also real sensory limits in terms of buying foods, drinks and 'luxury' goods without holding / smelling / rotating them in front of our own eyes. The internet will solve nearly all of those problems within a decade, and will take ever shorter times to roll out the technology. When that happens, more and more stores will close and / or become simply catalog space for their online back-end. My kids still have 10 years or so to go, and are looking forward to having picnics where retailers once stood. We don't need them, we never really did. When they go, the real consumer power unleashed by tools such as the Android G1 barcode reader will begin to drive value back to consumers and out of the hands of the distribution chain. Taking one simple example, computer games: There is no reasonable justification for retailers of stuff like computer games to take 53% margins on a 'zero risk' (sale or return basis) and for the distribution chain to take another 35% or so, leaving only about 7% for the developer who creates the IPR and makes the game fun to play. Roll on the internet shopping revolution. Roll on consumer power. Let's connect consumers to creators and really unleash the power! http://blog.david.bailey.net

Re: Bits Of Destruction

tywhite — Sun, 28 Dec 2008 04:35:04 -0000

Great post.
I yearn for a disrupted auto industry. Unfortunately they are so in bed with the lawmakers it is going to be difficult -- bailouts are less an issue than the protection dealers receive (as Dave noted above). The only way to break their system, in my mind, is to break the companies they do business with (specifically the big American manufacturers and their web of inefficiencies).
Not to rant, but America disgusts me sometimes -- we want the pill fixes, we look to solve the symptoms of problems instead of the causes. This is why I work in the internet industry -- the internet provides the opportunity to start anew, to completely disrupt the corrupt and inefficient establishment.
Unfortunately, the laws and structure essentially require us to wait for industries to hit rock bottom before we can rebuild them properly. I thought the auto industry might have hit bottom, but apparently not yet. Keep an eye on it, though, and let's hope more companies like Tesla are started and wait in the wings for their opportunities.

Re: Bits Of Destruction

fredwilson — Sun, 28 Dec 2008 03:05:06 -0000

I am headed there today with my son josh. Where would we find you?