I spoke with a businessman the other day who used to run a plant that manufactured socks. Whenever a problem came up where they weren’t meeting quota or they were wasting resources he would call in the supervisors and drill them only to come up with empty responses. He told me that he finally learned to go talk to the people on the production line. They saw where machinery was hurting rather than helping and where the people loading fabric were losing time. Just like anytime you are selling a product and you go to where the target market is, when you have a problem you need to go to where the people who have the most comprehensive assessment of the situation are.  You will never get a complete understanding from the person who sits behind the desk all day.

To truly understand the problems that companies are facing (and how you can fix them), get face-to-face with the people on the front lines. That might just be sitting down for coffee with someone who does the “dirty work” at a company, having lunch with someone’s secretary to understand the struggles their boss faces, or just listening to your neighbors who work in the blue collar areas of a company rather than in management positions. Never underestimate what people know and how their insights can benefit you. Who knows, their insights could be the spark for your next million dollar idea!

At this point, our daily routine was to arrive at work by 10 AM, at which time we all watched The Price Is Right and talked about where we would eat lunch that day. From 11 to 11:30 some work would usually happen, but around 11:30, we would get hungry and need to eat. Soon, someone would suggest El Azteca on Ponce, the one that killed someone with food poisoning  right around this time. Almost every day, we would find ourselves eating Mexican food. We would get home by one and swear that we were never eating at El Azteca again. On this fortuitous day, Caroline was left alone to answer the telephone. As luck would have it, this was the time that our credit card processing company called to ask some questions.

This business consisted of marketing and enrolling summer campers for nine months of the year and providing summer camps for kids for three months of the year. When a parent enrolled, we immediately charged their credit card for the full amount, which could be as much as seven or $8000. When parents enrolled their children the old-fashioned way with a form, they would include a $100 deposit and we would have to build them later. However, the credit card gave us the advantage of being able to hit them for the full amount immediately, and they never complained because they could pay it off however they chose to. The great part was that we collected interest on five or $6 million for as much as nine months.

I’ll never know what Caroline actually said to the credit card processor but when I got home from El Azteca, she suggested that I return the call. When I did, they inform me that Caroline had explained our policy to them, but that she had added she was not sure if this is the way it was working. They asked point blank if it was and I of course had no choice but to tell the truth. From then on they allowed us only to charge $100 per week deposit in advance and then to collect the final payment 1 June. That year our profit margin would have been almost equal to the amount we made from credit card interest, so I immediately recognized that my take-home pay was now seriously in jeopardy. I snapped and yelled at Caroline, “You cost me my salary, you are taking the food out of my babies’ mouth.” She burst into tears, ran out of the office, disappeared, and never came to collect her final check.

I don’t know if I’m right, but to this day, I believe that had I been on the phone from the beginning that I would have been able to the deflect the conversation, to figure out what was coming, and then have been able to position it better. I may be wrong, but I think the fact that I did not answer the phone cost me $300,000. The most important thing is that Caroline should not have been on the telephone answering questions with Visa in the first place. She should have been directing that call to the person who knew how to handle it. The fault was mine sense I had not told her to NOT be helpful on the telephone, and to only answer the questions to which she was party, which was basically nothing.

Leading me to another Caroline clause: instruct your employees to only answer questions that they are personally responsible and liable for. If they are not in charge of that part of the project, pass the telephone to the person that is or take a message.

Caroline, if you are reading this I would like to apologize for yelling at you. But your check was long-lost, sorry.

I told my wife that I wanted to write a blog on Ashley Madison and she got all upset. She wanted to know if I already had an account (I don’t), if I plan on getting one (I don’t), and if I had ever been on the website (I haven’t). She made me promise that I would not use my “research” as a justification to check the site out. But, for everyone else, you should probably do some “research” on the site yourself.

Ashley Madison was created by Canadian Noel Biderman in 2002. “Monogamy, in my opinion, is a failed experiment,” he says. Biderman was a sports agent and spent most of his time dealing with his clients wives and mistresses. When he discovered that 30% of on line daters are only pretending to be single, he saw a business opportunity. Biderman thought cheaters should have a website all their own. Interestingly, as he developed the first website, it was nearly impossible to get true focus group feedback on why people would commit adultery. Eventually he abandoned the research and went with his gut. Today, the company has expanded into several other niche dating markets and generates about $20 million in profit on $60 million in sales. He recently bought hotornot.com (I am not)  for $22 million and launched cougarlife.com.

Let me tell you a little bit more about Biderman, or as Paul Harvey would have said, “The rest of the story.” Biderman is happily married and has two young children. Amanda, his wife, said “The business itself doesn’t match who he is as a person – it’s not our lifestyle, our value system or any of that. I’d love it if he were working on a cure for cancer. But it’s a business and that’s how we look at it.” On the day of the interview, Biderman planned to sneak out of work and to go to his son’s birthday party at school with a cake. I agree with Amanda. I wish I was working on a cure for cancer, but unfortunately that is not my skill set. I do not approve of adultery, of course, but I defend Biderman’s right to get rich running this very legal company. He sought a business opportunity and went after it, even though he himself would not be a customer of the service. I do not think that he has a passion for infidelity. He is simply getting rich in a way that makes many people think less of him. He has had great trouble attracting investors and says that most of his owners, a handful of rich investors and hedge funds, don’t want to be associated with him due to fear it may hurt their reputations. But they cash their checks every quarter I am sure! Passion is not part of his entrepreneurial equation.

I think entrepreneurship is about solving problems. One such problem is that I do not own a Porsche! Each of you can decide if you would run a business like Ashley Madison or not and just how far you are willing to go to make your millions. One word of warning: Ashley Madison’s busiest day of the year is the day after Valentine’s.

• the biggest problem is that successful Indian entrepreneur does not reinvest in India,
• the US system is 10 times older, only 4-5 years old in India,
• US education system promotes entrepreneurship better, especially in research, innovation,
• there is a innovation bottleneck in India,
• best time ever to raise money is now and its easier than ever before
• In the last 24 months, many Indians are starting to come home to invest in India and the slow US economy is  drives money back to India,
• VCs looking for non-tech entrepreneurship, it  was financial services 10 years ago,
• tech entrepreneurship is not the only way and tech startups have fewer exits, so plan for exit from beginning!
• there are significant regulatory issues here and government is not helping enough, the incubators are not good, there are tax issues here  (investments not tax free is in UK),
• it takes 45 days to set up a company in India, versus 2 days in China,
• there are 10,000 people worth $100m, mostly in real estate, but its not doing as well now, so people moving into other areas,
• bottlenecks to innovation include needing different enablers at different points such as accelerators and incubators, 50-100 incubators are needed still,
• Indians need inspiration by a “go to moon” type national project,
• Tata mentioned several times as not doing enough,
• back people not ideas,
• most business plans have an extremely poor idea of competition,
• and most have not actually gotten real customer feedback,
• entrepreneurs must create the value differentiation, as most are very poorly articulated,
• India biggest challenge is distribution and biggest potential,
• most important question is how will you get the first 100 customers?  and how will you keep them loyal?
• looking for billion dollar ideas, not million dollar ideas,

  And my favorite, and I have never heard this anywhere else, so I am not sure it is true, but I hope it is…

• over the life of the whole VC industry (50 years), all VCs are a net loss!!

And i wanted to congratulate Ayush Agrawal, my friend at IIT.  He was selected a co-chair for the eSummit next year, a huge honor!!  See a horrible pic of the ’12 team below.  This picture proves your iPhone camera is not worth using…..

The awards always make me think of my cousin-once-removed Caroline. For those of you who do not understand how the whole cousin system works let me interject for a second: the children of your first cousins are first cousins-once-removed, and  your children and your first cousin’s children are second cousins. So, Caroline is my cousin Joyce’s daughter. When she was applying for college, she applied for many scholarships, grants and awards. She even nominated herself for certain scholarships that required nominees. Her brother Daniel teased her and said that he thought it was unfair that she was nominating herself. Her response, “Well, someone has to win, it might as well be me.” Of course she was right and won many of the scholarships that she applied for, and just recently graduated after a highly successful college career.

Back over a decade ago, the business I was running, American Computer Experience, was in a growth mode and we decided to go and raise venture capital. This company had always relied on public relations marketing, and had been very successful with it. We learned that by packaging a theme for the media, we could place many articles in newspapers around the country that helped promote our brand. For example, one year we would talk about how our program was a huge benefit for young girls, and we would distribute bios and pictures of all of the girls that had attended our programs. The next year we would choose a different theme, something like disadvantaged kids or minority kids. But as the company grew, the public relations needed to reinforce the idea that the company was a good investment, and therefore the PR effort was changed to promote the founders, Doug and me. We hired a PR firm that literally asked me which awards I wanted to win and told me the cost to win certain awards. I selected the awards I thought would look cool, and wrote a check.

There is that old expression that the only way to get business is to ask for it. I 100% agree, and would like to point out that the only way to win an award is to get nominated for it. If you don’t have a Vice President of Communications to nominate you, realize it’s quite okay to nominate yourself for most awards. I’ve done it, and won some of them. First cousin-once-removed Caroline was right, “Someone has to win, it might as well be me.”

Gets those applications ready!

Enough has been said about Part 1, yes its was so exciting that it got made, so disappointing that it was not better.  I guess my imagination is better than a $10 million budget would allow.

The first half of the trailer for Part 2 looks more like a Fox News commercial.  There is no new footage, as they have yet to film anything new, but they couldn’t even find any old Part 1 stuff laying around the editing room floor apparently. The second half is mostly a Rand interview from 1959.  For those that really want to push her legacy, you should get all the videos of her, and burn them!  She is cold and heartless on video and makes a very poor spokesperson for anything, much less her already harsh message.  See the trailer here.

Part 2 will begin filming in April with a release date in October, just before the election. Should make for some very interesting comparisons.  Part 2 should include the famous Money speech by Francisco.  To refresh…

“So you think that money is the root of all evil?” said Francisco d’Aconia. “Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?”  Can’t wait to see this part!

One guy, Bob, approached me about help with a medical product he had invented.  He called or emailed every week for months, and I always talked to him and emailed back.  His product is pretty technical and few would see its potential.  After a couple months, I found a great potential investor for him and arranged a meeting.  During the meeting, it was clear that the investor understood the product and market place much better than Bob.  And, the investor offered some incredible advice about how to improve the product so that the whole market would embrace it.  He expressed interest in seeing more.

Two months later I emailed Bob out of curiosity, to see what was up.  I had not heard from him since the meeting, nothing, not a thank you email, nothing.  Bob responded excitedly that he was about ready to present again.  Again?  What about a note to the investor telling him thanks and the status?  And a note to me to keep me from looking stupid?  Nothing.  And how he is excited to present again?  No way. I may love the idea but I would never help this guy again!  He was just rude.  Not by action, but by lack of common graces.   Someone arranges a meeting for you, you write a thank you note.

And a word on thank you notes.  One line of an email, especially if the email includes other stuff, does not suffice.  Old fashioned hand written notes still work best.

Another entrepreneur was a guy that I had helped a lot, had sent tons of business his way.  He used to work at a Fortune 50 company, and I need an intro there.  I asked him, explained what I needed, and he said no, politely, but no.  The reason was he might someday want to do business there himself and did not want to use up his favors there.  I was asking for an introduction, not a big deal.  He was not doing business there now at all, and his business is not related to theirs.  But he said no.  And I bet 50% of his current portfolio somehow was introduced by me.  Wow.

And finally, Samuel.  He is running a business I suggested to him.  The other day I asked for 10 minutes to fix a hard drive that I busted.   He said he could do it the next week, he was busy.  A big reason he is busy?  I got him set up.  Now, he is too busy to set aside 10 for me.  Wow.

Am I crazy?

Apparently though, the rule holds true for Facebook users too.   This 20% make the whole thing seem cool, hip, new, relevant, and trendy.  The fear is that they stop using the site and then it dies.   I bet the migration of less than 20% started the death of MySpace.  Think about it, if the one or two thought leaders that you follow leave, you are going too.

There are lots of us too that think of these heavy Facebooks users in a special way.  We call them dorks, losers, fools, and narcissists!  This 80/20 rule works here too.  Us normal Facebook-account-having-but-haven’t-checked-it-this-week people, us 80%, look at the other 20% and shake our heads.  Get a life!  Studies prove me right.

There are only two ways for Facebook to grow, by attracting more users (they are basically saturated already) or by producing more revenue from each of those users.  How to do that?  No one mentions who is clicking on the ads that support Facebook.  Are the magic 20% of content generators clicking on 80% of the ads too?  I doubt it.  See if this scenario makes sense.  I am bored with Facebook, I don’t really know who to check next, this seems a little silly, OH, but that ad is mildly interesting.  Ok, I will click it because it might be better than Facebook itself!   However, watch a 20% user, and they are always too busy doing Facebooky stuff to click ads.  I think the ad clickers and the ones bored with it in the first place.  Me.

So, the “non-users” are the ones clicking, which makes the ads valuable in the first place.  I could take your whole ad platform and live without it, happily.  Don’t buy this stock.  Granted it will soar in early trading, but the stock is not worth more than Coca-Cola and Disney combined.  At the opening price, the stock will be trading at 27 times sales and 100 times trailing earnings.  NO WAY!!!

But, you people that are excited about buying shares soon, a word of caution!!!  Do not buy!!!  This stock is fully priced as is.  It has been traded on SecondMarket and SharesPost for years.  What this means is that the market price has already been set, and is widely known.   It will be around $29.75 per share.  So, that is the value of the company, not a cent more.  If you pay above $30 a share you are betting that the stock will grow faster in the future than it has in the past.  Is that possible or likely?  Not in a billion years!

Facebook has grown to some 875 million users.  Can it get another 875 million?  Or another 100 million?  Are there really people sitting on the sidelines waiting to join Facebook?  Enough to continue their past growth rates?  NO.  So, membership growth has and will continue to slow dramatically.  The question then is can they better monetize Facebook and make more money from it?  Can they sell more ads?  Sure they can, but those sales are already priced into the price too!

Usually with an IPO, founders leave lots of money on the table.  The founders sell in the morning at say $20 a share, and it jumps to $100 by nightfall.  The founders left $80 per share on the table.  Mark was smart enough to delay and delay the IPO, so that the IPO price now reflects true value.  The price may soar but its fools buying a already fully-priced stock.  Within a year, the price will be below its IPO price, I predict.

The most controversial topic I raised was my belief that passion is not part of entrepreneurship.  For those of you new to this idea, I do not believe you need to be passionate about a product to sell it.  I have sold things I am passionate about, and things I could care less about.  The process is the same, and at the end of the day, i go home to the things I am passionate about, my wife Megan and my 3 kids.  I am passionate about life, family and fun.  I am passionate about the freedom that comes from the entrepreneurial lifestyle.  I am passionate about my new friends in Mumbai.  I am not passionate about a thing, stuff, junk.  Please, let me not be passionate about a product or a service, let me be passionate about helping more IIT students find a way to help India grow.

The excitement was overwhelming.  The desire for knowledge incredible.  I heard some great ideas.  If you emailed me and haven’t heard back, try again, I am still working through the questions.

Best to you all.  Ayush and Sagar, you rock.

Read press coverage of the event here in The Hindu and in the Business Standard.