Master of 500 Hats

Taking "Me, Inc." Public: Market Caps for Individuals

I occasionally dabble in speculative (some might even say imaginary) asset classes.  One that doesn't really exist yet is the market for securitizing individuals, or groups of individuals. 

While this market does conceptually exist in various forms -- credit cards & microfinance provide unsecured debt, the real estate market is sort of a proxy for individual incomes, and government bonds are perhaps the largest aggregation of groups of individuals within geographic boundaries -- as yet there isn't a market for taking individuals (or groups of individuals) public.

While there are a few notable folks like David Bowie, the Beatles, or Michael Jackson who have executed a form of intellectual property securitization, these are infrequent & unusual examples.

(UPDATE & CLARIFICATION: many folks in the comments are focusing on the literal interpretation of my headline, namely taking *one* individual public.  while i'm neither for or against that concept, what i'm really talking about here is more likely the creation of a derivative instrument that maps to the future income of an *aggregate group* of individuals. i severely doubt any one person is going to be enslaved as a result of an individual IPO, but regardless that's not really what i'm getting at... the calculation for an individual market cap below is merely an exercise by which to arrive at an estimated value for the asset class.)

If we were to create an asset class for "human capital" securities, how might we calculate it?  

Well, we would probably add up the total market cap of all "stocks" in this potential market... which would be the equivalent of the collective market cap of ~6 billion people. 

So what is the market cap for an individual?

Let's assume the following:

• in developed economies, average wage earner makes ~$25K/yr
• the average individual works for ~40 years during their lifetime
• they save an avg of ~10% of income per yr (probably optimistic)
• their savings earns ~6% and inflation is ~2% (net int. rate = 4%)

Ok, so now the average wage earner in a developed economy might earn a cool million in revenue during their lifetime ($25,000/yr * 40 yrs = $1,000,000).  If they saved 10% of their income, they'd be able to put away $100K, which if invested appropriately might be worth ~$250K by the beginning of their retirement.  finally, let's assume that a present value (PV) calculation for that $250K using a discount rate of 4% results in a value of $50K at the beginning of the wage earner's working career. 

If this is a reasonable way to calculate it (not sure if i've made any obvious errors here; please comment if so and i'll revise), then the market cap for an individual might be around $50,000.  if you wanted to be generous, it might even be north of $100K.  if you're pessimistic on the savings rate, then it could be as low as $10-25K (or even zero i guess?).

anyway, i think i'm close enough to go on record in saying the Atomic Unit of Happiness = The Value of an Average Human Life = $50,000 (roughly).

if this is correct, then the overall market value of the asset class representing Individual Income Futures is $50,000 * 6 Billion people = $300T (T=Trillion)

now here is where it gets interesting...if we assume that at least a 1/3 of the world isn't earnng $25K per year, but perhaps only around $5K per year, and another 1/3 might only be making $500/yr or less (the Bottom of the Pyramid, or BOP), then what we're really saying is that the overall asset class is currently only worth around $100T, and is undervalued by about $200T due to the current state of healthcare, education, housing, and overall economic opportunities for 4 billion of the world's 6 billion people. 

imagine then if you could invest in the undervalued portion of the asset class, and then enable access to healthcare, education, and housing for those $4B people.  you'd have one of the best and largest investment opportunities ever.

Fifty thousand here, two hundred trillion there... pretty soon you're talking real money.

hope to see some of you folks at Social Capital Markets 2009 :)

(included below is my previous presentation on Securitizing Happiness):

Securitizing Happiness: Solving the World's Problems by Making Trillion-Dollar Markets for Individuals, Small Business, & Natural Resources

View more documents from Dave McClure.

Securitizing Happiness: Hacking Human Suffering thru Financial Engineering (TEDxShanghai, June 2009)

Below are slides from my talk on "Securitizing Happiness" at TEDxShanghai later today.  This presentation is a slight update to the original talk i gave back in March 2008 at the O'Reilly Collective Intelligence FOO Camp, held at Google HQ in Mountain View:

Securitizing Happiness: Solving the World's Problems by Making Trillion-Dollar Markets for Individuals, Small Business, & Natural Resources

View more OpenOffice presentations from Dave McClure.

Note: many of these concepts are still fairly raw, and since i'm not really a financial engineering expert they could certainly use further refinement... so your feedback and comments are appreciated.  That said, i'm optimistic the basic ideas here are viable, worthwhile and can have substantial economic impact on society in the future.

The Secret History of Silicon Valley: Thu 11/20 Brown Bag Lunch @ Computer History Museum (Mt View)

Steve Blank is a pretty sharp guy, and one of the best folks in the valley on technology marketing.  He teaches at both Stanford and Haas/Berkeley, and besides being an academic he's been involved in several startups and actually knows his shit.  His book "The Four Steps to the Epiphany" and his presentation on "Customer Development Methodology" are must reads for tech entrepreneurs.

Next Thursday, November 20th, Steve will be giving a lunchtime talk at the Computer History Museum in Mountain View on the Secret History of Silicon Valley.  You can check out a previous video of his talk below:

Here's his Customer Development Methodology preso on SlideShare:

Customer Development Methodology

View SlideShare presentation or Upload your own. (tags: customer development product development)

Startonomics SF 2008: Yeah, We Rocked Your Face.

Summary of Startonomics SF 2008:

We Came, We Measured, We Conquered. 

  [mike drop to tha floor...]

all presentations & videos available via SlideShare and UStream, also on the Startonomics Blog.  additional coverage on CNet / Webware and Mashable, and other smart blogs. presos below via new SlideShare presentation pack widget:

| Get your Presentation Pack

look for us to hit the LA area sometime in January; other locations in 2009.  to hear about future Startonomics events, follow the Startonomics twitter acct @ STNX. much props to our speakers, sponsors, & supporters... and especially to Debbie Landa & the team at Dealmaker Media for kicking so much hiney.

Tim O'Reilly: "Web Meets World" (Web 2.0 Expo, NY08)

nice to see Tim up on SlideShare :)  more presentations from Web 2.0 Expo NY

Tim O'Reilly, Web 2.0 Expo NY 2008

View SlideShare presentation or Upload your own. (tags: sheep web2expo)

"Stop Throwing Sheep & Do Something WORTHY!" - Tim O'Reilly, 09/18/08

Andrew Chen: Solves Unified Field Theorem for Bkfst, Whips Out "6 Steps to Startup Analytics" B4 Lunch.

Sometimes i like to brag i skipped 2 grades, never graduated from high school, and started college at Johns Hopkins when i was 16.  Then of course i meet folks like Andrew Chen who graduated when he was only 14 (think he started at 12), has helped create a very successful startup, was an entrepreneur-in-residence at MDV, and i realize... um, i ain't all that.

As further evidence of me playing Salieri to Andrew's Mozart (sans poisoning, tho i do lay claim to Patron Saint of Silicon Valley Mediocrity), i am compelled to point out Andrew's latest masterpiece "The First 6 Steps to Homegrowing Basic Startup Analytics". 

While i weakly hope my Startup Metrics for Pirates lays down some basic fundamentals, i do not even begin to delude myself my simple melody can approach Andrew's 16-part symphonic grandeur, with both strategy & tactics laid out in brilliant & comprehensive detail.

Andrew: You Da Man.

(btw, did i mention i recruited Andrew to speak at STARTonomics in San Francisco on October 2nd?  if you can't beat 'em... get 'em to join up :)

TonchiDot Sekai Camera (aka World Camera): "Look Up, Not Down! We Have Patent! Imagine... Join Us!"

TonchiDot Sekai Camera was without a doubt the most amazing & hysterical presentation at TechCrunch50 this year... never seen anything like that demo, or the Q&A that came after. 

The entire room was spellbound, then laughing uncontrollably at the Q&A responses ("Look Up, Not Down!  We Have Patent!  Imagine!  Join Us!").  Almost never see Jason Calacanis & Michael Arrington speechless, but it happened.  Several audience members gave the presenters a standing O.

Geek Woodstock @ Foo Camp 2008 + Startup Metrics @ OATV Startup Camp

This past weekend i had the pleasure & privilege of attending O'Reilly Foo Camp (2008), and as usual it was mind-blowing.  I'm always amazed at the incredible people you meet at Foo, the wide range of topics discussed, and the general air of insatiable curiosity and intellectual generosity.  The event is by invitation only, and ~250 people usually show up.  While it's unfortunate not everyone who wants to attend gets invited, at the same time the caliber of people you meet is quite impressive (due to my work on O'Reilly conferences over the years i made the cut, but i'm not sure i really measure up on merit... better keep coming up with events / ideas Tim thinks are interesting ;)

photo by Scott Beale, Laughing Squid

In addition to Foo, this year O'Reilly Alpha Tech Ventures also hosted a Startup Camp one day before Foo Camp for a few of their portfolio companies & some up & coming entrepreneurs.  I was asked by Mark & Bryce to join them and give a talk on Startup Metrics for Pirates, which i recently updated below:

| View | Upload your own

So on Thursday afternoon (after dropping by YouTube Developer day in San Bruno) i picked up Andrew Chen in San Francisco, and we got to chat for a few hours on the drive up to Sebastopol.  The conversation with Andrew was a little mini-Foo all by itself, and we talked about all sorts of stuff including social networks, online gaming, advertising & revenue models, the state of venture capital & angel investing, etc. 

On Thursday night we joined the rest of the OATV Startup Camp geeks at Stella's for a wonderful dinner, and continue the startup conversations throughout the evening and into the next morning back at O'Reilly.  There were several great talks on startups by Tim O'Reilly, Mike Arrington, Mark Fletcher, Marc Hedlund, Ev Williams, Howard Morgan, Esther Dyson, and others.

Foo Camp started late Friday afternoon just as Startup Camp wrapped up, and went thru late Friday night, all day Saturday, and finished up Sunday around noon. A few of the Foo sessions i particularly enjoyed were:

• Economics isn't Physics (Bill Janeway)
• The Big Search Debate (Tim O'Reilly, Mike Arrington, Danny Sullivan)
• Neural Hacks (Ramez Naam) *note: this session topic has become a TechCrunch post on Provigil / Modafinil

There were many other great meetings / hallway discussions, as well as many games of Werewolf, and i also ran another session of Half-Baked Dot Com (winner: MilkMoms Dot Com, an on-demand breast milkdelivery service... don't ask me, ask Thor Muller ). 

All in all, a great weekend... thanks Tim!

Web 2.0 Expo SF: Series of Tubes + Startup Metrics 101

Starting tomorrow, i'm helping organize the biggest geekapalooza north of SXSW: Web 2.0 Expo runs all week in San Francisco. 

along with Brady Forrest & Jen Pahlka, i'm co-chairing the largest gathering of nerds in the free world (disneyland for nerds, some might even say :)

For the past six months, we've been working hard to put together over 100+ sessions and 200+ speakers on topics such as:

• Strategy & Business Models
• Marketing & Community
• Design & User Experience
• Web 2.0 Fundamentals
• Web 2.0 Development
• The Mobile Web
• Web Operations
• Social Networks & Platforms

If you're in town this week, i hope you'll stop by & check it out.

I'll also be giving a Startup Metrics 101 workshop tomorrow with Hiten Shah & Vanessa Fox.  If you're trying to figure out what your startup should be focused on & how to measure it, drop by and find out.  At the end of the workshop we'll do a few Extreme Startup Makeovers for any brave souls willing to subject their websites to public review & commentary (promise we'll play nice ;)

So hurry up & get those tubes humming!

Google sez: I'm STILL the JUGGERNAUT, BITCH! (courtesy of web analytics + Google Website Optimizer)

I've written before that while most people realize how dominant Google is in search, they don't realize how dominant Google is in web analytics. and imho, even fewer people understand why Google is placing such a huge bet on analytics (& checkout, & a/b testing), which i believe is required in order for them to pave the way for future growth in CPA-based advertising. 

yep, they're still The Juggernaut, bee-atch!

side note: many folks may be aware that one of the more notable transitions that occurred during the end of the last dot com bubble / recession of 2000-2004 was the dropoff in CPM-based advertising (Yahoo & AOL) and the simultaneous birth / growth of CPC-based advertising (Google & Overture->Yahoo).  this isn't really that surprising, since during tough times there will always be a flight to quality / lower risk, and qualified clicks (CPC) are certainly lower-risk / higher-quality than impressions (CPM).

looking forward, while i don't quite agree with folks who think another internet recession is looming, i would observe that any such pullback will likely create a new & further flight to quality, which i believe could spur further growth in CPA-based advertising (which typically results in a specific conversion and/or transaction).  in other words, CPC (clicks) is better than CPM (impressions), and CPA (actions or transactions) is better than CPC. 

with impression-based advertising, i hope some % of users who see an ad click on it, go to a website, and convert to an action or sale.  with click-based advertising, i know how many people click thru to the site, but i still don't know how many convert to an action or sale.  but with CPA, i only pay for the specific conversions, actions, or transactions that actually happen.  wotta deal!

This inexorable, incremental advertising [r]evolution is illustrated below:

now if you believe this analysis, you might suggest companies that control point of sale / transaction & conversion data are well-positioned to take advantage of this potential next wave of advertising... and you would be half-right, in that companies like eBay & Amazon (& actually also Yahoo Stores, Craigslist, & several other e-commerce sites) know exactly when sales occur, and could possibly setup a way to allocate & charge for advertising based on the potential for leads that actually convert.

however, most e-commerce companies aren't adept at offering "turn-on-the-faucet" advertising solutions that drive more users to their listings or eBay storefronts at the drop of the hat.  furthermore, i don't think they're well-prepared to gather data via web analytics to see which merchants they should be sending the best traffic to (just give me the GOOD leads, murray!).  this is kind of curious, since theoretically they have all the data they need to make it happen.  but so far, Google has been eating their lunch WITHOUT having hardly any point-of-sale transaction data (albeit with the modest success of Google Checkout they now have a little, and with Google Analytics they are gathering quite a bit).

still, all of this conjecture is moot without a strong ability to understand user behavior on websites prior to actions or transactions occurring.  and to date, Google Analytics -- like most analytics tools -- has not been very decision-oriented.  that is, the output of most web analytics tools do not drive towards making a decision... they simply sit there & look pretty.  great if you're sending a report to your boss, but kinda crappy if you're trying to figure out what features & marketing actually drive better performance.

Google Website Optimizer (multivariate testing / landing page optimization) is an absolutely critical piece of the web analytics / CPA puzzle that *does* provide exactly that type of feedback.  it allows you to conduct a series of experiments that combine various copy & graphics, and select the combination(s) that work best. 

as of yesterday, it's now available to anyone, on any website, free of charge.

wake up folks: time to smell the coffee.

and start COOKING... with GAS.