Christian Renaud's Blog

Why Video Games make me a better CEO

You may ask yourself, what does a CEO do after a hard day's work?

I wash the dinner dishes.

Luckily, I bought my wife a Chumby a few years ago as a present, which she then thankfully put it in front of the kitchen sink, so I have food for thought while I wash the food off of the dinner plates.

Much to my surprise, this CNET news article from Iowa State pops up, on the aforementioned Chumby, that claims a positive correlation between video game addiction and attention deficit disorder.  I nearly dropped the dinner plate.

OK, enough.  There are gamers and non-gamers.  There are people who were built for speed of thought and reflex, and those that were not.  It's not an affliction, it's the next level of evolution.  It's the higher clock-rate on your CPU.

I am the CEO of a successful security software company.  An average day to me looks like a nightmare to anyone else.  Yesterday for lunch I picked out office furniture for our new headquarters while eating sushi with my CFO and VC, while on the phone with a Norwegian friend who I was advising about Chinese negotiating tactics. I THRIVE on this level of parallel processing.

What some people call ADD I call deliberate training.  Every video game I have played since my parents bought Pong for our television, to Atari, to Wizardry and Ultima on my Apple IIe, to my Macintoshes and Windows PCs, to my countless consoles........they all taught me valuable skills that I apply every day to create shareholder value for my investors and sustain my employees.

ADD?  Yes, Little Big Planet (puzzle & reflex game) moves very quickly on my PS3, as does Rainbow Six Vegas 2 (collaborative team-driven first person shooter).  Guess what.... as a CEO you are constantly, continually, and by design, context switching.  I do this all day long.  You have to be able to move from option valuation equations to VLAN design to hiring decisions to fundraising strategies within a five minute period or else the business stops. Video games have taught me all of these skills and more, and I apply those lessons every day, and much more often that the quadratic equations I learned as an undergraduate.

Pong.  Console. Gradeschool years. Taught me excellence and speed through repetition.  If you don't think that these mind numbing games like Pong and Tetris are useful, try constructing waterfall charts for shareholders or doing pivoted capitalization tables.  Excel is much more mind-numbing than Pac Man or Pong could ever aspire to be.

Lemonade Stand or Taipan.  Apple II.  8th Grade.  Taught me supply and demand, and that demand is variable based on price of sale and episodic fluctuations in consumer spending.  HEY SONY, GUESS WHAT? THAT $299 PS3 PRICE CUT PUT YOU AT THE TOP OF THE CHARTS FOR CONSOLE SALES IN SEPTEMBER, GO FIGURE!

Wizardry and Ultima, Apple II. You will try and fail a million times before you succeed.  It's like picking a lock. And you will start with nothing and build up based on merit alone.  Steven Johnson predicted in his book Everything Bad is Good For You that games were increasing in complexity and that this complexity would make us smarter, and Edward Castronova laid out a very rational thesis in his book Exodus to the Virtual World how a generation (like mine) that was raised on video games that started you with $0 would result in a meritocratic value system (and polis, which we are beginning to see the signs of in voting preferences).

Civilization, SimCity, etc.  Macintosh.  Strategy.  Tactics.  That Sun Tzu was completely on the money when he said "Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat". You need a balance of both to win the race.

Grand Theft Auto 3 and it's sequels.  PS2 and PS3. That life goes fast then slow then fast then faster then slow then slow.  Patience.  Persistence.  And life isn't even remotely fair. Sometimes you are the car, and sometimes you are the flattened pedestrian.

I play games.  I love to play strategy games, shooter games, puzzle games on consoles, casual games in browsers.  The fact that the marketeers in the gaming industry are constantly trying to micro-segment the gaming market and, to paraphrase Al Ries and Jack Trout "Create a market to be first in" is worth diddly to me. I thrive on games that challenge my mental capacity, like I thrive on doing battle in business for the same reason.

So video game addiction has a positive correlation with ADD?  Sounds like a new educational curriculum to me!  You want people who can adapt, evolve, solve puzzles, move and think faster than other people, synthesize strategy and tactics, be persistent and not whine about an unfair advantage a competitor has but instead be actualized that they are out-executing you in the meritocratic business battlefield. You get up, learn where you just failed, dust yourself off, and get back in the game that much smarter.

Video Games have made me to be what I am today, and I thank them wholeheartedly for making me into a fast-moving, context-switching, shareholder-value-creating machine.

Emerging Technology- Slide Presentation

Belatedly, but as promised, here is the SlideShare link to the Emerging Technology: 2020 presentation I delivered at the Emerging Technology Conference at ISU, as well as the Federal Consortium of Virtual Worlds conference at NDU.  I will provide an annotated one in the near future as well.

Emerging Technology 2020

View more presentations from xianrenaud.

Palisade Systems

As many of you have noticed on my LinkedIn profile, I recently joined Palisade Systems as their CEO and President.  I thought I would provide a little background and context of the recent move for those that are interested.

In 2003, I was working at Cisco on a project that eventually became DKIM and the subsequent IronPort acquisition, and was socializing the idea of an anti-spam firewall network device with some key customers.  One customer in particular was very receptive to the idea, and added the additional feedback that some function to prevent data-loss in his organization (in the form of sensitive or financial data leaving the network) would be of great value.

 

We pondered this for a while, and eventually created two projects to determine our strategy for Data Loss Prevention (also known as Data Leak Prevention).  During this process, I happened to bump into Palisade at a local venture conference.  Palisade was founded 12 years ago as a web filtering company, as well as providing other network security functions.  We spoke, and I mentioned the burgeoning regulatory drivers surrounding DLP and the demand imminent for this type of solution.  They already had a number of the key software components necessary to move into this adjacent market, which they did over the next 12-18 months.

I have kept in touch with Palisade over the years, tracking their progress.  After leaving Cisco, I advised them part-time on their strategy and roadmap.  Recently, the opportunity arose to become their President and CEO, which I have since accepted.

DLP is an emerging technology, and even more so in the Small and Medium business markets that Palisade serves.  I am an emerging technologist at heart, having been on the bleeding edge of tech since I began my professional career.  This makes sense.

For those that track my other emerging technology activities, such as dynamic workspaces and virtual worlds, these are still on my radar, however will be de-emphasized as I help the excellent Palisade team take their technology to the next level.  We'll be continuing to add to the Technology Intelligence Group blog and ongoing research, but will be dialing-down any new research areas while I concentrate on this.  Bob, my indefatigable business partner on TIG, is hard at work on his next venture around revolutionizing and disrupting the event ticketing market.

Palisade will be starting their own blog soon, so I don't anticipate much DLP chatter on this, my personal blog.  When it starts, I'll be sure to post a link. In the meanwhile, we've been busy working with press and analysts to raise awareness of the company and their technology, which can be viewed here, here, and here (under my prior, part-time, advisory title).

Thanks to all of you who have already extended their congratulations on the new venture.

Good Karma or Bad Karma?

My current 'object of desire' is the absolutely gorgeous Fisker Karma.  Built by Fisker Coachbuild, and powered by a powerplant from Quantum Technologies, the Karma is an eco-geek's dream machine.  It is a plug-in-hybrid, which operates exclusively off of it's batteries, with a gasoline engine to power the electric plant in the event that the driven range exceeds 50 miles between charges.  If your commute is less than 25 miles in each direction, the gasoline engine never kicks on, and you end up with an effective 100MPG.  When you have returned home (or if you have an AC outlet at work), you plug it in and charge the batteries and you are ready to roll after work or the next morning.

The clever folks at Fisker Auto also have the option of a solar array on the roof of the car to keep the cabin (and batteries) cool during idle periods, thereby boosting the batteries' efficiency.  Rumor has it that there is also a garage-roof-solar-panel option with the car as well, to allow it to charge using solar while parked.  Of course, if you drive home from work in the evening, that doesnt give you much time to harness the sun to charge the battery unless you have some sort of fuel-cell that stored it up all day.

In my case, with two young children, it is the perfect pairing of exotic sportscar (it goes 0-60MPH in 5.8 seconds) and family sedan.  Granted, the estimated retail price is somewhere north of $80,000, so it is unlikely that my smarter-and-better-half will green-light the pre-order in these harsh macro-economic times.

Never one to be deterred, I set about trying to justify the value to myself (in preparation for the harder sell to my wife), and was surprised to discover some nasty facts about electric power in the United States that caused me to think twice about a plug-in hybrid. 

I'm going to lay out some data that I uncovered, and hope that some astute readers can point out the holes in my concerns, or new data, so I can justify this after-all:

The upside of the lack of privacy

There are good things and bad things when discussing the trade-off between privacy and transparency.  Back in the days when I frequented many a Santa Fe Institute lecture, there was lengthy discourse about The Beer Game, which simulates a distribution system for beer sellers with knobs to allow for certain levels of transparency from retail to distribution to wholesale.  The point of the exercise is to determine 'How much transparency is too little, and how much is too much'.    If you don't expose your retail demand in a timely fashion, you end up having no inventory.  If you expose too much, you end up 'flapping' your distribution chain with wild inventory swings.

I think back on this exercise frequently when it comes to the Internet+Social Media, and the blood/brain barrier of privacy and transparency.  Should I share my trip details, or keep them private?  What efficiencies (e.g. catching dinner with friends also in town) do I miss by omitting my travel plans from my blog, etc.. 

In this day, it's difficult to ascertain the level of data being collected about you, especially when I methodically opt-out of every data-gathering clause I find, deliberately out of my frothing libertarian paranoia. 

You can imagine my surprise when I just received an automated telephone call from CostCo, a big-box retailer in the United States, alerting me that the Clif bars that I purchased 'between June and December'  were possibly a infection vector in the recent Salmonella Typhimurium Outbreak.  They were able to determine this based on the fact that each SKU (part number) is tracked through sale, and tied to a particular CostCo member identification number.  Since they have my telephone number from the CostCo application, they were able to call me and notify me to trash the Clif bars else risk the wrath of Salmonella.

Am I happy that they warned me?  Absolutely.  Am I surprised that they were (admittedly well integrated and efficient) tracking my purchases to that level of resolution?  Absolutely.  Will it stop me from purchasing more goods at CostCo?  Nope.  Now I get to be tied up with this privacy/transparency quandry for a while.

What would you do?  Does this type of tradeoff offend you or do you feel that you'd sacrifice privacy for this entitlement?  Do you mind that Google knows more about you than your family physician?  Speak up!

Death and Taxes

First and foremost, allow me to apologize for the lengthy delay since my last post.  Pursuing the 'Hollywood style of work', as I do, means that my work is sometimes very busy and sometimes the opposite.  The months of November and December were very, very busy.

The reason for tonight's late post is a series of twitters that occurred today surrounding a relatively innocuous Ars Technica posting.  The posting concerns a 'Taxpayer Advocate' that recommended to the IRS that virtual worlds should be taxed.  Other than the sheer complexity of taxing virtual economies, which has been extensively discussed elsewhere by such august minds as Professor Richard Bartle and Professor Edward Castronova, among others, the idea of taxation at a micro-transactional level caused me to fire off two quick twitters:

"Struggling to explain how much of an asshat Nina Olson must be"

(Nina Olson being the taxpayer advocate in question)

quickly followed by:

"And WTF is a 'Taxpayer Advocate'? Someone who tries to Jedi-mind-trick people that taxes are good? The Romans paid taxes 3 days a year!"

This set off a storm of direct messages and public replies asking me about taxation, mostly defending it.  Most specifically, how are we to pay for police and schools.

To begin, as most of you know, I am a libertarian and am not the least bit frightened by the thought of a complete lack of federal, state, and local government intervention and services.  I have yet to see an instance of a government program that worked as advertised and was delivered at or under budget. Most recently, the TARP program came under fire as there were no reporting guidelines on how the public funds were used.  When this proposal, that the bailout-ees would have to account for how the largess was used to the baleout-ors, their reponse was:

"Iowa Banking Superintendent Tom Gronstal said he believes it will take some time before specific tracking mechanisms are put into place."

Ok, it was a 25 question application to apply for TARP funds, which went speedy quick.  But when the people who give you the funds want to know how the funds are being spent, 'it will take some time'.  If you had a stockbroker who refused to tell you how your deposits were performing, would you wait or find a better option.  Would you have even put your money with him/her in the first place?

So, my response regarding taxes, like all government programs, is that they are perpetuating an unsustainable model.  There will never be enough programs to make the government happy, and the government never shrinks itself.  It's self-perpetuating, because the people in charge of deciding what to shrink are the people who stand to gain by expanding instead of shrinking the programs in question.  Compound this extensive human self-gratification and you have a tax rate of >50% for many of us.

'The closest thing to immortality on this earth is a federal government program'- Reagan

I live in a house that I own outright.  I still pay a five-figure property tax bill, of which the monthly payments would afford me a lovely Italian or German sports car.  In addition, I pay ~50% in income taxes, and am taxed a 6% consumption tax (sales tax) on any of the remaining proceeds I try to utilize.

"The hardest thing in the world to try to understand is the Income Tax"- Einstein

On top of this, I write hundreds of dollars in monthly checks for both of my childrens public schools, for supplies and the like.  Even given the $33 billion allowance afforded to the k12 system through the 2007 federal budget (and not including any additional funds from state or local sources), the teachers are still overworked, horribly underpaid, and begging parents like me for more money for supplies.  If you were really generous with this allowance, and gave everyone in the U.S. 19 or under an equal share, they would each walk away with nearly $400 a piece, not counting any state/local sweetners.

My advice for those that are concerned that lack of taxes would render us school-less?  Try it.  Privatize all of it.  Watch how capital efficient and quality-competitive education would become.  It works every day in industry (barring misguided government regulation of energy and finance sectors), so why not education?  Look at the quality of private higher education, like Stanford, and tell me that education is a unique snowflake that cannot be privatized without severe damage.

"In large states public education will always be mediocre, for the same reason that in large kitchens the cooking is usually bad. "- Nietsche

Public services such as Police and Fire are trickier.  The Romans, who at one point only paid taxes three days a year, individually contracted private security and fire services.  This was rife with problems as one would expect, with Julius Caesar's own cash-heavy-friend Crassus having made his fortune by instituting the first Roman fire department.  That Crassus used it to extort the flaming homeowners to sell to him at remarkable discounts is unconscionable, however does not invalidate the private security model (e.g. ADT, Westec, Secom, San Francisco "Police Specials") and other more recent success stories. 

Do you think that you know more or less than some administrator how and where your children should be educated?  Do you think that a private company with a service-level-agreement for pay/profit would be faster or slower than your local police/fire/ambulance?  I worked for an ambulance company at one point, and discovered that municipalities 'bid out' these franchises to private companies who run them at a profit.  If you can do that for ambulances, why not fire and police services as well?  Why not let the homeowners themselves decide what security/fire/ambulance companies they want a contract with, rather than some overpaid local administrator?

Net-net, taxes are a bad idea in the virtual world just as they are in the real world.

“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”- Churchill

Lively heads for the giraffe graveyard

Google announced yesterday on their blog that they are shuttering the Lively project.  This is unfortunate for multiple reasons:

1) Google was the first real major player to have a virtual world platform launch, albeit social avatar-chat centric, which in many ways validated the market space to external skeptics.  Terminating the Lively project will reinforce the views of the perpetual doubters due to the press it will receive.  Very public failure.

2) Google had a unique opportunity to tie in Lively with a number of it's other products (GTalk, Chrome, the App suite) and never did so.  This would have made a very strong market position, allowing them to exploit existing GMail/GTalk contacts (as Vivaty does in Facebook) and embed GDocs into collaborative rooms.  No other virtual world company has the horizontal footprint to carry this off, and Google had the resources, the positions staked out on the battlefield, and still miscarried. 

This reminds me of the Persian King Darius III at the battle of Issus against Alexander the Great.  Darius had the overwhelming numbers (in this case, Googles vaunted market capitalization and resources) and somehow still lost to this scrappy upstart (scrappier startups).  It's still to be determined who the Alexander will be in this analogy.

3) There were a number of secondary companies who invested in Lively as a platform for value (Rivers Run Red comes immediately to mind) who are also going to be impacted by the closure.  Startups cannot afford to partner with multiple large company platforms due to the engineering commitment involved. 

At the end of the day, this isn't something as straightforward as Google choosing to 'prioritize our resources and focus more on our core search, ads and apps business', as said in the blog.  The entire Lively team was less than a dozen people in a company with 17,000 employees. They have more than a dozen people somewhere in the depths of their finance department who do nothing but analyze the costs of Google trade show tchockies. Cough, Bullshit, Cough.

What this proves to me is that Google is just as political and functionally inert as other large companies, their propaganda aside about being a fluid startup at heart.  Vibrant large companies encourage risk taking and have longer attention spans than 6 months for new products.  It isn't a matter of Google 'not believing in the 3D Internet/Avatar Chat market', as large companies don't believe ANYTHING other than the composite opinions of a few leaders, so you can't say with certainty that there was a single corporate position on Lively.  What is certain is that the team there didn't achieve the level of support from the rest of the organization that would have insured it's success in this challenging market.  Unfortunate, and yet another reason to sell GOOG if you hold it.

Grab the fiddles boys, I see smoke.......

I have changed my mind. 

I no longer have any concern and temporal angst about the government's totally misguided socialization of the financial system, and (soon to be) domestic automobile manufacturers.  It's just fine that General Motors has a market capitalization of $1.7B as of today, which is less than twice that of just the new line of revolving debt extended to the failing U.S. big-box electronics retailer Circuit City.  I suspect the airlines are queuing up salivating at the opportunity to 'tap the TARP' as well.

The fact that the government precipitated the crisis by inconsistent, ham-handed, and misguided regulation of short-selling financial stocks, and not the excesses of the corporations they blame, no longer ruffles my feathers. They spent the previous decade fumbling, bumbling, and overall disrupting the energy sector, at a federal and at a state level (by their own admission), and now they are using the same playbook on the financial sector.

The government will print more fiat money, further devaluing the USD at a time that we should be shoring up reserves in anticipation of the entitlement crush that the economy is moving into as the baby-boomers hit social security, medicare and medicaid.  They will hemorrhage money in colonial wars abroad, they will subsidize and effectively de-privatize the industries that we spent the last thirty years privatizing, following the lead provided by fine socialist icons like Christina Kirchner, who is currently in the process of de-privatizing private retirement funds so the Argentinian government can raid those like they did the state-operated retirement funds.

In short, they will throw taxpayer money at poorly and partially-regulated industries like the automobile, airline and financial sectors in the hopes that their largess will somehow reform these industries into more capital efficient, productive members of society.  If this wasn't a punchline stolen directly from Atlas Shrugged, it would be almost funny.

And the root cause of this all, according to government, was 'not enough government oversight'. Sure, we need more government, right?

Per a great article written by Veronique de Rugy in the December 2008 issue of Reason Magazine:

"Real federal spending increased from $774 billion in 1968 to $2.5 trillion in 2008- a 225 percent increase- and federal spending per household grew from $11,800 to roughly $21,000 over that period, in constant dollars."

Because if you are a lawmaker, are you going to remove laws or create new laws?  Are you going to shrink the government and downsize your own job, or grow your empire?  Take a guess.

"Look no further than your morning routine.  The federal government has put its imprimatur on the mattress on your bed (through the Consumer Product Safety Commission). The Federal Communications Commission regulates the transmission and content of your favorite morning show.  The Food and Drug Administration (FDA) and U.S. Department of Agriculture (USDA), as well as the Commodity Futures Trading Commission, regulate the coffee you drink and the sugar you add to it.  The USDA regulates the milk you pour in the coffee, as well as the cheese, butter, and other dairy products you might eat for breakfast.  And the FDA has its say about the shampoo, soap, and toothpaste you use with water that's regulated by the Environmental Protection Agency." (also from Ms. de Rugy's article)

The reason I am reconciled to this is that there is no chance whatsoever that it is sustainable.  The government cannot continue to party all night long and never pay the bar tab.  It will, during the next 20-30 years, suffocate all industry and taxpayers, and ultimately collapse into itself.

We'll then have the opportunity to reinvent this great nation from the rubble without all of the expensive and invasive entitlement and nanny-state laws.  Now where did I put the resin for my bow.....

The time of his life

If you read this blog, you know that I am a big fan of Thomas Jefferson and his governmental policies.  Specifically, that the best government is as little government as possible and that most bad government comes from too much.  It's for this reason that I am strongly against the concept of a default 'two party system' in the United States, and believe that the United States government is increasingly a duopoly that colludes to keep out any viable third party(ies) from the equation.

So, when my seven year old daughter came home on Thursday and said that they were going to stage a mock U.S. presidential vote in her elementary school, I asked her who she was going to vote for.  She said they only had two choices, Obama or McCain.  I sat with her for the better part of an hour explaining to her that she could vote for whomever she liked for president, and not just Obama or McCain.

Needless to say, when Friday came around and she returned home, she had her 'I Voted' sticker proudly on her chest.  She said that she had objected to the principal of her school but the principal had admonished her that she HAD to vote for one of the two-party candidates.  I will be following up with her (the principal) later, rest assured.

Foiled in my attempt to de-program my child from the overt political conditioning, I sweetly asked her who she voted for....

"John McCain"
"Why did you vote for Mr. McCain, honey?", I asked
"Because he is really old, and I want him to have the time of his life before he dies", she replied.

Crosspost from TIG Blog- Current Economy and Virtual Worlds

Originally posted at blog.techintelgroup.com

These are indeed interesting times for businesses, most particularly startups.  I always seem to be in a virtual world presentation or at a virtual world conference as the macro-economic situation worsens and worsens.  In stepping back, this downturn should have some surprising impacts on this stage of development of the virtual worlds industry.

By way of context, in my humble opinion, the virtual world industry is still relatively nascent. There have been companies doing virtual world platforms for fun and profit for decades, however as a technology sector overall, they are just now coming into mainstream adoption numbers.  There is the standard first/second/third technology generation tensions between early entrants (many of which are making money) and new market entrants (who are not) looking to disrupt and capitalize.

The virtual world companies that are in the middle of (or about to seek) fund raising will find their valuations pushed down as a best-case-scenario, with 'no capital availability' as a worst-case scenario.  Typical sources of capital like friends/family/angel investors are all feeling the pain of watching their personal portfolios shrinking on a daily basis, and are therefore less likely to invest in a speculative venture in an increasingly-crowded sector.  The venture community is suffering from a combination of gripping fear, lack of self confidence, and overall paralysis.....but only at a certain altitude.  Large VCs are most impacted, as they have so much more capital to put in to play that they need certain (absurdly large) valuations of the startups they are injecting capital into.  Smaller funds, which invest in smaller denominations/valuations, are going to clean up during this time. 

Bad news for VW startups wanting large valuations about now, good news for smaller VCs with capital on hand and VW startups looking for early smaller rounds.

What about the impact of the economy on the broader value proposition of the industry?  Lets break it down a step at a time....