Startup Conversations

The Power of Sports

I've been a player of sports, and a fan of sports for my whole life.  There is something about the emotions that it invokes, of commitment, passion and effort.  I finally got around to watching my DVR'd version of the 2009 ESPY Awards (from July 2009) and I saw something that reminded me again of how powerful a pull sports has on the human emotional state.

The ESPY Awards bestow a special Arthur Ashe Courage Award every year.  This year it went to Nelson Mandela for his embrace of the South African Springboks rugby team in its run to the World Cup title in 1995.  In South Africa, rugby was the white man's game, and the Springboks symbolized raw unyielding white power and rule.  Black South Africans hated the Springboks.

But Nelson Mandela saw the Springboks as a tool to unite white and black South Africans under a common purpose.  And he used it extremely effectively, as shown in the video clip from the 2009 ESPY Awards show honoring Mandela with the Arthur Ashe Courage Award for his wholehearted endorsement of the Springboks in the 1995 World Cup.

Watching this video reminded me of a surreal moment I had experienced while visiting South Africa in 1993, as part of a cultural and business exploration trip while I was in business school.  I was in a sports bar in Cape Town and there was a poster of Michael Jordan on the wall.

Even though Cape Town was the most racially integrated city in South Africa (and certainly had the best nightlife!), I did not see a single black person in the bar.   I was in a social conversation with a group of white South African men and women and every one of them worshipped Michael Jordan.  It was quite shocking to hear them gush over Jordan in a country where most black-skinned people wouldn't even be given the time of day.

There is something about sports that carries the power to elevate and energize the soul.  It certainly does it for me.  And I can already see it in my 7-year old and 6-year old sons.  It's something that I will certainly nourish in them as they grow up.

How Obama Makes Me A Better CEO

Different people will have different opinions about his politics, but I think everyone has to admit that Barack Obama knows how to get people to follow him (otherwise he would still be State Senator Obama, and not President Obama).  To rise from where he was to where he is in such a short period of time...his skills in this area are once-in-a-generation.

By definition, leaders must have followers, therefore Obama must be considered one of the greatest leaders of my lifetime.

How does he do it?  As a startup CEO, I need to know how to be a leader / attract followers.

One of the most illuminating moments of the presidential campaign was in the primary debate with Hillary Clinton and John Edwards, the question was posed to each "If Dr. Martin Luther King were alive today, who would he endorse?"  Clinton and Edwards gave the stock answers of why Dr. King would support them, blah, blah, blah.  Obama delivered an answer that skewered his opponents (without intentionally meaning to), and crystallized his leadership style, and I believe identified the single reason why he ultimately won the election.  Below is the 60-second clip of his answer:

He is that leader who makes the people following him truly believe that he is simply the vehicle that they use to accomplish their objectives.  It is very Zen-like, and may reflect his early upbringing in Indonesia.

We had a country of angry people who, rightly or wrongly, did not feel that the Bush administration reflected their wishes.  In comes Obama whose central thesis is that change happens from the ground up and the role of the president is to channel the wishes of the people.  He had a lock on that positioning throughout the primary and general election, and he rode it all the way to the presidency.

As a CEO, that is a great lesson.  While there is a critical difference in that the job of the CEO is NOT to be the most popular person / "win" an election, but it is to inspire and empower the team to go beyond their normal performance.  Empowered employees are the only kind of employees capable of performing above their normal levels, and more importantly are capable of acting as a true team and becoming much greater than the sum of their parts.

Q: How do you do that?

A: Make them feel like Obama made the voting public feel when he answered that question about Dr. King's endorsement.  That it's not about "me" as the CEO, it's about "you" as the real contributor and that it's my job as the CEO to channel all of your collective contributions to achieve our collective objectives.

This ad for Adidas from the Beijing Olympics captures this idea really well.

While the CEO (or the President of the U.S.) may be the one that looks like they're putting the ball in the basket, it is really the collective effort of everyone to raise the basket and lift the CEO to the level where they can reach it.  The CEO has to recognize, acknowledge and praise everyone for their contributions in scoring that basket.  Not that they "assisted" the CEO in scoring the basket, which implies that all they did was make it a little easier for the CEO to score the basket but that he could have done it anyway with a little more work on his part; but rather that the basket, the court, and the entire game would not even exist without everyone doing their part.

Obama is a master at that, and that is why watching him will (hopefully) make me a better CEO.

Financial News Shows: Follow the Money

I just finished watching my DVR'd version of Jon Stewart's interview of Jim Cramer.  Below is Part 1, at www.thedailyshow.com you can see parts 2 and 3.

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Pt. 1

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

There has been a lot of outrage over the "financial news" shows and the negative impact they have on personal investing and thus our economy in general.  I agree that they can have a negative impact ultimately on our economy, but only because people don't keep the proper perspective on them.  Many people have been trying to stress how Jim Cramer is not a market professional, but rather an entertainer.  I agree.  He used to be a market professional but now he is definitely an entertainer.  As are all the others.

In a karmic connection to one of the most important real news pieces in American history, Deep Throat's famous advice to Bob Woodward is spot-on for this issue: Follow the money.  Anybody who thinks the financial news shows are about providing real financial advice has been led astray.  Financial news shows are about SELLING ADVERTISING.  That is how they make their money; follow the money!  They are going to air content that attracts an audience that they can sell advertising against.  Period. It's not about airing content that helps people be better investors.  That is not their business, nor should it be.  It's a TV show, not a financial advisory firm.

I'm not saying they shouldn't exist or what they do is wrong.  Not at all.  I actually know Jim Cramer from when we invested in TheStreet.com when I was at Flatiron and think he's a great guy and have nothing at all bad to say about him.  My only issue with these shows is that there should be a *real* disclaimer.  The guests they have on the show all do disclaimers of their investment holdings, but that's not the issue.  The shows should be forced to air a disclaimer at the beginning of each episode such as:

"We are an ad-supported TV show, not a financial advisory firm.  We air market commentary and investment recommendations for the sole purpose of attracting an audience to sell advertising against. (We hope you enjoy the show!)"

Sometimes good market commentary and sound investment advice serve the purpose of attracting an audience, but that is purely a byproduct.  The product that they sell to advertisers is the size and composition of their audience, and everything they do on the show is done to optimize that product.

THE definitive book on entrepreneurship

Just kidding...there is no definitive book on entrepreneurship.  Just did that as title-bait.  Apparently it worked or else you wouldn't be reading this! ;-)

Lots of people ask me what are good books on entrepreneurship.  Tough question to answer.  But I just got my copy of the 2009 Kauffman Thoughtbook.  Kauffman Foundation is a charitable foundation that is the global thought-leader in entrepreneurship.  They founded the Kauffman Fellows Program, which I'm an alum of, so I've had some history with this entity.  Take aside the home-team rooting and I still believe this book is one of the best.

It's a series of short articles and interviews with leading entrepreneurs, venture capitalists and scholars.  Each piece is only a few pages long, so it's easy to ingest in small bites over time.

Follow the link above and you can PDF download each article for free and/or order a hard copy, also for free.

Enjoy, and if the spirit moves you please come back and add comments about your favorite articles.

Analyte Media

I am very excited to announce that I have officially left the slackard world of opining and pontificating on other people’s businesses (and occasionally providing them with capital…) and have enthusiastically entered “back into the arena” (to borrow from the Teddy Roosevelt quote on the left sidebar of this blog).

I co-founded Analyte Media (originally called Ajuga Media) with a fantastic partner and an equally fantastic group of initial team members.  I serve the business in the capacity of CEO.  Our initial team spent the better part of 2008 spending our own capital in trial-phase of the business model, and when that worked out well we decided to step on the gas and raise several million dollars in venture capital from two (also fantastic) venture capital firms.

The success of our trial phase led us to the conclusion that we did not NEED any outside capital, but we chose to do so anyway because we wanted these two particular VCs to be part of our team.  Their capital just happened to come along with them (believe me, I tried to get them without the dilution that came with their capital, but it just doesn’t work that way).  We also did it because our team does believe in my previous post on how growing a high-growth startup without engaging the people who help entrepreneurs do that for living (i.e. venture capital investors) is similar to raising children as a single parent…it can be done but you miss out on a valuable “other” perspective.

Since I left my first and only, real job at the age of 23 to embark on an entrepreneurial career, 19 years later I am now rounding out the last of the four primary seats that exist in the startup ecosystem.

1. The first one was being a bootstrapped entrepreneur (twice), with one of those being part of the founding team that was acquired by a public company that was in turn acquired by CA. 
2.  Then it was being a professional VC, including being an alumni of that great VC education and networking program called the Kauffman Fellows Program where I learned the business from Fred Wilson at Flatiron Partners (now of Union Square Ventures).
3. Then it was being an angel investor, with the good fortune of being involved with some teams that created some great, market-leading companies, including Feedburner, comScore and TicketsNow, among a few others.
4. And now the last seat at the table is that of the VC-backed entrepreneur.

In baseball, they call that “hitting for the cycle”, and I’m very excited to start this next phase of my career.  However it turns out, I’m sure it will be a lot of fun!

In the future, I will post more frequently about the variations inherent in those four different positions.  For now, I’d like to offer a few sound-bites:

• A simplified generalization is that there are “thinkers” and “doers”.  Obviously, successful people need to be able to do both, but most people are more drawn to one end of that spectrum over the other.  Investors are “thinkers” in that their personality type prioritizes analysis over action.  Entrepreneurs are “doers” in that their personality type prioritizes action over analysis.  I’m not denigrating either one at all.  To be a good VC, you have to be really sure the gun is aimed at the right target before pulling the trigger because you have a limited number of bullets.  To be good at operating startups, you have to be able to put a lot of balls in the air knowing that you can’t focus on all of them, and then be willing to operate in trial-and-error mode to flush out which balls to drop and which to keep going.   They are two pretty different ways of day-to-day operating and decision-making.

  

• Everyone exists on a spectrum, but it is generally correct that entrepreneurs focus on what can go right (“half-full” people) and investors focus on what can go wrong (“half-empty”).   Entrepreneurs really need that investor / half-empty perspective because there are a lot of things that can go wrong that can become fatal if the team is not prepared in advance for them.  This goes back to my previous post about how growing a high-growth startup without having VCs involved is like raising a child as a single parent….it’s not just the lack of time but more importantly the lack of perspective that’s the problem.  

Since I have traits of both sides (as evidenced by my historical career choices), the only thing I can hope is that as CEO of Analyte Media I have the self-awareness, and am willing to listen to the people that I have surrounded myself with, to know which situations warrant which types of behavior.  It will be several years before I can let you know how that one turns out…

Those astute readers of this will blog will realize that I have not described what Analyte Media does, who my co-founder is, who invested or any other specifics…I will do that in the near future but for right now we aren’t publicly unveiling ourselves.  When we are ready to put up a corporate site at www.analytemedia.com, I’ll also discuss it more informally here on my blog.  We will also be cranking up the recruiting engine pretty soon, and then I’ll be quite forward (possibly in your face!) about what we do and why people should want to join our team.

Wall Street Meltdown: A Different Perspective

Most people reading this blog already know that what has happened last week and over the weekend with the bankruptcy of Bear Stearns and Lehman, bailouts of AIG, Freddie and Fannie, the sale of Merrill Lynch, and the capitulation of Goldman and Morgan Stanley as independent investment banks is the stuff of financial history legend.  Students and academicians will be studying these events for the next hundred years, much in the way the Great Depression of the 1930's in the U.S. and other financial crises in other countries are still studied all over the world, looking for reasons and insights and more importantly how to NOT let them happen again.

The Wall Street Journal published an op-ed piece this morning by L. Gordon Crovitz that displayed a startlingly insightful, and yet simplistic, view into this that sliced right to the heart of the issue.  And it sliced into the patient's heart from an angle that previously had not been used.

All of the stories that I've seen have reiterated the same general story of "lack of federal regulations led to unfettered corporate greed".  There are offshoots to this story around "overly complex financial instruments" and "too big to fail" and other topics.

To me (and obviously to L. Gordon Crovitz), these are all secondary issues.  The primary issue is that the global free market failed to properly account, over time, for the balance sheet risk in the stock and bond prices of the entities that held these mortgage-backed derivatives.  It is BS that their risk was too complex for anyone to understand.  If smart people could create these instruments then other smart people could decode them and understand their risks.  Maybe not overnight after massive, inter-locking positions have been built up, but they certainly could have been understood over time as the positions were being built up over a multi-year period.

If the risk of these entities had been properly understood as the riskiness of their balance sheets increased over time, the free market would have driven their stock and bond prices appropriately lower over time, SMOOTHLY.  The management of these companies would have reacted appropriately to their lowered market values, and would have reduced the riskiness of their balance sheets (again, slowly and smoothly over time) in order to bring their market values back up.

But this did not happen?  Why not?

As Mr. Crovitz posits, it's because the Eliot Spitzer led charge against the Wall Street research analyst industry in 2000 removed a fundamental governor to the system.  It is the job of the Wall Street research analyst to do "investigative reporting" into the health of public companies.  In late 2000, several regulations were enacted that made it much harder, and much less attractive, for research analysts to perform high-quality investigative reporting on the public companies that they follow.  This post is not to get into how, why or what these regulations were, but suffice it to say that while they may have been well-intended, we now see that they may have led to horrible unintended consequences.

In 2008 there are less than half the number of research analysts that were on Wall Street in 2000.  The need for high-quality investigative reporting into public companies did not diminish, and the people that could do that job the best took jobs with hedge funds, but I'm sure that it slowed the number of smart, young people wanting to become research analysts to a trickle.

I'm also quite sure that many of the ex-research analysts turned hedge fund manager were pounding the table internally at their hedge funds (for months and probably years) screaming about how the stock and bond prices of these entities did not properly reflect the riskiness of their balance sheets, and pushing the fund to take huge short positions.  Kudos to them because those that did take short positions collectively made their investors billions in profits in a few short weeks.

But those insights were concentrated into a small number of equity long/short hedge funds that focused on the financial services sector.  Those insights were not widely dispersed to the general market; in fact the hedge funds are motivated to keep their proprietary information closely guarded and no matter how "right" they think they are they do not want to take too large a position because it could move the market and eliminate their ability to profit from the information disparity.

If high quality public company research had been done at the Wall Street investment banks, in effect creating more "table pounders" and keeping them at a (investment banking) platform that allowed, and encouraged, them to scream at all market participants in a very public way, the free market system may have functioned as it was designed, i.e. smoothly moving prices up and down and compelling management teams to take actions that properly align risk potential with return potential.

This gets to the title of Mr. Crovitz's op-ed piece: Information Haves and Have Nots.  That is absolutely the right title for this concept.  By chopping down the Wall Street research analyst function (causing it to be re-planted at the closed-information hedge funds), it created a smaller number and more concentrated set of "haves" containing information on the appropriate prices for the entities that held exposure to mortgage-backed derivative risk.  The vast majority of market participants became information "have nots".

We will now pay the price for that information disparity for years and possibly decades.

Moral of this story: Be aware of the unintended side effects of even the best-intended regulations.

Should you take VC money or Angel money?

I meet with a lot of entrepreneurs, and invariably this question always comes up in one form or another.  I think I have a pretty good perspective on this because I've been on all three sides of this question: 1) a professional VC, 2) an angel investor and 3) an entrepreneur facing this question for my own business.

There are both pre-investment issues and post-investment issues to this question.   Post-investment is a lot more nuanced and maybe I'll tackle it in the future, but not right now.  The pre-investment issue can be summed up very simply:

Raising angel money is like trying to find a date on Hot Or Not.  Raising venture money is like trying to find a life partner on eHarmony.

If you're "hot" (like this picture of Miss America 2008), you'll very quickly get lots of dates / investors.   

You may not ultimately like the dates you get, because they only like you because you're "hot", and if you stop being hot they move on pretty fast.  And always remember that different people find different looks "hot", like this picture of a New Guinea tribal woman doesn't appeal to me but I'm sure it does to New Guinea tribal men.

If your business is something that people well-schooled in the industry and market you are going after would find really exciting, AND you have the time and patience to spend a lot of time getting to know each other (because it will take a while),  then you may be better off going after professional VCs who know your market and are looking for long-term relationships (i.e. submit your profile on eHarmony).  For example, Tina Fey's humor, intelligence, style and looks aren't for everyone, but they sure do work for me (which I've fully disclosed to my wife!)

Food for thought when picking an investment route....a fun way to think about a serious topic!

NOTE: I fully disclose that I'm plagiarizing this concept from someone else, but I can't remember where I heard it so I can't give appropriate credit, so Thanks to whoever said it first.

Venture Capital and Mutation Theory

Many entrepreneurs that I talk to struggle with understanding how and why venture capitalists make the decisions they make, either in not funding their business or funding a different business.  It helps to understand the top-down dynamics that go on in the VC world, as illustrated by the following anecdote.  I heard this second-hand, so if anyone with first-hand knowledge (I know I have some readers from Adams Street) wants to chime in, I'm all ears.

Adams Street Partners is the oldest and arguably the best fund-of-funds in the private equity sector.  They invest in private equity partnerships in total, of which venture capital is a subset, but they are best known as a venture capital fund-of-funds firm.  They invest over $1 billion per year in new private equity partnerships, and have been doing it for over 20 years.  They have generated an annualized 20% return on capital (IRR) back to their investors over that 20-year period.  They invest in a lot of VC firms, who in turn invest in a lot of underlying portfolio companies.  Multiple thousands of underlying portfolio companies.  Over that period of time and that amount of capital, one would think the 20% return was generated by a very diverse mix of successful underlying portfolio company exits.  Not so fast.  The story told by Bon French (CEO of Adams Street) is that a full 5-points of the 20-points of return over that 20-year period is attributable to a single company exit within a single VC firm portfolio (Benchmark Capital's investment in eBay).

Why is this story important for entrepreneurs seeking to raise VC money?  Because VCs know they have to fund the monster hits in order to generate the type of return necessary for the VC asset class to continue to be attractive to the limited partner investors.  They need to find and fund the "mutant" companies: those with the DNA that creates the potential for them to grow beyond any rational expectation.  Hence, venture capitalists have to believe in "mutation theory" as the reason that the asset class is attractive to limited partner investors, like Adams Street.

I have no data to support this claim, so you've been forewarned about its potential accuracy, but my belief is that if one were to remove the top performing 1% of portfolio company exits out of the VC asset class return calculations, VC would under-perform the S&P 500.  It's that top 1% of exits that drive the whole reason for existence of venture capital as an institutional-grade investment asset class.

Entrepreneurs need to understand this so they can understand how and why VC's make the decisions they do.

What Spitzer Should Have Done

Ah, poor Eliot Spitzer.  I'll save you all my personal thoughts, because I'm sure most of you are uninterested in what I think about this situation.  So instead, this is an open letter to Eliot:

Good sir, this is what you should have done instead.  Strike a deal with your wife to trade sex for cash, food, clothing, housing, gifts, flowers and kind words.  In return, she must provide you with periodic sexual intercourse...possibly even "non-standard" intercourse depending on the volume of kind words included in your payments.  According to law enforcement officials, these sorts of schemes usually begin with the woman asking for and receiving a large diamond ring followed approximately twelve months later with a large party attended by friends and family.  It's a crime that so few law enforcement officers can ever catch -- Eliot, I bet not even you could have brought somebody down for this one.

The Onion uncovered the only known case of this kind ever being prosecuted.  Read the whole article below.

Housewife Charged In Sex-For-Security Scam

Perpetual Motion Money Machine For The Common Good

Congratulations to the Wikimedia Foundation for being named a Technology Pioneer 2008 by the World Economic Forum. It’s a fantastic accomplishment. But as Wikimedia becomes a pioneering global citizen, we should challenge their leadership to do more than harness the collective intelligence of its millions of collaborators to just educate, inform and entertain the world for free. According to my calculations, the collective intelligence captured in Wikimedia’s properties could (and should!) be used to generate over US$1 billion for charitable causes in less than four years, and by year five should be contributing over US$1 billion per year to the world’s charities!

Sounds crazy? Yes. Is it crazy? No! Read on.

Newman’s Own is a U.S. based company that is a role model for what Wikimedia should become.  Newman’s Own, owned by famous actor Paul Newman, operates as a regular profit-oriented company with competitive product offerings and market-rate salaries, marketing, distribution, R&D, administration and other general corporate expenses. The big difference is that all net profits generated by the business are donated to charity. If you live in the U.S. you have probably seen Paul Newman’s image clothed in garish costumes on the packaging of salad dressings, potato chips, salsa and other food products. It is shameless exploitation of Paul Newman’s image and reputation. But that exploitation has reportedly generated over US$200 million in charitable contributions since its formation in 1982. In fact, its corporate motto is “Shameless exploitation in pursuit of the common good.” A book with that as its title describes the story and its charitable beneficiaries.

If anyone reading this is unfamiliar with Wikimedia properties, they are community-created web sites with enormous consumer traffic. The largest property, Wikipedia.org, is a “crowd-sourced” online encyclopedia. According to my friends at the leading online media measurement company comScore Media Metrix, the Wikimedia family of sites, when viewed as a single property, is the 6^th most popular online media property in the world, in terms of monthly unique visitors (UV’s) and is a Top 25 Global property in terms of monthly page views (PV’s). And every page view is somebody researching something.

It is an iron-clad truth that revenue can be generated from online consumer traffic. Particularly from online consumer traffic where people are searching for something (see revenue and earnings of GOOG). Some percentage of the inquiries at Wikimedia properties has commercial value and advertisers would pay a lot of money to be in front of those people as they do their research. Wikimedia would not even need their own sales force to generate revenue because there are middle-man companies called advertising networks that have already aggregated advertisements from lots of different advertisers that would fall over themselves to serve their ads up on Wikimedia sites (the largest ad network is Google’s Adsense). All Wikimedia would have to do is paste a small bit of code on every page and voila, a money machine is created.

Now here is where the math comes in and the numbers get mind-boggling: First, a term of art in the interactive advertising business is RPM, and it stands for Revenue Per Thousand Page Views (M represents the thousand). A really low-quality site in terms of the traffic having commercial value (think chat and some social networks) can generate about US$1 RPM just by signing up for various ad networks and not even having their own sales force. Sites with traffic constituting more commercial value can get up to US$5 RPM using the ad networks. Sites with high-value traffic that hires its own sales force and works closely with advertisers and their agencies can generate US$20 RPMs and up.

A venture capitalist recently posted his views on expected RPMs for different types of businesses.  If you follow that link, you will see that Wikimedia would be classified as a business with many different "endemic" advertising opportunities, which he puts in the US$20 RPM range and up (examples of endemic advertising opportunities in Wikipedia would be entries on cities and countries would attract travel-related advertisements, entries on information technology would attract IT-related advertisements, etc.).  Certainly not all of Wikimedia traffic would have endemic advertising opportunities / high commercial value, but a lot of it would and it would probably match or exceed the percentage of Google searches that have commercial value relative to all Google searches.

According to comScore Media Metrix, the Wikimedia family of sites generated 40 billion page views from October 2006 to October 2007! And the number of monthly page views in October 2007 was 66% higher than the monthly number from October 2006. Lets use that to make some conservative estimates:

• Lets cut the growth rate in half to 33% and estimate 53 billion total page views for 2008.

• Lets assume that on average Wikimedia’s traffic can only generate US$2 RPMs.

That is still US$106 million in revenue! And the operating expenses are very low, and this effort would not add much more to it, so almost all of it would go to charity (Wikimedia's financial statements are available here, and they show the year ending June 30, 2006 had total operating expenses of less than US$1 million). Now maybe there isn’t enough ad inventory available immediately in the ad networks to service all these page views, but Wikimedia could flex its traffic-volume muscles, and its social mission, and pretty quickly take inventory allocation away from other properties to satisfy its page volume appetite.

Looking out a bit into the future and the numbers get really nutty. But its not unreasonable since its an online property that operates at a very high usage scale (just a notch below Google and Yahoo), yet has NONE of the product development and R&D costs that other for-profit companies must incur – their whole product is created by collaborators contributing their time for free. Lets look five years out, at 2012:

• Assume an average annual page-view growth rate of 20% over that period, yielding just over 100 billion page views in 2012

• Assume that Wikimedia has developed its corporate and technical infrastructures and now has a direct sales force focused on its high-value vertical content areas, world-class tools and programs for advertisers and can serve video and animated content and ads and can now generate an average of US$10 RPM. (And there is a chance that some of the governments of the world could be convinced to treat the buying of ads on Wikimedia sites as tax-deductible because it would be in effect a donation to charity.)

That is US$1 billion in revenue, with maybe US$50 million of expenses and all the rest of it donated to charity!  And every year the amount gets larger and larger as the traffic volume on Wikimedia continues to grow and the internet advertising industry continues to grow.

Lets put some context to these numbers. Rick Reilly wrote a great article in Sports Illustrated on how the United Nations estimates that over 1 million people in Africa die every year from malaria and that 650,000 of those people could be saved if they just had a mosquito net to sleep under. It costs in total about US$20 to get a mosquito net manufactured, delivered and installed in Africa. Based on that article Sports Illustrated started a program in partnership with the U.N. Foundation called Nothing But Nets.  US$13 million donated to that program could save the 650,000 preventable malaria deaths in Africa each year. Even with the lowest assumptions from its first year of operations, Wikimedia has the earnings potential to generate US$13 million for charity in about 6 weeks!  This is but one of many examples of how this kind of money can help improve the world.

Even if generating profits caused Wikimedia to vaporize itself after 6 weeks and cease to exist, it would still be the right thing to do if it could save 650,000 lives.

But generating profits would not cause Wikimedia to vaporize itself. It would do the opposite. It would grow stronger every day. Instead of the mythical perpetual motion machine, it would become a real-world perpetual money machine.

The contributors that create the Wikimedia properties would contribute even more passionately because its for the common good. Consumers would consume Wikimedia content even more than they do now because its for the common good. Advertisers would advertise on it at or above market rates because its for the common good. A portion of the money generated would be reinvested to hire smart people at competitive salaries in ad sales, technology and administration, improve its infrastructure to serve video and rich media content and create state-of-art tools for content contributors and advertisers. Wikimedia would have potential employees, corporate partners and advertisers banging its door down to be a part of a company with this kind of social mission combined with its innovation pedigree.

What would be a greater testament to the triumph of free markets than for everyone to supply what they are capable of, as content contributors, consumers or advertisers, in an effort to create a sustainable source of money for those less fortunate? It would be a free market based, global perpetual motion money machine for the common good.

I recently watched an interview with Jimmy Wales, the founder of the Wikimedia Foundation where he said that most of the world’s ills are caused by a lack of education and information. And that you can look at the social value of Wikimedia through a utopian lens and believe that by educating and informing people, it can have a positive social impact. I agree with all that. But I don’t think anyone can disagree that it still takes “filthy lucre” to make things happen a lot faster.

There is a presidential election cycle here in the U.S. right now. Maybe we can get a candidate to adopt this as a cause and use their bully pulpit to make it happen. Or maybe this effort needs its version of Paul Newman to be the face of it. It’s a global operation so it needs someone with global recognition…Oprah Winfrey? Global icon and Queen of All Media? Oprah has announced her retirement from her TV show in 2011, maybe she’s looking for a new effort?

Deploying billions of dollars to charitable causes is no small task. It takes a well-run, global organization to do it effectively. Someone should step up and offer their leadership skills. Maybe Wikimedia’s coming out party as a pioneering global citizen at the World Economic Forum in January 2008 can start the ball rolling.

To paraphrase Paul Newman:

To the leadership of the Wikimedia Foundation: If you are unwilling to shamelessly exploit yourselves for the common good, then shame on you.

To all of us as contributors to, consumers of and potential advertisers on Wikimedia properties: If we are unable to compel the Wikimedia leadership to shamelessly exploit themselves for the common good, then shame on us.