• All in, students owe over $1 trillion due to college educations. In August 2010, the volume of college related debt exceeded credit card related debt.
• As shown below, Student debt has grown 511% since 1999. The graph below plots this as red, compared to the housing bubble (blue line).

• This graph stops at 2006, with an average college cost of $120,000.
• The rather concerning trend line is the average increase in 4 year college education costs (including living), when compared to to the average increase in general goods and services.
• With rising costs, I was interested in looking at what type of debt students were generally taking.

• Note that this graph does not account for convenience users.
• Comparing 2004 to 2008, student Credit Card debt increased on every key metric. At least 30% of college students are putting tuition related expenses on credit cards.
• Taking a look at samples, Loyola University, North Dakota and Kentucky State have averages of 77%, 85% and 76% of their students paying tuition via loans respectively. Both North Dakota and Kentucky have average tuitions of under $8,000; clearly this is not isolated to high price institutions.
• Part of this trend is due to students receiving less financial support on parents. Surprisingly, the average family with children in college spends more eating out ($3,102) than supporting education ($2,055).
• The following graph compares cumulative College Credit to Insurance, Auto, Mortgages and other key financing arenas:

• As Daniel Indiviglio points out in The Atlantic, mortgages and home equity have increased threefold since 1990, as has household related debt. Meanwhile, student debt has grown six-fold.

Sources:

Chart of the Day: Student Loans Have Grown 511% Since 1999, The Atlantic

Let College Students Get Into Debt, The Atlantic

The Debt Crisis at American Colleges, The Atlantic

Student-Loan Debt Surpasses Credit Cards, Wall Street Journal

Students Borrow More Than Ever For College, Wall Street Journal

Student Loan Debt Climbs, Wall Street Journal

The Innoculated Investor  recently posted a transcription of 39 questions with Charlie Munger. It was a fantastic read, and I’d suggest you take a look.

What is fascinating about Warren & Charlie is their understanding of human behavior, and the understanding of irrationalities or rationalities (depending on your view) that models can’t explain. Charlie goes on to explain how economists, using marginal utility, could not understand why popcorn and drinks are priced so high at theatres relative to their prices.

Charlie calls these situations lollapaloozas, and believes they are best explained by a holistic approach from multiple disciplines vs. an exclusively economic lens. He then goes on to explain to explain many confounding circumstances, such as the failure of Keynesian economics and failed companies, using lollapaloozas.

The point is that quite often we get caught following processes, models and logic and fail to think outside of our training.  For example, perhaps Keynesian economics is failing not because the model is ineffective, but because it partly relies on the publics ignorance of economic theory. At a high level, this has changed as a result of recessions and recoveries.

This comes back to a point I often make, and is a key learning from when I was troubleshooting business units: that quite often individuals understand their models, customers and companies, but rarely have an implicit understanding of macro trends. An implicit understand is hard to teach, but increasingly I see companies and executives move in directions and markets they do not implicitly understand (‘China is booming, let’s do business there’.)

I’ve embedded the interview with Charlie below. It is worth the read.

Conversation With Charlie Munger

Over on Quora, an anonymous user posted very revealing insights on Apples’ investment activities. The answer: to stay ahead, they over-invest in their supply chain.

Put simply, new components are not cheap. The upfront capital requirement to build manufacturing plans is huge, and the margins shrink so quickly as technology moves that manufacturers cannot raise capital. According to the anonymous responder, Apple pay a significant portion of the factory construction cost in exchange for exclusive rights to the output for a set period of time, and then for a discount once this period expires.

Not only does this allow Apple to come out with new components long before rivals, but these components are impossible to duplicate (think of how long Apple had the touch screen monopoly for).

By the time competitors catch up on component production, Apples’ lower cost period is in play. That means that every time a competitor buys a component, they are potentially overpaying so that the factory can subsidize Apples discount.

Not only does Apple seemingly have a superior software, user experience and a higher price tag, but superior hardware that is sourced more cheaply than competitors. As competition increases and competitors catch up, it will be interesting to see how heavily Apple restrict their supply lines, especially with reports showing that Apple staked a consortium for the winning bid on the remaining Nortel patents.

It reminds me of the military strategy: control the supply lines, and if you must supply your enemy, make sure they pay (see how this is working with Libya and Oil.)

If you want to see the original Quora post, click here.

Yesterday I was faced with an ad asking me to consider job openings Research in Motion (RIM). I’m not sure if this is a new ad unit, or whether I’ve simply never seen it before, but I find it to be rather interesting. Clearly, based on something in my profile, RIM is targeting me to apply for jobs.

I’m not sure whether this is because my current location is listed as Toronto, because of my listed interests in technology, my background in startups, my listed positions in enterprise, or some combination. 

What I do find interesting is RIM’s decision to run these ads at this moment in time. The company is facing aggravated shareholders, declining stock values, less impressive quarters and is currently laying off employees. It makes me wonder if:

1. This was lined up long before the layoffs, and the timing is just poor;
2. As a result of current state, RIM is struggling to attract experienced hires;
3. RIM is finally filling some talent gaps in product development (and mistakenly targeted me); or
4. RIM just really really like me.

Either way, I found the ad unit, and the timing, to be rather interesting.

The WSJ claim that all entries will be reviewed by an Editor, who will decide the correct course of action. It’s only been a matter of time until somebody tries to capitalize on the Wikileaks success, and the WSJ make sense: they have a huge journalistic reach, and the ability shed light on issues where others may not.

But, friends, let’s take the WSJ as an example of how to NOT write a terms of service. A T.O.S. should understand your users, their motivation, and ensure that you are protected without alienating users. When we read the T.O.S. for Safehouse:

“”we reserve the right to disclose any information about you to law enforcement authorities or to a requesting third party, without notice, in order to comply with any applicable laws and/or requests under legal process, to operate our systems properly, to protect the property or rights of Dow Jones or any affiliated companies, and to safeguard the interests of others”

I don’t claim to be a genius (well, today at least) but something tells me this is not an attractive proposition to whistleblowers. Whether you consider whistleblowing ethical or not, clearly the WSJ have stumbled. If they have not alienated their potential user base already with this move, it will only take one execution of this rule to erode any trust they build.

Berkshire Hathaway, philosophically, get many things right (and their website is amazing.) I ran across an article the other day in which Warren Buffett listed his 6 guiding principles for building a solid business, in the context of acquisition targets:

1. Large purchases (at least $75 million of pre-tax earnings unless the business will fit into one of our existing units)
2. Demonstrated consistent earning power (future projections are of no interest to us, nor are “turnaround” situations)
3. Businesses earning good returns on equity while employing little or no debt
4. Management in place (we can’t supply it)
5. Simple businesses (if there’s lots of technology, we won’t understand it)
6. An offering price (we don’t want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown.

Source: How Buffett’s Most Recent Big Deals Have Done by Michael J. De La Merced

Perhaps we are not so different after all?

Note: This entry was taken from an article I found via DealBook (NYTimes). If you don’t subscribe, you should. Thanks to Spencer Thompson for the tip.

There is nothing wrong with experimentation, but as we enter a maturity stage of web marketing, it is important to clearly define the ‘why’.

Before creating any web channel (website, webinar, social media presence), you should sit down and ask Why? What is the purpose of this channel? How does it fit into your broader strategy? What do we want out of this channel?

It is a very simple exercise, but the results will save you plenty of headaches moving forwards. I’ve created a basic table below, which I’ve regularly used as a tool to refine and validate my thinking.

This exercise is relatively simple, yet being forced to sit down and jot ideas down on paper can uncover many red herrings, and ensures your thinking is valid.

If you are targeting Existing customers, it is important to define a purpose too, such as:

• Customer Support;
• Sharing information;
• Increasing up-sells;
• Increasing satisfaction;
• Building community; or
• Increased referrals.

Now, you have a (basic) macro view of our organizational channels and tactics. Another exercise I often follow is digging a little deeper on my audience, in a macro sense. Are you looking at existing customers, or trying to find new ones? How will you find new users? This quick macro view helps you manage all channels your organization is running, and find potential synergies / overlaps among them.

If you are targeting New customers:

If you are targeting new customers, firstly ask whether they currently use this channel:

• If yes, why? How often?
• If no, why not? Where else are they? Fish where the fish are. If your target market is not already on Facebook don’t try and drag them there. It takes a lot of time and effort to bring people to a new channel, why not just meet them where they already are?

How will we attract users to this channel?

As much as I’d love for ‘build it and they will come’ to be a viable strategy, it is not. We need to sit down and define how we will funnel our target market into each channel. Established channels can serve as viable tools to populate a new one.

Finally, metrics for success and objectives cannot be overlooked. Your metrics and objectives should correlate, with the objective being a defined volume of your metric. For example, if your purpose for a webinar was lead generation, the metric may be qualified leads, with the objective being 10 qualified leads. If your purpose was awareness, your metric may be unique visitors with an objective of 1,000.

It is important to note that there are many metrics that should be measured which lead to your objective metric; in the lead example above, unique visitors will lead to e-mail subscriptions, which will lead to qualified leads. Often, these metrics work together to form a funnel, which I will write about later in the month. For this exercise, I frequently list the key, last-touch metric that is required to reach my goal.

Once you have this completed table, you will that:

1. You have been forced to think through each of your planned tactics, and have likely changed directions once or twice based upon it (the why); and
2. You now have a nice table outlining everything you are working on. As your organization scales, it is easier for new workers to pick up where you left off.

I hope you found this one helpful! It is an exercise that, as mentioned, I often use.

This year I’ve been a little less visible with my speaking. It’s 100% intentional and due to a new rule I’ve self-imposed to curtail my speaking engagements, speak less panels. So, why?

Panels are general

I’m not saying all panels don’t add value. But, I find the incremental value is small.  We each have about 10 minutes of airtime. It’s a difficult tempo to get in when you have a few, 3-5 minute bursts with the microphone. In that time I can provide an opinion, a basic fact and generalize a trend. I understand this type of content is not for everybody, but, let’s be honest here. Most of us web panelists are saying the same thing. That’s gotta stop.

If you are new to an industry, panels are great to get a quick catch up. Most of the faces I see at my panels I’ve seen elsewhere, they are certainly not new.

Planned, Deep Content

One of the things I try and do in a panel is provide value. Because most panels in my industry are becoming general, it’s more and more difficult to do.  I’d rather provide something deep and sustained. What I can’t do on some panels is deep dive into the why’s, hows and intricacies. I like to pull out real numbers, graphs and trends. I like to pause and ensure the audience is caught up, and keep information relevant. The problem is, this is hard to do. Hence, most of my newer engagements are solo or co-presenting.

A little more relevant

Sadly, working with me is like herding a cat. It seems many other panels are too. In response, there are generally two types:

1. Those that go completely off the rails, with speakers spending too long discussing something irrelevant, or who fail to stick within a solid topic scope. It’s hard to keep a panel relevant in these cases.
2. Those that are overly transactional, where speakers quickly chime in an opinion, give a soundbite and move on. I appreciate what the moderator is trying to do here, namely, avoid no. 1. However, without some personality and fun the panel also becomes ineffective. It’s also important we remain responsive to audience questions.

Either way, both 1. and 2. miss the mark of audience relevance. There needs to be some degree of live changing, but we need to stick within topic.

I barely speak

Yes, this one is absolutely self-promotional, but let’s be fair here. Most panels are solid for branding and don’t necessarily generate sales leads. I love to come and speak / help people out, but if I’m there to brand myself I’m there to brand myself. After welcomes and intro’s, each panelist normally gets about 10 minutes of airtime. I’d much prefer more to drive my branding goals forwards.

We bore the audience

Arguing on panels can be great fun, but it’s rare. Audiences get bored of rapid fire questions and answers. Generally, questions have been pre-prepared for panelists, meaning we are not switching it up live to respond to their mood, or are too busy interacting with each-other to interact with the audience. Additionally, there is always that one speaker who is a distant Vogon relative, spends too long making his points or uses words nobody understand. Either way, that person loses us. That’s why I’m preferring to speak solo, where I really can interact.

Panels are not all bad

I’m not bashing all panels. Not at all. I’ll continue to speak on some, but reject far more than I once did. Sadly, I think we are getting lazier and lazier with events, more names (panelists) draws more audience and nobody has to be rejected. If I feel a panel has been constructed in a way that:

1. Has a narrow enough topic to provide value;
2. Has the right speaker-set to add value;
3. Is constructed in a way to remain fluid with the audience; and
4. The speakers have a chemistry;

then I may consider it. I’ll continue to speak at these events. The rest, sadly, I will walk away from. That being said, nothing beats a fiery panel. Maybe I need to play good cop bad cop with myself.

Startups are high risk. They are hard. At the early stages, it’s 2-5 people against the world with constrained resources. You need to grow to stay alive.

Perhaps one of the the hardest things with startups is avoiding common pitfalls. Over in Quora there is a brilliant discussion thread on common mistakes startup founders make (though any business or manager can take note). Below I’ve summaried the key, recurring points the community identified.

Im hardly the writer of these points, just the curator. I’ve acknowledged the contributors at the end of the post, I suggest you follow them.

Undervaluing Management Competency: Many startups and expanding businesses underestimate the difficulty of team management, general management and strategy. Being a ‘grown up’ manager is not always fun, but often necessary to move forwards as a business.

When management competency is undervalued, it’s not uncommon for key decisions to be made in haste. Herein lies another important part of management competency; ensuring that are made are informed and logical.

Lack of Strategic Focus: Similar to management competency, a strategic product, market and company focus helps drive and move things forwards. Having this focus, and blocking out tasks and expenditures that do not add to achieving this goal, can be difficult to do but is often key to driving a high growth, lean company forwards. (Note: A risk here may be missing easy pivots, there’s a downside to everything).

It’s also important to remained focused on the task, market and problem at hand; losing this focus can make task prioritization a nightmare. It’s also important to understand what tasks matter right now (chasing TechCrunch is fun, but maybe not the best thing right now).

Inconsistent Hiring Quality: Staffing has always been an issue for startups. It’s not uncommon to go from heavy resource constrains to having the capital for hiring very quickly. It’s very important to not rush in the hiring process or in dry spells. Instead, wait for the right people every time. The short term gain of a quick hire is not worth the long term ramification.

Overvaluing the Idea: As we all know, execution is worth more than ideas. Ideas are cheap, especially in technology. Focus on execution and iteration over perfection. It is rare that your ideas will win the war.

Poor time management and prioritizing: Some early stage companies struggle to differentiate between what is important and urgent, what is an opportunity and a problem, etc. It’s important to manage your time tightly, especially as an early stage CEO, and frequently prioritize tasks based on urgency, importance and impact.

Poor positioning: We all love talking about lean startups. It’s important to position your company around solving users problems, not technology problems.Positioning can also come down to communication. Externally, it’s important to have the right question set to lead your sales process. In other words, ensure your external messaging is correct.

Passion vs Process: Gary Whitehill points out that as a business grows, in some cases, the founder may not be the best person to continue running the business. Whereas a founder has unwavering passion, a vision and can execute under ambiguity the business manager should be process and protocol driven. As a company grows, this becomes key.

Keeping people motivated: Startups can be tough. You are often struggling to find revenue, fighting big corporations for users and have only 20% of the resources you need to do either. The people you have should be there because they love your mission. Focus on a strong culture and keep these people motivated; they can probably work half the hours for double the money in a larger corporation. Additionally, motivated people work faster and produce far better results.

User Validation: Focus on active user feedback to ensure you are getting this right. You may like your idea, but get your potential customers to say the same thing. It’s also important to ensure your are validating with the right people; if they are not going to buy your product, they are not the right people to validate with.

Goal setting and low hanging fruit: As mentioned earlier, it is important to have a strong strategic focus. When laying out tactics, ensure you are setting short, mid and long term goals. Short term goals should include plenty of easy wins, or low hanging fruit. These short term goals can also attribute to motivation.

Obsessing over competition: Understand who your competition are and what they do. Try to understand where they are going, but don’t obsess over them. Your obsession should be focused on your own product.

Resulting: We love testing, but ensure the you truly understand the cause of your results. Misattributing cause and effect can be terribly dangerous.

Running out of cash: Of course, running out of cash is a big mistake. More importantly it is often a symptom of one of the earlier described problems. Keep an eye on your cash, especially if you are pre-revenue. It’s common sense, but to often forgotten.

Of course, this post would be nothing had Quora users not contributed to such a brilliant discussion. In no particular order, check out Siqi Chen, Adam Rifkin, Fahd Butt, Keith Rabois, Gary Whitehill, George Kellerman, Nabeel Hyatt, Chadwick Sakonchick, Brandon Smietana, Gregory Magarshak, Evan Rudowski and Gary Stein. You can also find me on Quora as Alex Blom.

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