Congrats!!

Congrats to jeff and the team at participant productions, and to laurie david, for An Inconvenient Truth's big win at the Oscars last night!!

If you haven't seen the movie yet, see it now!

then check out http://IsTheWorldToo.HOTorNOT.com and donate!

james

is jetBlue apologizing too much? I think not.

I was impressed by the video of jetBlue's CEO taking responsibility for the problems customers faced a few weeks ago.

Putting a human face to the problem and taking responsibility reminds people that his company is not comprised of robots.. it is comprised of real people who make real mistakes. Everyone makes mistakes, so the situation becomes instantly more forgivable. Either the guy is a great actor, or you can tell that he cares.. and that matters a lot. One thing I learned from all my various gigs doing customer support is that people are willing to deal with problems.. they already know the world (and your product) are not perfect... but the one thing they aren't willing to deal with is feeling like you don't respect them or their concerns, and that you don't care. Making your customers feel this way is certain death for even the biggest companies.

Kudos to jetBlue, I only like them more now.

I was surprised, though, to read an article where some sort of aviation expert says the following:

"He has to stop apologizing," said Boyd. "It's over... He didn't piss off every passenger in America. He only pissed off 10,000 people. In New York, that's nothing."

This guy may be an aviation expert, but he is clearly no marketing expert. Sure, maybe the issue would go away faster if the CEO stopped apologizing. But that's exactly the point. The CEO isn't trying to sweep the issue under the rug, he's trying to address it. He's owning up to things... and every time he does, I believe it has a POSITIVE effect on the company's image. He is in effect turning what would have been a disastrous crisis into an opportunity to show the world his company cares and is a company worth liking. He's turning lemons into lemonade, whether intentionally or not.

The statement that "he only pissed off 10,000 people" is an antiquated viewpoint, one that shows this "expert" does not understand a world that includes the Internet. This expert doesn't understand that in today's world, 10,000 people is plenty enough seed for a message to spread across the Internet.

HOTorNOT launched when I sent an email to 40 people. 40. That's it. From that 40, the site grew by word of mouth and we estimate that easily over a hundred million people have actually been to the site since then. If the expert doesn't realize that 10,000 people who had crappy experiences is enough to ruin the company's reputation nationwide, he needs to stop acting like a bigshot and giving quotes to reporters.

With the Internet, you can't sweep things under the rug anymore... and trying to do so will only expose you as a company that fundamentally disrespects its customers. A company has nothing to lose in being more transparent, and potentially a lot to gain. There is a book called the ClueTrain Manifesto that addresses topics like these. It's definitely worth a read.

The next time you need to go to NY, I recommend you try jetBlue if possible. Not only are their prices typically better and the rides infinitely more bearable because they installed personal Satellite TVs into EVERY seat on the plane, but the people in the company actually give a damn.. and that goes all the way to the top.

Customer Service is a good sign..

... of a good company. not just because it makes customers happy, but because it shows a company CARES about their customers. They understand who they are building for, and i'm sure sensitivity to customer's feelings extends down to the engineers building the product. Often times, the things that make a product great are very low level details that arise as a result of the engineer giving a damn.

I know I said once already how bullish i am on the Wii.. but reading This Blog Post makes me even more bullish on the company.

How to stay happy

I think about happiness a lot, and more specifically, how to manage my own.

I came up with a formula, which i'm sure millions of others have thought of too, and it's perhaps wrong, but.. i find having a simple model enables me to manipulate my life to maximize happiness.

Happiness = Reality - Expectations

It's a lot easier to manipulate your expectations than reality. So basically for everything I do, I try to expect it to fail and result in disaster. Sometimes it does, at which point reality matches expecations and i'm feeling neutral about it. If I succeed, then it is more of an unexpected pleasure and I am happy. Of course I'm human and my expectations get raised a lot, which leads to unhappiness... but I try to keep it in check as much as possible.

Set the bar low, you'll win every time.

*NOTE: getting some flak for this one! keep in mind, this is how i've modeled MYSELF. I'm not saying it works for everyone... just for me.

Happy (Chinese) New Year!

It's the year of the Pig!

According to Wikipedia: "In China, the Boar ( 豬 ) is associated with fertility and virility. To bear children in the year of the pig is considered very fortunate, for they will be happy and honest."

(The New Year starts on 2/18..)

Wiii!!!!!!

I'm kind of known for being impulsive sometimes. That includes investing in stocks that I think are gonna be hot, for no fundamental reason other than I see their product and think it's gonna be HOT.

Last year when the Tickle Me Elmo came out, after seeing the video on YouTube, I immediately bought 4 units on amazon's marketplace and bought a ton of stock.. indeed, Mattel had an awesome quarter, not just with elmo but with barbie too, and the stock did really well.

I spent this past christmas at my brother's place, and saw his kids get their Wii.

Unreal. This thing is AWESOME... I still haven't gotten one yet, but I NEED one. Seriously, this thing is gonna make gaming SOOO much bigger. I used to play computer games back in the late 80's/early 90's, but along the way the industry got taken over by hardcore gamer types. What happened to Tetris?!? and Pacman??! and other games that were simple and easy but fun and addicting too??

The Wii is it. Innovative, FUN controllers. Simple games that are fun to play with your friends. They even allow you to personalize the players, little characters they call Mii's (pronounced Me's). Brilliant.

10 minutes later, I placed a market order set to buy (Ticker: NTDOY.PK) . So far, the stock has gone up, then has dropped back down a little bit. I'm not worried, this thing is gonna be huge.. I have no doubt about that. Normal people like me are gonna get Wii's. Hardcore gamers are gonna get xboxes/ps3's AND Wii's.. Within a few years, we'll all have one.

If you haven't seen it yet, find a friend who has one and ask to play it.. For all you fellow non-hardcore-gamers, it'll be like the first time you saw the Atari 2600.

For those that haven't seen how it is different, here's an old trailer video:

Best Widget EVER

Last Summer while in China, I missed (until 3 months later when cleaning out my inbox.. a futile effort) an email from my friend Ann. She was raising an angel round for her startup endeavor, Maya's Mom. It is a wonderful idea of a social network for moms, and had I gotten the email in time, I definitely would have chipped in.. It's a great idea and Ann is a smart gal.

Anyhow, I was just surfing the web and decided to check up on her site to see how it is going, and I came across a widget they have that is, IMHO, the most awesomest widget I've seen so far! It reminds me of the opening sequence of Kindergarten Cop. Here's it is:

Get the Kidism Widget for Your Blog

Digital Goods

This post is actually a response I just made in Danah Boyd's blog, where she discusses Facebook's virtual gifts program I found her post by way of Jeremy Liew's post about her post.

---

I'm not sure we were the first to implement virtual gifting in the States, although we did come up with the idea of doing it on our own (hadn't heard of cyworld at the time). I think there was a site that executed on it before us, but they tried to establish a whole community around gifting, perhaps a little TOO strongly.

The way we saw it was this: There are 2 use cases we identified where somebody would be interested in purchasing a digital good.

1. A purchase for yourself, in order to "pimp your page". The utility gained from this is one of SELF EXPRESSION. Of course this model is greatly enhanced if you close the system and don't allow people to just upload their own goods, but even in that case, you could have an "official area" too.. where people who put their digital goods outside it just look.. lame.

In this case, scarcity matters, but creating scarcity is probably best achieved not by pricing high, but rather by creating a large catalog and only allowing x items of each kind to be claimed.

The purchase is about users expressing themselves and wanting to feel differentiated from others. Spending $20 on an icon that anyone else could have spent $20 on is NOT differentiating. I believe the price should be lower in this case. The platform should concentrate on just having a billion items for sale.

2. A purchase from one person to another. The utility gained from this is one of SIGNALING. What is it you are trying to signal? In the case of HOTorNOT's virtual flowers, one is trying to signal extraordinary levels of interest. A user on the site can say "yes i'm interested" to every other person on the site because it costs nothing (but time) to click "yes" on people's profiles. However, it is presumed that money IS a limited resource. By spending money in order to purchase a flower, becaues the # of flowers I can afford is finite, it signals to the recipient that S/he is very very EXTRA special. So we chose to price the flowers high.

If the flowers were cheap, the system would be rampant with them. Girls would receive them from all over the place. They would DROP IN VALUE, because it is natural human instinct to value things that are scarce. Another thing we did to increase scarcity was have flowers "die" after 2 weeks.

So basically, because they're so expensive and less people are willing to send them is what makes someone who RECEIVES them DIFFERENTIATED. The flowers have REAL value to the receipient, and therefore real value to the sender who is gonna get props for sending them.

In fact, the signal or "gesture" is only one part of the value of our virtual flowers. The other value is the fact taht flowers are displayed on the recipient's homepage.. Not for the recipient to see, not for the sender to see.. but for EVERYONE to see. This is the equivalent of someone putting flowers on her desk when s/he receives them at work.. It's BRAGGING. and people like to brag.

Sending real flowers in real life has one added benefit that we could think of.. the value of the intrinsic beauty/smell of the flowers. Capturing 2 out of 3 online seems to be good enough.

We found, last time we ran the numbers, that sending flowers increased the likelihood of a "double match" on our system by 4x.. meaning as a signal, they are well received and really work.

If we had priced them low, the flowers would have been worthless to everyone.

Here is what our flower ordering page looks like, for those interested:


click here to see a picture of HoN flowers

This is the kind of stuff we think about all the time. If you enjoy thinking about "social engineering" (what I call it), like to create cool products, and are a coding MACHINE, see our jobs page!

On Having Balls, Part II: Staying Hungry

Today I had coffee with Albert Lai, the founder of a site called bubbleshare. It looks like he sold the company and has repositioned the site to be more like the increasingly dominant service Slide.

Albert mentioned that he gave most of the money he made from selling his first company to his parents.. A noble thing to do, but then he surprised me by adding "I gave them the money because it was of course enough for me to never work again, but you know.. i wanted to stay hungry".

..and that reminded me that I still haven't posted a follow up to a previous blog post I made where I said I'd reveal a bit about what is going on at HOT or NOT.

Albert's words impressed me. A Lot. Few people have the guts and the self awareness needed to manipulate his/her situation like this. It's something that Jim and I realized that we needed to do with HOTorNOT someday, and we actually acted on this year.

Running a cash cow in Silicon Valley is a very hard thing to do. By mid 2003, HOTorNOT was doing about 4 million in revenue, and it was still just the two of us running the site. The problem you run into is that the types of people who build successful cash cows tend to get bored and tired of running their sites after 3-4 years. The best example I have of this is my friend Andrew Conru, who runs the FriendFinder Network. Andrew is rumored to make over 100 Million a year in earnings for himself, and is incorporated as an S corporation (meaning the money is only taxed by the government once, not twice as is the case for the more common C corporation shareholder). Over the course of the past 11 years, he has gone through various managers and taken time off from the company to be an engineering professor.

There are a bunch of other notable S corporation websites out there making money, I've learned over the years.. Weather Underground is one too. I'm sure Markus Frind's Plenty of Fish site would be one too if he were in the US.

So.. what happens is this. At some point, you decide "ok, i need someone else to run this thing, but I don't really trust anyone to do it but people like me."

So you go out and get the smartest guys you can. But because you know these brilliant people are not going to want to stick around (especially because they see how much work they are doing, how much work you are doing, how much money they are making, and how much money you are making..). So you realize that compensation structure becomes a REALLY big issue. Even Andrew has had problems with this issue, despite the fact that he is probably (presumably) able to pay someone millions of dollars per year in cash compensation to do a good job of running his company.

And that is the natural, first-instinct way to address the problem. "Well, maybe we can pay them more to make them happy."

It never works. At least not here in Silicon Valley. Engineers at HOTorNOT last year were making 2-3x normal salaries, yet they were not happy... and we really couldn't expect them to be. After all, the only people we trusted with our baby were people like us.. and god knows I wouldn't have stayed here for a high salary. At their age (23), I wanted risk and potential reward, not a steady job. I make a big deal of telling people that when I finished my MBA at 25, I turned down a job that was gonna pay me about $180k in the first year.. despite the fact that I was $50k in debt.. to instead earn no paycheck and give entrepreneurship a go. These are the type of people you trust to continue running your site in "high profit margin" mode. Big company types won't do.

Simultaneously, watching your company continue as a cash cow can be painful. It was for us, at least. Sure, it was continuing to make a lot of money for Jim and I, but it was stagnant and boring. The downside of running a cashcow is that you don't want to do anything substantially different to make it better. The idea is that you milk the cow until it is dead, and hopefully invest that money into new things. Changing anything could screw the money machine up, so you tend not to take any risks. But it almost physically hurts to see the thing you worked so hard on be put into this mode, because you know that in this mode, death is inevitable. Nothing last forever without changing with the times. (Actually, nothing last forever, period. But doing nothing surely accelerates that process.)

So late last year, Jim and I took a look at our situation:

1. The site had already made tens of millions of dollars. That level of cash should make us more willing to take deeper risks with it now.

2. Rather than continue to milk the cow, we'd both prefer to rejuvenate the brand and do cooler things with it.. for fun, for glory, for reputation.. but mostly, for our employees. Because this time, we would give them a cut.

It seemed obvious what to do.. It's like going to Vegas, putting a dollar on the table, and winning $100. What do you do next? You pocket $80 and let the last $20 ride on another, bigger bet.

But how do we make sure we're hungry enough to give it a good shot? After all, after running a cash cow for 6 years, one gets pretty soft, right?

We did some stuff to make ourselves hard, just as Albert did. We:

1) Converted the company from an S corporation to a C corporation. This is not reversible any time in the near future, and changes the dynamics of how willing we are to spend the money we are making.

2) We stopped all dividending of profits. This money is now better used being reinvested into the company. What this basically means is that my income for the year just dropped from "x million" to "ZERO". Talk about taking a paycut! Additionally, since I am working here again, I took a salary of $24 a year. (I wanted it to be $1, but apparently that created a problem for our payroll vendor, so it became $1 per pay period)

3) We created a stock option plan and have started giving options to employees.. to make THEM hungry too. As part of this, our engineers took a paycut back to market rates. The fascinating thing about this is that THEY ASKED FOR THE PAY CUT. They understood that in order to deserve the reward, and in order for them to feel the need to work smarter/harder, they needed to take some risk. For guys that just turned 23, I found this to be incredibly mature.

Suffice it to say, I am feeling hungrier (and broker) than ever. It's an interesting thing because it's valid to point out that I have some money in the bank. But the truth is, when I first started entrepreneurship, I had nothing to lose. That made being an entrepreneur easier. Now I am gambling the largest asset I have, meaning now I have a LOT to lose. I've never felt this level of pressure before, and I have to say, it can be pretty nervewracking at times.

But we're on a mission. We have something pretty neat that we want to build, and we're willing to risk a lot to get there... and we're hungry as hell. Maybe we'll succeed, and maybe we'll fail, but at least we're going for it.

I'd like to end this post on one of my favorite quotes (and one of the few not by Oscar Wilde :) ).. It's by Pablo Picasso. I think it's fitting:

"Every Act of Creation, Is First an Act of Destruction".

We think it takes a lot of balls to destroy what you have in order to make room for the new. Even if we fail, at least we gave it a shot. But hopefully, we won't.

PS HOTorNOT is hiring!! If you or anyone you know would like to actually have fun at work,see our Jobs page! :)

Understanding when Entrepreneurs step down as CEO

Valleywag has a post today about Reid Hoffman's stepping down as CEO. They believe it is just spin when people are "kicked upstairs".

The truth is that most Entrepreneurs make crappy managers. They have the ideas, and the passion and energy needed to start something from scratch and get things moving.

Most entrepreneurs not only suck at taking the company beyond that, they HATE having the responsibilities of running a growing organization too. Most entrepreneurs like things small, when they can have an idea and have it implented by the end of the day.

As far as I know from discussions with Reid, I imagine Reid is quite happy about being "kicked upstairs". Valleywag speculated in the past that Philip Kaplan (PUD) was kicked out of the CEO spot at Adbrite.. But I know for a fact that Philip was all for it, and super excited to bring his CEO on board.

My point: Many if not most entrepreneurs dream of the day when they can drop their CEO responsibilities and let someone else have it. At that point, they can get back to the environment that they thrive in.. one where they have nothing to lose and can just have fun again building new things (even if from within the same company). The tough part is finding a CEO that you believe is the right person to replace yourself and take care of your baby.

On designing products

I just posted something to our company's internal blog that I think is worth sharing here.

Living in Silicon Valley, it's common to see people getting excited about technology. That's what brought us all here, after all. But it's easy for people here to start thinking that technology is all that is needed to make a good product, and that simply isn't true.

Here's what I wrote:

"It’s important for us to always remember when designing our product that none of us are the average user. In order to create good products that everyone can use, we have to step outside ourselves and put ourselves in the minds of others, to empathize with the average person. The best products in the world are created by smart people who can think like an average person, and not like an elite techie (or elite media person). "

I believe it is an actual skill, one that can be developed, to put yourself in another person's mind. If you'd like to develop it at HOTorNOT, we are hiring

PS I don't call others "average people" to act like i'm better in any way.. I just recognize that my friends tend to be uber geeky, and are clearly not normal.. Whether we're different in a good way remains to be seen :) That being said, I still watch MTV more than any other channel.. and love it.

What is Gavin Newsom's fate? Let's predict it, HOTorNOT style!

It was recently revealed that San Francisco's Mayor, Gavin Newsom, had an affair with his campaign secretary. There are a lot of questions about what impact this will have on the rising star's future political ambitions.

I have a silly (but true?) theory about this. JFK was supposedly a womanizer, but the women he chose were HOT, like Marilyn Monroe. Clinton, on the other hand, was the target of impeachment proceedings for his antics.

My theory is that people are willing to tolerate and forgive a politician's indescretions if they can imagine themselves being tempted to do the same thing. If Monica Lewinsky were super HOT, one can easily imagine the amount of temptation Bill would have felt, and one might be more willing to forgive him for it. But since Monica Lewinsky isn't nearly as HOT, it makes it a lot harder to relate with Clinton, and therefore easier to demonize him.

So.. What does this mean for Gavin? If his lover (user: gavintest1) is rated HOT, then we predict his future is fine. If she rates lower than Monica, things look grim for him!

Here's where you can see the data: The HOTorNOT.com Fate of Gavin Scoreboard