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Posts by Mark Tweedy

Mayfield Fellows Rule the World



It turns out there really is a secret society of the incredibly rich who are succeeding in altering the course of history. This shadowy cadre of young guns have more power than the IMF, the Bilderburg Group, and the Knights Templar put together and they operate beneath the foothills of Palo Alto. They are known under the springtime-and-flowers-suggesting moniker of The Mayfield Fellowship Program. And you just missed the application deadline.

Mayfield Fellows (not to be confused with the nautical-themed Cloverfield Fellows) are Stanford University students initiated into a community of venture capitalists, technology giants, and multi-billionaires, like a frat devoted to world domination. For example, this week offers a fairly good window of what it means to be a Mayfield Fellow. Kevin Systrom (’05 Fellow) and Mike Krieger (’07 Fellow) put together a little iPhone app called Instagram.  Now, just about everyone, including your crazy cousin, has built an iPhone app by now and most of these are on page 2000 of your search results for free games.

Systrom and Krieger, who have been in business for just 15 months and hired only 13 employees, just sold their app to Facebook for $1 billion. Yes, that was a letter “b” as in “But… how?” Systrom is pocketing $400 million and those unfortunate 13 employees now have to look for jobs and divide up $100 million amongst themselves. No fighting, kids.
Call it luck, timing, absolute financial insanity, or another day in the Fellowship. Stanford University offers the 9 month Fellowship every April to 12 undergraduates. There must be some ritual significance to the number 12. The program offers courses on technology startups, and internship at one of them (Systrom landed Twitter) and ongoing mentoring activities. It now appears that “mentoring” involves numbers with 0’s and commas.

In an interview with FastCompany magazine last year, Systrom casually mentioned that he met Mark Zuckerberg eight years ago, and was offered a job at Facebook to work on their photos. The thing is: those sorts of things don’t happen outside the Fellowship.
Systom’s connections also include Marc Andreessen, who created the world’s first web browser by in ‘93. Remember Mosaic? Andreessen hopes you don’t. Now he’s known mostly as an investor and one of Facebook’s early financial supporters. Andreessen wrote a check to Systrom for $250,000 a year before Instagram was born. This supports the theory that all startup ideas are crazy if you pitch them to the wrong people.
Systrom really is changing the world. Instagram’s digital photo filters are the first technology that can make your lame pictures of last night’s dinner actually look cool. Valuable but worth a billion?
Andy Ihnatko at the Chicago Sun-Times said it best:

My best theory was that Mark Zuckerberg stood to inherit a trillion dollars from his eccentric uncle, but only if he could spend a billion dollars in less than an hour without acquiring any tangible property.

The real answer may be a) that Instagram mastered mobile, which is where Facebook needs to go; b) Instagram brings 30 million users and a feel-good vibe that Facebook lacks; c) Facebook had the money and not the time to make their own; d) dropping a cool billion makes them look like a player in the days before their IPO when public perception means everything. My theory is that by granting a large chunk of that billion in Facebook stock, they are keeping the money within The Fellowship. In any case, all their scheming may come to naught with the coming of the insect overlords.
A list of successful Mayfield Fellows on Quora is a great place to start a serious investigation or Fringe-style paranoia session. If you are merely curious, take a look at current crop of Mayfield Fellows here in these halcyon days before you will be obliged to kneel before their massive golden statues
*******
Instagram logged 26 photos/sec and other cool stats on the Year in Review.

Posted in Blog

How much is your degree really worth?



cash for degreesMore than half of people in San Francisco county have college degrees, though you’d never believe it if you try to get on the Embarcadero Freeway from 16th Street on a Friday.  The Chronicle of Higher Education offers a great interactive map of the U.S., broken down by county, of people with at least a BA. At 51% percent, SF county about doubles the national average of 27.5%.

But the question is: have all those fraternity rushes and caffeine soaked cramming sessions translated into cold, hard cash? Suprisingly, yes.  San Francisco, San Mateo, and surrounding counties have a median income of $60,000 or more, far above the national average household income of $49,000.  Interesting side note: $49K per house (adjusted for inflation) is now the lowest it’s been since 1996.

This map is a great time sink if you are curious about education and income. For example, you will notice that higher percentages of degrees in a population generally translate into higher median incomes. Richer counties are also generally near major universities, like the Bay Area, Harvard, Yale, Georgetown, Madison, WI, and Boulder, CO.

You might wonder why these high income counties are clustered around university towns. Because people come from all over the country to go to college and scatter again after graduation, the median incomes seems like they should be more evenly spread across the country. But according to Forbes magazine’s list of the nation’s richest communities, university towns tend to hold onto wealth because of the large number of government employees in these areas. Also, successful startups like Google tend to locate where there is a good supply of highly educated university students who will work for popcorn and beer.

Another research rabbit hole you can go down is the county of Elko, in the northeast corner of Nevada, where only 15% of the population has a college degree but incomes are spiking over $100,000. What is the secret of this wealthy community hidden in the mountains of nowhere? It turns out it really is what you think. Elko leads the nation in gold mining, with another boom cycle that took off in 2009.

panning for gold

But if you don’t want sift dirt all day in a freezing mountain stream with a mule and a tin of boiled beans, your best shot at making a living is higher education. According to Census Bureau data, here are average earnings by degree:

  • Advanced degrees: $83, 144
  • Bachelor’s only: $58,613
  • High school diploma: $31,283

Of course, this doesn’t include considerations of debt, which some are predicting will be the next debt crisis on par with the collapse of housing values. This weekend, the San Francisco Chronicle reported that student loan debt just hit $1 trillion. This is affecting both students, who are now more reluctant to make big purchases or are unable to do so due to back credit, and parents who dipped into nest eggs and saw their retirement accounts vanish due to falling home values.

Overall, people with a college education bring in an average of $650,000 more over a lifetime than those with just a high school. Reducing student debt, perhaps by working for a startup for popcorn and beer, appears to be the critical factor in success after graduation.


 

Posted in Blog

Are online classes killing traditional universities?



This week the Wall Street Journal profiled the launch of a new online university from a company based in San Francisco.  New Charter University will offer tuition of about $800 per semester for as many courses as a student can finish. Including books and fees, people can obtain a bachelor’s from home for about $6,500 over four years. Students can even prepare for free by joining an online community that lets them access course materials and take practice quizzes.

For comparison, California Coast University is currently one of the lowest-priced online universities at a rate of $150/per credit hour. Degrees average 126 credit hours, which totals about $19,000 for tuition alone — double that for books and fees over 4 or more years. Still, $38K is a great deal compared to a brick-and-mortarboard university like the University of California. Their website recommends that instate residents prepare to pay over $120 K for a 4 year degree.

So what does a traditional university have to do to justify $120 K over $6 K to study in your pajamas?  Many already say they can’t. (See my blog on Peter Thiel’s mixed message on the value of university education.)

Gene Wade, CEO of UniversityNow, which created of New Charter University, said, “We wanted to create a high quality university where monthly tuition payments are the size of a cable bill, not the size of a mortgage payment.” One of the ways they are able to achieve this rate is by eliminating student recruitment costs and financial-aid administration. That’s right, no financial aid, but the difference in cost more than makes up for the loss.

In addition, though interactions are not face to face, that is rare at traditional universities as well due to the professor to student ratios. New Charter University reports that faculty can interact with students an average of 32 hours per week, compared to ten hours at a traditional university on a slow week. Students also get targeted support and customized instruction more in-line with tutoring and absent from lecture halls.

So does this mean enrollment in “meatspace” universities is falling? Not by a long shot. The National Center for Education Statistics reported that enrollment has increased 38% overall over that past 10 years.  For people over 25, enrollment has boosted by 43%.

For online courses, enrollment is actually slowing down. The Babson Survey Research Group’s annual survey, “Going the Distance: Online Education in the United States”, announced last year that “The slower rate of growth in the number of students taking at least one online course as compared to previous years may be the first sign that the upward rise in online enrollments is approaching a plateau.”

Your guess is a good as mine to explain this trend.  The report suggested one obvious reason, “There remains a consistent and sizable minority that see online as inferior.” That minority includes most employers and HR departments. This may just represent slow adoption as online universities are fairly new in the ancient world of education.

Some other reasons could be that students want to be around other students for the college experience, that barriers to exit are much lower when you study from home, and that most popular professors prefer traditional universities.

Regardless, online universities like the University of Phoenix have now added physical campuses as traditional universities add more online classes. But it’s likely that this new super low-cost option will make some dramatic changes in the landscape of higher education.

 

Online vs Traditional Universities

Posted in Blog

Why does the Bay Area lead the country in innovation?



A report just released by the Bay Area Council Economic Institute with Booz and Company is attempting to answer that question definitively.  The report is called The Culture of Innovation: What makes San Francisco Bay Area Companies different?  And the answer comes down to talent.  Not talent itself but the cycling of talent that only the Bay Area’s culture can create.

The Bay Area has dominated the field of innovation for quite some time. One measure of this is in terms of patents granted. The Bay Area leads the nation in total patents issued in 2010, percent of total patents issued, and in number of patents per million inhabitants.

One of the critical factors that supports this culture of innovation is infrastructure. By infrastructure, the report is referring to the top five laboratories and the five best research universities in the nation:

National Laboratories

  • Lawrence Livermore
  • Berkeley
  • Sandia
  • NASA Ames
  • SLAC (Stanford’s Linear Accelerator)

Top Research Universities

  • UC Berkeley
  • UC San Francisco
  • UC Davis
  • UC Santa Cruz
  • Stanford

In addition to (or because of)  these resources, a number of private companies have placed their research and development arms in the area, such as Agilent, Apple, Google, IBM, Intel, and Lockheed.

According to the report, the depth and diversity of all of the many research efforts in the region provide a core of basic science and technology, as well as a large pool of faculty, students, and scientific entrepreneurs who staff and build companies based on these technologies.

One result is that the Bay Area has captured between a third to one half of all U.S. venture capital dollars for the past ten years. Other areas of the country, such as Austin and Seattle, have attempted to recreate the Bay Area’s results with limited results.

So what is the secret?  The culture of entrepreneurship, which has proven difficult to reproduce.  Some features of the culture of innovation are:

  • Failure is not a bar to success.  The area is filled with
  • “Serial entrepreneurs”, many from overseas, who mentor new generations of companies
  • The spirit of acceptable risk
  • Willingness to invest in future markets
  • Creation of new paradigms in business

These factors are present to a larger degree and throughout the companies in the Bay Area, compared to the rest of the nation.  This turned out to be a better predictor of innovative success than money spent on R&D.

What made the difference, the report concludes, in top-down culture that supports innovation strategy as part of its overall business strategy.  Bay Area companies constantly seek new sources of ideas by nearly constant hiring. Entrepreneurs are always in need of fresh talent and ideas in areas like product development, the way the business is run, what the public wants, and even in imagining what is possible.

Video:

Posted in Blog

Ooops. Uber-investor and PayPal founder Thiel does a 180 on the value of college



Peter Thiel

Peter Thiel (source: wikimedia.org)

This is going to take some explaining. Peter Thiel, the cofounder of Paypal who has racked up billions in betting big on startups like Facebook and LinkedIn, used to dis college education.

Last year, he created the Thiel Fellowship, which finds 20 star students under 20 and pays them $100,000 each if they agree to drop out of school to work for him. In a piece for the New York Times, he said college is “overvalued.”

In education, you have this clear price escalation without incredible improvement in the product. At the same time you have this incredible intensity of belief that this is what people have to do. In that way it seems very similar in some ways to the housing bubble and the tech bubble.

Well, this fall San Francisco area students will be able to put up their hands and question the new professor on exactly what he meant by that. Thiel will be teaching Computer Science 183: The Startup at Stanford University this spring.

Class act

If you didn’t know better it would make sense. Thiel has a bachelor’s in Philosophy and a JD from Stanford. Many successful people come back to teach a business course at their alma mater out of pride (or revenge). But in this case, the class itself seems to be a complete repudiation of his earlier advice.

Stanford class registration documents give this class listing: “Inner accounts from the early days of startups including PayPal, Google and Facebook will be used as case studies. The class will be taught by entrepreneurs who have started companies worth over $1B and VCs(venture capitalists) who have invested in startups including Facebook and Spotify.” Speculation among students is that there will be celebrity guest speakers, maybe even Mark Zuckerburg.

It would seem that this would be a great value for students, whether Thiel was teaching it or not. Maybe that’s the real lesson here. The media loves fights and is trying to make this into a reality TV show with Thiel as the obligatory loud-mouth hypocrite. But Thiel is simply making a valid point about how entrepreneurs like Steve Jobs, Michael Dell, and Bill Gates had to drop out in order to break into new markets.

Graduate earnings

The truth is that most drop outs don’t make it big, most start-ups fail, and college education does make a significant difference in lifetime earnings for the majority of us, shown in this recent data from the U.S. Census Bureau.

The real hero of this story is Stanford, which proves itself to be open-minded enough to book a valuable course with someone they fundamentally disagree with on the value on a degree. Everyone, not just entrepreneurs, need to learn how to do that.

Videos:

Thiel on his role in the movie The Social Network and education in California:

News about the fellowship that pays smart kids to drop out: http://video.nytimes.com/video/2011/06/02/business/100000000846061/100k-not-to-go-to-college.html

Sources:

Reuters
The Atlantic Wire

Posted in Blog