Category Archives: CORE Insight Story

MY KRAKEN ENCOUNTER

T KrakenJohn Jonelis

I am sitting with the audience at the Funding Feeding Frenzy in Chicago—a big event for startup companies like mine that need investors to make things happen. I wipe sweaty palms against my suit pants—my turn to present—my turn to make a fool of myself is coming up fast.

I’ve watched two speakers go down in flames. One drew a unanimous KEEP FISHING and the other got hammered with the dreaded GO FUND YOURSELF. I’m not kidding. The judges hold up cards like the Olympics before the digital age. Only 20% of the companies here today will get a fully fundable rating and move on to due diligence with a potential investor.

The panel seems stacked with the most acerbic characters—jaded venture capitalists all, and so far they have not been kind. The last guy came off like Thurber’s Walter Mitty. Will they cut me up with unexpected questions like they did to him? What foul humor will they display when my turn finally rolls around? I remind myself they’re professionals giving their best but I picture those same judges checking their watches while my hopes, my dreams, my life savings, and four years of work sink to the bottom like a ship at sea.

krakenThis same process is happening simultaneously on three stages—the Guppy Bowl, the Piranha Pond and the top level—the Kraken Cave. I find myself here purely based on the amount of money I need to raise, not on my business acumen. Not on my good looks—that’s for sure. There’s a lot of open space in this arena. A lot of people milling around between stages making noise—probably making deals. I’m purposely sitting apart from my team, trying to calm my nerves. There’s nothing more my team can do. It’s up to me now.

My consultant—I call him The Coach, just for fun—helped me build a plan and we’ve started to execute it. The reason we’re here today is to raise extra capital to accelerate the implementation of the plan. I see a window of opportunity and I know it won’t stay open forever. I think back on all the work I put into it. Numbers I thought I’d never come up with. Every question answered. So now I’m ready, right? Maybe over-prepared? Yeah, I tell myself, but right now I need to get my mind off that well-rehearsed pitch and focus outside myself or I’ll explode. I remind myself what the coach said: “Funding is just a milestone, not sink or swim. We have a plan for either situation. Don’t worry about the judges—they’ll treat you fair.” I try to keep that in front of my mind as I watch the third presentation along with the audience.

The guy up front drones on in a monotone. He’s reading his own slides, his back to me. Even I feel insulted by that—why doesn’t he just mail them in? The audience is getting noisy and it’s hard to hear. Hope they don’t do that to me. What is it that he says his business does? I don’t seem to catch it—am I just stupid or what? How does he deploy his product? How does he make money for the investor? He’s spending all his time harping on why the whole world needs him in some desperate way but after all that I still don’t get it and by this time I don’t care.

I think he has it backwards. It’s as if without dollars he’s got no plan. I feel a real strong sense of—what is it? Arrogance. Yeah, arrogance. Will this guy listen to advice? Can he build a winning team? Will he let go of the company at the right time? I don’t think so. The panel seems restless. Now he’s running out of time and flashing through the numbers. PowerPoint slides. Rows and columns. Lots of them. No time to read it all.

Time’s up. The panel asks their questions. The old guy: “How can you say you project 160% ROI? You’d have to be paid for your raw materials.” The speaker confers with a partner. “We’ll have to check our numbers. For now let’s say 80%.” Is this guy serious? What kind of response is that?

The next panelist: “Can you go back to sales?” The projectionist pans through a bunch of slides and finally finds the one. “How do you quantify that volume projection for year two? It seems optimistic.”

More questions. They’re making hamburger out of him. Maybe that’s how they get their jollies—no, that thought is unworthy of me. I stop listening and practice deep breathing. When the process is through, one-by-one each judge holds up a GO FUND YOURSELF card, each with a sharp criticism. Wow, this guy just got tanked. What will they do to me?

I’m up. Please don’t let me be another Mitty.

First my product. I open with a story: “You’re a kid about to watch your favorite TV show when Mom asks if you finished your homework.” Can they hear the tremor in my voice? I see them all nodding so I signal for the first slide and inwardly cringe. It’s a lined page of paper covered with arithmetic problems in pencil—way too many to read. I made it myself to drive home a point but it’s a calculated risk. I notice the audience leaning forward in their seats, not saying a word. I force myself to face the judges. They’re staring at that slide, mouths open. They get it—they really get it. Originally I wanted to talk about technical details but The Coach convinced me to go for an emotional connection and say it from my heart so I came up with this bare-bones visual. I tell another story. I describe my product the way I was taught—so everybody understands. I check my watch—5 minutes. Half way there. Time to show the numbers.

My slides are simple and direct. No cute cartoons but no rows or columns either. They make their point with just a glance. I force myself to look each panelist in the eye and tell myself to talk more slowly. It’s dead quiet and I sneak a glance at the audience. They seem fully engaged. Hey, I’m no public speaker but it’s coming together now. Maybe the preparation is paying off. I move through the projections—capital plan, operations plan, revenue plan. A credible customer coming on board. Risk assessments, industry trends, competitor analysis, management team, how the investor will make money. All quick. All bold. Time’s up and I just squeeze-in the last slide. Now they can draw my blood.

The panelists look at each other and reverse their previous order. The young guy asks why I need two million dollars. I’m ready for that one. The next wants to know how much field testing went on and I’m ready for that too. They’re starting to focus on the product so I assume they accepted my numbers. Then the last guy clobbers me. He wants a lot more financial detail—as if that were possible in five minutes time.

I freeze. My lips are moving but nothing comes out.

The Coach slips me four copies of supporting details, neatly bound. That’s right—I did the whole thing before I wrote my pitch. That’s why I’m in business. That’s why I’ll still be in business whatever happens here. I walk to the judges table and hand each a document. “I know there isn’t time to go into every detail,” I say, “So here it is in black and white.” The moderator calls time and the judge that asked the question actually thanks me. He’s not trying to shoot me down—he’s genuinely interested. Just a regular guy doing his job—not some kind of monster. I let out a deep sigh of relief, thank the panel and wait for their verdict.

It happens fast. Four cards go up simultaneously—FUNDABLE, FUNDABLE, FUNDABLE, FUNDABLE. Wow! I’m so excited, I can’t concentrate on the comments but the tone is positive and I know The Coach is taking notes.

We break for lunch. Two judges and a woman I never met stick close to me. She says, “You hit it out of the park.” These people are asking when I can meet with them. It reminds me of the story Ron Santo told about the time his insulin got out of whack at a Cubs game. The pitcher released and Santo saw three balls coming at him. But he’d seen that before. He swung at the one in the middle and hit a grand-slam home run.

This is a fictional account drawn from a composite of personal observation, experience and imagination. Any similarity to actual individuals is purely coincidental.

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Go to – THE FRENZY

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Our logo proclaims “Chicago is the World.” We believe creativity is spawned by adversity. That makes Chicago a growing center for thought leadership in the world.
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Chicago Venture Magazine is a publication of Nathaniel Press www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link . This is not investment advice. We do not guarantee accuracy. It’s not our fault if you lose money.
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Copyright © 2011, 2012, 2013 John Jonelis – All Rights Reserved
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15 Comments

Filed under angel, angel capital, angel investor, big money, Chicago Ventures, CORE Insight Story, Entrepreneur, Entrepreneurship, Entrepreneurship and Politics, Events, FFF, Funding Feeding Frenzy, Innovation, Innovation and Culture, Internet, Internet Marketing, Invention, investor, Mobile App, Mobile Marketing, new companies

GOOD OUTCOMES

VERBATIM by a very special correspondent, Mark T. Wayne,

as told to John Jonelis

Runners KneesDid you know that, out of the multitudes of people that undergo knee surgery, 7% go bad within a year?* .No, I don’t mean to imply that patients with new knees turn to a life of crime, though some may do so.  There are no numbers whatsoever to prove otherwise. There’s nothing to stop a man once he can run from the scene of the dastardly deed for the first time in years on his spanking new knees. The temptation must prove strong among some folks. Mark T. WayneThink of it. After showing your navy revolver to the teller and receiving your withdrawal, you gleefully sprint—sprint mind you—to the bank exit and the getaway vehicle. It warms my blood to think of all the good done by rehabilitating criminals in this way—allowing a man to follow his true dreams. But I stray from the point.

New_Knees

Saving 100,000 Knees

I mean to talk about surgeries with bad medical outcomes. Legs that won’t bend. Legs that don’t straighten out. Pain that doesn’t go away. Horrible stuff. And that’s after going through the terrible ordeal of surgery and recovery! That drives a man mad.

Let’s talk about how we can put a stop to that problem. Let’s talk about ways we can save a hundred thousand good people every year.Knee

Most knee replacements turn out spectacularly well nowadays and it’s a miracle that so many poor cripples can walk again.  But to my way of thinking, 7% failure ain’t acceptable.  Why do you suppose it happens? 

Would you believe it?  These bad outcomes almost always stem from the simplest of all causes. People don’t talk to each other! Here’s what’s really going on:

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The Doctor Visit

The world is moving so much faster than it did a hundred years back. Long ago, doctors visited people in their homes like gentlemen. You paid with a live chicken or a good dinner, maybe.

No more! The situation has degenerated such that it is utterly execrable.  Such a momentous decision, and today is your first and only consultation with the surgeon.

Nowadays you bring along your life savings in the form of a plastic card and wait at the good doctor’s leisure in a parlor crowded with the sick and infirmed. After an hour or so of whiling away the afternoon so pleasantly, you are curtly summoned by your last name. 

You are led to a small chamber. The door shuts ominously, leaving you alone with your thoughts in a room arrayed with mysterious implements that suggest the application of pain. A strange narrow bed, high as a table, dominates the room and a white runner graces its top as if Thanksgiving Dinner is to be served—with you as the main course.

And indeed, you came here to get carved like a turkey. You want a new knee and you’re desperate enough to go under the knife to get it. So you are left to stew in this hellhole long enough to soften any resolve you may otherwise muster.

Your head snaps back as this demigod, tricked out in a white lab coat, bursts through the door with a rush that puts a crick in your neck. Nowadays, a doctor’s time is more valuable than yours and in a more important way.** . If you can squeeze out more than five minutes of conversation from this highly paid meat cutter, you go home believing you got your money’s worth.

Even the nurse barely utters more than a cursory salutation as she points you to the exit. Her primary function is to prevent you from wasting the demigod’s time.

Perhaps you are graced to receive a heavy pile of printed material too massive and confusing to be of any real use. The doctors don’t read it either.  Nobody reads such slop.  But they don’t hesitate to add to the pile whenever they feel it necessary.

[There are those who say that I am inclined to exaggerate.  Some say that my middle initial “T” stands for Trouble.  I cannot endorse such sentiment.  Slanders on my character like these are uncalled for and utterly ridiculous.  What honest and forthright man can, in all good conscience, make such an outrageous claim?  Let me go on.] 

.Hospital Ward

The Bad Outcome

The next glimpse you get of this demigod is on the day of your surgery—moments before the anesthesiologist puts your lights out. You may not recognize the doctor and mistake him for an orderly or a nurse.

Hours later, you wake in your hospital bed. They make you stand erect almost immediately. A brave man would scream with agony but they thought of that.  They pumped you so full of morphine that you can’t feel your toes.  Whiskey does not answer.  It ain’t strong enough.  By the next afternoon, you’re climbing a small set of artificial stairs, blissfully unaware of any pain.  They do this for good reason.  The sooner and more strenuously you move, the less scar tissue can form.

Naturally the demigod discharges you from the hospital a day ahead of schedule, ostensibly because you are doing so well. The real reason is to get you the hell out of there—to get you out before you contract one of the dread superbugs that plague these institutions.

Then the real fun begins.  Physical therapy.  Weeks and weeks of it.  And your days are full from sun-up till dark.  It’s such a pleasant vacation from the toils of your job.  I recommend it for those of you addicted to extreme sports and for those who love to indulge in a good long binge.  Under the influence of pain killers, you float through the work as if in a dream.  You’re determined to do everything listed in the ten pounds of printed matter—even if you can’t focus your eyes on the letters.  So you cut corners here and there.  You do just a little less than is called for.  Then less again.  Then sleep overtakes you. Maybe you take a day or two off.  Maybe you stop doing your therapy altogether.

You might not see the surgeon again for as much as six whole weeks. When you do, he looks over a hasty X-ray, shakes his head, clucks his tongue, and assesses your attitude with squinting eyes to determine if you’re likely to sue because your recovery is not going well.

X-ray side viewOf course your troubles aren’t the surgeon’s fault. Six weeks ago he installed the spare parts in a workmanlike manner using all his knowledge and skill, just like a good mechanic is expected to do. No, the finger points directly at you. You are responsible to follow orders during the crucial first few weeks.  If only you had done such-and-such on a regular basis, all would have been well.

And perhaps you genuinely tried to read and comprehend those hundreds of pages of medical and legal jargon. But in all the tomes of print you somehow missed the one important exercise that—had you performed it religiously—would have resulted in a life without pain. Now it’s too late.

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Mark T. Wayne

Mark T. Wayne

Ah, but I will permit you to begin anew:

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The Good Outcome

Imagine now that you are considering a knee replacement for the first time. You don’t know where to begin and it all seems so complicated. But YOU have a secret weapon from a company called Wellbe.me.  It’s called the Patient Guidance System™.  They also call her by her initials, PGS. I call her Peggy Sue.  She’s a world apart from some miserable tome of printed matter. She’s always at your elbow, ready to do your bidding. She explains every step of the way and amazingly—answers your questions just as they arise.

Wellbe.me Logo

You never fear getting lost. You always know what to do next. You always know whether your condition is on track or you need remediation.

And she delivers messages to and from your doctor and everybody else involved in your case. She leads you from the first moment of decision to the final result—YOU CAN WALK AGAIN!  They call this the “Total Episode of Care.”

Timeline

Who is this Peggy Sue? This is the 21st Century sir! She’s technology! You access PGS through an easy-to-use internet site. It’s both interactive and intuitive but it won’t serve you a whiskey and soda.  Use your computer, your tablet or smartphone, right from the comfort of your bed. You log what actually goes on, and you get back answers and action items.

Patient Guidance System

Your surgeon, your personal doctor, your in-home nurse, your therapist, the lab that analyzes your blood, even a trusted family member—they all get alerts on your progress at just the right time. And they communicate with each other. And they communicate with you. This is as neat as a perfect spider web in the morning dew. One vibration and everybody knows exactly what’s going on.

Therapist and Patient

  • Maybe you alert your doctor that your pain level is still at six and you can’t Wellbe.me on Tabletperform the exercises. He changes your medication and flashes the prescription to your pharmacy. Problem solved.  Quickly.  Just a few strokes on the touch screen.
  • Your nurse takes a blood sample and flashes it to the lab. The lab flashes the results to your MD who relays the order to decrease your dose of blood thinner. You see the alert on your screen. Problem solved.
  • The therapist visits and logs your progress. The surgeon monitors that data and schedules an early appointment because your knee is only at 80 degrees. Wellbe.me on a laptopHe expects 90 by now and needs to evaluate your case. There’s still time—still time to do something about it. No more nonsense or finger-pointing.  No more: “If only you’d done such-and-such, but now it’s too late.”
  • Nowadays, people want to be able to contact the doctor electronically. With the Patient Guidance System™, you can do that. You’re always in the loop. Peggy Sue always gives you, your doctor, and your care team a fresh report on your progress with benchmarks and checklists. No uncertainty. No confusion. No fear.

Online Communication with Doctor

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Better than Government Work

You figure you’ve heard all about this already. You imagine it’s the Portable Healthcare Act, right? Wrong! That law does not answer. There are too many different office systems that can’t talk to each other yet—and maybe they never will. Put all thoughts of that nightmare aside.  It’s just another bureaucratic mess that seems to happen from time to time in places where politicians gather.

But this ain’t the government, sir! This is private enterprise! This is new. And this is real. This solution is simple and direct.

It’s easy to use—Everybody can access it with the same equipment they already own. Everything gets done on the cloud, so there’s no software to install.  Doctors, surgeons, therapists, labs, nurses, family, and especially you can use it with whatever internet-ready hoozitz at hand—even your infernal smartphone. 

The technology exists right now—This is a highly sophisticated proprietary expert system. But it’s tied to a user-friendly web interface that anybody can work.  

Now why do you suppose the government didn’t think of that?

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James Dias, CEO

James Dias, CEO

James Dias and Abraham Palmbach founded this startup and call it Wellbe.me.  They’re out to save 100,000 patients a year. I’m glad I came out to BNC Venture Capital to see it. Maybe it will save you or me one day.

Abraham Palmbach, COO

Abraham Palmbach, COO

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Footnotes

* 6.9% of knee patients experience poor results after one year, either because of stiffness or pain, according to David A. Fisher, MD, et.al. in The Journal of Arthoplasty, September 2007. http://www.sciencedirect.com/science/article/pii/S0883540307002343

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** From Stephen Potter in his masterful book One-Upmanship, 1952.

http://www.amazon.com/One-Upmanship-Stephen-Potter/dp/1559211903/ref=sr_1_1?s=books&ie=UTF8&qid=1365125278&sr=1-1&keywords=one-upmanship+stephen+potter

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Contacts

Wellbe.me Wellbe.me Logo

http://wellbe.me/

info@wellbe.me

800-960-4118

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BNC Venture Capital BNC Venture Capital

http://www.bnchicago.org/Groups.php?group=8

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Graphics and Photography courtesy Wellbe.me.

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EDITOR’S NOTE:  Mr. Wayne is known to take off on flights of fancy and exaggeration.  No doubt you’ve read some of his works of fiction.  Be sure to thoroughly check every one of his claims.

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GO TO PART 3 – THE STORY BEHIND BIG DATA

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Chicago Venture Magazine is a publication of Nathaniel Press www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link . This is not investment advice. We do not guarantee accuracy. It’s not our fault if you lose money.

.Copyright © 2013 John Jonelis – All Rights Reserved

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4 Comments

Filed under angel, angel capital, angel investor, BNC Venture Capital, Characters, chicago, Chicago Venture Magazine, Chicago Ventures, CORE Insight Story, Data, Entrepreneur, Entrepreneurship, Entrepreneurship and Politics, Events, Information, Innovation, Innovation and Culture, Internet, Invention, investor, Mack T Wayne, Mobile, Mobile App, pitch, Social Entrepreneur, Software, vc, venture capital

GIVE IT AWAY

Impact Engine – Part 5

VERBATIM by Loop Lonagan – Investor and man about town,

as told to John Jonelis

Impact Engine

Loop Lonagan back at Impact Engine Investors Day. The Chase auditorium’s packed with angel investors and venture capitalists AND philanthropists that’d rather invest in self-sustaining ventures than just dump their money down the old rat hole.

Shayan Nahrvar of Raise5

Shayan Nahrvar of Raise5 at Impact Engine

Y’know, it ain’t easy fer these companies to get this far. Most startups just grub fer money. These guys gotta make money BY DOIN’ GOOD. And these is da ones Impact Engine picked to do the job. Let’s sit back and talk about one o’ dem.

Logo large

Do what you love to support the causes you care about

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Raise5 founder, Shayan Nahvar, (pronounced SHI-an nah-VARR) is a real likable and well-spoken young man.

Shayan Nahvar of Raise5

Shayan Nahvar of Raise5

No sooner does he start his pitch than up pops a video. And whoa–it’s Richard Branson! Richard Branson is pitching Raise5!

I didn’t see no celebrity endorsements at FFF this morning, but these guys at Impact Engine pulled it off. Makes me feel like they can pull off most anything.

This’s a whole new crowdsourced fundraising channel fer charities. Raise5 turns yer ordinary purchases into donations. AND they do it cheap. NGOs spend 35 cents on every dollar they raise–just to raise that dollar. That don’t make no sense to me. Raise5 can bring that down to somewhere in the 8-15 cent range ‘n’ make a profit doin’ it! That’s self-sustaining.

I can hear summa you Scrooges in da back grumblin’ and groanin’ about what da hell’s da purpose o’ just givin’ it away. Hey, lotsa companies wanna give back. And lotsa regular folks too. And this ain’t just fer Microsoft ‘n’ them guys. Artists and all kindsa folks can get in on the action. And the secret of it is this:  It’s not just da charity that benefits.  It’s the giver, as you’ll see:

Say you wanna support The Nellie Thursday Home For Old Dollsa legitamate charity. Maybe you got a garage band that does a revival act of an old group like The Monkeys or somethin’–one o’ them that’s better to ferget.  Maybe you know a few more bands that ape awful old acts. Hey–all together it could be a great show!  So youse guys put together a concert and have a whale of a good time while you raise money fer Nellie.  Here’s how it works:

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Raise5 Website

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How to become a freelance fundraiser:

  • Ya slide on over to the Raise5 site
  • Ya plug in yer service or product. 
  • Ya set yer price and da charity that gets da proceeds

That’s it! Raise5 does the rest.  Whadaya waitin’ fer?

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.Raise5 Sample

Here’s a real example:  Look at dis screenshot detail. Adam is willin’ to blast yer weblink to his 20,000 Twitter followers fer five lousy bucks.  The money goes to da WSPA t’ help dem furry creatures.  John’s gonna foam at the mouth when he sees dis ’cause he’s tryin’ t’ promote his new novel ‘n’ dis is the way to do it.

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Here’s another offer:  Fer a measley five bucks, you can get a great Raise5 Offercaracature like dis one.  Money goes to Doctors Without Borders.  How can you lose?

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Dis is a win/win/win setup:

  • Charities get a new way to raise funds.
  • Individuals ‘n’ companies get a new way to create impact ‘n’ social change.
  • Customers get to buy something great, knowing their money’ll make a difference.

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Check out dis COOL VIDEO:

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Da Business

Hey, there’s 1.6 million not-fer-profits in the good ol’ US of A just waiting t’ be served and 4000 right here in Chi-town. Raise5 takes a transaction fee from every sale, so the more money they make the more impact they have. What more do I need to say?

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CONTINUE TO PART 6

Go back to Part 1

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Da Contacts

Raise5raise5.comRaise5 logo

3234 North Richmond Street,

Chicago, Illinois, 60618

Crain’s Chicago Business covered this event and ran a nice article: www.chicagobusiness.com/article/20121206/BLOGS06/121209884

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Impact Enginewww.TheImpactEngine.com

Contact Linda Darragh – L-Darragh@Kellogg.Northwestern.edu

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Images courtesy of Raise 5 and Impact Engine

.Impact Engine large

Whadaya Think?

You’re invited t’ leave yer opinion. No, you don’t hafta leave yer name or email or nothin’. Just be polite. And keep it clean.  Click the COMMENTS command at da bottom.

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Chicago Venture Magazine is a publication of Nathaniel Press www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link . This is not investment advice. We do not guarantee accuracy. It’s not our fault if you lose money.

.Copyright © 2013 John Jonelis – All Rights Reserved

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5 Comments

Filed under 1871, angel, angel capital, angel investor, big money, Characters, chicago, Chicago Venture Magazine, Chicago Ventures, CORE Insight Story, Entrepreneur, Entrepreneurship, FFF, Impact Engine, Impact Investing, Innovation, Innovation and Culture, Internet, Internet Marketing, investor, Kellogg, loop lonagan, Marketing, new companies, philanthropist, philanthropy, pitch, vc, venture capital

THE TWO WHEELS OF CHANGE

Impact Engine – Part 2

VERBATIM by Loop Lonagan – Investor and man about town,

as told to John Jonelis

Impact EngineLoop Lonagan here at IMPACT ENGINE Investor Day. This is the new Chicago incubator fer companies that do well by doin’ good—and doin’ it profitably! Think of it—we’re gathered here to get richer by makin’ all them other poor slobs around the world prosper! This I like!

The keynote speaker is FK Day. (He calls hisself  FK fer short.) And he tells us a story that knocks us outa our seats. This is a real unusual chain of events that speaks about the virtues of capitalism doing alotta good by helping folks raise their own well-being.

Buffalo Bicycles

Here’s the shortlist:

  • The story starts with SRAM that makes high-end bike parts.
  • Then FK starts World Bicycle Relief—a not-fer-profit.
  • That leads to Buffalo Bicycles—a self-sustaining company.

Impact Investing

The Chase Auditorium’s packed with serious investors. Them’s the only kind they let in the place today and this hall seats over 500 of them rascals. They’s all squealin’ ‘n’ squirmin’ to get a piece o’ the action. Sheesh—I ain’t seen so much money in one room since I…well I ain’t s’posed to talk about that so lemme move on. I’m here to do summa that Impact Investing, just like da rest o’ these clowns. But first lemme get back to the keynote speaker

(Note to Editor—All that coffee I swilled down‘s got my eyes buggin’ out ‘n’ I feel a whole lot more coherent. I’m gonna give you the skinny on this thing. But I want you should cut me some slack—just in case I get something out o’ order.)

(Editor’s Note—Nobody’s perfect. I’ll print it just as you dictate it.)

Okay, so dis story starts after FK pioneers bicycle shifters ‘n’ brakes at SRAM. His stuff’s in high-end bikes AND in all the big international races. Even poor disgraced Lance Armstrong uses SRAM components so you gotta figure that FK knows a thing or two about bikes.

Hey—this is a Chicago company, okay? Don’t get no better ‘n’ that, right? Well actually it does as you’ll see in uno momento.

Bicycles WBR 1

World Bicycle Relief

Remember that big tsunami in Indonesia? FK and his wife go there to lend a hand. They’re lookin’ for a better solution than the NGO relief organizations. So they asks people lotsa questions.

Turns out nobody can earn a living or make any economic progress ‘cause there’s no transportation. Everybody’s on foot. That ain’t too efficient. There’s kids spendin’ six hours a day walkin’ to school ‘n’ back. Mothers carryin’ groceries long distance. And get this—businesmen haulin’ their wares to market 5 or 10 miles on foot.

You think da rush hour here in Chicago eats into yer day? It’s nothin’ compared to this. This is no way to do business. This keeps folks in poverty.

The Power of Bicycles 3

FK’s a bike guy, so he shows up pre-loaded with the natural solution to the problem. He runs experiments and finds out alotta things. Turns out a bicycle can increase the income of a poor family in a big way. Looks like it’s the single best way to fight poverty in these primitive areas.

So he creates the not-fer-profit organization, World Bicycle Relief, which is a real big deal. They partner with WorldVision and alotta other organizations.  They give out 24,400 bicycles in Indonesia.

Bicycles WBR 2

Africa

FK starts a buncha 9-day trips to Zambia to fight HIV/AIDS and creates a special bike for it. Bicycles WBR 10

His folks first task is to assemble their bikes so’s they can get around. Their last task, before they leave, is to turn over their bikes to the villagers.

Bicycles WBR 9 FEELING GOOD

FK gives out 90,000 bicycles this way and learns a lot more about the problem.

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By now he’s got three well-defined areas he wants to impact:

  • Education
  • Healthcare
  • Economic development

Bicycles WBR 3

I think education tugs at him strongest.  Kids in these countries gotta travel a real long way to school and still have time to do chores not to mention homework.  With bicycles, they can get to school more often.  That builds up the whole culture by givin’ these people a future.  Givin’ ’em hope.  Summa these folks wanna be teachers, doctors, engineers.  Somethin’ as simple as a bicycle can make that happen.

Lemme get you started with a terrific video. Have a look at it ‘n’ then I’ll tell you more.

Pretty good stuff, doncha think? Bottom line—bikes carry more weight farther and faster than shoes. Bikes get kids to school, people to clinics, and they get businessmen to markets!

Bicycles WBR 11

FK tells the story of a dairy farmer in Zambia. With a bike, he can get to the co-op twice a day insteada just once.

That instantaneously doubles his income! 

Summa these guys mount homemade cargo boxes on these bikes and use ‘em like trucks.

Bicycles WBR 6

According to FK, the most powerful bike in the world is one in the hands of a mudder feedin’ her family or a fadder making a buck fer his family or a kid gettin’ an education to claw his way outa poverty. All o’ these takes transportation. And education is real important. You gotta learn readin’, ‘rightin’, and ‘rithmetic and how to speak yer language da right way or yer never gettin’ nowhere in dis here world.

Bicycles WBR 7

Buffalo Bicycles

Lemme go back to the hardware development phase. FK takes this jeep trip down them things called roads in Zambia. Whadaya think he sees? Busted bikes in the ditches ever’place he goes—every brand ‘n’ model on the planet. Says it looks like somthin’ outa The Andromeda Strain. (That’s a movie in case you fergot.)

Bicycles WBR 8These bikes come from well-meaning charities. But it’s all wasted. People in Zambia take to callin’ ‘em Chinese Junks. Off-the-shelf bikes is way too flimsy fer this kinda terrain.

So whadaya think the average lifespan is for yer typical off-the-shelf bike? 30 days! That’s it! And there’s no way to fix ‘em neither! Too many different brands. No parts. No mechanics.

FK figures what they need:

  • Standardized bicycle
  • Standardized parts
  • Real, real rugged
  • Trained mechanics
  • Supply Chain

Bicycles WBR 14 THE BIKE

The Buffalo Bicycle is a rugged design like no other. It can withstand rough roads while carrying a load o’ trade goods to market.

Here’s a video of FK in Africa riding the roads with folks:

Da Business

Charity’s a good thing.  But how do ya make it self-sustaining?  How do ya make it grow like a hockey stick?  You turn it into a business.  Business can be a helluvalot more powerful than an outstretched hand.  A little capitalism can be good fer da soul and FK’s a capitalist at heart.  

FK sells the Buffalo Bicycle to third-world businessmen at a profit.  That makes the project self-sustaining.  He trains and supplies mechanics.  And that maintenance network is self-sustaining too. So far they got 124,754 bikes out there where they can do some good. 

He shows us graphs ‘n’ charts. He’s gonna be building 100,000 bicycles in eight African-based supply chains in 2015.  This program is scalable and sustainable.

Bikes from website 2

Remember all that research I told you about? FK makes a key point about that. He learned everything he ever needed to know from the end user. We need to stay deeply in touch with these people. The answers almost always come from there.

Bicycles WBR 13 Wrigley FieldAnd to me, the amazing thing is that he went and figured out da problem and da solution ‘n’ engineered such a wonderful outcome.  He bootstrapped all o’ this starting with lotsa fund-raising drives like the annual Wrigley Field Road Tour which is a part of Chicago Cubs Charities. 

Here’s a candid video of FK thanking his volunteers after a small fundraising drive–one of many:

Next up is a company called ThinkCERCA. Meanwhile, check out summa the other articles about Buffalo Bicycles below.  Ω

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CONTINUE TO PART 3

Go back to Part 1

More Reading

Wrigley Field Road Tour

http://worldbicyclerelief.org/pages/wrigley-field-road-tour

World Bicycle Relief on Wikipedia

http://en.wikipedia.org/wiki/World_Bicycle_Relief

Article in Forbes

http://www.forbes.com/forbes/2010/0510/creative-giving-sram-zambia-charity-armstrong-bicycle-economy.html

BBC Article in TON

http://timesofnews.co/2012/03/15/can-the-buffalo-change-africas-bicycle-culture/

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Da Contacts

FK Day

FK Day

World Bicycle Relief website  http://worldbicyclerelief.org

WBR on Facebook  www.facebook.com/worldbicyclerelief

SRAM Logo

SRAM Corp.  http://www.sram.com/

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IMPACT ENGINE website  www.TheImpactEngine.com

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[ Photos and video courtesy of World Bicycle Relief ]

Impact Engine

Chicago Venture Magazine is a publication of Nathaniel Press www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link . This is not investment advice. We do not guarantee accuracy. It’s not our fault if you lose money.

.Copyright © 2013 John Jonelis – All Rights Reserved

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18 Comments

Filed under 1871, angel, angel capital, angel investor, big money, Characters, chicago, Chicago Venture Magazine, Chicago Ventures, CORE Insight Story, Economics, Entrepreneur, Entrepreneurship, Entrepreneurship and Politics, Impact Engine, Impact Investing, Innovation, Innovation and Culture, Invention, investor, Kellogg, loop lonagan, Social Entrepreneur, vc, venture capital

7 TIPS FROM A WINNER

Funding Feeding Frenzy – Part 5

VERBATIM by Loop Lonagan – Investor and man about town,

as told to John Jonelis

FFF LogoLoop Lonagan here. I’m gonna go full circle at dis Funding Feeding Frenzy.

No, I ain’t drunk—well maybe I am by now—but what I mean is, I’m goin’ back to the start o’ this event. After all that stuff I already talked about, I’m finally gettin’ ‘round to the first speaker at the FFF—Palette App—the company that won last time.

Like I said, I seen the pitch before. I also seen them at BNC Venture Capital and later at their corporate offices. Research. A guy’s gotta check stuff out fer himself.  Anyhow, here I am at the FFF in the Chopin Theater to hear what he has to say.  And as it turns out, I’m very glad I to be here.

Chopin Theater Lobby

Lobby – courtesy Chopin Theater

The speaker is Jerry Freeman, founder of Palette App, and the guy’s real smart. He’s doin’ his pitch fer us as a demo—to break the ice before all the poor slobs face the judges.

So I’m sittin’ here next to Jay Kinzie, a colleague o’ mine from Mastermind Advisory Board in this cushy seat in the Chopin Theater. Rong Mayhem ain’t gonna wheel up behind me and start yellin’ like he did at that car barn they held this thing at last time. And the noisy crowd is banished to the trough downstairs.

Feeding Trough

Feeding Trough

That means I’m free. Free to concentrate on findin’ the companies I wanna follow up on. But first comes Jerry Freeman. He starts by giving his own pitch. I know it by heart so I’ll paraphrase:

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Da Pitch

Palette App logoPalette App helps architects and designers do their job better, faster, cheaper. (Jerry doesn’t actually say better, faster, cheaper, but that’s what it amounts to.)

They take away them old-fashioned sample binders that designers and architects been blowin’ their money on for 150 years. They hand ‘em this beautiful digital palette. It’s easier to put together, better organized and more efficient to use. You can make changes fer free! That’s a big deal in this industry.

Palette App

Palette App

It saves a designer about 30 business days a year. That’s alotta man hours. And that kinda time’s worth a few bucks. The digital palette’s better for the client too. That’s why I been excited ‘bout this company right from the first.

Palette

Palette

The software usta be just on iPad ‘cause that’s what designers and them kinda people use. But now it’s on Android too. There’s a version for architectural design schools, which turns out to be a big deal. You can read all about it at https://chicagoventuremagazine.com/2012/07/16/150-years-of-waste-meets-technology/

The company is up-and-running and generating revenue. They already got 35,000 products loaded in their system. They got multiple profit centers. They make money whenever a designer orders a sample. And they make money through subscriptions.

Far as capital goes, they already raised $700K and the first round is gonna close pretty quick. 70% of that came from the last FFF. You can read about that at https://chicagoventuremagazine.com/2012/11/23/shark-tank-meets-the-apprentice/

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Da Interview

So after his sample pitch which I kinda butchered—but hey—how ya gonna spoil something as good as that? Anyhow, Jerry sits down with David Culver and does an interview about what it’s like to run a startup. This is good stuff and I learn something.

Jerry Freeman and David Culver

Jerry Freeman interviewed by David Culver

Raising Money

This seems to be the biggest question on ever’body’s minds. Jerry says, keep pitching at every event you can ‘cause it’s the best way to get connections to lotsa investors. Raising money is a full time job. As CEO, raising capital turns out to be his #1 job.

Then there’s cold calling. You start by pitching on the phone to some junior-level gatekeeper. Then to the next one up, then the next. Then maybe you gets a face-to-face with a decision-maker, fly way out somewheres and run up the old expense account.

All that takes months. Then maybe you get a commitment. Whoa—the money ain’t in the bank yet, fella. Gotta go thru due diligence. Paperwork. It takes six months to get the check, if it comes at all. People drop out. Meanwhile, how you gonna pay yer staff? So you gotta watch yer cash flow real close.

So he says to keep entertaining small investors till the big checks come through—just to pay the bills. The little guys come through quicker.

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Crowd Funding

Glenn Gottfried

Glenn Gottfried

Let’s talk about the new self-directed IRA. Lotsa baby boomers got millions stashed in their IRAs. All those add up fast. There’s five trillion in investment dollars hidden away in these accounts. That’s right—I said five TRILLION dollars—almost a third as big as the national debt! It dwarfs private capital. Blows it away! And deals like that close in thirty days—not six months like with VCs and Angels.

This is a form o’ crowd funding. Usta be only charities raised money that way. Now there’s brand-new laws that open it up to investors. So far it’s only for accredited types—people with a million bucks plus. That’s gonna change but the government is draggin’ its toes—nothin’ new about that.

So fer now, friends ‘n’ family ‘n’ Kick Starter is still the best way for small cash, then

Loren Minkus with Jay Kinzie

Loren Minkus with Jay Kinzie

millionairs with self-directed IRAs. Pretty soon we might see the dam burst on crowdfunding and money’ll flow all over the place.

Jerry gives 7 more tips on how to run a startup:

7 Tips

  1. “The shorter your pitch, the better,” says Jerry. If you think yer gonna get through it in eight minutes, cut it back ‘cause it’ll always take longer. “Practice 21 times,” he says, “so you’re not nervous.”
  2. “Simplify. If you’ve got twenty ideas, narrow it down to three,” he says. When Steve Jobs came back to Apple, he cut down their product line to about five. Now they’re huge.
  3. “Challenge is important.” He asks himself why he ain’t tripling his users every month. You gotta find creative ways to reach that target.
  4. “The dot bomb era is over.” Start raising revenue ASAP. That helps attract investors way better than flashing yer goofy projections on PowerPoint. “When you can say, We already started generating revenue, it puts you in a different pile from the rest.”
  5. “Crank up sales fast because sales sell. Get to risk mitigation ASAP.” That’s important ‘cause investors is more risk-averse than dey ever was before. And the banks ain’t lending. Actual sales sounds a lot less risky.
  6. “Keep your people motivated.” Use every success to get your people rejuvenated. Tell ‘em stories from the road. Celebrate small successes.
  7. An entrepreneur is somebody who goes from failure to failure to failure without getting discouraged.” It’s good to come from a sales background so yer already used to rejection. “If you’re a wallflower, get over it,” he says. Then David Culver follows that with, “The fortune is in the follow-up.”
Chopin Theater

Stage – courtesy Chopin Theater

Gotta Go

I gotta catch a cab to another meeting, so after plenty o’ good food ‘n’ drink, I say g’bye to the FFF kinda early. Two guys tag along to share the ride. One’s an investment banker, the other a VC.

And wouldn’t you know it—I trip on another pothole, right there on the sidewalk. Now my suit’s slashed in both knees. Neither o’ these guys helps me up like the bums did.

And when I drop ‘em off, neither offers to share the cab fare.

Happy New Year to all o’ youse out there.  Cheers from da merry land of Shark Tank Meets the Apprentice.  

NOTE TO JOHN – I seen your articles on a buncha sites.  One o’ dem usta be a real good tech jounal run by the Huffington Post.  It went through a buncha changes.  Now it’s runnin’ third-rate soft porn right along with da articles.  Don’t know what’s with that but thought you’d wanna know.

NOTE TO LOOP – Thanks for the heads-up.  I’ll check it out and maybe put a stop to it.

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Continue to WHAT’S GOOD?

Go back to Part 1

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Da Contacts

Palette App – www.paletteapp.com

Funding Feeding Frenzy – www.facebook.com/FundingFeedingFrenzy

The Chopin Theater – www.chopintheatre.com/event.php?id=2275&pageId=soon

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Chicago Venture Magazine is a publication of Nathaniel Press www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link . This is not investment advice. We do not guarantee accuracy. It’s not our fault if you lose money.

.Copyright © 2013 John Jonelis – All Rights Reserved

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5 Comments

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THE RESUME IS DEAD

Funding Feeding Frenzy – Part 4

VERBATIM by Loop Lonagan – Investor and man about town,

as told to John Jonelis

FFF LogoLoop Lonagan here at FFF and we’re in for a treat. Mitch Schneider is pitching his new company, Kauzu. I like companies that do well by doin’ good fer people. And this one’s all about local jobs that keep people off the streets.

Say you got a business in an urban setting and need to hire an employee. You want somebody local. Hey, everbody wants local. Kauzu logoMcDonalds, Wal-Mart, Pace, Cook County—they want local people too. Local’s always better. Local employees stay longer and save the business alotta money.

Just by way of example, I’ll explain this from the point o’ view of a small guy—a shop or restaurant or somethin’.

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Da Old-Fashioned Way

You wanna put out feelers. But how you gonna do that? Monster? Whoa—they’re expensive and you get buried by applications from all over the place. So what else can you try? How about Craigs List? Usta be pretty good—my own daughter got a job thru them about five years back. But they’re still not as local as we’re talkin’. Then there’s the classifieds, but that’s expensive and in a city of millions, that’s not really local either. You can post a help-wanted sign in yer restaurant window, but then you gotta interview anybody comes in off the street, like my pal Big Bubba. Can’t picture him workin’ tables unless yer runnin’ a racket and need an enforcer or somethin’.

So those are all old-fashioned methods. If you decide to use one o’ those yer gonna get tons o’ applications to wade thru. Lots ‘n’ lotsa paper. Most o’ those’ll be the wrong people for the job. Ever try ‘n figure out which is best by lookin’ at paperwork? Good luck to you!  Far as I’m concerned you might as well throw darts.

Then after you pick a buncha people you think look good, you gotta interview ‘em. All of ‘em. There’s laws. Are you a professional in the use of modern interview techniques? Probably not. So yer wastin’ alota time and money. And it’s all happenin’ when yer short on help. I don’t know about you, but I don’t like it.  What if we could dump the resume and the application too?

.The Resume is Dead

Da New Way

Now, when I’m picking a stock, I use modern filtering and modern analytics. Why not apply that technology to jobs? So where do you go to get that?

Tablet

Along comes Kauzu. Here’s what they do:

  1. A business posts a digital help-wanted sign on Kauzu’s website for next to nothing. Kauzu uses filters and analytics and automatically matches the right people with the right jobs. And you get to set the filters yerself. No need to study hundreds of resumes or interview scores o’ people.
  2. Job-seekers fill out profiles on the Kauzu site for free. One and done. They see the close-by jobs that fit them right on their cell phones.
  3. The result? Businesses save time and money. You only interview pre-screened local candidates that are more likely to stick. Job seekers get a hyper-local job search with fully mobile functionality. The resume is a thing of the past.

Text Feature

“But,” you say, “What about people that don’t have smartphones.” And that’s true for about 70% of the unemployed. But hey—you don’t need no smartphone. Text works just as good. Just input yer location ‘n’ it shows you the nearby jobs.

If you got one o’ them newfangled smartphones or tablets, it gets evenSmart Phone better. Geo-location shows you the jobs right on a map. Of course you can always go to the public library and use their computer fer free.

Pretty slick. I like it a lot. So do chambers of commerce and city colleges that are pushing Kauzu. The timing couldn’t be better. Check out this video. And there’s lots more on their site.

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Da Business

Mitch, Paul, & GlennThis Mitch Schneider guy is super smart.  I had lunch with him not too long back at One North.  When we got done four hours had blown by.  I guess I like talkin’ to intelligent people and I’m impressed with Mitch.  I think this guy’s got the know-how, the drive and the creativity to make any startup sit up and bark.

They’re asking $500K for a 30% equity stake and expect to break even in month 17 with a 10X multiple in five years.  Translation—they’re investable.  So far they’re bootstrapping, but along with Paul Cusimano, they already built a nice team, a great website, and they got a big advisory board that includes—get this—Glenn Gottfried.  So they got the management, the tools, the channels.  Now they’re raising the money.

Mitch Pitch

Da Judging

So how did the judges respond to a terrific offering like this? Yer not gonna believe it. They didn’t get it at all. Mitch got four o’ the dreaded GO FUND YOURSELF signs and one STILL FISHING. Not a single FUNDABLE. Strange—real strange. Why didn’t the judges get it? The audience sure did—no question. People watching the Q&A got so frustrated, they kept calling out answers to the judge’s questions. That’s against the FFF rules but hey, it was kinda like a revolt. And these judges are guys I respect, so I ain’t got it figured out.

So afterwards I ask Mitch about it and he seems strangely unconcerned about it all. Turns out he’s using a different pitch every time he presents. He videotapes every one o’ them and runs comparisons. What a terrific strategy. Like I said, this guy’s smart. So he found a pitch that connects with an audience but not judges. He won’t repeat that one, but it might be good advertising fodder.

Glenn Gottfried at Lunch

Glenn Gottfried at Lunch

So I go downstairs fer some lunch and ask Glenn Gottfried how come the audience understands it but the judges don’t. He’s got alota good ideas fer fixing it but no real answer to why it happened. Guess we’ll wait fer the video analysis.  I’m still scratching my head, but it is what it is. If any o’ you guys can offer a suggestion, feel free to leave a comment.

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Continue to Part 5

Go back to Part 1

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Da Contacts

Kauzu  www.kauzu.com

Funding Feeding Frenzy

www.facebook.com/FundingFeedingFrenzy

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Chicago Venture Magazine is a publication of Nathaniel Press www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link . This is not investment advice. We do not guarantee accuracy. It’s not our fault if you lose money.

.Copyright © 2013 John Jonelis – All Rights Reserved

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.

7 Comments

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THE CLIFFS OF INSANITY

Seven Solutions

VERBATIM – From storied business consultant, J. P. Pierogiczikowski—affectionately known as Joe Perogi,

as told to John Jonelis

Cliffs of InsanityJoe Perogi here. I’m listening to Peter Orszag speaking real clear on The Fiscal Cliff. He comes all da way from Manhattan to give this great talk to us at The Chicago Council on Global Affairs.

This guy’s real smart. Sure, he’s way left o’ my way o’ thinking but he’s got alotta ideas,  Ideas make money move. And he understands the politics as well as the economics – a rare combination.  So after the talk, I read a buncha his articles, put it all together, and here’s what I come up with:Chicago Council on Global Affairs Logo

He says $750 billion per year of income is already vaporized. That’s right—it’s down da tubes fer good. He says it’s as bad as the dot com bust but get this—this time we’re not bouncing back so fast.

Peter Orszag - Bloomberg

Peter Orszag – Bloomberg

Private lending is zilch. And the jobs are just gone. We lost workers permanently. Lotsa skills become obsolete. People give up.

Here’s something new to me: This mess has been going on long enough that disability benefits are rising. And as Orszag puts it, “Once people get on disability, they don’t go off.” While all this is goin’ on, global labor supply quadruples. So no wonder you can’t find a job.

According to Orszag: “People can sense that all this is happening and that nothing is being done to fill that $750B hole. They’re right.”

Bridge Out Ahead!

Now take that same broken-down train and drive it off the Fiscal Cliff. More than $600 Billion in tax increases and spending cuts by the end of 2012. We’re talkin’ a train wreck of epic proportions on a national scale. Probably push Europe over the edge too.

Budget Elements - American Enterprise Institute

American Enterprise Institute

A Little Comic Relief

It’s times like these we gotta keep our sense of humor.  Orszag cites some stats from his Bloomberg column and that takes my mind back to just before the talk. I actually watch Orszag post that article while we’re sitting together in da coffee shop. And I have some fun with that. My old friend, Ethan Sobriety invited me to this shindig and I get here earlier than he does. So I introduce Orszag to him and Ethan almost throws a coronary. Orszag was Obama’s top dog in Management and Budget and the Congressional Budget Office. But he goes back further. Senior economist under Clinton’s Council of Economic Advisors and the National Economic Council.  These days he’s bigtime at Citigroup.Bloomberg Logo

My friend Ethan ain’t no slouch neither. International currency investor who makes a home in England, Asia, Africa, and right here in Chicago, but when the color comes back to his face he says hello to Dr. Orszag and shakes his hand. From his reaction I figure Ethan’s got a whole lot of respect for this guy.

Posting Article

Orszag Posting His Article

Whacha Gonna Do?

But Orszag is still speaking and I snap my attention back to what’s going on now, right in front of me.  He asks, “Will we shoot ourselves in the foot again?”  He says we’re doing stimulus the wrong way. “We need to do specific, gradual, policy that’s hard to reverse over time.” Gradual and irreversible makes for stability. That way business knows what’s gonna happen and has plenty of time to plan for it. Lending opens up. Da economy starts workin’ again. So are we doin’ that?  No, he says, “We’re doing the opposite.” Not good.

Anybody’d think them bums in the White House, the Senate, and the House of Reps could work this thing out. But Orszag shows two simple charts that explain why it’s so hard to fix. The first one explains the way Left and Right thinking used to overlap. All the deals get done in that overlap area. (This guy’s an economist and uses bell curves to make his point. Ethan tells me Venn diagrams might make more sense to most people, so I’m giving you that version.) Here’s the way it looked in the ‘60s:

VENN 1

Now let’s fast forward to today. You see it? There’s no overlap at all no more. No consensus. Maybe no deal.

VENN 2

Polarization

Some say polarization is the natural result of gerrymandering and Orszag says that might be as much as 15% of it. But he thinks it’s driven by the polarization of the population itself. We’re doing it to ourselves,” he says. Then he explains how:

  • If you put like-minded people in a group, the group becomes more extreme. That rings true to me. It’s plain common sense.
  • Landslide elections in voting districts are getting a whole lot bigger. Lotsa candidates run unopposed or with token opposition. That means our neighbors are more like us. Again, more like-minded equals more extreme.
  • Nowadays we can all pick our own reality. Each of us can select our own news feeds and the like. Orszag talks about how he “unfollowed” a Twitter user who criticized him. So now that person is still criticizing him, but it’s not in Orszag’s world no more, so it’s got no impact on his decisions. Again, if you listen only to like-minded people, you get more extreme.

The Positions

So here are the positions on da Left and da Right:

  • DA LEFT—Let the Tax Cuts Expire for the Rich– This is the plan to tax the $250K+ crowd. Problem is, it really doesn’t raise much money and it kills jobs.
  • DA RIGHT—Entitlement Reform – Everbody agrees we gotta do this, but gimme a break. If the country was ready to bite da bullet, Obama wouldn’t be in the White House again.

If there’s no deal, we go over The Cliffs of Insanity and da country goes into another Great Depression.

The Cliffs of Insanity from The Princess Bride - Wikipedia

The Cliffs of Insanity from The Princess Bride – Wikipedia

Seven Solutions

Even with no consensus, Orszag sees a number of possiblities:

  • Two-Stage Agreement – A 9-month temporary deal to give the bums in Washington time to work it all out. This is one of the president’s proposals.  Give him what he wants now and he’ll talk about the rest later.  But Orszag asks a good question: “If either side gives in now, why believe the other party will change later?”  So nobody budges. 
  • Tax Reform Refund – Let the tax cuts expire.  Replace them with a $1,600/year tax refund.  Do that till a deal is reached or the economy recovers. This way negotiators start with a clean slate. Both sides might find it easier to swallow. This is one of Orszag’s interesting ideas.  Maybe it works. I dunno.
  • Cut Spending – Orszag points out spending cuts are easy to say but hard to do. The more vague the proposal, the more popular it is and the more useless. When he was in government service, he’d give out a list of tax cuts but nobody could agree on anything significant.  But we gotta cut spending somehow.
  • The 50K Limit – If we limit itemized deductions to $50,000 for everybody, we can raise the same $700 Billion we’d get from taxing the job creators. But 90% of that is deductions from just three things: local taxes, home mortgage interest, and charitable contributions. Of those three, charity is the only one a taxpayer can do anything about. So charities would get clobbered. Not a good thing.
  • Raise the ThresholdExtend the tax cuts for everybody under $1 Million insteada chopping it off at $250K. So far nobody’s hot on this, but who knows? It’s the natural place to reach a compromise.  And as I see it, anybody earning $1M is likely to be runnin’ a corporation, not a mom and pop proprietorship or LLC. Regular corporations are taxed separate from personal income so I figure it shouldn’t oughta hurt jobs too much. But taxing corporations hasta raise prices. We all pay fer it, so either it’s a hidden tax or it’s inflationary.  I think one ‘o these days we’re finally gonna see summore inflation.
  • Scale Back Tax Breaks – Don’t raise rates at all. Chop off deductions the $250K-and-up earners. House Republicans might bite. But the White House hasta make a concession here and this commander in chief hasn’t shown any ability in the art of compromise. Also, the downside is this could hurt any housing recovery big time.
  • Social Security Reform – Orszag is big on this one and it’s real interesting stuff: Lift the $110,000 cap on payroll taxes. He says Democrats will leap at the chance to make Social Security solvent without private accounts. And, this one’s stable ‘cause it can be done in an orderly manner over several years. Again, he’s big on a plan that can’t be reversed and phases in over time. That means everybody knows what’s coming and has time to plan for it.

O’course, we can always kick the can down da road again like Obama did last term.  Orszag don’t raise this issue ’cause it ain’t a permanent fix.  We got a looming debt crisis and it’s only getting a whole lot worse.  

Optimism

Orszag sees some good coming in spite of all this suffering:

  • He sees shale gas and shale oil and a pipeline from North Dakota to Texas because there’s no way around it. So oil prices will eventually plummet.
  • He seems to like the way healthcare is headed because he likes defined contribution and national healthcare. Well, I figure ya gotta make allowances for people’s opinions.
  • He says there’s a lot more to come from the tech revolution.

At least that last one’s for sure.  I hope them bums figure this mess out before New Years Day.  And thanks Ethan for the great invite.  This was worth da trip.

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GO TO – THE FISCAL CLIFF – A SURPRISINGLY SIMPLE STORY

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Find Chicago Venture Magazine at www.ChicagoVentureMagazine.com Comments and re-posts in full or in part accompanied by attribution and a web link are welcomed and encouraged. This is not investment advice.  I do not guarantee accuracy.   It’s not my fault if you lose money.

.Copyright © 2012 John Jonelis – All Rights Reserved

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