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Align the interests of: 1. Users and 2. Investors.

Tuesday, August 11, 2009 by Dave Winer.

Last night Marshall and I did a flash call-in version of the Bad Hair Day podcast to discuss the acquisition of FriendFeed by Facebook. It was the first time I used BlogTalkRadio's call-in feature, and I liked it, and I want to do it again.  

Toward the end of the show Brian Hendrickson of Portland called in to say that he was launching a replacement for tr.im called rp.ly. Then somehow the subject turned to how to build a sustainable thing out of his daring act. I gave a lame answer. In my defense, I wasn't prepared. After much more thought I know the answer and I'd like to share it here. 

Before giving the answer let's be clear on what the question is. 

Brian is a young ambitious hard-working creative persistent developer. I can vouch for all that. He lives in Portland, but when we have events here in the Bay Area, he comes. He never gives up, never flames, and his stuff works. He's got all the attributes you look for in an entrepreneur. 

The question is this -- how to build a sustainable user-oriented business around Brian's talents so that it doesn't let the users down as the investors' interest diverges from the users' interest. That's what's going with FriendFeed and Twitter, when you really drill in. Some of it is incompetence and fear. Twitter's SUL is just plain dumb, it's not in anyone's interest. But FriendFeed getting acquired and not protecting the users, that is simple divergence. Their stockholders and the users had different interests.  

Anyway, when you frame the question this way the answer is very clear. You have to align the interests of the users and the investors.  

Think about that for a minute.  

Align the interests of: 1. Users and 2. Investors. 

How to do that? 

Well, they need to be the same people.  

Get ready for some non-linear thinking folks, because this is not the 20th Century. It's not Kansas and Twitter isn't Toto and the VCs aren't the Wicked Witch -- they're just business people following their training and instinct the best they can. 

To understand how this can work, back up a few years and then a few years more. 

Why did Google get such an outrageous market cap when they IPO'd? I maintain it's because they had a huge number of users who understood their product and were very excited about it. 

Okay back up another generation. Before Netscape went public the assumption was they needed revenue at a 20 percent pre-tax margin. They squeaked by if you looked at the numbers the right way in the right light, and squinted. But in the end none of that mattered. The stock didn't end up pricing based on the old metrics. Why? Same thing -- they had a huge number of users who undestood their product and were excited about it. They bought the stock and bid up the price. And up and up and up. 

We're now in the same place again. The question is this -- okay Brian isn't a Google or a Netscape. Neither is tr.im. Neither are the handful of developers who are excited by rssCloud and the idea of a loosely-coupled distributed 140-character message network. But who says public offering have to be mega-size. They don't. Sometimes they're very small affairs.  

And that imho is the answer -- we, the users, need to own a technology company -- and have it work to serve our interests. It has to help us achieve our goals to do what we are excited about. I believe the users are worth betting on, much more than I believe that Marc Andreessen or Larry and Sergey really had any idea how to tap into the potential of their inventions (with no disrespect to any of these brilliant people). The visionaries were the people who believed their stock was worth a lot more than anyone in Silicon Valley did. 

So that's what I'd like you all to think about -- founding a People's Software Company whose first act is to IPO and pool the financial resources of users who believe there is a gap in what Silicon Valley is providing using their old models for corporate structure. We're living in the proof that the gap exists, with all the failures of the centralized system in just the last week. See if your imagination takes you to the same place it takes me.  

PS: I've turned off comments on this post. I may explain why in a subsequent post.