tag:blog.jeremyrwelch.com,2014:/feedJeremy Welch2015-12-11T17:26:53-08:00Jeremy Welchhttp://blog.jeremyrwelch.comSvbtle.comtag:blog.jeremyrwelch.com,2014:Post/the-importance-of-openai2015-12-11T17:26:53-08:002015-12-11T17:26:53-08:00The Importance of OpenAI<p>Elon Musk, Sam Altman, Peter Thiel, Ried Hoffman and others have just launched a new non-profit with over $1 billion in funding, called <a href="https://openai.com/blog/introducing-openai/">OpenAI</a>, that is dedicated to Artificial Intelligence research. </p>
<p>Steven Levy has <a href="https://medium.com/backchannel/how-elon-musk-and-y-combinator-plan-to-stop-computers-from-taking-over-17e0e27dd02a#.u36wgfs99">a short interview on the launch of OpenAI</a> with the following snippet that I think is extremely important:</p>
<blockquote>
<p><strong>I want to return to the idea that by sharing AI, we might not suffer the worst of its negative consequences. Isn’t there a risk that by making it more available, you’ll be increasing the potential dangers?</strong> </p>
<p><strong>Altman:</strong> I wish I could count the hours that I have spent with Elon debating this topic and with others as well and I am still not a hundred percent certain. You can never be a hundred percent certain, right? But play out the different scenarios. Security through secrecy on technology has just not worked very often. If only one person gets to have it, how do you decide if that should be Google or the U.S. government or the Chinese government or ISIS or who? There are lots of bad humans in the world and yet humanity has continued to thrive. However, what would happen if one of those humans were a billion times more powerful than another human?</p>
<p><strong>Musk:</strong> I think the best defense against the misuse of AI is to empower as many people as possible to have AI. If everyone has AI powers, then there’s not any one person or a small set of individuals who can have AI superpower.</p>
</blockquote>
<p>Most people think of AI as something that happens OUT THERE, away from us. Instead, it must happen INSIDE – close to us. </p>
<p>Encountering AI is like encountering a new Lion or beast out in the wild. We must observe, interact, understand and co-evolve with it.</p>
<p>The incentives are too great for AI not to grow, with or without us. I hope you’re paying attention.</p>
tag:blog.jeremyrwelch.com,2014:Post/self-driving-electric-vehicles-will-kill-these-businesses2015-12-03T12:15:41-08:002015-12-03T12:15:41-08:00Self-Driving and Electric Vehicles Will Kill these Businesses<p>A storm is on the horizon for Automotive and related industries.</p>
<p>Current business models of gas stations, car dealerships, auto-care companies, car washes, and more are built for a world where:<br><br>
(a) <strong>gasoline engine vehicles</strong> are<br><br>
(b) <strong>driven by humans</strong>. </p>
<p>That’s all about to change. </p>
<blockquote>
<p><strong><a href="https://en.wikipedia.org/wiki/Electric_vehicle">Electric Vehicle</a> (EV)</strong> and <strong><a href="https://en.wikipedia.org/wiki/Autonomous_car">Self-Driving Vehicle</a> (SDV)</strong> technologies will enable so much behavioral change that most of today’s automotive-related business models will not survive. </p>
</blockquote>
<p><a href="https://svbtleusercontent.com/stknfk1ltcefdg.jpg"><img src="https://svbtleusercontent.com/stknfk1ltcefdg_small.jpg" alt="storm.jpg"></a></p>
<p>Some <a href="https://www.cbinsights.com/blog/autonomous-driverless-vehicles-corporations-list/">companies</a> and <a href="https://medium.com/@alexrubalcava/a-roadmap-for-a-world-without-drivers-573aede0c968">investors</a> are preparing for the coming storm, but many in auto-related businesses are going to be blindsided. </p>
<p>Below I’ve compiled a list of industries, companies, and product types that are facing a <a href="https://en.wiktionary.org/wiki/dead_man_walking">Dead Man Walking</a> future as a result of EV and SDV technologies.</p>
<hr>
<h3 id="auto-parts-retail-stores-and-aftermarket-part_3">Auto Parts Retail Stores and Aftermarket Parts <a class="head_anchor" href="#auto-parts-retail-stores-and-aftermarket-part_3">#</a>
</h3>
<p>Advanced Auto Parts, Pep Boys, Autozone and others sell aftermarket car parts to the masses of car owners. </p>
<p>EV engines are less complicated than their gasoline counterparts, meaning fewer replacement parts needed over the lifetime of the car. That equates to lower sales for retail stores. </p>
<p>While EVs reduce the number of purchases per buyer, SDVs will reduce car ownership entirely, vastly reducing the number of parts buyers in the market period. </p>
<h3 id="gas-station-amp-convenience-store-owners_3">Gas Station & Convenience store owners <a class="head_anchor" href="#gas-station-amp-convenience-store-owners_3">#</a>
</h3>
<p>Gasoline is dirty, and distribution is tightly controlled and regulated through a network of gas stations. </p>
<p>The electrical grid is everywhere. Electric vehicle fueling can occur anywhere there is an available electrical outlet (though speed varies based on outlet type and power). Current EV fueling already occurs mostly in parking garages, homes, and dedicated Tesla stations at shopping centers. </p>
<p>Any location where vehicles are parked for longer than an hour will likely have EV refueling stations. Most destinations are already wired to deliver enough electricity, but charging units need to be extended to parking spaces. This is the future we were anticipating with my last startup <a href="http://www.chrg.net/">Chrg</a>. </p>
<h3 id="auto-mechanic-shops_3">Auto Mechanic Shops <a class="head_anchor" href="#auto-mechanic-shops_3">#</a>
</h3>
<p>Oil changes, new spark plugs, engine flush, new timing belt – all the common engine maintenance services go the way of the dinosaur in an EV world. </p>
<p>EV engines are much simpler than their gasoline-engine counterparts, a point I explain in more detail on my post <a href="http://blog.jeremyrwelch.com/tesla-is-a-battery-company">Tesla is a Battery Company</a>. And any parts that remain in the car will be made to last longer. Tesla is targeting a <a href="http://www.teslamotors.com/blog/three-dog-day">one million mile lifetime for their vehicle powertrains</a>. </p>
<p>So fewer, and longer-lasting, parts means far fewer maintenance trips to the local auto mechanic or dealer. Still, brakes and tires will need to be changed and there’s always car upgrades or product recalls – so some dealer visits will be required, right?</p>
<p>Yes, but rarely. <a href="http://www.wired.com/insights/2014/02/teslas-air-fix-best-example-yet-internet-things/">Over the air updates will now take care of many car upgrades and recall issues</a>. Tesla enabled their car to better withstand lower-body impact conditions, and now to drive itself, all via software updates downloaded to the car while in the garage. </p>
<p>Also, remember that vehicles that can drive themselves won’t only be driving humans to their destinations. They will also drive themselves to a repair shop anytime the problem cannot be fixed by an over the air update.</p>
<h3 id="car-washes_3">Car Washes <a class="head_anchor" href="#car-washes_3">#</a>
</h3>
<p>EVs will still need to be washed. So will SDVs. But the question is where and how.</p>
<p>If self-driving cars results in fewer car owners, that also results into fewer car wash customers. Instead of consumer car washes, I expect vehicle cleaning to occur at vehicle storage facilities far outside most suburbs and cities. </p>
<h3 id="new-car-dealerships_3">New Car Dealerships <a class="head_anchor" href="#new-car-dealerships_3">#</a>
</h3>
<p>Tesla is not only breaking ground in EV and SDV technology, they are also driving a shift in the vehicle sales model.</p>
<p>Expect to see more direct to consumer sales of vehicles while people are still owning cars themselves. </p>
<p>Dealerships also make money from auto repairs. EVs require far less maintenance, and upgrades to the car can happen over the air via software. So dealer maintenance revenue will be slashed. </p>
<p>The car dealership business is dead within the next decade. Expect severe consolidation of the existing dealer players, with car makers beginning to route around dealers with “experiences” in malls and other consumer locations, similar to Tesla’s current model. BMW is already beginning to experiment with new marketing and sales techniques, recently showing their newest 7-series sedan via exclusive Uber rides.</p>
<h3 id="used-car-companies_3">Used Car Companies <a class="head_anchor" href="#used-car-companies_3">#</a>
</h3>
<p>Two key thoughts here. Fewer car owners means fewer car purchases by consumers, both new and used. </p>
<p>Additionally, there will be a major shift in vehicles over the next few years that will see the value of most gasoline used cars from the last 20 years slide QUICKLY to zero.</p>
<p>Why? Because the software and hardware systems in the cars are changing rapidly, and outdated models won’t be easily upgradable. </p>
<p>Let’s look at a similar model change in the phone industry. The Motorola RAZR debuted at a $600 price point in 2004, sold like hotcakes and led a market of slim flip-phones, then lost sales quickly once the iPhone and Blackberry smartphones started gaining marketshare. I am simplifying the story, but the point still stands that the transition from flip-phone world to smart-phone world happened rapidly, and flip-phone sales cratered.</p>
<p>But there’s one key difference between the mobile phone market and the car market – product price (and by extension, adoption cycle). Product price is high, so most car buyers hold onto their vehicle for 2-3 years at a minimum, some for a full decade. </p>
<p>Once it becomes clear to the average consumer that Electric, Self-Driving vehicles are the future, expect many buyers to skip new and used gasoline car purchases to save up for the new electric, self-driving versions. The pool of used car buyers – of the old types of cars – will plummet. </p>
<p>There’s already evidence of this behavior with Tesla’s waiting lists, with buyers paying $5k upfront and waiting years for delivery.</p>
<h3 id="parking-deck-companies_3">Parking Deck Companies <a class="head_anchor" href="#parking-deck-companies_3">#</a>
</h3>
<p>Many cars can already parallel park automatically. Elon and team are going a step farther, enabling your Tesla to park itself in your garage. This is just the beginning. As soon as vehicles are driving themselves, why park nearby at all?</p>
<p>Current parking companies exist in locations close to destinations (midtown NYC next to the offices of business folks who live on Long Island, Jersey, etc) because individuals have to drive to those destinations have to park somewhere. But if the rider can just be dropped off, why is parking necessary? </p>
<p>If you have a 6 hour day at the office, your SDV could drop you off, drive outside the city where parking is much cheaper, park and refuel, then drive back in to pick you up at the end of your work day. </p>
<p>Expect underground garages, airport parking, and even mall parking lots to undergo significant changes. Most likely they will be converted to service and cleaning centers for the vehicles, or into new destination use (Airports may reclaim parking facilities as actual usable space for restaurants, hotels, and more). </p>
<h3 id="insurance_3">Insurance <a class="head_anchor" href="#insurance_3">#</a>
</h3>
<p>Since starting their project in 2009, <a href="http://money.cnn.com/2015/07/17/autos/google-self-driving-car-injury-accident/">Google’s SDV has been involved in 14 accidents</a>, but was at fault in 0 of the cases. Each accident was caused by other human drivers (with rear-end collisions in 11 of the accidents).</p>
<p>Fewer accidents means fewer claims. Fewer accidents and safer driving also means lower premiums. The current insurance model will shift. </p>
<p>Another interesting question – if the driver is no longer responsible for directing the car in an SDV, and may not even own the car, will they be the primary holder of insurance on the vehicle? Or will they purchase insurance on a per trip basis?</p>
<p>I expect the SDV owning companies (Uber, Tesla, Lyft, etc) to be the primary buyers of insurance. Riders will have health and liability insurance for themselves, but would not need to purchase insurance on an SDV that they do not own. </p>
<p>There’s also a question of liability. Are the car manufacturers now liable for accidents instead of drivers? Will an engineer or computer scientist go to jail for designing a faulty algorithm that results in a severe accident? And at what point does the manufacturer’s insurance kick in?</p>
<h3 id="big-box-store-owners_3">Big Box Store Owners <a class="head_anchor" href="#big-box-store-owners_3">#</a>
</h3>
<p>Wal-Mart, Target, and dedicated big box grocery stores like Bi-Lo and Harris Teeter exist to centralize distribution of food and other consumer packaged goods in a world where driving yourself to the store is still the cheapest option. </p>
<p>In a world where transportation costs have plummeted and new delivery vehicles (including flying drones like <a href="http://tacocopter.com/">TacoCopter</a> and <a href="http://www.amazon.com/b?node=8037720011">Amazon Prime Air</a> ) emerge, is this model still viable?</p>
<p>Big box stores will still survive, but their function will change drastically. I expect them to shift from distribution centers for humans to distribution centers for local delivery bots.</p>
<h3 id="car-rental-companies_3">Car Rental Companies <a class="head_anchor" href="#car-rental-companies_3">#</a>
</h3>
<p>Enterprise and other car rental companies will either be driven out of business or merge directly with Uber, Lyft, or one of the other ride-hailing services. </p>
<p>Car rental companies already renew their fleets every few years. But rarely does an entire fleet of cars go completely out of date at once. With electric drive trains and automated driving, Car Rental companies will have major capital expenditures leading into the future. And these capital costs won’t be easy to pay when your customer base is collapsing.</p>
<p>Why rent a car at all if driverless cars become cheaper than driving yourself?</p>
<h3 id="amtrak-and-nonhigh-speed-passenger-train-comp_3">Amtrak and Non-High Speed Passenger Train Companies ### <a class="head_anchor" href="#amtrak-and-nonhigh-speed-passenger-train-comp_3">#</a>
</h3>
<p>Three common reasons for taking a train over a car:<br>
1) Faster routes from city to city avoiding traffic.<br>
2) Can work during the ride, no need to look at the road.<br>
3) Cleaner energy (depends on the route). Electric trains offset less carbon than cars and diesel locomotives.</p>
<p>An electric, self-driving vehicle world solves each of these issues, while also affording more personal routes.</p>
<p>I expect shorter route airline traffic to also be heavily effected by self-driving cars, but not as much as train traffic. Can’t take a self-driving vehicle across ocean routes… yet.</p>
<h3 id="large-truck-stop-rest-stop_3">Large Truck Stop / Rest Stop <a class="head_anchor" href="#large-truck-stop-rest-stop_3">#</a>
</h3>
<p>SDVs also include Self-Driving Trucks. Most large truck stops are built to be stop offs in between long truck runs. Refuel, buy food, shower, even get repairs made on a truck. </p>
<p>If the entire trucking business goes driverless, many of these services and products will no longer be needed.</p>
<p>Large truck stops will still exist at key hubs, but expect them to primarily be fueling and maintenance stops going forward – no longer supporting human needs like food and entertainment.</p>
<h3 id="local-auto-repair-shops_3">Local Auto Repair Shops <a class="head_anchor" href="#local-auto-repair-shops_3">#</a>
</h3>
<p><em>via Jason77700</em></p>
<hr>
<h2 id="what-other-industries-and-business-types-are_2">What other industries and business types are missing from this list? <a class="head_anchor" href="#what-other-industries-and-business-types-are_2">#</a>
</h2>
<p>Will add interesting tweets, suggestions and offsite conversation links here.</p>
<p>HackerNews:<br>
<a href="https://news.ycombinator.com/item?id=10672675">https://news.ycombinator.com/item?id=10672675</a></p>
<hr>
<p><em>Thanks to Mike Gibson for a long conversation on the future of vehicles that sparked this post and list.</em></p>
tag:blog.jeremyrwelch.com,2014:Post/Founders-Must-Be-Rooted2015-10-04T17:00:13-07:002015-10-04T17:00:13-07:00Founders Must Be Rooted<p><a href="https://svbtleusercontent.com/j3xwbnisvatdw.jpg"><img src="https://svbtleusercontent.com/j3xwbnisvatdw_small.jpg" alt="atlas.jpg"></a></p>
<p>Paul Graham claims that <a href="http://paulgraham.com/startupmistakes.html">20% of companies YC has funded have had a cofounder leave</a>. That is an enormous number. One in five.</p>
<p>If we’re entering the <a href="https://medium.com/@caterina/the-age-of-the-cockroach-5a720d917416">Age of the Cockroach</a>, we need more rooted Founders. </p>
<blockquote class="short">
<p>For <strong>Founders</strong>:<br><br>
How rooted are you? </p>
</blockquote>
<p>Do you feel confident, rock-solid and determined about the mission of your company? Do you have a support system and community that helps in the tough times? Are you structuring your life on a longterm view that will enable you to maintain consistent output and stability for your investors, employees, and partners for as long as it takes?</p>
<blockquote class="short">
<p>For <strong>Investors, Employees, and Partners</strong> of startup companies:<br><br>
Are the Founders you work with rooted?</p>
</blockquote>
<p>Would you follow them into battle? Are you confident that they’ll stay with the company no matter what happens because they care deeply about the mission? </p>
<h2 id="shutting-down-chrg-inc_2">Shutting Down Chrg, Inc <a class="head_anchor" href="#shutting-down-chrg-inc_2">#</a>
</h2>
<p>I’m asking these questions because, despite a decade of experience living the high-pressure, 16-hour day rollercoaster startup life, I do not think I truly understood the meaning of being a Founder until this year.</p>
<p>I learned this lesson the hard way – my cofounders and I recently shutdown our electric vehicle charging startup and returned our investor money.</p>
<p>Our team developed several key insights in a fast-growing market with massive potential. We built a strong brand and and launched a new product that was showing early signs of market fit. Then, unexpectedly, we ran into serious issues between the cofounders. Motivation-vaporizing, culture-changing, nerve-racking issues. We tried to patch things up initially, but over several weeks it got worse and worse. In order to save time and investor capital, we chose seppuku over a slow death. </p>
<p>As Founder and CEO, I ultimately blame the collapse on myself. I fought for as clean and quick of a shutdown as possible, but I am deeply angry and embarrassed that I let it come to this conclusion. I spent a lot of time reflecting over the last few months, trying to uncover mistakes I made and actions I missed that could have saved the company. </p>
<h2 id="founders-are-the-foundation_2">Founders are the Foundation <a class="head_anchor" href="#founders-are-the-foundation_2">#</a>
</h2>
<p>There’s one key thought I keep coming back to: </p>
<blockquote>
<p><strong>As a founder, your job is to carry everyone – customers, investors, employees, partners – until you reach the goal you set out to achieve.</strong></p>
</blockquote>
<p>Read that again. Process it.</p>
<p>Your title is not Creator or Inventor, it is Founder. You’re not just building a foundation, you <em>ARE</em> the foundation of your company.</p>
<p>Building the product; selling to customers; providing emotional support for employees; creating vision and a product plan for the future; even taking out the trash. The list goes on and on. Someone has to do these jobs to move a company forward. It is your job as a Founder to make sure they get completed – even if you delegated the task initially. This is an extreme amount of responsibility which requires firm footing.</p>
<p>I wasn’t prepared to carry everyone when I started Chrg. I was expecting to learn from and depend on one of my three cofounders who had more experience and domain expertise in our market. When the relationship with that cofounder changed, I wasn’t prepared to continue. I carried the weight with my other cofounder for awhile, but quickly realized that the path was not sustainable because I was not prepared to do it from the beginning.</p>
<p><a href="http://blakemasters.com/post/21742864570/peter-thiels-cs183-startup-class-6-notes-essay">Thiel’s Law</a> – <em>a startup messed up at its foundation cannot be fixed</em> –doesn’t just apply to the product and branding and market of a business. It applies to the Founders themselves, both individually and how they operate as a team. </p>
<h2 id="the-commitment_2">The Commitment <a class="head_anchor" href="#the-commitment_2">#</a>
</h2>
<p>Startups <a href="http://www.paulgraham.com/growth.html">seek high-growth above all else</a>. High-growth costs money. But more than just cash, high-growth costs focused time and gut-wrenching mental energy. </p>
<p>Founders must supply the time, energy and capital to build the initial product and start the growth cycle. As a company matures, Founders can work with investors to supply more capital and hire employees to supply more time and energy, accelerating the growth cycle. With enough time, the company may achieve the goal it set out to accomplish, and in the process become self-sustaining.</p>
<p>But until that time, by calling oneself a Founder, you are making a commitment to be the Foundation upon which every other process and person depends for as long as it takes to accomplish your mission. </p>
<h2 id="rooted-founder-rooted-foundation_2">Rooted Founder, Rooted Foundation <a class="head_anchor" href="#rooted-founder-rooted-foundation_2">#</a>
</h2>
<p>To form a solid Foundation with your cofounders, individually you must:</p>
<blockquote class="short">
<ol>
<li>Know yourself and maintain personal stability, and</li>
<li>Maximize creative output and time availability</li>
</ol>
</blockquote>
<p>You and your team need to solve every problem that comes your way. As the Foundation of your team, you don’t get to choose when problems arise (middle of the night, middle of vacation, etc), or what types of problems arise (technical, personnel, or just taking out the trash). </p>
<p>The second point, time availability and output, is championed in the Valley. All night hackathons, offices with chefs and barbers to minimize time away from the office, and a work-anywhere culture with always on messaging (from BlackBerry messenger slaves to Slack slaves) all support maximizing availability and output for founders and employees. </p>
<p>What’s strange about the Valley is that the first point of self-knowledge and emotional stability – which I now realize should be the first and highest priority of a Founder – seems to be discussed much less often. </p>
<p>The more I’ve thought about this, the more absurd it seems.</p>
<h2 id="get-rooted-your-way_2">Get Rooted, Your Way <a class="head_anchor" href="#get-rooted-your-way_2">#</a>
</h2>
<p>Startups are marathons and not sprints, so consistent and high-quality output is the goal. I believe founder <a href="http://www.inc.com/magazine/201309/jessica-bruder/psychological-price-of-entrepreneurship.html">depression, burnout</a> and <a href="http://www.businessinsider.com/startup-founder-jumps-to-her-death-from-rooftop-bar-in-manhattan-2015-7">worse</a> all result from misaligned expectations and not being rooted. From not having a support-system and community that can help give you perspective. From taking on too much pressure when you have <a href="http://nikolay.rocks/2015-05-28-do-not-work-with-insecure-people">unsolved personal insecurities</a>.</p>
<p>No two Founders are alike, which means that no two Founders will be rooted in the same way. But however they find it, all great Founders have become rooted enough to carry the weight of their company forward.</p>
<p>There’s an inner confidence and self-reliance component of being rooted that must be learned over time. Elon Musk once <a href="https://www.washingtonpost.com/news/innovations/wp/2015/03/24/when-elon-musk-lived-on-1-a-day/">ate on $1 a day to prove to himself that he could survive</a> even if his endeavors failed. Steve Jobs <a href="http://genius.com/1634167">dropped out of Reed College because he didn’t want to waste his parent’s money</a> until he knew what he really wanted to do with his life. At a young age, Richard Branson’s mother <a href="http://www.virgin.com/entrepreneur/richard-branson-5-lessons-my-mum">dropped him off 3 miles from home and told him to find his way home</a>. These kinds of experiences build inner confidence and determination that is transferable to future experiences. </p>
<p>But no man is an island. Even with strong determination and self-reliance, we all have breaking points. A Founder must also seek to root himself in processes of personal action (exercise, hobbies, charity work, and other stress relief and perspective-granting activities) and networks of people (cofounders, teammates, family, friends, and startup communities like YCombinator) that add further stability. </p>
<p>For example, Elon Musk moved away from his original home of South Africa, but he stayed close to family, cofounding his first company Zip2 with his brother Kimbal Musk. In the midst of financial trouble with both Tesla and Space X (in addition to a divorce from his first wife), Elon <a href="http://venturebeat.com/2010/05/27/elon-musk-personal-finances/">stayed afloat financially via personal loans from his friends</a>. </p>
<p>There’s no right answer and there’s no perfect state, and each team and person will have different requirements. But there is a level of stability that will feel right once you find it. When you hit that right balance, your energy levels and output will shoot up. I encourage you to get rooted and find that balance.</p>
<h2 id="my-path_2">My Path <a class="head_anchor" href="#my-path_2">#</a>
</h2>
<p>The sky-high living costs, cultural differences and distance from family became significant distractions for me in San Francisco. The luck and learning factors of Silicon Valley networks is real and so I plan to visit for extended periods often. But these benefits of SF mean nothing if I am not creating the highest-quality code, music, and writing as often as possible. </p>
<p>I reduced my possessions and shifted my primary geographic base back to the Southeast (Charleston). I am spending more time with family. I am reading more, writing more, and playing music more often. I hit the gym everyday.</p>
<p>There are far too many important problems in the world that need to be solved, so I will start another company. And when I next claim the title of Founder, my intention is to solve the problem or die trying. </p>
<p>Any less of a commitment is a waste of time and energy. I hope more Founders will realize this, and will bring a similar level of commitment to their companies and missions. </p>
<p><em>Thanks to Ty Ahmad-Taylor, Mike Gibson and Jason Mitchell and for providing feedback on early drafts of this post.</em></p>
tag:blog.jeremyrwelch.com,2014:Post/tesla-is-a-battery-company2015-04-01T16:00:49-07:002015-04-01T16:00:49-07:00Tesla is a Battery Company<p>Tesla Motors started as a Car company, but they should now be considered to be a Battery company for three key reasons:</p>
<ol>
<li>Tesla Leadership has Expertise in Batteries and Energy Systems</li>
<li>Batteries Are the Most Important Component of an Electric Vehicle (EV)</li>
<li>Tesla can enter other Markets with the Battery Tech they Developed While Building EVs</li>
</ol>
<p><a href="https://svbtleusercontent.com/ktwg7t2xf2pyrw.jpg"><img src="https://svbtleusercontent.com/ktwg7t2xf2pyrw_small.jpg" alt="Model-S-Battery.jpg"></a> </p>
<h2 id="electrochemical-blood_2">Electrochemical Blood <a class="head_anchor" href="#electrochemical-blood_2">#</a>
</h2>
<p>The careers of Tesla founders Martin Eberhard and Marc Tarpenning have been largely focused on Battery technology. Their first company together <a href="http://en.wikipedia.org/wiki/Rocket_eBook">NuvoMedia</a>, which built an eBook reader called the Rocket eBook in the late 90s, was a bet that as battery technology improved eBook readers would become much more feasible. They sold the company in 2000 for $187 million. </p>
<p>This sale would <a href="http://www.businessinsider.com/tesla-the-origin-story-2014-10">provide the funding necessary for Eberhard to explore the electric car market</a>, another product space that had potential to be deeply changed by improvements in battery technology. Eberhard and Tarpenning planned to build a two-seater sports car with an induction motor powered by lithium-ion batteries. This became the Tesla Roadster. </p>
<p>Eberhard and Tarpenning originally planned to outsource much of the frame and other auto components of the car, using the Lotus Elise vehicle as a base. As planned, Tesla would supply batteries and power train assemblies, while Lotus would be responsible for the chassis and other components such as wheels and shocks. In the end, Tesla took on many more subassemblies than originally planned, but their battery and EV power-train technologies are still their most important components.</p>
<p>The CTO of Tesla, <a href="http://en.wikipedia.org/wiki/JB_Straubel">JB Straubel</a>, also has deep expertise in energy systems, with a B.S. and M.S. in Energy Engineering from Stanford. Straubel is my pick as most likely to takeover <a href="http://money.cnn.com/2014/06/03/autos/tesla-musk/">when Elon Musk resigns</a> as CEO in a few years. </p>
<p><em>EDIT</em> Thanks to HackerNews for pointing out that Elon Musk was on track to <a href="https://www.iop.org/careers/working-life/profiles/page_57723.html">study high-energy-density capacitors</a> at Stanford, but dropped out to start Zip2. </p>
<h2 id="a-battery-on-wheels_2">A Battery on Wheels <a class="head_anchor" href="#a-battery-on-wheels_2">#</a>
</h2>
<p>The major car companies scoffed at Tesla when they launched the Roadster and subsequently when they announced the Model S. How could Tesla possibly compete with the decades of supply chain refinement, product and patent portfolios, dealer networks, and political swagger of the major car companies?</p>
<p>The answer is that Tesla doesn’t need to compete directly, because they’re not playing the same game. </p>
<p>In an ICE-centered automotive world, the engine is the most complicated and important component. As a result of the complexity of ICE engines, most modern car companies maintain ownership of engine design and manufacturing, marketing and branding, sales channels (via their own dealers), and final assembly, but outsource almost all other components of the car. </p>
<p>Electric motors are much simpler than their ICE counterparts. Some estimates place the number of components on an ICE engine at 200+ (including pistons, spark plugs, belts, coils and more), compared to less than 10 on a comparable electric motor. This comparison is a little over-simplified, but the point still stands: electric vehicles are much less complicated than their Internal Combustion Engine counterparts. </p>
<p>In an EV centered world, energy storage is the most complicated problem, and battery technology takes center stage. Tesla has developed significant expertise in the battery space while building their cars, and they can now leverage this expertise to enter other battery-dependent markets. </p>
<h2 id="the-distributed-energy-future_2">The Distributed Energy Future <a class="head_anchor" href="#the-distributed-energy-future_2">#</a>
</h2>
<p>Electric Vehicles are only one piece of a much larger shift in energy usage and generation. <a href="http://smile.amazon.com/Smart-Power-Anniversary-Electric-Utilities-ebook/dp/B00NEVDMXO/">A distributed energy future is coming</a>. </p>
<p>Today most consumers have only one choice of how to get their energy – a single regional power utility company. In much of California, that’s PG&E. In the NY Metro area, it’s Con Edison. In the Carolinas, it’s Duke Energy. Because of technology advances of the last few decades, in the near future the power utility company will be only one among many energy source choices.</p>
<p>Batteries, on wheels or stationary at the home/office, will play a key role in this ecosystem by serving as the connecting piece between multiple energy generation sources. </p>
<p>Home batteries can recharge nightly during the lowest-demand, lowest-price periods. Then, during the day, a home might run solely from battery power and rooftop solar. If there is an excess of energy available on the battery, the homeowner might even sell some energy back to the grid. The homeowner’s electric vehicle (battery on wheels) also charges overnight, and could sell some excess energy back onto the grid during peak energy usage periods while plugged in at the office. </p>
<p>This is the future Tesla is preparing for with their battery-building <a href="http://en.wikipedia.org/wiki/Gigafactory">Gigafactory</a>. Once fully operational, this single factory in Nevada will produce more lithium-ion batteries in one year than the entire global production in 2013 (across all lithium-ion factories, all companies).</p>
<p>Tesla is maneuvering to dominate the global Battery market. Tesla CTO JB Straubel, during a <a href="https://www.youtube.com/watch?v=zWSox7mLbyE">keynote presentation at the 2014 Energy Storage Symposium</a>, makes it very clear what direction Tesla is headed in:</p>
<ul>
<li>“I really love batteries. I might love batteries more than cars.”</li>
<li>“…energy storage is the biggest [factor]. You can’t win this battle without reducing the cost and improving performance of energy storage.”</li>
<li>“I guess again we should all be thinking bigger. The grid opportunity here is huge…”</li>
<li>“Maybe this whole group is not thinking in large enough scale for the market size of energy storage.”</li>
<li>“The grid storage market is slow to mature, but once you cross certain thresholds… its a much easier sales proposition… It will scale.”</li>
<li>“I see us more as an energy innovation company, at our core, than even as a car company.”</li>
</ul>
tag:blog.jeremyrwelch.com,2014:Post/on-googles-build-and-buy-acquisition-strategy2015-03-12T17:22:34-07:002015-03-12T17:22:34-07:00On Google's "Build And Buy" Acquisition Strategy<p><a href="http://en.wikipedia.org/wiki/Invite_Media" title="Invite Media">Invite Media</a> – where I cut my startup and adtech teeth – is the best performing acquisition in Google’s history by revenue growth, quickly scaling from tens of millions into the billions in only a few years. </p>
<p>This incredible feat is as much the result of Google’s Corp Dev and Product teams as it is the Invite Media founders, team and investors. By executing an acquisition strategy that I call “Build And Buy”, Google established a basis for cleaner technical and team integration of our growth machine, and they also insured they had people on staff with domain expertise that could steer the ship even after the original Invite Media team members left Google (<a href="http://www.schrodinger.com/" title="Schrodinger">the</a> <a href="http://www.vistarmedia.com/" title="Vistar Media">Invite</a> <a href="http://www.flatiron.com/" title="Flatiron Health">Media</a> <a href="https://trulywireless.com/" title="Truly Wireless">mafia</a> <a href="https://pippio.com/home" title="Pippio">is</a> <a href="http://lynkmessenger.com/" title="Lynk Messenger">strong</a>). </p>
<p>Any company attempting to solve a problem using technology they fully control and own faces a choice of Buy or Build. Buy means acquiring another piece of technology outright, most often by acquiring the company that created that product. Build means developing the technology product in-house.</p>
<p>Early in a tech startup company’s life, the only choice is to Build. But as a company’s coffers grow, whether to Buy another company to enter a new business area becomes an important question. If the company chooses Build, then Engineering and Product teams are typically lead the process. If the company chooses Buy, then the Corp Dev team is running the show (though Product and Engineering may still have input in the process).</p>
<p>Gmail is an example of a pure Build. The product was built internally, tested internally, then released to the rest of the world. Nest Labs is an example of a pure Buy. Google had no smart home division (though they did own a hardware co: Motorola) prior to buying Nest Labs. </p>
<p>For some product areas, especially any ad technology related products such as Invite Media, Google implements a hybrid “Build And Buy” acquisition strategy. </p>
<p>Here’s how <strong>Build And Buy</strong> works: </p>
<ul>
<li>Big Company starts Building the product internally. </li>
<li>Sometimes Big Company releases this product publicly and other times they only use it internally or in private beta. </li>
<li>In either case, if an outside company beats them to the punch by acquiring more customers/data/revenue with a competing product, then they pull the trigger on Buy. </li>
<li>Once acquired, Big Company keeps the acquired company running biz as usual (rather than an immediate push to integrate), then gradually merges the two teams and products over the course of several years.</li>
</ul>
<p>When Google bought Invite Media, they were already building a competing product internally. They bought us primarily for our customer list, brand and business (this is the case for most adtech acquisitions). Of course they wanted our technology as well, and wanted us to continue operating and growing the business. But on a pure race to build better tech, Google will almost always crush a startup because of their high number of excellent engineers and data center and server tech. However, even if they build a better product, that better product is useless without customers to use it. And that’s why they purchased us. After buying the leading brand and customer list in the space, the Invite Media Bid Manager product (built on our own custom software stack) evolved into Doubleclick Bid Manager (built entirely on the Google stack using Google design and software engineering best practices). </p>
<p>Why pursue the “Build And Buy” strategy instead of “Buy” alone? </p>
<ol>
<li>
<strong>A Winning Chance</strong><br>
If you launch publicly and win the market, no need to buy any companies.</li>
<li>
<strong>Domain Expertise</strong><br>
Even if you eventually buy the leading company in the space, you’ll already have internal expertise in the product area. The internal product managers can help Corp Dev with more accurate valuations of the acquisition targets. Also, if the acquiring company is public, Wall Street is likely to view the acquisition in a more favorable light if they know the company already has expertise in the space because this increases the chances of a clean integration of the acquired product/team/services. </li>
<li>
<strong>Negotiation Leverage</strong><br>
Existing relationships, existing customers, and existing product all give more leverage to the acquiring company. This is especially important early in the game when there might be a few leaders in the space in question, but no single company is dominating.</li>
<li>
<strong>Ready for Integration</strong><br>
Building before Buying will make product and even culture integration of an acquired company much easier because a framework of people and technology (and sometimes an entirely separate customer base!) is already in place to connect with acquired company.</li>
</ol>
<p>The massive growth post-acquisition would have been much harder to accomplish without the framework of knowledge and people Google had already established. This strategy sounds expensive on the front-end, but isn’t a failed acquisition much more expensive?</p>