Don’t Panic About E*Trade

Wow, people are really panicked.

Here’s what happened. Yesterday, Citigroup analyst Prashant Bhatia wrote an extremely negative report on E*Trade based on their announcement of exposure to mortgage securities where he put the likelihood of bankruptcy at 15%. How he calculated this, I don’t know. Maybe he estimated their exposure and risk curve for their portfolio, and then he ran monte carlo simulations of possible futures. More likely, he squinted his eyes, held up his thumb, and said “1 in 7”.

More coverage here in Business Week.

In any case, I’ve had a few people email me today about whether or not their money is safe at E*Trade.

Here is what I know:

1) If you have bank accounts, they are FDIC insured up to $100,000. So if E*Trade folded tomorrow, you’d be able to open up a new account elsewhere, and the FDIC would wire money in (up to $100,000) within a matter of days.

2) The brokerage accounts are protected by SIPC up to $500,000. Not sure how the re-imbursement works, but I’m guessing it’s something like an insurance claim.

3) The brokerage accounts are protected by a separate insurance policy for up to $150M per brokerage account.

None of these scenarios are likely – other brokerages & banks would be completely moronic to not buy E*Trade or it’s accounts for customer acquisition. E*Trade’s brokerage and bank business is doing quite well at this point.

In fact, here is an article suggesting that this might be a great buying opportunity for the stock.

So, unless you have more than $500K in securities at E*Trade and $100K in bank deposits at E*Trade, you are fine.

Update (11/13/2007): Wow. While E*Trade stock is now up almost $1.00 per share right now on Wall Street, I must not be the only one getting email on this issue. Look at what greeted me when I logged into E*Trade today:

Update (11/14/2007):  The following letter was updated on E*Trade today, which details the complete protection of brokerage accounts up to $150M.

To All E*TRADE Customers:

The old adage “there is no such thing as bad publicity” does not apply to E*TRADE FINANCIAL this week. Seemingly by the stroke of a pen… or a few clicks from a keyboard… a Company with a core business that has generated impressive growth quarter after quarter has been bombarded by rumored reports of its imminent demise.

Well, we want customers to know that the entire E*TRADE team has come together with resolve and commitment, taking appropriate and decisive action to manage through this issue and to ensure that E*TRADE FINANCIAL continues to deliver the best value in the marketplace for our customers.

I have spoken with scores of customers over the past week. Many of you have openly expressed your confidence in E*TRADE. It is genuinely gratifying to know that our retail customers—the heart of our business—understand the value in our model and the strength of the franchise.

Many of you have also asked me about asset protection, so to be clear—your money is safe at E*TRADE FINANCIAL. Here are the facts:

  • FDIC insures all E*TRADE Bank accounts to at least $100,000 and Extended Insurance Sweep Deposit Accounts to $500,000.
  • SIPC protects E*TRADE Securities customers up to $500,000 (including $100,000 for claims for cash).
  • Additional E*TRADE Securities protection provides up to $150 million per brokerage account, underwritten by London insurers (aggregate $600 million).
  • E*TRADE is well-capitalized by regulatory standards.

E*TRADE was founded on the concept of empowering the individual investor. This value is still at the heart of our business. We look forward to continuing to provide you with the products, pricing, service and functionality you have come to expect in order to help you manage your financial world.

We haven’t lost focus on our customers, our business or our future. The credit crunch has had a tremendous impact, but we are taking appropriate and decisive action to manage through it.

Thank you for your continued business,
Jarrett Lilien
—Jarrett Lilien
President, COO and Director, E*TRADE FINANCIAL

Historic Change at eBay: Semi-Persistent BIN (Buy It Now) Goes Live

A small announcement from eBay last week.  Most people probably didn’t notice it, given the news around Q3 earnings, Skype, and 100 other stories that people were tracking.

Here is the AuctionBytes article:

eBay Moves to Longer Lasting BIN Auctions

Actually, eBay began testing this back in July, but just recently expanded it to quite a few more categories.  Here is the original note from Sohil Gilani, the Product Manager who has spent a lot of time over the past two years studying and implementing this change:

Hi everyone, I’m Sohil Gilani with our Buyer Experience team. Over the years, we’ve routinely been asked why the Buy It Now option disappears from a listing when the first bid is placed. Our reason has been concern that it would create a confusing experience for a buyer, who could place a bid on an item, but then have someone Buy It Now (BIN) out from under them before the end of the auction. That said, we’ve done some extensive research that suggests keeping the BIN option available on a listing longer will increase the chance that a buyer wins the item and that it will close at a higher price for the seller. As a result, we’re looking at ways to change how BIN works that balance both buyer and seller needs.

In case it isn’t clear, let me explain the problem:

Ever since eBay launched the ability to add a “Buy It Now” button to an auction, it has disappeared as soon as anyone placed a bid.  So, for example, if you were auctioning a cell phone with a starting bid of $0.99 and a Buy-It-Now price of $99.99, a single bid of $1.00 would make the Buy-It-Now price disappear.

The idea is that a buyer has the chance to “snap up” the item for a fixed price set by the seller, or place a bid to try to win it at auction.  Usually, the motivation to place a bid is the belief that the bidder will get it for a lower price.

The problem is, once the Buy It Now button disappears, every future potential buyer is deprived of two things:

  1. The ability to immediately buy the item, without waiting for the auction to end
  2. The ability to see what the seller thought a fair “fixed price” was for the item

Many people, for a very long time, have asked why eBay makes the BIN button disappear after one bid.   Usually, they focus on issue (1).  After all, the need to wait for an auction to end is a major disincentive for a potential buyer.  eBay is likely losing quite a few buyers to the fact that useful BIN buttons are disappearing.  Sellers are also losing the ability to close a sale quickly, for a fair price that they have assigned.  Even worse, sellers actually pay eBay a fee to place that BIN button there in the first place.

The problem lies with issue (2).  As a former employee, I can’t reveal the actual number, but you would be shocked at how many auctions actually close at a price higher  than the original Buy It Now price.  This happens for a couple reasons.  First, sellers may not be very efficient at setting their own fixed prices – auctions are likely much better at fairly pricing the item.  Second, the original bidder who “knocks out” the BIN button is not likely the one who bids above that price.  Every future bidder has now lost that information, and as a result, is free to bid whatever they think is fair.  Apparently, in a large minority of cases, bidders end up with a price that is higher than the seller expected.

So, eBay has a dilemma:

  • If they keep the disappearing BIN button, they are likely losing sales AND velocity (the time it takes to close a sale).  They are also encouraging sellers to use a higher starting price (to avoid losing the BIN quickly), use reserve prices (to keep the BIN), or to not use BIN at all (which is a fee-generating feature) – all bad things that hurt the likelihood of a sale.
  • If they make the BIN sticky, aka “Persistent BIN”, they might actually decapitate the final selling price on millions of auctions.  That would hurt both eBay sellers and eBay itself, since both make money based on the final sales price.

The solution that eBay is testing finally allows eBay to gain some empirical data in real situations on how to best control the way the BIN price disappears.

  • Do you let the BIN button stay until a fixed dollar amount?
  • Do you let the BIN button stay until a fixed percentage of the final price?
  • Are the results different in different categories?  For different starting prices?

Well, all I can tell you is that, as an eBay seller, I was tickled pink to see this on my latest cell phone auction this week:

As you can see, I start all my auctions with a starting price of $0.99.  Normally, I lose that BIN button very quickly.  But in this case, the BIN button stayed, even after a bid of $0.99.  In fact, the button stayed until the bidding reached $50.00, giving buyers ample opportunity to buy my phone for fixed price.  The difference?  Literally 6 days of BIN button goodness were added, since my auction didn’t clear that price until the 7th day.

(Wow, that sounds like a biblical reference.  It was evening and it was morning, and the BIN button worked for 6 days and 6 nights, but on the 7th day, the BIN button rested…”)

Anyway, I’m glad to see eBay continuing to push its understanding of one of its most popular formats.  And a big congratulations to Sohil for seeing this effort through to live-to-site.  Count me as a big fan.

BTW If you are wondering why I bother buying the BIN feature on my auctions, even though it disappears so quickly, it’s a fair question.  In my selling experience, adding the BIN button not only increases the chances of my auction selling quickly, I also tend to set it for a higher-than-average price based on my research.  The way I see it, a buyer who wants it right now tends to be willing to pay a bit more for the privilege.  If not, they can always bid.

The LinkedIn Store is LIVE!

Tonight, the new LinkedIn online store went live.

One of the best parts of working at a startup is that you get to participate in all sorts of company activities.  In this case, all of the “models” in the store are actual LinkedIn employees.

For example, you may recognize the guy talking here on the LinkedIn fleece vest page:

If you hover over the “Adam Nash” link on the real website, it says “Props to our Product team”.  🙂

I guess with the new store, our CEO may have to modify his explanation of our business.  Technically now we have four revenue streams.

Order your LinkedIn merchandise today!

Craigslist: What Am I Doing Wrong?

Silly post this evening.

I don’t usually post or forward urban legends or humor emails I receive. Truth be told, I don’t get many of these any more – it’s as if the world went through 10 years of forwarding silly email as they got used to the medium, and that silliness has past.

I thought this email was fake, but I did this Google search, and I was able to verify that this was, truly, a legitimate Craigslist posting recently, and a legitimate response. So enjoy… it has exactly the right mix of humor, social commentary, and financial reference for my tast.

Here is the original Craigslist posting:

What am I doing wrong?

Okay, I’m tired of beating around the bush. I’m a beautiful
(spectacularly beautiful) 25 year old girl. I’m articulate and classy.
I’m not from New York. I’m looking to get married to a guy who makes at least half a million a year. I know how that sounds, but keep in mind that a million a year is middle class in New York City, so I don’t think I’m overreaching at all.

Are there any guys who make 500K or more on this board? Any wives? Could you send me some tips? I dated a business man who makes average around 200 – 250. But that’s where I seem to hit a roadblock. 250,000 won’t get me to central park west. I know a woman in my yoga class who was married to an investment banker and lives in Tribeca, and she’s not as pretty as I am, nor is she a great genius. So what is she doing right? How do I get to her level?

Here are my questions specifically:

– Where do you single rich men hang out? Give me specifics- bars, restaurants, gyms

-What are you looking for in a mate? Be honest guys, you won’t hurt my feelings

-Is there an age range I should be targeting (I’m 25)?

– Why are some of the women living lavish lifestyles on the upper east side so plain? I’ve seen really ‘plain jane’ boring types who have nothing to offer married to incredibly wealthy guys. I’ve seen drop dead gorgeous girls in singles bars in the east village. What’s the story there?

– Jobs I should look out for? Everyone knows – lawyer, investment
banker, doctor. How much do those guys really make? And where do they hang out? Where do the hedge fund guys hang out?

– How you decide marriage vs. just a girlfriend? I am looking for

Please hold your insults – I’m putting myself out there in an honest
way. Most beautiful women are superficial; at least I’m being up front about it. I wouldn’t be searching for these kind of guys if I wasn’t able to match them – in looks, culture, sophistication, and keeping a nice home and hearth.

it’s NOT ok to contact this poster with services or other commercial interests
PostingID: 432279810

Alright. Funny, right? Sick? Disgusting? Ridiculous? Hilarious? New York? Yes. Yes. Yes. Yes. Yes.

This post received a number of responses. However, this one is worth reading.

Dear Pers-431649184:

I read your posting with great interest and have thought meaningfully about your dilemma. I offer the following analysis of your predicament.

Firstly, I’m not wasting your time, I qualify as a guy who fits your
bill; that is I make more than $500K per year. That said here’s how I see it.

Your offer, from the prospective of a guy like me, is plain and simple a crappy business deal. Here’s why. Cutting through all the B.S., what you suggest is a simple trade: you bring your looks to the party and I bring my money. Fine, simple. But here’s the rub, your looks will fade and my money will likely continue into perpetuity…in fact, it is very likely that my income increases but it is an absolute certainty that you won’t be getting any more beautiful!

So, in economic terms you are a depreciating asset and I am an earning asset. Not only are you a depreciating asset, your depreciation accelerates! Let me explain, you’re 25 now and will likely stay pretty hot for the next 5 years, but less so each year. Then the fade begins in earnest. By 35 stick a fork in you!

So in Wall Street terms, we would call you a trading position, not a buy and hold…hence the rub…marriage. It doesn’t make good business sense to “buy you” (which is what you’re asking) so I’d rather lease. In case you think I’m being cruel, I would say the following. If my money were to go away, so would you, so when your beauty fades I need an out. It’s as simple as that. So a deal that makes sense is dating, not marriage.

Separately, I was taught early in my career about efficient markets. So, I wonder why a girl as “articulate, classy and spectacularly beautiful” as you has been unable to find your sugar daddy. I find it hard to believe that if you are as gorgeous as you say you are that the $500K hasn’t found you, if not only for a tryout.

By the way, you could always find a way to make your own money and then we wouldn’t need to have this difficult conversation.

With all that said, I must say you’re going about it the right way. Classic “pump and dump.”

I hope this is helpful, and if you want to enter into some sort of lease, let me know.

New York is a magical place.

Update (12/1/2007): I’ve been meaning to post this for a while. It turns out that this woman ignored the obvious right thing to do, and decided to respond. Her use of technical financial terms is bizarre and incorrect, but I’m guessing she was paraphrasing with some help from friends who had more knowledge about high end finance. In any case, I’ll let you judge for yourself.

From the “Best of Craigslist”, the post titled “To the gentleman who called me a depreciating asset

To the gentleman who called me a depreciating asset
Date: 2007-10-11, 8:23AM EDT

Dear Sir,

I must confess that I was somewhat taken aback upon reading your email. Indeed, it has taken some time for me to sufficiently recuperate from my surprise. Lest your confidence quickly inflate for little reason (as we know is the predisposition for Wall St. types), allow me to hasten to reassure you that the source of my surprise was neither your candor nor the accuracy of your perception. Indeed, it is your “claimed” success in light of your poor grasp of economics which has me baffled. If the standards required to meet with financial success on Wall St. have sunk so low, perhaps I should indeed “make my own money”, except for the fact that the effort/reward ratio is far too high for my liking – especially when so many of your ilk have displayed a far more cogent grasp of market realities than you have.

By now you are likely scratching your ever-vanishing hairline in confusion, so allow me to elaborate, dear man. To build some credibility I will tell you a bit more about yourself. Though you did not mention the details of your occupation, it is clear that you are an investment banker and not a trader, as any good trader would understand that human courtships are based upon a semi-efficient open market, and not an investment banking cartel. However, your inability to grasp the realities of the dating market is not surprising, given that 90% of the population are senior singles in maturity to you. Not to mention that you have successfully employed the tools of collusion and market manipulation rather that true acumen in your supposed wealth generation.

If your grasp of finance were not a minority partner with your ego, you would realize that the “outflows” associated with my depreciating “assets” are quite certain, and therefore subject to a low discount rate when determining their present value. In addition, though your concept of economics evidentially failed to move past the 1950s, advancement in plastic surgery is not subject to the same limitation. Thus, with some additional capital expenditure, the overall lifetime of “outflows” generated by these assets is greatly increased. Sad that Ashton Kutcher has demonstrated understanding of the female asset class which you, in all of your financial “wisdom”, have not.

You, on the other hand, are, given the uncertainty of the Wall St. job market, more of an inflation-indexed junk bond with an underwater nested call option. Though you may argue that you are more of an equity investment, my monetary minimums required from you do not change, and if you are unable to pay them, I will liquidate you without the benefit of a chapter 11, just as you would me.

Because your outflows are so much more uncertain with respect to mine, I require additional compensation in the form of a underwater nested call option on your future assets. I say underwater because, even taking into account the value of your junk bond coupon payment to me, the value of my “outflow” is in excess of the market price of your equity (which is quite low due to its riskiness associated with your poor grasp of finance and my existing claim upon your junk bond coupon).

I must thank you though for raising the question, despite the reputation cost of subjecting your weak logic to such widespread scrutiny. This took either considerable courage or ignorance on your part- and we’ll give you the benefit of doubt, just this once. My current boyfriend (a trader who lives in Central Park West, of course) and I thoroughly enjoyed discussing your response and we wish you the best of luck in your unhappy pursuit of that elusive market inefficiency.

Since it’s on best of craigslist, once again, I have to assume it’s legit. Ah, New York.

eBay Countdown Widget Launches (Beta)

Now this looks like fun…

eBay Countdown Widget (Beta)

I will self-admit, I’m more of a fixed-price buyer than an auction bidder, although I’ve done plenty of both on eBay.  But I like the idea of a smack-talking, action-packed, avatar-enabled feel to an online auction.  Captures some of the intensity and fun of a live auction, with the extra high tech coolness of a web-based widget.

We’ll see what people think, but I’m glad this idea came to life.  Special thanks for making it work on Firefox on the Mac!  Hats off to the Buyer Experience team, who I know have been cooking up ideas like this for the better part of a year.

Great New Features from the eBay Express Team!

It has been a while since my last eBay-related post, but this article crossed my news feed a few days ago, and I had to comment:

AuctionBytes: Merchants Can Opt to Post on eBay Express

Time moves fairly quickly on the web, and at this point, the last of the strategic features from our 2007 plan for eBay Express are rolling out to the site. It’s exciting to see Lara & the team bring them to life after months & months of planning & effort.

The AuctionBytes article is fairly understated, but I think it’s worth highlighting a bit of what is now possible on eBay Express:

  1. For the first time, buyers have one site where they can search & purchase, in one seamless experience, items from, eBay Stores,, and This is with 24×7 customer service, PayPal-based checkout, and 100% buyer protection.
  2. Robust Merchandising Platform. eBay Express is now delivering targeted, customizable, and in many cases, product-based merchandising through email and the site. It began with the new “Add to Cart” page that launched a few months ago, and has now been extended across the site and to regular emails to recurring buyers. More importantly, it’s a flexible platform that allows for experimentation and optimization based on the actual results the team sees from different merchandising techniques and different types of placements.

Hopefully, the eBay Express experience will deliver these in such a way that they will feel seamless and obvious to buyers. The goal is to never reveal the complexity of integrating three completely separate platforms for fixed-price items to buyers.

One last thing that is wonderful to see is the amount of experimentation that is going on with the site, as the team works to relentlessly improve buyer engagement and purchasing rates. Many people might not notice the improvements to the results set, the navigation controls on finding pages, the shopping cart presentation, integration, and the catalog-based experience in the media categories, but I see them now live-to-site, and I know that each and every one of those small feature improvements makes the experience measurably better.

So congratulations again to the team on these feature launches. I think I may make a couple extra purchases today on the site just to celebrate.

eBay Should Buy Ning… But Can They Afford It?

There was an interesting post yesterday by Don Dodge on the recent financing for Ning.

Marc Andreessen’s Ning raises $44M – Social Network on a Freemium business model

Wow. $44M is a lot of money, and a $214M post-money is a lot for a company at the stage Ning is at financially. Not sure what the end game would be to justify it, unless they either see a multi-billion dollar company on the horizon of 3-5 years, or a quick flip for $500-750M in 2008.

This is one of the areas of Web 2.0, however, that eBay should be a part of. eBay, after all, was built on community. Not just one community, but thousands – coin collectors, auto parts dealers, book sellers.

When I look at Ning, I see a product that eBay should have built – a single profile for a user (much more Web 2.0 savvy and current than the current eBay My World product), and the ability for users to create and join as many groups as they want, with full social networking features. Rather than Google Adwords, the free groups could easily be featuring actually product & item recommendations. The natural search indexing benefits of the groups would be excellent. eBay could build features to help members share searches, classify products, highlight Stores, and make vibrant mini-communities on the eBay/Ning platform.

A couple of years ago, eBay tried to update it’s incredibly dated eBay Forums with the new eBay Groups product. But compare that effort to Ning, and I think you’ll see why I believe that eBay should be courting the Ning team actively. Ironically, the eBay Alumni network is on Ning already.

If the price is too high now, maybe there is a way for eBay to just do a deal to bring Ning functionality to its members, and merge the Ning profile with My World.

Try it out for yourself, and I think you’ll see. The combination of the eBay member base and the functionality of Ning could easily 10x the number of social networks on Ning, and bring the number of users into the tens of millions. The eBay community has always wanted to form social networks… they’ve just lacked modern tools to do so.  eBay & Ning could reach a scale together on a time table that wouldn’t be possible independently.

Please note: In the interest of full disclosure, I do have some good friends at Ning. And I do have some good friends at eBay. So, while I’m not a truly disinterested party, I have no financial stake in Ning. I am a current shareholder of eBay.

My (Relatively) New Patent Applications & One Old Nash Patent

One of the great things about working for eBay was the support of the legal team for the creation and filing of patents.  Over the course of my four years at eBay, I filed several patent applications, starting with my first in last 2004.

When I was growing up, I used to always hear about the patents filed by my grandfather (in the food business).  They were always a symbol of success, intelligence and pride in my family.

What patent is this, you might ask?  Well, with great thanks to Google for their new, searchable patent database, I have now for the first time had a chance to read it for myself.   It is patent #3108882, dated January 29, 1963, and is titled “Method of Preparing an Edible Fish Product“.  To translate from the legalese: it is the method of preparing & packing gefilte fish in glass jars with jelly.  Yes, you now know where that came from.

I know there are significant problems with the patent system as it stands today, particularly around software.  However, I can’t help feeling proud of the patents that I worked on at eBay, and grateful for their support shepherding them through the legal hurdles.

Patent applications only display on the US Patent Office website 18 months after the application is filed, so right now only two of the applications are showing up.  The rest will likely become visible over the next year or so.

Here is the link to my patent applications on the USPTO website.    Note the most recent one to show up, for “seller and item filters”, the backbone of the eBay Express website.

Welcome, Kijiji US. The First Real Craigslist Competition.

It was announced fairly quietly on Monday, but if you didn’t hear, eBay launched Kijiji in the US this week.

Click here to go to the site, now live in over 200 cities across the country.

It has been interesting to read the reactions and articles on the launch. It seems like the consensus is that while this is a smart move for eBay, as the online classifieds business continues to grow in potential, most people feel like Craigslist has nothing to fear.

Henry Blodget wrote on his blog the following:

Second, Craigslist is run by socialists who appear to have no interest in turning it into a real business. This means Craigslist is likely to be free or near-free in perpetuity. And this, in turn, means that if eBay ever tries to make Kijiji US a real business, the few buyers and sellers who ARE using Kijiji will probably laugh all the way to Craigslist.

Sorry, Henry. Kijiji has been quite successful for eBay outside the US, and that is without ever charging fees for listings except in very specific categories. (Craigslist, for example, does charge to post job listings).

What eBay does have on its hands is a platform that was designed to easily scale, to roll out new categories and cities across the world almost effortlessly, and one that was designed to be profitable. They have iterated on the model in global markets where classifieds are far more competitive with e-commerce than in the US, and they are now bringing those lessons to the US.

The eBay position described here, in this article, sounds about right:

Kijiji, a site eBay has operated overseas for two years, is now available in about 220 cities across the United States, spokesman Hani Durzy, said Tuesday.

“We’re targeting young people and young families looking for bargains locally,” Durzy said. “For now it’s a free service and our focus is on building the user experience…”

“I think Craigslist has been an incredible success but we think there is market for more players,” Durzy said.

Don Dodge seems to think that Craigslist has a secret-sauce, built around not running Classifieds like a business. It’s possible, but it’s also possible that Craig Newmark is quite happy running effectively a large lifestyle business, where he has a lot of influence, plenty of income, and complete control over his dominion.

eBay has challenges here, no doubt. There are network effects around the classifieds business, to be sure. It’s not like Kijiji in the Bay Area is going to be able to displace Craigslist.

However, where some people see strength in Craig Newmark’s resistance to profit-motive, I see a potential weakness.

Theoretically, eBay will push to innovate on the revenue model for classifieds more aggressively than Craigslist. Google innovated on their natural search business, and gave birth to a multi-billion dollar industry. It’s possible that the craigslist team is missing out on significant opportunity, largely because they aren’t interested in anything more than slight profitability.

It’s also likely that eBay will reinvest those dollars into continued enhancement of the Kijiji experience and business. For example, Kijiji will likely launch in far more cities than Craigslist. Since the network effects are local, Kijiji in a new city should have an outstanding chance at blocking others from expanding. eBay will likely also have more dollars to invest into real problems like Trust & Safety around classified ads.

Craiglist has been a phenomenal success, largely because it creates amazing value for its users. One weekend, as an experiment, I posted a Craiglist ad for two oak dressers and a table on Saturday night. I asked for $400, and that the buyers pick up the furniture no later than Sunday night.

By Sunday at 5pm, I had $400 cash in my wallet, and 3 buyers had come to pick up the furniture and take it away. Amazing.

The online classifieds business is for real, and despite the natural worries about cannibalization, it’s good to see eBay moving on this opportunity.

I guess I’m playing devil’s advocate here by saying that Kijiji could be a real business for eBay in the US, and more importantly, it could be real competition for Craigslist if they aren’t on their game.  Of course, this will only work for eBay if they aggressively invest their profits from the business back into the business, to keep pushing the bar higher for the online classifieds experience.

A Sailor’s Map to Social Networks

Just for fun, found this link on Valleywag tonight:


In this map from Randall Munroe of, social networks and other online communities are represented by kingdoms. Myspace dominates this mythical world, the internet giants such as Yahoo and Microsoft are relegated to the “frozen north”, and blogs appear as a scattered archipelago. Now, all we need is this skin on a version of Risk, the global domination game, in which players can fling armies of users against their bitter rivals.

Of course, I can’t seem to find my favorite online communities, eBay & LinkedIn anywhere on this map. But still fun. I particularly like the Sea of Memes.

Amazon S3: Backbone to Cheap Multi-GB Web Backup for Mac OS X?

About a year ago, Amazon launched it’s S3 storage service.  This seemed a little strange to me at the time, because Amazon’s core business is as an online retailer… it was unclear to me what type of strategic advantage they would have as a long term of provider of cheap, online storage.

“Let a thousand flowers bloom,” I guess… (one of the most misunderstood quotations used around innovation, by the way.  Check out the source!)

In any case, I received my regular TidBITS digest email today, and it featured web-backup services for the Mac.  What was interesting was that the article featured primarily applications that use Amazon S3 as their backbone!  At $0.15 per GB, and $0.20 per GB/transfer, Amazon is a fairly cheap way to backup & store large libraries, like music & photos.

Several small software shops have built applications to help users do just that…

Here is the original TidBITS article.  The applications covered include:

  • Jungle Disk.   This application is the most polished of the bunch.  It does not handle incremental backups, yet, but it does support scheduled backups.  It will cost $20 when it reaches 1.0, but it’s free right now in beta.  Jungle Disk is available for Mac OS X, Windows & Linux.
  • S3 Backup.  This application, by Maluke, offers different named backups, as well as the ability to exclude files based on pattern matching.  However, it doesn’t offer scheduling or incremental backups, yet.  Still in beta.
  • Bandwagon.  This application is tailored for music lovers who want to backup and maintain a large music library online, to be available to multiple machines or for safe keeping.  Very interesting because it offers menu-bar controls, and support for multiple “storage clouds”, including Amazon S3.

I remember a few years ago looking into online backup solutions, and being totally disillusioned with the low storage volumes and costs offered.  I have about 300GB of content to backup, with daily increments that vary from 10MB all the way up to 2-3GB on days I upload a new set of photos from my camera.

These solutions aren’t there yet, but they are closer.  And the pricing is closer too.

Anyone out there actually try one of these?  Or are you using Amazon S3 for anything else interesting?

How to Track Prosper Loans in Quicken 2007 (Mac OS X)

So, a few confessions to start this off.

First, I am still a Quicken addict. It has been thirteen years, I think, since I started using Quicken in earnest to track my finances, and I’m still at it. Despite absolutely terrible releases of the software, and lackluster Mac support, it’s still one of my must-have applications.

Second, I am a big fan of I found Prosper when it was CircleOne, through some friends from eBay who left and joined the company. As a result, I’m a founding group leader (though not a very successful one), and a shareholder.

Earn 8-12%. Great Returns. No Banks. Borrow Money From People. Low Rates. No Banks.

So, with those confessions out of the way, on to the good stuff.

If you don’t know what Prosper is, it’s basically a marketplace where you can easily borrow money or lend money to other people. Consumer debt is very expensive, so it’s potentially a way for individuals to get cheaper rates borrowing, and for lenders to make higher rates than normal saving options. Here is a Q&A on Prosper from Money Magazine. Here is a write-up in Forbes of some strategy when dealing with Prosper.

If this sounds crazy to you, here are some of the rates you can earn on Prosper. Note that even for the highest risk borrowers, right now the default rate is around 3%. 24% – 3% is a very good return, but only if you spread your money around with a lot of very small loans.

For the past year, I’ve been struggling with an appropriate strategy to track Prosper Loans in Quicken. I found some information through web searches that seemed appropriate for the Windows version of Quicken, but didn’t work for me on the Mac. The idea was to create an Asset account, which is the loan, and then to set up a loan paid from the asset back to the Prosper account. I couldn’t figure out how to do it.

Since I had trouble finding a solution for this online, I thought I’d post my solution here. Feel free to comment if you’ve found a better way to track Prosper loans in Quicken.

Step 1: Create a Security for each Prosper Loan. I name them after the unique Prosper Loan number, like “Prosper Loan 335”

Step 2: Create a Brokerage account for your Prosper account. Transfer the money from your checking account to this account when you move money to Prosper.

Step 3: When you make a loan for a certain amount, let’s say $100, then purchase the shares of the Prosper Loan security, at $1 per share. So, in this example, you would purchase 100 shares of “Prosper Loan 335”

Step 4: Whenever you want to update the account, use the following 3 transactions. Use a “Sell Shares” transaction to represent the principal re-payment. Use a “Interest Income” transaction to represent the receipt of the interest payment. Lastly, use a “Miscellaneous” transaction to record the Prosper fees charged.

This is likely too much work to do monthly, although you need to if you want Quicken’s IRR calculations to be accurate. Personally, I’ve decided just to update the account once every 3-6 months, which is sufficient for my needs.

Let me know what you think… if this helps even one Quicken addict out there, it will have been worth it. 🙂

Update (4/9/2007): This is why I love blogging. AMF posted my blog comment on a Prosper Board, and now there are good comments there too. Check it out!

Update (4/10/2007): has their own solution… not as accurate as the one above, but worth linking to. I agree with them that it would be better for Prosper to offer a Quicken-compatible download format.

Update (4/10/2007): Are you interested in joining If so, please join my group. I originally started it for my investment club, but I’m changing it to be an open group for friends & family. I feel a little lame right now because I only have 3 members in my group, and I am a founding group leader.

Update (4/10/2007): has merged their approach with mine in a hybrid approach that tracks you entire Prosper portfolio as a single security. Only 3 entries per month! The only downside is you can’t track the performance of each loan this way. Check it out here.

Update (4/11/2007): OK, last update. But has followed up with a finally post on the topic. Between the two of us, I think we’ve provided the best way to handle this until we convince Prosper to provide downloadable transactions.

A Kindred Spirit: Amy Jo Kim at USC on Game Mechanics

Many thanks to Will Hsu for his post today for pointing me in this direction.

Please check out this summary write-up on the O’Reilly site on the philosophy and theories of Amy Jo Kim, PhD, based on her discussion of Game Mechanics and Online Communities at ETech.

Kim discussed five key mechanics of game design, why they are important and powerful, and examined examples of how they can be used in other settings. The five game mechanics discussed were collecting things, earning points, providing feedback, exchanges, and customization.

Many of these mechanics speak to very primal response patterns inside the human psyche, which is why they can be so powerful. Another key point is that games are designed to be fun and engaging, and whenever you can make any system or appliation more fun you’ll likely improve the user experience and get them using the system more regularly and for longer times.

I can’t tell you how closely Kim’s assessment of how to build compelling engagement matches my own. In fact, some of her assessment of the mix of understanding of video games, behavioral finance, and online behavior vaguely mirrors my own concept and theme for this blog.

I’ve long believed that people have underestimated video games as a new medium not only for entertainment, but for engagement. Video games have often been on the forefront of experimental and exploratory attempts at bridging the gaps between new technology and human interaction. Audio, Color, 3D, economics, story telling… video games have managed to incorporate these elements in the human/technology interaction long before any other classes of technology products have.

Kim lines up five types of game mechanics in her talk that she directly traces to the success of online communities like MySpace:

  • Collecting
  • Points
  • Feedback
  • Exchanges
  • Customization

It’s worth the full read here. Sounds like eBay, doesn’t it?

I’ve read some great material from Susan Wu at Charles River Ventures, and Wil Wright, creator of The Sims and Spore. But Kim’s overview is squarely aggregates quite a few of the insights I’ve been working to rationalize over the years.

I’ve got to look into this more deeply, as this captures so many of the threads in human computer interaction that I’ve personally been most interested in since my days in computer science at Stanford.

Update (4/5/2007):  Amy Jo Kim has a blog… why not go direct to the source?

Mitch Kapor & Mark Zuckerberg at the Startup School

Nice post on Matthew Mullenweg’s blog on comments made by Mitch Kapor & Mark Zuckerberg at the “Startup School” hosted at Stanford. Matt is the lead developer for

Mitch was the original found of Lotus, and has been a significant figure in the software industry for the past 20+ years.  He also happened to be one of the venture capitalists who backed my friends at Reactivity.

Here is how Matt described Mitch’s comments:

Mitch’s presentation was one of my favorite of the day, and one of the thing he emphasized was that you should hire for diversity because diverse groups of people innovate more. Diversity here is defined as a function of experience, background, family status, as well as the traditional definitions like gender, et al. He says that one of the most common mistakes entrepreneurship makes is building “mirrortocracies” instead of meritocracies, meaning they tend to hire people like themselves rather than hiring the best people regardless of backgrounds, and the company suffers as a result.

Mark Zuckerberg is the 22-year old founder of, the private social-networking site that is the ultimate destination for every college student (including my sister, a senior at UC Berkeley). Here’s what Mark had to say:

Almost on cue, Mark started out by saying that the two most important things for a company is to have people who are “young and technical,” and his explanation of such was actually the entirety of his prepared remarks. (He arrived shortly before his presentation, so AFAIK hadn’t heard any of Mitch’s.) He made some fair arguments for biasing toward a technically inclined workforce, even in roles like marketing and support, however he didn’t really say anything compelling in support of youth, besides some vague references to many great creators and chessmasters being between 20 and 35 years old. But in no uncertain terms, he said they have a bias toward hiring young people at Facebook.

Sorry to be snarky, but is it really surprising that a 22-year old founder of a company valued at over $1 Billion dollars thinks that people in their 20s are the best?

Truth be told, when it comes to technical prowess, Mark has a point. Young, fresh engineers don’t have a lot of legacy baggage. They are immediately up on the latest trends in the market and in technology. They are pampered in University environments with endless computing power and bandwidth, and that lets them think freely about interesting services that might make sense once the rest of the market has those things. Math & science are also playgrounds for young, flexible minds, and it is true that most great mathematicians and physicists break out in the 20s.

That being said, those strengths are also weaknesses. Young engineers are usually tragically poor at estimating the resources and complexity of engineering effort. They can be excellent individuals, but work poorly on projects that require scale and teamwork. They also, being free from baggage, can lack perspective when the project and/or the company hit inevitable challenges.  They can also be surprised when the market moves more slowly than they expect, because they naturally tend to be several steps ahead in technology adoption than the mass market.

When I was in engineering, I was a big believer in mixed-age teams. One or two solid, senior members of the team to anchor it – add perspective, balance, and mentorship. Surround them with a ratio of around 5:1 really young, super-smart engineers who have the energy and passion to work the long hours and who lack the background to know some things aren’t possible.

Valleywag has a better quote from Zuckerberg on the subject.  My guess is that he’s getting a lot of flack for being 22 & successful.  The truth is, reading the quote, he has a good point, but he’s not really presenting it in a well-polished way.

Don’t worry, Mark.  That’ll come in time.

Social Networking for Dogs

I’m not sure why Newton & Darwin are so popular, but they are.

At least, they are on Dogster. Some days, I feel like all I am doing is accepting “Pup Pal” requests from other dogs, mostly beagles, for my giant beagles. I say giant because although they are papered 13″ Beagles, they have somehow ended up on the large side. Well, if you consider 17″ and 50+ pounds large.

I had read that Dogster had become a fairly popular site, with good revenue from ads. But I had no idea how many people find it entertaining to “connect” their puppy with other dogs.

In any case, if you have dogs, and you want to connect with Newton & Darwin, here is your chance.