My law school classmate Henry Olsen has another great column in National Review, this time addressing the current political talk regarding the virtues of entrepreneurship is out of kilter Ronald Reagan's vision of entrepreneurship.

Reagan almost always referred to job creation as something we all did, not something that was the province of the elite few. His speeches did not emphasize, as Romney’s did or as Senator Ted Cruz’s still do, the role of the entrepreneur in creating jobs. He celebrated the effort, thrift, and ingenuity of the American worker, not the American boss.... For Reagan, the entrepreneur was simply another type of citizen, another average Joe. He or she is not greater than us, someone upon whom we depend. He IS us, and our efforts in working are as noble and important as his in creating.

Yes.

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Press business article of the week has to belong to Jessica Pressler, who writes great about everything. It's about the start-up culture, the place where tech and MBA meets, and guys who dislike cleaning their own clothes.  A taste:

[W]hen people in a privileged society look deep within themselves to find what is missing, a streamlined clothes-cleaning experience comes up a lot. More often than not, the people who come up with ways of lessening this burden on mankind are dudes, or duos of dudes, who have only recently experienced the crushing realization that their laundry is now their own responsibility, forever. Paradoxically, many of these dudes start companies that make laundry the central focus of their lives.

Extremely worth your time.

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I recently finished reading The Master Switch: The Rise and Fall of Information Empires by Tim Wu, a professor at Columbia Law School. The book was released in 2010, and I can't believe it has taken me this long to read it. (Concurring Opinions did a symposium on the book in 2011.) Once I started, I found excuses to peel away from other responsibilities so that I could read the book, and I finished it in three days. If you are interested in law and entrepreneurship, this book is essential reading. 

Wu's proposed "Separations Principle" ("the creation of a salutary distance between each of the major functions or layers in the information economy") is nice example of a set of regulations designed to promote the "release of energy" that Darian Ibrahim and I discuss in Law and Entrepreneurial Opportunities. Wu argues that antitrust law alone cannot create an environment in which entrepreneurial action can flourish. He details the costs of monopoly with colorful stories, and shows how government sometimes enables entrepreneurship, but too often plays an abetting role in the supression of entrepreneurship. Of course, not everyone agrees with Wu on the effect of his policy prescription, but Wu has the frame exactly right.

By the way, on Saturday, Wu was the subject of a nice profile in the NYT, highlighting his role in the debates about net neutrality, a term he coined in 2003.

UPDATE: Speaking of net neutrality and entrepreneurship...

And this from today.

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This morning, the Wall Street Journal is reporting that Mt. Gox—until this month the world's leading market for buying and selling Bitcoin—has "disappear[ed]" from the web:

The Bitcoin exchange Mt. Gox appeared to be undergoing more convulsions Tuesday [February 25], as its website became unavailable and trading there appeared to have stopped, signaling a new stage in troubles that have dented the image of the virtual currency. . . .

Investors have been unable to withdraw funds from Mt. Gox since the beginning of this month. The exchange has said that a flaw in the bitcoin software allowed transaction records to be altered, potentially making possible fraudulent withdrawals. No allegations have been made of wrongdoing by the exchange, but the potential for theft has raised concern that the exchange wouldn't be able to meet its obligations.

The apparent collapse of Mt. Gox is just the latest shock to hit Bitcoin, the price of which is now off more than 50% from its December 2013 peak:

For those better acquainted with the dead-tree/dead-president variety of money, Bitcoin is a virtual currency not backed by any government. Rather than being printed or minted by a central bank, Bitcoins are created by a computer algorithm in a process known as "mining" and are stored online or on your computer. They are bought and sold on various exchanges, including until recently Mt. Gox (whose troubles have been reported for a few weeks now).

So, why use Bitcoin—which may well implode (see, e.g., here, here, here, here)—instead of a traditional state-backed currency, which in many ways is clearly superior?

There are many reasons, some of them even lawful. Bitcoins can be regarded as a medium of exchange, an investment, a political statement...or a way of avoiding capital controls and other pesky laws like bans on drug trafficking and human smuggling.

But the criminal potential of Bitcoin is probably overstated. The Chinese have gotten wise to its use for avoiding capital controls. Using Bitcoin for criminal or fraudulent activity would be difficult at scale (PDF). The Walter White method is still far and away the best way to ensure your criminal proceeds retain their value and anonymity.

I don't share the utopian fervor for Bitcoin expressed in tech and libertarian circles (see, e.g., this supposedly non-utopian cri de coeur), but it may have some positive potential as a decentralized and lower-cost electronic payments system. We'll see if that ever gets off the ground.

In the meantime, the Mt. Gox collapse is pretty huge news for Bitcoinland. Unlike the NYSE (the failure of which would be hard even to imagine), Mt. Gox does not benefit from any systemic significance and thus is unlikely to receive a lot of official-sector help. The situation has some early adopters running for the Bitcoin exits, like this leading Bitcoin evangelist.

Despite (because of?) my agnosticism on the currency, I'll be writing more about Bitcoin soon. (Mainly, I wanted to stake a claim to being the first to write about Bitcoin on The Conglomerate.) If your Palo Alto cocktail party can't wait, however, this explainer (PDF) from the ever-impressive Chicago Fed should tide you over.

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I am feeling a lot of joy at being back in the classroom, particularly because it's been 2 years since I've taught the Lifecycle of the Corporation.  This is a class I pretty much made up, using the Entrepreneur's Guide to Business Law, and it traces...the lifecycle of the corporation (no false advertising here!).  We are in the venture financing unit, and here are some cool things that have come up so far:

Airbnb: This site lets people post bedrooms in their own homes to stay in.  WSJ weekend interview (pro), news from Davos from IHG CEO (con).  The interview gives a great entrepreneurship overview, highlighting the fortuitous way the idea came about.  Basically 2 out of work graphic designers know they need to make rent, and that a big conference is in town. 

Mr. Gebbia had three air mattresses and suggested turning the apartment into an "air bed and breakfast." 

Within three days, they had a rudimentary website up and booked three guests: a 35-year-old woman, a 30-year-old from India, and a 45-year-old father of five, each paying about $70 a night for several nights. "I thought we were going to get a bunch of young L.A. dudes, 23-year-olds," Mr. Chesky recalls. No matter. That month's rent problem was solved, and Messrs. Chesky and Gebbia thought they might be on to something.

For those who use the Netflix IPO case study, the story reminds me of the happenstance way Reed Hastings came up with the idea for Netflix.   Also, I had never heard of Airbnb, but several of my students had actually used it, making me feel old and out of it.

This story about the Immunity Project, a non-profit that received funding from Y-Combinator and is raising money for an AIDS vaccine based on research on "controllers," individuals who seem to have an immunity that prevents HIV from developing into AIDS.  They're looking for crowdfunding.  And they want to give the vaccine away once it's developed. 

This tech incubator that has been operating right in my backyard, whose open house I attended this past week.

And this website on VC negotiations by a former entrepreneur-turned-VC.

All in all, feeling invigorated by all things start-up.  In one heady moment I said to yesterday's class, "I'm not exactly saying that you should quit law school and start a company...But maybe you should quit law school and start a company." 

Don't tell the dean.

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I spend a lot of time talking to people who study entrepreneurship, and many of them are enthusiasts. Of course, many of use are Walter Mittys, living our lives vicariously through the daring business people we study, so it's easy to proclaim, entrepreneurship is for everyone. Then I stumbled on this infographic that made me think that might actually be true ...

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Here's a fun chart discussing one possible reason while the hypothesized MBA at a school like mine might be less interested in Wall Street, and more in Silicon Valley.

Entirely unrelated: Wharton now has a section of the full-time MBAs meet in San Francisco.

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Ried Hoffman, founder of LinkedIn, is quoted as saying, "If you are not embarrassed by the first version of your product, you’ve launched too late."

This encapsualtes one of the core principles of lean startups, which you can learn about here. (More free courses for entrepreneurs here.)

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According to the Times, Silicon Prairie is the big new thing, and I'm proud of the fellow Iowans who got the paper to run a story making that claim (admittedly, on a holiday weekend, but still).  Here's the evidence that Iowa, Nebraska, and Missouri have become a hub of entrepreneurial tech:

Although a relatively small share of the country’s “angel investment” deals — 5.7 percent — are done in the Great Plains, the region was just one of two (the other is the Southwest) that increased its share of them from the first half of 2011 to the first half of this year.

That's it.  The rest is just anecdote, layered with plenty of hedging.  You can, however, tell yourself a story why Silicon Prairie might be real.  Tech can be done anywhere, and so might as well be done on a flat, featureless landscape; the Midwest does well in creating high quality, not-so-high-wage white collar; and universities like Iowa State (home of the first computer!) have aggresively tried to prove their worth to the state by fostering spin-offs.  

Will this conlfuence of factors create a real technological hub, to the extent that a "hub" encompassing hundreds of miles of farmland even makes sense?  My guess is that it simply reflects a transformation of the economy going on everywhere, and not just in the fields of dreams.  But it is nice to have a label.

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The latest edition of The Economist has a fascinating article on “Chilecon Valley” that discusses the emergence of a startup community in Chile. The article focuses on a unique program of Startup Chile (a new Chilean governmental body) that gives grants to entrepreneurs in the United States and elsewhere to move to Chile for several months as they work on building their company and developing their technology. The grant recipients are then expected to network with, speak to, and mentor Chilean entrepreneurs.

The article touches on how law can foster or hinder the growth of a startup community, including by liberalizing immigration laws and allowing failed ventures to get a fresh start in bankruptcy.

Chile is making considerable efforts to diversify its economy beyond extractive industries like mining and agriculture. My spouse is co-organizing a fantastic three-day conference in Santiago from November 28 to December 1st that will focus on social entrepreneurship, sustainability, and innovation. The conference includes a fantastic line-up of speakers, including a keynote address by Al Gore, a pitch competition for social entrepreneurship startup companies, and some awesome music, including Devendra Banhart and Denver’s own Devotchka. Several panels will analyze the contribution of law to developing a entrepreneurial ecosystem in Chile.

You can check out my wife’s newly launched blog and website on the Chilean startup community here.

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Today in the Crocker Fellows class, we discussed the IMVU case study. IMVU claims to be the "world's largest 3D and dress-up community." 

No, thank you.

But I digress. The point of this post is not to direct you to IMVU, but to link to Stanford's Entrepreneurship Corner, an excellent resource for students of entrepreneurship. In fact, Eric Reis talks about his experiences building IMVU in several videos on ecorner.

Not as flashy as TED, but good stuff.

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This year BYU is inaugurating the Crocker Innovation Fellowships, and I am fortunate to be on the faculty, albeit in a very limited role. Nathan Furr (Business), Marc Hansen (Life Sciences), Chris Mattson (Mechanical Engineering), and Dan Olsen (Computer Science) have been pulling the laboring oars, so far, and I will make my main contributions in the fall semester.

As noted on the Fellowship website, "The goal of the course is to change the way students view the world and inspire the next generation of innovators." Closer to the ground, the year-long course begins this semester with an introduction to innovation, continues over the summer with an internship, and concludes in the fall with the students developing their own innovations. 

As a distant observer, I have been fascinated by the communications among the 20 Fellows as they build their collaborative community. They are sharing all sorts of ideas through Google Docs and LinkedIn, encouraging and correcting and building each other. Their energy is pretty infectious ... and I haven't even been able to meet them in person, yet!

Anyway, you are on notice. Watch for some great new businesses emerging from BYU in the fall 2012 semester.

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Like a lot of us, I've been traveling a lot this summer and have not been blogging the past few weeks.  My apologies. 

At the beginning of the summer, I read a book I had been wanting to read for a long time:  Me, Myself & Bob:  A True Story About Dreams, God, and Talking Vegetables.  The book tells the story of Phil Vischer, the creator of VeggieTales and Bob, the talking, singing, dancing tomato.  If you had children in the late 1990s, early 2000s, then you probably know of VeggieTales.  In these videos, vegetables appeared in stories that paralleled Old Testament stories or more general morality tales.  I knew that for awhile the videotapes and DVDs of these animated shows were ubiquitous, but I didn't know that in 1998, Big Idea (Vischer's privately-held corporation) sold 7 million VeggieTales videos or that Big Idea made the first 30-minute 3-D animated film.  I also didn't know until this year that Vischer lost Big Idea in bankruptcy, and the business (including Bob the tomato) was bought by Classic Media.  Here is an abbreviated version of the story; the book tells the whole thing.  One could chalk it up to the dot-com boom, but the story has a lot more to it.

The book touches on at least 3 themes, all of which are interesting to me:  (1) how does a company go from being a great small company to a great bigger company; (2) how does a company with a social goal avoid mission drift; and (3) how to discern what God wants you to dow with your professional life.  I'll leave #3 to some time when you catch me in person, but I'll touch on #1 and #2.

So VeggieTales was an amazingly successful small company, but tried to grow to be a bigger company.  Yes, we've all heard the stories of companies growing too big, too fast, but what does that mean?  For Big Idea, it meant that the cost-center parts of its budget grew a lot faster than the profit-centers.  HR went up, payroll went up, marketing went up, production values went up, expenses went up, but sales couldn't grow at the same rate.  Vischer talks about "Things I Learned #1:  Never Lose Sight of the Numbers" and "Things I Learned #2:  Ignore the Voice That Says "I Deserve It."  Vischer characterizes himself as a creative person and acknowledges that he lost sight of the numbers.  In his words, he was a Walt Disney who didn't have a Roy:  someone who could tell him when ideas were too expensive, too unrealistic.  He says good ventures have a Walt and a Roy.  If you read the book, you see the train going off the cliff (new fancy building, plans to have the first full-length 3-D animation movie), and you want to yell "Stop!"

The second point is one that my students and I talk alot about in my seminar Law and Microfinance.  How do pro-social firms maintain profits and even go public without losing sight of its mission or can they?  Vischer created VeggieTales because he wanted to provide children with Biblical entertainment that had one message:  God loves you.  During the rise of Nickelodeon and the Disney channel, Vischer felt called to counter what he saw as disturbing media influences on the youth.  As someone who had been obsessed with filmmaking, puppetry and animation his whole life, he thought he was in a position to change the world.  But, as the company grew and hired employees, he struggled with how to maintain this mission.  Some hires were in tune with the religious mission, but others were merely talented animators who wanted to live in Chicago rather than L.A.  Vischer wanted to keep everyone happy, so eventually none were and the watered-down mission that was left didn't inspire any of them.  Eventually, all of the top executives were against Vischer's original mission.

I recommend the book to anyone interested in animation, entrepreneurship or finding one's calling.  It reads very quickly.  Vischer is very funny.  After all, he did create talking vegetables.  One amusing tidbit:  I had always thought that VeggieTales stuck to the Old Testament to have a wider religious audience.  However, the real truth came from Vischer's mom, who told him that he couldn't do anything from the New Testament.  Jesus could not be a vegetable!

In case you're wondering what became of Phil Vischer, he now owns JellyTelly, which produces the fabulous and hilarious What's in the Bible.

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If you are at Law & Society this Friday and Saturday, come to the mini-conference on Entrepreneuship & Law that Brian Broughman (Indiana - Maurer School of Law) and our own Gordon Smith (BYU) have organized.  Here is the line up:

Friday, June 3, 2011

8:15 am to 10:00 am Regulating Entrepreneurs 2122 (Chair: Brian Broughman)

• Mira Ganor (Texas), The Power to Issue Stock
• Erik Gerding (New Mexico), Shadow Banking, Financial Innovation, and Regulatory Arbitrage
• Michelle Harner (Maryland), Mitigating Financial Risk for Entrepreneurs
• Poonam Puri (Toronto), The Regulatory Burden of Corporate Law
• Discussants: Kristin Johnson (Seton Hall) & Sarah Lawsky (UC Irvine)

12:30 pm to 2:15 pm Governance Structure of Entrepreneurial Firms 2322 (Chair: Brian Broughman) 

• Brian Broughman (with (Jesse Fried & Darian Ibrahim), Delaware Law as Lingua Franca: Evidence from VC-Backed Startups

• George Geis (Virginia), Organizational Contracting and Third Party Rights
• Alicia Robb (Kauffman Foundation), Entrepreneurial Finance and Performance: A Transaction Cost Economics Approach
• Discussant: Bobby Bartlett (UC Berkeley) 

Saturday, June 4, 2011

8:15 am to 10:00 am Law, Entrepreneurship, and Innovation 3116 (Chair: Gordon Smith)

• Mike Burstein (Harvard), Exchanging Information without Intellectual Property

• Sean O’Connor (Univ. of Washington), Transforming Professional Services to Build Regional Innovation Ecosystems
• Peter Lee (UC Davis), The Accession Insight and Patent Infringement Remedies
• Karl Okamoto (Drexel), Law and Entrepreneurship: An Assessment Approach

4:30 pm to 6:15 pm Global Entrepreneurship 3519 (Chair: Gordon Smith)

• Afra Afsharipour (University of California, Davis), US Private Equity Investments in India

• Sofia Johan (York Univ.)(with April Knil and Nathan Mauck), Determinants of Sovereign Wealth Fund Investment in Private Equity
• Gordon Smith, Stability and Adaptability

###

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Is it possible to have a spoiler when the story is this well known? If you don't want to know what's in the movie, don't read this post.

The Social Network begins with a frenetic exchange between Mark Zuckerberg and his soon-to-be-former girlfriend, Rachel Something, who becomes a Rosebud for the creation of Facebook. Later in the movie, Rachel utters the memorably stupid line, "The Internet's not written in pencil, Mark. It's written in ink," but that was one of the few missteps in this script. 

While the supporting actors are terrific, this movie depends on Jesse Eisenberg's portrayal of Mark Zuckerberg, and Eisenberg is terrific. I will leave the serious movie reviews to others (including Christine and Larry, who seem to have a good thing going at Illinois), but I wanted to note that The Social Network is a fabulous movie for lawyers, particularly transactional lawyers.

One of the main threads of the story is Zuckerberg's alleged theft of the Facebook idea from Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra, which I blogged about over three years ago when it led to litigation. Another thread is Zuckerberg's conflict with Facebook co-founder Eduardo Saverin, which involves an attempted dilution of Severin's shares. Then there is the angel investment by Peter Thiel and the distributions of shares to various other people, including Dustin Moskovitz, whose important role in developing Facebook is cheated in the film.

In the end, however, this film is only about one person. And his Idea. That Idea is at the heart of Facebook and the movie, and watching people grasp for a piece of it is what makes this movie fun.

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