Acquiring proven entrepreneurs is a smart way to innovate

Proven Entrepreneurs

Nearly every company understands the urgent need for innovation. Technology and globalisation have so accelerated change that scale and power — once the greatest strengths — have become weaknesses because they impair an organisation’s ability to adapt. The problem is, the term “innovation” is used so broadly that it has become virtually meaningless.

Consider the typical initiatives that companies pursue: some create labs to innovate, yet most labs fail to help companies adapt to the future. Others try methodologies such as the “lean start-up”, but find it difficult to act on potential breakthrough ideas. What these failures have in common is that they do not focus on the right talent.

To innovate successfully requires entrepreneurial talent, which is not simply being creative, smart and flexible. What sets entrepreneurs apart is that they envision a future that defies conventional wisdom, then assemble (and reassemble) the plans and resources needed to make it a reality.

You cannot teach this by sending your people to a two-day workshop; these skills come from months and years of hard-won experience. It is also incredibly difficult to hire this kind of talent; no entrepreneur worth his or her salt is looking for a traditional job.

In Silicon Valley, we have overcome these issues by using acquisitions to bring in innovative, entrepreneurial talent. I am not necessarily talking about “acquihires”, in which technology companies acquire start-ups as a recruiting strategy. Rather, you are trying to acquire leaders who have proven their ability to build a new business. Unlike most other skills, there is no academic degree or job title that can accurately predict this.

Even when you have identified one or more great entrepreneurs you want to acquire, you need to adopt a different approach to M&A. It is not simply a matter of buying the “right” company at a good price. The real challenge is finding talented entrepreneurs who are aligned with your mission and can function within a larger organisation. You have to make sure that the body does not reject the transplant.

At LinkedIn, we used acquisitions to fuel innovation when we acquired Pulse and Newsle. Both had built killer products. But we also wanted to transplant their entrepreneurs (and the future innovations they would create) into LinkedIn — Ankit Gupta and Akshay Kothari at Pulse, and Axel Hansen and Jonah Varon at Newsle.

Similarly, our business lines — talent, marketing and sales solutions — are run by acquired product leadership (Eduardo Vivas from, Russell Glass from Bizo and Sachin Rekhi from Connected).

To retain acquired entrepreneurs, you must build strong alliances with them based on closely aligned values and missions. In my book, The Alliance, my co-authors and I wrote about the importance of building open, honest and mutually beneficial relationships with employees. Each key employee should be on a “tour of duty”, which includes a clear objective (with agreed success criteria) that would help transform the company and the employees’ career. The same principles apply to any entrepreneurs you acquire, though their “signing bonuses” may include a few extra zeros.

When LinkedIn acquires a company, we work with the entrepreneur(s) to define a tour of duty that advances their career. Given the financial rewards they have already received, these tours focus less on compensation and more on learning opportunities.

For example, Ankit, Akshay, Axel and Jonah all came to LinkedIn with relatively little work experience; Ankit and Akshay had just finished their graduate degrees at Stanford, while Axel and Jonah were Harvard dropouts. Eduardo had jumped right into the start-up world after high school, and sold another company before building, but had never worked at a business of our scale. Working at LinkedIn gives these entrepreneurs the opportunity to manage a far larger team, with a far greater user base — experiences that will help them advance to executive roles or to start new businesses, whether inside or outside LinkedIn (preferably inside).

Executed properly, bringing in entrepreneurial talent via acquisition can be a major win-win. Your business gets a much needed infusion of innovation, while the entrepreneurs you ally with benefit both economically and by gaining valuable experiences that advance their careers.

This post originally appeared on Financial Times.

The Alliance: A Visual Summary

I’m co-author of a new book titled The Alliance: Managing Talent in the Networked Age. I’ll be writing a lot more about the book in the weeks ahead. To kick us off, here’s a visual summary of the key ideas that drive an employer-employee alliance, and details about the Tour of Duty framework.


The Information Age to the Networked Age: Are You Network Literate?

It’s said that when architects walk through an office, they see ceiling ornamentation, light sources, building acoustics. When psychologists walk through an office, they see unresolved father issues and avoidant personality disorders. When I walk through an office, I see networks. I know that makes me sound like the kid from The Sixth Sense. But I don’t see dead people. I see networks.

When you truly see networks, it changes the way you plan and strategize. You move differently.

Take job hunting. The Networked Age has radically changed this activity, and yet when you ask people how they look for a job, a surprising number continue to say they “search the job listings.” That’s the Information Age approach! In the Networked Age, you should look for people with connections to companies you’re interested in, trace the best path from those connections to people who can share useful intelligence, and then ask for introductions to those people.

Or consider investing. In my work at Greylock Partners, I don’t form an investment theory and then go search for a startup that fits this theory. Nor do I purchase ad space in the Yellow Pages and hope that talented entrepreneurs let their fingers do the walking until they find me. Again, those are Information Age approaches.

The Networked Age approach? I focus on being a great ally to my network, and developing strong relationships where the information flow is highly reciprocal. I put myself at as many key intersections in my networks as I can. As a result, my network inevitably ends up connecting me with great entrepreneurs and great investments.

A decade ago, John Battelle stressed the importance of “search literacy.” What he meant was that people who were skilled at using Google to find information had an edge over those who had yet to acquire this aptitude. In the Information Age, if you couldn’t make sense of an increasingly information-rich world through effective search capabilities, you’d be culturally marginalized, just like a person who couldn’t read street signs.

Now, those who can conceptualize and understand networks – both online and off – have an edge in today’s fast-paced and hyper-competitive landscape, where the speed with which we can make informed decisions is critical. To wit, the subtitle of my forthcoming book is “Managing Talent in the Networked Age” — I think the networked age changes everything.

I like to use the word “literacy” in this context because it suggests a fundamental skill, a capability you must possess in order to effectively navigate the world. An illiterate person, a person who can’t read street signs or complete job applications, has limited opportunities compared to others who possess these skills. A literate person moves freely and capably through the world.

So how do you know when you’re network-literate? I think in terms of three levels that signify ascending competency:

Apprentice: Using network technology

Journeyman: Establishing a network identity

Master: Utilizing network intelligence 

Apprentice: Using network technology

At this most basic level of network literacy, you’re part of some networks. You have a Facebook profile, a LinkedIn profile, etc. You’re using these networks to keep in touch with people you know, and on occasion, you may even use them to facilitate new connections.

While you may not be completely fluent yet, you understand that Facebook is more than just a place to announce what you had for lunch – it’s a place to strengthen personal relationships. Similarly, you know that LinkedIn is more than just a repository for your digital resume. You use phrases and keywords with deliberate intention, to maximize your discoverability by the kinds of people you want to be found by.

In the case of my own LinkedIn profile, for example, my headline isn’t “Executive Chairman of LinkedIn.” It’s “Entrepreneur. Product Strategist. Investor.” That’s because my LinkedIn profile is targeted primarily to entrepreneurs who might want financing from me.

(You’d be surprised at how many people simply use their current job title as the headline of their LinkedIn profile. This isn’t wrong per se. But ultimately the headline on your LinkedIn headline is the first thing many people will see about you in a professional context – so it’s an excellent place to choicefully craft your network identity. And your network identity is larger – or at least it should be larger — than your current position and company affiliation.)

Another way to make yourself more findable by the kinds of people you want to be found by are to join the same LinkedIn groups that they’re participating in, or to follow relevant companies and individuals within the domain of your industry. Once you start thinking in terms of how the people you want to be found by might in fact find you – and tailoring your profile to maximize such potential discoveries – you have begun to think in a network-literate way.

Journeyman: Establishing a network identity

Once upon a time, we exercised unchecked authority over our identities, verbally air-brushing our resumes into highly idealized portraits of ourselves, carefully vetting the references we chose to vouch for us. In the Networked Age, however, we’re all visibly and enduringly enmeshed in networks – even the so-called “self-made man” is a highly annotated specimen, with readily apparent links to the colleagues, mentors, institutions, and other entities that have helped shape the contours of his identity.

Indeed, we’re all the sum of an ongoing conversation that we initiate and propel, but which colleagues, customers, and even competitors contribute to as well. And while we once relied upon the broad strokes of resumes to define us, now we’re often judged by far more granular, network-derived metrics of influence and authority: Who retweets our tweets? Who comments on our Medium posts? Who shows up on LinkedIn as a 1 degree connection?

In the Networked Age, your professional identity expands well beyond your job title and the company you work for. You’re not just “you” anymore. You’re also who you know,how they know you, what they know about you, who they know, and so on. At the Journeyman level, this way of thinking is becoming second nature to you. You understand that your identity is multivariate, distributed, and partially out of your control – your network helps shape your identity too.

Increasing your network literacy also means understanding other people’s network identities. Tell me the name of a person, and I’ll think of the network around them. I always see a person as part of a larger web of relationships. When I met Jeff Weiner, LinkedIn’s current CEO, I’d already had conversations with many of my own trusted colleagues about him. I had relationships with people that he had relationships with, and these strong points of network connectivity gave me a clear signal about Jeff and the kinds of people he trusted and valued most. I had a network portrait of him. And based on that portrait, I knew I wanted to build a strong relationship with him.

Master: Utilizing network intelligence

Spend five minutes watching your LinkedIn feed or Twitter timeline, and it’s clear that information proliferates even faster in the Networked Age than it did in the Information Age. Consequently, the ability to extract the right information at the right time is more crucial than ever. Search literacy is an important starting point, but in today’s high-velocity world, network literacy is increasingly crucial too.

In the Information Age, the New York Times, the Wall Street Journal, CNN, and eventually Google were typically people’s “first reads,” i.e., their default sources of new information and intelligence. Now, if you’re fully network-literate, your networks are your first reads – because you’ve consciously built up pipelines of people who reliably deliver information that is highly significant and relevant to you.

There is a whole “dark net” of critical-edge information that hasn’t made it into newspapers and blogs, information that exists only in people’s heads. In the past, such information was difficult to access for all but the best-connected and most persistent individuals. Now, it’s often just a few keystrokes away.

And if you’re fully network literate, you’ve taken the time to understand the information flows within any given network. You know who the news breakers are. You know the thought leaders, the critics, and skeptics within a particular domain. You’re familiar with their preferred sources and biases.

While platforms like LinkedIn, Facebook, and Twitter certainly qualify as information Costcos, one-stop shopping for data en masse, the quality of your connections – and the strength of the relationships you have with them — generally matters more than the quantity. Ten extremely informed individuals who are happy to share what they know with you when you engage them can tell you a lot more than a thousand people you only know in the most superficial way.

But remember, using networks well is always a two-way street. People who exhibit the highest levels of network literacy know that the more relevant, high-quality information you share with others, the more such information you’re likely to receive. To be truly network literate is to always be thinking of how you can add value to the networks you’re a part of, and to make it a priority to turn connections into relationships, and relationships into alliances.

What Do You See When You Enter a Room?

These days, it’s not just Internet entrepreneurs who should see networks everywhere they look. When architects walk into a room, they should see networks. When psychologists walk into a room, they should see networks. In the Networked Age, we’re all like the little kid from The Sixth Sense. If you’re not seeing networks when you enter a room, you might want to check your pulse.

Learn how to support the development of network literacy inside your own company in my forthcoming book (with Ben Casnocha and Chris Yeh) titled The Alliance: Managing Talent in the Networked Age.

Photo: Rawpixel & HunThomas / shutterstock

Remix: LinkedIn

The World’s Bank: How Crowdfunding is Disrupting Old Banking

4 Crowdfunding - Rocio Lara

By Julie Hanna and Reid Hoffman

In San Francisco, Teresa Goines is breaking down deeply entrenched cycles of poverty and crime, one bowl of peanut butter stew at a time. Old Skool Café, the 1940’s supper club she started, gives jobs to at-risk and former gang youth. When banks turned her down, 41 people she’d never met crowdfunded a $5000 loan, putting their faith and money in Teresa, a former corrections officer with no restaurant experience in a city where most new restaurants fail. Their bet paid off. She repaid her loan in full. Each year, 25 troubled young people, most who have tangled with the law, get their lives back on track. Today, Teresa has an even bigger dream of opening Old Skool Cafes across the nation and revitalizing communities everywhere.

As high-tech investors, both of us obviously value high-impact, fast-growth companies that attract massive global user bases. Such companies can scale quickly, create thousands of jobs, and help the U.S. improve its export economy at a time when its share of global economic output is falling. But we also recognize that most businesses are small businesses. Indeed, out of the roughly 27 million businesses in the U.S., 21 million of them have no employees – they’re sole proprietorships. And approximately 4.6 million of the 5.9 million businesses that do have employees have nine or fewer.

Thus, small businesses are a crucial component of the American economy. Yet when people like Teresa Goines try to create new businesses and jobs, banks shy away. According to Biz2Credit, an online devoted to small business funding, big banks currently reject more than 8 out of 10 loan applicants, and small banks reject 5 out of 10. Some estimates suggest that investment in small businesses has dropped as much as 44 percent since the Great Recession in 2008. That’s tens of billions of dollars that fueled the economy and helped our communities thrive – gone, completely eviscerated. Meanwhile, twenty-one million people are underemployed or unemployed. Globally, it’s far worse, with half the planet’s population living on less than $2 a day.

While talent is universal, opportunity is not – even in the land of opportunity. The greatest threat to our long-term prosperity goes far beyond the financial crisis and the health of a few banks on Wall Street that have been deemed “too big to fail.” The real threat we face is a global opportunity crisis. In both the developing and the developed world, billions of people don’t have access to jobs and capital.

That’s why we’re on the board at Kiva, the pioneering crowdfunding platform where citizen lenders invest small sums in micro-entrepreneurs all over the world. Nearly 1.3 million borrowers like Teresa Goines, living in 76 countries, including the U.S., have received more than half a billion dollars in loans. 99% of these loans have been repaid in full, flying in the face of traditional banking assumptions about credit and trust.

Kiva is no longer unique. Today, an exploding crowdfunding sector is making billions of dollars of capital accessible to upstarts and entrepreneurs. Over 700 crowdfunding marketplaces, led by the likes of IndieGogo, Kickstarter, and Lending Club, are democratizing access to capital, fueling entrepreneurship and innovation, and profoundly changing the face of philanthropy at unprecedented scale and impact.

Citizens Lenders Democratizing Access to Capital

One of the best ways to fuel widespread prosperity is by helping Main Street invest in itself. Crowdfunding relies on the wisdom of crowds to identify fund and unleash entrepreneurial innovation far more efficiently than the credit rules of banks can.

Call it the emergence of a “world’s bank” – a system built by and for the people, delivering credit in America and across the globe in a radically decentralized, highly scalable, and crucially equitable way.

The World Bank funds institutions. The world’s bank funds people. For decades, the World Bank has existed as a top-down mechanism to spur economic growth in developing nations. In contrast, the world’s bank picks up with a nimble, bottoms-up model that is far more attuned to on-the-ground needs of micro-entrepreneurs and their communities worldwide.

The motivations for citizen-lenders run the gamut from altruistic to creative to financial. Kickstarter and IndieGogo funders typically get some type of reward in return for their capital. Kiva lenders are paid back by micro-entrepreneurs, albeit with no interest. Services like Lending Club offer lenders a way to earn interest on personal loans.

In the same way that citizen journalists have shaken up Old Media, citizen lenders may upend Old Banking. Already, Lending Club has made $4 billion in personal loans in the U.S. alone. Kickstarter lenders have applied over $1 billion to more than 60,000 projects in just five years. More than 60 projects obtained at least $1 million in funding, and one attracted over $10 million. There are over 1 million Kiva lenders residing in 198 countries. Finally, a new change in federal regulations has opened the market for equity crowdfunding, further empowering innovative entrepreneurs via marketplaces like AngelList and CrowdFunder.

Still, it’s easy to underestimate the impact of crowdfunding, dismissing these purpose-driven marketplaces as a simplistic way for do-gooders to easily support pet causes, yet incapable of driving massive structural change that can improve prosperity for all, not just a select few. The opposite is true.

The Surprising Sophistication of Crowdfunding Platforms

Crowdfunding can easily go where traditional banks cannot. Take Erastus Kimani, a 73 year old schoolteacher turned entrepreneur, who lives in a remote part of Kenya without indoor plumbing, much less indoor banking. Erastus attracted lenders from all over the world. They crowdfunded $1700 which allowed him to triple the production of his ceramic stove liner business. Using just his mobile phone, Erastus applied for, received, and paid back his loans in full. He did it all without bank officers, ATMs, or even a computer.

More broadly, crowdfunding is a sophisticated and pragmatic expression of democratic values and ideals. It recognizes that person-to-person connections are the essential fuel that powers the Internet. Just as Old Media behemoths struggle to keep up with the growth of people-powered content, traditional financial institutions can’t scale like crowdfunding platforms can. Imagine what it would cost a traditional bank to hire enough loan officers to match the network intelligence that millions of citizen lenders provide.

As technology continues to virtualize money, brick ‘n mortar banks have become as superfluous as traditional bookstores. Ornate buildings designed to convey trust and dependability just make loans look more costly. Meanwhile, the world’s bank lending infrastructure is increasingly made up of people like Erastus Kimani and his mobile phone. His status as a dependable borrower qualified him to join a growing network of trustees and vouch for other micro-entrepreneur borrowers in his village of Maragua, Kenya.

2 Erastus

Networks of Trust

Remember George Bailey from It’s a Wonderful Life, the small-town banker who helped local entrepreneurs achieve self-sufficiency and resilience? Or the stories of Bank of America founder A.P. Giannini, who in the wake of San Francisco’s devastating 1906 earthquake and fire famously made loans to distraught home and business owners on the basis of a handshake?

Crowdfunding multiplies George Bailey and A.P. Giannini. It uses early 21st century technology to return us to early 20th century ideals of loyalty, reciprocity, and community. The result is highly efficient trust networks based on reputation. It replaces credit score-based lending by faceless institutions with a person to person character-based lending model. It creates connections and stories that intermediary institutions are hard-pressed to facilitate. 34 individuals put their faith in Erastus Kimani. Not surprisingly, he paid back both of his loans in full.

Wall Street is evermore focused on creating increasingly exotic, abstract, and toxic instruments of speculation with little to no societal benefit. Our financial institutions are becoming less and less tied to producing tangible goods and services. In contrast, crowdfunding re-humanizes our economy. It makes the act of lending more fulfilling for both lenders and borrowers, brings meaning to commerce, and creates tangible social and economic value at a mass scale.

Philanthropy Exponentialized

While many traditional attempts to address poverty often set up recipients for a vicious cycle of dependency, crowdfunding platforms tie opportunity to innovation, accountability, and self-reliance. They create an ecosystem where debt, applied to entrepreneurial ends rather than mere consumption, can create value for people rather than simply becoming a millstone around their necks.

In the case of Kiva, lenders invest again when their loans are repaid. Over time, $25 has the impact of $250. $100,000 has the impact of $1 million. $1 million has the impact of $10 million. It’s philanthropy exponentialized.

Google and a growing number of companies and results-driven philanthropists have begun creating multi-million-dollar evergreen loan funds that are tapping the power of this leverage. Imagine if the Small Business Association, the Fortune 500, the World Bank, and even Wall Street followed suit and began directly supporting those three billion overlooked micro-entrepreneurs like Erastus Kimani and Teresa Goines through the world’s bank movement. It would profoundly accelerate our quest to end the global opportunity crisis.

Every technology revolution has its early adopters and its laggards. The early adopters fueling the world’s bank and democratizing access to capital understand that the true path to prosperity lies in recognizing the critical role that micro-entrepreneurs and small businesses play in establishing healthy and resilient economies. They understand that crowdfunding starts with individuals but quickly scales. First, it changes a borrower’s life. Then, a family’s. Then, a community’s. Finally, it changes the fate of nations.


Julie Hanna is an entrepreneur, investor, and chairperson of Reid is a board member at

This post originally appeared on LinkedIn.

(Photo credits: Crowdfunding logo via Rocio Lara. Erastus photo via Kiva

The Entrepreneurial Opportunities in the Coming “Resource Revolution”

Over the next decade and a half, 2.5 billion people in China, India, and other developing countries will join the global middle class. They are going to need skyscrapers to live in and super-stores to shop in. They are going to want smartphones, cars, flank steaks, air conditioning, pet clothing, Disneyland vacations, and probably some throw pillows.

How is a planet already straining under the pressure of today’s 2 billion middle-class consumers going to accommodate 2.5 billion additional ones?

For many observers, this unprecedented economic growth foretells a Malthusian meltdown. In this scenario, skyrocketing demand for scarce natural resources will lead to unchecked carbon emissions, water wars, massive deforestation, $100 Big Macs for the rich and cricket-meat Bug Macs for everyone else.

McKinsey director Matt Rogers and Stanford professor Stefan Heck have a more optimistic take on the future. In their compelling new book, Resource Revolution, they show how a third Industrial Revolution, focused on radically optimizing land usage and natural resources, is starting to materialize.

In their vision, the combination of finite resources and exploding demand for raw materials and finished goods isn’t a recipe for disaster. Instead, they see it as “the biggest business opportunity in a century.” Dealing with resource scarcity will compel companies to adopt new technologies, new manufacturing processes, and new management practices — all of which will drive innovation faster and faster.

As the global middle class expands, there will massive opportunities for entrepreneurs to create more efficient industries and more productive business ecosystems. Technologies and industries will collide in new and unexpected ways, and these entrepreneurial mash-ups, inspired in part by scarcity, will potentially produce greater utility and prosperity for society at large.

Take, for example, the car industry. Its production processes have been refined over a century of increasing consumer adoption and global competition. Its elaborate ecosystem of dealerships, service stations, roads, highways, parking lots, and fast-food joints with drive-thru windows is so robust and pervasive that driving in America feels as natural as breathing.

And yet for all its culture-shaping success, the entrenched car industry is wildly inefficient – and not just in terms of the 14 miles per gallon a Chevy Camaro gets. Even the most fuel-efficient cars aren’t driving machines as much as they’re parking machines. The average car is on the road only 4 percent of the time. And in that hour or so each day it’s in motion, it does a horrible job of leveraging the energy it requires to operate.

According to physicist and environmentalist Amory Lovins, almost all the energy in a car’s gas tank is either lost to heat dissipation, tire wear, idling, and powering accessory systems like air conditioning, or used to move the massive weight of the car itself – less that 1 percent of that energy is actually used to move the vehicle’s operator. On a similar note, roads reach peak throughput only about 5 percent of the time.

In recent years, however, resource scarcity and the new approaches it inspires has brought innovation to the car industry from entities with expertise in electric batteries, consumer electronics, and information technologies rather than combustion engines.

Tesla and Toyota are building cars that use high-torque, low-waste electric motors. Zipcar, Uber, and similar services make car- and ride-sharing as convenient and reliable as car-owning – thus turning more and more cars into driving machines rather than parking machines. Driverless technologies, pioneered by Google and now pursued by virtually every major car manufacturer and various other institutions (such as universities), will be ready for public adoption as early as 2017. The driving efficiencies that such technologies enable will eventually give every 4-lane highway the throughput of a 32-lane highway.

Tomorrow’s cars won’t just use natural resources more efficiently than today’s do. They’ll also make automobility cheaper, accessible to a wider range of users, more convenient, and faster. Thanks to driverless technologies and the car-sharing services they’ll enable, blind people and old people will be able to transport themselves without assistance. Circling for parking will go the way of dial-up modems. And millions of suburban garages, no longer needed to store two or three lightly used late-model sedans, will be leasable through Airbnb and other sharing platforms as office space for millions of new start-ups!

Ultimately, using raw materials, water, and energy more efficiently – and thus boosting resource productivity – means using them more intelligently. And that’s where networks and platforms come into play. Over the last decade, through platforms like LinkedIn, Facebook, and Twitter, we’ve gotten very good at sharing information about people and organizations, and creating real-time and increasingly granular maps – or graphs – of relationships, networks, information flows, etc.

Where we need even more innovation is in the realm of the so-called Internet of Things – i.e., objects and products that are connected to the web and potentially to each other. Because it is through greater and greater degrees of network intelligence that we can achieve the efficiencies that can boost resource productivity. For example, Tesla knows more about how its customers use its products than most car manufacturers, because Tesla cars send information back to the company about when, where, and how they’re being used (if owners consent to this functionality). In turn, such knowledge can help the company determine what improvements it can make to optimize future usage.

At Greylock, my colleague Josh Elman led an investment in a company called SmartThings that is developing a “physical graph” of the world through a platform that makes it easy to connect various household products to the web. Increasingly, we’ll be able to leverage the collective intelligence that a million connected refrigerators or thermostats can generate to seriously reduce energy loads (in addition to making everything more convenient and fun to use). In this environment, the opportunities for entrepreneurs and entrepreneurial thinking are endless.

Which is not to say that boosting resource productivity to meet the demands of the world’s rapidly expanding middle class will be easy. As Matt and Stefan suggest in their book, it will take long-range thinking and the right inputs from governments as well. Nor will every company out there embrace this challenge. But companies that proactively look for ways to deploy resources more intelligently can certainly help mitigate the strains that will come as the world’s middle class more than doubles in size over the next fifteen years.

Indeed, if we really want to stave off peak oil, peak water, and other instances of potential resource depletion, then we need to keep pushing closer and closer toward peak network.

Short-term Profit Taking vs. Long-term Value Creation: The Future of PayPal


In January, activist investor Carl Icahn acquired around 2 percent of eBay’s stock. A month or so later, eager for a return on his investment, he published an open letter to eBay’s shareholders.

In it, he expresses concerns about the “long-term value” of the eBay subsidiary PayPal, and its ability to “remain competitive over the long term.” His solution: Spin off the fast-growing payments processor as a standalone enterprise.

While Icahn mentions long-term shareholder value no less than seven times in his letter, his perspective on PayPal seemed far more focused on the short term when he spoke with Forbes a couple weeks ago.

“If you just went out and took it public you’d get a huge premium because of growth…” Icahn told writer Steven Bertoni. “PayPal is a jewel, and eBay is covering up its value.”

According to Bertoni, Icahn would like to see eBay sell PayPal to a company with “a more natural fit,” such as Visa. “Another giant in the space would pay a huge premium for PayPal,” Icahn enthused.

But if we assume that Icahn really does care about creating long-term stockholder value, as he insists, then the true issue here isn’t what sort of short-term pop he can engineer for eBay’s stock price, or what size premium PayPal might fetch from another company.

The true issue is what conditions are most conducive to PayPal growing increasingly valuable over, say, a 10-year time frame. I’ve been interested in this question ever since I served on PayPal’s founding board of directors.

So, what conditions will best help PayPal continue to grow its user base, increase revenues, and bolster its profit margins on a consistent and ongoing basis? Those are the long-term trends that are going to create real value for committed eBay shareholders.

The Innovation Culture of Silicon Valley

To me, what’s most interesting about this story is the light it sheds on the clash of values between Icahn’s Wall Street world and the culture of Silicon Valley.

In the popular imagination, Silicon Valley is mythologized as a place where entrepreneurs who are barely old enough to vote conjure a few thousand lines of code into billion-dollar companies in a matter of months.

But instances where this actually happens are rarer than total solar eclipses. The reality of Silicon Valley is that innovation takes time. The fabled Eureka moments may lead to product breakthroughs. But they rarely lead to fully formed products, and they never lead to mature and fully formed businesses.

Innovation comes from long-term thinking and iterative execution.

The prototypical Silicon Valley venture capital approach to investing is structured around the pace that start-ups evolve. VCs think in terms of five-to-ten year development cycles, not quarterly earnings reports, as they break out funding opportunities into Series A rounds, Series B rounds, Series C rounds, etc. Liquidity is typically seven to ten years down the line.

Strong platforms take years to realize their full potential. They often provide opportunities to cash out early along the way — but for those who are patient and more interested in long-term value creation, their rewards are even sweeter. Just ask Facebook’s Mark Zuckerberg. Or Workday founders Aneel Bhusri and Dave Duffield.

While PayPal is no longer a startup, it still has massive growth prospects. But to someone who isn’t investing in the long term, it’s just a cash cow that’s ready to be slaughtered.

That’s why Carl Icahn is churning out letters to shareholders so fast he actually rechristened ex-PayPal COO and Yammer founder David Sacks as “David Yammer” in his first missive. It’s hard to imagine he could have a coherent long-term plan given that his due diligence doesn’t extend to surnames. (It’s since been corrected.)

Icahn is determined to manufacture consent for a spin-off, then a sale, so he can make a quick profit on that PayPal premium.

If you believe that it takes more than a few caustic letters to shareholders and a quick trade to deliver compounding returns to investors over time, Icahn’s argument loses much of its zing.

After all, long-term value usually results from long-term strategies crafted and executed by a strong leadership team. eBay CEO John Donahoe has lifted the company’s annual revenues from $8.54 billion in 2008, when he took over, to $16.05 billion in 2013. David Marcus, PayPal’s president, is an accomplished entrepreneur who is deftly bringing PayPal into new markets.

Both of them have extensive knowledge of the commerce and payments landscape, and both of them agree that keeping PayPal and eBay together is the best way to create long-term value for both companies. They’ve considered spinning off PayPal, and they have determined that the current setup is the most strategic one.

I don’t have any inside information about their vision, but I do have some thoughts about why the PayPal/eBay combination works as is.

The Future of Payments

The payments space is extremely competitive right now. Amazon, Google, Apple, and Square all want to own it. And none of them are playing with each other. Instead, they’re all deploying whatever strategic assets they have to create their own closed commerce-and-payments systems.

In other words, while Carl Icahn is insisting that eBay and PayPal are two “disparate businesses” with “two very different business platforms” that should separate in order to improve their effectiveness, everyone else in the space is converging as furiously as they can.

Amazon is a commerce platform with its own payments system. Google has a commerce platform and a payments system. Apple has the capacity to leverage its commerce platforms (iTunes, App Store) and its hardware into a closed-loop commerce system that would let users pay for online and offline purchases using their iPhones. Square has allied with Starbucks because it needs large commerce partners to feed it transactions to process.

Any one of these payments system players would likely jump at the chance to add to one of the world’s largest decentralized commerce platforms to their strategic assets.

They can’t, however, because PayPal did that 12 years ago, when it sold itself to eBay.

At the time, I was working as PayPal’s Executive Vice President and helped engineer that deal. We had taken PayPal public earlier that year and had plenty of capital, but we felt that joining eBay would be advantageous for long-term innovation. There were massive synergies between eBay’s peer-to-peer marketplace and PayPal’s easy-to-use payments mechanism. Working as a team, we could share data and analytics about customer acquisition and fraud activity, we could grow our user base faster and less expensively, and we could create higher profit margins in a marketplace where a huge number of higher value transactions would be taking place on a consistent basis.

Twelve years later, the synergies that led to our deal with eBay are no less relevant. Today, 30 percent of PayPal’s $180 billion in annual transactions take place on eBay. 30 percent of its new users come from eBay. Its profit margins are higher here than they are in less established parts of its business.

Thanks to its mature and lucrative eBay business, PayPal has the ability to keep its margins as low as possible in the areas where it is undertaking its greatest expansion efforts – namely mobile payments and retail payments. And as evidence from the last couple of years suggest, this relationship is allowing PayPal to innovate in dynamic and abundant fashion. Last year, it launched 58 new global product experiences. Its mobile business has grown from $14 billion in 2012 to $27 billion in 2013. It has signed up approximately two million physical retail locations that accept PayPal as a form of payment.

As competition in the payments sector intensifies, profit margins on all payments systems will likely start trending to zero. As that happens, controlling major commerce platforms will become even more important to payments players, because they’ll still be able to create value by building valuable ecosystems on top of them.

Building Shareholder Value With a Competent Board of Directors

As Carl Icahn correctly asserts, companies do need to be responsive to their shareholders. Sometimes, activist investors can help spur constructive action against CEOs and boards who have been mis-managing a company’s long-term innovation efforts. That isn’t the case with PayPal.

Instead of providing a compelling explanation for why PayPal would be better off diverging from eBay at precisely the moment when everyone else in the payments industry is looking for convergence opportunities, Icahn has invested energy into attacking the integrity of eBay board members Marc Andreessen and Scott Cook, and the leadership abilities of eBay CEO John Donahoe. In a series of letters, he has insisted Marc Andreessen bulldozed the rest of the board of directors and unilaterally orchestrated a transfer of Skype to Microsoft that benefited Andreessen’s own firm to the detriment of eBay. Icahn should know better; these types of decisions are made by the entire board of directors.

While this has made for lively if unconvincing theater — in Icahn’s imagination, Andreessen has almost Lex Luthor-like powers to control the minds of others — it doesn’t qualify as a long-term strategy.

Instead, it’s classic market exploitation. And while market exploitation can lead to a quick buck in a quick trade, it creates less value over time than more fundamental approaches that rely on strong leaders executing carefully considered plans to build lasting assets.

In the end, Icahn’s stock in trade is trading stocks. Silicon Valley’s stock in trade is creating powerful products and platforms. The former approach creates short-term returns. The latter approach creates economically productive ecosystems that spawn industries, jobs, products, and services that benefit society at large, and compounding profits for long-term shareholders.

This post originally appeared on LinkedIn.

What I Wish I Knew Before Pitching LinkedIn to VCs


At Greylock, my partners and I are driven by one guiding mission: always help entrepreneurs. It doesn’t matter whether an entrepreneur is in our portfolio, whether we’re considering an investment, or whether we’re casually meeting for the first time.

Entrepreneurs often ask me for help with their financing decks. Because we value integrity and confidentiality at Greylock, we never share an entrepreneur’s pitch deck with others. What I’ve honorably been able to do, however, is share the deck I used to pitch LinkedIn to Greylock for a Series B investment back in 2004.

This past May was the 10th anniversary of LinkedIn, and while reflecting on my entrepreneurial journey, I realized that no one gets to see the presentation decks for successful companies. This gave me an idea: I could help many more entrepreneurs by making the deck available not just to the Greylock network of entrepreneurs, but to everyone.

And so today I’ve published LinkedIn’s Series B deck on my personal website. There are three thematic emphases:

  • how entrepreneurs should approach the pitching process
  • the evolution of LinkedIn as a company
  • the consumer internet landscape in 2004 vs. today

To help you figure out what aspects of the pitching process you’d like to understand better, I’ve summarized seven prevalent myths below, which I address more deeply in the full presentation.

MYTH: The startup financing process is about one thing — money.
TRUTH: A successful financing process results in a partnership that delivers benefits beyond just money.

A successful financing process obviously results in you raising capital for your company. But there are other critical outcomes you should shoot for as well. For example, great investors can significantly boost the strength of your network, which helps in recruiting employees and acquiring customers. Great investors can also be a source of network intelligence, so you can better prepare for likely challenges and opportunities ahead.

Put another way, the ideal financing partner is a financing cofounder. This is why already-wealthy entrepreneurs raise money from experienced investors for their next startup: they know partnering with angels and venture capitalists is about more than just the money.

Sadly, many investors actually add negative value, so an investor who adds no value (“dumb money”) but who doesn’t interfere with the operational process can sometimes be a decent outcome. But ideally you find an investor who can proactively add value (“smart money”).

How do you know if an investor will add value? Pay attention to whether they are being constructive during the pitch and financing process. Do they understand your market? Are their questions the same questions that keep you up at night? Are you learning from their feedback? Are they passionate about the problem you’re trying to solve?

MYTH: If your team is strong, show the team slide early in your pitch.
TRUTH: Open your pitch with the investment thesis.

You have the most attention from investors in the first 60 seconds of your pitch, so how you begin is incredibly important. Most entrepreneurs start with a slide on the team. The team behind your idea is critical, but don’t open with that. Instead, open with what the investors have to believe in order to want to want to be shareholders in your company — the investment thesis.

Your first slide should articulate the investment thesis in generally 3 to 8 bullet points. Then, spend the rest of the pitch backing up those claims and increasing investors’ confidence in your investment thesis — which includes background on the team. Clearly articulate your investment thesis so investors can offer feedback that helps you refine it, eventually getting to a place where you both agree on it.

This advice applies to seed funding rounds, too. Yes, seed investors understand that early stage companies have many unknowns and the idea will change a lot, so they look carefully at the people to see whether the team will be able to adapt. But even at this stage, lead with your overall investment thesis. Persuade investors your investment thesis is intriguing, then show who can make it happen.

MYTH: All investment pitches have the same structure.
TRUTH: Decide whether your pitch is a data pitch or a concept pitch.

Your investment thesis is either concept-driven or data-driven. Which kind you are pitching?

In a data pitch, you lead with the data because you are emphasizing how good the data already is. Investors therefore evaluate your company based on the data. When LinkedIn went public, it was a data pitch to public market investors. We showed investors a multi-year track record of data.

If it’s a concept pitch, on the other hand, there may be data, but the data supports a yet undeveloped concept. A concept pitch shows your vision for how the future will be and how you will get to that future, so investors will want to buy a piece of it. Thus, concept pitches depend more on promised future data rather than present data.

MYTH: Avoid bringing up anything that might paint your business as risky and decrease investors’ confidence.
TRUTH: Identify and steer into your risk factors.

Experienced investors know there are always risks. If they ask you about your risk factors and you can’t answer, you lose credibility because they assume you are either dishonest or dumb. Dishonest because if you’ve thought about the risk factors, but choose not to share them, you’re implying you’re not committed to a partnership. Dumb because you aren’t smart enough to understand that all projects have risk factors — including yours. Explicitly identify the one to three risks that could thwart your success and how you will mitigate them.

MYTH: Arguing that you have no prospective competitors is a strength.
TRUTH: Acknowledge all types of competition and express your competitive advantage.

Entrepreneurs often say they have no competition, assuming that’s an impressive claim. But if you claim that you don’t have competition, you either believe the market is completely inefficient or no one else thinks your space is valuable. Both are folly.

The market is efficient, eventually — if a valuable opportunity emerges, others will discover it. To build credibility with investors, you want to show that you understand the competitive risks and show why you’re going to win.

Express your competitive advantage this way: Why are you going to break out of the pack? What is your advantage? If you aren’t clear and decisive, investors won’t believe you have an edge that can lead to success.

MYTH: Don’t compare yourself to other companies because you think you’re unique.
TRUTH: Pitch by analogy.

Every great consumer internet company grows up to be a unique organization. But in the early days, you want to use analogies to successful outcomes to describe what your company is and what its potential could be. Time is short — it helps to refer to what those investors already understand.

The best pitch I heard of was in Hollywood for a film called Man’s Best Friend. The pitch was “Jaws with Paws.” Investors were told that if the movie Jaws was a huge success, a similar plot but on land with a dog could also be a huge success. The movie turned out to be terrible, but the pitch was excellent.

To be sure, pitch by analogy but don’t necessarily reason by analogy. Reasoning by analogy, when you’re developing your business strategy, is dangerous. In startup land, you’re running across a minefield, so the details matter and you have to be careful with your analogies as you conceive strategy. But for high level pitches, analogies work great.

MYTH: Focus on today’s pitch. The future will take care of itself.
TRUTH: Think also about the round after the one you’re currently raising.

Every time you raise a round, you should be thinking about the subsequent round of financing. Assuming you successfully close the current round, how will you raise money later? Who will be the next investors you pitch? What will their concerns be? What will you need to solve next?

Expect that Series B investors will want to see some slides from your Series A deck. Series C investors will be similarly interested in your Series B deck. Etc. When I created our Series A deck, I presented a growth curve that would be good enough to get an investment, but I also had confidence that I could beat it. I wanted to be able to go into my Series B presentation and say, “Here’s what I said before, and here’s how I did.” Because we beat our Series A expectations for network growth, investors could comfortably trust our promise to build revenue with our Series B financing.

Want to dive deeper and better understand how to pitch your startup? Read the full presentation at my personal website.

(Photo: Digital Vision via Getty Images.)

Disrupting the Diploma

Flickr: Anirduh Rao

How updating the communication device known as a “diploma” will help students acquire the right skills and help companies hire the right talent.

Every year, millions of Americans embark on the quest to earn a four-year college degree. Many motives propel them. They go to acquire skills and knowledge from experts in their fields. They go, more generally, to learn how to learn, and to broaden their minds in ways that will help them function as autonomous adults participating fully in the civic life of their country. They go to find friends and mentors. They go because they know that in today’s highly competitive job market, many employers won’t even grant them an interview for a position as a receptionist or a file clerk unless they have a four-year-degree.

College marketing literature rarely expresses this last fact so bluntly. Instead, it tends to emphasize vibrant communities of scholarship and learning, stimulating atmospheres of intellectual inquiry, enduring commitments to academic excellence.

Now, however, there are an expanding number of ways to acquire specific skills and knowledge faster and less expensively than one can manage through a traditional four-year degree program. There are increasing opportunities and venues where people can seek mentorship and develop strategic alliances.

The sole unique feature of a few thousand U.S. institutions of higher learning is their ability to grant four-year degrees. And because a diploma from a four-year program is the mechanism a majority of employers use to screen potential hires, it’s both increasingly valuable and increasingly costly to obtain.

These days, getting that sheepskin from a top-flight university can cost approximately $200,000 in tuition alone. And while many schools have begun to steeply discount their advertised tuitions as they scramble to attract new students in the current market, thousands of graduates continue to emerge from college saddled with six-figure debts. In 2010, the nation’s collective student loan debt exceeded its collective credit card debt for the first time in history.

To help temper the high cost of college, a number of high-tech start-ups have been making impressive strides in the realm of online instruction. But if we truly want to retool higher education for the 21 century in the most forward-thinking way possible, we shouldn’t confine our retooling efforts to instruction alone.

In the same way that trailblazers like Coursera and Udacity are making instruction faster, cheaper, and more effective, we should also make certification faster, cheaper, and more effective too.

To do this, we need to apply new technologies to the primary tool of traditional certification, the diploma. We need to take what now exists as a dumb, static document and turn it into a richer, updateable, more connected record of a person’s skills, expertise, and experience. And then we need to take that record and make it part of a fully networked certification platform.

Once we make this leap, certification can play a more active role in helping the higher education system clearly convey to students what skills and competencies they should pursue if their primary objective is to optimize their economic futures.

Granted, college isn’t just for training young people for the world of work. But if we truly believe that a college education is the best path toward general prosperity and personal fulfillment, we need to do more to ensure that our college graduates are economically viable.

One way to accomplish this is to establish certification as a platform in which the roles and interests of key players in the higher education system – students, educators, and employers – are explicitly articulated and tightly integrated. Functioning as a feedback loop, certification can then help achieve a goal that is at least as crucial as controlling tuition costs: Helping individuals stay employable and competitive in a professional landscape where the desired skills and competencies change rapidly.

Diplomas: Time for an Upgrade

We sometimes call a diploma a “sheepskin.” Why? Because until around a hundred years ago, that’s what most of them were made from. Then, paper diplomas began to appear. After centuries of usage, that was the big upgrade to this technology. And there really haven’t been any since.

Typically, we don’t think of diplomas as a “technology.” But they are. Economists often speak of their “signalling” value. Equipped with a diploma, a job-seeker broadcasts numerous positive attributes to potential employers: Perseverance, self-governance, competence in at least one area.

Employers, in turn, use diplomas as screening mechanisms. If you don’t have a diploma, you don’t get an interview. According to the New York Times, even employers looking for receptionists and file clerks require a bachelor’s degree these days. “When you get 800 résumés for every job ad, you need to weed them out somehow,” an executive recruiter told the newspaper.

So a diploma is essentially a communications device that signals a person’s readiness for certain jobs.

But unfortunately it’s a dumb, static communication device with roots in the 12 century.

That needs to change.

At my alma mater, Stanford University, a bachelor’s degree currently costs more than $160,000 in tuition alone. Less than ten miles from Stanford, however, another school, Foothill College, also issues degrees. There, you can get a two-year associate’s degree for around $2,790, or less than 2 percent of what you’d pay for a Stanford degree.

The problem is if the baseline requirement to obtain a job interview, even for positions like “receptionist” and “file clerk,” is a four-year bachelor’s degree, then in practical terms an associate’s degree is not even worth 2 percent of a Stanford degree. It’s worth zero.

So despite the fact that colleges and other education providers have established a variety of alternative programs and degree options, at a variety of different price points, employers have simply placed more and more emphasis on traditional four-year degrees.

Not that this means employers are satisfied with the system.

In March 2013, the radio show Marketplace teamed up with The Chronicle of Higher Education and asked around 700 employers to grade the nation’s colleges and universities on how well they were employing their graduates for the workplace.

53 percent of them said they “had trouble finding recent graduates qualified to fill positions at their company or organization.” 28 percent said colleges did only a “fair job” of producing successful employees. They also said that more than grades, major, or what school a person attended, “employers viewed an internship as the single most important credential for recent grads.”

At first glance, this perspective is baffling. Employers insist that college degrees are a prerequisite for employment, even for low-skilled clerical positions. And yet what they find most telling is not how well people do in four-year-degree programs, but how well they do in settings that approximate workplaces.

Thus, there’s actually reason for hope here. The more employers realize that four-year degrees don’t necessarily guarantee the attributes they value most, the more likely they’ll be to demand a system that does.


Design Specs for a Smarter Diploma

We spend years of our lives working to obtain a diploma. We invest substantial capital in it. And yet compared to the nuanced portraits of our aptitudes and attitudes that our teachers presented to our parents on our first-grade report cards, a college diploma is an opaque and unrevealing document.

If we were building a higher education system from scratch, would our records of assessment and certification look anything like today’s diplomas? Ask a hundred people to build a better diploma, and you’ll probably end up with a hundred different solutions. None, however, would look like a traditional sheepskin.

In my opinion, these are the characteristics a 21 century diploma should have:

  • It should accommodate a completely unbundled approach to education, allowing students to easily apply credits obtained from a wide range of sources, including internships, peer to peer learning, online classes, and more, to the same certification.
  • It should be dynamic and upgradeable, so individuals can add new credentials to it as they pursue new goals and educational opportunities and so that the underlying system itself is improvable.
  • It should help reduce the costs of higher education and increase overall value.
  • It should allow a person to convey the full scope of his or her skills and expertise with greater comprehensiveness and nuance, in part to enable better matching with jobs.
  • It should be machine-readable and discoverable, so employers can easily evaluate it in numerous ways as part of a larger “certification platform”

Two hundred years ago, what you learned about Latin, the Bible, and mathematics when you were 21 was just as likely to be true when you turned 70. So you spent four straight years in college lecture halls and libraries, you acquired skills and knowledge that would serve you for life, and then you were done.

Now, in today’s fast-changing world, it makes more sense to learn provisionally, opportunistically, as new challenges and necessities arise.

To make this style of learning more practical, we need certification for it that employers will grow to trust and value even more than they do traditional bachelor’s degrees because the efficacy will be so much better.

Imagine an online document that’s iterative like a LinkedIn profile (and might even be part of the LinkedIn profile), but is administered by some master service that verifies the authenticity of its components. While you’d be the creator and primary keeper of this profile, you wouldn’t actually be able to add certifications yourself. Instead, this master service would do so, verifying information with the certification issuers, at your request, after you successfully completed a given curriculum.

Over time, this dynamic, networked diploma will contain an increasing number of icons or badges symbolizing specific certifications. It could also link to transcripts, test scores, and work examples from these curricula, and even evaluations from instructors, classmates, internship supervisors, and others who have interacted with you in your educational pursuits.

Ultimately the various certificates you earn could be bundled into higher-value certifications. If you earn five certificates in the realm of computer science, you might receive an icon or badge that symbolizes this higher level of experience and expertise. In this way, you could eventually assemble portfolios that reflect a similar breadth of experiences that you get when you pursue a traditional four-year degree.

For students, the more modularized approach to instruction embodied in such diplomas would have immediate benefits. Traditional four-year degrees maximize tuition costs, because they only award certification for lengthy courses of study that require substantial capital investments. A more modularized system would move beyond this all-or-nothing approach. Instead of taking general education classes for two years and then dropping out and ending up with little to show for their efforts except two years of debt, students could make smaller investments — in money and time — to acquire specific credentials.

This approach would also encourage students to think more strategically about specific learning paths to pursue, and make it easier to integrate internships into their education. Instead of randomly choosing courses to fulfill “general education” and “support courses” requirements, a student on a more modularized path might focus on, say, the six courses necessary to earn a certificate in “Workplace Communication Skills” or “The Future of Space Exploration.” And then complete an associated internship before moving on to subsequent certificate programs.

At LinkedIn, we’ve developed a broad “Skills & Expertise” taxonomy that our members use to describe their attributes, and which then serve as the basis for endorsements from colleagues. For example, some of my skills include “Entrepreneurship,” “Project Management,” and “Viral Marketing.” In a more outsourced form of Apple University, the in-house program that Apple now uses to teach its executives to think more like Steve Jobs, companies could use this taxonomy to publicize the skills and experiences they value most, and education providers could develop curricula that leads to certification in these areas.

For champions of a traditional liberal arts education, encouraging our nation’s youth to major in “Project Management for Yahoo!” may sound like a higher education inferno even Dante himself couldn’t stomach.

But the national mandate to produce more college graduates — as expressed by President Obama and many others — doesn’t arise from our imminent shortage of Comp Lit majors. It arises from our desire to give more people access to training that can put them on a path to economic security, and to help them develop the skills that can keep America competitive on a global level.

Diplomas that get updated over time as new certificates are added, and which exist as part of larger certification platform, could transform the ways that employers use diplomas. Traditionally, bachelor’s degrees have offered an easy way to winnow a pile of a thousand resumes into a pile of twenty resumes — but they’re also a very limited filter. Because the specific information they codify about a person is minimal, they’re more far more useful for weeding than finding.

As certification gets more granular, however, and as diplomas contain more information and exist as part of a larger, networked ecosystem, new possibilities emerge. Want to find ten potential employees who have amassed at least three certificates related to brand management and have at least five positive endorsements from their instructors? A 21 century diploma should allow you to do that.

Certification as a Platform

One of the main reasons the college degree persists as a technology is because it doesn’t need a user manual. We know what a traditional college degree signifies in general. We’re familiar with many of its nuances. A degree in Biochemistry & Molecular Biophysics from CalTech means one thing. A degree in Sculpture from Bennington means something else.

How, in a landscape of infinite certificates, will we determine which ones to value and trust? This is the problem that has always plagued alternate forms of certification, and it will only intensify as digital instruction becomes more full-featured and effective.

One organization trying to bring a sense of order to the imminent chaos is Mozilla, the non-profit that oversees the development of the open-source web browser, Firefox, and where I’m on the Board of Directors. In 2011, Mozilla introduced Open Badges, an initiative to develop free software and an open technical standard that any organization or individual can use to issue verified digital badges that symbolize a skill or achievement attained through either online or offline study or participation in some activity.

For example, you might earn a badge for completing a six-week “Introduction to Statistics” course, or for consistently making high-value contributions to an online message board where math students seek help on their homework.

As a person earns badges from multiple sources, they’re all stored in a private repository called the Mozilla Backpack. There, you can arrange your badges into themed groups and choose which ones to share on social networks and other sites. Each badge comes with a great deal of metadata attached to it, including information about the issuer, what the badge signifies, the criteria used to assess your achievements, and on some occasions, links to the work you did in pursuit of the badge.

Already, Peer to Peer University, the YMCA of Greater New York, the Corporation for Public Broadcasting, and Disney-Pixar, to name just a few, have issued or are developing badges using Mozilla’s technical standard. Mozilla is a good initial step, but there are many attributes that are important – ranging from employer trust to persistent storage of the certification if the source goes away – that still need to be worked out.

Creating a shared standard for attaching machine-readable information to certifications is an important first step for getting employer buy-in. Another key step will involve aggregating this data. If millions of people start storing their certification information in a common repository like LinkedIn, certification will evolve from a product (i.e., a traditional diploma) into a platform that can be easily searched and analyzed.

With certification as a platform, not just a product, the feedback loops between all parties will tighten. Education providers will have more capacity to track what employers are looking for and adjust their curricula accordingly. Students will have more explicit guideposts to follow, so they can invest their tuition dollars and time into developing skills that will truly increase their chances of transitioning successfully to the workforce. Employers will be able to use certification as a finding mechanism, not just a screening mechanism.

With certification as platform, “Weed out everyone who doesn’t have an Ivy League diploma” will evolve into “Let’s find someone who possesses these specific skills and attributes that will help our organization.” With certification as a platform, the communication device currently known as the ‘diploma’ becomes a much richer signal that will help businesses hire better and help individuals learn and grow faster.

Making this transition won’t happen overnight. But if we truly want to use technology to transform higher education, we can’t just confine our efforts to transforming instruction. We have to transform certification too. In doing so, we have an opportunity to create a new system that makes it clear to students what skills are most relevant and in highest demand, and thus gives them a chance to pursue these skills more strategically.

But our higher education system can’t implement such changes alone. The business world has to embrace certification-as-a-platform, too. As long as it continues to depend on a 12 century communications device, the diploma, as its preferred gateway to entry, we won’t be able to fully capitalize on 21 century innovations in technology and education.


Author notes: Thanks to Greg Beato for significant editorial support on this piece. Also thanks to Ben CasnochaMimi Ito, and Joi Ito for their feedback. Photo credit: Anirudh Rao.

Immigration Promotes Entrepreneurship and Prosperity

Immigration is pure entrepreneurship. You leave behind everything familiar to start somewhere new. To succeed, you need to develop alliances. You must acquire skills. You will have to improvise on occasion. It’s a bold proposition.

Immigration is also fundamental to the U.S. national identity — as the Senate just acknowledged with passage of the most significant reform bill in decades. Our nation’s founders, determined to live in new ways, left behind old philosophies, old laws and old customs. The United States was conceived as a crucible for new beginnings.

Immigration has benefited the United States immensely. Because of our reputation as the country most receptive to ambitious upstarts willing to risk everything for a better life, we have attracted the world’s hardest-working, most innovative dreamers.

A hundred years ago, for example, two Hungarian immigrants, Eugene Farkas and Joseph Galamb, helped design the Ford Motor Co.’s paradigm-shifting automobile, the Model T. In our own era, German immigrant Sebastian Thrun has helped steer transportation into the 21st century with his work on Google’s self-driving-car project.

Identities don’t just happen. They are consciously crafted. Indeed, if our forefathers had wanted to be known as the Land of the Secure and Protectionist, they would have erected a giant sculpture of a barrier in New York Harbor. Instead, they went with the Roman goddess of freedom who, with her 30-foot torch, has served as an icon of American enlightenment for more than 100 years.

The Statue of Liberty is one of this country’s best-known symbols precisely because it embodies values and ideals fundamental to our national identity: America, land of the fresh start. America, teeming with opportunities, open to all. America, a land of innovation and progress, where we don’t just tolerate new philosophies, new technologies, new ventures and new citizens, but we welcome them.

The United States welcomes immigrants, and all of its citizens benefit from their arrival.

Multiple studies have confirmed that immigrants are more likely to start businesses than native-born Americans. In fact, according to the Partnership for a New American Economy, as of 2011, 42 percent of U.S.-based companies on the Fortune 500 list, accounting for a total of more than 10 million jobs worldwide, were started by U.S. immigrants or their children. Between 1990 and 2005, 25 percent of our highest-growth companies were founded by foreign-born entrepreneurs. That growth means more jobs and a more robust economy for all of us.

And that’s not a new phenomenon. Historically, the U.S. identity as a nation of immigrants has been one of our best competitive advantages. Now that the Senate has acted on reform, the country has an opportunity to build on this strength.

That’s why so many in Silicon Valley, including our crew of founders at, urge the House of Representatives to affirm this forward-thinking vision for our country. The immigration bill reflects an aspect of American identity that we instinctively recognize as true and essential. Sure, our technology industry needs more high-skilled technical talent, but at, our support of immigration reform is rooted in something deeper. As history’s most successful start-up, the United States is a land of new beginnings, risk-taking and commitment to progress for all immigrants. Only comprehensive reform makes good on the promise inherent in our national identity.

The legislation before Congress features important provisions for ensuring the security of our borders. It establishes a process by which the 11 million unauthorized immigrants already here can pursue citizenship over time and thus participate more productively in American life. It will increase our capacity to utilize new workers with a wide range of skills. And these workers will infuse the U.S. economy with energy and innovation, just as immigrants determined to put dreams into action have always done here.

The Statue of Liberty emphatically embodies our national identity of openness and entrepreneurial boldness. Our immigration laws and policies should do the same — promoting access and, through that access, producing opportunity, justice and prosperity for all.

(Originally published in The Washington Post)

Shape Your Identity Or It Will Shape You

“Keep your identity small.” — Paul Graham

reidhoffman_identity“Identity” has become somewhat of a dirty word, especially in Silicon Valley circles.  In many minds, the word “identity” goes hand in hand with the word “politics”; a divisive tool used by politicians to win voters by appealing to religious or ethnic affiliations.

YCombinator founder Paul Graham even wrote an essay about the importance of keeping your identity small.  Once your identity is threatened, he reasons, you become defensive and resistant to change or even dialogue. Thereby, non-collaborative and non-productive.

I agree that challenging someone’s identity can trigger defensiveness, but the answer isn’t to pretend that identity doesn’t exist.

Identity is a core and unavoidable part of all our lives.  Our actions shape our identity, and in turn, our identity shapes our actions.  Trying to pretend that identity doesn’t matter may make you feel better about yourself, but it won’t affect how others see you, and how their perceptions shape their actions.

The great irony is that many of those who, like Paul, advocate the suppression of individual identity aren’t shy in advocating the construction of strong corporate identities and brands.  Whether you’re an individual or a company, identity matters.

I believe that each of us should be thoughtful, proactive, and rigorous about our own identity.  Focusing on and answering a few key questions will allow you to shape your identity and thus your life to better meet the expectations you have of yourself.

You have an identity

As much as you might believe that your age, gender, or race is irrelevant, they affect how others perceive you.  In fact, they even affect how you perceive yourself.  In a famous set of experiments, subjects who were primed with different elements of their identity actually performed differently on tests.  Asian-American women who were primed with their ethnicity did better on math tests than the control group, and even better than those who were primed with their gender.  Doubtless these women considered the stereotype that men are better at math pernicious and false; that didn’t stop it from affecting them.

Silicon Valley is famous for its belief that it is a pure meritocracy, but I’ve noticed that most of the loudest advocates for this belief are young white men, and most of its other advocates are older white men.

We all have many aspects to our identities that even *we* don’t even realize we have.  Every action we take, no matter how seemingly trivial, can have meaning to others, which is why it’s critical to be thoughtful about shaping our identities.

Defining your identity

Your identity is your vector; it is a path defined by what you do and why you do it.  By indicating your direction, it helps you define your available options.   Like an old-fashioned newspaper reporter, your identity helps you sharpen your answers to the 6 Ws: Who, What, Where, When, Why, and hoW.

What: What you stand for in the world. You have to stand for distinct things, not platitudes.  One of the biggest reasons I’m an advocate for identity is because I believe in this “What”.  We are all moral agents, and we need to be thoughtful about what we stand for.  “Why am I a good person?” isn’t just a rhetorical question.

Who: Who you stand with.  Who’s in your network?  Whose networks do you belong to?  Part of the reason I wanted to respond to Paul’s essay is the fact that Paul is someone that I stand with.  Ironically enough, Paul is incredibly clear about whom he stands with; Paul is all about helping technologists and engineers have an impact on the world.

How: How you manifest your identity.  What are the key things you’re going to do?  One of the reasons I chose to write this essay is that I believe writing is one of the best ways to help thoughtful people evolve their views.  Writing makes it clear what I stand for in a very public and shareable way.

Where: Where you stand is also an integral part of your identity.  Geography matters.  If your identity includes becoming a successful software entrepreneur, you ought to be in Silicon Valley.  Strong entrepreneurs recognize that they’re much more likely to succeed in Silicon Valley than anywhere else.

Why: Why do you take a stand?  We are moral actors in this world, and we should be conscious about the reasons we take a stand.  If you treat this as an unconscious, unshapeable thing, that’s bad for the world.  The “Why” of your identity is something that binds all of your choices together, and frequently comes down to a statement of principle.  I believe in a number of key principles that I apply to myself and the world at large: A world of diminished violence, reaching human potential, getting to truth through intellectual discourse, and universal civil rights that apply to all people, all cultures, and all societies.

When: When do you act on your stance? When are you willing to take on risk, suffering, or pain?  Frequently, the answer is “When it’s really important,” which ties into the “Why” of your identity.

Coming up with these answers can be hard, even uncomfortable, but it is essential.  You can’t just go with the flow on everything.  Neither absolute flexibility nor inflexibility is a practical approach to life.  Even someone as notoriously insistent on getting his way as Steve Jobs reflects this principle.  Steve was inflexible on things like design and user experience, but he chose those things thoughtfully and with a purpose.  When you know the answers to these questions, you’re much better equipped to lead a life that reflects your beliefs and values.

The rise of Network Identity

One exciting development for constructing a thoughtful identity is the rise of what I call “Network Identity.”  There are key differences between a traditional group identity and the new network identity.  A traditional group has a set of members, and is the same for each member.  A network, on the other hand, is different for each individual.  Unlike a community, networks can overlap while still being different.

We like to say things like “You are what you eat,” to reflect the reality that your diet is one of the most critical inputs to your health.  In the same way, network identity states, “You are whom you choose to befriend.”  The sum of your network provides others with a valuable way of gauging your individual identity.  When I meet someone new, like many, I look them up on LinkedIn.  Looking at their position in the network, especially our set of mutual friends, is one of the strongest inputs into how I perceive them.

Just as with your personal identity, you build your network identity through the choices you make.  The good news is, for most of us, choosing whether or not you want to have a relationship with someone is easier than deciding what abstract principles to follow.  The bad news is, most of us don’t actively and explicitly terminate our friendships, so sometimes our roster of friends makes an unintended impression.  Even here, however, you need to be thoughtful; “my friend, right or wrong” is just as misguided as “my country, right or wrong.”

Defending your identity

Paul Graham’s approach of keeping your identity small may help keep conflicts from arising over your identity, but in fact this could actually be negative. Your identity helps you define key borders and boundaries (Where and When).  You have to choose what you’re going to advocate and defend (What and Why).  If you don’t enforce the integrity of your identity, you’ll lose it.  In other words, if you talk the talk, you have to walk the walk.

Saying you’re a “good person” is meaningless unless you actually *act* on behalf of others.  If you thought the invasion of Iraq was a mistake, what did you personally do about it?  If you think the US shouldn’t support autocratic regimes, what are you doing about it?  Only Tweeting doesn’t really count.

This can be a fine line to walk; I think of it as the difference between being principled and self-righteous.  You should follow the principles behind your identity; you shouldn’t seek out conflict as an act of self-aggrandizement.

Choose your own identity

Identity comes from choice; choice comes from identity.  On a daily basis, the actions you take, the people you spend time with, and the principles you choose to defend will define your identity.  Therefore, you should choose to construct an identity that signals to the world your core values and unique choices.

P.S. It hardly seems fair for me to pontificate about personal identities without sharing how I view my own identity.  Not all of you will agree with the principles I follow, but understanding them will certainly help us have a productive dialogue.  Here are some of the ways that I characterize myself:

  • Progressive
  • Technocrat
  • American
  • Intellectual
  • Mystical
  • Meritocratic
  • Friend

(Thanks to Chris Yeh and Ben Casnocha for their help on this essay.)