One of the disturbing things we notice as children is that paper money has no inherent value. Why is it that green pieces of paper are accepted in exchange for all manner of goods and services? Because we have all agreed that it should be so.

Mostly, it is because the various sovereign governments whose soil we inhabit have stated that they will accept payment of tax only in these currencies. So we had best have some of it. This demand creates motivation for all of us to work to get at least a minimum amount of it, and many of us would like to have more than a little.

So, we accept this “green lie” as a fact of life. Money makes the world go around, and we’re all playing this game under penalty of deprivation, or incarceration at the worst case.

Waking Up

Just like Neo, we are called to “wake up” and recognize the nature of this system. Socialist-capitalist world governments are a reality that we impose on ourselves; if we can look up and see beyond it, a whole new world opens up.

Currency Is Different from “Money”

Currency, the worthless bits of paper and metal we trade for handy things like food, beer, and fuel works pretty well and we can rest reasonably sure in our ability to use it to survive.

But what about your 401(k)? It’s an illusion. The financial system is engineered to compel you to shuffle the majority of your wealth into ledger accounts that exist only in your mind. And these “account balances” cause you to make all kinds of decisions — whether to eat out tonight, whether to buy a car or a house, whether to overthrow the government — in particular ways. Your behavior is, in a very real way, controlled by how much “money wealth” you perceive you have.

Glitches In The Matrix

When global financial bubbles jitter as they have done in the last 18 months, home values and 401(k) balances can be badly hurt. These downturns in perceived fortune, in a very real way, cause people to modify their behavior. Maybe you won’t eat out, maybe you won’t take that trip, maybe you won’t start a business. Why do you change your behavior when none of this is real?

Political Implications

Historically, governments are overthrown when unemployment reaches a sustained 15-20%. Current Keynesian fiscal policy adopted by the Fed is aimed at having a variety of control mechanisms to stimulate the economy (lower interest rates; bank lending; TARP mechanisms) when unemployment gets out of control.

But, as we have seen, these market interventions usually lead to unintended consequences. It’s been widely stated that the bank and insurance bailouts were “gifts” to firms like Goldman Sachs who disproportionately benefited from “loopholes” in the regulatory climate. You and your children will certainly pay for these mistakes in the form of devalued currency and sustained taxation.

My point here is to emphasize that monetary policy is an instrument of the state which is used to keep the populace in-line. The debates between the left and right over tax policy are pointless when fiat money allows the Federal Reserve to tweak the knobs of reality at will. And as long as you are motivated by money, you are under the control of this system — and the debates of left and right are just distractions to keep the masses busy. Bush? Obama? Who cares. It probably doesn’t matter to your bottom line. If it doesn’t matter to your personal security, why worry about it?

Finding Inherent Value

Do you ever wish you had a real skill? I don’t mean manipulating ideas or paper, but something tangible? Doctors can trade their services for food. Builders could trade their services for future return of garden produce.

What if your 401(k) was simply gone tomorrow? I don’t mean badly eroded, but gone. What would your future look like? What would be left for you if the monetary system — and all of our current economic system — went bust? What would you have left?

I’d argue you have more than you might imagine. You have family, friends, some basic skills, and an ability to trade effort for necessities. Because everyone would be in the same boat, this would be easier than you might imagine (though it would certainly be chaos).

Current social network tools allow you to start building an economy in the form of interpersonal relationships; by sorting people by shared interests and shared inherent motivations, these tools allow people who find meaning in the same things to find each other. And meaning is at the heart of interpersonal exchange.

Do Important Things

If you endeavor to do things that matter — things that help others, things that change the world, things that have meaning — you will accrue amazing awards in interpersonal relationships. People respect leaders. People respect those who make sacrifices for others. If you’re only in it for yourself and your ability to extract imaginary cash from the system, where will you be when the system fails?

“The System’s Gonna Fail”

In the 1972 film Deliverance, Lewis Medlock (Burt Reynolds) makes a case that “the system’s gonna fail.”
Burt Reynolds: “Machines are gonna fail, and the system’s gonna fail… then…”
Jon Voight: “And then what.”
Reynolds: “Then, survival — who has the ability to survive. That’s the game… survival.”
Voight: “And you can’t wait for it to happen, can ya? You can’t wait for it… Well, the system’s done all right by me.”
Reynolds: “Oh, yeah… You got a nice job, got a nice house, a nice wife, a nice kid.”
Voight: “You make that sound rather shitty, Lewis.”

He may be slightly exaggerating the situation, but when you read books like Extraordinary Popular Delusions and the Madness of Crowds (Charles Mackay, 1842 – yes, 1842!) you start to realize that the financial system we have now is only different from those in the past in that we don’t yet know how this one will fail.

That’s right: we just don’t know how this ends, but it will most assuredly end.

Cash as a Symptom of Good Work

If you spend your days creating real change, the distribution platform for your ideas and your work is larger and less expensive than ever before. Do something original and the entire world is your audience. Do something great and the world will want to reward you.

You can accrue massive “whuffie” in interpersonal relationships, but you’ll also very likely accrue a lot of cash if you do work that is both original and inherently valuable.

And since there’s no way of knowing when the system’s gonna fail, it’s best to simply do good work and build strong relationships. Then you’re covered no matter what happens.

You can only master the matrix when you stop playing by its rules. Wake up, Neo.

For a software startup, having a good idea is important, but a good team is essential.

Good ideas are easy to find; I keep a list of interesting business and tech ideas that I constantly update and probably have a couple hundred at the ready.

What’s hard to find, and is much more important for success, is a good team. What are the ingredients of a good team?

Go All In: Look for “Crazy Eyes”

It’s tough to go it alone. While you might succeed nurturing an idea as a side project, your chances of success go up dramatically when you band together with people who complement your skills and are willing to do what it takes to get something to market as quickly as possible.

I call it “crazy eyes.” You need to be able to look somebody else in the eyes and catch that wild-eyed glint of insane dedication – and truly commit to each other as collaborators. If you can’t find people to take risks with, you probably won’t be able to bring your idea to fruition.

Proper Casting

Putting together a good team is all about having the right people in the right roles. First, that means choosing the right people to collaborate with. Second, it means knowing and being honest about the strengths and weaknesses of each individual on your team.

All too often, I have seen people call themselves CEO that really ought to be “Chief Software Architect.” Or people in operational roles who clearly can’t stand being around other people. While it’s tempting to label yourself and your cofounder as COO and CEO, you need to be honest (and educated) about whether you are really right for these positions.

When you go to talk to potential investors, they will sniff out this kind of bad casting right away, and they will just assume you have bad judgment. If they think you have bad judgment about a simple thing like properly casting yourself, then they think you will have bad judgment about everything else; they certainly won’t trust you with investment funds.

Proper casting is a sign of honesty, clarity, and good judgment. It’s key to connecting with investors. Even if you don’t think you need investors, prospective partners and employees pick up on your casting judgment also. Do it right.

A Good Team Always Survives

What may seem like a great idea may turn out to be a bad one, or one that needs to be changed to be successful. Maybe it turns out that kids don’t want to play with horses in your 3D virtual world. Maybe instead, 50 year old men want to play war there. A good team figures that out and capitalizes on it. A bad team spends ever greater sums of money trying to embellish the pretty horses and advertise in kids magazines.

Even in the worst case, a good team that knows its strengths and weaknesses will know how to salvage assets and return value to investors (license the tech to others, etc). A bad team gets mired up in personality conflicts, personal crises, falls apart and becomes toxic to everyone.

This is why investors will almost always bet on a good team with an unproven idea over a sure-fire idea and a so-so team. Good teams deliver returns no matter what.

Good Teams Make Markets

I’ve seen lots of ideas that sound impossible on the surface turned into great businesses through the skills, connections, and experience of their teams. Want to sell WiFi in airports? Sounds impossible, but not if your COO spent 10 years as the director of purchasing for HMS Host. Want to sell an avionics upgrade to the Air Force? Sounds tough, but not if your CEO spent 10 years on contracts at Lockheed.

What a team brings to an idea is more important than the idea. Good ideas are a dime-a-dozen. Finding the people to make a good idea work is incredibly difficult.

Stay Calm and Open to Change

It’s easy for partner relationships to become emotional and strained. Often, partnerships form as a handshake and a promise of 50-50 equity. Operating agreements and buy-sell arrangements often come later, breed resentment, and then become set in stone as people invest increasing amounts of sweat equity.

Don’t let relationships get in the way of execution. While you may be passionate and emotional about your idea, you should be calm and cool about your relationship with your team members. Remember, it’s all about proper casting. Do whatever it takes to put people into the right roles and immediately address any questions regarding equity, hurt feelings, and the like.

There’s no better way to turn a good team bad than to let equity and casting issues fester.

Know a Lot of People

The best way to insure proper casting is to choose the right teammates to begin with. The best way to do that is to know lots of people with diverse skills. This will keep you from going into business with your college roommate and instead partner with people who have the skills that round out your team.

Just Say No

“No” is the most powerful word in business. The pressure to be “moving forward” in our society is intense. But if team is so important and you also believe in your idea, it doesn’t make sense to move forward with the wrong team or the wrong idea. Just say “no.” Instead, wait it out and find the right team, or at least part of the right team before moving forward. Or change your idea.

Every day I see smart entrepreneurs, under pressure to “move forward,” squandering their time by pursuing an idea with a “halfway there” team. I don’t mean to belittle any entrepreneur’s efforts, and I certainly wouldn’t bet against them. But there’s a difference between doing something just to be doing it (and not really believing in it) and going all-in with people who have what it takes to succeed.

And yes, many entrepreneurs don’t really believe in what they are doing: if they did, they’d quit their day jobs. Building up and then tearing down a half-baked startup takes time as well as real and emotional capital. Why waste all that? Life is short. Find the right teammates (if you need anyone beyond yourself to begin) and then go all in. Your support network will rally around you.

What Investors Look For

You may think investors read your idea first. They don’t. They look at where you live. They look at who your attorney is. They look at your background. They look at your team. Smart investors know that your network says more about you than anything else.

Once they’ve figured out “who you are,” then they consider your idea and determine if you have any hope in hell of delivering what you’re promising. Investors know ideas are cheap; they see them all the time, and usually have many ideas of their own. What they are looking for is why they should bet on you to deliver on your particular idea. And frankly, they are looking to see if you are delusional!

If you are realistic about your chances, have spent time building a good team, and have cast your team members in appropriate roles, most investors will look at any plausible idea favorably. It doesn’t hurt if you share some common acquaintances, either; shared social networks and shared values help ensure long term commitment to the investor and the community. This is why angels almost always invest close to home.

Local Is Best

It’s both tempting and possible to put together a “virtual” company with folks spread around the world. However, investors see this as a sign of team weakness. It means video conferencing instead of face-to-face meetings. It means slower response times. It means travel costs and weaker relationships. In the end, it lowers your chances of success and is just a pain in the ass.

In the context of larger established companies, having some remote workers can make lots of sense. But if you’re trying to launch a startup, do it with the people in your own backyard. Can’t find the right people? Keep digging; see below.

Build Your Network

The single best thing you can do to as an early stage startup is to build up your network of potential team members. And don’t just collect business cards at networking events. Build real relationships. Figure out what makes people tick. Spend time in environments where you take risks with people and try out new things. They will become your casting pool, now and in the future.

One of the best ways to do that is to get involved in your local tech community. Here in Baltimore, we have Beehive Baltimore, which lets freelancers and entrepreneurs spend time working together. From Beehive, TEDxMidAtlantic was born. That event brought over 100 amazing entrepreneurial thinkers together in organizing a 500 person, very complex event. Go to events like Ignite Baltimore; listen to the people around you and think about how you can collaborate with them. Grab lunch and beer with people!

These are just a few observations I have gleaned from my work with Baltimore Angels and with starting and observing many companies over the last 23 years. I welcome your comments!

I typically hate writing about topical technology subjects, because most often it’s reactive, worthless speculation.

However, the new Twitter “Lists” feature has me thinking; this is an interesting feature not because of the “tech” but because of the implications on the developing economics of social networks.

First, what it is: Twitter “Lists” allows you to create lists of Twitter users that are stored within Twitter’s servers. You can name those lists (/twitter.com/davetroy/art) and those URL’s can either be public or private.

People can then follow those lists, which really is more like “bookmarking” them, as they do not appear in your Twitter stream. Those lists in turn keep track of how many “followers” they have, and you can see how many people “follow” the lists you create.

Traditional “Follower Economics” Are Dead

Jack Dorsey and Biz Stone always said that the best way to get real value out of Twitter was to follow a small number of people; it was never their intention for people to aim to follow more than 150-200 people (the “Dunbar number,” or people we can realistically expect to maintain relationships with).

With “Lists” you can add someone to a list, but not necessarily “follow” them. So, instead of “following” Ashton Kutcher, you can put him in a list that you call “actors,” or “attention whores.”

You can even put someone in a list (cool people), have them publicize that, and then change the name of that list to something less flattering (douchebags, or worse).

The issue of derogatory lists alone is one that Twitter will need to address.

So traditional “follower counts” are going to be meaningless – instead of “followers” people are going to start talking about “direct followers,” “indirect followers,” and “being listed.” It’s all changing, and I applaud Twitter for being willing to throw the old (flawed) assumptions about follower economics entirely out the window in favor of a new approach.

Buying Influence and Reputation

Within a few hours of the introduction of “Lists” I was put onto a few:

• @danmartell/founders
• @Scobleizer/venture-capitalists
• @christinelu/vc-and-angels
• @DarrellHudson/top-500-techies
• @kim/rockin-this-twitter
• @the_api_book/twitter_history

This early “seed” of my reputation is quite flattering and arguably pretty powerful (though a fraction of what I expect my ultimate “listings” will be). It shows that I am an “investor” and a “techie,” and considered so by some pretty influential people. I did nothing to influence this and would not consider doing so.

But, I am lucky and glad to have been so-described this early on. What if I really wanted to influence what lists I was on, or to appear on as many lists as possible? I can imagine now the jockeying to get onto the lists of all the “A-List” digitalistas will be intense and powerfully ugly.

Imagine the seedy things that might go on at tradeshows in exchange for getting “listed.”

Going forward, the primary question will be which specific lists you appear on (influence of curator, quality, scarcity) and, secondarily, how many lists you appear on (reach, influence).

“1M Followers” will be replaced by “listed by over 50,000,” or even “listed by the top 10 most influential people in microfinance.” And yes, listing counts will be a fraction of follower count, as lists will necessarily divvy up the people you follow through categorization.

Scarcity: You get 20 lists

It looks like people are allowed just twenty lists right now. That’s undoubtedly a scaling and design decision by Twitter to keep things manageable.

Putting aside for a moment all the reasons why people might want more than 20 lists, let’s accept the limitation. You get 20 lists. So it’s a scarce resource. It means Scoble, Kawasaki, Gladwell, Brogan, Alyssa Milano, Oprah, Biz, etc, all each get just 20 lists.

What will someone pay to get onto one of these lists?

Do you think that an author would pay to get onto twitter.com/oprah/incredible-writers? Yeah, I do too. Now imagine that, writ large, and scummier, with people even less reputable than Oprah. Now you see what I’m talking about.

At least buying followers is a scummy behavior that’s amortized over millions of targets; buying 1/20th of one particular follower’s blessing could lead to very high prices and extremely unsavory dealings.

The Coming “Curatorial Economy”

Twitter is doing this thing, and whatever Twitter does in house trumps anything that a third party developer might do, period. So, stuff like WeFollow, etc, your brother’s cool thing he’s making, Twitter directories: they are done, people. Or these external things must at least accept the reality of Lists and what they mean to the ecosystem.

Some folks have been complaining about the user interface for list management, etc, and that’s all moot: it will be available through the API, and you should expect list cloning, lists of lists, mobile client support, etc, pretty soon.

But the genie is out of the bottle. Start managing your reputation in a way that’s authentic and ethical and stay on top of this. And be prepared for what I’m calling the “curatorial economy.” (You heard it here first.)

Everybody’s making collections, and there are certainly people who will pay and be paid for listings. Count on it.

Nearly every weekday between 4:00 and 7:00pm, eastbound US Route 50 in Annapolis, Maryland comes to a standstill. It typically happens near the westernmost edge of the city, and for a distance of roughly 7 miles, traffic inches along at a speeds often less than 10 miles per hour.

Yesterday it took me 30 minutes to cover these 7 miles (5:30 to 6:00pm).

It would be one thing if it was just me that was inconvenienced, or if this was a result of an accident or some unusual circumstance, but not so: this happens every day and there are tens of thousands of people affected by it. There is nothing unusual about it. We can only infer that this is how the road was designed to operate.

It would also be one thing if it was just this stretch of Route 50 that was affected by this kind of thing, but we all know it’s not. The Washington Beltway, to take one well known local example, is also apparently designed to fail spectacularly every morning and afternoon (and sometimes in between).

What does it say about a society that has its citizens sit in bumper-to-bumper traffic, day in and day out, spewing CO2 and other pollutants and wasting their time?

To me, it’s a sign of contempt. Anyone that would knowingly have people spend their time (and fuel) this way, day after day, must be filled with utter disdain for those so effected. Who’s to blame for these designs?

Surely there are some highway planners and road builders that could take the blame, but I have to think that any changes to the roads themselves can only yield marginal improvements — however needed those improvements may be.

The real issue boils down to us — the citizenry — and where we invest our financial and political capital. We are to blame.

We are the ones who have repeatedly failed to fund public transportation initiatives. We are the ones who have lacked the foresight to discourage long distance car commutes. Annapolis residents famously rejected the extension of the Washington DC metro along the US 50 median because it would “bring crime” from the big city. Now Annapolis is its own capital of crime, and DC is further away than ever by car. And the median strip that once could have accommodated the metro has been sacrificed to ineffective additional lanes. Opportunity lost.

So, there you have it: we’ve locked ourselves into an economic model that provides long term competitive disadvantage. While other countries make good use of public transport and respect people’s time by moving them around efficiently, lowering pollution and making people more productive in the process, we’re stuck in the 1970’s, with people killing 2-4 hours per day in their cars spewing gases. Nice.

So every day, by design, this SINGLE stretch of Route 50 causes at least $207,900.00 in lost productivity for people, costs $22,176.00 in fuel (at $1.60/gallon — try it at $3.99), and generates 152.46 TONS of CO2 output. And that’s when it’s working AS DESIGNED! This is what it’s SUPPOSED to do??!?

Go ahead and add in every other backup in Maryland — the DC Beltway, the Baltimore Beltway, I-95, I-83 for starters — and you’ll have an amazing amount of lost time, energy, and productivity! It’s staggering what a drag this is on our economy. And the first instinct we citizenry has is to expand the current roads and build new ones. And this won’t help!

The only things that will really help are to 1) work closer to where you live, 2) use public transportation or bikes to get there, 3) improve the design of the roads we have.

The inability (er, unwillingness) to make this happen in suburban America is why places that have better public transportation (and the vibrant work/residential communities that invariably build up around it) will outpace us in the long term.

We simply can’t compete in the world economy if we’re locked up in our cars.