There’s been an explosion of interest in new “startup accelerators,” incubation, coworking, startup funding, and new-manufacturing efforts in Baltimore in the last few months; unfortunately this appears to say less about Baltimore than it does about the growth in interest in these efforts worldwide.

Here’s a list of some efforts in this space:

• “Accelerate Baltimore” at ETC Baltimore
• Accelerator led by Cangialosi and Lane
• ETC Baltimore itself (Canton and 33rd street)
• Baltimore Node, Hackerspace on North Avenue
• Sizeable Spaces, coworking in South Baltimore
• Capital Studios, coworking on Central Avenue
• Beehive Baltimore, coworking at ETC Baltimore
• Accelerator effort being driven by Mike Brenner
• Accelerator/cyber/techspace in Harbor East, led by Karl Gumtow
• Innovation Alliance effort being led by Newt Fowler
• Theater/workspace being discussed by Chris Ashworth/Figure 53
• Shared warehouse workspace being discussed by Andy Mangold/Friends of the Web
• Baltimore Angels (Cangialosi et al)
• Invest Maryland fund (DBED)
• TEDCO’s Innovation fund
• Abell Foundation fund (tied to Accelerate Baltimore)
• Wasabi Ventures fund (investing in city, affiliated with Loyola)
• Fabrication Lab at Towson University
• Fabrication Lab at CCBC
• Fab-lab ideas discussed by John Cutonilli
• Highlandtown workspace development led by Ben Walsh
• Mike Galiazzo, pushing Local-Made, (head, Regional Manufacturing Institute)

Did you know about all of these things? Amazingly, many of the people leading these efforts don’t. Or if they do, they’ve not actually talked to the people involved. To me, this is a problem.

Why? Because folks attempting to gather support for these efforts don’t have all the facts. They either haven’t sat down and listened to people’s motivations, and they’re flying blind. Or it means that they have been unable to sell other like-minded entrepreneurs on their vision, which probably means their vision is not that compelling. And that’s even worse.

But this is not all that’s wrong.

Two Serious Problems

One: there’s a tremendous amount of duplication of effort represented in the list above. Why duplicate all of that administrative, accounting, legal, and governance overhead? By pooling more of these efforts together, that overhead can be minimized and shared.

Two: we don’t have enough human capital to support all of these different efforts. We simply DON’T. Many seem to think it will somehow materialize, but from where I sit, with possibly the widest-angle view of the landscape here of anyone, I don’t see that flow of new startups or even new individuals that can support all of this. It just doesn’t exist.

The Opportunity

Baltimore has an opportunity to become a regional and even international destination for people looking to start or join entrepreneurial enterprises. But for that to happen, we need to have stuff here that can actually become a destination.

And unfortunately, the efforts currently underway are not likely to become that destination because duplicated overhead will keep each effort small and parochial.

However, if more of these efforts pooled their resources and talent – and most importantly identified a BIGGER and more IMPORTANT vision for what it is they are trying to achieve, there would be many positive effects, such as ample governmental and foundation support. And that would be hugely helpful in funneling in the sorely lacking regional and international *human capital* that we so desperately need here!

One Possible Vision

Baltimore has an opportunity to become the hub for digital manufacturing and mass-customization technology on the east coast.

Cangialosi and Lane are already talking about supporting some basic fabrication capabilities at their proposed facility on Key Highway. Gumtow’s effort has placed fab-lab capabilities high on its priorities list. CCBC and Towson have fab-labs, though it’s my understanding they may be underutilized. If you’re going to spend money on fabrication equipment at all, it should be utilized 24×7 in order to maximize the asset.

Something bigger – like taking over the WalMart in Port Covington, or the Meyer Seed Warehouse in Harbor East – could support an accelerator, fab lab, and shared workspace. Thinking a little bit bigger would also have the effect of lowering per-square-foot costs dramatically, and even dramatically altering the real-estate ownership structure.

Baltimore is already home to Under Armour, and at some point in the near future (similar to what happened with Ad.com) it will start throwing off new entrepreneurs with experience in consumer products and manufacturing. Where will they go? Will we keep them here in Baltimore?

Focusing on the intersection of manufacturing and technology is important because it represents the one shot we have at rebuilding even a little bit of a middle class here in Baltimore. Because of that, you’ll find abundant support for such efforts — support that can further reinforce Baltimore’s reputation as an international destination for digital and manufacturing.

The More the Merrier?

I am a fan of placing many, diverse bets rather than making a few large ones. But it’s also important to make strong bets. Unfortunately, Baltimore is right now setting itself up to have many weak positions instead of a smaller number of stronger ones.

I strongly urge the folks leading these efforts to get to know each other and coalesce around a bigger unifying vision that can turn Baltimore into an important regional and international destination for entrepreneurs.

Because without agreeing on a bigger vision, it’s likely that these efforts – each led by well-meaning individuals but with individual motivations – won’t ultimately amount to much, and it would be a shame to waste so much time, effort, and talent.

It can be difficult to see the forest for the trees when it comes to defining what it is we in the so-called “tech community” are trying to achieve.

The confusion begins with names: some call it the “startup community,” the “tech business community,” or #BmoreTech. Whatever. I’ve been splitting these hairs for several years now, and with the help of many others and after many personal experiences with organizing groups, events, venues, and businesses have developed a simple but powerful vision for the community.

We’re all trying to build an ecosystem that looks something like this (click to enlarge):

Before we get into the specifics of this vision, here are a few basic values that underly it:

• People are the lifeblood of the community. The ecosystem requires educated, creative people. We should strive to enrich and build compelling opportunities for the people in our community.
• Businesses generate the wealth that powers our community. Strong businesses make a strong community. We should aim to make our businesses stronger and more valuable.
• There is a role for everyone. Diversity of expertise and background is essential to a strong business community. We should aspire to have a healthy mix of product companies, service companies, business service providers, and many types of venues and events for relationship building.
• We should celebrate our successes. Celebrating successes, whether they are successful exits or just milestones, is essential to creating a community that values growth, curiosity, and experimentation.
• We should connect people together.  Trust and strong relationships are a precursor to new business formation. With strong trust relationships, we’ll have more new businesses and they will be more successful.

With this in mind, here’s how this model works, step by step. It’s a cycle, and for simplicity, we’ll start at the bottom.

1. Getting into the mix. (6 o’clock) New participants, exited entrepreneurs, investors, hackers, new entrepreneurs come together via a mix of venues and events. By “venues” I am talking about spaces that offer opportunities for daily, ongoing interaction between individuals. They’re “high touch” while being “low risk.” Think coworking, hackerspaces, regular café coworking, incubators and accelerators, and educational institutions. By “events” I’m talking about one-off or periodic events that afford people an opportunity to get together, get to know one another, and try new things. (Think Bmore On Rails, Startup Weekend, EduHackDay, CreateBaltimore, etc.) New investors can participate in angel groups and pitch events.
2. New business formation, access to capital. (9 o’clock) With trust, exposure, and experience, new businesses can form. With the prolonged exposure made possible by the “mix” phase, entrepreneurs can make more informed decisions about who to go into business with and have likely had more time to refine their ideas before ever beginning. This means a lower failure rate for new startups than in a less-developed ecosystem. As for investment capital, some will come from exited entrepreneurs, some from venture capitalists, seed funds, and governmental initiatives like TEDCO and InvestMaryland. We should aim to connect investors with nascent businesses. This will happen naturally to some extent in the “mix” phase, but we should consciously encourage it; bootstrapping should also be an option.
3. Business growth. (12 o’clock) Some companies will grow to become strong product companies, others will become service companies. Some people want to grow their businesses to sell them, while others just want to build and run a great business. These approaches are all valid. We should celebrate the formation and growth of all of the companies in our ecosystem.
4. Entrepreneur exits. (3 o’clock) Some entrepreneurs will seek the opportunity to exit their businesses and capitalize on their growth. This is most lucrative with product companies. When these exits occur, we should celebrate them as successes of the community as a whole.
5. Entrepreneur returns to the mix. (6 o’clock) Exited entrepreneurs should be encouraged to re-engage with the community, either as investors or as active entrepreneurs to form new relationships and new businesses. The cycle starts anew.

That’s really it. If we can make this cycle work, we’ll have a thriving entrepreneurial ecosystem in Baltimore. (This is the exact same cycle that made Silicon Valley great, and is now working in places like Boston, Austin, and New York.)

That’s Great, But Where Do We Stand Now?

We have much of what we need in place: venues, events, investors, and businesses. But the two things we have most lacked are a cohesive vision for how this cycle is supposed to work, and also the last link in the cycle – systematically re-engaging entrepreneurs into the ecosystem.

However, just today came the news that Greg Cangialosi and Sean Lane are forming a startup accelerator in Federal Hill. That’s an example of two successful entrepreneurs getting back into the mix and re-engaging. We need more of that. But we need to make it easier and more attractive for entrepreneurs – there need to be obvious on-ramps and channels. We’re starting to get that in place.

My hope is that this vision, which I have shared in one-on-one conversations with many friends and leaders to much enthusiastic agreement, can now take root as the underlying force that animates our community.

Role of the Greater Baltimore Technology Council

There’s been much discussion about what the role of the Greater Baltimore Technology Council should be, and I submit that this vision, as I’ve articulated it here, is what the group has been moving toward for the last three years – and with Jason Hardebeck (who is himself an exited entrepreneur) at the helm, I believe we can move towards it more quickly now.

The GBTC’s job is to:

1. Help build and protect the ecosystem. GBTC should be a watchdog that ensures the ecosystem has the right pieces in place and that they have what they need to function properly. This means working with government, educational institutions, and others to ensure that the conditions required for the ecosystem to thrive are present.
2. Accelerate the cycle. The faster this ecosystem operates, the more successful we will be. Specifically, GBTC should connect people together, and celebrate our collective achievements, and help pull our educational institutions into the ecosystem. Ultimately this will pull in more smart, creative people, accelerating the cycle further.
3. Make our businesses stronger. By connecting our community together better and providing venues, events, connections, and celebrating our success stories, GBTC can help to make each of our businesses stronger and more robust. This also means connecting businesses to service providers (HR, insurance, accounting, legal) and mentors who can provide value.

For all the drama and hand-wringing, it really is this simple!

Some have wondered whether they “belong” in the GBTC. That’s something every person and entrepreneur has to decide for themselves; there are obviously many valid and valuable ways to participate in this overall vision that are outside of the scope of the GBTC. However, if you care about growing and protecting this ecosystem, and if the group can help your business grow and succeed, I’d encourage you to lend GBTC your support; it just makes good business sense, as GBTC is the only group that has been tasked with this important work.

I know that others in positions of leadership in Baltimore’s tech business community (and at GBTC) share this vision. I encourage your comments and feedback, but before reacting, you might take some time to really think this over. This is something I’ve been looking at for several years, and based on everything I know, this is the right way forward.

The Rest of the Story

Oh, and there’s one more thing.

We all want to prime this pump and get this vision more fully underway, but I also think it’s reasonable to ask how Baltimore’s tech ecosystem fits into the bigger scheme of things. What relationship should we have with other ecosystems, in our region and around the world? Is the point to win or are we trying to thrive? I’ll be touching on this topic in an upcoming post, and it should help to clarify how this vision makes even more sense for Baltimore.

It’s been a busy few days in the Baltimore tech scene, sparked by the recent changes in leadership at the Greater Baltimore Technology Council. While I have been on the board since 2004, because I was away on travel the last two weeks, I did not directly participate in the decisionmaking process that led to the most recent changes. In fact, I’ve been largely consumed with building my new business (410Labs) for the last year and I’ve not had time to participate in GBTC as much as I’d like.

However, there’s been a lot of speculation about the motivations and thinking behind the change, and as I’ve at least been a part of the ongoing conversations that led up to it, I feel compelled to speak up to set the record straight.

Here’s a brief recap of the facts.

• 1999-2007: GBTC was setup as a standalone organization and was extraordinarily effective at rallying the community, building new programming, and creating connections, under the leadership of Penny Lewandowski and Steve Kozak.
• 2006-2007: The GBTC began a long term strategic assessment process, focused on modernizing the group’s technology systems (databases) and also providing value to both small and large businesses. Several recommendations were made with a goal of “building the innovation ecosystem” in Baltimore. I participated in this “strategic planning committee” at that time.
• 2008-2009: Community-developed events like Ignite, Barcamp, SocialDevCamp and others had begun to cause many to question GBTC’s role: was it for networking events, or educational events? Was it focused on small businesses, or big ones? How would it be funded? What was the membership model? The Strategic Planning Committee grappled with many of these questions.
• January 2009: the board formed a “Strategic Advisory Committee” co-chaired by me and Rick Geritz, another local tech entrepreneur. We conducted a series of interviews and surveys to help understand perceptions and best potential roles for GBTC going forward.
• May 2009: We prepared a set of recommendations and submitted them to the board. The recommendations included the idea that the group should, in addition to focusing on the needs of larger companies, also focus on cultivating entrepreneurs and driving entrepreneurship in the region. The board approved our recommendations and authorized Steve Kozak to move forward with implementing them.
• June 2009 – June 2010: Kozak and the board engaged in a process geared around making the changes we recommended. (The changes would, in fact, ultimately be quite sweeping and could not be implemented overnight.) As part of that process, several additional ideas and models were explored.
• June 2010: Ultimately, the board came to feel that Steve Kozak was not the right person to implement these changes, and sought to go in a different direction with leadership. This is not a ding on Steve; he’s a strong and talented leader who did much good for the organization. But the board felt that it was time to make a change in order to more quickly implement its strategic plan, a move which by that time had gained some urgency.
• June-December 2010: Jennifer Gunner acted as interim Executive Director, and did a strong job of moving the group in the direction outlined by the board. However, the board felt that it should perform due diligence in performing a search for a new executive director – a process in which Gunner would also be considered as a candidate. The board authorized a Search Committee to review candidates and select a new executive director. (I did not participate in that committtee.)
• December 2010: After reviewing all of the candidates, the Search Committee recommended that the board hire Sharon Webb as CEO, and appoint Gunner as Chief Operating Officer. Webb would be tasked with implementing the strategies outlined as part of the strategic assessment conducted in 2009-2010 and would accordingly have full authority to hire, fire, and make tactical changes, as required.
• 2011: Webb got up to speed with the organization and interviewed many members and partner organizations to get a feel for how to best proceed. She did an admirable job, and has a strong background in leadership and strategic change. However, as an outsider to the tech community, some wondered if she was the right person to lead the group. Changes in leadership led to many staff departures, including Gunner. This is understandable and not a reflection of anything Sharon did wrong. On the whole, the group had made some bold moves and was moving in the right general direction.
• December 2011: Jason Hardebeck, who in 2001 had founded WhoGlue, one of the first social networking companies, just completed the sale of his company’s assets to Facebook. Hardebeck has long-time ties with GBTC and has known several board members (including myself) for over 10 years. As an energetic, experienced entrepreneur familiar with issues affecting large companies, small companies, and GBTC, he appeared to be a “catch” for the organization. The board made the decision to offer Hardebeck the executive director job, hoping to accelerate its new strategic plan, and put someone in place who was more directly acquainted with the Baltimore tech community. Again, this is not a statement against Sharon Webb, it was just an opportunity to move forward with an exceptionally strong candidate. Had the board waited, Hardebeck would likely have moved on to something else.

So, that’s the truth. All of it. Some have accused GBTC of trying to “spin” its PR message, and while it’s true that the group cares deeply about protecting the reputation and feelings of the folks involved in a potentially challenging situation, there has certainly been no effort made to conceal the truth.

Others have even gone so far to say that there are tones of sexism in this action by GBTC, and that GBTC’s board must be dominated by “white males.” This is a particularly daft unfounded line of thinking, as the board is quite large and is made up of a large contingent of brilliant, strong, women and men, including many people of color and diverse backgrounds. While white males are not under-represented, charges of sexism (or any other -ism) are completely unwarranted. Historically this is a board that employed Lewandowski, Gunner, a staff of females, and hired Webb. Enough conspiracy talk.

About Jason Hardebeck

If you’ve not had a chance to meet Jason Hardebeck yet, I encourage you to do so. He’s smart, understands entrepreneurship, and Baltimore Tech. He’s already making changes at GBTC, including blowing up its office in order to put its staff out into the community.

Some people know Jason’s story and background, but others don’t. Some have asked me, “So, he sued Facebook and sold them some patents. Sounds like a patent troll. Can I really look up to that?”

But the full story is complex. As mentioned, he started WhoGlue, one of the very first social networking companies — before LinkedIn or Facebook, back in about 2001. He was probably too early. He pursued alumni association contracts and built a successful business. Around 2003, he acquired a product (and an associated set of patents and a developer) from Siemens, the German communications firm, which would help him to expand his company’s product. He did that and expanded its capabilities, and continued to expand his business. However, due to a variety of factors, his product did not evolve into LinkedIn or Facebook, despite being early to the social networking market.

However, he owned some valuable intellectual property, namely patents for mechanisms for controlling what information people can see about each other in the context of a social network. He put these patents up for auction, and there was considerable interest.

My understanding is at this point he contacted Facebook to inform them that they were in violation of his patent portfolio, and to inquire about a settlement. I believe they responded with a cordial, “So sue us.” (Facebook’s approach to IP has been from the start to settle on an as-needed basis.) So he did. This led to a settlement and acquisition deal, which I suspect Jason can’t say much about himself because of the terms of that arrangement.

So, to dismiss Jason as a mere “patent troll” is to severely misunderstand his background and motivations. He was early to market, made substantial investments in building a business, did so, and then acted to leverage the assets he had built up using the laws afforded by our system. This is totally reasonable, and if you spend some time talking to Jason, you’ll see that he totally “gets” both entrepreneurship and technology. I don’t say this about many folks.

Going Forward

There is a cohesive vision for tech in Baltimore coming together now, between GBTC board members and others in the community. People like me, Jason Hardebeck, Greg Cangialosi, Mike Brenner, Jason Pappas, Tom Loveland, Mike Subelsky, Ann Quinn, Newt Fowler, Ellen Hemmerly, Ann Lansinger, and many others are starting to coalesce around a common set of goals, and agree about what the future can look like. There is more agreement than disagreement.

Tomorrow I’ll start to outline more of that vision. But I’ll leave you with one last thought.

If you don’t feel like your voice is represented in the conversation about Baltimore Tech, speak up. If you don’t think GBTC represents your views, we invite you to ask to join (or present to) the board. GBTC is all of us. There is no wall keeping out certain kinds of voices. It’s all about participation.

I volunteered my voice in 2004. There’s no one stopping you from doing the same today. In fact, it’s more urgent than ever.

A lot of people talk about innovation in terms of fulfilling an unmet market need. Specifically, there’s a lot of emphasis on “solving problems.” (I’m looking at you, Dave McClure.) The theory is that entrepreneurs should work on solving a problem that lots of people have, and not get too focused on some technology. That’s fair advice.

However, when entrepreneurs hear this, their first instinct is to often to go ask people about their problems and then try to solve them. Or they look for markets where there is a lot of money being spent.

“The best innovations are those that solve a problem that people didn’t even know that they had,” says Paola Antonelli, curator of design and architecture at MoMA. Twitter certainly falls in this category. In fact most people were sure they didn’t need Twitter, but now it’s a central part of our media landscape.

This class of innovation is the sort you have to shove down people’s throats at first, but then changes the world forever. And they’re tricky to find because no one will tell you they need them. And there’s no market study that outlines the opportunity.

Thinking about this, and stealing some good ideas from design thinking pioneers like Don Norman, Tim Brown, and Daniel Pink, I’ve settled on four key elements that entrepreneurs can use to think about innovation: design, affordances, emergence, and appeal.

Design

Steve Jobs is famously quoted as saying, “design is how it works,” and he’s right. How it works is determined by the design specifications and constraints. If it is software, the major design elements include aspects like synchronous vs. asynchronous, private vs. public, one-to-one vs. one-to-many vs. many-to-many, market size, viral reach, and mode of access. There are many other elements that determine the nature of a product’s design.

The outward aspects – how it looks and feels – are important insofar as they impose an additional set of operational constraints: what’s possible, what’s most likely, how the “happy path” feels, and how brittle the experience is.

When most people think about design, they think about “how it looks.” We’ll get to that in a minute. When you think about design, you really are determining “how it works,” and it’s the most critical part of creating an innovative product.

Affordances

Affordances are the possibilities that a particular design allows. If your product allows for a particular use, then its design affords that possibility. Sometimes there are negative affordances (a part allows for a hinge to open too widely, possibly damaging the product), as well as positive affordances (an iPod Touch can display streaming video, so it afforded the possibility for HBO to make a mobile subscription TV app.)

Every design offers a wide range of affordances, and you should think critically about what they are.

Emergence

Sometimes a design enables new behaviors that its creators did not predict. Users of the product start behaving in a new way that was not anticipated, though it is allowed by the original affordances (say hashtags on Twitter).

Sometimes the emergent behavior is incorporated back into the original design (such as when Twitter adopted hashtags and @ replies, and tracked their trends).

Emergence is usually a happy accident. Biz Stone, co-founder of Twitter, says, “always allow a seat at the table for the unknown.” That is an excellent design goal. By leaving a few doors open, one allows for this kind of emergent behavior to occur, and to capitalize on it.

Designers almost never consider all of the emergent possibilities that their designs afford. Being open to emergence, and incorporating it into later designs, is key to innovation.

Appeal

This is really a subset of design, but it’s worth discussing all by itself. Your product should have curb appeal and create an emotional connection with people that causes them to return to it again and again.

The finest Swiss clockwork will not go anywhere if it is packaged in an ugly shell. While design is “how it works,” your product’s human appeal has everything to do with “how it works with people.” Because without ongoing engagement from people, most products cannot survive.

So, how it “looks” certainly matters, but only insofar as it affects its ongoing appeal, and “how it works with people.” We know the best products are those that create that emotional, nearly-religious connection, and this can’t be overlooked.

Utility Is Difficult to Predict

I think asking about utility is often the worst way to evaluate a design in its early phases. “Why would I use this? What’s it good for? Who needs this?” are questions that are worth contemplating, but it’s also OK if the answer is “I don’t know yet.”

If a design affords a range of emergent behaviors, if it can be distributed to a large group of users, and it can be made appealing and inspire devotion, odds are it’s something worth experimenting with. The odds that the ultimate utility of an interesting design will exceed early predictions is very high.

I love engineers, and do some engineering, but engineers are particularly prone to evaluate concepts in the frame of “how is it different from XYZ that already exists,” or “what technology does it employ?”

The success of the Wii is one of the wins that stymied many engineers. “The graphics sucked, the games were primitive, and there were better technologies on the market.” And those things were not the point. The Wii won because of its design, it affordances, its appeal, and the emergent behaviors (and user communities) it enabled and reached.

So be playful in your designs. Give things a chance. See what happens. Learn from emergent behaviors. And always leave a seat at the table for the unknown.

Thinking about what works for entrepreneurs and what doesn’t, it occurred to me that it’s not always enough to do the right things. You have to do the right things in the right order.

That sounds hard. It is tough enough to know what the right things are, without also knowing what order to do them in.

But the order matters. Adding a particular investor first helps you get the interest of others. There is a right order to seek investors.

There is a right order in which to seek press and PR for your products, and possibly a different order that’s best for your company as a whole.

You could call it “strategic,” but that implies that it might be hard to figure out, or that a wrong move might cost you dearly. That’s probably not quite right; but there is usually one story that’s better than the others.

I think in the end we are all just telling stories: about ourselves, our companies, and our products. We tell a story to prospective employees, and all sales is really storytelling.

So here’s the trick: tell a good story. If you tell a story that has good characters doing interesting things in a compelling order, you’ll win.

And the inverse is also true. Tell a sad story, or a boring one, or one where the elements don’t build towards a climax, and odds are, you won’t get very far.

So the next time you’re worrying over strategy, or wondering how to get investors interested in what you’re doing, start thinking about your story: the characters, their beliefs, the heroes, and the villains.

Write a story that motivates you, and odds are, others will want to play a part too.

Newly-elected Maryland State Senator Bill Ferguson was recently named to the Baltimore Business Journal‘s Power 20. This week they asked me, as a friend of Bill’s and member of a previous Power 20 cohort, to comment on Bill’s relationship with and use of power.

“Bill is a curious, humble, and earnest young man, and he represents a true shift in how power is conferred in this town,” I said. “He didn’t work his way up through the ranks and spend a few years as a city council person, or wait his turn. Bill was able to win because of a shift in political power that’s taking place right now. He derives his power from the people, not from the system.”

Political power is now being conferred through the accumulation of weak and strong ties with citizens, and no longer by top-down power structures, power-brokers, and kingmakers. Don’t get me wrong; those folks still have an impact (they did in Bill Ferguson’s race – they got behind him when it was clear he was onto something), but that impact is waning. And things that were previously unthinkable are now possible.

It may seem like hyperbole to compare the situation in Baltimore to what took place over the last three weeks in Egypt. But it’s an apt comparison.

For decades in both places, people have felt marginalized by a top-down, tone-deaf government that was more interested in its own well-being than that of its citizens. In both places, decades of neglect and mismanagement have led to a serious crisis of confidence.

People are fed up. They’re tired of feeling marginalized, the failed programs, the broken promises, the lack of accountability and the inability to implement imaginative solutions. For 60 years, Baltimore’s population has been in decline, and places in decline have not had the benefit of oversight, dollars, or creative leaders. Instead, corruption (explicit or implicit) festers.

The Perfect Storm

Several factors are emerging all at once:

• Young people want to live near their work and are tired of commuting (and they’ll accept a pay cut to do it)
• Our roads are full and can no longer be meaningfully expanded due to lack of space and funds
• Fuel costs are projected to rise as China’s demand grows exponentially
• Online networks are having a meaningful impact on real-world relationships and politics

These factors, combined, have made Baltimore the most important jurisdiction in Maryland – practically overnight. Yet our leadership has not caught up with this reality.

Baltimore’s recent rise to relevance combined with the power of communications networks will create stark shifts in the power structure.

Two Kinds of Leaders

Today we have a choice between two kinds of leaders. We can choose between the leaders that the system hands us, or we can choose to put our faith in new, emerging leaders with whom citizens have a legitimate connection and a voice.

It is sadly telling that Mayor Stephanie Rawlings-Blake’s much-promoted (Orwellian, broadcast-oriented) Safer City social media campaign follows just one person on Twitter: the Mayor herself. And it has just 78 followers. Why? Because it’s all for show, and no one legitimately cares about a program to mitigate a problem – people actually want to solve it at the root. To hell with a Safer City: give me a city where everyone can earn a living, and I can bet you it’ll be safer.

But our politicians don’t know that, because they have not taken the time to benchmark ourselves against other cities or learn from best practices elsewhere. Baltimore has more cops per capita than any other city. Why is that?

Because we need them. Why do we need them? Because we have a lot of crime. Why do we have a lot of crime? Because we have no middle class. Why do we have no middle class? Because we have not seriously focused on enabling small business formation, which is the number one driver of jobs. Instead we have given tax handouts to fatcat developers so they can build big projects and enrich their cronies.

Yes, clearly the cure is more cops. As the Mayor told the Baltimore Sun’s Justin Fenton, “Maybe we could do without as many officers, but that’s not what the public wants. They want more patrolmen on the street. They want more police in the neighborhood.”

No, Madam Mayor. What the public really wants is for these root cause issues to be addressed. It takes true leadership and understanding to go beyond just treating the symptoms.

Accelerating Change

Some have called the recent events in Egypt “the Twitter and Facebook revolution.” A few have scoffed at the idea that these tools could spark a revolution and cite eons of revolutionary precedent as proof. But it’s a mistake to dismiss their role.

Online networks are accelerants. They create connections passively where none might otherwise exist. Critical mass for change comes when the density of connections between people reaches a threshold level. Ideas spread between networks instantly. What might have taken 10 years before now takes 1 year.

The Soviet regime could never have survived in the age of networks. Iraq would have collapsed under its own weight if given time and these tools.

And the same repressive structures will fall in Baltimore, for the same reasons.

To quote Gandhi: “First they ignore you. Then they laugh at you. Then they fight you. Then you win.”

David Lee Roth

“He who knows how will always work for he who knows why.”
- David Lee Roth

There are 168 hours in a week and you must decide how to spend them. You’ll probably want to spend some sleeping and eating. What will you do with the rest?

Many people that work with technology pride themselves on knowing how to do things the best way, with the best tools. In fact, the history of technology and its evolution is all about “how” and finding new, better ways to do things.

But in some important ways, “How” is the enemy of “Why.” Why should you do one thing instead of another thing? Why is it sometimes important to choose one technology over another? Some technologists would argue that it’s important to choose the better technology. Better for what?

After about age 15, I have always bristled when people called me a “tech guy.” And I wasn’t sure why. While I may be (on the best days) intelligent enough to pay attention to and use technology well, and maybe to have read a thing or two about algorithms and software, I always felt offended by the label. It was as if people were saying that I knew “how” to do things, but that I didn’t know why.

But I do know why. I’ve read enough philosophy, literature, and scripture to have a sense of what we should be doing on this earth. So calling me a “tech guy” feels wrong. I’m as much of a “why” guy as I am a “how” guy. They’re not mutually exclusive.

People who really know “why” often end up with real power and wealth. To save time, the “why” progeny formed a tribe. They go to the right schools and give each other important-sounding jobs. And they control many people who know “how” (but who may not yet know why.) Too often, though, the offspring of powerful people don’t really know “why.” They took a shortcut and there is none.

I spend a lot of time with tech people; in tech conferences; in the tech community. And many of those people know how to do a great many things. Fewer know “why.” Some have yet to realize it’s worth knowing. That’s OK, because learning why takes time.

It’s troubling to hear good, smart tech people get into the minutiae of a “how” question that doesn’t matter. (For me, home media usually falls into this category.) When I was younger, I might have had time to figure out the details of streaming movies to three televisions. Now I just don’t care. This is why Apple is making a fortune on its products. They generally deliver good results without requiring people to waste time on the details. (Steve Jobs knows both “why” and “how.”)

Here’s a challenge, tech people: learn “why.” And understand that “how” sometimes comes at the expense of “why.” You need to balance your priorities between both and choose how you’re going to spend your time each week. If you know only “how”, and never take the time to know “why,” rest assured you’ll be working for someone else who does.

As a tech-aware person you have a head start, because today it’s not enough to know only “why.” Someone who may know why but excludes technological study from their life can’t understand the world properly today because technology shifts so quickly. Sometimes things that once were important simply become obsolete.

Sometimes I talk to tech people who think they don’t have any real power because they are not part of the old-school power-tribe. But nothing is further from the truth, for inherited power is not real power.

No one has more power than someone who knows both “how” and “why.” Become that person and you change the world.

50% Off Loaves and Fishes…

Every few years a company emerges that grows so swiftly that it manages to define the zeitgeist and often helps to inflate a bubble that defies any rational explanation. Often these businesses are driven by new, disruptive ideas that take the market by storm and create a real shift in how people do things. Amazon (and online shopping), Google (and the search business), and Apple (music, smartphones, and touch computing) fall into this category. They created real, thick value.

For every one of these, there are others that grow, get tremendous buzz, and then seem to dissipate as quickly as they emerged. Or they settle into a kind of staid middle-age, their torrid teen years long forgotten. Think about 90′s darlings like IOmega, Boston Chicken, eBay, and Home Depot. It can be difficult to predict which businesses will stick around and which will fall away (or become low-growth, boring enterprises).

Groupon has emerged as the “Jesus Startup” of 2010-2011. The industry always needs one, and they tend to conform to an archetype and have a mythical story: the visionary CEO (Marc Andreesen, Evan Williams, Mark Zuckerberg) who experiences a remarkable rise to greatness. For this story and for these 15 minutes, we have Andrew Mason, the humorous and self-deprecating everyman who declares of the fledgling Groupon, “We could still fuck this up.”

The implication is that they’ve done something to “ace” it so far. But the truth is that they are just regular guys that started out doing something else (some kind of social mission charity stuff – blech – don’t talk about that, it’s not compatible with the visionary myth). And after executing on their original idea and experimenting a bit, they found themselves in the middle of a new exploding business model. Kudos for that. But as is the case with most “Jesus Startups,” there’s been a notable lack of critical thinking about what happens next.

Here’s where I think Groupon is weak.

1. Over-reliance on hypergrowth.

Groupon has posted some crazy huge numbers as they push through massive expansion into new markets. When you are turning up a new major metropolitan area every few days, gross revenue numbers are going to grow very quickly as businesses rush to be part of something that’s got so much buzz. As their geographic footprint stabilizes, top-line revenue will start to level out. When that happens, the business becomes much less interesting and has a lower upside (see Home Depot, Gap, Boston Chicken, Microsoft). This is why a push to IPO while this hypergrowth is happening seems to be a priority for the company.

2. Customer fatigue.

If you have been using Groupon, Living Social, GILT, HauteLook, or any of the countless other sites that rely on daily emails to get their message out, I’ll bet your experience has been something like this: at first you reviewed the emails every day; you bought a few things; you are now buying almost nothing; now, you may not look at the emails at all; you still have unused Groupons. Time is money, and people have too much crap. Eventually, people are not going to take the time with this. And when Groupon has exhausted all the “easy hits” that drive people to buy, then what? Besides, I thought email was “dead” and for “old people.” Right? Or did I miss something? (Sure, the deals spread through Facebook or whatever social channels, but email is a huge part of the business model.) As younger folks steer away from email, it’s an open question whether the current “daily deal” model can be sustained.

3. Business fatigue.

Businesses are tripping over themselves to be part of the latest new thing and expose themselves to thousands of customers at a shot. And sure, a Groupon deal can be a great opportunity for some businesses. But many businesses (some say up to 40%) have found that doing a Groupon deal can be a costly mistake that actually damages their business. The economics of the deals deliver a fraction (typically 25%) of the face value, which often does not cover their costs. While there is some breakage (unused deal revenue that can offset losses), this still may not cover the cost and hassle the promotion entails. Additionally, businesses that undertake in smart advertising can promote themselves all year round. A business can do a Groupon deal at most once every few months – otherwise the deal just doesn’t seem “special” enough. Groupon is a great novelty that can help some businesses become better established, but I really wonder if many businesses would participate more than once or twice, when compared to ongoing targeted marketing initiatives.

4. Scale as the only barrier to competition.

There are now thousands of competitors to Groupon (Living Social is the largest). There will be thousands more. The reason why both companies have received such massive investments to date is that they need to get big to create a local sales force in every market in the world, which is obviously an expensive proposition. If they can get sufficiently big, they can build a sustainable business that will dissuade new market entrants simply because any competitor would have to build a worldwide localized sales force. And if you’ve ever had to run a local sales force, you know that it’s a very expensive, messy, people-driven business. The business that Groupon will eventually most resemble structurally is the Yellow Pages. With sales teams in every city, the major directory publishers were able to exert a near monopoly control over the interface between local businesses and consumers, and Groupon is going after the same market. The difference is in Groupon’s use of technology and use of social. Otherwise, the two businesses are nearly indistinguishable. The assumption is that Groupon’s scale will prevent competitors from gaining a foothold, but I don’t see any real reason a focused local competitor couldn’t develop a sustainable business.

5. Tone-deaf on China.

Groupon has undertaken a massive push to expand into China. That sounds great, and any US investor would likely salivate over such an aggressive, prescient-sounding move. Ah, that Mason guy, he really knows his stuff. But my friend, China-expert Christine Lu tells me that Groupon’s Berlin office has recruited 1,000 new hires for China in the last three months – many recent college graduates. But here’s the thing. I’m currently getting a daily deal from a site in Shanghai called Wufantuan that’s indistinguishable from Groupon. (50% off Mexican food in Shanghai was one recent deal.) If you know anything about the Chinese market, you know it favors locals and cloning is part of the culture. To expect Groupon to be able to achieve anything meaningful in China is wishful thinking. Google got run out of the country on a rail. You expect the powers that be there to allow a US firm to “split” revenues with Chinese businesses to provide its budding bourgeoisie with deals on burgers, skydiving, and cupcakes? Um, yeah. OK. If there’s a business there, it will be Chinese. The entire Groupon strategy with China is theater, designed to show investors that they’re “paying attention to that market” while they ready the IPO.

So, the real deal of the day is for Groupon itself. The question is whether there’s enough upside in the model – and enough “bigger suckers” out there for the average Joe to make any money on the offering before the business model settles out and becomes the next eBay, Home Depot, or Gap. These are fine, sustainable businesses, to be sure, but all are way less sexy than they once seemed. (Yes, for about 6 months in 1995, Gap was incredibly sexy.)

Before you decide that Groupon’s the next hot young thing, it’s worth asking whether you want to jump on this model right now. I believe there’s a really nice, long term, but ultimately very boring business in there that should pay a nice dividend. Meantime, the visions of hypergrowth are likely much exaggerated.

I certainly can’t criticize the trajectory that Andrew Mason and company have managed to carve out for themselves. It’s an incredible story and it’ll be fascinating to see how it unfolds. The expectations are so high, they really can’t be met.

My bet is that they will need to move on to more sustainable forms of year-round marketing for businesses and away from the aggressive 50% discount model. That’s a much less sexy place to be and it will require some real creativity to carve out a niche there. But I just don’t buy the idea that they can continue to build a business based solely on deals of the day at such aggressive discounts.

The Groupon model right now is based primarily on creating new relationships between businesses and customers. They’ll be on to something really interesting when they can help to nurture and sustain those same relationships profitably.

From my friend Christine Lu (@christinelu):
Thanks for the mention Dave. I think they’re hiring 1K in the next few months. As in currently in the process of. Things over there have just sounded a bit weird to be a sustainable market entry strategy so I think it’s all a nice way to have a China story to prop up the IPO. The elusive vision of 1.3 billion people using Groupon. Nevermind that clones are already saturating the market and they’ll have Alibaba’s Taobao to deal with. Anyways, we discussed it a bit on Quora.

From my friend Vivian Wang (@vivwang):
The JV is a positive differentiator for both companies and will accelerate market consolidation. There are 1686 other group shopping sites as of December, yet only 29 sites have CIECC licenses to legally operate. Some believe there are only 10 serious contenders that can attractively compete. The real threat is Alibaba and Taobao, so a more international footprint into China seems warranted. One of the smarter things Groupon did was buy Mob.ly back in May, which has been developing on all mobile platforms. For a sector that’s already doing about $79B in transactions, I think the risk seems worth taking.
…
Hope something truly uniquely innovative comes out of this that the world has yet to see. I’d personally love to see Tencent migrate from selling a $1B of games & virtual goods to some seriously tangible merchandise. The foolish side of me actually thinks they’ll have a fair shot at it. Should be fascinating.

And from my friend Francine Hardaway (@hardaway):
I believe all this bargain stuff, especially in the US, is part of the recession and will go away when it is over and we all relax. I agree with you 100% on Groupon’s model; I am done buying stuff I don’t need, even at half price. All the people I know who love coupons (I never have) are armed with sheaves of them, and all that happens is the merchants are in price wars with one another in a race to the bottom. Sites like Groupon and Haute Look might be marketing front ends, but they are also margin-shavers for the people in the businesses they market. This HAS to be unsustainable at the end of the day, whether China is successful or not (and I bet it won’t be, because of all the people who, when we were in China, got up and said they would clone our products in half an hour).

What do you think about Groupon?

The 2011 Mayoral contests represent a unique opportunity to make American cities work again. Cities have already begun an inexorable return to relevance as refuges from crushing commutes, and as havens of culture and innovation. Our economy is increasingly hitched to our ability to develop and capitalize on innovative ideas, and that innovation can’t happen when folks are trapped in their cars and isolated in the matrix of suburban sprawl. Cities are the American future.

But in the early 1970′s, they were left for dead: victims of race and class warfare, they became abandoned places – a place where people work or would go to the symphony, but not places to build a life or raise children. Formerly walkable, livable cities degraded into a-la-carte destinations you could get into and out of quickly as 1950′s visions of suburbia gained dominance.

With this shift, cities’ political influence waned, and city politics evolved into a top-down enterprise. Power brokers, political clubs, and church groups conferred power on those who would play the game and wait their turn. In Baltimore, city politics became either a launching pad for state office, or a refuge of scoundrels whose city fiefdoms became ends in and of themselves. Instead of working for Baltimore, all too often our politicians have tried to enrich themselves at its expense. With minimal popular interest and the atrophy of the press, there has been increasingly less oversight. So the machine has lumbered on – unencumbered by the tempering force of investigation, new blood, or real political imagination.

In other contexts, leaders are judged on their ability to lead and deliver tangible improvements. But in our cities, it has become enough for our politicians to just not screw things up even worse than they found them. Enough. It’s time to move forward again.

In 2010 we saw some new trends: long-term incumbents who fit the old standard – of merely not being demonstrably corrupt or incompetent – were booted out. And not because of typical anti-incumbent anger, but because people saw something else: that maybe we could demand better.

In Baltimore, 27 year-old newcomer Bill Ferguson delivered a decisive blow to 27-year incumbent State Senator George Della. Gregg Bernstein defeated long-time incumbent Baltimore City States Attorney Patricia Jessamy. These races shared two things in common: no one thought they could upset the machine, and they used the Internet to organize financial and ideological support.

The simultaneous rise in the demand for urban living along with the use of the Internet for political and community organizing will usher in an era of unprecedented change in American cities. With the 2010 races, the old system was put on notice; in 2011 it will begin to be dismantled.

I support Otis Rolley in his candidacy for Mayor of Baltimore in 2011. At 36, Otis is part of the new guard. He’s qualified – he has a masters’ degree in City Planning from MIT. He has been in Baltimore since 1998. He served 10 years in the public sector and two in the private sector. As an executive, he led the Baltimore City Department of Planning and – shockingly – produced the city’s first actual master plan in 39 years.

In his time at Planning and as a Chief of Staff, Otis was struck with one question: can’t we do better than this?

Indeed we can. Leadership is about creating a culture based on shared values. We need a leader who is willing to stand up for his values and the values of people who care and work hard, and not allow entrenched career “slugs” to dilute those efforts. He proved he could do this at the Department of Planning, empowering those who had a vision for the city, pushing out those that did not.

But while Otis was able to turn around a non-performing department and produce a workable plan for the city, he ultimately realized that the only way to see its recommendations executed was as Mayor. We should give him this opportunity.

Otis can turn around our city the same way he turned around a department: by creating a new culture. Frankly, there are a lot of people in city government who should be looking for other kinds of work. We can start there.

Otis understands that we need to start allocating our resources differently. Economic development has for too long been about big projects, like the currently proposed $900 Million Baltimore Arena redevelopment. While this plan would assuredly enrich some developers and provide ample future backing for political operators looking to entrench themselves for a lifetime in Maryland politics, we should instead be thinking about new ways to capitalize on Baltimore’s biggest economic development assets: its people and its fortunate geography.

If instead we were to invest $900 Million in the infrastructure to support entrepreneurial enterprises and startups, we could potentially create tens of thousands of jobs across a wide range of income levels. A new startup-friendly Baltimore could outperform other regions in terms of standard and cost of living as well as access to a world-class workforce. A strategic focus on manufacturing, both large and small using the latest technologies, could restore what was once a thriving middle class. Arenas, convention centers, stadiums and hotel subsidies just deliver more jobs that don’t even pay a living wage. Otis knows we can do better.

In 2011, we have a choice: do we want to be a good city, or a great city? Otis has a vision that he will articulate over the coming months as part of what should be an open and healthy debate around the future of our city, and not about personal politics. As I have come to know Otis over the past 14 months, I am confident that he is the right leader for Baltimore’s future. If you give him an opportunity to serve, you will not be disappointed.

Baltimore is Otis’ first priority. He has no aspirations for higher office. He wants to work for Baltimore and for all of you. In 2011, we have the wind at our backs – cities are on the upswing, and the Internet is connecting us in unprecedented ways. It’s time to take back our cities and make them the vital, beautiful, functional, and inclusive places we all know they can be. Otis Rolley can help us do that. This is Baltimore’s moment; let’s seize it together.

Also check out Otis’ talk at TEDxMidAtlantic on November 5, 2010:

Last week another Maryland elected official, Prince George’s County Executive Jack Johnson, was arrested – along with his wife – on federal corruption charges. And once again, land development deals were the problem: a relatively inexperienced public official was lured by small profits gained by handing out development deals to a few cronies.

Shockingly, the press and the public feign surprise every time this happens. The Washington Post’s coverage of the Johnson arrest earnestly reports that the county seems to have developed a “pay to play” culture – and that you “don’t hear that about other jurisdictions.”

What about Baltimore city, where just nine short months ago former Mayor Sheila Dixon was convicted for accepting gifts and bribes from developers? Granted, Dixon was dealing in a few thousand dollars worth of gift cards and baubles while Johnson and his wife were flushing $100,000 checks and stuffing tens of thousands of dollars in their underwear. But one gets the impression that this may be a result of Dixon’s relative inexperience. Given more time, she would likely have learned to ask for more.

How did we get here? How is it that public-private development deals can be handed out to cronies and first-time “developers?”

First, too many people that seek public office expect to be financially enriched by it. There’s a reason it’s called public “service” – it is meant to be a sacrifice made in exchange for the opportunity to participate in private enterprise. When politicians go into office expecting that the power of public office should also include big money, they’ll be disappointed. Only crooked deals can fulfill those expectations.

Second, we have collectively lost sight of what “development” actually means. Today when people say “development,” they almost always mean turning an unsuspecting piece of land “into” something, whether it’s houses, a shopping mall, a hotel, or a stadium. And sometimes that fulfills a real need.

But too often, these are projects that we don’t truly need – but they do hold the potential to make a few people pretty wealthy. A small-time developer can double his wealth over a few years. But like a small-time addict, the beast must be fed: with new land, new projects, new deals. Because very often the gains are one-time hits. A housing project might make a five time return on investment. To keep the perpetual motion machine going, there must always be new deals.

This is where local elected officials come in. Mayors and county executives have just enough power to direct their agenda towards development projects that can enrich developers. Often, cronies of elected officials will become developers just to take advantage of their proximity to this fresh supply of new land deals. This seems to have been the case with Johnson. One of Johnson’s golf buddies had never developed anything, but was given a no-bid contract on a major project. This constitutes an illegal squandering of public funds.

Maybe it’s time to rethink what we mean when we use the word “development.” Do we really need to develop more strip malls, hotels, and suburban housing? In a place like central Maryland, we’re darn near out of land anyway. So this pyramid-scheme of land development has to stop. The corruption will only stop when local elected officials stop thinking that no-bid or restricted-bid contracts for major development deals actually move anything forward.

Instead, let’s start thinking about “development” in terms of “resource allocation.” How are we going to allocate scarce public resources to enrich our citizens through education, equal opportunity, and in repairing and maintaining the infrastructure and buildings we already have?

If the goal of “development” is to advance the economic opportunity and prosperity of the people of our state, maybe we should start by valuing our landscape. Instead of cluttering it up with mile after mile of pointless suburbia, let’s invest in places that mean something to the people that live there. Let’s make the places we have better. Let’s fix blight and make transportation systems that work. Let’s plant trees and make bike lanes.

Development should be about developing our people and making what we already have work more efficiently, not in building shoddy new projects that devalue existing assets and clutter our landscape.

And when contractors are required, let’s put the bidding online, require each bidder to go through the same qualification process, and let the lowest, most qualified bidders win.

When the public changes its perception of what development means, we will have fewer politicians who see elected office as a get-rich-quick scheme. Every time another politician is caught in these shenanigans, the public trust in government is undermined.

So a change in public perception about the nature of development can actually lead to a tangible restoration of public trust in government, and that can’t come too soon.