I am in Madrid for 8 days. Fon HQ are here, and so is my holding company. I also have great friends, a nice home, and my children who are visiting for Thanksgiving.
I love Spain regardless of the sorry condition the country is in. There is something special, historic, unique about this country. Life here is still good. The crisis has not increased crime or made life in any way uncomfortable for those who still have their jobs. But I just wish people here were more focused on getting out of the crisis and less focused on tribalisms and mutual accusations. Most commentary I read says that Spain is in the mess it is in because of something that somebody else did. Few Spaniards consider themselves the reason why Spain is in the mess it is in, but millions who over borrowed and now can’t pay are that very reason. Nobody who I read or speak to says, “well I overextended myself in real estate, I made a huge mistake, I lived beyond my means. I had a choice to buy or not to buy property, to get a mortgage or not get one. And I was ambitious, and greedy, and had a poor understanding of the economy. Now I have to pay and I don’t know how.”
Because in the end the Spanish crisis is the result of millions of individuals and thousands of companies going into debt in order to get homes, second homes, rental properties that now nobody wants. The rest of the economy is working well, but it has to finance the 25% of the economy that is stalled because construction came to a standstill. So credit died for everyone else. For us at Fon, if we weren’t able to raise funds in the USA or the UK we would not be able to grow. But other than an R&D credit we got from the Basque government few have appetite here to finance technology (the Basque region is by far the best managed part of Spain now). If a project does not have a few tons of concrete in it, it just does not get financed. And most times not even those do. All the credit available still goes into the black hole of construction and bad banks.
And on top of this there is now the dismembering of Spain. The parts of Spain that are threatening to become independent. Mainly Catalonia. But the Catalans have an economy that is extremely poorly managed. As badly managed as that of Madrid. The economies of Madrid and Barcelona suffer from exactly the same problems yet the Catalans think they will do better alone. While I respect their desire to try it out, I don’t think they would succeed in a generation. Catalans also have too much reliance on infrastructure as a main source of, first employment and now, unemployment. They also have enormous quantities of uneducated young people who need to be retrained for jobs other than construction. I can only imagine an independent Catalonia adding costs, hiring more people in government, building an army and other non sensical moves that make the financial hole Catalonia is in even deeper. But instead of joining forces to fight similar problems, Madrid and Catalonia are accusing each other of a number of absurdities. It’s as if a couple who had a child with cancer argued rather than focusing on the child. Pretty sad and discouraging.
In the meantime there is the USA in our lives. We moved there at the beginning of September and it’s been absolutely amazing. Teaching at Columbia, expanding my angel investing activities, making Fon grow globally. The atmosphere is vibrant, there is opportunity everywhere I look. It is paradoxical to listen to Americans talk about how poorly the economy is doing. If only they knew how it is in other parts of the world. How a country, a pretty developed economy as Spain, an economy the size of Texas, in which life expectancy is still higher than that of the USA, can put all its eggs in one basket, and go into a death spiral with unemployment shooting from 8% to 25%. The US economy is vibrant, extremely diversified, creative. Yes for decades now the USA has been living beyond its means and that explains a sort of fake growth that occurs when countries say their GDP is going up but so is their total debt. I have always argued that GDP growth should be discounted by credit expansion. In this sense the USA is going through a process similar to that of Spain except that so far it still has credit. The USA has to slowly borrow less, spend less, collect more, close that trillion dollar budget deficit, close the trade deficit. It has to do what Clinton did, balanced the budget, and Bush with his unnecessary wars and credit expansion, destroyed. That is Obama’s job for his second term. But if you ask me, I think he will pull it off especially with the help of this new trend in which the USA, thanks to shale gas and oil, will become energy independent and therefore much more competitive than China and the EU in terms of manufacturing. I see a return of robotics based manufacturing to the USA as a result of cheap energy. I am optimistic that the USA will make it beyond the fiscal cliff.
For Spain the jury is still out. What is missing here is entrepreneurship activity. Yesterday I read that Spain is offering nationality to all the Sephardic Jews it expelled in 1492 when Jews were 10% of the population of the country. This measure is more than symbolic. Something tells me that because if there is one thing us Jews are is entrepreneurial that this country would not have 25% unemployment and 50% youth unemployment if 10% of its population was still Jewish. But now it may be too late. Bombs and all, Israel, the “start up” nation, is a better magnet for Jews around the world than a Spain without credit to get companies started. Until most people in Spain realize that a welfare state is not an inherent human right but something that nations earn as a result of the wealth created by effective entrepreneurial activity, I am not optimistic that Spain will emerge out of the crisis.
The majority of start ups are not competing against other start ups. They are competing against the indifference of consumers, many of which couldn’t care less about their innovation. And this is true even when you, the founder, thinks that what you have come up is something totally revolutionary that will greatly help people. Look at our case at Fon. Fon is a huge success in countries like the UK, Belgium, Japan and others and with 7.5 million hotspots we are now the largest WiFi network in the world. Now what is the paradox of our technology that turns everyone’s WiFi into public WiFi? Fon happens to be an innovation that almost everyone wants if given to them but very few will do anything to get it. So at the beginning Fon was a consumer company who gave away or sold WiFi routers that shared WiFI and we almost failed as a consumer company. When we asked consumers to share a little WiFi at home and roam the world for free connecting to other Foneros or WiFI sharing members we only got 300K people around the world to do this. But when we pivoted and we started working together with telecom companies like BT, Belgacom, SFR, Zon and others, these companies made Fon a standard feature of their DSL/Cable WiFi services (meaning that people became Foneros by default) and if they did not want to be they could opt, out almost nobody opted out! And the telcos started working with us because they saw that we lowered their capex, their churn, their customer acquisition costs and increased their ARPU. So the partnerships keep growing around the world. Consumers benefit, we benefit, the telcos benefit.
So the paradox of WiFi everywhere is that if people are asked to do something to have a big benefit, to roam the world for free, they don’t. But if it’s given to them without asking and then asked the opposite, if they don’t want to be part of a WiFi everywhere community that gives them free global roaming, almost everyone wants to stay in. This “opt in vs opt out” paradox (a phenomenon proven highly relevant in the market for organ donations) symbolizes the struggle of start ups, even those who have truly innovative and beneficial products such as Fon.
As innovative as people think they are, there is only a small group of us geeks who enjoy testing and using whatever is new. For massive success indifference is the biggest enemy of start ups, and your role as CEO is to fight this indifference, to evangelize, to reach people in the best possible ways so they finally find themselves using your innovation and liking it. Your most important role is to fight indifference through whatever channel works best to promote your innovation.
This article was also published in LinkedIn. You can follow Martin by clicking below
For the last hour I have been testing a Google Chromebook made by Samsung.
At $249 there is not so much you can complain about. It is a decent piece of hardware for a super low price. If the competition is say a MacBook Air for $1000, which is what the hardware resembles, the price is unbeatable. But is it a MacBook Air? That’s the problem. It is far from it. The Chromebook is a solution if you are both addicted to Google Products and are broke. Otherwise it is much better to get a MacBook Air, a Windows PC, an Ubuntu PC, an Android tablet or an iPad mini.
Now if you, like me, find glass keyboards only a temporary solution in your life, a price to pay for the lightness of an iPad or an Android tablet, but an inconvenient way to write a post like this one, then you need a real keyboard. And if you need a real keyboard until now your choices were a PC, a Mac, a Linux (Ubuntu) PC. As of this week you can add a Chromebook to the list, especially if you are on a budget. Because the Chromebook has a real keyboard, it’s simple, light and fast, it opens and shuts like a MacBook or better. But while the MacBook Air is a machine that can work in standalone mode and online, the Chromebook is practically useless when it’s not online. The Chromebook is all you can ever do with the Chrome browser in one PC. Plus a very limited set of functions that do not require you to be online. The Chromebook is a cloud based device where the cloud is Google.
On the bright side, as a cloud device, the Chromebook comes with a 100GB Google Drive which is like the biggest Dropbox you have ever encountered, and it does have an SD card reader that allows you to upload any type of files to your Google drive, most commonly pictures and videos to the cloud. Also it has an ARM processor which is the processor type that tablets and mobile devices use and different companies license from ARM. This processor consumes much less power and the Chromebook runs fanless and cold which is phenomenal if you’re fed up with how the Macs burn your legs after some time.
Conclusion, if you are already a fan of Google products and are on a budget go for it. Otherwise get an Intel based PC if you like Microsoft or a Mac, or reflash your Windows machine with Ubuntu. All those choices will give you many more functionalities that are unavailable in a Chromebook like for example, iTunes, photo editing programs, video editing programs, and so on.
Now the question is, why not build a Chromebook that runs Android? I would love that, to have access to the Android app eco system, to be able both to type and touch the screen. I would like to see exactly the same hardware with Android, maybe there’s a hack for that. I could not find it. What I did find is a hack to make Ubuntu run on a Chromebook. Will try that next.
I just paid $38 to Facebook to promote a post I wrote in Spanish about the iPad Mini and Surface. I did it because I find the business model kind of absurd but want to understand what the rationale behind this is. I also did it because I was surprised the price was $38, like the failed IPO price. You would imagine that Facebook would have given up on charging $38 for anything and I wanted to see what I would get for $38.
I still think that Facebook should offer a $5 per month no ads version of its service. I dislike the fact that Facebook gives me the service for free and is always trying to think how to milk me as a user an activity for which it has an incentive to invade my privacy in all sorts of way. Especially in trying to make me as public as possible to sell me as a product to others. Facebook’s ads are so irrelevant, so much worse than those of Google, so irritating.
And there is the language issue as well. I hope FB realizes that my post is in Spanish and does not spam everyone who reads in English with it. I know this sounds absurd and it is so easy to recognize languages. SpotRadio and RadioMe, apps that I developed for Android do this very well on the fly and for many languages at the same time. But Facebook frequently shows me ads that encourage me to learn Spanish. So how aware is Facebook of who I am? It also frequently shows me great looking women with no friends in common with me to befriend and ads for all sorts of ways of meet women even though I am happily married and said I found those ads offensive.