September 4, 2011

Notes on U.S. College Debt

Lately, I’ve becoming more and more interested in the rapid rise of student related debt in North America. As I’ve started to collect my notes, I thought I’d share some of the key notes.

  • All in, students owe over $1 trillion due to college educations. In August 2010, the volume of college related debt exceeded credit card related debt.
  • As shown below, Student debt has grown 511% since 1999. The graph below plots this as red, compared to the housing bubble (blue line).
  • Yes, that blue line really is the housing bubble that triggered a major meltdown.
  • As you can see, the U.S. has gone from around $90bn in student debt (1999) to over $550bn in student debt (2011).
  • The average debt per student on graduation is $23,186, as compared to $13,172 12 years ago.
  • Clearly the intake of students has not increased by 511%; this debt intake becomes much clearer when looking at the average 4-year college cost.


  • This graph stops at 2006, with an average college cost of $120,000.
  • The rather concerning trend line is the average increase in 4 year college education costs (including living), when compared to to the average increase in general goods and services.
  • With rising costs, I was interested in looking at what type of debt students were generally taking.

  • Note that this graph does not account for convenience users.
  • Comparing 2004 to 2008, student Credit Card debt increased on every key metric. At least 30% of college students are putting tuition related expenses on credit cards.
  • Taking a look at samples, Loyola University, North Dakota and Kentucky State have averages of 77%, 85% and 76% of their students paying tuition via loans respectively. Both North Dakota and Kentucky have average tuitions of under $8,000; clearly this is not isolated to high price institutions.
  • Part of this trend is due to students receiving less financial support on parents. Surprisingly, the average family with children in college spends more eating out ($3,102) than supporting education ($2,055).
  • The following graph compares cumulative College Credit to Insurance, Auto, Mortgages and other key financing arenas:
  • As Daniel Indiviglio points out in The Atlantic, mortgages and home equity have increased threefold since 1990, as has household related debt. Meanwhile, student debt has grown six-fold.



Chart of the Day: Student Loans Have Grown 511% Since 1999, The Atlantic

Let College Students Get Into Debt, The Atlantic

The Debt Crisis at American Colleges, The Atlantic

Student-Loan Debt Surpasses Credit Cards, Wall Street Journal

Students Borrow More Than Ever For College, Wall Street Journal

Student Loan Debt Climbs, Wall Street Journal


July 21, 2011

Charlie Munger & Lollapaloozas

The Innoculated Investor  recently posted a transcription of 39 questions with Charlie Munger. It was a fantastic read, and I’d suggest you take a look.

What is fascinating about Warren & Charlie is their understanding of human behavior, and the understanding of irrationalities or rationalities (depending on your view) that models can’t explain. Charlie goes on to explain how economists, using marginal utility, could not understand why popcorn and drinks are priced so high at theatres relative to their prices.

Charlie calls these situations lollapaloozas, and believes they are best explained by a holistic approach from multiple disciplines vs. an exclusively economic lens. He then goes on to explain to explain many confounding circumstances, such as the failure of Keynesian economics and failed companies, using lollapaloozas.

The point is that quite often we get caught following processes, models and logic and fail to think outside of our training.  For example, perhaps Keynesian economics is failing not because the model is ineffective, but because it partly relies on the publics ignorance of economic theory. At a high level, this has changed as a result of recessions and recoveries.

This comes back to a point I often make, and is a key learning from when I was troubleshooting business units: that quite often individuals understand their models, customers and companies, but rarely have an implicit understanding of macro trends. An implicit understand is hard to teach, but increasingly I see companies and executives move in directions and markets they do not implicitly understand (‘China is booming, let’s do business there’.)

I’ve embedded the interview with Charlie below. It is worth the read.

Conversation With Charlie Munger

July 18, 2011

Forget Acquisitions: Apple control the Supply Lines

With Apple holding more cash than most companies will generate in revenue, the question often becomes ‘who will they buy’. But Apple make fewer acquisitions than their competitors, and tend to hold the cash (they do generate a healthy return through an investment portfolio), so the question becomes: where does the cash go?

Over on Quora, an anonymous user posted very revealing insights on Apples’ investment activities. The answer: to stay ahead, they over-invest in their supply chain.

Put simply, new components are not cheap. The upfront capital requirement to build manufacturing plans is huge, and the margins shrink so quickly as technology moves that manufacturers cannot raise capital. According to the anonymous responder, Apple pay a significant portion of the factory construction cost in exchange for exclusive rights to the output for a set period of time, and then for a discount once this period expires.

Not only does this allow Apple to come out with new components long before rivals, but these components are impossible to duplicate (think of how long Apple had the touch screen monopoly for).

By the time competitors catch up on component production, Apples’ lower cost period is in play. That means that every time a competitor buys a component, they are potentially overpaying so that the factory can subsidize Apples discount.

Not only does Apple seemingly have a superior software, user experience and a higher price tag, but superior hardware that is sourced more cheaply than competitors. As competition increases and competitors catch up, it will be interesting to see how heavily Apple restrict their supply lines, especially with reports showing that Apple staked a consortium for the winning bid on the remaining Nortel patents.

It reminds me of the military strategy: control the supply lines, and if you must supply your enemy, make sure they pay (see how this is working with Libya and Oil.)

If you want to see the original Quora post, click here.

July 10, 2011

RIM placing focus on Talent Acquisition?

As soon as meetings end, I am known to send a LinkedIN connection request. Every day I check to see who has viewed my profile. Call me an addict, if you wish.

Yesterday I was faced with an ad asking me to consider job openings Research in Motion (RIM). I’m not sure if this is a new ad unit, or whether I’ve simply never seen it before, but I find it to be rather interesting. Clearly, based on something in my profile, RIM is targeting me to apply for jobs.

I’m not sure whether this is because my current location is listed as Toronto, because of my listed interests in technology, my background in startups, my listed positions in enterprise, or some combination. 

What I do find interesting is RIM’s decision to run these ads at this moment in time. The company is facing aggravated shareholders, declining stock values, less impressive quarters and is currently laying off employees. It makes me wonder if:

  1. This was lined up long before the layoffs, and the timing is just poor;
  2. As a result of current state, RIM is struggling to attract experienced hires;
  3. RIM is finally filling some talent gaps in product development (and mistakenly targeted me); or
  4. RIM just really really like me.

Either way, I found the ad unit, and the timing, to be rather interesting.

March 7, 2011

Warren Buffet's principles for a sound business

We startups often get distracted in our own world, management practices, business models, financial structures, etc. We like to think that the “other side” (big business / the dark side) is totally different and lacks the approaches / insights we have. It’s true that the startup / technology space is unique in many ways, but quite often there are very direct parallels between the most successful big business and the most successful startups (once they become a business, that is.)

Berkshire Hathaway, philosophically, get many things right (and their website is amazing.) I ran across an article the other day in which Warren Buffett listed his 6 guiding principles for building a solid business, in the context of acquisition targets:

  1. Large purchases (at least $75 million of pre-tax earnings unless the business will fit into one of our existing units)
  2. Demonstrated consistent earning power (future projections are of no interest to us, nor are “turnaround” situations)
  3. Businesses earning good returns on equity while employing little or no debt
  4. Management in place (we can’t supply it)
  5. Simple businesses (if there’s lots of technology, we won’t understand it)
  6. An offering price (we don’t want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown.

Source: How Buffett’s Most Recent Big Deals Have Done by Michael J. De La Merced

Perhaps we are not so different after all?

Note: This entry was taken from an article I found via DealBook (NYTimes). If you don’t subscribe, you should. Thanks to Spencer Thompson for the tip.
February 20, 2011

Planning your Web Marketing channels

The problem with technology, and social sites in general, is they are easy, cheap and fast to set up. There is a growing trend to create presences for the sake of a presence, and quite often these channels are created with ill-defined goals.

There is nothing wrong with experimentation, but as we enter a maturity stage of web marketing, it is important to clearly define the ‘why’.

Before creating any web channel (website, webinar, social media presence), you should sit down and ask Why? What is the purpose of this channel? How does it fit into your broader strategy? What do we want out of this channel?

It is a very simple exercise, but the results will save you plenty of headaches moving forwards. I’ve created a basic table below, which I’ve regularly used as a tool to refine and validate my thinking.

This exercise is relatively simple, yet being forced to sit down and jot ideas down on paper can uncover many red herrings, and ensures your thinking is valid.

If you are targeting Existing customers, it is important to define a purpose too, such as:

  • Customer Support;
  • Sharing information;
  • Increasing up-sells;
  • Increasing satisfaction;
  • Building community; or
  • Increased referrals.

Now, you have a (basic) macro view of our organizational channels and tactics. Another exercise I often follow is digging a little deeper on my audience, in a macro sense. Are you looking at existing customers, or trying to find new ones? How will you find new users? This quick macro view helps you manage all channels your organization is running, and find potential synergies / overlaps among them.

If you are targeting New customers:

If you are targeting new customers, firstly ask whether they currently use this channel:

  • If yes, why? How often?
  • If no, why not? Where else are they? Fish where the fish are. If your target market is not already on Facebook don’t try and drag them there. It takes a lot of time and effort to bring people to a new channel, why not just meet them where they already are?

How will we attract users to this channel?

As much as I’d love for ‘build it and they will come’ to be a viable strategy, it is not. We need to sit down and define how we will funnel our target market into each channel. Established channels can serve as viable tools to populate a new one.

Finally, metrics for success and objectives cannot be overlooked. Your metrics and objectives should correlate, with the objective being a defined volume of your metric. For example, if your purpose for a webinar was lead generation, the metric may be qualified leads, with the objective being 10 qualified leads. If your purpose was awareness, your metric may be unique visitors with an objective of 1,000.

It is important to note that there are many metrics that should be measured which lead to your objective metric; in the lead example above, unique visitors will lead to e-mail subscriptions, which will lead to qualified leads. Often, these metrics work together to form a funnel, which I will write about later in the month. For this exercise, I frequently list the key, last-touch metric that is required to reach my goal.

Once you have this completed table, you will that:

  1. You have been forced to think through each of your planned tactics, and have likely changed directions once or twice based upon it (the why); and
  2. You now have a nice table outlining everything you are working on. As your organization scales, it is easier for new workers to pick up where you left off.

I hope you found this one helpful! It is an exercise that, as mentioned, I often use.

January 30, 2011

Why I’m speaking on less panels

Last year I was on a slight tear. I was speaking everywhere, from MARS & Next Media in Toronto to KM World in Washington, and all sorts of places in between. I even made a Speaking page on this blog, which I never formatted, updated once and have not touched since. Contrary to the dusty speaking page I did maintain speaking commitments; though I got more and more selective.

This year I’ve been a little less visible with my speaking. It’s 100% intentional and due to a new rule I’ve self-imposed to curtail my speaking engagements, speak less panels. So, why?

Panels are general

I’m not saying all panels don’t add value. But, I find the incremental value is small.  We each have about 10 minutes of airtime. It’s a difficult tempo to get in when you have a few, 3-5 minute bursts with the microphone. In that time I can provide an opinion, a basic fact and generalize a trend. I understand this type of content is not for everybody, but, let’s be honest here. Most of us web panelists are saying the same thing. That’s gotta stop.

If you are new to an industry, panels are great to get a quick catch up. Most of the faces I see at my panels I’ve seen elsewhere, they are certainly not new.

Planned, Deep Content

One of the things I try and do in a panel is provide value. Because most panels in my industry are becoming general, it’s more and more difficult to do.  I’d rather provide something deep and sustained. What I can’t do on some panels is deep dive into the why’s, hows and intricacies. I like to pull out real numbers, graphs and trends. I like to pause and ensure the audience is caught up, and keep information relevant. The problem is, this is hard to do. Hence, most of my newer engagements are solo or co-presenting.

A little more relevant

Sadly, working with me is like herding a cat. It seems many other panels are too. In response, there are generally two types:

  1. Those that go completely off the rails, with speakers spending too long discussing something irrelevant, or who fail to stick within a solid topic scope. It’s hard to keep a panel relevant in these cases.
  2. Those that are overly transactional, where speakers quickly chime in an opinion, give a soundbite and move on. I appreciate what the moderator is trying to do here, namely, avoid no. 1. However, without some personality and fun the panel also becomes ineffective. It’s also important we remain responsive to audience questions.

Either way, both 1. and 2. miss the mark of audience relevance. There needs to be some degree of live changing, but we need to stick within topic.

I barely speak

Yes, this one is absolutely self-promotional, but let’s be fair here. Most panels are solid for branding and don’t necessarily generate sales leads. I love to come and speak / help people out, but if I’m there to brand myself I’m there to brand myself. After welcomes and intro’s, each panelist normally gets about 10 minutes of airtime. I’d much prefer more to drive my branding goals forwards.

We bore the audience

Arguing on panels can be great fun, but it’s rare. Audiences get bored of rapid fire questions and answers. Generally, questions have been pre-prepared for panelists, meaning we are not switching it up live to respond to their mood, or are too busy interacting with each-other to interact with the audience. Additionally, there is always that one speaker who is a distant Vogon relative, spends too long making his points or uses words nobody understand. Either way, that person loses us. That’s why I’m preferring to speak solo, where I really can interact.

Panels are not all bad

I’m not bashing all panels. Not at all. I’ll continue to speak on some, but reject far more than I once did. Sadly, I think we are getting lazier and lazier with events, more names (panelists) draws more audience and nobody has to be rejected. If I feel a panel has been constructed in a way that:

  1. Has a narrow enough topic to provide value;
  2. Has the right speaker-set to add value;
  3. Is constructed in a way to remain fluid with the audience; and
  4. The speakers have a chemistry;

then I may consider it. I’ll continue to speak at these events. The rest, sadly, I will walk away from. That being said, nothing beats a fiery panel. Maybe I need to play good cop bad cop with myself.

January 16, 2011

Mistakes startups make (and you should avoid)

Photo credit Glenn Loos-Austin, taken at Disney. Hopefully you get the relevance to this post.

Startups are high risk. They are hard. At the early stages, it’s 2-5 people against the world with constrained resources. You need to grow to stay alive.

Perhaps one of the the hardest things with startups is avoiding common pitfalls. Over in Quora there is a brilliant discussion thread on common mistakes startup founders make (though any business or manager can take note). Below I’ve summaried the key, recurring points the community identified.

Im hardly the writer of these points, just the curator. I’ve acknowledged the contributors at the end of the post, I suggest you follow them.

Undervaluing Management Competency: Many startups and expanding businesses underestimate the difficulty of team management, general management and strategy. Being a ‘grown up’ manager is not always fun, but often necessary to move forwards as a business.

When management competency is undervalued, it’s not uncommon for key decisions to be made in haste. Herein lies another important part of management competency; ensuring that are made are informed and logical.

Lack of Strategic Focus: Similar to management competency, a strategic product, market and company focus helps drive and move things forwards. Having this focus, and blocking out tasks and expenditures that do not add to achieving this goal, can be difficult to do but is often key to driving a high growth, lean company forwards. (Note: A risk here may be missing easy pivots, there’s a downside to everything).

It’s also important to remained focused on the task, market and problem at hand; losing this focus can make task prioritization a nightmare. It’s also important to understand what tasks matter right now (chasing TechCrunch is fun, but maybe not the best thing right now).

Inconsistent Hiring Quality: Staffing has always been an issue for startups. It’s not uncommon to go from heavy resource constrains to having the capital for hiring very quickly. It’s very important to not rush in the hiring process or in dry spells. Instead, wait for the right people every time. The short term gain of a quick hire is not worth the long term ramification.

Overvaluing the Idea: As we all know, execution is worth more than ideas. Ideas are cheap, especially in technology. Focus on execution and iteration over perfection. It is rare that your ideas will win the war.

Poor time management and prioritizing: Some early stage companies struggle to differentiate between what is important and urgent, what is an opportunity and a problem, etc. It’s important to manage your time tightly, especially as an early stage CEO, and frequently prioritize tasks based on urgency, importance and impact.

Poor positioning: We all love talking about lean startups. It’s important to position your company around solving users problems, not technology problems.Positioning can also come down to communication. Externally, it’s important to have the right question set to lead your sales process. In other words, ensure your external messaging is correct.

Passion vs Process: Gary Whitehill points out that as a business grows, in some cases, the founder may not be the best person to continue running the business. Whereas a founder has unwavering passion, a vision and can execute under ambiguity the business manager should be process and protocol driven. As a company grows, this becomes key.

Keeping people motivated: Startups can be tough. You are often struggling to find revenue, fighting big corporations for users and have only 20% of the resources you need to do either. The people you have should be there because they love your mission. Focus on a strong culture and keep these people motivated; they can probably work half the hours for double the money in a larger corporation. Additionally, motivated people work faster and produce far better results.

User Validation: Focus on active user feedback to ensure you are getting this right. You may like your idea, but get your potential customers to say the same thing. It’s also important to ensure your are validating with the right people; if they are not going to buy your product, they are not the right people to validate with.

Goal setting and low hanging fruit: As mentioned earlier, it is important to have a strong strategic focus. When laying out tactics, ensure you are setting short, mid and long term goals. Short term goals should include plenty of easy wins, or low hanging fruit. These short term goals can also attribute to motivation.

Obsessing over competition: Understand who your competition are and what they do. Try to understand where they are going, but don’t obsess over them. Your obsession should be focused on your own product.

Resulting: We love testing, but ensure the you truly understand the cause of your results. Misattributing cause and effect can be terribly dangerous.

Running out of cash: Of course, running out of cash is a big mistake. More importantly it is often a symptom of one of the earlier described problems. Keep an eye on your cash, especially if you are pre-revenue. It’s common sense, but to often forgotten.

Of course, this post would be nothing had Quora users not contributed to such a brilliant discussion. In no particular order, check out Siqi Chen, Adam Rifkin, Fahd Butt, Keith Rabois, Gary Whitehill, George Kellerman, Nabeel Hyatt, Chadwick Sakonchick, Brandon Smietana, Gregory Magarshak, Evan Rudowski and Gary Stein. You can also find me on Quora as Alex Blom.

You might also like:

Why Social Media Gurus should be trampled by elephants

Social Media is NOT new

Pivoting 101

Value Driven Relationships: Coupons vs Search

December 28, 2010

Value Driven Relationships (Coupons & Search)

In July, I wrote a post titled Bargained to Irrelevance. In it, I identified a huge problem with coupon / deal sites as the inability to segment and hyper-target buyers. I also briefly touched on a second issue: when a brand is discounted frequently, most consumers will wait for the next sale period (especially online, where instant gratification is rarely a driver of purchase behaviour).

I was reading a post (courtesy of Spencer Thompson) by Bradford Cross. In the article, Why is Groupon so Important?, Cross points out that both Google, Groupon and other online advertising companies are in the business of selling relationships.

I don’t at all disagree with Cross. What I think we need to question is the differing value of these relationships across channels. Search-based ads are generally prime time to build relationships as the customer has often admitted a price insensitive intent. This is not always the case with bargain sites, who often stimulate intent.

The shift in channel value

Coupon-based sites profit by taking a spread of top-line revenue (a percentage of all sales). It is a Catch-22 situation in which to maximize revenue, coupon sites focus on increasing their top line audience and conversions. By doing so, they decrease the value of each audience member (collectively) and reduce their channel value.

There is a cause / effect relationship here:

  1. Your audience shifts, from ‘explorers’ to one that is value driven; and
  2. Value driven audiences are less likely to become customers.

A value driven audience

Let’s compare how an average user would discover a company via a coupon-based site vs search.

Search: User X has decided he wants to take fencing classes (user x likes swords). He searches for fencing classes in his local area via Google. Search marketers buy keywords for fencing classes within his city and promote their company to him, knowing that  User X could very quickly become a long term customer (because Google are in the business of selling business relationships, as Cross points out). User X has expressed an intent that is likely not yet price sensitive.

Coupon: User Y subscribers to regular coupon sites and occasionally buys deals. He sees a one-month package of fencing classes for 70% off so decides to try. He has always had a loose interest in fencing. While this is User Y’s first deal, some purchasers of this coupon are also trying yoga classes and some have purchased restaurant deals.

The example above may seem unfair, but my point is that most coupon deals are not based on intent-based discovery. They are based on generating interest. User X, who was interested in deals, has only a small chance of discovering a deal for fencing unless he is already part of the bargain community.

If he was part of the bargain community, he is the most likely person in the pool to become a long-term customer. This is the golden premise of coupon based sites, to unlock potential customers who have a level of interest. Yet, by promoting to the pool, we create waste (like most marketing tactics), customers who purchase with little intent of continuation. As the pool gets larger as does the waste, and our audience shifts from one who explore new things to one who are mostly value driven.

The second danger is that while in other marketing tactics our waste is in terms of marketing expenditure, coupon-based waste generally needs to be fulfilled by the vendor. Yes this provides increased opportunities for conversion but carries with it larger risks and operational overheads.

Value driven audiences do not become loyal customers

Because coupon sites are trying to increase their top line revenue, naturally the above-mentioned waste increases. The challenge here is that while User Y was interested in fencing, several of his counterparts who also participated in the buy were not. They buy coupons because they are novel, interesting and, more importantly, cheap.

User Y’s counterparts are dangerous. They are social loafers. We can convert some to customers but the percentage would be small. This is not the fault of these users, while completing fencing classes the coupon site has also promoted yoga classes, skydiving, tennis and hundreds of restaurant deals. Each of these deals are as cheap, interesting and attractive as the last so these customers continue in a value driven cycle of trial. Converting value driven audiences to loyal customers is difficult, and these users always have cost effective, new activities infront of them to try.

We have created

What we have created is a viable marketing channel that, for many vendors, is struggling to convert. Right now, the channel / relationship value when compared to other tactics is not there. Coupon sites, like Google, are in the business of selling relationships. Right now, these relationships have a very different value.

In my mind, what we are sorely needing (and only half seeing) is a way to filter deals with very strong targeting. That, paired with intent based search is clearly where we are heading. Sadly, we are not there yet.

Cheap masses do not build a business, they build short term revenue and long term ramifications.

That being said…. (and conclusion)

Do not think I am in any way against coupon, bargain and clearance websites. They can be an extremely effective tool for a marketer. However, I feel that we have reached a saturation point where there are more deals than the market can bear. Unlike other online tactics (i.e. Adwords), a poorly executed coupon campaign has a higher probability for a sustained negative impact on businesses.

I’m also seeing an increasing volume of complaints that coupon marketing is ineffective. I’m just trying to shed some light, here. I’ve no doubt that the leaders of the larger coupon sites have a grand-vision and some amazing pivots up their sleeves.

December 22, 2010

What are you really selling?

Following on from my last post on sales, I’ve decided to write a very quick post on sales pitches, specifically how to categorize and phrase your product benefits (what you are really selling the customer).

You can only be selling one of three things:

  1. Increased revenue;
  2. Decreased cost; or
  3. Changed risk.

That’s it. I’m not sure increased revenue or decreased cost require any further explanation. Clearly these are the categories we slot in benefits such as increased operational efficiency.

Changed risk is also quite simple, and refers to your products ability to increase or decrease variable risk.

That’s it. Your product has to be selling at least one of these three benefits. If you are not already, boil your product benefits down to these three categories.

As an aside, this posy is landmark: the first I have written 100% on my mobile. Phew, that was a challenge.