LOST: A Business Allegory

As one of my favorite shows ever comes to an end tomorrow, I felt a need to make a tribute in my own small fashion.  The most impressive feature of LOST (yes, always in all caps) was its ability to maintain a connected, though at times meandering, story arc on a major network over the course of six seasons.  It is rare for a show I like to go out at a point when I am still as interested as I was when I first started watching it.  Sadly (on a couple of levels), there will be a void in my life after Sunday night.

LOST earned repute among its fans for constantly weaving its themes and motifs throughout episodes and seasons.  In that vein I wanted to make a tribute to the show that incorporated the recurring ideas and themes of this blog.  Much of my experience and interests lie in business, finance and startups.  If imaginatively interpreted, LOST can provide us an allegory for these subjects.  The following expatiates the roles various characters and objects played in the show’s economic ecosystem:

  • Candidates / Companies (Startups): Our beloved main characters were on the island for a purpose unbeknownst to them and us. We eventually find out that they are there as candidates to replace the current protector of the island.  We root for them.  We empathize with their pain.  We smile with their successes because when they win, we the general audience win.  Startups in some form improve an aspect of civilization, albeit for a profit, and it is often for the greater good.  The characters of LOST, for its legions of followers and for the island’s well-being, provide a similar service.
  • Jacob / Venture Capital: Introduced early in the series but only making an appearance in the last episode of season five, Jacob is perhaps the most influential character on the show.  He is well intentioned and wants to give all the characters on the show a chance to succeed through their own decisions and actions.  He has a vested interested in all of them and guides them on their missions.  However, they ultimately  need to fend for themselves.  Jacob is Venture Capital.  After investing in their portfolios companies venture capitalists certainly have an influence on the big operational and funding decisions, but it is up to the companies to execute on their own.  Even though the two parties’ interests are not always perfectly aligned, like a parent to a child (or like Jacob to the candidates), venture capitalists wish the best for the companies.
  • The Island / Consumers: The island is us.  It is the consumers of our economy.  It is a moving target, which is why it eludes so many including people like Widmore who never seem to be able to find it.  The island is hard to reach.  It must invite you. Consumers are often difficult to reach, and customer acquisition and distribution plague many startups.  Finally, the island travels through time.  Similarly, timing is so crucial with consumers.  Introduce a concept too early, and it won’t work.  Too late, and you might as well not bother  (Jangl to Skype).  The candidates are there to serve the island just as companies operate to serve their customers.
  • Black Smoke (Man in Black) / Market Forces: Yes, the black smoke in LOST has always been a destructive force, at least on the surface.  Yes, the man in black in the form of John Locke vowed to destroy the island just this past episode.  But has he really been all that bad for our LOST economy?  He is responsible for weeding out the candidates.  Only four candidates remain going into the final episode.  As consumers, we want the best product possible from the best company, and the island, too, deserves the best protector possible.  The black smoke in its own chaotic way is doing just that.  Market forces can be brutal. While they often destroy seemingly good companies, they also ensure survival of the fittest.  Perhaps, Adam Smith really envisioned a cloud of black smoke when he wrote about his “invisible hand.”
  • Desmond / Big Brothaaa: Sorry, I couldn’t resist the play on Desmond’s catchphrase.  Desmond’s role in LOST‘s conclusion is one of the most intriguing questions leading into the finale.  For our purposes Desmond is the government.  In the show he has displayed a capacity for withstanding strange electromagnetic forces.  He is also tying up loose ends and helping the main characters stay on track to fulfill their purposes.  He has also been described as a failsafe against the black smoke, or market forces.  The government has the ability to do all this:  prop up companies and provide bailouts as a failsafe against financial meltdown.  On the flip side, just as Desmond is impervious to the island’s electromagnetic characteristics, the government can also be unresponsive to consumer outcry.
  • Ben Linus / Hedge Fund: Stretching even further, we can see Ben as a hedge fund.  He never quite seemed to be just another candidate.  He interacted with Jacob to glean any potentially useful information all the while manipulating island newcomers.  He somehow stayed above the fray, but when he did get burned it was huge—he lost his daughter Alex, tantamount to a complete fund collapse.  Going into the final episode, Ben might even be playing the man in black, or smoke monster.  Only a hedge fund manager could be cocky enough to believe he could manipulate market forces.
  • Charles Widmore / Private Equity, LBO: Well, Widmore is a corporate raider.  He literally raided the island in season four and seemingly for a profit.  In this last season his ego seems to have convinced him that only he can counter the smoke monster and save the remaining candidates.  I imagine Henry Kravis believed only he could straighten out “broken” companies battered by the free market back in his heyday.
  • Jack Shepherd / Google: It’s always been about Jack.  The show ends on the 23rd of May.  Jack’s assigned number as a candidate is, of course, 23.  This past episode he seemed to confirm his pivotal role as it all comes to an end by stepping forward to fulfill his destiny.  He might be the chosen one, but he is also responsible for his own fate.  The island needs him, and he needs the island.  He is Jacob’s ultimate candidate—the cream of the crop.  He is Google (or Apple or Amazon or any other wildly successful venture-backed company that you think deserves the crown).

There are probably many holes in this assessment.  It might turn out that this entire metaphor is somehow dismantled in the series finale, but hopefully like LOST itself, it leaves plenty of room for questions and debate.


Not Too Late for a Summer Job, Type-A Undergrads

I know. This is way too quick to write my next post, but too bad. This is time sensitive.

As the general job market worsens (I don’t believe the latest drop to 646K in jobless claims is at all an accurate indicator), so do prospects for summer internships and jobs for college students. I have enjoyed the hardship that is recruiting season at a school full of Type-A go-getters. Fortunately, for me times were good, and finance jobs were available basically to anyone that had read “When Genius Failed” or “Liar’s Poker” and rocked a 3.0 GPA. Alas, overachieving college sophomores and juniors, times are different, and interviewing for internships is hypercompetitive. I have had undergraduate students, mostly on the business major path, ask me for advice on what to do when the ideal summer gig isn’t available. I usually suggest being creative in the downturn (as does everyone else). I advise them to do something even remotely related to what the ideal job would have been (as does everyone else). I tell them to hang in there, and stay positive (yeah . . . you get the idea).

Everyone has been talking about innovation being born in times like this, and I agree. Opportunity cost is so much lower considering the higher level of risk involved in previously “safe jobs” and the lower short-term earnings potential in finance. So one thing I do suggest for college students is to look at operational roles in non-traditional and early stage companies. The problem here is that many of these companies do not have formal programs, and let’s face it, if you are a business or engineering major, you are probably somewhat risk-averse and cling to the comfort of a formal program. Startups also often want more experienced folks. Given the job outlook, the current talent pool can only hurt the inexperienced even more (admittedly, this last point applies to me too).

Obviously, this rambling is leading to something more positive. Today I discovered an awesome opportunity to work for startups in a formal program. It is offered by True Ventures (investors in Automattic/WordPress, Meebo, GoodReads, etc.) and is called True Entrepreneur Corps. It is an 8-week program for 2010 and 2011 grads and includes a small end-of-program stipend. More importantly, it sounds like a great experience targeted at this unaddressed yet still unemployed crowd. The best part is that the deadline is still a couple weeks away on April 15, 2009. So if you qualify, give it a chance. Perhaps, you’ll come out of it with an entrepreneurial bug and will be off changing the world in no time at all.

What’s with that Cloud?

Cloud computing has been given much hype. Even more traditional rags like The Economist are covering it. It is definitely an exciting technological movement, but I don’t think it really changes things for the average end-user. One of the biggest benefits of the cloud is economics. It provides cheap storage and scalability, which enables small to medium-sized companies to ramp up faster and compete more effectively with the big guys. The big guys—Microsoft, Google, Amazon, Apple, IBM, etc.—have been cognizant of the importance of the cloud and are offering up their own web services and application development platforms. Of the big guys, the ones that execute their cloud strategies best will gain greater entrenchment and integration with the smaller guys and consumer facing companies as they scale, such as a Twitter or one of the many budding iPhone applications companies. The cloud becomes a necessity for these players to remain cost-competitive and relevant to their enterprise customers.

But for the average end-user the cloud is mostly back-end technology that might not be a very noticeable game-changer in day-to-day computer use. Indirectly, the end-user will reap great benefits. New startups mean more innovation and smarter aggregation of information for users, but it will be hard for a consumer to say, “Wow, the cloud is great,” because the consumer doesn’t care where the data is coming from. In fact, other than Office-esque productivity applications run from the desktop, most people already meet most of their computing needs on the Internet, whether through webmail, social networks or other SaaS platforms.

The benefits of the cloud might be least obvious for the investor. Greater demand for IT hardware and software required for cloud infrastructure will definitely create a short-term spike for hosting and server companies. Companies like Amazon and Rackspace, of course, are already taking in fees for their cloud-based services. These ‘dumb’ services alone, however, will become commoditized much like webmail. Perhaps, the companies adding an extra layer of ‘value’ should be the target investments. Union Square Ventures invested in the open source cloud development platform, 10gen. Companies like GoGrid are pushing their services to help IT managers control and monitor their use of the cloud.

Perhaps, venture capitalists will also discover most of their cloud-related opportunities indirectly. Web 2.0 generally showed VCs that startups can get off the ground more cheaply and develop real technology before seeking funding. Maybe the cloud will allow early-stage companies to gain real distribution and generate revenue before needing that Series A.