A Benign Addiction

The holiday period is a tricky time for me, presenting too much opportunity to fall off the wagon...

My addiction started one day with a thought experiment. Until the age of about 26, I had found even fresh grapefruit juice too sour to drink. And yet, when served a half grapefruit, I always loved to spoon out every drop of the succulent citrus. Why did I have such opposite reactions to different presentations of the same food? I conducted an experiment to test the impact of expectations on taste--I closed my eyes and imagined that the juice in my glass had been spooned out of a fruit that very instant. I sipped it ever so slowly, as I would from a spoon, and the result was literally sensational.

From that day on, I had to drink grapefruit juice with every meal. The best juice, of course, flows directly from the grapefruit--freshly squeezed at time of consumption, but Who Has Time For This?

So I came to learn the intricate differences among retail brands of juice. Now, each batch of juice is unique. The color ranges from yellow to pink, the taste from tart to sugary, and the texture from thin to pulpy. I have my preferences, but also know that there is a time and place for each vintage. Sweet, pink, and pulpy juice can be breakfast all by itself, whereas thin, tart, yellow juice really hits the spot after a workout. But variety only goes so far--I wouldn't ever recommend drinking any grapefruit juice that is made from concentrate, or that smacks of the taste of rind, or that doesn't taste super fresh (older juice tingles from the onset of fermentation).

I came to frequent restaurants (like this one) that offer fresh-squeezed juice. And with one taste, I could instantly tell you if it was really squeezed that morning, or squeezed the day before, or store bought, or actually made from concentrate. And if the juice was store bought, I could easily distinguish the different retail brands--Tropicana, Just Squeezed, Odwalla, etc.


In time my preferences became so strong that the only commercial product I could stomach was Odwalla. Delightfully, each batch of Odwalla had a different color, sweetness, thickness and freshness, and I came to open certain bottles for certain meals or occasions based on the look of the juice, or the date (once you sampled a batch, every juice from that date was the same).

I know I sound crazy, but am I really any different than the wine enthusiasts you know, who relish the juices of a different grape fruit?

At the peak of my addiction, I was consuming well over half a gallon per day. If supplies ran out, cravings compelled me to immediately shop for more. When I found myself cruising for Odwalla in the 24-hour Safeway at 2AM, I knew something was wrong with me.

So I confessed the addiction to my doctor and sought her guidance. Her response: grapefruit juice is good for you--if you're going to crave something, you might as well crave grapefruit juice. (Her only caution is that grapefruit juice can dangerously accelerate absorption of certain medications.) Blessed by science, I surrendered to my whim.

But as I neared the age of 31, my supply went bust. E-Coli bacteria infected a batch of Odwalla apple juice. EPA tests at the factory turned up negative, but somehow many children became ill, one fatally so. To protect its strong brand (and, I think, to do the right thing), Odwalla responded quickly and openly to address the problem. With FDA guidance, Odwalla inserted multiple inspection points and began to pasteurize its apple juice. But alas, in their zeal to restore their good name, the folks at Odwalla decided to also pasteurize citric juices, in which the threat of e. coli infection is only theoretical.

That day, my only source of high-quality commercial juice dried up. Forced into withdrawal, I adjusted to life with only an occasional glass of the home-squeezed nectar.

Except... on lazy, rainy, holiday weeks like this one, I find myself at home with enough time, fruit, and helpful children to re-kindle and satisfy the urge.

...I think I'll go squeeze some right now. L'Chaim!

UPDATE May 9, 2006: Scientists isolate the molecule in grapefruit juice that increases absorption of drugs.

The Truth Behind Visto's Lawsuit Against Microsoft

Many press reports and blogs in the last week have implied errors in their coverage of Visto's legal action, including the notion that Visto is suing Microsoft for patent infringement using the intellectual property that Visto had licensed the day before from RIM antagonist NTP. Though I haven't been involved in Visto for many years, I do know that Microsoft is actually infringing Visto's own, original patents--I know this because at least one of those patents has my name on it.

In late 1995, I attended a Network World trade show where rows of net-connected PC's had been set up for use. These PC's were running on the same large TCP/IP network as my PC client at Bessemer as well our Exchange server, and yet there was no way for me to access my corporate email and calendar. As I thought about the problem, pondering the range of computing devices that would ultimately participate in reading and writing email/PIM data, I concluded that we'd eventually need virtual desktops to synthesize and synchronize the workspaces instantiated in each device.

So I recruited the assistance of Daniel Mendez, a technologist I knew from the Harvard Computer Science Department (and now a board member of Kepler's), as well as a team of developers recruited mostly from Sun (starting with Chris Zuleeg, now at eBay). We searched exhaustively but unsuccessfully for known commercial technologies to solve this problem. So we specified and crafted our own solution that anticipated the widespread use of disparate fixed and mobile devices, and addressed many challenges, such as synchronizing through corporate firewalls. In mid 1996, with funding from Bessemer, we incorporated Visto (called RoamPage back then) to develop and sell the technology as a service (first reviewed here in 1997). 13 of us had worked in a single room (plus a smelly toilet closet) behind a flower shop in Mountain View to develop this service--our only assets were 17 computers and a very well used futon. But in the coming months we filed broad patent applications that were subsequently granted.

It took years (frankly, more than I expected) for the wireless platforms to develop the processing, storage and bandwidth Visto needed to extend the virtual desktop to mobile users, but finally (after $150 million+ of venture capital) Visto leads a robust market for device-agnostic synchronization of email/PIM workspaces.

But now that the market is finally maturing, Microsoft is doing what is does so well--bringing products to market based on other companies' technology. Microsoft does indeed have a good track record of enhancing established products--I certainly prefer Word over Wordstar, Excel over Visicalc, and Access over dbaseIV. And if Microsoft can improve upon mobile PIM synchronization, I'll be the first to subscribe, but they can't expect to infringe upon issued patents without attracting lawsuits.

That's why Visto licensed NTP's patents--to respect others' intellectual property. NTP's patents are not cited in Visto's lawsuit. NTP, in turn, invested in Visto because of Visto's growth and intellectual property--not, as some have reported, to financially prop up a licensee. Believe me, prior to the NTP deal Visto was already very, very well funded (as one must be to keep step with Microsoft's lawyers).

I expect 100 comments on this post decrying the evils of patent litigation, but I am here to bear witness that these patents were not crafted by a bunch of attorneys in order to pick deep, corporate pockets. These patents were written by programmers who were engaged in building a viable, commercial platform, and genuinely wished to protect the invention.

As an informed insider, there's one last thing I can tell you about this lawsuit: Visto is going to win.

Profiling: A New Approach to Desktop Security

Speaking of the limits of rationality, often it is ignorance, not brain structure, that impairs the quality of our decisions. Sometimes we simply need to get a little expert help. That's why Bessemer (led by Rob Stavis of Skype fame) incubated and funded SiteAdvisor, a security startup with a fundamentally new approach to defending the flock of internet users from hungry predators...

A flawed premise characterizes the plethora of internet security technologies--a mismatch that fuels the growing scourges of spam, phishing and exploits. The flawed premise is that Users will be secure if they have the data to decide for themselves whom to trust.

Thanks to this superficially compelling idea, we have applet signatures, SSL certificates, 30 page online license agreements, and pop-up warnings when we are "about to enter an insecure website." Do any of you really stop what you're doing because of obscure language in an online license agreement, or because a pop-up window alerts you that an SSL certificate has expired? We all know what really happens, with the inevitable consequence that we are spammed, phished and exploited.

The idea that more information protects us springs from early technologies like PGP that relied on a rudimentary social network to convey trust. For a small community of 10,000 programmers who actually understood the details of public key encryption, PGP worked well. But for a billion internet users bombarded with technical jargon, too much information annoys far more than it defends. Sometimes fewer options are better (see prior post on the negative value of options when decision-making is sub-optimal).

SiteAdvisor tackles the problem of internet security by offering expert recommendations while you surf. For example, maybe you don't really want this Google search result, because that web site links to a lot of malicious sites (see icons added to the search results on the right). Er, are you sure you want to enter your real email address in this form? If you do you should, based on our tests, expect 254 emails per week in your inbox (see second screenshot)...

In a sense, SiteAdvisor extends the functionality of Websense, going far beyond content analysis. For example, SiteAdvisor's software analyzes the impact on your desktop from downloaded code, the security of pages referenced by hyperilnks, and the number of messages you should expect from sharing your email address. You can read a comprehensive review of SiteAdvisor in an article published today by Ben Edelman at Harvard titled "Deciding Who [sic] To Trust". Screenshots that illustrate the depth of SiteAdvisor's analysis are available here.

Profiling may be a dirty word in US airports, but it is widely hailed as an effective--and even critical--security mechanism. SiteAdvisor elevates reputational internet profiling to a higher level by encompassing all the elements of a web site--not just the public key, URL, IP address, or applet cert.

Personally, I will feel much freer to explore the back alleys of the net with a bodyguard watching my back.

Update: A preview version is now available here using the login "websafety" and a blank password.

Limits of Rationality: Beware the Paralimbic Cortex

My prior post featured a game theory question from my undergraduate Economics mid-term that illustrated, if nothing else, the practical dangers of applying rational logic to real world economics. While it's fun to ponder the fate of the sheep, who among us would actually take the little lamb's place, shielded only by the recursive logic that promises safety in large even numbers of rational yet ravenous predators? Even setting aside the cerebral limits of feline cognition, we naturally discount the purely logical solution because we intuitively understand the scientific findings that my college roommate has published on the limits of human rationality...

David Laibson is a pioneer and rising star of Behavioral Economics, a new branch of economics that models the reality of non-rational decision-making (I'm guessing he's the only Harvard economics professor to achieve tenure before puberty). Economists initially pooh-poohed Laibson's field (Myron Scholes once told me over a round of golf that behavioral economics is nonsense), but pioneers like Laibson proceeded to produce models that exceeded classical models in their prescriptive power. Laibson now teaches a slew of popular courses on campus including Ec 1030: Psychology and Economics in which, I imagine, he considers in gory detail what really happens to the sheep.

(Our other roommate for all 4 years of college and the first avowed atheist I ever met, Aaron DiAntonio, is also on the Nobel path for his work at Washington University on the biochemistry of fly brains. I was clearly the dunce of the dorm room, tolerated only for my pizza money and general tidiness.)

Laibson's research has focused on inter-temporal choices--that is, decisions we make that affect us later (such as how much to save for retirement). Specifically, studies confirm that many people make short term decisions when offered immediate gratification, and long term decisions when asked to make the same choice well in advance. Consider the following two examples:

1. You are in a shopping mall next to your home and you win a drawing, which pays out either $10o today or $105 tomorrow. Which do you think you would select? Not surprisingly, many people would choose the $100 today (probably because there is something they immediately want to buy). But what if the choice of prizes is $100 credited to your account in 90 days, or $105 credited 91 days from now? Almost everyone (even the people who selected the immediate $100 payoff in the previous situation) figure that they might as well wait the extra day for $5 more. (Of course many will evidently change their minds if given the chance on day 90!)

2. It's time for dessert, and you have just enough room left for the slice of pie presented before you. Of course, sometimes you eat it and sometimes you don't. But if you make the choice well in advance of the meal, you are much more likely to make the longer term choice of declining dessert. We all intuit that it's easier to avoid putting the treat in your shopping cart than it is to avoid the treat at mealtime.

These examples expose the illogic of human decision making. If $100 today is better than $105 tomorrow, than discounting back 90 days ought to yield the same calculus--$100 in 90 days must be better than $105 in 91. And yet it's not. The same goes for eating dessert.

The immediate gratification of food, sex, sleep, entertainment, shopping, comfort and other personal leisures factor stronger in real time decisions than they do in long term planning. That's why we often choose to restrict our own options (buy illiquid investments, buy only healthy food, ask the hotel clerk for two wake-up calls, and avoid old girlfriends)--we don't trust ourselves to make the right decisions. And often when we do trust ourselves, we fail to recognize that we will change our minds when making the same decision in real time. This psychological fact defies the rational assumption in economics that options can only help the optionholder, not hurt. Sometimes, in fact, we act in ways that imply a negative value to our options!

Collaborating with neuroscientists from Princeton, Laibson published fascinating findings last year in Science Magazine. Using functional MRI, they showed that short vs. long term decisions are made using different parts of the brain depending upon the immediacy of the short term benefits (paralimbic cortex for immediate gratification, lateral prefrontal cortex and posterior parietal cortex for delayed gratification). No wonder we can make drastically different decisions around the same set of tradeoffs!

Human intellectual frailty impairs not only classical macroeconomic models, but also our lives. The good news is that, in the absence of immediate gratification, our posterior parietal cortices compel us to overcome irrational impulses. We shop smartly to help our diets; some attend church sermons to curb "sinful" tendencies; as of last week, non-smokers can even take a vaccine to prevent unwanted addictions; and sheep avoid fields populated by large, even numbers of smart but hungry lions.

Finally, this phenomenon explains in part why thoughtful entrepreneurs raise venture capital (Hah! I told you I'd bring this baby home)...

Many entrepreneurs try to control the composition of their boards of directors, but more experienced entrepreneurs tend to share control, inviting the participation of their venture investors and outside directors. Surely, the entrepreneurs reduce their own options in the process, but those options have negative value! They expect good, experienced directors to compel them, once every quarter or so, to stop fighting fires and consider the long term direction of the company. Are we on plan? Why are there variances and what should we do about them? Do external factors (such as competition) warrant a revisit of our plan? Without the deadline of a board meeting, it's easy and natural to let these critical questions slide for too long. Raising venture capital from an investor with a track record of bringing this discipline is tantamount to making the right long term decision before the paralimbic cortex takes over!

Lion Bait

For those who enjoyed the hand-shaking puzzle, here's a problem from the mid-term exam of my undergraduate Economics game-theory class...

A sheep sits in the middle of a field surrounded by n lions (where n is some number greater than 10). Any lion can eat the sheep but, as each lion knows, it would become so tired that it would be as defenseless as a sheep itself--easy prey for another hungry lion who would in turn become tired and defenseless. The lions are all hungry (equally so for lamb or lion meat), super rational, but naturally not suicidal. Does the nearest lion, or any lion for that matter, pounce on the tasty ovine?

The solution to this puzzle illustrates a point that I will reference in my next post. Eventually, I really will show some relevance to venture capital (beyond the obvious metaphor of nasty lions devouring poor helpless lambs).

Meanwhile, be the "first person on the blog" to post the correct answer (a simple yes or no without proof will not suffice)!

RSA Acquires Cyota

Congratulations, and thanks, to CEO Naftali Bennett and the whole Cyota team!

I've had the honor of serving on Cyota's board for barely a year, but during that time I've been blown away by Cyota's relentless defense of banks against fraudsters. At a time when phishing, pharming, and identity fraud expose our accounts to easy pickings, the accountholders of Cyota's banking customers have been protected by a formidable suite of anti-fraud services. Thousands of banks--including 8 of the largest dozen in the world--use Cyota to process Verified-by-Visa, authenticate online bank transactions, shut down phishing attacks, and detect credit card fraud in real time. During my service on the board, customers like Capital One, RBC, Barclays, ING, Bank of America, Chase, US Bank, CIBC and Providian so valued the service that Cyota's account churn was absolutely zero.

Naftali and his co-founders Amir Orad, Lior Golan and Gilad Zvi have been sweating at Cyota for years, zigging and zagging through different business models as they crafted the right suite of anti-fraud services. They recruited top talent like CFO Jason Schwartz from Shopping.com, board member and former US Cyber-Security Chief Amit Yoran, VP Sales Geoff Geane from HNC, and Chairman Kelly Doherty (ex Vice Chairman, Bankers Trust). This outcome was not a product of luck.

Congratulations as well to RSA on acquiring this premium property right on the heels of the FFIEC industry directive to secure online bank authentication--RSA has an exciting year ahead. Despite offers from several acquirors, Cyota accepted this particular deal due to RSA's strong brand name and presence in online authentication. (The last time I negotiated a corporate development deal with RSA was in my Los Altos apartment over a poker game with Jim Bidzos, where we decided to spin out his certificate business into a newco, Digital Certificates, Inc., later re-named Verisign.)

Finally, kudos to Justin Label of Bessemer, who chased down Cyota (and every other anti-phishing vendor) as part of a focused road map initiative.

SETI, Limbo, Walmart and Will

I know many of you wish I'd stick to venture capital stuff, but sometimes the superstition just piles up, and I can't help but vent. Here's what came in today's news feeds...

1) George Will opposes Roe v. Wade and other judicial defenses of our Constitutional right to privacy, citing U.S. Judge Raymond Randolph...

Since 1973, the privacy right has, as Randolph says, "morphed." Now it means personal autonomy - everyone's right to do whatever he or she pleases so long as others are not harmed.

And what is wrong with that? If we're not hurting anyone, why on Earth should government--or for that matter any institution--restrict us from doing what we want? George, please take 10 minutes to read Smullyan's dialogue between God and a mortal (from Hofstadter's Mind's I), and tell your friends about it.

By the way, I'm not trying to provoke the very complex debate on whether a fetus counts as an individual who shouldn't be harmed. George isn't even making that argument. Instead he is evoking the moralistic position, with an air of self-evidence no less, that actions can be evil and worthy of punishment even if they don't harm anybody. Of course, you have to think like George if you believe that blasphemy, idolatry, homosexuality and pre-marital sex are all evil.

2) Store Manager turns Walmart opening into a revival.

3) Vatican holds summit on Limbo. Where do the unbaptized babies go? What about all the other good people who never had a fair chance to embrace the New Kingdom? Someone needs to decide!

3) Intelligent Design proponents seek credibility by asserting the scientific equivalence of ID and SETI. After all, IDers see a Creator behind earthy complexity, just as SETI presumes that any complex signal in space implies intelligent life behind it. Wha? SETI is listening for clearly artificial sounds, not just the sonic, astronomical equivalent of eBay's Virgin Mary grilled cheese. Here, SETI researcher Seth Shostak has to defend his scientific credibility and spend valuable time debunking the ID camp's ridiculous excuse for logic.

Unfortunately, this morning's news feeds suggest that SETI needs to take a back seat to SeTI: the Search for Terrestrial Intelligence.

The Secret of Success

Commenters on my previous post have correctly pointed out that a logic puzzle is probably a weak indicator of VC skills. So what is a strong indicator of success? The question reminded me of an encounter in 1990...

The first person I ever met from Bessemer was Neill Brownstein, one of Silicon Valley's pioneer venture capitalists (with investments like Ungermann Bass, Telenet, Maxim, Veritas and BusinessLand). At that interview, he asked me this question:

What do you think is the most common trait among successful venture capitalists?

I thought hard, trying to impress him. "Deep industry domain knowledge."

"No," he said.

"Um, analytical skills?"

"No."

Uh oh, I started grasping. "Rich network of contacts? Operating experience? Engineering background? Financial background? Skepticism? Patience? Sense of Urgency? Salesmanship? Decisiveness?" (the last of which I clearly didn't display)

"No."

"I give up. What is it?"

"Luck."

I have since followed Neill's advice.

Coincidentally, the second most important factor, I now believe, is a strong, stable platform with great mentors (like Neill and Felda) and smart partners.