I personally find the people who are in the software startup game just for the money to often be nearly delusional about their chances of success and the likely magnitude of it when it happens. Before I get into the details for founders, let me talk about options-hungry employees. If you are in it for the money and you aren’t a founder, you’re sticking your head in the sand. Full stop. Yes, you can point at your anecdotal evidence at once-per-generation companies like Google, Amazon, and Microsoft. But for the most part, employees never get “I never have to work again” rich doing startups. There are too many mechanics out there to make sure that the folks taking the real risks (investors and founders) make the real money. If you want to read more, read my intro to startup stock options. If you don’t want to start companies, focus on salary and how much you enjoy working at startups.

But even if you are a founder, don’t do it for the money. Do it because you love small teams. Do it because you love your product. Do it because you love playing the startup game (even if you don’t win it). But for the love of God, don’t do it because you think you’ll get rich and retire on a beach somewhere when you’re 30. Because, as crazy as it sounds, when you sell your first company it almost certainly isn’t going to happen.

Let’s run through a common exit scenario. You and 2 co-founders spin up a company (say you’re creating one of Mike Arrington’s “Dipshit Companies that wants to sell to Google for $20m“). You take a smallish seed round and a small-ish Series A round (yeah yeah, you can bootstrap– but the vast majority of 7 to 9-figure exits are funded companies). So after investors and options for employees, let’s say you each own 20% of your company (it can be a lot less or more, depending on what kind of leverage you have while fundraising, how big your options pool is, and how many of those options are exercised/accelerated upon exit). Now let’s say you exit for $20m 3 years into it. Congrats! Light up the cigars and start hunting for beach houses– you’ve now joined the new rich! Except you really haven’t. You see, you (like a lot of folks) aren’t really thinking what it means to retire at 30. You’re not alone. The fellas at AdGrok have the same mental math going on in their head in their “Fuck You, Money” post:

“Before anything else, let’s do the numbers: money market funds yield around 4%. That’s $400K interest on $10MM, which is certainly a living wage, leaving aside inflation. Of course, it doesn’t have to last forever: human life is sadly finite. Crunching more realistic numbers, ‘fuck-you money’ is about $4.2MM for a 30 year old guy who plans on dying at 70 and wants to make $200K/year. Well within the payout picture of a fortunate startup founder whose company is acquired.”

Of course, many of these numbers are strange. 4% for a money market? I’d love a link to that– the best I’ve been able to find is around 1.5% right now for a jumbo money market. Dying at 70? Chances are you’ll live to 90, at least. “Leaving aside inflation”? That’s disastrous (why would you leave aside a number that cuts your 4% by more than half?!). Let’s run through some REAL numbers, using my “Early Retirement Spreadsheet” (AKA “Fuck You Money Spreadsheet of DOOM” – feel free to save a copy and noodle with it).

In our above scenario, our happy founders are walking away with 20% of $20m, or $4m (might be a touch more due to unclaimed options, or a lot less if your investors are the double-dippin’). $4m– we could live on that forever, right? Let’s plug in some variables. 3% for average inflation (a touch higher than the average over the last decade to be conservative). Let’s assume you can get a 5% return (even though the last decade gave us -0.99% for the S&P and the outlook isn’t too rosy). And let’s assume you want to live in a major metro area in a nice house, a couple of kids in private school, and solid travel budget. You’re a millionaire, right? So let’s assume your annual family budget will be $200k. Upper middle class– certainly not in “butler country”, but real comfy, flying first class and living large. Here are our variables:

That’s not too crazy-conservative, is it? Heck, if you’re earning 5% on $4m, that’s $200k right there. No problem, right? You can coast forever with your fat nest egg largely untouched. You’re probably doing what I (and the AdGrok guys above) were doing: “Leaving aside inflation”. Let’s look at what you’ll have to spend to keep your $200k per year lifestyle with compounding annual inflation.

Wait a minute! I’m going to be spending nearly half a million dollars per year when I’m 60 to compensate for a 3% annual inflation? Don’t worry– you’ll be broke LONG before you 60th birthday. Let’s look at how your F@#$ You Money evolves over time with these variables.

You don’t even make it to 50. If you want to be optimistic about inflation and investment income (after all fees) and nudge them to 2.5% and 7% respectively, you don’t make it to 60.

There are a few morals to this story:

• make sure you freakin’ LOVE what you do. Love the game, love your product, love your co-workers, love your market.
• If you are going to be a mercenary, make sure to optimize not just for “f@#$ you money” but “f@#$ you influence”– make sure that as you sell your $20m company that you are well positioned to build another company, have a fat executive job, some great advisory roles, paid speaking engagements, and the like. Because you’re still going to want income.
• DON’T love the idea of living rich AND being retired. You can live rich on $5m OR you can retire early with $5m– but you sure as hell aren’t going to do both… for long.

Note: If you’d like to see the spreadsheet, it’s here. You can make a copy of it if you’d like to noodle with the variable to find your personal “never have to work again” number.

Now that I’ve stepped down from RescueTime, I’m pondering my next thing (whether it’s a product role at a very early stage startup or spinning up my own for the 3rd time). I figure it’s a good time to be introspective and consider my motivations. Why do startups? For me, it’s more about having the choice to work on the stuff I want to work on, work with cool people on small low-friction teams, and wear a lot of hats. I definitely see the lure of the financial reward, but it’s never been a primary motivator for me. I’ve said in the past that stock options for startup employees are generally a sucker’s bet, but the argument extends to founders, too (especially when you’ve got 3+ founders and/or need multiple rounds of investment).

On a recent trip to Alaska, my ideas around “F@#$ You Money” changed pretty radically because of two conversations (which I’ll relate below). First, let’s start with a definition:

F@#$ You Money: any amount of money allowing infinite perpetuation of wealth necessary to maintain a desired lifestyle without needing employment or assistance from anyone. (via Urban Dictionary)

Retirement Plans

The first conversation I had on my Alaskan trip was with an older retired couple who was traveling around Alaska. We’d had a few drinks at a local bar and got to talking about retirement, risk-taking, and (eventually) f@#$ you money. He started talking to me about his finances and told me that he was really anxious about money despite having a “couple million bucks”. “It used to be absolutely true when people said ‘money makes more money’,” he told me. “Be relatively sharp about flipping real estate, have a solid and diverse stock portfolio, and you’re making 6-10% per year or more.” 8% of $2 million is 160,000. Add some Social Security money to that and the fact that older couples generally have a paid off house or a cheap mortgage, and that feels pretty close to permanent retirement. If you want to live more lavishly, you can chip away at the principal.

But this couple was shaken by the new reality. What, exactly, are they supposed to invest their money in that throws off 6-10%? Real estate in major metro areas are looking at a 5-20% drop in the next two years. The stock market is volatile but stagnant (more on that in a minute). Money markets are throwing off less than the rate of inflation. Top all that off with the potential that inflation accelerates, turning their couple of million bucks into dramatically less… Which means that even if they leave it in cash, there is a lot of downside risk.

The formula for a 2 million dollar retirement changes from:

$2,000,000 * 8% = $160k/yr + Social Security

to

$2,000,000 / # of years you expect to live after retirement (say 30) = $66k/yr + Social Security

If that all works out, you die nearly penniless on your 30th year.

The idea of a millionaire couple (surely the top 5% of retirees?) living on a combined wage that is dramatically less that what they were likely earning before they retired was pretty damn shocking to me.

The second conversation that I had on my Alaska trip was with a money manager at the Seattle airport. He was one of the top wealth managers at one of the big Wall Street firms. His belief was that it was likelier to get worse before it got better and that it could be 10 years or more before the economy bounced back. “I think we’ll see Dow 4,000 before we see Dow 12,000,” he told me. With the ratio of workers to retirees changing for the worse and with birth rates flattening, he wasn’t sure how much it COULD bounce back. Obviously, his opinion isn’t shared by everyone. But there’s a chance he’s right. Given that, where exactly do you put your f@#$ you money? A balanced portfolio isn’t enough protection against that kind of drop.

(Want to worry some more? Consider how much you have to save to retire if your savings don’t throw off interest.)

Want to be Mercenary? Time to give up on F@#$ You Money and Focus on Other “F@#$ You” Things

Pretend that you sold a startup tomorrow and walked away with a cool $5,000,000 at the age of 30 (well, $4m after taxes). Assuming you live 50 years, that gives you $80k/yr (non-inflation-adjusted dollars). Perfectly comfortable, but certainly not the image of wealth that a $5,000,000 windfall historically brought to mind. So if you’re young and angling for greatness, I think you’re better off aiming for “f@#$ you influence and credibility” (which has as much to do with your personal brand as it does your financial success). THAT is the investment that keeps giving. It allows you to charge $30k+ for a 1 hour speaking engagement. It gets you a feeding frenzy of investors when you start making noises about your next startups (reducing your financial risk to near-zero). It gets you fat advising gigs (where you trade advice and influence for ~1% of startups), seats on boards of directors (which can be compensated for in various ways). It gets you access to the best angel investment opportunities. Hell, it could allow you to raise a $30,000,000 seed fund (rock on, Dave!).

Better yet, in the mercenary vs. missionary debate, don’t think like a mercenary at all. Focus on creating value, being passionate about what you’re building every day and let the windfall (if it happens) be a happy surprise.

[Timely note! We're hosting a Y Combinator Meetup in Seattle on Thursday Feb 25... details here!]

March 3 is the deadline for YC’s Summer 2010 session. I figured that I ought to throw my thoughts out there on the decisions that lead up to the application, the app itself, and the interview process that follows (if your app makes the cut!).

Making the Decision to Apply

• First off, I think the most important thing to emphasize as an entrepreneur is that you should optimize for your chance of success a meaningful exit, NOT the magnitude of it, should it happen. It may seem like selling for millions to Google is a foregone conclusion given how brilliant you are, but it’s not. Startup success is a tough slog with lots of randomness outside of your control. If you can trade a little bit of equity to nudge up your shot at success by a few percentage points, you should do so. Thankfully, YC from this perspective is a no-brainer. No one can argue that it doesn’t improve your shot (with the amazing mentoring they provide, the investor introductions/credibility, and PR bump), and if you calculate YC’s take is if you sell for $100m (divided by the number of founders), it isn’t too painful.
• Think about what you’re building, what market you’re playing in, and whether it’s appropriate for venture financing. I think I recall reading about someone applying who was proposing to build an app to manage Dungeons and Dragons campaigns. While there’s probably a business there, it’s pretty unlikely that the pen-and-paper RPG market is going to be the next big thing to change the world. Pick a big market– or better yet, pick a small market that can eventually morph into a huge market (like classifieds for San Francisco, selling books online, or an online garage sale).
• Read everything here and make sure you agree with some of it, but don’t be afraid to disagree with some of it either!
• Do something bold. You aren’t going to be thinking to yourself on your deathbed that you really should’ve taken less risks. YC is a blast. You get to meet amazing mentors, other great startup founders, and a few fairly impressive robots.
• Consider how committed you are to your idea/market, your company, and your co-founders. YC has plenty of flips, but the majority of ‘em seem to be going concerns for years. Can you get excited about what you’re doing (and who you’re doing it with) for 7 years?
• Do a gut-check on your team. Do they have the rough ingredients necessary to kick ass? If the better mousetrap you propose to build is going to be better because of an amazing UI, make sure you have a great UI guy. If you’re doing a vertical search/UGC play, make sure someone is at least a little interested in SEO. If you’re going to sell software to businesses, make sure someone is willing to sell stuff. And, of course, if you’re tackling something with big technical challenges (like most of us are) make sure you have some great hackers.

The Application Process

• Read Paul’s essays. It provides good insight into what’s important to him (and YC). Reading Founders at Work is a good idea, too. It’s a great book and shows you some patterns for startup success.
• Remember that the app is a sales pitch and focus your answers on the things that are important to YC. The biggest risks to YC are:
  • That you don’t have the chops to build something good. The best way to deal with this concern is to show them something good that you’ve built. Preferably several things, and preferably things that you’ve built with your co-founders.
  • That you’ll get bored/discouraged and quit. So try to work in examples of times when you’ve persevered despite significant obstacles.
  • That you’ll fail to make something that people want. So do what you can to show that you’re in tune with the market you’re proposing to serve. You can be a badass hacker with unflagging dedication, but if you don’t/can’t understand your users, you’re probably not going to be a big win for YC.
• Don’t be too shy or too arrogant to sell. I remember reading a comment on Hacker News that said, “My code speaks for itself.” No, it doesn’t. At least, not to investors, customers, employees, reporters, and the zillions of other people out there you’re going to have to sell to.
• Get working on your software ASAP. If you apply with a functional product (or even a launched product that people love), you remove a lot of the risks listed above.
• Get working on the YC app ASAP. If you’re unsure, apply! The app takes a few hours and it’ll help focus your thinking if nothing else.
• If possible, make sure that your whole team is ready to dive in whole hog. Starting something up is a commitment to your founders and to your new investors. Having a team member who has other commitments can be a source of contention.
• Hack the system! Every session I get emails from people asking me to review their apps. I usually do. I can’t imagine why you wouldn’t do this… YC founders are people who wrote successful applications and spent at least 3 months getting repeatedly kicked in the junk by Paul Graham and friends. I’m sure we must know something about how YC thinks that might not be obvious. If you can’t bring yourself to ask a stranger for some time, how are you going to raise money after YC? How are you going to hire your first employee?

The Interview

I don’t recall the stats on how many applications make the cut, but if you get asked in for an interview, congratulations! Now get to work building something (hopefully you already have).

• Get started on a demo. If you walk in and start monologuing, you’ll fairly quickly get interrupted and asked to start showing stuff.
• The “demo” will be less like Steve Jobs and more like Guantanamo Bay. You’ll be derailed almost instantly and peppered with questions and objections.
• Have a backup idea that you’re comfortable talking about. I know several founders who were essentially told, “we don’t like that idea. Do you have any others?” This may be a test of how much you love your idea as much as anything else. Founders who refuse to pivot often die from it. It also might be a test of your ability to have good ideas. If they don’t like your idea OR your backup, they might los faith in your ability to grok what people want.
• Practice. Ask 10 smart people to name 10 things that will make your idea fail. Have good responses for those objections. Don’t practice a speech. Don’t practice a 10 minute demo, practice little 1-2 minute chunks of a demo that you can string together if they leave you alone. Practice individual talking points and responses.
• Be willing to be wrong but also be willing to disagree. YC doesn’t want lapdog PG fanboys(and girls!), but they also want people who are coachable and willing to learn. Don’t be afraid to say, “That’s one of the things we’re going to have to figure out, but we have a few ideas.”
• Be dynamic and energetic. You’re a storyteller here. Your job is to get YC excited about your business. Make them believe that it (and YOU) are an investment opportunity. Work on eye contact, not talking to too fast, and thinking on your feet. Have someone role-play an aggressive interviewer.

That’s about all the advice I have. I’d close with this point– very very very few YC founders wouldn’t do it again in a heartbeat. It’s a killer experience and it’s certainly a needle-mover during the most fragile part of your new company’s life. Applying is cheap in terms of time and rewarding even if you don’t get asked in for an interview. Do it!

I just got word that I’ll be speaking at the Information Overload Research Group 2008 Conference in New York City on July 15th (though I’m not on the page yet… ).

This is the grassroots organization mentioned with RescueTime in the New York Times article “Lost in Email, Tech Firms Face Self-Made Monster” (well, it’s probably fairer to say that this is the article where RescueTime was mentioned with them!).

The conference looks like it’s going to be real interesting (and not just because I’ll be speaking there– I’m positively riveting!). If you’re in the neighborhood (or if you need an excuse to visit NYC), you should sign up (the conference only costs $150 and includes lunch– it’s a helluva deal). Brian Fioca, one of my co-founders will also be in attendance.

If you don’t want to go to the conference but want to grab a beer on the 14th, drop me a line!

There are people in the world who make a living communicating and living “in the noise” of email, IM, Twitter, Digg, TechMeme and the like. For them, the parade of communication and and information is probably a boon.

Unfortunately, for the rest of us (who make a living producing stuff– whether it’s software, design, written words, business plans, law briefs, or whatever) communication and social software is a necessary evil that’s getting to be… more evil.

Think about what the knowledge worker looked like 15-20 years ago compared to today. What frightens me is how scientific social software developers are getting about separating people from their time. We’re well beyond cowboy coders building something neat that people latch onto and have some fun with. Instead, we have analytics teams measuring how software is being used in a way that’s really never been done before. Hovering over our LCD cages like BF Skinner, they are watching what we’re doing, tweaking things to make it more engaging and more addictive, and measuring some more.

I liken it to the evolution of casinos and cruise ships, who basically run human cattle through finely tuned funnels designed to fleece them of money at every step… But instead of money, what we’re being fleeced of on the Internet is time and attention.

Again, for some people– this is fine. For some people, it’s literally building a career. In a way, I’m envious of them– they get to spend their lives immersed in a life-long party. I’m kind of envious of people who work in Vegas, too.

But for the quiet army of knowledge workers who are actually creating stuff– the boots on the ground in our knowledge economy– I think the increasingly personalized infoporn delivered to us through a broadening array of channels (like RSS, alerts, Twitter, Digg, Email, IM, Social Networks and more) is a looming disaster.

I imagine some people are shaking their heads reading this stuff and saying, “But people can choose not to indulge in this crap. We’re all perfectly capable of behaving like adults and working when we need to.” Indeed, maybe people will wake up and we’ll see a renaissance of attention.

I’m not so sure.

As I look at industries ranging from the gambling to alcoholic beverages, and as I watch very smart people fall prey to the attention-vultures, I think I’m more and more convinced that a concerted and scientific attack on the pleasure centers of our monkey brains will win the day.

There’s quite a flap over Paul Graham’s recent essay.

The attacking author quotes a comment on Reddit (always a good sign) as a good summary of the essay of why we should all be terribly offended.

“I work with young startup founders in their twenties. They’re geniuses, and play by their own rules. Oh… you haven’t founded a company? You suck.”

I kinda feel like there is a reading comprehension problem here. Paul added a “Cliff’s Notes” version of the article to clarify, but I’m going to boil down what I got.

The point I got from the essay is:

“I work with young startup founders in their twenties [note: he works with me and a mess of other founders who are also in their thirties... at least 1 or 2 are in their forties]. They seem stressed, but they seem happier and more alive. I think it might be a socio-biological thing– human beings are meant to be working in smaller groups, with clearer goals, and more ‘on the line’. Small businesses and startups seem like the best place to find this environment.”

Period.

Saying stuff like “happier and more alive” (which PG did not– I’m paraphrasing) does not mean that everyone else is miserable and dead inside.

Anyways, this isn’t a wild idea. There are piles of studies out there that have found a correlation between self-employment and satisfaction/happiness. Incidentally, there’s also a strong correlation between self-employment and making less money (but that’s good news, because there are ALSO studies that show that money doesn’t do much for happiness once you manage to have enough coming in to cover the necessities)

RescueTime will never be a purveyor of widgets (as a primary business), but there’s no denying that widgets are a damn good way to spread the word about your product, assuming that anyone actually wants to install them.

A widget that displays exactly how you spend your computer time may be creepy to some. As an old skool fella who is a bit more privacy-focused, I never really thought that a widget belonged anywhere on our near-term product roadmap. However, when we did our “What features do you want?” survey, thousands of people filled it out… 26% of ‘em expressed interest in a widget.

Sooooo, we built widgets. You can see mine to the right hand side of this blog– it’s a real time report of exactly what categories of my computer time I’m spending the most time on.

As we started thinking about it, RescueTime widgets could be used for all sorts of fun stuff:

• Lifestreaming. Just a fun little way to tell the world how you spend your time.
• Life hacking. We all know that discipline is hard. As Paul Graham says, there is nothing more motivating than the fear of public failure and ridicule. If your productivity data is available for all to see, do you think you’ll be a touch more productive?
• Workstreaming. Want to telecommute? Whip up a page for your boss with a few of your RescueTime graphs up there so he can feel “in touch”. For extra credit, you could throw a few static graphs ABOVE your real-time graphs, giving your boss graphs showing your pre-telecommute productivity.
• Create your own Dashboard! RescueTime has a handy Dashboard, but maybe you care about other graphs that require a few clicks. You could whip up your own “dashboard” (on a private page or intranet, maybe) that shows exactly what you want to see. Right now we really only offer two graph types (top apps/sites and top tags– or labels), but very soon any graph will be embeddable.
• Speaking of Intranets… You could drop a few graphs there to show what you’re up to. This will really start to sing when we introduce our groups functionality (allowing aggregation of multiple people into one graph).

Widgets are officially a beta product– we’ve got a few kinks to work out. For example, in Firefox there is a Flash bug that results in the status bar continuing to report “transferring data from RescueTime.com…” even though it’s not (you can switch to a different tab and back to make the message go away). Anyone know how to fix this?

I just posted what I thought was a pretty darn interesting post about Google’s dominance in my life. By my count (and, with RescueTime, my count is pretty damn accurate), 13% of the time I spend in front of my computer is taken up by Google products.

Note that this is COMPUTER time– not just my online time.

Check out the post!

I have a hard time getting high-and-mighty about the paparazzi crap that I see in grocery store lines, given that I can’t seem to tear my eyes away from the train-wreck controversies of online celebrities. I just…. can’t…. look…. away!

Over the past two weeks, one of the big memes in the echo chamber is related to stealing photos… It seems a small a capella band created a fun/goofy song about the Web 2.0 Bubble, set to the tune of Billy Joel’s “We Didn’t Start the Fire”. The video is a montage of photos of assorted Web 2.0 personalities, logos, etc. It’s cute. I’ll embed it below (note: this is the first time I’ve EVER embedded a YouTube video!).

IANAL, so I can’t really speak to whether this use falls under “fair use” and parody laws. I think the band in question truly believed that it does and did their best to make it right once they realized that they might be in a bit of a “gray area” (read their blog post here).

Regardless, what struck me was the strident and downright venomous response from some photographers and other “artists”. It sounds exactly like the venom spewed by real estate agents towards RedFin. It sounds a lot like some movie studios and musicians when they talk about what’s happening in their industry. These people aren’t angry at just this little a capella band. They are angry at the entire world for evolving past their business model. They’re angry about becoming obsolete. How obsolete they become depends on how well they adapt to the world– not how loudly they demand that the world adapt to THEM. Off the top of my head, here are a few things that are changing the business of professional photography:

• Cheap startup costs. Used to be that a professional photographer had to invest thousands in cameras, lenses, and development equipment. It still isn’t cheap to have good equipment, but it’s cheaper.
• Time and expenses of developing photos is greatly reduced (thanks to digital photography and Photoshop).
• There is a growing pile of semi-pro photographers who are happy to give away their photos or sell them royalty-free for a few bucks.ne?
• There are great marketplaces out there for cheap/good stock photography. iStockPhoto, anyone?
• Print media is dying. Slowly, but it’s dying.
• The global marketplace. For many photos, you just don’t need an onshore photographer. If I want a cool close-up shot of a keyboard and mouse, there are plenty of great photographers in Eastern Europe that have probably already have taken just such a photo and are delighted to sell it for a few bucks, royalty free.

Is the photography/stock photo business dead? Not by a long shot, and not for a long time… But clearly there’s a shakeup in the works.

Here’s that embedded video. If you haven’t already seen it, enjoy:

I’m going out on a limb to say that the future of cold-calling (and unsolicited offers in general) is pretty bleak. Which gives me great joy.

On one hand, unsolicited sales is getting cheaper, easier and (for a while) more effective- volume is going up.

On the phone front… With powerful CRM systems, companies can easily measure the success of cold calling and optimize it. Want more sales? Add more telemarketers. Run out of people to sell to? Buy a database in a new market segment. Sell to the same people again with a different pitch. With banks of low cost people who can call dozens of people per hour, you can see great success.

On the mail front… Digital printing is getting ridiculously cheap and companies have nailed the art of cost effective bulk mailing. Mailing lists are plentiful, cheap, and well targeted.

On the email front… Well, we’re all familiar with spam. And, of course, it’s pretty easy to send lightly customized emails to potential clients in a more manual way, liberally copy-pasting blocks of text.

Heck, even in the world of recruiting you see it. 15 years ago, applying for a job was a fairly careful and laborious task. You bought fancy paper, carefully crafted your resume, and often hand-delivered it. Now people can apply to dozens of jobs in an hour. Not qualified for a job? Who cares– it costs you nothing to apply. Fire and forget!

The problem with spam being so damn easy (whether it’s on the phone, in the mail, or on the intertubes) is that the volume gets high enough that sifting through these offers is no longer an effective way to spend your time. Essentially, it’s banner-blindness outside of your browser. Cold callers and marketeers are training us to flip our “ignore” switch as soon as we detect direct-marketing. So how do you know what to buy? Who to hire? Which non-profit to support? That brings us to…

Search is getting damn good, and social networking is actually getting useful

Years ago it was actually challenging to find vendors with a specific product/service. You could crack open the Yellow Pages and hunt around for the appropriate heading that you’re looking for (“Web Development – See Internet, Web Development”) and… at that point you have a list. No way to know if the vendors are good, bad, cheap, expensive, ethical or evil. You could try to network your way to a referral, but that was a bit of work, too. You could make a few calls to trusted colleagues/friends and see if they had any recommendations, but oftentimes they wouldn’t.

So, when the phone rang with a telemarketer, why the hell wouldn’t you buy from them? They’re just as good as your list of unknown vendors in the Yellow Pages. Add ‘em to the list, hear them out, get a bid/quote. Can’t hurt, right?

Nowadays, Google makes finding a vendor easy (or at least easier). Do a search, get a list. You’re done. No 40 pound book (I just dumped my Yellow Pages in my recycle bin the day after I received it- unopened). And it’s a bit more democratic– no longer is the vendor list sorted by who can buy the biggest ad, and no longer is the content controlled exclusively by the vendor. The TRUTH about the vendor (whether it’s good or bad) is becoming more readily available.

Enter social networking… With Twitter, Facebook, and LinkedIn answers (near as I can tell, the only useful piece of LinkedIn), I can ask ANYTHING and get trusted responses. A few months back (at my previous job) I asked on LinkedIn if people knew a good web development firm in Seattle and got about 20 responses… Many from people who I had actual relationships with. If you come up empty in your network, you can always drop in at Craigslist or Yelp and ask for recommended vendors from people who have first-hand experience working with them.

Mix it All Together and…

I just got a call from a very polite telemarketer selling technology outsourcing services. I told him I didn’t need any. He asked (as any good salesperson would) if it would be okay to follow up in a few months. I started to say, “Sure, can’t hurt”, but reconsidered. “Harry, I’ll be honest with you,” I said. “If I need your services in a month or a year, I’m going to give my business to someone that my friends and colleagues recommend. If I can’t get a recommendation, I’ll research it on the web and pick a vendor. If you want my business, my best advice would be to do great work for people in this town so that when I do start asking around, your name comes up.”

I think more and more people are thinking this way (even if they aren’t saying it). Between the deluge of marketing we’re getting bombarded with and the ease with which we can find a trusted vendor, I have high hopes that cold-calling (and Yellow Pages with it!) will meet a quiet death in the next decade or two as these tools and ideas find their way into the mainstream. If we can pull that off, then customer service (and product quality) will truly be the new marketing.