Information vs. Judgment: A VC’s dilemma

Yesterday in Does “A VC” have a blind spot for Apple? we outlined how Union Square Ventures VC Fred Wilson was drinking the Adobe Kool-Aid on why Apple hasn’t seen fit to allow Flash on the iPhone. His piece got dozens of comments, many of them quite negative as Wilson himself noted in comments he left here.

I’m glad to see that Wilson had his own “So I screwed up” moment and says he learned a lot from the commentary and moved on. That is as it should be.

Wilson’s “People”

I am, however, bothered by the way he concluded his follow-up piece, From Blog To Forum, with this:

All of this is fantastic for many reasons but there is one that stands out as the most valuable to me. It makes me a better investor. Kontra said this in his comment on the Apple/Flash thing:

Hopefully, you have people advising you on platform choices on a strategic level, going beyond press releases.

I do have people advising me. It’s you. And thank you for doing such a damn good job of it.

The part that bothers me (that I emphasized) is his consideration of his commentators. Though we live in the same city, I never met Wilson and don’t know him personally so I have no basis to judge whether he’s being condescending or not. And that personal stuff isn’t important to me, but the relationship between publishers/bloggers and their commentators as the bedrock of a new social order is.

Information is cheap and money for nothing

As the title of his site indicates Wilson is a venture capitalist; he invests in companies. The currency of his practice is the ability to make strategic decisions on the viability of ideas/companies he invests in. To do that he needs information.

Though he says he’s not a “technologist,” with an engineering degree from MIT and so many years in the business, it’s hard to ignore that he knew so little about the subject matter he himself chose to write about. Apparently at Union Square Ventures, partners’ blogs don’t get tech-checked by technology staff. Wilson says that’s not needed because I and his commentators are here to provide the necessary information and fact-check.

After all, aren’t we living in the Web 2.0 era with crowd-sourcing? Isn’t this supposed to be the antidote to closed-doors editorial practices of the mainstream media? Hasn’t User Generated Content mushroomed recently as a fertile ground for investment? Isn’t the crowd smarter than the blogger?

If Wilson knows the answers, he’s a better man than I. But what I do know is that I don’t “advise” Wilson. He doesn’t know why I chose to point out his errors or defended Apple. And I don’t know why Wilson promoted Adobe and Nokia at the expense of Apple. These could all be because we both have a monetary reason. For all we know, he might be getting ready to invest in Flash-based startups and I might be working at Apple.

Information vs. Judgment

What exchanged between us was information. But what a VC needs most of all is judgment. Information is cheap and bountiful. Good judgment is rare and expensive. I offered no information to Wilson that he couldn’t get himself by Googling for an hour before he wrote his piece. I offered no judgment to Wilson, because he hasn’t paid for it.

Who’s your daddy?

That brings us to the primary question here: in the age of information abundance and what seems like infinite commentator willingness, can we create businesses that harvest information and monetize it without compensating those who provide it? Further, is that sustainable? Would Wilson open up all of his investment decisions to his blog commentators before finalizing them? And if that were to happen, would he compensate those who contributed profitable information? Otherwise, is Wilson buying judgment, but getting his information for free from his commentators? And is that fair?

5 thoughts on “Information vs. Judgment: A VC’s dilemma

  1. Too many technology investors don’t understand the technology they’re investing in. Not just how it works, but the core philosophy of a technology, and how it fits into the world of technologies around us. They don’t audit a technology thoroughly enough.

    If you do your research on the technology of Flash and the mobile-inclusive Web, it is easy to make the judgement that FlashPlayer is no longer practical. There are about a dozen ways it’s impractical, you are going to hit on at least one of them with some research. You don’t have to take meetings with any business people or do any MBA work, you first just have to see if the technology can outlive its own ambitions.

  2. fred wilson : “i suspect you aren’t a regular participant in the AVC community so you might not understand what’s going on there.”

    Apparently, not. :-)

    (I do the same thing here, BTW, with my short “Daily question:….” pieces, which invite debate.)

    Even though your original piece had a question as a title, the rest of it was completely judgmental. You put down Apple and unambiguously “rooted” for Adobe. So I didn’t see it as a question posed, but as a statement made, and took issue with it.

    There’s far too much blind anti-Apple bias out there, which wouldn’t matter if Apple hasn’t been uniquely the one company that has managed to carry design in its DNA from inception, and that’s important to some of us.

    In any case, I tried to generalize this exchange away from being personal as I have no business casting aspersions without knowing you.

    So perhaps we could have a drink one day to remedy that, if only to bring back a VC from the dark side. :-)

  3. i suspect you aren’t a regular participant in the AVC community so you might not understand what’s going on there. that’s fine. but it’s a very rich discussion about lots of things, not just flash vs open standards. i write a post every day and i take about 30 mins every morning to do it. think of AVC as a forum, where i post a question and we discuss it. i suppose is should have stayed away from flash and iphone because there are apparently a ton of people way more technical than i am with big axes to grind on both sides. but that’s how it is. i am fine with taking the abuse when its deserved, but don’t underestimate how much learning goes on at AVC, both for me and the community that hangs out there.

    and if you live in NYC, let’s meet. I think i’d enjoy it and maybe you would too.

    fred

  4. Richard Stacpoole: “…run a company without having a deep, complete and developed understanding of what a business does, how and why.”

    Quite. And these CEOs are usually parachuted into companies and they soon discover they don’t have a full grasp of the situation. In desperation, they turn to the usual big-ticket consulting factories that in turn unleash their equally clueless and uninterested young consultant/bureaucrats to pile up billable hours. In many large organizations, this passes as “best practice” business ops.

    I still find it amusing that the worst insult Steve Jobs could come up with to slap on Steve Ballmer was to call him a “sales guy.”

    It’s no crime for Wilson to not know something, but pretending to know enough to pass judgment on a hot industry and get it completely wrong is inexcusable. There’s far too much of this in the VC business.

  5. This is a devastating rebuttal of Wilson’s post and raises some excellent questions. But I would like to go back a step and expand on one aspect you discussed.

    Kontra: “I offered no information to Wilson that he couldn’t get himself by Googling for an hour before he wrote his piece.”

    Imagine he had spent that hour learning the information he needed to make a better informed piece. The post he hopefully wold have produced with better understanding would not have attracted 156 comments needing to educate Wilson on some pretty basic definitions, trends and outcomes. Instead he might have received a dozen posts with:

    1. A much higher signal to noise ratio. Fewer “You (Wilson) are an idiot” posts.
    2. A discussion starting on a firmer footing, with fewer basic mistakes.
    3. A discussion on a higher level and of higher quality. Big ideas are built on small ideas, but they can’t be discussed unless we share a common language with accepted meaning and agreed, if not precise, definitions.

    I can’t talk to you about design because I know little about design outside of “I might not know design, but I know what I like”. I can talk to you about raising the pirate flag because I knew that you would instantly understand the significance of the phrase.

    I think there is a business orthodoxy that must be annihilated from Business especially MBA, accounting and law schools. And that is it is possible to run a company without having a deep, complete and developed understanding of what a business does, how and why. There is not a cookie cutter approach to running any business, especially technology and design companies beyond administration.

    The trap to the above is that you get an entrenched orthodoxy, an inability to take a step back and see all of the parts working as a whole.

    I have no feeling against Wilson, I don’t wish him harm or ill will. I certainly wouldn’t employ him in a strategic role.

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