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Fred Wilson posted a short and interesting video interview he gave some years ago in which he discusses the role of his blog in his life professional life.  This caused me to think about why I started, and continue to host this blog now that a number of years have passed.

Unlike Fred, I can’t say that I have a single cogent reason for it.  My reasons range from marketing thinks I should to I learn a lot from writing to I think the ecosystem may benefit from the perspective of someone, who is neither a VC nor an entrepreneur, who works closely with many start-up companies,, to I enjoy the writing.

With respect to the marketing motive, one thing I have learned is that marketing alone is not a valid reason to blog.  I probably spend between 2 and 4 hours per week on this blog (that translates to 150 hours per year (round numbers)).  I am pretty sure that I have not directly acquired a single client because of this blog.  Compare this performance to the book I wrote some years ago or an article I wrote on SEC issues related to sales of stock by insiders in public companies, each of which produced many very good clients.  But, I admit, I would not have started if marketing (and one of my partners) had not convinced me to give it a try.

With respect to learning, a lot of those hours I spend are used reading what other bloggers have to say, in effect, keeping up with the topics of the day.  I would be doing much this even if I weren’t writing, but when I read blogs now I consider them in terms of why is this person saying whatever they are saying and what would I say about it.  Strangely enough, this can make a difference in the daily practice of law.  (For example, I have formed opinions about the merits (or not) of VC seed notes and my clients have benefitted from these views.)

With respect to the ecosystem, blogging in this space is dominated by VCs (Fred Wilson, Brad Feld, etc.) and certain entrepreneurial types (Dharmesh Shah, Nivi and Naval, etc.).  Each of these groups has a vested point of view in, say the VC seed note debate, and almost all other topics.  I am not invested (and I use that word advisedly) in this debate (or most of the others) and there are times when a less committed point of view is useful.

Finally, as with everything in life, there is no excuse for not having fun.  You can think of tons of reasons to blog.  Leveraging your time (as Fred Wilson does), selling (as marketing would like to do), learning, etc. but in the end, it has to be fun.

Like may of you, I have regular automated Google searches for certain topics.  One of them has to do with clean energy.  I have had this search active for a while, so I only expect new stuff.  On Sunday, though, it turned up an interesting blog post by Brad Bradshaw on the subject of predicting peak oil from 2008.  Why would a 2008 post come up now? 

As if that was not enough, Monday's WSJ had an article on a subject near to my thesis that I have posted on from time to time that global oil reserves are systematically overstated.  The WSJ headline is "Natural-Gas Data Overstated."

I continue to report from time to time on what I read out there on the subject of peak oil.  It is not entirely clear to me how peak oil affects the tech world.  But I continue to believe that the methodologies used for calculating oil reserves systematically overestimate the size of reserves.  Another seemingly undeniable force is the growing appetite for oil in India and China (soon to be followed by other developing countries, I imagine).  One conclusion that I draw from this is that we, as a society, are grossly underinvesting in alternative energy and renewable energy technologies.  See my post on investment in New England versus California.  BTW, I think that taken together (meaning California, Mass, Texas and anything else you want to add to it) investment levels are still way too low. 

I like Don Dodge’s predictions for 2010, it seems as if we are about to enter the brave new world of mobile everything (commerce, computing, internet whatever), but I have been trying to figure out what bugs me about the predictions. I finally got it. Here is the answer. I was recently reminded of the scene in Star Wars when R2D2 plugs into the Death Star and turns off the trash compactor. In the brave new world of the future interoperability will be seamless. Think about all the devices we have (and shortly will have: the Android, the new Apple "pad" is that is what it will be, mp3 players etc.). Think about all the services (Pandora, Twitter, GPS directions etc.). My prediction is that 2010 will be another year of technology chaos demonstrating that we are still in the infancy of the technological age.

First, don’t put too much store in sales advice from a lawyer. Second, here is something I have observed more than a few times, so it seems to me that it merits mention. Every now and then I run across what seems to me to be a very compelling story. The entrepreneur has identified a pain point in the market. They have a service or a product that seems to address it elegantly. The business thesis hangs together in a very coherent and compelling way. The company has talented, energetic and committed officers and employees. Investors buy into the thesis and invest. But, somehow, for some reason after several years of trying the business is just not developing. 

I am just the lawyer. I don’t know what the problem is, but I have seen the situation before and I recognize the symptoms. Everyone involved is engaged in a collective delusion. They are all ignoring (perhaps they really don’t see it) an important fact. The emperor has no clothes. 

If you find yourself doing the same thing over and over again and getting the same results and you continue to be convinced that your strategy and tactics are destined to succeed – you just can’t explain why they haven’t, consider whether or not you and your team have not fallen into a collective delusion. You need to find reality in order to address it effectively. 

Your widget is perfect. It is the best thing on the market. The competition, while well established, is lumbering and slow and expensive. But no one is buying. You need to go back over each of the facts and examine each one. Somewhere you are missing something. Here is my bet. The most basic premise is where you have gone wrong. In this widget example, I began with “your widget is perfect.” I am willing to bet that it isn’t. If there is some premise that can’t be examined, that is truly an article of faith. If the CEO keeps saying our widget is faster, and no one ever challenges that assumption, it is almost certain that that is where the problem lies. 

It may be that the problem can’t be fixed, but you might as well know it. If it can’t be fixed and the problem is fatal, at least you can move on. If it can be fixed, then you at least have a shot at it if you can identify the problem. The real world gives you feedback. What you think is nice, but it better not fly in the face of what is actually happening or you may find that you are parading down the street with no clothes.

Last Friday we (my wife, son and I) went to see a play "The Overwhelming" about the Rwandan genocide. This post is not going to be a review of the play – which turned out to be quite good after a very slow first act. In many ways the play is about the collision between an American academic and his family (who assume the rule of law is universal) and various Rwandan’s who keep saying things like "do you know where you are?" In the end, this clash leads to some dark and brutal consequences.

I have spent a lot of time in Africa dating back to my Peace Corps days in Mali, to three business trips to Lagos, Nigeria (when I went in and out of Murtala Mohamed airport six times when it was one of the airports about which there were warnings in all other airports), the surface crossing of the Sahara desert and a recent visit to Uganda and Rwanda. When you add it all up, it is a lot of time, and Nigeria was (when I visited at least) a pretty dangerous place. Anyway, in all the time I spent in many African countries, I never felt threatened. And, nothing bad ever happened. Having said that, we visited Thailand a couple of years ago. We had a great trip. When we got home, we learned that the airport had been bombed by extremists just a few hours after we had left. Crazy stuff can happen anywhere.

Switching gears for a moment, NPR recently had a piece on what is the greatest invention? The Polio vaccine? Electricity? The internal combustion engine? The Flush toilet? My vote is not an invention at all, in the sense that it is not tangible. My choice is the rule of law. The rule of law enables everything.

One of my pet peeves has been the lack of understanding that people have around electronic records.  I have written prior blogs about the need to be careful about what goes into email and the like.  In particular, I have tried to note these issues whenever I see them on the front page of  the paper (yes, I still read the Journal in hard copy).  Well, on Monday there was an article about Congress calling for an investigation of Countrywide's VIP program after discovering that phone recordings had been destroyed.  I have no clue about the circumstances of the destruction, and it could easily be completely innocent. 

According to the WSJ,

A Bank of America spokesman said in a written statement that the VIP recordings "were retained only for a limited time or until avialable recording space was utilized. Due to these limitations, we have no recordings from before July 2008 when Bank of American assumed management of Countrywide and terminated the VIP program."

Perhaps Bof A was following some regular corporate policy and the destruction of the recordings had nothing to do with the contents. 

What I really want to get to (for which this article in the WSJ is just the jumping off point)  is that destruction of records (electronic or not) can be a really bad idea.  Lawyers have a word for destruction of evidence "Spoliation."  The link is to Dictionary.com, but here is how Black's Law Dictionary defines spoliation:

The destruction of evidence.  It constitutes and obstruction of justice.  The destruction, or the significant or meaningful alteration of a document or instrument.

There is also a wonderful latin phrase "contra spoliatorem onmia praesumuntur".  A rough translation of this phrase is that all presumptions go against the destroyer of evidence.   Not only does it look bad, a judge and a jury and a prosecutor are likely to assume it is bad.

Sometimes it is worth being reminded of the obvious.  I just read Fred Wilson's blog about not planning too much.  It reminded me that I recently heard some words to live by.  "You need to know what your customer wants, not what you think he or she should want."

This will be my last post taken from material in Saturday’s Times, I promise. Charles M. Blow had a fun op ed piece titled "The Prurient Trap." His basic point had to do with the hypocrisy of conservative who deliver the family values sermon and find themselves chasing young women in Argentina. But in the course of the article, he sites some statistics on divorce rates, teenage birthrates and subscriptions to online porn. States won by McCain dominate the wrong end of each of these charts. Having said that, Massachusetts has really low divorce rates and really low teenage birthrates, but is somewhere in the middle of the pack on subscriptions to online porn sites. What gives? Maybe it is a highly educated tech savvy state. The highly educated helps keep divorce and teenage birthrates down (it also seems to make for liberal politics) and the tech savvy part perhaps leads people to find their porn on line (as opposed to in other forms).

This is an observation that I have made before in this blog, but I was a little surprised to see similar thoughts appear in an analysis piece by Joe Nocera in the New York Times on Saturday under the title "S.E.C. Chased Small Fry While Big Fish, Madoff, Swam Free." The article makes a pretty compelling case that there is an institutional bias in favor of chasing the small fry over the big fish. Among the points that Nocera makes is that the SEC enforcement people are judged on cases they bring and win.. As Nocera points out, the small fish tend to be easier marks. They settle and pay the fines, even if they may not be guilty. In part this has to with the fact that the small fry may not have the resources to fight. In Richard Kwak’s case (the case Nocera outlines in his article), Richard Kwak was essentially bankrupted by his fight against the SEC (which he won in the end).

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To state the obvious: exits are affected by the state of the market. The state of the market is affected by investor confidence. Investor confidence is affected by fraud in the market. The SEC is charged with overseeing the public markets for securities. As a result their activities have a profound effect on our industry. I have written about this sort of thing before, but sometimes you have to wonder what the SEC thinks it is doing. I recently witnessed a colloquy between two SEC attorneys, a hazard of my end of the profession, and I thought it worthy of reproducing because of the evident frustration of the lawyers.

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I keep looking for good news and keep not finding it. One of my clients noted her frustration the other day. She has been trying to make a sale to a really big company. She felt she was making good progress, even closing in on the actual commitment, then she calls the VP she has been working with for many months only to find out that the fellow had been let go. Now she has to a start largely from scratch with someone new who is unfamiliar to her and who is unfamiliar to the project. I don’t think there is anything an entrepreneur can do about this situation. This sort of thing is just one more source of sand in the gears for the economy. One harbinger of change (that things have stopped getting worse) might be when you go for a couple of weeks without learning of some new second order problem you hadn’t focused on. 

Listen carefully when a lawyer says, “You’ve got an argument” or “we could argue that …” followed by some convoluted reasoning. This phrase could mean that your position is a loser but that he might be able to stir up some controversy and make life a little difficult for the other side. It may also mean that your lawyer hasn’t got the stones to give you the bad news. Lawyers know that clients have a tendency to take comfort in these words. To clients these words seem to translate into something like “if we say this the other side will capitulate.” But, your lawyer takes comfort in the fact that he has not given you any assurance of the outcome. What this phrase specifically does not mean is that the argument has any merit. In fact, I think it is most used when the argument has no merit. I am overstating the case, of course, but often what happens is a mutual self-deception. 

A while back, I had the job of giving a client the bad news that a contract simply did not provide for the license of certain software products. My client pointed to some language in the contract and said “but we could argue that …” and followed it with an interpretation of some words that defied common sense. Well, the other side can read the contract too, and they can find something they can argue too. This client proceeded to argue with his licensor and got nowhere. From this he concluded that the licensor was either a fool or a knave, since his argument should have worked on any sensible person. But, what he did not end up with was the license. Would he have done better without the self-deception? Who knows? But you have to believe that on average, you are better off understanding the real situation than placing your hopes on some half baked theory.

An argument is a fine thing, but don’t count on defeating your opponent with some Byzantine argument. In any negotiation or litigation, the best ally you can have is good commercial economics. Failing that a simple, easy to state, common sense reason that a thirteen year old could understand will hold you in good stead. 

A friend suggested that I comment on a post Confessions of a Pack Rat (aka My Document Retention Policy).  Which I did, but then thought to recreate the comment as a post here because, retention (at least of emails) is a theme I come back to from time to time on my blog. 

So, here goes: like diamonds, email (and all electronic copies of documents, letters, etc.) are forever. Unlike diamonds, everyone can afford to have them and keep them – and everyone does. If you really delete an email or an old draft of something, guess who will have it for sure: the guy suing you (or defending your suit). 

We had a case in our office in which our client got a multimillion dollar settlement from a fortune 100 company in part because our client kept everything electronic and the defendant had a “retention” policy that, in those days, caused them to delete old email. The defendant made assertions in various legal filings based on the statements of their employees, which turned out to be completely false when the old emails were produced (by my client). Defendant’s credibility was, of course, completely undermined.

See also my posting Email is Forever for a similar story about instant messaging.

Having said that, not everything is electronic. Careful attorneys often purge their paper files after a transaction for a variety of reasons. One reason is that saving all those forests of paper is expensive (Iron Mountain loves it, of course). Another reason is the one that several comments pointed to: in a litigation, some very bright graduate of some elite law school will doubtless be looking for the worst possible interpretation of everything. 

A story that I heard some time ago involves Larry Sonsini, one of the name partners in the venerable Silicon Valley law firm of Wilson, Sonsini, Goodrich & Rosati. As the story went, he was being deposed in connection with a securities fraud case. Plaintiff’s counsel pointed to a draft document that had the letters “BS” written in Mr. Sonsini’s handwriting in the margin and asked pointedly what that could possibly have meant. Sonsini, is said to have paused, looked at the document, and responded, “Bob Short to review.”

Having said all this, I keep everything, including my handwritten notes. For better or worse, I need these things (including my notes) to remember accurately decisions, analysis and facts. Like Fred Wilson (author of Confessions of a Pack Rat), I have been deposed, been a witness and had to produce documents (including my handwritten notes). I have never regretted it, and in two cases, my handwritten notes (made contemporaneously with events then long gone) proved critical to my client’s case.

Back to email for a moment, emails seem to be a place where people will write all sorts of things that they would never say or write in a more formal letter. Be careful what you write and to whom you send it.  Also be aware that whatever you send can be forwarded with ease (or with negligence). Finally, be aware of blind copies. You do not know who is getting the same email you just received.

I am going to deviate from my usual practice of limiting my blog posts to subjects related to start ups, venture capital and the like to comment on the Madoff scandal. This particular post reflects my views and my views alone. Specifically, it does not represent the point of view of any of my partners or of Foley Hoag LLP. I am solely responsible for this content. 

For all of my years as a practicing attorney I have represented small public companies before the SEC in connection with their ’34 Act compliance as well as in financing activities (including all sorts of PIPE transactions) and in M&A activity. It has long been my perception that the SEC has an institutional bias against small so-called mini-cap or micro-cap companies. The SEC will spend enormous resources to review and comment on filings from these companies. Small transactions will be hung up at the SEC for months and months because the SEC has a policy (or may be developing a policy) that somehow touches on what these companies are trying to do. Huge costs will be run up trying to comply with SEC comments. It becomes hard to escape the feeling that the SEC uses its regulatory muscle to try to regulate these companies out of the public market. In my experience, my clients have always been willing to make all disclosures – even to the point of disclosing matters that are patently not material to make certain that the public gets what it needs. Nevertheless, I have often had the feeling that the SEC starts from the proposition that all small companies are really nothing more than fraudulent schemes aimed a bilking investors.

From my limited vantage point, fraud seems to occur randomly in the business world. It is just as likely to happen at Enron as at some microcap company. But, one Enron, one Madoff, one Adelphia dwarfs one micro-cap scandal. The notion that the SEC gave a big time industry insider like Madoff a pass is beyond outrageous. It reflects a fundamental prejudice at the SEC in favor of the big boys and insiders and against small players. The SEC needs to re-examine its priorities. Fraud needs to be pursued at all levels and limited resources need to be allocated to achieve the best result for the investment community as a whole, and “small is bad” just should not be acceptable.