mathoda.com

Saturday was a big day for Microsoft and Yahoo, with Microsoft CEO Steve Ballmer offering about $33 a share for Yahoo, and Yahoo CEO Jerry Yang stating that the Yahoo board had concluded that undervalued Yahoo by about $4 a share. Microsoft decided to walk away.

A few hours earlier, about 1,700 miles away, Sue Decker, Chief Financial Officer of Yahoo, and Bill Gates, Chairman of Microsoft, who are both on the board of Warren Buffett’s Berkshire Hathaway, happened to be meeting in front of 30,000 people attending Berkshire Hathaway’s annual meeting. Given the momentous meeting between Ballmer and Yang that was to happen later in the day, I kind of wondered what they said to each other. Now I’ve found out:

Sue Decker: Should I kiss you hello? Or will people think we’re getting married?
Bill Gates: Don’t!
[stands up swiftly and shakes her hand]

According to Sue Decker, at the time she spoke to Bill Gates she thought Steve Ballmer would accept Yahoo’s higher asking price, and was surprised they didn’t. Here’s Sue Decker stating all of this and describing in insightful detail Yahoo’s past, present and future:

(http://edcorner.stanford.edu/authorMaterialInfo.html?mid=1975)

In the United States the process of incorporating a company is needlessly difficult. Entrepreneurs get to make a bewildering choice between a sole proprietorship, a general partnership, a limited partnership, a limited liability partnership, a c-corporation, an s-corporation, a limited liability company, and a host of other choices.

Each type of legal entity has different attributes and requires a multitude of different forms and procedures. Whether you can choose one of these entities is based on some strange and unusual criteria you must meet, which often can be cleverly circumvented by the proper paperwork (for example, although an s-corporation is limited to 100 shareholders, those shareholders can be companies or trusts themselves, allowing you to indirectly expand the number of owners).  Each of these entities gets treated differently by the taxation system on the federal, state and local level, and on an income and payroll level.

Google returns 39 million documents for the word “incorporate” but do any of them cleanly and simply explain how to go about it? The process is so complex and the source material for how these rules get decided is so dispersed across different federal and state agencies that the advice given is often wrong.  The advice lots of lawyers give can be wrong too.  I know, I’m a former large firm lawyer, and I’ve seen people misunderstand the consequences of certain choices.

Incorporation is so complex that various different services of highly different levels of quality have sprung up to tackle it. These vary from $50 incorporation services that often offer poor explanations of the consequences of different incorporation choices to $3000 services at large law firms.  The complexity of the incorporation system is really only to the advantage of the advisors.

Hernando de Soto has explained that for a country to unleash its capital and generate wealth it needs to remove the barriers to entrepreneurs seeking to pool and use capital (see my review of his book).  Muhammad Yunus has explained and demonstrated (wikipedia) even those in great poverty are entrepreneurs, if only they are given access to the opportunity.  It is past time for the incorporation process to be reformed.  Even an incorporation process that costs $100 bars the entry of many people who would like to start their own company (and in California incorporation carries government and tax fees of at least $900, not including advisor’s fees).

How should reform be implemented? Some principles to ponder:

• There should be a single federal website (company.gov) you go to to start a company in any of the 50 states or on a federal level.
• The website should give you a checklist of attributes you would like your company to have.  Check whether it is a nonprofit, for profit, a social business, limited liability, pass through taxation, etc.
• Each attribute you choose should clearly list the prerequisites and effects (pros and cons) of choosing it.
• Regardless of what attributes you choose for your company, there should be a single form you fill out to file taxes for the company.  This form should be the same across all companies.
• Servicing a lawsuit against a company should be as simple as uploading a claim on the federal website.  Companies, the press and the public would easily and freely be able to find out about new claims.
• States should have the freedom to add new attributes to the federal website for companies incorporated in their state, so that innovation in corporate forms is not curtailed.
• Incorporating on the federal website should automatically create your unique taxpayer identification number, and potentially provide further plain language information on how to start and fund your business.

Complexity in the incorporation processes is similar to complexity in the taxation process, creating unfair advantages for those who can afford the best advice. Refining the incorporation process could be a stepping stone to tackling reform of the tax system.

Google’s mission is to organize the world’s information and make it universally accessible and useful. Edufire.com founder Jon Bischke asks a great question: How close is Google to attaining their mission?

There appear to be three components to Google’s mission: (1) getting access to all of the world’s information, (2) organizing the world’s information in a useful way, and (3) making sure everyone can access the information.

How much of the world’s information does Google access presently and how can this be expected to change in the future? Google faces a number of problems in getting access to the world’s information. These challenges vary based on where the information is stored (in the Internet cloud, on a computer, or generated in real life but not stored), the privacy of the information (public, private, secret), the legal status of the information (public domain, copyright but shareable, copyright but illegal to share), and the type of media (text, audio, video).

According to a paper on Google’s storage system (pdf), as of November of 2006 Google stored approximately 850 terabytes of information for its search crawler, 70.5 terabytes of information for its maps software, 4 terabytes of information in terms of what users search history is, 2 terabytes in Google Base, and 9 terabytes in Google’s Orkut. This sounds like alot, but as of today, the Internet is 3,000 to 5,000 petabytes of Internet traffic (with about 3 gigabytes of that data being monthly American usage) (see MINTS survey). Even accounting for the discrepancy between 2006 and 2008, and for traffic generated versus actual content of websites, that’s a more than 3,000 fold gap.

One significant problem Google faces with the Internet are that there are significant parts of the Internet that it is prevented from accessing. For example, Google is not allowed by Facebook to crawl most of the information on Facebook’s pages. Google doesn’t know your click history on Yahoo’s websites. Also, alot of our usage of the Internet isn’t actually captured in the Internet very well. Patterns of mouse movements and web page navigation, for example. Furthermore, as Jon Bischke points out, Google is also not very good at indexing audio and video files (although they certainly are working on such problems; see NYTimes on Google’s new image search).

To Google’s benefit, the utility of the Internet keeps pulling more and more information into it. Yet there is a tremendous amount of information that is generated every moment that is on only personal computers or mobile devices, and that amount of information is dwarfed by the information that is not on any computer. While these challenges can be tackled with new tools (like Google’s book scanner, or Google desktop search, or a Google backup service for your computer), Google is far from having access to all of the world’s information. There’s plenty of information companies generate each day that they do not put where Google’s tools can reach the information, from oil company geological data to a consumer products company’s internal documents. For Google the solution likely lies in helping create new tools to capture (life recorders) and manipulate (personal computer software, Google enterprise search) that information, even if the information is never put into Google’s cloud infrastructure.

Will Google be the place people go to find the world’s information organized in a useful way?

The second problem that Google faces is that no matter how useful it is in creating easy to use methods to organize information, there are new ways of organizing information that Google won’t control (Facebook, Friendfeed, etc.). To some extent Google is trying to route around this problem by encouraging software developers to create programs that interface easily with Google’s systems (Google Apps Engine) but such a solution seems limited at best. Like Apple, Google can try to create powerful interfaces that have the best utility for users, but they will be competing against the whole world, including their own former employees. They will never have the best system for accessing all information.

Can everyone access Google’s services?

The third problem Google has is that as ubiquitous as it is, and the Internet allows it to be, Google is not the most commonly used search system everywhere. Google has taken a number of steps to make sure it is easily accessible, from placing their search box wherever they can (including on Dell computers, the Firefox web browser, and the iPhone), to creating their own cell phone software (Android). Although much of the world is not on the Internet yet, technological development proceeds, wireless technology is proliferating across the developing world, and Google may have a shot at being the mobile device of choice in the developing world. The challenge for Google will be to create the best tools, both on the Internet and off it, both connected to Google’s overall architecture and stand alone so people can maintain their privacy, in a world of consistently expanding choice.

For all of the utility that Google provides to people every day, their mission statement is beyond a stretch goal. They are far from achieving it, and likely never will. Perhaps the economics of storage and access mean that it’s not worth storing certain kinds of information at all. Yet it is great that Google has such an audacious goal. Without trying to solve significant problems, no great accomplishments would ever be made. Clearly organizing and making useful even a small portion of the information generated by the world can be fantastically worthwhile and rewarding.