Qualified Small Business Stock (QSBS) is a critical topic that most founders are unaware of.
Instead of writing my own blog post about what it is and why it is important, I asked ChatGPT:
describe what qualified small business stock and why it is financially beneficial to people that have equity that qualifies as qsbs
And the answer:
Qualified small business stock (QSBS) is a type of investment in the equity of a small business that offers certain tax benefits to the investor. QSBS is generally defined as stock in a domestic C corporation that is acquired at its original issue, directly or through an underwriter, and that satisfies certain requirements regarding the corporation’s active business, gross assets, and length of time the stock is held.
One of the main financial benefits of QSBS is that it allows investors to exclude a portion of the gain from the sale of the stock from their taxable income. For example, if an investor buys QSBS at a cost of $100,000 and sells it later for $200,000, they may be able to exclude up to $100,000 of the gain from their taxable income. This can result in significant savings on taxes and make the investment more financially attractive.
Another potential benefit of QSBS is that it may qualify for a lower capital gains tax rate. Under certain circumstances, the gain from the sale of QSBS may be taxed at a maximum rate of 28% rather than the higher rates that apply to other types of capital gains. This can further reduce the tax burden on the investment and increase the potential return on the investment.
Overall, QSBS can be a financially beneficial investment for people who have equity that qualifies as QSBS, as it offers potential tax savings and may be eligible for a lower capital gains tax rate.
It missed an important point about how much tax exclusion you can benefit from so I followed up with:
What is the total amount of money an investor can exclude from the gain of the sale if the equity is treated as qualified small business stock?
And the answer:
The total amount of gain that an investor can exclude from the sale of qualified small business stock (QSBS) depends on several factors, including the amount of the gain, the length of time the stock was held, and the amount of the exclusion that was previously claimed on the stock.
Generally, an investor can exclude up to 50% of the gain from the sale of QSBS if the stock was held for more than five years. This means that if an investor buys QSBS at a cost of $100,000 and sells it later for $200,000, they may be able to exclude up to $100,000 of the gain from their taxable income.
However, the amount of the exclusion may be limited if the investor has previously claimed an exclusion on the same QSBS. In this case, the exclusion is limited to the greater of 10% of the stock’s adjusted basis (i.e., the cost of the stock plus any improvements made to it) or $10 million. For example, if an investor previously claimed an exclusion of $5 million on the same QSBS and the stock’s adjusted basis is $100,000, the exclusion would be limited to $10,000 (10% of the adjusted basis).
In summary, the amount of gain that can be excluded from the sale of QSBS depends on several factors and can vary depending on the specific circumstances of the investment.
Lastly, I needed an image for this post. So I asked Dall-e-2:
create an expressive oil painting of a dog in a suit, smiling, depicted as an explosion of a money flying all around them
So there are two really important and unrelated points here:
If you are a founder or early-stage employee, you should internalize QSBS and speak with your accountant about it.
It’s worth spending some time with OpenAI and ChatGPT. It’s wild and only took me 5 minutes to create this post.
Yes, I had $2 million dollars locked away on a crypto-hard wallet that I couldn’t access because of a forgotten password.
But let’s start from the beginning…
In 2013 I started to learn everything I could about the world of Bitcoin and cryptocurrency. It was clear that a new “internet of money” was being born.
I started reading, writing, buying, and experimenting with the world of Bitcoin and everything around it. I almost started a company with the premise of letting people more easily buy and sell Bitcoin. I’ll add that one to the woulda, coulda, shouda list.
As we now all know, a few years later the ecosystem started to pick up. More people were getting involved, including some of my friends.
One of those friends had been making a living as a professional poker player. Instead of only trading cards and chips on digital poker tables, he now also started to trade various cryptocurrencies on a number of exchanges.
I was however busy with my day job building startups and didn’t have time anymore to focus on the crypto world. But, I still wanted to get in early on some of the emerging, off-the-beaten-path technologies that most people hadn’t heard about yet.
So in 2018, my friend Jesse and I were chatting and decided we should make a larger, more concentrated bet on an alternative coin. I would transfer him the money and he would buy and hold the coins for us.
And that’s exactly what we did.
On January 18, 2018, I sent my friend 2 BTC, which at the time was about $12,500/BTC. And with my 2 BTC, and his 2 BTC, together, we bought about $50,000 of a different coin called Theta at about $0.21 per token. This seemed a bit crazy at the time since the logical, sensible part of our brains told us we were basically lighting money on fire.
This is what lighting money on fire looks like.
“Someone’s sitting in the shade today because someone planted a tree a long time ago” – Warren Buffet
That was my plan.
To buy and hold, and not look at it for a very long time.
A few weeks go by…
We get a notice from the exchange where we had purchased and been storing our Theta coins. The exchange was about to shut down because the Chinese government was putting them out of business. Apparently, the Chinese government was working to ensure they had much more control over Bitcoin and the ecosystem. If we didn’t pull our coins and tokens out of the exchange by a certain date, we’d lose it all. I guess that’s China for you.
So we had to move the coins. We asked…
“Should we keep them?”
We decided to keep them. HODL!
Jesse bought a Trezor One hardware wallet and moved the coins onto the device for safekeeping. A hardware wallet is sort of like a digital lockbox for cryptocurrency, where the private information is stored within a physical electronic device. It looks a bit like a USB stick. We managed to move our coins mere minutes before the exchange disappeared.
Life went on.
I forgot about the coins and really the rest of my crypto holdings for that matter and just got back to work on my business.
Prices crashed. It was a nuclear winter in crypto land.
My $25k was now probably worth a few pennies on the dollar and at that point in my life, I just didn’t want to deal with the emotional roller coaster of big swings in the crypto markets. I had enough on my mind with work and didn’t want to be distracted and stressed with these insane markets. I wanted to sell off all of my positions and just ignore the crypto world for a bit.
So I asked Jesse to transfer me my coins so I can sell them and be done with it.
“I can’t do that.”
I asked, “What do you mean you can’t do that? Just send them or sell them.”
And then he said something that would set us off on a wild adventure:
“I forgot the password!”
You see, this is remarkable for two reasons. First, Jesse remembers everything. He remembers all of our friend’s license plate numbers from high school. After all, he plays poker for a living playing 8 tables at a time, knowing the odds, and remembers how probably dozens of different players play the game. In fact, one of the first places we heard about Theta was from another poker player!
Secondly, if you guessed the password incorrectly too many times, the device self-destructs. I mean, it doesn’t actually blow up, but the entire contents erase and our coins would be lost forever! The good news however is if you forget the password, you can always restore the device using a recovery seed which is basically a 24-word passphrase. Jesse wrote this down on a piece of paper while originally setting up the Trezor, but it got thrown away by accident along the way.
We were screwed!
At this point, I was almost relieved. After all, the investment basically went to zero and in many ways, it made living with that shitty investment decision a little bit easier to stomach.
I forgot about the coins and went on with my life again.
The nuclear winter in crypto land was over. Prices started to go up again.
Our $50k was back to about half.
Prices went up again….back to $50k.
Now we figured we should really try to get this wallet open.
“Dan, you’re an electrical engineer. You can figure it out!” I should have paid more attention in class because there was no way I would figure this out. And even if I did, I had absolutely no time to even try.
At this point, I had convinced myself I would never see the money again so I ignored it.
Prices went up again!
At this point, we decided to get a bit more active to figure this out. Jesse started googling the earth to find people that could help.
We found engineers that allegedly hacked this wallet before, but they weren’t interested in helping.
We found a few engineers who seemed like they could pull it off but they either flaked, weren’t interested or ran into obstacles quickly. Some of those engineers were even engineering professors from my school.
Finally, we found some guys in Switzerland who claimed they had done this before. They seemed like they could actually pull it off. The problem now was that I needed to meet them in Paris at their secret lab and Europe was shut down due to COVID. For a few weeks, we went back and forth trying to figure out how we could rendezvous in Europe to pass off the wallet but the combination of the shutdown and not being able to physically go to the lab to watch them hack the wallet made the prospects of this working a bit grim.
Group chats with our friends were becoming ridiculous. I told Jesse if we couldn’t find a technical way to free the coins, we’d find a chemical way to free the coins. As in, we’d go away for a weekend and I’d feed him hallucinogens until he remembered the password.
We found another engineer in Portland. He was a part of a famous hacker group back in the day and testified on the Senate floor saying, “Yes, we can take down the internet in 30 minutes.” We had been exchanging emails to see if he could be our guy to figure this out and free the coins.
He bought some hardware and special devices, made a few calls to some friends in the hacking world, and off he went, trying to hack an exact make and model of our Trezor to prove he could do this.
Over the next few weeks, he went to work and would update us on his progress.
I said as soon as he could prove success, I’d book a ticket out the next day to come to meet him in person with the wallet. We also talked about the fact that if he could actually pull this off, he could offer these services to many more people like us that are locked out of their wallets. In addition, we agreed that we’d have to film this hack because one way or the other we would have to tell this story.
It would either be a triumphant story or a miserable and expensive story, but either way, we were going to document the whole thing.
And sure enough, I eventually get an email with something to the effect of…
“I did it!”
The next day, I drove to Jesse’s apartment, picked up the wallet, and booked my flight to Portland to meet the hacker, Joe Grand.
The rest they say is history…
After two days in Portland, spending a few hours in his lab performing the attack on the wallet, he freed the coins!
At the time the wallet was officially hacked and unlocked, the total value of the wallet was about $2.5 million dollars.
At the lowest point, it was about $20k. At the highest, it was just over $3 million.
Joe is now making his services available to anyone that is locked out of their wallets with a new company called offspec.io.
Did we sell the coins? Yes, we sold some.
The rest? We put on another Trezor and locked it away.
And that’s my story about how I had $2mm locked on a crypto wallet.
And you can see the whole thing go down in this video.
We’re unofficially past the “Happy New Year” stage of 2017; that new year smell has almost entirely worn off, people are back from their sunny vacations in the Caribbean, and many are hard at work.
A lot of enterprise tech trends have been predicted to establish themselves this year, but none is as buzzy as artificial intelligence. It has been on the horizon for some time, but 2017 is poised to be the first time that bots at work are natural parts of our everyday workflow.
Don’t be mistaken, AI has a ways to go, and could accelerate at an unpredictable pace as bots gather more data. But people’s hesitancy about committing to bots at work, and questions around the effectiveness of these tools, will gradually melt away.
With this theme in mind, let’s take a look at what some B2B leaders predict for the future of work in 2017:
Matthew King, Customer Engagement Consultant at Microsoft
“Artificial intelligence breakthroughs are occurring at a rate which will certainly result in significant swaths of both blue and white collar workers across the globe facing the risk of automation. Even professions like sales, which tout the importance of human-to-human connection, are facing the prospect of first being assisted by, and eventually completely replaced by machine intelligence. As a society we must fundamentally re-imagine what work means to us, what our purpose on this planet is, and how to provide for people in an increasingly stratified world. The gains of efficiency improvements mean greater profits for the owners of capital and greater poverty for those who lose their ability to trade labor and skills for wages. We owe it to ourselves to think through how we should adapt as individuals and as a society to the ascendance of hyper-efficient, hyper-intelligent machines.”
Dennis R. Mortensen, CEO and Founder of x.ai
“We will see less hype around virtual personal assistants in 2017, but also, and this is the important part, less stigma! People will begin to get a sense of the real world applications of intelligent agents and the AI that powers them. Given these agents will look and feel mundane compared to the AI’s and robots depicted by Hollywood, we’ll see fewer silly and cartoonish accounts of robots taking over the world and eliminating humanity.”
Ceci Stallsmith, Platform Marketing at Slack
“You’ll have a small army of bots to help you do your job. As businesses move from email to messaging, all of the software you use for work will connect with the most pervasive for-work messaging products. As every business and startup went mobile in 2011, bots are the next major trend. As Mailbox, Sunrise Calendar, and other mobile-first productivity apps rose up, there will be a trend in hot bot for-work companies rising up in 2017. The big question lies in how intelligent these little helpers need to be: do bots need to understand your every request? Will they be able to intelligently gather your needs, or will we be happy with their existence to fulfill a specific function? If intelligence is required for success, the major players—Google, Microsoft, IBM, and Facebook—have a significant advantage over smaller developers.”
Aaref Hilaly, Partner at Sequoia Capital
“It becomes normal to talk to computers at work. Natural language understanding catches up with image recognition. Home devices like Amazon Echo and Google Home train people on how they can interact. Application vendors start to build in voice and messaging interfaces into their products, leveraging research from Google, Microsoft and others.”
Andrew Berger, Head of Sales Development, Square
“Customers and buyers demand information at their fingertips, and technology is facilitating the speed of information. Collaboration across multiple teams, departments, offices, and organizations is much more efficient with streamlined communication tools, such as Slack, enabling rapid response and answers to customers. The ability to sync CRM data into these communication tools, with smart bots and agents facilitating the workflow in an automated fashion, ensures all stakeholders are aware of customer needs and provides a much-improved customer experience.”
Jake Schwartz, CEO and Co-Founder at General Assembly
“Just as with the telegraph, the telephone, the mainframe, the database, the fax machine, email, and the PDA, etc etc, there are always new technologies changing how we work. The deeper change is what that work will look like. The demand for people with skills in data, software development, UX, is growing at an accelerated rate YoY. This acceleration will continue as companies make their transition to the future, which will involve a constantly evolving set of trends around communication, automation, and the pace of change. In the year ahead we are seeing more companies face their own challenges around staffing these roles, and how to upskill their previous generations of workers. Here at GA, we’re trying to make an impact by enabling the sourcing and the training of this next generation of skilled talent.
There were more than 250,000 positions open last year for what are called hybrid technical roles. These jobs don’t only pay well – with annual salaries ranging from $65k-110k – but their required skillsets are actually trainable and do not require an advanced degree. Roles are growing in skillsets that don’t exist (or are just starting to) and there’s a limited talent pool from which to fill that seat. I think in the year ahead we’ll see challenges tied to that skills gap become a painfully obvious opportunity for non-degree programs to make an even larger impact. Here at GA, we’re trying to make an impact by training people to be the producers of the future. We’re working to create efficient programs that fill the need for people versus solely focusing on the need for jobs.”
Ray Carroll, VP Sales at Engagio
“In 2017, the industry will start to realize that Account Based Marketing is NOT a technology category, it’s a strategic business initiative. Just like demand gen and inbound marketing are ways of running your marketing machine, ABM is a way of running your revenue machine. And, just like demand gen, ABM breaks down into many categories – including account selection, account research, account-based analytics, account-based advertising, automated sales plays, and more. If you want to succeed in 2017, you must align your entire organization around this strategy, put the foundation in place with lead-to-account matching and account-based analytics, and focus on quality engagement with your target accounts.”
There will always be a fine line between AI that enhances our skill versus replaces us entirely, and unfortunately, some of us will wake up and find ourselves in the latter situation.
These questions will only begun to be answered in the year ahead, but in 2017 we will continue the march towards another step forward in automation and intelligent systems.
The device includes a stethoscope cut in half and microphones. Researchers say it measures blood pressure with 95 to 98 percent accuracy.
I’ve been thinking a lot lately about the convergence of mobile devices and consumer healthcare. I believe there are three changes happening that are creating a perfect storm for a new wave of mobile medical devices.
1. Standardized Mobile Operating Systems (OS)
Before android or iOS came along, engineers that wanted to build a mobile medical device had to develop the software and the hardware. There were no standard, mobile operating systems in place that made software development scalable for medical devices. Sure there was MS Windows, Linux and other OS in existence, but none of these worked really well for small, mobile hardware. Engineers were required to use Programable Micro Controllers (PICs) and related devices. With the advent of android and iOS, it is now possible to write software without having to worry about the underlying supporting architecture and hardware.
2. Wireless Connectivity
The healthcare industry is inundated with expenses and impossible budgets. This is largely due to high volumes of patient visits and patient readmissions. Many of these visits are for simple physician checkups in order to conduct things like blood pressure measurement or EKG measurement. The information obtained from these frequent tasks are required to make the physician smarter about the patient so that they can implement the right treatment. The combinations of measurement devices and smartphones would allow these simple tasks to be done in the home and relayed back to the physician wirelessly.
3. Consumer Adoption
According to Gartner, total smart phone sales in 2011 reached 472 million units and accounted for 31 percent of all mobile devices sales, up 58 percent from 2010.” It’s no secret that people everywhere are using smart phone devices. If they aren’t, they will be very soon as it’s only a matter of time. Since consumers already have possession of these mobile devices, they are already in a position to buy a third-party accessory. Just like you might buy an iPhone case or a portable speaker, owners of smart phones could just as easily buy blood pressure measurement units or other medical plug-ins. Furthermore, the costs of a mobile medical device would be significantly lower because the consumer already effectively paid for half of the device – the phone.
So I think this market will emerge, but I’m not sure how long it will take. To understand that, there are two big question marks in my mind that need to addressed. The first is whether or not consumers care enough about their health in order to make them proactively engaged with one of these devices. I do think this could be overcome with things like game mechanics. The second is whether or not there will be a favorable environment with regards to governmental regulations, although I do think we are heading in the right direction. The HITECH Act, part of the 2009 stimulus bill, states that doctors are eligible for $44,000 in subsidies if they deploy “meaningful use” of electronic health records (EHRs) – keyword there being “electronic.” So it’s clear that we are moving in the right direction. It’s just a matter of how long it will take before we get there. I don’t know when our phones will be our personal doctors, but I do know it will happen.
Our society celebrates the buzzy and bubbly – acquisitions, funding events, mergers, new hires. As entrepreneurs, most of the buzzy stories we read are rather useless. They serve no practical application to help grow our respective businesses. This is why great entrepreneurs get out in the field and engage in as many conversations as they can with those they respect. They want to hear firsthand how people have succeeded and how people have failed. They search for tried and true lessons so that they can apply the takeaways to their own ventures. And in this process entrepreneurs uncover key insights that may lead to a critical pivot in a business model or perhaps may lead to a simple validation of an already held mindset. From my vantage point, all of these little stories serve as an important backdrop for anyone looking to build a great business.
So here are three short stories from three up and coming New York City startups. Maybe you’ll uncover a gem of insight that will help transform your business or project.
“No Silver Bullets” by Aaron, CEO & Co-Founder of Tutorspree
The hardest lesson I’ve learned since co-founding Tutorspree is that there are no silver bullets – even when charting something as amazing as the future of one-on-one learning. It may seem a bit strange that I need that as a lesson when everything else I’ve ever done has required huge amounts of hard work. Intellectually, I had no expectation that a startup would be any different. But emotionally, entrepreneurs are continually confronted with stories in the popular press full of the one huge a-ha innovation/decision/partnership that “made” a company. While I know that those may be possible in extreme edge cases, that they’re nowhere near the norm, and they create an irrational expectation that one is just around the corner.
The truth is that start ups are hard, they’re a slog, they’re a huge amount of all consuming work – but that’s also why they’re amazing. You don’t find a single silver bullet – that’s the just the story people tell afterwards, you find a whole bunch of little steps and you figure out how to string them together until you have your success. And looking back, that’s a bigger achievement than a single fell swoop, which might be as much luck as anything else. That’s a lesson I take into work with me every day, and it is a critical piece of what makes this the life I want.
“Motivation by Inspiration” by Mike Dirolf, CEO of Fiesta
For me, motivation has been the principle benefit of working from a co-working space in New York City; collaboration is a distant second. It’s great to have smart people around to ask for help and feedback, but it’s far more important to see how hard those people are working and to be inspired to keep up. At almost all hours of the day the space is filled with people working as hard as they can to turn their fledgling companies into successful businesses. It’s impossible to walk into the place and not feel energized.
A little over a year ago I set out on my own and was ostensibly working from my apartment. The reality was that I had a lot of trouble staying focused. About a month later I moved into a co-working space; since then staying motivated hasn’t been a problem. Now that Fiesta is growing and I’ve brought on a co-founder that external motivation might be less essential, but I’m convinced we never would’ve gotten this far without it.
“Colloboration” by David Reich, CEO & Founder of Assured Labor (Disclosure: David Reich has no relation to Dan Reich
Our company, Assured Labor, is an unusual start-up. Started at the MIT MediaLab, Assured Labor connects employers in emerging markets with local sales, operations and administration candidates using cell phones and web technology.
We have a staff of 15 (including our outsourced engineering team) distributed between Mexico, Brazil, Pakistan, Nicaragua and of course, our headquarters in New York City at Dogpatch Labs. We’ve often been asked why we keep our headquarters in New York while all of our operations are based in the emerging markets. The answer is collaboration. Our New York base allows us to collaborate with the world’s best engineers and business innovators, ensuring we can outcompete our local competitors. I’ll give an example of each.
Engineering. While we have been happily working with an outsourced technology team based in Lahore, Pakistan, we keep our senior technologist and product manager in the US. This is for two reasons: first, this is where the worlds top talent is, and second, to provide our talent with the opportunity to collaborate with likeminded entrepreneurs. In our incubator there is no shame in asking questions or fear that collaborators (from other companies) will steal our idea. This ecosystem allows our engineers to learn from peers other and build better services faster.
Business Innovators. Over the past year dozens of startups have come through Dogpatch Labs, each with it unique ideas on how they’ll monetize their business. I’ve seen Groupon models, Ad based models, Subscription models, Freemium models, Co-marketing models, and a dozen more. Each month notable experts come through Dogpatch to meet us, ranging from the Scott Heiferman of Meetup.com to Eric Reis the author of “The Lean Startup”. But best of all I’ve had the opportunity to learn from my fellow founders while sharing my opinions on what I’ve seen working both internationally and in the US. As technology is only part of building a successful startup these opportunities to collaborate with business innovators is a tremendous advantage.
Beyond the opportunity to collaborate in engineering and business innovation the collaborative environment of our co-working space has provided us with introductions to investors, employees, interns and partners. We also lean on each other for energy and motivation, sharing in each other success. While few things can match the business learning that comes from sitting with your customers, few things can match the business building to be gained from collaboration with other entrepreneurs, in the trenches, working to change the world.
The world will never be the same. Our society used to build machines and parts, in factories and in assembly lines. Today, our society builds computer programs and data bases, on laptops and in many cases, from anywhere around the world. People and businesses are becoming more efficient. They are working smarter, not harder, because they are beginning to leverage the most valuable employee of all: Data.
Take for example the airline industry. Consider all those times you got bumped off of a flight, rescheduled, canceled, or offered money to take a different flight. We’ve all been there and it always happens for a reason. This reason is that airlines try to prevent the loss of business and in doing so, they look at dozens of consumer driven behaviors such as how long you travel for, how many weekend flights you take, how many return flights you take, how many flights you take during the week, if you are a frequent flier, and the list goes on. All of these individual data points are used to inform a business decision. The decision is objective. The decision is data driven.
But what happens when we can make decisions using even more data points? Much more data points? Literally, hundreds of thousands if not millions of data points, and did I mention, in real time?
Welcome to the Data Renaissance. Thanks to increasingly efficient and scalable technologies like solid state drives, mobile devices, and cloud computing, the possibilities of data analysis are endless. I mean, just think about how much time we either spend online or connected to a mobile device. This has tremendous implications from travel, health and fitness, to finance, education, and media and the best part is, we haven’t even scratched the surface.
Like I said before, the implications here are huge. Many companies recognize the need to have these comprehensive data sets while having ways of analyzing that data. The digital media and online advertising industry in particular are both in a unique place since their very foundations are dependent upon these high growth technologies; digital devices and the Internet. In this space, companies are racing to a holy grail of advertising where they can leverage millions of individual consumer behaviors to inform brand engagement opportunities and purchasing decisions. Unlike the airline industry, online advertisers can leverage millions of data points instead of those “dozen,” and if done correctly, the consumer experience will be better than it’s ever been before. Everything will matter. Everything will be relevant. We will all become more enlightened and informed to things that interest the most because these new technologies are launching us into the very early, but still uncharted, data renaissance.
(Disclosure: The post can also be found at Lotame Learnings. Lotame is my current employer)
With the economy declining, one thing is certain: Innovation will lead to good products and services, and good products and services will lead to revenue. This could not be more true in the technology world.
It doesn’t matter what you are doing, as long as you continue to innovate and prove value in a market (good or bad), you can and will succeed.
This is a great presentation that outlines the harsh reality of our current economy as it relates to technology. Financials meet Tech. Great stuff.
In reality, this description somewhat defines the nature of a social networking sites. If you look at social networking sites today, users are able to participate in 3 ways, all of which contribute to the generative nature of a social network: Users are able to:
Generate and consume bi-directional content (messaging, statuses)
Generate and consume multi-directional content (groups, discussion boards, forums)
These three methods of participation allow the internet and social networking sites to grow at the staggering rate they are today. However, as these sites grow, keeping the content organized so that it remains relevant and meaningful to the user, becomes increasingly difficult. This issue is more prominent in the third method, as users are able to impact the entire network in a single instance.
Take for example the Groups feature. A single user can create a group made available to the entire network. That’s fine. But what happens when multiple users create the same group? An overlap occurs, and what should have been a single meaningful group, now becomes one group of many just like it.
Today, I joined my University of Wisconsin – Madison group as I am a recent alumni. There were about 3-4 identical groups? Do I join them all? The same scenario applied to many of the groups I wanted to join.
The generative nature of social networks allow for more noise, and enables users to disrupt the very social graph they create, making the networks more complex and less meaningful. Other people recognize the growing occurrence of this noise, and ironically enough, have used the same generative nature of social networks to maintain strong connections, content, and a healthy social graph (see Triiibes).
About six weeks ago, I joined Seth Godin’s social network called Triiibes (which he created using a white-box social network: Ning). The network was only made available to those that made an early purchase for his new book. As a result, the content and communication in the network is much stronger and meaningful then I’ve seen on any other network.
As social networks grow, they must look to sites like Wikipedia for guidance. They must learn how to keep the network connected using only meaningful and unique data points.
(Jonathan Zittrain’s book is a good read for anyone interested in technology and communications, and their inevitable effects on society)
The plain reality is that our civilization is experiencing harsh consequences directly resulting from our own innovations. The most highly debated and discusses innovation being automobiles and oil.
But, when you look at how oil has effected the socioeconomics of almost every culture worldwide, you would immediately understand how it is going to take a lot more then alternative energy to fix the oil problem. Because within the oil problem, there exist an entire set of other connected issue, from technology, to economy, and even religion. Being able to solve a problem, that addresses all connected problems, is extremely difficult. Doing this on an international scale is much harder, and executing the solution is near impossible.