Business Ideas IV: Follow My Diet

Idea: Follow My Diet – Help users follow their diet’s guidelines when eating out

MVP: Eating within a diet’s guidelines is challenging for most, and is further complicated when eating out at restaurants. FMD solves this problem by detecting when a user is in a recognized restaurant, and showing only those menu options that meet their diet’s rules (the app would also show how to custom order at restaurants to stay within the diet). At launch the top 100 restaurant chains in America would be supported, representing the majority of all American restaurants – crowdsourcing additional restaurants and menu items should enable coverage to expand quickly from there. FMD will also enable the tracking and optimization of a user’s diet over the course of time – fall off track and the app will let you know what sorts of food choices would put you back on track for the rest of the day or week.

Market:

Roughly 15% of all Americans (45m people) are trying to follow a particular diet at any given time, with total spending in the diet and weight-loss industry exceeding
$33B last year. FMD could market the app toward existing diet providers in the space, as a management tool for their clients. FMD could also find a market in the management
of diabetes and other diseases where diet is an integral part of managing a long-term chronic disease.

With a large potential user b2c user base, freemium or advertising-based business models might make the most sense for FMD – but the possibility of a disease-management oriented approach remains open as well.

 

Idea Score (0-10 scale, up to 2 points per question): 4.5 points

(Overall this idea scored relatively poorly – I think pivoting it toward the health management space, perhaps diabetes or other food-related disease management, could strengthen the business case substantially)

Feasibility of MVP / Market Entry: 1

A substantial amount of restaurant menu data needs to be gathered and maintained in order to enable the app to function – but most of this is readily available and can be parsed online. With major restaurant chains commanding a huge market share in the restaurant industry, it should be possible to gather this data pre-launch in order to enable a functional product at launch.

Revenue Market Size or Eyeballs: 1

While the market size is large (as discussed above), advertising-supported products need to gain substantial scale in order to support a meaningful revenue stream. Since FMD is initially focused on helping dieters eat out, restaurants may be interested in sponsoring the app in order to drive traffic.

In a Growing Market? 1

The market for weight-loss and diet solutions is well established, and on the whole can no longer grow faster than single-digit growth rates. But the market for apps
that help manage diet-related diseases continues to grow rapidly, providing a strong potential growth niche.

Difficult, Barriers to Entry, and Competition 0.5

Numerous competitors exist in the diet app space, and apps even exist to find healthy restaurant options – but none attempt to analyze the mass market restaurant space. This is the opportunity for FMD – fast casual and similar restaurants can be hard to navigate for dieters, but it seems that there are no apps that attempt to solve this menu navigation process in a comprehensive way.

Riding Hype or a Trend? 1

Digital health apps, fitness trackers, and similar are a fast growing space. While diet-related apps operate at the edge of this space, the relationship may provide some halo for a business like FMD.

Business Ideas III: HalfTimer

Idea: HalfTimer – Link employed developers with spare capacity to half-time positions

The economy is going full steam. The number of job openings is at an all time high [1]. Technology positions are particularly in demand, with hundreds of thousands of developer positions unfilled nationwide.

MVP: Halftimer.com places developers interested in long-term part time employment with companies looking for experienced development talent. We have found that experienced developers are willing to lower their hourly rates by up to 40% in order to secure a long term contract that is in addition to their full time job. This differential enables savings for companies that work with HalfTimer – a substantial competitive advantage in the staffing business. The initial MVP need not involve more than outreach to employers and developers via LinkedIn, to staff the first several candidates and prove the model.

Market: 5M full time technology professionals

Halftimer.com builds on a concept successfully used by my other ventures to tap an underutilized resource: experienced, full-time employed developers. Many developers, particularly at large corporations, are not fully utilized whether in terms of mental capacity or even time (this documentary details the situation at length). There are almost 5m individuals employed in development-related positions in the US today – if even 10% have excess capacity, this represents a pool of 500,000 potential resources.

Scoring (0-10 scale, up to 2 points per question): 6 points

1. Feasibility of MVP / Market Entry: 1.5 points

The HalfTimer concept exploits an inefficiency: most employers historically won’t buy limited hours for professional work. On the developer side, developers looking for additional freelance work find it difficult to consistently find small projects that fit around their day jobs. HalfTimer attempts to solve this problem, and market entry is straightforward as this is just a new spin on existing staffing concepts.

2. Revenue Market Size or Eyeballs: 1.5 points

500,000 potential HalfTimers, with net revenue per resource at $15,000 = $7.5B/yr total addressable market. Put another way, staffing ~100 HalfTimers would generate 1.5M in net revenue (against roughly $6.5M in gross revenue), enough to run a profitable small startup. The crucial question: cost of acquisition of both employers and employees.

3. In a Growing Market? 2 points

The technology employment market continues rapid growth, and the core constraint remains supply – which is precisely the problem HalfTimer seems to resolve.

4. Difficulty, Barriers to Entry, and Competition: 1 point

Many existing players in the staffing space could potentially attack this idea, and technically there are no real barriers to entry. Gigster, Gun.io, TopTal, and FlexTeam are startups attempting to ease companies’ ability to find freelance talent – these are similar but not identical to the HalfTimer concept (startup competition bolsters the strength of the idea, as it confirms an idea is worth exploring).

5. Riding Hype or a Trend? 0 points

The gig economy has grown substantially, and HalfTimer represents an evolution halfway between freelance and traditional full time employment. But it’s not clear that concepts in this space have much mind-share at the moment.

[1] The JOLTS survey shows the number of openings to be at an all time high, even when compared to 2000 and 2007 on a relative basis.

Note: I changed the first scoring question to address feasibility rather than whether the idea is “transformative”, which seems to be an imprecise concept at best.

Business Ideas I: Juggler, Never Let A Message Drop

Over the years I have kept a running spreadsheet of business ideas – my current business, HiddenLevers, was once a denizen of the same spreadsheet. But ideas have expiration dates [1], and my idea list has grown while my available time has shrunk. Over the next few months I will be sharing my ideas – I’d love to hear feedback and to inspire others to take the next step or gain inspiration. To provide structure, for each idea I’ll share my thoughts on what I thought the MVP might be, and a scoring of the idea using my own 10 point scale. Here goes!

Idea: Juggler – Never Let a Message Drop

Juggler would watch your firm’s emails, LinkedIn, and other messaging platforms to ensure that every inbound request is tracked and gets a response. The challenge today is that inbound business communication arrives across channels, and often comes in to many different personnel at your firm. Using AI, Juggler would determine which messages actually require response, and monitor these across all firm users, alerting managing when prospects and clients are awaiting response.

There are a ton of AI-based email solutions and also support email solutions from firms like Zendesk – but none of these seem to focus on this specific use case – firm-wide monitoring and taking a global look at all communications to a particular client.

MVP:

The MVP is simple – do the machine learning work to simply determine whether a particular email requires response. Emails asking questions clearly come to mind – but taking a true machine-learning approach, can we approach 99% accuracy here? This can then be married to a simple UI showing individuals (not messages) requiring attention – this sort of dashboard data could ideally then be integrated into Salesforce or other CRM platforms.

Scoring (0-10 scale): 6 points

1. Is it Transformative? 1 point

This is a fairly standard use of machine learning in 2018 – but the accuracy level required to make this viable is not. Also, many businesses still don’t take real advantage of CRM systems, and this idea automates some of the key value concepts from CRM for a small business (ie don’t let any leads slip through the cracks – I’m looking at you, contractors).

2. Revenue Market Size or Eyeballs: 1 point

This is a broad market – virtually every business could use this capability, so volume pricing of even a few dollars a month in a SaaS solution could scale quickly. Presuming that this capability is worth $5/user/month – the US market alone is greater than a billion per year.

3. In a Growing Market? 1 point

While email utilization is stable, multi-channel communication is growing – think chat, social media, VOIP (phone) – in theory the same approach could be applied to all of these.

4. Difficulty, Barriers to Entry, and Competition: 1 point

It may prove difficult to achieve the level of accuracy with machine-learning to inspire user confidence. If businesses suspect that even a few important messages might be slipping through, they will lose confidence and not use the product. Ideally the system ought to learn based on each user and firm’s data – posing a bit more complexity.

5. Riding Hype or a Trend? 2 points

AI and machine-learning are arguably THE trend of the moment, and while arguable overhyped – the Juggler idea definitely is riding this trend.

 

[1] James Watt’s steam engine was an excellent invention, and applying it to pumping water out of mines an excellent business idea – for the 1770s. The concept of hailing a car via smartphone was likewise a great idea – in 2009. It’s also possible to be too early – Yahoo Briefcase shutdown the same year DropBox was founded (although the latter was also a vastly superior implementation).

 

P.S. Investors out there, feel free to reach out if any ideas in this series are of interest – while my core business continues to grow rapidly, I’m open to discussions on how to seed fund and launch against many of these ideas.

The Great GOP Stimulus

The 2018 Trump stimulus exceeds the Obama-era stimulus package in size – will it pay off at the top of the economic cycle?

In 2010, when Barack Obama pushed for a stimulus package to help boost the American economy, it was decided by many in the GOP as wasteful spending. While there are more productive (infrastructure) and less productive¬†(tax rebates) ways to stimulate the economy, any form of spending (or tax cut) is a form of economic stimulus – this is a point agreed by both economists and businessmen like Warren Buffet. In fact, any form of budget deficit is a form of stimulus, as the government borrows (or prints) money that it doesn’t have to spend it into the economy.

The past year has seen the GOP enact not one but two stimulus measures – first a budget which ended Obama-era budget caps and boosted spending by roughly $150B per year, and second the tax cut which reduces taxes by another $150B per year. Taken together these measures are adding roughly $300B per year in stimulus to the US economy, potentially adding 1.5% to GDP for each of the next few years. Adding this stimulus to a core GDP growth rate of 2-2.5% might thus make 4% possible in the near term, with the bill due much later. The total federal (non-central bank) stimulus under President Trump’s first will hit at least $1.2 Trillion, exceeding President Obama’s 2010 stimulus package by $350 Billion [1], but this time at the top of the economic cycle!

What does this tell us? A few key takeaways emerge:
  • While most economists agree that it’s better to do fiscal stimulus when the economy is at or near recession, democracies don’t work this way, and there’s little correlation between economic need and actual governance.
  • When either party has complete control of government, they take the opportunity to spend on favored initiatives – in Trump’s case the DoD received most of the benefit, while in Obama’s case a variety of energy efficiency, infrastructure, and other initiatives were funded.
  • Budget deficits haven’t been a major issue over the last decade, but the tax cuts in particular will layer on top of Social Security and healthcare spending trends to drive debt-to-gdp well past 100% [2].
  • The best stabilizers in the US economy (unemployment insurance) are effectively automated – extending this sort of stabilizer to infrastructure spending (spending more on transportation funding etc as unemployment rises) would not just help buffer downturns – it would also get taxpayers a better deal.

Time will tell whether the GOP’s late-cycle spending will extend the business cycle substantially, but in the long run US policy will improve if more of these decisions are put on auto-pilot, removing the uncertainty of the political winds and the desire to spend at the least opportune times.

 

[1] The Obama administration stimulus plan cost around $850B in the end, including only the 2010 Stimulus measure and its implementation. Extension of Bush-era tax cuts and similar are not counted here, as these were extensions of existing measures, rather than new tax cuts or new spending as in the Trump administration’s recent moves.

[2] Many charts and news reports on the debt refer only to the publicly-held portion of the US debt, but when debts to the Social Security trust fund are included as in this data from the Federal Reserve, the US debt-to-gdp ratio already exceeds 100%.

A Better Estate Tax Reform

Replacing the estate tax with fair (no step-up) capital gains taxation at death could raise revenue for tax reform, and get rid of complex tax avoidance schemes

Among the many changes proposed among the Trump and GOP tax plans is the end of the estate tax – long a cherished Republican goal. Today’s Republicans decry the estate tax as a form of double taxation, while proponents (including Republican President Teddy Roosevelt) view it as a means to prevent an aristocracy formed through inter-generational wealth transfer.

What’s overlooked in the estate tax debate is that there’s a simple solution at hand, if we just look north, to Canada. This may be surprising to many Americans, but in the early 1970s Canada repealed its estate tax, replacing it with a simple application of capital gains taxes.

Canada applies its capital gains tax to an estate by assuming that the assets have been sold on the date of the owner’s death. Instead of taxing an estate in a special way, a consistent application of the existing capital gains tax serves to eliminate loopholes (in particular by eliminating step-up basis) and raise revenue while also substantially lowering the top rate of tax on estates. If transfers of ownership are treated as taxable for capital gains purposes, this eliminates the use of trusts and step-up basis as a multi-generational tax avoidance scheme, since tax would be paid on any change of ownership, including when assets are transferred into the trust.

Instead of exempting substantially all estates (as with current law), a capital gains tax-based approach could simply apply current capital gains brackets. The top rate of 23.8% would represent a reduction of over 50% from current rates. This change could generate substantial revenue to enable other aspects of tax reform – in the year 2000, when the estate tax exemption was $1.3M for a couple, it generated $25B per year in revenue (after substantial exclusions, credits, and deductions). With the economy today 90% larger than in 2000, it’s likely that a similar tax would generate nearly $50B today. Elimination of step-up basis could double this figure by adding another $50B – and $100B per year would pay for a huge chunk of current Republican plans on business tax reform, without penalizing most individuals.

Unfortunately, Republicans are fixated on ending the “death” tax and ramming through their current plan, while Democrats are interested in keeping top estate tax rates in place – when a broader capital-gains based approach would be fairer and would generate more revenue. Hardly the last time a good moderate approach is left to die in our polarized political climate!

The GOP Civil War on Taxes

Republicans love tax cuts, and both President Trump and Speaker Ryan have set their sights on lowering both personal and corporate income tax rates. But some Republicans also like controlling the budget deficit, while others favor defense spending or immigration control. How can the GOP cut tax rates, raise defense spending and immigration enforcement, and control the budget deficit? Here’s the heart of the problem: the federal government gets roughly $1.4T from income taxes, $440B from corporate income taxes and capital gains,¬†$1.1T from payroll taxes, and smaller amounts from other sources [1]. The tax plan under consideration will substantially cut the first two sources, without raising the other categories. How can such a tax plan be implemented without blowing up the budget deficit?

The evolving Trump-Ryan plan bridges this gap by introducing a new category: a border adjustment tax on imports. If all 2.7T in US imports were taxed at 20%, this could raise over $500B per year, providing a source for big tax cuts (though still not enough to pay for the tax cuts proposed). But there’s a problem with this idea – will 50 Republican senators vote for it?

The National Retail Federation has come out strongly against the plan, as have the Koch brothers, whose companies participate heavily in international trade. The Kochs are focusing their battle charge in 15 states where they may be able to sway Senate votes. Meanwhile, with retail giant WalMart strongly opposed, will the senators from Wal-Mart… err Arkansas be on board?

Hence we have a GOP civil war, pitting major exporters like Boeing, Oracle, and GE against retailers and other importers, and pitting nationalist Republicans versus traditional free-trade Republicans.

Trump and Ryan can only spare two votes in the Senate – will they be able to keep everyone on board? While the plan could stimulate US growth through tax cuts and favoring US production, it may also trigger a trade war that nullifies much of its benefit. There’s also the essential nature of the import tax – it is effectively introducing a new US consumption tax for the first time. Consumption taxes have been on the GOP radar for some time, as they tend to shift tax burdens down the income scale, and to reduce taxes on the wealthy. But is Trump’s base ready to pay an extra 40 cents at the pump every day, when many of them won’t see a huge tax cut [2]? Let the Republican tax civil war begin.

[1] The CBO provides a detailed breakdown of revenues here. I have combined corporate taxes and capital gains into one category, as both are taxes on capital.

[2] Roughly 50% of oil is still imported into the US, so a border adjustment tax could disproportionately increase oil prices.

Fix Healthcare.gov by turning it into Turbotax

Go to www.irs.gov. Look for the File Now button to file your taxes. You’ll find a list of options for filing, including software companies providing tax filing web sites and software. The IRS makes fillable online tax forms, and the instructions for completing them – so why not cut out the middleman and deliver a free irs.gov tax filing portal? Healthcare.gov is just the latest answer to that question – the government has a poor track record of delivering technology solutions, with IRS, FBI, and DHS systems as just a few examples of failure [1].

The department (Health & Human Services) managing the Obamacare rollout should take a lesson from the IRS: if you set the rules, and let the private market deliver the software, you can offload the expense and risk of technology development while still receiving the benefits of automation. Turbotax and its competitors receive not one dime from the IRS, and yet have taken a huge share in the multi-billion dollar tax filing preparation market. In addition, these companies have agreed to give their software away for free to low-income individuals, eliminating any criticism on fairness or access grounds.

Healthcare.gov could easily move to the same model, and here’s the crazy part – several companies, including eHealthInsurance.com and GetInsured.com, already have healthcare exchanges certified to sell ACA plans WITH subsidies! While any licensed insurance agent (including websites) can sell ACA-compliant policies, a handful have built out their technology to work with the federal government and provide access to subsidized ACA insurance. Rather than competing with these firms, Healthcare.gov could terminate many of its bloated IT contracts and simply list certified private exchanges on its site. These exchanges would provide a free shopping experience for consumers, and earn a commission on policies sold in a manner similar to the financing system for healthcare.gov itself [2]. Let HHS & CMS employees set and administer the rules of the ACA, and leave the exchanges themselves to the private sector – leading to benefits for taxpayers and health insurance shoppers alike.

[1] This paper found that 70% of government-run software projects failed to meet stated objectives. Government contract reform has become a hot topic as a result of healthcare.gov’s failure, but these problems have been going on for years.

[2] The ACA exchanges will charge insurers 3.5% of each policy premium sold on exchanges to finance the marketplace. While this “user fee” is lower than the commissions many private insurance brokers receive, many would likely still jump at the opportunity given the size of the new market on offer (perhaps 7 million individual policies through 2014).