They’ve since renamed themselves to Revenue Science and changed their positioning.

Re incremental convenience - the gas stations probably captured 80-90% of the benefit of pay-at-the-pump (in saved time / hassle / poor customer service of paying inside) with just any type of card reader at the pump. Saving users the extra 3 seconds and the frustration of having to re-orient the credit card is a minor added benefit. Put another way, I would have paid a penny more per gallon to go to a gas station that has pay-at-the-pump vs. one that only has pay-inside; however, I would likely not pay a penny more to go to a pump that has a reader that works with all possible orientations of a credit card vs. one that only works with one orientation.

However, I agree with you. The end-user convenience is worth the cost, and I think that extends to RFID. I’ve found the T’s CharlieCard system incredibly convenient when everyone is using properly (can slow down with tourists).

Some places are using RFID for contact-less smartcards (http://en.wikipedia.org/wiki/Smart_card#Contactless_smart_card) but it seems that most are small transactions (parking, transportation).

Clearly, you need to be profitable, especially over a predictable amount of time, but the theory is that if you can sustain growth in free cash flow, then you have the available resources to be reactive to your customers and the market.

Every industry is going to go through cycles and every profit margin is going to get whittled away as the processes of capitalist innovation and creative destruction force business change. In fact, arguably any business that shows higher profit margins than baseline economic growth is demonstrably a market inefficiency that at some point needs to resolve down to baseline long-term economic growth (2-3%). If you have sufficient free cash flow, you can adapt to those market changes.

The advantage of focusing on free cash flow is that you’re less wedded to a particular line of business because of its margin delta. You won’t react to margin contraction by trying to preserve a business where clearly revenues are already declining. Instead you constantly optimize for how to preserve and deploy the free cash flow that you have to keep the business healthy.

At least, that’s one theory. But it all assumes you’re making more money than you’re spending over a given time period.

The search engines are great examples too. Yahoo, Excite, Altavista, Infoseek, Microsoft, Ask.com all failed to turn web search into a huge business. Google’s game-changing idea was not PageRank. When PageRank came out it was similar or perhaps marginally better than Altavista or Excite and those other players had more users.

Google’s game-changing innovation was in their business model. Auction-based text-ads throw off gobs of money at almost no cost. That allowed them to continue to invest in their search engines at a time when everyone else had stopped investing in search and focused on other things.

This is where I separate making money from creating value. A great product with many users is valuable, but doesn’t inherently make money. Dry cleaners make money, but aren’t inherently very valuable.

Monetizing your value is indeed a third leg of the stool that can’t be ignored. However, if you want to make lots of money, you first need to build something valuable.

The capital framework described here is specifically useful once you’re down to a collection of choices and want to compute the risk/reward/value of each one so that you can “measure” / compare them against each other in a meaningful way.

I’ve heard it before and said it myself but I have never seen data to support it. =)

Is the vision gigantic?

Do I have an illogical passion for the vision?

Am I surrounded by brilliant people who execute?

Everything else is secondary.

I also recommend Marc Andreessen’s career advice:

http://blog.pmarca.com/2007/09/the-pmarca-gu-1.html

http://blog.pmarca.com/2007/10/the-pmarca-guid.html

http://blog.pmarca.com/2007/10/the-pmarca-gu-1.html