The Secret Lives of Amazon’s Elves

Monday, December 28th, 2009

Joel Johnson describes the secret lives of Amazon’s elves — “workcampers” who park their RVs near Amazon’s fulfillment center in Coffeyville, Kansas:

“From what the agency people had told us, Amazon had a bad experience busing in people from Tulsa,” says Chris. “There was a lot of theft and a lot of people who weren’t really serious about the job.”

Workers from Tulsa were adding a 4-hour round-trip commute to an already grueling 10-to-12 hour shift, Cherie is quick to add. “They’d get there exhausted.”

Enter the workcampers, people making a go at living in their RVs full time — many of whom might be otherwise overqualified. “I think Amazon was skeptical at first,” says Cherie. “But after the first trial year they were very, very impressed. Workcampers came in enthusiastic about working, since most are professionals. We’ve owned businesses or been managers.” White collar workers, trying their hand at the gypsy life. Even better, the workcampers were able to stay locally.
[...]
“Every shift starts with what they call a ‘Stand Up.’ You gather in one area with your usual department — ours was called ‘Sortable Singles,’ which sounds like it should be the name of a dating site — and they’d count off how many people they needed in each department. Run through a few announcements. Give you a few safety tips. And then they lead you through five minutes of group stretches.”

Cherie was mainly a packer, putting items in the box and scanning them. Chris, on the other hand, was a “water spider.” He explains, “A water spider is responsible for keeping all the packers supplied, so ideally they’d never need to stand up and leave their station to get any other supplies like all the different sizes of boxes, plus making sure their tape machines and paper-spitter machines are operating.”

“I never quite exactly figured out why they call it a water spider. My guess is back in the history of assembly line jobs, the water spider would be the person who would bring people on the line water to drink. Nobody seemed to know!”
[...]
Inside the warehouses, machines and man alike were controlled by Amazon’s computerized assembly line.

In one part of the factory, Chris watched two giant elliptical carousels, each one the size of a football field, carry wooden trays around at 15mph. “All the items are coming in the totes on one side of this giant machine. There are people who take each individual item, scan them and put them on the trays as they go by. The trays get to a chute where their order is being assembled, tilt, and the product flies down into that space. When all the items for a particular order are assembled in one place an orange light comes on and somebody comes by.” Above, another carousel brought an endless procession of empty boxes to be filled with the orders.

It wasn’t exactly what Cherie had envisioned. “When we told people were going to do this, someone said ‘Whenever I click the order button on Amazon, I always imagine a chorus of happy, singing Oompa-Loompas riding around on Segways and shipping my stuff.’ Well… no. It’s not exactly like that.”

“The computer has to prioritize how it’s going to send out all the pickers in this giant facility. So someone could order a book and a sweater and an iPod, and those could be in completely different corners of the whole facility. But somehow they all arrive within about 30 minutes of each other.” It’s efficiency even Willy Wonka could love.

How Success Killed Duke Nukem

Tuesday, December 22nd, 2009

Clive Thompson explains how success killed Duke Nukem:

To videogame fans, that logo is instantly recognizable. It’s the insignia of Duke Nukem 3D, a computer game that revolutionized shoot-’em-up virtual violence in 1996. Featuring a swaggering, steroidal, wisecracking hero, Duke Nukem 3D became one of the top-selling videogames ever, making its creators very wealthy and leaving fans absolutely delirious for a sequel. The team quickly began work on that sequel, Duke Nukem Forever, and it became one of the most hotly anticipated games of all time.

It was never completed. Screenshots and video snippets would leak out every few years, each time whipping fans into a lather — and each time, the game would recede from view. Normally, videogames take two to four years to build; five years is considered worryingly long. But the Duke Nukem Forever team worked for 12 years straight. As one patient fan pointed out, when development on Duke Nukem Forever started, most computers were still using Windows 95, Pixar had made only one movie — Toy Story — and Xbox did not yet exist.

On May 6, 2009, everything ended. Drained of funds after so many years of work, the game’s developer, 3D Realms, told its employees to collect their stuff and put it in boxes. The next week, the company was sued for millions by its publisher for failing to finish the sequel.

Sometimes you need to learn to let go — which is hard to do when you’ve learned to set ludicrously high expectations, and you have the money to burn:

When Duke Nukem 3D came out, Broussard’s Duke Nukem engine — called Build — produced the best-looking game around. Barely a year later, though, it looked antiquated. Broussard’s key rival in the Dallas gaming scene, id Software, had announced its Quake II engine, which produced graphics that made Build seem blocky and crude. Broussard decided to license the Quake II engine, figuring it would save him precious time; programming an engine from scratch can take years. Though 3D Realms never confirmed how much it paid for the license — Miller referred to it as “a truckload of money” on a gaming news site — the price was said to be as high as $500,000. When the engine was released in December 1997, Broussard’s team quickly began creating game levels, monsters, and weapons around it.

By May 1998, the team had created enough material to show off at E3, the annual videogame industry convention. Duke Nukem Forever was set in Vegas; in the game’s plot, Duke operates a strip club and then has to fight off invading aliens. Broussard showed a trailer featuring a dozen different scenes, including Duke fighting on the back of a moving truck, jet airplanes crashing, and furious firefights with aliens. Critics were awed: “It sets a new benchmark for making a 3-D game more like a Hollywood movie,” Newsday proclaimed. Broussard was clearly obsessed with making his product as aesthetically appealing as possible. When he brought a few journalists over to a computer to show off bits of the game, he pointed out the way you could see individual wrinkles on characters’ faces and mused over how to make his campfire more realistic. (”As soon as we mix in some white smoke and some black smoke, I think we’ll be there,” he said.)

Behind the scenes, though, Broussard was already unhappy with the results and was craving better technology. A few months after the Quake II engine was released, another competitor, Epic MegaGames, unveiled a rival engine called Unreal. Its graphics were more realistic still, and Unreal was better suited to crafting wide-open spaces. 3D Realms was struggling mightily to get Quake II to render the open desert around Las Vegas. One evening just after E3, while the team sat together, a programmer threw out a bombshell: Maybe they should switch to Unreal? “The room got quiet for a moment,” Broussard recalled. Switching engines again seemed insane — it would cost another massive wad of money and require them to scrap much of the work they’d done.

But Broussard decided to make the change. Only weeks after he showed off Duke Nukem Forever, he stunned the gaming industry by announcing the shift to the Unreal engine. “It was effectively a reboot of the project in many respects,” Chris Hargrove, then one of the game’s programmers, told me (though he agreed with the decision). Broussard soon began pushing for even more and cooler game-building tools: He ripped out the ceiling of a room at the 3D Realms office to assemble a motion-capture lab, which would help his team in rendering “complex motions like strippers,” he noted on the 3D Realms Web site.

Broussard simply couldn’t tolerate the idea of Duke Nukem Forever coming out with anything other than the latest and greatest technology and awe-inspiring gameplay. He didn’t just want it to be good. It had to surpass every other game that had ever existed, the same way the original Duke Nukem 3D had.

But because the technology kept getting better, Broussard was on a treadmill. He’d see a new game with a flashy graphics technique and demand the effect be incorporated into Duke Nukem Forever. “One day George started pushing for snow levels,” recalls a developer who worked on Duke Nukem Forever for several years starting in 2000. Why? “He had seen The Thing” — a new game based on the horror movie of the same name, set in the snowbound Antarctic — “and he wanted it.” The staff developed a running joke: If a new title comes out, don’t let George see it. When the influential shoot-’em-up Half-Life debuted in 1998, it opened with a famously interactive narrative sequence in which the player begins his workday in a laboratory, overhearing a coworker’s conversation that slowly sets a mood of dread. The day after Broussard played it, an employee told me, the cofounder walked into the office saying, “Oh my God, we have to have that in Duke Nukem Forever.”

Broussard and Miller had spent $20 million of their own money on Duke Nukem Forever before they went hat in hand to Take-Two, their game publisher, to ask for $6 million to help finish the game. They didn’t get it.

The Elves Leave Middle Earth – Sodas Are No Longer Free

Monday, December 21st, 2009

Steve Blank’s latest headline did its job and pulled me in — The Elves Leave Middle Earth – Sodas Are No Longer Free:

Last week as a favor to a friend, I sat in on a board meeting of a fairly successful 3½ year-old startup. Given all that could go wrong in this economy, they were doing well. Their business had just crossed cash flow breakeven, had grown past 50 employees, just raised a substantive follow-on round of financing and had recently hired a Chief Financial Officer. It was an impressive performance.

Then the new CFO got up to give her presentation — all kind of expected; Sarbanes Oxley compliance, a new accounting system, beef up IT and security, Section 409A (valuation) compliance, etc. Then she dropped the other shoe.

“Do you know how much our company is spending on free sodas and snacks?” And to answer her own question she presented the spreadsheet totaling it all up.

There were some experienced VC’s in the room and I was waiting for them to “educate” her about startup culture. But my jaw dropped when the board agreed that the “free stuff” had to go.

“We’re too big for that now” was the shared opinion. But we’ll sell them soda “cheap.”

I had lived through this same conversation four times in my career, and each time it ended as an example of unintended consequences. No one on the board or the executive staff was trying to be stupid. But to save $10,000 or so, they unintentionally launched an exodus of their best engineers.

This company had grown from the founders, who hired an early team of superstars, many now managing their own teams. All these engineers were still heads-down, working their tails off, just as they had been doing since the first few months of the company. Too busy working, most were oblivious to the changes that success and growth had brought to the company.

One day the engineering team was clustered in the snack room looking at the soda machine. The sign said, “Soda now 50 cents.” The uproar began. Engineers started complaining about the price of the soda. Someone noticed that instead of the informal reimbursement system for dinners when they were working late, there was now a formal expense report system. Some had already been irritated when “professional” managers had been hired over their teams with reportedly more stock than the early engineers had. Lots of email was exchanged about “how things were changing for the worse.” A few engineers went to the see the CEO.

But the damage had been done. The most talented and senior engineers looked up from their desks and noticed the company was no longer the one they loved. It had changed. And not in a way they were happy with.

The best engineers quietly put the word out that they were available, and in less than month the best and the brightest began to drift away.

Tycoon, Contractor, Soldier, Spy

Monday, December 21st, 2009

Erik Prince — tycoon, contractor, soldier, spy — founded Blackwater with a much more limited concept that it outgrew after 9/11:

Blackwater’s origins were humble, bordering on the primordial. The company took form in the dismal peat bogs of Moyock, North Carolina — not exactly a hotbed of the defense-contracting world.

In 1995, Prince’s father, Edgar, died of a heart attack (the Evangelical James C. Dobson, founder of the socially conservative Focus on the Family, delivered the eulogy at the funeral). Edgar Prince left behind a vibrant auto-parts manufacturing business in Holland, Michigan, with 4,500 employees and a line of products ranging from a lighted sun visor to a programmable garage-door opener. At the time, 25-year-old Erik was serving as a navy seal (he saw service in Haiti, the Middle East, and Bosnia), and neither he nor his sisters were in a position to take over the business. They sold Prince Automotive for $1.35 billion.

Erik Prince and some of his navy friends, it so happens, had been kicking around the idea of opening a full-service training compound to replace the usual patchwork of such facilities. In 1996, Prince took an honorable discharge and began buying up land in North Carolina. “The idea was not to be a defense contractor per se,” Prince says, touring the grounds of what looks and feels like a Disneyland for alpha males. “I just wanted a first-rate training facility for law enforcement, the military, and, in particular, the special-operations community.”

Business was slow. The navy seals came early — January 1998 — but they didn’t come often, and by the time the Blackwater Lodge and Training Center officially opened, that May, Prince’s friends and advisers thought he was throwing good money after bad. “A lot of people said, ‘This is a rich kid’s hunting lodge,’” Prince explains. “They could not figure out what I was doing.”

Today, the site is the flagship for a network of facilities that train some 30,000 attendees a year. Prince, who owns an unmanned, zeppelin-esque airship and spent $45 million to build a fleet of customized, bomb-proof armored personnel carriers, often commutes to the lodge by air, piloting a Cessna Caravan from his home in Virginia. The training center has a private landing strip. Its hangars shelter a petting zoo of aircraft: Bell 412 helicopters (used to tail or shuttle diplomats in Iraq), Black Hawk helicopters (currently being modified to accommodate the security requests of a Gulf State client), a Dash 8 airplane (the type that ferries troops in Afghanistan). Amid the 52 firing ranges are virtual villages designed for addressing every conceivable real-world threat: small town squares, littered with blown-up cars, are situated near railway crossings and maritime mock-ups. At one junction, swat teams fire handguns, sniper rifles, and shotguns; at another, police officers tear around the world’s longest tactical-driving track, dodging simulated roadside bombs.

In keeping with the company’s original name, the central complex, constructed of stone, glass, concrete, and logs, actually resembles a lodge, an REI store on steroids. Here and there are distinctive touches, such as door handles crafted from imitation gun barrels. Where other companies might have Us Weekly lying about the lobby, Blackwater has counterterror magazines with cover stories such as “How to Destroy Al Qaeda.”

In fact, it was al-Qaeda that put Blackwater on the map. In the aftermath of the group’s October 2000 bombing of the U.S.S. Cole, in Yemen, the navy turned to Prince, among others, for help in re-training its sailors to fend off attackers at close range. (To date, the company says, it has put some 125,000 navy personnel through its programs.) In addition to providing a cash infusion, the navy contract helped Blackwater build a database of retired military men—many of them special-forces veterans — who could be called upon to serve as instructors.

When al-Qaeda attacked the U.S. mainland on 9/11, Prince says, he was struck with the urge to either re-enlist or join the C.I.A. He says he actually applied. “I was rejected,” he admits, grinning at the irony of courting the very agency that would later woo him. “They said I didn’t have enough hard skills, enough time in the field.” Undeterred, he decided to turn his Rolodex into a roll call for what would in essence become a private army.

Five Laws of Human Nature

Monday, December 21st, 2009

Michael Marshall shares five laws of human nature — including Parkinson’s law and Student syndrome — with various sub-laws:

Parkinson’s law

Civil servant, historian and theorist Cyril Northcote Parkinson suggested in a 1955 article that work expands to fill the time available for its completion – backed up with statistical evidence drawn from his historical research. More recent mathematical analyses have lent support to the idea.

Parkinson also came up with the “law of triviality“, which states that the amount of time an organisation spends discussing an issue is inversely proportional to its importance. He argued that nobody dares to expound on important issues in case they’re wrong – but everyone is happy to opine at length about the trivial.

This in turn may be a result of Sayre’s law, which states that in any dispute, the intensity of feeling is inversely proportional to the value of the stakes at issue.

Parkinson also proposed a coefficient of inefficiency, which attempts to define the maximum size a committee can reach before it becomes unable to make decisions. His suggestion that it lay “somewhere 19.9 and 22.4″ has stood the test of time: more recent research suggests that committees cannot include many more than 20 members before becoming utterly hapless.

Student syndrome

“If it weren’t for the last minute, I wouldn’t get anything done.” So said an anonymous wit, and none but the most ferociously well-organised can disagree.

In fact, procrastination is a major problem for some people, especially those who are easily distracted or are uncertain of their ability to complete a task.

One of the most well-known examples of vigorous procrastination is student syndrome. As anyone who has ever been (or known) a student will know, it is standard practice to apply yourself to a task only at the last possible moment before the deadline.

Student syndrome is so common that some experts in project management recommend not assigning long periods of time to particular tasks, because the people who are supposed to do them will simply wait until just before the deadline to start work, and the project will overrun anyway (International Journal of Project Management, vol 18, p 173).

Some of the blame for student syndrome may be laid at the feet of the planning fallacy: the tendency for people to underestimate how long it will take to do something.

If you often get caught out by how long things take, we recommend considering Hofstadter’s law, coined by the cognitive scientist Douglas Hofstadter: “It always takes longer than you expect, even when you take into account Hofstadter’s law.”

Will Big Business Save the Earth?

Wednesday, December 9th, 2009

Will Big Business save the Earth? Maybe it will, says Jared Diamond (Guns, Germs, and Steel, Collapse), who until recently assumed corporations were environmentally destructive, greedy, evil and driven by short-term profits:

The embrace of environmental concerns by chief executives has accelerated recently for several reasons. Lower consumption of environmental resources saves money in the short run. Maintaining sustainable resource levels and not polluting saves money in the long run. And a clean image — one attained by, say, avoiding oil spills and other environmental disasters — reduces criticism from employees, consumers and government.

Let’s start with Wal-Mart:

Obviously, a business can save money by finding ways to spend less while maintaining sales. This is what Wal-Mart did with fuel costs, which the company reduced by $26 million per year simply by changing the way it managed its enormous truck fleet. Instead of running a truck’s engine all night to heat or cool the cab during mandatory 10-hour rest stops, the company installed small auxiliary power units to do the job. In addition to lowering fuel costs, the move eliminated the carbon dioxide emissions equivalent to taking 18,300 passenger vehicles off the road.

Wal-Mart is also working to double the fuel efficiency of its truck fleet by 2015, thereby saving more than $200 million a year at the pump. Among the efficient prototypes now being tested are trucks that burn biofuels generated from waste grease at Wal-Mart’s delis. Similarly, as the country’s biggest private user of electricity, Wal-Mart is saving money by decreasing store energy use.

Another Wal-Mart example involves lowering costs associated with packaging materials. Wal-Mart now sells only concentrated liquid laundry detergents in North America, which has reduced the size of packaging by up to 50 percent. Wal-Mart stores also have machines called bailers that recycle plastics that once would have been discarded. Wal-Mart’s eventual goal is to end up with no packaging waste.

One last Wal-Mart example shows how a company can save money in the long run by buying from sustainably managed sources. Because most wild fisheries are managed unsustainably, prices for Chilean sea bass and Atlantic tuna have been soaring. To my pleasant astonishment, in 2006 Wal-Mart decided to switch, within five years, all its purchases of wild-caught seafood to fisheries certified as sustainable.

Diamond found himself mightily impressed with Chevron:

Not even in any national park have I seen such rigorous environmental protection as I encountered in five visits to new Chevron-managed oil fields in Papua New Guinea. (Chevron has since sold its stake in these properties to a New Guinea-based oil company.) When I asked how a publicly traded company could justify to its shareholders its expenditures on the environment, Chevron employees and executives gave me at least five reasons.

First, oil spills can be horribly expensive: it is far cheaper to prevent them than to clean them up. Second, clean practices reduce the risk that New Guinean landowners become angry, sue for damages and close the fields. (The company has been sued for problems in Ecuador that Chevron inherited when it merged with Texaco in 2001.) Next, environmental standards are becoming stricter around the world, so building clean facilities now minimizes having to do expensive retrofitting later.

Also, clean operations in one country give a company an advantage in bidding on leases in other countries. Finally, environmental practices of which employees are proud improve morale, help with recruitment and increase the length of time employees are likely to remain at the company.

Great Demos of All Time

Wednesday, December 9th, 2009

David Foster shares some of the Great Demos of All Time:

  1. In the early 1850s, elevators had been invented and were in limited use, but were generally–with good reason–considered unsafe. At the Crystal Palace exposition of 1854, Elisha Otis demonstrated his elevator safety device. He had himself hauled up to a considerable height in an open cage, and then directed his assistant to cut the hoisting rope. The safety mechanism, as designed, clamped its jaws to the elevator’s guide tracks and kept it from falling.
  2. In the 1890s, most ships were powered by reciprocating steam engines (with commercial sail still holding a pretty respectable share). Charles Parsons, who had invented the steam turbine in 1884, set up the Parsons Marine Steam Turbine Company in 1893, with the objective of applying the invention to the propulsion of ships. He built a nifty little ship called the Turbinia, and, after initial trials, brought it unannounced to the Naval Review for Queen Victoria’s Diamond Jubilee (1893). Turbinia, which had an impressive top speed of 34 knots, raced between the lines of large ships, easily evading a Navy picket boat that had been sent to stop it, and indeed almost swamping the Navy vessel with its wake.
  3. In June 1914, Lawrence Sperry demonstrated his new airplane autopilot to the crowd assembled at the Airplane Safety Competition on the banks of the Seine. Flying with Sperry was his French mechanic, Emil Cachin. The Curtiss C-2 flew down the river, and directly in front of the judge’s stand. Sperry engaged his stabilizer device and passed in review with both his arms held high. The aircraft continued on a straight and steady course, with the pilot obviously not handling the controls. During the second pass, Cachin climbed out on the starboard wing and moved about 7 feet away from the fuselage, with Sperry’s hands still off the controls. As Cachin moved out on the wing, the aircraft momentarily banked due to the shift of weight, but the gyrostabilizer quickly corrected the attitudinal change, after which the Curtiss continued smoothly down the river. On the third pass, Cachin stood on one wing and Sperry on the other, with the pilot’s seat empty.

    The crowd and the competition judge were blown away by Sperry’s accomplishment, and the inventor was awarded the 50,000 franc prize. (The New York Times was less impressed, commenting snidely that “Of stability commonly understood, no heavier than air flight vehicles will ever have even as much as that dreadfully fragile monster, the dirigible.”)

  4. In 1952, the Remington Rand corporation proposed to CBS News that its Univac computer be used to predict the results on election night. CBS execs were skeptical about the idea, but went along with it.

    Most commentators were offering predictions ranging from a Democratic landslide to a tight race with Stevenson slightly ahead of Eisenhower. But at 8:30 p.m. Eastern time, Univac predicted that Eisenhower would pile up 438 electoral votes to Stevenson’s 93, with the odds of an Eisenhower win at 100-1.

    The CBS executive in charge did not believe these numbers, and adjustments to the assumptions were made. At 9:00 PM, the network announced that the machine was predicting 8-7 odds for an Eisenhower win.

    One of the Remington Rand staff members then discovered that he’d mistakenly added a zero to the Stevenson totals from New York State. With this error corrected (and I believe with the revised assumptions required by CBS still in place, though this isn’t clear from the sources), Univac gave the same prediction as before: 438 to 93 with odds of an Eisenhower win at 100:1.

    The final vote was 442 to 89. Late at night, CBS announcer Charles Collingwood made an embarrassing confession to his audience: Univac had made an accurate prediction hours before, but CBS hadn’t aired it.

Learn, Discover, Iterate, and Execute

Tuesday, December 8th, 2009

Steve Blank tells the tale of the second, more serious, time someone stole his startup idea:

We were starting Epiphany, my last company. I was out and about in Silicon Valley doing what I would now call Customer Discovery trying to understand how marketing departments in large corporations worked. The initial hypothesis for Epiphany (from my much smarter partner Ben) was that as departments in the enterprise (manufacturing, finance, customer support sales) became automated, the marketing department would eventually get its turn.

I remember presenting our ideas for Marketing Automation to one VP of Marketing in a large Silicon Valley company. His enthusiastic response was, “This will revolutionize marketing departments!” He continued: “I’d like to convince my boss so our company can be your first customer.” I should have been suspicious when he said, “I’d like to take a copy of your presentation to show him.” Caught up in the enthusiasm of hearing what a great idea we had, I violated one of my cardinal rules, and left him a hard copy.

Fast forward nine months. After talking to tons of customers and almost as many VC’s, we got Epiphany funded as a company that was going to automate Marketing Departments. After a ton of unreturned phone calls, I had written off the enthusiastic VP of Marketing who wanted to show my slides to his boss and moved on with building our company.

By now we had found a few customers and learned a lot more about the market from them and other prospects. Our business model changed as we realized that to become a large company, we needed to automate more than just a few marketers. As we were out looking for our Series B round, our company had gotten the attention of “name of big VC firm here” who wanted a play in enterprise software.

During the due-diligence process, I sat down with one of the partners who pulled out a set of slides and asked me: ”Have you seen these?” I quickly leafed through them and replied, “Sure they’re our original slides. Why?” He said, “Look again.” They had all my words from a year ago, but hey wait a minute, there’s someone else’s logo on my slides?! What’s going on? He said, “That’s what we’re trying to figure out. These guys just got funded, and they sound a lot like you guys.” Luckily I had the original slides and could prove who came first. Still the fact was a competitor had raised money using our idea and our slide deck.

And who was this competitor? The VP of Marketing who a year earlier had wanted a hard copy of our slides. He was now CEO of a new company in our market.

I felt like I had just been kicked in the stomach.

There’s a happy ending though:

Our competitor was executing on hypotheses we had developed 9 months ago, and their strategy remained static. We on the other hand, had moved on. We had discovered detailed information about what customers really needed and wanted and turned our original hypotheses into facts. We had validated our new assumptions by a set of orders, and we had pivoted on our business model. Our original idea had been nothing more than an untested set of hypotheses. Truth be told, we were no longer the company in those stolen slides.

While the common wisdom said that our success was going to be determined by which company executed better, the common wisdom was wrong. In a startup success isn’t about just execution, it’s how well we could take our original hypothesis and learn, discover, iterate and execute.

Are Those My Initials?

Monday, December 7th, 2009

Someone stole Steve Blank’s ideas on two occasions:

Once it almost mattered. This is about the time it didn’t.
[...]
The first time was at Rocket Science Games. I was positioning the company as the second coming of the video games businesses at the intersection of “Hollywood Meets Silicon Valley.” This was a great positioning, it helped us raise lots of money and get tons of press. I had a wonderful set of slides that illustrated (to me) this inevitable trend. At the end of the presentation was one “uber” chart I had labored over for months which laid out all the converging trends in the industry. I used it in all presentations and gave it at industry conferences.

Are those my initials on the slide?

Fast forward nine months. My co-founder, head of business development and I were in Japan raising money. We were sitting in the conference room of a large well-respected media firm when their CEO breezed in to give us an overview of who they were and how forward thinking their firm was. I thought highly of this firm and was in awe of their content and films so I was a bit blown away when the CEO got to the finale of their presentation. It was, as he explained, the sum of their strategy and strategic thinking for online media. And the slide was…

My slide.

Not a summary of my slide, or a Japanese copy of my slide, but my actual slide. I stood up from my seat, and walked around the boardroom table to get closer to the screen just to be sure. The CEO was beaming at my interest in the details of the slide. Examining the slide, I pointed to the bottom right and said to our translator, “Tell him my initials are still on the bottom.” The interpreter’s face went white, and after a lot of “I can’t tell him that,” he did.

We weren’t sure if we should feel insulted or complimented, but after a few deep breaths (and a lot of kicking under the table by my head of business development) my smart VP of business development used it as an opportunity to point out how honored we were that there was an obvious strategic alignment between the two companies. (I sat there smiling tightly.) Given the potential for a cross-cultural meltdown all parties behaved politely. The CEO turned out to be a very nice guy and rented a big bus to take his staff and all of us sightseeing, dinner and drinking around Tokyo. (I’m sure when he got back to the office he was handing out a personalized knife to the executive on his staff who had borrowed my slide.)

In the end, the CEO couldn’t get his board to give us the cash in exchange for the Japanese distribution rights and some equity. We ended up raising money from Sega.

I heard later that the slide disappeared from his presentation.

America’s Oldest Brewery

Sunday, December 6th, 2009

Years ago, when I was driving around Pennsylvania — and didn’t know the area — I found myself behind a truck emblazoned with the logo for something called Yuengling, which it trumpeted as America’s Oldest Brewery.

Frankly, the brand name looked Chinese to me — even if the Eagle logo didn’t — and I thought I should have heard of America’s oldest brewery. Nobody in the state seemed to know the story, so here it is:

  • The German brewer David G. Jüngling immigrated to the United States in 1823 from Aldingen in the Kingdom of Württemberg. He anglicized his surname from Jüngling to Yuengling and began the “Eagle Brewery” on Center Street in Pottsville in 1829.
  • Yuengling’s trademarked phrase “America’s Oldest Brewery” refers to the U.S. only, as the Canadian brand Molson, founded in 1786, is the oldest in North America.

It’s pronounced Ying-ling (/?j??l??/), by the way, and it’s now popular all along the east coast.

Thanks to the forgotten part-time teacher

Wednesday, December 2nd, 2009

We should give thanks to the forgotten part-time teacher, Victor Davis Hanson suggests:

An English 1A class taught by a TA or part-timer might service 30 students at a cost of $4,000 to 5,000 in instructional fees; an upper-division required course for the major, with 10 students, like “The Construction of Manhood in Blake” taught by a full professor might run the university $25,000. Part-timers might make $35,000 without benefits for juggling together 5-7 classes at different campuses, while tenured professors might make well over $100,000 for teaching 4-6 courses with full facilities, benefits, and support.

The problem is that all the old justifications for such wide imbalances — tenured faculty advising, publication, intangible college governance — don’t wash any more, at least in the case of the humanities and social sciences — not when TAs, lecturers and part-timers often have PhDs, and are as good or better teachers than full professors, while the scholarship of the affluently tenured, especially in the humanities and social sciences, is either irrelevant or unreadable, while their teaching is not subject to the same scrutiny or consequences as part-time evaluations.

Themed Casinos and Entropy

Tuesday, December 1st, 2009

Donald Pittenger has noticed a connection between themed casinos and entropy:

Currently active themes in the heart of the Strip include Venice, the Italian lake country, King Arthur’s court, ancient Egypt, New York City, Caribbean pirate islands, China, a desert oasis and Paris. Well on the way to phase-out are Aladdin’s Middle East and Hollywood. (The MGM Grand dropped some of its Hollywood-themed decor. On the other hand, the Aladdin has been pretty much transformed into its new, Planet Hollywood guise.)

Did I just mention “phase-out?” What I’ve been noticing are signs that that theme-purity is starting to diminish in the strongly-themed casinos — places where even the shops originally tried to conform to the overall scheme. The majority of themed casinos wear their themes lightly, embodying them in the general decor, but not extending to most of the shops and restaurants.

A case in point is the Paris. It has a Parisian-style shopping street where all (or nearly all) shops and restaurants were — Parisian. Yesterday I noticed that one shop site had been taken over by (if memory serves) a Shooz shoe store. And there was a new restaurant that, at a glance, didn’t seem particularly French.

The Luxor casino began an image remake a few years ago. Its architecture (a hollow pyramid) is impossible to change, but the ground floor details are changing from ancient Egypt to Los Angles show-biz.

The Luxor’s change was by top management decision. The Paris’ seeming shift is probably fed by the need to rent retail space, a need that will likely be enhanced by the current hard economic times.

Or, as the title of this post suggests, it’s possible that entropy itself kicks in where highly structured, low-entropic conditions exist.

Trading Mecca?

Tuesday, December 1st, 2009

The fact that Dubai can’t pay its bills should come as no great shock to anyone, because there’s no good reason for Dubai to be such a big trading Mecca, when it offers no real value:

The Discovery and Travel channels paint a picture of a Disneyesque place, and it is true that there is a staggering amount of money in Dubai. The real economy of Dubai, however, is built on what amounts to non-violent piracy.

Want to get around prohibitions against selling your US-made products into Iran or Syria? Sell to a broker in Dubai.

Think the 35% import tariff into India is too high? Your Indian customer has a cousin in Dubai who will buy your product for $20 each, then sell them into India for an invoice price of $10 each, thereby cutting the tariff paid to the Indian government by half.

Got a couple of containers of counterfeit name brand goods from China you want to unload — the brokers in Dubai are open for business.

Need to buy a couple of containers of legitimate goods from a US or European manufacturer in order to keep your franchise even though you have no market for them? No problem — the diverters in Dubai will take them off your hands and sell them into someone else’s territory at a bargain price.

Have some product with Israeli content you want to sell into Saudi Arabia in violation of their laws? The country of origin will disappear when the paperwork comes out of Dubai.

Dubai is a lousy location logistically, but it works just fine for breaking trade laws.

The Bad Management Stimulus

Monday, November 30th, 2009

Scott Adams (Dilbert) wonders if one if the prime drivers for entrepreneurship is bad management:

I have to think that bad management pushes a lot of capable people out of their day jobs, and those people go on to become entrepreneurs.

Imagine a world where managers always recognized and rewarded their most capable people. It would be hard for a rational employee to leave a great job for a ten percent chance of creating something even greater. But leaving a boss who is Satan’s learning-challenged little brother is relatively easy. And if the general economy isn’t serving up wonderful job opportunities at other companies (thanks in part to bad management) then you can see why people gravitate toward starting their own companies.

You can thank The Dilbert Principle for some of this entrepreneurial zest. The Dilbert Principle observes that in the modern economy, the least capable people are promoted to management because companies need their smartest people to do the useful work. It’s hard to design software, but relatively easy to run staff meetings. This creates a situation where you have more geniuses reporting to morons than at any time in history. In that sort of environment you’d expect the geniuses to be looking for a way out, even if Plan B has a low chance of success.

I’ve never seen a statistic on the number of companies that were started while an employee “borrowed” resources, from his day job, mostly in the form of time and Internet access, but I’ll bet it’s a big number.

Big companies with bad managers are the ideal breeding ground for entrepreneurs. Employees are exposed to a wide variety of business disciplines, and can avail themselves of excellent company-paid training and outside education. When you add broad skill development to the inevitability of eventually getting a moron for a boss, thanks to frequent internal reorganizations, it’s no wonder that big companies spray entrepreneurs into the environment like the fountains at Bellagio.

Why Wine Ratings Are Badly Flawed

Wednesday, November 25th, 2009

Acting on an informant’s tip, in June 1973, French tax inspectors barged into the offices of the 155-year-old Cruse et Fils Frères wine shippers. Eighteen men were eventually prosecuted by the French government, accused, among other things, of passing off humble wines from the Languedoc region as the noble and five-times-as-costly wine of Bordeaux. During the trial it came out that the Bordeaux wine merchants regularly defrauded foreigners. One vat of wine considered extremely inferior, for example, was labeled “Salable as Beaujolais to Americans.”

In this climate, lawyer-turned-wine-critic Robert M. Parker Jr. created his 100-point scale — which went on to become very, very influential:

According to a 2001 study of Bordeaux wines, a one-point bump in Robert Parker’s wine ratings averages equates to a 7% increase in price, and the price difference can be much greater at the high end.

But these wine ratings are flawed, according to two studies published in the Journal of Wine Economics:

In his first study, each year, for four years, Mr. Hodgson served actual panels of California State Fair Wine Competition judges — some 70 judges each year — about 100 wines over a two-day period. He employed the same blind tasting process as the actual competition. In Mr. Hodgson’s study, however, every wine was presented to each judge three different times, each time drawn from the same bottle.

The results astonished Mr. Hodgson. The judges’ wine ratings typically varied by ±4 points on a standard ratings scale running from 80 to 100. A wine rated 91 on one tasting would often be rated an 87 or 95 on the next. Some of the judges did much worse, and only about one in 10 regularly rated the same wine within a range of ±2 points.

Mr. Hodgson also found that the judges whose ratings were most consistent in any given year landed in the middle of the pack in other years, suggesting that their consistent performance that year had simply been due to chance.

Mr. Hodgson said he wrote up his findings each year and asked the board for permission to publish the results; each year, they said no. Finally, the board relented — according to Mr. Hodgson, on a close vote — and the study appeared in January in the Journal of Wine Economics.

“I’m happy we did the study,” said Mr. Pucilowski, “though I’m not exactly happy with the results. We have the best judges, but maybe we humans are not as good as we say we are.”

This September, Mr. Hodgson dropped his other bombshell. This time, from a private newsletter called The California Grapevine, he obtained the complete records of wine competitions, listing not only which wines won medals, but which did not. Mr. Hodgson told me that when he started playing with the data he “noticed that the probability that a wine which won a gold medal in one competition would win nothing in others was high.” The medals seemed to be spread around at random, with each wine having about a 9% chance of winning a gold medal in any given competition.

To test that idea, Mr. Hodgson restricted his attention to wines entering a certain number of competitions, say five. Then he made a bar graph of the number of wines winning 0, 1, 2, etc. gold medals in those competitions. The graph was nearly identical to the one you’d get if you simply made five flips of a coin weighted to land on heads with a probability of 9%. The distribution of medals, he wrote, “mirrors what might be expected should a gold medal be awarded by chance alone.”