Millions in Sales From 3 Simple Words

Monday, November 26th, 2007

Millions in Sales From 3 Simple Words: Life is good.

Mr. Jacobs is the 42-year-old co-founder of Life is good, a popular apparel brand based in Boston that is on track to break $100 million in sales this year. This is rarefied air for Mr. Jacobs, who a dozen years ago was selling T-shirts out of a battered van on the streets of Boston with his brother John, now 39.

From a single childlike drawing of a character they named Jake and their uplifting three-word slogan, the brothers have developed a fashion brand sold in 4,500 independent retail outlets in the United States and 27 other countries.

Since 1994, they have sold nearly 20 million Life is good T-shirts and now have a product line with more than 900 items, from hats to dog beds, and the company continues to grow 30 to 40 percent annually. There are now 93 independently owned Life is good retail shops selling only their merchandise, and the company plans to have a total of 200 by the end of 2009. With all that, Life is good has just 250 employees.
[...]
Though they had been reasonably content to sell enough of their wares to pay a meager rent and avoid taking real jobs, the Jacobs brothers always believed that they could make a better T-shirt and turn it into a bona fide business.

They posted their own drawings and slogans on the wall of their apartment near Boston and regularly polled friends at their frequent keg parties for feedback about their ideas. “It was truly like a focus group,” Bert Jacobs recalled.

In search of something that would resonate with a broad audience, they created Jake, a crudely drawn stick character not all that far removed from the Smiley Face, and were amazed at how he inspired an intensely positive reaction.

“This guy has life figured out,” wrote one friend next to the drawing.

They later posted a list of 50 slogans they had compiled and got a similar reaction to the unremarkable phrase “life is good.” A girlfriend concluded that the slogan with three simple words “kind of says it all.”

The brothers printed 48 test T-shirts that combined the slogan with the drawing for a street fair in Cambridge, Mass., in 1994, and sold the entire lot in 45 minutes.

That night, the brothers huddled and decided that the gold they had seemingly struck was a result of their message of optimism. “The reason people bought those shirts was because they understood it instantly,” Bert Jacobs said. “It made them smile, and it was tangible. They could reach out and get a little sunshine.”

Doug Gladstone, chief executive of Brand Content, an ad agency in Boston, agreed. “They tapped into something positive yet benign,” he said. “The product makes you feel good but it’s not over the top.”

By the end of 1994, the brothers had sold $82,000 of Life is good shirts through a couple of willing retail outlets. Within four years, they broke the $1 million barrier and believed they had found the small business they had always dreamed of and that they were sitting on an emerging brand.

The outside world did not see it that way. “It was a real uphill battle to get other people to say we had a brand,” Bert Jacobs said. “At $10 million and even $20 million in sales, they were still asking us when we were going to launch something different.”

1000% hedge fund wins subprime bet

Monday, November 26th, 2007

1000% hedge fund wins subprime bet:

A Californian hedge fund has made more than 1,000 per cent return this year by betting against US subprime home loans, making it one of the world’s best-performing funds of all time.

Lahde Capital, set up in Santa Monica last year by Andrew Lahde, last week passed the 1,000 per cent mark, after fees, following the latest leg of the credit market turmoil. The fall in the value of subprime-linked securities has boosted a group of funds which spotted the problems in advance.

The decision to use derivatives to short, or bet against, low-quality US home loans taken by a select group of hedge funds last year appears to have become the most profitable single trade of all time, making well over $20bn in total so far this year. John Paulson’s New York-based Paulson & Co, the biggest of the group with $28bn under management, is said by investors to have made $12bn profit from the trade already.

However, Mr Lahde, whose fund is one of the smallest specialists shorting subprime, has now begun to return money to investors, telling them in a letter: “The risk/return characteristics are far less attractive than in the past.”

In his letter, Mr Lahde said he expected the collapse in value of subprime mortgage-linked securities to be repeated for bonds backed by commercial property loans in a deep recession – which he also predicts.

“Our entire banking system is a complete disaster,” he wrote. “In my opinion, nearly every major bank would be insolvent if they marked their assets to market.” He also said he would be putting some of his own profits into gold and other precious metals.

Mr Lahde has used the phenomenal returns to boost his business, launching a fund to bet against commercial real estate this autumn – which made 42 per cent in its first two months – and is in the process of creating a third fund to short credits with a broader mandate.

Lahde’s first fund, US Residential Real Estate Hedge V Class A, soared 712.8 per cent in the year to the end of October, before this month’s sell-off pushed it past the 1,000 per cent mark.

There is no reliable data on how many other funds have made 1,000 per cent, or ten times the investment, in a year. But RAB Capital, London hedge fund manager, shot to prominence in 2003 when it returned 1,475.5 per cent in its Special Situations fund, which now runs $2.4bn and is the biggest shareholder in troubled bank Northern Rock.

Bigger subprime top performers include Paulson’s Credit Opportunities fund, up 550.8 per cent to the end of October, and the Subprime Credit Strategies fund run jointly by Texas-based Hayman Capital and Corriente Advisors, up 526.5 per cent.

Why Work Is Looking More Like a Video Game

Wednesday, November 21st, 2007

Michael Fitzgerald explains Why Work Is Looking More Like a Video Game:

Work is not play. But maybe it should be.

In fact, Paul Johnston has remade his company on the idea that business software will work better if it feels like a game. Mr. Johnston is not some awkward adolescent, but the polished president and chief executive of Entellium, which makes software for customer relationship management. Businesses spend billions of dollars on such software to try to track their sales staff, their marketers, their customer service — anything that connects them with customers. Unfortunately, most of the software is the business equivalent of calorie counting. No one does it gladly. Worse, the software has a Big Brother aspect to it.

“C.R.M. software is designed to let your manager peek at you,” Mr. Johnston says. He notes that even at Entellium, based in Seattle, he has had trouble getting his sales staff to update their data consistently. Reasoning that sales people are wildly competitive, he thought that they would respond to a program that showed where they stood against their goals — or their peers’. Hence, Rave, which Entellium introduced in April.

Rave adapts a variety of gaming techniques. For instance, you can build a dossier of your clients and sales prospects that includes photographs and lists of their likes, dislikes and buying interests, much like the character descriptions in many video games. Prospects are given ratings, not by how new they are — common in C.R.M. programs — but by how likely they are to buy something. All prospects are also tracked on a timeline, another gamelike feature.

Rave isn’t exactly the business version of Madden N.F.L., at least not yet. But Craig K. Hall, president of Logos Marketing Inc., a graphics company in Albany, said it reminded him of video games he has played, like the Legend of Zelda. Mr. Hall, 31, says he likes the way Rave pops up information, including news that will matter to clients. He also said its use of sales stages and checklists, also borrowed from the way games progress through levels, had helped him rethink the way his company operates. “They’ve done a good job of it,” he said.

The making of a UPS driver

Wednesday, November 21st, 2007

Nadira Hira of Fortune looks at the making of a UPS driver — that is, the arduous process of getting a Generation-Y twentysomething to work an arduous job:

But such is the Gen Y reaction to what one academic described as a “plum blue-collar job.” (UPS drivers make an average of $75,000 a year, plus an average of $20,000 in health-care benefits and pension, well above the norm for comparable positions at other freight carriers.) Much derided as a group of upstart technophiles of little work ethic and even less loyalty, Gen Yers aren’t exactly a perfect fit for Big Brown. In fact, it’s hard to imagine a worse match.

For decades this company, which last year had $47.5 billion in revenue, has relied on “human engineering” — strictly timed routines, rote memorization, even uniform appearance, going so far as to mandate short hair and outlaw beards — to distinguish itself. (And just in case you thought they weren’t hip to the times, there’s even a policy on piercings and tattoos: one stud in each ear at most for both men and women, and a ban on tattoos visible during deliveries.)

Though UPS has adapted over time, it’s that human aspect that has continued to make the business successful. Here, you don’t just pick up a package any old way. You take 15.5 seconds to carry out “selection,” the prescribed 12-step process that starts with parking the vehicle and ends when you step off the package car, delivery in hand. It’s all laid out in UPS’s “340 methods” — a detailed manual of rules and routines that, until now, was taught to UPS’s legions of driver candidates in two weeks of lectures.

But if there’s one group that isn’t down to be engineered, it’s Generation Y, people who can’t even be bothered to use punctuation, let alone memorize anything.

The inevitable discord started to show in 2003, when the oldest Gen Yers were in their mid-20s. UPS senior staffers began to notice a serious decline in some major performance indicators, among them drivers’ time to proficiency. Before, trainees had needed an average of 30 days to become proficient drivers; the younger group was taking 90 to 180 days.

Perhaps more disturbing, the number of new drivers quitting the post after 30 to 45 days on the job spiked. That was cause for serious alarm. Gen Yers make up over 60% of the company’s part-time loader workforce, from which it draws the majority of new driver hires. And in the next five years, to keep the more than 100,000 driving jobs that currently exist filled, the company will need to train up to 25,000 new drivers.

Hira quips that “the company created a whole new approach — and it doesn’t involve videogames”:

So did UPS bow to demographic pressure and abandon its 340 methods? It did not. Instead, the company is attempting to change how they’re taught, embarking on a management-training project the likes of which few in corporate America — or Generation Y, for that matter — have ever seen.

On Sept. 17, UPS opened its first-ever full-service pilot training center, a $34 million, 11,500-square-foot, movie-set-style facility in Landover, Md., aimed directly at young would-be drivers and known as Integrad. The facility and curriculum have been shaped over three years by more than 170 people, including UPS executives, professors and design students at Virginia Tech, a team at MIT, forecasters at the Institute for the Future, and animators at an Indian company called Brainvisa.

Because Stephen Jones — a former driver who heads training for UPS and is Integrad’s project manager — received a $1.8 million grant from the Department of Labor, much of the project data, including the research related to safety and generational differences, will be made public. That information could prove useful across industries — especially for companies that, lacking UPS’s almost obsessive penchant for measuring things, may just be starting to see this new generation’s impact.
[...]
When Stephen Jones began examining the problem of training the untrainable Gen Yers back in 2003, he didn’t have much to go on. The numbers told him that the company’s existing training program wasn’t working, and the popular media seemed to be saying that gaming was the answer. That, Jones thought, was the way this new generation learned, so he enlisted Francis “Skip” Atkinson, a former professor of instructional technology at Georgia State University, to do a full literature review — a step for which there’s usually no time or money in corporate settings — and conduct focus groups with UPS employees. “We thought we were going to design a bunch of videogames,” Jones says. “Then the research came back, and we did a complete 180.”

What Atkinson’s team uncovered in focus groups with Gen Y employees was surprising in its simplicity. “To a person, they said give me hands-on,” Atkinson says. “They liked the interaction with the computer, but they didn’t like learning from it necessarily. We found out very quickly that a lot of the studies out there had been done with a very select audience — college-bound, usually white, in affluent suburbs, able to afford these electronic toys — and that had nothing to do with the part-time loaders coming up through the organization at UPS.”

But the most profound problem, according to Atkinson, was the disconnect between part-timers’ expectations about the driver position and the reality of the job. New hires had so limited an understanding of the demands of driving for UPS that, once on the road, they were practically shocked into failure. They needed what would come to be known among Integrad insiders as “technology-enhanced hands-on learning.” So UPS enlisted the help of Virginia Tech, sending two managers to the university for a year and a half to help design students there turn Atkinson’s recommendations into a training program.

Situated in an industrial park across the street from the area UPS center, the Integrad warehouse doesn’t look like much from the outside. But just inside the door is a sight that’s at once familiar and surreal: a transparent UPS package car, complete with rows of (weighted) packages inside. Its incongruous surroundings — close yellow walls and gray linoleum floor — only underscore its big-toy appeal.

But its purpose is far from silly. Selection is the most fundamental part of a UPS driver’s job, and yet it can seem impossible when you’re staring into the gaping back door of a package car, desperately trying to figure out where your five packages are and how you’re going to get them out in the 65.5 seconds Jim Casey and his heartless minions have allotted you. It’s a lot to grasp in a lecture. But being able to watch an instructor demonstrate this selection process in an actual package car — with the same shelving system, odd-sized packages, and cramped space drivers have on-road — and getting the chance to try it yourself before your first trip out could make all the difference.

The same goes for the 340 methods (there are actually many more than 340 by now, but the name endures). These are so specific that they include everything from where to get gas — waiting for a station on the right side of the street reduces idling time and is safer than turning into oncoming traffic — to which finger to carry your keys on (hooking them on the ring finger puts the key in position for your index finger and thumb to turn it in the ignition and pull it out in one motion). It may seem fussy, but when Jones, the director, who is less than svelte, pirouettes through the motions, he is transformed by his muscle memory into a veritable Fred Astaire.

Down the line, another package car is equipped with force sensors in its handrail, in its bottom step, and on a large plate on the ground below. In a job as physical as a UPS driver’s is — he must be able to “continuously lift and lower packages that range up to 70 pounds each … while ‘unloading’ at a rate of 800 to 1,300 packages per hour and while ‘loading’ at a rate of 500 to 800 packages per hour,” says a casual list of essential job functions — one of the most difficult things to teach young Supermen is how frail their bodies really are. Grow lax with your three points of contact and you can be sure you’ll be growing old — with a hobble and a cane — before your time. And what better way to show that than with a computer-generated force diagram? Students take a few hops off the truck with and without the handrail, and immediately, they can see a representation of the impact on their bodies.

It’s elaborate, but Jones and his colleagues have come to believe it’s also essential. Because the young people they’re trying to train aren’t just Generation Y, they’re Generation Why? — a tribe of disbelievers who’ve learned to question absolutely everything. And they need the obstacle course of Integrad not because they won’t take notes in a lecture but because without these demonstrations they may not believe a word of what they hear.

It’s an idea probably best embodied by the lift-and-lower simulator, a series of cameras in the cab of another package car arranged to capture trainees’ posture as they lift and lower packages. These images are saved on a digital video recorder for later review. “The thing about young people is that they’re never wrong,” says Jones. “Tell them what they did incorrectly, and they’ll tell you, ‘I didn’t do that. You saw wrong.’ This way we’ve got it on tape and they can see it for themselves.”

The final kinetic-learning module — or for non-academicians, hands-on learning tool — is the crowd-favorite slip-and-fall simulator. UPS incurs significant costs every year from slips and falls, and it is first-year drivers who succumb the most. Lucky for first-years then that Thurmon Lockhart, director of the Locomotion Research Laboratory at Virginia Tech, has devoted his entire life to the issue. In his studies Lockhart has found that the only way to help people avoid falling is to “perturb” them — i.e., to put them through the motions of falling — which causes their bodies to adjust during subsequent encounters with falling hazards.

To that end, Lockhart’s lab houses a falling machine — a nine-foot-high metal frame with a body harness attached to it. A subject puts on the harness and gets comfortable walking back and forth, and then someone sneaks up behind her and spills soapy water, causing the subject to slip, scream, and flail around before getting caught by the harness. It sounds funny — until you wipe out.

Here’s where that videogame quip seems misplaced:

And while there aren’t any videogames in the Integrad curriculum per se, there sure are a lot of screens. Students log in to watch animated demonstrations of tasks, take quizzes on what they’ve learned, and conduct simulations with special teaching DIADs connected via Bluetooth. And in true mechanical UPS fashion, they get … scores! Every piece of data — from a student’s performance on a particular module to comments from his facilitator — is stored in a new database tool developed by Virginia Tech design students. It will continue to map trainees’ progress once they become drivers, and it’s customized for each level of the UPS hierarchy, so that a region manager can log on for general stats about his districts’ performance, and a supervisor meeting a new driver for the first time will already know every single possible thing there is to know about him.

Who Wants to Be a Facebook Millionaire?

Tuesday, November 20th, 2007

Who Wants to Be a Facebook Millionaire? Ooh! Ooh! Me, me, me! Or was that a rhetorical question?

Unlike most recent college grads, Joe Aigboboh does not have a Facebook account. But Aigboboh, 22, and his business partner, Jesse Tevelow, 24, are now among the world’s reigning experts on the Facebook platform—thanks to the popularity of one Facebook application, called Sticky Notes, that took Aigboboh less than a week to write.

They set up shop here, in the freshly painted basement of a dilapidated West Philly row house, a few weeks ago. Almost daily they get calls from Facebook-frenzied companies scrambling to stake their claim on the platform, offering them paid consulting gigs, development projects, full-time jobs. But now that their four-month-old company, J-Squared Media, is pulling in $45,000 a month in advertising revenues from Facebook, they’ve decided to focus on building their own applications instead.

The PayPal mafia

Tuesday, November 20th, 2007

Jeffrey O’Brien describes the PayPal mafia, “the hyperintelligent, superconnected pack of serial entrepreneurs who left the payment service and are turning Silicon Valley upside down”:

During the past five years they’ve been furiously building things — investment firms, philanthropies, solar-power companies, an electric-car maker, a firm that aims to colonize Mars, and of course a slew of Internet companies. It’s amazing how many hot web properties can trace their ancestries to PayPal.

Besides Facebook and Slide, there’s Yelp, Digg, and YouTube. Thiel and Levchin, the don and consigliere of the mafia, figure that all told, there are dozens of enterprises worth a total of roughly $30 billion — and that value is growing rapidly, as evidenced by Thiel’s good fortune with Facebook.

This group of serial entrepreneurs and investors represents a new generation of wealth and power. In some ways they’re classic characters of Silicon Valley, where success and easy access to capital breed ambition and further success. It’s the reason people come to the area from all over the world. But even by that standard, PayPal was a petri dish for entrepreneurs. The obvious question is, Why?

Maybe it comes back to the early hires. After their first breakfast, Thiel and Levchin began recruiting everyone they knew at their alma maters. “It basically started by hiring all these people in concentric circles,” Thiel remembers. “I hired friends from Stanford, and Max brought in people from the University of Illinois.”

They were looking for a specific type of candidate. They wanted competitive, well-read, multilingual individuals who, above all else, had a proficiency in math. Levchin’s original idea for PayPal was to beam money between PalmPilots, but Thiel has a way of seeing the bigger picture.

A staunch libertarian, Thiel figured a web-based currency would undermine government tax structures. Getting there, however, would mean taking on established industries — commercial banking, for instance — which would require financial acumen and engineering expertise.

Thiel and Levchin also wanted workaholics who were not MBAs, consultants, frat boys, or, God forbid, jocks. “This guy came in, and I asked what he liked to do for fun,” Levchin recalls. “He said, ‘I really enjoy playing hoops.’ I said, ‘We can’t hire the guy. Everyone I knew in college who liked to play hoops was an idiot.’”

They wanted competitive, well-read, multilingual individuals who, above all else, had a proficiency in math. Hmm…

Seriosity

Saturday, November 17th, 2007

Seriosity develops serious games and serious applications inspired by games. What specific features of game environments should business adopt?

  • Incentive structures that motivate workers immediately and longer term
  • Virtual economies that create a marketplace for information and collaboration
  • Transparency of performance and capabilities
  • Recognition for achievements
  • Visibility into networks of communication across an organization

Their flagship product, Attent™ “creates a virtual economy for enterprise collaboration and a solution to information overload”:

Using Serios™, the virtual currency of the Attent ecosystem, the solution enables users to assign values to messages based on importance. Attent also provides a variety of tools that enable everyone to track and analyze communication patterns and information exchanges across the enterprise.

Stop Death by PowerPoint

Friday, November 16th, 2007

Together, we can stop death by PowerPoint:

Lessons of Boston’s Big Dig

Friday, November 16th, 2007

Nicole Gelinas shares a number of Lessons of Boston’s Big Dig — including this lesson for future contractors:

Massachusetts, after taking a hands-off approach to its project’s risks during construction, is today using its most fearsome power — the power to indict — to push Bechtel and Parsons to settle with the state for hundreds of millions of dollars and avoid criminal charges. Massachusetts’s approach is a warning to future private-sector contractors and consultants: if something goes disastrously wrong with a project in which thousands of critical decisions were made with public and private cooperation, the state may use the criminal-justice system as a cudgel to deflect its own accountability.

Gelinas doesn’t just discuss what went wrong; she discusses all the things that went right, including some truly impressive engineering work:

In retrospect, it’s amazing how much went right after construction started in 1991. Over 14 years, Massachusetts, its consultants, and its contractors carved canyons under Boston while the city hummed above. They designed and built seven and a half miles of highway — 161 miles of separate lanes — more than half of them in tunnels. They built six interchanges and 200 bridges.

One of the innovations that made this work possible was the slurry wall, also used at New York’s World Trade Center, which allowed the state, as Salvucci puts it, to build huge underground tunnels “arthroscopically,” without pockmarking Boston with huge uncovered holes. The slurry wall, in effect, let Boston dig itself up without shutting itself down. The Big Dig’s general reliance on new technology was a major factor in one of the project officials’ biggest decisions: choosing a consortium made up of Bechtel and Parsons Brinckerhoff as the “management consultant.” Parsons was an expert in innovative urban tunneling dating to the early twentieth century, when it built New York City’s subways. Bechtel had constructed the Hoover Dam as well as most of modern Saudi Arabia, and had fabled political connections to accompany its engineering and logistics mystique. Caspar Weinberger and George Shultz, both in Reagan’s cabinet, were Bechtel men — though that connection hadn’t helped Salvucci at veto time.

One of the creative, audacious, and potentially disastrous things that Bechtel and Parsons, as well as the state’s contractors, did right on the Big Dig was jacking up the Central Artery — replacing the half-million-ton highway’s 69 support columns with temporary “underpinnings” so that contractors could remove the columns and make way for the tunnels. “Pinning the Artery” wasn’t the Big Dig’s only never-before-done feat. The striking Zakim Bridge — the one redesigned after community outrage — is the world’s widest cable-stayed asymmetrical bridge, expanding from eight lanes to ten to account for complicated traffic flow.

Elsewhere, underneath active railroad tracks, engineers froze ground too soft to withstand construction and pushed prebuilt tunnel sections through. They erected a huge temporary dam to dry out a basin in which to construct tunnel segments — and then flooded the basin, floating the segments and resinking them in their new underwater homes. They built underground bridges to hold up subways, threading highway tunnels above and below mass transit. And though insurance tables had predicted 40 serious accidents during the project, the Big Dig suffered only a quarter of that total, and three construction deaths — showing how much things had changed since, say, the 1870s, when raising the Brooklyn Bridge took 27 lives.

Planning Fallacy

Thursday, November 15th, 2007

When I recently discussed project management — in Critical Chain 1, 2, 3, 4, 5, and 6 — I touched on the planning fallacy:

A bigger issue still is that people are notoriously bad at estimating task durations, and they are notoriously overconfident in their ability to estimate. The optimistic and pessimistic estimates are supposed to book-end a range that covers almost all possibilities — 99 percent — but far more than one percent of tasks fall outside those estimated ranges.

Eliezer Yudkowsky discusses the Planning Fallacy in much greater detail:

Buehler et. al. (1995) asked their students for estimates of when they (the students) thought they would complete their personal academic projects. Specifically, the researchers asked for estimated times by which the students thought it was 50%, 75%, and 99% probable their personal projects would be done. Would you care to guess how many students finished on or before their estimated 50%, 75%, and 99% probability levels?
  • 13% of subjects finished their project by the time they had assigned a 50% probability level;
  • 19% finished by the time assigned a 75% probability level;
  • and only 45% (less than half!) finished by the time of their 99% probability level.

As Buehler et. al. (2002) wrote, “The results for the 99% probability level are especially striking: Even when asked to make a highly conservative forecast, a prediction that they felt virtually certain that they would fulfill, students’ confidence in their time estimates far exceeded their accomplishments.”

It gets worse:

A clue to the underlying problem with the planning algorithm was uncovered by Newby-Clark et. al. (2000), who found that:
  • Asking subjects for their predictions based on realistic “best guess” scenarios; or
  • Asking subjects for their hoped-for “best case” scenarios…

…produced indistinguishable results.

So what’s the solution?

Unlike most cognitive biases, we know a good debiasing heuristic for the planning fallacy. It won’t work for messes on the scale of the Denver International Airport, but it’ll work for a lot of personal planning, and even some small-scale organizational stuff. Just use an “outside view” instead of an “inside view”.

People tend to generate their predictions by thinking about the particular, unique features of the task at hand, and constructing a scenario for how they intend to complete the task — which is just what we usually think of as planning. When you want to get something done, you have to plan out where, when, how; figure out how much time and how much resource is required; visualize the steps from beginning to successful conclusion. All this is the “inside view”, and it doesn’t take into account unexpected delays and unforeseen catastrophes. As we saw before, asking people to visualize the “worst case” still isn’t enough to counteract their optimism — they don’t visualize enough Murphyness.

The outside view is when you deliberately avoid thinking about the special, unique features of this project, and just ask how long it took to finish broadly similar projects in the past. This is counterintuitive, since the inside view has so much more detail — there’s a temptation to think that a carefully tailored prediction, taking into account all available data, will give better results.

But experiment has shown that the more detailed subjects’ visualization, the more optimistic (and less accurate) they become. Buehler et. al. (2002) asked an experimental group of subjects to describe highly specific plans for their Christmas shopping — where, when, and how. On average, this group expected to finish shopping more than a week before Christmas. Another group was simply asked when they expected to finish their Christmas shopping, with an average response of 4 days. Both groups finished an average of 3 days before Christmas.

Likewise, Buehler et. al. (2002), reporting on a cross-cultural study, found that Japanese students expected to finish their essays 10 days before deadline. They actually finished 1 day before deadline. Asked when they had previously completed similar tasks, they responded, “1 day before deadline.” This is the power of the outside view over the inside view.

A similar finding is that experienced outsiders, who know less of the details, but who have relevant memory to draw upon, are often much less optimistic and much more accurate than the actual planners and implementers.

So there is a fairly reliable way to fix the planning fallacy, if you’re doing something broadly similar to a reference class of previous projects. Just ask how long similar projects have taken in the past, without considering any of the special properties of this project. Better yet, ask an experienced outsider how long similar projects have taken.

You’ll get back an answer that sounds hideously long, and clearly reflects no understanding of the special reasons why this particular task will take less time. This answer is true. Deal with it.

How I Work: Tim Brown, CEO of IDEO

Wednesday, November 14th, 2007

Fortune‘s latest How I Work column shares some hints from Tim Brown, CEO of IDEO, the legendary Palo Alto design consultancy:

Control e-mail: I hate PDAs. When I’m in a meeting with someone, I want to be with them. I get more insight if I’m engaged in the moment. I consciously use a phone that doesn’t have a full keyboard on it. Now I’m using the Nokia n95. It takes great pictures.

Clear your mind: I love music. I think I have every generation of iPod ever made. I carry a Nano when I go running. It has a couple hundred songs, not much, and I always have it on shuffle. I use the Nike+ [a wireless pedometer channeled through the iPod Nano] when I run, which is about three times a week for an hour. I like the end result. I travel much better when I am fitter, and I find I have better ideas.

Take good notes: I always carry a Moleskine single-lined five-by-seven-inch notebook. I replace it when it gets full — about every six months. I have a half-dozen or so now. They’re on a shelf in my office in Palo Alto. I’ll use any pen, but I prefer my Pilot Bravo black one. It’s good for writing, sketching, and drawing. I go through the finished ones and highlight the big ideas so they don’t get lost.

Flee your time zone: I like when I’m out of sync timewise with San Francisco — especially in Europe. I do e-mail in the morning and forget about it the rest of the day. It gives me time to think. When you’re traveling, it’s important to be in the place you’re in. I’ve had wonderful trips where I’m learning about innovation and design, and if I’m answering e-mail, I’m not in the place.

Try to stage accidents: I loved the library at the Royal College of Art because it didn’t have a logical system, at least none I could figure. When looking for a book on Islamic decoration, you’d find it by one on seashells. And you’d find all sorts of things with it. That’s the value of an accident. The more you encourage serendipity — say, by bringing together different people — the more you’ll get rich answers. The more you put a group together that sees the world the same way, the more conventional the outcome. We try to put teams together that have varied backgrounds — not just disciplines, but life experiences.

Unleash a Craze for Girls

Tuesday, November 13th, 2007



Peter Adkison, of Magic: The Gathering and D&D fame, hopes to unleash a craze for girls this time — with ponies, unicorns, and secret codes:

He has already introduced America to a boy-oriented trading card game (Magic: The Gathering) and one with unisex appeal (Pokémon). Now, Peter D. Adkison is hoping to find new success with a line of collectible cards aimed at girls.

This time the product may be a tougher sell because girls in the desired age group — 6 to 12 — have never driven a trading card craze.

The cards, called Bella Sara, are clearly more girl-friendly than the latest set of hockey cards or Dragon Ball Z cards. They have pastel colors, fanciful pictures of unicorns and virtual horses to groom, along with girl-power sayings like “Have the courage to trust yourself” and “Use your love to bring peace to the world.”

But history is against Mr. Adkison. “Is it possible a trading card product could catch on primarily with girls?” said Alan Narz, a columnist for Card Trade magazine. “Yes. Has it ever been done? No.”

Brazil announces new oil reserves

Saturday, November 10th, 2007

Brazil announces new oil reserves:

The Brazilian government says huge new oil reserves discovered off its coast could turn the country into one of the biggest oil producers in the world.

Petrobras, Brazil’s national oil company, says it believes the offshore Tupi field has between 5bn and 8bn barrels of recoverable light oil.

A senior minister said Brazilian oil production had the potential to match that of Venezuela and Saudi Arabia.
[...]
Brazil currently has proven oil reserves of 14 billion barrels, over half of which have been discovered in the past five years.

Really Bad Timing

Friday, November 9th, 2007

People have really bad timing when it comes to investing — really bad:

The New York Times summarizes a paper Dumb Money: Mutual Fund Flows and the Cross-Section of Stock Returns by two finance professors. The research, which covers the period 1980-2003, demonstrates that people tend to dump mutual funds just before the funds enter several-year periods of above-average performance, and to buy funds that are about to sag.

The authors cleverly take the analysis down from the mutual fund level to the level of individual stocks, by calculating the change in ownership of a stock by mutual funds which is attributable investors switching into or out of particular funds. The stocks most sold by funds that investors were leaving showed a return of about 18% going forward, while those most bought by funds that investors were switching into came in at around 7.3%. The authors suggest that a strategy of buying stocks with the most negative flow while simultaneously selling short stocks with the most positive flow would have produced a 10.7% annual rate of return…while involving very low risk, since the strategy doesn’t involve a bet on the overall direction of the market. (Transaction costs excluded from rate of return; also, apparently, interest costs on the short positions.)

Saving Energy By Fighting Friction

Thursday, November 8th, 2007

Saving Energy By Fighting Friction is becoming big business, with estimates that resistance may burn one-third of the world’s power:

Chemical giants such as DuPont and BASF, leaders in the $40 billion lubrication market, are developing new polymers and low-friction plastics for car engines and airplanes. And design shops, like Rumsey Engineers of Oakland, Calif., are installing — you guessed it — fat pipes. The company recently used them to double the efficiency of the air-conditioning system at the Oakland Museum. “We cut friction in half,” says company President Peter H. Rumsey.

Designers in the battle against friction draw lessons from the streamlined forms of plants and animals. One team at Mercedes-Benz, for example, has modeled a concept car on the smooth-swimming form of a boxfish. The “Bionic” car slices neatly through strong winds on the open highway. Better aerodynamics leads to cars that get 70 miles per gallon of gas, according to Mercedes, 30% more than a standard design. The opportunities for savings are even greater in trucks. When they’re rolling at highway speeds, they burn two-thirds of their fuel just to overcome the drag of wind. Researchers at Georgia Tech report that streamlining truck design could reduce this drag by 12%, saving 1.2 billion gallons of fuel per year in the U.S.

The nanotech players focus mostly on new substances. ApNano Materials makes chemical spheres called fullerenes, each one so small that several billion scarcely fill a single teaspoon. When blended into traditional motor oils, these balls leave a smooth film several atoms thick on the metal they touch. Tests by Israel’s technical institute Technion show that they can reduce friction by as much as 50%. ApNano founder Menachem Genut says his fullerenes will be available as an additive in name-brand fuel oil within a year.