A more comprehensive and devious approach

Saturday, April 22nd, 2017

An enterprising group of hackers targeted a Brazilian bank with a more comprehensive and devious approach than usual:

At 1 pm on October 22 of last year, the researchers say, hackers changed the Domain Name System registrations of all 36 of the bank’s online properties, commandeering the bank’s desktop and mobile website domains to take users to phishing sites. In practice, that meant the hackers could steal login credentials at sites hosted at the bank’s legitimate web addresses. Kaspersky researchers believe the hackers may have even simultaneously redirected all transactions at ATMs or point-of-sale systems to their own servers, collecting the credit card details of anyone who used their card that Saturday afternoon.

“Absolutely all of the bank’s online operations were under the attackers’ control for five to six hours,” says Dmitry Bestuzhev, one of the Kaspersky researchers who analyzed the attack in real time after seeing malware infecting customers from what appeared to be the bank’s fully valid domain. From the hackers’ point of view, as Bestuzhev puts it, the DNS attack meant that “you become the bank. Everything belongs to you now.”

It conquered the office

Friday, April 21st, 2017

Adam Smith famously used a pin factory to illustrate the advantages of specialization, Virginia Postrel reminds us — just before the Industrial Revolution really kicked off:

By improving workers’ skills and encouraging purpose-built machinery, the division of labor leads to miraculous productivity gains. Even a small and ill-equipped manufacturer, Smith wrote in The Wealth of Nations, could boost each worker’s output from a handful of pins a day to nearly 5,000.

In the early 19th century, that number jumped an order of magnitude with the introduction of American inventor John Howe’s pin-making machine. It was “one of the marvels of the age, reported on in every major journal and encyclopedia of the time,” writes historian of technology Steven Lubar. In 1839, the Howe factory had three machines making 24,000 pins a day — and the inventor was clamoring for pin tariffs to offset the nearly 25 percent tax that pin makers had to pay on imported brass wire, a reminder that punitive tariffs hurt domestic manufacturers as well as consumers.

[...]

Nowadays, we think of straight pins as sewing supplies. But they weren’t always a specialty product. In Smith’s time and for a century after, pins were a multipurpose fastening technology. Straight pins functioned as buttons, snaps, hooks and eyes, safety pins, zippers, and Velcro. They closed ladies’ bodices, secured men’s neckerchiefs, and held on babies’ diapers. A prudent 19th century woman always kept a supply at hand, leading a Chicago Tribune writer to opine that the practice encouraged poor workmanship in women’s clothes: “The greatest scorner of woman is the maker of the readymade, who would not dare to sew on masculine buttons with but a single thread, yet will be content to give the feminine hook and eye but a promise of fixedness, trusting to the pin to do the rest.”

Most significantly, pins fastened paper. Before Scotch tape or command-v, authors including Jane Austen used them to cut and paste manuscript revisions. The Bodleian Library in Oxford maintains an inventory of “dated and datable pins” removed from manuscripts going as far back as 1617.

[...]

But a better solution was on its way. In 1899, an inventor in the pin-making capital of Waterbury, Connecticut, patented a “machine for making paper clips.” William Middlebrook’s patent application, observed Henry Petroski in The Evolution of Useful Things, “showed a perfectly proportioned Gem.”

It was that paper clip design that conquered the office and consigned pins to their current home in the sewing basket.

One-handed zipping

Wednesday, April 5th, 2017

Under Armour introduced an ingenious new zipper design created by engineer Scott Peters a couple years ago:

Although the fastening still relies on the interlocking of two bands of metal teeth, the clasps at the bottom have received a thoughtful re-design. The motivation for Peters, he says, was watching his uncle, who suffers from myotonic dystrophy, struggle to engage the conventional clasps. The solution is the inclusion of magnets and a unique catch, so that the two halves automatically align with one another and the zipper can even be done up one handed.

MagZip

More on the MagZip‘s development:

The eureka moment of a magnetic zipper was crucial. But the exact millimeter grooves making the process practical would require painstaking nuance.

“Magnets in and of themselves won’t work. They’ll drive components together, but you have issues of alignment, issues of holding things together without popping out – and pulling them apart can be a nightmare,” Peters explains. “We had to figure out the combination of mechanical design so it self-aligns and easily locks itself in place, enabling you to zip with one hand.”

“We started rapid prototyping, getting parts machined, and testing. We’d make a part, assemble it, and glue it on a zipper to find out what worked and didn’t work. I had one part that actually broke, and when this had broken, it kind of showed me the way. . .we were able to evolve the design to where it is today, a more open hook-and-catch.”

Why Japan’s Rail Workers Can’t Stop Pointing at Things

Monday, April 3rd, 2017

It is hard to miss when taking the train in Japan:

White-gloved employees in crisp uniforms pointing smartly down the platform and calling out — seemingly to no one — as trains glide in and out of the station. Onboard is much the same, with drivers and conductors performing almost ritual-like movements as they tend to an array of dials, buttons and screens.

Shisa kanko on Skinhansen in Kyoto Station

While these might strike visitors as silly, the movements and shouts are a Japanese-innovated industrial safety method known as pointing-and-calling; a system that reduces workplace errors by up to 85 percent.

Known in Japanese as shisa kanko, pointing-and-calling works on the principle of associating one’s tasks with physical movements and vocalizations to prevent errors by “raising the consciousness levels of workers”—according to the National Institute of Occupational Safety and Health, Japan. Rather than rely on a worker’s eyes or habit alone, each step in a given task is reinforced physically and audibly to ensure the step is both complete and accurate.

Cutting Air Freight Costs In Half

Friday, March 31st, 2017

Natilus [sic] hopes to cut air-freight costs in half with drones — thanks to a more efficient use of fuel and the lack of an expensive crew:

Natilus, which has raised $750,000 from venture capitalist Tim Draper and was incubated at the aviation-oriented Starburst Accelerator in Los Angeles, will power its drones with turboprop and turbofan engines and standard jet fuel, sending them on missions at an altitude of approximately 20,000 feet. That’s well below commercial planes, but high enough to be fuel-efficient. Matyushev says trips across oceans would cost about half of what current commercial air freight transport runs, traveling a bit slower than manned cargo aircraft.

Natilus vs. Cargo Ship and 747

“Air cargo is all about speed at high price,” he says. “Ocean freight is longer transit times at lower pricing. And with certain goods — be it perishables, or goods that are looking for that middle ground — that idea of middle price for middle transit times is that sweet spot.”

Please remember this perverse outcome

Sunday, March 19th, 2017

Charlie Munger was not impressed with academic psychology, but he was impressed with Robert Cialdini‘s Influence:

Cialdini had made himself into a super-tenured “Regents’ Professor” at a very young age by devising, describing, and explaining a vast group of clever experiments in which man manipulated man to his detriment, with all of this made possible by man’s intrinsic thinking flaws.

I immediately sent copies of Cialdini’s book to all my children — I also gave Cialdini a share of Berkshire stock [Class A] to thank him for what he had done for me and the public. Incidentally, the sale by Cialdini of hundreds of thousands of copies of a book about social psychology was a huge feat, considering that Cialdini didn’t claim that he was going to improve your sex life or make you any money.

Part of Cialdini’s large book-buying audience came because, like me, it wanted to learn how to become less often tricked by salesmen and circumstances. However, as an outcome not sought by Cialdini, who is a profoundly ethical man, a huge number of his books were bought by salesmen who wanted to learn how to become more effective in misleading customers. Please remember this perverse outcome when my discussion comes to incentive-caused biases a consequence of the superpower of incentives.

Cialdini’s Pre-Suasion came out recently.

Meaning, even a very small meaning, can matter a lot

Friday, March 17th, 2017

Dan Ariely’s studies can be darkly humorous:

In their first experiment, Ariely’s team asked college students to find sets of repeated letters on a sheet of paper. Some of the students’ work was reviewed by a “supervisor” as soon as it was turned in. Other students were told in advance that their work would be collected but not reviewed, and still others watched as their papers were shredded immediately upon completion.

Each of the students was paid 55 cents for completing the first sheet, and five cents less for each sheet thereafter, and allowed to stop working at any point. The research team found that people whose work was reviewed and acknowledged by the “supervisor” were willing to do more work for less pay than those whose work was ignored or shredded.

In a second experiment, participants assembled Bionicles, toy figurines made by Lego. The researchers made the Bionicle project somewhat meaningful for half of the students, whose completed toys were displayed on their desks for the duration of the experiment, while the students assembled as many Bionicles as they wished. “Even though this may not have been especially meaningful work, the students felt productive seeing all of those Bionicles lined up on the desk, and they kept on building them even when the pay was rather low,” Ariely said.

The rest of the participants, whose work was intended to be devoid of meaning, gave their completed Bionicles to supervisors in exchange for another box of parts to assemble. The supervisors immediately disassembled the completed figurines, and returned the box of parts to the students when they were ready for the next round. “These poor individuals were assembling the same two Bionicles over and over. Every time they finished one, it was simply torn apart and given back to them later.” The students in the meaningful and non-meaningful conditions were each paid according to a scale that began at $2.00 for the first Bionicle and decreased by 11 cents for each subsequent figurine assembled.

“Adding to the evidence from the first experiment, this experiment also showed that meaning, even a very small meaning, can matter a lot,” Ariely said. Students who were allowed to collect their assembled Bionicles built an average of 10.2 figurines, while those whose work was disassembled built an average of 7.2. Students whose work was not meaningful required a median level of pay 40 percent higher than students whose work was meaningful.

“These experiments clearly demonstrate what many of us have known intuitively for some time. Doing meaningful work is rewarding in itself, and we are willing to do more work for less pay when we feel our work has some sort of purpose, no matter how small,” Ariely said. “But it is also important to point out that when we asked people to estimate the effect of meaning on labor, they dramatically underestimated the effects. This means, that while we recognize the general effect of meaning on motivation, we are not sufficiently appreciating its magnitude and importance.”

Visionary Leadership and Flying

Monday, March 13th, 2017

There seems to be a connections between visionary leadership and flying:

Thrill-seeking chief executives who pilot planes in their spare time are more likely to inspire original thinking at their companies, says Jingjing Zhang, an accounting professor at McGill University and co-author of a new study that surveyed more than 1,200 men and women in the top job between 1993 and 2003.

[...]

“Pilot CEOs are very different from other people, willing to take more risks in seeking the experience and sensations related to flying and innovation,” Ms. Zhang says, adding that many of the adventurous business leaders surveyed also raced cars or engaged in daring outdoor sports such as skydiving.

Using certificate records from the Federal Aviation Administration, the researchers found companies with a pilot in the top job spent more on research and development on average, and produced nearly twice as many patents each year as those with a nonpilot CEO. Moreover, those patents tended to be more diverse and interdisciplinary, and had a higher impact, inspiring further innovation.

The desire to learn how to fly small aircraft says a lot about someone’s willingness to seek out new and exciting opportunities that entail risk. It is a hobby shared by Larry Ellison, co-founder of software giant Oracle Corp.; the late Wal-Mart Stores Inc. boss, Sam Walton, and Virgin Group’s Richard Branson.

Erik Prince’s Training Bases in China

Wednesday, March 8th, 2017

I remember being shocked when I first learned that Erik Prince was able to start a mercenary company in the US. (Blackwater was originally just a tactical training facility before it started hiring out private military contractors.)

He has since moved on to providing logistics in dangerous places via his Frontier Services Group, but they’re not just helping Chinese mining interests in Africa. They’re now setting up Blackwater-style training camps in Chinese provinces:

In December, Frontier Services Group, of which Prince is chairman, issued a press release that outlined plans to open “a forward operating base in China’s Yunnan province” and another in the troubled Xinjiang region, home to the mostly Muslim Uighur minority.

“He’s been working very, very hard to get China to buy into a new Blackwater,” said one former associate. “He’s hell bent on reclaiming his position as the world’s preeminent private military provider.”

In an email to BuzzFeed News, a spokesperson for Frontier Services Group provided a statement and strongly disputed that the company was going to become a new Blackwater, insisting that all of its security services were unarmed and therefore not regulated. “FSG’s services do not involve armed personnel or training armed personnel.” The training at the Chinese bases would “help non-military personnel provide close protection security, without the use of arms.”

Amateurs talk abouts tactics; professionals study logistics. I guess the true professional provides logistics without dirtying his hands doing anything explicitly tactical at all.

By the way, Erik Prince is Betsy DeVos’s brother. I’m surprised that doesn’t come up more often.

Disrupters of the world unite!

Friday, February 17th, 2017

Tyler Cowen’s The Complacent Class suggests that America lost its taste for risk, and Edward Luce opens his review by poking a bit of fun at innovative start-ups:

Walk into any start-up company in America and you will likely see an almost identical decor: the walls will have been dutifully stripped of paint; the workplace will be littered with the same multicoloured pouffes; and most of its denizens will be wearing a variation on the casual hipster uniform. In an age of hyper-individualism, entrepreneurs strike a remarkably similar pose. The same applies to those who have refurbished their university common areas, set up corporate “chill-out zones”, or stripped their downtown apartments to look like a Silicon Valley unicorn. Everyone wants that creative energy to rub off on them. Disrupters of the world unite!

What happened when the U.S. got rid of guest workers?

Friday, February 10th, 2017

What happened when the U.S. got rid of guest workers?

A team of economists looked at the mid-century “bracero” program, which allowed nearly half a million seasonal farm workers per year into the U.S. from Mexico. The Johnson administration terminated the program in 1964, creating a large-scale experiment on labor supply and demand.

The result wasn’t good news for American workers. Instead of hiring more native-born Americans at higher wages, farmers automated, changed crops or reduced production.

You always have to have a plan B

Thursday, February 9th, 2017

Everybody fails, but not everybody responds to failure the same way, Mike Riggs notes, as he interviews Megan McArdle about The Up Side of Down:

Mike: You use the writing profession as an example of this.

Megan: You have to accept that being bad is part of learning to write. Most people who end up approaching professional writer status were always better at it than other kids. Then they get into the professional landscape and realize everyone else in the industry was also better at it than the other kids. This can be very traumatic for a lot of writers, and I’ve seen some of them just freeze. They don’t turn stuff in because as long as they haven’t turned it in, it’s not bad yet.

How do you hack that thinking? You say to yourself, “Look, I can rewrite garbage, I can’t rewrite nothing.”

Mike: It’s the iteration paradox. You miss 100% of the shots you don’t take, but you also miss a ton of the shots you do take when you’re first starting out. You have to do a thing over and over to get good at it, while somehow dealing with the fact that it’s really embarrassing and discomfiting to try hard at something and still be bad.

Megan: And the only way around that is to accept that failure is an essential part of the process.

You are not supposed to sit down and be Proust on your first pass. Proust wasn’t even Proust on the first pass. That means you have to see doing something badly as better than not doing anything at all. I won’t get fired for handing in 1,000 bad words. I will definitely get fired for not handing in anything.

After that, the next step is learning to recognize where and why you’re bad without rolling around on the floor, saying, “This is terrible, I’m obviously the world’s worst writer.” And you do that by looking at your bad work as a dipstick that measures where you can improve rather than one that measures your innate talents.

Mike: This speaks to the idea that learning how to do something new is good for you even if it doesn’t necessarily turn into a career.

Megan: We learn by doing stuff not well. That’s how people learn to play tennis. You don’t become good at it by creating a really elaborate theory of tennis ball physics, or else MIT would win Wimbledon every year. You hit a ball, you try to guess where it will go. It doesn’t go where you expect and then on the 100th time you finally hit it right. By hitting it wrong all those times, you learn to hit it right.

If you’ve never done anything you weren’t good at, you can’t learn the valuable skill of sucking at something but continuing to do it, which is how people get good at anything. And we have to make ourselves do it because doing something you aren’t good at is usually less rewarding than things that come more easily.

[...]

Mike Riggs: It seems like the best way to hedge against that kind of collapse at the institutional level is to be as diversified as possible at a personal level. Try things that are difficult, save as much as you can, contribute to a 401k. But even that is hard for lots of people.

Megan McArdle: The fact is you can’t assume nothing bad will happen. You could get hit by a truck tomorrow. Your company could go under. We should prepare for failure, which is why I always tell my readers to save 20% of their gross income. As you can imagine, this is not a popular suggestion with my readers.

I also advise people to have a year’s worth of expenses in an emergency fund. This was viewed, even by financial advisors, as quite conservative. But I spent two years being unemployed after getting what was supposed to be the golden ticket to a guaranteed job, which was an MBA from a top-five school. And that taught me there’s no such thing as a golden ticket. You always have to have a plan B. You always have to be thinking about what you’ll do if your company fails. Where will you go next? You should be maintaining connections in that industry, but you should also be living below your means. You should have a smaller mortgage than what you can afford. You should have more savings than you really need.

If you end up dying of cancer at the age of 40, you’ll have over-saved. But if you die of cancer at the age of 40, your biggest regret is not going to be that you didn’t spend more money while you were healthy. Your biggest regret is going to be about relationships and the people you didn’t call, so call your mother.

What companies get wrong about motivating their people

Sunday, January 22nd, 2017

Dan Ariely’s Payoff looks at what companies get wrong about motivating their people:

A few years ago, behavioral economist Dan Ariely conducted a study at a semiconductor factory of Intel’s in Israel. Workers were given either a $30 bonus, a pizza voucher or a complimentary text message from the boss at the end of the first workday of the week as an incentive to meet targets. (A separate control group received nothing.) Pizza, interestingly, was the best motivator on the first day, but over the course of a week the compliment had the best overall effect, even better than the cash. “When I get the money, I’m interested, when I’m not getting the money, I’m not so interested,” Ariely said in a recent interview. “Even relatively small bonuses can reframe to people how they think about work.”

“Purpose” has become a buzzword:

Often what it means is that the CEO picks a charity that they give money to. That’s often corporate social responsibility. But the reality is that a lot of meaning is about the small struggles in life and managing to overcome them and feeling a sense of progress.

[...]

Companies often don’t create this kind of sense of connection and meaning. They destroy it — unintentionally — with rules and regulations.

[...]

In many companies, in the name of bureaucracy and procedure and streamlining things, we’re basically eliminating people’s ability to use their own judgment. We think about people as cogs. And because of that we eliminate their motivation.

Ariely is largely against bonuses:

I don’t even think we should pay bonuses to CEOs. There’s lots of reasons to give bonuses. Some are for accounting purposes — a company says ‘Let’s not promise people a fixed amount of money: You’ll get at least x, above that we’ll do revenue sharing.’ I understand that. It depends on how much money we make. But when you have performance-contingent bonuses — and this goes back to the book — to motivate people, what you are assuming can hold people back. Imagine I paid you on a performance-contingent approach. What is my underlying assumption? My underlying assumption is that you know what you need to do but you’re too lazy to do it.

[...]

How many CEOs are just lazy? Who’d say, if they didn’t have the bonus, that I’m not interested in working? CEOs are deeply involved in their companies. Their egos are tied to it. The second thing they tell you after they say their name, often before they tell you how many kids they have and what hobbies they have is what company they are leading. To think that they’re just working for a bonus is just completely crazy.

How Amazon innovates in ways that Google and Apple can’t

Saturday, January 14th, 2017

Timothy B. Lee explains how Amazon innovates in ways that Google and Apple can’t:

Amazon has figured out how to combine the entrepreneurial culture of a small company with the financial resources of a large one. And that allows it tackle problems most other companies can’t.

[...]

Google’s approach — solve the hard technical problems first, worry about the business model later — is rooted in the engineering background of Google Founders Larry Page and Sergey Brin. In contrast, Amazon CEO Jeff Bezos spent almost a decade working for several Wall Street firms before starting Amazon — a background that gives him a more pragmatic outlook that’s more focused on developing products customers will actually want to pay for.

Bezos has worked to create a culture at Amazon that’s hospitable to experimentation.

“I know examples where a random Amazon engineer mentions ‘Hey I read about an idea in a blog post, we should do that,’” Eric Ries says. “The next thing he knows, the engineer is being asked to pitch it to the executive committee. Jeff Bezos decides on the spot.”

A key factor in making this work, Ries says, is that experiments start small and grow over time. At a normal company, when the CEO endorses an idea, it becomes a focus for the whole company, which is a recipe for wasting a lot of resources on ideas that don’t pan out. In contrast, Amazon creates a small team to experiment with the idea and find out if it’s viable. Bezos famously instituted the “two-pizza team” rule, which says that teams should be small enough to be fed with two pizzas.

Ries says that new teams get limited funding and clear milestones; if a team succeeds in smaller challenges, it’s given more resources and a larger challenge to tackle.

But Amazon doesn’t spend too much time on internal testing. “They prioritize launching early over everything else,” one engineer wrote in an epic 2011 rant comparing Amazon’s culture to other technology companies. Launching early with what Ries has dubbed a “minimum viable product” allows Amazon to learn as quickly as possible whether an idea that sounds good on paper is actually a good idea in the real world.

Of course, this method isn’t foolproof; Amazon has had plenty of failures, like its disastrous foray into the smartphone market. But by getting a product into the hands of paying customers as quickly as possible and taking their feedback seriously, Amazon avoids wasting years working on products that don’t serve the needs of real customers.

This seems to be the approach Amazon is taking with Amazon Go, its new convenience store concept. It’s a technology that could work in many different types of retail stores, but Amazon’s initial approach is modest: a single, relatively small convenience store. Media reports suggest that Amazon plans to open 2,000 retail stores, but the company disputes this. The Amazon way, after all, isn’t to open one store because there’s a plan for 2,000. It’s to open one store and then open thousands more if the first one is a big success.

In the abstract this approach — minimize bureaucracy, start out with small experiments, expand them if they’re successful — sounds so good that it’s almost banal. But it’s surprisingly difficult for big companies to do this, especially when they’re entering new markets.

Over time, big companies develop cultures and processes optimized for the market where they had their original success. Companies have a natural tendency to establish uniform standards across the enterprise.

[...]

“It doesn’t matter what technology” teams use at Amazon, one of the company’s former engineers wrote in 2011. Bezos has explicitly discouraged the kind of standardization you see at companies like Google and Apple, encouraging teams to operate independently using whatever technology makes the most sense.

Bezos has worked hard to make Amazon a modular, flexible organization with a minimum of company-wide policies.

(Hat tip to Arnold Kling.)

Pac-Pro Football

Wednesday, January 11th, 2017

The NFL relies on college football for its minor league, but that may change:

Don Yee, better known as Tom Brady’s agent, is launching a professional football league that will target young players who don’t qualify for college or just want to make money sooner rather than later. In limiting the player pool to those between 18 and 22 years old, the venture will challenge a nearly century-old system in which the National Football League relies almost entirely on colleges to prepare its future workforce.

[...]

The National Collegiate Athletic Association has steadfastly refused to pay athletes but has begun supplementing their scholarships with a monthly living stipend. The amount depends in part on whether an athlete lives on campus but can range from a few hundred dollars to more than $1,000. Also, Northwestern’s football players lost their bid to unionize and be treated as employees of the university.

In light of those developments and an NFL rule that requires players to be three years removed from high school to be eligible, Yee and other advocates for athletes have argued for an alternative route for players who want to make it to the highest level of the sport.

[...]

Yee hopes to avoid joining a long list of failed professional football leagues, a group that includes the World Football League, the United States Football League, and the XFL. The NFL folded its own alternative league called NFL Europe in 2007 after 15 seasons. These leagues collapsed amid declining interest and mounting expenses. Beyond paying a minimum of 45 players, owners need training facilities, equipment, coaches and insurance policies — expenses that can reach $5 million to $10 million annually.

“Pac-Pro Football” as its executives refer to it, will have a single-entity structure rather than a franchise model, with the league controlling all team and personnel decisions.

[...]

The Pac-Pro league, McCaffrey said, will target players with NFL-level talent that require additional seasoning. Among those players who could fit the bill are those who struggle with academics or lost their scholarships for disciplinary reasons, or junior-college standouts not yet ready for the NFL.

Heisman Trophy winner Cam Newton, for example, spent a year playing at tiny Blinn College after a series of problems forced him to leave the University of Florida. Though Newton later thrived at Auburn, he is the type of athlete the Pac-Pro founders hope will see the new league as a viable option.

Those athletes will be able to get jump on learning the professional style of play, which requires a different skill set than big-time college football.

Well, there is a decent pool of players, I suppose. Fans though?