Isegoria

Greg Beato calls Albert Lasker the original mad man:

At the time, most ads simply presented a product to the public, perhaps with an illustrated mascot and an uninspired tagline. “How would you like to have a fairy in your home?” went one that depicted a cute little girl. “Use Fairy Soap.” For Lasker, however, just saying a product’s name wasn’t enough. Advertising was news, he decided. It had to communicate something important. And then, with the help of a copywriter named John E. Kennedy, he further developed his philosophy. Advertising was, as Kennedy put it, “salesmanship in print.” You had to appeal to a consumer’s self-interest. You had to give potential customers a “reason why,” a directive that would make them understand how a product could dramatically improve their life in some way.

“A century later, this doesn’t sound like a particularly powerful insight,” the authors of The Man Who Sold America observe. But in 1898, Lasker’s approach to commerce was as revolutionary an idea as Amazon and eBay would be 100 years later. Combining persuasive, consumer-centric copy with a media network that could reach millions of people at once allowed manufacturers to move goods as never before. Over the course of his career, Lasker oversaw dozens of hugely successful campaigns and established Lord & Thomas as one of leading agencies in the United States. Lord & Thomas made oranges and raisins proprietary by creating the brands Sunkist and Sun-Maid. It helped Goodyear quadruple the sale of its tires in less than four years. It figured out a better way to market Kotex, offering it in a “wrapped box” that women could pick up and purchase without having to request it from a sales clerk. It turned Pepsodent and Palmolive into category leaders. It helped Lucky Strikes increase sales from 25 million to 150 million a day by positioning it as an alternative to sweets for women watching their figures. It brought Amos & Andy to NBC’s radio network, hired an unknown Bob Hope to serve as its pitchman for Pepsodent, and helped pioneer the soap opera genre with its radio show The Story of Mary Marlin.

In 1904, a 24-year-old Lasker purchased a 25 percent ownership stake in Lord & Thomas. Eight years later, he owned it completely. Under his guidance, the agency didn’t just craft pretty images and slogans to publicize its clients’ products. Instead, it served a more strategic role. In many instances, it encouraged the companies it worked with to reformulate products in ways that made them more compelling to consumers. In others, it hatched schemes to get consumers to use its clients’ products in ways the client had never pursued. To get people to buy more oranges, for example, and thus benefit its client, the California Fruit Growers Exchange, it hit upon the strategy of popularizing orange juice. First, it worked with a manufacturer to develop better juice extractors — electric ones for commercial use and simple glass ones for the home. Then, it launched its “drink an orange” campaign, with ads that advised consumers to look for the inexpensive glass extractors at their local retailer. This single campaign, the authors of The Man Who Sold America report, increased orange consumption per serving in the United States “from half an orange to between two and three.”

I couldn’t make this up:

JetBlue Flight 1052 from Pittsburgh had taxied to a stop at Terminal 5, Gate C around noon Monday when flight attendant Steven Slater, 38, was struck in the head with luggage that a passenger was trying to unload from an overhead compartment, according to an airport official with knowledge of the incident.

Slater demanded an apology from the passenger, the official said, but the passenger refused. The two argued before the passenger told Slater to “f— off”, the official said. The official said that Slater then got on the plane’s PA system and directed that same obscenity at all the passengers and added that he especially meant it for the man who refused to apologize.

Slater is alleged to have then activated the plane’s inflatable emergency slide, grabbed two beers from the galley, then slid down the chute, the official said.

The attendant then ran from the tarmac into the terminal, the official said. He made his way to his car and drove to his residence in Belle Harbor, Queens, the official said. The official said that jetBlue officials waited until about 25 minutes after the chute was deployed before they notified Port Authority Police. The wait enabled Slater to make the getaway, the airport’s police force. Steve Stampley, a jetBlue spokesman, declined to comment on the alleged reporting delay.

Authorities picked the flight attendant up at his home on Beach 128th Street Monday afternoon and brought him to the Port Authority Police station at JFK airport for questioning. The official said that Slater was calm when arrested and remained calm throughout his interrogation and the booking process. He was charged with reckless endangerment and criminal mischief. He was awaiting arraignment Monday night.
[...]
Gawker unearthed what appears to be Slater’s MySpace page, which mentions overcoming alcohol and substance abuse, and includes comments about how he ‘loves to max it out with trips around the world, sometimes on a moment’s notice!’

Your customers don’t want to talk to you:

Have you ever walked into an airport, seen that there is nobody in line at the check-in counter, but still made a bee-line for the self-service kiosk? Better yet, have you ever waited in line for an ATM machine even though there is nobody in line for the teller inside the bank?

If you answered “yes” to either of these questions, you’re not alone. Most customers these days demonstrate a huge — and increasing — appetite for self-service, yet most companies run their operations as if customers prefer to interact with them live.

In our research on this topic (which we discuss in our recent HBR article “Stop Trying to Delight Your Customers“), we’ve found that corporate leaders dramatically overestimate the extent to which their customers actually want to talk to them. In fact, on average, companies tend to think their customers value live service more than twice as much as they value self service. But our data show that customers today are statistically indifferent about this — they value self-service just as much as using the phone. And guess what? By and large, this indifference holds regardless of their age, demographic, issue type, or urgency.

When investors noticed that their stock mutual funds had lost value — lots and lots of value — they moved their money into commodity ETFs. But that wasn’t simply a case of closing the barn door after the horse had bolted. They also found out the hard way that when commodities go up, commodity ETFs often don’t:

Here’s an example. The Standard & Poor’s Goldman Sachs Commodity Index (S&P GSCI), which tracks 24 raw materials, is the basis for as much as $80 billion of investment. Managers of funds linked to the index, created by Goldman in 1991, have to buy their next-month futures contracts between the fifth and the ninth business day of each month. During that period in May 2010, fund managers sold contracts for June delivery of crude oil priced at $75.67 a barrel, on average, according to data compiled by Bloomberg. Managers replacing those futures with July contracts had to pay $79.68. After the roll period ended, the July contract fell back to $75.43. For each of the thousands of contracts, in other words, managers paid $4 for nothing — and the value of their funds dropped accordingly.
[...]
Professional futures traders exploit the ETFs’ monthly rolls to make easy profits at the little guy’s expense. Unlike ETF managers, the professionals don’t trade at set times. They can buy the next month ahead of the big programmed rolls to drive up the price, or sell before the ETF, pushing down the price investors get paid for expiring futures. The strategy is called “pre-rolling.”

“I make a living off the dumb money,” says Emil van Essen, founder of an eponymous commodity trading company in Chicago. Van Essen developed software that predicts and profits from pre-rolling. “These index funds get eaten alive by people like me,” he says.

A look at 10 well-known funds based on commodity futures found that, since inception, all 10 have trailed the performance of their underlying raw materials, according to Bloomberg data. The biggest oil ETF, the U.S. Oil Fund, which Wolf bought and which now has $1.9 billion invested in it, has dropped 50 percent since it started in April 2006 — even as crude oil climbed 11 percent. The $2.7 billion U.S. Natural Gas Fund (UNG), offered by the same company, has plummeted 85 percent since its launch in April 2007 — more than double the 40 percent decline in natural gas. Deutsche Bank’s (DB) PowerShares DB Agriculture Fund (DBA) has eked out a 3 percent total return since January 2007, while the weighted average of its commodity components has risen 19 percent. To be sure, those spot prices — reported on cable business channels and other outlets — set an unreachable benchmark.
[...]
The allure of commodity investment has hit even the most sophisticated investors. The California Public Employees’ Retirement System, the largest public pension in the U.S., has lost almost 15 percent of an $842 million investment in commodity futures since 2007, according to its latest filings, depriving it of income at a time when it has sought taxpayer money to cover retiree benefits. It defends the investment as insurance that will pay off in the event of inflation.

Just as they did with subprime mortgage-backed securities, Wall Street banks are transferring wealth from their clients to their trading desks. “You walk into a casino, you expect to lose money,” says Greg Forero, former director of commodities trading at UBS (UBS). “It’s the same with these products. You’re playing a game with a very high rake, a very high house advantage, and you’re not the house.”

I never noticed LEGO’s not-so-LEGO Galidor action-figure line, but it was a disaster, and even within its core construction toy business, LEGO was foundering:

LEGO managers had given designers free rein to come up with ever more imaginative creations. And they took it. Left to their own devices, designers conjured up increasingly complex models, many of which required the company to make new components — the various bricks, doors, helmets, and heads that come in a rainbow of colors and fill every LEGO box. By 2004 the number of components had exploded, climbing from about 7,000 to 12,400 in just seven years. Of course, supply costs went through the roof, too.

Even more troubling was that the new designs weren’t resonating with kids. That freedom to create elaborate new designs had a price. “It was making us more stupid,” Smith-Meyer says. All you needed to do was look at the fire truck in its LEGO City line. It went from being a conventional hook-and-ladder rig to a futuristic hot rod. Its cockpit-like pod for a driver was nearly twice the size of the back of the truck, where presumably all the firefighting gear was stored.

The truck looked cool to the adult designers, but kids hated it. “It totally failed,” says Nipper, the executive vice-president. The design free-for-all turned the LEGO City line, once among the largest pieces of LEGO’s business, into a shell of its former self, accounting for just 3 percent of the company’s total revenue, down from roughly 13 percent in 1999. “It literally almost evaporated,” Nipper says.

Looking back, Nipper doesn’t find fault with the designers. “Management was to blame,” Nipper says. “The same people who were doing crappy products then are making world-class products today.” Managers, rather, let those designers go wild. And, Smith-Meyer says, they did. “We almost did innovation suicide. We didn’t do a lot of clever components. We did a lot of stylized pieces,” Smith-Meyer says. “We wanted to be Philippe Starck” — the French industrial, interior, and furniture designer famous for everything from juicers to motorcycles. LEGO had assumed it would flourish by giving its designers whatever pieces they asked for in order to unleash their creativity. Instead, costs soared as the models veered toward the esoteric.

Just as design pushed LEGO to the precipice, it helped bring the company back. But here’s the paradox: Instead of giving designers free rein to conjure up their most brilliant creations to save the company, LEGO tied their hands. Instead of rubber-stamping nearly every request for a new component, LEGO put each one to a vote among designers. Only the top vote getters — the ones other designers imagined they could use — would be added to the palette. And it eliminated rarely used pieces, slashing the total number of components to about 7,000, the same number as in 1997.

LEGO also forced designers to come out of their cocoons and work with noncreative staff. At the earliest stages of product development, marketing managers, who had detailed research on the types of products kids wanted, helped guide development. Manufacturing personnel weighed in on production costs before a prototype ever saw the light of day. Gone were the days when designers could go wherever their imaginations took them.

Claire Cain Miller of the New York Times describes Elon Musk as full of brio and spin:

“He’s done amazing things, but at the same time, he’s not a straight-shooter,” says Darryl Siry, Tesla’s former senior vice president for sales and marketing. “It’s a reality distortion field and it’s a powerful one. He gives the facts to fit the narrative he wants out there.”

When your sales & marketing guy is uncomfortable with how far you stretch the truth, well, you’re probably taking things too far.

Tesla isn’t making money, and it’s not clear when it’s going to start:

In 2009, Tesla lost $55.7 million on revenue of just $111.9 million. It faces a period without significant sales revenue because it plans to stop selling the current version of the Roadster in 2011 and will not start selling the next generation until at least a year after the Model S is out.

Elon’s brother, Kimbal, calls him the double-down king:

In addition to his Tesla investment, Mr. Musk says he has funneled $100 million into SpaceX and $10 million into SolarCity; the total of $185 million is nearly all his proceeds from the sale of PayPal to eBay. (He sold $24 million worth of his Tesla stock, in part, he says, because he recently ran out of cash.)

The Wall Street Journal reports that men are hoarding old-model razors, because they’re tired of the endless “upgrades” that don’t provide a better shave:

Steven Schimmel, owner of Pasteur Pharmacy in Manhattan, says he quadrupled sales in his shaving aisle by carrying hard-to-find products like British shave creams, badger-hair brushes and safety razors. He sells eight brands of double-edge blades, including Gillette’s 7 O’Clock blades, bought from a dealer in India.

While the latest advances in shaving remain big sellers on Drugstore.com Inc., unit sales of hard-to-find blades including the Schick Injector and Wilkinson Sword increased in 2009 over the year before. Drugstore.com regularly lobbies blade-makers to maintain their inventories.

Shaving is big business:

Gillette brings in more than $4 billion in annual sales; Schick sees sales of around $1 billion a year, according to analysts’ estimates. Though the recession hurt sales of blades and boosted sales of cheaper disposable razors, the two companies still have a lock on the U.S. market. Gillette commands 70% of the razors-and-blades category, and Schick holds about 10%, according to market-data firm Euromonitor International Inc.

Why did so many successful entrepreneurs and startups come out of PayPal?

“Peter and Max assembled an unusual critical mass of entrepreneurial talent, primarily due to their ability to recognize young people with extraordinary ability (the median age of execs on the S1 filing was 30). But the poor economy allowed us to close an abnormal number of offers, as virtually nobody other than eBay and (in part) google was hiring in 2000–02.” (by Keith Rabois, former Executive Vice President of Paypal)

“Extreme Focus (driven by Peter): Peter required that everyone be tasked with exactly one priority. He would refuse to discuss virtually anything else with you except what was currently assigned as your #1 initiative. Even our annual review forms in 2001 required each employee to identify their single most valuable contribution to the company.” (by Keith Rabois, former Executive Vice President of Paypal)

“Dedication to individual accomplishment: Teams were almost considered socialist institutions. Most great innovations at PayPal were driven by one person who then conscripted others to support, adopt, implement the new idea. If you identified the 8–12 most critical innovations at PayPal (or perhaps even the most important 25), almost every one had a single person inspire it (and often it drive it to implementation). As a result, David enforced an anti-meeting culture where any meeting that included more than 3–4 people was deemed suspect and subject to immediate adjournment if he gauged it inefficient. Our annual review forms in 2002 included a direction to rate the employee on “avoids imposing on others’ time, e.g. scheduling unnecessary meetings.” (by Keith Rabois, former Executive Vice President of Paypal)

“Refusal to accept constraints, external or internal: We were expected to pursue our #1 priority with extreme dispatch (NOW) and vigor. To borrow an apt phrase, employees were expected to “come to work every day willing to be fired, to circumvent any order aimed at stopping your dream.” Jeremy Stoppelman has relayed elsewhere the story about an email he sent around criticizing management that he expected to get him fired and instead got him promoted. Peter did not accept no for answer: If you couldn’t solve the problem, someone else would be soon assigned to do it.” (by Keith Rabois, former Executive Vice President of Paypal)

“Driven problem solvers: PayPal had a strong bias toward hiring (and promoting & encouraging, as Keith mentions) smart, driven problem solvers, rather than subject matter experts. Very few of the top performers at the company had any prior experience with payments, and many of the best employees had little or no prior background building Internet products. I worked on the fraud analytics team at PayPal, and most of our best people had never before done anything related to fraud detection. If he’d approached things “traditionally”, Max would have gone out and hired people who had been building logistic regression models for banks for 20 years but never innovated, and fraud losses would likely have swallowed the company.” (by Mike Greenfield, former Sr. Fraud R&D Scientist of Paypal)

“Self-sufficiency — individuals and small teams were given fairly complex objectives and expected to figure out how to achieve them on their own. If you needed to integrate with an outside vendor, you picked up the phone yourself and called; you didn’t wait for a BD person to become available. You did (the first version of) mockups and wireframes yourself; you didn’t wait for a designer to become available. You wrote (the first draft of) site copy yourself; you didn’t wait for a content writer.” (by Yee Lee, former Product & BU GM of Paypal)

“Extreme bias towards action — early PayPal was simply a really productive workplace. This was partly driven by the culture of self-sufficiency. PayPal is and was, after all, a web service; and the company managed to ship prodigious amounts of relatively high-quality web software for a lot of years in a row early on. Yes, we had the usual politics between functional groups, but either individual heroes or small, high-trust teams more often than not found ways to deliver projects on-time.” (by Yee Lee, former Product & BU GM of Paypal)

“Willingness to try — even in a data-driven culture, you’ll always run in to folks who either don’t believe you have collected the right supporting data for a given decision or who just aren’t comfortable when data contradicts their gut feeling. In many companies, those individuals would be the death of decision-making. At PayPal, I felt like you could almost always get someone to give it a try and then let performance data tell us whether to maintain the decision or rollback.” (by Yee Lee, former Product & BU GM of Paypal)

“Data-driven decision making — PayPal was filled with smart, opinionated people who were often at logger-heads. The way to win arguments was to bring data to bear. So you never started a sentence like this “I feel like it’s a problem that our users can’t do X”, instead you’d do your homework first and then come to the table with “35% of our [insert some key metric here] are caused by the lack of X functionality…” (by Yee Lee, former Product & BU GM of Paypal)

“Radical transparency on metrics: All employees were expected to be facile with the metrics driving the business. Otherwise, how could one expect each employee to make rational calculations and decisions on their own every day? To enforce this norm, almost every all-hands meeting consisted of distributing a printed Excel spreadsheet to the assembled masses and Peter conducting a line by line review of our performance (this is only a modest exaggeration).” (by Keith Rabois, former Executive Vice President of Paypal)

“Vigorous debate, often via email: Almost every important issue had champions and critics. These were normally resolved not by official edict but by a vigorous debate that could be very intense. Being able to articulate and defend a strategy or product in a succinct, compelling manner with empirical analysis and withstand a withering critique was a key attribute of almost every key contributor. I still recall the trepidation I confronted when I was informed that I needed to defend the feasibility of my favorite “baby” to Max for the first time.” (by Keith Rabois, former Executive Vice President of Paypal)

“Extreme Pressure — PayPal was a very difficult business with many major issues to solve. We were able to see our colleagues work under extreme pressure and hence we learned who we could rely on and trust.” (by Keith Rabois, former Executive Vice President of Paypal)

An anonymous Google employee (“CinoBoo”) explains what it’s really like to work for the search giant:

I’ve been there for about 5 years. You can read about the good parts anywhere, so I’ll try to offer a counterpoint based on having worked at other software companies.

A common problem is that it’s easy to become spoiled by all the perks. Several offices have developed distinct cultures of entitlement, and people whine about the quality of the fudge on the free brownies. It’s embarrassing to be around people who’ve become like spoiled children.

An engineering-specific problem there is that there’s a lot of support for operations — that is, lots of people whose job it is to keep the systems running. Engineers don’t habitually carry pagers and are on-call relatively infrequently. The plus side is that they can focus on development, get adequate sleep, and be more productive. The downside is that they can easily lose touch with what’s really going on in the data centers and sometimes even their customers. It’s a trade-off. Google is at least aware of it and uses incentive programs to entice engineers to spend time in ops roles.

Last, the company is big into “generating luck”, which means trying a whole bunch of stuff in the hopes that a few efforts will pay off. The practical net effect of this on leaf-node employees is that you can wind up working on three, four, even five or more failed projects in a row. It doesn’t actively hurt you, and in some cases they even give big bonuses to teams that worked really hard before the project was canceled. But because promotions and bonuses are generally tied to “impact”, meaning stuff that actually launches and gets used, a whole lot of people wind up spending their first 4 years there with no launches, no promotions, and no fancy bonuses. (The bonuses really are quite generous for teams who launch things that are successful.)

This may wind up being a morale issue at some point, but at the moment people aren’t so fed up that they’d quit over it. They know they can always move to a sure-fire domain like GMail or Chrome or Ads or whatever, and be assured of at least minor launches and success for a few years. It’s just that there are a lot of opportunities for startup-like success within Google, and people are encouraged to participate without being told of the potential risks and opportunity costs.

These three factors combined yield a fair percentage of employees who wind up feeling a little disenchanted, though not actively scarred the way they might be if they’d worked for 90% of the rest of the industry.