Thursday, January 29, 2009

If the Neighbor's Grass Always Looks Greener, Rip out Your Lawn and Plant Wildflowers

Everybody complains about the finance industry, but nobody does anything about it. Everybody complains about the advertising business, but nobody does anything about it.

I spend a lot of my time talking to people, meeting them, listening to their ideas and what they need to achieve them, making introduction, sharing information and etc. This week's conversations caused something that has always bothered me to start to bother me: everybody wants to radically change some industry, but never their own. Bankers want to change healthcare. Academics want to change information management. Marketers want to change media. Media people want to change consumer packaged goods. Philanthropists want to change finance. And these are just the conversations I've had this month.

We need change. I look at the industries I am in and see that we need change. Not improvement, but fundamental change, a real rebuilding from the foundations change. But to change things we need to change the things we know. Any of us can look at another's industry and see where it is failing. But the real work is knowing how to get from where we are to where we think things should be. Doing that requires a deep knowledge of industry relationships and interrelationships, of its microstructures and systems. That knowledge only comes from having worked in the industry for years.

Certainly I understand the draw of coming at an old problem with an outsider's insights and another discipline's techniques; trying something that has not been tried, the new tool. But if you've not been in an industry, you probably don't understand how it and its ecosystem work and why past efforts to change it have failed. How can you address fundamentally complex issues that you don't even know about?

Last night I was ranting on the phone to a friend about people not being able to see the systems they are part of, and she asked me "well, how would you change what you do?" I told her, essentially, that what I do is done really rather poorly, but as well as can be expected. I was more guilty of lack of imagination than the people I was ranting about. So, to be honest, I'm not writing this to change your mind, I'm writing it to change my own.

The finance industry has failed us again and again. In the past four or five hundred years we've probably averaged finance-system led contractions at least a dozen and probably a score of times. In that time, we've incrementally improved the system, regulated it, computerized it and completely changed it and we still have failures. But, in fact, we haven't changed it at all. Anybody in today's finance industry can read an account of the Medicis, the 16th century English goldsmiths or the 11th century trade associations and see that those protean systems are the same systems we have today. Finance plays an absolutely key role in society's progress. Imagine how much better off we would be today if we had a more stable financial system for the past five centuries.

Similarly, the advertising industry has not had a notable success story since the mass roll-out of Grey Poupon in the '70s. Since the sixties--at least, and excepting 1999-2000--the industry's chatter about its own future has been focused on its dysfunction. Meanwhile, its entrepreneurs spend their time improving measurement, making transactions more efficient, collecting ever more personal data, and making in-your-face promotion even more in-your-face. As a result, while advertising expertise and spend becomes more and more crucial for companies trying to compete, advertising as a whole has become more and more a societal dead weight. Imagine how much better off we as a society would be if we could match consumers with the products and services that are right for them, spending more money on making the products and services better and less on targeting the gullible and wheedling the skeptics.

This economic disruption is an ideal opportunity to make fundamental changes, to change things for the better for the long term. But I think the window is short. In two years people will be making money again and see no reason to change. Now is the time to focus on real change, in our own industries. So, for me, no more incremental improvement, I want to talk about going back to basics and doing things differently, better.

Tuesday, January 27, 2009

John Bell, In the Accelerator, With the Polarizer

Last night I had a dream I was playing a card game with my son. It was an interesting game: each card had a piece of Dirac notation on it. He was winning.

It could be a real game, I thought, when I woke up. Perhaps there are a few cards on the table that represent some state of entangled particles (not to imply any belief in hidden variables, natch... it's just a game.) Each player has a hand of bras, kets and operators and they take turns trying to put down a valid expression. If they do, they get to measure the observable in question. The other players then need to play cards to make their own measurements and try to guess the state of the entangled particle. Sort of like Clue crossed with Wff n' Proof. Or something.

Anyway, I figured it would at least prepare my kids for the bizarre blackboard scrawlings they would face in their graduate quantum mechanics course. But then I decided I'd rather not encourage them into such an ontologically dodgy enterprise anyway.

Monday, January 26, 2009

Demand is not Just a Function of Price

The only interesting part of my Feedburner stats that is interesting to me is the part that tells me how visitors landed on this page. Usually it's through search, of course. I have two general reactions to the most frequent search terms:

1) I should write more about that; and
2) Why the hell are so many people shopping for reaction wheels? It's a satellite part. Don't you satellite builders have catalogs? Are there new suppliers popping up all the time that noone tells you about? I should do some reaction wheel lead-gen; I have to imagine they sell for top dollar.

Anyway, back to one. The most frequent searches in that category are 'what does non-profit mean?' and 'why does MacMall suck so bad?' or variations thereof. On the first, I keep planning to write more. The latter just makes me happy.

The time I ordered from MacMall and had such a horrible experience (to wit, their complete disavowal of any responsibility for shipping me a brick rather than a MacBook Pro) I blogged about it as revenge. Er, to alert the world to problems they may face when ordering from them.

I understand their difficulty. If you sell at a discount, you have to cut costs somewhere. But it seems to me that some things should not be cut, like selling working products.

I was thinking this today because of Amazon. I love Amazon. I probably do the bulk of my shopping on Amazon. I've been shopping at Amazon for thirteen years now and never had a bad experience.

Someone recommended "Competing with Analytics" to me the other day. I looked for it at Amazon and it was selling for $20 in hardcover. The link to "Other versions" showed a digital download for $7. So, naively believing that the promise of the digital world would save the rainforest while costing me less, I clicked on it and bought it. Naturally, it was a horribly overpriced five page summary that I bought, not a wonderfully underpriced version of the book.

Despite the fact that the summary purchase page was clearly labelled "Summary", I fired off an email to Amazon, moaning about the "bait and switch." Feeling better afterwards, I figured they'd send back a "dude, read the product page" and that would be it and I'd be out $7.

But, within 15 minutes, they had sent me an email apologizing and credited my account the $7.

Price isn't everything. Price is almost always a misleading purchase factor, even when shopping for a shrink-wrapped, brand-name product. I think about this a lot in regards to the promise of the web to provide more efficient information to consumers re purchase. In online marketing, reducing the consumer demand function to a function of price alone always leads to system-gaming. This was especially evident in the lead-gen world. I can't think of a single product where only price is the determining factor in purchase. (Price here meaning the dollar-out-of-pocket cost, not the 'total' cost.)

I think a lot about this because I think there's a huge opportunity to create more efficiency in the process of matching consumers and products. And it's a hard problem: determining a consumer's utility calculation and matching it to offerings of various vendors and products along its most salient dimensions. Hard is good.

Tuesday, January 20, 2009

After-Dinner Ruminations in the Highest Bobcat-Land

[This entry is somewhat general (uncharacteristically so, I hope.) I have more specific things to say, but I'm thinking out loud. Also, I usually think reductio ad absurdum, which necessitates the making of positive statements. Judge accordingly.]

I was talking with a friend about the right way to make a living. Somehow I got sucked into discussing corporate responsibility. I hate discussing corporate responsibility: it's a concept I've discarded. The idea of corporate responsibility seems to me a way to feel good about getting nothing done.

I believe there are systems and there are persons. People create the systems and people live within them. Sometimes the system suggests a person do the right thing and sometimes the system suggests a person do the wrong thing. In our time and our society each person almost always has the luxury of choosing to do the right thing.

But the system is like an anthill and people acting in the system are like ants. When a person chooses to buck the system, he or she is pushed aside and another ant takes his or her place. If the system presents me with a morally wrong but otherwise attractive choice, I hope to be aware enough to not choose it. But I never expect that my abstention means that path is not taken by someone else.

We can talk about corporate responsibility but that is just a way of distancing ourselves from talking about who is really responsible. We can ad-hoc hold each person responsible for their actions but no positive change can result from this: in a moral sense each person is already the inheritor of the results of their own actions; and, from the point of view of someone who is not the person making the choice, the action prescribed by the system gets made despite the choice of any particular person.

We can work for the day when every person has the understanding to make the right choice, but pretending that we live in that world today seems like another way of avoiding our own responsibility. We all act within the system, but we all also help create the system. Our responsibility for others' bad actions is to create a better system. We can blame specific corporations or specific people for bad actions or the lack of good actions, but because blame often replaces our conscious effort to understand and change the system, it is worse than sterile.

Gary Snyder once speculated on the bobcat's responsibility for doing no harm, exploring the morality of those who needed to live within a system. But the bobcat does not create his or her own system. As individuals we can attend to our own responsibilities, but for others we can only constructively understand how to create a better system.