Brand pollution in the home

This morning I walked from the bathroom to the pantry, and for some reason the five minutes that passed left me feeling exhausted.  In that small amount of time, I had passively interacted with over 60 brands.

Or rather, been assaulted by them.

 

Packaged products companies spend millions of dollars on package design to make sure their boxes and containers stand out on supermarket shelves.  Attention is a scarce resource, and a slight difference in focus can cause a brand to win or die.

But why do we have to tolerate flashy, in-your face grocery aisle advertising after we’ve already bought the thing? Seems more like a punishment than a reward.

This is precisely why I feel the need to hide all the products I use away in cabinets, turn boxes around, and peel off labels whenever I can.  A glass bottle or a can of sauce that just features the product itself is much more pleasing to look at, and makes me willing to keep it out in the open at home.

Understandably, brands want to develop equity in a recognizable package so your recognition in-store is tied to your us experience at home.  Yet I can’t help but believe there’s a better way that would make us feel less visually offended.

Some forward-thinking companies, mostly in the natural/organic trend, have started using clear packaging with minimalist labeling as a way of communicating their dedication to natural product.  But I think even the ugliest products could benefit from designing packages that we aren’t embarrassed or annoyed by seeing all the time.

Maybe brands with visual pollution on their packages can experiment a bit.  Try peel off labels, or make half the package clear or more visually appealing.  Customers are averse to advertising on TV and the web, so why believe we like it on our shelves?

TV realivision

Have you ever been in a fight with someone and realized that it had no purpose? Or heard a friend passing on some gossip about others? Perhaps you’ve competed with someone, stopped talking over an argument, or taken offense to a comment. Maybe you told others about it, wrote a passive-aggressive post on your favorite social network, and deleted the contact in your phone. Shows them right.

Sensitivity to criticism, rash decisions, exaggerated displays of emotion, inappropriately seductive behavior, rapidly-shifting emotional states, and approval-seeking — all behavior that’s worthy of being the center of attention, to be sure. This is how people take (rather than earn) their fifteen minutes of fame in their own little worlds.

The trouble is, these traits are known to psychiatrists as histrionic personality disorder.

Why do we love drama so much?  Kurt Vonnegut once wrote (neatly summarized by Derek Silvers – a worthwhile read here) that we’re addicted to drama because our lives are essentially mundane.  Yet, we’re trained by stories from a young age that dramatic variations in emotional state are actually the norm.

So when we experience real life in all its banal stability, we feel like we’re missing something. We seek out drama as moths to light because it is often quite literally the only light in our lives. And many people create their own drama where there is none.

This is harmless and natural when people play plot line madlibs but fill their own behavior in the blanks. It’s a very different story when people emulate exaggerated behaviors as they act out their own life dramas.

Enter reality television.

It turns out, growing up with Cinderella is not the same as growing up with The Jersey Shore. Reality shows have two central propositions: everything is unscripted, and the actors are people just like you and me.

That’s a toxic combination. It sets up the behaviors in the show as being normal, expected, and worthy of aspiring to. So when people watch a lot of reality TV, they start acting out the characters in the show in their own life dramas. The ‘reality’ trend greatly exacerbates our natural tendency for drama-seeking as expressed in the soap operas of the past.

So it’s no surprise that I avoid people who watch a lot of reality TV almost as much as I avoid watching it myself.

But we can rediscover our real realities, and find meaning in the silence and humdrum of normal days. Yes, it’s much easier to get attention and make life exciting by picking a fight, talking behind peoples’ backs, and making things happen in your relationships. But here’s a counter-proposal: use relationships as a source of stability rather than drama.  We can channel the desire for attention and excitement into creating, changing, and improving ourselves and the world around us.

I haven’t turned on the TV in years — either on a screen or in my real life — and I’ll never look back.

Deadweight jungle

Nothing warms the heart and uplifts the soul quite like a heartfelt gift. Friends and loved ones have a special way of imbuing even a modest trinket with deep personal significance. The best gifts are intimate, meaningful, and surprising. So then what happens when gifts become obligatory?

We’ve long pejoratively called commercialized gift-giving the “Hallmark Holiday,” but I doubt Hallmark is to blame for our behavior. Psychology teaches us that external expectations undermine our intrinsic motivation. So when there’s a holiday coming up, rather than expending the emotional labor of creating a deeply intimate gift for every recipient, rational people do exactly what one might imagine: they economize.

Enter the plastic jungle.

When we know that a gift is expected, the pressure’s on to get the right one.  It’ll be put on display in front of family and friends, and a competition ensues for whose gift is the most radical, memorable, and perfectly-suited to the recipient. For many, that pressure multiplied by the hundreds of expectant individuals on birthdays, religious holidays, and X‘s Day’s is too much to handle.

So we resort to a transfer payment.  Put some cash in an envelope? That’s too thoughtless. Instead, decide where your recipient will spend the cash and put a piece of plastic in the envelope instead.

But it turns out, those gifts only serve to make us feel better about our lack of emotional labor.  In the West’s giver-oriented gift culture, we need to know that our recipient is enjoying the gift and expect to hear follow-up stories to know it was put to good use.  That kind of lock-in destroys value for the recipient.  We’ve all been there, having to fake how much we love aunt Molly’s sweater, fondue set, or — more likely today — gift card to Applebees.

The problem is, recipients don’t value these gifts as much as we pay for them.  As far back as 1993, my micro professor wrote a paper called “The Deadweight Loss of Christmas” that describes the effects of mismatch between gift and recipient preference.  As summarized in the Economist, gifts are usually valued at 10-30% less than their actual prices.  The worst offenders are when extended family buys a specific gift, and we all know this. So the modern solution is to use gift cards when there’s a high probability of getting it wrong.

Plastic jungle isn’t my own term.  An entire marketplace by that name exists for people to trade gift cards at a discount, instantly destroying 8-20% of value in fees.

Imagine your broker called you today and offered you an investment that would be worth 85% of its value the following day.  Would you take it?  So why do that with your gifts?

This is the deadweight jungle. When emotions run high and the pressure’s on, we act irrationally. That we’re willing to waste so much value to avoid appearing thoughtless is indicative of the deep desire we have to feel appreciated and remain relevant in our loved ones’ lives.  Sadly, we’re going about it all wrong.

But there’s hope — gifts from friends and significant others are consistently the most valuable and kept the longest.  Why? There’s love in them, and love is memorable.  So, too, is creativity.

Warren Buffett changed the world by getting some of its billionaires to pledge their fortunes away to charity.  Let me suggest another kind of sea change.  For the less wealthy among us, let’s stop wasting money in the jungle.  When you don’t have the time, creativity, or love to give a memorable gift, just don’t give one at all.  Donate it to your favorite charity instead.  Give gifts less often, on random occasions, and throw expectations to the wind.

I promise everything will be okay, your family and friends will still love you, and the world will be a better place without all the extra plastic.

In Google We (Anti)Trust

Today the FTC launched an antitrust inquiry into Google’s core search business. This is a departure from the past, in that it’s not an analysis of their acquisitions as an indicator of trust formation, but rather taking a look at their main business.  Coverage on TechCrunch and WSJ.

Naturally, many Google competitors have called for such an investigation in the past. What’s monumental about this inquiry is that it’s happening now, a leading indicator that Google has almost reached the height of its market power as it stands today.  It has 2/3 of search share in the US and over 80% in Europe.

While many of us trust fully in Google having good intentions and doing no evil as a firm, I’ve been wary of their strategies for a while.  In an OPIM class taught by professor Clemons in spring 2010, we heard him discuss his theories about Google with a representative of the Google Legal team. Needless to say, they didn’t reach agreement.

Prof. Clemons wrote about what an antitrust case against Google would look like, back in March 2009 (on TechCrunch).  It was controversial, as was his later post that Google’s search results often qualify as misdirection.

For anyone who doesn’t feel like reading his posts (which are excellent by the way for anyone interested in the dynamics at play here), I’ll summarize.  It’s notable that, while Prof. Clemons focused on Google’s use of market power to send searchers to other companies’ websites, the new case might focus on Google sending searchers to its own web properties.  Both are damaging, but in different ways.

Search is an essential facility

The first part of Prof. Clemons’ argument is that search is an essential facility on the internet for companies to reach customers.  Search engines have become our default behavior online — we search even for things we know the URL for.  So the geometry of the web looks something like this:

This means that if a company’s page is not carried by a search engine, or is not given its due exposure, it can be basically ‘killed’ by being denied access to the way customers usually use the Internet.  Even if the customers still have a (less lazy) option for typing the site’s URL directly.

Google’s search function is not contestable

Next, we notice that Google is able to use its product in one market (search advertising) to completely subsidize its entry into other markets (like document editing and email).  The use of one market to subsidize another is a failure of the contestability test and often an indicator of abuse of market power.

Is there consumer harm?

This will be difficult to prove and hinges on one of a few arguments. One possible path is to charge Google with setting the prices of sponsored search too high, which limits the results that people see and causing them to go to web properties they didn’t intend. Another path is that Google is unfairly setting the organic search location of its own YouTube and Places properties to an artifically high rank.

Overall, while this particular inquiry may turn up fruitless (Google has undoubtedly learned from the Microsoft case), it’s certainly food for thought as we consider our own search behavior.  Ask yourself this — do you rely on Google’s answers too much when you search?  I’d be willing to bet that most people can count the monthly times they’ve clicked page 2 in a search result on one hand.

Cardboard casino boxes

This past weekend was the bachelor party of one of my best friends and greatest mentors. A weekend in Vegas, fifteen guys from college and work, three suites at the Venetian, two suitcases of booze, and bank accounts that had want of emptying.  All the trappings of an epic time and unforgettable stories.

Our standard of comparison

I’ll be the first to admit that I fell victim to the hype.  It was my first ever bachelor party, and in the post-Hangover world, it seemed like absolutely raging for the two days was the only way to go.  And rage we did.

In our first thirty minutes, the group probably lost close to five hundred dollars playing craps.  None of us felt particularly great for it, but walked it off and continued raging. Vegas has a lot of ways of parting you with your money, and they all involve an experience that’s commonly known to be epic.  So you invest a little in the adventure, and if it doesn’t turn out to be as mind-blowing as in the movies, you invest a little more until it is.

Oh, wait a minute.  Throwing good money after bad sounds a lot like, well, irrational escalation of commitment.  In the casino it’s known as gambler’s fallacy, and we knew immediately that the ROI on trying our luck wasn’t so hot.  But in other cases it’s more subtle.  You’re already in the club, so why not spend another grand for somewhere to sit? Or why not get the VIP treatment to make your night that much more story-worthy?

The epitome of fun

From the first evening, I quickly realized that the most fun was to be found just sitting around in our hotel room, cracking jokes at dinner, or walking from place to place. I felt strangely disconnected whenever we were out at a party spot.  That disconnectedness led me to have some really great conversations with other guys in the party, and I learned new things about their lives, perspectives, and histories.

I had a flashback to a midyear Christmas at the age of 8, when my mom bought our first ‘big screen’ (32″) TV. How excited I’d been to get something everyone else knew was awesome.  And then how I ended up having more fun cutting a hole in the box and making it into a spaceship.

Here we were, at one of the most celebrated destinations in Vegas, and I was cutting another hole in a box.

Something struck me about all the revelers in clubs, casinos, pool parties, and the like in Vegas.  Sweaty, cramped, in debt, and smiling.  I couldn’t help but remember a moment in tenth grade, reading The Catcher in the Rye.  Holden describes the phoniness of adults, as when they act out their roles and emotions.  In this resort world, it seems the most insecure people go the hardest, and act out having fun even when they’re not.

What’s strange is that in a group of very intelligent guys, I found all of us (myself included) falling victim to the insecurity too.  We constantly straddled the fence between our characteristic thoughtfulness, and our desire to have stories worth telling.  Overall, the weekend was a win for irrationality and, perhaps, a failure of imagination.  We walked away, mostly having had a great time in spite of the epicness, but telling ourselves those things were the very source of our enjoyment.

I’m glad I spent the weekend with my friends, and would fly somewhere to celebrate life with them again in a heartbeat.  But I’ll always remember that circumstances are nothing more than a catalyst for happiness.

My kids are going to grow up with a lot of cardboard boxes.

Passing the thought

You’re in fourth grade, writing your first research paper on Greek philosophy, and the teacher has a special announcement. Class will be held in the library today, for a session on citations and bibliographies by the librarian. Everyone knows that these sessions do untold damage to young kids — hours of boredom sitting through the semantics of MLA and the locations of commas and italics.

But something more sinister is also happening, and its echos into adult life are a tasteless, colorless poison. In a knowledge world, the modern form of passing the buck is passing the thought.

It turns out that adults repeat the same tactics they used during school, except for things that actually matter. That’s a dangerous combination.

When we teach kids to respect the authority of prior work, it ends up having a silencing effect on potential disagreement. I learned early on that, if a credible source with an important-sounding name, title, or pedigree simply wrote something down, I need only find and quote it to ‘prove’ a point. Indeed, citations are the ultimate academic commodity — they’re often counted as the only metric other than pages and words that matters to the quality of a paper.

These antics are repeated endlessly through primary school, high school, and college. We spend painstaking effort to include the minimum number and ensure every citation is formatted correctly. Or beware the wrath of your professor.

Why does this matter?

But when’s the last time you remember a teacher commenting on one of your citations? That you misquoted the author, took a quote out of context, or that the quote was based on shaky evidence?

For me, not once in my academic career. Not. Once.

As a time optimizer, I quickly learned to short-circuit such a flawed metric. A quote is a quote, after all, and no one would check. So lots of citations were taken out of context, or hastily added without actually reading the piece I was quoting.

I know this story isn’t particular to me, and in a school context it’s mostly inconsequential. But what effect does that formative experience have on people later on?

We see this every day, actually. People use outside evidence in everything from casual conversation to business presentations to formal research without completely reading the source. Worse still, many leaders will use an outside source to justify actions, without ever forming an independent opinion on the usefulness of that source’s data.

A form of office pollution

Jump with me from the classroom to the boardroom. This type of faux logic appears in business arguments constantly. It’s the cancer of consulting. Just pay someone else to do the work, and use their credibility to rationalize whatever the conclusion. The good word has been Written by McKinsey. (Or insert your favorite scapesource). So shut up. Next question, please.

Somehow, training kids in the scientific method but then valuing the citation alone as a stopping point has bred a culture of absolution. Just cite someone smarter than you, and you’re excused from the responsibility to think.

Here’s an idea: let’s discuss the logic behind conclusions instead of the authority of sources. My anti-MLA is a citation like “326 of 1000 surveyed in a randomized, controlled study would buy this product for $10”. By making the evidence explicit, it can lead to questions like “were the participants representative?” or “has that conclusion been repeated in other studies?” This is called traveling down the ladder of inference.

Holding everyone accountable for preparing these answers encourages discussion and engagement, rather than unquestioning belief. This requires a culture that praises people having the courage to be wrong, so we need to value discussion over watertight arguments.

Our responsibility to think independently has been in decline for too long. Once and for all, I declare war on citations.

Value pumps

Building a Better Value Pump (via Eugenia Lee)

This article explored how, in order to create a social enterprise with sustainable value to the poor, it should also make the poor more valuable to society. In other words, the best social enterprises are platforms that increase the poor’s own productivity.

Personally, I’ve always liked any approach that involves investment in infrastructure.  It seems like infrastructure, and access to that infrastructure, is what’s lacking in the equation for a lot of people in poverty.  The ‘fishing rod’ in the classic metaphor.

This raises some interesting thoughts:
– How can we make it seem less sketchy to transact with businesses operated from poor environments?  Can we empower entrepreneurs living in poverty?
– Can financial investors make smart investments ahead of growth in poor economies?  How can we make those types of investments attractive?
– What role can crowdsourcing play, where the crowd is the people who are being helped?

Diminishing returns to work

How Many Hours Should you be Working? (via Pawel Hytry)

– There’s a point of diminishing returns to work, and it’s closer to 40 hours a week than we’d think
– Meeting with employees is productive; meeting with consultants or outsiders is not

But how actionable is this?  While I completely understand diminishing marginal productivity, it’s really difficult to observe in the moment.  How can we build in triggers to know when our productivity is going down?

The curse of high achievers

HBR – Managing Yourself: The Paradox of Excellence

What I learned from this…

  • Use your support network and ask for help as soon as you’ve reached the point of diminishing returns
  • Ask for feedback even when the process is painful
  • Practice vulnerability.  Acknowledge publicly every time that you don’t know something or that you’ve made a mistake.  Start among friends to build your confidence, and expand out from there
  • Force yourself to speak up at every meeting.
  • Grant yourself permission to be mediocre, and have attention directed at that mediocrity.  It’s the only way you’ll gain new skills and stretch.

Doing the right thing poorly is better than doing the wrong thing well.

Why can’t companies foster this culture correctly?  One quote in the article notes, “My boss wants innovation as long as it’s done perfectly the first time.”  That type of hypocrisy is what leads to a stifling culture that claims to believe one thing but actually supports another set of behaviors.

I think this article is further pressing at the notion of “intellectual honesty”.  One of my favorite interviews (Dominic Orr of Aloha) discusses how important it is to build a culture of being vulnerable, as the DeLongs mention in the HBR article above.

Getting into the 10x revenue club

All Revenue is not Created Equal: the 10x Revenue Club

What gets a company into the 10x forward price/revenue multiple club?

– Competitive advantage period — how wide is the ‘economic moat’ that protects your castle, and how long will it take for that moat to dry up?
– Network effects — increasing value of using your product as more people use it. A positive feedback cycle that gives you an unfair advantage the more customers you get.
– Predictability — make your revenues repeatable, e.g. get people to subscribe so you always have a ‘base’
– Switching costs — decrease customer churn by giving them a reason to stick with you even if competitors undercut your prices.
– Margins — make a lot of money from every revenue dollar.  Duh.
– Marginal margins — make more money as you make more revenue.  Less intuitive, but it means to make sure you select a business that scales well.  Labor costs = death; information goods = amazing.
– Customer/Partner concentration — are your revenues reliant on a relatively small number of customers who might leave you?  Does any one customer (or partner or supplier) have too much control over your company’s future revenues?  Arguably, partners are getting even more important, as so many web businesses make money as affiliates or platform applications for another company’s product.  The article focuses on partners as a source of revenue, but dependence on a partner’s platform (e.g. all the apps who might have been killed by Apple’s announcements today) is also threatening.
– Cost per customer acquisition — is your marketing really expensive? Or do you grow organically well?  Bezos quote is perfect: ““More and more money will go into making a great customer experience, and less will go into shouting about the service. Word of mouth is becoming more powerful. If you offer a great service, people find out.”
– Growth, with caveats — growth is good, but it can’t be “profitless prosperity”. Growth can be misleading if it can’t be sustained profitably over time.  And growth because you’ve discovered a new market will bring other competitors, so if you haven’t established barriers to entry, you’ll see margin erosion (possibly for Groupon?)
– Cash — collect your cash before you recognize revenue; and spend less of that cash on capital investments to run your business
– Real options — ability to naturally expand your business into adjacent markets without diluting your brand or efficacy

How can a company manage expectations to get strong multiples in the market then?  And, since that analysis was based on public companies with lots of disclosures, what can private startups learn from the scorecard?

– Delay announcements of products but hint about them secretly, to make your company seem dangerous and competitive.  Kind of like installing lots of missile launchers on your beaches (arguably, people you hire fall into this function) but not showing how many missiles you have.
– Cohort analysis — show that earlier cohorts of customers use your product more frequently / engage for longer periods of time per use / pay more as you get more customers registered.  I.e. network effects.
– Footprint — don’t limit your product to a single platform, region, or business model.  Clearly you can’t overstretch, but have at least two major stories for each.
– Be noteworthy — take risks, develop a brand personality, and spend time doing things that are worth talking about.  Instead of spending too much on marketing.
– Focus, but don’t limit yourself — a key decision involves your branding and even company name.   If you’re a printing business, printing.com is better than paperprinting.com, because it leaves you open to printing on tshirts and birthday cakes later.