Showing posts with label Strategy. Show all posts
Showing posts with label Strategy. Show all posts

Monday, January 20, 2014

Free Startup Ideas – Traffic Predictions and Alarm Clocks Done Right

Here’s an idea for some enterprising engineer (most likely at Google or somewhere else with access to good traffic data) that I’m almost certainly not the first to have thought of.

A good traffic prediction algorithm would let you specify a time of day you need to arrive at a particular destination, a starting point, and tell you when you need to leave. Google Now already does a crude version of this. If you have flight details in your gmail account, it will sent you an alert when you need to leave in order to get to the airport an hour before your flight. But there’s a lot more cool stuff you could do with this.

For instance, it would be great to be able to take the directions in Google Maps and specify a day of the week and time (or day of the year) and see an estimate for how long the trip would take at that particular point in time. Since google has oodles of historical traffic data, they’d be able to get a pretty good estimate based just on historical traffic conditions. Ideally, you’d be able to take the same route and plot out how the expected length of journey varies with the starting time.

This would tell you what times of the day and night to avoid, letting you figure out how to adjust your work schedule to avoid traffic. It would also tell you about a fascinating quantity – the elasticity of time arrived to time left. There are times of the day, such as peak hour, where leaving 10 minutes later might cause you to arrive 15 minutes later (an elasticity of 1.5, suggesting that wasting those minutes is very costly), or at the back end when you can leave 10 minutes later and only arrive 8 minutes later (making those minutes subsidised).

Notably, everything I’ve described (like Google Now in its current form) only speaks of a point estimate of how long things will take, presumably either the mean or median. In reality, there’s much more interesting stuff you can do with the whole distribution.

For instance, lots of unexpected things happen with traffic – accidents, weather, what have you. So for a trip that leaves at 8am on a Monday, there’s actually a distribution of possible arrival times. For someone who knows what a distribution actually means, it would be very useful to be able to specify an acceptable percentage of the time that you would be late (or more than X minutes late), and have the algorithm give you a time that you needed to leave your house in order to get there on time with that probability.
If this were done, you could just subtract the number of minutes you need to get ready each morning, and that’s when you need to set your alarm.

Even more interesting would be to improve these predictions from unconditional to conditional by making use of both current traffic and weather conditions. The overall distribution of, say, Mondays in January, would give you the unconditional distribution of the chances of arriving on time. But you could definitely do better by generating conditional distributions that morning that relied on the local weather conditions and the current traffic conditions relative to the historical distribution. In other words, if you normally need to leave home at 8am, the app could use the fact that traffic at 6:30am is heavier than normal to estimate that you may need to wake up earlier than normal as well.

Done properly, I’d gladly pay $20 for this kind of app. If it really worked, I’d probably value it at much more than that, notwithstanding that an irrational cheapskate instinct kicks in regarding the prospect of paying more than a few bucks for an online app.

As with all Shylock ideas, should the app succeed I insist on receiving either fat royalties or a free t-shirt that says ‘I came up with the idea for [Traffick-ator] and all I got was this lousy t-shirt’. Medium please.

Friday, March 22, 2013

End the Engagment Ring Arms Race

As they said in Wargames, the only winning move is not to play.

Over at Priceonomics, they had an excellent piece recently with the arresting title 'Diamonds Are Bulls***'.

I challenge you to read through the whole thing and come to the end asserting that diamonds aren't in fact bulls***, but are actually worthy demonstrations of love and investments of money. The reasons for the Priceonomics headline include, but are not limited to, the fact that:
-The whole thing was started by a marketing campaign in 1938 by DeBeers to get people to buy more diamonds
-We could make flawless diamonds industrially for very little money
-They lose tons of value immediately after purchase, and
-Even experts barely know exactly how to value them.

The point the article doesn't answer, of course, is how this practice persists given that most men already know, either instinctively or by reading this stuff before, that this whole thing is an outrageous con. No man is genuinely, honest-to-god happy about spending thousands of dollars on an engagement ring. They might do it because they love the woman, and know she's excited about it. But they'd sure as hell wish that the woman would be equally excited to accept by way of a substitute a really nice restaurant meal, an expensive watch, or a trip to the Bahamas. All of which in combination you could probably buy for less than a mid-level engagement ring.

So we all agree this is an egregious scam perpetrated on us by DeBeers.  These monopolist turdbags have managed to convince women and men that this is something that you have to do, Serious You Guys, to show your love for a woman. The reason this works is that marrying someone is an important decision that many men are nervous about. DeBeers has found a way to capitalise on this by creating a perception that society all agrees that we need to buy diamonds to show our love. Just like in a strip club, when you don't quite know what you need to do and are afraid to ask, you'll spend money to make the problem go away.

This problem is particularly strong because proposing to someone is something that men don't generally talk about a great deal beforehand - not to their friends, and even less so to the future bride. So they don't really know what they should be spending, and are thus ripe targets to be scammed by salesmen and their own nervousness. And it's difficult to boycott, because at the point you're proposing to someone, you're meant to be declaring your love. Proposing, while simultaneously explaining why there's no ring because that's stupid, is likely to come across somewhat awkwardly, to say the least.

The other macabre genius of the plan is that it's difficult for couples to agree ahead of time not to do it, because to plan in advance 'Oh, when I propose to you, I'll do it in this way' ruins the surprise. As a consequence, even men who are 90% sure that their fiancee doesn't care much for an expensive ring will probably err on the safe side and spend the cash anyway, just to be sure. If they could have a conversation and confirm their hunch, they'd just skip it. But they can't. So DeBeers wins again.

Frankly, I find this immensely unsatisfactory. Not only is this wasteful, zero-sum arms race spending, but it's a scam perpetrated by the most successful cartel in the history of the world.

If there's one thing I hate, it's monopolists jacking up prices. Boy, do I hate monopolists. Nothing would please me more than to see those clowns reduced to being insurance salesmen or something actually productive.

So, how do we destroy DeBeers? How do we stop the arms race?

Here's the Shylock three step plan for how, as a society, we can stop flushing money down the toilet on worthless trinkets.

Step 1. Tell all future dates, well in advance of any proposal date, that you think expensive diamonds are a crock and a fraud, and that you won't be buying one, regardless of whom you marry.

Step 2. Follow through on it.

Step 3. There is no step 3.

Step 1 is the key part. What you need to do is make the conversation about the principle of the ring in the abstract, divorced from any implication about the girl in question. In other words, make it known that this isn't about the girl you're with, it isn't because this is on your mind since you're thinking of proposing soon. No, just as a moral stand, you're refusing to enrich a price-fixing cartel to satisfy an arbitrary demand about how romance should be.

The girl may object that she likes diamonds and finds them pretty. The immediate answer is that she likes them because the DeBeers corporation decided that she should like them. Why else would society just magically start liking them all of a sudden in 1938? And if you just like sparkly things, why not a cubic zirconium? Why not an artificial diamond? What on earth is the difference, other than burning money?

More to the point, the receptiveness of the girl to this argument is a great screening mechanism. Just like women who don't pine after massive weddings, the women who don't pine after expensive engagement rings are also, on average, the ones you actually want to be marrying. A girlfriend who agrees that this whole thing is a con and are happy with a cheap ring, a fake ring, or no ring at all is, paradoxically, the one worthy of the expensive ring. But thankfully, that's not even needed!

The real question is, do you go the hardcore route and insist on no ring at all, or do you just buy a small artificial diamond for a few hundred bucks, or a cubic zirconium for ten bucks?

The answer to that depends on how tolerant the other party is, and how much you feel like contributing positive externalities. Taking a stand to not buy any engagement ring (and just having the wedding ring) is risky, but decreases ever so slightly the societal expectation of having to spend money like this. It's providing a true public good. You won't be thanked by many people, but you'll always be an honorary member in exemplary standing around this humble corner of the internet.

Buying a fake ring will cost you not much more, but is implicitly acknowledges that you're catering to the societal demand by pretending you bought an expensive ring. And pretending is all it is, because it's unlikely anyone else will be able to tell the damn difference.

I can see the argument for the second one, if only to make the fiancee's life easier so that she doesn't have to explain to everyone why there's no ring at all. That's perhaps too big an ask in the short term. But even being willing to have a small ring is an improvement. Like all social attitudes, they change slowly.

One thing is for sure. If I decided to get married, DeBeers isn't getting a red cent out of me.

This may seem like an extreme position, but frankly if you've put up with the rest of the somewhat outrageous things I say, is this one really much worse?

Wednesday, May 2, 2012

Where does value come from?

Most people have very little idea what makes one business more valuable than another.

This state of affairs tends to persist, because most businesses aren't exactly eager to reveal where their competitive advantages come from either.

My favourite example of this principle is Coca-Cola. In one of the classic bits of corporate mis-direction, Coca-Cola has managed to convince the world that the key to its success is the secret recipe for Coca-Cola, closely guarded by only a few corporate executives. Astonishing numbers of people seem to believe it.

Viewed logically, this is kind of perplexing. Not least, because there's a wikipedia entry for 'Coca-Cola Formula', which lists a number of different purported recipes to try, including one uncovered by Ira Glass on 'This American Life' which claims to be the real deal.

And yet somehow, Coca-Cola doesn't seem to have collapsed since the February 11, 2011 Ira Glass show.

What's truly amazing, though, is that Coca-Cola seems to have managed to convince it's own employees that the value of Coca-Cola is in the recipe. You know this because a number of Coke employees went to Federal prison for trying to sell the Coke secret recipe to Pepsi, back in 2006.

Really?!? In this age of modern chemical analysis? When half the ingredients are listed on the back of the bottle? When the rest could probably be pieced together by a halfway decent organic chemist? That's the thing that's keeping the company afloat?

Of course not. But the myth persists.

The easiest way to see what Coke's real advantage is is to consider the obstacles you'd face if you managed to make a cola that unambiguously tasted better than Coke, to at least 70% of Coke drinkers.

Straight off the bat you've got economies of scale. Coke is enormous and gets enormous discounts. So does Pepsi though, so perhaps we could partner up or at least get financing to grow. But your new drink has to be close to as cheap to produce as Coke in order for you to be competitive.

What else? Well, marketing is the one that probably comes to most people's minds. And truthfully this is a big one. Lots and lots of people around the world know and love Coke. That means that when they go into the supermarket, they already know they'll like it, and so they buy it. Add in fancy marketing terms for affective associations between Coke, good times, and fun parties. Why? Because advertisers have crammed this into their heads over decades.

But perhaps the most neglected is simply logistics. Coke has a crazily effective distribution network. Even if you manage to set up the most-watched viral video that gets everyone fired up about your new cola, you're going to face the problem that it's damn hard for most people to purchase it. Soft drinks tend to be bought with the aim of being consumed then and there. This means that your Amazon strategy of doing internet-only distribution ain't gonna work so flash - people don't plan most of their soft drink purchases weeks in advance. The only way you'll get sales is if you can have your soft drink there at the point that the consumer is thirsty.

And how do you do that? By having your Coke alternative available to buy in every supermarket, every deli, every liquor store, and every hamburger stand. In the whole world. Supplied constantly. So that they never run out.

Think about that. How the hell are you even going to begin doing that?

And that's why you're never going to out-compete Coke.

Setting up an equally good marketing and distribution system isn't impossible, of course. It's just very hard.

It becomes even harder if you're spending all your time trying to work out the magic soft drink formula instead. Coke is happy to let you believe that this is the source of their success, for very good reasons:

In making tactical dispositions,
the highest pitch you can attain is to conceal them;
conceal your dispositions, and you will be safe
from the prying of the subtlest spies,
from the machinations of the wisest brains.