Amazon.com Widgets

Timezones, Expats and Doctors

December 19th, 2014

A friend of mine, an extremely talented pulmonary specialist, recently moved to Israel. Like many other expats who like living in one place but working in another, he is commuting. Unlike many others, he is telecommuting…. 6-9,000 miles.

Through an interesting arrangement, my friend is working for a company that provides remote Intensive Care Unit (ICU) oversight during the night shift in US hospitals. My friend does a long shift during relatively normal working hours – for him – watching many monitors in his home office, as well as having voice conversations via phone and Skype with health staff in the ICU.

Before this arrangement, there was no remote or even local additional layer of oversight. So why do hospitals pay extra for this remote oversight? Doesn’t this add to the expense?

Turns out, this is a great example of higher service for lower cost enabled by technology.

There are several tiers of hospitals in the world, based on a number of factors but including size of the hospital and size of the locale.

  • Large city hospitals, like Columbia-Presbyterian or Mass General, have large ICUs, a large staff of doctors at all levels, and many patients. The population concentration of the large city gives them the necessary staff to cover the unit 24×7, and sufficient patients – and thus billing – to amortize the additional expense. These hospitals don’t actually need much more.
  • Smaller hospitals in smaller neighbourhoods, towns or cities lack the density of population and thus the quantity of patients and doctors. With fewer doctors available, there are fewer people to handle the night shift; with a smaller patient count, there are fewer people to cover the additional expense.

It is the smaller hospitals that are “underserved” by the previous structure. When staff in the ICU had a question, they would call or page the doctor on-call, often waking him/her up in the middle of the night. They simply do not have enough doctors to fill the night shift.

The new telecommuting technology creates the opportunity for a remote doctor to create a “virtual night shift.” The hospital gets multiple benefits:

  1. Doctors on payroll no longer are woken up. We call this “quality of work environment.”
  2. Doctors answering questions are fully awake, no longer groggy or sleepy, leading to fewer errors.
  3. Doctors answering questions have been involved in and watching the ICU for the entire shift, giving them much better context and history, leading to fewer errors.
  4. Hospitals can be assured of doctors every night and every shift without having 3 or more doctors on payroll.

Hospitals get better results, at lower employee impact, for a small uplift in cost, which is more than compensated by the reduced internal staffing costs, not to mention insurance and liability concerns.

Technology created a “win-win” situation.

Will a CISO Board Delta Airlines?

December 18th, 2014

The Internet has been abuzz with the discovery by Dani Grant, a writer at BuzzFeed, that she had found an easy way to explore – and print, and use – lots of boarding passes from Delta, even those for other people and other airlines.

When you ask for your mobile boarding pass, Delta sends you a URL to click and view your boarding pass QR code as well as all of the “human-readable” details of your flight: name, flight number, frequent flier number, etc. Grant played around with the URL and, by changing a digit or two, was able to view flight information of lots of other people.

In other words, the entire security is in the URL, and the security method of that URL is just serial numbers. Not every single number gives a valid boarding pass, but many do.

First things first, let’s clarify that this is not a serious airline security breach.

Someone cannot use a different boarding pass to get on a flight. The boarding pass is proof that someone with the name on the pass is entitled to board the plane; it is not proof that the holder of the pass is that person. At 2 different points – TSA security and gate boarding – the boarding pass is checked and matched against government-issued ID. You may or may not like that as a security method, but holding someone else’s boarding pass will not get you onto the plane without government ID that matches your picture to that name. If you can make counterfeit passports, a fake or unmatched boarding pass is probably small potatoes.

What this is, however, is a serious business security breach. It can create great inconvenience to travelers. Someone can maliciously change someone else’s flight, blackmail them, find out when they are traveling along with their family and thus their home will be unoccupied, cancel their flight, etc.

The inconvenience and financial risk to individual travelers, and in aggregate to Delta, can be high.

The more interesting question is, how could Delta possibly let this happen? Some basic information security rules include:

  • Use more than one identifier; the single number, however long, should not have been enough.
  • Never use a security identifier that can easily lead to guessing another. If my secret code is “123” and I am employee number 123, it is pretty easy for someone who gets my code to figure out that someone else has “125” and break in.

What could Delta have done? There are a lot of solutions. Some include:

  • Keep the boarding pass behind a login-secured area.
  • Make the boarding pass available only from 24-hours before the flight until 24 hours after.
  • Use a UUID rather than a simple number. With 2^122 (2 to the power of 122) possible combinations, Delta will never use more than such an insignificant fraction that it would not be worth anyone’s time to try and check them.
  • Use some additional information, such as a hash of the serial number and other information, that guessing is nearly impossible.

How did Delta make such a rookie mistake and expose itself? I suspect there are 2 prime causes, both executive:

  1. CISO: Look at Delta’s executive leadership. While there is a CIO, there is no CISO, no one at the top level responsible for information security. Actually, there is no one at that level with any type of “security” title. No one at the top level owns auditing of systems and applications, checking compliance, responding to security incidents, working with outsiders, and instilling a security-conscious culture. In the era of Target and Sony, not having a CISO is a guarantee of serious mistakes.
  2. Merger: Delta does have a CIO, which is great. Her biography is here. Her greatest achievement appears to be merging Northwest and Delta. Having lived through the United-Continental mess of a merger as a customer, successfully merging the systems which are the lifeblood of these companies is no small feat. But with a focus on the merger, security often will fall by the wayside, and clearly did.

Apparently, this past summer, someone noticed that Delta is running Windows XP – long past end of life – in its customer- and agent-facing terminals. I suspect there are dozens of major security weaknesses at Delta with no one owning them.

What should Delta do? Here is a 3-step plan.

  1. Hire a CISO. Now.
  2. Fix the breach. Immediately. Apparently they did, although I have yet to read reports on how they did and whether or not it is a bandaid or a real fix.
  3. Open to white hat. Grant found the issue and submitted it to Delta… only to get a standard “customer service” letter. When she got no material response she publicized it. Delta should have a path for people finding security weaknesses to submit them to immediate review.

But the first is still most important, and will affect all of the others. Delta needs a CISO to board the airline’s executive.

 

The Hard Thing About Building Platforms

December 17th, 2014

Most products and online services today revolve around four basic actions a user does with valuable data:

  • create
  • read
  • update
  • delete

For example, if you are managing a customer in Salesforce.com, you are likely to create a new customer record, read it before the next time you call, update it with details of the call, or delete it if it is no longer relevant.

In true techie fashion, these have become known by their acronym as CRUD activities. Not quite as appropriate as the acronym for Seasonal Affective Disorder, but still pretty funny.

Because of this structure, the overwhelming majority of product development (i.e. software engineering) and product management references use CRUD as their examples. Roy Fielding’s REST proposal, which has become very widely adopted (with varying degrees of fidelity), is built around a similar CRUD model.

The problem is, CRUD is not the hard part. The hard part about any system or platform is policies.

Let’s use an example. You are building a group management system, say like Google Groups. The activities seem pretty straightforward. Your basic business objects and their activities are:

  • Group: Create it, update its name, delete it, or read information about it
  • User: Create a user, update it, delete it, or read information about it
  • Membership: create it (a.k.a. join a group), update it (change membership level), delete it (leave the group), or read information about it

Seems pretty simple, right? Not so fast. The CRUD part is simple. The policy part is hard.

  • Who can update the group? Who can read it? Anyone at all? Maybe anyone logged in? Maybe anyone who is a member of the group, or is it just group admins?
  • User: Who can create a user? Do users self-create, or does some administrator create them? Who can read information about a user? What if it is different people? Can user X let one class of people see their name, a different one their email, and yet another their phone number? Who can delete a user? Is it the user him/herself or an admin?
  • Membership: can anyone join a group, or does “join” really mean “request join”? Who approves a join request? What if a group wants all requests to be approved automatically? Who can see group membership? Just the admins, or any member of the group, or perhaps anyone at all?

It gets even harder. What if group A wants everyone to freely join by automatically approving all join requests, while group B wants every request approved by an admin, but group C wants all requests that are not approved by an admin within 24 hours to be automatically rejected? What if user 1 is willing to share information publicly, while user 2 shares nothing except with those with whom she has explicitly approved, while user 3 is willing to share name and email with everyone logged into the system?

Perhaps the worst part of all is creating interfaces that enable people to manage these policies. I have no doubt a good engineer can write a policy line that looks like:

if profile.require_login && user.is_logged_in && profile.share_email && !profile.keep_secret && joint_membership(user,profile) > 0

But very few users can read that, let alone write it. It is incredibly hard to do the following simultaneously:

  • define sufficiently flexibly policies to meet most of your users’ needs (80/20 rule)…
  • that are still simple enough for all of them to understand…
  • and visualizable enough that they can modify them to meet their needs without making mistakes.

The last requirement is the hardest of all. If you make them flexible enough and they understand it, but do not grasp the interface and its implications well enough – these are not logicians, mathematicians or engineers – they will set policies that expose their private in ways that upset them. If you think it doesn’t matter, ask Facebook via Carnegie-Mellon, Consumer Reports (HuffPo link), the US Supreme Court, or even Facebook itself.

It turns out that the CRUD part of the system is  less than 10% of the work, both in product development and product management. Once you have defined your basic items and the create/read/update/delete actions around them, only then does the work really begin.

 

Never Fight Your Customers

December 15th, 2014

Message to Keurig: never fight your customers.

Where did this come from?

You, Mr. or Ms. Entrepreneur, have worked hard, built up a successful business, maybe even sold it out to a larger firm because they saw how much it could be worth with their capital and market strength.

Whatever stage of your business, there are 2 prime rules for continued success and growth.

  1. Cash is King – but we all knew that. Without enough cash in the bank, your business folds.
  2. Never Fight Your Customers

It is impossible to emphasize the second rule enough, and amazing that I still find it necessary.

Time and again, I see examples of companies that start to feel some sort of “right” over how their customers use their products once they have bought them, and begin to find ways to fight their customers. Inevitably, it is the beginning of the end for the company.

Leaving aside legally controlled use items like prescription drugs, where you really do not want your customers using them in non-designated ways – for their physical health as much as for your financial health – whatever way your customer finds to use your product is to your benefit, and you should accept it and work with them.

Small startups never forget this; larger companies never seem to remember it.

Startup

If you are running a startup, you are hungry for a fast-growing customer base. Your very raison d’être is to modify your product in its entirety – features, service, channel, sales, packaging, price, etc. – until the market is happy enough to buy it in droves.

Your job is to adapt to the market.

Established Firms

Established firms, having found that successful business model a (relatively) long time ago, forget that the market changes, and begin to believe they have a right, a droit de seigneur, to that market as it stands today. As the market changes, and customers continue to buy their product but in a way that doesn’t quite fit the original market, the existing player tries to create restrictions, market-controlling, legal or technology-based, to force customers to use their product in the original fashion.

The incumbent simply cannot adapt to the changing dynamics.

At the beginning of this year, I noted that Keurig, the maker of the hugely popular one-shot coffee machines, hinted in its FY2013 annual report that it intended to produce some sort of “Digital Rights Management” (DRM), to ensure that only Keurig-sold or -authorized single servings, a.k.a. portion packs or “K-Cups”, could be used in their machine. I also noted why they cared so much:

  • 92%, or $4.015BN, of the entire company’s revenues are from single-cup brewers and portion packs
  • 79.4% of that, or $3.187BN, are from the portion packs
  • The brewers themselves are “just” an $827MM business

Essentially, Keurig is a portion pack company that uses brewers as a wedge to sell the K-cups. While I know very few people who would scoff at an $827MM business, the revenue from the machines, but in the scale of Keurig, the brewers are just the way in the door.

Yet the cups themselves are just plastic or foil cups of a straightforward dimension and foil cover of a certain thickness. Anyone can make them… and lots of companies do, especially those selling coffee that competes with Keurig’s owner, Green Mountain Coffee Roasters (GMCR). This, of course, is a threat to the heart of GMCR’s business.

The business model has changed. As K-cups have become more expensive, and alternatives cheaper, more people are either filling their existing Keurigs with alternate cups or buying them because alternatives make the machine viable. This bears repeating: many consumers buy Keurig machines only because they can get alternative cups.

Nonetheless, Keurig has plowed on in their latest models with a reader that checks if each cup is a “certified and authorized” Keurig K-cup. Unsurprisingly, the Web has come up with a simple “patch” to bypass it without requiring an engineering degree or invalidating the brewer’s warranty.

I have no doubt that Keurig will “take umbrage” at this “blatant” violation of its “rights” to control what goes into “its” machines, and the next generation will include fancier technology.

What a waste.

Eventually, alternate manufacturers will provide machines that are K-cup compatible, cost around the same as (or possibly less than) a Keurig, and that happily accept any K-cup. Within the next year, I would expect a company to explicitly market their machine as the “friendly” or “open” coffee maker: “It’s your coffee machine; make the coffee you want! Only with X brand coffee makers!”

In response, Keurig will see further erosion and raise prices on their machines to “make up for the lost revenues”, which will lead to further defections.  Hopefully, Keurig will get a CEO smart enough to recognize the spiral and turn it around.

When you fight your customers, your enemy really is yourself.

Your customers owe you nothing; get over it. Think like a startup, make your customers happy how they want it and they will make you happy.

A Great Product Manager

December 11th, 2014

In yesterday’s article, we discussed what product management is, and why it matters so much to companies. It also is important to early stage companies, who, at least in theory, cannot afford either the extra head count or the founder’s time. Actually, seeing how crucial product management is to getting product-market fit – as Steve Blank would say, that is the very essence of a startup – it probably is more important for early stage firms, since they have little to no wiggle room.

So what makes a great product manager? I have heard many answers to the question, including:

  • Technology background, preferably former engineer, so they can gain the respect of and thus have a positive relationship with the engineers, and understand what can and cannot be built into the product
  • Great marketing skills, so they can understand how the product will be positioned and fit in the market
  • Sales skills, so they can talk to customers and see what gets them to close the deal
  • Finance skills, so they can build projections and models to understand the entire business value of the product offering
  • People skills, also known as political savvy, so they can move an organization they do not command

In truth, all of these are, at least partially, correct, and none is.

Any product manager who is not, at the very least, competent in each of these areas will fail.

Every one of the skills listed above is crucial, because every one of the tasks above for which the skills are required is crucial.

A product manager cannot be successful if she or he cannot:

  • Get the respect of and thus build a positive relationship with the engineers
  • Understand what the market strategy is and how to work with marketing in order to build demand for the product and gain market share
  • Talk to customers and even sell, or at least help close, a few deals so as to truly understand from an individual customer’s perspective why the product is valuable
  • Connect all of the financial dots, what the gross margins for the product will be under different scenarios, operating margins, time to recognition of revenue and receipt of cash, and impact on business value and valuation
  • Connect all of the people and persuade them to move in a common direction, without the CEO’s ability to command it

I would venture one further and say that having too much strength in one area can be a liability. A former salesperson in finance is in such a different area that she is not likely to be pulled naturally into her sales comfort season. But product managers naturally touch every area of the company. A former engineer in product management is going to be deeply involved with engineering and is going to feel the tug to try and dictate technology solutions (the how, which is the domain of the engineers, as opposed to the what, which is the domain of product management) or perhaps even provide them. This will come at the expense of other areas.

On a personal note, I am an engineer by training who has done a lot of product management, both as an employee and as a consultant. It is only by conscious effort that I keep from getting distracted by and pulled into the technology side which is between 1/10 and 1/20 of the job.

There is nothing wrong with coming from one of the functional areas; it is necessary. But only by being aware of the tendency to pull back to those areas can someone overcome it.

In addition, I would add three critical personal skills for a great product manager:

  1. Communications: The product manager is the hub of the product through which everything flows. If the product manager does not communicate what the product must do to every stakeholder and, more importantly, why, people will not come on board, or they will and will make the wrong decisions for the right reasons.
  2. Listening: Even more important than communicating outward is listening, constantly and always, to everyone. Very very few people in a company or of the customers are doing things for selfish, malicious or negative reasons. Most just want to get their job done with pride, make sure it matters and get paid well. A product manager who listens can understand what people’s concerns are and how to address them, which will make for a much more effective and desired product and company. However, there is a deeper level. A product manager who knows how to “shut up and listen” conveys empathy. People will start to seek him or her out, and the information critical to the job will come in without much effort. Just as marketing creates demand that simplifies sales, great listening and empathy create the demand to share which, in turn, makes product management a whole lot easier.
  3. Humility: Everyone in the company is smart, especially in their area. Confidence is important in a product manager, but humility, truly recognizing that each person does his or her job well and knows it better than the product manager does, will teach far more than any book or market research, and will ease the flow of information.

Now go find a great product manager and hire them.

Products vs. Yo-Yos

December 10th, 2014

This article is not a list of companies that have great products or product management, enlightening as it might be. It also is not a list of companies with terrible product management, although I could compose a very long such list, and the stories would be very entertaining!

Instead, this is a discussion of why product management matters, and how you get great product managers.

The genesis of this article is a number of conversations and interactions I have had with companies over the last year or so, several of which have had great product management, while others have been sorely lacking in the field.

Why Product Management

Most people grow up in a particular function in companies, and thus get what most jobs do. The sales team sells; engineers build; administrators run the servers; marketing figures out who to sell to and creates collateral; finance keeps track of funds and budgets; etc.

What about product management? What do they do? They don’t:

  • Build
  • Operate
  • Sell
  • Finance
  • Market

After all, there are departments for each of those. So what do they do?

This lack of understanding is the reason why, at least in the first tech wave, many companies simply had no product management. This was particularly bad in Israel, where the “Field of Dreams” philosophy reigned: “we have the coolest technology, so everyone will come buy it”. It led to the destruction of innumerable firms. But it existed in New York and Silicon Valley and many other startup locations. Fortunately, the second wave has been much healthier.

So what is the purpose of product management?

The job of product management is to manage the product.

While that sounds trite, it actually is quite deep. To quote Peter Drucker, “the purpose a business is to create and keep a customer.” If the company can do so, keeping the customer happy at a profitable price, then the company will exist and grow; if not, the company will fail.

But what does it mean to service a customer, and at a profitable price? There is an almost infinite number of questions that needs to be answered. Some crucial ones include:

  1. What features must be included in the product today? How about in 1 month, 6 months, 1 year, 5 years?
  2. What service levels do customers expect? How much are they willing to pay for it?
  3. Do we need certifications? What kind? How much are they worth to us?
  4. What time to deliver / time to deploy do we need? What is that worth?
  5. What type of sales structure and sales process do we need? Do those match with the kind of product we are selling and the customer type we expect?
  6. How do all of the above tie into our pricing? Are we a premium pricing company (larger profits for a smaller market) or more mass market (smaller profits for a larger market) or somewhere in between?
  7. Etc.

Some of these questions are strategic and should be resolved at the level of the Board or, at the very least, the executive team together. But the decisions to be taken and their impact and implementation in a complete product-wide and consistent manner is something that has to be owned by someone. That someone is your product owner.

What happens when product management is weak or non-existent?

  • Engineers build a fantastic product or service… that no one wants
    • Or, they build a product that lots of people want… with all of the wrong features
  • Service levels are so high that customers are unwilling to pay a premium for them… leading to losses
    • Or, they are too low, and management cannot understand why customers are so unhappy
  • The product itself is priced too high, leading to low market share
    • Or it is priced too low, leaving lots of money on the table
  • The sales team lacks confidence going into each deal, leading either to a “race for the bottom”, a competition on price, instead of value, or a constant focus on value and higher price when all the customer wants is the lowest price
  • The company spends too much getting every certification it can dream of, at a higher expense but for no additional sales
    • Or it doesn’t get the certifications it needs and misses on crucial sales

But perhaps worse than all of the above is the “yo-yo” syndrome. Since the company does not have a consistent plan or picture for “creating and keeping the customer”, it bounces back and forth like a yo-yo with each subsequent development.

Does the following scenario sound familiar?

VP Sales: “Hello Mr. Operations Head. I just got off the call from a great deal, it could be worth millions to the company. All we need to do is get certification X by the end of the month and the deal is ours!”

VP Technology: “That certification takes 6 months at minimum, plus $1MM in fees. In addition, it will cost us $500k upfront in our own manpower, delay 20 critical new features, and $200k per year in maintenance. Is it really worth it? Where is the budget”

VP Sales: “Budget? That is your issue, you own it. We just have to have this now or this deal is D-E-A-D, dead, and on your head!”

VP Technology: “I would love to help you. Just get the CEO to sign off on the additional spend, delay of priorities, timeline, and we will do it. But I don’t hear about it being crucial for any other deals, while these features are, and cash flow is tight. Are you sure we should do this?”

Six months later:

CEO: “Mr. Tech, why are we over budget?”

VP Tech: “That was the additional spend you authorized for all of those great new deals worth millions.”

CEO: “Mr. Sales, where are all of those deals?”

VP Sales: “They are on their way, but I never promised them, just that they looked good. And we would hit our numbers anyways, if only we weren’t late on those 20 features you promised 2 quarters ago.”

Should you get certification X? Can you get it by the end of the month? Will you really get that deal? Is it even worth it for that deal? Sure, it may be a $1MMk 3-yr enterprise deal, but if it costs $1.5MM upfront and another $200k per year to get that certification, the costs will exceed the deal’s revenues, let alone its profits.

The critical question no one in the above conversation asked, “is this certification something that is good for our product in our market, independent of this deal?” If the answer is yes, then you should get the certification with or without the deal; if the answer is no, you should not get it… with or without the deal. Sure, the deal may impact the timing of acquiring it, but the yes/no decision should only be impact by what you expect the product to be in its market. Period.

That is the question the head of product should have been there asking. If s/he were there:

  1. The conversation upfront would have been more focused.
  2. The conversation six months down the line would not have been antagonistic and leading to blame
  3. The numbers likely would have been met on revenue and profit
  4. The head of sales never would have asked for those requirements, because s/he would know they were not part of the plan, or were already baked into the plan

Product management ensures the company delivers a viable, valuable and profitable product in its entirety to the market.

In the next article, we will look at what key characteristics make for a great product manager.

Movies on Mobile

December 9th, 2014

A few months back, I looked at the growing tide of making movies on mobile phones. I was referring not only to the typical home videos that we used to capture on a large home video camera, now on our portable phones, but semi-professional and even professional films on your iPhone or Android. Specifically, I was concerned with what this trend means for high-end camera makers.

This week, I saw a short – all of 1:22 – fantasy film called DragonBorne, which was done entirely on an iPhone 6. Not just the filming in HD, but the entire production, from filming to editing to soundtrack, to mixing, to special effects, everything was done on an iPhone 6. The producer, Matthew Pearce, even has a dedicated YouTube channel showing how to do advanced filmmaking on an iPhone.

While my original focus was on what this means for high-end camera makers, I also would like to take a look at what this means for film producers.

Producing films requires a few key inputs (non-exhaustive list):

  • Talent – actors, editors, etc. essentially labour
  • Equipment (i.e. capital)
  • Distribution – movie houses, TV network contracts, etc.

The Internet, and specifically YouTube followed by Vimeo and other platforms, have significantly reduced the value of distribution channels. Yes, you can make a lot more money when major movie houses show your film and your distributors advertise it heavily. But you, as a producer, can use Web video channels to get the film in front of as many people as a movie house, if not more. Further, with YouTube available on most large-screen home TVs, whether via dedicated boxes such as the Apple TV or Roku, Smart TVs, or via streaming over Chromecast or similar, anything that can be watched on the Internet can be watched in large-screen at home.

Talent is often broadly available, with far fewer people “making it” as producers/actors/directors than are capable. A mixture of luck and contacts combined with skill is what puts someone in the neon lights (assuming we still use neon and not LEDs).

All of this leaves the big constraint to widespread film production as capital. It takes a lot of money to buy the equipment – cameras, soundstations, editing software, all sorts of specialty gear – that is necessary to make a film.

The massive reduction in cost of such equipment is a risk not only to the camera makers, but to the studios. Yes, few will be able to match the quality produced by the well-funded and well-trained studios. But if 100x or 1,000x such “mini-studios” pop up, some will, inevitably, be as good as or better than the currently dominant, and very expensive, ones.

For years, even the Internet did not put the content creation business at risk. Anyone could distribute video, and with Facebook and Twitter even tell millions of people about it, but the quality was the sole domain of the pros. The simplicity of the newer software, the sheer availability of the hardware, all combine to put the studios firmly in the cross-hairs.

The Future of Productivity Apps

December 8th, 2014

The productive actions we take as humans in society have not changed in many thousands of years, among them:

  • Communicate
  • Write
  • Draw
  • Calculate

How we do these actions has changed, from stone tablets and steles to papyrus to parchment to paper to notepads to computers to smartphones.

In the computer era, the write/draw/calculate – which often form the basis for many other activities – have been dominated by what has been called “Productivity Software”. We used to use WordStar, then WordPerfect, several others in between, and eventually Microsoft Word came to dominate. I distinctly remember when graphical user interfaces became good enough that What You See Is What You Get (WYSIWYG, pronounced “why-zee-whig”) Word processing was an amazing new invention. For over a decade, the standard way to share a contract – communicate what we have written – has been, “email me a Word doc.”

While writing a local Word document, then emailing it to your counter-party for revisions, and back again, is orders of magnitude more efficient than what existed before, by the standards of the early 21st century, it seems positively quaint:

  • Multiple file revisions that are hard to keep track of;
  • Expensive word processing software;
  • Need to “attach and send”;
  • Insecure revisions.

Despite the extensive featureset of MS Word, the basic needs can be fulfilled far more simply, in a more collaborative fashion.

In this vein, Stepanie Retblatt of Smarty Pants recently did a (not very scientific) survey, quoted on Business Insider, to see what the next generation uses to “be productive”. Unsurprisingly, not a single one mentioned Microsoft Word. While some use apps like iOS Notes to start on their mobile and continue on their Mac, the most common answer was Google Docs. Indeed, it misses many of the features of Word, but where it counts, it has all of the advantages:

  • Accurate automatic revisions;
  • Free or near-free;
  • Automatically shared in real time;
  • Guaranteed revision integrity.

When it comes to school work, my kids, as well, very rarely use Word or PowerPoint. I have it installed on my Mac because of my work with clients who need it. But the other computing devices in the house – a netbook, a few tablets – do not have it. My kids simply use Google Docs. They create with it, share, and edit with it, and print from it.

Productivity apps still make lots of money in corporates and from the older generation. But when the younger generation – the future buyers – do not spend on it, its future is in serious question.

QE, USD and the Price of Gas

December 4th, 2014

Barely a decade ago, I lived in New York and would cross the George Washington Bridge to buy gas at prices below $1 / gallon. Then it crossed $2 / gallon and it seemed absurd! Before long, gas prices around or even above $4/gallon became the new normal. Nowadays, prices have dropped well below that – in many states it is below $3 / gallon – and the question of “what happened” has come up.

There is little doubt that the reduction in fuel prices is a “booster shot in the arm” to the economy. Driving to work is cheaper, public transportation (should be) cheaper, airlines can make more money, vacations cost less, transportation of basics like food and luxuries like iPhones cost less; in short, just about everyone wins.

While a lot of discussion on this topic has centred around production of shale gas in the US and Canada, I would like to look at a different perspective: the dollar.

To be clear: I do not believe the other factors, such as domestic production or Asian consumption do not matter, or matter less. I just want to focus on this one key area.

Oil is both imported and produced domestically, and trades on global markets. Even if it isn’t imported, domestic oil will be exported if it can get more money overseas than domestically. Oil itself is priced in USD, usually with West Texas Intermediate (WTI) Crude as the gold-standard (if a commodity can be standardized by another commodity) benchmark.

Like any commodity that is globally traded, its price in one currency will depend not just on supply and demand of the commodity itself, but also on the relative strength of the currency purchasing it. If you want to buy a car made in Germany when the Euro is strong and dollar is weak, it will cost you a lot more dollars than when the dollar is strong and Euro is weak. Actually, it doesn’t matter that much where it is manufactured, since they can always ship it elsewhere if your currency’s offering is too low, thus driving the price up (assuming the manufacturer can ship it around at will).

So what has oil looked like for the last 10 years? According to the St Louis Fed, which is pretty reliable, the spot price for WTI looks like this:

NPX

Why did I pick 10 years? It was long term enough to show the trend and short term enough not to get lost in data overload. Anyone can go to the Fed’s research page to create their own graphs. All of the graphs on this page are 10-year graphs with data points mapped each Friday.

As we can see – and have heard on the news and, more importantly, felt in our wallets every time we fill up – oil was pretty low 10 years ago, has been steadily climbing for years with some whipsawing in 2008-2009, and finally appears to be dropping in the last few months.

OK, now what has the USD been doing during that time? Thanks again to the Fed’s excellent research department, here is a trade-weighted average of the USD vs a basket of foreign currencies. It basically shows how the dollar is doing versus our trading partners, which is what counts. We cannot just measure against the Euro or the Canadian Dollar or the Yen, because that would show only the value vis-a-vis that currency, which may have its own reasons for suddenly rising or falling. A trade-weighted basket is one of the best ways to see how the currency is doing overall.

DTWEXM

That has been pretty volatile, too, and it isn’t too surprising. The financial crisis of 2007-2008 put a real dent in the value of the dollar, which picked up a bit as everyone else suffered the crisis. It has been picking up significantly – almost to its highest point in a decade – since the Fed stopped QE and has been talking up that it is done.

What happens when you put the two together? You get the following (WTI on the left, USD on the right):

WTI-vs-USD

Minus some relatively short-term effects, the majority of the change in price of oil – and hence all of its byproducts like gas and jetfuel, as well as things that depend on it like, well, everything – can be explained by the strength or weakness of the dollar. When the dollar is strong, oil is cheap; when the dollar is weak, oil is expensive.

I do not know and cannot judge if the ballooning of the Fed’s balance sheet as it pumped trillions into the economy for the past several years helped or hinder recovery. We have no control group to prove one way or another.

I can say, based on the above data, that the Fed’s actions – probably combined with governmental deficit spending – weakened the dollar and made our gas, travel, food and just about everything more expensive.

It is amazing what 2 little graphs put together can tell you.

Help Vampires

December 3rd, 2014

No, today’s article is not an appeal to raise funds via GoFundMe for poor vampires.

It is about the natural but detrimental users of your service.

StackOverflow – and its parent network, StackExchange – have been wildly successful in encouraging people to ask and answer questions about everything. The original site, StackOverflow, is about software engineering. This shouldn’t be too surprising since it was founded by Jeff Atwood, of “Coding Horror” fame, and Joel Spolsky, founder of Fog Creek Software, writer of (unfortunately now defunct) JoelOnSoftware blog and creator of Trello.

With their mission to make it easy to get quality answers to tough software questions, they want to make it as simple as possible to sign up and ask questions.

The problem is, when it is too easy to ask questions, people ask some really dumb questions. They might be the ones that could have been answered with the first two results on a Google search, or even searching on StackOverflow itself! But even then, it is easier to just ask, rather than put in the effort.

An even worse case is the “student question”, one wherein the university or high school student just copies the question verbatim and expects someone to solve their problems… when the whole point of paying for the course is to learn how to do it.

In StackOverflow, these actually have a term, the “Help Vampire“; my preferred epithet is “lazy b***ards.”

The important point, however, is that every business will have a class of users or behaviours they would prefer didn’t exist. They are the drunk in the bar, the person in Starbucks who takes up four chairs and 2 tables all by herself, the guy on the airplane who folds his jacket up to take up the entire overhead bin.

The questions for someone building a service are:

  1. When do you worry about them?
  2. How do you deal with them?

In answer to the first, you worry about them when they impact the business, and not much before. The only exception is if they will limit the business growth. In the case of StackOverflow, the Help Vampires only came as the site gained traction and was popular. If you worry about them too early, you will create difficulty in signing your users up. Like the old line about taxes – it is better to get 10% of $1BN than 100% of $1MM – it is better to have 10% of 1BN users be trouble than 100% of 1MM users be good. The first gives you 900MM great users; the second only 1MM.

In answer to the second, you need to assess if you deal with them. Sure, you can create tough or even draconian rules to keep them out, but will that make it too hard to get in and legitimately use your service? Will it kill the goose that lays the golden eggs? Think long and hard about how you discourage without destroying. StackOverflow left it to the community. In this case, it makes sense. Technologists are notoriously intolerant of laziness and leeching. If someone posts an absurd or lazy question, they will pile on and “downvote” it. For other services  that are not as community-driven (we used to call these UGC for “user generated content”, back in the days when instead of dollars, the supposed important metric was “eyeballs”…), it will be up to management to find ways to filter the worst of them out while helping tolerate the less egregious offenders.

I have managed strategies to find the balance based on business mission and objectives, but it is always a compromise. The trick is finding the right one.

Vampires are inevitable in any business; managing them is just part of growth.