Archive Page 2 of 8



Commercials help you enjoy television?

From the Freakonomics Blog today:

In a plot twist worthy of Lost, it turns out that TV commercials aren’t obnoxious interruptions after all. They’re helpful interruptions, which increase your enjoyment of TV by periodically reminding you how much you’d rather be watching your favorite show.

That’s according to a new study published in the Journal of Consumer Research, which found that commercials restore a sense of novelty to TV programming by breaking up the cycle which we become bored with following what’s on the screen.

In one of several experiments, the study’s authors screened the sitcom Taxi for two groups. One group saw an episode with commercial interruptions, and the other saw an episode with no interruptions. Those who saw Taxi with commercial breaks enjoyed it more, by a decisive margin.

Please Embrace This Commercial Interruption - Freakonomics Blog - NYTimes.com.

I find this an amazing and totally unexpected result. I wonder if the study can be reproduced, or tried with other forms of media.

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Make fewer products, but make them great

Matt Burns writes a great piece over at CrunchGear on how Apple’s success is tied to the fact that it doesn’t confuse customers with too many choices.

There really aren’t that many products: One cellphone, four iPods, three notebooks, and three desktop computers. Now look at HP’s, Dell’s, or even Garmin and TomTom’s product lines. Apple does something different and hopefully others are taking notes.

Apple’s secret sauce: A simple product line.

This reminds me of a section in Barry Schwartz’s book The Paradox of Choice. Here is Christopher Caldwell writing about it in The New Yorker:

Research in the wake of Kahneman and Tversky has unearthed a number of conundrums around choice. For one thing, choice can be “de-motivating.” In a study conducted several years ago, shoppers who were offered free samples of six different jams were more likely to buy one than shoppers who were offered free samples of twenty-four. This result seems irrational—surely you’re more apt to find something you like from a range four times as large—but it can be replicated in a variety of contexts. Students who are offered six topics they can write about for extra credit, for instance, are more likely to write a paper than students who are offered thirty.

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How Not to Fix the New York Times

Felix Salmon takes Henry Blodget to town over the Silicon Valley Insider’s mostly stupid advice on what to do with the New York Times.

How Not to Fix the New York Times - Finance Blog - Felix Salmon - Market Movers - Portfolio.com.

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Boxing Day Honesty Box

Cash register

Over a year ago now, I wrote a piece called Welcome to the Radiohead Economy for Report on Business Magazine. In the piece I compared Radiohead’s experiment of putting In Rainbows online and asking for donations to the practice of farmers leaving an “honesty box” along with their corn at an unmanned roadside stand.

During my research for that piece I also learned about a cafe in Kirkland, Washington that has all the lovely espresso drinks and sandwiches you would expect at an upscale cafe, but no prices or cash register, just a locked honesty box patrons can drop money into.

Obviously this isn’t a system that would work everywhere, but any good salesman (or conman) will tell you that one of the best ways to get your customers (or victims) to trust you is to first show that you trust them. I wish that more businesses understood that.

That’s why I was so pleased to read this story from the UK about a hardware store in North Yorkshire that was left open on Boxing Day with no staff and just an honest box. The truly amazing thing about the story is not that people didn’t make off with all the goods, but how many notes of thanks were also received in the box. This is a great way to build a community of trust and I’m sure it will benefit this guy’s business for years to come.

An honesty box is a terribly civilized thing, and putting one out shows just how much you think about

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Follow The Expert

I’ve been getting grief from a few people about the haphazard manner in which this blog is updated. I couldn’t agree more. Any successful media source relies on creating expectations and then meeting those expectations. So, my New Years Resolution will be to keep this blog updated regularly and full of fresh content.

In the meantime, here’s my latest Big Idea from ROB Magazine.

Wisdom of crowds

In the era of Google and 24-hour news, there is no shortage of expert opinion. Too often, the wrong ones prevail

KEN HUNT

December 16, 2008 at 7:00 AM EST

Things were going amazingly well. In 2007, AIG Inc. was one of the 10 largest companies in the world, and the unri­valled king of insurance. It had over 110,000 employees and operations in 130 countries. But much of the real action was happening in one little office called AIG Financial Products, ensconced in London’s exclusive Mayfair district. The branch had fewer than 400 employees, but between 1999 and 2005 this cabal of hard-core egghead quants took AIGFP from revenues of $737 million to $3.26 billion (all currency in U.S. dollars), largely by issuing credit default swaps on blue-chip corporate debt. Joseph Cassano, the leader of AIGFP at the time, was so confident in their business model that, as late as August, 2007, he was quoted as saying, “It is hard for us, and without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those transactions”

It wasn’t long after that it all came crashing down. The credit default swaps they issued added up to guarantees on nearly half a trillion dollars worth of debt, and none of that risk was hedged. When the underlying debt started to sour, thanks to a downturn in the housing market, AIG’s business swiftly crumbled and threatened to take down everyone who had purchased their products with them, including many of the world’s largest banks. Within six months of Cassano’s “one dollar” statement, his operation had lost $11 billion and triggered a U.S. government bailout that has since climbed north of $150 billion. So, where did these millionaire geniuses go wrong? Why didn’t they see this coming, and how could Cassano have been so extravagantly confident and oblivious? The answer to these questions lies in the fact that they were working from financial models built by the greatest minds in modern economics. They trusted these models, and everything in them pointed to a safe and steady stream of profits. Those models just happened to be dead wrong.

When Alan Greenspan was called before the House Committee on Oversight and Government Reform to explain the current mess, he pointed directly at the failure of the reigning computer models, saying that some time last summer, the whole modern risk management paradigm simply collapsed. “I was shocked,” Greenspan said, “because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.” Common sense, however, should have tipped off the financial world that the party couldn’t last forever: Housing prices had been known to crash before, lending standards on many subprime mortgages were absurd, and the notion that anyone could make billions of dollars a year risk-free sounds as naive as a Nigerian e-mail scam. The manner in which financial wizards were blindly trusting their risk models was akin to the truck drivers who had become so reliant on their GPS systems that they followed them into rivers and through farmers’ fields. Harvard Business School professor Niall Ferguson put it best when he wrote: “Those whom the gods want to destroy they first teach math.”

Farhad Manjoo, technology columnist for the online magazine Slate, is curious why we pay attention to some sources of information and blissfully ignore others.
big idea

His book, True Enough: Learning to Live in a Post-Fact Society, explores the way our personal ideology affects the way we interpret the world. According to Manjoo, “facts no longer matter.” These days, we simply decide how we want to see the world and then go out and find experts and evidence that back up our beliefs. Meanwhile, we have a tendency to dismiss those who are not onside, sometimes with devastating consequences.

In the case of AIG, and all the others who contributed to our faltering economy, those who should have known better, who were in the best positions to see the risks of subprime lending and the unfettered and unregulated use of high-risk derivatives, ignored the disease as it was spreading.

In the classic 1972 book Groupthink, Yale psychology professor Irving Janis showed just how a panel of experts can come to a consensus that is wildly incorrect. Experts worry about their status in the community. They fear veering too far away from the others, because if they do, they risk becoming irrelevant. Even the most well-informed or cynical experts can find themselves censoring their viewpoints and even actively changing their deeply held beliefs in order to remain in line with what they perceive to be the beliefs of the group as a whole.

In AIG’s case, it’s not as if there were no experts out there warning of the dangerous direction in which the economy was heading. One YouTube video making the rounds recently shows Peter Schiff, president of Euro Pacific Capital, touring cable television’s financial shows in 2006 and 2007. More than anything else, these appearances show exactly how uncomfortable it can be for a single person to speak up against the consensus of his peer group. On each program, Schiff warned that the economy was headed for a major meltdown, one that would extend far beyond the subprime mortgage market and would eventually cause markets—financial stocks, in particular—to plummet. During one debate on Fox News in May, 2006, four panellists in a row were given the opportunity to summarize their positions toward U.S. housing markets: Each one said, “The worst is over.” Turn to Schiff: “The worst is yet to come.” There were bursts of laughter, followed by assurances that nothing of the sort was likely, or even possible. As he cut to a commercial, Fox News anchor Neil Cavuto segued, “All right, Peter, I wish we had more time with you. I know you want to continue that exposé on Santa Claus.”

Given Schiff’s treatment, it’s little wonder that other experts weren’t lining up to contradict popular opinion. One great thing about the economy, though, is that the truth always comes out eventually. No model is so compelling, no bubble so exuberant, that it can beat market fundamentals in the long run.

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Pasha Malla Gives Girl Advice

Pasha Malla is one of Canada’s most talented and creative young writers. I’ve been loving his stuff, and this piece that he penned for The Morning News recently nicely captures his particular variety of funny brilliance.

If at Halloween you’re invited to a TV- and movie-themed party and she dresses up as Winnie Cooper and you dress up as Paul Pfeiffer, mainly because you already have the glasses, and at the party some guy who’s a dead ringer for Fred Savage saunters up, peels off his mole, and says, “Get lost, Paul, Winnie’s mine,” and you’re left standing there while the two of them go off dancing to the soundtrack from Forrest Gump, and when two hours later she finds you sitting by the punch bowl explaining for the umpteenth time that, no, you’re not supposed to be Woody Allen, she holds up a tie stolen from a passed-out Alex P. Keaton to her petticoat and redubs herself Annie Hall, and you Alvy Singer: She loves you. And, to be honest, I sort of love you, too.

I also really liked the bit about Gael Garcia Bernal.

Check out his short story collection, The Withdrawal Method.

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A wonderful little film

50 People, 1 question


Fifty People, One Question: New York from Crush & Lovely on Vimeo.

I can’t wait for the sequel: 50 people, 1 cup.

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Orwell’s Found Poetry

George Orwell

I’ve been reading Orwell’s diaries, thanks to a terrific project from The Orwell Prize that sends out his entries exactly seventy years after the day they were originally written. This is a great way to read a diary and it gives you an intimate sense of the writer’s life.

Entries are currently being published from the fall of 1938. Orwell is in Morocco where he was recovering from a near-fatal lung haemorrhage.

The entry from the 28th of October, 1938 is particularly spare and beautiful and reads as a piece of found poetry. I’ve reproduced it here. The line breaks are my own:

One egg. Many black beetles
squashed in the road. Inside they are
brilliant vermillion.

Men ploughing with teams of oxen
after the rain. Wretched ploughs,
with no wheel, which only stir the soil.

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The Dread Pirate Steve Jobs

I’ve been slacking off on maintaining this blog for the last month. It’s the time of the year where malaise and post-nasal drip seem to colour everything. I have a lot of ideas for posts and have a build-up of interesting stuff that I’ve come across in the last couple of weeks that I’d like to share, I just need a kick-start to get me in the habit of posting here again.

Thankfully, my latest Big Idea is out in Report on Business Magazine today, so reprinting it here gives me an easy way to start posting again. Next month’s Big Idea is about how computer models led to the downfall of AIG.

The Dread Pirate Jobs

What do today’s celebrity CEOs have in common with 17th-century pirates? A fearsome affinity for branding, for one

From Friday’s Globe and Mail

Drawing parallels between pirates and modern business is a popular pastime these days, and not just because a ragtag cast of Somali free-booters lucked into capturing more than two dozen Russian tanks earlier this year. In the past 18 months, a raft of books and articles have emerged arguing that, contrary to the half-crazed sea dogs portrayed by the likes of Johnny Depp, real pirates of the Caribbean made rational, intelligent business decisions, based on their dual goals of maximizing revenues and keeping down costs.

One of the men responsible for this explosion was Peter Leeson, an economist at George Mason University. In The Invisible Hook: The Hidden Economics of Pirates, his new book being released this spring, he contends that the world of 18th-century pirates—their business practices, social contracts and even the mythology that surrounds them—was more sophisticated than anyone previously assumed. Not only were pirates great managers, he says, they were experts at branding, developing some of the strongest and most consistent trademarks of all time.

“They wanted to avoid violence as much as possible,” says Leeson. After all, conflicts were costly. Crew members might be harmed in a fight, their ship could be damaged or, worse, they might destroy the ship they were attacking. “Pirates wanted other ships to give up without a fight. One way to do that is to have a reputation that is so heinous it’s scary.” A great example of this was the Jolly Roger flag, “one of the most memorable corporate logos in history,” says Leeson. That the skull and crossbones persists today, on T-shirts and books and candy bars, “is an incredible testament to the power of pirate branding.” The flag’s message is a simple one: Resist us, and you will be slaughtered.

The pirate brand didn’t stop at a winning logo. We know that pirates like Edward Teach, otherwise known as Blackbeard, actively worked on their personal images. “They looked a certain way and they had a particular reputation, and they cultivated that to the greatest extent possible because they understood the benefits it generated for them,” Leeson says. Blackbeard actively encouraged the worst rumours about his methods of torture and his sanity. He was so universally feared that, to this day, there are no verified accounts of his actually having to resort to murder—most of his victims submitted without a fight.

What does this mean for business today? While corporations can’t resort to threats of violence to get deals done, a reputation for hostility is as valuable as ever. The Recording Industry Association of America is an example of this: Its reputation for aggressive litigation (suing little girls and grandmothers with equal vigour) is designed to discourage illegal file-sharing. Likewise, Wal-Mart’s reputation for undercutting the competition causes many small businesses to simply roll over when it moves into town. Whether the business is privateering or private equity, “consistency is important for a message to become institutionalized,” Leeson notes. To many small business owners, Wal-Mart’s smiling yellow happy face is as scary as the skull and crossbones ever was.

But what happens when a company has so intrinsically linked its fearsome reputation to the personality of its captain? In the case of Apple, the company owes much—if not all—of its talent for bending others to its will to an enfant terrible CEO, Steve Jobs. Even within the company, the notoriously authoritarian chief is viewed as “a terror-inspiring taskmaster who’s forever screaming at his workers,” as Wired editor Leander Kahney wrote in his book Inside Steve’s Brain. How does a company ever crawl out from under that cult of personality?

Maybe it doesn’t have to. In the movie The Princess Bride, the black-clad hero Westley made his fortune by assuming the identity of the Dread Pirate Roberts, the original having long since handed off his mask and retired a wealthy man in Patagonia. Now consider Apple: Rumours surrounding Steve Jobs’s health—fuelled by the fact that Bloomberg accidentally published a draft version of his obituary last October—have investors wondering what might happen to the company if he died. Perhaps Jobs’s persona, black mock turtleneck and all, could be passed on down the line, for the next plucky privateer to play Dread Jobs.

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The First Time I Read About Obama

An endorsement of Obama

Months before his famous speech at the 2004 Democratic convention, I read about a young Chicago politician facing a rough and tough fight to become only the third black person elected to the United States Senate. The piece, written by the New Yorker’s William Finnegan, made an immediate impression on me. Here was a constitutional law professor who had been the first black editor of the Harvard Law Review, he was clearly intelligent, but even beyond that, everyone agreed that there was something special about him. He was principled, charismatic, a natural leader and a self-professed “legislation nerd” whose main concern seemed to be the most pragmatic way to move legislation in the right direction. We wasn’t an ideologue, he has a man who wanted to get things done.

When I heard that he had been selected to give a keynote address at the Democratic Convention, I was excited to see him speak, and of course I wasn’t disappointed. No one was. No one could have been. I remembered reading this specific bit at the time and thinking how true it must be now:

Jan Schakowsky told me about a recent visit she had made to the White House with a congressional delegation. On her way out, she said, President Bush noticed her “obama” button. “He jumped back, almost literally,” she said. “And I knew what he was thinking. So I reassured him it was Obama, with a ‘b.’ And I explained who he was. The President said, ‘Well, I don’t know him.’ So I just said, ‘You will.’ ”

I’ve often thought about this piece in the last couple of years as Obama made his triumphant run for the Office that Bush holds, but I had never gone back to read it. The New Yorker recently republished the profile on their website and it was just the opportunity I needed. Please take the time to read The Candidate.

One thing that is always mentioned about Obama is his preternatural calm. This is something he would be caught on tape mentioning about himself in preparation for the candidate debates. As reported in Newsweek’s remarkable “How He Did It“, Obama said, “There’s a certain ambivalence in my character that I like about myself. It’s part of what makes me a good writer, you know? It’s not necessarily useful in a presidential campaign.”

This same aspect of his character is mentioned in the New Yorker piece:

People in Illinois seem largely unaware of Obama’s long, annealing trip into their midst, although they often remark on his unusual calm. Now forty-two and a state senator, Obama emerged, in March, from a raucous primary as the Democratic nominee for the United States Senate. In a seven-person field, he received a remarkable fifty-three per cent of the vote—he even won the “collar” counties around Chicago, communities that supposedly would never support a black candidate. And everyone recalls that, as the votes were being tallied at his headquarters on Election Night, he seemed to be the least agitated person in the place.

That’s exactly the sort of guy I want handling the financial crisis, or the three am phone call.

Here’s another thing I liked about him at the time: While he had his problems with NAFTA, he clearly understood the upside of trade. Finnegan writes:

He mostly told the union men what they wanted to hear. Then he said, “There’s nobody in this room who doesn’t believe in free trade,” which provoked a small recoil. These men were ardent protectionists. A little later, he said, with conviction, “I want India and China to succeed”—a sentiment not much heard in the outsourcing-battered heartland. He went on, however, to criticize Washington and Wall Street for not looking after American workers.

Later, I asked him if he wasn’t waving a red flag in front of labor by talking about free trade. “Look, those guys are all wearing Nike shoes and buying Pioneer stereos,” he said. “They don’t want the borders closed. They just don’t want their communities destroyed.”

David Axelrod makes a couple of appearances in the piece. This, of course, was long before I had any idea who David Alexrod was:

“He could have gone to the most opulent of law firms,” David Axelrod, a longtime friend who is now Obama’s media adviser, said. “After Harvard, Obama could have done anything he wanted.” What he wanted was to practice civil-rights law in Chicago, and he did, representing victims of housing and employment discrimination and working on voting-rights legislation for a small public-interest firm.

One thing that was played up in this piece that I didn’t hear about in either the primaries or the general election is that Obama is not the typical product of the Chicago political machine. If anything, he is a testament to the fading power of that machine.

To an outsider with only the broadest idea of Chicago politics, Obama’s victory in the Democratic primary actually looked like a victory over cynicism. He had not slimed his opponents. Nor was he the candidate of the fabled local machine—that was Dan Hynes, the state’s comptroller, who comes from a powerful Illinois political family. Precinct captains and party organizations and old-line labor unions (most of the Teamsters, the A.F.L.-C.I.O.) had supported Hynes. The machine, however, is an outdated conceit. “A few creaky parts still work,” David Axelrod told me. “They can still elect a few water commissioners or sub-circuit-level judges. But no precinct captain can tell people how to vote for President or the Senate.”

And here was the money-shot for me: Obama comparing a good piece of legislation to great writing or great music:

Obama seems to be a true legislation nerd. When he talks about the maneuvering it took to line up the state’s prosecutors behind the videotape bill, and to keep the police associations neutral, his eyes narrow in pleasure. “You can’t always come up with the optimal solution, but you can usually come up with a better solution,” he said over lunch one afternoon. “A good compromise, a good piece of legislation, is like a good sentence.” He nodded. Miles Davis’s “Kind of Blue” was playing in the background. “Or a good piece of music,” he said. “Everybody can recognize it. They say, ‘Huh. It works. It makes sense.’ That doesn’t happen too often, of course, but it happens.”

In a short entry that accompanied the republication of this piece on the website, William Finnegan talks about why he left out talk of Obama having the talent to become the first black President.

What I didn’t include was something else Schakowsky said. “I think he’s got it,” she told me. “He can go the distance. He could be the first black President.” The quote was too bald, too broad, too bannerlike. Lots of other people in Illinois, including some Republicans, talked up Obama’s extraordinary promise, his possible future on the national stage, and I did use some of those remarks. But just coming out and saying “first black President” felt not only absurdly premature but like bad juju.

I guess we can all be happy that no bad juju got released.

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