kottke.org posts about business
Carrie Banks has owned and operated Isis Hair Salon in LA for more than 20 years. But because of recent events in the Middle East and jokers on social media, the name has become a liability in recent years. Banks has even had difficulty finding someone to replace the sign outside the salon in the event of a name change.
From a new Kickstarter publication called The Creative Independent, Philip Glass was interviewed about the importance of artists owning their work and getting paid for it.
My personal position was that I had wonderful parents. Really wonderful people. But my mother was a school teacher. My father had a small record shop in Baltimore. They had no money to support my career. I began working early. You’re too young to know this, but when you get your first Social Security check, you get a list of every place you’ve worked since you began working. It’s fantastic! I discovered that I was working from the time I was 15 and putting money into the Social Security system from that age onward. I thought it was much later. No, I was actually paying money that early.
The point is that I spent most of my life supporting myself. And I own the music. I never gave it away. I am the publisher of everything I’ve written except for a handful of film scores that the big studios paid. I said, “Yeah, you can own it. You can have it, but you have to pay for it.” They did pay for it. They were not gifts.
A lot in this interview resonates, including this:
It’s never been easy for painters, or writers, or poets to make a living. One of the reasons is that we, I mean a big “We,” deny them an income for their work. As a society we do. Yet, these are the same people who supposedly we can’t live without. It’s curious, isn’t it?
And this bit about making work vs performing (italics mine):
What happens, is that the artists are in a position where they can no longer live on their work. They have to worry about that. They need to become performers. That’s another kind of work we do. I go out and play music. The big boom in performances is partly because of streaming, isn’t it? We know, for example, that there are big rock and roll bands that will give their records away free. You just have to buy the ticket to the concert. The cost of the record is rather small compared to the price of the ticket. It’s shifted around a little bit; they’re still paying, but they’re paying at the box office rather than at the record store. The money still will find its way.
Then you have to be the kind of person who goes out and plays, and some people don’t.
I’ve been thinking a lot about the economics of writing online. Making a comfortable living only by writing is tough and very few independents are able to do it. More successful are those who are able to get away from writing online by speaking at conferences, writing books, starting podcasts, selling merchandise,1 post sponsored tweets and Instagram photos, building apps, consulting for big companies, etc. This stuff is the equivalent of the band that tours, sells merch, composes music for TV commercials, etc. But as Glass said, what about those who just want to write? (And I count myself among that number.) How can we support those people? Anyway, more on this very soon (I hope).
Photo is of a Chuck Close painting of Philip Glass taken by me at The Whitney.
Tonight, Elon Musk shared part two of Tesla’s “Master Plan” (here’s part one, from 2006). The company is going all-in on sustainable energy, building out their fleet of available vehicle types (including semi trucks and buses), and pushing towards fully self-driving cars that can be leased out to people in need of a ride.
When true self-driving is approved by regulators, it will mean that you will be able to summon your Tesla from pretty much anywhere. Once it picks you up, you will be able to sleep, read or do anything else enroute to your destination.
You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you’re at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost. This dramatically lowers the true cost of ownership to the point where almost anyone could own a Tesla. Since most cars are only in use by their owner for 5% to 10% of the day, the fundamental economic utility of a true self-driving car is likely to be several times that of a car which is not.
In cities where demand exceeds the supply of customer-owned cars, Tesla will operate its own fleet, ensuring you can always hail a ride from us no matter where you are.
Summing up: Telsa, Uber, and probably Apple all want to replace human drivers with robot chauffeurs. It’s a race between the Jetson’s future and the Terminator’s future. Fun!
LittleSis is a freely available database that documents personal and business connections in the worlds of government and business. For instance, here’s George Soros. And Dick Cheney. Love the Lombardi-esque influence maps. (via @kellianderson)
(P.S. Does anyone remember the name of a similar project done in Flash many years ago by one of the hotshot Flash developers? Can’t find it…)
Update: The Flash site was They Rule by Josh On “with the indispensable assistance of LittleSis.org”. Well, how about that. (via @ajayskapoor)
Radiohead compartmentalizes various parts of its overall business dealings into several smaller companies. Here are some of them as detailed in this Guardian article.
Random Rubbish LTD
Over Normal LTD
Ticker Tape LTD
_Xurbia_ Xendless LTD
You could whip up a really good Radiohead Business Name or Radiohead Song Title? quiz with these.
In his 1975 song Jungleland, Bruce Springsteen laments, “the poets down here don’t write nothing at all, they just stand back and let it all be.” I was reminded of that line when Springsteen canceled his North Carolina concert to protest the state’s recently passed bathroom law. In this case, the poet wrote. While it’s not unusual for musicians and other artists to use their public podiums for protest, it’s less common for corporations to do the same. At least, that used to be the case. But recently, many top CEOs are using their corporate muscle to influence social and political decisions across the country. When you wondered who would stand up for individual and equal rights in America, it’s unlikely that you thought of the The Boss and The Man. Here’s The New Yorker’s James Surowiecki with more on these unlikely alliances.
Amazon is now offering the ability to subscribe to Prime and Prime Video monthly rather than just yearly. Prime Video is $8.99/mo (Netflix is going up to $9.99/mo soon) and the full Prime offering is $10.99/mo. A year of Prime is still $99.
In Prime Video, Amazon has built a worthy competitor to Netflix. And it actually might be better at this point. The stable of impressive Netflix originals aside (which Amazon is also doing *cough* Transparent *cough* best show in years), Amazon allows you to rent/buy digital movies not available for free streaming1, provides discounts for subscriptions to Showtime and Starz, and (if you opt for the full Prime) offers free shipping on most stuff in the store (as well as other benefits.) I sub to both services, but if I had to make a choice right now, I’d probably stick with Amazon.
Sam Hinkie recently resigned as general manager of the NBA’s Philadelphia 76ers. His resignation letter took the form of an investor letter, a la Warren Buffett’s annual letters. Before he gets down to basketball specifics, Hinkie spends several pages explaining his philosophy. Along with Buffett and his business partner Charlie Munger, Hinkie mentions in this introductory section Atul Gawande, Elon Musk, Bill James, James Clerk Maxwell, Bill Belichick, Jeff Bezos, Tim Urban (whom he suggests the Sixers owners should meet for coffee), AlphaGo, and Slack (the Sixers’ front office uses it). He even quotes Steven Johnson about the adjacent possible:
A yearning for innovation requires real exploration. It requires a persistent search to try (and fail) to move your understanding forward with a new tool, a new technique, a new insight. Sadly, the first innovation often isn’t even all that helpful, but may well provide a path to ones that are. This is an idea that Steven Johnson of Where Good Ideas Come From popularized called the “adjacent possible.” Where finding your way through a labyrinth of ignorance requires you to first open a door into a room of understanding, one that by its very existence has new doors to new rooms with deeper insights lurking behind them.
If I didn’t know any better, I’d guess that Hinkie is a regular kottke.org reader. (via farnum street)
Captain America: Sam Wilson #4—written by Nick Spencer with art by Paul Renaud, Romulo Fjardo, and Joe Caramagna—finds its lead character looking a lot different than he usually does. This is the second issue where Sam has been trapped in a werewolf form, the results of a run-in with old Cap villain Karl Malus. Malus’ experiments with splicing human and animal DNA weren’t just garden-variety mad scientist shenanigans; they were R&D for the newest iteration of an old supervillain cadre called the Serpent Society. They’re calling themselves Serpent Solutions now and they’re serving as a metaphor for all the horrible things that happen in the name of turning a profit. Kidnapping people and turning them into giant iguanas? Just another regrettable but necessary fact-of-life decision in today’s business landscape, according to exec leader Viper.”
A quick but fascinating look at the fast fashion retailer Zara.
Fashion used to be sold in four seasons. Zara wants you to buy for one-hundred-and-four. New clothes arrive in every store twice a week — days known by fans as “Z Days” — and fuel the need to turn over your wardrobe.
The brand’s global distribution centre, also in Spain, moves 2.5 million items per week. Nothing remains warehoused longer than 72 hours.
The integration and feedback incorporated into their system is impressive. The knockoffs, not so much. Lots of parallels to Facebook here, not the least of which is both companies’ founders are among the richest people in the world.
In 1997, shortly after Apple’s purchase of NeXT, Steve Jobs took the stage at Apple’s annual developer conference to answer questions from the audience for at least 50 minutes. It was a different time for sure. Apple was reeling, Jobs had just returned as an advisor and then interim CEO, his last company, NeXT, had not succeeded on its own, and the iPod & Apple Stores were years off.
When he arrived at Apple after the NeXT acquisition, Jobs moved swiftly to pare down the number of projects that the company was working on. In this first video, Jobs responds to a question about Apple killing a promising technology called OpenDoc.
Jobs talks about how “focus means saying ‘no’” and how Apple’s loss of focus has made the company less than the sum of its parts and not more. Even at this early stage in Apple’s comeback, you can see the seeds of how it was going to happen.
In the second video, a later questioner tells Jobs “it’s sad and clear that on several accounts you’ve discussed, you don’t know what you’re talking about”, asks him to comment on OpenDoc again, and also tell the audience what “he’s personally been doing for the last seven years”, a reference to his answer to the earlier question in the video above and the failure of NeXT.
Instead of laying into the guy, as a caricature of Steve Jobs might, he responds thoughtfully and almost humbly about how Apple needs to focus on its “larger, cohesive vision” of selling products to people, starting with customer experience rather than technology, and most importantly, making decisions.
Of course, in hindsight, it is obvious how overwhelmingly right Jobs was in his assertions. Since then, Apple has focused relentlessly on what worked and has succeeded brilliantly, beyond anything anyone, save perhaps Jobs, would have ever imagined. I wonder what that cheeky engineer is up to now? (via alphr)
(Also, can we talk about the patches on Jobs’ jeans? That’s not a fashion thing, right? Like, those aren’t $450 jeans made to look worn out. To me, those are obviously Steve’s favorite pair of jeans — probably Levi’s, I can’t tell for sure — patched up because he wants to keep wearing them. No one in technology has been picked apart like Steve Jobs by people looking for clues to who he was as a person and how that informed his business activities.1 Was he an asshole? Was he an artist? Was he just all smoke and mirrors? If we can stoop to the level of assessing a man’s character by the clothes he wears, it seems to me that whatever else he did, Jobs was at once pragmatic and dreamy when it came to products, to objects. What a potent combination that turned out to be.)
Update: The man who takes a swipe at Jobs in the later video was possibly identified on Quora last year by an anonymous person who said they worked on the WWDC event and spoke to the man in question.
The audience member is named Robert Hamisch. Mr. Hamisch was a consultant at a security firm in the 1990’s that did consultant services for Sun Microsystems (their billing and payroll department) for a short period of time. As far as I know, he left the company (the consulting firm, he never worked for Sun directly) and has since retired. He attended the 1997 WWDC sponsored by his security consulting firm, although never had any stake in Sun Microsystems as a whole besides general system security for their billing and payroll department. I don’t know why he specifically asked about Java, but he may have just been frustrated with Jobs and his performance as a whole.
A short web search turned up no information on Hamisch. (thx, charles)
When reports came out last month about declining ebook sales, many reasons were offered up, from higher pricing to the resurgence of bookstores to more efficient distribution of paper books to increased competition from TV’s continued renaissance, Facebook, Snapchat, and an embarrassment of #longread riches. What I didn’t hear a whole lot about was how the experience of reading ebooks and paper books compared, particularly in regard to the Kindle’s frustrating reading experience not living up to its promise. What if people are reading fewer ebooks because the user experience of ebook reading isn’t great?
Luckily, Craig Mod has stepped into this gap with a piece asking why digital books have stopped evolving. As Mod notes, paper books still beat out digital ones in many ways and the industry (i.e. Amazon) hasn’t made much progress in addressing them.
The object — a dense, felled tree, wrapped in royal blue cloth — requires two hands to hold. The inner volume swooshes from its slipcase. And then the thing opens like some blessed walking path into intricate endpages, heavystock half-titles, and multi-page die-cuts, shepherding you towards the table of contents. Behbehani utilitises all the qualities of print to create a procession. By the time you arrive at chapter one, you are entranced.
Contrast this with opening a Kindle book — there is no procession, and often no cover. You are sometimes thrown into the first chapter, sometimes into the middle of the front matter. Wherein every step of opening The Conference of the Birds fills one with delight — delight at what one is seeing and what one anticipates to come — opening a Kindle book frustrates. Often, you have to swipe or tap back a dozen pages to be sure you haven’t missed anything.
The Kindle is a book reading machine, but it’s also a portable book store. 1 Which is of great benefit to Amazon but also of some small benefit to readers…if I want to read, say, To Kill A Mockingbird right now, the Kindle would have it to me in less than a minute. But what if, instead, the Kindle was more of a book club than a store? Or a reading buddy? I bet something like that done well would encourage reading even more than instantaneous book delivery.
To me, Amazon seems exactly the wrong sort of company to make an ebook reader 2 with a really great reading experience. They don’t have the right culture and they don’t have the design-oriented mindset. They’re a low-margin business focused on products and customers, not books and readers. There’s no one with any real influence at Amazon who is passionately advocating for the reader. Amazon is leaving an incredible opportunity on the table here, which is a real bummer for the millions of people who don’t think of themselves as customers and turn to books for delight, escape, enrichment, transformation, and many other things. No wonder they’re turning back to paper books, which have a 500-year track record for providing such experiences.
PS. Make sure you read Mod’s whole piece…you don’t want to miss the bit about future MacArthur Genius Bret Victor’s magic bookshelf. <3
Michael Lopp, Head of Engineering at Pinterest, recently gave a talk at the Cultivate conference in which he talks about different merit badges that a leader might earn if there were such a thing. Check the video for the whole list, but here are a few of them:
Influence without management authority
Delegate something you care about
Ship a thing
Ask for help from an enemy
Part of the list made me think of parenting, which reminded me of Stella Bugbee’s recommendation of the book Siblings Without Rivalry on Cup of Jo.
I have a VERY, VERY unlikely book that I often reference as a boss: Siblings Without Rivalry. It’s not about money or business per se, but I’ve found since reading it that I put so many of its lessons into practice managing my team at work. I love the way it teaches you to listen, repeat the issues without taking sides, empathize and then teach the parties involved to solve their own disputes. It also helps at home. (Duh.)
Amazon has garnered an enormous share of the book market, and their “activities tend to reduce book prices, which is considered good for consumers.” But hundreds of writers (including Philip Roth and V. S. Naipaul) are trying to convince the Department of Justice that — regardless of the lower prices — Amazon’s monopoly is hurting consumers. From The New Yorker’s Vauhini Vara: Is Amazon creating a cultural monopoly?
Google announced earlier in the week that they were creating a new company, Alphabet, to house a collection of companies, including Google.
What is Alphabet? Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main Internet products contained in Alphabet instead. What do we mean by far afield? Good examples are our health efforts: Life Sciences (that works on the glucose-sensing contact lens), and Calico (focused on longevity).
Google has been focused on diversifying their business for a long time, even before their IPO. In August of 2003, they posted a job listing on Craigslist looking for a manager to run their collection of Googlettes, which were essentially startups within Google:
What is a Googlette? It’s a new business inside of Google that is just getting started — the start-up within the start-up. We’re looking for an experienced, entrepreneurial manager capable of offering direction to a team of PMs working on a wide array of Googlettes. You will define Google’s innovation engine and grow the leaders of our next generation of businesses.
Georges Harik, who is now an advisor for Google Ventures, was a former director of the Googlettes:
As director of Googlettes, his team was responsible for the product management and strategy efforts surrounding many nascent Google initiatives including Gmail, Google Talk, Google Video, Picasa, Orkut, Google Groups and Google Mobile.
At the time, I riffed on this idea a little and imagined Google spinning out these businesses as a confederation of stand-alone companies:
Instead of generating ideas and people for internal use, what if they’re incubating start-ups to spin off into companies of their own? Fast forward five years and instead of being a big huge company, Google is a big huge company at the center of a network of 10-20 large to medium-sized companies with similar goals, values, and business practices. Most of these spin-offs would be engaged in businesses similar (and probably complementary) to each other and the Google Mother Ship, some of them maybe even directly competing with each other.
In hindsight, Alphabet is a much better name than Google Mother Ship.
From 1957, this is a drawing of the synergistic strategy of Walt Disney Productions, or what Todd Zenger of Harvard Business Review calls “a corporate theory of sustained growth”.
The boxes on the chart have changed, but since the appointment of Bob Iger as CEO, Disney has seemingly doubled down on Walt’s old strategy with their increased focus on franchises.
Disney’s dominance can be boiled down very simply to one word: franchises. Or rather, an “incessant focus on franchises” in the words of former Disney CFO Jay Rasulo.
“Everything we do is about brands and franchises,” Rasulo told a group of financial analysts last September. “Ten years ago we were more like other media companies, more broad-based, big movie slate, 20 something pictures, some franchise, some not franchise. If you look at our slate strategy now, our television strategy, almost every aspect of the company, we are oriented around brands and franchises.”
Franchises are well suited to extend across multiple parts of a big business like Disney, particularly because it’s a repeating virtuous cycle: movies drive merchandise sales and theme park visits, which in turn drives interest for sequels and spin-offs, rinse, repeat, reboot.
I wonder if more tech companies could be using this strategy more effectively. Apple does pretty well; their various hardware (iPhone, iPad, Mac), software (iOS, OS X), and services (iCloud, App Store, iTunes Store) work together effectively. Microsoft rode Office & Windows for quite awhile. Google seems a bit more all over the place — for instance, it’s unclear how their self-driving car helps their search business and Google+ largely failed to connect various offerings. Facebook seems to be headed in the right direction. Twitter? Not so much, but we’ll see how they do with new leadership. Or old leadership…I discovered Walt’s chart via interim Twitter CEO Jack Dorsey.
The Misfit Economy looks intriguing; the subtitle is “Lessons in Creativity from Pirates, Hackers, Gangsters and Other Informal Entrepreneurs”.
Who are the greatest innovators in the world? You’re probably thinking Steve Jobs, Thomas Edison, Henry Ford. The usual suspects.
This book isn’t about them. It’s about people you’ve never heard of. It’s about people who are just as innovative, entrepreneurial, and visionary as the Jobses, Edisons, and Fords of the world, except they’re not in Silicon Valley. They’re in the street markets of Sao Paulo and Guangzhou, the rubbish dumps of Lagos, the flooded coastal towns of Thailand. They are pirates, slum dwellers, computer hackers, dissidents, and inner city gang members.
Across the globe, diverse innovators operating in the black, grey, and informal economies are developing solutions to a myriad of challenges. Far from being “deviant entrepreneurs” that pose threats to our social and economic stability, these innovators display remarkable ingenuity, pioneering original methods and practices that we can learn from and apply to move formal markets.
I’ve never had the desire to go to business school or get an MBA, but I found this post by Ellen Chisa about what she learned during her first year at Harvard Business School fascinating. It almost nearly sort of makes me want to think about maybe applying to business school.
People often know what they’re good at (it got them where they are!) Unfortunately, things won’t always go well in your career. How you react and recover impacts everyone around you.
One of the best things I did this year was answering these two questions honestly, for myself:
What is my worst self?
When does my worst self come out?
My worst self: critical, impatient, stubborn, cynical, and sarcastic. It comes out when I feel like I’m not in a position to make an impact, and when I feel undervalued in a situation. It also happens if I think I’m fundamentally “right” and someone disagrees. If it goes on for too long I become incredibly apathetic and don’t do anything.
I have a hard time avoiding this, but I am better at catching it now. When I do catch it, I attempt to apologize to the group, move on, and catch it faster the next time.
Knowing yourself wasn’t really something I was taught in school, nor was it emphasized at home, so I was slow to learn my strengths and weaknesses and how to properly apply them to situations in my life. That struggle continues even today.
From Sarah Nir at the NY Times, an investigation into the world of NYC nail salons, where workers need to pay a fee to get a job, are underpaid, subjected to abuse, and are crammed into one-bedroom apartments with several other workers.
Qing Lin, 47, a manicurist who has worked on the Upper East Side for the last 10 years, still gets emotional when recounting the time a splash of nail polish remover marred a customer’s patent Prada sandals. When the woman demanded compensation, the $270 her boss pressed into the woman’s hand came out of the manicurist’s pay. Ms. Lin was asked not to return.
“I am worth less than a shoe,” she said.
Prepare to be infuriated over and over as you read this.
The typical cost of a manicure in the city helps explain the abysmal pay. A survey of more than 105 Manhattan salons by The Times found an average price of about $10.50. The countrywide average is almost double that, according to a 2014 survey by Nails Magazine, an industry publication.
With fees so low, someone must inevitably pay the price.
“You can be assured, if you go to a place with rock-bottom prices, that chances are the workers wages’ are being stolen,” said Nicole Hallett, a lecturer at Yale Law School who has worked on wage theft cases in salons. “The costs are borne by the low-wage workers who are doing your nails.”
In a Q&A about the investigation, Nir shares how she became interested in nail salons:
About four years ago, I was at a 24-hour spa in Koreatown. It’s one of the Vogue top-secret best-bet salons — a really unusual place. It was my birthday, and I treated myself to a pedicure at 10 AM. And I said to the woman, “It’s so crazy that this is a 24-hour salon. Who works the night shift?” And she says, “I work the night shift.” And I said, “Well, it’s daytime. Who works the day shift? What do you mean?”
And she said, “I work six days a week, 24 hours a day, I live in a barracks above the salon, and on the seventh day, I go home to sleep in my bedroom in Flushing, and then I come right back to work.”
And I was like, This woman’s in prison. People had to shake her to keep her awake. And then she would do a treatment. I just thought it was crazy.
I don’t see how you can go to a NYC nail salon after reading this article. Even Nir’s tips about being a socially conscious nail salon customer aren’t much help.
Update: Part 2 of Nir’s series on nail salons is out. It’s about the health hazards faced by nail salon workers, including lung disease, miscarriages, and cancer. One woman even lost her fingerprints.
Similar stories of illness and tragedy abound at nail salons across the country, of children born slow or “special,” of miscarriages and cancers, of coughs that will not go away and painful skin afflictions. The stories have become so common that older manicurists warn women of child-bearing age away from the business, with its potent brew of polishes, solvents, hardeners and glues that nail workers handle daily.
A growing body of medical research shows a link between the chemicals that make nail and beauty products useful — the ingredients that make them chip-resistant and pliable, quick to dry and brightly colored, for example — and serious health problems.
Whatever the threat the typical customer enjoying her weekly French tips might face, it is a different order of magnitude, advocates say, for manicurists who handle the chemicals and breathe their fumes for hours on end, day after day.
The prevalence of respiratory and skin ailments among nail salon workers is widely acknowledged. More uncertain, however, is their risk for direr medical issues. Some of the chemicals in nail products are known to cause cancer; others have been linked to abnormal fetal development, miscarriages and other harm to reproductive health.
Update: Governor Cuomo has set up a task force to conduct investigations into the city’s nail salons.
Gov. Andrew M. Cuomo ordered emergency measures on Sunday to combat the wage theft and health hazards faced by the thousands of people who work in New York State’s nail salon industry.
Effective immediately, he said in a statement, a new, multiagency task force will conduct salon-by-salon investigations, institute new rules that salons must follow to protect manicurists from the potentially dangerous chemicals found in nail products, and begin a six-language education campaign to inform them of their rights.
Nail salons that do not comply with orders to pay workers back wages, or are unlicensed, will be shut down. The new rules come in response to a New York Times investigation of nail salons — first published online last week — that detailed the widespread exploitation of manicurists, many of whom have illnesses that some scientists and health advocates say are caused by the chemicals with which they work.
This is good news…as long as it results in real positive changes and doesn’t just get a bunch of salon workers deported.
Update: The Times continues its nail salon coverage with an interview with Sister Feng, a Chinese social media star who worked as a manicurist in NYC for four years.
Q. The Times reported that some immigrant manicurists said their bosses would withhold tips and verbally or physically abuse them. Did you ever experience this?
A. There were times when my tips were withheld. But as long as I thought my wages weren’t out of line with my labor, I wouldn’t go to my boss and ask for the tips. In nail salons run by Chinese, being verbally abused was commonplace, so I changed workplaces often. But it never happened in salons run by Koreans. I was never physically beaten.
If you’ve bought a ticket to an event in the past, oh, 15-20 years, chances are you got it from Ticketmaster. Chances are also pretty good that you think Ticketmaster completely sucks, mostly because of the unavoidable and exorbitant convenience fee they charge. And that probably has you wondering: if everyone who uses the service hates Ticketmaster so much, how are they still in business? Because ticket buyers are not Ticketmaster’s customers. Artists and venues are Ticketmaster’s real customers and they provide plenty of value to them.
Ticketmaster sells more tickets than anybody else and they’re the biggest company in the ticket selling game. That gives them certain financial resources that smaller companies don’t have. TM has used this to their advantage by moving the industry toward very aggressive ticketing deals between ticketing companies and their venue clients. This comes in the form of giving more of the service charge per ticket back to the venue (rebates), and in cash to the venue in the form of a signing bonus or advance against future rebates. Venues are businesses too and, thus, they like “free” money in general (signing bonuses), as well as money now (advances) versus the same money later (rebates).
Read that whole Quora answer again…there’s nothing in there about TM being helpful for ticket buyers. It turns out asking “who’s the customer?” is a great way of thinking about when certain companies or industries do things that aren’t aligned with good customer service or user experience.1
Take Apple and Google for instance. Apple sells software and hardware directly to people; that’s where the majority of their revenue comes from. Apple’s customers are the people who use Apple products. Google gets most of their revenue from putting advertising into the products & services they provide. The people who use Google’s products and services are not Google’s customers, the advertisers are Google’s customers. Google does a better job than Ticketmaster at providing a good user experience, but the dissonance that results between who’s paying and who’s using gets the company in trouble sometimes. See also Facebook and Twitter, among many others.
Newspapers, magazines, and television networks have dealt with this same issue for decades now.2 They derive large portions of their revenue from advertisers and, in the case of the TV networks, from the cable companies who pay to carry their channels. That results in all sorts of user hostile behavior, from hiding a magazine’s table of contents in 20 pages of ads to shrieking online advertising to commercials that are louder than the shows to clunky product placement to trimming scenes from syndicated shows to cram in more commercials. From ABC to Vogue to the New York Times, you’re not the customer and it shows.
This might be off-topic (or else the best example of all), but “who’s the customer?” got me thinking about who the customers of large public corporations really are: shareholders and potential shareholders. The accepted wisdom of maximizing shareholder value has become an almost moral imperative for large corporations. The needs of their customers, employees, the environment, and the communities in which they’re located often take a backseat to keeping happy the big investment banks, mutual funds, and hedge funds who buy their stock. When providing good customer service and experience is viewed by companies as opposite to maximizing shareholder value, that’s a big problem for consumers.
Update: I somehow neglected to include the pithy business saying “if you’re not paying for the product, you are the product”, which originated in a slightly different phrasing on MetaFilter.
Update: One example of how maximizing shareholder value can work against good customer service comes from a paper by a trio of economists. In it, they argue that co-ownership of two or more airlines by the same investor results in higher prices.
In a new paper, Azar and co-authors Martin C. Schmalz and Isabel Tecu have uncovered a smoking gun. To test the hypothesis that institutional investors gain market power that results in higher prices, they examine airline routes. Although we think of airlines as independent companies, they are actually mostly owned by a small group of institutional investors. For example, United’s top five shareholders — all institutional investors — own 49.5 percent of the firm. Most of United’s largest shareholders also are the largest shareholders of Southwest, Delta, and other airlines. The authors show that airline prices are 3 percent to 11 percent higher than they would be if common ownership did not exist. That is money that goes from the pockets of consumers to the pockets of investors.
How exactly might this work? It may be that managers of institutional investors put pressure on the managers of the companies that they own, demanding that they don’t try to undercut the prices of their competitors. If a mutual fund owns shares of United and Delta, and United and Delta are the only competitors on certain routes, then the mutual fund benefits if United and Delta refrain from price competition. The managers of United and Delta have no reason to resist such demands, as they, too, as shareholders of their own companies, benefit from the higher profits from price-squeezed passengers. Indeed, it is possible that managers of corporations don’t need to be told explicitly to overcharge passengers because they already know that it’s in their bosses’ interest, and hence their own. Institutional investors can also get the outcomes they want by structuring the compensation of managers in subtle ways. For example, they can reward managers based on the stock price of their own firms — rather than benchmarking pay against how well they perform compared with industry rivals — which discourages managers from competing with the rivals.
Here’s a good explanation of what the One Ring from Lord of the Rings actually is and what it can do:
I transcribed a short passage from the video:
First, the ring tempts everyone (well, almost everyone) with promises that yes, this little ring can be a mighty weapon or a tool to reshape the world and gosh don’t you just look like the best guy to use it. Let’s go vanquish the powerful demigod who lives over there to get started, shall we? This is why the hobbits made great ring bearers, because they’re pretty happy with the way things are and don’t aspire to greatness. Of course, there’s Gollum, who started out as a hobbit, but all things considered, he held out pretty well for a couple hundred years. Set the ring on the desk of most men and they wouldn’t be able to finish their coffee before heading to Mordor to rule the world and do it right this time.
What’s interesting about hearing of The Ring in this focused way is how it becomes a part of Tolkien’s criticism of technology. The Ring does what every mighty bit of tech can do to its owner/user: makes them feel powerful and righteous. Look what we can do with this thing! So much! So much good! We are good therefore whatever we do with this will be good!
The contemporary idea of the tech startup is arguably the most seductive and powerful technology of the present moment, the One Ring of our times. It’s not difficult to modify a few words in the passage above to make it more current:
First, the startup tempts everyone (well, almost everyone) with promises that yes, this little company can be a mighty weapon or a tool to reshape the world and gosh don’t you just look like the best guy to use it. Let’s go disrupt the powerful middleman who lives over there to get started, shall we? This is why the nerds made great ring bearers, because they’re pretty happy with the way things are and don’t aspire to greatness. Of course, there’s Sergey and Larry, who started out as nerds, but all things considered, they held out pretty well for a decade. Set the ring on the desk of most men and they wouldn’t be able to finish their mail-order espresso before heading to Silicon Valley to rule the world and do it right this time.
Ok, haha, LOL, and all that, but it’s curious that nerds (and everyone else) shelled out billions of dollars to watch Peter Jackson’s LOTR movies in the early 2000s in the aftermath of the dot com bust. Those were dark times…the power of the startup had just been lost after Kozmo’s CEO Dave Isildur was slain by economists while delivering a single pint of Ben & Jerry’s Chubby Hubby to far reaches of the Outer Sunset and had not yet been rediscovered by Schachter, Butterfield, and Zuckerberg.
And these nerds, whose spines all tingled when Aragorn charged into the hordes of Mordor — for Frodo! — and whose eyes filled with tears when Frodo parted with Sam at the Grey Havens, came away from that movie experience siding with Boromir, Saruman, and Denethor, determined to seize that startup magic for themselves to disrupt all of the things, defeat the evil corporate middlemen, and reshape the world to be a better and more efficient place. And gosh don’t you just look like the best guy to use it?
Leo Gerard, president of the United Steelworkers International union, writes about a Institute for Policy Studies report called Fleecing Uncle Sam. One of the most eyebrow-raising details is this:
Of America’s 100 top-paid CEOs, 29 worked schemes that enabled them to collect more in compensation than their corporations paid in income taxes. The average pay for these 29: $32 million. For one year.
And from the report:
All seven of these firms were highly profitable, collectively reporting more than $74 billion in U.S. pre-tax profits. However, they received a combined total of $1.9 billion in refunds from the IRS, giving them an effective tax rate of negative 2.5 percent.
The seven CEOs leading these tax-dodging corporations were paid $17.3 million on average in 2013. Boeing and Ford Motors both paid their CEOs more than $23 million last year while receiving large tax refunds.
Are you ready for a new level of discomfort in air travel? A major US airline is considering a seating class called Economy Minus, which would offer smaller seats at a lower price.
Now a major airline may be considering another breakthrough idea: “Economy Minus,” a seat that offers less legroom at a discount price.
Before you scoff, consider that a new survey found that 42% of airline travelers said they would be very likely or somewhat likely to book a seat with less legroom if it means getting a cheap fare.
See also Why Airlines Want to Make You Suffer. (A: maximizing shareholder value)
My kids and I went to the new Lego Store in the Flatiron this weekend, and I again noticed how freaking expensive Lego sets are. The Death Star set is $400 + tax and even small sets are $30-40. Afterward I wondered if renting Lego sets would be an economically viable business and sure enough, someone is giving it a go: Pley. It works a bit like Netflix’s DVD service: you pay a flat subscription fee each month and can check out as many sets as you want, one at a time. Doesn’t look like they rent out Lego Stephen Hawking or Lego Mona Lisa though.
Last week, Emily Dreyfuss wrote a piece at about Why I’m Giving Wikipedia 6 Bucks a Month.
“Give me money, Emily,” Wales begged, “then go back to researching Beyonce lyrics.”
“Excuse me, Jimmy,” I wanted to say, “I don’t appreciate being watched as I read about how her song “Baby Boy” includes a lyrical interpolation of “No Fear” by O.G.C.”
Later, Wikipedia replaced Wales with other employees of the Wikimedia Foundation, which maintains Wikipedia with grants and donations. They moved me about as much as Wales did, which is to say not at all.
Today, while scanning my third Wikipedia article in as many hours, I saw the beggi…. er, note was back. It’s at the bottom now, without the pleading visage of a Wikipedian, and now includes an option to pay monthly.
I was annoyed, again. That’s the first instinct of anyone who spends time on the Internet and is constantly bombarded by pleas for money. But then I realized something: My annoyance was a symptom of my dependence on Wikipedia. I rely on it utterly. I take it completely for granted.
I found her argument persuasive, so much so that I just signed up to give Wikipedia a monthly amount as well. I consider it a subscription fee to an indispensable and irreplaceable resource I use dozens of times weekly while producing kottke.org. It’s a business expense, just like paying for server hosting, internet access, etc. — the decision to pay became a no-brainer for me when I thought of it that way.
Do other media companies subscribe to Wikipedia in the same fashion? How about it Gawker, NY Times, Vox, Wired, ESPN, WSJ, New York Magazine, Vice, Washington Post, The Atlantic, Buzzfeed, Huffington Post? Even $500/month is a drop in the bucket compared to your monthly animated GIF hosting bill and I know your writers use Wikipedia as much as I do. Come on, grab that company credit card and subscribe.
Casey Neistat visited several Apple Stores in NYC on the eve of the iPhone 6 launch to observe the folks standing in line. He found that many of those in line, particularly right in the front, were Chinese resellers.
The iPhone 6 won’t be available in China for several months, so a lively and lucrative black market has sprung up. The video shows several typical transactions: two phones (the maximum allowed per person) are purchased with cash and then the people sell those phones to men who presumably have them shipped to China for resale.
I remember last year, when the iPhone 5s came out, there was always a line of mostly Asian people outside the Soho store in the morning, even months after the launch. (via @fromedome)
Mojang’s popular game Minecraft has sold over 54 million copies. But that, and the $2.5 billion that Microsoft just paid to acquire the company, dramatically understates the impact that this game has had on [Dave Pell’s] third grader and his friends. They all wear Minecraft gear and watch Minecraft videos on YouTube. And several of them completed a week of Minecraft Camp over the summer. The way I see it, $2.5 billion just became the most anyone has ever spent on a babysitter.
The Verge: Why parents are raising their kids on Minecraft.
Markus Persson, the founder of Mojang (known as Notch), explains why he’s selling — and leaving — the company: “It’s not about the money. It’s about my sanity.”
Dang! It looks as though the Shake Shack is gonna IPO at a value of $1 billion. (BTW, $1 billion would buy you about 210 million ShackBurgers.)
At that level, Shake Shack would debut at 50 times projected earnings of about $20 million this year, the people said, asking not to be named because the details are private. The company has tapped JPMorgan Chase & Co. and Morgan Stanley to manage the share sale, said the people.
That valuation would put it in line with other dining chains that have tapped into investor appetite for new stocks in recent years. El Pollo Loco Holdings Inc. (LOCO), which raised $123 million in July, now trades at about 60 times projected 2014 earnings, while Potbelly (PBPB) Corp. trades at over 64 times estimated earnings, data compiled by Bloomberg show.
The Shack has about 50 locations worldwide. But their flagship Madison Square Park location will be closing for a few months soon for renovations…hopefully they’ll have it back open for the IPO.
Update: And the Shack filed for their IPO on Dec 29, 2014.
Shake Shack is a modern day “roadside” burger stand serving a classic American menu of premium burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. Founded by Danny Meyer’s Union Square Hospitality Group, LLC (“USHG”), Shake Shack was created leveraging USHG’s expertise in community building, hospitality, fine dining, restaurant operations and sourcing premium ingredients. Danny’s vision of Enlightened Hospitality guided the creation of the unique Shake Shack culture that, we believe, creates a differentiated experience for our guests across all demographics at each of the 63 Shacks around the world. As Shake Shack’s Board Chairman and USHG’s Chief Executive Officer, Danny has drawn from USHG’s experience creating and operating some of New York City’s most acclaimed and popular restaurants, including Union Square Cafe, Gramercy Tavern, Blue Smoke, The Modern, Maialino and Marta, to build what we believe is a new fine casual restaurant category in Shake Shack.
There are now 63 Shake Shacks. 63! I just wish the one across from the office would reopen. (via @caseyjohnston)
Update: From Tyler Cowen, Does the Shake Shack IPO mean you should stop eating there?:
A simple theory of IPOs suggests that they arrive when a product or company is experiencing “peak buzz,” or at least when the insiders in the privately held company think they are at or near peak buzz. This will maximize the expected returns on the IPO when it comes to market.
When it comes to food, peak buzz usually arrives a wee bit after peak quality, given reputational lags. So if you are seeing peak buzz, it is probably time to bail on the restaurant, at least on a restaurant which is going to be sold. Bailing on the restaurant may in fact be slightly overdue.
To test Cowen’s theory1, I went to the Shake Shack in Grand Central today (12/31/14). I stood in line for 10 minutes, ordered my customary Shack burger with fries (long live the crinkle cut), and then waited an additional 10 minutes for my food. Verdict: as delicious as ever. Service was snappy and friendly. Well worth the wait and price for me: I got exactly what I wanted.
Using Motorola, Nokia, and Nintendo as examples, Tero Kuittinen explains how dominant tech companies are lulled into “a comfy trip to the grave” by huge but ultimately short-lived successes before new paradigms take over.
For years, Nintendo has believed it could reject smartphone and tablet apps, yet still flourish. The reason for this delusion is familiar — it’s the toxic Last Blockbuster Syndrome that doomed the consumer electronics divisions of Motorola in 2004 and Nokia in 2007. Often at the start of a massive trend shift in consumer electronics, dominant dinosaurs get one massive hit built on a nearly obsolete paradigm, and that allows them to be lulled into a comfy trip to the grave.
The best example from the past few years is when Motorola, Nokia, and RIM were flying high with their phone products when the iPhone came along and changed the game.
A new study finds that insider trading is much worse than commonly thought: a quarter of all public company deals may involve some kind of insider trading. From the NY Times:
The professors examined stock option movements — when an investor buys an option to acquire a stock in the future at a set price — as a way of determining whether unusual activity took place in the 30 days before a deal’s announcement.
The results are persuasive and disturbing, suggesting that law enforcement is woefully behind — or perhaps is so overwhelmed that it simply looks for the most egregious examples of insider trading, or for prominent targets who can attract headlines.
The professors are so confident in their findings of pervasive insider trading that they determined statistically that the odds of the trading “arising out of chance” were “about three in a trillion.” (It’s easier, in other words, to hit the lottery.)
Only about 5% of the deals are ever litigated by the SEC. (via mr)