Ascription is an Anathema to any Enthusiasm

In service of one of my jobs I once attempted to draw a diagram showing how transactions unfold.  It started out simple: the customer gives cash to the vendor and he hands over the goods.  My goal was to illustrate how transactions acreet additional events.  For example bills, rebates, warrenties, service contracts, coupons, trial periods, six month discounts, and recycling.  Pretty soon I’d managed to clutter up an vast whiteboard and everybody cept me had lost interest. It’s was an essoteric interest probably shared only with the most fastidious of accountants, though the intent was to search for business oportunities.

I still find all this stuff far too interesting.  Particularly the ways that vendors structure all these aspects of the transaction cycle to their benefit.  For example this week Target is has some cell phone prepaid refill minutes on sale: two $25 cards for 42$.  Which sounds like a deal.  But it’s not since it’s really two 150 minute cards for 42$ and the $50 card gives your 460 minutes.

So given this essoteric interest I laughed outloud when I saw this business.  RecycleBank’s business model requires them to sell four players: the trash company, the town, the citizens, and finally advertisers.  They use technology to measure how much each household is recycling.  They do that with bar codes on the recycle bins and scanners on the trucks.  Citizens, who sign up, are then “rewarded” with coupons from advertisers in proportion to how much they recycle.

I love how this acreets some sales & marketing function onto the very tail end of the transaction cycle.   I love they glean (sic) exactly which customers are high volume consumers with a high preference for thrift - e.g. the perfect target for coupons.  And I just roll my eyes at the gloss of green combined with the personal data collection.  And finally, as I learned from the stamp script, coupons are all about increasing transaction velocity - and isn’t it wonderful how this injects the coupon at exactly the moment when there is space opening up inside the house?

Which makes me wonder, why I’ve never seen coupons on toilet paper?

I’ve noticed something in my current job search.  People keep asking the same question.  Sometimes they ask it in an aggressive way; as if they were giving an exam question.  Sometimes they ask it in a humble way; as if they assume I know and they would love to be educated.  Sometimes they ask as a kind of test of tribal membership; dropping a nominal answer while clearly inviting me to agree that is in fact the answer.  Sometimes it’s part of their start-up’s value proposition, even most of it; i.e. one of the keywords on the tin of their plausible premise; like “new” or “family sized!”

A few years ago the question that filled this role was “What’s up with this Web 2.0 thing?”  I’m not sure we ever actually settled, collectively, on an answer to that question.  We do seem to have agreed there was something to it.  Maybe less than the hope, but still there was something there.  Something about richer user interface, and something about web services & ajax.

Since this new question get’s asked in the midst of a job search I suspect my answers so far are muddy.  Colored by the necessity of giving an answer that will work well on the primary goal of moving the job hunt forward.  If the founder is chasing his vision it’s kind of lame to confuse the quest with a chaff of alternative visions.

I guess I really ought to puzzle out what my thoughts are about this question. That’s hard for the usual reasons.  There are some vendors who have grabbed a chunk of mind share.  There is a large incentive to deploy the idea to get with the current venture capital enthusiasms.  I’m, like we all are, a bit blinded by some of my favorite insights that are nearby. The temptation to frame it as nothing new is always a good dodge.

But for the record the question is “What’s up with this cloud computing thing?”

see also: new frontier, evolving, godzilla, energy, stormy weather, condensation

Back in the 1970s my bank called me.  One of my checks had bounced.  They were very nice about it.  Didn’t cost me a cent.  These days deep in the fine print of my bank account’s rules there is a 30$ fee.  But it gets worse.

Over the years main street banking has become more despicable in how they make their money.  The reasonably straight forward model of pooling funds for investments and then paying you a bit of the earnings fell apart when they noticed they could compete on the interest rate and make up the loss on fees.

The banks are now dependent on a business model that runs off fees and charges.  Which means that they sit in conference rooms to architecture their systems to maximize the fees.  The product managers walk a thin line between alienating the customers in the long term, and capturing profits on their stumbles in the short term.

For example let us say you pay 2 thousand dollars in bills, but you only have 13 hundred in the account.  The bank can maximize the bounced check charges if they delay paying your bills so they can batch up as many checks as possible.  That let’s them pay off the larger checks first, so as to increase the chance of draining your account.  With luck they will then have a dozen tiny little checks; these all bounce.  Fees Maximized!

There is a nice term of art for this behavior: Bad Profits.  His list of examples is fun.  Unsurprisingly many of his examples are pricing games.  If your a product manager the question you ask of each of those examples is how bad will it be?  How many customers will I loose.  If the answer is not many, or even not many while I’ve got this job, then the behavior’s not so bad from your point of view.

My bank regularly sends me email about the status of the game we are playing.  They send me solicitations for other products in the mail.  But if I were to bounce a check they wouldn’t notify me.  And unsurprisingly the check can bounce multiple times.

Here’s an amusing business tactic: lock out the customers. You know the drill. You visit the website, log-in, and the vendor inserts an extra page forcing you to provide your missing zip code, or what ever. “Our data quality is more important than your time.”

So this company, a health club, locked their patrons out of the club. If they went to the desk they were told that their account was missing their email address.

It’s always good to keep things neat and tidy, but it’s impossible to get across how much this kind of thing drives customers away. Particularly because it drives off the most lightly connected customers. The ones that are hardest to model. The ones you desperately need going forward. There is probably some deep design principle here. You need to design the system to maximize the amount of chaos in your data. Homogeneity is a false God.

Meanwhile, if you enjoy keeping account data tidy you might want to drop by the Useless Account web site. Sign up! Edit your account profile to your hearts content.

I have sighted a new urban myth: Electric heating is cheaper than oil heat! Here in Boston people heat with both gas and oil, and the cost per unit of heat between the two has diverged rapidly over the last few years. Those who heat with oil are looking for ways out of their plight. Apparently the rumor making the rounds that it is cheaper to use electric. That’s not true.

In related news Martin brings my attention to a company EnerNoc that sells negative energy, i.e. load shedding, to the utilities. They use telecom and widgets to shift power consumption from high demand time periods into low demand time periods. Martian’s example is the fridge. You chill when power is plentiful and let it coast when others are paying higher prices.

I assume that EnerNoc’s role in all this is to aggregate small power users into a large enough pool to be worthy of selling to the utilities. It’s a interesting example of a coordination problem. There are of course other ways to approach the problem; ones that are less dependent on a thicket of contracts and ongoing coordination signals controlled by a middleman and enabled, as Martian, points out by the telecom infrastructure.

The obvious alternative is to just broadcast signal; and let the demand side react to the signal by selling some simple technology that responds to the signal in reasonably simple ways. That alone would enable substantial contributions from the demand side. But you can improve the incentive structure either thru regulation or by using statistical sampling to tell which customers have gotten with program; and then reduce their tariffs.

The amount of signal that needs to flow from the grid operators to the consumers is small, in the sense that you can broadcast it. A signal only needs to flow back the other way sufficient to assure that the incentives play out right. It is stupid to presume that the only incentives that are available are monetary or that they need to be executed with fastidious accounting. Most social systems have very fuzzy accounting and they work just fine, thank you!

The puzzle to be solved here is how to draw more of the peripheral demand into a load balancing system. Reading about EnerNoc’s approach isn’t the first time I’ve seen discussion of this. For example Bruce Schneier mentioned a regulatory attempt at something similar. I liked that one a lot, it provided a way to signal household thermostats. He was concerned that the resulting system would attract hackers. I presume he’d be just as sanguine about the security of the EnerNoc system; probably more so since it’s a closed system.

Such concerns are appropriate, but for heaven sakes I wish smart people like Bruce would stop pretending that these cases are somehow unique. It is the very rare large scale system that doesn’t have vunerable choke points. Hubs who’s failure can bring the entire system to it’s knees. Telling designers not to build large systems because of those risks is lame. Helping them know how to build them so they are safe and robust is hard, yes. But these systems get built because they generate mind boggling amounts of value. So it’s better to do the hard job and forgo the short term pleasure of a bit of hysteria.

Speaking of load shedding: turning your car’s engine off when you stop is more efficient than you thought.