Steve Krause : Blog

Social Norms versus Market Norms in Daycare

"Any questions?" asked the daycare-center director. She was a pleasant mix of smart and caring. She no doubt wished her center could accept all the applicants. But this being one of the few daycare centers near downtown San Francisco, the wait list dwarfed the enrollment.

"Wait list" was a misnomer. The center chose children based on unspecified factors, only one of which was place in line. So, all parents present on this tour for applicants were listening attentively, mustering questions that demonstrated thoughtful consideration for their childrens' welfare, and otherwise exhibiting best behavior.

Until the following exchange:

Parent: What is the policy if I'm late to pick up my child?

Director: We understand that once in a while you get stuck in traffic or can't get here for extraordinary reasons. Just give us a call at the time, and we'll make sure someone stays with your child until you get here.

Parent: Is there a fine or penalty?

Director: We're not going to fine you for a rare event that's totally out of your control.

Parent: But what if it happens repeatedly? How many times do I have to be late before you start fining me, and what's the fine?

Director: Uh, we haven't had to deal with that before.

Parent: Well how do I get that question answered?

Director: Let me get back to you on that.

As this exchange progressed, the parent's demeanor went from neutral to baffled, like a boss mystified by a subordinate's inability to answer a simple question. Meanwhile, everybody else in the room was looking at each other like, "There's one person we don't have to worry about getting in before us."

At the time, I didn't ask myself why everyone except Baffled Parent knew something had gone awry. However, the incident came back to me when I read Dan Ariely's Predictably Irrational. The book is about how people's decisions—not just individually but in aggregate—can be skewed by factors beyond traditional economics' view of rationality.

Ariely would explain that Baffled Parent tried to apply traditional economics' "market norms" in a situation where "social norms" prevail. In fact, Ariely has an example of what happened when a day care center tried doing things Baffled Parent's way:

A few years ago, [Uri Gneezy of UC San Diego and Aldo Rustichini of the University of Minnesota] studied a day care center in Israel to determine whether imposing a fine on parents who arrived late to pick up their children was a useful deterrent. Uri and Aldo concluded that the fine didn't work well, and in fact it had long-term negative effects. Why? Before the fine was introduced, the teachers and parents had a social contract, with social norms about being late. Thus, if parents were late—as they occasionally were—they felt guilty about it—and their guilt compelled them to be more prompt in picking up their kids in the future. (In Israel, guilt seems to be an effective way to get compliance.) But once the fine was imposed, the day care center had inadvertently replaced the social norms with market norms. Now that the parents were paying for their tardiness, they interpreted the situation in terms of market norms. In other words, since they were being fined, they could decide for themselves whether to be late or not, and they frequently chose to be late. Needless to say, this is not what the day care center intended.

I'll have more to say on Ariely's book—of which social versus market norms is a small section—in a subsequent post.

What Is a Vegetable?

That was the question posed to me by my two-year-old daughter. She already knew examples of vegetables. She wanted to know what makes a vegetable a vegetable.

I didn't know, and I later found that the answer has a few twists and turns. From Wikipedia's Vegetable article:

The term "vegetable" generally means the edible parts of plants. The definition of the word is traditional rather than scientific, however. Therefore the usage is somewhat arbitrary and subjective, as it is determined by individual cultural customs of food selection and food preparation.

Generally speaking, a herbaceous plant or plant part which is regularly eaten as unsweetened or salted food by humans is considered to be a vegetable. Mushrooms, though belonging to the biological kingdom Fungi, are also generally considered to be vegetables, at least in the retail industry. Nuts, seeds, grains, herbs, spices and culinary fruits are usually not considered to be vegetables, even though all of them are edible parts of plants.

In general, vegetables are regarded by cooks as being suitable for savory or salted dishes, rather than sweet dishes, although there are many exceptions, such as pumpkin pie.

For a livelier version of the same topic, I liked "What is the difference between a fruit and vegetable?" from YES Mag, a Canadian youth science magazine:

The answer depends on your relationship with the two items. If you're stocking the produce department at a grocery store, a tomato is a vegetable. If you're a plant scientist—a botanist—a tomato is a fruit. Cucumbers, pumpkins, avocados, and peppers are all fruits. Culturally, however, the grocer is going to call them vegetables.

A fruit is the ripe ovary or ovaries of a flower—the mature ovary of a seed-bearing plant. Let's say you've got a tomato plant with those little yellow flowers all ready. A bee comes along and fertilizes the flower. The flower starts developing into a fruit with the seed inside. (There are four kinds of fruits, which explains fruits such as pineapple and blueberries, but let's not get into that.) And, hey, guess what? Nuts are fruits. True nuts that is, chestnut and filberts come to mind.

Vegetables, however, are the roots (eg, carrot), tubers (eg, potato), leaves (eg spinach), stems (eg, celery), and other bits of plants that you might eat. For a botanist, a vegetable is sort of like the umbrella word for all the edible parts of a plant. Just to keep life interesting, mushrooms aren't plants at all, they are a kind of fungus.

Let's just keep with the cultural distinctions!

I'm still working on how to explain this to a two-year-old.

The State Motto Grotto

When you drive in New Hampshire, you are constantly reminded of that state's motto, "Live free or die." It's on everybody's license plates.

Elsewhere, the opposite is usually true: You don't know or see state mottos. Yes, you'll see state nicknames on license plates, like Missouri being the "Show Me State." You'd recognize many such nicknames, but state mottos? Other than "Live free or die," they're apparently kept in a cave somewhere, a cave we'll call the State Motto Grotto. Prepare to behold the many beasts of language that dwell there.

A word of caution first. Many state mottos are in Latin, because if you really want to make a motto memorable, you of course say it in Latin. I mean, who can remember Alabama's "We Dare Defend Our Rights" without the crutch of the official Latin version, Audemus jura nostra defendere? Obligingly, I will provide non-English mottos in their original language and then an English version.

As a starting point, you might be surprised how few state mottos are about geographic identity. Minnesota: L'étoile du Nord (French, "The star of the North"). Indiana: "The crossroads of America." And with an extra bit of marketing panache, Michigan: Si quaeris peninsulam amoenam circumspice (Latin, "If you seek a pleasant peninsula, look about you").

Beyond those, state mottos are more about concepts than places. For an extreme example, North Carolina: Esse quam videri (Latin, "To be rather than to seem"). Don't look for it on a license plate soon.

Or how about Maryland's Fatti maschi, parole femmine? The direct Italian translation is, "Manly deeds, womanly words." But before your imagination runs wild, think of it as something like Theodore Roosevelt's, "Speak softly and carry a big stick."

Arizona, Colorado, Florida, Kentucky, Ohio, and South Dakota: God gets a mention in each of their mottos. Apparently, they're not taking too literally the "state" in "separation of church and state." (Florida, you clever one, your choice of "In God We Trust" kicks any complaints upstairs to the federal government, which features that phrase on its money.)

In the secular-inspirational genre, we have New York's Excelsior (Latin, "Ever upward"), Wisconsin's "Forward," Alaska's "North to the Future," California's Eureka (Greek, "I have found it"), and New Mexico's ominous Crescit eundo (Latin, "It grows as it goes").

Less manifest-destinational is South Carolina's Dum spiro spero (Latin, "While I breathe, I hope"), which Rhode Island reduces to "Hope." And Connecticut brings us the unusual Qui transtulit sustinet (Latin, "He who transplanted sustains"). It probably rocked harder in 1639, when it was first used.

More contemporary sounding, albeit from 1873, is West Virginia's Montani semper liberi (Latin, "Mountaineers are always free"). Or consider the following mottos, pulsating with the poetic minimalism of the Standard Industrial Classification. Utah: "Industry." Tennessee: "Agriculture and commerce." Montana: Oro y plata (Spanish, "Gold and sliver").

Finally, there's that classic American theme of liberty and freedom, rendered variously as:

• Delaware: "Liberty and independence"
• Iowa: "Our liberties we prize and our rights we will maintain"
• Massachusetts: Ense petit placidam sub libertate quietem (Latin, "By the sword we seek peace, but peace only under liberty")
• New Jersey: "Liberty and prosperity"
• Pennsylvania: "Virtue, liberty, and independence"

...and of course New Hampshire's "Live free or die," which delivers the theme in primal, commandment style.

Now, having toured the State Motto Grotto, perhaps you'll agree that "Live free or die" deserves to bask in the reflected headlights of motorists everywhere, or at least New Hampshire. By comparison, most other state mottos lack the pith and punch, and thus they linger in silentium (Latin, "in obscurity").

[Should you wish to audit every state motto, see Wikipedia's List of U.S. State Mottos. The license plate image is from Wikimedia Commons.]

John Gruber's Daring Fireball

The mainstream tech media has always had plenty of pundits and prognosticators. And now with the Internet, anyone with an opinion and a Web site can play along.

The good news is, amid a spectrum of awful to awesome, the best amateurs can be as good or better than most pros. Case in point: John Gruber, a Web developer and technical writer whose Daring Fireball blog tracks the world of Apple.

You've got to care inordinately about the Appleverse to read everything Gruber writes, and there's no shortage of people who do. Me, I rely on tech-news aggregator sites like Techmeme and Hacker News to link to Gruber's more general-interest stuff. Having clicked that direction many times over the years, I've been conditioned to expect insightful, well written, and righteously right (as in correct) views.

I was reminded of this with Gruber's take on this week's iPhone 3G announcement. His opening line is roughly what others said, but he then nails the story behind the story.

Today's message is pretty simple: Apple is going for iPhone market share in a big, big way....

So, step one: sell a ton of iPhones and grab a huge chunk of worldwide smartphone market share. That's the new $199 iPhone 3G. Step two: introduce features that people and companies love but which tie them to the iPhone. That's the SDK — games and apps from App Store, and custom in-house apps for the enterprise market.

The physical phone is not the story. A year from now, the iPhone 3G will be replaced by another new model. The platform is the story. Platforms have staying power, and, once entrenched, are very hard to displace.

Although that was good, where Gruber really gets interesting is when he dissects others' Apple coverage. For example, check out his prosecution of a Fast Company cover story on Apple that, to put it kindly, Gruber found lacking.

Here's a sample, with quotes from the Fast Company article in italics and Gruber's mix of intellect and umbrage in normal text:

In an age increasingly defined by interoperability and technical collaboration, Jobs still refuses to license Apple’s operating system.

Because there are so many companies making so much money "licensing their operating system", other than Microsoft. Worked out great for Apple the last time they tried it a decade ago, and it's worked out great for Palm now, right?

(Note also that all these decisions are, again, solely attributed to Jobs's personal whim, rather than to Apple as a company.)

He won't allow music and videos downloaded from iTunes to be played on other MP3 players.

Except for all those iTunes Plus tracks that have no DRM, and which Jobs has stated explicitly, in a widely-publicized open letter, he'd like to see the entire iTunes Store switch to, if the music labels would allow it.

He won't permit music downloaded from competing stores to play on the iPod.

Except for all the music from any store that sells DRM-free music, like Amazon's or eMusic's. Otherwise what's being argued here is that Apple should support Microsoft's DRM platform, formerly known as PlaysForSure, recently renamed to "Certified for Windows Vista", which Microsoft itself doesn't support in its own Zune players. There's a lot of stupid packed into the above 13-word sentence.

Maybe he could be more polite, but being a self-appointed messenger of truth takes its emotional toll—the title of Gruber's Fast Company critique being, "Yet Another in the Ongoing Series Wherein I Examine a Piece of Supposedly Serious Apple Analysis From a Major Media Outlet and Dissect Its Inaccuracies, Fabrications, and Exaggerations Point-by-Point, Despite the Fact That No Matter How Egregious the Inaccuracies / Fabrications / Exaggerations, Such Pieces Inevitably Lead to Accusations That I'm Some Sort of Knee-Jerk Shill Who Rails Against Anything 'Anti-Apple' Simply for the Sake of Defending Apple, and if I Love Apple So Much Why Don't I Just Marry Them?"

Whether you find his attitude entertaining or annoying, don't let it distract from his ability to marshal facts to puncture others' flimsy assertions. For this, as well as his own original analyses, Gruber is a welcome addition to the tech-media landscape—so much so that after years of doing Daring Fireball in his spare time, Gruber now makes enough income from the blog to have it be his primary job.

Good for him, good for us.

Zappos Makes It Pay to Quit

The online shoe retailer Zappos has an interesting option for new hires in its customer-service call center. After the first week of a four-week training program, you can take that week's pay plus $1,000 and walk away. Yes, they will pay you $1,000 to quit.

Presumably, you take this offer if you realize the job isn't going to work out. It's like getting a bonus for making a mistake.

That's the employee perspective. Now let's look at Zappos' angle.

10% of new hires take the money. Giving these people a reason to self-select themselves out saves Zappos the additional three weeks of training and avoids the marginal performance likely to follow until they move on.

And it saves far more if it removes bad hires who would otherwise never move on—the disgruntled employees who find it easier to stay and complain than get another job. $1,000 is nothing compared to the cost of keeping, or eventually firing, these employees. (Assuming they are capable of being happier elsewhere, these employees actually might be the biggest beneficiaries of having a specific incentive to leave.)

Although Zappos' system is not quite to the level of a garden where the weeds pull themselves, it seems to be a clever approach in that direction.

[Original source on Zappos' pay-to-quit program: Bill Taylor's Why Zappos Pays New Employees to Quit—And You Should Too at Harvard Business Publishing's Web site]

Intelligent Cross-Sell at Office Depot

At work, we just released a case study that's a nice progress report for Intelligent Cross-Sell, my group's main product. The featured customer is Office Depot, which runs one of the largest e-commerce sites in the world at officedepot.com—it's currently ranked #3 in the Internet Retailer 500, the Fortune 500 of retail e-commerce.

Here's the main story:

In 2007, Office Depot deployed CNET Channel's Intelligent Cross-Sell solution to automate and optimize merchandising on its e-commerce site, www.officedepot.com. Doing so caused a doubling of online cross-sell revenue for the multi-channel global retailer. Cross-selling is an important tool that involves recommending accessories to products, such as a memory card with the sale of a digital camera.

One of the keys to success was utilizing Intelligent Cross-Sell's "guided automation," which combines merchandisers' knowledge with the automation and scalability of a recommendation engine. For example, Intelligent Cross-Sell's point-and-click interface allowed Office Depot merchandisers to target cross-sell opportunities by factors such as key selling features, popularity, compatibility, and brand affinity. Then, Intelligent Cross-Sell executed the rules across millions of possible product combinations. Compared to Office Depot's previous cross-selling functionality, the result was a significant increase in the number and relevance of accessories offered as cross-sell opportunities across the site. This combination of more and better cross-sells drove the increase of cross-sell revenue.

Needless to say, I'm pleased. In my line of work, results are measurable, and these are the kind of results we like to see.

The full case study is here.

Kindle and Amazon.com's Big Thinking

I admire Amazon.com, both as a long-time customer and as a student of business. Amazon.com pioneered much of what makes online retailing useful: one-click ordering, personalized recommendations, and user reviews, to name a few standouts.

Beyond that, Amazon.com long ago transcended the category online retailer by providing a platform where other retailers can merchandise their wares alongside Amazon.com's or via their own Amazon.com-hosted stores. In addition, Amazon.com created the first large affiliate-marketing program, where individuals or companies can merchandise Amazon.com products on their sites.

And in a more recent step, Amazon.com generalized its infrastructure to offer a cloud-computing service (basically, a giant on-demand computing system, available over the Internet) that other companies can rent time on, for almost any purpose, not just online retailing.

These developments have a common theme. They all anticipated important changes to how business could be done, and Amazon.com executed those changes early, before others grasped the concepts. However, as some of Amazon.com's recent initiatives have gone further afield from Amazon.com's core retailing business, critics have questioned whether Amazon.com is going too far. Is the company investing in areas that, at the end of the day, aren't a retailer's business?

That's the subtext to a shareholder letter by Amazon.com CEO Jeff Bezos, discussing Kindle, Amazon.com's electronic book reader. Other e-book readers exist, but Amazon.com decided to design and manufacture its own. In the letter, Bezos makes a compelling case that Amazon.com has both the expertise and missionary zeal to deliver a successful e-book reader where others have failed, yet he leaves unsaid why Amazon.com is doing it.

Here's why: Kindle is not just an e-book reader but also a service by which one buys books from (you guessed it) Amazon.com. If this is starting to sound familiar, recall that the iPod trumped existing MP3 players not just by providing better hardware but by linking the hardware to a well-designed service for buying music (iTunes). Thus, with both the iPod and Kindle, competitive advantage is about offering a superior total experience in buying and consuming musics/books.

Note the "total experience" concept, because it goes back to the question of what business a retailer should be in. For books, Amazon.com proved it can design a great buying experience. However, let's say digital books go the way of digital music, where the best total experience—and the dominant market position—comes from an integrated offering of hardware, software, and service. If that happens, just being an e-book retailer won't work. Go ask the formerly leading music retailers who watched Apple's iTunes Store go from nothing to the largest music retailer in the world.

Of course, it's not a foregone conclusion that the e-books business will follow the iPod/iTunes model. However, Kindle is a smart hedge in case it does, since Amazon.com has a lot to lose—or, with Kindle, to gain—in that scenario.

Whatever Kindle's fate, its existence illustrates why Amazon.com is different. Amazon.com detected e-books' potential for disruptive change and went well outside the standard retailer's playbook to adapt—envisioning and implementing a better way to buy and read books. That's big thinking.

I recommend you read Bezos' letter (here's that link again), plus his 1997 letter to shareholders, which is on the same page. Compared to the typical CEO missive, I think you'll find Bezos' letters refreshing.

(Postscript: The purpose of Bezos' shareholder letters is to explain Amazon.com's actions and strategy, but not too much. For example, the 1997 letter notes: "We are planning to add music to our product offering, and over time we believe that other products may be prudent investments." Apparently, he chose that sentence instead of, "We plan to expand into so many product categories that we won't be able to fit all their tabs across the top of the screen." ;)

The Eric Carle Museum

Having recently moved nearby, it was inevitable that we'd visit the Eric Carle Museum of Picture Book Art in Amherst, Massachusetts. Any museum that won't instantly bore a toddler is a worthy museum for our current lifestage. Besides, having read The Very Hungry Caterpillar aloud several hundred times, I was a stakeholder.

For the uninitiated, Eric Carle is author of so many popular children's books that his work often commands its own shelf in bookstores. Carle's medium is the picture book: Each page has a picture and a small amount of text. A typical Carle book tells a story about an animal while teaching concepts like colors or counting.

The Very Hungry Caterpillar, Carle's most beloved book, seems to charm every child (and parent) it meets—to the tune of more than 20 million copies. The only risk in giving the book to new parents is that someone else already has. (If you want another Carle option, Brown Bear, Brown Bear, What Do You See? is also a sure winner.)

Visiting the museum, I was interested to learn that Carle was formerly an art director at an ad agency. In a video, I believe he even said something to the effect that he thinks of each page in his picture books as a billboard. This explains much about his simple visual style, child-like in its own way, communicating essence with little ornament.

Carle's visual recipes typically include basic shapes, vibrant colors with varied textures, and lots of white space. His textures are from painted tissue paper—cut, pasted, and layered into figures like the famous caterpillar below.

For a selection of Carle's work, with commentary by the artist, see this three-minute slideshow by National Public Radio.

And if you're in the Amherst area with small children in tow, check out the museum. It's part Eric Carle, part other picture-book authors and illustrators. In addition to the galleries, the library has thousands of children's books, the art studio lets children create their own collages, and the smartly curated gift shop goes well beyond just Eric Carle and kids' books.

Cameras That Make Us Better

Imagine a camera that only takes good pictures. If you combine a decent digital camera and a persistent person, it's already reality.

Compared to the fast-receding days of traditional photography, where you had to wait until your film was developed to find that Aunt Betsy had her eyes closed in the family shot, digital cameras let you immediately see the image you just snapped. Bad image? Just erase and take it again. At the end of the day, you've got a memory card full of good pictures.

While this does not make you a master photographer, it increases the quality of your pictures in the same way that having multiple tries on every golf shot would lower your score.

But with photography, unlike golf, some shots don't afford multiple tries. Your baby takes her first steps, cackling with delight at her conquest—oh, you snapped the picture just before the smile and got the grimace instead. That opportunity won't come back again.

But wait. Recently hitting the market is the Casio Exilim EX-F1, a camera that can shoot up to 60 full-resolution images in a second. (This is not HDTV, where most of the images are compressed in a way that relies on the presence of adjacent images. Each image on the Casio is its own standalone high-resolution image.)

You can spread the camera's maximum burst of 60 images across time—for example, 15 images per second for four seconds. You can also have it shoot continuously, only keeping the most recent 60 images. So, per our example of baby's first steps, you could capture baby in 15-images-per-second continuous mode. When you see the smile, you can save the last four seconds and later choose the perfect image of beaming baby.

Folks, that is cool. It's the next step in the world of cameras that only take good pictures—or more precisely, only keep good pictures.

Alas, the Casio Exilim EX-F1 is both expensive ($1,000) and, per David Pogue's review in the New York Times, laden with tradeoffs. However, its special functionality will get less expensive, and the tradeoffs will be smoothed out. At some point, continuous, high-resolution shooting will be part of all digital cameras.

As a regular photographer of, as Pogue describes it, "wildlife (including children)," I look forward to that day.

When Stupid Isn't (Product People Behind the Scenes)

Long ago, I was a technology analyst. I tracked the technical and market development of new technologies in areas like artificial intelligence and digital video. The purpose was to forecast which technologies, companies, and products would be winners.

On a regular basis, I'd come across products where something was obviously wrong: nonsensical features, out-of-whack pricing, positioning for seemingly nonexistent audiences, and so on.

As consumers, when we see such things, we just shrug and move on. As a technology analyst, part of my job was to understand such anomalies. Were the people behind these products woefully misguided, or were they seeing something that others could not?

Over time, I met many product managers, product marketers, product evangelists, and the like. They were usually smart people who had reasons for why the seemingly wrong was right. Of course, those were judgment calls at the time; they were only right or wrong in retrospect. But most of the time, their perspectives were at least plausible, if not occasionally inspired.

This experience came to mind when I noticed Chris Anderson's post about why the publisher Random House is not necessarily stupid. Author and prominent netizen Cory Doctorow had gone off on Random House's Crown imprint for a limited-time free download of Scott Sigler's Infected before its publication:

Publishers are schizophrenic and often end up acting really dumb in the service of trying to do something smart. Crown is putting Scott's book online for free as a PDF, but they're taking it down after only four days -- presumably just in time to kill whatever momentum the downloads are generating....There's no coherent explanation for a ticking-bomb download like this one; it's like the hesitation marks on the wrists of a half-ass suicide.

Anderson contacted Crown and talked to Shawn Nicholls, Crown's Online Marketing Manager, who provided a coherent explanation.

"We definitely subscribe to the believe that offering something online isn't going to take away from sales," says Nicholls. "The one thing I tried to do when we started this was to make a distinction between free music and free books. A MP3 can be a substitute for a CD, but we're not at the place where a pdf is a substitute for a hard book."

But Crown also believes in the concept of artificial scarcity: "Our goal was to create some buzz. Four days of availability gives a sense of urgency and makes it more of an event," he says. And although Crown did take the book down from its official site, Nicholls said that they wouldn't stop people from mirroring it elsewhere for as long as they want.

Nicholls also provided numbers that suggest the promotion worked.

Reading Nicholls' comments, I not only recalled similar conversations but was glad to see such conversations are increasingly happening in the public (blogo)sphere. To take another example, here is Glenn Keels, Dell's Sr. Manager, Commercial Products Team, responding to critiques that Dell's Latitude XT tablet computer is overpriced:

Probably the most important thing to note about tablet PCs is that we are talking about cutting-edge technology here.  If we just released the exact same technology as our competitors, we would be missing opportunities to drive this market to the next level - and this is an opportunity we did not want to miss.  The result is that our product does carry a slight premium to our competition (emphasis on the word "slight").

We believe that when you take a look at like-to-like configurations AND the incremental technology (that customers have overwhelming told us they want to have), the value equation for the Latitude XT far exceeds that of competitive systems.

Keels goes on to provide a table summarizing key feature differences with competitive models from Lenovo and HP. Although product people at those companies would likely have their own representations of the playing field, I say bring them on. If the conversation can be had at this level, rather than through glossy one-sheets and other marketing shellac, consumers will be the winners.