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Strong opinions, weakly held

Month: November 2010 (page 2 of 3)

OpenTable needs competition

This weekend I read a restaurant owner’s perspective on OpenTable. In short, he feels like OpenTable charges to much to arrange reservations, but that most restaurants feel like they must use it if they want to be competitive. In other words, that OpenTable has captured such a large portion of the online restaurant reservations market that they are able to extract monopoly profits.

Here’s how he breaks down the numbers:

One independent study estimates that OpenTable’s fees (comprised of startup fees, fixed monthly fees, and per-person reservation fees) translate to a cost of roughly $10.40 for each “incremental” 4-top booked through OpenTable.com. To put that in perspective, consider that the average profit margin, before taxes, for a U.S. restaurant is roughly 5%. This means that a table of 4 spending $200 on dinner would generate a $10 profit. In this example, all of that profit would then go to OpenTable fees for having delivered the reservation, leaving the restaurant with nothing other than the hope that that customer would come back (and hopefully book by telephone the next time).

What this looks like to me is a great opportunity for someone to build and launch an OpenTable competitor. I think the key would be to charge less than OpenTable, and make sure that restaurants could stay on OpenTable and book reservations through the competing site as well. Restaurants aren’t going to dump OpenTable since it is omnipresent, but I think most would gladly link from their own sites to a competitor if it would save them money and they still booked the reservation.

The catch is that OpenTable is good at what they do. They have a fully integrated solution where they provide a computer to use to book reservations. They offer a solution that enables restaurants to book reservations through OpenTable their own Web site. And, most importantly, people can find restaurants through the OpenTable Web site and mobile apps. That said, if OpenTable is really overpriced, the opportunity exists to take them on. After reading the article, I’d love to see someone give it a shot.

For what it’s worth, I could see Yelp going into the reservations business. Is there any reason the detail pages at Yelp don’t have a “make a reservation” link for restaurants that accept them? The opportunity is there.

Sarah Palin fans in a nutshell

Here’s a quote from an actual review of Sarah Palin’s new book at Borders.com:

This book, though unread by me as yet, should probably be required reading in schools across our country.

Thanks, Snoopy from NJ. You made my week already.

When should you change your passwords?

One of my closely held beliefs is that expiring passwords reduce rather than increase security because the more often you have to change your passwords, the less likely you are to remember them. That is offset by the fact that people tend to use one password everywhere, so if you force people to change them, that pattern can be broken to some extent.

This week, Bruce Schneier has an essay on the subject. Here’s his bottom line, but read the whole thing:

So in general: you don’t need to regularly change the password to your computer or online financial accounts (including the accounts at retail sites); definitely not for low-security accounts. You should change your corporate login password occasionally, and you need to take a good hard look at your friends, relatives, and paparazzi before deciding how often to change your Facebook password. But if you break up with someone you’ve shared a computer with, change them all.

Apple open sources their Java implementation

First Apple deprecated their Java implementation. Now they’ve released it as open source:

Oracle and Apple today announced the OpenJDK project for Mac OS X. Apple will contribute most of the key components, tools and technology required for a Java SE 7 implementation on Mac OS X, including a 32-bit and 64-bit HotSpot-based Java virtual machine, class libraries, a networking stack and the foundation for a new graphical client. OpenJDK will make Apple’s Java technology available to open source developers so they can access and contribute to the effort.

The question that remains for me is whether Apple will continue to contribute code to OpenJDK. (Hopefully they will.)

This, combined with the fact that Apple is no longer going to ship Flash on OS X, seems to signal that Apple isn’t interested in being responsible for shipping updates for other people’s runtimes any more. You can certainly run Java or Flash on your Mac if you like, but the vendor is responsible for making sure that your runtime is patched and secure.

Blizzard continues to innovate on the security front

It would probably surprise people to learn that Blizzard, a game company, provides better security options for players of its games (World of Warcraft and now Starcraft) than nearly all banks and financial services companies do for their customers. The problem Blizzard faces is that people steal World of Warcraft accounts all the time, either to use the characters to farm gold, or to just strip all of the cash and things that can be sold from the account and pocket the cash.

A number of methods are used to steal passwords, including phishing, catching the passwords using key loggers, and just brute forcing them. Blizzard’s first big attempt to solve the problem was to give users the option of protecting their account using two factor authentication — their password and an authenticator that is tied to the account. The authenticator is a key fob (or an phone app) that generates a number every few seconds that must be entered in order to log in. Once an authenticator is tied to your account, getting your password stolen is no longer a problem.

Despite the fact that the authenticator app is free and the physical authenticator only costs $6, many players do not use them, and accounts still get stolen all the time. Indeed, account thieves almost always attach their own authenticator to compromised accounts as soon as they’ve been compromised, making it that much more difficult for players to get them back. (I shudder to think about how much money Blizzard spends dealing with account theft.)

To enable players who haven’t gotten an authenticator to secure their accounts, Blizzard has introduced a dial-in authenticator. With it, you can assign a phone number to your account. If there’s something unusual about an authentication attempt, you will be required to dial in to a toll free number from that phone and enter a PIN in order to log in successfully.

There’s bound to be an interesting article written about the economics of account security that explains why Blizzard finds it more worthwhile to implement robust authentication solutions when so many businesses that are susceptible to financial fraud do not. Are people that much more likely to steal your World of Warcraft characters than they are to steal your Amazon.com account and use the credit cards you’ve saved there? Or is it that people are more willing to go to extra trouble to secure their game accounts?

Update: There are lots of smart comments about this at Hacker News as well.

The purpose of education

Roger Ebert, on education:

Of all the purposes of education, I think the most useful is this: It prepares you to keep yourself entertained.

Two good posts on budget deficits

Both Matthew Yglesias and Karl Smith (guest blogging for Ezra Klein) posted today on deficit spending by the federal government. They both dismiss the idea of opposing budget deficits for reasons of morality or responsibility and instead discuss them in terms of their impact on economic growth, which is the only thing you should really care about. Debt is a tool that can be used to make you (or America) better or worse off depending on the terms of the loan and what you do with the money you borrow.

Here’s Karl Smith:

So, deficits do matter. When the economy is strong, they lead the Federal Reserve to raise interest rates, strengthen the dollar and increase imports. When the economy is weak they lead to falling unemployment and rising capacity utilization.

Matthew Yglesias points out the negative effects of deficits, which under certain conditions:

In the real world, though, deficits matter for a specific reason. If the government tries to borrow a huge amount of money, investors will start demanding generous interest rates in exchange for lending. And if investors can get high rates lending to the government, which is safe, they’ll start demanding even higher rates of non-government borrowers. That becomes a problem for the private sector. Investments that are profitable at a low rate of interest are unprofitable at a high rate of interest, so the overall pace of investment and growth declines. Bad. The Federal Reserve can, however, act to keep interest rates low. The problem with this is that Fed action to lower interest rates might produce too much inflation. Inflation, when it gets high, is not just annoying but starts to really erode the workings of the price system and thus the whole economy. Again: Bad.

He then goes on to point out that the conditions under which it is bad for the federal government to engage in deficit spending are not currently in effect.

This is why just about every credible economist I read says that what the government needs to do is borrow money to stimulate the economy now and make a credible promise that it will cut the deficit later. For example, here’s Nouriel Roubini a couple of weeks ago:

The Obama administration did the right thing early, and avoided another depression. He is still doing the right thing now in pointing out the risks of early austerity. And he is limited by an unco-operative Republican party trapped in a belief in voodoo economics, the economic equivalent of creationism. Even so, he and his party have been unwilling to tackle long-term entitlement spending. Two years in, and this means the US remains on an unsustainable fiscal course.

The result will soon be the worst of all worlds: neither short-term stimulus nor medium-term fiscal sustainability.

How platforms attract developers

Marco Arment has a great post on why “If you build it, they will come” doesn’t apply to new hardware platforms. It lacks pithy quotes, so I urge you to go read it. It’s not very long.

Your browser determines your loan rate

People have noticed that Capital One advertises different interest rates on auto loans depending on which browser you’re using. Plenty of people are speculating as to the reasons why. I’m with the group of people who think that this is a manifestation of A/B testing rather than discrimination based on the browser you choose to use. Even if it is based on your browser (rather than random numbers or something in your cookies), I’d still guess that it’s just an arbitrary way of segregating the market for testing different interest rates to see what kind of response they draw. Wonder if Capital One will wind up having to explain what’s behind it?

The social impact of the Walkman

Dave Pell talks about social impact of the Walkman:

The Walkman and its offspring, such as the iPod, completely changed the way we experience music. And even more compelling, these devices also had a huge impact on the way we interact (or don’t interact) with each other. Before the Walkman, listening to music was quite often something we did together. Headphones and portability changed that. The very same sounds that had been a cornerstone of our social experience suddenly transformed millions of us into isolated walking zombies.

I imagine this is a paragraph many people can identify with:

I’ve known my wife since we were in high school. We’ve been married for more than a decade. And we’ve never once looked at each other and said, “They’re playing our song.” And after talking to a few other couples, I don’t think we’re all that unique. She has her songs. I have my songs. Our only modern equivalent to having a shared song is when one of us retweets the other.

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