Strong opinions, weakly held

Tag: business (page 2 of 9)

The benefits of transparency in engineering

For a long time, I was shocked by blogs like Etsy’s engineering blog, Code as Craft. I had a sort of old-school “information is power” mentality that led me to believe that letting competitors know about your technology stack would put a company at a disadvantage. Building scalable systems is hard, and I thought it was foolish to give away your secrets. I also prided myself on being able to sleuth the details of a company’s technology stack using URLs, HTTP headers, and page source.

I have long since come around to the opposite point of view, but general attitudes about this stuff hasn’t changed much once you get past the most progressive organizations. Stephen O’Grady explains to the recalcitrant why hiding your technology stack is a bad idea.

The other day I said on Twitter that all problems are user experience problems, except for scaling. And the solutions to those problems are generally so complex and so specific to a company’s product, staff, customers, and existing code base that slavishly copying one’s competitors at meaningful levels isn’t really possible. At most, what you usually get is an idea of what to try next, or issues you may run into down the road.

The advantages of sharing are real, and the disadvantages are an illusion. Go forth and start an engineering blog.

Instagram is not about silly filters

The big news of the week is Facebook’s purchase of Instagram. I wasn’t going to write anything about it because it didn’t seem like there’s much to say that hasn’t already been said, but that may not be the case. For general commentary, I would recommend Paul “@ftrain” Ford’s Facebook and Instagram: When Your Favorite App Sells Out. I want to talk about something specific — Instagram’s filters.

I was on the fence about posting about it, but after The Daily Show made fun of it this week, I felt compelled to do so. I’m not in the business if picking apart jokes, but I see the sentiments in the Daily Show piece reflected frequently in serious commentary as well, and for the sake of all of you out there who are about to start building your own photo sharing apps in hopes of hauling in a huge bag of loot, I want to make sure you don’t emphasize the wrong things.

There are a bunch of iPhone apps that enable you to apply silly filters to your photos, and they are popular. Instagram’s filters are a “me too” feature that seemed to decline in use over time. If you look at the “Popular” tab in Instagram on any given day, you’ll find that photos with retro filters were rarely seen.

What works about Instagram is that it fosters deeper connection between people who are friends on the service and makes it easy to “meet” new people through their photos.

The interface encourages people to share photos one at a time, rather than uploading them in big batches, unlike most other services. The prominence of the “like” feature encourages people to compliment other people’s photos and to publish photos that other people will like, driving the overall quality of the photos on the service up. Unlike the photos people usually post to Twitter or to Facebook, photos on Instagram tend to be composed somewhat thoughtfully.

Instagram makes it easy to see the photos that your friends have liked, which facilitates finding more interesting people to follow. Following is also lightweight, as it is on Twitter. The result is that it’s easy to grow your network on Instagram. Looking at the photos a person takes every day feels more personal than reading their updates on Twitter. You learn about the way they see the world.

Why did Instagram sell for a billion dollars? Not because of novelty filters, but because it provided a compelling place to look at good photos taken by people you care about, and to find new, interesting people and develop relationships with them.

What the economy of the future looks like

Matthew Yglesias makes the argument that Chipotle is the Apple of fast food. America may not be manufacturing consumer electronics, but it is manufacturing more burritos. It’s an interesting and provocative piece.

For what it’s worth, I love Chipotle. Specifically, the carnitas burrito with rice, black beans, cheese, corn salsa, and hot salsa.

Mark Zuckerberg will always be in charge of Facebook

Matthew Yglesias explains how Facebook’s ownership structure insures that if he so chooses, Mark Zuckerberg will have complete control over Facebook for the rest of his life. I find that fascinating:

To purchase a share in Facebook is to bet that at some future point some future person will want to take it off your hands for more money. You’re not getting even a notional slice of control in the company. There are no limits on the CEO’s ability to channel Facebook’s profits directly into his own pocket rather than yours. There’s not even a cheap-talk promise that he’s going to try to maximize the value of your investment. He created the company, he controls the company, he will always control the company, and he’s graciously allowing you to turn some of your working capital over to him.

Why maximizing shareholder value is no way to run a company

This article (link via Daring Fireball) makes a sound argument against the concept of “maximizing shareholder value,” a concept which has struck me as pretty stupid from the first moment that I heard it. It’s one of those things that makes sense as an abstraction, but no sense as a way to run a business on a day to day basis. Given that shareholders are the owners of a company, it theoretically makes sense to focus on making sure their investments pay off, but in practice, the approaches managers take to doing so are just disastrous.

As the article points out, what it comes down to is management focused on the expectations market rather than the real market. The article reviews Roger L. Martin’s book Fixing the Game, and quotes Martin thusly:

What would lead [a CEO] to do the hard, long-term work of substantially improving real-market performance when she can choose to work on simply raising expectations instead? Even if she has a performance bonus tied to real-market metrics, the size of that bonus now typically pales in comparison with the size of her stock-based incentives. Expectations are where the money is. And of course, improving real-market performance is the hardest and slowest way to increase expectations from the existing level.

I see the stock market as a game that exists almost entirely separately from the businesses upon which it is theoretically based. This article goes a long way toward validating those thoughts.

Why you might not want to do business with PayPal

Teresa Nielsen Hayden runs down the debacle of PayPal shutting down Regretsy’s toys-for-kids drive on utterly ludicrous grounds. PayPal works fairly well for most people most of the time, but every once in awhile we get these kinds of reminders of how much power PayPal has over your money if you choose to use them to process payments. There is a very troubling lack of accountability here.

How out of control is executive pay these days?

I’m already convinced that America’s growing income gap and out of control executive pay are real problems that are getting worse. If you are not convinced, this article on executive pay may change your mind. Don’t miss the visual aids. (Via James Fallows.)

Two opinions on the Groupon IPO

David Heinemeier Hansson takes a look at the numbers behind the Groupon IPO:

At the moment, it’s costing them $1.43 to make $1, and it doesn’t look like it’s getting any cheaper. They’re already projected to make close to three billion dollars in revenues this year. If you can’t figure out how to make money on three billion in revenue, when exactly will the profit magic be found? Ten billion? Fifty billion?

On the other hand, Matthew Yglesias says that Groupon is an example of how to achieve growth through aggressive deficit spending:

Maybe this will work out, or maybe it will be a disaster. But it’s worth noting that absolutely nobody thinks it’s categorically absurd to think that what a firm needs to do to maximize long-term profits is boost spending over revenues.

It’s an interesting way to take a jab at critics of economic stimulus.

Update: Jason Kottke points out that Amazon.com operated at a loss for a long time before becoming the profit-generating machine that they are today.

Finding the value in acquired companies

Horace Dediu on acquiring companies:

Clayton Christensen succinctly defined the value in any company as the sum of three constituent parts: resources, processes or business models. Market value can be nothing more and nothing less than these three things.

An acquisition has to be positioned on one of these targets just like a product is positioned on a specific market. The problem with being deliberate about where the value lies is that once positioned a certain way, the integration team will begin to execute on that plan. This means that the thing you decided was worth most (e.g. resources) gets all the attention and the other potential sources of value (processes or profit models) are discarded.

This argument reduces to there being three separate companies being available. The buyer pays for all but gets to keep only one.

When you look at it this way you realize that the reason most acquisitions fail is because the buyer throws away most of the real value in the company.

He goes on to analyze the acquisition of Skype by Microsoft by these criteria. I’d like to see other acquisitions that occurred further back in the past analyzed in this way. My gut feeling is that nearly all acquisitions focus on resources, since they’re the most obvious repository of value and the easiest (relatively speaking) thing to integrate into the acquiring company. It’s very hard to merge the processes of two different companies together, or for an acquiring company to support new business models that didn’t develop organically.

Have you started your own company?

I have never started a company, but Chris Dixon’s paean to entrepreneurs makes me want to.

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