It tends to work well. The display and text ads tend to convert better.

I’ve noticed that I get more and more ads for items that I’ve already purchased before. It bothers me as a consumer and as someone who has worked in the bowels of online marketing.

This ad annoyed me enough to provoke me to post about it, instead of complaining insensibly to co-workers who would just tell me to install an ad-blocker.

OK. Nothing wrong with the ad, right?

Wrong.

I‘ve been a customer of the YMCA for my entire life. I’ve been a subscriber to this particular gym for the last year. I learned to swim at a YMCA. I competed in a YMCA swim team. I attended YMCA summer camp for around six years. I’ve been indoctrinated into the YMCA as much as anyone can humanly be. I’m so bizarrely attached to the YMCA that, for at time, one of my only possessions was my YMCA-branded water bottle.

That damned water bottle is one of the only mementos from my childhood that I even own. I’m non-sentimental about every object that I have except for that water bottle, which is probably made from a material that increases my risk of male breast cancer.

I only visit their website to download a new version of their swimming pool schedule every couple months.

Yet, it’s likely that the people running the ad campaigns have no capability of knowing how I’ve interacted with their parent organization throughout my life.

Modern ad systems seem to be aware of what I’m doing right now.

Google is vaguely aware of my demographic information. Facebook knows all the details.

But there’s still a great deal that can be done to make advertising more efficient and targeting more accurate. Companies seem to be getting the details right, but miss out on the larger and more important business of managing customer relationships over a longer span of time.

Another issue is that the middlemen that serve the ads, like Google and Facebook, have no clue how I’m actually spending my money. The YMCA just has a Google ad campaign. They don’t know that I spent more than $840 over the last year on my gym membership and other associated services, and that I don’t need a free trial.

As the internet gets older, I expect that there will be more entrepreneurial opportunities to digitize the entire process. The upside for consumers will be less annoying ads. I hope for a world in which one day, almost every ad that someone sees is interesting and relevant to their interests — and hopefully one that the viewer opted into seeing.

This will be another privacy trade-off that people will need to think about making. In the physical world, there’s already no privacy in payments. When you use your card at CVS, those guys are sharing the hell out of your data with everyone, and they’re sending revolting coupon spam to your snail mailbox.

I hope that with technological advancement, we can reduce unwanted marketing messages. Better online ads will make it possible for content producers to create more compelling material.

The upside for companies will be better products, less money wasted on futile marketing efforts, and increased loyalty from customers.

Nostalgia ain't worth that much anymore.

As I write this, there are news items complaining about the bankrupt entity’s attempts to reward a paltry $13.5 million in bonuses to the company’s embarrassed executives. From 1899 to the present day, Kodak has been in the business of supplying the raw material that consumers wanted to use to capture their memories.

The company’s market capitalization stands at roughtly $78.7m.

Harkening back to yesterday’s post on bear market fortunes, Instagram sold itself to Facebook yesterday for $1bn.

For over 100 years, Kodak innovated in consumer photography. Making a photograph used to be a time intensive business. You took your film to a specialist to be developed. I remember learning the process myself in summer camp — processing film, mixing chemicals, making exposures — it was easy to make mistakes, took hours to accomplish, and required special facilities.

I even remember applying filters to exposures — something that Instagram does for you in an instant on smart phones. With film photography, it used to take special equipment, and it usually came out looking like shit unless you knew what you were doing.

Since 1997, Kodak dropped has dropped in value in excess of $20bn. Instagram and other companies like it fulfill the same desires that Kodak did with greater efficiency and panache.

Companies like Fujifilm have turned to other markets — focusing on specialized medical imaging instead of enabling families to take vacation photos.

The lesson that I’ll try to extrapolate from this is that it’s a worthwhile activity to go after a market in which the current leader is totally wedded to a complex, technologically obsolete capital structure. That capital structure may produce superior quality products, at least in the opinions of some.

The average photo taken on Kodak film and processed by professionals almost certainly has higher image quality than the typical amateur cell phone photo. In the subjective eyes of the market, that’s turned out not to matter so much.

People want to be able to take good-enough, cool-enough photos on their phones. They want to be able to share them with their friends and archive them digitally without much fuss. They prefer that to fiddling with apertures or getting film developed to put photos into fancy albums and to get it developed for projectors.

Companies like Kodak — of which the blue chip indices are full of — are wedded to a complex capital structure that has been lengthened and globalized for a long time — often more than a century.

The business’ managers are wedded to the old capital equipment, the old methods of management, old methods of marketing, and perhaps most importantly, old relationships.

Their incentives are actually to preserve the old line of business for as long as possible. The popular opinion of market even seems to punish executives who attempt to abandon old lines of production and the existing revenue streams that they generate.

Does anyone remember Netflix’s attempt to eliminate the obsolete section of their business? The DVD rental business is, without a doubt, doomed. Superior methods of distribution have been developed and broadly deployed. Yet consumers who are still happy with the old ways — and short-sighted public investors — cry out in protest when their supplier attempts to adopt revolutionary production methods.

This is one of the reasons why it’s usually so challenging to accomplish. Notice how Google’s attempt to re-enter the social networking market has provoked a chorus of harumphs from many in the tech commentariat.

This is one of the reasons why entrepreneurial activity acts as an endless font of technological renewal. The entrepreneur isn’t tied to old capital structures that are still generating profits. Her incentives are aligned with developing new methods and out-competing entrenched participants. There are no managers to appease whose expertise is tied to outmoded methods.

The entrepreneur’s lack of capital relative to industrial giants is in itself an advantage. The capital structure of a company like Kodak transforms into a crushing lodestone once it begins producing losses instead of profits.

Down is just as good as up.

From Ludwig von Mises’ Human Action:

“[The average businessman] associates the notions of rising prices and profits on the one hand and of falling prices and losses on the other. The fact that there are bear operations too and that great fortunes have been made by bears does not shake his dogmatism.

[...]

Entrepreneurs and investors do not bother about secular trends. What guides their actions is their opinion about the movement of prices in the comming weeks, months, or at most years. They do not heed the general movement of prices. What matters for them is the existence of discrepancies between the prices of complementary factors of production and the anticipated prices of the products.”

I found this passage compelling.

For entrepreneurs, the prospect of broad-based ‘recovery’ in the economy — usually a euphemism for a general increase in stock prices — is irrelevant. A boom in stock prices does nothing to spur entrepreneurs unless those same individuals can identify and exploit price discrepancies that have been generally obscured.

Entrepreneurs and investors who wait for ‘recoveries’ before acting are missing out on how the process works. If prices are declining in one area of business, it’s an invitation for entrepreneurial activity to reorganize the order of production there.

AirBnB did just that in one of the most severe real estate bear markets in history. Conventional wisdom would say to avoid starting a company in a crashing sector. It’s when a sector is crashing or booming that you want to re-examine it as an entrepreneur.

The general public — and the financial press — sees gains and losses in prices as positive numbers and negative numbers respectively, and emotionalizes each. The TV commentator will become giddy and overjoyed when the number is positive. They turn frantic when the number goes negative.

A market is ripe for entrepreneurial action when the price changes are large, regardless if that change is a negative number.

Many commentators are taking the launch video too literally. While the demoed product seems to be a mixture of Latitude, Maps, G+, Gmail, Hangouts, etc., I think that the form factor itself is more compelling. To me, at least, it seems more transformative to how humans interact with computers than any tablet or smart phone.

I’m totally indifferent to how well Google does with presenting its potpourri of disparate products onto a pair of glasses. Personally, I love Maps and Gmail, and could do without the rest of their ‘beautiful, unified’ offering.

What has huge, ongoing potential is the interface. What’s meaningful about this presentation is that we’re likely to see it commercialized in the near future.

It’s been bothering me over the past few years that the average video game character has a more informative interface arrayed about his virtual vision than a real person has. When you’re driving a car in Grand Theft Auto, you can see your route superimposed in the corner of your vision. In real life, you have to mount a smartphone on your car dashboard to see it.

I’m extremely familiar with lower Manhattan, so Google’s choice of location in the video resonated with me. Showing that a user can pull up a map of the Strand bookstore amused me especially — finally, there’ll be no reason to ever speak to a surly Strand employee ever again.

On a personal tangent, it reminded me of the time when I sold over 2,000 pounds of books over about three weeks a few years ago. It was an agonizing and heart-wrenching experience that I may never forget. Technological progress means that I can fit most of the books that I own now on a small device that weighs less than one pound.

Beyond my silly observation about rude used bookstore employees, there’s the germ of a useful point.

What’s stopping Wal-Mart from digitizing its employees? Why do employees who are there to convey information need a physical presence at all if eventually you can expect most of your customers to have augmented, networked vision? What if I can just ask my digital assistant where the lawnmowers are in the store and the route can be overlaid directly on my vision?

What’s stopping the technology from being applied in hospitals? Why should doctors have to pull medical records? Why not just see a patient’s medical history overlaid on the glasses when the doctor sees him?

Baristas can know every customer’s name as they walk in the store with a visual aid. A plumber might be able to see a HUD that details exactly where all the pipes in a house lead to without hammering through any walls.

I could go on, but I’ve made my point. The potential for software and hardware development on platforms like this is absolutely extraordinary. While it may be true that mobile devices as they exist now can perform many of these functions already, it’s just not as natural as a heads-up display. Smart phones will eventually be viewed as clunky prosthetic accessories.

For once, I’d like to see people welcome a new technology with enthusiasm instead of worry-warting about the consequences. If you don’t want to use a technology, you’re free to avoid it.

I liked this talk much better than Peter Thiel’s article in the National Review, which they discuss. Perhaps it’s because he comes across better without editors.

I don’t remember who recommended this book to me, but I bought it on impulse for a few dollars.

It comes from an earlier era — 2007 — a strange period in which companies like Goldman Sachs, McKinsey, and Microsoft were still widely respected on college campuses. During this strange time, elite college students wanted to be working in derivatives, consulting, or working on Windows Vista.

I’m being inappropriately rude here, because it’s actually a useful book packed into a small package. It distinguishes why some organizations succeed over the long run and others don’t: top-tier companies have a better understanding of how to recruit, train, and motivate young employees:

“Time to face the facts! Students do not think about what’s best for your organization during the recruiting process. They may start to think about the company once they actually begin to work, but while they’re deciding where they will work, they think about only one thing: keeping their options open.”

While it may seem like the book’s advice — to give college graduates some measure of responsibility, to give perks like travel, to give them role flexibility — are obvious, they’re actually not to people who suck at business or are ignorant about how to get new recruits motivated.

The book is geared towards companies doing college recruiting. There’s almost nothing about how to find and hire candidates who are already out of college — which disappointed me. I hoped to get a book that was a more general guide to spotting talent — because as Mark Suster writes, everyone at a startup should Always Be Recruiting.

What also surprised me was to learn about how much spying and intelligence-gathering top corporations do at the best universities. I went to two very good schools, but I dropped out before I could encounter recruiting-mania, so it was interesting to read about how those networks function.

As far as I can tell, our culture — at least in the US — seems to deny that there is such a thing as risk. The Personal Savings Rate as recorded by the St. Louis Fed has dropped significantly since 1959 from 8.3% (which is low) to a current rate of 4.0%. In 2005, it dropped to a stunning 1% for a brief period.

The data indicates that we live in an extremely present-oriented society that discounts the future in order to enjoy the present more.

This runs counter to the mission of the entrepreneur, which is to risk saved capital, toil with it, and perhaps build assets that will make for a better future.

I dislike introducing problems without suggesting a realistic solution to this, but the only one I can come up with is leading by example and encouraging conspicuous saving and production rather than conspicuous consumption.

A person that doesn’t save limits their capacity to endure risks.

It’s a good set of problems for startups to solve. Aaron Patzer founded Mint in 2006, just as the savings rate trend flipped. Intuit acquired Mint as the savings rate was near its peak — as people scarred by the financial crisis were stuffing their accounts with as much cash as possible to gird themselves against an unknown future.

They happened to capture multiple trends at once with an easy-to-use and free solution. They improved on one of Quicken/Money etc.’s core features, made it free, put it on the web, and added better transaction tracking than the paid alternatives. The design aesthetic was also replete with warm color, unlike the fluorescent spreadsheet color scheme of the paid competition.

Hedge fund managers get paid to manage risk — but risk is something that everyone struggles to manage. Mystic shaman sell risk-proofing. Psychics sell risk protection. Whether any of these deliver on their promises consistently is up to speculation.

What differentiates a shaman from someone selling something that works is that what works is seeing the world as it is rather than what you want it to be. A mystic promises to be able to control the rainfall by persuading the gods. A meteorologist makes rainfall estimates based on satellite imagery with reference to models of weather theory — and still gets it wrong most of the time. But at least the latter has a vaguely correct method for solving the problem of predicting complex weather systems.

Almost all predictions are worthless. I sometimes feel compelled to make a prediction, like when someone on Quora asks me to. I don’t think it’s wise, and I feel guilty when I’m tempted to spout predictions that can’t be acted on.

To go back to the example of Mint, if Patzer had started working on it in 2001, none of the trends that worked in his favor would have surfaced. The technology wasn’t there yet, the banks may not have had their infrastructure together, everyone was leveraging themselves into outer space, and venture funding was dead.

He could have had the same insight, a similar product prototype, the same drive, but failed due to factors out of his control.

Where what you can control comes into play is being able to choose when to enter a position and when to exit, and what you do while you’re riding it up or getting whipsawed off of it.

That’s when the challenging work is needed.

The goal of knowledge work is to invent and implement clever technological solutions that eliminate the need for vast quantities of work. A software program that could enable farmers to direct fruit-pickers 3% more efficiently would eliminate man-decades of ‘hard work.’

I’ve done ‘hard work’ before. It’s not as challenging as knowledge work. Hard work is coming home filthy, with your arms covered in lacerations from all the twisted metal you handle at work. Hard work is inhaling carcinogens in a chemical factory and shortening your lifespan. Hard work is showing up at 5 am on the dot on the work-site and being fired if you’re 30 seconds late on the boss’ watch, which is set five minutes fast.

It’s easy to fall into the trap of believing that ‘working hard’ as a knowledge worker is sufficient. When I transitioned from brute labor to using my brain, I used to pull all-nighters to make deadlines every week. It was ‘good enough’ only because the output was marginally better than that provided by other marginal copywriters.

The human body is an impressive device, but it’s not limitless. Most American education systems set the bar low except in a few disciplines. If you want to pass a course, you need to put in a few hours of concerted labor, a little disciplined study, and you’ve made it over the bar. You get your gold star. No one cares how you achieved the output as long as you convince the professor to stamp your work with an ‘A.’ There’s only one customer for you to deal with: a harried academic and perhaps her graduate student staff. Once you’re done with the class, which only lasts for a few months, you’re on to another one.

The world of work is rather different. A team can work superbly — produce bug-free code, manufacture a device with a six sigma failure rate, and otherwise be great enough to achieve an ‘A’ grade — and still fail. It’s up to customers to decide whether a product or service is useful to them. Our culture trains us for form instead of function. It takes substantial mental effort to break that habit.

The smart work goes on in the off-hours.

The hockey legend Wayne Gretzky studied videos of games for thousands of hours, created volumes of charts of where the puck was likely to go in various game situations, and internalized that knowledge. That’s how he knew how to skate where the puck was going rather than reacting to situations.

Most mediocre sports players spend their off-hours boozing, pill-popping, fucking whores, and hanging out with vapid musicians. It’s the same in most other disciplines, although professionals usually don’t have that sort of florid lifestyle. Your muscles — for knowledge-work, your talent — can help you progress for a time.

The way to get to a higher plane is to study and never stop studying, even when there’s no teacher to drag you along and give you a gold star for it. If I have done well at all in my short life, it’s because I value the knowledge that others can teach me.

I bought this book on introversion immediately on the advice of my old friend (and recent Brooklyn transplant) Ned White.

Yes, dear reader, if I trust your recommendation enough, I’ll buy a book on your say-so, read the whole thing, and then tell you what I think of it at the end. I can call multiple witnesses to attest to this perverse habit of mine.

I’ve not typically thought of myself as as introvert, despite the massive quantities of evidence in favor of the adjective being applied to me. I went roughly four years working in an apartment by myself, with only e-mails and the occasional Skype call to keep me company during the workday.

I enjoy talking to people. I’m comfortable performing in front of an audience. I can run a meeting. I enjoy casual banter. All of these made me think that I’m some kind of hybrid.

After reading this book, I’m not so sure anymore. The author, Marti Laney, defines introversion and extroversion in terms of whether social activity energizes you or drains you. Reviewing my own life, I know that chatting with people is exhausting. I don’t need as many casual friends as most other people that I’ve met. I tend to keep a small number of close friendships. Parties with large numbers of strangers alternately exhaust and terrify me.

I feel most comfortable in crowds of people who don’t know me. What I love about New York City (even though I don’t live there anymore) is how easy it is to be alone in a crowd.

I learned that I’m not fucked up because I dislike keeping a lot of random people in my life, and that it takes me an onerous level of effort to do something like “hang out” with “bros” on a couch, slamming “brewskies” and chatting about sporting events. It’s because that kind of activity drains the hell out of me.

It also explains why I can’t tolerate roommates — the mere presence of someone else in an apartment when I’m trying to get myself together for the next day prevents me from restoring my brain:

The more introverted you are, the more you need a serene environment for processing stimuli and for recharging. Why is processing time so crucial? Without it, you get information overload. New input lands on top of old input, and suddenly, your threshold is reached and you shut down. Crash. Circuits are jammed. Numbness sets in.

The book also taught me a measure of empathy for extroverts. I have usually found typical socialization habits of extroverts to be incomprehensible. Now, I’m starting to understand — a party for an extrovert is as enjoyable and relaxing as solitude is for me.

The author describes it simply:

They may be the ones who are raring to go after a party, asking, What shall we do next? Often the harder part for them is relaxing and giving their bodies a rest. Introverts, on the other hand, are energized by the internal world—by ideas, impressions, and emotions. Counter to our stereotypes of introverts, they are not necessarily quiet or withdrawn, but their focus is inside their heads.

The book’s title is about the advantages of introverts, because apparently pro-extrovert propaganda dominates America, which makes introverts feel deficient about themselves.

One observation that resonated with me (and may resonate with you) is the introverted tendency to attempt to learn as much about a topic as possible before feeling confident about it:

Many introverts don’t feel as if they know enough about a subject until they know almost everything, and that’s the way I approached this project. This happens for three reasons. First, introverts can imagine the vastness of any subject. Second, they have had the experience of their brain locking, so in an attempt to avoid that awful blank-mind moment, they overprepare by accruing as much information as they can.

I want to say that I don’t ‘over-prepare,’ but it usually takes me around three to six books read on a topic before I feel confident enough to win debates on it.

An introverted character brings sometimes-unpopular skills to any group:

We bring important attributes to the party—the ability to focus deeply, an understanding of how a change will affect everyone involved, the capacity to observe, a propensity for thinking outside the box, the strength to make unpopular decisions, and the potential to slow the world down a notch.

Extroverts cohere groups. They seem to focus on surface interactions. For introverts, the world of thought is brighter than the sensory world that we share with others. When I’m speaking with someone, I attempt to understand the inner world of the other person I’m talking to. I consider what’s being said to be the small exposed peak of an island that’s mostly submerged.

This book is easy to recommend, unlike most of the other psychology books that I’ve read. Most psychology books require too much effort from the reader to be applied effectively. Anyone can understand this one and make use of it.

Also, it seems like reading about introverts is chic these days, especially now that nerds are becoming billionaires again.

Read my notes on Hewitt Book List, my Quora board about what I’m reading.

For New York’s bankers and traders, the new math suddenly reordered their assumptions about their place in a post-crash city. “After tax, that’s like, what, $75,000?” an investment banker at a rival firm said as he contemplated Morgan Stanley’s decision. He ran the numbers, modeling the implications. “I’m not married and I take the subway and I watch what I spend very carefully. But my girlfriend likes to eat good food. It all adds up really quick. A taxi here, another taxi there. I just bought an apartment, so now I have a big old mortgage bill.” “If you’re a smart Ph.D. from MIT, you’d never go to Wall Street now,” says a hedge-fund executive. “You’d go to Silicon Valley. There’s at least a prospect for a huge gain. You’d have the potential to be the next Mark Zuckerberg. It looks like he has a lot more fun.”

Wall Street bargained with the government and the central bank for access to an infinite lending facility. In return, it gave up autonomy. Investment banks are becoming increasingly regulated. As far as I can tell, the main game that’s been running since the financial crisis has been the Treasury “carry trade” — borrowing from the Fed at near zero percent and lending the proceeds to the government for a slender, nigh-riskless profit on massive volume. It’s not risk-free, of course — the general public takes the risk — but it is for the banks in the context of that particular trade.

Silicon Valley has yet to accept such a bargain, so long as you ignore the many (now-mostly-failed) ‘clean’ or ‘green’ tech startups.

In Silicon Valley, risk and reward lies with companies, investors, and employees. The more risk that you take, the higher your potential upside. There are infinitely fewer rules and regulations governing user interface design than there are about kitchen sizes and seating arrangements in any restaurant in any state in the country.

You can decide where to place a button on a screen in a program used by millions of people with less oversight than selecting table height in a restaurant used by a few dozen people at once. This is part of the reason why Silicon Valley remains so widely admired: businesses can focus most of their efforts on solving problems rather than dancing a convoluted jig to please the regulatory gods.

Seeing what’s happened to Wall Street can be instructive to Silicon Valley. The more that you ask for “help” from the government, the more arbitrary rules that they’ll impose on your industry.

The final result of these protections in an era of international competition is stagnation and doom. China was the world’s leading power in the late Middle Ages and early Rennaissance, but hobbled itself for centuries through its intermittent bans on naval trade in 1371 and 1550. American presidents attempted to protect concerns like Bethlehem Steel in the later 20th century to no avail — people still make, buy, and sell steel, but most of the production happens elsewhere.

Those free trillions enjoyed by the banks aren’t weren’t really free — they were stolen from other people. They got mad once they figured it out. The costs that were obscured in the aftermath of the financial crisis are now apparent. The banks and politicians that colluded to pass incredibly unpopular bailout legislation are now dealing with large popular protest movements of various ideological flavor.

Silicon Valley’s competitive advantage is freedom, in the real sense, rather than that of a politician’s stump speech platitudes.

Workers, managers, and investors in many sectors can make decisions without needing to check with their legal compliance officer. The law only typically intrudes when an internet company attempts to do business in a legacy sector. Startups like AirBnB are able to avoid entire rolls full of red tape governing hotels, landlord-tenant agreements, and other onerous rules because their business isn’t legible to the legal system.

By the time that lobbyists for the hotel industry got around to bribing the right politicians and hyping the press with planted stories, it’s too late — the service is too popular. Once a sufficient number of people have adopted a technology, they become extremely resistant to having it taken away from them through legal means. Political action to suppress that technology becomes too expensive.

While the industry isn’t immune from regulatory overhead, it’s comparatively freer than any other industry. Computer systems engineering is less regulated than any other engineering discipline. As such, capital can flow more directly towards technological development without being diverted to regulatory obeisance.

This is why the anonymously-quoted Wall Street guy is a Mark Zuckerberg wannabe. Life in a protected industry sucks.