Book review: What Would Google Do?

In What Would Google Do?, Jeff Jarvis conveys his lessons learned from the greatest technology success stories of the past decade. He draws on best practices from Etsy, Craigslist, Amazon, and of course Google. I took notes of interesting, new concepts as I read but sadly didn’t end up with much. It may be great for corporate old-schoolers, who Jarvis seems to be talking to, but if you’ve been following blogs and news in this space this book will feel a little slow and obvious.

I managed to solidify a few key points that I’ll take with me as I engender my next big tech company in the next year. First, the best position is to create a platform on which others can build. I can expect to earn little or no profit for a while under this model, but hooking developers on my platform is a very powerful strategy. I need to extract the minimum value from the network of developers and related web services to take the network to its maximum potential size and value. This enables my developers and partners to charge more, which increases their dependency on my platform or network. Another positive side-effect is that competitors don’t want to jump into a space where the efficient leader’s margins are low.

Today’s web 2.0 method for growth is to forgo paying for marketing and instead create something so great that users distribute it. Later revenue can be found and extracted, but we’ve seen the revenue-maximizing strategy fail on AOL and Yahoo while Google stole their users to frame the world’s most powerful advertising machine.

These are the most powerful pieces of advice I discovered in WWGD:

How can you act as a platform?

What can others build on top of it?

How can you add value?

How little value can you extract?

How big can the network atop your platform grow?

How can the platform get better learning from users?

How can you create open standards so even competitors will use and contribute to the network, and you get a share of the value?

I’ll certainly be applying some of these principals to my next ambitious venture. As far as the rest of the book, I recommend reading a summary instead, unless you’re brand new to the Web 2.0 business world.

Book review: Freakonomics – A Rogue Economist Explores the Hidden Side of Everything

In my time studying Business Management Economics at UC Santa Cruz, I came to appreciate Economics as the underlying force driving many other Social Sciences, including Politics, Sociology, Community Studies, Anthropology, and History. In Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, authors Steven D. Levitt and Stephen J. Dubner assume this same premise to explore the hidden economic forces that connect seemingly unrelated phenomena in American society and history.

They do not argue that economics causes societal issues; rather they use economic models and experiments to explore complex issues, including racism, crime trends, abortion effects, medical malpractice, student and teacher cheating, and effects of parenting. They explore correlation and causality between distant patterns in society to convey an underlying human nature at work. In doing so they manage to prove that conventional wisdom is often wrong.

To me, the most interesting section of the book is what a bagel salesman’s data reveals about employee honesty in varying-sized companies and at different position ranks. Its findings “lie at the intersection of morality and economics,” and demonstrate consistent trends in theft, allowing the interpreter to actually predict theft within a company, given a few basic descriptions.

A bagel man named Feldman leaves bagels and cream cheese in office lounges and kitchens along with a wooden box and a sign requesting $1 per bagel on the honor system. By keeping perfect records (he’s formerly a financial analyst), he inadvertently invents a system to monitor rates of white collar crime.

At his own estranged office he receives a 95% payment rate because his colleagues knew him. But eventually he built his clientele up to 140 companies consuming 8400 bagels a week and the payment rate varied with distinct patters.

With enough data he learned to consider an “honest company” one that paid for 90% or more of its bagels consumed. 80-90% payment rate is annoying but tolerable, and if paid less than 80% Feldman posted a hectoring note. Even though as many as 20% of his clients steal bagels from him, his money box only got stolen 1/7,000 times.

The interesting part of his data is learning the factors shaping trends in honesty. Smaller offices tend to be more honest; a 50-employee company pays 3-5% more than a company with more than 300 employees, which can also be described as a reduction in theft as high as 60%. Unseasonably good weather reduces theft while cold weather has the opposite effect. The bad holidays include Christmas, Thanksgiving, Valentines Day and tax week, which each invoke up to a 15% increase in theft. Holidays that reduce the theft rate include Independence Day, Columbus Day and Labor Day.

Other interesting trends include the positive correlation between honesty and employees who like their boss and work. I was surprised to find an increase in theft as you move up the corporate ladder. Feldman speculates that executives cheated because of a sense of entitlement, or that perhaps cheating is what earned their place as an exec in the first place.

The conclusion of this excerpt, however, is quite positive and inspirational: The vast majority of Feldman’s customers do not steal even though no one is watching.

Freakonomics was a very fun and easy read, and not just because of my background in Econ. It’s entertaining all the way through and there are some very interesting insights into history and the nature of certain professions that you’d never know other than by reading this book. I recommend it.