Monthly Archive for September, 2010

What If They Made Movies?

Published
by
Victor Nicollet
on September 27, 2010
in Random
. 0 Comments

Amazon. They direct, produce and/or publish every single movie made since the beginning of cinematography. By sifting through your recent movie-viewing habits, Amazon are able to suggest the exact movie that will interest you the most, which you can then order with their one-click ticket purchase patented interface. They will then send you daily e-mails about that movie and other similar ones for the rest of your life.

American Airlines. The trailers hinted at a light-hearted romantic comedy, but the movie ends up being a three-hour claustrophobic thriller. The food served in the movie theater is horrible, and every patron ends up paying a different price for their ticket, plus a carry-on luggage fee. The lines at the theater are longer than for other movies, but that is mostly because you need a full-body scan because you can be allowed in.

Apple. This year’s iMovie was found in a New York bar after what appears to be two years of top secret development. Evangelists announce that it will change the way people watch movies, and that it will be available soon in a single movie theater chain to be identified at a later date. The DVD will of course only be compatible with genuine Apple products. The word on the street is that you cannot watch the movie if you rest your head on your left palm, but Steve Jobs said that’s the case for all other movies and you will get a free movie-watching glove to compensate for it.

British Petroleum. A profitable studio for years because you just had to see their movies despite their sky-high price, despite protests from hippies and tree lovers. Recently moved from their middle eastern movie sets back to the southern United States, but managed to annoy the locals in a badly thought through PR stunt. Now, they spend more money on appeasing the inhabitants than they spend on actual movies.

Dell. Not available in any movie theater. Instead, you can build your movie online by choosing cast members, plot elements and special effects from a list, and it gets delivered to you on DVD within a few days. The Angelina Jolie component (at +$9999) has been recently announced and widely acclaimed as a smart move.

Facebook. It’s like that anti-war rally scene from Forrest Gump, except you can tag all your friends right there in the movie. The studio managers pride themselves about being the fastest growing movie studio around and sweep under the rug any concerns about scenes from private amateur videos being made available to the general public. They’re currently considering a movie about themselves.

Google. They don’t make movies. Instead, they build super-computers that run super-algorithms that create the movie you want by spying on your browsing habits. SEO (SEenOntelevision) consultants now try to trick the super-algorithms into including product placement in the movies Google creates. The studio recently introduced a new way of watching movies: based on your reactions as you watch the movie,  the plot changes to fit your mood.

NASA. Ever since their hour of glory with their 1969 best-seller, they have been doing silly re-hashes such as «Dude, Where’s My Shuttle?», «Dude, Where’s My Venus Probe?» and «Dude, Where’s My Mars Rover?» that absolutely no one wants to watch anymore, despite every single one having a budget that puts James Cameron to shame. Recently, people have started making fun of their 1969 movie sets and how fake they look.

Nintendo. This japanese studio tries to revolutionize the way people watch anime by introducing interactive features in the viewing experience: the WiiSee comes with a popcorn-shaped controller you can use to simulate eating popcorn, and a straw-shaped controller you can use to simulate drinking beverages.

People’s Republic of China. They seem to only make movies about how great they are and how happy the actors happen to be. Cast members are forbidden from viewing movies from other studios, to keep their minds pure and honest. Their movies somehow net more profits in a single week-end than any other movie in a week, and they never get a single negative review—except that one time, but the reviewer said he was mistaken and then commited «suicide»

Twitter. A micro-filming studio, produces movies shorter than 140 seconds that somehow everyone feels obliged to share and reply to.

Wikipedia. A huge studio made up mostly from volunteers, they only publish documentaries about silly esoteric things such as rotoscopes or lycaenidae. They are known for the huge amount of editors on every single movie, and the insane bickering  between them.

Have any other suggestions? Let me hear them!

The Outstanding Economy

Published
by
Victor Nicollet
on September 25, 2010
in Strategy
. 2 Comments

Not so long ago, this world was a world where everyone died within miles of the place they were born.

If you wanted to have dinner, you could eat stale bread at home, or you could eat stale bread at a friend’s home, or you could eat somewhat less stale bread at the village inn or tavern. If you wanted to eat something really outstanding, you would go to a large city and spend what probably amounted to your life’s savings to eat a meal by a top chef. And you would be happy because it had meat in it. And spices. Then, the industrial revolution happened, and its main accomplishment was that it turned masses of people living in the country with access to plain, bland commodities into masses of people living in the cities with access to plain, bland commodities. It also had a very interesting side-effect: it sparked a century-long downward trend in transportation costs.

In 1610, even the richest merchant in Western Europe could not get their hands on a plain mango, because mangoes only grew in the east indies and were months away by ship or caravan. Until the advent of refrigeration, most of the western world knew of mangoes only in their pickled form (this led to the apparition of «to mango» meaning «to pickle» in some parts of the US).

In 2010, advances in refrigeration technology (fruit last longer), air travel (fruit travels faster) and cultivar development (the main cultivar of mangoes, Tommy Atkins, was picked because it provides the longest shelf life) mean that everyone in the western hemisphere can buy a fresh mango for the equivalent of ten minutes of work at the average wage.

On a local scale, inhabitants of major cities have hundreds of restaurants available to them for dinner, conveniently placed within an hour of their home by car or public transportation.

And of course, using the internet, anyone has access to any piece of information available online, and can buy unique hand-crafted pieces from an equally anonymous person on another continent.

Too Many Choices

When you only had access to a handful of options, you could become knowledgeable about each one. You could know how good was the food at every restaurant in town, because there were only five. You could have an opinion on everything, and if you didn’t, you could ask your friends, which is how reputations spread.

As the number of options increased, the reputation system could not follow because there are too many alternatives for any individual or tight social group to handle. This led first to the apparition of reviews (a trusted third party specializes in having an opinion on everything, and shares it with everyone), but the number of product categories has increased (meaning you now need a reviewer reviewer to determine whom you can trust) and they now differ on several variables (weight, battery life, size of the app store, price…).

So, we end up subject to the availability heuristic (people only remember and discuss exceptionally good and exceptionally bad things) and satisficing (people will settle on the first thing that’s not too horrible).

There are two obvious strategies one could follow from here. One is the classic approach to marketing, which you probably experienced on a daily basis for decades: create something that isn’t exceptionally bad (so it isn’t knocked out by the availability heuristic), advertise the hell out of it so that it’s the first thing people try (and settle on it through satisficing), and watch the cash come in. If you can set up a subscription-based system with lock-in, that’s even better. This is a great strategy for conquering a new market, but it’s extremely inefficient at stealing market share on existing markets.

The other strategy relies on creating an outstanding product—something that is so exceptionally good, the availability heuristic will kick in and customers won’t even remember there were any competing products in the first place. While this strategy can be used for conquering new markets, the classic approach is cheaper because it can afford using a cheaper product. On the other hand, the only way to steal market share is to create something that is obviously and undoubtedly better than the alternatives.

So, it’s a matter of outstanding vs. satisficing. What side are you on?

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Picture credit: Sergey Prokudin-Gorsky under Creative Commons.

Seven Community Profiles

Published
by
Victor Nicollet
on September 24, 2010
in People
. 2 Comments

There are many different ways in which an individual might belong to a community. Some of them are passive while others are active, some of them chose to belong there while others simply never chose to leave, some of them care about the community while others only care about whatever the community stands for. To anyone who has to work with communities, an overview of the various profiles of community members is essential.

1. The Passionate

He’s the meat and potatoes of your community, passionate about its final purpose and willing to share that passion with others. In a Neighborhood Association, these are people passionate about living there and willing to improve everything they can. In a Board Game Club, they are the people who love playing board games and always try to get their friends to play with them.

Cater to the Passionate, for they have the perfect balance of doing and sharing—if either is missing, your community will soon turn into chaos or silence. Their main interest in joining the community is finding like-minded people to discuss their shared passion, so that as long as you keep a fair proportion of  passionate members, they will be happy enough to stay.

2. The Socialites

Above all, the Socialite enjoys being part of social circles. The purpose of the community is just an excuse for meeting other people that have something in common with you. She joins a Poetry club because they she to meet people and Poetry is a good topic to start a discussion—but she will feel no obligation to stay on topic.

The Socialite is both an asset and a time bomb. Her tendency to network with everyone is an excellent way of keep conversations going, help new members integrate with the group quickly, and connecting to people outside your community for help or for finding new members. However, unless properly channeled to a dedicated «off topic» time or place (a forum, a dinner), she might bore people who joined the community out of passion.

3. The Devoted

Every community needs people to work on the bloody details of making it work—when everyone else is having fun, these people meet and toil and work so that the sessions happen on time and the new members are given all the useful information and the web site is online and there’s chocolate cookies and fresh lemonade waiting for everyone after the training session.

It is essential to find any new members that might turn into Devoted, to quickly grant them responsibilities that will help channel their energy. But be careful: people in positions of responsibility within a community have the power to change it. Some of the Devoted often have strong ideas about how the community should work, and such things are best discussed beforehand.

4. The Obsessed

Just like the Passionate, the Obsessed are madly in love with the purpose of the community, but they do not share it with others because of their timidity or lack of interest in human communication. In solo activities, such as Computer Programming, the Obsessed just keep to themselves (sometimes emerging from their cave to rant on a discussion board or join a club «to see what it’s like») but team activities, such as board games or sports, force them to join a group so that they can engage in their passion.

The Obsessed don’t care about discussing their passion, they just wish to act. They’re a nice bunch to have around, but too many of them can turn any community into a quiet wasteland and turn off new members.

5. The Clueless

The Clueless join a gym because their wife asked them to. They join a church group because they parents asked them to. They join a knitting club because they’re curious, but that curiosity fades after a few days. These are people who do not care about where they are, what they are doing or who they are doing it with. They come to one session in three and you couldn’t find their phone number even if your life depended on it.

Most of the time, the Clueless are members who joined only recently, and don’t really care about the community. Find them quickly, keep an eye on them, and let them vanish on their own.

6. The Role Models

When a member is exceedingly charismatic or skilled (and not completely obnoxious about it), other members will look up to her with respect and admiration. They are usually older members, who have been with the community for a while and are known to everyone. This implies that the community is old and large enough to support them, which is often a good sign that it’s in good health; role models may leave, but they sometimes come back and are remembered by those who have become the new elders.

Having Role Models is a very good thing, because they give members a new reason for being part of the community: staying near the role model. If you have a few admirable players in a sports team, the other team members will enjoy their presence as much as they enjoy the game. Cater to the Role Models, and prevent them from becoming obnoxious about their superiority.

7. The Moderators

Some members are recognized by others to be wise, honest, independent and beyond reproach. This gives them the authority and leverage to moderate any issues that might come up between the other members, and teach any new members the lessons they need to be accepted in the group.

In medium-sized communities, moderators are the key to the continued stability of the community. In large-sized communities, their natural authority vanished because there are too many members for a natural consensus to exist on their status. In these cases, it becomes necessary to supplement their natural authority with an official title—but be wary of the risks: an official title does not grant legitimacy in the same way that natural authority does

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The Two Hour Miracle

Published
by
Victor Nicollet
on September 21, 2010
in Strategy
. 0 Comments

Yesterday evening, I worked on the professional website of Alix Marcorelles. My mission was to create an online version of her résumé, with a professional feel and the appropriate SEO voodoo, based on a high-resolution picture of her and the PDF version of her resumé.

Fast Quiz: how long do you think it would take your usual IT contractors to achieve the exact same result, if you gave them a picture of that page and the money to buy the domain name and the hosting? I suspect your answer will be anywhere between one day and one week, depending on how competent they are and how much overhead there is.

Two Hours

The page you see there is the result of only two hours of work, including the boring parts about buying the domain and uploading the files to the host. This is the Two Hour Miracle: someone creates in a very short time something that would take most of your usual contractors at least one day to get right, even if you specified every single detail.

I do not wish to imply here that I am the fastest web designer in the world. In fact, I suspect that I am below average. What I say is that I am experienced enough with that craft to be aware of my own strengths and weaknesses, and since I only had two hours available to set up that website, I went for a design that was the most adequate for my skill set.

For instance, the regular three-column layout I used is based on the Blueprint CSS framework. It’s a basic out-of-the-box structure that takes me about five minutes to set up appropriately (and that’s including the time to download and install the framework). Without the framework, the same 4-4-3 column layout would take up to an hour to design, implement and test, and would probably involve some math to get right.

The Icons

The icons I used were from the FamFamFam Silk icon set, because that’s an icon set I am deeply familiar with. I immediately know whether there’s a «cell phone» icon in the pack, or what icon I could use to represent «geographical location» or «Microsoft Office» because I know them all. And I’m familiar with the «list of elements with an icon to the left» pattern, so that designing the right-hand side took me ten minutes (five of which were spent looking for a LinkedIn icon). Without intimate knowledge of an icon pack, the hunt for those icons could have taken hours.

Dispelling The Miracle

I often get to work with people who have seen the Two Hour Miracle happen for someone else, or even on another of their own projects, and then ask me to do the exact same thing for them, with only a few minor modifications.

Their modifications usually involve changing the page layout so that it does not fit within the out-of-the-box Blueprint model, which turns a five-minute hack into a two-hour design battle against the dark forces of Internet Explorer. They also involve some icons that don’t exist in FamFamFam at all, such as 32×32 icons, so I have to hunt these down for a few hours as well. And they want to see what it looks like before it goes online, so I have to delay the upload until I get a green light from them. Last but not least, instead of a one-sentence mission statement, they have two pages of «minor details» that I need to read before I can start.

And now, I have become the average IT contractor who needs two days to achieve something that, to the naked eye, looks strikingly similar to the Two Hour Miracle.

What allowed me to accomplish a Two Hour Miracle was the unfettered freedom to cut my own path towards the objective, to use the tools that let me achieve a reasonable level of quality at surprising speeds. The lack of detailed specifications and micro-management helped me get good results faster.

Assembling The Miracle Workers

How do you turn your team or contractor into miracle workers? Steer away from the classic approach to technical design: I decide on the features and ask the engineers how long it takes and how much it costs. Instead, set some high-level objectives, set a limit on the time and money available, and ask the engineers what they can do.  This change of perspective leaves a lot of design work to the engineers, which means you need to select people who can work this way, and treat them in a way that helps them instead of acting like an obstacle.

  1. Find people who share your sense of quality. If you want miracles to happen, you cannot afford to be micromanaging your own sense of quality down their throats. You need people you can trust with designing on their own a solution that matches your unspoken requirements. This means they can be trusted (their responsibility: be up to the task) and that you trust them (your responsibility: let go of the details, judge them on the overall quality of their work).
  2. Find people who can think ahead. Two hours of work, no matter how miraculous, are worth nothing if they need to be thrown away to take into account a critical requirement. You need people who can plan for most contingencies through experience or natural paranoia, and see how the greater picture of your project fits in with their current objectives. This means they can plan their work (their responsibility: foresee any problems and create a solid implementation plan) and that you let them plan (your responsibility: let them know ahead of time of any critical requirements you have).
  3. Explain why you need something, not how it should work. You might be convinced that your software needs a «Really Delete?» question, but your objective is to prevent data loss through accidental deletion, and your team knows that the application model or web framework supports the superior «Deleted. Cancel?» alternate solution to that problem at a lower cost. State your objective, and trust them with finding an appropriate solution.
  4. Provide clear, immediate and non-aggressive feedback. When people get unspecified things wrong, do not take it as a sign of their incompetence or malice. They can’t read your mind and probably have their own idea of what quality looks like. Feedback is necessary to help them adjust to your ideas. Also, remain available at all times for questions—if someone needs an answer from you to get to work on their two hour miracle, don’t delay them by six hours.
  5. Allow time for experimentation. Working at a very high speed relies on only using what you are already very familiar with, to avoid bad surprises. Not only can this get boring after a while (trust me, you don’t want your team to be bored), but it also means your team does not get to improve their skills with different technologies or implementation strategies. Accept that some time will be wasting chasing technical red herrings, and let your team regularly create prototypes and proofs of concept.

While this may sound like it only applies to software design, it doesn’t. Every creative, skill-based job out there can have Two Hour Miracles (and the above list is pretty much agnostic in this regard). For instance, here’s a quote from a short piece by Jason Cohen about finding a graphic designer:

The most important qualification is whether you like their prior work. I cannot stress this enough: Designers don’t morph their style to match yours; they don’t deviate from their own style.

If they make slick, glossy, mocha-latte-modern-glassy stuff, you’d better like that. If they make crunchy, green, friendly, round-rectangle stuff, you’d better like that.

This is basically the same thing: if you ask them for something that’s not part of their Two Hour Miracle skill set, don’t expect anything done in the short time.

See what I mean?

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To the people who have to deal with IT out there : if you agree with the above, would you consider sharing it around on Facebook or Twitter? I’d rather have this idea spread as much as possible :)

Facebook Pages vs Web Pages

Published
by
Victor Nicollet
on September 20, 2010
in Strategy
. 2 Comments

If you’re doing anything that involves dealing with many people, you need to have a web presence. It doesn’t have to be a billion-dollar corporation or a trans-national association. My wedding will have a web presence because it involves several people and losing an online web site in your history or bookmarks is harder than losing a fancy piece of paper, and because a web page can provide so much more features than dead tree paste.For instance:

Where will the wedding be? → link to Google Maps (though Alix prefers Mappy)

When will it be? → click a link to add it to your Outlook / Google Calendar

How do I get there? → see a list of hotels and train schedules

Who is coming? → use the RSVP feature

This is turning into a wedding organization checklist, which isn’t the point. The real question is, should I create a Facebook Page or a normal Web Page?

Advantages of Facebook Pages

  1. It’s easy: you don’t need any technical abilities to set up and maintain a Facebook page.
  2. It’s free (as long as you don’t buy ads).
  3. You get a clean and readable page layout, a discussion forum, a photo gallery, a simple web analytics suite, and a readily available Open Graph node (something people can Like)
  4. The wall of your page acts as a multimedia mini-blog with automatic subscription for Facebook users (when they Like your page, all your updates show up in their feed) and RSS subscription as well.
  5. People trust Facebook pages, because Facebook would not allow harmful or offensive pages

Advantages of Web Pages

  1. You can use any web domain. Not having your own domain name can sound unprofessional, and it can reduce your Google Ranking.
  2. You can create a web page for anything, without being limited by the Facebook terms of use or the possibility of Facebook simply wiping out your page from existence on a whim.
  3. You can have a real blog, with updates of a meaningful size.
  4. You control your web page, which lets you include any special features that Facebook does not allow (a store locator, files to be downloaded, dynamic data, restricted areas, multiple languages, a link to a twitter account).
  5. People explore web sites: they come in non-standard formats with non-standard information, so there’s curiosity involved.

So ultimately, it’s a matter of independence versus commodity. If you don’t need the benefits or social standing of having a standalone Web Page, go for a Facebook Page instead. Otherwise, be independent, but be prepared to pay the cost (in time and money).

On the long term, having a Facebook Page ultimately serves a different purpose from your Web Page, so you should strive to have both.

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We Don’t Care About Your Prose

Published
by
Victor Nicollet
on September 17, 2010
in People
. 0 Comments

So there you are, Mr Blog Author. Or Ms (I’m not very good at guessing genders over the Internet). Through devious plans and clever hacks and selling your body on the e-streets you’ve achieved what seemed impossible at first: brand new pairs of eyeballs hitting pages on your web site every day. There you are, rubbing your hands and cackling like an evil maniac in front of your Google Analytics benchmark, wondering what to do next.

«What you should do,» shouts just about every blog expert, «is let people subscribe in a variety of ways: RSS, e-mail, twitter…»

This is right. But it’s too soon. What you have now is a reader who has only read one article on your blog. Before they add you to their RSS aggregator or give you permission to send them e-mail updates or commit to anything, they will want to know whether that article they just read is typical of your abilities as an author, or if you just managed to get lucky.

So, they will click on another link, desperately trying to read another article on your blog. The second article anyone reads on your blog is the most important article they will ever read.

Silly people all around the world think it’s the first article that matters. Bovine feces, I say. You have absolutely no control over what the first article will be—this is up to the people who link to your web site. So, if a popular twitter user mentions your article about a shrimp on a treadmill to the tune of Benny Hill, this means a crowd will be reading that article as a first article. Besides writing great articles all the time, the only thing you can do is find out what articles people are being linked to, and improve the format of those articles (do not change their text: it’s dishonest and you will be called on it).


Courtesy of IttyBiz.

You do have control over what the second article is. What people can do when they’re done reading an article, ranked from potentially bestest to potentially worstest:

  • Pick a link in the «related posts» list (you have one, right?)
  • Follow a link in the «recommended reading» list (you have one, right?)
  • Click on a comment in the «recent comments» list (you have one, right?)
  • Use the «next» and «previous» links
  • Follow a link in the «recent posts» list
  • Click on the «home» link to navigate to the latest blog post
  • Go for the archives

Which one they will pick depends on whether you have these links and where they are in the layout. It’s in your best interest to have all of the links at the top of the list, and point them to the best articles you can find on your blog (I recently did this, using the number of Facebook Likes to pick them). And the real trick is this: people don’t care about your prose, what they love or hate is your ideas and your content. Unless you’re writing about prose, of course.

If people are looking for a second article to read, it means they enjoyed the ideas and content they found in the first article they read, and they need to read more.

Your «related posts» should point to similar content. Your «recommended reading» should match the theme of your blog (you have one, right?).

Always repeat yourself on your blog, in as many posts as you can. You write the damn thing, of course it feels repetitive to you. But someone who just discovered it and is intrigued by your ideas? They just cannot. Have. Enough. They want more and you should give them more!

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Cogwheels

Published
by
Victor Nicollet
on September 16, 2010
in People
. 4 Comments

Are you looking for a motivational speech or a way to lift your spirits? Then go away. This stuff is depressing when you think about it for too long.

Still here? God, you must enjoy being depressed…

Let’s go back to a 1950 essay by economist Leonard E. Read, I, Pencil, narrated by a pencil describing its genealogy:

I, Pencil, simple though I appear to be, merit your wonder and awe, a claim I shall attempt to prove. In fact, if you can understand me—no, that’s too much to ask of anyone—if you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing. I have a profound lesson to teach. And I can teach this lesson better than can an automobile or an airplane or a mechanical dishwasher because—well, because I am seemingly so simple.

Simple? Yet, not a single person on the face of this earth knows how to make me. This sounds fantastic, doesn’t it? Especially when it is realized that there are about one and one-half billion of my kind produced in the U.S.A. each year.

The Need For Infrastructure

The ideas presented in the essay are fairly simple: creating a pencil requires several workers to use tools upon base materials (wood, metal, graphite, rubber). These materials and tools themselves had to be obtained by more workers using more tools and materials (a logger needs a saw to cut down the trees that will provide the wood for the pencil), and so on up the stream of industrial capacity.

Looking at things from the other side: assume that you have the detailed plans for every single tool and machine and substance involved in creating a standard 1950 pencil, and tens of thousands of intelligent, skilled and motivated workers, and we send you all back in time to 30,000 BC. How long do you think it would take before you could produce a single pencil? How much longer before you could produce them on an industrial scale?

I know I promised never to quote video games again, but this quote from Chairman Sheng-ji Yang is so appropriate that it would be a crime not to use it:

Technological advance is an inherently iterative process. One does not simply take sand from the beach and produce a Dataprobe. We use crude tools to fashion better tools, and then our better tools to fashion more precise tools, and so on. Each minor refinement is a step in the process, and all of the steps must be taken.

And that’s why building a colony on Mars (or the moon) is so difficult: you have to ship the entire infrastructure from Earth before you can build anything meaningful in situ.

You’re just like Everyone Else

Where do you stand in the grand scheme of things? The complexity of everyday things means that no matter what you do, you’re a cog in a huge post-industrial machine. Even if you’re the CEO of a huge corporation, you’re just a cog that makes sure all the other cogs work together. What kind of cog are you exactly?

The general consensus is that working for a large corporation lets you feel like a very small cog in a very large machine, and that is a quite horrible feeling.

I disagree.

The little cogs employees of a large corporation may be frustrated at the small scope of their daily activities, but they still have hopes of being greater. They remain convinced that somewhere out there, some people are not just small pieces of a soulless machine, and they can grow up to be just like them.

This is a hope that I wish to annihilate.

The problem isn’t that there are large corporations. The problem is that our technological level prevents any single person of accomplishing anything significant on their own, unless your definition of «significant» predates our industrial society.

Some people create web start-ups in the deluded hope of being self-sufficient and doing something great alone or as a small team. Yet, even if they succeed, they merely add a tiny speck of additional value to a vast heap of existing infrastructure—server-side software, web browsers, server hosting, server hardware, online payment systems, banks, internet backbones and service providers…

The added value of a start-up is, by definition, to leverage existing resources in a clever way, because the founding team does not have the time to create a significant amount of new resources. That’s why we hear about «founders» (was there when it began) and «owners» (put money into it) and «authors» (provided all the high-level intellectual work) of successful projects, but seldom hear about «makers»

When you create a new company, you don’t stop being a cog in the machine. You just start being a cog in a cleverly unexpected and deviously useful place in the machine. Don’t let it go to your head—by going where no piece of the puzzle ever went before, it’s your responsibility to fit in with the pieces around, which is a lot harder than letting other people find the right place for you.

And a lot more exciting, too.

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Daily Budgeting

Published
by
Victor Nicollet
on September 15, 2010
in People
. 2 Comments

For the average person, buying one $900 television set every ten years is a reasonable spending, and buying the latest $900 television every week is outrageously unreasonable. The problem with infrequent costly purchases is that they don’t happen often enough to let people intuitively sense whether they’re overspending. They’re simply not on the same scale as everyday purchases.

To help me decide whether an expense is acceptable or not, I use a scaling technique that lets me see the actual cost of every purchase on the same scale as an amortized daily spending budget.

Daily Spending Budget

Every year, the average American income is $31,410 (€24,660 in France). If that average person split their income over the 365 days, they would have a spending budget of $86/day (€67/day). A large percentage of that will be spent on housing (rent/mortgage), credit card payments, various taxes, and utility bills. Another part of that is hopefully saved for retirement, college tuition or emergencies.

To estimate your current daily spending budget:

  1. Add up your monthly payments and savings. Every cent that leaves your account on a predictable, monthly basis, should be counted here. Multiply by twelve.
  2. Add your yearly taxes (estimated, if needed) to the total.
  3. If you have any annual spending (such as a yearly subway card or a magazine subscription), you can also add it to the total.
  4. Subtract this total from your yearly disposable income.
  5. Divide the result by 365.

The result is the amount you can use every day for variable or exceptional spending: food, movies, music, video games, brand new television sets, iPhone applications…  sounds small? It is.

When evaluating this budget, don’t take into account expected future changes (such as a long being repaid in full or a raise that’s going to happen). You should be extremely careful about basing today’s spending strategy on future events (that might never happen).

Amortized Daily Spending Budget

The standard spending budget doesn’t help, because most exceptionally large expenses exceed that daily budget anyway. So, what I do is amortize those purchases by spreading their cost over several days, and automatically subtracting the daily amount from my daily spending budget.

Quick example:

Jane has a $23/day spending budget, and she buys a $900 television on Monday. She could try amortizing that television over a single month, but that would cost her $30/day, which exceeds her daily budget. She could try amortizing that purchase over two months, which would cost her $15/day and leave her with a $8/day budget—too small. So, instead, she decides to amortize the television over three months. This only costs $10/day and leaves her with a $13/day budget.

The main benefit of this system is that it turns a $900 price tag that is fairly vague and difficult to compare into an easily compared daily cost (such as «you’re spending almost 50% of your daily budget on this television for the next three months»).

At the end of each day, add up your total spending for that day (excluding any purchases you are amortizing). If you didn’t spend all your money, use it to pay for purchases that you are amortizing.

On Tuesday, Jane spends $1 on coffee and $8 on lunch, leaving her with an extra unspent $4. She decides to subtract that from the television purchase. The daily cost of the television is now $9.96 (she paid $14, which leaves $886 to pay over the next 89 days).

Should you overspend, carry the balance over to the next day. Since the cost of your amortized purchases is already taken out of your daily budget, this means you pay for those purchases even when you overspend.

On Wednesday, she pays for her friend’s lunch for a total of $20. This exceeds her daily of  $13.04 so the negative balance is carried over to the next day.

When you overspend so much that your budget for the next day dives below zero, it means your purchase is too large. Ask yourself whether it’s worth it, and if it is, amortize it over one month.

On Thursday, Jane has a budget of only $6.08, but in addition to her $8 lunch she decides to buy a beautiful $30 sweater. Not only does this exceed her daily budget, but it also exceeds her $13 budget for the next day! She needs to amortize the sweater over one month. The sweater will cost her $1/day (her new amortized daily budget is $23 – $9.96 – $1 = $12.04). Also, out of the $8 lunch, $1.92 are carried over and deducted from the next day’s budget: $10.12.

If you’re currently amortizing several purchases, and you underspend, start paying for the purchase that has the lowest amount left to amortize.

On Friday, Jane decides to be excessively frugal, and only buys a $3 salad from the cafeteria at work. This means she has a $7.12 surplus from the day, which is used to pay for the purchase with the lowest non-amortized value : the sweater.

On Saturday morning, her outstanding amortization debt consists of:
→ $856.12 over 86 days ($9.95/day) for the television
→ $21.88 over 29 days ($0.75/day) for the sweater

This leaves her with a daily budget of $12.30

As you can see, if you overspend, your amortized expenses start clogging your daily budget to the point where you have to amortize the purchase of a $10 lunch over an entire year. If that doesn’t knock some budgeting sense into you, I don’t know what will.

This approach can be used in a weekly version instead of a daily version, but it’s harder to notice when you’re going over budget if you only catch up with your expenses once every seven days. I would suggest using the daily version anyway, even if you only compute the values weekly anyway.

You can download an Excel Spreadsheet to help you compute your daily budget easily. It should be compatible with OpenOffice. Let me know if it gives you any trouble!

Six Truths about Time Debt

Published
by
Victor Nicollet
on September 14, 2010
in People
. 1 Comment

Debt is a method for transforming money you will earn later into money you can spend today. As such, not only does it reduce the amount of money you will be able to spend later (because you will be busy paying back your debt) but it also restricts your freedom to reduce your spending drastically should a life-changing event happen (losing your job and moving back with your parents).

I won’t go deeper into details – the simple dollar is a great blog that can tell you more about debt and money than I ever will, so just go and read it.

Today, I want to talk about another kind of debt – time debt.

Time debt happens whenever you transform time you have later into time you have now. If you don’t spend the time to pick up your package from the post office today, you’ll have to spend that time in the near future. Accumulating time debt could happen because you waste time on futile things (such as sitting in front of the television watching shows that you don’t really care about), or it could happen for perfectly reasonable reasons: start-up founders are constantly in time debt, because there’s so much they have to do to get their product out to market and find customers that non-profitable activities are often delayed months at a time.

Despite the popular saying, time is not money: there are a few key differences between time debt and money debt that you need to take into account.

1. There is no inflation.
Not only does inflation mean the value of money decreases (you used to buy a Foobar for $1, now you need $1.20) and thus makes money debt easier to pay back, but the revenue of individuals also tends to increase when they get raises or change jobs. In fact, taking on $10,000 in debt to start a new company that earns you $100,000 in the first two years is one of the ways you can leverage debt to improve your revenue and automatically make your debt easier to pay back.

You will have 24 hours to spend every day for the rest of your life, and a lot of that is eaten up by sleep and natural urges. On the long term, having kids and growing older result in less time every day.

The only situation where «I’ll have the time to do it tomorrow» is a valid excuse is when you’re expecting a significant deadline to blow over. If you’re leaving your day job or your children are moving out or your very important paper due on Monday is done, then you can expect to have some free time. But even then, never underestimate your standing debt: all that free time is seldom enough to get all those delayed and postponed things done.

2. There is no refinancing.
Refinancing happens because you just can’t pay $4000 a month on a $3000 paycheck, so a refinancing company comes around and pays those $4000 a month for you, and you pay them $2500 a month for twice as long. That’s because money debt does not have solid deadlines—its deadlines are liquid, because they can be paid for using more debt (which is what refinancing is).

By contrast, you can’t decide to work 40 hours today by using your free time for the entire next week. If you have a deadline that requires 40 hours of work and you only have 24 hours left, you’re in trouble. Your only solution is to move the deadline—the equivalent of missing a payment.

As a consequence, be extremely wary of looming deadlines involving your time debt. Try to get these out of the way as soon as possible (keeping only those actions without a deadline on your to-do list), and when you do delay them, make sure they are small enough items to fit within your time buffer (that amount of time you can use in an emergency by giving up on sleep and leisure), such as paying bills or replying to mail.

3. There’s no price tag.
One of the easiest things about money debt is that there’s an explicit price tag on almost everything you buy. When you shop for a $900 laptop, you know it’s going to cost you exactly $900 (because that’s what the order confirmation page says), so you can accurately fit it into your budget (for instance, you could decide to amortize it over three months by decreasing your daily «free» budget by $10 — or use a credit card and decrease your daily «free» budget by $11, but that’s another story).

There’s no price tag for activities. All you can do is estimate, and that estimation is seldom accurate beyond the ten-minute threshold for simple activities. Do you know long it takes to pick up some groceries? To cash a check? To prepare that cake you promised you’d bring to church on Sunday?

Our inability to accurately estimate the time cost of activities means it’s necessary to keep a safe buffer of time every day, just in case an important activity just bursts.

4. There are dependencies.
With money, there are usually no dependencies or constraints in the order in which you pay for things. If you need to bake a chocolate cake, you can buy flour first or you can buy chocolate first, or you can buy both at the same time. In terms of time, you need to spend time buying flour and chocolate before you can spend time preparing the mix and putting it in the oven.

Quite often, in complex activities, we estimate the time fairly accurately (I need ten minutes to prepare the mix and put it in the oven) but fail to take into account the dependencies because these only surface when you actually start planning the activity in detail. So, your ten-minute baking spree suddenly requires a half-hour grocery trip.

5. There are massive economies of scale
Modern industrialized society has already extracted economies of scale from everything. If you buy twenty packs of soap instead of one pack, your per-unit economies are not very impressive—you probably won’t even get a 50% price reduction.

On the other hand, driving out once to buy twenty packs is significantly shorter than driving out twenty times. As an individual, you cannot benefit from industrial-scale infrastructure: even if you wanted to, there’s no way for you to open one thousand letters to dilute the cost of finding the letter opener because you do not receive that many letters. The best you can do is buffer tasks that benefit from being done together: make a shopping list in advance to optimize the trip to the store and buy gasoline while you’re there, keep your non-critical mail around for a week before you sort through it on Sunday afternoon, cook one meal that lasts a few days…

6. There are no savings
If you don’t spend any money today, it just sticks around. In fact, if you only spend a little, you will accumulate savings that can be used to buy (part of) a house, or a new car, or a computer, or your wedding, or your kid’s college tuition, or whatever.

That hour you spent on the train today? You will never get it back. Every second of your time that you don’t spend doing something is wasted forever. And you only have so much time on this earth.

Unused time lends itself to reuse, especially with modern technology. That hour on the train could be spent eating, sleeping or playing (so that you’ll have more free time when you’re somewhere else), catching up with an old friend over the phone, working on a project (even as small as a blog post) or organizing your calendar…

Related Posts

What are your considerations when saving time? Do you work with a time budget like you would work with a money budget? Do you have too much free time, or are you constantly running late?

Do I Have A Choice?

Published
by
Victor Nicollet
on September 13, 2010
in Random
. 0 Comments

I do have a choice. And I’m not really that happy about it. What happens if I click that «Add This» button on your article? This appears:

addthis

There are so many choices here that they actually had to add a search box to find the choice that you’re looking for. Of all the sharing options on this screen, I use Netvibes and LinkedIn, and have heard about LiveJournal, iGoogle and Hotmail.

But the real winner? This lets me share/bookmark the page using HTML Validator. Joy!

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