Saturday, February 24, 2007


So I'm at home with a cold with the usual symptoms which need not be described here. But it got me thinking of the analogy of viruses to music. In a way music can be easily compared to viruses - people can get "infected" if they really like a song, while some are "immune" if they just don't like it. The question though, which everyone would like to answer, is what makes certain viruses spread faster than others? And when I say viruses, certainly we can generalize to music, youTube videos, the next big thing, stocks, etc.

(One quick aside: there's a lot of existing theory (as mentioned in Fooled by Randomness and Origin of Wealth) which states that we're all heavily biased by hindsight. In the case of business, we tend to see companies which perform well and associate success factors to them, in the hopes we might emulate those factors and equally succeed in some fashion. Built to Last, In Search of Excellence, and a whole slough of business texts are based on this premise.

Sounds reasonable, but it's essentially wrong. Because unless you analyze the losers as much as you analyze the winners, there's no way to really suppose those "winner traits" are wholly unique or effective. In most cases, it may simply be luck - after all, you can theoretically flip 5 heads in a row, but flipping 5 heads may have nothing to do with your ability as a coinflipper. And because losers, at least in business, are quietly wiped away by the tides of bankruptcy/acquisition, we have no way of separating both groups. We do have "some" evidence to suggest these companies were just as much lucky as they were capable, given the fall in prominence of several of the companies mentioned in all those texts.)

I mention the parenthetical as often times we ascribe the viral growth of certain phenomena (Harry Potter, American Idol, fads in general) to certain factors, but modern experiments in network theory suggest attributes may be wholly irrelevent. In models mentioned in Six Degrees, the quality of the virus had little impact on the growth of the virus - meaning it was just as likely to fail than not. Rather, it's the ability of the virus to reach a subgroup of people (called a percolating cluster) and to completely saturate that group. The next step is for some members of that percolating cluster to have connections outside the immediate group, and which can then allow transmission at a far higher rate.

What's the big conclusion of all this studying? Instead of analyzing features, product, functionality, etc. of certain viral phenomena, we have to look at the consumers who use it. Are they fairly insular (e.g. I imagine a social networking site for refrigerator repair men might be grow beyond that immediate audience)? Are they well-connected? What do they use my product/service/idea for beyond what I (as the business owner) intended?

MySpace may be a good example of this - initially starting with a focus on bands, it soon became the "defacto" social network. And in retrospect it may make sense because bands and their fans are a diverse lot, given there may not be deep similarities between you and another fan of the same band. Hence the ability to reach several distinct groups quite readily.

As a counter example which did well but did not reach huge levels of usage, Paypal initially focused on auction owners (which in itself was simply a random event, where marketing individuals found initial instances of the product being used on auction sites), who in turn were growing thanks to the growth of auction sites (primarily Ebay). Now Paypal has differentiated by offering other financial products, though their primary service is still auctioneers. (For more info on Paypal, check out this quick read: Paypal Wars.)

Starbucks memo

"In a blunt Feb. 14 memo, Howard Schultz warned executives that the chain may be commoditizing its brand and making itself more vulnerable to competition from other coffee shops and fast-food chains." - WSJ, 2/24/07

When I initially read this memo, I thought Schultz sounded like a schmuck. All this nostalgic talk of "what was" and the breezy picture of yesteryear appeared to be the rumblings of, at worst, a rambling luddite. See below for a copy of the actual memo.

But a few observations make this memo an interesting piece:
His comment on small, gradual changes having a large impact on the overall system. There's a fair amount of research (cited in Origin of Wealth and Six Degrees) which suggests small preferences or adjustments can lead to massive epidemics or "cascades," due to the interconnectedness of the players involved. Now I don't know if Schultz is a big reader of complexity economics or network theory, or is just extremely intuitive, but his concerns of these small changes strongly affecting the value perception of the Starbucks brand seem closely analogous.
As mentioned before, his concerns sound legitimate, though the explanations seem weak. For the most part, the Starbucks brand is not a static concept, constantly changing depending on consumer tastes and opportunities for innovation (like automatic machines and flavor sealing packs). While the core concept of high value (and subsequently, high priced) coffee is under attack, can't innovation be targeted toward achieving those aims? I don't think the issue, as he mentioned, is making coffee slower or smell better: if anything, I want those baristas to make my chai latte as fast as humanly possible. What's missing is the compelling reason to stay. As an avid Starbucks fan (from spending time reading and studying GMAT at various locations in Manhattan), once I get my drink, unless I have a book on me or am meeting friends, there isn't much in the nicely laid out patio area to convince me to stay. Maybe it's video games, the ability to reserve tables for study groups, or even mini-concerts, but once the coffee/tea/latte is purchased, what's really to do?

On a completely irrelevent side note, isn't it interesting how Amazon has become the de facto imdb of books? Every blog I read which reviews a book always links to the Amazon page for that book. Now I'm generally fine with that because the page, besides purchasing ability, also has reviews and even excerpts for viewing. But shouldn't such a "homepage" for books be less, well, commercial? And can't they fix the damn URL's to include more metadata, rather an endless string of random characters and numbers? Just a thought.

From: Howard Schultz
Sent: Wednesday, February 14, 2007 10:39 AM Pacific Standard Time
To: Jim Donald
Cc: Anne Saunders; Dave Pace; Dorothy Kim; Gerry Lopez; Jim Alling; Ken Lombard; Martin Coles; Michael Casey; Michelle Gass; Paula Boggs; Sandra Taylor

Subject: The Commoditization of the Starbucks Experience

As you prepare for the FY 08 strategic planning process, I want to share some of my thoughts with you.

Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.

Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces. For example, when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines. This specific decision became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista. This, coupled with the need for fresh roasted coffee in every North America city and every international market, moved us toward the decision and the need for flavor locked packaging. Again, the right decision at the right time, and once again I believe we overlooked the cause and the affect of flavor lock in our stores. We achieved fresh roasted bagged coffee, but at what cost? The loss of aroma -- perhaps the most powerful non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the bins and grinding it fresh in front of the customer, and once again stripping the store of tradition and our heritage? Then we moved to store design. Clearly we have had to streamline store design to gain efficiencies of scale and to make sure we had the ROI on sales to investment ratios that would satisfy the financial side of our business. However, one of the results has been stores that no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store. Some people even call our stores sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee. In fact, I am not sure people today even know we are roasting coffee. You certainly can't get the message from being in our stores. The merchandise, more art than science, is far removed from being the merchant that I believe we can be and certainly at a minimum should support the foundation of our coffee heritage. Some stores don't have coffee grinders, French presses from Bodum, or even coffee filters.

Now that I have provided you with a list of some of the underlying issues that I believe we need to solve, let me say at the outset that we have all been part of these decisions. I take full responsibility myself, but we desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience. While the current state of affairs for the most part is self induced, that has lead to competitors of all kinds, small and large coffee companies, fast food operators, and mom and pops, to position themselves in a way that creates awareness, trial and loyalty of people who previously have been Starbucks customers. This must be eradicated.

I have said for 20 years that our success is not an entitlement and now it's proving to be a reality. Let's be smarter about how we are spending our time, money and resources. Let's get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others. We source and buy the highest quality coffee. We have built the most trusted brand in coffee in the world, and we have an enormous responsibility to both the people who have come before us and the 150,000 partners and their families who are relying on our stewardship.

Finally, I would like to acknowledge all that you do for Starbucks. Without your passion and commitment, we would not be where we are today.


Sunday, February 18, 2007

Best five minutes

The WSJ recently ran an article (pasted below) on the best five minutes of a movie, and how those five minutes really define the film. Alternatively, there are several books out there which describe the Power Law or Zipf's law which implies much of the average impact may come a small minority of drivers, i.e. average income is driven up by a small number of enormously rich people - when those outliers are removed, average income is much lower. One might apply the Power law qualitatively toward a movie - while most of a film is meant to build tension or provide context, you really only maximize your enjoyment in an extended scene, within which only a few moments are truly memorable. Any story, movie, song...they're really just great moments surrounded by context - a noodle dish with a single piece of duck, or a salad with one giant croutons. You could try to have more, but really, the scarcity and focus of those few items define the experience.

So originally I thought this post as a way to share my favorite short scenes in my favorite movies, which I might do eventually, but probably better would be describing real moments which have happened in the past month.

1. After a few hours of flirting, joking, story telling, light touching, more flirting, and alcohol consumption - getting the phone number/kiss/makeout session. The equivalent of notching the win, the pride and self-satisfaction, recognizing I am rewarded with amplification to the pleasure areas in my mind by a rush of various chemicals whose process were also enjoyed previouly by thousands of generations of my ancestors...isn't evolution grand?
(Certainly there are additional activities which I could also consider "my favorite" in this venue, but honestly, they usually take a bit longer than 5 minutes. ;-) (was this too much innuendo? Have I offended you?))

2. The first glass of wine/alcohol when having my usual weekly dinners with my buddy Ray. This is usually on a Wed or Thurs, we're both tired from the week but happy to be trying usually an exotic restaurant within the gustatory capital of the world. The first glass and gulp allow us the moment to exhale, remove the pressures of the office, and dive into the topic of the evening.

3. Making a turn around jumper during a pick up game - one of a few shots I can make with decent consistency. I may have turned the ball over umpteen times, waved my arms in providing ineffective defense, and missed a few layups, but if I can pivot my feet, get some distance, and sink that shot...there are few better feelings than watching that orange orb softly fall into the basket. Like it was meant to go no where else.

4. Recognizing and then building upon the business potential of a syndication project (still skunk works) at work.

How One Scene Can Say Everything

Deconstructing the best five minutes of 'Little Miss Sunshine'
February 17, 2007; Page P11

We all have favorite scenes from classic films; the quirkiness and diversity of our choices can be astonishing. Lately, though, I've been struck by how many movie lovers share a fondness for the same part of the same recent picture. As soon as I bring up the subject of my favorite moment in "Little Miss Sunshine," someone is sure to finish the sentence I've barely begun with, "The one where the son runs away from the van."

What makes that moment -- actually a five-minute-long sequence -- so memorable, or, in my view, enthralling? The question starts to answer itself when you take the time, as I've been doing, to study the sequence's substance on DVD. All of the ingredients that give the movie its special distinction can be found in the emotional and dramatic concentrate of what the DVD menu refers to as scene 16, "End of a Dream." Watch it on your own as a model of modern filmmaking, but read what I've written about it only if you've seen the film. There's no way to discuss such exceptional work without giving away crucial plot points, and my own point is to celebrate specifics, not to spoil pleasure.

[Morgentstern's Picks]
In a perfect world, every great scene ever shot would be instantly retrievable. Even though some can only be found on video cassettes, many treasures are readily available.

The dream that ends has been dreamed by the touchingly tormented adolescent son, Dwayne, who wants to be a test pilot. He wants it so passionately that he has taken a vow of silence, inspired by his goofy reading of Nietzsche, until he gets into the Air Force Academy. We know he'll blurt out something sooner or later, so his silence is a blithely funny set-up in a film that's full of funny set-ups (the entire road trip is a set-up for Olive's performance at the climactic Little Miss Sunshine pageant) and unexpected payoffs.

Scene 16 begins as a welcome respite from the shock of the grandfather's death, followed by the hilarity of the encounter with a motorcycle cop who never notices the dead body in the back of the VW van. Inside the van, whose broken horn keeps bleating disconsolately, Olive whiles away the miles by giving her brother an eye test with a chart she found at the hospital. Then she gives him a color-blindness test, and suddenly the comedy turns dark. Dwayne can't see the green A inside the circle of red dots; he really is color-blind. That means, as his intermittently suicidal uncle Frank explains, he can never be a test pilot. At first Dwayne processes this slowly, but then the darkness explodes into full-blown horror as the boy goes berserk, beating on the seats and windows and, when the van stops, running from it down an embankment into a suburban field, where he finally breaks his silence with a heartbreaking cry of "F-! F-! F-!"

[Big Moment: Abigail Breslin and  Paul Dano in 'Little Miss Sunshine.']
Big Moment: Abigail Breslin and Paul Dano in 'Little Miss Sunshine.'

Within the space of a couple of minutes we've been whipsawed, though never manipulated, from a state of benign enjoyment through several intermediate zones, including anxiety, to a sense of authentic tragedy. That's remarkable enough, but the scene's central drama is yet to come. On the embankment's edge, Dwayne's father, mother, uncle and little sister stare down helplessly at the solitary boy, who has fallen to his hands and knees in an agonized crouch. His mother ventures toward him, tries to console him, but he'll have none of it -- he lashes out furiously, reminding her of the family's flagrant failures. Following her retreat, Olive's father turns to his little girl and says, fairly hopelessly, "You want to try talking to him?" As she tiptoes down the slope, we wonder what this unworldly child can possibly say.

The answer is nothing, not a word. Olive puts one arm around Dwayne, rests her head against his shoulder and sits with him in healing silence.

It's a gorgeous resolution of a desperate situation. Until the color-blind test, Dwayne has been almost purely a comic character, no more dysfunctional in his monkish silence and punkish truculence than the rest of his screwed-up family -- excluding Olive, of course, who's the film's radiant life force. His parents haven't taken the full measure of his chronic anger; to do so they'd have to hold themselves as well as their problem child to account. But the film takes Dwayne seriously from the start, even though we don't know, until scene 16, what the writer, Michael Arndt, and the directors, Jonathan Dayton and Valerie Faris, have in store for him.

The secret of the film's appeal is that it's neither a comedy with drama nor a drama with comedy, but a story that's open to its characters' behavior -- where their feelings lead them is where the action goes. The secret of scene 16's power is that once the comedy takes a hairpin turn into tragedy, the only character who intuits the depth of that tragedy finally gets to act on it. Olive doesn't draw on some mysterious wisdom. When her dad suggests that she try talking to Dwayne, she knows there's nothing to say. She's just a little kid who sees that her brother is suffering. But when she applies her comforting touch in that eloquent silence, the whole family, along with Dwayne, starts to heal.

Scene 16 is only one of 23, at least as the DVD divides the film -- scenes that mix density with clarity, simplicity with complexity, in a modestly-budgeted enterprise that may well win an Oscar for Best Picture. If that should come to pass, it will be partly because this picture projects a bright ray of hope for the future of original films at a bleak, conformist time in the medium's history. While monster attractions with overhyped stars peddle primitive premises, belaboring one primal feeling at a time, "Little Miss Sunshine" ebbs and flows, dodges and feints, derives generous emotional dividends from fugitive feelings, and captures, without confining, the lovely firefly nature of life.

Friday, February 16, 2007


IHOP has announced a free pancakes day this Tuesday, and it got me thinking how much I would love a fresh serving. A thick, tall, but not too wide stack, perhaps with little chocolate chips staring at my like soft marble, or a string of banana slices and pecans arranged together to appear as if a little cake were assembled for celebration. Add in some warm syrup properly swathing the fluffy edges, never too much in one place else patches of wet sweetness saturate too deeply. A cool glass of thick milk chasing after each bite, an unsuspecting grin shaping my mouth, each taste adds to my desire but each taste also fills my belly till I can eat no more.

And I realize it is not the pancakes I yearn for, but the soft smile of my mother visage, the hearty chuckle of my dad's odd humor, and the whispered gossip from my sister's voice. For are not pancakes but a small piece of the quiet home left so far away?

Unfortunately, one cannot spend the entire day wishing for breakfast dishes. But one can make the time to plan a brunch.

Thursday, February 1, 2007

Books I would read

Alternatively, these would be books I'd like to write or participate in writing:

Synchronized Disorder
Everything you know about teamwork is wrong; a new guide for building teams beyond the vague conventional wisdom of "hiring talent" and "rewarding winners."

Without Faith
A new non-theistic philosophy meant to celebrate the best of man's morality, providing a framework to examine one's personal ideology without the need for

Sarcasm: A history
From the genetic and evolutionary drivers to a recent record of sarcastic development, Sarcasm provides a nuanced look at one of humanity's more ironic forms of humor.