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There is an interesting post in the New York Times about Google day care.  Getting everything you ask for is a problem, once you get used to it.  As human beings we just don’t seem to be that well suited to being super comfortable.  Sadly, it tends to make us worse in all the ways that really matter.Janet Ray-Dupree also wrote a great column about the duality of those who have a mindset that’s open to growth vs. protecting one’s reputation.  The results are predictable, but worth focusing on for a few minutes, especially in the context of the Google story.  Intellectual classism is just as harsh a cultural weapon as any other kind of social division.  It requires drawing a line in the sand between those who are in teh club and those who aren’t.  Those who obtain membership have to be treated special - and there is always a growing fringe who feels it necessary to further cement their membership by ostracizing those who lack membership.  Machiavelli wrote that it is better to be feared than loved, perhaps these people are just taking a page from The Prince?Google is an amazing company, I know super smart people work there who I respect a lot, and their engineering skills are beyond reproach.  However, I’ve always thought that the most interesting inflection point in Google’s history will be the day that things stop going their way.

This post is particularly timely for me because a few friends of mine have come to me within the last couple months asking me if the culture of Google is really something they are interested in joining.  Once Google stops losing the ability to snap up the smartest and most motivated people, they’re clearly headed in the wrong direction.  It will be interesting to watch the next year or two at Google.

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An inordinate number of hours are lost checking email every year.

In case this wasn’t self evident enough for you, studies are being done to support this conclusion.  AOL & Opinion Research Corporation conducted a survey of 4,025 Americans age 13 and over showing that the average email user checks their email 5 times per day.  This would be a pretty low average for the people I know.  AOL has a higher percentage of home & child users than say Outlook 2007 users.  When asked a question which probably skews more toward the work audience - the results were more in line with what I see every day.  Sixty percent of people who own a portable email device check every new email arrival! 

Here is a BBC article on Karen Renaud’s work on email stress confirming this thesis.  Some workers were checking their email 40 times per hour with more checking correlated to higher stress levels.  Their prescription was simple enough to say, “Check email less often.”  However, I’ve asked friends of mine if they could do it in real life.  Could you only check email a few times per day?  Half of the people I spoke with said they thought it was a good idea - but most said they probably couldn’t manage to pull it off.  The other half said they thought that unplugging themselves from the email fire hose would be more stressful, not less!

Productivity lost

Investigating whether or not one is missing out on productivity is an interesting idea.   There are basically three sources of lost productivity here:

1. Confusing urgent with important - You probably have fewer “high priority” emails than you think you do.  Most likely there is more important “real work” to be done that is actually a better use of your time.
2. Multitasking is a net loss for people - Computers can make great use of multitasking or “context switching” because 99% of computer tasks involve using many different resources (monitor, memory, CPU, disk, network card, etc.).  These different resources can operate independently at nearly 100% efficiency.  People, on the other hand, take about 15 minutes to recover from every “distraction” or context switch.  This means that if you are distracted by email, the phone, or anything else every 45 min (and the email takes you almost no time to answer) you’re operating at only 80%-85% efficiency!
3. Increased stress - The tax that stress imposes on your life of constantly having to be around to answer questions, discuss intelligently, or even just absorb information is well documented.  Learning, concentration, and decision making are all impared when under prolonged stress.  Additionally, acute & even long-term stress has been shown to lower your quality of life and health.

I think there’s something to this stress & productivity argument - so I’m going to try it.

I’ve chosen 4 times, roughly evenly spaced, throughout the day to check my email.  During those periods of say 30 minutes each - I expect to be replying & checking email continuously.  I’m processing email - so that seems fine to me to be handling new emails then.  However, when I exit that email time, I’m offline for email.  I have turned off the automatic send/receive option, I have turned off the email arrival notifications, and I have even shut down Outlook entirely for hours of the day.  I’ll report back in a month or so how it went - I’m giving myself time to go through email withdrawal - hopefully with good news!

Another interesting note, this is AOL’s third annual “email addiction survey.”  Definitely a bad sign!

Addictive?

This idea of checking every new email makes me think that perhaps this isn’t just a waste of time for some people - it can be an addiction.  Addictions have many things in common - behavioral & neurobiological.  I haven’t been able to find any - but I would love to see fMRI pictures of a CEO, middle manager, or consultant checking email.  I am pretty confident it would look very similar to the signature “sex, drugs, rock & roll” brain scan pictures that we’ve all seen before.  Lots of “bright red” where the pleasure centers of the brain are.  Who knows, it might soon replace chocolate - the AOL survey noted that women are 23% more likely to describe themselves as addicted to email (16% vs. 13%) - and check it 15 min more per day than men.

What can you do if you are addicted?  Try using similar strategies that you use when you face other addictive situations:

I can already tell this is going to be a tough battle…

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Imagine a situation in which there is a very small amount of your product, and the demand for it is growing like crazy. What would you do?

Manners matter

People are much more interested in being treated fairly than in coming out ahead vs. their alternatives during a negotiation or transaction. This wonderful overview paper by Richard Thaler about the Anomaly of Ultimatums reviews a bunch of work in microeconomics that reviews this in action – we have a long way to go to really understand the phenomenon – but it’s an interesting discussion about the phenomena and its impact on how to couch “offers” or negotiations.

The Ultimatum Game

The ultimatum game involves two people and a pile of money. For example you take $10 and ask one of the participants, called the proposer, to decide how much money to keep and to offer the rest of the money to the other participant, the responder. Now the responder gets to either accept or reject the offer. If accepted, the money is divided and both walk away. If rejected, then neither player gets anything. They both walk away poor. Take a moment and think about this - How much money would you offer someone if you were the proposer? How much money would you be willing to accept if you were the responder? The way this plays out in practice is fascinating! Responders are generally unwilling to accept anything less than 30-40% of the total. Offers of 20% and lower are frequently rejected, and a 50% split is often the most common result. Thus, it seems that responders are willing to “punish” proposers who try to be too unfair, even when accepting anything is better than nothing and would leave the responder better off. The really interesting stuff comes in when you change the rules slightly. Instead of having just one responder, you can have three or four of them all write down their best offer simultaneously, allowing the proposer to accept the best offer. Under this situation, the proposer is not viewed a being unfair, the proposer is simply taking the best offer available, and the responders are willing to accept much less. In fact, often the responders will even try to punish the other responders (by lowering their bid further!) if they feel they are behaving poorly in the game.

Google and Big Oil

Google continues to raise its prices faster than the rate of oil and gasoline, yet Big Oil is being hauled up in front of congress to defend themselves against price gouging, while Google is still seen by most as living up to their motto, “do no evil,” with near perfection. How can this be? Are Big Oil’s profits more “unfair” than Google’s? Economics says “no” but the general public seems to think “yes.” I believe the difference is a good lesson to reflect on especially for new business owners. Google’s prices for paid advertising are set by an auction process - so when the price of an ad goes up - you obviously have only your competition to blame. Google didn’t raise the prices of the ads, your stupid competitor did. Right? Yes. Oil & gasoline on the other hand, are priced differently. Oil prices are set by oil companies, and gasoline prices are set by refinery companies. Therefore, when prices go up (sometimes abruptly), people tend to eye the oil & refinery companies with distain and resent the price increases. Which is reasonable, because the oil companies were making plenty of money before, so they don’t need to raise their prices, right? No. The reason prices go up is not because the oil or refining company’s want it to. The prices go up because the relationship between supply and demand changes. Oil is a scarce resource, and lots of people want to use it. Therefore, when this supply & demand relationship change, you see big price swings. The exact same situation is happening for the scarce resource that Google sells - online ad space. Neither Google nor oil companies dictate prices, prices are basically set for them by the relationship between supply and demand - which their customers and competition control. However, people feel “ripped off” when oil companies raise prices because they percieve unfairness in the price raise.

As we’ve seen from the ultimatum game, this can have disastrous consequences for the efficiency of a market, and can actually make people behave in ways you might not expect them to toward your product or your company. When you’re thinking about how to handle your next price raise, negotiation, or partnership consider the fact that no matter what the “hard realities” are people have a deep desire to be treated fairly and with respect - and will go out of their way to punish you if you don’t respect that.

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I am a strong believer in two simple tests for business ethics which goes as follows:

1) If you find yourself asking “Is this ethical?” then chances are that it isn’t.
2) If the independent outside observer would view situation as potential unethical, it probably is.

With these in mind I thought it would be fun to share a story I heard from a student. There is a local entrepreneur who is running a very successful business in the collegiate tutoring space. So what you ask? Here’s the rub — he who shall remain nameless makes a habit of collecting old homework assignment and old midterm and final exams. He has been doing so for some years and has amassed a large pool of questions. Students pay per review session to go over questions that are likely to appear on exams or to work out homework questions with the tutor. Those who are able to attend the tutoring sessions (for a fee) generally do extremely well on the assignments (that were worked out for them) and well on the exams (as the tutor knows the types of questions each professor has a propensity to ask). Those who do not attend the sessions study like the rest of us did…

So what?

In the face of this competitive learning establishment, a certain department has assigned virtually no homework assignments (as many students were submitting nearly identical solutions). As long as professors exist they will draw from old exams and question pools, and as long as the entrepreneur exists there will be an industry set up around even the finest academic institutions - the questions is how much is too much?

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We’re delighted to be featured in the latest edition of the Carnival of the Capitalists blog round-up. An excellent post by Chris Harris is part of this weeks CotC:

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Starting a new business is about offering your customers a new choice. Maybe your widget is faster, uses less energy, costs half as much, or maybe it’s easier to buy because it’s closer. Therefore, studying how people make choices is a big part of microeconomics, and it should matter to you. The trick with studying choices is that there’s a lot of psychology involved. In fact, often the psychology of how a decision is made trumps the objective merits of the product or service. Anyone who sells a general commodity product or service knows what I’m talking about (think insurance, air travel, and rental cars).

Consider this comprehensive study of 84 speed dating sessions in the UK by Michèle Belot and Marco Francesconi, Can Anyone Be “The” One? Evidence on Mate Selection from Speed Dating, which found that (unsurprisingly) people evaluating dates in 3 minutes rely heavily on certain easily observable physical attributes. Both men & women prefer their partner be young. Women like tall men, and men prefer thin women. No surprises so far.
The preferences for these prospective dates accounted for around 30%-40% (for males) and 45% (for females). The bulk of what matters - was the pool of potential partners in each “round.” Thus, it seems that being a desirable person improves your chances of being picked after a 3 minute date, but being more desirable than your competition in the same room you’re in matters more!
There was a very consistent theme that men & women would both select the same percentage of partners in any given around, regardless of the “attractiveness” of that group. Reinforcing the theory that people tend to compare alternatives they have in front of them much better than they can compare alternatives over longer periods of time or distance.

What are the implications of this for your business?

Most businesses try to avoid becoming a commodity by changing their offerings fundamentally to avoid direct comparison with the competition. This can be expensive & time consuming. Perhaps all that’s required is to change the way you sell it - to make your product or serve the big fish in a much smaller pond. Some examples where businesses have changed the context in which they sold their products are:

• Companies selling high margin warranties after selling you a low-margin product. Once you’ve bought the TV for a rock bottom price at the store, they have the opportunity to basically be the only ones selling you a warranty on that TV because you can’t buy a BestBuy warranty for a TV you bought at CircuitCity!
• Grocery stores often separate their organic foods from their nonorganic (and much cheaper) alternatives so that they require significantly more diligence to compare to each other. Moreover, the organic tomatoes are often next to even more expensive items which makes them “seem cheap” in that context.
• Autorepair places tend to charge less for standard services (say lube & break jobs) than they do when you take it in for a more customized service because once you’ve taken your car there - you’re only deciding whether to do the work or not - it’s less likely that you’re going to drive out of there and see who can do the custom job for cheaper.

Maybe your business can benefit from considering the context of your sales and/or marketing a little more?

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