Thoughts

Introducing Auctions in Unexpected Places

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Google didn’t become the behemoth that they are by having the best technology. They didn’t invent a faster computer to retrieve the most accurate search results in .15 seconds. They became the leader in search and online advertising by being creative – and they did it through auctions. Yes, Google is the world’s largest auction company.

Have you noticed the advertisements that come up whenever you do a common Google search? They show both on the top and side of your search results (see image) and match incredibly closely to what you are looking for. Have you ever thought about how Google decides to place the accurate ads? Behind the scenes a genius little auction is held for every search that takes place.

Advertisers place bids for what they would be willing to pay to show up next to search terms that they believe are close to their product. Google also ranks the relevance of the ad using a complex algorithm. These two pieces of data are combined to rank each potential advertisement. Then a Vickrey auction is held to determine the price each advertiser must pay and the order of the ads. I highly recommend this extremely concise explanation from Wired magazine (only 226 words).

Well that isn’t so complicated, how much money did they make with that idea? Sure one step of the process is technologically complex, but even if their relevance ranking was created in one day, it would be able to get the job done. The real genius is applying an automated auction system to online advertising, optimizing for price and relevance while allowing the advertiser a high degree of control. So that begs the question – where else can I apply an efficient auction process that will make me billions of dollars?

Of course there are a lot of reasons Google is where it is today, I don’t mean to oversimplify things. But this simple auction is a good chunk of the $24 billion in revenue they made last year.

More:

  • Descending-clock auction for electricity – Trade Electricity Like Pork Bellies
  • Terrific full Google article in the Wired magazine issue – Secret of Googlenomics: Data-Fueled Recipe Brews Profitability

Rethinking Clothes – Fashion and Cleanliness

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Photo: Chet Thomas

I watched a fair amount of the cartoon Doug on Nickelodeon as a kid. Doug wore the same outfit every day. In fact, he had a closet full of the exact same outfit. And the best part about this dream world – no one seamed to notice or care! *

Why is it that we change outfits entirely from one day to the next? Why is there a social stigma that you shouldn’t wear the same thing two days in a row, or even two days in the same week? I am blessed that I am not the smelly kid in the class (you know who you are, I hope) – do I have to play by the same rules as everyone else? If I put on clothes to sit in front of my computer all day, they certainly aren’t going to get dirty. Regardless, the next day I have to get out a completely new set of clothes that will once again stay perfectly clean while I sit still for 90% of the day.

I believe this is an antiquated approach – not so long ago people sweated a lot more than today. There was much more physical labor, but now we have machines that can do it at a push of a button. There was a time when clothes were made of heavy wool, but now we have incredibly breathable fabrics. There was a time when a hot day was unavoidable, but now we have air conditioning to keep our environment at a constant 72 degrees. We even have air conditioning in our cars!

If we don’t sweat as much, the clothes don’t get dirty nearly as soon, so we don’t have to wash them after every use. And yet isn’t this the norm for most articles of clothing? And if we don’t have to wash them at the end of the day, why don’t we just lie them out and wear them the next day? Assuming you are going to be in a similar environment, it doesn’t make any sense to put outfit A back into your closet, and scrounge around the next morning to come up with outfit B. Then you have the difficulty of keeping track of how many times you have worn outfit A to know when it should be washed. Alternatively, if you wore it 3 days straight, then you could just throw it straight into the wash!

I can see two main arguments against this – 1) fashion and 2) cleanliness. Some people enjoy picking out a cute new thing to wear every day to impress their coworkers. I don’t and feel I am in the majority, at least for guys. Rather than having the minority impose their will on the majority, why doesn’t the majority band together to make it socially acceptable to wear the same thing multiple days in a row? As for cleanliness, you are either washing your clothes too often because that is what you were taught to do OR you are the smelly kid. Smelly kids should continue to wash their clothes after every use.


I do remember one episode of Doug where they dealt with clothing. For some reason Doug’s characteristic green sweater vest ensemble became the hot new fashion trend. So hot in fact that the entire school showed up one day wearing it. Doug was just one of the crowd, and no one believed him that he had been wearing it for years. Then the next fashion trend came and the whole school ditched the green sweater vests – except for Doug! Everyone thought he was a dork for wearing the old trend, and no one believed him that he had been wearing it all along.

Genetic Inherited Trait Mapping – Would You Want to Know?

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Photo: Horia Varlan

Here’s a common quandary for you – if you could know exactly when you are going to die, would you want to find out?  For me the answer is pretty easy – no way Jose!  I don’t want to live my life neurotically counting down to my death.  But what if you draw the line a little farther back?  What if you could know the likelihood that you will have a certain disease in your lifetime?  Or even the trivial: would you like to be told some of your insignificant traits that you may otherwise never even know?

Is this even in the realm of possibility?
If you recall from the pea pod example in junior high, each gene is made up of two alleles – with each allele either being dominant or recessive. To show the recessive trait both alleles must be recessive.  But for humans it is rarely this simple.  These genes combine in incredibly complex ways to make you who you are – most characteristics are determined by more than one gene.  Even though it is incredibly complex, I think it just a matter of time until every conceivable human trait is identified – it should be possible with enough data and large enough computers crunching the numbers. (geek tangent)

Affecting your lifestyle
What would I like to know?  Areas where I could potentially take action to prevent a calamity before it strikes, rather than just worrying for worrying’s sake.  The obvious example are lifestyle diseases such as lung cancer, skin cancer, heart disease, and stroke.  Am I in the top 1% of the population for genetic risk of heart disease?  If so you better believe I would be extra careful to watch what I eat and make sure I exercise.

Keep reading…

Open Source Development for Creating Laws – Introducing Wikilaw

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Photo: Brian Turner

A couple days ago I posted about the intriguing notion that anyone can write bills, which with a little hard work and a lot of luck can become a law.

Open Source Movement
I just started reading the book “Drive” which examines the motivation for human beings to behave the way we do. The hypothesis is that a simple cost benefit analysis is not enough to explain human behavior – there are other factors that must come into play because we do not always act in our own best interest.

An obvious example of this is the current trend of open source software. Why would anyone spend 20+ hours a week of their free time to work on open source programs? THEY AREN’T PAID FOR IT! But they do feel challenged, get the feeling of contributing to something larger than themselves, and develop their programming skills. Sometimes this is enough to convince a software developer to contribute.

A Wiki For Writing Bills
Let’s take the whole concept of Wikipedia and apply it to laws. Anyone can contribute to bills on the Wiki and therefore the whole responsibility does not rest on any one person. A mother in Ohio may work on one section, a farmer in California another, and a retired lawyer in Florida can make sure the wording is correct. By combining our efforts we can accomplish much more than individually and hopefully patch up the holes in our legal system.

This is inherently more difficult than Wikipedia – whereas Wikipedia is based on facts, Wikilaw is based on opinion. But this could be the best part about it! Your goal should be to produce bills which both Republicans and Democrats support. This can best be achieved with a bipartisan effort working together online on the same bill. Once the bill is complete, the community can vote on it – if it passes it is time to find a sponsor, if not it is back to the drawing board. Continue reading →

The Top 3 Reasons Everyone Should Read Blogs

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Photo: Marya

A couple of my friends have told me that Pedantic Posts is the only blog they read. I was shocked that these very intelligent people don’t take advantage of this relatively new communication medium. I personally only started reading blogs a few years ago (and thought the word “blog” moronic at the time), but since have come to realize how valuable they are as a source of information. Here are the top 3 reasons:

An opportunity to hang out with people much smarter than you
Some incredibly smart people are willing to share their thoughts online for everyone to enjoy. Individuals such as marketing guru Seth Godin, venture capitalist Fred Wilson, serial entrepreneur Marc Andreesen, and the capricious Tim Ferriss. No matter the subject that interests you, there is probably an expert blogging about it.

You may be blessed to hang around brilliant individuals in both your business and personal life. Even if this is the case, odds are you only discuss the same handful of things over and over again, which leads us to the next reason to read blogs.

Exposure to new ideas
One of the first things I learned about via blogs was polyphasic sleep (where you sleep 20-30 minutes every 3-4 hours). While I am not personally interested in drastically changing my sleep schedule, I enjoyed reading about this new idea. I realized there are people in this world doing interesting things and sharing them in the form of short posts that take less than 10 minutes to read.

Keep reading…

Answering the Question: Is Driving to the Airport More Dangerous than Flying?

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Photo: Luis Argerich

A person with an irrational fear of flying is frequently told “you’re more likely to die driving to the airport than on the flight” – is this actually true or just calming words?

Let’s look at some statistics
From the perspective of a passenger in the car/airplane:

  • Driving = 1 fatality per 88 million miles driven (excluding motorcycles which have a 25 times higher death rate and any pedestrians/bikers killed by cars)
  • Scheduled flights (mainly airlines) = 1 fatality per 64 million miles flown

(These numbers would skew in favor of airplanes if you cared about how many people were transported. But, knowing my readers as well as I do, you only care about yourself.)

It looks like the expected value of death favors driving, but I would argue that you should be trying to avoid fatal accidents all together – if you are in one, it is a crap shoot whether or not you are the one that dies. This is definitely not a situation I want to be in, otherwise I would play Russian Roulette.

  • Driving = 1 fatal accident every 76 million miles driven
  • Scheduled flights = 1 fatal accident every 2 billion miles flown

What are the odds of surviving this so called Russian Roulette?
Each fatal plane crash averages over 30 deaths, which is only 42% of the passengers on the flights. On the other hand each fatal driving accident averages 1.15 driver/passenger deaths. Unfortunately it is harder to track the number of occupants or even cars involved in these collisions. My approximation is 3 people involved – most cars have only the driver aboard, and the ones that do not are offset by solo car crashes. If the number is 2.75, this would equal the 42% survival rate for being in a fatal plan crash. Pretty darn close!

Keep reading…

Is Outsourcing Jobs Overseas Really a Problem? Depends Who You Ask

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Photo: Till Krech

Thousands, if not millions of Americans have lost their job overseas. Due to the recently flattened world, companies are now able to find workers in remote countries eager to work longer hours for significantly less pay.

Why do companies outsource jobs?
It’s simple – money. Companies have the goal of making money, not employing the most Americans as possible. Sometimes these conflict. If the business can make more money by laying off unnecessary workers or outsourcing jobs overseas, we have seen time and time again that they will.

Is this wrong?
No, it is not wrong. The company is simply responding to incentives – specifically, the management of the company is responding to incentives. The more money the company makes, the more money the executives make. These executives are often extremely removed from the lowest paid individuals who see their jobs outsourced – the management sees the pros but not the cons.

What is the result?
A report by McKinsey showed for every $1 of labor outsourced overseas, the United States receives $1.12 back (in addition to 33 cents retained by the country that does the work). So by outsourcing we are able to boost our production 12% without actually working!

Overall this sounds like a win for the United States, but in reality maybe it’s not – those simple numbers do not tell the whole story. Instead of $1 being dispersed amongst the poorest, $1.12 goes into the pockets of the richest! Outsourcing is a very efficient way of redistributing wealth – the poor in the US lose $1, the poor outside the US gain 33 cents, while the rich in the US gain $1.12!

Why outsourcing will not be stopped
Corporate executives are the ones who make the decisions for the business. They are also the ones who benefit the most from outsourcing jobs. If we expect outsourcing to stop, we have to change the incentives so that the negativities of outsourcing are felt.

Of course, the people who have the ability to change economic incentives are politicians – politicians that are buddy-buddy with the corporate big wigs and the associated lobbyists. Thus, until outsourcing becomes a compelling issue, nothing will change.

Translating a Free Online Education into a College Diploma

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Photo: wohnai

Over the last couple years an exciting new trend has emerged amongst universities across the country – they are providing courses online for free! Harvard, Yale, Stanford, MIT, UC Berkeley, Columbia, UCLA, and John Hopkins are just some of the schools that have lecture videos of entire courses online.

Why the heck are these schools doing this?
It is the free information movement. Just like there was a free love movement in the 1970’s, there is a similar free knowledge movement in the early part of the new century. Wikipedia is the epitome – its free information has become a part of the way we research just about everything. Another manifestation of this is the huge open source software movement providing free software to the masses. Examples are the Linux operating system, Mozilla Firefox web browser, and Android phone operating system. It is a cultural and economic phenomenon that deserves much more attention than a few sentences, but there is not room in this post so I will refrain – just be sure to take advantage of it!

What exactly are they offering?
It varies widely from school to school and even class to class. The organization OpenCourseWare currently has 200 schools with 13,000 courses offered online – some just have the lecture videos, while others also have the assignments and exams complete with solutions. Beyond what is posted you are on your own – there are no help resources such as teacher assistants or other class members to contact.

Keep reading …

Today Will Be Remembered as the Era When Technology Ruled Our Lives

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Photo: Chris Metcalf

Technology was originally created with the intention of saving us time. The cotton gin was created to save time processing cotton, the steam engine to save time over using horses for power, and computers to save time on calculations. But where is all this free time? It seems that people are busier and more stressed than ever before.

Despite the incredible pace of technological innovations in the last several decades, it has been ineffective in actually saving us time. An incredible number of tools are available today that have never been available before, but we don’t know how to effectively use them to reduce stress and provide more leisure time. It is not a limitation of the technology, rather our training on these technologies lags far behind – we just don’t take the time to learn how to use them effectively!

The technologies that dominate our everyday lives
In the grand scheme of things cell phones and email are new technologies. The majority of people got their first cell phone less than 10 years ago and email maybe a couple years before that. Now we are combining the technologies – chances are if you bought a new cell phone in the last year or two it now has email on it. The downside to these rapid technological advances is that we haven’t had time to properly learn the best way to use them.

Have you ever been talking to someone in person when their cell phone rings? How is this person supposed to respond? It is wonderful that you can be reached at any time of day by your friend 10,000 miles away, but at what cost? The call disrupts your face-to-face conversation for a digital one. Text messages are less obtrusive but the same principle applies – they dictate our lives and take us out of the moment.

Keep reading …

Second Order Effects Can Ruin Good Intentions

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Photo: Punchup

First, what is a second order effect? I wanted to start this with one of those “Merriam-Webster defines second order effects as …” that you so often see in papers by freshmen in high school, but I refrained. Let’s start with a first order effect. This is the direct result of a change. Taking it one level deeper, a second order effect is the result of the direct result of the change. It is better explained by an example.

A new tax break is created to give an $8000 rebate to first time home buyers this year. A first order effect is that more people buy homes this year. A second order effect is that less people buy homes next year because so many just bought houses this year.

As you can see, the second order effect is often an overlooked consequence. Laws, rules, and regulations are often put in place to create a change in behavior. But what is the consequence of that change in behavior? All too often we lack the foresight to look this far into the future, but there also could potentially be third, fourth, or fifth order effects!

Title IX
Title IX’s regulation of college sports is an example that jumps out in my mind. The intention was to make sure women and men have the same rights. One area most effected by this is collegiate sports – women and men must be equal in both athletic scholarships and the male-female ratio of athletes needs to match the schools student ratio. This is a tremendous first order effect – more women get to play sports and receive scholarships.

But unfortunately the school’s economic situation comes into play. Football is the only sport that makes money and there is not a women’s sport with an equivalent number of players. So if the school wants to have a football team, they will also have to have 5 women’s sports teams before they can even add another men’s sport. A second order effect is that schools are (economically) forced to drop some of the less common men’s sports teams. A third order effect may be that the sport loses popularity over time (wrestling is an example). Fourth order? How about we start losing the Olympic medal count to China because they train their athletic children to focus on a specific random sport. Fifth order? Communism wins.

What does this have to do with communism?
Absolutely nothing, that was a stretch. The point is, it is extremely hard to predict the result of a result of a result of an action. The consequences of the action may outweigh the benefit of the initial goal – this is why Republicans often vote for less government intervention – it’s not that they don’t want better healthcare, rather they believe the unintended consequences outweigh any improvement.