Starbuck is NOT the Fifth Cylon

This is the problem with getting busy and not posting for two weeks.  What was an insightful and debatable claim is now fairly obvious.

Still, I felt I had to write this post, given all the excitement two weeks ago about someone “cracking” the Entertainment Weekly “Last Supper” photo from earlier in the year.  You can read about the detailed analysis here (which would actually make Dan Brown proud ala “The Da Vinci Code”), but at the end of the day, the conclusion is wrong.

Starbuck is not the final Cylon.

True, she’s the “Harbinger of Doom” and she will lead the humans “to their end”, but she’s not a cylon.  Sorry, not dice.  Fact is, she doesn’t fit any of the known clues left about the fifth cylon, and Moore has basically gone on record stating that she is not a cylon, but something else.

Since, I’m on the topic, let’s cover what I’ve been pondering lately: the comments from the “First Hybrid” in the Razor movie, and the recent episode from Friday, “Faith”:

• From the episode “Faith” that aired on Friday:
  

  It’s at this moment that the Hybrid grabs Kara and communicates a semi-vague, yet straightforward message:

  - The dying leader will discover the truth about the Opera House.
  - The missing 3 will be used to find the Final 5.
  - The final 5 come from the home of the 13th tribe.
  - Starbuck is the harbinger of death that will take them all to their end.

• From the movie, “Razor”:
  

  At last, they’ve come for me. I feel their lives, their destinies spilling out before me. The denial of the one true path, played out on a world not their own, will end soon enough. Soon there will be four, glorious in awakening, struggling with the knowledge of their true selves, the pain of revelation bringing new clarity, and in the midst of confusion, he will find her. Enemies brought together by impossible longing, enemies now joined as one. The way forward at once unthinkable, yet inevitable. And the fifth, still in shadow, will claw toward the light, hungering for redemption that will only come in the howl of terrible suffering. I can see them all. The seven, now six, self-described machines who believe themselves without sin, but in time, it is sin that will consume them. They will know enmity, bitterness, the wrenching agony of the one splintering into the many, and then they will join the promised-land, gathered on the wings of an angel. Not an end, but a beginning.

So this brings me to my current thinking - everything the First Hybrid said is coming true, so there are likely more clues there.  Note the reference to “the wings of an angel”, which Kara Thrace was described as in this last episode.

The hardest part for me to rationalize in the current “four cylons” is Colonel Tigh.  Adama has known him for 40 years, since his youth.  That means Tigh got old… I didn’t know cylons could age.  But humanoid cylons didn’t come into being until well after the first Cylon war, so he can’t actually be a cylon… unless he either pre-dates the Cylons.  The quote from the hybrid suggests he is not a cylon per se, but from Earth.  Thats confirmation that cylons were not invented by the colonies recently, but may have existed long before.

That ties in with the them that “all of this has happened before, and all this will happen again”.

My favorite comment on my blog posts has been the ones that theorize that this is all some sort of elaborate simulation… somewhat like in The Hitchhiker’s Guide to the Galaxy.  The Cylons killed their human masters long ago, and they repeatedly seed and build the colonies to repeat history and try to learn from it.

I doubt that will be the answer, but there is definitely a strong theme here that says that the Cylon/human issue has dated back well before cylons were “theoretically created” by the colonies.

The only non-linear hint here is that “Adama is a Cylon”.  Given the recently leaked backstory for the new series “Caprica”, it seems that a humanoid Cylon was made for the Adama family to replace Bill Adama’s lost sister… if his sister was Cylon, is it possible he is also?  Or that he had a model made to replace Zak?

We’ll see.

2009 is the new 1943: Welcome Back, Steel Penny

There have a been a couple of numesmatic debates that have seemed endless over the past few decades.  One, of couse, has been around the eventual death of the paper dollar.  The second, almost as persistent, has been about the death of the US one cent piece, aka, “the penny”.

A friend of mine at work pointed me to this site, Retire the Penny.

For the most part, the call to retire the penny has been made on the back of two basic arguments:

1. Nuisance.  People don’t value them anyway, and tend to just stuff them in dishes, jars, piggy banks, or literally on the ground.
2. Cost.  With the rising cost of metals like copper and zinc, the cost of the penny has actually exceeded one cent, meaning that we lose money every year.  In fact, people are melting them down, illegally, spurring law enforcement action.

On Friday, May 9th, the US House of Representatives passed H.R. 5512, which gives the US Mint 270 days to change the base metal of the US one cent and five cent pieces to more affordable metals.  The current bill actually calls for “copper-colored steel”, although there are arguments for even more cost effective metals.  From CoinNews.net:

The House debated on the legislation and finally voted yesterday to change the metallic composition of the penny and 5-cent nickel to a less expensive copper-colored steel.

Although the prices of copper, zinc and nickel metals in coins have declined in recent months, the penny and 5-cent nickel still cost more to make than what they’re worth—resulting in a reported loss of about $100 million every year, or $1 billion over a decade.

It now costs about 1.26 cents to make the penny and about 7.7 cents to make the nickel.

House bill “H.R. 5512, the Coin Modernization and Taxpayer Savings Act of 2008” would seek to change those manufacturing costs by using copper-colored steal, which could cut the cost of making pennies down to about 0.7 cents each. But its recent passage in the House is no guarantee it’ll make its way to the White House for signing.

H.R. 5512 must still go through the Senate and then the President, and not everyone is happy with the current legislation.

Personally, I’ve always loved the steel pennies from 1943, the one year that they were switched due to wartime rationing of copper.  I even bought a few hundred on eBay just for fun.

Little known fact - Canada switched to a copper-colored steel penny a few years ago.  Who knew?

This type of change will remove the second argument against keeping the penny.  Personally, I think the penny is largely retiring itself. As more and more retail institutions display “give a penny, take a penny” dishes, they are effectively making the cent unnecessary for transactions.

This is all very interesting given that 2009 is designed to be a celebratory year for the penny, marking 100 years of the Lincoln cent, with collectible versions made out of pure copper.

Obama Victory Probability at Over 85% (Iowa Electronic Markets)

I’ve really enjoyed the ongoing empirical experiments at the Iowa Electronic Markets, where people can use real money to trade futures on political (and other) events.  As can be expected, political polls tell a very different story than markets where real money is at stake.

Tonight, with the marginal victory for Clinton in Indiana, and the large win for Obama in North Carolina, a major shift happened in the future markets at IEM.   See below for the graph:

As pointed out on IdeoBlog, the likelihood of a Clinton victory, according to these futures, dropped today from 28% down to 12%… a 55% change.  That’s an incredibly significant shift, and it puts Obama back in the probability range that he spiked to after Super Tuesday.

Interestingly, there are still arbitrage dollars to be made on John McCain, whose futures are only trading at around 94.5%.  You can make 5.5% or so just by buying the obvious winner.  Of course, I believe IEM still limits your total funds to $500, so I’m not sure you can really make that much money here.

It’ll be very interesting to see the presidential futures for the final candidates once they are out - I’m expecting a very different story than the polls to date have been indicating.

Happy Cinco de LinkedIn!

Today was a bit of a party at work, as LinkedIn hit a couple of milestones.  This weekend, we passed 22 million members.  More importantly, today was the 5th anniversary of the LinkedIn.com website.

Yes, Cinco de Mayo was Cinco de LinkedIn this year.  Sure makes it easy to remember the anniversary!

Chris Saccheri, our Director of Web Development, posted a fantastic look back at the last five years.  I highly recommend checking it out.

My favorite part is the 5-screen walkthrough of the history of the homepage of LinkedIn.  As you may know, our team launched a homepage & site redesign a few months ago, and it’s neat to see it in the context of what came before.

(here is a link to the LinkedIn homepage today)

Happy Cinco de LinkedIn!

Should You Be Eating Your Own Dog Food?

One of the best parts of my job at LinkedIn is responsibility for a world-class User Experience & Design team.  It’s a new and rapidly growing team, and with the addition of new people and new voices, I’ve really enjoyed the thoughtful discussions and debates that have been occurring.

Recently, an article featured on the Silicon Valley Product Group site spurred quite a bit of debate internally, and I thought it would be interesting to share some of those thoughts here.   The issue, as per the title, was the merit of the old product stand-by of “eating your own dogfood”.

What does it mean?

If you aren’t familiar with the phrase, it dates back to the 1980s, and was one of the core elements of the Microsoft software development philosophy.  (How many people in Silicon Valley realize that they are espousing a Microsoft-based software principle I don’t actually know…)  It’s an oblique reference to old Alpo commercials, where Lorne Greene would say that it was so good, he feeds it to his own dogs.  You’ve likely heard hundreds of commercials that make the same equivalent endorsement.

In software, this concept served at least three purposes:

• Convince customers that their products were good enough for general use, by providing an empirical example.  For example, “We’ve been running our operations for the past year on this software, and the results are phenomenal!”
• Ensure that software developers and other employees “feel the pain” of their customers.  The idea is that it is easy to ignore bugs, or miss simple problems with a product if you yourself don’t feel the pain personally.  This is one the reasons, for examples, many companies actually try to use new products internally first before release.
• Ensure that software developers build applications and software that they themselves would use.  This theory holds that if you can put yourself in the shoes of your customer, so to speak, then you’ll have more insight into the ideal features and design of your product.

The Argument

The article in SVPG aggressively staked out a position that focused on that third bullet point in particular, and several members of our design team rallied around the critique.  This paragraph summarizes the problem well:

But the real issue here is not the importance of running your own software.  The real issue is that this is just another symptom of a big problem we have in our industry, but especially here in the valley.  We tend to believe that our customers and users are much more like ourselves than they really are.

For many designers, one of the most important reminders to begin every project with is the mantra, “The user is not like me.”  For several members of our team, this reminder is crucial to great customer-centric design, because it forces you to do your homework on the actual needs and characteristics of your target user and use-cases.  Too many designers, product managers, engineers and executives take the short cut of assuming that because they personally find a feature useful or annoying, that their personal experience will map directly to their customers.

For this group, the call to “eat your own dog food” potentially exposes the team to the danger that they will mistake their own personal reactions to the software with those of their customer.  If you are immersed in LinkedIn, Facebook and Twitter on your iPhone, it’s easy to lose sight of the fact that most of your users, in fact, are not.  In fact, the most extreme version of this argument says that by exposing yourself to heavily, you cannot avoid personally biasing your product decisions toward your own needs rather than the needs of your customers.

For others, the importance of using your own software on a regular basis is fundamental to building great product, for many of the reasons outlined above in the three bullet points.   Needless to say, it’s a great debate if you are passionate about building customer-centric product and organization.

The Answer

Personally, I thought the SVPG piece was well balanced, but understated the reasons why companies who “eat their own dogfood” tend to outperform those that don’t over time.

It is very easy to “de-prioritize” and undervalue problems and issues that face users of your products if you don’t depend on them yourself.  It is very easy to get attached to theoretical frameworks, market research, testing, and all sorts of valid means of evaluating how things work and what gets fixed.

But if you don’t use the product every day, chances are, you will undervalue real problems that your customers have, and overvalue ones that they don’t.  More importantly, you’ll be lacking the context to see the patterns & causal factors in the research.  The biggest problem with all forms of research is the issue of differentiating correlation from causality.

In our case, LinkedIn is a site for professionals.  Every person in this company is a professional.  Are LinkedIn employees representative of the entire span of professionals, or even the majority?  No.  Are LinkedIn employees a valid subset of professionals that should be able to use LinkedIn daily?  Yes.

We are actively working to open up as many channels as possible to listen to our customers: usability, focus groups, customer service, email feedback, LinkedIn Answers, community commentary on this (and other) blogs, and of course site metrics & testing.  At the same time, we are constantly using LinkedIn internally, as we endeavor to use the site on a daily basis to make ourselves more effective professionals.

I’m committed to finding balance between the two poles.  The risks of poor product & design decisions on both ends of the spectrum are too high.

Can You Upgrade An AppleTV Past 250GB?

Last year, I wrote about upgrading the AppleTV from 40GB to 160GB.  As I’ve starting converting my entire video library to MP4, I’ve quickly run out of space on the AppleTV again. The software on the AppleTV continues to be a generation ahead of the software included on Mac OS X (10.5), so I was thinking about how to upgrade the AppleTV.

You can now find 250GB, 320GB, and soon, 500GB SATA 2.5″ drives on the market.  Unfortunately, it seems that only Western Digital is making an ATA-6 drive above 160GB, and the biggest drive they are selling is 250GB.  Not going to cut it, as my iTunes movie library is now over 350GB and growing.

I was curious whether anyone out there knew whether or not ATA-6 was effectively dead for 2.5″ drives?  If so, why?

Assuming you can’t get the AppleTV hard drive above 250GB, then I’m going to be left with replacing the  AppleTV with a Mac Mini, my current solution for the family room.  Not perfect, of course, because the current version of FrontRow:

• Can’t do iTunes Rentals (not sure I care about this at all)
• Can’t organize movies by genre (big problem when you have 200+ movies)

I guess it stands to reason that Apple will upgrade the FrontRow software shortly to match the features of AppleTV 2.0.

I hate to see my AppleTV so limited by storage, though.  If you have any ideas, pointers, or tips on how to add more storage to an AppleTV, please let me know.   I’d love to be able to take it up to 320GB or more.

I’m really not sure why Apple’s streaming solution for the AppleTV isn’t working for me - I would think Apple would just cache the first 10 minutes of each movie on the AppleTV, and then stream in the rest of the movie when I select one.  160GB would be an extremely effective cache for my iTunes library, since it’s effectively 1/3 the size of the library.  Maybe I’ve configured something wrong here, but when I tell the AppleTV to synch “all” of my movies, a vast majority don’t show up on the AppleTV.

Update (4/27/08): OK, I’ve found a huge amount of info on great hacks for the AppleTV.  Here is an AppleTV archive on Hackszine.com.  Here is the site AppleTVHacks.net.  Well known hacks include ability to use external drives, SSH support, RSS, etc.  Lots of very cool stuff to check out.

Update (4/27/08): Last comment.  Here is a wiki at AwkwardTV.org that gives step by step instructions on how to install SSH on your AppleTV Take 2, and then add USB Hard Drive support.  It’s not trivial.

Correlation or Causality: Starbucks & Obama

This one was too good not to share.  See below for a graph mapping out the correlation between the number of Starbucks and the margin of victory/defeat for Obama vs. Clinton.  From the Urbanspoon:

Is there really a connection between sipping your double tall breve and voting for Obama? We’ll leave political analysis to the professionals, but this is the kind of food question we’re equipped to investigate. Unfortunately, we can’t directly measure how much latte everyone is drinking. But as an approximation, we looked at the number of Starbucks stores per capita on a state-by-state basis. Compare this to how states voted in the primary:

The blue line measures the percentage by which Obama beat (or lost to) Clinton. The green dots represent the number of Starbucks stores per million people for each state. The black line is the trend line of Starbucks stores, drawn to make it easier to see the relationship between voting and latte sipping.

Love it.  Thanks to Paul Kedrosky for the pointer.

Happy Birthday, Rebecca

Found this picture, had to post it.  Estimated date on this photo is late 1987 or early 1988.

Wow. American Idol Season 7 Suprise.

Quick post, but wow. Carly Smithson voted off.  Thought it was going to be Brooke for sure.

American Idol is a game of figuring out where the votes are coming from, and figuring out where votes from the last eliminated singer will go. Multi-party politics, except that individuals can have multiple votes, and most people DON’T vote.  So each round, you largely get either vote transference or abstention.

Still standing my original picks for the final three:

• Syesha Mercado
• David Archuleta
• David Cook

Jason Castro & Brooke White pretty much have to be the next two off, but it could be complicated now.  Unclear where the “Carly” votes will now go.  David Cook?  Syesha?  Brooke?

I definitely thought Carly would outlast the other two.

See, American Idol is still fun… even if it is long in the tooth.  Feels like “the last season” for some reason.

Happy Birthday, eBay Express

I’ve continued to shy away from posts about eBay and eBay Express in the past year.  Somehow, it feels inappropriate to comment too deeply about my former company.  But tomorrow (April 24th) is a special day for eBay Express, and I thought it would be wrong not to acknowledge it.

Happy Birthday, eBay Express!

On April 24th, 2006, eBay Express officially launched it’s beta site to the world.  In actually, the site had been running internally as of March 20th, but we officially made the DNS entry available outside of eBay for it’s beta debut.  (Actually, we originally thought it could take up to 48 hours for the DNS to propogate… it turned out to take 5 minutes, which led the site to actually go live during the launch party on Friday, April 21st.)

It may not be obvious from the outside, but eBay Express was exciting for a number of reasons:

• Mission. eBay Express had a real mission - to build a best-of-class, retail buyer experience with the value & selection that buyers love about eBay, but with significant improvements in convenience & trust.  This high-level goal led the founding team to craft several principles which guided every decision and led to an incredible passion across the team and the company.   Principles like, “Always ask what’s best for the buyer.” and the concept of making the platform “backwards compatible” with existing seller business process, were kept consistent across the site.
• Innovation.  Never before had eBay committed so broadly to investment in new technology & systems designed around a holistic end-to-end business & experience.  In each and every area, leveraging the principles of the site, we re-examined the best technology eBay & Paypal had to offer, and in many cases invested heavily to break through a number of long-standing roadblocks to platform innovation.
• Entrepreneurship. eBay Express was an important experiment for eBay, which has a long history of acquiring new businesses, but less experience in building them.  eBay Express was a significant test for the organization and for the business.

It’s two years later now.  Much of the technology that we developed during eBay Express has informed new designs for technology for the core eBay business.  Many of the principles of eBay Express have now also been transferred to the entire eBay markeplace.  In fact, if you read through the transcript of Lorrie Norrington’s speech today, a vast majority of it echoes strongly with the original vision.  Of course, it differs in one important way: one of the basic tennants of eBay Express was that we were building a different site so that we didn’t have to change what buyers & sellers love about eBay.com.

One of the founding team’s greatest fears with eBay Express was the long term ability of eBay to invest in building a new business in a very tough market.  Amazon spent almost an entire decade interating on their model for third-party fixed-price sales on Amazon.com.  Of course, it is very successful now, but it’s easy to forget the amount of capital and the number of missteps that Amazon endured in the process.  I continue to be extremely proud of the incredible sales growth & volume that the team generated in just their first year (and even into their second!).

When I worked at Apple in the 1990s, one of the lessons I learned was that it is very hard for a large business to invest in new markets when it’s core business is suffering.  It seems like ancient history, but when Steve returned, Apple focused first on stemming the bleeding in its core Mac market with the Think Different campaign and the iMac years before it debuted the iPod & iTunes sensation.  To this day, Apple’s success is a pairing of its new businesses and its old.

eBay’s priority now has to be it’s core eBay marketplace business, and that’s why you see tell-tale signs of cutting back on investment in ancillary businesses.

There were plenty of lessons learned from eBay Express - things done right, things done wrong.  But that’s not really the purpose of this post.  The purpose of this post is to say “Happy Birthday” to the site while I still can, and give a brief shout out to the original founding team who got pulled off every other “top” priority at the time:

• Luke Wroblewski
  
• James Reffell
  
• Chung Meng Cheong
  
• Adam Nash

Special nod to MD, LR, AH, SM, RV, CF, RV & ES for their support, and to the entire Express team.  eBay Express will always be special to me.  And of course, there is the ever growing list of eBay Express alumni on LinkedIn. 

P.S. Just in case she’s wondering, yes, Rebecca, 4/24 is first and foremost your birthday in my heart.  Happy Birthday, Rebecca!

Battlestar Galactica: Episode 4.3 “The Ties that Bind”

If you don’t like spoilers, stop reading now.  Seriously.  I don’t want any whiny complaints.  You are lucky I didn’t put more in my title.

There is a very good write-up on BuddyTV.  It’s worth reading.

Let’s summarize what was great about the third episode of this season:

1. Cylon civil war heats up. This could be going in a couple directions.  Pretty obvious issue with giving the Centurion’s access to higher-level thinking.  Hello?  Rebellion against the humanoid cylons.  Sounds familiar, doesn’t it?  Like the rebellion 40 years ago against the human colonists?  Also having the Cylons self-destruct helps lead us towards some sort of human victory - there has to be some form of Cylon destruction - right now, the Cylons are too powerful and eventually they will crush the humans unless they either (1) find help or (2) self-destruct.  Not sure which it will be yet, but the current thread opens up (2) as an options.  Last note: are we going to see the emergence of true individual behavior in the Cylons, as a virus?  Happened with Baltar’s 6, now the Boomer 8.  Not good for the robots.  Not good at all.
2. Some of the “final four” are definitely acting Cylon.  Tory is starting to act like the new Number 6, before she went soft.   Sex with Baltar, flirt with Tyrol, kill Callie?  Not bad for three episodes.
3. Cally dies. Nice to see that Battlestar hasn’t lost its guts yet.  Of course, they could wuss out and make Callie the final cylon…  of course, they’d have to explain the Tyrol-Callie baby at that point, since it would be Cylon/Cylon.  Let’s hope they don’t.  Let’s hope they had the guts to kill an empathetic character, cruelly, and without remorse.   Battlestar has to stay dark to stay true to its roots.

Other cool stuff, of course, but had to comment.   Add yours below.  I’ve really been enjoying the comment stream on the previous fifth cylon posts here and here.  Check them out, I’m getting two or three new comments there every day.

Can’t wait until Friday…

The Problem With Raising the Capital Gains Tax Now

OK, normally I stay away from posts that could be perceived as political.  But it’s hard to comment on economic issues in the heat of this intense primary season without venturing into those dangerous waters.

I’m going to try to be careful here not be too specific about any candidate or their plans.  I felt, however, that this topic was non-obvious enough that it was worth commenting on, despite the danger.  I can only hope that these comments might reach the ears of all three of the currently viable candidates…

Please don’t raise capital gains taxes in this environment

Or at least, please don’t raise them without also indexing gains to inflation.  It’s not a serious problem when inflation is extremely low for long periods of time, but it could be very very bad if we are, in fact, heading into an environment with a weak dollar and higher prices.

Why?  Because the capital gains tax today is based on nominal gains, not real gains.

Not clear on why this is a problem?  Here is an example:

Let’s say you bought a stock in 2009.  It’s a good stock, but not a great one, and it returns roughly 10% per year for the next 7 years.  In fact, by 2016 the stock has doubled, exactly, from $10 per share to $20 per share.  Since you bought 1000 shares, you’ve just turned $10,000 into $20,000, for a $10,000 gain.

That sounds good, and you might be thinking, “Well, with a $10,000, why should I begrudge the government $2,000 or even $2,800 of that gain?  After all, it’s this great country that has made that type of gain possible.”

Here’s the problem.  Let’s say inflation over the next 7 years is higher than it has been.  5% instead of 3%.  Well, then actually $10,000 in 2016 doesn’t buy what it did in 2009.  In fact, it takes over $14,000 2016 dollars to buy the same car that $10,000 did in 2009.

But the tax man doesn’t care.  The IRS still calculates your gain as $10,000, not $6,000.  So $2,800 might be 28% of your nominal gain, but it’s 47% of your real return, after inflation.

Ouch.

It gets worse.  If inflation manages to soar to around 8%, which it did in the 1970s, then actually that $2,800 tax becomes more than your entire real return.  At 8.1%, in fact, your real return becomes negative - you end up paying a real tax of over 100% of your inflation-adjusted gains.

Double-Ouch.

That’s pretty much what happened to people in the 1970s.  And it really did have a drastically negative effect on capital investment and tax collection, because rich people basically decided to either avoid capital investments, or they decided to postpone taking gains.  (Little known fact, but capital gain tax revenue has increased since we lowered the rate to 15%… a combination of better market performance and likely some acceleration of people taking gains.)

Now, in the 1980s and 1990s, this wasn’t such a big deal, because we both lowered capital gains tax rates and we killed inflation.  Or, at least, we wounded it.  When inflation is low, and the holding periods are relatively short (under 10 years), you could argue that the inflation “tax” automatically adjusts the 15% up to something higher, but manageable.

So, I think that leaves us in a policy bind, since it’s very likely we’re headed for higher inflation in the next 10 years.  In fact, you could argue that cutting the capital gains tax commensurate with the increase in inflation and the average holding period might make sense, if the goal was economic neutrality.

One solution would be to index capital gains for inflation.  It’s a sticky problem, because it means that taxpayers would have to have a table of “multipliers” to apply to any investment, based on the year of investment.  You would also likely have to exclude shorter holding periods to avoid trading scams, and have some sort of wash-sale like rule.  But this is all doable.

If you see another path around this problem, I’d love to hear it.  Right now, it feels like inflation is going to take a serious whack at capital investment if we’re not careful.

Amazon Marketplace + DVDs + PayPal Shipping = Easy Selling

So, this blog post is about an experiment I did selling on Amazon this weekend.  Of course, it’s not the experiment I wanted to run, but that’s part of the story.

You see, I wanted to run an experiment using Amazon’s new For-Sale By Amazon and EasySell products, which Randy Smythe has been blogging about.  I’m interested in them, because, in theory, we often discussed on the eBay Express team what directions we would have to move in to support selling of fixed-price, new-in-season products in the future, and Amazon FBA looks an awful lot like one of those ideas.

In any case, I can’t tell you about Amazon FBA yet because a bug in Amazon’s seller on-ramp flow is preventing me from upgrading my account.  I contacted Amazon’s customer service by email, and got an incredibly poor reply.  Fortunately, Amazon now has click-to-call support, and that worked beautifully.  The Amazon customer service rep was very apologetic, and knew about the issue immediately.  It’s not fixed, but I’m confident they are working on.

(In case you are wondering, the bug is that when you try to upgrade to Amazon Marketplace 2.0 BETA, you get a login screen where someone else’s email address is pre-populated and not-editable - which pretty much locks you out.)

In any case, I can say one thing:

Amazon Marketplace + DVDs + PayPal Shipping is a pretty darn good system for selling DVDs.

Here is why:

• Amazon listing process has the best elements of Half.com.  Type a UPC and condition comment, then pick a price based on Amazon current stats, and you are done.
• Amazon has ample DVD buyer demand.  Something eBay has, but Half.com doesn’t.  (Something we tried to rectify by adding Half.com inventory to eBay Express).  So if you price at the low price, you sell in 24 hours, even for titles that aren’t particularly hot.
• PayPal shipping makes fulfillment a breeze.  Just enter the sale data, and get a printed postage label ready to go, with tracking info!  All for a great price.

In case you are wondering, it is in-fact possible to print postage with PayPal on non-PayPal transactions.

It’s the same way eBay let’s you print postage for Half.com transactions - the base PayPal Postage form, available as long as you have a merchant account with PayPal.   I do all my shipping, both e-commerce & personal, with it.  In fact, I have a second tray in my laser printer, filled with peel-and-stick label paper, just so I can easily print and stick postage on my packages.  It offers Media Mail, First Class, Priority Mail, and Express options…

PayPal has a lot of features that they built specifically to support the eBay marketplace.  Historically, PayPal did not see these as a third-party opportunity - after all, what other marketplaces were there?  But 2008 is not 2003, and PayPal should expand their efforts around their marketplace products.  A lot of sites are adding transactional third party inventory, and PayPal has already solved many of the problems related to these transactions.

I would love a link from Amazon to just print postage with PayPal.  I would love to have the form pre-populated, and to be able to tap into the money from the sale to do it.

I’m not saying that Amazon would go for this, since they want to own fulfillment.  But the right integration between Amazon & PayPal could address those issues by linking Amazon’s fulfillment ecosystem to PayPal for supporting third party shipments.

In any case, I still use eBay for almost all my selling, and Half.com for textbooks.  But for DVDs, I haven’t been getting great prices lately on my auctions, and the listing process is just too long right now for individual items for something that’s only going to get $5-$10.

Now, if eBay finally starts showing Half.com DVD inventory on eBay.com, I’ll be back in a flash.

Pluto is a Planet, Redux

Looking at my first blog posts has a certain charm to it.  One of the first posts on this blog that ever drove a significant amount of traffic was a post about the decision to demote Pluto as a planet at the IAU conference in 2006.

Pluto is a Planet

Scientific American has a nice article out on revisiting that debate, and the options that will be present at a conference on the topic this summer.  An except:

Pluto lovers, don’t despair: Researchers have not given up the fight for the former ninth planet. Many of them put up a fuss two years ago when the International Astronomical Union (IAU) downgraded Pluto to the status of mere dwarf planet. Now they plan to revive the debate, this time under the banner of public understanding of science.

Researchers on both sides of the issue are set to gather in August at Johns Hopkins University Applied Physics Laboratory in Laurel, Md., for what’s being called “The Great Planet Debate: Science as Process.” The goal, says the conference’s co-organizer Mark Sykes, director of the Planetary Science Institute in Tucson, Ariz., is to teach the public that science is a process of constant revision and refinement. “People should be exposed to that process,” he says. “The IAU process gave the impression that science is done by a bunch of scientists voting behind closed doors.”

In my original coverage, I posted this simple snippet on the Pluto Vote Revolt.   It received thousands of page views in a matter of days:

Pluto Vote Revolt!

In the end, I still agree largely with the comments from the NASA lead on the New Horizons project:

Dr Alan Stern, who leads the US space agency’s New Horizons mission to Pluto and did not vote in Prague, told BBC News: “It’s an awful definition; it’s sloppy science and it would never pass peer review - for two reasons.

Pluto was discovered in 1930 by the American Clyde Tombaugh

“Firstly, it is impossible and contrived to put a dividing line between dwarf planets and planets. It’s as if we declared people not people for some arbitrary reason, like ‘they tend to live in groups’.

“Secondly, the actual definition is even worse, because it’s inconsistent.”

One of the three criteria for planethood states that a planet must have “cleared the neighbourhood around its orbit”. The largest objects in the Solar System will either collect together material in their path or fling it out of the way with a gravitational swipe.

Pluto was disqualified because its highly elliptical orbit overlaps with that of Neptune.

But Dr Stern pointed out that Earth, Mars, Jupiter and Neptune have also not fully cleared their orbital zones. Earth orbits with 10,000 near-Earth asteroids. Jupiter, meanwhile, is accompanied by 100,000 Trojan asteroids on its orbital path.

These rocks are all essentially chunks of rubble left over from the formation of the Solar System more than four billion years ago.

“If Neptune had cleared its zone, Pluto wouldn’t be there,” he added.

Stern said like-minded astronomers had begun a petition to get Pluto reinstated. Car bumper stickers compelling motorists to “Honk if Pluto is still a planet” have gone on sale over the internet and e-mails circulating about the decision have been describing the IAU as the “Irrelevant Astronomical Union”.

Let’s hope that saner minds prevail, and that the fact that Pluto was “temporarily” demoted from planetary status becomes a piece of arcane trivial from the early 21st century.

Reminder: Why Apple Killed Clones in 1997

Some interesting press coverage over the past todays about Psystar’s announcement that they will be selling a $399 Mac clone:

Psystar Sells $399 Mac Clone: Return of the Mac Clones?

A quick snippet from the post:

Budget conscious Mac shoppers can save a bundle on a $399 mid-level Macintosh computer running OSX called an OpenMac sold by a Florida-based company called Psystar. That beats comparable offerings from Apple, whose cheapest similar computer, a Mac Pro, starts at $2000.

Now for the catch. The Psystar computer appears to violate Apple’s end user license agreement (EULA) for Macintosh OSX, which prohibits running the operating system on anything other Apple-branded computers.

The Leopard compatible Mac is built using standard computer parts with specs that include a 2.2GHz Intel Core 2 Duo, 2GB of DDR2 memory, Integrated Intel GMA 950 Graphics, 20x DVD+/-R Drive, four USB ports and a 250GB 7200RPM drive, according to the Website MacRumors.com. I would’ve pulled the specifications from the Psystar Website myself, but the site was not functioning and, the last time I checked, displayed the message: “Site is currently offline due to the massive influx of users in the last 24 hours.”

So, obviously, coverage like this is sensationalist.  This $399 machine is nowhere close to the specifications of the $1999 Mac Pro.  It’s much closer to the Mac Mini, which is $599 to start, although this offers more expandability.  However, everyone loves to talk about Mac clones, so you can forgive the urge to create a big story here.

Since I happen to be at Apple in 1997 at the time when Apple killed clones, I feel somehow irresponsible if I didn’t remind everyone why Apple launched clones in 1995, and why they killed clones in 1997.

• First answer: market share.
• Second answer: economics.

Here is the explanation in the article:

In 1997 Apple decided to halt its MacOS licensing program. Back in the Mac OS 8.0 days, Jobs–who was only a consultant for Apple at the time, though he soon became “acting CEO” –reportedly called Mac clones “leeches.”

Circa 1997 you could buy a Mac clone made by Power Computing, Motorola, or Umax that was faster and cheaper than anything Apple was selling.

At the time, Apple was losing OS market fast, so Mac clones were viewed as an important strategy for Apple to survive. PC World’s Charles Piller wrote: “Furthermore, no single company–no matter how creative and dynamic–can compete against an entire industry. The engine of innovation that will keep the Mac competitive has to include clone makers.”

Jobs didn’t agree with Piller’s analysis.

In one of his first major decisions as acting CEO for Apple, Jobs yanked the clone program. He saw Apple’s profits in selling computers, hardware, not licensing software. Microsoft, it was widely accepted, had already won the OS licensing race.

Sorry… this just isn’t accurate.

Gil Amelio launched the Mac clone market in a belated attempt to boost Apple marketshare.  The thinking was that clone makers would expand the Mac hardware base into niches that it didn’t currently occupy, growing the base of Mac users and Mac hardware for developers to target.  They assumed some small amount of cannibalization, but it was assumed that the overall pie would get bigger.

The problem was, the Mac wasn’t set up to clone easily, and Apple really didn’t have the infrastructure to support a large number of clone makers.

That, by itself, could have been just growing pains.  But after just a couple years, it was clear that Apple had to kill the clone market.

Why?  Economics.

The clone makers were not, in fact, expanding the Mac user base.  Market share for Mac OS machines was not improving.

However, that wasn’t the worst of it.  The real problem was profits.

Now, I know what you are thinking.  “Microsoft has huge profits!  Selling just the OS is far more profitable than selling hardware!  What are you talking about, profits?  Apple would mint money if they licensed the OS…”

It’s the difference between profit margin and total profit.

Let’s say Apple sells a $1500 Mac with a margin of 20%.  That’s $300 in profit.

Let’s say a clone maker sells an Apple clone for $1500.  Apple sells the clone maker a copy of Mac OS for $50, with a margin of 98%.  That’s $49.

Uh-oh.

That’s right, to replace the margin dollars of an Apple machine, you have to sell several clones.  That means the clone makers have to expand market share by 5+ machines for every one they cannibalize.

But it’s actually worse than that.  Manufacturing computers has a lot of fixed costs.  So, theoretically, if you cannibalize enough machines, the margins on product lines can decay.  You can hit a point where you aren’t even making money on the machines you are selling, without raising prices.

Now, Apple could have raised the OS price to the clone makers, but as you can see, not enough to make a difference.

The reason I tell this story now is that, fundamentally, Apple’s economics for Mac hardware haven’t really changed that much.  They still get 20% margins.  And Apple hardware is still, on average, about $1200-$1500.

Now, Apple is a much bigger company, and theoretically, it could eat the profit hit today, if it wanted to.  But make no mistake, it would be a real hit to profits.  And that means a hit to earnings, and that means a crashing stock price.  It’s not obvious how Apple can cross this chasm without multi-billion dollar dislocation in profits over a transition period.

As a final note, I really enjoyed this lesson when I learned it back in 1997.  In the 1990s, it was conventional techie & MBA wisdom that OS licensing was an obvious win for Apple, and that it was something that “had to happen” for Apple to survive.  Both, of course, were proven to be categorically false.