A Little Break from Blogging…

You won’t see a lot of posts from me this week.  My wife Carolyn & I are expecting our second son, and induction is scheduled for tomorrow.  As a result, I’m expecting the next week to be a blur.

As with our first son, I will likely have a Baby blog up so that family & friends can follow the action remotely.

You can look for updates on the Baby Nash website.  There will be updates there when we are ready.

My First eBay Guide: US 50 State Quarter Program

Instead of writing a blog post on this topic, I decided to use the new eBay Reviews & Guides feature to write a new “eBay Guide” on the topic of the US State Quarter Program:

Collecting State Quarters: Which Will Gain in Value?

Read it and let me know what you think. If you like it, and you are an eBay member, please vote for the guide as useful.

The fundamental theory is that by looking at the total mintage of a state quarter, and comparing it to the population of the state, you can partially predict where supply & demand will be out of balance in the future. This is because demand is skewed by the population of a state, but the US Treasury mints quarters purely based on macroeconomic conditions at the time.

I continue to be a fairly avid coin collector, and I thought it would be nice to try and “give back” to the eBay coin community by putting together a guide. I’m interested to see what feedback I get from posting in that forum.

Need Ideas for a Good Present? Eight (8) Core Xeon Mac Pro

Every year, people seem to have trouble figuring out what gifts I might want for the holidays or for my birthday.  This year, it seems simple enough.

AppleInsider | Ripe in Cupertino: an Apple with 8 cores

I really can’t say what I might need an 8-core Xeon Mac Pro for anymore.  When I was a developer, I could always say, “Well, my average compile time is 30 minutes, so reducing it to 15 minutes would be a real time saver.”

Today, my world is mostly Apple Mail, Quicken & Safari/Firefox.  Not really that performance intensive.  I do spend a lot of time in iPhoto & Photoshop CS2, so I guess that qualifies.  I have a 43GB photo library of over 29000 shots that can get pokey at times.  Applying filters to a 100MB scan still takes quite a bit of time on my dual G5.

I have been surprised at how many PC owners have decided to make the Mac Pro their first Mac.  My cousin Scott.  My friend Eric.  Apple really hit the nail with the Mac Pro in price/performance.  Apple design & quality, and performance cheaper than the equivalent Dell by hundreds of dollars.

So, it’s official.  You have my permission to buy me one of these 8-core machines when they come out.  I will not complain.

Firefox 2 Gets Some Attention

Mozilla Firefox 2 Logo

Nice post from Chad Alderson today about features he likes in Firefox 2.0.

Firefox 2 Owns

I’ve already posted about my favorite unsung feature in Firefox 2 – the ability to automatically recover all of your tabs in the case the computer or Firefox exits unexpectedly. It single-handedly saved me over 45 minutes of work one night as I was blogging.

Chad, however, has picked up on spell-check and better tab navigation as his favorite features.

I’m personally attached to Firefox because I have such close friends on Mozilla team. They have a tough problem – Firefox is clearly the front-runner and thought leader for modern browser design. Others can make significant progress through imitation – the Mozilla community has to really move in new directions to keep ahead of the pack.

Firefox really popularized tab browsing, so it’s not suprising to see that they are able to take the feature set to the next level. Enhanced navigation, session recovery are all insights you develop once you already have familiarity with tabbed browsing.

It’s very interesting to me to see which features people find useful in Firefox 2, and which features they love. I predict they’ll be separate lists. I think spell check is probably the most useful feature to date for me, but thanks to that one crash, the saved session is my favorite feature by far.

Kudos again to the Mozilla team for a great launch. If you haven’t already, go get Firefox 2!

SpotDJ Beta for iTunes is Live

Actually, it went live about a week ago.

SpotDJ Logo

What happened today, however, is that Scott Kleper, one of the co-founders, added a blog post about SpotDJ and some of the insights from launching the product.

SpotDJ Makes iTunes Better

Not being a big music lover myself, it’s hard for me to completely see the opportunity that Scott sees here. I see that more as a blind spot in my own understanding of the “music lover” rather than any assessment of the business opportunity for SpotDJ. As I posted earlier, I do find the idea of iTunes as a demand-generation platform fascinating – the same way I find Salesforce thinking of their application as a demand-generation platform fascinating.

Being a product guy, however, I did appreciate this tidbit from Scott’s post about a feature that they built for personalization of profiles on SpotDJ:

One of the features that we launched with the beta was the “30 Second Random Interview”. As a registered DJ, you can go to your profile page and answer 3 randomly chosen questions (e.g. “What’s the most embarassing song on your iPod?”). Once you’ve answered all 3, another one shows up. So you can keep answering questions, and the results of your interview are displayed on your public DJ page for other users to see. People love this feature! We have DJ’s who have signed up and answered all 20 or so questions (including, oddly enough, “What kinds of spots do you record?”) without even recording a single spot yet! I think it shows a Web 2.0 truism — you can build web sites that are simply fun to use. We could have made SpotDJ just a download site, but by adding some social features and cool things to explore, we made it a fun site to hang out on.

I think Scott is dead on here, and you can bet that I’ll be bringing this topic up as we discuss new features for the sites that I’m responsible for. There is a really positive insight from the recent growth of Web 2.0 sites around the engagement that people find in sharing personal insights and information with others. I like the simple design that SpotDJ went with on this as well.

So, if you haven’t checked out SpotDJ yet, you should. And if you haven’t thought about how to allow users to better engage with your site and each other on your site, you should.

eBay Reputation, Shipping Prices & Ending Times

A big thank you to one of the great product managers at eBay, Rebecca Nathenson, for forwarding me this German study on eBay economics. (I would link to her blog, but she is hiding it from me…)

The Effect of Reputation on Selling Prices in Auctions (PDF)
by Oliver Gürtler & Christian Grund

As I mentioned in my previous post about starting prices, I have a strong interest in academic studies on the economics of eBay, the largest online marketplace globally. I am convinced that our level of understanding of the economics of marketplaces like eBay are still in their infancy.

As someone who has been selling on eBay since 1998, this study covers three topics that are easily familiar: reputation, shipping prices, and ending times. The study is from May 2006, and it is based on the eBay Germany site, but their is no reason to believe that they are country specific.

The first piece of the study looks at the effect of feedback on final selling prices on eBay. They confirm the obvious – reputation does impact final selling price positively. What’s interesting here is that it seems that the overall number of negatives did not have a measurable effect on final selling price. However, the percentage of negatives did. This result verifies anecdotal experience from many eBay buyers and sellers who will tell you that the “percent positive” is their primary measure of eBay reputation, once feedback scores rise beyond an initial threshold.

The second interesting tidbit from this study is their study of shipping prices. Once again, it confirms the obvious – higher shipping prices lower final sale prices. However, the interesting tidbit here is the fact that one dollar of increased shipping led to less than one dollar in reduced final sales price. This means that sellers may be better off charging a fair cost for shipping & handling, rather than assuming that if they offer low shipping that the cost will be made up in the auction price.

When I first started selling computer components in bulk, I experimented with different combinations of price and shipping cost. In one experiment, I took the exact same listing & description, and set different prices for the item & shipping, but left the total the same. They ranged from $15.99 with free shipping all the way to $0.99 with $15 shipping.

The result – the best selling item, measured in page views and conversion rate, was the $9.99 price with $6.00 shipping.

My theory at the time was that two human factors were occurring here. First, people see exorbitant shipping as dishonest. As a result, the listings with ultra high shipping looked dishonest, and it resulted in a lower purchase rate. At the same time, although buyers love free shipping, they were confronted with sticker shock from the high $15.99 price. Clearly, gas stations know what they are doing when they price gasoline to the 9/10 of a cent.

In their words:

The results with respect to the other variables indicate that postage affects sales revenue negatively, which was expected. However, an increase of postage in the amount of 1 € does decrease the price only by the amount of 5 per cent on average, which means by about 60 Cent at an averaged price of 12 €… In our case, however, it seems to be beneficial for sellers to segregate the total revenue into the two dimensions postage and selling price, because potential buyers concentrate on the main price during auctions and neglect the amount of the postage.

The last interesting insight from this research is their investigation of the effect of duration and ending time on the final selling price.  Interestingly, there is a surprise here, which they dub the eBay Evening Fallacy.  They claim that auctions that end in the evening perform worse than auctions that end earlier.  As an interesting side note, they also found no evidence that duration impacts the final selling price.

What’s interesting about this insight is that it doesn’t really explain why this fallacy exists.  One possibility is that historically, evening ending times did perform better than earlier times.  However, as this became known, supply overwhelmed demand as everyone piled onto the same popular times.

I think actually this is a nice place to end this review, because in the end, while fascinating, the last insight is a warning.  eBay is a dynamic marketplace, and as information flows through the market, the profitability of different strategies may change over time.  Everyone knows they vary by country, by category, and by season.  They also can vary based on what everyone else is doing.

In finance, there is a theory of efficient markets that posits that public information flows nearly instantaneously through the stock market.  As a result, all returns are merely compensation for risk. Part of the attraction of private equity is the fact that it operates in a world, by definition, of more limited information and more limited access.  That’s what yields those wonderful returns that Venture Capital has seen over time.

It’s interesting to think of eBay in that light.  Strategies are always evolving, as information is communicated about how to succeed on eBay.   Are proprietary access to inventory, or proprietary strategies the keys to outperformance?  Efficient market theory has a risk-free return built into its model.  Does eBay have the equivalent of a risk-free return, and if so, what is it?

That’s why I love research like this.  It goes beyond the anecdotal and makes you think.

Will Wright is a Genius (Spore)

For some reason, I’ve been posting a lot about video games lately. I’m not sure why, since with all the commotion at home, it has been literally months since I’ve been able to play anything.

After all, I’ve already sold my Gamecube & PS2 in anticipation of getting the next-generation machines in 2007.

Still, it would not be right to talk about video games, and not tip my hat to Will Wright, creative genius behind a large number of games including The Sims.

For those of you uninitiated into the magic of his upcoming game, Spore, you can get some basic info here. Spore attempts to marry all the elements of various simulation games that have drawn me in the past. Everything from creature creation, evolution, village building, technology maps, global domination, and galactic conquest.

As a wonderful sign of the times, you can find extensive demos of Spore right now on YouTube! Some feature Will Wright himself!

It may sound juvenile to some, but I have always had the utmost respect for creators of great games. Of course, growing up in the video game era, I’ve logged literally thousands of hours in my life, from the Atari 2600 & Apple ][ all the way to today’s consoles and PCs. But that isn’t the reason.

Writing this blog has led me to some epiphanies about why I find so much interest in certain things, and I now realize that video games fit the definition of this blog in a way I hadn’t initially considered.  Building a great video game requires a marriage of understanding of people and technology.
Most great video games push technology to the limits, but that’s not always required. Tetris & SimCity are examples of great games that didn’t push technical limits.

More than anything, great video games are first and foremost great games. Building a great game requires an understanding of narrative and competition, interaction and presentation. Video games must contain enough complexity to generate dozens of hours of continuous engagement, and yet enough simplicity to seduce a new player quickly and easily.

At the same time, like an artist leveraging the voice of their medium, great gamemakers make the most of their medium – technology.  Just as a sculptor works with stone differently than brass, so too a great gamemaker will work differently depending on the platform.

When I began the graduate program in Computer Science at Stanford in Human Computer Interaction, I remember evaluating in detail the genius behind the original Mario 64 video game. Nintendo, the company that effectively saved video games in the late 1980s, had managed to take the standard 2D platform game, and elegantly translate it to 3D. More importantly, they had expanded the definition of fluid 3D control with their new controller, which allowed for incredible freedom of expression. They created a world for Mario that was 3D, and yet felt contiguous with the previous Mario properties in a way that didn’t seem bizarre like Disney’s attempts at a 3D Mickey.

Spore looks like one of those singular events in gaming, like World of Warcraft, that will take a genre to a new level. I have every confidence that Will Wright is going to launch another masterpiece.

The only question is… can I really wait for Maxis/EA to release a Mac version?

Blogs I Read: Rogelio Choy

Thought I’d give a quick shout out to another eBay-er who has a far more sophisticated and long-standing blog than myself.

Rogelio Choy

Ro spent a number of years managing market development for eBay’s developer program.  He now manages the Parts & Accessories business for eBay Motors, another one of eBay’s great tailored shopping experiences.

Ro often posts about startup activity, and hot water cooler news about web companies.

A sample of his most recent post (as of 10/22/2006) is here.

Blogs I Read: 2Million

This is another personal finance blog that I’ve started reading. It was references on My Open Wallet.

I found it through this recent post on calculating the benefit from renting out an old property instead of selling it:

The Real Return on My Rental Property

Here is the link to the blog itself:

2Million – My Journey to Financial Freedom

While I doubt I’d ever have the guts to post my personal financial details online, we are so lucky to have people like this posting out there. I myself have wondered if my wife and I should consider keeping our first house as a rental property when we eventually upgrade.

Check it out and let me know what you think.

Make Love, Not Warcraft

I found this posting of the South Park episode 1008, Make Love, Not Warcraft today on Tony Chor’s blog.

Make Love, Not Warcraft

If you hate South Park, don’t bother clicking. There is nothing so redeeming about this episode to change your mind. But, if you are a fan of online gaming, you might just find this episode to be hilarious.

The video is hosted at dailymotion.com here.

As a side note, Tony Chor is a friend from college who went into program management at Microsoft around 1990. He currently is the Group Program Manager for Internet Explorer 7, so they are all celebrating their recent release.

In a funny twist of fate, another friend of mine, Michael Schroepfer, is currently the VP of Engineering for Mozilla, responsible for Firefox 2.

Small world, huh?

Tony’s blog is here. Mike’s blog is here, although he hasn’t posted in a few months.

Invisibility & Cloaking Experiment Successful

Any fan of Star Trek knows all about “cloaking” technology.  Well, we’re one step closer as of yesterday.

LiveScience.com – Scientists Create Cloak of Partial Invisibility

Interestingly, while groundbreaking, the basic concept for cloaking has been worked out quite well in the science fiction community.  This experiment seems to confirm the basic approach:

Bend light around you, and there will be no reflection of light for an observer to see.   The experiment used the latest technology in metamaterial fabrication, and was limited to the microwave spectrum.  It also wasn’t perfect, with some small amount of distortion & reflection.

Still, it’s an impressive demonstration, and it’s extremely likely that this technology will progress with nano-materials to true cloaking capability at a variety of wavelengths, including visible light.

Most of the coverage I’m reading argues that this will be of limited use, largely because unlike Harry Potter, when you bend light around you, none of it is captured resulting in an inability to “see” outside of the cloak.  You are invisible to others, but others are invisible to you.

It seems to me that there is an easy solution to this:  the device in the cloak needs to be able to capture a percentage of light hitting it so it can “see”, but then have an energy source to duplicate the signal with sufficient fidelity to make it appear that the light was never captured at all.

I love seeing metamaterials play a strong role here.  As a trivia point, I originally planned to major in Molecular Biology at Stanford.  But my freshman year, I took an introductory course in Material Science & Engineering, and I fell in love with the science.  I ended up majoring in Computer Science, but Material Science was my “first love” in the Engineering School.

The advances in materials are every bit as breathtaking as the advances in software these days.  There is something magical about creating these materials with almost magical properties.

Any sufficiently advanced technology is indistinguishable from magic.”
— Arthur C. Clarke

Playstation 3, Uncanny Valley & Product Design

Like most tech geeks, I’m excited about the new wave of video game consoles coming out this year.  Xbox 360, Playstation 3, Nintendo Wii.  You name it, I want it.   This despite the fact that with work & a family I rarely have time to play video games anymore.

I came across a PS3 article yesterday that mentioned a term I had never heard before, but that I thought crystalized a phenomenon I’ve personally theorized over the years.  It’s called Uncanny Valley.

PS3 article here.  Wikipedia for Uncanny Valley here.

Uncanny Valley is a theory borrowed from robotics that says that when you have something relatively non-human like a puppy or a teddy bear, people will anthropomorphize it and like the “human-like” qualities of it.  However, if you make something too close to human, like a robot, people start to dislike it strongly as they focus on some key, missing detail.  Think about the uneasy feeling around corpses, zombies, or prosthetics.

The article makes the point about recent computer animated movies like Polar Express and the next generation consoles have run into this problem.  The computer animation is getting more realistic, but ironically people like it less than stylized, non-realistic graphics like The Incredibles.

I think this is a fantastic insight, and it goes beyond computer graphics and robotics.

As a software engineer and product manager, I have always been fascinated with the difficulty companies have migrating between major versions of platforms.  In most cases, no matter how good the new version is, a significant minority will hate it and complain ferociously about the disruption of the change.

Naturally, people have tried to solve this problem by trying to make the new version “feel” as close to the old version as possible.  Ironically, this seems to fan the flames even more as people focus even more on small differences.

Some of the most successful transitions, like Apple made from classic Mac OS to Mac OS X have been based on specifically not trying to make the new work the same as the old.  Sure, there are elements in common, but with Mac OS X Apple specifically did not replicate either the classic Mac OS Finder, or the NeXTStep browser.  They did borrow some of the better ideas from each.

I don’t want to turn this into a flame war about whether or not you like the UI decisions Apple made.   Instead, I just want to let this new insight flow around inside my head, and think about how it applies to various situations in life.

To my theory about people being “predictably irrational” – this seems like a truly generalized insight.  For human perception, sometimes being too close to something, without matching it, can be worse than establishing clear and thoughtful differentiation.

When I now look back on the product and design decisions we have made with eBay Express, I have new insights into the decisions we made.  We didn’t do it on purpose, but our rigorous focus on building the most convenient, multiple merchant, fixed-price shopping  experience has given the site an identity that is clearly differentiated and unique.  The site clearly evokes eBay, and many of the strengths of the eBay brand and community, but it offers a clearly differentiated experience through every page.


Welcome to Ununoctium (Element 118)

Just a quick article that I had to post.

The Seattle Times: Nation & World: Heaviest known element created

Ever since I learned about basic chemistry, I’ve had an unnatural affection for the periodic table. What an amazingly elegant and simple roadmap to understanding the composition of matter.

I’m not sure what we’re learning at this point as we built heavier and heavier elements, but for some reason, I still love the fact that we have scientists pushing forward our understanding of matter in this way.  This one was particularly interesting, because there has always been something special about the noble gases, and this one was the blank spot on that last row.

Let’s hope they give it a better name than Ununoctium

Apple license Mac OS X to Dell?

“Those who cannot remember the past are condemned to repeat it.”
Life of Reason, Reason in Common Sense, Scribner’s, 1905, page 284
George Santayana

“The future success of Apple, Dell and Intel lies with a licensing deal between Steve Jobs’ company and the PC maker according to analyst Gartner,” Andrew Donoghue reports for ZDNet UK.

The ZDNet article is here.  The MacDailyNews coverage is here (the commentary always cracks me up).

I happened to be at Apple Computer in 1996-7, and I remember quite well the launch of Mac OS licensing, and the eventual cancellation by Steve Jobs.

This idea is one that MBAs just love… regardless of the economic reality of the process.

The basic problem with OS licensing for Apple is easy.   Yes, the profit margins are much higher.   But the aggregate margin dollars are much lower.

Sell 10 copies of Mac OS X to Dell for $50 each.   Even if the margin is 95%, that is a $450 profit.

Sell 10 iMacs for $1000.  A margin of 20% gives you $2000 profit.

End result: Apple would need to expand Mac OS marketshare by 4-5x to make exactly the same profit they do today on the Mac.

It’s not impossible, but the problem is the transition.  What Apple learned during licensing is that when given the option to buy a non-Apple Mac, a lot of existing Mac users took it.

These are Mac users who used to give Apple $200 profit each, and they switched to giving them 1/5 that amount.

That means Apple would have to shrink to a company with less revenue and less profit for several years, in order to hopefully someday capture sufficient marketshare to exclipse their old numbers.  An uncertain bet, given the lockdown that the Windows monopoly has on the desktop.

Unfortunately, I’m not a Gartner subscriber, so I can’t read the original report.  But I feel like I’ve read 100 like it in the past 20 years.

None of them ever explained how Apple would live through the process.   What’s worse, is that Apple actually tried this already.  They gave in to the overwhelming pressure of management consultants everywhere.

Maybe there is an answer now.   Maybe the iPod business gets so large that Apple doesn’t really need the Mac profits anymore.  But I doubt it.

This is a good lesson for all companies that have very profitable businesses that are lower margin.  It’s wonderful to see a promised land with higher margins, but make sure you think through the transition.

In evolutionary biology, they refer to this problem as a “local maximum”.  The problem is that evolution can incrementally push you towards a solution that is better than any other incremental step – but it’s still not the ideal solution overall.

It happens in business as well.

By the way, if you didn’t hear, Apple is delivering numbers that no one would have ever thought possible in 1996.  Q3 earnings here.

Dow 12000? Could have been 22000! Berkshire Hathaway in the Dow Jones Industrial Average.

Big news this week. The Dow has closed over 12,000. Whoopee.
Sometimes, I am amazed at how incredibly stable certain staples of culture can be, even in the face of overwhelming logic & reason.

One example of this is the continued fascination that people have with the Dow Industrials index. This group of 30 stocks has changed over the years, but dates back over 100 years (1896), ever since Dow & the Wall Street Journal attempted to capture a measure of the “Industrial Strength” of the US Economy.

The problem is, the equation they used to calculate it is nonsensical. Literally.

The Dow Jones Industrial Average is a “price-weighted” index. This means that a $1 move in a $25 stock is worth more than a $1 move in a $10 stock.

This, of course, makes absolutely, positively no sense.

Now, a “market-capitalization-weighted” index, like the S&P 500, makes sense. An “even-weighted” index makes sense. Even some of the cool new “fundamental-weighted” indexes, based on figures like the revenues or cash flows of companies makes sense.

But a price weighted index makes no sense. If a stock in the Dow Jones splits 2:1, it’s future impact on the average will be lower than if it never split at all.

This, compounded with the incredible unpredictable and poor timing that the index owners have used to add & remove stocks from the index has led to extremely unpredictable performance.

There is a really great piece in Business Week that illustrates how ridiculous this index is.

As you may have heard, Berkshire Hathaway, Warren Buffet’s company, hit its own milestone lately by trading at $100,000 per share. Yes, that’s right. The reason it is so high is that they have never split their stock, and it has compounded at extremely high rates since the 1960s.

Can you imagine what the Dow would be like if it had included Berkshire Hathaway as one of its stocks (which would be easy to justify)?

The answer is: if they had added it in 2000, the index would now be at 22000!

Buffett’s Baby: Too Big for the Dow

Despite this, every newspaper and television show seems to highlight this milestone for this nonsensical financial metric. And it really does influence investor behavior. I have family members who have told me they are reluctant to buy stocks right now because “the Dow is so high”.

For the 20 or so readers of this blog, hopefully now you know the truth. Spread the word. The DIA is meaningless.