How an obscure brand conquered the world

Posted on April 24, 2019

Drugs and drink

As 19^th-century America regained its footing after the Civil War, the dislocation caused by rapid urbanization and industrialization created a fertile environment for innovators and hucksters of all stripes. Rising prosperity coupled with the intensifying rhythms of life shined a spotlight on various diseases, both real and imagined.

Curiosity and gullibility often outstripped common sense as people sought to treat their ailments, which could include specific symptoms like migraines or indigestion, or vaguer complaints like a surfeit of nervous energy. Sufferers turned to a growing number of tonics and liniments and oils and other concoctions of dubious efficacy.1 These were sometimes spiked with exotic substances but just as often had no active ingredients. Nonetheless manufacturers would make sweeping, unsubstantiated claims to cure all manner of diseases.

Creators of these so-called patent medicines, with their quaint and hyperbolic names, could generate extraordinary fortunes before interest evaporated and the market moved on to the next big thing.2 Entrepreneurs looking to get rich would hawk their creations to prospective buyers through new forms of advertising, crowded into newspaper pages and painted on every available surface, dominating the public consciousness. The lines demarcating the fledgling pharmaceutical industry from general commerce had yet to form, so the market was open to anyone with a persuasive pitch. Read more…

In their similarly frantic desire for wellness, modern Westerners haven’t advanced as much as we like to think. ↩
The industry is more formalized and respectable today, but the billions of dollars coursing through the healthcare system suggest a similar mad scramble for profits. ↩
Notably including the inventor we’re about to encounter, John Pemberton. ↩
“The” in the corporate name always being capitalized, to distinguish the current iteration from its predecessor company, which it supplanted after some truly byzantine corporate machinations. ↩
This was its slogan in the U.S. in the early 1980s, the “it” being unspecified but broad enough for the hearer to imbue it with whatever aspirations he saw fit. ↩
Someting validated personally: when I asked the tour guide at Atlanta’s World of Coca-Cola Museum about this unsavory part of the company’s heritage, he was quick to deny it, but without the indignation of one being falsely accused. ↩
One summer in my college years I was fortunate to spend a week in an isolated village in Mali that lacked electricity, telecommunications, or plumbing. But even there one could find lukewarm Coke, cooled however slightly from the baking ambient temperatures by a small generator-powered refrigerator in the back of a tiny shop. ↩
Should humans ever colonize the Moon, the Coca-Cola supply rocket won’t be far behind. ↩
Even billionaires are not immune: Warren Buffett is famous for his predilection for Coke, which he goes through at the diabetes-defying rate of 5 cans (1.75 liters) a day. ↩
The diamond industry pulled this off to great effect, essentially telling men that the best way—even we dare say the only way—to prove to your bride-to-be that you love her is by giving us a whole lot of your money. ↩

Stand apart by doing the same thing

Clusters of potential

Posted on April 17, 2019

Cultural masala

Prior to the passage of the Immigration and Nationality Act in 1965, the quota for Indian immigrants to the United States was fixed at 100 persons per year. This was infinitesimal relative to the populations of both the sending and receiving countries, especially considering that even then India had roughly half a billion people.

The lifting of this restriction unleashed a wave of entrepreneurial immigrants. This group included numerous budding restaurateurs who brought the varied cuisines of their home country to their adopted cities. Most Americans at the time were unfamiliar with Indian cooking, so local support networks and a natural customer base of those from similar backgrounds meant these early establishments were often located near each other.

A curious thing happened starting in the 1970s, as the broader South Asian population grew larger and more restaurants opened. Instead of spreading out across their localities to reach more potential consumers with their curries and dosa, many prospective owners chose locations directly adjacent to the few existing ones. Rather than staking out new territory, these restaurants and related businesses chose to go where the competition was most intense. A dozen eateries featuring comparable Indian or Pakistani or Bangladeshi cuisine could be reached within a few minutes’ walk. Read more…

Despite some common features across regions a monolithic Indian cuisine does not exist, and what is commonly known as Indian food in the West is generally that of a small part of northern India. ↩
Prodigious appetites excepted. ↩
The phenomenon is not exclusively American, with London in particular recognized for the number and quality of its South Asian restaurants, notably the numerous options lined up on Brick Lane. ↩
Doubly true if the clientele has a high percentage of Nepalis, who would know the real deal and quickly shun impostors. ↩
In the category of electric vehicles, some assume that Tesla is the future Ford, while others believe it will fade after performing its thankless pioneering role. Time will tell. ↩
These are sometimes segregated by price point, with the luxury marques off in their own clusters to avoid any association with their plebeian brethren. ↩
An example of Hotelling’s Law. ↩
Which has been known to irk city officials and bewildered pedestrians alike. ↩

Bundling value and offers you can’t refuse

But wait, there's more

Posted on April 10, 2019

Classroom daydreams

Although Harvard Business School student Dan Bricklin was physically present in class, his mind was elsewhere. He had become increasingly preoccupied with the inefficiency of analyzing business problems by means of calculator and paper, which often required tedious reworking of entire sequences when initial conditions changed. He envisioned a computer program that could reference data laid out in a grid and automatically recalculate it when needed, prefiguring the development of what is today known as the spreadsheet.

In early 1979 Bricklin cofounded a company that produced the first commercial spreadsheet software, named VisiCalc.1 Although it was the innovator, in the heady early days of the personal computing revolution his product would soon be eclipsed by the cryptically-named Lotus 1-2-3, not coincidentally developed by an early colleague of Bricklin’s. This program would go on to define the market through the 1980s. It had the good luck of being tied to the fortunes of the IBM PC, which went on to dominate the business world, unlike the Apple computers for which VisiCalc was first developed.

Those below a certain age will have never heard of either of these trailblazers, instead knowing the spreadsheet as the domain of Microsoft. Its now-ubiquitous Excel entered the fray late, but when paired with the growth of its Windows operating system it would go on to become the de facto global standard, relegating Lotus 1-2-3 and VisiCalc to historical footnotes. Read more…

His invention is commemorated in the classroom where he conceived of it by a plaque, which includes some of his initial sketches showing how a spreadsheet could work. Even Harvard formally acknowledges that not paying attention to the professor can pay off. ↩
And if you are currently using any of the open-source competition, bravo for your iconoclasm, but I’m guessing you don’t deal with corporate IT on the regular. ↩
A customer who probably should be sleeping, given the late hour at which many of these come on, which is not conducive to clear financial decisions. ↩
Unless you follow college sports, reality television, historical dramas, cooking, adventure travel, children’s cartoons, and political news with equal fervor. ↩
In a remarkable example of either coincidence or cunning, users of the Macintosh version of Microsoft Office 98 would see its menu icon for Internet Explorer appear larger than those of other applications, but only when Netscape was also running. I can find no evidence either way as to whether this was intentional, but it has a strong whiff of subliminal messaging. Somewhere in Redmond, a programmer knows the truth. ↩
No, you probably don’t need the upgrade/platinum package/full coverage. ↩
Be careful not to run afoul of your local regulators though, especially if you have what looks like a monopoly. ↩

Weather forecasts, big bets, and predicting the future

Effects and causes

Posted on April 3, 2019

Fair winds and following seas

For thousands of years people attempted to predict the weather, with limited success.

A rich folklore developed around various methods of forecasting, including the color of the sky, or the behavior of animals, or even aching joints in the elderly.1 In a few places and under certain conditions these could loosely be relied on. But their broader predictive value was low, and these forecasts had limited ability to see beyond the next weather system.

Humans remained at the mercy of wind and rain when going about their daily routines, farming, or traveling. Voyages by ship were especially precarious, as seas could easily be deadly for vessels caught unaware by storms.

This all changed in a meaningful way on August 1, 1861, when the British Meteorological Office issued its first official forecast, covering the weather two days out for selected cities across the U.K. and on the nearby continent. So began the practice of systematic predictions shared with the general public, providing the ability to plan outdoor activities and subtly influencing the rhythms of commerce. Read more…

One such method was even mentioned by Jesus 2,000 years ago, when he noted that the redness of the sky was used as a predictor for stormy weather by the scholars of the time. This is due to refraction of sunlight on clouds, captured in the more recent proverb “Red sky at night, sailor’s delight. Red sky in morning, sailor’s warning.” ↩
The staggering mathematical complexity of forecasting means weather bureaus invest in some of the most powerful supercomputers in the world. Even then the results are not nearly as accurate as some would like, leading to the irate local television viewer putting the hapless weatherman on blast. ↩
Often finance bros, these can be recognized by their corporate-branded fleeces and the jocular manner that belies the haggard look in their eyes. ↩
More importantly, they want to identify and act on these before anyone else does, because information that is commonly known is no longer actionable, at least if you want to make a killing. ↩
Also an attempt to import some of that legendary Teutonic stability to what was a shakier British economy. ↩
Keen observers will note that this money did not materialize from the ether and was in fact provided in a circuitous way by British taxpayers, who vented their frustration on the politicians who presided over the policy, hastening their electoral decline. ↩
If nothing else the ongoing drama has introduced those non-Brits among us to the spectacle that is parliamentary debate in the House of Commons, complete with bellows for “order” issuing from its speaker, to whom members ritually bow, and the queen’s ceremonial mace, this last feature being extra foreign to Americans, what with the royal overthrow that got the country started. ↩

Not knowing what you already know

Per aspera ad astra

Posted on March 27, 2019

73 seconds

Rocket engineer Robert Boisjoly was extremely concerned.

According to his calculations, a structural component that linked segments of the system he worked on was prone to failure if ambient temperatures were too low. This part had been assigned the highest criticality level for mission success. In recent days managers had cancelled launches several times as weather issues and minor equipment failures kept cropping up. Pressure was high to stick to the schedule, but he felt strongly that another delay was necessary.

On the night before the new launch, Boisjoly and his colleagues had an intense conference call with their counterparts where he laid out his reasoning. Notwithstanding the data his team sent and an extended back-and-forth, his warnings ultimately did not penetrate the managerial bureaucracy and convince those in authority to scrub yet again. The launch was still on when morning dawned, despite record cold.

Unlike many modern missions, this one did more than loft payloads into orbit. Its technical aspects were hardly the focus, as the American public was captivated by the presence among the crew of a school teacher, who was about to become the first member of the general public in space.

It was January 28, 1986, and the Space Shuttle Challenger waited on the launch pad at Cape Canaveral on an unusually frigid day in southern Florida. The temperature was below freezing and icicles hung from the launch structure. Read more…

Despite popular perception the Challenger itself did not explode, at least not in the conventional sense of being destroyed in an incendiary reaction. It instead broke apart violently as the stack comprising the boosters and fuel tank cracked up, subjecting the orbiter to tremendous aerodynamic stress. The astronauts survived the initial disintegration as their crew compartment blew out of the vapor cloud intact, though at this point there was no conceivable rescue. They were alive, if not conscious, when their cabin struck the surface of the Atlantic Ocean a few minutes later. ↩
Along with the human tragedy and massive disruptions to NASA, another knock-on effect of the Challenger disaster was the eventual decommissioning of a planned California shuttle base, for which billions of dollars had already been spent. It was shut down without seeing a single launch. ↩
The familiar orange external fuel tank was originally painted white, matching the shuttle. NASA soon realized this was unnecessary and saved several hundred kilograms in paint weight by skipping that step. ↩
The most likely rescue scenario involved preparing another shuttle for launch in an extremely rapid manner and sending it up to transfer the astronauts. The supply of breathable air for the Columbia crew was the limiting factor, leaving only a small window when rescue was possible. This would involve numerous procedures never attempted before, seriously risk the lives of a second shuttle crew, and transfix the entire world for days. But who doesn’t want to believe that it ultimately would have succeeded, adding an epic chapter to the human story of discovery? ↩
At the end of his contribution to the report investigating the Challenger disaster physicist Richard Feynman wrote “…reality must take precedence over public relations, for nature cannot be fooled.” ↩
And if you were wondering, no, managing the people who do the work is not the core work. ↩

Sari shops and the power of reciprocity

Quid pro tea

Posted on March 20, 2019

Just browsing

A feature of the retail landscape across the state of Kerala in southern India is the large store devoted almost entirely to the sari, that single piece of fabric which, when draped and pleated in various ways, has become the default women’s garment in many parts of South Asia. These shops are stocked from floor to ceiling with tens of thousands of saris, covering the full spectrum of color in every imaginable design. They line the walls without any obvious organizing principle and are yet ordered in some inscrutable way for easy retrieval by employees.

Upon entering one of these emporiums the prospective purchaser can expect to be promptly greeted by a scrum of sales representatives, one of whom will oh-so-graciously offer a beverage of her choosing: hot tea if she wishes or perhaps something cold to better counter the tropical heat outside.1 The customer is shown to a cushioned seat from which to consider the merchandise, and upon indicating the barest hint of directional interest the staff will spring into action.

Suddenly from the stocked shelves a profusion of brocades and prints and filigrees and paisleys and iridescent silks with lace details or fringes or golden threads will be dramatically unfurled, cascading one on top of the other in front of the customer. No whimsy is too trivial to be indulged. If a different texture or a slightly deeper shade of green is sought the clerks will immediately find it and drape it over the growing pile.2 Throughout this display the customer is aware of the sheer extravagance of the effort and the knowledge that each sari will have to be painstakingly refolded and filed back in its place.

All this thoughtfulness may appear altruistic, but it conceals a far more calculated motive. Read more…

Seriously, the ratio of sales staff per shopper can easily be above 5:1, which is partly a commentary on India’s vast population and its low cost of labor. ↩
A real-world analogue of the title character’s attempts to woo Daisy through the ostentatious tossing of shirts in The Great Gatsby, which you probably read at some point if you attended high school in the U.S. ↩
The purchasers of these saris are frequently expatriates that are high on money and low on time, so these transactions are infrequent, but when they happen these stores can really ring the cash register. ↩
Even though it was over a decade ago, perhaps I should have valued my time more than the few dollars I received. In any case their social engineering was of dubious benefit, as I did not listen to the radio regularly and so sent back a virtually empty journal, which had some unknown effect on the media market of metropolitan Washington, D.C. ↩
And if you’re ever in Kerala and not sure if you want to bring a sari (or six) home with you, politely decline the coffee. ↩

Skeuomorphism and the pull of mental models

What's past is prologue

Posted on March 13, 2019

All the news that’s fit to post

The New York Times was one of the first traditional media companies to recognize the growing significance of the phenomenon known formally as the World Wide Web. It decided early on to establish a presence in this new space, launching its first public site in January of 1996. Although it was a trailblazer in an unfamiliar medium, the actual layout would have looked familiar to a first-time visitor. The home page was designed to closely resemble the front page of the printed newspaper, down to the masthead and prominent references to classified advertisements, at the time the financial lifeblood of many journalistic enterprises.

The digital format unlocked by new web browsers promised as-yet unknown capabilities. How readers would engage with the content was hard to envision. Lacking an alternative model, the newspaper’s leadership took the obvious step of translating the experience of reading the physical Times to the virtual world.

Even publications that were expressly created for the internet took an approach that seems quaint when viewed from today’s vantage point. A few months after NYTimes.com went live, a new online-only news magazine called Slate was launched with funding from an unusual patron, Microsoft.1 Shaped around the conventions of a paper magazine, it was actually designed to be printed out at home and then read much as a conventional publication would be. In its layout it aped a print magazine’s sections, and it followed their weekly, staccato publishing schedules—all despite the fact that the medium had no constraints of printing, mailing, or article length.

These were early internet examples of a phenomenon called skeuomorphism, in which objects in one medium are crafted to imitate the forms of a different one, usually a predecessor. Read more…

A place not exactly known for launching magazines. Microsoft’s track record in media generally hasn’t been the best. Farewell Zune, we hardly knew ye. ↩
And if Elon Musk has his way, to a network of cars being shot around on rocket sleds in subterranean urban tunnels, or something. ↩
And if your phone isn’t using iOS or Android, bravo for your iconoclasm. Either that or maybe it’s time to graduate from the flip phone. ↩
On the other hand BlackBerry decided to ride-or-die with the physical keyboard, itself a descendant of the typewriter. This slavish devotion to an earlier form was part of the reason why its maker was swept away so quickly and thoroughly by the touchscreen wave. ↩
Back then if you wanted to unload your futon, posting an ad in miniscule type in the back section of the local newspaper and hoping someone stumbled on it was your best option. ↩
Harvard Business School is one of the most notable innovators, investing tens of millions of dollars in the past five years under its separate HBX banner, which just now was deemed mature enough to be rebranded as HBS Online. ↩

Grocery stores and hidden business models

Show me the money

Posted on March 6, 2019

Rent the shelves

At some point almost everyone has been an unwitting participant in the anthropological experiment that is the modern grocery store. From bountiful displays of fresh produce at the entrance that entice with healthy greenery, to staples like milk that are tucked away in the farthest corners, sending shoppers past every aisle to find them, the layout has been carefully designed to extract maximum revenue. Managers place profitable items in eye-catching positions to ensure that impulses overwhelm any carefully-considered lists a customer may have entered with.1

The business model for these stores seems straightforward: source goods from manufacturers or farms, merchandise them in compelling ways, and apply whatever markup the market will bear. This seems simple enough until you realize how low the margins are in the grocery sector. Profits of 1 to 3% are the norm, leaving little buffer for any lean times or stock that fails to move.2 But this overall figure masks the parallel economy that bolsters much of the supermarket industry and is expanding into other areas of retail. Stores are increasingly making money not from selling products, but from charging fees to suppliers who want access to prime spots on their shelves.

This is possible because food manufacturers come up with thousands of new concepts every year, of which the overwhelming majority fail. There isn’t a store big enough to present all of these options to the public. Further the window to get traction is short, before antsy investors or category managers eyeing their annual bonuses bail out.3 As a result, instead of selecting goods on their own, retailers can capitalize on their scarce commodity, shelf space. They rent it out to the highest bidder in exchange for what are known as slotting fees. Read more…

Hence the checkout lanes stocked with candy at high markups, testing the will of the drained shopper who feels like he’s earned it after finally figuring out which aisle had the capers. ↩
Even juggernaut Walmart operates at around a 3% margin, making its billions from the massive volumes enabled by its scale. Despite its reputation as “Whole Paycheck,” Whole Foods isn’t much better either, with margins in the same range or just slightly higher.↩
Maybe that sixth flavor of kombucha wasn’t the best idea.↩
In 2017, Ford generated $2.2 billion in profits from financing, compared to $7.3 billion from traditional car sales, so about 25% came from financing in the most recently reported year. ↩

Solving the handshake problem

The center can hold

Posted on February 27, 2019

Things fall apart

By the late 2000s the New York law firm of Dewey & LeBoeuf had established itself as one of the largest and most prominent in its profession.1 With roots stretching back to the early 20th century, it reached its final form following a mega-merger in 2007 that brought together two firms with powerful networks. The partnership was growing, billings were up, and peers ranked it highly in multiple legal specialties.

Just five years later, after a cascade of internal failures, defections, and financial mismanagement, Dewey & LeBoeuf ceased to exist.

Its undoing stemmed from multiple factors, but what sealed its doom was leaders who were increasingly mercenary, focused less on building something enduring and more on establishing personal fiefdoms and ensuring cash flowed into their own pockets, heedless of the long-term health of the organization. When the financial crisis of 2008 dried up client pipelines, the firm quickly realized its prestige and accompanying profits were ephemeral. Read more…

Not to be confused with the firm of Dewey, Cheatham, and Howe. ↩
The solution to the handshake problem for any number n will be n*(n-1)/2, and is relatively simple to derive (e.g., for 75 people: 75*74/2 = 2,775. ↩
They also serve to keep staff in the office and working long hours. Considering the pay of Silicon Valley engineers, inducing them to stick around for a $9 sandwich is a steal for Google. ↩
Maybe not incidentally, these firms are also absurdly profitable. ↩
In one of business history’s most fortuitously-dodged bullets, the consulting arm of Arthur Andersen split off from its parent due to internal squabbling and was forced to relinquish its name, becoming Accenture. A few years later when Arthur Andersen dissolved post-Enron, Accenture marched on unscathed instead of going down with it. ↩
The profusion of litigation it spawned lasting many years seems poetically appropriate for a law firm collapse. ↩

Activation energy and making things happen

Overcome the hurdle

Posted on February 20, 2019

Get it started

It’s a safe bet that if you can read this sentence you partly owe that ability to the large quantities of hemoglobin that are being continuously synthesized in your blood. Without this essential molecule your red cells wouldn’t be able to distribute the oxygen that allows you to function. The process of creating it is extraordinarily complex, depending on several tightly-interwoven sequences and involving numerous intermediates. An especially noteworthy participant is an enzyme with the ungainly name of uroporphyrinogen decarboxylase, which plays a critical role by shrinking the time required for a key step down to milliseconds.1 Without it the production of heme would take a staggering two billion years or so to complete, which is just a bit longer than the average lifespan. It is one of the most effective biological catalysts known, allowing life as we know it to exist.

Chemistry is replete with examples of necessary reactions that proceed too slowly on their own to accomplish their intended goals, absent some energy source or catalyst that can kick-start the process. This hurdle that must be overcome is known as the activation energy. It must either be input into the system or somehow circumvented by an alternate pathway before the main work can begin. Read more…