The 22 Immutable Laws of Marketing

Written on July 20, 2014. Written by .

Overview of the basic concepts of marketing. The laws are simple, but they aren’t always obvious. The emphasizes that successful marketing is more about appealing to the customer’s psychology than their rational decision making process.

★★★★

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Crossing the Chasm

Written on June 30, 2014. Written by .

This book provides a great mental model for how high-tech marketing works. It presents a technology adoption bell curve divided into customer groups based on how early they will adopt a new technology. The groups correspond to innovators who try new technologies for fun, early adopters (or visionaries) who are the first to find a real practical use for the product, the early majority (or pragmatists) who will adopt once a new technology has been proven by some of their peers, the late majority who wait to adopt until it everyone else already has, and the laggards who resist adoption for as long as possible. The Chasm refers to the gap between the early adopters and the early majority, which is a difficult transition. One of the key points is that most customers are looking to other customers for purchasing recommendations, which creates a chicken and egg problem that is best solved by appealing the the innovators. However, innovators don’t usually like to pay for technology, so you may have to wait until you get to the early adopters before the money starts coming in. This mental model applies to technologies that the author refers to as “discontinuous innovation”, which means a technology that requires a significant change of behavior for the customer.

★★★★★

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The Black Swan

Written on June 18, 2014. Written by .

This book is about the idea that people over-rely on the gaussian distribution and that big events happen much more often than a gaussian distribution would predict. It’s an important concept, but there wasn’t much useful information in the book.

★★★★★

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Manna: Two Visions of Humanity’s Future

Written on June 18, 2014. Written by .

I really like how this book addressed the issue of technological unemployment. It depicts a future in which an artificial intelligence called “Manna” is used to direct low-paid employees through headsets to optimize their performance. It would give step-by-step instructions to employees for how to cook a hamburger, take out the trash, or restock the shelves. This eventually leads to a fairly dystopian society where most people are on welfare. On the other hand, Australia ends up being a robot-managed co-op that is depicted as a utopia. I think it might be difficult to setup such a large co-op system, but if it could be setup it might be a better alternative. Even if a co-op were established, it would likely rapidly fall behind the pure capitalist economies because capitalism is more economically efficient, despite the fact that a large portion of the population could be left behind. So there were some aspects that were a bit implausible, but the technological unemployment example was very interesting.

★★★★

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Net Neutrality vs Freedom

Written on May 15, 2014. Written by .

In my last post, I discussed some problems with the general concept of net neutrality, but in this post I want to discuss net neutrality more concretely and in the sense that most people are talking about online.

isp

The general assumption is that every user of the internet, whether they are a content provider or a consumer, pays for their connection to the internet at a certain service tier, and that covers all their network costs. This is a nice simple model. For simplicity, we are ignoring the costs associated with the transmission through the internet, which is bundled into the costs each user pays.

A packet traveling between X and A will be prioritized according to X’s service tier between X’s server and the internet, and according to A’s service tier between the internet and A’s house.

Net neutrality suggests that because the whole link has been paid for by one party or another, it doesn’t make sense to “double dip” by charging both X and A for service over the same part of the network, namely the ISP’s part of the network.

Now in a sense, both X and A are users of the ISP’s network. Every packet on the internet has a source and a destination, and both the source and destination benefit from the connection. Similarly, cell phone companies in the US charge by the minute for both incoming and outgoing calls. This could be considered double-dipping, but since the situation is already so symmetrical (both parties talk and listen), it actually seems more fair than just charging the caller as some other countries do.

So even though it may be A who is watching a movie on Netflix (server X), Netflix is simultaneously leveraging the ISP’s infrastructure to run their business. But customer A already paid for internet access of a certain tier, so a net neutrality advocate would suggest that customer A has already effectively paid on Netflix’s behalf.

The question here is “Has customer A actually paid the total fee for using the ISP’s network on behalf of X, Y, and all other remote sites?”. If A’s contract with the ISP states that the service is “remote party neutral”, then they have paid for it and it would be a contract violation to filter based on the remote party. In this case, there is no need for net neutrality regulations because standard contract law already guarantees that the ISP can’t prioritize connections to X over connections to Y. However, if the contract does not stipulate this, then it may be the case that A hasn’t actually paid for such a privilege. The ISP may have offered a lower rate subject to certain restrictions.

Now why would the ISP even bother to offer a restricted plan? One possibility is that they are also a cable TV company and they want to block Netflix because Netflix is costing them cable subscribers. I know a lot of people get upset by this, but if you think about it, that should be their right. If you do the work of laying down cables and launching an ISP, you should be able to do whatever you want with it, even run your business into the ground with poor service. Sure, it sounds like it will be bad for consumers, but sometimes it’s good to give a company enough rope to hang itself because that will make it easier for competitors to enter the market. If you force a company to be just good enough to deter competitors from entering the market, you may actually be helping a bad company retain their monopoly.

But realistically, I don’t think even bad ISP companies are that dumb. The reason why they are interested in charging content providers is because their current business model is economically unstable. By unstable, I mean that there are alternative business strategies that would outcompete them if implemented. This concept is the business analogue of the “evolutionarily stable strategy (ESS)”. It is unstable because some customers are getting a better deal than others. People are paying for download rates, but they are not paying based on the quantity that they download. So those customers who download a larger total quantity of data are getting more service for the same price as other users on the same tier. If a competitor ISP charges people for what they actually use, the lower utilizing customers will switch to the competitor for the lower prices and the original ISP will have to raise its prices for the higher utilizing customers because the lower utilizing customers are no longer subsidizing them. So in this case the new ISP gets all the lower utilizing customers and half the higher utilizing customers (since both ISPs end up with the same price for them). That means that the new ISP gets more customers and outcompetes the old ISP.

Now probably the simplest option is for the ISP to just add a per-GB fee to their pricing structure. That would be an economically stable strategy from a pricing standpoint. But maybe the ISP assumes that people just don’t like per-GB fees, perhaps due to their market research. So then the ISP notices that their users fall fairly neatly into two categories: those who use streaming video services and those who don’t. The ISP realizes that they can effectively charge per GB without adding per-GB fees by charging a flat rate that is higher for customers who use streaming video. This strategy mimics the economically stable strategy without upsetting customers over per-GB fees. It is a business optimization, created in response to market pressures.

What about startups? If content providers have to pay every ISP in the country for fast-lane access to users, won’t that make it expensive to start a new streaming video service? Well, it already is quite expensive to start bandwidth-intensive internet companies. There are always barriers to entry in a business; that’s no reason to make laws that arbitrarily threaten other businesses. A startup might have to rollout their services one ISP at a time if they don’t have enough funding to cut deals with all ISPs at once. And really that is the worst case scenario. More likely the ISP will only be throttling the big names like Amazon and Netflix, which would actually provide a competitive advantage to startups because they would get fast-lane access without paying the fees that the big names pay.

And we haven’t even considered the unintended consequences of net neutrality regulations yet. For example, if a group of hackers launched a cyber-attack on one of the ISP’s customers, flooding the ISP’s pipes with packets and bringing the ISP’s services to a crawl, are we saying that the ISP should be legally forbidden from doing anything to fix the situation? That’s what straight-up net neutrality would suggest. Even if you wrote an exception for cyber-attacks into the legislation, what happens when a legitimate service comes out that effectively does the same thing? Perhaps a service that pings every computer on the internet many times per second, like a search engine spider, except that it indexes all nodes on the internet instead of just web servers. The customer isn’t requesting that traffic at all, so does it still make sense to say that this traffic is already paid for by the customer, or is it a form of freeloading by the remote service? You can probably work around this issue by making a net neutrality exception for anything that the customer didn’t request, but now it’s getting more complicated because you have to define what that means and it goes to show that making laws can cause problems you didn’t anticipate.

The bottom line is that businesses should be free to do business and to try any optimization they want as long as they aren’t committing fraud or violence. If they provide terrible service, the free market will fix the problem. Monopolies almost never last long and they only exist at all if they are doing a decent job and/or the government is helping them. And yes, governments are helping monopolies by making permitting processes difficult and rights-of-way access expensive. Piling on more government legislation (in the form of net neutrality regulations) is not the solution to having too much government regulation. The solution is to fix the problem at its core, reduce regulatory barriers, and encourage competition. I’m confident that we’ll retain remote-neutral internet access if that’s what the people really want. Promote freedom, not net neutrality.

Icons in the image are from the Oxygen Icon Pack, except the server which is from Itzik Gur.

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Net Neutrality is Wrong

Written on May 10, 2014. Written by .

EDIT 5-15-14: If you believe that I’m using the wrong definition of “net neutrality”, see this comment.

Net neutrality is factually, practically, and ethically wrong.

I’ve never disagreed with the ACLU before, but if there is one thing that I’ve learned it’s that every organization has some kind of unfair bias to help unify it.

Net neutrality is factually wrong because it doesn’t exist. Every ISP I’ve ever used has offered multiple pricing tiers with different upload and download speeds. That means some users will have more bandwidth than others, violating the idea of net neutrality (see the Wikipedia definition).

Net neutrality is practically wrong because enforcing it makes the internet slower and less efficient than it would be otherwise. If ISPs can charge more for high-bandwidth connections, they will have the financial resources and incentives to upgrade their infrastructure to support them.

Net neutrality is ethically wrong because it means that low-bandwidth sites have to pay more to subsidize the costs of high-bandwidth sites. And it means that some people’s naive opinions on how ISPs should operate their businesses are imposed on ISPs by force instead of by free market pressures.

Ironically, the phrase “free and open internet” has been used frequently in support of net neutrality regulations, but imposing a law is the opposite of freedom. The correct way to “vote” for what you want is to vote with your money and only pay for services that you support. There is no need to fear the loss of net neutrality because the free market, consisting of all of our money-votes, will enforce the right level of net non-neutrality.

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Is taxation theft?

Written on March 4, 2014. Written by .

Preamble: When discussing the question “is taxation theft?” people often commit the logical fallacy known as a “red herring” by diverting the discussion to the possible justifications for taxation rather than discussing the original question, which is whether taxation satisfies the formal definition of the word “theft”. Try to be cognizant of this.

To determine whether taxation is theft, we first need a complete definition of theft. If the definition refers to other vaguely defined terms, then it is not compete until the other terms are defined.

Merriam Webster defines “steal” (the verb form of theft):

“to take (something that does not belong to you) in a way that is wrong or illegal.”

The term “wrong” is vague and the term “illegal” is essentially a reference to the law book of the jurisdiction in which the act took place. To convert this into a complete definition, we would need to insert a definition of “wrong” and insert the relevant legal snippets from every jurisdiction in the world with conditionals for each and conditionals for each time period during which the laws differed. The complete definition would be thousands of pages long! I don’t think that is what we mean when we think of the word “theft”.

More fundamentally, the Merriam Webster definition is not a philosophical definition because a philosophical definition does not depend on the decisions of a group of individuals as is the case with law. Questions of morality are not decided by government decree. When we ask a question like “Is taxation theft?” we can’t just say “Well, a group of a individuals got together and said the answer is ‘no’.” That misses the whole point of the question. We are trying to find an objective definition that is not contingent upon personal biases or opinions.

Wikipedia has a complete philosophical definition:

“theft is the taking of another person’s property without that person’s permission or consent with the intent to deprive the rightful owner of it.” - Wikipedia

This definition does a much better job of capturing our intuitive notions of theft. However, it still has some problems. For example, it doesn’t specify how the consent is obtained, so a thief could obtain consent by pointing a gun to the owner’s head.

To construct a better definition, we will collect a set of uncontroversial examples that represent our common notion of “theft” and then find a definition that satisfies all the examples.

Positive Cases (Definition of “theft” should be satisfied)
1. Larceny – Someone points a gun at you and demands your wallet
2. Embezzlement – You are getting your car repaired and the shop sells your car and keeps the money
3. False Pretenses – A vendor sells you a gold-plated coin, but tells you that it is solid gold

Negative Cases (Definition of “theft” should not be satisfied)
4. Foreclosure – A bank takes possession of your house against your will based on the terms of a lien that they hold on the house
5. Accidental taking – You accidentally pick up the wrong jacket while leaving the party
6. Finding lost property – You pick up a dollar bill that was dropped in the middle of the park
7. Taking own property – You eat the meat in your refrigerator
8. Borrowing without consent – You borrow your housemate’s car who is on vacation to drive your friend to the hospital

An adaptation of Wikipedia’s definition that satisfies all of these constraints is:

theft is the taking or withholding of property without the owner’s prior voluntary informed consent and with the intent to deprive the owner of it

“Voluntary informed consent” is a legally defined term. New York State defines “Voluntary informed consent” (NY Public Health Law, Article 24-A; Section 2442; March 1998) as the legally effective knowing consent of an individual or his legally authorized representative, so situated as to be able to exercise free power of choice without undue inducement or any element of force, fraud, deceit, duress or other form of constraint or coercion. [Source]

The following notes show how each example above is satisfied by the given definition.

Example 1: taking without voluntary consent
Example 2: withholding (the proceeds from the sale) without consent
Example 3: taking without informed consent
Example 4: Contract with bank gives prior consent
Example 5: No intent
Example 6: Lost property is no longer property
Example 7: Not depriving the owner
Example 8: Not depriving the owner

If you accept this definition, then taxation is theft (by definition). Also, when a doctor bills a client without mutually agreeing on a price before rendering services, that is theft because the client did not give informed consent because they were not informed of the price.

If you don’t accept this definition and think that taxation is not theft, then I encourage you to construct a complete philosophical definition of “theft” that taxation does not satisfy while still satisfying all of the example constraints. If you succeed, please post your definition in the comments.

Epilogue: It is interesting to note that there are some forms of theft that can be justified and there are some forms of government revenue that are not theft.

Theft that can be justified:

Government revenue that is not theft:

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The Communist Manifesto

Written on February 11, 2014. Written by .

The very beginning was alright. I mostly agree with some of the complaints about society that they have, e.g. that workers are exploited by capitalists and that jobs have become more dehumanizing and/or less natural for humans to do. However, I was appalled at the leap that they took from these complaints to just prognosticating a revolution of extreme evil. The way it was written was particularly disturbing. The wording wasn’t that of promulgation, but as if it were already inevitable that the proletariat would unite and rebel against the bourgeoisie. They showed no shame in advocating violence to achieve their ends. And there was very little rational argumentation or philosophical justification. It came off as more of a call to arms than a manifesto.

★★★★

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The Lean Startup

Written on January 10, 2014. Written by .

This book talks about how to apply the scientific method and the principle of evolution to business development. The most valuable thing I got from the book was the ability to look at business development from this perspective. It also helped me to appreciate the risk of taking too long to release your product. A key concept in the book is that many businesses fail by making things that people don’t want, so it is very important to test your idea as early as possible, sometimes before even making the product. The specific recommended strategies for doing this were a little weak, but that is to be expected because it is the type of thing that is probably very dependent on the particular business.

★★★★

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A Buddhist vs. a Materialist on Consciousness

Written on November 30, 2013. Written by .

This is a hypothetical conversation between a Materialist (who believes that consciousness arises from the physical world), and a Buddhist (who believes that everyone shares one consciousness).

Buddhist: How many consciousnesses does one person have?
Materialist: One.
Buddhist: What part of the body is responsible for the consciousness?
Materialist: The brain.
Buddhist: If someone’s brain is split in half by severing the corpus collosum, are they still conscious?
Materialist: Yeah, I’ve heard of those split-brain people. They are still conscious.
Buddhist: Is the consciousness located in one side?
Materialist: I’m not sure, but I don’t think so.
Buddhist: So there are two parts that can’t communicate, but are both conscious. Doesn’t that mean that there are two consciousnesses?
Materialist: I guess so.
Buddhist: Well if there are two consciousnesses, then were there also two before the brain was split in two?
Materialist: Well, maybe when they are connected they fuse into one consciousness.
Buddhist: Interesting. So if you take two conscious things and connect them in a certain way, they become one consciousness? What kind of connection would that require?
Materialist: The connection would have to provide some way to share conscious experiences.
Buddhist: What does “sharing conscious experiences” mean more technically?
Materialist: Inducing another mind into neural activity that corresponds to some conscious qualia.
Buddhist: Could that be done remotely? For example by implanting a radio to neuron interface into two people?
Materialist: Yeah, I don’t see why not.
Buddhist: Well, aren’t our eyes just like radio to neuron implants operating on a different frequency?
Materialist: Yeah, though they are input only. And it isn’t clear if they are transmitting the right information to qualify as sharing consciousness.
Buddhist: True, but if two people are looking at the same object, they will both experience a related conscious experience. And though their eyes are limited in output capabilities, they do have speech and movement.
Materialist: It’s still not the same as the connection between the left and right brains of one person. The number of neural connections is so much lower.
Buddhist: That’s true, but our senses are so fundamental to consciousness. Can you imagine what conscious would be like if you had no senses? A connection through our senses can be significant regardless of the number of neurons involved.
Materialist: Even if it is significant, I’m not sure if I would say that two people have “one consciousness” just because they are sharing and mixing their conscious states through their senses.
Buddhist: It seems to have all the properties you suggested, at least qualitatively.
Materialist: I guess it’s a quantitative distinction. I do see that there is a kind of overlap, but at the same time there is still separation.
Buddhist: That’s what we call non-dualism.

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