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kottke.org posts about business

Truly limited edition music

Drummer Josh Freese is releasing his second solo album in eleven different limited-edition packages. The $75,000 option includes:

-T-shirt
-Go on tour with Josh for a few days.
-Have Josh write, record and release a 5 song EP about you and your life story.
-Take home any of his drumsets (only one but you can choose which one.)
-Take shrooms and cruise Hollywood in Danny from TOOL’s Lamborgini OR play quarters and then hop on the Ouija board for a while.
-Josh will join your band for a month…play shows, record, party with groupies, etc….
-If you don’t have a band he’ll be your personal assistant for a month (4 day work weeks, 10 am to 4 pm)
-Take a limo down to Tijuana and he’ll show you how it’s done (what that means exactly we can’t legally get into here)
-If you don’t live in Southern California (but are a US resident) he’ll come to you and be your personal assistant/cabana boy for 2 weeks.

Oh yeah, and the music on CD or via download. (thx, ainsley)

Update: Jeff Stern comments (the link is mine):

instead of 1,000 true fans, 1 wealthy fan


One flashlight per organization

Andrew Anker warns against companies having more than one “flashlight”.

This is a term I learned from a banker I worked for 20 years ago, people who shine brightly in one direction, but don’t let off too much light otherwise. Flashlights are kind of useless as board members, despite big reputations and good resumes — they’re just not lateral thinkers and don’t really want to dig in. Every company is allowed one flashlight, but it better be the CEO. It’s hard to know where to go when the light is shining in two (or more) different directions.

(thx, djacobs)


The business blogging bust

Dan Lyons, who wrote and tried to monetize the now-defunct Fake Steve Jobs blog, on the business of blogging:

Blogs can do many wonderful things [but] generating huge amounts of money isn’t one of them.

As businesses go, blogging is a lot like shining shoes. There are going to be very few folks who own chains of shoe shining places which make a lot of money and a bunch of other people who can (maybe) make a living at it if they bust their ass 24/7/365. But for many, shining shoes is something that will be done at home for themselves because it feels good to walk around with a shiny pair of shoes. Everyone else will switch to sandals (i.e. Twitter) or sneakers (i.e. Facebook) and not worry about shining at all. (via fimoculous)


Italy to the rescue

The entire collection of Kim’s Video in the East Village, all 55,000+ hard-to-find films, is now headed to a formerly abandoned town in Italy that is now run entirely by artists.

In a notice pasted on a wall inside the front door [of his video store], he wrote, “We hope to find a sponsor who can make this collection available to those who have loved Kim’s over the past two decades.” He promised to donate all the films without charge to anyone who would meet three conditions: Keep the collection intact, continue to update it and make it accessible to Kim’s members and others.

(thx, cliff)


The business of dumpster diving

Cory Doctorow profiles dumpster diver Darren Atkinson for Forbes magazine. Atkinson is as diligent, methodical, and dedicated as any successful businessman.

This is Canada, right? So there’s plenty of nights when it’s snowing so hard that you can barely see, nights that you might want to stay home instead of going out to work,” he says. “But those are exactly the kind of nights where someone might just set something out beside the loading dock, instead of putting it into the compactor. Those are the nights where you make the big score. I’ve tried to apprentice people, but they never want to do it like I do, methodically, avoiding left turns and red lights, logging what you found in each dumpster and not wasting time on the ones that are never any good, going out when the weather stinks.


Little tweaks make big money

Sometimes all you need is a little text change to save your business a lot of money. Jared Spool once helped a major ecommerce site with their checkout process. The company ended up changing the text of a submit button and making the company an additional $300 million in one year.

The form, intended to make shopping easier, turned out to only help a small percentage of the customers who encountered it. (Even many of those customers weren’t helped, since it took just as much effort to update any incorrect information, such as changed addresses or new credit cards.) Instead, the form just prevented sales — a lot of sales.

37signals recently changed how they labelled charges on credit card statements and reduced chargebacks by 30%.


Work on stuff that matters

Tim O’Reilly’s advice: work on stuff that matters.

The most successful companies treat success as a byproduct of achieving their real goal, which is always something bigger and more important than they are.

The best part about Tim’s advice is that it works in boom times *and* in a recession. I have some notes jotted down for this whole post that I’m probably not going to write about how to take advantage of the recession — yes, advantage…the gist: buy low! — and one of the main points is: recessions are temporary so take the long view and keep trying to do what is most important to you, i.e. stuff that matters.


Advertising in wireless network names

In an effort to entice their wifi freeloaders to buy more coffee, a chain of coffee shops in Holland integrated menu items into the name of their wireless network. Some network names included:

ButAnotherCupYouCheapskate
TodaysSpecialEspresso1,60Euro
BuyaLargeLatteGetBrownieForFree
BuyCoffeeForCuteGirlOverThere?

I wonder if this tactic worked. (via swissmiss)


ISO risky hugs

A columnist for the Financial Times signs up for Illicit Encounters, a site for people who want to have affairs, and finds that there are lots of men from the financial sector trolling for a bit on the side.

He said that, in a recession, people wanted hugs. This struck me as a pretty feeble explanation. Surely there are easier ways of getting hugs than putting one’s marriage on the line? Hugging one’s children or — if one is desperate — even one’s spouse might seem easier and safer.

He said that this was just the point: that the risk was the lure. That bankers are suffering from a risk deficit: their working lives have been derisked compulsorily and this could be a way of compensating by adding risk to their private lives.

Who’s gonna make the “Bankers Want Risky Hugs” tshirts? (via mr)

Update: Aaaaaaand, here’s the shirt.


The first mall

A photo from Life Magazine of Southdale Shopping Center in Edina, Minnesota after its opening in 1956.

Southdale Mall, 1956

Southdale was the first mall ever built and still stands today (I visited many times during my Minneapolis residency). The mall’s designer was an immigrant from Austria, Victor Gruen, who wanted to bring the community feeling of the European arcade to the suburbs.

Oddly, this most suburban American invention was supposed to evoke a European city centre. Hence Southdale’s density and its atrium, where shoppers were expected to sit and debate over cups of coffee, just as they do in the Piazza San Marco or the Place Dauphine. Gruen exiled cars, which he thought noisy and anti-social, to the outside of his mall. Most contemporary critics thought Gruen had succeeded in bringing urbanity to the suburbs. Southdale was “more like downtown than downtown itself”, claimed the Architectural Record. Another asserted, in a rare example of journalistic hyperbole that turned out to be absolutely right, that the indoor shopping mall was henceforth “part of the American way”.

Ironically Gruen’s creation only served to strengthen the suburban car culture that he despised. Later in life, Gruen became disillusioned with malls and their unintended consequences.

He revisited one of his old shopping centers, and saw all the sprawling development around it, and pronounced himself in “severe emotional shock.” Malls, he said, had been disfigured by “the ugliness and discomfort of the land-wasting seas of parking” around them. Developers were interested only in profit. “I refuse to pay alimony for those bastard developments,” he said in a speech in London, in 1978. He turned away from his adopted country. He had fixed up a country house outside of Vienna, and soon he moved back home for good. But what did he find when he got there? Just south of old Vienna, a mall had been built — in his anguished words, a “gigantic shopping machine.” It was putting the beloved independent shopkeepers of Vienna out of business. It was crushing the life of his city. He was devastated. Victor Gruen invented the shopping mall in order to make America more like Vienna. He ended up making Vienna more like America.

Update: Whoa, lots of email about this one, especially from Seattlites. There’s a bit of controversy that I was unaware of concerning the first mall…here’s a list of contenders. (thx, todd)


Lemonade Stand for the iPhone

Lemonade Stand, a remake of the popular Apple II game of the same title, is now available on the iPhone (@ iTunes Store). Everything I know about business I learned from playing Lemonade Stand.


The Olsen twins

I don’t know if you’ll enjoy reading a NY Times profile of the Olsen Twins, but I was oddly fascinated.

Mary-Kate’s contribution to the enterprise is a collector’s knowledge. She has been buying vintage Lanvin and Givenchy, among other classic labels of the mid-20th century, for a number of years. (Unlike Ashley, Mary-Kate continues to act, having played, with a perfect semblance of haze and obfuscation, a born-again Christian drug dealer on the third season of “Weeds.” This year she appeared opposite Ben Kingsley in the film “The Wackness.”) Ashley is the more entrepreneurial, the one who will tell you how much she admires Steve Jobs and Bill Gates.


This American Life on the financial crisis

This radio program made the rounds last week, but I finally got caught up this weekend so I’ll add my voice to the chorus urging you to listen to This American Life’s episode on the financial crisis, Another Frightening Show About the Economy. Paired with The Giant Pool of Money from back in May, this is an excellent overview of what’s going on in the financial markets right now. The hosts of the two shows are also doing a daily blog/podcast thing at Planet Money In addition, the last half of this week’s TAL concerns the political angle of the financial mess. I haven’t had a chance to listen yet, but check it out if you’re into that sort of thing.


Manny being Manny

Conventional wisdom and prevailing opinion among hardcore Boston Red Sox fans is that LA Dodgers left fielder Manny Ramirez finally sulked his way out of a Boston Red Sox uniform by basically phoning it in and causing trouble for his team for a couple of months earlier in the season, which phoning and trouble resulted in a trade of Ramirez to LA for very little in return. Two rebuttals have surfaced recently that seem more plausible to me. The first is Facts About Manny Ramirez by Joe Sheehan. Sheehan uses some of those pesky facts to illustrate that on the field, Manny played as well or better during the supposed phoning-it-in period than he has in the past.

When he played, Ramirez killed the league. He hit .347/.473/.587 in July. His OBP led the team, and his SLG led all Red Sox with at least 25 AB. The Sox, somewhat famously, went 11-13 in July. Lots of people want you to believe that was because Manny Ramirez is a bad guy. I’ll throw out the wildly implausible idea that the Sox went 11-13 because Ortiz played in six games and because veterans Mike Lowell and Jason Varitek has sub-600 OPSs for the month.

Four days before he was traded, Manny Ramirez just about single-handedly saved the Red Sox from getting swept by the Yankees, with doubles in the first and third innings that helped the Sox get out to a 5-0 lead in a game they had to win to stay ahead of the Yankees in the wild-card race.

In Manny Being Manipulated, Bill Simmons attempts to answer the question, Ok, so why did Manny suddenly want to be traded and, more importantly, why did the Red Sox actually oblige? Simmons’ answer: Scott Boras, Ramirez’s agent and “one of the worst human beings in America who hasn’t actually committed a crime”. According to Simmons, it all boiled down to mismatched incentives and following the money.

Manny’s contract was set to expire after the 2008 season, with Boston holding $20 million options for 2009 and 2010. Boras couldn’t earn a commission on the option years because those fees belonged to Manny’s previous agents. He could only get paid when he negotiated Manny’s next contract. And Scott Boras always gets paid.

Boras could only get paid for representing Ramirez if Manny signed a new contract. Which he will next year because as part of the trade, the Dodgers agreed to waive his 2009 option and allow him to become a free agent. And the Red Sox went along because they decided they’d rather have a good relationship with Scott Boras going forward instead of a weird relationship with Ramirez. As for Manny, he gets paid either way, rarely appreciated the weird pressure/adulation put on him and every other Red Sox player by Boston fans, and, I get the feeling, likes swinging a bat, no matter what team he plays for.


Muxtape v1.0, RIP

As anticipated, Muxtape was unable to maintain its original form under assault from the RIAA and slow moving legal negotiations with the labels.

The first red flag came in August. Up until then all the discussion had been about numbers, but as we closed in on an agreement the talk shifted to things like guaranteed placement and “marketing opportunities.” I was denied the possibility of releasing a mobile version of Muxtape. My flexibility was being constricted. I had been worried about Muxtape getting a fair deal, but my biggest concern all along was maintaing the integrity and experience of the site (one of the reasons I wanted to license in the first place). Now it wasn’t so simple; I had agreed to a variety of encroachments into Muxtape’s financials because I wanted to play ball, but giving up any kind of editorial or creative control was something I had a much harder time swallowing.

Instead, the site will become more of a stripped-down MySpace for bands wanting to put their music online. Disappointing because Muxtape, as originally conceived, was obviously what everyone but the “music industry” wanted. Some of that simplistic magic will likely transfer over to the new incarnation but it won’t be as cool as mix tapes for your pals. (thx, mark)

Update: For posterity, I’m pasting Justin’s whole note in here.

I love music. I believe that for people who love music, the desire to share it is innate and crucial for music itself. When we find a song we love, we beckon our friends over to the turntable, we loan them the CD, we turn up the car stereo, we put it on a mixtape. We do this because music makes us feel and we want someone else to feel it, too.

The story of Muxtape began when I had a weekly show at my university’s radio station in Oregon. In addition to keeping the station’s regular log I compiled my playlists into a web page, with each show represented by a simple block that corresponded to a cassette recording for that week. At the time, mixtapes were already well into their twilight, but long after my show ended I couldn’t stop thinking about how the playlist page served a similar purpose, and in many ways served it better. Like a mixtape, each playlist was a curated group that was greater than the sum of its parts. Unlike a mixtape, it wasn’t constrained by any physical boundaries of dissemination, but… it also didn’t contain any actual music. Someone might come across the page and smile knowingly at the songs they knew, but shifting the burden of actually compiling the mix to its intended listener defeated the purpose entirely.

Five years later, internet technology had advanced significantly. I was working on experimental user interfaces for web sites when I started thinking about that playlist page again, and ultimately set out to bring it to life. My desire to share music (in the mixtape sense) hadn’t gone anywhere, but the channels to do so were becoming extinct. Popular blogging services allow you to post audio files in an ephemeral sort of way, but it wasn’t the context I was looking for. A physical cassette tape in your hands has such an insistent aesthetic; just holding one makes you want to find a tape player to fulfill its destiny. My goal with Muxtape’s design was to translate some of that tactility into the digital world, to build a context around the music that gave it a little extra spark of life and made the holder anxious to listen.

The first version was a one-page supplement to my tumblr, and was more or less identical to what it would become later. The feedback was great, and the number one question rapidly became “can you make one for me, too?” At first I started thinking about ways I could package the source code, but the more I thought about it the more it seemed like massively wasted potential. Distributing the source would mean limiting access to the small niche of people who operate their own web server, whereas I wanted to make something that was accessible to anyone who loves music. The natural conclusion was a centralized service, which suddenly unfolded whole other dimensions of possibility for serendipitous music discovery. What seemed before like the hollow shell of a mixtape now seemed like its evolution. I knew I had to try building it. Three weeks of long nights later, I launched Muxtape.

It was successful very quickly. 8,685 users registered in the first 24 hours, 97,748 in the first month with 1.2 million unique visitors and a healthy growth rate. Lots of press. Rampant speculation. Tech rags either lauded it or declared it an instant failure. Everyone was excited. I was thrilled.

There was a popular misconception that Muxtape only survived because it was “flying under the radar,” and the moment the major labels found out about it it’d be shut down. In actuality, the labels and the RIAA read web sites like everyone else, and I heard from them both within a week or so. An RIAA notice arrived in triplicate, via email, registered mail, and FedEx overnight (with print and CD versions). They demanded that I take down six specific muxtapes they felt were infringing, so I did.

Around the same time I got a call from the VP of anti-piracy at one of the majors. After I picked up the phone his first words were, “Justin, I just have one question for you: where do I send the summons and complaint?” The conversation picked up from there. There was no summons, it was an intimidation tactic setting the tone for the business development meeting he was proposing, the true reason for the call. Around the same time another one of the big four’s business developers reached out to me, too.

I spent the next month listening. I talked to a lot of very smart lawyers and other people whose opinions on the matter I respected, trying to gain a consensus for Muxtape’s legality. The only consensus seemed to be that there was no consensus. I had two dozen slightly different opinions that ran the gamut from “Muxtape is 100% legal and you’re on solid ground,” to “Muxtape is a cesspool of piracy and I hope you’re ready for a hundred million dollar lawsuit and a stint at Riker’s.”

In the end, Muxtape’s legality was moot. I didn’t have any money to defend against a lawsuit, just or not, so the major labels had an ax over my head either way. I always told myself I’d remove any artist or label that contacted me and objected, no questions asked. Not a single one ever did. On the contrary, every artist I heard from was a fan of the site and excited about its possibilities. I got calls from the marketing departments of big labels whose corporate parents were supposed to be outraged, wanting to know how they get could their latest acts on the home page. Smaller labels wanted to feature their content in other creative ways. It seemed obvious Muxtape had value for listeners and artists alike.

In May I had my first meeting with a major label, Universal Music Group. I went alone and prepared myself for the worst, having spent the last decade toeing the indie party line that the big labels were hopelessly obstinate luddites with no idea what was good for them. I’m here to tell you now that the labels understand their business a lot better than most people suspect, although they each have their own surprisingly distinct personality when it comes to how they approach the future. The gentlemen I met at Universal were incredibly receptive and tactful; I didn’t have to sell them on why Muxtape was good for them, they knew it was cool and just wanted to get paid. I sympathized with that. I told them I needed some time to get a proposal together and we left things in limbo.

A few weeks later I had a meeting with EMI, the character of which was much different. I walked into a conference room and shook eight or nine hands, sitting down at a conference table with a phonebook-thick file labeled “Muxtape” laying on it. The people I met formed a semi-circle around me like a split brain, legal on one side and business development on the other. The meeting alternated between an intense grilling from the legal side (“you are a willful infringer and we are mere hours from shutting you down”) and an awkward discussion with the business side (“assuming we don’t shut you down, how do you see us working together?”). I asked for two weeks to make a proposal, they gave me two days.

I had to make a decision. As I saw it I had three options. The first was to just shut everything down, which I never really considered. The second was to ban major label content entirely, which might have solved the immediate crisis, but had two strong points against it. The first, most visibly, was that it would prevent people from using the majority of available music in their mixes. The second was that it did nothing to address the deeper questions surrounding ownership and usage for everyone else who wasn’t a major label: mid-size labels and independent artists who have just as fundamental a right to address how their content is used as a large corporation, even if they don’t carry quite as big a stick.

The third option was to approach a fully licensed model, which I had been edging toward since I met with Universal. I knew other licensed services so far had met with mixed success, but I also knew Muxtape was different and that it was at least worth exploring. The question about whether or not the labels saw value in it had been answered, the new question was how much it was going to cost.

It was June. I approached a Fifth Ave law firm about representing me in licensing negotiations with the major labels, and they took me on. Two weeks later I met with all four, flanked by lawyers this time, and started the slow process of working out a deal. The first round of terms were stiff and complex, but not nearly as bad as I’d imagined, and I managed to convince them that allowing Muxtape to continue to operate was in everyone’s best interest. Things were going well. I spent the next two months talking with investors, designing the next phases of the site itself, and supervising the negotiations. A big concern was getting a deal that took into consideration the fact that Muxtape wasn’t a straightforward on-demand service, and should pay accordingly less than a service that was. Another reason I liked the licensing option from the outset was that it seemed like an uncommon win-win; I didn’t want the ability to search and stream any song at any given notice, and they were reluctant to offer it (for the price, anyway). Muxtape’s unusual limitations were its strength in more ways than one.

The first red flag came in August. Up until then all the discussion had been about numbers, but as we closed in on an agreement the talk shifted to things like guaranteed placement and “marketing opportunities.” I was denied the possibility of releasing a mobile version of Muxtape. My flexibility was being constricted. I had been worried about Muxtape getting a fair deal, but my biggest concern all along was maintaing the integrity and experience of the site (one of the reasons I wanted to license in the first place). Now it wasn’t so simple; I had agreed to a variety of encroachments into Muxtape’s financials because I wanted to play ball, but giving up any kind of editorial or creative control was something I had a much harder time swallowing.

I was wrestling with this when, on August 15th, I received notice from Amazon Web Services (the platform that hosts Muxtape’s servers and files) that they had received a complaint from the RIAA. Per Amazon’s terms, I had one business day to remove an incredibly long list of songs or face having my servers shut down and data deleted. This came as a big surprise to me, as I’d been thinking that I hadn’t heard from the RIAA in a long time because I had an understanding with the labels. I had a panicked exchange of emails with Amazon, trying to explain that I was in the middle of a licensing deal, that I suspected it was a clerical error, and that I was doing everything I could to get someone to vouch for me on a summer Friday afternoon. My one business day extended over the weekend, and on Monday when I wasn’t able to produce the documentation Amazon wanted (or even get someone from the RIAA on the phone), the servers were shut down and I was locked out of the account. I moved the domain name to a new server with a short message and the very real expectation that I could get it sorted out. I still thought it was all just a big mistake. I was wrong.

Over the next week I learned a little more, mainly that the RIAA moves quite autonomously from their label parents and that the understanding I had with them didn’t necessarily carry over. I also learned that none of the labels were especially interested in helping me out, and from their perspective it had no bearing on the negotiations. I disagreed. The deals were still weeks or months away (an eternity on the internet) meaning that at best, Muxtape was going to be down until the end of year. There was also still the matter of how to pay for it; getting investment is hard enough in this volatile space even with a wildly successful and growing web site, it became an entirely different proposition with no web site at all.

And so I made one of the hardest decisions I’ve ever faced: I walked away from the licensing deals. They had become too complex for a site founded on simplicity, too restrictive and hostile to continue to innovate the way I wanted to. They’d already taken so much attention away from development that I started to question my own motivations. I didn’t get into this to build a big company as fast as I could no matter what the cost, I got into this to make something simple and beautiful for people who love music, and I plan to continue doing that. As promised, the site is coming back, but not as you’ve known. I’m taking a feature that was in development in the early stages and making it the new central focus.

Muxtape is relaunching as a service exclusively for bands, offering an extremely powerful platform with unheard-of simplicity for artists to thrive on the internet. Musicians in 2008 without access to a full time web developer have few options when it comes to establishing themselves online, but their needs often revolve around a common set of problems. The new Muxtape will allow bands to upload their own music and offer an embeddable player that works anywhere on the web, in addition to the original muxtape format. Bands will be able to assemble an attractive profile with simple modules that enable optional functionality such as a calendar, photos, comments, downloads and sales, or anything else they need. The system has been built from the ground up to be extended infinitely and is wrapped in a template system that will be open to CSS designers. There will be more details soon. The beta is still private at the moment, but that will change in the coming weeks.

I realize this is a somewhat radical shift in functionality, but Muxtape’s core goals haven’t changed. I still want to challenge the way we experience music online, and I still want to work to enable what I think is the most interesting aspect of interconnected music: discovering new stuff.

Thank to you everyone who made Muxtape the incredible place it was in its first phase, it couldn’t have happened without your mixes. The industry will catch up some day, it pretty much has to.

Justin


NYC’s eccentric vegetable peeler salesman

If you’ve spent any time at all walking around Manhattan, you’ve likely run across Joe Ades, the English gent hawking vegetable peelers at the top of his lungs on a bit of sidewalk. An occasional part of his current routine is a laminated copy of a profile of him that Vanity Fair published in May 2006. No surprise: Ades is a character.

Mayhew and the patterers might have been surprised at just how far Joe has taken this gent thing. At the end of each day he returns with his gear to a commodious three-bedroom apartment on Park Avenue, the home that he shares with his present wife, Estelle. (In spite of the polished ways of the patterers, their typical abode was the “vagrant hovel.”) Then it’s out again for an early dinner in a style unheard of in London Labour. Six nights a week, accompanied by Estelle, he hits some of the biggest-name restaurants in town-Elio’s, Jean Georges, Milos, Centolire. He never has trouble getting a table. In the soft light his hands glow pink from the half-hour hot-water-and-nailbrush treatment he performs as part of his evening toilette.

Update: Watch Ades in action on YouTube.


Adaptive Path’s advocacy program

I mentioned Adaptive Path’s employee advocacy system in my post the other day about alternative middle management strategies. Peter Merholz has written a little more about it on the AP blog today.


Not so middle management

Joel Spolsky, popular tech writer and founder of Fog Creek Software, has an article in the September 2008 issue of Inc. called How Hard Could It Be: How I Learned to Love Middle Managers. In it, Spolsky details how he came to the idea of building a small company where middle management was unnecessary. He took particular inspiration from an article he read about a GE plant.

It was about a General Electric plant in Durham, North Carolina, that made jet engines, and it offered a portrait of the perfect work environment: a factory that had more than 170 employees but just one boss. All the engine technicians reported directly to the plant manager, who did not have the time or the inclination to micromanage. There was no time clock, and people set their own schedules. Pay was egalitarian (there were only three pay grades), and workers who assembled the engines could switch tasks each day so their jobs were not monotonous. The result? In terms of quality, the plant was nearly perfect. Three-quarters of the engines it produced were flawless, and the remaining 25 percent typically had only a slight cosmetic defect.

The no-management rule worked at Fog Creek for a time but as the employee count crept up, cracks appeared in the system. Employees became disgrunted, in part because of a perceived lack of availability of the only two members of management, the CEO (Spolsky) and the president. To fix the problem, Fog Creek established a small layer of middle management.

First, we eliminated the need to get both me and Michael in the room. You have a question? I’m the CEO. Talk to me. If I want to consult with Michael, that’s my problem, not yours. Second, we appointed leaders for two of the programming teams — in effect, creating that layer of hierarchy that I had tried to avoid.

And frankly, people here seem to be happier with a little bit of middle management. Not middle management that’s going to overrule the decisions they make on their own. Not symbolic middle management that only makes people feel important. But middle management that creates useful channels of communication. If my job is getting obstacles out of the way so my employees can get their work done, these managers exist so that, when an employee has a local problem, there’s someone there, in the office next door, whom they can talk to.

Given his inital progressive approach to building a company, I’m surprised that Spolsky didn’t try something a bit different. For instance, Adaptive Path is structured using an advocate system. AP co-founder Peter Merholz explained the system to me via email.

It’s a way of avoiding typical management structures, where you have people reporting up a hierarchy. Our current structure has two levels… Executive management, and everyone else. That “everyone else” doesn’t report to the executive management. Instead, the report to one another through the advocate system. Each employee has an advocate. An advocate is like a manager, except they don’t tell you what to do. They are there to help you achieve what you want, professionally. Employees choose their own advocates. They simply ask someone if they would be their advocate.

Merholz allows that what the advocacy system doesn’t help with is communication across the organization — the very problem that was plaguing Fog Creek — and would likely work best alongside a light layer of middle management. But with the right guidelines and some slight changes, I believe it could work well in a company of 20-30 employees.

The Grey Dog’s Coffee restaurants — there are two locations in Manhattan — use a slightly different system of rotating management. Co-owner David Ethan explains.

From a historic perspective, I like to think that it’s one of the few truly bohemian places left in New York City, just based on the way we run it, like a commune. The management system here is that everybody manages. In order to work here you have two tries to show you can manage the place and if you can’t, you’re fired. Everybody manages about one shift a week and everybody’s equal. People work hard for each other. I don’t want to let you down because tomorrow it will be me. And I think they enjoy the responsibility of running a New York City restaurant. They get to pick the music, set the vibe, the lighting, everything. And they’re all pretty laid back, so it’s got a bohemian nature.

Running a restaurant each day and operating a software development company are quite different (for one thing, having a new boss every week wouldn’t work at a company like Fog Creek), but rotating managers on a project-by-project basis might work well. (BTW, I think Adaptive Path at one point rotated the presidency of the company through each of the founders in one-year chunks.)

Pentagram’s organizational structure provides a third possible way of avoiding a traditional system of middle management…although probably less germane to the Fog Creek situation than the previous two examples. The company is composed of several loosely connected teams that operate more or less autonomously while sharing some necessary services. Pentagram partner Paula Scher explained the system in her book, Make It Bigger.

As a design firm Pentagram’s structure is unique; it is essentially a group of small businesses linked together financially through necessary services and through mutual interests. Each partner maintains a design team, usually consisting of a senior designer, a couple of junior designers, and a project coordinator. The partners share accounting services, secretarial and reception services, and maintain a shared archive. Pentagram partners are responsible for attracting and developing their own business, but they pool their billings, draw the same salary, and share profit in the form of an annual bonus. It’s a cooperative…

She goes on to add:

Pentagram’s unique structure enabled me to operate as if I were a principal at a powerful corporate design firm while maintaining the individuality of a small practitioner.

Working small with the resources of a bigger firm, that’s the common thread here. I imagine there are many more similar approaches but these are a few I’ve run across in the past couple of years.


DIY perfume

In remembrance of her grandmother, Chicagoan Jessica Dunne created her own perfume called Ellie.

She sought out Michel Roudnitska, a perfumer who lives in France, to be her collaborator. Her family in her hometown of Villanova, Pa., served as her focus group. A friend volunteered to tie by hand the grosgrain ribbon bow that decorates each package. Then Ms. Dunne cold-called Claudia Lucas, the perfume buyer at Henri Bendel in Manhattan, and asked whether she could send a sample of the perfume.

More information about Ellie, as well as a more contemporary scent called Ellie Nuit, is available on Dunne’s site.


The $1000 iPhone app

Yesterday developer Armin Heinrich posted an iPhone app to the App Store called I Am Rich. The program displays a red gem, has no function but to display your wealth to others through ownership, and costs $1000. It has since been removed from the App Store, although no one knows whether Apple or Heinrich pulled it.

I Am Rich isn’t the most clever piece of art, but it’s not bad either. For some, the iPhone is already an obvious display of wealth and I Am Rich is commenting on that. Plus, buying more than you need as an indication of wealth is practically an American core value for a growing segment of the population. Is paying $5000 for a wristwatch or $50,000 for a car when much cheaper alternatives exist really all that different than paying $1000 for an iPhone app?

When news of the app got out onto the web, the outcry came swiftly. VentureBeat implored Apple to pull it from the App Store, as did several other humorless blogs. Blog commenters were even more harsh in their assessments. What I can’t understand is: why should Apple pull I Am Rich from the App Store? They have to approve each app but presumably that’s to guard against apps which crash iPhones, misrepresent their function, go against Apple’s terms of service, or introduce malicious code to the iPhone.

Excluding I Am Rich would be excluding for taste…because some feel that it costs too much for what it does. (And this isn’t the only example. There have been many cries of too many poor quality (but otherwise functional) apps in the store and that Apple should address the problem.) App Store shoppers should get to make the choice of whether or not to buy an iPhone app, not Apple, particularly since the App Store is the only way to legitimately purchase consumer iPhone apps. Imagine if Apple chose which music they stocked in the iTunes store based on the company’s taste. No Kanye because Jay-Z is better. No Dylan because it’s too whiney. Of course they don’t do that; they stock a crapload of different music and let the buyer decide. We should deride Apple for that type of behavior, not cheer them on.


How Starbucks is trying to get its groove back

Fourteen ways in which Starbucks has tried to revitalize its brand.

8. Ditch the underperformers: In July, Starbucks announced its closure of 600 stores. Check this map for a closure near you, or peep the full list. It’s also dropping 61 of its 84 stores in Australia, and eliminating 1,000 support jobs (not including all layoffs due to stores closures).


The no-food restaurant

Caroline Kininmonth runs a restaurant in Australia that doesn’t serve food. The place is BYOF and donations are accepted in a box next to the front door. (thx, john)


Advice for Yahoo!

Dave Pell’s advice for Yahoo!: Do What You’re Great At.

Yahoo is grown up. They know what they’re great at. They are great at news. When it comes to news, they absolutely crush Google. So here’s a whacky idea my Yahoo friends. Why not define yourself by your news services and the other stuff where you destroy the competition?


iPhone 3G hangover

After yesterday’s iPhone 3G revelry, the inevitable hangover. AT&T is done playing nice with iPhone customers. First off, the data plan for 3G is $10 more than the old plan. Second, in-store activation is required, “which takes 10-12 minutes”…with the old version of the iPhone, you could activate through iTunes and it took 2 minutes. (That means no online ordering of phones either.) Third, Apple and AT&T may be working on a purchase penalty for those who don’t activate their phones within 30 days…so no more buying a phone to use on another network. Four: no prepaid plans. Yay?


Moneyball works

Every year or so, the same question is asked: how is the Moneyball strategy working out for the Oakland A’s. This year’s answer is: pretty damn good.

Additions like [Frank] Thomas, motivated by this incremental approach, help explain why the A’s have won so many games in recent years even though they’ve consistently traded away or declined to re-sign their top players (Jason Giambi, Miguel Tejada, Tim Hudson, etc.), who demand top dollar—and largely on the basis of past performance. In short, Beane has bought low and sold high repeatedly and systematically, and as a result the A’s have won more games this decade than every team in the league except the Yankees (whose team payroll is routinely two-to-four times larger than Oakland’s).

Check out the current positions of the A’s and Yankees on the salary vs. performance graph.


Disney/Pixar progress

The NY Times has a look at the progress made by Disney since their 2006 acquisition of Pixar, a purchase some say Disney paid too much for.

“There is an assumption in the corporate world that you need to integrate swiftly,” Mr. Iger said. “My philosophy is exactly the opposite. You need to be respectful and patient.” Key to the successful integration, analysts say, has been Mr. Iger’s decision to give incoming talent added duties. Instead of just buying Pixar and moving on, Mr. Iger understood what made the acquisition valuable, said Mr. Price, the author. “If you are acquiring expertise,” he said, “then dispatch your newly purchased experts into other parts of the company and let them stretch their muscles.”

It also sounds as though Pixar has loosened their high standards since the acquisition…they’re outsourcing some animation, doing more sequels (Cars 2, presumably for the merchandising), and making several direct-to-DVD movies.


Zappos’ hiring practice

From this quick overview of why internet shoe retailer Zappos is such a great company, this clever hiring practice:

When Zappos hires new employees, it provides a four-week training period that immerses them in the company’s strategy, culture, and obsession with customers. People get paid their full salary during this period. After a week or so in this immersive experience, though, it’s time for what Zappos calls “The Offer.” The fast-growing company, which works hard to recruit people to join, says to its newest employees: “If you quit today, we will pay you for the amount of time you’ve worked, plus we will offer you a $1,000 bonus.” Zappos actually bribes its new employees to quit!

That’s pretty fucking brilliant. It applies a direct incentive of cold hard cash against what the company wants: employees dedicated not primarily to their paycheck but to the company/customers.


Gladwell on the mismatch problem

Picking a subject from his upcoming book, Malcolm Gladwell talked about the difficulty in hiring people in the increasingly complex thought-based contemporary workplace. Specifically that we’re using a collection of antiquated tools to evaluate potential employees, creating what he calls “mismatch problems” in the workplace, when the critera for evaluating job candidates is out of step with the demands of the job.

To illustrate his point, Gladwell talked about sports combines, events that professional sports leagues hold for scouts to evaluate potential draftees based on a battery of physical, psychological, and intelligence tests. What he found, a result that echoes what Michael Lewis talks about in Moneyball, is that sports combines are a poor way to determine how well an athlete will eventually perform as a member of their eventual team. One striking example he gave is the intelligence test they give to NFL quarterbacks. Two of the test’s all-time worst performers were Dan Marino and Terry Bradshaw, Hall of Famers both.

A more material example is teachers. Gladwell says that while we evaluate teachers on the basis of high standardized test scores and whether they have degrees and credentialed training, that makes little difference in how well people actually teach.


Honor system bakery

City Café Bakery in Kitchener, Ontario doesn’t have a cash register. Instead, they let their customers add up their own bill and put the money into a an old bus fare box. Here’s how it works:

“I liked the idea of simplifying things and … the honour system made a whole lot of sense,” Bergen says. “What irritated me about going into Tim Hortons, for example, was waiting in line for something as simple as getting a donut and a coffee. So the thought was, someone can pour his own coffee, grab his own bagel, cut it himself, throw the money in, and walk out. We don’t touch 60 per cent of the transaction.”

“Everything is rounded off to the nearest quarter with taxes included where applicable,” he says. “So every desert is $1.50 (tarts, brownies, and date squares), every pizza lunch is $5, every beverage is $1.25, every loaf of bread is $2.75 (Italian sourdough, multi-grain, and raisin bread on weekends), croissants are $1 each, and bagels are three for $2 (plain, sesame, and multi-grain).”

The bakery conducts audits every six months and Bergen says only once did things come up short.

“Our theory is that two per cent of our sales are being ripped off. ‘Ripped off’ in the sense that there are people who forget to pay or they make a mistake in paying, and then there are people who deliberately don’t pay. And every so often we have to kick somebody out that we know hasn’t been paying,” he says. “But at the same time we figure we’re being overpaid by three per cent. Some people come in and want a $2.75 loaf of bread, but they see we’re busy so they throw $3 in and walk out. Or, although we discourage tips, some people still give them to us. But because the staff is paid well (the average wage is $15.50 an hour), the tips go into the general pot.”

See also: What The Bagel Man Saw and Business lessons from the coffee and doughnut guy. (via bb)


Yahoo stock plunges?

The big tech/business news of the day is Yahoo’s stock “plunge” following the withdrawl of Microsoft’s takeover offer. I’m sure plunge headlines sell newspapers and all, but the more long-term story is more interesting.

On Jan 31, the day before Microsoft offered $31/share for Yahoo, YHOO was at $19.18/share (market cap: $26.4 billion) and MSFT was at $32.60/share (market cap: $303.6 billion). At the close of trading today, YHOO closed at $24.37/share (market cap: $33.5 billion) and MSFT was at $29.08/share (market cap: $270.8 billion). In other words, the Microsoft offer increased the value of Yahoo! Inc. by more than $7 billion and decreased the value of Microsoft Corporation by almost $33 billion. In still other words, in attempting to take Yahoo by force, they let an amount equal to Yahoo slip through their fingers. Why isn’t anyone writing about Yahoo’s amazing stock gains and Microsoft’s plunge?