Archive for April, 2011

New Problems for Old Economies

April 28th, 2011

In the last post I mentioned that our scarcest resource today is time, and ended on the question why so few people successfully solve the problem of helping us find what we want.

The problem companies with an industrial background now are facing is this is not a repetitive process, something you can manufacture cheaply and sell for a lot. It’s a process which requires you to care about one single topic more than everyone else so you become the go-to person (or company), and you have to accept that you probably can’t repeat this in another area, because you have to sift ever more, so your own time gets ever more scarce as well. But you only have to have a following in one area of demand to have enough leverage to monetize on it.

So here is the wrap-up of the whole axiom:

  • New users take the standard when they joined a (technical) movement for granted.
  • Continuous technical improvement combined with a continuous intake of new users creates an erosion cycle of the perceived quality of service.
  • With more content available, unobtrusive, personalized recommendations play a larger role than new content.
  • These recommendations can only be effictively mirrored in highly complex algorithms or better be done by a real person, someone who cares about the topic.
  • This care or curatorship creates credibility, credibility leads to a following, a following creates leverage, and ultimately leverage creates revenue.
  • New Rules

    April 25th, 2011

    More than ten years into it, formerly major players still haven’t figured out how the Web works and what they can do, especially because they’re asking the wrong questions. The question is not “How can I re-establish the old system, when I had the power, in this new medium and keep it at the same level for a long time to come to make as much money as possible with processes that have been working for me in the last 50 years?” Asking for something like this seems pretty silly, but it’s exactly what big companies do. Why? It’s the people who work there. They want to do the job they’ve been doing ever since, but we don’t need these jobs to be done anymore, at least not in the same fashion.

    What every player, regardless of size or age, needs to admit at first is that not only yesterday, but also today is a sunk cost, because you can’t change it, not at a significant level. So the question becomes “How do the achievements of today (i.e., the latest technical innovation) shift user expectations for tomorrow, and how can I use what I got to satisfy or exceed them?” Example: YouTube today is not what it was 6 years ago. Today’s standards make it very unlikely someone will watch a shaky mobile phone video with your cat chasing the woolen ball over and over and tell all her friends. What we want is high definition video, professionally shot and, even more important, a good story worth our time. We’ve moved beyond the point of boredom and doing stuff only for excitement, because there’s no more scarcity of entertainment for its own sake.

    No, the new scarcity is one that major movie studios could fill if they only decided to abandon their old-fashioned monetization chain. They need to figure out how to get HD video in 3D to my home, so easy, comfortable and cheap that torrent downloads or physical pirate copies are not attractive any more to everybody worldwide. What’s as important: They can help me discover more movies, just like Amazon does. But they could use a different algorithm, and only when I’m logged in. I don’t want a useless recommendation e-mail invade my inbox each day just to make me come back and spend more money.

    Just like the music industry wouldn’t have had to invent iTunes, but Spotify. We have always needed and still need someone to help us discover more of the stuff we already like and buy, and only then do we need someone to actually give it to us, not the other way round.
    The Internet has not ridded us of all scarcities, it just shifted them a lot. The ultimate scarcity is now time, because there is too much to choose from, and people and companies are adding ever more stuff. Today we need someone to help us find the stuff we want. And there’s a reason why there are not many people around trying to solve this problem successfully.

    Digital Natives – Digital Naives

    April 23rd, 2011

    Whatever circumstances you’re born into you assume as being normal, because “that’s the way things are”. When all you know is war, fighting and being on the run determines your image of life and reality. Most of us, who have never personally experienced war or other life threatening crises, assume a life of safety and comfort as being normal, and whatever “soft” revolution that we experience, like having Internet connection in every household, having a mobile phone and so forth, are conceived as normal by the next generation. Just because stuff like this exists.

    And usually “normal” stuff , no matter if it’s war or a computer, is not questioned by the new generation of participants or users. Today’s kids just use Google, YouTube and Facebook like it’s always been around and a somewhat integral part of life, but they don’t really know how it works (technically) or what its purpose is (advertising, not searching). In that sense, the new generation should not be called Digital Natives but Digital Naives.

    What’s a little funny about this whole thing is that it’s the first of the four stages of competence, but one can only advance through all four when he knows that he’s incompetent int he first place. And often this doesn’t happen because of the unawareness of incompetence, because the perceived ability to use a device, service or whatever makes one forget they don’t actually know how it’s done. This paradox is known in the professional world as the starting point of the Dunning-Kruger Effect, and when we take this as a given, big opportunities we haven’t seen before become pretty obvious.

    (Yes, it’s a cliffhanger.)

    Goals need to be 3D

    April 20th, 2011

    Here’s something  I learned from a website overhaul project: Goals need to be specified in (at least) three dimensions, otherwise you’ll be running into trouble because you’ll be overthrowing the schedule multiple times. Three questions:

    • What’s the content? – That’s the first and most obvious question, what we will see when we open the box.
    • How will it look like? – The second and second-most obvious question, how the box and its content will look.
    • How will it work? – The third, most boring, thus most critical question. It’s not only how something seems to work (what the UI does when the user performs a certain action), but it’s the point where the people on the project need to decide what the minimum tech specs are, in terms of technical design and quality, accessiblity, documentation, and so forth. All the stuff that’s not fun because it’s not so cool (except for the geeks). But vital (not only for the geeks).

    Once all of these questions have been covered (which is unlikely to happen in one single meeting, so everyone gets a list and checks off their items), it’s time to compare it to the status quo, and do this really thorough.

    One of the biggest problems is people tend to think stuff that’s working is okay, because as long as it’s working there’s no need to look under the hood to see what’s really going on, right? But you need to do this before you make any guess about how long something is going to take from A to B. It avoids questions (and answers) that make at least one person in the room feel stupid at a later point.

    Different Interests

    April 19th, 2011

    Seth Godin wrote a few days ago student debt has reached  new record in the US, now totalling at about one trillion dollars, which equals 10 million people with $100,000 of debt each. There are some folks who argue spending this money is an investment like a mortgage on your future home, because currently a college graduate earns about $20,000 more per year than someone who has only completed high school, but I think that’s not going to last because of the erosion of all these certificates. However, my point is an entirely different one.

    Everyone, no matter what age, has an idea what their life should be like in the future, and for most of us it’s one where we’re better off than today (whatever that may mean). And some of us will be the one who come up with ideas that will completely change our lives. And some of these people are not going have these great ideas in 5 years, but right now. The problem is, no one is listening to them. Because they aren’t experts. What do these greenhorns know? And even if they could put their idea to work, how would they know how to run a company that commercialises the idea? No, way too risky, thinks the man on the opposite side of the bank teller.

    The problem with banks is not only that they (still) misjudge credit risks, it’s even worse: this is their purpose. What’s more valuable: Someone who owes you $50,000 in startup credit who can pay it back within two years, or someone who owes you $100,000 for their degree at first, then $100,000 more for their new home, then $60,000 more for a car and so forth? Their interest is to make money by leading people through a debt curve which has been proven to work for the bank, but nothing else.

    Young people are trying to find their way into their best future, but obviously it doesn’t lead through a bank’s portal. Someone who has an idea is most likely better off to find a supportive venture capitalist, even if it requires flying to Silicon Valley or wherever that person may be located. To believe they could buy an expert status with the degree of a well-known institution might end up with someone else having the idea too and turning it into reality before them. Then what?

    Then comes the insight that ideas and expertise are two different pairs of shoes, interacting but not interdependent, and one can’t replace the other. And there also comes the (sometimes long) wait for the next idea.

    Being an Expert

    April 18th, 2011

    Credibility is in a way related to demonstrated success, which in our minds is transformed to expertise. When somebody does something well, we say, she must know a great deal about this. That’s why it’s easier for people to hire freelancers they’ve been working with before with (at least) satisfactory results. But whenever there’s a new face showing up, we’re sceptical. And for these new faces it’s very hard to prove their expertise, and it’s getting harder day by day. Just because they’ve done a good job for somebody else there’s no guarantee they’ll do a good one for us, because our situation is different, and there are dozens of other reasons easily made up to hesitate.

    Thing is, being an expert has not become easier. How’s that?
    In the end, it comes down to a simple formula:

    Expertise = amount of knowledge in a particular field ÷ availability of this knowledge.

    It’s as simple as that. In areas that have been explored for long and by a lot of people, as economics, there is a lot of knowledge around, giving a lot of people the idea that just because they know something, they’re semi-experts, and they can learn the rest from Wikipedia. Time is not a critical factor because it doesn’t matter how fast you reach the boundaries of an area. So in economics we have both a lot of knowledge as well as good access to it, which makes the former the critical factor. In other areas, which are more at the fringes of awareness or imagination for the most of us, the situation is different: There might be little knowledge (some things you can learn in an hour), but the availability might be little too, so it’s access that’s the critical factor.

    But in the end, repeatedly demonstrated success outguns every bookshelf or diploma-decorated wall.

    Final Cut Pitfalls

    April 13th, 2011

    Since the Editing Community will have to wait some more weeks for the release of the long awaited Final Cut X, I thought I’d share some insight of my latest work with Final Cut Pro 7.

    Log and Transfer:
    When importing footage from card media, it is possible to start editing with the imported clips while the others are still being ingested. However, I cannot say this is advisable. I encountered some random errors, such as clips only being partially transferred (with correct metadata, meaning FCP displays a duration of 3 seconds, and the clip (which should be 2 mins long) really is 3 secs. Other clips were fully imported, but with wrong metadata (you can shuttle through the entire clip of 2 mins, but FCP displays a duration of 5 secs in the browser window). So the old rule applies: Never touch a running system! Which is why you should ingest overnight, if you don’t have an assistant.

    Working with clip files:
    When I realized that FCP screwed up during the ingest, the only thing I could do was to re-run the Log & Transfer for the corrupted clips. So I selected these in the browser window, right-clicked and chose “Make offline…”, then picking the “remove from disk” option. And this is where you should stop and check in the Finder if these files have been properly removed. In my cases, some were still on the disk, which resulted in a major hassle I’ll explain in the next section. Remember: Double-check if files you want to be removed really are removed.

    Renaming files:
    One sweet feature of FCP is the ability to rename files to match the clip name. However, if the file you’re trying to rename already exists, Final Cut won’t do it — without any prompt of the failed action. Here’s the story: I offlined the corrupted clips and ran the Log & Transfer again. Let’s say the clip (and file) name was “MVI_5612.mov”. What happens is when Final Cut detects a file of this name in the Capture Scratch folder, it automatically increases the index number to the next one available, like “MVI_5678.mov”, if files ranging from 5612 to 5677 have already been captured. But it displays “MVI_5612” in the browser window. Again, you can only rename file “MVI_5678.mov” to match its clip name (“MVI_5612”) if the file “MVI_5612.mov” does not exist in the same folder. Seems logical, but any decent piece of software would at least give you an obscure error message. Or crash with an exception. But I’m not getting into Avid here.

    Media Manager:
    Also known as the Media Mangler, it’s not advisable to use the Media Manager when you’re working with mixed footage. I had a project containing ProRes4444 FullHD 25p footage and DVCpro 720p50 footage. I had already figured out that there is no way to convert the 720p50 footage to 25fps without crushing the metadata (making re-capturing at a later time impossible, or at least very cumbersome), but the problem remains when you’re consolidating your project to get rid of unnecessary footage. Though all images match in the new project, edited audio gets totally mangled. My workaround for now is to render your audio coming from footage that is not in the timeline codec (in my case that’s all 720p50 audio because the timeline was ProRes4444) to a hard file. Make as many tracks as you need to have all padding for later edits, and then use the Media Manager to consolidate the project.

    Extra:
    Rarevision offers an alternative to Compressor and FCP’s Log and Transfer to convert Canon 5D footage that I couldn’t test myself up to now, but the images on their site looks very promising.

    To Do What, Exactly? (Part II)

    April 3rd, 2011

    There was some feedback on one of my last posts that made me feel to explain my point a bit more in-depth.

    A legitimate argument was “Touting the process has at least one value for fans: gossip. Even if they’re the nerds everybody else is laughing about. After all, celebrity mags are no more than a collection of illustrated tweets.” And this is true. The point is, what’s the next step in the process of generating revenue? Gossip in and of itself is not monetizable. The problem of a marketer has always been, is and will always be: How do you convert attention into action? Shouting “Hey!” to make people turn their heads is easy, but then what? It’s action that generates revenue. People who buy stuff. If gossip just happens inside a silo it’s no big help, it may even be counterproductive. Trade, be it with physical goods or imphysical ideas, is based on imbalance, on one person having something the other wants to have. When everybody has the same level and quality of information, there’s no (re-)action. Evolution and progress (and also regress) happen at the fringes, not in the center, and a silo is a rectangular shaped fraction of the center with no fringes at all.

    The entire point is in terms of marketing, gossip is only a means, not an end. Celebrities know this, thus they’re attending parties to have photos taken, getting them into a dozen magazines every week which in return raises their value as a product. They’re (in most cases) aware they’re the product they want and need to sell themselves.

    This is different with most bands I know personally. Musicians tend to think that their product is whatever kind of merchandise which speaks for itself. But it doesn’t. Facts never ever speaks for themselves. As Seth Godin says in “All Marketers Are Liars Tell Stories”, it’s a huge difference whether you say “right-wing fundamentalist” or “person with deeply held beliefs”. As I wrote in the original post, it’s way easier for bands to tout the process of making a record (because it’s hardly comparable) than advertising the final product (which is easily comparable), but it’s the result that earns them money partially refinances their investments. If there’s no story about this product that may spread, the product itself won’t spread too. What happens is that within the silo of the before and after fans, they reach 100% market saturation. But outside the silo nothing changes. This is a critical point often ignored. It’s not enough to say “here’s the album we’ve been talking about a month ago…yes…the last update…remember? You liked our status back then…what we’ve been doing in the meantime?…Y’know….er…stuff..” or “Here’s the shirt. Questions? Look at the photo. Front. Back. See? Read the description. Comes in all sizes from S to XXL. Fine. Now, please, click the “BUY” button. Thank you.” This is a heap of crap in mammoth dimension. Why would anyone need to buy this? It’s a piece of black cloth with white paint on it. It’s not a desirable, somewhat fashionable item making the buyer feel better or leveraging their social status. No, it’s a commodity, and commodities are cheap in every aspect.

    There is, as with all disasters, one upside. Limitation creates predictability, and predictability minimizes risk. What’s more, limitation creates urgency as well. So when bands know there are 200 fans, they can ask each of them to invest a tenner for new music, giving the band one week of studio time. Delivery by download. Or when each fan invests 20 bucks, they can get a souvenir, which could be a signed Digipak with awesome design (emphasis on “awesome design”, which means created by an artist, not “someone who knows Photoshop”). When making shirts, they can only have 100 printed in the first batch and sell them for 5 bucks more than the second (of course you want every fan to have a shirt, but some want it more than others, and they are willing to pay extra for the temporal luxury of exclusiveness). If that sounds to commercial, it might be better to not start swimming in this pond at all.

    In the end, the question comes down to whether it’s a serious shot at making it your profession or just doing it as a hobby. The former requires a tough posture, especially towards yourself, and the latter brings up the question if you want the hobby to be self-sustainable or a bottomless pit.