Central Perk

vineri, 30 august 2013

Because They Marched

Featured

This week, the President hit the road for a College Affordability bus tour in New York and Pennsylvania, conferred the medal of honor for conspicuous gallantry, and reflected on what the Civil Rights Movement has meant for the country on the anniversary of the March on Washington 50 years ago, at the Let Freedom Ring ceremony on the steps of the Lincoln Memorial.

Click here to watch West Wing Week.

The Future of User Behavior - Whiteboard Friday

Posted: 29 Aug 2013 04:09 PM PDT

Posted by willcritchlow

In the early days of search, Google used only your typed query to find the most relevant results. We're now increasingly seeing SERPs that are influenced by all kinds of contextual information â€" the implicit queries.

In today's Whiteboard Friday, Will Critchlow covers what exactly that means and how it might explain why we see "(not provided)" in our analytics more often than we'd like.

PRO Tip: Learn more about how Google ranks pages at Moz Academy.

For reference, here's a still image of this week's whiteboard:

Video Transcription

Hi, Moz fans. I'm Will Critchlow, one of the founders of Distilled, and I want to talk today about the future of user behavior, something that I've been talking about a MozCon this year. In particular, I want to talk about the implications of query enhancement. So I'm going to start by telling you what we mean by this phrase.

Old-school query, key phrase, this is what we've talked about for a long time. In SEO, something like "London tube stations," a bunch of words strung together, that's the entire query, and we would call it a query or a key phrase. But we've been defining this what we call the "new query" made up of two parts. The explicit query here in blue is London tube stations, again, in this example, exactly the same. What we're calling the "implicit query" is essentially all of the other information that the search engine knows about you, and this what they know about you in general, what they know about you at this specific moment in time, and what they know about your recent history and any other factors they want to factor in.

So, in this particular case, I've said this is an iPhone user, they're on the street, they're in London. You can imagine how this information changes the kind of thing that you might be looking for when you perform a query like this or indeed any other.

This whole model is something that we've been kind of building out and thinking about a lot this year. Tom Anthony, one of my colleagues in London, presented this at a conference, and we've been working on it together. We came up with this kind of visual representation of what we think is happening over time. As people get used to this behavior, they see it in the search results, and they adapt to the information that they're receiving back from the search engine.

So old school search results where everybody's search result was exactly the same, if they performed a particular query, no matter where in the world they were, wherever in the country they were, whatever device they were on, whatever time of day it was, whatever their recent history, everybody's was the same. In other words, the only information that the search engine is taking into account in this case is the old-style query, the explicit part.

Then, what we've seen is that there's gradually been this implicit query information being added on top. You may not be able to see it from my brilliant hand-drawn diagram here, but my intention is that these blue bars are the same height out to here. So, at this point, there's all of the explicit query information being passed over. In other words, I'm doing the same kind of search I've always done. But Google is taking into account this extra, implicit information about me, what it knows about me, what it knows about my device, what it knows about my history and so forth. Therefore, Google has more information here than they did previously. They can return better results.

That's kind of what we've been talking about for a long time, I think, this evolution of better search results based on the additional information that the search engines have about us. But what we're starting to see and what we're certainly predicting is going to become more and more prevalent is that as the implicit information that search engines have grows, and, in particular, as their ability to use that information intelligently improves, then we're actually going to see users start to give less explicit information over. In other words, they're going to trust that the search engines are going to pull out the implicit information that they need. So I can do a much shorter, simpler query.

But what you see here is, again, to explain my hand-drawn diagram in case it's not perfectly beautiful, the blue bars are declining here. In other words, I'm sending less and less explicit information over as time goes along. But actually, the total information that search engines have to work with, as time goes on, is actually increasing, because the implicit information they're gathering is growing faster than the explicit information is declining.

I can give you a concrete example of this. So I vividly remember giving a talk about keyword research, and it was a few years ago. I was kind of mocking that business owner. We've all met these business owners who want to rank for the one-word key phrase. So I want to rank for restaurant or whatever. I say, "This is ridiculous. What in the world can you imagine somebody is possibly looking for when they do a search of 'restaurant.' "

Back then, if you did a search like that, you got a kind of weird mix, because this is back in these days when there essentially no implicit information being taken in. You've got a mix of the most powerful websites of actual restaurants anywhere in your country plus some news, like a powerful page on a big domain, those kinds of things. Probably a Wikipedia entry. Why would a business owner want to rank for that stuff? That's going to convert horribly poorly.

But my mind was changed powerfully when I caught myself. I was in Boston, and I caught myself doing a search for "breakfast." I went to Google, typed in "breakfast," hit Search. What was I thinking? What exactly was I hoping the outcome was going to be here? Well, actually, I've trained myself to believe that all of this other implicit information is going to be taken into account, and, in fact, it was. So, instead of getting that old-style Wikipedia entry, a news result, a couple of random restaurants from somewhere in the country, I got a local pack, and I got some local Boston news articles on the top 10 places to have breakfast in Boston. It was all customized to my exact location, so I got some stuff that was really near me, and I found a great place to have breakfast just around the corner from the hotel. So that worked.

I've actually noticed myself doing this more and more, and I imagine, given obviously the industry I work in, I'm pretty much an early adopter here. But I think we're going to see all users adopt this style of searching more and more, and it's really going to change how we as marketers have to think, because it doesn't mean that you need to go out there and rank for the generic keyword "breakfast." But it does mean that you need to take into account all of the possible ways that people might be searching for these things and the various different ways that Google might piece together a useful search result when somebody gives them such apparently unhelpful explicit information, in particular, obviously, in this case, local.

I kind of mentioned "not provided" down here. This is my one, I guess, non-
conspiracy theory view of what could be going on with the whole not provided thing, which is that actually, if Google's model is looking more and more like this and less like this, and, in particular, as we get further over to this end, and of course, you can consider something like Google Now would be the extreme of this where is in fact no blue bar and pure orange, then actually the reliance on keywords goes away. Maybe the not provided thing is actually more of a strategic message for Google, kind of saying, "We're not necessarily thinking in terms of keywords anymore. We're thinking in terms of your need at a given moment in time."

So, anyway, I hope that's been a useful kind of rapid-fire run through over what I think is going to happen as people get used to the power of query enhancement. I'm Will Critchlow. Until next time, thanks.

Video transcription by Speechpad.com

Sign up for The Moz Top 10, a semimonthly mailer updating you on the top ten hottest pieces of SEO news, tips, and rad links uncovered by the Moz team. Think of it as your exclusive digest of stuff you don't have time to hunt down but want to read!

Seth's Blog : First review: Malcolm Gladwell's new book

First review: Malcolm Gladwell's new book

I was lucky enough to get a preview copy and I've posted my review of David & Goliath.

The book comes out in five weeks. Can't hurt to order a copy now, because you'll definitely hear it being talked about everywhere soon.

• Email to a friend •

Seth's Blog : Understanding natural monopoly

Understanding natural monopoly

Why is there only one Twitter? One centralized phone network?

A natural monopoly is a business that benefits its users by being the one and only. If there were two incompatible phone networks, you'd need access to both in order to call the people in your life--and remember who was on each network.

Metcalfe's Law states that the power of a network goes up with the square of the number of people using it. In networks, then, there's a real penalty to having a second one.

An expensive shared resource (like power lines) are also a natural monopoly, since the incremental cost of adding one more user to the first line is so much less than the cost of building a second one right next to it.

It's possible to transform a service that might not be a natural monopoly (an app that helps you track your workouts) into one that might be (an app that lets you share your workouts with others).

Many natural monopolies exist in the micro space, as opposed to being universal monopolies used by one and all like the telephone. We only 'want' there to be one trade show for our industry, one trade association, one certification board.

Over time, even natural monopolies fade away, but when you look for breakthrough new projects (particularly as an investor) the home run lies in discovering the next one.

• Email to a friend •

joi, 29 august 2013

Mish's Global Economic Trend Analysis

Wal-Mart is not Costco; So Why Should it Pay Like Costco?
Celebrating Life: Greetings From Germany
Reflections on Peak Oil, India, Asia, and Global Growth; What's the Mathematical Outcome?

Wal-Mart is not Costco; So Why Should it Pay Like Costco?

Posted: 29 Aug 2013 04:15 PM PDT

President Obama, the unions, and Democrats in general are attempting to force Wal-Mart to raise its minimum wage.

In Seattle, there is an absurd push by activists to raise the minimum wage to $15 per hour for fast food workers, retail clerks, baristas and other minimum wage workers.

Venture capitalist Nick Hanauer said there's no time to waste. What the nation needs is money in the hands of regular consumers. "A higher minimum wage is a very simple and elegant solution to the death spiral of falling demand that is the signature feature of our economy".

Trader Joe's Lesson

Sophie Quinton for The Atlantic says The Trader Joe's Lesson: How to Pay a Living Wage and Still Make Money in Retail

Many employers believe that one of the best ways to raise their profit margin is to cut labor costs. But companies like QuikTrip, the grocery-store chain Trader Joe's, and Costco Wholesale are proving that the decision to offer low wages is a choice, not an economic necessity. All three are low-cost retailers, a sector that is traditionally known for relying on part-time, low-paid employees. Yet these companies have all found that the act of valuing workers can pay off in the form of increased sales and productivity.

"Retailers start with this philosophy of seeing employees as a cost to be minimized," says Zeynep Ton of MIT's Sloan School of Management. That can lead businesses into a vicious cycle. Underinvestment in workers can result in operational problems in stores, which decrease sales. And low sales often lead companies to slash labor costs even further. Middle-income jobs have declined recently as a share of total employment, as many employers have turned full-time jobs into part-time positions with no benefits and unpredictable schedules.

QuikTrip, Trader Joe's, and Costco operate on a different model, Ton says. "They start with the mentality of seeing employees as assets to be maximized," she says. As a result, their stores boast better operational efficiency and customer service, and those result in better sales. QuikTrip sales per labor hour are two-thirds higher than the average convenience-store chain, Ton found, and sales per square foot are over 50 percent higher.

A Different Model

Yes, Ton, you are exactly correct. QuikTrip, Trader Joe's, and Costco do have a different model and it would behoove someone at MIT's Sloan School of Management to figure out differences in that model, and why retail sales at Trader Joe's beat those of Wal-Mart by 50% on a square footage basis.

Why Wal-Mart Will Never Pay Like Costco

Bloomberg writer Megan McArdle hits the nail on the head with her analysis of the situation in Why Wal-Mart Will Never Pay Like Costco.

Wal-Mart is trying to move into Washington, a move that said local housing blog has not enthusiastically supported. Hence, we've been treated to a lot of impassioned reheatings of that old standby: "Costco shows it's possible" for Wal-Mart to pay much higher wages. The addition of Trader Joe's and QuikTrip is moderately novel, but basically it's the same argument: Costco/Trader Joe's/QuikTrip pays higher wages than Wal-Mart; C/TJ/QT have not gone out of business; ergo, Wal-Mart could pay the same wages that they do, and still prosper.

Obviously at some level, this is a true but trivial insight: Wal-Mart could pay a cent more an hour without going out of business. But is it true in the way that it's meant -- that Wal-Mart could increase its wages by 50 percent and still prosper?

Upper-middle-class people who live in urban areas -- which is to say, the sort of people who tend to write about the wage differential between the two stores -- tend to think of them as close substitutes, because they're both giant stores where you occasionally go to buy something more cheaply than you can in a neighborhood grocery or hardware store. However, for most of Wal-Mart's customer base, that's where the resemblance ends. Costco really is a store where affluent, high-socioeconomic status households occasionally buy huge quantities of goods on the cheap: That's Costco's business strategy (which is why its stores are pretty much found in affluent near-in suburbs). Wal-Mart, however, is mostly a store where low-income people do their everyday shopping.

As it happens, that matters a lot. Costco has a tiny number of SKUs in a huge store -- and consequently, has half as many employees per square foot of store. Their model is less labor intensive, which is to say, it has higher labor productivity. Which makes it unsurprising that they pay their employees more.

But what about QuikTrip and Trader Joe's? I'm going to leave QuikTrip out of it, for two reasons: first, because they're a private company without that much data, and second, because I'm not so sure about that statistic. QuikTrip's website indicates a starting salary for a part-time clerk in Atlanta of $8.50 an hour, which is not all that different from what Wal-Mart pays its workforce.

Trader Joe's is also private, but we do know some stuff about it, like its revenue per-square foot (about $1,750, or 75 percent higher than Wal-Mart's), the number of SKUs it carries (about 4,000, or the same as Costco, with 80 percent of its products being private label Trader Joe's brand), and its demographics (college-educated, affluent, and older). "Within a 15–minute driving radius of a potential site," one expert told a forlorn Savannah journalist, "there must be at least 36,000 people with four–year college degrees who have a median age of 44 and earn a combined household income of $64K a year." Costco is similar, but with an even higher household income -- the average Costco household makes more than $80,000 a year.

In other words, Trader Joe's and Costco are the specialty grocer and warehouse club for an affluent, educated college demographic. They woo this crowd with a stripped-down array of high quality stock-keeping units, and high-quality customer service. The high wages produce the high levels of customer service, and the small number of products are what allow them to pay the high wages. Fewer products to handle (and restock) lowers the labor intensity of your operation. In the case of Trader Joe's, it also dramatically decreases the amount of space you need for your supermarket ... which in turn is why their revenue per square foot is so high. (Costco solves this problem by leaving the stuff on pallets, so that you can be your own stockboy).

Wal-Mart's customers expect a very broad array of goods, because they're a department store, not a specialty retailer; lots of people rely on Wal-Mart for their regular weekly shopping. The retailer has tried to cut the number of SKUs it carries, but ended up having to put them back, because it cost them in complaints, and sales. That means more labor, and lower profits per square foot. It also means that when you ask a clerk where something is, he's likely to have no idea, because no person could master 108,000 SKUs. Even if Wal-Mart did pay a higher wage, you wouldn't get the kind of easy, effortless service that you do at Trader Joe's because the business models are just too different. If your business model inherently requires a lot of low-skill labor, efficiency wages don't necessarily make financial sense.

If you want Wal-Mart to have a labor force like Trader Joe's and Costco, you probably want them to have a business model like Trader Joe's and Costco -- which is to say that you want them to have a customer demographic like Trader Joe's and Costco. Obviously if you belong to that demographic -- which is to say, if you're a policy analyst, or a magazine writer -- then this sounds like a splendid idea. To Wal-Mart's actual customer base, however, it might sound like "take your business somewhere else."

Think Beyond Minimum Wage

Profit per employee at Wal-Mart is $7,428. At Costco it's $10,625. Because of the difference in business model, it is illogical to assume Wal-Mart will have higher profit if only it paid Costco wages.

Activitists like Nick Hanauer and Zeynep Ton of MIT's Sloan School of Management need to go beyond their simplistic model of raising minimum wages and actually think about why things are as they are.

Neither one of them can distinguish a symptom of a problem from the problem. The problem is not that wages are too low, the problem is the Fed (central banks in general) are hell-bent on causing price inflation (and wages did not keep up).

The solution is to get rid of the Fed, not to raise minimum wages (which will only encourage businesses to seek ways to eliminate more employees).

Outsourcing

Manufacturing employment was devastated by outsourcing to China. Why? Global Wage Arbitration: Unrealistic employee costs made it profitable to move.

In Italy, in just this past month, an Italian factory owner moved company to Poland while staff are on holiday

Earlier this month, the owner of an electrical components factory in the north of the country waved his employees off on their summer holidays. Then, without informing them, he moved the entire operation, lock, stock and barrel, to Poland.

Fabrizio Pedroni, 49, said he was driven to the drastic course of action because his factory, located near the city of Modena, had not turned a profit for five years and he was being strangled by high salaries, crippling taxes and dismal rates of productivity.

Moving the factory to Eastern Europe was the only way of saving his company, which was founded 50 years ago by his grandfather.

I commend the Italian business owner for his move. The bureaucrats and socialists are of course howling like mad.

The difference between manufacturing and fast food, is the latter must occur locally. But force higher minimum wages and you are guaranteed to see more fast-food robots.

Robot Wars

Those with jobs will benefit from a hike in the minimum wage (but what about everyone else?). What about those on fixed income? What about the marginal worker who loses a job (or cannot get a job in the first place)?

If you do not know the answer, here's a hint: Robot Wars in China; Burger Flipping Robots Serve 360 Gourmet Burgers an Hour

For further discussion, please see World's Dumbest Idea.

Socialist fools never think about such things (until problems arise such as massive outsourcing to China or increasing use of robots instead of humans locally). Then instead of realizing what the real problem is, the socialists and union activists scream for tariffs to protect the jobs and taxes on robots. Somehow, in their twisted minds, its better for everyone in the country to pay twice as much as before for underwear if it saves 500 underwear manufacturing jobs.

Technology moves on. I do not claim that getting rid of the Fed will eliminate robots. However, the inflationary practices of the Fed coupled with misguided polices of bureaucrats and the artificial suppression of interest rates have exacerbated the problem.

Academic Wonderland

Here's the deal. The problem has gotten worse ever since Nixon closed the gold window. Removal of ties to the gold standard allowed central banks to inflate at will, and governments to spend at will (and both did). The result was shrinkage of the middle class and declining real wages for everyone but those in the top 10%.

I propose we attack the real problem rather than the symptom of the problem. Unfortunately, Zeynep Ton and thousands of others in Academic Wonderland would rather attack symptoms instead of problems.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Celebrating Life: Greetings From Germany

Posted: 29 Aug 2013 12:00 PM PDT

Greetings from Munich and Rothenburg ob der Tauber, in Germany.

Actually, I am now back in the states, having returned from a fantastic European trip with Liz, on a delayed honeymoon following our June wedding.

Click on any image below for a larger, sharper view.

Rothenburg ob der Tauber is rated as the best preserved medieval town in Germany.

Stone Walls Surrounding City of Rothenburg ob der Tauber

Rothenburg Entry Point Tower Known as the "Burgtor"

Rothenburg ob der Tauber - Markusturm Hotel (where we stayed)

Rothenburg ob der Tauber - Flowers and colorful buildings

Mural at the Pizzeria Italia in Rothenburg
Question of Identity: How many people can you identify in the mural below?

Answers at bottom of page.

Munich New Town Hall part of Marienplatz in Munich, Bavaria, Germany - Passing Storm at Sunset

Nymphenburg Palace

Picture of Liz in the Nymphenburg Palace

Pagodenburg - Royal Tea House at Nymphenburg Palace

Dining at an Outdoor Restaurant

Question of Identity Answers

Link to Rothenburg image in new window: Rothenburg Mural

I suspect the hardest person for most people to identify will be the person at the far right. I got it in about 15 seconds. Think out of the box!

From Left to Right

Laurel and Hardy
Elvis
Clark Gable
John Wayne
Charlie Chaplin
Marilyn Monroe
James Dean
Humphrey Bogart
Fred Astaire
Cary Grant
The Pizzeria Owner

Celebrating Life

I met Liz through Selective Search as noted in my June 17 post Celebrating Life: I Got Married on Friday.

Please click on the previous link for more on our story, how we met, and images from some trips we took in June shortly before we were married.

Greetings From Prague

On the European trip, we also visited Prague. Please see Celebrating Life; Greetings From Prague for some images.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Reflections on Peak Oil, India, Asia, and Global Growth; What's the Mathematical Outcome?

Posted: 29 Aug 2013 08:51 AM PDT

In response to Currency Lessons: Think a Sinking Currency is Always Good For Manufacturers? my friend "BC" pinged me with a few comments.

India has a trade deficit of 10% of GDP.
70% of India electricity generation is from fossil fuels.
100% of India oil consumption is imported.
20% of India natural gas consumption is imported.
India's Domestic crude oil and natural gas proven reserves are equivalent to 4-5 and 11-12 years of consumption at the 10-yr. trend rate.
India is a disaster of national and regional instability in the making and not far behind Turkey and MENA [Middle East and North Africa].
The ongoing economic decline or collapse and social disintegration in MENA, Turkey, Pakistan, Indonesia, India, and parts of China, will make the economic, social, and political landscape increasingly difficult, if not impossible, for most of us.

What's the Mathematical Outcome?

India wants to maintain 6% growth. China wants to maintain 7.5% growth. The US wants to maintain growth. Europe desperately wants to resume growth. Every country on the planet wants to increase exports relative to imports.

Ignoring Turkey, Indonesia, Pakistan, Africa, and the Mideast, the wants and needs of India, China, Europe and the US are mathematically impossible. That every country on the planet wants to increase exports relative to imports is mathematically impossible in and of itself.

History suggests that war is the inevitable outcome of such tensions, and clearly tensions are building.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com