marți, 29 iulie 2014

Unraveling Panda Patterns

Unraveling Panda Patterns


Unraveling Panda Patterns

Posted: 28 Jul 2014 05:16 PM PDT

Posted by billslawski

This is my first official blog post at Moz.com, and I'm going to be requesting your help and expertise and imagination.

I'm going to be asking you to take over as Panda for a little while to see if you can identify the kinds of things that Google's Navneet Panda addressed when faced with what looked like an incomplete patent created to identify sites as parked domain pages, content farm pages, and link farm pages. You're probably better at this now then he was then.

You're a subject matter expert.

To put things in perspective, I'm going to include some information about what appears to be the very first Panda patent, and some of Google's effort behind what they were calling the "high-quality site algorithm."

I'm going to then include some of the patterns they describe in the patent to identify lower-quality pages, and then describe some of the features I personally would suggest to score and rank a higher-quality site of one type.

Google's Amit Singhal identified a number of questions about higher quality sites that he might use, and told us in the blog post where he listed those that it was an incomplete list because they didn't want to make it easy for people to abuse their algorithm.

In my opinion though, any discussion about improving the quality of webpages is one worth having, because it can help improve the quality of the Web for everyone, which Google should be happy to see anyway.

Warning searchers about low-quality content

In "Processing web pages based on content quality," the original patent filing for Panda, there's a somewhat mysterious statement that makes it sound as if Google might warn searchers before sending them to a low quality search result, and give them a choice whether or not they might actually click through to such a page.

As it notes, the types of low quality pages the patent was supposed to address included parked domain pages, content farm pages, and link farm pages (yes, link farm pages):

"The processor 260 is configured to receive from a client device (e.g., 110), a request for a web page (e.g., 206). The processor 260 is configured to determine the content quality of the requested web page based on whether the requested web page is a parked web page, a content farm web page, or a link farm web page.

Based on the content quality of the requested web page, the processor is configured to provide for display, a graphical component (e.g., a warning prompt). That is, the processor 260 is configured to provide for display a graphical component (e.g., a warning prompt) if the content quality of the requested web page is at or below a certain threshold.

The graphical component provided for display by the processor 260 includes options to proceed to the requested web page or to proceed to one or more alternate web pages relevant to the request for the web page (e.g., 206). The graphical component may also provide an option to stop proceeding to the requested web page.

The processor 260 is further configured to receive an indication of a selection of an option from the graphical component to proceed to the requested web page, or to proceed to an alternate web page. The processor 260 is further configured to provide for display, based on the received indication, the requested web page or the alternate web page."

This did not sound like a good idea.

Recently, Google announced in a post on the Google Webmaster Central blog post, Promoting modern websites for modern devices in Google search results, that they would start providing warning notices on mobile versions of sites if there were issues on those pages that visitors might go to.

I imagine that as a site owner, you might be disappointed seeing such warning notice shown to searchers on your site about technology used on your site possibly not working correctly on a specific device. That recent blog post mentions Flash as an example of a technology that might not work correctly on some devices. For example, we know that Apple's mobile devices and Flash don't work well together.

That's not a bad warning in that it provides enough information to act upon and fix to the benefit of a lot of potential visitors. :)

But imagine if you tried to visit your website in 2011, and instead of getting to the site, you received a Google warning that the page you were trying to visit was a content farm page or a link farm page, and it provided alternative pages to visit as well.

That " your website sucks" warning still doesn't sound like a good idea. One of the inventors listed on the patent is described in LinkedIn as presently working on the Google Play store. The warning for mobile devices might have been something he brought to Google from his work on this Panda patent.

We know that when the Panda Update was released that it was targeting specific types of pages that people at places such as The New York Times were complaining about, such as parked domains and content farm sites. A follow-up from the Timesafter the algorithm update was released puts it into perspective for us.

It wasn't easy to know that your pages might have been targeted by that particular Google update either, or if your site was a false positive—and many site owners ended up posting in the Google Help forums after a Google search engineer invited them to post there if they believed that they were targeted by the update when they shouldn't have been.

The wording of that invitation is interesting in light of the original name of the Panda algorithm. (Note that the thread was broken into multiple threads when Google did a migration of posts to new software, and many appear to have disappeared at some point.)

As we were told in the invite from the Google search engineer:

"According to our metrics, this update improves overall search quality. However, we are interested in hearing feedback from site owners and the community as we continue to refine our algorithms. If you know of a high-quality site that has been negatively affected by this change, please bring it to our attention in this thread.

Note that as this is an algorithmic change we are unable to make manual exceptions, but in cases of high quality content we can pass the examples along to the engineers who will look at them as they work on future iterations and improvements to the algorithm.

So even if you don't see us responding, know that we're doing a lot of listening."

The timing for such in-SERP warnings might have been troublesome. A site that mysteriously stops appearing in search results for queries that it used to rank well for might be said to have gone astray of Google's guidelines. Instead, such a warning might be a little like the purposefully embarrassing "Scarlet A" in Nathaniel Hawthorn's novel The Scarlet Letter.

A page that shows up in search results with a warning to searchers stating that it was a content farm, or a link farm, or a parked domain probably shouldn't be ranking well to begin with. Having Google continuing to display those results ranking highly, showing both a link and a warning to those pages, and then diverting searchers to alternative pages might have been more than those site owners could handle. Keep in mind that the fates of those businesses are usually tied to such detoured traffic.

My imagination is filled with the filing of lawsuits against Google based upon such tantalizing warnings, rather than site owners filling up a Google Webmaster Help Forum with information about the circumstances involving their sites being impacted by the upgrade.

In retrospect, it is probably a good idea that the warnings hinted at in the original Panda Patent were avoided.

Google seems to think that such warnings are appropriate now when it comes to multiple devices and technologies that may not work well together, like Flash and iPhones.

But there were still issues with how well or how poorly the algorithm described in the patent might work.

In the March, 2011 interview with Google's Head of Search Quality, Amit Sighal, and his team member and Head of Web Spam at Google, Matt Cutts, titled TED 2011: The "Panda" That Hates Farms: A Q&A With Google's Top Search Engineers, we learned of the code name that Google claimed to be using to refer to the algorithm update as "Panda," after an engineer with that name came along and provided suggestions on patterns that could be used by the patent to identify high- and low-quality pages.

His input seems to have been pretty impactful—enough for Google to have changed the name of the update, from the "High Quality Site Algorithm" to the "Panda" update.

How the High-Quality Site Algorithm became Panda

Danny Sullivan named the update the "Farmer update" since it supposedly targeted content farm web sites. Soon afterwards the joint interview with Singhal and Cutts identified the Panda codename, and that's what it's been called ever since.

Google didn't completely abandon the name found in the original patent, the "high quality sites algorithm," as can be seen in the titles of these Google Blog posts:

The most interesting of those is the "more guidance" post, in which Amit Singhal lists 23 questions about things Google might look for on a page to determine whether or not it was high-quality. I've spent a lot of time since then looking at those questions thinking of features on a page that might convey quality.

The original patent is at:

Processing web pages based on content quality
Inventors: Brandon Bilinski and Stephen Kirkham
Assigned to Google
US Patent 8,775,924
Granted July 8, 2014
Filed: March 9, 2012

Abstract

"Computer-implemented methods of processing web pages based on content quality are provided. In one aspect, a method includes receiving a request for a web page.

The method includes determining the content quality of the requested web page based on whether it is a parked web page, a content farm web page, or a link farm web page. The method includes providing for display, based on the content quality of the requested web page, a graphical component providing options to proceed to the requested web page or to an alternate web page relevant to the request for the web page.

The method includes receiving an indication of a selection of an option from the graphical component to proceed to the requested web page or to an alternate web page. The method further includes providing, based on the received indication, the requested web page or an alternate web page."

The patent expands on what are examples of low-quality web pages, including:

  • Parked web pages
  • Content farm web pages
  • Link farm web pages
  • Default pages
  • Pages that do not offer useful content, and/or pages that contain advertisements and little else

An invitation to crowdsource high-quality patterns

This is the section I mentioned above where I am asking for your help. You don't have to publish your thoughts on how quality might be identified, but I'm going to start with some examples.

Under the patent, a content quality value score is calculated for every page on a website based upon patterns found on known low-quality pages, "such as parked web pages, content farm web pages, and/or link farm web pages."

For each of the patterns identified on a page, the content quality value of the page might be reduced based upon the presence of that particular pattern—and each pattern might be weighted differently.

Some simple patterns that might be applied to a low-quality web page might be one or more references to:

  • A known advertising network,
  • A web page parking service, and/or
  • A content farm provider

One of these references may be in the form of an IP address that the destination hostname resolves to, a Domain Name Server ("DNS server") that the destination domain name is pointing to, an "a href" attribute on the destination page, and/or an "img src" attribute on the destination page.

That's a pretty simple pattern, but a web page resolving to an IP address known to exclusively serve parked web pages provided by a particular Internet domain registrar can be deemed a parked web page, so it can be pretty effective.

A web page with a DNS server known to be associated with web pages that contain little or no content other than advertisements may very well provide little or no content other than advertising. So that one can be effective, too.

Some of the patterns listed in the patent don't seem quite as useful or informative. For example, the one stating that a web page containing a common typographical error of a bona fide domain name may likely be a low-quality web page, or a non-existent web page. I've seen more than a couple of legitimate sites with common misspellings of good domains, so I'm not too sure how helpful a pattern that is.

Of course, some textual content is a dead giveaway the patent tells us, with terms on them such as "domain is for sale," "buy this domain," and/or "this page is parked."

Likewise, a web page with little or no content is probably (but not always) a low-quality web page.

This is a simple but effective pattern, even if not too imaginative:

... page providing 99% hyperlinks and 1% plain text is more likely to be a low-quality web page than a web page providing 50% hyperlinks and 50% plain text.

Another pattern is one that I often check upon and address in site audits, and it involves how functional and responsive pages on a site are.

"The determination of whether a web site is full functional may be based on an HTTP response code, information received from a DNS server (e.g., hostname records), and/or a lack of a response within a certain amount of time. As an example, an HTTP response that is anything other than 200 (e.g., "404 Not Found") would indicate that a web site is not fully functional.

As another example, a DNS server that does not return authoritative records for a hostname would indicate that the web site is not fully functional. Similarly, a lack of a response within a certain amount of time, from the IP address of the hostname for a web site would indicate that the web site is not fully functional."

As for user-data, sometimes it might play a role as well, as the patent tells us:

"A web page may be suggested for review and/or its content quality value may be adapted based on the amount of time spent on that page.

For example, if a user reaches a web page and then leaves immediately, the brief nature of the visit may cause the content quality value of that page to be reviewed and/or reduced. The amount of time spent on a particular web page may be determined through a variety of approaches. For example, web requests for web pages may be used to determine the amount of time spent on a particular web page."

My example of some patterns for an e-commerce website

There are a lot of things that you might want to include on an ecommerce site that help to indicate that it's high quality. If you look at the questions that Amit Singhal raised in the last Google Blog post I mentioned above, one of his questions was "Would you be comfortable giving your credit card information to this site?" Patterns that might fit with this question could include:

  • Is there a privacy policy linked to on pages of the site?
  • Is there a "terms of service" page linked to on pages of the site?
  • Is there a "customer service" page or section linked to on pages of the site?
  • Do ordering forms function fully on the site? Do they return 404 pages or 500 server errors?
  • If an order is made, does a thank-you or acknowledgement page show up?
  • Does the site use an https protocol when sending data or personally identifiable data (like a credit card number)?

As I mentioned above, the patent tells us that a high-quality content score for a page might be different from one pattern to another.

The questions from Amit Singhal imply a lot of other patterns, but as SEOs who work on and build and improve a lot of websites, this is an area where we probably have more expertise than Google's search engineers.

What other questions would you ask if you were tasked with looking at this original Panda Patent? What patterns would you suggest looking for when trying to identify high or low quality pages?  Perhaps if we share with one another patterns or features on a site that Google might look for algorithmically, we could build pages that might not be interpreted by Google as being a low quality site. I provided a few patterns for an ecommerce site above. What patterns would you suggest?

(Illustrations: Devin Holmes @DevinGoFish)


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luni, 28 iulie 2014

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Calling All Munitions and Fighter Plane Experts: Is German Pilot Claim "Air-to-Air Attack" Brought Down MH17 Credible?

Posted: 28 Jul 2014 03:56 PM PDT

Peter Haisenko, a German aviation expert made a claim yesterday that air-to-air fire brought down MH17.

The above link is to a translated page.

As a lay person, it's easy to be persuaded by such arguments. Moreover, even if Haisenko is an aviation expert, one has to wonder about his munitions expertise.

I have some questions later, but first let's take a look at some images and a translation of Haisenko's thesis.

Haisenko provides this High-Res Image of MH17 Cockpit.



Click on chart for sharper image, or click on the preceding link for an even bigger image.

Haisenko Notes

  • Cockpit shows traces of shelling, clean round hole, about 30 mm caliper.
  • Some holes are bent inward, some outward
  • Rivets bent outward
  • Moreover, small cuts can be seen, all bent outward, which hint at the fact that fragments have penetrated the outer hull from the inside of the cockpit.

Bullet Holes in Shell




Now the Controversy

The rest of what Haisenko has to say is quite controversial. Here is my modified translation (corrections welcome).
So what can be happening? Russia has published radar recordings, that show at least one Ukrainian SU-25 in close proximity of MH17. This corresponds with the statement of the lost Spanish controller who claims to have seen two Ukrainian fighter aircraft in the immediate vicinity of MH17.

Consider the armament of the SU-25: It is equipped with a double-barreled 30-mm gun, type GSh-302 / AO-17A, capable of firing 250 rounds anti-tank fire or splinter-explosive projectiles, in a defined order. The cockpit of the MH17 has been fired from two sides: the entry and exit holes on the same page. [Mish Note: Reader John points out that a SU-27 has a service ceiling of 62,523 feet and that the Ukrainian army has that aircraft.]

Now just imagine what happens when a series of armored fire and splinter-explosive projectiles, designed so that they can destroy a tank, hit the cockpit. The shells partially escape across the cockpit from the other side, slightly deformed again.

The splinter-explosive projectiles will explode inside the cockpit, as designed.

Because the interior of a commercial aircraft is a hermetically sealed chamber, the pressure inside the aircraft in a split second will rise to extreme levels by these explosions. But the aircraft is not equipped. It will burst like a balloon.

Coherent Picture

The largely intact fragments of the rear sections are broken at the points that are based on the construction breakup most likely under extreme pressure. The image of the widely scattered debris field and the brutally damaged cockpit segment fit to do so. Furthermore, a wing segment shows traces of a grazing shot, which directly leads to extension to the cockpit.

Interestingly, I found that both the high-resolution photo of the cockpit as the segment are also now been removed from the grazing shot on the wing from Google Images. One can find virtually no other pictures of the wreckage, except smoking ruins.
Accident?

Even if Haisenko is correct, the image presented does not rule out an accident.

For example, it is conceivable Ukrainian military aircraft thought they were firing on a Russian plane. Notice I did not say likely, I said conceivable.

Regardless, if plane damage rules out a Buk, then the air-to-air thesis that remains, however unlikely initially, must lead to the truth.

By the way, one of my contacts (Not Dreizin) assures me that an SU-25 can get high enough, not for prolonged periods of time, but long enough to make such an attack. I do not know if that claim is credible, but a SU-27 certainly can hit that altitude.

Six Questions

  1. Is the MH17 damage consistent with either a buk or an air-to-air attack?
  2. Does the damage assessment favor one type of attack vs. the other?
  3. Could a Buk reasonably have only hit the cockpit?
  4. Could multiple Buks be in play to cause both input and exit holes as show?
  5. If so, could multiple Buks have only hit the cockpit?
  6. Could the flechettes (dart-like or ball bearing-like projectiles) launched when the buk exploded simply have traveled completely through the cockpit leaving both entry and exit holes?

Three Scenarios

  1. If the damage is only (or primarily) consistent with an air-to-air attack, we have a new ballgame.
  2. If the damage is consistent with either a Buk or an air-to-air attack, with roughly equal probability, we have not learned much.
  3. If the answer to number 6 is yes, and the rest of the damage is also consistent with a Buk, and the damage is inconsistent with an air-to-air attack , then it is safe to rule out the latter.

For now, I would like some military fighter-plane and munitions experts to assess the damaged parts and make a yes-no-maybe type of assessment on Haisenko's analysis, not on who did it or why, but rather on an assessment of the images shown (and what type of weapon did the damage).

Meet Elena from Sloviansk

Finally, even if it was a Buk, please consider this Video of Militia Soldier - Elena, from Sloviansk with English subtitles.

Posted on June 18, 2014



Partial Transcript

Good day. My name is Elena. I am in the city of Sloviansk. I am native to this town. I have joined the military ranks. I cannot bear this anymore. We are being bombed every day by Ukrainian army, on orders from Junta, Artillery, Air Force. And they drop bombs not on check-points. They drop bombs on people's houses. People live in cellars with their children. How long are we to bear this? How is it that government sends mercenaries on their own people? The people are fighting from here, in defense of their own city. They want to live, not merely exist. Terrible things are happening. For example: An incident that happened recently. A passenger plane was flying by, and Ukrainian attack aircraft hid behind it. Then he lowered his altitude a bit and dropped bombs on the residential sector of Seminovka. They wanted to provoke the militia to shoot at the passenger plane. There would have been a global catastrophe. Civilians would have died. Then they would say the terrorists did it. There are no terrorists here. There are regular people here, that came out in defense of their own city. ... Don't you have any humanity left?

Believable?

Easily. Please note that video came out one month prior to the MH17 crash. It was not a made up story afterwards to fit what happened. And it fits numerous other reports none of which appears staged. 

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

IMF Warns Pound Overvalued; What About Other Currencies?

Posted: 28 Jul 2014 12:26 PM PDT

Is the British pound overvalued? What about the Euro? The US Dollar? The Yen?

Curiously, economists make that case for all of those currencies.

And today, the IMF is pounding the drums with this proclamation "Overvalued" Pound Prevents Rebalancing.
The International Monetary Fund warned on Monday that the pound was "overvalued" and preventing the rebalancing of the economy away from a reliance on spending and imports.

In its annual assessment of the UK economy, the fund said sterling was between 5 and 10 per cent overvalued because of a "lack of competitiveness and limited export diversification".

"Staff estimates that the current account balance is 2.6 per cent weaker than its equilibrium level, and that the real exchange rate is overvalued by about 5–10 per cent," the IMF said.
Equilibrium Level Madness

Apparently the IMF is the arbiter of the "equilibrium level" of any and every currency. A few examples will prove the point.

New Zealand Dollar Overvalued by 20%

On April 10, 2014 the IMF warned New Zealand Dollar May Be Overvalued.

Canadian Dollar Overvalued by 10%

On March 2, 2014 the IMF Warned Canadian Dollar Overvalued by 10%" despite recent depreciation, thus the Bank of Canada should wait before hiking rates..

Australian Dollar Overvalued by 10%

On November 21, 2013 the IMF Stated Australian Dollar Overvalued by 10%.

US Dollar Overvalued

This dates back a while but on October 28, 2010 the IMF said US Dollar 'Overvalued' On Currency Markets.

Swiss Franc Overvalued

Returning to this year, on March 24, 2014, IMF Suggests SNB Use Negative Rates if Franc Pressured because the "franc remains moderately overvalued."

Euro Overvalued

As shocking as this may seem, I cannot find a recent IMF opinion on the Euro, but on May 8, 2014, Mario Draghi, president of the ECB discussed the Pernicious Effects of an Overvalued Euro.

I am pretty sure the IMF would agree.

Yen and US Dollar Overvalued

On October 12, 2012, the Wall Street Journal proclaimed If Yen Overvalued in IMF View, So May Be Dollar.
Japan's finance minister may have breathed a sigh of relief Thursday when the International Monetary Fund chief reaffirmed the yen is "moderately overvalued," a phrase traders believe is supportive of potential market intervention to weaken the currency against the dollar.

Not so well-known in the market, however, is that the 188-member international lender also sees the dollar as "moderately overvalued," a view that makes it harder to conclude the IMF would endorse future intervention by Tokyo in the dollar-yen market.
Yuan "Moderately" Undervalued

On May 29, 2013, and contrary to sentiment in Washington DC that says the Yuan is massively undervalued, The IMF Seeks Flexible Chinese Yuan, Says "Moderately Undervalued".

US Dollar Index



click on chart for sharper image

Summary

Note that the US dollar is about where it has been since the beginning of 2012, but higher than it was in October of 2012 when it was judged to be "overvalued".

Is it more overvalued today? 

Apparently the British pound, New Zealand dollar, Australian Dollar, the US dollar, the euro, and the yen are all overvalued.

The yuan is the one major currency that is allegedly undervalued, but only "modestly".

Mathematics

IMF overvalued-undervalued judgments are generally on a basket of currencies basis.

However, it is not mathematically possible for all those currencies to be 5-20% overvalued against all the other currencies in the same basket.

Even if it was possible, based on precise timings and currency fluctuations, the idea that the IMF can fine tune currency valuations to the nth degree as it has done is absurd.

All Currencies Overvalued

Nonetheless, the IMF appears to be on target with all those "overvalued" assessments, not against  other currencies in the basket or against each other individually, but against gold, and by far greater percentages.

If you agree with my assessment, and perhaps even if you don't, please consider How Much Gold Should Someone Own? Where and How To Own It?

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

No BBC Video Removal Scandal After All; Evidence of Military Planes Shadowing MH17 Mounts

Posted: 28 Jul 2014 12:24 AM PDT

On July 23 the BBC deleted a video report from correspondent Olga Ivishina regarding the crash of MH17. This has caused quite a stir in the blogosphere because the deleted video contained eyewitness reports of military aircraft flying on the same day, shadowing MH17.

Here is the deleted video from cache: Катастрофа рейса MH17 Би би си в поисках Бука 23 07 2014, LQ 



Global Research Canada has some interesting translation clips in Deleted BBC Report. "Ukrainian Fighter Jet Shot Down MHI7″, Donetsk Eyewitnesses.

BBC's Initial Response

I found dozens of references to the removal, but to find BBC's reason for removing the video, I had to search the BBC website. It's in Russian.

Jan Leder, managing editor of Russian BBC Service explains Why Bi-bi-si Material Removed From Site.

Video Reposted

My initial reaction was that Leder's response was disingenuous.

However, the BBC has since re-posted the video.

Reader Jacob Dreizin, a US citizen who speaks Russian and reads Ukrainian, went over the original and now re-posted videos and it appears the BBC was telling the truth all along.

From Dreizin
Although it's not entirely clear, the managing editor says that the intent from the get-go was to fix the material and put it back up as soon as possible.

I have reviewed the original version side-by-side with the new one. And I can see what she's talking about. The new video still has all the eyewitness ladies that everyone has focused on.

The new video removed a somewhat irrelevant lecture from the VItalii Naida, the Ukrainian counterintelligence chief. Instead, it has a Ukrainian official claiming that no combat flights take place over rebel areas, followed by a local resident making a mockery of that claim.

It also has a segment where a BBC aviation expert is quoted as giving his rebuttal to a rebel's claim that Ukrainian warplanes have used civilian flights as cover.

The expert says that while he can't rule it out, it seems very unlikely to him, for various technical reasons. However, I don't think he quite understands precisely what the interviewees are saying.

All in all, there's no BBC scandal here.  But if you just want to focus strictly on what the eyewitness ladies said I've improved it a bit.  Here goes...

Eyewitness #1:  There were two explosions in the air.  This is how it [the plane] tore apart. And it [the remains of the plane] flew off to the sides [gesturing with hands in two opposite directions]. 
Eyewitness #2:  And nearby there was one other airplane, a military one, everyone saw.
Eyewitness #1:  Yes, yes. It was going lower, because it could be seen. It was going below the passenger plane.
Eyewitness #3:  There were sounds of an explosion. But they were in the sky.  Then this plane turned around sharply like this [gesturing with her finger], changed trajectory, and flew in that direction [showing the direction with her hand].
Mounting Evidence

  1. Credible eyewitnesses saw multiple planes.
  2. Russia claims radar picked up multiple planes
  3. Russia claims Ukrainian Buks in Eastern Ukraine
  4. Plane moved from original flight path in mysterious circumstances

Russia gave a detailed report on numbers 2 and 3 (See Russia Claims Photos of Ukraine Deploying BUK Missiles in East, Radar Proof of Warplanes in MH17 Vicinity)

Ukraine denies all of the above, and of course the rebels deny having Buks. It's quite possible, and in fact likely, that both sides are lying about multiple things.

That said, Russia has at least come out with some of its evidence. The US and Ukraine have little to offer but hype and reports that appear fake, coupled with over-reliance social media.

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

What's an inversion, and what's it costing you?

The White House Monday, July 28, 2014
 

What's an inversion, and what's it costing you?

Last week, President Obama called attention to one kind of corporate tax loophole in particular -- called an "inversion" -- a word you might be seeing in a lot of news headlines lately.

It's not the most intuitive name for a corporate tax loophole, so we're breaking it down for you.

Click here to find out what it is, how it's costing you, and how to fix it.

Learn more about what inversions are.

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Another Win for the Affordable Care Act

 
Here's what's going on at the White House today.
 
 
 
 
 
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Another Win for the Affordable Care Act

Today, the Medicare program's Boards of Trustees released their annual report -- and it's certainly good news: The Medicare Trust Fund will last until 2030.

Just five years ago, in 2009, the Trustees predicted that the Trust Fund -- which helps pay for Medicare benefits and administration -- would become insolvent in 2017. Since then, the life of the Trust Fund has been extended an additional 13 years, thanks to the Affordable Care Act and other reforms.

See what this all means for you, and learn about how the Affordable Care Act is continuing to improve the lives of many Americans.

Facts on the Medicare Trust Fund


 
 
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Here's Your Syllabus: Everything a Marketer Needs for Day 1 of an MBA

Here's Your Syllabus: Everything a Marketer Needs for Day 1 of an MBA


Here's Your Syllabus: Everything a Marketer Needs for Day 1 of an MBA

Posted: 27 Jul 2014 05:15 PM PDT

Posted by willcritchlow

A few years ago, I wrote a post on my personal blog about MBA courses. I have a great deal of respect for the top-flight MBA courses based, in part, on how difficult I found the business-school courses I took during my graduate degree. I'm well aware of the stereotypes prevalent in the startup and online worlds, but I believe there is a lot of benefit to marketers having a strong understanding of how businesses function.

Recently, I've been thinking about how to build this into our training and development at Distilled; I think that our consultative approach needs this kind of awareness even more than most.

This post is designed to give you the building blocks needed to grow your capabilities in this area. Think of it as a cross between a recommended reading list and a home study guide.

Personal development: a personal responsibility

I've written before about the difference between learning and training, and how I believe that individuals should take a high degree of ownership over their own development. In an area like this, where it's unlikely to be a core functional responsibility, it's even more likely that you will need to dedicate your own time and effort to building your capabilities.

Start with financial basics

I may well be biased by my own experiences, but I believe that, by starting with the financial fundamentals, you gain a deeper understanding of everything that comes afterwards. My own financial education started before high school:

  • My dad used to give me simple arithmetic tasks based around the financials of his own business before I was old enough to be allowed to answer the phone (when my voice broke!)
  • At college, I took some informal entrepreneurial courses as well as elected to study a few hardcore mathematical finance subjects during grad school
  • After college, I worked as a "consultant" (really, a developer) for a financial software company and got my first real introduction to P&Ls, general ledgers, balance sheets, and so forth
  • Before starting Distilled, I worked as a management consultant and learnt to build financial models and business cases (though the most memorable lesson of this era is that big businesses just have more zeros in the model – at a certain point it doesn't matter whether you're working with $, $k, $m or $b)

So, where should you start your financial education?

I'd begin by learning how to read a balance sheet (which will quickly lead you to a load of ratios) and how to read a P&L (profit and loss statement). From there, you can get to cash flow.

In order to take this all in, you will need to set aside some time to work through a few examples and to dig into the definitions, acronyms, and concepts you haven't heard before. These are not the kinds of post you can simply skim.

This may also be a good time to revisit some basics:

While working through all of this, you should be aiming to:

  • Become comfortable with the language and terminology
  • Understand the connections between cash, profit and assets
  • Begin seeing the sensitivities in how timing, margins, and business models impact outcomes

Since all of this is pretty dry, be sure to add in some human interest by reading about business models in 'the wild' and applying your new-found knowledge to some real-world examples. Amazon is a great place to start because of its unusual focus on free cash flow over profit (for longer reads, I also recommend Bezos' shareholders letters and The Everything Store).

Management: structures and methodologies

When you're trying to get things done, it pays to understand the context of the people you're seeking to influence. Whether you're an external consultant or embedded in the organisation, the people you're dealing with will have their own priorities, incentives, and worldview.

Above all, you need to get close to people in order to understand what truly makes them tick.

You can spend a lot of time digging into dry tomes on organisational design if you wish, but I've learned a lot of things from reading business biographies in order to understand the thinking of senior management at big business. Here are some of my favourites:

  • I already mentioned The Everything Store about Amazon in general and Jeff Bezos in particular
  • In the Plex (relevant to our interests: about Google) has all kinds of interesting anecdotes and management challenges
  • I am a massive fan of The Hard Thing About Hard Things by Ben Horowitz that documents a lot of the interpersonal and management challenges he has seen and faced over the years
  • I was recommended The Five Dysfunctions of a Team by a client-turned-friend who has led large engineering teams – its language of "conflict and commit" quickly became part of my personal thinking
  • In a variety of ways, I've learned interesting things even from books that I found difficult to read or where I felt as if I wouldn't like to work for the individuals (including Winning by Jack Welch, Steve Jobs by Walter Isaacson, Who Says Elephants Can't Dance by Lou Gerstner, and the epic Warren Buffett biography, The Snowball by Alice Schroeder)
BenHorowitz081513_076BSheehan_crop.jpg

Ben Horowitz
Image source: developers.blog.box.com/

6629275_c179a0dc20_z.jpg

Jeff Bezos
Image source: James Duncan Davidson, Flickr

The way I work is to highlight sections of a book as I read it (the Kindle is a godsend for this) and then, if I found it interesting enough, to write up a brief book report for my team. This should be somewhere between enough information to persuade them it would be an interesting read and enough to impart its key lessons.

See my write-up of "Only the Paranoid Survive".

Strategy: the interesting parts

For me, all of this forms the basics of what you need to think about the interesting parts. I'm fully aware (and glad!) that some people become specialists in the details above and enjoy working in them. For me, they serve as tools to understand and to communicate about the way that companies and markets function.

I find that the most interesting learning has elements of storytelling, timeliness, and humanity. During my university studies, I was most excited when I got to hear about theorems developed in the last few years. In corporate strategy terms, it's important to know your history, but it's also exciting to realise that we can read the history that's happening all around us right now.

In rough chronological order, here is some reading material I've found interesting recently:

  • Only the Paranoid Survive is the story of how Andy Grove chose to lead Intel through the almost complete disappearance of its multi-billion dollar core business in just a few short years. See my notes
  • The Innovator's Dilemma by Clayton Christensen – I've written about this before here on Moz and over on our own site
  • In writing about The Innovator's Dilemma, I've talked before about the influence Mark Suster has had on my thinking. I find the vast majority of his writing very thought-provoking. I particularly enjoyed his recent presentation on Why it's Morning in VC which included some great stats about the growth in market opportunity for businesses that think 'online first'
  • For the most cutting-edge thinking about the evolution of strategy in a connected world, I haven't come across a better thinker than Benedict Evans. His newsletter is one of a handful that I read religiously

Putting it together

Different people learn in different ways, but I thought I'd close with a few ideas for more structured ways of learning:

  • Work through the basics by recreating some of the analysis linked to above. Build the Excel, learn the terminology, etc.
  • Read a book from the list and write a book report
  • Form a study group to discuss a Harvard Business Review case

Further reading

The more you get into reading about business, the more you'll realise what a rabbit hole it truly is. I'd love to hear some recommendations in the comments section. I've also included a few more resources that didn't fit into the flow above but that I thought people might like to check out:

  • MBA Mondays from Fred Wilson (I recommend you start at the end and work forwards through time). I've liberally pulled individual posts into the writing above, but there's a wealth of further information in this series
  • Harvard Business Review produces an incredible amount of content, so you'll have to pick and choose, but there's something there for everyone – from written content and video, to deep financial analysis to inter-personal management advice
  • I have had The Personal MBA recommended highly to me – though I have to admit that it's still sitting in my wishlist

When I first pitched this post idea to the Moz editors, they were keen that it contain actual insight itself rather than just links to a bunch of books – something I wholeheartedly support. So, I thought I'd include my notes on Andy Grove's Only the Paranoid Survive. Here you can see what I meant by taking notes and highlighting sections of a book to discuss with a group. This is a great way of digesting the ideas of a book, especially if they are particularly complex.

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Andy Grove, Robert Noyce and Gordon Moore (1978)

Image source: Intel Free Press, Flickr

Only the Paranoid Survive: my notes on a business classic

Documenting his time at Intel, Andy Grove's book provides a fascinating insight into how he led the company out of the memory business and into the microprocessor business. He details his approach for dealing with what he calls "strategic inflection points" which are those times in the life of a business when its fundamentals are about to change. As he says, this "can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end."

It's an incredible story of leadership, management, and strategy, and I highly recommend you read it (even though it's unfortunately not available on the Kindle – a criteria which is fast becoming my top priority for which books I'll read).

Written in 1996, the book looks pretty dated (in parts) almost twenty years later. But to illustrate the power of the insights from the man that Fortune magazine called "The best manager in the world", I wanted to kick off with some quotes from the final chapter of the book. These detail Grove's support of Intel post-retirement – guiding them on the changes he thought the internet would bring to their business. It highlights the value of the rest of the book by proving that he is capable of applying his theories to the future (which is always the hardest part of making predictions).

Highlighting the era in which the book was written, it starts with a section entitled:

What is the Internet Anyway?

Grove immediately lays out his stall:

I felt that the Internet was the biggest change in our environment over the last year.

And then goes on to predict a number of the disruptions that subsequently came to pass – starting with the effect on advertising:

To do that on a big scale, you have to "steal the eye-balls," so to say, of the consumer audience from where they get those messages today … to displays on the World Wide Web.

Publishing:

We may be witnessing the birth of a new media industry.

And even mobile (though he doesn't call it that):

Such an Internet appliance could be built around a simpler and less expensive microchip. Clearly, this would be detrimental to our business.

His presentation, to a group of senior managers at Intel in the mid-90s, clearly met a mixed reception – and I love how much the quotes could be an indictment of my entire career:

Comments on my presentation range from "This was the best strategic analysis you've ever done" to "Why the hell did you waste so much time on the Internet?"

Rather than just pointing out problems, he clearly outlines a set of solutions – starting with embedding the internet at the top level of strategic direction:

Intel operates by following the direction set by three high-level corporate strategic objectives: the first has to do with our micro-processor business; the second with our communications business; the third with our operations and the executions of our plans. We add a fourth objective, encapsulating all the things that are necessary to mobilize our efforts in connection with the Internet.

...and hedging with a deliberate attempt to check his hypotheses to make sure they are correct:

So I think there is one more step for Intel to take to prepare ourselves for the future. And I think we should take it now while our market momentum is stronger than ever. I think we should put together a group to build the best inexpensive Internet appliance that can be built, around an Intel microchip. Let this group try to derail our strategies themselves.

Having set the scene, rather than rehash the story itself, I want to jump to the second half of the book. Here Grove details the general lessons he learned and the approaches he has taught since his retirement as a professor at the Stanford University Graduate School of Business.

So many of the lessons concern the ways that senior managers can make sure they stay abreast of the lessons their teams are learning at the coalface. But learning the lessons are so rarely enough in themselves. Grove details a conversation he had with Intel's Chairman and CEO at the time – Gordon Moore:

I looked out the window at the Ferris wheel of the Great America amusement park revolving in the distance, then I turned back to Gordon and I asked, "If we got kicked out and the board brought in a new CEO, what do you think he would do?" Gordon answered without hesitation, "He would get us out of memories." I stared at him, numb, then said, "Why shouldn't you and I walk out the door, come back and do it ourselves?"

Knowing is not sufficient. It's clear that you still need to work up the courage to make a change somehow. Early on, Grove dedicates a chapter to the necessary methodology of gathering information from the people he calls "Cassandras" who help funnel knowledge of impending changes to senior management:

The Cassandras in your organization are a consistently helpful element in recognizing strategic inflection points… Cassandras are usually in middle management; often they work in the sales organization.

He then goes on to address two potential objections to the particular kinds of action needed at this stage – by middle and senior management. I particularly like the second part – exhorting 'armchair quarterbacks' to get out of their comfy seats:

If you are in senior management, don't feel you're being a wimp for taking the time to solicit the views, convictions and passions of the experts. No statues will be carved for corporate leaders who charge off on the wrong side of a complex decision...If you are in middle management, don't be a wimp. Don't sit on the sidelines waiting for the senior people to make a decision so that later on you can criticize them over a beer -- "My God, how could they be so dumb?"

Continuing the theme that it's necessary, but not sufficient to know what's going on, Grove calls out common behaviour among senior people who (consciously or subconsciously) know what they need to be focusing on, but continually find themselves drawn in other directions. It reminded me of the adage that your calendar never lies:

At such times, senior managers often involve themselves in feverish charitable fundraising, a lot of outside board activities or pet projects...Frankly, as I look back, I have to wonder if it was an accident that I devoted a significant amount of my time in the years preceding our memory episode, years during which the storm clouds were already very evident, to writing a book. And as I write this, I wonder what storm clouds I might be ducking now.

In this theoretical section that comes after many of the personal stories of his own challenges, Grove lays out some mechanisms for coping with and dealing with strategic inflection points once you've seen them coming. In particular, he focuses on clarity of communication:

But when the structure of the industry changes, all of these elements change too. The mental map that you have been carrying with you all these years and relied upon in charting your company's course of action suddenly loses its validity. However you haven't had a chance to replace it with a new mental map. You haven't made the explicit substitutions about how things are done now versus how they were done before, or who matters now versus who mattered then...If senior managers and know-how managers share a common view of the industry, the likelihood of their acknowledging changes in the environment and responding in an appropriate fashion will greatly increase. Sharing a common picture of the map of the industry and its dynamics is a key tool in making your organization an adaptive one.

...and clarity of purpose:

Management writers use the word "vision" for this. That's too lofty for my taste. What you're trying to do is capture the essence of the company and the focus of its business. You are trying to define what the company will be, yet that can only be done if you also undertake to define what the company will not be.

...and he addresses head-on the obvious counter to some of his simple examples by saying that he believes oversimplification is a risk worth taking in pursuit of extreme focus:

But the danger of oversimplification pales in comparison with the danger of catering to the desire of every manager to be included in the simple description of the refocused business, therefore making that description so lofty and so inclusive as to be meaningless.

Just before we get to the final section on the internet that I started with to make my broader point about the usefulness of Grove's framework, he talks about some of the personal pitfalls of leading in the way he describes. I found these two passages to have echoes of 'the hard thing about hard things' that I referenced above. First, leading when you can't know if you're right:

I can't help but wonder why leaders are so often hesitant to lead. I guess it takes a lot of conviction and trusting your gut to get ahead of your peers, your staff and your employees while they are still squabbling about which path to take, and set an unhesitating, unequivocal course whose rightness or wrongness will not be known for years.

...and second, the loneliness of this course:

When I started on this software study, I had to take the time I spent on it away from other things...This brought with it its own difficulties because people who were accustomed to seeing me periodically no longer saw me as often as they used to. They started asking questions like, "Does this mean you no longer care about what we do?"

I hope you've enjoyed this little tour through my ways of learning about business. I think an awful lot of learning comes down to curiosity and, in my experience, business is an endless source of fascination and things about which to be curious. I look forward to hearing your best links and book recommendations in the comments.


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