Author Archive for Mike Speiser
By Mike Speiser
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Sunday, September 13, 2009 |
12:00 AM PT |
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Let’s say that you’re an entrepreneur or general manager about to take a new product to market. How do you price it? Traditional economic theory tells us that the market clearing price is the point at which supply and demand meet, and that consumers always know the utility of any given purchase. So surely pricing your product shouldn’t be that hard, right?
Just as most of us must rely on relative pitch to discriminate amongst various tones, so too must the vast majority of consumers rely on relative price cues in order to determine what they’re willing to pay. What this means, according to behavioral economist Dan Ariely, is that the price of everything is “up in the air.” That’s where menu engineering comes in. Continue »
By Mike Speiser
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Sunday, September 6, 2009 |
12:00 AM PT |
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Our short-term memory is widely believed to have a capacity of seven elements, plus or minus two. This assumption has influenced a number of major decisions — it’s the reason that U.S. phone numbers have seven digits, for example. There are ways to trick your brain into being able to store more than seven (plus or minus two) items, however. One example of a hack around the limit is described in George Miller’s 1956 paper “The Magical Number Seven.“
Most people can only reliably differentiate between six tones on an absolute basis (people with perfect pitch, or roughly 3 percent of the U.S. population, can do so among up to 50-60 pitches, according to Miller), so the rest of us use relative pitch to differentiate amongst a wider range of tones.
Another approach is to connect items through a story. Stories serve as one of mankind’s most efficient compression algorithms, allowing people to dramatically exceed the seven-item limit. If you want to show your boss how hard you’ve worked, pack your presentation with data, charts, and bullet points — but if you want to have an impact, tell a story. The same goes for building great products, effective advertising and selling yourself as a candidate for a job. Continue »
By Mike Speiser
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Sunday, August 30, 2009 |
12:00 AM PT |
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Overnight successes make for great stories, but that’s largely because they’re so rare. Success, the kind that leads to great products and businesses, is built on the foundation of a huge amount of hard work over many years and is achieved by continuous improvement. Continue »
By Mike Speiser
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Sunday, August 23, 2009 |
12:00 AM PT |
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Over the past year, I’ve wished more of my friends “Happy Birthday” than I had my entire life prior to that. This summer, I’ve checked in daily with numerous friends while they were on their vacations. And last week I accidentally ignited a debate among 16 of my friends over the article “Why Exercise Won’t Make You Thin.”
Of course, none of this happened in person, but via Facebook and Twitter. The asymmetrical and casual nature of social networks is allowing humans to engage in what Robin Dunbar has termed “social grooming” with increasingly larger groups — without investing increasingly larger amounts of time. The value of these communications improvements is so great that going forward, I expect significant increases in human and capital investments in this space. Continue »
By Mike Speiser
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Sunday, August 16, 2009 |
12:00 AM PT |
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About a year ago, a friend posed to me the following question: ”Why do students plunk down $150,000 for a 4-year education at MIT when virtually all of the courseware is available free of charge online?” Not only was it a great question, but answering it is critical to bringing elite levels of higher education to the online masses.
Like so many other industries, early attempts at delivering online education have generally consisted of making available the same content that’s found offline. While this is a good start, the key to online education is amplifying the way in which we learn when we’re at school — from our peers. Continue »
By Mike Speiser
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Sunday, August 9, 2009 |
12:00 AM PT |
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After graduating from college, I left the barren Arizona desert for Manhattan to take my first job. It didn’t take long for my new Manhattanite friends to inform me that it was time to upgrade to wine from beer, so I enrolled in a wine-tasting class. But while it was great fun, I don’t think that I was any better at assessing the quality of wine after I’d completed the class than I was going in, though I was much better at faking it.
It wasn’t until years later that I discovered the secret, and it came via a Princeton economist. Understanding the fact that wine is an agricultural product, and as such is dramatically affected by weather, Orley Ashenfelter used decades of weather data and auction prices to come up with this equation for Bordeaux wines:
“Wine quality = 12.145 + 0.00117 winter rainfall + 0.0614 average growing season temperature — 0.00386 harvest rainfall”
Assessing wine is considered an art rather than a science, but oftentimes creativity is about applying a little science to art — as Orley did by taking into account weather and auction data. In an effort to inspire entrepreneurs to also turn ill-practiced art into science, below I share a few other examples. Continue »
By Mike Speiser
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Sunday, August 2, 2009 |
12:00 AM PT |
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My mother was a high school mathematics teacher and understood that kids learn best when learning is fun, so at a very young age she started teaching me math “tricks.” In the second grade she showed me how 9 times any number less than 10 was simply that number minus 1 concatenated with the sum of difference plus whatever it takes to get back to 9. For example, 9 x 8 is 8 minus 1 (7) concatenated with 9 minus 7 (2) — 72. I was hooked.
Since then I have been fascinated with finding quick and dirty tricks to arrive at answers (or good approximations) to everything from the probability that my beloved Arizona Wildcats basketball team will win a game to market sizes and rates of return. Below are three of my favorite business hacks. Continue »
By Mike Speiser
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Sunday, July 26, 2009 |
12:00 AM PT |
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If you’re out to create something truly great, you’ll likely need to challenge some widely held — but incorrect — beliefs. Challenging conventional wisdom is much harder than most people realize, and those that do make us uncomfortable. Which is why it’s so important to learn how to identify and embrace people who see the world differently than you do. Continue »
By Mike Speiser
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Sunday, July 19, 2009 |
12:00 AM PT |
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Some friends and I recently organized a trip to Las Vegas. We were able to find great hotel rates for Friday night, but published Saturday night rates were crazy expensive. So we turned to Priceline, and within minutes we had a 5-star hotel for Saturday, on the Strip, for a fraction of the lowest listed price.
Priceline, Hotwire and vacation packages from offline and online travel agencies can offer prices that are dramatically lower than published rates without cannibalizing revenue because they are opaque selling channels. Opaque selling makes some part of a purchase non-transparent to the consumer (such as which hotel, what time the flight will leave, what products you are buying) so that the probability of revenue cannibalization is dramatically reduced. While opaque selling creates incremental revenue for airlines, hotels and car rental companies, can it work in other industries? Continue »
By Mike Speiser
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Sunday, July 12, 2009 |
12:00 AM PT |
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When in doubt, diversify. That’s the underlying logic behind diversifying. The benefits of diversification with respect to risk come at a cost – that of losing whatever edge you might have been able to gain from skill. If you seek extraordinary performance, focus on what you know very well, have conviction and take a stand. It’s the right way to build a product or to build a company. Continue »
