This is Why You Don't Want Nice Things

A while back I wrote about how I think renting is a superior form of ownership. As I keep reading and trying new secondary markets, from Uber to Getaround to AirBnb, I am even more convinced that owning things is ill-advised. Right now every internet user can rent cars, tools, bikes, and dozens of other products and services which used to be enjoyable only by the people who ponied up the cash to purchase them [1]. Distributed economies have changed the value of owning things, but most people are still paying too much to own too many things and it makes us unhappy - I call this over-ownership.

A classic example of over-ownership would be buying a home when early in life.

According to Bureau of Labor Statistics, 50% of people between the ages of 20 and 24 have been with their current employer for less than 2 years [2]. The only age group in which people have worked for their current employer longer than 8 years is 55+. An 18 year old person can expect to move 9.1 more times in their life. By age 45, people can expect to move another 2.7 times [4]. That's approximately 1 move every 4.2 years for people between the ages of 18 and 45.

Using the New York Time's "Is it better to rent or own?", I calculated that if you live in Raleigh (my previous city of residence), pay less than $1,000 in rent, and want to purchase a $200,000 home [5] on a favorable 2.8% mortgage and 1% property tax rate, it only makes sense to purchase if you expect to stay put for more than 6 years. If you live somewhere like San Francisco (where I currently live), and want to buy the average $1M home, and you currently pay $3,000 per month in rent, it will take 18 years before it makes sense to buy.

So most young people shouldn't buy houses, yet according to Calculated Risk and The Atlantic [6], more than 38% of people between the ages of 25 and 29 do own their houses. This says that me that a fair number of those buyers are going to lose time, money, and sleep on their housing purchases.

Now, think about all the items in your home and think about how much you use them. Think especially of expensive items; KitchenAids, belt sanders, laptops, etc. I would be willing to wager that it would be cheaper for you to rent items you use infrequently instead of owning them. I would go even one step farther: renting would not just be cheaper, it would solve a myriad of other lifestyle problems. If you had 50% fewer objects in your house, think about how much easier it would be to clean, how much less time you would have to spend maintaining possessions, and how much easier it would be to move to the next home/apartment.

There aren't currently enough online services and they are still too inconvenient for my vision of utopian rentals to be practical tomorrow, next month, or perhaps even next year [7]. But in the near future, renting will make our lives universally better by allowing us to own less stuff.

[1] Car rentals, boat rentals, parking space rentals, and especially service rentals like Taskrabbit. And these are just a few examples in each category.

[2] http://www.bls.gov/news.release/tenure.t01.htm">http://www.bls.gov/news.release/tenure.t01.htm

[3] Surprisingly, the old adage about 7 career changes in a lifetime is also bunk: Seven Careers in a Lifetime? Think Twice, Researchers Say.

[4] Calculating Migration Expectancy Using ACS Data

[5] Trulia housing demographics for Raleigh puts the median value of a house in Raleigh NC at $200,000.

[6] http://www.calculatedriskblog.com/2009/04/us-homeownership-by-age-group.html, The end of ownership: why aren't young people buying more houses?" 

[7] One comment I received on the original version of this post was that in making my recommendation for renting, I forgot to include time costs. The basic argument is that there is too much friction in renting, which makes renting a $300 Kitchenaid, for instance, a bad deal. Existing services would require you to find a nearby person renting the item, perhaps drive to their home, sign a paper, drive back to your home, use the mixer, and repeat the process when returning it. But I'm not thinking about existing services. When I first wrote this post, Getaround didn't offer instant rentals, but now they do. The same is true for AirBnb and a host of other services. The instant acceptance peer to peer rental markets are already thriving, we just haven't hit saturation with all the stuff we could possibly rent.

Special thanks to my good friend Ben for checking my numbers on this post and keeping me honest.

Why You Should Refuse to Build a Company on Content

As web business models go, content is well understood: you produce something of value and then monetize through ads, lead generation, or just charging for what you produce. I refuse to start a new business based on selling content and so should you. Here's why:

It Doesn't Pay

The web has produced an extreme abundance of content. It has simultaneously failed to fix micro-transactions. This has resulted in the expected value of any specific information falling to zero. There are isolated niches in which content is still worth money, but they are becoming fewer and father between [1]. As a test of this mindset: would you be reading this right now if I had asked you to pay me even $0.10 for the privilege?

The average piece of content is worth almost nothing. This means that most people in the US can't make a living wage producing content. If you are a good developer, for instance, your time is worth many times more producing code than it is producing content of almost any type.

Producing Content is Unpleasant Work

Some people have realized that content has become too expensive to have people keep producing it. These new content companies (like Demand Media) are highly profitable while traditional content producers (like newspapers) wither and die. Algorithms will be increasingly important in content creation, and they do it just well enough to invite a click and then frustrate you into (hopefully) clicking an ad. Sites like About.com and Mahalo flood search results with just-good-enough information at scale and it's hard to beat companies that wield hundred of millions of links.

With that as your competition, you are forced to create bad/mediocre content as quickly as possible. Producing content is therefore a race to the bottom in which you must compete with the lowest paid global workers to produce bad content as quickly as possible. I don't want to make anything that sucks, much less in large quantities.

There Aren't Any Interesting Problems

You could argue that monetizing content in a sustainable way is an interesting problem, but I would beg to differ. Creating ever-more complex link farms at scale isn't my idea of doing great work. And past that problem, producing content is essentially the same process as it was 500 years ago. I do not mean to imply that creating good content is easy, but the problem is well understood, labor intensive, and has reached a level of development where success is defined more by cutting input costs than by creating better outputs.

Piracy Exists

But just for the sake of argument, let's ignore everything above. If you have a real itch to write the next revolutionary book of jQuery tutorials, there's the issue of piracy. Despite misguided legislation attempting to curb the behavior, piracy is easier today than it was when I downloaded my first MP3 on Napster in 2001. If it's easy to take from you and all you have is takeable, you are in a position of extreme vulnerability.

Again, there are content businesses that make money, but you'll notice such businesses are almost always established B2B companies operating in specialized markets where the liability of piracy is higher than the cost of acquiring material.

This Situation Is Deplorable

I say all of this with the greatest sadness. If people can't make ends meet producing good content, the world is a poorer place. I won't really miss another review of the iPad 9, but I will miss proper journalism. I just finished reading the book 1491. It was both enthralling and breathtaking in the scope of research that went into it. But reading it was a guilty pleasure because I knew the author had to take a huge gamble to write the book, and his odds of making money on his investment were poor. If societies lose people that make it their business to seek truth and produce content, those societies become worse. Watergate was only exposed because 2 Washington Post journalists spent more than three years researching and seeking truth full time. I want to live in a world where people like that can feed their children.

At the same time, I realize I'm not prepared to devote 10 years fighting this issue, and so I refuse to start a company based upon content, and I think if you realistically evaluate the costs, you will too.

[1] I can imagine a number of niche B2B content business models in which you charge for access to highly specialized technical information that changes a great deal. Perversely, one such content business model is law, which doesn't produce any economic value, law merely re-allocating resources between parties.

Your Child's Name Won't Limit Their Digital Future

What are you planning to name your children? If you answered with any common first and last name combination, your child may be at a digital disadvantage. They will be condemned to a life of appending numeric sequences to their user names, picking off-brand Twitter handles, and choosing unrelated domains for their websites. Their Facebook and LinkedIn profiles will be difficult for new acquaintances to locate, Google results will misrepresent them to future employers, and their children will have an even harder time of it.

At least, that's what I thought several weeks ago.

It's easy to imagine that any given name you choose for a child will be common enough that somebody out there has grabbed the domain, the Twitter handle, the Facebook username, the Gmail address, and countless other digital identifiers. In this paranoid world-view, your child is relegated to being a second class citizen of the net (or whatever it becomes) simply by dint of having a common first/surname combination.

But how large of a problem is it really? To answer the question, I did some research on full name variation and came away surprised.

It is trivial to find popular baby names for a given period of time, but finding the frequency of full names in the US is another matter. The CDC and census bureau both don't have full name information for confidentiality reasons, and the only place I was able to find a list of unique first and last names was from a company doing greyhat Facebook advertising and data mining [1]. Here is their list of the 100 most popular first and last names on Facebook in 2009 [2].

I then ran these names through a bulk domain availability search (where the name "John Smith" turns into "johnsmith.com"). Not a single .com domain is currently unregistered.

Of course, that test doesn't tell me much except that at the very edges of the full name distribution, most of the domains are taken. The bigger question is how long the tail is. If 98% of first name/last name combinations are not contained within the top 100, then your kid will be fine unless you do name them John Smith.

Since I wasn't able to get my hands on a dataset for full names, I decided to approximate the frequency of firstname + lastname duplicates based on individual surname duplicate frequency in the US. Because surnames have fewer letters than first names and surnames combined, there are fewer possible combinations. This means that there should be a lot more duplicate surnames than duplicate first name/surname combinations. So, if it turned out there was a lot of surname repetition, I wouldn't be able to conclude much about how common first name/surname combinations are, I would just know that they are less common than the data I can see. However, if duplicate surnames turn out to be relatively uncommon, I could conclude that first name/surname combinations are more uncommon still, and disprove my suspicion that the uniqueness of my child's name is important to their digital future.

Among surnames, the top 100 most popular constituted 16.4% of the US population, the top 1000 accounted for 38.9%. That means that the majority of surnames lie in the long tail rather than the head of the distribution. We can therefore assume that the distribution of full names is even more skewed towards the long tail since the domain space is substantially larger. This assertion is supported by the Facebook data above.

This Wikipedia graph suggests there were around 350,000,000 users on Facebook in 2009. The total number of names in the top 100 comes to around 592,000, which represents just .1% of users on the site.

The conclusion I have to draw is that unless you name your son John Smith and your daughter Sarah Smith, they will have perfectly viable digital identities available to them when they graduate from college and need to start looking presentable to the rest of the world. So rest easy; I know that I, for one, want to name my first child Ellis. According to White Pages Names, it seems it is suitably obscure, and hey, I notice the domain "ellissaines.com" isn't registered. I think I'll register that ... just in case.

Special thanks goes out to the staff of the Alden Reference Library at Ohio University for helping me obtain this link and other vital statistics I used in this blog post! Specifically Sherri Saines (@bibliosanity), Tim Smith, Kelly Broughton, and Cary Singer.

[1] The company was later banned from scraping Facebook, which is presumably why their data is so old.

Save Time, Cash, and Carbon with Amazon Prime

I have been a heavy user of Amazon prime for years, and it baffles me why anyone shops offline for anything but perishable grocery items. If shopping is something you enjoy as a recreational pastime, you can stop reading now, but for all the rest of us, read on to see why Amazon Prime is not just good for your budget, time, or carbon footprint.

Assumptions

Let's start by making some assumptions. First, I will assume that you earn exactly the national median for a fully employed person in the US: $32,140 which is approximately $15/hour [1].  I assume you spend money like a typical American as well, meaning that you spend approximately $7,423 per year on personal care, misc, alcohol and tobacco, apparel, and entertainment [2]. I assume you have access to a car [3] that gets the national average of 24.1 mpg [4]. Further, I'm going to assume that you are like 90% of Americans and live within 15 minutes of a Wal-Mart [5] which represents an 8 mile distance [6]. I will make the further simplifying assumption that you purchase all your goods at Wal-Mart. You value your free time at $10/hr or a 2/3 of your working wage. Your primary shopping objective is to save money on the goods you want and need.

I will assume that most of your shopping is done for relatively common goods, which is just to say that you are not trying to find a new Tiffany diamond necklace, you're shopping for things like shoe laces, t-shirts, and garbage bags. I will assume you shop about as much as the average American, or .75 hours/day [7], and that a typical shopping trip requires 2.16 hours for a total of approximately 127 shopping trips per year.

The Cost of Offline Shopping

Let's start by calculating the costs associated with your current shopping habits. 127 shopping trips per year means your car is being driven 127 * 8 = 1016 miles per year getting you to and from the store. The IRS mileage rate is $.56/mi [8], which means you are spending $569 in car depreciation every year to shop. Further, at 24.1 mpg, and an expected fuel cost in 2013 of $2.04/gal (so cheap!) [9], you're spending $83 on gas for those trips. The total cost to you in terms of automotive expenses is therefore $652/year.

Then there's the time cost. Shopping takes time away from doing other enjoyable things, like watching movies, taking walks, and eating with friends. In the above assumptions, we put the cost of your time at approximately 2/3 of your working wage, $10/hr, which means that you are paying yourself 274 hours * 10 = $2,740 to go shopping. So far, the total cost of shopping offline is $3,392 per year and that doesn't count any of the unpleasantness of fighting through weekend traffic, having to visit multiple stores (because remember, in this hypothetical example you only ever have to shop at one store), and finding a parking spot at an already overcrowded mall.

The Cost of Shopping on Amazon Prime

Save Time

With Prime, goods are delivered right to your door and the actual finding and purchasing of goods requires significantly less of your time. Consider a simple example to demonstrate the point: it would likely take you less than 15 minutes to find a common item like a serving ladle (not an affiliate link) on Amazon which is less than the one-way time required to get to a store. If you were able to avoid only 25% of your shopping runs over the course of the year, that would be 68.5  hours of your life back. We're talking about a 2.8 day's worth of time you can could spend playing fetch with your dog, socializing with friends, or reading interesting blog posts like this one. That's 8 days of vacation time from work. If you are aggressive about shopping online, you could easily avoid far more than 25% of your shopping trips.

Save Money

Prime costs $79/year (soon to be $99), restricts buyer choice, and recent studies have shown that Amazon can cost as much as 20% more than Wal-Mart [10]. But it's still a money saver. The average American is spending $7,423 on non-grocery non-medical purchases per year (see the CNN money link in the footnotes below). $7,423 * .2 = $1,484, add the $79 subscription fee, and it costs $1,563  more on average to shop on Amazon compared to Wal-Mart. If you shop at Target, Macys, or any other more expensive retailer, the cost savings is likely to be much smaller. Compared to the cost of offline shopping calculated above ($3,392), however, Amazon will save you approximately $1,829 ($3,392 - $1,563) per year in automotive upkeep, gas, and time.

In addition, the estimated 20% premium is an estimate based upon a relatively small sample size for non-Prime customers. So the above estimate is likely understates the actual savings.

Shrink Your Carbon Footprint

Finally, shopping online is better for the planet because it significantly reduces the energy cost of shipping goods to consumers [11]. The most efficient way to deliver goods to end users is on big trucks, planes, and delivery vehicles like that UPS truck with all the Amazon packages in it. True, such trucks get poor mileage per gallon, but they deliver hundreds of packages per run, and unlike your personal vehicle, UPS and other shippers are spending big money on reducing their fleet mpg [12].

Conclusion

Amazon Prime saves time, money, and helps me be a reduce my carbon footprint. The $79 might sound like a lot, but it's a drop in the bucket compared to the improvements in quality of life. And if you are like me and dislike shopping in the first place, all of these calculations are meaningless. I would actually be willing to pay more to avoid the mall, but Prime has conveniently given me a better option. You can check it out here (non-affiliate link): http://www.amazon.com/gp/prime

 

[1] Personal income in the US: http://en.wikipedia.org/wiki/Personal_income_in_the_United_States

[2] This comes from the CNN money breakdown of American expenses: http://money.cnn.com/interactive/news/economy/us-spending/

[3] For every car in the US, there is 1.3 people, so this seems pretty reasonable. http://en.wikipedia.org/wiki/Motor_vehicle

[4] Presumably if it is newer, you'd be more likely to get good gas mileage, but I'm working with averages here. http://en.wikipedia.org/wiki/Fuel_efficiency

[5] It's actually pretty shocking that we all live so close to Wal-Marts, http://www.statisticbrain.com/wal-mart-company-statistics/

[6] This is an extrapolation from the statistic about living 15 minutes from a Wal-Mart. I do not have a statistical source to back up the conversion from 15 minutes to 8 miles, I'm just guessing you can't go 60 mph on the way to the average Wal-Mart from the average home.

[7] Yes, that means that the average American spends 274.13 hours shopping every year: http://www.bls.gov/news.release/pdf/atus.pdf

[8] 2014 IRS mileage compensation rate: http://www.irs.gov/2014-Standard-Mileage-Rates-for-Business,-Medical-and-Moving-Announced

[9] Expected cost of gasoline: http://www.nytimes.com/2015/01/28/business/energy-environment/after-steadily-falling-price-for-gas-notches-an-increase.html

[10] The study was conducted by Kantar Retail. Their sample size is pitifully small (36 goods) and doesn't take into account the fact that Amazon doesn't cover all goods with Prime shipping: http://www.bloomberg.com/news/2012-06-22/wal-mart-beats-amazon-prices-including-glee-dvd-set.html

[11] The study is actually focused on Buy.com, which presumably has a less efficient distribution network than Amazon: http://campustechnology.com/articles/2009/03/16/shopping-online-more-energy-efficient-say-carnegie-mellon-researchers.aspx

[12] http://compass.ups.com/ups-lightens-up-with-fuel-efficient-plastic-trucks/

Minecraft Isn't Educational

I have spent the majority of my professional career building edtech products. First I taught tens of thousands of students Chinese and Japanese, then I taught millions of kids to code. I know a lot about building educational products; games in particular. As a lover of Minecraft and an edtech game designer, I'm here to tell you that Minecraft isn't an educational game.

For those not familiar, Minecraft has several game modes none of which are games in the sense of having levels, bosses, missions, and achievements. Minecraft more closely resembles a digital sandbox with varying levels of abstraction. Survival mode is a bounded sandbox with randomly generating baddies. Creative mode is digital Legos. None of Minecraft's game modes explicitly teach the player anything. That's right: there is no educational content in Minecraft whatsoever. There are no lessons, tutorials, grades, or tests, there is no backstory, no plot, no puzzles, no brainteasers, riddles, math, or history. Nothing in the game tries to teach anyone anything. 

I hear you crying out "but Minecraft holds kid's interest long enough that they learn to mod the game, or build simple circuits, or build historic structures. Surely that's educational!"

But take a look at that line of reasoning again: the advocates don't claim that Minecraft teaches anything. They claim that kids like it enough that they may end up teaching themselves something unrelated while playing. The girl who likes computers learns enough Java to mod the game. The boy that likes building things constructs interesting structures. But to say that learning in the pursuit of addictive entertainment is educational is sloppy and unfair reasoning. By that same logic, Grand Theft Auto 5 is educational because some kids get so into it that they memorize the geography of LA to minimize transit between missions [1]. 

The reason that parents, schools, and kids call Minecraft educational is that it combines the addictive behavior of video games with the least offensive content imaginable. What learning occurs in the course of that addiction is labeled educational, but is no more useful to kids than anything else they voluntarily spend equal amounts of time on.

Why does the distinction matter? Because it's misleading educators and game designers. Spoiler alert for people making edtech games: there's very little to learn from Minecraft because as I mentioned above, it doesn't teach anything. Spoiler alert for teachers: Minecraft won't teach your students anything useful [2]. 

I love Minecraft and have played for much longer than I'd like to admit. So has my wife. So has my brother. As a game, it's great; but as education, it's no better than World of Warcraft. If you want your kid to learn, you'd be better off letting them follow their interests and educating themselves.

[1] Yeah, yeah, "Los Santos." Everyone knows it's LA.

[2] Even though it will keep them entertained for a class period with little to no chance that parents will complain.