We’re now two years into the unfolding drama, and fear of deflation has resurged in the past few months as the sovereign debt crisis in Europe has led to a spike in the value in the dollar, a potential for weakening global demand, and the threat of a double-dip recession.  While I personally don’t believe we’ll see an extended period of deflation given the current monetary & fiscal incentives in our country (a blog post on this topic is coming), I do think a few years of borderline deflation may still occur.

From today’s Wall Street Journal:

The old bogeyman of deflation has re-emerged as a worry for the U.S. economy. Here’s something else to fret about: After studying more than a decade of deflation in Japan, economists have slowly realized they have no idea how it works.

Every time you see a piece on deflation, you find references to Japan.  This is not unexpected – Japan is the second-largest economy in the world, and it wasn’t too long ago that many highly educated people thought that it would usurp the US role as the dominant western economy.  This is really the only large-scale modern example of deflation – to find another you have to revisit the 1930s, and too many elements of our system have changed for those analogies to be completely helpful.  In fact, I see some pieces stretch back into the 1890s at times.

Unfortunately, Japan has been a wreck of an example.  They pursued massive borrowing and Keynesian stimulus, running their national debt to over 200% of GDP.  In fact, the most notable thing that they’ve achieved is setting incredible new records for the potential debt a country can take on without completely imploding.  This is similar in some ways to new records being set for over-eating.  Impressive, scary, and not something that inspires you to try it yourself.

However, if you want to understand deflation, and more importantly how to handle deflation, you need to turn to the true masters of deflation.  That’s right, living in our midst, there are huge multi-billion dollar economies that have not only survived a deflationary environment for forty years, they’ve thrived in it.

I’m talking, of course, about the children of Moore’s Law: our high tech industry.  Moore’s Law (circa 1975), loosely put, predicts that the number of circuits that you’ll be able to put in a semiconductor for a fixed cost will double every two years.  This is the equivalent of saying that the price of a circuit will drop by 50% every two years.

That’s deflation of 22.47% per year.  Put that in your pipe and smoke it.

But the industry has thrived, and looking at the financial structure of high tech companies, you can learn a lot about the topsy-turvy logic of deflation and how individuals can cope.

• Debt is Bad. For decades, high tech companies have resisted the traditional financial wisdom of adding leverage to their balance sheets.  Why?  Theoretically, leverage is one of the key ingredients in Return on Equity, a primary measure of financial performance.  The answer is, when it comes to deflation, debt can kill you.In an inflationary environment, being a lender is tough.  There is a risk that inflation will eat of the gains (or more) of the interest you are charging.  If I loan you $10,000 at 5%, and inflation jumps to 8%, I’m losing 3% on the deal.   $300/year lost purchasing power is tough, but imagine that being $3B on a $100B loan portfolio.  This is because as a lender, my return is the interest rate I charge MINUS the inflation.

  In a deflationary environment, roles are reversed.  As a lender, I’ll lend you money at 0%!  After all, if deflation increases the value of a dollar by 3%, then I effectively make 3% on a 0% loan.  My return as a lender is the interest rate PLUS the deflation.  But the borrower has the other end of the deal.  Not only do they have to pay the interest, but they have to pay it with higher value dollars in the future.  Ouch.
  
  Moral of the story: In a deflationary environment, you do not want to owe debt. This is why deflationary environments lead to massive deleveraging.   You do not want to be caught holding a check denominated in low value today dollars, and forced to pay it back with higher value tomorrow dollars.

• Don’t Buy Today What You Can Buy Tomorrow. This is something that any avid purchaser of computer equipment knows.  You pay a lot for the privilege of buying computing power today.  I guarantee you, it will be cheaper 6 months from now.  Want a 2TB hard drive?  Just wait a few months for significant discounts.  Want that Mac Mini?  It will be cheaper (or faster) in a year.  Same item, same condition, same quality – lower value in the future.  That is what deflation looks like.In a deflationary environment, on average items will cost less in dollars in the future than they do today.  So if you don’t need it now, you should wait.  In fact, you are paid to wait.  Literally.  High tech companies know this – they don’t source components until they absolutely need them to put in boxes.  High tech consumers know this.  Want to buy a 42″ LCD TV?  Wait a year, I promise you that exact same model, brand new in the box, will be a lot cheaper.

  This may not seem weird to you, but think about it for a second.   It’s not normal.  In order to keep the box the same price, most consumer products companies literally shrunk what they are offering you, or raise the price.   In high tech, they regularly have to double what they give you every two years, just to keep the price the same!  This is also why high tech companies are desperate to unload inventory as soon as possible… within days.  When I was at Apple, we moved our days of inventory on the books from eight week to just under two days!  Dell at the time was at six days.  Just six days of inventory!  That’s how you handle deflation.

  Moral of the story:  If you don’t absolutely need it now, wait. In inflationary environments, we buy now to avoid paying a higher price in the future.  In deflationary environments, the later you buy, the cheaper it is.  So don’t buy it unless you need to use it, immediately.

• Success Depends on Increasing Value through Innovation. We take this for granted now in the high tech industry, but let’s face it:  high tech is unique.  If the internal combustion engine followed Moore’s law, we wouldn’t be worried about oil usage right now because we’d all be getting over 1M miles to the gallon.What people don’t realize about Moore’s Law is that it isn’t some government regulation.  There is no one handing out 2x performance every two years that high tech companies can just cash in periodically.  Literally hundreds of thousands of brilliant people, across a range of disciplines, degree programs, and commercial ventures are constantly ahead of the curve, inventing the technologies that will deliver that incredible curve.

  It’s a trap, in a way.  The innovation that makes the deflationary environment a fact is also the path to surviving it.  If you miss the next step on the curve, you’ll find that your products quickly are only worth half as much, and your more innovative competitor will still be collecting full price.

  This is tough to handle at an individual level.  In an inflationary environment, everyone gets some form of raise to “adjust for inflation”.  In a deflationary environment, everyone should get a pay cut to “adjust for deflation”.  However, since employees, managers, unions and even governments hate to see this happen, you tend to see layoffs instead.   It’s a vicious productivity war.  If you want earn the same paycheck next year, and deflation is running at 3%, you have to be 3% more productive to make that math work for the business.   At the company level, you need to see companies that can deliver productivity gains every year at a rate above deflation, just to tread water.

  Morale of the story:  There is no coasting in a deflationary environment, no rising tide that lifts all boats. Inflation may be an illusion of more money, but it’s an illusion that people emotionally depend on.  Deflation forces people to come to terms with a basic economic fact – if you aren’t able to make more with the same cost next year, you’ll likely be worth less next year.

I’ve obviously oversimplified a fairly complicated macroeconomic situation in the comments above.  However, I’m hoping that the insights provided will be helpful to those of you who have trouble visualizing what deflation might look like, in practice.  If there is interest, I may put together another post on what types of investments perform best in a deflationary environment.

As a side note, for an explanation on why I believe that deflation will be, at worst, short-lived in the coming years, my next blog post will delve into the reasons that I believe that significant inflation is coming.

I wrote the speech last night (on an iPad) at the local Starbucks.  After a number of twitter questions, youtube searches, and other research, I decided to adopt the high level framework from Steve Jobs 2005 Commencement speech at Stanford, replacing his stories with my own, and adding my own form of 8th grade humor.  I did stick with his “dots” lesson, but you can see I changed the lesson from it quite dramatically.

Overall, quite a few people seemed to enjoy the speech, as a number of the students, parents and faculty came up to me afterward.  It seems like the students liked the jokes at the beginning, while the parents liked the third story on painting behind the refrigerator.

While I ad-libbed a few jokes, the notes below are exactly what I brought up onto the podium with me.  Let me know what you think.

Ice Breaker:

• Last time I gave the 8th grade graduation speech here it was 1987
• Weighed 85 pounds
• I was 12 years old
• Had to stand on a milk crate to reach the microphone to give my speech

Who am I now?

• I have a wife, 3 beautiful boys, and two really fat dogs.
• I am an executive at one of the cooler technology companies in the Valley right now.
• It is part of my job to buy and play with every single new tech toy that comes onto the market.  Yes, it’s true. It’s my job to get the iPad the day it comes out.  Yes, I get paid for it.

(By the way, I appreciate you laughing at all my jokes.  If you don’t think they are funny, don’t be afraid to just laugh at me.  I’ll take it.)

Humorous Anecdote:

Wasn’t sure what to speak about.  Fortunately, they have this thing called the Internet now, and it’s pretty good.  I have over a thousand followers on Twitter, so i asked the for ideas.  I searched YouTube.  Poked around Facebook.  Even asked my younger cousins, who are in junior high now.

Not surprisingly, the ideas were spectacularly bad.

• Some people said I should include a lot of quotes from Family Guy. I did a search and found over 768 funny quotes from Family Guy.  I’m 99% sure that literally none of them are OK for me to say out loud here.
• Other people said I should ask the girls whether they are on Team Edward or Team Jacob.  I don’t really even want to know what that means.
• I got a suggestion to talk about video games.  Apparently, Splinter Cell: Conviction is just awesome.  While that’s probably true, I’m not sure what to tell you about games except that you should treasure these years – once you have kids, you pretty much have until the age of 7 and then they start beating you.
• Apparently, a lot of people think it would be funny if I gave a lot of advice to the boys in the class about girls.  Unfortunately, I still don’t understand high school girls, so not much help there.  Girls, in case you are curious about high school boys, all you need to know is that they really don’t mature much from here.  Don’t overthink it.

Anyway, since none of those ideas panned out, I decided I would cover three stories today and keep it relatively short.

I am going to tell you some things tonight that you are not going to believe.  But they are true.  Just three stories about:

1. Coins
2. Volleyball
3. Painting

First, Coins.

• There are a million little things that make you, you.  Don’t ignore them.  When I was little, i loved numbers.  I used to punch 2x2x2 into the calculator until it got too big for it to display.  Yes, I know that I am not normal.  I’ve always been a geek.   But who knew that knowing all the powers of 2 would be a uniquely valuable skill when it came to computers?
• Hobbies are good.  You’ll be surprised where they’ll take you.  I collected baseball cards and coins.  Yes, I’m a dork.  At the time, I had no idea that I’d end up at business school, and that I’d have a natural sense for markets and trading.  I also had no idea that 20 years later there would be a company named eBay, or that it would do $60 Billion in sales.  I also had no idea that I’d end up working for that company.
• Steve Jobs said a few years ago that a lot of life is about connecting the dots.
• The wonderful thing about high school is that you are still busy adding dots to your picture.
• You’ll spend your life connecting a lot of these dots, but it may not be for years or decades.
• Don’t let anyone discourage you right now from learning and investigating.  If you find something interesting, don’t let anyone tell you that it isn’t worthwhile or cool. Pursue your hobbies, and do them deeply.  You’ll be constantly surprised later at how your life connects the dots.

Lesson 1: Draw lots of dots.

Second,  Volleyball.

• In my senior year of high school here at Pinewood, I was a starter for the Varsity Volleyball team.  This was a big deal for me, largely because I wasn’t actually always good at Volleyball.
• In fact, when I first tried out for the team my sophomore year, I didn’t make it.  (The fact that I was 5’3″ at the time may have been a factor).  I made the team my junior year, but mostly as a substitute.  But I practiced.  2 hours a day.  Extra trips to the gym, practicing against the wall, etc.  I didn’t make starter until senior year.
• There are two types of skills in this world: ones where you’ll have natural talent and ability, and ones where you won’t.   Everyone is different, and I was pretty fortunate to be naturally talented in a bunch of areas.  But there are far more things out there that you won’t be naturally gifted at.
• Don’t limit yourself to the things you’re good at.  Everyone is afraid of looking foolish, and that keeps a lot of us from pursuing things that we’re interested in, but that we’re not immediately good at.   Don’t fall into that trap in high school.  If you are interested in something, don’t just try it.  Do it, and do it well.
• Pushing forward and mastering something that you’re not naturally great at gets you way more than just a skill.  It teaches you persistence and diligence.  More importantly, it gives you the confidence to learn and do anything.
• It also teaches you to not take your talents for granted, and how special it is when you *do* have a unique gift in area.

Lesson 2:  Don’t limit yourself.

Lastly, I promised to tell you about painting.

• I’ve always liked to work with my hands, and now that I have a house, I’m always doing something to it.  When you paint a room, like the kitchen, you always reach a difficult point – do you paint behind the refrigerator?
• After all
  • no one else will see it
  • you can fix it later
• But in the end, there are good reasons to paint behind the refrigerator.
  • first, you know it’s there
  • take pride in your work
  • act as if people are watching
• Character is what you do when no one is watching
• Important in high school, tremendously important in college & adult life
• Some of the worst things that important people have done in the past decades have been because they thought they could get away with cutting either legal or ethical corners when no one was watching.  Many of you will turn out to be important people someday, and like they say, practice makes perfect.

So if I leave you with anything

Lesson 3: Be the type of person who paints behind the refrigerator.

Congratulations to you all.  Thanks for having me here today.  Take care.

LinkedIn Blog: Find and Follow Your LinkedIn Connections on Twitter

Tweets on LinkedIn

You can install Tweets by going to the install page on LinkedIn.

There’s no need to run through all of the great new features – the LinkedIn blog post does a good job of that.   Here is some of the most notable press coverage:

• Mashable: LinkedIn Beefs Up Its Twitter Integration
  
• TechCrunch: LinkedIn Deepens Integration With Twitter; Becomes A Full-Fledged Client

The buzz was fantastic to see.  We pushed out the new application at 4PM PST, and by 4:10PM we were trending with over 20 tweets per minute about the application.  (This included a really nice shout out from Ryan Sarver at Twitter).

One of the most unique aspects of this launch was the added ability to see which of your LinkedIn connections are on Twitter, and which ones your are (or aren’t following).  For example, I personally discovered that I had over 334 LinkedIn connections with Twitter accounts, but was only following 120 of them.  With a few clicks, I was able to discover that key people, including several executives at LinkedIn, had Twitter accounts that I should be following.  Click click click.  Done.

The reason I really loved working on this project is that it captures one of the fundamental reasons the LinkedIn platform is so important.  We believe that every business application would be better if it was integrated with your professional reputation and relationships, and this feature is a great example of how Twitter can become more valuable when it’s integrated with your LinkedIn account.  Finding the right people to follow on Twitter can be difficult, and leveraging your LinkedIn network is a great way to find and follow professionally relevant Twitter accounts.

With the new Twitter list functionality, I can now keep tabs on the tweets of my LinkedIn connections on LinkedIn, on Twitter for iPhone, in Tweetdeck, Seesmic, Twitter.com or any Twitter client that supports lists.  Set it once and forget – LinkedIn keeps it up to date.

A special thank you to the team, in particular Alejandro Crosa, Sarah Alpern and Taylor Singletary.  Very exciting to see this feature live.

You’ll be even more impressed with what we have planned next. 

Currently, a person must have a net worth of $1 million or an annual income of $200,000 if single or $300,000 if married (and filing jointly) to be an accredited investor. The senator’s proposed bill doesn’t say what inflation adjustment will be used to convert these numbers, established in 1982, to today’s dollars. But if we use the Bureau of Labor Statistics inflation calculator to adjust these figures on the basis of the consumer price index, then the annual income requirements for accredited investor status would become $449,000 if the investor were single and $674,000 if the investor were married, while the net worth requirement would become $2.25 million.

This is exceptionally bad news, if it passes, on multiple fronts.  To explain why, let’s review some of the basics.

What is an accredited investor?

Investing in public securities, like stocks and bonds, is heavily regulated.  There is a long standing legal concept, dating back to the 1930s, that individual investors need to be protected from nefarious money raising capitalists.  However, a special exception was carved out for the rich, under the auspice that sufficiently wealthy investors have enough education and resources to protect their own interests.  Thus, for private companies that wish to raise capital from private investors outside these large regulated facilities, there is a concept of an “accredited investor”.

Accredited investor qualifications have changed over the years.  Currently, there are two ways to qualify as an individual:

• You are single and make $200K/year, or you are married and make $300K/year as a household
• You have over $1M in liquid assets

When do you need to be an accredited investor?

You need to be an accredited investor to invest money in angel investments, hedge funds, certain private partnerships, and other high risk / unregulated investments.  For example, if Mark Zuckerberg came to you in 2005 and offered to let you put $25,000 into thefacebook.com, you’d need to be an accredited investor to do so.   (BTW If you can go back in time and do this, I highly recommend it).

Who is this going to hurt?

This is really going to hurt two groups – entrepreneurs and individual investors.

Entrepreneurs are going to be hurt by the severe limitation of who they can potentially raise money from at the angel stage.  As the Business week article points out:

Updating Reynolds’ estimate of the share of the adult population who are accredited investors to the 2008 adult population as reported in the Statistical Abstract of the United States, there were 5 million to 7.2 million American adults who were accredited investors in 2008…

Adjusting the income and net worth requirements for accredited investing to those proposed in the Dodd bill would reduce the number of accredited informal investors to 121,000 to 174,000 people.

So if this passes, we are talking about a massive decline in the number of potential angel investors in a new business.  Potentially a 98% decline, if the numbers above are accurate.  Outside of web 2.0 companies in Silicon Valley, raising angel funding is not trivial as it is.  Reducing the pool of investors here is massively disadvantageous to most entrepreneurs.

Individuals are also hurt here – that same 98%.  These are people who make a lot of money – $200K/year individually or $300K/year if married.  Imagine yourself as the founder of a cool web company, which sells to Google for $10M.  Your cut is about $1M after taxes.  Your friend is starting a new company, and you want to make a $50K investment.  You can’t because… the government says you aren’t rich enough?  Really? (I guess you are rich enough for a top tax bracket, just not rich enough to make investment decisions.)

Why do they think this is a good idea?

The amounts to qualify as an accredited investor haven’t been changed in a very long time.  Originally, these amounts were incredibly large, but they were never indexed for inflation.  I don’t think anyone ever envisioned millions of Americans qualifying.

Given the recent scandals around hedge funds and related ponzi schemes, these changes are an attempt to “protect” the public from people who would trick them into investing into shady schemes and poor investments.  The assumption is the same as the original one in 1933 – that in order to be sophisticated about investments, you need to be rich.

Alternatively, you could argue that we just don’t care that much if “rich” people lose their money, but that normal people, even those earning $300K/year, need to be protected from charlatans and rogues who would trick them into unregulated investments.

A better solution: make accredited status earned by knowledge, not income or assets.

We are learning the wrong lessons from the recent financial crisis and scandals.  If anything, recent events have demonstrated that dumb money is bad in large amounts, whether it is aggregated from a bunch of small investors, or funded by large rich investors.

We know from clear evidence that lottery winners, professional athletes, movie stars, and other wealthy people can still be incredibly financially ignorant.  Just because a retiree has accumulated $2M over a lifetime does not mean that they have significant financial education, or that they understand how to evaluate a hedge fund for legitimacy.  We also know that there is significant danger in this money being lost, stolen, or even worse, leveraged and invested in ways that can exacerbate bubbles.

My thesis is as follows:

• Just because someone has a high income and/or significant wealth, does not mean that they have significant financial education, or will appoint/hire people who have significant financial education.
• Depriving entrepreneurs and individuals from the opportunity to fund new businesses is completely unfair, and likely counter-productive to goals of encouraging new business formation and entrepreneurship.

My proposal would be as follows:

• We introduce a new form of license / test that gives you “accredited investor” status for a fixed number of years (3-5 years).
• We do increase the accredited investor limits – in fact, we eliminate them over time.

Look, we force people to repeatedly take a test to prove that it’s safe for them to drive.  It’s not a big stretch to insist that people who believe they are capable of making unregulated investments have the proper education.

The advantages of this program are clear:

• Meritocracy.  This allows for anyone with the will to research and learn the ability to become an accredited investor.
• Education.  This allows the government to ensure that all accredited investors, regardless of wealth, are aware of relevant financial and legal issues around investments.  This would help prevent charlatans from taking advantage of people.  For example, the test could ensure people are aware of their rights, of recent financial returns, of warnings signs, and of recourse for reporting fraud.
• Self-funding. The government could charge a fee to take this test to help fund the license and potential even some enforcement resources.  It could also charge a licensing fee for institutions that want to offer classes around the license.
• Centralized verification.  This would ensure that every accredited investor is easily verifiable.

As always, very interested in thoughts and feedback from those familiar with the issue.

Update: Good news.  It looks like some amendments have made it through on the Senate bill that restore much of the status quo.  That means the primary damage will be avoided.  Maybe now there is an opportunity over the next four years to take a different approach to qualifying accredited investors.

In 2008, I wrote a blog post about my initial success growing blueberries here in Silicon Valley.

Blog: Blueberries in Sunnyvale

It’s a great post, and it covers a lot of the basics of which varieties to plant, and an example of how to set up watering properly.  I ended on this note:

If you’ve read this far, chances are you think that replacing useless ornamental shrubs and bushes with gorgeous, fruiting blueberry bushes is a dream come true.   Well, you too can live the dream.  I’m happy to announce that growing blueberries in Sunnyvale is definitely a reality.

This will now be my third season harvesting blueberries, and it looks like it will be a bumper crop this year.  However, I thought it was worth putting together an update, because the second season was not very successful at all.  In fact, it was lessons from the second year that really led me to do some research and come up with the techniques that I believe have led to a great 2010.

How to Fertilize Blueberries

I’m not a terribly creative or active gardener, in that I tend to favor plants and setups that don’t require constant maintenance.  Blueberries don’t require a lot of work, if you set them up properly, but they do require fertilization on an annual basis.  More importantly, they require the right kind of fertilization.  (Sources:  Michigan State Agriculture, Ontario Ministry of Agriculture)

Here are a couple key facts:

• Blueberries require acidic soil. Actually, according to eHow and other sites, the proper pH for Blueberries can be anything from 4.3 to 5.1.  That’s pretty acidic, and much more acidic than any soil you are going to find in the Bay Area naturally.  That means, you’ve got to add something to the soil at least annually for Blueberries to flourish.
• Traditional fertilizers can hurt Blueberries. Like most plants, Blueberries need nitrogren.  However, they don’t handle it in nitrate form well, and it can lead to significant issues.  You can use fertilizers made for acid-lovers like Azaleas.  Instead, look for sulfer-based fertilizers.

I personally use the following process:

1. I strip about 1-2 inches of accumulated leaves and top soil off the area.
2. I use ammonium sulfate (purchased at Home Depot, in the garden section).  I sprinkle liberally around the bushes, based on the package instructions.
3. I put down a few bags (about 1 inch) of new top soil from bags.  These bags contain fresh organic matter, which lightly fertilizes.
4. I mulch the entire area.

When to Fertilize Blueberries

This is the part I got wrong in 2009.

In 2009, as per some of the recommendations on blueberry.org, I waited to fertilize my blueberries until they started to flower.  This was a huge mistake.  In the end, I was left with a small number (<30) flowers per bush, and a very sparse crop.

My working hypothesis was that, due to the warm winters in Silicon Valley, the plants never really go fully dormant, but do set based on the frosty nights in December/January.  As a result, they bloom by February, as the weather warms but is still wet.  A few articles on the web from other warm weather growers seemed to confirm this theory.

As a result, this year, I decided to prepare and fertilize my blueberry bushes over Thanksgiving using the treatment above.  I was actually very fortunate on the timing – we had quite a bit of rain in December, as well as a few frigid nights, so I felt like I did the work “just in time”.

Results for 2010

No harvests yet, but all eight bushes (four of each variety) are literally bursting with huge (20 berry+) bunches of green blueberries.  I think there are at least 200+ berries per bush.  Barring some unforeseen tragedy, it looks like the early fertilization and preparation was key for preparing the plants to make the most of their fruiting season.

Here is a quick snapshot that I tweeted out this weekend.  You can see some of the leaves are still red from the winter, although there are quite a few new green shoots and leaves.

I hope this helps any aspiring blueberry growers out there.  It’s a real delight to pick blueberries in the morning on the way to work.

What I bought & why

I decided to purchase the 64GB Wi-Fi only model.  Rationale:

• Wi-Fi is everywhere I’m going to use this device.  I don’t travel very much, so this device will be used mostly at home, relatives houses, work, and the occasional Starbucks.  When I travel, I tend to fly Virgin America and stay at hotels with Wi-Fi.  Paying the $130 premium for the 3G model, plus the $30/mo. data plan seemed unnecessary.  Besides, if I need it in a year, will be cheaper to sell this one and buy a new one than to pay all that money just for the “option” of using 3G.
• I realized that storing a dozen movies and few TV show seasons is pretty likely.  Movies are 1.5GB each typically, so not hard to see using 30-40GB for video on the device.  So yes, I’m one of the suckers that paid $200 for 48GB of flash.  Rip-off, yes.  Pay-to-play, I guess.

Initial thoughts with the physical device

• It is much thinner than I expected. I realize this is an illusion based on the increased screen size, since it’s not thinner than an iPhone.  But it’s surprisingly thin to look at and hold.  Still feels sturdy, though.
• Orientation. Despite the natural orientation vertically, it really wants to be held horizontally.
• Surprisingly, it feels safe to “let go”.  When I’m sitting down, I find myself letting go of the device in my lap, and using two hands.  Not to touch type, mind you, but to hit different areas of the screen with different hands.  For the first few minutes, I used it like an iPhone, but once I let go, I got much faster with the device
• The touch is addictive. The combination of the speed of the device and the touch interface makes it incredibly engaging.  You just want to interact with it.  Everyone who has played with it has said the same thing – there is something about this form factor that demands engagement beyond the iPhone or iPod Touch.
• iBooks is gorgeous. If Apple worked a deal where you got the physical book and the iBook for one price, I’d be on this train immediately.
• The new Video Player is great. I was confused at first, because I expected the video in the “iPod” application.  But once discovered, the new Video app is excellent.

Takeaways

• iPad native applications are an order of magnitude more interesting than iPhone apps.  While a few iPhone apps are enjoyable on the device, the full native applications are phenomenally better.  I didn’t realize this until I had the device.  The native interface controls, larger real estate, and the design of the native iPad apps (both Apple & 3rd Party) are phenomenally better.  So much so that I think the iPhone apps are just a numbers game for marketing purposes.
• The pricing for iPad apps is higher.  Almost all the games cost money, versus the plethora of free games on the iPhone.

Gotchas / Minor Problems

• It was not obvious to me at all why I couldn’t rotate the display.  Turns out, the hardware switch on the device is not a vibrate/mute switch like it is on the iPhone.  It’s a “rotation lock”.  I spent at least a few minutes looking through every setting on the device to figure out why it wouldn’t rotate.  This is a place where a simple contextual help bubble when you click the lock icon would have helped.  This is a UI blunder.  Let me put it this way, if you wanted to confuse the maximum number of users, you would design a device that looks exactly like an iPhone, use a control exactly like the iPhone, and then change it’s function.  I think they should have left the mute button the way it was, and added a rotation lock separately.
• Some MP4s won’t play. Still trying to figure this out.  Some of my older Handbrake generated MP4s won’t play on the device, even though they play on the AppleTV.  This seems foolish – all these devices are powerful enough now to deal with the files that play on Mac Minis.  They should make them more tolerant of all MP4s.
• Storage is stingy for video. As predicted, I quickly filled up the device with photos & video.  Let’s hope they take these to 128GB and 256GB soon.
• Volume & Rotation Lock on the right, not the left. Why did they change this from the iPhone?
• Adding Apps from the App Store is a pain on the device. They should make this easy.  Instead, every time you click install, it boots you out of the App Store, and puts the icon on a new page.  Why?  Did they really want to torture iPad users?
• Get Ready to Spend Some Time on Configuration. My goodness, Apple.  Did you really need to make it so that by default, all my iPhone apps move to the iPad as well?  What a mess.  I had to uncheck all of them, and manually check the ones I wanted.  I could have really used some intelligent defaults, like initially only installing apps that were suitable for the iPad.  This was a miss for the iTunes team.

Final Assessment: Is it worth getting the iPad 1.0?

Absolutely.  Believe the hype.  This is a transformative device.  The engagement of the native iPad applications tells me two things:

1. Native > Web.  Look, I love HTML 5.  I love web development and web apps.  But the seamless touch interface, animation, and graphical richness of the iPad native applications has raised the bar again.  HTML 5 may help web apps catch up to the dated, stale interfaces of Windows and Mac applications.  But the iPad is something different.  The story on the iPad will be native apps for the next 2-3 years, minimum.
2. Touch is for real. Watching my 5 year old with the device, I realize that touch is the 80 in the 80/20 of future device interactions.  I’m realizing how many things I don’t really need a physical keyboard for.   And the mouse?  Except for detailed graphic design, I don’t need it at all.  I’m not saying keyboard/mouse is going away anytime in the next decade.  But I am saying that an increasing number of use cases may not need it.  I can already see how photo viewing via touch will give way quickly to photo editing via touch.

LinkedIn Blog: LinkedIn for Blackberry: Anytime, Anywhere

You can download it at http://www.linkedin.com/blackberry

Twitter is on fire with the news right – I’m watching the stream of comments in realtime.  Great pieces on TechCrunch & Mashable already.  As usual, the team seems to find it amusing to use my profile in all the screenshots, so I guess that is some measure of fame.

The best part of this launch is that it’s just the beginning of our efforts on the Blackberry platform.  I’m very proud of the entire team for pulling together to make this first launch successful.  Special kudos to Chad Whitney on his first major launch and blog post – he even got a new profile photo for the occassion.  Chad joined my team in December 2009, and has already made a phenomenal impact on our mobile products.

Since I’ve written three previous articles on the topic:

• Café World Economics: Profit & Café Points
• Café World Economics: Updated Tables
• Café World Economics: Real World Hourly Wages
• Café World Economics: Profit & Café Points (2010 Edition)
• Café World Economics: Alien Invasion & Google Docs

The Economics of the Spice Rack

The “Spice Rack” is a concept I have advocated previously for Farmville.   A mechanism to purchase items that would accelerate / change the equations for existing actions.  (My original request was for increased levels in Farmville to actually accelerate the length of time it would take you to harvest any crop, like a 10% cut in time, etc.)

Café World has rolled out 7 spices:

• Mystery Spice – Random improvement (reduce time by 1,2,5 min, +5 or +20 CP, +5% or +10% servings)
• Super Salt - Increase the number of servings by 5%
• Power Pepper – Increase the number of servings by 10%
• One hour Thyme – Speed a dish by one hour
• Six Hour Thyme – Speed a dish by six hours
• Instant Thyme – Make a dish ready immediately
• Salvage Sage – Rescue a spoiled dish

For this analysis, I’ve started with the simplest spices: Super Salt and Power Pepper.

For each dish, I calculated the increase (or decrease) in profit for buying the spice and applying it to one dish for the cycle.  I assume that Café World rounds down when you apply the 5% or 10% increase in number of servings. I express the number as an “Return on Investment” percentage (ROI) on the cost of the spice.

So, for example, if spending 600 coins on Power Pepper yield an extra 150 coins of profit after subtracting the cost of the pepper, I describe that as a “25% ROI” for Pepper for that dish.

Results of Spiceonomics

There are a few very interesting takeaways from the table below:

• Spices are rarely worth it. Salt & Pepper have negative ROIs for almost all dishes.  In fact, in the history of the game, only 9 dishes are profitable when using the spices.  Interestingly, Grand Tandoori Chicken is net neutral (ROI = 0%).
• Spices help more advanced players. Almost all the dishes with positive ROI are at the higher levels.
• Spices help infrequent players more. The way the numbers work out, all the dishes where spices help are longer cooking time dishes.  This is good for players that might only play the game once a day (say, in the evening).

The Spiceonomics Table

Here is the summary table.  As usual, you can find all the supporting data in my Café World Economics spreadsheet on Google Docs.

Updated Tables for Profits, Café Points, and Real Hourly Wages

Have trouble figuring out whether Mystical Pizza is a good dish?  Deciding on whether to make the Dino Egg or Rackasaurus Ribs?  My Google Doc is now updated with tables for all 62 Cafe World dishes for data, and color coded based the cooking time of each dish, to help make picking the right dish easy.  Rather than cut & paste everything here, I’m going to just link to the doc.

Click here to view the Google Doc

I’ve been happy with the ReadyNAS, and performance has been fairly good since I upgraded the Gigabit switch that I use.  However, over the past two years, my storage needs have grown:

• iMac 27″: 2 TB drive for documents / applications / photos, 2 TB drive for iTunes, 2 TB for Time Machine
• Macbook: 250GB main drive

The ReadyNAS has 4 750GB drives, providing 2.25 TB of available storage.  At the time I deployed it, my backup needs were about 1 TB, so I could use the drive for backups and incremental updates.

The problem now is the iTunes drive.  It’s too large to backup effectively with Time Machine.  I’ve been using Carbon Copy Cloner to update a disk image of the drive on a weekly basis, but I’ve found that it’s extremely finicky and errors out in a number of situations.  Plus, at 1.6TB, the iTunes library will likely outgrow it’s 2TB home sometime in 2010.  (If you’ve ever purchased a TV season on iTunes, you’ll understand the storage needs).

In order to figure this out, I tried asking the question on Quora, LinkedIn, and Twitter.

• Twitter got me no answers whatsoever.  Very disappointing.
• Quora got me no answers for weeks, although one trickled in almost a month later.
• LinkedIn was the clear winner, and even I was surprised at the speed and quality of the responses.

So, I decided to make the big move to upgrade the system.  Looking at prices on NewEgg, I decided to opt for the Western Digital WD15EARS SATA 1.5TB drives.  Low power and 64MB of cache.  $109 each.  (Great price – selling the 750GB drives will likely pay for 25% of the upgrade).

Unfortunately, the drive wasn’t listed on the compatibility page on NetGear’s website.  Fortunately, a quick board question provided me with the info I needed – the drives will work, if I upgrade to the new beta firmware (4.1.7 T29).

So that’s what I’m doing tonight:

• Upgrade firmware
• One-by-one replace each 750GB drive with a 1.5TB and let it resync
• Once all four drives are replace and synched, reboot and let it reconfigure to the 4.5 TB logical size.

Once I get the ReadyNAS NV+ to 4.5 TB, I’m going to move my iTunes library to the ReadyNAS.  This way, it can scale easily to more than 2 TB, and I don’t have to worry about backup because of the RAID configuration.  (I have a clone of most of the library on a Mac Mini in the kitchen.)  I will then move the 2 TB drive that currently houses the iTunes library, and move it to the Airport Extreme hub so I can use it as a Time Machine drive for the MacBook.

I’m not sure this information is actually useful to anyone.  My guess is that someone, somewhere out there will want to know that you can, in fact, upgrade the Infrant ReadyNAS NV+ to more than 4TB, and that you can use the Western Digital DV15EARS 1.5TB drives with it.  And maybe, just maybe, someone out there is morbidly curious about the evolution of my network storage.

Or so I hope.  I’ll update this post if anything goes wrong.

More and more companies seem to be thinking of IT as a human resources benefit.

(If your eyes just rolled back in your head, stay with me for a second.  This is a big deal.)

Historically, IT has been positioned as one of two things in the enterprise:

1. Cost Center. In this model, IT technology and services are a required cost of doing business and being competitive, but don’t add any differentiation versus your competitors.  As a result, IT is managed by cost, and the goal is to provide “sufficient” productivity compared to other comparable companies at the lowest possible cost.  In this frame, every software purchase, every hardware purchase, every investment in training or personnel is evaluated based on price.
2. Productivity. In this model, IT technology and services are seen as productivity enhancements, and potential differentiators.  Here, investments are made based on an Return on Investment (ROI) justification, where the benefits can include saving time and/or people, or potentially boosting output or revenue.  In this frame, there is a heavy bias towards technology that allows people to get more things done, more quickly, and with fewer errors.

Both of these models tend to heavily favor technology that is cheap.  What they don’t favor is technology that is enjoyable to use.   This has led to many decades of enterprise technology that is sold to decision makers at the top of the organization, and rolled out to reluctant employees who bear the brunt of the cost savings and/or potential productivity gains.

I had never considered that there might be a third model until a blog post about IT at Google surfaced in 2006.  [Note: I hope someone can find this URL for me - I've tried with no luck tonight].  This post wrote about how Google set up stations on every floor, with surplus batteries and machines to make swapping out faulty equipment a breeze.  It talked about giving employees a choice of platform to work on.  Most importantly, it talked about thinking about IT as an HR benefit.

IT as an HR Benefit

When you think about benefits in a human resources context, there is a very different frame of reference.  In business school, students who take incentives classes learn about different forms of compensation and their impact on psychology.  In theory, benefits need to justify their existence in some way beyond straight cash compensation.  Sometimes benefits are required because competitors offer them.  Sometimes benefits are offered because it’s cheaper, due to taxes or bulk purchasing power, for the company to buy them than the employee.  Benefits can be long term, or reward certain types of behavior.  In some cases, benefits are offered because people actually appreciate them more than the equivalent of cash.

In most companies, while benefits are in the end a cost center, they are factored into the general budget and philosophy around compensation of employees.  As a result, more often than not, benefits tend to compete with each other.  Given a compensation budget, what percentage of dollars will be spent on salaries vs. bonus vs. benefits?  Would employees prefer a 401k match or transportation vouchers?  Charitable contribution matches or gym discounts?  Who benefits from each program, and how much?  Will the benefit help with recruiting new employees, or with employee satisfaction and retention?

When framed as an HR benefit, IT comes under a whole different light.  Consider:

• What percentage of your employees time is spent in front of a computer?
• What is the relative cost of newer, more enjoyable technology over the “base model”?
• How much would an employee appreciate dollars spent on IT technology vs. other benefits?
• How does your technology affect your internal corporate culture?

These are very different questions than the ones that tend to drive historical cost-driven IT decision making.

In this model, you might get everyone a 24″ flat panel monitor instead of a 20″ monitor.   Why?  Because as a benefit, this might only cost $50 per employee per year, and they would appreciate it far more than the dollars themselves.   And they would appreciate it for hours every single day.  In fact, they might want to stay at work longer to use it compared to the machine they have at home.

In this model, you might give everyone the choice of mobile device (Blackberry, iPhone, Android, etc).  Of course, it would cost more in software support and development, but allowing employees to use the device of their choice might be appreciated every single day.  It also might make them a little more reluctant to consider working in an environment where they are forced to use a less-preferred platform.

LinkedIn

At LinkedIn, our IT department provides a wide range of choices, which we actually advertise on job postings:

• Choice between Mac or Windows environment
• Choice between laptop or workstation
• Choice between two 24″ displays or a single 30″ display
• Choice between iPhone or Blackberry

Do these technologies boost productivity?  Absolutely.  Do these technologies cost more than a homogenous, lowest-cost environment?  Absolutely.

But when you look at this list, it’s hard not to see them as benefits.  I see new employees every day, almost giddy when they first get their first laptop and 30″ display, or a tower with 24GB of RAM.  I hear people with guests at lunch brag about how LinkedIn lets you have an iPhone or a Blackberry.

Many of these employees spend anywhere from 4 to 10 hours with this equipment every day – is it any wonder that they perceive these as benefits?

Thoughts for the Industry

The question I have is, how pervasive is this trend?   For most office workers, any computer offers sufficient speed and available software.  In the consumer market, with the resurgence of design-based thinking, we’re seeing more products and profits driven by quality of the experience rather than quantitative metrics or feature checklists.  Will it spread to the enterprise?   Will employees demand it?

Many great professionals that I know in IT long to provide better products and services to their fellow employees.  Maybe this is the opportunity for IT & HR professionals to work together to reframe the way we justify technology at work.

Don’t get me wrong – I’m a huge fan of Twitter.  I’ve learned a lot from them from both a user-perspective and a product-perspective.

The problem, however, is that tweets are ephemeral.  They offer an interesting combination of news sharing, brief commentary, and even a smattering of public dialog.  Unfortunately, they dissipate like snow flakes on a warm windshield.

I’ve been posting on the blog for several years now.  Almost 700 posts total.  But there is no question that my blogging activity has dropped considerably as I’ve tweeted more.  This is my first blog post in over a month.

And where are those tweets now?

In 2006 I wrote a thoughtful, but brief blog post about the Orion program, and the reinvigorated plans to establish a permanent presence on the moon.  A few weeks ago, President Obama put forth a proposal to kill the program.  I tweeted several times about it… but no blog post.  It’s sitting on a “to do” list of blog topics that I haven’t completed.

Does it matter?

I suppose it depends on the reasons that people have for blogging.  For me, blogging serves multiple functions:

1. Blogging allows me to collect and share opinions about topics of interest (e.g. The Real eBay Magic: Irrational Commerce)
2. Blogging allows me to demonstrate my interest / skills around a topic (e.g. The Personal Economics of Farmville)
3. Blogging allows me to share knowledge publicly (Roth IRA Loophole: Everyone Can Qualify in 2010)
4. Blogging allows me to keep a diary of topics of interest (The Self Organizing Quantum Universe)
5. Blogging allows me to personally experiment with social media (Category: Blogging)

Unfortunately, I’m worried that the trade off between tweeting and blogging is having a significant long term impact on many of these goals.

My working theory is that Twitter is influencing me to blog less in two ways:

1. It’s real time. As a result, I’m more likely to comment on something during the day, rather than waiting until the evening to blog about it after work.  But, once I’ve commented, the pressure to blog about it lessens.
2. It’s where I get my news. As I’ve started depending on Twitter more for news than Google Reader, my old workflow of going through blog posts and articles, finding topics of interest, and then blogging has been broken.

Now, Twitter has its own value.  In terms of traffic generation, I find it phenomentally effective.  It has also become my primary conduit to gain environmental awareness of topics both personal and professional.  Twitter has also enhanced my professional reputation in a number of circles – circles that rarely if ever discovered by blog.

As a result, while I’m still going to tweet frequently in the coming month, I’m also going to make a renewed effort to blog more frequently over the next 30 days.  At minimum, I’m going to shoot for 1-2 posts per week, to get some rhythm back into the exercise.

I’m also going to experiment with some different tools and features to see if I can’t help turn topics that I find interesting enough to tweet about into topics I’m interested enough to blog about.

Silicon Alley Insider: What’s It Like Working for LinkedIn by Nicholas Carlson

It’s a short piece that covers the basics of working for a hyper-growth, late stage web 2.0 startup.  The piece begins with the following:

During a recent trip out to the Bay Area, we swung by the LinkedIn world headquarters.

We learned that LinkedIn may be the “serious” social network, but the people behind the site know how to have fun.

They wear gorilla suits to the office. They play frisbee golf around cubicles. Sometimes, they build robots modeled after each other.

Sounds like fun, right?  The article has a 24-slide series of photos to illustrate the trip.   The slide show is called:

LinkedIn is Made by Robots and Men in Gorilla Suits

It turns out that I am, in fact, the Man in the Gorilla Suit.

On Slide 17, you see a picture of the large stuffed gorilla that sits next to me at work:

I asked Kay, “what’s with the stuffed bear?” Her answer: “Get your facts right, it’s a stuffed gorilla. Sheesh.” It belongs to VP Adam Nash…

On the next slide, they provide the snapshot from the FAQ page on the company store, where I’m posing in gorilla suit, wearing a LinkedIn t-shirt:

…who is sometimes known to wear a gorilla suit around the office.

As my brother would say, “It’s funny because it’s true.”

It turns out that the Gorilla suit is just about my favorite Halloween costume.  Originally an eBay purchase in 2005, I wear it every year to the office.

So now you know.

On January 21st, Ikai Lan (@ikai) posted this tweet:

What’s the big deal, right?  So what if Ikai found a better deal on Amazon for his Star Trek geekfest?

Here’s the big deal. This was my response to Ikai:

The issue here isn’t that I was somewhat obnoxious (although clearly, I was a bit obnoxious).  Ikai & I worked together at LinkedIn, so it’s not unexpected to have a little bit of fun with the back & forth on Twitter.

The problem is that Ikai is a smart, technical guy.  He’s also someone who looks for a good deal.  If someone like Ikai thinks that Amazon has a cheaper price on an item like the complete DVD collection for Star Trek DS9, then eBay has a real problem.

eBay’s Value Problem

When I wrote my Eulogy for eBay Express in 2008, I talked about four key value propositions that eBay navigates: value, selection, trust and convenience.  One of the motivating factors behind eBay Express was trying to find a way to leverage eBay’s huge advantages in value and selection, while shoring up perceived weaknesses in trust and convenience.

But here we are in 2010, and while eBay has the item, apples-to-apples, for over $100 less than Amazon.com – Ikai didn’t know it.  And you know what?  If a low price falls in the forest and no one is around to hear it, it doesn’t make a sound… or a sale.

eBay’s Value Problem is actually a Search Problem

The point is, despite the fact that Ikai is an engineer working at Google, he couldn’t find the item.  So a $115 price advantage was nullified.   Why?

I’m not a 100% sure what Ikai did to identify the proposed “$350 price”.  When I searched on eBay, I found literally dozens of items priced below $300, many of which were from top sellers, and many of which that offered returns.  In fact, I saw items as low as $130, but I tried to find the lowest priced item that matched the quality of service Ikai would expect from an Amazon third party seller.

Of course, I’ve been on eBay since 1998, and I spent years working on structured data and search products at eBay, so I have a hunch why I found the items and he didn’t.

He typed the wrong query. My guess is that he typed something like this “Star Trek DS9 season 1-7” in the DVD category.  Makes sense, right?  Unfortunately, this only returns two items, the cheapest of which is $299.

Despite years of investment, the eBay search engine still doesn’t understand that “DS9 = Deep Space Nine”, and that “1-7″ is a range, and that “season” is an attribute that DVD sets for television series can have.

Now, what I did do?  Simple:

1. I typed the query “deep space (nine, 9)”
2. I selected the category for DVD
3. I selected “Buy It Now” for listing type
4. I sorted from highest price to lowest

Let’s review the tricks I used:

1. The () notation is how the eBay search engine does OR.  So I was able to find listings with both “nine” and “9″ in them.  To be fancy, I could have used “DS9″ in there too, but it wasn’t necessary.
2. Filter to DVD category to clean out other clutter.
3. I figured Ikai didn’t want to bid on an auction
4. Sorting from high to low is a counter-intuitive trick, but if you assume that the collection will be more expensive than individual DVDs, it makes sense.  I use this all the time with high priced items, since quality tends to float to the top.

I then scanned down the list to find the cheapest collection sold by a credible seller (someone with high feedback and % satisfaction).  And then I tweeted it to Ikai.

Would anyone else know how to do this? Would anyone else want to do this?

I do it, largely because I still love eBay, and because I actually know how to do it.  Plus, I really appreciate saving money on items like this, so the $115 is worth a few minutes.

But all I know is that if eBay can’t leverage it’s intrinsic price advantage with buyers like Ikai, then it has a serious problem.  They can never beat Amazon or traditional retailer e-commerce sites on trust and convenience.  They can, however, beat them on price and selection.

But customers have to be able to find those advantages to value them.

To some it’s a mashup of “Dancing With Wolves” and “Ferngully: The Last Rainforest.” But James Cameron’s “Avatar” has stormed the international box office with a global taking of more than $1.6 billion and may very well be on its way for a sequel … or two.

“I have a trilogy-scaled arc of story right now,” Cameron told MTV. “But I haven’t really put any serious work into writing a script.”

Avatar is highly derivative of other stories and science fiction, and as an avid reader of the genre, I thought I could take a crack at a potential, obvious premise for the backstory of Avatar 2.

Premise: It’s five years after the first movie.  There has been peace on Pandora, as Sully and Neytiri have ushered in a new age of cooperation and understanding between the tribes of the Na’vi.  The humans have been evacuated, with the exception of a small set of scientists who have been given permission to continue their efforts to bridge the learning and knowledge of the two cultures.

However, there have been unusual occurrences on the planet.  The behavior of the flora and fauna on Pandora has been unpredictable, confusing Neytiri who utters more than once that “this has never happened before”.   Modifications of some species begin to appear, as well as completely unknown species are discovered.  The scientists can’t explain it, and Sully tries more than once to communicate with Eywa, with no answers.

Silently, a massive human invasion fleet is on its way to Pandora.  The resources of Pandora are too valuable, and once the Na’vi attacked the corporation, it justified a larger military involvement at 100x the scale of the original movie.

It turns out, however, that the biology of Pandora was too idealistic to have naturally evolved.  After all, every creature sharing a common communication link is incredibly unlikely.  10 foot humanoids with carbon fiber skeletal structures also seems a little far fetched.  It turns out that Pandora is a very special planet, because it’s entire eco-system of creatures was engineered by an advanced race.  That race left Eywa, a massively parallel organic computer, in place, dormant, to monitor the situation and ensure that Pandora progressed as planned.

When Eywa awoke, it began taking emergency measures to modify and enhance existing species against the potential threat.  And it sent an interstellar signal to its creators, to let them know that all was not well with Pandora.  That’s right.  The creators are coming…

… there.  That’s enough for Avatar 2.  Avatar 3 can then focus on what the master plan of the creator race was after all, when the Pandora experiment goes awry.

Given the evolution of the Aliens story (also by James Cameron), I actually think this is a plausible direction.  There is a parallel between the plot surrounding a single ship facing one alien in the first movie, and a massive military engagement with a massive alien force (and new creatures) in the second movie.

Please note: I have absolutely no data whatsoever about the actual direction of Avatar 2.  This is just speculation on my part, as a science fiction lover.  Any reflection of the real plot or premise for Avatar 2 is purely coincidental.

Since I’ve written three previous articles on the topic:

• Café World Economics: Profit & Café Points
• Café World Economics: Updated Tables
• Café World Economics: Real World Hourly Wages
• Café World Economics: Profit & Café Points (2010 Edition)

I find it fairly interesting that Zynga is clearly mapping the same thematic variants from Farmville to their other games.  I remember when they did the space theme for Farmville (I still have 5 alien cows that produce Milktonium as proof…)

I won’t repeat the previous analysis. As a reminder, all of these numbers assume:

• The numbers are per dish, per stove
• The numbers assume the cost (15 coins) and experience (+1) of cleaning the stove each cycle
• Profit & Cafe Points tables assume “instant” cleaning time.
• Real World Hourly Wages assumes a cleaning time of 1 minute per stove.

You can read my previous posts for the rational behind these assumptions.

Profit per Dish

Here are the dishes, sorted by profitability as measured by profit per dish per day.

Café Points per Dish

Here are the dishes, sorted by café points per dish per day.

Real World Hourly Wage per Dish

Here are the dishes, sorted by the real world hourly wage for each dish per day, in US dollars.

Special Bonus: I’ve now moved my spreadsheet over to this Google Spreadsheet.  Now you can see all the rows of calculation for some insight into Café World Economics.  As usual, let me know if you find mistakes or have questions…

Updates:

I’ve added the following posts on Café World Economics since this one.

• Café World Economics: Spiceonomics

Since I’ve written three previous articles on the topic:

• Café World Economics: Profit & Café Points
• Café World Economics: Updated Tables
• Café World Economics: Real World Hourly Wages

I won’t repeat the previous analysis.  As a reminder, all of these numbers assume:

• The numbers are per dish, per stove
• The numbers assume the cost (15 coins) and experience (+1) of cleaning the stove each cycle
• Profit & Cafe Points tables assume “instant” cleaning time.
• Real World Hourly Wages assumes a cleaning time of 1 minute per stove.

You can read my previous posts for the rational behind these assumptions.

How to use these tables. For me, I use the tables as follows:  If I know I won’t be able to check on my Café for the next 24 hours, I go down the table I’m trying to optimize for (money or experience) and I look for the first dish in the list that is 1440 minutes AND that I have enough experience to cook.  For example, I’m currently at level 42, so if I’m looking for a “1 day” dish, the first one for experience is Grand Tandoori Chicken.  But since I can’t buy that yet, I have to keep going down until I hit King Crab Bisque.

Table #1:  Profit per dish

Table #2: Café Points per dish

Table #3: Real World Hourly Wages per dish

Once again, a thank you to Simple Think, which continues to have the most up-to-date raw data on Café World dishes at all levels…

Update: I’ve now posted additional articles on Café World Economics:

• Café World Economics: Alien Invasion & Google Docs
• Café World Economics: Spiceonomics

Download LinkedIn for iPhone

I wrote a fairly lengthy piece on the official LinkedIn blog, so no need to replicate the full walk-through here.  In any case, check out this new home screen:

This application represents a huge achievement for the team.  It’s really a complete redesign and re-architecture of the entire stack supporting the application, based on an end-to-end design that was driven by user feedback and business metrics.

Building iPhone apps is a wonderful throwback in some ways to the days of client software, except with the advantage of over a decade and a half of web-based architectures.  There is a richness to client applications that the web still doesn’t replicate, and a complexity and depth to their design that is often under-appreciated.

Of course, the team had fun too.  The “Themes” feature, for example, was never part of the original plan.  It was originally a last minute easter egg that we included for fun in internal testing.  It proved so popular, however, we felt like we had to include it for everyone.

There are hundreds of things I love about this new application.  Even the way it presents a user’s profile is thoughtful, as LinkedIn is designed to allow you to put your best foot forward as a professional:

Of course, I wouldn’t be a product manager if I didn’t also have hundreds of things I’d like to see improved in the application.  It has been fun to watch the Twitter stream all day, as the feedback has been mostly positive.  Still, while this application represents a big leap forward for LinkedIn on the iPhone, it’s really just a beginning.  What’s most exciting about the architecture of this application is that it will let us rapidly innovate and improve the mobile experience through 2010 and beyond.

So here’s a quick shout out to the team – thank you for the hard work and effort in 2009 to produce an iPhone app we can be proud of.   I couldn’t be more excited for 2010, as we change the way people think of mobile business applications.

I’ve been a little surprised to see how few accurate blog posts exist out on the web that break down the profit & experience for Fishville.  For reference you can still find my first two blogs posts here:

• Fishville Economics: Points, Experience & Levels
• Fishville Economics: Points, Experience & Levels Part 2

Fortunately, I have found at least one new useful resource:

• The Fishville Wiki (on wikia)

I’m at Level 42 in Fishville, so I can get almost all of the data myself.  However, I’m still missing the data for the last two fish:

• Blueline Trigger
• Longhorn Clownfish

If you have the data on either of these two fish, please post here in the comments.

In the past few weeks, Zynga has rolled out a number of new fish.  I’ve updated my Google Doc with all the updated numbers.

The most interesting addition has been a series of fish that you can only purchase with Sand Dollars, which is the Fishville denomination for game money that you have to buy with real money.

This poses a dilemma for my calculations, since I base profitability on coins spent to coins earned.  As a result, I needed a conversion ratio from Sand Dollars to Coins.  Although you can’t buy Sand Dollars with Coins, you can buy both with real US dollars ($) from Zynga with a scaling price table:

Notice anything strange?

According to this table, the ratio of coins to sand dollars varies between 300 and 287, and in a non-linear fashion.  It’s as if Zynga didn’t compare the volume discount on coins to the volume discount to sand dollars when they generated these prices.

Since it’s non-linear, I decided to take the “average” ratio as my conversion.  So, for the purposes of this blog post, one sand dollar = 292.75 coins.

Using that ratio, I was able to regenerate my graphs.  Here is the graph showing profitability of each fish, per level.  All the assumptions from my second blog post still hold:

What you’ll notice is that some of the “sand dollar” fish are actually money losers for the first two levels.  That’s right, assuming my conversion ratio, you’d be better off just buying coins with your money, rather than buying sand dollars and then growing these fish!

Now, the updated experience points chart tells a different tale:

In this case, you can clearly see that the best fish for experience, excluding the “fast fish”, are the sand dollar fish.  As a result, it’s pretty clear that what you are buying with your sand dollars is a fast path to rise up levels.  If you’re willing to spend the money on Batfish, you’ll be able to climb those levels quickly, and with much less work than minding 5 minute fish…

You can reference the full data in my Google Doc.  Let me know if you see any issues with the calculations.

For reference, I’ll include the Level 1 tables here, just in case there are issues reading the now huge Google Doc.

Profit per Fish when you harvest at Level 1:

Experience per Fish when you harvest at Level 1:

Enjoy.  Happy Holidays.

I normally don’t post most LinkedIn announcements here, but this one is too big to ignore.

On Monday, LinkedIn made faceted search available to all members.  This effort brought to fruition efforts that date back to 2007 to completely rearchitect and redesign the LinkedIn search experience based on the unique characteristics of people search.

Rather than try to describe the feature here, I’ll just point to the formal LinkedIn blog post by Esteban Kozak, and embed his great youtube video on the feature:

The news coverage has been flattering:

• Mashable: Facebook Could Learn a Thing or Two from LinkedIn’s Faceted Search

What’s most exciting to me, however, is that these are still very early days in the development of the LinkedIn search platform.  It took LinkedIn over five years to amass its first billion queries.  This year alone, LinkedIn will exceed that number by a wide margin.  People search requires unique investments in structured data, relationship information, search intelligence, and personalized relevance.  (If you’re curious, the Boolean Black Belt got a sneak peak at some upcoming features).

I just wanted to take a moment to say kudos to the entire search team for this tremendous achievement that cuts across all areas – product, design, research, web development, engineering, marketing & operations.

Twitter integration, Open developer program, Faceted Search.  What a great way to launch into the holidays.

Can’t wait for January

From CoinNews.net:

Released at Noon Eastern on Thursday, December 3, 2009, the Platinum Eagles were limited to a mintage of only 8,000. Over 7,200 of those sold in the first few days, even with a household order limit of 5 pieces in place. The US Mint sold just 4,769 of the one ounce proof coins during all of last year.

Some had theorized that this year’s run would be challenged by the high price of the coin ($1792.00) and the relatively unpopular new design.  However, given the huge demand for precious metals this year for investment (gold, silver, platinum, palladium), it’s hard to be completely surprised that this coin sold out so quickly.

Nope.  2008 the US Mint only sold 4,769 coins.  This year, they sell out early at 8000 coins.

The case for buying platinum right now is fairly strong:

• The relative price of platinum to gold is extremely low, given gold’s huge run up.  A few years ago, platinum cost over 3x an equivalent amount of gold.  At current prices, the two metals are approaching parity.
• Simple investment vehicles in Platinum and Palladium, like ETFs, do exist (they trade in London), but don’t have popular US versions (yet), so investment demand remains weak compared to it’s ETF-rich brethren of gold (GLD) and silver (SLV).
• The automotive industry, which is the largest consumer of platinum and palladium, is extremely depressed.  However, since the demand for fuel efficient cars is growing, the use of these metals in catalytic converters and fuel cells seems to forecast significant future demand when the industry recovers.

That being said, I was surprised when I searched eBay for completed listings for the 2009 Platinum Eagle.  Normally, when there is a sell out at the US Mint, you immediately see panic buying on eBay for huge premiums over the US Mint price.

Here is the query.  What you see is that, as of December 12, the prices range from $1727 to $2050, hardly a premium given the transaction costs of eBay / PayPal which can easily run 8-9%.

As a result, I have to wonder:

• Was the sell out the product of true individual demand for the coin?  Or was this a case of coin dealers speculating on a sell out and premium collectible opportunity?

The problem with the Platinum Eagle series is that it’s unclear how many collectors actually try to build “the complete set” of these expensive coins.  Set building is typically the primary driver for premium values for the silver and gold eagle series.

I’ll be watching the completed auctions closely this coming week.  There are a couple sellers already experimenting with higher prices.  Let’s see if they stick.

This post is the third in the Café World Economics series:

• Café World Economics: Profit & Cafe Points
• Café World Economics: Updated Tables

But before I get to the new tables, I did some additional analysis based on my popular Farmville post, “The Personal Economics of Farmville“.  I’ve produced a table that ranks all the Café World dishes based on the equivalent US $ / hour wage you are valuing your real world time when you play the game.

In order to do this, I needed to find some additional data.  The first was an effective value of Café World coins.  To do this, I used the payment schedule that Zynga has in the game (as of 11/30/2009):

Note the wide disparity in values!  If you pay the bare minimum ($4.99), you are valuing Café World coins at 3062.12 per dollar.  But if you pay at the high end ($49.99), you get 6667.33 coins per dollar.

Since there is such a wide disparity of values, I decided to calculate both a high and a low estimate for my table.

The second new piece of data needed was the “time spent per dish“.  This is something that I left out of my initial calculations, but makes sense in this context.

Since all of my tables are “per dish per stove per day”, I estimated that you need to spend one (1) minute per cycle to clean the stove, buy the dish, and click through the 3 ingredients, and then get the finished dish.  This might be a tad high, but it’s in the right ballpark.

What this means is that a dish that takes 5 minutes to cook is now estimated to have a cycle time of 6 minutes, with 1 minute of “real world time” spent.  So, 1440 / 6 = 240, which means to cook a 5 minute dish all day you’d need to cook 240 cycles, which implies a sign up for 240 minutes of “real world time”.

This allowed me to do the simple algebra to weigh the profit per dish per day, in Café World coins, and then subtract the real world time, and figure out the effective “hourly wage” of each dish.

As it turns out, whether you use the high value or low value for coins, the sort order is the same.  Here are all Café World dishes, sorted by “hourly wage”:

Now, these figures are a little misleading, because the dishes that result in high profit (like the Impossible Quiche) and that have long cycle times result in very low amounts of real world time. As a result, if you can make $2 in a minute, you effectively get $120/hour. Still, it makes a point. If you are trying to minimize time spent in Café World for maximum profit, this is a pretty good list to go by.

First thing you’ll notice, is that Chips & Guacamole may build your Café World coin stash, but they are not valuing your time very highly.  In fact, you have to get to Kung Pao Stir Fry to break above the living wage in California, at the low valuation for coins.

However, it also shows that the economics of these coin values are unsustainable. If Zynga allowed people to convert coins to US $ at these rates, then the value of opening up 50 Facebook accounts and cooking Impossible Quiche all day would beat most jobs.  ($200/hour = approx $400K per year!)

Just one of the interesting things you find when you crunch the numbers.

For those of you looking for updated tables with the new dishes, see below.

Café World dishes, sorted by profit per dish per day:

Café World dishes, sorted by Café World points per dish per day:

Enjoy.

Update: I’ve now published updated information on Cafe World Economics.

• Café World Economics: Profit & Café Points (2010 Edition)
• Café World Economics: Alien Invasion & Google Docs
• Café World Economics: Spiceonomics

First, background:

• I’m using Quicken 2007 for the Mac, updated with the R2 updater and the R3 Certificate updater.  This is the most recent version.
• I’ve used Quicken since 1994 to keep track of my expenses and investments.  That’s right, this file has 15 years of meticulous data in it.
• Quicken for the Mac users at some level are masochists.  Circa-2000, Intuit decided that the Mac market wasn’t worth supporting, and effectively ended support for the product.  As Steve Jobs brought the Mac back, Intuit brought back support… but very little enhancement to the product.  Quicken 2007 is largely the same as the Quicken 1999 product, except far more rickety and long in the tooth.

OK, so here’s the story:

1. About 3-5 weeks ago, when downloading stock quotes, I got a very strange error.  It said something like “Unable to create INTC. Security already exists.”  (Of course it exists, I’ve been tracking INTC for more than 10 years…)
2. About 2 weeks ago, I quit and relaunched Quicken for some reason (my machine tends to stay up for weeks at a time.)  On relaunch, all of my “manually entered” stock quotes were gone.  After a brief panic, I restored a file from Time Machine from a week prior, and all was forgotten.
3. Periodically, I received that error when downloading stock quotes.
4. On Friday, I restarted Quicken and got a spinning beach ball.  I thought it hung, so I force quit it, and restarted.  Spinning beach ball.
5. No worries, right?  I have multiple backups.  I use Time Machine to get an older file.  I launch. Spinning beach ball.
6. Uh oh. Mild panic.  I tweet.  No one tweets back.
7. I go to the “Quicken Backup Folder”, which is created automatically in your Documents folder.  I select several of the backups, duplicate them, and try to launch them.
8. Good news, the file from November 12 actually works, but all security prices are missing.
9. Bad news, it’s missing two weeks of data!  A lot of manual re-entry of the last two weeks.  Not too bad though.
10. On Saturday, I quit Quicken and relaunch as part of a reboot.  Spinning beach ball.
11. Uh oh. Time Machine backups don’t work.  I tried five of them from the last three weeks.
12. Double Uh Oh. The only file that seems to work is that one from November 12.  But it gives me an error “Unable to save security”.  It works, but is missing all security prices. But it’s missing the two weeks of transactions.
13. A bit of panic here. I search Intuit boards.  No luck.  I post a question anyway, even though the community on the boards gives me no confidence of ability to help or desire to do so.
14. I delete Quicken 2007 and all preference files, and try to reinstall + updaters.  No luck.
15. Tweets return nothing, except strange semi-taunts like, “I hate Quicken too.”
16. Finally, I realize I may have to create a new file, then export/import all the transactions to create a new clean file.  Creating the file works.  Trying to export QIF and reimport into the new file leaves totally bizarre numbers and transactions.  Seriously, has QIF export ever worked in the past two decades?  Will it ever work?
17. Desperation.  I start seriously contemplating doing all my finances in Mint… except Mint doesn’t actually support managing accounts without online access that well.  I like Mint, but I use it differently than Quicken…
18. Hail Mary. The Quicken file isn’t really a file, it’s a Mac OS Package.  It’s a fancy name for a directory of files that is tagged to act like a single file for the Finder.  Looking inside, I find a data file for “Quotes” and a directory for “Quotes Details”.  I delete both.
19. Salvation.  I launch Quicken.  No beach ball.  Works beautifully.   All stock quotes are gone, but a quick click to download quotes fixes that.  I manually re-enter the few securities that don’t have ticker symbols.  Everything is wonderful again.

So, just to capture some trouble-shooting for you, here is what I saw:

• Launching Quicken with the corrupted file led to a spinning beach ball for over 30 minutes
• When it did finally load, it gave me an error “Unable to open file”
• There was a history of getting errors related to the downloaded stock quotes for securities

Solution was:

• Make a duplicate of your Quicken file (always, always have a clean backup)
• Right-click (or control-click) on the Quicken file.
• Select “Show Package Contents…” from the Finder.
• Double-Click on the “Contents Folder”
• Select the “Quotes” file and the “Quotes Details” folder
• Drag them to the trash, and empty trash
• Relaunch Quicken with the file

Thus, I am still a Quicken user, at least for a little while longer.  Intuit, if you are reading, please get Quicken 2010 (which has been promised for two years) out the door.  And make sure the import from Quicken 2007 files is *flawless*.

I’ve been a little surprised to see how few accurate blog posts exist out on the web that break down the profit & experience for Fishville.  Based on comments to my original post, I made some mistakes.  As a result, I’m posting this follow up to help address the most common concerns:

• What about Level 5 (and 6 and 7…). I classify my charts based on the completion of levels, which is a little confusing because in Fishville, your fish is “Level 1″ until it completes the level, and then it is Level 2, etc.  As a result, you don’t get the “Level 1″ experience until your fish reaches Level 2.  Confusing.  Even more confusing, after completing Level 4, your fish can continue to go up levels… it just won’t be worth anything more.  As a result, I ignore all levels above 4.
• Why doesn’t my experience number match yours? It’s because I’m including the experience you get from dropping the egg in the tank, not just the experience you get from harvesting.
• Level 4 doesn’t take the same time as the other levels. Oops.  This is correct.  I still don’t have accurate info on whether the “Level 4″ time is the same for all fish (2 days) or different.  For this post, I use the 2 day number, which changes the economics considerably.  (Hint: It’s not worth your time to ever let this happen)
• Can you post a Google Doc of all your tables & charts? See the end of this post.  First time for everything.

To recap, here are the assumptions for my tables & charts:

1. I assume harvesting & buying fish is instantaneous. Yes, I know its not.  Fodder for a future post.
2. All profits are calculated per fish. Same with experience
3. Total Experience = Experience from dropping egg + Experience from the level(s) of growth
4. Total Profit = Revenue from harvesting the fist – Cost of the egg

In my last post, I described how your “profit per minute” increases with levels, but your “experience per minute” falls with levels.  A lot of people didn’t understand this, so I decided to try some charts to illustrate.

Here is a chart I made in Google Docs showing the effect of increasing levels on Profit / Minute.  Because there is a fixed cost to buying a new fish, the linear increase in profit per level helps your profit / minute.  Of course, it falls off a cliff once you hit Level 4, and it takes up to 2 days to complete.

This means that, from a profit per minute perspective, it’s better to let your fish grow to complete Level 1, Level 2, and Level 3 before harvesting.

But there is a catch.  Because you get XP every time to buy an egg, the effect on experience points per minute is the opposite.  Every level you go, your experience points per minute drops!  See this chart to visualize:

Based on the comments to my original blog post, it’s very obvious that most players continue to ignore the experience points you get for dropping an egg in your tank – choosing instead to focus only on the experience points you get when you harvest the fish.  Big mistake, because this leads you to keep fish around too long.

Since my last post, I’ve also been able to complete my tables for all current fish.

Here is the profit table for Level 1 profits:

Here is the experience table for Level 1 experience.  Note that I included the experience you get for dropping the egg, as well as the total experience you get for completing level 1.  Remember, Total = Dropping Egg + Level XP:

As promised, here is a link to the Google Doc with all my tables and charts.  Please post additional info, corrections, or data in the comments below.

Updates:  I’ve now posted additional columns on Fishville:

• Fishville Economics: Points, Experience & Levels Part 3

Fishville has a deceptively simple frame:  you have a fish tank, and you buy fish eggs for it.  The fish hatch, you feed them, and then when they are fully grown, you sell them for profit.

What I’ve found most interesting about the game is the new dimensions they are exploring in the economics of the game.  Fishville adds a couple distinguishing twists versus Farmville or Café World:

1. Multiple Tanks. How many people wish they had more than one farm in Farmville?  In Fishville, Zynga has two types of expansion – the ability to put more fish in a single tank and the ability to buy new tanks.  This may not seem relevant from a structural standpoint – after all whether you add 20 fish to one tank or 10 to 2 tanks shouldn’t matter – but it should create a new dynamic around buying virtual goods to decorate different tanks.
2. Harvest Levels. This is the real twist to the economics.  Fish grow up in stages, up to four levels.  The revenue in coins and the experience you get goes up linearly with each level.  So if you have a 4 hour fish, you can harvest them at 4 hours at Level 1, or 16 hours at Level 4.  You still have to feed them or they die (similar to withering crops in Farmville), but you don’t need to “replant”.

The Harvest Levels have the most impact on the game economics.  In financial terms, each fish now has a fixed cost and a variable cost, as well as a fixed experience pay-off and variable experience pay-off.

For example, let’s take the Mini Dart Goby, the first fish.

The Goby costs 7 coins for an egg.  That’s a fixed cost.  If you grow it to Level 1, you’ll get 18 coins, for a profit of 11 coins.  Easy, right?  Hold on.  If you wait until Level 4, you’ll get 72 coins over that same 7 coin cost, for a profit of 65 coins.

The fixed cost means that your “profitability” or “profit / minute” goes up the longer you wait to harvest.

Seems like a no-brainer to wait until Level 4?  Not so fast.

With Experience Points, the math works in reverse.

The Mini Dart Goby gives you 2 XP for dropping the egg.  At Level 1, you’ll get 8 XP, for a total of 10 XP.  But if you wait until Level 4, you’ll get 32 XP, for a total of 34 XP of the time period.  In this case, your “XP / Minute” goes down the longer you wait to harvest.

It gets even harder.

You can harvest a fish in-between levels… but you don’t get any credit for the time between levels.  So if you are half-way between levels, your “profit / minute” and “experience / minute” will be terrible.  In fact, the math says you need to harvest at level boundaries pretty closely.  (I think in a future blog post, I’ll graph this.)

For now, here are some tables I’ve made for the fish I have data on.  Unfortunately, this game is so new, I can’t find any guides online with data for all fish.  Special thanks to Erin Hoffmann, who serves as both data provider and my toughest competitor in Fishville.

The most interesting aspect to these tables is that while the profitability / minute rises for each level, Zynga has kept the fixed costs proportional enough that the ranking of the fish does not change significantly between 1 level or 4 levels.

Here is the profitability of different fish at Level 1:

Here is the profitability of different fish at Level 4:

Here is the experience productivity of different fish at Level 1:

Here is the experience productivity of different fish at Level 4:

If you’d like to help, I’m missing data for the following fish:

• Blue Damsel
• Inland Silverside
• Pajama Cardinal
• Longnose Hawkfish
• Annularis Angelfish
• Blue Spot Grouper
• Blue Hippo Tang
• Bartlett Anthias

For each, please leave a comment with:

• XP / Egg
• Revenue / Level
• XP / Level
• Minutes / Level

Hope this helps the new Fishville players out there.  Enjoy.

Update (11/14/2009): New blog post coming tomorrow, with updated tables and new info.  Also, fixing the issue around the whole “Level 4/Adult” confusion, and publishing a Google Doc to help others benefit from the raw data.  I’m still finding that people are ignoring the XP from the dropping of the egg, and only focusing on the XP from harvesting, so I’ll update tables to make that more clear.

Updates:  I’ve now posted additional columns on Fishville:

• Fishville Economics: Points, Experience & Levels Part 2
• Fishville Economics: Points, Experience & Levels Part 3

This is the second post in my Café World Economics series.  The first one is here:

• Café World Economics: Profit & Café Points

Here are my Café World tables, updated for the three new dishes Zynga rolled out last week.

First, the table of dishes, sorted by total profit per day:

Here is the second table, dishes sorted by Café Points per Day:

As per some of the comments, I’ve realized that there is an overhead in time for setting up a dish. It’s likely small (15-20s), but still, that’s a material increase on a 5 minute dish. I’ll provide that update in a future post.

In truth, I had hoped to have my first FishVille Economics post up by now. Unfortunately, the little spat between Zynga & Facebook seems to have precluded it for now. Fishville has been down all day.

Update:  New Café World Economics posts are available:

• Café World Economics: Real World Hourly Wages
• Café World Economics: Profit & Café Points (2010 Edition)
• Café World Economics: Alien Invasion & Google Docs
• Café World Economics: Spiceonomics

For quick reference, here are the links to my first seven Farmville posts:

• The Personal Economics of Farmville
• The Personal Economics of Farmville, Part 2
• More Farmville Economics
• Farmville Economics: What Price Experience?
• Farmville Economics: Risk Adjusted Crop Profitability
• Farmville Economics: Sweet Seeds are Almost Genius
• Farmville Economics: Flowers & Updated Tables

I’ve updated my tables to include the new crops.  You’ll notice that none of the new crops are significantly differentiated by either experience or profit.

Please remember, all tables normalize the values for one square per day (24 hour day), and include the cost and experience involved with plowing the square per cycle.

Here are the crops, ranked by Profit / Day:

Here are the crops ranked by Experience / Day:

Here are the crops ranked by Profit + Experience / Day (using 15 coins for XP value):

And here are the crops by Risk Adjusted Profit / Day:

Enjoy. Happy Farming.

It’s natural at that point for the eye to wander, seeking out the next great Zynga game.  And for me, that happened a little over a week ago when I decided to take the plunge into Cafe World.

Cafe World has a number of elements that I had originally suggested for Farmville:  animated sims, shorter time spans, more functional enhancements.  It’s a much more complicated simulation, and as a result, it took me quite a bit longer to get the hang of it.

There are a few very interesting new aspects to the game that make modeling the economics difficult.  Expect future posts from me on how to model “The Buzz Factor”, which affects the velocity that your food is consumed over time, and how to model “Spoilage”, which is similar to Farmville but more absolute.

A couple quick tips, for the fans out there:

• Your Buzz Rating drops by 1.0 for every customer who comes in and leaves without food.  The minimum is 5.0, the maximum is 105.0.  There are two ways to preserve it, however.  First, when you run out of food, remove the doors on your restaurant.  This will close the cafe, and keep your Buzz rating flat.  Second, your buzz rating will not fall if you are not actually running the game.  That means it’s safe to run out of food, as long as you aren’t watching…
• If you block your waiter(s) in, then they will serve the food infinitely fast.  This is just like the Farmer trick from Farmville.  I highly recommend doing this with the three serving stations against a corner.  One warning – for this to work, you need to give the waiter/waitress *two* squares of freedom.  With just one, it doesn’t seem to work.

To get things started, however, I thought I’d just run the simple numbers on profitability and experience for each recipe.  I found elements of this information on various posts across the web.  (Here is one from Cafe World Strategy.  Here is another from Cyberanto.  This one was the best, from Simple Think.)  Unfortunately, no one seems to know the Café Points experience breakdown between preparing & serving the Impossible Quiche… I guess no one is at that level yet. (I had to guess in my table).

First, profitability.  Each dish below is normalized as follows:

• All values are normalized for a 24 hours day
• A “cycle” is based on cooking time, but includes the cost & cafe points for cleaning the oven once
• I assume an infinitely fast player for cleaning/preparing/serving

The next table shows the same information, but for Café Points instead of profit. This is more useful if your primary concern is “leveling up”.

Two things seem clear to me from these tables:

1. Overstuffed Peppers is the dish to beat.  12 hours cooking time means you don’t have to babysit the game endlessly.  One of the most profitable, and does a fair job of building experience.
2. Fast Food is King. If you have the patience and time, serving burgers can’t be beat.  All the numbers are incredibly weighted towards the foods with short cycles.  After all, when you can literally serve something 288 times in a single day, that’s a huge multiplier.

In future posts, I’ll try to rebalance these numbers across risk of spoilage and personal time value, to bring some sense to the madness.  I can tell already, however, that the Overstuffed Peppers is going to be the best balance of time & profit.  Of course, my cafe is still dawdling at Level 14…

Update:  New Café World Economics posts are available:

• Café World Economics: Updated Tables
• Café World Economics: Real World Hourly Wages
• Café World Economics: Profit & Café Points (2010 Edition)
• Café World Economics: Alien Invasion & Google Docs
• Café World Economics: Spiceonomics

For quick reference, here are the links to my first six Farmville posts:

• The Personal Economics of Farmville
• The Personal Economics of Farmville, Part 2
• More Farmville Economics
• Farmville Economics: What Price Experience?
• Farmville Economics: Risk Adjusted Crop Profitability
• Farmville Economics: Sweet Seeds are Almost Genius

I’ve updated my tables to include both Sweet Seeds and the new cut flowers.  You’ll notice that, as per my last post, Sweets Seeds really aren’t as good as they should be.  At least, it’s not clear to me why Super Berries were so much better.

Please remember, all tables normalize the values for one square per day (24 hour day), and include the cost and experience involved with plowing the square per cycle.

Here are the crops, ranked by Profit / Day:

Here are the crops ranked by Experience per Day:

Here are the crops ranked by a sum of profit and experience per day (see previous posts for why I ascribe 15 coins to the value of one point of experience):

And finally, the most important table: Risk Adjusted Profitability.  This takes into account the risk of spoilage and the time it takes for each crop to harvest.  I’ve found this to be the best table to answer the question of “what should you plant”:

Stay tuned for my next post, my very first on Café World, my new Zynga addiction.  Very different simulation & economics, and should be good for a few interesting analytical posts.

Updates: I’ve now posted follow-on posts about Farmville Economics:

• Farmville Economics: Cranberries, Pattypan Squash, Acorn Squash

Full story here on the LinkedIn blog.  You can download LinkedIn for iPhone v1.5 here.

An article last week in the Wall Street Journal on investing in gold reminded me of a topic I had meant to cover this past summer:

What is the best hedge for a crisis?

The last two years have validated the fundamental premise of The Black Swan theory.  That premise is that, due to incomplete information and faulty statistical assumptions, the market generally underprices risk at the “tails” of the distribution.

In other words, while the outcomes of the market tend to look like a normal distribution, in reality, more “rare” events happen than would be predicted mathematically.

Given a potential fear of crisis, what is the best way to hedge?  What’s the best way to have some fundamental security in the face of these events?

For Nassim Taleb, the author, he has made his investment approach well known.  He keeps the vast majority of his money in cash, and periodically invests a small percentage in out-of-the-money puts on the market. In 2008, this made for extremely high returns (between 65% and 115%).

Unfortunately, this is such an extreme approach, it’s hard to recommend it as a general practice for anyone but the most stalwart intellectual and contrarian.

If you read any financial press, or listen to AM radio, you likely have heard a much more common refrain about a hedge against crists:  Gold.

Gold has historically been pitched as the ultimate hedge against inflation and crisis.  You can literally find websites that explain how to not only buy gold bullion, but how to effectively bury it in your yard in such a way that it won’t come up on satellite photos (in case the US Government chooses to confiscate it again, like FDR did in 1933.)  I’m not kidding.

Because fascination with gold goes back basically as long as recorded history, it’s rare to find new information on the topic.

This article in Seeking Alpha, however, caught my eye, as a rare piece that had something new to say about investing in Gold.

July 9: A Golden Hedge Against The Dreaded Dollar

This article highlights a well known point – that recently, when the market collapsed, gold actually collapsed with it.  In fact, if you look at the charts, in the past decade, gold and the market look like their moving together.  This makes it a terrible hedge, because good hedges are supposed to be decoupled.

In truth, GLD does appear to be a venerable contender for a portion of a well-diversified portfolio. Yet in a “black swan/perfect storm catastrophe” like the 3 month, systemic breakdown of 2008 (September through November), GLD dropped an astonishing -30%.  PowerShares DB U.S. Dollar Bullish (UUP) soared 20%.

What’s interesting, however, is that in these periods, a very surprising asset has done well: The US Dollar.  The author goes on to advocate for a split between the US Dollar Bullish ETF and Gold.

The article shows this chart, which tracks gold and the US dollar over the past two years:

The insight here is not that you should split your “crisis” holdings between Gold and the Dollar.  Most Americans are already heavily weighted in dollar holdings.   The insight is simply that gold actually doesn’t cover you in all crises, despite the protestations of the gold bugs.

Indeed, I would like to see this relationship going back over the past century, to see what possible approaches might make sense:

• A balanced approach?
• A reciprocal trade where you sell into strength of one, and buy the other?
• Relationships between various mixes of gold & dollar to hedge a stock portfolio?

My guess is that a dollar-denominated fixed income allocation (Treasuries) would look similar to dollar bullish, and would fit a more traditional view of asset allocation.