Getting to "yes" in a world of "no"…

It’s a while since I made a proper web-log blog post, so here are some interesting JavaScript postcards from the edge that I found while trawling the web. Enjoy!

* Best link there is: Essential JavaScript Design Patterns by Addy Osmani – great little ebook (and free!)

* Peter Michaux’s Early and Late Mixins

* What is the length of a JavaScript array?

* JavaScript declaration hoisting – great for job interview tests, terrible for real code

* It turns out that you the JavaScript delete operator can never delete objects (only properties of objects). Just so you know!

* How to have a JavaScript function return undefined.

* A neat JavaScript chess programme called GarboChess. I like it!

I recently wrote (and indeed published on Amazon) a nicely interactive chess ebook (Chess Superminiatures, based around more than a hundred real-life chess games all under ten moves long). As a result, my exposure to all things ebook-related and ebook-business-model-related has spiked sharply in the last month or so.

But when it comes to VAT and ebooks, even I didn’t see this one coming.

It’s like this. The basic business model for ebook publishing is as an Agency arrangement, so if you buy a Dorling Kindersley ebook on Amazon, you’re not buying it from Amazon, you’re actually buying it from Dorling Kindersley with Amazon ‘merely’ acting as an Agent. (Yes, even though Amazon does the hosting, selling, customer transaction, billing and money collection, and then gets to sit on the money for 60 or so days before passing it on to DK.)

All the same, at this point any underlying business model differences are merely semantic as far as a customer is concerned: if you’re buying an ebook, you don’t particularly care whether it was Amazon or DK that sold it to you. You know that it ultimately came from DK, the rest is just meh.

…except if you want a VAT invoice for your purchase. Because unlike normal books, the price of ebooks (potentially) contains a VAT component (i.e. if the seller is VAT registered). Did you know that? But… how would you get a VAT invoice for an ebook?

This is the point where it gets fuzzy and legalistic.

Because it is acting as an Agency, Amazon itself doesn’t charge VAT on the sale, because the transaction is between the customer and the ultimate publisher. So whether or not there is VAT on the transaction depends on whether the ultimate publisher is VAT registered, and that is not actually made clear on the Kindle product screen.

But all the same, you would have thought that an Amazon-mediated transaction between a customer and a VAT-registered publisher would necessarily generate a dated VAT invoice of some sort, as just about every other VAT-rated transaction in the EU is required to do, right?

Wrong! Amazon sidesteps this entire issue by sneakily insisting in its Terms & Conditions that Kindle content is only ever for “personal use”. With this single stroke, they (seem to) remove the need for VAT invoices, because someone buying a book for “personal use” would not have any explicit need for a VAT invoice, because they would – as an individual – be unable to claim back VAT.

So that’s the end of that… or is it? Frankly, if I was an EU commissioner tasked with dealing with Amazon, I would be spluttering with fury into my latte every time this topic came up, because Amazon plainly sells a whole host of business-oriented content for Kindle readers, and the wave of ebook titles swells ever higher each year.

This “for personal use only” in the T’s and C’s is without any doubt nothing more than a gigantic hack: as I wrote elsewhere a few days ago, the person who first devised this trick is probably still chortling into their hand years later. In fact, it’s such an epic business model hack that I think it genuinely deserves its own Wikipedia page – give credit where credit’s due!

So, to be truthful, the line should say something like “possibly includes VAT if the ebook publisher is VAT registered (irrespective of Amazon’s own VAT accounting), not that you can claim it back because only personal use of Kindle content is allowed within Amazon’s current T&Cs”.

Way back in 2002 or so, I devised the idea of “gamification”, a clunky (but useful) way of proposing that electronics devices of all sorts would be vastly improved by taking on board the lessons games companies had had to learn. My position was simply that the games industry was the ‘cradle’ for the major technology waves that were just about to break, and that tech people needed to get their heads around that.

The people at Apple certainly did: in terms of how I personally describe gamification, I’d say that the iPhone, the iPad, the iTunes Store and the App Store are prime examples – near-frictionless interfaces coupled with a games-industry-informed platform-centric way of doing business. And that certainly has done the company nothing but good.

Websites, too, were something that concerned me greatly back then: when I looked (and still look) at websites, the thing I look for more than anything else is a kind of ‘authorial voice’, an online corporate presence in a rather more literal sense than the phrase usually connotes. You also find this in packaging copy and TV voice scripting (e.g. Innocent Smoothies have a great ‘voice’, Shakeaway usually pitches it right, More Than has become pretty good, Orange used to nail it but has lost its way, Apple comes and goes, Coca Cola sucks terrifically, Macdonalds is even worse these days, etc).

In retrospect, what subtly linked my twin obsessions from back then was what I now call the notion of psychological distance – for if authorial voice is the process of ‘humanizing’ a company to the point that it can actually talk to you in a language that you can almost accept as human, then gamification is very much the process of using technology to reduce the psychological distance between you and it – bringing you emotionally closer to it.

The example I like to give to show the limits of gamification is the whole idea of a government tax website: though it would make sense to tune users’ flow through the tax website, the idea of using gamification techniques to bring the user psychologically closer (and somehow more emotionally aligned) with The Taxman would seem somehow alien to a lot of people.

But even though this seems like a kind of counterexample to the whole gamification-is-universally-good gospel, maybe – just maybe – you could make a positive difference here. All the same, you’d have to start your design process from a radically different corner to normal… that of psychology and empathy.

The most basic ’empathy hack’ would be to add a changing sidebar showing simple top-line statistics about what your tax money does for people – education, healthcare, etc. Tax shouldn’t be presented in a stark, oppositional way, when it is actually the backbone of how a civilized society functions. Tax is how we get money fairly from the people who make it to the people who need it – and illness or changing personal circumstances can rapidly alter which side of that whole equation you happen to be sitting on.

My point here is that by reducing the empathic distance between the website user and the website owner as a first step, we are already oiling the conceptual wheels in a very direct way. By adding this kind of touch, we’re giving The Taxman a believable human voice (rather than a cartoon bowler hat, *sigh*). Only then can we start to think about anything so fancy as gamifying the interface – in sales terms, you need to answer the “who cares?” question long before you try to close the deal.

Beyond that, it’s an open question about what the tax website people would need to do: but my larger point is that gamification is hugely dependent on a collaborational mindset having first been invoked or engineered. Without a proper appreciation of psychology (and how things like authorial voice can to a large degree help), gamification isn’t really a lot of use.

I think it was Gartners who claim that 85% of current gamification projects are likely to fail: my point here is that without actively trying to reduce the empathic distance first, many such projects would never have a chance of working at all.

More generally, in these days of customer-centred design, I’d contend that interface design is fast becoming an exercise more in psychology than in programming. But I’m not sure if even a single current CompSci course has this as a design precept, not even the computer games courses. The world is changing fast, that’s for sure…

Infographic suckage…

I’m sorry, but even for the purposes of satire I couldn’t bring myself to click on the [add patronizing rows of little jelly-baby men] button. Really, nothing highlights the suckage, banality, and information underloadedness of most infographics better than infographics themselves…

infographic-suckage

Yesterday I had bad hay fever and a headache: so I decided to throw myself at one of the countless books in my in-tray, Michael Lewis’ (2010) “The Big Short”. 24 hours later, and I found that I’d accidentally read the whole book: it’s certainly an engrossing read. 🙂

I already knew a fair bit about the causes of the 2007 / 2008 financial market collapse and how it played out: but Lewis foregrounded the people not so much at the eye of the storm, but rather encouraging the storm to get on with it and smash everything up. (Basically, because they’d each found ways of taking a huge short position against the stupid, mad, exploitative system that had rapidly been built atop an unsustainable industry selling mortgages to people who could barely begin to afford them.)

But then Lewis got a big detail wrong (something which I happen to know about), and I think that throws his overall judgment sideways. He writes (p.78):-

“Wall Street’s newest technique for squeezing profits out of the bond markets should have raised a few questions. Why were supposedly sophisticated traders at AIG FP doing this stuff? If credit default swaps were insurance, why weren’t they regulated as insurance? Why, for example, wasn’t AIG required to reserve capital against them?”

This is where Lewis drops the ball. As I understand it, the reason Joe Cassano (“a guy with a crude feel for financial risk but a real talent for bullying people who doubted him”, [p.86]) ran AIG’s operation from London was because, compared to the US, the UK had unbelievably lax rehypothecation rules – the rules that should stop you borrowing a hundred times over against the same collateral asset.

It’s true that Cassano’s group was sold one of the biggest pups in history by companies gaming the ratings agencies in ways that were, from my perspective, completely unethical. But what gave AIG the ability to insure the repackaged subprime tranches at all was simply that because they were operating out of London, they could do whatever hypothecation they f*&king well liked.

Ultimately, Goldman Sachs and the rest may have encouraged AIG to pull the trigger, but it was London’s lax rehypothecation rules that loaded AIG’s submachine gun. Without a gigantic sucker insurer to sit on the other side of the trade who just happened to have the means to scale it up, the subprime market would surely never have happened in the first place.

So was London no more than a passive passenger in the meltdown, one hijacked by those nasty old US investment banks; or did its (lack of) rules actively help derail everything? I suspect the latter… but you’ll have to make up your own mind.

What scares me most is that, thanks to the ridiculous bailouts that ensued, nobody involved seems to have learnt anything. Rehypothecation in London remains infinite. What will trigger the next meltdown?

I just read a clip-quotes-together-and-number-them article supposedly on why the VC model sucks. It annoyed me enough to want to answer my own question: right now, what in Startup Land really sucks?

elephant-cropped

Well… Venture Captal as an asset class does indeed currently suck, it’s quite true.

But the way that wannabe entrepreneurs flood VCs with pathetic app-centric slideware designed more to wrap around the VC business model than around real customer needs, that also sucks.

And the ridiculous way that journalists and bloggers write about VCs and startups sucks too. I mean, what is the point of reading an article in TechCrunch about how insanely clever startup X’s founder is to have got VC funding, when the odds are at least 9:1 that it’ll all turn brown and runny inside 12 months?

Oh, and the way that business angels claim to be liquid (when nearly all their actual worth is tied up in a whole myriad of tax avoidance schemes): and so spend most of their time wasting entrepreneurs’ time doing meetings when they have an actual business to run: that sucks as well.

And really, don’t get me started on how ridiculous cargo cults such as The Lean Startup waste startups’, angels’, and VCs’ time by encouraging entrepreneurs to design their companies around processes that can almost never be funded or scaled. Because that sucks.

Even so, despite all that pathetic sucking, right now the maximal suckage in the whole train-wreck startup ecosystem is simply this: 95 or more out of every 100 people who currently want to be an entrepreneur are just f^&king kidding themselves.

Jeeez, so you lost your job as a mid-ranking software project manager at Acme Corp: does that automatically make you an entrepreneur? No. So you think you’d like to write a cool app, does that make you an entrepreneur either? No. In fact, do just about any of the half-baked excuses people put about for being an entrepreneur actually make you an entrepreneur? No, they don’t. They really, honestly don’t. And the more I hear them, the sadder it makes me.

Back here on Planet F^&king Earth, being an entrepreneur actually involves two things: (1) not spending money while still moving forward, and (2) selling like the biggest sales monster ever seen. Almost all of the current demented crop of entrepreneurs act as if these are two skills they can somehow get by without having to acquire or use: but they’re wrong, ridiculously and riotously wrong.

In fact, anyone can knock together a business plan based around spending someone else’s money (a Fantasy Startup game a child could play), but the real world is the cruel antithesis to such self-indulgent reveries. It is the immovable rock on which all such plywood dream ships get brutally shattered. You don’t like this? Well, sorry, but welcome to my world.

So… you want to be an entrepreneur, do you? Ever wondered whether you might actually be part of the problem?

I found this very unfortunate spelling mistake on my mobile phone, thought I ought to share!

Severly_Delayed

bacon-small

 

It struck me the other day that if The Lean Startup is as good an idea as its evangelists like to claim, why not apply Lean Startup principles to real life? Hey, that would work perfectly… errrrm, wouldn’t it? Well…

Dating

  • No, sweetie, I’m not being “unfaithful”: I’m merely A/B testing you and her. Oh, and six others… <sssssssslap>
  • No, sweetie, I’m not “dumping” you: I’m merely iterating fast towards a better product/market fit… <sssssssslap>
  • Hey, babe, wanna see my MVP enter a rapid scaling phase? Let me cross your sweet little chasm… <sssssssslap sssssssslap sssssssslap>

School

  • Following in-depth UX testing, I pivoted from homework to Call of Duty 11 : Rendition to Guantanamo…
  • I’m sorry, Ms Taffenheimer, I really don’t think Geography is going to be one of my “engines of growth”…
  • No, Jake, in exams you are not allowed to “build-measure-learn” from other students’ test sheets…

In Restaurants

  • Wow, I’ll have what he‘s having. Errr… no, I mean I’ll have what she‘s having. No, what that other guy’s having. No, wait…
  • Can I order a mouthful of everything on the menu? I’d really like to iterate fast to my perfect meal…
  • I’m going to persevere with super-hot curries, even though I’ve lost all sensation above my knees…

In The Slush Pile

  • Yeah, we hire workers in pairs, set ’em at each other’s throats for a week, then fire whoever flinches first. Never fails…
  • We’re not “firing you”, we’re just “pivoting you into an externally managed role stack”…
  • I keep iterating my CV based on my rejection speed metric – if it takes a whole week, I must have been at the top of the pile…

On The Phone

  • “We like to pivot fast. Press ‘1’ for BlueFab Corp. Press ‘1’ for defunct.ly. Press ‘1’ for cloudnproud. Press ‘1’ for…”
  • “Hello, what product would you like us to make for you? Press ‘1’ for cloud, press ‘2’ for virtual, press ‘3’ for 3d printing…”
  • “We’re sorry, but fooddood.ly pivoted before we could ship your food order. Can we make up the order with LED pens instead?”

Elsewhere On The Planet

  • Yeah, Morty, we just put “Snakes On A Plane 2.0” into production, it tested real great on the Internet…
  • The nuclear industry is so responsive now we’ve introduced continuous code deployment… <bawooooooooooooooshhhhhhhhhhh>

Eric S. Raymond famously contrasted the ordered (but rigid) “Cathedral” of Big Software Development [e.g. Microsoft Windows] with the disordered (but dynamic) “Bazaar” of Open Source Software [e.g. Linux]. His intention was to try to demonstrate how the Bazaar approach is The Right Answer to the challenges of the modern world, and (conversely) how the Cathedral approach was dead in the water.

As I often tell my young son, anytime someone offers you an either-or choice, the chances are that you’re being conned (or at least coerced). Coke or Pepsi? Errrrm… I’ll have a nice glass of water, if that’s ok with you. So I think Raymond’s dichotomy is something of a forced-argument fallacy, in that by fixing the terms of reference around two massively distant poles, he was trying to make his argument seem more convincing than it actually was.

All the same, I agree it was good that Raymond opened up the whole open-closed debate, because the world of software has historically been very closed. But then again, a lot of software now seems to use open-source libraries on closed platforms (i.e. iOS), so it would seem that neither position actually “won”: rather, the whole idea of software became both more complex and more financially compromised. Even Linux (Raymond’s poster-child for the Bazaar) has itself become a heavily politicised and contested development area, with a tightly controlled feature “funnel” and significant corporate involvement.

The other big issue opened out by Raymond’s open-closed debate was whether the Cathedral-Bazaar / closed-open continuum could usefully be applied to anything apart from software. Having tried for several years to do this with historical research in an online forum, I can say with confidence that it simply doesn’t work. In that context, an online community degenerated into what was more like a third-rate Pub Quiz team, a rag-tag rabble which couldn’t even decide its own name, let alone work together towards a shared purpose.

All of which is why I found this interview with Jaron Lanier in the Smithsonian Magazine so interesting. Despite having helped ‘found’ many of the ideas & ideals of the World Wide Web, Lanier now seems to see it as a socially dysfunctional mess – as having transitioned from utopia to dystopia. Summarizing, he now feels that the endless trolling and schadenfreude gets in the way of any of the kind of positive virtual social interactions he hoped for from the Web, which he sees it as an imminent “social catastrophe”. He seems to see anonymity as a thing that gives people the power to destroy social capital far more readily and easily than anything else can build it.

Moreover, Lanier thinks that what started out as digital libertarianism (of ideas) has become a kind of incultured piracy (of digital property). And don’t get him started on the death of the middle class (which he seems to blame on disintermediation, but it’s not entirely clear how).

 “I think it’s the reason why the rise of networking has coincided with the loss  of the middle class, instead of an expansion in general wealth, which is what should happen. But if you say we’re creating the information economy, except  that we’re making information free, then what we’re saying is we’re destroying  the economy.”

Perhaps the most audacious part of his argument is that he tries (inexactly, I think, but in broadly the right spirit) to connect rehypothecation with digital piracy – that somehow the virtual copiedness of piracy is the same as infinite rehypothecation.

“To my mind an overleveraged unsecured mortgage is exactly the same thing as a pirated music file. It’s somebody’s value that’s been copied many times to give benefit to some distant party.”

This is, I think, where Lanier’s argument train leaves most people’s rails: there may be parallels, sure, but did the web really cause the current (far from finished) Recession? Actually, I would argue that the Recession came about as a consequence of the laissez-faire financial deregulation set in motion by Prime Minister Margaret Thatcher, but that ended up being so brutally amplified by commodities speculation during the period 2001-2007 that the resulting volatility caused the whole system to collapse under the pressure.

Computers played their part in that, sure, but the overall development arc was quite independent of the World Wide Web or anything virtual. Basically, “virtual” is a useful catch-all phrase for ‘non-physical system’, but it really doesn’t have anything like the rhetorical or logical power that Lanier is relying on for his argument.

I think Lanier sees Bad Stuff going on and wants to be The Canary Of Impending Doom: but this isn’t good enough. At any given moment, you can discern a heady mix of Good Stuff and Bad Stuff all around you, but only a pessimistic idealist would think that the Bad Stuff is going to win. The right question is surely how to give nudges to the Good Stuff to keep it all in some kind of ongoing dynamic balance, but I’m not sure Lanier is enough of a pragmatist to do that. Oh well!

For me, the Cathedral and the Bazaar are both unhelpfully idealistic ways of looking at the world, and I can’t help but conclude that Jaron Lanier views the Web in that and similar dichotomies (virtual-physical, wealthy-poor, political-naive etc). This is, however, a fairly impoverished weltanschauung, far from the nuanced realpolitik that holds sway in most human affairs.

I suspect that what is emerging as the major alternative to the Cathedral and the Bazaar is the Tank: a self-contained, self-reliant, compact, Nietzschean powerhouse. In an increasingly paralyzed and purposeless world, what I call a “tank” is a powerful unit with its own self-constructed epistemology and ideology, but where the powerlessness of its context magnifies its own power (relatively speaking).

In the US, the Tea Party movement was surely the first political tank: and perhaps UKIP will turn out to be the UK’s first political tank. By which I mean, the Tea Party and UKIP don’t seem to be built on strong arguments, but the paralysis of their opposition makes them relatively strong. Perhaps the Lean Startup “movement” is also a tank, made powerful largely by the paralysis of the startup funding landscape.

Here’s some stuff that turned my startup finance world upside down, perhaps it will do the same to yours.

One of my favourite mad economics topics is rehypothecation. If you’ve managed up till now to avoid the word, it’s because you’ve been living in a financial la-la land, a dreamworld where banks and brokers are honest & straightforward, and the world financial system is basically sound.

Of course, they simply aren’t, and it isn’t. But however bad you think everything is, rehypothecation makes it all worse… much, much worse.

The quick version goes like this: that when a bank or broker lends money secured against an asset, they can then borrow against the same asset they’ve lent against. And that the bank or brokers who lend them money can then repeat the process. The initial mortgaging is hypothecation: the subsequent chain of mortgages is called rehypothecation.

As explained on the excellent Zero Hedge site, there is a fundamental asymmetry between US rehypothecation rules and UK rehypothecation rules:-

Under the U.S. Federal Reserve Board’s Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client’s liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets.

But in the UK, there is absolutely no statutory limit on the amount that can be re-hypothecated. In fact, brokers are free to re-hypothecate all and even more than the assets deposited by clients. Instead it is up to clients to negotiate a limit or prohibition on re-hypothecation. On the above example a UK broker could, and frequently would, re-hypothecate 100% of the pledged securities ($500).

And this is why the financial crisis actually started in London, in a little office in 1 Curzon Street, where AIG ran its UK operation – specifically there so that its boss Joe Cassano could sell credit default swaps (CDS’s) within the UK’s lax rehypothecation regime. Errrm…. $2.7 trillion of the b*gg*rs. And when that clever-arse scheme started to unwind, the whole financial world caught a cold. If not actually syphilis.

Of course, the UK government has dramatically responded by… leaving it all in place, exactly as it is. So, no danger of a repeat performance, then? Dream on!

All that’s actually happening is that US legislators are now making it harder for US companies to silently shift assets to London to rehypothecate them many times over. And this kind of activity makes up the core of what is known as the “shadow banking sector” (though the phrase has a different meaning in China).

Even though people know this is going on, they don’t often see what it has to do with them. And in particular, why should any given startup care about this kind of fairly abstruse systemic bad behaviour?

Well, I’ve always thought it was really central to understanding the way banks behave: and today I found this comment that crystallized all my thoughts into one single, chilling iceberg moment. The commenter writes:-

It always seemed strange that banks would accept accounts receivable as loan collateral, but not inventory. Now it makes sense – inventory is too real.

That which is real can be stolen, wither, rot, age, depreciate, fall out of favor, or die. Convert into a journal or book entry, and its value becomes more opinion than fact.

So, it would seem that the actual reason working capital has fallen so drastically out of UK banking fashion is that it’s fundamentally to do with real things. If it were more virtual, it could be endlessly rehypothecated. It’s not that there’s no money in working capital, it’s that there’s no capacity for rehypothecation. And that’s nothing that’s going to change in the UK in the obvious future… the City’s making far too much money out of it.

Hence you can see the UK financial regulation regime as one that has become irreversibly skewed away from the physical to the virtual – that for all the poxy pure software play startups that pop up in Shoreditch, the really virtual part of the economy is the one that attracts foreign assets to the Square Mile to be played endlessly with.

Who’d run a UK startup, eh?