Learn, Make, Learn

Enough *Is* Enough

Ernest Kim, Joachim Groeger Season 1 Episode 16
Ernest:

Hello and welcome to Learn Make Learn, where we share qualitative and quantitative perspectives on products to help you make better. My name is Ernest Kim and I'm joined by my friend and co host Joachim Groger. Hey Joachim, how's it going?

Joachim:

I'm well, Ernest, thanks for asking, as you do at the top of every episode.

Ernest:

My pleasure.

Joachim:

yeah, no, we're doing well. We had some quality family time, family in town, which was really nice. And, just trying to get back into a emptier house with fewer participants taking part in family stuff, which is, it's a little sad when someone who's always there, then, Goes back to another country, start missing them, but Yeah, we're gonna, we're gonna get through it. That's all I can say. Uh, how about, yeah, how about you, Ernest?

Ernest:

It's funny because we actually had family staying with us as well. and they also, left just a couple of days ago. So, yeah, we're also kind of, uh, coming down from that. So definitely, uh, Feel where you are.

Joachim:

yeah, exactly.

Ernest:

All right. Well, this is episode 16. And today we're going to discuss the idea that when it comes to products and product innovation, in our new era of higher for longer interest rates, enough is enough. But let's start with some follow ups. Joachim, do you have any follow ups to our previous episode on Kahneman or to any episodes prior?

Joachim:

Um, yeah, I had a quick follow up that got triggered by a meme that I saw, um, and we will link to it. I saw on Mastodon, and the meme was, it's just three panels, the first figure is speaking and says, Blow my mind. And the second person says, Did you know that if you touch the spacebar on your touchscreen, it allows you to move the cursor through the text. And initially, I didn't think that was that impressive. It didn't blow my mind. And then I thought about it more. And I realized, is that true? This is it. So I went to my phone, held down the spacebar, and then it became, I could control the cursor on the text that I typed out. And it did blow my mind. And I was mind blown, but then also so disappointed in the designers, because it, It is not obvious at all that that function is hidden there. So I'm sure people have encountered this and I think it does make the rounds where it pops up again and again. That's a really bad thing that it's not something that's so obvious to us. Uh, and it reminded me of our discussion way back when we were talking about vision pro and user interaction design and coming up with, a, a language that allows you to interact with your devices that doesn't require extra instruction. And here it's become a meme. That's how ridiculous it is. It's so hidden and concealed that it's become a meme. Um, and so it made me a little bit sad that I, you know, I don't know how long that's been lurking in under my iOS keyboard. Um, I have had many frustrating moments trying to move the cursor. Never occurred to me that there might be another way to do it. So, um, that's kind of a reconnecting to all the discussions that we've had and almost, um, a kind of a connection back to the Kahneman thing, which is sometimes we are really dumb and it's worth explaining something or showing an obvious way back to the user. And, uh, this is one of those examples where it's too deeply concealed. And I just. have no way of interacting. I mean, when would you ever hold down a spacebar? It's meant to be a quick tap to, to move to the next word. So there's nothing in it that would say you should, this would happen naturally or whatever. So, uh, little connection to two, two topics that we talked about. Um, yeah. What about you, Ernest? What's, uh, what's on your mind? Yeah.

Ernest:

couple of things to share. One quick one though, there is a very similar thing in iOS where if you have an iPhone that's full screen that does not have a home button, you know, and at the bottom of the screen you'll see that horizontal bar that, um, allows you to go back to home. If you actually, um, pull that bar sideways instead of up, it is an application switcher. So it'll just go directly to the next app. And that's a similar thing where many people aren't aware that that feature exists. Uh, and I agree that Apple used to be so good at these affordances that would help you to interpret the interface without having to have, guidance, uh, direct guidance. And, um, I think as they've gotten into the touch interface era and even more so in the voice interface era. They've seemed to have lost focus on that as an important aspect of their interfaces to just provide you with some form of hint or cue to let you know that these features exist. So I'm glad you brought that one up. Um, okay. So from my end, I have two things. First, following up on our Time to Learn episode, where we kind of geeked out on watches, I wanted to highlight an event that's taking place this week. So, for context, we're recording this the week of April 28th, and the event is the Wind Up Watch Fair, hosted by Warn Wound. which is a fantastic resource for information on watches. And they now host watch fairs three times a year, one in New York, one in Chicago, and then this one in San Francisco. It kicks off this Friday, May 3rd, and runs through this Sunday, May 5th. And, uh, this is not sponsored by Warner Welln, it's just something I thought some of our listeners might be interested in. Um, I was lucky enough to be able to attend the first wind up event in San Francisco a few years back. And I'd say that even if you have only a passing interest in watches, it's worth a visit. For one, it's entirely free. But it's free. I'd say more importantly, the Warner Whelan team does just a great job of cultivating a warm, welcoming environment. Um, there are going to be over 60 brands on site for this incarnation, including some big ones like Oris and G Shock and Citizen. For me, the real stars of the show are the micro brands, like for example, Anardane out of Scotland. Fiers out of England, Orage out of Switzerland and Minase out of Japan and many, many more. So these are the sorts of brands that you're almost never going to, you know, encounter in your day to day. So wind up is a great opportunity to see their products in real life in the metal. Um, they're also expanding their lineup of non watch exhibitors this year. So for example, Leica, the camera company, will be at the show, as will a number of brands from the bag world, including Bellroy and Topo Designs. So the windup watch fair San Francisco is my first follow-up it's free, like I mentioned. Takes place this Friday, May 3rd to Sunday, May 5th, and we'll provide a link to the Windup site in our show notes.

Joachim:

I was just going to say, technically, Leica is a watch exhibitor as well, if you think about it. You're right. There's just, you know, just little watchmaking pedantry happening right now, but they have a couple of pretty interesting watches in the last couple of years.

Ernest:

That's a great point. I wonder if they'll have any of those on hand.

Joachim:

It would be That would be so foolish if they didn't. How sad would that be if decided, you know what, this is a watch thing, but we really focus on other stuff.

Ernest:

Yeah, so that's, um, I, I, I really couldn't encourage you more if you're in the area to, to check it out. Uh, my second follow up is a message from a good friend and listener, Jeff, who shared a great note with, um, you. connectivity into several of our previous episodes. And I think it connects to today's topic as well. Now I've done some anonymization to his message to protect the innocent, but I think the substance gets through. So he wrote quote, while discussing a product on a previous episode, you mentioned that half of the initial product ended up in the recycle bin. I know from firsthand experience that in reality, instead of the recycle bin, all of those products ultimately ended up in the garbage. What companies don't want to acknowledge is that the product is ultimately waste. We spent all this time measuring the percentage of waste compared to the weight of a product. So a product that weighed 500 grams with 15 percent waste in manufacturing was considered more sustainable than a product weighing in at 250 grams with 50 percent waste. But when you consider that ultimately the product itself is also waste. The numbers are stark. 575 grams of total waste for the supposedly more sustainable product versus 375 grams of total waste for the supposedly less sustainable product. Anyway, just another example of the importance of ensuring that you're measuring the right things, unquote. So I want to send a huge thank you to Jeff for sharing this because it's such a vital point. Now Joachim, you've cited Stafford Beer's observation on a couple of occasions that the purpose of a system is what it does. I'd paraphrase this and suggest that the output of a system is predicated on what it measures. In this case, if you genuinely care about reducing the environmental impact of your products, you need to account for the material volume of the product itself, which as Jeff noted, ultimately ends up in the garbage bin, in many cases. You also need to measure absolute values as in total grams of waste versus relative values, which can lead to the sort of gaming of percentages that Jeff highlighted. It's a, just a super important point. And again, a big thank you to Jeff for taking the time to share this real world example. And we love hearing from you. So please keep the comments and questions coming to learnmakelearn@gmail.com.

Joachim:

I just want to add, sorry, I just realized that this is sequence, but Jeff's point, and also your point as you're pulling it together at the end of not trying to game it by using percentages, that is such a It's such an obvious point, but we are so accustomed to talking about percentages and not total volumes of things. And it's really interesting to see actually pretty renowned popular science writers leaning on percentages to make their point, but actually using that, that, that, uh, approach to completely masks the, the deeper problems. And the only one I would just want to highlight is Steven Pinker, who is a very big name in neuroscience and popular science writing. He does this thing where he talks about, uh, World War II not being as bad as everyone says. And you just ask yourself, what are you talking about? This has been, this is the bloodiest war on records. We have annihilated, you know, huge numbers of people. It's insane. And he says, well, don't worry about the absolute numbers. Think about the per capita mortality. And you go, you've lost the plot, my friend, you've just completely lost the plot. That, that is not. That doesn't make any sense. So I just wanted to point out that this idea of going to percentages and fractions and normalizing is a neat trick. And it's really a great rhetorical device. If you know that you're going to look good in a, in a fraction, but as Jeff points out, man, it's those absolute numbers matter, especially when it comes to environmental impact, I don't think the environment cares that, you know, Oh, well, per person, it's only this one. Like, no, no, it doesn't really matter. It's the absolute amount of stuff that is the problem. So, uh, yeah, you so much, Jeff, for bringing that up. It's such a great, such a great point.

Ernest:

I'm really glad you emphasized that. Well, all right. moving on to our main topic for today enough is enough. And to set us up, I'm going to quote an article by Rogé Karma that was published in the Atlantic last December. Quote, when inflation started to spike in 2022. The federal reserve made the only move it could raising interest rates. Over the course of 18 months, rates shot from near zero to above 5% and have remained there since. Now inflation appears under control, having fallen steadily since July, 2022. But while the fed may be done raising rates, it's not cutting them back to zero anytime soon. As jarring as 5% interest may seem. By historical standards. It is pretty modest. And believe it or not. Represents a healthy adjustment. America since the great recession has been living through an anomalous period of super low rates that contributed to widening inequality and speculative asset bubbles. Higher for longer, should Herald a fair more sustainable economy. Americans just have to survive the transition. Because before we get to the good place higher for longer is going to feel bad. Or at least very weird. Rates haven't been this high since George W. Bush was president and Taylor Swift was an elementary school. At this point, nearly every facet of the American economy has reshaped itself around near zero interest rates. As with any dependency, withdrawal will be painful, unquote. as karma notes, we lived in a ZIRP or zero interest rate policy world for over a decade. And that's influenced every facet of the American economy and economies around the world, including consumer products. So today we're going to dig into what the post ZIRP withdrawal means for people in the business of making products. First any thoughts on the broader economic dynamics associated with zero interest rate policies and the return of more typical rates of interest.

Joachim:

Yeah. This was, um, another interesting topic that, that you threw into the mix, Ernest, and I'm happy that you did. Um, It was a real challenge to think through, to be honest, um, but thankfully, some smart people have written some really good books about this. And the one that I leaned on quite heavily is a book by Edward Chancellor called The Price of Time, The Real Story of Interest. And when interest rates are zero, or close to zero, tomorrow and today in financial terms seem almost the same. There's no reason to put money in the savings account and expect it to get bigger. So therefore money today, money tomorrow, it's almost the same thing. Um, so this zero interest rate world leads to a really weird disconnection from how we experience time and how financial markets experience time. What's interesting about Edward Chancellor's book is he does this back and forth structure to his chapters. He basically shows you in a historical situation where, he tracks some phenomenon related to interest rates. And then he shows you how that is informing something that's happening today. So the zero interest rate regime has existed in the past and it gave us the gilded age, and that was then swiftly followed by the crash and. lots of intervention system. Japan's economy also had a very similar situation with zero interest rates and that led to all kinds of craziness as well and no discipline and flabbiness. it's a really, it's a bad outcome and it's surprising that we really hadn't quite contended with the fact that that is the economy that we're building up. And so go back away from this econ perspective. What does this mean about the world and how we perceive product innovation? I think it's just that. incumbents were able to sit there, get really big, and they didn't really need to innovate because they could just use debt to pay their way out of the situation. In that situation, no one's going to be able to actually compete on quality. It's not about quality. It's just scale. You have so much scale. So even if someone comes up with a great product, they really don't have a shot at competing on the dimensions that you as a product creator would want to compete on, which is I have a better product than you. I know that the quality is higher. I think that's probably what's going to change is that we actually have an opportunity now to go back to a world where we compete on quality and not just your ability to financially engineer. a cool solution for yourself. So that, that, that was kind of the quick, quick thing that came to mind when I was thinking about all of those things. As we move to higher interest rates, There are going to be ripples through the system and it's going to cause an adjustment. This is why people make fun of boomers, man. They got to ride the bubble. They got to ride the asset price bubble. They got to do cash out and now they get to chill and it's. us now, everyone who's still in part of the labor force, to figure out which are the right companies, who figured it out right, who didn't take advantage of the financial engineering apparatus that's out there, who is actually making real stuff. Um, and so call back to one of our earlier discussions around values and ethics. Those become anchors now, right? So an employee perspective and designer perspective, I suggest that it would be a moment to really, focus back on the things that you care about and be in a place where you hope that you can actually innovate so that's, that was getting a little bit long winded and I had a couple of other points, but I think they'll come up as we discuss more. Um, so I think the big implications are there's a big adjustment. That's been. Total mismanagement of everything at multiple, and this has been going on not just the last, uh, five years, six years. This is something that started like in the early 2000s, the late 90s, you know, you can trace it back to the late 90s to Alan Greenspan's operation. So this is not something that has occurred out of nowhere. People have been taking advantage of it and we've been along for the ride for some of it. again, if you're not in the C suite, you're probably going to pay the price in some way. Sorry, that's a bit sad way to put it, but I hope we'll get back into the, like, this is a chance for quality and true efficiency to shine, right? We want to find that silver lining and, and focus our minds on that. But anyway, um, yeah. Let's, let's, let's, uh, let's, uh, let Ernest get in on this. What are you about this? Again, this was a topic that you proposed. I'm really happy that you did. yeah, let's talk about the direction you wanted to pop into this.

Ernest:

Well, as you kind of started to go in this direction, I was curious to hear if there are any companies that stand out to you as examples of, whether for good or for ill, we might be able to point to, to say, okay, here's an example of what you can do in this environment or what you shouldn't be doing in this environment.

Joachim:

I think in this environment, people have gotten incredibly undisciplined because they know they can use, They, in the past, were able to just spend money like mad to get themselves out of a hole, even though they shouldn't even have started digging a hole. And so, um, and I think a really recently interesting, uh, situation that involves product innovation is, um, actually the review of the humane AI pin by Marques Brownlee, uh, He, you know, he's a, he has an incredibly successful YouTube channel, millions of subscribers, has a whole business built around reviewing tech products. He's generally a booster for technology. So people really, they'd like to go to him because he's always so enthusiastic and so optimistic about the future, and it always has been. And humane AI did exactly that. They approached him. His audience is what they wanted the millions of viewers that he has. And, He was not impressed by this product. I mean, it, it was a disaster. In fact, the title is the worst product I've ever reviewed dot, dot, dot for now. Um, so he's very clearly stating this is half baked. This is nowhere near ready. And, it kicked off a whole storm of discussion. And there's a really strange interaction that, uh, popped up online. Someone called Daniel Vasallo, who is allegedly an AWS or former AWS engineer. He tweeted, I find it distasteful, almost unethical to say this when you have 18 million subscribers, i. e. the title of the YouTube video being this is the worst product I've ever reviewed. Hard to explain why, but with great reach comes great responsibility. Potentially killing someone else's nascent project wreaks of carelessness. First, do no harm. Really, I just found that such an interesting take because his perspective is that the power should lie with the company, because it traditionally has, because they've been able to spend people out of existence and not with the customer. The customer is essentially irrelevant in this whole thing. And that's the sloppy thinking I think that has been able to permeate, people who have been working in these huge corporations, essentially just do what the hell they want to do. You look at the Google product graveyard, it's absolutely epic. It's insane. The list is We'll link to it. It's embarrassingly long, the failed things. And the only reason why they're able to keep doing is not because they're innovating, because they have access to the capital markets and they can play these games. And so of course your perspective on your product becomes I showed up, that's it. Now shut up and sit down and buy the damn thing. And I think, subliminally, I don't think Marques Brownlee came into this wanting to be negative. I think he wanted to be an optimist, but the environment is such that he found it hard. He said to talk about a 700 product. In a positive light, when it was failing so badly, you know, 700. I think in the past phones have been getting progressively more expensive. People didn't really care that much. We were okay with it. We could get easy zero interest finance on it. It's fine. So I found this inversion really bizarre that he was saying that. Marques was being unethical because he was telling his viewers exactly what he thought of an expensive product. And his viewers are there to see reviews of a product in order to make an informed decision. So the ethics of the situation are pretty clear cut. And I think just, a little bit of a piece in the customer feedback loop that's coming through is, I can't afford all this crap anymore and I'm not going to want to compromise on things if it costs so much money. And that's feeding all the way back. Marcus Brownlee was also had a scathing review recently of the rabbit, the R1, uh, the large action model and all of those things. And he was again, giving it a rough ride and saying it's pretty slow, pretty bad and so on. Um, But he said the one, the silver lining is it's 200, only 200. So if it is an iterative product. There's a way to deal with it. 200, you're going to get software updates. Maybe you're willing to go down that path and be an alpha or beta test in that environment. I think the customer large corporation relationship is undergoing a change. And I really don't think people are in this. Game anymore to just let prices go up in exchange for nothing being improved. I mean, let's think about this very briefly. I feel like we're picking on Netflix all the time. I think last time we talked about Netflix, but if you think about it, usually when prices go up, something has changed in the product, right? It's something has gotten better or something that goes into the product has become more expensive. Netflix subscription charges have just been going up over and over again. And we haven't really gotten much more, we're in fact getting less, oh you can't password share, oh you can't have more than five screens, oh now you get ads, you know. So all these things that used to be value adds for the Netflix service are now being removed and now being put through higher, higher prices, and in exchange for no extra quality. And I don't think people are going to want to play that game much longer, hence you alluded to the fact that subscriber numbers don't be reported anymore, I think they know something is up if they keep doing this. Yeah, what's your take on that? Did you catch that whole controversy? And have you seen any other discourse on humane AI?

Ernest:

I did. I was just flabbergasted by that whole conversation that you highlighted, just the idea that the role of the reviewer should be to protect the company and, you know, rather than sharing an honest perspective on the product. I think it speaks to that. The sort of perversions that have happened. Come up, um, over this, you know, decade plus where we've had this very artificial business environment of a near or zero interest rates, um, that have led to these very backwards sort of perspectives on, uh, how this is all supposed to work. Um, you know, another example that comes to mind for me is, Kind of a product of this sort of Zerp, as people call it, phenomenon is certainly crypto. I think that's a kind of classic example of something that wouldn't happen in a scene environment. But, um, I'd say that kind of a build on that is actually this, uh, Large language model based approach to AI. This is something you've talked about in a previous episode as well, but, um, I just wanted to quote this article from Reuters from last year. They noted that, uh, some quoting here, Morgan Stanley estimated that Google's 3. 3 trillion search queries last year cost roughly a year. fifth of a cent each, a number that would increase depending on how much text AI must generate. Google, for instance, could face a 6 billion hike in expenses by 2024 if chat GPT like AI were to handle half the queries it receives, analysts projected. What makes this form of AI pricier than conventional search is the computing power involved. Such AI depends on billions of dollars of chips, a cost that has to be spread out over the useful life of several years. Analysts said electricity likewise adds costs and pressure to companies with carbon footprint goals. So, um, I can't remember which episode it was, but you had, raised this and how ridiculous these approaches are. You know, it's kind of like that expression of hiring Arnold Schwarzenegger to take out your trash. But, uh, Yeah, it's almost like you couldn't come up with a more expensive way to deliver on search than using an LLM based AI to do it, you know,, in terms of as this article notes to, um, the chips, the processing power, but also the actual just electricity. Um, it just is incredibly powerful. Yeah. Wasteful. and it just every day feels more and more like this current AI, uh, craze is just another grift, that is predicated on cheap money, but you know, now that money isn't as cheap as it was. Um, it's, I think you're starting to see that, the promise isn't quite what we were, uh, told it was going to be. Uh, I don't know if you had a perspective on that.

Joachim:

It is really just overkill, right? You're able to grab all this compute. And that was in the content. I remember, I think we were talking about alternative ways of achieving very similar performance, uh, but using techniques that are incredibly low cost and can run on local laptops and can handle a lot of capacity. So, I think we've become very Undisciplined. And I remember this as well. Um, when I was working for a tech platform, I basically had an interface where I could interact with the data and I had no sense of how much extra machinery was being spun up. in order for me to complete my task. We had essentially auto scaling, meaning that if a task was bigger, it would just grab more servers and, grab more compute as much as it needed. And it would just serve the, um, give me my results as quickly as possible. I never saw a bill. I never saw how many credits I was spending. It was just part of doing business day to day. So again, it's this, undisciplined and, and unconstrained approach to these problems and total overkill. Um, so there was something about, like you said, Arnold Schwarzenegger taking out the garbage for you. Although, you know, to be honest, I would pay for that service because. I have a problem with liking Arnold Schwarzenegger. But anyway, aside, aside, aside, I agree with you there. But I feel like there's There must be so many more examples like surely also the tech ones are so easy, but physical stuff I had the humane. Is there other physical stuff that comes to your mind when you're thinking about this this world?

Ernest:

Oh yeah, definitely, um, you know,, one that comes to mind, I think just based on my interest in cars is, uh, to me, kind of the error example of a zero interest rate policy product is that Tesla cyber truck, which, you introduced, uh, as they would have said, introduced a host of quote unquote innovations, which added significantly to its cost with little to no added benefit for the customer. And I'd say exhibit a in this context is their use of stainless steel for the truck's body. And, um, you know, for sake of time, I won't talk through it, but I'll include a link to a Wired article that kind of talks to the many reasons why stainless steel is a really poor choice for body panels. One big one being that they're. Quite heavy, which when you're talking about efficiency is the exact opposite of what you'd, you'd want. Um, but then to me, the, there is a counter example here too. So, you know, that would be what not to do the sort of thing to not do anymore. We should have never done it, but certainly not now, um, in this new environment. So on the flip side is the Volvo EX30, which is a new compact, uh, electric SUV from Volvo. That's going to go on sale in the U S this summer. It's targeted, targeted at the most popular automotive segment in the U S and possibly in the world, which is the compact crossover segment. It delivers fantastic real world performance against the attributes that people actually care about, uh, such as range, but also safety. And it was engineered from the outset to be perfect. profitable, even at a very aggressive price point. And, um, I was really interested to see that the Detroit free press, which is a publication that really isn't known to be in the bag of the EV industry. They, uh, did a review of the X 30 and they were so impressed after their test drive that they wrote. I'm quoting them here. The Volvo X 30 is. Prime to change how many Americans think about EVs and put the exciting new technology within the reach of a vast new group of buyers unquote. Now if you compare their reaction to the conclusion of the editors at the drive who ended their review of the Tesla Cybertruck with the following quote, the constraints of the Cybertruck's construction and its current pricing scheme have doomed it to be a play thing rather than a useful tool like its competitors unquote. And I think this. These two, you know, contrasting quotes, they highlighted an important point when we talk about enough being enough. We're not talking about a lack of innovation. Instead, it's about innovating, um, against the things that matter for your customers rather than your CEO's ego. The Volvo EX30 is full of this sort of focused innovation, um, and it's going to be offered at a starting price of just under 35, 000 in the U. S. While still delivering a healthy profit margin for Volvo, something that the company has been really open about. Um, you know, so those are a couple of examples kind of, uh, what not to do and maybe what you could do. What you look to as an example, uh, looking at another industry, we talked about this in a previous episode and kind of touched on it, uh, earlier as well, that Apple vision pros and cons episode. We talked about the Apple vision pro and to me, that is. I think will be seen as very much a zero interest rate policy era product in that it was designed really more as a tech showcase, kind of a play thing in the parlance of that drive quote, then a product that enables its users to actually do any job in particular, perhaps outside of watching movies in isolation. Now, you know, you can contrast that to the momentum that continues to build. Behind Meta's latest generation of smart glasses, they're Ray Ban Meta smart glasses, uh, with many real world users really praising the fact that the product obviates several other products and actually adds value to their lives. Um, so that, you know, that would be another kind of, uh, what not to do, what, and what to do in this new sort of environment. Um, but, uh, that's just on mine. I was curious if you had any, any other things that came to mind, or if you had any thoughts about those products.

Joachim:

Yeah, I think they're really good examples of Just the excess the excesses of what we we have right now I remember the Cybertruck when it was launched people could take delivery of Oh, it was a launch event, I can't remember now, but they had the Cybertruck pulling a 911 Porsche on a trailer, and they drag raced it against the same 911, and they showed that the Cybertruck won, and there's some controversy around whether it actually won and blah blah blah. That's such a, it's so ridiculous. It's just ridiculous thing. Electric cars were meant to be, uh, actually there to help the environment, and they're not there as, like tractors to pull stuff. meant to be efficient ways of getting us to a cleaner future. Well, so I think back to the point that you are making, that is the slight paradox of where we are. And I found this really paradoxical and hard to wrap my head around, which is if interest rates are zero, then tomorrow is like today, which means you're able to think about something that goes long run. So you want to innovate and innovation takes time. So you'd think in this environment, innovation would just be everywhere. But the problem is, everything looks flat. So essentially, you can now wind the time horizon further out, and you can then start promising ever more extravagant things. And that's where the insanity comes in. And that's the slight thing that's a subtle piece about innovation in this environment, because you would really think all innovation would thrive in this environment. But that's not true. Because if my innovation is something that will incrementally improve Efficiency, um, costs, whatever, by a few dollars, a few cents on the dollar or whatever. So kind of a tangent on this whole, efficiency and small incremental benefits don't generate any value for the company in this environment. Um, here's, here's a quick example that. should illustrate how crazy things were at one point. The chief marketing officer of Uber appeared on a podcast. We'll link to that in the show notes if I can find it. And he's the former CMO of Uber. And they paid for a highly focused advertising product. Basically, they would only pay for an ad if a user saw the ad, clicked on the ad, installed the app, and Paid for a first ride, so an incredibly high bar of quality that they wanted to hit. And they were spending hundreds of millions of dollars, I believe is the number on this, performance advertising product. And you would think in the world of efficiency, this is a great idea. They're totally focused on just the thing that matters, which is generating revenue. Forget brand awareness and all of that. They want to make sure people are using the service straight away. After a while, it's chief marketing officers asking questions around how is this budget being used and should we really be refining what we're doing here. So they started switching off some of that performance advertising budget. And for some reason, the inflow of installations So they switched off this advertising product that only paid out when there are ads that led to conversions and then bookings, and they switched it off and nothing changed. So everyone's celebrating, they are very happy, they can switch off this ad, they can save money and redeploy it somewhere else. Now the chief marketing officer could not let go of this. Paradox, which is, if I'm paying for something, it surely must be doing something. It cannot be that when I stop spending money on something, it stops absolutely nothing from changing, nothing changes, So, he started digging around, and eventually, he figured out that, they don't directly pay for it. buy these ads. They're going through various agencies who go out and then they look for third parties and so on. But essentially what he figured out is these companies were using vulnerabilities in other apps. that granted them access, root access, to the phone. Meaning they could use, if you installed a crappy Torch app on your phone, um, that app you probably could have granted root access, and whoever's used, built that app can start seeing what you're doing with your phone. And what they were doing was trying to figure out when someone installed Uber and booked a ride. They would see all of that information. So then, when they saw that event take place, they would grab the IDs, pass those back to, uh, the agencies and say, Hey, see, we, um That's the person that we served an ad to, and lo and behold, they, um, they, they, uh, installed and bought a ride. So, of course, these were They were taking credit for things that are going to happen anyway. So no wonder when you switch it off, nothing changes. So, that's not the story. The story is that the Chief Marketing Officer realized they could switch off all of the budget because there was no way to guarantee not all of their impressions were these type of fraudulent, quote unquote, fraudulent impressions. And so, he just shut down the whole budget, saving the company hundreds of millions of dollars. In this interview, if I recall correctly, he points out that he had no way of celebrating that or receiving kudos from leadership. He was living in a world where hundreds of millions of dollars saved meant nothing because on the other side, on the value generation side, as opposed to the cost saving side, the business was promising driverless cars, which was going to, you know, monopolize all urban transit in perpetuity for the rest of human history. And so again, It's a quadrillion, drillion, billions of dollars will be coming your way. And you don't have to discount it because interest rates are zero. And even if there's only a 1 percent chance of it happening, you'll still be a billionaire in expectation, right? On average, you might be a billionaire because of that. So, how can you compete against that number? However, in this environment right now, there's a lot that can be done and people will be listening and looking out for that. lazy thing to do is to lay off your workforce. That's not a cost center, they generate value for you. I think, hopefully, We will make it through this period where companies make terrible choices and get rid of people that might be valuable, and we will actually start seeing an opportunity for just grounded principled thinking to, to come back. And yeah, as you were pointing out, the NFTs and all of those things were just totally out of control. there was no way to really, even process that type of insanity. And again, only possible in a zero interest rate environment because you're saying this thing is going to be worth trillions and trillions of dollars. And there's, you know, even if there's only a 1 percent chance of that being true. So, um, yeah, just a quick excursion on that.

Ernest:

Hmm. Was curious, um, do you see it, if we kind of bring it back to folks who are making products on a day to day basis, are there given These things we've talked about, are there certain frameworks or approaches that you would suggest as guidelines, if you're kind of, you know, just trying to figure out what you can do in this environment?

Joachim:

Oh, yeah, this is kind of maybe just really, really obvious, and it's something we've talked about in so many different contexts, but ultimately, you have to be really focused on this simple truth that is, are you serving a customer's need? And I think that's really the only thing that should guide you through this time. Um, yeah. I think you could take that a step further, which is in this environment of crazy low interest rates and, you know, total promise the heavens to your customers and your investors. or rather in this completely crazy hyped up environment where any fairy tale about what's possible decades from now will get you investors focus on the things that are actually real incremental contributions to a customer's well being. And so I would go so far as to suggest that in this environment and business models and business modes that were based on quote unquote parasitic interactions with larger firms are not going to be sustainable in this environment. And what I mean by that is if you're going to build Some sort of supporting product around a generative AI thing like I'm gonna build the generative AI bridge that connects You know insurance salespeople with chat GPT. Well, you're not really building a generative AI product You're just the tunnel that feeds information to that chat GPT bot. So you're not actually doing something. You're just sitting there as a middle person consuming the value that ChatGPT is getting and kind of skimming off some of that for yourself. And because, uh, OpenAI and Microsoft's margins are so fat right now because they can do all this crazy, leveraging, you will get some benefit from that. And people will buy into your product because they say, of course, ChatGPT is going to be this, you know, quadrillion dollar, uh, company. So, a quadrillion per dollar. product. So anything that gets, 1 percent from a quadrillion is still a huge amount of money. And so any parasitic thing that emerges from that will be very valuable. And I think that type of calculus is going to fall away now because you can't make those crazy promises anymore. I think if you stop trying to find the thing that feeds off another business and is also then trying to live off of another platform, um, you're going to be in a better state of affairs. So actually try and build something that stands by itself and addresses a customer need. Maybe that is the more focused way to think about what I, um, how I would direct my efforts now. Um, yeah. It shouldn't be that you do the thing that sits in the middle between a customer and a bigger product and a platform. And also there are risks, of course, by building on other platforms. I think YouTube creators are the perfect example of individuals who are building on a specific platform targeting a specific algorithm, and they are constantly trying to figure out how to get traction on that platform. And they are playing a losing battle against an algorithm that changes, every day, every month, every quarter, and different things become important. And, their businesses are incredibly fragile. So I would focus on just having your core value added, uh, approach to things and yeah, focus on the customer right at the end of all of this. So again, pretty straightforward, but I would add that little extra bit of Don't build something that is feeding off of another product, trying to skim some of that goodness that another company has somehow generated, because some of that goodness is being generated by zero interest rate plus hype. And you don't want to be part of that, because when it comes crashing down, guess what? You're going to be the first person to feel the pinch. So, yeah.

Ernest:

Yeah. Yeah. I, I think your point that it,, it's pretty, it's actually pretty straightforward as I, you know, feel the same. I think there were some things maybe you could look to as, uh, guiding lights, to give you a sense for where things might be headed as well. You know, you had mentioned Japan earlier and, there were some very specific dynamics at play in that market, but I do think that they can be a really good example to look at for where things might be headed now that we're in this new, more reasonable interest rate environment. And I say that because, Japan's been through this extended period of very slow or negative growth. Uh, coming out of the, what they call the lost decade, but that's continued, you know, to today. And, you know, it's a similar sort of dynamic that we're now starting to see in the West as well, where this kind of hyper growth is slowing down. And when I did some digging into consumer behaviors there, uh, I forget who published this report. It was one of the consulting agencies, but they noted that. The two areas of opportunity in Japan today are, and when it comes to consumer goods are at the value end, there is an opportunity for things like the Don Quixote, the kind of dollar stores, or at the quality end, not ultra luxury, but your everyday staples, with an added element of quality to them. So, what we're seeing there is products in the middle. Are getting crunched. but if you're at either end, there's a lot of opportunity either at that kind of value end or at the higher quality end. and I think if you say, wanted to focus more on that higher quality end of that, opportunity spectrum. There's a few things I would say could be helpful, you know, in terms of how you can increase your chances of success. And one thing is something you've, you touched on earlier, which is just being really ruthless in your focus on the real problems to solve the real jobs to be done by your consumer. not just what your CEO wants, or just what is the trend of the day, but really getting, absolutely. Sharp on the need of your customer and then this might sound obvious, but then just being really ruthless and executing against that. And I could share one example that speaks to this. I was involved in creating a product and the team was very excited about the idea of creating some unique packaging for this product. it was kind of meant to launch at this event and it just felt like there'd be a great opportunity to create this special, touch point. And this was at a time when people were really into Apple's packaging. This was kind of at the, at the start of the, you know, Apple's very cool packaging. And my boss at the time had really great advice. He said, If you were the customer and, you knew that we had X dollars to spend against everything to do with this product, would you want us to spend that on the product or on the box, And, you know, when I thought about it, I had to be honest and say, you know, I would want it to be in the product. The box would be nice, but it's something you're probably going to toss, right? So, you know, that's what I mean when I talk about really being ruthless about executing against That job to be done. There's so many ways you can get distracted, but, the reality is you have a very fixed amount of FOB dollars to spend on that product, so be ruthless about using that to execute against that job to be done. And then the last one might be a little bit controversial because it might seem counterintuitive, uh, but it's in terms of your messaging and your engagement with your customer. I think it's been very popular. In the past few years to take this highly segmented approach to engaging your customers, you know, identify each of your segments and, um, make sure they're, you know, MECE, mutually exclusive, collectively exhaustive so that you could be as efficient as possible in reaching each of those individual segments. But I think the problem with that is, you know, when you get into the super hyper targeted sort of messaging, you end up with stuff that has no resonance. So instead I'd say, think more about benefits and messaging that are going to resonate universally as much as possible. think about messages that are so compelling that your customer will be able to relay it themselves, and focus on building your story and your product around that versus trying to get, too clever by half in getting super segmented and super targeted. Uh, so I guess those would be the three things I would focus on just that kind of really ruthless focus on job to be done. Ruthless focus on executing on that job and then getting to a message that resonates broadly versus being super targeted. But I don't know if you have any reactions to any of that.

Joachim:

Yeah, I have to say that this ruthless focus on executing on the job and getting things done in a focused way, got me thinking a little bit more, about, what are the levers that have been ignored during this whole period of zero interest rates? So, Another way of thinking about the zero interest rate thing is you don't have to actually run a business that's profitable because you can just keep taking out debt. And if interest rates keep going down, that debt becomes, you can refinance the debt at ever decreasing interest rates and just accumulate corporate debt over and over again. In fact, if you actually look at a chart, You can see when interest rates start going down, uh, like say Apple, a company that's notoriously cash hoarder, their corporate debt just starts skyrocketing as they take out debt to do all kinds of financial engineering at the end of the day. So, debt allows you to run unprofitable businesses and therefore crappy businesses can survive. Now, what's interesting in that environment is then we've all become, we've lost the simple, um, muscle. We've not trained the simple muscle, which is set. Meaningful prices. I think prices are such a powerful disciplining device in this environment now. Now people are actually going to be asking. how much should we charge for this, this product. In the past, we might have been able to charge below cost. So Uber's initial strategy of just undercutting everyone and using debt to finance and subsidize those rides. Yes, we all took advantage of those rides and we got the benefit of that. But, look at the, um, the consequences now it's not great. Um, so we were enjoying lower prices, but also. If a product was, I'll call it premium mediocre, to steal a phrase from Venkatesh Rao, um, it's, there are a lot of products that sit in the middle. These products are neither bad nor great. They're okay. And they have been priced at a slightly more premium point than a basic good. and their quality is maybe only marginally better or it's just a very popular brand and they can ride on brand recognition to enable that type of purchase. So the price there is, yes, containing something on the brand, but you are getting away with that because people were able to take out debt and credit cards and interest free payment plans and all of those things that enable the flow of money from consumers to, to sellers. And so, prices have not reflected the true cost, uh, and value of products. And I think there's a lot of that premium mediocre stuff that is going to have to fall by the wayside, unfortunately, and people will be looking at focus. Uh, people will be looking at quality again. And that I think is again, the, the product creators golden moment, which is, Hey, you've all been ignoring this very basic advice of, trust the customer, follow the customer's needs, meet them where they are, think holistically and broadly about the implications of what you're doing. Yeah. All the things we've been talking about in previous episodes comes together in these moments because now it's really critical to get it right because now there are real consequences. We can't just take out a loan and, uh, whitewash and wash over the problems. So that's Interesting, I think. And again, right back to the thing I wanted to talk about, which is about pricing. Um, if you compare media companies, two media companies come to mind. One is Vice Media, that is a super debt loaded, crazy, over the top hype machine that has completely collapsed overnight. And an offshoot, From Vice, uh, from Motherboard's, from, uh, from Vice's sub brand, Motherboard 404 Media. So, Vice was a thing that I could consume, there were ads, it was totally free, no price. And there was some quality journalism there as well. Uh, like I mentioned, Motherboard was great, but then they also had a news channel, they had HBO shows. all of this fueled by debt. Um, at one point, I think they were valued over four billion dollars, which is completely insane because there was no money coming in. It was all being spent and they were taking out loans to just consume. All doable in a decreasing interest rate environment where you can just refinance over and over again. So, yeah. That company just collapsed and they were just making totally stupid bets with no discipline at all. And they forgot the core mission. If you really wanted to be a news organization, you have to find news and get reporters and pay them. And it turns out they weren't paying them, they weren't paying the reporters, they were treating them pretty badly, and they were using the money for completely ridiculous vanity projects. Contrast that with 404 Media. I think it's about four or five people who left Motherboard. I mean, rather, Motherboard shut down and they didn't have jobs anymore and they set up this tech journalism platform. That's super critical to us understanding what is actually going on outside of the hype machine. They don't write press releases for tech companies. They actually try and assess what's going on. And they have a subscription model. So they're saying this is the actual price for this thing. And they say, you know, you've been used to living in an environment where everything is free and the businesses promise crazy audiences to advertise and therefore it all works out and we have debt and blah blah blah. Here we're saying no, the, the price for this to be sustainable is, I forgot exactly what the number, but it's a, not, it's a pretty significant number. It's like five,$6 or something per month. And so you would, you know that everyone's scared about doing that because they'll say, well, you, you're not gonna get any customers. You won't have scale, you won't have growth. And say, well, they've probably done the math and said, if they can just get a fraction of, um. the original audience of Motherboard paying some money in some form, they can make it sustainable. And the good news is within a year, they were totally sustainable, able to pay their wages and survive. And, and this, this, um, this website's going to exist for a little bit longer in an environment with, you know, increasing interest rates where Their whole business model from the outset was to be disciplined and make sure there was more money coming in than going out. So set prices to make sure more money coming in and going out. And then also wait for the feedback from the market, because if you set a real price, you will know if your product is actually valuable. back to the Netflix example on, on subscription fees, those subscription fees are going up and soon those numbers are going to really bite and people are going to ask themselves, is it app really worth putting 30 down? to get access to some show that you want to binge watch. Um, and here's the thing I find so surprising about that. I think, people don't pulse their subscriptions. Like switch them on and switch them off based on the content that they want to have. So that's your hack for saving money on Netflix. You know, switch it off when you don't care about what's on there, switch it back on when you need it. And I guarantee that That will become more popular as a strategy, and I'm sure Netflix will find a way to shut that down. As opposed to actually adding value into the system, right? Password sharing used to just be a thing that you did and it was okay. Shut it down, lock people into it, grab money. So you're just coercing people into paying for money. And that's not really adding value. You're just forcing them to do something they don't do. And they will ask simple questions around, Do I really want to be coerced into paying for the subscription? Am I getting anything out of it? Um, so. Yeah, all of that to just come back to the simple point, prices are powerful now, setting prices that reflect the true value, the cost, the value out of what you're doing will become your ally in these, in these difficult times. So, yeah.

Ernest:

I think that's a great place to end it. Um, and we'll actually maybe talk about this a little bit more when we get into our Recommendations of the Week as well. But, um, now that you've heard our perspectives, we want to hear from you. Please share your thoughts with us at learnmakelearn@gmail.com. Now, let's move on to our Recommendations of the Week. Joachim, do you have a recommendation you'd like to share?

Joachim:

Yeah. Um, this week I'm going to recommend a YouTube channel and it's the YouTube channel by Stuart Hicks. He's a practicing architect as well as an assistant professor of architecture at the University of Illinois at Chicago. And his channel is just incredibly entertaining. He has, he covers so many wonderful topics. Um, and the video that really stuck with me recently was one on modernism and, minimalism as well. He was using Rohe as a case study of how minimalism has failed us. and the video is really fun because he plays two, two people in the video. One, the booster for modernism, and then the other one, the more critical voice. And he uses Chicago as a great, example of how van der Rohe's work was really cool for a bit, but then also inherently destructive and had no real concern for the longer run implications of the designs. So there are a lot of interesting aspects of how the design influenced the way the city was able to then progress. And in particular, Stuart Hicks highlights the effect of grid structures allowing the ghettoization of certain, you know, minorities. So it's, it's interesting. It's a great video. It's a genuinely powerful lesson that I think we've talked about in different ways where we've discussed how design affects decision making and therefore it affects the way people interact with each other. And so this is a great video as an introduction to Stuart Hicks channel. It touches on so many aspects, but his channel is chock full of Really just wonderful, um, wonderful discussions on all kinds of, different topics, including the Line project in Saudi Arabia, which is just that huge structure that is a long line that's supposed to be a self contained city in the middle of the desert, And, and many more topics. I think just browsing through the channel, you'll find at least one video that will tickle your fancy. Uh, and then you'll just be compelled to watch more because he's a really great, um, presenter and teacher. I think that's the most important part is, uh, as a professional academic and a teacher. He's also really good at explaining things to, uh, to lay people. So, um, yeah, I, that's my recommendation for the week.

Ernest:

That's awesome. I can't wait to check that out. Um, as an architect, architecture junkie, I'm really excited to check that out. on my end, I wanted to highlight a product and it does, like I mentioned, connect back into our conversation. And it's a product from Birkenstock. It's actually not a sandal, but a boot and particularly what they call their Birmingham boot. And, just to give you a little backstory on this, I guess around maybe a little over a year ago, I just made a commitment to myself that, uh, outside of athletic shoes, I would only ever buy shoes that are resoleable so that I could, keep them for longer and not contribute to the waste stream, that we touched on, uh, in that, message from Jeff that we talked about earlier. So I spent, I kind of, uh, I did a bit of a deep dive into resoleable shoes and boots, and that led me to this product from Birkenstock, their Birmingham boot. And, um, it's offered in both, um, slip on and lace up forms. And there are a few things that excited me about them. One is that they're resoleable. They feature what's called stitch down construction that's very easy to resole. They're also made with very high quality leather uppers, Horween leather for the leather geeks in the house. And I was also drawn to the fact that Birkenstock shoes offer a very generous fit, which works really well for my feet because I have wide feet. I also really like Birkenstock's footbeds, anyone who's worn a Birkenstock sandal or any of their products will recognize that their footbeds are very contoured. You know, there's a lot of, like a cheap flip flop will just be flat, the footbed. But by contrast, Birkenstock's footbeds are very contoured. Some people don't like it, but I love that. I find that it just Makes my feet feel really good and helps me to feel comfortable for longer and, um, the Birmingham features the, uh, Birkenstock's deep blue footbed, which, um, is very contoured around the heel and the arch, um, has a less of a, what's called a transverse arch, which is that arch that spans the space just behind the joints at the base of your toes. some of Birkenstock's. shoes have more of a pronounced transverse arch. The boots, um, these boots have less of that, but still overall, I'd say they have, great support underfoot foot. Compared to most what are known as heritage resoleable boots, these Birkenstock Birmingham's are Really, really comfortable right out of the box. A lot of these kind of classic heritage boots take a really long time to break in. And the idea is that because they have leather footbeds, they conform to the shape of your foot over time. So, you know, eventually years down the road, they'll feel amazing, you know, and as, as if they were designed for you, but. They have a really long break in period. And at the beginning, they can be pretty uncomfortable. So, Birkenstocks made some decisions that make the shoes, uh, these boots more comfortable, you know, straight away. Now I know that some hardcore heritage boot fans aren't so happy with some of the decisions that Birkenstocks made, like for example, Weston Kay who, um, runs the Rose Anvil YouTube channel. channel, which I really like, he has a video and I'll provide a link to the video where you kind of breaks down the boot. He actually cuts it in half and he calls out some of the things he's not happy about. And I think he makes some really good points. But I'd say that for me personally, um, I am a fan of the choices Birkenstocks made here. I think they've struck a good balance between comfort and durability. Um, and the fact that these boots are resoleable means that they're usable life is longer. should still be measured in decades rather than years. so that's just some context on the product. Now, as an Asian person who takes off my shoes at home, ease of entry and exit is a big consideration when it comes to shoes and boots. So I started with the slip on version of the Birmingham, and I really liked that. The comfort and, you know, especially like I mentioned that underfoot comfort. but I'd say my critique would be that they look and feel like they're very voluminous, even for me, you know, even considering that I have pretty wide feet. when you look at them from above that kind of, uh, top down view, they, they look quite big on your feet. You know, I, I like them enough to keep them but I ended up also buying a pair of the lace up version. And I'm really, really happy with that version. They're built on the same platform. They're also, they're both resoleable. They both kind of have that same underfoot feel, but, um, the lace up version, just by virtue of its laces allows you to get a much, um, closer fit, uh, you know, also allows you to tune that fit because of the laces. And, so I find that it's just a much more versatile, overall product, the lace up version, because it allows you that ability to tune the fit. And, the, uh, slip on I'd say would be good just for everyday wear. Uh, but the lace up version, I find that, I can tune to fit enough that I feel comfortable going hiking in them. I'm able to use it across more contexts. Now, as to our previous conversation, these aren't inexpensive products the, um, lace up version is I believe 350 and the slip on version is 320. But I do think they offer really good value because when you consider the fact that, I mean, I, they'll basically last the rest of my life because the fact that you can resole them, I think you'll be able to get two to three resolings without really a compromise in the other aspects of the shoe. So, you know, that's when you consider that to me, the price becomes very reasonable. Also the fact that you're not just contributing to this. waste stream of disposable products. Um, that's something that really matters to me now. So, um, uh, it's a product that. I'm really glad exists, you know, in this day and age where there are so many disposable products. And I was very, I went to an REI this past weekend and looked at the boots they had on the wall, and I was really disappointed. That they had no resoleable boots at, you know, REI, which is a company that talks a lot about sustainability. and you know, it depressed me that one day didn't make that decision to, to bring in a boot that was resoleable. And also that so few manufacturers today are, you know, building on this. So, um, I was really happy to see that Birkenstock was doing this. One thing I'll point out, um, as a bit of a caveat, Birkenstock does make some boots that look like they're resoleable, but actually are not. so, it's something to just be aware of the, the Birmingham definitely is resoleable. There's at least one other boot, that I believe they make that is resoleable as well, but anything below about, I think, 190, 190 will probably not be resoleable, even if it looks like it is. So, um, that's kind of one shame on them sort of thing, I think. But overall, I'm really, um, happy that they're offering this product and it's something I've been really happy with. So the, uh, Birkenstock Birmingham boot, uh, in slip on and lace up versions. Alright, well, I think that does it for us. Thank you so much for joining us here at Learn Make Learn. As we mentioned, we want to hear from you. So, please send any questions or feedback to LearnMakeLearn at gmail. com and tell your friends about us. In our next episode, we're going to dig into the perils of fan service, often associated with anime and more recently big budget franchise films. Fan service is generally understood to be material added to a work that has no relevance to the story or character development and is included solely for the purpose of pleasing existing fans. The Marvel Cinematic Universe and recent crop of Star Wars films are full of fan service moments, with the most egregious for me being the eye rolling moment early on in Solo, a Star Wars story, in which Solo's name. Something I don't think we, we needed to know. Um, but, Fanservice is something we also see in product design, and while it certainly makes sense to engage existing customers when planning for the next incarnation of a given product, balance too far over into fanservice can lead to diminishing returns. We'll share our own experiences and perspectives on fanservice on the next Learn Make Learn.

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