Free Coffee! Well, Almost

Terra Bite LoungeFree coffee! Free coffee! But only if you don’t mind the guilt of not giving a donation, you cheapskate.

Steven Levitt, one of the authors of Freakonomics, posted an article last week about an interesting new coffee shop in Seattle, WA: The Terra Byte Lounge — “an upscale voluntary payment cafe/deli.”

The Seattle Times calls the founder, Ervin Peretz, the “Robin Hood of the Starbucks set.”

Terra Bite Lounge looks like any other coffee shop – until you get to the menu. There are no prices listed. Terra Bite doesn’t have them.

You read that right: No prices. Customers pay what and when they like, or not at all – it makes no difference to the cafe employees, who are instructed not to peek when people put money in the metal lock box.

And there’s the rub. The coffee is essentially free and customers have the option of contributing however much they want – a “voluntary-payment” system, as the Kirkland Weblog calls it.

Quite an interesting social experiment in trust and honesty, eh? Are customers really paying? Yes, at an average of $3 per transaction. Some even pay more than they would at Starbucks (SBUX).

It’s because the social pressures of contributing are strong. One commenter on the Freakonomics Blog added that, “peer pressure & guilt is only part of it. There’s also an element of the reciprocity impulse, and darn it, just plain old decency.” Another commenter offered a counter argument, however:

I live right around the corner from Terra Bite in Kirkland. This business model makes me feel uncomfortable when I’m there – did I put enough in the box? Did I put too much? I really like having a fixed price to pay.

I’m uncomfortable with tipping too, for the same reason.

Will this business model work? We’ll see. Another Starbucks cafe just opened in the same neighborhood. The competition will be fierce. But if it does work out, Peretz has hinted that he’d be interested in expansion.

Hmmm. Think free coffee will work in San Francisco?

Want an iPhone?

Apple iPhone Want an Apple iPhone (AAPL), but can’t because of stinkin’ cellphone carrier contracts? This new service seems to have the answer: Cellswapper.com!

I’m not affiliated with them in any way, nor have I used their service yet. I heard about them on TechCrunch and thought their service sounded pretty damn cool.

When the Motorola Q (MOT) first came out, I got it right away, first-generation bugs and all. And oh boy are there bugs. The OS occasionally locks up on me. There’s dust inside the screen. And the original battery dies inside of a day, requiring the bulkier extended battery. Sigh…

I don’t think I’m going to be an early adopter of the iPhone. I’ll probably consider the second generation of it though. So the excitement of Cellswapper.com isn’t so much that I can get out of my Verizon (VZ) contract to get an iPhone. It’s mostly that I can lose the Motorola Q.

Creative Review Says: Your Mother is a Whore

Cover of Creative Review This just in from the Creative Review: Your Mother is a Whore. But that’s only if you’re a subscriber to that UK magazine. The subscribers received this February 2007 issue in a brown envelope with those words crudely written on it.

What’s up with that? Why so mean? Adrian Shaughnessy from the Design Observer tells us that this issue featured guest editors from the UK advertising agency Mother. And they are here to make a statement:

Does the presence of money diminish our creativity? The Sistine Chapel was a commissioned work. Was Michelangelo less of an artist for taking the Vatican’s money? Some would argue painting the Pope into a fresco is more noble then putting a Ford in your Bond movie. Some wouldn’t. We’re not here to decide. After all, ‘We sold our soul and it feels great.’

Once upon a time, I contemplated a career in graphic design and illustration. I was one of those kids who’d doodle in class all day long. Fate took me on a different path, but I still like to keep in touch with the design community.

The question of whether or not money stifles creativity is as old as, well, it’s pretty old. So I’d like to posit a theory:

Money can increase creativity.

How? Money puts boundaries on art. Creating art within boundaries can lead to innovation & creativity. Therefore, money can increase creativity.

An article from The Madison Avenue Journal, entitled “A New Lens To View Limits Through: Constraints & Creativity by Christina Kerley, quotes Marissa Ann Mayer of Google (GOOG) on this topic.

Marissa believes that constraints empower creativity, and remarks, “creativity thrives best when constrained”. Rather than constraints and creativity living at odds, she posits a complementary, almost symbiotic, relationship between the two polarities, writing, “innovation is born from the interaction between constraint and vision”.

“Constraints can actually speed development. For instance, we [at Google] often can get a sense of just how good a new concept is if we only prototype for a single day or week.”

Kerley (or simply CK, as she’s more commonly known) adds an example from her own experience.

Here’s a creative constraint that I constantly grapple with: length. I have to keep my columns to a certain word count to be sensitive to readers’ busy schedules. Get too wordy, go off on too many tangents, and I lose my audience.

37signals, the web design & development agency known for innovation, also uses constraints to foster creativity. “Constraints are a unique advantage that small teams have over the big guys,” they write. There’s only six people in 37signals, and they’ve been able to build five products, write one book, and create an open-source framework. They even claim that the lack of constraints is what killed the quality of the most recent Star Wars films. From a comment on Slashdot:

No the problem is money. Lucas has way too much of it. Especially for the first film [New Hope] there was a severe budget crunch. They were limited in both money and time. I think this forces a film team to make decisions that in the long run are good for the film. If you have no boundaries, you are more likely to throw in little bits that really have no business being in the movie. If you are limited, you are forced to trim the fat and leave the good bits. With the prequels, Lucas had no limits. He effectively had infinite money and time in which to make these films. As a result he wasn’t forced to REALLY think about which parts worked to help the film and which didn’t.

Constraints seems very counter-intuitive to creativity. Shouldn’t giving yourself total blue-sky freedom make you more creative? How else would you come up with that next great big idea, if you’re forced to hold yourself back?

To that, I ask: have you ever been in a productive brainstorming session? If so, think back to their use of constraints. They could be as innocent as, “brainstorm solutions to solve this specific problem” or “using the resources we currently have, what can we do next?”

One popular brainstorming method, known as lateral thinking, has participants refocusing their minds to different frames of reference. For instance, if I ask you: “It took two hours for two men to dig a hole five feet deep. How deep would it have been if ten men had dug the hole for two hours?”

You might answer logically and say, “twenty-five feet deep.” But in lateral thinking, you could also answer:

  • There are more men but are there more shovels?
  • Would we rather have 5 holes each 5 feet deep?
  • The two men may be an engineering crew with digging machinery.
  • What if one man in each group is a manager who will not actually dig?
  • Etc.

Lateral thinking isn’t the removal of constraints. It merely shifts the constraints over. Psychologist Edward de Bono created the Six Hats method as an application of lateral thinking. In it, participants approach the problem by putting on six different “hats” (effectively, constraints).

  • Red hat – think emotionally
  • White hat – think logically & realistically
  • Green hat – think about creative solutions
  • Yellow hat – categorize and combine solutions
  • Black hat – think skeptically of those solutions

All of these organizations and individuals – Google, 37signals, and Edward de Bono – have all realized the need for constraints in being creative and innovative. Money for art is just another constraint, isn’t it? So it shouldn’t stifle creativity; if anything, it should strengthen it.

A Woman’s New Best Friend

Yellow Diamond Ring You know what’s insane? De Beers’ stranglehold on the diamond industry and their deliberate pricing strategies.

What’s the rule for an engagement ring? That it should cost about two months’ salary? I see peers in Sillicon Valley spending more like three to six months’ salary sometimes. Insane!

So it fills me with joy when I hear that manufactured diamonds are becoming as good as mined diamonds. The benefits are endless:

…environmentally friendly (no open-pit mines), sociopolitically neutral (no blood diamonds), and monopoly-free (not controlled by De Beers).

Not to mention, hopefully, much more affordable too. Unfortunately, due to technical constraints, they haven’t been able to manufacture clear diamonds yet – only yellow diamonds (which happen to be very rare in the wild).

But before you run out and buy one, you’ve got to ask yourself: “Will your sweetie mind a manufactured diamond?” Has De Beers’ apparent monopoly also brainwashed her into believing that only mined diamonds = true love? (And if so, do you really want to go through with this? Just sayin’.)

P.S. Here’s a handy guide of manufactured diamond producers.

Huge Chinese Investment Fund

Growth Chart of China This is huge. In a few months, China is going to to build the world’s largest investment company: The State Foreign Exchange Investment Company.

It will be funded about 210 billion dollars. Reportedly, that’s only one-fifth of China’s foreign exchange reserves (China has one trillion dollars for foreign exchange?? Holy moly!).

In contrast, the world’s largest mutual fund, the Growth Fund of America (AGTHX), has 160 billion dollars. Bill Gates, the wealthiest individual in the world, has 53 billion dollars.

This is huge because an investment company this size will have an impact on global economies. George Soros, an individual investor with only 8.5 billion dollars (I said “only,” geez, wish I had “only” 8.5 bill), infamously pressured the British pound from joining the European Exchange Rate Mechanism (ERM) and thus, adopting the euro. If one guy with a few billion dollars can do this, imagine what 210 billion dollars could do.

Fortunately, China realizes this. Zhou Jiangong, a Shanghai-based economic analyst, comments:

The outflow will be carefully managed since a stable asset market is in the interest of China.

This also means a potential profit for those who follow the company. Zhang Ming, a Beijing-based economist with the Chinese Academy of Social Sciences, offers:

Other investors will be following it closely and try and guess its next move. They’ll buy assets that the company is likely to buy, and withdraw from markets if that’s what they believe the company will do.

This is one company I’m going to definitely keep an eye on.

How Do YOU Feel When You Trade?

Brett Steenbarger of TraderFeed posted a personality questionnaire a few weeks ago. It is designed to assess the emotions you experience when trading in the stock market. Here’s how I scored:

Questionnaire

  1. I feel happy when I’m trading = 4 (often)
  2. I feel stressed when I’m trading = 2 (occasionally)
  3. I feel alert and energetic when I’m trading = 5 (most of the time)
  4. I feel discouraged when I’m trading = 1 (rarely)
  5. I feel capable of succeeding at my trading = 4 (often)
  6. I blame myself when my trading doesn’t work out = 1 (rarely)
  7. I feel satisfied with my trading results = 4 (often)
  8. I feel edgy and frustrated when I’m trading = 1 (rarely)
  9. I feel in control of what happens in my trading = 3 (sometimes)
  10. I make impulsive decisions when I’m trading = 1 (rarely)

Totals

My positive emotional experience score (all the odd questions): 20
My negative emotional experience score (all the even questions): 6

Steenbarger next post describes what these scores mean. Basically, a high positive score and a low negative score is good. So I’m doing well. Whew!

He cites several studies that describe a concept called subjective well-being (SWB). One study, from the Annual Review of Psychology, entitled “On Happiness and Human Potentials: A Review of Research on Hedonistic and Eudaimonic Well-Being” by psychologists Richard Ryan & Edward Deci, describes SWB as having three components:

  • General life satisfaction
  • The presence of positive emotions
  • The absence of negative emotions

They may sound familiar; they’re basically the components of happiness. One of the more interesting finds from this study is that we’re happier when we pursue autonomous goals.

When we are free to set and pursue our own goals, we tend to be much more fulfilled than if we are pursuing goals that have been set for us.

You’ve probably heard the axiom that good-looking people are happier in life. Well, another notable find from the study:

Interestingly, such factors as salary and physical attractiveness do not predict SWB. In fact, people whose values show a preference for high income and job success over personal relationships tend to report less happiness and self-fulfillment than those who emphasize interpersonal attachments.

The questionnaire was designed to “assess well-being and stress in the context of one’s trading.” The positive emotional experience questions focused on feelings of personal satisfaction, perceived competence, and perceived autonomy. The negative emotional experience questions focused on feelings of anxiety, frustration, and loss of control.

In other words, it’s much more important to have self-confidence and control over your own trading goals, than to be in the market purely for a profit. Steenbarger summarizes this well:

Trading may not always be profitable, but it is important that it contribute, over time, to a sense of autonomy and competence and that it be accompanied by experiences of personal fulfillment.

Will Blog for Cash

What are all the ways to make money off your blog? When Darren Rowse of ProBlogger.net recently published his top income streams, it got me thinking.

My aim isn’t to make a living off my blog. I already have a job I love (it’s like getting paid for a hobby). But I’ll admit I’ve fantasized about making a side income from my blogs. And c’mon, what blogger hasn’t?

So far, there are three five main sources of income for blogs. All are essentially advertising vehicles for businesses, but with some differences.

UPDATED 12/16/2007: The lists below have been revised as I’ve gotten new info from advertisering providers.

  1. Ads
  2. Affiliate programs
  3. Job boards
  4. Paid reviews
  5. Video

Ads

There’s a wide variety of ad types from which to choose. First, there’s the UI of the ad: text, image, video, or RSS. Then there’s the payment method: CPC (cost per click), CPA (cost per action), or CPM (cost per 1000 impressions). Finally, there’s the ad selection: automatically matching your content, explicitly setting the criteria (category, location, keywords, etc), or a hybrid of both. Each will vary in revenue potential, depending on your blog’s content, audience, and popularity.

Affiliate Programs

Affiliate programs basically offer what look like ads for your blog, except they focus on the product or service sold by the parent business. Most offer CPA programs where bloggers get paid for qualified leads. A qualified lead is when a click from the blog leads to a sale. Bloggers get a share of this revenue.

Shopping comparison engines are an exception. They offer CPC affiliate programs because they earn their revenue not from sales, but from clicks from their site to their merchants. Bloggers get a share of this click revenue.

There are too many affiliate programs to list. They can range from direct providers (e.g. retail stores, mortgage providers, insurance companies, etc) to affiliate networks (third-party companies that have set up affiliate programs for others). What I have here are some of the more popular ones, including several affiliate program directories.

Direct Providers

Affiliate Networks

Shopping Comparison Engines

Lists of Affiliate Programs

Job Boards

Job boards are the newest offering on the block. They basically offer businesses a way to advertise their job listings on blogs – and bloggers get to set the price for hosting these job listings. Prices can range from $10 – $500, though bloggers aren’t paid until the job is “closed,” meaning the business hired someone that came through that blog. Essentially, this is a CPA model. One job board, HiddenNetwork, offers a CPM model instead.

This trend seems to be just the tip of something larger: CPA classified listings of any kind of product or service. Anyone, from large businesses to your neighbor down the street, could be creating these listings and advertising them on blogs soon.

Paid reviews

Paid reviews are a new and somewhat controversial form of word-of-mouth marketing using blogs. Business pay anywhere from $5 – $500 for each blog post written to review their product or service. A recent FTC ruling has made it necessary for bloggers to disclose that they’re getting paid for the posts too.

Video

As embeded videos become more widespread on blogs, some companies are finding ways to monetize them through CPC video ads. Placed at the end of the videos, bloggers get a share of the revenue earned each time a video ad is clicked. The creator of the videos also get a share.

Good luck getting rich! And don’t forget the little people who helped you along the way!

Reality TV as Advertising?

My Super Sweet 16 Who’d have thunk that MTV (VIA) could spawn a niche market? In last December’s issue of Entrepreneur magazine, there was an article entitled: “Party Planning for Teens“. It opened with:

Blame MTV’s My Super Sweet 16 for showing teens nationwide the extremes the super-wealthy go to for a child’s coming-of-age soiree. American teens, who number more than 70 million, want what’s hot at their parties–from bar and bat mitzvahs to sweet 16s, quinceañeras and other coming-of-age rites.

That got me thinking. If My Super Sweet 16 could start a new niche market, could similar reality TV shows also start (or jump-start) other markets? What if an advertiser created a reality TV show just to increase the demand for their product or service?

That could be a stupid idea. TV as an advertising medium is losing its luster. More and more kids are on the Internet. They don’t care about TV. Or do they?

Another Entrepreneur article, “Whip Up a Hot Kids’ Cooking Business“, cites a growing interest in cooking classes among today’s youth.

Americans’ interest in cooking has drizzled down to the nation’s kids. From cooking classes and kits to full-fledged cooking parties, this still-hot category even includes kids’ cookbooks in the recipe for success.

It doesn’t point to Top Chef, Hell’s Kitchen, or even the Food Network as influences. But it makes me wonder. Also: has American Idol increased the sales of karaoke machines or customers to karaoke bars?

Goodbye 30-second commercial spot, hello 60-minute TV show!