The Hub Cool News

No Bezos

warren-buffettWarren Buffett is a genius in many ways, but not when it comes to investing in retailers, reports Anupreet Das in The Wall Street Journal (7/17/14). It’s the "one area where he says his investing track record is ‘awful,’ ‘pretty bad’ or ‘really bad’." It’s not that he’s invested in all that many retailers, and those that he has "are profitable … But the retail sector continues to confound the billionaire investor and his partner Charlie Munger," who have "lamented how the Internet is rapidly reshaping shopping habits."

"I think the new technology is going to be very disruptive," Charlie told an annual Berkshire Hathaway meeting in May. "Retailing in particular is facing major threats." In fact, Berkshire’s dismal track record at retail pre-dates the Internet, and includes "a 1966 deal to buy Baltimore department store Hochschild-Kohn," which was "one of the conglomerate’s biggest mistakes to that point." Warren suggests that retail is inherently challenging "because shopping habits and sales channels are constantly changing."

He has invested in retailers "that appeared to have at least some protection," but were done in by the Internet. Meanwhile, Warren "is effusive about someone who he believes figured it out years ago: Amazon.com Inc.’s Jeff Bezos," whom he reportedly called the "best CEO in America" and described as "ungodly smart." But Warren doesn’t blame anyone but himself for his retail-investment mishaps, writing in an annual letter: "I simply was wrong in my evaluation of the economic dynamics of the company or the industry in which it operated."

Chloe & Isabel

chloe+isabelChantel Waterbury created a "social retail brand" that is reinventing direct sales, reports Angus Loten in The Wall Street Journal (7/17/14). Launched in 2010, Chloe & Isabel "uses independent sales associates to sell the company’s jewelry online … Named for hypothetical best friends with opposite tastes — trendy versus classic — today the company has 80 full-time employees, including a team of jewelry designers who source and produce hundreds of styles."

The enterprise uses "proprietary software that allows its independent sales associates, known as ‘merchandisers,’ to create their own customized Chloe & Isabel web boutiques and tap their social networks for customers. The company currently has nearly 5,000 merchandisers, who start by purchasing a starter kit, comprised of 18 pieces of jewelry for $175. The sales associates earn commissions, typically 30% of their own sales." The company currently is valued at $100 million, and hopes to be profitable by 2015.

Chantel says she has no plans to open any retail stores "because the merchandisers are my stores," adding that "every single merchandiser creates her own collection. She’s a micro-entrepreneur." She says she’s managed to raise some $32.5 million in venture capital. "It’s a business model that’s disrupting the entire retail industry, and that’s something venture capitalists are always on the lookout for." Chantel is eyeing expansion overseas "to help women develop skills and foster their careers."

Setting the Table

table-settingMiles Davis is the patron saint of the dining experience at Eleven Madison Park, reports Jay Cheshes in The Wall Street Journal (7/5/14). It’s the "loose collaborative spirit" of the jazz legend’s music that guides the way the staff interacts with diners. "In the same way that cooking is a muscle, so is hospitality and service," says owner Will Guidara. Gabriel Stulman takes the same approach, allowing his staff to "drink on the job, play their own music over the sound system, and wear just about anything they like."

"How much fun can you have as a diner if everyone around who’s serving looks miserable?" says Gabriel, owner of "six cozy restaurants around Manhattan." "We started a competition at all of our restaurants — who can get the most unsolicited hugs," he says, adding: "We have this mantra. Treat celebrities like locals, and locals like celebrities because everyone loves to be made to feel special." Staff are "encouraged to offer a drink or dish on the house every day" and generally "lavish guests with … warmth."

Will credits Danny Meyer’s 2006 book, Setting the Table, with changing the industry by creating "a new sort of dining room culture centered not on service (the technical aspects of working a room), but hospitality (the way you’re made to feel there)." Danny pioneered this "30 years ago" with "his first New York restaurant, Union Square Cafe." "In the 1980s I would go to all these hot restaurants to learn about the business," says Danny. "The food was really exciting, but I started to realize the people weren’t always that nice."

Standing in Line

line-of-peopleIf you think you always pick the slowest line at the grocery store, you’re probably right, reports Adam Mann in Wired (7/15/14). The reason is that the "math is working against you … Chances are the other line really is faster. Mathematicians who study the behavior of lines are called queuing theorists, and they’ve got the numbers to prove this." Basically, if a store has three checkout lanes, your odds of choosing the fastest one is one in three, given that delays happen at random.

Queuing theory dates back to "the early 1900s," in Copenhagen, where "a young engineer named Agner Krarup Erlang was trying to figure out the optimal number of lines for the city’s switchboard … Erlang devised equations that took into account the average number of phone calls in a given hour and the average amount of time for each call." Where grocery stores are concerned, the solution is to "make all customers stand in one long snaking line, and serve each person at the front line with the next available register."

This is what Trader Joe’s does, and it works because "a long delay at one register won’t unfairly punish the people who lined up behind it. Instead it will slow everyone down a little bit." The only problem is "customer psychology. We human beings like to think we are in control of our lives and can beat the system if given the chance," and some prefer to roll the dice with multiple lines. Disney, meanwhile, addresses potential impatience by offering diversions while visitors wait in line, and some fix it themselves simply by fiddling with their mobile devices.

Newspaper Buzz

bee-buzzUSA Today is using digital media to reclaim its spot as America’s largest-circulation print newspaper, reports Leslie Kaufman in The New York Times (4/14/14). One new locus of its efforts is Social Media Tuesdays, a day when its reporters "must act as if there is no other way to get their articles except through sites like Facebook and Reddit … The purpose is to get them thinking like their readers, who increasingly get news through their Twitter feeds instead of the newspaper’s front page or home page."

The mastermind of this is Larry Kramer, the paper’s publisher. "I hope and expect that Larry will lead a re-thinking of what the print newspaper should be in an era when so many people get their basic news 24/7 digitally," says L. Gordon Crovitz, a consultant. "Too many daily newspapers still focus on reporting what happened yesterday, despite many readers having learned yesterday what happened yesterday." The paper also runs competitions among its journalists to "create the most viral headline or add the most new Twitter followers."

Susan Page, the paper’s Washington Bureau chief, says such activities have brought more energy to the newsroom. "We file more and we file faster … and we file without consideration of whether it will make the print edition." It has also helped return USA Today’s status as America’s biggest newspaper by circulation. However, whether it will help restore profits is unclear, as "the growth in online readers and digital advertising revenues are still not making up for the sagging fortunes of their core newspaper product."

Twitter Fodder

twitter-birds"Being good at prediction often does not mean being good at creation," reports Sendhil Mullainathan in The New York Times (7/15/14). The observation is a function of "the oldest of statistical problems: Correlation is not causation." This fundamental truth is the bane of anyone who wants to "go viral" by guessing at what kind of tweet is most likely to catch on and spread. While it may be relatively easy to guess which tweet gets retweeted, it is obviously much harder to create one that gets retweeted.

What’s more, an algorithm designed to predict which tweets will be tweeted most often has a slightly better track record than humans — "67 percent of the time, beating humans, who on average get it right only 61 percent of the time." Consider, as well, that the algorithm "has no other knowledge. It has none of the contextual information you have accumulated over the years … It does not have a sense of humor or know what a pun is. It does not know what makes a turn of a phrase elegant or awkward."

Using "a few crude features, such as length of the tweet, the presence of certain words," and so forth, it "finds information in unexpected places." It knows that "longer tweets are more likely to be retweeted," but why? Well, because they "have more content," and it’s the content that makes the difference. "Some of the most predictive variables are circular." Facebook knows that the faster a post attracts comments, the more popular it will be. In other words, if you want to write a popular post, "write one that people like."

The 5th Dimension

beth-annThe confluence of our digital and physical lives is creating richer brand experiences. A Hub White Paper by Beth Ann Kaminkow of TracyLocke. In the early days of the Internet — well maybe as recently as five years ago — there was a sense that we would have our digital lives and our physical (real) lives. Games like Second Life and Farmville helped perpetuate this theory. With the growing pervasiveness of the Internet, our assumption was that a person would be able to craft a separate persona portrayed only online while maintaining a distinct version of themselves offline, and never should their two worlds collide.

Perhaps we underestimated how ubiquitous the digital era was about to become during Web 2.0. Now, as we experience the ‘Internet of Everything,’ and the rise of an even more intelligent Web 3.0, there’s still more blurring and blending between the physical and virtual. This gives rise to data capture opportunities that can now track our every move online and offline. In fact, it is the very desire to gather more data that is most inspiring the building of bridges and connections between the physical and the digital world. Read the rest of Beth Ann’s White Paper.

Game Escapes

d-dA generation of writers found their muse playing Dungeons & Dragons in their youth, reports Ethan Gilsdorf in The New York Times (7/14/14). Junot Diaz teaches writing at MIT and says his first novel, The Brief Wondrous Life of Oscar Wao, was inspired by his "gaming years." It won a Pulitzer Prize. While his books are not of the fantasy genre, he says the "fantastic narratives" of D&D taught him "a lot of important essentials about storytelling, about giving the reader enough room to play."

It is indeed D&D’s "improvisational and responsive nature" that makes it "different from novels and other narratives … Plotlines are decided as a group," and, explains English professor Jennifer Grouling, "you have to convince other players that your version of the story is interesting and valid." Dungeons & Dragons is played "around a table, not a video screen. Together, they use low-tech tools like hand-drawn maps and miniature figurines to tell stories of brave and cunning protagonists."

The storyline is framed by a Dungeon Master, who "must create a believable world with a back story, adventures the players might encounter and plot twists … If the Dungeon Master creates ‘a boring world with an uninteresting plot’," then players are apt to take the story "in a completely different direction." Unlike a novel, which is "a finished thing … the plot is always fluid; anything can happen." Other writers who cite D&D as an influence include Cory Doctorow, Stephen Colbert and Robin Williams.

Escape Games

parapark2Being locked in a room with no clear means of escape is becoming a popular pastime in Budapest, reports Lisa Abend in The New York Times (7/6/14). Currently, there are about "50 room-escape games scattered throughout the Hungarian capital," and small groups of people pay about $40 each to play. The room is "filled with clues and obstacles," and players must apply "deductive logic, teamwork and a bit of luck" to find their way out in less than an hour. Attila Gyurkovics came up with the idea about three years ago.

At the time, he was looking for a game that would help build teamwork among businesspeople and students. "At first, people looked at me like I was crazy: ‘You want to open a place where you lock people inside?’" But his enterprise ParaPark, now has "four games in two locations in Budapest" and is franchising "elsewhere in Hungary and abroad … Within months of opening, versions of ParaPark were popping up all over the city. With its post-Communist feel, Budapest is well suited for room escape games."

Attila says the appeal is grounded in flow theory. "You lose yourself," he says. "You’re not standing outside yourself saying, ‘Oh, I have to call my mom’ or ‘My boss is watching over me.’ You become completely absorbed by the game." Janka Csoti, who recently played at ParaPark, concurs. "What I liked about it," she says, "is that I was fully present : no checking my mobile, not thinking about what I was doing later. I felt like I was really giving my time to my friends."

Bonobos Bag

bonobos-guideshopsFor men, a shopping bag is "a tiny badge of shame," says Bonobos CEO Andy Dunn in a New York Times piece by John Koblin (7/3/14). "You’re running around, and you want to jump to dinner or back to the office or to the gym," says Andy. "You don’t want to have to deal with this bag." That bit of insight fits neatly with the Bonobos vision for the future of retail — stores where men can try some and buy some, but then have their purchases shipped, arriving at their home "a day or two later."

Bonobos, originally an online-only retailer of mens’ apparel, arrived at this concept in 2011 after opening "the lobby to its 25th Street headquarters with some fitting rooms to see if customers wanted to try them on. Sales started picking up for its shirts and its pants as well." This followed an earlier attempt to follow up its success selling pants online with shirts. "We made these great-fitting shirts and put them on the site, and no one cared," says Andy. "They weren’t selling well."

Bonobos has found other advantages to its 10 store — or Guideshops, as they call them — where nothing is in kept in stock. "You don’t have anyone manning a stockroom or playing defense against changing rooms where customers are dumping inventory in a corner," says Andy. "You don’t have the same folding nightmare or visual presentation nightmare." The only nightmare, so far, is making money — Bonobos has yet to turn a profit. But it is heavily backed in venture capital, and plans to open 30 more stores over the next two years.

Shopkick Crosshairs

shopkickThe nexus of the mobile and physical worlds is obvious. "It’s called shopping," says Cyriac Roeding in a Forbes article by Hollie Slade (7/21/14). Since 2010, Cyriac has been developing this simple reality into Shopkick, an app that "can guide you through the clutter" of the shopping experience, "and reward your perseverance." Say you walk into Macy’s. First the app reminds you to open it, and then you are rewarded with points, or ‘kicks’ just for doing so and perusing "the most liked products you can buy in Macy’s."

That will yield "50 to 100 ‘kicks’," and, depending on the store, "you can get 500 more for scanning sponsored items and 1,000 more if you spend over $75 with a linked credit or debit card. You can redeem those kicks for a gift at Macy’s or something else, from a Starbucks card (1,250 kicks) to an iPad (125,000 kicks). This is the age of the invisible apps ‘that just notify us when something is going on’," says Mary Meeker, a trend spotter and venture capitalist.

So far, "Shopkick has racked up 7.5 million users" and "has been profitable since 2012." It does face competition from Apple’s iBeacon, "a Bluetooth signal that allows messages, like flash sales and discounts to be sent to nearby phones," but Shopkick now bundles iBeacon with its own app as ShopBeacon. "The conversion rates are very high," says Cyriac, by which he means "20% to 90%." "That’s the opposite of online shopping, where conversion rates are terrible," by which he means "maybe 3%."

Follow The Footprints

michael-miller-catapultThe ‘Internet of Things’ portends new digital pathways to brand engagement and loyalty. A Hub White Paper by Michael Miller of Catapult. In today’s wired world, even the most basic human behaviors leave behind a powerful data trail. Our phone calls, the websites we surf and nearly everything online that we view, click, e-mail, buy, sell, post or forward—all of these data points generate unique digital footprints that marketers can use to reach customers with increasingly relevant messages that drive purchases and build brand loyalty.

The problem, however, is that such a disparate data network limits brands and retailers to a one-dimensional view of the consumer. CVS is unaware of the vitamin purchases I make at GNC. Kroger hasn’t got a clue which general merchandise items I buy at Costco. The same is true of Internet companies: What I ‘like’ on Facebook remains unknown to Google. Imagine what marketers could accomplish in a world of sentient computing where digital devices all ‘talked’ to each other (i.e., shared information across platforms), and where our brand interactions were not simply dictated by cataloguing what we type, download or surf, but literally were based on what we do. Read the rest of Michael’s white paper.

The Rare Tea Cellar

rare-tea"The Rare Tea Cellar has a 1949 vintage pu-ehr tea that sells for $30,000 a cake," reports Hunter Atkins in Forbes (7/21/14). It also houses "Emperor’s Private Reserve Himalayan Dream ($8,000 a kilo), brewed from the finest strands of a tea leaf delicately plucked only beneath the light of a full moon." All told, The Rare Tea Cellar has "450 varieties of tea" for those who aspire to experience "a tea higher than what the Queen of England drinks."

The Rare Tea Cellar is also "a small warehouse of the world’s greatest edible wonders: finger limes from New Zealand, peels of lemons that grow only outside the pyramids of Egypt, sapphire salt from the Himalayas, honey truffles from Hungary, sea grapes from Okinawa, tree resin from Morocco, emerald pistachios from Sicily, and pepper berries from Tasmania." This trove is the brainchild of Rodrick Markus, whose mission is to find and deliver the world’s rarest ingredients to the world’s most adventuresome chefs.

"He’s out there finding stuff for the chefs that nobody else is," says Curtis Duffy of Grace, a Chicago restaurant. Rodrick also creates his own products, such as Rare Botanical Bitters, which he claims "turns even bottom-shelf liquor into a tasty bespoke cocktail." Some ideas — like beef jerky tea — didn’t catch on, but Rodrick says he delights in what he calls ‘F.U. ingredients.’ For example: "Rather than use a pecan, you use a wild hickory nut, which is ten times the cost because it takes four hours to crack."

Harney & Sons

harney-teapotThe late John Harney "helped restore the American palate for high-quality teas," reports Paul Vitello in The New York Times (6/26/14). Tea hasn’t been "the No. 1 beverage in America" since the 1773 "tea-tax protest … ignited the Revolutionary War." Mr. Harney was himself "a committed coffee drinker" until he "was converted to the gospel of tea" by "Stanley Mason, an Englishman who had settled in northwest Connecticut after 50 years in the London tea trade."

At the time — the 1960s — Mr. Harney was "part owner and innkeeper of the White Hart Inn, a two-century-old restaurant and hotel" in Salisbury, Connecticut. Mr. Mason was already retired, but had "started a small company to blend and package premium teas, and he persuaded Mr. Harney to add some to his menu." The tea was such a hit that Mr. Harney bought the tea company, "hired Mr. Mason as his consultant and began a 10-year apprenticeship in the tea trade."

He "barnstormed the country in the 1980s and ’90s to acquaint restaurant managers, their luncheon patrons and the public … with the dying art of tea appreciation … introducing the nuances of aroma, body, complexity and aftertaste in loose teas from China, Africa and India to people whose experience with tea had often been limited to what came in store-bought tea bags." Today, Harney & Sons has "$300 million in annual sales, employs 150 people," and "imports about a million pounds of tea each year." John Harney was 83.

Franks Anatra

franks-etcBill Loizon discovered that an old Volkswagen pickup makes a perfect hot dog stand, reports Paul Stenquist in The New York Times (7/6/14). He also came up with a perfect name for his venture — Franks Anatra — but that’s another story. Bill (most people call him Frank) initially built himself a hot dog cart after his Greek restaurant failed. But he wanted something bigger, better and faster. The lightbulb went on sometime after he saw "a 1940 Ford that had been converted into a barbecue grill."

Bill earlier had come across a rare Volkswagen pickup (image)– a vehicle that had been popular overseas, but not in the US. Recognizing its potential as a hot dog stand, he bought one and converted it for the purpose. "The truck was made for this kind of thing," says Bill. It also attracted attention at farmer’s markets and other open-air events. People would "stop to see the truck and end up buying lunch." Its quirkiness created a certain appeal that helped "create demand for on-site hot-dog parties" for corporate clients.

When naming his enterprise, he landed on Franks Anatra, and developed a backstory that all his recipes came from the "island nation" of Anatra, and even emblazoned the truck with "the island’s great seal. The entertaining mythology added a twist to the more obvious connotations of the name." Trouble started when he tried to copyright the name – the Frank Sinatra estate stopped him cold. Now known as Franks Etc., Bill says he’s never been busier, and that the copyright story "created a new mythology."

Taste the Taconic

taste-nyThe State of New York is creating a local marketplace along the Taconic State Parkway, reports Ralph Gardner Jr. in The Wall Street Journal (7/8/14). "It would have been delightful if just a rest stop, perhaps with a couple of vending machines … had opened on the Taconic," writes Ralph. But it’s much better than that. It’s all part of an "initiative called Taste NY that showcases the Empire State’s bounty by giving local farmers, apiarists, bakers, cheesemakers, etc., a new venue to sell their products."

So, "instead of finding a gas station filled with Hershey Bars, Slim Jims and Budweiser (not that these fine products don’t have their place) you discover fresh produce, perhaps the best cider doughnuts you ever tasted, local milk and eggs, cheeses, jams and maple syrup. Even grass-fed beef." Not only that, but the "restrooms are sparkling and the sink incorporates a brushed-steel soap dispenser, faucet and hand-dryer. The hand dryer … even has mood lighting."

Mary Jo Mueller, a cashier at the rest stop, says the restrooms are key to the experience. "The restroom is one of the reasons it’s such an attractive spot to showcase these products," she says. The appeal extends beyond those just passing through: "Even the local people are coming to buy their local produce and dairy," says another sales clerk. Located at Todd Hill, and open every day but Monday from 10 am to 7 pm, and Fridays until 8, Taste NY hopes to have local food trucks at the ready when the store is closed.

Font of Disruption

typefacesThe typography business continues to be a font of innovation and resilience, reports The Economist (6/28/14). Monotype, the biggest typography enterprise, has been around since 1887, and currently offers "a catalog of 18,000 fonts … In its early days it sold ingenious machines that enabled Edwardian printers to cast lines of type in seconds; now … it sells software that renders text on screens." It now embraces "cloud computing, which both offer a vast new market and upends a long-standing sales model."

"For years, font firms discouraged the use of their products on websites, fearing piracy. But a standard adopted in 2010 means that rather than having to be installed on web servers, where they are easy to pilfer, font files can now be streamed from online libraries." Monotype is also cashing in on "licensing deals" to manufacturers as they "add flashy displays to car dashboards, televisions and even white goods such as hot tubs. Sales to individuals are also doing well … as fancy fonts are used to pep up wedding invitations and the like."

Monotype is "both supplier and competitor to Adobe … which owns more than 2,000 fonts, and to the plethora of independent font publishers." Google, meanwhile, "has made more than 600" free fonts available" and "type-designers find it ever easier to sell their work directly to consumers, sidestepping middlemen … The falling price of the design tools they use is encouraging novices to have a go. This, in turn, makes it easier for their big corporate customers to build in-house font teams." To thrive,therefore, font firms must continue to be "bold."

Archibald Optics

archibald-opticsRohan Dhir is returning to tradition to disrupt the luxury eyewear business," reports John Ortved in The Wall Street Journal (7/5/14). "It’s like the old times when you’d hear about a great cobbler two towns away and then travel to try him," says Rohan, founder of Archibald Optics. "We’re just connecting people with the Internet." Rohan also taps into the past from a design perspective, with specs that "take cues from British designs of the 1960s and ’70s."

On the face of it, Archibald Optics sounds a lot like "Warby Parker, another disruptive eyewear label, whose prices range from $95 to $145." However, Rohan says there are differences, most notably "that Archibald targets a higher end of the market," and asserts that "his glasses are on a par with those of British brand Cutler and Gross, which retail from $475 to $800 (Archibald’s are $195 to $300 because of its drastic reduction of the industry’s standard markup and the absence of marketing costs)."

Rohan achieves this using "an untraditional eight-person team to create his samples," including "a civil-engineering student and a toy designer. He then tracked down a high-end Japanese eyewear manufacturer and convinced its craftsmen to work with him." He says his business model borrows from "Church’s — maker of luxe, long-standing British shoes." He’s already thinking of line-extending into footwear: "We can go into any category where craftsmanship is valued and anyone is paying (exorbitant) markups," he says.

Think Disruptive

mark-lineyFlex the power of Big Data to unlock new brand experiences. A Hub white paper by Mark Liney of Landor Associates. So much of what I read about consumer-facing brands and big data strikes me as little more than navel-gazing. We’ve seen B2B businesses such as IBM implement big-data solutions that help entire cities better plan for the future. However, as Landor recently found in a study of CMOs, there are few strong examples of consumer-facing brands that have truly grasped how big data can benefit their organization and their customers.

As big data emerged, organizations scrambled to make sense of their data assets and began to focus on how many they had, how they could improve them, and how they could get more of them. This resoundingly inward-looking exercise led to infinite talk of potential and opportunity—but potential for whom? Picture the scene. It’s, say, 1947, and a crowd of executives is huddled in a boardroom. They’re strategizing how to sell more products. One especially obnoxious boss yells out, "They’ll buy whatever we tell them to!" Snickers fill the room as the executives craft plan after plan to trick consumers into buying more of what they don’t need. Continue reading Mark’s white paper.

Yellow Fever

tour-de-franceThe great myth of the Tour de France is that most of the riders are in it to win it, reports the Economist (6/28/14). The great irony of the Tour is that because it was designed to be "so punishing that only a single rider would finish," it created "a culture of cooperation" among riders that had no chance of donning the winner’s yellow jersey. "For the majority," writes Richard Moore in Etape, "the Tour de France is not about winning." The real story is not about "supreme solo performances" but rather the teamwork behind the scenes.

"Once a rider is no longer a factor in a race … he forms a truce with his rivals … On a daily basis, [they] will share water, food, clothing and effort just to make it to the finish to ride another day." Another myth is that anyone actually loses the race — except those that fail to complete it: "No man who completes the Tour (and only men compete) is a loser." In fact, there’s even a "tongue-in-cheek prize for the rider who finishes the Tour last," who are awarded a trophy known as the Lanterne Rouge.

One of the Lanterne Rouge winners, Wim Vansevenant of Belgium "eventually came to see his prize as recognition of his self-sacrifice." Another, Gerhard Schoenbacher, was so determined to win the prize that he walked the "the last 100 meters" of the race, "engulfed by journalists and photographers." The doping, meanwhile, "engulfed the back of the peloton just as much as it did the leaders." "Everyone was doing it," says cyclist Michael Barry, author of Shadows on the Road. "I had to dope to keep my job."