All The Details Matter

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From the U.K. comes a story that highlights just how quick and ruthless the consequences can be of a tiny data error in this interconnected world: 

The Telegraph reported the British High Court has found government agency Companies House was liable for the demise of engineering firm Taylor & Sons Ltd, after they wrongly recorded that the Welsh company had been wound up.

in 2009 Companies House confused Taylor & Sons Ltd with Taylor & Son Ltd, a completely different company that had gone into liquidation.

When it realised its mistake three days later, Companies House tried to correct it but it was too late.

Taylor & Sons Ltd co-owner and managing director Philip Davison-Sebry told the Telegraph Companies House had already sold the false information to the credit reference agencies.

“We lost all our credibility as all our suppliers thought we were in liquidation,” he said.

“It was like a snowball effect.”

Within just three weeks Taylor & Sons’ 3000 suppliers terminated their orders.

The company is a family run business that was established in 1875 but within two months of the error it had gone into administration.

Also, and presumably unintentionally, demonstrating why Douglas Adams found British bureaucracy such a fertile source of inspiration. 

Infinitely Improbable

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Lewis Packwood at Kokatu recounts an amusing and unusual tale of an online community rising up and thriving unexpectedly. Although considering the involvement of Douglas Adams perhaps the improbable should have been considered routine. The story comes from the early days of the internet (late 90's) and the building of a promotional website for a video game based on Starlight Titanic, a lesser known entry in the Douglas Adams universe:

Yoz was busy adding content to the nascent website, and one such feature was an employee forum for the fictional company Starlight Lines, the owners of the Starship Titanic.

"The idea was to present a read-only Senior Management forum in which you'd see some of the key backstory characters getting on each others' nerves. But we figured there should probably be a writeable forum for the lower-level employees, so I spent half a day hacking up a stupidly basic forum system."

Fans who had signed up for the mailing list received a cryptic email granting them password access to "the restricted Titanic Project Intranet Websiteand then a follow up email apologizing for "the accidental email leakage." All of this in character of starship management of course, in the obtuse bureaucratic language Adams was famous for.

Satisfied with their humorous promotion, the team moved on. 

Yoz then quickly forgot all about the employee forum, but six months later he happened to take a quick peek. And there were ten thousand posts in there.

Bearing in mind that the forum was buried deep within the website and was (just about) password secured, this was a phenomenal result. But even more fascinatingly, the forum had evolved into an extension of the game itself.

Visitors to the forum had created fictional employees and passengers on the Starship Titanic and begun role playing as them. Someone would make up an implausible, Adams-esque scenario, and everyone else would react to it in character, resulting in some enormously complex storylines and in-jokes that developed and diversified over years. And this strange fictional world had appeared entirely spontaneously, without any input from Douglas Adams or The Digital Village. Indeed, Yoz was as surprised as anyone when he stumbled across it: "It was like ignoring the vegetable drawer of your fridge for a year, then opening it to find a bunch of very grateful sentient tomatoesbusily working on their third opera," he says.

Story: "The Secret Douglas Adams RPG People Have Been Playing for 15 Years"

The Undo Button

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Richard Fergie writing on E-Analytica illustrates perils for marketers when trying to outsmart ad-tech algorithms:

Before Christmas I ran a brand bidding incremental value test for one of my clients. The results showed that nearly all PPC brand traffic was canibalized from organic. We paused the brand campaigns. This is about what happened next.

Mid January, competitor ads on the brand name terms became much more aggressive. We uhmmed and ahhed for a bit because we didn't want to waste money with no direct return but it was also obvious that these competitor ads were causing brand damage. At the end of January the decision was made to re-activate the brand campaigns.

"The undo button doesn't quite work the way you think it does."

For a variety of reasons (very generic brand name, high rolling competitors, other Google subterfuge) this account had always had a high CPC for brand terms (over $1). When we turned the brand adverts on again the CPCs for the brand campaign were the highest in the whole account. This was not good as it was eating our very limited budget.

What happened here is instructive. He had made a decision to run ads against the brand's words (this is the equivalent of running an ad linked to Amazon for people who search for the word "Amazon" in Google), and though it was nominally successful it was apparent that nearly everyone clicking on the ad (and costing money) was someone who would have clicked on the regular organic search results anyways.

So you start out with people Googling your brand name and clicking through to your site for free, and and up with people Googling your brand name and you paying a dollar or more for the same click. Whoops. 

The problem came in three stages. First he noticed his competitors were also bidding for the same words, and driving his costs up, and then when he decided to stop paying for those increasingly expensive clicks, he ended up with less traffic than when he started the whole experiment, and was forced to return and pay even higher prices. Spending money and effort to get fewer visitors is not a good way to make an advertising client satisfied.

Thankfully the story has a happy ending:

To figure out what was going on here I made the following assumptions:

  1. For these queries and advertisers, quality score is essentially click through rate.
  2. Google's estimate for our CTR remained unchanged from when the ads last ran.
  3. The estimate for the CTR of the competitor ads has increased since we stopped running brand ads.

This meant that our competitor's ad rank improved because we left the auction. When we returned our CPCs were higher because the actual CPC is the ad rank of the advertiser below divided by your own quality score.

Using this reasoning I predicted that brand CPC would fall as our competitor's CTR reduced now that our ads were back at the head of the auction.

Two weeks later it looks like I was right: the brand CPC is back to where it was.

An important lesson that with a flawed plan, an online marketing campaign is actually capable of causing real harm, beyond just being ineffective or wasteful. 

Nobody Could Have Predicted

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News from Techcrunch today regarding more backing for a regulated bitcoin exchange in the US:

Fresh from scoring a massive $75 million funding round, bitcoin payment firm Coinbase has revealed that it will open the first regulated bitcoin exchange in the U.S. on Monday.

The company, which added the New York Stock Exchange and USAA to its list of investors last week, told the Wall Street Journal that it has “regulatory approval” in half of all states, including significant areas like New York and California. (The New York Department of Financial Services has been very vocal in its call for regulation via a proposed ‘BitLicense’.)

Coinbase already offers exchange services in 19 countries overseas, and it said that its work accruing necessary licenses and approvals in the U.S. took five months. The company will only be able to offer services to customers that sign up in states were it is approved, but there are plans to gain approval in further states.

It's hard to reconcile the increasing infrastructure surrounding bitcoin with the reality that it is fundamentally and irretreivably flawed and destined for eventual collapse that nobody could have predicted.  Because if recent years have taught us anything, it's that the backing of major financial institutions is a reliable sign that a bubble situation is impossible. 

The Dangers Of Compound Interest

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Paul Collins, writing in Lapham's Quarterly, takes a fascinating dive into the intriguing history of trusts and estates meant to last for centuries:

The notion of a “Methuselah” trust has a long history—and as with many peculiar notions, Benjamin Franklin got there first. Upon his death in 1790, Franklin’s will contained a peculiar codicil setting aside £1,000 (about $4,550) each for the cities of Boston and Philadelphia to provide loans for apprentices to start their businesses. The money was to be invested at compound interest for one hundred years, then a portion of the fund was to be used in Boston for a trade school. For Philadelphia, he recommended using the money for “bringing, by pipes, the water of Wissahickon Creek into the town”—or perhaps “making the Schuylkill completely navigable.” The whole scheme was perfectly suited for a man who once half-jokingly proposed that, in preference “to any ordinary death” he be “immersed in a cask of Madeira wine” for later revival, as he had “a very ardent desire to see and observe the state of America a hundred years hence.”

Franklin’s plans soared beyond a mere century, though. After a portion of the funds were to be paid out for a first set of public works, the remainder was then to grow for another century—until, by Franklin’s estimate, in 1990 both cities would receive a £4,061,000 windfall from their most famous native son.

Apparently, the era was marked by a bit of a craze for schemes by which a wealthy benefactor, through the miracles of compound interest, would wield influence on society long after death. The story of Peter Thellusson is fascinating, and apparently the inspiration behind the Dickensian Jarndyce v. Jarndyce saga in Bleak House:

Thellusson had an impressive fortune of some £600,000 by his death in July 1797, worth about $68 million today. But at the reading of the old financier’s will, his reckless sons received the shock of their lives. “It is my earnest wish and desire,” he lectured them from beyond the grave, “that they will avoid ostentation, vanity, and pompous shew; as that will be the best fortune they can possess.”

It would also be almost the only fortune they’d possess. Most of the estate was to be invested at compound interest until every currently existing heir was dead, whereupon upward of £19 million would cascade onto their distant descendants. It was as if, one legal scholar marveled, Thellusson had “locked his treasure in a mausoleum and flung the key to some distant descendant yet unborn.”

His heirs did not take the news well: one took out a pistol and shot the old man’s portrait.

 A problem that gave rise to the common-law principle of perpetuities