A New York Times article today (via Marginal Revolution) took note of Netflix’s contest to develop a movie recommendation system better than its current Cinematch system. The prize? One million dollars.

It seems that prizes like this are one of the most effective ways to drive innovation. Governments and scientists dislike them because they create uncertainty about the ultimate winner and the timing of payments. Prizes, though, have a long and distinguished history of producing useful ideas and breakthroughs. As the Times article points out:

BACK in the 1700s, prizes were a fairly common way to reward innovation. Most famously, the British Parliament offered the £20,000 longitude prize to anyone who figured out how to pinpoint location on the open sea.

Grants, which have largely replaced prizes as research drivers, have the benefit of providing funds for researchers to purchase the equipment needed for their research. Prizes, though, provide some other benefits:

These are the two essential advantages of prizes. They pay for nothing but performance, and they ensure that anyone with a good idea — not just the usual experts — can take a crack at a tough problem. Much to the horror of the leading astronomers of the day, a clockmaker ultimately claimed the longitude prize.

Although Netflix expected little quick progress (the prize was announced in October) on the algorithm contest, machine learning experts quickly jumped in and have been at it ever since. The winner must produce a 10% improvement over the current algorithm and contestants are currently up to 6.75% (Netflix maintains a leader board).

This contest notion fits right in with the current open source and user generated content trends. The idea that anyone can enter is a key aspect of the whole thing. A contest among a company’s small R&D team won’t produce the same kind of results. It’s not clear how large the universe of contestants must be and how large the prize must be to make a contest like this truly effective but common sense suggests that effectiveness increases with the size of both. Many companies offer bonuses for good ideas, but I think that’s different and less effective. The type of Netflix prize described here sets out a clear problem and has clear criteria for winning. While a good prize takes the form of “If A (solve the problem), then B (earn the prize),” corporate innovation bonus schemes often take the form of “If A, and if A2, then some level of B.” A prize works best for specific problems, although it could be adapted for specific outcomes (e.g. a new product reaching $20mm in sales 2 years after launch). The less specificity, however, the less incentive.

Prizes do seem to be making a comeback, however, as evidenced by the Millenium Prizes, the X-Prize Foundation, and NASA’s Centennial Challenges.

Talk to any Wal-Mart vendor about RFID tags, and his eyes will start to dart around the room, his feet will shuffle, and he’ll say “uh” a lot. He’s either nervous about how to meet Wal-Mart’s upcoming RFID requirements, or he’s pretended it will go away and you’ve just reminded him that it won’t. For some people, however, RFID tags are fun.

Today’s New York Times published an article about billboards that give Mini Cooper owners personalized messages as they drive by. The enabling mechanism for these messages is an RFID tag in the driver’s key fob. From the article:

The boards, which usually carry typical advertising, are programmed to identify approaching Mini drivers through a coded signal from a radio chip embedded in their key fob. The messages are personal, based on questionnaires that owners filled out: ‘Mary, moving at the speed of justice,’ if Mary is a lawyer, or ‘Mike, the special of the day is speed,’ if Mike is a chef.

Of course, this raises privacy concerns, but,

‘There’s no piece of this that’s invasive,’ said Trudy Hardy, manager of Mini’s marketing department. ‘It’s a completely voluntary program, and there is zero confidential information in the fob.’

This is a fun use of RFID technology and it gets us closer to the day when we all do the “Minority Report Walk” for real (remember Tom Cruise walking down the street as signs called to him by name and projected his image?). Even more fun are billboards that display your own message when you drive by (in your Mini, of course). This inventive bit of loyalty building was covered earlier by engadget:

Users can select a custom message to be encoded on their RFID chip, and when they cruise near an overhanging MINI billboard, their particular message lights up for the world (or at least nearby motorists) to see.

Every fun use of RFID technology that gets consumers to willingly carry a little homing beacon around, makes it that much easier when the time comes to convince them that it’s really in their best interest to beam their presence around a store so they can receive special offers tailored just for them, and so signs can present ads for their favorite retailer that just opened a new store around the corner. There will always be privacy concerns, but that’s why innovation is so important. Nobody will carry a RFID tag around just because you want them to, they’ll carry one around when it helps them get something they want.

When I last visited a vendor in China, we oohed and aahed over a Stratsys rapid protoyping machine, or fabricator, that happened to be sitting in a corner of the conference room we met in. It was a large machine, about 6′ x 4′ x 3′ and caught our attention when we saw a small object it produced. It was a threaded shaft, with a bolt type cap on both ends. In the middle, threaded onto the shaft, was a nut. The object was all one piece so we puzzled over how exactly the machine created it since it seemed as though one of the bolt caps would have to be removed to screw on the nut. These devices are also referred to as 3-D printers, and that gives you a better idea of how they actually work. You feed in blueprints and out comes the object. It was immediately clear how useful this machine could be since a common source of problems communicating with Chinese vendors is the Americans’ inability to realize that the vendor’s frame of reference is a different culture, while the Chinese tend to take every single instruction literally. The ability to make a prototype quickly, cheaply, and accurately would avoid a lot of problems. In essence, you could email actual products. I don’t recall exactly how much the prototyper cost, but I was left thinking it was around $1mm.

Earlier this month, New Scientist magazine had a story about a kit for a desktop fabricator, or fabber. The instructions and software necessary to build the device are available free from the Fab@Home project at Cornell University. The kit can be assembled for around $2,400 and is all open source. Hod Lipson of Fab@Home said, “We think it’s a similar story to computers. Mainframes had existed for years, but personal computing only took off in the late seventies.” Referring to how the Altair 8800 spurred the development of the personal computer, he said, “We hope Fab@Home can do the same for rapid prototyping.”

We talk a lot about user generated content and how the “new creatives” are expressing themselves through blogs, podcasting, and videos. In short order we may see the same revolution occur with physical objects. When people can design and produce their own objects, from toys to jewelry, email them to friends and offer them for sale online, we’ll have moved into a new creative generation. Opportunities will be created to “sell picks to the miners.” Businesses could sell software for particularly sophisticated projects, special materials, or marketing services to the new entrepreneurs. Manufacturers could find their products reverse engineered and improved with the replacement or addition of parts. The usual legal issues will follow as well. Can I fabricate a patented item on my desktop fabber? If it’s for my own personal use? If it’s for the use of my family too? What about a few friends as well?

(Not quite as convenient as a desktop fabber, but still pretty convenient, is eMachineShop.com, an online machine shop. eMachineShop allows you to “instantly design, price and order your custom parts online!” )

[Update: See comment for an even cheaper fabber.]

It’s dark. It’s insidious. It’s a conspiracy. It’s fostering anarchy. And it’s just plain cool. It’s the Graffiti Research Lab. In it’s own words the lab is, “Dedicated to outfitting graffiti artists with open source technologies for urban communication.” Yeah, ok, they’re talking about graffiti here, but sometimes the way you say it makes it so much more..uh…meaningful. These guys have some pretty neat things going on, starting with LED throwies. “A Throwie consists of a lithium battery, a 10mm diffused LED and a rare-earth magnet taped together. Throw it up high and in quantity to impress your friends and city officials.” Watch the video here (at the end the whole thing becomes a community event).

The point here is that this is high-tech graffiti. High-tech not just with regard to the medium, but with regard to the organization, the reach, and the purpose. It moves beyond running along the railroad tracks with spraypaint (although it includes that too). It moves beyond spraypaint because traditional graffiti has been mainstreamed. It’s art. We need online calendars to keep up with the graffiti shows. It’s hard to be part of the mysterious underworld when you can’t be late for the opening of your show at the Whitney Museum. GRL is bringing back that mystery and lawlessness, only dressed in a new du rag with a silicon gold cap.With graffiti, and its stylistic cousins, comic and tattoo art, all but mainstreamed, I’m a bit surprised it hasn’t found it’s way into more products, particularly social expression products. You can write on a wall in Facebook, but why can’t you tag it? What about greeting cards and wrapping paper using graffiti and tattoo designs? Notebook covers? Mini-fridges? Dog crates? Posters?

We see more of comics. A recent story in the New York Times tells of comic strip collectors and reprints of both famous and obscure strips. In March, the movie “300” will be out. It’s based on a graphic novel (and loosely on the Battle of Thermopylae). And, of course, the ever present art galleries to show comic book art.

There’s a lot of inspiration out there, for those who want it.

“Tell a story.” That seems to be the marketing advice du jour, and is usually very effective. There are times, however, when it misses the mark, and I was reminded of that last night watching the State of the Union.

The State of the Union speech, and the Response to the State of the Union (a ridiculous notion if ever there was one), are an exercise in marketing communications. The President has programs to sell to the nation and Congress, and the opposition has a different view to sell. “Tell a story” advice seems perfectly suited to these two speeches, and both President Bush and Senator Webb took the advice. Why was it, then, that I dreaded the moment when the President would start to tell the stories of the “citizen heroes” in the gallery? Was I the only one who cringed when Senator Webb pulled out the photo of his father? The speakers were telling stories, but they just didn’t work. Why?

The answer, I think, is that the stories were too specific; too anecdotal. It’s pretty clear that a politician can find an example or two to “prove” just about any point he wants to make. Doing so in a speech simply confirms that the speaker fits the politician stereotype and becomes embarrassing, not probative. A story I would want to hear would be broader and more extensible. Don’t tell me about a woman who started a $200mm company, tell me about a entrepreneurship program that helped 50 laid off workers start their own companies. Don’t tell me about a student from an inner city school who went on to college, tell me about an education program that enabled hundreds of inner city students to graduate from college.

One last point should be obvious - if you’re going to tell a story, tell one that proves your point. In his Response last night, drawing a parallel to the War in Iraq, Senator Webb told the story of President Eisenhower, who entered office pledging to end the Korean War and soon did so. In telling the story, however, the Senator seemed oblivious to the fact that North Korea, which was left intact by the Korean War armistice, is now one of the major sources of instability in the world. Stories can be very powerful, but only when they support your message..

Blinking 12:00. You know what I’m referring to, don’t you? Yes, your parents’ VCR. You know what it’s a metaphor for too, right? Devices too complicated to use properly. In some businesses, as the feature set of a new product begins to grow, someone will remind the design group of the Blinking 12:00, there will be some discussion of of how the consumer is really after simplicity, and the duly chastened group will pare the product down.

It turns out that we don’t want simple products after all. In a recent article posted to his Web site, Don Norman describes a complex $250 toaster and Korean SUVs with a forest of controls on their steering wheels. He asks,

Why such expensive toasters? Why all the buttons and controls on steering wheels and rear-view mirrors? Because they appear to add features that people want to have. They make a difference at the time of sale, which is when it matters most.

Why is this? Why do we deliberately build things that confuse the people who use them?

Answer: Because the people want the features. Because simplicity is a myth whose time has past [sic], if it ever existed.

He goes on to describe how people will believe that a product that looks more complex - a lot of buttons, knobs, and levers - will be perceived to be better than a more powerful, simple version, even if the power of the simple version is explained to the consumer. While the same consumer may curse the difficulty of use of the product after purchase, it’s too late, he owns it now. This means that even fully automated products need some controls to be desirable. (Joel Spolsky has the software take on this.)

The design challenge then, becomes one of creating powerful products, with obvious features, yet are easy to use. That’s a pretty tall order, but some products do seem to be moving in that direction. Think of digital cameras. When I bought my digital camera, I read the manual, looked through the on-screen menu, fiddled with the f-stop and shutter speed, then promptly dialed up “Auto,” and have rarely changed it since. Unfortunately that auto setting isn’t the best for the action shots I usually take, but it’s really just too complicated for me to figure out what is, so….

We seem to hear about, and experience, the transparency of the internet every day. We read blogs critical of products and companies, check price comparison sites before purchases, review data on corporate political contributions, and choose hotels based on guest reviews. If a picture is worth a thousand words, a slide show is worth ten thousand, and Influxinsights just put me onto ten thousand that a couple of retailers would prefer not to exist. After a trip to Kohl’s in one case, and Wal-Mart in another, two would-be customers decided the condition of the stores was so horrendous as to deserve a public dressing-down. They each posted pictures, and some of these companies’ brand equity that was carefully built up over the course of years was chipped away.

While a negative blog post about either one of these two stores could have been damaging, pictures had a much greater impact. These episodes prove that there is no such thing as “an isolated incident.” Of course, it’s hard to imagine that either store lost business over these postings, but I have no doubt that some Kohl’s and Wal-Mart employees lost sleep (at the very least). On the other hand, imagine if these pictures were of a product caught failing or malfunctioning - it would be devastating ( e.g. the Kryptonite lock). All sorts of companies are subject to complaints and exposés all the time, but with every customer walking around with a camera in her pocket, the margin for error is now a lot smaller.

Last Sunday I went to the movies to see Pan’s Labyrinth. It was a matinee and I hoped that the theater would be relatively uncrowded so that I could quickly buy some food and find a good seat. After buying my ticket at the outside kiosk I walked through the door to a great disappointment - the lobby was dirty and only one of the eight snack bar stations was open, which created a long line for food. Man, could I have used a Living Room Theater!

Via PSFK I see that Living Room Theaters has just opened in Portland. As the website describes it:

Six intimate Living Room® Theaters. Exclusive high-definition digital movie projection. Attentive in-theater service right up until the film begins. Plush recliners, private tables and chairs. Sleek café. Cool bar. Warm fires. Fast Wi-Fi. Cinema that caters to all your senses.

Sounds pretty nifty to me. Plenty of people in Portland have complained about the price ($13 and $9 for a matinee) and said they could go elsewhere to see more popular films (LRT shows artsy, independent films). I guess prices are lower in Portland because that doesn’t sound like that much to me. This criticism misses the point, however. Upscale services like this aren’t about a cost benefit analysis, they’re about luxury and status. It turns out that there is another upscale theater nearby in Vancouver called Cinetopia, which is over a year old. Apparently there is a market.

These theaters are just one more sign of the growing luxury trend. Exclusivity available to the masses. Like so many industries, movie theaters are going through major change. Blockbuster, Netflix, downloadable movies, and digital movies which require capital investment are all changing that business. I don’t know if Living Room Theaters and Cinetopia will survive, and if they don’t it could be for reasons other than missing a trend (i.e. poor location, mispricing, poor selection, etc.), but it may be that in the future the only out-of-home theaters will be high-end. It’s hard to say, but for now, it continues to be difficult to overestimate consumers’ willingness to pay up for luxury goods.

Monday’s New York Times story on the ubiquity of advertising ignited some discussion about the relative merits and demerits of ads everywhere, all the time. Many writers lamented the loss of blank space while others decried the crass commercialization of Everything. I’m a little more sanguine, however.

Early in the Times article, Linda Kaplan Thaler, chief executive at the Kaplan Thaler Group, a New York ad agency, is quoted as saying, “Ubiquity is the new exclusivity.” This is one of the article’s key statements about this trend. The statement itself reminds us that the trend will one day be replaced. The fact that we are reading an article about it in a major daily makes us believe that day will come sooner rather than later. In fact, one suspects that Ubiquity is now, well, ubiquitous.

This ubiquity of ads, though, has a meritorious effect - innovation. It takes great ads to break through the clutter and it’s the existence of great ads that convinces consumers to allow the clutter. Any consumer backlash is quickly felt. The “Got Milk?” signs that smelled like chocolate chip cookies in San Francisco bus stops caused complaints and were quickly “de-smelled.” Longer in coming but much more draconian is the ban on outdoor advertising that began on January 1st in Sao Paulo, Brazil. Despite the ultimate outcome, I do believe the smelly “Got Milk?” signs were a good idea. They went a bit too far for some people, but I’ll bet there were more people telling friends they’ve got to visit a bus stop to smell the sign than there were complaints. (Advocates for those sensitive to scents ultimately did them in. It is San Francisco after all.)

One of the great ads mentioned in the article was “an interactive floor display for McDonald’s last year [that] showed the head of a teenage boy with small Big Mac burgers flying past; when people stepped on the ad, the burgers bounced away from their feet.” An Adidas sign “looked like a static picture of a sneaker until someone walked past it, triggering a motion sensor that sent a spray of miniature sneakers flying.” People liked these ads, were amused by them, and were probably glad they saw them. Although another innovation, the electronic billboard, is said to make a community “look like Las Vegas,” if programmed to be season, time of day, event, or even weather specific, it will be a great improvement over the static pasted graphics now on display. As John McNeil, executive creative director at McCann said, “If you do it the right way, you actually win points.”

As another example, look at product placement, which was also demonized when it first became popular. The fact is, it enhances a user’s experience, whether it’s watching television or playing a video game. A NASCAR video game with actual products on the cars is much more realistic than one with blurred logos, and we always laughed at how TV characters never drank a recognizable brand of soda.

Interestingly enough, even the ad opponents mentioned in the article seemed to accept the ads, they just wanted advertisers to pay more. The New York and New Jersey Port Authority canceled plans for Geico to place ads at toll booths at the George Washington Bridge when politicians and preservationists complained. The preservationists may have been high-minded about it, but others (only the politicians?) felt the space was sold too cheaply. In New York City last month Chase and Commerce banks were told by the city to turn off ads projected onto the sidewalk outside some branches. I have to wonder if it was because no fees were paid for the sidewalk space. As George Bernard Shaw said,”…now we’re haggling about the price.”

Ultimately this trend will also respect varying community mores, as the Sao Paulo example shows. Commenting on the Adidas sign, a women from the state of Washington said the sign was “cool,” but “I wouldn’t want to see it back in Spokane.”

Finally, one ad agency president said that this type of out-of-home advertising is “one of the last mass mediums.” Yes, and perhaps that explains why it’s so popular among ad agencies - like nearly all mass media advertising, a good creative ad can make a big splash, yet the ROI really can’t be measured. The article ends with Perry Ellis dubbing a campaign which placed ads on shirt boxes and dry cleaning bags a success because laundries continue to call looking for more after the campaign ended. Since the bags and boxes were given to the laundries for free, that tells me more about the cleaners desire for free bags than the success of the campaign.

In case you needed any more proof that Americans are pet crazy, the FDA has approved a weight-loss drug for dogs. (I really wish the FDA would spend a little more time approving human drugs rather than dog drugs.) It’s been obvious for some time to even the most casual observer that pets are a big business in the US. Owners are willing to spend more and more money spoiling and anthropomorphizing their dogs and cats and no end is in sight. It can be hard to find a business application for some trends, but here it seems pretty simple - make lots of stuff about pets, for pets, and for their owners.

This obesity “epidemic” in dogs seems to pretty closely mirror the same “epidemic” among humans. This shouldn’t be surprising since a dog’s behavior is determined by its owner’s. I wouldn’t be surprised to find that overweight dogs frequently have overweight owners. Then again, as someone who was drafted by the audience for a dog/owner lookalike contest, perhaps I should tread carefully here!

Through Marginal Revolution comes this NYT story about on-site company health clinics. Years ago, when I worked for Scott Paper, we had a company clinic and I was told that when Al Dunlap came on the scene (I left shortly before) he took one look at it, declared that he wasn’t running a hospital, and fired everyone involved. That clinic was a remnant of days gone by and Dunlap was following the conventional wisdom of the day when he shut it down. There are new forces at work now, however. As the Times says:

Today a new wave of clinics is opening, driven largely by a motive that was less of a factor in the past: employers’ desires to reduce their health insurance premiums by taking care of workers before they need to see outside doctors. More than 100 of the nation’s 1,000 largest employers now offer on-site primary care or preventive health services — a number forecast to exceed 250 by the end of the year, according to David Beech, a health benefits consultant.

These are full out clinics with some even maintaining a small pharmacy.

That clinic at Scott was awfully convenient. I didn’t have to worry about making an appointment, taking time off to see a doctor, and then trying to remember to get a prescription filled. I actually went to see a doctor when I was sick, and received treatment. Now, I see a doctor perhaps once every two years. I know that my self diagnosis is correct 95% of the time and there is no reason to miss work to have it confirmed. I try to get the doctor to call in a prescription if I bother calling at all. As a result, when I’m sick, I stay sick longer and am more likely to infect my co-workers. What’s worse, though, is that I gamble that I know what’s wrong. I gamble that my current illness doesn’t fall into the 5% that I’ll misdiagnose and I further gamble that if it is misdiagnosed it isn’t serious. If I had a clinic available to me a short indoor walk away, I would rarely take those chances.

So, I think this is a good deal for employees, but what about employers? Some benefits to an employer seem obvious - less missed time for sickness or doctor’s appointments, a healthier workforce, and fewer small health problems growing into large health problems due to a lack of treatment. The Times article also provides claims that companies can save some serious money with clinics. Nonetheless, the argument that these companies aren’t in business to “run hospitals” still seems powerful. The solution, though, appears obvious - outsource. Will that cut into savings? Sure, assuming the company would otherwise be a competent health clinic administrator (a not inconsequential assumption). The article names some firms providing this service in what looks like a high potential market. Done right, employees save time and hassle, employers get a healthier workforce, and clinic operators get a steady, well defined customer base.

Through Micro Persuasion I saw that IBM is helping Sears launch a store in Second Life, and has already been working with Circuit City. Like everyone else writing online I applaud these retailers for opening stores in Second Life and expending some real effort to explore where the future of retailing might be headed. The real game, though, is Life 1.5 (if “First Life” is real life and Second Life is a virtual world, I guess shopping online leaves us with a foot in each - Life 1.5).

As commentators talk about the need for Second Life to get easier to use so more people can shop in virtual stores, I think developers should focus on creating virtual stores outside of Second Life. Sure, the framework already exists in Second Life to create these stores so it only makes sense to start there, but the real goal should be to create stores that any visitor to a company’s Web site can use. That would mean no download required, by the way. If I were Linden Lab I would be working on a standalone virtual store app that I could sell to retailers for their own Web sites.

Second Life might eventually become the online equivalent of Wichita, where companies go to test market their products before unleashing them on the world. Second Life stores could be integrated with a retailer’s online virtual store so that Second Life citizens could bump into their neighbor, who is not a Second Lifer, in Sears. Sears, meanwhile, could open sections of its store just for Second Lifers with special deals and products. It could have regional (real world geography) virtual stores as well.

Linden may very well be working on this right now, but it looks like opportunity to me. Not everyone wants to live a Second Life, but (almost) everyone wants to shop in an easy to enter virtual store.

Just when you think Hollywood is hopelessly anti-capitalist (artistically, if not in practice), comes this (through A&L Daily). It turns out that Angelina Jolie is an Ayn Rand fan and is lining herself up to play Dagny Taggart in a film version of Atlas Shrugged. The International Herald Tribune reports:

…Rand’s grand polemical novel keeps selling, and her admirers in Hollywood keep trying, and the latest effort involves a lineup of heavy hitters, starting with Angelina Jolie.

Randall Wallace, who wrote “Braveheart” and “We Were Soldiers,” is working on compressing the nearly 1,200-page book into a conventional two- hour screenplay. Howard and Karen Baldwin, the husband-and-wife producers of “Ray,” are overseeing the project, and Lions Gate Entertainment is footing the bill.

Others have tried to bring the book alive on both the big and small screens, but have never quite been able to pull it off. In the IHT’s words:

Until now, at least, no one in Hollywood has figured out a formula that promises both to sell popcorn and to do justice to the original text, let alone to the philosophy that it hammers home endlessly, at times in lengthy speeches. (The final one is 60 pages long.) But Baldwin said he believed that Wallace and the rest of their team were up to the task. “We all believe in the book, and will be true to the book,” he said.

While this news may be interesting to Ayn Rand fans and to some in the movie industry, why should anyone else care? Well, although this movie is a long way from production, the mere fact that it is able to pick up some momentum seems counter to many trends posited by today’s conventional wisdom. Rand’s heroes celebrate industry and cities while we worry about deforestation and global warming. Rand celebrates egoism while the press decries the Bush Administration’s alleged egotism (the two concepts are often confused). Rand writes of capitalism, individual liberty, and free thought while we watch industries beg for protection from world trade and hear politicians speak of the Holy Grail of bi-partisanship (known as decisions by committee in the business world). Is change in the air?

It’s way too early to say, of course. If successful, this movie won’t be out for years and the world will be a different place by then. On the other hand, perhaps this is an early warning sign of a future public mood shift away from the “nanny state” and toward more self reliance and personal responsibility. Judging by actions at the micro level, this certainly seems plausible. Small businesses (or entrepreneurs) have been lauded for years now and they are enabled by capitalism and a healthy sense of personal responsibility. We’re frequently told how today’s youth refuse to rely on corporations to manage their professional lives and define their self worth. That’s an attitude that even John Galt could love!

It will be fun to watch the progress of this film and ultimately see how faithful it is to Rand’s book. In the end though, perhaps it’s best to remember one thing… it’s just a movie!

(Reason picked up on this here.)

Facebook yesterday announced that it has launched Facebook Mobile. Facebook Mobile will allow users to surf Facebook, upload notes and photos, send and receive Facebook messages, wall posts and pokes using text messages, update their status, and search profiles.

Last summer when Facebook launched its News Feed service, it faced a user rebellion . Through the use of a constantly updated listing, the News Feed instantaneously alerted users to changes “friends” made on their pages. Suddenly it was clear just what information was private and just what was public. Gone were the days when you could quietly note a breakup with your boyfriend or girlfriend knowing that most of your friends won’t look at your status for some time, but that particular new friend who looks will see you’re available. Now, the moment you change your status, “Sally is no longer in a relationship with Tommy” hits your friends’ screens. Facebook allowed users to opt out by item, the rebels calmed down, and now I would guess that while still finding it a bit creepy, most users like the News Feed feature. Now you can get the News Feed on your cell phone.

The announcement doesn’t specifically mention the News Feed by phone, but if you can see your page you can see the feed. How about a feature with which you can choose what kind of status updates you have texted to your phone? You could conceivably break up with your boyfriend at his dorm and text the change in status to your Facebook account as you walk out the door. Meanwhile, “that guy” from your philosophy class receives a text message with your status change as he leaves the dining hall and diverts to your dorm. You meet along the way and before you even make it home your love life has been re-charged!

Facebook has some big competitors in this space, starting with MySpace. In the offline world, however, Facebook is at least partly competing in a market known as social expression. Hallmark and American Greetings are the most well known players in that market and I wonder if they see Facebook and MySpace as competitors. Why send a birthday card when you can post “Happy Birthday!” on your friend’s wall? And now it gets sent to his phone so you know he’ll get it right away. A “Congratulations!” card? A post is much more immediate plus it has the side effect of notifying everyone else that your friend did something special. That’s social expression! American Greetings has at least some understanding of the nature of the battle as evidenced by its AG Interactive division.

Card companies generally watch consumers mature into their prime demographic and become card buyers. It’s not clear, however, that today’s crop of young adults will ever become card buyers. The market is social expression, not cards, and there are just too many other ways to express yourself.

The House passed a minimum wage increase today amid the usual rhetoric of salvation from the Democrats and doom from the Republicans. As an issue, the minimum wage seems easy to understand - all workers make $7.25 per hour (the new minimum) or more. The reality, of course, is not so simple.

Minimum wage arguments are economic in nature but the issue is one that splits economists. A November survey of economists by Robert Whaples found that 47% believe it should be eliminated while 38% favor increasing it. The rest would leave it alone (14%) or decrease it (1%).

The rhetoric is quite fanciful as reporters and politicians alike speak of giving low wage earners a “raise,” as if the same people have populated that category for ten years. Of course, one of the characteristics of the US economy is the fact that people tend not to stay in the low wage category for long. The AP story also notes a statistic from the “Economic Policy Institute, a liberal leaning group,” which pegs the number of people who would benefit from an increase in the minimum wage at 5.6mm. That is a number that is difficult to find in the BLS table of minimum wage workers. The real number from 2005 is 1.8mm. Furthermore, of that 1.8mm, only 479k actually made the exact minimum wage. As Alan Reynolds points out in a January article, it’s difficult to understand how a minimum wage hike will raise the pay of people who were never making the old minimum wage to begin with! Reynolds notes that:

Any employer with an annual income below $500,000 is free to ignore the minimum wage [and it] does not apply to workers on small farms or at seasonal amusement or recreational facilities. It does not apply to newspaper deliverers, companions for the elderly, outside salesmen, U.S. seamen on foreign-flagged ships, switchboard operators or part-time babysitters. Such handy loopholes aside, there is sure to be some outright evasion of any minimum-wage law, since it is impossible to monitor all the casual day labor and home care going on.

Reynolds goes on to say that “Whenever the minimum wage has been increased, the most obvious result was an increase in the number earning less than the minimum.” In 1997 when the last increase occurred, workers earning the minimum doubled from 1.5mm to 3mm. The whole debate then, appears to be about a pay increase for 479,000 workers, out of a total of about 142mm workers. Well, that’s not quite true since there is an unknown number of workers earning over $5.15 now, but less than $7.25. Of those two groups, some certainly do receive a pay raise while some lose their job or are forced into part-time work (remember the 1.5mm jump from 1997). Most troubling, however, is another point made by Reynolds:

Those displaced from job opportunities by a higher minimum wage have to abandon the job search or they have to compete in larger numbers for scarce jobs that pay less than the minimum wage. Such intensified rivalry must push the lowest wages even lower.

So minimum wage increases are far from simple. It’s tempting just to ignore the whole thing because it only affects a very small group, some of whom are benefited and some of whom are hurt. Sounds like a wash, right? Well maybe, but it does have a bit of a different effect than most government redistribution policies. Usually government takes a little bit away from each member of a large group and bestows a lot on each member of a small group. Here, government takes a lot from a small group (total or partial job loss) for the relatively smaller benefit of a larger group (higher wages). It makes one wonder just what the characteristics of the winning group are that makes them favored by government.