Books – Page 105 – artdiamondblog.com

Google Used Auction Model to Allocate Internal Resources

(p. 202) Google’s chief economist, Hal Varian, would later explain how it worked when new data centers open: “We’ll build a nice new data center and say, ‘Hey, Google Docs, would you move your machines over here?’ And they say, ‘Sure, next month.’ Because nobody wants to go through the disruption of shifting. So I suggested we run an auction similar to what airlines do when they oversell a plane– they keep offering bigger vouchers until enough customers are willing to give up their seats. In our case, we offer more machines in exchange for moving. One group might do it for fifty new ones, another for a hundred, and another won’t move unless we give them three hundred. So we give them to the lowest bidder– they get their extra capacity, and we get computation shifted to the new data center.”
Google eventually devised an elaborate auction model for divvying up existing resources. In a paper entitled “Using a Market Economy to Provision Computer Resources Across Planet-wide Clusters,” a group of Google engineers, along with a Stanford professor of management science and engineering, reported a project that essentially made Google’s
computational resources into a silicon Wall Street. Supply and demand worked here not to fix stock prices but to place a value on resources. The system not only allowed projects at Google to get fair access to storage and computational cycles but identified shortages in computers, storage, and bandwidth. Instead of the Vickery auction used by AdWords, the system used an “ascending clock auction.” At the beginning, the current price of each resource would be displayed, and Google engineers in competing projects could claim them at that price. The ideal outcome would ensure sufficient resources for everyone, in which case the auction stopped. Otherwise, the automated auctioneer would raise the prices for the next “time slot,” and (p. 203) remaining competitors for those resources had to decide whether to bid higher. And so on, until the engineers not willing to stake their budgets on the most contested resources dropped out. “Hence,” write the paper’s authors, “the auction allows users to ‘discover’ prices in which all users pay/ receive payment in proportion to uniform resource prices.”

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

Sound Economic Policies Benefit Africa More than Sachs’ Profligate Interventions

Source of book image: http://images.huffingtonpost.com/2013-09-02-TheIdealist.jpg

(p. A19) Nina Munk’s new book, “The Idealist,” is about the well-known economist Jeffrey Sachs and his “quest to end poverty,” as the subtitle puts it.
. . .
The quest began in 2005, when Sachs, who directs the Earth Institute at Columbia University, started an ambitious program called the Millennium Villages Project. He and his team chose a handful of sub-Saharan African villages, where they imposed a series of “interventions” in such areas as agriculture, health and education.
. . .
With almost every intervention, she documents the chasm that exists between the villagers and those running the project. At one point, the Millennium Villages Project persuades the farmers in Ruhiira to grow maize instead of their traditional crop, called matoke. “The results were fantastic,” she reports, a bumper crop. Except there were no buyers for the maize, so some of it wound up being eaten by rats. In Dertu, Sachs’s staff decided it should set up a livestock market. It flopped. Efforts to convince villagers to start small businesses largely failed. The critical problem of getting clean water to the villages was enormously expensive.
Ultimately, reports Munk, Dertu was scaled back by the Millennium Villages Project while Ruhiira is today lauded as one of the project’s most successful villages. “There is no question the lives of people in Ruhiira have been improved,” Munk told me. “I’ve seen it.” But she is dubious about what that means — other than the fact that if you pump millions of dollars into an isolated African village, the villagers’ lives will be better.
. . .
That things in Africa are getting better is undeniable. Child mortality is down, as is the number of people living in extreme poverty. In his book, “Emerging Africa,” Steve Radelet, the former chief economist for the United States Agency for International Development, gives credit to such factors as more democratic governments, a new class of civil servants and businesspeople, and sounder economic policies. Sachs wants us to believe that the Millennium Villages Project has also helped show the way.
“The Idealist” makes it tough to believe it’s the latter.

For the full review, see:
JOE NOCERA. “Fighting Poverty, and Critics.” The New York Times (Tues., September 3, 2013): A19.
(Note: ellipses added.)
(Note: the online version of the review has the date September 2, 2013.)

The book under review is:
Munk, Nina. The Idealist: Jeffrey Sachs and the Quest to End Poverty. New York: Doubleday, 2013.

The Radelet book mentioned is:
Radelet, Steven. Emerging Africa: How 17 Countries Are Leading the Way. pb ed. Washington, D.C.: Center for Global Development, 2010.

After 25 Years of Government Harassment, A&P Was Finally Allowed to Lower Prices for Consumers

The two main types of creative destruction are: 1.) new products and 2.) process innovations. Much has been written about the new product type; much less about the process innovation type. Marc Levinson has written two very useful books on process innovations that are important exceptions. The first is The Box and the second is The Great A&P.

(p. A13) A prosecutor in Franklin Roosevelt’s administration called it a “giant blood sucker.” A federal judge in Woodrow Wilson’s day deemed it a “monopolist,” and another, during Harry Truman’s presidency, convicted it of violating antitrust law. The federal government investigated it almost continuously for a quarter-century, and more than half the states tried to tax it out of business. For its strategy of selling groceries cheaply, the Great Atlantic & Pacific Tea Company paid a very heavy price.
. . .
A&P was Wal-Mart long before there was Wal-Mart. Founded around the start of the Civil War, it upset the tradition-encrusted tea trade by selling teas at discount prices by mail and developing the first brand-name tea. A few years later, its tea shops began to stock spices, baking powder and canned goods, making A&P one of the first chain grocers.
Then, in 1912, John A. Hartford, one of the two brothers who had taken over the company from their father, had one of those inspirations that change the course of business. He proposed that the company test a bare-bones format at a tiny store in Jersey City, offering short hours, limited selection and no home delivery, and that it use the cost savings to lower prices. The A&P Economy Store was an instant success. The Great A&P was soon opening one and then two and then three stores per day. By 1920, it had become the largest retailer in the world.
. . .
While shoppers flocked to A&P’s 16,000 stores, small grocers and grocery wholesalers didn’t share their enthusiasm. The anti-chain-store movement dates back at least to 1913, when the American Fair-Trade League pushed for laws against retail price-cutting.
. . .
Thanks in good part to the Hartfords’ tenacity, the restraints on discount retailing began to fade away in the 1950s. Chain-store taxes were gradually repealed, and state laws limiting price competition to protect mom and pop were taken off the books. By 1962, when Wal-Mart, Target, Kmart, and other modern discount formats were born, the pendulum had swung in consumers’ favor.

For the full commentary, see:
MARC LEVINSON. “When Creative Destruction Visited the Mom-and-Pops; The A&P grocery company may be nearing its sell-by date, but a century ago it was a fresh, revolutionary business.” The Wall Street Journal (Sat., Oct. 12, 2013): A13.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Oct. 11, 2013, and had the title “Marc Levinson: When Creative Destruction Visited the Mom-and-Pops; The A&P grocery company may be nearing its sell-by date, but a century ago it was a fresh, revolutionary business.”)

Levinson’s book on A&P is:
Levinson, Marc. The Great A&P and the Struggle for Small Business in America. New York: Hill and Wang, 2011.

Google Had the Most “Massive Parallelized Redundant Computer Network” in the World

(p. 198) . . . by perfecting its software, owning its own fiber, and innovating in conservation techniques, Google was able to run its computers spending only a third of what its competitors paid. “Our true advantage was actually the fact that we had this massive parallelized redundant computer network, probably more than anyone in the world, including governments,” says Jim Reese. “And we realized that maybe it’s not in our best interests to let our competitors know.”

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.
(Note: ellipsis added.)

Goldman I.P.O. Led to Pressure to Grow

Source of book image: http://s.wsj.net/public/resources/images/OB-ZF094_bkrvgo_GV_20131008133334.jpg

(p. B8) Steven G. Mandis, a Ph.D. candidate in sociology at Columbia University, takes a measured, academic approach to the question in a new book, “What Happened to Goldman Sachs,” an examination of the bank’s evolution from an elite private partnership to a vast public corporation — and the effects of that transformation on its culture.

. . .

Mr. Mandis said that the two popular explanations for what might have caused a shift in Goldman’s culture — its 1999 initial public offering and subsequent focus on proprietary trading — were only part of the explanation. Instead, Mr. Mandis deploys a sociological theory called “organizational drift” to explain the company’s evolution.
The essence of his argument is that Goldman came under a variety of pressures that resulted in slow, incremental changes to the firm’s culture and business practices, resulting in the place being much different from what it was in 1979, when the bank’s former co-head, John Whitehead, wrote its much-vaunted business principles.
These changes included the shift to a public company structure, a move that limited Goldman executives’ personal exposure to risk and shifted it to shareholders. The I.P.O. also put pressure on the bank to grow, causing trading to become a more dominant focus. And Goldman’s rapid growth led to more potential for conflicts of interest and not putting clients’ interests first, Mr. Mandis says.

For the full review, see:
PETER LATTMAN. “An Ex-Trader, Now a Sociologist, Looks at the Changes in Goldman.” The New York Times (Tues., October 1, 2013): B8.
(Note: ellipsis added.)
(Note: the online version of the review has the date SEPTEMBER 30, 2013.)

The book under review is:
Mandis, Steven G. What Happened to Goldman Sachs: An Insider’s Story of Organizational Drift and Its Unintended Consequences. Boston, MA: Harvard Business School Publishing, 2013.

“Steven G. Mandis is the author of “What Happened to Goldman Sachs.”” Source of caption and photo: online version of the NYT article quoted and cited above.

Larry Page: “At His Core He Cares about Latency”

(p. 184) Speed had always been an obsession at Google, especially for Larry Page. It was almost instinctual for him. “He’s always measuring everything,” says early Googler Megan Smith. “At his core he cares about latency.” More accurately, he despises latency and is always trying to remove it, like Lady Macbeth washing guilt from her hands. Once Smith was walking down the street with him in Morocco and he suddenly dragged her into a random Internet café with maybe three machines. Immediately, he began timing how long it took web pages to load into a browser there.
Whether due to pathological impatience or a dead-on conviction that speed is chronically underestimated as a factor in successful products, Page had been insisting on faster delivery for everything Google from the beginning. The minimalism of Google’s home page, allowing for lightning-quick (p. 185) loading, was the classic example. But early Google also innovated by storing cached versions of web pages on its own servers, for redundancy and speed.
“Speed is a feature,” says Urs Hölzle. “Speed can drive usage as much as having bells and whistles on your product. People really underappreciate it. Larry is very much on that line.”

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

Puritan Slavery

Source of book image: online version of the WSJ review quoted and cited below.

We are taught in elementary school that the roots of America lie in the religious Puritans and Pilgrims. But I believe that there is something to Russell Shorto’s argument that we under-appreciate the contribution of the secular libertarian Dutch of New Amsterdam. In this continuing debate, it is useful to have an accurate history of all sides.

(p. A11) The great Puritan divine John Winthrop, founder of the Massachusetts Bay Colony, probably wouldn’t make it through Allegra di Bonaventura’s book without suffering a cardiac episode. Set principally in the seaport town of New London, Conn., “For Adam’s Sake” provides an astonishing worm’s-eye view of Winthrop’s beloved Bible Commonwealth in the throes of its ghastly unraveling, even as it narrates an intimate history of racial slavery in early New England through the entwined lives of five families (the Winthrops among them).

Many readers will be surprised to learn that slavery flourished in colonial New England–albeit on a smaller scale than on the plantations of the antebellum South. And they might be forgiven their incredulity: “New Englanders in the nineteenth century,” Ms. di Bonaventura writes, “studiously erased and omitted inconvenient and unsavory aspects of their region’s collective past in favor of a more heroic and wholesome narrative of their own history.” Such acts of moral cleansing all but obscured the lives of enslaved New Englanders well into our own time.

For the full review, see:
KIRK DAVIS SWINEHART. “BOOKSHELF; Not Your Parents’ Puritans; Slavery flourished in colonial New England. Yet the Puritans’ erasure of its signs have obscured their crimes well into our own time.” The Wall Street Journal (Mon., Aug. 5, 2013): A11.
(Note: the online version of the review has the date Aug. 4, 2013.)

The book under review is:
di Bonaventura, Allegra. For Adam’s Sake: A Family Saga in Colonial New England. New York: Liveright Publishing Corporation, 2013.

The relevant book by Russell Shorto is:
Shorto, Russell. The Island at the Center of the World: The Epic Story of Dutch Manhattan and the Forgotten Colony That Shaped America. New York: Doubleday, 2004.

Push the Flywheel, in Business and Life

Jim Collins makes wonderful use of the flywheel analogy in his Good to Great book. His point is that many achievements in business require long, gradual work to build to a major achievement that finally gets noticed by the business press and the general public. The business press often assumes that the success is overnight, when it is in fact long-building.

(p. C14) Flywheels – weighted wheels used for absorbing, storing and releasing energy – get used in everything from pottery wheels to car engines. Lately, they have showed up in corporate spin.

“Our more than 19,000 store global footprint, our fast-growing CPG presence and our best-in-class digital, card, loyalty and mobile capabilities are creating a ‘flywheel’ effect elevating the relevancy of all things Starbucks, and driving profitability,” CEO Howard Schultz said in a statement accompanying quarterly earnings last month.
“So we have the flywheel spinning in the right direction because it is spinning one way and letting us generate these margins, contribution margins,” said Overstock.com CEO Patrick Byrne last month. “And so now we can give some of that back and that makes it easier to get it spinning faster.”
“We are at the one-mile market (sic) in a marathon,” commented Symantec CEO Steve Bennett in an earnings call with analysts last week, “and the flywheel is just starting to spin.”

For the full story, see:
JUSTIN LAHART. “Overheard.” The Wall Street Journal (Weds., Aug 6, 2013): C14.
(Note: the online version of the story has the date Aug 6, 2013, and had the title “Ride a Painted Pony, Let the Spinning Wheel Fly.” The print version did not identify an author. The versions were slightly different in two or three places–when different, the version quoted above follows the print version.)

The Collins book, mentioned above, is:
Collins, Jim. Good to Great: Why Some Companies Make the Leap… And Others Don’t. New York: HarperCollins Publishers, Inc., 2001.

Google’s Redundant, Fault-Tolerant System Worked with Cheap, Low-Quality, Failure-Prone Equipment

(p. 183) Google was a tough client for Exodus; no company had ever jammed so many servers into so small an area. The typical practice was to put between five and ten servers on a rack; Google managed to get eighty servers on each of its racks. The racks were so closely arranged that it was difficult for a human being to squeeze into the aisle between them. To get an extra rack in, Google had to get Exodus to temporarily remove the side wall of the cage. “The data centers had never worried about how much power and AC went into each cage, because it was never close to being maxed out,” says Reese. “Well, we completely maxed out. It was on an order of magnitude of a small suburban neighborhood,” Reese says. Exodus had to scramble to install heavier circuitry. Its air-conditioning was also overwhelmed, and the colo bought a portable AC truck. They drove the eighteen-wheeler up to the colo, punched three holes in the wall, and pumped cold air into Google’s cage through PVC pipes.
. . .
The key to Google’s efficiency was buying low-quality equipment dirt cheap and applying brainpower to work around the inevitably high failure rate. It was an outgrowth of Google’s earliest days, when Page and Brin had built a server housed by Lego blocks. “Larry and Sergey proposed that we design and build our own servers as cheaply as we can– massive numbers of servers connected to a high-speed network,” says Reese. The conventional wisdom was that an equipment failure should be regarded as, well, a failure. Generally the server failure rate was between 4 and 10 percent. To keep the failures at the lower end of the range, technology companies paid for high-end equipment from Sun Microsystems or EMC. “Our idea was completely opposite,” says Reese. “We’re going to build hundreds and thousands of cheap servers knowing from the get-go that a certain percentage, maybe 10 percent, are going to fail,” says Reese. Google’s first CIO, Douglas Merrill, once noted that the disk drives Google purchased were “poorer quality than you would put into your kid’s computer at home.”
(p. 184) But Google designed around the flaws. “We built capabilities into the software, the hardware, and the network–network– the way we hook them up, the load balancing, and so on– to build in redundancy, to make the system fault-tolerant,” says Reese. The Google File System, written by Jeff Dean and Sanjay Ghemawat, was invaluable in this process: it was designed to manage failure by “sharding” data, distributing it to multiple servers. If Google search called for certain information at one server and didn’t get a reply after a couple of milliseconds, there were two other Google servers that could fulfill the request.

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.
(Note: ellipsis added.)

Gates Did Not See that Gmail’s 2-Gig Storage Would Beat Hotmail

(p. 179) About six months after Gmail came out, Bill Gates visited me at Newsweek‘s New York headquarters to talk about spam. (His message was that within a year it would no longer be a problem. Not exactly a Nostradamus moment.) We met in my editor’s office. The question came up whether free email accounts should be supported by advertising. Gates felt that users were more negative than positive on the issue, but if people wanted it, Microsoft would offer it.
“Have you played with Gmail?” I asked him.
“Oh sure, I play with everything,” he replied. “I play with A-Mail, B-Mail, C-Mail, I play with all of them.”
My editor and I explained that the IT department at Newsweek gave us barely enough storage to hold a few days’ mail, and we both forwarded everything to Gmail so we wouldn’t have to spend our time deciding what to delete. Only a few months after starting this, both of us had consumed more than half of Gmail’s 2-gigabyte free storage space. (Google had already doubled the storage from one gig to two.)
Gates looked stunned, as if this offended him. “How could you need more than a gig?” he asked. “What’ve you got in there? Movies? PowerPoint presentations?”
No, just lots of mail.
He began firing questions. “How many messages are there?” he demanded. “Seriously, I’m trying to understand whether it’s the number of messages or the size of messages.” After doing the math in his head, he came to the conclusion that Google was doing something wrong.
The episode is telling. Gates’s implicit criticism of Gmail was that it was wasteful in its means of storing each email. Despite his currency with cutting-edge technologies, his mentality was anchored in the old paradigm of storage being a commodity that must be conserved. He had written his first programs under a brutal imperative for brevity. And Microsoft’s web-based email service reflected that parsimony.
The young people at Google had no such mental barriers. From the moment their company started, they were thinking in terms of huge numbers. Remember, they named their company after a 100-digit number! Moore’s Law was as much a fact as air for them, so they understood that the expense of the seemingly astounding 2 gigabytes they gave away in 2004 would be negligible only months later. It would take some months for Gates’s minions to catch up and for Microsoft’s Hotmail to dramatically increase storage. (Yahoo Mail also followed suit.)
“That was part of my justification for doing Gmail,” says Paul Buchheit of its ability to make use of Google’s capacious servers for its storage. “When people said that it should be canceled, I told them it’s really the foundation for a lot of other products. It just seemed obvious that the way things were going, all information was going to be online.”

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.
(Note: italics in original.)

Larry Page’s Very Tough Love: “I’d Rather Be Doused with Gasoline and Set on Fire than Use Your Product”

(p. 171) Caribou took forever to develop. Part of the problem was that Larry and Sergey were so invested in the project. They adopted it as their primary email system and would often drop by to give criticisms and suggestions. Buchheit would often take a working prototype to the weekly Google product strategy meeting, where product managers submit their products to a human wind tunnel of executive criticism. Products have been known to die at GPSs; there are stories of teams entering the conference room, exhausted and hopeful after long hours of getting a demo just right, and Page saying, “You’re wasting our time” and ordering the project dismantled. Larry and Sergey liked Caribou too much to kill it but dished out very tough love. At one point Page told the group, “I’d rather be doused with gasoline and set on fire than use your product.”

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.
(Note: italics in original.)