How Much is That Really Worth? The Mother-in-Law’s Guide to Valuation

Dearest Mother-in-Law,
Last year, when you and I went to the One World Observatory, we saw that famous tourist location—the penny crushing machine. We watched a tourist put her penny in the machine and then added in a dollar. The machine then crushed the penny into a medallion that she could take home as a souvenir. Your quite reasonable reaction was, “Why would you pay a dollar to have your own Penny crushed?”
The Penny I Crushed at 1 World Trade
The way you were looking at it was:
  1. Initial valuation: $1.01.
  2. You start with a penny and a dollar.
  3. Then you put a dollar in a machine that crushes the penny.
  4. You get back the crushed penny.
  5. Final valuation: $0.01.
  6. Result: You feel like you’ve wasted a dollar.

But I think the crushed penny is a pretty good value. To understand why, let’s understand the job that the crushed penny is doing. When most people think about products, they think about the product itself, i.e., I’ve taken a penny and gotten a crushed penny. But people don’t buy most products just to own them, they hire products to perform a job. The famous Harvard marketing professor Theodore Levitt used to tell his students, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!”

Clayton Christensen, of Harvard Business School, and Scott Cook, CEO of Intuit, introduce the concept in their article Marketing Malpractice: The Cause and the Cure. I’ve paraphrased some key parts below.

A hypothetical fast-food restaurant is looking to improve sales of its milkshakes. Researchers observed that in the afternoon parents often bought milkshakes, in addition to complete meals, for their children. What job were the parents trying to do? They were exhausted from repeatedly having to say “no” to their kids. They hired milkshakes as an innocuous way to placate their children and feel like loving parents. This was expected and a well known job that milkshakes perform.

However, one researcher was surprised to find that 40% of all milkshakes were purchased in the early morning by customers driving alone in their cars. He found that most bought it to do the job of making their drive to work more interesting and keep them satiated until noon. 

So the milkshake is doing two completely different jobs. With children, the milkshake is a competitor to a toy or candy. However, as an early morning snack, customers may buy a bagel, banana, or donut instead. The key point here is that the milkshake can be hired to do completely different jobs, meaning that it has a very different value depending on the context.

Getting back to my crushed penny. I want it to do the job of a souvenir, providing a physical memento of the trip that the kids can buy and keep. The alternatives are a t-shirt, a stuffed animal, or a postcard. It would be hard to find a souvenir for my boys for cheaper than that.

So I’ve talked to my kids and we agree that the crushed penny is a good souvenir. But how can we make it more valuable than another typical item they might get at the souvenir shop. That’s where the elongated coin album comes in.

The Penny Crusher Album
At the One World Observatory, you asked me why anyone would buy a case for these crushed pennies. “It’s even more useless than the crushed penny!” you insisted. But the album has a wonderful purpose. It lets my boys keep their crushed pennies in a safe place and makes sure they don’t lose them. It turns a crushed penny into a treasured collectible and makes the kids into official crushed penny collectors. Then, when they are deciding between whether they want the crushed penny or an expensive souvenir, we can have a discussion on what we’re likely to keep around longer and value more. The crushed penny and album should do well in that fight.
The Boys Penny Collection (So Far)
I agree with you that crushing a penny for $1 is not a worthwhile exercise. But creating a token souvenir at every tourist attraction we attend for $1 in lieu of something we’d just lose is a great deal! Buying an album is a drop in the bucket and makes each penny that much more valuable to the kids.

Mother-in-Law’s Guide to Open Banking

Dearest Mother-in-Law,

First of all, Open Banking is not about keeping banks open later in the day or having more banks open on Sundays. Open Banking is about 2 things:

  1. Open Banking Regulation: Many countries are regulating how banking data can be used. Open Banking refers to customer ownership of their own banking data. This article will focus on Open Banking regulation.
  2. Open Banking Collaboration: Even when this regulation doesn’t exist, banks see the benefit of collaboration and the usage of APIs (which is just a technical word for being able to use stuff from other banks). This version of Open Banking is broader and I’ll try to cover it in another post at some point.

Continue reading “Mother-in-Law’s Guide to Open Banking”

The Mother-in-Law’s Guide to Software Testing

This is part of my Mother-in-Law’s Guide to Technology. My Mother-in-Law is a very smart woman even if she isn’t a “computer person.” The goal of this series is to take some big and treacherous sounding ideas and bring them down to earth.

Dearest Mother-in-Law,

Remember when you had kids and you told them to do stuff. And remember how they used to do what you told them but that wasn’t always what you intended them to do? Well, that’s the way computer programs work.

Just like kids, computer programs will do what you tell them, but beyond that, all bets are off. They don’t do anything that directly contradicts what you said but that doesn’t mean they’ll do what you want them to do. Continue reading “The Mother-in-Law’s Guide to Software Testing”

The Mother-in-Law’s Guide to Cloud Computing

This is part of my “Mother-in-Law’s Guide to Technology.” My Mother-in-Law is a very smart woman even if she isn’t a “computer person.” The goal of this post is to take a very big and treacherous sounding idea and bring it down to earth. I tried this before in a post which I’ve now renamed The Mother-In-Law’s Guide to Chaos Engineering.

Dearest Mother-in-Law,

You know when we visit a Target or a Wal-Mart in the suburbs and they have 30 checkout lanes and only 3 are open at any time? I always wondered why that happens. It even sparked someone to write a funny blog post about the phenomenon: Target Store Opens More than Three Checkout Lanes; Shoppers Confused. Continue reading “The Mother-in-Law’s Guide to Cloud Computing”

The Mother-in-Law’s Guide to Chaos Engineering

In this post, I’m trying to take something technical and make it (mostly) readable for my mother-in-law. Enjoy!

One big trend, especially for internet companies like Facebook, Google and Netflix, is not to have one massive computer anymore. This is an oversimplification but computers used to be one big expensive box. The faster the computer you needed, the more money you spent. But eventually, the computers became too expensive to possibly meet the needs of today’s internet companies. So Netflix (and others) started stitching together these large supercomputers out of many smaller and cheaper computers by connecting them in these clever ways.

The benefits of doing this are pretty amazing because they allow you to get this supercomputer that can do incredible things that are very low cost. The problem is with each of the smaller computers. Because they’re so cheap, they can fail at any time. This means that Netflix has computers failing constantly. But customers don’t see this happening. So how does Netflix get this to work?

Netflix needs to make sure that of all its computers and systems are resilient. Using a car metaphor, Netflix is always able to swap out a spare tire if one gets a flat. On their blog, Netflix explains how they test this tire changing/computer failing problem:

Imagine getting a flat tire. Even if you have a spare tire in your trunk, do you know if it is inflated? Do you have the tools to change it? And, most importantly, do you remember how to do it right? One way to make sure you can deal with a flat tire on the freeway, in the rain, in the middle of the night is to poke a hole in your tire once a week in your driveway on a Sunday afternoon and go through the drill of replacing it. This is expensive and time-consuming in the real world, but can be (almost) free and automated in the cloud.

This was our philosophy when we built Chaos Monkey, a tool that randomly disables our production instances to make sure we can survive this common type of failure without any customer impact. The name comes from the idea of unleashing a wild monkey with a weapon in your data center (or cloud region) to randomly shoot down instances and chew through cables — all the while we continue serving our customers without interruption. By running Chaos Monkey in the middle of a business day, in a carefully monitored environment with engineers standing by to address any problems, we can still learn the lessons about the weaknesses of our system, and build automatic recovery mechanisms to deal with them. So next time an instance fails at 3 am on a Sunday, we won’t even notice.

In addition to Chaos Monkey, Netflix has a number of other members of the Simian Army. The Netflix descriptions of these fellows is a bit technical:

Latency Monkey induces artificial delays in our RESTful client-server communication layer to simulate service degradation and measures if upstream services respond appropriately. In addition, by making very large delays, we can simulate a node or even an entire service downtime (and test our ability to survive it) without physically bringing these instances down. This can be particularly useful when testing the fault-tolerance of a new service by simulating the failure of its dependencies, without making these dependencies unavailable to the rest of the system.

Chaos Gorilla is similar to Chaos Monkey, but simulates an outage of an entire Amazon availability zone. We want to verify that our services automatically re-balance to the functional availability zones without user-visible impact or manual intervention.