Flint's Blog

Freakonomics for Randomness

I read this great book over the weekend that reminds me a lot of Freakonomics.  It's called The Drunkard's Walk:  How Randomness Rules Our Lives.  If you haven't heard  of Freakonomics, it was a runaway bestseller and described how economics intersects with everyday life - everything from the drop in New York City crime rates to the fixing of Sumo fights.

The Drunkard's Walk starts with a basic primer on probabilities with a little history lesson thrown in and then quickly moves in to some real world examples. 

One of the more interesting ones is The Monty Hall Problem.  Monty Hall was the host of a TV game show called Let's Make A Deal.  He would offer contestants the chance to win a car by picking one of three curtains.  Behind one of the curtains would be a car and the other two curtains would have a goat.  After the contestant selected a curtain, Monty would open one of the other curtains and reveal one of the goats.  At this point, Monty would give you the chance to switch the curtain you selected to the other remaining one.  The question is, what would you do?  Since I was a math geek, I of course knew the answer was it didn't matter, you had a 50-50 chance at that point of winning the car.  Apparently an overwhelming majority of math professors in the US also agreed.  And that's where we would all be wrong.  You're actually far better off switching to the other curtain.  Here's why. If  you select Curtain 1 and decide not to switch,  you have a 1 out of 3 chance of getting the car.  However, if you do switch, you have a 2 out of 3 chance of getting the car.  The Wikipedia link above has much better explanation.

Other stories covered in the book are Wine Ratings (i.e. is there really a difference between an 89 and 92), why polling results are often misleading and where they get the +/- numbers, and how you can improve your SAT scores just by taking them a few more times.

Very good read, even if you're not a geek.

Can someone please invent a better email system?

Email billing has been one of Billtrust's more popular B2B offerings.  However, it is a daily battle to manage the delivery of email.  There's no way to guarantee to delivery, there's no way to know for sure if someone received an email, there's no way to know for sure if someone opened an email, and there doesn't seem to be any solution on the horizon.

Obviously the problem is spammers and the great lengths that everybody goes through to block unsolicited email. ISPs attempt to block spam, corporations attempt to block spam, all email clients worth their salt have spam filtering built in.  The net of all of this spam filtering is that a large percentage of spam is blocked .  However, a small percentage of emails that should get through, invariably don't.

So I know it's not a revolutionary concept but can someone please invent an email system that is fee based?  Any fee, no matter how small, would be a huge deterrent to spammers.  Businesses that send opt-in email want it.  People who receive email want it.  ISPs would embrace it.  The only ones who wouldn't want it are the spammers and the companies that sell spam protection.

Marketing On Your Invoice

Businesses that send bills to consumers (B2C) have known for a long time that inserting stuffers or adding a message to your billing statement every month will often result in a 0-2% response rate depending on the offer.  These might seem like low response rates but bill messaging & stuffers are an inexpensive way to communicate and upsell your customer base.  For some reason, most businesses that send bills to other businesses (B2B) haven't caught on to this yet.

Our VP of Marketing, Mitch Rose, has a great post on this here.

The basic theory is that you're paying for the postage and the paper anyway, why not add a message?  It's free, it's being read by your customer, and it may be the only communication you have with them this month.  The only possible reason not to do it is because you're too busy.  I could imagine someone from  marketing bringing this message to the CEO of a company "I'm sorry but I'm just too busy to talk to our customers."  WHAT!!! 

This is the time where I would go with one of my favorite sarcastic motivational lines "Let's set the bar a little lower and we'll pass out shovels."

The Value of the Network

Most businesses would love to have the Network Effect that have made companies like eBay wildly successful.  Simply put, the more users use something the more value that is created, which leads to more users wanting to use it.

We recently were at SAP's Sapphire user conference in Orlando and heard a lot of discussion about a  network that was going to allow billers and payees to seamlessly deliver bills electronically.  This is not a new concept. 

A number of banks banded together back in the 90's to create a consortium call Integrion.  The banks weren't thrilled that CheckFree and Intuit had a stranglehold on the bill payment market so decided to put a bunch of money in a pot and build a payment network.  Ultimately I don't think a single payment was made through Integrion when they folded up shop.

Apparently the lessons learned from this endeavor were soon forgotten and the banks decide to tee it up again.  They threw some more money in a pot and formed Spectrum. This time with even loftier goals.  Not only did they want to rout all payments through their network, they were going to manage all bill delivery as well.  This network met a similar fate of not processing a bill or payment before it was quietly put to rest.

Both of these networks met a similar fate because they didn't follow what in hindsight seems to be blindingly obvious.  There needs to be a value proposition for all participants in the network or it just won't work.  The reason eBay is successful is because they offer tremendous value to both the buyer and the seller.  The ATM network is even a better example and the banks certainly get some credit here.  Banks avoid paying tellers to handle withdrawals and consumers get the convenience of 24x7 access and avoiding long lines.

Spectrum and Integrion failed because they didn't make their networks financially compelling for billers to rout their bills through.  They were good concepts and certainly there was enough friction to make this interesting, but imposing a tariff that exceeds the value is a sure fire recipe for failure.

Ultimately someone will figure out a working bill presentment and payment network that will be compelling for all participants - banks, billers, and consumers - but it's a hard problem.  Billers don't have the necessary IT infrastructure, consumers have ingrained bill payment rituals that are hard to change, and banks move slowly - and that's why it hasn't happened yet.  Or maybe I'm wrong.