What do you notice about these four sets of gas prices (click to enlarge)?

While I was filling up at the gas station today, I noticed it too. No matter what the price of gas is, the difference between Regular, Mid-Grade, and Premium always seems to be just about 10 cents. What’s up with that?

I did some quick research on the Web and could not find any information on this topic except for another blogger questioning the same phenomenon: Mercer On Value: Why are gas prices exactly 10 cents higher per grade? As Chris Mercer, the author of this post, points out, from a cost standpoint, the only difference between the various grades of fuel would be a little bit of octane booster - likely either toluene (paint thinner; used in Formula1 and other racing leagues) or ethanol or MTBE (I think they stopped using this as it was found to cause contamination of municipal water supplies). I’m sure the prices of these octane booster fluctuates quite frequently and moreover, I highly doubt that, at the volumes that oil companies produce, the cost of these octane boosters is anywhere even close to 10 cents per gallon.

I have to agree with Chris that the 10 cents pricing differential is simply the price elasticity of demand. Oil companies (and I guess to some extent the gas retailers) must have figured out over the decades that 10 cents is the magic number.

1) 10 cents is small enough to hook customers who voluntarily choose to purchase a higher grade of gas than their car’s requirement. (i.e. buying 89oct midgrade for a 87oct requirement car) Many consumers are willing to pay $1-$2 extra per tank to feel like they’re making their engine happier.

2) 10 cents is not large enough to persuade customers to downgrade to a lower octane even if their car requires premium fuel. (i.e. downgrade to 89oct instead of the 91oct required by their car). Because the engine performance difference between mid-grade and premium fuel is generally very slight, most consumers could downgrade and never notice the difference. The oil companies know this and this puts an upper bound for the price differential between fuel grades.

What grade fuel do you use and have you either switched or considered switching up or down?

Ask most people about Alibaba and you’ll likely be met with scratching heads. A lot of people have heard the name, but only a few folks seem to know that Alibaba is a Chinese company that offers a directory service for Chinese manufacturers and suppliers. I had watched some sort of documentary a few months back that played up the vastness of Alibaba’s directory and how through a couple clicks of your mouse, you too could can find a suitable Chinese supplier for just about any type of good you want to manufacture or sell.

Alibaba makes a lot of sense. I mean let’s face it. Doing business internationally is intimidating. Doing business in China is even more intimidating unless maybe if you’re Chinese and speak the language well. I certainly am not such a person so I know that connecting myself to the right Chinese supplier would be next to impossible without an agent to help me. From what I’ve been told, such agents can be quite expensive and because of biases (read: kickbacks), the agent may not even connect you with the optimal supplier for your needs.

Alibaba usurps the need for such an agent and provides someone like me direct access to the suppliers. It’s a simple concept that offers exciting opportunity for creating business relationships between foreign companies and China. Assuming Alibaba works as advertised, it’s no wonder that Yahoo! invested $1bn for a 40% chunk of the company. But, the question is, does it work? Is it really that easy for an average American businessman to locate and work with the right Chinese partner?

For one man’s experience, check out this post by Greg Runco. Greg designed a slipper and was looking for someone to manufacture it. He used Alibaba and describes his experience thus far with the supplier he chose. Greg also has several other interesting posts on his blog. I find his style sort of similar to mine and I enjoyed reading through his posts. Thanks for the introduction Greg!

I’m gonna go ahead and bet that this will make my Top 10 list of Worst Headlines of 2006.

Read transcript of call

Some interesting tidbits:

on Google Checkout and the topic of CPA which came up several times

Brin: “Studies show that about 63% of users abandon their shopping cart before they complete the buying process.”

Schmidt: “We did Checkout to solve the problem that Sergey described, which is we simply want to make the whole process of buying just quicker, more foolproof, more likely to conclude. We think that that ultimately will translate into higher value for the advertiser, which should ultimately be reflected in our overall revenue.”

Schmidt: “all of our testing indicates that people are much more likely to purchase from our advertisers if they have enabled Google Checkout”
Kamangar: “Our goal is long-term to increase the amount of searches and commercial searches on Google, increase the click-through rates to our advertisers, and increase the conversion rates that these customers get because of increased convenience.”

Page: “I know there’s a lot of talk about the CPA, or paying per purchase. One of the issues with that is people look around a lot before they buy something. So it’s probably not the only information you want to look at when you’re paying for advertising. But we’re also excited about using more data like that in our models.”

Kamangar: “That [conversion] information sits in the hands of the advertisers, and they can adjust their bids if they like. Conversion rate signals are not affecting the ranking.”

So I guess the official partyline about Checkout is to increase conversion for advertisers by making the checkout process more convenient. However Checkout isn’t a revolutionary improvement in convenience. Services like (the now defunct) MS Passport, Y! Stores, and even many browser toolbars offer the ability to automatically recall a user’s relevant information (addresses, cc info, etc.). I’m surprised that their touting this functionality so much.

It was emphasized that through Analytics and improvements to the AdWords tool, advertisers can efficiently monitor conversion themselves and adjust their bidding appropriately. I’m not sure how realistic that is. It seems like it would require the advertiser to be fairly sophisticated or pay a SEM optimization firm to regularly analyze the conversion vs. bidding ROI data and adjust correspondingly.

Ultimately, Schmidt says that the idea that Checkout is the first-step in a move to CPA is “a very interesting idea” although Kamangar says “we don’t have any plans right now to use Checkout information for anything outside of Checkout”. Eh, who knows…

On ad quality

Kalamangar: “beginning in last year, we began incorporating signals from the landing page into the ranking method and the final quality score…It has produced a small number of advertisers that were engaging in arbitrage and other methods that resulted in lower-quality ads, and as a result, has allowed us to show more ads from higher-quality customers.”

I had read here and there about Google’s initiative to weed out advertisers who are essentially arbitrage plays, but never any official confirmation that Google was actually doing the landing page analysis and booting certain advertisers from the system.

On net neutrality

Brin: “we really care about net neutrality, not for Google as a company, but rather for all the small Internet companies out there”

Page: “I’d also point out that it’s largely been driven in countries like the U.S., where we have very poor last-mile connections for users, much slower than in countries like South Korea, which has spent less money and has much better connections, and haven’t been pushing for elimination of net neutrality.”

Even though what Brin is saying is true, let there be no doubt that losing net neutrality will cost Google money. It may not have a material impact on the business, particularly because of their existing relationships with ISP and Google’s significant leverage because of their huge brand/presence, but it will hurt the bottom line.

In the past 24 hours, Its Rishi was visited by readers from over 18 countries:

• Australia
• Poland
• Germany
• China
• Sri Lanka
• Pakistan
• Finland
• Ireland
• France
• United Kingdom
• Brazil
• Netherlands
• Canada
• Indonesia
• Denmark
• Italy
• Viet Nam

..and of course the USA. How cool is that?! I’m honestly not sure why all of you international foks are coming (OK, that’s kind of a lie because I have analytic software that tells me) but it really is pretty amazing to me that you do. When I started this blog in November ‘05 I had 2 readers on a good day.

One of my more popular posts for the past couple of weeks has been MyTube = YouTube Ripper. Concrete evidence of the worldwide popularity of YouTube. I didn’t expect that this post would be that popular but I’m more than happy to get the attention. =)

Hard drive failure can be very, very painful. Since hard drives are generally reliable, many computer users have never experienced failure. But, for the rest of us who have had a drive crap out on us, we know it to be an event as horrific as a catastrophic earthquake. However, the difference between earthquakes and hard drive failure is that hard drive failure is often predictable.

If you’ve ever looked at the feature list of your hard disk, one of the items listed will be “S.M.A.R.T.”. No, that doesn’t mean that your hard disk is super intelligent. S.M.A.R.T. stands for Self-Monitoring, Analysis, and Reporting Technology (Wikipedia article for more info). Basically, it’s a monitoring system built-in to your drive which detects and reports on it’s condition.

In order to read the S.M.A.R.T. report off your drive, you’ll need to download and run a small piece of software. I use a free, open-source tool called smartmontools. To download the Windows installer, click here.

1) Run the installer program. (For platforms other than Windows, read the appropriate steps for your OS)
2) Open up a command prompt (Start|Run|type in ‘cmd’|OK) and change directory to where you installed smartmontools (e.g. ‘cd “Program Files”\smartmontools’)
3) To get a health check on your primary disk, run smartctl -H /dev/hda. If you see PASSED you’re in good shape. If you see FAILED, the time to start panicking is NOW! Create a backup asap and go get a new disk because you’ll be needing it very soon.

If you want to give your drive a thorough check-up, follow the steps outlined here (Scroll down to the “SMART Testing” section). Running the full battery of tests takes about 30 minutes and does not interfere with your use of the computer.

It’s a very good idea to run this test periodically, say once a week or so. It takes almost no time at all and the potential benefit in time and data can be priceless.

It’s been a while since the last review I posted and I must admit that the pace at which I’m going through The Personal MBA reading list is not as brisk as I would like. The good news, though, is that I just finished reading Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne.
The book has quickly garnered a laundry list of awards and is endorsed by one of my business-world idols, Carlos Ghosn. My curiosity was piqued so I hopped over to Amazon and ordered it.

The book promises to teach the reader “how to create uncontested market space and make the competition irrelevant”. That’s a pretty bold promise. So, does the book deliver? I think so. Or about as well as a book can.

So “What’s this ‘Blue Ocean’ thing??”, you might ask. Well, to define what a Blue Ocean is, it’s easier to first define what it’s counterpart, the “Red Ocean”, is.

Red Oceans represent all the industries in existence today or, in other words, the known market space. The boundaries in such industries are well-defined and the competitive rules of the game are known. Companies in Red Ocean industries try to outperform their rivals to snag a greater share of existing demand. Because of such factors as accelerating advances in technology, trend towards globalization, and stagnant worldwide demand, industries have witnessed accelerated commoditization of products and services. This commoditization means that buyers increasingly select based on price which leads to price wars which leads to shrinking profit margins. Every industry is or will eventually become a Red Ocean and companies regularly employ traditional competitive-stategy techniques to survive in bloody Red Ocean environments.

However, for a company to sustain high performance, it must look beyond it’s current environments and grab new profit and growth opportunities. This is precisely what a Blue Ocean offers. Blue Oceans represent all the industries that don’t exist today or, in other words, the unknown market space. (If you raised the BS flag after reading that sentence, think about this: Many multi-billion dollar industries of today did not even exist 30 years ago e.g. bio-tech, personal computers, mutual funds, cell phones, express package delivery, coffee bars, and the list goes on… )

The underlying process of creating a Blue Ocean is something the authors call value innovation. Instead of focusing on beating the competition, focus on making the competition irrelevant by creating a leap in value for buyers. Value innovation is contradictory to the commonly accepted competition-based strategy concept of a “value-cost trade-off” which says that there must be a compromise between product differentiation (added value) and low cost. Blue Oceans achieve differentiation and low cost simultaneously.

The authors cover the basic analytical frameworks of the Blue Ocean strategy: the strategy canvas (the value curve), the four actions framework, and the eliminate-reduce-raise-create grid. In later chapters, the authors go into further detail about the formulation and execution principles (there are 6 in total) of the strategy.

One thing I really liked about the book was that the authorss unit of analysis is a single strategic move of a company, not the entire company or industry. In the first chapter, the authors find fault in books such as In Search of Excellence and Built to Last which had put several companies on a pedestal as “model” firms, yet, today, many of these firms are far from being industry leaders. The authors reasoned that if the same company can be brilliant and lame at different points in its history, then it doesn’t make sense to make the company the unit of analysis for studying strategy.

Another aspect of the book that I really liked was the extensive use of case studies. They helped to solidify the concepts being explained as well as making the text more enjoyable to read.

Overall, I would highly recommend this book. This shouldn’t be the only book you read about competitive strategy, but I think it should be on your reading list if you want a more complete perspective of the subject. At the very least, find a copy of the book and read the first section as it does a nice job of covering the key points of the strategy.

Note: As I did before, I made fairly detailed notes while reading the book. If you would like a copy of the notes, shoot me an e-mail and I’ll be happy to send you a copy.

“The era of the blockbuster is so over. The niche is now king, and the entertainment industry – from music to movies to TV – will never be the same.” says Chris Anderson of Wired Magazine.

Mr. Anderson has written an article that clearly articulates a trend in media that you and I have observed over the past few years but since it has been gradual, it may not have struck you as being as dramatic as it truly is.

Let’s look at some facts:

• Twenty-one of the all-time top 100 albums were released in the five-year period between 1996 and 2000. The next five years produced only two
• Time spent listening to the radio is now at a 12-year low, and rock music is among the formats suffering the most.
• The average top 25 blockbusters in any given year so far this decade have accounted for 5 percent less of the total box office gross than in the 1990s, even as they’ve cost 57 percent more to make.
• Today’s top-rated show, American Idol, is watched by just 18 percent of households. During the ’70s, American Idol wouldn’t even have made it to the top 10 with that kind of market share.
• the number of weeks the average best-selling novel remains at the top of the list has fallen by half over the past decade.

OK, enough with the facts. Read the article