If you're not thinking of watching the video, think again. Even if you watch just the last two minutes. There's a good twist in the tail in the way the most successful team made the most money :-)
She teaches a class at Stanford and offers each team $5 of 'funding' in an envelope. She tells them that once they open the envelope, they have 2 hours to make as much money as they can.
She cites three teams' approaches:
1) First team opens a free stand that offers to check peoples bike tire pressure for free, then charges $1 to inflate if necessary. This team changes midstream to accepting donations instead of charging, and makes more money. Lauded for rapid iteration.
2) Second team makes lots of reservations at local restaurants, and then sells them to people waiting in line for same restaurant. Didn't use the $5 at all. Lauded for realizing that the $5 constraint was artificial, and that using it constrained their thinking.
3) Third team skipped the exercise, and sold their 3 minute class presentation time as a advertisement to a local company. Made the most money. Instead of presenting, they recruited. Lauded for realizing that the 2 hours was also artificially hampering their thinking.
Personally, I found the presentation glib and condescending, and the solutions immoral and dishonest. I'm hoping for good discussion about the issues here, but I would not recommend the video.
See, the problem here is that she hands out two artificial constraints, and then praises the teams who ignore the constraints.
1. Used a device to measure the tire pressure and materials to build the booth and signs. Did they cost less than $5? Maybe. Did it take less than 2 hours to create the booth, the signs, and perform the services? Unlikely.
2. Well done on finding something you can acquire for free and then sell. However: did they make the reservations at 6pm and then sell them before 8pm? If not, the process of making the money took more than the 2 hours allotted.
3. You had two hours. Instead, you spent 2 hours talking to an advertising company and then a week later you sold 3 minutes of your time. Total time used to make $650: a week. In the real world you can't just discount lead time and idle time; that's a mistake made by a lot of starving contractors.
The point of the puzzle is to work inside the constraints. "Thinking outside the box" is a great skill and all, but basically all these teams are doing is finding creative ways of breaking the rules. It means the puzzle isn't "make the most money in 2 hours with $5", it means the puzzle is "find out how far you can stretch these rules without being disqualified". Points for creativity, sure, but that wasn't the problem.
Your argument seems to lean a bit too strongly on unsupported accusations of fraud:
Did it take less than 2 hours to create the booth, the signs, and perform the services? Unlikely.
What, you're saying that a team of college students, on a college campus, which presumably has a fully stocked stationery store within five minutes' walk, can't throw up some hand-scrawled signs in less than (say) 15 minutes for under five bucks?
Yeah, they probably had to already have the tire pump and gauge. I presume that "what do we have in our closets" was an important part of the process of choosing this business plan. ;) And I don't seem to recall anything in the "constraints" about not being allowed to beg or borrow anything, nor any rules about not being allowed to use stuff you already own. This isn't accounting class.
did they make the reservations at 6pm and then sell them before 8pm?
Why not? Remember: They're doing this in parallel, using multiple team members and multiple restaurants. And, given the anecdote ("this works better for restaurants that hand out little buzzers") we're not talking about the sort of reservation that needs to be obtained hours in advance. We're talking about people paying for the privilege of jumping the line and turning a 40-minute wait into a 4-minute wait. You can get through quite a few cycles of that in two hours.
"And I don't seem to recall anything in the "constraints" about not being allowed to beg or borrow anything, nor any rules about not being allowed to use stuff you already own."
What if "stuff you already own" includes a bank account with 2 million bucks in it? I also thought the solution was a bit dishonest, but then the whole thing should not be taken that serious from the start.
The reservations solution seems even worse, though I am not sure how exactly it works (would it piss off restaurants in the long run, or is it really a valuable service?).
Selling the presentation time seems to be the only valid solution.
If stuff you already own includes a bank account with 2 million bucks in it, and you burn through it in order to excel in one class, that's a lesson in itself. Or, more realistically, if a student had $100 in their pocket and used it as additional funding.
You can easily be in a similar situation in real life. You can get a mortgage on your house, or sell your car, or pawn family heirloom, etc. You can extend your runway (and hopefully increase the possibility or size of success), while ensuring deeper fall if you do fall.
So back to the class, if one group did spend invest their $100 along with the initial $5 seed funding, they'd have to earn more than the other groups to have a comparable return.
I wish I could mod this up twice. This is, like, Confucius deep.
If a student weren't allowed to sacrifice their entire life and all of their resources to excel at this one stupid class exercise, it wouldn't be a very good simulation of the entrepreneurial experience, would it?
You know what would have made for a great class? If one of the students had invested $2 million out of pocket to create an additional $100k in two hours. They would have presented that to the class. Everyone would have to agree that, objectively speaking, in dollars and cents, they would have "won". The next question to ask them is: do you feel successful? Have you accomplished whatever it is that you wanted to accomplish, when you signed up for a class on entrepreneurship? And does that make you happy?
Whatever their answer was, it would probably be educational.
For me, a take-home lesson from Startup School was that a lot of extremely talented and successful entrepreneurs are still searching for their answer to this question. They've invented something great, or they've made N millions of dollars, or both, and yet the question persists.
"seeing the constraints are artificial" does not mean "cheating" or using things outside of the constraints. I don't think the winning teams used more than $5 and 2 hours.
It doesn't take much to see that 2 team-hours is a much bigger asset than the $5, so you're better searching for the best way to use 2 hours, and maybe even ignoring the money.
It took a bit more insight to realize that hard to tap advertising space(and other opportuities) in a university town is a much bigger asset than the team-hours and the money.
In what way is offering to check someone's tire pressure and then inflate it for a nominal fee, or a donation, "dishonest"?
The first scenario is one a lot of Jiffy Lube-type garages and auto parts stores like Pep Boys do all the time (although typically with more than just tire pressure, e.g. transmission fluid).
The latter -- asking for donations and letting people pay what they want -- is something the Boy Scouts in my hometown used to do all the time. Free air for your tires, free coffee by the side of the Interstate ... I saw them doing free brake light replacement once. In theory they'd do it for free if someone really couldn't afford it, but in practice people pay what they think the service is worth (or whatever of that they happen to have on hand), so it's a sort of self-defined "sliding scale."
I don't see any misrepresentation there so I don't see how it's inherently dishonest.
Hm, to set up the experiment properly could become an entertaining experience :-)
Edit: really, though, what is the actual experiment here? If all external aids are allowed, the only lesson left seems to be to think outside of the box.
As far as a restaurant is concerned, why would they really care? It might annoy customers, but as long as the tables are still filling up, I feel the restaurant is more than happy, because they're still making the best of their available resources (tables and wait-staff).
It's a valid point how the artificial constraints are the envelope and the time, because the way she listed the rules was, clock starts when you open the envelope - it's almost a a ploy, or a method of trying to distract someone.
Imagine, if you were handed an envelope and were told "there's money inside there", wouldn't you immediately start to wonder "how much?" and you would immediately want to open it. She restricted this thought by applying a 2 hour time constraint, from the time you open the envelope, which almost forced the students to think twice about jumping to the money. Instead, all the groups achieved something without ever really having to open the envelope. I think it was interesting, and a job well done.
>As far as a restaurant is concerned, why would they really care? It might annoy customers, but as long as the tables are still filling up, I feel the restaurant is more than happy, because they're still making the best of their available resources (tables and wait-staff).
It's scalping. It raises the cost of a dinner in the restaurant without additional gains for them. Obviously restaurants would not go this.
It raises the monetary costs of dinner for people, who want to pay to avoid waiting. For the normal-waiting patrons the strategy feels like increased congestion. (And they bear the costs.)
Why do restaurants have queues anyway? Why don't they just raise their prizes until supply meets demand? There's more than one scholarly article about this question.
As far as a restaurant is concerned, why would they really care? It might annoy customers, but as long as the tables are still filling up, I feel the restaurant is more than happy, because they're still making the best of their available resources (tables and wait-staff).
You answered your own question -- to the customer, it's annoying.
... and to the restaurant owner, it discourages walk-in traffic.
It's immoral in that it's dishonest (We have a word for reserving space at the restaurant by claiming to be a party of two, but not being one -- it's called lying). If you wanted to do this in the moral clear, you need to speak to the restaurant owner first, and see if they'll pre-allocate you tables.
I do feel that it was sketchy to ignore the rules the way these teams did. However, the restaurants do not have a contract with their customers. If they want to have a contract with their customers, they can, but calling their expectations of what customers will do a "contract" dilutes the term.
You make valid points. My problem is less the specifics of the individual teams' solutions -- I don't dispute they were very clever and creative solutions -- but rather the impression that the greatest reward went to those who went furthest outside of the rules.
Team 1 were arguably entirely within the rules and made $200, Team 2 went a little outside (unless they were handed the envelope at 6pm) and made a little more, Team 3 ignored the 2-hour stipulation entirely and made $650.
Fundamentally, you're not rewarding creativity at money-making, you're rewarding creativity at rule-breaking.
If you watch the video, all teams were handed the envelop at the start of the week in class. They were allowed to think an form a business plan as long as they liked. They didn't know how much was in the envelop. Once they opened the envelop, they had 2 hours to make money.
Exactly. They weren't told they must open the envelope. The last team figured this out and (presumably) timed it so that their 2 hours coincided with the 3 minute presentation time.
Actually the lesson was about managing valuable resources, not gaming the system. It was a warning that the system can be distracting and can easily confine your thinking.
The lesson was: don't let funding distract you from identifying the most valuable resources available to you. At worst, the cases you mention break the rules in rather insignificant ways. All three scenarios can quite plausibly be done entirely within the rules as defined, even if they didn't quite make it in reality.
Presumably, there were much less creative solutions that also failed to entirely obey all stipulations. It was an exercise, not a contest.
But that's very important. People are constantly working under ... and handing out ... artificial constraints. Getting outside the box is one of the most important lessons. Who could possibly want to communicate but be limited to only 140 characters?
The US spent a million dollars to develop a pen that could write in no-gravity. The Russians used a pencil.
"In the province of the mind, what one believes to be true is true or becomes true, within certain limits to be found experientially and experimentally."
The US spent a million dollars to develop a pen that could write in no-gravity. The Russians used a pencil. they didn't, and pencils are useless in space 'cause of the filings floating around and jamming equipment
Not using the $5 at all thinking outside the box is. You break a rule that thought existed before you thought about it. It is a constraint on your mind, not your world. This is a space pencil.
Using $10 instead of $5 is not thinking outside the box.
The problem was 'you are given X amount of seed money and two hours to make as much money as possible.'
The problem was not 'you are given X amount of seed money and two hours to make as much money as possible; however, you must use, and only use, that money while buying the materials you are going to require.'
The problem was not designed to make students money but to show them that there are lots of possibilities in the world for success with hard entrepreneurial thought (they were given four days to think of a plan).
I can be wrong, but I am pretty sure that the rules did not even matter (in the strictest sense). They could spend six dollars on buying signs and a bike pump to make their project a success because the goal of the "problem" was to open the minds of the young entrepreneurs.
If each person did not come up with a brilliant idea, then there would be no harm. However, in mind of the problem, the students were supposed to hear what the other students did to achieve success because the path to achievement is the path to success. -> And that is why people take the class. They want to discover the path to success.
> The point of the puzzle is to work inside the constraints
The constraint here is (your current resources + $5 + 2 hours), not just the $5 and 2 hours. And the point is to get profitable. It's an entrepreneurship puzzle, not programming puzzle.
The biggest issue with this one is its unrepeatable... it's a one time deal.
They executed the advertising opportunity, now they have nothing. The other two, issues with their business practices aside, have set up businesses that could continue to operate, grow and scale.
To me that deserves more recognition than a flash-in-the-pan idea.
But that wasn't what they were asked to do. They weren't asked to develop the best sustainable business model with 2 hours and $5, they were asked to come back with the most money.
Well I understand what you're saying here, but you're over-thinking the problem (like an engineer). The point of the exercise was to get the students excited about entrepreneurialism.
The real world (read Wall Street) has plenty of constraints and people are always gaming the system to make a buck. So in this sense, it's a valid exercise.
Edit: In terms of "gaming the system" I'd like to think of this as leveraging opportunities in the system for a particular gain, not "cheating" the system.
Pretty much everyone that cheated the system was rewarded by the keeper of the system. So this sounds like a good lesson to learn. "You don't get ultra-rich by being ethical and honest."
Do you really think it's reasonable to compare Wall Street to these lemonade-stand kinds of business school assignments?
I'm starting to think there should be a "Godwin's Law" corollary -- as any discussion thread grows, the probability of comparisons to Wall Street approaches 1.
With wall street as with most things, there is no "outside the system" everything is the system even if other people don't recognize it. I'll argue outside the rules is still inside the system, and that not all rules are created equal.
On another note, Breaking rules isn't what caused the recent wall street collapse it was a lack of looking ahead at consequences of actions.
Sure, and it's why we need to have both regulation on the front-end, and courts on the back end, to discourage attempts to "game" the "system", so that people's actions which benefit themselves are also beneficial to the society at large.
"Breaking rules isn't what caused the recent wall street collapse it was a lack of looking ahead at consequences of actions."
Not really. All the people who caused the problem are still employed and still rich. So for those entrepreneurs, they are still succeeding. It is the USA public who are failing at being entrepreneurs, not Wall Street.
There are two levels --- the first is within the context of a class assignment, and the second is as a business operation.
1) The bike tire pressure check isn't bad, but seems to be cheating on the class solution by using outside materials. Once one can 'presume' a pressure gauge and a pump, why not presume further specialized equipment or further outside funding? As a business proposition I was happy with it when they were charging a set price, but I personally feel uneasy with the change to donations. This isn't clear cut, but it's guilt based and I wouldn't do it myself despite the effectiveness. Compare with the Hare Krishna technique of forcing free flowers and then asking for a donation: http://www.garyasanchez.com/what-hare-krishnas-can-teach-us-...
2) Selling restaurant reservations is probably fine within the context of the class, but is a violation of the expectations of the restaurant. If everyone were to follow their approach, the system would collapse and the restaurant would need to implement a policy of cancellation charges. My simple view would be that if the restaurant would change their system if you told them what you plan to do, it is immoral.
3) From the point of view of the class, the winning solution feels like a cheap trick. Yes, it makes money, but not under the rules that were officially given. From a business point of view, it takes advantage of a captive audience. What's really being sold is the time of a third party who does not benefit from the transaction, and yet due to social constraints is unable to leave. This strikes me as both immoral and dishonest.
I fear that my scruples here aren't entirely consistent, and I'm pretty certain that they reduce my ability to make easy money. But I enjoy being in a situation where I can make decisions based on the answer to "Would the world be a better place if everyone followed this advice?". And for me, on this criteria, the last two solutions fail, and the first is on the edge once the donation approach is taken.
My simple view would be that if the restaurant would change their system if you told them what you plan to do, it is immoral.
Well, that moral principle is not going to generalize well.
But let's resist the urge to play moral philosopher and consider the facts: Would the restaurants want to stop you from doing this?
I don't think it's obvious. If I pick up half a dozen extra reservations and then try to sell them, I don't really add to the workload of the greeter, unless I pick up substantially more than end up being used. (Obviously, if you try to get 100 reservations, sell five, and return the other 95, the restaurant is going to stop you. So, don't do that!)
What you're essentially doing is allowing people to buy a better position in line. That seems perfectly rational: An upcoming reservation, like a stock option, is a commodity, so one can put a price on it, right? And it's worth noting that restaurants do this all the time [1]:
...it's called "bribing the maitre'd", and they don't advertise it, even though -- if it weren't for other considerations -- it's a good thing for the restaurant. A person who is willing to pay cash money to get in to your restaurant faster is probably someone with (a) more money to spend, so they're likely to order wine and dessert and all the good stuff that pads the profit margin, or (b) a big fan of your restaurant, such that they'll pay extra to come to your restaurant instead of the less-busy restaurant down the street, or (c) about to become a big fan of your restaurant, because they can always get a seat there right away; it's just a matter of a few bucks!
So the real mystery is why restaurants don't do this themselves. I suspect that the answer is social signaling: A restaurant doesn't want to be the entity that makes the majority of its customers feel poor. For every person whom you allow to publicly buy their way to the front of the line, you send a message to an entire line-full of other people that they're just too cheap or too poor to do the same thing. The point of a restaurant is to allow people to feel rich at a fixed rate, not to force them to feel poor at variable rates. So before long your restaurant will have a reputation as "that obnoxious place which caters to snooty rich people who want to show off all their money". Unless that's your business plan, that isn't a good idea.
(It is this, not the fear of breaking some non-existent law against overtipping maitre'ds, that keeps the practice of bribing maitre'ds below the radar. It's okay to spend money for better service; it's impolite for either party to call attention to it.)
The solution that these entrepreneurs have come up with is to create two queues: The queue run by the restaurant, and a separate queue containing the reservations owned by the entrepreneurs, which they will sell for a fee. The genius of this is that there's a strict limit to how many rich people can buy their way ahead of you: The entrepreneurs only have so many spots ahead of yours. Then the entrepreneurs can fix the fee to enter their queue, which will help prevent unsightly bidding wars from breaking out in front of the restaurant. And, because the whole scheme is run by a third party, the restaurant doesn't have to adjudicate disputes, or explain all this to everyone who shows up, or spoil their reputation as scrupulously fair egalitarians who would be shocked -- shocked! -- by the offering of a bribe.
So my guess is that restaurants might be okay with this, if it's done right. (i.e. The right number of "buyable" reservations vs the usual ones, the right fixed rate, no intimidation of customers, and of course no counterfeit reservations. I believe it is the latter two problems that have given rise to laws against ticket scalping.)
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[1] How great is it that when trying to google this article the first thing I find is the HN link?
A restaurant who takes reservations is entering into an agreement: you promise that you will eat a meal there at a certain time, and they promise that they will have a table ready for you at that time.
If the restaurant is all booked up, they turn people away. If some of those reservations are held by scalpers, and the scalpers don't find a buyer, the table will be empty when it may have been used if not for the actions of the scalpers.
What the students did was to break this unenforceable contract, and convert an agreement to make a transaction at some point in the future into a pure option on their part. That's stealing value.
If the restaurants want to do this, that's one thing. If the restaurant attempts to cultivate an image of being the hip spot to be seen, then it's in their interest to seat anyone dressed nice, or has money to throw around, or whatever, preferentially. But I would expect that they take this factor into account when setting the wages of the maitre d, just as they account for tips when setting the waiters' wages. Thus, the restaurant captures the value.
If this became prevalent, I would expected restaurants to move back to a model of calling names, or asking the name as if they can't tell from what number buzzer you had. Psychologically, buying a buzzer would seem okay to a lot of people who would not be comfortable if what you were selling is "listen for Charlie, party of 4, and say you're Charlie".
All the above applies equally to buzzers or waiting in an physical queue. If the queue is visibly large or if the host says it's a 45 minute wait rather than a 20 minute wait, some patrons will go elsewhere.
There's no genius in this, it's just plain dishonest, and if any restaurant knew you were making fake reservations and then selling them they'd put a stop to it. That you don't think this is obvious blows my mind, and forces me to think you're a dishonest person in general. I can't fathom an honest person not immediately seeing this as wrong.
Okay, first of all, you should apologise to mechanical_fish. Ad hominem attacks are not cool.
I agree it's a bit shady to sell reservations, and I would be uncomfortable to play any role in this (person in line, person buying, student selling, or restaurant employee), but how is it "dishonest"? That implies deception, and I see none.
Selling reservations definitely violates the egalitarian "first-come, first-served" nature of the restaurant queue. If I were a restaurant owner, I wouldn't let it happen out of fairness to the people in the queue who don't want to pay. Both choices send strong signals, certainly, but I think that's a choice on the restaurant's part.
Isn't it deceptive to make a reservation at the restaurant without any intentions to ever show up?
Call the restaurant and tell them "we would like to reserve 10 seats with the intention of selling them on the free market". If they give you the reservations, you have a honest business.
I owe him no such thing, nor did I attack him. I spoke of my own state of mind, that his comment made me think he was dishonest; I did not say that he was.
Omitting the truth is just as dishonest as lying. You don't try and parse technicalities with honesty, either you were acting in good faith or you weren't, not telling the restaurant that you intend to sell the reservations - something certainly outside their expectations - is deceptive and is most certainly dishonest.
I owe him no such thing, nor did I attack him. I spoke of my own state of mind, that his comment made me think he was dishonest; I did not say that he was.
Saying things like that makes me think you're a sophist.
I once heard one of the participants from the first season of the Apprentice speak. One of the assignments her team was given was to take a business taxiing people about via bicycle and make it as profitable as possible.
Most the teams decided to jump on the idea of selling advertising. Her team had the insight to realize they weren't just selling advertising on a taxi-bike but they were selling advertising on a national television show. Needless to say they won that round. This is what the third team sounds like to me. Legitimate.
Regarding item 1, in the real world analogy of getting seed money an entrepreneur certainly isn't limited to only using that seed money. They can use their credit cards or their house or their own equipment or anything else.
The point of the exercise quite explicitly was to teach people to look past constraints that do not exist, like the $5 limitation you're getting stuck on. There was no restriction on using outside materials, that is a constraint you created on your own due to your interpretation of the presentation.
3) You're also assuming that the students didn't benefit from being introduced to the presenting company. Another poster mentions that it was Frog Design, and if that's the case then it was probably to the benefit of the students as well; Frog Design's a good company.
Making and selling restaurant reservations doesn't strike you as dishonest? It's an honor system. What's to stop me from making reservations at ten different restaurants for my blind date tonight, and deciding at the last minute which one will make the best impression on my date? The system relies on honesty. It only works because few people are willing to abuse it, and those who do so only do it in a small way. This business would either be blackballed and frozen out by the restaurants, or the reservation system it depends on would be abandoned.
But let's say you could convince restaurant owners that selling reservations is a dandy idea. Sure, restaurants have long known (the idea isn't new) that they could, for a very minimal cost, sell reservations to the highest bidder. Sure, almost all have decided to go with a system that is perceived as free, fair, and egalitarian (with some discretion for doing favors for VIPs and accommodating glamorous people.) Suppose you can convince them. Why wouldn't they do it themselves? Restaurants manage their image very carefully and would certainly prefer to be in complete control. They could just do it in a notebook until (as the phenomenon caught on) their reservation software offered support for it.
The only plausible way I could see the business surviving is by charging lots of money (fewer customers limits your visibility) and kicking some of the money back to maitre d's as bribes.
I'm not so sure that it does. It relies on filling the tables at the restaurants. The restaurants don't care if the people who come to fill your table aren't the same ones that originally booked the reservation. Nor do they care if a certain number of reservations are no-shows, if the number of no-shows is smaller than the number of people waiting at the door.
As I said above, you obviously can't take this all the way to the edge case or you'll have a company that buys up every single reservation, sells none of them, and then cancels them all at the last minute. Then that company will go out of business, either because the restaurant stops them or because the restaurant goes broke, taking the company with it. ;) So, don't do that! Just because your business plan fails on some edge case doesn't mean that it has to fail for you...
Restaurants do care if they deny reservations to non-paying customers and then have empty tables because your business didn't sell as much as usual. They also care about alienating customers who are told, "We don't have any free reservations available, but some are available for an extra charge." Very likely, if they found out what you were doing, they would put you out of business whether you were hurting them or not, just to prevent their patrons from ever facing that choice.
Like I said, the greatest proof that restaurants don't want their patrons paying for reservations is that they don't do it. They already have what they need: a way of recording reservations and a maitre d' with knowledge of their business and a triple-digit IQ. They know there's demand: many people already try to get a table on a busy night by slipping the maitre d' some cash. If they wanted in on it, they'd already be in on it, and you'd be stuck trying to convince a restaurant to hand over control of a simple, vital, near-zero-cost part of their business to a third party for no gain. I maintain that you could only survive as a parasite by avoiding notice and/or paying off the right people.
I'm not so sure that it does. It relies on filling the tables at the restaurants. The restaurants don't care if the people who come to fill your table aren't the same ones that originally booked the reservation. Nor do they care if a certain number of reservations are no-shows, if the number of no-shows is smaller than the number of people waiting at the door.
Restaurants are in the business of filling their tables by making customers happy -- those customers will return, tell their friends, and the tables stay full. By filling up available spaces (thus resulting in customers being told that a very long wait is to be expected) and providing a paid line-cut (who enjoys being cut in front of while waiting 60 minutes?), you're going to make a lot of the restaurant customers unhappy, both directly and indirectly.
If this was an ethical business, they would have told the restaurant what they were doing and received approval before they decided to lie to the restaurant to achieve their aims.
Agreed.. I'm surprised by the comments here where many seem to think that some ways of making money are more fair than others. I would have expected the Hacker News crowd to really admire the winning team's 'hack'.
But anyway, as long as it's not illegal, I don't see what the problem is. The instructor didn't say how (or even whether) to spend the seed money.
Another way to look at it -- a good idea and good execution can overcome almost anything, even shortages of time and money.
Hackers have historically had very strong ideas of morality that extend way beyond illegal vs. legal. This is why some hackers advocate doing certain things they consider moral but illegal, and abhor other things that they consider immoral but legal.
> But anyway, as long as it's not illegal, I don't see what the problem is.
It's thinking like that that makes most people not like Wall Street and businessmen in general. Legal and illegal and right and wrong and not the same thing. Being ethical doesn't just mean following the law, it means following the spirit of the law and not doing things other would perceive as wrong, regardless of the law. It's wrong to cut in line, but it's not illegal, that doesn't mean you should do it. It's wrong to be rude and insulting for no reason to a stranger, but it's not illegal, that doesn't mean you should do it or that it's OK to do it.
That's true, and I totally agree with you. I guess my comment came out wrong. What I meant to say was that I don't see what the problem is for the purposes of the assignment.
Obviously the rules for doing business on Wall Street, where decisions can impact millions of people, and the rules for this business class assignment are going to be different.
The problem for the purpose of the assignment, is you shouldn't be teaching such bad behavior. If you reward people for behaving badly, they'll do it again. A great teacher would give assignments that paralleled the real world and encouraged behavior that would be both ethical and beneficial in the real world, because to a student, it is not obvious that the rules would be different in the real world.
It's a funny stunt once, but it's not an admirable business, because over time it would create less value than it destroys. Stanford classroom hours are limited and vastly expensive for the students.
From what I can see, their customers were happy, they made money, and it was all above-board, let alone legal. Clearly, something must be wrong!
I have to say, I'm even more amused by people's outrage at these winning tactics than by the tactics themselves. I begin to understand why it's necessary to have an entire class in entrepreneurship. Perhaps it is largely about training people not to be pinned, like hapless chess pieces, by the force of trivial preconceptions.
I'm assuming, based on the teacher's description (which involved "those little buzzers" and the concept of "trading one buzzer for another"), that these "reservations" they were selling were in fact "places in line". [1] If you built a business around selling reservations at a reservation-only restaurant, where the typical reservation was made days in advance and they were handed out in fixed quantity, I would have more... reservations about the business, as you do. [2]
But places in line? Everybody "gets one". The question is: Where is it, and how much would you pay to trade with the person ahead of you?
If I walked up to someone holding a buzzy coaster at a local restaurant and offered them $20 to trade coasters with me, would you be morally offended? Would they necessarily be unhappy?
Yes, I agree that if every place in line is for sale the whole thing gets tremendously painful for the people who arrive late and don't want to engage in a commodities-trading session before dinner. But what if only one in every 20 places is for sale?
If someone doesn't arrive -- no problem, everyone else moves up.
And, really, the kidney thing is unfair on several levels. For one thing, it's a cheap shot. If you want to take a moral stand on the sanctity of restaurant reservations, do so with pride! Don't feel the need to pretend that your debate opponents are also against motherhood, apple pie, and life itself.
For another, it's a different problem. The laws against paying for donor organs are in place because the market for donor organs is worlds different from the market for restaurant seats: You can't open up new sources of donor organs the way you open up a new restaurant [3], and the difference between the best chef and the second-best chef is smaller (in quantity and in kind) than the difference between one kidney and zero kidneys. Nobody dies if they don't get a seat at their favorite restaurant and have to eat at -- gasp! -- the International House of Pancakes down the street.
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[1] We don't really have another name for this, do we? I've been burned by this hole in our lexicon before. Me: "Do you take reservations?" Restaurant: "Yes." Me: "Can I make a reservation?" Restaurant: "No, we don't take them over the phone. We give them out as you arrive."
[2] I can't believe I just wrote that, either.
[3] Well, not unless you're Sweeney Todd. In which case you can do both at once!
If I take a job as a hit man, and I always manage to kill my targets I am also making my customers happy, but I would hardly claim that I was being ethical.
{edit} To expand on that, the legality of what is being done doesn't matter either. There are many unethical things that are still legal (e.g. patent trolls, large companies burying competition through using the legal system as a money drain, suing someone for defamation/slander just to shut them up about something that is true but you don't want anyone to know about, etc).
And it wasn't 'above the board' either, because it's not like they told the restaurant what they were doing. If I call ahead and book a table for two that I have no intention of using unless I can scalp/pawn it off on someone else, how am I being ethical by lying to the restaurant? {/edit}
thanks. I would have failed the "winning" team. From my perspective, they made nothing from their two hours. The money was made by the 3 minutes in class which was not part of their 2 hour earning time.
Presumably they didn't line up the deal just before the presentation; presumably that was done in advance.
Look at it this way: if you can do things like that, you could just as easily form a "company" and spend the whole assignment period accumulating liquid but non-monetary assets in whatever manner you see fit. Then, at the last minute, open the envelope and buy the company from yourselves with the $5. Liquidate the company and pocket the value of the assets.
Would that be a valid solution to the assignment? If not, why would arranging a deal before starting the "timer" be any more valid? The agreement is still an asset, just a somewhat less liquid one.
What if it was counted because the teacher thought making the deal was where they made the money, not in the classroom. They made their money in the 2 hours, but delivered their service afterwards, which doesn't contradict her guideline.
So, the income can be counted before obligations are resolved? Tradesmen can "earn" large amounts of money in short periods of time under this definition, as they're often paid half up-front to fund materials, but they still need to do work in order to "earn" that money.
Well it depends on the method of accounting you're business would need or want to use, but in a monetary sense, then yes, it can be counted as cash made as soon as the money, not the product, is delivered.
I agree with comments below that the winners used illegal and immoral models but.... And the instructor, I hope, was in violation of her contract by allowing the ad presentation but.... That's not what really disappoints me.
What really disappoints me is that she missed a great teaching moment. She handed out $5s to a bunch of teams. Where is her return?
She missed showing how to use leverage. She had every right to say "no" to an ad presentation and so she should have looked at the margin by which the "winning" team won (say $300, whatever it was) and charged that team a buck less ($299) for the right to substitute the ad for the presentation they were supposed to make.
It's only 6 minutes, but if you want the 10 second version, the winning team sold their 3 minute presentation time in class to a company called Frog Design that wanted to recruit Stanford design students. Frog Design paid $650 for this 3 minutes.
Lessons learned in this experiment: Successful teams did not frame the problem in terms of the $5 limitation. Instead, they thought of the problem in terms of services they could easily provide where salesmanship and timeliness were valued. The most successful team forgot about the $5 limitation and the 2 hour time limit altogether.
I normally hate watching videos to get information, but to the credit of the presenter this video is very concise and quick. The whole thing is insightful.
The peculiar thing about these brilliant hacks is that they challenge our assumptions about what's allowed to such an extent that they feel dishonest.
That isn't because there is anything amoral about them. Social interactions are a kind of delicate dance, they thrive on a certain basic level of predictability. So people are unnerved when that is taken away from them.
It was a bit dishonest - they sold other peoples time without any guarantee they could deliver it. The students could all have got up and left saying they weren't going to be exploited, or have done a non-violent protest, etc..
The more I think about the video, the more disappointed I become.
You're right: these "genius entrepreneurs" were selling the time of their classmates. The 3-minute slot had no value if their classmates didn't tolerate the fact that their time became a commercial - one which they certainly didn't opt into.
On the one hand, it's probably true that the timeslot they sold was the most valuable thing they had, for the purposes of the demonstration - and on that basis, they get a "gold star" for making the identification.
On the other hand, their actions were questionable at best, and unethical at worst. Imagine, for example, if professors routinely sold part of their lecture time to any startup that wanted a few interns. It's a strategy that doesn't scale, because it erodes trust and reduces the chances that it will work in the future. Therefore, it's a bad strategy and a bad "moral of the story."
Recap: good exercise in identifying valuable things, bad exercise for determining sustainable growth.
Imagine, for example, if professors routinely sold part of their lecture time to any startup that wanted a few interns.
I don't need to imagine. Most of the conferences I've been to work this way.
There are many ways to look at this. One is to note that, if I needed a job, I would probably pay cash money to attend a series of 3-minute commercials by companies that were looking to hire interns. Indeed, this is a lot of what Stanford students are paying tuition for. In the building next door to your college classroom is a job placement office that specializes in exactly this. So I'm kind of dubious about the assertion that this is some kind of terrible disservice to the students.
Another way to look at it: "sustainable growth" is highly overrated. It's not merely that it wasn't a criteria of the original problem -- which it wasn't -- but also that judging what is and isn't "sustainable" is an exercise in predicting the future. And, like all exercises in predicting the future, it tends to miss a lot of the good stuff. You find yourself saying things like "This business plan won't scale past the first 5000 customers!" or "If Netflix catches on, Blockbuster will get into the business and crush Netflix like a bug!" or "How could I ever make a million dollars doing something this trivial?" or "How can Twitter succeed after the open-source open-protocol Twitter Substitute comes along, as it surely will, any minute now?" [1]
But the most obvious conclusion is: Just because you can't do it twice doesn't mean it isn't worth doing once. If I were a student in that class, I would surely have been happy to sit through a three-minute presentation, though I'm not sure I would have heard much of it, because I would have been too busy rolling on the floor with laughter at the scope of the other students' awesome hack. But, yeah, it won't work a second time. Everybody knows the punch line now.
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[1] Hey, if people didn't believe stuff like this I wouldn't see it pop up on HN every three months, like clockwork.
> You're right: these "genius entrepreneurs" were selling the time of their classmates.
Exactly. But you miss the fact that they already had the time of their classmates to sell. No matter what happened, the classmates would have to sit through 3 minutes from this group.
My experience with these in-class group presentations is that most groups tend to shut out the presentations of the other groups because they're focused on waiting for their turn to present and last-minute prep. So unless it's a really good presentation most of them probably fall on deaf ears. Now these students will present a company pitch for a company that wants to actively recruit students from the class. I'd probably listen to that.
Who said anything about twice, though? They had 3 minutes and they sold it -- I don't think that means they got another 3 minutes. Now both the students and the instructor might have given them another 3 minutes, but that's not something they could have assumed nor is it somehow wrong.
I'm amazed by the number of people in this thread who have gotten the challenge wrong.
They didn't only have 2 hours to conceive and execute their idea, nor did they have to limit themselves to the $5.00.
They were given an envelope that contained an unknown amount of seed money, and then they had 4 or 5 days to decide how to make money with it. They would only have 2 hours once they opened the envelope to make as much money as possible.
The challenge wasn't what people could make with $5.00, it's how the teams dealt with a set of unknowns in order to make money.
(Edit: Someone disagrees with me, but I'm not sure why. If you watch the video, it's quite clear that this is the case. I'm not just stating an opinion here.)
I haven't voted you either way, but from the video it's still not clear to me whether the $5 was a known or unknown amount. I agree that the exercise makes more sense if it's unknown, but I don't think it was ever clearly stated.
1. Email everyone I've done work for in the past 5 years, promising all of my time on Mondays for the next year to the highest bidder by 2:00 p.m.
2. Same as #1, but instead of the highest bid, the first $10,000.
3. Same as #2, but $1,000. I will accept all checks received in the next 2 hours. What they will get: free use of my next web service for life.
4. Tell my employer that unless he cuts me a bonus check for $10,000 in the next 2 hours, I quit.
5. Write a one page book, "How I Lost 50 Pounds in 9 Months." Make as many photocopies as possible. Put on a pair of pants twice my size and sell the one page books for a buck a piece in front of McDonald's or the food court at lunch time. (I weigh 150 pounds.)
In all 5 cases, I leverage assets (goodwill & good health) I've already earned in much more than 2 hours.
The $5? For the lunch I eat while my "assets" (hopefully) earn.
But with several of those options, you take on liabilities that may exceed the money you made. By the same logic, you could use your two hours to get a mortgage on your house. (And the last option sounds like fraud.)
Apparently by ignoring the money and the time limit...
Personally I found the latter 2 solutions pretty unimaginative in ignoring the $5. If the exercise is to maximise the $5 (a much harder task it seems) then they seem to have failed.
if we're going for outside the box thinking I would buy a homeless person a meal and claim the satisfaction was priceless. since priceless > $650 I win.
I'd buy balloons and a bag of rice, make five juggling balls and busk. The balls take about 30 minutes to make, I'd get about an hour of busking, so I'd make about $40 as a one off, maybe $100, depending where I am.
Well, since you ask, juggling balls that you can buy for less than $1 are crap. Very, very hard to juggle five with them. Good juggling balls in the UK cost upwards of ukp3 each, so that's about $10 for five, and you can't buy them in your corner store.
This is merely an academic "bounding/framing" exercise in every sense of the word. Pure entertainment.
A better measure of business creativity would be to allocate the same fixed budgets of labor and materials to all teams and record revenue, profits, and judge the sustainability of the solution at the end of a more reasonable operational timeframe--say 1 week.
The "winning" teams operated under entirely different working budgets for materials and labor during their prep time and 2 hour window.
It's made even worse as the professor immediately demerits the 'party' example due to the costs of the party supplies and setup. Apparently, Stanford student time & attention is "free" for one team, but worth $650 for the other.
If the question is what I would actually do, I'd probably offer "computer tune-ups" as someone else suggested. That, or set up and secure wifi routers. A lot of people are afraid of wifi routers because they've heard the person next door can get them in trouble; solving this problem is of definite value to them. Once I did this for someone whose house was big and radio-interfering enough to require repeaters; I made $100 in an hour.
If the question is what would make the most money, I'd print up a bunch of official-looking flyers and an official-looking record sheet, go to some high-traffic spot, and collect "donations". This is very unethical, but it probably earns money the fastest of anything that can be set up so quickly.
Actually in the video, one of the teams did something similar. They went to a highly trafficked area on campus and offered to test bike tire pressures for free, then fill the tire up for a dollar if necessary.
They had a great response from this, but soon learned that they could make even more money by asking for a "donation", instead of a dollar.
They have time to make money from 2 hours after they open the envelope. If you make your money outside of that time, how is it supposed to count towards the money that you made for the project?
Why couldn't they just never open the envelope and work 9-5 jobs for a couple weeks? Then say 'HAH! see! we made 2,000 bucks each!'
First team: regular work.
Second team: speculation.
Third team: ads.
Where is direct marketing team?
My solutions:
Receipt one:
* by bunch of cheap sport items;
* walk to the park;
* lease them;
* hire and teach other people to do that instead of you for half of income.
(Tested).
Receipt two:
* by a sport item (e.g. ball);
* walk to the street;
* encourage people to play a casual game with you, alone, or with other people;
* hire and teach other people to do that instead of you for half of income.
(Tested).
Hm, maybe one could lend dogs to people who want to flirt with other people who have dogs.
Like suppose you take a stroll in a park and notice a hot specimen of the opposite gender walking their dog. Desperation kicks in, until you notice the helpful dog lender.
I would say sports items would be too boring, unless it would be some really hot new item (like those springs you attach to your feet). Plus you would have to worry about insurance - what if someone breaks his leg while playing with your sports item?
Trick 2: Forget about providing the actual service within those 2 hours. Use the 2 hours just for doing the actual trade.
3.
Then sell something before you buy it. If I was given just 2 hours, I would do quick brokerage.
Hour 1: Find a group of people who wants to buy laptops* at a decent price. Get their configs down and get a commitment.
Hour 2: Find a seller who will give the best price on bulk laptop purchases.
*Laptops because I think it has high profit margins. But if finding a group or a business that is willing to buy laptops is hard - I would switch to some easy product - like movie tickets.
... and you've just created an inductive proof for how the US financial system collapsed.
Don't get me wrong: I think step 3 has a good chance of working. BUT if you, like your customers, assume that a commitment is equivalent to the actual asset (i.e. the laptop) then you are vulnerable to defaulting on YOUR commitment if and when you cannot deliver the asset.
How might that happen? Imagine you commit to purchasing laptops through a broker, exactly like yourself, who has no laptops to sell. This happens all the time (e.g. "just in time" ordering) and it results in delays, angry customers, and in the case of the US financial system, systemic fraud, corruption and failure.
Naked short selling is surprisingly similar to your strategy:
This happens all the time in the material product world. You go to customers, get their orders, then have the products made. Watch some Shark Tank on Hulu. Anyone with a product and tons of inventory is scorned by the panel.
They all say, "Get the sales, then make the product." Why are you going to invest thousands of dollars stocking a product you aren't sure you can sell?
While in theory you are correct, there are a few points to ponder upon:
Laptops are not like stocks or other exchange commodities. As in, their prices won't fluctuate like crazy (unless of course you manage to get pre-order commitments to like 10,000 laptops.) At the scale we are talking about, we have a pretty good idea of what price discounts we'll get. And more importantly - who will be able to deliver them well.
Agreed - delivery is the important aspect, when it comes to just-in-time order fulfillment. If they don't deliver, then you don't deliver either.
On your last point, I agree again: scale is critical. You describe something that might work once, given that there are no supply chain screw-ups or customer service problems. At the scale you describe, you can probably absorb any costs associated with these problems, but you will eat into your time and/or profit to do so.
My whole point is that the risk doesn't disappear just because you haven't invested any capital; you've just shifted the risk.
Interesting parallel. However, I think this would be like the financial system if you got the commitments, and then created a market for these commitments, where they were freely sold as liquid assets.
Since it's a video, I will risk ruining the 'surprise' for you since it's hard to scan a video. She says the most successful teams didn't really use the $5 because it was a limitation, they broke out of the standard "framing" of the problem.
So, the 2 hours is more important than the 5 dollars? I did get caught by the framing, but in retrospect I should have been tipped off by the fact that most wages are > 2.50/hr.
Yeah the 2 hours plus their "skills and creativity." One of the examples she liked the best was a team that sold their class presentation slot to a company that wanted to pitch to business students.
Get as far as you can on $5 of gas and drive to friends and family's houses running msconfig and cleaning up crapware to make their computer run faster. Easily $20 - $40 a pop. Protip: reinvest a little profit into more gas, make even more money!
Actually oranges and extremely cold winters heavily impact businesses. Jamba juice 2 years ago stopped carrying fresh squeezed OJ and smoothies with orange juice in them were 25 cents more.
Totally worth the time. But its great, instead of thinking of what you can do with what you're given, think of what you can do with what you already have. The funding money and time you have to do anything is only there as a buffer, a push in the right direction if needed, but that money is not there to fund your work, your ideas are.
Or the other thing I would do is - organize an auction.
1. Source products from an auction company on consignment basis.
2. Find an event happening in town and pickyback to it - hold your auction at that event (with permission) or outside but very near the event (with no permission).
3. Auction the stuff. Anything over the reserve price = profit. Anything under the reserve price = sale canceled.
Sourcing products within 2 hours from an auction house is hard though - unless you already have a relationship with them before. But given a bit more time - and this is a good idea.
Set the kids out front with as much lemonade and cookies as $5 will buy. Pretty sure they could at least double that $5 in two hours on a warm afternoon with lots of passing traffic.
Just an idea, sell lottery ticket, 50 cents per ticket and winner gets $5.
Need to make some assumptions and do some calculations to figure out the optimal way to price the ticket.
Also, we can ask people to buy ticket in advance, then use that money as new prize and lottery that again. Sounds like ponzi, but in fact more like the fractional reserve system our banks use ...
not sure whether this will really work, just an idea ...
Easy... I'd buy a Sharpie, a piece of cardboard, and some ragged clothes at Goodwill, and stand out on a street corner. It's not uncommon for bums to make upwards of $200/day around here.
She published a book called "what I wish I knew when I was 20". If you like the story, you'd probably enjoy the book as well (the $5 funding story is in there). It's a good motivation recharger for those entrepreneurs in the thick of it - get's you pumped up to innovate. Also, might make you want to go to the d-school at Standford because a number of stories are based on her class there.
The rules were, 2 hours and $5. No one spent only two hours and only $5. The first suggestion from the class was a $50 house party. Tire pumps cost more than $5. The restaurant reservation scheme occurred the next weekend.
The last, most creative team was perhaps the only one that actually followed the rules, assuming they sold the class time in those two hours.
My iPhone app, EasyPlay, a gesture-based iPod controller, is on sale for $0.99. Or, if you like natural language processing, check out iRhyme, my iPhone NLP rhyming dictionary.
My main point is that for 5 minutes time spent, a revenue stream is opened up; an efficient conversion of units of work time to revenue potential. (given I've already invested several months in these apps). The only risk was having this entry be downvoted for self-promoting on HN, since the rank is now at -4 points.
I'll report how successful this experiment was tomorrow.
