nabil laoudji

One of my favorite services is Pandora, a free, personalized streaming radio station.  Pandora’s appeal has less to do with it being free and streaming (free streaming radio has been around since the dawn of the internet), and more to do with it being personalized.  Pandora tracks the songs to which I listen — versus the ones that I skip — and plugs that info into a powerful algorithm that figures out what song I’d like to listen to next.  And then feeds it to me.

I love Pandora.  And I’m not alone.  Today 20 million users log in to Pandora because Pandora has got them figured out.  Other organizations have also jumped on the personalization bandwagon.  Even your local grocery store tracks the items you buy, and uses that information to print coupons on your receipt, which experience has shown you are more likely to redeem.

But in many ways, that’s old news.

What I find really interesting is what happens when user data is combined from more than one organization.  It’s taking the profiles of the Facebook friends you invited over for dinner, and combining it with your grocery store history to recommend the food you should buy for the party.  It’s taking your listening history on your iPod, and combining it with your bank’s data on the concert tickets you’ve purchased over the last ten years, to give you a deal on an artist you’d like who is playing five blocks from your house.

My prediction is that more accurate recommendations drawn from multiple sources will only make people happier.  So who’s going to do it?

That’s less certain.

The simplest theory is that a large company will snap up user databases that have a lot of synergy (e.g. streaming media companies and banks) by buying those companies outright.  The obvious choice is cash-rich Google, which through services that it has either created or purchased already knows what you search for, what you watch (YouTube), where you are (Latitude), what you read (Adsense cookies), how healthy you are (Google Health) and the sweet nothings your better half whispers in your voicemail (Google Voice), albeit poorly.

The alternative is that as more companies appreciate the value of buying more data (to understand their clients) or sharing more data (as an added source of revenue), we’ll see the rise of a universal API that will enable companies to plug into one-another’s databases for a set cost.

The biggest stumbling block to moving in this direction is privacy.  The data love-making that I described above would be illegal in many European countries, where consumer privacy laws are very strict.  On a social level, people might not be so pumped to have their kid’s liberal daycare center know that they spend most of their discretionary income on aerial wolf-hunting junkets.

This last week, I asked Facebook’s VP Mike Schroepfer (who spoke at the MIT EmTech conference) and the founder of Mint.com Aaron Patzer (who spoke at MIT Sloan two days after selling his personalized financial website… for $170 million) about how companies should deal with privacy issues as they collect more and more data on their users.  The common thread in their responses: set expectations.  Mike emphasized the importance of telling consumers very clearly what you are doing with their data (a lesson learned from the Beacon fiasco).  Aaron emphasized the importance of creating a flawless customer experience (pixel-perfect website; high uptime) that boosts confidence in the organization’s ability to manage customer privacy.

As the costs of gathering consumer data goes down, and the value becomes more apparent, it’ll be interesting to watch the interplay between how organizations gain access to data (take-overs versus APIs), and privacy.

In the meantime, back to my playlist on Pandora.

I spent Labor Day weekend in Pennsylvania with my family, where one question rose above the rest: now that you’ve sat through orientation, what are your thoughts on MIT Sloan?  My response: I’m excited. And not for the reasons that I expected.

Sloan, like many business schools, gives students a lot to be excited about: dynamic professors, great facilities, and so forth.  But what really turned me on to Sloan this week is less commonly emphasized in the business school pitch: it has to do with power.

Sloan demonstrated this most poignantly through two keynotes.

First came Simon Johnson (baselinescenario.com — you’re welcome Simon), former chief economist at the IMF, current professor of entrepreneurship, and celebrity pundit on today’s financial crisis.  Simon laid out, in no uncertain terms, that the reason America’s economy is increasingly vulnerable to collapse is that it is regulated, by proxy, by those who stand to profit most from its vulnerability, aka the financial services sector.  Today, in the wake of the worst economic crisis in a century, the major players in the financial services industry have more power than ever, thanks to a wholesale transfer of capital from the bottom up.

Second came John Sterman, Sloan operations professor.  Professor Sterman walked us through a simulator, where teams of eight were asked to run a vertically integrated beer manufacturer (and let the breweries brew!), and make iterative decisions on managing the beer’s supply chain.  By the end of the exercise, many teams who only hours earlier glowed with mutual admiration, found themselves mired in accusations of incompetence, while their supply chains failed in front of them.  The purpose of this exercise was to demonstrate that the reason organizations fail has less to do with the competence of their employees, and more to do with the design of the systems in which they operate.  His poignant illustration thereof?  Photos of soldiers in the Abu Gharib prison giving the camera a thumbs-up while Iraqi prisoners lie bound, gagged, and naked on the floor beside them.  Professor Sterman: “It wasn’t just a few bad apples.  It was the failure of a system.”

Unlike medicine or law, one doesn’t need a masters in business to practice in the field.  More than any other degree, conventional thinking is that the value of an MBA is that it is an insertion point into the prevalent power structure.  And yet during my orientation Sloan demonstrated a willingness to not only examine this power structure dispassionately, but in some cases call for its wholesale destruction.  And that’s why I’m excited.

New trend? Media companies are going shorter on virtual, longer on reality.

Yesterday’s communication technology enabled me to keep tabs on a handful of folks who I couldn’t easily see (e.g. calling my Aunt Najet who lives 3,000 miles away in Tunis). Today’s tech also enables me to keep tabs on a whole bunch of folks who I can easily see but do not (e.g. following the Facebook updates of a friend who lives in my neighborhood but who I haven’t met up with since high school).

HOLDING THE BABY
While every month I keep tabs on an increasing number of folks, I feel that the emotional input I get from these interactions has not increased accordingly. No matter how many pictures and status updates I see of my friend’s cute newborn on Facebook, no experience summons the same emotion as holding him in my arms. In short, the advantage of today’s tech (or data cloud) is that it enables me to easily keep tabs on lives of a whole bunch of people; the disadvantage is that more and more of my interactions lack physicality, or shared space.

BACK TO THE BODY
My hypothesis is that as I, and those around me, have a greater volume of interactions with people in the data cloud, a tension is building. The more interactions I have in the data cloud, the more thirsty I become for an experience in the physical world. I believe that the recent success of companies that provide a physical experience can be attributed to this trend.

In the video game industry, several decades and billions of dollars were spent on luring gamers into increasingly sophisticated virtual worlds. Yet after years of this, a console called the Nintendo Wii dispensed with the pursuit of creating sophisticated graphics, and reminded gamers that they had a body. By asking gamers to wave around their arms to control virtual characters, Nintendo hit a nerve and outsold all of its competitors. Today Microsoft is taking this one step further, and is developing an Xbox accessory that tracks a gamer’s entire body, including the expression on their face, and relays it to their on-screen avatar (see Project Natal).

In the web tech industry, companies such as Facebook and LinkedIn, that have generated millions off of sites that allow people to build virtual social networks, are pushing out applications (see Loopt) that enable users to locate friends in their surrounding area (say the mall), and actually meet up with them in person. Google recently released its own location-awareness app (see Latitude) and is pushing it across mobile platforms. Michael Arrington (see TechCrunch) calls location-awareness the next killer app.

CHEW IT OVER
It’ll be interesting to track which organizations step away from the data cloud, and find innovative ways to get back to reality. In the meantime, why not sit back and enjoy a stick of Dentyne gum, whose “Make Face Time” marketing campaign gets to the heart of this trend: