Consider the music business. In nearly every segment, from performers to promotion to distribution, there is far more talent and capital being applied than will ever be able to be profitably returned. People get into the music business as a life choice. Nashville is full of artists just barely getting by, but thankful to be in the business. On the web there are hundreds of startups trying out dozens of business models for selling/giving/pushing/pulling music. Hardly any of them are making profits, and none of them are seeing big exits. But money and talent keeps flowing in, whether it is hedge fund veterans backing LimeWire or  Google trying several strategies.

When there is too much capital, the bad can start to crowd out the good. There are only so many early adopters, and they get tired of hearing about all the new things. Your competitors are losing money on every sale, making it up in volume, and setting customer expectations all wrong. Lavish launch parties, expensive marketing campaigns, and picky consumers drain your resources. Incumbents with natural or historic monopolies become demanding and exploitive of new partners. A new entrant who tries to be above the fray doesn’t find anyone doing business at that level.

Music isn’t the only market with this problem. Many other media segments have it too, including video games, Broadway theater, and film. For most of its history the airline business has been losing investor’s money. Nearly any tech-VC fad, particularly one with light capital or intellectual property requirements, can fill up with suckers. The restaurant business may be subject to the same problem, and the nightclub business probably is.

If you know you are in a market full of suckers, it might still be possible to build a successful business. You can find an angle to exploit people who want to be in the market, either in the style of The Producers (generally illegal) or in the style of Ticketmaster (potentially illegal). You can be consistently and significantly better than everyone else, like many Hollywood directors or Apple’s iTunes. Or use the market to prove out your idea and build your brand, but make your money in a more diverse market, like Moontoast (whose presentation at WebInnoinspired this post).

At the poker table, it’s not very often that a sucker turns his two-seven offsuit into a full house. When it comes to startups, there are a lot more ways for people with capital and skills to spoil the game for everyone. If you look around the table and everyone else looks like a sucker, you might be one too.

Similarly, you don’t work on great technology at a startup.  Startups, by and large, aren’t about technology — at least, not the Web 2.0 startups like Facebook, Foursquare, Twitter, Groupon, etc.   They are about business model discovery.  So if you are fundamentally a technologist at heart, whose heart sings when you’re making a better file system, or fixing a kernel bug, you’re not going to be happy at a startup.   At least, not if the startup is run competently.

Ted might have a point about Web 2.0 startups, but there are still  technology startups in software. These startups generally need to prove out their product and market rather than their business model. Business model innovation is sometimes part of the exercise. But more often the company is executing on a standard business model, with some need to validate the market, a greater need to validate/implement the technology, and most importantly a need to link the innovative technology to an addressable market. Much has been written about this, because it is the traditional structure of startups.

Web 2.0 startups are trendy right now because they are disturbingly capital efficient. Companies like Diapers.com and Groupon have negligible technology risk. Proving out the business model costs very little money in the age of Everything as a Service (EaaS). They generate good stories about selling virtual goods before they exist, of zero-inventory supply chains and zero-employee companies. Investors like the idea of low risk high reward returns, even if they are still uncomfortable with the decreased emphasis on capital.

But while those companies are grabbing headlines and mindshare there is plenty of deep technology innovation going on in startups. There are more innovative database startups at various stages in their life than I can remember right now (e.g. Vertica, Clustrix, Tokutek), not to mention the NoSQL startups (Cloudera, Basho), messaging companies (Solace, Kaplan, 29west), visualization companies (Panopticon, Spotfire), and hundreds of other software startups with a sizable technical product innovation challenge ahead of them. And there are plenty of recent success stories that wouldn’t have been able to build their company without great technology (VMware, Google, Amazon).

It’s great that business model innovation is well enough understood that it is top of mind for developers. Understanding what key innovations are required, be they business or technical, and what are the most efficient ways to validate them, is key to success in any startup. It’s too bad that some engineers think that there is no longer a place for great engineering at startups. Not all startups require great engineering, but many still do.

Ted’s trying to defend Google against claims that Facebook is poaching all the engineers. From where I stand, he’s right. Plenty of great engineers are going to work at Google, more than are leaving. And Google is able to run projects like ChromeOS, LLVM, and AppEngine. Projects that wouldn’t be the same in a startup.

But if you were going to find fault with Google in this, consider: Googlers now believe they are doing engineering that can’t be done anywhere else. If that was true, it would mean they don’t have anything to fear from startups. Believing that is a step towards the hubris and ossification that Google is working so hard to avoid.

In August of this year I joined the ranks of people “cutting the cord”. I was moving, and when we set up Verizon FiOS at the new house we left off video. Three months later, I’d like to fill you in on how it has gone and what I see in the future of consumer video delivery.

I dropped FiOS television for two reasons: price and customer service. As for the price, paying more than $50 per month for cable television has always seemed excessive to me. Verizon kept edging up the costs, to something like $65 for fairly-basic service. “Fairly basic” is where customer service comes in, it was always difficult to navigate the different offerings, promotional rates, and timeouts.

In comparison, Verizon FiOS internet service is easy to buy, transparently priced, and has had fabulous technical support the few times I have had to use them (they have never asked me to reboot anything). I highly recommend FiOS internet service if it is available to you.

But back to television. Having decided to drop cable but not to suspend all consumption of video media, we replaced it with a few a la carte offerings:

1. Netflix Streaming ($16.99 $9.99) – This works great. We’ve been long time Netflix customers. The number of movies and especially television available streaming keeps going up. We’ve hardly used the shipped-DVDs part of our Netflix subscription in months. They just changed around the plans, so we dropped to $10/month which only allows one DVD at a time, but unlimited streaming.
2. Hulu Plus ($7.99/month) – We’ve been using Hulu for a long time. The “plus” mostly means you have access to current shows (e.g. Glee) without them aging out. Otherwise you can only play the most recent handful of episodes. Hulu Plus also includes lots of rerun-grade television from the 80s and 90s.
3. Amazon Unbox ($2/episode) Some premium shows aren’t on Netflix or Hulu, like Mad Men, but they are available pay-per-episode on Amazon.
4. Apple iTunes ($3/episode) Other premium shows (True Blood) are only on iTunes.

All this runs into a Mac Mini we bought a few years ago. I like the Mac because it is an open enough platform to run all the various media services I might want, while not having the maintenance headaches a Windows Media Center or Linux machine would have (I used to run MythTV before I switch to the Mac). There are many other ways to do it, like single purpose set top boxes (Netflix, Apple TV, Google TV, Boxee, etc) or game consoles or TVs with built in streaming media functionality. But I like the lack of lock-in that comes from having a general purpose computer attached to the television.

The total cost of this kind of setup is thus $600 for the hardware (not counting the actual television), under $20 of fixed costs per month, and another $15 of premium content purchases per month. That’s about $30 per month cheaper than the FiOS television I was getting.

What’s the downside? I have missed out on some content. The two things I wanted to watch but could not find online were the Emmy Awards (I could get red carpet and backstage feeds, but not the actual event) and the Macy’s Thanksgiving Day Parade (nice website but no streaming). I also no longer have access to Red Sox games, or other Boston sports. Given the tough season the Red Sox were having, I didn’t really miss it, but that might be a problem next year. MLB.com will sell you video feeds of games, but only outside the home market for the team. I could get around that restriction, but paying $200 for content only to have to violate the license terms seems abusive.

The Future of Television

I’m liking my new media lifestyle, it’s hard to imagine going back. If anything, it seems like more content is coming to me. The question for the content-producers is how are they going to get it to me. There are fortunes to be made in correctly predicting the new media distribution landscape.

One big opening I see is around children’s television. There isn’t a clear leader in this space. Netflix has a lot of children’s content, but doesn’t really offer the Saturday Morning Cartoons experience. Of course, maybe children will be looking for a more interactive media experience on their Saturday mornings. Media companies are still producing a lot of children’s television, and kids consume it. I predict a $10/month service focused on content for children, with optimized catalog and playback.

Another obvious opportunity is in sports. This is likely to be dominated by incumbents. I would happily pay per-game, or buy a reasonably priced subscription. $200 for the season from MLB is kind of high since I don’t come close to watching every game.

Finally, the big question is whether consumers in general will want this kind of a la carte experience, buying a $10 subscription here, a $2 video there, or if they would really rather have the bundled experience that cable offers. Even if someone does put together a bundled service, it’s hard for me to imagine people paying $60-100/month for internet-delivered television. Not with Netflix and Hulu setting price expectations so low.

In business school you are likely to encounter the Theory of the Firm. If you haven’t been to business school, but you grew up in the modern west, it may seem strange to think that you need a theory to explain the existence of big companies. But actually, big companies are a recent innovation, something that came about in the later part of the Industrial Revolution, the early 20th century. Adam Smith, when conceiving the famous Invisible Hand of capitalism, had no concept of the international megacorporation. His pin makers worked in small groups, with the free market guiding their interactions.

If the markets are efficient, there ought not be any need for corporations. People can freely associate to pursue their various goals, exchanging money for goods and services, each pursuing their own ends. In fact, a large corporation represents an imposition on the free market, where a group of people (employees) decide to transact with each other and the owners of the corporation under special rules. The question at hand is why they do that, and why are some specializations best kept inside the firm while others are commonly contracted out.

The large corporation may be a phenomenon of the 20th century, brought about by efficiencies of scale, inefficiencies of communication, concentrations of management and financial expertise. Or there may be fundamental value to the corporation. The theory of the firm enables us to reason about why companies exist, and whether they will persist.

The most widely understood theory of the firm is that of Ronald Coase, based on trasnsaction costs. In Coase’s model, having a service provider within the firm is economically advantageous when the cost of transacting for a service or asset with an outside party exceeds the inefficiency of bringing the service or asset inside the firm. To answer whether a given function belongs inside the firm, from office cleaning services to recruiting to software development, examine the costs associated with contracting for the function, compared to the efficiency gained from getting the service on the free market. This theory is very attractive for the modern lean startup. In the 21st century more and more functions, from graphic design to office space, are being standardized, commoditized, and delivered on liquid markets like 99designs. As communications technology improves, transaction costs go down, and firms should get smaller. These are exciting times.

But there are other approaches to understanding the firm. The paper which precipitated this blog post, Eric Van den Steen’s Interpersonal Authority in a Theory of the Firm (via Marginal Revolution), finds substantial value in the firm to create goal-alignment. In his model, consider two parties with two business opportunities (for example, building a product and selling it) deciding how to pursue them. If their two opportunities have are substantially interdependent, but their decisions are made independently, then each is in danger of being spoiled by the other. If instead one party takes a controlling role, offering the other party appropriate incentives, then the likelihood of being spoiled drops out and it is more likely that both business opportunities will be successful. And further, the optimal incentives in this case looks more like salary than like partnership, because the goal is to get the employee to do what they are told, rather than what they think will be most successful.

The take-away for the lean startup is that you must include in your firm the people, skills, and assets from whom you require alignment to a common goal. You can outsource anything where the practitioner can pursue their own profit maximization and not impact your focus. The meta take-away is that the theory of the firm is still open to innovative interpretations. For anyone interested in studying entrepreneurship, it’s important to understand the economics underlying the organizations that are being created.

In laptops and desktops, Apple is unassailed as the luxury brand. Whenever I talk to non-engineers about buying laptops or desktops, this is clear. If I suggest they get a Mac, the response is never “I don’t know if it will run my software” or “I prefer Windows”, but rather “I can’t afford one” or “it feels unnecessary.” Rather like if someone asked me what car to buy and I suggested a BMW. As far as I can tell, non-geeks would all buy Macs if money were no object. And there is a strong correlation between people who display what computer they use socially (geeks, coffee-shop denizens) and Mac users (gamers have their own tastes and displays). Thanks to the fact that the OS no longer matters, consumers are free to select either a utilitarian lowest-bidder machine, or a Mac.

Apple doesn’t really have any competition in this market. Sony has tried several times, and makes some really nice (and really expensive) machines. But because the Sony brand still doesn’t mean luxury to the man on the street, it doesn’t give people the opportunity to show off that they require from their luxury goods. And so Apple has a near-monopoly on expensive computers. In June 2009, Apple had 90% market share for non-business computers costing more than $1000. Their consumers are not price sensitive, and so Apple gets correspondingly high margins, creating a lucrative and stable business.

The iPod is also a luxury good, albeit a luxury that nearly everyone can afford. I think it is a fluke that Apple dominates the portable music player market. I think the iPod is the Coach purse of the Apple lineup: It’s a luxury good, but one that nearly anyone can afford and is easy to justify. And with those ubiquitous white earbuds, you can show off your good taste even when the player is in your pocket.

Speaking of the iPod, some people think that Apple is becoming a media company, leveraging their control of the player into domination of the music business. Far from it, I would say. Apple is happily participating in the demise of the music industry, carrying the record labels in a hand basket towards the free or nearly-free distribution of recorded music that is the obvious conclusion of technological improvements. If you told Steve Jobs that all music is going to be free tomorrow, the logical response would be “great, people are going to need new iPods with more storage.”

The iPad is clearly a luxury good. Early adopters proudly show off their iPad. It’s very expensive and has little competition. There is a big question as to how the market for tablets will develop. It may go the way of MP3 players, an expensive but pleasant toy where everyone buys the nice one from Apple. Or it may look more like the modern PC world, where anyone can get a decent table from Acer/Dell/HP/etc for $200. A lot depends on how broad the demand is for tablets.

The iPhone initially headed in the direction of the iPod, looking like mainstream consumers were choosing between an iPhone and no smartphone at all. But Android has created a credible option, in fact a wealth of credible option, that more practical consumers see as the better option when it comes to price, service availability, etc. But Apple still sells plenty of phones to people who want the new iPhone, even if the antenna is broken, the service is terrible, and their preferred carrier doesn’t have it.

Expect Apple to maintain a high price point and air of exclusivity around the iPad and iPhone. In the face of dozens of perfectly adequate Android competitors, Apple may well cede the low end of the market. Their branding, integration, and user experience will allow them to capture a premium price at the high end. Their product line will stay simple; customer’s aren’t interested in the optimal price/performance or choosing features. Customers just want the new Apple device, and will not be especially conscious about the price or comparisons to third party products.

Much has been written about developers fleeing iOS for Android. It’s true that Apple has been difficult to do business with. I expect mobile app developers to realize that Apple has the customers they want. Years ago, Apple was able to keep developers on the Mac platform when their market share was in the low single digits, because the average Apple user bought a lot more third party software than the average Windows user. Similarly, by hanging on to the high-end, $4-latte-drinking customer, Apple will be the place to go for developers selling $4 apps. Expect comparisons of per-user app spend to be forthcoming, and the numbers to be in Apple’s favor.

Apple has figured out how to be the only mass market luxury vendor in desktops, laptops, and MP3 players. By applying the same techniques to tablet computers and mobile phones, they might not maintain raw market share, but they can hang on to the most profitable customers, which is more important. They will do it not by offering the best products on some absolute scale understood only by geeks, but by offering a user experience that starts in the store, a brand which is increasingly well recognized, and a set of stories that tell people they are buying something more than just luxury.

Everyone knows that networking is the best way to get a job. Not everyone is prepared to attend “networking events”, hand out business cards to people they meet, or spend all their time maintaining professional relationships. If you are one of these people, I have good news. You can still benefit from networking to find jobs and other opportunities. Merely by being non-hostile, open to the possibility of networking, you can benefit from the networks of people you already know, your friends and coworkers.

The reason is simple: networkers need you. People in the world who network, who spend lots of time maintaining relationships, are participating in a gift economy. They trade favors, introductions, contacts, and other information. Most networkers are looking for win-win situations, connections they can make which benefit both parties. When they get you a job, they are also helping someone fill a position.

These networkers need raw material, which comes from people like you who are not otherwise plugged into the network. By being open to networking, you let them help you. Here are three simple principles to be open to networking:

• Be open. When you meet someone socially, and they are interested in you, tell them about yourself. If you are looking for a new job, or new opportunities, or about to finish a program at school, or an expert in some part of your field, feel free to volunteer that fact. This isn’t begging, it is giving people the opportunity to help you out.
• Be specific. The more specific you are when telling people about your interests, the easier it is for them to help. No one wants to flood their network with a request for “a job”, but if you are “an experienced robotics engineer looking for a clean tech startup,” that message is valuable and easy to route to the right place.
• Be appreciative. People who network do it because they like helping people. But do not immediately respond with a gift or other token. Networking is long term game, and there will likely be opportunities to reciprocate in the future. Or you can pay it forward, by doing your own part to help others in a similar way.

Networking doesn’t have to mean pushy conversations with strangers. By maintaining your existing social relationships, and being open, specific, and appreciative, you can let other people do the networking for you. Good luck.

Consumer goods suffer greatly from this problem. They are produced and distributed by large and complex organizations. Consumers, particularly in traditional retail settings, have little to go on but what it says on the box and the brand. And in recent times, brands have become commodities themselves, with everyone from Martha Stewart to Sesame Street selling their name. In order to make this market work, we need better technology at the point of sale.

Enter Buy It Like You Mean It.

Send them a barcode (via SMS or otherwise) and they will send you back a customized report about that product and how it aligns with your personal political or social inclinations. This information is crowd-sourced, Wikipedia style, from what I imagine will become an active community of corporate watch dogs. In the short term, they are focusing on chocolate, to build a complete database and work the bugs out of their system. But I’m sure it won’t be long before they branch out. And probably build an iPhone application.

I’m a huge fan of the application of technology to improving market dynamics, and especially of applying technology to level the playing field between consumers and corporations. Since the first time I heard the idea, I’ve been excited about Vendor Relationship Management (VRM), the dual of the ubiquitous Customer Relationship Management (CRM). A lot of this stuff is still in the conceptual stages, such as ProjectVRM at Harvard. Buy It Like You Mean It is a refreshingly concrete application of the same ideas.

I imagine a future in which self-organized blocks of consumers, aided by software, can effectively hold their own against even the largest vendors. Chinese “team buying” (Tuangou) is an early example of this. I look forward to using technology to share information with other consumers about my credit card company, auto mechanic, airline, or hotel. Actually, I can already do that. So instead I look forward to using technology to digest and aggregate all the freely available information, and to even more directly manage my relationship with these vendors, all the way to making purchase decisions for me.

Much appreciation to Taza Chocolate for hosting the launch party. They are a stone ground chocolate factory in Somerville, making ultra-high end chocolate. If you have a chance to tour their factory, I highly recommend it.

Suffice to say the evaluation didn’t go well for me. It isn’t clear that there were any problems with the product. But I kept getting blocked by other things in the evaluation. I had trouble logging in. Trouble figuring out their programming paradigm. Trouble deciding what the tool is good for. And more.

After taking their survey, I decided to capture for myself what I learned about the my own bungee connect evaluation process.

• Knowing what a tool is good for is non-trivial. It helps to give me good examples of problems I would solve with this tool.
• Even better is to give me problems I could solve with this tool that will impress other people. Like if I just spent an hour with this on the couch, I should be able to show my wife something. Or my boss.
• Samples are really good for learning. Especially samples that can be extended into boss-impressing applications.
• Exercises are also a good thing. They are better than samples for getting me hands-on.
• Videos are a really slow way to transfer information. I’m an early adopter of programming languages. This means I learn at least one new language per month. I don’t have time to sit through a 5 minute video about hello world. If you can’t explain hello world in a page of text, you have a problem.
• Rather than a video, give me an exercise and a cheat sheet. The cheat sheat should give me instructions for completing the exercise, in excruciating detail (I can skip the obvious parts, since it is just text).
• If the exercises are long, or build on one another, give me Julia Child-style opportunities to start with a mostly-complete version of the application.
• I’m really busy. During the signup, wait for email, click link to confirm cycle, you are almost guaranteed to lose my attention.
• I’m really busy. Things that timeout are at odds with that. Development environments that timeout in a matter of minutes are basically unusable.
• Programs are made of files. Anything that tries to hide the files, or make the files too opaque, will make me uncomfortable. Are you listening Smalltalk?
• Offering hosting is good. But being the only place I can store my software is scary.
• Web services are cool, but the number of public web services is not yet impressive. And their documentation leaves something to be desired. If your software depends on third-party services, document the heck out of those too.
• Twenty dollars at Amazon is sufficient incentive to get me to take a survey.

That’s the braindump for now. I’ve already noticed areas where we at StreamBase could be doing better.

I am a long time Netflix customer and former Netflix shareholder. I got out of the stock because I don’t think they are positioned to win in online-rentals. The recent announcement with LG about a set-top box might help, but it’s far from a solution. Right now, customers have yet to find a business model they really like. And so companies are serving up a wide variety of business models, hoping to find one that works. As a result, we are in a tornado of different pricing and contract terms. Now Apple, who has gotten this right before, has thrown their hat in.

The goal with all these different business models is for the company to make as much money as possible. Company bosses are likely to see the price of their brick and mortar competition as a baseline. Ideally, they would like to charge more. They provide additional convenience, they say. Ticketmaster is a success story here, charging additional fees for purchasing online. But they sell one of the remaining actually-scarce goods, tickets to live shows in capacity-limited venues. And they are an effective monopoly. And everyone hates them. An online movie provider cannot win by charging extra for convenience.

Customers don’t accept the brick and mortar price as the right base price. For customers, the base price is free. And claims of convenience fall on deaf ears. It’s quite often more convenient to steal films than to acquire them legitimately online (bad websites, DRM software, advertising). Advertising models might work for older content, but not for big-budget Hollywood films. An online movie provider cannot win (or stay in business) pricing at free.

This leaves frustrated customers and frustrated industry players. Taking a page from Getting to Yes, I went looking for objective criteria to decide the fair price for digital movie rental, based on the current market price for retail movie rental, and the differences that result from going online. I’m going to assume that contract terms will be achieved that for most customers are equivalent to retail rental, and that a software/player stack will be created that offers sufficient convenience.

Customers currently pay about $4 to rent a movie at Blockbuster. But there are a number of additional components of the cost to consumers, beyond simple price. Important components are:

• $4 in cash
• Travel costs to get to the store
• Risk that they won’t have the movie
• Risk that something else will come up between the time you rent and the time you watch
• Risk that the disc will be damaged
• Risk that the pimply-faced-youth will frustrate you with incompetence

As you can see, most of these costs are removed by the convenience of the online rental. “Great,” says Hollywood et al, “we can charge them more and capture all the value.” Well, hold on a second. Let’s look at the costs to the rental store:

• Cost of acquiring the rights and media for films that get rented
• Cost of films that don’t get rented
• Cost of floor space, fixtures, bricks, mortar
• Wages of pimply-faced-youth

As you can see, many of those costs are lower too. “Great,” say customers, “we should get access to more movies more easily for less money.” Ah, a classic two-party negotiation just waiting to have objective criteria applied.

Pricing is about supply and demand. Pricing is about finding a market-clearing price, where there are equal numbers of buying and sellers at that price, so all goods change hands, and both profit and utility are maximized. At least that’s what I learned in Econ 101.

Soft-costs of buying are reduced for buyers. This means that at every price point (lower and higher than $4), there will be more buyers. Production costs are also reduced. So there should also be more supply at every price point.

That means that if the market were working properly, prices would go down, and consumers would be happily buying more of a better product. Instead, prices are staying high, products aren’t better yet, and consumers are getting frustrated and opting out of the whole thing.

The punch line is that on the internet, information doesn’t need to be free, as Stewart Brand claimed. People are willing to pay. But in the mind of consumers, when you remove the overhead of moving about physical goods, and you are trying to set a fair price, Information Wants to be Half Price.

In these markets, the price buyers are willing to pay is defined by average quality of good. Buyers lack information, so can only assume they are going to get a product of average value. Unfortunately, this lower price drives the best products out of the market, because sellers (who know they have the best goods) won’t accept that price. When the best goods are removed from the market, the average quality drops, the price drops, and the next best goods are removed from the market. The conclusion is that in these markets quality falls until it matches the amount of information that buyers have.

Bruce applies this principle of economics to explain why there are so many bad security products. But others in the blogosphere have picked it up as a way to describe other parts of software. I first saw it at David Anderson’s blog, where he talks about the lack of information when hiring software engineers. The most stark application to the job market comes in a Reddit comment through:

I just realized that it applies to the IT job market. Here the seller (the applicant) has all the info about himself, while the employer knows nothing. So what happens is that companies expect the average, and pay accordingly. That’s why people who are smarter than average shouldn’t go on job interviews, because they’ll likely to get below what they are worth.

In the IT market it also helps to explain the pervasive use of certifications. Even if they don’t indicate that a candidate is good, they do cut out the bottom of the distribution of candidates (the truly terrible sysadmins). Since top people will have already taken themselves out of the market for these jobs, it’s ok to alienate them. Removing the bottom people pulls up the average, so prices (salaries) presumably rise.

As much as I like thinking about the talent market, my favorite application of this meme is Reg Braithwaite’s The Not So Big Software Design where he applies it to tract housing (a pet issue of mine) and by metaphor to custom software development. The customers for both new houses and custom software are definitely ignorant, and they tend to buy based on what we in the software industry call buzzwords. For new home buyers, these are things like granite countertops, en-suite master bathrooms, the number of bedrooms, etc. Builders optimize for these easy-to-observe items, at the expense of things that can be critical to livability or maintainability of homes.

It’s a good discussion of the realities of custom software. The metaphor does tragically fall down though. At least buyers of used cars and tract housing can resell them to the next ignorant buyer. Companies are generally stuck with their custom software.