Monday, September 22, 2014

Do Something Wrong and Fix It

I am reviewing discrete math videos. Because yes I am that nerdy.

The instructor made an interesting comment at one point.

Do something wrong and then fix it. 

This got me thinking about work and life. I get frustrated at times with limited thinking. Oh we can't do this. No we can't do that. People, let's do something. Let's at least try something new and see what happens.

Making mistakes helps us learn. But only if we learn from our mistakes. By taking a chance and trying something we at least learn what doesn't work which is better than learning nothing at all. Thomas Edison didn't come up with the light bulb on his first attempt. He tried many materials to find out which ones didn't work before he found out which one did.

Studies show how mistakes help us learn:

And how correct analysis of mistakes help us learn faster:

I have learned for myself over time, that sometimes rereading the first page of a complex topic I'm not getting over and over doesn't help. It helps to go quickly through the whole book, scanning the information to get the big picture. Then I review the material again for the fine grained details. I don't get hung up on every minute piece of information along the way. I want to get to what matters. I don't sit there stuck on page one I just keep going.

This reminds me of people who stall meetings arguing about semantics and the meaning of words and trivial details. They distract from the bigger problem you are trying to solve. In fact I am surprised how many meetings I attend with general discussion topics and circular conversation that have no real purpose or agenda. A meeting should have a problem to solve, a plan to get there, and a deliverable. There is a problem which has to be clearly stated at the start of the meeting - and it has to be the right problem. Instead of talking about all the problems and being afraid of making mistakes or wasting time on distracting tangents, stay focused on the real problem. Make a plan of actions to take to solve the problem. Then do it.

If the actions turn out to be wrong, so what. Cross them off the list and consider the accomplishment as having discovered and eliminated particular actions that did not solve the problem. Think about why they did not solve the problem and then try something else.

Thinking is key to this whole process. I don't want to sound like you should just flail around doing things for the sake of doing them. But taking some action is better than nothing. While working on something and after it fails, think about why and fix it.

I remember performance testing a complex new system and when it took over a day to run, a guy on my team turned to me (somewhat triumphantly as if he wanted to prove it wouldn't work) and said "Well now we are screwed." And I said, "No, now we fix it." Turns out they were running the app and database it two different data centers. Duh. Latency going over that network caused the problem. There was nothing wrong with the application.

This next article talks about the trade off of speed and accuracy. It seems that taking our time solving problems can help us improve the accuracy of our results. However the end of the article considers the cost of not taking fast action in the case of turning off a nuclear reactor:

This brings me to my last point. You have to think about what is really going to work. This can be based on research as opposed to pulling something out of thin air with no real basis for the decision. However there is a cost associated with thinking too long. In the case of a business loss of innovation might mean loss of market share -- and creative staff that can drive game changing products to market. The cost of rushing and bypassing security might lead to a Target or Home Depot scenario. But the cost of not taking any risks may put you out of business as the competition passes you by if you are paralyzed with fear of all the potential consequences.

It's a trade off. It brings me back to discrete math and algorithms. You don't want to sit around staring at a problem, thinking, talking and doing nothing. 

Unleash the potential of people to solve problems. Let them try things. If you can think ahead about how to do things faster using a reasonable algorithm that should give you accurate results, use it. If you want things to be faster but not sure what to do, try something that poses minimal risk. It the risk of doing or not doing something puts you out of business, consider of the potential loss is worth it and slow down a bit and think it through. But don't just do nothing.

If you are blocked, stuck or not sure what to do, do something wrong that moves you towards a final solution, and then fix it.

Sunday, September 14, 2014

Apple Pay and Transaction Rates

I'm reading some conflicting information on Apple Pay and the related transaction rates. There seem to be some contradictory articles about credit card transaction fees and some hype about Apple's cut.

To better understand the fees associated with Apple Pay it might be helpful to first understand who pays what in typical credit card transaction scenario. This is glossing over some details but here is the gist of it:

A merchant that wants to accept credit cards has to get a merchant account. This is a separate bank account just for credit card processing. The merchant account is linked to the  platforms that process credit cards, that ultimately get the money for the transaction from the POS machine, phone system, e-commerce web site, iPhone, etc. into the merchant account of the merchant. Then the money gets transferred, once settled, from the merchant account to the specified checking account.

Whenever a merchant accepts a credit card, they have to pay a fee. You are all happy that you don't have to carry cash around and get to use your credit card. Every time you swipe the merchant is paying a fee, unlike when you hand over your Benjamins.

The credit card companies and banks have set up this whole convoluted pricing structure for how much it costs a merchant when you pay using a card. For example a "card not present" transaction on the Internet costs more than a "card present" transaction where you swipe your card at a point of sale machine. Like in the store at Target or Home Depot. Because "card present" transactions are more secure and less risky.


Also processing a card on a web site or alternate transaction processing system might require a "gateway fee" for linking the alternate processing device to traditional processing platforms. Some well known gateways are Cybersource,, and Verisign. PayPal lumps all those fees together. Some merchant accounts do as well - they might raise the discount rate (the fee on each transaction) and eliminate the gateway fee.

Oh and you know that card you love that let's you get cool rewards? That's great that your credit card company does that for you. So nice of them. But actually depending on the type of card being used the merchant may pay a higher rate for those too. Different card brands, vacation cards and debit cards can all have different fees associated with them. So actually you should be thanking your local coffee shop along with the credit card company for you last vacation funded by credit card rewards - or wherever you spent the most money. The coffee shop paid a higher fee for your transactions most likely.

So along comes Apple Pay and the idea is to find ways to make transactions more secure and convenient for consumers. So you get your new iPhone 6 and you are like "Sweet now I can just use my fingerprint instead of pulling out my card and it's all way more secure."

But behind the scenes the credit card companies might be making your favorite coffee shop pay more to have that added convenience. (And that is why the coffee shop offers a discount for cash or have minimum amount for credit card transactions, which might not exactly be in line with their merchant agreement but nevermind that.)

So it was kind of a big deal for Apple to negotiate a low fee for merchants to pay in all this transaction business, besides implementing all the cool new technology. They had to do the same thing when they negotiated a low price with the record labels for single songs instead of a whole higher priced album on iTunes. The price has to be one that people will pay, and although you don't see that price the merchants see it when you swipe and it eats into their profits, and ultimately things cost you more. And who wins? The people getting the fees for processing the cards obviously.

There is a cost and a risk to processing cards but Apple has said it will assume some of the risk to lower these transaction fees. If the fees to merchants are too high they won't accept Apple Pay. It sounds like they have negotiated lower "card present" rates but found conflicting reports. Merchants will want to verify with their banks what they pay for and Apple Pay transaction.

Some other articles are stewing about all the money Apple will be making on these transactions. All they are doing is taking a cut of the fees merchants will pay anyway for helping to facilitate the transaction - and if all goes according to plan - make it more secure and convenient.

Additionally, everyone wants a cut of transaction revenue. The credit card processors and banks control the game. If an alternate payment source comes along that creates competition and lowers transaction fees, that's a good thing for merchants. It should in theory make all our stuff cost less and easier for small companies to accept credit cards (or tokens) for payment. 

I don't know all the details of the Apple deal or who is paying what fees or how much each player is making. I just read some articles that didn't really explain the fee structure or were making a big deal about the fees Apple was getting, so thought would shed some light on how the fee structure typically works.