Kevin Systrom

During the Zappos acquisition last week, I saw someone tweet something to the effect of “Congrats on your acquisition!” to the CEO. It struck me as a bit odd, and I didn’t know why at the moment. So I’ve been thinking about it. Why do we congratulate people on an acquisition?

Consider, for instance, growing a lemon orchard from seedlings. The value of that orchard is the net present value (NPV) of future cash flows from the fruit that you’ll sell at the market (not to mention the future earnings diversifying into lemonade sales, etc.). Imagine you sell the fruit day in and day out with a nice steady cash flow. Someone (a large lemon conglomerate) comes along and offers to buy your orchard for the exact NPV of all the future cash flows. Let’s say they bought it for $1B dollars (it’s quite a large orchard).

Would it make sense if someone congratulated you on the sale? If you answer yes, I challenge you to consider that all things being equal - at the time of sale, selling and staying the course are equivalent in terms of value. I’m overgeneralizing, but my point still stands: it’s strange that we focus on the transaction alone.

I’m not taking issue with selling. I’m taking issue with the fact that so much of the valley’s day to day conversation revolves around completing *transactions* instead of creating value. Instead of hearing “M&A volume is way down” I wish I heard about value creation being down: Google’s revenue stagnating, facebook’s future in question because of staff turnover, entrepreneurs aren’t innovating in x y or z space, etc.

The true thermometer to the health of the valley is not one of M&A where money changes hands from few to few. Often, in a transaction like that, users don’t see much of an improvement in service anyway. The true thermometer of the valley is when someone creates something that increases productivity, or enriches people’s lives such that many are willing to pay for that service.

Why not congratulate Zappos as they grow? As they innovate in customer service? When they send you that pair of shoes overnight instead of the slow option? It turns out, most startups aren’t like lemon orchards - they don’t produce fruit. They’re hoping someone else will figure out how to make the trees yield. That’s why I find it strange that Zappos sold - lemons and all  - it was one of the few who actually had a chance of making money sustainably in the long run.

Photo: Flickr / Lori Greig

Ever since I discovered the nltk (natural language toolkit) for Python, I’ve become somewhat of a closet natural language junkie. Why? Because language is one of those areas of science for which you can’t write simple rules. After browsing the nltk documentation and online book, it’s pretty amazing how far you can get, though.

One feature I’ve come across in document parsing and analysis is known as TF-IDF (term-frequency inverse-document frequency). TF-IDF is a measure of how important a feature is for an object among all other objects in a collection. For example, all bikes in the Tour de France have two wheels (an unimportant feature) while only a few have electronic shifting (an important and differentiating feature).

Often TF-IDF is used to explore what the most important features of a document are. One could create a naïve algorithm that ranks term importance by order of term frequency (TF). In this post, “the” “and” and “a” are most likely to be the most common words. Should we then assume that “the” “and” and “a” are what this post is about?

Someone clever out there figured out that you could penalize these terms with inverse-document frequency (IDF). That is, the inverse of how frequently these terms occur in all documents. “The”, “and” and “a” occur in *all* my posts, so we’d want to penalize these terms. However, “TF-IDF” occurs quite frequently and doesn’t occur anywhere else on my blog (yet). We would then correctly assume that this post has an important feature called “TF-IDF”.

TF is simply the count (n) of word i in document j divided by the total number of words in document j:

IDF is a bit more tricky. It’s the log of the inverse of the count of how many documents (objects) include word (feature) i divided by the total number of documents. If 14 of 23 documents included the word “apple”, IDF would be log(23/14). You’ll notice that if all documents include the word, idf=log(1)=0, which means tf-idf = 0. Alternatively, if one of 1000 include the word “oxymoronic”, you’d get a very high tf-idf.

So what can you use TF-IDF for? Well, it’s not just for documents anymore. Imagine a few more use cases:

• Uncovering expertise for someone on twitter. (Dan Cederholm uses the word CSS frequently, and it doesn’t occur much in others’ tweets)
• Uncovering salient characteristics of a wine (many wines are said to be fruity, but few are described with the term ‘pencil lead’)
• Discovering unique terms in user reviews for a business. (‘Foie Gras’ is a bigram used many times in reviews for SF Chez Spencer but not for other restaurants)
• Finding someone’s ‘haunts’ on foursquare (I visit Ritual Roasters often, but so does everyone else — vs — I visit Sightglass Roasters every day, and very few other people do currently)

In the few cases I’ve gotten to use TF-IDF on large data sets, I’ve been very surprised about how well it works. Try it for yourself and see if you can discover hidden features in your data, as well.

I remember it quite clearly. It was two years ago: the day I started loving to cook. I was wandering around the bottom floor of San Francisco’s City Lights bookstore and happened upon a copy of Alice Waters’s “Simple Food”. Since the opening of Waters’s Chez Panisse restaurant in Berkeley in 1970, Californian Cuisine has become somewhat of a cult following in restaurateurs worldwide. Waters’s simple ethic of high quality, in-season and local ingredients has influenced chefs to start thinking less about what they can ship in, and more about what they can find down the road.

However, many overlook the true revolution Waters brought to the table: the revolution of simplicity. Too often, Haute Cuisine is an elaborate and showy charade of multiple reductions, rare ingredients, and unnatural forms. Waters introduced the idea that simplicity itself could bring out the most important elements of a dish. It was less about elaborate presentation and more about creating a modest, satisfying dish from only the freshest ingredients.

Cooking, for me, has never been so far away from my other passion for the web. I find that cooking often teaches me more about building and creating for consumers than any book on amazon ever could. I find often, that we over-engineer our solutions for folks, when all they really want is a delicious simple meal. One of my favorite chefs Nate Appleman says in his cookbook: A16 Food and Wine, “When wrestling with a recipe I’ll remove ingredients instead of adding them. Often by simplifying a recipe, it will become much more elegant and delicious”.

Sites these days are replete with niche features that don’t relate to their core concepts. Social layers get added just because they can. All of a sudden, its in every product’s best interest to be able to post 160 character updates (I’m looking at you Google Reader). Product managers and engineers are adding ingredients left and right, and while still edible, the results are often less delcious than a simplified straight-to-the point dish. But why? Are we embarrassed by simplicity? Does everything need to be over-engineered? What if we just stripped our products down to the bare essentials and got *really* good at the basics? Some companies have done quite well sticking to fewer, better ingredients. Could you?

Everything starts as an idea or at least an intention. Most of the time ideas and intentions never manifest themselves in anything but talk. The single common element in everyone who ends up doing is that they tried - sometimes many times - but surely at least once. Knowing this, what would you try today? What would you attempt tomorrow? Surely you have a list, no?

Well here’s what I’m off to do: keep a blog going to write down thoughts. If this blog can be more for others than it is for me, I’ll consider that a win - but at its most basic level, a place to jot down thoughts is all I’m really after. So there’s my idea and intention. Let’s roll.