So if you’re LDS and an entrepreneur, or interested in entrepreneurship, or interested in LDS entrepreneurs, or interested in Mormons, feel free to join either or both groups.

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Although it will come back to haunt my political career someday, I don’t mind revealing that I’ve tried outsourcing web programming to companies overseas before. The first time it was to a company in Bulgaria. They charged me a few grand, did some shoddy work, and I finally fired them after they told me they wouldn’t be in touch for three days because they were going to “a party.” If I weren’t Mormon and married I would have  been intrigued, but instead I just felt ripped off. I ended up losing a client over that debacle.

More recently I’ve tried India. The nice thing about India is that they don’t go to parties. As near as I can tell, people who have jobs in India work 20 hours per day, and the other 4 hours are spent on work-prep. Indians (and I do mean real Indians, not native American Indians) are also possibly the most polite people on earth. However, what I’ve been learning from my experiences with two Indian outsourcing firms is that hard work and tact aren’t enough. There are still some huge barriers between Americans and Indians and I’m not sure how easy they are to overcome.

1. Language. Yes, they speak English, but the accents are so strong and the specific vocabulary so different as to make it impossible to understand more than half of what they say. Even communication by email can be difficult when they say things like “Please intimate your response” which I’ve learned means “Let us know.”

2. Time and Cost. Face it, there’s only one reason why people outsource–it’s cheap. Or is it? It doesn’t take a mathematician to figure out that three hours at $20/hr and one hour at $60/hr are the same thing, except that the $60/hr is better because it only took an hour. My experience so far is that when you add up all the hours, outsourced labor isn’t necessarily any cheaper, and then you find yourself saying “Well wait a second, so I paid the same amount but it took three times as long? Why did I do that?”

3. Quality. There’s ups and downs here, in my experience. Some of the projects I’ve had done have gone very well and work very well. But only after fixing 20 things, which, to their credit, the Indians fixed very quickly. I would prefer, of course, that they fixed those things before I ever tested their work since the problems were fairly obvious, but I guess you can’t have it all.

5. Independence. Or lack thereof. Whenever a former employee asks if they can use me as a reference I say “Sure! I’ll tell them that you work well under constant supervision.” That’s how working with Indians has been. If you don’t tell them explicitly to do it, it doesn’t get done. Someone once described this to me by saying that you have to give them a blueprint and instruction manual to get them to make a peanut butter and jelly sandwich. It’s true. I believe this is a result of #6.

6. Creativity. More than anything else the Indians I have worked with lack creativity. I don’t mean they aren’t good at scrapbooking or watercolor, I mean they seem to have a distinct inability to bridge gaps and connect two seemingly disparate ideas or concepts. Or in other words, they don’t think of things on their own, they only follow instructions. Well, perhaps I’m wrong on this point. There actually have been a number of times they haven’t followed instructions, especially when it came to implementing visual features of websites, but I never thought of those moments as sparks of creativity.

This lack of creativity is what I believe gives Americans and some other cultures an edge. I recently had a project that I got estimates from several people on, including an Indian outsourcing firm. I gave everyone the same information. The Indian firm sent me scores of questions, 85% of which I was able to answer myself, despite them being the programming “experts” whereas I’m just a high-level geek. After a month, I still didn’t have an estimate because I hadn’t been able to answer all their questions. By contrast, I had a British woman turn around an estimate in 24 hours. Turned out it was wrong because she hadn’t accessed some important information. She corrected the error within an hour and got me a revised estimate. She got the job, and the Indians didn’t.

This isn’t just a repeat of historically precedented abuse, it’s a serious competitive disadvantage for India if this experience is in any way representative of the majority. The Indians lacked the knowledge and experience to provide a proper estimate. They got hung up on the parts where they didn’t have the answers. And this resulted in them taking way too long, being paralyzed, and losing the business.

Now I’m sure there are Indians who would look at this and say “Well yeah, you just hired the wrong company. There are 1.2 million outsourcing companies in India that would have done a better job.” Really? Because I am in the process of trying out another Indian outsourcing firm, one that has received venture capital financing from a reputable, US VC fund, and yet I’m having the same type of experience. I believe there probably is an Indian firm out there that can do high quality work and do it fast, but I’d be willing to bet they charge more than $20/hr, and so once again, I have to ask myself whether there’s any reason to go overseas if I can get the work done here with the same or better ROI.

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I called in a week or two ago to cancel my gym membership with 24-Hour Fitness. Aside from the hassle of them telling me I had to come in to the club to cancel (nothing but an excuse to try and sell me on not canceling), now I find out that although the guy I talked to said he would cancel my account, he didn’t. He “froze” my account, which doesn’t prevent my card from getting charged again. Not only that, but when my card got charged again and I called in today to figure out what was going on, they told me they have a 30-day cancellation policy, meaning that no matter when you cancel, you’re probably going to get charged one more time after you cancel.

Now I ask you, my good man, why a business would have a policy that says you have to give 30 days notice of cancellation? I can think of some reasons, such as when a business has to dedicate such resources to a customer that it makes sense to have such a requirement. For example, imagine that acquiring a customer means you have to hire 10 new employees to service that customer. That would be a situation where a long-term contract with a 30-day or longer cancellation policy would make sense. But when I cancel my membership at the gym it doesn’t affect their business at all. 100 cancellations might, but not 1.

The only reason they have this policy is because they know that most people don’t read the policy upon signing up, those that do will forget what it says, nobody will cancel until they’re ready to stop going to the gym, and so the gym will get one more month of revenue without having to provide any service. It’s a beautiful thing for the gym, but quite irksome for customers. And now that I am irked, I pass this information on to you. I would encourage you to not sign up at 24-Hour Fitness, but I bet every other gym does the same thing. So let’s stick it to them and remember to cancel 30-days before we’re really read to stop going. That’ll show them.

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1. My four-month old daughter. This might become a challenge when she’s three and banging on my door.

2. Lunch with my wife. Not to mention being able to see her several times a day, although we did have to set some rules. Basically from 8am-6pm is “work time” and after 6pm it’s family time.

3. Flexibility. If I want to go for a job in the middle of the day I can.

4. Gas. If my wife and I were both working outside the home like we were a few years ago we’d be spending about $1,000 per month on gas. As it stands we only use the cars to run errands and are saving about $800-$900 per month on gas alone.

5. Efficiency. No distractions = focus.

6. No commute. I actually liked having a commute because it gave me a chance to listen to books on tape, but now I do it while I’m jogging so no real loss.

7. Cost. Where do I begin? No office space means I’m saving about $5,500 per month over what I was paying out a year ago. Then there’s no commuting as mentioned above and a host of other associated costs I was able to get rid of.

8. Dress code, or lack thereof.

9. Time. No commute, no co-workers to shoot the breeze with, etc.

10. No co-workers. I mean, I like people, but man, I get a lot more done when I’m by myself and I don’t feel like I’m missing out on anything socially. After all, I’ve still got Facebook.

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If you are paid $50 per room, what is your incentive? Your incentive is to paint as many rooms as fast as possible to maximize the amount of money you make in a given time period. At first blush this would seem to benefit both you and me, since I also make more money as you paint more rooms, but the problem is quality control. As speed increases, quality decreases, all other things being equal. On one extreme you could walk into a house, open a bucket of red paint, throw it against the wall, and run out the door and claim you’re done. If you, as my employees, painted rooms in this fashion I wouldn’t be in business very long and you wouldn’t have a job very long. On the other extreme you could paint the room using a 10-hair fine paintbrush and take 3 weeks to finish one wall. Just as in the first example, this is unsustainable. Somewhere in between is a level of quality that will make 99% of customers happy (there are always some customers who aren’t happy with anything, of course) and which can be reached quickly enough that $50 for you and $50 and a cost of $100 to the customer makes sense for all parties involved.

Neither employees nor business owners always have the long-term vision necessary to head off problems of this nature before they arise, but if’n they do, what can be done to fix the problem or prevent it in the first place?

You could simply say that I shouldn’t hire painters who will do a lame job, but that’s not the best solution. The better solution is to find a way to build both speed and quality into the system and that means adding an incentive for quality. But what would that be in this case? Here are a few ideas:

1. Customer feedback. The customer has an incentive to get a good paint job for their money, right? So feedback could be submitted directly to me, the owner (not the guy who did the paint job, of course), and I could set up a system whereby for every negative mark the painter loses a portion of that $50, or maybe he just has to go back and redo the paint job until it’s satisfactory.

2. Co-worker feedback. I could have another employee review the paint job. However, this would likely not be as accurate because there is a conflict of interest. After all, my employees have to work with each other, and it would be too easy for employees to be tempted to give each other good marks.

3. Management feedback. I could go check the paint job myself, but again, that builds a conflict of interest into the system.

It seems obvious that the best way to control is to use customer feedback data to create an incentive for my employees to do a high-quality job. But what if the situation is more complicated than that? After all, it’s not too hard for a customer to differentiate between bad, poor, sub-par, decent, and good paint jobs, even if they’ve never had any painting experience. But what if the service being provided is one where it is difficult for the customer to know whether the results are good, or where subjective measures can easily come into play? And what if it isn’t just a matter of one employee painting a room, but many employees working on a project, the end result of which can’t be directly tied to any one employee?

Of course my business is search engine optimization, so that’s what I’m thinking about. What is success when it comes to SEO? First, we have to look at what the customer wants. They want to make more money. If they sell something on their website, they want to sell more of it. If they get leads through their website then they want more leads. But sales and leads can be influenced by multiple factors, including many that have virtually nothing to do with SEO. These can include:

1. Website design

2. Usability factors

3. Navigation

4. Content

5. Offline marketing campaigns

6. Age of client’s domain

7. Newsworthiness of client’s company/industry

8. General nature of client’s industry

While some tracking can be done, much of what makes an SEO campaign successful can be mis-attributed to other marketing efforts and vice versa. Oh, and of course there’s the search engines themselves and their fickle nature. While search engine advertising can be tracked down to the smallest minutiae, SEO is different, and that lack of detailed trackability means an SEO firm can do a “good” job and still not attain the ultimate desired results. And because SEO is not well understood by most clients, it also means the client may not be able to judge the effectiveness of an SEO campaign the way they would the paint job in a room.

So let’s switch up the scenario a bit. Now I own an SEO company and you work for me as a link builder, building incoming links for my clients. Let’s say I want to pay you on a per-task basis, just as I would pay an employee who paints rooms. How do I do it and how do I control quality?

First of all, there are a number of ways I can set up the measurement of the task. The most obvious method would be for me to pay you based on the number of links you build. But once again, that creates a negative incentive we have to deal with, because your incentive is now to build as many links as fast as you can, but anybody who knows anything about link building knows there are varying degrees of quality when it comes to incoming links, and measuring that quality is not easy. There are links that are obviously good, links that are obviously bad, and a large gray area in between. Then there are permanent links vs. temporary links and  reciprocal links vs. three-way links vs. parallel links.

One way to increase the incentive to build quality links would be to pay based on the number of links that get indexed by Google. But for many employees this would be too much to ask, since it takes control out of their hands and puts their fate in the hands of a finicky search engine that changes its mind about how to rank things on a regular basis (more than once per day, in fact).

But the larger problem here is that no matter what I do, your results are not directly tied to my results. You may do a great job and yet the customer may be unhappy with the results my company provides. Conversely, you may do a horrible job and yet the customer may end up thrilled with the overall results. So what’s the answer?

As it stands, it would seem the answer is to manage for quality as much as possible and refine along the way as needed, recognizing that perfection is unattainable. This makes for a business model that has some issues when it comes to scalability, one of which is sure to be customer satisfaction, since coming up with an objective measurement of success that fits all customers is virtually impossible. However, it is also these types of challenges that present opportunity and safety, since a business that is difficult to master presents a barrier to entry for competitors.

Once I figure it all out I’ll let you know. In the meantime if you have any ideas, or if you’ve worked in companies where employees were rewarded based on results but incentives had to be balanced to make sure the long-term results were in everyone’s best interests, let me know.

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Who are these speculators anyway? Well, do you own any stocks or mutual funds? Do you have a retirement program through your employer? Have you ever bought something and then sold it for more than you bought it for later? Have you ever bought something because you thought it might be more expensive later and you wanted to save money? Then you’re a speculator. Perhaps not an oil speculator, but a speculator nonetheless.

Speculation is a good thing for markets because it smooths out the bumps. With oil and other commodities like corn, wheat, and pork bellies, “futures markets” allow farmers to sell their product before they have them so that they can sell at what they feel is the best price during the next year, rather than whatever the price happens to be when their crop is harvested. If it weren’t for the futures market, the price of commodities like corn would go up dramatically when corn was not being harvested, and would then crash dramatically when it was being harvested and brought to market. Being able to sell corn at a “future price” smooths out those peaks and dips.

Speculators are people who invest based on what they think will happen in the future. If they think the price of something will go up, they buy more of it. This in and of itself drives the price of the product up, and theoretically a group of speculators could get together and agree to all buy futures at the same time, which would artificially drive the price up. This is what politicians are taking aim at. But this type of collusion is rare and if it were happening we would likely have seen a crash in the price of oil as speculators would have gotten nervous that they would miss out when the time came to sell. The prolonged high price of oil is evidence that prices are not being driven up artificially but are based on real changes in the world such as devaluation of the dollar and increase global demand. This is why it’s foolish for politicians to make a sideshow out of going after speculators who are doing nothing more than forecasting where the market is going.

It’s a distraction from the real issue, which is the policies politicians have created the prevent oil companies from being able to increase oil supplies. As always, it’s easier and more convenient to blame somebody else.

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Ok, it’s really not that simple. It’s that simple in a 100% free market, but we have additional factors in our market. For example, taxes. When the government taxes something, the price goes up. Sometimes the government taxes something to artificially drive up the price so that people will use less of it, like cigarettes (which is French for “small, feminine cigar” and yet macho cowboys still smoke them instead of manly cigars). How the government thinks that by increasing their tax on gas (i.e. windfall profits tax) the price will go down is beyond me. By the way, did you know the government makes more off a gallon of gas than the oil companies do? Something to think about.

But what’s more interesting and meaningful is why supply is where it is and why demand is where it is. Let’s look at demand first. Why aren’t we more like Europe and Asia? Why is it that we drive everywhere and every teenager here has a car whereas in Europe people get around on subways and buses and rickshaws and such? I’ve heard that it’s because Firestone and the other tire companies lobbied the government in the 50s to not build mass transit systems but freeways instead so that more people would use cars and they could sell more tires. True or not, it’s a fact we don’t have the same kind of mass transit systems Europe and other countries do.

I wish we did. I lived in Brazil for two years and took the bus everywhere. It was great. You could leave your house, walk two blocks, and there would be bus every five minutes. You didn’t have to know when it was coming, you just needed to know where and you could go there anytime. A bus comes by where I live now twice per day–once in the morning on the way to Salt Lake City, and once in the evening on the way back. You miss the bus and you’re hosed. I miss a good bus system. Plus the way those bus drivers in Brazil drove it was a sort of adventure. I mean, you didn’t know if you’d make it home again the way they took corners.

But we don’t have that kind of mass transit. Oh, I know they’re working on it, but is it ever going to be close to what they have in Brazil or Europe? I don’t think we’ll ever get there. Part of the reason is that it’s just not feasible in all areas. Sure, mass transit works in large cities where many people are packed into a small geographic area (i.e. New York, Chicago, LA) but in our country people are spread out. Even after all the mass transit plans are implemented the majority of the US population will not use them, and it won’t be a marketing problem. There will always be auto-users, and chances are the number will grow even as mass transit grows. Conservation is all well and good for individuals, but as a whole this country will continue to consume more and more energy, and at the moment the cheapest form of energy is gasoline. That may change in 20, 30, or 40 years, but it’s not changing today or in the next 10 barring some miraculous scientific breakthrough. Until then, it’s all about oil and the demand is not going away.

If we can’t look to demand for a solution to high gas prices, then let’s turn to supply. By now you’ve heard all the people saying that there is enough oil offshore, in oil shale, in ANWR, and inside of polar bears’ heads to keep the US stocked with oil for the next 300 years. Then there are coal to oil technologies and they say there’s enough coal to produce three times the oil the Saudis have. Then there’s nuclear technology as well.

So why don’t we use all this stuff that we have? The answer from those on one side of the political spectrum is that the environmentalist movement won’t allow it to happen. The environmental side says the oil companies already have access to millions of acres of land that they’re not using. The oil companies then say they only have 10 years to use the land once they start, and it takes 8-9 years just to get the permits which leaves them 1-2 years for drilling and harvesting, which isn’t enough to make it worth it.

Now it seems to me that what a true environmentalist would be afraid of is damage to the environment, habitat, and species. The oil companies say they can get the oil out without any major damage to any of the three. Granted, some environmentalists would consider the death of one stinkbug a major disaster, but I think reasonable people simply don’t want huge oil spills ala the Exxon Valdez or to turn ANWR into a huge field of oil pumps winding away, smashing polar bears and caribou in between their parts if they should happen to wander into them. Well, the Exxon Valdez, it should be mentioned, was a ship that was carrying oil to the US from another country, so you could make the case that if we were getting more of oil from our own shores instead of foreign shores it never would have happened in the first place. The oil companies can use one acre of land in ANWR to do what would have taken 10 acres a few years ago, and they would only end up using something like .001% of the land in ANWR. And remember Hurricane Katrina, that big hurricane a few years ago? 3,000–yes, three thousand–oil platforms were in the path of that hurricane. Not a single one was lost, there were no spills, and no lives were lost.

It would seem the technology to harvest oil safely is there. Why not let the oil companies have their way for 10 years and then let’s analyze things and see how they’re doing? We could impose massive penalties in the case of disasters. For example, let’s say that if a company has a major spill they’re responsible for cleanup, compensation to any human victims, and they’re out and their assets in the area get auctioned off to the highest bidder with the proceeds going to straight to the DNC. One strike, you’re out. We could set up rules about the impact on the habitat and Greenpeace and the Sierra Club could send volunteers to monitor things. After 10 years if things are working out let it continue, if not, figure out something else.

If anyone has a convincing argument for why we shouldn’t open ANWR and offshore areas to drilling and Utah and other states for mining oil shale I’d love to hear it. Not because I’m going to have a kneejerk reaction and refute it, it’s just that if there’s a credible argument against these things I haven’t heard it yet. All I hear is ill-formed arguments from politicians who feel obligated to support the environmental lobby but who obviously don’t care about anything but politics and other people who care about the environment and have been misled by those politicians and can’t argue the matter beyond regurgitating what the politicians say, but who can’t go any deeper.

By the way, I’m not on the payroll of the oil companies but I wish I were. If any of them would like to start paying me to post more of this kind of stuff just start sending me checks.

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There are places closer to SLC, but what they lack is the ability to house 100 people in one building. The family has tried cabins before, but they like having one large building so that people can interact more. The last time they did cabins it rained the whole time so every family stayed in their own cabins the whole time and the whole purpose of having a family reunion was shot. The place in Altamont is nice because it has several nice, large bedrooms upstairs for the grandparents, about ten large rooms in the basement with bunk beds for all the kids and their parents, a game room, kitchen, and a huge common room that could fit 300 people if it needed to.

So if you know of any places similar to Hidden Springs Ranch, only closer to SLC, let me know.

BTW, if you’ve got a few million this might not be such a bad business model for you to invest in. The building would cost you $3-4M, the land would cost you another few million if it were in or around the Park City/Heber area, but then you’ve got a nice place to use yourself, and you can rent it out for $7-15K per weekend, and given that Hidden Springs out in the middle of nowhere requires that you reserve two years ahead of time, it sounds like there’s plenty of demand to go around. I’d consider doing it myself if I had $10M to blow.

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As I’ve been training for triathlons one of the “pains” I’ve dealt with which I believe could be a viable business opportunity is that normal gyms aren’t set up for triathletes, nor are they set up for anyone seriously interested in any of the individual disciplines (swimming, biking, running). Sure, all gyms have treadmills, most have stationary bikes, and many have pools, but the equipment isn’t made for serious athletes, it’s for lazy, fat people like I used to be who are trying to get in shape by exercising 15 minutes per week. Here’s what is really needed:

Swimming, 100 meter pool. The swim portion of triathlons is done in open water with rare exceptions, and the swim is generally either out or back or a triangle shaped course. Whatever the case, you aren’t swimming laps up and back in a pool which means you don’t have a wall to push off of every 25 meters. Most gyms have 25 meter pools, and since pushing off a wall propels you at least 5 meters, you’re really only swimming for 20 meters of the 25. The other non-realistic factor is that your arms get a break every 25-30 seconds as you turn around, whereas when you do a triathlon your arms are constantly moving for anywhere from 15 to 90 minutes. Therefore, the longer the pool, the more realistic it is compared to open water swimming. So the ideal triathlon training facility would have a 100 meter pool, or at least a 50 meter pool.

Biking, better stationary bikes and classes taught by triathletes. I don’t know the stationary bike market too well, but I’m sure there are stationary bikes that are more like a real road bike or time trial bike than the ones at my gym, so getting some better stationary bikes would be the first step. The second step would be to have spin classes taught by triathletes or expert bikers who can give you tips and instruction that is specific to what you’re training for. And the classes wouldn’t have to be limited to stationary bikes. How about making the triathlon gym a central place for starting outdoor bike rides?

Running, better classes. I’m not sure whether there are better treadmills than my gym has or not. It seems like a fairly straightforward piece of equipment. But being able to take a class from someone who has run marathons and done triathlons would make it much more interesting.

Additional ideas:

Allow people to store all their triathlon equipment at the gym. Bike, swim gear, etc.

Combine the gym with a swim/bike/run equipment store that employs triathletes.

Locate the gym centrally, but also near good outdoor bike and run paths.

Challenges:

I think the biggest question is whether there is a market to support such a thing. I’m pretty sure Niles, Ohio doesn’t have the customer base, but Salt Lake City, Utah just might. Land and building costs would be major, just as building any gym would be, not to mention ongoing maintenance, staff, etc. We’re probably talking about a $3M investment to get this thing off the ground. But given the niche nature of such a business it could be expected to draw people in from a much wider area than a normal gym, and the monthly fees could also be higher than a normal gym. If you’ve got $3M you want to blow on a crazy idea, let me know. If you want to take the idea and run with it feel free to, all I ask for is free membership.

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Now, there’s only one reason a customer who’s canceling their membership would need to talk to a “sales associate” and that’s to get sold on something, like not canceling. Otherwise any employee should be able to cancel my account in about ten seconds, and I shouldn’t have to spend an hour of my time and $4 on gas to physically drive to the gym only to get pressured into not canceling when I know I want to cancel.

So I called back today and this is how the conversation went:

Me: Hi, I need to cancel my membership.

24hr: Ok, you’ll just need to come into the nearest gym and talk with a sales associate and they can do that for you.

Me: What if I don’t live near a gym anymore? (I still do, I was just wondering what they would say if I didn’t. Would they require that I fly to another state and rent a car in order to cancel? My intent was to simply get the guy to admit they had a process for canceling over the phone and then go down that route, but it turned out to be easier than that.)

24hr: Well, I guess we can do it over the phone then. Can I get your name?

And that was the extent of it, more or less. Apparently somebody is going to call me back in three days and confirm that my account has indeed been canceled, although I’m suspicious that they’re really just giving me a waiting period to “cool down” so that they can try and keep me signed up.

But why make it this hard at all? Sure, maybe most people are pushovers and easily manipulated, I know I have been in the past and still am on occasion, especially if it has anything to do with Ben & Jerry’s. Maybe most businesses look at people and say “Hey, if people will buy more of something if it’s $19.99 than if it’s $20.00 then there’s no end to what we can get away with!” But there’s something inside me that wants to believe that people are smarter than that, that people like to be treated as though they were intelligent, and that when they want to cancel something they really know that they want to cancel it.

I also tend to believe that if you make it easier for someone to get out of something you make it easier for them to get into it. If I’m considering two gyms and one advertises “Sign up for 36 months at $30/month!” and the other says “$30/month and cancel at any time without any penalties!” which one would I sign up for? My risk is greatly diminished if I sign up for the one that allows me to cancel whenever I want at no additional cost, and the more a company with a subscription business model can do to make it easy for me to cancel, the more likely I am to go with that company over competitors.

That’s one of the reasons my company doesn’t have long-term contracts for our search engine optimization services. Sure, I’d love it if all my customers were locked in for 12 months at a time so that I could depend on the recurring income, but I’d rather have some customers than no customers at all, and I’ve found that by getting rid of long-term contracts, going month to month, and letting the customers cancel at any time it gives me an advantage when it comes to signing them up, and most of our customers end up sticking around even though they have no obligation to. They just happen to like the results and feel it’s worth it to keep paying for them. If only my gym understood how this works.

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