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Comment by nkurz | Hacker News Reader

She teaches a class at Stanford and offers each team $5 of 'funding' in an envelope. She tells them that once they open the envelope, they have 2 hours to make as much money as they can.

She cites three teams' approaches:

1) First team opens a free stand that offers to check peoples bike tire pressure for free, then charges $1 to inflate if necessary. This team changes midstream to accepting donations instead of charging, and makes more money. Lauded for rapid iteration.

2) Second team makes lots of reservations at local restaurants, and then sells them to people waiting in line for same restaurant. Didn't use the $5 at all. Lauded for realizing that the $5 constraint was artificial, and that using it constrained their thinking.

3) Third team skipped the exercise, and sold their 3 minute class presentation time as a advertisement to a local company. Made the most money. Instead of presenting, they recruited. Lauded for realizing that the 2 hours was also artificially hampering their thinking.

Personally, I found the presentation glib and condescending, and the solutions immoral and dishonest. I'm hoping for good discussion about the issues here, but I would not recommend the video.

View on HN

See, the problem here is that she hands out two artificial constraints, and then praises the teams who ignore the constraints.

1. Used a device to measure the tire pressure and materials to build the booth and signs. Did they cost less than $5? Maybe. Did it take less than 2 hours to create the booth, the signs, and perform the services? Unlikely.

2. Well done on finding something you can acquire for free and then sell. However: did they make the reservations at 6pm and then sell them before 8pm? If not, the process of making the money took more than the 2 hours allotted.

3. You had two hours. Instead, you spent 2 hours talking to an advertising company and then a week later you sold 3 minutes of your time. Total time used to make $650: a week. In the real world you can't just discount lead time and idle time; that's a mistake made by a lot of starving contractors.

The point of the puzzle is to work inside the constraints. "Thinking outside the box" is a great skill and all, but basically all these teams are doing is finding creative ways of breaking the rules. It means the puzzle isn't "make the most money in 2 hours with $5", it means the puzzle is "find out how far you can stretch these rules without being disqualified". Points for creativity, sure, but that wasn't the problem.

Your argument seems to lean a bit too strongly on unsupported accusations of fraud:

Did it take less than 2 hours to create the booth, the signs, and perform the services? Unlikely.

What, you're saying that a team of college students, on a college campus, which presumably has a fully stocked stationery store within five minutes' walk, can't throw up some hand-scrawled signs in less than (say) 15 minutes for under five bucks?

Yeah, they probably had to already have the tire pump and gauge. I presume that "what do we have in our closets" was an important part of the process of choosing this business plan. ;) And I don't seem to recall anything in the "constraints" about not being allowed to beg or borrow anything, nor any rules about not being allowed to use stuff you already own. This isn't accounting class.

did they make the reservations at 6pm and then sell them before 8pm?

Why not? Remember: They're doing this in parallel, using multiple team members and multiple restaurants. And, given the anecdote ("this works better for restaurants that hand out little buzzers") we're not talking about the sort of reservation that needs to be obtained hours in advance. We're talking about people paying for the privilege of jumping the line and turning a 40-minute wait into a 4-minute wait. You can get through quite a few cycles of that in two hours.

"And I don't seem to recall anything in the "constraints" about not being allowed to beg or borrow anything, nor any rules about not being allowed to use stuff you already own."

What if "stuff you already own" includes a bank account with 2 million bucks in it? I also thought the solution was a bit dishonest, but then the whole thing should not be taken that serious from the start.

The reservations solution seems even worse, though I am not sure how exactly it works (would it piss off restaurants in the long run, or is it really a valuable service?).

Selling the presentation time seems to be the only valid solution.

If stuff you already own includes a bank account with 2 million bucks in it, and you burn through it in order to excel in one class, that's a lesson in itself. Or, more realistically, if a student had $100 in their pocket and used it as additional funding.

You can easily be in a similar situation in real life. You can get a mortgage on your house, or sell your car, or pawn family heirloom, etc. You can extend your runway (and hopefully increase the possibility or size of success), while ensuring deeper fall if you do fall.

So back to the class, if one group did spend invest their $100 along with the initial $5 seed funding, they'd have to earn more than the other groups to have a comparable return.

I wish I could mod this up twice. This is, like, Confucius deep.

If a student weren't allowed to sacrifice their entire life and all of their resources to excel at this one stupid class exercise, it wouldn't be a very good simulation of the entrepreneurial experience, would it?

You know what would have made for a great class? If one of the students had invested $2 million out of pocket to create an additional $100k in two hours. They would have presented that to the class. Everyone would have to agree that, objectively speaking, in dollars and cents, they would have "won". The next question to ask them is: do you feel successful? Have you accomplished whatever it is that you wanted to accomplish, when you signed up for a class on entrepreneurship? And does that make you happy?

Whatever their answer was, it would probably be educational.

For me, a take-home lesson from Startup School was that a lot of extremely talented and successful entrepreneurs are still searching for their answer to this question. They've invented something great, or they've made N millions of dollars, or both, and yet the question persists.

In what way is offering to check someone's tire pressure and then inflate it for a nominal fee, or a donation, "dishonest"?

The first scenario is one a lot of Jiffy Lube-type garages and auto parts stores like Pep Boys do all the time (although typically with more than just tire pressure, e.g. transmission fluid).

The latter -- asking for donations and letting people pay what they want -- is something the Boy Scouts in my hometown used to do all the time. Free air for your tires, free coffee by the side of the Interstate ... I saw them doing free brake light replacement once. In theory they'd do it for free if someone really couldn't afford it, but in practice people pay what they think the service is worth (or whatever of that they happen to have on hand), so it's a sort of self-defined "sliding scale."

I don't see any misrepresentation there so I don't see how it's inherently dishonest.

Because the equipment presumably cost more than 5$.

And so would the clothes they are ostensibly wearing.

Hm, to set up the experiment properly could become an entertaining experience :-)

Edit: really, though, what is the actual experiment here? If all external aids are allowed, the only lesson left seems to be to think outside of the box.

As far as a restaurant is concerned, why would they really care? It might annoy customers, but as long as the tables are still filling up, I feel the restaurant is more than happy, because they're still making the best of their available resources (tables and wait-staff).

It's a valid point how the artificial constraints are the envelope and the time, because the way she listed the rules was, clock starts when you open the envelope - it's almost a a ploy, or a method of trying to distract someone. Imagine, if you were handed an envelope and were told "there's money inside there", wouldn't you immediately start to wonder "how much?" and you would immediately want to open it. She restricted this thought by applying a 2 hour time constraint, from the time you open the envelope, which almost forced the students to think twice about jumping to the money. Instead, all the groups achieved something without ever really having to open the envelope. I think it was interesting, and a job well done.

You answered your own question -- to the customer, it's annoying.

... and to the restaurant owner, it discourages walk-in traffic.

It's immoral in that it's dishonest (We have a word for reserving space at the restaurant by claiming to be a party of two, but not being one -- it's called lying). If you wanted to do this in the moral clear, you need to speak to the restaurant owner first, and see if they'll pre-allocate you tables.

I never said whether it was moral or not, which it definitely isn't...I was just referring to the students response to the task at hand, which I still believe for what they were assigned was a job well done.

>As far as a restaurant is concerned, why would they really care? It might annoy customers, but as long as the tables are still filling up, I feel the restaurant is more than happy, because they're still making the best of their available resources (tables and wait-staff).

It's scalping. It raises the cost of a dinner in the restaurant without additional gains for them. Obviously restaurants would not go this.

The situation is more complicated.

It raises the monetary costs of dinner for people, who want to pay to avoid waiting. For the normal-waiting patrons the strategy feels like increased congestion. (And they bear the costs.)

Why do restaurants have queues anyway? Why don't they just raise their prizes until supply meets demand? There's more than one scholarly article about this question.

Why not take ALL the reservations, and then force EVERY customer that wants to eat there to buy them from you?

Because you're fucking up the social contract that restaurants have with their customers.

I do feel that it was sketchy to ignore the rules the way these teams did. However, the restaurants do not have a contract with their customers. If they want to have a contract with their customers, they can, but calling their expectations of what customers will do a "contract" dilutes the term.

Actually, 'Social Contract' is a term on its own, that is many things to many people, but in general, it is the idea that societies have unspoken rules in order to maintain order. I do not think he is diluting the term, as it (or at least the concept) has been around for quite some time.

"seeing the constraints are artificial" does not mean "cheating" or using things outside of the constraints. I don't think the winning teams used more than $5 and 2 hours.

It doesn't take much to see that 2 team-hours is a much bigger asset than the $5, so you're better searching for the best way to use 2 hours, and maybe even ignoring the money.

It took a bit more insight to realize that hard to tap advertising space(and other opportuities) in a university town is a much bigger asset than the team-hours and the money.

You make valid points. My problem is less the specifics of the individual teams' solutions -- I don't dispute they were very clever and creative solutions -- but rather the impression that the greatest reward went to those who went furthest outside of the rules.

Team 1 were arguably entirely within the rules and made $200, Team 2 went a little outside (unless they were handed the envelope at 6pm) and made a little more, Team 3 ignored the 2-hour stipulation entirely and made $650.

Fundamentally, you're not rewarding creativity at money-making, you're rewarding creativity at rule-breaking.

If you watch the video, all teams were handed the envelop at the start of the week in class. They were allowed to think an form a business plan as long as they liked. They didn't know how much was in the envelop. Once they opened the envelop, they had 2 hours to make money.

Exactly. They weren't told they must open the envelope. The last team figured this out and (presumably) timed it so that their 2 hours coincided with the 3 minute presentation time.

Fundamentally, you're not rewarding creativity at money-making, you're rewarding creativity at rule-breaking.

And there's your insight. If what you want is money, and lots of it, finding creative ways to game the system is how it's done.

I am not lauding that, just pointing it out.

Actually the lesson was about managing valuable resources, not gaming the system. It was a warning that the system can be distracting and can easily confine your thinking.

Maybe on Wall Street, but elsewhere you make a lot of money by creating something people really want, but not generally what they wanted.

elsewhere you make money by making people want things, not trying to predict what they want. People usually don't know what they want anyway...

> finding creative ways to game the system is how it's done.

And a good way to end a up crook or in jail. Business should be about creating value for both parties involved.

The lesson was: don't let funding distract you from identifying the most valuable resources available to you. At worst, the cases you mention break the rules in rather insignificant ways. All three scenarios can quite plausibly be done entirely within the rules as defined, even if they didn't quite make it in reality.

Presumably, there were much less creative solutions that also failed to entirely obey all stipulations. It was an exercise, not a contest.

"she hands out two artificial constraints"

But that's very important. People are constantly working under ... and handing out ... artificial constraints. Getting outside the box is one of the most important lessons. Who could possibly want to communicate but be limited to only 140 characters?

The US spent a million dollars to develop a pen that could write in no-gravity. The Russians used a pencil.

"In the province of the mind, what one believes to be true is true or becomes true, within certain limits to be found experientially and experimentally."

The US spent a million dollars to develop a pen that could write in no-gravity. The Russians used a pencil. they didn't, and pencils are useless in space 'cause of the filings floating around and jamming equipment

Not using the $5 at all thinking outside the box is. You break a rule that thought existed before you thought about it. It is a constraint on your mind, not your world. This is a space pencil.

Using $10 instead of $5 is not thinking outside the box.

For some people finding fault is easier than seeing the point.

"The US spent a million dollars to develop a pen that could write in no-gravity. The Russians used a pencil."

False: http://www.snopes.com/business/genius/spacepen.asp

Well I understand what you're saying here, but you're over-thinking the problem (like an engineer). The point of the exercise was to get the students excited about entrepreneurialism.

The real world (read Wall Street) has plenty of constraints and people are always gaming the system to make a buck. So in this sense, it's a valid exercise.

Edit: In terms of "gaming the system" I'd like to think of this as leveraging opportunities in the system for a particular gain, not "cheating" the system.

Yes, because the lesson I really want people who are thinking of working on Wall Street to learn is that they should be trying to cheat the system.

Pretty much everyone that cheated the system was rewarded by the keeper of the system. So this sounds like a good lesson to learn. "You don't get ultra-rich by being ethical and honest."

With wall street as with most things, there is no "outside the system" everything is the system even if other people don't recognize it. I'll argue outside the rules is still inside the system, and that not all rules are created equal.

On another note, Breaking rules isn't what caused the recent wall street collapse it was a lack of looking ahead at consequences of actions.

Sure, and it's why we need to have both regulation on the front-end, and courts on the back end, to discourage attempts to "game" the "system", so that people's actions which benefit themselves are also beneficial to the society at large.

"Breaking rules isn't what caused the recent wall street collapse it was a lack of looking ahead at consequences of actions."

Not really. All the people who caused the problem are still employed and still rich. So for those entrepreneurs, they are still succeeding. It is the USA public who are failing at being entrepreneurs, not Wall Street.

Do you really think it's reasonable to compare Wall Street to these lemonade-stand kinds of business school assignments?

I'm starting to think there should be a "Godwin's Law" corollary -- as any discussion thread grows, the probability of comparisons to Wall Street approaches 1.

> The point of the puzzle is to work inside the constraints

The constraint here is (your current resources + $5 + 2 hours), not just the $5 and 2 hours. And the point is to get profitable. It's an entrepreneurship puzzle, not programming puzzle.

The problem was 'you are given X amount of seed money and two hours to make as much money as possible.'

The problem was not 'you are given X amount of seed money and two hours to make as much money as possible; however, you must use, and only use, that money while buying the materials you are going to require.'

The problem was not designed to make students money but to show them that there are lots of possibilities in the world for success with hard entrepreneurial thought (they were given four days to think of a plan).

I can be wrong, but I am pretty sure that the rules did not even matter (in the strictest sense). They could spend six dollars on buying signs and a bike pump to make their project a success because the goal of the "problem" was to open the minds of the young entrepreneurs.

If each person did not come up with a brilliant idea, then there would be no harm. However, in mind of the problem, the students were supposed to hear what the other students did to achieve success because the path to achievement is the path to success. -> And that is why people take the class. They want to discover the path to success.

Arguing that the winning students have "broken the rules" assumes the rules dictated they had to spend all of the money; I didn't see or hear mention a requirement that they spend any or all of it anywhere. It seems to me a set of rules along one dimension of a subject in no way implies corollary sets of rules along any others. For example, if someone told you that you could create any password, but that you could only use three letters of the alphabet (e.g. A, B, and/or C), they haven't said you could not use each one once or more, or not use numbers, or characters, symbols, etc., and they certainly haven't said how long or short the password needs to be, or if you even need to use letters at all, or for that matter that you even needed to create a password; maybe you'd rather spend your time gardening!

To me the three examples (even though they were kind of hokey) didn't so much turn the constraints on their heads as they did make them totally irrelevant... They made it less an issue of the constraints of certain explicit rules, and more about the implicit absence of others.

In the real world there aren't any constraints, but there are plenty of artificial limiters like the $5.

"Total time used to make $650: a week"

You could use the "idle time" for other stuff.

The biggest issue with this one is its unrepeatable... it's a one time deal.

They executed the advertising opportunity, now they have nothing. The other two, issues with their business practices aside, have set up businesses that could continue to operate, grow and scale.

To me that deserves more recognition than a flash-in-the-pan idea.

But that wasn't what they were asked to do. They weren't asked to develop the best sustainable business model with 2 hours and $5, they were asked to come back with the most money.

Team 4 phoned a rich family member and got him to donate $1000 to their effort.

That's one of the main things executives bring to the table in a business: connections.

Thanks for the synopsis. I'm curious, though, what makes the solutions 'immoral' or dishonest? They seem perfectly legitimate to me.

There are two levels --- the first is within the context of a class assignment, and the second is as a business operation.

1) The bike tire pressure check isn't bad, but seems to be cheating on the class solution by using outside materials. Once one can 'presume' a pressure gauge and a pump, why not presume further specialized equipment or further outside funding? As a business proposition I was happy with it when they were charging a set price, but I personally feel uneasy with the change to donations. This isn't clear cut, but it's guilt based and I wouldn't do it myself despite the effectiveness. Compare with the Hare Krishna technique of forcing free flowers and then asking for a donation: http://www.garyasanchez.com/what-hare-krishnas-can-teach-us-...

2) Selling restaurant reservations is probably fine within the context of the class, but is a violation of the expectations of the restaurant. If everyone were to follow their approach, the system would collapse and the restaurant would need to implement a policy of cancellation charges. My simple view would be that if the restaurant would change their system if you told them what you plan to do, it is immoral.

3) From the point of view of the class, the winning solution feels like a cheap trick. Yes, it makes money, but not under the rules that were officially given. From a business point of view, it takes advantage of a captive audience. What's really being sold is the time of a third party who does not benefit from the transaction, and yet due to social constraints is unable to leave. This strikes me as both immoral and dishonest.

I fear that my scruples here aren't entirely consistent, and I'm pretty certain that they reduce my ability to make easy money. But I enjoy being in a situation where I can make decisions based on the answer to "Would the world be a better place if everyone followed this advice?". And for me, on this criteria, the last two solutions fail, and the first is on the edge once the donation approach is taken.

My simple view would be that if the restaurant would change their system if you told them what you plan to do, it is immoral.

Well, that moral principle is not going to generalize well.

But let's resist the urge to play moral philosopher and consider the facts: Would the restaurants want to stop you from doing this?

I don't think it's obvious. If I pick up half a dozen extra reservations and then try to sell them, I don't really add to the workload of the greeter, unless I pick up substantially more than end up being used. (Obviously, if you try to get 100 reservations, sell five, and return the other 95, the restaurant is going to stop you. So, don't do that!)

What you're essentially doing is allowing people to buy a better position in line. That seems perfectly rational: An upcoming reservation, like a stock option, is a commodity, so one can put a price on it, right? And it's worth noting that restaurants do this all the time [1]:

http://news.ycombinator.com/item?id=318827

...it's called "bribing the maitre'd", and they don't advertise it, even though -- if it weren't for other considerations -- it's a good thing for the restaurant. A person who is willing to pay cash money to get in to your restaurant faster is probably someone with (a) more money to spend, so they're likely to order wine and dessert and all the good stuff that pads the profit margin, or (b) a big fan of your restaurant, such that they'll pay extra to come to your restaurant instead of the less-busy restaurant down the street, or (c) about to become a big fan of your restaurant, because they can always get a seat there right away; it's just a matter of a few bucks!

So the real mystery is why restaurants don't do this themselves. I suspect that the answer is social signaling: A restaurant doesn't want to be the entity that makes the majority of its customers feel poor. For every person whom you allow to publicly buy their way to the front of the line, you send a message to an entire line-full of other people that they're just too cheap or too poor to do the same thing. The point of a restaurant is to allow people to feel rich at a fixed rate, not to force them to feel poor at variable rates. So before long your restaurant will have a reputation as "that obnoxious place which caters to snooty rich people who want to show off all their money". Unless that's your business plan, that isn't a good idea.

(It is this, not the fear of breaking some non-existent law against overtipping maitre'ds, that keeps the practice of bribing maitre'ds below the radar. It's okay to spend money for better service; it's impolite for either party to call attention to it.)

The solution that these entrepreneurs have come up with is to create two queues: The queue run by the restaurant, and a separate queue containing the reservations owned by the entrepreneurs, which they will sell for a fee. The genius of this is that there's a strict limit to how many rich people can buy their way ahead of you: The entrepreneurs only have so many spots ahead of yours. Then the entrepreneurs can fix the fee to enter their queue, which will help prevent unsightly bidding wars from breaking out in front of the restaurant. And, because the whole scheme is run by a third party, the restaurant doesn't have to adjudicate disputes, or explain all this to everyone who shows up, or spoil their reputation as scrupulously fair egalitarians who would be shocked -- shocked! -- by the offering of a bribe.

So my guess is that restaurants might be okay with this, if it's done right. (i.e. The right number of "buyable" reservations vs the usual ones, the right fixed rate, no intimidation of customers, and of course no counterfeit reservations. I believe it is the latter two problems that have given rise to laws against ticket scalping.)

---

[1] How great is it that when trying to google this article the first thing I find is the HN link?

A restaurant who takes reservations is entering into an agreement: you promise that you will eat a meal there at a certain time, and they promise that they will have a table ready for you at that time.

If the restaurant is all booked up, they turn people away. If some of those reservations are held by scalpers, and the scalpers don't find a buyer, the table will be empty when it may have been used if not for the actions of the scalpers.

What the students did was to break this unenforceable contract, and convert an agreement to make a transaction at some point in the future into a pure option on their part. That's stealing value.

If the restaurants want to do this, that's one thing. If the restaurant attempts to cultivate an image of being the hip spot to be seen, then it's in their interest to seat anyone dressed nice, or has money to throw around, or whatever, preferentially. But I would expect that they take this factor into account when setting the wages of the maitre d, just as they account for tips when setting the waiters' wages. Thus, the restaurant captures the value.

If this became prevalent, I would expected restaurants to move back to a model of calling names, or asking the name as if they can't tell from what number buzzer you had. Psychologically, buying a buzzer would seem okay to a lot of people who would not be comfortable if what you were selling is "listen for Charlie, party of 4, and say you're Charlie".

All the above applies equally to buzzers or waiting in an physical queue. If the queue is visibly large or if the host says it's a 45 minute wait rather than a 20 minute wait, some patrons will go elsewhere.

There's no genius in this, it's just plain dishonest, and if any restaurant knew you were making fake reservations and then selling them they'd put a stop to it. That you don't think this is obvious blows my mind, and forces me to think you're a dishonest person in general. I can't fathom an honest person not immediately seeing this as wrong.

Okay, first of all, you should apologise to mechanical_fish. Ad hominem attacks are not cool.

I agree it's a bit shady to sell reservations, and I would be uncomfortable to play any role in this (person in line, person buying, student selling, or restaurant employee), but how is it "dishonest"? That implies deception, and I see none.

Selling reservations definitely violates the egalitarian "first-come, first-served" nature of the restaurant queue. If I were a restaurant owner, I wouldn't let it happen out of fairness to the people in the queue who don't want to pay. Both choices send strong signals, certainly, but I think that's a choice on the restaurant's part.

"That implies deception, and I see none."

Isn't it deceptive to make a reservation at the restaurant without any intentions to ever show up?

Call the restaurant and tell them "we would like to reserve 10 seats with the intention of selling them on the free market". If they give you the reservations, you have a honest business.

To be fair, they do intend to have someone show up and fill the table.

What if nobody is buying? Anyway, further discussion seems futile.

I owe him no such thing, nor did I attack him. I spoke of my own state of mind, that his comment made me think he was dishonest; I did not say that he was.

Omitting the truth is just as dishonest as lying. You don't try and parse technicalities with honesty, either you were acting in good faith or you weren't, not telling the restaurant that you intend to sell the reservations - something certainly outside their expectations - is deceptive and is most certainly dishonest.

I owe him no such thing, nor did I attack him. I spoke of my own state of mind, that his comment made me think he was dishonest; I did not say that he was.

Saying things like that makes me think you're a sophist.

See?

I once heard one of the participants from the first season of the Apprentice speak. One of the assignments her team was given was to take a business taxiing people about via bicycle and make it as profitable as possible.

Most the teams decided to jump on the idea of selling advertising. Her team had the insight to realize they weren't just selling advertising on a taxi-bike but they were selling advertising on a national television show. Needless to say they won that round. This is what the third team sounds like to me. Legitimate.

Regarding item 1, in the real world analogy of getting seed money an entrepreneur certainly isn't limited to only using that seed money. They can use their credit cards or their house or their own equipment or anything else.

The point of the exercise quite explicitly was to teach people to look past constraints that do not exist, like the $5 limitation you're getting stuck on. There was no restriction on using outside materials, that is a constraint you created on your own due to your interpretation of the presentation.

3) You're also assuming that the students didn't benefit from being introduced to the presenting company. Another poster mentions that it was Frog Design, and if that's the case then it was probably to the benefit of the students as well; Frog Design's a good company.

Making and selling restaurant reservations doesn't strike you as dishonest? It's an honor system. What's to stop me from making reservations at ten different restaurants for my blind date tonight, and deciding at the last minute which one will make the best impression on my date? The system relies on honesty. It only works because few people are willing to abuse it, and those who do so only do it in a small way. This business would either be blackballed and frozen out by the restaurants, or the reservation system it depends on would be abandoned.

But let's say you could convince restaurant owners that selling reservations is a dandy idea. Sure, restaurants have long known (the idea isn't new) that they could, for a very minimal cost, sell reservations to the highest bidder. Sure, almost all have decided to go with a system that is perceived as free, fair, and egalitarian (with some discretion for doing favors for VIPs and accommodating glamorous people.) Suppose you can convince them. Why wouldn't they do it themselves? Restaurants manage their image very carefully and would certainly prefer to be in complete control. They could just do it in a notebook until (as the phenomenon caught on) their reservation software offered support for it.

The only plausible way I could see the business surviving is by charging lots of money (fewer customers limits your visibility) and kicking some of the money back to maitre d's as bribes.

The system relies on honesty.

I'm not so sure that it does. It relies on filling the tables at the restaurants. The restaurants don't care if the people who come to fill your table aren't the same ones that originally booked the reservation. Nor do they care if a certain number of reservations are no-shows, if the number of no-shows is smaller than the number of people waiting at the door.

As I said above, you obviously can't take this all the way to the edge case or you'll have a company that buys up every single reservation, sells none of them, and then cancels them all at the last minute. Then that company will go out of business, either because the restaurant stops them or because the restaurant goes broke, taking the company with it. ;) So, don't do that! Just because your business plan fails on some edge case doesn't mean that it has to fail for you...

Restaurants do care if they deny reservations to non-paying customers and then have empty tables because your business didn't sell as much as usual. They also care about alienating customers who are told, "We don't have any free reservations available, but some are available for an extra charge." Very likely, if they found out what you were doing, they would put you out of business whether you were hurting them or not, just to prevent their patrons from ever facing that choice.

Like I said, the greatest proof that restaurants don't want their patrons paying for reservations is that they don't do it. They already have what they need: a way of recording reservations and a maitre d' with knowledge of their business and a triple-digit IQ. They know there's demand: many people already try to get a table on a busy night by slipping the maitre d' some cash. If they wanted in on it, they'd already be in on it, and you'd be stuck trying to convince a restaurant to hand over control of a simple, vital, near-zero-cost part of their business to a third party for no gain. I maintain that you could only survive as a parasite by avoiding notice and/or paying off the right people.

I'm not so sure that it does. It relies on filling the tables at the restaurants. The restaurants don't care if the people who come to fill your table aren't the same ones that originally booked the reservation. Nor do they care if a certain number of reservations are no-shows, if the number of no-shows is smaller than the number of people waiting at the door.

Restaurants are in the business of filling their tables by making customers happy -- those customers will return, tell their friends, and the tables stay full. By filling up available spaces (thus resulting in customers being told that a very long wait is to be expected) and providing a paid line-cut (who enjoys being cut in front of while waiting 60 minutes?), you're going to make a lot of the restaurant customers unhappy, both directly and indirectly.

If this was an ethical business, they would have told the restaurant what they were doing and received approval before they decided to lie to the restaurant to achieve their aims.

Agreed.. I'm surprised by the comments here where many seem to think that some ways of making money are more fair than others. I would have expected the Hacker News crowd to really admire the winning team's 'hack'.

But anyway, as long as it's not illegal, I don't see what the problem is. The instructor didn't say how (or even whether) to spend the seed money.

Another way to look at it -- a good idea and good execution can overcome almost anything, even shortages of time and money.

I am not surprised in the least!

Hackers have historically had very strong ideas of morality that extend way beyond illegal vs. legal. This is why some hackers advocate doing certain things they consider moral but illegal, and abhor other things that they consider immoral but legal.

> But anyway, as long as it's not illegal, I don't see what the problem is.

It's thinking like that that makes most people not like Wall Street and businessmen in general. Legal and illegal and right and wrong and not the same thing. Being ethical doesn't just mean following the law, it means following the spirit of the law and not doing things other would perceive as wrong, regardless of the law. It's wrong to cut in line, but it's not illegal, that doesn't mean you should do it. It's wrong to be rude and insulting for no reason to a stranger, but it's not illegal, that doesn't mean you should do it or that it's OK to do it.

That's true, and I totally agree with you. I guess my comment came out wrong. What I meant to say was that I don't see what the problem is for the purposes of the assignment.

Obviously the rules for doing business on Wall Street, where decisions can impact millions of people, and the rules for this business class assignment are going to be different.

The problem for the purpose of the assignment, is you shouldn't be teaching such bad behavior. If you reward people for behaving badly, they'll do it again. A great teacher would give assignments that paralleled the real world and encouraged behavior that would be both ethical and beneficial in the real world, because to a student, it is not obvious that the rules would be different in the real world.

It's a funny stunt once, but it's not an admirable business, because over time it would create less value than it destroys. Stanford classroom hours are limited and vastly expensive for the students.

From what I can see, their customers were happy, they made money, and it was all above-board, let alone legal. Clearly, something must be wrong!

I have to say, I'm even more amused by people's outrage at these winning tactics than by the tactics themselves. I begin to understand why it's necessary to have an entire class in entrepreneurship. Perhaps it is largely about training people not to be pinned, like hapless chess pieces, by the force of trivial preconceptions.

"their customers were happy"

The people who got a reservation, maybe, but what about the people who didn't get one?

Maybe a good business idea would be to sell kidneys that one steals from traveling students. I am sure the customers would be happy, too.

I'm assuming, based on the teacher's description (which involved "those little buzzers" and the concept of "trading one buzzer for another"), that these "reservations" they were selling were in fact "places in line". [1] If you built a business around selling reservations at a reservation-only restaurant, where the typical reservation was made days in advance and they were handed out in fixed quantity, I would have more... reservations about the business, as you do. [2]

But places in line? Everybody "gets one". The question is: Where is it, and how much would you pay to trade with the person ahead of you?

If I walked up to someone holding a buzzy coaster at a local restaurant and offered them $20 to trade coasters with me, would you be morally offended? Would they necessarily be unhappy?

Yes, I agree that if every place in line is for sale the whole thing gets tremendously painful for the people who arrive late and don't want to engage in a commodities-trading session before dinner. But what if only one in every 20 places is for sale?

If someone doesn't arrive -- no problem, everyone else moves up.

And, really, the kidney thing is unfair on several levels. For one thing, it's a cheap shot. If you want to take a moral stand on the sanctity of restaurant reservations, do so with pride! Don't feel the need to pretend that your debate opponents are also against motherhood, apple pie, and life itself.

For another, it's a different problem. The laws against paying for donor organs are in place because the market for donor organs is worlds different from the market for restaurant seats: You can't open up new sources of donor organs the way you open up a new restaurant [3], and the difference between the best chef and the second-best chef is smaller (in quantity and in kind) than the difference between one kidney and zero kidneys. Nobody dies if they don't get a seat at their favorite restaurant and have to eat at -- gasp! -- the International House of Pancakes down the street.

---

[1] We don't really have another name for this, do we? I've been burned by this hole in our lexicon before. Me: "Do you take reservations?" Restaurant: "Yes." Me: "Can I make a reservation?" Restaurant: "No, we don't take them over the phone. We give them out as you arrive."

[2] I can't believe I just wrote that, either.

[3] Well, not unless you're Sweeney Todd. In which case you can do both at once!

With the kidney example I really only wanted to demonstrate that "the customers are happy" can not be the only criterion for ethical businesses.

I heard that in India it's a common occupation to wait in lines and sell one's place.

If I take a job as a hit man, and I always manage to kill my targets I am also making my customers happy, but I would hardly claim that I was being ethical.

{edit} To expand on that, the legality of what is being done doesn't matter either. There are many unethical things that are still legal (e.g. patent trolls, large companies burying competition through using the legal system as a money drain, suing someone for defamation/slander just to shut them up about something that is true but you don't want anyone to know about, etc).

And it wasn't 'above the board' either, because it's not like they told the restaurant what they were doing. If I call ahead and book a table for two that I have no intention of using unless I can scalp/pawn it off on someone else, how am I being ethical by lying to the restaurant? {/edit}

I agree with comments below that the winners used illegal and immoral models but.... And the instructor, I hope, was in violation of her contract by allowing the ad presentation but.... That's not what really disappoints me.

What really disappoints me is that she missed a great teaching moment. She handed out $5s to a bunch of teams. Where is her return?

She missed showing how to use leverage. She had every right to say "no" to an ad presentation and so she should have looked at the margin by which the "winning" team won (say $300, whatever it was) and charged that team a buck less ($299) for the right to substitute the ad for the presentation they were supposed to make.

-t

thanks. I would have failed the "winning" team. From my perspective, they made nothing from their two hours. The money was made by the 3 minutes in class which was not part of their 2 hour earning time.

As long as they either don't open the envelope until just before the presentation, I'm pretty sure they fit within the rules of the competition.

Presumably they didn't line up the deal just before the presentation; presumably that was done in advance.

Look at it this way: if you can do things like that, you could just as easily form a "company" and spend the whole assignment period accumulating liquid but non-monetary assets in whatever manner you see fit. Then, at the last minute, open the envelope and buy the company from yourselves with the $5. Liquidate the company and pocket the value of the assets.

Would that be a valid solution to the assignment? If not, why would arranging a deal before starting the "timer" be any more valid? The agreement is still an asset, just a somewhat less liquid one.

What if it was counted because the teacher thought making the deal was where they made the money, not in the classroom. They made their money in the 2 hours, but delivered their service afterwards, which doesn't contradict her guideline.

So, the income can be counted before obligations are resolved? Tradesmen can "earn" large amounts of money in short periods of time under this definition, as they're often paid half up-front to fund materials, but they still need to do work in order to "earn" that money.

Well it depends on the method of accounting you're business would need or want to use, but in a monetary sense, then yes, it can be counted as cash made as soon as the money, not the product, is delivered.

"Personally, I found the presentation glib and condescending, and the solutions immoral and dishonest."

Welcome to business school.

I think you really missed the point. It has nothing to do with ethics, and everything to do with creativity.

Next year the team that beats the Kobayashi Maru scenario wins... gah, I hate these kind of artificial competitions.

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