Openness in the news

A few tidbits highlighted in the inner pages of a friend’s WSJ this morning. All are about (to some degree) IT openness.

Comcast is partnering with Clearwire (and thus Sprint) to resell its WiMax service to its existing cable modem subscribers. In integrating its offerings, Comcast is seeking to increase switching costs. More fundamentally, either this suggests that Comcast realizes that revenue growth in its core business is over, or it decided it needs to bundle in-home and coffee shop Internet access for residential users to compete with AT&T (DSL + Wi-Fi hotspots) and other integrated telecom companies.

Meanwhile, Clearwire is eager to generate revenue and win WiMax adoption before the more widely endorsed LTE tsunami comes flooding in.

The EU has forced major mobile phone makers to adopt a standard recharger plug by 2010. Nominally to reduce the number of chargers in landfills, of course it’s really about forcing an open standard to reduce switching costs. While I think this is exactly the sort of trivial economic micromanagement that governments should avoid, fortunately the government didn’t have to push too hard as European and US telecom trade associations had previously brokered the plan.

Alas, the format is the relatively new (and incompatible) micro-USB instead of the ubiquitous mini-USB that I already have on all my hard disks and some of my existing cameras and cellphones.

Dell is rumored (by the WSJ and earlier reports) to be planning an Android device aimed squarely at the iPod Touch. This makes a lot of sense, since for many users, the value of the iPT comes from its WebKit web browser, a mail client, Google maps and an RSS reader. Assuming Android has gotten around to fixing their awful email client, the open source (and thus inherently commoditized) platform makes perfect sense for the company that seeks to copy Apple’s new technology innovations (and old production innovations) as its core commodity business declines.

As with other Dell technology efforts, it would enable the low R&D company to build upon the R&D efforts of others, a classic (if decades old) example of open innovation.

Who wants Flash?

When Flash 10 comes to mobile phones in the fall, it will be available for Android, the Palm Pre, Symbian S60 and even Windows Mobile. This leaves out the BlackBerry and iPhone — roughly 30% of the world market (and the majority of the US market).

Obviously this is not a technical issue — the ARM processors on the missing phones are no less capable than those that will have Flash. In the long-running iPhone saga, Steve Jobs has been explicit in rejecting the need for Flash.

This obviously slows Adobe’s efforts to make Flash a ubiquitous cross-platform mobile phone media platform, building upon its success delivering annoying animated ads (as well as YouTube videos) to desktop owners.

Will phone buyers prefer a phone that has Flash over a phone that doesn’t? So far, there’s no evidence of that Flash matters that much, but my hunch is if either RIM or Apple gives in to Adobe, the other will have to follow.

Meanwhile, economists and pundits crow about the importance of open standards, but then developers take the lazy way out and use a proprietary platform like Flash because it is powerful with good tools. (Like all proprietary systems, it’s partly open — in this case not being died to any particular hardware.)

So it’s fine to say that, all things being equal, developers and users and MIS managers prefer open standards over proprietary standards. The problem with that claim is that all things are never equal: the creator of a mostly proprietary standard has financial resources rarely available to more open standards (with their more limited options for appropriation).

Adobe has done a good job of re-investing the rents provided by its control of Flash to continuously advance the platform. In doing so, it builds upon the successful efforts by Macromedia since it bought FutureWave Splash in December 1996. (Ironically, Adobe founder John Warnock turned down the opportunity to buy Splash the year before).

Money for nothing! Chicks for free?

The NYT reports that it now may be possible to get high levels of physical conditioning and endurance in a small fraction of the time previously thought. In lab rat and student studies, brief-high intensity exercise (with proper warmup, cooldown and rest) produced health benefits comparable to more extended efforts.

If this can be translated into a usable training regime, it promises the end to the mantra “no pain, no gain” for most fitness goals. I can’t wait to apply this to my irregular semi-weekly swimming workouts.

Since time is money, this scientific breakthrough promises to provide “money for nothing” for stressed-out professionals who don’t want to die of a massive cardiac arrest. The only disadvantage is that for individuals whose self-image (or social desirability) is directly tied to their muscle tone, such fitness will become less unusual and thus less differentiating.

This leaves a pressing question unanswered: once we can get money for nothing, how soon until we get chicks for free? I realize that Mark Knopfler no longer has to worry about this issue, but it would be of considerable interest for about half of the population. If cable weren’t so darned expensive, I’d add that I want my MTV.

Video source: dailymotion.com

Efficient vs. inefficient regulation

As part of outsourcing economic criticism to save money during tough economic times, I’ve been quoting conservative and libertarian critics of the administration’s economic policies.

Today I’ll quote from three nominal supporters of the Waxman-Markey bill that passed the House Friday on a 219-212 party line vote (eight Democrats voted “no”.) All agree that “cap and trade” makes more political sense than it will ever make economic sense. Finally, I include a more skeptical analysis of the bill’s likely effects from one of the usual suspects.

The first two quotes are from the standard-bearer of American liberalism, the Gray Lady herself. From a May 17 NYT article by John Broder:

How did cap and trade, hatched as an academic theory in obscure economic journals half a century ago, become the policy of choice in the debate over how to slow the heating of the planet? And how did it come to eclipse the idea of simply slapping a tax on energy consumption that befouls the public square or leaves the nation hostage to foreign oil producers?

The answer is not to be found in the study of economics or environmental science, but in the realm where most policy debates are ultimately settled: politics.

Many members of Congress remember the painful political lesson of 1993, when President Bill Clinton proposed a tax on all forms of energy, a plan that went down to defeat and helped take the Democratic majority in Congress down with it a year later.

Cap and trade, by contrast, is almost perfectly designed for the buying and selling of political support through the granting of valuable emissions permits to favor specific industries and even specific Congressional districts. That is precisely what is taking place now in the House Energy and Commerce Committee, which has used such concessions to patch together a Democratic majority to pass a far-reaching bill to regulate carbon emissions through a cap-and-trade plan.

From a column by Thomas “World is Flat” Friedman, April 8:

Last week, House Democrats, with administration support, introduced a 600-page draft bill on energy and climate. At the center of it is a plan to reduce greenhouse-gas emissions through a complicated cap-and-trade system. These people have the very best of intentions, but I wish they would step back and ask again: Can cap-and-trade pass? Will it really work? And is it the best strategy, with all the bureaucracy it will require to monitor, auction emissions permits and manage the trading?

Advocates of cap-and-trade argue that it is preferable to a simple carbon tax because it fixes a national cap on carbon emissions and it “hides the ball” — it doesn’t use the word “tax” — even though it amounts to one. So it can get through Congress. That was true as long as no one thought cap-and-trade could ever pass, but now that it might under Mr. Obama, opponents are not playing hide the ball anymore.
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Since the opponents of cap-and-trade are going to pillory it as a tax anyway, why not go for the real thing — a simple, transparent, economy-wide carbon tax?

A word from the Washington Post editorialists on Friday:

Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) have toiled for months to produce legislation that would mark the first of many steps leading to a carbon-constrained economy -- and that would also get votes. The result is a 1,201-page measure filled with political compromises, directives, subsidies and selections of winners and losers that most members won't be able to analyze before the vote and that leaves us wondering how effective it will be.
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The government would set a cap on the amount of carbon dioxide that could be emitted and would issue allowances to polluting sectors that could buy and sell those rights.

This complex system has some theoretical advantages over our preferred alternative -- a straightforward, easily understood carbon tax -- but it could be vulnerable to manipulation that would compromise its effect. Already pollution credits and their revenue are being divvied up to the advantage of polluters. During the campaign, President Obama supported the cleanest variation of this mechanism: selling all emission allowances at auction. This week he abandoned that sensible stance with a full-throated endorsement of Waxman-Markey, which gives away 85 percent of the pollution credits in the first years of the program and provides many avenues potentially to evade compliance. While in theory the bill relies on the market to find the most efficient alternatives to greenhouse-gas emitting energy sources, in practice its subsidies, regulations and exemptions could skew the outcome in costly ways.

Finally, from the Wall Street Journal editorialists, also on Friday

The Cap and Tax Fiction
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[T]he Congressional Budget Office did an analysis of what has come to be known as the Waxman-Markey bill. According to the CBO, the climate legislation would cost the average household only $175 a year by 2020. … A closer look at the CBO analysis finds that it contains so many caveats as to render it useless.

For starters, the CBO estimate is a one-year snapshot of taxes that will extend to infinity. Under a cap-and-trade system, government sets a cap on the total amount of carbon that can be emitted nationally; companies then buy or sell permits to emit CO2. The cap gets cranked down over time to reduce total carbon emissions.
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The hit to GDP is the real threat in this bill. The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment. Some companies will instead move their operations overseas, with the same result.

When the Heritage Foundation did its analysis of Waxman-Markey, it broadly compared the economy with and without the carbon tax. Under this more comprehensive scenario, it found Waxman-Markey would cost the economy $161 billion in 2020, which is $1,870 for a family of four. As the bill's restrictions kick in, that number rises to $6,800 for a family of four by 2035.
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The reality is that cost estimates for climate legislation are as unreliable as the models predicting climate change. What comes out of the computer is a function of what politicians type in. A better indicator might be what other countries are already experiencing. Britain's Taxpayer Alliance estimates the average family there is paying nearly $1,300 a year in green taxes for carbon-cutting programs in effect only a few years.

Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history. Even Democrats can't repeal that reality.

Computer tip of the day

I was at the office supply store yesterday, looking whether any computer equipment was on sale (as with the Sears of old, no one buys at list price).

I spent most of my time looking at external disk drives, as my wife has filled up her hard disk with digital photos and I’m looking to buy something under $100 either to store the overflow or (more likely) to backup all her data so I can move the overflow to her existing backup drive. The store had 2.5" disk drives in the 160-500 Gb range, and 3.5" disk drives with a terabyte or more.

In front of the disk drives was a guy with an official-looking polo shit who turned out not to be a store employee — nor even a customer — but just someone from the disk drive industry doing competive research.

Given the latter information — and where we were standing in San Jose — it was pretty trivial to figure out he was from the old IBM disk drive group on Cottle Road. (You might have heard of them, since they invented the disk drive in 1956 and also the floppy disk in 1971).

Alas, the historic building was destroyed by a fire, and the giant Cottle Road facility is going to become a strip mall and houses. IBM merged its disk drive business with Hitachi in 2002 as a way to exit the business. Since then, I meet Hitachi engineers now and again, particularly when they serve as a fellow science fair judge dispensing awards the IEEE Santa Clara Valley chapter. Some of the Hitachi engineers worked for IBM 8 years ago, while others are new to Hitachi and its San Jose disk operations.

My new acquaintance from Hitachi Thursday was proud of the fact that their reliability (e.g. one year failure rate) was better than the other companies on the shelf. If company “H” has a 0.8% failure rate, then company “S” is next best at 1.2%. It’s hard to set a reliability for company “V,” since they don’t make their own spindles and buy from other companies on a product-by-product basis. (We didn’t mention company “M” because they were not on the shelves, nor company “B” or “I” or “ST”.)

However, the market is being driven by company “W,” which is although lowest reliability is driving demand and market dynamics through an aggressive price war. (Here we call that commoditization.) My engineer acquaintance seemed wistful about having to match price while maintaining quality, but he was also pragmatic that consumers want to save that last $10 for something they’re eventually going to throw away.

Because, as my acquaintance made clear, all of these disk drives are going to fail. However, I learned a few things about when and how.

Although power supplies can and do fail (and can often be replaced free), the main failure to worry about is when the head stops floating over the platter. (I think he was referring to what we 35 years ago called a “head crash”). Some disk drives will beep — warning that failure is imminent — which means that an immediate backup is imperative.

The #1 way to increase the odds of a head crash is heat. People stack their disk drives with other electronic devices, magnifying the heat beyond the original design spec. Or perhaps (as I do) they use them in an un-air conditioned residential room in California in the summer. (From now on, my backup HDD’s will stay turned off until the interior temp drops below 80° F).

The other point — which surprised me — is that the 2.5" HDD are more reliable than the 3.5" HDD. They are made from higher quality materials, which makes sense since they need a higher recording density. (Since most of them go into laptops, I would imagine they also need to be more rugged.) Of course, for external HDDs, today they are powered by the USB port which means there’s no power supply to go wrong.

So I guess my next stop is to go to Fry’s and buy a 2.5" hard disk drive made by company “H”, such as the 250 Gb external they have for sale at $60.