Sunday, November 30, 2008

Monitoring Google's self-regulation

The converse side of Google providing targeting information for foreign terrorists (or militaries) is the question of Google censoring information that’s politically objectionable to host governments, rather than have its search (or YouTube) banned nationwide.

Today law professor Jeffrey Rosen has a long (5200 word) article in the New York Times Magazine entitled “Google’s Gatekeepers.” (Yes, I know, “long” is redundant in this context). Both Frank Pasquale and Mike Madison commented on the article in the Madisonian blog, which is where I saw it. 

Rosen highlighs government objections from China, Turkey, Thailand, France, Indian, Pakistan and Saudi Arabia. The crux of the issues is summed up in these two paragraphs from Rosen’s article:

Voluntary self-regulation means that, for the foreseeable future, [Google associate counsel] Wong and her colleagues will continue to exercise extraordinary power over global speech online. Which raises a perennial but increasingly urgent question: Can we trust a corporation to be good — even a corporation whose informal motto is “Don’t be evil”?

“To love Google, you have to be a little bit of a monarchist, you have to have faith in the way people traditionally felt about the king,” Tim Wu, a Columbia law professor and a former scholar in residence at Google, told me recently. “One reason they’re good at the moment is they live and die on trust, and as soon as you lose trust in Google, it’s over for them.” Google’s claim on our trust is a fragile thing. After all, it’s hard to be a company whose mission is to give people all the information they want and to insist at the same time on deciding what information they get.
This reminds me of what Prof. Randy Stross said during his Sept 30 talk at SJSU about his book Planet Google. From the transcript:
The only time I am going to be most worried about what Google is doing is when they offer bland reassurances. [I’m not worried] when they agonize publicly — here are the issues for us, here [is why we] are agonizing — which is what they did when they confronted the question about what to do with the Chinese government’s demand that they censor results for certain search terms.

As long as they do that, I think they can hold to “don’t be evil” but if they revert to standard corporate speak with the rote reassurances, this is a company that as I fear will know more about us than any entity — private or public — in the world. I don’t want to hear reassurances; I want to see them worry about my worries.
One thing I found comforting in the NYT article is that search engine censorship is being reported. Today, it’s to, a website run by the EFF and various law schools. Under the proposed Global Online Freedom Act, it would also be to the US government. (Rosen makes it clear that Google et al want to change some of the provisions).

It’s wrong to have the EFF or DOJ (or other USG) tell Google what they can and cannot censor to keep Google legal in China or Turkey or Thailand or France. But government (or voluntary agreement) can absolutely play a role in assuring full disclosure, so that the public can see how Google (or Microsoft or Yahoo) are balancing the trade-offs that rightly worry Prof. Rosen and Prof. Stross.

Bob Rubin: it's not my fault!

From Saturday’s WSJ:

Under fire for his role in the near-collapse of Citigroup Inc., Robert Rubin said its problems were due to the buckling financial system, not its own mistakes, and that his role was peripheral to the bank's main operations even though he was one of its highest-paid officials.
Its troubles have put the former Treasury secretary in the awkward position of having to justify $115 million in pay since 1999, excluding stock options, while explaining Citigroup's $20 billion in losses over the past year and a government bailout of at least $45 billion.
"Even though he has no 'operating' responsibilities, he still has a fiduciary responsibility as a board member," said William Smith, a New York money manager and frequent critic of Citigroup's current management and board. "He has overseen the entire meltdown, yet been compensated as an operating employee while bragging about having no operating responsibility." Mr. Rubin can't "have it both ways," Mr. Smith added.
Citibank stock is down 70% since Rubin joined the firm in 1999, and down 86% since its peak two years ago.

Citibank is the most egregious example of banks saying that everything is OK as the financial collapse built this year, and systematically underestimating the risk posed by complex derivative instruments.

I guess NY bankers have the same attitude towards personal accountability as Washington politicians. (Of course, Rubin is both, having served as US Treasury Secretary from 1995-1999). If Wall Street is supposed to have the smartest financial minds in the world, why is it that they couldn’t create

Decades from now, historians may look at Enron and Worldcom as rare examples when leaders of business collapses actually paid a price for their malfeasance. Meanwhile, “leaders” like Rubin get millions for their pockets, billions in taxpayer bailouts, and help destroy trillions in US equity market value, while continually dodging any responsibility for their actions.

Saturday, November 29, 2008

Google Earth: a terrorists' best friend?

Residents of India, Indian expatriates and freedom loving peoples around the world are mourning the loss of nearly 200 lives in the terrorists attacks in Bombay, the Indian financial capital. The best coverage of the attacks has (not surprisingly) come from The Times of India.

One Times report said that nine of the 16 fidayeens had lived in Mumbai to recce (reconnoitre) the terrain. Another report said “ the ten terrorists had not come to Mumbai before this to conduct any 'recce' and they had learnt about the locations with the help of Google Earth.”

I tend to believe the former report. A computer rendition is no substitute for a face-to-face visit, and it’s easy enough for unarmed foreign nationals to visit any democratic society (particularly, as it appears here, there are plenty of resources to buy forged passports). Also, the terrorists have a strong incentive to give misleading information about their prior visits, to discourage attempts to identify terrorist plots before they happen.

Still, this highlights the dilemma that Google Earth/Google Maps (and its Microsoft and Yahoo counterparts) face in making available information that might be used for deadly purposes. As Randy Stross notes in Planet Google (pp. 147-148), this exact controversy came up with both US and foreign government facilities when Google Maps was introduced.

One example cited by Stross was the use of Google Earth in a plot to blow up JFK airport in New York City, which brought requests for mapping companies to work with US and local law enforcement officials. Foreign security official had long complained about Google’s role; as a FSS (née KGB) analyst said:

Terrorists don't need to reconnoiter their target. Now an American company is working for them
Despite such complaints, Google Maps still provide aerial photos of sensitive sites such as the French defense ministry. Even if Google Earth does not (as one humorist suggested) provide real-time imagery, Google (and others) provide plenty of pictures that would be hard (if not impossible) to obtain by a terrorist or other non-governmental attacker.

It’s one thing to say that “everybody’s doing it” and thus no individual firm faces any need for self-restraint on sensitive locales. On the other hand, as more crimes (or military attacks) are committed using such tools, there will be public pressure to do something about this problem.

Friday, November 28, 2008

Biggest Yahoo of them all?

This week, Carl Icahn doubled down on Yahoo, adding 6.8 million shares (at $9.88 per share) to go with the 69 million he bought earlier at $25/share. Some see this as a positive sign, but increasing his stake by 10% (and net investment by 4%) seems a very weak endorsement of the company‘s future. Others speculate that he wants to influence the choice of top Yahoo to replace soon-to-be-former CEO Jerry Yang the man who turned down Microsoft’s $31/share offer.

Earlier this week, Merc columnist Mike Cassidy wondered whether Yang’s blunder counted as the “worst business decision ever.” I might have voted for worst decision of the year, but ever?

Cassidy got an earful from his readers, who suggested a range of other mistakes:

  • Big Three automakers: for killing the EV1, making gas guzzlers “nobody wanted to buy”, and taking their private jets to beg for a bailout. Comment: Not even close.
  • Xerox PARC for fumbling the future. Comment: Top 25 but not top 5.
  • WebVan and the other dot-com fools. Comment: I was tempted to list these in the top 5, but then many of the founders dumped their soon-to-be-worthless shares on greater fools and now live in Atherton or Saratoga — so who made the mistake here?
I’ve got some other nominees. How about all those banks loading up on subprime loans? The decision of GM and Ford a decade ago to plough their cash back into their declining businesses, rather than buy out their (ultimately more profitable) competitors? Railroads passing up the chance to buy airlines 90 years ago?

One guaranteed top 5 pick: IBM handing control of the PC industry over to Intel and Microsoft in 1980 (a bigger mistake by at least an order of magnitude than Yang’s). Another (as recounted by Al Chandler): RCA aggressively licensing its color TV patents to obscure, struggling overseas electronics makers; the bottom line was nicely padded by royalty income, until Sony, Panasonic, Toshiba and others drove RCA out of business.

It’s hard to see how a Yahoo acquisition that never happened could touch some of the biggest value-destroying acquisitions of all time. Cassidy’s readers mentioned Time Warner buying AOL; as with WebVan, it was dumb for the buyer but not for the seller. While this probably destroyed the most market cap, in terms of consequences I’d put Sprint buying Nextel ahead of Time Warner’s mistake: Time Warner may survive but it’s not clear that Sprint will. (And while we’re on cellular, various firms like PacTel and MCI unloading cellular franchises in the 1980s would also have to qualify as top 25 blunders). Then there’s MCI buying WorldCom, certainly a purchase that had irreversible consequences.

There’s plenty of material here for teaching undergrads and MBAs. But even if every business student learn these lessons, foolish optimism or unbounded greed will cause some to make ever-greater mistakes down the road.

Thursday, November 27, 2008

Best headline of the week

From the Wall Street Journal, Wednesday Nov. 26, p. B1:

Retail Downturn Rains on Macy's Parade
Department-Store Chain's CEO Says Size Lets it Strike New Deals, Cut Costs to Weather Sales Decline
Fortunately for NYC parade-goers (as well as Miley Cyrus, Snoopy and Buzz Lightyear), the rain is only metaphorical, with partly cloudy skies and temperatures in the low 40s.

Wednesday, November 26, 2008

Google "breaking" iPhone rules: Get over it!

The Google-iPhone stories keep on coming.

The blogosphere is-a-Twitter (®) over Google’s use of undocumented APIs in its voice-activated search application. Google this week confirmed earlier analysis that Google couldn’t implement at least one feature (auto-detection of face proximity) without using the undocumented APIs.

Of course, applications use undocumented APIs all the time — for years if not decades. As a Mac developer in the 1980s, we had to figure out (translation: reverse engineer) what the undocumented APIs were to get our printer drivers working, but other applications also needed to know for system-level things like Memory Manager hacks.

The consequence is that anything using an undocumented API may break when a new OS or device comes out. (For example, the VM scheme in our printer driver broke when the 68040 used a different code/data caching scheme than any previous Motorola processor).

This means that undocumented APIs are to be avoided, but if you need them to ship, you ship. However, you have to carefully track prerelease hardware and software for incompatibility and be ready to drop everything if your code is not upward compatible.

Thus, I find a lack of realism in the hysteria over “Google: Yes, We Broke iPhone App Store Rules” and all the similar headlines. (There’s also the possibility, as some have commented, that Apple might have deliberately shared these APIs).

Yes, there’s an element of capriciousness (if not hypocrisy) in Apple’s decision to overlook the “violation” and let the world’s largest Internet company distribute its app through the App Store. But they’re Apple’s rules, to enforce as they see fit. And it’s not like that’s new — people have been complaining about it since the App Store opened earlier this year.

And this is just a microcosm of a larger economic reality of third party software relations. For thirty years, ISVs have known that major, strategically important third party applications are treated differently than those from no-name companies. Sometimes the favored applications aren’t even good, just from a company that has a lot of clout. (Something like dBase Mac comes to mind).

So, as my favorite band once sang

But the big, bad world doesn't owe you a thing.
Get over it.
Get over it.

Tuesday, November 25, 2008

A real war of IP violators

In addition to killing people, forcing thousands of civilians to permanently leave their homes, and causing $1+ billion in damage, Russia’s invasion of Georgia in August may have also violated a special EU “design right” (consistent with the WIPO policy for industrial designs) held by the Finnish government.

The New York Times reports on the similarity between Russian and Finnish military camouflage uniforms, and the suggestion (never quite proved) that Russians stole a Finnish design. I didn’t know that camouflage can be protected, but apparently it can:

Over the last decade, as the world’s militaries switched over to camouflage based on digital images, it has become standard for countries to protect their patterns — though manufacturers in China have been known to pirate them and sell them commercially. The M/05 took years to create, Captain Karhuvaara said. Finland barred reservists from using it and filed for design protection within the European Union, he said.
But of course, Finland has no desire to pick any fight (ever) with Russia, so in the end, it let the matter drop. I suppose the Poles or the Czechs might pursue the matter, but otherwise (fearing invasion or commercial retaliation) none of Russia’s other neighbors will stand up to the Bear in their midst.

Hat tip: Madisonian

Citibank's Chronic Crises

The Wall Street Journal — the BFF of American big business — is calling for the breakup of Citibank and the firing of its board of directors. Here are the concluding paragraphs of its editorial this morning:

While other banks can claim to be victims of the current panic, Citi is at least a three-time loser. The same directors were at the helm in 2005 when the Fed suspended Citi's ability to make acquisitions because of the bank's failure to adhere to regulatory and ethical standards. Citi also needed resuscitation after the sovereign debt disaster of the 1980s, and it required an orchestrated private rescue in the 1990s.

Such a record of persistent failure suggests a larger -- you might even call it "systemic" -- management problem: If taxpayers have to risk so much to save Citigroup, then regulators should at least exert the discipline to break up this behemoth so it is never again too big to succeed, much less to fail.
This caught my eye for several reasons. First, my belief that firms that are “too big to fail” either need to be allowed to fail now, or be made smaller so next time they can fail next time.

Secondly, Citibank has engaged in some of the most egregious lobbying, as when Robert Rubin (onetime Clinton Treasury Secretary) pushed to protect Enron from reduced credit ratings and bankruptcy. (Citibank later paid $3.7 billion in damages for protecting Enron). Given how Enron was the symbol of business corruption earlier this decade, why has Rubin escaped any damage to his reputation?

In a real free market, failure has consequences, and those responsible for failure are held to account. The alternative is corporate socialism — i.e. France, the UAW or a nationalized auto industry.

The big banks should be an easy call: they collect lots of money when times are good and make taxpayers foot the bill when times are bad. It should be one or the other — government wages with government guarantees, or free market wages with the free market risk of failure. (Not to mention shareholders who fire managers who mess up).

So far, Obama has resisted the temptation to write a blank check to Detroit, but even if he stands tall, there will be many other opportunities for politically connected fatcats to feed at the public trough.

Monday, November 24, 2008


Note to readers: iPhonetics should not be confused with iPhonatics.

A regular reader — noticing my raft of recent iPhone postings — offered a pointer to this story published in London’s Daily Telegraph.

Google voice search baffled by accents
From correspondents in London
November 19, 2008 11:30pm

A NEW voice-recognition search tool for the iPhone has problems understanding British accents, leading to some bizarre answers to spoken queries.

The free application, which allows iPhone owners to use the Google search engine with their voice, mistook the word iPhone for "sex'', "Einstein'' and "kitchen sink,'' said the Daily Telegraph.

Comments left by users on the application's website seemed to confirm the problem.

"Awesome job google. only problem is every time I say the word 'fish' it registers as sex,'' wrote one, identified as Kevin.
The Yahoo version headlines it “iPhone sex: Google application baffled by British accents,” but the text makes it clear this is more of a Google story than an iPhone story.

This makes a nice segue to my next raft of postings — offering observations from Prof. Randy Stross’ book Planet Google. On page 87, Stross makes it clear that the free voice search offered by Google in the US is a datamining experiment — filling a codex of phonemes — rather than yet another failed business model. Quoting Google exec Marissa Mayer
Google’s speech recognition experts told her, “If you want us to build a really robust speech model, we need a lot of phonemes … people talking, saying things so that we can ultimately train off of that.”
As with other examples in Stross’ book, Google runs its business by algorithmically data mining terabytes of data. It can find billions (trillions) of pages of text off the Internet, but for a wide ranges of human voices, it offers a free beta services in hopes of enlisting millions of volunteers.

Presumably, once Google has its fill of (North) American, it can graduate to British, Scottish, Irish and perhaps someday even Aussie.

Saturday, November 22, 2008

iPhone mas fotos

Here in Chile, all 3 carriers are GSM but only two are carrying the iPhone. This is a change to the former country exclusive we saw in the US, UK and several other countries where the iPhone launched in 2007 (under the old business model).

Both carriers are offering huge ads emphasizing their sale of the iPhone: billboards, point of sale, and even covering the side of their respective stores.
The biggest ad I saw (in Viña del Mar) was by Movistar, which had an add several car lengths wide. After traveling for a while, I saw a few ads where Movistar advertises they are a subsidiary of Telefónica, the Spanish mobile group that includes O2 in Britain, which is the iPhone carrier there.

The second carrier to carry the iPhone is Claro. Across the street from Movistar (facing towards the Marina Arauco mall) it plastered its store with a 10' high sign.

Claro is a Latin America chain — here in Chile, a rebranding of the former Smartcom PCS. Claro doesn’t mention that it’s part of the Mexican phone chain América Móvil, owned by the world’s richest man.

The third cellular carrier is Entel PCS. In the Marina Arauco mall, it was showing the Nokia N95, but since it (and the others) had a wide range of Nokia and BlackBerry models, it did not seem to have the same sizzle. (That said, I didn’t see anyone trying an iPhone — perhaps after four months everyone who wants the current model already has one.)

I couldn’t figure out why Entel PCS was the only carrier to say “no” while the others said “sí.” And then on the way to the airport (and in the airport) I saw Entel advertising that it’s part of the world’s largest mobile phone network, Vodafone. The same Vodafone that generally believes in commodity handsets.
I don’t know if that’s the reason Entel stands alone, or if it’s because Apple thought two was enough. Or perhaps Apple had to grant both carriers rights to distribute in Chile, to fulfill a broader global partnership with each carrier.

Photos by Joel West, November 2008: Viña del Mar (1, 2), Santiago Airport (3). Photos published yesterday: Santiago Airport (1,3); Lima Airport (2).

Friday, November 21, 2008

Cultural universals

I’ve been traveling this week and — far from home — have seen more iPhone ads. Here are a couple of iPhone ads I saw Wednesday night while passing through airports.

Anyone want to hazard a guess where? (The second one should be a big tipoff).

In the interests of equal time, here’s a BlackBerry ad. My host on the trip was carrying a CrackBerry — as addicted as any American. While I saw a surprising number of iPhones at the (hint) workshop where I was speaking, my host said he stuck with the RIM product because (exactly as I feel) with the virtual keyboard the iPhone is not really a serious e-mail machine.

Still, as a % of disposable income or per capita GDP, the iPhone here (hint) is quite a bit more expensive than in the States. A Matchbox car is $1 instead of $5 and most food items are about 50% or maybe even 1/3 of the cost as in the states. My spaghetti dinner Friday night was $3 and a half hour in an Internet cafe was 30¢.

Thursday, November 20, 2008

SVCE recognized during Global Entrepreneurship Week

Global Entrepreneurship Week is drawing to a close. On Tuesday, the Silicon Valley Center for Entrepreneurship and our director Anu Basu were honored by San José mayor Chuck Reed for its work in promoting entrepreneurship.

Img 8127-Topost
Photo: Profs. Joel West, Anu Basu and William Jiang of the SJSU Department of Organization & Management.

I wouldn’t call it a major milestone, but we hope it is yet another reminder to the community of the ongoing role we play in promoting entrepreneurship in the Valley.

For example, our Neat Ideas Fair is (AFAIK) unique in the country in spotlighting nascent business ideas (pre business plans), drawing a wide range of entries from engineering and industrial design in addition to business students. The 5th annual fair will be held Dec. 4 at the student center.

In January, we will also be starting a new undergraduate major in entrepreneurship, and launching a new class in green entrepreneurship.

This is an important time for encouraging entrepreneurship. On the one hand, fundraising is tough. On the other hand, the opportunity cost is low and (in some case) perhaps close to nil. Firms that begin at the trough (have we found it yet?) could be well positioned if (as usually happens) the recession lasts 1-2 years.

Wednesday, November 19, 2008

The Mouse who once set IP policy

Belated birthday wishes to Mickey Mouse. Eighty years ago Tuesday, he made his professional debut in Steamboat Willie, the first Disney cartoon, the first cartoon with sound, and the beginning of the Disney empire.

Daniel Finkelstein of the London Times describes the back story of that first cartoon and also defends Uncle Walt against his posthumous critics. He recommends the 2007 biography of Disney by Neal Gabler (now in paperback) which brings together a largely unknown facts about Uncle Walt and his empire.

My interest is Mickey’s role in setting the term of US copyright law. A decade ago, the copyright on Steamboat Willie was about to expire, so Disney Co. lobbied its friends in DC to extend all copyrights by 20 years. The ex post facto extension of copyright term makes no economic sense whatsoever, but (despite the heroic efforts of Larry Lessig) it was upheld by a 7-2 SCOTUS ruling. Hence the disparaging term “Mickey Mouse Copyright Law” or “Mickey Mouse Copyright Extension Act.”

Did I mention that there was no economic justification for this? (Yes, I know that Stan Liebowitz would beg to differ). People who created something 70 years ago (or even are dead) get no incentive for innovation or creativity for such an ex post facto change in terms. Instead, it is just another exhibit in the core Libertarian argument that a government that has the power to hand out favors to the well-connected is a government of men, not laws — or a government that can be bought.

However, today I find myself encouraged. I think this is the last copyright extension we’ll ever have: the law will be permanently set at 90 years rather than 70 (or 50) years, but it won’t be extended indefinitely. Someday Fitzgerald and Faulkner and Winnie the Pooh will be in the public domain.

Why? In 1998, the biggest threat to Steamboat Willie was unauthorized DVDs: think of all the DVDs of It’s a Wonderful Life, whose copyright was allowed to lapse.

Today, it’s the Internet. And, as any fool knows, this is a battle that won’t be won by copyright or copyright enforcement, but by clever business models that can compete with free.

Steamboat Willie is already being given away free by GooTube. Disney either doesn’t know or doesn’t care — or it realizes that pulling this copy will only have it replaced by another somewhere else.

So Eric Eldred may not live to see it, but someday works will again start falling into the public domain, and (hopefully) we’ll never see this mistake repeated again.

Nokia to release Symbian TD-SCDMA phone

TD-SCDMA is China’s homegrown claim to 3G mobile connectivity, an attempt to reduce royalty payments to foreign IP holders and force foreign telecom makers to license Chinese patents. The technology was originally developed by Siemens (back when they made cellphones) and Chinese scientists. There have long been questions about the radio technology and (thus far) user tests seem to bear that out.

Chinese ministry plans for TD-SCDMA have been on again and off again for years — and with them, the government’s willingness to license any 3G technology (since no other 3G technology would be allowed until TD-SCDMA could be deployed).

TheTD-SCDMA rollout was long planned to be showcased at the Olympics, and 20,000 phones were distributed to foreign visitors there.

In August the Chinese government confirmed that it was forcing allowing the country’s largest operator, China Mobile, to build a nationwide network, after trials in eight cities began in April. China Mobile had hoped to offer W-CDMA (with its breadth of manufacturers and economies of scale) or to provide dual coverage, but the Ministry of Industry and Information Technology (MIIT) said no.

With the country’s largest operator now stuck pledged to deploy TD-SCDMA, foreign makers of handsets and semiconductors will kowtow before the technology to demonstrate to MIIT their loyalty and avoid ceding the market to rivals.

On Wednesday afternoon in China, Nokia announced that not only will it support TD-SCDMA phones in China, but that it plans to release a phone next year using Symbian OS:

Nokia has started the development of a TD-SCDMA device based on S60 on Symbian OS, and plans to launch the product before the end of 2009.

Nokia's S60 TD-SCDMA device will enrich the TD-SCDMA device portfolio for Chinese consumers, and promote the development of TD-SCDMA in China.

Symbian is the world's leading smartphone platform, with over four million developers globally. By launching the S60-based TD-SCDMA device, Nokia combines Symbian's massive resources with the market opportunities provided by TD-SCDMA. There are currently over 10 000 third-party S60 on Symbian OS applications commercially available. The current S60 on Symbian OS applications will be compatible with S60-based TD-SCDMA devices, offering enriched experiences to China's TD-SCDMA users.
Thus far, S60 has been GSM (or W-CDMA only). It would appear that this will be the first time it’s been deployed on another radio interface (with a different SIM card architecture, signaling, etc. etc.). There were once plans announced to release a CDMA version but somehow the phone never got released — perhaps due to Qualcomm/Nokia IP hassles or Nokia’s withdrawal from the CDMA market.

There has been some speculation about Nokia’s commitment to S60, both with its Maemo tablets and the plans to open source Symbian. If such speculation were accurate, then the decision to use S60 in China would be surprising, given China is the world’s biggest market (and market penetration) for Linux phones (cf. Although I have no inside information, this implies that Nokia’s smartphone strategy for the next 18 months still remains firmly in the Symbian camp.

Tuesday, November 18, 2008

Two ideas for patent reform

Patently-O talks about two ideas on patent reform — one serious, one not.

The silly one is that Halliburton seems to be trying to patent how to be a patent troll. Halliburton didn’t want to talk about the application. Given stricter rules on business model patents, this seems to be a nonstarter.

The serious one is that telecom entrepreneur (and former UCSD professor) Ron Katznelson is doing a road show for his patent reform ideas. I interviewed Katznelson for my planned SD telecom book, because he worked at Linkabit, worked on DBS standardization with General Instruments, and then started a company MCSI (later Broadband Innovations).

Ron’s recent talk at the UC Davis Law School was written up Monday at Patently-O, complete with slides. His two main concerns are addressing the huge number of pending patents, and also the declining quality.

Detroit's long overdue toughlove

The NYT this morning covers all the opposition from left, right and center to the Detroit Three’s groveling for a Federal blank check. The article concludes:

It all feels excessive to some in Detroit. “I didn’t know that some really, really hate us,” said Ms. Tompor of The Free Press.
No, it’s actually toughlove: a refusal to continue to be the enabler of prior destructive behaviors.

Everyone reconizes the terrible precedent. As Charles Krauthammer asks
Where do you stop? Once you've gone beyond the financial sector, every struggling industry will make a claim on the federal treasury. What are the grounds for saying yes or no?

The criteria will inevitably be arbitrary and political. The money will flow preferentially to industries with lines to Capitol Hill and the White House. To the companies heavily concentrated in the districts of committee chairmen. To clout.
As Detroit native (and Congressional political guru) Michael Barone wrote:
And, of course, the Detroit Three will not be the last flagging enterprises to line up for government subsidy. Michigan is not the only state that has a talented congressional delegation capable of enlisting allies on relevant committees and from states with economic stakes in failing companies. Other unions, noting the UAW’s success in maintaining benefits, will be standing in line.

[Gary Varvel]
In recommending that the Feds help auto workers but not automakers, NYU prof David Yermack notes nearly a half-trillion in private capital squandered by two Detroit auto makers in the past decade:
Over the past decade, the capital destruction by GM has been breathtaking, on a greater scale than documented by Mr. Jensen for the 1980s. GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM's physical plant during this period was $128 billion, meaning that a net $182 billion of society's capital has been pumped into GM over the past decade -- a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.

As a society, we have very little to show for this $465 billion. At the end of 1998, GM's market capitalization was $46 billion and Ford's was $71 billion. Today both firms have negligible value, with share prices in the low single digits. Both are facing imminent bankruptcy and delisting from the major stock exchanges. Along with management, the companies' unions and even their regulators in Washington may have their own culpability, a topic that merits its own separate discussion. Yet one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.
An interesting thought experiment: GM buying Toyota would have been like Yahoo buying Google or the railroads buying the airlines. Alas, in all three cases, I’m sure they would have mucked it up.

Former Northwest Airlines exec Michael E. Levine argues that bankruptcy is the right solution to GM’s problems. After all, they worked for airlines.
The social and political costs would be very large, but if GM fails after getting $50 billion or $100 billion in bailout money, it'll be just as large and there will be less money to soften the blow and even more blame to go around.

But unless we are willing to support GM as it is indefinitely, the downsizing and asset-shedding will have to come anyway. Even if it builds cars as attractive and environmentally responsible as those Honda and Toyota will be building, they won't be able to carry the weight of GM's past.

GM as it is cannot survive without long-term government life support. If it gets that support, it can't change enough and won't change fast enough. Contrary to Mr. Wagoner's brave declaration, bankruptcy is an option. In fact, it's the only option that merits public support and actually has a chance at succeeding.

The Linux iPhone that wasn’t

Didn’t see it last week, but John Gruber claims that outgoing iPod guru Tony Fadell had wanted to make the iPhone using Linux. No one else is reporting it (except to quote Gruber), so it’s either a bonafide scoop or just a fanciful rumor.

Monday, November 17, 2008

What Yahoo wants to be CEO?

The Chief Yahoo will no longer be Chief Executive. As announced in a memo to Yahoo employees and a public press release, Jerry Yang is stepping down as Yahoo CEO. Tomorrow’s WSJ article has the subhead “Co-Founder's Rebuff of Microsoft Haunted Tenure.”

Despite my criticism of Yang’s tenure, it’s not an easy job. Terry Semel didn’t do any better. But in 10 years, Yang will still be the Yahoo cofounder while Semel’s tenure will be a brief footnote in history. (Instead, Semel will be remembered for taking $25 million of shareholder money to endow a UCLA medical lab — or perhaps his wildchild who seems intent on proving Britney Spears normal.)

So who are they going to get to run it now? Eric Schmidt looks brilliant because he became Google CEO rather than stick around to be Sun CEO (another no-win hand.) Would Yahoo have done any better under Schmidt, without the Google money, market position, technology, and cofounders?

If the goal is just to stall until Microsoft buys them, that’s a plausible plan. Would they get even half of the $33/share they turned down six months ago? Seems pretty unlikely. So there’s $15b in Microsoft’s money that stays in Redmond rather than bailing out long-suffering YHOO shareholders.

The trauma of business school rankings

Apparently Business Week released their business school rankings last Thursday. Although I had their blog on my RSS reader, I hadn’t heard about it until today when a friend of a friend had to cancel a meeting due to a college-wide crisis brought on by a traumatic fall in the rankings.

In the new rankings, Chicago repeated at #1. This time, it’s with the donation by stock fund manager and alumnus David Booth, that renamed it the “University of Chicago Booth School of Business.” (“Chicago Booth” for short.). The gift “is valued at $300 million” although that seems to include some pledges and NPV calculations that make it different from $300m cash.

There are a lot of rankings for full-time MBA programs: Business Week, US News, the Financial Times and (most recently) the Wall Street Journal. Although I’ve seen schools tout the one that makes them look best (UCI was once a fan of the FT list), my sense is that Business Week carries the most weight in the US and the FT everywhere else.

They nominally use similar constructs: input quality, output quality, faculty quality. But how they operationalize that may differ: for example, Business Week measures both pre- and post-MBA pay, which is fascinating because (they report) Wharton grads go from $80k to $120k but Darmouth grads climb from $65k to $115k.

There are some important differences. The FT uses the most transparent measure of faculty quality, by counting research articles in a well-known list of "Top 40” journals. The WSJ (working with Harris Interactive) puts a heavy emphasis on recruiters, allowing them to punish the snotty, self-important (but probably smarter) hotshots at schools like Harvard and Stanford.

The face validity of some is also more suspect than others. Normally Harvard and Stanford are vying for #1 — both in the reports and in the minds of b-school academics — but Harvard has been #4 or #5 most of the past few years and Stanford has rarely cracked the top five. (This informal reputation does tend to lag by several years changes in the real world). The WSJ rankings are hard to figure out.

The FT had the advantage of being the only study that put European schools on the same scale as the Americans, to provide some elements of comparability. In 2000, Business Week has added international rankings, but not on the same scale. They have the usual suspects — INSEAD, Western Ontario, London, adding fast-rising IESE from nowhere to the #2 spot. Still, the decision to rank Queen’s ahead of Western Ontario

Business Week helpfully provides a table of the biennial rankings over the past 20 years, which nicely proves a point I’ve been trying to make for eight years. When I visit a top 50 b-school, I find rankings are always a concern. When I hear some dean (or faculty member or donor) say “we’re going to get into the Business Week top 30” (or the US News top 25 or top 50), my question is always: “who’s going to volunteer to leave?”

This year, four schools added to the list: SMU (#18), BYU (#22), UW Seattle (#27) and Georgia Tech (#29). All are informally considered top 50 schools, and both SMU and Tech had been in the BW rankings before. To make room for these four schools, four also left the top 30: Georgetown (top 30 for 4 of the past 5 surveys), Michigan State (3 of 5), Purdue (6 of 8) and Rochester (6 of 11).

Looking at the list, I would expect 2 or 3 of the schools ranked #23-30 will be gone in 2010, but otherwise the same cast will be jockeying for position among the each other.

Is this healthy? Does it matter? It certainly has consequences: I predict that at least one (probably two) of the four deans will be forced to resign in the next year. But do these metrics make schools better? Probably not — schools are now “teaching to the test” in hopes of improving their scores on the various metrics.

Still, I don’t see the b-school deans calling for a boycott of rankings the way law school deans have. Accountability and external metrics — however flawed — force organizations to be more effective and/or more efficient. Plus there’s the “prisoner’s dilemma” — if the top 10 schools unilaterally disarm, then schools #11-20 will exploit that to become the new top 10. The lawyers think they can organize collective action to destroy the rankings, but I think they ought to go back and read their Mancur Olson.

Sunday, November 16, 2008

Listening for a revenue model

Tonight Apple ran a TV ad for Shazam, an iPhone application that listens to a song and tells you what it is. It’s the latest in a series of Apple ads promoting Web 2.0 apps available for the iPhone, which have also included Loopt and restaurant finder Urban Spoon (with the cool randomizer feature).

A quick search on the Internet shows that Shazam once charged for use, but now is free thanks to competition from Midomi. In head-to-head reviews, some prefer Shazam, some prefer Midomi. Isn’t this great? Not just a cool technology, but a consumer choice as well.

So far, news accounts have said Shazam’s getting market share but not revenues. Back in September, Samsung announced it was bundling Shazam with its phones, revenue model unspecified. A week later, Shazam landed the world’s biggest mobile phone operator, Vodafone, where the service would be €3/month.

I can’t imagine why you’d need to charge. I would think that you could make a lot of money from the 5% commission for iTunes sales — given one estimate of a 25% click-through rate. But maybe on some platforms there’s no revenue share on music sales.

The Washington Post story quotes the Shazam CEO, Andrew Fisher, in his guess that somehow ads will solve his problems:

While Fisher thinks that the mobile ad market is still 18-24 months out, he says that he's fielded a lot of interest from mobile ad networks which are keen on their inventory, hence their decision to test the waters using their iPhone application.
In this regard, I guess Fisher is in the same boat as Facebook CEO Mark Zuckerberg.

So we’re back to the chronic Web 2.0 dilemma: it’s easier to get users than revenues.

Saturday, November 15, 2008

Not all innovation is innovative enough

This month I’m working on a generalized paper on open and user innovation, a follow up to the encouragement I received for my talk at the User and Open Innovation Conference last august at Harvard. While doing the research for the paper, I found an interesting juxtaposition of two sources with the same argument: don’t bother with half-hearted innovation.

The first reference was in Geoff Moore’s Dealing with Darwin. Since I reviewed the book two years ago, I have been a big fan of the book. As I said in the review:

Certainly his most ambitious book yet, Dealing with Darwin, uses his consulting practice — with a special emphasis on Cisco — to offer nothing less than a grand unified theory of product and service innovation. While academics may be skeptical absent peer reviewed statistical tests, Moore appears to offer a complete framework for innovation that is both mutually exclusive and exhaustive. The hubris is stunning, even by business best-seller standards: still the integration is novel, as are many of the concepts.
Since that time, I’ve used it in every section of my MBA technology strategy class. The students find it approachable and useful, even if (as always) they rebel at the idea of reading an entire book (even if spread across two weeks).

One of the first ideas I use from the book is his proclamation in the first chapter (pp. 5-8) that if innovation is intended to support a differentiation strategy, it must be enought to “achieve separation” in the minds of a buyer. Without differentiation (as regular readers of this blog know), the alternative is commodization, competing on price and plummeting profit margins. Moore concludes that desirable innovation outcomes are either differentiating, neutralizing the differentiation of a rival, or improving productivity (i.e. cost reducing).

However, he argues, a majority of innovation spending is wasted, because they achieve none of these three. The “pernicious” examples of waste including neutralization efforts that overspend by adding “nice-to-have enhancements” that are not necessary for neutralization. Conversely, other efforts underperform, by spending heavily to create differentiation but that is not enough to achieve it.

As a (now timely) example, he mentions the fate of America’s biggest auto maker:
This is a horrible outcome. In effect, you have spent the resources for differentiation but have achieved the outcomes o neutralization. … You are sliding down a hazardous commoditization curve, and if you do not do something drastic in fairly short order, you will find yourself stuck at the bottom of the hill, with neither the energy nor the funds to get yourself back to the top.

This has been the fate of the Chevrolet division of General Motors [and other firms]… It is not that these companies do not innovate. It is that their offers do not achieve separation — and here is the kicker — they were never designed to!

Picture in your mind a Chevrolet sedan from the past ten years. Just try. Nothing? That’s my point. … Innovation for differentiation must be bold enough that, if it wins, it achieves separation. That’s why Chrysler’s failures are more memorable than Chevrolet’s successes— the Viper and the Prowler, for two.
We covered Moore’s book last month in my tech strategy class. This morning, while looking for more general innovation resources, I rediscovered a famous 1991 paper on new product development by Elko Kleinschmidt and Bob Cooper. To quote from the abstract:
While many writers and strategists maintain that innovation is important, research has often demonstrated that product innovativeness does not have a major impact on the rate of success in the marketplace. Elko Kleinschmidt and Robert Cooper demonstrate that the relationship between product innovativeness and commercial success is U-shaped. That means that both high and low innovativeness products are more likely to be more successful than those in-between. The authors suggest that past research has not allowed for this non-linear relationship and that their data show that moderately innovative, middle-of-the-road products are less likely to succeed when measured by a number of performance criteria.
So across two decades of academic and consultant study of innovation is evidence supporting a rather simple idea: innovate enough to make a difference to your buyers, or don’t bother.

Friday, November 14, 2008

Should Apple buy Yahoo?

PC World columnist JR Raphael notes the various rumors that Apple is getting into the search engine business. After noting that the world doesn’t need another search engine, he suggests:

3. If you must get into search, buy Yahoo. Please.

Speaking of [Jerry] Yang, there's a floundering search engine with a well-known brand just waiting to be bought. If Apple really wants to get into search, maybe it should consider snatching up Yahoo for the $4.99 price tag it likely holds at this point. Sure, Yahoo isn't exactly prime real estate at the moment -- but it has the potential to be, if people who knew what they were doing were running it. And while the word "success" hasn't been uttered for years at the Yahoo headquarters, the site does still have a sizable amount of users. Plus, if Apple were to buy it, we could finally stop having to hear all the silly announcements and proclamations about "the great new service" or "fantastic deal" Yahoo has in the works -- you know, the one that's really going to turn things around this time.
Apple isn’t going to buy anything as big as Yahoo, let alone acquire a sinking ship.

In 1997, a troubled Apple did sign a deal with big bad (rich) Microsoft to cooperate on software applications and accept a $150 million equity investment.

So it’s plausible that Apple might do a search deal with Yahoo: Steve Jobs could strike a hard bargain on the revenue share — a better deal than it would get with Google, since (other than iPhone on-deck real estate) Apple’s too small to have much bargaining power with the Monster of Mountain View. Apple also has the resources to bring some technology to the deal — just enough so that the iPhone search experience (or Mac?) will be different from what Yahoo! Mobile provides to other phones.

A sense of mobile sensor research

Third of four parts on my mobile phone university road tour: Part 1 (teaching mobile phones), Part 2 (university research), Part 4 (Georgia Tech).

One of the biggest and longest-established research projects on mobile devices is the Center for Embedded Network Sensing at UCLA. The center is headed by Prof. Deborah Estrin of the CS department. Estrin’s mom and dad were also CS professors there, and her big sister Judy is a well-known Silicon Valley technologist, entrepreneur and author.

In August 2002, Prof. Estrin and her colleagues won a 10-year, $40 million NSF grant that created the center. Most of the core technology seems to come from UCLA, but the remote sensing work is conducted in a partnership with UCLA, UCR, UCM, USC and Caltech.

“Sensing” is a big topic. The unifying theme is what us social scientists call “data mining” — compiling so much data that analysis can be done by sifting through the gigabytes (terrabytes?) of observations to deduce patterns. Much (although not all) of this research is on topics without immediate commercial application, on the assumption that academia should pursue the gaps in knowledge that won’t be filled by private industry.

The sensor community is more than just Deborah Estrin. They have their own conference, the annual ACM-sponsored SenSys, which met last week. In addition to the UCLA crowd, my travels also took me to SenSys participants Andrew Campbell of Dartmouth and Sam Madden of MIT.

Some of the sensing work (at UCLA and elsewhere) appears to be rural (or even seaborne) observation of the natural environment. These observations are done by devices that sit in the field, whether a large expensive device, or dozens (or hundreds) of inexpensive devices. For the latter, the Berkeley TinyOS and Motes are a popular choice.

But mobile phones make great sensing devices for more populated areas, in two different ways. First, individuals go places (like Westwood at rush hour) that you want to observe. Secondly, you may have a particular interest in the actions, travels, activities or concerns of the individual who’s carrying the phone. (Estrin and Campbell co-chaired the UrbanSense workshop before SenSys ’08 that focused just on this area of research.)

Mobile phones now make this sort of research all possible. They have data communications capabilities (50 years ago, we called this “telemetry”). They have sensors and computers to process the sensor data. Best of all, on a college campus lots of teen and twenty-something volunteers will carry them everywhere. (If you’re lucky, they’ll even buy the phone with parental rather than research project money.)

The sensors we heard about were:

  • location: this might be via cell towers, GPS, WiFi hotspots, or other sources of context. A big concern is that some phones/carriers make it difficult to access these services, either for business model reasons (carriers want a revshare) or privacy reasons (so you can’t plant spyware on your girlfriend’s phone and monitor her location 24/7). A practical consideration is for the power requirements, particularly for GPS.
  • motion: after location, by far the most popular sensor was the accelerometer, normally put in a phone to rotate the display (or the picture taken by the camera). Researchers couldn’t get enough of them, and wished there were more, as they used various tricks to try to infer phone (or wearer) position, motion and orientation. I suspect many would have drooled over the compass in the Nokia 5140, but this seems to be a very small niche so far.
  • camera: there was a lot of interest in image capture, but my sense (!) was that it’s held back because it still takes a human to point the camera in the right direction. (Last week there was an entire workshop on image sensing at SenSys ’08).
  • microphone: this can either be used to capture conversations by the participant, or (as the Dartmouth team tried) to measure the ambient noise as a way of inferring activity.
For mobile phone research, the UCLA CENS team is focused on “participatory sensing,” to learn what is going on around the phone owner. Their concept is a data acquisition “campaign,” and created a platform (called “Campaignr”) to manage such solicitations. Some of the projects including monitoring bicycle routes and encouraging high school students to agonize over their carbon footprint with PEIR.

At Dartmouth, people are not only carrying the sensors, but the sensing is “people-centric.” Their current application is CenceMe. As last week’s conference paper explains:
CenceMe … combines the inference of the presence of individuals using off-the-shelf, sensor-enabled mobile phones with sharing of this information through social networking applications such as Facebook and MySpace. … We present the design and tradeoffs of split-level classification, whereby personal sensing presence (e.g., walking, in conversation, at the gym) is derived from classifiers.

In essence, mobile phones can create mobile sensor networks capable of sensing information that is important to people, namely, where are people and what are they doing?
The classification scheme tells social network friends what I’m doing, and also classifies me as to my personality traits (nerdy, party animal, cultured, healthy, or greeny). The CenceMe app has other intriguing ideas — like taking a picture at a random time. Overall, it seems to bring new meaning to the idea “reach out and touch someone.”

Sam Madden of MIT is an old friend, who I met when he was a 15-year-old Mac programmer before he became a hotshot. His research is focused on less on the people and what they’re doing, and more on gathering the data and maintaining the network connections. For example, rewritten Wi-Fi drivers in CarTel attempt to acquire a hotspot in milliseconds, not seconds, while Macque attempts to gather relevant data in an energy-efficient fashion.

All three schools were using Nokia (S60) phones donated by the Nokia Research Center, mainly the Nokia N95. UCLA had also used a Samsung Windows Mobile phone, Dartmouth was trying the iPhone, while Madden’s group at MIT (one of several using mobile phones there) was explicitly trying to make its WaveScript data acquisition language support as many platforms as possible.

However, Nokia played a much more basic (and unfortunately scarce) role in facilitating this work. All three researchers were invited by Henry Tirri of Nokia Research to a February 2005 workshop in Helsinki, to mark the launch of SensorPlanet. This sort of research leadership by an industrial firm is rare — Microsoft and Google are doing it, IBM used to it (but has largely pulled back), and Apple never did.

Thursday, November 13, 2008

Wall Street or Sacramento, the hubris is the same

The financial meltdown was, at is core, a testament to the hubris of smart financiers who thought they could master risk, but failed miserably. To earn an extra percentage point (or less) on their returns, they created complex derivatives that provided no protection when it turned out the subprime mortgages they bought from Fannie Mae (and its lenders) were all junk.

It’s not just Robert Rubin at Goldman Sachs or Richard Fuld of Lehman Brothers, but even America’s largest public pension fund: CalPers. The one that covers California state employees (outside the UC) that I was hoping would pay me $3K/month when I retire at age 65.

CalPers invests on behalf of 1.6 million members and retirees. Its staff reports to an elected and appointed board, which is packed with union members and ruling party politicians (nowadays Democrats with one token Schwarzenegger Republican). Despite being thousands of miles from Wall Street and nominally with a public service (or at least public employee) ethos, CalPers showed the same hubris in making risky investments, particularly in heavily leveraged land deals that once accounted for 20% of its portfolio.

The WSJ reports:

For the quarter ended June 30, Calpers says it expects a loss even greater than 100% for its once high-yielding land and housing investments, thanks to its use of borrowed money on deals. The losses also dragged into negative territory the quarterly returns on its overall $22 billion real-estate portfolio, typically one of the pension fund's most profitable.
One of its biggest (and most disastrous) land investments was a majority stake in the planned Newhall Ranch, 15,000 acres of undeveloped land north of Los Angeles, once appraised at $2.6 billion. When the economy slowed down (even before bloody October) tract development ceased, the developer filed for bankruptcy, and now its lender wants to liquidate the land (which today would be at firesale prices).

Back in February 2007, CalPers announced that it implemented a risk management system:
CalPERS recently implemented the large-scale CalPERS Risk Management System - a comprehensive framework for measuring, monitoring, and managing risk. The key goals of the Risk Management team are to achieve an enterprise-wide view of the investment and risk profile at CalPERS, increase return on risk taken, and establish an appropriately focused risk culture.
I suppose it could have been worse, but as a CalPers member I’m not at all reassured that they did anything to solve the risk problem.

The WSJ also reports that many CalPers investment managers are leaving. Are they suffering any more consequences for their bad decisions than the Fuld or Rubin or Jimmy Cayne or Franklin Raines? Probably not. Certainly none of the politicians or union members will suffer any consequences for their failed oversight.

Tom Friedman agrees with me

It doesn’t happen very often, but in opposing a blank check bailout of Detroit, NYT scribe (and best-selling author) Thomas Friedman agrees with the WSJ. His column today specifically endorses the Paul Ingrassia plan I cited Monday. This perhaps the first and last time that both Friedman and I agree, and that I’m on the record ahead of him.

His lead is highly personal:

Last September, I was in a hotel room watching CNBC early one morning. They were interviewing Bob Nardelli, the chief executive of Chrysler, and he was explaining why the auto industry, at that time, needed $25 billion in loan guarantees. It wasn't a bailout, he said. It was a way to enable the car companies to retool for innovation. I could not help but shout back at the TV screen: "We have to subsidize Detroit so that it will innovate? What business were you people in other than innovation?" If we give you another $25 billion, will you also do accounting?

How could these companies be so bad for so long? Clearly the combination of a very un-innovative business culture, visionless management and overly generous labor contracts explains a lot of it.
Unlike Ingrassia or my column, he also blames politicians, in even more scathing terms than Monday’s WSJ editorial:
The blame for this travesty not only belongs to the auto executives, but must be shared equally with the entire Michigan delegation in the House and Senate, virtually all of whom, year after year, voted however the Detroit automakers and unions instructed them to vote. That shielded General Motors, Ford and Chrysler from environmental concerns, mileage concerns and the full impact of global competition that could have forced Detroit to adapt long ago.

Indeed, if and when they do have to bury Detroit, I hope that all the current and past representatives and senators from Michigan have to serve as pallbearers.
Consistent with his latest book, Friedman wants to add green car restrictions to the new Detroit Three — something not mentioned by Ingrassia and exactly opposite what the WSJ editorial argued. In particular, he demands cars that “can also run on next generation cellulosic ethanol.”

Friedman wants to micromanage — rather than manage by objective — which is a mistake on principle. But it’s also a mistake in practice, as Detroit needs to spread its bets between electric vehicles, hydrogen cars, hybrids, diesel, ethanol/biomass. (And within electric vehicles, bet on capacitors in addition to lithium-ion batteries). That’s what a free market does — place bets on various technological trajectories to see which one works out to be a winner. Five years ago, hydrogen fuel cell cars were touted as the ne plus ultra, but today firms that bet solely on hydrogen have nothing to bring to the market while hybrids, plug-in hybrids and diesels are sold to energy conscious consumers.

Friedman is a big thinker and a pundit, not a business strategist or executive. This is manifest in his final paragraph, where he offers the (IMHO silly) suggestion Steve Jobs leave his Palo Alto home to spend a year in Detroit in the name of national service. (I suppose if President Obama called Jobs it might happen, but given how long Jobs took to remake Apple in his own image, it would take a multi-year commitment).

Still, the pragmatic realism of his overall conclusions are encouraging. Given the political leanings of the House, Senate and next White House, the question of a Detroit bailout is not if but how. With a convergence of ideas from right and left, perhaps this bailout might be different, and maybe even this time failure will have consequences. If we’re lucky, a failed presidential candidate (who decried wasteful spending and has no auto plants in his state) will lead the charge for protecting taxpayer interests in this latest bailout.

Wednesday, November 12, 2008

University mobile phone research

Second of four parts: Part 1 (teaching mobile phones), Part 3 (sensor research), Part 4 (Georgia Tech).

I was extremely lucky to spend the last two weeks of October (after classes were over) visiting some of the top U.S. research universities to hear about how they do research and teaching using mobile phones. It is a real eye-opener to see what’s going on in universities.

Once upon a time, mobile phones made phone calls, but now researchers are treating them as mass-produced mobile computers with large LCD screens and the ability to return data. Did I also mention that these are devices that thousands of readily available test subjects (18-22 year-olds) will gladly carry in their purse or pocket?

On Oct. 22 I visited UCLA, then on Oct. 29-31 I went with representatives of Symbian to MIT, Dartmouth and Georgia Tech. We did not have time to visit all schools that have active research programs on mobile phones, which would also include Stanford, Berkeley and UCSD.

Most (but not all) of the research is going on with the highest-end phones, like the Nokia N95 or iPhone 3G. We came across three platforms and vendors over and over:

  • Nokia. For many researchers, the Nokia N95 was their favorite phone because of its capabilities. But there are also the people: the (PhD-ridden) Nokia Research Center labs in Palo Alto and Cambridge are actively seeking out research collaborations with a small set of universities like Stanford and MIT. The Symbian OS with the S60 UI is also the world’s most popular and tested smartphone platform with the widest range of handsets.
  • Microsoft. As with Nokia, Microsoft Research is also filled with PhD researcher seeking collaborations with top universities. This is the natural choice for those owning Windows laptops, as the Windows APIs are familiar to many programmers and there are a variety of devices.
  • Apple (i.e. the iPhone) This is mainly driven by the pull from the students (or faculty) that went and bought iPhones on their own. It also has fans (particularly among Mac owners) because it runs Unix and has a good Mac/iPhone cross-development environment. Apple provides some limited support for university software development — a customized version of its app store.
We saw some interest in BlackBerry, Linux phones, and some projects that ran on the generic JME-enabled handset. A year from now, I’d expect Android to have a major presence — given that it’s open source and has Linux APIs — but until recently there was no source, documentation or devices available.

Other key issues:
  • Handset Costs. Most of this research is funded by competitive research grants (typically NSF), while others are industry or DoD funded. Some researchers get the phones donated by the manufacturers while in other cases they have a budget to buy them. Free phones are much more important when they are being given to a 100 test subjects than if there’s just one or two demo units.

    The other way to do a large-scale deployment is to use the students’ own phones, either through the Java least common denominator or by targeting a single popular platform (which here in the US is the iPhone).
  • Airtime costs. Researchers also need a way to pay for the air time for their phones — in most cases, involving expensive data plans. Strikingly, I didn’t see a single CDMA phone (probably something I would have seen at UCSD), so this becomes an issue of who’s paying for the SIM card to activate the phone. Occasionally, they get could get SIM cards donated by the phone makers, but this is pretty expensive. In other cases, experiments can be done on the Wi-Fi networks owned and operated by most university campuses.
When looking for mobile phone research, there is the question of the theoretical discipline. At least in the US, there are few professors of mobile phones: communications groups (within E.E. departments) would study new radio technologies, but this wouldn’t be done using existing mobile phones.

Instead, the action we saw was in software applications running on the phones. I identified four major fields within computer science:
  • sensor networks: in which a mobile phone is a portable computer with attached sensors. This is represented by last week’s 6th ACM Conference on Embedded Networked Sensor Systems (SenSys 2008) — hosted by NC State that attracted many of the people we met.
  • embedded computing: We expected to find people in this area, but not in the universities we visited. (From a Google search, it would appear the Americans would attend the International Conference on Distributed Computing Systems while the Asians attend Embedded and Real-Time Computing Systems and Applications (RTCSA).
  • ubiquitous or pervasive computing: the idea that comptuers will be everywhere in our life and things not previously computerized (like a shirt) gets a computer. They have the ACM-sponsored UbiComp conference and the IEEE-sponsored PerCom conference.
  • mobile computing: which has the ACM-sponsored MobiSys and the MobiCom conferences, both sponsored by the ACM’s Sigmobile.
The latter two fields appear to also attract researchers from information systems (MIS) departments in a business school.

In addition to CS and IS, mobile devices also seem to be attracting attention from others that use computer-enabled media — media studies, gaming, virtual reality — things that were on PCs that are nwo moving to mobile phones.

Later this week, I hope to post my thoughts on two specific areas of mobile phone research: sensor networks and the large Georgia Tech operations. I’ve already posted my notes on the use of mobile phones in the classroom. Stay tuned.

Tuesday, November 11, 2008

Does failure have consequences?

Reading the WSJ page B1 at lunch, I was struck by the ironic juxtaposition of two stories. The first was about failure and its consequences:

DHL Beats a Retreat From the U.S.
Deutsche Post Unit's Campaign Foiled by Souring Economy, Management Missteps

Four years ago, DHL's parent stormed into the U.S. with an advertising campaign designed to take on FedEx Corp. and United Parcel Service Inc. ...

On Monday its parent, Deutsche Post AG, announced a massive retreat. The company said it will pull the plug on domestic U.S. deliveries by the end of January and cut about 9,500 jobs. DHL will continue to deliver and pickup international shipments in the U.S.

Its foray into the U.S. was done in first by a series of management missteps and then finished off by the slumping U.S. economy.

Deutsche Post expects its U.S. express operation to lose $1.5 billion this year after losing $1 billion last year. In recent months, a number of high-profile customers have taken their business elsewhere. ...

DHL ran into problems almost from the moment it entered the U.S. in 2003 by purchasing Airborne Inc. of Seattle for $1.05 billion. Critics said the company underestimated the intensity of the competition, didn't have a cohesive strategy and failed to retain top Airborne talent. Airborne also proved a less-than-perfect fit because of its threadbare ground network and reputation as a discount service.
In other words, Deutsche Post will have nothing to show for its $1 billion acquisition — other than several billion more in losses since then.

The second was about failure and its lack of consequences:
GM's Shares Tumble on Rising Cash Concerns

General Motors Corp. stock fell to its lowest level since 1946 as concern intensified that the auto maker could run out of cash and be forced to file for bankruptcy protection.

GM and sympathetic lawmakers boosted their calls Monday for the federal government to bail out the company. In return for aid, lawmakers in Congress have suggested the government could seek to take a stake in the company, limit executive compensation and require GM to speed the introduction of fuel-efficient vehicles. A GM spokesman declined to say if GM would go along with such requirements.

GM's chairman and chief executive, Rick Wagoner, told the trade publication Automotive News that GM needs financial help before President-elect Obama takes office Jan. 20. But Mr. Wagoner added in the interview that he would not be willing to resign in return for aid. "I think our job is to make sure we have the best management team to run GM. It's not clear to me what purpose would be served" by his resignation, Mr. Wagoner said.
Instead of fixing the problems once and for all — with consequences for management, shareholders and employees — Wagoner hopes to continue on his current path with money from you and me.

In the real economy, failure has consequences. For politically powerful and influential firms — or those firms “too big to fail” — stakeholders are insulated from those consequences.

Creating even more "too big to fail" firms

If the stereotypical Republican economic policy error is pandering to Wall Street, then the Democrat one is pandering to labor (usually organized labor).

Andrew Ross Sorkin of the NYT predicts that, in the name of saving jobs, the Obama administration will approve mergers that it might otherwise have rejected. He bases this on an interview with former Clinton era tormentor (now highly paid Democrat lobbyist) David Boies, who says

“Antitrust theory is theoretical. Losing jobs and plants is real.”

“Preserving jobs and economic stability will be perceived as more important than preserving competition,” Mr. Boies said.
There’s a huge fallacy in this reasoning: we got into this mess because certain companies became “too big to fail,” so the government decided to intervene to prevent them from failing. Some companies that are broken need to fail: if they don’t, taxpayers are providing an indefinite subsidy to enable management, labor or business model pathologies (e.g. autos).

Letting broken companies be gobbled up by their competitors should mean that new management will run these companies better. But it also means the survivor will be bigger and perhaps has to be bailed out at any cost. The progression of Hudson and Nash to AMC to Chrysler (whose next owners are pressuring GM to bail them out) illustrates the progression.

So allowing a merger to form an ever-larger struggling company is creating a bigger problem that’s deferred into the future. There will be another economic downturn five or eight or ten years down the road, when these troubled companies will again go into crisis mode. Or maybe they’ll skip the next crisis, and it will be 15 or 20 years off before the government is asked to bail out a company that’s “too big to fail.”

In politics, this sort of intentionally short-term thinking is called “kick the can down the road.” Politicians hope is that when the problem reappears they will be gone, or if they’re not gone, that no one will remember their culpability in creating the problem. Exhibit A: is Fannie Mae.

The cumulative effect of such creeping corporatism is to eliminate the financial accountability for managers, employees, directors of privately held companies. This would have to be funded by taking ever-more money from taxpayers to prop up politically favored large companies — while keeping the tax and regulatory burden high on the well-run companies that don’t need bailouts. Heck, why don’t we change our name to the United States of France?

The US test (since the days of Teddy Roosevelt) for rejecting a merger has been: will the new company have too much power to hurt customers? The EU standard (since the days of Mario Monti) has been: will the new company have too much power to hurt competitors? (Such concerns are trumped by a second test: will the merger serve national or EU industrial policy goals?)

The 21st century, free-market standard should be: will the new company be “too big to fail”?