Strategies for a discontinuous future.

Consulting & advisory, research notes, in the press, about bubblegen,
next wednesdays.

Saturday, November 08, 2003

I also added a rough but fun piece about Microsoft's bounties tactic, and why it's a pretty bad idea, especially for viruses - since no market has been legitimized for them yet. Enjoy!

-- umair // 7:44 AM //


Since it's property rights day, I (finally) added a draft version of my property rights paper to the site. It's still kinda rough, so bear with me.

It's not another trawl through copyright law - instead, I start from the assumption that copyright is inadequate, and analyse new kinds of rights and business models.

The first part is just a basic intro to some property rights concepts, so if you're familiar with these, don't waste your time - skip ahead. Otherwise, click here to begin reading it. Enjoy!

-- umair // 6:39 AM //

Friday, November 07, 2003

Very nice. Students at Penn State revolt against the Napster deal. Rightly so, because it's a bad deal for them. Also interesting:

"Well, it turns out that Penn State President Graham Spanier is serving as co-chair of the Committee on Higher Education and the Entertainment Industry, along with Cary Sherman, president of the Recording Industry Association of America (RIAA)".

-- umair // 9:55 PM //


Tactic of the Month Award

Wow. Spam is now built into Belkin's wireless routers, which, every eight hours hijacks a random HTTP connection, and redirects users to a page for Belkin's parental control system. That means you could be sending your app to Harvard, paying your bills, or buying a car from eBay when the redirect happens.

This gets the catastrophically stupid tactic of the month award. The suit in marketing that dreamed this up really needs to get in touch with consumer preferences and value creation.

Oh wait: here's the OP to usenet, and Belkin's AMAZINGLY stupid response. And a pretty good response to Belkin. In which we can see that the suit from Belkin is in fact completely out of touch with why this is a colossally idiotic strategy.

Why? This Slashdot poster does a great job of explaining:

"Ok if I buy say a Book from my favorite online bookstore and get it shipped UPS, I'd expect it to arrive as a book right?

But what if every one in 100 times, UPS thinks I might like a corporate logo bumper sticker instead of my book, they throw my book into the eternal void, and give me a UPS bumper sticker instead. I'm supposed to like this?"

(Via /.)

-- umair // 9:32 PM //


The Reg notes that Apple's only barely breaking-even, and then proceeds to draw seriously alarmist conclusions from that fact, about how Apple's given a 'perpetual monopoly' to the oligopolist record labels backed by restrictive DRM.

This is all wrong. First of all, iTunes was never going to be a serious money-maker for Apple. What it is is a brilliant way to build consumer share and thus support their networked hub strategy. Second, Apple hasn't given 'control' of a new distribituion distribution to record labels - only consumers can legitimize a distribution channel. Third, the Reg completely overlooks the fact that strategically, iTunes is only successful if it sells more tracks than people woul otherwise download - and that hasn't been assessed yet.

-- umair // 9:17 PM //


Here's a great article by a Fed economist, about labor market disruptions being vital to macroeconomic growth.

Basically, he argues that technological shifts create labor market churn, but are vital to the comparative advantage of a nation being sustained - so the jobs will come back, but only when we've built new sources of innovation to support labor market growth.

-- umair // 7:10 PM //


Research says that 'media-center' PCs will drive PC TV sales. Ummm...ok.

But it seems pretty obvious if you ask me, especially since these are exactly the kinds of components that the gray market for non rights protected media hardware will deal in.

-- umair // 7:06 PM //


A great piece about Friedman and the history of monetarism. If you don't know what I'm talking about, read it.

-- umair // 6:11 PM //


Hackers don't think too much of MS's virus bounty, claiming that they're already comfortable with the risk they're taking.

If anything, a bounty for hackers will legitimize a market for them, and only make the virus situation (a lot) worse.

-- umair // 5:39 PM //


Ha ha!! Nice move by the telcos. Since they lost the court battle to have VoIP regulated, they've shifted the battleground - to the FCC (where they're sure to win).

Now this, from a strategic point of view, is news.

-- umair // 5:30 PM //


Interesting commentary predicting failure in the CE market from the PC makers, because their competences are all wrong.

-- umair // 5:28 PM //


Mobi-tickets - buy a ticket via your mobile, get a pic of a bar-code which is scanned at the point of entry. Pretty cool.

-- umair // 5:25 PM //


Since it's property rights day, I'm finishing up my prop rights piece tonight and I will post it tomorrow. Check back - it's a fun read.

-- umair // 8:26 AM //


Oh my god. Here's an incredibly cheezy article from Baseline about "loving blogging" if you're a corporate. It uses (what else) the example of MS and the Scobleizer

Note to corporates: if you're gonna 'love' something, you can't fake the funk. You gotta really love it. There's nothing people hate more than corporates co-opting something cool in the name of 'love'. Now that's a strategically sure way to kill profit margins on the new project.

-- umair // 6:12 AM //


Property Rights Day, Part 5

Here's yet ANOTHER article about the impasse in digital property rights. This one focuses on DRM, and how it's never really worked, and isn't working now.

Look, it doesn't take a genius to see that the economics of DRM are essentially those of copy protection - because DRM is just massively distributed copy protection.

Copy protection hasn't worked for nearly 25 years - why would DRM work now?

What we need is innovation about property rights. If I say that once more today I think my browser might explode.

-- umair // 6:09 AM //


Property Rights Day, Part 4

Here's another great idea by Congress: require everyone to use antivirus software.

Great!! So the software makers have less incentive to make secure software - because this is like a subsidy to them. So the arms race speeds up - because this is like a legislated escalation.

We really need to elect people with a basic understanding of economics to office.

-- umair // 6:06 AM //


Property Rights Day, Part 3

the FTC issues a restraining order against a messenger service spammer, calling their practice of continual bombardment with ads for a pop-up blocker 'extortion'.

Blah, blah, blah - the problem is that enforcement costs are too high: the FTC can't take action against every firm that does this, or every leap forward in the technological arms race that allows new versions of it.

What's necessary are systems based on new kinds of incentives - the way that property rights are structured in this system, the incentive for spammers is, well, to spam.

-- umair // 6:02 AM //


iTunes outsells Napster by 5 to 1. Evidence of first-mover advantage?

Probably a little bit. But it also has to do with the fact that iTunes has been very slickly marketed, and Napster's perceived as probably the ultimate evil corporate move by it's target market.

-- umair // 5:58 AM //


Property Rights Day, Part 2

Details about newer copyright battles taking shape in government. Blah, blah, blah - we all know copyright's broken.

-- umair // 5:57 AM //


Property Rights Day, Part 1

Non-compete clauses surface in the Net porn industry.

-- umair // 5:55 AM //

Thursday, November 06, 2003

The Guardian has one of the strangest pieces I've read in a long time. It argues (against all logic) that learning to code is a highly valuable skill, and that if everyone learned how to code, we'd be free from the 'tyranny of the machines'.

These guys are living in a Matrix fantasy, I think. If anything, economics shows us that exactly the opposite is true: coding is a skill that doesn't command much value anymore, because it's a relatively easy skill to pick up.

Oh yeah, and there really isn't any 'tyranny of the machines'.

-- umair // 10:06 PM //


Decent piece about the problems startups might face in exiting via trade sale (ie, being acquired), even if the economy picks up.

First, accounting: most startups don't do it very well, but most acquirers value it a great deal. Second, more interesting, deal complexity: many ventures funded in the last few years incorporated all sorts of arcane liquidation preferences and other rights schemes. So anyone buying them faces steep transaction costs just in understanding what they're getting.

The article also notes something else that's veeery interesting: that there's a market failure for seed funding in the States, because of the way the risk capital market is structured.

-- umair // 5:47 PM //


Apparently, BizRate and Shopping.com are now auctioning off keyword search results - but doing their best to make this opaque to users.

This is a GREAT strategy. In fact, I think everyone should do it. That way, when consumers find out that these firms have basically been setting up massive markets for adverse selection, they'll understand that their trust had been violated, and only ever use Google again.

-- umair // 7:34 AM //


Very, very nice Post article about the competitive dynamics Wal-Mart's unleashed via it's single-minded focus on destructive price competition, and how they've affected labor.

I think the business world is about to learn some big lessons from this kind of nonstrategy. Right now, the focus is on labor. Next, my guess is it will be quality.

It's about time.

-- umair // 7:22 AM //


The French government is subsidizing smaller games developers.

I'm a big fan of government subsidies for media industries, because I think private sector works are slaves to profits, which kills their incentive for risk-taking. So I think this is a great move to develop a more competitive games industry.

-- umair // 7:20 AM //


Nissan's going to use live actors to perform live ads at showings of the new Matrix flick. Is this a good tactical move? A killer one.

First, it's (very) different. Second, it's better - it directly addresses the credibility gap: most consumers think most ads are bullshit. Third, it's revolutionary because it offers consumers a new value proposition.

I hate seeing ads before movies, but I'd rather see a live performer than a mind-numbingly idiotic Coke ad designed to get me to salivate like a Pavlovian dog. That's because the live performer has a far stronger incentive to put on a good show than the Coke ad does.

-- umair // 7:15 AM //


Alibi is a Russian firm that makes alibis for people. (Via LinkFilter).

-- umair // 7:08 AM //


Trilobite fossil with 360 degree eyes found. Check the pics - they are phenomenally cool. Now that's innovation.

I could go on a neuro rant, about how cool this organism's visual system must have been to be able to process this...but I think this is one example where I don't have to. (Via LinkFilter).

-- umair // 7:07 AM //


Hacking traffic lights tells us a little bit about how steep enforcement costs are going to become as technologies become more interdependent, transparent, and accessible.

-- umair // 7:03 AM //


Another conference on digital media ends up at the same place: either a compulsory tax redistributed to content producers, or DRM.

Strategically, neither is viable. Economically, the market won't support either one.

What needs to happen is innovation: not in rights management, but in property rights themselves.

-- umair // 6:57 AM //


News.com.com asks 'are PC's next in Hollywood piracy battle?'. Obviously - the goal of this strategy is total control. It has to be, otherwise, it can't work.

-- umair // 6:54 AM //


AOL tries some desperate tactics to hold on to it's eroding user base - one of it's few remaining strategic resources. The problem is that all of these tactics are simply incremental innovations - or based on price competition.

The real money will go to the revolutionaries - and I think there are many, many discontinuities yet to come in the connectivity market.

-- umair // 6:52 AM //


Penn State reaches a deal with Napster where on-campus students get free music. Of course, the catch is that they can't burn or download these tracks - unless they pay. So it's really just streaming.

Terms are undisclosed, but probably pretty good for Penn State, since Napster is a late entry into an already competitive market, where all the players' strategies are based on price competition.

Good strategy? Not by Napster. This is basically just a marketing tactic.

Although the idea of selling a small number of communal licenses rather than a large number of private licenses is extremely interesting. Hmmm.

-- umair // 6:48 AM //


New academic work on spam suggests users would tolerate spam in exchange for discounts on connectivity:

"These results confirmed the researchers' hypothesis that users who pay high monthly service fees are willing to receive spam in return for obtaining a discounted rate".

Ummm. All this will do, in terms of competitive dynamics, is drive down the price of the discount, and thus drive down the 'price' of spam, forcing more spam to be sent for every ISP that does this.

Not to mention users really will hate it - no matter what survey results show.

-- umair // 6:45 AM //

Wednesday, November 05, 2003

The economy's growing, but jobs aren't coming back.

Here's the best Post article I've read in ages. It's about unemployment. The employment rate for African-Americans is 60%. The article is incredibly sad and shocking.

-- umair // 6:36 PM //


Read about the coming obsolescence of the mouse.

-- umair // 6:14 PM //


A competitor's take on Friendster.

-- umair // 6:10 PM //


Avaya and Extreme: a textbook example of a strategic alliance.

-- umair // 5:58 PM //


Samuleson's written a killer op-ed about the 'era of excess'.

-- umair // 5:49 PM //


Presentations from Sony's latest strategy meeting. Very interesting stuff.

Concept of what the forthcoming PSP might look like.

Article about the PSP and a new iPod rival.

-- umair // 5:40 PM //


This is a first-hand account of one man's experience of the War on Terror - the Canadian who was deported to Syria.

Whatever your opinions on the subject, you might wanna read this - because it talks about what happened to him in Syria.

Here's a story for some kind of context from the Post.

-- umair // 5:26 PM //


Yeah, yeah, I know. The Broadcast Flag got approved.

Like I've been saying for ages, it's no big surprise - the FCC is a corporate tool (to be blunt). Not only that, they haven't really thought the economics of this through. If they had, they'd see that legislating digital property rights is totally out of sync with the microeconomics of the market.

The interesting bit is that it's going to strategically backfire - just like Amazon's attempts at price discrimination. I'll tell you why when I post a longer piece later today.

btw, it was a unanimous (5-0) vote. So much for the voice of...anyone else but the MPAA.

-- umair // 5:23 PM //


A history of Victorian-era robots. Very cool. (Via MetaFilter).

-- umair // 5:17 PM //


MS offers a bounty for virus writers (SoBig). Many people think billg is a strategic genius, but he's not. This is a great example. Offering a bounty for virus writers does a lot worse than just legitimizing a market for writing viruses - it's only gonna act as an incentive for future virus writers.

It might be better strategy if they produced better software.

-- umair // 5:13 PM //


News.com.com talks about the price war in VoIP, claiming that "It's unclear how far VoIP companies can go in cutting prices further".

No, actually it's 100% clear - prices can (and will) be cut all the way to zero. Look at Skype. This is because very few of the players in this space have a strategy - they have nice technology, but they're not doing anything differently or better. So, in the absence of strategy, these firms will do what's rational: slash prices to grab a user base, because that's the strategic asset they're all fighting over.

For an example, you could look at this article, which talks about ads being used to subsidize VoIP.

Paul Gauguin said "art is either plaigiarism or revolution". The same is true of strategy.

-- umair // 5:12 PM //


A very interesting paper about Net filtering in Saudi Arabia.

-- umair // 5:05 PM //


Reviewing the work of Demsetz and Coase and writing a longer piece about property rights. Stay tuned. Or read this seminal paper by Demsetz.

-- umair // 6:59 AM //

Tuesday, November 04, 2003

The Spammers' Compendium: a list of devices and tricks used by spammers. Very cool. (Via LinkFilter).

-- umair // 8:24 PM //


Here's the best article I've seen about MS's decision to source the next XBox chip from IBM, instead of Intel.

It covers some of the strategic issues, but leaves unsaid the most obvious one: Microsoft is leveraging the XBox to ease it's dependence on Intel. Together, they're both platform leaders. This is the first clear sign that Microsoft wants to be the only one.

-- umair // 6:58 PM //


The Reg neatly summarizes the debate between the WSJ and Skype. Interesting reading, if you're bored. Otherwise, it's pretty irrelevant - only time will tell if Skype makes it. Posing by pundits sure won't.

-- umair // 6:30 PM //


God. This is crazy.

A conservative organization that basically wants to legislate morality has compiled a list of 200 academics, and is pushing it to the government to get funding revoked. Apparently, the list is being taken seriously.

There's almost no better way to totally destroy the innovation capacity of the US than to break the infrastructure for research finance.

This is exactly what happened in almost every Third World country that's become a theocracy or dictatorship: the universities were the first targets of the 'moral majority'.

-- umair // 6:27 PM //


I've been asked by a couple of readers about strategy versus tactics. Here's an article that makes the distinction clear.

It's about Israel versus Palestine, so try and read it apolitically. It doesn't represent my views on the issue, and I'm not linking to it to make a political point - rather, it's interesting to hear a General discussing the conflicts between strategic interests and tactics.

-- umair // 6:21 PM //


The two guys that transformed Gucci are stepping down. I think it's the right time, since Gucci's lost a lot of it's creative vitality in the last year or two.

-- umair // 5:33 PM //


The issues surrounding cloned meat.

What are the odds that this won't pass? Pretty small. Look at what the food industry's in the US has been able to get away with until now. A third of the country's kids are dying of obesity.

-- umair // 5:27 PM //


The latest management guru in Italy is...


-- umair // 5:22 PM //


God. CBS has yanked their Reagan mini-series after pressure from the RNC.

If this isn't censorship, I don't what is. This is like something that would happen in a tinpot Third World dictatorship. I can't believe it's happening to CBS.

Here's the best article I found on the whole sad affair.

-- umair // 5:20 PM //


Nice article about hypersaturation of information in our environment, and what it means for cognitive capacity and cognitive strategies.

"As a result, there are fewer "big thinkers". It has become harder to see the bigger picture, because it has simply become too big".

"If you find it hard to get information it sticks. Before the internet came along, just the achievement of finding out something was an emotional euphoria all by itself."

-- umair // 5:18 PM //


IIT's make it to Dilbert. Funny (or offensive).

-- umair // 5:14 PM //


Bluejacking: goes from cool to incredible nuisance in the next few months. At least that's my prediction.

Here's a decent reference.

-- umair // 5:12 PM //


See, now this is innovation: making a laptop bag look cool. Why do laptop bags have to be so bloody ugly? There is a huge market of (realtively wealthy, price-insensitive) people waiting to be tapped for this...

-- umair // 5:09 PM //


MTV is going to launch a music download service. Smart?

Not for MTV. First, there's already massive competition in this space. Second, MTV's competences don't really support downloadable music anymore. They've eroded their music competence in favour of a broader cultural competence - their value now is in the shows they produce, which impact culture hugely (like Jackass).

Finally, it's difficult to see how MTV can have an effective strategy: how it can do something different and better than it's competitors to offer consumers more value. If it's model is just a replication of the same old iTunes...forget it, in this market, there really are early-mover advantages.

-- umair // 5:03 PM //


Apparently, twice as many online singles have been sold as CD singles. Not exactly a surprise - CD singles are about five times the price!!

-- umair // 4:56 PM //


Article about how the music industry is starting to experiment with P2P for tracking and promotions. Kind of interesting if you don't already know.

-- umair // 4:54 PM //


Yahoo updates it's site, putting tabs for image search, a yellow pages, and a products search on it's home page.

Apparently, this is news. It might have been in 1998!!

-- umair // 4:50 PM //


The battle for customer share in the music services space begins:

"Apple iTunes for Windows prevents Musicmatch Jukebox from working with the iPod by deleting critical files used by Musicmatch."

Is trying to lock your competitors out a decent tactic? Apart from the fact that it's so 90s, it's really kind of pointless. Focus on giving user what they value - not taking away what they value (even if it's your competition).

-- umair // 4:49 PM //

Monday, November 03, 2003

The Economist has another nice piece on why the Yukos affair is a little dodgy.

-- umair // 7:14 PM //


Kazaa's revamped it's value proposition: it's Kapsules let content owners package whatever they want, and offer them via the P2P network to consumers.

According to Kazaa, this has two advantages. First, it cuts bandwidth costs for producers. Second, it lets content owners control their content, and distribute more than simply songs, or games - they can, for instance, offer a Kapsule of lyrics, songs, videos, etc.

Is this compelling? It certainly does offer both producers and consumers benefits. The bandwidth costs are a little less important, I think. The Kapsules idea is cool - and that's what's important: this market needs risk-takers. Eventually, someone will unlock consumers wallets - but it ain't gonna happen without experimentation like this.

-- umair // 7:11 PM //


Here's something you don't see everyday: an incredibly frank interview with a Nintendo VP, discussing the relative failure of the GameCube, and their new strategy of price competition, positioning themselves not as a substitute to the PS2, but as a complement.

Veery interesting. Read it!

-- umair // 7:00 PM //


Yahoo discontinues Platinum (it's premium streaming media service). Like I keep saying, bundling makes e-commerce possible; unbundling makes e-commerce impossible.

This is because of value dispersion: consumers have different preferences, and the market for those who are willing to pay for such services is too small to be sustainable.

Yahoo's new strategy is to roll Platinum into a broader Premium package - all in all, a good moce.

-- umair // 6:57 PM //


The Net disrupts the 'turf accountant' aka gambling and betting market in the UK - because it's doing what everyone in 1999 said it would: creating a more frictionless marketplace, with lower search and transaction costs.

-- umair // 6:53 PM //


Very interesting piece about PC makers invading the CE market - specifically, TV's. Argues that they can cut prices because their margins are lower (because they often sell direct and have more efficient supply chains), and that they will also introduce fresh innovations to this market, like wireless connectivity and storage.

-- umair // 6:50 PM //


The Diebold case makes it to mass media. Predictably, they miss the point - calling it a copyright issue, when it's an issue of corporate control over the public sphere.

-- umair // 6:48 PM //


Detailed piece about Clay Christensen and disruption. Read if you have no background in this.

-- umair // 6:09 PM //


Yeah, we all know copyright is broken. MIT's latest music service has gotten yanked by, surprise, the RIAA - even though it obeyed copyright.

"It doesn't seem that M.I.T. was trying to steal anything, but rather to simply hew to the letter of the law in an incredibly byzantine area," he said. "Good faith and technical genius alone doesn't make it work."

-- umair // 6:06 PM //


SV argues the Web is full of dead sites. So what? That's part of the point of the web - information doesn't necessarily lose it's value just because it's old.

-- umair // 6:02 PM //


Replication Wars

Amazon changes search inside the book to disable printing.

-- umair // 6:00 PM //


Cool article from SV.com about the growing importance of design for technology products, and how much consumers value a great design. Hardly a surprise - the real battle was pushing this past the beancounters.

-- umair // 5:56 PM //


This is an excellent article about Yukos, which puts the whole affair in context, explaining how the Russian barons like Khodorkovsky made their money when the economy was opened up. Killer reading.

-- umair // 4:58 PM //


Here's a very nice article demonstrating the flip-side of doing business in China - quality control leads to compromise costs, there's significant political risk, and technology is difficult to obtain.

It uses the auto industry as an example - noting that it's actually more expensive to make a car in China than it is in, say, Germany. Highly recommended.

-- umair // 4:49 PM //


Here's an article about 'adulthood', and when it happens. What's more interesting is that many of these kids feel they have little opportunity to develop their own human capital. This is probably the strongest early warning signal of competence erosion.

-- umair // 4:44 PM //


I'm back. Expect updates (lots) today. I'm blogging from a bloody winXP system, which is making my life very difficult...

-- umair // 4:39 PM //



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