Strategies for a discontinuous future.

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

Saturday, December 20, 2003

Here's an old article from 1993 by Daniel Bell, who's a top sociologist, about the post-industrial society. It makes for thought-provoking reading these days.

-- umair // 6:29 AM //

Friday, December 19, 2003

Nice piece about the dynamics of the music download space: Loudeye is gaining power as more powerful firms like Amazon buy into it's platform (a huge strategic mistake), and Wal-Mart is (surprise) going to come out swinging by offering 88 cent downloads.

-- umair // 7:16 AM //


Nice piece about XML hardware firms partnering with heavyweights like Sun to add credibility - and reach. Good strategy from both sides, allowing them to leverage their most powerful strategic assets and resources.

-- umair // 7:13 AM //


Real strikes a deal with Ericsson to package it's codecs etc into Ericsson devices. Ericsson had already licensed Helix, Real's server-side solution for streaming media. Nice move.

-- umair // 7:10 AM //


Salesforce.com files for an IPO. Now there's an interesting development, because they're one of the few ventures around these days that has a solid chance to really make a mark on the IPO market and expectations (unlike Orbitz, who pretty much blew it).

-- umair // 7:05 AM //


Apparently, 2004 will be the year of Bluetooth. I have my doubts - I think if it was gonna happen, it would have already happened. That's one of the big implications of accelerated adoption.

-- umair // 7:04 AM //


Here's a killer Filter with tons of links about hypercompetition and hypercommoditization in the digital music space.

-- umair // 7:01 AM //


Real sues MS for antitrust violations for linking Windows Media too tightly to Windows. Blah, blah, blah.

-- umair // 6:59 AM //


The Beeb reviews Science mag's top 10 advances for 2003 - mostly physics, biochemistry, and genetics.

-- umair // 6:58 AM //


Bendy lampposts. Why? To cut deaths from accidental impact. But also because they're cool.

-- umair // 6:55 AM //


Accelerated adoption

Camera phones sell like crazy as users find cool new ways to use them. No chasm here - the mass market's needs are evolving as adoption accelerates. Nice article - illustrates how dumbing down technology is bad strategy, and how better strategy would harness user innovation instead of stifling it.

-- umair // 6:53 AM //


Sony's Qrio - a humaniform robot - can jog.

-- umair // 6:51 AM //

Thursday, December 18, 2003

Crooked Timber has a nice post on the increasing formalism and mathematization of economics - and why it goes against the foundations of the field as a form of rhetoric.

-- umair // 4:14 PM //


Salon talks about VC's who are pushing for outsourcing. I disagree with this fundamentally; I've discussed why social capital (which is destroyed by outsourcing) is necessary for innovation. Outsourcing in it's current incarnation imposes serious compromise, inflexibility and coordination costs - which startups can't afford to pay, in financial, intellectual, social, or human capital.

Besides which, the math doesn't really make sense. If you're a VC, you'll only fund a venture if you expect to make 10x (give or take a few multiples). At this point, saving even a mil by outsourcing isn't worth it for two reasons. First, the additional risk you take makes your already risky payoff even more uncertain, lowering it's expected value massively - because the way that VC's value investments is risk-sensitive. Second, in terms of your expected return, the savings from outsourcing are generally fairly small, unless you're one of the few startups that hires more than 1000 engineers - you're not gonna invest 5 mil and then try and save 500k on outsourcing, because if you're hoping to exit with 50 mil, the 500k becomes irrelevant. In short, it ain't worth the risk - that's why we don't see more VC's doing it.

At the same time, it's tough to fund new ventures that are entirely based in Asia, because exits again become more risky - this time because Asia has no really good markets for venture exits, and because this model hasn't been proven here, so the markets here are less than friendly to it. Whoever wants to do ti will pay significant pioneering costs (but maybe reap serious profits as well).

I think this is the shift that will have to happen, rather than outsourcing, because the costs of innovation in the US are high, and rising - due to the failure of IP and copyright, the success of litigation tactics, lack of qualified people, and simply a lack of interest.

Of course, if you can fool foreign workers into working for NO equity, you've got a better deal - maybe an unethical one too.

Interestingly, here is the VC in question's rationale:

"...Would you pay an engineer $120,000 for a job that the exact same engineer with the exact same abilities can do for $20,000?"

The point is that though the engineer's abilities may be the same, the abilities of the firm are an emergent property, and those are dependent on many different factors - and this dependency is combinatorially complex: each member depends on each other member. Furthermore, in a situation at the edge of discontinuity, like most ventures, managing this interdependency is absolutely critical.

-- umair // 3:43 PM //



Gets it wrong again - encryption is not a parallel to Prohibition. He needs to take a closer look at the corporate forces which have more or less agreed to lock down the Net in the next 2-3 years. When they do this, encryption won't mean a thing, beyond the 2% of the population that is able to subvert the hypercapitalist infostructure.

For the other 98%, doing so will simply be too costly - the transaction and search costs of making deals will have been pushed through the roof.

-- umair // 3:34 PM //


Futurewatching: the HomePod. All this thing needs is a Net connection to a collaborative filter.

-- umair // 3:31 PM //


Euro RSCG's top ten trends are way behind the accelerated change curve. All of these trends have already been replaced or morphed into others.

-- umair // 3:27 PM //


The Guardian doles out British Blog Awards. Look, I don't really care about these awards, and I'm hardly PC - but even I couldn't help noticing two things. First, the winners end up being generic, because the categories are idiotic (under 18s?). Second, the list is very homogenous.

Awards for blogs kind of defeat the purpose of blogs in the first place. These awards are an embarassment to the entire British blogging scene - they miss the diversity and coolness of bloggers all over the UK.

-- umair // 8:17 AM //


BitTorrent and RSS as disruptive technologies. Nah - cool, yes, disruptive, no. Both are contenders for the dominant designs in their respective fields - P2P networks and XML structures. Dominant designs have to be established before they're disrupted.

-- umair // 8:08 AM //


Welcome to the Bubblet

Loudeye (with MS) launches a customizable turnkey 'music store solution'. Uhhhh...can someone tell me why anyone would buy this?

Either a download service is a massive source of advantage for you, and represents some part of a competence or strategic asset - in which case, you'll develop your own. Or it's just a generic part of your strategy - in which case, you'll probably partner with somebody for whom it is strategically critical.

Here's a lil piece about hypercompetition in this market.

-- umair // 7:38 AM //


Avaya demonstrates VoIP strategies heating up. Also shows the importance of strategy: Avaya's been around the block a few times, and clearly gets the need for a coherent strategy in this market, beyond the flailing we're seeing from it's many competitors.

-- umair // 7:34 AM //


Steve Jobs on Wal-Mart and Dell entering the music download space.

-- umair // 7:30 AM //


Very nice article about how firms (and the Net) create gray markets when pursuing idiotic rights strategies. They can pursue such strategies because (surprise) copyright is broken: consumers can import single copies of movies for personal use, but everything else is pretty much undefined - which makes publishers like Miramax want to grab all the rights as early as possible, and then redistribute them as they sees fit.

Of course, once it has all the rights, it has no incentive to give any of them back.

-- umair // 7:24 AM //


Very interesting Reason article looks at the inevitability of gray markets for organs.

-- umair // 7:18 AM //


Investment banks becoming hedge funds, Pt 374.

-- umair // 7:12 AM //


Nice editorial by Varian points out Red Queen effects in SUV ownership.

-- umair // 7:10 AM //


Responding to criticism and litigation about fraud and abuse, the NYSE decides to appoint as it's new CEO...the President of Goldman Sachs. You can't make this stuff up.

-- umair // 7:08 AM //


Vonage hits the NYT. Not a bad read, points out the strategy decay of the incumbent telcos quite nicely. Not much needs to be said - at least until the FCC decides to regulate VoIP.

-- umair // 7:01 AM //


Orbitz IPO is less than overwhelming. Better than I predicted, not as good as the Street had hoped.

-- umair // 6:50 AM //


Toshiba releases a VoIP software package for its PC's licensed at $200 per seat.

-- umair // 6:47 AM //


iPass and T-Mobile reach a deal to let iPass customers access corporate networks via T-Mobile WiFi hotspots. Blah, blah, blah.

-- umair // 6:44 AM //


Nice article about Groxis, which is a search tech firm, and it's various products. A little behind the curve, but a nice read if you haven't already heard.

-- umair // 6:38 AM //


Google Print. Google's new search-in-the-book feature. Context.

Either a response to Amazon, or more likely, what's already powering Amazon's search-in-the-book feature.

-- umair // 6:36 AM //


More about InterTrust's coming DRM system.

-- umair // 6:32 AM //


Optima claims patent rights over CD burning; sues Roxio.

-- umair // 6:29 AM //


The PSX launches in Japan. Analysts dismiss it, but the public seems to like it. I think it's a very smart play from Sony.

-- umair // 6:18 AM //

Wednesday, December 17, 2003

Here is a cool essay about the creeping Big Brother-ization of the Net. Best one I've read yet, with a deep technical understanding.

-- umair // 6:51 PM //


EMC acquires VMware. The goal? Total virtualization, of storage, servers, operating systems, etc. Noble, probably practically unattainable, sure to anger billg.

-- umair // 7:08 AM //


A very nice (academic) neuroeconomics paper about the emergence of brains and their correlation with longevity, in terms of capital theory.

"...ecological conditions that lower exogenous mortality favor increased expenditure on survival and hence also much greater investment in brain capital".

Now there's a cool hypothesis.

-- umair // 6:47 AM //


Bubble 2.0

Another bubble business model surfaces anew: free computers in exchange for consumer share. In this case, watching ads while you're online. Will it work? Well, it's got a better shot now, since the PC has experienced massive hypercommoditization since 1998, and because many of the kinks have been worked out with online ads.

-- umair // 6:43 AM //


Price Competition is Not a Strategy, Pt 374

Wal-Mart misses earnings by a 'fraction of a cent'. Shares fall 3 per cent. If you play the game by the Street's rules, you haven't got a strategy, you're just an interface between the consumer and the Street.

-- umair // 6:39 AM //


The Wall Street Virus, Pt 743

Finally. Calpers sues the NYSE (and Goldman Sachs and assorted minor players). It's about time - the gaming of the system that goes on on the trading floors and in the pits is unconscionable, and are the big reason that the market is still underperforming, innovation is stifled, corporates are forced to resort to accounting tricks, and you get taken for a lot of money.

The exchanges (and banks) need serious reform - and it's only the biggest institutional investors like Calpers who can force it on them.

The worst part is that the information asymmetry is locked into place by an iron-clad incentives mechanism: if you're not a member of the club, you have very little idea of the magnitude of what I'm talking about - but if you are, it's in your best interest to shut up and enjoy your bonus.

-- umair // 6:24 AM //


Apparently, the marketing droids think Apple is the Marketer of the Year. Why is it that the aforementioned marketing droids never get that marketing needs to be backed up with coherence: a business and product that deliver something people want?

I think that these days, Apple's success has less to do with slick marketing than it does with simple consumer insight that actually makes it past beancounting managers, past brainiac strategists, and into simple products that sell for reasonable but not outrageous prices at your local Apple store.

Of course, the fact that these days Apple spurs massive hypercompetition by actually creating new markets is a good and a bad thing: a good thing for consumers, but a bad thing for Apple, who never seems to erect any kind of serious barriers to competition. Despite all the awards that marketing droids want to dole out.

-- umair // 5:54 AM //


Picked up a book by Neil Gershenfeld of Media Lab fame while I was sick - about the rise of 'things that think', which is one of their research groups.

Made me think of MS's play for control of digital rights, via SCO and appropriating the BIOS. Will 'thinking things' only think what corporates want? Context from last week's Steven Levy article (already linked to if you saw it here before).

That's a really scary thought - but it looks more and more that way, and like the Media Lab's vision of a rosy future of interconnected was pretty far off the mark.

Instead, it looks like we'll have a network of things that only connect to each other when, where, and how corporates want. What happens when Mattel subsidizes a 'smart doll' that pipes up whenever product placements activate it during your kid's favorite TV show?

This is terrrible strategy, but it's so much more natural for the beancounters than slashing, burning, and renewing their business models, that it's by far the most likely outcome.

-- umair // 5:50 AM //


So in the past few month I started relying pretty heavily on link aggregators like Technorati and Blogdex for my morning reading, since they're so efficient at digging up hot news.

But the capture of Saddam highlights a big problem: I'm sick of reading accounts of it over and over again, but they still dominate the link aggregators. I think this is because the link decay of an event is proportional to it's frequency. So catastrophic (very rare) events take a really long time to decay. Maybe the response curve needs to be altered? Interesting.

-- umair // 5:40 AM //

Tuesday, December 16, 2003

Downloading copyrighted works from P2P networks is now legal in Canada.

-- umair // 8:17 PM //


The Economist gets outsourcing wrong (sub). The article basically focuses on the (aggregate) economic benefits, and then jumps into talking about how outsourcing can results in higher quality and greater flexibility, completely ignoring all the recent data about exactly this stuff not happening as planned.

It also doesn't consider the strategic impacts: competence erosion, the loss of variety, and massive coordination and compromise costs. Economi benefits at the macro level are nice, but they're irrelevant strategically unless firms can capture some of the rent.

-- umair // 7:59 PM //


While I was sick, it occurred to me that part of the reason why social networking software works in the States is because of the death of local institutions. Europe has them in spades - the pub in the UK, the cafe in France, etc - places where you can get to know other people.

The States has become so atomized that social networking software fills this institutional need - but this is also why it doesn't really work in Europe. It also means that there's room for a whole class of 'replacement institutions' - I think social networking software will be the tip of the iceberg.

-- umair // 7:41 PM //


Intelligence as the adaptive solution to a problem of optimizing energy and entropy. Or, "Why Behavioral Intelligence Systems are Predictive Bioenergetic Cost/Benefit Analysis Systems". Very interesting. Here's a link to the longer paper.

-- umair // 6:15 PM //


Strategy of the Day

The best way to win the coming war for control of the networked hub is to open-source it. Look what people are doing with AppleScript and iTunes. Can Sony compete with this?

-- umair // 4:31 PM //

Sunday, December 14, 2003

Sorry folks, I got sick right after my presentation, so no updates. I will try to update and return emails tomorrow when I am (hopefully) feeling better.

If you're looking for a sci-tech fix, try reading Carl Zimmer's blog - he's a fairly well known science writer - and picking up the mistakes in the science. Here's a couple of quick ones.

"...It seems that if a pokey pathogen has even a slight rise in its rate of new infections, there�s an opportunity for rapid evolution. A few lineages of the pathogens will have the opportunity to infect a chain of people, and that will offer the chance for it to evolve into a fast-spreading strain".

This is a pure mathematical fallacy. In biological terms, any infection has many factors which impact it's 'rate of new infections'. For instance, the simplest one is that the virus might be self-limiting (like Ebola appears to be) - it might kill people faster than it can effectively spread. This is why we don't see many kinds of combinatorial explosions outside of simulation, in the real world - there are huge number of limiting factors.

True combinatorial explosions are mostly confined to situations of massively distributed positive feedback with very few endogenous limiting factors, like 'chain reactions' in physical systems, or autocatalysis in chemical ones. If you don't get what I'm saying, treat Zimmer's sentence as math and you will.

"...a report of some unintended evolution ...in Alberta, the hunters have shot the biggest rams with the biggest horns... But the researchers found that the hunters have altered the gene pool in the process. Genes that help produce big horns and big bodies are vanishing from the population. Meanwhile, rams that produce smaller horns and grow to smaller sizes were favored. The horns have shrunk 25 percent as a result".

Wrong - this hasn't 'altered the gene pool' anymore than my dog dying alters the gene pool of all possible dogs. It's not evolution.

It's artificial selection. I'm not playing semantic games; in fact, there's a really big difference - the genetic algorithm (if we want to call it that) works on mutation/recombination, selection, and inheritance. This is simply a case of selection and inheritance. The mechanisms that create novelty in evolution aren't at work in this example.

It will be an example of evolution if and when this population of rams is exposed to enough selection pressure to discover a new variation that helps it adapt. Such an adaptation might be, for example, horns that have survival vaue to the rams, but no economic value to hunters.

Interesting read nonetheless - thought provoking. Also begs the question: what exactly is it about Corante that kind of irritates me?

-- umair // 7:18 AM //



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