Saturday, August 07, 2004
The Economics of Biotech
Wow. This paper, which is a review of a conference held by the Dallas Fed, is absolutely killer (as long as you understand the state of play scientifically already). Essential reading.
Fortune invites some suits to brainstorm about the shape of the New Corporation. Looks like at least some in the corporate world are beginning to clue in to the need for re-inventing the corporation of today. However, there is a need to see more forces than just technology as the key drivers shaping the New Corporation. Many other social forces are at work here and we need to figure out their impact to re-design the corporation of today. This is the *real* disruption of our generation, and it will happen slowly but surely over the next few decades.
Keiretsu strategy used by southern Pennsylvaina's farmers. Interesting.
Politics of the Day
A cartoon version of Hayek's Road to Serfdom, which is especially apt given...Cheney. If you have no idea what I'm talking about, you need to read it. (Via, strangely enough, /.)
Quote of the Day
The Virtue of Idleness:
"...Or as the late, great British writer Jeffrey Bernard put it: "As if there was something romantic and glamorous about hard work ... if there was something romantic about it, the Duke of Westminster would be digging his own fucking garden, wouldn't he?" "
You've probably heard the arguments before - but they may be worth a reread - especially given the current macroeconomic disruption's implications for the future of work (read: we will all have to do a hell of a lot more of it).
You could also check out the author's magazine.
Expanding the pie - aggression may be a less adaptive tactic than cooperation for some parasitic strategies, because reward depends nonlinearly on cooperation, as well as on the variables which influence the relationship between host and parasite. Very interesting.
Does the comparative advantage of your economy impact strategy and competitiveness? Of course it does.
But we've taken ours for granted for a long time - and so it's decayed. The link between macro structure and how it limits (or enables) firm strategy is something that is going to emerge as a very, very serious issue in the next year or so - especially given the latest jobs data.
Here's another great example:
"...the health care liabilities of
both employees and retirees represent
a significant competitive disadvantage
relative to the Japanese carmakers with
their younger, non-unionized work force.
He noted that GM, which has two-anda-
half pensioners for every employee,
estimates that pensions and health care
benefits add $1,000 to the cost of each
car it makes. A structural issue like that
is not easily remedied."
How not to analyze biotech, pt 123 (sub):
"...Don't look now, but after powering a biotech stock mania that imploded four years ago, the largely discredited business of "genomics" is back."
1) Start with a fundamental misunderstanding of the science. In this case, that genome discovery = massive therapeutic profits immediately.
2) Hype the analysis.
3) When the bubble bursts, declare the technology 'discredited'.
What's important has always been important: the cost of sequencing and the resulting ability to efficiently translate genome into proteome.
The War on Sex
"...The lesson for Texas teens is that the only safe sex is no sex, and that may be a lesson that heads nationwide."
Link. Needless to say, this flies in the face of science. And even history - where we can see the effect of these policies: they're turning an AIDS pandemic into an apocalypse.
But it doesn't fly in the face of the total intellectual bankruptcy that results from religious fundamentalism. This is exactly
what fundamentalist Muslims teach their kids as well.
Markets tank, payrolls are flat. Blah, blah, blah.
The Street vs The Rest of the World
You see, the difference is that the Street thinks most people are fundamentally lazy, stupid, and myopically self-interested. It's therefore in your best interest to take advantage of, well, anyone you can, because not only would they do it to you, but there's no payoff to not
doing it - because most people are too lazy, stupid, and myopically self-interested to coordinate with you and create any kind of social value.
I've never held this view - but I am fast changing my mind. What kind of people can allow this to stand (James Hart)? Well, if you admit that we live in a democracy, they've gotta be lazy, stupid, and myopically self-interested.
No one wants to test the market (especially when it keeps defying our predictions)
"...Underwriters for software maker Lindows Inc. on Friday cut the estimated price range for the company's pending initial public offering to a range of $7 to $9 a share from $9 to $11 a share.
Separately, medical-device maker Stereotaxis Inc.'s 6.5 million share initial public offering is now expected the week of Aug. 9, according to a spokeswoman at Goldman Sachs.
The Stereotaxis offering was originally expected to price on Wednesday. No reason for the delay was given.
Open source development and user innovation levereaged for developing a classic game.
Using distributed intelligence to glean market trends. Tim O' Reilly talks about using book sales to figure out technology dispersion. Interesting.
Friday, August 06, 2004
Google continues to make its platform more valuable. Good move.
Innovation by re-contextualization : Reality TV hunts for India's smartest kid
History lesson of the day : Cricket and America.
Prestigious scientific journals are a bit like the RIAA, and now they're starting to feel the same heat.
Politics of the Day
Killer article about Saudi Arabia. Highly recommended.
Brain Hacks (2)
Checking out more details at idiolect, it's more about cognitive strategies and heuristics than hardcore neuro. Sounds pretty cool!
Thought of the day. Let's think about links as currency people use to trade thought capital with one another. That way, we can explain the growing homogenization of the Net - inflation.
Link inflation: The growing number of links chasing a (relatively) smaller and smaller amount of thought capital. A smart entrepreneur would attempt to arb the differential by establishing an alternate currency
- not just hoarding links like link aggregators (blogdex, daypop, etc) do in order to preserve value. I don't mean something evil, like MS's doomed SmartTags - I mean a tradable currency which doesn't get devalued like links currently are.
The beginning of the end for radio's business model. Who's fault? Their fault. 30 mins of screaming ads per hour != repeat listeners.
Singapore responds to growing rivalry from lower-cost and larger-scale players by shifting GLC strategy to invest in it's competitors:
"...That means Temasek going to China for a slice of state-run companies as they privatize, to Indonesia and Korea for stakes in their banks as they restructure, and to India, where Apollo Hospitals Enterprise Ltd., a local company in which Temasek plans to buy a stake, recently announced plans to set up an outpatient center in London to bring people to India for low-cost surgeries."
Joe Schoendorf of Accel tells the NYT (bolding mine):
"...One Silicon Valley venture capitalist, Joe Schoendorf, also plans to bid for shares, even though he said he believed that the bear market for technology stocks was nowhere near ending.
"The whole system of how we finance technology companies in this country is broken
," he said. "A Dutch auction may not be the right answer, but its better than anything else that has come along."
Today's WSJ front-page piece:
"...Many of today's bankrupt baby boomers simply weren't as frugal as their Depression-era parents. But the increase in middle-age people filing for bankruptcy also is attributed to soaring medical costs, an unstable job market and years of aggressive credit-card marketing....
...Personal-bankruptcy lawyers across the country say they've witnessed a tidal shift in their practices, seeing older clients with longer work histories. "These people didn't take their credit cards to Atlantic City," says Gabriel Del Virginia, a New York bankruptcy attorney. "It's largely because people lost their jobs or had a catastrophic illness."
Until last year, Charlene Freeman, a 48-year-old who lives in the Boston area, worked at home, doing technical writing on a contract basis. As the family's primary breadwinner, she says she was earning $150,000 a year, had a perfect credit record and a spacious home with a pool. Her husband is an independent computer technician.
Then, her long-controlled kidney disease turned into kidney failure, halting her income while her medical costs soared. Although she paid $725 a month to insure herself, her husband and child, Ms. Freedman wasn't insured for the numerous drugs prescribed to her. Those costs at one point rose to $1,200 a month. The drug costs are on top of her usual $4,000-a-month outlay for mortgage, groceries, utilities and other expenses.
Although Ms. Freeman has disability insurance, it wouldn't cover anything related to kidney problems because it was a pre-existing condition.
To pay the bills while she battled her illness, Ms. Freeman drained the couple's retirement savings, her home-equity line, and tapped her young son's savings accounts. She used 10 credit cards. What she didn't realize, she says, is that her husband was using checks sent to them by credit-card companies. These checks, sent unsolicited, have no grace period; interest begins to accumulate on them as soon as they hit the cardholder's account.
In May, when her husband went out of town for a job, Ms. Freeman asked for the checkbook so she could pay the monthly expenses. Shocked at the size of their credit-card bills, Ms. Freeman decided to look up the couple's accounts online and add up exactly how much they owed. As her mouse clicked through the pages, Ms. Freeman says her eyes filled with tears. The couple had accumulated $115,000 in debt. "I sat there and said 'I'm s-d,' " she says. She plans to file for bankruptcy in the fall. "It's killing me to file," she says. "But there's no way I can make enough to pay it off."
Her husband, Jim, says he didn't tell his wife he was using the credit-card checks because he didn't want to upset her while she was ill. "I was always banking on that next big job to come in to pay for it, but it never came," he says."
Aaaaaaaaaaaaaaarggh. You know, I never write political rants, but I gotta let loose:
I am on vacation in Cairo. Why is it that a Cairene at the lowest end of the income scale can get decent affordable healthcare - but an American can't?
Let's not make any economic arguments - because comparing the American economy to the Egyptian economy is only going to make you look stupid.
Oh yeah. Because the HMO's have succesfully railroaded the creation of any
kind of healthcare system (but their own) by lining the pockets of the people we elect.
Guess we better not elect them then. Oh wait - then who's gonna make us feel safe after terror alert code orange?!
Jesus, this Orwellian sh*#@t is really...Orwellian.
You know, you should subscribe to the J if you don't already.
Link of the Week
Wade Davis on the Death of the Ethnosphere. I know, I know, it sounds really touchy-feely. Go read it anyways. (Via MeFi).
WSJ: Google IPO unlikely next week. What a surprise. Look, next week is the first date they can
IPO - not, by and stretch of the imagination, the date they will
. Why? Just take a look at the markets...
Valuations Make Bubbles
"...It's been profitable for five years, and until this week, the only way it made money was by charging $75 for each job posting on the Bay Area page. It just announced that it will begin charging $25 for job listings in New York City and Los Angeles, two cities that make up half of the 120,000 job postings the site runs in an average month...
By my back-of-the-envelope calculations, the site, which employs only 14 people, will be making about $25 million per year on 12 percent of its available ad inventory. That's peanuts for most public companies."
So he argues they should go public. Two points. If your company is making this much (and it's this small), you have little reason to go public - unless you're a maniacal greedhead. Second, the numbers in this valuation don't add up. $25 million is way (way) more than I can get plugging in almost any kind of numbers, using the assumptions above.
But even beyond that, something in me really rebels at the sight of beancounters drooling over making $$ from cool stuff other people made...again.
Light blogging today - busy, busy, busy. New projects linked at right. Check em out!
Thursday, August 05, 2004
Brain Hacks is an interesting idea, but IMHO, as a former neuro student, kind of off-kilter.
First, the brain-computer metaphor is kind of 20th century. We now know it's not an accurate way to think about the brain - even if you talk about massive parallelism etc. This is because we have no idea how neurons really
work. Sure, we know that neurotransmitters jump across synapses and fire off action potentials after neurons reach a threshold of activation - but we have little idea what the hell this actuall means: how the interconnections create anything of value. For example, neurons have all sorts of different waveshapes, can be modulated by each other, by dendritic interactions, etc - we haven't even scratched the surface of how this works.
So, second, we have no idea how the brain really
works - our machines just aren't up to speed yet. Molecular tools miss the big picture, and imaging tools can't tell us how information actually gets turned into meaning (they can only tell us where and when; ie, the caudate nucleus, hippocampus, etc). Can you hack something you don't understand? Yeah - but the consequences are going to be combinatorially unpredictable.
I really hope I'm proved wrong, because I think this would be a cool book to read.
Globalization of Advertising
WPP and VNU form a JV to offer TV ratings in '30 countries outside the US'. Wealth creation is moving...fast
RyanAir boss thinks oil prices will fall post-September - in fact, he's pretty much bet the farm on it. Very interesting.
Pic of the Day
Absolutely phenomenal view of Valles Marineris. If you don't know where Valles Marineris is, stop wasting time here and go read Red Mars/Green Mars/Blue Mars.
The articles comparing Apple now to Apple then begin to appear. Yeah, yeah - I know I said it first!
Innovation of the Day
Anti Innovation of the Day
Trolleys with video screens. So they can get your kids while they're still young!
Wednesday, August 04, 2004
Solaris to get Linux compatibility and go open source. Intersting move, if somewhat late. Will it affect Linux? Nope, because x86-Linux is already a hyper-commoditized platform. Will it make Solaris more valuable? You bet. Will Sun be able to capture the value by itself? Only if it can figure out the value drivers. And the answer is not in services : IBM is the king of that hill. In my opinion, the answer is in integrated software and hardware products built on hyper-commoditized platforms that fundamentally disrupt industry economics at the high-end of enterprise.
Tivo gets the nod. Two cheers for (somewhat) Napsterization of Hollywood, one cheer for Michael Powell.
16 Biological Strategies
1. Imitate (Mimic)
2. Imitate (Parasite)
4. Primary sense (eg; Vision)
5. Niche sense (eg; Sonar)
11. Structural multiplexity (4 levels of protein structure)
13. Presociality: Eusociality (joint-stock [email protected]
14. True sociality
I think more and more about biology and strategy these days. These are my notes; you may find them cool to keep in mind when you think about your strategy and what it really
Politics of the Day
Interesting piece in Wired begs the question - is the rebirth of online advertising really just a bubble? What happens when the advertisers realize most registration data is, well, crap?
Gates says he'd buy Nintendo 'at once' - if Yamauchi ever decides to sell.
The Reg has a nice piece about the Net increasing the gains to specialization and asks if this is creating siloed thinking (esp in IT). Yup - because lower transaction costs = greater efficiency = greater specialization. A very interesting point, related to my post about the Net below.
Startup of the Day
Trendum mines trends from Net 'chatter'. Absolutely great idea - why don't the Daypops of the world go this route?
Globalization of the Day
George Lucas sets up a studio in Singapore. Meanwhile, employers in the States complain that new grads can't even use Excel and Word (and, sometimes, read).
Another draft of a piece in progress - Enjoy!
9 Strategic Uses of Open-Source
1. Open up to complementors outside your industry, expanding the market horizontally, blurring industry boundaries, and thus relatively devaluing your rivalsï¿½ strategic options and future market power.
2. Open up to suppliers and buyers, raising their switching costs by increasing the gains to integration. This implicitly locks-in the market vertically. Donï¿½t confuse this with explicit (evil) lock-in.
3. Open up to everyone, disrupting everybodyï¿½s position (even your own). This exerts maximum innovation pressure over your entire ecosystem. Only use this strategy when youï¿½re got innovation capital you can deploy ï¿½ when youï¿½re ready to disrupt your own position, but your competitors arenï¿½t ready to be disrupted.
4. Open up to complementors inside your industry (usually downstream from you), hypercommoditizing your own product ï¿½ but also exerting total price competition over your rivals.
5. Open up to complementors inside your industry (usually downstream from you), hypercommoditizing your own product ï¿½ but also vastly increasing innovation pressure among complementors, rapidly and massively multiplying the value created by your product (by forcing your complementors to hyperinnovate against one another)..
5. Open up to complementors inside your industry (usually downstream from you), hypercommoditizing your own product ï¿½ but also establishing it as the (or as part of the) dominant design which coordinates your industry.
6. Open up to complementors inside and outside your industry, vastly increasing the range of strategic options you can generate, giving yourself greater strategic space to innovate in, thus massively increasing the future value of innovation pressure you can generate.
7. Open up to consumers ï¿½ harnessing the explosive power of user innovation, which acts as a multiplier for your ability to exert innovation pressure over your competitors.
8. Open up to multiple selected potential competitors, trading your protected position for co-opting and internalizing the gains from their technological advantage, and giving yourself platform dominance.
9. Open up to multiple selected potential competitors and sidestep hypercompetition by moving upstream or downstream, thus simultaneously co-opting their technological advantage, multiplying selection pressure amongst them, and turning them into hypercommoditized complementors whom you can exert platform leverage and innovation pressure over.
321 Studios closes.
iPhone.com redirects you to Apple's iPod page. A hint of things to come? (Via SmartMobs)
Gureilla gigging. Why did this take so long...?!
"...Sweden now has a mobile phone penetration rate of 100.1%. In other words, there are more mobile phone accounts than people in the country, largely because many subscribers have both home and business mobile numbers. And Sweden are nearly twice as many mobile phone accounts as fixed lines -- 9 million to 5.4 million. Is this the future of telecom?"
Yup. I think our use of machines follows a power-law relationship (intuitively, I don't know anyone that's ever done the study...). Any machine that makes it to the 'power' part of the curve is going to have a higher penetration close to or higher than 100%. Think about TV, PCs, etc.
Interestingly, the growth of the mobile industry in the Third World has been absolutely (unbelievably) explosive - largely because mobile, relative to fixed-line, which is still government controlled, is higher-quality, you can take it with you, and not much more $$. Oh, wait - that's the value proposition everywhere
interesting piece about why id should open-source Doom 3 - to promote innovation from smaller players with fewer resources, to expand the 3d engine market horizontally, to shift innovation pressure to different areas of game design, and, most interestingly, to hypercommoditize it and establish a Doom 3 component of the larger CE electronics platform we all know and love.
Naive strategy tells you open-sourcing would be an idiotic move for id, until after their temporary monopoly's dissipated (which is what they usually do - release their source a few years after their game's been released).
But this piece raises some very nice arguments for a strategic use of open-source, which we will see more and more firms playing with, to shift the competitive dynamics of their markets radically. Put this way, you can see why open-source is so powerful. Highly recommended.
I would like to invite you to check out some new projects I have been involved with. You can find them here: http://www.humans.cc
Human Licenses are a new class of licenses which fill the gap between copyright and Creative Commons. They encourage replication and
revenue sharing, by letting you define viral revenue sharing across replication chains. We've also included a bunch of other fun attributes, so go check them out. They're still beta and not 'legal' yet - so bear that in mind if you decide to use them.
Break and Shake are designed to question the media industry's myopic focus on protection tactics and filesharing. We think it's absolutely necessary to demonstrate to the media industry with hard numbers how much filesharing really costs, versus how much they stand to gain by creating truly new business models - not simply repackaging old ones with DRM and antipiracy measures.
Break is open-source valuation designed to answer the first half of this question - how much filesharing really costs. Shake is designed to answer the second - how high the cost of protecting a decaying business model really is.
Tuesday, August 03, 2004
Next Big Things
Rise of the robots, pt 318. I got my kid sister an Aibo this summer - it absolutely rocks.
The robotics market will be to the next 20 years what the video games market has been to the last 20 - total hypercompetition and hyperinnovation, explosive growth, cultural revolution, and whole industries vaporized in the process.
Unintended Consequences (Net Version)
Lately, I've noticed that the Net seems more and more homogeneous than ever. The blogosphere is full of 'what he said' posts. And the papers simply repeat each others' stories ad infinitum. Is the Net is hyperpolarizing preferences (ie you read only what fits with what you already believe - reinforcing the rigidity of your preferences), and so creating incentives for replication (people tell you what you want to hear)? Something to keep in mind.
A nice piece about genriching trees to process toxins.
VoIP's cost advantage is music to the ears of startups.
Musicmatch offers 'limited sharing'; analysts gush.
Evolution at the edges of the search market - local search functionality from Yahoo etc. Combine this with social software and you've got something very, very cool...
Must read (especially if your last name rhymes with "artz" or "ealy" and you recently found a big cash bounty coming your way) -- Cash Kills. Cool comment on how trigger happy CEOs sitting on cash hoards tend to make bad acquisitions. Original paper from Jarrad Harford here.
Here's a short piece about personal DV players.
"...Paid download services like CinemaNow that allow users to download programs in minutes could encourage adoption if they're priced right, he said.
"If you could download as many episodes of Seinfeld as you want for $10 a month and keep them on your device, that's a pretty good value proposition," Martin said."
Uhh...no - let me rehash the now tired argument: subscription, bundling, blah, blah, preferences, blah, blah, consumers nickel-and-dimed-to-death, blah, blah, Korea, Japan, blah, blah, blah.
Politics of the Day
You have got to be fucking kidding me. Mediawhores indeed.
Standup for the Lord : Christian Comedy makes its debut in America.
How not to think about disruption : The Myth of Disruptive Technology.
Globalization of Advertising
Subway mocks Americans, hooks up with Morgan 'Supersize Me' Spurlock to sell subs in Germany. Scroll down; the pic is hilarious (or offensive).
Labels 'blacklist' anybody upstream (aka Real) from doing business with P2P nets. Uhhh...file this under 'Supplier Power, Coercion':
"...Also last year, RealNetworks (Nasdaq:RNWK - news) abandoned negotiations to bundle its music-playing software with Morpheus, a deal that could have eventually steered Morpheus users to paid content distributed on Real's Rhapsody service.
"The labels have blacklisted you guys ... which means I'm probably not going to get much latitude to do anything as far as Rhapsody goes," RealNetworks general manager Ryc Brownigg said in a phone message to StreamCast Networks Inc. last September."
Milken is a f%^#ing genius.
"...He talked about understanding peopleï¿½s talent and coupling that with capital. Milken said he was trying to figure out how do we define, find and finance human capital. He said we have no ways of judging that beyond giving college kids a credit card and tracking that (laugh from the audience)."
You know, if he figures out a viable way to do this, it will have almost unimaginable consequences. It'll make the technological disruptions of the last 25 years look like little tiny pinpricks. I cannot believe how smart this guy is or overstate how potentially big this is. Wow. Here's the current state of private equity human capital contracts.
Here's one of his better articles if you want more.
The Death of Advertising
OK. The much ballyhooed Death of Advertising is finally upon us. About ten years too late, but better late than never.
One of the channels that advertisers are shifting to is video games. Take, for instance, Massive. They've set up an ad platform that delivers dynamic targeted ads to any game that's part of their network and can be updated online. Good idea? Yeah. But...
The question is: is traditional advertising really dying, or is the virus just moving to a new host? Massive is a great example. Now, they might simple replace real billboards on your local highway with virtual billboards on the highways in your favorite driving game. Is this - substituting the simulation economy for the physical economy - really innovation? Is it gonna have an impact with the much-desired 21-34 year old males? Or will it end up in the same place as traditional advertising - an exclusionary Red Queen race to forcibly steal attention?
So I think the death of advertising is not upon us yet: the real death of advertising will happen when we start to see real dialogues
between producers and consumers, so value dyads can define new drivers of wealth creation and reshape old ones.
Aside: I see more and more is marketers who say 'I am having a conversation with my customer just like the digerati tell me' - but are really doing nothing of the kind (viz. Gawker adblogs). This may in fact be worse than traditional marketing - because it devalues new technology in the eyes of the consumer, who then discounts further attempts at real dialogue.
interesting piece from the Guardian argues that football (soccer) and basketball are substitutes
, so football will never take off in the States. Hey, I'm a tennis player, what do I know...
PVRBlog has a nice post about the integration race in the media industry - my comment:
...Nice post. Integration strategies are ways to exert more power over the market. After a market's been disrupted, and competition for revenues increases, integration races often start. Think about the aftermath of previous technological disruptions and you see integration strategies writ large.
Take a huge example from the early 20th century - cars - and think about how Alfred Sloan at GM used integration to exert massive power over an accelerating number of competitors (and suppliers) via scale and scope economies. So it's a natural response from a media industry that's under assault from nearly every angle.
I think the interesting question is - the costs of integration are pretty steep. First, you've gotta pay coordination costs to get the integration to work. Second, you've gotta make the right bet on the future value drivers (in this case, mass customization or not). Are these costs even worth it to begin with for the media industry? Put another way, is building scale and scope to grab more advertising dollars (and increase their efficiency) a smart move?
I think this is just another form of protecting decayed business models, and the media industry's digging itself an even deeper hole. In fact, AOLTW tried it a looong time ago, and it sucked even then. Forget integration; try some innovatio (for a change).
Uhhh...ok. Geekitude out.
Sun brings Ray Server to Linux. Now we're getting somewhere. Granted that thin-client computing has been in the state of "about to realize its full potential" for ages now, but Sun needs to bet on such risky horses if it's going to have any chance of survival at all. Besides, MS is more vulnerable today than it has been in the past.
Monday, August 02, 2004
Politics of the Day (2)
Thoughtcrime. (Via MeFi)
"...What changed was Technorati's code. It ain't working for me - not sure how it is for everyone else.
Please folks - give us WYSIWYG editing, a built-in aggregator and PLEASE Technorati - bring back the old code!
Let's see now who has Technorati, NewsGator and 6A in common?
Oh yah - VCs. Is it a coincidence that once the money shows up - the code gets shitty?"
Ahhh. The eternal question.
Jeff Nolan, who can somehow blog about at about Mach 17, points out why I'm bored with handsets - the real action is watching how low-cost players in China and Korea will change the stale market dynamics:
"...global sales of mobile handsets soared in the last quarter. What's interesting about this is that the biggest prize, China, is developing a very robust hometown set of handset players, companies like Innotech and Benq. I am really impressed with the products that the Chinese companies have been turning out, I have no doubt that between Korea and China we are seeing a wholesale repositioning of the consumer electronics mfg landscape."
That is an absolutely excellent point (and why you should read Jeff).
Business Model of the Day
KeepMedia. Revenue stream 1: $4.95/month for access to the archives of 170 magazines + papers. They will make a few bucks from niche markets, but where's the money? There are simply too many substitutes available which give consumers relatively good value (for free, no less) for the mass market to buy at significant levels. Revenue stream 2: the platform angle. The market for scalable CMS with integrated billing is already taken - and saturated.
So where's the magic? After all, the team they've lined up is fairly impressive. The angle is simple scale economies - the more suppliers they sign up, the larger their scale advantage gets, and the more attractive their archiving platform becomes to the rest of the market. Their personalization also throws in weak network externalities for consumers, which is a mild value driver. After they reach a critical mass, they will be the backend archive solution powering digital content. Don't be fooled; the aggregation play - which may sound very 1999 - is a disguise for what's actually a pretty good business model.
Will SenderID become a 'de facto standard'? Yes. Will it do anything to stop spam? Absolutely not.
Note to USAToday:
This is not a competitor to the iPod:
"...The Rio Carbon, shaped like a slim wedge and weighing 3.2 ounces, uses Seagate Technology's new 1-inch, 5-gigabyte hard drive, and touts up to 20 hours of playback time on a rechargeable battery. It will cost $249."
For the simple reason that the uPod gives you 4x the storage + Nx the cool factor for a few bucks more. Sorry, wrong value equation. Better luck next time.
Politics of the Day
The GOP plans to scrap the IRS. According to Drudge, so you may wanna take it with about a Saturn V-full of salt. Drudge says they wanna replace it with a VAT.
What a great idea! I agree - Let's make sure that the dollar plummets another
25%/year for the next ten years. I would not bet too heavily on America's financial future at the moment.
A bit about MS's new MSN search (ya know, the ones that searches the Net + your local machine).
CDT files a (last-ditch) S-1.
Handset sale breakdowns - Nokia loses (obviously). Snooze. I am really bored with the mobile industry - cash cow or no.
The Real End of Free
Craigslist to start charging for job postings.
Gap in the value equation:
"... "The maximum coverage available at this time for lawsuit and settlement costs is US$5 million, which means that clients would pay OSRM a premium of $150,000."
This strikes me as a fairly small number considering the potential liability if a court case goes the wrong way. Also note that it was fairly unlikely OSRM would come back with a nice clean slate for Linux - and thus put themselves out of business.
If you find the fact that 'culture training' is part of the training for outsourced workers in India funny, the last laugh's gonna be on you. They're learning something which is a wealth driver - and you (if you're in the States) are most likely not.
OK. That was harsh. The point is, the future happens - with or without you.
Here's the draft of a somewhat controversial piece I'm working on. Enjoy.
The Death of the Corporation
Iï¿½m going to try and inject a fresh viewpoint into the stale debate over outsourcing. So far, itï¿½s basically the same old debate between capitalists and workers. The former argues that business can be made more efficient, freeing up resources here for cooler, fresher uses; the latter argues that the pain involved isnï¿½t worth any potential gains, and around and around we go.
I say: Let these jobs go ï¿½ we donï¿½t really want them. Let these jobs go to places where people are not just eager to do them, but to places where people find some hope and meaning in them. They stopped giving us that long ago. So let them go to places where they represent the future. Our future is to help find
My argument isnï¿½t an academic one. Itï¿½s purely anecdotal. Hereï¿½s what Iï¿½ve seen: for the last 10 years or so, our culture has ridiculed, made fun of, and even scorned the kinds of jobs that are being outsourced now. In the movies, books, TV shows, and art that reflects what we think and feel, the kind of work thatï¿½s being outsourced has repeatedly represented for us negative things, not positive things: the loss of meaning, the loss of creativity, and Kafkaesque mechanization. These jobs have been objects of derision to us ï¿½ not objects of hope, happiness, and value ï¿½ for a long, long time.
Need evidence? Itï¿½s there in droves. Mike Judgeï¿½s Office Space, where a bunch of disgruntled code-slaves revolt against the total vapidity of their jobs at what looks suspiciously like an anonymous suburban systems integrator. Seinfeldï¿½s recurring subplot of Costanza looking for an office-drone job where the bureaucracy can simply absorb him, so he can do nothing. The term ï¿½McJobï¿½. The Matrix, where Neo, fed up with the total intellectual and spiritual bankruptcy of his ï¿½day jobï¿½, doubles as hacker by night ï¿½ and eventually, takes the red pill. How many of us can relate to these examples?
But nowhere, and hereï¿½s the interesting bit, do we see any glorification of the kind of jobs that are being outsourced. Nowhere. But there are
many jobs that are glorified and lionized by our culture: the forensic scientists in CSI, the plastic surgeons in Nip/Tuck, the casino owner in Las Vegas. In a sense, what Iï¿½m saying is a truism: we think thereï¿½s little to lionize about a call-center operator. AT&T may try and do it in cheesy ads, but do we really believe it? On the other hand, being a call center operator is
something thatï¿½s lionized in the Third World. Itï¿½s work people are eager to do not just for the money, but because it gives them hope ï¿½ hope for the future.
I think there is a deep truth in our collective scorn of certain kinds of work ï¿½ as furious as we are when itï¿½s taken away from us. Perhaps itï¿½s because we feel devalued when we do it. Such work has one thing in common, beyond the fact that itï¿½s often automatic and repetitive: itï¿½s not intellectually, creatively, or spiritually challenging. I think we scorn such work because we know we can and should
do cooler and better things; because we know that when we do it, we arenï¿½t building the future, weï¿½re clinging to the past.
Our macabre fascination with outsourcing, and the slow but sure cultural devaluation of specific kinds of work ï¿½ these are the surface rumblings of a deeper tectonic shift. If we think about it, itï¿½s the corporation
- not outsourced jobs ï¿½ thatï¿½s been the target of our collective cultural contempt. This tectonic shift is nothing less than the death of the corporation.
Whatï¿½s really being outsourced is really the corporation itself. Itï¿½s slowly being rebuilt ï¿½ lock, stock and barrel ï¿½ in other parts of the world. The legal seed is planted in Bermuda. The human cogs and gears run in India. The assembly lines chug along in China. The corporation is multiplying like a virus, and finding a new home in a less harsh environment it can more easily adapt to. Remember all that stuff about heterarchy replacing hierarchy? About adding new voices to stale old boardrooms? Well, this
is how it happens ï¿½ slowly, painfully ï¿½ but as sure and steady as time itself. The revolution sounded
cool when Tom Peters wrote about it; but itï¿½s a hell of a lot scarier now that weï¿½re actually on the operating table.
So where does that leave us
? Well, where weï¿½ve always been: as the folks who came up with all this wonderful stuff in the first place. What we ï¿½ all of us ï¿½ have to do now is to invent the post-corporation. Actually, thatï¿½s not entirely accurate: thinkers like Hamel, movements like open-source, and startups like Google have already been hard at work doing it. So what we really have to do is finish reinventing the corporation. Thatï¿½s more than a little scary, and it will involve more than a little pain.
All this means that the upside of outsourcing is quite different from what youï¿½re used to hearing by now (that ï¿½retrainingï¿½ is the key to scoring a new job with a fatter paychceck). The upside is that we
ï¿½ not India, China, or Russia ï¿½ but we, get to define and build the grand new machine that will power the economies of the 21st century ï¿½ the post-corporation. This is a huge upside: we get to invent the future for the rest of the world
. We get to invent the next great machine that will power everyoneï¿½s
economy and impact everyoneï¿½s
What will this machine ï¿½ the post-corporation ï¿½ look like? Well, itï¿½s a work in progress. A few things are likely: the post_corporation will care more about truth than marketing, more about inclusion than exclusion, more about all stakeholders than only financial markets, and more about innovation than protecting obsolete business models.
But perhaps the most valuable part of the upside is that ï¿½ unlike when the corporation was invented ï¿½ we all
have a say in how the post-corporation is invented. You can write a book, start a blog, go to shareholder meetings, write an op-ed, become a business prof, lawyer, accountant, activist, or even toss it all in and try and start your own post-corporation. Now, of course, all of these entail different levels of risk ï¿½ if you want to have a say, youï¿½ve got to take a risk. But thatï¿½s why our system works so well: it rewards risk and innovation, and so sorts out the best ideas from the better ones.
This is not an inconsequential task, to build the next great thing. Are we up to the challenge? I think, like so many times in our past, we have to be. If we want to continue to maintain the legacy our ancestors handed to us ï¿½ as the worldï¿½s innovators, leaders, and builders ï¿½ weï¿½ve got to begin by having the courage to admit what weï¿½ve been trying to tell ourselves: let these jobs go ï¿½ we never really wanted them. Instead, weï¿½ve got to begin building the future.
Strategy decay : Sun floats a trial balloon about buying Novell, apparently to get access to Suse and gain leverage over IBM. "What would owning the operating system on which IBM is dependent be worth? History would suggest we look to Microsoft for comparisons,"
said Jonathan Schwartz.
This is just *so* wrong on multiple levels. Will Sun be able to pull off an MS? I don't think so. Consider this:
1.IBM and the rest of the world is much smarter today. Refer to my earlier post : creating a digital platform is extremely difficult in the post-standards war era, as the market is likely to vehemently resist the creation of another monopoly. MS had vile, luck and the element of surprize on their side, Sun does not. Why would IBM or the rest of the world allow Sun to create an OS monopoly?
2.Switching costs among the different Linux distributions are extremely low. All of them are subsititute goods for one another. How can Sun exert market power when it cannot create a lock-in due to high switching costs?
3.MS literally owned the OS, erected barriers to entry by creating a formidable patents arsenal, bought or bankrupted competitors, and most importantly, controlled the Win32 API. Sun can gain none of this by acquiring Novell. In fact, GPL was *designed* to prevent anyone benefiting from a strategy a la MS.
4.MS did not have a competing in-house product line with entrenched power interests and a cult following. Sun has not even managed to build a business in Linux servers, ceding the market to IBM and HP. What are the chances of Linux surviving internal politics at Sun? This is classic Innovator's Dilemma stuff, and I don't think Sun has figured it out yet.
5.What is it that Sun can do that IBM cannot in terms of Linux? IBM already has way more credibility in Linux than Sun. They have an army of ex-AIX engineers working full-time to port all of its best features on Linux. IBM is also a bigger Java player than Sun. What would prevent IBM from rolling its own distro overnight and use its army of consultants to peddle it? In fact, it'd be almost sweet to have IBM's customers pay their services arm to migrate from Suse to IBM's own.
I'd bet on this being yet another company meeting death by acquisition. Note to Jonathan : acquisition without strategy is much worse than a strategy without acquisition. Please do not end up as a business case in Clayton Christensen's books, that'd be tragic for our industry. You've got so much to go for, don't settle for this.
What'd I do if I were Schwartz? I'd do the Moore-and-Grove walk with Scotty and ask some fundamental questions about where I want to be. Sun has always done best by being a technology maverick and disrupting the market with a whole new economics. Where does such economics come from? Well, Open Source, of course. The key is to think of open source as an *economic* force, rather than a place to mooch off free software and build a service-based business.
It is logical for Sun to go up the food chain and get into software. Clearly, open source is a key force of disruption there and Sun must figure out how to benefit from that. The Java Desktop is briliant, there's a whole world out there waiting to be saved from monopoly rent extraction. Look some more and you find that a number of enterprise software product markets are ready to be taken down by solutions built on top of commoditized open source. Same strategy can be further extended for hardware. Sun must go beyond the reluctant efforts to push low end AMD servers and look to disrupt other markets like graphics design, storage, security and data centers. SGI's, Network Appliance's and EMC's of the world are begging to be Open Source roadkills.
Recommended reading for Sun managers : The Rise of the Insta Company. Go forth and multiply a thousand insta companies within Sun. Be the champion of Open Sourcing the entire economics of technology industry.
What do you think? How would you make strategy for Sun?
Distributed Economies of Scale
A very nice piece about SugarCRM leveraging open-source to accelerate time-to-market provides a vivid illustration of why open-source is a fundamentally new production paradigm, and one that won't stay confined to software for long.
Note to Michael Powell : Big Telecom's protection tactics are not exactly helping the market evolve. Oh wait - I forgot, you don't want
the market to evolve!
How not to analyze strategy : Blackberry vs. Good from Gigaom. I tend to agree with Om, I think RIM has done a great job of entrenching its platform. Even better, it has actually managed to do that with the cachet of being cool.
The Edge has a cool discussion : what's your law?
Politics of the Day
Total intellectual bankruptcy.
If you're coming here to comment about Apple vs Real, look at this first. If you know this stuff, that's cool; if you don't...you should.
I can't believe someone actually picked on my grammar. Is that a sure sign I won or what!!? (ducks)
One more interesting point from an email I got:
"...Please consider Apple's ability to continue making iPods profitably if they open up. Consider the example of Palm that nearly went bankrupt trying to both control the platform and make the widget. You may saythat either it is not possible or that it doesn't matter, the platformis the prize --> sacrifice the iPod for AAC/Fairplay platform ?"
OK. First, the point is not to consider not only what they gain or lose by doing
it, but what they gain or lose by not doing
it. I've argued they lose more by not
opening than they lose by opening. Second, opening the platform does not sacrifice iPod sales
. Sure, it's possible that Real might try and out a competitor, but, as I've argued before, the iPod has no
real competitors, because Apple's competitors don't understand the value drivers in this market. And they won't for quite a while. So the iPod absolutely owns the market. Creating a standard around iTunes/iPod would, if anything, drive
sales - by creating a thriving market for complements (more of them, available more cheaply, than Apple's currently limited selection).
Put your money where your mouth is.
(Uhhh...that's facetious. Take some free advice from someone who's worked on the Street: you have about as much chance making $$ on this bet as you do of seeing John Ashcroft as a Vivid Girl.)
Sunday, August 01, 2004
History of Copyright.
Reading more and more history these days - looking for (and finding) linkages between technological change and business/production model shifts. Here's a great example (bolding mine):
"...Central to the evolution of western copyright is the evolution of the printing press and with this, the system of privileges by which authors were remunerated. Privileges had been granted from the sovereign to the booksellers following the invention of printing, to regulate the book trade and to protect printers against piracy. By the seventeenth century it had become customary for publishers to offer honours to the writers for the works they conceded to print. But institutions in honorarium, gave authors a mere acknowledgement
. Consequently, the writer was not afforded value for his/her work.
The invention of the printing press, and the possibility of printing multiple copies of books cheaply resulted in a wider market for books which had previously been available only to the most privileged members of society. The printers and publishers soon forged powerful guilds and petitioned the authorities for protection against unfair competition from printers who copied their editions.
Unfettered competition, with freedom for any printer to copy anotherï¿½s editions, led in all the major European countries to a situation in which "piracy was born, so to speak, with the art itself."
These privileges were in time used as an instrument of censorship by the authorities. These prohibited printing unless the book was first licensed.
Printing was prohibited without the consent of the owner. Authors complained, and were concerned with moral rights mainly and objecting to publication without consent, false attribution of authorship and modifications to the text which were harmful to their reputation."
Link's from here.
Attack of the Replicants
Greatest Mefi thread ever. There's a big Goatse in the middle of the thread, so be very, very careful (esp if you have no idea what I'm talking about).
The Economics of Gangbanging
Supply-chain innovations reinforce natural scale economies - the incumbent's got such a big advantage that it charges competitors for prison insurance. Also interesting is that the risk of imprisonment is assessed at least quasi-rationally - as the price of doing business.
"...Still, police said, the Mexican Mafia dominates Southern California, in part because of its powerful control of inmates in the California prison system. Zeigler and other police officials said gang members know their day in prison is inevitable, so smaller gangs pay taxes to the Mexican Mafia, for peace on the street and protection behind bars.
The tax can be as much as $10,000 a month, and Zeigler said the Mexican Mafia taxes "the hell out of MS." If a gang has paid its fees, it can place the number "13" after its name, for the "M" in Mexican Mafia, the 13th letter of the alphabet. Thus, in California, Mara Salvatrucha is known as MS-13."
More media disruption here. (via slashdot).
I know, saying any more in this debate is a waste of electrons and photons. But I found something more interesting than the usual electronic detritus here and here.
Link of the Day
DeLong the physicist. Who knew?
Killer forthcoming paper by Lerner and Tirole about one of the big unanswered open-source econ questions: how do licenses get chosen and defined? Essential reading.
Strategies that Work When Property Rights Don't - a recent chapter by Anand and Galetovic. Get it while you can. Chock a block full of interesting examples from the music industry and even sports mgmt. Argues that labels/publishers should shift businesses to where they can capture rents - ie complementary goods file-sharers actually buy.
If you're not technical, skip the beginning-middley bits and go to the latter 3rd.
Latest research on file-sharing is gonna add fuel to the fire - a PhD student at Chicago finds file-sharing negatively impacts music buying by ~ 10%. Very interesting stuff - his method is to control for all sorts of variables, and regress net access with respect to time against music buying. He finds those with broadband connections using P2P are 30% less likely to buy music.
Of course, these character are generally all found in the demographic that thinks major label music sucks...so you may take this with a grain of salt or two.