Mitch Kapor should look at chaordic organizations
Mitch Kapor of the Open Source Applications Foundation blogs his impressions of the challenge to hierarchical structures represented in his effort to lead the development of Chandler, an open source PIM that, since it was revealed a couple weeks back, has been called everything from Agenda 2.0 to the Outlook killer everyone has been waiting for.
I'm flying to Washington D.C. this weekend for the board of trustees meeting for the Chaordic Commons, an organization dedicated to developing alternative forms of organizational structure and systems of shared ownership based on the ideas of Dee Hock, who founded VISA International. I'll be blogging the conference here and on my social and political blog, if the facilities allow.
Mitch writes in his blog (this is an excerpt -- read the whole posting):
In a conventional corporation, there are a basic set of ground rules about how activity is organized. Corporations are still ultimately hierarchical. Some pyramids of power are steeper, others flatter, but they all point to the top. Anyone who works in the business world absorbs a set of default rules about how workplaces operate, e.g., your boss tells you what to do, but you don't tell your boss what to do.
As an open source project, we are experiment in progress. Like every other project we have to determine how decisions are made and who has what kind of power. Other projects have pioneered various methods of organizing their own activity, i.e., who can submit code for inclusion and who can commit it. There's a lot to learn from them and there is not yet any general consensus....
In a world in which all points can be discussed endlessly, it becomes important to have generally agreed-to processes by which decisions can actually be made and respected. Whether munging reply-to headers is really harmful or not isn't the point. It is that it's a Brave New World out there and we better get used to it. What's new here for me is not the endless discussions of mailing lists, but their impact on a project which is trying to work in an open and participatory fashion. And everything I discussed here is just the tip of the iceberg.
Take a look at the Chaordic Commons' discussion of principles of transition:
In some cases, participants may need or want to develop a special set of principles for the transition from one type of organizational system or structure to another. This is more likely to happen when working with existing institutions that already have well-defined or ill-defined relationships, or within a single organization that will be adopting a new structure or governance system.
During the transition from the pre-existing Bank of America licensing structure to the formation of Visa, for example, Dee Hock and his colleagues were consciously guided by several principles concerning the position of banks then involved in the system:
- Duplicate levels of management should not be created but that for greater efficiency and economy, the new organization should combine all existing structures.
- Every bank heavily and directly involved should be entitled to voting membership.
- Assessments should not exceed the present royalties.
- No bank should be financially damaged or otherwise left in a lesser position, as a result of the reorganization.
- The plan must offer enough advantages to gain voluntary acceptance from a majority of the licensees.
- All existing contractual obligations must be honored for any bank that might decide not to accept the plan.
- The unique position of the Bank of America in the system must be recognized, properly compensated, and its ability to provide sustaining assistance during any transitional period should be utilized.
Getting from point A to the end of a collaborative project, especially one where people hope to profit in some way, is tremendously difficult. Dee Hock's book, The Birth of the Chaordic Age, tells the story of VISA's creation, which involved getting a bunch of banks to share customer information that they had held sacred for decades. What is not in the book is the story Dee's son, an accomplished lawyer, told me: When the various banks met, the lawyers had to sit in the corner and could not talk unless asked a direct question -- it was the only way they ever got anything done.
Palm 6 -- Be cool
Joi Ito posts a comment in response to an article in The Register USA about a leak from PalmSource, the software division of Palm, describing the next generation of Palm OS:
Version 6.0 will be as dramatic a change for the platform as OS X was for Apple, or NT was for Microsoft, and represents the culmination of work from the former Be team Palm acquired last year.
The new OS will feature multimedia and graphics frameworks drawn from BeOS, PalmSource's Michael Mace told us. Mace says this is real BeOS code, but Steve Sakoman, the team's former leader at Be Inc, and now PalmSource's "chief products officer" has denied that Be code would be incorporated into the new OS. More likely, we suspect, the new OS will inherit some algorithms and architecture from BeOS.
Version 6.0 will feature granular, application-level security and pluggable I/O interfaces. Which means that licensees can swap out the Graffiti input mechanism for an alternative, such as biometrics. Application developers need not concern themselves with the specifics: apps will simply receive an event.
Let's parse this. First, Be was conceived originally as a media OS. Jean Louis Gassée, Be's founder, demonstrated it as a media hub the very first time he showed it to me in 1994. Since the Be OS and Palm OS are markedly different, the supposition by Register writer Andrew Orlowski is probably correct that only certain functions from the Be OS have been integrated in Palm 6, but based on the addition of audio in Palm 5 (late, but welcome, indeed), the path from a single-market OS for portable devices to an all-purpose platform for use with a variety of consumer devices is pretty clear. This is what the talk of "feature granular, application-level security and pluggable I/O interfaces" is describing.
This is very reminiscent of the Newton OS, which Sakoman and some of the Be team worked on in its early stages. What goes around comes around, eh?
Powell sees the light
FCC Chairman Michael Powell is showing signs of growth in his perspective about spectrum management, writes Kevin Werbach. In a recent recapitulation of his favorite speeches on on wireless policy delivered at the University of Colorado, Boulder, Powell is talking more about open spectrum and the irrationality of spectrum scarcity as the foundation for FCC policy. Werbach has commented extensively and with authority on this issue. If you want to see some important features of the evolving thinking about wireless, it's good reading.
Net is mainstream, broadband will get there
David Weinberger links to a Neilsen/NetRatings study of Net usage (see the chart), quoting:
US households making annual salaries of between $100,000 and $150,000 represent the fastest growing income group online, rising by 20% between September 2001 and September 2002. Following close behind, reports Nielsen, is the income group of those making between $150,000 and $999,999, increasing by 14% over the same period of time.
It is important to note, however, that Nielsen finds the income group with the largest unique audience online is actually that with annual household salaries between $50,000 and $74,999, with roughly 37.3 million people as of September 2002.
The reason usage is increasing faster in the high-income housing is that this is where broadband is most widely used. It changes a household's network usage radically--I found this in 1996 when I put a T1 into my home; suddenly my kids thought the computer was better than the TV.
The largest part of the Net, that is the largest addressable audience is a solidly middle-class group that increased its usage more slowly, but in the same pattern that the typical U.S. household followed early adopters onto the Internet a seven and eight years ago. The message: Broadband is inevitable.
Wondering what the top 25 sites last week, according to Neilsen/NetRatings were....
Research better pay
Citigroup snapped up Sanford C. Bernstein CEO Sallie Krawcheck to run its research group,which they will call "Smith Barney." Seems that Citigroup had the old name lying around and finally found a use. This is a real coup -- the head of research at Keefe, Bruyette & Woods agreed with me in The New York Times. He said: "This is a huge coup." I'd say it's real and huge, but I'd be redundant then, wouldn't I?
Making research pay is hard. I spent almost a year trying to figure out how to balance banking and research concerns with a startup bank. The economies of scale a Citigroup brings to the problem, because the bank and brokerage side of the business can drive trading volume fees to the research group.
Starting up, however, is very difficult. Rutberg & Co. is making a game effort to produce research, but it isn't a pure research firm at this point, because it needs to bring capital to deals through syndication in order to participate in profits.
The Citigroup research group, the new Smith Barney, Citigroup explains, will include its private client services group, which includes 12,500 personal financial advisors -- this assures trade volume, at least what there is there days, will be a significant source of revenue. Investment banking and underwriting will live on their own, but it will likely remain possible to link them on individual deals, by assuring IPO volume by allocating shares to Smith Barney clients. It's not clear if that will be encouraged or not, but Citigroup CEO Sandy Weill said: “Over the last several weeks, we have been working closely with our regulators and have been considering a number of ways to address the issues challenging the industry. Our new structure is consistent with the goal of assuring the impartiality of research, which we share with our regulators."
We'll see. Sanford Bernstein has a stellar reputation for impartiality, with Krawcheck an important part of that.
PVR: Setting the stage for change
The way we use media is changing, though not in the way that cable and telco folk predicted back in the mid-1990s, when video on demand was supposed to be the Way. Jenny Levine, The Shifted Librarian, points to a study about the viewing habits of personal video recorders (PVRs). The results speak for themselves: people will download and manage their content, want to control their programming, and real-time downloads aren't particularly important. Check it out.
Would I build a Helix client?
Email from Marc raises the question of whether it makes sense to use Real Networks Helix DNA open source code -- is it worth the time and trouble? The answer is "probably, if I could."
The RealOne client, which is the foundation of the Helix client, currently supports Windows Media and other formats in addition to Real files. Marc raises a good point about the spec of Helix provided by Real here, which implies that Real is the only format it currently supports at a binary level. That means, as I read it, that a developer will need to license Windows Media codecs separately.
Because the Helix client is, for the most part, open now, it is relatively straight forward to integrate codecs for new versions of Windows Media and competitive streaming formats into a client that, if I had any programming talent (which I don't), would be able to handle multiple subscription services accounts, process metadata and perform other functions to add to the experience of media. For instance, I'd like point and click to book mark and save points in a streaming file where I would want to start the stream the next time, instead of having to hand code the entry point in a URL, as David Weinberger does here. Then, I'd have a library of streams that are useful when I want them, like what I have with portable digital audio in the AudibleManager software I use to download and play audiobooks, radio programs and periodicals on my iPod. (Disclosure: I get a check every month from Audible for consulting services, so don't take my word for it -- try it yourself.)
I can also port the Helix player to new platforms under Real's open source license, so just as Macromedia has announced Flash now runs on the Palm OS, I could port a Helix player with features Real doesn't provide to a handheld or other platform. This all assumes I would pursue a streaming-centric approach to media delivery.
The question, however, is what's going to be on the player once I build it? Right now, if I buy a RealOne subscription, I get a limited range of programs for my monthly fee, and I don't necessarily get what I want, besides streaming baseball games. One can take only so many bikini contest programs or Big Brother 24/7 and I don't care about NASCAR. A Helix client with support for secure access to both RealOne and Windows Media premium content would give me a wider choice -- it will also give me more leverage as a consumer to demand the unbundling of programs, so that I can really pick and choose what I want. Imagine this capability on a PVR and the potential becomes really quite interesting -- would you rather have a client on the PVR that tells you just what is on cable that you can record, or would you want a client that also gave you the option of getting programming from Web sources, as well? I think the answers pretty simple: More choice is better.
Now, if only the notion of "basic" and "premium" programming shibboleths would pass like the kidney stone it is in guts of the online programming business and we got to pure a al carte selections combined with some bundled packages that address specific audiences, we might get to a business model that consumers will appreciate. It's a simple straightforward fact that we don't change television sets to watch different channels, so an open source media client that facilitated getting premium content from a number of sources without having to switch players is the right idea.
Where are the savings?
New Networks Institute, a research group, says, "There is a recession at hand and every company is having its problems. However, It is clear the Bells' have decided to give the public, the press, and regulators a distorted picture of their current health so that they can get more financial relief, and higher prices for local phone customers and competitors using the Bell networks." This is a good read.
This is a great piece of research -- while the Bells bemoan their fates, they are burning everyone, from investors to customers, to enrich themselves. Note, however that Qwest, which was a long distance carrier moving into regional Bell land, is not on the list. Qwest is just plain losing money, having sunk billions of dollars into overseas and domestic long distance capacity.
From the report:
The Bells profits are still beyond anything that could be considered fair and reasonable for companies that are monopolies.
Major Cuts in Expenses Should Be Leading To Lower Prices. Phone prices should be declining because the two major costs, construction and staff, are decreasing sharply.
Participatory journalism defined
J.D. Lasica points to a great discussion of participatory journalism at Hypergene MediaBlog. This underscores the need for an ethics debate about blogs, since the assumption is that participatory journalism "relies on either community host [the blogger] or community of participants [informed readers] to define and police ethics, values and credibility."
The definition is....
Participatory Journalism: When a citizen, or group of citizens, plays an active role in the process of collecting, reporting, analyzing and disseminating news and information. The intent of this participation is to provide independent, reliable, accurate, comprehensive and relevant information that a democracy requires.
Except for the medium of distribution and overhead required to collect and analyze data, this could be a description of journalism. Not to say that blogging (if that's what we'll even call it in the end) is journalism, but that the responsibility that comes from addressing an audience is similar. I very much like this comment from John Seely Brown of Xerox PARC in an essay on The Elements of Journalism:
"In an era when anyone can be a reporter or commentator on the Web, 'you move to a two-way journalism' John Seely Brown suggests. The journalist becomes a 'forum leader,' or a mediator rather than simply a teacher or lecturer. The audience becomes not consumers, but 'pro-sumers,' a hybrid of consumer and producer."
When I was a journalist (you can hear the grey hair talking) I always went to great pains to answer every call or letter from a reader -- still do today, so that may be why I don't see the distinction that many folks are hollering about. Talking with and debating my readers helped me understand them better, sharpened my understanding of the topic and, more importantly, kept my wit sharp. Some folks take this as rude, but I don't know of a notable wit that succeeded by keeping their thoughts to themself.
The irony of blogging is that it makes it harder to respond, because it is hard to find every reference to my comments; they used to come to my email inbox, but now they are spread all over. The referrer log doesn't cut it, because it relies on actual linking taking place, and many times comments are not linked.
If we want a dialog, we need an easier way to track the spread of ideas we engender/ignited/tossed out. Backlinking is effective, but requires discipline by bloggers or the trail quickly disappears. (See this excellent posting about backlinking by Denise Howell.) Google still lags behind the actual state of the Web, so it isn't up to the challenge, yet. A kind of Reverse RSS with a Google-driven context engine that ties a blogger's work to other items that might have a relation to it, from their day job to articles they wrote years before on mailing lists, is what I am thinking....
This would give us the tools as readers to better study the sources we rely on, how they think and what kind of conflicts they may either disclose or hide. That would be progress from old journalism (by saying this, I am not saying blogging is journalism), where you would seldom even have contact with the reporter who covered the news.
Mapping insecure wireless access
Howard Rheingold's Smart Mobs blog reports that the Worldwide Wardrive, an effort to create a statistical analysis of how many access points are currently deployed, where and how they are protected (or not) from unwanted access, is underway through November 2nd. The goal is not to break into networks, but to educate network owners about their security shortcomings and, generally, to get an idea about how many hot spots there are around the world. Should be interesting to watch.
The areas covered and who is doing research are listed here.
Interesting chart here, for example, that describes the total number of access points found to date, how many are WEP (encryption) enabled, how many were using their default SSID (network name) and distribution of most common network names chosen as an alternative to the default SSID -- one supposes the top choices were "wireless network" or "wireless."
Your software has an objection
LawMeme comments: "An unfortunate result of software licensing: when you sell your business, you may not have anything to sell."
An object lesson in the perils of software licensing agreements. Kmart is trying to sell the assets of its Bluelight.com unit, which happens to include some Microsoft software. Now, Micrsoft wants to block the resale of that software, claiming that it amounts to a form of piracy.
"The licenses that debtors (Kmart) have of Microsoft's products are licenses of copyrighted materials and, therefore, may not be assumed or assigned with Microsoft's consent," Microsoft said in its objection, filed last week.
Okay, so, let's say I buy a car. It includes, besides the design of the vehicle, a lot of electronics and computational capacity from... oh, let's just use Motorola, as an example. When I decide to sell the car five years later, does Motorola have the right to block that sale because it includes code it created? No. Why then, would Microsoft have a reasonable claim on a legal copy of software at the time it is sold as part of a larger asset sale?
Yahoo! scales vertical wall?
PaidContent.org reports on the launch of Yahoo!'s Industry Center pages, which aggregate a view of the ten leading companies in an industry, calling the service a precursor to "perhaps the holy grail for business sites." I respectfully disagree, in that these are building blocks, but not precursors to a premium service. By that, I mean that a single industry vertical service is inadequate, but you can create real value by organizing a comprehensive view of various markets (not just the top 10 companies), reaching further to create integrated access to deep information from a variety of sources -- many that either don't exist or are so expensive today that only specialists use them.
I wouldn't look for a "Medical Devices Industry" vertical that people subscribe to, but for a "Deep Research" service that you might enter through any number of industry vertical pages and pay for more information as you need it. For example, you may not need a year's subscription to a "Medical Devices Industry" vertical service when doing research on a company in which you are considering an investment, but you'll pay for the data when you need it if the site is organized to lead you to what you need before giving up in frustration.
I'm probably splitting hairs by differentiating between "precursor" and "building block," but the point is that there won't be a lot of little Yahoo! but a deeper broader Yahoo! built on these vertical services.
Bright guy having hot monkey sex on the radio
David Weinberger, smart guy with a lust for monkeys, is starting a hopefully regular gig on WBUR's Hear and Now. Listen here, anytime.
Making hard games easy makes money
From The End of Free comes this report about CBS Sportsline's fantasy league profits. Sportsline fantasy league revenues grew to $10 million in the first year, after they converted the free service to fee service. If you've ever played fantasy leagues without a computer, you know the the only reasonable way to be totally up to date is to give up your day job. By automating daily standings and building trading around email-like exchange, fantasy sports sites have built real revenues.
Yahoo! fantasy sports leagues are still free in their basic form -- but they get free players to upgrade by offering real-time statistics and improved control of league metrics for various fees. This is Jerry Michalski's Law of Convenience in action. By making a game that was hard to play convenient and fun, you create value.
Helix source open for business
CNET News.com reports RealNetworks reveals code in single Helix. The company releases source code to its streaming media technology in a bid to set a single standard for media players--and to take on Microsoft.
I think this is a good move. The point is not that servers are the center of the business, but that Real Networks can sell servers that deliver content to a wide variety of open-source clients, increasing potential carriage for its premium streaming services. The convenience of a one-stop shop for premium content is attractive consumers. At first, the online media world will seem like you have a dozen cable carriers all vying for your subscription, but eventually there will be consolidation and a few sources will offer a wide variety of mix-and-match choices. It won't be exactly like cable, where you get a basic package and then upgrade for HBO. Instead, ultimately, it will be a choice of individual shows, on your schedule, and you will be able to pay for them commercial free or take them for free or a smaller fee if you accept commercials.
I need a new phone company
Qwest, the up-and-comer telco that ate US Worst, my local carrier, is writing down the value of its fiber network. That means they're admitting they paid too much or, rather, that they should have recognized everyone else's building out meant they would be faced with vast over-capacity in the market.
Of a massive $40.8 billion write down, $10.8 billion represents the premium paid for to get the fiber into the ground. The rest reflects the premium paid by Qwest for US West. The company has about $700 million in cash and long-term debts in the $22 billion range. Looks like a job for Teddy Forstmann (but, according to Forbes, Forstmann doesn't want the job) or Carl Icahn. Can anyone say "blood's in the water!"
Foolish speculation
The idea that AOL and Time Warner would break-up after all the pain of the combination at the same time the Net bubble was deflating is simply foolish. Of course, some fools think it is a good idea. The combined company produced about $38 billion in revenues when it first merged and now generates about $40.3 billion. That's not a disaster, it's just a long process of adjustment. And, given the environment in which this merger has been concluded and implemented, the company's record isn't so bad.
All-in-one H(P)ome Entertainment Center
This PC has more ports than most sailors have put into to hide from storms or a catch quick case of the clap. Hewlett-Packard's new Media Center PCs sport:
* HP's six-in-one media card reader on the front panel, allowing users to transfer digital data from all common flash media formats.
* HP remote control
* DVD+R/+RW or CD-RW drives
* floppy drive
* PVR TV tuner card,
* Media Center keyboard
* infrared receiver
* TV-out
* one front-access and four rear-access USB 2.0 ports
* one front-access and one rear-access IEEE 1394 port
* IR blaster to control a set-top box
* 10/100 Base-T network interface
* optical mouse
* 512 MB DDR memory.
This is cool, if you like complication in your life, I suppose. But it doesn't conform to my idea of the all-in-none devices that will ultimately link separate media experiences on different appliances. Take it from someone with a home sound studio and multiple PCs, these Media Center systems are going to look like a tangle of brambles when you have them all hooked up.
A dark Christmas
And Hannakuh, too. And Kwanzaa -- there will be little gift giving this year. Consumer confidence fell to the lowest level since 1993, far more than expected. The Conference Board's Consumer Confidence Index dropped to 79.4 in October from 93.7 in September and consumer's feelings about their current situation and future expectations both dropped dramatically, as well.
Oy! There goes consumer spending and here comes the double-dip portion of the recession. The Fed is expected to cut rates next week, but how low can they go, given that rates are already so low there is not much leverage left.
Open Source: Path to Profit?
ZD Net reports that the Butler Group, a European IT research firm, says Linux will be the "major server operating system by 2009." All those server admins today who know how to administer Apache will be the lords of computing -- what'dya know, open source does pay off.
If you can't sell planes, sell bandwidth
osOpinion reports that Boeing's In-Flight Broadband is on Track. Aircraft manufacturing giant Boeing moved a step closer to the commercial launch of its in-flight broadband service with the Federal Aviation Administration's approval of the satellite-based system. Boeing now has received the nod for its Connexion service from both key U.S. regulatory agencies -- the FAA and the Federal Communications Commission.
Okay, so you're going to sell half as many planes in 2004 as in 2000? Only part of the solution to your revenue problems.
We knew that was coming
osOpinion reports Satellite Smashes Terabyte Data Barrier. A European satellite launched three months ago recently passed a mind-boggling data transmission milestone while monitoring Earth's environment from its 800-kilometer-high orbit. The European Space Agency's Envisat has exceeded the terabyte mark for data transferred over a satellite channel.
More data means more data-crunching capacity is needed. The report suggests almost all weather will be predictable -- even avalanches and other natural phenomenon -- but only if you are processing terabytes of data against models in real time, as this wildfire prediction system does. Then, you have disseminate the information quickly to the people who will be affected. Not quite a solution to today's unexpected weather.
Harvey, it's not good to appoint cronies
Want to restore investor confidence? Don't appoint cronies of the SEC chairman to oversee the corporate oversight board. The BBC's article is far more frank than the cuddly U.S. coverage. Basically, it points to the continuing insider trend on Wall Street, where Chairman Harvey Pitt, a former lobbyist for investment banks, continues to surround himself with friends and supporters. The markets, as dynamic environments, need a leader comfortable with differences of opinion, not Pitt.
William Webster, the former director of the Central Intelligence Agency, has a pretty good rep for reforming fouled institutions. The Washington Post wrote: "over a troubled institution, brought in a full measure of probity and steadiness and largely restored public and congressional confidence in a sensitive agency where the demands of government and individual liberty easily collide."
Child safety or privacy?
osOpinion on The False Promise of GPS Tracking Gadgets. This is a thoughtful, but perhaps too damning, article about the double-edged blade of privacy and political problems for child tracking devices. In principle, these things work, but in practice there are a lot of reasons to question whether people will adopt this technology and pay to use it. Most of the companies trying this market have relatively expensive technology and a monthly fee in the $10 range.
More cooks or coders?
The New York Times knows Where the Jobs Are. Only two fields dominate the top of the Labor Departments list of fastest-growing occupations. But a look at the areas that will add the greatest numbers of jobs gives a different view.
Keep in mind, these are only projections to the year 2010. On a percentage basis, IT leads, but retail and food preparation dominate in absolute numbers.
Jurisdictional options
Via Ernie-the-attorney, this IEEE Spectrum article by my old comrade in privacy battles, Dave Banisar of Privacy International. Very interesting how, by choosing a jurisdiction with restrictive press laws, entities have increased options to control or limit particular messages.
Powerful organizations and individuals can also use jurisdiction to force their detractors to defend themselves in faraway courts. The threat of a lawsuit can have a chilling effect even if a case is weak. For example, after three criminal libel cases in Mexico were dismissed by the courts there, Banco Nacional de México (Banamex) went to New York courts. It sued two Mexican reporters for articles revealing in a New York weekly newspaper the role of the bank's owner in drug trafficking. The New York court also dismissed the case under U.S. constitutional protections of free speech. But how eager will the next reporters be to risk having to grab a passport, hire a foreign attorney, and defend themselves in a court 4000 km from home?
In other words, along with all the good that comes of increasing person-to-person communications, the Net's reach can have adverse impacts on free expression.
Consumers don't agree
Regarding the conclusion by the Register of Copyrights (see below), consumers -- you know, the people with all the money Hollywood and the music industry want to reap -- don't want crippled digital content. From PCWorld.com (via Slashdot)
According to a survey recently released by GartnerG2, the research service of Gartner/Dataquest, 77 percent of respondents thought they should be able to copy CDs for personal use in another device. Also, 60 percent said they should be able to give copies of CDs to members of their families.
The results fly in the face of efforts by the music industry to gain tighter control over their content as they face the perilous, infinite possibilities for copying in the digital age. But while the ghost of such free file-sharing services as Napster still haunt the halls of Hollywood, Gartner discovered that consumers do not think copy-protected CDs are the answer.
Biotech less-than-cash crash
Corante points to a San Francisco Business Times story about the fact that 27% of public biotechs are valued at less than cash on hand. This reflects the growing concern that the discovery and regulatory process are dauntingly long and that with a new level of insight into human health having erupted only a couple years back, investors are simply not convinced that many of these companies can make it. Part of the problem is that biotechs have specialized so much that you have teams of extremely expensive folks working on one project, because It is analogous to the problem of one-product companies in many other industries, which, if they don't get a hit with their first launch, fail immediately.
I'm moderating a panel on this topic in San Francisco on the 19th of November. To date, the panel includes executives from: Amgen, Burrill & Co. Venture Capital/Merchant Bank, Manatt Phelps, Merrill Lynch, The Petkevich Group, Innovation World and Stanford University. It's invitation only, so let me know if you'd like to attend and I'll pass your name along to the folks hosting the event.
Lotsa wireless
Email from In-Stat this morning predicts that Wi-Fi node shipments will be 33 million in 2006, compared to the 6 million nodes shipped in 2002.
This notable comment on emerging competition for today's wireless standards from Gemma Paulo, a senior analyst at In-Stat: "The popularity of Wi-Fi in the home has generated increased interest in extending this wireless home network to entertainment and home automation clusters, opening the door to Wireless Personal Area Network (WPAN) technologies such as Ultra-wideband (UWB) and Zigbee."
The way I read this, Paulo is saying that these alternative standards will hive off parts of the market, when I think they'll merely complement 802.11 networks, which will serve a hot spot. UWB makes a lot of sense for wide-area networking and Zigbee is a relatively low data rate communications protocol for systems automation. In essence, the wireless networking market is branching into niche application environments that call for different throughput and power requirements. Rather than competing, these new standards are filling design and application requirements where Wi-Fi makes little or no sense.
Based on recent research I've been doing, I estimate there are approximately 10.2 million 802.11 b devices installed now, compared to a few hundred thousand in the middle of 2000 -- not bad growth if you ask me.
Think Stamp Act
Doc points to this LA Times piece, She Holds the Cards in the Copyright Fight. The story about Marybeth Peters, the Register of Copyrights at the Library of Congress seems to be unaware of the purpose of that institution, the repository of knowledge for the benefit of the public:
Peters believes that many "fair-use" practices consumers take for granted, such as taping a TV program or copying a magazine article, need to be reevaluated in the digital age because the economic harm to copyright owners is far greater. For instance, she agrees with court rulings that Napster-style song swapping over the Internet is illegal.
Peters has been United States Register of Copyright since August 7, 1994, her biography tells us. She has a law degree and has consulted to the World Intellectual Property Organization on copyright law (you can read Peter's comments to Congress about WIPO treaties and the U.S. effort to conform to WIPO standards). You can watch a nifty video at the Copyright Office web site about how the organization is promoting the goals of the framers of the Constitution, that:
The Congress shall have Power . . . To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries . . .
Article I, Section 8, U.S. Constitution
I'm an author and I do like having my copyright, which I can choose to use however I want, including making my work available free over the Net. But I am also a reader and a viewer who, having paid for copies of works, want to be free to sell them again -- not to photocopy and sell them -- but to sell the copy I purchased when I am done. Or just loan it to a friend.
Since the whole question is so darned ambiguous Peters has, according to the LA Times, "declared that consumers — who are free to sell books and CDs that they have legally acquired — should have no such rights when it comes to e-books or digital music."
I'd urge Ms. Peters to take a walk down into the stacks at the Library of Congress and read up on the American Revolution, starting with the Stamp Act and the public response to it.
You want ease of use with the information overload?
Tools coming for connecting information by Dan Gillmor. We need more sophisticated methods for gathering, massaging and making connections among all the pieces of information that enter our lives each day -- everything from e-mail to Web pages to phone numbers and more. So when I see useful tools, I pay attention. Dan's comments stand on their own -- the convenience we're always promised remain just over an ever-receding horizon. Thanks Tomalak's Realm for the link.
All in none, not one
Joi Ito posts some links about digital media adapters and writes: "I guess the key to the Intel thing will be low cost and open standards. If they can help orchestrate a bunch of devices without trying to make their device do everything, it might work. I still don't like the idea of "fat" home servers. I am hoping that, at least in my house, I can use everything I already have. My PC hard disk, my audio amp and speakers, my plasma display and my digital satellite dish... Having said that, there may be a market for small all-in-one's..."
The evolution of the PC provides a good historical example of where we're going. First, there were separate systems operating in isolation within a computer that were linked by bus architectures. Chip architecture has progressed from a processor that needed a wide range of peripheral systems on the motherboard and cards plugged into the card bus to facilitate additional functionality. Those outboard systems have been rolled into the CPU over the years, to the point where a chip even is aware of other chips through built-in networking capabilities. These days, Intel and National Semiconductor make entire systems on a chip that include cache, imaging and other capabilities, but only some of that comprehensive operating capacity is called on by the various systems and UIs that are wrapped around. It's the designer's choice, basically, what features of a system their device will use.
It's also plenty cheap to buy silicon that can be embedded in almost any device. Today's stereo is a largely digital device with some analog functionality (I should say, many people's are -- my circa-1985 Vector Research amp is an analog device). So, the digital media adapater, which plugs into PCs, TVs and stereos to connect them over digital wired or wireless networks are a transitional device that will be replaced by "smart" devices that, even if they provide only a single form of functionality, such as playing audio, will still be aware of the larger networked environment and be able to monitor it for new content and even functionality in the form of downloadable logic.
So, the device won't become "one," intelligence will become "many" and it will be unnecessary, even unnatural, to look to build a variety of features into a device that needn't have those features. For example, people often talk about screen geometries as the defining feature of the UI, when it should be a simple matter of routing video content or UI control features to the nearest useful screen. That way, a handheld can store, carry and playback video or interactive content without the need for a screen. In other words, there is no need for an "all" device.
Surprising killers
Kevin Werbach writes convincingly about the misguided assumptions that the broadband network will work a particular way to deliver a certain range of applications when it is finally realized. He writes (but the whole posting is worth the read):
Real killer apps tend to surprise people. No one in the early 1990s thought that interoperable email would be the driver of the Internet boom. And who would have predicted that the most successful of the countless Internet startups was the one that made it easy for people to swap Pez dispensers? eBay looks obvious only in hindsight.
Broadband isn't an application; it's a platform. No one magic bullet will suddently convince everyone to adopt it. That's also the fallacy of legislation such as the Tauzin-Dingell bill that thinks one regulatory change, whether deregulating the incumbent phone companies or regulating them more, will transform the market overnight. We can do things that will speed up or slow down broadband. The difference matters to investors and to companies seeking to capitalize on the broadband opportunity. It's dangerous, though to set up a straw-man broadband nirvana and fight an all-or-nothing battle about it.
I wrote an essay, The Summer of My Content (n., adj. and v.t.), Part 2, that focuses on the challenge of seeing this Net medium (whether it is narrowband or broadband) as destined for one conclusion vs. many. An excerpt:
Arie de Geus distinguishes between two types of companies in his study of long-lived firms, The Living Company. One set of companies are like drops of water collected in a puddle, a stable body that evaporates rapidly when conditions change; these are economic companies, which include most businesses in the physical economy. The other type of company de Geus equates with a river, a constantly changing collection of drops that keeps its people and values in motion. "A river company is open to the outside world: There is tolerance for a high entry of new individuals and ideas. It is, in fact, expected that new concepts and knowledge will flow though the company's stream of activity on an everyday basis." River companies survive, because they keep flowing.
Does the entrepreneur who founded the Web business you are considering investing live in a puddle or flow like a river? Is her personality content with the puddle or will it pursue new views, new ideas and new opportunities as the content of a daily existence that involves all aspects of human life? I'm not advocating taking a poll of entrepreneurs to see which ones take the time to go home to dine and spend the evening with their kids. That would be missing the point, because the rules provided by anyone - me, a business magazine, another investor - will divert you from a true understanding of the true content of a company.
If you take a look at the basic myth of Western civilization, the millennium story, which has come down from Zoroaster, the Jewish tradition, Christianity, Islam and even our latter-day New Agers, you see that the idea of transformation is at the center of every great civilization. At some point, the world will end and be invented anew.
I believe that this same mythical substructure is at the heart of the entrepreneurial phenomenon. People want to change their world for the better. They start businesses to do it, because economic ties are the most efficacious conduits to the rest of the world, no matter where your little corner of the globe is located. This has been true since the Middle Ages, when fairs were established around Europe and the Far East; these markets became the principle meeting place for cultures that had once been isolated from each another.
Keep an eye
Jeremy Allaire writes that the Macromedia DevCon this week will be blogged in a variety of media, including text, audio, video and synchronous conversation with Jeremy, who is staying home for the birth of a new baby. Should be very interesting to see how this works.
Here is where to watch/listen/read along.
Those aren't the greatest earnings
Huge profit at Verizon, but no growth seen. Seattle Post Intelligencer: Verizon Communications Inc. said yesterday it earned $4.4 billion in the third quarter, largely from selling off assets and investments, and boasted that long-distance and wireless phone services were helping it overcome falling ...
Verizon is profitable, but the "huge" in the headline comes mostly from the sale of assets and the rest, $0.77 per share, are flat from the previous year and projected to be flat or down one percent in coming quarters. Of all the regional telcos, SBC still looks like the best buy at a very reasonable P/E of 13 and a return on equity of 20.52%
While Verizon and SBC's operating profits are almost identical at 18.8 percent and 20.6 percent, respectively, SBC does a much better job extracting profit because it has a much lower debt load. Verizon's profit margin is about 2 percent, while SBC delivers 15 percent of revenues in profit.
Hilarious
As long as don't find out this is Microsoft's doing (anything seems possible these days, eh?), this is a very funny parody:
Thanks, Howard, for the link.
1994 all over, again, but without the stupid money
Scott Loftesness has a comment on two items about "light at the end of the tunnel" from Mark Anderson of Strategic News Service and the dreary levels of VC spending in the last quarter by VentureOne.
Personally, I don't buy any of the arguments Anderson puts forward. He says these areas are showing signs of recovery (with my comments on each in italics:
1.) PC operating system sales
If hardware sales were significantly up, rather than slightly up from the previous and worst year in history, this would be a good sign. OS sales improvements actually lower the likelihood of hardware sales improvements, because a "better" OS milks more life out of older hardware. Everyone I know is talking about the improved performance they get from old Macs and PCs with OS X Jaguar and Windows XP, respectively.
2.) Ad sales
Ad sales are flat to down in most publications and up slightly at a few newspapers, which means consumer companies are addressing consumer markets, but that the narrower markets characterized by trade publications and special-interest publications, where early signs of recovery would appear for the PC and telecom market would first appear. No company, except Microsoft, appears willing to spend more to win market share right now.
3.) Government Spending is way up
What is Anderson smoking? Tax revenues are way, way off at the federal, state and local level. Increased defense spending, yes, but on battlefield technology, not PCs. Basically, the biggest single customer for IT equipment, the U.S. government, is beginning to cut back in the face of rising deficits.
4.) Asia launches the broadband revolution
Yes, things are hot over there. But the demand for portable and handheld devices, which is where the majority of Asian broadband use seems to be focused, is not addressed by the majority of the U.S. IT industry. This is why Dell, among others, is moving into printers and handhelds with wireless capabilities.
5.) U.S. interest rates remain low, and headed lower, while housing starts and car sales remain robust.
Huh? In a deflationary environment, housing is not an indicator of demand for anything except the most conservative investment a household can make in the face of miniscule or negative returns elsewhere. Car sales are down sequentially and both Ford and GM have been lowering guidance based on the fact that 0% financing will eventually create a saturated market for cars -- a lot like the saturated market for PCs and servers after the pre-Y2K upgrade cycle and PC prices started to fall precipitously going into 2000.
Anderson's indicators don't point up at all.
The hestitancy among investors will mean that poorly conceived companies, such as your basic one-component or one-product wonder, will not be funded. Yet there is a lot of activity with entrepreneurs -- I see and hear it every day. People are starting companies and, this time, thinking about the long haul. When the economy recovers, it will be stronger than ever, because all the dumb money looking for a quick exit will not have driven industries to self-destruction.
Mean markets
Slate asks whether the market rallied today because the most liberal senator in the United States, Paul Wellstone, was killed in a plane crash. Expecting the Senate to go Republican, the writer, Daniel Gross (see below for his CEO credentials piece), the market apparently shot up. Gross makes a convincing case:
For proof that it was Wellstone's death and not any other news that moved the market, just pull up an intra-day chart on the Dow. You'll see that it was meandering around lazily for much of the day, down 30 in the morning, up 40 in the afternoon. At 1:30 it was basically flat.
All the news that had the potential to move the market broke in the morning. Some was negative: Cigna had an awful quarter, and orders for durable goods fell more than expected. But some was positive: Consumer sentiment improved slightly, and housing starts were strong. The usual push-me-pull-you. Stocks in Europe had closed down.
Friday afternoons can be volatile, especially if it's a day on which options expire. This wasn't one of them. By 1:30, pretty much all the day's market-moving news had been incorporated into stock prices.
After 1, bulletins started to cross the wires describing a small plane crash, without identifying its occupants. At 1:31 came the first word that Wellstone was likely on board.
Whether you agreed or disagreed with Wellstone's opinions, he was an example of a man who always voted his principles, who stood alone rather than cave into political convenience. His loss is a real tragedy for anyone hoping for a more genuine politics.
Why do CEOs pump their resumes?
Slate's Daniel Gross wonders why so many CEO's lie about their education. "It's mystifying why a mature, successful executive would lie about a degree he may or may not have obtained 20 or 30 years ago. Sure, an MBA from Stanford or Harvard might gain its holder entrée into a prestigious firm. But at the top of the profession, experience and track records tend to matter far more than credentials. No 50-year-old executive gets hired for a top job simply because he has the right degree."
The reason is simple: They started out lying about their qualifications then couldn't stop. I tell my nine-year-old all the time that one bad decision closes off many of the good options he has and opens a plethora of bad choices. I blame the CEOs parents and society, too!
It's the business plan, stupid
Seattle Post-Intelligencer reporter John Cook has a good piece on the proposed take-over and privatization of OnVia. The current CEO is saying he won't sell out to the founder at a premium to current value, because the company will be worth more at break-even. Alas, his company is valued at a lot less than cash and he laments: "I sit here sometimes and say I don't understand how a stock can be valued at $20 million or less with $40 million in the bank . . ."
The story concludes with an unsatisfactory comment from an investment banker who says "the valuation is a little out of whack." In fact, a lot of companies are trading at less than cash -- some are good deals and others, which are clearly only going to burn cash until they fail, are not worth the paper the stock certificates are printed on. OnVia hasn't proved its case or even that it can break even.
