I, Cringely. The Pulpit
Robert X. Cringely brings you the weekly audio version of his blog, I, Cringely.
Tue, 16 Dec 2008 10:01:01 -0500
This is my 603rd and last column for pbs.org. If you want to continue reading my work, please visit http://www.cringely.com, which is also in this week's links. Thanks for your support.
Everybody in my line of work writes prediction columns for the coming year, but I wonder how many we will see this time around? The world is unsettled. It's not just this damned financial nightmare we have to deal with but also a sense of between-ness, like something has just ended yet still lingers slightly though it is obvious that something new is about to arrive. But will it be a good something new? That's hard to tell. So for this reason I think the prognosticators will mainly keep their heads down this year. Except, of course, for me. I'm too stupid to shut up.
So let's get on with this experiment in humiliation. You know the drill. We begin with a look at last year's predictions to see how I did then jump into my predictions for 2009. If you care to follow along you'll find last year's predictions column in this week's links. For a real laugh you can find my predictions from many previous years in the archive.
I wrote a year ago that we'd see the beginning of a shift away from PC-centrism with other platforms beginning to supercede the venerable PC. This is a slow process as I said it would be but generally I think I was correct. Sales growth for PCs slowed in general while growth for smartphones and netbooks increased. I never said PC sales were going in the toilet but it seems clear that the action these days is elsewhere, so I'm going to claim this one.
I said the Digital TV conversion would be a nightmare, though the greatest pain would be felt in 2009 when the analog transmitters are actually turned off. I think this is correct. Poll your friends and you'll find most are in denial. While everyone has seen a DTV commercial, there are millions of people who still don't know what's happening. Free converter boxes are sold out, which ought to be good, but expected DTV sales have not met forecasts, so I say there are 10-15 million people who are going to wake up mad as hell in February. So I got this one right and claim it for 2009, too. While it may seem quiet now, February and March are going to be ugly.
I wrote that Cisco would acquire Macrovision, which didn't happen. Two right and one wrong. I still think Macrovision has to find a landing place somewhere or the company is doomed.
I predicted that venture capitalists would sour on start-ups with revenue models based solely on advertising, citing Facebook as an example. This one is hard to call because the general tightening in the economy has led VCs to push all their companies toward multiple revenue models and much tighter books. Still, I probably got this one wrong, though I'd say it is still coming.
I predicted that Google would bid and win the 700 MHz spectrum auction. They bid, true, and made a good effort at shaping the deals that resulted, but Google didn't win so this was wrong. I am not worthy.
I predicted that IBM would have bad earnings, would try to sell Global Services, and failing that might fund the sale itself. Wrong, wrong and wrong. IBM's earnings were saved by the weak dollar or I would have been right. They couldn't sell Global Services because no company was stupid enough to buy. But they didn't have to finance anything because the credit crunch came and it was clearly not going to happen. I'm the loser here. If you are keeping score it is pretty dismal, down to two right and four wrong.
I said Microsoft would indefinitely extend the life of Windows XP. I might well claim this one but -- like Wall Street -- I may as well take all my losses while I can. Yes, you can still get XP, but if you are an individual it requires downgrading from Vista so you have to buy Vista anyway. In the long run this strategy really hurts Microsoft because the made-for-Vista computers that are being downgraded to XP don't work as well and Microsoft's reputation suffers even further, if that's possible. Redmond sees this as a clever success on their part, too, which says a lot about the company.
Of course I had to say that Steve Ballmer was going to retire, too, though now I see him not following Gates for another 2-3 years. In the long run, though, he's toast, simply because things are going to get uglier and uglier for Microsoft. Two right and six wrong. Maybe it IS time for me to retire.
I said Apple would embrace multi-touch pointing in its computers. They did. Whew!
I said a 3G iPhone was coming. Yes! And an Apple subnotebook/tablet. No! This latter device remains in the wings, however. Four right and seven wrong.
Apple didn't license ANYTHING, much less its embedded OS X. Silly me.
Let's get this over with quickly. Apple DIDN'T license the Windows API, DIDN'T dump Akamai for Google (ironically Google became an Akamai customer), and Season 2 of NerdTV never appeared.
Final score four right and 11 wrong -- my worst outcome EVER and the first time I dropped below 50 percent. Obviously I have to start making vaguer predictions or move into pizza delivery -- probably the latter.
So, having lost all credibility, let's just leap into my predictions for 2009. Who knows, I might see a miracle and actually get one or two right.
These are in no particular order, by the way.
The economy and its many problems will clearly dominate 2009. We're in a recession that will last at least through the middle of the year and maybe longer. They way we'll buy our way out of it will affect the nation for decades to come. It is NOT a happy time.
1) The good news is that most recessions mean new IT platforms. The minicomputer hit its stride in the early '70s recession, the PC in the early '80s recession, client-server computing in the early '90s recession (notice these things happen every 10 years or so?), the Internet in the 2001 recession, and now we're about to see mobile take over in an even bigger way. Desktops will survive but most of the growth will be in mobile devices.
2) This one isn't what you'd expect. In 2009 there will be several HUGE cyber thefts as well as companies admitting huge cyber thefts that happened in previous years but were kept secret. The former will happen because the security infrastructure on the Internet is more fragile than ever while the latter will happen because companies -- especially banks -- will want to get every write-off they can while the news is so generally bleak. Who will care if they report losing $1+ billion or so to some guys from Russia or Nigeria three years past?
3) IT layoffs are going to happen, putting tens of thousands of technical people on the streets, yet STILL the big employers will be pushing for unlimited H1B visas to bring in technical people from South Asia. This mean-spirited and blatant age discrimination might be successful, too, unless the Obama administration does the right thing.
4) Intel will continue to dominate while AMD slowly suffers, but I don't see AMD being acquired in 2009.
5) Death of daily newspapers will accelerate and many papers will fail outright. When the Detroit Free Press announces it is ending home delivery on most days as they are expected to, well that's it. I thought this process would take longer but it is likely that half the daily newspapers in America will be gone in three years.
6) The next Yahoo CEO will dismember the company and sell it piecemeal, made possible by the fact that only the Internet companies have much real cash. The Yahoo name will survive but the company will not.
7) Microsoft will peak in 2009. By this I don't mean the company's shares will reach a peak value by any means, but its aggregate peak of wealth and influence will be reached and everything will be slowly downhill from here, accelerated primarily by the efforts of Apple. Microsoft hasn't been able to find a franchise to replace the PC. Games are big but not profitable enough. Mobile is too crowded. Content they simply aren't good at. That leaves Enterprise and Microsoft can dominate that only as a smaller company, so smaller it will become.
8) The catalyst for Microsoft's decline will be when the world's most influential IT analyst, Walt Mossberg of the Wall Street Journal, writes sometime this spring that he can no longer see any reason to own Microsoft products. He could have written that story a year ago but it is taking Mossberg time to get up his nerve, but he eventually will.
9) Not only will Microsoft peak, Google will, too! Oh Google will continue to grow for another decade or more, but as a technology leader Android is probably the peak. The company is too fat and happy to be a technical leader for much longer. It's still a good investment, though.
10) If Microsoft and Google are down then what's up? Apple! This could play out a number of ways. Apple will certainly continue to grow its Macintosh market share. iPod growth may be softening but the iPhone will make up for that. Still, faced with Android I think Apple will drive its content business through an acquisition in the cheap-or-free networking space (remember it was Apple that came up with WiFi in the first place) to stake some claim on the last mile. But even more importantly, at some time next year Apple will take the gloves off and go head-to-head against Microsoft Office, driving margins down for Redmond and generally making trouble.
11) My last prediction for 2009 has to do with venture capital. While investments in technology will continue, the really smart VCs will realize there is a much better and more certain way to make a ton of money in the short term: start a bank. Look for the rebirth of community banks, in this case backed by VCs. Work with me on this one. There is no credit available because the big banks won't lend. But it takes only about $20 million to start a very fine little bank that WILL loan money because the cash can be acquired from the Fed for almost nothing and lent at high rates to technology companies that can pay it back. By creating banks the technology industry will become self-funding. And when the big banks finally stop being frozen with fear and want to take back the lending business, they'll have to buy all those little banks for at least a 10X multiple. It's not like starting Cisco or Dell, but a 10-bagger business model that can be replicated over and over again while actually helping the nation can't fail.
That last one was my gift to you, America and the world. Thanks for 11 good years.
Sun, 07 Dec 2008 09:05:13 -0500
Looking for improved business models for the personal computer business, Apple CEO Steve Jobs often used to cite automobile makers, though never American car companies. The examples were invariably German. Whether it was the design aesthetic of his Mercedes sedan or Porsche's success at selling high-margin cars as entertainment devices, Jobs could always point to farfegnugen as a way to sell a good car for a great price. So since he thinks about these things anyway, and because the U.S. automobile industry is on the skids and begging for help this week, I find myself wondering what would happen if Steve Jobs were put in charge of any of the Big Three car companies?
It wouldn't be boring, that's for sure, and I'm fairly certain Steve could do a better job than the Detroit executives currently in charge.
When Steve Jobs returned to Apple in 1997, the computer company was in worse shape than some of these car companies. Apple's share price was in the toilet, it had poorly conceived products it couldn't sell, the company was losing money, market share was dismal, and CEOs from John Sculley on had tried without success to find ANY company that would buy Apple. Steve himself had such low expectations for Apple under Gil Amelio that he sold all his new Apple shares shortly after Apple bought his NeXT Computer.
What a difference a decade makes. Today Apple and Jobs are at the top of their game, taking market share from other computer companies while at the same time establishing game-changing new product concepts like the iPod and iPhone. Apple is America's largest music seller (who could have seen that one coming back in '97? Nobody), has no debt, and $22+ billion in the bank. Even at its currently depressed stock price, Apple is worth more than any of the car companies and for good reason: Apple has a future.
What did Jobs do to make Apple such a business success and how would he translate these techniques to a car company? It's not really that hard to imagine.
Back in 1997 Apple had a huge list of products it made or sold, many of them not for a profit. Here is a partial list of Apple products from 1997 courtesy of my friend Orrin, who brought this idea to my attention:
Workgroup and network servers LaserWriter laser printers
StyleWriter inkjet printers
External disk drives
Lots of software
And don't forget the Mac clones. Jobs killed the clones, dropped the Newton, and streamlined the Mac product line into what today are four ranges of computers -- personal and professional, desktop and portable. Yes, there are the Mac Mini and the xServe, I know, but nearly all Apple computer sales lie with the MacBooks, MacBook Pros, iMacs and Mac Pros.
Apple quit the printer business entirely and, over time, got out of the business of manufacturing its own computers at all.
The decisions Steve Jobs made in 1997 were that Apple's core competence was in making computers and its future then lay with graphics and desktop publishing professionals who loved the products. While these conclusions may seem obvious, they weren't reflected in the Apple product line at the time. Steve knew the value he had in his product development team, too, which was a clear difference between he and Sculley, Spindler, and Amelio, all of whom had come in varying degrees under the sway of the diabolical product development chief Jean-Louis Gassee.
One advantage of my having written about this industry since dinosaurs roamed the earth is that there are columns about Apple in my archive dating from 1997 that give a sense of what the company, its products and lack of leadership were like at the time. Read them: they are in this week's links. They give a sobering look at how bad things were and show an eery resemblance to the positions of the automakers today.
Look at the American car companies with their many brands that often compete with each other within a single company. It's bad enough competing with Chrysler and GM, but why should Ford be competing with itself? There has been some streamlining over the years (goodbye Plymouth and Oldsmobile) but not enough. There are simply too many models chasing too few buyers. So long Mercury.
The first lesson Jobs learned was that he couldn't build a successful company selling products at a loss. While we can argue that Apple prices are higher than they might be, nobody can argue with Apple's quality or its success at selling those products. So the first thing Jobs would do as head of a U.S. car company would be to eliminate the lines that are showing -- and have long shown -- little or no profit, which today generally means the biggest and the smallest cars. Goodbye Hummer.
Honda is an archetype for this sort of marketing, having a limited line of cars with nothing down at the bottom fighting it out with Kia and Hyundai. A Honda Fit may be inexpensive but it isn't cheap.
There is a lot of conventional wisdom at work in the car business and some of it is completely outmoded. Why, for example, is it so important to have a complete line of cars for every customer age and financial circumstance? That made good sense at a time when America was being introduced to car ownership and a brand could grow with its customers as their financial circumstances and taste in cars changed over time. But the car market is beyond mature today and doing things primarily because it made sense to do so in the era of Henry Ford and Alfred Sloan, well that makes no sense at all.
The business press loves to differentiate between two types of auto executives -- the financial types typified by GM CEO Rick Wagoner and the "car guys" personified by GM vice chairman Bob Lutz (who also did stints at Chrysler and Ford). When the companies periodically lose their way, it's attributed to too much finance and not enough car. But Steve Jobs is something in-between. No large American company in any industry has tighter financial controls than Apple, yet the strength of Apple is supposed to be its design. All this proves is that the finance-versus-car-guy scenario loved by Fortune and Forbes is simply bogus.
It's not that there aren't smart executives at these car companies, but they are shackled with several bad ideas and exist in an unrealistic corporate environment.
Their main delusion is the myth of the complete car line. Apple in 1997 had a tremendous advantage in being clearly a minority player. There was no hope that the Mac OS would topple Windows, but that made chipping away at Windows a tactical effort where significant advances could be made by Apple just concentrating on niche markets. The U.S. automobile makers can't (or won't) do that because again they think they have to make every type of car for every type of buyer. Yet each company IS a minority player; they just pretend that this condition is temporary, but it isn't.
This corporate delusion of majority status has meant that it simply wasn't possible for any of the car companies to take truly radical actions. They can't take big risks on new technology because the downside is perceived as being too big. Yet the effect of this over time has been to virtually guarantee that downside as the companies die from inaction or, more properly, UNDER action.
That's where Steve Jobs' second strength comes into play -- identifying important new technologies. He'd look at the car market and conclude a number of things: 1) it's a no-brainer to embrace dramatic design (no boring cars); 2) performance sells, and; 3) safety and fuel economy are co-equal secondary goals. So Steve's goal for his car company would be to make a limited line of vehicles that were dramatically styled with visibly different technologies from the competitors and were uniformly 20+ percent safer and 20+ percent more fuel-efficient.
That's not so hard to do, either, as I showed last week with my DA-2A example. Or look at XP Vehicles, the company that will sell you an inflatable car that arrives at your house in a box. But embracing these ideas requires the companies do something else that Jobs came to embrace with Apple's products - stop building most of their own cars.
There are two aspects to this possible outsourcing issue. First is the whole concept of car companies as manufacturing their own products. There is plenty of outsourcing of car components. Most companies don't make their own brakes, for example. Yamaha makes whole engines for Ford. Entire model lines are bought and rebadged from one maker to another. But nobody does it for everything, yet that's what Steve Jobs would do.
All the U.S. car companies are closing plants, for example, and all are doing so because of overcapacity. But what would happen if just one of those companies -- say Chrysler -- decided that two years from now it would no longer actually assemble ANY of its own vehicles? Instead they'd put out an RFQ to every company in the world for 300,000 Chrysler Town & Country minivans as an example. Now THAT would be a dramatic move.
And a good one, frankly, because with a single pen stroke most of the overcapacity would be removed from the U.S. car market. Chrysler would have to shut down all those plants and lay off all those people, true, but doing it all the way all at once would change the nature of the company's labor agreements such that there wouldn't be a whimper. When you are eliminating 8 percent of capacity the tussle is over WHICH 8 percent. When you are eliminating ALL capacity, there is no tussle.
So Chrysler reaches out to contract manufacturers in this scenario and you know those manufacturers would fight for the work and probably give Chrysler a heck of a deal. For current models, for example, Chrysler could probably sell the tooling and maybe even the entire assembly plant for a lot more than they'd get from the real estate alone. But that particular advantage, I'd say, would be unique to the first big player to throw in the production towel.
In this scenario, Chrysler becomes a design, marketing, sales, and service organization. What's wrong with that? They can change products more often and more completely because of their dramatically lower investment in production capital. They can pit their various suppliers against each other more effectively than could a surviving car manufacturer. It's what Steve would do.
And Steve would also embrace one dramatic new technology, whether it is electric, hydrogen, natural gas, whatever, but he'd do it in a very Steveian fashion, which is to say exactly the way he did the iPod and iTunes. That is, he'd sell you the car and then sell you whatever is required to fill up the car. This has always been a barrier for the car companies because they couldn't imagine themselves in the business of running electric/hydrogen/LPG stations, while Steve would imagine his company MAKING A PROFIT running just those stations.
Steve would take an existing operation that already had an ideal geographic distribution like McDonald's restaurants. He buy McDonald's or seduce the company into a deal. Then he'd embrace a propulsion technology like advanced electric capacitors -- batteries that could be recharged in less than a minute -- and put charging stations on the drive-through lanes. By the time the electric models were ready for sale he'd have 12,000 charging stations in place to serve them. Would you like fries with that charge?
Is it too late for the Big Three? Ford is the strongest company from what I've seen, but I believe there may be some creative juices in GM, too. Their prototype car the Volt takes hybrid cars to the next level, I just wish they were selling them now because Toyota or Honda will probably beat them to the market with something similar. Another thing Apple does well is product introductions. They very rarely show their hand before they are ready to send you home with one. GM announced the Volt in January of 2007 yet it is still slated for sale by 2011.
Wed, 26 Nov 2008 21:37:06 -0500
My first car was an Oldsmobile, a red 1966 convertible I wish I still owned today. It was big and heavy yet somehow managed to average 18 miles per gallon in an era when gasoline cost 35 cents. Detroit and the U.S. automakers ruled the world when that car was built, yet now the companies say they are on the skids, bleeding money and headed for bankruptcy. What happened? And what can we do -- if anything -- to save an industry that for a century defined our nation as well as our youth? I have some ideas.
Whatever the mechanism of their demise, the car companies did it to themselves. They love to blame labor agreements, pension plans, and health plans for their precarious financial situation, yet didn't the companies negotiate and sign those deals in good faith? Surely the down-the-road financial burdens were calculable at the time. Is it that we're living longer than expected, rather than expiring early like Pinto gas tanks? Maybe that's part of it, but to blame the unions for good negotiating is worse than forgiving the companies for bad. And what does it matter? The real issue at hand -- and the only one that really matters -- isn't who to blame or even whether or not to save these specific companies, but how to get me a really sweet ride. That's because the only way the U.S. auto industry is going to survive in any form is by making cars so cool that we'll stand in line to buy them even in a global financial crisis.
It's the cars, stupid.
My hobby is building small airplanes and one of my favorites is a Davis DA-2A, winner of the Outstanding New Design contest in 1966, the same year my Oldsmobile (and my current Thunderbird convertible) was built. That little Davis can teach us a lot about cars.
I didn't build my DA-2A, but I am rebuilding it right now and know it intimately. My Davis is an all-aluminum two-seater with an 85-horsepower engine. The engine was built in 1946, the plane in 1982, and the whole thing cost under $4,000 at the time, though today I have more than that invested in the instrument panel alone. The plane weighs 625 lbs. empty, 1125 lbs. loaded, has a top speed of 140 miles per hour and can travel about 600 miles on its 24-gallon fuel tank.
Why can't I buy a car like that?
Imagine if we took the basic design parameters of my DA-2A and applied them to a modern automobile. The new design would have to carry two people and luggage, have an empty weight of no more than 625 lbs. and use an 85-horsepower engine. With a loaded weight of 1125 lbs., the car would have a power-to-weight ratio comparable to a Chevy Corvette and be just as quick -- probably even faster than the airplane's 140 mph. Driven only 20 percent over posted speed limits as God intended, the car would easily get 50+ miles per gallon.
Who wouldn't want to buy one?
At the heart of manufacturing is the simple concept of buying raw materials in volume at a low price per pound and selling manufactured products at retail for a high price per pound. The eventual retail price per pound is determined by the marketplace and ideally it ought to be high enough for the manufacturer to make a profit. The very light weight of our DA-2A car analog suggests that it ought to be inexpensive to buy, but maybe all that means is we have to look beyond the car industry to bicycles.
Car buyers and bicycle buyers approach retail pricing from completely different directions. Car buyers, whether they think about it this way or not, traditionally try to buy cars that cost the least on a per-pound basis. Do some research on the Internet and you'll see that luxury cars, whether we are talking about a Cadillac SUV or a big Mercedes sedan, tend to cost about $10 per pound; mid-range cars cost about $6 per pound; and economy cars cost about $4 per pound. Manufacturers prefer luxury cars because, given the same profit margins, they make vastly more gross profit on a fancy car than they do on an entry-level car. This pricing bias is part of what is working against Detroit right now.
Bicycles are different. Bicycle buyers, whether they are conscious of their behavior or not, try to pay the MOST per pound rather than the least. A lighter bike is always a better bike and a more expensive bike. Cheap bikes from Wal-Mart tend to cost about $2 per pound, nice bikes from a bike shop cost about $20 per pound, and top-of-the-line racing bikes cost about $200 per pound which, interestingly, is about the same per-pound cost as a top-of-the-line Ferrari or Aston-Martin.
So the trick to turning around the U.S. auto industry is to make car buyers adopt the values of bicycle buyers, which implies the willingness to pay $20 per pound of final product. The way to achieve that goal is by building cars that are both affordable at $20 per pound and EXCITING TO DRIVE.
Under this formula, the car version of my DA-2A would cost $12,500, making it broadly affordable. Yet with 6061 aluminum alloy selling in volume for around $1.60 per pound, there ought to be plenty of profit in there for the companies.
Detroit doesn't understand that.
Just as the price point bias tends to push manufacturers toward heavier cars, so do consumer buying habits and even government regulations. Trucks overtook cars in the 1990s as America's most popular vehicles and that wasn't some grand plan from General Motors or Ford, it just happened. The companies were grateful of course -- ecstatic even -- because trucks were already profitable on commercial sales alone so the consumer truck boom came with almost no additional fixed costs. Trucks were INCREDIBLY profitable and heavy.
So were SUVs. When I was a kid there were Chevy Suburbans and Jeep Cherokees, but I didn't know anyone who owned one. SUVs grew out of the truck boom and were yet another Detroit windfall, this time finding a way to charge $10 per pound for a truck. Wow!
Government regulations began pushing car companies down the path of inefficiency with the passage of the Clean Air Act in 1967. Cleaning the air was a legitimate goal but the way Detroit went about complying was not. First they installed air pumps to force complete combustion of exhaust gases IN THE EXHAUST, not in the engine where power could be produced. To make this work reliably they had to richen the fuel mixture to ensure that there was enough unburned gasoline in the exhaust to burn with the air introduced by the air pump.
Am I the only one who sees problems with this approach? To lower exhaust emissions reliably over the average 100,000-mile life expectancy of a car, the companies deliberately used more gas, hurting gas mileage. What did they care, right? Gas was 35 cents per gallon. But the companies were already on a slippery slope.
In 1972 the companies were forced to reduce compression ratios to accommodate unleaded fuel. Again the reason was laudable but the reaction was not. The lower-compression engines were less efficient, so to get performance back you had to buy a bigger engine -- paying the same amount per pound but buying more pounds. Detroit liked that.
Catalytic converters came along in 1975, and again required richening the fuel-air mixture for proper operation over the 100,000-mile vehicle life.
I'm not arguing here against environmental regulations but against the way they are frequently applied. This happens in other fields, too. Your cardiologist will recommend barbequing to reduce fat while your oncologist prefers frying to reduce carcinogen exposure. Either way you are still going to die.
For 40 years we've had a succession of slight product modifications to accommodate new automotive regulations in generally the wrong ways. The car companies fought against airbags because of the cost, not because of any safety issue. Their safety bias was always toward the heavier vehicle even though statistics show big SUVs are actually less safe than smaller cars. This was simply because they wanted to sell more pounds of car to make more money.
Technical innovations are a hard sell in Detroit because most of them fail. Even my idea of a light weight yet powerful car was tried before in the Crosley Hotshot of the late 1940s -- reason enough, many car execs would say today, to not revisit the concept.
Detroit has made poor use of new materials because they tend to cost a lot per pound. The companies could use smarter designs that required fewer pounds, but then the door might not slam with that solid sound and what if people didn't buy. Remember the Edsel?
Remember the Edsel indeed. All the Edsel had going against it was ugly design. In every other sense it was just another car with an engine in the front and drive wheels in the back. The Edsel didn't fail because it was too radical, yet that's how it is remembered.
The leaders of the Big Three U.S. car companies have about six weeks to come up with a way to save their companies. THEIR jobs (the CEOs) are toast, but the companies can be saved. All it takes is a little smarts and a lot of guts to come up with faster, smarter, more efficient cars that are uniformly 50 percent lighter than the models they replace.
I would have suggested they consult Leeon Davis, designer of the DA-2A and many other remarkable airplanes, but Leeon died earlier this year. He could have helped a lot, I know it.
Tue, 18 Nov 2008 18:18:48 -0500
There is no joy at Yahoo, for mighty Jerry has struck out.
This week Yahoo cofounder Jerry Yang announced he was stepping down after 17 turbulent months as CEO of the big Internet portal -- a time in which the company rebuffed a buyout offer from Microsoft, flubbed an ad sales agreement with Google, and ended up being worth a third of its former self when the rest of the market is down only 40 percent.
Jerry blew it.
And rare in the annals of public companies, JERRY blew it, nobody else. There is no blame to be shared because the Chief Yahoo took his anti-Microsoft stand pretty much single-handed, having bounced Terry Semel from the job in June 2007. Semel, who was more Hollywood than Silicon Valley and never well suited for the job anyway, had backed the Microsoft deal. Freed from his duties at Yahoo, Semel also voted with his brokerage account, selling a large number of company shares while the selling was good.
If there is a lesson to be learned here it is not so much that Jerry was wrong, but that Jerry was Jerry and that wasn't the right thing for Yahoo shareholders.
There are three seminal ideas that guided Jerry Yang, who is, after all, a diverted graduate student who got on-the-job training in business. To understand these three ideas is to understand Yahoo under Yang:
1) Microsoft is evil. Yang came of age in the Netscape era and saw Microsoft break the law to destroy that company and try to control the Internet. Whatever its motivation, Microsoft did all the bad things they were accused of and more and Yang could never forget or forgive that, even at the cost of his own company. He took it personally.
2) The power of "no." There was a time in the 1990s when venture capitalists Kleiner Perkins and Sequoia Capital were trying to get Excite and Yahoo -- their respective portals -- to merge in a forced marriage designed to benefit only the VCs. It didn't feel right to Jerry, who put his foot down and scotched the deal. It worked that time, so saying "no" became for Yang the default position, especially after Broadcast.com.
3) Don't get screwed. When Yahoo bought Broadcast.com for $4.7 billion and it became clear that Yang & Co. got almost nothing of value for their money, they resolved never to get screwed on another deal again. That was the moment Yahoo embraced bureaucracy. They never made a quick decision again and in many cases hardly made any decisions at all.
Mix these three concepts together, add independent wealth and a personal golf course, and you get the Jerry Yang of today. He was inclined to say "no," couldn't embrace Microsoft's evil, and sure as heck wasn't going to be screwed by Redmond, which he knew could never be trusted. As long as Jerry was in command the deal would never happen -- and didn't.
Given all this it's a wonder Yang can remain with the company as he says he will. I couldn't do it. He must feel like Ralph Nader. Or maybe that's exactly it; Jerry Yang, like Nader, still doesn't get it.
The best thing Yang could have done for Yahoo shareholders was to sell the company to Microsoft. He chose, instead, to do what he thought was best for the Yahoo COMPANY, which is weird given that it no longer feels anything like it did back in those glory days. He threw away $20+ billion just to preserve a memory.
Hey, I have been thinking about Comcast's new 250-gigabyte monthly download cap and what to do about it. Comcast, of course, is just trying to keep its top 2-3 percent of P2P gonzos from ruining things for the rest of us. If a tiny minority of users are taking half the available bandwidth, well they have to be somehow crushed (that's the theory). Comcast first tried slowing down the miscreants, you'll remember, denied the company was doing that, then got busted by the AP of all outfits. So now they'll try this new cap.
As a guy who sees a GRAND PLAN nearly everywhere, of course I see one here. Comcast says the new cap will affect less than 5 percent of its users, but that's now. What happens in five years as connections get faster and faster, Internet movie and video distribution explodes and the cap doesn't rise comparably?
Remember wholesale bandwidth costs are dropping by 50 percent per year and have been for the last decade, so Comcast's costs get cheaper and cheaper while at the same time more and more users will impinge on the bandwidth cap. If 5 percent are in violation today, that will be 10 percent a year from now, 20 percent two years from now and 40 percent three years from now, unless Comcast raises the cap.
I think they won't raise the cap but will rather introduce paid bandwidth as an alternative tier and get us to start paying a la carte for those parts of our Internet experience that Comcast might presently view as under-compensated entertainment products. It's just a way for Comcast to benefit financially from third-party and user-generated content.
So maybe a little civil disobedience is in order.
That 250 gig bandwidth cap, while more than 95 percent of current users require, only comes down to 3-4 days of wide open bit-pumping on a cable modem. Why not build a utility that takes all participating users to 249 gigs per month? Even a 5 percent participation rate among Comcast users would take the network to its knees and possibly force a more respectful attitude from the cable company.
But hey, it's just an idea.
Finally, readers have been asking what I'll be doing after this gig ends on December 15th. Frankly, I have no idea, but as a guy with kids ages six, four, and two, I can assure you I'm not retiring. Guys like me don't retire, we just get lots of life insurance and work until we die.
It might not make sense to hurl myself unemployed into the worst financial crisis in 80 years, but sometimes a guy just has to do what a guy has to do. Besides, as someone who has been fired from EVERY JOB I'VE EVER HELD, this might be my last and only chance to actually quit something.
I'll land somewhere, you can be sure, probably with NerdTV and my Moon shot in tow. And I'm open to ideas. Just nothing very illegal, okay?
Fri, 14 Nov 2008 15:57:16 -0500
President-Elect Barack Obama has announced that when he's in office he'll appoint a Chief Technology Officer (CTO) for the whole darned USA. Though Google CEO Eric Schmidt already said he isn't interested in the job, I am.
I accept, Mr. President.
And while the idea of Cringely for CTO may seem lame to most everybody I know (including my Mom), I think I can make a strong case for why I am EXACTLY the right guy for the job.
For one thing, unlike Eric Schmidt I don't have a lot of money. Schmidt can't afford to take the job because Google stock is down and he'd lose a fortune. Not so for me. I come encumbered only with debts, which is to say I am a true American. I'd be perfectly willing to put those debts in a blind trust ASAP.
The U.S. CTO would have to be a dynamic leader capable of speaking his or her mind and holding his or her own against a tide of critics and special interests. Hey, that's what I do every week (sometimes twice)! Maintaining and defending technology opinions is my only business and some people think I do it too well, which I take as a compliment.
Now we need to consider why President-Elect Obama thinks the country needs a CTO in the first place. The President has long had a Science Adviser, so why appoint a CTO? It's the distinction between adviser and officer that I'd say is the whole point; one simply advises while the other implements and leads directly. And I think there is plenty of room for new leadership in this area.
America has always been tops in science, tops in research and development, tops in medicine, tops in industrial development, tops in technical infrastructure -- tops, tops, tops. But are we tops today? I don't think so, and I'd say we've been slipping steadily for the last eight years and probably for many years before that. The rest of the world has caught up and some other countries now lead the U.S. in many respects. Yes, we have technical traditions and deep institutions, but those traditions are weaker than they were and the institutions are, too. I think something can be done about that.
My belief that something CAN be done is critical, because most of the usual suspects for this job probably think it can't. The reason I am so optimistic is because of the very financial disaster that is the current U.S. economy. Things are so bad right now that I am greatly encouraged.
Sometime in February the new Obama Administration is likely to propose the mother of all economic stimulus packages. It won't be a $650 check that comes in the mail. It won't be a $700 billion equity injection in various financial institutions. It WILL be a public spending plan modeled after the New Deal of the 1930s, injecting $600+ billion primarily into infrastructure construction and reconstruction. The difference between this New New Deal and the first one is that while plenty of roads and bridges will be rebuilt, a lot of the money this time will probably go into information infrastructure. Well that's my bag.
The U.S. CTO - at least this FIRST U.S. CTO - will be the buyer-of-cool-stuff-in-chief for the entire nation.
I would make a better buyer-in-chief than almost anyone else because of two important characteristics in my warped personality: 1) I would be immune to special interest groups so this wouldn't turn into another National Information Infrastructure boondoggle, and; 2) yet as a true enthusiast I would buy with such reckless abandon that I'd easily fulfill the economic stimulus needs while spewing money widely enough to guarantee at least a few good technical investments for the nation.
This latter point probably requires some explanation. As we can see from the current $700 billion bank bailout, the ranks of those actually benefitting are pretty small. We're $325 billion into the thing and consumers - the people paying for it -- have yet to benefit at all as far as I can tell. Most banks haven't even benefitted. And those that have benefitted have done little to share their wealth. To put things in the most positive light I can, let's attribute this to the very surgical nature of this process. To put it more honestly, nothing really changes except the rich get richer.
Look at Al Gore's National Information Infrastructure program of the 1990s, which was intended to build for us all exactly the sort of data network enjoyed today by people in Japan and Korea. $200 billion in tax credits were distributed, primarily to telephone companies. That's $200 billion in government revenue foregone, which is just the same, it seems to me, as writing a check. And what did we get for it? Limited Internet service in schools and no Internet service in homes. The DSL we have today we paid for, believe me - phone companies sell that stuff at a profit. However well intentioned Al was, his system was gamed by the phone companies who took the money and ran.
That can't happen again.
If we are going to have a huge economic stimulus package that we'll pay-off as a people over the next 30+ years, I say we should get something for it. If we hire as CTO some slick-talker from IBM or GE this won't happen. If we hire Bill Joy it won't happen, either. Bill's too smart and too gentle and too darned rich for the job.
We need someone with just enough savvy to know good technology, enough independence to make the right decisions, and crazy enough to do it all 24/7 right out in public so that vaunted "transparency" we keep talking about yet never see can be proved to be more than just a modern myth.
I'm the man for that job.
AND I can use the work.
That's because December 15th will mark my last column for PBS.
After 11 years and more than 600 columns I'll be moving-on, perhaps into that big CTO job in Washington, but then maybe not. This is my decision, not that of PBS, which has been nothing but good to me these many years.
In the month I have left I will be filing many columns, trying in a breathless rush to put a cap on this part of my career and leave behind a few ideas of how things should be and where they can go if done right. Though it will be a couple weeks early, the last column will be my predictions for 2009.
Stick around until then. I'm right most of the time, you know.