Geek Force Podcasts
Leading Men
I, Cringely . The Pulpit | PBS
Leading indicators are measurements that change over time and suggest future trends for important second-order results like population growth and economic development. Economists in particular are often looking for indicators that have been known historically to lead the overall economy. If unemployment goes down, for example, it is a good bet that shortly thereafter income will rise and the economy will improve. It's for this very reason, then, that economists and Wall Street fund managers are always looking for newer and better leading indicators. But such indicators needn't be limited to the economy: they can apply to technology and technical culture, too, which has its own feedback loop to economic development. My friend George Morton, who figured this all out, says that by knowing the right numbers to look at we can have a good idea what countries will be leading in technology -- and presumably in economic development and power -- in the years ahead. The measure George likes is the number of Cisco Certified Internetwork Experts or CCIEs. The CCIE is Cisco's top certification category and VERY hard to earn. Being a CCIE doesn't mean you have Len Bozack on speed dial, but it might as well. Cisco products dominate the Internet and CCIEs are Cisco gurus, so if you are serious about the Internet as a nation you'll have CCIEs hanging about, or that's the theory. Conversely, if you just talk a good game as a country with technological aspirations, maybe you won't have many CCIEs at all -- maybe none. It's one way to determine who the posers are. Cisco publishes the total number of CCIEs and their geographical distribution four times per year and George used the Internet Archive to track down the last nine years of data to look for trends. All of this is behind one of this week's links. Where I took a step further was to divide the number of CCIEs into each country's population, then do the same for each country's Gross Domestic Product and correct for widely varying populations and states of economic development. For a baseline, then, the U.S. has at present 5,863 CCIEs, which is 1.947 CCIEs per 100,000 population and $2.2 billion of GDP per CCIE. It is logical to assume that nations with adjusted numbers that exceed those of the U.S. for CCIEs per 100K are Internet up-and-comers and ought to fare well in the decades ahead. Beyond the population statistic, countries that have significantly less GDP per CCIE are those that would seem to have made networking a national priority. Countries that are significantly behind the U.S. on one measure or another are just that -- behind the U.S. -- which is not good. Here, then, are some of the numbers I calculated: Canada, not surprisingly, is similar to the U.S. with 2.2 CCIEs per 100K and $2.45 billion per CCIE, as is the UK with 1.5 CCIEs per 100K and $2.12 billion in GDP per CCIE. Ireland is very similar to the UK with 1.48 CCIEs per 100K and $2.95 billion in GDP per CCIE. The really interesting European numbers to me come from Germany, with 0.74 CCIEs per 100K and $4.3 billion per CCIE, and France, with 0.36 CCIEs per 100K and $8.11 billion per CCIE. Both of these countries appear to be underinvesting in network technology, with France especially lagging. Latin America is dramatically behind Europe and North America, though I found it interesting that Argentina, with 0.17 CCIEs per 100K and $8.94 billion in GDP, is 50-100 percent ahead of both Mexico and Brazil. It is especially interesting to compare India with China and Japan with South Korea. India has 0.036 CCIEs per 100K to China's 0.22 per 100K -- a 7X differential -- while India has $10 billion in GDP per CCIE to China's $3.3 billion. There is no doubt that there is plenty of network expertise in India, but these numbers show that expertise isn't making it out of the technology centers to the rest of the country. China, on the other hand, is developing its IT infrastructure much more broadly. This also doesn't take into account the simply huge numbers coming out of Hong Kong, where there are 3.3 CCIEs per 100K and $1.13 billion in GDP per CCIE -- numbers that might properly be added to the rest of China in some accounts. Japan has 1.23 CCIEs per 100K to South Korea's 1.9, but the significant difference between these two countries is the $4 billion per CCIE in GDP for Japan compared to $1.28 billion in South Korea, which is clearly investing massively in network infrastructure. Looking 30 years into the future I think it is clear that the regional leaders will be China and Korea, NOT India and Japan. Israel has numbers very similar to Korea with 1.43 CCIEs per 100K and $1.4 billion in GDP per CCIE, which is more than double on both scales that of the other Middle Eastern leader, Saudi Arabia, with 0.42 CCIEs per 100K and $3.2 billion in GDP per CCIE. And don't count out corporate haven Bermuda with its five total CCIEs and its population of 66,000. That's 7.5 CCIEs per100K and $900 million in GDP per CCIE. "When looking at the countries a key element for IT is the English language," said George. "Yes I know Harvard still publishes diplomas in Latin. Where English is a first language, or an important second language is key to the number of CCIEs. Sorry C, PERL, JAVA, Cisco IOS, Basic, &t. are all English context. The Moore's CCIE Law also brings into question the ability of countries to attract IT capital with open or closed network infrastructure. The last point -- over 50 percent of all CCIEs in the US work for Cisco. In Mexico, and India I bet it is over 50%. Both are very large call centers for Cisco Support. Morton's CCIE Law = Moore's Law accelerated by the technological support available to exploit Moore's Law. The degree of acceleration is measured by the available number of CCIEs. It's Newton's Second Law: F=ma, (or Force = Moore's Law * CCIEs)." What we're talking about here is the future of world power in this century, but I can understand if your eyes have glazed over a bit. Maybe something more interesting would be the big question reverberating through the hallways at Google: why the heck can't they make any money from YouTube? This is, on the face of it, the same question that eBay must be asking about Skype. Both were fairly large investments yet neither is contributing significant revenue to the parent company. Poor Skype can't feed us ads before or after every phone call, especially since the only way to have contextual data to make those ads more valuable would be to listen in on the calls -- a no-no. But for YouTube the problem is different because it ought to be fairly easy to figure out what a video is about then sell ads against that metadata. Easier said than done, my friends. The problem with YouTube and advertisers is that the nature of the videos, themselves, is too varied and the metadata too easily wrong. A hotel chain that might well want to advertise before a video of the Paris Hilton, for example, might be extremely reluctant to advertise before a video OF Paris Hilton, yet from the perspective of metadata both are extremely similar. This is a HUGE problem for Google and all the other streamers of user-generated videos, which leads some people to believe that amateur night will eventually end and the Internet will return to being like most television -- a place for predominantly professional video. What's funny about this is I think I have the problem figured out. The answer seems obvious to me, but I'm not sure Google would even listen if I told them my answer. read less
Latest Episodes for this Channel
Leading Men
Fri August 22 2008
Leading indicators are measurements that change over time and suggest future trends for important second-order results like population growth and economic development. Economists in particular are often looking for indicators that have been known historically to lead the overall economy. If unemployment goes down, for example, it is a good bet that shortly thereafter income will rise and the economy will improve. It's for this very reason, then, that economists and Wall Street fund managers are always looking for newer and better leading indicators. But such indicators needn't be limited to the economy: they can apply to technology and technical culture, too, which has its own feedback loop to economic development. My friend George Morton, who figured this all out, says that by knowing the right numbers to look at we can have a good idea what countries will be leading in technology -- and presumably in economic development and power -- in the years ahead. The measure George likes is the number of Cisco Certified Internetwork Experts or CCIEs. The CCIE is Cisco's top certification category and VERY hard to earn. Being a CCIE doesn't mean you have Len Bozack on speed dial, but it might as well. Cisco products dominate the Internet and CCIEs are Cisco gurus, so if you are serious about the Internet as a nation you'll have CCIEs hanging about, or that's the theory. Conversely, if you just talk a good game as a country with technological aspirations, maybe you won't have many CCIEs at all -- maybe none. It's one way to determine who the posers are. Cisco publishes the total number of CCIEs and their geographical distribution four times per year and George used the Internet Archive to track down the last nine years of data to look for trends. All of this is behind one of this week's links. Where I took a step further was to divide the number of CCIEs into each country's population, then do the same for each country's Gross Domestic Product and correct for widely varying populations and states of economic development. For a baseline, then, the U.S. has at present 5,863 CCIEs, which is 1.947 CCIEs per 100,000 population and $2.2 billion of GDP per CCIE. It is logical to assume that nations with adjusted numbers that exceed those of the U.S. for CCIEs per 100K are Internet up-and-comers and ought to fare well in the decades ahead. Beyond the population statistic, countries that have significantly less GDP per CCIE are those that would seem to have made networking a national priority. Countries that are significantly behind the U.S. on one measure or another are just that -- behind the U.S. -- which is not good. Here, then, are some of the numbers I calculated: Canada, not surprisingly, is similar to the U.S. with 2.2 CCIEs per 100K and $2.45 billion per CCIE, as is the UK with 1.5 CCIEs per 100K and $2.12 billion in GDP per CCIE. Ireland is very similar to the UK with 1.48 CCIEs per 100K and $2.95 billion in GDP per CCIE. The really interesting European numbers to me come from Germany, with 0.74 CCIEs per 100K and $4.3 billion per CCIE, and France, with 0.36 CCIEs per 100K and $8.11 billion per CCIE. Both of these countries appear to be underinvesting in network technology, with France especially lagging. Latin America is dramatically behind Europe and North America, though I found it interesting that Argentina, with 0.17 CCIEs per 100K and $8.94 billion in GDP, is 50-100 percent ahead of both Mexico and Brazil. It is especially interesting to compare India with China and Japan with South Korea. India has 0.036 CCIEs per 100K to China's 0.22 per 100K -- a 7X differential -- while India has $10 billion in GDP per CCIE to China's $3.3 billion. There is no doubt that there is plenty of network expertise in India, but these numbers show that expertise isn't making it out of the technology centers to the rest of the country. China, on the other hand, is developing its IT infrastructure much more broadly. This also doesn't take into account the simply huge numbers coming out of Hong Kong, where there are 3.3 CCIEs per 100K and $1.13 billion in GDP per CCIE -- numbers that might properly be added to the rest of China in some accounts. Japan has 1.23 CCIEs per 100K to South Korea's 1.9, but the significant difference between these two countries is the $4 billion per CCIE in GDP for Japan compared to $1.28 billion in South Korea, which is clearly investing massively in network infrastructure. Looking 30 years into the future I think it is clear that the regional leaders will be China and Korea, NOT India and Japan. Israel has numbers very similar to Korea with 1.43 CCIEs per 100K and $1.4 billion in GDP per CCIE, which is more than double on both scales that of the other Middle Eastern leader, Saudi Arabia, with 0.42 CCIEs per 100K and $3.2 billion in GDP per CCIE. And don't count out corporate haven Bermuda with its five total CCIEs and its population of 66,000. That's 7.5 CCIEs per100K and $900 million in GDP per CCIE. "When looking at the countries a key element for IT is the English language," said George. "Yes I know Harvard still publishes diplomas in Latin. Where English is a first language, or an important second language is key to the number of CCIEs. Sorry C, PERL, JAVA, Cisco IOS, Basic, &t. are all English context. The Moore's CCIE Law also brings into question the ability of countries to attract IT capital with open or closed network infrastructure. The last point -- over 50 percent of all CCIEs in the US work for Cisco. In Mexico, and India I bet it is over 50%. Both are very large call centers for Cisco Support. Morton's CCIE Law = Moore's Law accelerated by the technological support available to exploit Moore's Law. The degree of acceleration is measured by the available number of CCIEs. It's Newton's Second Law: F=ma, (or Force = Moore's Law * CCIEs)." What we're talking about here is the future of world power in this century, but I can understand if your eyes have glazed over a bit. Maybe something more interesting would be the big question reverberating through the hallways at Google: why the heck can't they make any money from YouTube? This is, on the face of it, the same question that eBay must be asking about Skype. Both were fairly large investments yet neither is contributing significant revenue to the parent company. Poor Skype can't feed us ads before or after every phone call, especially since the only way to have contextual data to make those ads more valuable would be to listen in on the calls -- a no-no. But for YouTube the problem is different because it ought to be fairly easy to figure out what a video is about then sell ads against that metadata. Easier said than done, my friends. The problem with YouTube and advertisers is that the nature of the videos, themselves, is too varied and the metadata too easily wrong. A hotel chain that might well want to advertise before a video of the Paris Hilton, for example, might be extremely reluctant to advertise before a video OF Paris Hilton, yet from the perspective of metadata both are extremely similar. This is a HUGE problem for Google and all the other streamers of user-generated videos, which leads some people to believe that amateur night will eventually end and the Internet will return to being like most television -- a place for predominantly professional video. What's funny about this is I think I have the problem figured out. The answer seems obvious to me, but I'm not sure Google would even listen if I told them my answer. read less
Frontier Daze
Fri August 15 2008
One of the great strengths of the Internet as a communication and entertainment medium has always been its lack of security, a fact that seems to pass over the heads of many "experts" today. Bob Kahn and Vint Cerf could easily have added robust security to TCP/IP, but they deliberately chose not to with the idea that innovation would be encouraged by making the Internet a wide-open space. It wasn't that they prohibited security, but pushed it up the stack, effectively making it other people's business. If your application required security, there was nothing keeping you from adding it, but on the other hand there were few, if any, hints about how best to do that. We were on our own and to a great extent we still are, which means there is a lot of bad stuff happening and probably always will be. I could write column after column about Internet abuse, but my inspiration this week is actually quite prosaic. There is a fairly popular commercial website I heard about this week that has a novel way of making sure its ad revenue numbers are met. This site has its own ad sales team selling display space bringing in tens of millions of dollars per year in revenue. It is a good site and grandly profitable, but if for some reason revenue dips below target a little code kicks in and starts refreshing particular pages every 90 seconds, generating each time a new "hit" on that page's banner. The refreshes are tied directly to revenue and nothing else and it seems to me that what's happening is, well, theft. Here's how these bozos can get away with a stunt like this. First, advertisers often don't really want to know the success of their ad campaigns to a fine level of granularity. They'd rather keep the ad game a sort of dark art because, frankly, they pretty much don't know what the heck they are doing anyway and ad buying is done by the lowest-level agency employees when it properly should be done by the highest. So if something is wrong they'd really rather not know about it, thanks. The second reason why this kind of stunt goes unpunished is because it doesn't happen all the time. The site generally provides good content and good service and they only kick in this little script when absolutely needed. So if a lot of people seem to be clicking on ads but few are actually buying, well it comes back to that black art, doesn't it? And finally, the Internet isn't as sophisticated an ad space yet as are magazines, for example, where the Audit Bureau of Circulations does a pretty good job of keeping track of how many people actually read ads. The Internet, though some would claim otherwise, doesn't really have a comparable operation to the ABC, but it probably should. This is not the first time I have heard of a scam like this, but it is the first time I've heard it applied to a big and respected operation. There are lessons to be learned here by publishers, advertisers, and readers alike. More bad Internet behavior apparently took place over the last several days during the Russian invasion of the Republic of Georgia, where the Russian government was accused of cyber-terrorism. This is a good time to define "cyber-terrorism," which to me means the deliberate attack on network infrastructure with the goal of causing harm, destruction, and possibly theft. There can be little doubt about the baldly geopolitical nature of the Russian invasion, but what happened on the bits-and-bytes level I wouldn't call terrorism, more like graffiti. The affected Georgian websites were informational and were quickly moved to servers in the U.S. Whether the bad guys were employed by the Russian government, Russian Mafia, or were just high school kids as some have suggested, what they did wasn't terrorism. No systems or networks were destroyed, no bank accounts plundered, no command and control systems crushed. If the Russians had intended there to be a cyber component of this invasion you can bet they would have done a better job of pulling it off. And the attacks, such as they were, weren't strictly from one side, according to this report I got from Moscow: "Starting in the first hours of Georgia's armed attack on Tskhinvali, Georgian hackers began the war on the Internet. The servers of leading Russian mass media, including the website http://www.mk.ru, were subjected to DDoS attacks. But specialists in information security and our hackers won an unqualified victory in the Internet war. "These attacks were reported to us," Vitaliy Kamlyuk, an expert of the Kaspersky Laboratory for Computer Security, reported to Moskovskiy Komsomolets. "According to our information, the DDoS attack was organized on Friday. At that time requests from computer zombies were sent to the servers of Russian information resources, including http://www.mk.ru. These (zombies) are machines infected with viruses that one or several hackers have joined into a whole network. They sent innumerable requests, which caused a short-term glitch in the work of several sites and editorial offices. But to our knowledge these attacks did not have great success. The systems administrators of the information sites were able to deal with the virtual attack quite quickly. We are continuing to monitor the situation. Our partners also continue to intently watch the development of this cyber-war." Cyber war? I don't think so. I had yet another indication this week that the Internet is still a frontier and that came when there was information I desperately needed and nobody had yet thought to provide in a way that was useful to me. This may seem silly, but there are people who claim that the best ideas have already been taken when it comes to Internet businesses, yet every day I look for something and can't find it. In each case that's a business opportunity lost, because if I'm looking for something there are probably thousands of others looking too. This week, like millions of Americans, I was looking for cheap fuel. I packed my wife and three kids in our 1996 34-foot Winnebago motor home for a 1,600-mile cruise up the U.S. East Coast and back. The Winnie clocked in at SIX miles per gallon, so obviously I was on the hunt continuously for the cheapest gas I could get. Armed with a notebook computer and a fairly reliable cellular data connection, my wife riding shotgun surfed all the gas sites from Charleston, South Carolina to Scranton, Pennsylvania, and back while I did the driving. There was plenty of data available and it proved pretty reliable, but the question never answered by any site we could find was, "where's the best place on my route for me to stop for gas?" You can get gas prices by ZIP code (gasbuddy.com is great) or along your route (aaa.com is the best), but no site looked at my route, checked all the data and did what I really needed, which was to just tell me where to stop. Instead they expected me to click on every station or input every ZIP code, write it all down on a piece of paper and make my own damned decision. Not my style. Here is a terrific mash-up opportunity that you'd think would have been written back when gas was $2 per gallon. Ironically, I can get this very information for my airplane on my delightful Flight Cheetah display, but in this instance cars are apparently not so advanced. Someone please hurry up and get such a service going before I take my kids on another trip. read less
What Goes Around Comes Around
Thu August 07 2008
Editor's Note – As many readers have reported, we have had difficulties in recent weeks both posting the current column and especially posting reader comments. These problems are not unique to I, Cringely, but affect all PBS blogs based on the Moveable Type platform. Architecture changes are in the works as well as an entirely new version of Moveable Type that we hope will shortly fix these problems. Until then please bear with us. Companies have their own personalities, generally adopted from founders or charismatic leaders. Some companies are gentle, others competitive, some are even cruel. Once a corporate personality becomes embedded it can continue in that fashion for years -- even decades -- past the departure of the original inspiring executive, as generations of leaders and wannabe leaders act the way they think The Big Guy would have done. Sometimes corporate personalities are effective but often they just get in the way, especially when companies act in ways they no longer need or even understand. And sometimes the lingering effects are legal or regulatory, too, as companies spend years cleaning up messes inspired by executives now long gone. That's what's happening right now with Microsoft, I believe, which seems to be coming out on the losing end of a number of lawsuits. The first bit of evidence can be found in Microsoft's recent settlement with Texas-based Vertical Computer Systems Inc., which accused Microsoft of violating Vertical's patent on so-called SiteFlash technology that the company said was copied by Microsoft in .NET. The companies settled with terms as yet unannounced, but Vertical definitely won since Microsoft is buying a license to the patent in question. It's nice for Vertical that Microsoft settled, but sharp legal minds (far sharper than mine) were surprised. Microsoft isn't in the habit of settling these suits early if at all and the U.S. Supreme Court' KSR decision from April, 2007 has shifted the advantage in such lawsuits to companies with large patent portfolios (that would be Microsoft) and away from their smaller adversaries (that would be Vertical). The importance of this decision (and its dire effect on small inventors) has gone right over the heads of most people, but it is rapidly changing the way IP is handled in the tech world. So if Microsoft normally doesn't settle suits like this early and the legal terrain has actually improved for Microsoft since the suit was originally filed, what the heck are they doing settling the suit and presumably paying millions that could probably have been avoided? Some clever folks think that this is a ploy on Microsoft's part aimed at companies like Adobe, which is presumably also on Vertical's to-be-sued list. Getting a SiteFlash license for .NET puts pressure on Adobe's .NET competitor called Air. Or that's the claim. Yet viewed in a current legal light, Adobe is in as strong a position as Microsoft was, patent-wise, and so should have as good or better chance to beat the Vertical patent in court. If Vertical sues Adobe AND LOSES, then Adobe is strengthened and Microsoft is weakened. So what's really going on? Of course I have a theory. I think Microsoft settled quickly and quietly with Vertical to avoid going to court because a trial might have exposed Redmond to far more risk than one might expect from a little patent infringement suit. That's because of something that happened in an earlier case I covered extensively several years ago – Burst v. Microsoft. For those who don't remember or never knew the sad story of Burst v. Microsoft, it was a complicated suit involving not just patent infringement but also anti-trust, restraint of trade, and breach of contract. The smoking gun in the Burst case was that Burst lawyers caught during discovery a pattern of apparent destruction of e-mail evidence on the part of Microsoft. Microsoft claimed it was “too hard” to search for the lost e-mails (Burst had copies from its side so many of the messages were known to have existed) but Judge Frederick Motz finally ordered Microsoft to do whatever it took to dig up the tapes and find the e-mails. Fortunately for Redmond, the case settled (for $60 million) before Microsoft actually had to produce anything. Now, as they say, for the rest of the story….. Months after the Microsoft/Burst settlement I received e-mail from a former Microsoft contractor: “Now that Burst v. MS has moved out of the courts, I thought that I might add a little to what you know about this case. Back about two years ago when the judge told MS to cough up the rest of the emails that was supposed to have floated around between MS execs that discussed the Burst relationship, the team that I was on (Corporate tape backups) was asked to gather all together all of the tapes that were used during that time. Even though there was a corporate policy in place that any *.pst was to be excluded from backup capture, the effort failed. Not only did the Backup Exec software fail to filter out those pst files, but some of the involved blue badges (Microsoft employees) intentionally disguised their mail files so that they would not be recognized and included in the nightly backups. This last effort was even prohibited by policy from the VP level. As I was the one tasked to gather the tapes together from Arcus/Iron Mountain, I know exactly how many tapes were recalled for the involved servers. They filled several 240 tape trunks and were stored in the Building 11 tape vault.” “Several months after all of the tapes were gathered, MS legal started asking for restores of any pst files captured, the tapes 'mysteriously' went missing. Now because our team was a managed service vendor, we were held directly accountable and responsible for the loss. I can think of a lot of reasons that the tapes were removed by someone blue. It is also possible that someone on our team performing a standard purge of old media mistakenly pulled them and sent them to the shredder and even though the tapes were stored in a special section specifically marked “Do Not Touch” taped across them I find it highly unlikely.” This is Bob, back again. In case you aren’t familiar with this case let me put this guy’s statement in some context. Microsoft was saying in court that it couldn’t find the tapes and that it would take millions of man-hours to search for them when in fact the several trunks full of tapes were apparently easily gathered and already stored in the Building 11 tape vault. At the time Microsoft lawyers were claiming the tapes would be impossible to find, THEY HAD ALREADY BEEN FOUND. It would be interesting to know if Microsoft’s lawyers were aware of this. They should have been, but this may have been one of those instances when it was to their advantage NOT to know. And then THE TAPES DISAPPEARED. Funny we never heard about that, either. To my knowledge, Microsoft never presented this "the dog ate our tapes" story, most likely because they may not have wanted to acknowledge that there even WERE such tapes. The fact that there were tapes and then there weren't probably SHOULD have been mentioned, since I'm guessing not doing so violated a court order. Certainly it should probably have at least been mentioned in the discovery materials given to Burst. Why, if the tapes were found, did they sit for months in a special tape vault in Building 11 rather than be examined for the missing messages? And then there is the big question about what happened to the messages at all -- messages that were in a locked vault and labeled "Do not touch" -- how did they get thrown away and by whom? The former Microsoft contract employee who contacted me on this issue did not do so anonymously, by the way. I know his name and how to reach him. We have talked on the phone more than once. He did not hesitate to name names: "...Calvin Keaton, the blue badge who managed the team, made the appropriate loud noises about the loss to HP services, although I never saw any public disclosure about it.... Just glad I never had to depose for the issue. Can’t imagine that it would have done my career any good." So the outside vendor was Hewlett-Packard, one of Microsoft's hardware OEMs, which is to say Microsoft's bitch. The tape disappearance was blamed on HP, which reportedly accepted the blame, and the employees directly involved kept expecting there to be repercussions, especially legal ones. They expected to be deposed by Burst lawyers. But it never happened. This was, for Microsoft, a perfect ending. The damning tapes were lost in a way that could be blamed on a contractor -- a contractor over which Microsoft had great power -- power greater than just a services contract. The contractor "accepted" responsibility though there was no real evidence they had done anything wrong. It could just as easily have been a Microsoft employee who destroyed the tapes. It is possible that Microsoft never revealed to the court either that the tapes had been found or that they had later gone missing. This admission would have had to have taken place at the spoliation hearing that was scheduled for the week Microsoft instead settled with Burst for $60 million. I contacted both Burst and Burst's lawyers last year and they could not recall any aspect of this incident having been revealed to them by Microsoft or by the court. It was news to them. But of course by that time the case had been long settled. Microsoft's legal behavior in this is consistent -- consistently bad -- and the only intersting aspect of that part is that it is logical to assume Redmond would have paid ANYTHING to avoid that spoliation hearing and its need to either come clean about evidence destruction or to commit perjury by not coming clean. $60 million was nothing to Microsoft. Burst could probably have got a lot more money had they known what was actually going on. And where was HP in this? Why didn't HP file a friend-of-the-court brief explaining what had happened? Even the lowly contract workers who were blamed expected that to happen yet it didn't. Did the HP legal Department even know about the incident? My guess -- and it is only a guess -- is that HP corporate was never told about the incident, though that is not in any way an acceptable excuse. It should have been reported. Shortly thereafter, of course, HP lost the storage contract. My source was laid-off and moved away from Seattle. Microsoft (and HP by implication) got away with it... or so they thought. But since the Burst settlement there have been at least a couple more Microsoft lawsuits that may also have been affected by the lost evidence in Burst v. Microsoft. The people of Iowa cited it, I'm told, in their anti-trust case against Microsoft that settled pre-trial last year. It may have been known, too, to Vertical in this most recent case. Any claimed pattern of deception on Microsoft's part would be dragged-up in similar cases. If these claims are true, what Microsoft allegedly allowed to happen and then did not disclose (along with the suspicious timing of all of it) was illegal in a stop-the-presses, all-capital-letters way. You just don't do that to Federal judges. So Microsoft is paying and paying and paying again not just for intellectual property licenses in these subsequent cases, but also for this earlier information to be kept out of court. And for lawyers who understand such issues, it strengthens their hand substantially. The next case in which I expect this information to be a part is Gotuit Media's suit against Microsoft over the latter's Silverlight video technology, which Gotuit claims infringes on three of its video tagging patents. Gotuit's lawyer is Spencer Hosie, who also represented Burst and ought to be fairly familiar with the whole lost document issue. We started this column, remember, with the idea that companies adopt the personalities of their founders or charismatic leaders. Microsoft has always been an aggressive company willing to push the line and unafraid of litigation, which pretty much describes Bill Gates, too. It's not hard to imagine some Microsoft employee with a key to that tape vault in Building 11 asking him or herself “What would BillG do?” and making the wrong move as a result. It's very possible that today's Microsoft is very different from the one that spawned this behavior. But that doesn't matter because the company is still stuck with it. Bill Gates may be gone from Microsoft but the company will be living with his legacy – good and bad – for decades to come. read less
The Eyes Have It
Fri August 01 2008
So little real information leaks out of Apple these days that we tech pundits tend to jump on any crumb we can get and munch it to death. That's certainly the case with this week's story about Apple possibly dumping Intel chipsets for the new MacBooks expected to be announced in September. What's funny to me is that the answer to what's REALLY happening has been in front of us all for more than a year. Here's how this mess of a story got started. On Monday, July 21st Apple Chief Financial Officer Peter Oppenheimer dropped a bomb on those listening to Apple's quarterly conference call on earnings for Wall Street analysts. He said that gross margins for the coming quarter, and possibly beyond, would be lower for three reasons: 1) a back-to-school special; 2) a one-time charge related to a contract manufacturer, and; 3) "a future product transition that I can't discuss with you today." That's it. That's all he said. And from that sprang a zillion stories about what that future product transition could possibly be. It settled eventually on the idea that Apple might be abandoning Intel processors, later downgraded to Intel chipsets, for the new MacBooks and beyond. Of course Apple's recent purchase of PA Semi got folded in as pundits wondered if Apple was going back to PowerPCs after all. I know how these stories develop, having written more than a few of them myself over the last 20 years. You start with one fact, get the usual suspects to speculate on what that fact could mean, throw those speculations into print, then look for an official denial of the parts that are wrong. Once that denial comes through we rinse and repeat with the goal of eventually converging on something close to the truth. It's not a very elegant way to do journalism, but that's the way it happens in the tech trades, which now include everything from blogs to the New York Times. But what's REALLY happening here? Stepping back from the carnage we can see that Apple has a "product transition" coming up that will hurt margins in the near term, but Oppenheimer also said it was dramatic and would definitely HELP margins in the long term. That's all we really have to work with from Apple, but it is really quite a bit if you parse the data carefully. First is the product transition, which quite specifically DOESN'T mean a new product. If Apple was announcing something completely new as they did last year with the iPhone and Apple TV, then Oppenheimer would have referred to it as a new product. As CFO he has fiduciary and legal responsibilities that could land the guy in hot water with the SEC, so language on these calls is important and never by chance. Second is the margin hit that will go away, which smart readers right away saw as a change of chips, because they start expensive and become very cheap over time. By making an aggressive semiconductor move Apple would be trading profit margins for technical market advantage knowing that in a few months the new chip process would come down and margins could return to normal. THAT's why all the smart money went immediately to speculating about Intel, then backed off somewhat as official denials began filtering through back channels from Cupertino and Santa Clara. As of today people are just left scratching their heads. Apple isn't changing CPU families and evidently they also aren't dumping Intel chipsets for those of Nvidia. But SOMETHING is happening because Peter Oppenheimer gets no pleasure predicting lower margins that he knew would drive down Apple's share price, if only temporarily. So now the pundits are wasting even more packets wondering what Apple is planning, at the same time generally admitting that they (the pundits) don't really have a clue. Regular readers of this column may well have an idea what's up, because I wrote about it more than a year ago. Before I drop my own bomb, though, I should say that I have no new information and what I am about to predict is based solely on my earlier reporting. Here's what I THINK Apple is about to do. I reported more than a year ago and repeated in this year's predictions that Apple would be adding H.264 hardware support to its entire line of computers. The chip they are adding comes from NTT in Japan and was developed in cooperation with Japanese broadcaster NHK. The chips began sampling a year ago and should now be available in volume, though Apple may be paying as much as $50 each for early production. This would be a major blow to gross margins because, unlike all the speculation covered above, this wouldn't be a matter of replacing one chip with another but of adding a new chip to the mix. That'll be an extra $50, thank you, with no savings from eliminating other parts. The fun part is figuring how this all fits into Apple's strategy as not just a maker of computers but also as a seller and distributor of entertainment content. The NTT chip is not just an H.264 decoder, it encodes, too, which is what makes it so special. The last I heard NHK was claiming the chip could compress a 1080p video and audio stream into four megabits per second, down from the 20 megabits normally required. If we assume Apple will apply the same kind of wink-wink, nudge-nudge transcoding to 1080p that they've already applied to 720p in the Apple TV, then it is within reason to expect they'll claim to distribute 1080p over iTunes in two megabits per second. As the dominant technology platform in television and movies today, it makes good sense for Apple to put this H.264 hardware capability into the Mac Pro line, and maybe even into the MacBook Pros for professional use, but darned if I can immediately see why such powerful and expensive compression capability is required in a MacBook, iMac, or Mac Mini, yet I was told long ago that the chips would be applied "across the entire line." We'll see. Of course this is all about taking command of the 1080p video market. Apple's strategy with iTunes will continue to evolve, but for the moment having a unique real-time 1080p capability will suck a lot of early adopters back into the Apple stores and give Apple's emerging content competitors like Netflix something new to worry about. When Apple marketers sit down to talk about the competition they discuss Netflix and MAYBE TiVo, but that's it. Hulu is something iTunes could emulate overnight so it doesn't matter and none of the other video distribution channels are seen as having the potential to achieve critical mass. What really excites me as a content creator is the amazing potential of real-time HD. Video and games are by far the greatest consumers of cycles on modern PCs. By embracing a dedicated H.264 chip THAT IT MAY WELL HAVE EXCLUSIVELY FOR A YEAR OR MORE, Apple is taking an out-of-the-box approach that will frustrate its competitors in both software and hardware. While the H.264 chips are expensive, they'll enable Apple to save money elsewhere by having slower computers that run faster video. Though it is doubtful that many will use it, you can be sure Apple will trumpet the ability to support 720p video in iChat. So why am I the only one writing this? It's because I could be wrong, of course. But I don't think so. I'll just have to take a chance and see. read less
The Five Percent Solution
Mon July 28 2008
This column is about a new chat system called Talkinator, which I find very exciting, but to do it justice first I have to cover some of the emerging -- but not often recognized -- realities of Web 2.0 that make a Talkinator even possible. Bill Gates used to worry about Microsoft losing its monopoly overnight because of a technical mistake. We all laughed. We laughed because Microsoft had such financial and sales clout and had the executive suite of nearly every customer company so snowed that they seemed unassailable. But on some level Gates was correct and we've seen that proved by Google. We didn't need Google, or didn't think we did before Google came along. I don't recall sitting around complaining about Alta Vista and Excite and the other pre-Google search engines, which seemed to do a pretty good job in their day. But then Google came along and was clearly better -- enough better that we all jumped. How much better did Google have to be than Alta Vista to replace it in the minds and mice of most users? I argue five percent better is good enough. In a market where products are presented as services and those services are ad supported and don't cost users any cash, there is almost no exit barrier. The system has no friction, no stiction. Five percent better is enough to steal that kind of promiscuous market. And five percent isn't much -- a little better UI or server or just a slightly different idea can be enough. Web 2.0 made this trend even more pervasive, because now applications could be built of other applications, many of them open source. Getting five percent better could mean an idea realized through a mashup with almost no real work, or that was what we have told ourselves. But the reality is that for true success real work is still required, and that's one of the Web 2.0 white lies that need to be exposed. Web 2.0 makes it easier to do things, but not easier to do them well. You need a good idea, good building materials, and most especially a good carpenter to put it all together. I sense that the Web 2.0 market is maturing and more good carpenters are starting to appear. One of those carpenters is Paul Tyma, the author of Talkinator. I have written about Paul before in his role as author of Mailinator, another novel web service. That column is among this week's links. Mailinator is an e-mail system that requires no sign-up. The idea is brilliant: if you don't want people to know your real e-mail address, just make up a mailinator address (stinkyface@mailinator.com, for example). Mailinator addresses are useful to give when you don't want to be data-mined and bombarded with offers as the world discovers you are interested in pre-Columbian art or original pictures of Betty Page. Anyone can check messages for stinkyface, but most Mailinator mail is never read because it is spam. The business model here is both simple and modest: show ads to the one percent of Mailinator users who actually DO check their mail. In order to make money with this business model you need a LOT of traffic, which Mailinator fortunately gets. According to Paul, the Mailinator server receives about 12-15 million messages or 28 gigabytes of mail per day, 99 percent of which is never read. The one percent that IS read means there are at any moment about 150 active users on mailinator.com. The volume of mail coming in has hit as high as 2,000 messages per second. There is an important lesson in Web 2.0 economics here. Mailinator runs on ONE server. That server is in a rack at Serverbeach and would cost under $100 per month if Paul actually paid for it. But by running a link for Serverbeach on the Mailinator page, Paul gets free service whenever one of his users becomes a Serverbeach customer through that link. His traffic volume is so high that the referrals mean he will never pay a cent for that Mailinator server. So the server is free, the traffic volume is HUGE, and even with that one percent duty cycle the site makes good money from AdSense ads alone. So why aren't there more Mailinator competitors? There are plenty, but they come and go. The reason they come is because the idea is clever and easy to implement: rent a server and run Sendmail and some scripts. The reason they go is because you can't run Sendmail and some scripts on a single server processing 2,000 messages per second while 150 people read their mail at the same time. Mailinator is a nice little business if you can run it on a single server, but you can't support enough users on a single server if the service is built as a mashup. So Mailinator, which has been rewritten now three times, is 100 percent custom code, highly optimized for what it does, which is the other lie about Web 2.0: mashups often don't scale well. Sendmail is an Internet bogeyman. Mail is so hard to do well, we're told, and Sendmail is so good (and open source to boot) that hardly anyone ever goes beyond it. We'll put a front end on Sendmail, maybe a webmail interface, but the server, itself, generally goes untouched. With Mailinator Paul Tyma did the unthinkable and threw Sendmail away, replacing it with a truly modern mail engine that someone smart ought to buy. Which brings us to Talkinator, Paul's new chat system. This is quite specifically text chat and involves no voice or video, just letters and words. And like Mailinator, Talkinator is a no-log-in system. Why would he do that? Why have no log-in? The better question might be why do the other chat systems HAVE log-ins? They want you to register so those systems can track you and make money from your chatting habits. They have log-ins so those sites can be more useful, maybe, but mainly so they can more effectively USE YOU. Talkinator is different. Imagine going to a website is like entering an unfamiliar house. Web surfing is, for the most part, a solitary experience, even though there can be hundreds or thousands of people on the same page at the same time. With Talkinator you enter the room and ask, "Is anybody home?" Wow! There are 138 people there right at that moment and with no registration you can call yourself anything you like and start chatting immediately. Embed Talkinator in YOUR web site and your users can communicate in real time with each other and with you. It's free. Now imagine you run an Elvis tribute page and a bunch of your friends run Elvis tribute pages, too. If you all embed Talkinator in your sites and choose the same name for your chat room YOUR USERS AND YOUR FRIENDS' USERS WILL ALL BE IN THE SAME ROOM. But what if the linked sites or their users are from different countries and different cultures? Talkinator has a bot that leverages Google Translate so users with different languages can still communicate. I use Google Translate to communicate with my cleaning lady, who speaks far better Portuguese than I do. But Google Translate doesn't always tell her exactly what I mean, so I began doing recursive translations where I would translate my instructions into Portuguese then back into English so I could fine-tune the text until I knew it was perfect. As a favor to me Paul implemented this in Talkinator as what he calls a round-trip translation option so misunderstandings are minimized. Arguments are minimized, too, since Talkinator simply won't allow swearing. Try it. So who needs another chat client? We all do. Talkinator isn't intended to replace ICQ or AIM or any other chat system with zillions of users. It is intended to help people with common interests meet each other and communicate on the Web. THERE IS NO BUSINESS MODEL. Talkinator is an experiment, but it is so useful that traffic will build to a point where, like Mailinator, a single author can make a fair living just by having fun. Getting back to the Bill Gates market dominance model, Talkinator has to be a huge headache for companies doing something similar. Look at Meebo, which presents itself as the web intersection of AIM, Yahoo Chat, Google Talk, and MSN Chat with some ads thrown in. Talkinator was written by one very good programmer, runs on one free server supporting thousands of simultaneous users and can be scaled to any number of users with additional free servers. Talkinator could be turned into a Meebo competitor over a weekend. That puts Meebo's recent $200 million valuation in a different light don't you think? read less
