WHAT COMES AFTER RECOVERY By Michael S. Malone
I know, I know, it’s tough to talk about good times right now – what with the Dow still on the down escalator, the banking industry looking more screwed up than ever, and both Congress and the Administration managing to find new ways to impede the natural healing process of the economy.
But we will come out of this disaster – though my cheery prediction of this summer (when it should have happened) has begun to fade in the face all of the counterintuitive Fed ‘solutions’ before us – and when we do, it will be a whole new game out there, with new opponents and new battlefields.
What will be the biggest competitive fights of the post-crash tech business world?
I can see four shaping up already.
The first – and biggest, revenue-wise – fight will be for control of the world’s data centers. This will be between Hewlett-Packard, Cisco Systems and IBM. . .and the first salvo came this week with rumors that IBM was negotiating to buy the also-ran in this race – the long-suffering Sun Microsystems – and put that company out of its misery.
This is a trillion dollar market, and the fight will be between some of our biggest corporate heavyweights, so this contest is going to feature some heavy punching, global battlefields and no doubt appeals by the losers for Federal anti-trust investigations into the winner.
And who will the winner be? Hard to tell. Cisco has the industry creds, HP has the muscle and the broadest tech capabilities and IBM has the best access to corporate C-level officers – and is about to beef up its hardware with Sun Micro. Expect this duke-out to last the better part of a decade.
The second battle will be over the control of revenue-generating information. Right now, the clear industry winner is Google, which, in a brilliant stealth campaign, offered the world a free Internet search engine . . .and in exchange took much of the world’s advertising revenues.
The rest of the world has now caught on to that bait-and-switch, but not before it is almost too late. The race now will be to nail down the world’s last remaining information caches – and if possible, create new ones – before Google snatches them up, as it did with YouTube. That’s what Microsoft is trying to do, and you can be sure that was Carol Bartz’s primary charter when she was hired to bail out Yahoo! That’s where Twitter is going too, despite the widespread notion that the company has no revenue model. And, perhaps it goes without saying, that’s exactly what Mark Zuckerberg is trying to do with all of those controversial schemes at Facebook to monetize user information.
What we can expect to see then, over the next few years, is an Information Land Rush, with companies snatching up every unclaimed pile of information on the planet (and beyond: consider Google Space), spending huge bucks to create new ones – and then building sturdy legal, software and security walls around them.
Is it too late to stop Google. It may seem so right now. But Google is suffering serious growth pains that it may yet not overcome. And though it may not seem the case, there remains more information on the Web not controlled by Google than under its hegemony. In the end, it may prove to be the case that no one defeats Google head-on (though Microsoft and Yahoo will continue to try), but that other, equally powerful new companies spring up alongside it.
The third battle is well underway. It is for control of the Third Screen – i.e., smartphones. The ultimate size of this market – especially when you consider that two billion people in the developing world are saving their truly hard-earned money to be part of it – is almost beyond imagination. Certainly trillions, maybe even tens of trillions, of dollars. This is actually two battles, as is often the case in tech – one hardware, the other software.
You already know about the hardware battle: Apple, Palm, Blackberry, Nokia, Motorola, etc. Apple, with the brilliant iPhone, took the early lead, but you can’t discount the sheer manufacturing power of the Big Boys of Cell. This week’s iPhone 3.0 announcement already suggests that the as-yet unshipped Palm Pre already has Apple nervous.
The software battle is at least as interesting. Here again, Apple took an impressive early lead, thanks to the usual superb user interface on the iPhone and brilliant tactical move of the Apple App Store, which now offers 25,000 iPhone applications created by third-party developers – a number which is doubling every two months. In an economy where most entrpreneurship is punished by the government or unable to find venture funding, designing iPhone apps has become the hottest new form of start-up business.
But waiting in the wings is Google and its new Android smartphone operating system. Apple’s biggest flaw, especially under the otherwise brilliant leadership of Steve Jobs, is that it will almost always choose a controlled minority market share over an uncontrolled majority share. That’s how the company lost the personal business to Microsoft, despite having superior products. And despite an admirable openness about iPhone apps, there is already some grumbling out there amongst developers about Apple’s heavy-handed tactics.
With the open-systems Android, Google is trying to do another Microsoft to Apple, this time in the smartphone business – and, as always, capture yet another vast information cache in the process. Is it too late? Hardly. For all of the iPhone’s success, it has still only capture a tiny fraction of the potential world smartphone market. This battle has just begun to skirmish, and will last a generation. Google is betting that a couple dozen giant phone makers will prove to be more clever than a couple dozen product designers at Apple.
History hasn’t shown that to be necessarily true – but has proven that, given Apple’s core philosophy, those score or more phone companies will eventually produce products that are nearly as good and a whole lot cheaper . . .and in the developing world, that price differential will prove decisive.
Mr. Malone omits the crucially important intermedeary step, before recovery can take place: a civil war decisively won bty the conservative resistance.
If this happens, it won’t happen in America. Maybe at Google’s development center in Prague where czech corporate tax rates are 20% and the flat income tax is 15%. There’s no reason to build a business here if the Democrats are going to take half of it away from you so they can “spread the wealth”.
I don’t think it’s entirely accurate to say that Apple lost the personal computer battle to Microsoft. That’s actually an old narrative, written with the assumption that history had come to an end.
10 years from now, I think we will see more clearly that Apple did not lose so much as, after the return of Steve Jobs, it settled comfortably into a niche (or bunch of niches, depending on how you look at it) in which they figured out how to be absurdly profitable, and through which the Macintosh exercised an influence on personal computing out of proportion to its market share.
Also, I wouldn’t rule out the possibility that in retrospect, Apple will be seen as having a much more viable business model than Microsoft because Apple sold its own high-margin hardware along with its OS. Whereas Microsoft sold software licenses at a relatively low return per unit while plowing huge sums of money into developing an OS that had to be all things to all people, as well as accommodate a mind-boggling array of hardware configurations.
The author’s optimism was always the promise of the Info Age. Those that believe that its going to be easy are naive. There’s too much at stake. If civilization implodes first, we’ll never know, and that will be a shame. Nationalism is not the answer, either. All are inalienable and deserve a chance. I’m thankful for my chance and am happy to share what I’ve found with anyone who’s interested. That’s *always* been the way that we advance.
Dear Sirs,
A little background – I built my first analog computer in 1959. I’ve been around a while.
I’ve experienced, first hand, 50 years of shattering, world changing advances in information technology that have not lived up to their hype. Yes, it is a marvelous technology but it is best viewed by going back to basics. It was called data processing. Just as swamps became wetlands and jungles became rain forests they’re still swamps and jungles. It is still data processing.
(Matthew 3:12) ‘Whose fan is in his hand, and he will thoroughly purge his floor, and gather his wheat into the garner; but he will burn up the chaff with unquenchable fire.’.”
Separating the wheat from the chaff is still the problem. Finding the needle in the haystack might be easier if you made a bigger haystack, but that assumes that it will contain more needles – an unproven assumption.
There have been many attempts to glean information from large quantities of data. The Japanese famously spent $5 billion on an “inference engine” with very disappointing results. Various “data mining” ventures have met with meaningful results, but only when dealing with numeric data and looking for specific predefined relations.
If there is meaningful content out there it will be discovered by eyeballs. Someone makes a connection and tells someone else. It has always been thus and always will be.
Discoveries occasionally happen when somebody puts two and two together. They far more frequently happen when someone sees that two and two doesn’t necessarily equal four. This is the difference between deductive and inductive reasoning. Computers are great at deductive stuff. They are kinda iffy with induction.
They can’t do intuition and that’s the gold mine. Vastly more available information will yield some progress. But, like so many of the past great leaps forward, it will disappoint.
Regards,
Roy
The true direction/excitement is the convergence/merging of infotech, biotech and nanotech. Read Juan Enriquez’s “As the Future Catches you” and Dinesh D’Souza’s “Virtue of Prosperity” to get an idea.
I agree with posters #2 and #3. We have yet to hit bottom with this financial crisis. Obama and crew only keep making it worse. After the recent Fed action, the dollar will soon have no value. As stocks continue to dive, government pension funds will collapse. State and local governments will have to start laying off employees as we continue to spiral downward.
I hope enough conservatives survive the civil war or next revolution to rebuild from the ashes. I would suggest that the Amish will end up being rich, not Google or Apple. No doubt there will be a big demand for buggies, hand operated equipment, kerosene lamps and homemade clothes.
Without legal protection for intellectual property, software designers are working for free, and software companies are worth zilch.
I think there is way too much “Startrek” in the mix here. There is a evolution occurring, called cloud computing. But, no one yet knows where its going to go. Cloud computing is the next step in the Web, some media outlets are calling it web 3.0. I guess the media geniuses haven’t learned from the Web 2.0 mistakes. (You can’t feed people manure and tell them its ice cream).
Back to clouds, its an incremental step. It targets businesses, and for the most part, as a business owner your told you don’t know where your application is running or where your data is located. Cloud sales people actually tell you “you don’t have to know, it a service.” Whoa!!! my applications to run my business and my critical business data ? I don’t need to know where it is ? Do these guys think they are my mother ? What kind of kool-aid are they drinking ?
This is the new game board where Google, Yahoo, Amazon, HP, IBM and Cisco want to play. They haven’t figured out to be successful your customers need to trust you, better than they trust their own families. HP has already dropped out of the cloud storage business without explanation, leaving 10s of thousands of customers stranded. Can you trust your business to company that engages in those practices ?
What happens when a service provider goes off-line for days, like amazon did. How do you run my business ? Is there a degraded mode of operation ? Can you use other providers to spread your risk ? Can I get my data over to them ?
There is no answer today other than NO.
The logistics are currently broken, trust cannot be established, risk is not managed, customers are locked in to specific providers. Does anyone really expect this next wave of competition to be successful. I think not. HP is smart, they are bailing out now and taking the consumer penalty before they get in over their heads.
There are lots of players entering this market. Commoditization of these services is accelerating exponentially, so is the decline in price. Who will be able to provide a viable and sustainable business model ? The VC community is looking for the big win, $20b markets with high yields. VC expectations are so absurd it laughable. Its so bad, they don’t even know people are laughing (most are crying).
Data mining and other service will evolve as the computing platforms evolve. But, don’t look to the big companies for vision or innovation. Don’t look to universities, not lately anyway. Look at the small fries, individuals with true vision. That’s what’s going to drive the recovery.
Because VCs will only consider projects with $100m revenue in 5 years, true innovation does not get funded today. Not investing in small projects, the VC community is actually stifling any recovery. This economy requires capital at the ground floor to survive. IN past decades much of the ground level capital came from small startups and the other businesses supporting them. Consumerism drives the economy. Trickle down economics has stopped trickling down and there is no capital to trickle back up. The economy has been financed by consumer debt. Now consumers are leverage, over extended, no more credit. The country is flooded with a foreign workforce brought in has H1Bs, T1 and L1 visa holders. That is 4 million of them or about $200b in salaries with an additional $100m in foreign outflow (sending money home). The biggest offenders, India and China. Do you think some of the people in those 3 million homes in foreclosure could be support by some of those jobs? Who let them in an army of foreign workers? Our electorate in Washington. All parties !!!!
Instead of dreaming about after the recovery, lets first get to recovery, we are not there. We need to fix the VC investment models and get rid of the foreign workforce in non-”life critical” roles.
Aww, I miss my Commodore 64.
POKE 53280,15
SYS7
I liked Roy Lofquists comment . He senses the truth. As we approach a new technological era he can see the failures of technology to solve the real problems of mankind. He even quotes scripture so we know he has been seeking answers in some unusual places.
There is a reality of truth in acknowledging that imperfect men can only create imperfect devices. The evil and sin of this world won’t be solved or defeated by better information gathering. Our real struggle is with our own imperfection . Nice job Roy. I’m an old guy too.
My Back Pages
Crimson flames tied through my ears
Rollin’ high and mighty traps
Pounced with fire on flaming roads
Using ideas as my maps
“We’ll meet on edges, soon,” said I
Proud ‘neath heated brow.
Ah, but I was so much older then,
I’m younger than that now.
Half-wracked prejudice leaped forth
“Rip down all hate,” I screamed
Lies that life is black and white
Spoke from my skull. I dreamed
Romantic facts of musketeers
Foundationed deep, somehow.
Ah, but I was so much older then,
I’m younger than that now.
Girls’ faces formed the forward path
From phony jealousy
To memorizing politics
Of ancient history
Flung down by corpse evangelists
Unthought of, though, somehow.
Ah, but I was so much older then,
I’m younger than that now.
A self-ordained professor’s tongue
Too serious to fool
Spouted out that liberty
Is just equality in school
“Equality,” I spoke the word
As if a wedding vow.
Ah, but I was so much older then,
I’m younger than that now.
In a soldier’s stance, I aimed my hand
At the mongrel dogs who teach
Fearing not that I’d become my enemy
In the instant that I preach
My pathway led by confusion boats
Mutiny from stern to bow.
Ah, but I was so much older then,
I’m younger than that now.
Yes, my guard stood hard when abstract threats
Too noble to neglect
Deceived me into thinking
I had something to protect
Good and bad, I define these terms
Quite clear, no doubt, somehow.
Ah, but I was so much older then,
I’m younger than that now.
Bob Dylan Copyright ©1964; renewed 1992 Special Rider Music
Mr Malone’s assumptions probably have some merit, provided that the trend towards collectivism is quickly reversed by whatever means is required. If it is not, none of his forecasts will be of any value, because when the government starts controlling the means of production, the innovators and leaders wikll not be allowed to function except where it suits the needs of the central planners. One of the fallacies of collectivism is that people think they can allocate the resources available to help everyone become equal. That has never worked and it never will, The only total equality is slavery, and not even then, since some will always be “more equal” than others. Mr. Malone is assuming that current trends can be continued. That is not necessarily true. No one really knows the future. Mankind isn’t that smart. As a matter of fact mankind is very ignorant, and only ignorant, arrogant people think they know what everyone needs better than the individuals themselves. It is far better to be able to act in one’s own self interests, than to be told what to do by someone else. That is how America became great, but on its current path it will become just another stagnant worker’s “paradise”. Those people who praise fairness are among the most ignorant of all. If you want fairness, you have to cut the pie so everyone has exactly the same amount. I’m still waiting for some techie to give me a formula for doing it. When a government controls an economy it controls the lives of everyone who lives under that economy. Those who claim this is good are just taking advantage of the brainwashed public who have lost all understanding of what freedom is really about. So Mr. Malone’s forecasts might well be correct, but given current economic trends, the chances of his being right become more remote every day.
We need to decisively re-orient the economy toward the productive sectors:R&D, hheavy and light industries,mining etc,and away from enterntainment,financial manipulation,and outsourcing.Globalism finance,and entertainment only serve to empower the leftist plutocracy that has destroyed the USA.This can only be done through civil war.Without transformative change,it will be only a matter of time before the left destroys the computer industry.
We need to decisively re-orient the economy toward the productive sectors:R&D, hheavy and light industries,mining etc,and away from enterntainment,financial manipulation,and outsourcing.Globalism finance,and entertainment only serve to empower the leftist plutocracy that has destroyed the USA. good site
Then once again, the opposite could possibly be true. – Life doesn’t imitate art, it imitates bad television. – Woody Allen Born 1935