Category Archives: Business

Economics is failing

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Yes, that’s right, traditional economics is failing, but then we knew that. We hear talk that we’re out of the recession, but for a lot of people that doesn’t seem to be true. Many businesses are out of the recession and the “market” seems to think we’re out of the recession. However, what does it mean when the market is out of the recession? A lot of the market runs on high frequency trading, so the market can make money without a lot of people participating. Based on traditional economics theory, these markets should behave in a specific manner and they aren’t.

Slate calls this the difference between salt water and freshwater economics. Where the freshwater economics is based upon a lot of the traditional neoclassical theories, while the salt water economics is what the market traders are using. They’re using physics or other sort of network models that aren’t included in traditional economics theories.

Many of them have begun to use various forms of evolutionary economics, because it works. However, there’s a disconnect between the market and many of the leading theorists in Academia. Why? because those economists have made a career out of developing these theories. I believe that economics is at the beginning of a paradigm shift and it’s going to be painful. A lot of things are going to be changing because of this paradigm shift.

We’re staring at the end of jobs within the next 40 years, not all jobs, but a huge amount of the works force is going to be automated. Google’s working on industrial robotics with Foxconn, multiple companies are working on driverless cars, a few companies have developed drag and drop software so you don’t need to know how to code to develop software which will automate work because you build in your process rather than building your process around the system. This is radically going to change work. In the Race Against the Machine book it’s clear we’re going to be seeing changes in how our society works.

We’re going to be entering a time period where traditional economics doesn’t work and neither does capitalism. A blog post I read the other day has an interesting discussion of how we can move beyond capitalism (based on Star Trek). By the way, when I’m saying capitalism isn’t working, what I mean is that it’s not going to work to fundamentally keep the majority of the people working or provide any realistic relief to non-working people. It will be working quite well for a subset of the population that figure out how to survive or thrive in that economy. The question at that point becomes not what we think our economy is or should be, but what we value as a society.

I’ve talked about this in other posts in the past, however, I think that when we are looking at the “market place of applicable ideas” and we see that the people that should be influenced the most by economic theory AREN’T using it, but our government is, we have a serious problem. People at banks making huge sums of money on trading should be influenced by economic theory because they deal with vast sums of money and are actively driving a huge portion of our economic activity (valuable or not is another question). If they don’t see value in using those theories, then our leaders that are still applying them need to seriously rethink what theories they are applying to “manage” our economy.

When the prevailing theory in a discipline is failing, for the discipline to survive it must move beyond it. Typically the new theories that save it come from outsiders and indeed in economics it has – from two sources, Biology and Physics. Hopefully our leaders and teachers can see it before our current economic theories destroy us all.

Powerful Microsoft investor wants MS to focus on Enterprise

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According to the Washington Post an influential investor is pushing for a new direction at Microsoft. His goal is to get Microsoft to ditch the consumer market and focus solely on enterprise. He wants the X-Box gone (likely sold to someone), Surface gone (either sold or killed), and their other non-enterprise solutions eliminated as well. I think that from a Financial person’s perspective these are something of an obvious option. X-box isn’t killing it in the market, they are expensive and take a while to recoup the cost of development and all that. The Surface hasn’t had great sales – although it’s hard to separate weak sales of the Surface from the abomination of Windows 8 that sold with the bulk of them initially (I’d bet they’d be solid devices with Android on them).

I think it’s important to remember why Microsoft is Microsoft. It’s not entirely because of Enterprise. It’s because Operating systems are difficult to learn and people don’t want to learn more than one if they can avoid it. Only recently have the bulk of people been fluently on two different operating system – Windows/Mac/(few on linux) & iOS/Android/Windows Mobile/Blackberry. The most common interaction would have to be Windows & iOS and/or Android and Mac & iOS.

The reason for strong enterprise Windows sales is because of the massive consumer base that Microsoft has managed to hold on to despite it’s best efforts. If most people had to learn multiple different operating systems between home and work it would increase their stress levels at work. The skills they learned at home wouldn’t transfer well. I think this is also the reason why enterprise is conservative in upgrading their Windows OS – essentially skipping every other one. XP/Seven because those are the products that seem to build a strong enough user base on the consumer side. Most techies don’t like Win 8, so that hurts sales to Mom and Dad or their friends. They’ll tell them to avoid a product or get them to go back to Win 7 over 8 if possible.

The battle for the next OS is going to be fought on tablets and phones, before it’s fought on laptops and desktops. I know there are some tech experts out there calling for the death of the tablet, however, I think it’s far more likely that there will be a convergence between laptops and tablets. Where a tablet can meet our core needs of our laptop.

The more powerful of the two Surface products (Pro) was just that type of product. It was able to do a lot of WINDOWS laptop stuff, but in the form factor of the tablet. Should have sold well, except it cost a ton for a tablet or under powered laptop. I think that this really is the consumer space people will work from. We really don’t need more space unless we’re gaming and then people will build a desk top or buy a console.

Consoles – the X-box isn’t just a console, it’s supposed to be a full multimedia PC replacing the need of a desktop. You pair the Surface Pro with an X-Box and you’ve got everything you need for your house. This is what Microsoft is envisioning. Everyone is still using Office on their Surface, Skyping on both X-Box and Surface, and everything is based on the familiar (sort of) Windows OS. Keeping it front and center.

Let’s say MS ditches the console and Surface. They’d have to license out Windows to run on tablets and wouldn’t have the ability to help shape those conversations. They are competing with 2 Rabid fan bases in mobile OSes, one that many companies are able to use for free (with some licensing fees to MS), Google is pushing to replace MS in netbooks and likely other environments – Chromebook and ChromeBox. All of these could threaten their dominance as the work station in enterprise. For the bulk of the work I do, I could probably do it on a tablet as long as I have a compatible office suite.

Furthermore, MS isn’t the only option in many of the enterprise spaces. They aren’t the only OS, Office Suite, or Enterprise service company (Dell, IBM, Accenture, SAP, etc…) it’s not a guarantee this process would work. Furthermore, people are already talking about an Android server for some activities. These are all threats to MS core business OS and Office Suits. Leaving the consumer space only opens them up to more threats as people will want to stay in a similar environment.

This is another example of the Innovator’s Dilemma and MS should look to use Lean to help solve their cash and process challenges. Both the Surface and X-Box are good products. They just need to figure out how to find the right market for the Surface.

Saving video games from publishers

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There’s big money in video games. No one can deny that, especially now that the definition of casual gaming has changed from Wii type games, to games on your phone that mimic some really old school type flash games (bejeweled for example). One of the largest game publisher is EA, they have been notorious for making both amazing games (BF4), amazingly bad games, amazing games with poor execution (SimCity), and amazing cash grabs (Dungeon Keeper iPhone). However, it’s not alone in trying to destroy gaming.

Zynga made a pretty big run at the title and likely helped shape the current state of our gaming industry. They were the original most successful company in facebook for gaming coming up with Mobwars and Farmville. They’ve been replaced with King.com (Candy Crush) now though and have nearly gone out of business. At one point they had a higher valuation than Facebook.

The point of these games is similar to a casino. Keep you coming back and keep you putting money into the machine. They design games to be addicting and put frustrating blockers in your way to entice you to pay money to overcome those obstacles. They technically are “Free-to-play” but they certainly aren’t “free-to-have-fun”. For example, about a year ago Real Racing 3 came out and to unlock everything with cash, it would cost $503!

The article that got me thinking about this topic highlights a 1997 game called Dungeon Keeper which has been released on mobile platforms. In the game you build a dungeon and try to kill heroes that come through and kill your monsters. One of the things you do is dig out spaces for your dungeon, this used to just take a minute or two in game time. Well, EA did it’s little cash grab option with it and now that same space will take roughly 30 hours to mine out unless you pay them money to speed that up! Here’s a video with a nice little summary of the topic.

Now, we know that this hasn’t been limited to mobile games for some time. It’d hit the hardcore gamers in the form of Downloadable content (DLC) and in many cases would be a $15 or so charge to make the game functional on top of the $50-$60 you already paid for the game. In some cases they’ll also charge you for other visual upgrades and stuff like that.

In some cases the companies are doing it because it’s a beloved franchise and they know people will fork over the money for it even if they’ve vowed to never buy from that company again (BF4 after SimCity debacle for instance). This is because they are able to charge monopoly prices being the only game in town.

In other cases, they are able to charge this behavior because of the addictiveness of the game and the pressure of your peers playing the same game. It’s a casino mixed with keeping up with the Joneses mentality. The worst of the worst and company are pulling in as much money as they can on it. In many cases those games are straight up copies from other companies – or at least the game mechanics are the same.

This has made some people discouraged over the future of the gaming business model. I believe that we have some of the most generous people in the world in gaming. You have the Extra-Life fund raising event, HumbleBundle, and a ton of other things like that. There are also really honest folks out there trying to break into the industry, just look at Steam Green Light, Kickstarter Games (check out KBMOD’s Crowdsourced corner), and just the sheer number of new games and apps that have a single price and are honest about their pricing (this link will take you to a list of games that are pay upfront or honest free to play).

Which makes me think that we have two different type of people running gaming companies. We clearly have psychopaths at the head of the company and normal regular people trying to do right by their customers. I think the hardest thing is, we have honest people working for those psychopaths, which is unfortunate.

What can we do as gamers and employees? Well, if you think your CEO is a psychopath leave; it’s going to be an unhealthy work environment in general. Secondly, if we want to see those business models die, educate your friends on how horrible this movement is for gaming in general and point them to cheaper alternatives that aren’t cash grabs. Help inform your friends that aren’t savvy about this. Send them links to games that are better, more fun, and less vile in their pricing schemes.

If you have any recommendations for honest, safe gaming, let me know in the comments!

Lenovo bought Motorola now what?

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Well, it’s complete, Lenovo has completed it’s assimilation of IBM’s x86 market and now has moved onto the mobile market in the US through buying Motorola Mobility. This move makes a lot of sense for both Lenovo and Google (as well as IBM). From the Innovator’s Dilemma perspective, we have a company that is focused on building produts at a good price with all sorts of efficiencies buying a much lower on the priority source of revenue from Google and IBM.

What else does this mean? Well, it’s likely that Lenovo will begin to experiment with unique products to take advantage of their full technology stack. They are one of the few companies that have successful lines of business in Laptop, Servers, and now Smartphones. They obviously will be quickly filling any gap they have in the tablet space – which they already have offerings. Now, they can take mature technologies from Motorola Mobility and implement them in their broader product portfolio. In the sale, Google kept most of the patents, but they are sharing the patents with Lenovo. This is a big deal for Lenovo as they can freely use those technologies with no cost which means they can experiment with those technologies in unique products.

For Google, it’s a good move because they don’t need to manage a legacy manufacturing and design firm that they never really integrated. This is especially true since they were partnering with other companies to develop their Nexus line up. It simply made no sense to hold on to a company like Motorola when you weren’t planning on truly using it. Plus, Google makes most of it’s money from ads still and from their ecosystem. They do better if there’s strong competition in their operating system ecosystem. In fact having Lenovo as a partner now will likely help them more than owning Motorola ever did.

Lenovo will be able to put more money into their smart phones and will likely offer unique products that mix their laptop capabilities and servers with the smart phones. What could we see? Well perhaps a fully docking phone/tablet that truly replaces a laptop and maybe even a desktop. With the small server capabilities they may even figure out how to mix those capabilities by selling a smart phone that can connect to a “personal server” that allows you to access more power and storage while on the go.

I’m excited to see stronger cometition for Samsung and Apple in Lenovo and look forward to interesting products from the company to compete and push the market in a new direction.

Technology obsessive culture leads to product worshiping

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Apparently, today is the 30th year since the Macintosh computer was introduced. All over the internet was a big masturbatory fest over this great achievement. Honestly, I don’t really give two shits. Quite frankly, I don’t think that it really changed everything and anything – similarly I don’t think that the iPhone did. In both of these cases the technology had been in the market, it just required the right type of interface or marketing. It’s well known that there were a lot of similarities between the work that was being done at Xerox PARC and at Apple. In fact, Steve Jobs went to visit and learned a lot about what the computer gods of Xerox were doing. Did he steal ideas from there? No, but I’m sure that his ideas were enhanced and improved because of his visit. Similarly to the way that his ideas were enhanced and improved by all the competition to the iPod including the Palm Pilots, BlackBerry, Windows Mobile and so on.

Apple was the first to market for really easy to use printing interfaces as well as type faces. However, at the same time that Apple came out with their product, Adobe was developing their similar product which was a spin off from Xerox. Similar, Microsoft Office was developed by an ex-Xerox employee.

Did the Macintosh change things? It’s likely from a design perspective more than anything as both Windows and Apple’s operating system were similar to the Xerox operating system. What happened, why did Apple succeed and change things and not Xerox? Because Xerox didn’t know what to do with what they had. Apple, coming from a different perspective, different cost structure and different corporate culture, was able to move into the market with only competition from IBM. IBM was a business first company and didn’t really understand the market they were helping to develop. This is why IBM wasn’t able to dominate the market the way they did in the minicomputer and mainframe days – in fact, IBM has completely exited the x86 market. Because of IBM’s business decisions we now have Microsoft and Intel (and others of course).

We idolize the great personalities and the beginning of a new technology. But the movement and technology wasn’t created by Apple even though they get the credit. Apple did do great work, they helped to shape an early portion of the computer age, but the introduction of a specific product only notes a specific point in the total arc of that technology. Computers went racing on by, new ways to interface with computers have emerged and were even invented before the Macintosh was released.

The Macintosh was certainly was a high mark at the time and was a great introduction to many people to the greater opportunity of computing. It allowed more people to access computers. I know that I used a version of Macintosh while I was growing up in elementary school, however at home we never owned a Mac, we only ever owned PCs while I was growing up. The Mac was already on the way out by the early 90s, which at the time was fairly fast, considering the quick ramp of computer since then.

Should we honor the Mac? No more than we should honor the first Palm, Blackberry or Android phone. I fully expect the iPhone will be honored as much or more in 3 years when the iPhone hits ten.