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Posted Thursday, July 31, 2003 Linux vs. Windows
Joel sounds more realistic to me. The Apple cultists have been saying that they are going to clean the PC's clock any day now for close to 20 years. The Linux cultists are just as shrill. I think that Microsoft will be challenged by centrifugal force. But I would bet that in 2008 there will be more computers running Windows than there are today. And fewer computers running Linux. . . . . . .
Moore's Law and MedicareIn this essay, I argue that the two are well matched.
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Posted Wednesday, July 30, 2003 Would Odlyzko Short Verizon?If Verizon is really committed to putting this much money into fiber to the home, I would think that Odlyzko would short their stock.
Thanks to Lawrence Lee for the pointer. . . . . . .
Posted Tuesday, July 29, 2003 Must-reads from Andrew OdlyzkoDr. Weinberger found one on privacy and price discrimination. Did you ever wonder why the supermarket and all those other folks want to put all your purchases into a database? Andrew thinks he has the answer. Companies want to try to charge lower prices to price-sensitive customers, and vice-versa.
Another quote about price discrimination:
But read the whole thing. (Thanks, Hylton, for the pointer to Joho) And when you're finished, you have to read The Many Paradoxes of Broadband.
Again, read the whole thing. And please pass it along to Reed Hundt. And also read...oh heck, just go to Andrew's site and read everything. . . . . . .
Posted Monday, July 28, 2003 Gold in the Diamond Age?This sounds like what Neal Stephenson called a Matter Compiler in The Diamond Age.
Somehow, gold is involved in the process. Howard linked to this under the category "the era of sentient things." Could be. Or it could be the era of gibberish. . . . . . .
Making my argument for school vouchers
Well, he's actually talking about Web browsers. He is saying that Microsoft has stopped innovating, which means that some other browser could take over. I have to say that about every six months I download Mozilla, try it for a few days, and then uninstall it. I guess you have to be a connossieur to appreciate it. . . . . . .
Mandatory LibertarianismYes, it is an oxymoron. But it expresses my frustration with opponents of school vouchers. I argue that
Markets work all the time. But people are convinced that they cannot possibly work in education. It makes me want to mandate a course in markets and libertarianism. . . . . . .
The Freddie Mac Scandal, Con'tThe Washington Post's Jerry Knight has the sense to be skeptical of the innocence of Freddie Mac's Board in the whole deal.
His point is that the Board members, several of whom are political appointees given supposedly cushy jobs by the President, might have to learn some finance in order to oversee the company effectively. However, I am still not convinced that what Freddie Mac did was evil. They have a portfolio of mortgages, which they hedge with derivatives. In economic terms, the hedges and the portfolio match up well. What happened was that the accounting rules said to treat the portfolio and the hedges differently. The portfolio should be valued historically, and the hedges should be marked to market. Thus, it was the accounting rules that created an asymmetry that distorts the value of the company. Freddie apparently tried to evade the accounting rules by coming up with transactions which it claimed could be accounted for differently. I don't know enough to know how shady this was from an accounting standpoint. But as an economist, I naturally think that trying to get the accounting to match up with the economics is a good thing. The best thing would be if accountants used mark-to-market accounting for everything. The distortion is that they do not do so with mortgage portfolios. . . . . . .
Posted Sunday, July 27, 2003 Making the Race TallerHere is a story about the FDA approving human growth hormone for children who are not deficient in the hormone to begin with.
OK. Now, once those children have been given growth pills, somebody else will be in the bottom 1.2 percent. And once those children have been given growth pills... Randy Newman once sang "Short people got no reason to live." Don't worry, Randy. We are about to be engineered out of the human race. . . . . . .
A Hopeful Sign?After reading on Gizmodo about a new small notebook PC from Sony, I decided to go look at one at CompUSA. After checking the web site to make sure that they had it in stock, I went out to the store. It was no longer in stock. They had sold four of them, including the demo model. We don't really need a new PC in our family, but this one just sounds really cute. It is small enough to be truly portable, but big enough to have a real keyboard, plus some attractive features like WiFi, DVD drive, and even a camera. Anyway, my point is that maybe the tech market is coming back to life. When an expensive product sells out quickly, there is hope. . . . . . .
Posted Thursday, July 24, 2003 Must-Read GibberishMost of this riff by Neil Gershenfeld is incomprehensible to me. But he thinks it's important.
Is he providing insights or talking gibberish? I link, you decide. . . . . . .
Join the Club!Woohoo! Somebody is finally trying the business model for content that I have been advocating for more than five years: a club that for a flat fee lets you access content from a variety of publications. The product is still vaporware, but journalists have been clued in on it. The Washington Post had this story.
All business models for content are imperfect. That is because information wants to be free but people need to get paid. That is, the right marginal price for content is zero, but creators need to be compensated. Of all the imperfect models, I believe that the club is the most promising. With the flat monthly fee, the marginal cost is zero. You also avoid the "mental transaction costs" of micropayments. It's much more consumer-friendly than a model in which you have to subscribe separately to the individual publications. Online zines and would-be professional bloggers should hope that the KeepMedia model catches on. I think that it is the best hope for us. I can't wait to try it. . . . . . .
Posted Wednesday, July 23, 2003 Mudball FightsIn theory, making Boards of Directors more accountable is a positive corporate reform in the post-Enron environment. In practice, what this means is that Boards will fight harder to evade accountability. Freddie Mac's Board is so worried about being held responsible in any way for its accounting issues that it hired a hit squad to go after senior management. So we get this story.
The slogan "steady Freddie" was an investor-relations tag line that came and went years before any controversial accounting decisions were made. It was supposed to provide a subtle dig at Fannie Mae, implying that Fannie's higher profitability was due to the fact that it was taking more risk.
If the goal of steady, nonvolatile earnings growth is sinister, what should employees have been encouraged to achieve instead? Overall, the report comes across as a mountain of innuendo atop a molehill of real issues. If they had a real case against senior management, they could let the facts speak for themselves, rather than try to make mundane corporate blather sound like a directive to cook the books. The reason that the report comes down so hard on Freddie Mac management is that the Board, which funded the report, is trying to deflect attention away from itself. I am not saying that I think that the Board deserves to be held at fault. But even though I was never a big fan of senior management when I worked at Freddie, I think they are getting unfairly blasted in this mudball fight. If the Board wants to take an active role in evaluating corporate performance, fine. But it is not in the interest of shareholders to hire a firm like Baker, Botts for the sole purpose of trying to slime top management. Since the goal of corporate governance reform ought to be shareholder interests, it is clear that we are not there yet. . . . . . .
Posted Tuesday, July 22, 2003 On Middle Management
It sounds like we at Corante are piling on and bashing everybody who works for a large organization. I don't think that is what we mean to do. Here are my views on the topic. 1. Middle managers have valuable skills and they do important jobs. 2. In the world of business, there tends to be a trade-off between security and autonomy. You have more autonomy in smaller organizations, particularly if you are the owner-entrepreneur. You tend to have more security in large organizations. 3. One of the reasons that people become really bitter when they are laid off from large organizations is that they know that they have gotten screwed both ways. They did not have the autonomy, and now it turns out that they did not have the security, either. But still, on average, a middle manager enjoys a lot more security than an entrepreneur. 4. There is nothing wrong with choosing security over autonomy. 5. There is nothing wrong with trying to minimize the personal risk of starting a business. Trying to go out on your own on a moonlighting basis is ok. Giving up on a business before you go completely bankrupt is ok. Yes, there are plenty of heartwarming stories of entrepreneurs who were down to their last dollar of available credit before they turned the corner, but those of us with a lower pain threshold should not feel ashamed. Having said all that, I think that people often over-estimate the personal risk involved in starting a business. The downside is that you will backtrack a bit financially. But people do that in other ways, too. A lot of times, people who are stuck in their careers will take time off to get an MBA or another type of degree. If you instead put that time and money into starting your own business, at the worst you may learn more and acquire more useful skills than you would get by going to school. At best, you may get lucky and pull off a success. . . . . . .
Posted Monday, July 21, 2003 Privacy, Transparency, etc.A nice survey article from Reason on the issues.
I agree with the majority that is willing to sacrifice privacy for convenience. Where I disagree with the majority concerns this statement from the Reason article.
This does not have to be the case. The problem, in my view, is that we have way too many laws, and to maintain social peace we have come to rely on selective enforcement. Technology threatens that equilibrium. I blame the majority not for their failure to fight the technology, but for their failure to fight the laws. . . . . . .
FuturistsHere is a big Rand study of the future of technology, with an emphasis on how it will have different impacts in different regions of the world. For example,
For some reason, I find these sorts of "big-picture" exercises in futurology to be less helpful than random anecdotes I pick up in smaller chunks. Maybe that is because I prefer to paint my own "big picture." For my purposes, the challenge is to sift through all the things that people say are going to be important and determine which ones will in fact prove feasible and significant. For example, the Rand folks think that computerized language translation will be an important application going forward. If it worked, I agree that it would be very significant. I think that the language barrier is very important today, in that it lowers economic performance for everyone and increases the disparity between the English-speaking world and everyone else. So the important question is whether language translation, which so far is a disappointment, will prove feasible. I would like to read an article that delves into the language translation problem and explains why the next 5 years will see the type of progress that failed to occur in the last 5 years. I can't just take the Rand folks' word for it. . . . . . .
Posted Sunday, July 20, 2003 Smart Mobs?I'm with Zimran.
I think this is an important point. It's kind of the flip side of the point I've been making that Big Media is deader than we realize. Insurgencies, from the California recall petition to the Howard Dean campaign, are the initial beneficiaries of the Internet. As Zimran says, the result is that bitter partisans are empowered, and the center has been weakened. . . . . . .
Pick Your Battles?Bruce Schneier has a long rant about stupid security policies. At one point, he advises,
This is true in general when it comes to corporate stupidity. On our return trip from Canada, we had scheduled to change planes in Boston, with a 90-minute layover. We were a bit nervous about making the connection, but all of the problems that worried us--getting through border patrol, customs, and re-entering the gate area through security scanners--were non-events. What did us in was the hostile UI of Logan airport and the American Airlines check-in system. The small planes that we were using do not park at the terminal proper. Instead, they go to somewhere in Lower Slobovia, where you take a bus to get to a terminal. Then we had to take another bus to get from that terminal to the American Airlines terminal. Then, since our ticket said "American Airlines" we stupidly went to the American Airlines ticket counter. There, we were told that we were on "American Eagle," which was at the other end of the terminal, and American Airlines could not help us. When we got to "American Eagle," both agents were working on a complicated booking for much later in the year involving three couples trying to co-ordinate travel. We said, "We need to check in for the flight that is about to leave for Baltimore," at which point an agent shot back, "I can only work on one thing at a time." Twenty minutes later, they were still working on that one thing when another agent came and offered to help us. She pointed out, however, that by this point it was too late to catch the plane, because we still had to go to the gate and then take the bus to Lower Slobovia. In short, there is plenty of stupidity going around that has nothing to do with security. Pick your battles. . . . . . .
Posted Saturday, July 19, 2003 Life in the Nonconfrontational Big CorporationFastCompany was started early in the dotcom heyday, but its appeal has always been primarily to middle managers in big organizations. Apart from Dan ("Free Agent Nation") Pink, the magazine mostly serves up what I call "chicken soup for the middle manager's soul." Others have described the magazine, which makes extensive use of personal photos, as business porn. I once devoted an essay to debunking the FastCompany ethos.
The reality is that top management does not want middle managers to be risk takers. Top management wants middle managers who are great platoon leaders, who can motivate the troops to do as much work for as little money as possible. Motivating the troops is the subject of the latest issue, which features a carrot on its cover. It turns out that the featured manager in the cover story is Mary Cadagin, a former colleague from my days at Freddie Mac. She now works for Fannie Mae. I think that of everyone I have ever worked with, the one I respect the most is Cadagin. Only a handful of people have impressed me as much. The story tries to make her out to be someone that you or I could imitate. In that sense, it fails to capture her unusual intellect and unique personality. But something about the story troubled me. The project that it featured is a difficult one to execute, to be sure. But for Cadagin, it is something that she could have done 15 years ago. In fact, it appeared to have fewer political banana peels than were strewn in front of the projects I saw her handle during the two years that we overlapped at Freddie. Why is she still carrying middle-management water, instead of holding down a top executive position? Perhaps this is her choice (we have not kept in touch). But if there is something that has kept Cadagin from reaching the highest levels, my guess is that it is because she is willing and able to handle confrontations. After reading David Brooks' Bobos in Paradise, I noted that the fundamental ethos of the bourgeois bohemians seemed to rest on the principle, "Thou shalt not confront." This attitude may make it easier to deal with diverse cultural and moral views, but it makes it harder to deal with real evil. In the corporate world, "thou shalt not confront" probably makes for a better corporate environment most of the time. But it makes it impossible to blow the whistle effectively in an Enron-type environment. And it keeps someone with Cadagin's skills and temperament from rising above the mediocrity in the management layers on top of her. . . . . . .
Posted Friday, July 18, 2003 "Influentials" Use the NetHere is a Roper study that shows that "influentials" rely on the Internet more than other media. Really, I believe that Old Media is closer to dead than most people realize. On vacation, I was reading "The Battle of the Atlantic," about the U-Boat fight in World War II. There were experts on both sides who thought that the Germans were winning in 1942, but the British head of anti-submarine warfare believed that the key indicators showed that they had won. By mid-1943, he was clearly right. Similarly, there are many people on the Web who are frightened of Old Media. You can still get the Walden Puddle types worked up over media consolidation. And, of course, Old Media still thinks that they are all-powerful. But the Roper study is statistical evidence for my view, which is that we have already won. Other indicators include the fates of Trent Lott and Howell Raines, and the wartime popularity of command post. The Roper study appears to be commissioned as a way to help convince advertising agencies to buy on the Web. But the typical Web ads are Old Media, and my guess is that they do not affect the "influentials" very much. A lot of us use pop-up blockers--the new version of the Google toolbar is worth downloading just for that function alone. If the Battle against Big Media were like the Battle of the Atlantic, it's late 1942. We've won, but most people don't know it yet.
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Posted Wednesday, July 9, 2003 Supernova 2003, part 6Sister Lawley (from Many-to-Many), Dan Gillmor, and Anil Dash demonstrated that the "back-channel" was important at the conference. Blogging and IRC, which would be rude in other contexts (not paying attention to the speaker, having side conversations, cursing), was ok here. They put the IRC channel up on the projector, to illustrate the back channel. The panel invites the audience to speak up, and no one raises their hand. But people are still typing on IRC. I'm impressed with Lawley's point that this is a real change in group dynamics. It will be interesting when classrooms are wired to show the backchannel conversations. . . . . . .
Supernova 2003, part 5Bruce Mehlman says that he is in favor of "protective technologies" to deal with copyright, although he does not want a government mandate for it. My guess is that the economics of "protective technologies" are terrible. They are like a huge tax, and the deadweight loss from the tax exceeds that of other taxes, like the income tax. In other words, it would be more efficient to have tax-financed public subsidy of content than to use protective technologies. Greg Staple talks about the FCC policy on unbundling as affecting broadband rollout. My view is that it won't affect broadband either way. It's just rent-seeking, with no-engineer lawyer-based "retail phone companies" fighting for rents with monopoly Bells. The consumers and broadband have nothing to gain in this. Staple quotes Powell as saying that this will promote broadband. In this case, I have to differ. Like Powell, I would have held my nose and voted against the lawyer-only phone companies, but I would not have predicted that it would lead to more broadband. Blair Levin disagrees with me and agrees with Powell that we will see more broadband investment. Gigi Sohn says that the investment won't be worth a damn if prices don't come down. Blair says that if there were different applications...I agree with Gigi Greg Staple asks who matters: Congress, FCC, others? (My answer would be: INCUMBENTS. Where you have regulation, you have incumbents.) The art of deregulation is the art of overcoming incumbents. Blair says Congress does not act often enough to be important (me: but their old acts matter, and the threat of acting matters). Blair says states are under-estimated. (me: and the rent-seekers probably are even stronger there. That's why I did not like the FCC decision to allow the states to continue to regulate unbundling)
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Supernova, part 4David Isenberg says that "the era of voice is over." I don't think that my wife would agree with that. I would give up a phone before I would give up email, but I think she would do the reverse. Raju Gulabani said that as prices have declined, people talk more on the phone. David later amended his statement to "the era of voice-only is over." The point is that eventually what people want are IP packets, not special services (e.g., voice). In the next session, Cory Doctorow said that Congress has delegated tough policies ("nuclear waste") to the FCC, which subjects the FCC to lobbying by individuals. The response of the FCC person was that sheer volume was not as helpful quality analysis. (sorry, the panel was convened at the last minute, and I did not catch the names) . . . . . .
Hundt vs. Powell (Supernova, part 3)My father recently asked me if there were any good economists in the Bush Administration. I thought for a while, and then I said, "Michael Powell." My appreciation for Powell jumped even further yesterday, when I heard Reed Hundt give his talk. Herewith a list of things that bothered me. 1. He invoked "national competitiveness" as a reason for a big broadband subsidy. There is no such thing as national competitiveness. And it is one of those causes, like energy independence or stopping child porn, that invariably is used to justify bad policies. A lot of politicos talk about national competitiveness of course, so I don't take off points for it. 2. He used the metaphor of the interstate highway system. Again, I don't take off points, but it really shows how dated his thinking is. He still has the "information superhighway" model of the Internet. 3. He says that Asia and other countries are "winning" with a more state-directed model. That looked reasonable 15 years ago. It looks stupid today. 4. He is focused on getting broadband into homes. My sense is that the people who want broadband in their homes already have it. The next thing they want is better mobile connectivity. Fiber to the home does nothing for that. 5. He says that HDTV is a bad idea, and that fiber to the home is a better idea. As I tried to point out in the Q&A, the arguments that he is making for fiber to the home are the same ones that were made for HDTV. He is mocking a white elephant HDTV while following the exact thought process that created it--and that does not trouble him in the slightest! 6. He says that it is unthinkable that telcos or cable companies could fail. Obviously, he is not a signatory to the "Fail faster" letter. It is not surprising that he and I disagree ideologically. It is not surprising that he believes in an industrial-policy approach to telecom, although I was surprised to see how confident he was about it. But he seemed to me to be unaware of what has been going on in technology in the past five years, if not longer. Along every dimension, Michael Powell stands head and shoulders above Hundt. I'm sure that Powell will make some calls that turn out to be wrong--I think his job has more challenges, ambiguity, and importance than Greenspan's--but I've found myself agreeing with his thinking on every major position he has taken so far. Someone at the conference said that opening up the MMDS/ITFS band to open spectrum was a triumph. As you can see from this article, Powell had to overcome opposition to do it. . . . . . .
Supernova 2003 part 2David Weinberger made his case against digital identity. He said that there is "zero user demand" for it. He said that the solutions that have emerged for handling transactions are working reasonably well. Things like when you register for a vendor, get an email, then click on a confirm page. So he does not see big benefits. He sees potential costs. The most interesting is that he thinks that "trust system" is something like an oxymoron. His point is trust is something that is implicit. Explicit systems are designed to overcome distrust. His view is that explicit social trust systems are destined to fail. UPDATE: My own view is that implicit social trust is destined to fail at large scale. That is, a small group of people (say 5 if they don't know each other too well, up to 100 or 150 if they know each other really well) can get by on implicit rules. For larger groups, the rules need to be written down (see Clay Shirky's essay on the need for a constitution.) So, I agree with David that formal systems are a substitute for implicit rules. What is fascinating about the Internet is that there are many instances in which it is not clear which approach should apply. But I would guess that the size and persistence of a group ultimately will be the determining factor, with small size and longer persistence favoring implicit rules. Changing topics, I found a link (on Howard's blog, naturally) to the Microsoft analysis comparing the cost of data storage with the cost of data shipping. It draws implications from that. It's clearly what Tren Griffin was referring to yesterday. . . . . . .
Supernova 2003I still haven't left for vacation. I'm caving into fashion, and blogging the conference. The first speaker was Reed Hundt, Clinton-era FCC Chairman. For what he said, see Dr. Weinberger's notes. I guess my take is that I found the speech, which advocated a $50 billion government subsidy for fiber-to-the-home, rather pitiful. Somebody help the guy get an OS upgrade--it's like his brain is running Windows 3.1. Stowe Boyd says he was "unmoved" by Hundt's talk. I guess that's a more gentle way to put it. Boyd also discusses Clay Shirky's talk, which was on the fact that we have a robust Internet backbone, decent small-area wireless networks, and a flimsy phone wire (or cable wire) in between. Clay didn't discuss the solution. It seems to me that you have to build the backbone forward (but not Hundt's $50 billion monstrosity) and wait for the wireless networks to build out. I think it will be mostly the latter, because that is what is needed for mobile computing/communication and for what Microsoft's Maria Fernandez pointed out will be a lot of device-to-device communication. Microsoft's Tren Griffin suggested that with a few more turns of Moore's Law, you will be able to get all existing content on a hard drive, and that will be cheaper than high bandwidth. I think a lot of people reacted like this. But I think that Tren is right. As Andrew Odlyzko says, Content is not King. People want to use bandwidth to communicate. For the most part, they do not want to download movies to their PC's, much less to cell phones. Tren is not saying that only corporate-created "content" matters. He is just saying that using the Net to ship around corporate-created content ultimately is not a cost-effective use of bandwidth. We will find other uses for bandwidth. Another random point is that Craig Silverstein from Google said that their staff uses videos to communicate. He says that because videos are now easier to make and easier to watch than several years ago, this works. I'm still a bit skeptical, but I took it in as a data point. Oh--I should have mentioned that my Howard Dean of Walden Puddle essay is up. Lots of Puddlers here at the conference. Maybe I'll take my laptop to today's session. . . . . . .
Posted Monday, July 7, 2003 Come Back July 18I'll be back from vacation in Canada then, although it may take me another couple of days to get back to blogging. Before we leave, I will be checking out Kevin Werbach's Supernova conference, where I expect I'll meet a lot of people from Walden Puddle. I discuss Walden Puddle (my term for people who cherish the decentralized Internet but distrust decentralized markets) in an essay that TechCentralStation might carry while I'm away. Kevin says that there will be WiFi and a photowiki at the conference. I'll settle for pencil and paper. So, not that anyone's holding their breath, but my perspective on the conference will be rather delayed. I'm sure you will be able to tap into Walden Puddle's conference perspective much sooner. . . . . . .
Posted Thursday, July 3, 2003 Organize ThisA story goes that Hell was created when God took Satan to see Heaven. "It's beautiful," Satan said, appreciatively. "Here--let me organize it for you." In that spirit, we have the idea of organizing blogs by topic or by location. . . . . . .
Another WiFi metaphorIn case we needed another metaphor to try to explain the difference between WiFi and traditional Internet service, here's another one from the Reed, Frankston blog.
Anyway, by 2007, Cometa is supposed to figure out the taxis-owned-by-railroad-companies model. . . . . . .
Gateway to Hell?
My sense is that, apart from video games, the family den has been a killing field for tech companies. But companies keep going after it, like World War I generals sending infantry charging into machine guns. The TV still dominates in the den. The Internet wins everywhere else. Convergence is a loser. How hard is that to figure out? . . . . . .
Posted Tuesday, July 1, 2003 WowClay Shirky's writings are usually must-read, but this one is unusually good even by his standards. I'll pick a paragraph, just because it uses the word "economist"
Actually, the core point of the essay is probably this:
But the essay is better than any excerpt or summary could convey. . . . . . .
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