The Pebble and the Avalanche

The Palm PDA: The Descent from Brilliance to Incompetence

I've just spent a few minutes working with my Palm PDA again. The Palm is simultaneously a great invention and a terribly frustrating piece of equipment. On the one hand, it really does store all my information and keep track of my schedule; on the other hand, the Palm software on my computer desktop can be intensely frustrating. Not to mention, of course, that the hardware always seems to give out after only a couple of years.

Take my address book, for example. A recent hardware fault with my Palm forced me to restore the system from scratch. Unfortunately in its latest incarnation the backup and restore software running on my desktop computer (a MacBook) decided to erase more or less all of my personalized categories. Instead of names and addresses sorted neatly into "Business," "Travel," "Restaurants," and the like, the addresses were dumped into one huge jumble that I'm still trying to sort out two months later.

What I find puzzling is how Palm descended from brilliance to incompetence. On the surface, Palm continues to make the right decisions; witness their recent decision to disaggregate themselves into a hardware company and a software company. But in practice Palm seems to be on a downward spiral: the iPhone is the choice for the hip and cool, Microsoft's horrid software ensnared most business users, and Google will shortly release Android to capture a wealth of innovation. There's a lesson in here somewhere and I intend to find out what it is.

Topics:  · business

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Suing to Change a Diagnosis?

If this article is true (found via Techdirt), I believe I can promise the tactic will backfire. I find very unsettling the idea that a doctor can be sued to change his diagnosis to conform to a corporation's dogma. On the other hand, I have to commend Taser for fighting against unlawful-death lawsuits and sticking up for their product even if it does mean suing doctors in court; few enough companies seem to do this nowadays.

Society expects that a doctor's judgment be rendered without any outside pressure; just look at the furor over hypothetical conflicts of interest when doctors receive grant money from drug companies. If a company attempts to reverse the disaggregation of medical opinion from corporate interests, they will eventually face not just public opprobrium but in all likelihood Congressional attention.

One word of warning: add a grain of salt to the newspaper article. Reporters as a class seem to believe quite sincerely that doctors' integrity is under assault from corporations; I have to wonder if this corporation's side of the case is fairly represented.

Topics:  · business

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The Great Yahoo! Beer Money Caper

Microsoft's quest to purchase Yahoo! continues to puzzle me. First, there's Yahoo! itself as a company; I can't quite figure Yahoo's business model and why the company might be worth $45 billion — I can't help but thing of advertising revenue as just beer money. And Yahoo! itself evolved from a simple list of Internet resources into a huge aggregation of barely related resources. (I stopped reading Yahoo's new pages when Google News provided a more interesting new feed.)

The other question is about Microsoft itself. As others have pointed out, a hostile takeover rarely works in the Internet world. As far as I'm concerned, however, I can't imagine that Yahoo! would survive a Microsoft takeover even if it were friendly. Despite Microsoft's deep pockets and rigid control over the desktop, Microsoft's internal efforts to create a popular web site relevant to Microsoft's business model failed utterly. Microsoft clearly intends to modify Yahoo!'s operation to support Microsoft's goals (so I expect that Yahoo! will one day suddenly stop working with non-Microsoft browsers, for example).

This entire operation reminds me of AT&T's purchase of NCR. AT&T failed to create its own computer business; they purchased NCR instead, installed the managers who had failed at running AT&T's internal attempts, and promptly ran NCR into the ground. In the end, the mistake destroyed AT&T: AT&T's "trivestiture" allowed them to dispose of NCR while distracting investors by with the creation of Lucent.

Pointless aggregations are not a sign of strength. Disaggregation fosters innovation; random aggregations and forced integration generally fail miserably. Microsoft is about to make a company-killing mistake.

Topics:  · business · internet · microsoft

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Does Your Mother Work for the CIA?

The banks and credit card companies I do business with suffer from a series of fascinating delusions. The first has to do with my social security number. That number appears on countless documents at dozens of companies, but now companies pretend that my social security number is some sort of huge secret that only I know. They use it to authenticate me when I call — and now they only ask for the last four digits, as if though that enhances security. Well, just using the last four digits is useful: someone who wants to impersonate me has fewer digits to memorize.

But the other delusion is even funnier: they all seem to think my mother works for the CIA. Well, maybe that's not actually what's going on; but certainly they seem to think she has a secret identity. The believe that no one except me (and presumeably my siblings) know her maiden name. Even better, American Express recently asked me to enter my mother's birthday to use as a PIN number to access my online account — again, her birth date must be a huge secret, with steely-eyed CIA agents purging the public records of both our birth certificates. What is even more foolish (and opens a huge security hole) is that American Express won't let you select any other PIN number when you validate a new credit card; if you select a random number to use instead, they bounce you to a live operator.

To provide real security on some of my more important accounts, I've started using a different and random "mother's maiden name" for each account. In the meantime, unless your mother really does work for the CIA, please be aware that these questions about your Mom by the banks and credit card companies provide no actual security. A secret shared by dozens of different companies isn't very much of a secret.

Topics:  · business · privacy

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If Only American Airlines Were Certified Kosher

A few days back I wondered about the lessons of the American Airlines business disaster: what did it mean for Southwest Airlines, for example, and how could other airlines avoid similar costly problems. Could disaggregation play a role? For example, should American diversify its fleet and not rely so heavily on MD-80 jets?

But then I realized American Airlines' biggest problem: it isn't certified kosher.

Did you ever wonder how Jews find out what foods are kosher? (Or how Moslems find out what foods are compatible with Halal?) Different organizations across the country are hired by manufacturers to certify food as kosher; the manufacturer is then allowed to place the organization's logo on the packaging and those who are interested recognize the logos. Here in Chicago, for example, there's one large organization with almost national scope; a few smaller organizations of various sizes (and perceived reliability); and local representatives of the two national certification organizations. If I'm a manufacturer and I want my food certified for the kosher market, I have a choice of who will regulate me.

On the one hand, each organization must be strict — otherwise no one will trust their certifications and their endorsements become worthless; in other words, they compete on the basis of how well they can guarantee compliance with kosher standards. On the other hand, again because the organizations compete with each other, they cannot be wildly unreasonable towards the businesses they regulate (although that certainly happens, because once a business hires a kosher certifying organization, it's rather difficult to switch to another). And for the most part the certification business is congenial: organizations know about each others' inspections and how they interpret the rules about kosher foods, and "as long as everything is kosher" they'll accept each others' certifications.

The FAA ordered American Airlines to ground all its MD-80 airplanes because the ties on wire bundles are one and one-quarter inch apart instead of one inch apart, even though the FAA knows the problem is not urgent. Why can the FAA act so arrogantly and arbitarily? Because they're the government: they have monopoly power. Now imagine if an auditor you had hired did something wildly unreasonable that cost you tens of millions of dollars. Not only would you never hire them again, but everyone else in the industry would avoid them like the plague.

So the answer to the huge fines (Southwest Airlines) and huge business losses (American Airlines) of the past few weeks is not better enforcement; the answer is competition in the world of airline regulation. Let's adopt the kosher-certification model to lower costs and improve overall saftey.

Topics:  · business · government

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American Airlines and the Question to Southwest Airlines

American Airlines' fleet of MD-80 planes is grounded yet again for inspections — not for a flight-safety issue but because of a dictat from regulators. Regardless, American is suffering a public-relations disaster. And O'Hare is expecting thunderstorms this afternoon...

The question in my mind is whether the American Airlines experience applies to Southwest Airlines. American relies heavily on the MD-80 but Southwest relies exclusively on a single airplane, the Boeing 737. By using just one type of airplane Southwest eliminates substantial costs — not just in inventory of spare parts, but of training of both pilots and mechanics. While this has worked for Southwest in the past, American's reliance on the MD-80 also worked for them in the past. One question is whether or not investors will devalue Southwest Airlines because of a newly perceived vulnerability; the other question, one that I find more interesting, is if there's some method to mitigate Southwest's risk, and how disaggregation can play a role. It's a question that I can't answer just yet.

Topics:  · business

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Where Are They Now? Up To the Same Dirty Tricks 10,000 Miles Away

I ran across an interesting article in The Sydney Morning Herald on Saturday, 15 March (and yes, I was in Sydney when I read it). Australia made the same mistake the US did: Instead of disaggregating local fixed-line telecommunications service into separate businesses to allow true competition, they left the national monopoly that provided local land-line communications intact and mandated by law that the monopoly, Telstra, allow competitors to lease Telstra's lines.

If you read the book, you know what happened next — Australia's monopoly is following the Baby Bell playbook.

In fact, they've got Baby Bell players running the show. Sol Trujillo and Phil Burgess, formerly of US West, are now 10,000 miles away and working for Telstra. They've brought the old US Baby Bell tricks with them to Australia. When a competitor attempts to lease a line, their local monopoly Telstra attempts to charge a huge fee; the local regulators side with the competitor; Telstra heads off to court and issues florid press releases about reasonable rates, competition, rates of return, and similar bilge. At present Telstra has forty-seven legal actions pending against the regulators.

Although Telstra recently lost its biggest case in Australia's highest court, the legal actions continue. Each one, even when it's lost, costs the competitors time and money and helps discourage other competitors from even trying. And just as in the US, the political pressure campaign from Telstra is slowly modifying the views of the regulators.

Different conditions, different country, same results: the failure to disaggregate spelled the failure of the project.

Topics:  · business · telecommunications · where+are+they+now

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Video Blog

Dan York interviewed me to discuss my Phone 2 Directions idea; here's the video.

Topics:  · business · innovation · internet · telephony

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Good Disclosure and Sneaky Implementation of Bad Policy

Although I've found exactly what I wanted at Closet Organizer Source, I've decided to find a different company that supplies the same product. I have to give Closet Organizer Source credit: their privacy policy is well-written, easily understandable, and fully disclosed:

In return for making a purchase or registering at our site, we offer to keep you informed of new and ongoing benefits, exclusive sales and promotions and other customer-only benefits... If you make a purchase at ClosetOrganizerSource.com, we include you in our list to receive email updates about special offers, new products and services, and relevant information. We are a NetShops, Inc. company... We share the information you give us with other NetShops companies in order to provide you information and special offers from other NetShops sites.

Or, in other words, order anything from this company and receive a ton of spam from them and an undisclosed number of other companies. Your personal information also goes to their marketing firms, of course.

The sneaky part is twofold: first, when they ask for your email address, they say they need it to contact you about your order — nothing at all about a deluge of email marketing. Secondly, there is no checkbox next to the form that says "check here to receive promotional materials."

They say you can opt-out, but that's contrary to Internet etiquettte and I'm not in favor of encouraging rude behavoir. Frankly, I'm not comfortable with a company with this sort of invasive and evasive default policy, and I'll chose a company that has a more sensible privacy policy instead.

Topics:  · business · privacy

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Warning: If Blu-ray Wins, You Lose

If Sony's Blu-ray format for next-generation DVDs wins, as now seems possible, you will be the loser, for two reasons. First, a Blu-ray DVD costs about twice what an HD-DVD costs. As for the players, the lowest-cost DVD player is $300, while the lowest cost HD-DVD player is $100.

A good portion of the extra cost of a Blu-ray isn't due to technology; it's due to copyright royalties collected by Sony. All this would seem to indicate that HD-DVD is a superior choice from the industry and consumer perspective, but the industry seems to have chosen Blu-ray over HD-DVD. This comment on a newspaper article says it all: an inferior format won.

As another comment points out, the producers of DVD were more intrested in "strong" digital rights management than they were in producing low-cost DVDs. Given that digital rights management schemes don't actually work and tend to cause severe headaches for consumers, I personally will be steering clear of Blu-ray for as long as I can.

Topics:  · business

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