#iranelection
Posted on June 17, 2009
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It’s hard to not get caught up in the drama unfolding in Iran, especially given the prominent role that technology is playing in these events… technology from right here in Palo Alto. Unfortunately, a smattering of revolt around the mantra of reform does not equal freedom and Iran will not be free until the people cast off the yoke that the theocracy ruling class has burdened them with.
Mousavi, the candidate that the world is rallying around, campaigned on reform but he is hardly a liberal reformer himself. When Mousavi, and the other candidates, talk about reform they are primarily referencing the economy, which like Venezuela under Chavez has been decimated under Ahmadjinedad’s reign. Iran under Mousavi would still feature a theocracy calling the shots and imposing their will on the population, a Stalinist state all in the name of God.
Nonetheless, it is reassuring that masses can unite when the offense is so great and speech can trump repression. At every turn the Iranian authorities have been frustrated in their attempts to control the flow of information, a fact that will continue in the days ahead. Imagine where China would be today if Tiananmen Square protesters had cell phone video and Twitter on their side…
U.S. Innovation Threatened
Posted on June 17, 2009
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Interesting survey came out about economic competitiveness. Actually, maybe interesting is an overstatement, reinforcing is probably a better word.
Asked about the economic future of the U.S. over the next decade, only 13 percent of the 3,000 survey respondents agreed with the statement that the U.S. “will remain the most innovative country and therefore the global economic leader.”
[From Survey: US residents unsure of future of innovation | The Industry Standard]
Fundamentally nothing has changed in the U.S. that negatively impacts competitiveness, except for the economic recession, but a number of issues have been left unaddressed over the years and the result has been an erosion of competitiveness.
Immigration is a big nasty issue and what the tech industry cares about, H-1B numbers, is actually a really small part of the overarching issue. In a perfect world it should be a relatively straightforward solution to increase/decrease the number of new visas issued year over year, but of course we know it is not a simple solution. There is simply no way that the H-1B (actually there are several visa types that should be dealt with) issue gets addressed independent of the broader illegal immigration issue so I think we will end up living with the status quo.
The larger and more complex issue impeding competitiveness is the patent and copyright systems, both of which are dreadfully out of step with technology innovation and seemingly ill-equipped to deal any expansion of technology innovation. More significantly, the drag that the legal processes impose on new business creation are onerous to say the least, diverting capital away from invention and creation. There is momentum building to reform patent, trademark, and copyright law but given the scope and powerful interest groups surrounding all sides, it’s hard to speculate on what might actually be done to reform this system.
I am not a big believer in government sponsored investment in innovation because the money used for these programs must be borrowed or taxed out of the economy, which puts drag on the overall economy, but more importantly there is a well documented track record of inefficiency and political patronage in government programs that perverts the originating purpose for the spending in the first place.
Pundits like to point to the internet as an example of a success story for government sponsored innovation but it’s important to realize that the internet was originally built by the military, which operates much differently from the rest of government and secondly that the impact of the internet on modern life is a consequence of a massive amount of infrastructure spending done by the private sector with investor capital, not the government. Commercialization of the internet is responsible for its success, which is anathema to those who promote a larger government role in private sector investment.
Tax policy, federal and state, remains the single largest issue affecting investment and innovation. The federal R&D tax credit has a worthy goal but in practice is such a complex process that only the largest companies can take advantage of it. Capital gains taxes remain too high and fail to recognize the myriad ways that capital can be deployed. For example, there is no differentiation between long term cap gains as a consequence of real estate investment versus venture capital, the former arbitrages an existing asset while the latter actually benefits innovation. Germany’s capital gains tax system is a much more reasonable approach to taxing investment gains.
The U.S. is unlike practically every other country in that it taxes citizens on income irrespective of where that income is generated. There are arguments on either side of this issue that are valid; my preferred approach would be to couple offshore income generation with low capital gains taxes to encourage wealth created offshore to be reinvested within the U.S., and right now we have a system that has the exact opposite effect.
Lastly, K-12 education is often pointed to as a key competitiveness enabler, and it would be hard to dispute the role that education plays in modern society and wealth creation, yet this understates the role that parents and external forces have in education. It is impossible to force students into a math and science education tract, at least not without adopting a planned approach to economic development, something that simply will not happen in free societies. Despite the inadequacies of our K-12 education system, the U.S. consistently turns out generations of young people that engage in business creation, research, and innovation.
The forces involved in K-12 education will frustrate every attempt to reform the system, it will only happen when a majority of voters engage the issue and force reform but that require a massive leap of faith that voters will actually take the time to consider more than 30 seconds of sound bite. If it were me I would like to see the school year extended, restructure the system to graduate students after 10th grade and move them to a pre-collegiate track or vocational school for 2 years, and lastly, revamp the curriculum to reflect critical thinking as well as core subjects, but I admit that I am also vastly simplifying a complex problem.
In summary, while U.S. competitiveness has declined relative to other countries, little will be done to improve the core issues so it will be left to the private sector and families to carry the burden. It may also be misleading to suggest that factors in the U.S. alone are responsible for this shift, given that other countries have developed over the last 30 years and closed the gap with the U.S., making the issue less about the U.S. losing leadership and more about a global economy improving the conditions by which all of the mankind develops. At any rate, surveys like this tend to not be very informative, instead they serve primarily to reinforce whatever bias a particular interest group holds.
Contrarians Unite!
Posted on June 11, 2009
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I think Paul really nails it. The VC industry needs to get smaller, re-evaluate what needs they are serving, and reconsider their place in the food chain. Entrepreneurship does not exist as a consequence of the venture capital business, it exists in spite of it.
Kedrosky presents himself as a contrarian, perhaps even a heretic, among VCs. “Many venture industry participants are comfortable with their industry’s size, structure and compensation model,” he writes. “At the same time, the industry has become conflated with entrepreneurship in the popular imagination as well as in policy circles, with the result being a widespread and incorrect belief that venture capital is a necessary and sufficient condition in driving growth entrepreneurship.”
[From Harris: One critic says smaller is better for venture capital industry - San Jose Mercury News]
Every bubble is predicated on a shift in the way that capital is allocated, going from a demand driven environment to one that is supply driven. The availability of excessive capital distorts valuation and the rush to fund all but guarantees that unsustainable businesses will be funded, which is great from an experimentation standpoint but also guarantees that the boom-and-bust cycle in tech continues unabated.
There is a lot of debate about how big the VC industry should be, but that’s a red herring because it’s not up to commentators or venture investors to determine that number but rather the LPs that provide the capital. It would be my hope that what comes out of this process is that a healthy venture capital sector emerges that creates more Apple, Cisco, Oracle, and Google companies that are able to stand the test of time and employ tens of thousands of people not just tens of tens while fundamentally bettering the foundation of our economy for everyone to benefit from.
Comcast Upgrade Breaks What Worked Fine
Posted on June 10, 2009
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I noticed something interesting a few weeks ago, 2 of the televisions we have that don’t have cablecards or set top boxes stopped receiving some channels. After many calls to Comcast I learned what many people already know, it doesn’t matter if you have a digital TV because Comcast took advantage of the DTV conversion to change their channel package. Channels that were previously on “expanded basic” and required no set top box now require a converter box and more importantly, Comcast’s remote control.
The way cable works, and why it was better for us than satellite, is that you don’t need any converter box to decode the signal for the channels we often watch while in our kitchen, as one example, like cable news. This makes for a very clean installation with no extra hardware or additional control units while giving us exactly the channels we want.
Comcast took something that worked really well, broke it and called it an upgrade… they are really earning a Comcraptic reputation.
What I find particularly aggravating is that Comcast is taking advantage of the federally mandated digital TV (DTV) conversion to push through something they call “digital transition”. Comcast customer support kept repeating the phrase to me “the government is making us do this” and this is patently false and misleading. Comcast’s “digital transition” is a plan to open up bandwidth on their network, it doesn’t have anything to do with the federal mandate.
It’s very clear that the DTV mandate doesn’t force the cable companies to do anything… what Comcast did was a choice they made and part of a larger strategy to get a piece of their hardware on every television their customers have. The timing was deliberate and intended to obscure their actions under the umbrella of what the federal government was doing to over the air full power broadcast station on public airwaves.
Newspaper Harakiri
Posted on June 10, 2009
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In response to a report that the NYTimes has hired Goldman to solicit bids for the Boston Globe, here’s what one analyst had to say… which I submit as a viable contender for understatement of the year.
“We’re skeptical about the number of bidders who would try to purchase an entity that doesn’t make any money and doesn’t have a labor base that appears willing to try to get it toward being profitable,” Simonton said.
[From Report: Times Co. will take bids to sell Globe]
In Support of Detroit
Posted on June 9, 2009
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The American car business gets dumped on a lot, much of it for good reason but much of the criticism overlooks the unique that American car manufacturers bring to the party, a much edgier approach to design that is not constrained by rules about what cars are supposed to look like. This unconstrained approach to the market makes the U.S. market more competitive and innovative than anywhere else in the world, and I’m not just talking about the innovation of cup holders.
This is a reflection of the U.S. car market, which is more freeform than Europe, and it’s why U.S. designers have gone on to lead or senior designer roles at foreign companies (for example, Tom Kearns at Kia and the always polarizing Chris Bangle who recently left BMW). It is also why European and Asian companies have put their design studios in the U.S., almost exclusively in Southern California (15 in total, including Mercedes, Toyota, Nissan, Kia, Mitsubishi, and Honda). The American market isn’t just a large export market (dominant export market) for foreign manufacturers, it’s one that defines global trends as well.
Sometimes this freeform design works, like Chrysler’s 300C (it’s easy to forget that in the 1990’s Chrysler was the most profitable car company in the world), and sometimes it fails miserably, like the Pontiac Aztec which was a truly what-the-hell-were-they-thinking design (@pjozefak and I had one of these as a rental in Austin once, people stared at us with a look of dismay).
The ability of American manufacturers to create new vehicle categories and move utility segments upscale is also worth noting. The lowly minivan spawned a category that is now a mainstay for the majority of companies, pickup trucks used to have rubber floor mats, AM radios, and bench seats, today they are just as likely to be seen in the executive parking lot as they are on the job site, the “retro” trend in car design started with the Plymouth Prowler, an open wheel retro hot rod that never in a thousand years would have come out of Europe or Japan, and the mighty SUV category itself is a uniquely American creation that every manufacturer has fielded an entry in.
Speaking of SUVs, it’s easy to paint them with a scarlet letter but the fact remains that they fill a need for many buyers and not just in the U.S., market. The Mercedes M class is one of the most sought after vehicles for sale in European markets, and the emergence of the luxury SUV spawned offerings by every manufacturer in every market; who would have thought that a passenger vehicle built on a truck chassis would evolve to the segment it is today with classic SUVs, crossovers, and hybrid offerings?
Don’t get me wrong, I am not suggesting that European and Asian cars are not beautifully designed, actually quite the contrary and given my own purchasing behaviors I am a case study in how European cars appeal to American buyers. European and Japanese car designs stand the test of time as well, the same cannot be said of GM, Ford, and Chrysler where a 10 year old model looks dated. Despite an abundance of impressive performance, quality, and styling coming in the market, there is something that Detroit used to offer that is very different and that is a sense of automobiles as fashion and lifestyle instead of just exercises in performance engineering.
The failings of GM and Chrysler should not overshadow the significant contributions these companies have made, nor should they be summed up as simply “not making the cars people want” or high quality because both are factually inaccurate statements. We should take down these companies because of decades of poor management decisions, fulfilling the promise of capitalism which is that the strong survive and the weak wither, but in the final equation it is likely that very little about the American car market sensibilities will change irrespective of whatever the Federal government wishes, the names on the badges will change but the offerings will remain the same.
Sadly, the Detroit that stood on the shoulders of great men like Harley Earl, Zora Duntov, Alex Tremulis, Ralph Roberts, and Elwood Engel is coming to an end and what will emerge is a big question mark.
D-Day +65
Posted on June 6, 2009
Filed Under Uncategorized |
What more can be said that hasn’t already been said.
Climate Change Reconsidered
Posted on June 5, 2009
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I try not to post anything on climate change because I’m not qualified (like most people) to debate the scientific issues but also because I don’t relish getting shouted at by frantic commenters. This recently published book on the subject is fascinating and all 880 pages are available as a free download.
The scholarship in this book demonstrates overwhelming scientific support for the position that the warming of the twentieth century was moderate and not unprecedented, that its impact on human health and wildlife was positive, and that carbon dioxide probably is not the driving factor behind climate change.
The authors cite thousands of peer-reviewed research papers and books that were ignored by the IPCC, plus additional scientific research that became available after the IPCC’s self-imposed deadline of May 2006.
[From Welcome to the Web Site of the Nongovernmental International Panel on Climate Change]
Whatever side of the issue you are on, a reasoned debate dominated by facts rather than hyperbole and speculation should be viewed as a welcome development.
Twitter Clicks
Posted on June 3, 2009
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I’ve been tracking my link traffic with bit.ly (liking very much btw) and have noticed a couple of interesting patterns. These observations may form a basis for how twitter compliments bloggers and media in ways beyond simple promotion of posts.
When I post a link as a tweet, the link gets more traffic than when I blog it (as measured proportionally according to my twitter follower number and daily pageview traffic to my blog). The traffic is immediate and often quite profound, not uncommon that within 2-3 minutes of posting a link it is not uncommon to have between 40-60 clicks on it and within an hour can have several hundred if not more due to retweets (I have 1,600 followers, a lot but certainly not what someone like Pete Cashmore has, so I can only imagine the link deluge he can create).
Not surprisingly, the link traffic for a tweeted link is immediate and very distorted in that it falls off to zero within hours. Twitter is a medium that lives in the moment so anything that falls below the fold is gone forever for all practical purposes. On my blog, thanks to search tools predominately, a link can live on literally forever as search traffic finds discrete posts and continues to send traffic to linked items. Items posted to my blog can benefit substantially from services like StumbleUpon, and Twitter itself has risen in ranking in terms of traffic sources to where it is not uncommon to see Twitter drive incoming traffic to blog posts well beyond the useful life of the link itself.
What would I conclude from this? My primary learning is that Twitter is indeed useful as a microblogging service that people are using to discover information. This is not a zero sum game between Twitter and blogs, the two compliment each other nicely provided the author uses each according to their unique capabilities. Bloggers that are using Twitter primarily as a mechanism for promoting new blog content are missing a bigger opportunity to build out a separate and distinct publishing channel that enhances and expands their blogging footprint.
This integrated approach to new media is no different than what has happened in other formats over the years.
Time Warner CEO hints at online fees for magazines
Posted on May 29, 2009
Filed Under Uncategorized |
It’s always leaves me speechless when these CEOs talk like they are completely unaware that they are in the advertising business.
Time Warner CEO Jeffrey Bewkes told an investor conference Friday that he doesn’t think it makes much sense for publishers to provide their content without a way to recover the production costs.
[From Time Warner CEO hints at online fees for magazines]
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About
My name is Jeff Nolan and I write Venture Chronicles. These are my thoughts on technology, innovation, management, public policy and pretty much anything else that I find interesting.
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