Tim Oren's Due Diligence

The Roving Eye: Carlson Curves Updated, Troubled Metro WiFi, Tasty Media Bits

The Pace of Genomics Learning. Rob Carlson revisits and updates his charts on gene sequencing learning curves. Carlson is commendably modest about this effort: "I have cautioned both the private sector and governments from attempting to use this data to forecast trends." However, that's overlooking a collateral benefit of well-defined learning curves such as Moore's Law: They serve as a synchronizing vision among current and potential creators and users of a technology. Users start working on applications in advance of economic feasibility, with a fair amount of comfort that time will fix that problem. Innovators and infrastructure creators on the sell side proceed with greater confidence that new demand will appear to reward their efforts in reducing costs. Carlson uses a 'Thousand Dollar Genome' as a way to think about the possible consequences and limits of demand. While that's undoubtedly useful, it has some risk of falling into the 'Who needs an IBM machine in their home?' trap from the computing world. Make the technology cheap enough, and all sorts of uses pop up that defy the original idea of how it should be packaged. (Note Carlson also has some interesting but less well established curves for gene synthesis. Well worth watching for futurists and would-be biotech investors.

WiFi not so fine. A lot of the Bay Area's attempts to turn 802.11 into a metro access solution are shutting down. WiFi's ubiquity and consequent low costs got a lot of people, from engineers to investors to city councils, excited about the possibility of bending it to a use for which it was never designed. While I've seen some ingenuous attempts at things like meshing and remote management, the crux of the matter seems to be operations, which is often overlooked by those who've never run a network. Earthlink, at any rate, has been finding out the hard way that running an outdoor WiFi access network is a bit tougher than remotely managing racks of modems in Telco central offices. (Via Jeff Nolan.)

California ablaze. It's a tragedy for those caught up in the wildfires, but it can also make for some stunning photography.

You say you'd prefer a somewhat damper location? In the Navy.... Those waves are breaking over the equivalent of a six story building.

The Science of Scotch. The New York Academy of Sciences hosts a podcast with the brew master of Laphroig, one of my favorite tipples. Turns out the flavor is due in part to ancient seaweed. Here's some music to go with your wee drop.

The Roving Eye: The Disaggregation Generation, A Merger Of Inconvenience, Too Much Greenery?

Second Order Effects. Growing up in a low-friction economy, taking networked media for granted, may have profound effects on society and its organization, observes Michael Malonein a great WSJ piece. I've often found it ironic that electronic media, conceived in part with the idea of 'augmenting' large hierarchical organizations, have at times had the effect of pouring acid on them instead. Another effect has been to shift attention to areas where friction still binds, such as the need to free healthcare risk pooling from ties to specific companies, without turning it into a government bureaucracy. Meanwhile, the regulatory and compliance burden on even small enterprises continues to grow, not shrink. At some point these two trends are going to impact head-on.

Now there's an investing theory. Let's have all the annoying companies buy each other. Comcast acquires Plaxo.

Why I'll be backing McCain. It's certainly not because he's my favorite politician. For one, he takes a too casual - if not arrogant - attitude towards the First Amendment. Nonetheless, he will have my vote and support. This guy says why.

Has Green hype gone over the top? Well, yes.

The Roving Eye: Someone Poke Fake Steve, Spybots Invade England!, Genetic Nannyism

Reality sets in at Facebook: Low entry barrier, low CPM. Even Fake Steve has noticed that most Facebook apps are fluff. More pointedly, developers are seeing very low effective CPM rates. CPM being a rather obsolete concept, I'd prefer to see data presented in revenue-per-user terms, as here. But it's clear that the open, easy, widely adopted Facebook is struggling to monetize, while the smaller, focused, and closed LinkedIn is claiming much higher effective rates (see interesting discussion here.) I'm still picking Facebook to be the Pointcast story of this decade.

Winning the War with Rhino Snot. Letting the troops (as versus the Pentagon) name your products can have interesting results. This company looks like it's self-supporting, but it would be fun to see its CEO try to get through a VC pitch without cracking a grin. It would definitely earn a place on the 'best name' honor roll.

Better see what's hiding in the closet. Following the precedent of DARPA's robotic Grand Challenge, Great Britain's Ministry of Defense (MoD) is mounting its own competition for automatons, with a twist. This time the robots are for surveillance purposes, meant to spy out snipers, IEDs and armed vehicles and soldiers in a village sized trial area. The task specific element of the challenge ups the ante from DARPA's trials, which were mostly about success in navigation. The MoD's competition also allows cooperating teams of bots, which could be of different types. One team anticipates coordinating a team of flying and earthborne bots. The MoD trial will take place in August.

The best things IBM ever made... were those clicky, battleship-weight PC keyboards. Dan's Data sings the praises of the 'buckling spring' design. (Via Derek Miller). Having spent many hours banging on an awesome converted Selectric used as the console on a IBM 1800 way back when, the PC keyboard was a welcome relief from the mushy action of the VT series and other 'glass TTYs' of the time. Almost worth having to put up with segment registers. The economics of the PC industry and weight requirements for portability put these things into the museum, but I still miss 'em.

What happened to 'Know Thyself'? Our self-appointed guardians in New York and California are on watch, making sure you can't get your genome analyzed at your own expense. Because it raises big concerns: 'What will patients do with this information? " Gee, would you suppose that might be their own business? if you wanted to freeze private investment into this area, you couldn't have picked a better way than this kind of statist fear-mongering. And maybe that's the point.

Go As Business Metaphor

Business writing and speech are loaded with metaphors drawn from sports and games - home runs, gambits, huddles, assists, game plans, and on and on. At the risk of being overly obscure, I'm going to drag in another source: The ancient Asian game of Go.

About twenty years ago I was working at Apple and had a cube in the De Anza 3 building. One of the campus cafés was downstairs, and I soon discovered there was regular lunch time Go playing group. I had learned the rudiments of the game in college, due to a friend working on a very early attempt at a computerized player. So I was drawn in as a kibitzer and soon active player. I never made it past somewhat decent amateur status before I was (inevitably) re'orged and moved to another office. But my period of play overlapped with a time when I was observing and learning(?) a lot about high tech business in general and software and platform competition in particular. Inevitably the two experiences grew together, and provided some metaphors that have proved interesting over the years, and seem appropriate to current issues.

Likely most people have at least seen a go board and stones (if not, try the Wikipedia article). Very generally speaking, the object of the game is to play groups of stones in order to surround as much space as possible. A group of stones without enough space within will die, and one with too much space inside may be vulnerable to the opponent trying to build his own viable group within that space.

Basic business metaphors can be something like this: The whole board is the available market. The stones played down are investment and expense to go after the market. A space surrounded is the net margin achieved by a product or company (the group). Too little space, and you're squeezed out of the market. Too much margin, and you are inviting competition to jump into your space.

So much for the basics, but further metaphors can be derived from tactical situations and styles of play. Of these, the one that keeps coming to mind lately is the issue of light vs. heavy plays (karui vs. omoi). These can refer to attempts to extend a group or jump into new territory. Light plays are probes. If the opponent attacks strongly, a stone or small group can be sacrificed to gain advantage elsewhere. Heavy is playing so large a group that it cannot be sacrificed, or fighting over an initial probe that would be better abandoned. This may let a more flexible opponent gain the net advantage.

Of course, such metaphors must be incomplete. The real board is multi-dimensional, and shifts in size and shape. There are usually multiple players, and people are not white and black stones. The board seldom starts empty. The customers get a vote on the moves. But the comparison can sometimes be instructive:

Given the description of light and heavy above (or found on the links), what style would you say Google, Microsoft and Yahoo are each playing? What type of play is best for a startup?

The Roving Eye: A Plan for MSFT - or GOOG, NYT Beats Its Sector, Fred And The Future, and More!

NC, anyone? Don Park has an idea for getting Microsoft out of the Vista trap: Put out an 'operating system' that's just a sandboxed browser, and sell backend services and upgrades. Buy just what you need, not have the whole glutinous mass thrust down your throat. Just one problem for the strategy, as exposed by commenter Rob Breidecker: "Google should do this as well". No, Google should be doing that instead - they don't have a current revenue stream to protect, and they are building a suite of apps that are perforce stripped down to work in a browser environment.

You go, Pinch!. The entire newspaper sector posted a 9.4% year-on-year decline in revenue last year, but the Times managed to beat that, with a 10.6% drop in Q1. And its publisher wants to tell other media moguls how to run their companies...

A must read for entrepreneurs. This is already widely linked, but just in case you haven't seen it VC Fred Wilson posts a think piece about the shortcomings of M&A as a liquidity path and provokes a fascinating discussion. There are the usual number of just plain naive comments, but it's held together by a great dialog among thoughtful veterans like Robert Seidman, Jeff Jarvis, Marc Hedlund and Fred himself. I intend a longer post in this direction, but for now just read the whole thing.

Azeroth invites you... to a science conference in virtual reality. That would be Worlds of Warcraft, not Second Life, though. All the meeting swag is virtual, and after the poster session they'll storm a city. I like the way those guys party. (Hat tip to Ann Laurie.)

Friday Eye Candy. Here's some fine photography to take you off to the weekend. I remember the old drive-in theatre out past Coyote Point, but it was already deserted what I arrived.

The Roving Eye: Macroeconomic Clicks, Mobile Web - Immobile Carriers, Cable Scams & Warranties Too!

Google as economic indicator. The latest search advertising numbers are out, and while Google continues to bomb their competition, their year on year growth rates are off dramatically for the second month in a row. Henry Blodgett has numbers and relays possible interpretations from Mark Mahaney of Citi: "1. Google's ongoing efforts to improve both lead quality for advertisers and the user experience for searches.
2. A macroeconomic dampening of commercial queries by searchers." While Google's always tweaking the algorithms, I'll take door number 2. Over a decade back, when I was at CompuServe, we carried all of Visa's card swipe traffic over our network. We didn't have to guess how good the Xmas season would be, we knew within a few days of its start, from the overall transaction volume. Likewise Google, now at about 2/3 share in search, doesn't just represent the market; it is the market. It seems perfectly reasonable that economic slowing would show up not only in advertiser spending, but in users not clicking on ads for purchases they are going to postpone. Of course, Google's revenue is sort of like California real estate, where people start whining if they don't get double digit growth.

Mobile Web Bubble. Jeff Nolan shares my conviction that mobile Web is over-hyped and over-invested. It's one of those "it's a wonder it works at all" sort of things, but the experience just isn't rewarding enough to justify the cost for most times and uses. Carriers, as usual, are their own worst enemy when it comes to costs and performance. I pick this one to remain a niche. It's well worth clicking through for the ensuing intelligent discussion among Jeff and his commenters. RTWT. (Here's the report of Mowser's demise that brought on Jeff's reflections: "...the mobile traffic just isn't there. It's not there now, and it won't be.")

Not Comcast This Time! The Instaprof reminds us of one of the bigger consumer hustles out there, overspec'ed and overpriced audio and video cables. I ran into this recently when a Radio Shack clerk tried to talk me into buying you-know-who's gold plated audio patch cord over their house brand. This stuff just fattens up the store's and manufacturer's margins, and likely the clerk's incentives as well. You don't need fancy cables for modern systems. Unless you've got an old turntable in your setup, the signal levels coming out of your components are already high level. Digital standards already include error detection and correction codes to deal with any noise, so fancy copper is even less necessary now. If you've got low level analog signals that need to be protected from noise (satellite dish signals) or high level RF signals that might generate noise, make sure they run in shielded cables. Coax and phono cables are all shielded. Anything more elaborate just fattens someone's margins. I've got 25 year old cables that once starred in my Apple II+ setup, now part of my surround system. They still work great.

Warranty Economics. The Popular Science article linked above also mentions one of the other margin builders, extended warranties. Due to a stint examining the business model of a long dead bubble-era startup, I know a little about the economics of these warranties: On the average, what you pay for the coverage is about twice what the warranty company expects to pay in claims, whether it's electronic gear or automobiles.
When comparison shopping or dickering for a major purchase I always ask about the pricing of the extended warranty. First, it makes the salesman hopeful that he will make some margin on the backend, and so possibly gains some leverage on the item's price. Second, divide the number in two and you've got a rule-of-thumb estimate for repair costs in the out years. Combine that with the reliability rating from Consumer Reports (you checked, right?), and there's a rough indicator of how likely your new purchase is to become a PITA.

Ned for MSFT. This one has already been linked all over the blogosphere, but I'm going to do it too, because it's tone perfect and funny. I'm reminded of this makeover video of a couple years back, which turned out to be an inside job.

The Roving Eye: Harshing Microsoft, An Anthropic Principle For Investing?, Proof God Loves Us

Vista Collapse? And here I thought I was being rough on Microsoft. Now Gartner says Vista (and Office) are becoming irrelevant, and maybe only a Yahoo deal can save Microsoft.

That really depends on how MSFT handles the acquisition, should it close. If it compromises the Yahoo business for the sake of the core, or tries to use the Windows and Office franchise to dragoon users onto the Yahoo properties or worse - both - then both businesses will end up in the same tar pit. In the best interpretation, closing the Yahoo deal could be a gigantic example of the business move known as 'getting pregnant' - spending so much on a venture that it can't be ignored or compromised. If Microsoft forced itself to stop regarding services and anything operational as a red-haired stepchild of the Windows franchise, trying to leverage everything to and from that same franchise, and learned to respond to customer input in real time, it might end up being worth it. But it still wouldn't answer the question about Vista's relevance.

Update: The save XP movement breaks into the mainstream press. Pretty soon people are going to be squirreling away XP discs next to their incandescent light hoard.

What Can't Be Hedged? Physics has the notion that models that don't allow the existence of humans may as well be ignored. An interesting article from Policy Review essentially proposes an investing parallel, with globalization in the place of humanity: Any future in which globalization collapses cannot be hedged, and it's not worth doing it anyway. Globalization is now so deeply entrenched that the magnitude of disruption it would take to break up its economic patterns would leave little future in which to enjoy any proceeds of betting on the ultimate Black Swan. The author, Peter Thiel, is alarmed by the current frequency of bubbles that seem to threaten financial stability, but it doesn't take a lot of reading in (for instance) 19th century history to know that frequent shocks are nothing new. In theory, a more networked society and financial system may generate more frequent excursions, but also be more resilient against them. Thiel's point is that it's only worth taking one side of that bet. (Another interpretation is that this is a public display of how a hedger talks himself into being an optimist...)

Congress, As Seen From Iraq. You can take it from one of the locals or from one of our folks on the scene: The Congress critters trying to smear Gen. Petraeus aren't hurting his reputation, but their own.

The Religion of Beer. Speaking of Iraqis, some of them have their heads screwed on straight. As soon as Sadr's militia got kicked out of town, the Basrawis got their priorities in order. Perhaps they were inspired by one of America's founders, but more likely the cradle of civilizations was among the first to display mankind's proclivity to ferment anything that will, and sample the results. Meanwhile, back in California, one of our 'esteemed' legislators wants to make beer so expensive we'll be resorting to homebrew ourselves. Brilliant!

Web 2.0 Investors: Pay Attention To Caja

Anyone playing in the "Web 2.0" domain, even if non-technical, has likely heard of such essential components of the Web applications style as AJAX and JSON. The 'J' in these acronyms stands for JavaScript, on which these standards are built. So the strengths and weaknesses of JavaScript are directly related to what can be built in the common Web 2.0 style, and therefore what business ideas can be implemented. Now there's another JavaScript related technology coming along quietly but quickly, and so far little noticed outside of developers' circles. It is called Caja, and it may have a major impact on what can and can't be accomplished by JavaScript-based Web 2.0 sites.

The Roving Eye: Bad Debt Decoded, Stories From The Front, Is No Media Cow Sacred?

Debt Crunch In Plain English. Many of the indirect consequences of the subprime mortgage meltdown have become so arcane and obscure that investors can be surprised when a bit of not-so-prime toxin turns up in a part of their portfolios they thought was safe. DLA Piper has a nice page with a (fairly) plain English explanation of the auction rate securities market meltdown.

No Editor, No Spin The US Army has put up a fascinating archive of debriefings of personnel returning from Iraq and other combat locations. (Click GWOT Oral History Program on the sidebar). There are hundreds of items from the top generals all the way to front line infantrymen. I've only dabbled in the archive, but there's some fascinating stuff there, like this story of the Thunder Run into Baghdad. This should be incredibly valuable for the historian, or for any pundit who's actually willing to read something from those on the ground before spouting off. Anyone up for correlating these reports against the MSM stories of the time?

Last As It Was First. The book was the first medium to go 'mass', back in the day of Gutenberg. Ironically, the advent of the net and the Long Tail phenomenon typified by Amazon, along with well-entrenched habits for print consumption, may have provided an Indian summer for the medium. But the distribution chain was in trouble, first the independent book shops, and now the big boys are being squeezed. (Update: More at the WaPo.) Along with all the time displaced to reading Web pages, we may finally have a successful electronic book with the Kindle. In common with vested interests from other old media, old style authors have noticed, and are screeching about the end of the world as we know it. Labels Studios Publishers are being squeezed as well, and cutting back on their risk-reducing activities of fronting advances to authors and absorbing returns from the channel, leading author Roger Simon to wonder "what's the point of the publisher?"

Sea-borne Owl. This place needs a Friday animal post occasionally. Aw, isn't that cute?? Every carrier group needs a licensed falconer on board.

The Roving Eye: Bogus Recession?, Bad Voodoo, CA's Favorite Export

Recession Limited to MSM? As opposed to the media atmospherics, the actual growth and inflation numbers are about the same as 2000, the end of the Clinton era. Of course, they are being treated very differently. Wonder why? Just another example to show that those making business and investing judgments based on journalists' writings are likely to get what they deserve. Update: More here.

Bad Voodoo At War. Tonight PBS' Frontline series will premier a documentary of a National Guard platoon caught up in the 'surge' in Iraq. The footage was shot by the soldiers themselves, and the editor seems to be trusted by the milblogs crowd, so perhaps we will get a portrayal free of the usual cant. For you Bay Area folks, it's on at 10PM this evening on KQED. I'll be watching.

A Zin A Day Keeps The Doctor Away. They keep finding out that red wine, or more accurately its antioxidant ingredient resveratrol, is beneficial to your health. First heart disease, now cancer treatment and side effects of diabetes seem to be benefited. Who knows, maybe it's good for healing broken limbs as well. Just in case, I'll have another.

Good On LiveLeak. After initially kowtowing to threats of Islamist violence and removing the controversial Fitna video, LiveLeak has now improved its security arrangements and reinstated the video. LiveLeak took a drubbing from the blogosphere when they caved, so they deserve some credit for manning up.