Tim Oren's Due Diligence

Seeing Apple Through Different Eyes

(Based on an e-mail to a friend, that I decided should be a post.)

Have you ever had one of those moments, when a chance encounter with a voice from the past causes you to see a chunk of your own history in a different way?

I had such a moment when reading the excellent interview with former Apple CEO John Sculley at Cult of Mac. The specific passage was this:

"The board decided that we ought to sell Apple. So I was given the assignment to go off and try to sell Apple in 1993. So I went off and tried to sell it to AT&T to IBM and other people. We couldn’t get anyone who wanted to buy it. They thought it was just too high risk because Microsoft and Intel were doing well then."

At the time, I was involved with the ill-fated Kaleida, one of the IBM/Apple joint ventures. And I had my own theories about the meaning of some of more off-center or squirrelly goings-on in the Kaleida board, at meetings with IBM, and in the related office politics. That quote suddenly snapped things into focus: I, Kaleida, and the equally ill-fated Taligent were part of an arranged date with IBM, that didn't work out.

The whole Sculley interview is worth the read, and he comes across as remarkably open and even magnanimous to Steve Jobs (in both his incarnations). If anything, he omits some of his own positive impact: The company would have died in the late 80s without the 'Open Mac' transition, which he fostered. But his reflections on the 'design thing' are right on target: The best way to sell John, or to get your project on stage with him was the 'big vision', a clear assertion of a direction and what Apple would do for a new set of users, no matter how half-baked your first version might be. For both better and worse, the shadow of Steve Jobs hung over Sculley for his entire tenure.

He's also on target in saying that his lack of technical background left him disarmed against both internal and external engineering controversies. As an example, much of impetus for the famed Pink vs. Blue schism (that led to both Taligent and the equally disastrous Copland) came from an internal engineering report that the existing MacOS was so entwined with the Mac hardware that it was impossible to either port it to an Intel platform, or to 'jack it up' and insert a real multi-tasking operating system kernel. The latter assertion was given the lie when the A/UX team did exactly that, showing that it was a hard and ugly task, but not infeasible. John may never have known about it, and certain never understood the implications, and so ran without knowledge of another set of strategic options that might have been available.

Synthetic Biology Primer

If you're trying to keep up with the rapid progress in synthetic biology or genomics generally, here's a nice get-you-up-to-speed primer (PDF) from Scott Mohr. Dating from mid-2007, it only contains one of three sections advertised in the front matter, that on 'Molecular Biology for Novices', but that's 73 pages of reasonably dense material right there.

I grew up on "Blue Book Biology" a 'few years' ago, and amazingly it's still in print, in its ninth edition. That plus the intervening years of perusing the odd Scientific American (more recently, American Scientist) article left me able to follow things like the Church and Venter talk, but lacking confidence that I had the whole story. Mohr's piece is a good level set for those with similar aging or informal backgrounds. What's interesting is that the understanding of what is going on in the cell hasn't changed that much from my high school BSCS days, but the understanding of how it happens has grown immensely more sophisticated and - increasingly - modifiable.

Yahoo Tries To Pick A Fight It Can Win

So now Carol Bartz, Yahoo CEO, says "we didn't care about search anyway". That may be retrospective sour grapes, but the truth is that Yahoo has acted as if search was not strategic, all the way back to 2000 when it effectively outsourced it to the then-small Google. Meanwhile, content-head CEO Terry Semel put out the word that Yahoo was to become a media company. The wisdom of those decisions is now obvious, but they are a done deal, and trying to evade the outcome has taken Yahoo nowhere. I've written here before suggesting that the company had better find a new positioning taking the reality into account.

So what's the new position? To, err, be a media company, it seems. From the NYT article:

"Its Sports section..., has reporters producing top-notch original material ranging from scoopy news items and blogs to long-form analysis pieces.... According to Ms. Bartz, the majority of Yahoo’s sites will go the way of Sports. In particular, Yahoo will throw investments behind its entertainment, finance and news operations. Ms. Bartz noted that there are plenty of unemployed journalists out there to pick up."

Interestingly, there have been similar strategic noises emanating from another fallen star, AOL, saying:

"...we are a low-cost producer of high-quality content at scale.... we have none of the legacy costs associated with producing print publications, for example. We don’t own printing presses, or fleets of delivery trucks. We don’t have the elaborate editorial structures geared to producing products over a printing press."

The linked article further notes that AOL has hired 1,500 journalists, most as freelancers, and intends to double or triple that number in the next year. AOL has developed a stable of vertical sites, e.g., EnGadget, that most readers don't recognize as part of the parent company or brand.

If there's wisdom in the Yahoo and AOL positions, it may simply be in picking a target they can beat with their existing capabilities. Both of the companies have figured out how to live within the economics of Internet advertising revenue. They are going up against an industry whose print business lies in financial ruins, that is getting ready to drive away its Internet readers with pay walls, and indulging in delusions that some form of DRM wrapper will let it start charging for goods that are no longer scarce.

Yahoo and AOL may not be able to beat Google's 21st century management style, or slug it out with Microsoft's multi-headed technology hydra, but if they can't beat the likes of the AP, the Tribune or Pinch Sulzberger's NY Times, they deserve to go under. The outcome may not be as lucrative as winning the search wars and making the market in attention, but becoming the heirs to a large chunk of the news and entertainment industries is not a bad consolation prize. (And someone with more patience than myself should line up the various strengths and weaknesses of AOL and Yahoo and see if they are natural competitors, or would be stronger together once Time Warner cuts loose the AOL assets.)

The biggest note of caution in these plans is all those aforementioned journalists. A major factor in the decline of the legacy media has been the exposure of the degree to which cant and attitude had replaced research and knowledge of their beat among reporters. Sloppy editing due to ideological bias and financial constraints has compounded the problems, which have been made glaringly obvious by the rise of citizens media. AOL and Yahoo both propose to take on large numbers of employees and stringers who have grown up in that environment. Some number of them are on the streets because they and their organizations ceased adding value; their new employers are going to have to figure out how to organize and manage them so they don't end up with similar product.

They are good reasons to think that both AOL and Yahoo might be equal to the job, for differing reasons. AOL has a deep history of organizing itself around communities of interest. Online Old Farts like myself will recall that AOL (née QuantumLink) got its start by pursuing and supporting the senior and gay and lesbian communities, among others, before it went to a horizontal consumer strategy. Those organizational genetics for getting close to virtual or physical communities may still exist. In spite of grossly wasting its community assets for years, Yahoo still has an impressive collection of virtual communities under its groups umbrella, many of which could be exploited as source, channel, or quality control on related reportage or analysis. Many of Yahoo's focal content areas - I'll mention finance in particular - correspond to vibrant blogging communities that might be brought into alignment with a true new media strategy. This will be interesting to watch.

(Update: See this follow-on post.)

The Roving Eye: The Grin Test, Buh-bye Pontiac, Red State CA

Sovereign Risk. Everyone who's pitched knows about the 'grin test' - where you get to take your best shot in front of the executive staff/board/investment committee/limited partners, and then have to smile - and mean it. Just now a lot of hedge fund managers are thinking about that test as it regards investing in unionized companies in politically charged industries. Wonder what that means for the unionized, leveraged, leftist newspaper industry?

I learned to drive on my father's 1967 Pontiac Catalina station wagon. Big honkin' V8, 3-speed manual shifter on the column, as long as my current F-150 and probably weighed more. It was a pig, and even more fun when towing a trailer. It was years later when someone informed me that I'd taught myself double clutching to keep it (and my later VW bus) from ripping out the clutch. Here's some other memories of Pontiac for those who date. Good bye, GM, you're dead to me.

Bankrupt in Sacramento. The electorate paints the state red as the Democrat and RINO taxes and budget fiddles fail big time. Except the proposition to cut legislators pay when there's a deficit. Let's see: no deficit, no new taxes, and no budget chicanery. Just what part of stop spending can't the political class understand? Under the Democrat legislature and Schwarzenegger, the annual budget has increased $41 billion in five years - nearly 40% - while businesses and citizens flee the state. Meanwhile, Ahnuld is in DC, hoping for a bailout. How pathetic is this?

Revolution. Is that a description, or a recommendation?

Back To Code

So if I'm only doing the VC thing part time, and don't currently have my fingers in a startup pie, why the relatively slow rate of posting around here?

I've gone back to writing code, and it's been sucking up a fair amount of time and bandwidth.

Why? One level of answer is that I missed being able to build my own tools. Since HyperCard finally died I've had no environment for knocking out quick hacks, unless you count Excel, and I don't. I also found my engineering feasibility and schedule BS detector becoming fuzzier and less useful given the accumulating years since being hands-on.

But Rich Miller didn't buy that motivation when I laid it on him, and you shouldn't either. The second level answer is that I'm playing around with a set of notions about social software, and have some specific ideas that I think worth implementing at prototype level. Exactly what is a matter for later posting. Being acutely aware of the overhead involved in building a team and raising funding, and wanting to remain agnostic about where these ideas were on the spectrum from hobby to serious business, I decided to just have a go at it myself.

I've been working in Perl, for a variety of reasons:

My last serious code (defined as something used by another human) was in a combination of C and various scripting languages. Perl has a familiar feel to someone used to C syntax, immediate gratification, and loosey-goosey typing. Object orientation in Perl is only skin deep, so I can decide how deeply I want to buy into it for a specific project.

CPAN has an awesome collection of libraries with mature functionality aimed right at my tasks of interest. Even the not-so-mature bits are useful cribs for a newbie. While the excitement may have moved on to other languages, the archives of accumulated Perl wisdom at places like Perl Monks saves a lot of frustration when hitting a real puzzler.

I deliberately punted the choice between the leading languages du jour, Ruby and Python. A combination of avoiding premature commitment, and deliberately creating the potential (necessity?) of shifting environments when going from batch-like personal prototypes to possible future web services.

Finally, I've got 40 years worth of computer language history and syntax buried in my hind brain, all the way back to assembler and Fortran II. Reading the camel book alone can't suppress all those years of bogus instincts. I need live code and a motivation to screw around with it to make a new language natural. Fortunately, one of my other avocations provided both: geocaching, of all things. One type of geocache is the 'puzzle' cache, where one has to solve a problem to find the actual coordinates. Given the Silicon Valley environment, a lot of the puzzles around here are rather nerdy - math problems, word puzzles, and cryptograms, many of them most efficiently solved with code. And the lingua franca of the code snips passed among would-be puzzle solvers is Perl. That gave me lots of little challenges and quick rewards while getting started, culminating in writing a hill-climbing solver for substitution ciphers.

Those toy programs barely touched the Perl libraries, and went just fine with a plaintext editor and the command line. That's not enough power for a real project, and misses the point of modern development environments anyway. So I've ended up working in an Eclipse environment, using the EPIC plug-in, all on my trusty MacBook Pro. I'm using git for source code control (it's good enough for perl, it's good enough for me), but mitigating its rather arcane command line interface with the GitX GUI for commits and other common tasks. The developers' suite that comes with OS X provided a nice stable Perl 5.8.8 configuration, which I'm sticking with for now. All in all, probably overkill for a one man project, but you never know.

None of this is meant to provoke a religious discussion about languages and environments (YMMV, and I've seen so many flame fests that they are just boring) but as a bit of background for upcoming posts about the actual topics of interest.

The Roving Eye: Mike Rowe is a Smart Guy, The Real AIG Scandal, Wired Still Funny, An Old Fart Moment

The fever's gone, so today is the day to stop the drugs and see what happens when the overlapping antihistamines, cough remedies and the like wash out of the system. So far a marginal headache and a few sniffles, but the brain cells are mostly firing again.

Also a dirty guy. Spend 20 minutes on this TED talk instead of another Discovery Channel rerun. It's well worth it.

Can you say moral hazard? Most of the AIG bailout money went right out again, to counter-parties to AIG's failed credit default swap trades. All made whole, and the bills passed on to the taxpayers and their future generations. Shouldn't these big banks be taught some lessons about counter-party risk? Instead the ones learning that lesson are the $1 / year guys. The country's in the very best of hands.

Another good source for bank information. This site pulls together TARP as well as conventional bank rating metrics.

Analysis No, Snark Yes.

The passing of the computer lab. One of those things that make you feel old. Who needs a computer lab when everyone already has one? I got into the racket when the 'computer lab' was a building, not a room; there was only one computer. The chokepoint was access to key punches, which is why I learned to fix the most common failures of IBM 026 and 029 punches: He who revived the machine got first use and didn't stand on line. Over time the prestige went from a big card deck, to a mag tape, and then just a listing, because you'd gotten 'interactive' privileges. Then you got to stand on line for a ASR 33 or 'glass TTY'. 'Home computing' meant you'd scored a gig that would give you an old terminal and an acoustic coupler so you could do more work. I like sitting here with a supercomputer on my lap a lot better, but occasionally the boggle factor kicks in.

The Roving Eye: Signs of the Times, Web 2.0 Reality Check, Caja Redux, The Other Thing The Newspapers Missed

Toldyaso Dept.: The commentariat has noticed the financial pit that awaits the New York Times, leading to a curious role reversal. Michael Hirschorn of The Atlantic takes a post-apocalyptic view, while conservative Jules Crittenden bemoans the impended debacle. More typically, Steven Den Beste emerges from anime gazing to write an epitaph:

The big reason you aren't seeing the public shedding many tears over the demise of the NYT is that we all know that they've dug their own grave. The impending demise of the NYT isn't tragedy, it's justice.

What he said. Mind you, I don't think the NYT will actually fold up in one step, but at least the Sulzberger family's equity and control is going to be largely or completely washed out. Could the Times regain some part of its former position when Pinch is finally walked out the door? We'll see.

Buzzword Heat Death. Kudos to Jeff Nolan for calling BS on the viability of many so-called Web 2.0 startups. The steadily dropping capital costs of creating Web-based component software has meant that it's easy to get something of the sort started, resulting in an over-crowded marketplace and little differentiation. Many Web 2.0 startups built on underpants gnomes business models are running into unsurprising viability and exit problems in a hostile capital and credit environment. Jeff may be right in tagging Michael Arrington as one of the least critical promoters of the meme, but he shouldn't have the whole albatross hung round his neck: I seem to recall John Battelle, Tim O'Reilly and a few others ginning it up to create a trade show / conference sized aggregation of post dot-com innovations.

Somebody's Paying Attention. My article on the Caja safe Javascript dialect is getting an increasing number of hits, nine months after it was published, coming in from a combination of Wikipedia, Google's developer pages, and plain old searches. Something's going on out there. If you're seriously interested, you should also check out architect Mark Miller's note on performance implications, number 3 on this thread.

I Know, For I Was There. Jack Shafer has a worthwhile article at Slate on the newspapers' multiple tries at online presences that still left them missing the boat. He nails two core issues: The newspapers were reacting defensively to perceived technology threats, and stepped back each time the threat proved minimal, leaving them unprepared when it finally became mortal. Second, the content and platforms used were always "non-generative" in the sense that creation and provisioning was always centrally controlled. That's correct as far as it goes. When I was involved with CompuServe, putting up user interfaces and content involved writing code, and deploying it onto central servers one at a time. There were no such things as user-accessible markup or distributed data centers on a routed network. What he misses, though, is that content was never central to even early online services. The use of person-to-person communications functions - e-mail, chat, bulletin boards and file libraries - was the greatest predictor of customer loyalty and driver of revenue, even then. With their "Content is King" attitude, newspapers missed the fact that even the early online service business relied on what we'd now call "community". They still haven't learned it.

Update: See Jeff Jarvis' comments on both the Shafer and Hirschorn pieces. Worth a read.

The Roving Eye: Poll Bias Revealed, Monetary Tightwire Act, The CRAmel's Nose

Just what you've suspected. Math and computer science professors Mark Schilling and Len Adelman (that's THE Adelman, the 'A' in RSA), analyze the various tracking polls from March through this week, and lay out their systematic bias. An overview here and the original paper here. Unsurprising, the polls run by the MSM are biased significantly to the left. Keep it in mind in the next few days.

A good read for beginning entrepreneurs. It's been out there a while, but I just bumped into it: This piece is a useful reflection on the old 'youth and enthusiasm meet age and cunning' rite of passage. YMMV re the applications to the current scene, but it's worth a read. Via TJICistan.

Deflation again. The MSM catches the meme. Unwinding leverage at all levels from i-banks to consumers puts pressure in this direction. The Fed et. al. are trying to compensate by injecting hundreds of billions in both usual and 'one time' ways. You've only to look at Japan after its real estate bubble collapsed to see what they are worried about. The least likely outcome is stability: What are the odds that this shoot-from-the-hip monetary policy happens to just compensate for the deflationary forces?

And I thought I could get obsessive. Everything you ever wanted to know about bands' recording studio setups and much, much, much, much more.

Dissecting the crash. American Thinker has a well documented blow-by-blow of how CRA lending and Fannie and Freddie helped create the mortgage crisis, and how they were politically forced or enabled. It's damning enough, but I think they err in emphasis on at least one point: Once the GSEs and the regulators and raters had been debauched, it wasn't CRA debt that made up the bulk of the never-should-have-been-written loans. With the door open and no rationale to keep them out, it was real estate punters plus average Joes trying to live above their means who made up the bulk of the bum loans. Update: More here.

You can see this graphically by replicating an experiment I did after my driving vacation in September: Bring up the curiously named but useful real estate service Hotpads, and click on the 'Foreclosures' tab. Search on your own metro area, or one you know well. Unfortunately, Hotpods doesn't have a 'satellite' view, so crank up Google Earth in another window. Now look for clusters of foreclosures in Hotpads, and then use GE to see what's actually on the ground. When I did this for four different metro areas (Medford, Vancouver, Boise and Reno) I found that the biggest clusters were associated with recent tract developments, the kind with the postage stamp lawns and the huge houses packed in tight. That's house flipper territory. When I do this on Bay Area regions that I know, there's a wash of possible CRA foreclosures in East Palo Alto and Menlo Park and Fair Oaks here on the Peninsula. But if you want to see the neighborhoods that have been hammered, you jump out to the growing edge of the East Bay beyond Dublin, or all the way out to Stockton and Merced in the Central Valley.

The Roving Eye: No - The Peacock Can't Sell, The PC Stops?, A History Of Newspaper Folly

Dropping The Internet Baton. As I speculated, NBC's revenue from online video advertising during the Olympics was pitiful. eMarketer reports the take as only $5.75 million. Via TechCrunch, which notes that Yahoo had more Olympics related page views than NBC. Ouch, that's gotta hurt!

The Good Enough Point? Ole Eichhorn notes the deceleration of improvement in laptop specs in the last few years. We're seeing a confluence of reasons: Limitations imposed by energy budgets and battery life, performance already good enough for most uses, and a lack of inspiring new applications to drive platform specs. The bleeding edge of development has shifted towards low power, more specialized mobile devices on one hand, and server-based applications on the other. As laptop technology commoditizes, one might expect a shift from specsmanship towards packaging and design, which may partly explain Apple's rising market share.

Who else remembers videotext? Valleywag is not my usual cup of tea, but in this case they've done a service with a history of the newspaper industry's misadventures online. It's not as if the papers haven't tried through the years - the article includes a screen shot from a Viewtron NAPLPS interface circa 1983. But it seemed that they walked away from that and other experiments with the same lessons that proved fatal to CompuServe: Online was a slow-growth market, not ready for real consumers, and too much or too early investment was the way to lose your money. All of which was true, until it wasn't. Unlike the online services, the newspapers thought they could deal with the change in their own time, since after all "Content is king". Except it's not, It's easily trumped by communications and community, and the industry is still in a flat spin from which it's unlikely to recover.

Didn't you always suspect this? A fake restaurant wins an award from Wine Spectator. The spoof menu and wine list contained a number of vintages that the magazine had previously trashed. Wine Spectator claims it did its diligence by making phone calls and checking online - everything except actually eating at the place. One hopes they are actually tasting the wine they review. Snark aside, I've little use for this kind of review content. Going to the wineries and checking things out personally is one of the pleasure of California that partially justifies the price tag of living here.

The Roving Eye: Yahoo Bleeds, Credit Meets Nicotine, The Underbelly of Higher Ed

Once is an accident, twice is coincidence... Jeff Weiner. Jeremy Zawodny. JR Conlin.. All apparently headed to startups or funders thereof. (Update: Usama Fayyad as well.) Come on, purple and yellow, don't just lie there, do something! Even other people's startups have figured out how to leverage your under-worked community assets.

Forex for Dummies as well as the rest of us. Here's a well-done tutorial on the ups and downs of the dollar, from a group of Bay Area money managers.

This is your brain on credit. A fascinating study suggests that paying with credit rather than cash partially disengages the cost function. (HT: Maggie's Farm.) So there's a scientific basis for the recommendation of some of my favorite personal finance books to dump the credit cards. I'd also say, from personal experience, that running a rigorous household budget may have the same effect, assuming you pay off your cards each month - and you do, right? Whether it's cash, debit or credit, it all gets marked off against a balance, the only thing that varies is when. Most people can figure out that pain delayed is still pain, but...

This is your brain on cigs. The latest American Scientist brings a piece on another study, a combined behavioral and MRI look at differences between nicotine addicts and others in a stock market simulation. Seems the addicts lose the ability to process what the experimenters call 'fictive signals' - what those of us with an economic bent would call opportunity costs. Do you suppose these two groups of researchers should be comparing notes?

In the belly of the beast. Adjunct 'Professor X' at Unknown College pens an Atlantic piece on the woes of teaching English lit and comp to those of marginal academic abilities. This all sounds very familiar. About 25 years ago I spent some time as an adjunct, in computer science, at a community college in Flint, Michigan, motivated by a need to keep the wolf away from the door as well as sampling the teaching option before plunging into the commercial world. Two weeks into the first term I was bemoaning the fact that I could see myself easily flunking half the students, based on their complete inability to handle systematic problem solving, let alone actual programming. My fellow slave laborers opined that it was normal, and the best thing I could do is persuade them to drop the course while they could still get a refund. Yeah, I been there. 

Glenn Reynolds has talked about a current bubble in higher education, and if you count back the years, my experience was at the height of the fad for retraining autoworkers. There is one other factor in common: Some of my students were driven into the classroom to escape the consequences of a local economy wrecked by a combination of auto company management incompetence and auto union arrogance. And a lot of today's lower echelon students are driven there because their high school diplomas mean little as a credential, due to...