May 2004 – Emergic

Bruce Mau’s Incomplete Manifesto for Growth

[via Arun Katiyar] My favourites from the manifesto:

1. Allow events to change you. You have to be willing to grow. Growth is different from something that happens to you. You produce it. You live it. The prerequisites for growth: the openness to experience events and the willingness to be changed by them.

2. Forget about good. Good is a known quantity. Good is what we all agree on. Growth is not necessarily good. Growth is an exploration of unlit recesses that may or may not yield to our research. As long as you stick to good youll never have real growth.

4. Love your experiments (as you would an ugly child). Joy is the engine of growth. Exploit the liberty in casting your work as beautiful experiments, iterations, attempts, trials, and errors. Take the long view and allow yourself the fun of failure every day.

6. Capture accidents. The wrong answer is the right answer in search of a different question. Collect wrong answers as part of the process. Ask different questions.

11. Harvest ideas. Edit applications. Ideas need a dynamic, fluid, generous environment to sustain life. Applications, on the other hand, benefit from critical rigor. Produce a high ratio of ideas to applications.

33. Take field trips. The bandwidth of the world is greater than that of your TV set, or the Internet, or even a totally immersive, interactive, dynamically rendered, object-oriented, real-time, computer graphicsimulated environment.

DIY Telco

Robert Cringely on how “Linux is inadvertently poised to emake the telephone and internet markets”:

One of the cheapest Linux computers you can buy brand new (not at a garage sale) is the Linksys WRT54G, an 802.11g wireless access point and router that includes a four-port 10/100 Ethernet switch and can be bought for as little as $69.99 according to Froogle. That’s a heck of a deal for a little box that performs all those functions, but a look inside is even more amazing. There you’ll find a 200 MHz MIPS processor and either 16 or 32 megs of DRAM and four or eight megs of flash RAM — more computing power than I needed 10 years ago to run a local Internet Service Provider with several hundred customers. But since the operating system is Linux and since Linksys has respected the Linux GPL by publishing all the source code for anyone to download for free, the WRT54G is a lot more than just a wireless router. It is a disruptive technology.

A disruptive technology is any new gizmo that puts an end to the good life for technologies that preceded it. Personal computers were disruptive, toppling mainframes from their throne. Yes, mainframe computers are still being sold, but IBM today sells about $4 billion worth of them per year compared to more than three times that amount a decade ago. Take inflation into account, and mainframe sales look even worse. Cellular telephones are a disruptive technology, putting a serious hurt on the 125 year-old hard-wired phone system. For the first time in telephone history, the U.S. is each year using fewer telephone numbers than it did the year before as people scrap their fixed phones for mobile ones and give up their fax lines in favor of Internet file attachments. Ah yes, the Internet is itself a disruptive technology, and where we’ll see the WRT54G and its brethren shortly begin to have startling impact.

You see, it isn’t what the WRT54G does that matters, but what it CAN do when reprogrammed with a different version of Linux with different capabilities.

If you have a WRT54G, here’s what you can use it for after less than an hour’s work. You get all the original Linksys functions plus SSH, Wonder Shaper, L7 regexp iptables filtering, frottle, parprouted, the latest Busybox utilities, several custom modifications to DHCP and dnsmasq, a PPTP server, static DHCP address mapping, OSPF routing, external logging, as well as support for client, ad hoc, AP, and WDS wireless modes.

If that last paragraph meant nothing at all to you, look at it this way: the WRT54G with Sveasoft firmware is all you need to become your cul de sac’s wireless ISP. Going further, if a bunch of your friends in town had similarly configured WRT54Gs, they could seamlessly work together and put out of business your local telephone company.

There is an obvious business opportunity here, especially for VoIP providers like Vonage, Packet8 and their growing number of competitors. If I was running a VoIP company ,I’d find a way to sell my service through all these new Wireless ISPs. The typical neighborhood WISP doesn’t really want to DO anything beyond keeping the router plugged-in and the bills paid, so I as a VoIP vendor would offer a bundled phone-Internet service for, say, $30 per month. I handle the phone part, do all the billing and split the gross sales with the WISP based the traffic on his router or routers. If one of my users walks around with a WiFi cordless phone, roaming from router to router, it doesn’t matter since my IP-based accounting system will simply adjust the payments as needed.

The result is a system with economics with which a traditional local phone company simply can’t compete.

Broadcatching: RSS + BitTorrent = TiVo for PC

Portland Phoenixwrites:

Broadcatching in its currently proposed form marries the peer-to-peer file sharing program BitTorrent with the increasingly popular RSS (Really Simple Syndication) protocol. BitTorrent is often lumped in the same category as p2p programs like Kazaa, but it features a few fundamental differences that make it ideally suited to broadcatching.

First, BitTorrents algorithm is designed specifically for the transfer of very large files, such as games, movies, or episodes of TV shows. These bulky files are broken down into many small pieces, so users can simultaneously download a torrent of bits from multiple users, which the BT client reassembles into a cohesive whole for the end user to watch, play, or do with as he or she pleases.

Second, BT allows users to download these file packets from each other before the person being downloaded from has even finished their own download of the requested file, thus enabling even faster propagation of popular files through the network. The more people who have a file, the faster that file can be downloaded, which increases the number of people likely to have the file, etc.

BTs ability to rapidly distribute large, popular files means its the perfect venue for sharing timely content like television shows.

Now imagine if your favorite provider of torrent files also provided an RSS feed of those files, and your RSS aggregator had the ability to recognize a torrent file and launch BitTorrent automatically. You could subscribe to the RSS feed provided by that new indie-film producer you just heard about, the network that airs your favorite TV show, the brother-in-law who loves to shoot home movies. You could set this broadcatching system to check for and download new files while you sleep, and wake up to fresh content on your hard drive.

Here’s more.

eBay’s Business

Robert Scoble talkd to an eBay exeuctive on a flight and gathered this info:

$7 to $8 billion runs through the eBay platform (yes, he called eBay a “platform”) every quarter.

Every hour eBay registers 3000 to 4000 new users.

This year they are expecting somewhere around $3.5 billion in revenues. That’s above expectations.

Every day about a terabyte of data courses through eBay’s data centers (most of the machines running eBay are running Windows, he told me. The back end they use is running on Sun Microsystems computers).

eBay has a high degree of customer lockin. How? Well, for one, many of their customers are getting rich (he says he knows a few power sellers who have already retired). Second, the more you buy and sell on eBay, the better your ratings, and those aren’t transferable to other auction systems.

USA Today wrote recently on the eBay ecosystem.

Bill Miller had an interesting perspective on eBay’s growth, comparing it with Microsoft at the same time in the latter’s history:

The question on eBay is simple: how long will the growth continue, and at what rate? That will determine whether it is like Microsoft in 1990, a bargain, or like most companies with high expected growth rates, a dud. Part of the answer lies in the description.

What is eBay’s business? If it is an auction site where individuals, mostly, sell unwanted items sort of like an Internet enabled flea market then it probably is fully priced. That is not how the company describes its business, though. Here is eBay’s description of what it does: “We make inefficient markets efficient.” For those who can size markets, that is all you need to know, if you believe it.

I got Microsoft totally wrong in 1990. It was a great value, and no value investors owned it. It looked expensive; it wasn’t. EBay looks expensive too. Mulligan.

He adds about the cryptic reference to Mulligan: “‘Mulligan’ in golf refers to a second shot you can take without penalty. Like a second chance to correct a
mistake; a do-over.”

Alexa shows Growing International Traffic

Brian Dear looks at Alexa’s traffic on some popular sites and sees their Alexa rankings going down…and some other sites are seeing their traffic go up. About Alexa: “Alexa’s graphs capture how the rank, within Alexa’s own lists, of popular websites changes over time. The business goal, of course, for any web business is higher and higher traffic, month over month. That ought to translate into higher and higher rankings within Alexa, one would think.”

An Alexa product manager commented: “We here at Alexa have been watching the same trend for the last several years: International sites moving up in the rankings and other very popular US sites slowly dropping…The growth in web usage among non-us nations, particularly Asian countries, is real.”

Admittedly, Alexa isn’t the perfect way to decide the popularity of a website, but it is still an indicator.

Creating a Generic Site-To-RSS Tool

Roy Osherove writes: “I’ll show how to use regular expressions to parse a Web page’s HTML text into manageable chunks of data. That data will be converted and written as an RSS feed for the whole world to consume. Finally, I’ll show how to create a generic tool that enables you to automatically generate an RSS feed from any website, given a small group of parameters.”

TECH TALK: Good Books: Investing: The Last Liberal Art

Robert Hagstroms book Investing: The Last Liberal Art talks about the need for a latticework of mental models. It is inspired by Charlie Mungers thinking that one needs to have a framework of the best ideas across multiple disciplines. This may seem contrarian to what we are always told the need to specialise. While the title of the book may imply an emphasis on investing, that is not necessarily the case. The book is a great tutorial in thinking through challenges we face from multiple different angles. As Hagstrom suggests: Innovative thinking most often occurs when two or more mental models act in combination.

From the book description: Investing: The Last Liberal Art offers a unique picture of investing within the larger world. It explains how investment management works by borrowing the big ideas from other complex disciplines: biology, economics, mathematics, philosophy, physics, and psychology. In the biology chapter, Hagstrom analyzes the central nervous system and the immune system as complex adaptive systems and then draws parallels with the behavior of the economy and the stock market. In the physics chapter, he explores a mathematical distribution and considers the advantages of scale in relation to the bigger is better models that define the business strategies of Wal-Mart, McDonald’s, and Home Depot. This interdisciplinary approach or model describes in which mechanisms the markets work and how to select and hold stocks.

Chetan Parikh, who first recommended the book to me, writes in his review:

This book is certainly the best book that I have read for a long time. It is a book on how to connect and unify many disciplines – physics, biology, social sciences, psychology, philosophy and literature – to investing and the markets. It also contains some serious advice on how to read a book – a boon to avid bookworms like me.

Ideas just bubble from every page – the author warns in the preface: “Reading this book requires, then, both an intellectual curiosity and a significant measure of patience.” – I went through the book in just two sittings, impatient as I was for more. In a way, this book crystallises the thoughts of Charlie Munger, Vice-Chairman of Berkshire Hathaway, who believes in a liberal arts understanding of investing and feels that building a latticework of mental models could greatly help people to improve their investment returns. Bill Miller, the investing superstar of Legg Mason, actually practices this by gaining insights from various disciplines to aid his investment thinking.

To be an intellectual Christopher Columbus, an investor should acquire models or concepts from various branches of knowledge and then attempt to recognise patterns of similarity in them. Investment decisions have a higher probability of success when ideas from other disciplines also lead to the same conclusion. As Charlie Munger has stated – “You’ve got to have models in your head and you’ve got to array your experience – both vicarious and direct – on this latticework of models.” As Benjamin Franklin said it is forming “habits of mind” that seek to link together different disciplines. Intelligence is really a factor of how many connections or links one has learned. As Munger also stated: “You can reach out and grasp the model that better solves the overall problem. All you have to do is know it and develop the right mental habits. Worldly wisdom is mostly very, very simple. There are a relatively small number of disciplines and a relatively small number of truly big ideas. And it’s a lot of fun to figure it out. Even better, the fun never stops. Furthermore, there’s a lot of money in it, as I can testify from my own personal experience. What I’m urging on you is not that hard to do. And the rewards are awesome..It’ll help you in business. It’ll help you in law. It’ll help you in life. And it’ll help you in love..It makes you better able to serve others, it makes you better able to serve yourself, and it makes life more fun.”

Robert Hagstrom writes in his book: Latticework is itself a metaphorIt is a but a very small stretch to envision a metaphorical lattice as the support structure for organizing a set of mental conceptsOne thing we understand about the human mind is the variability with which it receives and processes information. Any educator knows that the best way to teach a new idea to one student will have no effect whatsoever with another; the best educators, therefore carry with them a virtual key ring with many different keys for unlocking individual minds.

Tomorrow: Investing: The Last Liberal Art (continued)

Continue reading TECH TALK: Good Books: Investing: The Last Liberal Art

What Tomorrow Will Look Like

Eric Savitz of Barron’s attended the Future in Review conference, which looks ahead to the world in 3-5 years. His report:

Let’s just say that the future looks a lot like the present, only with more of everything — more broadband access, more wireless technologies, more data storage and more competition for the West from China, India and the rest of Asia. Here’s a sampler:

Connie Wong, president of Hutchison Whampoa Americas, predicted that in five years, all mobile-phone handsets will be made in China, Taiwan and South Korea, with Nokia “transformed into a service provider.” She also expects widespread use of handsets for watching video, and an explosion of consumer-created content.

Tim DiScipio, chairman of ePals, which provides “school-safe” e-mail systems, made the scary observation that, according to Department of Education data, the fastest-growing segment of Internet users is kids two to five years old.

Tom Standage, a reporter for the Economist, concluded Wi-Fi isn’t likely to be the way consumers connect to the Internet outside the home, noting that there are only 30,000 public hotspots, less than 0.1% of the world’s access points, and half of those are in South Korea. “To an engineer’s proximation,” he quipped, “there are roughly no hot spots in the world.”

Martin Tobias, a Microsoft alumnus who is a partner with the venture firm Ignition Partners, alarmingly predicted that his former employer won’t ship its new version of Windows, known as Longhorn, before 2009. He didn’t seem to be kidding.

Ray Ozzie, creator of Lotus Notes and CEO of Groove Networks, forecast that within five years, 3.5-inch disk drives — the kind in desktop PCs — would offer two to five terabytes of storage, while laptops, with 2.5-inch diameter drives, will have one-terabyte drives. How much is that? Well, George Zachary, a partner at Charles River Ventures, repeated a recent comment from Microsoft executive Rick Rashid that with a terabyte of storage, you could record and store every conversation you have for your entire life. And with two terabytes, you could capture and store 360-degree photos of every minute of your life. Ozzie also made the point that the real security issue for computing is that systems need to be “complacency-immune,” since people don’t do many simple things they could do to protect themselves. Said Ozzie: “People are the fundamental problem.” They usually are.

Bill Janeway, vice chairman of Warburg Pincus, a big proponent of software delivered as a service, forecast “the death of the applications software industry,” with SAP as “the last man standing.”

Beau Vrolyk, another Warburg Pincus partner, seemed unimpressed with grid computing — linking many computers to take advantage of otherwise unused computing “cycles.” Noting that the average user would be hard-pressed to use more than a few percentage points of a computer’s number-crunching ability, he said: “There are still problems that can be solved with more computing power, but they are interesting mostly to esoteric scientists.”

What India Needs

Gurcharan Das writes in a letter to Manmohan Singh:

Growth, you said, is the best anti-poverty programme, I hope you will repeat this to your colleagues when they try to pressure you into populist programmes that our deficit burdened treasury cannot afford. The best way to distribute the fruits of growth, as we both know, is through better schools and better primary health centres. This is the only way to give reforms a human face (and not leaky poverty programmes). However, the reform of education and health is not just about spending more money. It is about making teachers and nurses accountable, so that they will, at least, show up.

Like it or not, India s general elections have become municipal elections. What matters to the rickshawala is that the cops not take away a sixth of his daily earnings. The farmer wants a clear title to his land without having to bribe the patwari. The sick villager wants the doctor to be there when she visits the primary health centre. The housewife doesnt want the water tap to go dry while she is washing. This is how government touches ordinary peoples lives, and in successful societies people take these things for granted. You might say that these are local subjects, but to ordinary citizens you are the face of the government and they expect this from you.

Where does the illness of governance lie? Why dont employees of the central, state, and local governments do their jobs? In the Far East , for example, citizens get far better service. Is it because we protect labour excessively in India , to the point that they no longer feel accountable? This was my experience in the private sector, at least our labour laws have taken away accountability and diminished our companies competitiveness. Thus, you may have to tackle labour laws despite your partners.

If you buy my argument about governance then your focus will shift from policy to implementation. Hold your finance minister accountable for the behaviour of income tax officers. Judge your home minister, for example, for eliminating harassment of honest NGOs who get foreign donations. Reward your economic ministers for eliminating red tape foreign investors repeatedly tell us that they prefer China over India because of our red tape.

In the end, even if you make a small but perceivable difference, you will break the anti-incumbency factor, which is a code word for poor governance. If you do not, then you will be asking for the return of the BJP in 2009.

McKinsey on Indian Industry

McKinsey Quarterly discusses how other industries need to replicate the success of India’s outsourcing and automotive industries:

India has clearly benefited from closer integration into the global economy in industries such as automotive, business-process outsourcing, and IT. To build on that success, the government must now lower trade and foreign-investment barriers still further.

First, tariff levels should be cut to an average of 10 percent, matching those of Indias neighbors in the Association of South East Asian Nations (ASEAN). Although progress has been made on tariffs, the Indian government still prohibits imports of many goods and protects inefficient companies from foreign competition. To give those companies a chance to improve their operations, the government might first lower duties on capital goods and inputs. Then, over several years, it could reduce them on finished goods.

Foreign-ownership restrictions should be lifted throughout the economy as well, except in strategic areas, notably defense. At present, foreign ownership is not only prohibited altogether in industries such as agriculture, real estate, and retailing but also limited to minority stakes in many others, such as banking, insurance, and telecommunications.

Indias government should also reconsider the expensive but often ineffective incentives it offers foreign companies to attract foreign investment, for these resources would be put to better use improving the countrys roads, telecom infrastructure, power supply, and logistics. Whats more, MGI research found that the government often gives away substantial sums of money for investments that would have been made anyway.3 (To give one example, it has waived the 35 percent tax on corporate profits for foreign companies that move business-process operations to India, even though the country dominates the global industry.) Moreover, state governments often conduct unproductive bidding wars with one another and give away an assortment of tax holidays, import duty exemptions, and subsidized land and power. Yet MGI surveys show that foreign executives place relatively little value on these incentives and would rather see the government invest resources in the countrys poor infrastructure.

Finally, interviews with foreign executives showed us that Indias labor laws deter foreign investment in some industries. It is no coincidence that software and business-outsourcing companies are exempt from many labor regulations, such as those regarding hours and overtime. Executives tell us that without these exemptions, it would be impossible to perform back-office operations in India. To attract foreign investment in labor-intensive industries, the government should therefore consider making labor laws more flexible.

Some Indian policy makers might argue that the reforms proposed here would undermine long-held social objectives, such as creating employment. But the evidence shows that regulations on foreign investment, foreign trade, and labor have actually slowed economic growth and lowered the standard of living. A decade ago, Indias per capita income was nearly the same as Chinas; today, Chinas is almost twice as high.

Indias economy has made real progress, but further liberalization will be needed to sustain its growth. The country now has 40 million people looking for work, and an additional 35 million will join the labor force over the next three years. Creating jobs for all these Indians will require more dynamic and competitive industries across the economy. Opening up to foreign competition, not hiding from it, is the answer.