Contrasts

Right now I’m reading Empires of Light. It’s the fascinating tale of how the world was electrified. Not “electrified” in the sense of “the Beatles are coming to town!” but rather, literally, why I can flip a switch and the lights go on in my house.

This tale could be utterly pedantic – for instance, “first we wired up Wall Street, then we went up 1st Avenue”, etc. but it’s not. Rather, it’s the story of all the people behind this massive undertaking: their dreams, their quirks, their greed and the alliances and factions between them.

The central characters are Thomas Edison and Nikola Tesla. Edison is the quintessential scrappy American inventor while Tesla is the refined, sophisticated European scientist. I absolutely loved this paragraph where the author writes about what each thought of the other:

…Far worse, believed Tesla, was Edison’s approach to science: “If Edison had a needle to find in a haystack, he would proceed at once with the diligence of the bee to examine straw after straw until he found the object of his search…His method was inefficient in the extreme, for an immense ground had to be covered to get anything at all unless blind chance intervened and, at first, I was almost a sorry witness of such doings, knowing that a little theory and calculation would have saved him 90 percent of his labor.” Edison, in turn, dismissed Tesla as a “poet of science” whose ideas were “magnificent but utterly impractical.”

I love the stereotypes they throw at each other (and this is in the 1880’s). For what it’s worth, Tesla’s ideas won, but it took American money and business acumen to make them win – plus he died broke. Edison’s technology lost the war, but lives on (it powers the computer I’m writing this on) and so does his company: General Electric was formed out of Edison’s many holdings.

The Not So Humble Convenience Store and Vending Machines

When I was a management consultant we would read briefs written from other teams around the world. The Japanese teams were always raving about both the convenience stores and vending machines in Japan as world leaders in retailing.

Given that your average bodega in North America contains questionable food of uncertain age and most vending machines are variations on Coca Cola, I’ve always been a bit skeptical. However, being here has made me a convert.

Kings of Convenience

Your typical Japanese city is dotted with 7-Elevens (do not confuse it with the North American version), Family Marts and Lawson Stations (in Tokyo you also get the more upscale “Natural” Lawson).

In addition to drinks, snacks, etc., these stores sell a lot of fresh food. The triangles below are seaweed-wrapped rice with a vegetable/meat/fish core. Needless to say, you have to turn over your inventory pretty quickly to stock that:

Fresh fish and triangles in convenience store

Same for the fresh croissants, noodles, fried chicken, etc. that can be found in most of these stores.

There are also ingenious heated racks for serving you hot beverages:

Hot beverages at Family Mart

I highly recommend the Boss coffee in a can.

However, the kicker for me was that you can buy Muji in Family Mart stores:

Muji at Family Mart

New Yorkers and Londoners are crazy for Muji and it routinely sells there for outrageous prices across a very limited line of goods. In a convenience store – a convenience store! – in Tokyo you can buy more of their products than you can in NYC. Those are shirts in the lower left; underwear above them. Stationery in the middle. On the right are snacks (delicious cheese pretzels; yogurt-covered cherries) with noodles and sauces below them.

NYC and LDN: eat your heart out.

Cointastic

Because Japan’s so safe, they have vending machines for everything. There are your traditional drinks (and yes, that is Tommy Lee Jones for Suntory; Lost in Translation was not a joke):

Tommy Lee Jones for Suntory

There are also cigarettes:

Winston cigarette vending machine with stupid ad

And my personal favourite, booze:

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The fact that a beer/liquor vending machine does not:

a) Get broken into all the time

b) Lead to drunken youths lounging in the streets

tells you something about the national psyche here.

One other cool thing about some of the vending machines here is that you can pay with your cellphone. (Yet another potential line of business overlooked by North American cellphone companies).

Cellphone-enabled Vending Machine

The vending machines here are also not limited to chilled drink cans. This one will make you a hot coffee or a milk shake:

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Here’s a shot of showing just how many different drinks you get in each of these vending machines. Compare that to your typical 8 flavours (two of which are usually the most popular one) back home:

Inside vending machine

The (Mobile) Elephants are Dancing

It has been a fascinating few weeks in the device-side of the mobile internet. A ton of major events have happened.  It worth looking at them all to try and figure out the patterns and understand what’s going on.

Item 1: Blackberry unveils preview of OS 6

Blackberry released a video showing what their new OS 6 is going to look like.  It’s worth worth watching, because it’s a bet-the-company move.

Why is this a bet the company move?  Take a look at there charts from recent Mary Meeker state of the internet reports.

This first one is from 04/09 and shows the share of handset shipments vs. usage for different manufacturers.  One way to read this is that if your usage is higher than your shipment share then people love using your phones.  And if people love using your phones, you’re probably going to keep growing.

So how does RIM do?  Not well.  Lots of shipments, but very low relative usage:

Here’s an updated version from the end of 2009.  RIM’s slipping on usage – Android has jumped ahead of them – but they’re holding firm on shipments.

The scary thing for RIM right now is that they have to get people to use the mobile web on their phones.  That’s why the video above shows Facebook, Twitter and a bunch of other web properties on the new OS 6.  If RIM can’t get people to use the web on their phones, no developers are going to build for their platform and then it’s a vicious cycle to the bottom.

Worse, RIM will still look financially good as they’ve got a massive salesforce and are still the leaders in integrating with corporate email systems.  They’ve also got great relationships with the carriers so they’ll be able to use price to ship a lot of units.  They’ll even throw off a lot of cash in the meantime but it will be like watching GM’s arc from 1960-2010.  I’ll keep watching the graph above: if it doesn’t shift, they are doomed.

The battle for smart phones used to be about who was the best at selling high-priced devices to corporations (the only ones who could afford them).  RIM won by having a great keyboard and Exchange email integration.  But Apple redefined the space and made it a consumer game – which will be won by whoever has the most intersting apps on their platform.

Which brings us to…

Item 2: Some Guy Named Steve’s Thoughts on Flash

This morning Steve Jobs wrote a post where he explained why Apple will not support Flash on the iPlatform.  It’s a beautiful piece because it is the intersection of deep technical knowledge and keen insights on business strategy.  Even if you know nothing about Flash or technology, you can appreciate the letter.

The implications are striking.  Flash is dead as a technology for anything other than lazily creating websites for small businesses.  The market seems to understand this:

So what are the implications for software developers?

First, if you’re on Flash, migrate away from it as fast as you can.  Similarly, migrate away from any software tool that uses anything other than web standards to enable you to code across platforms (and even then be wary).

Second, focus on making your data clean and creating an API.  If you don’t have the resources to develop across multiple platforms (after all, you were using Flash for that), you need to convince someone to do it for you.  Give them access to your data and let them go to town.

Adobe got whacked by the Apple stick today as Apple reaffirmed their focus on their platform.  But Apple doesn’t just take away, Steve giveth too…

Item 3: The Crazy Pricing of Apple’s iAds

The Business Insider is claiming, courtesy of the WSJ, that Apple is looking to price its iAds at 10X the traditional price of ads.  They’re going to charge $0.01/impression and $2.00 per click (!).  They keep 40%; the developer of the software program keeps the rest.

Why is Apple charging so much for this?  Well first, they’re the only game in town (see Item 2) so they can.  More importantly though, 60% x $2.00 = $1.20.  That’s a huge amount of money for a developer – particularly given that the average price of an iPhone app is $2.40.

You can bet that many more developers are going to be clamoring to put these ads in their applications.  Which means that more people will be trying to develop for the iPhone.  Which means that more people will buy and use the iPhone as it has the coolest, best apps.  Go take a look at item #1 again and you can see why it’s RIM’s bet-the-company moment.

There’s no way Apple will sustain this pricing over the long haul, but it might be enough to kick RIM or Symbian out of the game.  Especially since Palm’s now gone…

Item 4: What the Hell is HP Doing?

The last major event of the past few weeks (at least, at the time of writing this) is HP buying Palm.  HP’s got a long history in the mobile space (remember the iPaq or the Jornada?) and now they’re “doubling down on the Web OS [Palm’s operating system].”

Many people assume that they’re doing this to re-enter the hot mobile space, etc. but I’ll bet $5 it’s for the following:

1) HP has been at risk of getting ‘stuck’ as a computer manufacturer.  They make middle-of-the-road devices and the market is fragmenting to the high- and the low-end.  By buying the WebOS they can build some cheaper and/or differentiated devices like netbooks, tablets, etc. without having to pay about $40/unit to Microsoft for a copy of Windows.  (They already make high-end [and high margin]  devices like the Blackbird and VoodooPC)

This is augmented by the fact that software is shifting to the Web: you use your browser, Facebook and Twitter – and you don’t care if the underlying platform is Windows or WebOS.

2) You’re going to see a whole lot of WebOS systems in the government and enterprise.  Remember that HP has a massive consulting organization.  The Web means that this group increasingly spends its time moving bits around its clients’ organizations; that’s where the money is.  Now they can offer linux-based devices on the server side and WebOS-based devices on the client side, meaning that an HP offering just got cheaper than the competition.

Don’t be surprised if 5 years from now you go to your doctor’s office or local fire department and everyone’s using an iPaq Palm device.

3) What you won’t see is a great phone.  Palm hasn’t shown themselves good at picking carrier partners (witness the long exclusivity to Spring) and HP doesn’t sell phones, so don’t expect them to do a good job either.  Also, Palm’s never going to beat Apple or Android on the software side; they lack the scale and focus to do so.

There are going to be a lot of devices that use the WebOS but the developers are going to be working on commercial apps for industry (think medical records) or HP will be paying the Facebooks, Twitters, etc. of the world to create versions of their apps on the WebOS platform.

As the Chinese say, may you live in interesting times…

Commoditizing Dog Food

It’s always refreshing to see someone take their own advice (aka eating their own dog food).

Last week Facebook announced their Open Graph initiative.  It’s their hugely ambitious attempt to take over the web.  In a nutshell, the idea is that you Facebook will be used to log you on to all websites and all your preferences (which bands you like/hate, etc.) will reside with them and in return they’ll personalize everything for you (both content of sites and ads).

It’s a great idea as long as you trust Facebook with every private aspect of your life. And you don’t mind if they share it with their development partners. And you trust them to delete your info if you like something you shouldn’t have. And you don’t want to use any competing service that might be improved based on your preferences (you can bet Facebook won’t share your data with them).  In short, it’s a closed universe and those work really well right up until they don’t – usually when you try to do something someone in the corporate Politburo didn’t want you to.

So, what to do? Well, a group of interesting folks have started OpenLike, an open source project to come up with a standard for ‘liking’ objects on the web (that’s the mechanism for capturing your preferences).

Are these folks doing it out of the goodness of their hearts?  Probably in part, but more likely they’re focused on “commoditizing the complement“.

The notion is simple: you want to drive down the cost of anything that augments your product/service.  Joel Spolsky wrote the definitive treatise on this.  While the notion is simple, identifying a complement isn’t always obvious and that’s what makes OpenLike so interesting.

If you look at the folks behind the initiative, one of them is Chris Dixon, who wrote the blog post about complements referenced above.  He runs Hunch, a site that gives you recommendations and gives you better results as you and others use it.

Hunch’s value lies in their algorithms: the more data they have about you – most notably your preferences about what you like/don’t like – the better their algorithms work.  In other words, preference data is the complement to their algorithms, so they’ve got a massive interest in making it as cheap as possible for people to give them their preferences.

Facebook is threatening to make it infinitely expensive (they’ll almost certainly never give Hunch that data), so they’ve got a fire under their butt to consider doing something else.  They could try buying the preference info from users, but that’s typically not a good way to run your business (ask Microsoft who is offering cash back on search and losing a fortune).

They’re focused on building a killer product that will offer enough “value” (I put it in quotes as it’s such an elusive term) to users for them to want to give them their preferences.  But that’s not enough when you’re going up against the web-wide distribution of an industry leader with over 400 million users.

Hence OpenLike.  If they can provide an alternative to Facebook’s platform they provide a way for themselves to thrive.  Publishers are happy as their content can get shared to more places on the web.  Hunch is happy as they can get more preferences.  And open web advocates are happy as the user is back in control of their preferences rather than one private company.  Plus it’s always nice to see people like Chris walking their talk.

On another note, this will also be a small win for Google, who will now have a search entry for the exact phrase “commoditizing dog food”:

Why Cities Matter

When the Internet arrived in force in the ’90s, one of the promises was a new era of telecommuting.  You could live in the middle of nowhere but be part of the high tech workforce in a major city.  However, this hasn’t played out and, in fact, the opposite appears to be happening: cities matter more than ever.

This little chart from a recent Brookings Institute presentation (note: PDF) sums it up more beautifully than anything I could say: