Sunday, January 31, 2010

Apple Silicon in Next iPhone?

Apple has been using ARM to power iPhones, but has been buying the chips from third parties like Samsung. (A reason Intel said Apple's ARM decision was a mistake.) Now that Apple has launched its Apple A4 system-on-a-chip in its new iPad (not yet shipping), the question about Apple's possible plan to use its PA Semi acquisition to supply its own silicon to its high-volume iPhone business has become much more serious.

Tantalizingly, Steve Jobs' post-iPad-launch discussion with Apple employees included a few tidbits:
  • Apple will update iPhone's OS (and the iPad's) aggressively, which will make it a hard target for Google to catch with Android
  • Apple views Google as intending to destroy iPhone, and Apple is committed to protecting iPhone
  • The next iPhone "is an A+" update
These related pieces of information suggest that (1) Apple is leveraging its control over its software to improve its competitive advantages, (2) Apple's migration to its own hardware may leverage existing margins and capability advantages to the detriment of either features competitors or price competitors, and (3) Apple's ability to leverage its intimate knowledge of self-designed hardware to offer users a high-value software experience will be increasing rather than decreasing with the improvement of future hardware and software. It also suggests the name of the SoC that will run the iPhone may be "A+" instead of "A4".

Given who Apple got with the PA Semi acquisition (Alpha? StrongARM? Yeah. That team's leader.), it's expected Apple will enjoy genuine advantage going forward. Apple has begun showing us how it will leverage that advantage with custom low-power silicon predicted earlier:
Before the year is out, Apple will have the most powerful, lowest-cost SOC in the industry. There's nothing that I can see from ARM licensees or Intel that could challenge the power-per-watt, the power-per-buck, the power-per-cubic-millimeter of size. Apple is going to have quite a performance, battery efficiency and cost advantage over the competition
-- Richard Doherty, quoted in cnet news
The future is here.

Winning The Lottery Can Change Your Life

... or end it. Apparently the research is right: more money doesn't make most people happier for very long.

Marriage is a better long-term investment.

Saturday, January 30, 2010

RIP Flash?

Apple's pogrom against CPU-hogging proprietary plug-ins, announced with the iPhone's nonsupport of Adobe's Flash, continues with the iPad and its "screaming fast" A4 processor.

Perhaps Apple's plan to push developers toward standards, and away from competing content-creation suites, calls for mobile devices to drag developers into a standards-based future. And drag them, it might. Microsoft changed its back-end tools to send MPEG-4 rather than proprietary content to iPhones, for example.

On the other hand, many sites are simply horribly broken on the iPhone: they sniff that you use a mobile platform, redirect or rewrite all URL requests to a URL that users aren't trying to reach, like the URL of the domain's mobile-version home page (not a mobile-version of the linked page, a mobile version of the home page of an entire news site like the Washington Post), and thereby break every single link made to any page in the entire domain. The fact these dufus site developers can't bother to give an already-HTML site to a mobile device suggests that revising a site to do it properly is simply beyond their pathetic powers.

So, what's the real reason to halt flash?

Easy: Flash sucks. Flash is the number one cause of crashes in browsers on MacOS X. (Heck, it crashes browsers on Ubuntu Linux and on MS-Windows, too.) And not only browsers: according to Apple's Bertrand Serlet, "plug ins" (read: Flash) constitute the number one cause of all application crashes on MacOS X. Flash is also implicated in security problems on every platform for which Flash is released (and spawned third-party Flash security tools). And the number one use of Flash – delivery of video – doesn't even require Flash; HTML 5 supports plugin-free delivery of much of the content, like streaming video, that plug-ins like Flash were designed to support. Use of Flash to create full-featured applications is certainly possible, but it also sucks: it doesn't behave like any users expect, and for example won't support cut-and-paste with any other applications and will be totally unaware of the spellchecker that all your MacOS X applications inherit from upstream Cocoa objects. Worse, unless Flash sites are carefully designed, making useful links to content deep within Flash sites can be impossible for regular users. And we've seen how much effort most site designers seem to be willing to spend making a site usable by a customer's browser. Got accessbility aids? Unless your Flash site designer knows to sniff for them, Flash will simply defeat all the accessibility aids that your computer offers all your non-Flash applications.

Don't expect Apple to support Flash on mobile devices Apple holds out as examples of innovative and high-quality user interface. Flash won't be designed for multitouch or any other technology Apple may choose to offer.

Job-Making Tax Credit All Backwards

As described here, the mere declaration in the State of the Union of a tax credit to small businesses that hire workers won't cause such small businesses to hire workers. Because businesses make hires based on sales, cash flow, and demand for products/services that requires additional personnel, the tax credit won't so much give an incentive to hire as it provides a windfall to businesses whose success was going to lead to hires without the tax credit.

Who benefits? Not the public. Why are we paying for this?

On the Market for iPads

There is one apparent downer in what appears to be Apple's iPad strategy.

The iPad, like the iPhone and iPod Touch, will sync via iTunes to a host computer that provides its software updates and backs up its data in case of mishap. The iPad is thus potentially a companion device rather than a main machine. This may not be a problem to existing Apple customers, who have a computer and happily sync their Apple-designed companion devices to that computer using iTunes, but one of the apparent advantages of the sub-$500 price tag is that it would seem to appeal to folks with a sub-$500 computer budget. If Apple tells these folks that they need to buy some other machine in addition, Apple may be talking itself out of a sale.

How the iPad's specs play into this companion device meme? Straight off, I note that it has a maximum capacity of 64GB. You can get an iPod with more storage. Lesson? You need someplace to put your data, because it doesn't fit on the iPad.

(Note: I say this as the owner of a machine with 2TB internal storage, a large music collection, tens of thousands of photographs, and lots of fax-email transmissions filed away in various folders along with other records of projects to which they relate, which projects may contain multi-megabyte documents and presentations. The putative netbook-vs-iPad customer I hypothesize is very unlikely to have this quantum of data, or it would be on an existing computer with vastly greater power than exists in netbooks. I may be making a big deal out of nothing. However, I point this out to invite questions and discussion of Apple's strategy.)

On the bright side, the 64GB of storage is fast, low-power, solid-state flash that supports Apple's program to deliver battery life. A quality-of-life issue working in iPad's favor is that a user will never, even in some kind of energy-conservation mode, have to wait for the hard drive to spin up to access a cache file, save a document, or do anything else involving the filesystem: the solid-state drive is always ready to go, and it's quiet so nobody is bugged when you save files or the operating system synchronizes its cache or swaps.

(And the iPad will save files, as it supports content-creating applications. Apparently, managing files will be the responsibility of the files' applications and the user will not be asked to know anything about the filesystem. Let's hope developers come up with high-quality mechanisms for sorting and finding the files users will handle.)

Since the iPad will, according to Steve Jobs, allow users to make documents and to save them in various competing but common formats and to email them without having to access some kind of host machine, the iPad is much better suited as a stand-alone device than initially supposed by Walt Mossberg when he approached Apple's CEO on the subject of sending in his review from the device (to editors who could not read iWork's native formats). Unlike the week-long Kindle charge, Steve Jobs (in the same interview) made clear that he didn't think that plugging the iPad in daily was a burden for anybody. As a person who's been bitten by failure to plug in an iPhone in a confusing or busy night, I can attest that a one-day charge can limit people – especially on a multi-day road trip. On the other hand, in a multi-day road trip one would expect access to a car's DC outlet and a recharge; classrooms have power outlets; school lounges have power outlets; airports have power outlets; some airlines support iPod recharging; and there are recharging solutions for iPod-compatible sockets that appeal to virtually any circumstance a user might imagine (aircraft-headphone-jack-to-iPod-connector recharging?). These don't prove the recharging problem doesn't exist, though: they prove that vendors will sell users a crutch to overcome battery limitations in iPod-connector-equipped Apple products. Still, with ten hours of video, one can do much more than one would have expected with a notebook's battery life.

"The history of tablets has been that they've all been failures, and the question is ... can you create a market for something that never had a market before by making it better as a device or by delivering a lot of content or services that other tablets didn't have?"

This is really the question for Apple. Will Apple grow the tablet market like it did the market for MP3 players, or will the iPad join the other skeletons drying in the desert of tablet devices?

I think Apple's bid to grow the market depends in part on its success in pitching the iPad as a stand-alone device and not as a mere companion to real computers.

(UPDATE: Mule Design's Mike Monteiro predicts the iPad will be sold to users instead of notebooks, suggesting a belief the iPad will – whether immediately or down the road – offer an experience free from the orbit of a "real computer" because it will itself be sufficient computer. The Mac Observer's Dave Hamilton says he's sure that the notebook replacement is where Apple is heading with the iPad.)

UPDATE: Mossberg agrees:
If people see the iPad mainly as an extra device to carry around, it will likely have limited appeal. If, however, they see it as a way to replace heavier, bulkier computers much of the time—for Web surfing, email, social-networking, video- and photo-viewing, gaming, music and even some light content creation—it could be a game changer the way Apple’s iPhone has been.
"Laptop Killer? Pretty Close" by Walt Mossberg

Friday, January 29, 2010

iPad Rocks Competitors' Pricing

Apple's ability to deliver the iPad as cheap as $500 has surprised some competitors, who thought they were safe below a $1000 floor on Apple pricing. Netbooks, previously priced to sell are now in direct competition with a sleek piece of high-end hardware offering an innovative UI and well-designed software, may face the choice to lower pricing or lose share.

Display panel supplier AUO sees client inquiries on iPad-like display panels, and foresees the possibility that the device could sell many more units than the previously-predicted three or four million or fewer.

With Apple's margins difficult to calculate due to the unknown component cost of its self-designed system-on-a-chip, its unclear how much wiggle room Apple has for competition. Apple may plan sucking the air out of PC manufacturers by competing at multiple price points as it does in the music player space.

If the iPad proves serviceable as a stand-alone computer and not a companion device requiring additional computing infrastructure, Apple could sell quite a few of these tablets.

ACAS: Hungry to Buy, Wanna Let 'Em?

Remember the last time ACAS asked for authority to sell shares below net asset value? The idea was to buy ECAS, which made book-keeping sense because ECAS was itself trading below NAV, making ACAS' below-NAV share price doubly-discounted. Trading ACAS shares below NAV to get ECAS shares that were trading below book seemed to leave ACAS ahead in NAV. In the time since, ECAS has grown the China business of its Metall Technologie portfolio company and made several investment exits representing double-digit rates of return. Although ACAS has apparently looked at deals to sell ECAS, the price hasn't been good enough to tempt management to discard this tool in its global capital management arsenal.

ACAS certainly could liquidate existing assets – some, like its holdings in AGNC, are extremely liquid – but ACAS has plans for those assets, too. AGNC is providing something like $1.40 a share per quarter, which isn't a bad return on ACAS' $20 per share. 7% per quarter? Plus capital appreciation? And AGNC has such a sharp management team; how could ACAS bear to part with the rest of its investment? Now that ACAS' NAV is on the way up, why would ACAS want to part with peach investments?

So, ACAS has come back to the well, asking for permission to issue shares below NAV. Sigh.

The proxy statement echoes the argument posed here last year, that deals are so good even below-NAV fundraising is expected to yield outstanding ultimate returns:
We believe that current market conditions have created opportunities to invest in assets at prices that are at significant discounts to their economic or intrinsic fair value. For instance, the decrease in purchase multiples for some private and public companies has generated historically unusual attractive strategic investment opportunities to acquire certain middle market public companies that could prove to be accretive to our future net asset value.
Proxy Statement
Last year, this was argued here in support of the last below-NAV approval, predicted here to be approved:
ACAS will be approved to conduct the below-NAV issuance needed to close the ECAS deal and others like it; the result will be ACAS surviving its liquidity and net-worth crunch; and the due diligence that has produced ACAS its historic returns will continue to produce future returns, possibly amplified by the availability of insanely good deals during a time of broad economic crisis
Jaded Consumer, "ACAS: Profit Isn't Cash Flow"
Once again, the question is whether owners believe management warrants their confidence. If not, owners should sell. Do not pass GO, just sell.

Those who believe that management can value a deal, and work out the value of potential fire-sale purchases, will naturally vote to approve sale below ACAS upon Board approval.

The fact that NOI has stabilized and that NAV is heading north again gives ACAS some added credibility as the company navigates the waters in which it finds itself. Exactly how ACAS should be navigated through these waters is a question many may ask, but management's done an excellent job in rough times and expecting the performance to continue isn't as crazy as it sounds.

The language in the proxy makes it clear that management is contemplating deals that, like the ECAS deal, are stock deals for assets trading below their net asset value. Instead of issuing shares for cash, ACAS would issue shares for discounted assets that management believes are even more discounted than ACAS shares on the date of the transaction. Like the ECAS deal, this could be accretive rather than dilutive and would benefit shareholders. Since, according to the proxy, Malon Wilkus still has an interest in millions of shares of ACAS, I think he has a strong incentive to ensure that the shares do well over time.

I'm inclined to vote to support the fundraising so that outstanding deals can be consummated if and when they appear.

Vignette on U.S. Security

This piece is a delicious commentary on the United States' efficiency in creating security.

Thursday, January 28, 2010

Apple's Vocabulary

The iPad: What's In A Name?
Apple announced the iMac last century to showcase that buyers could afford a small, friendly, lower-power Mac that wasn't a PowerMac but would handle common user tasks with cheer and aplomb. ("The excitement of the internet. The simplicity of the Macintosh.") While colorful, the things were criticized as slower than Intel products and as elevating form over substance. (The fact that they all came with network interfaces and modern I/O was largely ignored by critics; the fact that it didn't have ancient I/O interfaces for compatibility was the primary observation of critics.) The iMac was a huge success, widely credited for saving Apple from its 1990s-era cash hemorrhage and single-digit market share.

A bit later, Apple bought SoundJam, formerly published by Casaday & Greene, and released the rebadged product as iTunes to help folks manage music collections. It was criticized as lacking the features of some not-free music players, though since it was a free download there was little discussion among analysts what iTunes meant to Apple other than that it provided an out-of-the-box music manager. Ho-hum, right? After the release of the Firewire-only iPod, Apple leveraged iTunes to provide an interface for Mac users to access digital music that was not in a Microsoft-licensed format. Microsoft threatened to dominate digital content, and Apple's defensive move was designed to make sure that Apple's customers weren't dragged onto PCs due to file format incompatibility (or, worse, to turn Apple into a Microserf forced to tithe to Redmond for every song or movie played with Apple's hardware). Part of the iPod's success can be attributed to this Apple Store concept, which Apple renamed during litigation with Apple Corp. and has been for years known as the iTunes Music Store. The iTunes Music Store, however, sells movies and audio books, and has in essence been rebadged as iTunes, so that the distinction between the player and the store interface has blurred. Apple probably likes this. iTunes passed WalMart years ago as the top music vendor in the U.S. is now the world's largest retailer of music in any format. Along the way, Apple started selling DRM-free music, and the fear Redmond would overtake all content's file formats faded.

In the beginning of this century, Apple announced the iPod, which was a music player. People expressed some puzzlement why the name said nothing about music, and I speculated that the name suggested Apple might over time morph the thing into a bigger-than-just-music tool intended to extend one's computer. I understand some folks use iPods now to run video presentations and back up or transport key files and files too large for email, CD, or the like. The iPod was criticized at launch as having less storage than some competitors (5GB), being more expensive than other competitors ($399), and lacking features like radio or a contact manager that would support input on the device. (Soon, one could buy a 10GB version for $499, or even more with optional engraving!) Most concerning, Apple was offering the most expensive MP3 player anyone had seen, and the market for all MP3 players was tiny. It was obvious that Apple would sell to Kool-Aid-drinking loyalists but – especially with the product's Firewire-only interface – no-one else. The iPod was a huge success, and was credited with enhancing Apple's profitability beyond that achievable with its high-end PC sales, and bringing Apple from a niche computer company to a mainstream tech company. The iPod was credited with aiding Apple sales through network effects and by creating a "halo" effect that improved Apple's power to sell costlier Apple products ... like iMacs and iBooks (well, in the post-Intel world, this is iMacs and MacBooks).

A few years ago, Apple announced the phone everyone expected Apple to announce, and it was immediately criticized as lacking a keypad, having a slick-looking UI that prioritized appearance over substance, and having less memory than some high-end portable devices (among other complaints). In particular, it was criticized as useless to business due to supposed limitations of its contact syncing and its messaging tools. The kiss of death? It was supposed to run only one application at a time, so you could not leave an instant message client open to receive messages while using the browser. No multitasking! What geek would want that? This phone -- which Apple called the iPhone -- synced to one's computer for contacts, music, movies, and whatever else one wanted (though one could buy from Apple's store over the airwaves, and back these purchases up on sync with a host computer). The synch tool for the iPhone was iTunes, which had long ago been ported not only to Apple's new Unix operating system but also to Microsoft's DEC-derived operating systems that descend from NT. Anyone with a mainstream operating system could download and use Apple's iTunes software, and synch with iPods or iPhones at will. The iPhone is has progressed from being in beta testing by a third of the Fortune 500 to being piloted or deployed at 70% of Fortune 500 companies. The App Store – another section of the iTunes Store – has transmitted over three billion applications to users. Apple sells millions of the phones per quarter and holds a large and growing fraction of the growing smartphone market.

Apple recently announced a long-awaited tablet device. Rumors about its name abounded, and there were two camps: it would be an "i-device" or it would have some name that transmitted that it was a powerful stand-alone tool. Some voted for the name Canvas. Some hoped that the tablet would be all about creating content, and others predicted a revolution in publishing content. My own pre-announcement comment on the likelihood that shedding the i moniker to escape the association with smaller-powered appliances was: "I will be unsurprised if the product doesn't have an i moniker, though I must say that the success of iMac and iPhone have made the moniker also ring with quality. It's not a bad badge at all, really." Apple, to the amusement of everyone who recalled this Apple lampoon from MadTV, named the thing iPad.

The iPad, which is not yet on sale, is currently being criticized as being too big for your pocket or for using as a camera, lacking storage, lacking battery life compared to the Kindle eBook reader, and lacking any discernible market. Business Insider's take is that the iPad is "A Big Yawn." The announcement didn't help Apple's shares. It has no keyboard and its bulky keyboard-dock draws derision to the iPad already. It's been panned as useless for business because it follows the iPhone's model on application management and closes applications not in the foreground.

Given that this machine is already hated, what's there not to love? Already, major companies with services the not-yet-released device is expected to impact have changed their services and pricing in reaction. With major book sellers already lined up to sell content on the device, school bookstores may start saving inventory capital by telling students to click a link (for an affiliate fee, no doubt) to download everything on their syllabus. Students will have every book needed for class, every day. Magazines and newspapers interested in selling to students who don't leave campus can reach their audience on the iPad, and those old National Geographic magazines (or whatever) will be easier to store digitally than in box after box in the basement. Presumably one can search those electronic book versions ... do you remember how hard it was to find quotes and make citations from that huge pile of books and notes next to your desk? Ubiquitous electronic books could make that hassle a thing of the past. (If one can't copy text selections from a book, making a book report could be hard on a machine that won't run Pages while running the reader application, and can't run them side-by-side.)

Of course, this is only talking about students. As Jobs described in the iMac announcement, many people want a simple way to get connected to the internet for email and web access. The iPad, especially with 3G and an unlimited data plan, makes this connection simpler than ever before. You need someplace to plug it in at night, and it runs all day. In the right kind of holder, it doubles as a picture frame when you aren't using it. It's the ideal invisible computer: ready for use, but not requiring the clutter or cabling of a desk or even a short-battery-life notebook.

The fly in the ointment? As an "i" product, it seems to be tethered to a "real computer" for software updates and other maintenance. Can a person take this to school without also taking "a computer"? Is the iPad a substitute for a netbook, or is it always the little sibling of some general-purpose computer? Or, as in the case of the original iMac, perhaps Apple intends the iPad to be a simple, stand-alone, fully-powerful device whose lack of input connectors signals movement to new interfaces (bluetooth, WiFi, G3) rather than a signal that it's unable to connect.

Steve Jobs told Walt Mossberg at the announcement event that the screen is the biggest power-eater, that the chip serving as its brains uses hardly any power at all. Apple makes that chip. The chip is called the A4.

Apple's A4 Announcement
Apple, which is ordinarily fairly quiet about what goes on inside its AppleTV, AirPort, iPod, iPhone, and other products that aren't running head-to-head with other manufacturers' products advertised chiefly on CPU specs, did an unusual thing yesterday. Apple announced what amounts to an iPhone on steroids – an iPod Touch with the capability of always-on wireless broadband and enough size and battery to watch movies on intercontinental flights – and Apple spoke directly about the new device's processor.

Sure, we expect to hear about the capacity: without knowing what it'll store, it's impossible to know if it'll hold your library of music or movies and users can't evaluate its utility. But Apple ordinarily offers scant hope of discerning without disassembly the suppliers of such components as the memory controller, processor ...

... but on this product Steve Jobs made clear whose processor it was: Apple's. The processor's name is interesting, too.

What is the A4?
A4 is the most common size of paper. You can do anything with it.

Apple's decision not to talk about the specific graphics support, types and number of processor cores, and so forth continue Apple's tradition of making its device announcements about what you can expect to do with the device rather than making them about announcing to competitors what it's charging for a box full of a specific component set. Apple's A4 announcement is that Apple controls the hardware, and that hardware is a blank slate on which users can do anything -- and which Apple will upgrade, change, or modify as it chooses, without warning to competitors, to improve its margins and its competitiveness, in an endless number of versions of the A4.

Apple's choice of the name A4 is Apple's announcement that it is the new supplier of paper to the digital world. It invites developers to build wild things for users, and suggests to creative users that they might use it to fold the next world-record paper airplane. Apple will sell the A4 of the future, and users of that digital paper will be handling the iPad.

Expect A5 or A6 in a future iPhone (A5 is 1/2 the size of the A4, which is a bit bigger than the Apple tablet). Expect Apple to leverage volumes to make margins attractive, and to leverage the unknown content of its chips to force practical comparisons rather than hardware spec match-ups. Expect Apple to sell iPads based on how they feel in your hand.

Tuesday, January 26, 2010

Heavy Metal Can Be Hazardous To Your Health

Police say a found body is a student's who went missing from a Metallica concert

Apple: Record Profits At World's Top Music Seller

Apple may be the top music seller in the world, but that's not where the profit is. Apple's hardware sales – buoyed by high-margin iPhone and Mac sales – have led Apple to gross margin of 40.9% (up from an already lofty 37.9%) and an all-time record in quarterly profit of $15.68 billion ($3.67 per share), up from $11.88 billion ($2.50 per share) in the year-ago quarter.

Apple's increase in profit topped estimates in some measure because of new accounting changes that make Apple's balance sheet a bit more transparent, and have the effect of bringing into the quarter of sale revenue that previously was spread across the month of sale and the twenty-three months following. This explanation why analysts didn't foresee the profit number doesn't reduce the impact of Apple's feat: Apple's new accounting principle yielded a boots of 46.8% profit, compared to the year-ago quarter after it was adjusted to accommodate the new accounting principle. Apple's profit surge isn't an accounting artifact, it's real growth.

Under the new principle, revenue (and thus profit) will be accounted for in a manner that more realistically ties a quarter's profit to its sales. The new principle increases transparency. This is good for people trying to make sense of Apple's balance sheet. Comparisons between quarters will make sense because the accounting principle was adopted retroactively: prior quarter results have been provided under the new rule.

So, Apple Beats Estimates Again. What's the News?
The news is that Apple's non-US sales have grown to the point they now are larger than Apple's US sales, meaning that Apple's strategy to reach a global market is working more than at just a couple of customer sites. Apple's recruitment of a Microsoft exec to lead European operations may be part of a new phase of foreign growth effort designed to leverage the global-friendly infrastructure Apple built in its localization-friendly platform (I say "platform" when I mean Cocoa, but Cocoa exists on both the Mac and, in modified form, the iPhone).

The iPhone, which was an established quantity a year ago when it helped Apple set what was then a record quarter, helped Apple again with a 100% increase in sales over the prior year's comparable quarter. (The smartphone market didn't double; this is share growth.) While some had predicted even more of an increase (9m sold instead of 8.7m sold), 100% gain in a year isn't bad when one's comparative period was stellar to begin with. The new iMac is a likely high-volume participant in Apple's 3.36m units of Macs. Considering that the highest-end iMacs were available only from Apple as a BTO option, it's likely that Apple gained quite a bit of its high-margin sales from buyers who came directly to Apple and let Apple keep both the manufacturer profit and the profit ordinarily ceded to retailers.

Wait, there's more.

In a break from usual silence on unannounced Apple products, and in a nod to recent details-free notices of an Apple event tomorrow, Steve Jobs yesterday said in the earnings press release: “The new products we are planning to release this year are very strong, starting this week with a major new product that we’re really excited about.”

Apple is releasing the next product it believes will take the baton from the relay team people keep saying has run out of members: iMac, iPod, iPhone ... and whatever its newest addition proves to be. Apple is opening the first page on the next chapter of its "go big or go home" playbook, and if Apple keeps rolling out successes like those that carried the baton in the past, shareholders' future will look a lot like the past ten years.

Monday, January 25, 2010

On Flying and Security

The post-9/11 "improvement" in the "security" that is "enjoyed" by passengers was summed up a few years ago by a dearly departed friend of mine after it became clear how onerous and vapid the new programs were. He refused to get on another plane as long as he lived.

And when he died in 2006, he'd been as good as his word.

Jonah Goldberg's recent opinion piece in the Los Angeles Times confirms that things are no better. If there's a no-fly list, you're best off signing up. In it, he entertainingly quotes an Israeli security expert to make a point I've been preaching for years: "The United States does not have a security system; it has a system for bothering people."

The appearance of guards and the imposition of inconvenience is no substitute for a properly-designed and competently-implemented security policy. And the irony in all this is that as bad as that "security" system is, it's apparently enough to thwart what terrorists are currently capable of attempting.

The primary security improvement actually achieved in the United States is the elimination of the ridiculous notion that passengers should meekly go along with whatever criminals require, in the outrageous expectation that they will be rescued by competent professionals. The only competent anti-terrorist activity apparent on September 11, 2001, was the conduct of civilian passengers on Flight 93. The "shoe bomber" and the "Christmas bomber" were not subdued by some crack team of security specialists but by their co-passengers – who no longer believe dangerous mischief on aircraft is someone else's problem. The second useful move toward airline security was putting firearms on the planes.

Still, screening for explosives needs improvement.

So far, we have improved security by making passengers aware of the risk of criminals and ensuring they are not fooled into thinking compliance is a route to safety; and we have armed some of the planes. These may be consistent with airline security, but they are not themselves airline security. Barring Cat Stevens, author of the song Peace Train, from entering the United States is the kind of idiocy that contributes not at all to security, but undermines it by making a mockery of other aspects of an attempted security program.

Sunday, January 24, 2010

Terrorist Tapes

The recently-released tape purporting to be bin Laden claiming responsibility for the failed bombing by a Nigerian of a civilian airplane headed for Detroit offers an opportunity to reflect on the impact of terrorists on the lives of regular Americans.

Where We've Come From
Nearly nine years ago, an organized group of well-funded murderers planned a complex attack that required members to do things like learn to fly aircraft, and travel quite a bit to obtain placement to conduct a coordinated effort from different airports. The result of the attack was an enormous increase in the visibility of a nutball network that preached the end of all things Western. The tangible result was not so much a victory for these nuts, though.

Not only did they utterly blow their capacity to launch such a venture – a fact borne out by the observation that in the following nine years, nothing of the sort has been accomplished since – but they lost more of their own membership that day than they claimed in victims killed. Consider that the United States gains thousands in population each day from births and immigration, after subtracting the number that die of all causes (the leading causes being heart disease, cancer, stroke, chronic respiratory disease, and unintentional injuries). Because the birth rate in 2001 was 14.1 per 1000 persons, and the United States population at the time is estimated to be a bit over 278,000,000 persons, it follows that the annual births in 2001 were a bit above 3.92 million persons and that the average daily birth count was nearly eleven thousand persons. However, September is one of the months with the highest birth rate. Even if the population that would have been added on September 11, 2001 would have been only the daily average of 8,000 had four aircraft not created additional unexpected mortality, the unexpected loss of nearly 3,000 lives would have left the United States with a population increase exceeding 5,000 persons. (Consider also that the World Trade Center dead included an estimated 500 foreign nationals from 91 different countries; if the "enemy" targeted by al Queda is broader than the U.S., it's clear the rest of the world grew quite a bit more than al Quaeda.) By contrast, al Qaeda's apparent exclusion of women from its membership seems to indicate that it grows only by recruitment. The ultimate devastation of Osama bin Laden's communication infrastructure and leadership (Ayman al-Zawahiri, Abu Saeed al-Masri, and others) suggest that the attacks may have had a more negative impact on the organization's health than anything else.

For perspective: in 2001, the undisputed high-water-mark of al Queda success at killing Americans, Americans lost more lives to accidental drownings (3,281) than it did to the violent efforts of their enemies; and drownings, which claimed responsibility for 0.1% of U.S. deaths in 2001, wasn't even a ranked cause of death. (By contrast, deaths due to "malignant neoplasms" – that's medi-speak for cancer – were nearly half a million, and were the second leading cause of death behind one of the causes of death linked to cardiovascular disease.) In all, 2,079,691 died in the United States in 2001.

So, how was such a venture converted into the "victory" of Ameria's enemies? Like the "victory" of Vietnam while losing 20:1 in its most favorable engagements, it was a matter of marketing rather than military accomplishment. But for the incessant harping by members of the media –excited to have something with which to alarm people into staying tuned for advertisements – there would have been little to celebrate in the mountainous wastes the terrorists' leaders called home. However, the for-profit media crowed nonstop about their deeds – a fact that made every sentient being on the planet aware of the attackers, and allowed them to reach an audience they would never otherwise have reached. With greater reach came greater opportunity for recruitment. The result? Many of the nutballs blowing themselves (and marketplaces full of civilians) to pieces in Iraq over the ensuing years were the result of foreign recruitment.

Where We Are Now
Osama bin Laden, having escaped an ugly death in Tora Bora and slipped into the lawless backwaters of Pakistan, can't use electronic communications for fear of being pinpointed by the ceaseless SIGINT effort to identify enemy command and control structures. He communicates, if at all, by sending runners. The lag between events and his knowledge of them may be small in the case of high-profile matters given news airtime – he can receive signals without risking his position, though he cannot transmit – but the lag between his knowledge of a matter and an ally's receipt of resultant instructions has dropped to a time frame last known in another century.

And his effectiveness? The newest tape either proves Osama bin Laden lacks the power to make even one plane explode – while losing an operative with potential knowledge of his handlers – or proves that Osama bin Laden is so weak that he is reduced to falsely claiming the power to lose an operative. Honestly, I'm not sure which is the worse implication for bin Laden: incompetence, or impotence.

The Medium Is The Message
Osama's latest tape – if it is Osama – comes to us from the lips of a news network long sympathetic to Islamofascists, having been delivered in cassette tape format by a runner who received it from someone who would not be capable of being followed back to Osama bin Laden. When, after a failed effort to murder a civilian airplane of holiday travelers, bin Laden attempts to preach gloom and quivering fear to his enemies, what do we really learn? Certainly not that we are quaking in our boots.

He (purportedly) says, "America will not dream of security until we experience it as a reality in Palestine." Yet the message comes to us on a day his operatives have failed to do anything to harm Americans – indeed, it comes after (a) his supposed operative was identified as a threat and law enforcement officers had already planned to arrest him on arrival, and (b) when his plan proved so simple in its design that it didn't require landing in the U.S. to implement, the operative was subdued by unarmed and irate passengers so that he could be turned over, alive, for processing by the legal system. If anything, the message proves that, whatever failings American security may suffer (and we thank you, Osama, for helping us to troubleshoot those systems), the security apparatus delivers security that is sufficient to be effective to thwart the efforts of which bin Laden is currently capable.

In short: bin Laden either lacks relevance because he must claim "credit" for the failed attempts of others, or he lacks relevance because he commands an outfit that is no longer capable of effecting completed attacks. If the best al Quaeda can offer is fools like these, America's security has improved dramatically since we last heard from al Quaeda.

Saturday, January 23, 2010

MSFT Still Seeking Home-Media Stride

In its latest shake-up of its internal structure, Microsoft has married the Zune group and Windows Media Center to the Entertainment Business Group (e.g., XBox and all Microsoft's Gaming development).

After declaring phone apps unimportant, one wonders what the future of MSFT's upcoming Zune Phone will be (multiple inconsistent phone OS versions, for example?); is joining Zune to the Entertainment Business Group really calculated to lead to increased focus on what will make Microsoft's handheld player an outstanding and novel experience? Is it likely to help make Microsoft's phone OS simpler, more efficient, or easier to maintain? Like its new desktop OS?

Merely understanding that Microsoft needs to do something better hasn't helped Microsoft improve much. Has its phone got a chance?

In other news, Apple is reputedly discussing with Microsoft the replacement of Google's search service with Microsoft's Bing as the default search engine in Safari and iPhone. The article discusses Apple and Google as increasing in rivalry, with the view that Microsoft has become a pawn in a growing long-term enmity between Apple and Google, who so recently shared a couple of board members.

The question is whether Microsoft is more important to Apple and Google as a common enemy, or has decreased in relevance and become part of the environment in which Apple and Google expect to divide up the future. It's an interesting question – Microsoft's ongoing effort to control APIs and server back-ends seems to offer some continued threat in light of MSFT's significant server share and browser share and its long willingness to hijack standards in order to prevent competition. Until Microsoft is believably defanged, the huge, cash-flush developer shouldn't be treated lightly. Microsoft's own consulting division, not to mention Microsoft shops like Accenture, regularly deploy new large costly database-backed enterprise applications on Microsoft's back-end tool chain, thereby enslaving huge customers to Microsoft's tools, APIs, operating systems, and supporting hardware for years to come. This isn't trivial, and however much Apple and Google might want to see a future based on standards that play to their strengths, neither Apple nor Google has anything like it at present.

Tuesday, January 19, 2010

Republican: What's In A Name?

Today's apparent Republican victory in a Senate race for a Massachusetts seat so long held by Democrats that until recently nobody thought the Democrats could lose their filibuster-proof Senate majority until next year raises an interesting question about what it means to be a Republican.

In Massachusetts, the major issue was the economy, and the Republican underdog launched a media war in December that led with a speech by John F. Kennedy pledging to cut taxes -- a speech finished, in the ad, by Massachusetts' State Sen. Brown himself as he sought to fill the seat formerly held by Ted Kennedy. The Party of Lincoln assumed the Kennedy mantle, apparently, to give the people what they wanted ... which was apparently not the health plan advanced by Democrats.

But just recently, in Houston, the mayoral office changed hands and while the Republicans didn't take the seat – Houston is rather less Republican than Harris County, in which most of Houston lies – Republicans certainly had something to say on the election. And the election was a squeaker. In the runoff for the mayor's office, the African-American male Gene Locke ran against the Caucasian female Annise Parker. Let me set the stage:

A former oil-and-gas-industry software analyst, Annise Parker ran on the strength of a political record with the City of Houston on the City Council, and argued that she proved her fiscally conservative record as City Controller. During the election, she advocated programs to enhance home values. In the League of Women Voters survey (which I like to read because it's a nonpartisan body that publishes every candidate's exact words answering a hatful of election-relevant questions), Annise Parker said of her identification of Houston's priorities and her plan to address them:
Public safety and jobs. I’m the only candidate who’s used tough audits to free up millions for police and safety. I won’t cut the police budget to pay for things we can’t afford, like expensive new museums. I’m the only candidate with energy industry experience and a plan to create jobs by making Houston the headquarters for new energy development.
League of Women Voters – Houston, November 2009 Runoff Voter's Guide
Gene Locke is a lawyer. Not to knock lawyers, but they have a certain reputation, and in Texas that reputation isn't stellar. We would rather elect as the top executive in the state a ne'er-do-well who lost money constantly in the oil business, and was solvent only because his family connections got him a place at the table investing in a baseball franchise, than we would elect a lawyer. True, without lawyers nobody's rights would be worth a nickel, but we have gone so far to prevent lawyers from protecting people's rights that we've let ourselves be talked into amending the Constitution to give the legislature the power to control damages in civil suits (the ad campaing pretended it was about medical liability, but it covers "liability for all damages and losses", making it in effect an invitation for insurers to buy damages caps from the legislature). This may not seem strange to readers in England, where Parliament can do whatever it pleases, but in Texas we are so suspicious of the leguslature that we don't let it convene every year, and in the years we allow it to convene, we only allow it to convene for less than half a year. The answer is pretty simple: they can't be trusted when your back is turned (look at D.C.), so you have to make sure you know when they will be working so you can watch them like a hawk. They are, after all, mostly lawyers. When asked about Houston's priorities, Gene Locke didn't explain how he'd save money or how he'd allocate resources more efficiently, he just said in effect that he'd improve security by putting more cops on the street (which netted Locke a union endorsement), and to pay for this he said he'd magic up more tax revenue by creating more jobs (though, like some other politicians we might name, he never said how he was going to make these jobs fast enough to pay for the expense he planned). In short, Locke seemed a classic spendthrift politician willing to say anything, however implausible, to get elected. So, why was Gene Locke endorsed by Conservative Republicans of Texas? (The Party itself doesn't officially endorse non-Republicans, but particular Republicans may.)

Why would Texas Republicans endorse an apparent spendthrift lawyer in favor of an ex-oil-and-gas employee with a track record for trim budgets? The answer is simple. It's a matter of priorities. With the election of Annise Parker, Houston became the largest city in the United States with an openly gay mayor. Local Republicans are much more interested in social conservatism than in fiscal conservatism.

The irony of promoting social conservatism ahead of the small-government, lean-government philosophy that guides some of the nation's self-proclaimed conservatives is that promoting a government policy that seeks to direct people's love lives seems to steer directly into the teeth of a clear Supreme Court pronouncement that government has no legitimate interest in regulating such conduct. Moreover, it provides a dangerous precedent that government can and should be active in instructing individuals not only how to be effective citizens (the purpose of educating children into employability and to understand duties as citizens), but instructing them how to conduct their personal affairs, including in personal affairs that are guided by religious principles, as the debate over sexuality is principally guided. If we want more government involvement in our religion, in our decision whom we should date, in our decision what careers are appropriate (can you imagine Texans deciding that to end law suits, the education of competent attorneys should be halted?), and in our decision whether to vacation or to take another week of high-stress overtime, we can presumably count on our so-called Conservative Republicans of Texas to help us get there.

Republicans have long spoken about the danger of a huge Democratic government insinuating its tentacles into every facet of the lives of regular working taxpayers. Maybe it's a close cousin to this spectre, the Big Brother Republican, that is responsible for the increases in the size of the government budget under a supposedly-Republican Congress under Clinton and, later, Bush. Republicans promised fiscal conservatism. Apparently, social activism is at least as important for some of the folks who wear the Republican label.

In the face of organizations like Gay Republicans – presumably fiscal conservatives uninterested in government involvement in private affairs and more concerned that government not spend the public fortune pretending to "fix" problems like those hypothesized by proponents of political hysteria like the so-called manmade global warming – it's clear that "Republican" doesn't mean the same thing to everyone. Since people vote on the basis of labels like "Democrat" and "Republican" (voters don't know all the folks on those long November ballots, just the top few) it's likely quite a few aren't getting what they bargain for (a disappointment that cost the Republicans dearly in the 2008 election, and cost Democrats the Senate seat today in Massachusetts).

Will the real Republican please stand up?

Friday, January 15, 2010

Self Defense in Ted Kennedy Country

I still see the bumper stickers: Ted Kennedy's Car Has Killed More People Than My Gun.

In Massachusetts, self defense doesn't mean what it means in Texas. A business owner confronted by a man who broke into his business to steal at night (in Texas, this is a "state jail felony" and witnesses have a right to use force to put a halt to it) has a right to use force to protect his property, including deadly force to prevent the flight of a burglar at night if he thinks use of other force would present too unreasonable danger to himself.

But in Massachusetts, trying to stop a string of serious crimes by firing warning shots to get the compliance of a burglar found inside at night gets you charged with discharge of a firearm within 500 feet of a dwelling (not to mention aggravated assault). Just carrying a weapon with a permit is enough to be threatened with criminal charges by police who assert boldly but falsely that they are the only people entitled to possess weapons.

What is the meaning of a right to own weapons for the constitutionally-protected purpose of defense if local government makes it a felony to discharge them in that same defense? Crazy. What is the right to self-defense if local government can make its exercise a felony?

Big Brother Has A Sick Mind

The story I just read about criminal prosecutions for "sexting" raised some interesting legal questions ... at least initially. The furor over teens' use of cell phones and SMS messaging to transmit homemade kiddie porn isn't new. The traditional concern -- that recipients of risqué photos taken by kids of themselves for the benefit of their romantic interests would redistribute sensitive pictures without permission -- is fairly serious in that it impacts kids by intruding on what they (foolishly) expected to be a private communication. Ahh, to be young.

The lead paragraph's suggestion that a girl was being prosecuted in Wyoming for sending a picture of herself was a new twist: were kids being prosecuted for victimizing themselves?

One can imagine law enforcement effort, however, to prevent such foreseeable evils as the development of porn businesses based on buying pics from "consenting" minors too young to give legal consent. So this isn't utterly crazy, is it? But it gets worse: pictures taken at a slumber party, mostly of kids dressed more thoroughly than one would expect in a G-rated underwear advertisement, were the purported evil in the supposed self-promotion of child porn.

Prosecutors who insist that kids consent to a pretrial sentence to a re-education program on child porn (with a curriculum designed for what age group, one wonders?) or else face criminal prosecution have too much time on their hands. If the images of all the prosecutor-threatened kids were plausibly sexual in nature, one would expect that at least third parties who transmitted the images would be in trouble under draconian kiddie porn laws. One wonders what is wrong with the mind of an adult male prosecutor that he can't see images of teens wearing an amount of clothing comparable to that ordinarily seen at a beach without being driven mad with unquenchable erotic nervous energy of the sort that would persuade him the images would lead to prosecutable evil. This turkey needs therapy.

On the other hand, one of the girls was topless. She had apparently just stepped out of a shower and was wearing a towel like a skirt. I haven't seen the photo, though. It might be pornography, and it might be performance art. v It can be tricky to tell the difference.

But I know it when I see it.

Saturday, January 9, 2010

Another Day On The Road: The Case for Car Control

Former emergency-room physician Christopher Thompson claimed he was stopping to photograph obnoxious bicyclists for identification purposes when he stopped his car, but the jury didn't buy it.

Instead, they found the bicyclists' version of the story more credible: after honking at the cyclists and whizzing dangerously close as they pulled into single-file to permit him to pass, he slammed on his brakes in front of them to punish them for flipping him off. When they had smashed face-first into the physician's red Infiniti, breaking teeth and bones and cutting their faces, Thompson's 9-1-1 call recorded his explanation that the cyclists weren't badly hurt but would fake injury, just before he yelled at them to get their bikes out of the road.

Thompson got five years from an L.A. judge in the felony assault of two cyclists.

In 2005 there were over 6.4 million auto collisions, which caused 2.9 million injuries, nearly 43,000 deaths, and approximately $230 Billion in economic loss. While it's easier to get folks riled up over things like airline safety and firearm regulation – because they're sexy and make exciting news, so folks hear about it – the nonstop rain of auto collisions has receded into the background and seems largely ignored.