Monday, November 30, 2009

of estimates and bias in the error

It is widely accepted as a given among financial analysts that Apple makes a practice of lowballing its revenue and earnings estimates for the near future, and those estimates are routinely treated as a worst case baseline.

Apple has apparently also begun using best case estimates of sales in calculating what to tell component suppliers about how many units of their products it may be purchasing, and then waiting for the prices to come down before actually making those purchases. Taken together, these behaviors have been characterized as bullying.

You may recall that just a couple of years ago, Apple was implicated in an effort to monopolize the market for flash memory, via extended contracts for nearly all of the production capacity of the main suppliers, and that at about that same time the U.S. DOJ began an investigation into price fixing on the part of those suppliers. That investigation ended without any indictments, but it seems clear that the struggle over the price and availability of high density, non-volatile memory chips continues.

Gadget manufacturers (not just Apple) want the latest, highest density chips at commodity prices, but will substitute a larger number of lower density components in their designs if the total cost of production ends up being lower. Chip foundries need higher prices for the latest, highest density chips, to cover the costs involved in development and upgrading their production lines, and they need something above production costs generally to cover the costs of building new factories to meet the seemingly insatiable demand, which can go soft at any time with a downturn in the economy or the advent of some new technology that renders their own products obsolete, so amortization schedules must be relatively short.

The question is what is a reasonable profit and during what phase of a product's life-cycle should the foundries be able to expect to turn a profit. If they attempt to take the bulk of it early, they end up pressuring their customers to keep using older, lower density components. If they postpone profits until later in the life-cycle, they run the risk that their customers will move on to the next new thing before they've completely covered their development and production upgrade costs. Undoubtedly, it ends up being a balancing act.

Apple's recent approach, if understood for what it is, merely complicates the calculation. Gadget manufacturers are always competing to provide a better perceived value to their customers, while leaving some room for a profit of their own. One of the ways they go about this is to attempt to get a better deal than their competition on components used by all. That they are out to get the best deal they can while securing the availability of the components they need shouldn't surprise anyone, least of all the foundries.

Supplying estimates of future component purchases based on best case sales is just a way of improving the chances that the components will be available, if needed, should that best case turn out to be reality. That subsequent orders typically don't total to those estimates shouldn't surprise anyone.

It's something of a given in any business that a change in the per-unit price as a function of an increment in volume is always either negative or zero, never positive; maybe that needs to change. Maybe, in this situation, per-unit pricing needs to follow a model where it decreases from small lots to moderate volume, and then begins to increase again above moderate volume, combining the volume from all customers, with rebates based on the same formula if some customers end up canceling their orders because the price went too high, vaguely like the market for electrical power works, but operating over periods on the order of a week rather than fractions of an hour. This would provide gadget manufacturers with an incentive to spread their orders out evenly over the entire life-cycle of any component they made use of, and provide some systematic moderation on the substitution of newer, higher density components.

Such a system may require a disinterested, third-party broker.

Sunday, November 22, 2009

the lengths to which a point must occasionally be carried

Sometimes it's just not enough to state your case in a reasonable manner. Lunacy must sometimes be addressed with intense sarcasm.

Saturday, November 21, 2009

journalism in the age of the internet

When was the last time you believed something because you heard it on FOX News? How about MSNBC?

Do you settle for any single source these days, however reliable, or, whenever something happens that really moves you, such that it becomes important to know the truth, do you turn from your television to your computer to track down the real story?

Even if you don't understand the relevant terminology well enough to look up references, Google does.

Even if you're not personally acquainted with someone living near the scene of the event, someone else on Twitter, or AOL, or FaceBook, or MySpace is.

You may have to settle for second or third-hand accounts, but you don't have to settle for what passes for journalism in this age of media consolidation, which while sometimes excellent is also sometimes abysmal.

That ability, to fact-check what you're fed by corporate journalism, is an important new factor in the few-to-many dissemination of information that is print and broadcast journalism. Journalists are constantly at risk of having their bullshit called, not just by other journalists, but by members of their audience or readership. This constitutes pressure to get it right, and may well be the single most important reason many working in the news media still aspire to call themselves journalists rather than entertainers, and mean something by it.

It also constitutes pressure on the corporate "news" divisions themselves, on the editors and publishers, on the people who make the decisions about which stories to go with and which to bury, to keep their corporate agendas in check and not allow them free rein to dictate what the news is. Before the Internet people had little idea of what they weren't being told; now there are other ways to get the story out, and other bases for determining whether a story that is run is being spun.

The Internet doesn't replace journalism, but it can empower individuals to take on the role when the professionals fall short, their curiosity enhanced by advanced search engines leveraging the huge resource of available information, and their soft voices amplified by ad hoc networks driven by others's need to know.

Bloggers are the semi-pros in this environment. The best of them gather followers who value something about what they publish, whether subject matter, sources, process, or perspective, and they frequently put the professionals to shame. Because they typically read other blogs, a story which finds its way into the blogger network can take off like wildfire. The most important reason for corporate news organizations to keep bloggers on staff is for the early warning they can provide of a breaking story the blogger network got ahold of first.

Even casual bloggers, like myself, play a part in making this network happen, passing along tidbits that interest us and contributing our own ideas and insights. One needn't make a career of it to participate.

Don't settle for less than real journalism - by which I don't mean professional journalism, although the two certainly aren't mutually exclusive - and don't be afraid to take on the role of journalist when the ball lands in your hands. You may be the person in the best position to tell a story others don't yet know they need to hear.

Friday, November 13, 2009

respectfully adjusting Martellaro's spin

In a Hidden Dimensions piece on MacObserver John Martellaro appears to be suggesting that the iPhone OS platform, or some more capable version of it developed for a tablet device, is destined to supersede the full-blown Mac environment. "Appears to be" may be the key phrase here, as that may not be what he's really saying at all, but he's at least invoking the possibility and running it up the flagpole.

Martellaro points to the relative security of legitimate iPhone apps, sold through the app store, as compared with the potentially riskier situation on the desktop, and suggests that such an arrangement may represent the future.

That's a point I'll grant, but rather than the Mac being left to flutter on the wind of widely varying approaches to application marketing and widely varying quality, I'm expecting Apple to expand the App Store to include Mac apps, not as an exclusive means of distribution, as with the iPhone, but as an option available to the developer, with the same convenient, consolidated business arrangement as on the iPhone.

The added value of such an arrangement for the end user derives both from it offering a one-stop shop and from it providing some assurance that the software they're buying won't turn out to contain a trojan. Developers will be relieved of the need to make their own distribution and payment arrangements, and guaranteed a percentage of whatever price they set for each download.

As it isn't likely to ever be the exclusive means of Mac app distribution, the rules for acceptance might actually be more strict than for iPhone apps, with emphasis on completeness and providing functionality with real value. On the other hand, without the overriding concern for maintaining the integrity of the cellular network and usability as a phone, Apple could go the other way and only insist that the applications it distributes not increase the end user's risk. Most likely it will start out with much the same collection of policies as for iPhone apps, diverging only gradually.

The App Store is and probably will continue to be driven by mobile and portable devices, but having already gone to the trouble of creating it the additional effort to expand it to include Mac apps should be minimal, and, given that many Mac apps currently retail for tens or hundreds of dollars, it could turn out to be a significant contributor to Apple's bottom line.

Assuming it happens, expect Software Update to be integrated such that it automatically offers updates to applications purchased through the Mac App Store.

Monday, November 09, 2009

in complex times people grasp for simple answers, followed by drift, leading to a business idea

I include myself in this, having long since turned my back on television, as the increasing number of channels diluted its value as a commons, and more recently having all but given up on trying to keep up with "the news" at all. I have projects instead, this blog being one, another involving programming, and another as an advocate for a vision - at once the most important thing I could be doing and the least achievable. In the latter two cases, the blog is not the project, but only a way of keeping myself involved and moving forward, even if only at a snail's pace. I also have an obsession, with Apple, Inc., with its products, and in particular with the process by which it develops them and decides which to take to market.

These, and a few others in the same vein, are my simple answers, what I cling to when events threaten to shake my sanity. To a significant extent they define who I am, and to a much larger extent they define what I need to be paying attention to, and therefore the context within which procrastination happens.

For me, the main force driving procrastination (other than my obsession with Apple) is my need to be around other people. While I like working individually, I really don't care for spending a lot of time alone, so my ideal situation is having others nearby without really being involved in what they're doing or them being involved in what I'm doing. A coffee shop with decent wireless internet connectivity is just about ideal, except that it's harder to concentrate on getting something done in such an environment and easier to just browse haphazardly. Even that's not a total loss, as it can substitute for channel switching a television to find out what's going on out there in the world. Digg is a particularly good starting point for this sort of browsing.

A coffee shop with curtained nooks might work. One with leasable nooks with lockable doors, in which you could safely leave all your stuff when not in use, might work even better. The main difference between this and a rental office in a building with many such is the vibe. Coffee shops have activity cycles, but the content of conversations varies widely, whereas what happens in and around offices tends to be more tightly constrained to the business at hand; it's filtered.

A few details follow: even with doors, curtains are a good idea, for a little privacy and a little sound dampening; the doors, when open, should lie flat against the wall or slide out of sight; the cool factor of double doors is more than worth the extra trouble; rentals should probably be either hourly (with something like a 4 hour minimum) or weekly; set your rental fees such that you don't feel compelled to push food and drinks to renters; rental work-nooks by the hour or week would work well with longterm colocation services, where people pay to have their computer installed on a rack with secure power and continuous internet connectivity.

This idea isn't terribly scalable. You could stretch it to two floors, but probably not three. Make the coffee shop space in the middle too large and it will lose the intimacy that loosens tongues and creates the vibe. On the other hand, make it too small and it'll end up inducing claustrophobia. Also, pack nooks together such that there's no room along the wall for anything else (art, booths, ...) and it'll look like a storage facility. A high ceiling is okay if you circulate air vertically so that you don't end up heating the ceiling while the floor freezes, and dampen echoes somewhat.

Let me know if you decide to go out and start your own coffee shop with rental nooks; I'd love to check it out!

Saturday, November 07, 2009

some guy named Merlin, with something on his mind

Makebelieve Help, Old Butchers, and Figuring Out Who You Are (For Now) from Merlin Mann on Vimeo.

One of the reasons I love The WELL is because it's well supplied with old butchers.

a new twist in tech competition

Possibly taking a cue from Steve Ballmer's lampoonish (and much-lampooned) manner, NVIDIA has resorted to castigating their nemesis, Intel, in a series of web-published cartoons.

For their part, Intel has been tempting fate, publicly, by attempting to lock NVIDIA out of producing chipsets compatible with their QuickPath Interconnect technology, Intel's answer to HyperTransport. Intel claims that NVIDIA's license does not extend to QuickPath Interconnect, an issue that will be decided in court at this point. NVIDIA, for their part, has knuckled under to Intel's demand to cease development of chipsets using QuickPath Interconnect, claiming they've discovered a better approach (that will allow them to continue to compete with Intel). In the meantime, NVIDIA continues to sell single-chip chipsets with integrated graphics for both Intel's Core 2 and Atom processor families, as well as dedicated GPUs which lie outside of the scope of Intel's complaint. They've also recently introduced the Tesla, the first in a family of General Purpose GPUs, which offers extreme acceleration of many computing operations.

NVIDIA could combine the Tesla with a multicore ARM processor and offer Intel some formidable competition, leveraged by CUDA and/or OpenCL. NVIDIA might even go further and offer their GPGPU designs for licensing as part of the ARM ecosystem, which could dramatically reduce Intel's longterm prospects. Intel may rue the day they chose to attempt to lock NVIDIA out of the chipset market.

Sunday, November 01, 2009

as good a theory as any

Seth Weintraub, writing in a Computerworld blog, had this to say about Apple TV: "My theory is that Apple has had all of their best talent in the past two years working round the clock on the Tablet - so the AppleTV gets neglected."

It's as good a theory as any, although I do have another to offer, which is that Apple has been waiting on the availability of the right components at the right price to allow them to do what they want to do with Apple TV, while still offering it at a price appropriate to a discretionary home entertainment component, without losing money on each unit sold. The right components might include something significant designed in-house, and it is rather likely that Apple's chip design people are already otherwise occupied with higher priority projects.

Apple TV is currently mainly an appliance for renting/buying and displaying video from the iTunes Store. As such it has still proven modestly popular, with a few million units having been sold. That's without 1080p, without being usable as a DVR or the inclusion of a tuner, and without the sort of graphics hardware that would make it a game machine in the same league with Sony's PS3 or Microsoft's Xbox. Apple could add any or all of these capabilities. If they were to add all, and keep the price in the same range as the original machine, they would have a far more compelling product that would likely fly off the shelves.

But Apple doesn't develop products without consideration for how they fit into their overall product line, and there are most likely components of that puzzle you and I haven't yet seen, such as the aforementioned tablet.