Icahn't understand why they cling to the nest egg

Proving that not every billionaire is terribly bright, Carl Icahn once again displays his failure to comprehend why it might be better for Apple (and its investors) for the company to hold onto the majority of its investments. Apparently he assumes that if they were to pour those assets into buying back stock that it would increase the price per share, and therefore the value of his own holdings. Superficially, that makes sense, but if you credit Apple management with being clever about how they've invested all those billions, and you should, then maybe not.

choice is not an unmitigated good

Choice is of relatively little value when it resembles a minefield, when all of the available choices are poor or worse.

Steve Jobs' posthumous coup de maître

Who knew that Laurene Powell Jobs was brilliant? Well, probably anyone close to the family, but in particular Steve himself, and, in putting her on public display as he was dying, and leaving everything to her, he acted like a volleyball player setting the ball for another to spike. We've only begun to hear from LPJ; get used to it!

where's the better alternative to ObamaCare?

If the Tea Party wing of the Republican Party hates ObamaCare so much, they should be offering a better alternative, like single payer.

one way Apple could respond to the e-book judgement

Assuming they don't win a reversal of the e-book judgement on appeal, Apple still has options.

One option would be for them to move the preponderance of the code in the iBooks app into iOS and OSX, making it available through a new high-level API, so publishers could easily build their own apps based on the Apple code, providing a relatively uniform experience for users, and an opportunity for Apple to incorporate indexes to the collections in these other apps into its own iBooks app, or into a new utility that treated iBooks as just another instance of the category.

Presumably Amazon would also take advantage of this code to build their own iOS/OSX reader.

As for sales, besides the iBooks Store, Apple could offer to host, for a nominal fee, publisher-specific stores that worked with the apps based on Apple's iBooks code and used Apple's payment system, as well as allowing those apps to work with non-hosted stores.

The advantage to Apple is that it would make it possible for them to make their platforms clearly superior for e-book reading, through API improvements that would improve the behavior of all apps based on that API, including Amazon's, giving publishers an even better reason than they already have to be on Apple's platforms.

Smaller publishers and independent authors would still choose the iBooks Store. Medium-sized publishers might opt for their own stores, hosted by Apple. The largest publishers would most likely prefer to host their own stores in-house, but still take advantage of Apple's e-reader code.

While it's unlikely those opting for publisher-specific stores would agree to Apple's usual 30% cut, Apple could set a lower commission for hosted stores, say 20%, and a still-lower commission for independent stores, say 10%, and continue to garner revenue from the e-book business.

How Apple could monitor sales via independent stores and collect their 10% isn't clear to me, but I'm fairly confident they could find a way of doing so, and by making this their standard approach to the business they could at least put Amazon in the position of having to choose between coughing up 10% of sales or doing without access to the API that enabled a uniform reading experience.

two wrongs don't make a right, but some wrongs are more dangerous than others

Cult of Mac has published a thoughtful piece about the e-book antitrust case against Apple and a collection of publishers with whom Apple was working to build its iBook Store business, in which they link to another thoughtful piece, published by FORTUNE.

The FORTUNE article asks one very poignant question, “Why the Justice Department chose to prosecute the new entrant in the e-book market, and not the monopolist.”

To me it looks like the DoJ chose the safer target. With all of the patent litigation in which it is embroiled, Apple's star is already tarnished. Also, the notion that there might be something illegal about raising prices (conspiring to do so, actually) is likely to play well with the public.

Everything else being equal, lower prices are generally in the public interest. I say 'generally' because there are exceptions. Too low a price on gasoline, for example, would forestall development of alternatives to the internal combustion engine until the last drop of petroleum had been pumped from the ground.

In the case of e-books, the logic is a little different. Let's start by examining the costs involved in publishing books on paper. First there's the compensation to the author, without which many books would never be written. It's not that authors are greedy, but that they need to be able to treat writing as a full-time job to get anything done. They need to be able to live off the proceeds of their writing. Some manage a comfortable living this way; more live on a shoestring.

Then there's the costs to the publisher, which include managerial overhead as well as editing, typography, graphics, and making sure all the legal ducks are lined up. Then come costs for printing, distribution, and publicity, frequently including author tours.

E-books replace the costs of printing and distribution with the negligible cost of a download, making it reasonable that they should be less expensive than the print versions of the same books, but how much less expensive? One could argue that since they seemingly reduce all incremental costs to that of the bandwidth used by downloads, there is no limit to how low the price can go, since the fixed costs can be spread over arbitrarily large sales figures. The flaw in that argument is that one incremental cost remains in the e-book scenario, market saturation, so price reductions will not necessarily result in a proportionally larger market.

The Amazon model is akin to a print distributor which has purchased the right to reproduce and sell some title, for a flat fee plus marginal royalties. The Apple model is like a distributor which charges a percentage of the retail price, paying for printing out of its cut. Neither of these is necessarily better or more appropriate than the other; they're just different.

The problem with Amazon's use of their model is that they have engaged in predatory pricing, sometimes selling e-books below their cost, with the result that they have very little competition.

The problem with Apple's model is that the publishers liked it so much that they wanted to force it on Amazon.

So DoJ hauls Apple into court, and orders it to change its model. Go figure.

Apple should get into the bus manufacturing business (for example)

Okay, maybe not bus manufacturing, but the point here is broader than that.

I've spent about a quarter century in the transit business, 14 years of that as a bus driver. I've driven vintage GMCs, Mercedes, and Carpenters, and new-at-the-time Blue Birds (they used to make transit buses) and Gilligs. That phase, driving, ended in 1997, but since then I've mostly gotten around by bus and bring that experience as a driver to the table in evaluating the buses I've been on as a rider.

To distill that experience into a single observation, it seems to me that bus manufacturers must have a difficult time hanging onto good engineers. (If you're an engineer, working for a bus manufacturer, how many resumes have you sent out in the last year?)

Bus manufacturers are primarily two things: they actually build the coaches or have them built to spec, possibly starting with a purchased frame, and they act as systems integrators, incorporating major components like engines and transmissions as well as minor components like signage and security systems, delivering it all as a package.

Each of these components may have troubles of its own, but in addition to that there are typically problems with the integration of components, and during the break-in period a good deal of debugging must be done before the buses are really ready for service.

In addition to the above, the underlying technology is on the cusp of change, with electric drive having become a practical, affordable alternative to mechanical drive, and rapid progress in battery and supercapacitor technology, as well as sensors, controllers, and electronics of all types. The list of potential improvements is practically endless, but the pace at which they are actually finding their way into each year's new models is embarrassingly slow.

This is a situation ripe for an Apple-style intervention, much as they intervened in the cellular industry with the iPhone, setting the bar higher for the industry as a whole.

It might be a bigger deviation from their core business than Apple would care to make, and there might be another company better positioned to step in, but that notion of intervention still applies.

For Apple such a move would have a profound effect on their brand, assuming they were to use "Apple" in this context. (Note that they don't with FileMaker, which is much closer to their core business.) Initially it would be incongruous, but over time people would come to think of Apple as an approach rather than as a product range, so it might actually be beneficial. Moreover, it would be bold, and people admire boldness.

With respect to Apple, the real point here is that one shouldn't count out the possibility of them doing something as surprising as getting into bus manufacturing, because it isn't a safe assumption that they won't, and the sluggards in whatever industry they do move into had better sharpen up their game if they don't want to be left in the dust.

society (a.k.a. government) has an obligation to ensure necessary basic research

Society has an obligation to ensure necessary research for which there is no profit motive, or for which the profit motive acts to distort the outcome of the research. Note that I did not say an obligation to fund such research, although that will frequently be the only way to make sure it happens.

In some cases, of course, such as research into MS or cancer, government needn't foot the entire bill, since private donations are significant, but for basic science where it isn't yet known whether any practical application might result, and especially for the investigation of potential collateral effects of developments which have moved into the realm of privately funded applied research, the onus is upon government to take the initiative, in the latter case because companies which stand to profit from the deployment of novel products cannot be trusted to investigate whether that deployment should be allowed.

Take, for instance, the effects of neonicotinoids on bees. How much can you trust studies saying that such concerns are overblown, when those studies have been paid for by the companies which profit from the sale of neonicotinoid-based products.

On the other hand, if the burden for such investigations into collateral effects were to fall entirely on government, that would leave no incentive for the companies involved to constrain their submissions to a likely few. Continuing with the chemical example, they might submit every compound they were able to synthesize and bog down the system to the point that there weren't enough qualified people on the planet to conduct the needed research. So at least some of that cost should be borne by those who stand to profit.

Moreover, it makes sense that the entire cost of determining whether a product should be allowed on the market should be paid for out of profits rather than taxes, so perhaps government should conduct whatever research is needed and then bill the company submitting the provisional product. To take this one step further, perhaps the payment of that bill should take the form of company stock, at market value, so the more often a company proposed a new product, necessitating a new round of research to assure the safety of that product, the more it would become publicly owned. In some cases, of course, the government could end up owning the company, since the cost of conducting the necessary research might exceed the company's market cap.

No doubt this would dramatically slow the introduction of new products to market, particularly in the chemical industry, and, at least in that case, that would be a welcome result. We need to be much more careful than we've been in the past with regard to what we introduce into our bodies and into the environment, taking the time to investigate collateral effects before allowing a new product onto the market.

Perhaps it is only in the chemical industry that such a process might be needed.

Larry Ellison displaying projected grief

Apple once pushed Steve Jobs out, and paid a steep price for doing so. More recently Steve Jobs was forced to resign as CEO by a terminal illness, leaving behind a team that understood and loved him. These situations are only superficially similar.

Larry Ellison, on the other hand, has never had to deal with life without Steve since first making his acquaintance, thirty-some years ago. It is understandable that he would want to attribute the success of Apple entirely to Steve Jobs, but in doing so he discounts the possibility that Steve may actually have managed to make himself unnecessary to that success, something he was clearly aiming for in his last few years.

Apple's continuing success is a tribute to Steve's foresight and understanding of the schlock-intolerant collaborative process, which he endeavored to infuse deeply into the way Apple works.

computing's present as the past's future