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The Sweet Spot On Apple’s Racket

 

iPad sales are falling – but the sky is not. We’re merely dealing with a healthy case of expectations adjustment.

The tablet computer has always felt inevitable. The desire to harness the power of a computer in the comfortable form of a letter-size tablet with a keyboard, or perhaps a stylus for more natural interaction — or why not both? — has been with us for a very long time. Here we see Alan Kay holding a prototype of his 1972 Dynabook (the photo is from 2008):

Alan_Kay_and_the_prototype_of_Dynabook,_pt._5_(3010032738)

(credit: http://en.wikipedia.org/wiki/Dynabook)

Alan prophetically called his invention a personal computer for children of all ages.

For more than 40 years, visionaries, entrepreneurs, and captains of industry have whetted our appetite for such tablets. Before it was recast as a PDA, a Personal Digital Assistant, Steve Sakoman’s Newton was a pen-based letter-size tablet. Over time, we saw the GridPad, Jerry Kaplan’s and Robert Carr’s Go, and the related Eo Personal Communicator. And, true to its Embrace and Extend strategy, Microsoft rushed a Windows for Pen Computing extension into Windows 3.1.

These pioneering efforts didn’t succeed, but the hope persisted: ‘Someone, someday will get it right’. Indeed, the tablet dream got a big boost from no less than Bill Gates when, during his State of The Industry keynote speech at Comdex 2001 (Fall edition), Microsoft’s CEO declared that tablets were just around the corner [emphasis mine]:

“The Tablet takes cutting-edge PC technology and makes it available wherever you want it, which is why I’m already using a Tablet as my everyday computer. It’s a PC that is virtually without limits — and within five years I predict it will be the most popular form of PC sold in America.

Unfortunately, the first Tablet PCs, especially those made by Toshiba (I owned two), are competent but unwieldy. All the required ingredients are present, but the sauce refuses to take.

Skip ahead to April 2010. The iPad ships and proves Alan Kay right: The first experience with Apple’s tablet elicits, more often than not, a child-like joy in children of all ages. This time, the tablet mayonnaise took and the “repressed demand” finally found an outlet. As a result, tablets grew even faster than PCs ever did:

PNG - Tablets Fastest Ever

(Source: Mary Meeker’s regular Internet Trends 2014 presentation, always long, never boring)

In her 2013 report, Meeker showed iPads topping the iPhone’s phenomenal growth, climbing three times faster than its more pocketable sibling:

PNG - iPad 3X iPhone Meeker 2013

(Source: Mary Meeker Internet Trends 2013)

There were, however, two unfortunate aspects to this rosy picture.

First, there was the Post-PC noise. The enthusiasm for Android and iOS tablets, combined with the end of the go-go years for PC sales, led many to decree that we had finally entered the “Post-PC” era.

Understandably, the Post-PC tag, with its implication that the PC is no longer necessary or wanted, didn’t please Microsoft. As early as 2011, the company was ready with its own narrative which was delivered by Frank Shaw, the company’s VP of Corporate Communications: Where the PC is headed: Plus is the New “Post”. In Microsoft’s cosmos, the PC remains at the center of the user’s universe while smartphones and tablets become “companion devices”. Reports of the PC’s death are greatly exaggerated, or, as Shaw puts it, with a smile, “the 30-year-old PC isn’t even middle aged yet, and about to take up snowboarding”.

(Actually, the current debate is but a new eruption of an old rash. “Post-PC” seems to have been coined by MIT’s David Clark around 1999, causing Bill Gates to pen a May 31st, 1999 Newsweek op-ed titled: Why the PC Will Not Die…)

Both Bill and Frank are right – mostly. Today’s PC, the descendant of the Altair 8800 for which Gates programmed Microsoft’s first Basic interpreter, is alive and, yes, it’s irreplaceable for many important tasks. But classical PCs — desktops and laptops — are no longer at the center of the personal computing world. They’ve been replaced by smaller (and smallest) PCs — in other words, by tablets and smartphones. The PC isn’t dead or passé, but it is shape-shifting.

There was a second adverse consequence of the iPad’s galloping growth: Expectations ran ahead of reality. Oversold or overbought, it doesn’t matter, the iPad (and its competitors) promised more than they could deliver. Our very personal computers — our tablets and smartphones — have assumed many of the roles that previously belonged to the classical PC, but there are some things they simply can’t do.

For example, in an interview with the Wall Street Journal, Tim Cook confides that “he does 80% of the work of running the world’s most valuable company on an iPad.” Which is to say Tim Cook needs a Mac for the remaining 20%…but the WSJ quote doesn’t tell us how important these 20% are.

We now come to the downward trend in iPad’s unit sales: -2.29% for the first quarter of calendar year 2014 (compared to last year). Even more alarming, unit sales are down 9% for the quarter ending in June. Actually, this seems to be an industry-wide problem rather than an Apple-specific trend. In an exclusive Re/code interview, Best Buy CEO Hubert Joly says tablet sales are “crashing”, and sees hope for PCs.

Many explanations have been offered for this phenomenon, the most common of which is that tablets have a longer replacement cycle than smartphones. But according to some skeptics, such as Peter Bright in an Ars Technica op-ed, there’s a much bigger problem [emphasis mine]:

“It turns out that tablets aren’t the new smartphone…[t]hey’re the new PC; if you’ve already got one, there’s not much reason to buy a new one. Their makers are all out of ideas and they can’t make them better. They can only make them cheaper.”

Bright then concludes:

“[T]he smartphone is essential in a way that the tablet isn’t. A large screen smartphone can do…all the things a tablet can do… Who needs tablets?”

Hmmm…

There is a simpler – and much less portentous – explanation. We’re going through an “expectations adjustment” period in which we’ve come to realize that tablets are not PC replacements. Each personal computer genre carries its own specifics; each instils unique habits of the body, mind, and heart; none of them is simply a “differently sized” version of the other two.

The realization of these different identities manifests itself in Apple’s steadfast refusal to hybridize, to make a “best of both worlds” tablet/laptop product.

Microsoft thinks otherwise and no less steadfastly (and expensively) produces Surface Pro hybrids. I bought the first generation two years ago, skipped the second, and recently bought a Surface Pro 3 (“The tablet that can replace your laptop”). After using it daily for a month, I can only echo what most reviewers have said, including Joanna Stern in the WSJ:

“On its third attempt, Microsoft has leapt forward in bringing the tablet and laptop together—and bringing the laptop into the future. But the Pro 3 also suffers from the Surface curse: You still make considerable compromises for getting everything in one package.”

Trying to offer the best of tablets and laptops in one product ends up compromising both functions. In my experience, too many legacy Windows applications work poorly with my fingers on the touch screen. And the $129 Type Cover is a so-so keyboard and poor trackpad. Opinions will differ, of course, but I prefer using Windows 8.1 on my Mac. We’ll see how the upcoming Windows 9, code name Threshold, will cure the ills of what Mary Jo Foley, a well-introduced Microsoft observer, calls Vista 2.0.

If we consider that Mac unit sales grew 18% last quarter (year-to-year), the company’s game becomes clear: The sweet spot on Apple’s racket is the set of customers who, like Tim Cook, use MacBooks and iPads. It’s by no means the broadest segment, just the most profitable one. Naysayers will continue to contend that the prices of competing tablets are preordained to crash and will bring ruin to Apple’s Affordable Luxury product strategy…just as they predicted netbooks would inflict damage on MacBooks.

As for Peter Bright’s contention that “[tablet] makers are all out of ideas and they can’t make them better”, one can easily see ways in which Google, Lenovo, Microsoft, Apple, and others could make improvements in weight, speed, input methods, system software, and other factors I can’t think of. After we get over the expectations adjustment period, the tablet genre will continue to be innovative, productive, and fun – for children of all ages.

JLG@mondaynote.com

Google might not be a monopoly, after all

 

Despite its dominance, Google doesn’t fit the definition of a monopoly. Still, the Search giant’s growing disconnect from society could lead to serious missteps and, over time, to a weakened position. 

In last week’s column, I opined about the Open Internet Project’s anti-trust lawsuit against Google. Reactions showed divided views of the search engine’s position. Granted, Google is an extremely aggressive company, obsessed with growth, scalability, optimization — and also with its own vulnerability.

But is it really a monopoly in the traditional and historical sense? Probably not. Here is why, in four points:

1. The consent to dependency. It is always dangerous to be too dependent from a supplier one doesn’t control. This is the case in the (illegal) drug business. Price and supply will fluctuate at the whim of unpredictable people.This is what happens to those who build highly Google-dependent businesses such as e-commerce sites and content-farms that provide large quantities of cheap fodder in order to milk ad revenue from Google search-friendly tactics.

326_jaws
In the end, everything is a matter of trust (“Jaws”, courtesy of Louis Goldman)

Many news media brands have sealed their own fate by structuring their output so that 30% to 40% of their traffic is at the mercy of Google algorithms. I’m fascinated by the breadth and depth of the consensual ecosystem that is now built around the Google traffic pipeline: consulting firms helping media rank better in Google Search and Google News; software that rephrases headlines to make it more likely they’ll hit the top ranks; A/B testing on-the-fly that shows what the search engine might like best, etc.

For the media industry, what should have remained a marginal audience extension has turned into a vital stream of page views and revenue. I personally think this is dangerous in two ways. One, we replace the notion of relevance, reader interest, with a purely quantitative/algorithmic construct (listicles vs depth, BuzzFeed vs. ProPublica for instance). Such mechanistic practices further fuel the value deflation of original content. Two, the eagerness to please the algorithms distracts newsrooms, journalists, editors, from their job to find, develop, build intelligent news packages that will lift brand perception and elevate the reader’s mind (BuzzFeed and plenty of others are the quintessence of cheapening alienation.)

2. Choice and Competition. In 1904, Standard Oil Inc. controlled 91% of American oil production and refining, and 85% of sales. This practically inescapable monopoly was able to dictate prices and supply structure. As for Google, it indeed controls 90% of the search market in some regions (Europe especially, where fragmented markets, poor access to capital and other cultural factors prevented the emergence of tech giants.) Google combines its services (search, mail, maps, Android) to produce one of the most potent data gathering systems ever created. Note the emphasis: Google (a) didn’t invent the high tech data X-ray business, nor (b) is it the largest entity to collect gargantuan amounts of data. Read this Quartz article The nine companies that know more about you than Google or Facebook  and see how corporations such as Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf, and Recorded Future collect data on a gigantic scale, including court and public records information, or your gambling habit. Did they make you sign a consent form?

You want to escape Google? Use Bing, Yahoo, DuckDuckGo or Exalead for your web search, or go here to find a list of 40 alternatives. You don’t want your site to be indexed by Google? Insert a robot exclusion line in your html pages, and the hated crawler won’t see your content. You’re sick of Adwords in your pages or in Gmail? Use AdBlock plug-in, it’s even available for the Google Chrome browser. The same applies for storing your data, getting a digital map or web mail services. You’re “creeped out” by Google’s ability to reconstruct every move around your block or from one city to another by injecting data from your Android phone into Maps? You’re right! Google Maps Location History is frightening; to kill it, you can turn off your device’s geolocation, or use Windows Phone or an iPhone (be simply aware that they do exactly the same thing, but they don’t advertise it). Unlike public utilities, you can escape Google. Simply, its services are more convenient, perform well and… are better integrated, which gets us to our third point:

3. Transparent strategy. To Google’s credit, for the most part, its strategy is pretty transparent. What some see as a monopoly in the making is a deliberate — and open — strategy of systematic (and systemic) integration. Here is the chart I made few months ago:

326 graph_goolge

We could include several recent additions such as trip habits from Uber (don’t like it? Try Lyft, or better, a good old Parisian taxi – they don’t even take credit cards); or temperature setting patterns soon coming from Nest thermostats (if you chose to trust Tony Fadell’s promises)… Even Google X, the company’s moonshot factory (story in Fast Company) offers glimpses of Google’s future reach with the development of autonomous cars, projects to bring the internet to remote countries using balloons (see Project Loon) or other airborne platforms.

4. Innovation. Monopolies are known to kill innovation. That was the case with oil companies, cartels of car makers that discouraged alternate transportation systems, or even Microsoft which made our life miserable thanks to a pipeline of operating systems without real competition. By contrast, Google is obsessed with innovative projects seen as an absolute necessity for its survival. Some are good, other are bad, or remain in beta for years.

However, Google is already sowing the seeds of its own erosion. This company is terribly disconnected from the real world. This shows everywhere, from the minutest details of its employees daily life pampered in a overabundance of comfort and amenities that keep them inside a cosy bubble, to its own vital statistics (published by the company itself). Google is mostly white (61%), male (70%), recruits in major universities (in that order: Stanford, UC Berkeley, MIT, Carnegie Mellon, UCLA), with very little “blood” from fields other than scientific or technical. For a company that says it wants to connect its business to a myriad of sectors, such cultural blinders are a serious issue. Combined to the certainty of its own excellence, the result is a distorted view of the world in which the distinction between right and wrong can easily blur. A business practice internally considered virtuous because it supports the perpetuation of the company’s evangelistic vision of a better world can be seen as predatory in the “real” world. Hence a growing rift between the tech giant and its partners and customers, and the nations who host them.

frederic.filloux@mondaynote.com

Google and the European media: Back to the Ice Age

 

Prominent members of the European press are joining a major EU-induced antitrust lawsuit against Google. The move is short on rationale and long on ideology. 

A couple of weeks ago, Axelle Lemaire, France’s deputy minister for digital affairs,  was quoted contending Google’s size and market power effectively prevented the emergence of a “French Google”. A rather surprising statement from a public official whose profile stands in sharp contrast to the customary high civil service profile. As an MP, Mrs Lemaire represents French citizens living overseas and holds dual French and Canadian citizenship; she got a Ph.D. in International Law at London’s King’s College as well as a Law degree at the Sorbonne. Ms. Lemaire then practiced Law in the UK and served as a parliamentary aide in the British House of Commons. Still, her distinguished and unusually “open” background didn’t help: She’s dead wrong about why there is no French Google.

The reasons for France’s “failure” to give birth to a Google-class search engine are simply summarized: Education and money. Google is a pure product of what France misses the most: a strong and diversified engineering pipeline supported by a business-oriented education system, and access to abundant capital. Take the famous (though controversial) Shanghai higher education ranking in computer science: France ranks in the 76 to 100 group with the University of Bordeaux; 101 to 150 for the highly regarded Ecole Normale Supérieure; and the much celebrated Ecole Polytechnique sits deep in the 150-200 group – with performance slowly degrading over the last ten years and a minuscule faculty of… 7 CS professors and assistants professors. That’s the reality of computer science education in the most prestigious engineering school in France. As for access to capital, two numbers say it all: according to its own trade association, the size of the French venture capital sector is 1/33th of the US’ while the GDP ratio is only 1 to 6. That’s for 2013; in 2012, the ratio was 1/46th, things are improving.

The structural weakness of French tech clearly isn’t Google’s fault. Which reveals the ideological facts-be-damned nature of the blame, an attitude broadly shared by other European countries.

A few weeks ago, a surreal event took place in Paris, at the Cité Universitaire Internationale de Paris (which wants to look like a Cambridge replica). There, the Open Internet Project uncovered the next European antitrust action against Google. On stage was an disparate crew: media executives from German and French companies; the former antitrust litigator Gary Reback known for his fight against Microsoft in the Nineties – and now said to help Microsoft in its fight against Google; Laurent Alexandre, a strange surgeon/entrepreneur and self-proclaimed visionary  living in Luxembourg Brussels where his company DNA Vision is headquartered, who almost got a standing ovation by explaining how Google intended to connect our brains to its gigantic neuronal network by around 2040; all of the above wrapped up with a speech from French Economy Minister Arnaud Montebourg who never misses an opportunity to apply his government’s seal on anti-imperialist initiatives.

The lawsuit alleges market distortion practices, discrimination in several guises, anticompetitive conduct, preference for its own vertical services at the expense of fairness in its search results, illegal use of data, etc. (The summary of EU allegations is here). The complaint paves the way for painstaking litigation that will drag on for years.

Among the eleven corporations or trade groups funding the lawsuit we find seven media entities, including the giant German Axel Springer GroupLagardère Active whose boss invoked the “moral obligation” to fight Google. There is also CCM Benchmark Group, a large diversified digital player whose boss, Benoît Sillard, had his own epiphany while speaking with Nikesh Arora in Mountain View a while ago. There and then, Mr. Sillard saw the search giant’s grand plan to dominate the digital world. (I paid a couple of visits to Google’s headquarters but was never granted such a religious experience – I will try again, I promise.)

Despite the media industry’s weight, the lawsuit fails to expose Google practices directly affecting the P&L of news providers. Indeed, some media companies have developed business that competes with Google verticals. That’s the case of Lagardère’s shopping site LeGuide.com but, again, the group’s CEO, Denis Olivennes, was long on whining and short on relevant facts. (The only fun element he mentioned was outside the scope of OIP’s legal action: with only €50m in revenue, LeGuide.com paid the same amount of taxes as Google whose French operation generates $1.6bn in revenue).

Needless to say, that doesn’t mean that Google couldn’t be using its power in questionable ways at the expense of scores of e-retailers. But as far as the media sector is concerned, gains largely outweigh losses as most web sites enjoy a boost in their traffic thanks to Google Search and Google News. (The value of Google-generated clicks is extremely difficult to assess — a subject for a future Monday Note.)

One fact remains obvious: In this legal action, media groups are being played to defend interests… that are not theirs.

In this whole affair, the French news media industry is putting itself in an awkward position. In February 2013, Google and the French government hammered a deal in which the tech giant committed €60m ($81m) over a 3-year period to fund digital projects run by the French press. (In 2013, according to the fund’s report, 23 projects have been started, totaling €16m in funding.) The agreement between Google and the French press stipulates that, for the duration of the deal, the French will refrain from suing Google on copyrights grounds – such as the use of snippets in search results. But those who signed the deal found themselves dragged in the OIP lawsuit through the GESTE, a legacy trade association – more talkative than effective – going back to the Minitel era  that supports the OIP lawsuit on antirust rather than copyrights grounds. (Those who signed the Google Funds agreement issues a convoluted communiqué to distance themselves from the OIP initiative.)

In Mountain View, many are upset by French media that, on one hand, get hefty subsidies and, on the other, file an anti-Google suit before the Europe Court of Justice. “Back home, the [Google] Fund always had its opponents”, a Google exec told me, “and now they have reasons to speak louder…” Will they be heard? It is unlikely that Google will pull the plug on the Fund, I’m told. But people I talk to also said that any renewal, under any form, now looks unlikely. So will be the extension of an innovation funding scheme in Germany — or elsewhere. “Google is at a loss when trying to develop peaceful relations with the French”, another Google insider told me… “We put our big EMEA [Europe and Middle East] headquarters in Paris, we created a nicely funded Cultural Institute, we fueled the innovation fund for the press, and now we are bitten by the same ones who take our subsidies…”

Regardless of its merits, the European press’ involvement in this antitrust case is ill-advised. It might throw the relationship with Google back to the Ice Age. As another Google exec said to me: “News media should not forget that we don’t need them to thrive…”

–frederic.filloux@mondaynote.com

 

The Beats Music Rorschach Blot

 

Apple has a long track record of small, cautious, unheralded acquisitions. Has the company gone off course with hugely risky purchase of Beats Music and Electronics, loudly announced at an industry conference? 

As Benedict Evans’ felicitous tweet put it, Apple’s $3B acquisition of Beats, the headphone maker and music streaming company, is a veritable Rorschach blot:

Benedict Evans Rorschach

The usual and expected interpretations of Anything Apple – with the implied or explicit views of the company’s future – were in full display at last week’s Code Conference after the Beats acquisition was officially announced during the second day of the event. Two of the conference’s high-profile invitees, Apple’s SVP Craig Federighi and Beats’ co-founder, Dr. Dre (née André Young), quickly exited the program so all attention could be focused on the two key players: Eddy Cue, Apple’s Sr. VP of Internet Software and Services; and Jimmy Iovine, Beats’ other co-founder and freshly minted Apple employee. They were interviewed on stage by Walt Mossberg and Kara Swisher, the conference creators (59-minute video here).

Walt and Kara had booked Cue and Iovine weeks before Tim Bradshaw scooped the Apple/Beats story on May 8th in the Financial Times (the original FT article sits behind a paywall; TechCrunch version here). Was the booking a sign of prescience? smart luck? a parting gift from Katie Cotton as she retires as head of Apple PR? (And was Swisher’s warmly worded valentine to Cotton for her 18 years of service a quid pro quo acknowledgment?)

After the official announcement and the evening fireside chat, the Rorschach analysis began. Amidst the epigrams, which were mostly facile and predictable, one stood out with its understated questioning of culture compatibility:

‘Iovine: Ahrendts or Browett?‘ 

The “Browett”, here, is John Browett, the British executive who ran Dixons and Tesco, two notoriously middle-brow retail chains. Apple hired him in April 2012 to succeed Ron Johnson as the head of Apple Retail… and showed him the door seven months later, removed for a clear case of cultural incompatibility. When Browett tried to apply his estimable cost-cutting knowledge and experience to the Italian marble Apple Store, things didn’t work out — and the critics were quick to blame those who hired him.

Nothing of the sort can be said of Dame Angela Ahrendts. Now head of Apple’s physical and on-line stores, Ahrendts was lured from Burberry, a culturally compatible and Apple-friendly affordable luxury enterprise.

Will Iovine be a Browett or an Ahrendts?

In a previous Monday Note, I expressed concern for the cultural integration challenges involved in making the Beats acquisition work. What I learned from the on-stage interview is that Jimmy Iovine and Eddy Cue have known and worked with each other for more than ten years. Iovine says he’ll be coming to Cupertino ‘about once a month’, so my initial skepticism may have been overstated; Apple isn’t acquiring a company of strangers.

But are they acquiring a company that creates quality products?  While many see Beats Music’s content curation as an important differentiator in the streaming business, one that would give a new life to its flagging music sales, others are not so sure. They find Beats Music’s musical choices uninspiring. I’m afraid I have to agree. I downloaded the Beats Music app, defined a profile, and listened for several hours while walking around Palo Alto or sitting at my computer. Perhaps it’s me, my age, or my degenerate tastes but none of the playlists that Beats crafted for me delivered neither the frisson of discovery nor the pleasure of listening to an old favorite long forgotten. And my iPhone became quite hot after using the app for only an hour or so.

Regarding the headphones: They’re popular and sell quite well in spite of what The Guardian calls “lacklustre sound”. I tried Beats Electronic’s stylish Studio headphones for a while, but have since returned to the nondescript noise-canceling Bose QC 20i, a preference that was shared (exactly or approximately) by many at the conference.

There was no doubt, at the conference, that Apple understands there are problems with Beats, but there’s also a feeling that the company sees these problems as opportunities. An overheard hallway discussion about the miserable state of the iTunes application (too strongly worded to repeat here verbatim) neatly summed up the opportunity: ‘Keeping Beats as a separate group affords Cook and Cue an opening for independently developing an alternative to iTunes instead of trying to fix the unfixable.’ It’s worth noting that the Beats Music app is available on mobile devices, only, and it appears there’s no plan to create a desktop version. This underlines the diminished role of desktops, and points out the possibility of a real mobile successor to the aging iTunes application.

Continuing with the blot-reading exercise, many members of the audience found it necessary to defend the $3B price tag. Some point out that since Apple’s valuation is about 3X its revenue, Beats’ purported $1.5B hardware revenue easily “justifies” the $3B number. (Having consorted with investment bankers at various moments of my business life, as an entrepreneur, a company director, and a venture investor, I know they can be trusted to explain a wide range of valuations. Apparently, Apple is paying $500M for the streaming business and $2.5B for the hardware part.)

My own reading is that the acquisition price won’t matter: If it acquisition succeeds, the price will be easily forgotten; if it fails, Apple will have bigger worries.

Ultimately, the Apple-Beats products and services we don’t haven’t yet seen will do the talking.

–JLG@mondaynote.com

Nadella’s Job One

 

Microsoft has a new CEO – a safe choice, steeped in the old culture, with the Old Guard still on the Board of Directors. This might prevent Nadella from making one tough choice, one vital break with the past.

Once upon a distant time, the new CFO of a colorful personal computer company walks into his first executive staff meeting and proudly shares his thoughts:

“I’ve taken the past few weeks to study the business, and I’d now like to present my top thirty-five priorities…”

This isn’t a fairy tale, I was in the room. I didn’t speak Californian as fluently as I do now, so rather than encourage the fellow with mellifluous platitudes — ‘Interesting’ or, even better, ‘Fascinating, great vision!’ — I spoke my mind, possibly much too clearly:

“This is terrible, disorganized thinking. Claiming to have thirty-five priorities is, in fact, a damning admission: You have none, you don’t even know where to start. Give us your ONE priority and show us how everything else serves that goal…”

The CFO, a sharp, competent businessman, didn’t lose his cool and, after an awkward silence, stepped through his list. Afterwards, with calm poise, he graciously accepted my apologies for having been so abrupt…

Still, you can’t have a litany of priorities.

Turning to Microsoft, will the company’s new CEO, Satya Nadella, focus the company on a true priority, one and only one goal, one absolutely must-win battle? For Nadella, what is Microsoft’s Nothing Else Matters If We Fail?

In his first public pronouncement, the new Eagle of Redmond didn’t do himself any favors by uttering bombastic (and false) platitudes (which were broadly retweeted and ridiculed):

“We are the only ones who can harness the power of software and deliver it through devices and services that truly empower every individual and every organization. We are the only company with history and continued focus in building platforms and ecosystems that create broad opportunity.”

One hesitates. Either Nadella knows this is BS but thinks we’re stupid enough to buy into such pablum. Or he actually believes it and is therefore dangerous for his shareholders and coworkers. Let’s hope it’s the former, that Nadella, steeped in Microsoft’s culture, is simply hewing to his predecessor’s chest-pounding manner. (But let’s also keep in mind the ominous dictum: Culture Eats Strategy For Breakfast.)

Satya_Nadella

Assuming Nadella knows the difference between what he must say and what he must do, what will his true priority be? What battle will he pick that, if lost, will condemn Microsoft to a slow, albeit comfortable, slide into the tribe of has beens?

It can’t be simply tending the crops. Enterprise software, Windows and Office licenses might not grow as fast as they used to, but they’re not immediately threatened. The Online Services Division has problems but they can be dealt with later — it continues to bleed money but the losses are tolerable (about $1B according to the Annual Report). The Xbox One needs no immediate attention.

What really threatens Microsoft’s future is the ebullient, sui generis world of mobile devices, services, and applications. Here, Microsoft’s culture, its habits of the heart and mind, has led the company to a costly mistake.

Microsoft has succeeded, in the past, by straddling the old and the new: The company is masterful at introducing new features without breaking older software. In Microsoft’s unspoken, subconscious culture, the new can only be defined as an extension of the existing, so when it finally decided they it needed a tablet (another one after the Tablet PC failure), the Redmond company set out to build a better device that would also function as a laptop. The best of both worlds.

We know what happened. Users shunned Microsoft’s neither-nor Windows 8 and Surface hybrids. HP has backed away from Windows 8 and now touts its PCs running Windows 7 “Back By Popular Demand”  — this would never have happened when Microsoft lorded over its licensees. And now we hear that the upcoming Windows 8.1 update will boot directly into the conventional Windows 7-like desktop as opposed to the unloved Modern (née Metro) tiles.

Microsoft faces a choice. It can replace the smashed bumper on its truck with a stronger one, drop a new engine into the bay and take another run at the tablet wall. Or it can change direction. The former — continuing to attempt to bridge the gap between tablets and laptops  — will do further damage to the company’s credibility, not to mention its books. The latter requires a radical but simple change: Make an honest tablet using a version of Windows Phone that’s optimized for the things that tablets do well. Leave laptops out of it.

That is a priority, a single, easily stated goal that can be understood by everyone — employees and shareholders, bloggers and customers. To paraphrase a Valley wag, it’s a cri de guerre that’s so simple you can remember it even if you’re tired, drunk, and your spouse has thrown you out in the rain at 3 A.M. in your jockey briefs.

This is an opportunity for the new CEO to make his mark, to show vision, as opposed to mere care-taking.

But will he seize it?

Nadella should know the company by now. He’s been with Microsoft for over twenty years, during which time he’s proven himself to be a supremely technical executive. The company is remarkably prosperous — $78B in revenue in 2013; $22B profit; $77B in cash. This prosperity bought the Board some time when deciding on a new CEO, and should give Nadella a cushion if he decides to redirect the company.

Of course, there’s the Old Guard to contend with. Bill Gates has ceded the Chairman role to John Thompson, but he’ll stay on as a “technical advisor” to Nadella, and Ballmer hasn’t budged — he remains on the Board (for the time being). This might not leave a lot of room for bold moves, for undoing the status quo and for potentially embarrassing (or angering) Board members.
I can’t leave the topic without asking another related question.

We’ve just seen how decisive Larry Page can be. He looked at Motorola’s $2B red ink since they were acquired by Google — no end in sight, no product momentum — and sold the embarrassment to Lenovo. If regulators approve the sale, Motorola will be in competent hands within a company whose leader, Yang Yuanqing also known as YY, plays for the number one position. (Lenovo is the company that, in 2005, bought IBM’s ailing PC business and has since vaulted over Dell and HP to become the world’s premier PC maker.)

With this in mind, looking at the smartphone space where Apple runs its own premium ecosystem game, where Samsung takes no prisoners, where Huawei keeps rising, and where Lenovo will soon weigh in — to say nothing of the many OEMs that make feature phone replacements based on Android’s open source software stack (AOSP) — is it simply too late for Microsoft? Even if he has the will to make it a priority, can Nadella make Windows Phone a player?

If not, will he be as decisive as Larry Page?

JLG@mondaynote.com
@gassee

Why Twitter needs a design reset

 

Twitter is the archetype of a greatly successful service that complacently iterates itself without much regard for changes in its uses. Such behavior makes the service — and others like it — vulnerable to disruptive newcomers. 

Twitter might be the smartest new media of the decade, but its user interface sucks. None of its heavy users is ready to admit it for simple reason: Twitter is fantastic in broadcast mode, but terrible in consumption mode. Herein lies the distortion: most Twitter promoters broadcast tweets as much as they read them. The logical consequence is a broad complacency: Twitter is great, because its most intensive broadcasters say so. The ones who rarely tweet but use the service as a permanent and tailored news feed are simply ignored. They suffer in silence — and they are up for grabs by the inevitable disrupter.

Twitter’s integration can’t be easier. Your Tweet it from any content, from your desktop with an app accessible in the toolbar, or from your smartphone. Twitter guarantees instant execution followed by immediate gratification: right after the last keystroke, your tweet is up for a global propagation.

But when it comes to managing your timeline, it’s a different story. Unless you spend most of  your time on Tweeter, you miss many interesting items. Organizing feeds is a cumbersome process. Like everybody else, I tried many Twitter’s desktop or mobile apps. None of them really worked for me. Even TweetDeck seems to have been designed by an IBM coder from the former Soviet régime. I looked around my professional environment and was stunned by the number of people who acknowledge going back to the basic Tweeter app after unsuccessful tries elsewhere.

Many things are wrong in the Twitter’s user interface and it’s time to admit it. In the  real world, where my 4G connection too often falls back to a sluggish EDGE network, watching a Tweeter feed in a mobile setting becomes a nightmare. It happens to me every single day.

Here is a short list of nice-to-have features:

Background Auto-refresh. Why do I have to perform a manual refresh in my Twitter app each time I’m going to my smartphone (even though the app is running in the background)? My email client does it, so do many apps that push contents to my device. Alternatively, I’d be happy with refresh preset intervals and not having to struggle to catch up with stuff I might have missed…
Speaking of refreshes, I would love to see iOS and Android coming up with a super-basic refresh system: as long as my apps are open in the background, I would have a single “Update Now” button telling all my relevant apps (Email reader, RSS reader, Twitter, Google Current, Zite, Flipboard, etc.) to quickly upload the stuff I’m used to read while I still have a decent signal.

Save the Tweet feature. Again, when I ride the subway (in Paris, London or NYC), I get a poor connection – at best. Then, why not offer a function such as a gentle swipe of my thumb to put aside a tweet that contains an interesting link for later viewing?

Recommendation engine. Usually, I will follow someone I spot within the subscriptions of someone I already follow and appreciate. Or from a retweet. Twitter knows exactly what my center of interests are. Therefore it would be perfectly able to match my “semantic footprint” to others’.

Tag system. Again, Twitter maintains a precise map of many of its users, or at least of those categorized as “influencers”. When I subscribe to someone who already has thousands of followers, why not tie this user to metadata vectors that will categorize my feeds? Overtime, I would built a formidable cluster of feeds catering to my obsessions…

I’m puzzled by Twitter’s apparent inability to understand the needs of the basic users. The company is far from unique in this regard.; instead, it keeps relying on a self-centered elite of trendy aficionados to maintain the comfy illusion of universal approval – until someone comes up with a radical new approach.

This is the “NASA/SpaceX syndrome”. For decades, NASA kept sending people and crafts to space in the same fashion: A huge administrative machine, coordinating thousands of contractors. As Jason Pontin wrote in his landmark piece of the MIT’s Technology Review:

In all, NASA spent $24 billion, or about $180 billion in today’s dollars, on Apollo; at its peak in the mid-1960s, the agency enjoyed more than 4 percent of the federal budget. The program employed around 400,000 people and demanded the collaboration of about 20,000 companies, universities, and government agencies. 

Just to update Pontin’s statement, the International Space Station cost $100bn to build over a ten years period and needs about $3bn per year to operate.

That was until a major disrupter, namely Elon Musk came up with a different way to build a rocket. His company, Space X, has a long way to go but it is already able to send objects (and soon people) to the ISS at a fraction of Nasa’s cost. (Read the excellent story The Shared Genius of Elon Musk and Steve Jobs by Chris Anderson in Fortune.)

In the case of the space exploration, Elon Musk-the-outsider, along with its “System-level design thinking powered by extraordinary conviction” (as Anderson puts it), simply broke Nasa’a iteration cycle with a completely different approach.

That’s how tech company become vulnerable: they keep iterating their product instead of inducing disruption within their own ranks. It’s the case for Twitter, Microsoft, Facebook.

There is one obvious exception – and a debatable one. Apple appears to be the only one able to nurture disruption in its midst. One reason is the obsessive compartmentalization of development projects wrapped in paranoid secrecy. Apple creates an internal cordon sanitaire  that protects new products from outside influences – even within the company itself. People there work on products without kibitzing, derivative, “more for less” market research.

Google operates differently as it encourages disruption with its notorious 20% of work time that can be used by engineers to work on new-new things (only Google’s dominant caste is entitled to such contribution). It also segregated GoogleX, its “moonshots” division.

To conclude, let me mention one tiny example of a general-user approach that collides with convention. It involves the unsexy world of calendars on smartphones. At first sight not a fertile field of outstanding innovation. Then came PeekCalendar, a remarkably simple way to manage your schedule (video here) on an iPhone.

Peek-Photo3

This app was developed by Squaremountains.com, a startup created by an IDEO alumni, and connected to Estonian company Velvet. PeekCalendar is gently dismissed by techno-pundits as only suitable for not-so-busy people. I tested it and – with a few bugs – it nicely accommodates my schedule  of 25-30 appointments a week.

Showing this app during design sessions with my team at work also made me feel that the media sphere is by no mean immune to the criticism I detailed above. Our industry is too shy when it comes to design innovations. Most often, for fear of losing our precious readership, we carefully iterate instead of seeking disruption. Inevitably, a young company with nothing to lose nor preserve will come up with something new and eat our lunch. Maybe it’s time to Think Different™.

frederic.filloux@mondaynote.com
@filloux 

 

Security Shouldn’t Trump Privacy – But I’m Afraid It Will

 

The NSA and security agencies from other countries are shooting for total surveillance, for complete protection against terrorism and other crimes. This creates the potential for too much knowledge falling one day in the wrong hands.

An NSA contractor, Edward Snowden, takes it upon himself to gather a mountain of secret internal documents that describe our surveillance methods and targets, and shares them with journalist Glenn Greenwald. Since May of this year, Greenwald has provided us with a trickle of Snowden’s revelations… and our elected officials, both here and abroad, treat us to their indignation.

What have we learned? We Spy On Everyone.

We spy on enemies known or suspected. We spy on friends, love interests, heads of state, and ourselves. We spy in a dizzying number of ways, both ingenious and disingenuous.

(Before I continue, a word on the word “we”. I don’t believe it’s honest or emotionally healthy to say “The government spies”. Perhaps we should have been paying more attention, or maybe we should have prodded our solons to do the jobs we elected them for… but let’s not distance ourselves from our national culpability.)
You can read Greenwald’s truly epoch-making series On Security and Liberty in The Guardian and pick your own approbations or invectives. You may experience an uneasy sense of wonder when contemplating the depth and breadth of our methods, from cryptographic and social engineering exploits (doubly the right word), to scooping up metada and address books and using them to construct a security-oriented social graph.

We manipulate technology and take advantage of human foibles; we twist the law and sometimes break it, aided by a secret court without opposing counsel; we outsource our spying by asking our friends to suck petabytes of data from submarine fiber cables, data that’s immediately combed for keywords and then stored in case the we need to “walk back the cat“.

NSA-Merkel-Phone

Sunday’s home page of the German site Die Welt

The reason for this panopticon is simple: Terrorists, drugs, and “dirty” money can slip through the tiniest crack in the wall. We can’t let a single communication evade us. We need to know everything. No job too small, no surveillance too broad.

As history shows, absolute anything leads to terrible consequences. In a New York Review of Books article, James Bamford, the author of noted books on the NSA, quotes Senator Frank Church who, way back in 1975, was already worried about the dangers of absolute surveillance [emphasis mine]:

“That capability at any time could be turned around on the American people and no American would have any privacy left, such [is] the capability to monitor everything: telephone conversations, telegrams, it doesn’t matter. There would be no place to hide. If this government ever became a tyranny, if a dictator ever took charge in this country, the technological capacity that the intelligence community has given the government could enable it to impose total tyranny, and there would be no way to fight back, because the most careful effort to combine together in resistance to the government, no matter how privately it was done, is within the reach of the government to know. Such is the capability of this technology…. I don’t want to see this country ever go across the bridge. I know the capacity that is there to make tyranny total in America, and we must see to it that this agency and all agencies that possess this technology operate within the law and under proper supervision, so that we never cross over that abyss. That is the abyss from which there is no return.

From everything we’ve learned in recent months, we’ve fallen into the abyss.

We’ve given absolute knowledge to a group of people who want to keep the knowledge to themselves, who seem to think they know best for reasons they can’t (or simply won’t) divulge, and who have deemed themselves above the law. General Keith Alexander, the head of the NSA, contends that “the courts and the policy-makers” should stop the media from exposing our spying activities. (As Mr. Greenwald witheringly observes in the linked-to article, “Maybe [someone] can tell The General about this thing called ‘the first amendment’.”)

Is the situation hopeless? Are we left with nothing but to pray that we don’t elect bad guys who would use surveillance tools to hurt us?

I’m afraid so.

Some believe that technology will solve the problem, that we’ll find ways to hide our communications. We have the solution today! they say: We already have unbreakable cryptography, even without having to wait for quantum improvements. We can hide behind mathematical asymmetry: Computers can easily multiply very large numbers to create a key that encodes a message, but it’s astronomically difficult to reverse the operation.

Is it because of this astronomic difficulty — but not impossibility — that the NSA is “the largest employer of mathematicians in the country“? And is this why “civilian” mathematicians worry about the ethics of those who are working for the Puzzle Palace?

It might not matter. In a total surveillance society, privacy protection via unbreakable cryptography won’t save you from scrutiny or accusations of suspicious secrecy. Your unreadable communication will be detected. In the name of State Security, the authorities will knock on your door and demand the key.

Even the absence of communication is suspect. Such mutism could be a symptom of covert activities. (Remember that Bin Laden’s compound in Abbottabad was thoroughly unwired: No phones, no internet connection.)

My view is that we need to take another look at what we’re pursuing. Pining for absolute security is delusional, and we know it. We risk our lives every time we step into our cars — or even just walk down the street — but we insist on the freedom to move around. We’re willing to accept a slight infringement on our liberties as we obey the rules of the road, and we trust others will do the same. We’re not troubled by the probability of ending up mangled while driving to work, but the numbers aren’t unknown (and we’re more than happy to let insurance companies make enormous profits by calculating the odds).

Regarding surveillance, we could search for a similar risk/reward balance. We could determine the “amount of terror” we’re willing to accept and then happily surrender just enough of our privacy to ensure our safety. We could accept a well-defined level of surveillance if we thought it were for a good cause (as in keeping us alive).

Unfortunately, this pleasant-sounding theory doesn’t translate into actual numbers, on either side of the equation. We have actuarial tables for health and automotive matters, but none for terrorism; we have no way of evaluating the odds of, say, a repeat of the 9/11 terrorist attack. And how do you dole out measures of privacy? Even if we could calculate the risk and guarantee a minimum of privacy, imagine that you’re the elected official who has to deliver the message:

In return for guaranteed private communication with members of your immediate family (only), we’ll accept an X% risk of a terrorist attack resulting in Y deaths and Z wounded in the next T months.

In the absence of reliable numbers and courageous government executives, we’re left with an all-or-nothing fortress mentality.

Watching the surveillance exposition unfold, I’m reminded of authoritarian regimes that have come and gone (and, in some cases, come back). I can’t help but think that we’ll coat ourselves in the lubricant of social intercourse: hypocrisy. We’ll think one thing, say another, and pretend to ignore that we’re caught in a bad bargain.

JLG@mondaynote.com

 

Surveillance: The Enemy of Innovation

 

by Jean-Louis Gassée

When we think of government surveillance, we worry about our liberties, about losing a private space where no one knows what we do, say, think. But there is more. Total Surveillance is the enemy of innovation, of anything that threatens public or private incumbents.

No apocryphal levity this week. Instead, a somber look into an almost-present future. For once, Tim Cook isn’t holding his cards close to his chest; he makes no secret of Apple’s interest in wearable technologies. Among the avenues for notable growth (in multiples of $10B), I think wearable devices is a good fit for Apple, more than the likable but just-for-hobbyist TV, and certainly more than the cloudy automotive domain where Google Maps could be a hard obstacle.

Apple isn’t alone, every tech company seems to be developing smart watches, smart glasses, and other health and life-style monitoring devices. (Well, almost every tech company…we haven’t heard from Michael Dell, but perhaps he’s too busy keeping his almost-private company out of Carl Icahn’s clutches.)

To gather more facts for a future Monday Note on wearable devices, I took my usual Play Customer route and followed the example of friends who sport activity-monitoring bracelets such as the popular Jawbone UP wristband (see Frédéric’s experience in a recent MN). I look up on-line review and find more than a few negative comments, but I choose to ignore them and listen, instead, to users who say the bugs have been squashed.

At the nearby Palo Alto Apple Store, a sales gent performs the fitting and the cashectomy with equal competence. Five minutes later, I download the required smartphone app, read a few instructions, and complete a first sync. I’m ready to monitor both my daytime activities and nighttime sleep patterns.

That was three days ago. It’s too early to say much about the product experience, which has been uneventful so far, but a dark, nagging thought comes to fill the void. Here is yet another part of my life that’s monitored, logged, accessible. The somber ruminations of a recent Privacy: You Have Nothing To Fear Monday Note are rekindled. At the time, I wondered if perhaps I was being paranoid. That was before the flow of Edward Snowden’s revelations to The Guardian’s Glenn Greenwald.

This is what we think we know so far: The State, whatever that means these days, monitors and records everything everywhere. We’re assured that this is done with good intentions and with our best interests in mind: Restless vigilance is needed in the war on terror, drug trafficking, money-laundering. Laws that get in the way — such as the one that, on the surface, forbids the US to spy on its own citizens — are bent in ingenious ways, such as outsourcing the surveillance to a friendly or needy ally.

If this sounds outlandish, see The Guardian’s revelations about XKeyscore, the NSA tool that collects “nearly everything a user does on the internet”. Or read about the relationship between the NSA and the UK’s GCHQ:

…the Guardian has discovered GCHQ receives tens of millions of pounds from the NSA every year…In turn, the US expects a service, and, potentially, access to a range of programmes, such as Tempora [GCHQ's data storage system].

Those campaigners and academics who fear the agencies are too close, and suspect they do each other’s “dirty work”, will probably be alarmed by the explicit nature of the quid-pro-quo arrangements.

Every day there’s another story. Today, the WSJ tells us that the FBI has mastered the hacking tools required to remotely turn on microphones and cameras on smartphones and laptops:

Earlier this year, a federal warrant application in a Texas identity-theft case sought to use software to extract files and covertly take photos using a computer’s camera, according to court documents. 

The surveillance and snooping isn’t just about computers. We have license plate recorders and federally mandated black boxes in cars. And now we hear about yet another form of metadata collection: It seems that the US Post Office scans every envelope that they process. Not e-mail, “sneaker mail”. Reading someone else’s mail is, of course, a federal offense. No problem, we’ll just scan the envelopes so we know who’s writing to whom, when, how often…

To this litany we must add private companies that record everything we do. Not just our posts, emails, and purchases, but the websites we visit, the buttons we click, even the way movement of the mouse…everything is recorded in a log file, and it’s made available to the “authorities” as well as buyers/sellers of profiling information. It’s all part of the Grand Bargain known as If the Product Is Free Then You Are the Product Being Sold.

When asked why Google doesn’t encrypt the user data that it stores, Vinton Cerf, the revered Internet Pioneer turned Google’s PR person, sorry, VP and Chief Evangelist, serenely admits that doing so would conflict with Google’s business model and disrupt user features.

At public events, Vint Cerf, a Google employee who was an early architect of the Internet, has said that encrypting information while it is stored would prevent Google from showing the right online advertisements to users.

I’m not singling out Google: Facebook and many others would have to make the same statement.

We’re now closer to trouble with innovation. In an almost-present future, we’ll have zero privacy. Many will know what we do, what we say, where we are, at all times. This will cast a Stasi shadow over our lives, our minds, our emotions. (See The Lives Of Others, Florian Henckel von Donnersmarck’s dramatization of state-sponsored surveillance in East Berlin.)

Let’s not dwell on the discredited You Have Nothing To Fear retort and turn to what happens to All Things New under a total surveillance regime.

Personal freedoms, civil rights, new ways of doing, thinking, speaking, dressing or undressing, science and philosophy, religion, fashion or cooking or smoking… Anything really new breaks existing canons, the rules, laws, habits, and understandings of the established order.

Total surveillance protects everything, starting with the status quo. With everything open to scrutiny by our Benevolent Guardians, there’s no safe place to discuss ideas that may seem disturbing at first, but that, given time and privacy, can evolve into new standards, behaviors, and technologies.

Anything that sticks out gets pounded.

Take past 100 years. Behold all the disruptive liberties and the inventions that upended public and private incumbents. Now, imagine how many would have been killed in the womb under a total State and private surveillance blanket.

But, you’ll say, we have a democratic system; if we don’t want our privacy invaded, surely we can voice our objection through our votes. After all, we elect and fire our representatives, the ones who make the laws and who hire and fire government executives for us.

Not really, or not anymore.

Two thousand years ago, Juvenal condemned Roman politicians who tried to buy votes with food and entertainment. It was a panem et circenses culture in which society “restrains itself and anxiously hopes for just two things: bread and circuses.”

The politicking in our current demagocracy is just as unsavory. To get elected one must promise to provide more with fewer taxes — or whatever bread and circus the latest Big Data says we crave. Instead of shedding light, the campaigning makes sick entertainment.

Once in office, our solons need money to be reelected so they promptly sell “our” votes to lobbyists who are eager to finance the reelection campaigns. Even worse, these same lobbyists provide the platoons of lawyers and consultants who inject the “appropriate” loopholes into inscrutable laws.

All of this makes (most) business feel like an oasis of sense and good will. Many otherwise capable people turn up their noses at the cesspool of politics and stick to their cleaner fun.

Is the situation hopeless?

I pray not. But I can’t help but see our laws — the tax code is the prime example — as old operating systems that are patched together, that have accumulated layer upon layer of silt. No one can comprehend these rules anymore, they’re too big and complicated to fit in one’s head…they’re seemingly unfixable.

This could leave us pining for a messiah, an Arthurian pure heart who pulls the sword from the stone and leads a revolution. We know what happens next in this narrative: the Okhrana becomes the NKVD.

Or perhaps technology itself will come to the rescue. Just as terrorism is viewed as an asymmetric threat in which a small, agile, and stealthy enemy can inflict damage on a giant, perhaps technology will provide us with an asymmetric advantage against surveillance and recreate a modicum of private space for us.

What I don’t see is The State simply renouncing its surveillance, it’s so convenient. Nor do I see us paying for truly anonymous Gmail, Google Maps, or Facebook.

JLG@mondaynote.com

 

Please, Please Uncle Tim, Tell Us A Story…

 

I’m back from D11, the 11th yearly edition of the Wall Street Journal’s tech conference. The conference site gives you the complete speaker roster, commentary, and full videos of the on-stage interviews as well as demos and hallway conversations.

With such a complete and well-organized reproduction of the event, why even go?

For the schmoozing, the in-the-moment impressions of speakers, the audience reactions… This is the only conference I attend (I’ve only missed it once). I enjoy rubbing scales with aging crocodiles and watching new and old saurians warily eying one another.
Speaking of attendees, I’m struck again by the low, almost non-existent European participation. Most pointedly, Fleur Pellerin, France’s Minister in charge of the Digital Economy, wasn’t there… even though she will be in the Valley this week. Had Minister Pellerin spent a day or two with us in Rancho Palos Verdes, she would have seen, heard, felt, and learned more than in the half dozen limousine hops she’ll make from one Valley HQ to another where she’ll be subjected to frictionless corporate presentations that have been personalized with a quick Search and Replace insertion of her name and title.
At D11, the rules of Aristotelian Unities apply: unity of action, place, and time. The entire ecosystem is represented: entrepreneurs, investors, CEOs of large companies, consultants, investment bankers, journalists, headhunters. What better place to contemplate the Knowledge Economy’s real workings, its actors and its potential to lift France out of its unemployment malaise?

(Of course, Pellerin might also be looking to mend fences after Yahoo’s attempt to acquire DailyMotion was blocked by another French minister. My own view is that the French government did Yahoo a favor. From what I think I know about the company and the political climate surrounding it, Marissa Mayer and Henrique De Castro, her COO, probably had no idea what awaited them.)

The conference formula is refreshingly simple:  Walt Mossberg, the Journal’s tech guru, and Kara Swisher, his co-executive, sit down and interview an industry notable (or sometimes two). No speeches allowed, no PowerPoints…
In the early days, I felt the questions were a little too soft — with the regrettable exception of Kara’s condescending grilling of Mark Zuckerberg four years ago. She clearly didn’t take him seriously. But Uncle Walt once told me he trusts his audience to do our job, to correctly decode the answers, the body language — and to look at one another and roll our eyes on occasion.
Once again, we were treated to phenomenal speakers. I liked Dick Costolo, Twitter’s witty, deeply smart (and best-dressed) CEO; and was impressed by Facebook COO Sheryl Sandberg’s deft handling of questions about business, gender, and politics. Sandberg is a  veteran of Washington, where she worked for Treasury Secretary Larry Summers, her thesis adviser at Harvard, and Google  — where she worked for another Larry. Reading her best-selling and inevitably controversial Lean In doesn’t replace seeing her on stage.


Another highlight was the one exception to the No PowerPoint rule: Mary Meeker’s high-speed walk through the freshest version of her rightly celebrated Internet Trends deck. And, while we’re at it, take a look at this astounding (no exaggeration, I promise) zettabyte (1 billion terabytes, 10^21 bytes) Internet traffic projection by Cisco.
Then we have the perplexing interview with Dennis Woodside and Regina Dugan, CEO and Sr. VP, respectively, of Motorola Mobility, now a Google subsidiary. (Regular attendees will recall that Dugan was on stage at D9 as Director of DARPA , the Defense Advanced Research Projects Agency that gave birth to the Internet).

Woodside stated that Motorola would deliver a range of new phones later this year, including a “hero device” with better integration of sensors into the User Interface as well as class-leading autonomy. He also added that Motorola would sell it for much less than the various $650 smartphones available today, probably meaning no-contract Samsung, HTC and Apple top-of-line phones at Verizon and other carriers.
A smarter-but-much-cheaper phone… it’s a bold but credible claim. Keep in mind that Motorola doesn’t exist to make money for itself. It’s part of what I call Google’s 115% Business Model: Advertising makes 115% of Google’s profits and everything else brings the number back down to 100. The smartphone market could become even more interesting if, after making a free smartphone OS, Google subsidizes the hardware as well.

Less credibly, however, Woodside insisted that Google has not and will not give its captive Motorola special access to Android code, because this is something Google simply doesn’t do. Perhaps he doesn’t recall that Google gave advanced access to upcoming Android builds to chosen partners such as Samsung, HTC, and, if memory serves, LG.
Just as interesting, if a bit troubling, Regina Dugan gave us insights into individual identification research work at Motorola. She proudly displayed a tattoo on her forearm that incorporates an RFID (Radio Frequency Identification) antenna that lets you log onto services without the usual annoyances. Or you can swallow an “authentication” pill that’s powered by digestive acids. As Dugan puts it, “your entire body becomes your authentication token.”  Hmmm… A tattoo on one’s forearm, a pill that emits an ID signal that you can’t turn off (for a while)…

Last but not least, Tim Cook’s interview. The low point in the Apple CEO’s appearance came during the Q&A section at the end (it’s around the 1:10:35 mark if you want to fast forward). A fund manager (!!) plaintively begged Cook to make him dream, to tell him stories about the future, like Google does. “Otherwise, we’ll think Mike Spindler and Gil Amelio…” (I’m paraphrasing a bit).


Cook refused to bite. As he’d done many times in the interview, he declined to make announcements, he only allowed TV and wearable devices were areas of “intense interest”. And, when asked if Apple worked on more “game changers” like the iPhone or the iPad, he had no choice but promise more breakthroughs. Nothing new here, this has been Apple’s practice for years.
Which raises a question: What was Apple’s CEO doing at D11 less than two weeks before the company’s Worldwide Developer Conference where, certainly, announcements will be made? What did the organizers and audience expect, that Tim Cook would lift his skirt prematurely?
Actually, there was a small morsel: Cook, discussing Apple TV, claimed 13 million current generation devices had been sold to date, half of them in the past year… but that’s food for another Monday Note.
Audience and media reactions to the lack of entertainment were mixed.

For my part, perhaps because of my own thin skin, I find Tim Cook’s preternatural calm admirable. Taunted with comparisons to Spindler and Amelio, dragged onto the Senate floor, being called a liar by a NYT columnist, constant questioned about his ability to lead Apple to new heights of innovation… nothing seems to faze him. More important, nothing extracts a word of complaint from him.
This is much unlike another CEO, Larry Page, who constantly whines about “negativity” directed at Google, a conduct unbecoming the leader of a successful company that steamrolls everything in its path.
I have my own ideas about Cook’s well-controlled behavior, they have to do with growing up different in Mobile, Alabama. But since he’s obviously not keen to discuss his personal life, I’ll leave it at that and envy his composure.
New Apple products are supposed to come out later this year. You can already draft the two types of stories: If they’re strong, this will be Tim Cook’s Apple; if not, it’ll be We Told You So.

JLG@mondaynote.com