Monthly Archives: April 2009

Going cross

royal-gorge

Royal Gorge looked exactly like this yesterday, except there were no people other than my family, and a handful of other late-season stragglers, at the largest cross-country ski area in the US. We’ve become late converts to cross country for a number of reasons: there are no lines for anything, it costs a lot less, there are no lines for anything, it’s great exercise, there are no lines for anything, you reach astoundingly beautiful areas with minimal infrastructure and no noise. What have I been doing going downhill all these years? 

Exercise is always a wonderful tonic, and combining exertion with mountains, snow and wonderful sun provides a good equation for bliss. I’m only following the news in the slightest way this week, so posting will be light to non-existent.

The Homebrew Molecule Club

ebaypcr

Seven years ago, I wrote a speculative paper for the foresight team in the UK Government’s Strategy Unit. It was meant to be a look at what we’d now call “unknown unknowns”, the kinds of developments that could take political leaders and policymakers unawares. One of my notions was that bioengineering could become a cheap hobby. For the most part, that’s great. As I’ve written before, we should be encouraging more experimenters and tinkerers. But policymakers understandably worry about the few deviants who might try to cook up something evil in their basement. 

It turns out, it didn’t take long for the world of basement molecular biology to emerge. David Ng notes that you can have a home molecular biology lab for less than $1,000. From Homebrew Computer Club to Homebrew Molecule Club?

Another laughable transportation innovation

puma

c5

The launch yesterday of the GM/Segway PUMA brought back memories of Clive Sinclair’s comical, ill-fated C5. I don’t think the PUMA will attract quite the ridicule of the C5, but I expect its commercial success may be as slim. 

I’m certainly all in favor of efforts to innovate in transportation, but I’m not sure the world is clamoring for the PUMA. The grand words at the launch — that it “could change the way we move about in cities” — are clearly bollocks. Dean Kamen and his acolytes said the same thing in the frenzy before the launch of the Segway, and its most notable impact has been as something to laugh at in Paul Blart: Mall Cop and YouTube videos of Steve Wozniak

Far more fruitful would be more research and more investment in mass public transport. The Obama stimulus package included funding for public transport, but it was fairly modest given the desperate underprovision in most American urban areas. The other personal transport that should certainly be pushed doesn’t require much innovation. It’s staggeringly efficient, has a zero-carbon footprint and could help reduce the western world’s obesity epidemic. All hail the bicycle.

And all shall win prizes

longitude

I think the use of prizes to spur innovation is underexploited. So it’s gratifying to read that one of the X Prize Foundation‘s latest challenges is to develop an energy-efficient vehicle. There are 111 entrants for the $10 million prize, but the qualifications are stiff: 

Only production-capable, consumer-friendly cars [may] compete. Those that qualify will race their vehicles in rigorous cross-country stage races in 2009 and 2010 that combine speed, distance, urban driving and overall performance. The winners will be the vehicles that exceed 100 MPGe, meet strict emissions standards and finish in the fastest time.

Given the potential market for a car that could achieve that, $10 million seems rather petty. But if you’re a tinkerer or a little-known start-up, that $10 million provides a significant incentive to get a working invention out the door. 

The most famous innovation prize was the award offered by the British Parliament in 1714 for anyone who could come up with a method to calculate longitude. Dava Sobel’s overrated, but best-selling Longitude popularized the story of John Harrison’s invention of the marine chronometer. More recently the X Prize Foundation awarded the Ansari X Prize to Bert Rutan’s Scaled Composites, when SpaceShipOne took its three passengers 100km above the Earth twice in two weeks. The aviator Charles Lindbergh’s New York to Paris flight was spurred by the Orteig Prize back in 1927.

Al Gore and bearded billionaire Richard Branson have also caught the prize bug. They’ve put up a $25 million award for any method that will remove at least one billion tons of carbon per year from the atmosphere.  

In a less direct way, the Silicon Valley venture economy is about innovation prizes. The right invention or business idea wins millions in venture capital, and potentially billions in market capitalization. The advantage of pure prizes is they can concentrate activity of a solution to a specific problem. More important, they have the great advantage of transparency and fairness. There is a mythology in the Bay Area that great ideas will inevitably rise to the top, and that VCs will scour the Earth for winning idea. In practice, there are enormous hurdles to getting a hearing with most VCs, and plenty of institutional and political hurdles to actually inking a deal even if you managed to get in the door for a presentation. Prizes get rid of those barriers and create a far more democratic process. Let them multiply.

Wouldn't it be nice?

incredibles-logo

I have to confess that since The Incredibles, I haven’t been smitten by Pixar‘s films. As a near-neighbor of Pixar’s studios in Emeryville, and a great admirer of the company’s management style, I wish it weren’t so.  

But I like the quote from Disney CEO Robert Iger in today’s New York Times. Iger is responding to analysts who are grumbling that the expensive Pixar acquisition isn’t reaping the appropriate commercial rewards: 

We seek to make great films first. If a great film gives birth to a franchise, we are the first company to leverage such success. A check-the-boxes approach to creativity is more likely to result in blandness and failure.

Given how many check-the-boxes films seem to come out of Disney (see Disney Channel passim), I think Iger is showing his mastery of spin rather than his corporate philosophy. Still, it would make a good motto to live by.

Sun set

sunset

The weekend collapse of the takeover talks between IBM and Sun doesn’t mark the end of the story, although it certainly marks another step in Sun’s descent to the horizon. The Wall Street Journal reports that Sun’s board was split on the deal, with a faction led by CEO Jonathan Schwartz (immortalized as My Little Pony by Dan Lyons) in favor and a faction led by co-founder and chairman Scott McNealy against. It reeks of what is often called founder’s syndrome in Silicon Valley. 

Founder’s syndrome takes many forms, but it is characterized by an inability to let go of past glories, and a conviction that no one else could ever do as good a job as you. Sometimes that may be true (see: Steve Jobs). Often, however, there comes a time when founders need to move on because their baby outgrew them, or industry shifts demand different strategies and styles. 

Examine McNealy’s Sun career and it screams founder’s syndrome. McNealy was the lone non-technologist among the Sun founders. He grew up in Michigan, the son of an auto industry executive. (Deep thought: maybe Sun could solve its founder problems by loaning McNealy to GM.) His Michiganer upbringing shows in his passion for ice hockey, which is not a natural northern California sport. But despite his status as the non-geeky guy, McNealy became CEO in 1984 when the company was only two years old. He handed over the lead executive role to Ed Zander — another non-geek — in 1999, but returned on his white charger only three years later. He then handed over the reins to Schwartz — who marked the return of the geeks to the top — three years ago before pulling hard on the bridle this weekend.

I imagine Schwartz and others thought that McNealy, who reveled in the glory years of Sun, would fade comfortably into the background while the company struggled through a difficult transition. Couldn’t he spend more time on the golf course, improving his scratch handicap? No such luck for the executives, it seems.

What are the options now for Sun? It looked a nice acquisition for IBM, but hardly essential. Still, these sort of ructions in a takeover often merely delay a deal. I wouldn’t be surprised if IBM comes back with some cosmetic alterations to the conditions that apparently offended McNealy and other directors. Om Malik thinks Cisco would be a better match. Cisco certainly has an unrivaled reputation for efficiently absorbing acquisitions. Malik also suggests that Sun could take itself private. The company had revenues of nearly $14 billion last year and has a few billion dollars in cash. Its market cap inevitably plunged today on news of the deal collapsing, so it’s valued at less than half revenues. There was a day when that sort of situation cried out for going private; I suspect those days are gone.

The moving finger writes, and, having writ, moves on

So Silicon Graphics is sold for a song. Who knew it still existed?

There was a time when it was one of the stars of the technology world, making high-powered workstations that competed with DEC, Apollo and Sun. Compaq bought DEC, and then was bought by HP. HP also bought Apollo. Sun looks like being consumed by IBM. Proprietary, expensive workstations stopped being a big deal a long, long time ago, replaced by commodity Linux boxes.

One of the sadder demonstrations I recall seeing was at Silicon Graphics in the late ’90s. SGI was a member of the World Economic Forum and on one of my swings through the Valley I was given a demonstration of the power of their computers. At their campus — which is now Google’s home — they had a special room to show off their stuff. I remember an elaborate computer-generated simulation of racing cars and rollercoasters, which was designed to make viewers as queasy as being in the real thing. It did, and I’m sure it took a staggering amount of computer power in those days.

But it seemed largely irrelevant even then: of use for Hollywood special effects and a handful of other specialized applications. I thought it was a dead end, a party trick when so many of SGI’s neighbors were intent on taking over the world. So it proved.

Fiat lux

Fiat Cinquecento

It’s understandable that most American commentaries on the auto industry restructuring signalled by president Obama on Monday have concentrated on the likely fate of GM (see also Nate Silver’s analysis — he’s as good as he is at psephology), the firing of Rick Wagoner and the schadenfreude associated with Cerberus’ humilation. But as someone who has casually followed the auto industry for years, mostly with a European spin, what’s astonishing is the rise of Fiat.

Back in the late ’80s the magazine I ran did a cover story about the European car industry. Britain’s one remaining mass manufacturer, Rover Group, was already a basket case, but we tried to get a sense of what was happening elsewhere in Europe. What seemed clear is that there were too many companies chasing too few sales. Even assuming Rover would go to the wall, there had to be other casualties. The three big German manufacturers, VW, Daimler-Benz and BMW, looked likely survivors. The two French firms, PSA and Renault, were a bit wobbly. But the clear loser in Europe was Fiat. It was almost entirely dependent on its domestic market, which looked vulnerable to entry from stronger foreign marques. And it was ensnarled in a Byzantine corporate structure that had more to do with Italian politics and the whims of the Agnelli family than good business sense. Fiat wasn’t long for this world.

Our judgment in 1988 looked like it would be vindicated a number of times. Domestic market share sank from the 60s to the low 40s by the mid-1990s. Gianni Agnelli, l’Avvocato, who was Italy’s Rockefeller, JP Morgan and Carnegie wrapped in one for many decades, was being exposed as a figure ill-adapted to a globalized industry. The company sought salvation, as so many others have, with a new chairman reared by Jack Welch at GE. Paolo Fresco engaged in some valuable corporate clean-up, and CEO Paolo Cantarella was the necessary car guy rather than a political Machiavelli, but there didn’t seem to be any magic bullet for Fiat.

Enter Sergio Marchionne. He has engineered a recovery from near-death for Fiat. Consider how remarkable the turnaround has been. Only nine years ago, Fiat grabbed at an alliance with ailing GM, in the hope that the US group would eventually do the decent thing and absorb the failing Italian firm. GM’s problems worsened, but so did Fiat’s, to the point where GM was happy to pay a $2 billion penalty in 2005 to get out of its Italian entanglement.

Only four years later, a revitalized Fiat looks like the only hope for the hapless Chrysler. Marchionne may be one of those rare beasts who is extraordinarily gifted at management. Carlos Ghosn, who saved Nissan and shored up Renault, is another one. The car industry is fortunate to have two such prodigies. I’m skeptical whether Fritz Henderson, GM’s new CEO, is made of similarily Right Stuff, but we’ll see. For now, I’ll continue to be amazed at Fiat’s return from the dead. And I wouldn’t mind a Cinquecento to drive around Berkeley.