Sunday, July 22, 2007

Flatline - escaping the hideous smiley face of junk

I remember the hideous smiley faces of the 1970s. For years they haunted boomer dreams, but now we're trapped in the pit of the smile, deluged in cheap junk that's worth less than nothing ...
Gordon's Notes: Riding the dragon - Fallows on China

James Fallows .... The curve is named for the U-shaped arc of the 1970s-era smiley-face icon, and it runs from the beginning to the end of a product’s creation and sale. At the beginning is the company’s brand: HP, Siemens, Dell, Nokia, Apple. Next comes the idea for the product: an iPod, a new computer, a camera phone. After that is high-level industrial design—the conceiving of how the product will look and work. Then the detailed engineering design for how it will be made. Then the necessary components. Then the actual manufacture and assembly. Then the shipping and distribution. Then retail sales. And, finally, service contracts and sales of parts and accessories.

The significance is that China’s activity is in the middle stages—manufacturing, plus some component supply and engineering design—but America’s is at the two ends, and those are where the money is. The smiley curve, which shows the profitability or value added at each stage, starts high for branding and product concept, swoops down for manufacturing, and rises again in the retail and servicing stages. The simple way to put this—that the real money is in brand name, plus retail—may sound obvious, but its implications are illuminating....

So how can one escape the smile and restore "balance to the force"? One approach is fundamentally Darwinian. Strong brands invest in defect analysis and early detection, eliminating suppliers who deliver flawed product. Consumers forget about commodity products and invest in brands. Consumers miraculously develop a memory for what brands fail...

Oops. The memory part is the problem. Do you remember what companies had melamine in their dog food? Do you think you'll remember a year from now? Diethylene glycol in the dime store toothpaste? The DVD player that broke after one month? The wireless home phone that always crackled? The noisy fan, the sloppy wrench, the flimsy toaster ....

What other strategies are there? How else can the curve be balanced between design, brand, manufacturing and retail? How can costs be shifted from retail and brand to invest in better manufacturing and design -- anywhere?

I think we need to look for new options. What if an insurance company were to provide insurance policies guaranteeing devices performed to spec on delivery and for two years post sale? The policy would include a large rider to cover recalls, including a prize to anyone who found a recall qualifying defect. Anything that qualified for coverage would be able to display an appropriate and meaningful "seal of approval". Consumers could choose to get the insurance or not, some might decide the "insurable" measure was enough by itself. Vendors would, of course, have to pay for the "seal".

Perhaps this would produce a kind of "meta-brand", allowing manufacturers to outsource branding and shift investments to design and manufacturing - flattening the hideous smiley.

Saturday, July 21, 2007

Dyer: Five new essays

Dyer has five new ones:
2007

July 1 Perspectives on Terrorism
July 3 The United States of Africa
July 6 The End of Cheap Food
July 10 The New York Times vs. Reality
July 14 North Korea: Five Wasted Years
I'm puzzled Dyer doesn't have a larger blog profile. It's true that his web technology is medieval, but I suspect it's simply a lack of big name attention. Now if Brad were to start reading Dyer ...

The best time to buy a plane ticket

Buy your plane tickets on a Wednesday ...
The Big Picture | The Cheapest Days to Buy Certain Items

Great article in Smart Money that fits in well with recent Retail Day: how and why certain pricing strategies occur...

Airplane Tickets
When to Buy: Wednesday morning.
Why: 'Most airfare sales are thrown out there on the weekend,' says travel expert Peter Greenberg, a.k.a. The Travel Detective1. Other airlines then jump into the game, discounting their own fares and prompting further changes by the first airline. The fares reach their lowest prices late Tuesday or early Wednesday....
Of course if everyone were to follow this advice the advice would become worthless ...

No End in Sight: Fallows rave review

I almost never watch television. This has its benefits, but I miss a great deal. I know America's disastrous war only through print. I would like to see this documentary:
James Fallows

...Next week Charles Ferguson's documentary No End in Sight opens in DC and New York, followed in August by "select other cities." It is worth making time to see this film...

... It covers almost exactly the same terrain, including many of the same sources and anecdotes, as did my book Blind Into Baghdad. But rarely have I seen a clearer demonstration of how much more powerful the combination of pictures, sound, music, real-people-talking, etc can be than words on a page... there are times when the experience of seeing, for instance, chaos on the streets of Baghdad transcends any mere verbal description of it....
(I wanted to embed a clip of the movie, but they'd set it up to start playing on page load. That's obnoxious so you'll have to visit the site if you want to see it ....)

Riding the dragon - Fallows on China

James Fallows, one of my favorite writers, returned to China a year or two ago to feel the beating heart of the new world. He's digested a portion of his experiences in an essay for The Atlantic. After reading the essay, I think I understand why there's been so little response from the economists I respect to recent problems with just about everything we buy, eat and use (emphases mine):
China Makes, The World Takes, James Fallows, The Atlantic July/Aug 2007

... One facility in Guangdong province, the famous Foxconn works, sits in the middle of a conurbation just outside Shenzhen, where it occupies roughly as much space as a major airport. Some 240,000 people (the number I heard most often; estimates range between 200,000 and 300,000) work on its assembly lines, sleep in its dormitories, and eat in its company cafeterias... From the major ports serving the area, Hong Kong and Shenzhen harbors, cargo ships left last year carrying the equivalent of more than 40 million of the standard 20-foot-long metal containers that end up on trucks or railroad cars. That’s one per second, round the clock and year-round—and it’s less than half of China’s export total...

...But what is of intense interest to him, he said, is a company that has built up a brand name and relationships with retailers, and knows what it wants to promote and sell next—and needs to save time and money in manufacturing a product that requires a fair amount of assembly. “That is where we can help, because you will come here and see factories that are better than the ones you’ve been working with in America or Germany.”

Here are a few examples, all based on real-world cases: You have announced a major new product, which has gotten great buzz in the press. But close to release time, you discover a design problem that must be fixed—and no U.S. factory can adjust its production process in time.

The Chinese factories can respond more quickly, and not simply because of 12-hour workdays. “Anyplace else, you’d have to import different raw materials and components,” Casey told me. “Here, you’ve got nine different suppliers within a mile, and they can bring a sample over that afternoon. People think China is cheap, but really, it’s fast.” Moreover, the Chinese factories use more human labor, and fewer expensive robots or assembly machines, than their counterparts in rich countries. “People are the most adaptable machines,” an American industrial designer who works in China told me. “Machines need to be reprogrammed. You can have people doing something entirely different next week.”....

... You are an American inventor with a product you think has “green” potential for household energy savings. But you need to get it to market fast, because you think big companies may be trying the same thing, and you need to meet a target retail price of $100. “No place but China to do this,” Mr. China said, as he showed me the finished product...

... Casey’s PCH has a Google Earth–like system that incorporates what he has learned in 10 years of dealing with Chinese subcontractors. You name a product you want to make—say, a new case or headset for a mobile phone. Casey clicks on the map and shows the companies that can produce the necessary components—and exactly how far they are from each other in travel time. This is hard-won knowledge in an area where city maps are out of date as soon as they are published and addresses are approximate. (Casey’s are keyed in with GPS coordinates, discreetly read from his GPS-equipped mobile phone when he visits each factory.) If a factory looks promising, you click again and get interior and exterior photos, a rundown on the management, in some cases videos of the assembly line in action, plus spec sheets and engineering drawings for orders they have already filled. Similar programs allow Casey and his clients to see which ship, plane, or truck their products are on anywhere in the world, and the amount of stock on hand in any warehouse or depot. (How do they know? Each finished piece and almost every component has an individual bar code that is scanned practically every time it is touched.)...

... Even some newly built facilities leave to human hands work that has been done in the West for many decades by machines. Imagine opening a consumer product—a mobile phone, an electric toothbrush, a wireless router—and finding a part that was snapped on or glued into place. It was probably put there by a young Chinese woman who did the same thing many times per minute throughout her 12-hour workday....

... It is conceivable that bad partnerships, stolen intellectual property, dilution of brand name, logistics nightmares, or other difficulties have given many companies a sour view of outsourcing; I have heard examples in each category from foreign executives. But the more interesting theme I have heard from them, which explains why they are willing to surmount the inconveniences, involves something called the “smiley curve.”

The curve is named for the U-shaped arc of the 1970s-era smiley-face icon, and it runs from the beginning to the end of a product’s creation and sale. At the beginning is the company’s brand: HP, Siemens, Dell, Nokia, Apple. Next comes the idea for the product: an iPod, a new computer, a camera phone. After that is high-level industrial design—the conceiving of how the product will look and work. Then the detailed engineering design for how it will be made. Then the necessary components. Then the actual manufacture and assembly. Then the shipping and distribution. Then retail sales. And, finally, service contracts and sales of parts and accessories.

The significance is that China’s activity is in the middle stages—manufacturing, plus some component supply and engineering design—but America’s is at the two ends, and those are where the money is. The smiley curve, which shows the profitability or value added at each stage, starts high for branding and product concept, swoops down for manufacturing, and rises again in the retail and servicing stages. The simple way to put this—that the real money is in brand name, plus retail—may sound obvious, but its implications are illuminating.

At each factory I visited, I asked managers to estimate how much of a product’s sales price ended up in whose hands. The strength of the brand name was the most important variable. If a product is unusual enough and its brand name attractive enough, it could command so high a price that the retailer might keep half the revenue. (Think: an Armani suit, a Starbucks latte.) Most electronics products are now subject to much fiercer price competition, since it is so easy for shoppers to find bargains on the Internet. Therefore the generic Windows-style laptops I saw in one modern factory might go for around $1,000 in the United States, with the retailer keeping less than $50.

Where does the rest of the money go? The manager of that factory guessed that Intel and Microsoft together would collect about $300, and that the makers of the display screen, the disk-storage devices, and other electronic components might get $150 or so apiece. The keyboard makers would get $15 or $20; FedEx or UPS would get slightly less. When all other costs were accounted for, perhaps $30 to $40—3 to 4 percent of the total—would stay in China with the factory owners and the young women on the assembly lines....

So today, my mother can't buy a phone that works. I can, but I use research tools unimaginable ten years ago to find the one model available for sale at the moment that will work reliably for at least two years (A Panasonic phone was my last answer). On the other hand, I've given up on finding a DVD/VCR that's reliable, or a toaster that I can trust. In those cases, I just do without.

It doesn't matter, and neither do the calls I and others make for more oversight, more financial consequences. After reading Fallows one fact cannot be ignored -- we are riding the dragon, and nobody in particular is steering anything. We're not getting off until the beast is full.

Friday, July 20, 2007

Those evil Russians - good thing we outed 'em

 Of course you know how this goes ...

Glenn Greenwald - Salon

In February, 2001, the Bush State Department issued a highly critical report documenting Russia's human rights abuses, both domestically and with regard to its treatment of foreign detainees. I found the document randomly today while searching for something else. Among the Russian moral outrages we protested...

Yeah. We do all of 'em now. Routinely.

One bright side of the GOP regime is that our righteous diatribes now cause hilarious laughter instead of irritation or embarrassment. Well, it's a bright side for people like Putin.

John Edwards: Another man the media dislikes

It's increasingly clear that the US media dislikes John Edwards almost as much as they disliked Al Gore. Digby draws some conclusions (via DeLong):

Digby on the media and John Edwards

...Ambinder says right out that "fairly or unfairly" the press can't stand John Edwards and so they are going to bury him. This is, of course, not unprecedented, since we saw what they did to Al Gore for the same reason. The matter-of-factness of his statement still made my head spin a little, but I appreciate the candor. At least we now know what we are dealing with. (And there is no question about whether it's fair. It most certainly isn't.)

Now, I am not especially surprised that the press corps doesn't like John Edwards. Many of these people probably didn't like guys like him in high school either and one thing we know about the political press corps is that they have never matured beyond the 11th grade. (See: chilean bass stupidity.) But I have to ask, once again, just who in the hell these people think they are and why they think they are allowed to pick our candidates for us based upon their own "feelings" about them? I don't recall electing them to anything. (But, hey, maybe we should just poll the kewl kidz and find out which candidate they "like, totally, like" and we can cancel the election and save a lot of time and money.)

This is exactly this kind of thing that makes people like me laugh when I get lectured by professional journalists about "objectivity" and "ethics." At least I put my political biases up front. These phonies hide behind a veil of journalistic conventions so they can exercise their psychologically stunted desire to stick it to the BMOC, or the dork or whoever these catty little gossips want to skewer for their own pleasure that day. Please, please, no more hand-wringing sanctimony from reporters about the undisciplined, unethical blogosphere. Their glass houses are lying in shards all around their feet.

Each time they've pulled this puerile nonsense in the last few years, it's resulted in a mess that's going to take even more years to unravel. And they learned nothing, apparently, since they are doing exactly the same thing in this election. If the press really wants to know why they are held in lower esteem than hitmen and health insurance claims adjusters, this is it.

Krugman had a similar rant a while back. I don't think the '11th grade' is the full story; we need an insider to figure this one out. I do agree that the US media have about as much right as the GOP to be sanctimonious. Their star hangs low.

Privacy and Reputation Management: An update

I was reflecting today on what I've learned over the past year about the state of the art in data mining, data rights, trading in data rights. What I see now, and what I think is coming, suggests this is a good time to summarize the themes of privacy and reputation management (including identity management) together, with a bow, as always, to David Brin.

It's not hard to drive to the bottom line. You should live your life as if you have no secrets. Assume that anything you write, say, do will one day be visible. Assume that every aspect of your medical history, your employment history and the time you yelled at the kids is public.

No, we're not quite there yet. You can still assume multiple digital identities, manage them carefully, and be one small step away from Google. If you don't have a credit card or a phone or a license you can still be surprisingly hard to find, and you can probably live. The trend is clear though, barring a dramatic awakening of our stunned citizenry we will be there within 5-10 years. When we get there there will be a large retrospective effect, so that transparency will propagate backwards in time. What you can conceal now will become public then.

That's why, today, you must assume you live in the proverbial fishbowl. Live accordingly.

Ah, you don't want to live that way? Well, you might try taking a cattle prod to your fellow voters. Personally I don't hold out much hope however, I think we might as well get used to the idea that this battle was lost ten years ago, and focus instead on making identity theft a serious crime with penalties for the corporations that own and manage our identities.

Blogs, identity management and brands - an illuminating story

I'm a 'connections' kind of person. Everything is more or less enmeshed and connected to everything else, everything is recursive and emergent. It's not necessarily a strength -- complexity can be paralyzing. Reality is overrated. This connection, though, is hard to avoid. It's a connection between brands, blogs, why blog, and identity management, and the odd emergent consequences of Google.

The story is quickly told. I ran into some operational issues with a software vendor suffering from a successful product release and I wrote about in my ultra-low subscription mildly pseudonymous tech blog. The blog has low subscription numbers, but Google seems to like it; it appears in searches and gets read. I've had some interesting experiences with posting about corporate issues -- not infrequently I get a comment back from the CEO.

As usual, a company that searches the web for bad reviews (an industry spawned by Google and brand management, in this case the search might have been internal) found the review and sent it on to the vendor's sales organization. The twist this time was that I'd also complained directly to the vendor, under my true name (John Gordon F.). The details and timings of the problems were sufficiently similar, and my pseudonym shield sufficiently mild, that I received a direct phone call from the head of sales. She admitted their sales process was bunged up, and I said if she submitted a comment to that effect and said they were addressing the problem that I'd willingly add an addendum to my post. (She didn't actually post a comment, so I've left the post unchanged.)

I wasn't bothered by the exposure (see a later post), but I was amused. It's a story that illuminates the modern connections between blogs, brand management (reputation management for a vendor), identity (reputation management for a person) and emergence. All favorite themes of mine.

Incidentally, I ought to update my why blog post -- the tech blog is an amazing way to get very direct feedback to vendors.

Thursday, July 19, 2007

Andreesen recommends a manual for startups

Depending on how hard I look at my day job, I vacillate between mild to strong commitment to doing my own thing. In the meantime, I collect recommendations like Andreesen's:
blog.pmarca.com: Book of the week: Best book for tech entrepreneurs this year

Steve Blank is a super-experienced Silicon Valley technology entrepreneur who is best known for starting E.piphany, a successful software company, and also founded or worked at a broad range of meaningful tech companies over the last 30 years including Zilog, Convergent, MIPS, Ardent (one of the most innovative mini-supercomputer companies of the late 80's), and Rocket Science Games....

... he's just written and published a book, The Four Steps to the Epiphany, that is a very practical how-to manual for startups.

In a nutshell, Steve proposes that companies need a Customer Development process that complements their Product Development Process. And he lays out exactly what he thinks that Customer Development process should be. This goes directly to the theory of Product/Market Fit that I have discussed on this blog before -- in this book, Steve provides a roadmap for how to get to Product/Market Fit.

Schneier review: excellent essays on secrecy, security and the modern terrorist

I fell behind on reading Schneier on Security. Mistake. I see a dozen posts I'd like to expand, integrated, comment on, cheer about, etc. Instead, here's the rundown:

  • Why our governments passion for secrecy is bad for our security: It's open vs. closed source. Secret stuff isn't critiqued, so stupid assumptions aren't questions. The WaPo article had this money quote: "... some members of Congress tell me that they avoid reading classified reports for fear that if they do, the edicts of secrecy will bar them from discussing vital public issues."
  • The recent flock of terrorists have been idiots. I've written about this too, though much less well. The shoe bomber (Richard Reid) was obviously cognitively impaired and probably schizophrenic -- he's been the template for the post 9/11 crop. Not all terrorists are idiots however -- Hamas has competent terrorists. Menachem Begin was a very smart (Irgun) terrorist. Whether by intent (how smart is Zawahiri anyway?) or by accident, the flood of incompetent terrorists, and our idiotic panicked responses to them, will make it easier for competent terrorists to do their work. See also: terrorism and the shoulders of giants and how talented is this group?
  • Why terrorism doesn't work. It works to create terror and disruption, but not to achieve the stated aims of the terrorists. Schneier: "The author believes that correspondent inference theory explains this. Basically, the theory says that people infer the motives of an actor based on the consequences of the action. So people assume that the motives of a terrorist are wanton death and destruction, and not the stated aims of the terrorist group..." Schneier expands on this theme in a longer related essay which reassuringly suggests Bin Laden and Zawahiri are really stupid:
  • This theory explains, with a clarity I have never seen before, why so many people make the bizarre claim that al Qaeda terrorism -- or Islamic terrorism in general -- is "different": that while other terrorist groups might have policy objectives, al Qaeda's primary motivation is to kill us all. This is something we have heard from President Bush again and again -- Abrahms has a page of examples in the paper -- and is a rhetorical staple in the debate. (You can see a lot of it in the comments to this previous essay.)

    In fact, Bin Laden's policy objectives have been surprisingly consistent. Abrahms lists four; here are six from former CIA analyst Michael Scheuer's book Imperial Hubris:

    1. End U.S. support of Israel
    2. Force American troops out of the Middle East, particularly Saudi Arabia
    3. End the U.S. occupation of Afghanistan and (subsequently) Iraq
    4. End U.S. support of other countries' anti-Muslim policies
    5. End U.S. pressure on Arab oil companies to keep prices low
    6. End U.S. support for "illegitimate" (i.e. moderate) Arab governments, like Pakistan

    Although Bin Laden has complained that Americans have completely misunderstood the reason behind the 9/11 attacks, correspondent inference theory postulates that he's not going to convince people. Terrorism, and 9/11 in particular, has such a high correspondence that people use the effects of the attacks to infer the terrorists' motives. In other words, since Bin Laden caused the death of a couple of thousand people in the 9/11 attacks, people assume that must have been his actual goal, and he's just giving lip service to what he claims are his goals. Even Bin Laden's actual objectives are ignored as people focus on the deaths, the destruction and the economic impact.

    Perversely, Bush’s misinterpretation of terrorists' motives actually helps prevent them from achieving their goals.

  • Commentary on the UK "plots": He's picked a great set of commentaries to review. (See also idiots, above.)
  • Improvising weapons: The comments are scary. (See also my post on talent, terrorism and the shoulders of giants.)
  • Greek wiretapping scandal. Was the engineer murdered, or did he jump? I'd not heard of this 2005 story. It happens here, of course.
  • Cameras used for congestion monitoring are now for security monitoring. Of course. Surely no-one is naive enough now not to expect this. If the data is cost-effectively available it will be used. No matter what the law once said. Laws are easy to change.

Wednesday, July 18, 2007

Impeach Cheney

Impeach Cheney. Because if you impeach Bush, then Cheney becomes president.

Doctoring under the influence: EMRs, mobile phones, and cognitive load

My wife, a physician, commented today how annoying it was to have her personal physician staring at a laptop during the entire patient visit. It made me think of the vast literature on mobile phone use and driving. The negative multitasking impact probably varies by age and ability, but it's generally compared to a few glasses of wine.

Is there any reason to expect that interacting with a computer is less demanding than talking on a cell phone? Does anyone have any doubt that the cognitive load of dealing with a software package (electronic health record, EMR, EHR, etc) impairs the ability to think about patient care?

There's been surprisingly little research done on this, though I do recall a quite good opinion piece on the topic a few years ago. Fertile ground for future scholars, no doubt.

Problems in Google-land: Gmail, Blogger and do you really trust Web 2.0?

Last week a bad update broke Google's BlogThis! tool. It took them a week to fix it, and there was never any official notification of the problem, though Google's support people did post in response to numerous help group complaints.

This week Gmail's spam filter is malfunctioning. The "whitelist" functionality is broken and it's miscategorizing email. I tried to post about this on the Gmail Group but the "problem" group is down (really, I'm not joking, they're out of order). Users who get large volumes of spam will inevitably lose email in the mess.

Google has not provided any notification on any blog, or on their help page, of the Gmail malfunction. (They did provide notification us that the Gmail Help Group is down, but that's rather obvious.)

It's the failure to notify, more than the bugs, that really concerns me. Google is not treating their customers respectfully.

The foundation of "Web 2.0" apps (what we once called "application service provider") is trust in the service provider. The "web 2.0" model doesn't need to be perfect -- all software has bugs and local hard drives fail, so traditional "owned" software models have their own problems. The "web 2.0" model does, however, require trust, and trust requires respect.

If Google can't respect their customers, who can? What does this say about all the other web 2.0 services that we increasingly rely upon?

2011: The year American life changes

When will energy costs in general, and gasoline costs in particular, fundamentally change the way middle-class Americans live and work? We know gasoline prices will rise until something changes, even if the US never implements a carbon tax.

Of course change like this is not generally abrupt, it's a process and it's probably underway now. So, really, what I'm asking is when will the change be obvious and undeniable?

I think a reasonable marker is the year that the baseline gasoline price hits $5 a gallon. I used to think it was $7 a gallon, but that was before I paid attention to what my commute was costing me. If the average American burns 3 gallons of gas during each daily roundtrip commute, and gas costs $5 a gallon, then each daily commute costs $15 in gasoline alone, or about $3,000 over 200 commuting days. For a family with two commuters that's $6,000 a year.

That's a meaningful percentage, perhaps 10-13% of the average American family's after-tax income. It doesn't include the effects of cost increases for heating and cooling, lights and computers, and all the rest of our lives.

That's a number that a middle-class American will start to notice, and it can't come out of savings. Middle-class American's don't save -- their assets are in their homes. Americans will have to change their behavior. It means smaller cars, hybrids, bicycles for some, closer employers, working at home, etc. Employers will have to change their behavior, setting up peripheral offices at transit hubs, investing in remote work support and collaboration solutions ...

The 'working at home' bit is particularly interesting. I've been in distributed work groups on and off for years, and they're terribly ineffective for complex or innovative product work. We get far more done with less money when everyone sits in walking distance; but it's getting harder, not easier, to get people to relocate and stay relocated. Of course part of the problem is that employers have not seriously thought about how to make remote work groups effective (hint: technology is an enabler, it's not a solution). Commuting costs of $15 a day and more mean that employers will have to get very good, fairly quickly, at supporting remote work groups.

So when does it happen? I'll pull a number out of the air, extrapolating from my amateur chart and the Copernican Principle, and guess, even without a carbon tax or the complete collapse of Iraq, that it's 2011.