Revolution In The Valley
December 30, 2004 | Business & Commerce | Products & Opportunites | Science
I had intended to read The Wisdom of Crowds, but I woke up with a severely frozen neck and upper shoulders, which was pretty bad for concentration. I cannot look up, and my left to right mobility is about 10 degrees, max. It's hard to tell how this happened, since I have exerted approximately zero physical effort all week, but perhaps I slept in an odd position all night or something. I could certainly use more exercise, and I'm doing my best to interpret this as just another helpful signal along those lines.
Anyway, today instead of reading anything that required brainpower, I read Andy Hertzfeld's book, "Revolution In The Valley: The Insanely Great Story of How The Mac Was Made."
It's something of a coffee-table book, with a square format, lots of photos, and a strong visual design. Based on a series of essays written at his Folklore.org website, the book tries to present a balanced internal view of the wild, intense, and stressful birth of a groundbreaking new product. It would appear to describe, with as much accuracy as any one person could, the events of 20 years ago that led to the revolutionary Macintosh personal computer. The essays were vetted at folklore.org, so any obvious errors or misperceptions were caught early on.
Following on Hackers & Painters, it describes some similar development ideas, made considerably harder since Apple had to tool hardware, print manuals, and hold elaborate press events that were scheduled months before the code was shippable. As Graham points out in H&P, web-based apps are the biggest opportunity since the birth of the personal computer, and you can launch one for less than $1,000 – far less than 20 engineers working for four years on a huge new computer bet.
At the time, the bet was that people would respond to 1) a mass-market personal creatvity computer, and 2) a graphics-driven display. At the time, DOS and CP/M were the "mass-market" operating systems, and they were character-based. Some readers may have never used such a thing, but you can think of it as a brain-dead Unix command line interface. Unix happens to be elegant, powerful, and joyful to use, none of which can be said about DOS or CP/M.
One of the big product development lessons was the iterative nature of the project. This is not news to modern developers, but big companies remain committed to extensive planning and Gantt charting and schedules and deadlines and all that goes with it – primarily high-ceremony over high-productivity. Hearing about the simultaneous bootstrapping of hardware (disk controllers, graphics cards, boot ROMs, serial buses, the mouse) and system software (QuickDraw, desk accessories, clicking, dragging, folders, windows, icons, the desktop) and applications (MacPaint, MacWrite) is simply amazing.
It reminded me of the recent U2 release, How To Dismantle An Atomic Bomb (iTunes download). There is a bonus package that has an included DVD with a 25 minute interview segment and some studio footage. At one point Adam Clayton, the bass player, recounts the development of a particular song. Paraphrase: "Larry [drums] doesn't want to commit his part until the vocals are done; I can't really fit in and support the rhythm until the drums are somehow happening; Bono doesn't want to finish the lyrics until the last minute and he hears what The Edge [guitar] is going to do; and Edge will continue to evolve the song until everyone else hs their part down. It's kind of an all or nothing affair." (I'm sure that's a very rough quote from memory, but the gist is there.)
For the Mac project, every element was new in a commercial product. There had never been a 3.5" floppy drive, there had never been a mouse pointing device, there had never been a bit-mapped display. The level of invention and innovation required to produce the first Macintosh was beyond most anything I can think of today. I especially liked the series of Polaroid photos that showed Bill Atkinson's evolution of the user interface. Proportional fonts – a big deal! Fast bit-blits to move images around on screen – amazing! Primitive halftone images – first time ever seen on a personal computer! Overlapping windows. Title bar on the botton of the screen and not the top. Title bar for every app (as Windows still remains) instead of for the whole screen. How to cue the user to move the window on the screen – Tabs? Borders? Title bar? It just goes on and on. Sure, Xerox PARC figured out a lot of this stuff, but they never shipped anything! It was all research, and no design. The Mac project was all design, and research meant building something to see how it worked, and then building it again when someone had a good-enough idea about how it might work better.
What today we take for granted was 20 years ago a struggle just to figure out what the use-cases were, much less determine the correct approach to handling them! When Steve Capps developed MacPaint, he happened to put a row of tool icons on the left side of the screen. The lasso, the box, the circle, the paint bucket, etc. Today, you can buy a copy of Adobe Photoshop that costs about 50% of the original price of the Mac 128K, and the tools are still right there on the left.
Ultimately the idea of the Mac has won, hands down. Although they command only 4% of the total market, but perhaps 65% of the creative services market, every single personal computer using the fundamental concepts that lie behind the Mac.
Interestingly, I didn't realize that when Apple sued Microsoft for "stealing" the Mac interface they did not lose the suit based on the theft. They lost because in 1985 John Scully, in order to get Microsoft to renew their Applesoft BASIC application, gave Microsoft a perpetual license to the Mac interface. The suit was about the interpretation of that agreement, not that all the ideas all came from Apple. Ladies and gentlemen, hire good lawyers if you're going to play this game! This was easily the second-most serious business blunder in the information age, second only to IBM buying a non-exclusive license from Microsoft for DOS, creating the competitive market that IBM ultimately lost to the likes of Dell and Compaq. Had Scully hung tough, foregoing Applesoft BASIC (obsolete in just over a year anyway) the Mac interface might have been the dominant computer in the world.
Over the weekend my brother showed me The Cult of the Mac, which I found to be weird and boring. People with Apple tatoos? People who have no life outside of Macintosh obsession? If you're going to be that obsessed about something, make it something you're creating, not consuming. Between Hackers & Painters, and Revolution In The Valley, you should have a good idea of what you're aiming for if you decide to build something that other people will use. And who knows, it might even change the world.
Hackers & Painters
December 30, 2004 | Business & Commerce | People & Society | Science
I read Paul Graham's book "Hackers & Painters" the other day. If you're reading weblogs, you're probably interested in technology, society, or both. If so, you'll enjoy this book. Subtitled "Big Ideas from the Computer Age," the writing is lucid and insightful, and I was filled with ideas while reading. Aaron Swartz thinks it should be called "How to Think Like a Computer Millionaire."
Most of the essay's (along with others unpublished) are available online, though revised and edited for publication, so you can get a taste of the work. You could even avoid buying it altogether, but I like the book format because, well, it's a book. It has nice typography, you can read it on the couch, etc.
If you're a business-person, the important thing to know about Paul Graham is not that he has Ph.D. in Computer Science from Harvard, or that after grad school he studied painting at RISD and at the Accademia in Florence. No, the important thing to know is that he and Robert Morris started Viaweb in 1995, and wrote what was probably the first web-based application – to build online stores – and three years later sold it to Yahoo! (June 1998) where it became the Yahoo! Store. The Yahoo! Store is the largest online store builder, with over 20,000 users. The code was written by three people, and the company had about ten employees when it was bought ($49MM). That's a nice effort/reward ratio. Yes, it was Internet Bubble pricing, but it delivered a lot of value to Yahoo!, and doesn't seem unreasonable compared to other Bubble-era acquisitions. Yahoo! has 20,000 people paying between $30 and $300 per month for the service – how much would you pay for the technology behind it?
The book starts by getting inside the mind of nerds – you know, those unpopular kids in high school who got beat up and had their lunch money stolen. Kids like Bill Gates, Steve Jobs, Paul Graham, Larry Ellison, etc. Probably a helpful chapter for parents and teenagers alike. He then offers a defense of free speech, explaining why programmers think the issue is so important, and why societies live and die on their acceptance of heretical ideas. He discusses the opportunities of web-based software applications, and even though I've been offering such services for over five years, I still learned a few things (which things exactly are trade secrets). Well, okay, here's one:
At Viaweb, one of our rules was, run upstairs. [...] What this meant in practice was that we deliberately sought hard problems. If there were two features we could add to our software, both equally valuable in proportion to their difficulty, we'd always take the harder one. Not just because it was more valuable, but because it was harder. We delighted in forcing bigger, slower competitors to follow us over difficult ground.
The last part of the book is about programming languages, especially Lisp, and you might be tempted to skip over it, but if you're at all technical – or work with or supervise someone who is technical – then it's recommended reading. He's trying to describe why the choice of language matters, and how it impacts your ability to succeed in business. Not everyone will agree with his reasoning, but it is hard to dismiss it, if for no other reason than his personal success with this approach.
In the middle is an excellent chapter on "How to Create Wealth," and since this one's not online it's reason enough to buy the book. If you're wondering how exactly the computer enables wealth-creation, this is the place to start. Reading it got me interested in starting another startup – even though I swore it off three years ago, after having started two companies myself and been an early hire at two others, and seen the inside of a venture capital-funded businesses twice. Like making sausage, it's not the for faint of heart.
Finally, the last chapter on Design and Research provides a quick overview of how design matters to people, and the factors that matter to design. Along with Taste for Makers, which argues for an objective standard of tasteful design, you can get a sense of his aesthetics and how to apply it to "virtual" products like software code, and software interfaces.
Lynne started reading this yesterday, and seems pretty engaged in it too.
Next up on my reading list is James Surowiecki's The Wisdom of Crowds, which is all the rage right now. It should be an interesting comparison, since Hackers & Painters is about small teams producing something excellent that affects large groups, and Wisdom of Crowds argues that: "Large groups of people are smarter than an elite few, no matter how brilliant – better at solving problems, fostering innovation, coming to wise decisions, even predicting the future." The Battle of Big Ideas awaits!
Moveable Type 3.1.4 -- How?
December 28, 2004 | Business & Commerce | Products & Opportunites
Would it be too much trouble for Six Apart to include a "readme" file describing how to upgrade their software? Apparently so. Here's what I see when I download the new release:
What am I supposed to do with this? Ironically, I open up the "docs" folder, and there isn't even an "index" page? Where do I start with that guys?
I realize that MT is a power-user product, and indeed yesterday I spent a few hours hacking Unix so I can handle it, but really – do I have to wade through the full manual to perform what is supposed to be a simple upgrade? The manual, by the way, has outdated version numbers in it, making me wonder if the instructions are accurate for this release. And anyway, do I really need all the files? Can't you just give me the changed files and I can install those?
If it's such an important upgrade, and you encourage all users to upgrade, how about making it easy for us? Even complex free-software projects maintained by volunteers have readme files. This is an old idea, but still, after three years, not standard practice for non-free commercial software from Six Apart.
Connectivity Restored
December 28, 2004 | Life
Friday afternoon our cable modem died. After talking with tech support, I had the choice of immediately driving into town (half-hour each way) to exchange it before the office closed (early) for the holiday, or waiting until Monday to make the swap. Friday was a busy day, and I couldn't deal with a "drop everything" situation, so I punted and turned off the router. For what it's worth, I never once thought of reverting to a dial-up modem.
It was interesting having a forced disconnection. On one hand, there was a holiday, lots of family time, etc., so in theory I was busy and wouldn't be on the net much. On the other hand, connectivity is a big part of my routine, and having some routine stability during holidays is nice. I dislike the continual disruption in every aspect of my life during the holidays – different foods, at different times, with different people, typically with more alcohol, more sugar, more carbs, less nutrition, less sleep, more commitments, more traffic, more observed frenzy. Yes, most of these are under my control, but not all – especially within the realm of family expectations – and somehow "the holiday spirit" carries us in less predictable ways. On the plus side, Lynne had the idea of bringing asparagus to the family dinner, which turned out to be great. It was the only green food on the table.
Coming home to the familiar world of the web, blogs, Mac OS X, email, my to-do list, and Doonesbury is comforting, I suppose. That probably sounds pathetic, but I'm one of the more stable people I know around the holidays, and this is a "whatever works" moment. It would probably also work to eat a more regular food mix, at a regular time, with two or three people instead of 15, with less or no alcohol, and minimal sugar, more nutrition, more sleep, fewer commitments, and zero retail excursions. Good luck.
Reading all this makes me sound fragile and unable to cope with change, but in fact I'm a well-adjusted, high-functioning change agent whenever possible. I guess the holidays simply appear crazy, and I protect myself as best I can. In summary, perhaps the net makes me feel connected to a larger community, and when the physical/analog/local community is enthralled with frenzied consumerism, and self-destructive gluttony, the larger community is a useful construct for averaging the emotions. This was obvious only in its absence.
Oddly, the inverse of this is also appears true: Sometimes the larger digital community is overwhelming and disconnected and abstract, and the antidote is to turn it off and take a walk or have coffee with a friend or read a book.
Originally this post was to be a simple "I'm back" message. Who knew I had something to say about how the net intersects with our routines and larger sense of community?
Wealth Inversion
December 12, 2004 | Business & Commerce | People & Society
What I love about this inversion, is that it changes the notion of wealth from "what I have" to "what we all have." And also from "what I accumulate" to "what I save."
In this whole world, there is nobody more generous than the miser — the man who could deplete the world's resources but chooses not to. The only difference between miserliness and philanthropy is that the philanthropist serves a favored few while the miser spreads his largess far and wide.
If you build a house and refuse to buy a house, the rest of the world is one house richer. If you earn a dollar and refuse to spend a dollar, the rest of the world is one dollar richer—because you produced a dollar's worth of goods and didn't consume them.
Even some hard-core economists seem to think this is a good idea.
Digital Innovation Continues Apace
December 11, 2004 | Business & Commerce | Products & Opportunites
Totally hot new service offering: Amabuddy. ("Don't buy not knowing.")
You are in a bookshop or a record shop. You found something that interests you.You can't decide whether to buy it now or later online. What you need is a price check and a quick review, perhaps some ideas of something similar that others might recommend. Amabuddy can help!
What is Amabuddy? You dial a number that allows you to then enter a book's ISBN number or a CD's UPC number. Amabuddy then runs to the Amazon site and gets the various prices (including those from small independent sellers) and average customer review. It then speaks it into your ear. Better still it recommends what else might interest you so you can browse other items whilst in the store. Also you can bookmark books so that you can come back and make sure you want them.
There is a weblog that supports the service. Amazingly, they say they have a prototype SMS service working that will return text to your SMS-enabled cellphone. (But this costs real money, and they'd need a sponsor.)
Built with VXML, Python, MySQL, Apache and Amazon API.
Think about it. Two guys built this fantastic service in a few days. It has the potential to completely change the retail shopping experience. For example, they say:
What else? If we can convince someone like Amazon or someone else who has a large database of clips of music, you could listen to clips from music albums whilst your in a record store that doesn't have listening facilities. With 3G you could do the same with Video/DVD as well.
Whatever will they think of next?!
Surviving vs. Thriving (Retail Edition)
December 4, 2004 | Business & Commerce | People & Society
We're renovating a basement office for my wife's business. The south wall has a bank of windows that measure eight feet by four feet. We need blinds, or shades, or something, to block the glare on sunny days.
Cellular shades are the way to go for good-looking light-blocking and filtering. A few months ago I shopped at the designer home decor shop in town and priced two for our bedroom. The quote came in at over $400, so instead we spent $40 on two pull-down shades. I was expecting this bank of windows in the office to run at least $600, and probably more. Because it's a space where Lynne will spend many hours a day, we wanted it to be comfortable — pulldown bedroom shades are a bit ugly, but you only use them when you're sleeping so who cares. You can always hide them with curtains.
Lynne noticed an ad for JC Penny offering "50% + 30%" off a particular brand of cellular shades on Wednesday only. We went in and took a look. The helpful salesperson oriented us to the options, then told us that on Friday (yesterday) there would be a sale on ALL brands for "65% + 10%." Further, there was a coupon in the mail to catalog shoppers for an additional 10% off, and if we opened a Penny's charge that day we could take an additional 10%.
Wow, let's do some math. If the shade costs $100, this Friday sale would mean that with all the discounts we'd pay $25.52. That's a 75% discount. We liked the selection better on the Friday sale, so we waited and went in yesterday.
First of all, the original price for this 8' by 4' bank of windows was $590. Because the windows are so much bigger than our bedroom, it means that Penny's is a LOT cheaper than the designer home decor shop. I'm sure there are quality differences, but this is an office, not a showroom. We'll take the trade-off. Second, we never got the coupon in the mail, but the salesperson had one we could use. That's pretty helpful, and I'm sure it happens all the time, and I wonder if Penny's executives realize it, or perhaps even encourage it. In the end, our final price was $167.27. That's simply a damn fine discount, and I'm wondering how they can make any money on the sale.
What's going on is identified in an article in today's NY Times: "Worried Merchants Throw Discounts at Shoppers." Apparently post-Thanksgiving sales were dismal, and everyone is panicked, so the discounts are thick right now. A few quotes:
At the start of November, "everything was coming up roses," he added, [John D. Morris, a retail analyst with Harris Nesbitt] "and suddenly there's a foul smell in the air."
[Michael J. editorial note: Hmm, I wonder what event in early November caused a change in mood? Perhaps the 55 million people left out of the Bush mandate are concerned about the future? If 48% of the country slows consumption, you're going to notice it in a lot of painful ways.]
Mr. Flickinger said he thought there was still time, though not much, for the merchants to end up happy with their holiday receipts. "They only have 5 to 10 days to turn it around or it'll be too late," he said. The way to do this, he said, is to advertise, he said. "They should be advertising in four-color supplements and on drive-time radio."
He added, "The ones that discount the deepest, the fastest will have the most success."
Okay, so what is success? Here success is not losing your shirt, so to speak, on unsold inventory at the end of the holiday season. With 75% discounts, merchants are giving up any hope of profit on those sales in order to get people in the door and make it up on other products. Or, if they can really make money with 75% discounts, then consumer goods are vastly overpriced and once customers figure it out the entire retail landscape will change. Implied in the analyst's statement is that receipts are more critical than profits. At this point, things are dire, and they better just get some revenue and deal with net earnings later.
In dramatic contrast, this week I received the annual report for Neiman Marcus. (Here's the JC Penny annual report for comparison.)
Tangent: Regular readers may wonder how or why I'm an investor in Neiman Marcus. In 7th grade (mid-1970s), as part of a class project, I bought a share of stock in Warner Brothers and a share of General Cinema. My stock broker, the late Richard Mansel, was very kind to humor me in this educational exercise. By the end of the school year, General Cinema hadn't moved much, but was still in the game. On the other hand, Warner had moved from around $7 a share to something like $53. I was a local stock-picking maven. Everyone asked me, "How did you know?" to which I replied, "I bought things I was interested in." But I digress.
As I matured, I came to understand that GC was really a financial engineering vehicle. For instance, they bought a Pepsi bottler. Then they sold the Pepsi business, and used the profits to buy Harcourt Brace Javonovich, the textbook publisher. Eventually they sold that and bought Neiman Marcus. These guys made hundreds of millions of dollars at each turn; it was very interesting to watch. So today, due to splits and dividend re-investment, I own perhaps 3 shares of Neiman Marcus.
The point I'm getting at: Neiman Marcus is not JC Penny. Neiman Marcus is not offering 75% discounts on anything. If they can't sell it at full price, they take it out of the store and unload it on the wholesale market where the customers don't notice. To wit:
We have never been more focused on the needs of these customers or our commitment to enhancing shareholder value. We delivered on both of these goals last year, reinforcing our market leadership, while generating record sales and earnings in an improving, but still tentative, economic environment. Total revenues increased 14% to $3.55 billion, compared to $3.10 billion in fiscal 2003. Net earnings grew 87% to $205 million, or $4.19 per diluted share, compared to $109 million, or $2.29 per diluted share, the prior year.
Dig: "Generating record sales and earnings in an improving, but still tentative, economic environment."
Through our team’s intense focus on full-price selling, disciplined inventory management and rigorous expense control, we achieved a record operating margin of 9.7%, far surpassing our previous high of 8.5% in fiscal 2000. SG&A (selling, general and administrative) expenses as a percentage of sales declined more than 120 basis points to 24.7%, our best performance in six years. Importantly, we also generated a return on equity of 16.3%, compared to 11.3% in fiscal 2003.
Dig: "Intense focus on full-price selling."
Many factors contribute to our optimism, including the continued growth of the affluent consumer demographic and the increasing economic power this segment represents. We believe no one understands luxury customers better than The Neiman Marcus Group and we will continue to differentiate ourselves in the market by developing new ways to engage, inspire and delight them. In our view, the best is yet to come.
Dig: "The continued growth of the affluent consumer demographic and the increasing economic power this segment represents."
There you have it. The bifurcation of retail success matches our societal makeup. If you are selling to people with money to spend, things are pretty rosy. If you're going after middle-class consumers, you're pretty nervous.
I haven't shopped at Neiman Marcus since I lived in Dallas in 1987 — and even then I wasn't their target customer. But I'm guessing that shopping there this weekend would be a very different experience from what happened yesterday at Penny's.
Extreme Lifestyles (Back to the Land Edition)
December 4, 2004 | People & Society
Thursday at dinner a friend told me about a person he knows who was once an electrical engineer working at one of the government research labs. At some point in the 1980s, this person realized that the US government was supplying the military technology that he was developing to both sides of the Iran/Iraq war. This profiteering from both sides of a war was unconscionable — it was pretty far from "defense" — and he quit his job to live in the country. Today, he lives on $5,000 per year. He has a very large vegetable garden, a root cellar, an old car, and a small shack of a house, with lots of library books to read. This highly-educated engineer, happier than he's ever been in his life, is not choosing whether to shop at JC Penny's or Neiman Marcus — he's choosing not to shop at all.
Not necessarily a trend, but something to consider. Along the lines of "The best things in life aren't things;" or "More fun, less stuff." Slogans that have a ring of truth, even if we can't personally "afford" take such an extreme position.
