Atomic Energy

Open-source, as discussed in the previous posting on network equipment, is a fascinating world. Perhaps the best intellectual and business promotion ever written is Eric Raymond’s “The Cathedral and the Bazaar.” There is no question that open-source has led to an upheaval in the world of business technology, enabled entirely new industries, and benefitted the overwhelming majority of individuals and companies out there, with few tears shed for those commercial vendors that have lost business due to open-source competitors. For those who do shed such tears, I strongly recommend Joseph Schumpeter’s “Capitalism, Socialism and Democracy.”

In this article, we will explore the legal side of open-source. This article was inspired by a rather heated debate on open-source licensing with The Schlossnagle. Theo is probably one of the best system engineers and architects I have met. He is the author of a book on building scalable Internet applications, and founded and runs the consulting firm OmniTI.

Open-source creates an interesting and unique series of challenges for its creators.

• Copying: In the closed-source world, while someone else can potentially reverse-engineer your product, or duplicate its functionality, in the open-source world, the original source is available right there for anyone to take. Thus, the only protection you have as to how your code is used is legal in the form of copyright.
• Usage: In the closed-source world, you have the option of using code inside your software to restrict its usage and functionality, based on, for example, license keys, which you control. In the open-source world, such an option does not exist. Since the code is open-source, it is easy for anyone to see how the usage controls work and bypass them.

Unsurprisingly, most open-source products allow for unlimited usage. For example, anyone can download and run as many copies of Apache, Linux or OpenBSD that they want. It is almost a truism that open-source and unlimited usage are the same. Obviously, they are not, but they essentially go hand-in-hand.

Where it gets interesting is in redistribution or repackaging. To understand this, we need to delve a little bit into the arcana of copyright law.

In most modern developed countries, copyrights give the author of some creative work the exclusive right to decide how his or her work may be redistributed. This does not include an original, depending on the laws of a country in question and sometimes the particular sales agreement, but duplicates. Thus, if I create a painting, and you (for some unknown reason, given my artistic talents) purchase it, in most cases you may then resell that painting to whomever you want and for whatever price makes you happy. However, under copyright law, you do not have the right to duplicate or copy (hence rights to copy or “copy-right”) that exact painting and sell it off. In doing so, you are violating my copyright. I, and only I, have the right to decide how my work gets duplicated.

All of this is particularly relevant in the world of open-source code. If I create an open-source product, when you download it, you have already created a copy. You are welcome to use it for your own use as you see fit. However, if you distribute it to someone else, especially for some form of compensation, and you have not received my permission to do so, you have violated my copyright.

Given all of the above, it is crucially important to decide exactly how the creator of open-source software will license that software. There are, essentially, two schools of thought in open-source licensing: GPL and BSD/Apache/MIT, which, for brevity, we will call BSD.

• GPL: The Gnu General Public License, based on the Gnu project by Richard Stallman, is a restrictive distribution license. While it has many details, its philosophy is, essentially, “I made this for free, you can use and distribute it for free. If you want to make money off of it, you cannot since I did not.” The GPL restricts distribution of the software to inclusion in any other software or product that is also GPL (or compatible). For many open-source developers, this makes a lot of sense. They are more than happy to contribute their work product to the good of the community, but do not want someone using that work product to make money unless they do. There really is one downside to the GPL: it restricts adoption. If what you have is unique, or used only in GPL-type products, then adoption will be high. But given the choice between a GPL product and an unrestricted one, a new product developer will always prefer to incorporate an unrestricted one.
• BSD: This is a class of license that says, essentially, do what you want with my product. There are variants on the BSD (not taking into account who was first) incorporated in the BSD, Apache, MIT and several other licenses, each of which contain legally important differences, such as limitations of liability, requirements of attribution, and other legalities, but essentially all of these licenses let someone use and redistribute the product largely at will. Thus, if I am building a commercial product, I am unable to use a GPL-licensed product in mine, but I can use a BSD one.

The battles between the BSD and the GPL camps can get fierce at times. The GPL was created by a “religious extremist,” the BSD is an “invitiation to legal piracy,” the list goes on. When a very powerful Web 2.0 rich client library, ExtJS, converted from a less restrictive version of the GPL (LGPL) to the full GPL, criticism by users was severe. In the end, both of these philosophies are valid, and are entirely subject to developer’s choice. If you created a product, you really do have three choices:

1. Keep it closed-source and sell it commercially. Microsoft and Oracle have built huge business on this, as have countless other companies. There is nothing wrong with reaping the financial benefits of your financial investment.
2. Open-source it and make it completely available, i.e. BSD. Again, there is nothing wrong with being fully community-focused, and either making no money on the product, or making money through ancillary services, such as consulting and support arrangements.
3. Open-source it and restrict it only to similar products, i.e. GPL. If there is nothing wrong with making money off of your labour and investment, and it is certainly commendable to contribute to the community, it is certainly acceptable to take a middle road that says, “I want to make money, but am willing to be altruistic towards others who are also altruistic.” Many products in the GPL world are dual-licensed, wherein the GPL applies to other GPL products, but if you want to embed it into a commercial product, you need to buy a typical commercial license.

Theo did raise one interesting objection to my middle-of-the-road argument in favour of GPL and/or dual licensing. He said that commercial and BSD-style are very clean and clear, black and white. One has a very clear picture where one stands. The GPL and dual-licensing, on the other hand, are much more in the middle, a shade of grey, and can be confusing. While I understand that objection, I am not convinced it holds for several reasons.

1. Life is grey. Very rarely is life, or business, black and white. Humans work quite well on the middle ground, codified as Maimonides’ “golden mean.”
2. If it works, use it. If the philosophy applies well to the situation at hand, then it should be used.

Which does this author prefer? None. Each license – commercial, BSD, GPL – has its time and place.

If you asked anyone current in the technology world to say the first word that comes to mind when told networks, it is a fair bet that 99% (if not more), will say, “Cisco.” For years now, Cisco has dominated the business of network equipment. Despite challenges from Juniper, 3Com, Bay, Nortel and many others – including many no longer with us – as well as from Asia such as Huawei, Cisco remains dominant. According to its latest annual report, in 2009, Cisco sold $29BN in product alone, of which over 94% came from Routers, Switches and Advanced Technologies.

It is possible, but not definite, that despite 25 years of history, Cisco may be at or past a peak of influence, depending on how it responds. Essentially, it is possible that the complete business that Cisco dominates may be at a turning point, where it will split into multiple component parts, where Cisco may dominate some, all or possibly none of those component parts.

To understand where we are, it is necessary to look at the history of Cisco and commercial networking in general. In the early days, the products at the heart of Cisco where home-grown. Engineers who needed a router to connect between networks, or a firewall to protect networks, would take a workstation or server from a major Unix equipment manufacturer, likely as not Sun, put in extra network interface cards (NICs), and then write software to route, switch or control the traffic as it came into one NIC and wanted to go to the other. I have distinct (and warm) memories of building some of the earliest firewalls this way at First Boston, while the CheckPoint founders were still in the Israeli army.

Over time, as corporate (and eventually Internet) networks grew, first linearly and then exponentially, this solution simply could not keep up for several reasons:

1. Manufacturers did not make enough slots for the NICs that were needed;
2. Traffic grew beyond the capacity of standard computer hardware to manage;
3. Standardization became crucial, so that a router or firewall built by an engineer in one company was usable by the next hire;
4. Security grew in importance, vis-a-vis both external and internal threats;
5. Criticality of the systems required full support and service-level-agreements (SLAs) on both support and spare parts.

In short, Do-It-Yourself (DIY) became untenable. Into the breach stepped Cisco, with fully-supported and -documented network device operating systems, hardware made for the special networking loads, training courses for the engineers, and even certification, to ensure your next hire knew what s/he was doing.

In the years since, the open-source revolution has slowly been growing. Whereas, in the early Cisco days of 15-25 years ago, all systems support was commercial, nowadays many businesses are comfortable relying on commercial or community support for open-source products. Open-source can still provide standardization, solving at least part of the issue, as well as support, whether community or commercial (a la RedHat). Further, many open-source products perform better than their closed-source counterparts, and are far more secure. Few to no commercial companies have the resources to find and plug holes, especially security holes, to match a dedicated community of tens of thousands of open-source product fans. Thus, Apache dominates Web services – Intranet and Internet – Linux continues to make in-roads in the enterprise, with whole companies betting the (server) farm on it, and more startups than one can count have built their entire business on Ruby on Rails (or its latest incarnation), PHP or Java.

The one area where open-source is essentially non-existent, at least at first glance, is enterprise networking. True, mini distributions of operating systems with firewalls in them have arisen (like m0n0wall, pfSense, smoothwall or many others), but the places where it counts, Cisco still rules the roost. It is important to note, as an aside, that as of ASA release 8.0, Cisco has based its router and switch operating systems on Linux, and is likely to continue to do so.

With the growth of open-source in the enterprise in general, and its ability to solve problems 3,4,5 above, it is slowly becoming clear that the advantages to hardware-specific networking solution vendors exist solely in their hardware. With Cisco’s gross margins on product running 64.0% (that is gross margin, not variable cost), customers are paying a premium to solve all 5 challenges, when Cisco’s proprietary and expensive solution is required for only 2 of the 5 issues.

Over the next several years, open-source routing, switching and firewall software solutions, whether new ones yet to be discovered or growth of existing solutions plus some management add-ons, will reach the point where they can run on any hardware, and will directly solve problems 3,4,5. At that point, the open-source solutions will become the de facto standard, running on whichever fairly commodity hardware is available from Cisco (if it rises to the challenge of somehow commoditizing its hardware while continuing to make a reasonable profit) or any other players. Essentially, the market for networking equipment will break down to its component parts:

• Hardware, which will run whichever….
• Software, likely open-source, the customer chooses, supported by….
• Support Agreements, provided by a support company of the customer’s choice.

Nowadays, Cisco makes obscene (according to the customer) or beautiful (according to the investor) margins, selling all three together to solve all 5 problems. The open-source revolution will hit networking some time in the next few years, break the three components apart, and either provide even more revenue and profit for Cisco, or bring a legendary dominant player to its knees.

Clean technology, especially energy generation, has generated (pun intended) an enormous amount of interest lately. Using one simple (and admittedly simplistic) metric, VCs invested almost $5BN in green/clean tech in 2009, out of a total of just under $18BN, or over 25%. Given that most VC investments involve uncertainty whether or not a market will adopt new technologies or services, but not whether or not they will work in the first place, while clean/green is often a question as to whether or not it will even work, that is an astounding number. Further, many green/clean firms explicitly depend on government subsidies to survive, where such subsidies and policies are fickle at best. If a “weighted” approach were taken, weighing in other normal factors – the same way that sales in retail are seasonably adjusted – then the percentages would be significantly higher.

A major player in this approach is solar. Solar energy panel creators, investors, installers, etc. are endless, and it appears everyone is getting into the business. Solar looks and feels nice: it is, literally, clean, generates no polluting byproducts (except in the creation of solar panels themselves), and the Sun is available nearly everywhere on the planet. In a recent discussion, the questions as to whether or not the Sun could ever generate all or the majority of energy requirements for the human race. I decided to perform some basic research and make it available here.

In order to simplify the issue, we need to understand several issues.

First, there are actually two parts to energy: generation and location.

• Generation: This is how you turn latent (or potential) energy into actual energy that can be used. Examples include solar cells in Arizona converting the Sun’s rays into electricity; a hydro-electric dam in Beaumont, Quebec, converting the flow of water (mechanical energy) into electricity; the Indian Point nuclear reactor in New York converting the energy connecting the protons and neutrons of a uranium atom into electricity; and, the classic example, an internal combustion engine in a car converting the chemical energy connecting atoms and molecules in petroleum into mechanical energy to move the car.
• Location: Location is getting the generated energy to the point of usages. If we generate energy in Beaumont, but need it in Albany, it is useless unless we can transport it from Beaumont to Albany. Similarly, we may have a wonderful solar field in Arizona, but it is useless if it cannot be somehow stored and transported to an Acela express train currently speeding from Washington, DC, to Boston.

For the sake of simplicity, we will completely ignore location. In other words, we will assume that any energy we generate – in the case of solar, almost exclusively electricity – can be properly stored for extended periods, and properly transported. Somehow, the electricity from the Texas solar field will make its way to a battery in a car that will travel from London to Manchester.

Second, the amount of solar energy hitting the earth is not the same at every location, nor is it the same at all times of day or year. For the sake of simplicity, we will assume that every location on the earth will receive 12 full hours of Sun, and equatorial (i.e. maximum) Sun at that, every single day. We are ignoring clouds, rain, wind, haze, sunrise/sunset, elevation/azimuth, north/south, and all those other pesky factors that reduce the amount of solar energy hitting a single spot, and assuming we are simply blessed with the most we can get.

Third, we are going to assume that our solar cells are 100% efficient. In other words, our magical solar cells can capture every single joule of energy that the Sun provides to a given spot. Obviously, this is a very big fiction: nothing engineered is ever 100% efficient, and current commercial solar cells technology is around 10-12%, expensive commercial technology is ~22%, some research equipment has gotten into the 40%+ range. Obviously, produced, commercially viable, high-efficiency cells are a very long way off. Nonetheless, we will ignore all of these factors and assume we are 100% efficient.

Fourth, and last, we will ignore commercial viability. We do not care if our solar fields can operate at a profit or break even, or even at a massive loss. We only care whether or not it is scientifically feasible to capture enough solar energy to power civilization’s needs.

What Are Our Needs?

Surprisingly, this is a difficult question. To simplify it, I will focus solely on the United States. The US is a large, continent-wide country, with a population of ~300MM and a surface area of 9.8MM sq km. It is an advanced Western society, with high energy needs. Most countries in the world – politics notwithstanding – aim to emulate at least the United States’ economic position. According to Lawrence Livermore National Laboratory, US energy usage in 2008 was a total of 99.2 quadrillion (or quad) BTUs (British Thermal Units).

How Much Sun?

How much energy is actually hidden in those rays of light (actually photons) that hit the earth? The question depends on whether we are looking at the surface of the earth, or the edge of the atmosphere, a great distance up. According to NASA and most scientists nowadays, energy making it to the edge of the atmosphere, is 1.368 kW / sq m. For every square metre of atmospheric surface, 1.368 kilowatts of energy – of all forms of radiation – bombard it. About 30% of that is reflected by the atmosphere itself, so about 958 watts of energy per square metre make it into the atmosphere. However, another 20% is lost to clouds, atmospheric obstruction, etc., so about 51% (NASA) reaches the earth’s surface. Thus, with perfect 100% efficiency, no clouds in the way, no thinking about angles of the Sun and other effects, 697 W/sq M reach the earth’s surface. One Watt is 1 joule / second, so, over an entire year with 31.5MM seconds, with perfect conditions, 22MM joules of energy hit a square meter. We already saw that the US used 99.2 quads of energy in 2008. Each quad BTU is 1.06 quadrillion kilojoules, so the US used 105 quadrillion kilojoules. Since each square metre produces, under perfect conditions, 22MM joules, we would need 4,776 MM square metres, or 4,776 square kilometres, of surface to power the United States. According to the CIA Factbook, the US has a surface area of 9.8MM sq km. In other words, under perfect conditions, the US would need to cover less than 1% of its surface area to supply its energy needs.

This looks very promising… until we start to account for efficiencies, weather, Sun declination, and all the other factors. Realistically speaking, the US, even with 50% efficiency solar cells, is unlikely to capture more than 5% of the solar radiation hitting its surface. The Sun is not directly overhead all day, anywhere; much of the US is northern and thus subject to much sharper angles of the Sun in the winter; large river and lake concentrations, as well as mountainous and populated areas, make placing solar cells impractical. Economics, of course, always enter the picture. Given this fact, we must multiple by 20 the surface area that would need to be covered. With perfect energy efficiency cells, the US would need to cover ~1% of its surface area. Suddenly, it is not that simple. Now, we return to dealing with today’s cells. Given the maximum (and very expensive) efficiencies of 22%, with these cells, the US would need to cover 4.4% of its surface area. That is a lot of land, larger than all of California!

Summary

In sum, given today’s best technology (which will change), and the weather (whose uncertainty, if the specific characteristics, will not), the US would need to cover an area the size of California to supply its energy needs, even before considering challenges of storage, transportation and cost-effectiveness. As much as I would like to be bullish about solar, I believe solar will remain a niche service, at least for the foreseeable future.

Ten years ago, two colleagues and I decided to create a start-up to create electronic academic transcripts. For various reasons, mainly involving the movements of the dominant player in academia IT, we decided not to pursue the venture. In the end, the dominant player did not move in that direction, leaving the market wide open. In the years since, several ventures have pursued this market, notably TranscriptCenter and Scrip-Safe. In the last half year, discussions have renewed as to whether we should venture back into the e-Transcript market. Of course, to succeed at this late stage, we would have to differentiate ourselves from the main players. We decided that the only way to do so is to take a different tack. The existing players are just automating the process. Whereas before a graduate would physically go to his alma mater’s registrar, file a form, get a paper transcript in a sealed envelope and mail it to the new school, now the alumnus goes online to file the request, and the e-Transcript provider would retrieve the transcript and transfer it digitally. Nonetheless, the data is still owned by the old school.

Our perspective was to give ownership to the student upon graduation, creating a Personal Electronic Academic Record (PEAR). When the student graduates, s/he receives, by email, CD or thumb drive, an digital academic record (the PEAR), digitally signed by the institution. When applying to a new institution, the applicant would simply submit (on a Web site or by email) the PEAR s/he received as is. The admissions office could then check the original digital signature on this new venture’s Web site (or that of the original school), validate it, and be done. At first blush, this seems great, as it gives control to the student, not the institution.

On deeper research, though, we realized that it did not make sense. The graduate applies to schools a maximum 4-5 times in their life, and for most once or twice. It is a very rare process. Given the choice between needing to hold on to and keep track of this digitally signed PEAR for the next several decades, or dealing with the fairly low digital pain of asking for a transcript online when it happens, nearly everyone will go for the latter. Carrying this PEAR for years is just not worth it.

This is a classic example of knowing your market. It is easy to come up with good technology ideas, harder (but not that much) for smart people to come up with good market ideas. It is way too easy to get entranced by what technology can do, and buzzwords (such as ownership of data, democratizing information, etc.) that speak to them. In the end, though, the ability to succeed in a venture means the ability to sell, and the ability to sell depends on human behaviour, psychology and sociology. In this case, everything pointed in the right direction, except what real, live people want to do.

We abandoned the venture; let the existing players have it.

Cloud computing is all the rage, and for very good reason. The economics of everything within cloud computing – Software-as-a-Service, Platform-as-a-Service, Infrastructure-as-a-Service, Storage-as-a-Service, basically anything “XaaS” – are just way too compelling to ignore. Unless you are: so big that you cannot gain any more economies of scale, e.g. GE or JPMChase; dealing with such sensitive data that you must host it on your own, e.g. Bank of America or anyone processing credit card transactions; or dealing with such flows of data in-house and on-location that doing it offsite makes no sense, e.g. Merck’s corporate HQ in Whitehouse Station, NJ; then cloud computing makes all the sense in the world.

Of course, every new business model creates new business opportunities. For years, CIOs worried about “vendor lock-in.” If I use an Oracle database, how painful is it for me to move to MySQL or MS-SQL if business dictates I need to? If I use ADP to process payroll, how difficult and expensive will it be for me to migrate to Paychex? Every vendor decision a business makes, and especially one in the IT realm, comes with a certain amount of loss of control. The level of difficulty in and cost of switching vendors to perform the same service or process, is what is known as vendor lock-in.

With the advent of cloud computing, wherein entire chunks of my infrastructure may be running on Google App Engine, Amazon Web Services, SoftLayer or any of dozens of cloud players, CIOs are, justifiably, concerned about vendor lock-in. In order to address this problem, several companies have either expanded their offerings to include or been formed explicitly to offer “cloud virtualization,” and become, in my own words, “cloud abstractors” or “cloud virtualizers.” In short, these companies will become your interface to cloud providers. You contract with them, they will “abstract” out for you  from the cloud providers. You deal with them, they will handle your back-end, whatever your provider. Want to move from Amazon EC2 to SoftLayer? They will do it. Prefer Joyent over SliceHost? They will take care of it. Some even offer to migrate on the fly, in real-time. Essentially, these companies are offering to virtualize the virtual world, adding one more layer of indirection or abstraction. A significant player in this space is RightScale, the cloud management software and service company, who now have a “Cloud Portability” offering.

The question is, will they make it? Will cloud customers move en masse, or at least in large enough scale, to make these offerings viable? I believe that they will not, for two key reasons.

1. Downline Lock-In: Let us say I buy a Cloud Abstractor’s offering so that I am “liberated” from Amazon Web Services. Sure, I am no longer locked into AWS, but now I am tied into that Abstractor. Now, in theory, I could avoid it by dealing with two Abstractors, but then I am doing all the engineering and business work anyways, so I might as well go to the source and deal directly with AWS and one other. Additionally, if I am going to get locked into any one vendor, I certainly would prefer it be a solid, stable, committed company like Amazon than some other smaller player. This is somewhat reminiscent of how load balancers, like those F5 market for tens of thousands of dollars, were first deployed. First, you had one Web server, serving data. All was great, until it crashed, so you put in two of them. That is great, except one is doing all of the work, while the other sits idle, a pretty expensive waste of resource. Along came F5, sold you a load-balancer, and now you have protected yourself from one Web server crashing, and you had both serving data, a pretty good scenario… until the lone F5 load-balancer crashed. Easy to solve, they say, just buy two (very expensive) F5 boxes. So now you have two F5s and two Web servers. All you have really done is push the “vendor lock-in” (or, in the Web server case, point of risk) further down the line. It would be much better to solve it at the source, with your Web servers. None of this is to dump on F5, who have some pretty good products, but rather to point out that sometimes solving a problem with another solution just pushed it down the line. Same thing with Cloud Abstractors and vendor lock-in: if you solve it by pushing it down the line, you have just locked into a different vendor, when you might have been better off at the source.
2. Timing of Expense: In order to avoid vendor lock-in, if it is desired and possible, requires ongoing expense. By contrast, if you want to move and already have vendor lock-in, it requires a much higher one-time conversion expense. Most situations of vendor switch, especially of locked-in products, are likely to occur infrequently, at most once every several years, and in many cases never, since by the time the switch occurs, new technology – infrastructure and applications – are likely to replace the old that was locked into the vendor. Given the infrequent costs and the even greater likelihood of technology refresh by then in any case, very few businesses are likely to invest in an expensive service or product that reduces vendor lock-in in the cloud computing space.
3. Compensation: CIOs are compensated for what they deliver, not what they do not. Vendor lock-in, in a cloud computing situation (or almost any long-term investment), is not a problem for today, but rather one for several years down the line, at best. The CIO will get paid for delivering performance at a good price to his business, enabling the business to grow profitably. Cloud computing gets him/her there; worrying about lock-in just increases today’s costs without bringing any short- or medium-term benefit to the business. Higher expense today to avoid a possible challenge in the future is a recipe for negative IT budgets, and thus works directly against the firm’s – and the CIO’s – direct financial interest.

In summary, I believe most CIOs will complain about vendor lock-in, wish it weren’t so… and then move ahead anyways, for very good reasons.

A few weeks after writing the article on my vision for the future of the mobile carrier industry – let’s call it the “pipification” (as in turning into pipes) of mobile, especially with the advent of 4G in the form of LTE and WiMax, and the subsequent conversion of everything into data, including voice, data, SMS – I came across the October 29, 2010, issue of Forbes magazine. Cover story? “The $10 Phone Bill” by senior reporter Steve Woolley. It is a fascinating piece on the Rise and Fall of the Phone-an Empire (with apologies to Edward Gibbon), in which Linquist and I largely see eye-to-eye. Of course, Linquist is a highly successful founder and CEO of a multi-billion dollar company, in which he has taken his vision forward. Nonetheless, it is interesting to see how much we agree.

The meat and potatoes of the mobile carrier industry – charging for calls and, secondarily, for text messages – is about to start a precipitous decline. Last year US growth in mobile minutes talked was 3% to 2.2 trillion minutes, the slowest growth ever. It is widely expected that 2010 will be the first year of decline. This, combined with competition and political pressure to keep per-minute and plan prices low and reasonable (with “reasonable” defined in odd and political ways), is the main reason that so many carriers are pushing subsidized expensive phones, including smartphones, with multi-year commitments. The money they make on data, and especially the margins, can often exceed what they make on basic voice. But this is just delaying the inevitable. MetroPCS and similar companies, including new players like the one for which I advocate in my earlier article, will eventually commoditize mobile service, with each company selling access to digital pipes, and competing on bandwidth, latency, availability (bits per cubic meter, as Linquist discusses in the Forbes article), and of course, customer service… an area where mobile carriers are not generally highly regarded (understatement here).

For the executives at AT&T Wireless, Verizon, Vodafone, Orange and the rest, this is pretty bleak; for those of us who use the service – i.e. everyone – and the entrepreneurs and executives smart enough to drive the trend rather than be driven by it, like Roger Linquist, this is a very rosy future indeed.

White Goods are normally defined as those basic bland appliances we use around our house, usually the large ones: fridge, washer, dryer, dishwasher, oven/stove. This is a fairly staid market, and has been for many years. Whatever little innovation there is normally comes in terms of features added on. Thus, there may be a new “high-value” GE or Amana line, which may include digital temperature controls instead of a knob, or stainless steel instead of white exterior. All in all, though, this is a low-innovation market, signaled by the intense consolidation in the market over the last decade or two. Nowadays, when you buy a GE or Amana or any brand, it is likely made by only one of two companies, with a label slapped on it. This type of consolidation and outsourcing only occurs when there is little innovation and differentiation.

The one exception to this has been in cleaning products, where Dyson and iRobot have really created innovative products. Dyson’s vacuum cleaners are vastly more efficient than a typical Hoover, and do not lose power as time goes on. Further, Dyson created it using basic mechanics, physics that has been around for a very long time, not some new innovation in optics, chip design or software. iRobot, on the other hand, uses modern technologies to remove the bulk of cleaning effort from the hands of individuals in the first place. Dyson makes cleaning more effective; iRobot makes cleaning less labor-intensive.

There is one area that (despite Whirlpool’s protestations to the contrary) has had nearly zero innovation in a very long time, but should be subject to a very simple form: clothes washers and dryers. Sure, there are models that are more energy-efficient, more water-efficient, use electronic cycles, but in the end, clothes washing (agitated or tumble) and drying (tumble or “baking” in the European style), is essentially done the same way it has been for decades. The veritable trusted name-brand in washers and dryers, Maytag, was acquired by Whirlpool for $2.7BN back in 2005.

I believe that clothes dryers are a simple area to innovate, and are a classic case study in learning from your market. The average clothes wash cycle time for a top-loader or high-speed front-loader washer, American-sized 10kg machine, is 25 minutes. The average dry time for a similar full dryer is 60 minutes. If you watch anyone doing washes, you will see that they load the wash, when it is finished they load the dryer and another load in the wash. The wash finishes after 25 minutes, and the clothing sits there for another 35 minutes, waiting for the dryer to finish. Yesterday, for the first time, I saw someone who put two dryers in his house to avoid exactly this problem. Those of us in the operations business look at the model and instantly recognize that the dryer is the bottleneck in the process. While my colleague of yesterday had a workable, if expensive, solution, and I am sure Whirlpool appreciates his throwing an extra $1,000 their way, this is hardly the right way to go about doing it. Interestingly, the latest front-load high-efficiency washers on a normal cycle take closer to 45 minutes. While this may be necessary to save water, I am not wholly convinced it is not at least partially a ploy to distract those doing loads of the lack of innovation (and slow time) of dryers.

I believe that there is room for innovation if someone could invent and patent a dryer that efficiently and effectively dried a full load of clothes in the same 25 minute cycle, or at least close, they would quickly take a commanding position in the market or, alternatively, be able to quickly sell to a large existing player.

Wireless carriers are the company everyone loves to hate. No one denies that they bring an invaluable service. However, their legendarily awful customer service; lock-ins and contracts; early termination fees; obtuse bills; and obscene roaming charges force us all to wish there was a better way.

I believe that current trends will create new forms of wireless carriers that are likely to spell the death of the old ones, unless they find the ability to innovate and cannibalize their own market. Of course, their track record is not exactly enticing.

• Short-term: In the short-term, there is room for a carrier that will provide global free roaming, unlimited data, no contracts (= no subsidized phones), and excellent customer service. A company like this will have to draw its executives from the Internet sector, one where change is a given and customer service is a right, not a privilege granted by the company. This carrier will operate as Virtual Mobile Network Operator (VMNO), lease bandwidth in multiple countries (initially US and UK), will sell plans at a price that is below current standard plans but without the phone subsidy, and thus no commitment. Customers will be able to purchase a direct in-dial phone number in any country where the carrier operates (or even those where it does not), all of which will ring the mobile phone wherever the customer is. When the customer dials out, it will show the local number as caller ID. All calls will be local. If the customer dials a UK number, it deducts minutes from his/her 1,200 minute plan, but not long-distance charges; if the customer lives in the US but is in the UK, each minute is deducted from his/her 1,200 minute plan, but no roaming charges. With current VoIP technology and the ability to buy tower capacity as a VMNO in multiple countries, this carrier is viable right now. It will need to market directly to mobile (pun intended) traveling customers, such as executives, pilots, and consultants, and will need to price out correctly. Nonetheless, with sufficient capital, this is achievable at this very moment. The primary challenges are: sufficient capital to form the company; successfully leasing tower capacity from companies whose business model you are trying to disrupt; and a large enough initial market to sustain the company through growth.
• Long-term: In the long-term, 4G is coming. Whether LTE or WiMax, within a few years all mobile services in modern developed countries will be 4G. In the 4G world, voice and data are not 2 distinct mobile services; voice will only be VoIP, running over 4G data. In that world, your voice carrier could be your mobile carrier, or it might be Vonage, Skype, or some other, new mobile VoIP company. If you get off the plan at Heathrow, London, your voice is not roaming; it is just connected to the Internet and giving you voice. In many ways, this simplifies matters. Given the mindset of wireless carriers, it is to be expected that they will block all VoIP except those that they sell, at contracts, lock-in and premium. Again, we can expect data roaming charges to more than offset any lost voice roaming. However, for our mobile carrier disruptor, this world is even easier. Our upstart disruptor can focus solely on leasing data bandwidth, and leave it open to the Internet. Because it is data, much of the cost of roaming disappears. No longer does a call need to route through the local carrier, back to the home country, and then back again. As soon as you are online locally, you are online globally.

If someone could raise sufficient capital (several million dollars just as seed), hire the right executives, customer service people (love to see the ones from Tony Hsieh’s Zappos), engineers and dealmakers, this could start right now.

Undoubtedly, the hottest – and most critically analyzed – announcement of the last week has been Apple’s release of the iPad. I will take a slightly different perspective on it, looking at it from the perspective of the iPod. We will do this from two angles: marketing and long-term strategy

First, from the marketing perspective, I believe this device’s name is awful. Jokes abound on the Internet within a day of the release – and having spent almost a decade on Wall Street, I suspect it took less time than the fastest trade-processing system for the jokes to hit the trading floors – about whether it is an Internet device or a 21st century sanitary napkin. Apple has been very successful with its iMac, hugely successful with its iPod, and beyond all expectations with its iPhone. However, there is a concept of brand overuse, and there are appropriate extensions and inappropriate ones. Anyone with half life experience should have seen the associations coming; this is especially true for a master of marketing like Steve Jobs. It was always hip to walk around with an iPod – “oh, cool iPod” – and an iPhone, but most people tend to keep discussions of their bodily functions outside of the hip and cool space. “Is that an iPad?” “(blush) Oh, no, just a tablet computer” is not a good sequence for generating demand. Microsoft ran afoul of this in a minor sense with its Zune. Zune sounds very close to the Israeli Hebrew slang word for intercourse. The irony is that an enormous percentage of Microsoft’s R&D is performed in the major Microsoft R&D Center in Herzliya Pituach, Israel. This should have raised a red flag. Nonetheless, Microsoft either didn’t notice, or decided that a 7MM person market is not worth the trouble of changing the name. In any case, Zune has hardly been a smashing success, for reasons that make its crude-sounding name a minor element.

In the issues of larger long-term strategy, I believe Apple may be suffering from a mixture of envy, technical limitations and confusion.

1. Envy: Apple owns and dominates the digital music market. By selling an MP3 player that was easy to use, hip and cool, Apple placed itself precisely where it needed to be to become the prime retailer of music, upending the decades-old music distribution system. For all that Amazon and Wal-Mart have done in this space, as well as other minor players, Apple deserves full credit for finding the way to disrupt the music market using the Internet; kudos to Steve & Co. However, in the book market, an existing retailer, Amazon.com, managed to successfully sell an eReader with an attached store, essentially grabbing a page straight out of Apple’s playbook. Further, with Amazon’s existing relationships with publishers, they became the perfect channel for it. Amazon is no technical upstart in the book distribution business; they are a dominant player in the business, and they moved into digital distribution by using Apple’s model. I believe Steve Jobs saw Jeff Bezos do this and went green with envy.
2. Technical Limitations: The Kindle is limited in many ways: it cannot do video, general documents, really surf the Web, work in many other countries, etc. However, at buying and reading books, the Kindle is superb. In the old Unix systems administration world, the software design philosophy was to do one thing, and do it extremely well. In that respect, the Kindle follows this philosophy. Buying books is easy; battery life with wireless on is now up to a week; the pages are crisp and clear, thanks to eInk technology. The iPad, on the other hand, uses colour and audio, with multiple wireless connections, which makes for a great multimedia environment, but tires the eyes and has a limited battery life of 10 hours. Granted, this is much better than most laptops or even the iPhone, but it is pathetic for long-term use. Most people are willing to curl up with a good book or two on the beach for days, but to have to go charge it? Definitely not.
3. Confusion: Apple seems to recognize its limitations, and thus seems to position the device midway between a reading revolution and a laptop revolution. In politics, this is called triangulation; in marketing, we call it confusion. If you go to Apple’s iPad page, the title is “the best way to experience the web, email and photos.”

With all of that, there is no question that the iPad (I cannot even write the name without wondering if StayFree is going to sue them or partner with them) is a very cool device. However, Apple has gotten quite confused and possibly envious. After a great run of iMac, MacBook, iPod and iPhone, I am concerned they are about to flop.

Many sectors, especially technologically-driven ones, have undergone at least one if not multiple revolutions in the last half century. Much of the technology-driven ones can be laid at the foot of two major technologies, fiber optics (for long-distance high-speed communications) and the integrated circuit, whose children include just about everything on silicon, and, in its microprocessor variant, follows Moore’s Law.

Two areas that have, frustratingly, followed evolutionary, and at times very slow evolutionary, paths are transportation and portable-power.

• Transportation: Transportation has undergone enormous changes since a hundred years ago. In World War II, barely 70 years ago, a major method of moving materiel and men was still horse-drawn, at least in the early years of the war. The first jet engines were invented in 1910-1930s, essentially immediately prior to World War I through immediately prior to World War II. Nonetheless, since the arrival of the commercial jet aircraft  with the De Havilland Comet immediately after World War II and the popular Boeing 707 in the 1950s, essentially jet travel has remained the same. People gather together at major airfields (now called airports), hand their luggage, check in, sit on a plane that may or may not have the range to make it to their destination without refueling, and fly at somewhat under 600mph. The only real attempts to improve on that model – the Concorde series which could reach speeds 30-50% faster than general commercial jet aircraft – went down in flames after one of its models, unfortunately, went down in flames, and after years of unprofitable services to its operators. Other efforts in recent years have included many predictions about private jet taxis or air taxis, which are really structured around resolving mid-range travel issues. Commercial transportation, on the other hand, still gets on boats that ply the same routes as the British Navy in the 1700s and still goes at less than 30 knots (nautical miles per hour). A person still ships from New York to London in 7 hours, while his large-scale cargo goes in a week or two. While information has democratized, decentralized and diffused, transportation remains as slow as ever. I do not know where the next revolutions will come from in transportation, but it is ripe for a revolution. We might be concerned for all of the poor TSA employees who will no longer have the pleasure of smelling our shoes and seeing us naked through full-body scanners, but it is a price we are willing to pay. On the other hand, the increased (and increasingly inane) so-called security measures foisted on the public will only drive innovation in transportation. In that respect, there may be an upside. It is also worth noting that, in most years, airlines have lost money, and lots of it. The number of airline bankruptcy over the years is quite large. A new model may not only improve everyone’s lives; it would also need to be much more economically viable.
• Portable-power: Also known as batteries, this is how we carry around power with us for usage in small and large objects, whether electric cars, iPhones, laptops, or everything in between. While power usage has improved over the last several years (and decades), this is largely due to improving efficiency in the devices themselves combined with minor evolutionary improvements in batteries. Batteries are improving on the order of single-digit to, sometimes, double-digit percentage improvements, over one to several years, in their ability to store power, while demand, driven by the systems that use them, are doubling in accordance with Moore’s Law. A number of researchers and firms are struggling with creating revolutionary battery (really portable-power) systems. Some are focused on hydrogen fuel cells, or micro-fuel cells; others are focused on biologic cells, for example, ones that use sugar or other biological fuel sources; an interesting research project is the air force’s work in betavoltaic cells, which use the decay of certain isotopes to generate power.

I believe both of these sectors are far underfunded and overdue for major revolutions that will affect almost every other sector there is.