Atomic Energy

In the last several years, the concept of 3D printing has shown significant promise and even actual execution. 3D printers have existed, at least according to Wikipedia, since the 1980s. However, the combination of reduced cost of printer, increased flexibility, and expanding number of materials which can be shaped using a 3D printer has brought 3D printing closer to the regular end-user.

I do not know if 3D printing will ever be a desktop experience. Unlike desktop 2D printers, which at most require 8×10, A4 or Legal sized paper and a few standard ink cartridges, 3D printers require raw materials of varied enough types to make it likely prohibitive for a home or small business user to stock them, even if the printer price itself drops to the point of being mass-market affordable.

I do, however, believe that many items which we now purchase online and have sent UPS, or purchase from our local corner store (any of those left?), Target or other big box retailer, will be purchased from a local 3D printer. Even if Amazon can buy those mugs in bulk, such that its landed cost is $5, and its shipping is as low as $1, it still has inventory costs, and shipping of the product and its raw materials to Amazon are built into that $5. Raw materials can be densely packed, usually far more so than manufactured goods, such that the $6 cost to Amazon to have it delivered to your door (plus whatever profit margin it requires), may still be more expensive than a local or regional 3D printer having the raw materials shipped and stored near you, ordering it custom online, and picking it up (or local delivery) later that day or the next day.

What I find most interesting is the macroeconomic impact. Currently, a very large number of products, both high-value/high-complexity like iPhones and Lenovo laptops, and low-value/low-complexity like mugs and stuffed animals, are manufactured in China. While China is becoming a global manufacturing centre for excellence, its primary value-add is in providing labour at a fraction of the cost of target market nations like the US, Canada, the UK and Germany. For fully or nearly fully automated manufacturing, China provides little to no value-add; indeed, there have been numerous cases of fully automated manufacturing firms choosing to stay in developed nations, rather than offshore to China, since China provides no value-add, especially when shipping times and costs and offshore management costs are taken into consideration.

The current value chain, then, looks something like this:

• Raw materials are acquired and purified, mostly in developing countries but also in fully developed ones – petroleum, bio-goods, aluminum, etc.
• Raw materials are shipped to manufacturing centres such as China
• Raw materials are turned into finished goods using relatively low-cost labour in China
• Finished goods are shipped to market countries
• Finished goods pass from importer to retailer (and some others on the way)
• Retailer sells and ships finished goods to end-consumer

Putting China in the value chain is actually quite expensive. However, the labour cost-savings (as well as regulatory overhead for running a labour plant, as Jobs told Pres. Obama in early 2011) are so enormous for labour-intensive manufacturing that they more than make up for the added steps, cost and time.

What happens if 3D printing is able to manufacture many low-complexity goods directly near end-consumers?

• Raw materials are acquired and purified, mostly in developing countries but also in fully developed ones – petroleum, bio-goods, aluminum, etc.
• Raw materials are shipped to 3D printing facilities relatively near the end-consumer
• Raw materials are turned into finished goods automatically using 3D printing
• Finished goods are sent to end-consumer

3D printing not only allows for greater customization. It may also allow significant cost and time savings in the value chain by removing China from the entire chain. China’s relatively low-cost workforce will still be necessary for high-labour manufacturing that is difficult to automate. I do not expect to see iPhones manufactured by 3D printing in my lifetime (although I may live to eat those words, and would not complain if I do so). However, China’s position as critical juncture in most manufacturing lines may be supplanted, and, given the inefficiency, probably should be.

The geopolitical and macroeconomic ramifications are something to seriously consider.

Finally. RIM’s management has stepped aside. After 20 years running Research in Motion, Ltd., from startup to superstar to falling star, Mike Lazaridis and Jim Balsillie have stepped aside as co-CEOs and handed the reins to Thorsten Heins, formerly RIM’s co-COO. Of course, Balsillie and Lazaridis will remain active Directors, so one wonders how much maneouvring room Heins will actually have, but it may not matter that much. Heins is set to stay the course, and believes in RIM’s strategy. Heins may not have much of a choice, as the (c0)COO from the current management team, he is likely to be personally (and emotionally) vested in the current strategy.

I am not wholly convinced that the company can be saved. It has lost the war for the platform, and the battle for the hearts of its users.

A colleague recently asked me for my opinion on RIM’s management shuffle. My response?

“The Costa Concordia has already hit the shoals and is taking on water, with or without a new captain. Work to constantly delight your customers *before* the rocks, not after the ship is going down.”

Rumour has it that RIM will be asking the Nasdaq to change their ticker symbol from RIMM to RIP…

Today, in the Harvard Business Review blog, Anne Kreamer discussed the exciting new finding that reading books, general books, even (horror) fiction or literature, stimulates new pathways and is beneficial to your social interaction and, by extension, your usefulness to society and the economy. Thus, one no longer need to feel guilty about reading, whether John Keegan’s military history or Clayton Christensen’s Innovators Series, whether the Great Gatsby or Harry Potter.

While I have no doubt some of her “guilt” discussed was intended tongue in cheek – anyone who really enjoys sitting reading the Great Gatsby in the evening instead of watching television is, thankfully, not about to be too burdened by such guilt – there is nonetheless some implicit (or explicit) assumption of productivity requirement. The study “absolves” one of the “sin” of non-productiveness when reading by showing that even reading can be a socially productive activity.

I find this deeply troubling. Literature, history, fiction, business.. it matters not. Reading is good in the absolute sense. To really understand the meaning of good, listen to Bill Cosby’s classic “The Apple” (available on iTunes and Amazon).

I love business. I love productivity. I see value in every productive moment and could not live without it. If I were wealthy, retirement would be the farthest thing from my mind, as it is, quite simply, unproductive. Profit means excess value creation, and the improvement of the lot of mankind. But life is about life. Reading is good because it expands one’s mind and makes them a better, more educated and more creative person and member of society, and a more fulfilled and fulfilling human being. It need no justification, no dispensation from the priests of high business.

I had the privilege of attending Columbia University, with its excellent core, as an undergraduate. Over the entrance to Earl Hall the following is inscribed:

“Erected for the Students that Religion and Learning May Go Hand in Hand, and Character Grow with Knowledge.”

A year ago, I wrote a piece on the tension between HTML5 and Native Apps, especially as it was playing out on mobile devices. The original is here. I found it interesting how the world flocked to the Web to get off of native apps, yet in mobile had flocked to native apps.

At least partially, I think that people were actually flocking to the idea of the cloud, rather than the no-distribution (or “No Software” as Benioff of salesforce.com would call it), which appealed primarily to IT departments. Nonetheless, it is ironic that the creation of truly portable devices – iPhones, iPads, Androids – meant considering being really offline on a regular basis, as opposed to mostly connected on a desktop/laptop. html5, with its offline capabilities, is meant (in part) to resolve that tension by providing the ease of development and distribution of a Web app, with the offline capabilities of a native app.

Pascal-Emannuel Gobry, who has quoted my writings before, wrote an extensive interview piece that largely agrees with my assertion: html5 apps will eventually dominate and then replace native apps. He asserts that it will take longer, and that it will have different economics and dynamics than the closed-wall garden of current app stores.

I would find it very interesting to apply the models of Clayton Christensen @claychristensen to the html5 vs native app discussion, especially in light of Gobry’s description of native apps as very highly integrated (Christensen’s terms) vs open and modular (again, Christensen’s). Christensen’s model would imply that in the early stages, the integrated, controlled native app model is likely to dominate, but over time the modular html5 model will take over, eventually disrupting Apple’s and Google’s position at least in the app store.

An interesting possible continuation is that without locking to native apps, both iOS and Android become just platforms. Much as I like my iPhone and iPad, will html5 not only reduce their clout in the app store distribution model, but possibly lead to openings to disrupt the very platform itself?

Paul Vixie objected to a response on thehill.com (my response is on page 2 of the comments) to his (and other key Internet engineers’) objections to SOPA/PIPA on technical grounds, response by Paul is here. I agree wholeheartedly with Paul on the technical issues – not sure I would publicly try to disagree with Paul on the guts of DNS – but there is a more fundamental issue at stake, specifically the limits of government intrusion vs. freedom, and the limits of liability/culpability for unintended involvement in liable/criminal acts.

Here is my response as posted there:

@richard, @paul,

I think we miss an important point here. Richard, Paul knows far more about DNS and DNSSEC than almost anyone else on the planet, including you and me. He is correct – and I would trust him even if I didn’t understand him – that end-to-end security of DNSSEC is similar to that of https; if anyone in the middle changes an element or response, then the whole thing is invalid.

However, you both miss a key point. The issues with SOPA are not technical in nature, although, as @paul says, there are technical issues. If it were possible to do DNSSEC and the restrictions of SOPA/PIPA, the backlash would still exist.

The Internet-using population as a whole objects not to the mucking with the guts of the Internet as the attempt to create censorship. No one (at least no one mature) objects to anti-crime. There are already laws on the books that make it a crime to copy and distribute copyrighted material. If someone takes a copy of the last Harry Potter film, copies it and redistributes it without approval from the copyright holders (Warner Bros), then they can be charged with criminal activity under Section 5 http://www.copyright.gov/title17/92chap5.html

However, SOPA/PIPA does not even attempt to criminalize copyright infringement; that is already done. It attempts to criminalize any intermediary, knowing or otherwise, and give government and sometimes private individuals the power to shut down entirely those intermediaries.

If someone carries 500 copies of Harry Potter on his person, flies American Airlines into LAX, and is caught by Customs, he is held liable (as well as suppliers), not American Airlines nor LAX, and Expedia is not held liable for selling a ticket on AA, or Google from providing search results to Expedia. Yet SOPA/PIPA ask that the moment that happens, American Airlines can be shut down, as can LAX, Expedia and Google.

The only time AA or LAX should pay is if Warner Bros warns them in a timely fashion, and they don’t take reasonable action. We have a law like that for Internet copyright, it is called DMCA.

The issue is not the technical, it is the fundamental.

One of my favourite daily reads is Fred Wilson’s AVC at avc.com. I don’t always agree with him, but Fred has some great insights, raises interesting issues, and every one of his daily posts has 100+ comments. The community Fred has gathered around his writing is phenomenal. I think if he could find some way to monetize it, he could retire from the VC business, although I strongly suspect he enjoys it too much to do so.

In yesterday’s comments thread, John Revay posted a question about selection of technology for building a prototype. It was an important question, one that underlines how seemingly irrelevant early stage choices can have a huge long-term impact (or, in financial terms, the decision is highly leveraged). I felt it is worth repeating the question and my answer to it in full here.

And the response:

A piece on Twitter today made me think of the Second Amendment. Apparently, a Massachusetts DA used a subpoena to get information on some Twitter users, and then made the mistake of asking Twitter not to inform the user. Twitter promptly ignored the request to keep it secret, while still complying with the law by providing the user’s info.

What does this have to do with the Second Amendment (while steering clear of the politics)?

One of the key purposes of the Second Amendment was to counter balance the exclusive right to the use of force. While there is never any desire for civilians to rise up against the government, the very knowledge that government does not have an exclusivity on the means of force and violence would naturally curb its inherent tendency towards excess.

I am not an anarchist, nor one of those who believes that government and civilization are inherently evil. Hobbes was right, without organized civilization, life would be nasty, brutish and short. I do, however, recognize the foresight and understanding that the Founders had, that government, by its nature, would tend towards abuse of its power.

For some time, despite many well intentioned DAs, some, perhaps too many, have abused that power, in the self-interest of either power or political advancement. They do so safe in the knowledge that they pay no price for that abuse, as it normally does not make it to public knowledge.

The Twitter case shows how that power balance may be shifting. As key elements of behaviour that interest government shift online, government is attempting to use its tools – and abuse them – believing the old rules apply. While the tools can and should be used, and Twitter, Google, Facebook and the like should comply, officials need to know that the online communities communicate across large number of people, in many ways organized themselves, in seconds.

If the knowledge that officials no longer have a monopoly on organization, similar to its lack of monopoly on the use of force, in and of itself will curb abuses, then the Internet and social media have provided yet another invaluable service to society.

A few months back, Marc Andreessen posited that Oracle was in really big trouble, it just didn’t know it yet (at least not publicly). His experiential reasoning: he invests in lots of companies, and is connected to many many more, and not one of them, without exception, uses Oracle. Everyone uses either MySQL/PostgreSQL (i.e. open source) SQL, or NoSQL Mongo/Couch/etc.

Yesterday, Oracle’s earnings came out, revenue was basically flat, and the share plunged. As pointed out by Matt Rosoff, this may confirm Andreessen’s prediction.

My take on it was the income from support and maintenance versus new license sales. When a software firm reaches the point that the revenue from maintenance equals or exceeds revenue from new sales, essentially the company is on the way down. I was a customer of IBM when VP at a large financial back in 2001-2005, and I clearly recall when IBM’s Tivoli division crossed the 50% mark.

A software – and any – company’s future depends on its ability to sell to new customers. If existing customers are paying the same or more as new ones, then you are having a hard time selling to new customers, and you are on your way down. You may milk the cow for a good few more years, in which, because of reduced R&D investment, your cash may be higher than before, but life is on the way down.

The real pity of it is that Sun was a great company (and great engineering shop with great talent), and likely will go down along with Oracle.

ABC reported this week that the French company Atos will be aggressively moving to a “zero email” policy, at least for internal communications. The rationales appear to be:

• People in the real world are replacing much of their email communications with IM, SMS and platform-specific messaging, like Facebook
• Only 10% of email messages in the company have value, while an additional 18% are pure spam.

I agree that many people are switching from email to platform-specific, IM or mobile communications (roughly including SMS and iMessage in the latter). However, it is more than likely a choice of convenience than specific preference. When much of your communications already occurs inside a social network like Facebook, then it is natural to have one-on-one communication inside that platform.

However, it is extremely unlikely (actually absurd) that an enterprise will simply turn over all of their communications to a social network – US-based Facebook or any French one – and have everyone friend everyone else and communicate there. So what Atos is planning is replacing their well-known and well-defined email-based messaging system with… another messaging system. The other system may have better IM tools, like presence or real-time short message streams, like IM products, or may have chat channels, but these tools have long been available to enterprises. Switching from one messaging platform to another may make for great press releases – “look, we enterprise are killing email!” – but fundamentally, nothing much has changed, except for a huge expense.

Additionally, the justifications around spam and useful messages, are not email-specific they are messages-specific. Only 10% of messages are useful. Today, those happen to be email. Switch to any other platform, however good, and those messages will simply switch to the other platform.

This reminds me of the old joke about the kid at camp who got a letter from his parents saying, “you know how 75% of all accidents occur within 1 mile of your home? We are much safer now, we moved 2 miles away!”

Last night, I had the pleasure of speaking with an old friend of mine. He is a fairly experienced executive with M&A, so naturally we discussed the DOJ and FCC attempts to torpedo the AT&T/T-Mobile tie-up, as well as the general difficulty of getting an acquisition done, especially when there are interested lawyers on multiple sides.

I have always been a big believer in the power of words. For example, “economics” is defined as the “allocation of scarce resources.” When dealing with an economy, and understanding that every allocation you make is a choice at the expense of something else, you understand the need to make trade-offs and try to make the best choices. On the other hand, in some languages, e.g. Hebrew, the word for “economics” sometimes means, “to provide.” In that context, a normal person’s mind, especially if they do not understand the intricacies of how various elements of macro-economics tie together and influence each other, will tend towards, “why shouldn’t everyone have everything?” I believe this difference in meaning has had a pernicious impact on Israeli economics for decades, and goes a long way to explaining the uphill battle modern liberal economists have had in Israel. They are winning, but slowly.

Society, and especially media reports, often refer to “the government” or “the DOJ” or “the FCC” as being against or for a particular result. For example, “the DOJ is against the AT&T/T-Mobile merger,” or “the FCC is concerned,” or “DHS objects to using electronic devices on flights.” However, there is no such thing as an independent mind known as “DOJ” or “FCC” or “FAA.” The reality is that people make these decisions. And these people, like every other person, have their own biases, political viewpoints, cultures, and, most importantly of all, incentives.

An attorney at the FCC, whether Genachowski or someone underneath him, has decided to object to the deal. Whether this is due to real concerns about competition, or someone who needs another notch on his/her belt to advance in government employment or private sector… (a) these incentives matter and (b) this is a person, who has been invested with a certain amount of power, who is making the decision, not an agency. This person is no more or less fallible, and no more or less honest, than anyone else. It is just a person responding to incentives.

A similar thought comes to mind with respect to the ban on electronic devices during taxi, takeoff and landing on flights. There is no, absolutely no, zero, nada, zilch, rien, klum, you name it, evidence that such devices are dangerous to the flight. Period. There has not been a single documented incident of damage caused, nor is there an engineering-driven reason to suspect it. Yet, the “FAA”, i.e. a real person with real incentives, has decided to continue to ban them.

I am glad to see the absurdity of this policy finally get some attention, in the New York Times, no less – Bits column, available here – but I find the most interesting part to be the FAA’s response, about halfway through the article, where the FAA’s spokesman admits that there is no evidence, but “would rather err on the side of caution.” If he really wanted to be safe, he would just ground every flight indefinitely; that would certainly be safe… and useless.

I do not know who at the FAA has the power to make these “safety” decision, just as I do not know who at DHS has the right to make the decision that 3 ozs of toothpaste is fine, but 3.5 ozs of cream cheese (seriously, I tried to take it through DCA once) is life threatening. But whoever is “erring on the side of caution” is not the “FAA”, but a real person with real incentives. These incentives, whatever they are, currently push towards being frightened unnecessarily. Find the incentives, you find the reason for the policy.