The News – 05/30/03

In this Issue:	Recommended Reading
The Cheap Revolution Shameless Self-Promotion Dept. The Continuing Saga of FeaturePrice Charge for Spam Say Goodbye to Bananas It Could Come To This More on Qurb	I realize this is the only newsletter you’ll ever need, but if you want more in-depth detail, check out: Stan Hustad’s The Coaching Connection Management Signature's The Express Read

The Cheap Revolution

You know if George Gilder’s on it, it’s a trend. At his recent Storewidth conference, Guru Gilder and other industry luminaries extolled the virtues of cheap, and it really does seem to be a trend that’s building momentum.

Rather than pay big bucks for a few, specialized, high powered servers, for example, many companies are instead deploying large numbers of inexpensive commodity Intel-based hardware. And they’re not necessarily putting our favorite software monopoly's bloated, security-hole-plagued operating systems on these Cheap little boxes. Linux, the King of Cheap, is becoming very popular in corporate America.

Forbes publisher Rich Karlgaard pumped the Cheap notion in his introduction at the Storewidth conference, which Forbes co-sponsored. In a bit of hyperbole, he claimed, “Sun's biggest competitor today is eBay, selling one-year old servers.”

The hottest tech stocks at the moment are all Cheapies: EBay has seen its shares top $100 and stay there; Amazon.com recently rose to a new 52-week high at $34.13; and Yahoo has traded as high as $28.85. What do two of these market leaders have in common? Cheapie architecture. Google is running on 12,000 cheap PCs and the free Linux operating system, serving 150 million page views per month. Amazon uses the secure Apache Webserver variant, Stronghold, to host its sites. eBay, on the other hand, uses huge Sun mainframe-like UNIX servers, and, perhaps coincidentally, is the only one of the three to have had several significant outages.

Three trends are driving interest in these companies’ stocks, according to Goldman Sachs, which recently held a conference of its own. First, Goldman claims that e-commerce has “finally crossed the chasm to mass-market adoption.” Second, the investment firm expects that broadband growth will pick up due to price reductions and drive e-commerce and online advertising. Finally, consumer Internet companies like the Big 3 represent one of the only “truly emerging growth sectors.”

Huh? The Internet – the consumer Internet no less – may be coming back into vogue on Wall Street? Holy portfolio, Batman! How does this renewed investor interest in post-Bubble companies square with the Cult of the Cheap?

It’s clear that any revolution is actually over when the technology becomes cheap enough to not really care that much about. Witness my favorite example, presented by Kevin Kelly at a Delphi conference in late 2000: the Sears Home Electric Motor. (Longtime SNS Readers can skip this if you’ve heard it; it’s still a great point, two and a half years further into the current revolution.)

Former Wired editor and author of the Bubble-y bestseller, New Rules for the New Economy, Kevin Kelly related a story of the early 20th century Sears Home Electric Motor. This product was a portable but expensive device that could power all manner of labor saving devices. Kelly asserted that people of that time couldn't imagine what was to come: Motors disappeared into the fabric of home support systems.

It's certainly true. Rather than a single, expensive, valuable resource that needs to be conserved, managed, and maximized, domestic electric motors today are in everything and we never think about them. Try taking an inventory of all the motors in your house. Did you remember to count any mechanical clocks? How about the timer in your dishwasher or your washing machine?

Kelly's point is that computing will disappear into the background just as so many other technologies have. It was an earlier cheap revolution that made it possible for electric motors (and telephones, and reliable electric power, and a myriad of other last-century innovations) to fade into the fabric of our everyday lives, rarely attracting our attention. Will this current Cheap Revolution be the beginning of “computing too cheap to meter?”

Kelly’s way of describing this Cheap Phenomenon was as a cost curve that approaches zero. A corollary to his thinking is my assertion that, “On the Internet, everything devolves to free.” (See my presentation from that same Delphi conference for more on that subject, here. Email me if you want the PowerPoint file; it’s good for a post-Bubble laugh.) Incidentally, Kelly is currently researching his next book, an attempt to answer the question, what does technology want?

I’m tempted to answer Kelly’s question flippantly, harking back to the old “Information wants to be free” saw – Technology wants to be free, and technology wants to be expensive.

Few people who are familiar with the “Information” quote, uttered almost 20 years ago by futurist Stewart Brand, are aware that the back part of that quote is, “information wants to be expensive.” This quote has been flying around the Net since its inception and has been used as the justification for all manner of foolishness. (Old timers will remember Stewart Brand as the creator of the Whole Earth Catalog, and also the pioneering electronic community the Well, AKA Whole Earth 'Lectronic Link, as well as a founder of the Global Business Network.)

Brand originally said, in 1984 at the first Hackers' Conference, “On the one hand information wants to be expensive, because it's so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.”

Three years later, he had refined the message somewhat, in The Media Lab: Inventing the Future at MIT: “Information Wants To Be Free. Information also wants to be expensive. Information wants to be free because it has become so cheap to distribute, copy, and recombine – too cheap to meter. It wants to be expensive because it can be immeasurably valuable to the recipient. That tension will not go away. It leads to endless wrenching debate about price, copyright, 'intellectual property', the moral rightness of casual distribution, because each round of new devices makes the tension worse, not better.”

In later talks at the Media Lab, Brand added one final elaboration on this theme: “Information wants to be free (because of the new ease of copying and reshaping and casual distribution), AND information wants to be expensive (it's the prime economic event in an information age)... and technology is constantly making the tension worse. If you cling blindly to the expensive part of the paradox, you miss all the action going on in the free part. The pressure of the paradox forces information to explore incessantly. Smart marketers and inventors quietly follow-and I might add, so do smart computer security people.”

So why am I belaboring this point? Well, try substituting the word “technology” for information in Brand’s quotes and you get an interesting insight into the Cheap Revolution:

On the one hand technology wants to be expensive, because it's so valuable. The right technology in the right place just changes your life. On the other hand, technology wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.

Technology wants to be free because it has become so cheap to distribute, copy, and recombine – too cheap to meter. It wants to be expensive because it can be immeasurably valuable to the recipient. That tension will not go away.

If you cling blindly to the expensive part of the paradox, you miss all the action going on in the free part. The pressure of the paradox forces technology to explore incessantly. Smart marketers and inventors quietly follow-and I might add, so do smart computer security people.

Kind of creepy the way it fits. And it does make a nice pat answer to Kelly’s question.

But Kelly is serious about his question. What does technology want?

As technology becomes more animated and autonomous, I think we should be asking ourselves where it wants to go, what its biases are and how far it can govern itself. We need to know this at the very least in order to push back expertly and with appropriate force -- otherwise we push in blindness.

I believe these deep ruminations have something to do with the Cheap Revolution. For example, part of the Cheap Revolution is IBM’s push for computing as a service. And part of computing as a service is IBM’s support for grid computing, the ability to link together hundreds, thousands or even millions of computers to provide computing muscle on demand. Big Blue is reaping the benefits of this devolution to Cheap: According to Forbes’ Karlgaard, E-Trade recently “yanked 50 Unix servers that cost $220,000 apiece and brought in a gaggle of $4,000 IBM servers.” Grid is a Cheap technology that wants to take over the enterprise.

(OK, I can’t resist, as long as we’re taking a stroll down memory lane in this piece. E-Trade’s former Chairman and CEO, Christos Cotsakos, used to be CEO of ACNielsen back in 1996 when I worked there. He was asked by a fellow employee at a trade show what he thought of the Internet. “The Internet is crap,” he said, sending a chill up my spine, since I was responsible for the only Internet efforts at ACNielsen at the time. E-Trade was his first job after leaving ACNielsen, and for years following his departure, my email signature featured his quote.)

If you can stand one more pundit, according to Karlgaard and my buddy Graeme Thickins, business guru and author of The Innovator’s Dilemma, Clayton Christensen told the crowd at the Storewidth Conference you can escape the Cheap Revolution's margin pressure in only three ways:

·              Improve your product offering faster than anybody else can. This tactic works, generally, only for market leaders with a good brand name, a greased distribution channel and financial might. (Think Intel.) And it works only as long as the market wants the added functionality and is willing to pay for it.

·              Sell fast custom solutions that answer a customer's needs. Xilinx, with its programmable logic chips, does this. So does IBM, despite its size. IBM's trick has been to go modular and bring into its Big Blue tent an army of third-party solutions providers. The old, highly integrated IBM would never have been able to react quickly enough to customers' needs.

·              Find an unserved market and serve it cheaply. This is the way of the disrupter, says Christensen. The product or service should be so cheap, in fact, that the industry's old guard thinks there's no money to be made and walks away. An example, says Christensen, is how Sony served teenagers with transistor radios in the 1950s. Their parents owned expensive tabletop vacuum-tube radios from RCA or Philco. For their part, RCA and Philco knew all about transistors. But they figured these solid-state curiosities would never replace vacuum tubes until they were capable of producing a superior sound. That left the teenagers unserved. Tinny-sounding as transistor radios were in 1955, they were--by the standard of no radio at all--good enough. By serving the unserved, Sony got a toehold in consumer electronics and never looked back.

Thickins said Christensen painted MBAs as the anti-innovators. Christensen said Sony has had 12 bona fide disruptive technologies, “but the 'Walkman' was the last one, in 1979. What happened? A Sony exec told [Christensen] that every decision used to be made by the CEO, conferring with only five close assistants. Their policy was to never do market research. What happened? In 1982, they hired their first MBA.”

So what do these various trends – the Cheap Revolution, the stock resurgence of consumer Internet plays, information/technology wants to be free/expensive, grid computing, and disruptive innovation – have in common and, more importantly, what do they portend for the future?

Tune in next issue to see if I can pull it all together.

Storewidth.com

Briefly Noted

• Shameless Self-Promotion Dept.: My feature article, Grid Computing Takes Off in the Enterprise, was published in the inaugural issue of Fawcette Technical Publications’ Enterprise Architect magazine. (Registration required to view.)
  
  My article, “Innovative Marketers Target Unwired Customers” was published in the NetSuds newsletter.
  
  Coming Soon: A new eBook, Be On the Wave Or Under It™ will collect the best of SNS’ insights over the last couple of years, along with additional material from CTOMentor white papers and new material. It will make a great gift (Father’s Day?) for associates and friends in need of a guide to the latest and greatest technology. Watch for more information in upcoming SNS issues.
  
  I was quoted extensively on eLearning in a recent issue of the Minneapolis magazine, Upsize, which is aimed at growing businesses.
  
  A couple issues ago I debuted SNS Begware, an opportunity for you, gentle reader, to express your appreciation by tipping your server via PayPal. See the sidebar for more info. Total in the kitty so far: $46.48. Thanks, Mike!
  
  I’ve reworked the TrendSpot and Opinion sections, adding a Prediction Tracking page to track the various predictions I’ve made, and also added a Stuff I Said page with some quotes of things I said a decade or so ago on the Net.
  
  I repurposed and adapted an article about the wireless service known as Short Messaging Service (SMS) for the Reside newsletter. It’s entitled, Wherever they go, there you are and it points out how marketers can use – carefully – this new way to contact their customers.
  
  I’m featured in Manyworlds’ Thought Leader Showcase, which lists a few of the white papers I’ve done. I’ve also added their fancy icon to the StratVantage site.
• The Continuing Saga of FeaturePrice: I’ve written before about my struggles with my old Web hosting company, FeaturePrice. I’m safely away from the weirdness that has enveloped that company, but I’m fascinated, in a slow motion train wreck way, by the continuing spectacle. Recently I got an email from the founder and former co-owner of FeaturePrice, who obviously absconded with their client list before he left in December. He’s spinning a wild tale that I don’t quite believe. His chief “evidence” is several postings on the FeaturePrice site that refer to the company going out of business. Yet I suspect that perhaps these postings were the result of hacking, perhaps by an insider, perhaps, say, an ex-partner? If you like a good mystery, check out the link.
  IXWebhosting
• Charge for Spam: This scheme is brilliant: Charge people for reading their emails. Talk about the Attention Economy.
  CashRamSpam
• Say Goodbye to Bananas: If you needed proof that it’s not nice to fool Mother Nature, check out the plight of the banana. Seems that bananas are sterile mutants of the wild banana, and have been asexually reproduced through cultivation for centuries. That means all modern bananas are clones, and thus have the same genes. That’s an evolutionary no-no, and Emile Frison, head of a worldwide network of banana researchers (oh, yeah!) called the International Network for the Improvement of Banana and Plantain (INIBAP), is worried the fruit will be extinct in 10 years. Now this sounded fishy to me, so I did a bunch of checking and found the story at two different reputable sites. Still and all I could have slipped up and this story will make a monkey out of me!
  Millenium Debate
  CBC
• It Could Come To This: Regular SNS Readers know I’m not a fan of silly trademarking/patenting. Well this item shows the logical conclusion of the type of stupid patent granting that’s become an epidemic. Keep in mind that this is satire. But it could happen.
  Denounce.com
• More on Qurb: Alert SNS Reader Ken Florian reports his experience with the spam filter Qurb:

The [Qurb] whitelist is pretty straightforward...Only those inbound addresses that already exist in the Outlook Contact list at the time Qurb is installed or addresses that are later specifically and manually designated as ‘accepted’ get to the Inbox...others go to the "Qurb" folder

Up to now, I've not used anything other than some lame Outlook rules so I have little to compare.  The fact that the "Qurb" box shows up as an Outlook folder is very convenient.

As you know, there is no perfect solution, because I still need to check Qurb for welcome senders.   Even so, it's easier to process that way because I know that most items in the Qurb folder are spam, spam, spam, spam....and the visual inspection of what to keep and what to whack is faster than it would be scanning the Outlook Inbox.

A short time ago I took the costly step of registering all the major domains containing a form of my name. Eventually, I will designate one as "super secret" to be distributed only to those I trust to have secure systems. The others I will use gradually over time and dump one if/when it is compromised.

I was way too cavalier when I first registered my original domain...I used it everywhere, now to my chagrin. This may be advice that is too basic for your readership but if anybody bothers to register their name (or something like it), they need to preserve it carefully...once it has been grabbed by the general populace, it is "gone" forever!