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Category: economics

Microsoft and Google: Wielding Hard and Soft Power

Published July 8, 2008 by cgerrish

Vendor Lock In

Steve Lohr of the NY Times posted an interesting article on the economics of Google and Microsoft. As usual the Network Effect was front and center in the analysis. Bill Gates gets his props as the foremost applied economist of the 20th Century. For those keeping score at home, that would be the last century. According to Lohr, Google lays claim to the 21st century. But it’s Lohr’s extension of the metaphors of hard and soft power that open some new areas for conversation.

Microsoft is associated with hard power combined with the network effect. The idea is that through proprietary formats and an operating system, Microsoft created a lock in that couldn’t be broken. You can check out any time, but you can never leave. Interestingly, Microsoft’s network effect was created without the Network. Dominance was enforced at the Enterprise and OEM level, most users never actually had to buy a Microsoft product.

Google is associated with soft power. Users are free to leave at any time, no proprietary formats are used, but ongoing usage creates a form of addiction. The network effect enables the large scale harvesting user gestures to create a learning machine that constantly adapts their algorithms. The result is the ongoing incremental improvement of the value of their software products delivered through the Network. Switching costs are low, but finding better value is difficult.

The internet has detached the user experience from Microsoft’s hard power, and Google has created a cash machine located firmly within the Network. Microsoft won the 20th century battle for hard power, but the 21st century’s battle is over soft power. The major players have to dominate without lock in, and Microsoft is starting to pivot from hard power to soft power. The Yahoo play was part of that strategy, Live Mesh and Silverlight also move Microsoft up the stack to the level of the Network. To win in the soft power arena, you’ve got to play in the open and you’ve got to deliver more value. The other thing Microsoft needs is a source and engine for harvesting user gestures as an input to improving the value of the product.

The hard power metaphor is useful at looking at the lock in players that still have some dominance. The obvious move would be to look at the entertainment industry, but that game is largely over. It’s the Telcos that really still play hard ball with hard power. The iPhone is starting to break that lock as it floats above the telephony system and lets the Network dominate. Think about the raw usage percentages of the iPhone, how much telephony, how much Network? The big lie that the Telcos need you to believe is that voice data is special. They need to distract you from the fact that the Network is getting more and more real time and delivers multiple media types for a lower cost.

But the Telcos are safe until the internet identity problem is solved. Today you’re identified by a phone number. Tomorrow it may be OpenID or CardSpace, but you won’t need that phone number anymore. When the hard power war is over in that space, a huge wave of innovation will be unleashed. And you might be surprised about who’s leading that charge…

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Mark Lucovsky and Jason Calacanis suggest National Heathcare as a Web Service

Published June 28, 2008 by cgerrish

Red Cross

Shuffling through my notes, I found a post that slipped through the cracks. It references a Gillmor Gang from earlier in the month, Mark Lucovsky of Google was a guest on the show:

The conversation was wide ranging and focused on Lucovsky’s current role at Google and his former role at Microsoft. Jason Calacanis shifted the discussion on to the general ecosystem of online business infrastructure. He’s in the middle of making some decisions about the growth path for Mahalo and sees the cost of these services dropping rapidly.

Calacanis’s political point was that the virtualization of fundamental web infrastructure lowers the cost of business creativity and therefore will be a major economic driver– and may pull us out of this recession. Lucovsky commented that he didn’t see a consolidation of infrastructure providers, but rather an environment where each of the big online companies provided the thing that they do best as an API or service.

In a comment on Microsoft’s Live Mesh, Lucovsky asserted that the complexity of the problem required a seasoned professional like Ray Ozzie. He’s made the requisite number of mistakes to take on a project of that level of difficulty. Lucovsky goes onto say that there’s a difference between this kind of creativity and the frothy sort of Web 2.0 stuff that comes across our screens every day via TechCrunch.

Assuming that business creativity in this ecosystem is not the sole province of the young and the rich, there are a couple of pieces missing. This picks up the thread of a conversation that happened about a year ago about age and business creativity. It was a conversation that unleashed a lot of passion. Here are a couple of links back into that conversation space:

Creativity in any space is tied to risk taking. The young assume immortality and therefore have a high tolerance for risk, time allows for recovery from failure. The rich also can recover from failure through the buffer of money. As we all know, time is money and conversely money is time — and time heals all wounds.

If, as Calacanis asserts, it’s all about ideas in this new era of cloud-based infrastructure, then implicit in that is the notion that the services that sustain the human side of that equation take a similar form. National healthcare and a decent retirement system would reduce certain aspects of risk and open the field to a broader range of individuals: people who’ve lived a little and made the requisite number of mistakes to create at a deeper level.

A new era of a meritocracy of ideas in the technology businesses is deeply intertwined with the political questions that sustain the humans that do that work. In our conversations about the path of technology, these background processes need to brought to the surface– if there is to be change we can believe in.

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Track: The Future Tense of ‘To Search’

Published June 23, 2008 by cgerrish

NASA Tracking Dish

Trying to understand what track might become if it emerges again. Every time I start to deepen the question, a new train of thought is unleashed. Track is not a well known gesture on the Network, but its potential value is unlimited.

A glint in a riverbed, images of the goldrush, Das Rheingold and Deadwood rush through my mind’s eye. Certain basic commodities are so rare and valuable that men are moved to desperate action to acquire them. Track is more like water or search, it’s rare now, but will eventually be as common as clicking on a link. It will be a primary mode for hunter-gatherers on the Network trying to find something in this particular moment. And in this moment, the glint remains obscured from vision.

Walking down the street with an economist. I spot a twenty dollar bill on the sidewalk. “Hey look,” I say, ” a twenty dollar bill.” My friend the economist snorts, “don’t be ridiculous, if it really was a twenty dollar bill someone would have picked it up by now.”

Karoli Kuns says “I’ll drop a link in Twitter” as part of a live conversation across the Network. I’m listening on time delay via RSS/Sync/iPhone. It’s just a casual gesture, no one questions what she means. Think about the ripple effect of really simple publishing, and the simple findability of the item.

A commercial rolls across the television screen in the background, a bank commercial:

Real-time info matters.
Chase what matters.

Certain elements of the periodic table only appear under very special circumstances, they’re called transuranic elements. They don’t appear naturally, to the extent they exist they’ve been artificially produced in nuclear reactors or particle accelerators. Track only exists in a rarified air, a particular set of environmental conditions had to occur. The basic requirement is the real-time web, where there’s enough volume of traffic to allow track to return valuable results. Twitter is relatively small, but it has established itself as a primary gesture market with enough data structure to allow for some interesting queries to return satisfying results.

Given the general instability of Twitter, one assumes the staff there is concentrating on the basic publish and subscribe capabilities. As they discuss the new architecture, they’ve made mention of messaging rather than a traditional CMS. That suggests that track could be meaningfully supported, but they don’t seem to have an expansive understanding of what they’ve enabled.

The gesture space around track is completely new. While it’s difficult to explain what Twitter is, a solid definition of track is even more elusive. The initial use case is the extension of a directed social graph through keywords to create a listener in the live web’s primary gesture market. This creates opportunities for interactions in real time.

While chat might be the obvious first interaction, there are others that will emerge:

  • A clarification
  • Extension of a concept
  • A negotiation
  • Relaying a message to a different social graph
  • An agreement on a transaction

Complex structures can be built from simple gestures. A primary market for gestures combined with track could be the primary mechanism to enable VRM. When connecting customers and vendors in real time, it will be easier to filter a single stream of gestures rather than the whole web. Now some might argue for a special stream just for VRM transactions, but I disagree. When thinking of categories, I tend to agree with that guy who said something like — categories are important, but “everything is miscellaneous.”

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Oil and the Geography of Desire

Published June 22, 2008 by cgerrish

Exotic Fruit Poster

The annihilation of distance is a feature of our modern life. On the network, all locations are one click apart. Or rather, two clicks, because most transport is mediated by Google. In our daily lives, the products in local stores, and the food in the fridge has global sources. The cost of transportation, combined with lower production costs, has made geography a non-factor. 

What was once exotic is now available everywhere. In the United States we’ve achieved a kind of homogeneity of place that at first seems desirable, but soon becomes boring and expected. We no longer know the seasonality of our food, our local stores are replaced by national chain stores. Our set of choices is much larger, but it’s the same set available everywhere to everyone.

Geography and distance had become a hidden facet of the products we buy and the food we consume. The price of oil has surfaced this hidden facet. The exotic becomes exotic again; a grape is no longer just a grape, but it’s a grape from Chile. The quality of distance is reasserted, and distance has a price. Higher prices result in lower demand, and may create different economics around many things we’ve come to think of as local.

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