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Category: economics

Kindle: Network Connectivity included in purchase price

Published November 25, 2007 by cgerrish

Connectivity to the network included in the purchase price of the Kindle. This is the most revolutionary part of the Kindle. It’s a product, a hunk of plastic and electronics that comes in a box with a recharger. The price is a little high for an e-reader, the special sauce is the built in complimentary network connectivity. There’s no meter running and network connectivity is essential nowadays in everything in life,  with a lot of tech advances in robotics, A “networked robot” is a robotic device connected to a communications network such as the Internet or LAN, EMS Solutions works with the latest cable and wiring connections.

It’s EVDO, Amazon calls it WhisperNet– but it doesn’t really matter what the technology is or what it’s called. The consumer doesn’t need to think about it. It’s what enables shopping for books and periodicals, and what allows delivery. It will only be noticeable when it’s slow or not working.

I’m not sure how the economics of this work, but if the cost of the network is built in to the cost of the reader and the purchased content, the issue of the price of the network disappears. And with that, a big usability problem and a big uptake issue goes away. The network is assumed. With some mass production, economies of scale and a little time we may get the price down to what a DVD player costs.

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Bring me the dreadlocks of Jaron Lanier

Published November 21, 2007 by cgerrish

Jaron Lanier

Jaron Lanier writes in a New York Times Op-Ed piece that creative types need to get paid for “digital content.” Lanier used to be in the “information wants to be free” camp. Now that information has become content and it seems to adding some value when it grows via spontaneous generation in caves like Facebook or Delicious, Lanier is interested in a piece of the action.

Burma Shave Sign

Lanier thought that somewhere down the road the creative people making digital content would find a payday. But the network is what you make it. The network we inhabit isn’t built for collecting tolls, it’s built for billboards along the roadside. There are some closed loop systems like Second Life where payment for digital goods is normal. All that’s required is for the system owner to control the physics of the entire virtual experience. iTunes is an end-to-end experience as well, but it’s an extension of a familiar payment model. These are the kind of models that Lanier is well-known for pioneering.

The question about getting paid is an interesting one. Right now it’s advertising and targeting that pays the bills. Better targeting + big traffic flow = Google.But what if we want an alternative to advertising.

When the work of art is a physical thing or a performance there’s a clear ceremony around collecting payment. The introduction of mechanical reproduction changed the intrinsic value of the work of art, the price, but not the nature of the transaction was affected. Generally the cost of mechanically reproducing art or creative output was still relatively high and required a specialized set of skills. In the age of digital reproduction, the only skill required is “copy” and “paste.” The original and copy are only differentiated by a creation time stamp. The digital is also viral in the network and the packets can be anonymous as they travel through the long series of tubes. When you bought that digital content, which vintage of time stamp is yours? Can we put toll booths on every entry point on the network? Can we implant the toll booth in the user?

This is the point where it would be nice to reveal the magic method by which creators of digital content get paid on an open network. There’s not one answer. Some clues to help us along the road? Philip Greenspun’s book was free and digital before I bought the copy that sits on my bookshelf. The 37 Signals book, Getting Real, was sold first as a PDF download, but is also available to read for free online. Here’s another clue, we pay for the container, not the content. It’s the form of the hardback book, not the text it contains. Think about that in relation to the network. You can see the problem.

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Bill Hambrecht, Google & pricing an IPO with a social network

Published November 18, 2007 by cgerrish

The Google offering happened a while after I left WR Hambrecht + Co, but I can’t believe I never saw this Charlie Rose interview with Bill Hambrecht. It seems like ancient history viewing it now. Looking at the offering price and today’s price one might think the deal was underpriced by the modified dutch auction. As I recall, at the time, many thought the IPO offering price of $85 per share was too high.

Hambrecht’s modified Dutch auction method of pricing IPOs still isn’t understood very well. Basically it’s the idea of the wisdom of crowds (or markets) applied to determining the appropriate offering price for a company’s initial public offering. Think of it like Digg for pricing the initial stock price for a company. It’s a like asking the community of investors what the right price should be— a radical use for a social network.

The method works best when a broad range of people have an opinion on the proper initial price for a company’s stock (a high bid to cover ratio). It doesn’t work very well when the company isn’t well known. In cases like this investors (bidders in the auction) actually have to read the prospectus and attempt to determine a reasonable price. This, of course, is nearly impossible. It would be like trying to rate a new album from a band you’d never heard based on the tax returns of the musicians.

For those in the tech community looking for liquidity events through an IPO (as opposed to acquisition), you’d do well to at least take the time to understand how the Dutch auction works. Back in the day Joe Tennis and I put together a flash animation explaning how Hambrecht’s OpenIPO works. Check it out, it still holds up pretty well.

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“Macs just work” It depends on the meaning of “work”

Published November 18, 2007 by cgerrish

Apple or Microsoft: Choose your platform

Scoble and Winer are crowing about the fact that Apple products break sometimes. And if you use them in the margins of their functionality, they break more often. Now clearly Apple products break sometimes, they have strange limitations and can infuriate developers who create in the space close to core functionality. They’re claiming that this contradicts Apple’s brand promise which they define as “it just works.”

It depends on the meaning of “works.” If you mean Macs always function perfectly from a mechanical and software perspective— well that’s simply impossible. And certainly Winer and Scoble should know that. Especially Winer, who once said: “I make shitty software. With bugs!” The truth of it is, everybody does. Apple does too.

The “it works” I like about Apple’s products is they’re easy for regular folks to learn how to use. They make it easy to get started, easy to get online and browse, easy to get into digital photography, easy to buy music online and transfer to an mp3 player. That’s the brand promise. The very idea that any company could have a brand promise that implies their products are perfect and never break is absurd. A lot of brands trade on the idea of quality and reliability. That doesn’t mean they never break. Those of us immersed in the digital sometimes lose sight of how difficult it can be to use a computer. A translation of “it just works” might be, “even I can use this computer.”

Chumby

A related thread is the introduction of Chumby. The digerati hail the hackability of the device, but that’s not what’s really interesting about it. It’s that it’s simple. It takes away almost all of the power and flexibility of a computer, but the user is left with enough value to make it interesting. It’s the beginning of a wave of single purpose websites and network connected devices.

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