by Dana Blankenhorn
  Volume VIII, No. VIII

This Week's Clue: Gurley Man

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This Week's Clue: Gurley Man
SSP (Shameless Self Promotion)
SP (Shameless Promotion)
The False Dilemma of Open Source
Comcast's Mouse Trap
November 2
Clued-in, Clueless
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For the Week of February 23, 2004

Venture capitalist William Gurley put a column into the News.Com hopper recently saying that 802.11 may be "under-hyped."

He called it an "open standard" and added this. "Once a single interoperable standard gains the acceptance of multiple vendors in a marketplace, a consumer bias toward compatibility and scale economics create an increasing-returns phenomenon that is nearly unassailable."

In the long run he is absolutely right. In the short run he is absolutely wrong.

He's wrong because most 802.11 equipment isn't based on "open standards." It's based on proprietary consumer electronics operating systems like Nucleus and VXWorks. It's a good product, but it's not what Gurley claims it to be.

I've often said here that Clues come from patterns, and you can get a lot of Clues reading history. This is especially true if, like Gurley and myself, you've lived the history you're studying.

I'll start with what you may consider a remarkable statement. Between 1975 and 1990 computing applications, on the whole, went backward. The Motorola 6502 and Intel 8088 couldn't handle the multi-tasking operating systems, like Unix, then in use. So Apple and Microsoft kludged-up some primitive, single-tasking knock-offs, called Apple DOS and MS-DOS. (Yes, I'm skipping over CP/M. Sue me.)

What happened then, on the whole, was that the mass market recapitulated what had happened in the computing space up until that time. Word processing, spreadsheets, online services - all these things had existed before.

The change started in 1984. Apple bit the bullet, ditching the Apple II and Apple DOS, for a new, graphical, multi-tasking operating system called the Macintosh. In its early years this too was a recapitulation, a recapitulation of work done by people like Alan Kay at Xerox PARC. The mouse, the point-and-click interface, desktop publishing, they had all been thought of long before.

Apple also made a crucial mistake, confusing hardware and software. Instead of licensing the new operating system widely, it thought it was a hardware company and resisted for six years, giving Bill Gates all the time he needed to take the mass market. Meanwhile, of course, the application space languished some more.

I saw the story first-hand in the growth of Samna, an Atlanta company. Their "innovation" was the Lanier Word Processor, a decade-old product licensed for the purpose and renamed Ami. Ami was later bought by Lotus for its SmartSuite, and Lotus was bought by IBM. Founder Said Mohammadioun made a tidy fortune.

But the PC application space didn't really take off until Windows, the mass market leader by default (thanks to the stupidity of Apple and IBM) finally got around to building a so-called "multi-tasking, multi-threaded" operating system. Finally, the PC could lead the computing evolution, rather than following it. The PC platform merged with the LAN platform, then the Internet platform, and created the world of today.

Right now, 802.11 equipment is just like that original 8088. It can do one thing at a time. It's a product, not a platform.

But this business does not have to recapilulate the past. Right now embedded Linux is being offered to 802.11 vendors.

And it's not getting a hearing.

As a result the access points you're buying today are pretty useless. They will let you and your kids share files, but that's about it. They are not a platform on which new applications can be built.

If William Gurley would turn his attentions into making 802.11 a platform, new applications will come. But in this story he ignores that, as manufacturers today ignore that. So home networking users are doomed to short-term disappointment. They will use the technology to share their existing files, maybe (if it can be done simply and cheap) their audio and video files. And that's it.

If you've read me before you know where I'm heading. The World of Always-On promises a host of new applications, even new application spaces, using new data obtained from you, your home, and the things you own. But in order for that world to be born we need a solid, modular, scalable platform, something we can build on. Right now home networking is a cul de sac, a dirt road. With Linux, it can be a city.

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Shameless Self-Promotion

I work as a business analyst with Progressive Strategies, a New York research firm that has the ear of the world's top technology companies.

My last book, "The Blankenhorn Effect" won the Computer/Internet category in the 2003 Independent Publisher (IPPY) awards .

You have my permission to forward this newsletter widely. And if you have trouble subscribing let me know. Remember: it's journalism that keeps the Clues coming...

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Shameless Promotion

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Takes on the News

The False Dilemma of Open Source

News.Com has been running features on a phony issue -- the idea that open source software companies can't make a living. .

Many companies that have long sold shrink-wrap software, like Novell, are under the mistaken belief that they sell a product. They never did. Software licenses have always been written so that no one "buys" any software package. The original reason was because software broke, and software companies didn't want to be liable. Later, under Microsoft, this changed to a "subscription" model -- you don't buy anything, you rent it.

The fact is that the government classifies software as a service, not a product. That should be the business model going forward.

In a complex system, like an Always-On system, there are many layers of software, and as more people have banged on them the bottom layers have become very stable indeed. This is especially true of kernels, the operating system instruction sets that define what you can do with the operating system and how you can do it. The current Linux kernel is very stable. So, believe it or not, is the Windows kernel, and the Macintosh kernel is also rock-solid.

Licensing a kernel, then, based on a fear it will break, or trying to get paid for it again-and-again, under a subscription, is silly. This is a product. Whether it has a price on it is irrelevant. Its incremental value, based on how easily software is copied, is zero anyway.

Above this we have the operating system, which implements what the kernel can do. This can be very stable. Linux is very stable. This may not be stable at all. Windows is not stable. Buyer beware.

Above that are stacked a host of applications, many of them in layers. As applications age, as they're tested in the marketplace, most gain a measure of stability. The incremental cost of maintaining them falls toward zero.

But there are two things that are never worth nothing in the world of software. One is the inspiration needed to come up with new things for software to do, combined with the perspiration to create the initial design and the first implementation. The other is the grunt work needed to slowly make existing products stable.

This is where the real money is. And all these things - ideas, implementations, support - these are services.

It doesn't matter whether your software is written under the General Public License (GPL) of GNU-Linux, the less-restrictive BSD license, or the you-can't-see-the-code Windows license. It's the design and implementation of something new that costs the big money, with continuing payments necessary to maintain the software as it becomes stable. The more copies there are, the more people there are paying this freight, the faster these costs can go down, being spread across many units, but for some time they remain real enough. And customers will find a way to pay them.

My best analogy, as you know, is to that of a volcano. The lower layers are fairly stable, although if someone comes up with a great innovation you might get another path toward profit. It's the gems that emerge from the surface, and the lava bubbling from underneath itself, that require energy (money) to produce and maintain.

IBM has committed itself to Linux, not because it's free but because it can be profitable to sell services and solutions based on it. So should you, and for the same reason.

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Comcast's Mouse Trap

Comcast's offer to buy Disney was good news for Disney shareholders, but bad business. The proposal represents an attempt to marry two "Trusts" -- the cable trust and the media trust -- into one big thing.

Generally, I think folks should stick to their knitting. This becomes harder-and-harder the more you combine disparate businesses under one umbrella. People go from being entrepreneurial, and bottom-line oriented, to being bureaucrats, managing to the numbers rather than the customers.

This is the kind of lunacy that caused Time-Warner to buy AOL.

It's Time-Warner, in fact, that Comcast's Brian Roberts is trying to emulate. But Time-Warner built its cable empire at the same time it was combining various media properties. At Time-Warner, the cable guys have always known they worked for the media company, not vice-versa.

The word Roberts will spin around this is "synergy." I don't believe in it, not between big companies. I do think a big company can buy a small company and, perhaps, exploit it in ways the small company never imagined. But big mergers almost never work, in the long run, not for the shareholders anyway.

November 2

November 2 dawned clear and cold. But even where it rained, people took it as a bad omen.

Exit polls were out by 10 AM, on Drudge and the National Review. Despite a 40% approval rating, despite a 20% approval rating for Congress, President Bush and the Congress had been returned to power overwhelmingly. Senator Kerry, soon to be Senate Minority Leader Kerry, had won just two states, Hawaii and (ironically enough) Vermont. He had fallen in his home state of Massachusetts 53-47. Surveys indicated few found much real difference between the candidates. Both were Yale men, from the same secret society called Skull & Bones. Both were backed entirely by corporations. Why not go with the devil you know?

How could this be, people asked. And what happens now?

What would happen is that economics would take over where politics had failed. The dollar would continue falling and Russia would lead moves to start making more loans in the more-stable Euro. The economies of China and India would rocket along, the former beset by growing social unrest, the latter by religious strife, but all this allowing yet-more nations in Southeast Asia - like Vietnam and the Philippines - some time in the economic sun.

Australia and New Zealand processed a tsunami of visa applications from white Americans, many of them college-educated, all claiming a fear of persecution. In Canberra the Howard government urged continued processing, suggesting (sub rosa) that this would offset growing immigration from Asia and the Muslim world. In Auckland experienced LA techs took 1/10th their former salaries to work on Peter Jackson's "King Kong," hoping against hope he might sponsor their staying.

The "brain drain" of American intellectuals, who would not be replaced by foreigners for the first time, was hardly noticed at the time. But the air of American triumphalism would be short-lived. For it's intelligence, the "high bandwidth mind" as they say at Microsoft, that is the great engine of economic growth in a post-industrial age. With fewer of these on-hand, American power, influence, and the American lifestyle would slowly wither away.

Even as the Republic was replaced by an Empire, the American Century had ended.

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Clued-in, Clueless

Clued-in is the CDT's offensive against spyware , especially programs that masquerade as anti-spyware tools but in fact are anything but. They don't need legislation, so they win regardless, and pick up both political points and clout for nothing.

Clueless are John Dvorak's analogies in his recent column on file sharing. No candy was stolen in the production of this item.

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