404 @BenBajarin – Thinking Out Loud

“Real Work”

The tablet vs. the PC remains one of the central debates of our time. As an analyst for both the PC industry and the tablet industry I have to study the market for both devices. Benedict Evans wrote a piece yesterday that is worth reading. In summarizing a key thought of his he points out that “its all just glass… The question is what do you want to do with it.

In a similar vein Joanna Stern wrote this provoking article on the subject of tablets and productivity. She puts a number of tablets to the test to see if they can suffice as a PC replacement. The tests she performed are valid and whether a tablet can be replaced by a notebook is a topic that needs addressing. However, it is the wrong question. The correct question is what Benedict asked: what do you want to do with it.

What DO you want to do with it?
My entire thesis about the market for PCs, tablets, and even smartphones is that the markets are mature enough for consumers to know they want one, two, or all three of these devices. But not mature enough that the same consumers, generally speaking, are self aware enough to why, or what specific preferences they have with each device. Prior to the iPad, the only device we had for a “real work” device was a PC. Consumers were using a PC to do things like email, browse the web, write a report, do a school paper, make a movie, edit some photos, etc., on that device because it was the only device capable of doing so. This entire proposition has now been challenged. Not only are tablets, and even smartphones, capable of doing many of the tasks that most consumers users their PCs for, but that they are also better than the PC for many of them.

I firmly believe my iPad is a better web browsing tool than my PC. I believe it is a better entertainment device for games, watching movies, and TV shows. I personally believe it is a better art studio. With all the use cases we can list for our smart devices, the central issue keeps coming back to what do you want to do with it.

Back in the Netbooks thankfully short lived heyday, I was tasked with doing some research to understand why the Netbook was taking off in key PC markets like the US and Europe. We spent a bit of time talking to consumers all over the world to get a handle on what the primary tasks they did with their PC the most of the time. What I discovered was enlightening. The vast majority of consumers we spoke to (greater than 90%) rarely used more than a handful of applications. Mostly they just browsed the web, used an email client, played some casual games (like Solitaire), and every now and then Word or Excel. My key takeaway was that the vast majority of time consumers spent using their PCs they were doing very simple things. This research is where my conclusion that the PC over-serves most consumers is based.

Benedict make a point in his post that I think is exactly the way we need to understand the market for PCs. He points out that one way to look at the market is to draw a clear line between commercial and consumer markets. I would include a university student in commercial for the time being. There are very real and very clear reasons why a commercial customer needs a PC. Perhaps this person needs a desktop, because they work primarily from their desk. Or perhaps they are primarily a mobile worker and work heavily out and about and so the notebook is the right form factor. While I think there are cases when a tablet can suffice for a mobile worker, I recognize there is still a role for the portable desktop (notebook) in the market.

The consumer market is a very different beast. While its true many enterprise workers are also consumers, many do not need to bring their work(PC) home with them. I’m convinced the PC is a truck analogy rings exactly true. A truck is necessary for some people on a daily basis for their line of work. For others, it is only necessary every now and then like when they move, or have to take things to the dump, for example. The only question is if the car is the tablet or the smartphone.

The Connected Vacation

I’m going on vacation. My family and I are headed to a friend’s cabin in Tahoe. It is dumping snow there right now and will be during our drive that will make for some interesting driving. I’m responsible for all the tech stuff for our family. That means getting kids iPads charged, bringing the chargers, charging all my fun stuff like my connected goggles and all my GoPro’s. I take about as much technology as anyone on vacation. In fact, I’d wager to bet I’m in the .01% category with how much technology I take on vacation.

Vacations are about slowing down and relaxing. While I take my iPad and sometimes my Mac, and try to work as little as possible, most of the technology I take has a single purpose in goal. To capture memories.

While I do participate and enjoy several extreme sports, my primary uses for my GoPro’s are to capture memories while on Vacation. When I first got my GoPro v.1 I brought it to Disneyland and wore it on my head to video our experiences on the rides and around the park. People freak out today when someone wears Google Glasses into the bathroom. Well, that is nothing in comparison to my forgetting my GoPro was on my head and walking right into the Men’s room. Yep, it happened. That faux pas aside, the video I made was easily the best family video I had made to date. It was then I realized how powerful a pervasive capture device mounted on my person could become for capturing memories.

Technology to me isn’t a burden when I go on vacation. It is empowering. Getting away from technology and unplugging is without a doubt relaxing, and I aggressively pursue downtime from “work.” But it is important to me to capture memories for myself and my family. Technology isn’t only the best solution for this, but it is getting even better.

I believe in the future of a capture device mounted to our person. In the short term, this device has a specific purpose. For me, I mount a capture device on myself when I want to capture video of what I see and experience. My googles have a heads up display (HUD) that has a GPS built in and well tell me how fast I am going on the slopes, or on my dirt bike, as well as how much vertical air I get on any jump. Every bit of technology I bring and use enhances my vacation experience it does not detract from it. And as I stated, this technology will only get better and enhance our experiences even more.

We can only hope as capture, sensors, display, and other key technology gets even better integrated into things that our ability to use technology to enhance our experiences will become so transparent that we won’t even have to think about the technology itself.

I’m a sight to behold, but I stand my ground that connected vacations are the best.

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500 Words at Tech.pinions

Due to an emergency, I had to fill in for a colleague at Tech.pinions today to write the daily post. I published there what I was going to write for my 500 word post for today. It is on the subject of how consumers have a technological worldview in the same way they have a worldview about life, religion, politics, etc.

Here is the link.

Dumb Pipes

As Mobile World Congress is underway, I am reminded that at its core MWC is a telecommunications trade show. There was a time where the telecommunications element was a bigger deal than it is today. As I ponder the broader mobile industry, I keep returning the question of the role of carriers, and if they are nothing more than dumb pipes.

I pay money to my carrier so that I can keep a device in my pocket that can make calls and maintain a consistent connection to the Internet through their network. The carrier’s hook to many consumers, particularly Western ones, is a device subsidy. A carrier sells a smartphone at a subsidized cost. Making the device more affordable, even sometimes free to the consumer, in exchange for a multi-year commitment. Other than that element, my carrier is just a dumb pipe. Can they reverse this trend? I don’t see how.

A carrier’s true value, their real asset, can be summed up in this image.

cell-tower

Carriers own a cell tower that they upgrade to provide faster service and broader access. That’s about it. They used to have much more differentiation than they do today. Some had proprietary devices or solutions. Some were known for better quality or were the only ones available. Those days are long past in most cases. Pricing is a particular strategy that T-Mobile and Sprint are trying to compete with, but they have simply embraced their “dumb pipe-ness” sooner than other carriers.

What is left for carriers to offer that I will pay them for? This is the question they are confronted with; it is also one with no legitimately good answer to.

Cable companies, while also a “pipe” are not in as dire a predicament as wireless carriers. Cable companies invest in the infrastructure and also the content. As I pointed out a few days ago, there are rigorous rights in place to protect those investments in content.

Smart devices were ultimately the downfall of the wireless carriers when all the value moved to the handset and its ecosystem rather than their own proprietary ecosystem. This is the fear that some cable companies must face. Could smart devices eventually do the same thing to them? We can only hope.

Ultimately, this has all happened before. At one point in time, AT&T owned not just the infrastructure, but also the phone system they handed to customers. Very similar to the way a cable company installs a box in your home so you can get TV, AT&T gave you a box so you could make land-line phone calls. Eventually, the FCC broke up this monopoly and hardware innovation began. Similarly as wireless carriers lost control of the hardware we observed similar innovation in handsets. I’m guessing the same will be true when the cable company monopoly is over. We await the day when we can see hardware innovation beyond the outdated and fantastically terrible hardware our cable companies provide us with today.

I am yet to find a better way to look at the current environment than to recognize that the world will be a better place when we have more dumb pipes.

The Perils of Being an Early Adopter

I’m an early adopter. I’m the product of an environment that made me this way. My father being one of the first industry analysts in this industry brought home a lot of cutting edge technology. He brought home many things that made it in the market and many that didn’t. When it came to technology I always had access to the latest and greatest. That environment fostered my love of technology and gadgets. I was the first on my block with a Nintendo. We were the first family with a car phone. We were the first on our block with a DVD player. We had more PCs than people in our household (this is currently true of tablets per person in my house which currently sits at 3:1). The list is nearly endless.

Now I’m an adult, with a family, but I still find myself craving for the latest gadget. It doesn’t matter what it is or if even prior to owning it I’ve concluded it will fail in the market. Something about the latest gadget draws me to at least try it out. In my line of work, I get the opportunity to test many of the new gadgets as they come out. This feeds the early adopter traits in me, but it is also a blessing and a curse. When you test out as much technology as I do, you see all the sides of the product. You see the good, the bad, and the ugly. Being an early adopter is often the thrill of the chase. There is a status that comes along with the latest and greatest. It is exciting. It is also depressing. This is the peril of being an early adopter.

The excitement and anticipation of most products are often followed up by a feeling of depression when the device does not live up to the hype. Unfortunately, this has been my experience with many wearables and smart watches for example. I get excited about the prospect of using them but then know they are capable of so much more that disappointment emerges. Even today as I watched Samsung unveil a number of gadgets that I will inevitably try I find myself feeling I already know what will happen.

They key to being an early adopter, I have learned, is to lower your expectations of many of the gadgets you desire and acquire. I did this with Google Glasses and was the better for it. I see the devices potential, but I knew it was a very early beta stage product. I have also tempered the number of gadgets I seek. I now only look to acquire and test the ones I think are important for either a technological reason or a market reason rather than get anything and everything. This helps my sanity as well as my bank account.

There is something to living a technological monasticism. For me, having to find a balance between the devices I will use and the ones I need to study for industry reasons is central. The contrast between an early adopters technological worldview and a late adopters is miles apart. My wife will use her iPhone until it literally dies. I try a new phone every few months. Miles apart.

Apple TV

In the late 90s I started a company called iSpyMusic. It was focused on helping the music industry embrace the Internet. It was a short lived adventure. I remember a meeting with Universal’s music group that left me shaking my head. We were discussing an online promotion we were going to do with Boyz II Men via their website. It included using some of the latest and greatest web technologies and would promote a number of their songs. My vision for this company was to help artists stay relevant in the public eye. Artists often lose mindshare months after their albums come out. Their labels then have to spend tens of millions of dollars getting the artists back into the minds eye of their fans prior to their next album debut. iSpyMusic was going to help artists use technology and the Internet to keep their fans engaged year round.

In this particular meeting with Universal was Boyz II Men’s management, their label representative and 6 members of Universal’s legal team. The lawyers outnumbered the non-lawyers in this meeting. We got no where. Legal shut down nearly everything we could do on the basis of contract rights. Whether a stream of a song snippet constituted a “play” and the label should be compensated each time it is streamed was an issue. All kinds of ridiculous things that later got worked out to get where we are today with digital rights. But it was at that time that I realized how much a mess the entertainment industry is when it comes to the ability to use technology.

So that brings me to TV and more specifically Apple TV. Have you ever asked yourself why companies like Amazon and Netflix don’t offer more movies online as a part of the subscription service? Or why a more robust subscription service to motion pictures with movies that have recently come to DVD isn’t available? The answer is digital rights.

Back when Starz was working on their own streaming subscription service the president of this group explained to me something that was fundamental. He explained that, at the time, Starz owned the rights to any subscription service for movies up to a certain length of time after it is released to DVD. These rights were acquired for their network TV channel but extended to digital as well. The length of time after a DVD released they had rights to depended on the studio and ranged from 6 months to a year. This is why Netflix and Amazon don’t have new releases available to stream for a number of films anywhere near their release date. What Netflix and Amazon have paid the rights for are the movies that fall outside these contracts or where the rights have lapsed. Starz pays the studios for these rights and even a few years ago Sony announced their deal with Starz was extended to 2021.

Things are not as cut and dry for the TV networks either. They receive absurd sums of money for access to their shows from the cable providers. Apple or any other company has ways of creating a compelling service with unrestricted access to this content but it will cost them some serious cash. Which they do happen to have.

This is the archaic and dysfunctional backdrop of entertainment media rights that Apple and any companies who hope to compete in the TV service space must cope with. Service providers, network broadcasters, content owners, studios, and more have out of date contracts cut prior to the digital era and extent for decades. This makes any play by Apple TV as a primary service or replacement for cable an uphill climb. It is not the technology as much as it is the contracts that stand in the way of the re-invention of TV.

The Post-Western Technology World

Many years ago I read a great book by Fareed Zakaria called the Post-American World. His fundamental point was not that the West was going to decline but the global story was about the rise of other nations into the economic conversation. Many of the fundamental points he made about economics apply to the global technology landscape. Think about this tweet:

Is this same destiny in store for American PC OEMs? We think about the challenges that HP and even Dell have had. Lenovo an Asian OEM is now the number 1 PC manufacturer and I don’t see that changing any time soon. Apple is the only Western OEM keeping the West competitive in markets like PCs, smartphones, and tablets. And I don’t see that changing anytime soon either.

But what is fascinating is to think about what is happening with the rise of the rest. China is the now the largest market for electronics. In Q4 alone China shipped 100m smartphones in 2013. The mobile internet in Asia is bigger than the mobile and desktop web in the US and Europe.

Western markets still remain incredibly important markets. They are no longer THE markets. Furthermore, for many companies and their strategies, other markets may be more important. Just look at Facebook’s acquisition of WhatsApp. The bulk of WhatsApp’s customers are not in the West but are in emerging markets like Asia (where is declining), India and surrounding regions, Latin America, and SE Asia. Which means that one of the largest technology acquisitions has just taken place for a company whose customers are are primarily outside of Western markets. This is a sign of things to come.

The West has never had a lock on innovation. With local skills in manufacturing and programming increasing in regions like China and India I expect a steady stream of innovation from these rising players in the global technology industry. This does raise some interesting questions. What are the role of global companies vs. regional ones? I see companies like Xiaomi, ZTE, and Huawei and while they have a growing presence in China it is not clear if they can be successful in other markets. Especially ones like India where local brands like Micromax are also growing and competing well in their region. I find the line of thinking that perhaps local/regional technology brands are better suited to compete and serve their regions needs than the global/foreign brands. Samsung is learning this lesson right now as it is being squeezed from every angle in markets like China and India. Apple as well has their work cut out with them competing with the local Chinese brands.

What is left to conclude from the rise of the other, much larger, markets than Western ones is that the a global strategy must operate with a regional focus. Companies who look to compete in multiple global markets can no longer use simple one size (pricing tiers) fits all strategy. Each market is becoming uniquely different. Customers are defining their needs, wants, and desires differently in each region. This is why ultimately regional players can have an edge. They will look to create solutions that fit a market problem unique to their region. That is how WhatsApp started. Many more will follow.

Modern Day Solitaire

My first tech industry job was at Cypress Semiconductor. I held a few roles there but my first was to be on the team that drew diagrams of the chips Cypress made as a reference for other engineers. This is where my love of semiconductors began. After a few months there word got out in my department and the ones around us that I was fairly technical and could troubleshoot and diagnose Windows PCs with the best of them. IT requests often take a while to respond to so before long I became the default tech support for my half of the building.

As I walked around from one request to the next I remember always noticing a familiar game on people’s screens as I walked by–Solitaire. It was as if Solitaire was the universal “I’m bored and need something to pass the time” game at work. I don’t think I’d be going too far out on a limb to proclaim solitaire the most popular PC game of all time. The many hours logged playing this single game on PCs tells us something about regular folk. They like simple games that help them pass the time.

This is why it should come as no surprise that a game like Angry Birds or Candy Crush is so popular with the masses. Or why a game like Flappy Bird could become an overnight success. Most humans want a game they can quickly start playing and be done with in a few minutes. These games are the modern day Solitaire. Ultimately these are the types of games that can be the most successful but are also the hardest to predict and duplicate the success of.

Mobile game play dynamics are essential to the business model and the stickiness of a particular game. We know that free games with IAP (in app purchases) are the overwhelming majority of apps in each marketplace. A game like Clash of Clans is built on this model that combines the reality of being competitive and winning with the necessity to spend money in a game. A game like Clash of Clans is a fantastic business model but it is also one that will not appeal to every type of consumer.

What made Solitaire successful was that it was purely a time killer. There was some strategy involved but the end user could literally start playing and stop at will. This is also the beauty of Angry Birds and Flappy Bird. An entire game can be started and finished in just a few minutes.

While these games are likely to be the most successful they are also the hardest to monetize. They don’t require much engagement and in fact thrive on what I call micro-engagement. Meaning small amounts of engagement. How does one monetize micro-attention minded consumers? Are ads the best way to do this? What if no one clicks on the ads because engagement is so minimal and shallow? Are in app purchases the best model for someone just looking to do some video game snacking? Solitaire became what it was because it was free and pre-installed on every Windows PC. Which makes spending money on these types of apps a long shot.

These apps will be the most popular and gain the most traction but they will also be the hardest to monetize. Lightening in a bottle is hard to predict and duplicate. Yet that is exactly what these apps are.

Our Future Based in Science Fiction

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I have always liked science fiction movies. I never got into much science fiction literature. I have always thought that science fiction can be helpful to spur ideas in the visionary about the future. One may see a flying car and they may be inspired to try and invent it. One may see a smart house with built in assistant that manifests itself as a 3d hologram that you interact with (saw this on the latest episode of Almost Human). Science fiction at its best is an exploration of what the future may look like. Often is the case, Science Fiction helps play a role and bring about self-fulfilling prophecy.

Those who dream up science fiction in literature and in movies get to create a version of the future as they see it. Often these writers have imagination but also something that many humans struggle with–vision. The visionary see the world as possibilities. They may look at something and see how far it still has to go to be great. When you look at a smartphone, tablet, care, thermostat, or any product, do you see it as it is or how much better it can be? This world view is what sets the visionaries apart.

This is why science fiction is a basis for self-fulfilling prophecy. While the visionary is great at vision, they are also rarely the inventor. This is up to the engineers, and others who have the technical know how to turn the vision into a reality. Science fiction helps the mind imagine a future filled with robots, drones, smart glass, smart homes, smart cities, and more.

Which is why I like science fiction. I like to see what creative minds envision our future to look like and think about what is viable and what is not. For example, if you watch much modern science fiction you notice that the communication device is a small device and dedicated to just communications. The screens which display data are larger and either displayed on a large piece of glass or as a holographic 3-d interactive projection. Is this where we are headed? Where the comms device is un-bundled from the screen? This could happen when all our screens are smart. When we have smart glass all around us able to display whatever we want when we want. This day is no where near being close but it is fascinating to think about.

One thing that always intrigues me about most modern science fiction is the display devices. A table is a large computer display, or a wall, or a mirror, or a windshield. These examples get me thinking about how glass itself will evolve to include sensors, pixels, power, and SoCs. This seems to be one thing I think most science fiction gets right. Smart glass will be all around us.

Everything gets smarter when it gets a brain. In the future most, if not all, electronics will have a brain. Most will also have a voice a well. Some of these devices we will talk to. Some will talk back. Some we will use our hands with through gestures or with touch. But as I watch most science fiction I keep coming back to one point that doesn’t get talked about enough and that is security. It seems as though when everything is smart and connected those in the field of cyber-security are going to have a lucrative job.

Theory: Tech Acquisitions are like the NFL Draft

I explained in my TIME column this morning that I believe the stage is set for a period of intense acquisitions of tech companies large and small. Two primary reasons this is the case. The first being that we are coming off a deep recession. During this period I watched major players in the tech industry cut their research and development budgets and outsource their innovation to traditional ODMs in China. There was nothing wrong with this but what was lost was proprietary IP leading to proprietary differentiation. After times of research and development cut backs companies will look to use acquisitions as a means to play catch up for time the lost not investing as heavily in proprietary technologies, software, and services.

Couple that with the booming number of startups in all areas of industry and it makes sense that a large number of companies will be acquired when the wallets open up from companies with deep pockets looking to gain ground in key areas. With that in mind I have a theory. It is related to how to anticipate the types of companies which may be acquired. It is related to how the first few rounds of the NFL draft works.

In the NFL draft generally the first 10 or so players who get drafted are mostly clear. After that, and occasionally before that depending on the strength of the top 10, teams will participate in a “run” on certain position players. The foundation is laid for these “runs” when there are a number of comparable picks of certain position players all available for draft. Let’s say there are a number of good cornerbacks entering the draft in a particular year. After the top 10 picks are over you may see a team quickly draft one of the top rated cornerbacks and that can often trigger a run on cornerbacks for the series of next picks. Or in a later round you may see a run on offensive lineman, or quarterbacks. The trick for a GM is to have many different scenarios planned out with regard to your teams needs. So that when a run on a certain position happens you are ready.

Similarly the stage is set for tech acquisitions. The question is not when a run on certain companies will happen but when and which companies. We have a number of comparable social apps, payment apps, wearable tech companies, mobile security, cloud storage, the list could go on. On major competitor buying up just one of these types of companies could trigger others to do the same. The big global tech companies are the teams and the startups are the draft picks.

Investors know this, which is why they pour investments into companies many other investors are investing in. Understanding which types or classes of startups will be attractive to large multi-national organizations is a key part of making wise investments. Everything hinges on betting on where the puck is going. NFL teams do this in the draft, investors do this with startups, and companies do this with their acquisitions.