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5by5 | The Critical Path #8: In Memory of Robert Boyle

Sep 28, ’11 7:54 PM
Author Categories Podcast

Episode #8 • September 28, 2011 at 2:00pm

Horace and Dan talk about why CEOs are paid so much and what analysis has come to mean in equities research and the value of cross-pollination between the camps that form around technology companies.

5by5 | The Critical Path #8: In Memory of Robert Boyle.

  • Ian

    Have a link to the book you recommended, might as well give you the amazon referral credit.

  • Interesting insight on Amazon Fire browser. http://cdespinosa.posterous.com/fire

  • Do you know if Amazon may be subject to Microsoft patent lawsuits even though they are using a forked version of Android?

    • r.d

      Amazon licensed Microsoft patents for their Linux based servers and Kindle.
      Microsoft just told SeattleTimes that the license doesn’t cover Android Kindle.

      In fact Oracle could sue as well as Google with their own patent war chest
      include Android patents.
      Not to talk about Apple which will also be suing.

  • Matt Gunson

    Horace,

    I’m a huge, huge fan of you Dr. Christensen’s work. I agree with you on Innovator’s Solution. The most important business book out there. In fact I came to know your work when Dr. Christensen suggested you as a great source of mobile industry analysis.

    Great work. Keep it coming.

    This is a bit off topic so forgive me, but it’s been bugging me for about a week.

    Christensen was bearish on the iPhone and Apple in general. That might not be totally accurate actually, but he did say the iPhone was “not disruptive.” His reasoning at the time (2007) was justified, it was not cheaper, and it was not a market that competitors were going to vacate, in fact competitors challenged the device.

    What I wonder is this, did Christensen see the iPhone as a high priced phone (sustaining) and not foresee how it would disrupt computing? He’s a brilliant man and its far more probable that I am short sighted on disruption theory and not connecting some dots than Christensen being short sighted on the iPhone. But when the iPhone was launched smart phones were still more “phone” than “smart.” Now voice activity is something like 45% of usage.

    I’d love to hear your thoughts on this, because on the surface it appears that you and Christensen are not perfectly harmonized on Apple, or at least were not before the past 12-18 months.

    Thanks in advance for your thoughts.

    Matt Gunson

    • I have not discussed this with Clay directly but with some of the folks at Innosight. The consensus at the time was that the iPhone was a phone entrant and as such not a disruptive threat to incumbents. My contention was and remains that the iPhone was a computing disruption and that the 3G network itself was disruptive because it enabled new business models that obviated voice. I think with the iPad (as a prequel of the iPhone) this idea may be gaining credibility.

      This is why disruption analysis is very hard. You need to step back and see much more broadly where the product will lead. That requires a lot of detailed knowledge. Even the iPod turned out to affect industries that were not in its sights. Music retail, live performances, exercise videos, movies, etc.

      On the other hand if you were to ask me about the impact of certain disruptions in energy, transportation or advertising I would very probably not “get” the full picture. I think being a black belt at disruptive analysis requires a lot of domain knowledge as well as reading case studies outside that domain. It is not something that is never intuitive so it requires practice and technique.

      • Matt Gunson

        First, I think I would side with you on the iPhone but my knowledge of disruption theory is limited to christensen’s books and I have no experience in practice.

        Second, It seems like one of the biggest tricks with disruption analysis is foreseeing the job(s) to be done. It does seem like an entirely new product like the iPhone could be tough to forecast because it can expand the range of current job to be done. If you separate the iPhone and the App Store you could maybe make an argument that the device itself is sustaining but the App Store/iTunes (or the 3G network as you state) is disruptive because it’s the developers who are expanding the application of the device to new jobs. I think your

  • Just some random thoughts I had while listening to the podcast:

    Regarding motivations and your dream of collaborative analysis thriving on the web, what drives you? Yes, analysts publish documents that as you say don’t come with a URL, but that’s because they sell their knowledge to companies who either A) need to compete with someone or B) companies that are involved in the financial markets. Analysts make their money by hoarding knowledge and then selling access to it. Boutique analyst firms will often charge a premium fee to work directly with a company to give them information they specifically need.

    So as for collaboration in a public forum … why? What’s the goal, other than providing a better prediction of how many iPhones or iPads Apple is going to ship next quarter? It’s fantastic to talk about the decisions companies make and how they have the potential to disrupt the market, to have facts and figures to make educated guesses is even better, but the folks who do that call themselves pundits.

    • I’m motivated by finding out how things work and I know that is motivating a lot of other people. If you don’t limit your audience through pay walls or burden your thinking with a salary, the best way to think of analysis is as entertainment. That’s the job to be done.

      The logical conclusion of that train of thought leads to viewing Wall Street as nothing more than theater and corporate strategists as nothing more than court jesters. Once you accept that framework you should strive to become better at it. In doing so you will reach bigger audiences who will understand you better than those who used to pay you. (I touched on this here: http://www.asymco.com/2010/09/23/asymco-the-existential-theory/)

      • That was a great blog post, you should surface it again for those who might be new to your site. It is 10 months old after all! 🙂

  • Just some random thoughts I had while listening to the podcast:

    Regarding motivations and your dream of collaborative analysis thriving on the web, what drives you? Yes, analysts publish documents that as you say don’t come with a URL, but that’s because they sell their knowledge to companies who either A) need to compete with someone or B) companies that are involved in the financial markets. Analysts make their money by hoarding knowledge and then selling access to it. Boutique analyst firms will often charge a premium fee to work directly with a company to give them information they specifically need.

    So as for collaboration in a public forum … why? What’s the goal, other than providing a better prediction of how many iPhones or iPads Apple is going to ship next quarter? It’s fantastic to talk about the decisions companies make and how they have the potential to disrupt the market, to have facts and figures to make educated guesses is even better, but the folks who do that call themselves pundits.

  • RobDK

    The original 2007 iPhone was like Apple dipping their toes in the water, getting to know the market. That is why they had limited distribution.

    The disruption came in 2008 with the 3G and the AppStore. That is when sales started to rocket and the data usage and software took new exciting, and disrupting forms.

    • An observer however should have road mapped the iPhone three years out without difficulty. Putting your finger on what part of the iPhone makes it disruptive is quite hard. I believe it was a new input method and the high speed mobile network that changed computing.

  • Les S

    Horace, when you look at a set of and start to look for patterns in the chaos how much of that process is defined by disciplined adherence to established ways of thinking about the issue and how often does a hunch lead to the discovery of a pattern? Have those hunches or instincts ever given rise to a new set of rules you would use to look for patterns again?

  • Les S

    I meant “when you look at a set of data”

  • Great show!

    Regarding CEO compensation: I think huge compensation packages indicate a lack of understanding of the business by a company’s board of directors. They don’t know how to move a company through a time of industry disruption, so they hire a “miracle worker” from outside the company. Fire/hire CEOs until the company is successful. And the new CEO knows exactly how chaotic and risky their new job, and demands a golden-parachute deal.

    Reminds me of Carnegie-Mellon University’s Capability Maturity Model Level 1: “Worship the Hero”.

    None of this is interesting by itself, but it leads me to wonder: do companies with strong values (or at least strong brands) weather industry disruption better than their peers? Is HP suffering because they sold their calculator and bench-instrumentation business?

    http://en.wikipedia.org/wiki/Capability_Maturity_Model#Levels

  • Dan,
    Are you able to direct us to an example of your motion charts that you talk about at the outset of this podcast? I know you’d prefer you narrate yourself, but if we could see examples of what you mean it would be interesting.

    I don’t see any comments about either doing a group project or an Asymco conference. I would have thought there would be great interest in both. I certainly am.

    Shane.

    • Mark212

      No kidding. I’d be very excited at the prospect of seeing Horace Live, especially with how he described his iPhone-based presentation with motion charts.

      At least give us some links to your upcoming appearances?