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Asymcar 15: Sunray Sedan

Sun-Car

Matt Grantham joins us to discuss electric vehicles, renewable energy, smarter software, solar opportunities and economics. Matt introduces us to Solar X, the solar car challenge. He reflects on these emerging technologies in light of Australia’s nearly extinct auto manufacturing sector.

We explore the concept of a car as the home power source and consider possible EV disruption of traditional power generation and distribution concerns. The potential business models arising from these emerging technologies makes us pause in light of solar firm’s stock performance.

via Asymcar 15: Sunray Sedan | Asymcar.

Twenty Questions from Catalin Stelian Andrei

Catalin Stelian Andrei, Editor of The Day, INTERNET PROTV asked me twenty questions:

1. What phone do you have in your pocket right now? Why that model?

I carry the iPhone 5. The last iPhone I bought was an iPhone 5C which I gave to a family member.

2. Apple is going to launch, form all we know, an iPhone with a bigger screen, long after their market rivals. Is Apple one step behind, being forced to take this road in the fight with Android and Windows Phone devices? Because many smartphone users were hoping that an big screen iPhone, a redesigned model, will be lauched long time ago, and that didn’t happen.

Making bigger phones is easier than making smaller phones. First because miniaturization has always been the most difficult engineering challenge, and second, because a smaller phone has a smaller battery making efficiency much more important. The larger the phone, the simpler it is. The third reason smaller is more valuable is that it’s easier to carry and use. The largest phones cannot be put in pockets and cannot be used with one hand. In the history of consumer, electronics size reduction has been the most consistent measure of performance, and the most rewarding. Usually the most exceptional reductions in dimensions create the highest price and profit bands. There have been niches for larger portable devices but they are consistently a small part of the overall market. If Apple were to introduce a larger device I hope they will be able to solve usability problems and make the category attractive to a larger audience.

3. What do you expect from the new iPhone 6?

I expect it to run the latest version of iOS and, with the new apps developers will ship, that should make the most impact in people’s lives. I imagine health maintenance and home automation will become valuable new franchises. Of course iOS 8 will also run on older iPhones, but I suspect the newest iPhone will somehow run the new software better and have smoother integration with services.

4. What’s the “not to do” lesson that Apple needs to learn for the now iPhone from it’s own past experience or their competitors?

The biggest challenge is to move rapidly with scale. The company has managed to grow from zero phones a year to hundreds of millions. That’s great but it’s still frustrating to wait one year for major improvements. The “cycle time” of innovation for Apple remains one year. I wish it could be faster but perhaps this is also too fast for some. In some services like maps and iCloud and iWork, which are independent of hardware (mostly,) speed is of the essence.

5. The iPhone is the most expensive smartphone on the market right now. In Romania, it certainly is. But where does Apple gains it’s most money from, selling products to users or selling services, like iTunes, App Store? And having that in mind, what will be their next step: better – breakthrough products or bigger, more complete services?

The answer to where a company “gets its profits” is best answered by asking where a buyer “gets his value” from the product. For instance you might answer the question of where a car company gets its value by saying that it’s from making people be in more than one place in a day. So the “differentiation” of a car is in answering the question slightly differently. If it’s hard to see a difference to this answer between cars then it’s hard for any one company to make a profit. For a company like Apple, we need to ask what its users value about the experience and why they are willing to pay for that. My hypothesis is that the brand’s value is in making life a little bit easier. That’s what Apple competes on. Of course, some people are not willing to pay to have an easier life and some even want to make their lives more complicated so Apple’s proposal to make life easier, for a price, is not accepted by everybody—which is ok by them. But for many, paying for comfort, productivity and ease of mind is worth quite a bit. The reason Apple is able to gain a premium over the competition is that this value proposal (of paying for simplification) is either weak or non-existent for competitors. Indeed, many competitors compete on the basis of making life more complicated.

6. What does innovation means for Apple right now? What are their options for assuring a next decade of success? A new Steve Jobs person or a Steve Jobs tipe of group thinking. How hard is that to achieve?

Innovation is meaningful invention—bringing useful creations to a large number of people who then make use of that creation. The interesting aspect of making money from innovation is that it’s a rare phenomenon, requiring many disciplines to work together. It’s like a big movie that somehow works and becomes widely popular but costs little to make. Many movies are made, few are successful and very few of those which are successful are built at low cost. What we know about technology innovation is that it’s a combination that comes together under strong leadership but that leadership alone is not sufficient. The myth of Steve Jobs is that he was both necessary and sufficient to success. The truth is that he was necessary but not sufficient. To make successful innovations requires strong leadership and teamwork and a process of incentives and passion that is hard to create a formula for. How this works at Apple is its biggest secret.

7. Who are the key Apple employees right now? Do they need another Jobs or do they already have him?

All Apple employees are key. I would say that’s the magic formula. There is no chief magical officer (and there never was.)

8. What will be the next best thing for Apple? […]

I don’t know. It’s probably not knowable.

Asymcar 14: Grand Prix. An interview with Ossi Oikarinen

Ferrari in Montreal

An interview with Ossi Oikarinen, Technical Director at Team Rosberg, a 30-year veteran of motorsport, Formula One TV presenter and deep insider.

We cover Grand Prix racing and DTM touring cars from the point of view of business models, jobs to be done and technical innovations. We touch on many other fine points.

This is a good one.

via Asymcar 14: Grand Prix. An interview with Ossi Oikarinen | Asymcar.

The greatest show on earth

Dan Niles, a former analyst who is now a portfolio manager, said on a CNBC appearance that the WWDC event actually had nothing of any real meat for investors

From Worldwide Developer’s Conference Prompts Analysts to Raise Apple Price Targets – 24/7 Wall St.

The “investors” that Dan Niles refers to are undoubtedly those who invest (or, more accurately, speculate with) money. But the audience for the event was an entirely different set of investors. These investors[1] invest their passion, intellect and a substantial fraction of their lives with Apple.

For them WWDC had a great deal of meat. Indeed, for them, it was probably the most significant event Apple ever staged.

The path to realizing this is to imagine the world as the “D” in WWDC see it. Developers don’t just build. Using an analogy of building or construction, they are architects and designers as well as contractors and craftsmen and artists as well as builders. And not of just of houses but of cities and communities. They see and think through tools and techniques for building and innovations in building materials. Innovations which allow them to imagine first and, later, to build new cities in ways that were never before possible.

We were therefore witnesses to an event which was, in essence, a cement conference. A new building material was introduced along with the methods for using it and the tools for shaping it. Perhaps some observers expected to see skyscrapers and interstate highways presented, and thus were disappointed. But they should not have had such expectations. A cement conference is esoteric. It’s about the rudiments which, when combined with imagination, ingenuity and a lot of work, generate livable spaces.

A few spaces go beyond comfort and delight us. Fewer still enlighten and cause the sprit to soar.

And yet it was still a cement conference.

Perhaps the way to understand the show better would be to “play it backwards.” Rather than the way it was presented, let us begin with the end:

We were shown a new concrete formulation which when coupled with a new way of mixing, forming and curing can lead to increases in productivity of construction. This is especially true when producing shapes that are complex, intricate and built into modules.

We were then introduced to some pre-formed kits that allow the materials to be combined for new uses such as flexibly shaped hospitals and gyms. And we would have to stretch only slightly to imagine how this might lead to better health and wellbeing.

Then we were shown examples of new ways that this cement was used to create new work environments. We had a preview of “show homes” beautifully architected and designed. And these homes were seamlessly connected through new transportation networks and allowed for easier commutes.  Again, it did not take much to imagine how these workspaces and homes would lead to greater productivity and how other spaces could be built around them that made such a collection of communities a wonderful place to be.

Some saw banks, and some saw art galleries and some saw warehouses, but all who were there were seeing a new world, populated by many loyal citizens.

Perhaps not populated by all. Indeed, such a country is not for everybody, perhaps only a billion people could be resident and it would not be cheap to live there. But still, imagine.

So this was the way I saw WWDC 2014. A cement conference cheered by cement enthusiasts but leaving Architectural Digest writers asking what the fuss was all about.

 

Notes:
  1. All nine million of them []

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This month’s featured dashboard is Flu Data. It’s a dashboard showing daily influenza information from the Centers for Disease Control, Google Flu Trends, and Wikipedia page hits.

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Pragmatic Episode 22: Core Business

Understanding what is and isn’t your core business is critical for success. Horace Dediu joins John Chidgey for a very special episode of Pragmatic where for once John doesn’t do all the talking!

via Tech Distortion.

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The Critical Path #117: Why Did Apple Buy Beats?

Horace talks about CapEx and begins unpacking the massive topic that is The Capitalists Dilemma. We focus on the surprisingly under-discussed data with regard to Apple’s acquisition of Beats. The deal was officially announced within hours of this recording.

via 5by5 | The Critical Path #117: Why Did Apple Buy Beats?.

Questions for Eddy Cue and Craig Federighi

The Re/Code conference begins this week, and Apple executives Eddy Cue and Craig Federighi will be answering questions from Kara Swisher and Walt Mossberg.

Here are some questions I hope they ask:

For Eddy Cue:

  1. Why is there no app store for Apple TV? Even though the product is running essentially the same hardware and software as the iPhone and iPad and iPod touch and even though it connects to the iTunes stores, there is no option for developers to build apps for it or for consumers to use their TVs to run iOS apps. I might add that it’s been seven years since the platform launched and that’s a long time to wait.
  2. As Amazon has been granted a monopoly on the distribution of ebooks by the US federal government, why not compete by selling ebooks as apps? Apps were used as ebook containers well before the iBookstore launched and there were tens of thousands of “book apps”. Why not encourage authors and publishers to build apps by offering tools which make it easy to do so? I might add that if you do this for authors, why not do it for musicians and video producers? Why have separate stores for different media when they are all just content?
  3. YouTube is becoming the TV of choice for millions. Before it becomes that choice for billions, what are you doing to encourage user-generated video content distribution through your ecosystem?
  4. Apple’s Services revenues are growing remarkably quickly. The number of users is over 800 million. Do you see an opportunity for services to become a more independent business at Apple? In other words, why not bring iTunes to Android?

For Craig Federighi:

  1. Marc Andreessen uses the phrase “Software is Eating the World” to describe the disruption that software-enabled businesses are having on those who don’t depend on software. You are the head of software at Apple; what’s on your plate? In other words, what do you see the opportunity for software at Apple beyond enabling device sales? I might add that although you are leading Software Engineering at Apple, Software and Services are part of Eddy’s organization. Does this separation make sense?
  2. It’s likely that iOS will be used by more people than Windows in the near future. What do you see as the obstacles to iOS replacing Windows for what most business users use daily?
  3. If you believe that iOS can replace Windows (at least in some tasks), do you think the iPad will ever replace the Mac?

This was originally posted on LinkedIn on May 28th.

Who Solved the Capitalist’s Dilemma?

In The Capitalist’s Dilemma, Clayton Christensen and Derek van Bever introduce a powerful new theory which explains the relative paucity of growth in developed economies. They draw a causal relationship between the mis-application of capital in pursuit of innovation and the failure to grow.[1]

In particular, they observe that capital is allocated toward the type of innovations which increase efficiency or performance and not toward those which create markets (and hence long term growth and jobs.) This itself is caused by a prioritization and rewarding of performance ratios rather than cash flows and that itself is due  to a perversion of the purpose of the firm.[2]

For this statement of causality to be confirmed we need to observe whether it predicts measurable phenomena. For instance, we need to see whether companies which create markets apply capital toward market-creating innovations and whether companies which create value through efficiencies or performance improvements hoard abundant capital.

Over the entire global economy, the pattern of capital over-abundance is easy to see. The amount of cash or securities on balance sheets is extraordinary and unprecedented (estimated at $7 Trillion, doubling over a decade). However, growing cash is not a perfect indicator of inactivity. Cash is the by-product of earnings after investment. So if operating profits are growing and investment is growing, but not as fast, then it’s possible to grow cash while still growing investment.

The better measure is investment in capital equipment or, more specifically, purchases of plant, property and equipment.[3] Indeed, on a global scale, capital expenditure as a percent of sales is at a 22-year low.

CapEx is a good proxy for non-financial “investment”. It’s also a measure that can be easily obtained as companies report this activity in their Cash Flow Statements.

So the best method for assessing the theory’s predictive power is to look at market creators and measure their investment in PP&E. At the same time we need to look at market sustainers and measure their (probable) lack of investment in PP&E.

So here is my first attempt:

Screen Shot 2014-05-27 at 5-27-3.25.43 PM

It’s an admittedly small sample of companies that are not that dissimilar. But within this group, over the time frame of about 9 years, we can see how capital expenditures are growing.[4] This sample shows that for a few companies, the amount spent on capital equipment grew dramatically. Especially since they are in businesses that might be thought of as not capital intensive.

Notes:
  1. and, indirectly, in the increase in inequality and hence the destabilization of socio-political institutions []
  2. That being the creation of customers not shareholder returns []
  3. Operating expenditures can also be measured but they cannot grow inorganically due to most of the costs being related to skilled employment which has supply constraints. []
  4. Note that Apple’s data extends to the end of their fiscal year and reflects their forecast given last October in the 10-K filing []