I bet the same people who protested SOPA and PIPA would view this decision-making body with about the same paranoia as Donald Sutherland in the remake of “Invasion of the body snatchers.” Like Sutherland, they will want to stay awake forever, lest the aliens come in while they are asleep and steal the independence of the Internet.  (Alright, maybe that stretches the metaphor a tad, but you get the idea).

Of course, there is a key difference. The ITU is one of those international organizations that does not have to answer to anybody in particular. None of its decision makers have to stand for reelection. None of the leaders have much to fear from any web-based protest.

I do not know about you, but if the ITU sticks its nose into Internet governance I do not see this turning out well.

Don’t get me wrong. I have met several people from the ITU over the years. All of them have been very polite and thoughtful and well-spoken. But that is still not the same as being held accountable. 

How would the Internet community react to more international governance, such as from the ITU? If I had to guess — and this not going out on much of a limb — the same people who mistrust a few Hollywood lobbyists with the text of a law about piracy will trust the decisions of many non-US governments even less. Will they bend their behavior to abide by a directive that emerged from negotiations between a government in Paris and a government in Bejing or Moscow? How about, say, Kinshasa or Caracas? Ya, right.

I am just saying. The same instincts that led Sergey Brin and Larry Page to defy Bejing — and, mind you, at some financial loss to their firm — are the same instincts that fueled the SOPA and PIPA revolt. These sentiments exist widely.

It is nothing personal, nor foreign-phobic. These sentiments have been around for quite some time. For as long as I have been watching policy making in this space — which is approximately two decades — there has always been a big and vocal community who guards their independence. This community is thoughtful and a bit defiant, and, importantly, suspicious of any bottlenecks or concentration of authority.

As David Clark so succinctly and graciously summarized the sentiment in 1993:

We reject: kings, presidents and voting. We believe in: rough consensus and running code.

Sure, the venue for the recent protests is new, and so is the instrument for protesting. But read the online chatter about SOPA and PIPA. It has the same tone and sensibility, less revolution, more evolution in the target and means. The ITU would get as much revolt today as any other authority.

Here is what I mean. Over the years various firms and authorities have become the target for this sensibility. More than two decades ago (in Clark’s speech) the targets were the largest telephone companies, especially AT&T in New Jersey and the global standards bodies trying to coordinate technical developments across countries in the early 1990s. Among the many concerns at the time, there was deep suspicion against the way any one decision maker would impose their interests too strongly, ruining the accomplishments of the community.

These same instincts would resist the ITU, should it try to insert itself.  Different venue, but the same protest.

In the article Phil Weiser  gets it right on target, “Part of the challenge is to defend the bottom-up governance model.”

Donald Sutherland understood the problem with the defense in Invasion of the Body Snatchers. It means never going to sleep.

Soon you will become focused on the urgent distractions of teenage life, not to mention imminent partying and dancing. Before that happens I would like to steal five minutes and make a wish for your future.

You were born with extraordinary gifts of character. You are responsible to a fault, a tad too literal for your own good, and you possess a natural tendency to aspire to do more than necessary. It was no surprise to your mother and I that you performed beautifully today at your Bat Mitzvah. We are very proud of you.

I sometimes joke that you are a very low-maintenance child. I may regret saying this at some point, but I would like to give you permission to stop being low-maintenance – at least for a little while. It is time for you to lose some of your innocence and grow beyond mere instinct.

Think of it this way. You already possess a keen ear for honesty and graciousness. Without much effort those traits will blossom as you grow up, turning you into a responsible and conscientious adult. Experience can help you bloom further, developing other traits you also possess, such as patience and generosity.

Consider patience. You have been endowed with an abundance of it. It enables you to step back from impulse, to reflect thoughtfully, or look beyond the merely ephemeral. However, it also has a downside. Patience fosters endless waiting if it lacks a well-specified aim and if it goes adrift.

As an adult you will face decisions that will try your patience. This is particularly so with choices over whether to give up or stay the course. These can be the most difficult in an adult life. So here is my first wish for you: to learn to refine your patience with your gifts for honesty and grace.

Now consider generosity. While you already are kind, generosity goes further. It is the foundation for the grandest form of human charity, whether it is writ in a large selfless gift or a small nurturing gesture of love.

As an adult you will see the fruits and failures of your generosity, how generosity leads to great achievements and disappointments. So my second wish for you is this: to learn to become aware of the fear of disappointment, to learn how not to make it central to your actions. Give to those around you in the most graceful way possible, with warmth, without expectation, and honestly.

Here is what I am trying say. Patience and generosity together, offered honestly and graciously, enable partnership and love, and many of the mature behaviors of grownup life. But these character traits do not arise by themselves. They develop during experiences, and most such experiences fall outside the routine. Some can be painful. I wish that you will have the courage to face these experiences as an inexorable part of growing up, and learn from them.

I have one more wish, and it starts with the hope that you do not take this advice too literally. This is just advice, not a rule. If you come up with a thoughtful answer to life’s riddles in your own unique voice, then it is your prerogative to use your gifts as you wish. So this is my last wish: whether or not you give these words any more than fifteen seconds of thought, please take a moment and share your thoughts with your mother and me. We would like to know your thoughts as you grow. I hope we can have a conversation.

And with that, it is time to party. Let’s start the party with a toast to life. L’chiam.

There are three criteria for these awards. It had to involve something in 2011. It had to involve information and communications technology. It had to be notable.

The winners do not give acceptance speeches. The awards come with no prize other than a bit of dry sarcasm, which is dished out at the same time as the awards.

That is about it. If I missed any juicy events, feel free to make suggestions for additional awards this year.

Enough said. Let’s start the fun.

The technology push award. The first award goes for the example that best demonstrates why good technology alone does not create value. This year the award also could be renamed the award for technology-without-a-plot-does-not-an-entertaining-movie-make. That is because it goes to Cars2 from Pixar. I am listing this one first because I took this failure personally. I have attended every single Pixar movie ever released, including many of its short films back in the day when these only played at film festivals. They had never failed me until this one, and this one hurt me where it counts, namely, with my kids. I insisted we see it and they thought their dad has lost his touch. Every ten minutes my seven year old would turn to me and whisper, asking a question about what was going on. My nine year old just sat there and remained confused. No other parent in the theater told us to be quiet, because their kids were asking questions too. This is the same studio that made Wall-E and Up? Every studio puts out turkey now and again, but never Pixar, not until this one. Let’s hope they learned their lesson. Guys, it’s the story, not the technology.

Break it and they will not come award. Speaking of fragile, this next award could be renamed the-business is-more-fragile-than-you-thought-award. It goes to CEO of NetFlix, Reed Hastings. He did what nobody thought possible, screwing up a viable entrepreneurial business in the name of a bad strategy, which is quite impressive in light of several years of making good strategic choices. He managed to anger more than half a million subscribers, which then led to a massive stock devaluation. And for what? Let’s see. It had something to do with splitting up the organization and renaming part of it and… oh, never mind. I still don’t think I can explain this strategy or why it made sense to somebody. In any event, it is a good bet that this year Hastings will not appear on any magazine covers as CEO of the year, as he did last year.

What were they thinking award. Speaking of not making sense, this year the award just has to go to the management at AT&T for seeking to buy T-Mobile. They did not win for the idea, but for how they executed on it. Any sane observer — except, perhaps, an extreme libertarian — could see that this 39 Billion dollar merger raised serious antitrust questions. Did management have a plan for handling those issues? Well, potentially they could have, but as it turned out, no, they did not. They had “talking points”, to be sure, but these were public relations statements without real substance behind them. The management seemed to think that enough political influence and enough smooth talking and a few public endorsements from (obviously self-interested) organizations would be enough to get the merger the regulatory approval it needed. After all, that had worked in the past. Amazingly, it almost did here too. Why did it fail? There are many reasons, but for this award it is important to stress that AT&T’s management got greedy, seeking regulatory approval without concessions. That generated the predictable response from the staff at the FCC and the antitrust division at the DOJ, who kept asking pesky questions – such as, how could this merger be worth 39 billion without raising prices? And if AT&T could finance a merger this big, why couldn’t they simply finance a build out their own network, which would not eliminate a competitor? Rumor has it that AT&T negotiated without ever acknowledging the elephant in the room, and eventually the staff gave up trying to find common ground, which is what the staff always prefers to do. And so, after months of frustration, out came the lawsuits to block the merger. Note to management at AT&T: you want to live with the government? Then do not drive the staff to endless distraction by instructing your representatives to deny what everyone else can see.

The Cat’s Cradle award. This next award goes to the firm who came closest to realizing the plot of Kurt Vonneget’s book, Cat’s Cradle. In this piece of fiction, Vonnegut describes the arrival of the apocalypse, which comes about when all the world freezes over. For those of you who have never read this book, (spoiler alert) the world ends from scientific invention that freezes water. At first it is contained, but little by little it spreads, and human governments cannot manage to keep it concealed in a safe place. In Vonnegut’s vision, the end finally arrives due sheer incompetence, and it is an absurd vision at that. (end of spoiler)  It was no contest this year. The winner this year has to be the management at the Fukshima nuclear power plant in Japan. (Yes, I know this falls outside the criteria to focus on IT, but this example is too good to pass up, so just go with it, ok?) Having been warned years ago by experts that its backup reactors needed to be moved to high ground, the management decided to save a buck and ignore the advice. When a Tsunami hit this year, the backup generators on low ground became flooded (duh!), and failed, and, as expected, the nuclear reactor overheated, which required heroic acts from many employees to prevent it from becoming worse. Let’s hear it for penny wise, and Chernobyl foolish.  So it goes.

Who put them in charge award. Speaking of near nightmares, a special category of award goes to governments that find interesting ways to abuse new technical capabilities. This year the Mubarak regime wins in a close race with the Iranian regime. To be sure, this one is a judgment call. It is hard not to give an award to the Iranian regime because it is so consistent year after year. It employs brutal thugs to suppress religious freedom in the name of a specific religious interpretation, and, in addition, the government’s dogged pursuit of nuclear weaponry makes them a good candidate for the Cat’s Cradle award. Yet, for novelty the Mubarack regime was hard to top. After all, the Egyptian government turned off the Internet in Egypt, and in just a few hours. As it turned out, it took very little effort, a few phone calls from the government security apparatus to a few key players (as if this had been planned far in advance). To be sure, many Internet experts had speculated that such action was possible, and certainly the Chinese government has demonstrated the potential for an impressive degree of filtering, but nobody had seen a government actually turn off the entire Internet. It was breathtaking to witness! Egypt cut its Internet off from the outside world with remarkable speed and, ah, with a calculating madness that Voldemort would admire. Of course, rather than chilling the protest it just reminded everyone about why they were protesting. 

Miss Manners would not approve award. While we are on the subject of audacious actions, this next award is for an audacious action too. It goes for violating a societal norm that supports a technology. This year it goes to the management of Murdoch’s “News of the World” for hacking into phone messages (of dead people, no less). Now, to be sure, this award required stretching the rules, since the actual offensive acts were performed a few years ago. It qualifies because these acts only became publicly known recently. How bad was this act? Well, commentators were not debating the actual facts, but, rather, only debated how bad a spin to put on those facts. In this case, commentators debated two options, whether management (a) knowingly turned a blind eye on unethical behavior it had unwittingly encouraged, or (b) management actively encouraged unethical behavior from reporters by rewarding it. Whew, those are some tough choices.

Make no little plans award.  Sticking with this audacious theme, this award goes to the gutsiest strategic action in tech markets in the last year. Of course, AT&T was up for this award, but this is not the academy awards, with multiple awards going to the same recipient. It is more fun to involve someone else, so this year the award goes to Google for bidding to buy Motorola Mobility for twelve billion dollars. Let’s hear it for doing the unthinkable, such as — I dunno’ — managing a hardware business about which the new owners know very little. Let’s all recall how this happened. Larry Page decided last year he wanted to be CEO of the company he founded, kicked Erik Schmidt out of the executive office, took over Google, and wasted no time taking bold action, making this bid. By some estimates two thirds to three quarters of the value of Motorola comes from the patents Motorola holds. Wow, is that ever bold! Larry may have to be a quick study, however. The last time I checked, managing some of the world’s software engineers is quite different from managing some of the world’s best hardware engineers. Let’s also note that, in case it was in doubt, this move confirms that this a good era in which to be a patent lawyer who specializes in the communications world.

The passive judiciary award. Speaking of patent suits, now it is time for the award for stupidest judicial award by a non-technologist. While there are many candidates, perhaps none surpasses the judicial decision to allow all the patents of Nortel to remain intact as one big solid pool to be sold to the highest bidder. The US Department of Justice actually cleared this one, and without restrictions on the sale. As many a commentator pointed out, why did the rights of the debtors take precedent over everyone else’s rights? After all, that patent pool was, in effect, a large right to exclude competitors in many communications markets – such as, let’s see, smart phones, which is, after all, one of the fastest growing technology markets in years. Why does an effort to blindly protect the debtor’s right to get a few more dollars get precedent over the potential negative spillovers that the patent pool might create for the fastest growing market in tech? For goodness sakes, would it have been so hard to make the sale contingent on the buyer agreeing to license the patents at reasonable and non-discriminatory rates? Without such restriction this sale was the equivalent of selling a tank to one side of the gunslingers at the OK Corral. After a consortium (which included Apple and Microsoft) won the bidding and Google loss, was it any surprise Google thought they were in an arms race and had to make another massive purchase of patents? Was it any coincidence that the Motorola purchase occurred just a little later?

Pointless political moment award. While the bickering in DC has yielded many fine candidates for this award, I do not want to use this space to celebrate dysfunctional government. Instead, let’s celebrate something a little less painful, namely, a waste of time during a hearing. Perhaps that is also a symptom of dysfunctional government, but I would prefer to focus on actions that did not disrupt the worldwide market for US government bonds. In any event, the winner is Erik Schmidt, who testified to the Senate on behalf of Google. Call me old-fashioned, but is it asking too much to expect a witch hunt to contain content and tension? More to the point, hearings are supposed to have moments when Senators ask pointed questions and witnesses squirm under the bright lights of exposure. Well, damn, in my view the most interesting fact to emerge from the hearing was the brand of Schmidt’s laptop (Aren’t Google and Apple squabbling now or can Schmidt not bring himself to use a Microsoft product?). More to the point, by my count, there was only one gotcha moment in this hearing, which is a pretty poor use of three hours of a Senator’s time. What was the point of this hearing? It appeared to be either (a) a very expensive way to reward Erik Schmidt for being kind to the ecosystem during his tenure, or (b) a very elaborate way to warn to Larry Page, now that he has taken the reins, to play as nicely as Erik did. In either event, it still seemed like a waste of time.

The linguistic award. Let’s change direction. It is time for the award for most interesting new socio-tech word, which has a political element to it this year. This year the award goes to the word “Wikileak.” In 2011 it was officially crowned as a new word by the global language monitor. In case you have not been paying attention, “wikileak” means “becoming known quickly in spite of efforts at concealment”. Wiki means “quick” in Hawaiian. Whether you regard the folks who leak government material as saviors or misguided, let’s give them credit for changing the way many of us think about these issues.

Hope triumphs over experience award. This award goes to an entrepreneur for keeping to an entrepreneurial vision in the face of all evidence to the contrary. This year the award goes to Groupon. Despite all the commentary that says their business model has no sustainable competitive advantage, the founders turned down a six billion dollar buyout from Google, and the management insisted on going forward with an IPO. To pile it on, no commentator has found a kind word for Groupon since then. Gosh. That is a lot of money to turn down in order to stubbornly pursue a dream. Well, to heck with the consensus! Stubborn pursuit of entrepreneurial goals deserves some grudging respect, even if it does not get anybody’s dollars. Go for it, guys! I hope they prove everybody wrong, or, at least, they are still in business three years from now.

Deep into data award.  Each year there are many amazing statistics about the use of technology. Each year there are many good candidates for most amazing statistic, of course. This year the winner goes to the following: More than 70% of the world’s population has a cell phone. Do you hear me now? More than 70%?!? The grid spreads each year just a little more, connecting us ever more…

The human comedy award. No, this is not an award for stand-up comics. For those of you who do not know the William Saroyan novel, the title is ironic. Each year there needs to be an award to remind us all that there is more to life than merely technology. The winner this year marks the saddest moment in tech business: Steve Jobs’ announcement that he was stepping down as CEO of Apple. It does not matter whether you admired him or despised him in his professional role, on a personal level this is just awful. He was only 56 years old and his kids were not fully grown yet. It is just too soon.

There you have it! Those are my awards for the year. What are yours?

To appreciate this point, it’s necessary to move beyond the managerial maxims many recent eulogies have used to describe Steve Jobs. These have displayed a disappointing degree of plasticity. Look, as a youngster, Jobs displayed a penchant for brashness, impatience, and needless confrontation, just as he did later in life. Two decades ago, the old consensus held that Jobs succeeded in spite of himself, while the recent consensus ascribed Jobs’ commercial success to his passion and attention to detail. The common analysis reassessed superficial traits based on outcomes.

That interpretative flip is a symptom of a deeper schism. Different conceptual frameworks underpin and frame distinct perspectives about the role for entrepreneurs in American business. Steve Jobs’ career can illustrate these perspectives.

At the outset

As is well known, Steve Jobs and Steve Wozniak founded Apple at a time when the PC market lacked rules and boundaries, outside of any large firm’s plans. In such a chaotic setting, a couple of college dropouts could aspire to make an impact with nothing other than heady ideas, technical talent, and a maxed-out credit card.

Jobs and Wozniak didn’t make the first commercial PC, but they were the first to generate enormous mass-market attention. Possessing different personalities and skills, they were classified by the news media as the modern Watt and Boulton of PCs, an archetypical pairing of a wunderkind engineer and dynamic hustler.

The stereotyping was never accurate, of course, but it helped nurture publicity for the young firm. Indeed, public attention gave Apple the curse and blessing of instant publicity, whether the firm did something trivial or substantive. It helped Apple catalyze attention after every upgrade to the Apple II, and it brought intense scrutiny when the Apple III and Lisa failed to catch on, arguably, due to overpublicized quality control issues. It also helped launch the Macintosh and gave momentum to its 1984 Super Bowl commercial, which still ranks as one of the most audacious advertisements.

More to the point, from that time onward, Jobs experienced the high-tech equivalent of the paparazzi treatment (and fought to protect the privacy of his personal life).

So, for example, unlike most boardroom battles, the world noticed the irony when the CEO that Jobs hired eventually pushed him out. It’s hard to recall now, but John Sculley wasn’t widely criticized at the time except by some loyal Apple groupies. Contemporary wisdom went against Jobs. His board thought he had overstayed his usefulness.

Why? At the time, Jobs’ experience fit a particular view about how entrepreneurs serve their firms and society. In this view, entrepreneurs are a catalyst, taking risks that established firms would not initially take. In this case, for example, it’s well-documented that the Apple II motivated IBM to create a PC.

That view comes with inherent limits on the entrepreneur’s purpose, foreseeing little additional role beyond the catalytic one. That is why, for example, many venture capitalists (then and now) dutifully jettison the founders of start-ups. And that is why, once Apple became a large firm, many of its board members concluded that the passionate young Jobs had too many quirks and had stayed beyond his usefulness.

Into the wilderness

Though hardly unique in his degree of self-belief, that trait certainly helped Jobs bounce back from multiple failings after he left Apple. Yes, multiple. Almost a decade after leaving Apple, Jobs had a reputation for doing many things well, but not for making money.

It is (again) hard to recall, but Jobs’ next two destinations—Next and Pixar—did not meet their commercial goals for a long time. After all, Next sold few boxes. It received technical praise, not sales. Its biggest sale came late, in 1996, when it sold its software to Apple. Pixar too received attention for its short videos using computer-generated imagery (CGI). But for almost a decade after Jobs joined the firm, it lived on investor charity and revenue from a few commercials. It didn’t have a hit until late 1995.

Both firms had reputations for being archetypical examples of capabilities in search of value. Consider Pixar as an example. It had a team of people who did CGI exceptionally well, but it had difficulty paying for the equipment and their salaries. Initially, Pixar planned to visualize medical images, but that market never materialized. It sold boxes for CGI, too, but there were few buyers.

The staff also put together short films, but initially this was advertising for the technology. Luxo the Lamp demonstrated possibilities, not profitability. Eventually, making films became Pixar’s singular strategic focus, but not out of any profound vision. There just was no viable alternative. For many years, it was an open question whether Pixar could make an entire feature film that—um—more than nerds would watch at an animation film festival.

In short, by early 1995, Steve Jobs’ admirers lauded the technical accomplishments, while less charitable observers still regarded Jobs as an egotistical jerk with an excessive taste for quixotic technical perfectionism. Overall, the paparazzi still took an interest, but it was less mean-spirited than in the past. After all, life had taken Jobs down a peg, and he had persevered.

How much Jobs had learned at Next and Pixar was widely underestimated. During that decade, Jobs met many leading executives in the media industry. He also gained an appreciation for how entertainment firms organized projects. Judging from later behavior, he also gained an appreciation for blending technological perfectionism and serving users.

Back for a second bite

Things changed quickly for Jobs after Toy Story was released in November 1995. As its revenues went to infinity and beyond, Jobs gained more public credibility as an executive. In 1996, Apple’s board brought Jobs back as part of the buyout of Next. By 1997, he was CEO of Apple again.

By that point, Apple’s business was adrift. Jobs brought direction to the organization by doing what he did instinctually well—namely, making his own views the final arbiter of the firm’s strategic direction.

He brought two other things, too. First, he brought his experience negotiating with partners. Many a talented engineer/programmer/designer was happy to work with a CEO who pressed for perfectionism and edginess, defending the firm’s purpose in every negotiation with outsiders.

The Apple announcements showed the second thing Jobs brought back to Apple—a disciplined articulation of a broad vision of value creation through technical improvement. User needs and desires took precedence over merely great advances. Jobs as user-advocate (now a very familiar canon to any recent Apple-watcher) came through in this new persona.

Little by little, symptoms of this new energy showed up in product releases—in the Apple AirPort, the iMac, and then in the iPod. A year after the first iPod came iTunes. Crucially, Jobs had negotiated deals with music copyright holders, giving iTunes an extensive catalogue.

Most readers know the story, so I will not belabor it. The sales of iPods and iTunes dominated legal music downloading. That begat the iPhone and the App Store, and that led to the iPad, which is not done upending, more broadly, publishing and notebook computing.

Notice the bigger change. No longer did Jobs pursue perfectionism for its own sake. Rather, it served a purpose. Jobs made perfectionism subservient to a strategy long used by branded firms in consumer electronics—copious umbrella branding, mass distribution married to consumer targeting, selective product upgrades carefully timed against seasonal sales trends, anchor stores for demonstrations, and judicious use of intellectual property strategies. Apple did that with an additional twist, adding great software and a great online presence to its hardware.

Apple’s actions also altered the conversations about piracy in many boardrooms. Though history suggested that mass market buyers abhorred the inconveniences of pirated goods, no firm had demonstrated a successful mass market approach until iTunes did.

The approach seems obvious now, but it wasn’t when Apple first implemented it. Recall that Amazon, Yahoo, AOL, Sony, and Microsoft were close by, as were countless entrepreneurs. Several of them could have done something similar had they set themselves up for such a goal. They just didn’t see the strategy. Admire him or detest him, Jobs deserves his due.

Back to the big question: How can one entrepreneur make a difference? Most great entrepreneurs hold steady to a broad vision with specific implications, even in the face of considerable doubt, suffering financial losses with intent, combining lessons in unique ways in search of lightning in a bottle. Some entrepreneurs spot and ride the waves of bigger trends, acting as catalysts, pushing the market into previously unforeseen territory. Others execute so well that they creatively destroy old markets as they nurture the new.

Jobs did all of that and more. That is why his career doesn’t fit neatly into any platitudinous managerial maxims about entrepreneurship. Jobs made the most of every chance, and he learned from each one. It will be a long time before another entrepreneur brings as much value to his firm and to society.

Copyright held by IEEE. To view the original essay click here.

Need some humor right now? Then read this post about the Internet Hysteria Index, entitled, “Internet hysteria — Are we Losing our Edge?” Written by Scott Wallsten and Amy Smorodin of the Technology Policy Institute, it takes aim at some of the *ahem* excesses of communications policy discussions today. In particular, it aims at its excessive hype.

And a warning to those of you with a tin ear for a joke or merely a complete lack of sense of humor… before reading this post be sure review the meaning of deadpan humor and understated sarcasm.

Enjoy!

Platforms are reconfigurable base of components on which participants build applications. Platforms have a long history in computing and electronics, with examples going back to IBM, Microsoft and Intel, among many others. Google and Apple are recent practitioners, and their prominence has renewed interest in platform strategies. It is, however, not entirely transparent to a non-expert how the (newer) discussions about platforms relates to the (familiar) analyses of standardization. My talk pointed out some of those links.

Background to set the scene: I stayed at Hitotsubashi University (on the left), a lovely campus in a residential neighborhood a train ride out from downtown Tokyo. I traveled there at the invitation of Professor Reiko Aoki, a professor at the university, and a member of an advisory group for the government on technology policy. She arranged for a presentation at the university, and another at the Research Institute for Economy Trade and Industry (REITI), a part of METI, the government agency with many experts in industrial policy. Professor Aoki and I both share an interest in standards. Sadao Nagaoka, also from Hitotsubashi and an expert in technology policy, provided commentary. We are pictured together at REITI at METI (at the top).

Platforms

Here is a link to the slides for the talk. Though I discussed platforms at both the university and at METI, attached is the latter set of slides because it is mildly more accessible.

That seemed more appropriate for METI. Why was that? The staff at REITI asked for it. They advised me to have examples in the talk, and fill it with accessible points. For this discussion about platforms I borrowed from similar to talks I recently have given at the FCC and at the Federal Reserve Board.

The talk motivated its themes with two recent examples, Wifi and Android. I picked these purposely. The former was designed by a standard setting organization (the IEEE), while the latter comes from a private firm (Google). On the surface they look quite different. Yet, both examples share similarities, in spite of differences in origins and in governance.

In each case, the platform helped grow the market after a lengthy unprofitable period of exploration by firms. In each case, the platform embeds multiple standards for interacting with applications, facilitating transactions between the various participants in the platform, and in each case there are various participants — application vendors, users, intellectual property holders, advertisers, and so on.

In this sense a platform is more than merely a new design or an endorsement of a bundle of standards. Related, successful platforms involve much more than merely designing a product.

Platform leaders much manage the flow of information to business partners, responding to their concerns, update plans in appropriate ways, and manage other aspects of the support process. In each case the standards and platforms continue to evolve after the design initially deployed. The markets for products and services around those platforms also evolve, typically building additional capabilities into the platform to satisfy the needs of users.

The talk ended with a number of observations about ways to understand the evolution of platform. For example, firms who aspire to be platforms leaders face considerable risks managing their costs and revenues. A large number of costs arise up front, while much of the revenue may arise much later, if it arises at all. Many firms aspire to become platform leaders, but many fail.

I focused on these issues because I guessed the audience would find them novel and useful. Looking at standards through the lens of platforms helps illuminate some of the processes that shape the evolution of markets and competition.

The talk ended with a focus on issues in competition policy. There is a concern in many countries about the early moments in a platform’s development, when it is possible for government’s to influence things because nothing has been settled. At such early moments, however, it is challenging for policy makers to assess whether platforms have created value, or whether the exploratory activity of firms has any chance of creating a commercially successful platform.

Here the talk discussed symptoms of a healthy competitive situation (e.g., whether entrepreneurs are present), and symptoms of a virtuous cycle (e.g., whether the participation of developers generates sales, which incents more developer involvement in a platform). In a healthy situation the justifications for any policy intervention are rather weak. In a less healthy situation policies can aim to create a setting where healthy competitive processes thrive.

Feel free to examine the slides for the details.

What kind of reactions did I get? It was respectful, to be sure, but also peppered with many good questions. Japan has a rather strong industrial manufacturing base, but one well suited to the last generation of technology in electronics. Many of Japan’s leading firms would like to make the leap to the next competitive era, keeping up with Chinese and US industries, but they are not sure how to do it. The game firms, such as Sony and Nintendo, have experience managing platforms, but the new sets of platforms differ in many ways, particularly in how they employ the Internet.

There is also a concern that platforms founded on open standards leads to commoditization for all participants. This is a valid question, to be sure, but it is easy to misunderstand. Examples suggest that differentiated firms can succeed in spite of standards if they have strong brands, distribution and other assets. More to the point, standards can create value through enabling interoperability, as in wifi’s case, which otherwise would have been unobtainable without any standard.

So, in general, there is general puzzlement about how to fit the new thinking about platforms into the existing strengths in Japanese industry. The audience at REITI at METI also asked about whether the existing regulatory approaches make sense for platforms.

Prosperity

Let me end with a few observations about Japan. Many of the traveler slogans ring true in person, but there is also so much more.

• By western standards Japanese behavioral norms are extraordinarily polite (at least with a foreigner in the room). It takes a bit of getting used to, and it leaves a visitor with the impression that something is not being said. Still, to be frank, it certainly leaves a better impression than many alternatives. It is a lot less infuriating than, say, a mouthful of New York insult, a whiff of Parisian snub, an evening of SoCal parochialism, or, what is nearly universal throughout the world, a sales person selling timeshares.

• The Tokyo train system exceeds every US urban transit system for speed, efficiency, and cleanliness. That said, the number of passengers that squeeze into a typical car make sardine boxes look like luxury accommodations.

• Tokyo is one of the world’s great cities. It is an enormous city, with staggering geographic range, and multiple neighborhoods – something on the same scale as the greater New York area. The high income and wealth also was evident – albeit not too ostentatious – in the automobiles and clothing of the denizens of the commercial and political districts, where I spent my time.

• Speaking of clothing, the financial and political districts of Tokyo took their sartorial direction from utilitarian norms. To an American eye it was more off-the-shelf Brooks Brothers and imitation leather, and not much customized Italian cut accompanied by Gucci and Prada. While not a surprise, it left me to wonder: does any major financial center of the world follow any other norm?

• As an interesting contrast, buildings in these districts had settled on more than a utilitarian norm, largely employing later generations of modern architecture. That meant they incorporated more appealing shapes – i.e., colors that blended with surroundings, less apparent exterior support structures, and more reflective glass. On the ground the public spaces in the commercial and political districts are often beautiful, albeit, a bit too bright at night for my taste. It is quite appealing as a collection, creating a very striking Tokyo skyline.

• Not far outside Tokyo is a very crippled nuclear power plant managed by an electrical utility whose management would like to avoid paying a price for its prior penny-wise-and-pound-foolish decision not to locate backup generators on high ground. For several thoughtful people (with whom I had conversations) this situation symbolized something deeply disturbing, since this outcome varied from the country’s norms, which prides itself on intelligently managed public services and public spaces.

• University campuses contain a universal rhythm to them. The scenes of students at Hotitsubashi could have been taken from anywhere. Students happily or somberly braved the rain, dressed sloppily in sweat pants and shirts, hair deliberately unkept in fashionable manners, with backpacks slung unthinkingly over slumped shoulders. The students walked around as their iPods ear-buds isolated them from noise, or spoke on cell phones, or engaged in high-pitched conversation with giggly friends.

• After feasting on the universalisms of business attire, cell phones, young adulthood, and architecture, I could not help but notice other universalisms of global commerce, namely, the ubiquity of Apple, Starbucks, McDonalds, Coca Cola and Disney. It is a bit absurd. Global citizens have only a few things in common beyond their iPods: off-the-rack pinstripes; a mouse with a nervous laugh; a multilayered sandwich comprised of ground beef, special sauce, and a sesame bun; and a propensity to drink a fizzy caffeine fix or an overpriced cup of coffee.

I do want to end on upbeat note. It was a great visit. Indeed, I cannot forget my first morning, the air clear and brisk after a rain. I walked to a Starbucks near the train station, the students walking in the other direction on their way to school. There I sat drinking a latte, trying to answer email on my smartphone’s browser, and I could not help but reflect on the short time interval between trains.

What is that all about? At a procedural level it is just a detail — the FCC reviews mergers involving the transfer of licensing. The Department of Justice (DOJ) has a review process too, but just a different standard of review. The DOJ uses antitrust, while the FCC considers whether the merger is in the “public interest.” Even if the FCC delays its review, the FCC must continue to do its review. The first hearing in front of judge takes place in February.

Today’s post provides a little insider baseball about these reviews (The Wiktionary definition for insider baseball “Matters of interest only to insiders”), trying to explain the chess moves to a wider audience. Seemingly small procedural moves provide a window on the likely outcome of this merger. To paraphrase Robin Bienenstock and Craig Moffett of Bernstein Research, AT&T has not thrown in the towel, but they are acting like a firm who understands the odds of success are low. I prefer to think of it this way: economic substance does matter. This requires a brief explanation.

Insider baseball

Here is the relevant background. Ever since AT&T announced its intention to merge with T-Mobile brand and absorb all its assets, I have had many conversations with friends in the industry, and these quickly descend into insider baseball. These conversations recently took on a whole new tenor because the FCC just announced plans to hold a hearing about the merger.

Prior to that announcement these conversations differed in one of two ways, depending on whether the conversations involved lawyers or a political analysts.

My basic observation has never changed: if this merger were a homework exercise in an economic textbook, then this merger could not pass without modification. It combines the second and fourth largest firms in a market that is already very concentrated. It would take large additional economic gains — in efficiency or some other facet of the situation — to make up for the higher prices, lower innovation and blockaded distribution higher concentration would generate.

And I would always end the same way. The insiders might know something the rest of us do not know about those gains. What are those gains, if any?

For quite some time lawyers have answered this question one way and political analysts answer another.

Lawyers invariably dodge the question, arguing that the framing is irrelevant. They launch into comments about the uncertain state of antitrust law in the United States, observing that many judges today do not think there is any valid reason to enforce any antitrust law, irrespective of the facts of the case. Such judges just do not like antitrust laws for ideological reasons. Recently such friends have gotten more specific, commenting on the odds of getting past the particular judge assigned to hear the from Department of Justice, as it tries to block the merger.

Political analysts, in contrast, avoid the question a different way, reaching the same conclusion, that the economic analysis was irrelevant. They invariably launch into comments about AT&T’s enormous powerful presence in Washington, observing that AT&T has gotten whatever it has wanted from the Obama and Bush administrations. Recently such friends have gotten very specific, about which representatives and senators were most likely to act on AT&T’s behalf.

To be sure, both answers do explain a number of events in the last decade. Both avoid the substantive question in this specific instance, under the (not entirely crazy) belief that economic substance generally does not matter for legal or political questions. However, both have the same flaw: economic analysis does not matter most of the time, but that does not imply its irrelevance all of the time in every instance.

To say it another way, both still beg the question: are there any benefits to make up for the drawbacks inherent in the merger?

Bit by bit the evidence started to accumulate during the summer. To make a long story short, there was not much evidence of benefits. To make efficiency gains AT&T would have to fire quite a few people, but to get the merger past its unions AT&T’s management had to promise to preserve jobs. To buy political support AT&T had to promise to build broadband in under-served areas, but independent analysis showed that far cheaper ways to build such broadband than through a thirty billion dollar merger. The economic benefits did not exist. To use an old expression, there was no there there.

That is my point. While sometimes — perhaps even most of the time — the underlying economic facts do not have any bearing on a review of a merger, in this case it has mattered. That is what the insiders are coming to terms with. In this case, the economic substance is egregiously below any minimal standard, so much so that it cannot be ignored.

What has moved online soonest? Things that are easy to share with one click. It tends towards the quick hit: Pictures that tell a story, recommendations that require little elaboration, snappy and quick quotes or retorts, and other self-explanatory links.

I reserve a special place for parody, or humor with wide appeal, or sarcasm with gotcha-to-it. This happened during the Royal Wedding, for example. That was a situation where an event captured the attention of virtually the entire online world, and the parodies of the pictures spoke to a common perception.

A new image has recently made the rounds. It is interesting because it speaks to an event that occurred at University of California, Davis, in a protest that grew from the occupy movement. Some of the police used pepper spray.

Now, to be sure, police using pepper spray does not lend itself to parody, at least, not on first blush. Look at these photographs of the incidents. Despite being a very local story, the images have gone global. (Do most people know where Davis is? It is just outside of Sacramento, California, in case you did not know. Of course, that just begs the question of whether most people know where Sacramento is…)

My first reaction to these pictures was simply “ouch.”

Ah, but that has not stopped a range of satirists from taking the image, removing the context, and making a delicious parody of the situation.

If you search for them, they are easy to find. Here are a few of my favorites.

This first one takes the iconic Seurat painting, which hangs in the Art Institute of Chicago, and adds a new participant. The contrast with the visual calm of the painting exaggerates the disruptive violence of the pepper spray.

But other satirists saw something else. Here is a play on the use of force, matching Yoda with the pepper spray, making a pun of excessive force.

Are you fond of the art of Michelangelo? We have a parody for you! Feast on this combination of pepper spray and the hand of God from the Sistine chapel. It makes a rather bold statement, as if the use of force violates moral precepts.

For my taste that is a bit too sanctimonious and heavy handed (get it?), but I can appreciate the imagination and cleverness that went into making the message. This image will garner strong reactions from a viewer — both positive, from those who oppose the use of such force, and negative, from those who would find it offensive to use such an iconic image for this purpose, I would guess.

Now that you get the idea, there is no end to ways one can combine pepper spray with images. That is my final observation. Look at the extraordinary range of the messages.

Combining pepper spray with the iconic painting of the Declaration of Independence makes for a strong political statement. It seems to suggest that such behavior is out of place, inconsistent with Democracy.

But it is quite possible to make a point without bringing up the politics at all.

Consider this combination with an iconic MC Escher drawing. It gives the pepper spray a different meaning, a more contemplative one. Placing pepper spray inside the reflective mirror twists the meaning. What does the artist mean to suggest?

I cannot get a precise message. That ambiguity stands in contrast with the precision of the image. Notice how the policeman’s image has been curved to be consistent with the refraction of the crystal ball. It gives the composition more authenticity, making it appear as if the spray is in the room with Escher.

Lets finish this off with one more, something lighter. This last picture combines the policeman with the iconic cover of the Beatles Sargent Pepper’s Lonely Heart Club Band. Let’s give some due to the creator of this one. First, the pun on pepper is brilliant. It is ok to groan. Second, the album combines the faces of so many different icons. It is visually jarring.

Ah, but it takes on new meaning by adding two (not one, but two!) pictures of police with pepper spray. It is almost funny, as the police belong in crowd. And the offensive image is muted because they spray the drum, not any band member, or part of the entourage.

Summing up, what was the point of surveying all this parody? The web has changed word of mouth. Where will it take global culture next? I do not know any better than anyone else, but the process works quickly and unexpectedly.

Maybe this example illustrates one thing. If a small incident in one little city can go global, just imagine what might happen to a sanctimonious authoritarian government in a high-profile situation. They do have much to fear from the freedom the web offers.

Actually, that is not entirely fair. Viewed at short intervals, broadband adoption will appear to be a slow moving process. However, a little stepping back from the short run headlines reveals good news and bad news in this report. That is the point of this post.

The big picture

Let’s start with the key picture. It updates government surveys on Internet use with data from October, 2010. This is the best survey on this topic in the country, and it has been collected longer than any other, so each new release deserves attention.

The good news is obvious in the picture. More households use broadband than in the prior year. A whopping 68% of US households have broadband, while another 3% have dialup. Considering the commercial industry was just getting off the ground two decades ago, that is pretty darned impressive.

The bad news is a bit more subtle, but also obvious in the diagram. Most of the growth in the last few years arose from a combination of new users and the replacement of dial-up with broadband. Why is that bad news? Look at the diagram. The latter trend has near finally finished, since there are almost no more dialup users left. In October of 2007 11% of households still used dialup. That is down to 3% today. Even in the recent past a significant fraction of broadband adopters were simply converts from dialup. But the diagram tells the obvious story: most of the converts have, well, converted. That means virtually all future growth has to come from new users.

Which gets us to the second picture. It shows the results of surveys of non-broadband users. It asks those users to explain why they do not have Internet access at home. Once again, there is good news and bad news in the diagram.

The good news is in the left most bar chart, which surveys dialup users. The two biggest reasons for not using broadband are expense and availability. Both of those should get better over time, albeit slowly. There is still hope for more converts.

The bad news is in the right bar charts, which covers the vast majority of non-users. The first and third biggest reasons for non-use are “don’t need it, not interested” and “No computer/computer inadequate.” Why is that bad news? Simply stated, this is the population that will fuel most of the future growth. Yet, neither of those reasons for not adopting will go away easily. Both  issues defy resolution, either through good marketing campaigns from private providers, or with any reasonable policy intervention. Finally, the second most common reason for non-adoption — too expensive — will eventually be overcome, but it too is likely to be slowly overcome, as already noted.

In short, new adopters will be hard to come by.

To summarize, the diffusion of broadband continues, but it is reaching some limits. There are just not many dialup users left to convert to broadband. The next phase has to involve generating new users, but that is likely to be considerably more challenging to overcome, as it involves generating adoption from a population of households who have little reason to act.

I had the great fortune to meet him several times. The first of these meetings occurred when I was a student. Those first meetings were informal because his son and I were friendly. He showed up on campus one day, because – as his son said – his father was on sabbatical. I did not appreciate that Rosenbloom was one of the preeminent scholars in the study of innovation. He was merely the father of the person with whom I had studied for comprehensive exams. We shared an office. This was his Dad. There was a family resemblance.

Richard Rosenbloom eventually gave a seminar during that year – it was research about the development of VCRs. I still remember it today. It influenced my views of competition between standards. It came at a formative moment.

I would like to honor his memory in this post.

What actually happened in VCRs?

Rosenbloom wrote about the VCR industry at a time when the academic world was going crazy over the competition between VHS and Betamax. It is hard to appreciate his influence without understanding the context of the contemporary craziness.

Just to remind those who did not live through it: Competition between the formats displayed a characteristic that any watcher of platform competition today would recognize. There were feedbacks between the suppliers and demanders.

More to the point, the designers of the VCR had anticipated that home users would show reruns of TV shows and various versions of home movies. None of them had planned for the rental industry, as it actually emerged, so the feedbacks between rental distribution and hardware distribution occurred outside the control of the prominent firms.

The feedbacks started to matter when the video rental industry sprung up. In brief, it went like this. Users bought hardware, but typically only one format. Video stores carried titles, even in both formats, but favored more titles with the format that reflected the most popular format with local customers.

Little by little, more VHS hardware generated more demand for VHS rentals, which generated more purchases of VHS hardware, and so on. It took a few years, but eventually VHS pushed out Beta altogether.

Two things about this process had a big effect on the academic conversation at the time.

First, Sony lost. This was the era in which Sony seemed to have a magical touch, so the experience ran counter to every expectation about its invincibility.

Second, the feedbacks did not operate overnight. Anybody awake lived through the slow and inexorable decline in Beta titles. It was easy to watch the process — by merely visiting the shelves of the local video store each month and asking video store managers about what they were doing. It was impossible to miss.

There was a third thing about these events, and I hesitate to bring it up. Many observers thought Beta was technically superior. To such people, watching Sony and Beta not succeed was inconsistent with the belief that the best technology always wins. There are still many academics today who cling to this idea, and have never surrendered on any dimension of this proposition.

Indeed, at the time I first met Richard Rosenbloom there were many academics who obsessed over this idea and its opposite. To each side, events in VCRs generated a spirited academic conversation about the nature of competition. The example of VCRs raised questions about whether such competition displayed perverse tendencies, potentially away from efficient outcomes. The debates could get very heated.

(Digression: though this debate was quite popular in my youth, over the years I have learned to have little tolerance for this discussion. Three reasons. First of all, it is obvious to any long-time observer of technology markets that the best technology does not always win. Twenty five different factors matter in most commercial markets in addition to technical superiority. Only a foolish economist or engineer ever centers an analysis on one aspect of a commercial situation, such as a product’s technological prowess. That necessarily ignores all other factors, such as distribution, service, reputation, pricing, etc. Second, it is almost impossible to settle this argument, as an honest empirical proposition, because life rarely arranges the facts in such a way as to deliver a definitive answer.  Third, this debate is usually a massive distraction. In virtually any setting where this question arises there are often twenty other issues more worthy of attention. End of digression.)

Into this conversation stepped Richard Rosenbloom and his collaborators (among them the very green Michael Cusumano, who later wrote some pretty interesting stuff about software…). I still remember the seminar well for one reason: Rosenbloom knew what he was talking about – he knew everything there was to know about VCRs, how they had been developed, how they worked, how the various parties had behaved and why, and anything else you might want to know.

Indeed, Rosenbloom was the first scholar I ever heard state with some authority – backed up by interviews and documents – that Sony’s executives and those elsewhere had not anticipated the rental market. He also could explain – again with some authority – why Sony and the designers of the VHS had not worked together: all parties had collaborated on a previous generation of the technology, and Sony burned their partners when the JV lost money, so the partners decided to go in their own direction the next time around.

His seminar was like that. Somebody would ask a question, and Rosenbloom would not speculate idly, like many academics do. He just knew the answers. He had done his homework, and thoroughly, so he just stated the answer without pretention.

Back to the bigger point: Why was that seminar so influential to me? Rosenbloom illustrated by example how and why great applied scholars know every theory and every fact. Great applied scholars just know how every theory does (or does not) fit the facts. Great applied scholars can do that because they go the extra mile, by interviewing executives, by reading multiple reports, by considering every angle, and by remaining skeptical about simple explanations. I can still recall my sense of admiration and appreciation and awe.

Rosenbloom had other ineffable qualities, and these emerged gradually, after I met with him several times. He was gentle, patient, and respectful in dealing with others, even in the face of stupid questions and arrogant questioners. It is hard to appreciate how wonderful it is to meet someone like that without spending time submerged in the insanity of the academy. Just take my word for it: it was like watching someone keep their head while everyone around them lost theirs.

If you would like to know more, here is the obit that the Harvard Business School posted. It is classy. It gets all the key facts right. It is worthwhile to read.

Still, that obit did not quite capture the essence of Richard Rosenbloom. That is why I felt compelled to write this. He was a mensch and a model for many, including me.