Embracing Chaos

I’d like to share a couple thoughts on Detroit — a couple ideas that I’m not hearing in the popular or business press, but are important to understand. Chrysler goes bankrupt First some background. Chrysler is being restructured under bankruptcy. This doesn’t mean they’re going out of business. It means that they owe more money than they have or will be able to pay. So with the help of a judge, they’re sitting down with everybody they owe money to and telling them frankly “you’re not getting everything we owe you. Sorry, but there just isn’t enough to go around.”…

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DSLR cameras make very little sense today. Modern imaging technology is rapidly turning them into dinosaurs. The forces keeping them alive are a combination of a physical legacy in hunks of glass, and aspirational marketing. I’ll explain, but first, what’s a DSLR and why don’t they make sense? Background on SLRs and DSLRs (If you what “f-stop” means, feel free to skip ahead to the next section.) SLR stands for Single Lens Reflex. Practically speaking it refers to a camera where you can change the lens. You look through the same lens that actually takes the picture, letting you put…

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A few weeks ago Lawrence Lessig showed up The Colbert Report to plug his new book, Remix. The interview itself is quite funny. Lessig talks a bit about how traditional copyright laws don’t make sense with modern technology. My favorite part is when Colbert dares the public to remix that interview with “a great dance beat” by saying he will be “very angry and possibly litigious” with Lessig periodically interjecting saying “I’m totally fine with that” and “I give you permission.” Of course, the great dance beats have been showing up. Lessig blogged about a bunch of them. The one…

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Coincident with the launch of the iPhone 3G hardware, Apple has started a couple of new online services: MobileMe and the iPhone App Store. In some ways these are natural extensions of existing product lines. But I believe their launch actually represents a fairly substantial strategic shift as Apple attempts to diversify from a hardware-only company to one that runs on a mix of hardware and services. In order to make this strategy work, Apple will need to sacrifice its much coveted high hardware margins. Diversifying from hardware Since Jobs pulled the company out of the doldrums, Apple has been…

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Here I propose an alternative explanation for iPhone scarcity: the difficulty in obtaining a new iPhone keeps people from complaining about problems with it. I will explore this sophisticated marketing technique that Apple may or may not be employing to cover up quality problems with the new iPhone 3G. Even if Apple is not doing this deliberately, I assert that it is a valid and potentially very useful technique if your product is lucky enough to have the prerequisites. New iPhones are hard to get The blogosphere is full of speculation about whether or not Apple deliberately made the iPhone…

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Evolution-like processes exist in many places beyond genetic adaptation of biological species. We see similar processes in a great many aspects of modern life, generally running many orders of magnitude faster. Much of economics and business is governed by processes that select for the most successful product or business model or manufacturing process or organizational structure. Successful practices thrive and out-compete ones which are less effective at meeting human needs and desires. Warfare has very obvious parallels. In computer science, user interfaces, programming languages and system architectures all evolve by analogous processes. Similar effects can be found in governments, religions,…

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This last week there was a lot of news coverage of a “daring hostage rescue in Columbia.” Fifteen people were freed from the FARC. Many had been held captive for years, including politician Ingrid Betancourt, and three Americans. The press has been celebrating the victory along several lines. How wonderful it is for these people to be set free after years of captivity. How the US military helped plan and support the operation. How the guerrillas were fooled into giving the hostages up without firing a single shot. (Aren’t we smart! Aren’t they stuipd?) But there’s a dark side to…

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Amazon has a history of facilitating disruptive change. First by selling books online, they demonstrated the advantages of a well-run online store. Then with music, movies and just about everything else, they have shown that centralizing inventory and customer experience allows for reduced costs and an improved experience over a traditional distributed retail model. Today, Amazon Web Services is starting to disrupt IT operations similarly by providing a higher quality service at lower cost than most companies can manage themselves. They achieve these scale economies through centralization. With Kindle Amazon is attempting another disruptive change, this time in the way…

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[I wrote this for my excellent class on Open Innovation. With mere weeks to go until I finish my MBA, I haven't found much time to write original stuff for this blog, so I'm recycling a bit.] The music recording industry is in trouble. Disruptive changes in music playback technology have seriously reduced demand for their mainstay business, physical CD sales. CD sales comprise 80% of the industry’s total revenue, but have dropped sharply in recent years. Last year sales dropped by 19%, and the channel is in danger of freefall as retailers start to re-allocate store space currently assigned…

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Although most corporate mergers fail (often due to mis-aligned incentives on the part of the deal-makers) there is a solid economic foundation for the proposed Microsoft + Yahoo! merger. Most of their assets will work no better combined than separate. But the merged Microhoo ad network would be significantly more valuable than the sum of two ad networks alone. Why bigger is better for online advertisers The reason lies in network effects of the online search + advertising industry. Imagine you’re an ad buyer which is to say you have a service you want consumers to find online. Unless you’re…

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