*Really* Understanding Jio

A while ago, I wrote an essay called “Airtel, Amazon and Untangling some Thoughts“. Today’s essay is a continuation of that one, and we’ll begin with a diagram I’d put up in the last one:

The basic thesis in that essay was that the reason the Amazon/Airtel, Google/Vodafone ideas made sense was because all the major players wanted to be present in the entire space.

But the recent investments in Jio take our story down a different path:

I wrote that Daily Update on the occasion of Facebook investing $5.7 billion for a 10% stake into Jio Platforms; it turned out that was the first of many investments into Jio:

In May, Silver Lake Partners invested $790 million for a 1.15% stake, General Atlantic invested $930 million for a 1.34% stake, and KKR invested $1.6 billion for a 2.32% stake.

In June, the Mubadala and Adia UAE sovereign funds and Saudi Arabia sovereign fund invested $1.3 billion for a 1.85% stake, $800 million for a 1.16% stake, and $1.6 billion for a 2.32% stake, respectively;

Silver Lake Partners invested an additional $640 million to up its stake to 2.08%, TPG invested $640 million for a 0.93% stake, and Catterton invested $270 million for a 0.39% stake. In addition, Intel invested $253 million for a 0.39% stake.

In July, Qualcomm invested $97 million for a 0.15% stake, and Google invested $4.7 billion for a 7.7% stake.

With that flurry of fundraising Reliance completely paid off the billions of dollars it had borrowed to build out Jio. What is increasingly clear, though, is that the company’s ambitions extend far beyond being a mere telecoms provider.

https://stratechery.com/2020/india-jio-and-the-four-internets/

That excerpt is from an essay written by Ben Thompson over on Stratechery.com, and it is one I will be quoting from extensively in today’s post, along with two other essays.

The last sentence in that essay is the basic idea behind my essay today: what exactly are Jio’s ambitions, why are those ambitions whatever they are, how is Mukesh Ambani going about meeting those ambitions, and what will the ramification be on India – and then the rest of the world.

What are Jio’s ambitions?

Think back (or scroll up) to that diagram I have above. Jio doesn’t want to (and never did want to) build out a large telecommunications firm and stop there. Building out the telecom infrastructure, expensive though it was, was the means to an end. And when I say expensive, I mean expensive: 30 billion dollars!

From a strategic point of view, this is impressive, but one has to call out RIL’s execution and ability to deliver on its vision. Here it is really important to circle back to the core petroleum business. Not many companies in India would have the ability to plough in ~$30B+, the biggest private sector investment in the country’s history, to build a broadband network to cover the country. The legacy business gave RIL the buffer and cash reserves to do this (see below for RIL’s capex over the past five years).

https://hind.substack.com/p/from-oil-to-jio

I came across this essay via Ben Thompson himself on Twitter, and I wish I had been aware of this newsletter earlier:

But why did Jio spend those 30 billion USD? With what objective in mind?

I suppose all of you are sick and tired of the phrase “data is the new oil”, and I am too – but the bad news is, there really is no better answer to our question in this section.

Oil, its linkages, its by-products, and its enabling nature is what attracted Dhirubhai to oil as a business. It wasn’t just about oil itself – it was always about all of what oil allowed one to get into as a business. And it is the same now – it’s not about telecommunications and data. That just enables Reliance to get into – well, everything, really.

The distinction is important: when I say data is the new oil, I don’t mean the fact that data about you (and everybody else will be collected). Mukesh Ambani understands that statement to mean that whoever controls the pipe through which data (or oil) flows wins.

Jio’s ambition is to be in the 21st century what Reliance was in the 20th: the sole controller of oil data

Why are those ambitions whatever they are?

People love to talk about moats in the tech world:

The term economic moat, popularized by Warren Buffett, refers to a business’ ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms. Just like a medieval castle, the moat serves to protect those inside the fortress and their riches from outsiders.

https://www.investopedia.com/ask/answers/05/economicmoat.asp

But perhaps a better way to understand both what Dhirubhai and Mukesh Ambani have done (with oil and data respectively) is to not think of those businesses as having moats around them but to think of these businesses as walls around the Indian consumer.

A moat protects a business. But Jio in particular is a business that is a moat. If other businesses want to get at the Indian consumer, you must literally get Jio’s permission. And the other way around too: if an Indian consumer wants to get at the Internet, she must do so through the Jio moat.

Mukesh Ambani, in an analogy that might make sense in today’s day and age, wants Jio to be Heimdall.

Heimdall is the brother of the warrior Sif. He is the all-seeing and all-hearing guardian sentry of Asgard who stands on the rainbow bridge Bifröst to watch for any attacks to Asgard. He partly won the role through using his eyesight to see an army of giants several days’ march from Asgard, allowing them to be defeated before they reached Asgard, and making their king a prisoner. (emphasis added)

https://en.wikipedia.org/wiki/Heimdall_(comics)

Another way of thinking about this is to liken Jio to China’s Great Firewall:

The Great Firewall of China (GFW; simplified Chinese: 防火长城; traditional Chinese: 防火長城; pinyin: Fánghuǒ Chángchéng) is the combination of legislative actions and technologies enforced by the People’s Republic of China to regulate the Internet domestically. Its role in Internet censorship in China is to block access to selected foreign websites and to slow down cross-border internet traffic. The effect includes: limiting access to foreign information sources, blocking foreign internet tools (e.g. Google search,Facebook, Twitter, Wikipedia,and others) and mobile apps, and requiring foreign companies to adapt to domestic regulations.
Besides censorship, the GFW has also influenced the development of China’s internal internet economy by nurturing domestic companies and reducing the effectiveness of products from foreign internet companies. (Emphasis added)

https://en.wikipedia.org/wiki/Great_Firewall

I don’t mean that analogy as a criticism – far from it. Quite the opposite, in fact, I say it with great admiration. In the part that is emphasized above, substitute Jio for GFW, and Mukesh Ambani’s playbook starts to make a lot of sense!

Ben Thompson makes a similar point in his essay…

The key to understanding Ambani’s bet is that while all of the incumbent mobile operators in India were, like mobile operators around the world, companies built on voice calls that layered on data, Jio was built to be a data network — specifically 4G — from the beginning.

https://stratechery.com/2020/india-jio-and-the-four-internets/

… but to my mind, doesn’t go far enough. Yes, data first, and yes, Jio got it right, but it is the strategic thinking behind “OK, what’s next after I’ve won the telecom sector” that’s truly impressive.

This section is titled “why are those ambitions whatever they are?” The answer boggles the mind.

How is Mukesh Ambani going about meeting those ambitions?

Three excerpts, all from the same author, but across two essays:

It’s very common now to talk about Reliance’s political connections and proximity to the government. This too has a deep seated history. Quite simply, you couldn’t be an industrialist or entrepreneur in India in the 1970s without currying favour with the government or having the right friends. Ambani became adept at this, forging ties with close aides of Prime Minister Indira Gandhi, like R.K Dhawan and T.A. Pai.

https://hind.substack.com/p/reliance-origins

Reliance at the time was seen as such a creature of the Congress that Rajiv Gandhi, who had become Prime Minister in 1984 after his mother’s assassination, wanted to keep a distance from Ambani. S Gurumurthy and Shourie both have ties to the BJP, the ruling administration now. Gurumurthy is co-convener of the Swadeshi Jagaran Manch (affiliated with RSS) and currently on the Board of the Reserve Bank of India.

https://hind.substack.com/p/reliance-origins

There’s, of course, also the question of regulatory capture and how much of a role that will play in RIL and Jio’s continued success. Pretty much every time an investment in Jio was announced over the last couple of months, a pointed note was made of Reliance’s closeness with the current government. These allegations have dogged Reliance regardless of administration. One argument is that Ambani basically controls whichever government is in power.

https://hind.substack.com/p/from-oil-to-jio

You couldn’t have built an empire around polyester, or oil, or data, without at least the tacit help of the government. Mukesh Ambani, and his father before him, learnt an obvious, if difficult to master, lesson. You need to be friends with whoever is in power. This is always true, but especially so in a country like India.

Because our babudom delights in coming up with rules and then making money off of the inevitable violation of those rules, the only way to avoid this problem is by making friends with the people who sit on top of the babus in the pecking order. And that’s not the BJP, or the Congress, or the United Front: it’s all of them. And when whoever happens to be in power wants a particular tune to be sung, it will be sung.

That, like it or not, is just good business sense.

So no, Mukesh Ambani is not especially close to Narendra Modi, and neither was Dhirubhai Ambani especially close to Indira Gandhi/Rajiv Gandhi. The key word in the previous sentence is “especially”. The Ambanis are especially close to the throne, and they don’t particularly care who is occupying it at just the moment.

They do care that the occupant not get in the way of their business, and that they have managed quite magnificently. Again, I mean this in an admiring sense, not as a critique. It remains the only way to do business in India on a very large scale, like it or not.

I think an easier answer is that Reliance knows how to work the system. I recently read this article by Mark Lutter, which argues that one thing that constrains Silicon Valley’s ability to build is that it hasn’t engaged seriously with politics. “Part of politics will be co-opting old institutions. Get innovation sympathizers in key positions of power.”

https://hind.substack.com/p/from-oil-to-jio

My only contention in this section is that you can’t answer the “how” without getting creative about working around the inevitable regulatory hurdles, and nobody is more creative in this regard than the Ambanis.

What will the ramifications be on India and the rest of the world?

India will – I don’t see any alternative to this – eventually become a duopoly when it comes to telecommunications. Vodafone is a dead man walking, and BSNL/MTNL are deadweight that the Indian government can support for only so long. Airtel remains the only credible competitor, although it’s challenges are going to be many, and very painful

Original chart here: https://hind.substack.com/p/from-oil-to-jio

And eventually, a very large part of India’s communications, commercial transactions will all go through Jio’s services. This, as the author mentions, may or may not be true, but I love the uniquely Indian example:

One use case I recently heard anecdotally was of JioMeet being used for day-long satsangs. This could be an apocryphal story, but to be honest, it is such a specifically Indian use case, that I can believe it. Can you imagine the kind of customer connections Jio can build if it becomes the default satsang app during the era of Covid?

https://hind.substack.com/p/from-oil-to-jio

Second, where the rest of the world is concerned:

Jio’s network and its work on 5G, which takes years, was by definition not motivated by a phrase Prime Minister Modi first deployed two months ago. Rather, Ambani’s dedication hinted at the role Jio investors like Facebook and Google are anticipating Jio will play:
..
..
Jio leverages its investment to become the monopoly provider of telecom services in India.
..
..
Jio is now a single point of leverage for the government to both exert control over the Internet, and to collect its share of revenue.
..
..
Jio becomes a reliable interface for foreign companies to invest in the Indian market; yes, they will have to share revenue with Jio, but Jio will smooth over the regulatory and infrastructure hurdles that have stymied so many (emphasis added)

https://stratechery.com/2020/india-jio-and-the-four-internets/

Remember the Heimdall analogy? The emphasized part above is the Heimdall play at work. You can enter Asgard India, sure, but only at Heimdall’s Jio’s pleasure, and Facebook and Google, among others, already have agreed, and backed up their agreement with cold hard cash.

Could I be completely wrong about all this?

Yes, and in two ways. Here’s the first, via Benedict Evans:

Every five years or so, a big telco thinks it can move up the stack and compete with the internet. This is a little like a municipal water company trying to get into the soft drinks business. Jio may be different: it has a more captive, less sophisticated base, a retail arm to leverage, and maybe more ability to innovate and understand the market. Or maybe not.

Benedict Evans’ Newsletter from the 21st of July

He elaborates on this further (read the entire conversation on Twitter):

Essentially, Evans’ point seems to be that other companies in other countries have tried what Jio is trying to do now, and maybe it won’t work out here because it hasn’t worked out there.

Maybe. The thing that makes me want to bet against Evans’ contention is how close Mukesh Ambani is to the government, and how involved the government in India has always been when it comes to regulation. In other words, I’m not betting just on how good Jio is (and it is good, but Evans has a been there done that gut feel – and he could be right). I’m also betting on how not laissez-faire our regulation is in practice. And that, weirdly, is the ace up Mukesh Ambani’s sleeve.

And the second way I could be wrong? Two words:

Jeff Bezos.

What a battle this is going to be.

Non-medical, non-economics links about Covid-19

David Brooks in the NYT:

Viktor Frankl, writing from the madness of the Holocaust, reminded us that we don’t get to choose our difficulties, but we do have the freedom to select our responses. Meaning, he argued, comes from three things: the work we offer in times of crisis, the love we give and our ability to display courage in the face of suffering. The menace may be subhuman or superhuman, but we all have the option of asserting our own dignity, even to the end.

John Authers in Bloomberg:

For now, the approach being adopted across the West is Rawlsian. Politicians are working on the assumption that they have a duty to protect everyone as they themselves would wish to be protected, while people are also applying the golden rule as they decide that they should self-isolate for the sake of others. We are all Rawlsians now.

How long will we stay that way? All the other theories of justice have an appeal, and may test the resolve to follow the golden rule. But I suspect that Rawls and the golden rule will win out. That is partly because religion — even if it is in decline in the West — has hard-wired it into our consciousness. And as the epidemic grows worse and brings the disease within fewer degrees of separation for everyone, we may well find that the notion of loving thy neighbor as thyself becomes far more potent.

And on that note, this by me from a couple of days ago.

A cartoon from the New Yorker about social distancing and how to do it “right”.

Also from the New Yorker, Siddhartha Mukherjee, writing like only he can:

But three questions deserve particular attention, because their answers could change the way we isolate, treat, and manage patients. First, what can we learn about the “dose-response curve” for the initial infection—that is, can we quantify the increase in the risk of infection as people are exposed to higher doses of the virus? Second, is there a relationship between that initial “dose” of virus and the severity of the disease—that is, does more exposure result in graver illness? And, third, are there quantitative measures of how the virus behaves in infected patients (e.g., the peak of your body’s viral load, the patterns of its rise and fall) that predict the severity of their illness and how infectious they are to others? So far, in the early phases of the covid-19 pandemic, we have been measuring the spread of the virus across people. As the pace of the pandemic escalates, we also need to start measuring the virus within people.

And finally, Ben Thompson, probably the only writer alive who can build a story linking Compaq and the coronavirus.

 

How do you interact with your computer?

“Alexa, play Hush, by Deep Purple.”

That’s my daughter, all of six years old. Leave aside for the moment the pride that I feel as a father and a fan of classic rock.

My daughter is coding.


My dad was in Telco for many years, which was what Tata Motors used to call itself  back in the day. I do not remember the exact year, but he often regales us with stories about how Tata Motors procured its first computer. Programming it was not child’s play – in fact, interacting with it required the use of punch cards.

I do not know if it was the same type of computer, but watching this video gives us a clue about how computers of this sort worked.


The guy in the video, the computer programmer in Telco and my daughter are all doing the same thing: programming.

What is programming?

Here’s Wikiversity:

Programming is the art and science of translating a set of ideas into a program – a list of instructions a computer can follow. The person writing a program is known as a programmer (also a coder).

Go back to the very first sentence in this essay, and think about what it means. My daughter is instructing a computer called Alexa to play a specific song, by a specific artist. To me, that is a list of instructions a computer can follow.

From using punch cards to using our voice and not even realizing that we’re programming: we’ve come a long, long way.


It’s one thing to be awed at how far we’ve come, it is quite another to think about the path we’ve taken to get there. When we learnt about mainframes, about Apple, about Microsoft and about laptops, we learnt about the evolution of computers, and some of the firms that helped us get there. I have not yet written about Google (we’ll get to it), but there’s another way to think about the evolution of computers: we think about how we interact with them.

Here’s an extensive excerpt from Wikipedia:

In the 1960s, Douglas Engelbart’s Augmentation of Human Intellect project at the Augmentation Research Center at SRI International in Menlo Park, California developed the oN-Line System (NLS). This computer incorporated a mouse-driven cursor and multiple windows used to work on hypertext. Engelbart had been inspired, in part, by the memex desk-based information machine suggested by Vannevar Bush in 1945.

Much of the early research was based on how young children learn. So, the design was based on the childlike primitives of eye-hand coordination, rather than use of command languages, user-defined macro procedures, or automated transformations of data as later used by adult professionals.

Engelbart’s work directly led to the advances at Xerox PARC. Several people went from SRI to Xerox PARC in the early 1970s. In 1973, Xerox PARC developed the Alto personal computer. It had a bitmapped screen, and was the first computer to demonstrate the desktop metaphor and graphical user interface (GUI). It was not a commercial product, but several thousand units were built and were heavily used at PARC, as well as other XEROX offices, and at several universities for many years. The Alto greatly influenced the design of personal computers during the late 1970s and early 1980s, notably the Three Rivers PERQ, the Apple Lisa and Macintosh, and the first Sun workstations.

The GUI was first developed at Xerox PARC by Alan Kay, Larry Tesler, Dan Ingalls, David Smith, Clarence Ellis and a number of other researchers. It used windows, icons, and menus (including the first fixed drop-down menu) to support commands such as opening files, deleting files, moving files, etc. In 1974, work began at PARC on Gypsy, the first bitmap What-You-See-Is-What-You-Get (WYSIWYG) cut & paste editor. In 1975, Xerox engineers demonstrated a Graphical User Interface “including icons and the first use of pop-up menus”.[3]

In 1981 Xerox introduced a pioneering product, Star, a workstation incorporating many of PARC’s innovations. Although not commercially successful, Star greatly influenced future developments, for example at Apple, Microsoft and Sun Microsystems.

If you feel like diving down this topic and learning more about it, Daring Fireball has a lot of material about Alan Kay, briefly mentioned above.

So, as the Wikipedia article mentions, we moved away from punch cards, to using hand-eye coordination to enter the WIMP era.

It took a genius to move humanity into the next phase of machine-human interaction.


The main tweet shown above is Steven Sinofsky rhapsodizing about how Steve Jobs and his firm was able to move away from the WIMP mode of thinking to using our fingers.

And from there, it didn’t take long to moving to using just our voice as a means of interacting with the computers we now have all around us.

Voice operated computing systems:

That leaves the business model, and this is perhaps Amazon’s biggest advantage of all: Google doesn’t really have one for voice, and Apple is for now paying an iPhone and Apple Watch strategy tax; should it build a Siri-device in the future it will likely include a healthy significant profit margin.

Amazon, meanwhile, doesn’t need to make a dime on Alexa, at least not directly: the vast majority of purchases are initiated at home; today that may mean creating a shopping list, but in the future it will mean ordering things for delivery, and for Prime customers the future is already here. Alexa just makes it that much easier, furthering Amazon’s goal of being the logistics provider — and tax collector — for basically everyone and everything.


Punch cards to WIMP, WIMP to fingers, and fingers to voice. As that last article makes clear, one needs to think not just of the evolution, but also about how business models have changed over time, and have caused input methods to change – but also how input methods have changed, and caused business models to change.

In other words, understanding technology is as much about understanding economics, and strategy, as it is about understanding technology itself.

In the next Tuesday essay, we’ll take a look Google in greater detail, and then about emergent business models in the tech space.

 

Five articles about Clayton Christensen

As I mentioned in yesterday’s post, Clayton Christensen passed away recently. Five articles about him in today’s write-up, to honour the man, and his most popular and lasting contribution to theory.

The Innovator’s Dilemma is what most people know Clayton Christensen for, and the book is a great read. It is slow going, be warned, but the idea is remarkable. And that idea is the theory of disruption.

First, a quick recap of the idea: “Disruption” describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price. Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. Entrants then move upmarket, delivering the performance that incumbents’ mainstream customers require, while preserving the advantages that drove their early success. When mainstream customers start adopting the entrants’ offerings in volume, disruption has occurred.

As I said, most people know of The Innovator’s Dilemma, but there was another book – and theory – called The Innovator’s Solution. But where the second theory was concerned, Ben Thompson wasn’t so convinced.

Read the whole thing, but if I had to summarize the argument (always a dangerous thing to attempt), it’s this: there’s a world of a difference between B2B and B2C companies.

The excerpt below is from a fine profile of Clayton Christensen by Larissa MacFarquhar, and reading it (the entire thing) is recommended. You might also want to pair the excerpt with Thiel’s Christainity. At any rate, I was reminded of it.

Mormons believe that family is for eternity, and that in Heaven they will be together with their relatives as they were on earth. They believe that after death they will grow to resemble their heavenly parents as children grow to resemble earthly parents, until eventually they become gods.

Also from the New Yorker, a rather less complimentary piece about the efficacy of the theory of disruption:

Christensen has compared the theory of disruptive innovation to a theory of nature: the theory of evolution. But among the many differences between disruption and evolution is that the advocates of disruption have an affinity for circular arguments. If an established company doesn’t disrupt, it will fail, and if it fails it must be because it didn’t disrupt. When a startup fails, that’s a success, since epidemic failure is a hallmark of disruptive innovation.

Joshua Gans writes in his honour, upon his passing, and the link is here.

And finally, I found this advice from an essay written by Clayton Christensen very useful indeed – and of course, the rest of the essay is also very well written!

 

In using this model to address the question, How can I be sure that my family becomes an enduring source of happiness?, my students quickly see that the simplest tools that parents can wield to elicit cooperation from children are power tools. But there comes a point during the teen years when power tools no longer work. At that point parents start wishing that they had begun working with their children at a very young age to build a culture at home in which children instinctively behave respectfully toward one another, obey their parents, and choose the right thing to do. Families have cultures, just as companies do. Those cultures can be built consciously or evolve inadvertently.

Apple through five articles

I’ve said it before and I’ll say it again. If you are really and truly into the Apple ecosystem, you could do  a lot worse than just follow the blog Daring Fireball. I mean that in multiple ways. His blog is one of the most popular (if not the most popular) blog on all things Apple. Popularity isn’t a great metric for deciding if reading something is worth your time, but in this case, the popularity is spot on.

But it’s more than that: another reason for following John Gruber’s blog is you learn about a trait that is common to this blog and to Apple: painstaking attention to detail. Read this article, but read especially footnote 2, to get a sense of what I mean. There are many, many examples of Apple’s painstaking attention to detail, of course, but this story is one of my favorites.

There is no end to these kind of stories, by the way. Here’s another:

Prior to the patent filing, Apple carried out research into breathing rates during sleep and found that the average respiratory rate for adults is 12–20 breaths per minute. They used a rate of 12 cycles per minute (the low end of the scale) to derive a model for how the light should behave to create a feeling of calm and make the product seem more human.

But finding the right rate wasn’t enough, they needed the light to not just blink, but “breathe.” Most previous sleep LEDs were just driven directly from the system chipset and could only switch on or off and not have the gradual glow that Apple integrated into their devices. This meant going to the expense of creating a new controller chip which could drive the LED light and change its brightness when the main CPU was shut down, all without harming battery life.

Anybody who is an Android/PC user instead (such as I), can’t help but be envious of this trait in Apple products.

There are many, many books/videos/podcasts you can refer to to understand Apple’s growth in the early years, and any one reference doesn’t necessarily mean the others are worse, but let’s begin with this simple one. Here’s Wikipedia on the same topic, much more detail, of course.

Before it became one of the wealthiest companies in the world, Apple Inc. was a tiny start-up in Los Altos, California. Co-founders Steve Jobs and Steve Wozniak, both college dropouts, wanted to develop the world’s first user-friendly personal computer. Their work ended up revolutionizing the computer industry and changing the face of consumer technology. Along with tech giants like Microsoft and IBM, Apple helped make computers part of everyday life, ushering in the Digital Revolution and the Information Age.

The production function and complementary goods are two topics that every student of economics is taught again and again. Here’s how Steve Jobs explains it:

 

You can’t really learn the history of Apple without learning about John Sculley firing Steve Jobs.

According to Sculley’s wishes, Steve Jobs was to represent the company externally as a new Apple chairman without influencing the core business. As Jobs got wind of these plans to deprive him of his power, he tried to arrange a coup against Sculley on the Apple board. Sculley told the board: “I’m asking Steve to step down and you can back me on it and then I take responsibility for running the company, or we can do nothing and you’re going to find yourselves a new CEO.” The majority of the board backed the ex-Pepsi man and turned away from Steve Jobs.

And the one guy who helped Steve Jobs achieve his vision for Apple once Jobs came back was, of course, Jony Ive. This is a very, very long article but a fun read, not just about the relationship between Ive and Jobs, but also about Ive and Apple. Jony Ive no longer works at Apple of course (well, kinda sorta), but you can’t understand Apple without knowing more about Ive.

Jobs’s taste for merciless criticism was notorious; Ive recalled that, years ago, after seeing colleagues crushed, he protested. Jobs replied, “Why would you be vague?,” arguing that ambiguity was a form of selfishness: “You don’t care about how they feel! You’re being vain, you want them to like you.” Ive was furious, but came to agree. “It’s really demeaning to think that, in this deep desire to be liked, you’ve compromised giving clear, unambiguous feedback,” he said. He lamented that there were “so many anecdotes” about Jobs’s acerbity: “His intention, and motivation, wasn’t to be hurtful.”

Apple has bee, for most of its history, defined by its hardware. That still remains true, for the most part. But where does Apple News, Apple Music, Apple TV fit in?

Apple, in the near future will be as much about services as it is about hardware, and maybe more so. That’s, according to Ben Thompson, the most likely (and correct, in his view) trajectory for Apple.

CEO Tim Cook and CFO Luca Maestri have been pushing the narrative that Apple is a services company for two years now, starting with the 1Q 2016 earnings call in January, 2016. At that time iPhone growth had barely budged year-over-year (it would fall the following three quarters), and it came across a bit as a diversion; after all, it’s not like the company was changing its business model

Understanding Microsoft Better

One reason that I will probably never shift over to the Apple ecosystem is simply because I am so accustomed to using Windows. Which is not to say that I am not tempted: of course I am. But sit me in front of a Windows PC, and I can be working right away (insert Windows 8 joke here) – shifting to a Mac is tempting, but I lose a couple of days just figuring out what is where. Windows is literally part of my muscle memory now (insert Windows 8 joke here too).

And it’s not just me! Microsoft is, for better or for worse, omnipresent in so many people’s lives today, and that’s primarily why Bill Gates is as wealthy as he is.

But how? How did Microsoft get to be Microsoft?

“Microsoft entered the operating system (OS) business in 1980 with its own version of Unix called Xenix but it was MS-DOS that solidified the company’s dominance. IBM awarded a contract to Microsoft in November 1980 to provide a version of the CP/M OS to be used in the IBM Personal Computer (IBM PC). For this deal, Microsoft purchased a CP/M clone called 86-DOS from Seattle Computer Products which it branded as MS-DOS, although IBM rebranded it to IBM PC DOS. Microsoft retained ownership of MS-DOS following the release of the IBM PC in August 1981. IBM had copyrighted the IBM PC BIOS, so other companies had to reverse engineer it in order for non-IBM hardware to run as IBM PC compatibles, but no such restriction applied to the operating systems. Microsoft eventually became the leading PC operating systems vendor”

So much so that the PC was ubiquitous. Almost part of the furniture!

So potent was the PC — especially the Windows PC — two decades ago, that The New York Times commented: “Computer use has become so widespread, and Microsoft’s grip on the industry so powerful, that the introduction of Windows 95 took on the decibel level of a national event, almost a new August holiday that might be dubbed Bill Gates Day.”

In effect, for many many years, especially for the layman, Microsoft was Windows, and Windows was Microsoft. But that is no longer true, and has not been true for years.

The story of Windows’ decline is relatively straightforward and a classic case of disruption:
The Internet dramatically reduced application lock-in

PCs became “good enough”, elongating the upgrade cycle

Smartphones first addressed needs the PC couldn’t, then over time started taking over PC functionality directly

 

It’s just that it took some time for Microsoft itself to realize this:

My well-chronicled frustration with Microsoft’s corporate strategy comes down to one point: I don’t think any company should have both horizontal (i.e. services) and vertical (i.e. devices) businesses. It creates conflicting incentives: a horizontal business should be great on every platform, while a vertical business should be differentiated.

And Nadella’s approach has been key:

Microsoft existed to “empower every person and every organization on the planet to achieve more.” Though vague enough to deserve a place in the pantheon of corporate sweet nothings, the new mission offered a semantic shift that would define Microsoft for the five years that followed: It would become a people company instead of a product company.

I hope to post more about the company, especially the fifth link, because understanding how Nadella got Microsoft to completely reinvent itself is worthy of deeper exploration.

Etc: Inequality, Gigerenzer, solstices, technology today, and Sir Abed

Five links that I read about recently that I figured you might enjoy reading too.

  1. “A decade ago, the writer Deborah Solomon asked Donald Trump what he thought of the idea that “all men are created equal.” “It’s not true,” Trump reportedly said. “Some people are born very smart. Some people are born not so smart. Some people are born very beautiful, and some people are not, so you can’t say they’re all created equal.” Trump acknowledged that everyone is entitled to equal treatment under the law but concluded that “All men are created equal” is “a very confusing phrase to a lot of people.” More than twenty per cent of Americans, according to a 2015 poll, agree: they believe that the statement “All men are created equal” is false.”
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    The New Yorker on inequality. I learnt about luck egalitarianism by reading this article, but it is a good overview of the topic more generally.
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  2. “There is a low-tech way design your portfolio. It’s simply called 1/N formula or equality heuristics. Simple divide your funds equally across funds. It sounds too simplistic for the complex world of finance, and unlikely to impress any investor from whom you are raising funds (unlikely to impress you if someone is asking for your money, saying 1/N is their portfolio allocation strategy). ”
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    A nice profile from Founding Fuel of Gigerenzer’s work, ideas and productivity.
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  3. “I’m informed, however, that this 20 minute error in the Hindu solar calendar is deliberate, and that this has been put in place for astrological reasons. Apparently, astrology follows a 26400 year cycle, and for that to bear out accurately, our solar calendar needs to have a 20 minute per year error! So for the last 1700 or so years, we have been using a calendar that is accurate for astrological calculations but not to seasons! Thankfully, the lunar calendar, which has been calibrated to the movement of stars, captures seasons more accurately!”
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    The catchily titled Noenthuda blog explains more about Makar Sankranti and the summer solstice.
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  4. “…few companies are pure “tech” companies seeking to disrupt the dominant cloud and mobile players; rather, they take their presence as an assumption, and seek to transform society in ways that were previously impossible when computing was a destination, not a given. That is exactly what happened with the automobile: its existence stopped being interesting in its own right, while the implications of its existence changed everything.”
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    Contextualizing technology today, by Stratechery.
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  5. “The idea is to give an extremely poor family an asset — say a cow or a goat or bees — that can increase its income over time. BRAC is hardly the first group to use this model; another prominent one is Heifer International. But BRAC combines the donation with a mix of services that has proved highly effective — including training and coaching on how to use the asset, cash grants to tide the family over while getting a new enterprise started, and help with health care and education.”
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    As the title of the blog post says, a profile of the most influential poverty fighter you’ve never heard of. Education matters!

Tech: Links for 24th December, 2019

Beginning today through until the 31st of December, I’ll link to five pieces from each category that I enjoyed collating this year. There’s no science or overt logic to any of them: I’m just going to scroll through the posts, and replug those that I enjoyed re-reading. Hopefully, next year, I’ll get a little more scientific about it. Happy holidays!

  1. Let’s help ourselves understand Stratechery and it’s Aggregators concept.
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  2. I wish the world would get more excited about Oumuamua!
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  3. I hope to be working (from a writing papers viewpoint) on urbanization in the coming year.
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  4. I am an unabashed fan of Google, and it’s products. With some caveats, about which I hope to write in the coming year. But kudos to them for doing what they do, especially in education!
  5. Five great reads from The Ken.

Tech: Links for 5th November, 2019

  1. “Wearable technology, wearables, fashion technology, tech togs, or fashion electronics are smart electronic devices (electronic device with micro-controllers) that can be incorporated into clothing or worn on the body as implants or accessories.”
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    Wikipedia on wearables.
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  2. Wearbles are bigger than you thought.
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    “Wearables are now bigger than iPad and will soon be bigger than the Mac. And the glasses are supposedly coming next year, and the $250 AirPods Pro just shipped.”
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  3. You’ve heard of Google Glass, presumably. But uh, one ring to rule ’em all…?
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    “Amazon is experimenting with putting Alexa everywhere, and its latest experiment might be the wildest yet: a new smart ring called the Echo Loop that puts Alexa on your finger.”
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  4. “And it goes without saying that the technology still matters: chips need to get faster (a massive Apple advantage), batteries need to improve (also an Apple specialty), and everything needs to get smaller. This, though, is the exact path taken by every piece of hardware since the advent of the industry. They are hard problems, but they are known problems, which is why smart engineers solve them. ”
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    The ever excellent Ben Thompson, writing about wearables in 2016. He was bullish then, and I suspect will be even more bullish now.
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  5. All of which, I hope, will help contextualize Google’s latest acquisition.

RoW: Links for 16th October, 2019

Five links about the NBA, China and the United States of America

  1. “Apple removed an app late Wednesday that enabled protesters in Hong Kong to track the police, a day after facing intense criticism from Chinese state media for it, plunging the technology giant deeper into the complicated politics of a country that is fundamental to its business.”
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    The NYT gives us useful background about the topic…
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  2. “But Apple is in a particularly difficult position, due to the company’s success in China: Unlike several other big consumer tech companies, which either do little business in China or none at all, Apple has thrived in China. The country is Apple’s third-biggest market, which generates some $44 billion a year in sales. And Apple’s supply chain, which lets it produce the hundreds of millions of iPhones it sells around the world each year, is deeply embedded in China.”
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    Recode explains the perils of integrating too successfully with China in terms of both backward linkages as well as final sales (that’s a loaded statement, worthy of a deeper analysis!)
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  3. “This morning brings new and exciting news from the land of Apple. It appears that, at least on iOS 13, Apple is sharing some portion of your web browsing history with the Chinese conglomerate Tencent. This is being done as part of Apple’s “Fraudulent Website Warning”, which uses the Google-developed Safe Browsing technology as the back end. This feature appears to be “on” by default in iOS Safari, meaning that millions of users could potentially be affected.”
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    Via John Gruber, over at Daring Fireball (please follow that blog!), a somewhat unsurprising, yet depressing revelation.
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  4. “I am not particularly excited to write this article. My instinct is towards free trade, my affinity for Asia generally and Greater China specifically, my welfare enhanced by staying off China’s radar. And yet, for all that the idea of being a global citizen is an alluring concept and largely my lived experience, I find in situations like this that I am undoubtedly a child of the West. I do believe in the individual, in free speech, and in democracy, no matter how poorly practiced in the United States or elsewhere. And, in situations like this weekend, when values meet money, I worry just how many companies are capable of choosing the former?”
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    Ben Thompson provides useful background and an even more useful overview of the larger picture.
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  5. “Daryl Morey wrote a pro-Hong Kong tweet and had to retract it, and then both the Rockets and the NBA had to eat crow. ESPN — part of the Disney empire I might add — has given only tiny, tiny coverage to the whole episode, even though it is a huge story on non-basketball sites. I’ve been checking the espn/nba site regularly over the last 24 hours, and there is one small link in the upper corner, no featured story at all.”
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    And finally, Tyler Cowen explains how incentives always and everywhere matter.