Thursday, February 28, 2013

Telecommuting, Marissa Mayer, and the Workplace of the 21st Century

Should businesses allow telecommuting?

Fair disclosure: I have lobbied in the past for Apple to buy Yahoo!. I still hold that position. But what to make of Marissa Mayer's new no-telecommuting policy?

Marissa Mayer, CEO of Yahoo!, former Vice President at Google, recently announced a no-telecommute policy at Yahoo!. She has stirred up a lot of controversy. Notably, Forbes supports the ban arguing that face-to-face collaboration will foster innovation. Richard Branson argued that employees need to trust each other enough to work remotely. Many argue that for the good of parents and kids, parents need to be able to work from home and raise children.

Q: So who's right?
A: They all are.

Marissa Mayer and Forbes are right. Often a five minute conversation can resolve an issue that would require a 16 email chain. Videoconferencing can help to resolve acute issues that come up. But communication latency, compression artifacts, and limited resolution all hamper creativity. Have you ever successfully brainstormed remotely? It can work, but the not as well. Similarly, a lack of water-cooler time can prevent a cohesive culture from developing. Those cultural HR campaigns and marketing materials do little. I do disagree that working remotely damages trust. I have worked remotely with some consumate professionals who I would trust with my toughest projects. Similarly, I have worked in person with morons who barely understand their own jobs or sociopaths who try to push all of their responsibilities on others. Trust comes from competence and forthrightness, not from co-location.

Richard Branson is right, too. I personally enjoy the human aspects of my job. I make it into the office whenever I can. But I can't always make it in. Like every human being, I get sick. It's nice to work from home so that I don't have to use my PTO. Without the ability to work from home, employees will go to work sick and pass germs on to colleagues. My girlfriend and I used to live several hours away. Without the ability to work remotely one day a week, we wouldn't have been able to maintain our relationship. Surprise, Ms. Mayer! I would have chosen my girlfriend over my job. As a talented, in demand engineer and product manager, I have no shortage of recruiters emailing me. I am sure that Yahoo!'s top talent have many opportunities, too. I am sure that many busy parents are currently considering how to achieve a better work-life balance.

So what's a CEO to do? How to achieve the TAO of telecommuting?

First, blanket, no-telecommuting policies will be harmful in the long term. Those talented Yahoo! employees who want to telecommute will leave. Period. But how to achieve a common culture and foster creativity while facilitating a good work-life balance for all employees? Like anything else, develop a detailed, pragmatic plan.

All jobs should be classified into telecommuting bands, similar to the job levels many companies use to grant vacation days and other perks. Everyone needs to spend some time in the office. Yes, even that sysadmin who lives in another state and only needs an Internet connection in order to monitor the database and restart the servers. The company should fly him in for one week a quarter, do some knowledge transfer, and do some fun morale building activity. Others may need different amounts of time in the office. For example, an engineering manager may need to spend four or five days a week in the office. An engineer may only need to spend three days. A receptionist could not ever work from home.

Maximize productivity and creativity

My mother always told me You catch more flies with honey than with vinegar and the old proverb is true. There are much better ways to foster creativity, productivity, and a vibrant culture than to force people into the office. Encourage employees to take an ownership stake in the success of their team, division, and company. I'm not talking about a financial stake. Those incentives don't work as well as you think. Allow workers to work on their own projects with an 80/20 policy or a 24 hour ShipIt contest.

Yahoo! and Telecommuting

I can't promise to understand all of the cultural and organizational issues at Yahoo!, but I'll donate my 2 ¢ to my noble bog readers anyway. Marissa Mayer has kept a high profile for a CEO. She has nearly five times as many hits on Google as Yahoo's founder, Jerry Yang. Certainly this announcement has generated a lot of publicity for Yahoo! of late. There is a good chance that lower level Yahoo! managers are already allowing their most valuable direct reports to violate the policy lest they walk. This policy may also die quietly. I do also think Yahoo! needs a shake-up. Its communities, Yahoo! groups and Flickr have been languishing in the wake of Facebook, Instagram, Tumblr, and the like. The temporary energy generated by this policy might work.

In the end, though, Yahoo!'s problem isn't policies, it's talent. Google has been purchasing the best engineers, scientists, and product managers for years. My best computer science professor left a high profile tenure track position at a top 25 university to take the Google money. Yahoo! shelled out a nice chunk of change to Ms. Mayer, but she won't transform the company on her own. Does Yahoo! have the money to buy the best and brightest? All the more reason for Apple to acquire the iconic Internet portal.

Wednesday, February 20, 2013

Supreme Court Appears to Back Monsanto in Patent Dispute

soybeansdna, biotechnology

I updated you guys yesterday on a fascinating case before the Supreme Court. As you have probably figured out, I am leery of the extremely broad legal protections given to IP in this country. I felt that the case was important enough that I posted it both to my political blog and to my tech blog.

Let's have an update on the arguments.

According to the New York Times, the arguments in Monsanto vs. Bowman seemed to go the way of the giant chemical and agricultural company. Apparently, the attorneys for Monsanto were allowed to speak at length whereas Mr. Bowman's attorneys were shut down. The justices outright told Mr. Bowman that the legal basis for his defense, namely the doctrine of patent exhaustion does not apply.

Although it seems that Bowman is unlikely to win outright, SCOTUS observers have been wrong before. The court may decide the case on narrower grounds that would not have pose such a huge threat to our long-term agricultural stability. Justice Breyer appeared to open the door for an exception with his comment "maybe three generations of seeds is enough", but it isn't completely clear what loophole that would allow. Perhaps the court could rule that Mr. Bowman intentionally planted seeds that he knew contained the genes resistant to Monsanto's herbicide Roundup, and there broke the patent. Perhaps if a farmer planted the seeds without any intention of using the patented seeds, then the patent might not apply.

Stay tuned for a ruling.

Monday, February 18, 2013

Monsanto Attempts to Control Global Food Supply

Today the US Supreme Court is considering a case which puts the country's, nay the world's food supply at risk.

This entry is posted to both my political blog and my tech blog. I apologize for the overpost, but the issue is both political and technical. It is also extremely important to the well-being of the nation.

Vernon Hugh Bowman, a 75 year old farmer from Indiana, purchased some soy beans from a local granary. He planted those beans and harvested the results. Some of the beans were genetically engineered and patented by Monsanto, but he did not attempt to purchase genetically engineered beans. He didn't care. The Monsanto beans were mixed up with others.

Many people oppose the patentability of living things. Although I share their concerns, I do believe that patent protection for such innovations can be a benefit to society–as long as that patentability does not extend to naturally occurring substances or processes. Let's set that issue aside. It is very complex and deserves its own discussion.

Monsanto viewed Bowman's growing of soybeans as an attempt to infringe on their patent. The gigantic agribusiness sued, and a lower court ruled in its favor. The judgment ordered Monsanto to pay Bowman $84,000. The agricultural biotech industry compares the planting of patent protected seeds to copying protected software. But the parallel doesn't work. Copying software violates its copyright. A software patent is violated by writing new software that performs the patented activity. Seeds cannot be copyrighted because they copy themselves. Bowman could have violated Monsanto's patent by engineering a new seed which had the desired biochemical properties of the original–namely resistance to a particular herbicide.

If Monsanto get's it's way, it will have inordinate control over the nation's food supply.

The practice of monoculture is already dangerous. Most farmers have chosen to grow a single variety of a single crop. They have chosen varieties that have drought resistance, herbicide resistance, or that yield larger crops. These varieties have been bred and engineered. Before modern distribution systems, many farmers bred many different beneficial varieties, but now the top few varieties claim the vast majority of acreage. This is risky for the food supply because if that variety is particularly susceptible to a new disease, a huge amount of the world's food could be lost in one epidemic causing famine across the third world.

This case poses a threat to biodiversity in agriculture that spreads far beyond that posed by monoculture. Plants don't know the boundaries of fields or property lines. Much like Tiger Woods, they have evolved to spread their seed as far as possible. If it does spread to some unpatented crops, farmers who are not Monsanto customers would be violating its patent just be replanting their own crops. Eventually, the patented crops would overrun all other crops and monoculture would rule all.

Farmers can not violating a patent by planting seeds. That is the intended purpose of the seed. If it was a patent violation to plant patented seed, then Monsanto's customers would be violating the patent by doing so. Farmers that buy Monsanto's seed sign a contract to not replant the harvested seed, but to purchase fresh seed the next season. But that contract is only enforceable on those who sign it. It is unrelated to the patent protection granted by the USPTO.

SCOTUS: Don't be a schil to big business again. Do what's right. The nation's best interests are clearly in line with the law here. Rule justly.

More details here.

Thursday, February 14, 2013

A Broader Strategy for Apple

Yesterday, I suggested that Apple buy Yahoo! or at least finance its acquisition in order to facilitate a long term partnership. Google is the king of internet data. In the digital economy, data is becoming more and more valuable and Google is outpacing all others. Apple has its own share of data, but only on those who purchase its hardware products. In the short term, this is fine. Apple is making fat margins and has $137 million of free cash. In the medium to long term, this lack of good consumer data is a liability. It is not operationally or logistically possible for Apple to keep up hardware sales growth at current levels. Google just needs to churn out more and better on-line products and services. And that's cheap. It requires no fixed assets. As I proposed yesterday, Yahoo! could help Apple catch up.

Apple's shareholders have filed a lawsuit attempting to force Apply to return some of its "petty cash". Apple is going the cash in short term, liquid investments earning a percent or two. The suit argues that investors could make better use of the cash and that Apple should return it in the form of larger dividends or a share buyback. Apple should absolutely NOT return the cash.

As I have argued, Apple needs to invest strategically in order to continue growth long term. And there are a number of ways, Apple could do this. Below are a few acquisition possibilities that would benefit Apple strategically:

  • Yahoo!: Enough said. Estimated cost: $33 billion.
  • Dropbox: Consumer cloud storage site would give Apple a ton of data to mine. Estimated cost: $8 billion.
  • Tumblr: Up-and-coming hip photo sharing site would be (relatively) cheap and increase Apple's already significant fashionability. Estimated cost: $2.5 billion.
  • Nokia: Old hand in the mobile devices industry with reputation for reliable, low cost manufacturing. Could help Apple easily scale up capacity without sacrificing cost or quality. This play would be most likely to happen when Apple decides to expand its mobile device offerings. Estimated cost: $18 billion.
  • Canonical: Largest Linux distributor would give Apple cred in the OSS community. Ubuntu has recently diversified into the mobile OS market. This play would be more defensive. Ubuntu could potentially pose a long term threat and Apple could snap them up cheaply. The OSS culture would be hard to integrate, so Apple would most allow Canonical to operate as a standalone while influencing its broad strategic direction. Estimated cost: $600 million.
  • WMWare: Server technology company would allow Apple to make a play in the enterprise server and hosting services market. At first, this might seem like an unadvisable play. Margins on enterprise software and services are growing more slowly than consumer revenues due to vicious competition. On the other hand, the business will be cash positive while allowing to mine e-Commerce traffic patterns and thus, perhaps, stay ahead of the competition. Estimated cost: $40 billion

Of course, there are uncountably many start-ups that might make sense and that Apple could snap up cheaply. It could easily pay cash for a all of those businesses and buy more. Of course, that would be a mistake. Over-diversification would prevent Apple from bringing its laser-like focus on quality and user-experience to its acquisitions. On the other hand, it will need to take some risks in order to continue its rapid growth.

My advice to Tim Cook:

Don't return cash to shareholders. They think that they can spend it better than you, but they can't. Do your due diligence. Investigate possible acquisitions. Pick one, two, or maybe even three that make sense. Develop a solid plan to either integrate the targets or run them as subsidiaries.

Then pull the trigger.

Wednesday, February 13, 2013

How Apple and Yahoo! can fight The Google, Lord of the Internet, Titan of Data

Yahoo! Logo Yahoo! Logo Yahoo! Logo

Google and Apple have eaten Microsoft's lunch, but Google is going to eat Apple's if Apple isn't careful. Remember the old Mac vs. PC battle of the late 80s, early 90s? Remember who won? That's right Microsoft forced Apple nearly to the brink by opening up its OS. Of course, this isn't a problem, yet. Apple is getting fat profit margins on its premium hardware, and it can always open up its OS when it does become a problem.

More importantly, Google owns the Internet. It has data on everyone in the world, and it uses that data to sell ungodly amounts of ads and analytics. Apple doesn't have that. More important, Google has innovative employees and enough user data to pick attractive new products and an ability to link them together through the broadest Single Sign-On mechanism on the Internet or in Mobile. This will only make Google's data more valuable. In a decade Google will control a plurality of ads and analytics dollars worldwide. In a few decades it could control a majority of such data.

Apple needs a partner which can help it to make more inroads into this market. And who better to partner up with than Yahoo!? Yahoo! has a huge on-line user base that's very active in communities. It boasts one of the most successful web portals, and the leading picture-centered social network in Flickr. Yahoo! could give Apple the users, on-line engagement, and broad communities that it needs.

Straight acquisition? Maybe. Better yet, feel out the anti-trust regulators first.

If the regulators won't allow Apple to gobble up Yahoo!, then the Microsoft deal could show the way.

Apple could finance a private takeover of Yahoo! as Microsoft financed Michael Dell. WIth the cash Apple has, it could finance a huge portion. It could pick it's suitor.

So what are the possibilities? Apple could finance a tech mogul along with private equity. Bob Parson (founder of GoDaddy), Marisa Meyer (current Yahoo! CEO), Sean Parker (Napster, Facebook), Elon Musk (founder of PayPal) are all possibilities. But I think there is a better spouse for Yahoo!

Apple should finance a takeover of Yahoo! by a group of traditional media companies, Disney, Viacom, Universal.

This would make a new media company focused on monetizing traditional media and opposing the ads and analytics behemoth, Google. Of course these companies would be happy to partner with Apple on content monetization, analytics, and advertising. iTunes downloads have a lot higher margines that YouTube views, right?

Apple will still need to find a way to fight the hardware portable, Android OS, but at least it would have a fighting chance in the war for user data./p>

Don't even get me started on Facebook...

How Microsoft Can Rise Like a Phoenix

In my most recent blog post, I asserted that Microsoft is dying.

One paragraph summary:

MS is paying for software development that other companies are getting for free. Microsoft employees are writing worse code than their unpaid counterparts. Microsoft can't focus on their user experience, because they have to write more parts of their OS than others get for free.

But how can Microsoft reverse this downward trend that may accelerate into a death spiral?

Follow the plan below:

  1. Dump the Windows kernel
  2. Adopt an open source kernel, probably a POSIX compliant kernel (list of them here)
  3. Adopt a creative culture of innovation and experimentation where failure is allowed
  4. Spin off the following divisions into majority controlled subsidiaries:
    • XBox
    • Mobile
    • Server
    • Office
    • Kernel: this division would not write a kernel, rather it would adapt the open source kernel for Microsoft's use
    • Online communities
    • Cloud computing
    • Device drivers and hardware specifications
    • Microsoft Research
    • New market exploration

Microsoft should maintain a majority stake in each allowing it to direct the strategic direction and leverage synergies between them. On the other hand, they would operate separately and might have different cultures. They would need to pay for services inter-subsidiary services. This would force costs downward.

The parent company would be left as a hollow corporate shell. This would allow it to focus solely on broad market strategy and avoid the costs associated with managing operations across a vast corporate empire.

This prescription sounds drastic for a company that is sitting on huge cash reserves and is still quite profitable, but it is growing slowly in markets that are growing quickly. Its competitors are growing like weeds. Furthermore, Microsoft's technical strategy is out-of-date by twenty years in an industry that is moving at light speed. Soon enough, Microsoft will face a tipping point. It needs to take drastic steps before it falls off a cliff.

Why Microsoft is Dying

By now, everyone has heard that Michael Dell is trying to take Dell Computer private

He recently threw in his lot with Microsoft, but not forever.

Microsoft is a big debt-holder for the new private entity, but not an equity partner. In the short term, it can use that influence to keep Dell on the morphine drip of Microsoft software.

Whether or not the acquisition goes through, Michael Dell should see the writing on the wall for Microsoft and Windows. The monopoly status of Microsoft means that it will play a huge part in a growing market long term, but in the end, Windows will become a relic.

Want to know why? First a recent history of the evolution of human knowledge.

Crowd-sourcing has become a buzzword. At its core is the concept of sharing creativity. That concept is at the core of knowledge and learning. Academic standards for writing allow, no require, citation of other relevant works and foundations. They also require review by experts. The more experts like a work, the more it is cited, the more influence it has. Thus was formalized the evolution of ideas, memetic evolution. (Interestingly, the structure of this network of knowledge is theoretically similar to that of the Internet. In network theory, they are both considered small-world networks.) In 1969, the Unix operating system was born of this system at AT&T Bell Labs and UC Berkeley. Strictly speaking, UNIX is a kernel. It controls the low level function. Users can't talk to it directly. Windows and buttons and command prompts talk to the kernel–they are called chrome. Berkeley's version of Unix (BSD Unix) allowed any person anywhere to modify the code for their own use. Furthermore, they could redistribute the system for profit or free as they liked. If users liked, they could submit their changes. If the changes were good, they would be incorporated into the source. Suddenly users and individuals could incorporate changes that would benefit them the most. Better yet, others would make improvements to those improvements!

The Unix OS is still the standard for much scientific computation, but Linux systems (which are very similar to Unix ones) have replaced them as the engines of E-commerce. Linux uses a very similar license to the BSD license, but it goes even further in promoting the OSS model. If users modify Linux, they cannot redistribute changes without redistributing the source code. For this reason, the Linux license is considered "viral" by many.

In 1998, Steve Jobs made the bold decision to ditch the two decades old Apple written operating system and build on top of the BSD system. This allowed Apple to crowd-source the low level engineering of its consumer operating system! Apple was free to focus on a shiny new user interface that "just worked". The BSD Operating System has always been far superior to Microsoft windows, so OS X steadily gained marketshare while maintaining higher margins. The freedom to focus on user interfaces has allowed Apple to spend engineering dollars building amazingly intuitive consumer gadgets. The decrease in manufacturing costs driven by the rapid industrialization of Southeast Asia has given allowed Apple to extract ever fatter profit margins from Customers and Partners.

Windows will become a relic because Apple uses more reliable software to run the innards of all its devices. Apple has superior chrome and performance. It pays more money for better hardware, too, and users are happy to pay. Linux and UNIX are given away for free to anyone--and they are becoming easier and easier to use everyday. They will eat into Microsoft's license fees, too. Microsoft still pays tons of expensive developers tons of expensive money to do what thousands of Linux and UNIX contributors are do for free everyday. And because of Microsoft's bureaucracy their devs don't do as good a job as their unpaid counterparts. (To be fair, Apple, IBM, Google and countless other countries pay developers to contribute to these products. But what code gets in is managed by dedicated experts who know their projects inside and out. No pointy-haired types are involved.) Google is assailing Microsoft's market dominance on all fronts. It now offers two OSes, Android and ChromeOS, with more planned. It also offers cloud based office software to compete with MS Office. Sooner or later Microsoft will wash out.

Steve Ballmer is largely responsible.

Under his leadership, Microsoft's culture of innovation has died and its place in the market will, too:

Ballmer should be:

  1. Fired
  2. Tarred
  3. Feathered
  4. Set on fire
  5. Set adrift on Lake Washington

Tuesday, February 12, 2013

Industry Implications Of Microsoft Financed Dell Buyout

As we all know from finance 101, debt holders have a material stake in the debtor company. Of course if this stake is high enough, the creditor can influence strategic decisions albeit quietly. As has been suggested elsewhere, this was Microsoft's play in financing $2 billion of debt in Michael Dell's play to take Dell computer private. (We'll see if minority shareholder lawsuits allow the deal to go through.)

This is an interesting play by Microsoft, and I think broader than a defense of the lucrative PC ecosystem. That defense is only a medium term play by Microsoft. Although the consumer PC ecosystem is lucrative, it isn't growing at the rate that mobile is. I believe that that is where the true value is. The Microsoft Surface is not a bad play. The UX of tablet + keyboard is a great concept. Of course, the early reviews of Windows 8 as a UI are not good. On the other side, Dell surely wants to enter the tablet market. And Michael Dell wants to gain all the equity he can before that play is made. Furthermore, that transition likely requires more control and discipline than the quarterly ups and downs of the market would allow.