Thoughts In Grey

Why Apple (and Intel) Failed. Why they'll succeed anyway.

Watching the iPhone 4 antenna flaw unfolding for several weeks really took me back.  It was an illustration of how difficult it can be for any company to notice or adjust correctly when large-scale changes are effecting their customer base and with it the expectations of their products.

I was at Intel (NasdaqGS: INTC) back in 1995 when we went through the cathartic moment remembered today as the Pentium FDIV Bug. Calling it a "bug" would almost overstate what it was. A small imperfection in a lookup table meant that some division operations that required accuracy beyond six decimal points would provide flawed results. Realistically, this did not have an effect on the vast majority of Pentium-based personal computer users. Even a relatively sophisticated guy like me never needed that level of precision. The guy who found it was a mathematician, others who had problems might have included astrophysicists and guys working on quantum mechanics.

Intel's reaction to the discovery of the flaw was no different than it had always been. The nature of the problem was published in the processor's "errata" sheet -- an obscure document that only users with the most demanding needs were aware of or consulted. Major software companies and PC assemblers were notified so that they could compensate for the problem in software/firmware if they deemed necessary. It was thought to be a non-issue.

What Intel hadn't coped with internally was that things had changed. The Pentium was their first truly branded product, and its release coincided with Microsoft's Windows 95. Windows 95 was also the first truly branded computer operating system, complete with a Rolling Stones soundtrack to accompany the launch commercials. In 1995, the PC business was becoming branded and "comsumerized" even as the companies that were driving the change had few people in them with any sort of a consumer perspective. Apple is in much the same position today. They're no longer a supplier to geeks who idolize Steve Jobs. They've got to look at things from a different perspective, just as Intel did when their moment of truth came.

Credit for College Kids?

"Same as it ever was"

- The Talking Heads

Interesting discussion on CNBC earlier, about a rule embedded in "Financial Reform" which demonstrates to me how far we've come in 20 years and how far back we need to go in order to restore some sense of financial sanity to our lives and financial institutions.

But to understand how far off the rails we've come, we need to look back 20+ years to when I was in college. As a college student, for the most part, I couldn't get any credit of my own. After all, I had no real income and little disposable income. I did have one card off a parent's account for use in emergency situations, but for the most part I got by with cash and my Debit/ATM card. I was, admittedly, better off than many of my peers, but even for me the general rule was that if I didn't have the cash for it, I couldn't buy it.

A Physicist and an Economist Are On a Desert Island...

Today's news from the world of physics is both exciting, disturbing and potentially highly-disruptive. Even a low-level science buff like myself can get excited about the fact that the Standard Model -- long the mainstay of theoretical physics -- has been shown to have a major potential flaw.

But even amongst physicists whose work is inherently tied to the existing model, there are no put-downs, no dismissal of the work, no personal criticism of the scientists who claim the conflicting discovery. Rather, there is a true sense of inquisitiveness, a desire for greater proof and a recognition that if the discovery proves to be true, it will force the dismissal of formerly-held beliefs, but will in the end advance the field, not retard it.

Try presenting a similar type of observations to a bunch of economists. Bring a flak jacket if you do.

Brief Notes

Was a nice 4th of July. While my "date" for the fireworks party flaked, I had fun anyway.

• Ben Bernake is responsible for more than half of the currency currently in circulation. Yup, after 234 years of U.S. history, more than half the dollars in circulation were created in the past decade.
• And worth noting that serial criminal Casey Serin has spent yet another independence day still at large.
• Is this a sign of the end of prohibition? When governments start considering that taxing something is preferable to spending money on banning it, we're likely at an endgame. Considering that about 20% of the accumulated Federal deficit is related to the 40-year "war on drugs" and that the "war" has absolutely nothing to show for itself, maybe that's a good thing?
• Not that I'm in favor of drug use. Never used the stuff and don't plan on changing my stance anytime soon, but historically such bans -- whether on alcohol or anything else -- have never been anything other than a gift to organized criminals who are happy to step in and supply the market. We've shown that we know how to reduce smoking and drinking in much cheaper ways, so why insist on continuing down failed path of dealing with drug abuse through criminalization rather than trying something that has a history of working?
• Not that the morons at the L.A. County Commission don't have anything better to do. Like maybe deal with the broken county hospitals, the overcrowded jails (mostly overcrowded with low-level drug offenders), and the perpetually broken budget?
• On the other hand, the never-ending war on drugs is certainly good for a few laughs now and then, courtesy of the dumbest criminals.
• I tweeted this outrage from the Federal Reserve a few days ago but didn't comment on it here, as it sort of speaks for itself. As usual, Barry gets the last word.
• "Remember that all models are wrong; the practical question is how wrong do they have to be to not be useful" - George Box
• Andy Grove hits things right on the head, as he always did during the few opportunities I had to meet him during my short years at Intel (NasdaqGS: INTC). Industries are like ecosystems. You can't outsource the dirty pieces that we think somebody else should do cheaper and still expect to hang on to the "good" pieces. In the end the "high value" work tends to be a lot easier to do when you're right down the street from the factory or the call center or any of the other places where the rubber meets the road.
• Andy also is willing to break some taboo and remind us of times when things got bad enough that troops had to be called in to keep the peace. He doesn't remind us (but somebody should!) that one of the more common depression-era crimes was kidnapping and that violence against the well-off tends to increase when people decide they have no better options. I think a lot of people at the upper end of society are fooling themselves about how the current state of affairs will affect them.
• From my Facebook wall: "Facebook thinks I should become a fan of Barack Obama and Fox News, apparently because my real-world friends include a guy who had a show on Fox Business, and a former campaigner for Obama, among others. And isn't it grand that on this 4th of July weekend, I can still be friends with both of them and many others, and put the political BS aside."
• And for the record, I am not a "fan" of any politician or large corporation. When they pay me and/or bail me out to the tune of billions of dollars, I'll consider it.
• But please do hit the button above and become a fan of this blog! I can't pay, but I'll be really, really, really grateful.