We wanted shock and awe, instead we got shock and confusion. What to make of the launch of the iPad? The first rule for the folks who live at Infinite Loop, Cupertino, is that great products create their own market. Second, Steve Jobs actually knows quite a bit about publishing and print. With that in mind we shouldn't get too fixated on the iPad as a Kindle killer.
When it comes to divining the the future of publishingactivate the link. It will take you through to a fascinating mock up of what an e-magazine or e-newspaper could look like. Think National Geographic, Life - um maybe Playboy - with high quality graphics, some of which mutate into speaking videos when you click on them. This is surely the kind of thing that someone would watch on the iTab. The Kindle is better suited for long reading sessions, but the iTab still has great potential in the publishing arena.
As for its prospects in other markets, we will have to wait and see what the Apps Community make of it. My guess is that the ITab will take off slowly but will then build considerable momentum a year or more out. Video traffic, which is already growing at 130 compound, according to Cisco is the real market for this device. I think a number of vertical markets, such as medical, could also run with the iTab.
The really big news out of Apple this week though has to be the astonishing breakthrough the company has made in Asia. Asia as a per centage of profits, doubled to 20%. Sales in Taiwan and Japan were up several fold and in China, 200,000 legal iPhones have been activated. I say legal because several hundred thousand have been smuggled into the country. China Unicom confirms that 70% of those buying an iPhone are switching to 3G.
To put that number in context, the iPhone sells for $1000 dollars in China, a country were per capita income is around $3,400. Furthermore, you cannot use WiFi on the official iPhone, though you can if you smuggle one in. The new official number for 3G users in China is 13m. That could double this year. Chinese operators are a accident prone as their Western cousins. 3G wont be big there unless they embrace a device like the iPHone. Apple growth in Asia will be the single most important event of the coming year.
A few days after Apple announced, LG Electronics published a 70% drop in mobile profits. I think we have seen the high water mark for Asian handset makers. It used to be possible to travel the length and breadth of Asia without seeing an Apple product but that is now changing. Asian handset makers compete on hardware design, but that doesn't count for much in the Smart Paradigm. Apple can now fight on its own terms - applications and content. Asian handset makers and Nokia will struggle to equal the richness of the Apps Store. I wonder what Good Night Vienna is in Mandarin
There is a real risk that the clash between Google and the Chinese authorities mutates into a trade war. Secretary of State Hilary Clinton's statement yesterday has cranked up the temperature. It is difficult to police the internet successfully, but it is an easy task compared to threats that come from microchips and communications systems that may have been tampered with.
In 1982, a three-kiloton explosion blew apart a natural gas pipeline in Siberia. The explosion was visible from outer space. Two decades later a leading US journalist, quoting senior secret service sources, revealed that what had taken place was a cunning plan that had been perpetrated by American security forces. The Man From Uncle had sprinkled faulty chips and software throughout the Soviet supply chain. At a designated time they blew apart and destroyed a large part of the Soviet Union’s gas supply. Nice work.
In September 2007, Israel launched a successful bombing raid against a suspected nuclear facility in Syria. Israeli planes were able to cross Syria’s borders and attack because agents had already planted a ‘kill switch’ that remotely turned off surveillance software. News of this attack was first reported in IEEE Spectrum, the respected trade magazine for electronics engineers. Over the last few days, India reported that just before Christmas it detected the first cyber attack on government computers originating from China. Last July 4th, US and South Korean government computers were put out of action following cyber attacks that again originated in China.
As both the Israeli and Russian examples show that lethal attacks not only come from the internet, or faulty software. The real danger might come from imported chips and electronic systems. If we are looking for the cause of the next trade trade war, high tech is likely to be at the heart of it.
Today’s integrated circuits can have 1 billion transistors, a number that will double every 18 months. To put this in context, at the rate of one transistor a second it would take 75 years for a person to check a pair of chips. A typical cell phone has several hundred million transistors, making them difficult to check for faults. Last year about 200m smart-phones, such as the iPhone and Blackberry, were shipped. This year the number will approach 300m.
These devices are powerful computers, but with the added twist that they are linked to the mobile phone network. Even at today’s level of sophistication it is difficult to check these devices for Trojan Horse circuits. Within a couple of years it will be common for smartphones to have a billion or more transistors. Any foreign power hacking into the phone network has the opportunity to gain information about the time and place of individuals. It would also be possible to gain information about who that individual met and communicated with. As such, smart phones take the opportunity for information gathering and for causing havoc to a new level.
According to an essay penned by General Wesley K. Clark and Peter L. Levin, in the respected Foreign Affairs Magazine, in January 2008 the FBI reported that 3,600 counterfeit Cisco network components were discovered inside US defence and power systems. The authors claim that as many as five per cent of chips are counterfeit. Now ask yourself, where are most of these devices made? Those that are not made in China are often made in Taiwan. Now, imagine the potential problems we would have if Taiwan became part of the PRC.
America says it wants to build a Smart Grid. Such a grid would be built using internet standards and use advanced IT systems. Sounds great in theory, but I hope they are able to check all parts and software because if not, the country is leaving itself wide open to attack. It's time to apply Andy Grove's dictum to politics and international affairs: only the paranoid survive.
Sir Alan Sugar gets a mention here for predicting that the iPod wont make it to the next Christmas. I can remember attending a conference in 1988 -I think- when he was sharing the platform with a very young Michael Dell. A journalist asked Sugar if he thought that direct sales of PCs was the way forward. No chance, said Sugar. I can’t remember what Dell’s reaction was but he has been laughing all the way to the bank ever since.
Were you lucky enough to see the great Dennis Potter’s last interview before he died in 1975? Didn’t he burn, didn’t he glow, life was intense, just as it was for Blake’s tiger. In a similar vein, here is the last lecture given by a brilliant young scientist called Randy Pautsch. There is something about proximate death that brings out the lyrical. It will probably be one of the most uplifting things that you will see this year. Pautsch, who died of liver cancer shortly after, is in fine form and rather disconcertingly, he looks amazingly well. There is one lovely Geek joke too: “Yes, I have to confess to a death bed confession, I’ve just bought my first Mac.”
Below is a link to a fascinating lecture give by VS Ramachandran, a leading neuroscientist that looks at the synapses that might create culture and the global mind. This is followed by a link to a McKinsey paper on the dollar's prospects
A heart felt plea from a venture capitalist who bemoans the fact that a third of his portfolio appears to be in breach of patent laws. I dare say that the ancient Babylonians didn't plan to wreck their civilisation by over irrigating their fields. Patent laws might by our version of the Babylonian dilemma. We are slowly being strangled by patent laws that are being applied to software.
Net Neutrality Interesting piece from an economic prospective that argues that net neutrality makes sense.
A useful unit of energy is the gigawatt: a billion watts. A large coal fired plant generates a gigawatt, so does a dam like the Hoover, and so does a nuclear reactor. Multiple a gigawatt by a thousand times and you get a terrawatt. Global energy consumption is of the order of 16 terawatts.Most of the terawatts we use come from coal fired power stations.
Coal fire power stations belch out gigatons of carbon dioxide, which is the main contributor to climate change. Currently, there are 387 parts per million -PPM- of CO2 in the atmosphere. This is rising at 2 ppm each year. There is some agreement among scientists that a realistic number to aim for is 450 ppm.At this level it is calculated that global temperatures will only rise by about 2 degrees centigrade. A rise of this order will still mean a large loss of species but the odd polar bear and penguin might just struggle through.
The figures I am now going to use come from Saul Griffith, a materials scientist who received a MacArthur “genius” award in 2007. Griffith’s starting point is that 450 ppm. He calculates that, in order to keep atmospheric concentration of CO2 at 445 ppm humanity will have to cut fossil fuel use to around 3 terrawatts a year. He further calculates, taking account of efficiency improvements, that to reach this target we have 25 years to build a new country called Renewistan. Renewistan is a place where every available inch would be covered by wind, solar and biofuel energy sources. As a guide, he calculates that Renewistan is roughly the size of Australia. Australia; 25 years? It is not going to happen is it?
Like Marxism, Socialism, Fascism, the environmental movement has become a secular religion. The chief characteristic of a secular religion is that wants take precedence over needs. There may, therefore, be an argument for saying that the dogma of efficient markets is a secular religion as well. Certainly, there are similarities with the environmental movement and the way financial markets and many economists work. The wide use of complex models and the faith in their accuracy is one. The green movement, in common with some fundamental religions, has gone from concerning itself just with the environment to opposing many aspects of progress. It, rather like a fundamental religion, has become deeply conservative.
A handful of senior scientists, both in terms of age and achievement, point out that as the climate is non linear we should guard against placing too much faith in mathematical models. One of the most passionate critics of these models is Freeman Dyson, who we have quoted several times before. Dyson is one of most celebrated mathematicians and theoretical physicists of the last century, and, as it happens, a splendid writer too. Another scientist who we follow is Vaclav Smil, who has written numerous books on climate issues, and in his most recent, Global Catastrophes and Trends, also takes the global climate models to task.
The problem is that in a non-linear system a small, perhaps not even perceivable change, can lead to a dramatic effect. Another scientist who is familiar with the models and has serious doubts about them is Stewart Brand. He has just written a books that will, we think, become a classic. It is splendidly written and uses a clear, concise argument to demolish a number of the dogmas that the green movement clings to. In Brand’s view the Green Movement is one of the obstacles standing between us and survival. The books is called, Whole Earth Discipline.
I am the age of the average American dam, which means I am in the D to D- minus stage of my life ( see infrastructure piece). In 1978, when I came to London, there was a book shop I used to frequent on Camden High Street, called Compendium, that specialised in American imports. One of the first books I remember buying was, The Whole Earth Catalogue, which Stewart Brand created and edited. It was published annually for a number of years and won the National Book Award. In its day it was highly influential. When hippies weren’t doing drugs or listening to the Grateful Dead they would read it. Brand studied biology and ecology (back in the days when ecology was a dirty word) at Stanford. The point is, Brand was early to the environmental movement. Like most sane people he can see that climate change is happening, but being a good scientists he prefers facts to dogma.
In the spirit of Darwin, Brand has no problem confronting new facts that undermine many of his most cherished beliefs. On one level, the Whole Earth Catalogue reads like a coming of age. Brand is over 70 years old now.
Like James Lovelock, the scientist who devised the theory of Gaia with Lynn Margoulis, the noted American biologist, Brand whole heartedly endorses nuclear power. Furthermore, he has marshalled facts and arguments that shoot down the fears of storing the waste from nuclear reactors.
He also agrees that cities are to be encouraged. They are efficient users of energy, their existence, as demonstrated by Jane Jacobs, has, over the millennia, resulted in most agricultural breakthroughs. Cities are where innovation and civilisation happens. Brand loves cities, he would embrace nuclear power and he can see that genetically modified crops have a role to play in an over crowded planet.
That’s the good news. Now for something different. In one of the most alarming parts of the book Brand reports a telephone conversation he recently had with James Lovelock, the doyen of climate scientists. It is worth repeating in part:
I phoned Jim Lovelock after his Royal Society talk to get details on why the gentle optimist I’ve known for three decades is so alarmed. “ The year 2040 is when the IPCC (intergovernmental panel on climate change) is estimating that Europe, America and CHina become uninhabitable for the growth of food,” he said. “They’re grossly underestimating the rate of temperature rise, so that 2040 may be 2025. People don’t realise how little time we’ve got. The planet really is on the move.”
“On the move toward what?” I asked.
He said: “I don’t think there’s much doubt at all amongst those few of us that have worked on the problem, that the stem is in the course of moving to its stable hot state, which is about 5 degrees Celsius globally higher than it is now. Once it gets there, negative feedback set in again, and the whole thing stabilizes and regulates quite nicely. What happens is, during that period, the ocean ceases to have any influence on the system, or hardly any.”
To cut to the chase, Brand asked him how many people could earth support in its new hotter, stable state - 1 billion. As we like to say in the stock market, “It’s a view.”
Google's Andy Rubin has been talking to the Wall Street Journal's Walter Mossberg about the new Nexus smartphone. Apparently, Google is planning to open some retail stores to sell the Nexus direct.
Get the picture? First, Google launches the Android platform and encourages the world's mobile companies to support it. Good thinking, that way you raise brand awareness and suck in legions of developers. Without developers the Android has as much fizz as a can of Dead Bull - which by all accounts is the favourite tipple of portfolio managers these days.
Then, as momentum builds you do what you were always planning to do anyway. Knee cap your customers by launching your own handset. None of this should come as a surprise. There has been a lot of hot air expended on the subject of smart phones. But one thing should, by now be clear. The Apple way - which is to be vertically integrated so you can control the product like a crazed control freak is the best way.
Microsoft might like to sing the old tune about horizontal value chains and how that worked best in the PC space. It is whistling in the wind. The smartphone is an embedded device, the PC by contrast is a generic device. A generic device is open, you can do with it what you will with it. You can run any software you want on a generic device. That's not the case with smartphones. You and I cannot take the lid off and write our own code. Instead, we have to get it from a registered supplier. Therefore, Apples plays the role of gate keeper in a way that Microsoft never could in the PC world.
The Apps Store has become the game changer. Just the other day LG Electronics' CEO said that the company was in a state of panic. Finally, the penny has dropped even in Asia. We are living in the Smart Paradigm: content and applications is the key to hardware sales. Giants like LG and Samsung will thrive or die over the coming years on their ability to replicate the Apps Store. Don't hold your breath though, this is a fiendishly difficult trick to pull off.
This is what makes Google's play so interesting. An Apps Store is really the marriage of software and content development with social networking. Therefore, the bigger your apps store becomes the less likely it is that a competitor will be able to build a successful one. Apps Stores, like any other networkable entity follow a power law - a tiny number will generate most of the revenue and control the market. Maybe just one or two - besides Google and Apple who are the other challengers? Nokia - possible but unlikely. A mobile operator - no way.
As a character in the Wire might say - mobile handset industry has been played.
Youtube's traffic has risen 137% over the last year and the number of unique visitors is up 32%. Welcome to the Fourth Wave. My feeling is the up coming Apple Tablet will add further momentum to this trend because it will have great graphics - probably supplied by nVidia but possibly Imagination Technologies in the UK and 3G and WiFi .
The last blog mentioned the number of turning points that we have passed and are likely to pass during the present year and how this would result in upside surprises. By the end of 2007/8 we passed 20% for global internet connections, we have passed 20% for 3G and this year mobile internet connections will pass the number of fixed line internet connections. As these turning points are passed technologies like the mobile internet become mainstream social phenomenons, which means that growth rates could increase. We have become and look and see society - to be seen is to be. Welcome to the Panopticon - always visible, always seeing.
Turning point, fork in the road, this year will have more than most. Anyone who has studied the history of the mobile phone, the fax and internet penetration knows the importance of the 20% rule. Once a networked service reaches 20% penetration growth accelerates.
Last year internet penetration went through 20% of the global population. The latest estimates put the number of people connected to the internet at 1.7bn according to Wikipedia. My company, Cykeparters, estimates that more than 20% of the mobile handsets sold in the US are now smartphones. Globally the number of mobile subscribers on a 3G network recently passed 20%.
This year Qualcomm estimates 3G handset will outsell ordinary mobile handsets for the first time ever. Meanwhile Ericsson forecasts that this is the year that mobile internet connections outnumber fixed line internet connections.
Now this is just awful news for mobile operators because it means one thing - bad publicity. The reason is that their networks are unable to keep up with all the traffic. Following the launch of Apple's latest iPhone last year, Youtube stated that video uploads from mobile phones rose by over 400%. Weeping and wailing was heard from San Francisco to New York as AT&T's network kept dropping the ball. This Christmas AT&T had a new cell mate in the doghouse. In London the O2 network repeatedly crashed because of iPhone generated traffic.
Things look set to get worse with data hungary devices, such as Google's new Nexus and a posse of Android devices that are data hungary and come with video cameras. Those people at Apple are of course at it again too . If the rumours are correct, on the 26th January the company will launch the iTablet, or maybe it will be called the iSlate. Either way, the new device looks as though it will be optimised to carry video.
As a result there have been rumours that Apple is holding talks with a number of video and TV content providers to offer a subscription service similar to iTunes. This makes sense. With 3G penetration and connection speeds rising, and a likely surge in WiFi hotspots those old distinctions between TV, phones and computers will evaporate. We are moving to a world where every nook and cranny of the economy and environment will be saturated by wireless broadband and video content. We will live in a present saturated by data. One manifestation of this will be the growth in augmented reality. If Apple ever opens its video APIs on the iPhone interest in this technology will surge.
Cisco has estimated that mobile video will dominate network traffic by 2013. Mobile, plus video, plus social networking is a game changer. As Samuel Beckett (following Bishop Berkley) said, to be seen is to be. This plugs in to a very real human need. When Freud was alive repressed sexuality was the force that shaped the human psyche. Not many people today are sexually repressed; at least not in my neighbourhood. If Freud were alive today my guess is that most of his patients would not be complaining about Oedipus they would be talking instead about Big Brother, Hello Magazine and why they haven't yet made it on to Oprah. Today's citizens have hang-ups about identity not sex.
My hunch therefore is that companies, like Apple and Google and a host of others, such as Arm in the UK, that are linked to mobile video and smartphone theme will continue to surprise us on the upside. The 1970s were a terrible time for the economy but a golden period for tech. The same pattern is likely to be repeated over the next few years.
Hi, I'm Keith Woolcock, I look for emerging themes and technologies that have the power to create and destroy businesses. I search for those points in life where change is taking place at the fastest pace. I have worked both as an national newspaper journalist and tech analyst with banks such as Merrill Lynch and Nomura