Burlingame, Calif. -Last week, I got a glimpse of the future--and even captured a couple of minutes of it on video.
It happened during the opening dinner of a three-day powwow on media and entertainment, convened by the Paley Center for Media (formerly the Museum of Television and Radio) and the technology governors of the World Economic Forum. The event glittered with executives and political wonks: California Gov. Arnold Schwarzenegger spoke; so did Google's Eric Schmidt and Yahoo Chief Terry Semel.
Even more memorable than the speakers, however, were the scores of guests holding up little white boxes, about the size of a BlackBerry, videotaping the event. Each dinner guest had been given a "Flip" video camcorder--and instantly put it to use.
Sitting next to me, Jonathan Kaplan, the spirit and chief executive behind the company that developed the Flip, beamed--and pointed his Flip toward center stage as well.
Welcome to a world where everything you do may well be recorded. Flip clips bring special significance to the phrase "global village." Just like several generations ago, when the old ladies of the village kept a sharp eye on everyone, today an electronic eye will do that for us.
Every event. Any time. Anywhere. This thing fits into a purse or pocket. The quality of the video? Not as great as your high-end camcorder, for sure, but sweet enough--and certainly handy. It took my 10-year old about two seconds to find the "on" button and start filming breakfast the next morning.
It won't all be great video. (OK, my Arnold footage isn't brilliant. I did get a shot of the green snakeskin boots, though.) There will be plenty of chances to accidentally delete footage. (Yeah, I did that too.)
Kaplan's company, Pure Digital Technologies, based in San Francisco, is at the front of this wave. In May, it rolled out two models: one captures 30 minutes of video, the other 60 minutes. Prices range from roughly $120 to $150--maybe less, depending on where you shop.
Such technology is essentially software, wrapped up in a package of plastic and metal. Kaplan says Pure Digital spent about six years building the software inside the Flip. At first, the start-up licensed its technology to a number of companies: RCA, for instance, makes "Small Wonder," a similar camcorder. These plug into your computer or your television directly. Drugstore chain CVS/pharmacy sells a one-time use camcorder, based on Pure Digital's technology, that sells for $30. (Those video clips have to transferred to a DVD at CVS, a $13 operation.)
But the opportunity seemed too juicy to leave to everyone else. About six months ago, Pure Digital, which has a raft of high-stakes financial backers including Mike Moritz of Sequoia Capital and Benchmark Capital, decided to go for broke by selling Flip video devices itself. "Designed in America, made in China," Kaplan says.
Expect to see these kinds of recorders--whether using Pure Digital's technology or someone elses'--everywhere. In your cellphone too.
There's enormous power to the technology. I saw video footage from China last year, taken by a journalism student who did an internship with Forbes, documenting appalling working conditions in factories that are making high-tech products. Imagine if the Chinese workers who build the Flip hand out a few boxfuls of devices to their friends--and share with the rest of the world some of the heartbreaking images of the human and environment cost of economic progress.
Imagine how a Flip would have changed the history of Watergate--if either Woodward and Bernstein had used them, or if Nixon's gang did.
Imagine how schooling changes: Will my boys videotape future classes instead of taking notes?
Jonathan Schwartz, the pony-tailed chief executive of Sun Microsystems, got his five minutes of stage time too. He described how he had recently asked a fresh-faced new hire at Sun what he thought of the company.
"Well, it's kind of an old-fashioned company," the 20-something conceded.
"Old-fashioned?" fumed Schwartz. "In what way?"
"You use e-mail," replied the younger man.
"What's wrong with that?" demanded Schwartz.
"My parents send me e-mail," he answered.
So uncool, so 1990s.
Just keep your nose powdered.
Your comments are most welcome. Write to me at ecorcoran@forbes.com. Please also note whether I can share your comments with readers.
BURLINGAME, CA--Sam's Grill, in downtown San Francisco, is a bit like a time machine. It sits on a corner, just off busy Bush Street, where buses and motorcycles and Priuses vie for road space, pedestrians scream into their cellphones and neon signs blink. Once through the heavy wooden doors of Sam’s, the light seems a bit softer, the daily commotion muffled by the curious rabbit-warren architecture of the place. Every table is cloistered in its own, wood-paneled nook. It's a bit like dining in a private car on a train.
Last week, I joined my mother-in-law and 12 of her college friends at Sam's to celebrate their 60th college reunion. The boisterous octogenarians had traveled from various corners of Canada for the event. They retold stories of mischievous classmates and dour professors, of picnics in the snow and even of a peculiar old horse.
One, Lloyd Rodway, who sports a dapper silver mustache, leaned across the table toward me. "Do you know what this ring is?" he asked. He stretched out his right hand on which he wore a dull gray band on his little finger. He took it off and handed it to me.
"It’s an iron ring," Rodway said. I handed it back, and he slipped it back on his finger. "When I became an engineer, I took part in the 'Kipling ritual.' I promised to use my engineering skills to the best of my ability to help the rest of the world."
"Like the Hippocratic oath?" I asked.
"Just like that," he answered.
It turns out that in the early 1920s, seven of the past presidents of the Engineering Institute of Canada got together in Montreal and considered how to encourage Canadian engineers to feel closer, part of a special guild. One offered to ask his friend, British writer Rudyard Kipling, to draft an appropriate oath.
Kipling was charmed by the idea. In 1923, he delivered "The Ritual of the Calling of an Engineer," with the caveat that it remain an exclusively Canadian affair. Even today, the ritual is intensely private--never recorded and only attended by other ring wearers. The ceremony calls for the inductee to lay a hand on an iron ring and pledge to use his or her knowledge to serve society.
Kipling even got involved with designing the ring itself: "It is rough as the mind of the young. It is not smoothed at the edges, any more than the character of the young. It is hand-hammered all around, and the young have their hammerings coming to them. It has neither beginning nor end, any more than the work of an Engineer, or as we know Space itself. It will cut into a gold ring if worn next to it: thus showing that one had better keep one's money-getting quite separate."
Since the first ring ceremony in 1925, exactly 312,956 Canadian engineers have joined the fellowship of the ring. Malcolm McGrath, who helps administer the program at the University of Toronto, says that students eagerly anticipate the ceremony, even dropping into his office to try on rings. Some 13,000 Canadians took the ring last year. (In the early 1970s, engineers in Ohio started a similar group inspired by the Canadian rites. About 10,000 American engineers join annually.)
An iron ring won’t get anyone a job; it doesn’t convey any accreditation (although you have to have graduated from recognized programs to qualify). But it has genuine meaning: Ring wearers try to do the right thing.
That thirst for purpose reminded me of the famous letter written by Google's co-founders when they registered their company for an initial public offering in April 2004. The starting principle of Google, wrote Sergey Brin and Larry Page, was, "Don’t be evil."
"We believe strongly that in the long term, we will be better served--as shareholders and in all other ways--by a company that does good things for the world even if we forgo some short-term gains," wrote Google's founders. "We aspire to make Google an institution that makes the world a better place. With our products, Google connects people and information all around the world for free."
But can a corporate pledge ever be as intimate or as genuine as a personal vow?
The most contemporary technology is intensely personal: We carry our own music library in our pocket, our work life on a laptop or PDA, our most important connections burned into our cellphones.
It's nice that Google has adopted an ethical pose--though precisely what it means for a company to "do no evil" becomes hazier the bigger and more complex a corporation becomes.
Critics of Google’s policies in China argued that the company tacitly backed evil by yielding to censorship demands by that country’s central government. Privacy advocates are growing leery of Google as it makes readily available Web pictures so detailed that you can see who has snuck out of work for a coffee break. Newspapers, starting with The Wall Street Journal, may even grouse that Google's adroit control of Web advertising has crippled the press's ability to remain financially independent--and so may eventually hurt the free flow of information.
I'm not sure I know what it means for a company to "not be evil." When individuals decide to try to use their talents to improve the world, they can make a difference.
Your comments are most welcome. Write to me at ecorcoran@forbes.com. Please also note whether I can share your comments with readers.
Burlingame, Calif. -Talk about watching evolution in process.
A bevy of new devices are emerging, machines smaller than a laptop computer, bigger than a cellphone. Like variations of Darwin's finches, each of these is evolving its own specialty:
--Steve Jobs' iPhone will let you talk.
--"Mobile PCs," based on Intel's chips, will let you run the software written for PC on lightweight, portable machines.
--The "Foleo," Palm's new machine created by Palm Pilot and Treo inventor Jeff Hawkins, aims to be a "mobile companion" that sits somewhere between a PDA and a full-fledged laptop.
Each of these design efforts--and I'm sure there are scores more--are scratching away at the environment, trying to figure out what it will take to survive. What will consumers (and businesses) buy? At what price? With what usage caveats?
No one better channels consumers' longing to be cool than Steve Jobs and Apple. In the business world, Palm's Jeff Hawkins is Jobs' separated-at-birth twin: Twice before, Hawkins has proven that he can translate our hazy desires to break free of our desks into silicon and plastic.
(Full disclosure: This week, Elevation Partners, which owns a portion of Forbes, said it was investing in Palm. Fuller disclosure: Elevation didn't whisper a word about the deal to us before it was announced. Darn.)
But what gives me absolute confidence that something like these devices will exist are not just these electronic artists--but the armies of unrecognized design and manufacturing engineers who are steadily building the silicon chips that will power these emerging devices.
Take Intel: Executives there say that they believe the company's future lies with "system on chips," effectively special-purpose microprocessors tuned to carry out specific tasks.
Even more experienced in this area is Texas Instruments. I didn't include TI in my list at the top because TI's chips are used in such a diversity of cellphones and handheld machines. For a decade or so, Texas Instruments has been steadily building an entire ecosystem of design around its platforms. Constellations of companies in India, China and elsewhere are building special-purpose chips on top of TI's design architecture.
Bottom line: If you can dream it up, somebody can make a chip that will make it work.
Fundamental to this equation are the "foundries," the massive chip manufacturing facilities run by companies as diverse as Taiwan's TSMC, China's SMIC and Chartered, even IBM. Chip fabs have been around for decades, of course. But what's different now is the ease with which they can make literally hundreds of different products at once.
Enormously complex manufacturing software--go ahead, call it artificial intelligence software--mean that these factories can be programmed to stamp out very diverse designs. Relatively small batches of design suddenly have inherited many of the cost advantages that once blessed a single design.
Are you old enough to remember the heyday of Xerox PARC, when it was an incubator for astonishing ideas? The guiding design philosophy of those days, as I recall, was simple: Do away with a constraint. Pretend that a key--but expensive--component has become free. Pretend bandwidth is free. Pretend silicon is free.
Silicon chips are almost free. The limitation now is software. Jobs, Hawkins and for that matter, companies like Intel, must all be scrambling to figure out how to inspire software designers to write applications that will make their devices sing.
Prepare to see scores and scores of devices. That much is clear. The billion dollar question in the balance is one of evolution: Which one--or ones--will dominate?
I'm starting to morph this column into more of a blog-like conversation rather than a classic piece of reporting. Your comments are most welcome; you can send me a note at ecorcoran@forbes.com. If you do, please let me know if I can share your comments with readers.
Numbers are the lifeblood of Intel. Here are some of the numbers that can make--or break--the company, including how many bits of data its chips can crunch, the power those chips demand and exactly how much it costs to make each chip.
My recent story on Intel described the struggles within the company to get performance and power numbers right and the pain of trimming the costs of running the entire business. So far, Intel has cut staff, most significantly in marketing and management. But Intel's executives have more controls at their disposal, and how they tune those dials can be a strong indication of the health of the business today and over the year to come.
Those controls are buried deep in the intricacies of chip manufacturing. A neighbor of mine joined Intel in 1974. She remembers working in its first factory in Santa Clara, Calif., using scissors to cut circuit patterns into "rubies," sheets of red plastic. After she finished, others would take those ruby "masks" and shine light through them, exposing the surface of a silicon wafer covered with light-sensitive goop called a photoresist.
The chemicals hardened, forming a protective cover for the silicon. Then the silicon wafer was bathed in an acid bath to "etch," or dissolve, unwanted portions. Coat, expose, etch, rinse and repeat. The process would go on until the silicon was fully patterned with the electronic design.
I thought of my neighbor a few months ago when I visited one of Intel's finest "fabs" in Chandler, Ariz. The process is still called "lithography," but it bears as much resemblance to the work of 30 years ago as a robin does to a dinosaur.
The Chandler fab is an enormous squat building. Although it is staffed night and day by people, sturdy robotic boxes with an equally sturdy name ("Front-operating universal pods," or "FOUPs") run the show.
No person--even one suited up in one of Intel's stylishly androgynous "bunny" suits--ever touches a wafer. Instead, stacks of 25 wafers are encased in plastic cassettes. FOUPs, which travel along narrow gauge tracks in the ceiling, shuttle the cassettes from one stop to the next: to a machine that smears photoresist chemicals onto the wafers, or maybe to a machine that exposes them to ultraviolet light.
Coat, expose, etch, rinse and repeat. Some of the machines are so massive they require special bolts so that the floor beneath them will not buckle. All cost millions--even tens of millions--of dollars apiece. After about 60 days, the cassettes will have finished their Disneyland-like odyssey through the fab. They will have covered about 32 miles in their FOUPs. And then they will be shipped to another factory, where they will be sliced into individual chips and assembled into boards or modules for customers.
By the end of this year, Intel will be able to make chips with components measuring 45 nanometers wide. That size means designers can squeeze more than several hundred million onto a silicon chip smaller than a postage stamp. By contrast, Intel's 8080 microprocessor, introduced in 1974, had 4,500 transistors connected by circuit lines measuring six microns wide.
As the transistors get smaller, the silicon wafers are getting bigger. Today's top of the line silicon wafers measure 12 inches across; their immediate predecessors were a mere 8 inches in diameter. Thanks to the magic geometry of circles, the larger wafers have twice the surface area of the smaller ones. Better manufacturing techniques mean Intel has to use less energy and water to pattern the big guys.
Bottom line: It costs Intel less (in variable costs) to crank out chips in its latest and greatest fabs than it does in older ones. By next year, four of those 12-inch wafer fabs will be equipped to make chips with components measuring 45 nanometers.
The more chips Intel can build in its new fabs, the better its profits.
Or turn it around: Getting rid of some of its older fabs will perk up the bottom line.
Right now, Intel has a stable of 16 fabs operating or under construction, half of which can handle the big 12-inch wafers; the other half process smaller 8-inch disks. Five of those older fabs are in the U.S.
Intel has already put a Colorado fab up for sale and said it would cut the workforce at a New Mexico site by about 1,000 employees. Intel also recently said it would fold its assets for building a type of Flash memory into an independent company, formed jointly with STMicroelectronics.
That leaves five older fabs, including an operation in hometown Santa Clara.
In past years, Intel has converted older fabs so they can make smaller chips or work with larger wafers. But it's a numbers game: Since larger wafers can produce so many more chips, how many factories does a company really need?
Here's my bet: Between now and the end of the year, we'll see Intel sell off some of those older 200-millimeter fabs. Even the Santa Clara location could be on the block.
When that happens, you can expect to see the bottom line benefit--profitability will improve for at least a couple of quarters.
Once the endorphins of selling assets wear off, management will be left with the toughest task of all: growing the business.
With this contribution, I'm starting to morph this column into more of a blog-like conversation rather than a classic piece of reporting. Your comments are most welcome; you can send me a note at ecorcoran@forbes.com. If you do, please let me know if I can share your comments with readers.
SAN CARLOS, CALIF. -A week or so ago, I took my first trip in a Tesla. It is one cool California ride: a smoldering, red convertible with two low-slung bucket seats. I could practically feel the road as we purred along Silicon Valley's scenic Highway 280, accelerating nimbly past BMWs and other ho-hum gas guzzlers. And we were quiet--almost as quiet as my desktop computer--because the Tesla runs on pure electric juice.
Tesla Motors, based here about 10 miles north of Palo Alto, aims to do to the auto industry what Apple once did to the plodding mainframe computer business. The company has a radical idea, a pragmatic approach to technology, a business model borrowed from the computer industry and a flair for style. The first Teslas are expected to reach customers' driveways early this autumn. The key question isn’t whether the company can build one car or even a few hundred--it's whether Silicon Valley can reinvent the automobile business.
Or ask yourself this: If you had $100,000 to spend, would you consider plunking it down for one of the first Tesla roadsters? For equity in the company? Or would you steer clear?
Tesla's radical trend is simple--environmentally-friendly technology can be sexy. Forget about clunky sandals and snub-nosed cars. Tesla's roadster packs the sizzle of Angelina Jolie in a tight T-shirt.
There's nothing particularly practical or economical about this snug two-seater with its single cup holder. Fully loaded with leather seats, a hard top and a sweet sound system (and, yes, a port for your iPod), a Tesla roadster will set you back $100,000. But it’s the stuff legends are made of: In four years, with a staff than now numbers 170 and $60 million of private capital (almost half from its chairman, Elon Musk), Tesla has created an all-electric car that makes people drool.
So far, 350 people have plunked down deposits of $50,000 or more to get one of the first Tesla roadsters. Many of those owners-to-be haven't even had a chance to go for a test ride. They just needed one of these clean-tech beauties. (Chairman Musk will get car No. 1 when it rolls off the docks. That seems fair: After all, he's paid about $30 million for his.)
Like the smartest Silicon Valley entrepreneurs, Tesla's founders have made great use of technologies invented elsewhere. The car's extruded aluminum chassis was pioneered by Lotus. Its battery is based on lithium-ion cells, just like those powering your laptop. Nineteenth-century physicist Nikola Tesla, the company’s patron saint, built the first AC induction motor. The 15 patent applications filed by the company largely focus on how to make all the parts work together and how to assemble various subsystems automatically.
There’s no "motor" under the front hood, just fans. The magic happens in the back. Power comes from the battery pack made of 6,800 lithium-ion cells, each about the size of a tube of lipstick, wired together into “sheets” in Thailand. The cells are identical to those that run laptop computers but are surrounded by computer smarts--a system that manages charge levels, cools the cells and sniffs for smoke. Executives say that the car's careful management techniques should make its battery pack last longer than the one in your laptop. Tesla will guarantee its battery pack for five years (or 100,000 miles).
Fans and critics will wrangle over Tesla's motor muscle. To its credit, the Tesla can leap from 0 to 60 miles per hour in four seconds and reach speeds of 130 mph. (I can't tell you how fast we were driving recently because the speedometer in this prototype was stuck. But the car accelerated as smoothly as the best rides I can remember.)
Don't plan a cross-country sprint with your Tesla, however. Company executives say it will log 250 miles between charge-ups. If you hook up a Tesla to a high (220 volt) charger--something that looks like a cross between a parking meter and a gas pump--the car will be back on the road in three and a half hours. It will need a seven-hour feeding at a standard (110 v) wall outlet. The car trunk is big enough for a set of golf clubs and a weekend bag. Leave home bags too bulky to fit into the overhead storage bin of a commercial plane.
Tesla’s business strategy is pure Silicon Valley. The company has made fine use of overseas suppliers and partners: The chassis is made in Norway, the brakes and airbags in Germany, the 900-pound battery pack assembled in Thailand and final assembly, at least for now, is done in England. Tesla does own one facility it considers a core asset: the Taiwanese operation that makes the motor.
Within the past few weeks, Tesla has announced it will open a 60-person research and development operation outside of Detroit. After much negotiation, the company decided to build its future U.S. assembly operation near Albuquerque, N.M., neatly outside the reach of the automakers' unions. That facility, slated to employ 400 and to produce between 13,000 and 25,000 cars a year, will build a four-door electric sedan, called "Whitestar," slated for late 2009.
Like Apple, which sells its wares in glitzy shops but not electronics chains, Tesla has no interest in the usual car dealership arrangement. "Our customers are not comparison shopping," says Darryl Siry, Tesla's vice president of marketing. Tesla plans to open five wholly owned "customer centers" in the U.S. over the next 18 months--two in California, one each in New York, Chicago and Florida. Those pit stops will sell cars, service existing customers and of course, sell branded tchotchkes such as T-shirts. “People keep asking for them,” Siry says. “They should be ready soon."
Siry is mum about when Tesla might be cash-flow neutral. But starting production in the U.S. will take big bucks. It’s anyone’s guess whether that could come from more sugar daddies, a traditional automaker as partner or an initial public offering. The "Risk Factors" section of a Tesla prospectus might be as big as a phone book, but in certain market cycles, investors hardly care.
After a long IPO dry spell, technology companies are once again sprinting for the public market even though profits are still only a distant hope. About a third of the tech companies that did IPOs last year were unprofitable, according to Thomson Financial. Earlier this month, wireless broadband company Clearwire raised $600 million in its IPO, even though it has warned investors it will likely continue losing money through 2008.
Recent business history has shown that Silicon Valley can rock the world--create disruptive innovations that genuinely change the way we live and work. No one had a Web browser 15 years ago; now most of us can't live without one. Some other dreams, however, such as online pet food, proved to be mirages.
Tesla's founders certainly want to end up the winner’s circle. All they need to do is prove that their business model is half as alluring as the roadster.
BURLINGAME, CALIF.--If you could choose between starting a high-tech career in India or the U.S., which would you pick?
Indian immigrant Rosen Sharma opted for the U.S. in 1993 and has done extraordinarily well here. But if he were just coming out of college these days, he says, he would pick India. The business opportunities are better, he says, and quality of life issues are at least as good: Nice housing? Schools? Safe streets? The chance to feel prosperous on a young engineer's salary? India is holding its own just fine against the U.S., he believes.
Sharma's answer is unnerving. A big part of the U.S. tech boom over the past 20 years has come from our ability to pull in the best and the brightest from India, Taiwan and other Asian countries, year after year. We've taken it for granted that these talented immigrants want to come here and that they will help the next generation of American start-ups achieve greatness.
But Sharma's perspective demands our attention.
In 1993, he says, after graduating with flying colors from the Indian Institute of Technology in Delhi, Sharma headed straight for the U.S. So did most of his classmates. Of the 40 people in Sharma's graduating class at IIT Delhi, he says, all but three came to the U.S.
It was a smart move for him and a great deal for the U.S. Sharma earned a Ph.D. from Cornell University and has since started more than a half-dozen companies--building products, generating revenue, rewarding investors and creating jobs. Now he sits on five company boards and runs his own start-up, SolidCore Systems, in Palo Alto, Calif.
The U.S. is home to Sharma now. He's applied for U.S. citizenship. He's raising his children here. He wants the U.S. to be an engine of innovation, for U.S. companies to build sought-after products and to generate good returns for workers and shareholders.
But Sharma, who is president of the IIT Delhi Alumni Association, says the next generation of Indian engineers are unlikely to feel the way he does: Last year, only 10 of the 45 IIT graduates who went through the same program Sharma did decided to pursue jobs in the U.S., he says.
If this represents a trend, it will have significant consequences for the U.S. AnnaLee Saxenian, now dean of the School of Information at the University of California, Berkeley, has devoted years to tracking the impact of immigrant entrepreneurs. Along with researchers at Duke University, she reported in January that foreign-born immigrants helped start one of every four U.S. technology start-ups over the past decade. Together, those companies employed 450,000 people and generated $52 billion in sales in 2005, according to the study.
As America staggers toward the next national election, we'll hear plenty of slogans about making the U.S. "more competitive." Candidates will debate tax policies and vow to fix our public schools. Chances are you won't hear them talking about making the U.S. more receptive to ambitious graduates from overseas. But they should.
But take another look at my first question: It doesn't just apply to foreign nationals. If you're a bright young person born in the U.S., where should you begin your career? In this country or abroad?
"Overseas," asserts Sharma--but this time, for positive reasons. In order for U.S. companies to be competitive, to serve the largest number of customers and build the most suitable products for customers all over the globe, they will need executives who have broad global experience.
Students are already sensing this trend: Several months ago, when I spoke to business school students touring Silicon Valley about job prospects, many said they were actively considering international opportunities, too.
It sounds like a contradiction--that the U.S. should continue to try to try to woo the best and the brightest from overseas even as homegrown emerging stars seek their fortunes outside our borders. But in a world where competition is truly global, that kind of exchange program makes sense--particularly if those Americans eventually return home and help build stronger companies.
Michael Dell's name is on a lot of doors in Round Rock, Texas. There's the company, for starters, and there's a very fine minor-league baseball field, which he helped build, for another.
Putting your name on the door is a sure sign of commitment. On Wednesday, Michael Dell lived up to that commitment by resuming his role as chief executive of the beleaguered computer maker he founded. You could practically hear the fans cheering all the way in California.
About a year ago, I spent some time trying to make sense of what was going on at Dell . The signs were decidedly mixed. Growth began slowing in 2005. Late that year, Dell missed its forecasted earnings. Management promised to fix mistakes in pricing--and the next quarter's results duly bobbed back up (for the period ending January 2006). But it was merely the eye of the hurricane.
I visited Dell last January with what I thought was a simple question: How are you going to grow the company?
I spoke with Michael Dell. I spoke with Kevin Rollins, whom Dell had named the company's chief executive in July 2004. I spoke with a number of managers. They assured me that all the problems were momentary glitches.
But the conversations left me perplexed. I had hoped to hear some plans for new products or advertising campaigns or fresh initiatives in the works--along with recognition that the issues that had dogged the company for months were grave and warranted high-priority attention. Instead, I heard the equivalent of, "Trust us." I decided I needed to know more before writing an article.
At the time, I knew that some of Dell's problems were not of its own making: competitors Hewlett-Packard, Lenovo Group and others were improving their games. But Dell's leaders had made some choices that clearly hurt their business. In pursuit of high profit margins, Dell had skimped on customer service, once a banner of pride for the company. Dell managers were also punching the "lower price" button frequently--too frequently, in fact, to sustain real growth. And suppliers were muttering that the company wasn't keeping as close an eye on its parts inventories as it once had.
Employees, too, felt distant from Rollins, even though he had been with the company since leaving Bain Consulting in 1996. Within Dell, Michael Dell was clearly a hero--a warm guy with good instincts for making people feel like part of a team. Rollins left people feeling like part of a machine. One former employee grumbled to me that Rollins always seemed to be the smartest guy in the room--or, at least, he acted that way.
Those feelings boiled out in November 2005 during the company's biannual "Tell Dell" survey, where employees could anonymously convey how they felt about their jobs and the company. They weren't happy. Employees felt "we might not have been listening enough, and they didn't think we were positioning the company for success," Rollins later told me. "Those scores had traditionally been extremely high. And those were the ones that hit."
Rollins said that in May 2006, when I had returned for more interviews. It was a tough time. The day before my visit, Rollins had to announce Dell's most disappointing revenue growth in four years. My questions were largely the same: What are you going to do about it? How serious are these problems?
This time, Rollins acknowledged that there had been problems--but he insisted that the slip-ups were now behind Dell. He told me: "We realized [in February] that industry was more competitive, that our competitors had improved, their capabilities are faster and at a higher level than we had knowledge of. And so [that] required a more aggressive and active approach than we would have taken prior to that."
"How do you feel?" I asked.
"Terrible. We thought we could do better," Rollins conceded. Even so, he remained bullish. He added: "You have to put this in context: We're still, as a company, gaining share. We're still growing faster than our competitors. We still are more profitable by a long shot."
I wondered if he was trying to convince me or trying to convince himself.
We talked about pricing strategies. Rollins' first language was not the geek-speak of technology but the waxing and waning of the data that mirrored the business: the elasticity of prices, the metrics of the supply chain and the return on investment of countless efforts within the company, notably customer service.
I asked Rollins if he thought there were parallels to other tumultuous times during Dell's history--say, in 1993, when Dell was losing money, or 2001, when its meteoric growth stalled.
"No," he insisted. Dell was still very profitable, he said. These turns are merely bumps along the way to continuing to grow the business.
In June, Forbes published a tough article on Dell that disappointed Rollins. And it turned out there were even bigger problems ahead: The Securities and Exchange Commission began scrutinizing the company's books. By the end of the year, Dell's chief financial officer--who told me he hoped the company could cut its component costs by 5% across the board--would be out. An audit committee began scrutinizing Dell's financial records. As a result, Dell has yet to issue final financial reports for the quarters ending in August 2006 and November 2006. There are few expectations that it will report anything other than a preliminary assessment of its year-end results in March.
Rollins worked hard during his more than 10 years with Dell, and he helped build the company into an industry powerhouse. But a thousand little things finally caught up with him: his emotional distance from employees, his relentless pressure to drive by the financial numbers and keep up profit margins, his stony conviction that problems were merely temporary.
So on Wednesday, Michael Dell decided that his name on the door meant that he needed to be in charge. Analysts are applauding the move. John Spooner, with Technology Business Research, wrote: "We believe that Dell is stepping back into his former role in an effort to regain the trust of the Dell customers, whether corporate or consumer, while also offering reassurance to Wall Street."
In a note sent to employees on Wednesday, Michael Dell wrote that he felt like it was start-up time again. Dell isn't quite the league's underdog--but it does have some serious training ahead before it can look like a winner again. If Michael remembers what made the company great in the first place--genuinely wonderful products and great customer service--Dell will once again become a company to root for.
http://www.forbes.com/home/technology/2007/02/01/michael-dell-rollins-tech-cz_ec_0201dell.htmlSphere: Related Content
Letter From Silicon Valley Burlingame, Calif. -Most of the business press these days is spellbound by Apple's iPhone--the upcoming Steve Jobs creation that he says will shake up the mobile phone business. Pundits, citing the gadget's beautiful design, cool features and clever marketing, have already declared it a triumph of innovation.
The iPhone, when it's available, may well be a dandy product. But anyone who's really serious about understanding innovation should disconnect from the hard-to-replicate iPhone launch and spend time studying the career of long-time inventor Dean Kamen.
Kamen holds several hundred U.S. and foreign patents. He was inducted into the National Inventors Hall of Fame in 2005 in recognition of the "ambulatory infusion pump"--a way of administering drugs that can move with a patient. Countless patients and their caregivers have benefited from the pump and the other ideas it inspired.
What drives Kamen, 55, is the satisfaction of solving a genuine problem. He doesn't try to analyze markets or predict revenues. He looks for stumbling blocks: The debilitating, unglamorous problems that stop people from going about their daily life. For most of his career, Kamen has hoped that people won't have to use his inventions. "You don't say to someone, 'I can't wait for you have to end-stage renal failure,' " so they can try out his latest dialysis technology, Kamen says wryly.
Kamen's one big effort to develop a product that would create buzz has yet to really take hold, five years after its launch. That was the Segway "personal transporter," or what the rest of the world calls a motorized scooter. Kamen still insists there's a need for the Segway: City streets are clogged with traffic and pollution, and Segways can reduce both, Kamen contends. But in spite of the energetic efforts of some of the Valley's finest venture capitalists, most people are happy to make do with cars, bicycles or their own foot power.
Kamen has been confronting problems head-on since grade school. At the time, one of the biggest problems he had was a familiar one: He hated to make his bed. His mother insisted. He analyzed the problem: He needed a way to straighten the sheets and covers automatically. Kamen affixed pulleys to the corners of his bedclothes and strung them with ropes. By standing at the foot of his bed, all he needed to do was tug on the ropes and the bed would make itself. "It was a great invention," he says, with satisfaction.
School frustrated Kamen. He focused instead on building things, including lighting systems for everything from museums to rock bands. His older brother Barton, in medical school, complained about challenges of delivering drugs to patients, including premature babies. Dean got to work. He invented a pump that delivered precise doses of medicine at precise intervals. "We put it in an isolet for tiny babies," Kamen recalls. "Then someone said, 'Bet you could stick it on a belt.' " Kamen soon delivered the first portable insulin pump for treating diabetics.
Kamen started a company to manufacture and sell medical pumps, but his heart wasn't in running a business. In 1982, he sold the company to Baxter Healthcare. He continued to work for Baxter and helped build its portable dialysis machine for people with kidney failure. Hundreds of thousands help patients every day.
He wound up starting an invention business: DEKA (for Dean Kamen) Research & Development, which is based in Manchester, N.H., and employs a couple hundred engineers and scientists on a broad portfolio of devices. Among their inventions: the iBOT wheelchair, which climbs over curbs (and was the core technology underlying the Segway), intravascular stents and irrigation pumps used in medical procedures, to name a few.
I asked Kamen what he believed was his team's "core competency." Building pumps? Fluid flow technology?
He scoffed at the question. "Oh, that's all business-speak that people use to make things look consistent in hindsight," he says. "We think we work hard. We try to understand fundamental science, and we try to stay current with technology."
And he looks for problems.
About 15 years ago, Kamen was bemoaning how few American students were interested in technology and invention. He started an engineer's version of the 4H Club, a nonprofit organization called FIRST which hosts robot-building competitions for high school students. The initial FIRST competition took place in a New Hampshire school gym in 1992; since then 100,000 kids have taken part around the world.
More recently, Kamen got interested in the need to provide clean water and electricity to villages in the developing world. "Now here's a real problem!" he says with relish. To solve it, Kamen turned to a very old technological idea--the Sterling Engine, which uses an external source to heat gas contained in a chamber; pistons move as the gas heats and cools.
Kamen says his improved power generators and water-purification machines are rugged enough and affordable enough for even remote villages. Two villages in Bangladesh are experimenting with the machines now, which run entirely on cow dung. Kamen has put tens of millions of dollars of his own money into developing the equipment--not because he's looking for a profit, but because he wants to solve a problem. "Now, there are three entrepreneurs running these machines," essentially establishing a mini power company for a village, he reports.
The final constant in the Kamen equation is patience. "It took 15 years for the diabetes pumps to take hold--and 20 years before the government started reimbursing for them," he says. FIRST has been in operation for 15 years and is finally getting worldwide attention. Segway? Still in its infancy, Kamen says. "The 'ah-has!' happen in an instant," he says. Winning acceptance in the marketplace, however, seems to take a decade or two--even when the need is palpable.
So here's to the inventions that so many in our community need: wheelchairs that let the disabled venture confidently onto a grassy field for a picnic; dialysis machines that quietly wash poison from a body overnight; low-cost machines that can make dirty water clean or power lights with cow dung.
I will be discussing these and other topics with Dean Kamen onstage on Feb. 8 at the Computer Museum in Mountain View, Calif. (The event is hosted by the not-for-profit Churchill Club.) Tickets are $70; the only pay Kamen and I get for the evening is a T-shirt. Join us for a discussion about the nature of invention and the kinds of problems that still need to be solved.
Burlingame, Calif. -
Most of the business press these days is spellbound by Apple's iPhone--the upcoming Steve Jobs creation that he says will shake up the mobile phone business. Pundits, citing the gadget's beautiful design, cool features and clever marketing, have already declared it a triumph of innovation.
The iPhone, when it's available, may well be a dandy product. But anyone who's really serious about understanding innovation should disconnect from the hard-to-replicate iPhone launch and spend time studying the career of long-time inventor Dean Kamen.
Kamen holds several hundred U.S. and foreign patents. He was inducted into the National Inventors Hall of Fame in 2005 in recognition of the "ambulatory infusion pump"--a way of administering drugs that can move with a patient. Countless patients and their caregivers have benefited from the pump and the other ideas it inspired.
What drives Kamen, 55, is the satisfaction of solving a genuine problem. He doesn't try to analyze markets or predict revenues. He looks for stumbling blocks: The debilitating, unglamorous problems that stop people from going about their daily life. For most of his career, Kamen has hoped that people won't have to use his inventions. "You don't say to someone, 'I can't wait for you have to n-stage renal failure,' " so they can try out his latest dialysis technology, Kamen says wryly.
Kamen's one big effort to develop a product that would create buzz has yet to really take hold, five years after its launch. That was the Segway "personal transporter," or what the rest of the world calls a motorized scooter. Kamen still insists there's a need for the Segway: City streets are clogged with traffic and pollution, and Segways can reduce both, Kamen contends. But in spite of the energetic efforts of some of the Valley's finest venture capitalists, most people are happy to make do with cars, bicycles or their own foot power.
Kamen has been confronting problems head-on since grade school. At the time, one of the biggest problems he had was a familiar one: He hated to make his bed. His mother insisted. He analyzed the problem: He needed a way to straighten the sheets and covers automatically. Kamen affixed pulleys to the corners of his bedclothes and strung them with ropes. By standing at the foot of his bed, all he needed to do was tug on the ropes and the bed would make itself. "It was a great invention," he says, with satisfaction.
School frustrated Kamen. He focused instead on building things, including lighting systems for everything from museums to rock bands. His older brother Barton, in medical school, complained about challenges of delivering drugs to patients, including premature babies. Dean got to work. He invented a pump that delivered precise doses of medicine at precise intervals. "We put it in an isolet for tiny babies," Kamen recalls. "Then someone said, 'Bet you could stick it on a belt.' " Kamen soon delivered the first portable insulin pump for treating diabetics.
Kamen started a company to manufacture and sell medical pumps, but his heart wasn't in running a business. In 1982, he sold the company to Baxter Healthcare. He continued to work for Baxter and helped build its portable dialysis machine for people with kidney failure. Hundreds of thousands help patients every day.
He wound up starting an invention business: DEKA (for Dean Kamen) Research & Development, which is based in Manchester, N.H., and employs a couple hundred engineers and scientists on a broad portfolio of devices. Among their inventions: the iBOT wheelchair, which climbs over curbs (and was the core technology underlying the Segway), intravascular stents and irrigation pumps used in medical procedures, to name a few.
I asked Kamen what he believed was his team's "core competency." Building pumps? Fluid flow technology?
He scoffed at the question. "Oh, that's all business-speak that people use to make things look consistent in hindsight," he says. "We think we work hard. We try to understand fundamental science, and we try to stay current with technology."
And he looks for problems.
About 15 years ago, Kamen was bemoaning how few American students were interested in technology and invention. He started an engineer's version of the 4H Club, a nonprofit organization called FIRST which hosts robot-building competitions for high school students. The initial FIRST competition took place in a New Hampshire school gym in 1992; since then 100,000 kids have taken part around the world.
More recently, Kamen got interested in the need to provide clean water and electricity to villages in the developing world. "Now here's a real problem!" he says with relish. To solve it, Kamen turned to a very old technological idea--the Sterling Engine, which uses an external source to heat gas contained in a chamber; pistons move as the gas heats and cools.
Kamen says his improved power generators and water-purification machines are rugged enough and affordable enough for even remote villages. Two villages in Bangladesh are experimenting with the machines now, which run entirely on cow dung. Kamen has put tens of millions of dollars of his own money into developing the equipment--not because he's looking for a profit, but because he wants to solve a problem. "Now, there are three entrepreneurs running these machines," essentially establishing a mini power company for a village, he reports.
The final constant in the Kamen equation is patience. "It took 15 years for the diabetes pumps to take hold--and 20 years before the government started reimbursing for them," he says. FIRST has been in operation for 15 years and is finally getting worldwide attention. Segway? Still in its infancy, Kamen says. "The 'ah-has!' happen in an instant," he says. Winning acceptance in the marketplace, however, seems to take a decade or two--even when the need is palpable.
So here's to the inventions that so many in our community need: wheelchairs that let the disabled venture confidently onto a grassy field for a picnic; dialysis machines that quietly wash poison from a body overnight; low-cost machines that can make dirty water clean or power lights with cow dung.
I will be discussing these and other topics with Dean Kamen onstage on Feb. 8 at the Computer Museum in Mountain View, Calif. (The event is hosted by the not-for-profit Churchill Club.) Tickets are $70; the only pay Kamen and I get for the evening is a T-shirt. Join us for a discussion about the nature of invention and the kinds of problems that still need to be solved.
Burlingame, Calif. -Some people watch Wal-Mart sales to track the economy's health. Others believe they can divine the harshness of the winter by measuring the stripes of the woolly bear caterpillar. (There is some lingering disagreement over whether the woolly bear is a leading or lagging indicator.)
“Talent” is a hand-wavy way to describe the people every company dreams of hiring: folks with powerful instincts for technology or marketing, or industry trends who are willing to work insane hours to tackle seemingly impossible tasks. A decade ago, all roads seemed to lead to Microsoft; more recently, of course, they end at Google.
But there’s refreshing news in Silicon Valley. Google is still a hot ticket. But lots of talented young people are widening their horizons. Chat with current M.B.A. students from top schools--as I’ve been doing lately--and it’s clear that their dreams involve lots of other companies, including spunky little start-ups that most of us haven’t heard of yet. Going to work at those outfits will be risky indeed. But it’s that kind of risk-taking that helps the Valley rejuvenate itself.
This winter, swarms of graduate business students have been visiting the Valley to check out opportunities for summer internships and jobs. About 85 students made the trip from MIT’s Sloan School of Management in early January.
In three days, the visitors from Boston enjoyed a whirlwind of introductions and sneak peeks. They talked with executives of fledgling start-ups and toured companies with market caps in the billions. They chatted with venture capitalists. And of course, they lunched at Google.
A number of students have an eye fixed on the very long horizon and so hope to land jobs in organizations that will build skills they expect to use for decades. Garrett Dodge, a first-year student, says Symantec and SAP are high on his list. “I want to see how great organizations are run--and if it leads to a start-up down the road, that’s all good.”
Others found inspiring signs in companies that the conventional wisdom had once dismissed. “There was a sparkle in the eyes of the people at IBM's research facility,” observed Donna Pitteri, another first-year student.
And plenty of the students--some of whom have already run their own businesses--are lured by start-ups. “The point isn’t just to get a job--it’s to do something you’re passionate about,” says Antonio Sosa-Pascual, a first-year student who helped coordinate the Sloan tour. The commonality is that there is no commonality.
Sosa-Pascual is intrigued by professional networking ventures and alternative energy. That drew him to oDesk, which is serving as a clearing house for engineering talent around the globe, as well as NanoSolar and Miasole, which aim to build cheaper solar cell chips. He gave good marks to the oddly named Fat Spaniel, which uses Web-based software to measure energy savings too.
Chris Johnson, who has a background in aerospace engineering, was thrilled to look under the hood of Tesla Motors, the start-up building a powerful, all electric car. Also meaningful: Conversations with one of the more hardcore start-ups, a semiconductor company called Cavium Networks.
Sloan students who have already started companies on their own savored their venture capital time. “You hear that most people have 20 seconds to give an elevator pitch on their business ideas,” says Ryan Tseng, a 23-year-old who has already founded a company that makes wireless power systems for consumer electronics. “Many of these people gave us a couple of hours of their time.”
Ted Hamilton savored the back story behind Pandora Music, a seven-year old company that’s beginning to find some traction after navigating through some choppy economic times. “I was really impressed with their persistence and passion,” he says.
Just as good: A reception at San Francisco’s panoramic Carnelian Room atop the Bank of America building, where Hamilton got a warm reception from some big company executives when he described one business idea he has been nurturing. “Now I need to see if I can get the business off the ground while I’m at school.”
It’s easy to look around the Valley and see signs of a bubble, but all those companies and choices are signs of health. And these students--and plenty of other smart people--are picking their spots based on what ignites their passion and where they feel they can learn the most.
So what about Google?
Before the Silicon Valley trek, none of the well-known Google perks--the gourmet food, the onsite laundry, the pay or the stock options--seemed to tweak the interest of the Boston students. This made them rarities, because the Googleplex is teeming with applicants: The company says it gets 3,000 applications per day.
And it has places for many of them--Google expects to double its 10,000 headcount by the end of 2007. To put those numbers in context: Microsoft passed the 10,000-employee mark in early 1992 but kept growth to about 3,000 a year until 1998. Last year, it employed more than 71,000 people.
In theory, that kind of growth should deter ambitious applicants--how do you make your mark when there are 19,999 co-workers hired ahead of you?
But Google’s “managed chaos” atmosphere--more collegial than corporate--helped sway some of the visitors. So did talking to a dozen or so former Sloan students who talked about their experiences after signing on with the search giant. “The students got to talk with people with the same values and intellectual horsepower that they have,” says Kenneth Morse, who directs Sloan’s entrepreneurship program.
“I saw my freshman counselor from MIT,” says Johnson. “He likes it. Google still has that start-up vibe--the opportunity that people can contribute outside of their prescribed roles.”
The visit turned a few more heads. Post-visit, an informal poll found 42% of the Sloan students were upbeat about summer internship prospects at Google and 26% would consider a full-time job.
Where those students and the other three-quarters of Sloan’s entrepreneurial program wind up, I’d be willing to bet they will make a difference. And as Bill Gates always warned, it’s the little company you don’t suspect that can change your world.
12.18.06, 6:00 AM ET Burlingame, Calif. --Andy Grove understands how to make a re-entrance like no one else.
Not the pop-star flounce onto a stage, heralded with flashing lights and throbbing background music. But the kind of entrance that matters--the ability to look at a growing problem that surrounds him, step away--then come back in with a fresh solution.
I was reminded of this skill recently when the retired Intel chairman joined Harvard Business School professor Richard S. Tedlow onstage recently here in Silicon Valley to discuss Tedlow’s newly published biography, Andy Grove: The Life and Times of an American.
At 70, Grove is still wiry and hip enough to sport a black leather bomber jacket, even though his hands tremble slightly due to Parkinson’s disease. He smirked as Tedlow described how Grove originally told him that the idea of someone writing his biography was the “stupidest idea” he had ever heard. But Grove quickly relented and gave Tedlow his full cooperation.
What comes through in the biography and in the discussion onstage with Tedlow is how Grove made his biggest decisions: by stepping outside himself and viewing the situation coolly, at a distance.
Case in point: a fateful decision in 1985. At the time, Intel was reeling from losses in its memory chip business due to sharp competition from Japanese manufacturers. Grove had spent months wrestling with the problem, including petitioning the U.S. government to take action. Frustrated, he asked Intel co-founder Gordon Moore, "If we got kicked out and the board brought in a new CEO, what do you think he would do?" Moore’s answer: quit making memory chips. "Why shouldn’t you and I walk out the door, come back and do it ourselves?" Grove responded. So they did.
Intel faced an similarly crucial juncture in the early 1990s when Grove had to bet the company on a single chip design direction: Should Intel continue making its x86 class chips or should it follow a more technologically elegant approach called “reduce instruction set computing” or RISC? Intel’s engineers split into warring camps; RISC was the hipper choice, the one that seemed to prove that Intel’s engineers were the best. Grove even took part in a jocular in-house Intel video in which he wore dark sunglasses and rapped about the virtues of RISC chips.
Still, Grove listened when colleagues approached him with a nonengineering-based argument: Abandoning the x86 architecture, they said, would leave Intel’s huge base of existing customers stranded. None of the software written for x86 chips would work smoothly on the newer design. “They saw through all the technical mumbo jumbo,” Grove recalls, “and focused on the most important, basic factors.” Grove stepped away from his own inclination to pick a more technologically sweet solution and stuck with the x86 design. Intel’s value soared.
Grove was slower to step outside his own beliefs when customers discovered a subtle flaw in the ability of Intel’s Pentium processor to carry out certain types of arithmetic functions. Grove dragged his feet on apologizing to customers until the howling both inside and outside of the company was deafening. In his book, Tedlow describes the Pentium gaffe as Grove’s biggest mistake.
Onstage with Tedlow, Grove was impatient with that choice. Yes, a mistake. But his biggest? Grove says he agonizes every day that he didn’t leave Intel with a clearer road map for the future. Intel’s most recent track record has been mixed. Its high-end chip, Itanium, which took root during the end of Grove’s tenure, proved too ambitious and left the company vulnerable to competitor Advanced Micro Devices. Intel is also still seeking a clear path in a world where countless little handheld electronic devices are emerging as the next new thing.
Tedlow countered that Grove was asking too much of himself. “Every generation has to solve the problems it faces,” he told Grove and the audience. “It’s hard to solve the problems that will happen 10 or twenty years out.”
“That attitude brings an anti-investment, pro-short-term perspective,” Grove snapped back. “Some problems take longer than the tenure of a CEO,” he added.
These days, Grove has taken on a couple of other big problems, ones that will certainly take more than a few years to right: improving the U.S. health care system and preserving America’s separation of church and state.
Once again, Grove is trying to step outside his personal concerns to see the problems in a clear light. Almost a third of all Americans lack adequate health care and increasingly turn to hospital emergency rooms for simple medical care--a disaster in the making, worries Grove.
Existing technology can help, he believes. Grove is a fan, for instance, of walk-in medical clinics at drugstores instead of emergency rooms for many procedures. He advocates keeping people’s medical records in PDF files on the Internet to cut costly mistakes and unnecessary procedures. Wireless sensors that kept elderly or infirmed patients in close contact with medical providers could help them stay in their own homes instead of heading to nursing facilities. “We’re using technology to achieve extraordinary care for a few people. What intrigues and motivates me is the idea of using mass technology to help many more,” he says.
Just as important, Grove believes, is protecting the U.S. from the kind of sectarian strife that has ravaged so many other countries, including his native Hungary, where he saw relatives suffer first at the hands of the Nazis and later under the Communists. A clear separation of church and state--as set forth in the U.S. Bill of Rights--is essential for creating an environment in which people can believe what they choose and tolerate differences among their neighbors. Grove is supporting an online petition drive calling for the renewed separation of church and state.
Stepping outside your own concerns and pride, finding a new solution and then reentering is tough for any of us. It’s far easier to pontificate on other people’s problems than to see our own clearly. But as Grove has shown, true self-awareness can be our most valuable asset.
http://www.forbes.com/2006/12/16/intel-andy-grove-tech-cz_ec_1218valleyletter_print.html
Sphere: Related Content
A chunk of the Hewlett-Packard spy scandal ended yesterday not with a bang but a snivel.
A snivel, because the $14.5 million penalty the government has levied on HP amounts to a “tsk, tsk,” for a company with a $109 billion market capitalization.
A snivel because the money will go into a kitty that the California attorney general’s office can use to investigate other companies. During the heat of the revelations, HP executives asserted that other companies have employed the same pretexting techniques--in some cases, even the same investigators. The California attorney general’s office apparently spent $350,000 investigating the charges against HP.
With the $13.5 million that HP is now contributing to the “Privacy and Piracy Fund” for investigating other allegations about lapses in consumer privacy or intellectual property piracy, the government could, in theory, chase down another half dozen or more companies that have been spying on people they don’t trust--whether those people happen to be board members, employees or journalists. Then it can scold them too--and move on.
Like a grumpy parent, the government frequently slaps down extra regulations when companies have gotten out of line. Yet it’s not clear that those regulations benefit anyone but the lawyers who get paid to enforce them. The U.S. government spent more than a decade pursuing antitrust actions against Microsoft, to the delight of its competitors. During the height of that action, Microsoft chairman Bill Gates repeatedly said that he was more worried about some unknown upstart snatching Microsoft’s business than he was about government action. Like it or not, Gates was essentially right--and Google is proving his point.
Threatening to chase after companies that abuse privacy rights--particularly when the penalties are tiny--won’t change behavior. Adding more regulation to HP’s internal operations will not change those practices, either.
I’m more of a fan of public service as a penalty for transgressions. HP should be required to show the world the value of ethical behavior. How exactly should it do this? Perhaps it should be required to give printer cartridges to California schools with wrappers that say “Don’t cheat!” Maybe its executives should be required to write “I promise not to spy on people!” a hundred times and then post the papers on billboards on Highway 101.
I asked some school kids how they would punish someone who snuck a look in a private notebook: they said that they should have the right to look in the other guy’s notebook. That’s not a bad idea--maybe HP should award major news organizations an all-day pass allowing journalists to poke into filing cabinets and e-mail queues.
If you’ve got a great suggestion, let me know--maybe we’ll post a list and HP will voluntarily do the right thing.
Public opinion can be the strongest medicine of all. We need to demand that companies do the right thing--and praise the ones who do it and shun those who don’t.
BURLINGAME, CALIF.--As a reporter, I try to follow the story wherever it leads, editors and expense accounts permitting. In February, I hopped on a plane and headed to Bangalore, India. Last week I thrilled my editors with a more parsimonious proposal to visit Second Life, a booming virtual world.
Second Life, created by San Francisco-based Linden Lab, is both easy and difficult to explain: Science fiction fans will recognize it as an attempt to create the visions of cyberspace described in novels by authors like William Gibson and Neal Stephenson. Another explanation: It’s a video game, like World of Warcraft or Grand Theft Auto, that lets players wander around doing whatever they’d like. Except it’s not a game--there’s no goal to accomplish and no one to beat.
It is easier to describe Second Life’s growth: Very fast. Second Life went live in June 2003. Last December, it had 92,000 users, and about 4,200 typically played at one time. Now the site has topped a million unique customers and on Sunday crossed the threshold of 18,000 users at a single time. Half are from outside the U.S.; almost 44% are women.
Those numbers are still tiny compared to Google's YouTube or News Corp.’s MySpace, to name the two most prominent growth stories of the second tech boom. But the buzz about Second Life is growing even faster than its user base.
Part of that growth stems from Second Life’s virtual economy, which theoretically lets users make money by buying and selling items and land in cyberspace; last week, a user claimed to have become a real-life millionaire based on her Second Life exploits.
Although in practice it might be hard for a single person to walk away with that big a check, users are steadily turning their Linden dollars into real ones. In October, for instance, Linden Lab paid a total of 917,000 real dollars to users in exchange for their virtual ones. Since October 2005, the company has paid out 6.8 million real dollars.
Marketers love Second Life, or at least the idea of Second Life, as well. About 40 real-world companies have established beachheads, more for pumping up the “cool” factor of their brands than for moving real products. Sony BMG, the music label jointly owned by Sony Corp. and Bertelsmann AG, has a spot where musicians perform. In November, IBM and Dell opened big sites; the president of Nintendo of America has been making the rounds as well. Time for me to go, too.
Or at least try to go. My aging home computer could help me buy a round-trip ticket to India, but it balked at taking me to Second Life. On my first attempt, my PC lacked the graphics horsepower to render clothing for Second Life’s “avatars," the animated characters that represent the users in cyberspace. It made the virtual world look like a mall filled with naked mannequins--not exactly a cozy experience. So I borrowed a machine with a fresher graphics card and plunged in again.
Landing in Second Life is a bit like getting plunked down in an unfamiliar city where most of the people speak your language and it doesn’t hurt when you accidentally walk into a wall. That’s important because if you’re over the age of 32--the average age of Second Life denizens--it may take a while to get comfortable with the combination of keystokes and mouse clicks that lets you move through the world.
I wandered through a piazza environment, eying other avatars. It felt a bit like being backstage at a fashion show: Everyone has the same youthful appearance and drop-dead physique. You can make a fat avatar--and they probably exist--but I didn’t happen to spot any. As one denizen confided, “You can always look fabulous in Second Life!”
Indeed, many did. Nymph-like women and butch men strolled around wearing form-fitting jeans, blouses with flowing sleeves and chest-exposing vests. Someone floated by with some marvelous white wings. I tried chatting him--I think it was a him--up. “Nice wings,” I typed. “Where did you get them?” “Don’t remember,” he answered and drifted away. “Anybody from Spain here?” typed another character. “Donde?”
If you sign up for a free account, Second Life gives your character L$250 in virtual pocket money--each Linden dollar is worth about four-tenths of a real-world penny. You can get by here on that--but it would be nice to have a bigger spending account to snap up, say, a hovercraft or some Christmas decorations. To plump my account, I could buy more Linden dollars using my real ones. If I had some software skills, I could render up some cool representations of stuff and sell it for Linden dollars. I could sell a service--and anything from virtual sex to journalistic stories about life in Second Life is fair game.
I contacted a fellow journalist, Marvel Ousley, an editor for SL News Network, for a few pointers. Ousley “transported” me to her office. (To get around Second Life you put in the name or coordinates of the location you want to go, click the “transport” button and whoosh, you’ve arrived.) It looked like any of the thousands of fine offices I’ve visited from San Francisco to Bangalore: Large chairs and a sofa, potted office plants, a big screen TV. Ousley’s avatar sports a fedora and a sweater with her magazine’s name. And, like the denizen of any other Silicon Valley office, she promptly offered me a logo shirt.
When my avatar asked her questions, my virtual fingers moved as if typing on a keyboard. But I wasn’t ready for a fully virtual conversation, so I cheated by tracking down her real-world phone number and chatting with her on a real phone as our avatars sat on her office sofa.
When Ousley first joined in April, she got caught up in the world and started working on a couple of publications. Now she tries to keep the habit under control--an hour or two a day--so that it doesn’t cut into her real-world work. In the real world, Ousley is Susie Davis, a freelance journalist who is working on documentaries.
“I wasn’t a gamer,” she says. “But here you meet people--maybe you join a book club or some other activity. You discover you share a lot with people that you might not get to know in the real world.” Ousley promised to take me sky diving on my next visit.
There is sex in Second Life as well, though Linden Labs doesn’t play that up much in its marketing materials. It’s there if you want it--but most of it happens away from the most commonly trafficked areas, says Catherine Smith, director of marketing for Second Life (aka “Catherine Linden” in SL).
Catherine shows off her virtual apartment, a graciously appointed flat with a view of the water and a few glittering Christmas trees. “What I love is there is so much beneath the layers in Second Life,” she says..
Overall, visiting Second Life is a kinder, gentler experience than, say, playing the even more popular World of Warcraft online multiplayer game, which boasts 7.5 million users. There’s no question it’s great fun to custom-design myself. (Shall I be a redhead? How about a guy?) But it’s a place that demands commitment, much like moving to another country means learning a new language and customs, I’d have to spend a lot more time in Second Life before I becoming fluent in how to move, live and act in this world. It might be fun to spend that time. But now real life is calling.
BURLINGAME, CALIF.--There is only one person who is both on the Forbes Rich list and the Computer History Museum’s Hall of Fellows--essentially the all-star list for computer science pioneers. (Hint: He probably isn’t your first guess.)
The chasm between who collects the big bucks and who invents new technology struck home for me in the past week. On the one hand, there’s YouTube, the Web’s current repository for video clips. YouTube made use of technology developed by others, notably Macromedia. The company went from startup to score ($1.65 billion in Googlebucks) in a dizzying 20 months. (Cashing out those winnings will take a bit longer; Google has tucked 12.5% of the equity due to YouTube--about $224 million--into escrow for a year until the dust kicked up by copyright lawyers scrambling to sue the company settles.)
On the other hard, there’s privately-held NeoPhotonics, based in San Jose, Calif., whose roots stretch back ten years. If business continues to ramp up, the company hopes to get off what has been a financial roller coaster and turn cash flow positive next year.
The scientists who built NeoPhotonics have invented things you’ll never see but that could change your life. Topping the list: better batteries for medical devices and optical chips for communications networks. The batteries are used in implanted defibrillators, devices that get an irregular heartbeat back in sync. The optical components sit at the end of fiber optics, repackaging data sent via light waves into electronic ones and so opening the spigot of data flowing from the Internet into local homes.
NeoPhotonics is a case study of how much persistence it takes to build a business around genuine invention.
The company started in 1996 with the promise that new nanomaterials could store energy more efficiently than conventional techniques. At the time, Sean Bi, a Chinese-born post-doctoral student in physics at the Massachusetts Institute of Technology, was working on a unique way to create powders of nanoscale particles by shining laser light through gases. Nanoparticles are almost like new elements: They have different properties than bigger versions of the same molecules. (Super tiny things have much bigger surfaces than they have volume--and this changes many properties.)
An MIT professor introduced Bi to a successful Japanese-born physicist turned businessman, Nobuyuki Kambe. Together, Bi and Kambe spent a year refining the technique. Pete Thomas, a venture capitalist then with Institutional Venture Partners, was intrigued. “They created a platform technology that could be focused to develop batteries,” he says. Thomas provided $1 million in seed funding, enough to enable them to turn lab bench experiments into a process that could churn out big batches of nanosize-particle powders. They called their company NanoGram.
Led by Tim Jenks, who joined NanoGram as chief executive, the company started developing batteries that scored high for efficiency. Yet as they experimented with the properties of their powders, Bi and Kambe realized their novel batteries released charge fast--ideal for implantable defibrillators, less so for consumer devices like cell phones.
Jenks was hunting for other applications for the powders, too. Optoelectronics was hot; NanoGram’s scientists soon realized they could create perfect coats of glass on top of silicon wafers--a boon for those making optoelectronic components. In 2002, they divided the company into three: NanoGram Devices, which kept the battery-making technology for medical devices; NeoPhotonics, which went after the optical devices market; and a third firm, NanoGram Corp., which managed the intellectual property.
As the tech bubble burst, NeoPhotonic snapped up another technology-centric company, 14-year-old Lightwave Microsystems, which was on the verge of closing shop. The technologies of the two companies meshed well, but the business liabilities did not: NeoPhotonics filed for Chapter 11 in 2003.
Most of NeoPhotonics investors did not lose heart, however. Thomas continued to sit on the board. The battery company was sold to Greatbatch for $45 million; NeoPhotonics emerged from bankruptcy. With additional financing, Jenks merged the company with a Chinese-based manufacturing operation and began building a portfolio of optoelectronics devices. Revenues were $55 million last year and have most recently exceeded $25 million per quarter. Altogether, NeoPhotonics has amassed a treasure chest of 128 U.S. patents, along with almost 100 overseas patents and few dozen more pending.
Was it worth it?
Yes, say Thomas, Jenks and Bi, in separate conversations.
“The technology created the road for NeoPhotonics,” says Thomas, now with ATA Ventures. "The proof that patents are valuable is that you're winning in the market with products that use that technology," which NeoPhotonics is, Thomas asserts.
It also led to other products such as the batteries for defibrillators and equipment for producing literally tons of nanoscale particles, he observes. “Where NeoPhotonics goes in five years time couldn’t have happened without the early nanotechnology work,” he says.
Jenks is also upbeat. Millions of new subscribers for high-speed Internet connections could mean very high double-digit growth for NeoPhotonics, he says. Although its beginnings have been tumultuous, Jenks believes the company's deep technological strength will make future growth steadier.
And Bi, who is now an executive with software maker ArcSoft says he is grateful for the chance to have developed new technology--and for the opportunity to see how it takes just the right combination of people, technology, market readiness and funding to bring an idea out of the lab and into production.
“Commercializing fundamental technology generally takes a longer time” than building on existing technology, Bi notes. “Should you wait for someone else to do this hard work?”
“This is what risk capital is about,” Thomas says. Such experiences test the mettle of entrepreneurs and inventors--but does create long-term value, he says.
And that guy who made both the Forbes list and the Computer Museum’s Hall of Fame? Intel's co-founder, Gordon Moore.
Burlingame, Calif. --Is India's gain America's loss?
Sunny globalists like New York Times columnist Thomas L. Friedman delight in India’s rising economic prominence, led by its vast pool of high-tech engineers.
Then there’s the apocalyptic crowd, who believe that India’s advancement is inexorably tied to America’s ruin. In their eyes, every time a U.S. job leaves for India--where well-trained people will get the job done for 30% or less of U.S. wages--American workers and the overall U.S. economy suffer a grievous wound.
The answer is less clear-cut than either side would have you believe. India’s new status as a high-tech powerhouse is creating headaches that could soon cause India to look a lot more like any prosperous Western country wrestling with complacency, obesity and all the other ailments of the well-to-do. That doesn’t mean Americans can kick back and chill. But as the monetary costs of doing business internationally level out, new opportunities for clever capitalists will appear.
Back in the 1980s, I got to know India as a student of developmental economics and as a visitor who rode rickety overnight buses that swerved around roadside cows. Back then, government restrictions and infrastructure problems made it simply too hard and too expensive to do much high-tech work in India.
Returning to India earlier this year, I was awed by many of the changes triggered by more liberal economic policies and the influx of work that came as international companies first swerved to avoid Y2K problems, then looked for cost savings by piping work overseas via the Internet. Now cities like Bangalore and Hyderabad hum with energy, money and opportunities.
When I returned to the U.S., a Silicon Valley friend glumly asked if I too was convinced that American businesses would soon be hollow shells, mere marketing fronts for legions of harder working Indian engineering enterprises.
Not quite, I said.
On the one hand, there is plenty of evidence of the energy and smarts of the Indian workforce.
Stuck in a traffic jam in downtown Bangalore on a work morning, I saw jauntiness in the step of the people heading to work. Locals even take a weird pride in the morning traffic snarls. Look at how busy we are! Just about everyone clutched a cellphone. Just about everyone looks young--because they are. More than a third of India’s population is under the age of 15, making it among the most youthful nations on the planet and certainly younger on average than China.
The startups and companies I visited in Bangalore included giants such as Wipro as well as homegrown ventures such as Cosmic Circuits, which design analog circuits for companies making wireless gadgets. (See: “Chips and Biranyi” and “TI Seeds It,” April 2006.)
These little companies are virtual cousins to Silicon Valley startups. Ganapathy Subramaniam started Cosmic Circuits with four colleagues after he had spent 16 years at Texas Instruments-India. The engineers kicked in their own money and got their start in Subramaniam’s living room. Within a few months they had lined up a couple of international clients and were recruiting on top Indian campuses for “freshers,” or recent engineering graduate students. They were so keen to meet one deadline that many people in the company worked for seven days without leaving the office.
Now, 15 months later, Cosmic Circuits employs more than 50 engineers working on analog chip design and has a dozen international customers. The company's offices have moved to the eastern fringe of Bangalore in part because the cost of downtown office space rivals San Francisco. From its building, you can see a rash of construction: luxury homes, tunneling into streets to lay fiber optic cable, even bamboo scaffolding swaddling a new local temple. Subramaniam loved his tenure at TI. But he is eager to demonstrate that Indian companies can hold their own with the best. “India has proved herself in software services,” he says. “Can we do it in semiconductor design? That’s our ambition.”
India’s more established companies are now struggling with the problems their American competitors face. Big companies, including Wipro, Microsoft, Google and Dell, fill up towering modern offices surrounded by carefully manicured lawns. It’s only a short stroll across those lawns, however, to another office--and another job and a bump up in salary. Managers are reluctant to discuss turnover, but it’s a big issue here. Wages are rising steadily, particularly for more experienced engineers. Dataquest India reported last year that engineers could expect an 18% average salary bump each year.
Those who watch broad trends worry, too, that India may be running thin on good help. The National Association of Software and Service Companies released a study this year that found that only one in four engineering graduates were employable. The others lacked technical skills, English fluency, ability to work in teams or presentation skills. Some of India’s big companies, such as Wipro and Infosys, have begun recruiting top graduates in any field of engineering to work in information technology, creating a vacuum of talent in other fields.
Managers tell me that even when they can find employees, they’re increasingly difficult to please. One Indian boss--who has supervised engineers in both the U.S. and India--was vexed at the challenges of managing in India. “People don’t say no,” noted one manager, even if they don’t know how to get a job done. They may be willing to put in long hours on a project, but may not know how to get the help they need to solve a problem.
When projects are finished, employees crave evaluation. “They want lots and lots of recognition,” sighed one manager. Employees at another company practically stopped working until executives procured fancier ID badges, simply because friends at nearby companies had such badges.
I idled away half a day in the Bangalore airport, waiting for a delayed flight for Hyderabad, watching well-dressed Indian families also waiting for flights to various local destinations. Everyone looked well fed, many bordering on plump. Teenage boys grinned, flashing silver braces on their teeth. Gold bracelets jangled on the arms of young women as they snapped open the latest Motorola Razr cell phones. We all flipped through the local papers, which carried big stories about cricket match championships, the latest Bollywood scandal and advertisements for luxury apartments.
One business executive pressed me for information about cultivating grapes, as he is keen to start a vineyard. Another reveled in describing trips to Paris, a cultural mecca that made up for the “boring” time spent in the U.S. Yet a third despaired that his elementary school age son is too spoiled and spoke admiringly of the stricter discipline he had observed in American families.
What’s more, just as Americans have nervously watched India’s ascendancy, so too do the Indians keep a close eye on China and other emerging economies. Indian executives fret that their country lacks China’s manufacturing muscle. They worry about outsourcing operations starting up in Eastern Europe. Indian politicians talk eloquently about the need to improve the schools that lack the star quality of the seven Indian Institutes of Technology. They also wonder how to foster leadership in other industries, including automobiles.
Sound familiar? A few years ago, anthropologists Akhil Gupta and James Ferguson of Stanford University observed that “the ‘distance’ between the rich in Bombay and those in London may be much shorter than that between different classes in ‘the same’ city.”
Translation: India is embarking on some of the same ups and downs that characterize America. True, Indian companies will beat out some U.S. competitors for jobs. But as India’s upper middle class continues to expand, smart U.S. companies will look for ways to tailor products to consumers in Mumbai and Bangalore. That’s already happening in the mobile phone business.
Does it mean more or fewer jobs for Americans? It means different jobs, different opportunities, different markets. And realizing that our competitors look very much like we do.
I'm building a not-for-profit venture, Lucere.org, to share best practices for using technology in school. I'm part of an ongoing conversation on education at O'Reilly Radar, see: http://radar.oreilly.com/edu2/ and here: http://21stcenturylessons.blogspot.com/
In my past life, I was executive editor for technology cover for Forbes. I've also been a staff writer at The Washington Post and Scientific American. You can see some of the stories I've written in the past here http://elizabethcorcoran.blogspot.com.
