Back in 2005 when Steve Jobs announced the transition from IBM Power PC chips to Intel PC chip [yep same one that were and are used in Windows-based PCs], the Mac community was flabbergasted. Many raised the question how were Macs going to distinguish themselves from Windows PCs now that nearly everything was the same but the operating system. Some said this was an opportunity for Redmond to finally run Macs out of PC town with their upcoming Longhorn upgrade.
Apple’s Steve Jobs insisted that the performance uptick with greater battery life more than justified the transition by itself. The rumor mill boiled down to three main reasons beyond “better performance”:
1)An Intel chip would allow quick boot switch from Mac to Windows – and BootCamp arrived within 1/2 year to do so;
2)Intel would be able to offer a better chip price to Apple because now it would have 2M/year chips that were “gravy”;
3)And so Apple would be able to offer Macs for prices within 20-40% of PCs.
And as the chart above shows, after the very fast transition from PowerPC to Intel chips between June 2005 to August 2006 Apple’s portable sales took off despite the 2008-2009 recession. Oh and despite the fact that during this latter period Apple’s Macs were selling not at a 20-40% premium to the equivalent equipped Windows but 100% to 300% more. Given the disaster that was and is Vista and Windows 7 during the same period, Apple threw away the huge opportunity to gain market share over PCs.
The Lost Opportunity
By all standards Vista was and is not a WOW but a WWO [pronounced "woe"] World’s Worst OS. A truncated version of the major revision that was Longhorn, Vista was thrown out well before even the second job of baking was done. The litany of WWOs are many and well documented:
1)Slower than Windows XP by a factor of 25-50% in tests on identically the same machine;
2)Such a change from Windows XP and predecessors, that there was/is a significant learning curve;
3)Still plagued with lingering reliability problems – “reboot to get Windows working again”;
4)Bloated memory usage and requirements comes up against laptops with 1 or 2GB memory ceilings;
5)Plagued with incompatibilities with existing peripherals, hardware and software;
6)Security already shaky gets completely turned off because it is so intrusive.
Consumers were not given a chance to decide because Windows XP in June 2008 was the not allowed to be sold; but large organizations were allowed to choose and they voted overwhelmingly against Vista and chose to stay with Windows XP .
This represented juicy opportunity for Apple and their TV ads certainly indicated they knew it in 2007:
But for reasons unknown and unfathomable Apple from 2007 [during the height of the Vista problems] did not lower their prices for Macs but raised them. I know because I wanted to buy a Mac laptop but found the price of a Mac at more than 100% more of the equivalent PC too expensive . I knew my clients would demand Windows capabilities and that would entail substantial investments in time and money in getting Parallels to work effectively in Mac with Windows XP. That ritual I just did not have time for. But I have continued to watch Mac versus PC prices and today they are even worse: Apple – Dual Core CPU 2.5GHz, 15in screen , 4GB RAM, 320GB hard disk – $2000US Toshiba – Dual Core CPU 2.5GHz, 16in screen, 4GB RAM, 640GB hard disk – $800US
The price has drifted up to 250% greater not for the equivalent PC but one that bests Mac with double the hard drive space and a larger screen. But give Steve Jobs credit he was not the only one to spurn this opportunity to gain significant market share from Microsoft and Windows PC – the Linux and VM communities also fumbled the chance for market gains as well.
Summary
So having passed on the opportunity to gain significant market share in the desktop and laptop markets, Steve Jobs may have decided to be more price conscious given whatever motivates the man these days. And so instead of the rumored $1000 price for the iPad – Steve started out at $499 for the basic machine [- some argue that $630 is the base price because no one is going to want to buy an iPad without 3G]. But that $499 price acts as a bar – this is what the market of new Netbooks, Smartphones, eReaders and even most laptops will have to break if they want to be successful. This in turn will put even more pressure on Windows pricing – consumers are going to look at the in store price of Windows at $150 to 350 [I know Redmond's price to OEMs is much less at $60-100, but most consumers don't know that]. So consumers like more corporates [businesses are looking in askance at their large Microsoft Assurance contracts given that they now spend 80% of their budgets to just to operate and maintain systems] will be looking for better bargains. And this time not just Apple, but Google and a ton of Asian hardware players with Chrome OS and Android will be offering devices at well under the $499 bar.
So two years late, Steve Jobs makes partial amends for pricing his Macs so high such that Microsoft and PC vendors at 1/3th price in crushing economic times have gotten the last laugh at Jobs and his annoying Apple TV commercials.
The great speculation in the Business and Automotive Press is how much gain will Motown get out of Toyota’s costly and embarrassing recall of 9++million cars plus the halt in sales of more than 60% of its fleet worldwide. There is a superb summary of the problem here. The argument is that the quality chart above from Consumers Reports has to change fundamentally for there to be lasting change . And Reuters BreakingViews Alex Currie starts with a similar cautionary note:
The glitch that forced the Japanese carmaker to halt sales of 63 pct of its U.S. fleet should benefit Motown rivals. But shared platforms exacerbated Toyota’s pain. With the Big Three making greater use of the cost-saving measure, they may want to invest more in quality control.
However, Ford which is profiting in the shor term also appears to have taken M. Currie’s viewpoint well ahead of time as reported in the Kansas City Star:
Ford’s quality has been rising, and consumers are taking notice. Consumer Reports rates Ford’s quality as better than Toyota’s. The Fusion rated higher than the Toyota Camry and Honda Accord.
So perhaps Ford is reasonably well positioned to move up and to the right on the Consumer Reports chart. But look at the problems confronting both GM and Chrysler.They are in the bottom 3 positions and they both have the stigma of having gone bankrupt on the taxpayers dime. Forbes has some telling commentary[my emphasis]:
… there will be a great cost: incentives to get customers buying Toyota’s again when the problems have been solved at the factory; money to keep the wounded dealers alive, and money to pay for the recall work. We’re probably talking about a cost in the billions–not millions–counting those incentives. That’s money that won’t go to developing new models, new hybrids, new electric cars. And we’re not talking about the lawsuits, which will go on for years…. The Camry, which is among the cars in trouble, has been the nation’s bestselling car for years. It’s less likely to be the No. 1 this year. Figure Honda’s Accord will be No. 1 this year, and other family-size models, such as Ford’s Fusion and Hyundai’s new Sonata, will take bites out of the wounded Toyota. The smaller Corolla could be hurt by other competitors, like Honda’s Civic and Ford’s Focus and a new Chevrolet Cruze coming this fall. Too bad for Chevy that it’s not ready now.
In addition, to not being ready with its newer models GM has the problem of a recall of its own – the Vibe 2009-2010 models have to be recalled because they use the Toyota Matrix base. So will Vibe owners get the $1000 incentive to Toyota owners to change to another GM car? Notably in all the Web reports, Chrysler/Fiat barely gets a mention. Neither do Kia or Hyundai despite the fact that both Korean automakers have seen both sales gains and improved auto reviews. Summary
It is clear that the hurt for Toyota is not going to be temporary and Honda may take a slight hit for its own recall. Motown will gain but it appears to be Ford that is positioned to profit the most while Chrysler appears still licking its wounds. However, other foreign vendors – notably the Koreans and the always highly rated German manufacturers may also pick up. But the real lesson here is a)the ugly PR emanating from months of not biting the bullet by Toyota on a serious safety problem, b)how quickly the Web spreads the word [just google "Toyota pain"], and c)how well positioned Ford and the Korean automakers are to take advantage of Toyota’s pain … or a slip by anybody else.
Ever since the Supreme Court made such a flawed decision on campaign finance, the issue has been percolating on the front burner. And the gas turned up when Supreme Court Justice Alito mouthed “that is not true” when President Obama in his State of the Union Speech criticized the Court’s campaign finance decision saying it “will open the floodgates for special interests, including foreign corporations, to spend without limit in our elections.” So as anticipated, this story has legs as the 2010 electoral season starts off with primaries in many states next month and the purse strings for corporate and special interest TV ads considerably loosened. Here are some of the major events: Washington Post – Congress prepares for legislative fight over campaign finance. Alliance for Justice – spells out who can do what now that the strings are unloosed. Seattle Times – is so “thankful” that it can now make electoral editorial recommendations without fear of prosecution. The Galesburg Register Mail – sampled Illinois sagacity and found the electorate reasonably well informed, willing to comment and about evenly split on the issue.
Given the election year and economic circumstances, I suspect Galebergians will be far from having the last word on this judgment.
Forget the MSNBC commercial at the beginning, here is President Obama speaking with the House Republicans for 1 very full hour. This is must see TV. The discussion is pointed, frank but polite – none of the Fox News Fair-and-Balanced stridency nor MSNBC name calling. The number of good ideas that get exchanged here is relatively high despite strong policy differences. The problem is this may be only a onetime phenomenon – though one would like to see it done on a regular basis.
The price for the iPad at $500 starter may be a watershed. This is the target price that eReader and Smartphone vendors no longer can exceed. This is also the price that netbooks from Asus, Dell, Google, HP, and others have to beat. This becomes the Universal Mobile Working Computer top level price. This price puts tremendous pressure on Microsoft Windows 7 which ranges from $110 for upgrades to well over $350 for top of the line models. Probably 80-90% of users are not doing Forex trading or database development so their need for even a $100 encumbered price for their Mobile Work computer – its not in the cards.
After much speculation, Apple’s iPad hit the Gadget Mindscape market with a thud. To say that the Gadgeterati did not like the iPad is, unfortunately for Apple, an understatement: Gizmodo – 8 things about the iPad that sucks – No Thanks Apple PCWorld – Apple’s iPad mistakes – so many Engadget – On the iPad, Not Impressed
But I liked the comment over at CNETfor Viewpoint 2:
contrary to what Ina posted, the tablet computer started life in the late 80s and early 90s by Pen Computing called Pen Point. Head over to boycottnovell.com and you should find some interesting things about how Microsoft worked to put Pen Computing out of business because they would not use Windows. A spinoff from the Pen Point business was Apples Newton but it was a much smaller design and when the press said that Apple was dead because of Windows 95 and it almost happened, the Newton didn’t survive the cuts needed to keep Apple going. Palm Computing made the handheld tablet to norm but Microsoft once again felt that it must be based on Windows and if you don’t know, marketing programs made sure more Windows Pocket PCs were on store shelves than Palm devices. They did try again around 2000 with another large Windows based tablet but the bloat of Windows required alot of hardware so the devices were heavy, used too much power so they had short battery life, and they were expensive.The funny thing about Microsoft is, they keep failing because to them, Windows is the hammer and EVERYTHING looks like a nail. When you look out on the market over the past 20 years, the new things you see are not there because they look like something else. They are there because they are different and they were designed to make the most of what is available and what fits the design the best. Microsoft just can’t have a hit like the iPod ever because everything they do is somehow tied to Windows and the world will never become a place where everything must fit that rectangular shape, metaphorically speaking.
The 25 million iPhone users and 125 million iTunes account members are a good starting point for those who can easily and immediately see value in this device and feel right at home using it. Pricing it at $499 is brilliant and will probably result in 10s of millions sold this year as long as the battery life is as stated.
Now add to this a good chunk of the 6-10 million eReaders which will likely be sold this next year and Apple will likely pickup a big market – not tens of millions as iPad currently stands but likely teens of millions in its first year. And Apple has a way of quickly adjusting to market demands. Remember the iPad is fast, gorgeous screen, thin and well appointed (for extra bucks). But most important for Google and Microsoft, Apple has left so much missing in the iPad there is a lot of room to maneuver for both companies.
This is Viewpoint 3. Both Google and Microsoft must be breathing sighs of relief – they have plenty of wiggle-into-the-market room for their Universal Mobile Computing Devices. For example, Google’s Android and Chrome OS operating systems support multitasking right now, Flash and HTML fully, and a wider range of connectivity options. And because JavaScript, HTML and Flash are primary programming tools for ChromeOS, the number of immediately available developers is at least 10 times the number of iPhone/iPad developers. And with ever faster microchips plus flash-memory or SSD devices – whatever Google turns up with will be ultra-fast and likely ultra secure as well[Linux base OS]. The chinks for Google are full multi-touch+gestures; how much of Wifi Direct, Bluetooth/Blueray, WiDi, and other emerging connectivity options they choose to implement. But perhaps the biggest chink in the Google armor is the disastrous sales and support exhibited at the Google Store so far with the release of the Android phone. But as the mobile medium of contact and easy data exchange, Google has lots of opportunities Microsoft’s Steve Ballmer owes Steve Jobs a heartfelt – “Thank you, Thank you, Thank you”. First because Steve Jobs did the usual and lead the way with innovation allowing Redmond to pick up the cues and copy, copy, copy. But also because not Windows Mobile 7 but Windows itself has been given a reprieve. Big business is still not enthusiastic about adopting Windows 7 – and because it is 20-40% slower than their existing Windows XP apps, has the continuing disaster of IE as its browser of choice, represents a huge retraining/learning curve for users, and presents a high price in tight economic times among the most prominent reasons. But with a Windows 7 full multi-touch, high connectivity [especially to Exchange and Sharepoint], low price tablet/Netbook from HP [it will have to be $500 0r less], businesses might finally warm up to Windows 7. The contradiction is that Windows 7 alone is priced at $190 [at Amazon]for Windows 7 Home Premium [ closest counterpart to Windows XP in most shops] this price represents a huge chunk of the $500 price that iPad has set in the market for the Universal Mobile Computing Devices.
Slate has some excellent commentary and investigation on how the Supreme Court reached the concepts of Money being equal to Speech and a Corporation is equivalent to an individual. These two concepts are the critical flaws in the Supreme Courts granting unlimited campaign funding rights to Corporations and any other special interest group. Here is a sampler:
Go back almost a century, to the time when the modern corporation was created, and you’ll find laws that prohibit or limit the use of corporate money in elections. And yet this week, a 5-4 Supreme Court struck down the limits that Congress passed in 2002 in this tradition in the case Citizens United v. FEC.
The majority’s ruling unleashes a new wave of campaign cash and adds to the already considerable power of corporations. The court’s main rationale is that limits on using corporate treasuries for campaigns are a “classic example of censorship,” as Justice Anthony Kennedy wrote for the majority. To get there, Kennedy depends on two legal theories that blossomed as constitutional principles in the mid-1970s: money is speech and corporations are people. Both theories are strange, if not simply wrongheaded—why, according to the Constitution or common sense, would money be speech or corporations be people? The court has also employed theories not uniformly but, rather, as constitutional cover for dominance of the electoral system by corporations and by the wealthy.
After pouring billions of dollars into the global fight against malaria and rebranding Microsoft in a more cuddly, human way, Bill Gates had just about shaken off accusations that he represented all that was unappealing about aggressive American capitalism.
But today his reinvention suffered something of a setback when he played down China’s attempts to stifle dissent on the internet as “very limited”.
Less than two weeks after Google said it planned to uncensor its Chinese search engine in protest at attempts to break into the email accounts of human rights activists, Gates criticised his rival’s decision and insisted that agreeing to Beijing’s demands was just part of doing business in the country. “You’ve got to decide: do you want to obey the laws of the countries you’re in or not? If not, you may not end up doing business there,” he told ABC’s Good Morning America programme.
He also brushed aside accusations that Microsoft has been complicit in helping filter the web by saying that it was not an issue because any censorship could be circumvented with technical knowledge. “Chinese efforts to censor the internet have been very limited,” he said. “It’s easy to go around it, so I think keeping the internet thriving there is very important.”
Gates’s comments echo those last week by Microsoft chief executive, Steve Ballmer, who took a swipe at Google by suggesting that the company had over-reacted in China. “People are always trying to break into other people’s data,” he said on Friday. “There’s always somebody trying to break into Microsoft.”
Ballmer also likened Microsoft’s complicity in actively filtering internet content to the oil industry’s decision to import oil from Saudi Arabia, despite the censorship that takes place there. “If the Chinese government gives us proper legal notice, we’ll take that piece of information out of the Bing search engine,” adding that even countries with “extreme” free speech laws, such as the US, exercised some censorship.
The comments of both men come despite the fact that efforts to censor the internet in China – a project known as the Golden Shield – are among the most extensive in the world. The country’s estimated 300 million internet users are almost all affected by the various blocks and filters, which include direct censorship of anti-government protesters, members of the Falun Gong religious group, Tibetan independence campaigners and the Taiwanese media. At various points, Beijing has also blocked access to international news websites including the BBC and the Guardian, and around 50 Chinese bloggers are in prison as a result of their postings.
If you are interested, the Guardian has one of the best coverages of the events in China – see more here.
Frank Rich of the NYTimes provides another update to this article in his opinion piece “After the Massachusetts Massacre”. Rich argues that the problem for President Obama has been that he failed to make jobs and financial regulation top priorities. Here is the core of what he had to say:
Obama’s plight has been unchanged for months. Neither in action nor in message is he in front of the anger roiling a country where high unemployment remains unchecked and spiraling foreclosures are demolishing the bedrock American dream of home ownership. The president is no longer seen as a savior but as a captive of the interests who ginned up the mess and still profit, hugely, from it.That’s no place for any politician of any party or ideology to be. There’s a reason why the otherwise antithetical Leno and Conan camps are united in their derision of NBC’s titans. A TV network has become a handy proxy for every mismanaged, greedy, disloyal and unaccountable corporation in our dysfunctional economy. It’s a business culture where the rich and well-connected get richer while the employees, shareholders and customers get the shaft. And the conviction that the game is fixed is nonpartisan. If the tea party right and populist left agree on anything, it’s that big bailed-out banks have and will get away with murder while we pay the bill on credit cards — with ever-rising fees.
Update 1: Jan 12, 2010 – The Dealbook blog at the New York Times has taken the unprecedented step of providing an extensive preface to a most provocative, yet logical post by fellow NYTimes writer Frank Rich – The Other Plot to Wreck America. This preface and subsequent post picks up and defines much more comprehensively the arguments made in Takethe5th back in November of last year. Basically Frank Rich argues clearly that more so than al-Qaeda, our very own Wall Street Banking community poses a greater threat to the well being of Americans. Here are some salient points made from the Dealbook Preface.
What we don’t know will hurt us, and quite possibly on a more devastating scale than any Qaeda attack. Americans must be told the full story of how Wall Street gamed and inflated the housing bubble, made out like bandits, and then left millions of households in ruin. Without that reckoning, there will be no public clamor for serious reform of a financial system that was as cunningly breached as airline security at the Amsterdam airport. And without reform, another massive attack on our economic security is guaranteed. Now that it can count on government bailouts, Wall Street has more incentive than ever to pump up its risks — secure that it can keep the bonanzas while we get stuck with the losses.
The window for change is rapidly closing. Health care, Afghanistan and the terrorism panic may have exhausted Washington’s already limited capacity for heavy lifting, especially in an election year. The White House’s chief economic hand, Lawrence Summers, has repeatedly announced that “everybody agrees that the recession is over” — which is technically true from an economist’s perspective and certainly true on Wall Street, where bailed-out banks are reporting record profits and bonuses. The contrary voices of Americans who have lost pay, jobs, homes and savings are either patronized or drowned out entirely by a political system where the banking lobby rules in both parties and the revolving door between finance and government never stops spinning.
It’s against this backdrop that this week’s long-awaited initial public hearings of the Financial Crisis Inquiry Commission are so critical. This is the bipartisan panel that Congress mandated last spring to investigate the still murky story of what happened in the meltdown. Phil Angelides, the former California treasurer who is the inquiry’s chairman, told me in interviews late last year that he has been busy deploying a tough investigative staff and will not allow the proceedings to devolve into a typical blue-ribbon Beltway exercise in toothless bloviation.
He wants to examine the financial sector’s “greed, stupidity, hubris and outright corruption” — from traders on the ground to the board room. “It’s important that we deliver new information,” he said. “We can’t just rehash what we’ve known to date.” He understands that if he fails to make news or to tell the story in a way that is comprehensible and compelling enough to arouse Americans to demand action, Wall Street and Washington will both keep moving on, unchallenged and unchastened.
Here is our original posting from November 11th, 2009
The Obama administration is earning top marks so far for its efforts in Foreign Affairs as manifested in the Nobel Peace Prize; mixed results on its domestic programs as measured in housing reforms, rescuing the auto companies and health care reform; but it is starting to earn serious failing grades on its overall economic and financial reforms.
Take a listen to these two discussions on You Tube. Yes they are heated and passionate; but also they have a strong core of truth that is quite damaging for Obama and key Democratic Senators and Congressmen – they are acting not in the interests of the American people but rather working much more mightily for Wall Street lobbyists and major corporate campaign contributors.
The case of the financial industry and Goldman Sachs is so telling. Goldman contribute hugely to both US political parties not only in dollars but also in high-level 1-3 year postings. And Goldman profits mightily from these dollar and manpower investments. Goldman received not $10B [which Goldman constantly reminds us they quickly paid off with interest]. They received directly $23B from the US because Goldman’s AIG exposure of $13B was made 100% whole by taxpayers. Lehman Brothers and Bear Stearns, Goldmans biggest competititors, were allowed to fail while a Goldman man , Henry Paulson, was the key decider at Treasury. Ditto as Goldman was allowed to change to being a bank holding company with access to Federal funds at the lowest possible rates and with additional protection for their capital funds. This is services rendered by the Federal government worth additional billions of dollars to Goldman. Meanwhile Goldman is raising its bonuses paid to its work force to between $16B and $23B which will be a 40% increase at the lowend while most Americans have seen either job losses or cost-cutting wage losses continue to be the order of the day among corporates. And banks who have gained $trillions in support are still not making loans to small businesses and consumers except at cutthroat rates. Of course this cuts off consumer incomes needed to re-inflate the economy. Not good.
So while the Republicans implode on general policy being set by Rush Limbaugh, Sarah Palin and Fox News, the Democrats have a huge Achilles heel, their financial and economic policy is one-sidedely oriented toward rescuing the financial institutions [which are indeed shaky] while doing much less for families, homeowners, and small to medium size businesses. The problem is that most major Democratic players including the President appear to be beholden to the financial and corporates elites whose huge campaign contributions helped them to power.
Now the immediate problem may not be as large to the Democrats as it first might appear because the Republicans are loath to point out these financial and economic follies because it endangers the very same sponsors/contributors who make equal dollops to Republican coffers. So Republicans are out to generalize the economic and financial mess. Thus, now one can understand the Republican Tea Party line of attack, get President Obama fully responsible for Budget deficits and job losses without having to commit to any Republican financial reforms or job creation investments that their corporate/financial sponsors do not approve of. Sound more and more like a Bautocracy?
The worst part of this Bautocracy is the string of huge mistakes the US political leadership is now making on a regular basis which are devastating, “friendly-fire” blows to the US Economic, Political and Social Welfare:
0)A President who was “elected” by an unfair cloture of counting the votes in Florida undermining the legitimacy of one of the most important votes in the US which now every 2 bit dictator in the world uses as defense for their “Mugabi-like” abusive clings to power.
1)A President and Executive Administration unwilling to listen to or contemplate [="connect the dots"] the possibility of a terrorist attack of 9/11 proportions on US soil.
2)A neo-conservative misdirection of US military resources in Iraq rather than Afghanistan/Pakistan where Al Qaeda still survives and plots. The cost in lives is thousands, in military stress untold, in misdirected dollars=> $trillions.
3)Increasingly succumbing to the wishes of financial elites who, despite the progression of increasingly devastating financial fiascoes in the 1990’s of the Savings & Loan/Resolution Trust debacle, LongTerm Capital Management failure, and the DOT.Com bust – were able a)to dismantle all meaningful financial regulatory reform providing the pre-conditions for the Housing/Banking Bust of 2007-2009 and b)to foster the fiction of efficient and effective capital markets while in reality those markets were becoming opaque, secretive, and subject to manipulation such that financial derivative exposures [and not just housing ones] continue to cripple World Financial markets.
4)Because of these misdirected fundings, there has been a measurable loss of international leadership in health, education, and welfare for US citizens. Now China and Asia lead both economic growth and technical innovation while Europe and South America lead with Economic and/or Social Reform. The US is unable to produce anything constructive in Climate Change reform other than to help ring the bell.
Inevitably the price of Bautocracy is leadership that can’t cope and address problems with any concerted effectiveness as the buys that twine prevent realistic assessment and solutions of national impact. In a Bautocracy inevitably you get what you pay for .. or else.<
Bautocracy – a political system allowing financial elites to buy access to elected representatives such that 1 man, 1 vote can be bypassed.
Robert Reich, Former Secretary of Labor’s Commentary on Goldman from July of this year.
John Roberts promised a gradualist Supreme Court – “just calling the balls and strikes”. But in a rushed decision riddled with many questions and problems left un-answered, Roberts and company threw out 30 years of Supreme Court precedence and 100 years of moving to the individual not groups and corporates as the basic holder of voting rights. Equating money as free speech and special interest groups/corporations as single-minded, unanimous voters are the two fundamental flaws in this decision. This is another tragic step as the US slips into an ungovernable bautocracy.
The fight over who and how one can buy political power has gone on for the length of the Union. For the last 20 years the fight has become brutal – and it is reflected in the wretched partisanship in federal politics of the last 10 years. Most recently the Republican Party became the NOPE machine, with not one member crossing over to support any Democratic domestic agenda items. The Democrats, using their now lost filibuster-proof majorities in the House and Senate excluded the Republicans from obstructing health and other domestic legislation. The voters waiting for consensus seethed as jobs continued to be lost while banks, rescued with more than a trillion dollars of their taxpayer money, continued to reject most mortgage amelioration, reduced loans to small businesses by a whopping 10%, yet paid their own workers bonuses bigger than in 2007, the start of the financial crisis. And the Obama administration put ever longer Democratic healthcare wrangling above jobs, financial reform, and substantive moment on promised education, energy and climate change reforms. So now in the need to rescue John McCain’s campaign financing reforms, there is no will to take the issue on as bitterly parochial partisanship rules Congress. Given the rushed decision, with many unanswered major issues [think of such serious problems as the power of foreign corporates to now influence US elections, the easy ability of corporate and other special interest groups to dodge disclosure rules, the threat of nearly unprovable "we will do all it takes to destroy you" lobbying by special interests] one has to question the integrity of the John Roberts Supreme Court. Who set the agenda and to whom is the Roberts Court beholden to given such a flawed judgment. Unfortunately, the Supreme Court has on its recent record the precedent of extreme political partisanship in the decision in 2000 not to count all the 2000 presidential election votes. Tyrants around the World say to US delegates – “don’t talk to us about voting fairness when you failed to count your presidential election votes”. Now imagine what Zimbabwe’s President Robert Mugabe or Iran’s Prime Minister Mahmoud Ahmadinejad will proclaim – “Don’t you dare presume to lecture us about voting irregularities when you have basic voting rights problems yourself”. And then the tyrants will whisper “Thank you, Chief Justice John Roberts”.
Slate’s Big Money blog has a curiously titled story partly via the NYTimes – apparently the new CEO of Morgan Stanley is “definitely not a slimeball”. Now given that Morgan Stanley is a member of the exclusive “Too Big To Fail” club of financheevil institutions [uhh, financial institutions, since "banksters" does not seem completely satisfying, one can't help looking for a proper portmanteaul for the Too Big To Fail set - TBFT is just too acronimically accommodating]. So what is Slate implying here – that some, most, or the complete set of “Too Big Too Fail” CEO’s are slimeballs??? See for yourself at the Slate/Big Money story here. Oops, Lloyd insists on letting you know - he apologized.
Here is the latest on the fast evolving China vs Google story as it takes some interesting turns and starts to reveal some of its underlying causes:
CNET Reports: “After warnings of strained U.S.-China relations, China’s government has issued statements denying any state involvement in the cyberattacks on Google and defending its online censorship.” This Chinese statement exonerates China and warns again of consequences for bilateral relations between China and the US which could be damaged.
UPI reports that China ups the ante and denies any government involvement, “explicit or implicit” in the cyberattacks.
But Foreign Policy magazine lists the 10 biggest Chinese Cyber-attacks of the last five years.
Bloombeg News catches a novel spin by Xinhua, the official China news agency: ‘Clinton’s statements about Internet freedoms were also “inconsistent with the facts” and an example of the “double standards” imposed by the U.S., according to the commentary dated Jan. 23. It is “common practice” for countries including the U.S. to restrict access to online information, according to Xinhua.’ Bloomberg makes no attempt to refute the accusations either indicating they are preposterous or Bloomberg does not know or if Bloomberg does know it is not telling. This party would be curious as to what the Chinese are referring to – the secretive, ill-fated Democratic Party Health Bill negotiations? Hardly a match for banning Twitter,Facebook, You Tube and others plus censored Baidu and Google searches in China.
Federal Computer Week and Computerworld report: “The U.S. has no formal policy for dealing with foreign government-led threats against U.S. interests in cyberspace. With efforts already under way to develop such a policy, the recent attacks could do a lot to shape the policy and fuel its passage through Congress.” they go on to say that retaliation is self-damaging and broader cyber attack policy should be the priority.
Each time, Baidu has benefited from the fall out of Google in China. Each time, Baidu’s share prices increased when Google encountered problems in China. Indeed, some people suspect that Baidu is the prime suspect behind the recent cyber attacks on Google as Chinese companies can “suggest” the government to engage in certain actions against foreign companies when necessary, especially when it is related to national security.Although the attacks seem to come from China, both Baidu and the Chinese government vigorously denied their involvement. They claim that they are the victim of cyber attacks as well. Recently, Baidu was inaccessible for a few hours on January 12, 2010. They claim that they were attacked by the Iranian Cyber Army, who attacked the US domain registration company register.com . Baidu is currently suing the company for negligence.
Baidu is a company that many claim was the “Hooligan Search Engine” in China. It used to host many materials that infringed on the intellectual property rights such as mp3s, videos, etc.(Though now it is trying to comply with the applicable laws). It used to bully Chinese small businesses and tried to “persuade” them to advertise on Baidu. (If they did not, consequences would follow). It also used many other tactics to increase its market share in China. Most of its users are young, not-so-wealthy, relatively less educated compared to the sophisticated, educated, and wealthy users of Google. And they are easily angered and instigated by certain nationalistic events as well. To say that Baidu is totally innocent is to say that Hitler did not kill any Jews, some say. (What would the Chinese government want Google’s source code for? Although I personally hope and believe that Baidu might be innocent).
This account, if certifiably frank[given the Hitler remark, I suspect it is], then would help to explain a)why Google is still losing to Baidu in the Chinese market and b)why the following unexpected departure of a Baidu COO and then CTO occurred as the Google story broke. The following stories suggest that Baidu may indeed be implicated.
As was pointed out last week, Google isn’t the top dog in terms of search in China, and some suggested that its loud threat to depart the country was a humbled company, tail between its legs, quitting a market it couldn’t conquer: Baidu holds the top spot in terms of search in China.However, in the last 10 days, Baidu has seen both its chief technology and chief operations officers leave. COO Ye Peng left the company on 8 January, citing “personal reasons”. The China Digital Times said that the People’s Daily also cited “personal reasons” for CTO Li Yinan’s departure and did not lay out his future plans. Blogger Uln at Chinayouren called the departure ‘mysterious’. However, a comment on that post says that Li is taking over as CEO at a subsidiary of China Mobile, a move that was also reported by Xinhua, the official news agency of the People’s Republic of China.
The departures come as Baidu’s share of the Chinese search market is slipping as Google was gaining. BusinessWeek reports:
“Baidu had 58.6 percent of China’s online search market in the fourth quarter, down from 63.9 percent in the previous three months, according to researcher Analysys International. Google’s market share increased to 35.6 percent from 31.3 percent over the same period, the Beijing-based researcher said.”
The Financial Times said that the departures from Baidu suggest “further disruptions ahead in China’s Rmb7.5bn ($1.1bn) online search market”. The company is the process of transitioning to a new search advertising platform called Phoenix Nest, similar to Google’s AdWords. As with Yahoo’s calamitous move to its new Panama advertising system in the US from 2003-2007. The transition has been cited as one of the reasons behind Baidu’s falling market share.
Finally Googles actions on canceling its cellphones launch has had a chilling effect as noted here – its actions are implying that China, given its cyberattacks and continued outright intellectual property thefts, is not a good place to do High Tech business.
Stay tuned – as noted before, This Story Has Legs.
”Any accusation that the Chinese government participated in cyber attacks, either in an explicit or indirect way, is groundless and aims to discredit China,” an unidentified ministry spokesman said. ”We are firmly opposed to that.”
But more ominous was the refusal of the Chinese to do any thorough and transparent investigation of the cyber attacks and whether they originated in China. Now according to Foreign Policy magazine there are solid reasons for this accusation. The Chinese have been complicit in at least 10 cyber blitz attacks in the past five years on major US government agencies and companies. So it should not be a surprise that the Chinese unleashed a PR blitz upon the US Information hegemony, blasted any need for its government to investigate the Cyber attacks in the transparent manner suggested by US Secretary of State Hillary Clinton, and finally said stay out of accusing the Chinese government of censorship and clandestine tracking of its Web users. Instead they cited the US for its huge National Security screen of emails and telephone calls.
Clearly the Chinese have upped the ante but have left “a way out” for the US. Clearly the Chinese want this tamped down to a just a business dispute between it and Google despite the “cat” of broad Chinese cyberattacks having slipped out of the bag. So the Chinese tack is to have Google come to them and show the Chinese authorities what evidence they have of cyber attacks[read this as how did you detect our most subtle cyber attacks?]. Clearly this is a case of high stakes international economic and political poker – watch now what a frazzled White House does given the apparent domestic funk it is in and the power position of Chinese control of $2.4 trillion of US debt.
There is an interesting article in the Sports section of the New York Times. As the Jets pack up for the Season having just failed to be the Arizona Cardinals of this season – the Times Reporters ask what will the team need to make it to the top next season. And the analysis is complex because this next season there is likelyno salary cap in the NFL. In fact, working without a salary cap stands to make the unrestricted free-agent players very rich – and maybe the rookies a little less so. What is fascinating is the thought the NFL has put into one capless season to guarantee parity and not money dominates in the NFL. After this year the NFL will likely revert to a cap system. In a similar fashion, the national political election season is already upon the US – as all the members of the House and 1/3 of the Senate are up for re-election. And the US Supreme Court has made it a capless one as well – unlimited campaign funding allowed for all corporations and special interest groups. However, unlike the NFL, the US Supreme Court a)has not taken any thought or made any plans for the implementation of its decision allowing for unlimited campaign financing and b)this decision is not for just one season.
