AT&T Must Be Stopped

Posted in tech on March 21, 2011 by themaroon

When I saw the news break this weekend about AT&T and T-Mobile merging I immediately thought “there’s no way this is going to get approved by the FTC”. Today I opened up my RSS reader and there were dozens of articles about what a bad thing this will be for customers. It’s hard to disagree, and I’m famous for my ability to do so.

This will be particularly disastrous for mobile networks because, since they operate via radio waves, it requires a potential upstart to acquire large amounts of spectrum to compete, and in this day in age there isn’t much left to go around. It would be ok to let automobile manufacturers merge down to two because there are always foreign ones to compete with, and anyone with a decent chunk of capital can start their own. (See Tesla). But there’s a very real limit on how much spectrum can be used for mobile devices and we’re pretty much at it. There’s going to come a point, in fact we might actually be there, where you simply can’t start a carrier for any amount of money.

Also the FTC could not possibly approve any other mergers in the space. This particular one will leave three national networks, and the FTC will never let a market that previously had a half dozen competitors consolidate all the way down to two. If this merger goes through, AT&T will have about 1.5x the users and spectrum Verizon does, and Verizon will have no way to catch up.

And what happens if Sprint Nextel fails? They’re having some serious troubles, and while I’m a fan of their service and optimistic that they can turn it around, if they don’t we’re once again stuck with a duopoly. At least then Verizon could possibly pick up their spectrum, but still, that’s not good.

Spectrum is the new gold rush. I’m concerned that if this merger goes through the effects will be both disastrous and irreversible.

GDC

Posted in Games on March 17, 2011 by themaroon

This year we attended the Game Developers Conference in San Francisco. It was a good time and I met lots of interesting people. Attending talks, meeting bloggers, writers, and other developers, and walking the showroom floor is a great way to take the pulse of the industry. The buzz this year was all about mobile gaming.

Smart phones have totally taken mindshare from Facebook. Facebook’s policy changes over the last year have not quite forced all of the independents out, but they’ve certainly made a platform that was previously very indie-friendly no longer so. Smart phone ownership among the two biggest platforms is probably somewhere around 200 million and growing rapidly. There is  good chance that there will be a billion people with iPhone or Android models before there are a billion Facebook users.

Right now mobile gaming pretty much means iOS gaming. Everyone agrees that Android RPUs are just too low and spreading a game there is just too hard. Their app market’s poor usability, difficult payment system, and terrible ranking algorithms, along with Android’s inferior demographics, have discouraged use of it as a discovery tool. Google almost seems to be hoping customers will find apps the same way websites are found (ie. through Google) rather than through a centralized app market, and that’s just not panning out.

There is one bright spot, and that’s free to play games. Android users, like iOS users, monetize well. Especially now that Google is working on carrier billing with major carriers everywhere, if you can get customers in the door you can make money off of them.

I’ve argued with friends over whether or not Facebook would revert their developer platform to its glory days (I contend no) and whether or not Google will improve the app market (ditto) and I’m now more convinced of both. I spoke to a developer advocate for Android and am more convinced than ever that they don’t even understand that their app market is failing, let alone why, and that any changes beyond the cosmetic won’t be coming any time soon. They’ll put out graphical refreshes a couple times a year, but they’ll also keep choosing Google Checkout over something people actually want (PayPal), keep failing to make users sign up for it upon activation, and assure themselves that there terrible ranking algorithms which keep the same three sucky apps at the top of the charts for months at a time are superior.

Tablets were in full force at GDC. I got to play with the Motorola Xoom and the RIM Playbook. The Playbook might do alright with the business crowd, I really don’t know. Both Android and iOS have mediocre at best email applications, which might be a draw. It won’t rival the iPad in sales, but it might have been worth developing for RIM.

Android, on the other hand, will be outselling the iPad possibly this year, and if not definitely in 2011. The Xoom isn’t there yet, but it’s damn close and there will be new tablets shipping every month soon, and by the end of the year even more frequently than that.

It’ll be fun to see where the gaming industry goes. I expect soon we’ll even see a wholesale shift away from consoles toward mobile as the user numbers just dwarf everything that came before.

How Competitors Can Challenge the iPad

Posted in tech on February 22, 2011 by themaroon

New tablets are starting to debut at a rapid pace and many more will be launching over the coming months. While the Galaxy Tab seems to have done modestly well, the iPad is still crushing the market. Most of the Android tablets just don’t look that exciting (yet) but I think by the end of the year that won’t be true.

Tablets need to do a few things to compete with the iPad, I’ll list them here in approximate order.

1. Compete on price. Nobody’s going to buy your Xoom for $800 when they can buy an iPad for $500. The lowest end iPad would seem to be the vast majority of sales. For a long time there when iPads were scarce, you could pretty easily pick one up by stepping up to the $600 level, but a $500 required waiting for weeks. Most people waited.

This makes sense. The whole reason one of these devices work is that everything is in the cloud. Your email is web based. Your video is coming from Netflix. Even your music is going to move into the cloud soon if it hasn’t already. What’s a few gigabytes at that point?

If your device is going to be priced higher than the iPad, there better be a damn good reason. Give me an AMOLED screen for example. (I think we’ll see this in the sequel to the Galaxy Tab, and it will be awesome.)

2. Think more along the lines of a notebook than an oversized iPod. This, I think, is one of Apple’s mistakes, both with the iPad and the iPhone/iPod Touch. They still make me tether my iPad to my PC. Why?  Developers have seen, as a result, that iDevices are often running on older OSes because people don’t want to do that.

And why should they? It’s ridiculous. There’s no reason this device can’t be updated over the air. There’s no reason it can’t sync music over Wi-Fi. With a Bluetooth Keyboard and Mouse this device could be as independent and functional as any notebook. It’s Android competitors will be.

3. Better licensing terms to foster app development. While I’m not in the camp that thinks Apple’s app store policies are unethical or abusive, I am almost certain they’re a strategic mistake. Tablets are a glorified thin client and are largely meaningless without cloud services. When it comes to cloud services, subscription revenues are king.

Forcing good e-reader apps like Amazon’s Kindle, or good video apps (Netflix) off of your device in an attempt to get 30% of revenues from them is a mistake. Those kinds of apps are why the device exists. They don’t have high enough margins to eat 30%. It would have been better to enforce this policy from the beginning so that we wouldn’t have come to love those things only to have them yanked away.

4. Support Flash. This is a no brainer. The lack of Flash is constantly a pain on the iDevices, and none more so than the iPad. Want to look at the website of any high end restaurant? Nope! Watch Hulu? Nope! (That’s partially due to Hulu being a pain in the ass, though you can get around that on Android with some browser string hackery). Play Cityville? Nope.

The lack of Flash is a true annoyance on the iPad. It won’t be on Android devices.

5. USB ports. There’s no reason current accessories can’t be just a driver away from working with tablets. It’s understandable why Apple forces accessory makers to use their certified connector, but for third parties the ability to connect mice, keyboards, printers, cameras, etc. might be enticing. I know I’d love to be able to charge my phone from my iPad.

6. Don’t roll your own OS. We’re in the early 1990’s all over again here, and Apple’s simply repeating their mistakes from the PC market. If you want to compete, just do exactly what the PC makers did. License a good third party operating system (right now that means Android, though I expect there will be a competitor soon, but more on that in another post) that developers are supporting, that is going to give you a software lead which in turn will give you a sales lead.

Though I love WebOS (I’d rate it a 9, iOS a 7.5, and Android a 6 and I’m the only person I know who has used all 3 extensively) I think HP is making a big mistake. They’ve got a chicken and egg problem with their app market. Their hardware is too far behind the times (by the time the WebOS tablet launches the iPad 2 and who knows what Android tablets will be on the market) and they probably don’t have a good enough strategy or big enough ad budget to solve it. The same is true of RIM’s Playbook. 

I think we’re seeing only the beginning of the tablet market right now. We are where smart phones were 4 years ago and the space is really going to heat up. Competitors have the chance to do the same thing to Apple that PC makers did two decades ago.

Bubble 2.0

Posted in Startup on February 17, 2011 by themaroon

There’s been a lot of discussion lately about whether or not we’re in a yet another tech bubble. It’s a complicated question because what exactly is a bubble? Clearly we all agree it involves “irrational exuberance” but to what degree?

Mark Cuban says it’s not a bubble, it’s a pyramid scheme. I think his logic is flawed. It assumes that later investors are paying back the former, which is quite atypical. Most of the action these days is coming from seed and angel investors, who rarely get paid anything before an IPO or acquisition. If anything, convincing later investors to follow on only increases an early angel’s variance, as it raises the figure needed for an acquisition. The public markets, I think, aren’t going to be as easily fooled as last time around and I don’t think anyone’s counting on them being the suckers at the bottom of a pyramid.

Currently there isn’t much bubble-like activity in the public markets. In the first go around I was asked questions like “I just bought 1,000 shares of Cisco, what do they do?”. Back then anything even remotely computer-related had a stratospheric P/E ratio. Most publicly traded tech stocks are trading at reasonable levels now. Even Apple is at 20, compared to an S&P 500 average of 24. There are a couple exceptions (most notably Netflix) but on the whole tech stocks are not out of line with what we’re seeing in other industries.

There are a few big differences this time around. For one there are real revenues and even profits. Groupon will likely top $1 billion this year, and their margins are probably pretty high. Facebook’s may have topped $1 billion last year already. Zynga is pulling in somewhere in the 9 digits. Last time the problem wasn’t that people were giving a company a $50 billion valuation despite it only having $1 billion in revenue, it was that they were giving a multibillion dollar valuation to a company that might not even have a feasible business model. When it comes to P/E ratios, there’s a huge difference between fifty and infinity. Fifty means the company has a proven revenue stream and a high chance of increasing profits through improving operations or scale. Infinity means they might be trying to sell something nobody wants.

I have no doubt that startup valuations are overly high. It’s just to good of a fundraising climate for founders. Even though Y Combinator alone is pumping out 80+ startups a year, the relatively low capital needs have too many investors chasing after two few startups. Even if you assume there are another 80 startups worth funding in the valley every year (and we’re at the point where I’m not sure that’s a safe assumption anymore, at least at the angel level) that’s still not that many opportunities to do an early deal with a team of founders.

So what’s going to happen in the long term? Well, I expect investors are going to see a lot of middling returns. This time around companies, with a few exceptions, aren’t going to crash and burn like last. Even Twitter will probably find a way to make decent revenue. The amount of money that can be made selling ads alone is now substantial thanks to targeting. During the original bubble products like AdSense and virtual goods and freemium services weren’t yet widely understood, and if they had been I think we would have at least seen fewer wipeouts. People know a lot more about making money on the net now than they did a decade ago and that will help a lot when the inevitable correction comes.

Kudos to Nokia

Posted in Mobile on February 16, 2011 by themaroon

The tech blogs are all atwitter about Nokia’s move to Windows Phone 7, and the response is overwhelmingly negative. Personally I think they’re all insane. Nokia’s Stephen Elop has sent a bold signal that he’s not going to sit there and shuffle deck chairs on the Hindenburg while Android and Apple eat the rest of their large but rapidly declining market share in smart phones.

Now, I’m not 100% sure Nokia made the right call going with Windows. Android might have been a better alternative. I can see why they’d go with Windows Phone though. Microsoft is the devil you know. They’re honest about their intentions. They want to make money selling you their operating system and selling apps on it. I’d bet they’re even sharing the latter with Nokia. Their interests are aligned with an OEM’s just as they have been in the PC market for decades now.

Google’s somewhat sneaky about the whole thing. They’ll give you the “open source” operating system, but all the good parts of it are closed source and owned by Google. It may be free as in beer, but it isn’t free as in speech, and it isn’t going to get any freer over time either. If you want access to the Android app market (and if you don’t have that, good luck selling units) you have to play by their increasingly stringent rules, which soon will include using Android’s stock UI.  

Moreover Windows Phone 7 is marketable, Android isn’t. Windows is a brand that, no matter how often maligned it may be by people who read tech blogs is still trusted by most people. Android is a commodity. I’ve asked just about everyone I’ve encountered with a smart phone what operating system they’re on. Most of the Android people say “I don’t know.” Windows and iOS don’t have that problem, and if Nokia wants to create value they need to avoid being a commodity.

As unrecognizable as Android is to customers, Symbian is far worse. Samsung, Motorola, LG, and Sony-Ericsson all moved on because of it. Its web browser sucks. Despite having the largest share in the market its app selection is anemic. It is, as Elop said, a burning platform.

A lot of the nutjobs complaining about “Elopocalypse” say Nokia should have just improved Symbian. But then they’d be looking at, at best, 1-2 years before they had a viable competitor to Android and iOS, and another year at least before the apps arrive, if they ever do at all. The smart phone OS market is going to be won in less time than that. Nokia doesn’t have time to wait for Mr. Right (if you even accept the assumption that there’s significant value in owning the software, which itself is ludicrous) because they need Mr. Right now.

It takes a bold leader to ditch a platform with the highest share in its market. There’s a fine line between courage and stupidity, but I think  they’re on the right side of it. They could spend lots of time and money developing an OS that can compete with what’s out there now, then lots more time and money trying to attract developers to it. And if the first iPhone had just launched this year that might be the way to go. But it didn’t, so it isn’t, and I think Nokia should be commended for having the courage to make a bold play to recoup what they’ve lost.

Verizon iPhone and Android

Posted in Mobile on February 7, 2011 by themaroon

The iPhone is launching on Verizon, and the mobile industry is all atwitter about it. As an iOS developer myself I’m certainly happy to see it. It’s clear that this will expand Apple’s (and therefore my) audience to some extent, and that’s nothing but positive. It’ll be a good thing for everyone except AT&T, and for them I don’t think it will be disastrous.

As I said before the iPhone launched, people largely choose their carrier first and their phone second. While the iPhone has done a better job of getting people to jump ship than any other mobile device, that paradigm still hasn’t really changed.

What this means is that Apple is about to shift a good chunk of units on Verizon. Surveys seem to indicate about 20% of AT&T customers will switch with their next upgrade, which won’t help AT&T with their perennial war for the largest carrier in the US. It also means we could expect to see Apple as much as double their US sales of iPhones in 2011.

But what it also means is that this won’t really be a game changing event. Android is now activating somewhere around three times as many units per day as Apple, and even if 100% of Verizon iPhone owners choose it over Android, it won’t put much of a dent in that. Apple only sells something like 20% of their units in the US anyway, which means even if iPhone sales here double, they’re looking at an overall 20% growth.

Furthermore, Android is now becoming a serious competitor to iOS in the tablet space. The iPhone had no serious competition in the consumer smart phone space for almost three years, the iPad will have it in less than one.

What does all that mean for app developers? Right now not much. The Android app store experience is so poor that even a 3-5x multiple of users still doesn’t make it as compelling of a development environment for someone developing standalone apps. It’s perhaps more compelling for those making apps that they will use as a continuation of their brand (think online banking) but for a developer making an app for the sole purpose of profiting from it directly, the iOS platform is still looking substantially better.

How To Block Unwanted Phone Calls

Posted in Mobile on January 31, 2011 by themaroon

Last year my company raised a Series A funding round. When a company raises money and issues securities, it is required to fill out a form with the SEC called Form D. Form D filings are made public, and intrepid bloggers often use them to confirm funding rounds.

Ours was picked up somehow (perhaps automatically) by TechCrunch and posted on CrunchBase. Our lawyers, who had been using my cell phone to contact me for 3 years, used that number in the Form D. I’d looked over the form in advance and thought nothing of it. There’s no way I could have guessed what would happen.

I quickly discovered that salesman of software and hardware monitor Crunchbase and call everyone who raises money. I started getting multiple calls a day from reps who worked for companies like Salesforce, Dell and CDW. One particularly obnoxious one, Rad Game Tools, still calls me frequently asking for my cofounder.

I had no idea what triggered the sudden deluge, in fact because I’d gotten them on occasion before (who knows how they’d gotten my number) I didn’t even notice for a couple days that something was up. When you’re busy it doesn’t immediately occur to you that something that used to happen once or twice a month is now happening 5 to 10 times a day.

Then I started getting calls from irate Starfleet Commander customers. Starfleet is a very competitive game, and customers’ blood can sometimes run more than a little hot as a result. Customers can spend months (or even years) building up a fleet and then lose it in just one moment of carelessness. Many times when something like this happens, the customer contacts our support to try to convince us to give them their stuff back, which we don’t. Suddenly those people were calling me.

Curious why, I did a little search and found that Google had indexed CrunchBase. Now when someone went searching for our customer support number (which we don’t have, everything is via the net) they saw my cell phone number right there in the result. They didn’t even have to click through!

Between the salesmen and the customers I was quickly getting bombarded. I looked at my phone one night and saw over 50 missed calls, not one of them from a person I knew. I was on the verge of switching my number as I had done once before when it turned out that its previous owner didn’t like to pay his bills. (I not only got calls from debt collectors he owed, but even got hassled at a Wal-Mart when getting an oil change because he owed them too.)

But changing your number is a pain for everyone involved. So I decided to look for a better way, and I found one pretty quickly. I was using WebOS at the time, and it turned out that if you had your phone in developer mode you could, by checking a box in WebOS Quick Install, set up a tweak to block all callers not in your contact list.

A while later I switched to Android and there I discovered a couple apps. The one I’ve been using is made by EasyFilter. It’s missing a whitelist (I’d love to allow all calls from my area code) but other than that it does pretty much everything I want which, really, is just to block every contact number that isn’t in my list from calling or texting.

Unfortunately that’s only step one. While most of the callers will give up as soon as they’re sent to voicemail, enough won’t that you’ll get annoyed. (Well, at least if your number was publicly connected to raising a 7 digit sum.) So the next step is voicemail filtering.

For that I originally used Google Voice. It’s a free service that allows you to have all your voicemails sent to it. You can do that easily, every cell carrier has a number you can dial that will enable you to send your voicemails to a third party service. Why that exists I have no idea, but it’s fully automated and quite simple to use.

Using a third party service like Google Voice you can simply spam filter unwanted calls just like email. Just flag them as spam and future calls will go straight to the junk filter. This is especially nice because the people who leave voicemails tend to be salesman and do so repeatedly. You rarely get someone who does it once.

I’ve since switched to YouMail. Google Voice’s text transcriptions are comically bad, but for a small fee YouMail will give you human edited ones that, while far from perfect, are usually at least good enough for you to figure out who was saying what. Google’s text transcriptions are so far off that they’re largely worthless.

(I’m thinking about switching back to Google because though I’ll miss the text, I’m finding YouMail sometimes takes over an hour to notify me of my voicemails. That may be slightly more annoying than transcriptions are helpful.)

Either way, this two step solution has saved me from having to get a new number, and if you’re struggling with unwanted calls and have a modern smart phone it can work for you. (Unless you have an iPhone, since Apple almost certainly would reject such an app, though even then if you’re willing to jailbreak I wouldn’t be surprised if one exists.) It’s mildly annoying at times, when someone new is calling me they simply have to leave a voicemail once so I can add them to my contacts or I’ll never hear from them. But unlike email, where this sort of approach would fail miserably, I can block out everyone who isn’t a contact and miss very little.

A Stage 3 World

Posted in tech on January 25, 2011 by themaroon

My last post about Google got an enormous response. A lot of people focused more on the driverless cars than I meant to (I was just using that as one example of AI monetizing) but it is an interesting topic. Presumably it’s why I got so many comments (hundreds between my website, email, and other places). I’ll give my thoughts on some of them.

First, some people said “that isn’t interesting, science fiction writers have been talking about this for decades.” Maybe they have. The closest thing to my vision that I’ve seen is Minority Report. I remember a scene with cars zipping by at incredible speeds. I think they were levitated though. I haven’t seen anything that resembles what appears to be the near future.

It may have been written about, in fact it probably has many times, but like 99.9% of the population I haven’t read it. I’d be happy to if someone has a good recommendation. Though I’m always optimistic about the genre I find most sci-fi to be poorly written crap. Like most niche genres (fantasy, western, romance, etc.) the fact that it caters to a pre-disposed segment of the population (in this case, people who like to think about science and technology, of which I am one) means the writing has to be much less good to achieve a level of success.

In my list of benefits of driverless cars, I compacted the timeline greatly. I see the transition occurring in the following three stages.

Stage 1: All cars on the roads have drivers.

Stage 2: Some cars have drivers, some don’t.

Stage 3: All cars on roads are driverless.

The line between stages 1 and 2 will be very blurry, but it will be drawn in the history books somewhere around now. (Humorously, many people said “cars can’t drive around on the streets by themselves yet,” apparently oblivious to the fact that Google’s cars already are.) As some commenters mentioned, we’re moving increasingly in that direction now. Dynamic Cruise Control matches the speed of your car to that of the car ahead of you. Cars can parallel park themselves. They can hit the breaks to prevent you from getting in an accident when the driver ahead of you stops abruptly, and they can warn you when you’re coming out of your lane. These aren’t the techs in labs either; they’re in models you can currently buy, many of which aren’t very expensive.

The line between stages 2 and 3 will simply be government regulation. Stage 2 will last for years, and maybe even a few decades, and then it will end when the government says “within 10 years all cars on public roads must be driverless”. The real shame is that there’s no politically and technologically feasible way to skip a protracted Stage 2. All the best stuff (like the highly increased average speed) will have to wait until Stage 3, and to be honest Stage 2 is far harder of a technological problem. If we were able to start from the ground up, designing both our system of roads and our automobiles we could easily have driverless cars now.

A lot of people pointed out that government regulation will inhibit Stage 2. I’m not so sure. For one, it’s clearly legal now or Google wouldn’t be doing it. I can’t imagine they’d be dumb enough to have cars driving themselves around the streets of San Francisco without asking their legal team what the risks were in advance.

Also, this technology must be in the late stages. Google doesn’t want the PR nightmare that would ensue if one of their cars hit a pedestrian or t-boned some old lady at an intersection. If Google has these cars out there logging hundreds of thousands of miles, you can be sure they’re pretty damn safe.

And really, why wouldn’t they be? We’ve had driving simulations for decades. Once the car’s sensors do a good enough job of modeling the reality around them, the rest is nothing more than a video game. If an AI can race competitively in the latest Gran Turismo why can’t it drive around New York? Is it really that hard to detect other cars, pedestrians, stop signs, traffic lights, etc?

There’s a strong chance that by the time regulation even addresses this issue it will be solved. The NTSA won’t have to guess about safety, they’ll have hard data. My guess is it wouldn’t be hard for computers to do a better job driving our cars than we do. It turns out we’re pretty awful at it, and the proliferation of smart phones is making us materially worse. Texting and driving is believed by many to be both more dangerous and more common than driving drunk.

Some people said we’ll see full automation in airlines first, for regulatory reasons. I don’t believe it. People are decidedly and predictably irrational when it comes to air travel. Certainly we could have this technology there, but one airline crashing would cause a groundswell of opposition that you’d need 10,000 cars crashing to accomplish.

Take 9/11 for instance. After the planes hit the towers, air travel decreased markedly, and miles driven shot up. More people died as a result of the extra driving due to the terrorist attack than on the planes during it (at least according to one researcher). People fear flying in a way that is psychologically understandable but statistically irrational.

On the opposite end of the coin, people hate driving. In fact a long commute actually makes you more unhappy than a bad marriage. A number of people like driving and there will certainly be racetracks for them, but I think most would agree that the benefits of complete automation vastly outweigh the hobby of a minority.

A lot of people didn’t like my thought that urbanization will reverse. I’m using “urbanization” to mean specifically living in cities and not suburbs. People will mention that urbanization has increased, but in America that is only because suburbs are typically counted. In fact in the industrialized world people have been leaving cities for surrounding areas for decades. Now in the US, the population in the suburbs of the 20 major cities exceeds that of the population in those cities. I did not mean to suggest we’d all go back to an agrarian society, I simply see the world trending toward one giant suburb.

People gave a number of reasons why urbanization would continue instead, but almost all of them are based upon notions of proximity that become antiquated in a Stage 3 world. Proponents of urbanization pointed out that population density leads to variety. This is true now, but that’s an artifact of geography. The real benefit to density is proximity (almost every other characteristic is negative) and the only benefit to proximity is travel time. That travel doesn’t have to be by car, and perhaps even despite cars being effortless and flawless in terms of safety some people will still want to walk for health reasons. (Humorously enough, not having to drive will, I think, lead to people having something like an exercise bike in their car to work out on while travelling.)

Take restaurants for instance. An Ethiopian restaurant can be found in any big city like New York or Chicago. Good luck finding one in a small city like Akron, where I live. The reason is entirely travel times. When choosing a restaurant, the time required to get there is a deal-breaker. I may be in the mood for tapas, but I’m not ever going to drive two hours to eat it. I’d have to be really in the mood (and the restaurant really good) to even drive half an hour.

This puts a practical limit on the restaurant’s customer base. To start an Ethiopian restaurant, you need to have enough people who like Ethiopian food (or will try it and then come to like it) who can get there within some amount of time, let’s say 20 minutes. In a densely populated city like New York or Chicago that exists. In a sparsely populated one like Akron that doesn’t. Triple the speed at which everyone drives, and you’ve now tripled the geographic customer pool. People could spread out to 1/3 of the current population density and still have the same amount of variety they do now. Akron, it its current density, might just support one then.

There are almost no benefits of city life that aren’t solely based on travel time and thus eradicated by much faster transportation. Proximity isn’t and end in and of itself. It’s a means to one, which is low travel time. I derive no benefit from having my friends being within 3 miles of me. I derive benefit from being able to go to their house, or meet them at a restaurant, quickly and easily. A friend or restaurant 9 miles away in a Stage 3 world is the same as one 3 miles away now in Stage 1.

Either way I’m excited by the thought that I may live to see a Stage 3 world. That is, of course, assuming I don’t get hit by a bus driven by a human beforehand.

How To Use Monkey Math To Prove Anything You Want

Posted in Opinions You Would Agree With If You Weren't An Idiot on January 5, 2011 by themaroon

I’ll bet you didn’t think someone could use numbers to try to prove that people who make twice as much as you are worse off financially. But with lots of monkey math, this hilarious piece of idiocy from the fiscal times at least gives it a go.

They took a fictional couple that makes $250k a year and showed that at the end of the year they’re somewhere $27,000 in the hole and a meager $1,963 ahead. Of course, you might think to yourself “my wife and I make half that much and manage to save up a lot more than $2k, and our cost of living is at least as high as Plano Texas.”

First of all, a lot of these numbers don’t make any sense. In every locale the family is spending $9k in medical and dental expenses out of pocket (in addition to their insurance premiums). This is a young couple, still paying student loans, with two young kids. They’re paying between $24k and $36k in mortgage interest, which they’re apparently not deducting or their tax burden would be a decent amount lighter. They’re spending $10k on maintenance and cleaning, which is probably 10x what anyone with a decent home actually spends. Hell I have maids and I pay half their cleaning bill. 

They’re spending $7,500 a year in car loan payments on one car, meaning they’re driving a Lexus, and a nice one too. They’re somehow spending $6-7k in gas, plus another $2k in gas taxes, meaning they’re spending $9k in gas per year, so they’re driving somewhere around 75,000 miles between them.  The average American drives less than half that, so they must be driving an hour to and from work each day, though judging by the mortgages they’re paying, they’re not living that far from the city. They’re spending $5k in parking, despite the fact that at most one or two of these cities probably require you to pay for it. Maybe they valet their car every day on the way into work.

They spend $3,000 on clothing every year, so you know they’re shopping at Banana Republic with occasional trips to Saks. They’re taking an annual vacation for $4,000 (once nice cruise to the Bahamas a year, not bad) and spending $2,693 on movies and sports. Guess they have season tickets to the local NFL team. That’s not counting home entertainment of $1,500 (new 50” plasma every year) which, by the way, doesn’t count the $200/mo they’re spending on cable and internet. They have a dog that’s costing them $1,571/year. I have two dogs and don’t think I spend 1/2 of that on average, and I take good care of them, but maybe theirs has doggy cancer or something.

Then, on top of all that, they’re putting $33,000 into a 401(k) and $8,000 into their kids college fund. So they’re saving $41k/year. They’re making a few thousand off of investment income (which will snowball quickly since they’re socking away more than most Americans earn) and in all but three locations their negative cash flow is still less than they spend on parking.

I’m not sure in what universe I’m supposed to feel sorry for these people, but it isn’t this one. Despite the article’s protestations that they’re not living the high life, the numbers shown indicate they’re living in an expensive house, enjoying an expensive cleaning service, feeding their dogs steak, eating steak for lunch themselves, going on nice vacations, driving a brand new Lexus, and still increasing their net worth by somewhere between what the average American family makes in 6 months to what they make in 1.5 years, depending on where they live.

That’s not even counting the fact that they’re young and the future looks even rosier. Their incomes will increase. Their student loans will be paid off. Their home equity will build. That $40k they sock away every year alone will make them millionaires at retirement. They’ll have put away $72,000 per kid for college, which, with only 5% interest will turn into $128k per child by the time they hit 18, so unless they raise future Harvard grads they’re going to be getting a big chunk of that back. They themselves got by on $20k and $40k respectively for two undergrad degrees and one masters.

Please don’t mistake me for one of those people who feel antipathy toward people who make way more than them. I’m not, in fact I hope to be one of them some day and I work hard toward that. This fictional family appears to have gotten where they were through hard work and doing what we as a society want citizens to do. More power to them.

But these numbers are ridiculous, and it’s bad journalism. A good journalist would say “what is the financial picture really like for a family that makes $250,000 a year?” A partisan hack would ask “how can we paint a picture that shows that people who make $250,000 a year really can’t afford to pay any more in taxes?” The Fiscal Times, in this instance, clearly chose the latter.

And it’s ineffectual. It’s ludicrous to use partisan monkey math to try to convince average Americans that people who make twice as much as I do can’t be in a bit higher of a tax bracket than they are now because they already have it so rough. Even with their steak-eating dogs and season tickets to the Jets, these people are saving a ton, and they’re not even remotely trying to live frugally. I know people whose household income is around half of what these people make who are still able to both live comfortably and save up for a decent retirement.

If we want to talk about the impact of taxes on high earners, let’s use honest numbers. These numbers are only going to make rich people smile and everyone else laugh.

Google Will Become an AI Company

Posted in tech on January 3, 2011 by themaroon

For quite some time I’ve been pretty down on GOOG. Not the company, Google, but the stock in it. The reason, I realized, is that I’ve been thinking of Google as a search company and search as a market is largely played out. There’ll be some growth from mobile, though much of it cannibalistic, and some further increases from local and just general demographic shifts as the web insinuates itself further and further into more people’s lives. But overall search will remain an industry measured in the tens of billions for quite some time, and their stratospheric stock prices have left better investments in many other corners of the market.

My thinking might have been wrong though because Google isn’t a search company. Right now they’re a product development company (and generally a poor one) funded by search. In the future, though, they’re going to transition to an artificial intelligence company. They’re already halfway there. Search is just the problem they first applied AI to, and the one they’ve grown to dominate. In the future they will have much bigger fish to fry. While Facebook is still trying to figure how to make money off of people sharing pictures, Google may be revolutionizing one industry after another by pushing the bounds of what software can do.

Take the automotive industry. That’s nearly two orders of magnitude larger than search. To put that another way, if Google managed to scoop up just 2% of that industry they’d have more than doubled their revenue. With their driverless car project, I think they’ve got a shot of taking a much bigger slice of the pie than that.

Imagine a world in which all cars drove themselves. Seriously think about the ramifications. Here are just a few:

1. Cars may be cheaper and/or higher markup. Mechanical drivers will eventually reach a point where errors are no longer a common occurrence, and as a result, safety regulations (which currently add significant expense to cars) could be greatly relaxed. The conversion to electric cars (which will have to occur, as fossil fuels won’t be able to accommodate the meteoric rise in drive time) will also eliminate expensive exhaust systems.

2. Children could own cars. Don’t feel like schlepping your kid to soccer practice? Just buy them a car. Age restrictions on driving only exist because children can’t be trusted not to kill themselves or others on the road. If a machine is driving for them that’s no longer an issue. Parental controls will easily alleviate other concerns.

3. The beverage industry will grow. Designated drivers are a thing of the past. Go to the bar, get wasted, have your car take you home. Hell, get a rum and Coke to go on your way out the door. How many times have you had a beer or two less than you wanted to because you knew you had to drive home? Never again.

4. Speed limits will be unnecessary. A mechanical driver processes information so close to instantaneously that mechanical limits will be the only factor restricting speed. Cars that can travel at 200 mph will become common and fetch premiums.

5. Traffic, too, will become a thing of the past. Slowdowns are caused entirely by human error. Accidents, people stopping abruptly, merging poorly, etc. Intelligent routing and better driving will mean that you’ll maintain top speed throughout your trips.

6. The map will shrink greatly. Right now I live about 30 miles from my office and the commute is on the very edge of what I can stand. Make my car driverless (freeing me up to watch TV, read a book, catch up on emails, etc.) and able to travel at twice the speed, and spend the entire trip at top speed (rather than slowing down and speeding up on the highway) and I could feasibly live as far as 100 mph away. Since the area of a circle is proportionate to the square of the radius my possible housing locations just grew by about 11x.

7. Urbanization will reverse. Why pay $3,000/month for a flat in Manhattan when you can get from 100 miles upstate to work in 30 minutes? That’s enough time to watch The Daily Show on the way in anyway.

8. Airlines will be devastated. Why fly from New York to Chicago? Just hop in the car, watch a couple movies (on the screen that is mounted where Wikipedia says that something called a “steering wheel” used to be) and you’re there.

9. Other forms of public transport won’t fare much better. A driverless cab won’t cost much more than a bus (which also will be driverless) but will be a hell of a lot nicer. Don’t even get me started on subways.

I could go on but you get the point. Whoever invents the driverless car is going to make a lot of money. Possibly more than anyone has ever made before by an order of magnitude. This could be Google. I’m not saying it will be them. There’s far too much standing in between us and the driverless future to predict something like that accurately, especially since many of the obstacles are governmental. But it does seem as if it almost has to happen eventually, and right now they’re probably the frontrunner.

And that’s just one industry. Imagine customer service. A program that could do as good of a job as a real call center rep could simultaneously decrease costs and improve service. It would replace millions of employees nearly overnight. How much could that make? There’s almost no industry that can’t be greatly improved by AI.

So while as a search or mediocre product development company GOOG is starting to like more like a blue chip, I think as an AI company, Google has a shot of generating massive growth.

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