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Sympathy for the bad apples « The Poor Man Institute

We’ve got what amounts to a reverse Nuremberg defense, where Bush administration officials are let off the hook because they were only giving orders.

But while Apple caused a revolution, it is unlikely to become dominant in the market. It has sold just over 20m iPhones since the first device appeared in 2007; in that time more than 1.5bn phones have been shipped by everyone else. A similar thing happened with the personal computer market. The concept was championed by Apple when it launched Apple II, the world’s first personal computer, in 1977, and the first Macintosh in 1984, but other players now lead the market.

From Sound familiar? Apple launches a revolution - and then gets overtaken

Apple sure is fun to write about, isn’t it?

From what I can see, Apple likes to make neat products that they would personally enjoy using and that can be sold for a reasonable profit. The Observer article chose to mention how Apple lost a tremendous amount of market share in personal computers within a few years of the Mac’s debut (let’s ignore the fact that that also occurred within a few years of Steve Jobs’ departure). The Observer did not choose to focus on portable music players, a market that Apple stepped into and still holds a dominant position in.

In the case of music players, Apple’s cheapest iPod is $50. I’ve seen MP3 players with comparable features for $20. Apple competes in music players not by driving prices down, but by driving features up. There is a low end that they will not touch. They same is true of Macintosh computers: Apple will compete only in price segments in which they can compete profitably. Though they ensure that their prices are not insane, they also don’t worry too much about competing on price. They compete instead on fit and finish and the software.

What does this tell us about Apple and phones? Unlike music players, the cell phone market is already quite established. As the Observer points out, Apple has had only about 1% market share. Apple doesn’t care. They may have only 1% market share, but they have a product that is generating billions a year for them. As the iPhone line expands and improves over time, Apple’s market share will likely expand as well. But, that’s not the goal: the goal is making profitable products that people want to use.

So, back to the Observer article: they say that Apple started a revolution but will be overtaken. While I am pretty sure that Apple will never have a dominant market share position in cell phones (say more than 30%), I don’t think it’s certain that they will be overtaken in the new segment that they have created: portable computing and communication devices. They have first mover advantage with the App Store and have already built a thriving ecosystem around the iPhone. Those 20 million phones sold, plus some number of iPod Touches, represent a platform for Apple to grow, rather than “just a phone”.

Apple’s ultimate success (or failure) with the iPhone should not be measured relative to cell phone market share, but relative to ultra portable computing devices in general.

In 2009, it’s likely cliché (maybe even passé) to complain about things that you see around the security checkpoints at airports. For example, today I saw a mother removing tiny sandals from a baby’s feet to put them in a bin for x-ray scanning. I’m pretty sure that I’ve read before that the whole “shoe bomb” thing was overplayed. I’m more certain, though that a pair of baby sandals are not a risk. Maybe if the bad guys can hire away James Bond’s Q, baby sandals will become a risk.

The sadder thing that I saw, however, was the posters with a photo and bio of a TSA employee. I’ve certainly seen these in the past, but I hadn’t really thought about why they were there. The only thing I can imagine is that they’re there to “humanize” the TSA employees. It’s sad that such a thing is necessary. I’m sure that TSA employees have taken tons of verbal abuse over the past few years, and these posters are probably there to deter that.

Yelling at a TSA employee is not only likely to ruin the day of someone who’s just a normal person, it’s not going to do you any good. Those people are not empowered to do anything. If you have a complaint, wouldn’t it make more sense to complain to the TSA itself? Or complain to your congressperson? Or on your blog or twitter?

“When the iPhone came out, it was so far beyond what was out there on the market, pretty much up until now,” said Edward Zabitsky, analyst with ACI Research. “But with what’s coming out from competitors, that advantage is going away. For the first time, Apple’s going to be faced with a serious growth challenge.”

via Apple: 123% surge in iPhone sales - Apr. 22, 2009 .

Yeah, the gizmos coming out from competitors are going to kill Apple, since Apple hasn’t been working on anything new.

The analyst started off on the right track: the iPhone was indeed way ahead of the pack. A year later, Apple introduced the iPhone 3G and, more importantly, the App Store. Which put Apple even farther ahead of the pack (don’t underestimate the power that the App Store gives Apple for the time being!). At this point, we already know that iPhone OS 3.0 is coming out the summer with more goodies, and it would be fair to guess that Apple is not sitting around letting the iPhone hardware languish.

Perhaps the iPhone 3G’s advantage is going away, but I sincerely doubt this will be the year that the iPhone starts to fall.

Recently, I recorded a new screencast (an introduction to Bespin’s Python backend), and I got to use the new ScreenFlow 1.5. It’s a great update to an already awesome product. The ability to add text layers from within ScreenFlow is a very welcome addition.

Beyond that, one of the lesser features is a actually a big deal for me: mics that are recorded in mono are automatically played back in stereo. Lately, I’ve had to record screencasts using my Blue Snowball USB mic. The Snowball sounds OK and all, but it’s very quiet, even with the firmware update that increases the gain. With ScreenFlow 1.5, I can use my Audio-Technica large condenser mic instead of the Snowball. I used that mic on my latest screencast and did not need to adjust the gain after the fact at all. The relatively small improvement of making a mono signal come out in stereo makes a big difference for me.

Speaking of audio, ScreenFlow 1.5 added audio effects. I found them to be largely useless, because I don’t think a screencast sounds very good with reverb. I had expected the effects to be something more along the lines of compression and normalization rather than reverb. Maybe next release…

Beyond that, The Omni Group has released OmniDazzle for free!

The Omni Group - OmniDazzle

Introducing OmniDazzle, a set of fun and useful enhancements that help you highlight certain areas of your screen, create visual effects, and track the location of your mouse pointer.

It’s not the kind of product I would pay for, but for free it looks like a nice addition to a screencaster’s toolbox. Highlighting portions of the screen with OmniDazzle looks lot better than normal text highlight. OmniDazzle’s price change didn’t happen until after I recorded my latest screencast, so I’ll have to use that one next time.

Camtasia for the Mac is still vaporous at this point, but I know that TechSmith is working hard on it, so the competition will be heating up.

Study Finds High-Fructose Corn Syrup Contains Mercury - washingtonpost.com

Almost half of tested samples of commercial high-fructose corn syrup (HFCS) contained mercury, which was also found in nearly a third of 55 popular brand-name food and beverage products where HFCS is the first- or second-highest labeled ingredient, according to two new U.S. studies.

Back in August, I posted about 10 health experiments you’re probably participating in. One of them was the great high fructose corn syrup experiment. We’re beginning to see how that experiment is turning out, aren’t we? Thank goodness there are alternatives available.

Update (1/29): Also via Daring Fireball, comes the rebuttal that sounds perfectly rational. I still think that we’re likely to find, over time, that HFCS is bad stuff, but it doesn’t look like mercury is going to be the reason that it’s bad.

Obama takes steps to reverse Bush climate policies | U.S. | Reuters

U.S. President Barack Obama began reversing the climate policies of the Bush administration on Monday, clearing the way for the government to allow states to set stricter limits on greenhouse gas emissions from cars.

Immediately after the 2004 election, I announced that I’d be saying “I told you so” to the folks that voted for Bush. I was certainly correct. Bush’s second term was terrible, and I’m quite happy that we voted for a break in policies.

Obama has been in office for less than a week. He’s got a lot of problems to deal with in his presidency (not all of which are Bush’s fault, mind you, but they certainly have gotten worse under Bush). You can certainly tell that he’s making some changes, starting with the executive orders on ethics and transparency and then in today’s change in direction for the EPA.

Sure, Obama will have his missteps, but I’m happy to see what he’s starting off with.

Gold has gone up quite a bit over the past few years. Generally speaking, you don’t want to invest in things when they’ve just had a run up. On the other hand, with the US government printing trillions of dollars to try to get our economy out of the toilet, it is a certainty that inflation will come along with that at some point. Maybe not this year, because things are a mess and there’s still a risk of deflation. But, sometime soon we’ll have to pay the tab on all of that printing/borrowing.

It turns out that it’s pretty easy to invest in gold, and you don’t have to have a stack of gold bars at your house (mind you, I wouldn’t mind it if someone sent me a stack of gold bars).

The most “virtual” thing you can do is invest in GLD. GLD is an exchange traded fund that is intended to track the price of gold. Right now, gold is $854 an ounce and GLD is $84 a share. GLD has the benefit of being easy to trade using your current investment account, and has a relatively small expense ratio of 0.40%.

Less virtual than that is a precious metals account at EverBank. You can buy your way in for $5,000 and put your money into a pool that is used to buy gold, which doesn’t sound entirely unlike GLD. Or, with a $7,500 minimum, you can have EverBank store actual gold for you. If you pay them some money, they will even ship it to you. But, the main point, is that you can put money into an account that is backed by physical gold that EverBank holds for you.

The advice to buy and hold index funds over the long term is pretty common. Charts depicting the growth of the stock market over decades can be pretty compelling. Here’s a compelling chart (from the always-a-great-read The Big Picture):

Once you adjust for inflation, you can see that the Dow Joines Industrials Average did not go anywhere in real terms from 1929 to 1995. When people talk about bear markets and bull markets, they don’t talk about secular bear and bull markets often enough. We are in a secular bear market right now, which means that the stock market is going to continue to return basically nothing for the next several years and, even worse, inflation is likely to get worse and cause some serious losses.

Take a look at the section of the chart from the 1970s. If you bought and held stocks during the ’70s you would have lost a ton of money in real terms, due to inflation.

I’ve been sick the past couple of days and have been watching movies to pass the time mindlessly. I signed up for Netflix at a handy time, and was able to watch via Watch Instantly. I watched some entertaining movies, but I also watched a couple of documentaries. Netflix has a nice collection of documentaries available via Watch Instantly.

One that I watched was Enron: The Smartest Guys in the Room. One idea that the movie put forth was that Enron’s partners were complicit in Enron’s fraud. The mark-to-market accounting was key to how long Enron was able to keep its house of cards up, but they needed to keep getting new infusions of cash to keep things going. The companies that bought into Enron’s continued existence certainly didn’t look very deeply at Enron’s ability to keep on paying. One, Merrill Lynch, even temporarily took some barges off of Enron’s hands to pull them off of Enron’s books. A bunch of banks bought into Enron’s LJM2 company which was used to pull more debt off of Enron’s balance sheet.

Arguably, Enron was a complex business and it was hard to understand all of the workings of the company. But, if you’re a bank that is considering investing, isn’t that a red flag? Complexity certainly doesn’t seem like a feature to me. The banks could have been taking it on faith and Andersen’s good name that Enron was turning out fantastic performance, but a writer for Fortune magazine managed to sniff out the trouble. You’d think the people forking over billions in investments could too.

I also watched a bit of Maxed Out. The movie talks about big banks’ predatory lending practices and how targeting people who will have trouble paying is good business for them. These are many of the same banks that invested in Enron.

Those are also many of the same banks that got bitten earlier this year when those bad mortgages they’ve been taking on (and CDOs they’ve been invested in) finally came back to bite them for real.

The phrase “too big to fail” has been bandied about, with respect to some of these companies. It occurred to me that maybe the converse is true. These companies are too big to not fail. They have so many executives and independent businesses that are out to produce outsized returns and win big bonuses that some of them are likely to take irrational risks and lose giant sums of money. With enough leverage, the amount of money lost could be enough to sink the parent company.

So, if these companies are going to run themselves in such a way as to allow these kinds of losses, they should also be allowed to fail. Or they shouldn’t be allowed to get “too big to fail”.

I do also think that a focus on quarterly profits and day-to-day stock prices, rather than the long term health of a business, is another thing that leads to problems like Enron and bad mortgages.

By the way, I know that all documentaries come with biases. I am sure there are other sides to these stories. However, there are plenty of indisputable facts out there. It’s grating that we, as citizens who are footing the bill for these mistakes and as shareholders in these companies, are not being looked after by Congress and Boards of Directors.