Saturday, March 30, 2013

Digital Disruption

Even in the field of investment advice the supply chain is being disrupted: Aivars Lode Avantce

By Andrew Osterland
January 20, 2013 12:01 am ET

Internet-based advisory firms aren't much of a concern for most traditional fee-based financial advisers.
But they are for Ric Edelman.
The chief executive of The Edelman Financial Group, which manages more than $9 billion in assets, thinks that technology platforms offering financial advice could become the preferred option for younger Americans who eventually will inherit trillions of dollars from their baby boomer parents.
Equally scary is the possibility that as the digital platforms improve, they will attract more high-net-worth clients who sustain the thousands of fee-based advisers across the country.
Research from consulting firms such as Cerulli Associates Inc. suggests that wealthier investors already have diverted a significant amount of assets to low-cost, self-directed accounts since the financial crisis.
The proliferation of online investment services firms has been staggering.
Two years ago,
Grant Easterbrook, an analyst with consulting firm Corporate Insight, reported on five online startup firms offering different levels of investment management or financial planning services. His latest assessment covers 37 such outfits.
“The services these firms provide range from investment advice based on algorithms to low-cost online financial advisers focused on either investment selection or financial planning. Their fees are cut-rate,” Mr. Easterbrook said.
While few online outfits manage more than $100 million in assets, and most serve small investors who aren't very profitable for traditional advisers, Mr. Edelman believes the technology they use will have a profound impact on his practice and the entire advisory industry.
“This is the direction the world is moving, and we're at the beginning stages of it,” Mr. Edelman said. “Technological advances in the next three to five years will have a radical, disruptive impact on financial advice and how it's delivered.”
Attracted by a relatively low $50,000 client minimum, so-called mass-affluent investors have been advisory clients of Mr. Edelman's for a long time. On Jan. 7, however, he opened his doors to all comers, lowering his firm's investible assets threshold to just $5,000.
His plan is to deliver his services to these low-end customers via a revamped Edelman Online platform he says offers the firm's investment management services without human intervention, though all clients will have access to an adviser if they wish.
Mr. Edelman calls it a long-term loyalty program. “When these customers earn more money and receive their inheritances, they'll give it to me to manage,” he said.
Many of his peers think he's wasting his time and money targeting less affluent investors, but Bill Winterberg, founder of FPPad, a technology consulting firm for financial advisers, thinks it's worth the risk.
In fact, firms that don't prepare for the change run the bigger risk, Mr. Winterberg said. “Those who choose not to serve up-and-coming clients will miss the opportunity.”
Conventional wisdom, however, suggests the opportunity isn't much to miss. Numerous studies of lower-asset advisory clients indicate that they rarely evolve into bigger, wealthier ones. Bank of America Merrill Lynch research showed that the asset levels of 92% of small clients remained about the same after a two-year period. The company cited the findings when it announced early last year that it was reducing payouts to advisers on clients with under $250,000 in assets.
Wirehouses as a group continue to push advisers to shed smaller clients, but they're not ignoring them entirely. Merrill Lynch, for example, wants to serve clients with less than $250,000 — but on its Internet-based Merrill Edge platform, which had $75.9 billion in assets as of Sept. 30.
The optimistic view of low-cost tech offerings is that they are simply expanding the market for financial advice, reaching customers not currently served. A Society of Actuaries study in 2009 found that there were 14.9 million households in what they term the middle mass market between the ages of 55 and 74. With median net worth ranging from $111,000 to $348,000 depending on age and marital status, most of these pre-retirees and early retirees are not receiving financial advice, according to Betty Meredith, director of education and research for the International Foundation for Retirement Education.
Jude Boudreaux, a financial adviser whose company, Upperline Financial Planning Inc., has no minimum asset threshold for clients, believes the growth of online advice platforms is positive for the industry.
“We need more ways for non-high-net-worth people to access professional advice and technology,” Mr. Boudreaux said. “I don't think it's a danger to the industry. Technology will never replace what a true financial planner does.”
The more ominous possibility is that technology could undermine the economics of the advice industry just as discount brokers did to the brokerage industry and exchange-traded funds are doing to the asset management industry.
The marketing message of these online upstarts is easy enough to understand. “We're for the mass- affluent investor and anyone else smart enough not to want to spend 2% of their assets on a financial adviser,” said Jonathan Stein, chief executive of Betterment LLC. Mr. Stein's firm, founded in 2011, serves investors online and charges as little as 15 basis points.
It asks customers a series of questions and recommends simple portfolios of stocks and bonds, depending on the answers. The portfolios can be automatically re-balanced for a little extra. The company doesn't offer tax and estate planning or insurance, nor does it advise on philanthropic activities or the like — largely because most of Betterment's clients don't have those challenges.
That's not financial planning, said Michael Kitces, partner and director of research at Pinnacle Advisory Group Inc. He calls firms such as Betterment and FutureAdviser “robo-advisers” and doesn't consider them a threat to true financial planners.
“They do what Vanguard and Schwab do. They're just $2 trillion in assets behind them,” he said.
He sees a more substantial challenge from companies such as Personal Capital, a firm led by former Intuit CEO Bill Harris, and Learnvest, a website initially catering to women that offers financial plans for a flat fee but doesn't manage money. Both firms have increasingly elegant analytical tools and have hired dozens of certified financial planners.
“Financial planning done badly will be under siege by firms like these,” Mr. Kitces said. “If you only deliver passive portfolio design and management to your clients, these business models will take you down.”

Folks are lining up around the block to lose money

The numbers say it all commerce is here to stay! Aivars lode Avantce

Folks are lining up around the block to lose money
Saturday, February 2, 2013
 There are times to be bullish, and there are times to be cautious (or even bearish).

And just about nobody ever gets them right.

For example, in early 2009, after the market plunged more than 50% from its 2007 highs, nobody was bullish – even though it was the perfect moment to buy.

And if investors knew that they should become more bullish as stock prices fell and less bullish as they rose, we could have avoided a situation like we faced in 2009, when the S&P 500 traded for 13 times earnings.

The stock market went up almost 20% in 2009. It's gone up every year since, including last year's 13% rise. So folks now are bullish, with the American Association of Individual Investors Sentiment Survey showing 52% of respondents bullish on stocks for the next six months. Historically, anything above 50% is getting into extreme territory. Less than 19% were bullish the week ending March 5, 2009, the day before the S&P 500 officially bottomed.

The mistake is obvious. The herd thinks whatever just happened will happen again soon. It's called "recency bias." It assumes the most recent data is the most important data. In the stock market, recency bias is closely aligned with availability bias. That's when you think the most readily available data is the most important data.

Price quotes are the most readily available data about public companies. So putting our two biases together, the most recent price-quote history is irresistible to the vast, thundering herd of investors.

And now, after four years of stock market gains, all anyone can see in the rearview mirror is a rising market… so that's the overwhelmingly popular expectation.

Everyone wants to buy. Everyone wants to take more risk. "Junk" bond yields dipped below 6% for the first time in history this month. (Earlier this week, Steve Sjuggerud – one of the best contrarians I know – told DailyWealth readers that it's time to sell junk bonds.)

I'm not delusional enough to try to call a top in the market. To believe that is to remain under the spell of recent price quotes. I'm just saying if all you know is price quotes – and that's all most investors know – you're going to lose money… and from the looks of things today, it looks like folks are lined up around the block to lose money in stocks once again.

 One of the biggest trends in the market today is the decimation of brick-and-mortar retailers by e-commerce.

Arguably the most visible bankruptcy resulting from this trend is book retailer Borders. Electronics retailer Circuit City also shuttered in large part due to Internet competition. Circuit City's main rival, Best Buy, is also hemorrhaging sales and clients… And the company's founder is considering taking the company private.

 If you had to pick one company that's done the most to hasten the demise of brick-and-mortar retailers… it would be the world's largest online retailer, Amazon. Take a look at this chart of Amazon's sales versus the sales for the Morgan Stanley Retail Index (an index of 31 national retailers).

Barnes and Noble's hardest lesson: It pays to be small

The internet continues to change the face of retailing. Aivars Lode Avantce

Barnes and Noble's hardest lesson: It pays to be small
By Nin-Hai Tseng, Writer January 29, 2013: 3:33 PM ET

Barnes & Noble has struggled to keep up with the growth of digital books, but that's not the only hurdle it faces. We just want stores to be smaller now.

FORTUNE -- Barnes & Noble expects to close up to a third of its retail book stores over the next decade, The Wall Street Journal reported Monday. The closures seem inevitable. Like other retailers, the chain has struggled in a digital world, where readers increasingly turned to e-books and online discounts. Its savior is arguably its Nook products, but sales during the holiday season fell from a year earlier amid competition from the likes of Amazon,Apple, and Google.
Indeed, it's hard to run a bookstore in the Internet age, but new technology is only part of Barnes & Noble's (BKS) problems. Its stores simply got too big in a nation that increasingly prefers things -- well, smaller.
Since the financial crisis, Americans have warmed to smaller sizes in everything from cars to homes. Even massive Wal-Mart stores (WMT) have downsized. In 1962, the world's biggest retailer opened discount stores averaging 108,000 square feet, says Ed McMahon, senior fellow at the Urban Land Institute. By 1988, Wal-Mart unveiled its Supercenters, averaging 185,000 square feet. But a decade later it opened its Neighborhood markets, which, at an average of 42,000 square feet, was more than two times smaller than its Supercenters. The chain went even smaller in 2011, with its Express stores averaging 15,000 square feet.
The big box trend coincided with what many other retailers did as America's middle class left cities for the suburbs. Between 1960 and 2000, retail space rose ten fold -- growing from 4 to 38 square feet per person, McMahon says. Retail space grew five times faster than retail sales. The financial crisis put an abrupt end to that expansion. There is now more than 1 billion square feet of vacant retail space, mostly where big box retailers once did business.
MORE: Time for Samsung's next act
Beyond Wal-Mart, going small is being driven by several factors - some related, others unrelated: People are getting married later; U.S. cities are growing faster than suburbs for the first time in decades; the remaining suburbs, filled with sleepy strip commercial centers, are being turned into walkable urban places.
Of course, the Internet has played a big role in shrinking physical stores as well. Just as superstores put many local stores out of business, online shopping is hurting big box retailers, McMahon says.
But some local stores that managed to stick around are now thriving again. This is perhaps most evident in the market for books. In the years where big-box chains saw bankruptcies and store closures, the number of independents have generally stayed steady during the past few years. The American Booksellers Association, a trade organization that supports independents says that since the depths of the Great Recession, it has had roughly the same number of members -- 1,524 in 2008 to 1,567 in 2012. Stores did indeed close during those years with few if any new openings, but in 2009, new ones sprung up. Last year, 40 opened nationwide.
That's far fewer than Barnes & Noble, which until 2009 opened 30 or more a year. But the fact that any indie stores are opening at a time when big-box chains are closing says a lot about being small and local.
This isn't to say independents haven't struggled. In November 2011, best-selling novelist Anne Patchett opened Parnassus Books in her hometown, Nashville, TN. When a local bookstore closed and the area lost another one due to the Borders bankruptcy, Patchett partnered with Karen Hayes, a native who left her job in sales at Random House. The closings left a void in the area that's also home to Vanderbilt University, a literary community.
Parnassus filled it, but not all communities may be lucky enough to have an Anne Patchett around.

Office Depot debuts 'interactive' store, as merger rumors boosts stock

Brick and mortar business continue to have to transforn themselves due to the internets continued  business model disruption. Aivars Lode Avantce

Office Depot debuts 'interactive' store, as merger rumors boosts stock
By Marcia Heroux Pounds, Staff Writer
6:07 p.m. EST, February 8, 2013
Savvy customers sip on coffee while surrounded by the latest gadgets. They surf the Internet on laptops or tablets, check out some new headphones or ponder their next electronic purchases in a soothing, relaxed manner.
Office Depot's new "interactive'' stores are a little Apple-like, a little Starbucks-like. The stores still will sell basic office supplies and provide copy and print services for small businesses, but now it comes with a twist, a bit of modernization and hip as the company gets away from its old big-box mentality.
The new versions are already in six states and will be rolled out in Florida and elsewhere later this year as the office-supply giant trends toward smaller-format stores.
"We're looking at drawing traffic and new customers," said Juan Guerrero, senior vice president of Office Depot's North American retail division. The store is trying to attract the 18- to 35-year-old population — not the typical Office Depot shopper. Most current customers are small-business owners or mothers shopping for school supplies for their kids.
Office Depot's latest retail concept caps more than two years of initiatives to turn around the company in a difficult economic environment. The initial phase, introduced in 2011, was to reduce store sizes. The average 23,000-square-foot store is being reduced to units more like 5,000 to 15,000 square feet.
The idea is to attract new customers and inject some excitement into Office Depot stores, which customer surveys revealed were "somewhat clinical and cold," Guerrero said.
While some analysts cast doubt on a younger demographic shopping at Office Depot, most say the smaller-store strategy is beginning to work.
Major stockholder Starboard Value LP could force a bolder move, a merger with rival OfficeMax. The industry is ripe for consolidation, with both retailers smaller than Staples, which leads in sales and profitability, analysts say.
Starboard Value, an activist shareholder that holds nearly 15 percent of Office Depot's stock, may seek seats on the company's board this spring at the company's annual meeting. Speculation of industry consolidation pumped some life into the stock, now over $4 a share, though still down nearly 70 percent from five years ago.
"If Office Depot can turn things around, [Starboard Value] is going to be happy. If that doesn't happen, they may have to do an OfficeMax deal," said Anthony Chukumba, analyst with BB&T Capital Markets.
Starboard has retained former Home Depot CEO Bob Nardelli and former Staples executive Joe Vassalluzzo as consultants, according to a securities filing.
When comparing the rival office-supply stores, "Office Depot is clearly ahead of OfficeMax in terms of small-format stores," said Chukumba, whose firm buys and sells both stocks.
Office Depot already is investing more than $60 million a year reducing its store count, with plans to downsize or relocate 500 stores — nearly half its U.S. outlets over the next five years.
OfficeMax also plans to debut a new, smaller store format this spring, comparable in size to the Office Depot transformations, said Nicole Miller, spokeswoman for the Naperville, Ill.,-based retailer.
"The goal is to focus on innovation and roll it out gradually," she said.
But a merger?
OfficeMax "has a long-standing policy that we do not comment on market rumors or speculation," Miller said.
Morningstar analyst Liang Feng said while Starboard may seek a seat on Office Depot's board, the power still rests with BC Partners, which holds three seats whose directors are contractually obligated to vote with Office Depot management. In 2009, Office Depot sold a 20 percent stake in the company for a $350 million investment.
Chief Executive Neil Austrian has said the company's strategies to shrink stores and increase profits are paying off. Austrian was not available to address recent company issues or plans, spokesman Brian Levine said.
Office supplies continue to be a tough sector. Office Depot's sales decreased 5 percent in its latest quarter, compared to same period in 2011. And during an investor presentation in November, Office Depot forecasts annual sales to be down by 3 percent in 2013, down 1 percent in 2014, and flat in 2015.
If Office Depot and OfficeMax did merge, they would face significant costs. BB&T estimates the companies would have to spend $300 million to $500 million to close 200 North American stores.
Yet savings from a merger also could be significant, according to Goldman Sachs, with lower costs for purchasing and distribution, advertising, and general and administrative expenses.
Another hurdle would be the Justice Department, which could have antitrust concerns.
If a merger is proposed, it would go before the federal official who once denied Staples' proposed acquisition of Office Depot. Former Federal Trade Commission official William Baer was recently confirmed to head the U.S. Justice Department's antitrust division.

The USA's change to first-inventor-to-file (FITF)

patents are ??? what value? Aivars Lode Avantce

The USA's change to first-inventor-to-file (FITF)

With the America Invents Act of 2011, which was signed by President Obama on September 16, 2011. The law will switch U.S. right to the patent from the present "first-to-invent" system to a "first-inventor-to-file" system for patent applications filed on or after March 16, 2013. Many legal scholars.] have commented that such a change would require a constitutional amendment. Article I, Section 8, Clause 8 of the US Constitution gives Congress the power to “promote the Progress of ... useful Arts, by securing for limited Times to ... Inventors the exclusive Right to their respective ... Discoveries.” These scholars argue that this clause specifically prohibits a first-inventor-to-file system because the term "inventor" refers to a person who has created something that has not existed before.
Under the first-to-invent system, when two people claim the same invention, the USPTO would institute an interference proceeding between them to review evidence of conception, reduction to practice and diligence. Proponents argue that the FITF aligns the U.S. with the rest of the world, according to the original U.S. patent system, and brings more certainty, simplicity and economy to the patent process, all of which allow greater patent participation by startups.

It's Official: Teens Are Bored With Facebook

Teenagers interested in moving away from facebook. Aivars Lode Avantce

It's Official: Teens Are Bored With Facebook

Updated 12:34 pm, Monday, March 4, 2013
Teens texting
Teenagers are a good measure of what's "cool." Observing which apps they use and how they interact with technology can help the rest of us spot budding trends. 
And lately it seems teens have grown tired of Facebook.
Adam Ludwin recently launched a social photo album app called Albumatic. Before its launch, he showed the app to a focus group of 20+ people under the age of 25. Most told Ludwin they didn't like how reliant the app was on Facebook.
"They gave me the typical teenage response: 'We're bored with Facebook,'" Ludwin told Business Insider. 
His test group doesn't seem to be an outlier. Branch CEO Josh Miller recently asked his 15-year-old sister if she still used Facebook in a blog post titled "10th Grade Tech Trends." According to his high school sibling, teens are obsessed with Instagram and Snapchat, but they're less enthralled with Facebook.
"She mentioned that she tries to visit Facebook as infrequently as possible," he wrote. She also told Miller she only visits Facebook after she's thoroughly stalked people on Instagram.
Even Facebook Chat isn't as appealing as it once was. "When you go on Facebook Chat the people you don’t want to talk to are always the ones who immediately chat with you,” his sister said.
Even Facebook has admitted it has a teen problem.
From its annual 10-K report:
We believe that some of our users, particularly our younger users, are aware of and actively engaging with other products and services similar to, or as a substitute for, Facebook. For example, we believe that some of our users have reduced their engagement with Facebook in favor of increased engagement with other products and services such as Instagram. In the event that our users increasingly engage with other products and services, we may experience a decline in user engagement and our business could be harmed.
Why isn't Facebook "cool" anymore? The Verge's Ellis Hamburger asked a few social media experts for their thoughts.
"I think it has less to do with kids consciously looking for 'the next big thing' than Facebook just no longer being a space that serves them," one said. In other words, it used to be "cool" to brag about yourself and show pictures to friends on Facebook. Now people are looking for more intimate places to share items with a handful of people, like Snapchat. There's a sense of privacy there, and it meets a need Facebook has grown too big to serve.
Of course, this doesn't mean teens are deleting their Facebook profiles. They're just looking to use the service less, and they're open to communicating on other platforms.
The good news for Facebook is that teens are still rabid Instagram users. So while they may be shifting attention away from the social network, Zuckerberg can still monetize them on mobile devices.

Does Working from Home Work? Evidence from a Chinese Experiment

The way of the office is to extinction? Aivars Lode Avantce

Does Working from Home Work? Evidence from a Chinese Experiment

Nicholas Bloom, James Liang, John Roberts, Zhichun Jenny Ying

NBER Working Paper No. 18871
Issued in March 2013
NBER Program(s):   LS   PE   PR 
About 10% of US employees now regularly work from home (WFH), but there are concerns this can lead to “shirking from home.” We report the results of a WFH experiment at CTrip, a 16,000- employee, NASDAQ-listed Chinese travel agency. Call center employees who volunteered to WFH were randomly assigned to work from home or in the office for 9 months. Home working led to a 13% performance increase, of which about 9% was from working more minutes per shift (fewer breaks and sick-days) and 4% from more calls per minute (attributed to a quieter working environment). Home workers also reported improved work satisfaction and experienced less turnover, but their promotion rate conditional on performance fell. Due to the success of the experiment, CTrip rolled-out the option to WFH to the whole firm and allowed the experimental employees to re-select between the home or office. Interestingly, over half of them switched, which led to the gains from WFH almost doubling to 22%. This highlights the benefits of learning and selection effects when adopting modern management practices like WFH.

Google: 10 Golden Rules

Googles perspective of creating a successful working environment. Aivars Lode Avantce

Google: 10 Golden Rules 
Getting the most out of knowledge workers will be the key to business success for the next quarter century. Here's how we do it at Google.
At Google, we think business guru Peter Drucker well understood how to manage the new breed of "knowledge workers." After all, Drucker invented the term in 1959. He says knowledge workers believe they are paid to be effective, not to work 9 to 5, and that smart businesses will "strip away everything that gets in their knowledge workers' way." Those that succeed will attract the best performers, securing "the single biggest factor for competitive advantage in the next 25 years."

At Google, we seek that advantage. The ongoing debate about whether big corporations are mismanaging knowledge workers is one we take very seriously, because those who don't get it right will be gone. We've drawn on good ideas we've seen elsewhere and come up with a few of our own. What follows are ten key principles we use to make knowledge workers most effective. As in most technology companies, many of our employees are engineers, so we will focus on that particular group, but many of the policies apply to all sorts of knowledge workers.
1. Hire by committee. Virtually every person who interviews at Google talks to at least half-a-dozen interviewers, drawn from both management and potential colleagues. Everyone's opinion counts, making the hiring process more fair and pushing standards higher. Yes, it takes longer, but we think it's worth it. If you hire great people and involve them intensively in the hiring process, you'll get more great people. We started building this positive feedback loop when the company was founded, and it has had a huge payoff.
2. Cater to their every need. As Drucker says, the goal is to "strip away everything that gets in their way." We provide a standard package of fringe benefits, but on top of that are first-class dining facilities, gyms, laundry rooms, massage rooms, haircuts, carwashes, dry cleaning, commuting buses – just about anything a hardworking engineer might want. Let's face it: programmers want to program, they don't want to do their laundry. So we make it easy for them to do both.
3. Pack them in. Almost every project: at Google is a team project, and teams have to communicate. The best way to make communication easy is to put team members within a few feet of each other. The result is that virtually everyone at Google shares an office. This way, when a programmer needs to confer with a colleague, there is immediate access: no telephone tag, no e-mail delay, no waiting for a reply. Of course, there are many conference rooms that people can use for detailed discussion so that they don't disturb their office mates. Even the CEO shared an office at Google for several months after he arrived. Sitting next to a knowledgeable employee was an incredibly effective educational experience.
4. Make coordination easy. Because all members of a team are within a few feet of one another, it is relatively easy to coordinate projects. In addition to physical proximity, each Googler e-mails a snippet once a week to his work group describing what he has done in the last week. This gives everyone an easy way to track what everyone else is up to, making it much easier to monitor progress and synchronize work flow.
5. Eat your own dog food. Google workers use the company's tools intensively. The most obvious tool is the Web, with an internal Web page for virtually every project and every task. They are all indexed and available to project participants on an as-needed basis. We also make extensive use of other information-management tools, some of which are eventually rolled out as products. For example, one of the reasons for Gmail's success is that it was beta tested within the company for many months. The use of e-mail is critical within the organization, so Gmail had to be tuned to satisfy the needs of some of our most demanding customers – our knowledge workers.
6. Encourage creativity. Google engineers can spend up to 20 percent of their time on a project of their choice. There is, of course, an approval process and some oversight, but basically we want to allow creative people to becreative. One of our not-so-secret weapons is our ideas mailing list: a companywide suggestion box where people can post ideas ranging from parking procedures to the next killer app. The software allows for everyone to comment on and rate ideas, permitting the best ideas to percolate to the top.

7. Strive to reach consensus. Modern corporate mythology has the unique decision maker as hero. We adhere to the view that the "many are smarter than the few," and solicit a broad base of views before reaching any decision. At Google, the role of the manager is that of an aggregator of viewpoints, not the dictator of decisions. Building a consensus sometimes takes longer, but always produces a more committed team and better decisions.
8. Don't be evil. Much has been written about Google's slogan, but we really try to live by it, particularly in the ranks of management. As in every organization, people are passionate about their views. But nobody throws chairs at Google, unlike management practices used at some other well-known technology companies. We foster to create an atmosphere of tolerance and respect, not a company full of yes men.
9. Data drive decisions. At Google, almost every decision is based on quantitative analysis. We've built systems to manage information, not only on the Internet at large, but also internally. We have dozens of analysts who plow through the data, analyze performance metrics and plot trends to keep us as up to date as possible. We have a raft of online "dashboards" for every business we work in that provide up-to-the-minute snapshots of where we are.
10.  Communicate effectively. Every Friday we have an all-hands assembly with announcements, introductions and questions and answers. (Oh, yes, and some food and drink.) This allows management to stay in touch with what our knowledge workers are thinking and vice versa. Google has remarkably broad dissemination of information within the organization and remarkably few serious leaks. Contrary to what some might think, we believe it is the first fact that causes the second: a trusted work force is a loyal work force.
Of course, we're not the only company that follows these practices. Many of them are common around Silicon Valley. And we recognize that our management techniques have to evolve as the company grows. There are several problems that we (and other companies like us) face.
One is "techno arrogance." Engineers are competitive by nature and they have low tolerance for those who aren't as driven or as knowledgeable as they are. But almost all engineering projects are team projects; having a smart but inflexible person on a team can be deadly. If we see a recommendation that says "smartest person I've ever known" combined with "I wouldn't ever want to work with them again," we decline to make them an offer. One reason for extensive peer interviews is to make sure that teams are enthused about the new team member. Many of our best people are terrific role models in terms of team building, and we want to keep it that way.
A related problem is the not-invented-here syndrome. A good engineer is always convinced that he can build a better system than the existing ones, leading to the refrain "Don't buy it, build it." Well, they may be right, but we have to focus on those projects with the biggest payoff. Sometimes this means going outside the company for products and services.
Another issue that we will face in the coming years is the maturation of the company, the industry and our work force. We, along with other firms in this industry, are in a rapid growth stage now, but that won't go on forever. Some of our new workers are fresh out of college; others have families and extensive job experience. Their interests and needs are different. We need to provide benefits and a work environment that will be attractive to all ages.
A final issue is making sure that as Google grows, communication procedures keep pace with our increasing scale. The Friday meetings are great for the Mountain View team, but Google is now a global organization.
We have focused on managing creativity and innovation, but that's not the only thing that matters at Google. We also have to manage day-to-day operations, and it's not an easy task. We are building technology infrastructure that is dramatically larger, more complex and more demanding than anything that has been built in history. Those who plan, implement and maintain these systems, which are growing to meet a constantly rising set of demands, have to have strong incentives, too. At Google, operations are not just an afterthought: they are critical to the company's success, and we want to have just as much effort and creativity in this domain as in new product development.

A new rockstar is born: Samsung depute Galaxy S 4 smartphone

As we have discussed in the past Apples hold is being challenged. Aivars Lode Avantce

With hundreds waiting in line and hundreds of thousands watching online, Samsung unveiled the flagship smartphone in its lineup, the Galaxy S4, at what seemed to be the center of the universe -- Radio City Music Hall in New York City.
'For each of us, life is a journey. What you want is a device that can help us on the journey.'
- Samsung's CEO JK Shin
If Apple has long been renowned for throwing spectacular events, Samsung proved itself equal to the task. Where Apple relied on the sheer charisma and magnetic personality of Steve Jobs in a black turtleneck, Samsung went for pizzazz, enlisting the talent of a myriad of dancers, a full orchestra and extravagant sets -- at one point, a car was suspended sideways in midair -- during the highly choreographed event. Radio City was packed with not just the media but also fans of the new kid on the block.
Samsung wasted little time before revealing its new flagship phone, accompanied with the tagline, “life companion.” More than just a smartphone, Samsung pushed the idea that the new Galaxy S4 is a constant friend, a willing companion and able assistant.
"For each of us, life is a journey. What you want is a device that can help us on the journey,” Samsung's CEO JK Shin said on stage later adding that “We will make life richer, simpler, and fuller.” (Shin proved himself a showman as well, though perhaps no Jobs; he appeared as several different characters throughout the hour-long, staged unveiling event.)
The smartphone will be available at the end of April in 155 countries, although Samsung did not reveal the price yet. Sprint immediately announced plans to carry the device, though it did not say when. 
“Sprint is excited to bring the benefit of Truly Unlimited 4G LTE data to the U.S. variant of Galaxy S 4 in the second quarter of this year,” Fared Adib, senior vice president of product development, said in a statement.
As expected, the phone is best in class against most quantifiable measures.
“It’s slimmer, yet stronger,” Shin said, who at one point appeared on stage dressed in full costume. The new phone is visually almost identical to its predecessor, the SIII, but slightly larger with a 5-inch 1080p AMOLED screen and a 13-megapixel camera, all of which is enclosed in a polycarbonate case that comes in white and black. It feels thin yet solid in the hand, and the screens transitioned smoothly and looked sharp.
The S4 is powered by a 1.9-Ghz processor, 2GB of RAM, and 4G LTE, running on a 2,600-mAh removable battery.
Samsung emphasized more “human” modes of interaction through eight sensors, including infrared “air” gesture and eye-tracking, enabling users to manipulate the device without actually touching it. An advanced touchscreen accepts input even with gloves on. The phone can also detect the temperature, humidity and your heartbeat.
More than impressive specs, Samsung showed off a plethora of new software features that includes instant translation, pictures with sound, and numerous TouchWiz updates. Samsung wants the Galaxy S4 to be central to your interconnected life, allowing seamless interaction with the cloud and also the ability to control your television or car. S-Health can then tell you how many calories you’ve burned and detect your sleeping patterns.
In the end, however, the S4 appears to be a continued evolution more than revolution. While every category appears to have been improved, there’s nothing that resoundingly screams “breakthrough,” despite the energy of the event, which was at once enthusiastic but sometimes also awkward. It also remains to be seen whether users embrace the mountain of new features.
But what is clear is that Samsung has once again raised the bar, leaving no stone unturned for the next generation of the world’s most popular Android phone, and will put further pressure on Apple with a new flagship that more or less lives up to expectations.
The only question left unanswered, after a staged spectacle like this: Is there another act in Apple's playbook?

Sunday, March 3, 2013

Software does not age, it matures

Legacy software has a history which makes it better read on. Aivars Lode Avantce

Software does not age, it matures

There is an old joke that goes like this: what is the main difference between hardware and software? When you use the hardware for a very long time, it eventually wears down and breaks. When you use software for a very long time, it eventually matures and stops breaking.
This joke is funny to software developers, because they know it is true. It flies above the head of the general public because it is rather counter-intuitive. The first part rings true for just about everyone. The less mentally agile citizens (or those who grew up in simpler times and have trouble finding themselves in the modern hustle and bustle of technology) can apply the car analogy in their heads (think of hardware as your car and how it ages) and it kinda works. Everyone else, whose brain can correctly interface with modern electronic appliances know this to be true from experience.
Modern electronics age quite rapidly, and generally has to be replaced long before it starts to break due to physical wear and tear. This is partly by design (planned obsolescence) and partly due to inherent forces within the industry (Moore’s Law). This process is very visible, even to the untrained eye. Anyone can probably name a dozen technologies that rose to prominence and then faded into obscurity within their lifetime.
Commercial software follows a similar obsolescence cycle – or at least so it would seem to an untrained eye. Publishes love to apply superficial UI redesigns and add minor changes to increase the number of bullet points in the feature list every few months, and force customers to re-buy their software under a new version number or even updated product name. Constant feature additions (which lead to inevitable bloat) usually make the software perpetually unstable. So those who are accustomed to working with proprietary licensed software the joke seems incomprehensible.
But for free software, it works. Free software doesn’t age and usually does not become obsolete. It matures, stabilizes and becomes a rock solid foundation upon which you build other software. It actually blows people’s minds when I tell them I use software that is over 30 years old every single day. Don’t believe me?
As you probably know, I am a LaTex user. At the core of that complex typesetting is the Tex codebase which was originally released back in 1978 and frozen in 1989 at version 3. That software is so stable that since then, whenever a new update is released the version number is not incremented, but instead a significant digit is added at the end of it, so that the version number as a whole approaches π. Donald Knuth himself proposed that after his death Tex ought to be updated one last time, and the version number should be changed to π at which point all future bugs will automatically become features.
The primary text editor I use is Vim which is based on vi, which was written by Bill Joy in 1976. While novice programmers often scoff at it, and regard it as archaic, it remains an extremely powerful tool for power users. It is also one of the Two True Text Editors™ – the other one is Emacs which was written by Richard Stallman around the same time as vi, but designed to solve an entirely different set of problems. Bill Joy was writing an ultimate tool for text manipulation over slow network connections – an editor that would minimize cursor movement and maximize the amount of work that could be done by chaining key-stroke commands. Emacs on the other hand was built as an infinitely customizable text editing framework. Stallman knew that coders will always need their editors to do weird things, and that no matter how great the plugin API is in your IDE, it will probably not be enough. So he created a LISP interpreter with a built in text editor allowing users to write and re-write the core of the system at a whim.
The shell I use is Bash which was first released back in 1989. It was a backwards compatible replacement to the Bourne shell (1977) which in turn replaced the Thompson shell (1971). Despite it’s age, Bash is a staple of the Linux and Unix worlds. Along with the Bourne shell it is the default shell on most systems, and a primary interface through which admins interact with most servers on the internet.
The C programming language, used to write all of the above (except maybe the Thompson Shell), as well as the operating systems on which these programs run was created in 1972, and the latest stable release is from 2011. It is still used to create modern applications today, and tends to be the preferred language for systems programming. The 22 year old Linux kernel, originally released in 1991 by Linus Torvalds is written primarily in C, and has been in continuous development since then.
Apache and PHP – the technology used on the back end of this site (and many others on the internet as part of the ever popular LAMP stack) are all close to 20 years old now. PHP is still big mess of a programming language, but it has matured considerably since it’s inception, and the community that spawned around it has become adept at working around it’s shortcomings and building bridges over it’s feature gaps and plugging its security holes.
Algorithms and methodologies used in all the above applications are even older than that. Most of the state of the art searching and sorting algorithms as well as most of the common data structures such as trees and graphs were discovered in the early 70′s. I like to joke around that the reason for this was that back then resources such as memory and disk space were very limited, and Moore’s law was not a known trend yet. These days programmers don’t have the same incentive to be clever – it is often much easier to throw hardware at the problem at hand, or wait 18 months and then double your performance than devise a clever method of working around your limitations. It is however probably more accurate to say that most of these fundamental algorithms were devised back then rather than now, for the same reason many of fundamental scientific and mathematical theorems were discovered in the ancient times – it is much easier to stumble upon patterns and solutions when the science is young and the field is almost entirely unexplored.
I guess my point is that free software does not typically age – it matures. It doesn’t become obsolete – it becomes stable. Most application software grows until both the creators and community agree it is feature full, and good enough, at which point it stabilizes. Since new features are no longer aggressively added, the code surface for bugs to hide in decreases and over time it approaches zero. Systems software on the other hand is in the unique situation – it can never be stable, because it always has to catch up to hardware and support new devices and new interaction paradigms. Therefore OS can be either slightly buggy or behind the times, but not both at once.
I usually tell young, impressionable new programmers that releasing open source software is like getting married. It is a life-long commitment. Once you put it out there, you are stuck with it. There will always be bugs to be fixed and new features that will need to be added. And there will always be users out there for whom backwards compatibility will be of paramount importance. Mistakes you make early in your design and development process will haunt your for the rest of your life. Even if you divorce yourself from your project, you can never erase it from existence. It will always be around in the form of various forks and continuation projects. The only way to kill a popular open source software is to make it irrelevant. That usually only happens when you or someone else develops a competing product that completely outclasses the original. And even then there will almost always be holdouts and old fashioned users refusing to let go.
Software is kind-of weird like that. On one hand it is a very volatile market with a lot of turnaround. The rapid churn of the hardware world, the breakneck pace of new advancements and discoveries makes it seem like there is very little permanence in there. To a layman’s eyes, it might seem that applications become obsolete almost the instant they hit the market. But this is not true. Software is surprisingly durable. It endures, it evolves and it carries on. You would be surprised how much of the shiny programs you use right now can trace their lineage all the way to the dawn of the information age.
I would wager that a lion share of software on your computer is also at least a decade or two in the making. What ancient, but still perfectly usable programs do you use? How old are they, and why do you think they survived for so long?

HP cuts workforce by 5%, looks to probe GM hires

Customers getting sick of being change managed to death. Aivars Lode Avantce

HP cuts workforce by 5%, looks to probe GM hires

HP says 18 of its key IT employees depart suddenly for jobs at GM, hints that more may leave for the automaker

Computerworld - Hewlett-Packard reduced its workforce last year by 17,800 employees, more than half way to the restructuring goal it announced last year. Most of the departures came via layoffs, though some key IT workers left unexpectedly.
The company employed 331,800 worldwide as of Oct. 31, the end of its fiscal year, according to a Dec. 27 10-K filing with the U.S. Securities and Exchange Commission.
Last May, HP announced plans to cut its worldwide workforce, as part of a turnaround effort. Overall, the company last year said it was looking to cut 29,000 workers, or about 8.3% of its global workforce, through layoffs and voluntary incentives by the end of 2014.
An HP spokesman said Wednesday that the company is "on track" to meet the restructuring goals. Some workers in HP's IT services unit in Austin are leaving on their own to take jobs with General Motors, a major HP customer, according to a state court filing last month in Texas.
HP is asking the Texas state court for permission to depose two of its former IT managers who left for GM. HP wants to investigate whether employment contracts were violated.
HP, especially since its acquisition of EDS in 2008, has been a longtime IT services provider of GM.
But GM CIO Randy Mott, a former CIO of HP, last year detailed plans to move the automaker away from a highly outsourced model and take some of its IT work in-house.
In September, GM said it was hiring 500 IT positions in Austin to staff a new IT center. GM's career site lists numerous development jobs.
On Nov. 30, 18 employees of HP's Global Information Technology Organization in Austin "resigned en masse and without notice" and "immediately began working for General Motors in Austin in GM's new IT Innovation Center," according to court papers filed by HP.
HP's court action was reported by the Austin Business Journal, which posted the court filing (PDF).
HP, in its court papers, said the sudden departures affected at least four teams within HP's IT organization, "and HP expects that additional resignations will follow as the departed employees will likely seek to build out their teams by filling in with subordinate employees from HP."
In the case of the two IT managers, HP alleges that their hiring agreements included a clause that prevents them from soliciting HP employees.
"HP strongly suspects that something other than mere coincidence will explain the en masse departure, on the same day and to the same place, of 18 employees working within the same organization," the company said in its court filing.
HP believes that the resignations "were the result of concerted activity by the departed employees but needs to take depositions pre-suit to determine the causes of action it may have," it wrote.
A GM spokesman said the company cannot comment on the allegation. HP also declined comment.
In May, HP announced plans to cut 27,000 employees by the end of 2014. In September, it added 2,000 to the list.
At the end of 2011, HP had 349,600 employees. The cuts through Oct. 31 represent about 5% of its global workforce for that period.
Previously, HP had said that it expected to cut about 12,000 by end of 2011 fiscal year.

Is Samsung the New Apple?

Will Apple's dominance at the moment prevail? Aivars Lode Avantce



Samsung Earnings Analysis Q4 2012Image Source: Nan Palmero, Flickr
10:25 AM
Samsung (005930) announced earlier this week that it expects to post a record-breaking fourth quarter when it reports its earnings later this month. The consumer electronics giant claimed an unaudited operating profit of about $8.3 billion, topping analysts’ $8 billion estimate by a healthy margin, on revenue totaling $53.6 billion. Samsung said itsold an average of nearly 500 handsets per minute during the holiday quarter, suggesting total shipments well in excess of 60 million units. In other words, it had an Apple-like quarter.
Meanwhile, chatter on the Street suggests an increasing likelihood thatApple (AAPL) will miss analysts’ consensus when it posts results for its holiday quarter on January 23rd. This would be Apple’s third consecutive miss after falling short of Wall Street’s consensus in both the third and fourth fiscal quarters last year, and it would come at a time when Apple shares are still trying to recover after having lost more than 25% of their value in late 2012.
Apple’s performance hardly reflects investors’ soured sentiment, of course, and the company is still expected to post a huge December quarter. In fact, it may very well be the most profitable quarter any technology company has ever posted. Investors still aren’t convinced Apple can maintain its growth over the long haul though, and they’re waiting for Apple’s “next big thing.”
On the other side of the globe, Samsung continues to steamroll over its rivals. The only otherAndroid vendor that has managed to climb into the black in recent history is LG (066570), and it eked a profit of $139 million — including just $19 million from its mobile business — in the third quarter. In the same quarter, Samsung racked up $6 billion in profit while shipping more smartphones than any other company in history.
“Samsung is growing faster than the market,” RBC Capital Markets analyst Mark Sue said in a recent note to investors. “Smartphone penetration is now maturing to a replacement cycle in the developed markets, while growth in emerging markets is expected to be driven by demand for low-end/mid-tier smartphones.”
If recent rumors are accurate, Apple may finally set its sights on emerging markets with a low-end iPhone due out later this year. The company will not have an easy time matching the rock bottom prices hit by various Android handsets and Nokia’s (NOK) pseudo-smartphone Asha line though, so it may have to bank on novelty and hype for the most part as it approaches these untapped markets.
In the meantime, Sue expects Samsung to ship an unprecedented 280 million smartphones in 2013, outgrowing the market and Apple as well.