Stephen Baker

The Numerati
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What Symbian's fall says for Apple
January 27, 2013News

There was a time, at the turn of the century, when Nokia resembled today's Apple. The company dominated the cell phone market. It ran its factories flat out and could negotiate the best terms and prices from suppliers. For a few years, Nokia made all of the profits in the industry. Everyone else, from Motorola to Sony, was losing money in cell phones. 

But to extend its dominance into the smart phone era, Nokia needed to adjust. As cell phones evolved, many expected the industry to follow the pattern established with PCs: In this scenario, the companies making the innards--the software and chips--would run off with the profits, leaving manufacturers as little more than glorified assembly shops. This was the dynamic that propelled Microsoft and Intel skyward, while pushing IBM out of the PC business and relegating Apple to a struggling niche role.

The key was to develop a software platform under the control of the phone-makers. So Nokia invited its competitors to join a consortium, and together they launched Symbian. I covered the launch, in 1999, for BusinessWeek. Researching the story, I met the key strategist for the company, an articulate Dane named Juha Christensen. As Juha described it, Symbian was the hope Europe's tech economy. Europeans, who were more advanced in cell phones, were positioned to lead the wireless stage of the Internet. This would be bigger and more transformative than the desktop version. But the phonemakers had to keep the computer companies at bay. The biggest threat was Microsoft.

A year later, Juha left Symbian… for Microsoft. I wrote that story, too. He said Symbian was a mess. What he and I didn't know at the time was that Microsoft was also destined to flounder in mobile, and that a gadget that seemed to have nothing to do with cell phones--Apple's iPod--would eventually evolve from a music machine, to a touch-screen browser, to the world's leading smart phone. We also never could have guessed that struggling Nokia would eventually hire a Microsoft executive, Stephen Elop, as CEO, and that he would lead the two former titans into an alliance of underdogs. Today, Nokia's Lumia, with Windows 8, appears a last-chance bid for both companies to rescue their future in the mobile Internet.

Nothing is clear, though, because the forces that bring dramatic change do not progress from the story lines we know, but instead hatch from ideas that we don't yet see, or even imagine. If you ask analysts about the smart-phone market five years from now, they're likely to feature today's dominent players, led by Apple, Google, and Samsung, just as an entire industry once saw a future defined by Nokia and Microsoft. Things change, often dramatically.

For example, when I was interviewing Juha back in London, it didn't occur to me that 13 years later we would be friends on a social network, that I would see his update pop up (on my phone) about the extinction of Symbian. His update was followed by reminiscences from his old colleagues. I added a memory of my own, and asked him if his departure marked the beginning of the end. He responded (and told me I could post it.)

The beginning of the end occurred half a year before, when Nokia went from supporting Symbian as an independent venture, driven by the usual entrepreneurship, opportunism, paranoia and fear that propel start-ups forward, to treating the company as a buyers cooperative, restricting its ability to control the user experience and programmability.

The seeds to what became Nokia Series 60 were sown then, and eventually led to the trouble which Nokia now, fortunately, is well into recovering from, ironically as a beneficiary of the Windows Phone platform we pioneered at Microsoft.

I love this industry. Never a dull moment.

***

Incidentally, I just came across this excellent post by Eugene Wei about Apple, Amazon and the Beauty of Low Margins. If you have 10 minutes and want to explore the strategies of these companies, it's worth a read. (hat tip @timoreilly) Also, Henry Blodget analyzes Apple's fallen stock, and says it could be a bargain. He does caution that Apple could follow the route of other humbled giants, such as Nokia. But he says that Apple could also settle into a prosperous slower-growth mode, in which it rewards investors with dividends. In other words, he is seeing a transition for Apple from a growth to a value stock. 


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Filling the ignorance market in social media
January 9, 2013News

I've been knee-deep in social media ever since the New York Times article popped up on the Web site Saturday evening. It's been fun. 

Some people, I see, read the article and consider me a social media skeptic. Just to clarity, I'm a big believer in the power of social media. My only point is that it's so vast and complex that it's hard to harness--to measure, predict and monetize. But I would have a hard time taking seriously any marketer today, or advertiser, who isn't intensely focused on social media. It might not be a huge dollar focus. But it has to studied. Businesses have to grapple with it. That's where the customers are, and increasingly, the data that defines their markets and generates opportunities.

Just for background, social media was one of my beats at BusinessWeek. Heather Green and I wrote a 2005 cover story called Blogs Will Change Your Business. We updated it three years later to Social Media Will Change Your Business, and the magazine story was Beyond Blogs. The last story I did before leaving BusinessWeek, in December of '09, was Beware Social Media Snake Oil. I also write a story five years ago called Why Twitter Matters.

I've received quite a few emails from companies specializing in measuring social media behavior, and optimizing campaigns for it. (A post from Bottom-line Analytics, another from BPI Media.) Naturally, some are a bit offended by the angle of the article, which focuses on how hard that job is. But the reason their industry is growing so rapidly, attracting both hucksters and serious data scientists, is that there's so much mystery, and so much to learn. Social media is an enormous ignorance market. In the Information Age, after all, each question is a market opportunity. And the answers to the questions, instead of resolving the issue, simply create cascades of more valuable questions. The process never stops, just as in neuroscience and genetics.





I was on a conference call yesterday afternoon. And when I walked into the kitchen, the last ray of sunlight was hitting the fruit.

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How we lose our freedom to drive, part two
November 14, 2012News




2013 Tesla; a future model will be driverless

"Thirty years from now, our grandchildren will have to hack our cars to be able to drive."
That prediction came to me a few years ago from Luis von Ahn, a computer science whiz at Carnegie Mellon. It's obvious to anyone who sees our killer drones in the Middle East or the fast development of Google's driverless cars. Even Tesla is joining the act. We'll be driven by programmed vehicles in the not too distant future. These machines will follow the fastest, safest, and most fuel efficient routes, depending on the weighting of the algorithms. It'll be greener and much safer. Everyone will have a designated driver.

How will this transformation happen? There are a number of steps. First, the machines. Google, of course, is developing the real thing. But automation has been creeping into driving for decades. It started with the automatic choke, and automatic transmissions, things we barely think about anymore. Then automatic pilot, collision-detecting systems, parking programs, and finally, GPS.

Second, the authorities managing traffic have to get a bunch of data on how transportation is working, and then do analytics and optimize it. This is what's happening now. I just came upon this item from IBM a new traffic management system. It's designed to minimize traffic jams, which needless to say are humongous time and energy drains.

From the release: Using real-time traffic data, they can evaluate an incident with “predictive traffic management technology” to determine how to keep vehicles moving, according to a release. Called “Decision Support System Optimizer” or DSSO, it can detect incidents, predict the impact of these incidents, predict traffic and suggest the best course of action to take to solve a problem.

Once proven driverless cars exist, along with programs to manage them efficiently, the only thing missing is for societies to adopt automated driving. How does this come about? In the beginning, perhaps some more organized and authoritarian  regimes will impose them. Places like Singapore. (Could automatic cars be the on-ramp for women to "drive" in Saudi Arabia?) Maybe even mayors in certain cities will prohibit "free driving" in their areas, citing environmental and safety factors. I could see a data-driven Bloomberg type moving toward this in Manhattan.

But much of the push in western societies, I'm betting, will come from the marketplace, specifically insurance. These cars should be a lot safer, which would lead premiums for automatic drivers to plunge, at least in the early stages, while they build a market. Since the early automatic drivers are likely to be on the prudent side, those remaining in the "free driving" set will represent an ever riskier pool (free spirits, dare-devils, along with a sprinkling of libertarians and privacy advocates, many of them rich.) Free driving will come to be seen as a luxury.

Of course this means that we will be minutely monitored. But I think by the time this change comes around, most people will be well aware that we're already under surveillance, from cell phones, gps, EZpass booths, cameras, etc. Compared to other "services" in the surveillance economy, such as advertising, automated driving will provide real value. In any case, these are the types of deals we're going to be striking more and more with the Numerati. In them, we are promised different blends of efficiency, safety, economic and environmental savings, and in return we're asked (or compelled) to sacrifice a measure of freedom and privacy. It's nothing new, but it's going to speed up.

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Romney's Orca: a tech meltdown or wishful thinking?
November 10, 2012News

Today's digital technology is engineered for hard information but marketed through dreams.I've been mulling that distinction a lot as I read post-election coverage of Romney and Obama's use of technology. Seems to me that the Romney team not only sold shining visions, as politicians must, but also swallowed a lot of them. On Election Day, they were short on hard data.

Consider their big computer system, Orca. The Boston Globe details its failures on Election Day. It seems almost unbelievable, but an enterprise that had spent $1 billion, had everything hinging on this one day, decided to try out this massive computer for the first time on Election Day? Didn't anyone understand that complex new software systems with thousands of users typically crash the first few days? That first-time users will struggle with PIN codes and log-ins?

Instead of honing the system with test runs, and training the volunteers and staffers to use it, the Romney team sent each person 50 pages of instructions a couple days before the election and wished them good luck.

This insider account describes an approach focused on vision, not the frustrating details that get in the way:

From the very start there were warning signs. After signing up, you were invited to take part in nightly conference calls. The calls were more of the slick marketing speech type than helpful training sessions. There was a lot of "rah-rahs" and lofty talk about how this would change the ballgame.

What's strange is that Romney sold himself as a hard-headed businessman, a guy who could cut through the crap and manage the data. Yet he bought the tech dream of a miracle machine that would turn out the voters and grant him victory. He and his team appear to have had a naive faith in technology. 

They also believed the gauzy visions of their own pollsters, and unlike the rest of us, seem to have turned a blind eye to discouraging data, such as Nate Silver's blog. His advisors now say he and his team were "shell-shocked." Perhaps they saw Silver's numbers, but figured that Silver didn't factor in the power of the miraculous Orca. In any case, they lost their grip on the vital distinction: In politics and business alike, you market with dreams and operate with facts.


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Why Nate Silver is never wrong
November 8, 2012News


Election day was a big one for the Numerati. Rayid Ghani, who I profiled in the "Shopper" chapter, was President Obama's chief data scientist. He moved from modeling people's preferences in food to their politics, and apparently pulled it off brilliantly.

Then there's Nate Silver. I interviewed him onstage at South by Southwest in 2009. He represented the rise of statistical methods in politics. Now everyone knows about it, and him. Actually, he was a huge star at that 2009 event. There were a couple thousand people in the auditorium, and hundreds of others in spill-over rooms watching it on TV. But then he was a more of a star for politicos and geeks. Now he's mainstream.

As I mention in the headline, he's never wrong. And this is something that the gut-level pundits can't understand. He's never wrong, because he doesn't call elections, he calculates probabilities. He wrote on the Election Day eve that Romney had a 10% chance of winning. In other words, if he ran his statistical model through 100 scenarios, Romney would come out on top in 10 of them.

Silver made his first big splash in baseball analysis, where this type of thinking is older than the spitball. Romney, in essense, was coming to the plate with the chances of a miserable hitter, someone like Sandy Koufax. The Dodger lefty was one of the greatest pitchers ever, but a sorry hitter. His lifetime batting average was .097. An easy out. But still, 10% of the time his grounders found a way through the infield, his bloops fell in. Twice in his career, once in 1962 and again a year later, he actually hit a home run. So Romney on Tuesday was essentially Koufax at bat. Likely to lose, but not certain to. If Romney had won, Nate Silver would not have been wrong.

People are going to have to get used to this type of statistical thinking, because we're going to be besieged by probabilities. In medicine, for example, we're going to hear that a certain condition has a 10% or 14% chance of killing us within 10 years or 15 years. It's not mortal, but it could be. Before, we didn't have the numbers to play the odds. Now we will.

The rise of the Numerati threatens pundits and ruminators in the worlds of politics and sports. They make money by sitting around and speculating about events that could go either way. Some, like Joe Scarborough, feel threatened by the statisticians. He should, because statisticians like Silver make it clear just how empty his talk really is.


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What Dylan can teach Jonah Lehrer (and the rest of us)
August 1, 2012News

So it turns out that Jonah Lehrer fabricated some Bob Dylan lines for his best-seller, Imagine: How Creativity Works. I feel sad for the whole team at Houghton Mifflin, my publisher and his. They worked madly on his book and helped turn it into a best-seller, only to see it self destruct. (You can't even get the link for it on Amazon anymore.) I also feel sorry for Jonah Lehrer. He must be pinching himself, hoping it's just a nightmare.

Just a few minutes ago, I was humming Like a Rolling Stone, the song at the center of the Bob Dylan section in the book, and it occurred to me that the lyrics could almost have been written for Lehrer. It's directed toward a young, rich and privileged person (or generation) who "once upon a time dressed so fine, threw the bums a dime," etc. It goes on:

"People'd call, say, "Beware doll, you're bound to fall"
You thought they were all kiddin' you..."

Of course, there's a fall. It seems disastrous. But falls can lead to growth, and to liberation. Becoming unmoored--a rolling stone--can be exhilarating. In the beginning of the song, Dylan sings with contempt, which is what Lehrer is on the receiving end of today. But by the end, the singer is in cheerleader mode. The fall is an opportunity.

...you got nothing, you got nothing to lose
You're invisible now, you got no secrets to conceal.


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Watson redux
September 12, 2011News

Just a reminder that the Watson Jeopardy matches, originally broadcast in February, will be on TV again today through Wednesday in North American markets. For those of you who read the book following the broadcast, this is a chance to see the machine that you've come to know! Here's a podcast I did with Bloomberg BusinessWeek's Rachael King in anicipation of Watson's return.

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Watson: a patent goldmine?
August 17, 2011News

Steve Lohr writes in the NYT about the booming market for tech patents. Clearly, the smart phone is turning out to be a war zone for intellectual property. This would be expected, since the smart phone holds the keys to the biggest consumer tech market in the world. Five years from now, perhaps two billion people will have smart phones, and many of them will be replacing their handsets every year or two.

But it's not just size. The smart phone is a stitching together of many existing technologies. And each time a researcher figures out how to run, say, the movie camera and the ebook reader off the same segment of the battery, or how to make sure that a swipe across the screen answers the phone without interfering with the email you're writing, there's a patent to file. The smart phone is the epitome of technology consolidation--and every connection in it requires innovation, and a patent.

As I read the article, I was thinking, as I often do, about IBM's Watson. Like a smart phone, Watson congregates lots of disparate technologies. It has natural language recognition, information retrieval, multiple layers of analytics, even advanced betting strategies. All of it is stitched together so that it can develop confidence in answers within three seconds.

As I write in Final Jeopardy, it's no sure bet that Watson and its kin will be answering loads of our questions in five or ten years. But if the Watson family isn't, other machines will be. Question-answering will be a mammoth market. (Many of the services, of course, will be accessed through smart phones.) And even if Watson doesn't prevail, I'm betting that the intellectual property in Watson--the patents--will pay off royally.

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"Corporations are People": an op-ed
August 16, 2011News

Here's a piece I wrote for the L.A. Times after reading Mitt Romney's comment (below).


"Corporations are people, my friend." Mitt Romney, Aug. 11, campaigning in Iowa

I've been thinking about people I know. Apple comes to mind. It's terrific at electronics and has a great eye for design. It's far richer than everyone in my neighborhood. Another person I've known for years is General Motors. It almost died awhile back. Enron, which passed away in 2001, wasn't an especially nice person, or an honest one. But people will be people.

You might find this hard to believe, but these people — the kind with CEOs and corporate headquarters — need money more than we do. For them, money is like oxygen or food. If they come up short, they get eaten or die. So you really can't blame them for laying us off, slashing our medical benefits or moving our jobs offshore. They do it to survive. On the other hand, you shouldn't take them too seriously when they talk about, say, clean air or early childhood nutrition. If anything threatens to cost them money, they tend to line up against it, because every dollar they lose leads these people one step closer to extinction.

Now, there was a time that the government was considered a person, or at least "the people." It looked out for the population's welfare and education. It built roads and chipped in for retirement. This turned out to be an enormous and expensive job, and before long we began hearing that government was not the solution but the problem. Its taxes and regulations got in the way. If it didn't back off, people like GE and Exxon Mobil would take their jobs elsewhere. Government was not the people, it was a thing — a bad thing, at least for certain people.

Fortunately, government is run by politics, and politics run on the very stuff that these people are built to amass: money. So they can weigh in, advertising their agenda and investing in politicians who see things their way. Their argument is simple: If they aren't free to make lots of money, they'll go somewhere else where they can, leaving the rest of us in bad shape. One good way for them to make money is to shrink this thing — the government — that has its hand in their pockets and always seems to be writing irksome and expensive new rules.

Money is so important to these people, sad to say, that it can cloud their judgment. A decade ago, a number of them chased the illusion of ever-expanding wealth and ended up making a boatload of bad bets. Two of these folks, Bear Stearns and Merrill Lynch, were eaten. A third, Lehman Bros., died. Others faced grave danger and threatened to carry the economy down with them. So the people held their noses and asked the despised government — that thing — to save them. The government borrowed trillions of dollars to do just that and avert economic collapse. Yet that rescue appeared to make the government even much more dangerous. It now was deeper in debt, which meant it might have to raise taxes on the very people it rescued.

Fortunately, these concerned people got relief from the courts. Early last year, the Supreme Court ruled that everyone — all kinds of people — should benefit from the 1st Amendment right to free speech, which included giving unlimited and secret campaign contributions. Given this opportunity, some people had more money to give to politicians than the rest of us. And naturally, the first Congress elected following this ruling tended to its patrons' interests. Who wouldn't? The politicians promptly carried the battle to their donors' enemy — the government — and came within a whisker of starving it of funding.

In the end, it appears, the government of the people, by the people and for the people, might not perish from the Earth. But it will at least be brought to heel — by and for a different kind of people, the kind with shareholders and CEOs. And now — wouldn't you know it? — as we emerge from the bitter battle over the government debt, some folks, like Exxon Mobil, Johnson & Johnson and Microsoft, find themselves with a higher credit rating than the battered United States government. You might call it the people's victory.

Stephen Baker, a former senior writer for Business Week, is the author most recently of "Final Jeopardy: Man vs. Machine and the Quest to Know Everything."

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Nokia and the iPhone
June 14, 2011News

I covered Nokia in its glory years, from 1998 to 2002, when it towered above the rest of the mobile industry. With its focus on consumers, mastery of intuitive interface and enormous advantage in scale, it thrashed Motorola, Ericsson, and a host of other pretenders (Alcatel, Sony, Philips, Siemens, etc.) quarter after quarter. The company appeared poised to dominate the next phase of Internet communications--the mobile revolution. I went so far as to propose a book on the company. (I dropped the idea when BusinessWeek moved me back from Europe to New York, following the dot-com bust.)

Nokia's future competitors, as phones turned into computers, were likely to come from the software and consumer electronics industries. Nokia understood this, and they beefed up research in Silicon Valley. But whenever I raised computer-makers like Dell as future competitors, the Nokia folks always had the same response: They had spent decades building expertise in radio technologies, and it was hard stuff. It would be no easy thing for a computer or software company to slap "telephone chips" into their machines, as my writing implied. Radio was hard.




                                       Nokia's original Webphone, the Communicator, in 1996

Well, I'm sure they were right. It was no easy thing. But companies like Apple and Google figured it out and, along with Canada's RIM, maker of the Blackberry, they have taken over the smart-phone market. Nokia's stock is swooning and its bonds are rated only one notch above junk.

I was reminded of this while reading this morning that Nokia and Apple have reached an agreement on disputed intellectual property. Apple will now pay Nokia royalties. I have no ideas what the patents cover, but it must be cold comfort to Nokia. Instead of exercising its hard-won mastery over radio technology to win control over mobile, the world's most important communications market, it simply gets a slice of royalties from the marquee company it lost to.

A couple more points from those Nokia years. When I was writing, it seemed that Europe, with its single GSM standard, was well positioned to lead the mobile Internet. Asia, with some of the most advanced mobile markets in the world, appeared a much more powerful rival than North America, which was viewed as a mobile backwater. But software innovation, along with design, transformed the market. (Producing great software can make up for lots of handicaps, which is one reason to be optimistic about continued innovation leadership in the U.S.)

One more point about Apple. As I mentioned above, when I was looking at computer-industry competitors for Nokia, I had my eyes on Microsoft, Dell and Palm. I saw Apple as a potential acquisition. It seemed to me that Nokia, whose market cap climbed to a quarter of a trillion dollars during the boom, might gobble up the computer maker, or at least form an alliance with it, to benefit from Apple's design and software prowess. I don't know if Nokia execs ever considered such an idea. But if they read BusinessWeek, they were at least familiar with it.

One more point, this one extending into the realm of wild hypotheticals. If Nokia had taken over Apple, would Nokia have produced the iPhone? My guess is that the iPhone would never have happened. Nokia would surely have insisted that any smart phone work on top of its Symbian operating system and fit into the family of Nokia phones. That would have been the kiss of death. Still, Nokia would no doubt be better off today if it had spent billions from its boomtime stash to buy--and kill--Apple.



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