When closed is better than open

The iPhone and Android are fighting for smartphone leadership with many similar strategies: touch screens, a good browser, an app store with thousands of apps.

Overall, however, Android is seen as more open. This is normally assumed to be a good thing, but two recent incidents suggest such openness has some disadvantages.

One of the long-remarked differences is that that Apple is selective (some say arbitrary) about which apps it allows in the Apps Store, whereas Google is pretty laissez-faire about what it allows in Android Market. But — as in many things involved complex technical or business systems — it’s not that simple.

Finally Google realized that some people were abusing its app store and decided to throw some out. AppBrain reported Monday that one app developer alone had 4,000 apps deleted from Android Market. On Wednesday, AndroidGuys reported that one of impacted developers vowed to be back, using multiple fake logon accounts. (H/T: Phandroid).

Why would one firm publish 4,000 apps? Reportedly the developer said:

We didn't want to have to do that. But the Android Market doesn't have many people who like to pay for apps. So how is a developer to live? Just off of ad revenue?

This is interesting on so many levels. Ad-supported free software works great for Google and is the norm on the Internet, but (if this claim can be believed) isn’t working so well for app developers.

As in desktop and server Linux, apparently Android users expect free beer. Excessive openness by Android — like free access to open SMTP relays — makes it possible for “spammers” to both gain access and work around limitations in a way that a physical market would not allow.

In telling the smartphone app story, we think about positive externalities: more apps brings more users brings more apps. We don’t think about negative externalities (like traffic jams or overcrowding): more users brings more abusive app vendors brings lower average app quality.

Finally, this problem raises the question of what the count of Google apps means if so many of them are bogus. If a real live human being is screening each app, then both the count and the quality are meaningful.

I figure Google will solve this eventually, probably with an algorithm. The algorithm will count the number of apps, the rate of app submission, the similarity of apps, perhaps their complexity. Just like the credit card companies, this will trigger an exception report that has to be monitored by a real live human being.

The one that seems more troubling — and harder to fix — is the openness to customization by manufacturers that preload craplets on the phone. Wired lists examples of Samsung (with a T-Mobile phone) and HTC (with the Sprint Evo). The HTC rep was blunt:

“It’s different from phone to phone and operator to operator,” says Keith Nowak, spokesman for HTC. “But in general, the apps are put there to meet the operator’s business and revenue needs.”

What’s particularly annoying to users is that this bloatware cannot be removed by users. To me, this is inconceivable: I can delete apps from my Mac and every Palm OS phone I’ve ever owned.

Alas, this is inherent in the Android business model. The iPhone put Apple in the driver’s seat with carriers, but it was a temporary aberration. The whole point of Android was to commoditize smartphone software, and with it reduce barriers to entry (and thus prices) for smartphones. Commodity phones are the dream of Vodafone and the rest of the world’s carriers, restoring (in their minds) them back to their rightful dominance in dictating to vendors and users alike.

Big bad Apple controls what apps are allowed in its app store. Big bad Apple tells operators what apps it will provide pre-installed. So the iPhone is less open, but (at least as long as Steve Jobs is there) that proprietary control is used to provide a better user experience.

NOW they tell us!

Earlier this month, GE CEO Jeff Immelt expressed disappointment that the Chinese government is not all that interested in buying Western imports. As Gomer Pyle would say, “surprise, surprise, surprise!”

One man who’s not surprised is former LA Times China correspondent Jim Mann. Since leaving journalism, Mann seems to have made a career of writing books telling Americans that what they see in China is just their imagination.

Writing in The New Republic, Mann shreds the naïveté represented by Immelt and all the others business moguls that hoped that China would some day import in proportion to their exports:

Over the past two decades, the business community has been more upbeat about China than any other constituency in American society. Business leaders led the charge in loosening trade restrictions with China. …

However, over the past year or two, and to their evident surprise, their earlier assurances were revealed to have gotten things exactly backward. Immelt was merely the latest representative of corporate America to ring the alarm about restrictions on business operations in China, taking his cue from the leaders of Google and other major companies. …

American and European companies have vied for centuries, through all of China's upheavals, to dominate what used to be called "the China market." Now, increasingly, China wants to keep that market for itself.

The entire blog entry is worth reading in its entirety.

While I agree with Mann, I’m not clear why business leaders are surprised. China’s industrial policy is utterly predictable who studied US/Japan or US/Korea trade relations over the past 50 years — let alone anyone who understands the brief interruption in China’s role as the dominant Middle Kingdom.

I began my academic career studying the Japanese technology industries. After researching Japanese non-tariff trade barriers — particularly Mark Mason’s account of Texas Instruments and Marie Anchordoguy’s report of what happened to IBM — more than a decade ago I was completely puzzled as to why American and Western executives thought they would ever establish a large and durable market position in China. My two colleagues, Ken Kramer and Jason Dedrick of UCI, also wrote about this sentiment 9 years ago.

Mann himself also captured this in his book Beijing Jeep, chronicling how Jeep transferred technology to Chinese manufacturers to allow them to improve their export capabilities while providing Jeep (at best) temporary access to the Chinese market.

At the risk of mixing my metaphors even more: “When will they ever learn? When will they ever learn?"

Time for the US "stress test"

In one of the last issues of my FT subscription, Gillian Tett called attention to the American empress and emperor who’ve been bucked naked for years.

After noting the planned “stress test” for European banks, Tett wrote:

But on the other side of the Atlantic, there is another black hole which badly needs to be discussed – this time in America’s huge government-sponsored enterprises, such as the housing giants Fannie Mae and Freddie Mac, and the interlinked Ginnie Mae and the Federal Housing

So far this year, this GSE issue has attracted scant political attention. Indeed – and astonishingly – the 2,300 page financial reform bill that President Barack Obama signed this week barely mentions these institutions at all.

She notes that the US has already spent $145b of taxpayer money to bail out Fannie and Freddie. However, given the large and ongoing exposure of both Fannie and Freddie to bad debt, the future bill ranges from a low of $390b (the CBO estimate) to almost a trillion dollars. The reality is, nobody knows.

So is there any chance of seeing a proper “stress test” on this exposure? Or exit strategy? Don’t bet on that soon. … Nevertheless, behind the scenes – and almost against the odds – there is now pressure building for a proper debate.

She notes two alternatives: privatization of the GSEs, or shifting to an explicit (and limited) financial guarantee.

She concludes:

Personally, in an ideal world, I would favour the first set of ideas, namely full privatisation. After all, it seems profoundly bizarre to have the state underpinning housing so deeply, in a country that espouses free market ideals. But, in practical terms, the second route is probably the only realistic platform for reform now. And if the state subsidy could at least be defined – and limited – that would certainly be a vast improvement on the current status quo.

After all, if there is one thing we have learnt in the past two years, it is that sooner or later investors tend to panic when they see a bottomless black hole of losses and fiscal fudge. That is why Europe is doing these stress tests today. But the fact that Washington has not yet learnt that lesson in relation to the GSEs is disappointing, to say the least. There now badly needs to be a proper debate about Fannie and Freddie – if not a public stress test too.

Everyone wants to be Silicon Valley

For decades, politicians and business leaders from the rest of the world have come to Silicon Valley, wanting to create the next Silicon Valley.

From research of people like Martin Kenney, Anna-Lee Saxenian, Tim Sturgeon and others know the relevant list of preconditions for SV"s success.

Technology from universities, good industry-university relations (as in the Terman era), entrepreneurial culture, entrepreneurial infrastructure and last (but not least) venture capital. Oft-copied, these explanations for SV’s success might be necessary, but they do not appear to be sufficient to create a high-tech cluster.

And of course the other requirement for a cluster is to, well, be clustered. Spillovers happen in a cluster due to VCs visiting companies, universities talking to companies, and workers changing jobs — limiting the size of a cluster to (roughly) a radius of a one hour commute.

Meanwhile, since the end of the dot-bomb era, Silicon Valley has struggling with its raison d’étre, with many assuming that its salvation will be “clean” technologies such as renewable energy, energy efficiency and better life cycle consideration of material use and waste.
At the InterSolar trade show Wednesday, I picked up a renewable energy industry trade magazine enerG, which devoted its closing column to adapting a speech by Obam’s commerce secretary, former Washington Governor Gary Locke:

U.S. Needs to Become the Silicon Valley of Renewable Energy
…
For the Record is an edited excerpt of a speech … in Washington D.C. in February.

Two observations about the dubious economic logic of this article:

• First, an entire country cannot be a regional cluster. Even in biotech — perhaps the most fragmented of America’s high tech clusters — leadership is concentrated in the Boston and San Francisco regions, with San Diego a distant third.
• Secondly, if some place is going to be the Silicon Valley of renewable energy, why not Silicon Valley? That’s certainly what local entrepreneurs have had in mind for the past three (or even five) years.

However, to be fair to Secretary Locke, the original speech only warned against a future in which “Shanghai became the Silicon Valley of clean energy.” So the confused clusterology of the headline is due to the magazine editors, not a politician and lawyer.

I love Lucy

Reading in my soon-to-be-discontinued FT subscription, Lucy Kellaway this morning offered bold and brilliant advice to managers around the world:

My appraisal of job appraisals: get rid of them
Lucy Kellwaway On Work

Last week an e-mail went round the office touting for suggestions on ways to improve our performance appraisal system. My suggestion is dead easy and dirt cheap: get rid of the whole thing and replace it with nothing at all.
…
Over the past 30 years, I have been appraised three dozen times – as banker, journalist and non-executive director. ….

But never have I learnt anything about myself as a result. I have never set any target that I subsequently hit. … The norm is a harrowing hour’s conversation during which you are forced to swallow an indigestible mix of praise and criticism referring to long-ago events, which leaves you demotivated and confused on the most basic question: am I doing a good job?

After citing all the problems, she goes on to quote Samuel Culbert of UCLA’s Anderson School, who advocated abolishing all evaluations. Apparently Culbert was on the radio last week, promoting the paperback edition of his book Beyond Bullsh*t. His alternative: a regular 1-on-1 relationship talk in which both parties talk about what’s working and what’s not.

It sounded like a great argument. In fact, from my experience as a manager and an entrepreneur, I loved the argument when he made it in the Wall Street Journal two years ago. The arguments also resonate with Bob Sutton of Stanford, who’s blogged about the topic in May and February of this year.

(Here I am only talking about appraisals in private firms. In institutions such as universities some sort of formal periodic appraisal is clearly essential to assure accountability and fairness prior to granting lifetime employment.)

However much I agree with Lucy, Sam and Bob, it seems like tilting at windmills to hope that performance appraisals will ever go away. The reasons are numerous: institutional isomorphism, bureaucratic inertia, HR norms or just the usual fear of litigation. Still, some entrepreneurial companies (as Sutton hints) may be able to find a way to tweak or supplant the obviously flawed system with a real mechanism for providing feedback, motivation and accountability for the average worker.