Barack Obama won the U.S. presidency for one very good reason: he presented himself as a credible leader. McCain offered little in the way of hope that he had the intelligence or risk profile to make real changes to the way this country works. This isn't a slap at conservative principles (as a conservative, I hardly feel inclined to do that). It's a slap at conservative leadership.
That's politics, but what about business? Reading through The Wall Street Journal and the Financial Times today, I almost became physically ill reading non-stop headlines that evidence hand-wringing and resignation: job cuts, various industries begging for Papa Government to bail out their own mismanaged businesses, etc. Pathetic.
The one ray of light in the midst of the gloom-and-doom tripe is Daniel Henninger's article, "America Needs Its Frontier Spirit":
The greatest danger in the current economic crisis is that the United States will lose its historic appetite for risk. The mood now is that risk-taking got us into this mess. Risk, though, is the quintessential American trait that built the nation--from the Battle of Bunker Hill to the rise of the microchip. If we let risk give way to a new ethos of commercial reserve and regulatory restriction, the upward arc of the US ascendancy will flatten. Maybe it already has.
Daniel Boone, the famed American frontiersman, went belly-up speculating on Kentucky land. He moved on in 1788 and paid his debts. So should we, without losing sight of the American frontier,w here we discovered the rewards of risk.
Amen. An emphatic amen.
People are rightly worried about job losses, but there's a very good way to overcome them: create new businesses and new industries to employ people. This isn't something that we should do with government: I'm talking about technology-driven businesses, not the CCC of the 21st Century.
Alan Frazier suggests that that the venture capital model is broken. Yes, IPOs have dried up, but perhaps a the model needs tweaking to fund companies that pay back investments in earnings, not stock-market explosions. Having said that, who says the IPO market is closed forever? If we can create new businesses that create new wealth, why wouldn't the market cheer for these counter-trend crusaders?
Oliver Marks writes over on ZDNet of open-source companies that are thriving in the downturn, but we are not alone. SaaS, Web companies, and others that drive inefficiencies out of old markets will do well, even in a recession (or, perhaps, particularly because of the recession). These are our latter-day frontiersmen and frontierswomen.
Let's not give up. The financial meltdown has one clear message: stop spending debt, and return to profitability in our homes and businesses. It does not tell us anything about the need to regulate away risk. Risk is what justifies reward. In this environment, we need leaders who will boldly push forward into taking intelligent risks.
Will you be one of these leaders? Will I?
While Bill Gates rightly argues for "creative capitalism" that will "most effectively spread the benefits of capitalism and the huge improvements in quality of life it can provide to people who have been left out," his old company, Microsoft, continues to ignore one of the best ways to drive value into and from those developing economies:
Open source.
Proprietary software treats developing economies as "vassals" to Microsoft, Oracle, IBM, SAP, etc. Open-source software, on the other hand, gives developing economies the raw materials to build up their own IT ecosystems. Instead of shipping rubles back to the US to pay for US-developed software, Russia and the developing IT economies of the world can keep their currency local, and then start inviting others' currencies in.
Some criticize Gates' proposals as misplaced. I tend to agree, but not for the reasons these critics highlight. No, I think Gates simply isn't "creative" enough in his capitalism. He suggests:
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Microsoft has news for those who hold to the "Six degrees of Kevin Bacon" theory. We are linked with everyone else on the planet by 6.6 degrees of separation, not six.
Researchers at Microsoft studied records of 30 billion electronic conversations among 180 million people in various countries....This was 'the first time a planetary-scale social network has been available,' they observed. The database covered all the Microsoft Messenger instant-messaging network in June 2006, equivalent to roughly half the world's instant-messaging traffic at that time.
It's a nice corroboration of the "six degrees" theory, but I actually find the data used much more interesting. What would you do with 30 billion electronic conversations?
What would I do? I'd use that data, and other such data from Facebook and other social networks, to describe my social graph and thereby provide trusted commercial connections with others. Knowing my connection to that person on the other side of an eBay purchase? Priceless. I suspect we'd act very different online if we knew how closely we're actually connected to that hitherto anonymous buyer or seller.
Trust is the currency of any viable economy. Whoever can figure out how to corral the data behind our respective social graphs and turn it to commercial use will be the next billion-dollar business. Hint: It starts with the address book.
Goldman Sachs IT Spending Indexes
(Credit: Goldman Sachs)Goldman Sachs has bad news for most of the IT economy: IT spending will slip from 7 percent growth to 5 percent growth in 2008. While not yet recessionary, the outlook is dipping dangerously close to that, as its indexes in its latest IT spending report show:
Expectations of budget growth remain down significantly on a year-over-year basis, with many CIOs limiting their purchases to projects with a high and fast ROI. We continue to believe that 2008 IT spending will decelerate to 5 percent from 7 percent in 2007....Demand for discretionary IT projects dropped to its lowest point in the history of our survey, with caution beginning to spread to the offshore providers.
CIOs have emphasized to us that they are buying on a need versus want basis, are often downsizing deals to fit with current budget constraints.... In fact, contrary to general tightening in spending, purchases with an especially compelling ROI are being accelerated in the current environment.
The sky isn't falling, but it's going to scrape a few vendors' heads in a worsening IT economy. No wonder venture capitalists are bemoaning their exit options and returns.
But not everyone is going to get pummeled. In terms of spending priorities for 2008-09, server virtualization and server consolidation were ranked No. 1 and No. 2, respectively, with cost cutting hitting No. 3 and grid computing and on-demand computing rounding out the very bottom of the list. (In addition to open-source software, which is not surprising because people shouldn't necessarily be proactively "buying open source" so much as buying open-source virtualization, applications, etc.)
In short, no one is clamoring to spend money on buzzwords.
... Read moreAs but one more piece of testamentary evidence that the old guard at Microsoft needs to be shown the door, Bill Gates has demonstrated conclusively that he has exactly zero understanding of open source, or at least zero desire to have an intelligent discussion about it. Speaking to a pharmaceutical industry group, Bill Gates took time out to utter irrelevancies and inaccuracies about the GNU General Public License:
There's free software and then there's open source," he suggested, noting that Microsoft gives away its software in developing countries [largely in response to open source, I might add]. With open source software, on the other hand, "there is this thing called the GPL, which we disagree with." Open source, he said, creates a license "so that nobody can ever improve the software," he claimed, bemoaning the squandered opportunity for jobs and business.
Ahem. It's the exact opposite, Mr. Gates. 100% the exact opposite.
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It was just a matter of time. Silicon Valley, which has remained largely impervious to the increasingly global economic downturn, is starting to feel the strain, according to The New York Times. It's not that housing prices are in freefall (they're not) or that people are being laid off en masse (they're not), but rather that the exit opportunities have largely dried up. According to the Times:
During the first three months of the year, only five companies backed by venture capital investors went public on Wall Street...That is down from 31 in the fourth quarter of last year, and is roughly the same level as at the nadir of the dot-com bust.
There was also a sharp falloff in the acquisition of start-up companies by bigger corporations...There were only 56 acquisitions in the first three months of the year, down from 83 in the fourth quarter.
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I have to admit that I found the irony stifling in this CNET article on Bill Gates and his efforts to bring compassion for the poor to capitalism. Gates, who for years resisted pricing Microsoft's software lower for developing markets has suddenly become a big believer in helping the poor.
In every industry, Gates said, businesses need to start thinking about how they can use some of their energy and resources, say 6 percent, to expand their reach to poorer segments either in their own country, or globally. Food companies need to focus on micronutrients, while drug companies should devote some energy to diseases that affect largely the poor, such as malaria and tuberculosis.
But not in software, apparently. It wasn't until 2004 that Microsoft - more in response to the need to fight Linux and piracy than any increase in the size of its heart - started to lower its pricing for markets like Indonesia. Until that point Microsoft continued to price its software above the annual wages of people in these developing markets.
... Read moreBill Gates welcomed the world to a new breed of "kinder capitalism" at Davos this week. Conveniently forgetting his past, Mr. Gates declared:
We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well.
We have. It's called open source. Open source is "kinder" by design, no matter how capitalistically/self-interestedly it is used. Here's why:
... Read moreI nearly cried (really) when I read Mark Shuttleworth's eloquent and searing analysis of the United States financial crisis. He doesn't necessarily call it such, but he points to my country's failure in economic leadership...and the adverse consequences for the planet.
Underlying it all is a too-easy addiction to credit:
To make matters worse, a series of financial innovations created a whole industry designed to help people go back into debt on their houses. I remember trying to watch TV in the US and being amazed at the number of advertisements for "home equity withdrawals". They made it sound like turning your major personal financial asset - your paid-off house - into an ATM machine was a good thing. In fact, it was a means to spend all of your primary store of wealth. And with inflated house prices, it was a way to spend money that you did not really have. A convenient way to get into a deep, dark hole of family debt.
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The Open Season team got on the phone with Marten Mickos, CEO of MySQL, and Rich Green, SVP of Software at Sun Microsystems, shortly after the announcement of the acquisition was made. You can listen in here.
As Matt and Dave see it, Sun may well become the center of the open source universe, acquiring a bevy of companies. Are Matt and Dave jealous of Marten's riches? Yes they are.
"It has been like walking around in a candy story," Mickos said, after looking over Sun's vast computing labs.
Enjoy the podcast. We did.
