Money, money? Part 1

Back from running errands around the Valley. Just figured out how to get my son's very old iPod to work as a music player in my old Bimmer. Yep, it can be done. BMW wants $250 for the adapter cable, US electronics chains want $150, some guy in China? $12 with free shipping.
So, I have access to to my ancient music as I crawl along Highway 101 in The Valley. Good for me, death to most consume electronics... note I said 'most'.
Last song I heard was 'Money' by the good old Grateful Dead. Got me thinking as I pulled up home...How do you make it in Tech these days?
Software? Simple code is generated by cut and paste cowboys in India, VietNam, or rural China, for much less than US minimum wage. Difficult stuff out of eastern Europe mills or in big companies with big development systems and expensive help.  Not much profit in either. Unless the code can be used to unlock value from a secondary source.
Hardware? Even worse. Intricate designs and fabs costing in the 10s of billions of US dollars mean that only high volume, think LCD TVs or high value, think automobile fuel control, can be made profitably on their own. Anything else has to be tied to a product that enables a secondary money source.
Back in the Iron age, money was made by selling hardware. Software was the near-free giveaway.  Renting beaches in Hawaii for Apple corporate parties was evidence of the 60-80% gross margins of the day.  Nature abhors a vacuum, and Asian manufacturers abhor someone else making gross margin. So, the vacuum was filled quickly. Prices fell, quality fell, support went away, and volumes exploded.
IBM sold it out, Dell merged it out, but poor HP was stuck. HP was trying to sell it's PC business, with it's sub-5% GM and no prospect of improvement. No takers, couldn't even GIVE it away.
All of this is well known, of course. So, back to the Dead song, how do you get money?
Really only two ways now.

1. Sell data
2. Be Apple

(3) hope NVDA can pull another rabbit out of the hat

I will talk about the 'sell data' in Part 2 of 'Money, money?'.
Apple? They break ALL the current rules.
They mint money on hardware, while no one else make any gross margin.
They are almost completely vertically integrated when everyone else outsources all but the most critical functions.
And, with fashion brands and high end retailing under extreme pressure, Apple packs their stores and has people waiting in line for days when a new product availability is announced. Why did Apple succeed when other notable brands failed so miserably? Easy, they are not an Asian company,  and didn't try to be one. They controlled OS and software rather than cheap out and license it. 

Most importantly, they invested in service and support.  People with money WILL pay for service and support, but only if they get it at a level they expect.  Other US manufacturers treated service and support like the OS, outsourced it. The value of HP's brand was lost when a customer calls in for help and gets someone named 'Joe' reading a script deep in an Indian call center.  The value of the brand went to zero, as did the customers' willingness to pay up.  Hard to make 'Money, money' when customer are not will to pay you much.

Can Apple continue to mint money? Yes, until the value of quality and service goes to zero. As it has, for example, in the auto industry. Then, all you have is fashion. And, looking the turnover in teen clothing chains, that doesn't last.

Next for Apple? Bundling TV, books, music, news better. My local paper, the San Jose Mercury News is not even good for wrapping fish now. SF Chronicle is even worse. WSJ and NYT are too expense. And who wants to listen to FemLit Interns who run the Times OpEd section these days?

Health monitoring is the Holy Grail. If Apple, or someone else, can reliably monitor important body functions, they will clean up. It is coming, maybe Apple Watch X. Perhaps Google or (doubtfully) Samsung will first. The are all trying. 

On the Road...

Every generation seems to have a story about being on a road. Maybe it is literal, maybe philosophical, but usually it is both. 'On the Road', Easyrider, 'Zen and the Art of Motorcycle Maintenance', and many other titles. The road starts with the confusion straightaway, into a few questioning turns, over an anger bridge, past a few drunken hairpins, and too often ending up in a mental hospital or a morgue somewhere. By the time the dear reader gets to the 'somewhere', they are either confused (Art) or depressed (Easy Rider). 

We all have a road story, and it is our life. No one can possible understand the route we took as we cannot understand it completely ourselves.  If you tried to lead a full life, then the road is full of unexplained twists and turns that seem either naive or foolish as you look back.  But, you took the road and now are at some type of destination, if you are up there in years as Ol' Si is. You are the road you traveled. 

High School? Told to get into a trade. Plumbing was hot then.  Fixed VWs, went to Community College on lunch break at noon.  What the hell, I will take Calculus. There were 39 guys, 37 of whom said they wanted to go to med school, I was doomed. That girl? A math genius. aced every test. 

Prof, who was a semi-retired Engineer told me I could DO IT, pass the class. No screwing around, no excuses, no 'poor kid struggling' crap. Just study. Office hours if needed, which I did. Girl in class helped me for the price of a cup of coffee.  I made it over the bridge, sober. Passed. First time in my life I put my mind to something really hard and succeed.  

You can talk about the biggest rush in your life. Your first beer, your first kiss, the first time you rode in an early Porsche Turbo.  I will pick the C+ in Calc 1A. First step on the journey,  one that got a lower class, blue color kid started on the roadtrip. One he could never have imagined. 

Ended up here.  What a drive.

The Kids are All Right?

I am not a big FaceBook user, but our company has a marketing campaign on-going, so we are suppose to be hip and cool and monitor our company page. Because of the mental lapse, signing up for a class reunion,  I get a lot of FB posts from people in my High School graduation class. Make a note- no web crawling after a glass of Scotch. Anyway, there has been an ongoing dialog from my peers about the world in the early 70s.  One thread was about dress codes.  The schools expected us to show up each morning with short hair or a long skirt - but not both.  One day the world changed for us, schools simply dropped dress codes.  Suddenly, you realized that girls actually had legs, and some guy could grow enough hair to need a pony tail.  Amazing!

And, we were thrown into a world of controversy. What now? Last week we worried about the condition of our face, now we are having to talk about Vietnam, race politics, and women's rights. Huh? Most 17 year olds then either thought what their parents thought, or the exact opposite.  What does this mean? Do I join the Kiwanis Club or become a Dead Head?

Many in my generation showed there feelings about war, oil, and race by taking to the street and marching with protest signs.  Very little was accomplished, as we were too stoned to remember why they were walking in the first place.  Today, young people are walking to actually change things... by not driving cars. And, that change for society is more radical than any SDS manifesto.

While sitting though yet another VC panel, one speaker said something remarkable. "What investments do you have in all the cool automotive technology being developed?" was the question from the floor.  'We have none" was the answer. "Young people are not buying cars, the median age of a car buyer in 2012 was over 50. Kids in general, do not care about cars. They buy one only as a form of transportation, and then powered by electricity if possible. In major metro areas, they can rent, share, or simple borrow cars for the rare time they really need one. That is a major change, and we are negative on anything in the automotive space!" A lady next to me with GM on her name tag later confirmed what the VC was saying. "Young people are increasingly ambivalent about cars, many only care about the Bluetooth integration or the size of the subwoofers".

Think about that.  Nearly every major country lists auto manufacturing as a key industry. Tens of millions of jobs, billions in campaign contributions, and much national self-worth is wrapped up in cars and related industries. What is Italy without Ferraris? US without pickups?

Cars were the center of a young man's world in Southern California in the 70s. Now, they are just expensive pollution machines that sit idle 22 hours a day. Oil politics, pollution, traffic... all results of a society that puts a lot of cache on the automobile. Hard to admit for Ol' Si, a car guy who not only knows the words of the song 'Little Deuce Coupe', but knows what the words 'ported and relieved flathead mill' mean.

If, indeed, cars are no long something that people care about, will they be sold like everything else on Amazon? "Send me something red with the iPad connector" will be the order.  With little differentiation, gross margins in the car industry will collapse, and with it a lot of industrial capacity. And, where will that spending go, if not for car payments? Will it go into savings? What will young people do for jobs? Maybe a small business will provide the job, and use the unneeded car payment.

In ol' Si's neighborhood, there are many small businesses being started by young people.  Once you get past the pierced everything and neck tattoos, you see hard working business owners. One couple, who run a bakery near me, say they neither need nor want a car. They bake stuff, sell stuff, and are happy. They pay people to do deliveries, outsourcing the need for a car.

Maybe in a few years, your high end bagel fryer will have the same cache as a big-block Chevy did in my generation. Sitting on his Grandpa's lap, a young boy in 2047 may hear.  'My Hobart 503CV was the hot ticket then, son. I cranked out the best onion bagels in town and had all the girls chasing me!"

Given the state of the world, maybe the kids ARE alright.

ThanksLiving

Ol' Si survived another holiday.  For you outside the US, that would be the feast of Thanksgiving. Actually, for this grizzled old veteran of Silicon Valley, it is the only US holiday that I actually enjoy. Around my family, significant other, and good friends.  Lots of good food, decent TraderJoe's bargain wines, and a no -guilt run at the dessert line. There is none of the religious garbage or phony nationalism that surrounds most holiday here. Christmas is a consumer spending orgy, Easter has no meaning to most of us, other than the snow has melted.  I appreciate Veterans Day. But, it is not holiday, it is a memorial. Thanksgiving is a holiday.

Celebrating freedom, celebrating life. Living in The Valley, you need to stop and remember where you are and what you are doing every day. While we think we are marketing IP, developing codecs,  or spec' ing out switching power supplies, we are actually creating world peace.

The seeming mundane tasks done in Silicon Valley mean that Vietnam can employ millions of MOOC -educated young people in software testing,  Eastern Europe can keep it's brilliant, but unemployed physics PhDs creating/preventing computer viruses, and India has a place for IIT grads that doesn't involve pushcarts.  Total social meltdown in failed Socialist societies has been averted, because people are writing apps, bidding for work on Freelancer.com, or getting into US grad schools.  Consider the world if we could have vectored all the smart people in Germany to jobs after WWI.

OK, OK, I know-- we are are under the gun now. Code drop is late, quota is too high, vendors are not paying in even 90 days.  We all have underfunded 401Ks, overfunded teenagers, and leaky roofs.  But, we are free and everyone around me seems to be eating well. World is a bit unstable, not in places we need to care about anymore.

Ayn Rand may have a correct view of the future in her book 'Atlas Shrugged', but no one I know has moved to the hills in Colorado yet and the trains still run on time.  I see very few John Galt bumper stickers, so things appear somewhat stable.  Speeches from Washington, DC are ominous and following the script, but the storm seems some time away.

Finish your turkey, top off the Scotch sniffer and toast Thanksgiving. A holiday that still means something.

One on Won

Ol' Si feels like Janus some days.  The image of a god that looks forward and backwards at the same time.  You need to be able to do that to survive in The Valley. What has happened? What will it lead to? Always good to think like that.  The rear view may not have the answers, but does have a lot of clues that can loosely be interpreted as a guide.

Troubleshooting RF electronics is easier with a lot of rear view mirror time. But, even with a 50+ years of experience, 'troubleshooting' human beings or predicting their behavior is still a low probability affairs.

I was stuck in the airport during a long weather related delay.  Nursing a beer, I struck up a conversation with a seeming shy women at the barstool next to me. As we discussed what we did, I found out she was in sales.  Over the course of a couple of drinks, she described her world and what it took to be successful. And, apparently, she was very successful.

The key to be a successful salesperson, she said, was the 'will to win'. But, strangely, not her will, the other persons. Huh? Aren't salesmen hyper competitive? 'Killer instinct' as the usually short, loud, and whiny sales managers I have worked with would say.

After a few minutes, she explained why most in sales fail. "Everyone has to win, has to be right. Most salesmen are ex- jocks, ex- beauty queens, ex- something. Always need to be stroked and be told they are the best, right, or whatever. The customer typically also has a big ego, and enjoys the thrill of winning. Key difference is that the customer has the money. So, the customer has to 'win'. Your job is to determine if letting them win is worth your time and effort". In other words, you must control your ego, the demand to win.  You need to win a war, not fight every battle to the death.

In her words, control your need to win, focus only on important things that help reach a goal. Easy to say, tough to do.

I am lucky to know a few people who have survived huge setbacks, both personal and professional. Many are still forging ahead with a positive attitude.  Yet, many more have been smacked by one life event have changed... not for the better. They set unrealistic standards and goals based on someone else's life in a much different time. Their plan isn't working and they are angry.

Going back to the airport and the conversation with the saleswoman. 'Have to be right....big ego'. Sounds like a plausible reason for friends' attitude changes. Many were top scholars, great athletes, talented musicians. Then they weren't. They became bitter and jealousy took over. If you are like Ol' Si, doing OK and adjusting your goals to meet reality, they hate you. You are a loafer or a simple mind.

Some things in life seem to get larger with time. Waistlines, medical bills, consumption of Scotch. Some get smaller ... like my Holiday Card mailing list. Stay happy, avoid those who aren't. I am.

The 'New' New Normal

If you ever read the financial section of the newspaper, or watched Lou Dobbs on TV, you know about the 'New Normal'.  The phrase, penned by Bill Gross, it refers to low interest rates and limited stock and bond returns predicted for the long term future. But in The Valley, there is a new 'New Normal'.  'Normal' people are not the norm.  The guy who is adjusted, sleeps well, has a balanced life, and is in control of his emotions is the 'like, so yesterday' as my niece would say.

In the past years, Ol' Si has seen a marked increase of psychopaths in positions of power.  They have little or no people skills. They have fits, tantrums, and probably recall fondly torturing ants in their youth.  Exhibit behavior that would have gotten you fired, and possibly locked away two generations ago.

Of course, the hyper-trendy press LOVES them. Movies are made of their lives. Execs debate why that management 'style' worked. Shell shocked former employees try to hide their pain in the BiographyTV interviews.

These sickies do not think as most of us do. Part of it is either a medical condition or the effects of psychedelic drug use. They may be bipolar, have ADD, ADHD, sleep disorders, permanent PMS, maybe all of those afflictions... something. Rather than treat it, the relish it.

What is going on here? Well, today's popular fiction is that social skills get in the way. Yes, being a jerk makes you successful. Three angry ex-wives, a mistress who jumped off a bridge, and 5 kids that refuse to speak to you means you have made it.  Goldman Sachs will now make you a Partner. VCs will be begging you to sit on their investment team. After all, it takes psychos to know psychos, and it appears that such people generate a hundred-to-one return on investments at IPO time.  You have to wonder if college health centers are being bugged by institutional investors and head hunters, looking for those Computer Science students who stopped getting Ridelin prescriptions filled.

How can abusive people get away with it? I think the shock value of their actions has something to do with it. Starting with Miss Jones, our first grade teacher, we had the controlled, cooperative female personality rammed down our throats.  Little League baseball is all smiles, win or lose. Can't emit gasses or burps in the dugout, like we did when I was a kid. Parents can only cheer, lest they be banished to the parking lot.  In other words, public school reduced us to social mush. A version of 'Barney'.  When someone smashes that norm, we are shocked. What to do? Some hide, some fight back, and some will follow the new leader. Lady Gaga is rich after all.

To be abusive and keep your job,  you need to be right all of the time. Many people will lie in ambush, waiting to get you fired if you screw up. However, if you get a string of good decisions, you start becoming bullet proof. "See" the investors will say. "You have to think out of the box! Kill people if needed, as long as we get the IPO out in the upcoming window!"  Next thing, a corner office awaits at a Semiconductor company.

Young people are noticing this.  Even Dilbert was pitied in a recent cartoon strip. "It must be hard to be a Normal", he was told by a young co-worker with a list of every mental deficiency known to man. You are now a noun, a 'Normal'.

And, like every other micro-trend, 35 startups will jump on this concept immediately. Look for a pile of Indiegogo and Kickstarter funding campaigns for movies on 'How to get rich like Steve Jobs!'.

And, Ol' Si knows a market when he sees one.  In my spare time, I am writing a book. "Scream! "The Driver to Success.". Next will be the seminar series, if I can locate Anthony Robbins' evil twin, "Yell and Throw Furniture on Your Way to the Top!" Companion workout sessions available in Blu-Ray soon.

For once, I will jump in with both feet on a risk. Immerse myself in a startup. Work insane hours. Abuse all around me. I can just see that Porsche in the driveway now!

Yes, I know this whole affair is a very bad trend for society. Speaks ill of our evolution. Sad day for humanity. But, I smell money. As a rich producer of Porno movies once said "Hey, I know we are on the road to Armageddon.  I'm just trying to get my share!"

Ol' Si isn't worried about the consequences to our society or my soul. Well, at least until the plague of locust appear on the horizon.

Undress for Success

I grew up in your basic lower middle class neighborhood. We didn't have much, but neither did most of my friends. We played baseball, read Mad Magazine, and dreamed about the fast cars we saw every day. We didn't have nice clothes, but it didn't matter. Until early High School. New guys from uptown middle schools showed up with the latest cool styles. Nice golf style wool shirts, real windbreaker jackets like the pro athletes wore. Decent looking slacks. Boat shoes. Si wore what was on sale at the cheap department store before last Christmas or near my birthday. Shoes were my Uncle's discards. Pants a inch too short or long. And, the girls noticed... them not me.

The cool kids had money, their parents had two cars, and they probably took real vacations, somewhere that didn't involve a tent. Rich was cool.  It was clear that I was Not Cool. My self esteem was not high, as you could guess.  But, I was soon saved by the greatest event in teenage social evolution... the removal of school dress codes. Now every guy looked like a slob, because they could. T-shirt, shorts, old tennis shoes. No one wore fancy anything. Rich didn't matter that much, because you could not show it. The counter-culture won!

Right after I got out of college, we entered the era of Disco. America's version of the bubonic plague that ravaged Europe. Women dressed in dancing clothes all the time, even if they really didn't have the body to. Men wore the abomination of the ages, Polyester suites. Men of my generation look back on Disco in the same way that historians view the use of leeches in medicine.  What the hell were we thinking?

Ol' Si tends to put Disco style clothing on the list of things that you don't dwell over, lest you feel depressed and start drinking Gin again. Like going into combat or working at Cypress Semiconductor.

These days, clothing choices are a mixed bag. In The Valley, 'dressed up' is a pair of ironed Khakis from Land's End and a button down shirt of some type. Shoes? Anything/nothing OK. Execs dress up for important customer visits of course; new jeans and a golf shirt (with logo of a famous resort) are the rage. Women who can wear tight jeans do, those who can't wear fashionable skirts.

That is now the way in most of the US. East Coasters are still guys in suits, but that no longer has a good connotation. "Suits" in The Valley speak are clueless MBAs, who parachute in from a bank or consulting firm to reek destruction on your marketing plan or IPO proposal.

This is not to say you won't see suits on local people in The Valley. Walk into any Schwab or Fidelity Investments office. The guy or gal behind the counter wears a Wall Street -worthy suit, crisp white shirt and appropriate red power tie. They are helping someone with the forms needed to deposit those millions of dollars of Google stock options. The slightly confused customer is in shorts, wrinkled shirt and flip-flops. Hasn't shaved in a couple of days, probably just got through a code release all-nighter. The doorman at the Fairmont is very well dressed, helping scruffy locals out of their Tesla Roadsters or Porsche Turbos. Wealthy kids from Menlo Park buy the latest style of torn jeans and beach sandals from well dressed Nordstrom staffers.

Just for grins, I wore a dress shirt and tie to work last week. I had just got a decent haircut the day before, as was feeling a bit dapper. The very attractive lady in accounting smiled at me for the first time.  My boss suddenly seemed nervous. The Prez gave me a long, confused look, almost catching his flip-flops on a cable bridge. People were generally uncomfortable around me.

I was the rich kid on the first day of High School! Maybe I will take a vacation... and leave the tent at home this time.