Safari Goes Corporate – Jobs Announces Windows Version

Steve Jobs today announced that Safari, the annoyingly broken browser for the Mac, would soon be appearing on Windows systems as another annoyingly broken Windows application. Aside from the obvious joy at the thought that browser compatibility testers would no longer require a Mac to do their job, is there any other import to this announcement? Well, there are a few possibilities…

One possibility is this is part of the strategy of going ever closer into direct competition with Microsoft, although Safari isn’t in the same class as IE (or even Firefox). Safari was built on the KDE Project’s KHTML layout, BTW. For a number of years there was frequent sniping between the groups – the KDE volunteers felt Apple didn’t comply with the spirit of open source (they’d take their time in submitting changes, for example) while Apple complained they weren’t quick enough fixing their bugs. I always found the latter complaint hilarious because Apple was notorious for never fixing their bugs even when they could. The source trees have diverged greatly since this initial schism (schism in open source? perish the thought), and there are dreams of somehow “mending the rift” through “unity” initiatives. But this is a lot of work for a questionable gain.

Open sourcerers are good at fractionating markets, but lousy at aggregating them. It’s just too easy for someone to run off and roll his own when he gets miffed for a potential quick gain (while wacking the older group). Fractionation totes up in the big book of life as a long-term cost hit on the entire open source market segment, and is something Microsoft loves to see.

As Apple has migrated off the PowerPC, the distance between them and a Wintel platform (Mactel?) has diminished mightily. The “next step” (yes, a pun) is moving their software onto Windows to develop an audience, so the distance between Windows and Mac becomes a matter of taste. Apple knows that eventually they have to face the harsh economics of the Wintel world. They also know Microsoft has to move the Windows franchise intact to a very broad market, while they only have to appeal to a subset of that market.

Is it better to be a remora or a whale? If they can profit from the current Microsoft open-source obsession (you know, “Get Linux”), they can do very well taking bites out of Microsoft’s market, since Microsoft prefers to fixate on one enemy at a time. If Apple gets too troublesome, Microsoft can always buy it. Of course, maybe something in that Microsoft-Apple agreement signed years ago makes this a lot easier than one might think (although nothing is ever easy around Steve Jobs).

Fun Friday – Internet FSBOs, Business YouTubes

A few items on the Internet front. For years realtors have been hammering customers that selling their home with them gives the buyer a 16%+ sales advantage. This has made Internet-based FSBO sites a queasy deal for somebody’s biggest investment / nest egg. So a bet on who got the best deal from their home sales between a couple of bored economics profs at Northwestern (one used a realtor, the other did a FSBO) resulted in a detailed analysis of a successful (20% of the market) Internet FSBO site versus realtor sales in Madison. And guess what – the Internet site did just as good at the end of the transaction (considering size, locale, and so forth) as the realtor-mediated transactions. The FSBO site did take longer, but that may simply be due to the reluctance of buyer’s agents to show any FSBO houses – a problem that may disappear as buyers demand to see houses they see on the Internet. The future is starting to look more rosy for Internet-based realty businesses.

Business Week has decided to launch a “VC” video pitch competition, where desperate entrepreneurs line up to convince cynical readers their ideas, like Frosted Flakes, are “Grreat” (thank you Tony the Tiger). Those ideas that survive the slings and arrows of ridicule (likely those so stupid or so obtuse nobody can understand them) undergo a final beauty contest via a biz plan competition for the princely sum of $500,000 “from a VC firm to invest in the proposed business”.

No word as to what serious VC would put half a million on a business by public acclamation, but I’d place my money on a series of Sanjaya-inspired hair salons. Wow, think of the possibilities.

I’ve been involved in a number of biz plan competitions over the years (along with real meetings with real investors), both as a participant and a reviewer. I’ve done video pitches. I’ve developed video pitch technology for CEOs. And I’ve watched other CEOs do video pitches. And while the views were great (they were restricted to VCs invited by the CEO – business plans are actually very valuable), nobody believed Internet video would ever “catch on” enough to matter. Amazing the difference one Sequoia with one YouTube can make!

Don’t believe this? Think that everybody knew YouTube would be a success before 2006? To illustrate, I once decided to enter the Berkeley Haas business plan competition in 2004 with an interesting Internet video startup idea I had while I was working with the physics department on our alumni greeting card video project. It seemed a good idea at the time. People were watching, the system worked, and it was easy and fun. And I made sure to run the business plan by some pros in the Valley. I do my homework.

So it was a straightforward business plan to evaluate – good customers, good technology, and good numbers. A no-brainer, really. I looked forward to seeing how Haas dealt with it – remember, I’ve participated in and co-founded a number of venture-backed companies over the years, so I’m no novice. But did they evaluate the business? No! When I got back the comments, I got things like “They have some TAM numbers from an analyst. But…they really haven’t done a good job in showing the SAM” (nobody had, and nobody could). “Their exec summary is 3pp long. In general, I tell people I won’t look at anything over 2pp” (such terrible food and such small portions). And finally, “regardless of their domain experience, etc., I would never back this team. I will NEVER back a team where it appears that the founders are husband and wife or domestic partners. We did it once; it was a painful lesson”. I always wondered if this last comment was their usual fallback ploy for businesses presented by African-Americans or Jews or single women – funny how you don’t hear they won’t invest in white / Indian / Asian guys because they “did it once” and it failed. It’s hard to fight prejudice.

After the inept evaluation and overt bigotry I received at the hands of Haas biz school, I resolved only to talk to real professional VCs who could afford the time to actually read a 3pp exec summary and understand the business. In other words, don’t go this route if you really care about your business. Do the hard work of developing the relationships instead, or get someone in the biz who can.

Don’t hold your breath to see all these cool startup ideas anytime soon – Business Week is still shopping around for someone to build the site for them. Knowing mags as well as I do, it won’t be a lucrative deal for the site designer.

The Game of Life – Windfalls Matter, Education Doesn’t

Nicholas Kristof painted a portrait of China as the emerging leader of this century through their serious and aggressive education goals in an article in the NY Times a few days ago. He compares his own daughter’s “excellent schools in the New York area” to a peasant school in Guangdong Province and finds it lagging two grades behind — an appalling discrepancy. When well-traveled, well-educated affluent Americans pale in comparison educationally with China, you’d think Americans would begin to understand the “competitiveness” concerns Silicon Valley has been screaming about for years. After all, if the top classes of American society cannot compete with the children of peasants, what does that say about American competitiveness in a global economy? Yet America does nothing more than wring hands and complain while China pulls ahead. Why?

Perhaps the witty essay by Lawrence Downes (“Love and Debt”) today holds the answer. In his exploration of the newly revised “Game of Life” from Milton Bradley, he found that players who chose to forgo education and have children did much better in the game than those who deferred having children, spending time and money on education. Debt just happens, with no downside consequences — no foreclosures, no homelessness. There is no connection made between career, salary and education. In fact, to make the game more interesting those who are not educated were far more likely to win lotteries or other windfalls than those who are educated. In the world of Milton-Bradley, a doctor is more likely to end up poor than a “strawberry picker”. A degree is simply a means to more debt, and not a means to social mobility.

In the real world, we laugh at such silly notions — after all, it is a game and games aren’t real. We all know that debt is real and inescapable. Credit reports make or break obtaining mortgages and using credit. Interest rates can escalate on the basis of one late payment, causing people to spiral deeper and deeper in debt for old purchases. It isn’t debt that “happens” — it’s poverty. So why should we care? Perhaps because the games we play very much reflects our biases and wishes, sometimes to the exclusion of all else.

Salaries and job security are tied very much to education. Those who start off poor and ignorant are statistically likely to remain that way if they do not better themselves through education. In Silicon Valley, there is a tremendous demand for educated workers. Whether you believe there is an H1B visa crunch or not, it is inescapable that engineering and programming jobs are increasingly going overseas to get the job done. This is not just because of lower salary costs (the costs of administering an overseas contract when factoring in time, travel and oversight ends up more in the realm of two-to-one, not the 10-to-one HR drones like to quote), but because countries like China and India are turning out more and better engineers, scientists and programmers than America.

According to Computing Research Association’s 2005-2006 Taulbee survey of Ph.D.s in computer science and computer engineering (CS & CE), instead of increasing the number of CS and CE doctorates, they have been steadily decreasing since the dot-com boom, so that the “number of new CS majors in fall 2006 was half of what it was in fall 2000 (15,958 versus 7,798)”. China and India are simply picking up the slack. In addition, the CRA notes that “54 percent of CS doctorate recipients in 2004 held visas”, up 8 percent in two years. As Americans shun these majors, more and more foreign students are taking their places in American universities. And those students are the ones Google and Microsoft and the next big startup will hire.

Very few people who hang around the house watching TV and having kids ever win a lottery. Those divorced from society are much more likely to end up in prison or hospitals. People who are impoverished through lack of education, access or debt aren’t likely to get that magical windfall — that get out of debt free card that Milton-Bradley promises them. In fact, according to mathweb’s lottery calculator, if I had to pick six correct numbers in any order from 1-49, the odds of my winning are 1 in 13,983,816! But this doesn’t even scratch the surface — restrictions on ordering and numbers reduce the odds significantly. According to PBS Frontline, the odds of winning the California Super Lotto Jackpot are 1 in 18 million! Despite the enormous reality distortion field that surrounds the occasional “lucky” lottery winner (Steve Jobs RDF is nothing compared to this), the truth is it isn’t going to happen to most everybody — just a few folks. Is that a good basis for financial security? According to a 2006 survey from the Financial Planning Association and the Consumer Federation of America, “one-fifth of Americans (21 percent) [and] 38 percent of those with incomes below $25,000” believe that winning the lottery is the means to personal wealth and debt mitigation. And it should be noted that 30 percent of those with no high school degree believe in a lottery saving them, versus only 8 percent of those with a college degree.

While people who have a college education often have more relationships, opportunities and financial leverage, those who have not built this economic network rely on fantasies of wealth. Milton-Bradley built this fantasy into their world, with a twist — the lower the status and profession chosen, the more likely the player to get windfalls. The higher the status and profession chosen, the more likely the player would accumulate straight debt with no windfall potential. The message to children who play this game is pretty clear — don’t bother to go to school, stay home and have babies, play the lottery and everything will be fine. Hmm, I don’t know about you, but that’s not the way every millionaire and billionaire (yes I know a few well) in Silicon Valley got their wealth…

To be successful, a game must hold the promise of a world that we wish were real. Games reflect our values and aspirations. If Americans didn’t believe more in lotteries instead of education, why would they push games like this on their children?

Bill Gates has recently joined with Eli Broad to spend $60 million to push education to the political forefront as a nonpartisan “single-issue initiative”. According to Bill Gates, “The lack of political and public will is a significant barrier to making dramatic improvements in school and student performance”. Mr. Broad adds that “We’re trying to create a Sputnik moment, to get people to see that our very economic future is at stake.” So far, even with all their money spent on advertising, they are having little effect on the political campaign. Not surprising, really, when three of the major Republican presidential wanna-bes don’t believe in evolution (so much for healthcare and biotech investments) and Democrats spend their wad on other matters like Iraq.

This disdain for education as the key to success is why America will lose and why China will win. But Milton-Bradley will probably sell a lot of games. And isn’t that what America is all about?