Mr Gates also realised that making hardware and writing software could be stronger as separate businesses. Even as firms like Apple clung on to both the computer operating system and the hardware—just as mainframe companies had—Microsoft and Intel, which designed the PC’s microprocessors, blew computing’s business model apart. Hardware and software companies innovated in an ecosystem that the Wintel duopoly tightly controlled and—in spite of the bugs and crashes—used to reap vast economies of scale and profits. When mighty IBM unwittingly granted Microsoft the right to sell its PC operating system to other hardware firms, it did not see that it was creating legions of rivals for itself. Mr Gates did.
….
And look at what happened when Mr Gates’s pragmatism failed him. Within Microsoft, they feared Bill for his relentless intellect, his grasp of detail and his brutal intolerance of anyone whom he thought “dumb”. But the legal system doesn’t do fear, and in a filmed deposition, when Microsoft was had up for being anti-competitive, the hectoring, irascible Mr Gates, rocking slightly in his chair, came across as spoilt and arrogant. It was a rare public airing of the sense of brainy entitlement that emboldened Mr Gates to get the world to yield to his will. On those rare occasions when Microsoft’s fortunes depended upon Mr Gates yielding to the world instead, the pragmatic circuit-breaker would kick in. In the antitrust case it did not, and, as this newspaper argued at the time, he was lucky that it did not lead to the break-up of his company.
Category: Business
Walter Bagehot Was Wrong
The governor of the Central Bank of Luxembourg raised some eyebrows when he questioned the integrity of the fast-growing balance sheet of the European Central Bank. Yves Mersch, a member of the ECB’s governing council as well as the Ben Bernanke of the Grand Duchy of Luxembourg, raised the issue at a gathering of the International Capital Market Association in Vienna two weeks ago.
Insofar as a currency derives its strength from the balance sheet of the issuing central bank, the euro is unsound and becoming more so, as Mr. Mersch did not quite say. We, however, will say it for him. In fact, we will say the same for most of the leading monetary brands, that of the United States not excluded. The mortgage mess is the immediate cause of the new debasement. A long-held article of central banking dogma is the remote cause.
Mr. Mersch landed on the front page of the Financial Times by acknowledging that the ECB is accepting a dubious kind of mortgage collateral in exchange for loans to the world’s liquidity-parched financial institutions. In so many words, Mr. Mersch charged that the commercial banks are gaming the central bank, a situation he called of “high concern.” Reading Mr. Mersch, we thought of Thomson Hankey.
The Art of Satire
Why Rivals Don’t Copy Southwest’s Hedging
David Carter, an associate professor of finance at Oklahoma State, has an interesting perspective on why rivals haven’t caught up to Southwest. Prof. Carter helped write a 2004 case study on Southwest’s hedging that is taught in business schools. Although the study details how Southwest uses home-heating-oil futures and other instruments to make its hedges work, Prof. Carter says he has heard from only one other airline that seemed interested in putting that knowledge to work: the German carrier Lufthansa.
Other carriers may have opted for caution because it is psychologically hard to switch strategies when prices are moving against you, Prof. Carter says. Airlines that didn’t hedge much when oil was at $25 or $40 a barrel might have felt uncomfortable launching a big hedging program when oil got above $60.
Frequent management shuffles at many airlines also might have made it harder for carriers other than Southwest to jump into hedging in a big way, Prof. Carter adds. A hedging blunder early in a CEO’s tenure might overshadow whatever else that boss might be accomplishing.
Southwest’s treasurer, Scott Topping, offers another possible explanation of why his airline has stayed ahead of the pack so long: Since the late 1990s, Southwest’s hedging strategy has been set by two or three people, rather than by committee, making it easier to act decisively.
Cities Startup Broadband Efforts
Internet traffic is growing faster than at any time since the boom of the late-1990s. Places like Chattanooga are trying hard not to get stuck in the slow lane.
Some 60 towns and small cities, including Bristol, Va., Barnsville, Minn., and Sallisaw, Okla., have built state-of-the-art fiber networks, capable of speeds many times faster than most existing connections from cable and telecom companies. An additional two dozen municipalities, including Chattanooga, have launched or are considering similar initiatives.
The efforts highlight a battle over Internet policy in the U.S. Once the undisputed leader in the technological revolution, the U.S. now lags a growing number of countries in the speed, cost and availability of high-speed Internet. While cable and telecom companies are spending billions to upgrade their service, they’re focusing their efforts mostly on larger U.S. cities for now.
Smaller ones such as Chattanooga say they need to fill the vacuum themselves or risk falling further behind and losing highly-paid jobs. Chattanooga’s city-owned electric utility began offering ultrafast Internet service to downtown business customers five years ago. Now it plans to roll out a fiber network to deliver TV, high-speed Internet and phone service to some 170,000 customers. The city has no choice but to foot the bill itself for a high-speed network — expected to cost $230 million — if it wants to remain competitive in today’s global economy, says Harold DePriest, the utility’s chief executive officer.
Madison’s pitiful broadband infrastructure could certainly use a shot in the arm.
The mother of all on-board ideas, or Why Southwest Airlines Should Fly to Madison
Southwest Airlines, saving passengers’ necks since 1971.
Colleague Karen Robinson-Jacobs, who flew to Chicago on Saturday, said the airline had an interesting on-board amenity: free Mother’s Day cards for anybody on the airplane who needed one.
Flight attendants announced during the flights that anyone who needed a Mother’s Day card should hit their flight attendant call button. On both her flights, Dallas-Little Rock and Little Rock-Chicago, Karen reported the airplane immediately sounded like slot machines hitting the jackpot as numerous forgetful passengers hit their call buttons.
The idea reportedly came from Southwest president Colleen Barrett, who had each originating flight Saturday provisioned with about three dozen cards. But that was not enough to fill the last-minute demand on the Little Rock-Chicago leg, as Dallas-based flight attendant June Zapata ran out mid-plane.
Another Round for the Guild
The Guild Inc., a Madison, Wis.-based online art retailer, has raised $2.5 million in Series C funding, according to a regulatory filing. Shareholders include Dolphin Equity Partners
The Guild, a company with many lives, must be north of $50,000,000 (!) in funds raised over the years.
Related: A Pravda View of Guild and 1/11/2006: Guild Raises another $6M.
Fascinating.
The “Rebirth of the Rust Belt”
CNBC video of Matthew Simmons on the “end of the Starbucks’ economy”. Bottom line, from Simmons: good for the midwest.
Innovation lessons from Pixar: An interview with Oscar-winning director Brad Bird
Hayagreeva Rao, Robert Sutton, and Allen P. Webb:
If there’s one thing successful innovators have shown over the years, it’s that great ideas come from unexpected places. Who could have predicted that bicycle mechanics would develop the airplane or that the US Department of Defense would give rise to a freewheeling communications platform like the Internet?
Senior executives looking for ideas about how to make their companies more innovative can also seek inspiration in surprising sources. Exhibit One: Brad Bird, Pixar’s two-time Oscar-winning director. Bird’s hands-on approach to fostering creativity among animators holds powerful lessons for any executive hoping to nurture innovation in teams and organizations.
Bird joined Pixar in 2000, when the company was riding high following its release of the world’s first computer-animated feature film, Toy Story, and the subsequent hits A Bug’s Life and Toy Story 2. Concerned about complacency, senior executives Steve Jobs, Ed Catmull, and John Lasseter asked Bird, whose body of work included The Iron Giant and The Simpsons, to join the company and shake things up. The veteran of Walt Disney, Warner Brothers, and FOX delivered—winning Academy Awards (best animated feature) for two groundbreaking movies, The Incredibles and Ratatouille.
Ten days before Ratatouille won its Oscar, we sat down with Bird at the Emeryville, California, campus of Pixar, which is now a subsidiary of Disney.1 Bird discussed the importance, in his work, of pushing teams beyond their comfort zones, encouraging dissent, and building morale. He also explained the value of “black sheep”—restless contributors with unconventional ideas. Although stimulating the creativity of animators might seem very different from developing new product ideas or technology breakthroughs, Bird’s anecdotes should stir the imagination of innovation-minded executives in any industry.
On Energy: “Some home truths about tomorrow”
It’s about 179 miles from Fort Worth to the campus of Texas A&M in College Station, and I drove there to speak at the Student Conference On National Affairs on Thursday, February 21. It was not lost on me that making the round trip between the Metroplex and A&M’s Memorial Student Center meant that I would use the equivalent of one barrel of oil to discuss the fallacy of America’s quest for energy independence.
My slight amusement continued when one of the first students I met had arrived late from Chicago because his luggage had been misrouted and lost by the airline. I doubted that he got the irony of how much fuel it took to bring him the 1,100 miles from Chicago to Texas to attend SCONA 53, which was titled “Creating A Sustainable Global Energy Policy.”
Simply Selfish: Ethanol or Food
My talk came after an address by the Ambassador of Azerbaijan and before talks by Mark Albers, a senior vice president of Exxon, and by Virginia Governor George Allen. I had been asked to speak that afternoon about the magic of alternative fuels’ saving the day and alleviating the current energy crisis – assuming that high price is the sole determining factor in today’s energy debate. I felt the best way to do that was to discuss the beginnings of the automotive age in both America and the world, to relate to the students and professionals attending how, in the 1920s, these exact same circumstances led to a campaign to wean the American public off of oil – and why today the debate is back, but the end results will be the same.
I usually find it best to use 4th-grade math to show the fallacy of the again-current line of thinking about alternative fuels such as ethanol. After all, most people seem shocked to learn the fact that a new 2008 Suburban, designed to run on E85 ethanol and in which the owner uses only E85 as fuel, requires four acres of farmland be dedicated to corn production to keep that one vehicle running. But it’s true: That Suburban owner may live in a beautiful home on a quarter acre in the Metroplex, but somewhere in America four acres of corn must be set aside to provide fuel for just that one SUV.