Managing Risk

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I’ve spent a massive amount of my time while running Infinity Softworks managing risk. In this case I’m talking about business and technical risk. When do I count revenues? How reliant am I on a partner? How reliant am I on a technology sticking around?

Sometimes I’ve been good at this. I’m conservative about deals, for instance, never adding cash expectations to my budget until the contracts are signed. Sometimes I’ve been bad at this. We were extremely reliant on Palm in 2004 and didn’t even understand how reliant we were. When the relationship failed 70% of our revenue disappeared at the same time.

Yesterday App.net announced that renewals didn’t meet expectations and that the product would continue but that the team developing it would no longer be full-time. Development would be open sourced.

This doesn’t bode well for those that rely on ADN for log in and syncing services, the developer back-ends. If I did, I would be looking for an alternative right now. In managing a business it seems that I am always surrounded by risk. My goal is to minimize it as much as possible where possible.

This is one of the reasons we don’t do log ins with Facebook or Twitter or Google. This is one of the reasons we prefer to manage our own servers. This is one of the reasons we have multiple revenue sources. As I was planning Equals one of the things I thought about was all of these risks. It is one of the reasons we chose to develop the web version first and mobile-specific versions later. Relying on Apple, Google, Samsung and Amazon to provide us customers is dangerous, especially if we factor in the rules that go along with participating in someone else’s store.

Honestly, it isn’t possible to get rid of all risk. But it is important to consider which risks are worth taking and eliminate all the rest.

Programming Sucks

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Incredibly hilarious rant (especially if you are a programmer) about how ridiculous writing code is. One of my favorite snippets:

The human brain isn’t particularly good at basic logic and now there’s a whole career in doing nothing but really, really complex logic. Vast chains of abstract conditions and requirements have to be picked through to discover things like missing commas. Doing this all day leaves you in a state of mild aphasia as you look at people’s faces while they’re speaking and you don’t know they’ve finished because there’s no semicolon.

 

The Leveling Off Of iPad Sales

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There has been much discussion this past week about the leveling off of iPad sales. From Benedict Evans’ excellent article on the topic:

Tim Cook also explained it on the earnings call: a channel inventory problem.

Fred Wilson asked about whether focusing on tablet sales is the wrong thing to do, and is going to recommend to his portfolio companies to focus on smartphones. Fred later revised his response by saying a drop in tablet pricing may change all that.

Personally, I think the smartphone growth rate was a strange beast because it was built on top of the feature phone business and subsumed its market. The world was already carrying a phone and we used those phones for communication: voice and text messaging. So when we bought smartphones, what apps really helped make it take off? Voice and text messaging. So Twitter took off and Facebook and Instagram and WhatsApp and Line and a bunch of others that are communication platforms. The phone itself was used before for communication and is used still for communication. At its core even Uber is a communication app, or at least that’s where it is revolutionary. A private car paid for with credit card isn’t. It’s the idea that you can do it from a phone and see where your driver is.

What’s the other use case that has done well on smartphone? Games and entertainment apps. These are easy to explain, too. I’m bored, need instant entertainment, and that phone is already in my pocket. My point is that there are long established use cases for the smartphone, a big reason is because we have been using them in a non-smart form for 15 years now.

What about tablets? The device is new. We’ve never had a highly portable piece of computerized glass before, with a day’s battery life, that’s light and compact. So what do we use it for?

I think that’s fundamentally what the slowdown in sales is about, not price. We don’t fully know yet. Yes, it’s an interesting reading device and I think that’s fueled a lot of the sales so far. But the best reading device is the one with us and that may very well turn out to be a 5″ phone.

Even look at the apps we use on them. Most are just slightly reconfigured smartphone apps. In other words, we haven’t really figured out yet what we will use these for, just like it took us years to figure out exactly what we were going to use the PC for. At one point there was a debate as to whether command prompts or GUI was better, too.

This isn’t to say that smartphones aren’t a good bet, just to say that I wouldn’t bet against the tablet. In some ways tablets are more interesting because each one of us has a higher likelihood of finding the business that helps sell tablets. I think the odds of that are less and less in smartphones.

Choosing Sides

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If I had to pick, it’d be the iPad. That’s the device that has changed my world more than any other. In the morning I pull the iPad off the charger, I use it all day to answer email, read, follow the news, do work, and then put it back on the charger at night, a full 16 hours later.

When I travel I used to carry all kinds of stuff with me — books, laptop, CD player, DVD player — all to keep me entertained. Now, my iPad does just fine [1]. I load it with movies and off I go. Generally I don’t even bother carrying a laptop with me, unless I know I will need to write code while away. Otherwise my iPad does the trick for me.

I never run out of battery. In fact, I don’t even notice the battery meter anymore. I have been trained that my iPad’s battery will easily last until the next charging cycle.

Most people I know say their iPhone is their most prized device. I use my iPhone, too, but a simpler, smaller device would suit me just as well. For years I carried a PalmPilot and dumb phone, even long after the smartphone category was invented. I never cared much about the phone. And it still annoys me that even a day of light use drains the battery on my iPhone down to nothing. I spend all my time calculating and worrying about running out, which is just plain annoying.

We are all different. Everyone has their own preferences. No matter what your choice, it strikes me that we are living in the golden age of technology products. Maybe there’s an amazing future of voice activated, monitoring devices that can tell me what I need before I need it. But if what we have today is the zenith, I’ll take it.

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[1] The other device I love is also a device I carry with me when I travel: a Kindle Paperwhite. All the books I can read, extremely lightweight, a subtle backlight that doesn’t wake up my wife when I can’t sleep and need to read in the middle of the night, and a battery that lasts a month!

Innovation Illiteracy

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Earlier this morning I tweeted the following:

Who said invention was easy? Oh, right. No one. Damn.

Then I read a great article from Horace Dediu about innovation illiteracy, something he coins as innoveracy. Horace said,

Rather than defining it again, I propose using a simple taxonomy of related activities that put it in context.

  • Novelty: Something new
  • Creation: Something new and valuable
  • Invention: Something new, having potential value through utility
  • Innovation: Something new and uniquely useful

To illustrate, here are some examples of the concepts.

  • Novelties: The choice of Gold as a color for the iPhone; the naming of a version of Android as “Kit Kat”; coining a new word.
  • Creations: The fall collection of a fashion designer; a new movie; a blog post.
  • Inventions: Anything described by a patent; The secret formula for Coca Cola.
  • Innovations: The iPhone pricing model; Google’s revenue model; The Ford production system; Wal-Mart’s store design; Amazon’s logistics.

I thought this a rather unique approach and was very happy to see that I had used the right word. Equals is an invention right now. With more time, I’m hoping it will prove an innovation as well.