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Tuesday, November 8, 2016

Analysts: What Are These?

Analysts are not always a savvy breed. In fact, sometimes they are downright stupid. Their general types of stupidity can be broken down into classes. I'll just name a few.

The first class, show offs, often throw around terms like disruption, logistics, zero-inventory and so forth without actually knowing their implications. Showing off is a pointless pretense of prowess, unless it shows valuable insight. Usually this class misses the forest for the trees.

The complainers just have axes to grind about their specific issues. They consider their beefs to be of paramount importance while ignoring the majority of users. A specific kind of complainer is the port complainer. They have whined about their disappearing serial port, FireWire port, headphone jack, and old-style USB port. But, hey, things change. It's disruption in action. Old media becomes obsolete, like vinyl records, cassette tapes, and CDs: this is because media is now delivered online. Cords disappear and wireless connections dominate: this is because virtually all updates are now accomplished over-the-air (OTA).

Then there are trolls. They know that the generation of disinformation creates knee jerk reactions that budge stock price. Close your eyes and imagine for a minute that many of them are simply Russians from the St. Petersburg Troll Factory and you will be just about right!

The feature creatures are typically Windows people who just care about feature lists and spec bullet points. They count ports, processors, gigaHertz, and keys on the keyboard. They are the ones that think shovelware makes for good workflow. If they actually use the features that they write about then they would know better. It's the user experience that leads to user satisfaction and commands user loyalty.

I don't want to forget the price people. To them price is everything. Forget about surprise and delight, user experience, or even quality! I can't tell you how annoying these people are. Their inevitable assertion is that the cheapest product always wins, which as we know already is totally wrong. Even if you're selling refrigerators! It's the product that gives the best value that wins. If you get into a price war, you've already lost.

The market share obsessors are yet another class of flawed analysts. To them, it's only about units, no matter if these units are only used for limited purposes, left in a drawer, or even if they are catching fire. They totally avoid the issue of who is actually profiting and thus who will see the consistent growth. For instance, Apple has 12.1% of the smartphone market yet makes 104% of the profit. Yet Android has 87.5% market share. How can this be? The Android hardware makers' profit is largely negative. Yep - they are losing money.

The software profiteers subscribe to the 90s Microsoft model: just build the software and let other idiots kill each other making cheaper and cheaper hardware; there's no profit in hardware, right? Wrong! If there's no profit in hardware then who is going to make it? By the way, the hardware makers often want their own unique look, defeating the standardized software. Also consider that software prices are plummeting. With the introduction of the App Store, Apple has turned software into a $2 commodity. This has forced the software profiteer into the subscription model.

Finally I give you the walled garden haters. These are descended from the people who like to build their own computers and hack them. They want freedom from carriers, authoritarian systems, and so forth. They want to pwn their hardware. In their minds all software is free, regardless of the time and effort expended by software developers. This class doesn't fundamentally grok the concept of an ecosystem, along with why ecosystems are essential to the survival of modern hardware. The hubris of these haters is in ignoring that hacking, device security, and identity theft has become the defining crucial problem of our time. All this for one reason: walled gardens are inherently more secure. IT people have long ago figured this out.


It's disappointing to find that so many analysts are last-millennium-thinkers, and they have themselves become disrupted. They're still betting on Microsoft for God's sake! Don't let their investment firms get ahold of your portfolio!

8 comments:

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  3. > Finally I give you the walled garden haters. These are descended from the people who like to build their own computers and hack them. They want freedom from carriers, authoritarian systems, and so forth. They want to pwn their hardware. In their minds all software is free, regardless of the time and effort expended by software developers. This class doesn't fundamentally grok the concept of an ecosystem, along with why ecosystems are essential to the survival of modern hardware

    Adding to my comments on your related blog, I agree with you that an ecosystem is critical. That is why I am hoping to create an ecosystem for apps monetized with new paradigms enabled by blockchains. And displace the totalitarianism that way. Eventually the OS and hardware will become commoditized and then Apple has to find a new business model. That is probably why Apple is attempting to corner payments, music, apps, etc.. But hopefully we in the blockchains ecosystem will destroy that and Apple will probably shrink considerably unless they can find new markets for their “reality distortion field” walled gardens. I expect this will be difficult for Apple as the former affluent West collapses economically. We are nearing the end of epoch. Apple appears to be the dinosaur.

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  4. You wouldn't be the first person to predict that Apple will fail. Hell, people do it for a living, and this post spells out their motives in exquisite detail.

    Everybody says that hardware become commoditized. But if that were true, companies like Mercedes-Benz would never make money. And Apple wouldn't be reaping literally all of the profit in the smartphone market. Check out the most recent quarter in China: Samsung dwindled and Apple expanded.

    Disruption often has the result that old theories no longer model reality so well, Shelby.

    By the way, how is Duterte's Philippines doing for you?

    You may be right that blockchains are a disruptive technological force.

    But your comment that the West will collapse ignores the effect of other disruptive technologies that have already begun to make their effects felt.

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  5. It is interesting to note that Apple’s downturn was when Steve was (kicked out and thus) not there driving new innovation.

    However his Next was a failure because there was not a significant market for it.

    I do not know if there will continue to be large enough markets relative to Apple’s market cap for highly non-commoditized innovation in hardware + software integration . Society benefits greatly from commoditization of computer hardware (+ OS integration). I am contemplating that commoditization of vehicles does not make sense except for some components such as ABS brakes (and raw inputs of course), because of the incongruent design parameters for different use cases and preferences. Do you have any insight which says that computer hardware + OS software is headed in the same direction away from commoditization? If so that would be a very important revelation.

    > And Apple wouldn't be reaping literally all of the profit in the smartphone market.

    Well afaik we have Android clones in oversupply thus I presume driving profit margins down. As I stated in my other reply today, I do not think there is another business model for Apple. My point is whether it is sustainable for Apple to maintain that moat and expand it significantly.

    Thinking about this more, I think it is likely that Samsung is going to shoot themselves in the foot on the high end where they compete with Apple. After all these years, they still can not get basic things to work correctly such as my damn Samsung refusing to stop downloading OS upgrades without my permission. The Android software continues to suck around those usability QA rough edges.

    If Apple would simply allow other appstores to be accessible by default with a strong warning disclaimer every time they are accessed from the iPhone, then most of my criticism would stop. (And including not banning any apps in the phone itself).

    I also wish Apple would license iOS on the low-end, again with strong disclaimers that these are not Apple-endorsed. Seriously take on Android at all levels without harming their existing moat. Heck I might even consider to come to work for Apple if they do that, if there was some interesting integration work with blockchains to be had (or something I am suitably interested and expert in).

    Can Tim Cook just open the walled garden a little bit more without disrupting the point of having it?

    > By the way, how is Duterte's Philippines doing for you?

    The horrendous drug dealing problem in the neighborhood from where my ex was from (where I developed CoolPage after leaving your Fractal Design Corp) is now cleared out.

    Unfortunately drug dealing is geo-political issue and I think your blog is not the proper place for us to discuss this.

    I am preferring to use the term ‘dis—integrate’ w.r.t. West. Collapse into smaller more nimble factions. So yeah I agree disruptive paradigm-shifts will also synergize with the coming splintering.

    Heck maybe Apple could even be a major force in the coming increase of degrees-of-freedom. I am willing to entertain that possibility. I am eager for win-win every where that we can.

    I am listening. Talk to me.

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    1. Britain pulling out of the EU is certainly an example of splintering. Yet they countries are the same as they were before. Globalization may simply not be a popular thing. The rise of nationalistic tendencies won't create fascist states. Not any more. It will, however make the countries less likely to globalize.

      This won't cause civil war. That's not likely at all.

      Pulling out of NAFTA is the closest thing to what you are predicting. I feel that's about it. Has the US finally decided that it can't withstand continual welfare increases? Possibly. But, even if it is true, unemployment may change that as AI begins to have its effect.

      Android clones in oversupply? Perhaps. And that would be because they slug it out to make the cheapest model.

      The best model wins, not the cheapest. This is the disruption of commoditization. People gravitate to the product they prefer. Brand loyalty only works for a while, right? Well, it just depends on how much people prefer your product, your service. User experience and thoughtfulness does count. I'm not being an idealist. This very concept has led to Apple being able to sell a product that is not the cheapest, and thus maintaining profit margins. Send in the clones - and we still win.

      This model also works this way: we don't want to be the first necessarily to market with a given feature; we want to be the first to market that does the feature right. Being a perfectionist does have its advantages.

      On the other hand, to your comments about global instability, I won't disagree that there are significant disparities. Hell, there are places that don't even have running water, yet people have cell phones.

      Russia is not splitting apart any more. That happened in the 90s. Now it's agglomerating its perceived properties to preserve its self-interests. Unfortunately Russia is depending upon the petro market, which is destined to drop in price due to changes in extraction tech. And the obvious drop in demand. And, hell, the arabs aren't doing them any favors either by glutting the market to preserve their client base.

      The US is in political flux, which is just another shift. If anything, the latest election staved off civil war because the government finally became sensitive to the job displacement problem. The government is buying time to shift those jobs elsewhere. A massive increase in the dole just exacerbates the debt problem.

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    2. > Britain pulling out of the EU is certainly an example of splintering.

      Except the Millennials are enamored with Marxism and have started the move towards clusterfuck in the UK which leads to civil war when the economy turns down hard in 1930s Great Depression. Because this time we do not have the hard working capitalists of our grandparents, but rather youth who believe in Marxism as a solution. A Harvard study concluded that 51% of the Millennials do not believe in capitalism.


      > This won't cause civil war. That's not likely at all.

      Have you been ignoring all the violence at Berkeley and other revolution seed stores around the country. This is just fomenting stage. When the economy turns down very hard, then the violence will begin in earnest akin to the LA Riots but nationwide and ongoing as an ideological war of attrition. The Left will come back into power and they will usurp the Constitution to try to undo everything Trump will have done (such as remove his Supreme Court justices).

      You will think I am crazy now. But let us check the facts again 5 years from now.

      > Android clones in oversupply? Perhaps. And that would be because they slug it out to make the cheapest model.

      I meant that they compete on price and volume because there is no moat to protect larger margins.

      > The best model wins, not the cheapest. This is the disruption of commoditization. People gravitate to the product they prefer.

      I have no idea who made the parts in my PC. And I do not care. Well I see my monitor is an Acer. Commodization means no one cares much about who makes the hardware. They only care about the software they use.

      > Well, it just depends on how much people prefer your product, your service. User experience and thoughtfulness does count. I'm not being an idealist.

      That is software. Hardware eventually becomes undifferentiated. There are not so many variants one can do with hardware. Integration with hardware is not that huge of a problem. Software and services is where the zillions of variations come into play that capture the users.

      > Send in the clones - and we still win.

      Not if people are happy with software not made by Apple.

      > This model also works this way: we don't want to be the first necessarily to market with a given feature; we want to be the first to market that does the feature right. Being a perfectionist does have its advantages.

      Agreed the software has to be good. Hardware should also work properly. But the software is where the differentiation is most important.

      > Hell, there are places that don't even have running water, yet people have cell phones.

      And this is one of huge reasons Apple has been so rapidly disrupted. And for example Apple is also so naive if they think China will not clone their product. And then they will make the software better tuned for the Chinese market.

      > the latest election staved off civil war because the government finally became sensitive to the job displacement problem

      But the Left will come back with a vengeance. Bernie Sanders would have won the national election if Hillary had not of cheated in California to steal the primary. The USA leans Marxist now. And they will have to kill the conservatives who have guns.

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    3. Even China has to live in the world. Cloning a product would infringe patents in China. Hey - maybe they'll build their own Android phone. But I think Xiaomi is already in that position of being as close to Apple in look and feel as they could be. If it weren't for that crappy Android OS, they could even achieve parity.

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