The Internet Bust or BOOM?

I always chuckle a bit when i hear the concept of the internet bust. Venture Capitalists are essentially lemmings that will happily jump off the cliff as long as the others are running just as fast. There are many reasons for this but the primary reason is that most of them come from the financial world, have very limited or no technology adoption understanding, and for some reason just cannot understand what adoption of technology takes, the chasm, the early adopters, etc., nor do they wish to learn.

Venture Capital is not scalable due to their is really only one company that will win with any new NEED, or Market Pain, The Gorilla will win, The Gorilla can start out with two guys in a basement, and displace a 10,000 person company "overnight" (within 2 years).

The problem is that Venture Capitalists tend to pick "Winning Teams" ie experienced or succesful people in their first company. This doesnt work, because the companies technology adoption is often times not dependant on the C-Level Executives, nor do they often bring any value to a company. The Technology itself, great middle management and most often a great technology team usually are the drivers. The C-level guys take the credit but were not responsible for the success, or most times, have any idea of why or why not their company is doing well.

But if you take a look at the only functionalities that were adopted, and made sense initially, there were 10 startup companies fighting for positioning during those exciting years of 1996-2000 when things were really cooking. All we really needed was the followoing:
Microsofts - Explorer - the platform to use the internet - a winner.
AOL - email - a way to access the internet, and use email - a winner. (smart enough to buy a real company before the competition ate their lunch for them, cant say any of the others are that smart, nor will their brands significantly transfer over to any other segment)
Yahoo - News/email - a winner
Google - Search engine who won - google isn't the best search engine, not even close, but everyother site was very crowded on the front page, the crisp one line search was the reason they won, period. I still use metacrawler its better.
ebay - replaced yard sales (early adopters, late adopters, and laggards still attend yard sales)
Real networks - watching video online.
skype - using the phone online.
linkedin - replaced the phone book business pages.
facebook - replaced the phone book white pages/yearbooks/sewing circles, and holiday cards all in one.
So thats about it for replacing fundamental things online, everything else will be in the later adoption cycles.
So far the early adopters choose the above, they will have those markets, and most likely nothing else, people cant use one brand to do fundamentally a seperate task, thats not how were set up, and its always fun to watch these big winners waste their money on attempting to get into a seperate business using the brand, they always fail.

But anyway thats a huge BOOM, not a huge bust. The 20 or so Venture Capitalists who understand technology shifts spend all their money on  a dozen companies who are chasing the big win, thats what they are supposed to do, thats how they win, and they expect to most of the time be in the companies who will loose. There is not enough room for thousands of vc, investing in more than a dozen companies attempting to do the same thing. There is always one winner, one secondary winner who will take 10-20% of the market, and 3-4 bottom feeders that are walking dead but covering costs in any market, which if they hit another need they will replace the existing gorilla in that space and so on and so on.

Whenever a Government, or Entire Industry starts investing in startups, 95% of that money will be wasted completely not ever to return, because they have no expertise in identifying what TECHNOLOGY will win, but lots of expertise in picking a TEAM, that seems to always loose.

The good thing is this pattern will never change, most simply do not spend time understanding, or simply cannot understand the technology adoption cycle, so go get them guys, and dont lose hope, there is always one or two areas that are ready to have a technology replaced, but typically not more than one or two per industry.

Till next time. A.D. Bernstein

Much Ado about nothing. The Video Paradigm Change and other entrenched webased services

Everyknow and then someone who doesn't understand how technology is adopted will write an article that says something ridiculous like company b will be the next company a.

To be more exact,  there is alot of talk about facebook expanding into movies, or amazon expanding into tablets with kindle, or a myriad of big companies who have won a space trying to get into another space that historically has never happened and in the future will NEVER happen.

The market accepts one website/technology/brand/product as the choice to do one thing. If that company would like to enter another space it has to do so via purchasing another company, or starting a new brand itself.

Blockbuster - The Video Store - won the video market, and is now dead. due to:
Displacement by Netflix - The Video Mailed to your home - the low end disruption, that moved up to mid-level online disruption, and has solidified itself in peoples mind as the place to go if you would like to have a movie mailed to you, or go online to rent a movie....period. No one else can or should attempt to go after this market, if they do they will fail.

Facebook recently did a deal with Time Warner to stream movies, this will fail, because this is not what people use Facebook, for its the friend and family network, that replaced the tearoom for old ladies to gossip about whats going on in the neighborhood. and replaced the photo-album for trips, and newborn family members etc. the new neighborhood if you will. This is a one trick pony, that have no experience in technology, nor does anyone on their team, so this is a rookie move, which will be followed by another rookie move, and another until they realize they should stick to just buying other websites that have succeeded in their niche like google. go by a map company, or a new online dating site, don't waste your money on doing something that won't work.

Facebook displaced Myspace, because myspace was a good place for bands, and musicians to interact with other artistic sorts, but not the place to share your art with your mom and dad, and uncle sue. Facebook the "look at me im good looking site" gained traction in a low end market displacement "dating" if you will but had all the bells and whistles to go up the value chain quickly to accomplish the look at my neighboorhood, and what little suzie is doing on friday night, so the tearoom grannies, and all the other arts and crafters grabbed onto that very quickly niching out, and niching out, due to the usefullness of how you interacted, to simply add the bands and musicians there as well.

I suspect that the next revision that people will be looking for is a video facebook or sorts, but we already have that with skype, the market is just not there for neighbors wanting to look at other neighbors friends, and family at 7am or 11pm. SKype is used for long distance family calls, and international business calls period. Im sure some software guy uses it all day long to talk to his software friend, but those are way early adopters, and it will be a few years before that chasm is crossed.

Now onto Amazon, Amazon is where you buy books, not read them. its like Cisco getting into the phone business. If your brand is knowwhere near what you think you can sell dont sell it. Amazon isnt known for its nifty computers, thats apple, or if you want a cheap computer toshiba, but if you want an amazon computer its like buing a dominoes pizza, table and chairs, yes that what you eat the pizza on but no, nobody wants a dominoes pizza table and chair set.

Large companies in one niche:
Google - search engine
Amazon - where you buy books
ebay - the yard sale lady online
facebook - the neighboorhood gossip room
youtube - the 15 minute or less funny video clip place
Apple - the cool electronic piece of equipment place.
microsoft - the office software
netflix - the online movie place

Are all stuck doing there one niche thing on the internet. not in the history of the internet (all since the really long time of 1995) has there ever been a departure from the one place to do the one thing, and there never will be thats how technology or a displacement works.

The only thing that a large succesful displacement company can do is buy another company that succeeds in displacing something else that used to be done off-line.

Anyway, Don't listen to reporters articles when they report something goofy like company b is going to take over company b's space when they are clearly entrenched in a different niche application.... it just doesnt happen.

Patents are now "first to file" or "First Large Company who would like to take your idea and run with it reform"

S.23 Patent Reform Act of 2011, Passed the Senate March 8, 2011

I typically stay away from politics and politicians, because they don't do anything anything that makes any kind of sense. Although they are so easy to figure out, it's simply  a matter of  inquiring who paid them to write a law, typically so they can go on an extra vacation, put some money away for their personal retirement, or hire an extra secretary for there stay on the hill to help collect extra checks, to continue the process for the next election....so on this Bill I did.

It didn't take very long to identify who wrote S.23, politicians don't write anything, nor do they read anything. They are very familiar with bank software though.....i'd imagine, or at least there new secretary is.

S.23 Patent Reform Act of 2011 overturns over 100 years of precedent , and brings to mind  one of my favorite founding fathers: Benjamin Franklin



Benjamin Franklin



This is completely ironic, due to that Benjamin Franklin had so many disruptive technologies implemented, more so than anyone that I can think of like electricty, and the stove, and my favorite, let's let them rent books so they won't be as dumb, they simply can't afford it (the very disruptive concept of the library)

Would have one of the greatest principals "The Patent" dissapear due to "Benjamins" (cash) given to write a bill to give that was paid for by "The Church". (Microsoft Corp.), which goes against seperation of church and state. (church being run by the king of england, back then..this is a more of a money equals power concept, and the chuch was the only thing back in the declaration of independance days that would right checks to the king to implement laws. Now our Church consists of the Fortune 500, who right checks somehow for their own benefit all day long via brokers called PACs, individually, and directly, but i'll explain that in a second. This would'nt ruffle my feathers very much it's obvious, I know, and this isnt a political blog,  but since they took all of the innovators out at the knees on this one, I will go into detail, because this particular one (bill) irked me just a bit.

So this piece of legislation was written by the following recipients of cash and sitting congress members:

(and just for note, it doesn't matter one party affiliation, it just so happened this bunch of enablers happen to be Democrats, and Orin Hatch who apparently is party agnostic.. the deposits all go to his bank account.)

Democrats - Patrick Leahy, Richard Bloomenthal, Chris Coons, Al Franken, Kirsten Gillibrand, Charles Grassley, Thomas Harkin, Amy Klobuchar, Herbert Kohl, Joseph  Lieberman, Charles Schumer.

Rebublicans - Orrin Hatch, and Jon Kyl

The sum total of years of expertise in Patents........well it doesn't matter but none. they don't right the law they just pass it.

Direct Payments made to Mr. Patrick Leahy.. Paid for by:

Microsoft Coroporation  outright- $33,250

Technet (microsoft indirectly "a sponsor member") - $81,961

Other  Church Denominations include: (most likely not for this bill) (but maybe)

Time Warner - $63,400, Walt Disney Co - $43,000 Vivendi - $34,706 National Amusements $27,750 Comcast - $25 General Electric - $23,000 Google $23,000 Oracle - $21,000 Intel $16,900

Direct Payments made to Mr. Richard Blumenthal.....come on down your the next contestant on. the price is right. just sign here please.

Microsoft Corporation - $10,000

Assn. for Competitive Technology (micorosoft indirectly) - $2,000

Direct Payments made to Mr. Chris Coons..

Microsoft Corporation - $5,000

Entertainment Software Association - $1,000 (hmmm microsoft here maybe..)

Direct Payments made to Mr. Al Franken.............(oh common Al.....i was hoping not to see this here..if there was one guy who i thought would be a shining light in the darkness but he is now assimilated)

Microsoft Corporation - $20,050

To be fare Al had some of the same big donors as the leader of the "PAC" Patrick Leahy that might be involved but doughtful, they most likely had other bills to pass  National Amusements - $25,000,  Time Warner - $49,000 GE $52,000, News Corp $22,000.

Direct Payments made to Mr. Chuck Grasley

Microsoft Corporation - $16,250

Direct Payments made to Mr. Orrin Hatch

Microsoft Corporation - $4,500

Entertainment Software Association - $1,000

Cisco, AMD, Google, and Oracle are here too. ...but not a pattern like our boy Bill.

But anyway you get the picture. why would you ask would anyone pass such a mindblowingly ridiculous piece of legisislation that basically gives any company (church/institution) the ability to take any piece of published or non-published paper of professors worldwide, entrepreneurs who have had good notebooks, and havent published yet, due to financing issues, havent patented yet due to financing issues. and place the patent in.... well for what I can see not a whole lot of money is just as I said mindblowingly ridiculous.

From this point forward anyone can place a patent on any new paper they read, and the originator of the work gets nothing..

Why would Microsoft do this? Well they obviously are in a down period, have no real additions in the pipeline that would be useful enough that isnt already offered in the office suite, I mean common how many languages can you translate an article into, or how many fonts can you integrate until the diminishing returns on investment come into play.

This is a last grab political approach to innovation, but totally in characteristic with previous ploys, etc.

(for the record before looking into this i didn't realize that Microsoft was indeed the culprit, I was thinking someone much more on the ropes or on the downswing, but know it makes sense the money never lies in politics ever)

In technology the list of successful integration goes as so:

Technology defers to: Engineering

Engineering, defers to: System

System, defers to: Adoption

Adoption, defers to: Politics

If you can go directly to Politics, the Adoption, System, Engineering, and Technology are irrelavent.

And so a big dying company can hope to make the underlying technology coming at it a little less virulent, by just taking that technology for themselves. in this case this is exactly what is going to happen.

The particulars of the bill:

The patent reform bill overturned centuries of precedent that granted patent protection to the first inventor to file a patent application, rather than requiring patent office examiners to decide who was first to produce an invention. The White House, which promoted the legislation, said the changes would reduce legal costs, improve fairness and support American innovators.

I would agree it reduces all legal costs of attempting to identify who legally owns the rightful invention....this is much to complex...and legal....why not make it simple .....the big company owns it ...easy......

Big company now fairly owns the poor professors last five years of work, with zero compensation.

Support American Innovators......................See Page 2 of my blog on Innovators, this will support the Late Adopters and Ludites...not Innovators.

Part 2 support AMERICAN innovators, not really every chinese manufacturer running their search bot software will be able to mine and patent just about anything they are mining without that little hastle of inventorship in the way.

A true swipe at one of the fundamental principals of America, Invent something and you can make a lot of money selling it here without worrying about the church...until March 8, 2011, thanks to the church of Microsoft Corporation and the list of donors above.

Stop Calling your Technology Disruptive IT'S NOT

You can google disruptive technology, or here marketing people, or entreprenuers use the term disruptive to describe what they are trying to develop, and not only is it not disruptive, its generally not even a unique idea.
The term disruptive is applied so often it has become a buzzword, which is unfortunate, because now you actually have to listen to what someone is describing, then explain to them why what they have isn't disruptive, or even sustaining.

So the only link that you should stop on when you google disruptive technology is Clayton M. Christensen
                    Not Tony Robbins 
Clayton M Chistensen                                         Anthony Robbins

Clayton looks like a typical ludite management type who wouldn't know a new technology and its application, to save his life, and he definately has taken on the Anthony Robbins sell my book and do the circus act approach.......but his books and information are good, unbelievable from a guy who reminds me so much of Tony....who is an obvious moron.

Clayton M Christensen and Joseph Bower co-wrote the 1995 article Disruptive Technologies, Catching the Wave, and it was like an awakening happened, it obviously described what the tech industry was experiencing on a regular basis, in detail, and would give any Management the tools to identify and protect their particular industry, at least point them into the right direction of what company to purchase......right??? oh well maybe next cycle...That would mean there would have to be an early adopter making decisions with a C or V starting in the title...usually doesn't happen.

TYPES OF INNOVATIONS

SUSTAINING - Revolutionary or Discontinuous (transformational)
An innovation that creates a new market by allowing customers to solve a problem in a radical new way.
Does not have an effect on the existing market.
Not always Disruptive, but sometimes.

Tivo - ability to record live television for watching whenever, didn't affect generally watching tv at regular time by the masses.

EVOLUTIONARY - An Innovation that improves a product in an existing market in ways that customers are expecting.

ie: Another Version of Microsoft Windows, the Iphone #5

DISRUPTIVE - An innovation that creates a new (and unexpected) market by applying a different set of values.

ie: Netflix (delivery of videos through the mail) vs. Blockbuster (driving to a store for videos)


How Low end disruption occurs over time




















Disruptive Technologies are RARE.

They typically are sitting in the lab somewhere, or have been published 30 years ago, the timing money, and most importantly the ability to cross from early adopters to early majority has to be in place.

OLD Disruptive Examples:
Cathode Ray Tube (big Box TVs) to Liquid Crystal Displays (LCD)'s  - CRTs are obsolete
Chemical Photography to Digital Photography - Chemical Photography is obsolete
CD's and DVD's - Digital Downloads - CD's and DVD's are obsolete, although available at walmart
Printed Brochures - Websites

NEW Disruptive Examples:
Light Bulbs to Light Emiting Diodes (LED's) - Light bulbs will become obsolete

The Dynamite Inventors

 The Dynamite Inventors 

For those of you who dont know the history of the Nobel Prize, Alfred Nobel was an Innovator, a real Entrepreneur.
Alfred Nobel the Chemist came back from Studying in the United States to work in his fathers factory, which became bankrupt. An explosion occured in the factory killing 5 people including Emil Nobel, Alfreds brother.
Alfred being a chemist quickly engaged in creating a safe form of nitroglycerine (invented by his professor).
He Patented Dynamite in 1867. along with another 355 patents throughout his lifetime.
He became rich and famous selling dynamite.
Alfreds brother Ludvig Nobel died while visiting france, and the french newspaper reported on his death "the merchant of death is dead" this upset Alfred Nobel, and the rest is history, he left the bulk of his fortune 31,225,000 Swedish Kronor ($250M US current day equivalent) in 1896 to fund the prizes.

Alfred Nobel



Alfred Nobel always recognized Ascencio Sobrero as his co-inventor, an honorable trait, its funny that when the money comes that many inventors seem to forget who they developed the technology with these days.



Ascanio Sobrero

The Internet Inventors

Like any new technologies that successfully get implemented in society, there are the innovators, and  the early adopters (champions) that can connect the innovators to the money, development and adoption, below is the cast of characters and how they made the internet happen:

THE INNOVATORS - The Scientists

The "Inventor" first to publish


Paul Baran

in 1960 Invented Packing Switching networks or "the internet"
Who was laughed out of AT&T for not understanding how voice telecommunications work. Textbook case of selling or introducing to late majority adopters, or ludites.



1961/1962 - mathmatical theory of packet networks - MIT
Queing Theory led to packet switching concepts or "the internet"

Leonard Kleinrock



12 years later The fundamental building blocks/concept/heart/ of the Internet - Transmission Control Protocol and Internet Protocol developed and introduced in 1972. by:

Robert Elliot Kahn        and          Vinton Gray Cerf

Vinton Gray Cerf - in 1982 also came up with email, and offered the first commercially available email service via MCI.

1977 The Grad Student working with Leonard Kleinrock who did all the work on Hierarchical Routing


Farouk Kamoun



THE KEY TO THE INTERNETS SUCCESS "THE CHAMPION/THE GATEKEEPER" EARLY ADOPTER
You can see the charm just oozing out of this guy! If you have a new technology find this guy in an mid-large sized company, he is who your looking for.

Wesley A. Clark - ARPA (now DARPA)

Walked the Idea into the Suits, it Takes a Wesley to approach a Lawrence.

THE CASH - THE EARLY ADOPTER
Funded - ARPAnet


Lawrence Roberts - ARPA (Now Darpa)

The foundation of the internet is now laid and working:

ENTER INNOVATORS
Tim Berners-Lee and Robert Cailliau

Proposed in March 1989 Hypertext Transfer Protocol at CERN
December 25, 1990 Implemented the first successful communication between a Hypertext Transfer Protocol (HTTP) Client and Server via the internet.


Tim Berners-Lee                                     Robert Cailliau
in 2004 "Sir" Timothy John Berners-Lee, in 2004 still just Robert Cailliau (they must have run out of swords)

There are lots of innovations and early adopters from this point forward, but the end of the real innovation stops here. All the applications, windows, video, chat currently in 2011 are all obvious and not really technology, just technical improvements.

Even the extensions into hollographic imaging, voice, video, and data are obvious and have been discussed and written about for ages. The above group have done most of the heavy lifting, and the future is laid out clearly. Just a matter of timing for every application that you can think of, adoption rate is a different matter, and time is what will take for everything under the sun to be adopted.

Paul Baran (1960). "Reliable Digital Communications Systems Using Unreliable Network Repeater Nodes". RAND Corporation papers, document P-1995. http://www.rand.org/pubs/papers/P1995.html.

Leonard Kleinrock, Farouk Kamoun: Hierarchical Routing for Large Networks; Performance Evaluation and Optimization.

Emerging Technologies for Moores Law

Gordon Earle Moore - Founder and Chairman Emeritus of Intel Corporation

Moores Law coined by Calvin Mead at Caltech in 1970 essentially says some day soon were going to hit a wall, was again originally described by Gordon E Moore in 1965. Essentially the number of transistors that can be placed inexpensively on an integrated circuit doubles every two  years. some say it is already hear with the ability to purchase a computer with 2 chips instead of one, obviously the performances available on one chip such as processing speed, memory capacity, sensors, heat dissipation, etc. is no longer feasible, you need 2 chips for todays video hungry gamers.

So the issue is that Silicon used as the semiconductor etched at the smaller and smaller levels, were currently at about 50nanometers, one nanometer is pretty close. Density at minimum cost per transistor is the goal you get into high cost when were at this level so it makes financial (market) sense to stop.

Compound this and everyother aspect of computing that is demanding higher and more performance at just about every level, power, storage space, pixels etc. somethings got to give.

The emerging technology will emerge from somewhere, right now the University and Semiconductor laboratories have their technology enthusiasts speaking with other start-ups, Proffessors, and other enthusiasts looking for the cure.

This is a textbook example of Pain, which will follow with a handful of spin offs, spin ins, and start ups lining up to take a shot at replacing the semiconductor silicon.

So who are the contenders, well the short list actually comes from..... Carbon Nanotubes.....Graphene.... and....Molybdenite. All have been around since the dawn of mankind.

Carbon Nanotubes first published in 1952 by Russians L. V. Radushkevich and V. M. Lukyanovich, then brought back to life by


Sumio Iijima NEC - often credited with the discovery, actually identified the double walled carbon nanotube.

Issues that are preventing immediate (1-3 year) adoption
#1 - they are small tubes (think stack of needles) allignment, and allignment is something of an issue here.
#2 - properties, some of these needles turn metallic, some stay carbon, so you cant have that in a semiconductor wafer for obvious reasons.
#3 - COST - these are grown on CVD machines.

Im sure people are addressing the above issues somehere, and even if they do, then Mr. Pragmatic Buyer is going to insist that someone else buy this experiment before he sets up a line on his floor for implementation.

Graphene - Even better than Carbon Nanotubes, a very nice conductor.
Discovered in 1918 by  V. Kohlschütter and P. Haenni

Brought back to life with a couple of 2010 Nobel wins for Russians Andre Konstantin Geim, and Konstantin Sergeevich Novoselov, the "discovery", just like everyother "discovery" someone else claims the glory for bringing an old paper out of the dust...but on to Graphene. They used a piece of scotch tape (seriously) to apply the graphene for their experimentation...

Graphene basically the same issues as above, a pragmatists nightmare to get this to work, although there is no stack of tubes issues, the growth and how to etch are major hudles.

ENTER - Molybdenite via the Swiss Andre Kis and colleagues of the Ecole Polytechnique Federale de Lausanne (EPFL) in Feb 2011 they announced that Molybdenite can be made into smaller transistors, 1.8eV band gap, and transmit 100,000 times better than Silicon, the Graphene guys were close, back in 2005 they had Molybdenite on their sticky tape as well, but they put it down.

My hats off to Andre Kis, and see you at the Nobel awards soon....Molybdenite, is etchable, fast, and feasible, so more importantly this looks like the next phase in semiconductors.

Dr. Andre Kis  of the Ecole Polytechnique Federale de Lausanne

Intel's information page on Moore's Law