Month: November 2011

Around the time Apple launched the tablet Microsoft was working on something called the Courier. A Microsoft alternative to the iPad.  Microsoft beat writer Jay Green just did an expose on the Courier and what happened for CNet.  It’s a pretty telling article on some of the inner working at Microsoft and how decisions are made.  It makes for good corporate political intrigue .  It raises a lot of questions.  I shall try to provide my insight.

I remember the first photo’s of the Microsoft Courier, the new, but ill-fated Microsoft project to capture the tablet market. For starters it was different. It opened like a book with two screens. It looked very cool and sleek.  It showed thinking outside of the box ( I hate that term).  Being at Microsoft at the time it was something everyone craved.  Microsoft has and still is in the mindset of let others create the market and we will come from behind and take the market.  In the past against WordPerfect, Lotus, Novell and many others it was a strategy that worked well.  Lately that has not worked so well starting with Search, Smartphones, Social Networking, Digital Music, Cloud Computing (Ballmer’s quote on the cloud -“We’re all in”…did you really have a choice?) etc..it has, in my view, become a rather outdated mode of attack.  The market is moving much faster and the gains some of these companies make in market share, make it a lead that cannot be caught

In reading the article you get a sense of internal Microsoft politics and I have to be honest a rather disconnected Bill Gates.  We will tackle the latter first and then move on to this blogs episode pf “Dallas” in the next segment.  At one point as things unfolded Steve Ballmer turned to his old friend, boss and Microsoft chairman Bill Gates for his opinion and guidance on which direction to move forward with.  J Allard and crew met Bill at his Kirkland office to review and promote the Courier, as the Tablet for Microsoft moving forward.  Things were going well until the discussion of email came up.  The Courier teams view of email was web-based services such as Hotmail and gMail.  Bill still had and has stuck in his head Microsoft Outlook as the greatest email client since sliced bread.  I think Bill has lost touch with how people communicate.  We have services like SMS (text messaging), Instant Messaging, and Social Networking.  There are a lot of options that do not require a desktop app of the power of Outlook.  But Bill is not a hipster so the new communications technologies seem primitive to him.  He is so connected to his inner geek.  As Steve Jobs said, “It would not have hurt him to have dropped some acid when he was younger”.  The Courier team did not gets Bill’s blessing.  They should have brought some LSD.

Microsoft politics at a high level is pretty simple.  The group with the most money wins.  At Microsoft that really means two groups, the Microsoft Windows division and Microsoft Office division.  What the Courier team was doing was a stripped down version of Windows that would have its own release cycles.  I always felt one of J Allard’s great attributes at Microsoft was his ability to see what was wrong with success.  When he launched XBOX he essentially formed a new company within Microsoft and did not fall into the Microsoft product group track.  The challenge he was going to have with the Courier was it required an operating system.  He was going to do battle with the Windows Division.  It was to be a David versus Goliath moment.  However in this story David does not win.

Steve Sinofsky is the President of the Windows Division, Though not always popular, he does do one thing very well, ship products on time.  I can only guess at this time but I doubt my guesses will be that far off base.  To talk slightly technical for a moment we have the issue of code bases.  This is the actual code developers write to create Windows.  The stuff that makes most people’s eyes glaze over.  What J Allard was proposing was a “new” Windows OS for the Tablet.  One with its own release cycles.  Over time it would “fork” into a completely different direction and I could see eventually being its own OS with its own fiefdom at Microsoft. .  These are very valid points as Microsoft release cycles are no longer acceptable in today’s technology world.  In the old days three-year release cycles were the norm.  In today’s consumer driven world the norm is 12 to 18 months.  More importantly it would not be under the guise of Steve Sinofsky.  Given that the Tablet space is one of the hottest markets on the planet and Microsoft was starting to work on the planning for  Windows 8, this was a battle Steve was not going to lose.  Steve simply could say, “J I have 10 billion dollars….game over”.  And so it was.

Coming forward to today we look like we are still 12 months from the release of Windows 8 (maybe sooner depending on which rumor mill you are listening to).  In the meantime the market has heated up.  The iPad 2 is a run away success.  It sold 500,000 in its first three days on the market.  We now have low-cost providers entering the market for the holidays the Amazon Kindle Fire and the Barnes and Noble Nook.  These coming at prices below $200.  The early review on the Amazon Kindle Fire are very good.  In the mean time we wait for Microsoft.  Will it be June?/  In time for the holidays in 2012.  What version will Apple be on?  By then they should be hard at work on the iPad 4.  I big bet Microsoft is making is the belief that the market wants Windows, that they specifically want a Windows Tablet.  The market moves fast, it will be different when the Windows 8 Tablet ships.

Finally the frustration for many Microsoft employees was that there was a cool device being worked on.  It was perceived as something that could change the game and make Microsoft likable again.   It was different and dangerous, something that is a must if you are to change a market.  But do to internal politics we never saw the Microsoft Courier.  It was created with a start-up mentality in some cool offices in Pioneer Square.  As Jay Greene comments that has all been shut down.  I am not surprised by the death of the Courier and it’s legacy   It was a battle that it was never going to win.  However I know that the people at Microsoft crave this type of excitement in product development.  Though Windows brand still commands 90% market share, it is frankly becoming a rather dull brand.  In the mean time we are promised better things for tomorrow.  However a promise for tomorrow is a promise to no one.

Good Night and Good Luck

Hans Henrik Hoffmann November 23, 2011

We seem to hear it every day. It’s on the news. The impact to the global economy could be immense.  The fall of the Euro Currency and the Euro Zone could begin.  The ripple effect will bring us into a global recession.  All this stemming from the birth place of democracy, Greece.  Somehow I don’t think Aristotle saw this coming.  How does a global economy evolve so that Greece holds the fate of economic recovery or economic disaster in it’s seemingly feeble hands?  More than anything it is evidence on how connected we are as a global economy.  It just takes one domino to fall to set in motion a chain of events.  It’s an interesting phenom but somehow the domino example simplifies what is a rather complex topic, but one I would like to try to tackle.  Hopefully it will make some sense in the end.

In college I studied in Copenhagen for a year in 1987 (prior to the fall of the Berlin Wall).  A primary focus was, the then 30 plus year old union, the European Economic Community.  The big transition being discussed at the time was not the move to a common currency, the Euro, but the move to border less states.  At the time you still required a passport to travel from Denmark to Germany.  It was a point of pride for my fellow students to have a passport with a bunch of  stamps representing all the countries they had visited.  All the students in the program had the travel bug.  Later in the school year we went to the European Union headquarters in Brussels, Belgium to see, hear and learn how this community worked.  We visited the different branches of EU government, US trade representatives and enjoyed Belgian beer.  It was an exciting time in Europe as they were moving forward with great plans of an integrated Europe.   There were obstacles. Certain countries were economically well behind others, this included countries such as Ireland, Portugal and Greece.  While other stronger members, primarily Germany paid the bills to modernize these struggling countries.  Looming in the distance was the idea of a common European currency.  The idea of saying good-bye to Italian Lira’s and Greek drachma’s

Stepping back a bit further Europe as a whole has always had different views on social services.  In part driven by the culture, in part driven by the different relationships between labor unions and the state and private industry.  There are, like any system, both good and bad things.  There are basics like health care.  In Europe it is covered by the state (through higher taxes), but specialty services like a back surgery you may need may take a long time to get scheduled.  But talk to anyone in the United States who is out of work and the biggest concern is health care.  Another big one is retirement.  In France for example some public workers can retire in their fifties.  With people living longer and needing more care in their old age, this has become problematic. not to mention very costly.  There are a lot of other services provided by many European Union members but bringing this back to current events when the economy dives it impacts these social services.

Since the fall of Lehman-Brothers we have seen the global economy dive, and it is worth to note I say global economy.  We are interconnected.  The effort to create a common currency in Europe was well founded as the world looked only to, and still only looks to the US dollar for safe haven.  This has been a savior for the US as foreign countries buy up US treasuries and float our debt.    The euro for a while looked like it would act as an alternative to the dollar.  And for a while it was.  The challenge in Europe is it is often called the United States of Europe, but in really these are still independent sovereign states.  Though they for the most part have a common currency (Denmark and the United Kingdom have yet to move to the Euro), in term of funding social services each country still has to fiance these services on their own.  This means that each country has to finance these services through the issuance of government debts.  In the end you have Greek Bonds, Italian bonds, Spanish bonds etc.. With 27 countries in the European Union how do you proactively manage each countries finances?  This is unlike the states in the US that have to balance their budgets each year, which is why a lot of the big cost cutting we see on a daily basis is happening at the states and down through counties and cities.  Imagine if you will 50 states, in addition to the federal deficit, all running multi-billion dollar deficits.  Now imagine Europe..except your not imagining.

When the economy tanked the math becomes pretty simple.  If your tax revenues fall below what your services cost you start to run a deficit and the lager the deficit grows, the more it costs to finance as the banks who loan the money expect higher returns, in the form of higher interest rates.  At some point the interest rates get to a point where the country cannot make payments.  In the case of Europe the magic number seems to be 7% interest.  So what does Greece have to do?  They have to cut government or what is being called austerity measures.  This means social services that have been available for years have to be re-examined and cut.  It could be health care costs are slashed.  Retirement ages are raised. Pension payments are cuts.  Unions rights are challenged.  Education cuts.  It all sounds very familiar to what we hear about on the news on a daily basis in the United States.  Except in this case it is very real.  However as we have seen on television this leads to civil unrest.

One scenario has that Greece declares bankruptcy and exits the Euro and goes back to the drachma.  That means anyone in Greece owing money in Euros will see there costs dramatically rise as the relationship between the drachma and Euro is one where we will likely see the drachma slide and thus end up costing debt holders even more money.  This will likely also lead towards sky rocketing inflation in Greece,  All in all this scenario would be bad for Greeks and the Greek economy. It would also cause instability in the Euro as you would then have the who’s next scenario, which right now is Italy, an even bigger problem looming, that is no longer on the horizon.  If the euro starts to falter it will be good for no one.  As we are hearing this eventually starts to impact economies beyond the shores of Europe.  We have already seen some Wall Street firms make bad bets on Greek debt, leading to more layoffs.

It’s hard to believe that the birth place of democracy has become such a focal point of global economics and politics. What would Aristotle or Socrates do?   Of course much of their dialog was about the conflicts of man himself.  this material thing called the economy might not interest them a whole lot.  But it is of interest to the people who make up the economy, who are already on edge from three years of economic unrest.  Frankly we are all tired of the instability in an increasingly connected and unstable world.  It’s still hard for most to grasp how Greece holds our fate.  I have  tried, but does this comfort someone who is unemployed in Topeka?  Maybe it is best to leave this to Socrates:

“True wisdom comes to each of us when we realize how little we understand about life, ourselves, and the world around us.”

Good Night and Good Luck

Hans Henrik Hoffmann November 15th 2011

I will preface this entry by saying my morning ritual starts with coffee and CNBC. I love the stock market and invest whenever I can. I find it a wise long-term investment and enjoy doing the research. I run Yahoo Finance all day long. I check my accounts all the time and do not get overly concerned win or lose.  But then again that is just me. In recent news  we have seen this global phenomena of people protesting Wall Street and the financial markets.. It has spread like locusts across the United States and across the oceans.  My buddies at CNBC Jim Cramer, Joe Kernan, Becky Quick and whomever else is on in the morning show are confused as to what they are protesting and what the protesters want.  I don’t think it is that hard to figure out. People in America understand Wall Street they just don’t want it running their country. I wonder how often the CNBC folks follow current events and what the impact of those event are.  It’s the latter that concerns me more, I think they are on top of the former.  Is Wall Street just so disengaged from main stream America that they really don’t know what is happening .  So what do the protesters want? For starters CNBC they would love for you to all to be fired and your network to be shut down. Remember I like your show, but I am just saying…

If we go back in time and just review what the internet and cable networks have meant for Wall Street, in short it has been nothing less than monumental.  If you remember before the internet investing was done over a phone.  How your account was viewed was through a monthly statement.  To place a trade was expensive.  I remember the first trades I did were $69.  You really had to factor that in to your return on investment.  Now trading is done online and you can view your statements whenever you want.  The cost to trade is less than $10.  The cable networks supply a steady flow of up to date business news.  Earning reports, Tax Cut discussions, political leaders and CEO’s, who have more or less become pop stars. The stream of information we are given is endless and relentless.  We have the ability to make thousands upon thousands of dollars in a relatively short time.  The down side of course is we can lose that money in a relatively short time, which brings us back to where we are today.  When things began to unravel it happened very quickly.   Then homes just started being repossessed.  No one was ready.  This left us with a nation  of angry people.  Which is where we are now.

Andrew Ross-Sorkin wrote the epic book “Too Big to Fail”, which detailed our current economic downfall.  It is a great book, detailing the events and activities of all the power players in the financial services sector and in government.  It was a lot of late night dinners at high-class restaurants.  Corporate jets flying crossing the Pacific and Atlantic.    Interactions with government officials at the highest level.  The cast of characters is vast and includes;  Lehman-Brothers CEO Dick Fuld, JP Morgan CEO Jamie Dimon, Secretary of the Treasury Hank Paulson, Fed Chairman Ben Bernanke, Tim Geitner President of the New York Fed etc..It is an impressive line up of individuals.  All playing with and trying to hold onto the power they wield on day-to-day society.  They come off as economic puppet masters playing with a group of puppets called the economy.  The good news is they are all in fine health and living well.   Dick Fuld still has his retreat in Sun Valley. Which brings us back to our protesters and why they are angry.  As engrossing as the book is, it never mentions the people who make up the economy.  Your neighbors, your friends, co-workers, at the end of the day these are the people who make up the economy.  What was happening to them while Goldman-Sachs and others played God? Do any of these people know what life is like without a job or health insurance? Hundred’s of thousands of people in America no longer have a home that they own.  These are many of the people who are angry at Wall Street.

As the economy continues to sputter along it seems obvious (at least to me) that people are going to start to get a little roiled with these so-called prophets of Wall St.   While these great and mighty business leaders are having double martini’s with caviar there are people in the real world with real world problems.  Families whose house was foreclosed.  Children with medical issues, but no health insurance.   Fathers and mothers collecting unemployment.  These issues add a heavy weight and pressure to everyone involved.  It has been going on since the fall of 2008 and people are getting tired.  And the worst part?  Everyone says it’s not getting better, that it could be another year or two before we turn the corner.  In the meantime Wall Street gets excited by great earnings.  Sometimes good products (Apple comes to mind), other times through cutting costs, or layoffs.  While Bob heads to unemployment, Cramer says good job Apple or Goldman.  It has become that our lives are governed by Wall Street.  America emigrants left Great Britain as they were tired of being ruled by despot monarchs.  Now we are ruled by something much stronger but far less tangible.

After all this, when the protests break out CNBC cannot seem to understand why?  Funny thing is Cramer used to be one of them.  Back in his hippy days and then he lost his hair and needed to change direction.  When one looks at the people who make up the protesters there are the people impacted and those who are just joining the work force.  Those who have experienced reality and those that are young and are idealists.  Neither of whom should be ignored.  It is not that different from what happened at the turn of the century as average Americans began to turn against the Vanderbilt’s and JP Morgans of the world.  the so-called “Robber Barons”.  One of the biggest issues people had then and they have today is the access these people have to power, namely Capitol Hill.  Corporate Execs go to Capitol Hill seeking tax breaks and access to government programs that result in big payouts.  These big payouts being funded by you and I through our tax dollars. Democracy is 100% not 1%. It would be wise for many leaders in America to remember that.

In the end CNBC,  people are tired and hope is beginning to wane.  While you prop up government officials and corporate CEO’s the real America waits.  They wait to return to a job, a career. to provide for their families, to be insured. Those things that we have become accustomed to that now seem to be slipping out of our reach.  Maybe if you did a human interest story and talked to the actual people who make up the economy.  Maybe then you would understand. Until then tells us all your ivy league theories and enjoy another Manhattan (Makers Mark please) for me.  Choose to ignore the real economy.  That is the protesters outside your door.  They are the economy now and the economy moving forward.  They should be the ones you worship.  They are America. Remember I am a big fan of yours…but I am just saying.

Good Night and Good Luck

Hans Henrik Hoffmann November 1, 2011