Tag Archives: Business

I’ve Never Wished I Was Less Technical

I got an early-ish start with computers when I was about 6 or 7 years old.  My dad created an MS-DOS boot disk that got me to a DOS prompt on the one of the hard diskless IBM clones in his office.  Once I had booted to the command line, I’d put another floppy disk (these were 5.25 inch floppies, the ones that really flopped) in the B drive, type in the commands which I quickly memorised, and my six year old self would be ready for some hardcore word processing.  Using Multimate at first, but then moving on to PC Write, I penned a few short stories and would love to visit the office and use the computers.  My Dad’s staff even gave me access to the holy of holies – the one real IBM PC (not a clone) which had a 5 megabyte hard disk, and was protected by a password.  I was solemnly lectured to never disclose the password, not to anyone, and I never have, even to this day.

And so it was against this backdrop that I became interested in computers.  When I was nine my family bought our first computer from a back alley vendor in the Philippines.  It was an IBM compatible XT Turbo, which was technically an 8088, with a twenty megabyte hard disk and a monochrome CGA monitor.  It was outdated when we bought it, as the 386 had just been released, but I loved it.  I spent hours learning different software packages like Norton Commander, PC-Tools, and playing games like the Commander Keen trilogy.  We kept it until I was twelve, and then gave it to a Chinese friend when we replaced it with a 486 DX-33 we picked up in Hong Kong.  Built like a tank, it is probably still in operation somewhere.

Despite this early introduction to computers, I didn’t get started programming until I was sixteen.  It was harder then – we had just got the internet but the tutorials and blogs and wealth of easy information we have now didn’t exist.  It was also difficult to get the necessary software you needed – thanks to living in China I could buy a pirated copy of Borland C++ or Microsoft Visual C++ for about a dollar, but they were a bit overwhelming to setup.  I finally found someone who knew how to program and begged him into giving me a few sessions.  He had a book, helped me setup my compiler, and agreed to meet with me once a week to teach me.  I even managed to get these sessions accepted as school credit during my junior and senior year.  I still keep in touch with Erik now, and he was one of the groomsmen in my wedding.  Together we even managed to cobble together two “junk systems” from spare parts and after a few weeks of constant trial and error, we got Slackware running in 1998, still one of my proudest technical achievements.

Every American college bound student knows that their junior year of high school is crucial for getting accepted into their university of choice, and I began targeting computer science as my major.  I was heavily advised that I should focus on a business degree instead.  At the forefront of that group were several of my math teachers, who knew that I didn’t do well in that subject, but there were also many others who thought that I shouldn’t “waste” my people skills in a technical role.

But I was really enjoying programming!  My first real project was a string indexing program which could accept a block of text (much like this blog) and then create an alphabetical index of all the strings (words) and the number of times they appeared.  Written in C, I had to learn about memory management, debugging, data structures, file handling, functions, and a whole lot more.  It was way more mentally taxing than anything I’d ever done in school, and it required a ton of concentration.  I wasn’t bored like I often was in classes.  It was hard.  Erik would constantly challenge, berate, laugh at me, and most importantly, accurately assess me using an instructional style that I’d never been exposed to before – he only cared about the results, not the trying.

Although I was dead set on computer science, I really liked making money too.  My parents noticed this and for one semester during that crucial junior year they offered me financial rewards for grades achieved.  After I’d hosed my dad for over a hundred bucks due to my abnormally high grades that semester, he announced that “grades should be my own reward” and immediately discontinued the program.  There were plenty of people telling me that a degree in business would better suit these talents of mine, and if I was honest, at the time I knew they were probably right.  I was great in my non-science subjects, I could mail it in on papers and still get an A, and I knew that diligence, attention to detail, and math were weaknesses.  Getting a business degree would be stupidly easy.  Getting a computer science degree would be pretty hard, at least for me.

I was close to changing my mind when Erik mentioned, “You know, I’ve never wished I was less technical.”

This is advice that I really took to heart.  It rung true when I was seventeen.  It’s even more true today.

For me, the advantage that I incurred by getting a computer science degree meant that I could start my own consulting company and be one of the technical contributors while also being responsible for the business stuff.  It helped me obtain positions of leadership because I didn’t need technical middle men to explain things to me.  If things were going poorly, I could help manage the crisis effectively, and when things were going well I could explain why and point out the technical decisions that had carried us to success.

Guess what?  I got to do all the business stuff too!  Having a technical background has never limited my business acumen or hampered me in any way.  I haven’t coded for money since 2007, but I use my knowledge and experience every day, and I stay up to date with technology as much as possible.  I love it when our technical lead shows me the code behind the latest feature.  If anything, having an appreciation for complexity, code, and systems design has only helped me design and implement better budgets, business models, and pricing schemes.  I’ve never met any “business person” who is better than me at Excel, the language of business, and much of that stems from just knowing how to program.  This has made me the goto guy in almost every planning or budget meeting I’ve ever been in.

Unfortunately, it doesn’t work the other way.  People who aren’t technical will always struggle in any technically related environment.  I’ve met so many people who have struggled and struggled to make their great idea a reality chiefly because they weren’t technical, couldn’t contribute, couldn’t cut through the bullshit, and therefore couldn’t effectively manage their way to success.  Sometimes, they’ll try to fake it and just lose the respect of the programmers.  As many times as I’ve thought to myself how glad I am that I have a technical background, I’ve had others voice to me the frustration that they just wish they knew more about technology.

If you’re reading this, and you’re trying to figure out which way to go in life, make sure you get technical first.  If you didn’t choose that path, there’s still plenty of time – get out there and learn to code.  There are so many resources.

This is what the “everyone should learn to code” movement is really saying – not that everyone should be a coder, but that everyone could benefit from understanding the environment, pressures, and disciplines that drive a huge part of our economy.  It’s not just business either – artists can benefit from more creative displays and better performing websites, not-for-profits could benefit from volunteers who know how to help out in technical areas, and it’s just nice sometimes to be the guy who can get the projector working in a foreign country!

So get technical.  You’ll never regret it.  And if you’re a programmer and you ever see a kid who wants to learn, help them out, you may just find a friend for life.

Cynical Optimism: Technical and Business Planning

I thought Rand Fishkin’s recent blog post on “Cynical Optimism” was a nice read.  He talks about how while there are plenty of things to be cynical about when it comes to humanity and our tedencies towards negative things, there is plenty to be optimistic about with regards to our progress as a whole.  The phrase “Cynical Optimism” is one that I really like to use when describing how to attack business plans, budgets, technical roadmaps, or other kinds of planning.

First, Be Optimistic

When setting goals, you definitely want to be an optimist.  Aim high, don’t limit yourself, and always strive for accomplishments that are meaningful and aligned with your values.  This is the classic “CEO” way of looking at the world and deciding where to go – strategy, vision, and confidence are huge assets here.  When goal setting, make sure you show your work!  Define goals in the form of “We’d like to do X because of A, B, and C”.  This provides important context and you’ll find that there are often other cheaper better routes that could be had which your haven’t considered.

Second, Become a Pessimist

Once you’d laid out your goals, make sure you switch hats and cast an incredibly cynical eye over your plans.  You want to identify everything that can, will, or should go wrong.  This is the perspective that a “COO” or “CTO” would take, as they’re the ones seated more firmly in the trenches.  The important thing here is to engage your team and let them know it’s OK to second guess goals in the context of determining how they’ll be achieved.  By critically assesing what it will take to arrive at your destination, you’re ensuring you don’t run off the rails enroute.

Now You’ve Got a Plan

Forcing yourself to wear both hats is hard – it’s often difficult to pull yourself across the chasm if you’re naturally predisposed to one outlook or the other, but if provides the following:

  1. Builds a culture of intellectual honesty.  It’s always easier in a team environment to just go along with the flow and feel like you don’t have any skin in the game.  If your team feels they can object or hone objectives, they’ll perform better.
  2. It can reduce the risk of making major mistakes.  By critically attacking your objectives you’ll anticipate problems and avoid major pitfalls that could have been forseen.  You’ll never know what you don’t know, but often teams drift into problem areas they could have avoided.
  3. In dysfunctional organisations, it’s amazing how almost everyone involved will know (and be able to point out good reasons) how goals won’t be achieved, well ahead of time.  You’ll prevent this kind of “death by politics” syndrome which affects a lot of companies.
  4. Bottom up planning is always the best way to meet top down objectives.  In other words, the high level goals can be set by the product owner, CEO, or visionary, but they’re on the worst vantage point to actually see how to go about achieving these things.  A tip on how to encourage realistic plans – don’t confer time estimates of any kind when setting strategic goals.  Just say “We’d like to do X” and see what comes back!

Lastly, Remain Engaged

Plans sometimes need to change.  You’ll need to react to new things.  As your team engages with the problem the goal-owner will need to remain intimately engaged with the team.  Fine tuning your goals is a necessary part of any meaningful project or endeavor – not fine tuning will just ensure failure.

Fun with Video Marketing

We had a lot of fun writing, storyboarding, and critiquing this video of what my company does and how it helps our clients: training companies.  There was some debate over what accent we’d use for the narration but in the end we decided that we’re a Scottish company and we should use a Scottish accent.  I think we made the right decision.  Enjoy!

This was My Brand Too!

Recently I’ve had two really dissapointing experiences with companies that I’ve admired and sought to emulate.

One of them I’ve admired for something like 12+ years.  If you asked me who the top companies in the world were, unequivocally, I’d list this particular outfit.  I loved their philosophy, their marketing, their service, everything.  I told people the way I felt as well.  The other company was a fast growing outfit who conquered their industry and was an inspiration to me at every step of the way.

Both of these companies have clearly lost their way and it’s a cautionary tale for those of us who are running, growing, or seeking to start out on something new.  The weirdest part of it is that I feel as though heroes of mine are gone.

These companies were my brands too!

How could this have been prevented?  What can we learn?

  • Don’t overreach – both companies broadened their product line to the point that they were doing too many things.
  • Don’t ignore the small stuff.  Things like consolidated invoicing don’t seem like a big thing in the developer scrum, but they’re huge to customers who are probably using all of your products because they love you.
  • Don’t underestimate the power of a financial credit.  Several times along the way a discount or permanent waiving of fees for what was admitted to be substandard service would have set things right in my mind.
  • Don’t ever tolerate rudeness to customers by you staff.  If this happens, get the staff to seak out the customer and apologise.
  • Don’t blame your failings on a third party.  It’s your fault for introducing the third party – third parties mean more responsiblility for you, not less.
  • Don’t allow tickets to wallow unresolved for months.  This just festers the entire situation.

At the end of the day, I won’t be using these providers as much anymore, and that’s sad, because I truly loved both companies.  We’re probably all guilty of a some or all of the above at some point, but it’s how we respond that matters.

Free Business Idea for a United Kingdom Startup

Start a Stripe.com clone for the United Kingdom.  Even better, launch to the wider EU and support accepting payments in GBP, USD and the Euro.  You’d instantly get worldwide press and massive attention from developers and startups within the countries you’ve chosen to support.

Stripe is too busy focusing on the USA despite saying they’re coming to the USA and other competitors in other markets are starting to spring up, like the newly announced PIN which caters to Australians.

Your competition will be incumbents like SagePay, Paypal, and Google Checkout, all of which won’t be able to move fast enough and are despised by your target market: startups and developers.  The only real threat to you in the United Kingdom is GoCardless which could attempt to compete, but they’re focused on UK Direct Debit payments at the moment.

The lack of competitors doesn’t really matter anyway – there’s plenty of room for you, plus the above, plus Stripe.  My training company software startup would use you in a heartbeat.  Dozens more would as well, just troll the forums begging Stripe to launch internationally and scoop up your first beta testers.  Seems all you need is a couple smart developers, a good lawyer, and a connection to a bank.

Any takers?

Some Thoughts on the Netflix Price Hike

I started subscribing to Netflix in 2003.  There was a hiatus for a couple of years when The Wife and I lived very close to a Blockbuster, and we even tried their streaming/mailing service when it launched, but the long waits for everything and the ultimate closure of our Blockbuster put the final nail in that coffin.  Living where we do today, there isn’t a video rental store within several miles, and we burn up our subscription – we have the 5 DVD plan with Bluray and it’s only by the iron fisted management of the Chief Queue Mistress that we’re kept in the appropriate quantity of DVDs.  We are also Amazon Prime members gaining access to their streaming service and while I do own Amazon stock, I don’t own any Netflix stock.Waking up to the firestorm over Netflix’s change in their pricing was amusing to me.  Everyone everywhere was melting down, but I thought it was a smart decision that probably needed to be made, even though it was going to be painful.  Price hikes are never fun, particularly when you begin charging for something that you’ve always done for free.  No matter what people are going to hate it, but my take on this boils down to the following points:

  • Netflix has a very short window to expand its offering globally before competitors start making that road a lot harder.  Last year was Canada, this year it’s Latin and South America, next year they’ve announced they’re hitting the UK and Spain.  A linchpin of any global expansion strategy will be their streaming service – it’s cheaper to scale initially and can be maintained and improved by engineers working on the core platform.
  • Netflix’s content prices are undoubtably going to skyrocket over the next five years.  Streaming was an afterthought, almost experimental foray when it started, and there was no competition, but content owners are going to want to extract their toll now that they’ve seen how well it’s worked.
  • Those customers (in my own unscientific scanning of the comments and arguments) who complained the loudest chose to denigrate the streaming service as a “weak library”.  If that’s the case, choose the DVD option.  Problem solved.
  • Very roughly, lets say all 85k people who whined on Facebook cancel, and lets say all other complainers are added in for a total of 150k cancellations due to the change.  Netflix loses something like $1.5 million dollars per month.  Assuming everyone is only on the cheapest plan which we know is not true, they’ll gain an additional six bucks a month from their 25 million subscribers, netting them an additional $150 million a month.  They’ve lost less than 1 percent of their subscriber base and made out like bandits.  A price hike that only loses you 1 percent of your subscriber base?  That’s an amazing success story.
  • That extra revenue will be immediately deployed to taking their service global AND buying better content to bolster their streaming service.  The angry cancelers will find they don’t have any serious alternatives, and will be re-subscribed within six months or less.  Blockbuster?  Redbox?  These are the alternatives that are out there, and they all suck.  Hulu might pick up some, but there simply is no replacement for the massive library of DVDs by mail.

Could their communication have been better?  Maybe, but nobody wants to hear that things you’re getting for free are now costing more.  That’s how revolutions are started.  Better to just announce it and take it on the chin like they did.  One thing that all the complainers forget is that Netflix is probably one of the most data driven companies in existence.  They’ve already ran the model, and will be within a few points on how many subscribers will leave.  They know the alternatives, and they know their plans for expansion.  Who wants to bet that this price hike perfectly correlates to how much additional revenue they project they’ll need for expansion and content acquisition?  From where I sit, it looks like a really really smart move that should pay off huge within the next two years.  I doubt there’s going to be an apology forthcoming like some so-called market experts have advised in the press. Maybe it’s time to rethink the fact that I don’t own their stock…

High Speed Passenger Rail for America: Thanks But No Thanks

Most of you know that I really like trains.  Model railroading is a hobby of mine, and I grew up consistently riding trains in China as alternative transport options either didn’t exist or were really unsafe (read: 80’s era Chinese airlines).  We generally travel by train in Europe when we visit.  However, most people are usually surprised that I don’t support any plans for high speed rail in the US and don’t envy the extensive passenger networks that exist overseas.Passenger service requires the presence of several factors which are almost never available in the United States:

  • Relatively short distances (less than 4 hours).
  • High population density.
  • Good local public transport one you’ve reached your destination.
  • High schedule density (a lot of trains providing lots of schedule options).

Passenger rail is incredibly expensive to operate by itself even with the presence of those four factors.  The last requirement of sufficient schedule density imposes a lot of constraints on the rail network that aren’t readily apparent to observers too.  As an example, The Wife and I often choose to ride the Amtrak from South Florida to Orlando instead of making the drive.  It’s more expensive at roughly 100 bucks for both of us round trip compared with a tank of gas at 40 bucks, but the 27 dollar toll for the turnpike makes things a little closer.  It’s roughly an hour longer too, but it’s nice to be able to read or watch movies on the train instead of driving.  Most importantly, and what prevents us from using it a lot more is the schedule: you can depart at 9:30 AM from South Florida, or 1:30PM from Orlando, and that’s it.  Compare this to Europe where most cities have an hourly service and you can see the difference.  There are several points in this little anecdote: the schedule, the cost, the need for pickup upon arrival in Orlando (thanks Sara’s family!) and the time all conspire to eliminate huge swaths of potential customers.A more insidious issue: once you’re at sufficient schedule density, you basically invalidate your rail network for freight traffic.  Here’s something you may not have known: the United States has the world’s most efficient railway system (See here, and here: the US enjoys the cheapest freight rates in the world).  This is because it’s entirely freight based which allows the railroads to maximize what trains are really good at: moving huge amount of cargo extremely cheaply and efficiently.  Adding in passenger traffic (particularly dense traffic) with its priority trains would essentially destroy the efficiency we have or require incredibly expensive infrastructure investments.  Even with those investments it’s generally not feasible to run freight and intense passenger service on the same trackage.  Most freight in Europe travels by truck in case you didn’t know.Passenger rail, even where it’s “successful” in Europe and Asia is still a chronic money loser requiring subsidy support.  In a wholly unsurprising development, China’s extensive new (and darling of the media) high speed passenger network is essentially insolvent.  This is the ideal which Friedman and other breathless watchers of China and India have been prescribing for the United States for years.  Says Chinese professor Zhao Jian:

“In China, we will have a debt crisis — a high-speed rail debt crisis,” he said. “I think it is more serious than your subprime mortgage crisis. You can always leave a house or use it. The rail system is there. It’s a burden. You must operate the rail system, and when you operate it, the cost is very high.”

I’d rather have the railroad system the US currently has, thank you very much.  A privately funded, operated, and most importantly, wildly efficient transportation system that’s designed to move big bulky stuff.  As gas prices fluctuate and we continue to import a huge percentage of our manufactured goods, we’re sitting pretty.

Some Quick Thoughts on the Kindle

I got an iPad for Christmas.  For me, it was a relatively simple decision.  I fly/travel a lot and was burning a lot of space carting books around, especially newer hard cover books.  I also already use an iPhone 4G and have been extremely happy with the platform and device, so I was excited to see a lot of my favorite applications make their way to the iPad.  Essentially, I was looking for an eReader that had good battery life (at least 8 hours) which would provide flexibility to do other things.  This ruled out the Kindle eInk device and the Nook but I felt like the Kindle bookstore was more mature, had better selection, and was more portable (available on more devices).  All of my iPad reading is done with the Kindle application.The Kindle application ecosystem has gotten a lot of things right.

  • The highlighting is a killer feature.  Read a book, non-destructively highlight it, view your highlights on kindle.amazon.com.  This makes note taking SO much faster, easier, and portable.
  • The device syncing is fantastic.  I generally will read on the iPad most places but read on my phone if I’m biking at the gym.  The iPhone app syncs up where I left off and I don’t have to think about it.  Yes, this is a little feature and an obvious one, but it makes a big difference.
  • The book selection is very good.  Only when I’m trying to find more esoteric books is it a problem, and then I dutifully click “Tell the Publisher”.  Amazon should give you an email when it becomes available, but they don’t seem to do that right now.
  • The desktop applications are nice and consistent with the mobile applications.
  • The one-click buying is ridiculously convenient, and the books downloads almost instant.
  • Page turns are instant, and pleasant.
  • The built-in (and offline) dictionary is used a lot more than I thought it would be.

The Kindle software needs to improve on a few things:

  • I can’t find a good way to export all of my annotations in plain text.  I’m wondering if this is some sort of DRM policy to prevent people from highlighting the entire book (which I haven’t tried) then exporting it.  Anyway, I have to copy and paste my highlights directly from the web page right now which is not the end of the world, but is annoying.
  • It’s super annoying that the iOS Amazon application doesn’t include the Kindle eBook store.  You have to use your web browser to hit the store and purchase a book.  It literally does not exist within the mainline iOS Amazon app.  Search for a book there and it won’t show you if it’s available on the Kindle.
  • Their DRM policy is really stupid.  This is something everyone says to me when I mention I use a Kindle.  Almost all DRM complaints would go away if Amazon let you do an time unlimited lend of a book to another account which prevented you from reading that title while it’s lent out.  Currently they let you do one lend (total, ever, never to be lent to someone else after that one-time lend) for up to 14 days.  Stupid, stupid, stupid.  My response to those complaining about these restrictions is that it’s relatively simple to strip the DRM, and just like that, Amazon is only hurting it’s paying customers and providing an incentive not to buy and to pirate.
  • The Kindle app should start supporting every file format out there that’s available.  I know they’re starting to do this, but seriously, what’s the holdup?

Things I’m unsure about / haven’t tried yet.

  • It’s unclear to me how PDFs work.  I’ve got a bunch that I’d like to have for reference, etc., and locally manage (or access via Dropbox), and you can’t just drag a PDF into the app and have it show up on your device.  Very annoying.  I get that there’s some sort of post-processing that needs to happen for eInk devices, but it seems like this could all be easier.  Maybe you could post-process yourself on your desktop app and save everyone the trouble.
  • Haven’t done much note taking.  I’ve found note taking to be almost unnecessary when you can just highlight content and move on.

Parting ThoughtIf I was involved in an eInk company today, I’d be doing everything I could to bridge the “tactile gap” that still exists for most people.  The Wife has emphatically stated that reading for her is half tactile.  She likes the page turning.  The physical pages.  The weight of the book.  The smell.  She’s like an alcoholic who loves everything about the experience: the glass, the ice, the sound of the pour, the smell.  It’s easy to dismiss this as a triviality but it’s going to be a long-term battle for the next twenty years at least.  The company that can make an eInk page that feels like paper inside a book with pages to turn might have a shot at interesting these people.  Nice leather cover, plenty of pages (a thousand?) to accomodate 95% of books out there.  Pages to turn, etc.  It’d be like the book lover’s smokeless cigarette.Maybe I’m just out to lunch, but I’d love to see a double-blind study with a well-worn eInk “book” compared to a normal book and see if people could tell the difference or would care.

China vs. the United States: What about all this debt?

It’s almost impossible to mention China in a conversation now without hearing about them owning a large portion of our debt.  Based on my own unscientific and anecdotal perception (I asked a bunch of people), most would answer that China owns “most” or “close to half” of our debt, and I’m commonly asked “when I think that Mao Zedong will be on the hundred dollar bill.”Before we begin, I’d like to make clear that I am a fiscal conservative.  I believe the US should not routinely run a deficit, particularly a large one.  I live in a state (Florida) with a balanced budget provision in our constitution and even though it’s ignored from time to time, I think it would be a good thing to have nationally, and I believe it to be extremely unwise to routinely run deficit spending.One of the best resources for understanding the national debt is, unsurprisingly, the US Treasury.  You can read up to date reports on outstanding debt and its holders here.  Wikipedia has a slightly outdated but directionally graphical correct representation of this data here.  From this, we can see that somewhere around 30% of all US Treasuries are held by foreign and international interests.  The rest are held by insurance companies, other investors, pension funds, mutual funds, and the government itself (mostly the Social Security trust fund).Already, this is probably not the picture you expected.  Less than a third of all US debt held by foreigners.  The treasury helpfully breaks this down further here, listing each country by holdings and the dates of the holdings.  Of that debt, China is indeed the leading holder at roughly 20.8% (as of July 2010), but Japan is right behind at 20.2%, then the United Kingdom at 9.2%, then oil exporters (5.5%), Brazil (4.0%), Hong Kong (3.3%), Russia (3.2%), and Republic of China or Taiwan at 3.2%.After just a few minutes of basic research, we’ve learned that China has roughly 6% of our national debt under its ownership, and of the rest of the countries on that list, Japan, the UK, Taiwan, and Brazil would be counted in the friendly-to-America column, or at least in the “choose America over China” column.  It can be argued that Hong Kong is essentially China, but it still doesn’t change the general picture at all.China, along with other countries, just doesn’t own that much of America’s national debt.  In fact, I’d say in light of all the political rhetoric, 6% is a shockingly small amount.Still, lets say that the nightmare scenario happens, things went sour with China, and they wanted to begin flexing their muscle, using our debt against us as a weapon.  What would their options be?

  • They could sell their holdings.  This would immediately depress the value of treasuries and probably cause some amount of alarm.  However, were China to begin selling their nearly 800 billion in treasury bills, the market for these bills would rapidly cause their existing holdings to plunge in value.  In other words, by selling, they’d screw themselves fairly quickly, and they’d be forced to take that money and place it somewhere else.  Where?  The EU has proven recently to be a less than stellar investment.  Their own domestic market wouldn’t be able to absorb a nearly trillion dollar capital injection without being inflationary.  Not to mention that the Fed could simply step in like they did with TARP and buy up the 800 billion dollars that China would sell, at rock bottom prices.  Our allies could also mobilize considerable buying pressure so that their own holdings wouldn’t devalue.  At the end of it all, China would probably lose the most from this maneuver.
  • They could unpeg their currency to the US Dollar. China today artificially keeps their currency pegged at an unfavorable exchange rate (to them) in order for their products to remain cheaper for Americans.  Unbelievably, most of the current US diplomatic effort on economic issues is centered around trying to get China to remove this peg, thus making things more expensive for Americans.  Derogatory terms like “dumping” are used to describe China’s gift of subsidized products to millions of Americans.  By demanding that China unpeg its currency, we’re basically saying “remove your artificial subsidy on goods that middle and lower class Americans predominantly buy, and that will help us.”  Smarter people than I have written on this elsewhere numerous times.
  • Are there other options here? I’m trying to think of them, but the reality is this – Chinese businesses are flush with dollars.  There’s a reason almost all of the countries that are major holders of US debt are manufacturing or commodities export driven (China, Taiwan, Brazil, Oil Nations, and Japan).  They receive dollars for their products, and need to buy materials to make their products.  These materials can and do often come from other economies, so it’s advantageous to use the world’s reserve currency to procure these materials.  Notice how India is absent from the list – they’re a knowledge exporter (mostly services and knowledge work like software), and therefore most of their income is paid in wages to individuals who then spend the cash within their own economy, not paid to other economies to procure raw materials.

If you were to obtain a large sum of money (in the billions or trillions of dollars), you’re going to need to make decisions regarding the investment of that money using long term, macro-level criterion.  Government stability comes into play, geopolitics becomes important, and all of a sudden in addition to a rate of return, you’re faced with the difficult decision of who do you trust with your money – but on a national scale.  If you’re China and you’re looking around the world to invest your US dollars, you can choose Europe, a handful of economies in SouthEast Asia that are just as invested in the US as you and are competitors to yourself, Africa, or South America.  The world just got a whole lot smaller.  In that context, the US is by far the most stable recipient for your investment, and its markets are also the driver for your current economic success.Deng Xiaoping, the former leader of China and the architect of China’s reforms that shifted the country to free-market capitalism, is famous for his quote that China should stick to its economic policies for one hundred years.  China is thirty years in and has already taken enormously expensive steps (subsidizing exports by pegging to the US dollars for example) to ensure stability and continued growth.  Reasons for this are also steeped in history, as we’ll in see future posts.Sure, China is investing more in Europe, as the recent debt offerings from Spain and Portugal illustrate, but the broader context here is that a global economic downturn hurts China just as much or more than any other economy.  Their domestic markets aren’t big enough or sophisticated enough to sop up the spare manufacturing capacity that would be created by a global downturn.  China’s economic interests are driven by political and historical goals that go unseen by Western economic analysts.The analogy to this situation is simple:  as a construction company, you build a house, then rent it to a tenant who can also beat you up.  You sell furnishings to him too.  You’ve invested a lot in the home that you build, and all of a sudden, your tenant starts having trouble paying you back.  Unfortunately, the house is so big and lavish that there’s nobody else who can afford it, or if they were to buy it, you’d have to sell at a steep or near-total loss.  What do you do?  You follow the wisdom that banks who own their own mortgages follow: you do what you can to work out a payment plan and look to keep the tenant in the house, while not humiliating him in the process.  This way, both of you make it through hard times, and you can sell him a nicer house when he’s back on his feet in a few years and is looking to upgrade.China is not about to jeopardize its future by focusing on short term issues and America needs to stop wringing its hands over non-issues.  The problem isn’t China’s holdings (or any other foreign entity’s holdings) of our national debt, the problem is the national debt: it’s us.  It feels a lot better to fear monger, but at the end of the day, we’re the problem.

New Trend? Desktop App is Free, Mobile App Isn’t.

I’ve noticed a new trend (at least, it seems that way to me) that seems to be gaining popularity with Micro-ISVs, and that is to give away your desktop application while charging for the mobile app.  I’ve seen it with Plex, Magento, and I’m suspecting this is the strategy behind last week’s (and my new favorite) GTD piece of software Wunderlist from 6 Wunderkinder.  Their new application is simple, beautiful, and runs on Windows and the Mac, while supporting syncing via the web, which fixes my top two annoyances with my current GTD favorite, Things.  They just announced via Twitter today that they’ve open sourced the entire application, but their mobile application is “coming soon”, and my guess is they’ll charge 10 bucks for it, which I’ll happily pay.If this is a new trend with Micro-ISVs, I think it makes quite a bit of sense.  Get users hooked on your mainline offering, even open source it, become the defacto standard, and then charge for the extra bit of mobile functionality.  It solves the “edge case” problem of increasing costs involved when targeting the Big Three mobile platforms (Blackberry, Android, and iOS) and gets people to fork over money where they’re most comfortable – big shiny app stores that make it easy to buy.I think there are some challenges to overcome, but overall it should be a smart strategy.  We’ll see how it plays out, or even if it’s a trend at all.