After watching “The Great Hack” on Netflix I am appalled by the absence of any moral compass at Cambridge Analytica, which transformed Big Data into a political weapon. Other disturbing examples are Uber’s former corporate culture and Facebook’s collusion with CA in abusing our privacy. These cases are prima facie evidence of the crucial need and the opportunity to integrate the Humanities and ethics with deep technology development. I began my career as a Humanities graduate at Intel Corporation working closely with Ivy League MBA’s and senior engineers. We shared our knowledge and learned together to enable the company to excel. The best companies are those grounded in an appreciation of human values, companies that seek out Humanities graduates with a passion for technology to balance out their teams.
Human Oversight of Deep Technology Development Is Playing Catch-up
Systems Similar To Those In Place for Medical Science Are Urgently Required
After watching “The Great Hack” on Netflix I am appalled by the absence of any moral compass at Cambridge Analytica, which transformed Big Data into a political weapon. Other disturbing examples are Uber’s former corporate culture and Facebook’s collusion with CA in abusing our privacy. These cases are prima facie evidence of the crucial need and the opportunity to integrate the Humanities and ethics with deep technology development. I began my career as a Humanities graduate at Intel Corporation working closely with Ivy League MBA’s and senior engineers. We shared our knowledge and learned together to enable the company to excel. The best companies are those grounded in an appreciation of human values, companies that seek out Humanities graduates with a passion for technology to balance out their teams.
After watching “The Great Hack” on Netflix I am appalled by the absence of any moral compass at Cambridge Analytica, which transformed Big Data into a political weapon. Other disturbing examples are Uber’s former corporate culture and Facebook’s collusion with CA in abusing our privacy. These cases are prima facie evidence of the crucial need and the opportunity to integrate the Humanities and ethics with deep technology development. I began my career as a Humanities graduate at Intel Corporation working closely with Ivy League MBA’s and senior engineers. We shared our knowledge and learned together to enable the company to excel. The best companies are those grounded in an appreciation of human values, companies that seek out Humanities graduates with a passion for technology to balance out their teams.
Since Facebook announced its new Libra currency and mobile payments scheme, the global reaction has been very mixed. Libra is not truly a cryptocurrency though it will use blockchain. It will be pegged to a reserve currency, which cryptocurrencies are not. Libra will “potentially” be governed by an association independent of Facebook, though that association remains non-binding and sketchy at this point. Potential regulatory issues abound around the World, and Facebook is currently not viewed very favorably by many governments. But most interesting to me, Libra appears to be modeled after Kenya’s M-Pesa mobile payments system, the world’s leading mobile payments system, invented by mobile carrier Safaricom. Then I asked myself if Facebook, knowing that it needs to move away from selling personal data, has seized on Safaricom’s M-Pesa as its new revenue model.
Facebook’s Libra and Safaricom’s M-Pesa
Are the similarities mere coincidence and competition, or is a global mega-corporation exploiting a successful Kenyan enterprise without collaboration or compensation?
Since Facebook announced its new Libra currency and mobile payments scheme, the global reaction has been very mixed. Libra is not truly a cryptocurrency though it will use blockchain. It will be pegged to a reserve currency, which cryptocurrencies are not. Libra will “potentially” be governed by an association independent of Facebook, though that association remains non-binding and sketchy at this point. Potential regulatory issues abound around the World, and Facebook is currently not viewed very favorably by many governments. But most interesting to me, Libra appears to be modeled after Kenya’s M-Pesa mobile payments system, the world’s leading mobile payments system, invented by mobile carrier Safaricom. Then I asked myself if Facebook, knowing that it needs to move away from selling personal data, has seized on Safaricom’s M-Pesa as its new revenue model.
More disturbing to me, I asked myself if this might possibly be an example of Western mega-corporate exploitation of a smaller enterprise in the developing world. I have heard no reference whatsoever to M-Pesa from Facebook. In similar situations in high tech, the mega-enterprise would typically acquire the intellectual property of the smaller company, hire its founders and employees to gain market advantage. This is often called an “acqui-hire.” Even without IP, it can be done to simply ensure a positive brand image transaction.
Four years ago, in 2015, Facebook With apparent good intentions, and also a good dose of Facebook business strategy, struck out to promote Free Basics, a free limited Internet for the poor in less developed countries sponsored by Facebook and its local telecommunications partners. India was a prime market focus. While on the face of it Free Basics seemed to have merit, Zuckerberg ran into a wall of opposition. On close inspection of the details, Facebook’s problem, despite all of its global corporate sophistication, appeared to have been naïveté about the foreign markets it was trying to enter. International business is strewn with case studies of corporate arrogance and ignorance that led to failure. Zuckerberg could have looked no further back than 2013 for clues from Google and Eric Schmidt, who also failed in India, as to why Facebook failed. The Indian government viewed both Facebook and Google with the same suspicion that they had for the Raj in 1947.
I do not have all the answers yet about Libra and M-PESA, and other mobile carriers have also entered the mobile payment market, but at this point, I have deep reservations about Facebook’s failure to acknowledge its role and its responsibility to Safaricom and M-PESA. IMHO, questions need to be raised directly to Facebook.
PAYING for a taxi ride using your mobile phone is easier in Nairobi than it is in New York, thanks to Kenya’s world-leading mobile-money system, M-PESA. Launched in 2007 by Safaricom, the country’s largest mobile network operator, it is now used by over 17m Kenyans, equivalent to more than two-thirds of the adult population; around 25% of the country’s gross national product flows through it. M-PESA lets people transfer cash using their phones, and is by far the most successful scheme of its type on earth. Why does Kenya lead the world in mobile money?
M-PESA was originally designed as a system to allow microfinance-loan repayments to be made by phone, reducing the costs associated with handling cash and thus making possible lower interest rates. But after pilot testing, it was broadened to become a general money-transfer scheme. Once you have signed up, you pay money into the system by handing cash to one of Safaricom’s 40,000 agents (typically in a corner shop selling airtime), who credits the money to your M-PESA account. You withdraw money by visiting another agent, who checks that you have sufficient funds before debiting your account and handing over the cash. You can also transfer money to others using a menu on your phone. Cash can thus be sent one place to another more quickly, safely and easily than taking bundles of money in person or asking others to carry it for you. This is particularly useful in a country where many workers in cities send money back home to their families in rural villages. Electronic transfers save people time, freeing them to do other, more productive things instead.
Dozens of mobile-money systems have been launched, so why has Kenya’s been the most successful? It had several factors in its favour, including the exceptionally high cost of sending money by other methods; the dominant market position of Safaricom; the regulator’s initial decision to allow the scheme to proceed on an experimental basis, without formal approval; a clear and effective marketing campaign (“Send money home”); an efficient system to move cash around behind the scenes; and, most intriguingly, the post-election violence in the country in early 2008. M-PESA was used to transfer money to people trapped in Nairobi’s slums at the time, and some Kenyans regarded M-PESA as a safer place to store their money than the banks, which were entangled in ethnic disputes. Having established a base of initial users, M-PESA then benefitted from network effects: the more people who used it, the more it made sense for others to sign up for it.
M-PESA has since been extended to offer loans and savings products, and can also be used to disburse salaries or pay bills, which saves users further time and money (because they do not need to waste hours queuing up at the bank). One study found that in rural Kenyan households that adopted M-PESA, incomes increased by 5-30%. In addition, the availability of a reliable mobile-payments platform has spawned a host of start-ups in Nairobi, whose business models build on M-PESA’s foundations. Mobile-money schemes in other countries, meanwhile, have been held up by opposition from banks and regulators and concerns over money-laundering. But M-PESA is starting to do well in other countries, including Tanzania and Afghanistan, and last month it was launched in India. At the same time, operators in some other countries are doing an increasingly good job of imitating it. Some of the factors behind Kenya’s lead cannot be copied; but many of them can, which means it should eventually be possible for other countries to follow Kenya’s pioneering example.
For the last few years, I have been invited to speak with graduating classes of university engineering students. I call my lecture “Engineer to Entrepreneur.” From my background in teaching management and entrepreneurial mentorship, I focus on the unique challenges engineers face in entering the business world, particularly those who may consider starting their own new business. I discuss a full range of issues, but my personal emphasis from my experience is the “character” issue. Some excellent engineers have successfully made the transition to entrepreneurship and executive management, but for others, the Odyssey is a bridge too far. Engineers must learn to think differently than when they are solving an engineering problem. Consequently, I place significant emphasis on honest self-analysis and appreciation of one’s strengths and weaknesses. Listening is a priceless skill. If you have experienced Google’s Larry Page in public, he is an excellent example of an engineer who has very successfully transitioned into a senior management role. Sergei Brin, on the other hand, opted for a CTO-like role, which I think was the right choice for him. That is the point of my lecture. I hope that many who view my YouTube Channel will find it helpful. You can find the complete lecture on my website.
Remember that my website, mayo615.com has over 400 posts on a wide range of management and technology topics.
I decided it was time to update the website with a new look. Most importantly, The Mayo615 site now supports Google’s AMP (Accelerated Mobile Pages), an open source initiative, enabling pages to display quickly and optimally on mobile devices. Have a browse and leave me a comment on what you think.
Years ago now Google quietly announced its “Loon Balloon Project” in New Zealand. The objective was to launch high altitude balloons that could potentially float over areas of the globe that did not yet have Internet access. The tech press predicted that the idea was “loony” indeed, though some called it “crazy cool.” Google has since also dabbled with the idea of low earth orbit satellites to achieve the same goal. With the rise of SpaceX, this seems an even more interesting technological approach, though other firms in the 1990s lost large amounts of money and failed. A modest aerospace company and a subsidiary of Airbus in Toulouse France is manufacturing low-orbit internet access satellites, hoping to launch as many as 650 such satellites. The idea that is captivating me is the potential for space-based Internet access to potentially provide an alternative to growing political and corporate control and Balkanization of the Internet.
Net Neutrality May Yet Be Achievable…Maybe
Years ago now Google quietly announced its “Loon Balloon Project” in New Zealand. The objective was to launch high altitude balloons that could potentially float over areas of the globe that did not yet have Internet access. The tech press predicted that the idea was “loony” indeed, though some called it “crazy cool.” Google has since also dabbled with the idea of low earth orbit satellites to achieve the same goal. With the rise of SpaceX, this seems an even more interesting technological approach, though other firms in the 1990s lost large amounts of money and failed. A modest aerospace company and a subsidiary of Airbus in Toulouse France is manufacturing low-orbit internet access satellites, hoping to launch as many as 650 such satellites in a “global constellation”. The idea that is captivating me is the potential for space-based Internet access to potentially provide an alternative to growing political and corporate control and Balkanization of the Internet.
OneWeb Launches First Six Internet Access Satellites
Ariane Soyuz rocket launch with six OneWeb satellites on board. February 27, 2019
Political Internet Censorship And Access In Developing World Potentially Solvable
But business challenges and technical problems remain
Aclear plastic box the size of a sofa sits in an underground factory in the suburbs of Toulouse in southern France. Inside it, a nozzle fixed to a robot arm carefully drips translucent gloop onto bits of circuitry. This is to help get rid of excess heat when the electronics start to operate. The slab that is created is then loaded onto a trolley and taken away as the next piece of electronics arrives for the same treatment.
This is what the mass production of satellites looks like. Making them in quantity is a necessity for OneWeb. The company was founded in 2012, and it has yet to launch a single satellite. Yet it plans to have 900 in orbit by 2027. That seems a tall order. Intelsat, the firm which currently operates more communications satellites than any other, has been around for 54 years and has launched just 94.
OneWeb, which is part-owned by Airbus, a European aerospace giant, and SoftBank, a Japanese tech investor, needs such a large quantity of satellites because it wants to provide cheap and easy internet connectivity everywhere in the world. Bringing access to the internet to places where it is scarce or non-existent could be a huge business. Around 470m households and 3.5bn people lack such access, reckons Northern Sky Research, a consultancy. OneWeb is one of a handful of firms that want to do so. They think the best way to widen connectivity is to break with the model of using big satellites in distant orbits and instead deploy lots of small ones that sit closer to the ground.
The rate at which an object orbits depends on how far away it is. At a distance of 380,000km, the Moon takes a month to travel around the Earth. The International Space Station, around 400km up, buzzes round in an hour and a half. In between, at an altitude of about 36,000km, there is a sweet spot where satellites make an orbit once a day. A satellite in this orbit is thus “geostationary”—it seems to sit still over a specific spot. Almost all today’s satellite communications traffic, both data and broadcasts, goes through such satellites.
The advantage of a geostationary orbit is that the antennae that send data to the satellite and those that receive data coming down from it do not need to move. The disadvantage is that sending a signal that far requires a hefty antenna and a lot of power. And even at the speed of light, the trip to geostationary orbit and back adds a half-second delay to signals. That does not matter for broadcasts, but it does a little for voice, where the delay can prove tiresome, and a lot for some sorts of data. Many online services work poorly or not at all over such a connection. And it always requires a dish that looks up at the sky.
Head in the clouds
Ships, planes and remote businesses rely for internet connections on signals sent from geostationary orbit, but this method is too pricey for widespread adoption. Beaming the internet via satellites orbiting closer to the planet has been tried before. The idea was popular at the height of the tech boom of the late 1990s. Three companies—Teledesic, Iridium and Globalstar—poured tens of billions of dollars into the low-Earth orbit (leo) satellite internet. It culminated in the collapse of Teledesic. Although the technology of the time worked, it was very costly and so the services on offer had to be hugely expensive, too. Iridium survived, but as a niche provider of satellite telephony, not a purveyor of cheap and fast internet access.
OneWeb is among several firms that are trying leo satellites again. SpaceX, a rocket company founded by Elon Musk, a tech entrepreneur, is guarded about its proposed system, Starlink, but on November 15th American regulators approved an application for 7,518 satellites at an altitude of 340km (bringing the total for which the firm has approval to nearly 12,000). Telesat, a Canadian firm, has plans for a 512-satellite constellation. LeoSat, a startup with Japanese and Latin American backers, aims to build a 108-satellite network aimed at providing super-fast connections to businesses. Iridium, still in the game, will launch the final ten satellites in its new constellation of 66 by the end of the year. Not to be outdone, a Chinese state-owned firm recently announced the construction of a 300-satellite constellation. In ten years’ time, if all goes to plan, these new firms will have put more satellites into orbit by themselves than the total launched to date (see chart).
These companies want to avoid the technical issues of geostationary satellites by putting theirs into a low orbit, where the data will take only a few milliseconds to travel to space and back. And because signals need not be sent so far the satellites can be smaller and cheaper. OneWeb claims they might weigh 150kg and cost a few hundred thousand dollars, compared with a tonne or more, and tens or even hundreds of millions of dollars, for the geostationary sort.
Floating in a most peculiar way
At 1,200km up, where OneWeb intends its first satellites to operate, they do not sit still in the sky. A satellite overhead will sink below the horizon seven minutes later. That has two consequences. First, to ensure that a satellite is always available to any user, a great many are required. Second, to talk to such a satellite you need an antenna that can track it across the sky.
One way to understand this is as a cellular-phone network turned inside out. On Earth, cell-phone towers are fixed; a user’s phone talks to the closest or least busy one, which may change as the user moves or traffic alters. In OneWeb’s system each satellite is a moving cell tower, circling the Earth from pole to pole in one of 18 orbital planes that look like lines of longitude (see diagram). The 900 cells, each one covering an area of a bit more than 1m kilometres, skim across the Earth at 26,000km an hour. Clever software hands transmission from one satellite to the next as they move into and out of range.
There are three ways to connect to such a network. One is to place an antenna on a terrestrial cell tower, which can use the satellites to get data to and from a mobile-phone network, in place of the fibre optic, microwave or cable links that are normally used. The second is for homes and businesses to have their own ground terminals, smaller and cheaper antenna that can talk to the satellite. The third is for vehicles to have ground terminals. This might be important for driverless cars, which will need to transmit and receive large volumes of data over an area which may be broader than that covered by appropriate terrestrial cellular networks.
In all cases data will make their way to the wider internet through large ground-based dishes, called gateways. An email sent from a house connected to one of the new satellite network, for example, would travel up to a passing satellite, down to a gateway then onward to its destination.
The firms involved today hope to overcome the obstacles confronting the previous generation of leo satellite firms because building and launching hundreds of satellites is now much cheaper. The cost of launch in particular has tumbled in the past decade with the arrival of better rockets and more competition. OneWeb has a contract, reportedly valued at over €1bn ($1.1bn), for 21 launches with Arianespace, a European consortium. Russian-built Soyuz craft will also take 34 to 36 satellites up at a time from either French Guiana or Kazakhstan. OneWeb may later use Blue Origin, a rocket firm owned by Amazon’s founder, Jeff Bezos; it also has a contract for launching single satellites to replace ones that break down with Virgin Orbit. Virgin Group, like Airbus and SoftBank, is an investor in the company. SpaceX intends to launch its satellites on its own rockets.
Space to grow
The bigger challenge is making satellites quickly and cheaply enough to fill up these rockets. It typically takes existing satellite-makers two years to build one after contracts are signed. They are not up to the challenge, says Jonny Dyer, who worked on a Google project that first brought the OneWeb team together (but stayed with Google when the two parted ways). “The supply chain does not scale,” he says. “They’re not used to working at those volumes, and they’re not used to the unit cost.”
OneWeb and SpaceX thus not only have to make new satellites, they have to build a system for building satellites. OneWeb has been doing so in Toulouse for the past two years. Its first satellite was completed in April and ten more will be ready in time for the company’s first launch, some time before February 2019. To step up manufacture, OneWeb is building two copies of its production line in a new factory in Florida. It hopes to have the first satellite from this facility ready before March 2019 and to raise output to ten a week not long after.
The factory floor in Toulouse has separate workstations for propulsion systems, communications payload, solar panels and so on. Satellites in the making move on robot carts from one station to the next. Cameras track the components and look out for errors—misalignments and the like. The finished cube is about the size of a beach ball bedecked with antennae and solar panels. After testing, it is shipped out. The system has had teething problems. The first launch will be more than a year behind schedule. But Greg Wyler, OneWeb’s boss, says he still hopes to offer connectivity in places in higher northern latitudes, such as Alaska and Britain, by the end of 2019.
Putting satellites in place is only part of the problem. How useful they will prove to be depends on designing and building antennae to get data to homes or vehicles that are not close to terrestrial cell towers. “The elephant in the room…has always been the ground terminal,” says Nathan Kundtz, the former boss of Kymeta, which makes antennae. Mr Kundtz says that tracking satellites across the sky mechanically is untenable if the antennae are to be affordable and widely used. His firm does tracking electronically. No moving parts, he says. Teledesic failed in part because no such ground terminal existed in the late 1990s. Fortunately, the necessary electronics have shrunk in size and cost.
Aerial combat
Firms such as Kymeta, along with at least two other companies, Phasor and Isotropic Systems, are producing flat, electronically “steerable” antennae with no moving parts that can send and receive signals from leo satellites. Kymeta’s antenna is the least orthodox. It relies upon the same kind of lcddisplay found in laptops and flat-screen televisions. Instead of using the 30,000 pixels in its screen to display images, it uses them to filter and interpret the satellite signal by allowing it to pass through at some pixels and blocking it at others. Different patterns of pixels act like a lens, focusing the signal onto a receiver beneath them; the pattern shifts up to 240 times a second, changing the shape of the “lens” and thus keeping track of the satellites overhead. Phasor’s system works similarly, but uses an electronically controlled array of microchips to perform the same task. Isotropic Systems, which has said that it is developing an antenna that will be able to receive signal from OneWeb’s satellites, uses an optical system more like Kymeta’s.
Kymeta and Phasor have both said that they do not want to sell antennae directly to consumers, but will focus on businesses, cellular networks, maritime and aviation customers instead. Isotropic Systems has announced that it will use its technology to produce a “consumer broadband terminal” in time for OneWeb’s launch. Once available, consumers are most likely to get the new pizza-size antennae through their internet service providers. But if it is too expensive for people to receive signals on the ground—most of the world’s unconnected are poor—those ventures selling direct to consumers will struggle. Mr Wyler says his firm needs antennae that cost $200 at most for the consumer business to thrive.
Telesat, the next biggest firm in terms of constellation size, is taking a different approach. It does not plan to offer services to consumers directly, but instead is focusing on filling in gaps for cellular networks, as well as businesses, ships and planes. Specialised telecoms companies would buy bandwidth and resell it. In contrast to Messrs Wyler and Musk, and their aspirations for global coverage, Telesat has divided the surface of the planet into thousands of polygons, and modelled exactly in which ones it makes financial sense to offer strong connectivity. This means its constellation needs fewer expensive gateways.
Mr Wyler, in contrast, is known as something of a connectivity evangelist. His first satellite internet firm, o3b (Other 3 Billion), placed large satellites in a higher orbit, providing a connection only slightly slower than a leosatellite. Now owned by ses, a larger satellite company, o3b specialises in providing connectivity to islands that are otherwise cut off. OneWeb’s goal of connecting consumers is largely in the hands of SoftBank, its main investor, which owns the exclusive rights to sell the new bandwidth.
Even if the new satellites bring the internet to people and parts of the planet that have been ill-served up until now, putting ever more objects in space brings another set of difficulties. Satellites in densely packed constellations may crash into each other or other spacecraft. “If there are thousands [of satellites] then they’ll have much higher probability of colliding,” says Mr Dyer. “If there is a collision in these orbits it will be a monumental disaster. At 1,000km, if there’s an incident it will be up there for hundreds of years.” Geostationary satellites, because they do not move relative to each other, are unlikely to collide.
Managing constellations is particularly difficult, says Mr Wyler, because each satellite has only a tiny amount of power to work with (equipping small ones with bigger thrusters would be hugely expensive). So even if a crash were imminent, there would be little that could be done about it other than watch. “What are you gonna do? Nothing. Get popcorn. There’s nothing to do,” says Mr Wyler. OneWeb has designed its constellation so that faulty satellites fall out of orbit immediately to avoid this risk.
Access all areas
The new constellations will also raise tricky questions of national jurisdiction. Countries generally have control of the routers which connect them to the wider terrestrial internet. Satellites threaten that control. The national regulators that OneWeb has talked to are uneasy, says Mr Wyler, because it would create a route to the internet that countries could not monitor. OneWeb’s intention is to build 39 “gateways” on the ground around the world that will beam up and receive traffic from its satellites.
The first is under construction in Svalbard, a remote Norwegian island chain. These access points, and those planned by other firms, present another difficulty. Some countries are willing to share gateways with other countries. Others want their own because they are concerned that third parties will be able to monitor internet traffic, potentially using it to hack data flows of national importance.
Questions remain about whether the businesses involved can do all they promise cheaply enough. But if these companies succeed, their impact will go beyond helping to bring 3.5bn people online. Mr Musk has hazy plans to use Starlink as the foundation for a deep-space network that will keep spacecraft connected en route to Mars and the Moon.
With a network of satellites encircling the planet, humans will soon never be offline. High-quality internet connections will become more widespread than basic sanitation and running water. The leo broadband firms are trying to reinvent the satellite industry. But the infrastructure they are planning will provide a platform for other industries to reinvent themselves, too.
Correction (December 11th, 2018): This piece originally stated that Intelsat has launched 59 satellites in its 54-year history. That is the number of active satellites the firm has in orbit. The firm has successfully launched 94. Sorry.
NOTE: My original post, originally published in January 2013, continues to be one of the most viewed on the site. Android and Apple have enjoyed an estimated 98% market share between the two, and many of my earlier projections regarding this market appear to have been borne out. However, the smartphone market has now matured to the point that it is at a strategic inflection point which has major implications for the future of this market and the major competitors. The rapid maturation of the smartphone market should have been foreseen: the rise of domestic Chinese competition combined with the predictable end of the Western consumer fascination with “the next smartphone”
NOTE: My original post, originally published in January 2013, continues to be one of the most viewed on the site. Android and Apple have enjoyed an estimated 98% market share between the two, and many of my earlier projections regarding this market appear to have been borne out. However, the smartphone market has now matured to the point that it is at a strategic inflection point which has major implications for the future of this market and the major competitors.
The Rapid Maturation of the Smartphone Market Should Have Been Foreseen
The signs of a dangerous strategic inflection point in the global smartphone market have been evident for some time: the rapid rise of domestic Chinese competition combined with the predictable end of the Western consumer fascination with “the next smartphone.” Five years ago, Samsung Electronics, the South Korean technology giant sat atop the Chinese market, selling nearly one of every five devices there. Today, Samsung is an also-ran, controlling less than 1% of the world’s largest smartphone market. Samsung has trimmed local staff and last month closed one of its two Chinese smartphone factories. Surely, Apple must have been aware of this and the growing number of much lower cost domestic Chinese competitors that were already hammering Samsung. Apple’s release of a lower cost iPhone, the XR, in Asia in October 2018 appears to have been a case of too little too late. Sales of the device have been disappointing in both Japan and China, and Apple has been relegated to offering “trade-ins” to camouflage slashing the price of the XR. Apple had ample warning over at least a five year period.
Meanwhile, I sensed a very different kind of maturation of the smartphone market in North America and Europe. In what I like to call the smartphone market “Star Wars” phenomenon, each new generation of smartphones was greeted with a hysteria that was only paralleled by the Star Wars craze. This simply could not continue indefinitely. Beginning in 2017 it was apparent the smartphone market as a whole was already shrinking, and there was significant anecdotal information in the media that smartphone hysteria was waning, if not publicly available hard data. I began having discussions about this with Tim Bajarin, one of the top Apple analysts. As Apple moved to launch the iPhone X and broke the $1000 price point barrier it encountered clear if perhaps not overwhelming evidence that the smartphone market was softening: more people chose not to upgrade their phones. I like to say that the last major feature consumers seemed to want/need was water resistance, as so many had already experienced the disastrous “toilet drop.” I view the Bluetooth earbud phenomenon as a distraction and perhaps a hint of the coming change. Samsung flirted with water resistance as early as the Samsung Galaxy S5, perhaps because water resistance had become a standard feature in the Japanese market. By 2018, water resistance was standardized, and the market began experimenting with “the next big thing” for phones, folding screens. WTF? It was clear to me that the smartphone market had run out of gas, and was undergoing rapid maturation, as phones were no longer fascinating and novel, but just simply commodity devices.
To my mind, and IMHO, this has been a case study in a classic “strategic inflection point” that was missed by both Samsung and Apple. Samsung might be forgiven for being the first to cross into the inflection point, while the media was still promoting “the next smartphone” hysteria, and not yet recognizing the sense of the market. Apple has no such excuse. The rapid maturation of the smartphone market should have been foreseen by Apple. Apple’s most disturbing move was the decision to increase pricing rather than delivering greater value, at exactly the wrong time. The crucial rhetorical question is what are the larger implications for Apple’s future business?
Smartphone vendors shipped a total of 355.6 million units worldwide during the third quarter of 2018 (Q3 2018), resulting in a 5.9% decline when compared to the 377.8 million units shipped in the third quarter of 2017. The drop marks the fourth consecutive quarter of year-over-year declines for the global smartphone market.
Quarter
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3
Samsung
23,2%
22,9%
22,1%
18,9%
23,5%
21,0%
20,3%
Huawei
10,0%
11,0%
10,4%
10,7%
11,8%
15,9%
14,6%
Apple
14,7%
11,8%
12,4%
19,6%
15,7%
12,1%
13,2%
Xiaomi
4,3%
6,2%
7,5%
7,1%
8,4%
9,5%
9,5%
OPPO
7,5%
8,0%
8,1%
6,9%
7,4%
8,6%
8,4%
Others
40,2%
40,1%
39,6%
36,8%
33,2%
32,9%
33,9%
TOTAL
100,0%
100,0%
100,0%
100,0%
100,0%
100,0%
100,0%
2009 to 2012
In one of the most interesting high tech scenarios in years, the “smart mobile” OS (operating system) market is shaping up to be a classic Battle of the Titans. Key strategic issues, theories, speculation, and money, lots of it, are making this a great real-time strategy and marketing case study for management students of all ages (smile). So as Dell prepares to fade into the sunset, get yourself a drink of your choice, and some popcorn, sit back and watch it all unfold.
The best metaphor I can apply to this might be a “destruction derby” featuring at least two players, or perhaps a bizarre multidimensional Super Bowl or Rugby World Cup match, with four teams on one playing field with four goal posts at each cardinal point of the compass.. At the moment all four teams are tackling, passing, and running at each other in a confused pile. There are scrums, rucks and mauls in multiple locations. Two competitors, Google and Apple appear to be winning. The other two, Microsoft and Research in Motion, are pretty banged up, but still playing.
The two currently dominant competitors, Google Android with its acquisition of Motorola Mobility, and Apple IOS are rapidly consolidating and expanding their global market positions, via partnerships, vertical integration, and application development ecosystems. Microsoft has publicly committed to spending massively to make Windows 8 the third OS option, but a recent IDC mobile OS market forecast projects Microsoft with only a miniscule share in 2015. Something tells me that Steve Ballmer will go on a rampage if that happens, rather like the video of him screaming and dancing on stage in my post “Extrovert or Introvert, Authentic Presentations Take Practice,” November 30th. http://mayo615.com/2012/11/30/introvert-or-extrovert-authentic-presentations-take-practice/
The key question is whether Microsoft or RIM, will be able to establish a third mobile OS to a survivable market position. It is not at all clear that either can do so at this point. The market is also speculating that mobile hardware market leader Samsung, is possibly considering making its own play by creating its own mobile OS ecosystem. While this may seem far fetched, this kind of vertical integration seems to be making a resurgence as a strategic move, after having been discredited. Then there is the perennial Nokia, who has seemed to be on death’s door, but may be coming back. As a strategic partner for Microsoft, Nokia’s fate may have a huge bearing on Microsoft’s strategy to reinvent itself as the PC goes into atrial fibrillation. Will Amazon enter the fray with its own smart phone entrant, and if so, with whose OS? Will Research in Motion and the Blackberry be able to achieve a survivable market share, or is RIM already a walking zombie?
Finally, in a kind of death dance patent dispute reminiscent of the film, Gladiator, Nokia and RIM are now locked in new lawsuits and counter-lawsuits, as if to say, “If neither of us are going to survive, we might as well kill each other for the entertainment value.”
Here’s a more concise overview of the race to be the third mobile platform:
For Management students, this real time case study offers the opportunity to apply and ponder:
1. The time tested 1976 Boston Consulting Group (Bruce Henderson)“rule of three and four.” In a stable mature market there can be no more than three surviving competitors, the largest of which can have no more than four times the share of the smallest of the three. Here, the question is whether a third competitor can successfully emerge at all?
2.Barriers to market entry. Former Intel Marketing VP, Bill Davidow‘s book, Marketing High Technology, An Insider’s View, still considered the standard on the topic, suggested his own metric for a barrier to a new market entrant, or even a competitor just struggling to survive the market shakeout. The market entry barrier rule of thumb in dollars is three-quarters the most recent annual revenue of the market leader. In this case, that is a very big B number… Microsoft has the bucks, but is it just too late?
3. Vertical integration. Rumors of Samsung introducing its own mobile OS seem implausible, but hey Nvidia just announced its own gaming console to compete with Microsoft, Nintendo, and Sony.
4. Resources and capabilities. It is necessary to consider the respective resources and capabilities of each of the many direct players, and those playing in related markets that bear on the mobile OS market.
5. Related markets, new markets, peripherally involved competitors and products which all could play a role in the eventual outcome of this. The integrated Internet HDTV market is only one example. Featuring Apple, Microsoft, Google, and Samsung, and the HDTV manufacturers, it could influence things. What if Amazon were to vertically integrate and introduce its own smart phone?
This is the hairball of this Century so far. Are you all still with me, here?
For over a year now I have blogged here about the red flags flying about Travis Kalanick and Uber. Many investigative articles have been published over this time, in the New York Times and other publications, which have raised disturbing questions about Uber, Kalanick and some members of his team. The Board of Directors has finally taken action but it feels like its a day late and a dollar short. Why did it take so long? I have bluntly used the epithet that “Uber is Trump,” but now on reflection, it is more apt to describe Uber as Enron the sequel, and “deja vu all over again.” Remember the audio of two Enron electricity traders laughing about “screwing grandma?” That is Uber.
A Silicon Valley Tragedy
Remember Enron’s “Smartest Guys in the Room?”
An early photo of Uber’s management team
Why did Uber spin so wildly out of control?
For over a year now I have blogged here about the red flags flying about Travis Kalanick and Uber. Many investigative articles have been published over this time, in the New York Times and other publications, which have raised disturbing questions about Uber, Kalanick and some members of his team. The Board of Directors has finally taken action but it feels like its a day late and a dollar short. Why did it take so long? I have bluntly used the epithet that “Uber is Trump,” but now on reflection, it is more apt to describe Uber as Enron the sequel, and “deja vu all over again.” Remember the audio of two Enron electricity traders laughing about “screwing grandma?” That is Uber.
Culture Trumps Strategy
So as the current management adage says, culture trumps strategy. This is not simply about the bad behavior of a few individuals and that eliminating them will solve Uber’s problems. The aggressive, confrontational business strategy is itself an integral and inextricable part of the problem. Some have said that Uber has a good business model and deserves to succeed. I dispute that. Jeremy Rifkin’s Third Industrial Revolution describes his vision for a new sharing economy. The book has been read by world leaders and praised for its insights into a bright new evolving economy. Uber and other companies like it have morphed the sharing economy into something ugly.
Uber morphed the sharing economy into “the gig economy,” epitomized by jobs without security or benefits, and the now viral video of Kalanick berating an Uber driver who was going bankrupt. SFGate also exposed the Uber operating strategy of psychologically manipulating drivers to work more hours than intended. The central principle of Kalanick’s business strategy is what he euphemistically describes as “principled confrontation.” Uber enters a market without following any existing rules or regulations, simultaneously entering into negotiations with municipalities which are typified by stalling tactics from Uber, and no intention to conclude an agreement. Uber’s goal is to take over the market by force, making any agreements with municipalities unnecessary. While pursuing its strong-arm goal, Uber has used a software tool, Greyball, to evade law enforcement. Uber is now under criminal investigation for the use of Greyball. Even the notion that Uber somehow improves traffic congestion has been debunked by a Northwestern University study commissioned by the San Francisco Transportation Authority which found that ride sharing has a heavy negative impact on San Francisco’s traffic congestion. See www.sfcta.org/TNCsToday
Uber is also facing a major lawsuit from Google for expropriating Google driverless car technology by hiring one of Google’s engineers. Uber has now fired the engineer in question, but the firing itself may be a circumstantial admission that its intent was to steal Google IP. In another case, nearly 200 Uber employees were encouraged to use fake ID, burner phones and credit cards to sabotage Lyft, by booking and then quickly canceling more than 5000 rides with Lyft. Then there is the matter of what can now only be described as pervasive sexual harassment within Uber. Adding to all of these issues, local communities have begun to resist Uber much more aggressively. In one example, a protest movement in Oakland is opposing Uber’s plan to open offices in Oakland. There are other examples dotted around the World. Finally, there is the unresolved matter of the status of Uber’s drivers as “independent contractors or employees” which is nearing a final decision in California state and federal courts.
Clearly, Uber’s business strategy is driven by its ugly corporate culture. Stepping back to consider the complete picture, Uber’s business strategy looks to me like a house of cards.
Uber’s Leadership Conundrum
Those who know me and my blogs here know that I am a student of Harvard Business School professor John Kotter and his philosophy of leadership with humility at its core. Uber presents a leadership conundrum for me. I was interested to hear BackChannel journalist Jessi Hempel express the same point tonight on PBS Newshour. Uber obviously urgently needs to change its culture, yet without the wild aggressive culture defined by Kalanick, the question remains whether Uber can survive? It is not clear to me that humility could turn the Uber cultural battleship. There have also been a number of business articles suggesting that changing a corporate culture is far more challenging than changing a corporate strategy. So I am left to ponder Peter Drucker’s Four Quadrants of Managerial Behavior, and Quadrant Four’s “high task, low relationship” model for Uber. I learned this in Intel’s M Series management courses years ago. The course used the case study of the film “12 O’Clock High,” a demoralized B-17 bomber unit as its example. Gregory Peck arrives as the new unit commander and begins by “kicking ass and taking names.” A similar case would be George Patton’s arrival in North Africa to take command of a demoralized tank unit. My sense at the moment is the only best hope is that somehow an interim leader at Uber will have the latitude to take whatever actions he deems necessary to right the ship. Such a solution seems doubtful at the moment.
Business Ethics Missing in Action
This morning on NPR’s Morning Edition, Nina Kim interviewed the Director of the Markulla Center for Applied Ethics at Santa Clara University, Kirk Hansen. The Center is named for early Intel and Apple executive, Mike Markkula. Mr. Hansen said that “Uber will undoubtedly become one of the most important business case studies” to emerge from Silicon Valley. Hansen went on to point out that founders of startups are often not capable of taking the company to a mature large company, and that it may be necessary to remove or reassign the founder. In the case of Uber, this is impossible because Kalanick and his founder group have the majority of shares. This contrasts with most startups legal framework, where the investors or Board may hold the right to remove the founder in specific circumstances.
The Smartest Guys in the Room
As a grey-haired Silicon Valley alumni, I am personally offended and outraged by what has happened at Uber. I am deeply ashamed. Over the years I have worked for some well-known SV companies, startups, VC firms, and my own consultancy. I have personal knowledge of things that happened that were not kosher, and I have been present in situations where the ethics were not the best, but nothing in my Silicon Valley experience rises to the level of Uber. Something has gone wildly out of control since my time with how we conduct ourselves in business, and it is now tarnishing the history and reputation of fifty years of Silicon Valley achievements. From my own personal experience working at one wildly successful company years ago, and after rewatching the Enron documentary video, “The Smartest Guys in the Room,” the answer is simple: too much money.
Uber Technologies Inc [UBER.UL] Chief Executive Travis Kalanick is likely to take a leave of absence from the troubled ride-hailing company, but no final decision has yet been made, according to a source familiar with the outcome of a Sunday board meeting.
Emil Michael, senior vice president, and a close Kalanick ally has left the company, the source said.
At the Sunday meeting, the company’s board adopted a series of recommendations from the law firm of former U.S Attorney General Eric Holder following a sprawling, multi-month investigation into Uber’s culture and practices, according to a board representative.
Uber will tell employees about the recommendations on Tuesday, said the representative, who declined to be identified.
The company is also adding a new independent director, Nestle executive, and Alibaba board member Wan Ling Martello, a company spokesman said.
Holder and his law firm were retained by Uber in February to investigate company practices after former Uber engineer Susan Fowler published a blog post detailing what she described as sexual harassment and a lack of a suitable response by senior managers.
The recommendations in Holder’s firm’s report place greater controls on spending, human resources and other areas where executives led by Kalanick have had a surprising amount of autonomy for a company with more than 12,000 employees, sources familiar with the matter said.
Kalanick and two allies on the board have voting control of the company. Kalanick’s forceful personality and enormous success with Uber to date, as well as his super-voting shares, have won him broad deference in the boardroom, according to the people familiar with the deliberations.
Uber CEO Travis Kalanick speaks to students during an interaction at the Indian Institute of Technology (IIT) campus in Mumbai, India, January 19, 2016. REUTERS/Danish Siddiqui/File photo
Any decision to take a leave of absence will ultimately be Kalanick’s, one source said.
The world’s most valuable venture-backed private company has found itself at a crossroads as its rough-and-tumble approach to local regulations and handling employees and drivers has led to a series of problems.
It is facing a criminal probe by the U.S. Department of Justice over its use of a software tool that helped its drivers evade local transportation regulators, sources have told Reuters.
Last week, Uber said it fired 20 staff after another law firm looked into 215 cases encompassing complaints of sexual harassment, discrimination, unprofessional behavior, bullying and other employee claims.
SILICON VALLEY SHOCK
Even a temporary departure by Kalanick would be a shock for the Silicon Valley startup world, where company founders in recent years have enjoyed more autonomy and often become synonymous with their firms.
Uber’s image, culture, and practices have been largely defined by Kalanick’s brash approach, company insiders and investors previously told Reuters.
Uber board member Arianna Huffington said in March that Kalanick needed to change his leadership style from that of a “scrappy entrepreneur” to be more like a “leader of a major global company.” The board has been looking for a chief operating officer to help Kalanick run the company since March.
The debate over Kalanick’s future comes as he is also facing a personal trauma: His mother died last month in a boating accident, in which his father was also badly injured.
Michael, described by employees as Kalanick’s closest deputy, has been a recurring flashpoint for controversy at the company.
He once discussed hiring private investigators to probe the personal lives of reporters writing stories faulting the company. Kalanick disavowed and publicly criticized the comments.
Michael will be replaced as the company’s top business development executive by David Richter, currently an Uber vice president, the company spokesman said.
Alongside Uber’s management crisis, its self-driving car program is in jeopardy after a lawsuit from Alphabet Inc alleging trade secrets theft, and the company has suffered an exodus of top executives.
One Uber investor called the board’s decisions on Sunday a step in the right direction, giving Uber an “opportunity to reboot.”
Since I joined the high-tech industry years ago, Silicon Valley has had a fundamental need for highly educated engineers and scientists that could not be filled by American graduates. This reality has been bemoaned by Congressional politicians for decades now, who have essentially done nothing to increase the emphasis on STEM education (science, technology, engineering, and math) for resident Americans, and who instead chose to provide the H1-B Visa enabling Silicon Valley high-tech companies to employ immigrants to fill these crucial positions, and has enabled the high-tech industry to thrive. The election of Donald Trump has changed all that. His platform is almost completely devoid of any acknowledgment of the crucial importance of high-tech innovation to U.S. productivity and economic growth, the need for H1-B immigrants and the parallel need for greater investment in STEM education.
Immigrants Will Think Twice About Coming To Silicon Valley
Since I joined the high-tech industry years ago, Silicon Valley has had a fundamental need for highly educated engineers and scientists that could not be filled by American graduates. This reality has been bemoaned by Congressional politicians for decades now, who have essentially done nothing to increase the emphasis on STEM education (science, technology, engineering, and math) for resident Americans, and who instead chose to provide the H1-B Visa enabling Silicon Valley high-tech companies to employ immigrants to fill these crucial positions, and has enabled the high-tech industry to thrive. In my own group at Intel years ago, one of my closest colleagues was a Canadian math graduate from McGill and a Harvard MBA with an H1-B visa. Today, Silicon Valley is now notable for its multicultural diversity. The election of Donald Trump has raised very real fears in Silicon Valley. His platform is almost completely devoid of any acknowledgment of the crucial importance of high-tech innovation to U.S. productivity and economic growth, the need for H1-B immigrants and the parallel need for greater investment in STEM education. But then Trump is on record calling computers “a mixed bag” and thinks people should wean themselves off the internet. Trump is also said not to have basic computer skills, beyond the use of his Twitter account.
Supporters of Trump prior to the election were few and far between. Peter Thiel, a venture capitalist, former founder of PayPal, and a gay man, is perhaps the single most visible Trump supporter in the Valley. Tim Cook, CEO of Apple, did hold a private Silicon Valley fundraiser for Paul Ryan during the election, but otherwise, his support has been publicly tepid at best, as Trump has lashed out vigorously at Apple’s overseas manufacturing. Meg Whitman, CEO of Hewlett-Packard and a host of other Silicon Valley luminaries were outspoken supporters of Hilary Clinton. There are indications of a tenuous thaw from some in Silicon Valley but where will it lead?
What Will Happen to the H1-B Visa and Investment In STEM?
Silicon Valley’s luminaries woke up Wednesday morning to a darkened new global order, one that the ceaseless optimism of their tech-powered visions seemed suddenly unable to conquer.
Across the technology industry, the reaction to Donald J. Trump’s election to the presidency was beyond grim. There was a sense that the industry had missed something fundamental about the fears and motivations of the people who use its products and that the miscalculation would cost the industry, and the world, greatly.
“The horror, the horror,” said Shervin Pishevar, a venture capitalist at the firm Sherpa Capital who, like just about every leading light in tech, had strongly supported Hillary Clinton’s candidacy. “We didn’t do enough,” he added. “There were too many people in the tech industry who were complacent. They waited and waited and waited to get engaged in this election. And now we have this nightmare.”
Others were more succinct in their devastation. “I’m heartbroken,” said Stewart Butterfield, co-founder of the corporate messaging service Slack.
For some, buried in the visceral reaction was also a realization that the tech industry’s relationship with government — not to mention the public — looks bound to shift in a fundamental way.
During the Obama years, Silicon Valley came to see itself as the economic and social engine of a new digital century. Smartphones and social networks became as important to world business as oil and the automobile, and Amazon, Apple, Facebook, Google and Microsoft rose to become some of the most prosperous and valuable companies on the planet.
Mr. Obama, who rode many of these digital tools to the presidency, was accommodative of their rise; his administration broadly deferred to the tech industry in a way that bordered on coziness, and many of his former lieutenants have decamped to positions in tech.
Mr. Trump’s win promises to rip apart that relationship. The incoming president had few kind words for tech giants during the interminable campaign that led to his victory. Mr. Trump promised to initiate antitrust actions against Amazon, repeatedly vowed to force Apple to make its products in the United States, and then called for a boycott of the company when it challenged the government’s order to unlock a terrorist’s iPhone. Mr. Trump’s immigration plans are anathema to just about every company in tech.
Amazon, Apple, Facebook, Google and Microsoft offered no immediate comment about Mr. Trump’s win, or how the new administration’s stated policy goals would affect their businesses.
But it seems clear that a shift is in the offing. Leaders of these behemoths have long spoken in ambitious, gauzy sentimentalities about a broadly progressive future. Their goals weren’t simply financial but, they said, philosophical and democratic — they wanted to make money, sure, but they also wanted to make the world a better place, to offer a kind of social justice through code. Theirs was a tomorrow powered by software instead of factories, and offering a kind of radical connectivity that they promised would lead to widespread peace and prosperity.
Last year, Sundar Pichai, Google’s chief executive, published a broad rebuke of Mr. Trump’s plan to ban Muslims from immigrating to the United States. Mark Zuckerberg, Facebook’s co-founder and chief executive, told an audience of developers in April that “instead of building walls, we can help people build bridges.”
Peter Thiel, former founder of PayPal, and perhaps the most visible and lonely Trump supporter in Silicon Valley
In private, during the campaign, many tech leaders were positive that their vision would prevail over Mr. Trump’s. When asked about whether they were preparing in any way for a Trump victory, bigwigs at many of the industry’s leading tech and financial firms were bemused by the notion. They thought it would never happen.
The deeper worry is that tech is out of step with the national and global mood, and failed to recognize the social and economic anxieties roiling the nation — many of them hastened by the products the industry devises.
Among techies, there is now widespread concern that Facebook and Twitter have hastened the decline of journalism and the irrelevance of facts. Social networks seem also to have contributed to a rise in the kind of trolling, racism and misogyny that characterized so much of Mr. Trump’s campaign.
And then you get to the economic problems. Unlike previous economic miracles, the tech boom has not led to widespread employment. Much of the wealth generated by the five biggest American tech companies flows to young liberals in California and the Pacific Northwest, exactly the sort of “global elites” Mr. Trump railed against in his campaign.
It’s not clear that most Americans see technological progress as the unalloyed good that it is considered in Silicon Valley. Technology has pushed so deeply into people’s lives, changing how they work and go to school and raise their children, that it could well raise more fears than hopes. A new smartphone is nice, but perhaps not if it means that your trucking job will be replaced by a big rig that drives itself.
“We need to figure out how to connect more Americans to the economic engine of technology,” said John Lilly, a partner at the venture capital firm Greylock Partners.
On Wednesday, some in Silicon Valley worried about their disconnection from the mass of voters who chose Mr. Trump.
“In tech, we need scale, so we look at the world through the lens of aggregate metrics like page views, active users and even revenue,” Danielle Morrill, the chief executive of a start-up called Mattermark, wrote in an email. “But that doesn’t mean we understand the people on the other side of the screen as individuals. That’s the danger and the opportunity.”
Still, some people in tech said that despite their heartache over the outcome, they felt renewed inspiration to take bolder action to realize their progressive visions. Some made very big, idealistic proposals — this being, after all, the land of disruption. On Twitter, for instance, Mr. Pishevar said he would fund a campaign to get California to secede from the nation.
Others weren’t as high-flying but were nevertheless resolute.
Aaron Levie, the chief executive of Box, an online document storage company, suggested that the tech industry promote specific policy issues.
“To shift to an economy driven by innovation from tech-enabled businesses, we need to get ahead on the issues we’ve been talking about in Silicon Valley for years, like education, patent reform and immigration reform,” he said. “By and large, minus taxes and some tax repatriation issues, much about Trump’s rhetoric has been antithetical to most of the big businesses that are driving the economy.”
Mark Suster, a venture capitalist at Upfront Ventures, echoed the idea.
“Tech needs to take a deep breath, and then reflect on how this happened,” he said. “And have policy proposals that can realistically address the inequality in our country.”
In 1981, Richard Feynman, probably the most famous physicist of his time asked the question: “Can we simulate physics on a computer?” At the time the answer was “theoretically yes,” but practically not at that time. Today, we may be on the verge of answering “yes” in practice to Feynman’s original question. Quantum computers operate in such a strange way and are so radically different from today’s computers that it requires some understanding of quantum mechanics and bizarre properties like “quantum entanglement.” Quantum computers are in a realm orders of magnitude beyond today’s supercomputers and their application in specific computational problems like cryptography, Big Data analysis, computational fluid dynamics (CFD), and sub-atomic physics will change our World. Canadian quantum computing company, D-Wave Systems has been at the center of Google’s efforts to pioneer this technology.
In 1981, Richard Feynman, probably the most famous physicist of his time asked the question: “Can we simulate physics on a computer?” At the time the answer was “theoretically yes,” but practically not at that time. Today, we may be on the verge of answering “yes” in practice to Feynman’s original question. Quantum computers operate in such a strange way and are so radically different from today’s computers that it requires some understanding of quantum mechanics and bizarre properties like “quantum entanglement.” Quantum computers are in a realm orders of magnitude beyond today’s supercomputers. Their application in specific computational problems like cryptography, Big Data analysis, computational fluid dynamics (CFD), and sub-atomic physics will change our World. Canadian quantum computing company, D-Wave Systems has been at the center of Google’s efforts to pioneer this technology.
Reblogged from New Scientist
Google’s Quantum Dream May Be Just Around the Corner
31 August 2016
Revealed: Google’s plan for quantum computer supremacy
The field of quantum computing is undergoing a rapid shake-up, and engineers at Google have quietly set out a plan to dominate
By Jacob Aron
SOMEWHERE in California, Google is building a device that will usher in a new era for computing. It’s a quantum computer, the largest ever made, designed to prove once and for all that machines exploiting exotic physics can outperform the world’s top supercomputers.
And New Scientist has learned it could be ready sooner than anyone expected – perhaps even by the end of next year.
The quantum computing revolution has been a long time coming. In the 1980s, theorists realised that a computer based on quantum mechanics had the potential to vastly outperform ordinary, or classical, computers at certain tasks. But building one was another matter. Only recently has a quantum computer that can beat a classical one gone from a lab curiosity to something that could actually happen. Google wants to create the first.
The firm’s plans are secretive, and Google declined to comment for this article. But researchers contacted by New Scientist all believe it is on the cusp of a breakthrough, following presentations at conferences and private meetings.
“They are definitely the world leaders now, there is no doubt about it,” says Simon Devitt at the RIKEN Center for Emergent Matter Science in Japan. “It’s Google’s to lose. If Google’s not the group that does it, then something has gone wrong.”
We have had a glimpse of Google’s intentions. Last month, its engineers quietly published a paper detailing their plans (arxiv.org/abs/1608.00263). Their goal, audaciously named quantum supremacy, is to build the first quantum computer capable of performing a task no classical computer can.
“It’s a blueprint for what they’re planning to do in the next couple of years,” says Scott Aaronson at the University of Texas at Austin, who has discussed the plans with the team.
So how will they do it? Quantum computers process data as quantum bits, or qubits. Unlike classical bits, these can store a mixture of both 0 and 1 at the same time, thanks to the principle of quantum superposition. It’s this potential that gives quantum computers the edge at certain problems, like factoring large numbers. But ordinary computers are also pretty good at such tasks. Showing quantum computers are better would require thousands of qubits, which is far beyond our current technical ability.
Instead, Google wants to claim the prize with just 50 qubits. That’s still an ambitious goal – publicly, they have only announced a 9-qubit computer – but one within reach.
“It’s Google’s to lose. If Google’s not the group that does it, then something has gone wrong“
To help it succeed, Google has brought the fight to quantum’s home turf. It is focusing on a problem that is fiendishly difficult for ordinary computers but that a quantum computer will do naturally: simulating the behaviour of a random arrangement of quantum circuits.
Any small variation in the input into those quantum circuits can produce a massively different output, so it’s difficult for the classical computer to cheat with approximations to simplify the problem. “They’re doing a quantum version of chaos,” says Devitt. “The output is essentially random, so you have to compute everything.”
To push classical computing to the limit, Google turned to Edison, one of the most advanced supercomputers in the world, housed at the US National Energy Research Scientific Computing Center. Google had it simulate the behaviour of quantum circuits on increasingly larger grids of qubits, up to a 6 × 7 grid of 42 qubits.
This computation is difficult because as the grid size increases, the amount of memory needed to store everything balloons rapidly. A 6 × 4 grid needed just 268 megabytes, less than found in your average smartphone. The 6 × 7 grid demanded 70 terabytes, roughly 10,000 times that of a high-end PC.
Google stopped there because going to the next size up is currently impossible: a 48-qubit grid would require 2.252 petabytes of memory, almost double that of the top supercomputer in the world. If Google can solve the problem with a 50-qubit quantum computer, it will have beaten every other computer in existence.
Eyes on the prize
By setting out this clear test, Google hopes to avoid the problems that have plagued previous claims of quantum computers outperforming ordinary ones – including some made by Google.
It’s Martinis and colleagues who are now attempting to achieve quantum supremacy with 50 qubits, and many believe they will get there soon. “I think this is achievable within two or three years,” says Matthias Troyer at the Swiss Federal Institute of Technology in Zurich. “They’ve showed concrete steps on how they will do it.”
Martinis and colleagues have discussed a number of timelines for reaching this milestone, says Devitt. The earliest is by the end of this year, but that is unlikely. “I’m going to be optimistic and say maybe at the end of next year,” he says. “If they get it done even within the next five years, that will be a tremendous leap forward.”
The first successful quantum supremacy experiment won’t give us computers capable of solving any problem imaginable – based on current theory, those will need to be much larger machines. But having a working, small computer could drive innovation, or augment existing computers, making it the start of a new era.
Aaronson compares it to the first self-sustaining nuclear reaction, achieved by the Manhattan project in Chicago in 1942. “It might be a thing that causes people to say, if we want a full-scalable quantum computer, let’s talk numbers: how many billions of dollars?” he says.
Solving the challenges of building a 50-qubit device will prepare Google to construct something bigger. “It’s absolutely progress to building a fully scalable machine,” says Ian Walmsley at the University of Oxford.
For quantum computers to be truly useful in the long run, we will also need robust quantum error correction, a technique to mitigate the fragility of quantum states. Martinis and others are already working on this, but it will take longer than achieving quantum supremacy.
Still, achieving supremacy won’t be dismissed.
“Once a system hits quantum supremacy and is showing clear scale-up behaviour, it will be a flare in the sky to the private sector,” says Devitt. “It’s ready to move out of the labs.”
“The field is moving much faster than expected,” says Troyer. “It’s time to move quantum computing from science to engineering and really build devices.”
In the simplest terms, the concept here is how a company can potentially increase both revenue and market share by executing a strategy to work with direct or indirect competitor(s) to the benefit of both, a win-win. The old Arab saying, “My enemy’s enemy is my friend” also applies. It can also be as simple as joining an ad hoc collaboration among a group of companies or a standards group to create market order and simplicity from an overcrowded and confused market. Customers invariably respond to products that provide the greatest value and paths to long-term increased value and cost reduction. Collaboration or “Co-opetition” is one of the most effective means to achieve that goal, particularly in an economic environment where “flat is the new up.”
A Strategy For Survival in Tough Times
In the simplest terms, the concept here is how a company can potentially increase both revenue and market share by executing a strategy to work with its direct or indirect competitor(s) to the benefit of both, a win-win. The old Arab saying, “My enemy’s enemy is my friend” also applies. It can also be as simple as joining an ad hoc collaboration among a group of companies or a standards group to create market order and simplicity from an overcrowded and confused market. Customers invariably respond to products that provide the greatest value and paths to long-term increased value and cost reduction. Collaboration or “Co-opetition” is one of the most effective means to achieve that goal, particularly in an economic environment where “flat is the new up.”
Multibus: An Early Example of Collaboration Building A New Market
Soon after joining Intel, I learned about Intel’s concept of “Open Systems” and its “Multibus” system architecture. Motorola was Intel’s primary competitor in microprocessors and so-called “single board computers” at that time. Intel’s now legendary Marketing VP, Bill Davidow had developed a strategy to recruit other companies to support Multibus as an open system standard. Davidow’s idea was to make Multibus more attractive to system designers by having a stable of compatible products from other companies supporting Multibus. It worked. Since that time the concept has evolved significantly and has played a major role in the development of many new markets. This post discusses some of the evolutionary changes, offers two high-tech case studies and some key requirements for successful collaboration. It is more important now than ever as a survival strategy in a particularly challenging global economy.
The IBM Personal Computer Sets The Standard For The Future
Perhaps the best known high-tech example of an open system is the IBM Personal Computer, involving IBM, Intel, Microsoft, and thousands of other supporting companies. The result has been the creation of a huge new market, with over 400,000 applications for the PC, significant price competition, and interchangeable components from multiple vendors. By contrast, Apple opted for a closed, proprietary system, which persists to this day, and continues to be a source of discontent from Apple customers: higher prices, as well as accessories and interfaces only available from Apple, etc. In sheer market share, the PC dominated at 85% of the total market, while Apple was forced to concentrate on niche markets like education and graphic design. I am not going to discuss the PC as it has been analyzed extensively over the years, though it does provide an excellent case study on the dynamics and market power of open systems versus closed proprietary systems.
Important Current Co-opetition Successes: DSL And Android
I will discuss two other cases, one less well known and the other better known and more recent. In the first case, I was personally involved so my experience enables me to speak in-depth on the topic. Shortly after leaving Ascend Communications, I was called by a friend at Compaq/HP in Houston and asked to fly down to Houston for a private discussion with the VP of the Presario Division and his team. The VP wanted to incorporate a high-speed digital subscriber line (DSL) connection in the Presario out of the box. The idea was that a consumer would connect the PC to a standard RJ11 telephone wall jack, and be instantly connected to the Internet. However, I had to explain that the challenges to this were enormous. First and foremost the telephone companies themselves could not agree on the standard for how DSL worked. Equally problematic, the DSL market was fragmented with dozens of competitors offering different proprietary solutions.
We decided to proceed regardless, recognizing that if HP/Compaq were to succeed with their ingenious idea, it would require a fundamental change in the current DSL market and the telcos. This could only be attempted if Compaq joined forces with Intel and Microsoft, and even then the outcome would be uncertain. I contacted Ali Sarabi in Intel’s Architecture Labs, who admitted that Intel had been thinking of the same idea, and talking with Microsoft as well. So within two weeks all three companies met at Microsoft in Bellevue and the idea gained steam. Soon after we held three days of secret meetings in Atlanta with DSL companies, without explaining our purpose, and came away completely dejected. Bringing the competitors together was hopeless. They all pointed in a different direction. It then dawned on us that if we could get the telecom companies to agree on a single DSL standard, they could unite and as “the customers,” and therefore dictate to the DSL competitors what they would buy. Nothing works better than the opportunity to make money.
Another round of secret meetings in Seattle with the telecoms, and follow-up meetings around the country led to a breakthrough: the formation of a global consortium of over 100 telecom companies and DSL companies that culminated in the International Telecommunications Union in Geneva Switzerland creating a single global DSL standard, which eventually made the original Compaq Presario vision a reality.
Special Interest Group Legal Framework Paves The Way
One of the keys to this success was a simple legal framework for the companies to collaborate, known now as a “Special Interest Group,” avoiding any hint of unfair competition and ensuring that the technical aspects of the standard would be in the public domain. The SIG legal document has since been used in a number of other developments, notably Bluetooth and USB. Other standards bodies, like the IEEE and IETF, are also structured similarly, enabling the creation of crucial collaborative projects like WiFi. These efforts are now a key aspect of many high-tech markets. Many companies devote entire teams to managing their participation in these standards bodies and ad hoc industry collaboration activities. Even on a small scale, some agreed framework, a Memorandum of Understanding or a simple one-pager may be required to achieve the necessary trust to move forward.
Android Repeats The IBM PC Phenomenon
The second case of successful global industry-wide collaboration is the Google Android smartphone operating system versus Apple IOS. Once again, Android is an open architecture while Apple IOS is a closed proprietary system. Android has been adopted by a wide range of smartphone manufacturers, most notably Samsung, HTC, and Huawei. Despite the well-publicised popularity of Apple’s iPhone, the fact remains that Android, as an open architecture dominates the global smartphone market at 82% market share in 2015, as reported by International Data Corporation (IDC), and Apple again stuck in the 15% range.
Global Smartphone Market Share 2015 (IDC)
Two Failures To Collaborate: Videoconferencing And The Internet of Things
The video conferencing market has been around for nearly thirty years. Originally, there were big bulky proprietary systems. Cisco Systems later became a major player with its own impressive HD technology. In all, there were nearly a dozen major competitors addressing an “enterprise market” for business use only. The equipment was very expensive. Then along came Skype, WebEx, Apple Facetime and others. The problem is that, after thirty years, none of these competitors applications can talk with any other application. Clearly, this is a problem. So “middleware” startups have sprung up, offering a simple translation of otherwise incompatible video transmission protocols. Bluejeans technology is one excellent example. I have used it personally in my UBC classes to link a guest lecture on Skype to UBC’s corporate video conferencing system because there is no other way to do it. Is this the best solution or cost-effective. Absolutely not. Why, after thirty years, has the video conferencing industry failed to standardize?
In another case, the emerging new market buzzword is “The Internet of Things.” This means that everything in your home can and will be connected to the Internet. Sounds simple enough, right? Not exactly. Today the IoT market remains a complex, confusing Tower of Babble, with multiple competing communications protocols. Some products support WiFi, but there is no one single agreed way to communicate. A recent ZDNet post explains that home automation currently requires that devices need to be able to connect with “multiple local- and wide-area connectivity options (ZigBee, Wi-Fi, Bluetooth, GSM/GPRS, RFID/NFC, GPS, Ethernet). Along with the ability to connect many different kinds of sensors, this allows devices to be configured for a range of vertical markets.” Huh? This is the problem in a nutshell. You do not need to be a data communication engineer to get the point. I have written here on this blog about this embarrassing failure to collaborate.
Summary
While the open architecture of the PC happened more or less organically, as so many companies were keen to get in on the action, the DSL problem was a hairball of enormous global complexity that had to be solved. I am honored to have been part of that effort. Google’s decision to launch Android as an open architecture was more like Multibus, and the conscious strategic decision of Eric Schmidt and Larry Page to enter the market as an open system from the outset. Other examples in other industries abound and are documented in the now legendary book, Co-opetition.
The result in all three successful cases has been a dramatic market success. The key takeaway point is that in all three cases the open architecture created opportunity and expanded the market. Industry collaborations like this are as relevant for smaller markets with only two or three competitors as for large complex markets. Collaboration can be the key to company survival or failure.
mayo615 