Disruptive Tendencies

Adding my .02 to the GigaOM blog highlighting several key metrics from US mobile operators. Drilled down and expanded the view at 3GSpeedTest. You can check it out at http://www.3gspeedtest.com/2010/03/02/of-churn-arpu-and-value-of-net-add/

Space Juxtaposition

Catching up on the news this morning, I scanned the MSNBC homepage for interesting stories. “Iran Sends Mouse, Worms, Turtles into Space” caught my eye, especially as it was juxtaposed with another story, “US Grieves Over Cancelled Program”. Iranian President Ahmadinejad is quoted as saying that the “Scientific arena is where we could defeat the West’s domination.”

Now, I don’t equate the launching of a 10’ rocket with the Apollo program or the space shuttle, but it seems that they are kicking ass in ambition. While Iran aspires to, and works towards, putting man into orbit within the next 10 years (it has already put a communications satellite into orbit), America is getting ready to mothball the shuttle fleet this year and has just cancelled the Constellation program, “effectively cancelling a five-year, $9 billion effort to build new Orion spacecraft and Ares rockets”, which “were slated to replace NASA’s three aging space shuttles.”

Is it possible that Iran (?!?) will have a heavy launch vehicle capable of putting man into orbit before the US gets its act together and replaces the shuttle fleet?

And it’s not just Iran. Our traditional space race competitor, Russia, will soon be the only means we have of getting our own astronauts to the International space station ("Can we catch a ride? We'll give you gas money."). India has successfully inserted a spacecraft into lunar orbit, has a manned program underway, has allocated budget and will launch a manned mission by 2014-2015. China has put men into orbit, and has laid out its plans to put a man on the moon by 2020.

I was in grade school when the Apollo program was underway. It was a race to be the first, to be the best, and to show the world what America is capable of achieving. We had political will. There was national pride. We accomplished that which no other country has yet to achieve. We were leaders. We swaggered when we walked.

And today? I fear that we’re not even laggards. Our mojo is gone. It's not that others have passed us, it that we've pulled ourselves out of the race. While other countries see manned space flight as a primary ambition, we yawn collectively and couldn’t care less. Maybe we’ll start caring when Iran has its own astronauts in orbit or when Russia/India/China puts astronauts back on the moon. But by then, we’ll be left in their dust – moon dust. That’s my .02!

Martin Suter

martin.suter at iplicensing.net

Homeland Insecurity Redux

So a Nigerian Islamist, named Umar Farouk Abdulmutallab, who was on multiple Watch Lists, tries unsuccessfully to detonate an explosive on a plane. How do we react?

Three hour waits in order to pat down women, children, and business people. Carry-ons limited to one piece only. No peeing in the last hour of a flight. No blankets. Nothing in one’s lap.

Hysterical and absurd are but two adjectives that come to mind.

Over a year ago, I blogged about how ludicrous it is for the DHS (from a policy perspective) and the TSA (from an implementation perspective) to treat every traveler as equal risks to safety and security (Homeland Insecurity?).

“C’mon…When was the last time a 70 year old fat lady tried to hijack a plane? Or a 45 year old high tech executive father of two? Or a high school student?...We live in a world where it is somehow deemed more acceptable to humiliate old fat ladies than it is to say out loud what we all know: radical Islamists are the threat, not my 14 year old son or the old lady next door, or me.”

“We lack the resources to treat everyone as a potential risk.”

Let me see if I’ve got this right…As someone who took over 150 flights last year, who has been screened by DHS multiple times, and who clearly is not an Islamist, I now need to arrive 2-3 hours ahead of my flight. I need to check my roll aboard, which will require that I wait at the other end for at least an hour to get my luggage. Do you think the airlines and airports are staffing up to deal with a 100% increase in checked luggage? Do you think they’re staffing up on the Customer Service side to deal with the inevitable surge in lost luggage? Do you think they’re budgeting for compensation claims due to baggage delays? Not a chance.

The joy of traveling was already largely gone, but now, thanks to the over-reaction by the DHS and TSA, it has totally disappeared.

Why should I be subject to the inconveniences, delays and costs associated with these absurd new procedures? Am I deemed a threat?

Why should you be subject to the inconveniences, delays and costs associated with these absurd new procedures? Are you deemed a threat?

Put some wood behind the arrow, but aim it at the bullseye, not at me and not at you.

Umar Farouk Abdulmutallab and his ilk are the ones who should be subject to the inconveniences, delays and costs, because they are the threat.

Not you or I.

That’s my .02!

Martin Suter

martin.suter at iplicensing.net

Tiger, Inc., A Failure in Corporate Governance

The near total implosion experienced by Tiger, Inc. these past 10 days, is almost unprecedented. "Almost", because, while not illegal, in many ways, it’s analogous to the collapse of Bernie Madoff’s empire. As with Bernie, people had “invested” in Tiger, cheering him on in his quest for greatness, paying him to represent their brand, only to find that all of the “equity” that had been carefully built up, was but a mirage.

Why does it matter? Of the ~$1 billion that Tiger is purported to have made since being launched into the public consciousness in 1996, less than 10% of it has been earned swinging a club and sinking putts. Ninety percent has been earned by Tiger, Inc., the sale and promotion of the man and the myth.

So what of it?

It’s hard to imagine that those in the inner circle of Tiger, Inc. weren’t aware of his high-risk behavior. Steve Williams, he who puts a smackdown on photographers, has been by Tiger’s side since 1999. I’m guessing that, during this time, he has spent at least 2000 nights on the road with his boss. Clearly, Steve has bought into the “What goes on in Vegas, stays in Vegas” mantra.

Mark Steinberg, Tiger’s agent and head of IMG’s Golf Division, is probably more responsible than anyone for 100% of Tiger, Inc. revenue. Is it possible that he wasn’t aware of Tiger’s behavior, or were he, Steve and others afraid to intervene and put their own livelihoods at risk? But if they were complicit, they would have contributed to the fraud, and must share responsibility for the fall of Tiger. As Solomon Burke sings in None of Us Are Free, “If you don’t say it’s wrong, then that says it’s right”.

I understand that Tiger must surround himself by people who he trusts implicitly, and clearly those near him can keep a confidence. But he also needs to surround himself with people whom he can trust to keep him grounded. People criticized Michael Vick for surrounding himself with his friends from the ‘hood, who shared with him a tendency towards illegal and high-risk behavior. People criticized Mike Tyson for surrounding himself with an entourage that fed his massive ego. Why are those in Tiger, Inc., if they were aware of his behavior, any different?

If I was Elin, I would feel betrayed, not only by my husband, but by those in the inner circle who attended the wedding, ate at my table, and played with my kids. Elin needs to assume the role of CEO of Tiger, Inc., although it’s not clear that she has any desire to do so. She should completely restructure Tiger, Inc., replacing everyone in the inner circle that has been part of the failure in governance and rebuilding both her personal relationship and the business anew.

“Sorry Steve, but somebody else needs to be on the bag next season.”

“Sorry IMG, we’ll take it from here.”

She and Tiger should work directly with sponsors that have been deceived and which, frankly, have now seen their brands tainted by association. Tiger needs to worry about being a husband, a father and winning majors and less about Tiger, Inc.

As much of a train wreck as John Daly appears to be, at least he doesn’t pretend otherwise. He parks his motor home out front of Hooters, chugs beer, poses for pictures and signs autographs. Seems that while he’s out front, Tiger’s sneaking his girl out the back door. Jack Nicklaus, a heavy smoker, refused to smoke on the golf course and hated seeing a picture of himself with a cigarette. While he would admit to human failings, he understood that he was a role model and adapted his behavior accordingly.

Why do we care about Tiger’s private life? I don’t, and frankly have read things that I had no desire to ever know.  This isn’t about Tiger’s private life, it’s about deception and a massive breach of the public, paternal and marital trust.

Tiger may end up being the winningest golfer and even surpass Nicklaus as the golfer with the most major championships, but Tiger can no longer ever become the “greatest” golfer. Great is who you are, not what you’ve accomplished. Great is how your friends and family describe you when you are gone, not how many trophies are on the mantle. As much as he would like it to be different, the narrative about his life is forever tarnished. Can you imagine reading a Tiger obit someday that fails to describe this past week in detail?

As the Accenture ad says with Tiger standing in the deep stuff, “It matters what you do next.”

Do right, Tiger.

That’s my .02!

Martin Suter

(martin.suter at iplicensing.net)

 

Immigration Policy as Scientific Impedance (Redux)

Yesterday, I wrote about how two out of three Americans, awarded the Nobel Prize for Medicine this year, were immigrants to this country. Well today, as I perused the Times again, I came across an article on this year’s Nobel Prize for Physics recipients. It turns out that two out of three of the Physics winners are also immigrants. Dr. Kao was born in Shanghai and Dr. Boyle in Canada.

Imagine a scenario today, where a Chinese or Canadian engineer had a job opportunity in the US. Chances are that their prospective employer would attempt to sponsor them for an H1B visa, an employer-sponsored visa for positions requiring advanced degrees. But there is a limited number of these every year, and typically the H1B pool is vastly oversubscribed. So maybe today’s Dr. Kao or Dr. Boyle can’t even enter the country to work.

Or perhaps they get lucky, and get that coveted H1B. Despite the fact that neither their spouse nor their children are able to work under their H4 status, they decide to emigrate anyway. The 6 year clock starts ticking, and unless they get a Green Card during this period, they’ll have to move elsewhere at the end of this period – earlier if they lose their position with their employer sponsor.

Once again, they’re amongst the lucky ones, whose employer agrees to the expense and administrative overhead and begins the employer-sponsored Green Card process. Before the application is actually submitted, the company needs to submit a job description, with a minimum set of qualifications required to do the job, and have this approved by the Department of Labor. Once signed off by this Department, the position needs to be posted internally and advertised externally for a period of 30 days, during which time the employer is required to accept applications for the job.

If, during this phase, an American applies, who meets the minimum level of qualifications, the potential applicant is deemed to be taking a job away from an American and cannot apply for his/her Green Card, meaning that once his H1B 6 year clock runs down, he/she must leave the country.

It’s very easy to imagine tomorrow’s potential Nobel Prize winners being put through this process today. Does anybody believe that employment is zero-sum? That there is a finite number of positions available? Or is it more enlightened to acknowledge that scientists, engineers and entrepreneurs are creators of jobs, and that their desire to immigrate to America should be embraced and encouraged.

There’s way too much friction in the system today. Brains abhor friction, and in a flat world, can just as easily be located elsewhere. When the Nobel Prize winners in 2040 are all in China, Russia, India or Korea, it will be too late for America, and it need only to look back a few decades and bemoan its own immigration policies.

That’s my .02!

Martin Suter

(martin.suter at iplicensing.net)

 

Immigration Policy as Scientific Impedance

A headline in today’s New York Times proudly proclaimed, “Three Americans Share Nobel for Work in Cell Biology”. The three winners discovered telomeres, thus solving a longstanding puzzle involving the ends of chromosomes. Apparently the implications of their work extends to cell division in both cancer and aging, which I must say, I’m very pleased about.

The article goes on to describe how two of the recipients were women, and how rare an event this is, with only eight women having won the Nobel Prize for Medicine previously. “Fantastic”, I thought, as science needs more women role models for young women today.

Then the article took a slight turn – it seems that two out of three recipients are immigrants. Dr. Blackburn came to the US in the ‘70’s, because it was “notably attractive as a place to do science, but goes on to suggest that “while America is still a magnet for foreign scientists, one shouldn’t take that for granted.”

Having previously blogged about the implications of an unenlightened immigration policy (“US Immigration Policy & Global Competitiveness”), I read on with interest.

Indeed, the point that was made by Dr. Szostak was that the world was now much more competitive in science, and that “we have to work a little harder to attract people from around the world and make sure they want to stay here.”

But as noted by Dr. Cech, former president of the Howard Hughes Medical Institute, onerous visa requirements are benefitting European countries especially, as “Even now, there is an implication when foreign scientists apply for visas that they should be distrusted, denied several times, and should have to hire lawyers and jump through a lot of hoops.”

Brains, like bits, abhor friction. It doesn’t matter whether the electrical impulses are synapses firing or semiconductors crunching data, electricity travels the path of least resistance. If US immigration policy makes it too onerous for today’s brilliant young minds to move to the US, these future scientists, engineers, entrepreneurs and yes, even Nobel Prize winners, will no longer be able to proudly call themselves “American”.

That’s my .02!

Martin Suter

(martin.suter at iplicensing.net)

Applied Game Theory: Modern Analogue to Asimov’s Psychohistory?

Last weekend’s New York Times Magazine had an article, which I found fascinating: “Can Game Theory Predict When Iran Will Get the Bomb?”  In it, Bruce Bueno de Mesquita, reportedly one of the world’s most prominent applied game theorists claims to have calculated the answer.

Game theory assumes that people look out for what is good for them, (i.e. they act with rational self-interest) and de Mesquita then uses mathematical analysis to predict (very often correctly) such messy human events as war, political power shifts, Intifada.

Applied stats as a predictor of human events, I thought. Where have I heard that before?

Then it occurred to me that this was the premise behind Psychohistory as imagined by the great sci-fi writer, Isaac Asimov in his “Foundation Series”. “Psychohistory depends on the idea that, while one cannot foresee the actions of a particular individual, the laws of statistics as applied to large groups of people could predict the general flow of future events.”

In Foundation, Hari Seldon, a Pyschohistorian, predicts the fall of the Galactic Empire, in much the same way as de Mesquita predicts the fall of the Iranian theocracy. (See the video on TED.com: “3 predictions of the future of Iran, and the math to back it up”)

Interestingly, at the end of the talk, Chris Andersen poses the question: “I got very nervous halfway through the talk, just panicking whether you had included in your model the possibility that putting this prediction out there might change the result?”

I wonder whether Chris was aware, when he posed the question, that by so doing, Bruno was violating one of the two axioms established by the fictional Seldon – “that the population should remain in ignorance of the results of the application of psychohistorical analyses.”

Time will only tell.

That’s my .02!

Martin Suter

(martin.suter at iplicensing.net)

Skype - Joltid Licensing Dispute: Epic M&A Screw-up?

eBay must be ruing the day that it signed the M&A deal to buy Skype for $2.6b, in addition to an additional $530m as part of the earn-out provisions. Its original vision of incorporating Skype functionality into its auctions never happened. Despite that, Skype has proven itself to be quite interesting as a standalone entity, with some value potentially to be recouped via a spin-out IPO. However based on an eBay 10-Q form filed with the SEC on 7/30/2009, this is now at risk over a dispute over a license.

It seems that some of the core functionality within Skype is based on peer-to-peer software licensed from Joltid, a company also controlled by the founders of Skype, Niklas Zennstrom and Janus Friis. So if I get this right, Joltid entered into a non-arm’s length license with Skype (pre-acquisition), a company that Zennstrom and Friis also controlled. When eBay acquired Skype, it would have known that while it was “buying” Skype, it wasn’t buying Skype source code, it was licensing it from Joltid. Given the amount of money involved in the deal, and the fact that the principals were the same, insisting on a perpetual, fully paid up license, in some Field of Use (voice, IM and video applications) with rights to derivatives would seem to have been very do-able.

Instead, it appears that Zennstrom and Friis pocketed a boatload of eBay cash, and retained control of Skype’s destiny via a licensing agreement. Now with the M&A (and liquidity) at risk, eBay is now over a barrel. Negotiate and pay for that fully paid up license, re-write everything, or write it all off as the worst deal of the century. OK, maybe that’s overstating it, the Time Warner-AOL deal sucked pretty badly too.

I’ve been involved with transactions that have nearly fallen apart at the eleventh hour because of legacy tech transfer licenses. “What do you mean we’ll have to pay 4% royalties ad infinitum? We’re buying the company!” When it gets to this stage and a deal’s at risk, the original licensor has all of the leverage, and will often be “bought off”, at the expense of the shareholders, to make the issue go away so the deal can get done.

Having negotiated multiple technology transfer and M&A deals, I have learned that it is imperative to construct the tech transfer deal with M&A in mind. Exclusivity in a well-defined Field, rights to Derivative Works, Non-Assertion of IP rights, a built-in cap or royalty buy-out to convert to a license in perpetuity, are all essential. Of course, in a non-arm’s length licensing agreement, like that between Joltid and Skype, the license terms would have been very different, but in this case it is incumbent on the acquirer to recognise this and force the issue while they have the leverage.

In hindsight, many would agree, this acquisition missed the mark strategically, resulting in a $1.43b writedown. But it’s hard to fault big, bold plays with the potential to break new ground. I have a deep admiration for those involved in transactions like that. But a key takeaway is the tactical execution by eBay’s M&A team appears to have missed the inherent conflicts of interest and let slide the licensing agreement with Joltid. Now, with no leverage, it’s biting them hard. Caveat emptor!

That’s my .02!

Martin Suter

(martin.suter at iplicensing.net)

Nortel’s Devolution to Non-Practicing Entity?

As someone who once wore a Nortel employee badge, and who counts many ex-Nortel employees among friends and family, watching Nortel’s descent from the peak has been hard to watch. Those, with better visibility into the decision-making than I, will ultimately dissect all of the wrong turns. 

Financial mismanagement, ill-conceived M&A deals, and strategic missteps have, unfortunately, landed Nortel where it is today – in bankruptcy protection and actively divesting entire businesses; its enterprise business possibly to Avaya, its wireless business to Ericsson. But like the Black Knight in Monty Python’s “The Holy Grail”, they’re “not dead yet”, despite hacking off multiple limbs.

When Nokia Siemens Networks’ bid was announced for Nortel’s remaining wireless business (CDMA and LTE roadmap), the decision to exclude wireless-related patents was a very strong indicator of intent. Under the terms of the announced transaction, NSN received a license to Nortel wireless IP, while Nortel retained ownership of said IP. According to reports, the Ericsson deal construct is very similar, with ownership of Nortel patents remaining with Nortel.

Once NSN’s stalking horse bid was announced, others emerged as suitors for the wireless business, including most notably RIM and the eventual winner of the auction, Ericsson.

Why would RIM pursue Nortel’s wireless business at the 11^th hour? Is it because it aspires to get into the CDMA/LTE base station business? I’m guessing not. Could it be that RIM saw Nortel’s moves signaling a fundamental shift in its future business model? Rather than remaining in the messy business of actually producing and selling product, why not sell off the operating businesses for a bunch of cash, throw in non-exclusive licenses to Nortel’s IP, and re-emerge as Nortel, the Non-Practicing Entity (aka Patent Troll)?

Few companies have been as badly burned recently, by NPEs, as has RIM. With its $612.5m settlement with NTP, for what ultimately amounted to the assertion of just a couple of claims (the validity of which was being seriously challenged), and more recently, its settlement with Visto for $267.5m, I’m sure RIM can see a day when Nortel, the NPE, asserts claims against RIM’s LTE products, at a cost to RIM that makes its $1b pseudo-offer seem reasonable. No doubt this is why RIM is rumoured, already, to be pursuing licensing discussions with Nortel for LTE patents.

A key here is that Nortel, as an NPE, would no longer be constrained by the usual rules of engagement that make the assertion of claims, by practicing entities (PEs), so rare. As a going concern, and even with an impressive patent portfolio (reportedly 5,500 patents), it would be highly unlikely for Nortel to assert its patent position against its main competitors. A kind of détente exists with patent holders, who understand that an assertion here will bring a counter-assertion there. The worst fear of PEs, however, is the NPE (or Troll), for which this détente is irrelevant, and where the business model is uniquely about asserting and monetising IP rights.

So Ericsson gets a pass on LTE patent assertion by Nortel, a key US customer committed to LTE, and a team capable of enhancing the CDMA to LTE migration story. Not a bad deal for $1.13b. And while one is tempted to feel sorry for NSN, its original bid of $650m turned out to be woefully miscalculated. One can only guess at what losing the deal with Nortel will end up costing NSN; in legal costs, eventual royalties and market share. Conversely, Ericsson will have gained in all of these areas. Kudos to its management team for realising this.

So what of Nortel? Can it make the transition from multi-billion dollar equipment vendor to NPE/licensing company? There certainly are precedents, even in Nortel’s backyard. Wi-LAN and Mosaid are two companies that have gone done this path, each of which has developed IP licensing as a core competency. Keep an eye on key Wi-LAN or Mosaid employees. If they start to leave, perhaps it’ll be to take on the challenge of monetizing Nortel’s patent portfolio. And if I’m Jim Balsillie, I’d be super pissed.

That’s my .02!

Martin Suter

(martin.suter at iplicensing.net)

Reflections on "Working"

“What do you want to be when you grow up?”, is a question we ask our children. Why do we use the verb “to be”, as if their job is what they are, not what it is that they do.

Or is our job what we are?

This past weekend, I had the opportunity to watch the Trinity Prep high school musical theater class perform “WORKING”, a musical adaptation from the book by Studs Terkel. Watching a group of exceptionally talented students, with a private school education and the future in front of them, play mill workers and firefighters, check-out girls and waitresses, UPS drivers and Wall Street executives was a jarring juxtaposition.

Janine Papin, the head of the theater department and director, summed up the rationale for the selection as follows:

“Each semester, Patrick (Nugent, Musical Director) and I attempt to find a show that meets the needs of the students enrolled. In the case of WORKING, each of the 13 students has his/her time in the spotlight and as part of the ensemble. As they step in and out of different people’s shoes, it shows them a side of life that they have yet to, or may never experience. I believe that exposure to the different sides of life and various socio-economic groups will help these students see things differently. We have all been told that we can’t really understand anyone until we have walked in their shoes. I hope that this show deepens both the actors’ and the audience’s understanding of the human condition.”

She knows her students, and is always striving to teach them, not simply about “acting”, but to make them better citizens of the world. Her students know this, or at least sense it, and are incredibly responsive and loyal. Parents of students also get this, and are profoundly grateful for her commitment to her students. Every one of them is a better person for having worked with Janine and Patrick.

As a father watching the show, one of the scenes was particularly poignant. Mike (sung by Jamie Pittle), a father, speaks to his own son as well as to his relationship with his own father.

“Boy you never stop to think, how fast the years run now they’ve taken you…I remember when you were three and a half, your ma and me would sit there…planning for our kid. I was your hero then. I could do no wrong. As far as you was concerned, I was the best of men…You hadn’t learned, how little time it takes and that Daddies make mistakes.”

“Seems to me that lately I’ve been thinking a lot about my Dad…Lots of funny things come back, I thought I’d forgot, and now they make me sad…He was my hero then. He couldn’t do no wrong, as far as I was concerned, he was the wisest, and the strongest, and the best of men…I hadn’t learned…that Daddies make mistakes.”

Mike then went on to describe his rationale for working, and his dreams for his son:

“…my kid is my imprint, you know what I mean? This is why I work…You know what I want? I want my kid to tell me that he’s not going to be like me…I’m sure the first caveman who went over the hill to see what was on the other side, didn’t go just out of curiosity. He went there because he wanted to get his son out of that cave.”

I would wager that I wasn’t the only man in the theater for whom this song hit close to home.

The kids on stage are being groomed for success. They come from privileged backgrounds, and are candidates for America’s finest schools. Notwithstanding their background, these kids are no strangers to hard work. Academic rigor is de rigueur and scholarships from the best schools are likely. You don’t get to be as talented as these kids by accident. They have had to work at it, and I have a profound respect for their talents. There is nothing to which these kids aren’t able to aspire, but a little wisdom imparted along the way can only help.

 “If I could’ve done, what I could’ve done, I could’ve done big things…With leeway to go far as I could go, I would’ve gone places – to the front of the line, the top of the tier, a long way from here…”

Perhaps as a result of this class, these kids (and the audience) will think differently about the maid, the grocery store clerk, the truck driver, the immigrant laborer, the firefighter, and the mason. If this happens, mission accomplished.

These people work, and like Mike probably work hard, so that their sons and daughters can have a better life than they’ve had. That’s something to which every one of us can relate, and is worthy of our compassion and respect, no matter the work.

Thank you Janine & Patrick.

That’s my .02!

Martin Suter

(martin.suter at iplicensing.net)