The Student Becomes the Master???

google motorola mobility merger approved

Google has announced the closing of its acquisition of Motorola Mobility, after a number of global regulators and authorities approved the transaction. As a leading global technology and engineering firm, Motorola built a reputation for quality and innovation, but pressures in its core markets and businesses had long threatened to make this global leader and manufacture into an also-ran in the modern digital economy. Google has earned a strategic coup in tapping the vast and underutilized technological and human resources of [part of] the Motorola family, and is now positioned to make the leap beyond the intangible space it has led into the tangible space Motorola once dominated. We’ll see how well they pull that pivot off. Our Chicago-based tech geeks and business types all hope that this is a promising development for the remains of the old Motorola we knew and loved, and hope that the student-teacher dynamic of this new combination can lead to even more “dynamics” in the marketplace.

Despite the promising nature of this transaction, a number of us find it ironic that the final hurdles and conditions came from China regulators who extracted some concessions from Google on keeping Android open, ostensibly to maintain competition.

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Amazon Web Services

Amazon Web Services logo

Amazon is a diverse company. Its financial reports do not break down its revenues into detailed categories but it’s obvious that it has a vast retailing presence in media, electronics, and general merchandise; and it sells a lot of Kindles, including Kindle Fires that arguably make Amazon one of the more successful competitors against Apple in the tablet market.

There’s another category on its quarterly reports labeled “Other” which hides Amazon Web Services, one of Amazon’s most interesting ventures.

Amazon has built a global network of servers that are highly reliable, massively redundant, and very secure. It makes them available to developers very inexpensively as a cloud computing platform. Amazon has stayed ahead of Google and Microsoft in making cloud servers and cloud storage available to all.

You won’t recognize most of the services offered through AWS but you’ll get an idea of the scope of the operation by looking at Wikipedia’s list of AWS products.

Amazon Web Services - Wikipedia list of AWS products

One of those products, Amazon Simple Storage Service (S3), has gotten much of the attention so far. Basically developers can write a program that stores files in the cloud and use Amazon S3 as the storage space with confidence that the storage will be safe and cheap.

When you use Dropbox, your files are stored on Amazon S3 servers. Amazon S3 is used to store data for Tumblr and Posterous. Backup programs are being built to store backups in Amazon S3. It’s far cheaper and more effective for a growing company to use S3 to hold your files instead of building its own global server network.

Another AWS service, Amazon Elastic Compute Cloud (EC2) provides something that network administrators are still getting their heads around. Basically it allows anyone from an individual to a Fortune 500 company to spin up a virtual server and operate it for a limited time for a specific project, or operate it continuously to run line-of-business programs. Either way, it costs almost nothing.

Last month Amazon made the experience even more friendly with the introduction of theAWS Marketplace, where a variety of business applications can be discovered and deployed with a minimum of expense and difficulty. From GigaOM:

“Nearly every company needs to run document management systems, CRMs, wikis, bug trackers, project management tools and other web-based software. Server applications tend to be tricky to setup and require a non-trivial amount of sys-admin knowledge to run and maintain. The AWS Marketplace encapsulates all that complexity and allows end users to discover, purchase and deploy complete server applications with one click. . . . This significantly lowers the barrier of adoption of cloud computing at the departmental level, making it easier for business units to bypass traditional IT. Why wait weeks to have a server delivered and setup when you can get pretty much the same result by whipping out your credit card and paying $50 a month for a small instance running the app you need now?”

AWS continues to be aimed primarily at enterprise IT departments, IT pros and developers. As an end user or businessperson you’re not going to go lightly over to the AWS Marketplace and spin up a project management system or SQL database. It’s a big and complex platform.

For IT departments, IT pros and developers, though, it changes everything to have so many hard things done automatically, preconfigured, cheap. As more people become familiar with the Amazon tools, it will likely grow exponentially. Microsoft, Google, Rackspace, and others are competing with Amazon to build out their own global networks and offer the same kind of services but Amazon is a rather large step ahead. Amazon may win the loyalty of application vendors, who do not always have the resources to develop for many different platforms; and Amazon may deliver the most customers if its marketplace begins to be widely used by businesses.

Descriptive Camera - Amazon Mechanical Turk

One recent report highlighted the unbelievable variety of things that creative people can do with the AWS platform. One of the AWS services is named “Amazon Mechanical Turk.” Programmers can send requests through Mechanical Turk to human beings who receive a small payment for completing a task that a computer cannot do. There are people around the world who have signed up to get micropayments for quick decisions – choosing the best photograph of a storefront, writing a product description, or identifying a performer on a music CD.

Last month the “Descriptive Camera” turned up on the gadget sites, a project done for an NYU class that demonstrates some of the awesome power that can be unleashed cheaply.

The Descriptive Camera takes a picture and uploads it to Mechanical Turk.

Three minutes later, a little printer spits out a slip of paper with a prose description of what was in the picture.

Sample photo and description:

Descriptive Camera - Amazon Mechanical Turk

That’s an awesome display of technology and outsourcing. Think it’s pointless? Look forward a few years and imagine that your camera automatically gets that kind of metadata and stores it in each image, where your camera already records shutter speed and date and time. You’d have a whole new way to search through your photos, wouldn’t you?

Watch for references to AWS. You’re likely to see it mentioned more and more frequently in the next few years.

Guest Contributor, Bruce Berls. Originally posted at Bruceb.com

LO$T IN TRAN$LATION…


US and Chinese film industries - copycat or cooperation?

US and Chinese Film Industries – Copycat or Cooperation?

News this week comes of another unexpected economic milestone in the US-China relationship. A Chinese firm buys AMC Entertainment from Apollo and Carlyle Group to become the largest U.S. theater operator overnight. Via China Daily Mail.

 

AMC Empire 25 (cinema) 234 West 42nd St. New York (Times Square), Manhattan, New York City (Photo credit: Wikipedia)

Following a generation of complaints about United States firms’ frustration at investing in China, this development is surprising for many reasons.  One of the more interesting elements is the fact that the acquiring firm is a private enterprise.  Among the many complaints of U. S. investors seeking access to China has been the role and interference of the state-owned enterprises and the political estate in China, which has made it difficult for foreign investors to take viable stakes in China.  There’s also a parallel issue of longstanding disputes between the U. S. and China on intellectual property and market access (in the film industry, in particular), which makes this almost unthinkable event all the more ironic, given the lack of major progress on those intractable trade issues over the past decades.

 

 

China News

China’s Dalian Wanda Group agreed to acquire AMC Entertainment for $2.6 billion, becoming the biggest theatre operator in the U.S. by revenue.

Ties between the U.S. and Chinese movie industries have warmed after China agreed in February to open its market to more American films, with DreamWorks Animation announcing a landmark deal in the same month to build a production studio in Shanghai.

AMC and Wanda had held off-and-on discussions about a possible deal more than a year ago. Talks grew serious after AMC, the world’s largest operator of IMAX screens, cancelled its plans to go public, according to media reports.

“This acquisition will help make Wanda a truly global cinema owner, with theatres and technology that enhance the movie-going experience for audiences in the world’s two largest movie markets,” Wang Jianlin, chairman and president of Wanda, said in a press release on Monday.

By acquiring AMC, part-owned by…

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America – Land of the Non-Political Economy

It’s refreshing to be reminded about how little politics matter in our economy. How do we reflect on this? By looking at how influential they are in other countries. The latest example is in view at our biggest “competitor”, China. In a current NY Times report we see how political the economy really is. The Chinese (mainland, not Taiwan) economy has no free distribution mechanisms, there is not process nor established procedure for distributing opportunities, or rather they must be greased by and for the benefit of the oligarchy. In contrast, in America we have today (5/18/2012) a view of Facebook as it goes public. This company was invented by a few guys, funded by a bunch of endorsers over the years, and finally built into a web powerhouse, all without any political intervention, rather by a raw effort to build stickiness.

All this is to say, as we hear partisan bellyaching about the economic policies of one side or the other, remember that as much as the President and Congress can do structurally to set the rules, in the day to day they do very little vis a vis the economy. They by and large do not manage opportunities; they do not have any real control of gas prices, the labor market, or any other facet of activity. For that matter neither do our business moguls. If they had their way natural gas (ergo our heating bills) would be priced much higher today.

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Tidbits #13 – DJ Culture…

dj_tiesto
…dance with me. DJ culture, let’s pretend. Living in a satellite fantasy, waiting for the night to end…

Tiësto

DJ Tiësto

I will admit it – being a child of the 60’s, I was trancing to the Pet Shop Boys tunes in the80’s… Dutch DJ Tiesto above reportedly earned 20MM USD in 2011 by headlining blockbuster events. My students at Columbia College here in Chicago (I teach economics to fine arts majors) pointed out that the DJ in the latest Blackberry Bold commercial is someone named Diplo, another mover-and-shaker in the rise of the DJ culture here in North America…

Diplo

DJ Diplo

DJs have always been big in Europe – I experienced it firsthand living in London in the early 2000s working in the derivatives industry. I still cannot get the snappy beats from Neutrino and Oxide’s Bound 4 Da Reload out of my head (their first hit from 2001 debut album, I believe)… Tiesto and Diplo are two of many DJs whose status now equals that of rock-stars. What led to their sudden and emphatic rise, and is there business lesson in this for us (much like SMB chief editor’s recent flammable post on the Bucket Boys and the follow-up)? From my non-artistic vantage point, there are 3 reasons:

 

 

  • Original content – in the past DJs spun someone else’s creations. Now they collaborate with big name artists to produce original tunes and sound. Before they were commodity – now the good ones are true artists up there with Usher and Beyoncé.
  • Scale – there’s only so much you can charge by spinning at nightclubs, whether the content is original or not. By choosing to headline events like Coachella and Lollapalooza instead, they are able to earn more, a lot more.
  • Approach – this hypothesis is from my students. The good ones approach every gig like it’s a business deal. They have a chief of staff, functional specialists and good advisors; they plan, forecast, execute and review what went well and what didn’t; and they keep their eyes wide open for the next big thing¸ whatever it may be or wherever it may come from…

I believe there is a business lesson in this for all of us. By the way, seeing how big they are getting, I doubt this is a passing fad – the trend isn’t likely to slow anytime soon…

Tidbits #12 – This isn’t your old bank’s free toaster.

mercedes amg gullwing brilliant silver

Get a Mercedes Benz when you open a [qualifying] new CD account!

On the surface, this seemed to be one of the best gimmicks “promotions” to attract new customers I’ve come across in a long time…   A Florida community bank called C1 Bank with ~1BN in assets is offering 2012 Mercedes roadster to new customers with FL residence who deposit 1MM or more in a 5-year CD, in lieu of $61K in interest they would have earned with the CD.  No, it’s not the AMG Gullwing pictured above, rather a new MB roadster worth ~60K.  But before you jump at it, here are the details of the deal and caveats to consider –

  • While better than 5-year treasury rate of .82%, the equivalent annual yield rate of 1.2% is not much better
  • Current CD yield rates are near their all-time lows, and many predict that it could only go up
  • FDIC only covers up to 250K in case the bank itself goes south
  • Lastly, for some reason if you need to re-neg on the 5-year contract, you will pay 3K in penalty plus the entire price of the car when it was new

It certainly begs the question – are you better off taking advantage of 0% financing deal offered by some luxury makers and putting your 1MM away in higher-yielding but just as safe debt instruments?  One thing for sure, even for deal that seem to be no brainer, it always pays to do some due diligence.  You decide…

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Labor Market Efficiency

beveridge curve labor economics

David R. Kotok has written a salient commentary about the current state of the Labor Market. In it he describes what is going on in the above “Beveridge Curve”. In summation, the shift to the right of the data points over time indicates a less efficient labor market. That is, for any one data point, say Feb ’12, a concurrent job vacancy rate in say Nov ’01 shows a much lower U-6 (fully loaded) unemployment rate, here approx. 9.3% versus 15%. How can this be? Are there so many more folks now looking for a job with the same level of jobs available (vacant)? He does not posit a definite reason for this move, but a recent paper in the Harvard Business Review lends some insight.
What if the current ease of travel and taste for independence was driving some of this shift? What if people were taking a trade off in income for flexibility? In The Rise of the Supertemp, Miller and Miller assert that some 16 million Americans are working independently today (Source, MBO Partners). These include an estimated 3 million managers and professionals, defined as folks with graduate degrees or equivalent who desire the flexibility of temporary work. And what if this group tended to stay independent, given their level of talent and the ability to choose what they work on and with whom to work.
To quote, “The only comprehensive survey of U.S. Independent professionals to date, conducted in September 2011 for MBO Partners, found that close to 80% of independent workers are satisfied with their situation, including 58% who are highly satisfied.” Further, only 19% said they planned to seek a traditional job.

The ground rules for successful Supertemp engagements are project oriented and include:
1) Focus on what needs to be done now – this means specifying your most critical objectives
2) Define the work clearly – agree on written deliverables
3) Identifying additional resources required
4) Identifying the internal sponsor – the one who can make things happen internally, in small company cases this is usually the CEO
5) Check in regularly – to reassess goals and objectives.
Hurdles to an efficient market for Supertemps remain, e.g. the difficulty of obtaining healthcare outside traditional employment situations, and tax reform.

Regardless of the ongoing issues, we believe that temporary work is here to stay for the

Economics beveridge curve

Economics Beveridge Curve (Photo credit: Wikipedia)

highly talented managers and professionals (think engineers, lawyers, accountants, CFOs, etc.) and will lead to a continued “inefficiency” in the traditional “Beveridge Curve” for the U.S. Employment market, or should we say to a new level of efficiency based on a permanent Supertemp professional class, working how and when they want to.

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