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December 11, 2009

The Swindle
Posted by Patrick at 11:00 PM * 108 comments

Down underneath the snark and the in-jokes and the whole idea of a well-established journalist writing a blog in the persona of Steve Jobs, there’s a terrifying amount of truth in this particular post about American business, American empire, and America’s future.

And now here we are. Right here in your own backyard, an American company creates a brilliant phone, and that company hands it to you, and gives you an exclusive deal to carry it—and all you guys can do is complain about how much people want to use it. You, Randall Stephenson, and your lazy stupid company—you are the problem. You are what’s wrong with this country.

I stopped, then. There was nothing on the line. Silence. I said, Randall? He goes, Yeah, I’m here. I said, Does any of that make sense? He says, Yeah, but we’re still not going to do it. See, when you run the numbers what you find is that we’re actually better off running a shitty network than making the investment to build a good one. It’s just numbers, Steve. You can’t charge enough to get a return on the investment.

Now there was silence again. This time I was the one not talking.

Honest to God, blog cliché or not, read the whole thing.
Comments on The Swindle:
#1 ::: Stefan Jones ::: (view all by) ::: December 11, 2009, 11:55 PM:

Oh My. The article appears to have been Making Lighted.

But I read it.

Yeah.

Well, at least our country has Jesus, Free Market Capitalist on our side.

#2 ::: Andrew ::: (view all by) ::: December 11, 2009, 11:55 PM:

I frequently wish that Apple would buy out so many other companies I deal with daily with their giant mountain of cash. But they're too smart to do that. :(

#3 ::: Raven ::: (view all by) ::: December 11, 2009, 11:56 PM:

And the final nail in this particular coffin: there is no shortage of bandwidth. ATT could fix this without substantial investment. Technical overview here. It looks at least plausible to me.

#4 ::: Will "scifantasy" Frank ::: (view all by) ::: December 12, 2009, 12:10 AM:

Well, that hit me harder than I thought it would.

#5 ::: CaseyL ::: (view all by) ::: December 12, 2009, 12:18 AM:

As a casualty of a company that "unlocked value" from its assets by using them as collateral for failed business strategies and then selling them off to make the shareholders happy (and which company then laid off 40-50% of its workforce, including me)... FSJ has described, wittily and pithily, exactly the mentality that has doomed this country.

Reading it made me weep.

#6 ::: Miriam ::: (view all by) ::: December 12, 2009, 12:20 AM:

I'm not surprised, though I'm coming at it from the perspective of an accountant (public, mind you). It's always a numbers game. Companies will frequently make piss-poor decisions if they think the numbers won't add up in their favor, or if a ROI won't be big enough soon enough.

#7 ::: B. Durbin ::: (view all by) ::: December 12, 2009, 12:20 AM:

Yeah, this sounds familiar. Like RIAA and MPAA. Or many of the other companies that are too big for their own good.

#8 ::: Avram ::: (view all by) ::: December 12, 2009, 12:47 AM:

Makes me wish Fake Steve had been updating in August '08, when Apple extended its exclusivity deal with AT&T to 2010.

#9 ::: Tom Whitmore ::: (view all by) ::: December 12, 2009, 12:57 AM:

Karen passed this on to me earlier -- and her comment was, "Do you think Steve Jobs pays him to write this?" An amazing piece indeed; one of the most accessible statements about what's wrong with our culture, to quote her again.

#10 ::: Mark Gritter ::: (view all by) ::: December 12, 2009, 01:09 AM:

I don't find it surprising if this is somewhat close to the truth for AT&T, though. An expanded buildout has to demonstrate that it'll bring in at least as much return on investment as your current business, or it won't happen.

Power companies are the model here. Why does your electricity or gas company give you a rebate for an investment in buying less power? Because the numbers don't work out on building a new power plant.

#11 ::: Spiny Norman ::: (view all by) ::: December 12, 2009, 02:06 AM:

OT, funny as hell, because it's true.

#12 ::: Linkmeister ::: (view all by) ::: December 12, 2009, 02:16 AM:

It's this paragraph that really burns because it's so accurate:

Used to be, we were innovators. We were leaders. We were builders. We were engineers. We were the best and brightest. We were the kind of guys who, if they were running the biggest mobile network in the U.S., would say it’s not enough to be the biggest, we also want to be the best, and once they got to be the best, they’d say, How can we get even better?

Now we have Wall Street bankers destroying the country and squealing/squalling that their g-d bonuses are sacrosanct and how could anyone begrudge them their money because after all without them the rest of you clowns are nothing, nothing, do you hear me?

#13 ::: Earl Cooley III ::: (view all by) ::: December 12, 2009, 02:58 AM:

Seventy percent. We need to have 70% of the executive class get their stuff confiscated to bring them down to the poverty level, so that they can be less of a bleed out on the economy when they live totally on public assistance. Of the remaining 30% who have successfully managed to rationalize the expense of the air they breath, their compensation needs to be capped at no more than 50% greater than the regular management level, with a corresponding amount of their stuff confiscated to levels appropriate to that pay scale.

The money saved could then be used to bankroll full universal health care. Ta da!

#14 ::: Scott ::: (view all by) ::: December 12, 2009, 03:45 AM:

Something that people learned in the late 90s is that being popular is not identical to being profitable. The underpants gnomes' step-2, right?

If something doesn't turn around and make money, the private sector WON'T DO IT. (or they'll do it until they realize that it won't make money...) Not only that, the options for getting things done outside of the private sector are unusually grim this year (not that I think high-end mobile phone service really merits government activity)

Personally, I think Apple should start suing AT&T for business lost. (Anecdotally) There are quite a few people who like the iPhone as an object, but can't stomach AT&T. Or if not that, Apple needs to make deals with other carriers, and let customers choose. AT&T would, all of a sudden, have a reason to put in the hardware so their clients can use the service.

It all makes me wonder how much AT&T put into Apple to make the iPhone happen in the first place. Did they underwrite R&D or something?

#15 ::: Charlie Stross ::: (view all by) ::: December 12, 2009, 07:18 AM:

It is worth swivelling your eyes east to Europe.

Here in Thatcherland, O2 (the cellco so goddamned awful they had to change their name from "Cellnet" so people would forget who they were) got the exclusive on the iPhone. Their network is bloody terrible, only mitigated by the fact that they throw in free BT OpenZone wifi access -- being the cellphone wing of BT, and BT being about the biggest wifi hotspot operator in the UK.

But they've lost the exclusivity. Within the next 8 weeks, you'll be able to get iPhones in the UK from Orange, Vodafone, and Tesco (the supermarket chain who wiped the floor with WalMart). Currently contract prices on Orange and Vodafone look geared to mirror those of O2, but Tesco are promising deep reductions. So there's going to be an iPhone/bandwidth price war next year in the UK.

(The same thing seems to be happening elsewhere in Europe.)

The reason you might want to watch is that iPhone users consume about four times as much bandwidth as regular smartphone users. And by the end of 2010, about 25% of mobile phone users will be carrying smartphones, and the iPhone is the #1 top-selling personal brand (as opposed to Blackberry for businesses). This suggests to me that the networks are going to be stress-tested in 2010. Whether they respond by installing more backbone 3G capacity -- or by copying AT&T -- may tell you something interesting about the economics of running a mobile phone network.

My money is on the iphone exclusivity deal itself being the poison pill that's made AT&T dig their heels in (that, and AT&T -- as a telco -- fundamentally misunderstanding how TCP/IP works and thus borking their backbone router configuration, as noted by Raven in #3). If Verizon and Sprint start carrying the iPhone, AT&T might be forced to up their game ...

(Macro level: that Fake Steve rant is stinging. And true, so true. Also true of the UK. Swan-song for Anglo-Saxon Economic Model at 11.)

#16 ::: Alan Braggins ::: (view all by) ::: December 12, 2009, 08:09 AM:

> iPhone ... Tesco are promising deep reductions.

Also offering it as PAYG. Which probably won't interest the people who currently are most likely to stress the bandwidth - but might increase takeup and move more people into that category.

#17 ::: John Chu ::: (view all by) ::: December 12, 2009, 08:18 AM:

Fake Steve Jobs has nailed it, as usual. Was the US always this interested in immediate profits at the expensive of long-term value? A friend of mine regularly complains that record companies used to record operas, a massive expense, not because the opera would make money for them right away, but because it would turn a profit over the fullness of time. Of course, they don't really record operas any more. At least not in a studio. But I don't know if that's grounded in truth or nostalgia.

As for iPhone, Apple doesn't currently have the flexibility to offer it to multiple vendors in the US that it does in Europe. In the US, exclusivity is also a technical problem. Verizon and Sprint use CDMA rather than GSM. T Mobile uses GSM, but operates its 3G network on a different frequency than AT&T. In order for an iPhone to work on multiple networks, Apple will have to redesign it to a different chipset and to add more antennas. (Yes, an existing iPhone can use the T Mobile 2G network. A friend of mine unlocked his iPhone precisely to do that. I can't imagine "unable to use our 3G network" will be a big selling point for T Mobile though.)

Of course, making iPhone universal (or whatever Apple would call it) is hardly impossible. There are a bunch of multi-standard phones out there. It's just iPhone isn't one of them yet. Getting it on Verizon's or Sprint's network is more than a matter of contracts. It's a matter of perhaps wholesale redesign. Of course, Apple could have been working on this all along for all I know. I guess we'll find out late June or early July.

The future is interesting because both Verizon and AT&T have chosen LTE as their 4G technology. When that rolls out, Apple can design the phone to one technical standard and it might actually work on both networks. I don't think we're expected to see LTE phones until 2011 or 2012. Even then, it will need to fall back on more heavily deployed networks. (If AT&T is holding back on expanding its 3G network because 4G is coming, they're seriously underestimating how long 3G will stick around. It wasn't too long ago that we finally got rid of all vestiges of analog.)

Incidentally, I doubt Apple will make a CDMA only iPhone. One of Apple's strengths is how few SKUs of iPhone there are. (e.g., they don't need one per keyboard layout thanks to the virtual keyboard.) Yes, there is a Chinese version with no WiFi. (Insert rant about mainland Chinese government here.) But I suspect the potential mainland Chinese market is larger than the potential CMDA market. (I will now undercut myself by saying that I'm not even Fake Steve Jobs. Had I been running Apple, it would have been long bankrupt.)

#18 ::: AndrDrew ::: (view all by) ::: December 12, 2009, 08:19 AM:

Mark Gritter @ #10

My local power company's Manitoba Hydro. I don't know about actually charging less, but they are involved in all sorts of rebates, loans and advertising campaings for reducing energy comsumption. It's kind of a unique situation, though: they can turn around and sell it elsewhere for more. When the promotions for reducing energy consumption start ramping up, you know that there was just a huge price-spike for juice south of the border.

#19 ::: Wesley Osam ::: (view all by) ::: December 12, 2009, 09:41 AM:

In theory, if you have a widget company, it exists to make widgets--the best widgets it can possibly make. Profits are what allow your company to continue making widgets.

Today, in practice, the main purpose of any company is to maximize short-term profits. Making widgets is an annoying formality, a chore, and you cut as many corners as you can get away with.

The interesting thing is that much economic theory continues to assume that the business world still follows the first, ideal, situation.

I think in the age of reality TV fame is starting to work like this. Everyone wants to be the center of attention, but they don't want to have to work to earn it--they want a shortcut past the part where they master a skill, or build something great, or accomplish anything notable to deserve their fame. So increasingly we're seeing these stupid attention-seeking stunts, like the "balloon boy" incident, and those aspiring reality TV stars sneaking into a state dinner.

It occurs to me, too, that many victims of the publishing scams discussed on this site--not the majority of victims, but probably a good chunk--are people who want to have their name on a book, but don't see the need to master their craft, revise their work, learn about books and publishing, or pay their dues by collecting a pile of rejections.

#20 ::: David Harmon ::: (view all by) ::: December 12, 2009, 09:49 AM:

This attitude has been developing, and festering, at least since the Reagan years. It seems to me that it also ties into Teresa's description of ShrubCo as a "blowout scam" -- that being the ultimate expression of the "short-term profit" mentality.

#21 ::: Bill Higgins-- Beam Jockey ::: (view all by) ::: December 12, 2009, 10:01 AM:

Oh, Patrick, you just like that Fake Steve Jobs entry because it talks about the Beatles.

#22 ::: Steve C. ::: (view all by) ::: December 12, 2009, 10:37 AM:

I'm trying to think of any area of life where you get double-plus-good brilliance all the time. Most of the time you get tolerable, once in a while you get decent, and sometimes you get marvelous.

#23 ::: guthrie ::: (view all by) ::: December 12, 2009, 11:46 AM:

The article and comments by others remind me of one of my bugbears, which is the possible fall in basic research over the years. Yes, we have the occasional blue laser and giant magnetowhatitsname, and yes there are some foolks looking at fancy memory which can be smaller than flash.

But that kind of confirms the point- that every research has to be goal oriented, when in fact everything I've ever read suggests that the really important breakthroughs need serendipity, openness and resources in the right place and the right time.
Which is not what you get when you have companies interested in maximising ROI and short term returns rather than investing for the future, which in AT&T's case would be lots more broadband.

Of course what I really want is empirical confirmation of this, can anyone help?

Searching the internet finds the occaisional article with sections that say obvious things like
"A survey conducted recently by Quint Wellington Redwood, the independent management consultancy dedicated to solving IT-related organizational issues, reveals that for 75% of companies, cost reduction is still the most compelling reason for IT outsourcing. However, outsourcing to reduce costs has a negative impact on commercial innovation. The survey actually shows that too sharp a focus on cost reduction is a clear impediment to innovation."

Or
"•As a rule, companies are performing less pure and applied research. Instead, they are concentrating their R&D budgets on product development and engineering. This has been a trend for several years — indeed, 44 percent of survey respondents said they spend less than 20 percent of their R&D budget on basic research and advanced development — but it became even more pronounced during the recession"

Which is of course where the government comes in. Except here in the UK they have been pushing university research towards commercialism for decades. The end result being, when I was made redundant earlier this year and considering a chemistry PhD, most of those of offer seemed to really be engineering, about optimising some chemical reaction in partnership with some big company (and of course us taxpayers pick up much of the tab for it). Of course we can't have everyone trying to do breakthrough research, but the impression I have is that short term commercialism has killed long term experimental research in universities. (Excpet perhaps stuff like the LHC)

#24 ::: Dave Fried ::: (view all by) ::: December 12, 2009, 12:16 PM:

What this article misses completely is that Apple is *just as bad* as AT&T. They could have allowed multiple carriers to have the iPhone, forcing them to compete for customers based on quality and cost of service. That would have led to more units sold overall (though perhaps at a lower price), more people using Apple's great platform, and better networks for all users as the carriers scrambled to keep up with each other.

Instead, Apple has chosen to create artificial scarcity and make more money *right now* by getting massive kickbacks from AT&T. In return, AT&T is spared having to innovate or expand its service because people who want the iPhone (which is nearly everyone, from what I can tell) are willing to subject themselves to crappy service to get the product.

Apple makes some great products. But they're a company just like any other company, interested in profit and not much else. Apple is, in general, a stifler of innovation. It is so obsessed with the image of its products that it makes it extremely hard for third-parties to do interesting things with them. Even Slashdot, which used to be a nest of Apple fanboys, has become increasingly hostile towards the company, to the point where you'll actually hear positive things being said about Windows.

#25 ::: heresiarch ::: (view all by) ::: December 12, 2009, 12:44 PM:

Wesley Osam @ 19: "In theory, if you have a widget company, it exists to make widgets--the best widgets it can possibly make. Profits are what allow your company to continue making widgets. Today, in practice, the main purpose of any company is to maximize short-term profits. Making widgets is an annoying formality, a chore, and you cut as many corners as you can get away with."

The purpose of any company, in theory or in practice, is to make money--as much money as possible. It's written into their charter. It's why they exist. Period. That successful widget companies consistently arise under the leadership of people who just love the crap out of making great widgets is a predictable but in the end meaningless variation in the trend: people obsessed with widget-making are useful to profit-production in the same way a neat widget-making machine is. It is meaningful precisely and only insofar as it furthers the real goal, which is to make tons of cash. Love of widgets is just noise in the signal.

The real conflict isn't between people who want profit and people who love making real good widgets, yessir! as much as it is, as guthrie @ 23 says, between people who want to make profit right now and people who want to make more profit tomorrow, or maybe even the day after. American capital has gotten caught in a vicious circle of short-sightedness, consistently sacrificing the solid possibility of billions over the next decade for the tangible reality of a couple tens of millions in the next fiscal quarter. You can't fault capitalists for being capitalists; you can fault them for sucking at it.

#26 ::: Constance ::: (view all by) ::: December 12, 2009, 01:59 PM:

Woo. Just. Woo.

It's been with ever-growing sense of tragedy watching over the years this nation turning into ruins.

Love, C.

#27 ::: Constance ::: (view all by) ::: December 12, 2009, 02:15 PM:

#17 ::: John Chu

"Fake Steve Jobs has nailed it, as usual. Was the US always this interested in immediate profits at the expensive of long-term value?"

This year's National Book Award for History, The First Tycoon: The Epic Life of Cornelius Vanderbilt (2009) by T.J. Stiles, provides a fairly accurate answer to that question. This is because a biography of Vanderbilt is also a history of business, finance and the corporation in the U.S. and the world -- these current models of capitalism having been invented and developed primarily in New York City during Vanderbilt's lifetime. You can also find the same trajectories mapped in the first volume of Gotham: A History of New York City to 1898 by Edwin G. Burrows and Mike Wallace (1998).

IOW, the answer is: Why yes, this history of these capitalist forms have always been more interested in short term profits than long-term investment. "Making a killing," is a term originated in the NYC financial world, and it means just what it says: the fastest way to make a lot of money is to kill a good financial entity dead, via knocking out all competitors and controlling the consequent monopoly.

Competition is the only solution, and there is no longer competition, now that the corporations own the state and it's corporate welfare all the way.

Love, C.

#28 ::: Diane ::: (view all by) ::: December 12, 2009, 02:27 PM:

Everyone talks about how Apple could have the iPhone on all these carriers, etc. and how it's just greedy of them to stick with AT&T...

Except one of the deals with the iPhone was, "You take it as is. You don't put your crapware on it, you don't charge users for every little app, you just provide the service, okay?"

Verizon said, "Ha, you're kidding, right? You work for us, you do what we tell you, just like Nokia and Samsung and the others do."

AT&T was desperate enough to take the bait and go along with Apple's demand, because they needed something to differentiate themselves from the other carriers.

Phone makers have never been able to dictate terms to carriers before, and now they can. Or at least one of them can. And now the carriers are realizing that having a phone people want really can change the game.

I have no doubt that Apple wants out of their exclusivity with AT&T, but they're also not going to sit up and beg for the carriers to love them. Here's the phone, take it or leave it.

FSJ is always spot on when he talks about the industry.

#29 ::: Patrick Nielsen Hayden ::: (view all by) ::: December 12, 2009, 02:59 PM:

#24, Dave Fried: "Apple makes some great products. But they're a company just like any other company, interested in profit and not much else. Apple is, in general, a stifler of innovation. It is so obsessed with the image of its products that it makes it extremely hard for third-parties to do interesting things with them."

I can buy the idea that Apple is "interested in profit and not much else." And I can buy the idea that it's "obsessed with the image of its products." I'm not sure if I can buy the idea of both statements being true at the same time.

Certainly companies that keep an eagle eye on profit tend to be the companies that stay in business. Apple's much-criticized focus on profitability instead of market share has worked out very well for them, giving them a huge cash reserve and all the flexibility that affords. But I think one of FSJ's points is that Apple is, in fact, less "interested in profit and not much else" than most companies of comparable size. Apple, or at least Jobs, is indeed obsessed with image, and style, and design, to a degree that goes beyond business-by-the-numbers. It's what makes the company interesting even when they're being stupid. One has the sense that something's in their corporate DNA other than a blind drive to profit. Maybe not something very nice, but at least something.

(It may be that this is true and also ultimately, in heresiarch's phrase, "noise in the signal." I don't know. I do know that none of the above is ventured as a moral defense of Apple; I agree that Apple tends to both innovate and to act as a stifler of other people's innovation.)

Constance (#27), I was just thinking about Cornelius Vanderbilt. But without romanticizing figures like him, I still think there's a difference between monsters like him and automata like Randall Stephenson. I guess that's what I find compelling about FSJ's piece--it's like the last chapter of The Difference Engine, a vision of the "hot shining necropolis" in which optimized information technology sweeps everything human away. The reason Fake Steve Jobs's fantasia is affecting is that it gets at something real: Randall Stephenson wins. And will continue to win. Steve Jobs, the visionary salesman of IT for the masses, is stymied; in his bullying, tyrannical, obsessive way, he's recognizably human, a denizen of the old world of cares and things. It's Stephenson's world, the one of "unlocking value" and "breaking things up and parceling them out and selling them off in pieces and then putting them back together again", in which "the only kind of engineering that matters anymore is financial engineering", where "paper-thin faces billow like sails, twisting, yawning, tumbling through the empty streets, human faces that are borrowed masks, and lenses for a peering Eye. And when a given face has served its purpose, it crumbles, frail as ash, bursting into a dry foam of data, its constituent bits and motes."

#30 ::: Dave Fried ::: (view all by) ::: December 12, 2009, 03:21 PM:

Diane @28:

It's true that Verizon tends to ruin good phones with crapware (one of the reasons I won't switch to get the 'Droid). But there are a lot of other carriers out there who would love to offer their customers the single most popular portable device on the market.

You can forgive Apple for signing the original agreement, but not for the extension. They're just as bad as AT&T. Worse, in some ways - because they're the market leader and making money hand over fist, they have a lot more leeway to "do the right thing" than AT&T, which is struggling to compete with bigger, stronger rivals.

#31 ::: C. Wingate ::: (view all by) ::: December 12, 2009, 03:43 PM:

re 20: Not to defend the Great Satan Reagan, but this issue is as old as incorporation itself. And statements that begin "the purpose of a corporation is" just serve to obscure the issue even further. Ir seems to me that what really happens is that every corporation is eventually governed by those who do not love (agape) it, and of course the corporation therefore suffers. That's the real message in "running the numbers", because if its bosses loved ATT, they would want to see it expanded.

#32 ::: Wesley Osam ::: (view all by) ::: December 12, 2009, 05:02 PM:

heresiarch, #25: I think the idea of companies as just profit-making machines encourages short-term thinking. (I realize this is built into the system at the moment. I'm not convinced it's the only way to be capitalist.) It's the difference between "This company exists to maximize profits," and "This company exists to fulfill a purpose, and to continue doing so we need to maximize profits."

A business can turn a profit by making a solid product and building a reputation for quality... or it can cut corners. For the people who see their work in terms of maximizing profits and nothing else, there's no particular reason to invest in creating a better product if running the numbers tells them they're better off drifting along with a shoddy one.

#33 ::: Constance ::: (view all by) ::: December 12, 2009, 05:10 PM:

#29 ::: Patrick Nielsen Hayden

Perhaps the primary difference between Vanderbilt and that Difference(!)Engine is that Vanderbilt, though a monster himself too, convinced that what he wanted / thought was RIGHT and also RIGHT for the nation and everyone else, is that he was a man of enormous appetitites, who was not even fazed by destroying his own structures in order to win, i.e. defeat the other guy. He was competition in the form of a man, with magnificent vitality and appetite for winning, sex and food, with winning so far at the top of the list that the next two didn't even come close.

Or as the DE describes he was recognizably a male human being, who could and did break new ground and break up old ground, whereas whatever an RS is, it is not that.

Gack, I'm blithering.

Love, C.

#34 ::: guthrie ::: (view all by) ::: December 12, 2009, 05:24 PM:

COnstance #33 -
"thought was RIGHT and also RIGHT for the nation and everyone else"

Wait, you just described Tony Blair.
Hang on, wrong topic.

#35 ::: Randolph ::: (view all by) ::: December 12, 2009, 05:44 PM:

One thought on the deindustrialization of the USA (since that seems to be the subject here) has been bumping around in my head lately: I wonder how much racism, perhaps unconscious, contributed to it.

#36 ::: Constance ::: (view all by) ::: December 12, 2009, 07:49 PM:

#35 ::: Randolph

In what way?

It's not a coincidence that with Voting and Civil Rights laws getting passed, with de-segregation, that immigration suddenly re-opened after being closed fairly tight for so many decades. Cheap labor to replace the below market pay for black labor.

So much is determined by the eternal search for unpaid or the lowest paid labor.

OTOH, T.J. Stiles states at the top of his biography of Vanderbilt that the U.S. has always manufactured far less than it imported, from the very beginning we ran a trade deficit here. The one exception was the post WWII era -- when there was NO competition from Europe or Asia or anywhere else.

Love, C,

#37 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: December 12, 2009, 08:08 PM:

Vanderbilt, Carnegie, and Rockefeller aside, there has been some change in the consensus business community view of the purpose and the appropriate time horizon of corporate activity in the US. After WWII it became obvious that investing in research, especially basic research, on average yielded high financial and societal advantage in the medium to long term. Over the next 30 or 35 years many billions of dollars were invested in the creation and growth of new products and industries based on that research. But then corporations started to move their time horizons back from making 5 and 10 year plans to planning no farther than the next quarter or even the current quarter, and research was cut back, then cut out. And the effect has been to stifle the long term growth of many corporations that made those cuts. I'll name the ones I've personal experience with or have friends and colleagues at: Tektronix (a no-growth zombie for the last 15 years, selling off divisions and technologies for peanuts), HP (many product lines gone, with most manufacturing out-sourced to China), IBM (pretty much out of the hardware business, and no longer the darling of Wall Street), DEC (dead), Xerox (completely ignored potentially hundreds of billions of dollars of product sales they could have based on their labs inventions).

One highly indicative symptom of the change is the attitude in the business community towards startups. When Jobs and Wozniak founded Apple, they knew they would have to spend years building up a company, and more years making it profitable before they would be rich and powerful, and they knew the first few years would be on a shoestring financed by second mortgages and loans from friends, and that their company headquarters would be in their garages for some time before they could afford to even rent office space. This was the norm for startups at the time; even when venture capital was available it was never in great enough quantity to allow any frills, or even salary for the founders. By the time of the dotcom boom in the '90s that expectation had been turned completely around: venture capitalists threw large quantities of money at anyone with a half-assed business plan, and often the founders were managers with no real understanding of the technology they were hawking (often the first technical employee was hired, rather than part of the original team). Venture financing always included large salaries for the founders and officers of the corporation, and the business plans rarely had any thought for the long-term beyond being acquired by another corporation so the founders could cash out.

Randolph @ 35:

I wonder if it wasn't the reverse: racial discrimination driving the change in business. Racism fueled the "White Flight" in the 60's and 70's when a large percentage of the techocratic and skilled labor classes fled the cities and the first ring of suburbs. In order to get access to the labor pool it needed, corporate headquarters, design centers, and R&D facilities, along with any capital-intensive manufacturing that wasn't going overseas, also had to move out of the cities. But this resulted in a large burst of capital investment at a time when interest rates were going up, so the corporations found it financially rewarding to reduce the time for return on their capital investments. This in turn resulted in a habit of shorter and shorter term thinking.

Just a thought, with no research whatsoever behind it.

#38 ::: heresiarch ::: (view all by) ::: December 12, 2009, 08:32 PM:

Patrick Nielsen Hayden @ 29: "But without romanticizing figures like him, I still think there's a difference between monsters like him and automata like Randall Stephenson."

Yeah, about fifty years. It happens over and over again: a company begins as a whirling dynamo of creativity and turns into a soulless vampire. Innovation is unpredictable, and eventually it missteps. When it does the profiteers and penny-pinchers are ready to step in with their simple, easy and short-sighted ways to generate profit. The shareholders, who never really gave a damn about widgets, are ready to listen. The difference between Apple and AT&T isn't qualitative, it's chronological. Over a long enough timeline, every corporation becomes AT&T.

#39 ::: Teresa Nielsen Hayden ::: (view all by) ::: December 12, 2009, 08:44 PM:

Randolph, on deindustrialization: less racism, I think, than the right's passionate-to-the-point-of-irrationality hatred of organized labor. See also Constance (who is not blithering): "So much is determined by the eternal search for unpaid or the lowest paid labor."

#40 ::: Patrick Nielsen Hayden ::: (view all by) ::: December 12, 2009, 08:46 PM:

C. Wingate, #31: "It seems to me that what really happens is that every corporation is eventually governed by those who do not love (agape) it, and of course the corporation therefore suffers."

heresiarch, #38: "Over a long enough timeline, every corporation becomes AT&T."

OMG you're both right.

This is a great thread. (Which is to say: people I respect are telling me things I haven't thought of before.)

#41 ::: heresiarch ::: (view all by) ::: December 12, 2009, 09:03 PM:

Constance @ 36: "So much is determined by the eternal search for unpaid or the lowest paid labor."

That's what drove the industrial production out of the US--it was too expensive to pay domestic workers compared with Third World workers. Even when the Third World came to the US, cost of living drove wages up compared to taking production to them.

The history of economic development can be written as a constant movement of progressively more advanced parts of the production chain to poorer regions of the world. First agricultural production, then cash crops, then simple manufacturing, then complex manufacturing, and now even the service industry, in the form of call centers. It's just not efficient to employ workers in a country where they can demand better treatment politically.

#42 ::: Alex Cohen ::: (view all by) ::: December 12, 2009, 09:24 PM:

Does anyone remember the original Steve Jackson Illuminati game? There were three expansion sets; the third featured a kind of wheel to indicate how various alignments would gain or lose power.

I've often felt in the decades since that we're living in a world where somehow some player moved the marker three spaces up the Corporate track.

How did we end up in a world in which financialization is the greatest achievement? Why is profit the only virtue? I guess the Gnomes of Zurich are playing a mean game.

#43 ::: Earl Cooley III ::: (view all by) ::: December 12, 2009, 09:39 PM:

I helped beta test a bunch of the early SJGames products. My deck from the trading card version of Illuminati is about three meters to my left, even as we speak. There is a lot of great stuff in those games. "Illuminati: Someone You Trust Is One Of Us". heh.

#44 ::: DanR ::: (view all by) ::: December 12, 2009, 09:45 PM:

God - this is the same basic economic fallacy that played out in the Soviet Union, only the US system is falling at a much slower pace. Communism and Capitalism both work splendidly in a vacuum, that is, when everybody involved believes devoutly in the greater good of the policy. When the innovators and ruling class inevitably start using the framework to feed off the masses, the machine begins to rust, and quickly becomes outdated.

I suppose you could say the same thing about religion... but it is the holiday season, after all, and it's probably best to stick with consumer goods.

#45 ::: Anticorium ::: (view all by) ::: December 12, 2009, 09:46 PM:

They could have allowed multiple carriers to have the iPhone

They did, actually, provided that you do not mistake America for the world.

#46 ::: Stefan Jones ::: (view all by) ::: December 12, 2009, 09:55 PM:

#42, #43: Orbital Mind Control Lasers?

That was one of mine.

Based on a quip by "Dietrich" on an episode of Barney Miller.

#47 ::: Rikibeth ::: (view all by) ::: December 12, 2009, 10:15 PM:

Stefan Jones @46: the Orbital Mind Control Lasers were yours? No, no, don't mind me, I'll just be fangirling over here in the corner.

#48 ::: David Bilek ::: (view all by) ::: December 12, 2009, 10:31 PM:

#40 pnh: OMG you're both right.

The thing is, capitalism is supposed to take this in stride and correct it. Older moribund companies which fail to evolve and innovate should be overtaken by newer, mobile, innovative companies. The older companies should, like Gaiman's Morpheus, have to change or die.

Except that they have found a third path. Anti-competitive practices abetted by regulatory capture. And an even more corrupting fourth path; should their anti-competitive practices fail, bribe lobby the government to loot the coffers for you. It's not a problem that the recording industry, the auto industry, the phone companies, and so on have become dinosaurs. It's a problem that their competitors aren't allowed to outcompete them, nor are the dinosaurs allowed to fail and instead the wealth of the middle class ends up in the shareholders pockets. (I realize GM finally had to declare bankruptcy. But it was only after tens of billions of dollars everyone knew was going to be flushed down the drain ended up being flushed down that inevitable drain).

Whether this is an inherent problem with a capitalist system or an accidental problem with how we've set ours up is left as an exercise for the reader.

#49 ::: Glenn Hauman ::: (view all by) ::: December 12, 2009, 11:35 PM:

Point of digression for a correction:

#10: Power companies are the model here. Why does your electricity or gas company give you a rebate for an investment in buying less power? Because the numbers don't work out on building a new power plant.

Hi. Back here on this planet, we have a small problem with massive global climate change. One of the big things that helps forestall that is consuming less power. Lower your thermostat, turn off lights, paint your roofs white, etc. This lowers overall demand and usage, and reduces stress on what's running at close to capacity now.

So unless the numbers not working out you refer to are temperatures, take the rebate and the hint.

#50 ::: Steve C. ::: (view all by) ::: December 12, 2009, 11:37 PM:

The average lifespan of a Fortune 500 corporation is less than 50 years. Evolution in capitalism takes no prisoners.

#51 ::: janetl ::: (view all by) ::: December 12, 2009, 11:55 PM:

We see the pure profit motive, short term, mess things up time and time again. But you definitely do want the value of what you produce to exceed the value of what you put into it. Which takes you off into a discussion of how to value things, which gets very hairy, very fast. Wish I had some nice clear answers. From the little I recall from graduate school, economics hasn't come up with anything tidy.

I do know that I adore my iPhone, madly. The apps! Taking a photo, editing it, and then sharing it all from the phone! The connection to the world! (how I long for Making Light in an iPhone friendly format!). I absolutely hate it as a phone. My old Verizon LG flip phone was orders of magnitude better for, you know, talking on the phone. I coveted my friends' and coworkers' iPhones for at least 6 months before finally taking the plunge, because they all assured me that it was a lousy phone. They were right. So I enjoyed the Fake Steve Jobs assault on AT&T on a purely personal level, even as I grieved the bigger picture that he paints so well.

#52 ::: Lee ::: (view all by) ::: December 13, 2009, 12:08 AM:

Patrick, #40: Even Wal-Mart -- which started, as you may recall, with a deep commitment on the part of Sam Walton to "buy American" whenever possible. That business plan lasted... oh, about 20 minutes past his death, and was promptly replaced by the one we were all discussing a few threads back.

heresiarch, #41: Does it seem to you, as it does to me, that eventually we are going to outsource ourselves into becoming a third-world economy, even as the cheap-labor countries follow the curve we did in the late 19th and early 20th century... at which point it will become more profitable to bring manufacturing jobs home again, because we'll have become the people willing to work for peanuts?

David, #48: Anti-competitive practices abetted by regulatory capture.

Bingo! We had a sharp lesson in 1929, and over the next couple of decades, a lot of regulations were put in for the specific purpose of making sure it wouldn't happen again. And they worked just fine, for about 40 years -- which is to say, until a lot of the people with active adult memories of the Great Depression, and the events leading up to it, were dead. Starting with the Reagan administration, all those regulations have been slowly, carefully, and systematically repealed or de-fanged... and here we are headed for another 1929 event. Worse yet, the populace has been largely bamboozled into believing that regulation is the problem rather than the solution, so that even with the evidence right in front of their eyes, they don't see it.

It sounds paradoxical, but it's not: without regulatory control, the "free market" is no such thing.

#53 ::: Randolph ::: (view all by) ::: December 13, 2009, 12:45 AM:

Constance, Bruce, Teresa, thanks for the comments. Lots of food for thought there.

Bruce, one point of disagreement: IBM is still very much in the server hardware business. Other than that, AOL.

Janet, I wonder if the iPhone makes a better phone if you add a Bluetooth headset.

#54 ::: Earl Cooley III ::: (view all by) ::: December 13, 2009, 01:52 AM:

A Toyota Prius is a nice iPhone peripheral. A friend of mine has both. I might go the Android route instead (to avoid having to deal with AT&T); apps for it can be written in Java. heh.

#55 ::: David Goldfarb ::: (view all by) ::: December 13, 2009, 02:45 AM:

janetl@51: So why not buy an iPod Touch, and a simple non-smart cell phone for talking on?

#56 ::: Handslive ::: (view all by) ::: December 13, 2009, 03:23 AM:

I read this post and the Fake Steve post. Shortly afterward I read this post from Bruce Sterling that points to some articles about Vodafone 360. An interesting range of commentary on the mobile telecommunications industry there to consume all in one sitting.

Also, my sides hurt from laughing.

#57 ::: abi ::: (view all by) ::: December 13, 2009, 05:11 AM:

Bruce Cohen @37:
After WWII it became obvious that investing in research, especially basic research, on average yielded high financial and societal advantage in the medium to long term. Over the next 30 or 35 years many billions of dollars were invested in the creation and growth of new products and industries based on that research. But then corporations started to move their time horizons back from making 5 and 10 year plans to planning no farther than the next quarter or even the current quarter, and research was cut back, then cut out.

I have a theory about this.

After WWII, we did something we've never done before (to my knowledge). We invested in our human infrastructure the way we'd invested in our physical infrastructure with the WPA. As with the WPA, we were spending the money for quite another reason, but the law of unintended consequences isn't always one's enemy.

The GI Bill gave us two things. First off, we had this huge crop of well-educated people who could do blue-sky research. And second, we had a bunch of managers who believed that spending on something whose return you could not predict was not wasteful. After all, it had given them an education.

(The GI Bill still exists, and still helps people; I know at least two of the people on Making Light have benefited from it recently. But it's a mean-spirited ghost of its former self now.)

I don't know how to extend our horizons again, but I suspect that we'll do it almost by accident, as a side effect of something quite different. Creativity, like falling in love, is harder if you chase it directly.

#58 ::: Serge ::: (view all by) ::: December 13, 2009, 08:30 AM:

abi @ 57... Creativity, like falling in love, is harder if you chase it directly.

So all those cartoons about Pépél le Pew are a metaphor about Creativity in America, even though le skunk, he has a funny accent, oui?

#59 ::: Nancy Lebovitz ::: (view all by) ::: December 13, 2009, 08:47 AM:

What seems to happen is that outsourcing leads to development in poor nations. Do you eventually hit a point where there's no extremely cheap labor left?

#60 ::: guthrie ::: (view all by) ::: December 13, 2009, 10:47 AM:

Nancy #59 - yes. Eventually you will, but that'll take quite a few years, and by the time that happens the original countries will be full of desperate cheap labour in return.

#61 ::: Steve C. ::: (view all by) ::: December 13, 2009, 11:03 AM:

Guthrie @ 60, Nancy @ #59 -

I think long before the time of cheap labor disappearing, we'll be seeing tech obviating the need for manufacturing labor. I think functional replicators will widespread by the end of the century. (Not Star Trek style, but more like 3d printing).

Now cheap labor for services is another story. But tech is also making inroads there.

#62 ::: Andrew Plotkin ::: (view all by) ::: December 13, 2009, 11:32 AM:

I loved the Fake Steve article, as a parable. I'm not convinced it works as an indictment of AT&T right now, on this issue.

Yes, this will be a (qualified) defense of the phone company. (Qualified in the sense of "partial", not "I am a qualified industry analyst.")

"You're in the business of selling bandwidth. That pipe is what you sell," says Fake Steve to AT&T. That is true. What are they selling it for? My iPhone bill is $60/month, with "unlimited data". (Original iPhone -- it costs $70 for a new one.) How much bandwidth can AT&T supply me, at cost, on my contribution of $60/month? I have no idea -- but it ain't unlimited.

The first iPhone anyone bought oversold AT&T's network capacity.

(Realistically, the phone can only push so much data per second, so it's not literally unlimited. And running the radio at the max rate eats power, so you can't realistically do it 24/7 while still being mobile. But people want a lot of data.)

If AT&T builds more pipe, then what? All us users say "yay, better service!" and use more service. *For the same flat monthly fee*. That's the ugly numbers that Straw Randall Stephenson refers to: they can upgrade their system a lot and *not make any more money*.

(There'd be some indirect revenue growth as the stigma of iPhone networking lessens, drawing in new customers. But then, those new customers help push the network back towards being shitty.)

The rational economist says, okay, you've got a broken sales model. Price bandwidth per megabyte and then let carriers compete on price. Sure, AT&T will move heaven and earth (house and senate?) to avoid competition, but that's irrelevant until they can *sell* their pipe as opposed to giving it away.

People like not being dimed; they like grabbing their devices and using the Internet without thinking about costs. That's one reason the iPhone is a hit, and I am 100% certain that when Real Steve Jobs was making his deal with AT&T, he made "unlimited data" an unconditional requirement. Real Randall Stephenson estimated the popularity of the unproven, speculative Apple gadget, decided he could make a profit on the estimated demand at $60/month, and signed. Oops.

If AT&T switches to pay-as-you-download, it'll be torches and pitchforks. (I'll be the third pitchforker on the left.) They might just be able to find an acceptable cut-off, with a flat fee up to a certain monthly usage and then extra charges after that. So what does that look like? "Incentivizing heavy users in order to optimize the network resources blah blah".

(The landline ISPs have already been through this. This is why the fine print on my "unlimited" Comcast cable hookup says, in effect, "Unlimited until you hit 250 gigabytes in a month, and then the hell with you. Or any other number we decide is too much.")

#63 ::: Constance ::: (view all by) ::: December 13, 2009, 12:35 PM:

#41 ::: heresiarch :::

Constance @ 36: "So much is determined by the eternal search for unpaid or the lowest paid labor."

That's what drove the industrial production out of the US--it was too expensive to pay domestic workers compared with Third World workers. Even when the Third World came to the US, cost of living drove wages up compared to taking production to them.

The history of economic development can be written as a constant movement of progressively more advanced parts of the production chain to poorer regions of the world. First agricultural production, then cash crops, then simple manufacturing, then complex manufacturing, and now even the service industry, in the form of call centers. It's just not efficient to employ workers in a country where they can demand better treatment politically."

That's not quite true, or rather not the whole truth.

It begins with plundering the less developed, or more accurately the less militarily developed world for its resources for the benefit of the invaders - conquerers - exploiters - capitalists. This includes the Amer-Euro slave trade and their slavery institutions, i.e. actual people. Most economic historians agree that the industrial revolution was funded by the vast, short-term material gains of slave labor in the new world, and that includes to very great degree the slave trade itself, and what it involved, from building specifically designed ships for the trade and everything else that supported it.

These days Africa is still a primary nexus for such exploitation by the wealthier nations -- many of whom are wealthier by earlier exploitation of her populations and her resources -- U.S., Euro, Asian and Australiana corps are gobbling the arable land and water of Africa -- buying them as outright sale, 'privatization,' with an eye of making a killing selling the products grown on that land and the water (which has been going on for decades already -- you don't think the bottled water industry was a thing that just grew like Topsy, did you?) to the wealthier nations that have exhausted and / or polluted their own land and water beyond production capacity.

And in fact, there is NO reason other than greed to say that in the U.S. labor cost too much. Unregulated labor, perhaps in terms of certain kinds of corruption (that went hand-in-hand with political methods and elected officials), and of course, as is biting us so hugely in the ass now, health insurance.

The carbon footprint costs of outsourcing far outweigh the labor costs -- except that the corps throw those costs on us, instead of bearing them themselves. This is the most inefficient way of doing things possible!

Love, C.

#64 ::: guthrie ::: (view all by) ::: December 13, 2009, 01:07 PM:

Steve C #61 - I'd forgotten that one.
I suppose its another reason why countries can have massive numbers of underemployed people and still get by. But then what do we do with all the unemployed people?

#65 ::: Patrick Nielsen Hayden ::: (view all by) ::: December 13, 2009, 02:11 PM:

Oh, and something I forgot to answer, janetl's #51: "how I long for Making Light in an iPhone friendly format!"

We want that too. We're trying to get our act together on it, probably as part of a general redesign in the not-awfully-distant future.

Meanwhile, this alternate front page works reasonably well with most handheld browsers.

#66 ::: Steve C. ::: (view all by) ::: December 13, 2009, 02:39 PM:

guthrie @ 64 -

Good question. I'm an optimist, I suppose. We'll figure something out. Sometimes it seems that all of history is concerned with getting something figured out, often at the last moment. Not without pain, of course, but since people are still around, we must do something right on occasion.

#67 ::: j h woodyatt ::: (view all by) ::: December 13, 2009, 03:12 PM:

I'm not sure the real SJ is as ignorant about how U.S. telecom companies work as the fake one, but that's a damned fine rant. I was worried that it was going off the rails right up until the last two paragraphs. Then it all clicked into place.

#68 ::: Earl Cooley III ::: (view all by) ::: December 13, 2009, 03:13 PM:

The iPhone Simulator (run in the Safari browser) could be a useful testing tool.

#69 ::: janetl ::: (view all by) ::: December 13, 2009, 03:17 PM:

Patrick Nielsen Hayden @ 65:
The alternate front page is a great improvement on the iPhone -- thanks! If you'd like any help with testing a redesign, just let me know.

#55 ::: David Goldfarb @ 55:
So why not buy an iPod Touch, and a simple non-smart cell phone for talking on?

Because I wasn't clever enough to think of it? I was hoping to reduce the number of gadgets in my purse, and honestly thought that I didn't talk on the phone much. I don't, all that much, but now realize that I need it to work reasonably well. I can add a headset, but digging one out to use as you answer a ringing phone isn't convenient.

I used to carry a phone, Palm, and work-related Blackberry. I still carry the iPhone and Blackberry. There doesn't appear to be a way to synch both my personal calendar, and my work one, to the iPhone (they both use an Exchange connector), so I'm still carrying the Blackberry.

#70 ::: guthrie ::: (view all by) ::: December 13, 2009, 03:56 PM:

#64, 66. To answer my own question - you can put people on job sharing, so that 2 people do half a job each for half the time. Or you can spend money on arts and communities, there are plenty of little jobs that are good for people to do that otherwise don't get done. Of course the problem is how do we get the money together, and thats what I don't think is likely in the current economic set up.

#71 ::: heresiarch ::: (view all by) ::: December 13, 2009, 04:23 PM:

Lee @ 52: "Does it seem to you, as it does to me, that eventually we are going to outsource ourselves into becoming a third-world economy, even as the cheap-labor countries follow the curve we did in the late 19th and early 20th century... at which point it will become more profitable to bring manufacturing jobs home again, because we'll have become the people willing to work for peanuts?"

Sort of? Maybe? It's almost impossible to imagine the US going so far south* as to outcompete the current Third World** in political oppression and dire poverty. The level of wealth, both personal and invested in form of infrastructure is just so high compared to honest-to-god poor places. I think the relative standing of the US will drop from where it is today, but it'll hit a balance point long before it reaches Third World levels. It already is, actually--there's a Chinese manufacturer who just opened a plant in the US (the South) because it was cheaper.

That's looking at the US as a whole, however: industry by industry you get a different picture. Any field of agriculture reliant on hand-picking employs a Third World-esque labor force already; same with meat-packing. So it can be very misleading to try to talk about the entire US.

Also, there's no way that developing countries can follow the same path the US and Europe did: that path is dependent on having a bunch of poor colonies to exploit. China and India are already following a very different developmental path than the US, and anyone who comes after them is going to have to move even further away from the colonial model. (Not that that's a bad thing.)

*pun intended.

**It's worth taking a second to point out how misleading this, and most other terms are when discussing global economics.

abi @ 57: "the law of unintended consequences isn't always one's enemy."

And thank goodness for that.

#72 ::: heresiarch ::: (view all by) ::: December 13, 2009, 05:35 PM:

Constance @ 63: "It begins with plundering the less developed, or more accurately the less militarily developed world for its resources for the benefit of the invaders - conquerers - exploiters - capitalists."

I don't really disagree with any of that except the idea that colonialism is the precondition of industrialization, rather than the other way around. Industrialization begins with exploiting the underclass at home. Capitalism only moved out of the homeland when it exhausted the opportunities of/encountered sufficient resistance from workers in the domestic arena. 16th and 17th century England is a microcosm of the same economic relationships that were later played out on a global scale in the form of colonialism. It ended (declined) domestically and expanded internationally because it became more profitable in both scale and degree to do so: they could exploit more people at a higher degree of exploitation.

"And in fact, there is NO reason other than greed to say that in the U.S. labor cost too much."

"Too much" is irrelevant--the point is that it costs more. The world would undoubtedly be a better place if labor everywhere cost the same as it does in the US, and it would arguably be a more productive world, but that doesn't matter one whit to businesses. It isn't about getting a reasonable or fair amount of profit. It's about getting as much profit as possible, and as long as that is true businesses will continue to outsource as much of their production as possible to the place with the lowest standard of living they can find. That preference will produce a constant displacement of production away from more developed areas towards areas where the new level of production has just become feasible.

#73 ::: guthrie ::: (view all by) ::: December 13, 2009, 05:44 PM:

Not just exploiting the underclass - the USA is an example of what you can do with undeveloped natural resources. But what happens when they begin to run out?

#74 ::: Leroy F. Berven ::: (view all by) ::: December 13, 2009, 08:18 PM:

heresiarch @ 71: "Also, there's no way that developing countries can follow the same path the US and Europe did: that path is dependent on having a bunch of poor colonies to exploit. China and India are already following a very different developmental path than the US, and anyone who comes after them is going to have to move even further away from the colonial model."

Take a look at the patterns of Chinese investment in resource extraction (especially oil and mining) in sub-Saharan Africa, particularly during the last decade or so. Economic colonialism does not require formal political suzerainity.

#75 ::: linnen ::: (view all by) ::: December 13, 2009, 08:29 PM:

Aside from it being non-AT&T, open-source, and works-in-Europe GSM, the biggest reason for me to purchase the Google G-1 smartphone was its non-connectivity with office email.

Between two USD 250+ smartphones, the ability to tell the boss "If you want me connected to the office off-hours, You pay for the cell-phone!" is priceless.

#76 ::: Constance ::: (view all by) ::: December 13, 2009, 08:57 PM:

As I mentioned above, the current round of exploitation of Africa's resources by China and other Asian nations as well as Europe and the U.S. is beyond criminal -- it's outright theft of the most resources without which it is not possible to live, much less do anything else, water and the capacity to grow one's own food.

The terrible instabilities caused by these exploitations have led to rape as a matter of course, multiple rapes suffered by individual women, children. Sometimes babies. These conditions have turned human beings insane.

To say that the costs of labor at home is inefficient, as I also said above, ignores the cost of the carbon footprint -- as well as the costs of what it does to the places where the labor and materials are outsourced, as well as the costs to the environment in these same regions from the theft of the natural resources as well. In reality the costs of all these factors, and the concomitant factors of disease, social de-stablization and further economic and environmental-driven out-migration to those very countries that outsource in the first place -- the costs are stupendously higher than paying those decent wages at home.

What's going on now is very much what went on in the 17th and 18th centuries, just different emphasis, but the same motivations: selfish greed for vast short-term profits, and damn everything else.

Love, C.

#77 ::: B. Durbin ::: (view all by) ::: December 13, 2009, 09:19 PM:

"Starting with the Reagan administration, all those regulations have been slowly, carefully, and systematically repealed or de-fanged... "

Lee, it's worse than that. I know that in specific reference to the housing bubble, the de-regulation goes back to the Carter administration, and I wouldn't be surprised to see if some of the practices date back to a short few years after various regulations were installed.

(In reference to housing, imagine a whole lot of contributing factors acting like super-saturating a solution. Then came the repeal of Glass-Steagal-- the act that kept lending banks out of investment, or some such-- and that acted like a sudden shock or an item dropped into such a solution. Try it sometime: you get a huge crystalline structure appearing out of seemingly nowhere.)

#78 ::: heresiarch ::: (view all by) ::: December 13, 2009, 09:54 PM:

Leroy F. Berven @ 74: "Take a look at the patterns of Chinese investment in resource extraction (especially oil and mining) in sub-Saharan Africa, particularly during the last decade or so. Economic colonialism does not require formal political suzerainity."

And I'd be the last person to claim that it did--remind me sometime and I'll tell you how the Cold War, the War on Drugs and the War on Terror are just colonialism by another name, and still smelling just as sweet. Nonetheless, equating the current Chinese presence in Africa with what the West has done and is doing there does the Chinese a disservice: the Chinese are actually building roads and infrastructure in return for the resources they're extracting, which is one up on the US. Not to mention relative size: there's not enough Africa there for it to play as big a role in China's development as Asia, the Americas, and Africa played in Europe's rise. Furthermore, the rise of China is relying heavily on the US and Europe as a market for its rising manufacturing sector--there was no equivalent foreign market during the period of European industrialization. Put it all together, and it's a different ballgame. Equivalencies are hard to make.

Constance @ 76: "In reality the costs of all these factors, and the concomitant factors of disease, social de-stablization and further economic and environmental-driven out-migration to those very countries that outsource in the first place -- the costs are stupendously higher than paying those decent wages at home."

I don't disagree with any of that. It's all true. Capitalism is all about creating externalities and letting other people pay them, be it environmental degradation or human suffering. Preventing businesses from doing that, from dumping all the costs of their production on everyone else, requires a political structure with the will and the power to keep them in check. Those political structures have a nasty tendency to value only the well-being of the people and environment within certain geographical confines, and damn all anyone outside it. So businesses move outside it. They always will, as much as they can, until there's nowhere cheaper to move to--until they're forced to take into account all the costs of their production no matter where they do it. Until then, they'll make the money they can while they can.

#79 ::: Michael Roberts ::: (view all by) ::: December 13, 2009, 09:56 PM:

A more concise statement of what I see around me every day in post-industrial Indiana I cannot imagine. Richmond used to be a place where stuff got made, records got recorded, and so on. Now, as far as I can tell, mostly it's a place where people get shit-faced drunk and harassed by the cops, or if they have a little more money, watch TV 14 hours a day and go to Cancun. And bleat about how those damn foreigners hate us for our freedoms.

God, I can be so bitter.

#80 ::: Earl Cooley III ::: (view all by) ::: December 13, 2009, 10:20 PM:

linnen #75: Between two USD 250+ smartphones, the ability to tell the boss "If you want me connected to the office off-hours, You pay for the cell-phone!" is priceless.

Of course, the boss could call at 3am and say, "If you want to keep yer jorb, you'll pay for that cell-phone yourself. Oh, by the way, I'm cost-cutting by eliminating the company's group health benefit; go buy yer own health coverage. Have a nice day and get back to work!"

#81 ::: truth is life ::: (view all by) ::: December 13, 2009, 10:41 PM:

One factor which must not be overlooked comparing the relative economic strength of the United States of the mid-century and the United States of today is World War II. Especially this number: 50%. As in, the US had about 50% of global GDP directly after the war, due to several important industrial economies getting blasted apart. This obviously had a significant effect on the world economy directly afterwards, and is a major reason both why WWII was directly followed by the "Long Boom" lasting into the mid-60s, and the later fall off of relative industrial strength.

For the first, obviously directly afterwards the US was the single largest producer of everything. And we usually gave US-made equipment and designs to ravaged European states and Japan to rebuild. Thus, we immediately had a significant demand for basically everything, funding it largely with our own money paying for our own products. The follow-up to WWII--the rebuilding--was about as important as WWII itself for getting the US out of the Depression, as it built up the world economy and created significant demand for American products both domestically (thanks to cheap education and an abundance of well-paying jobs) and abroad (thanks to the destruction of most other manufacturing sectors, in whole or in part).

Of course, that leads to the later fall. Well, we weren't selling crappy old equipment to other people; no, we were selling the latest and greatest! So, partially funded by our own money, they were getting an industrial sector that could beat ours in efficiency. Not that there's anything wrong with that at all--but no one in he US seemed to be paying attention to the impossibility of the US remaining so economically dominant forever. So, a fall from grace.

And at the same time, corporations passing into the dead zone, where they are most likely to bloat, stiffen, and collapse, and executives and leaders only aware in the abstract of the reasons for the laws and regulations of previous generations. Sorrows multiplied by sorrows is the result--and who knows when it will end?

#82 ::: Michael Roberts ::: (view all by) ::: December 13, 2009, 10:57 PM:

truth@81 - I'm not convinced. America of the late 1800's had a vibrant and thriving prosperity that owed nothing at all to a much later crash on the world stage. I mean, that didn't hurt. But against a longer timespan, I'm just not sure it was the whole story.

In fact, one could argue that the Great Depression was the first go-around of this current problem; acting on the assumption that the American machine would continue to churn out prosperity forever, everybody and his brother tried to get rich off the stock market in the 20's. I've read that they talked about an end to the business cycle then too.

Repetitive doom.

#83 ::: truth is life ::: (view all by) ::: December 13, 2009, 11:23 PM:

@82: Well, the post-WWII thing couldn't have happened without the late-1800s growth. But, that growth was largely based around a China-like sense--that is, due to a large, relatively untapped pool of manpower and natural resources, we were a much cheaper place to produce goods than the more developed European states. And that led to strangely China-like conditions, including very poor treatment of workers (though, thankfully, no formal abandonment of human-rights principles, which proved useful later).

And then the post-war boom, caused in no small part by the devastation meted out by the war, led to the effects cited in #57, whereby the vast numbers of new professionals churned out by government-funded higher education could get jobs, and where the average worker lived a comfortably middle-class lifestyle--the privations of the 'China-period' had led to unions and the like that could promote American workers, while the enormous profits to be made and lack of offshore competition (and, to a degree, the lack of offshore demand) made management more willing to negotiate generous salaries and aid packages, as well as quite demanding of workers to meet the growing demand in the US and overseas. As other economies began to get back onto their feet and reindustrialize and generally reduce the US from being utterly, utterly economically dominant, the other countries could now effectively compete on price against US firms, while the US firms themselves had an incentive to move manufacturing overseas.

Basically, my argument is that the extraordinary conditions of the post-war world led in a lot of ways to the America we see today. For example, as I indicated above, US firms were all too able to fund large insurance plans for all their employees at that time, both due to being relatively richer and health care being much cheaper. Between that and New Deal policies promoting company-funded healthcare plans, there was no urgent need for fundamental reform as there was in Britain, for instance, which didn't have the massive relative wealth that the US did. That's part of the reason the the UK got an NHS in 1948, while almost none of Truman's "Fair Deal" proposals (which included a universal health care system) were passed by Congress.

#84 ::: Linkmeister ::: (view all by) ::: December 14, 2009, 12:55 AM:

There's an article in the current New Yorker comparing 21st century health care in America to early 20th century agriculture in America. The latter was eating up huge proportions of GDP until scientific farming took hold through ag extension programs in various counties around the country. It all started with one farm as a pilot program.

It's interesting history, and I had never known any of it.

#85 ::: Michael Roberts ::: (view all by) ::: December 14, 2009, 01:13 AM:

Huh. That makes sense.

#86 ::: Constance ::: (view all by) ::: December 14, 2009, 10:09 AM:

The history of the U.S. is a constant graph of booms and busts. The Panic of 1837 was one of the Finest.

Among other problems the nation had was a lack of specie. Fortunately the conquest of Mexico in the 1840's took care of that. It's likely that the history of this nation would have followed a different expansion, migration AND immigration, and transportation trajectory if gold hadn't been found at Sutter's Mill. The Jacksonian vs. Hamilton battle with banking is a part of that, which periodically still rises from the dead, though who is on which side of that financial vision of the ideal switch regularly.

As for what China is 'accomoplishing' in Africa -- don't fool yourself. It's wrecking not building anything other than the European bank accounts of the Big Men who rush to sell out their land, their people and their heritage. Why ever would anyone think the Chinese are building anything in Africa with less corruption and better stability than they are doing at home?

Love, C.

#87 ::: linnen ::: (view all by) ::: December 14, 2009, 01:02 PM:

It gets even better. It seems that Randall Stross wrote an article in the NY Times that this is all the iPhone's fault, not AT&T's. (Paywall at the Times, so I'll link to the Boing-Boing article

John Gruber tears into the article at his site, Daring Fireball.

#88 ::: heresiarch ::: (view all by) ::: December 14, 2009, 03:55 PM:

Constance @ 86: "As for what China is 'accomoplishing' in Africa -- don't fool yourself. It's wrecking not building anything other than the European bank accounts of the Big Men who rush to sell out their land, their people and their heritage. Why ever would anyone think the Chinese are building anything in Africa with less corruption and better stability than they are doing at home?"

Well, they aren't. They're doing just about the same job, with similar levels of corruption. It's a testament to how completely Africa has been screwed over that that's nonetheless a substantial improvement.

It's not a product of benevolence; in fact it's quite the opposite. Chinese companies have a huge amount of experience building infrastructure from nothing, and so they pay for resources and then get the money right back in the form of construction contracts--win-win for China. It's still a better deal for Africa than what they get from the IMF and World Bank, who demand economic reforms that lay African markets open to exploitation from abroad and make it impossible for African countries to hold on to any of the wealth their resources are producing. At least China's resource extraction model leaves them with roads, or dams, or anything at all.

China in Africa

#89 ::: Bruce Baugh ::: (view all by) ::: December 14, 2009, 04:39 PM:

1920s prosperity's universality is way, way overrated. The whole first part of the 20th century is a straightforward story of decline into increasingly institutionalized violence and subjugation if you weren't white, for starters. Race riots were on the rise, and it was the second era of the Ku Klux Klan, and institutionalized pressures against a whole bunch of ethnic and social minorities. Even in the white mainstream, boomtime prosperity was no more a given for everyone than it was in the '90s. And then of course when the whole thing came down, look at how much blame went to small investors and people who weren't actually investing at all, rather than to those who created, maintained, and grew rich on the system.

#90 ::: fidelio ::: (view all by) ::: December 14, 2009, 05:04 PM:

Bruce Baugh @80 et alia--as far as "prosperity" goes in the 1920s, there was very little of that in the agricultural sector at all; it's a frequent observation that as far as hard times went, the Great Depression started for farmers as early as the mid-1920s.

#91 ::: Constance ::: (view all by) ::: December 14, 2009, 05:18 PM:

#88 ::: heresiarch

That article is not persuasive, particularly the way it uses the term 'investment' which really does seem to indicate extraction.

I've been following this for quite a while, and this includes the reports of the people I know well who live there.

More toxic garbage as consequences of the extraction, more social instability and warlordism, more violence.

It's like telling Havana it MUST create a harbor that is suitable for Cruise ships to pull right up to Habana Vieja -- so the tourists can trample through for four hours, while the ship opens its bilges and toilet collection tanks into the waters of Havana, etc. This isn't providing the city or the people anything it can use, that is good for it at all. Cruise ships are part of the problem and can never be part of the solution, anymore than African big men selling off Africa's birthright to China is an answer to any of Africa's problems.

Love, c.

#92 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: December 14, 2009, 05:40 PM:

janetl @ 69:

Up until this fall I carried an iPod and a standard cellphone. When the phone gave up the ghost, I decided I was sick of having to carry 2 devices when 1 would do, and bought an iPhone. It's not really that bad as a phone IMO: I like it better than most candybar formfactor phones, and considerably better than most smartphones (I hate Blackberrys in particular). In any case the convenience factor of having just one device and being able to make a call and add an item to my calendar at the same time wins me over again everytime I do it.

#93 ::: janetl ::: (view all by) ::: December 14, 2009, 05:52 PM:

Bruce @ 92: I have a (sort of) side-by-side comparison of the iPhone on AT&T versus my old Verizon LG.

I used to commonly make a phone call sometime between 5pm and 8pm, while on a downtown Portland sidewalk. With my Verizon LG phone, unless a bus was going by, I could hear & be heard. With my iPhone on AT&T, the exchange consists of: "Are you there?" "What did you say?" Neither side can hear. Hooking up a headset helps a bit, but is a nuisance.

A conversation on the iPhone indoors, in a quiet environment, is OK.

#94 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: December 14, 2009, 06:08 PM:

Steve C @ 61:

Really thorough automation of both blue collar and most white collar jobs in the US and Europe has been held back in the last few decades because of the availability of cheap offshore labor. This has led to corporations spending as little as possible for capital upgrade of plant, both manufacturing and office. But at some point in the next decade or two as labor costs in China and India increase, and assuming we hit a floor in labor costs in the US (I suspect most EU countries will hit a floor much sooner than the US), corporations will have to make a choice between trying to squeeze their workers and/or their customers harder, and paying the capital investment cost of cutting work force drastically with new automation.

At that point a phase change in the economic system of much, if not all, of the industrialized world becomes very likely, because some set of corporations will choose to make the investment and will get a significant competitive advantage by doing so. It won't be long after that before the financial benefits of large-scale automation and the removal of unnecessary jobs will be necessary for any corporation to compete successfully. Automation is going to mean an increase in systemic unemployment from the roughly 8% average (U6 measure) that the US has been seeing for the last couple of decades to perhaps as high as 30% or more. A consumer-driven economy can't survive that change, and a society without effective social safety nets (like the US today) will be driven into civil unrest unless it changes quickly.

The problem the US in particular will face then is that we've backed ourselves into an ideological corner where individual worth is conditioned on job status and monetary income, and that any scheme that tries to redistribute wealth is politically suspect. How do we get from where we are to a society where, eventually, only a minority of the population has an income based on a job?

#95 ::: heresiarch ::: (view all by) ::: December 14, 2009, 08:14 PM:

Constance @ 91: "I've been following this for quite a while, and this includes the reports of the people I know well who live there."

I've been following it too, and I'm wary of your on-the-ground intelligence: Africa's a big, diverse place and the experience of someone living in one country doesn't necessarily say a whole lot about the experience of someone living in a different region within the same country, much less someone in a neighboring country. Well, I doubt we're going to change each other's minds at this point.

Bruce Cohen @ 94: "Automation is going to mean an increase in systemic unemployment from the roughly 8% average (U6 measure) that the US has been seeing for the last couple of decades to perhaps as high as 30% or more."

Is that your own estimation, or are you citing something? Also, are you talking long-term or short-term unemployment?

#96 ::: heresiarch ::: (view all by) ::: December 14, 2009, 08:29 PM:

You know, Constance, I apologize for impugning your friends. I don't know anything about them, and I shouldn't be maligning them sight unseen. I still don't see this conversation going anywhere productive; I've presented my position, and you've presented yours, and neither of us are convinced. Agree to disagree?

#97 ::: Lucy Kemnitzer ::: (view all by) ::: December 14, 2009, 09:31 PM:

My local paper is running the incorrect, Port Huron version of the story.

#98 ::: DanR ::: (view all by) ::: December 14, 2009, 11:47 PM:

heresiarch #88:

That article on China in Africa was compelling. Particularly interesting was how the author continually referred to the continent as if it were a single country, "Africa"...

With this influx of money, African states would be so much better off if they were *united*

#99 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: December 15, 2009, 12:19 AM:

heresiarch @ 96:

All of that post is my opinion. I was talking about long-term unemployment. I've already started to hear economists talking about how the current unemployment figures, especially the increase in people leaving the workforce, means we should no longer expect a systemic unemployment of 4 or 5% (U3). They're saying that there won't be a complete recovery from the current unpleasantness, that we can expect to have a floor of perhaps 8% from now on. I think that this might be true if we do nothing to correct it (and it looks like the people with the power to do so aren't eager to), and that it's likely we'll see further erosion in employment over time.

#100 ::: Glen Blankenship ::: (view all by) ::: December 15, 2009, 01:51 AM:

So why not buy an iPod Touch, and a simple non-smart cell phone for talking on?

Primarily because the iPod Touch only connects to the net via WiFi.

The iPhone connects anywhere I can get a 3G or Edge network cell-phone signal (which, here in LA, is just about everywhere - though I realize AT&T's coverage isn't quite so thorough elsewhere).

3G isn't quite as fast as WiFi (and Edge is really slow, but it's rare that I can't get 3G), but I don't have to find an open WiFi hotspot, and I can use it on the move.

I can even get Google Maps with Traffic while I'm on the freeway. Which can be a real lifesaver here in LA.

I thought about getting an iPod Touch + a flipfone, but the WiFi-only net connection on the iPod was a deal-breaker.

#101 ::: Larry ::: (view all by) ::: December 15, 2009, 08:46 AM:

Dave @24: Apple went to Verizon to have it and they got turned down. Apple, at the time, could only find one carrier willing to carry the phone which required network modifications for its use. This was ATT. I would love to see how Apple is not working with third parties though, any examples?

As for slashdot, it's never been an apple fanboy haven. Quite the opposite since it's not Linux.

The problem is not just wall street, it's a short term return mentality in corporate america. Most of the time they only look to the next quarter and their bonuses. I've seen it many times. Funny thing is at work I am seeing the other side too. This one group is investing lots of cash in a death march project that, so far is about 8 months overdue and they just hired about 40 more people to work on it. I swear that corporate america is insanity.

#102 ::: Steve C. ::: (view all by) ::: December 15, 2009, 09:54 AM:

Larry @ 101 -

This one group is investing lots of cash in a death march project that, so far is about 8 months overdue and they just hired about 40 more people to work on it. I swear that corporate america is insanity.

I've seen that phenomenon as well. I've seen IT projects that the leaders knew would fail, for one reason or another, but they had to continue until the funds were spent.

Anyone who went to the execudroids in charge and said as much would find themselves shunted to "special projects" or other road to egress.

Part of the problem is that big IT projects come from the capital budget, and you don't just end those without impacting the books. That's why you find big corporations spending hundreds of millions on new big projects while the operating budget for existing systems is starved.

It's funny how the type of account your budget is charged to can affect your career.

#103 ::: Constance ::: (view all by) ::: December 15, 2009, 11:42 AM:

#96 ::: heresiarch

Absolutely! It's also kinda off the topic of the thread's discussion.

Love, c.

#104 ::: eyelessgame ::: (view all by) ::: December 15, 2009, 03:22 PM:

This may be a rumor, or garbled story, but as I understand it, at some point in the 1970s - under Ford, I believe - something basic about corporate law was changed.

It is a requirement that companies provide value to their shareholders - hence 'fiduciary duty' of the CEO to the board. It used to be that the requirement was that the company direct its effort to providing a reasonable short-term return to its stockholders. This has changed, formally or informally, to a requirement that the company maximize return to its shareholders.

This is why we are treated to the spectacle of annual lawsuits against Costco for paying their employees more than the going rate, and Costco's constant need to defend itself by pointing to the value-add of reduced turnover, better training, and reduced shrinkage.

Or so I hear. I may be wrong. But to the extent that this is true, it explains much, and in a way it is hopeful: it's not that people as a whole suck, or that capitalism or society must inevitably collapse in the way we're collapsing, it's the lesson that bad law, and bad regulation, has an enormous impact on the behavior of the system.

But it's curious that I hear so little about this change in law/policy -- I don't even know whether it was an act of Congress or a change in some regulatory agency -- so I would not be at all surprised to hear I was completely mistaken.

#105 ::: C. Wingate ::: (view all by) ::: December 15, 2009, 05:32 PM:

re 104: The original "the purpose of a business is to operate profitably for the benefit of shareholders" case in the USA is Dodge v. Ford Motor Company. However, all is not as it seems. Part of the reason Ford was trying NOT to run profitably is because he wanted to keep the Dodge brothers from using the money they were earning from investing in Ford to start their own rival company, which is of course exactly what they did when they won the case.

In general this sort of stuff is governed by case law, which is to say, the shareholders get to sue if there is an issue. I know of no Ford-era case (and note the common name, suggesting that something got misremembered along the way) addressing this-- not that I am a legal scholar. Also, the phrase "operate profitably" is in general interpreted loosely, so that IIRC correctly Microsoft didn't pay dividends for decades-- for that matter, I'm not sure if it does now.

#106 ::: eyelessgame ::: (view all by) ::: December 16, 2009, 12:06 PM:

thanks - much appreciated. You're probably right re "Ford".

#107 ::: Bill Stewart ::: (view all by) ::: December 16, 2009, 03:07 PM:

Glen@100, Larry@101 - While AT&T's 3G coverage is not very widespread, and while they've had problems getting enough bandwidth to sustain the iPhone load (not sure how much of that's a radio issue which is hard to fix vs. a backhaul issue that's easier), their 2.5G EDGE data coverage and speed was a lot better than the other carriers', and it's GSM so most of Apple's phone design could be used world-wide. That was a very good thing the first year or two, though it's caused more trouble recently. One thing that constantly annoyed me was that the San Francisco / Silicon Valley area was very late in getting 3G service at all, so the part of the country that has the highest concentration of Apple fans who just have to buy the latest shiny thing got really bad service for the 3G and 3GS rollouts - duh! I got to listen to lots of grumbling from friends, and they were quite right.

Disclaimers: I'm not speaking for AT&T (if I were, I'd be wearing a suit, or at least holding a hand-puppet with a tie in front of a video camera and being more polite.) And I don't work in the wireless part of the company; these days I do firewalls.

#108 ::: Paul Duncanson ::: (view all by) ::: December 16, 2009, 10:05 PM:

Fake Steve calls for the users to rise up against AT&T in Operation Chokehold.

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