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Saturday, December 17, 2016

Profit Angle

I have read that Android's success is a direct result of Apple's iOS being a walled garden. Let's look at this statement now from two different angles. First, is the walled garden really bad? Second, is this the real reason that Google and Microsoft are actively developing their own hardware?

Is the walled garden really bad?

Apple curates the apps that are allowed into the App Store. This has demonstrably reduced malware compared with Android. Recently, a form of malware, called Gooligan, was found to be present in about 100 apps. It is present in about one million phones in the wild, and increasing at a staggering rate of about 13,000 smartphones per day. I would actually say curation is a plus. So, what is it that people prefer about the Android operating system?

Let's look at what makes Google's Android shine over Apple's iOS.

This article points to three main reasons: Android...
  1. can be rooted
  2. uses non-proprietary software formats
  3. interface can be customized
Rooting

Talk about dubious value. Being able to root Android means (in hacker parlance) the phone can be rootkit'd. In plain English, it means that apps can enter superuser mode and obtain administrative privileges on your smartphone. Once that happens, they can reconfigure your device, redirect its output, and install their own choice of apps. In other words, you are exposed to malware that can steal your passwords, the money in your bank accounts, access your email, snapchat photos, microphone, track your location, keep logs of your text messages, listen in on your phone calls, and essentially every bad thing you can imagine. Malware on Android is a critical problem right now.

Your average consumer should never, ever root their phone. It's only for hackers, spies, and criminals to take advantage of you. What this represents is Google not looking out for you.

Now let's look at how pleasant rooting is on Android. Why should you root your phone? This article spells it out perfectly (while detailing how complicated, dangerous, and potentially undesirable the rooting process can be). The main reason that people want to root their phones is to get rid of the bloatware that's typically installed by the manufacturer (Samsung, for instance). Welcome to the same problem we had in the last millennium with PCs: shovelware. This is how they differentiate their phones from each other in the Android ecosystem -- the same way vendors used to differentiate their PCs in the Wintel ecosystem. But, in comparison, it's a fact that Apple now allows you do delete the pre-installed apps you don't want on iOS 10, without rooting your phone.

Many users want to bypass the complexity of using Terminal to obtain superuser mode on the phone's Linux kernel to change various privileges. Hey: what consumer would want to do that? So they buy rooting software to do it. Can you trust that software? No. In July 2016, rooting software was reported to have installed malware on 10 million Android handsets.

And, by the way, each manufacturer's phone has a different rooting process due to the security bloatware they've installed. Joy.

Non-proprietary software formats

This means that, unlike iOS apps, which are available only through Apple's own App Store, Android apps are available from several sources. The Google Play Store is not the only place you can buy and install Android apps. There are many alternatives, including Amazon Appstore for Android, SlideME, 1Mobile Market, Samsung Galaxy Apps, Mobile9, Opera Mobile Store, etc.

Is this a good thing? It does open up multiple sources for Android apps that run on various smartphones.

But what are the downsides of multiple app stores?

The first problem is fragmentation. Each Android smartphone has a different hardware configuration, which turns out to make the app developer's life hell. Each smartphone has a different screen configuration, for instance. Before buying an app with a specialized purpose, like using the GPS, or a game app with high demands, it's important to decide if that app will run properly on your phone. This is precisely why smartphone manufacturers have been building their own app stores -- not all apps in the Android ecosystem run on every phone.

The second problem is trust. Can you trust the app you download to be free of malware? You would like to know that the App Store you are using is checking for malware. Fundamentally, if they do not have access to the app's code, app stores cannot protect you from malware. What happens is this: you download an app, as it runs, it loads and install malware from some server somewhere. This installs Gooligan.

Nowyou find new apps simply appearing on your phone. This happens because ratings are actually steered by app companies through the use of the Gooligan software. Gooligan installs itself, initially, for the purpose of buying apps it wants you to buy, forging your approval to buy them (and possibly spend money on them) and then rating them highly. These apps can be installed because Gooligan can obtain system privileges. Usually this happens because you enter the admin password for your machine. Perhaps it's to give the app privileges to install some fontware or customization feature. These new apps it installs potentially contain the real malware, because you do not have a choice nor can you control where they come from.

Customizable interface

Really? Can't you customize the interface of an iPhone? You can customize the wallpaper and the lock screen photo. If you want to go further, you can use customization apps like Pimp Your Screen, Call Screen Maker, iCandy Shelves & Skins, Pimp Your Keyboard, and so forth.

On Android, you should ask yourself how much you want customization. After all, it might come with malware.

Oh, cost!

One of the main reasons that people prefer Android is the cost of the phone. Which really has nothing to do with Android. Actually, cost is normalizing because deals with carriers are being made that pay for the phone up front, in exchange for locking you into the carrier for two years (usually). But this applies to all phones now. So, cost is not as much a reason as it used to be. But the plain fact is that, without a carrier deal, Apple's iPhones do cost more.

Why Google and Microsoft are developing their own hardware

Second, is that even the reason that Google and Microsoft are developing their own hardware? No, it isn't. The real reason is profit envy. The price of software has been dropping quickly since the App Store was created. This means it's harder for software-only companies to keep operating margins high. Think Microsoft, who has gone to subscription software to guarantee upgrade revenues, amidst unpopular OS upgrades, like Vista. The profitable niche, mobile devices, must look pretty good to them. Should they merely license OS to hardware manufacturers, like Windows? Will that work? No. Google gives Android away for free: upgrades don't cost anything. So nobody will buy Windows Phone if it costs money. Also, hardware and software both need to be upgraded.

The real reason is that, given that software is becoming essentially free, to make the profit you must make your own hardware. Also to make the hardware work best, you must develop custom software. In fact, the best features require both hardware and software to make them work.

This tight vertical integration is why Apple reaps well over 90% of the profits in the smartphone industry year after year. They sell their own hardware. That, and their profit margin is about 40%.

Value proposition

So, why are people willing to pay a premium price for iPhones?

As always, the price is paid based on the value perceived. The value of better user experience on iOS, easier installs, significantly better privacy and security, and great design is huge. It leads to unprecedented user satisfaction ratings and loyalty. People pay for this, and enjoy the rewards.

Apple devices, on the whole, are more up to date than Android devices. Here is a chart of Android OS versions as of September 13, 2016 and their share on smartphones. It clearly shows the latest version, Marshmallow, at 18.7% installs. And on iOS? As of November 27, 2016, 63% of iOS devices have upgraded to iOS10, 29% are running iOS 9, and 8% are running earlier versions. Get the latest stats on Apple's App Store page.

Clearly Apple's customer base upgrades significantly faster.

General comparison

Consider this article on iPhone vs. Android as a near-complete analysis of the subject.

49 comments:

  1. I just spent half an hour fighting with Apple DRM ("All that music on the old iPod? *Of course* you want to delete it all!"). Google tells me to buy an app for $40 to pry the music loose.

    On my Samsung phone, I plug it in, and a disk shows up. All my data is my data.

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  2. You know, of course, that just because you have copies of them, those songs don't actually belong to you (really you only own a single copy). DRM is meant to protect the rights of the copyright holder. I am not sympathetic to wholesale free media dissemination, which is illegal, but I am sympathetic to the process of media migration, which certainly should be legal. In the era of CDs, people were led to believe that the media they bought were theirs to copy (making a single copy is legal for personal use, as the courts have ruled) yet the ability to copy without loss of quality led to less scrupulous people burning CDs (to sell for profit) that contained data they knew they didn't have the rights to.

    With Apple devices, I've never lost any media, ever. I'm still using the same iTunes Music Store (iTMS) login I used on my first FireWire iPod. In addition to iTMS media, I also have AIFFs from CDs I bought in the pre-iDevice era, as well as my own compositions I mastered to AIFF, MP4, and other formats using ProTools.

    This kind of media can n to be easily migrated into iCloud, as I understand it — even my own compositions. Though in any reasonable world I own them in their entirety since I own the copyright. As for myself, I keep these kinds of media in an iTunes Music folder (database) on my laptop. You can back this up six ways from Sunday but access to the iTMS media contains DRM and requires authentication to play.

    And they're just files. You can keep your iTunes database on a Mac or a PC.

    I know plenty of music artists and I'm pretty sure they would like DRM to be applied to their media to protect their royalty streams. Its not greed. It’s simply how they make their living.

    Just because data is intangable doesn't mean it's free.

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  5. > I would actually say curation is a plus.

    Indeed, but anyone who advocates it be 100% centralized, “flunked” Economics 101 even if they received an A grading.

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    1. We should agree to disagree on this one. It's clear to me that curation is a high-priority security issue. If Android's security travails aren't already making that obvious.

      Curation certainly isn't eating into the profits, is it. Look for other companies to go this way also.

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  6. > The first problem is fragmentation.

    And we all wear the same shoe size. And the Internet was better when Yahoo was the only portal. And the Internet would be better if Facebook was the only website and all others (including all apps) were served via Facebook and Facebook APIs.

    Diversity is antithetical to the physical laws of the universe, because Einstein did not say that the Second Law of Thermodynamics is fundamental. Coasian costs are not a fundamental aspect of the comprehension of economics and free market fitness.

    > Fundamentally, if they do not have access to the app's code, app stores cannot protect you from malware.

    That is why there is this concept that is taking over the world that you might have heard of: “open source”. Users should have the freedom to decide whom they choose to trust for curation, i.e. United Laboratories or Consumer Reports free market fitness. We should be free to decide which curators we trust. And 80+% of the ecosystem has said that freedom is more important than totalitarianism and conflation of business function with political corruption.

    I agree the current Google ecosystem for apps is perhaps a chaotic mess and eventually users will demand more organization of curation, but the alternative need not be 100% totalitarianism subjugation to bankrupting ideology of Cupertino and insane California environmentalists. I gave a very thorough explanation in private of the insanity of the West recently on this issue and I can not repeat all the economic arguments here. Of course nobody wants pollution, but this is complex issue that is not going to be solved with the totalitarianism that is bankrupting the West.

    > But the plain fact is that, without a carrier deal, Apple's iPhones do cost more.

    Which is a huge factor outside the affluent areas of the world, especially where there is prepaid service and you are not locked into a long-term carrier contract (e.g. the Philippines where I am). And the reason Android phones are less expensive and more diverse offerings is because Google is not stifling competition with a walled garden.

    > The real reason is that, given that software is becoming essentially free, to make the profit you must make your own hardware.

    My understanding is that Google is involved not to make a huge profit on short-term on Android but to prevent Apple from stifling the Internet and app ecosystem worldwide so that Google mainline business revenues in advertising can control to grow without retardation by lack of freedom for all parties in the ecosystem.

    > As always, the price is paid based on the value perceived.

    I do not need the best device to achieve some basic things I need a smartphone to do.

    Agreed though that often the Android software stack is derelict. And it really pisses me off that my Samgsung refuses to stop downloading updates to my phone without my permission even I shut off the auto-update. The Bluetooth audio latency was horrendous until just recently and still not at par with iPhone (which I discovered when I tried to use my smartphone as a karaoke sing along with an Bluetooth loudspeaker).

    The smartphone ecosystems are dominated by behemoths which are forcing crap on the users that we do not want!

    This has to stop and I am planning to try to do something about this starting from a common API for apps so we can abstract away the iOS and Android APIs.

    I do not know enough yet about the market and technological forces that are driving this totalitarianism outcome, but I am determined to end it, if possible.

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    1. It's not about shoe size, Shelby. You totally changed the subject. Fragmentation's problem is that it prevents the adoption of more recent builds of the OS, and thus inhibits better security for Android! Its benefit is that it allows multiple vendors to use the Android operating system, while creating their own crappy look. Which differentiates them from their identical competitors.

      Now, to your point, it's great that there's competition. This drives progress, and most likely drives innovation as well. But one thing it doesn't drive is operating system advancements, when it's only Google doing it. The hardware vendors are stuck using whatever Google came up with, and presenting the same advancements as their competitors. Which must totally suck for them. This is why its hard to create a single app that works on all the devices there. They make the UI so different and inconsistency is bad.

      So app developers just develop for one "predominant" hardware vendor, like Samsung or LG. Which defeats the model.

      Google doesn't have to stifle the app developer. Their "ecosystem" of many hardware vendors does this automatically. And the subsequent fear generated by malware app developers.

      Google is not out there to prevent Apple from stifling competition. They are out there for the money pure and simple. Their "collect all data on their customer and sell it to anybody" model. It's not a coincidence that this is becoming illegal in some countries.

      You are missing the forest for the trees. Google pwns you. It doesn't respect your privacy any more than Uber respects their drivers or their female employees.

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    2. I agree Google’s business model is ultimately the most evil. Eric Schmidt is a globalist wolf who has no problem with collecting data on all us sheep. As I recall, he violated Steve Jobs’ trust when he was on the Apple board. But Apple instead of putting up a serious challenge that might subsume Google’s forthcoming evil victory is throwing it all way in order to maximize profits within a smaller (but lucrative sector) of the market. I do not blame Apple for doing this as it makes the most sense for its investors over the near-term. And I am not sure if there is any other business model Apple could have pursued which would have made sense at its market capitalization (and I presume that capitalization is probably necessary to provide the resources to do the work that Apple does, although I have not analyzed it in detail). So we are sort of stuck with the reality of the economics of it all.

      I am not as well studied on the specifics of the hardware and OS integration as I presume you (and surely your colleagues) are, but I do know that some basic stuff on Android did not work correctly the last time I tried to program an app, such as there was no standard API handling dual SIMM cards.

      I also loathe low quality software, low quality integration, and low quality QA (on all those engineering aspects not just on hardware manufacturing). I am 100% on board with you guys/gals at Apple on that point. I actually am very similar to Steve Jobs in that I admire perfectionist holistic design integration. But I draw the line where degrees-of-freedom of more important priorities are sacrificed. As I am sure you know also, it is a balance of factors that must be weighed.

      It has been argued by Eric S. Raymond that Google got into mobile in order to prevent Apple from stifling the growth of the Internet on mobile with an Apple monopoly. I can also see your point is valid as well, that Eric Schmidt realized they had to be in mobile to make sure they could data mine everyone. Both of those motives seem to be very plausible.

      > Google doesn't have to stifle the app developer. Their "ecosystem" of many hardware vendors does this automatically. And the subsequent fear generated by malware app developers.

      Well I can see that eventually it is possible that for example Samsung phones and OS might eventually blacklist certain apps, but afaik that is not the case today. So for the moment, your retort moves the goal posts, because my point is about being able to blacklist software that competes with the vendor who controls the blacklist. So far Android developers do not face this as severely as iPhone developers do. I realize this does not impact most developers, but it will for example impact severely if I launch an OS on top of an OS and then Apple will surely not allow it into their Appstore. Google might also not let it into their Playstore, but there are many Android appstores.

      The issue of hardware + OS integration variation and how to program efficiently for it, seems to me to an separate/orthogonal concern. Google may suck at organizing this. Apple may be somewhat better, but partially because they have less variation.

      This sounds like an engineering opportunity to me. But I do not know the details of how difficult it would be to improve on those current two choices. But if I did into a common API for apps abstracting away both iOS and Android, then eventually I will probably be getting into that sort of engineering. But initially I would begin much more high-level where the low hanging fruit is. There are many apps that do not need the lower-level or more detailed APIs.

      It is not valid to talk about how bad Google is, as a justification/obfuscation of the lesser evil that Apple is. All of that evil must be overcome.

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    3. You miss Google's motives entirely. They believed they could leapfrog Apple by offering the Windows of the smartphone world. Then they would let the smartphone makers slug it out just like Microsoft did in the 90s.

      And this is consistent with what actually happened. Schmidt's position on the Apple board gave him the data to think about, and his old-school mentality just decided that Microsoft had the better model: software only - because it's pure profit. Their actions got Schmidt kicked off the board (the right thing to do - just not soon enough).

      But, in the mobile revolution, the Microsoft model has been out-thought by Apple.

      And how is this? Simple.

      First, users prefer simplicity over complexity, security over vulnerability, and good design over "good enough for government work" crap. Second, by targeting consumers and not the vocal minority of Ars Technica readers (I am one myself, by the way), Jobs was preternaturally brilliant.

      This led to a situation where both the hardware and the software could be controlled in concert. In a time where people (like Efi Arazi) were warning me that a company should be either a software or a hardware company but not both. Conventional wisdom failed because it was disrupted, just as fabless design markets disrupted chip production. But in reverse! This was a vertical integration success.

      Steve Jobs was also smart enough to invest in encryption technology. Remember when the iPhone came out and Jobs decided to omit Flash? Security was already part of the company's decision chain. As privacy increasingly became an issue, that became part of it as well.

      Google went the other way, and now they must Alphabetically boil the ocean for new innovative technologies to survive. Their moonshots are considerably less daring than Elon Musk's, though. And that's literally obvious. We need more like him. And where did he make his billions? PayPal.

      You can't launch an OS on top of an OS - nobody will want that. It's already so tough for Amazon to sidestep the Android OS in their devices. They will have to build their own OS soon.

      You could make something a security shell, but that won't have a market because my sense is that OS vendors will eventually cooperate to solve the security problem. This will be necessary to their survival - more than just a competitive advantage.

      Consider hardware vs software integration. Each hardware vendor needs to outshine the other. Which means some cool hardware feature. This creates an environment that defocuses the OS maximally because, well, for the consumer focus and simplicity always wins over defocus and complexity.

      You could be God and still not get the OS right for all Android devices.

      You should have a look at Apple's App approval processes. They are fast and clean now. You are misinformed.

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    4. > You miss Google's motives entirely. They believed they could leapfrog Apple by offering the Windows of the smartphone world. Then they would let the smartphone makers slug it out just like Microsoft did in the 90s.

      I did not miss any motives entirely.

      That potential motive you describe is consistent with the desire to protect their ad revenue business model by not allowing Apple to have a monopoly on mobile. Surely you know that Google makes most of the revenue on ads, not Android.

      > But, in the mobile revolution, the Microsoft model has been out-thought by Apple.

      And caused them to lose 80+% market share to Google. So apparently Steve Jobs was wrong yet again. And Apple is losing yet again, for the same reason they always lose, which is they think of the world as their own walled garden.

      > First, users prefer simplicity over complexity

      Very simple to buy an Android phone for $50 here in the Philippines. And simple to use. And nearly no one is paying $600 for iPhone.

      > security over vulnerability

      Nobody here really cares.

      Frankly I do not care that much about it. I should not be doing security sensitive activities on a mobile phone. A mobile phone is a communications device. All the data should be automatically backed up on a blockchain. The mobile device should be a disposable thing I can throw in the garbage and buy a new one for $50 when it gets a virus. And that is where we are headed.

      > This led to a situation where both the hardware and the software could be controlled in concert.

      Repeating the same mistake he made on the Mac and destined for disruption by commodization again eventually (well already for the most part in terms of unit sales, but not yet in terms of revenue).

      > just as fabless design markets disrupted chip production. But in reverse! This was a vertical integration success

      Disagree. The vertical integration is a short-lived delusion that will be disrupted from below.

      > Jobs decided to omit Flash?

      Flash was a resource hog not compatible battery operated devices.

      > We need more like him. And where did he make his billions? PayPal.

      Mircea Popescu is doing it at a much faster rate than Elon did and without government subsidies.

      > You can't launch an OS on top of an OS - nobody will want that.

      The consumer does not care as long as it looks & feels good.

      The app developer cares. Already there are frameworks for programming iOS and Android with a common API.

      The browser was an amazingly successful OS on top of an OS on the desktop.

      > They will have to build their own OS soon.

      Commodization on the way …

      Jeff Bezos will disrupt yet another industry.

      > my sense is that OS vendors will eventually cooperate to solve the security problem

      Like they do not do on my desktop OS?

      A better sandbox for apps (aka a browser) is a likely solution, yet you think I can not build an OS on top of an OS.

      > Each hardware vendor needs to outshine the other.

      Disagree. They can just sell on price and look & feel of the hardware. Moving towards $50 - $200 smart phones and commoditization. Disruption from below. Yeah some will still pay $600 for a smart phone, but that will be a smaller segment of the market.

      > They are fast and clean now. You are misinformed.

      How can you conclude I am misinformed? What did I say? My only point has been that Apple can censor what ever it decides to. And that is totalitarianism.

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    5. The whole issue is profit. Their ad revenues became small compared with Apple's hardware revenues. Their motive is, as always, profit, and they craved that profit model.

      Ad revenue is truly the cash cow they milk at Google, but both Google and Microsoft have definite plans to be in the same hardware plus software model as Apple, because they envy the huge profits in that model. Microsoft is burning away their hardware vendors in such a move, which is gutsy, though the hardware vendors seem to be outpacing Microsoft, which is predictable.

      Google is in danger of having a single predominant hardware manufacturer, Samsung, take over their platform.

      I'd say Google protecting their ad revenues was initially a good motive, but it was when they saw how fast Apple was growing (and they had a front row seat with Schmidt in their presence) that they decided that there were faster growing methods to make profit.

      Their plans were huge, larger than just an OS. That's why Schmidt left the board.

      Apple didn't start to replace Google for searches, nor build their own Maps App until after Schmidt's duplicity was recognized. That's the hole in your theory.

      Your contention that market share is important is dumb. Steve never said we wanted to own the smartphone market. We don't want to build the cheapest phone - that leads to no profit. We wanted to build the best phone - the one people wanted to buy and would pay more for. This strategy worked, and it's continuing to work. People that don't work for Apple who have tried both OSs often tell me that they prefer iOS, and have moved to iOS because it's a much better user experience. No, consumers don't want to be able to rootkit their phones! They are dismayed at how insecure rootkit'ing is! Or they don't care about the hard-to-use useless bloatware.

      But, hey, if you want to buy the cheapest, then why did you buy a Samsung?

      Samsung's numbers are not looking so good in China, BTW.

      You don't care about smartphone security? Then you, my friend, are not a 99% consumer. The smartphone is like the center of the consumer's life. Not a laptop, which is only for coders basically. You surely couldn't have missed that mobile is taking over and that smaller fits in your pocket. This is what consumers want. And thus security is the linchpin. Privacy is of utmost importance to everybody.

      Bezos hasn't been successful in disruption even the tablet market, which is in decline, much less smartphones. He is, however, providing Musk with a decent competitor in cheap space flight. Though Musk, it appears, is on a mission. The Alexa product is great, as long as it doesn't hear every word I say and become something the feds want to subpoena.

      People have been saying commoditization is supreme ever since Google created Android. But that model of just building software while hardware developers slug it out to make the cheapest model, is just not the way to make money in mobile. Besides, let the other hardware vendors slug it out for the last bitcoin while Apple sells fewer and reaps all the margins. We will see which company lasts longer. How much cash does Samsung have? or Xiaomi? How many options will they have at the end of the day?

      You can build an OS on top of an OS, but it won't succeed because the vendor will build it on their own, or Google. And then they'll be eating your lunch.

      If you want to take advantage of crowdsourcing software, build an App Store on a popular device and let the developer profit directly from it. That's the model that's worked so far. Look for Microsoft to directly copy that model too.

      How do people profit from open source? It's a long game, for sure.

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    6. Hardware vendors do need differentiation, whether it's price, style, or performance. This has always been true in the PC market. Those that can't differentiate, die.

      Hey, you're a big critic, Shelby. If your futurist acumen is so great, then lets see you profit from it.

      BTW the consumer couldn't care less about the App Store policy of acceptance. They just see great apps. What they do care about is the rate at which sinister malware slinks through and infects their devices. Or ransoms their smartphone data. Remember, it's the center of their universe.

      Submit an app for approval and let's see how you fare. I don't see how you have been hurt.

      Or are you simply operating from self-interest in trying to sell your next-gen model of payments and software project building?

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    7. > Ad revenue is truly the cash cow they milk at Google, but both Google and Microsoft have definite plans to be in the same hardware plus software model as Apple, because they envy the huge profits in that model.

      Doubt this is their ambition because they will fail as there is no way Google can dial back the commodification and openness to get a walled garden to emulate Apple’s captive B2C market. The AOSP ecosystem will route around Google if Google has that aim.

      Rather I think Google is wisely instead aiming for some vertical integration in B2B/enterprise services (to leverage for example their huge server farms and cloud storage technology) instead of Apple’s B2C focus. Google is probably aiming to compete more with Amazon on services.

      > Google is in danger of having a single predominant hardware manufacturer, Samsung, take over their platform.

      You know the details of this better than I do.

      I did note in a comment recently on your blogs that Google is moving more APIs out of AOSP into Google Play, and I think remember reading this was to have some leverage over Samsung to prevent them forking off the AOSP.

      I expect other titans will rise to rival Samsung such as at least one from China and perhaps Jeff Bezos, but I do note for example that Samsung has an investment in one of the only two 14nm fabs that is not controlled by Intel.

      Perhaps the most salient disruption of Samsung will come from below, as the cheapest generic smartphone technology becomes sufficient for the billions in the developing world and some (or more than one) Chinese manufacturer takes this market (perhaps in collaboration with HTC or ?). I notice China is getting into manufacturing decent CPUs for smartphones.

      Sony is also making quality smartphones and I almost bought one for the camera and will probably do so next time as Sony makes very high quality hardware.

      > That's the hole in your theory.

      I doubt there is any such hole. Google presumably understands they can not beat Apple at Apple’s strengths.

      We posit they got into commodification of mobile to be sure that Apple could not create a jail around the expansive enterprise services that Google probably thinks (and probably correctly) they can do better than Apple.

      Google is a B2B company. Apple is B2C. Google wanted to prevent Apple’s B2C myopia (the jails et al) from messing up the broader vision of an open Internet. Afair, Apple would have killed HTML5 on mobile if they could have had their way, but this was thwarted by Google’s prescient strategy.

      The Pixel hardware may just be a hedge to keep their commodification strategy from being usurped by Samsung, not a serious intent to surpass Apple in the affluent B2C markets where Apple excels.

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    8. > Your contention that market share is important is dumb.

      Will you bet your entire net worth and retirement nest egg on your surety that the Windows vs. Mac scenario will not repeat?

      > We wanted to build the best phone - the one people wanted to buy and would pay more for. This strategy worked, and it's continuing to work.

      But I argued that iPhone is not unequivocally the best phone.

      Apple has excellent marketing and has identified an affluent sector of the market, and knows which security, environmental, and reality-distortion-field buttons to push in order to get the Jim Jones followers to enjoin a captive market wherein Apple can milk 30% revenue share from all economic activities in the ecosystem.

      I do not think this will not sustain as we are heading into a 309 year cycle global sovereign debt crisis on par in severity with the fall of Western Rome.

      The future (roughly 5 - 10 years from now) shifts to servicing the billions of people who are all at a much lower level of income than the current customers of Apple. For the reasons I already explain on your Wikileaks blog, China will become the wealthiest country per capita and they will of course establish their own replacement for the B2C iPhone market.

      The average price of the iPhone has not come down in price since its inception while the average price of Android has continually declined.

      Absolutely no way Apple will remain competitive in China long-term. No foreign company has. China will absolutely not allow their domestic markets to be served by foreign companies, except on exotic things that do not have the economies-of-scale that Chinese Taipans target (e.g. Ferrari).

      China is busy learning to copy all of Apple stuff. And preparing to usurp.

      I hope you (and Tim Cook) are aware how the Taipans in Asia route around patents:

      > On 27 April 2015, it was reported that Ratan Tata had acquired a stake in Xiaomi.

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    9. > You don't care about smartphone security?

      Users care up to a point, but not the level of security theater that Apple employs to justify creating a jail and captive market which they can use stifle all competition in their ecosystem that threatens Apple’s captive revenue extraction market.

      I admit it is brilliant marketing Apple does to take advantage of that weakness in people, but I believe it will backfire on Apple for the reasons stated in all my comments.

      I expect my planned OS on top an OS will largely solve the security weaknesses on Android (even upgrading the older phones!). So please stop assuming there are no compelling reasons users will not want it.

      The free market routes around those Coasian barrier rent seekers who try to extract 30% revenue share from an entire ecosystem.

      > Then you, my friend, are not a 99% consumer.

      I perceive like most in the developing world, I care about security only when it causes me problems. I read user curation comments about an app before installing, unless it is a well known app.

      I and many in the developing world are not those Jim Jones followers that frantically worries about everything in the demographically and actuarially bankrupt Western world. Who think verified user comment curation is unable of identifying malware in many cases and therefor they better give their idolatry to the Apple Koolaid.

      > The smartphone is like the center of the consumer's life.

      Agreed. And this is a very important factor that aids my belief in my Bitnet project.

      > Not a laptop, which is only for coders basically.

      We can not do maximally productive work of nearly any kind of creative arts on a mobile device. The screen is too small, the keyboard is too slow, and the pointing device is too imprecise.

      Millions if not billions will have to do productive creative arts work in the coming Knowledge Age.

      I do think our mobile device may become the CPU for docking station where we do maximally productive work.

      And I follow the same security procedures on my Linux desktop that I do on Android in that I do not install apps that are not widely reputed without reading sufficient verified users curation comments. I do not need to rely on any walled garden.

      > You surely couldn't have missed that mobile is taking over and that smaller fits in your pocket. This is what consumers want.

      Correct I did not miss it.

      > And thus security is the linchpin. Privacy is of utmost importance to everybody.

      I do not use my mobile phone much for purchases yet. Neither do the vast majority in the Philippines.

      And by the time I and they do, I intended to have provided them (and myself) a sufficiently secure solution on Android (commensurate with what they have at risk which will be much less than the case is now with credit cards), without all the unnecessary walled garden drama and marketing theater.

      When the most you can lose is a disposable financial account with $10, then do you really need to drink Apple’s Koolaid and them capture you in a jail where they can extract maximum rents by scaring you unnecessarily.

      Delete
    10. > People have been saying commoditization is supreme ever since Google created Android. But that model of just building software while hardware developers slug it out to make the cheapest model, is just not the way to make money in mobile. Besides, let the other hardware vendors slug it out for the last bitcoin while Apple sells fewer and reaps all the margins. We will see which company lasts longer. How much cash does Samsung have? or Xiaomi? How many options will they have at the end of the day?

      I can still build a PC from non-branded components made in China. The parts still get built even though no company has large profit margins.

      > Hardware vendors do need differentiation, whether it's price, style, or performance. This has always been true in the PC market. Those that can't differentiate, die.

      There remains enough differentiation of price, style, and quality to sustain some margins, but the fat margins of Apple’s rent seeking captive markets disappear. For example, I paid $60 for a branded higher quality power supply than a generic $10 one. But that power supply company is not making 30% revenue share on everything in a captive ecosystem. Commodification benefits the consumer.

      Delete
    11. > And thus security is the linchpin. Privacy is of utmost importance to everybody.

      And I do not trust Apple on this either, because they do not publish all the verifiable detailed technical specifications and source code, e.g. for the Security Enclave.

      I do not trust what can not be vetted by many peer reviewers in open source.

      We have no way to know if Apple has received national security letter gag order forcing them to spy on us and pretend they are not. Even Tim Cook would not be allowed to tell you this. You could end up entirely betrayed in the end and look like a fool for trusting a centralized authority and security through obscurity.

      Vast majority of smartphone users obviously do not care enough yet, because Google gets away with collecting our private data and users continue to buy Android 80+% of the time.

      I do think the market will eventually push back and demand an AOSP on a hardware with open source firmware. And with all the best security and privacy enhancements. And then this will be more trustable than iPhone.

      The free market will solve this. Totalitarianism is not a solution.

      Delete
    12. > You can build an OS on top of an OS, but it won't succeed because the vendor will build it on their own, or Google. And then they'll be eating your lunch.

      Let them. I will make my money on the blockchain and due to inertia and the fact that it disrupts them, they can not and will not compete on creating a blockchain. Besides I am the only person in the world right now who knows how to design consensus algorithm for a blockchain that theoretically is not a winner-take-all power vacuum.

      (be careful about jumping to assumptions about the blockchain and cryptocurrency area of computer science where in high probability I am currently far more expert than you, given that has been my focus for the past 4 years)

      > BTW the consumer couldn't care less about the App Store policy of acceptance. They just see great apps. What they do care about is the rate at which sinister malware slinks through and infects their devices. Or ransoms their smartphone data. Remember, it's the center of their universe.

      They will care when they can not get the apps they want any more.

      > Submit an app for approval and let's see how you fare. I don't see how you have been hurt.

      Apple can never accept my app-browser OS on top of an OS, because it will allow loading code and apps bypassing Apple walled garden. It will bypass Apple Pay and not give Apple any revenues from the apps, upsells, content, etc..

      I presume Apple will fight this vehemently. And the risk of Apple banning it, makes developing for iPhone a waste of effort. The only possible strategy is to see Apple as an enemy. I wish it was not so.

      > Or are you simply operating from self-interest in trying to sell your next-gen model of payments and software project building?

      I am operating from rational self-interest, but I do think my self-interest is aligned with a large segment of the imminent future market.

      But talk is cheap. And liver illness can turn coders into talkers.

      Delete
    13. Well you're right about the Pixel. But maybe it's too soon, because their sales haven't really grown above 10^6 units. The changing of Google and Microsoft into hardware companies to ape the Apple model is an obvious move. They see that the old models are dying.

      You may not use your mobile devices for purchase, but that economy is growing exponentially in the US and China. The online shoppers were roughly equal to the brick and mortar shoppers this last Christmas season. This is the way things are going. In the cities, people have means delivered to them, groceries delivered to them. Malls are closing stores. Hell, Sears just closed 20 stores, including its UTC store in San Diego. I've shopped there.

      But don't assume that brick and mortar is dead. It still accounts for the vast majority of sales revenue. Still, 70% of Americans think they will get a better deal online. It's become tough to compete.

      Apple actually pushed for HTML5, as an alternative to Flash, which is like a sieve.

      Creative work on mobile devices is increasing rapidly. Users' work on iPad Pro and Apple Pencil is phenomenal. I'm talking music, drawing, painting, design. And I'm a perfectionist in all of those fields. But let the brands compete. Competition can only bring better and better products.

      Consumers can get all the apps they want. They are continually surprised and delighted at what apps can be built.

      I'm pretty sure Google will fight your OS on top of an OS as well.

      I do not debate blockchain's adaptability to the task. Other companies have embraced blockchain. You should move quickly to provide enterprises with a blockchain-based security system for their sensitive user data. I mean, every company will buy that now that Target, POS systems, and literally everybody is getting hacked. And start with Sony. They really need it. Come on! Solve a problem for which there is a market, Shelby! Go for it!

      Delete
    14. > Privacy is of utmost importance to everybody.

      Stumbled onto this allegation against Apple’s commitment to privacy:

      > Apple, meanwhile, drew ire for its new iTunes Plus downloads, which come without the digital rights management (DRM) that restricts the use of ordinary iTunes tracks. Activists were outraged when they discovered that the new tracks were still watermarked with the names and email addresses of the person who had bought them.

      And it also has an error in logic:

      > So while Google details are private and potentially anonymous, Apple's users only waive their right to privacy if they share their tracks illegally.

      They waive their right to privacy if those files accidentally get distributed.

      Apple has placed an undue burden on their users and worse yet apparently did so surreptitiously. It also demonstrates that Apple thinks punishing the 2% criminals in society at the detriment of the privacy of the 98% is justifiable, else Apple thinks a high percentage of their users are willing to do “illegal” activity. The hypocrite irony of it.

      Delete
    15. Every time you make a copy or print a document it is watermarked in some way. Perhaps the watermarking simply wasn't removed because somebody forgot. In either case, the copy operation wasn't in any way inhibited.

      BTW it looks like Windows users are once again experiencing a severe ransomware attack, from the Petya variant. This is one more reason to install those OS updates you seem to be inconvenienced by.

      The original zero day exploit for Petya comes from the NSAs Eternal Blue program. The idiot Shadow Brokers entity leaked this and other exploits and made the shady malware companies pay for the rest via on online auction. This has obviously exposed the (Windows) world to an extreme ration of malware attacks.

      No matter where the zero day exploit came from, it's obvious also that users don't generally upgrade, even when the software patches are critical. Even enterprise users. And it's totally to their detriment. Yes, most users simply don't know what they're doing. This argues for easier, more polite upgrades. With more testing.

      With systems like Windows, which are loaded with countless zero day exploits, it might just have to be sensible to force critical infrastructure users to upgrade and apply.

      Delete
    16. > … ransomware attack, from the Petya variant. This is one more reason to install those OS updates you seem to be inconvenienced by.

      Would having the user’s data backed up in the cloud then reformatting the storage on the corrupted device and reinstalling an OS not suffice as a recovery option?

      Upgrading the OS regularly does not protect against exploits which are not zero day (i.e. not known to the OS vendor). Afaics, my strategy above would recover from non-zero day exploits.

      Delete
    17. > The changing of Google and Microsoft into hardware companies to ape the Apple model is an obvious move. They see that the old models are dying.

      I will repeat that at least in the case of Google, I expect they are creating Pixel not just for revenue (they do not expect to beat Apple at Apple’s core strength of vertical market integration), but more saliently to create leverage against Samsung and others in the ecosystem, so as to move the ecosystem towards better integration, less bloatware, better testing, better upgrading of OS, etc..

      Google is competing against its own ecosystem not to monopolize it (Microsoft’s mistake) but to raise the level of excellence.

      > You may not use your mobile devices for purchase, but that economy is growing exponentially in the US and China.

      I know. That is why blockchain payments on mobile are going to be big time. And that is why I said we will only want say $10 - $100 of private keys on our phone at any given time typically (user configurable of course), because the mobile phone is not an absolutely secure device.

      Instead of trust Apple to do that with Apple Pay for the user (guarding their credit card account from the phone and merchants), we will instead have an open system that no one monopolizes. Of course this will obliterate Apple Pay on a global scale. The challenge has been solving technical issues on the blockchain. I claim to exclusively have these technological solutions.

      > Apple actually pushed for HTML5, as an alternative to Flash

      It seems I vaguely remember a few years ago that Apple was pushing their own content delivery stuff and for a while generic HTML5 was not an option on iPhone, but perhaps I am mistaken. Now that I think more about, I remember Daniel Glazman (and possible Ian Hickson) were Apple employees or sponsored. Any way, my point is I have never trusted Apple when it comes to any way that their devices can be made open subverting Apple’s monopoly over ecosystem rent extraction.

      > Users' work on iPad Pro and Apple Pencil is phenomenal.

      You stated earlier tablets were dying.

      > Consumers can get all the apps they want. They are continually surprised and delighted at what apps can be built.

      It is not just the availability of software, but the ecosystem and monetization. When a monetization model comes along that empowers the users of apps with income and employment (while employment shrinks globally due to global sovereign debt collapse and automation), yet cuts Apple out of the pie, Apple will refuse to give its users access to it. Apple can not replicate this onboarding model I am planning, and especially not while taking 30% share as a transaction fee.

      > I'm pretty sure Google will fight your OS on top of an OS as well.

      I do not think they can. It is too late for them to close their ecosystem. They can push back only so far on moving APIs in Google Play, but afaics they can not lock-down the OS at this point requiring we jailbreak it to install an .apk. Plus I do not see why they would. It will increase usage rates thus increasing their revenues. Also it would provide a compelling advantage that iPhone can not copy which puts the final nail in iPhone’s destined single-digit percentage market share death spiral, repeating the Mac vs. Windows commodification outcome.

      Delete
    18. > Other companies have embraced blockchain. You should move quickly to provide enterprises with a blockchain-based security system for their sensitive user data. I mean, every company will buy that now that Target, POS systems, and literally everybody is getting hacked. And start with Sony.

      That is one of the capabilities of the Bitnet project I am working on. It is a multi-faceted project. But again I admit talk is cheap.

      Thanks for the idea. Afair, I had alluded to such a feature in Steemit.com comment I wrote last year. I also mentioned an idea for how we can possibly eliminate the need for secure certificate authorities (who allegedly can be corrupted).

      Delete
    19. Personally, with your capabilities, I would rush to this if I were you. I can't say how important securing the enterprise is! And this is not something that is government-specific, which should also be enticing.

      Talk is cheap but consider that you are one of the very few that can accomplish this.

      Delete
  7. > Fragmentation's problem is that it prevents the adoption of more recent builds of the OS, and thus inhibits better security for Android!

    Massive changeover to these rapid-fire OS fixes can cause more harm than they prevent. The fixes have not been in the wild a long time and thus can create new problems that did not exist before.

    It is folly to think a mobile phone is a secure device.

    I do not want the vendor forcing me to upgrade the OS when I am not ready to. I am very conservative and upgrade to new OS after it has stabilized for a while.

    Apple is creating a strawman Hegelian dialectic to justify its totalitarianism so that it holds all the control over its ecosystem. But this has strangled its market share.

    Google is moving more of its OS into Google Play services in order to make most apps incompatible with the AOSP.

    Apple and Google are two faces of the same totalitarianism monster. We the people are being squeezed between two variants of evil.

    A colleague mentioned to me that with an enterprise signing certificate, one can ship apps that are not on the AppStore. But I retorted that Apple probably retains the control to turn off the certificate. He said they must be renewed annually.

    > The hardware vendors are stuck using whatever Google came up with, and presenting the same advancements as their competitors. Which must totally suck for them. This is why its hard to create a single app that works on all the devices there. They make the UI so different and inconsistency is bad.

    This was not the case for Windows (and now Linux) on PCs because all the parts of the PC were commoditized and the OS was standard and installed separately after building a system with standard components.

    But Google does not want to create an ecosystem where we can choose to install our own OS on hardware.

    Consumers benefit from commoditization because then the manufacturers do not attempt to monopolize the ecosystem.

    Seems we need to commoditize the mobile hardware + OS ecosystem.

    ReplyDelete
    Replies
    1. You are wrong about massive changes to the OS. Apple has no problem putting out releases, and seeing them accepted by a huge majority of their devices. The problem is fragmentation. In this form, it's the inability of the old phones from actually upgrading to the new Android OS that counts. That's why the latest OS has 7% uptake in the Android world compared with 93% in the iOS world.

      You should know this!

      BTW, no vendor forces upgrades. It's always opt-in.

      Market share is not really the most important aspect of a product segment. Though the iPhone and iPad enjoy much larger market share fractions than the Mac does, that's for sure! What is important is shipping the best product you can. So people will become surprised and delighted. So they will feel like they are holding the future in heir hands. So the product can enable them to do more. So their lives can be improved. This is why consumers like Apple's products. Their experience is so much better. Any service they need is provided and the service gets very high marks.

      It's the whole product that is important. The lifecycle, from creation through use, through upgrades, through recycling.

      Where's the beauty and desirability in your crowdsourced code factory bag-on-the-side-of-the-OS plan? Who's going to buy it? Who wants it? I'm serious. These are marketing decisions you should make before proceeding.

      It's dangerous to say "people don't know what they want". You really have to be a 1 in 100 visionary to succeed with a plan like that.

      The people are not being squeezed out by totalitarianism. The people are being provided with products they can choose between. Competition is very important to progress.

      When you say we the people, you are referring to coders. My friend, coding is important to our future but we are simply in the minority. We will become the mathematicians of this millennium. And a few of us will become great designers and succeed. I used to have a friend that called coding "bit-pushing" like he was pushing a broom across a messy factory floor.

      The plain and simple fact is thaat, if you want to build your own OS, you will have to start your own smartphone company like Andy Rubin.


      Delete
    2. > You should know this!

      I am aware of everything you’ve written. Just because I challenge some of your interpretations, perspective, and predictions w.r.t. things we both know about, doesn’t imply that I didn’t know something.

      > You are wrong about massive changes to the OS.

      My perception is that most Android users here in the Philippines do not care about OS updates. Google provably by market share obliteration understands the vast majority of the market well. Apple understands that security and environmental theater sells to a small minority of affluent “professionals” (and spoiled brats) who want to think they are better than everyone else. It is a status symbol for those who think the #1 problem in the world is there are not enough bike lines, that also dovetails well with people who are affluent due to a debt bubble and middle-man/rent seeking corruption, e.g. those snobbish who work at banks in the Philippines typically prefer iPhone yet it is going to be ironic when blockchains disrupt the banking clerk jobs.

      The advantages of the iPhone are palatable for those who want maximum pillow comfort at the cost of future incompatibility as the ecosystem diversifies away (same as Windows did to the Mac, eventually even professionals had to stop using the Mac because of unsupported s/w).

      > Apple has no problem putting out releases, and seeing them accepted by a huge majority of their devices.

      Jim Jones also had good Koolaid compliance.

      > The problem is fragmentation.

      I am trying to explain to you that I believe this is an ecosystem network effects feature, not a problem.

      It is very complex to make this argument by example (easier in the abstract but abstract concepts do not translate well to those with ingrained obfuscating perspectives), so it would be best argued verbally. In the abstract more degrees-of-freedom means more opportunity and fitness. For example, I have already explained that Android fragmentation is an opportunity to provide an OS blockchain monetized ecosystem on top of AOSP, which drives all sorts of massive disruption.

      > In this form, it's the inability of the old phones from actually upgrading to the new Android OS that counts.

      The hysterical security theater aside, that is a feature not a problem. It helps drive the sales of new phones and old phones get handed down to those who otherwise would be able to buy thus increasing market share faster.

      > BTW, no vendor forces upgrades. It's always opt-in.

      Incorrect. Samsung forced the download of the upgrade and keep sticking the damn confirmation dialog in front of my activity enough times until I accidentally clicked install instead of later. And there was no way to stop it. Even if I turn off auto-update, it still downloads the updates when ever I have data on (e.g. connected to WiFi).

      Delete
    3. > Market share is not really the most important aspect of a product segment.

      Those who do not learn the lessons of history are doomed to repeat the same failures.

      Windows vs. Mac.

      Mac fell to single-digit market share and the diversity of vertical market s/w and services on Windows pulled away from Apple’s tightly controlled little perfect world, to the obliteration point where most people could not use a Mac even if they liked it.

      Remember you and Tom hired me to help on the Windows version of Painter X2 (my first task was to fix the printing which Tom was surprised I fixed in the first day on the job) because Windows was too important to ignore, even though you preferred Mac and probably would have preferred to have nothing to do with Windows. And as for ability to be prescient, I cold called Fractal from a magazine ad I saw asking for collaboration or employment and then it went on to become a million units sold in Japan and eventually Corel Painter with all your hard work (not mine as I left). But point being I recognized a trend early and I have done that correctly more than once already in my career.

      Afaics, Steve Jobs came back and cherry picked off affluent markets for high-end laptops based on Unix as Windows was becoming decadent and Linux was rising on the PC but was not polished. So he saw an opportunity to put Apple’s better GUI and hardware integration on what was fairly poor for Linux distros at that time. But he really did not turn Apple around to something world-class significant until the iPod and iPhone. Yet now I claim the iPhone is being disrupted with the commodification paradigm that Windows disrupted the Mac, yet this time the OS is open source commoditized and Google makes their revenues not from the OS but from Internet advertising.

      > Any service they need is provided and the service gets very high marks.

      There is no way that Apple can provide every service needed by the vast majority of the computing markets and maintain a jail that keeps out any serious competition to Apple’s revenues. This is a conflict-of-interest that will disrupt Apple, analogous to Microsoft’s monopolistic conflict-of-interest charging too much for licenses for netbooks and the afaics computing for the billions in the developing world pirated XP and never moved beyond Vista so as to be able to avoid paying licenses. Then mobile further disrupted the PC.

      > It's the whole product that is important. The lifecycle, from creation through use, through upgrades, through recycling.

      I am arguing that in the overall abstract network effects, that is not the most important. Degrees-of-freedom are the most important.

      Top-down control is expedient and can create the illusion of massive success for a period of time for those who ignore the abstract and the tell-tale signs that the abstracted disruption principle of commodification is holding true again.

      Delete
    4. > I cold called Fractal from a magazine ad I saw asking for collaboration or employment

      I screwed that up. I mean it was an ad for Painter, and there was no solicitation for employment. I cold called Fractal because I liked the advertising artwork and the product and asked if there was an opportunity to collaborate. So I was prescient in 1993 on the upcoming mega-success of your venture.

      Apologies for the multiple posts, but there is so much to be discussed.

      Delete
    5. The more abstract you are, the less concrete you are. For a lesson on why disruption rarely succeeds, try the well-balanced writings of Horace Dediu. Blockchain is just a technological cleverness that can easily be surpassed by a new technology. That's why they call it technology.

      Samsung forces upgrades? My God man, why do you continue to use that monstrosity?

      Windows vs. Mac is an interesting thing, since now the Mac is one again on the incline. But why look at desktops and laptops? That's for students and esoteric people like you and me, who code for a living. Consumers are all mobile now, and the Enterprise is quickly following as the cost of doing business and IT service declines with BYOD.

      Computers are simply getting smaller, more integrated into devices. Fewer and fewer laptops will be required. Desktops will become the workstations of the high-end users.

      Shout all you want about Apple service, Apps, Music, and such. It's working and growing at an exhilarating pace.

      Criticize what clearly works all you like. Predict doom and gloom all you want. Or the downfall of western society if you like. But please don't be an esoteric nutter on my site.

      The charging of high exorbitant prices for licenses to Ohs and Apps was disrupted by Apple, BTW.

      And Apple has never been afraid from disrupting itself. Read Dediu. He has this figured out.

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    6. > since now the Mac is once again on the incline

      Presumably because iPhone’s market share is greater than Mac and the cross-integration with the Mac. Thus I presume depends on iPhone market share not cratering.

      > The charging of high exorbitant prices for licenses to Ohs and Apps was disrupted by Apple, BTW.

      I do not know how you rationalize that Apple is not implicitly charging a huge license fee for iOS as bundled with iPhone.

      Afaics, the license fee is ongoing by the 30% transaction fee added to all app purchases and other such ecosystem rent extraction.

      Apple created a platform for huge competition between apps, but afaics this was initiated by the Internet. Apple extended the Internet browser sandboxed apps to downloadable apps that run on a sandbox with more capabilities.

      > Samsung forces upgrades? My God man, why do you continue to use that monstrosity?

      Probably will buy a Sony or Pixel next time around if I can.

      Just to repeat, I can not buy nor support Apple products because their business model is monopolization of ecosystem rents. I think that is fundamentally a flawed model and I intend to do my utmost to help prove it.

      Thanks for the extra motivation with the “nutter” comment. I will come back in a few years and please do not hide if I was correct about everything.

      Delete
    7. > Blockchain is just a technological cleverness that can easily be surpassed by a new technology.

      That is akin to arguing that the Internet did not disrupt almost everything because it can be eventually surpassed.

      Blockchains are a fundamental disruption of monopolistic economic models. No third-party controlled payment system (e.g. Apple Pay), third-party controlled database consistency (e.g. iCloud) can compete. We simply have to solve the scaling and winner-take-all issues of proof-of-work. I claim to have that solution. We will see.

      Delete
  8. > Apple is a tough one, I have a Mac Book Pro, and I much prefer it to a windows laptop, but there is no walled garden for the laptops. I have an Android phone, I think most people can't really tell the difference between Android and iOS, its why Android is selling well - but Apple make all the profits.

    Agreed. But the killer point is that Apple does not take most of the profits from the economy of computing. Just as PC hardware manufacturers do not. Software and services take vast majority of profits, e.g. Paypal. Apple will lose control over the software business revenues because of numerous competitors who are going to dilute what they are able to capture via the Appstore fees. For example, with my idea for Bitnet, they will not be using Apple Pay but rather a blockchain to pay for in app upgrades and upsells. Jeff Bezos will do something similar routing around Google and Apple in terms of revenue sharing of software and services. Ditto China will clone iPhone hardware and either clone iOS and/or target something like my app-browser OS on top of an OS (which will be more secure because it will have better sandbox, e.g. ridiculous that computer programming languages do not use brackets for string delimitation to avoid scripting attacks).

    Apple makes great laptops, but afaik that it not a large enough growth market to sustain their market cap growth.

    ReplyDelete
    Replies
    1. Apple's services division is their fastest growth segment. Probably you missed that.

      Delete
    2. > Apple's services division is their fastest growth segment. Probably you missed that.

      Which will be disrupted by:

      * blockchain payments and ecosystems built on blockchain onboarding of billions of users (yours truly expects to be in on that).

      * collapse of the debt-based global economy accelerating in Europe 2018ish and spreading to the USA a couple years after that.

      * ecosystem innovation which Apple will ban from their ecosystem and deliver apps to Android that iPhone users can not get.

      * ecosystem innovation on hardware which Apple can not match, e.g. higher-rez screens on Android and more disruption likely coming from Jeff Bezos.

      * concomitant with the collapse of the debt-based affluent West, say goodbye the the RIAA. Indie music will take over. Ditto every form of content. Billions of brown people are coming.

      Apple is peaking over the next few years in terms of revenue growth. They already collapsed in marketshare (but not yet to single digits and loss of critical mass, but that is coming). And Android has surpassed iPhone finally in Internet usage.

      Apple will compete vigorously and maximize this peak.

      Delete
    3. For example, have you seen iflix is disrupting Netflix in Asia (especially in the Philippines where I am) by being 1/3 the monthly cost and providing Korean drama as well as some Western content. The filipinos prefer Korean content nor, although my gf still thinks Tom Cruise is worth her attention.

      The future employment of the world demands that content creation and monetization become open to more people and not the RIAA co-opting everything to put the profits into the pockets of the few.

      Delete
    4. Which is why it's great that iTunes enables great new artists to post their own stuff. Honestly, who needs a label when you have the internet?

      Delete
  9. > They believed they could leapfrog Apple by offering the Windows of the smartphone world. Then they would let the smartphone makers slug it out just like Microsoft did in the 90s.

    And they did leapfrog Apple in just a few years in units shipped and diversity of manufacturing/ecosystem. I believe parity (or better?) was also attained on usage such as Internet activity, apps installed, etc.. Also kept pace proportionally with a ~third of Apple’s profits.

    Microsoft’s mistake with Windows wasn’t the commodification of the hardware, but that the OS also becomes commoditized. Microsoft based their revenues on licensing the OS. A commoditized computing ecosystem maximizes the growth in Google’s revenue which is primarily from ads. Google seems to want to diversify their revenues and is dabbling in hardware (competing with Apple’s strengths with its presumably? better integrated Pixel XL smartphone) and services such as their cloud storage/services (competing with Jeff Bezos).

    Apple is going to face competition with fitness advantages from every direction within various market segments, because Google has created a more open ecosystem with more degrees-of-freedom and thus superior network effects. For example, Jeff Bezos’ Android-based devices.

    Afaics, Apple has been able to forestall the inevitable with excellent execution on vertical integration (Apple Pay probably being a cornerstone that I think will eventually be obliterated by blockchain payments but that may take a while yet) and racing into markets where their vertical integration advantages that remain had not yet saturated the market for them, e.g. China. Clever marketing leveraging security and environmentalism theatre (grabbing the actuarially bankrupt debt-driven fat of socialism before it collapses).

    Apple probably needs to begin to transition to a pivot asap because Google is not only disrupting them on market share but also now going to compete on the integration with hardware and software with the Pixel XL. I will comment more specifically on technical comparisons of iPhone and Android in a separate comment (maybe on one of your other blogs).

    But I do not see a way Apple can pivot. It looks like an eventual checkmate but with several more years of fat revenues for Apple yet. Similar to Microsoft they will have more cash than they can spend well, yet unable to find a strategy that can compete far into the future.

    > Their "collect all data on their customer and sell it to anybody" model.

    Apple owns the customer. Google sells the customer. At least with Google we get a move towards commodification of the hardware and OS, which means in the future we the people can take control.

    For example, on iOS an app can not multi-thread (multi-tasking on iOS is a tightly controlled jail which is why we can not run Youtube in the background or download something in background while doing another task on iPhone but we can on Android). While tightly controlling the sandbox has some benefits, for the long-run strategy of network effects it is better to put it into a browser that sits on top off (and is optional) to the OS. In economics, separation-of-concerns is critically important for avoiding Coasian traps (which over the short-run can be highly profitable).

    So this means if I developed an OS on top of an OS (and I could explain why I think this will be so successful but I’ve alluded to the key themes already), I could not make it work well on iPhone with requiring users to jailbreak their iPhones. My son said he used to prefer iPhone until he wanted to run the Gameboy Advance emulator and had to jailbreak the iPhone.

    > First, users prefer simplicity over complexity, security over vulnerability, and good design

    Agreed. But users prefer many different things in addition to those things.

    Innovation will be coming against Apple from every network effects direction that Apple stifled with their walled garden.

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    1. It's clear the walled garden doesn't stifle innovation. Just have a look at the App Store to see what I mean.

      Don't build an OS on top of an OS - that's doomed to failure. Build a new OS. You cannot make your model work on virtually any smartphone out there today. Consumers won't see why it's valuable to rootkit their phones. So many dangers lie down that road. Nothing that's relied on jailbreak has ever succeeded.

      You mistake market dynamics for innovation. The only reason Apple is in their current position is (1) innovation and (2) supply chain genius.

      When a company controlls the whole product, and does it right, the result is something the consumers want. It's a rare thing. This approach will always be better. This is why Google wants to build their own hardware, and Microsoft as well (though they are too little too late and mobile is really eating their lunch).

      All you have to do is watch them and you will see that what Apple does is clearly enviable.

      Your arguments are Byzantine. Simplify your approach, Shelby.

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    2. > The only reason Apple is in their current position is (1) innovation and (2) supply chain genius.

      Brilliant marketing of “we will make you more productive and more cool” (as long as we can take 30% of everything you spend in ʸOUR ecosystem) has nothing to do with it? Backed up by excellent vertical integration thus far.

      Your confidence is predicated on it not being profitable for the free market to duplicate Apple’s advantages on Android at lower rates of rent extraction. How likely is that when Apple is generating far in excess of the cash required to engineer, market, and manufacture its systems?

      > When a company controls the whole product, and does it right, the result is something the consumers want.

      Agreed but is there a model where a company can do that and be very profitable yet not need to jail the phone and otherwise restrict the ecosystem to a monopoly on rents? And is there some black swan disruption that will not be compatible with such a said monopoly?

      I provided my “nutter” projections on potential blackswans and my explanation of Google’s business model (including a different plausible motivation for Pixel not being to monopolize rent extraction). So now we will observe the outcomes.

      > Your arguments are Byzantine.

      I believe many have said that about Steve Jobs’ ideas before they were fully developed and came to market.

      Steve innovated. Kudos. We are arguing now economics models, not about innovation. Unless yu can successfully argue that no one can match Apple’s innovation without copying their monopolization of ecosystem.

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    3. Really I would applaud any company that strives to create great products by making the user experience better for stuff we do every day. It's all about studying the problem, imagining a better way, and implementing it.

      Remember, curation occurs mostly to prevent malware from entering the device. And this does occur in spades on Android, as you know. And every PC out there is obviously loaded with legacy zero day exploits. It takes an IT expert to secure those things.

      This is why the enterprise needs YOU, Shelby. Damn those companies have dilettantes for IT managers, or simply don't understand the scope of the problem.

      Secure them, and do it soon. Write the product that will save their bacon. If you are looking for revenue, then make some using your blockchain expertise.

      Sometime tech has to flex its muscles to fight back the bullies. And you may be one of the few that can accomplish it.

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    4. Mark apologies for the late reply. I am battling a (potentially multi-drug resistant) bacterial infection in my only non-blinded eye. I really need to get out of the Philippines asap (as soon as I complete the basic implementation of my blockchain design so I can raise funds in a private placement), as the public health here is dangerous.

      Thanks again for the kind words, encouragement, and the astute suggestion to also consider the needs of enterprises. And there are likely more than just security benefits for enterprises. Issues such as portability, availability (reliability), and total costs aspects.

      Frankly I waffle a bit on my opinion of Apple, because I do recognize the value in technical excellence and creating products and ecosystem that just works well without hassles. I recognize that the free market needs an Apple. Most all of you (perhaps even all, including Tim Cook and the marketing/spin masters team :) believe you are doing your best to help. Yet it does not change my belief and points about benefits of decentralization and competition. And Apple is an option in a decentralized free market because Apple does not have 80% of the market. And Android OS has 80% share, but the ecosystem is more decentralized. So those are competing means of decentralization.

      Various people in the markets put out all of these hateful words (sometimes I get overzealous also :), some of because of strong beliefs but less useful and less accurate than actions proven in the free market (which is I suppose one of your implicit points in the blog about analysts).

      And I agree with you that we engineers are at our best when we are out there doing our best to address the priority issues we perceive.

      I agree emphatically with your implicit point that customer pull drives technology, not vice version.

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  11. > Their ad revenues became small compared with Apple's hardware revenues.

    As you know, the revenue growth is mostly in payments, cloud storage, music, and app sales, not hardware.

    Afaik, most of these services do not require proprietary hardware integration.

    This opens a huge opportunity to compete by providing better services integration on Android and perhaps even providing services that Apple would not allow on their ecosystem because they bypass Apple’s monopoly.

    Frankly I think the best competition to Apple on Android will not come from Google nor Samsung. I predict it will come instead from a more innovative player in the ecosystem that has a more astute sense of how to create major disruption a la Steve Jobs.

    Take care Mark. Thanks for the discussion.

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  13. Apparently comments with too many links are assumed to be spam, so I copied my comment (about our fundamental disagreement regarding convergence of mobile with large screens employment) into a Gist.

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  14. > Predict doom and gloom all you want. Or the downfall of western society if you like. But please don't be an esoteric nutter on my site.

    Who needs a home when you have an iPhone?

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