I got a phone call on Wednesday this week from AJ Bell, probably better known as Sippdeal, who asked if i’d be willing to be interviewed by the Daily Telegraph following this weeks Chancellor’s Autumn Statement. Nominally because I have a SIPP with them, an ISA and contribute into 3 grandchildren’s ISAs. Rumour was that there was going to be some changes that would affect us, so they’d like to get my views after the content was delivered in Westminster.
A photographer was dispatched from Nailsea (Severn Estuary, close to Bristol) to photograph Jane and I in our Oxfordshire garden. Then with the help of three biscuits, pictures of us both with the two horses that spend a few hours a day in the field by our house. George and Malik duly obliged, taking turns to put their heads over the gate between us. The photographer left us to go find a McDonalds on his way back west, nominally to find a WiFi network to send our pictures back to Telegraph HQ in London.
We no longer watch Breakfast TV nor get a morning paper - bar Tuesday when there’s a good Health section in the otherwise god-awful Paul Dacre rag (I talked Jane into cancelling The Mail every other day, after getting increasing needled by their incessant sensationalism). I normally stay well away from the minutiae of government speeches, but given I was going to be questioned, I listened to the whole speech on Sky, leaving to take Jane off for a doctors appointment around 65 minutes in, close to the end. In the car outside the doctors courtesy of Sky Go on my Nexus 5 phone, I heard Ed Balls response, and then the rather juvenile jibes from George Osborne about Ed Balls progress at piano lessons. Jane returned, we drove home, and I made some notes covering the effects the announcements had on us, personally.
Not a lot as it happens; just disappointment that grandson Charlie, age 9, looks like he has to spend another tax year imprisoned in his Child Trust Fund (no new inflows, so providers have done an exit stage left and the interest rates are very poor). Meanwhile, Ellie age 11 and Ruby nearly two have index trackers in Junior ISAs that are snowballing nicely, with rates better than those found on the high street. But I digress.
I’ve been a big fan of the writing of John Lanchester, who writes fairly long pieces for the London Review of Books, but does so as an exemplar of brilliant journalism. I’d read his book about the financial crisis, and tellingly had done a piece about the financial performance of the current government to date - albeit in January this year. If you want to experience it, set aside some quality reading time and have a gander at http://www.lrb.co.uk/v35/n01/john-lanchester/lets-call-it-failure
We had a phone call from the Doctors asking Jane to go back in for a further consultation at 3:15pm, so I called Jessica at the Telegraph to let her know our time constraints for an interview should one still be required. She did it then and there, so I went through the positives and negatives in our view. We largely agreed that the changes weren’t too material to our own circumstances, so the likelihood is that we’d be quoted at some other point when CTF’s are featured again. But then she asked the killer question; what did you think of the content of the Autumn Statement? It sort of went like this:
I listened to the speech and saw all the graphs, but something is bugging me. All the graphs showed the borrowing requirement dropping aggressively down, but every graph was a future forecast; none had any historical actuals on them. Osborne also cited caveats about the Royal Mail sell off. He cited the proportion of tax income coming from the top x% earners rising as a percentage of the total. He cited some special cases that weren’t subject to his austerity plans (pensioners), but that big decreases in welfare spending were planned. He said he’d seek capital gains from sales of property owned by foreign nationals. He aims for £9Bn extra income by combating tax avoidance, but didn’t mention of transparency of trusts, nor any caps, nor planned reductions, in Common Agricultural Policy payments.
To date, the Governments PSBR has actually been routinely climbing every quarter, trending relentlessly up. He has taken the £28Bn from the Royal Mail into his current account, and booted the matching (or more) liabilities into future government borrowing, and still seen his overdraft not benefit from that big infusion. Borrowing is still up. So, to hit the downward trends as presented, he’d need to press things hard.
Income from Capital Gains from Foreign Nationals selling property here doesn’t feel material to me; many are buying here, but with little need to sell. There will be some money from sale of stakes in Eurostar (which was mentioned), and from RBS and Lloyds (who weren’t). He mentioned a big decrease (think he said 10%) in Welfare payments, but I seem to recall that two thirds of that bill is pensioners - largely immune as one of the special cases. So it feels like there is a big (further) assault on those on benefits or low incomes. This at a time when I thought he should have gotten rid of the cruel benefit reductions based on excess bedrooms, where there is insufficient local stock of smaller housing for the afflicted to move into.
On CAP payments, main beneficiaries of the latter are trusts, landowners and large companies who leave land fallow; not farmers who were supposed to be the recipients of that money. And I was surprised that the promised transparency of trusts, and use of offshore tax havens, was not mentioned in the context of his need to earn another £9Bn of tax that HMRC are not currently collecting.
The journalist then asked how I felt about the future after what i’d heard today. I signed off by saying that all eyes are on the government achieving all the projections given, and the ultimate litmus test is whether they are achievable. She then signed off.
Coverage since has erred on the positives, and on how bad Ed Balls response was. If he’d read the John Lanchester piece before and had been as baffled as I was by the “all projections, no history” graphs used - adding a bit of arithmetic to see who was going to be squeezed - he could have blown a cannon ball through the likely future behaviour of the government.
It looks like an assault on the poor and needy, like swathes of the self employed are in for quite a kicking by HMRC, while wealthy landowners and companies continue to get big (and uncapped - as negotiated by this government to refuse such a thing) payouts from the public purse in EU CAP payments. That includes the trust that owns Iain Duncan-Smith’s main residence (nominally his wife and sons trust) that the Guardian reckons continues to receive 150,000 Euros per year for leaving land around it fallow, as it has received for the last 10 years. And no action as such on Trusts, or on transparency of tax havens.
I do still wonder (in private moments) who owns the house where Margaret Thatcher lived, and if the government will see any capital gains from it now she’s no longer here. I suspect that transparency would open up a few unwanted worms. But hey, we’re all in it together, and in the final analysis, I thought tax income was going to be a bell curve, and the effective tax rates at both ends being low was just a fact of life I could have no influence over - so back to work.
Tonight on my Twitter stream I have one comment from Andrew Neil, saying “Gov Cuts borrowing by £73Bn over the next 5 years but interest bill will rise by over £6Bn because of higher bond yields. Price of £1.57tn debt”. My brain starts to fizz again; that means inflation cuts in, or that our Moody & Poors is about to suffer a big downgrade, or that the true borrowing requirement is bigger than expected. Or bits of all three.
Next up, The New Yorker, with a tweet that says “By George, Britain’s Austerity Experiment Didn’t Work!” http://nyr.kr/IZQCsp
With that, my gut reactions at the time on Autumn seem to be very prescient. Or some form of unlucky coincidence. I just wonder why the Americans can see it unfolding, but our media appears to be running blind. I think we need the next installment from John Lanchester, and to hope those paid to steer the ship can navigate around the rocks amongst this (to me) rather confusing fog of numbers and trends.
In the meantime, I have customers to keep happy from Monday and a lot of work to finish between now and then. Better get to it.
Impulse purchase of the day. I was examining the box at the bottom of the display, when an assistant walked past and confirmed it was the last one of the stock that arrived this morning. Being promoted heavily in store.
Appears to be very competent, based on the shortest of plays in the store and looking at all the literature. The box opened up just like that of the Chromebook Pixel. The cover folds back like an iPad Smart Cover to sit on the sofa arm.
Left it on charge for 3 hours, and will have a more detailed look later, including seeing if it works okay with our Chromecast. Stay tuned!
Having heard a comment that none of the Android folks have announcement events like Apple, I decided to watch the last Xiaomi event in China - the first where Hugo Barra was introduced. It’s 65 minutes long, in Chinese but has English subtitles.
Some takeaways were:
- they appear to use KeyNote to do the presentations
- each video is preceded by a blank slide with “video” on it (very Apple)
- focus demographic is 20-30 year old “fans”
- have a very iCloud like photo service, but downloads rather than syncs
- another Dropbox like service
- 27 updates to their core service in the last 5 months
- Mi 3 phone has high spec, 5” 1080p screen, 13 megapixel camera, multiple colours
- optional case that doubles as desk stand
- Chinese seem to like impressive benchmark specs
- have a version of auto-awesome that distinguishes male/female in pics
- different auto beauty retouches/enhancements based on gender
- pushes “honesty” in pricing
- Mi3 handset about 1/3 of 5C price here
- also sell a 47” Android based Smart TV
- very impressive!
- colour, thin surround (about 6 variants, just like the phone)
- uses LG and Samsung screens, own electronics
- says it’s likely to be owners first TV purchase. Priced at around £350
Finally shipped from Amazon. It is available in the USA only, so used my Amazon.com account to ship it to my cousin in Tucson, Arizona. Fascinating to watch the delivery zig-zagging across the US. Started in Whitestown Indiana, then Indianapolis, Louisville Kentucky, Alberquerque New Mexico, Phoenix Arizona and then down to Tucson. Now on it’s final redirection leg across the Atlantic.
Netflix, YouTube and Chrome support already in place. Some of my Podcast sources are adding support. Hopefully, BBC iPlayer, ITV Player, 4OD, Demand 5 and SkyGo to follow.
Another hack I’ve seen is an app that spots video playing on your handset or tablet, and if it sees a Chromecast equipped TV in range, tells you it’s available. One button press on the notifications list duly throws the stream into the TV, controlled by your device.
On iOS, the notifications stream is much less sophisticated and the apps run much more like islands. That said, the major integration win for Apple is in their Passbook - where over 900 vendors allow you to store vouchers, loyalty card balances and plane boarding passes. I most often pay for my Starbucks consumption that way. The only other place I try to scan codes is Tesco, but their readers appear unable to read iPhone screens at this stage.
Today, Argos sent me a questionnaire, offering a chance to win one of two Samsung tablets if I could spend an estimated 25 minutes telling them about my buying habits; I passed. Google’s various apps know enough. So does Amazon. Apple do know some of my music tastes and podcast consumption. Firefox - none.
I’m now wondering if the Notifications systems - built on data slurped automatically in my service - is the real economic moat around platforms. If so, it’ll take some major effort for Firefox OS to provide a similar experience.
Lenovo appear to have market leadership worldwide in terms of Windows PC shipments, but now sell more Android devices than they do PCs. That said, 98% of them in China today. Outside of India, it looks to be a major distribution effort across many countries to reach equivalent volumes of potential customers.
There is a case in recent history of a large high tech company that did an identically structured pivot attempt, and demonstrates one end game of such a “one company, one egg, one basket” strategy. I fear that this latest restructure puts Microsoft in grave danger of following the same example.
I used to work for DEC, where 1957-1982 there were many customer industry focused product lines. Things like Engineering Systems Group, Graphic Arts (that’s Newspapers/Publishing), MDC (Manufacturing, Distribution & Control), Education, Commercial OEM, Technical OEM, Laboratory Data Products, etc. Some 130 of them, all pulling on the output of Central Engineering and Manufacturing, then applying their industry knowledge to ruthlessly deliver excellent value to customers in their target industries. Each product line paid for the sales presence they needed down to office level worldwide.
By 1982, there were some concerns in the Exec Committee that there was too much “who knows who” horse trading of capacity in manufacturing, so they elected to move to the same sort of model that Microsoft has just moved to. That of “one company, one strategy, one architecture” model, orientated around the strategic core asset - VAX (in the case of Microsoft this time around, it is Windows).
Aside from a financial bath in the very first quarter in 1983, where all the cracks in the processes that the Product line structure papered over got exposed, the company really mushroomed in sales performance.
Unfortunately by 1987, some specific members of the Exec Committee started citing a date when they’d outgrow IBM in size (who were 7x DECs size at the time). DEC missed virtually every strategic product transition at the low end. Management hyped up attacking the high end with very expensive ECL chips, while the labs in Hudson had $300 CMOS VAX chips ready to go. The very impressive Prism/Mica chips (30x VAX 11/780) taped out. But an exec committee that kept on flip-flopping between 32 bit and 64 bit edicts into engineering, then losing patience with the delays they’d caused - and killing the very projects that were the foundation of the next generation CPU technology. Key staff left.
It took a further 5 years to get Prism/Mica out - adding a couple of instructions, fixing on a 64 bit address space, and calling it Alpha AXP. By then, the rot had set in. That Silicon was the fastest CPU in the industry by nearly 2x for getting on 10 years, but the company above it faltered.
Ken Olsen (co-founder) got deposed, and Bob Palmer (new CEO) elected to move back to a different divisional model.
So, he had PC, Storage, Components & Peripherals to play in the now horizontally integrated markets, and a few vertical industry ones (Financial Services, Consumer Process Manufacturing, Discrete Manufacturing & Defence, Healthcare, Telco+Media+Transport). However, he also got the salesforce commissioned (something against the traditions of the company), and introduced a “two quarters missed financials and you’re out” ethos in the divisional heads.
These final moves were Digitals death knell. You either had a lottery on who didn’t get fired, handing extra responsibility to those leaders who happened to string together two quarters of good sales (largely by seasonal industry trends rather than own performance). Or the panic stricken ones would stuff their distribution channels with stock, hoping that would delay the inevitable for at least one more quarter.
Following a few Bob Palmer legal stunts with Intel and with Microsoft, the company was sold to Compaq, having accumulated losses in Bob Palmers 5 year reign equivalent to the total profits of the company in 35 years under Olsen.
Given the above, I think Microsoft need to be extra vigilant not to go the same way.
The new organisation structure will give Microsoft every opportunity to follow in DECs footsteps if they are not extra careful. The key litmus test will come when the company needs to move from Windows to whatever platform needs to come next, and I currently see no seeds planted of what that will be.
Meanwhile, the other side of my brain says that centrally planned monoliths have an over dependency on the cleverness at the centre, while the chaos that is capitalism distributes the risk. A network will always defeat a hierachy. Just ask Gorbachev.
Good enough for Linus Torvalds, so good enough for me
Having complained about how laptops stopped evolving several years ago, Linus has gone quiet on the subject since he got his ChromeBook Pixel. With a touch screen, better than retina display, 3:2 aspect ratio and cold start to ready in less than 4 seconds, the only complaint I’ve ever heard is its price: £1,049 retail in the UK (including VAT). That’s £883.33 including delivery before tax.
A steal. Mine arrives tomorrow. Side effect is that it’ll keep my Google Apps for Business work well clear of the rest of the otherwise mixed jumble of personal gmail and apps accounts.
Enterprise Hardware/Software and The Hall of Marbles
Every time I hear a vendor utter words such as “private cloud” or “hybrid cloud”, I see visions of brakes being applied. Usually by vendors or IT departments, who sell (or buy) the concept that they can evolve gradually into the future as prices plummet. I think Simon Wardley describes the reality very eloquently in one of his blog posts, relating the story of “The Hall of Marbles”:
It’s the exponential growth part that catches most past suppliers out and that’s due to this expectation of gradual change due to the previous competitive stage (i.e. product vs product).
To explain this, I’ll use an analogy from a good friend of mine, Tony Fish.
Consider a big hall that can contain a million marbles. If we start with one marble and double the number of marbles each second, then the entire hall will be filled in 20 seconds. At 19 seconds, the hall will be half full. At 15 seconds only 3% of the hall, a small corner will be full.
Despite 15 seconds having passed, only a small corner of the hall is full and we could be forgiven for thinking we have plenty more time to go, certainly vastly more than the fifteen seconds it has taken to fill the small corner. We haven’t. We’ve got five seconds.
Hence for a hardware manufacturer who has sold computer products and experienced gradual change for thirty years, it is understandable how they might consider this change to utility services will also happen slowly. They will have huge inertia to the change because of past success, they may view it as just an economic blip due to a recession and their customers will often try to reinforce the past asking for more “enterprise” like services.
Worst of all, they will believe they have time to transition, to help customers gradually change, to spend the years building and planning new services and to migrate the organization over to the new models.
Alas, Amazon alone is estimated at $2bn in cloud revenue for 2012 and predicted for almost $4bn in 2013. If that growth rate continues then by 2016 they will be in excess of $30 billion in revenue. They also have rapidly growing competitors such as Google.
The cold hard reality that many existing suppliers probably don’t comprehend is that the battle will be over in three to four years and for many the time to act has already passed. Like the rapid change in climate temperature in Greenland, our past experience of change does not necessarily represent the future.
In industry, we have a long history of such rapid cycles of change and inertia is key to this. These cycles we call “revolutions” as in industrial, mechanical and the revolution of electricity. During these times, change is rapid not gradual and disruption is widespread.
We are in a time when mobile, the cloud, a deluge of data and collaboration tools - based on open source software - are brewing a perfect storm. Google, Amazon, 10gen and GitHub will, I’m sure, be there when the dust settles. Who else?
Neelie Kroes: why isn’t Westminster blessed with Politicians like her?
Neelie Kroes (@NeelieKroesEU) is Vice President of the European Commission responsible for the European Digital Agenda. She announced some changes to enforce Net Neutrality in the EC today.
Kroes said that some services such as Skype and WhatsApp are being deliberately degraded or blocked outright by some ISP “simply to avoid the competition”.
“In my view, such ideas are on their way out. Most consumers see the richness and vibrancy of the full, unlimited internet and wouldn’t want anything less,” she said
Speaking in Brussels today, she added: “Equally, it’s clear to me that many Europeans expect protection against such commercial tactics. And that is exactly the EU safeguard we will be providing. A safeguard for every European, on every device, on every network: a guarantee of access to the full and open internet, without any blocking or throttling of competing services.”