A prototype model of the E7 is on a nine-city U.S. tour, as Carbon Motors executives market the car to law enforcement officials and municipal fleet managers.

Unlike conventional police cruisers, which are retrofitted consumer vehicles such as the Ford Crown Victoria, the E7 is the first car designed and built specifically for law enforcement.

The article goes onto list specific design features planned with law enforcement in mind. My favorite feature? This:

The rear passenger compartment is completely sealed off from the cockpit. Molded plastic seats in back allow for easy cleaning and prevent prisoners from hiding contraband.

“Easy cleaning,” you ask? Have you ever seen what a drunk person can do to the backseat of a car?

So what’s promising about this? Carbon Motors is a small startup company in Atlanta pushing a niche car that is street-ready and designed for a highly specific audience. When was the last time we saw a new auto company form outside of the realm of the major manufacturing houses and build an entirely new brand of car? Probably not since the early 1960s. As Seth Godin pointed out in his recent article about the plight of the Detroit auto industry, there were upwards of 1000 car companies 90 years ago, and the result of having thousands of different, independent auto companies was increased innovation.

The Big Three, Toyota, Honda, and all of the other major auto companies were not singularly responsible for all of the automotive innovation of the past 100 years. In fact, innovation was largely driven by the diversity of thought and leadership during the early years of the auto industry. To quote Wikipedia, the same section used in Seth Godin’s article:

Throughout this era, development of automotive technology was rapid, due in part to a huge number (hundreds) of small manufacturers all competing to gain the world’s attention. Key developments included electric ignition (by Robert Bosch, 1903), independent suspension, and four-wheel brakes (by the Arrol-Johnston Company of Scotland in 1909).^[16] Leaf springs were widely used for suspension, though many other systems were still in use, with angle steel taking over from armored wood as the frame material of choice. Transmissions and throttle controls were widely adopted, allowing a variety of cruising speeds, though vehicles generally still had discrete speed settings rather than the infinitely variable system familiar in cars of later eras.

Between 1907 and 1912, the high-wheel motor buggy (resembling the horse buggy of before 1900) was in its heyday, with over seventy-five makers including Holsman (Chicago), IHC (Chicago), and Sears (which sold via catalog); the high-wheeler would be killed by the Model T.

The consolidation of the thousands of small auto companies into a handful of large, powerful auto companies was a drastic change in that it allowed auto manufacturers to finally leverage economies of scale for the first time. By having a larger pool of resources, both human and non-human, these major auto companies were able to develop more efficient production methods that allowed them to produce cars cheaply while remaining cost-competitive.

However, the upwards-sustaining innovative processes of these major auto manufacturers, the process that lead to small incremental improvements and not game-changing improvements, are what have been holding these companies back. The processes developed by the visionaries who consolidated all of those small companies into the Big Three and other large companies have not been changed while costs have risen and demand has fallen, largely due to inept leadership.

Companies like Carbon Motors are intriguing to me, because it shows innovative promise in an industry long-thought to lack it. Folks like those at Carbon Motors are a glimmer of hope, because they are the leaders who could reinvent the auto industry should the U.S. Government do the right thing and allow the Big Three to fail. Perhaps the new auto industry won’t consist of large, bureaucratic organizations who design cookie-cutter cars to please every possible market; perhaps we will see competitive landscape of the auto industry resemble its old former self, where thousands of smaller, more nimble companies competed fiercely to produce cars designed for very specific people with very specific tastes.

Only time will tell, but let’s hope that small upstarts like Carbon Motors and others like them are ready and willing to serve the former customers of the Big Three should they rightfully fail.

New York Times Op-Ed: An Economy You Can Bank On by Casey Mulligan, University of Chicago Economics Professor

Look, folks, I’m in the same boat as many of you; all of my savings are tied up in Washington Mutual and my fledging retirement fund is invested mostly in the stock market (I chose an aggressive growth portfolio.) Do you think I’m not concerned? Of course I am - but I’m not shrieking like a moron and demanding more Government control of private business in order to prevent…. more Government control of private business?

Let’s distill some sense out of this hysteria.

The AIG and Bear Stearns Bailouts: Total Steals for the Federal Reserve Bank

Let’s talk about AIG first, since that is on the forefront of minds of Americans this morning. AIG is the world’s largest insurer and in exchange for 79.9% of their equity they received $85 billion in funding from the U.S. Federal Reserve Bank. Here are the point-by-point facts worth noting, taken from this morning’s Wall Street Journal:

• The $85b loan from the Fed to AIG has a two-year duration on it with an 8.5% interest rate - this means that the Fed assumes that there is a reasonable probability that AIG will bounce back within that timeframe.
• The fact remains that AIG is a fundamentally solvent company with $1 trillion in assets and $77.9 billion in surplus capital, but the problem is that a large amount of its cash are tied up in non-liquid assets which cannot be tapped for running the day-to-day operations of the company and that is why AIG is borrowing against those assets from the Fed and elsewhere.
• The loans made to AIG by the Fed and other lenders are secured by the aforementioned $1 trillion dollars in assets.
• AIG’s insurance business is still profitable.
• AIG is not going to be run by a government bureaucracy, which is what everyone seems to think. Since the Fed has taken over the vast majority of ownership in AIG they have since fired the incumbent CEO and replaced him with Edward Liddy, the former head insurer of the Allstate Corporation. This is about as far as the Fed is going to go in terms of getting directly involved with the management of the company - they fired the bozo who put AIG in this position in the first place and replaced him with an outsider who happens to be a successful insurer for another firm. Sounds just like what a private bank would do if they took over a business.

Overall, it looks like this might be a total steal for the Federal Reserve Bank. This time last year AIG direct traded at $70 a share; the Federal Reserve just acquired a 79.9% stake in the company for just around $3 a share. The Federal Reserve just purchased an 80% share of $1 trillion in assets for $85 billion - that my friends, is a steal.

The American tax payer is going to see a net benefit, not a loss, for this bail out. Look at how well the Chrysler bailout of the late 1970s turned out for the Fed: people said the exact same thing then that they’re saying about the AIG bailout, that it was a “return to feudalism.” How did it turn out? Well, read this segment from the New York Times for your answer:

You can draw a clear line from the Chrysler bailout to the recent attempts to steady Wall Street. Back then, Washington insisted on a few pounds of flesh, like a wage freeze for Chrysler workers, in exchange for aid. Mr. Paulson has done something similar by insisting that shareholders of the Wall Street firms benefit little from any bailout.

In 1979, the government structured the Chrysler deal so that taxpayers might earn a profit from it (which they did). This year, the Fed effectively purchased securities from Bear Stearns that it hopes to sell for a gain when the financial markets calm down. While it’s way too early to know if the strategy will succeed as well as it did three decades ago, it’s certainly conceivable.

The NYT goes on to insist that perhaps the Chrysler bailout may not have been that successful because it didn’t stop the U.S. Auto Industry from getting steam rolled by the Japanese beginning in the early 80s. I guess the argument that they’re trying to make would have been that if Chrysler collapsed then there would have been this magical alternative history where Ford and GM would have begun producing hybrids (I’m being sarcastic) beginning back in the early 1980s. Sorry, NYT, but I’ll stick with what actually happened (win-win for the Fed and Chrysler) versus a speculative theory that can’t be tested.

The point I’m trying to make this this: we will see a net profit from the Bear Stearns and AIG bailouts, just like how we did from the Chrysler bail out. The Fed drove a hard bargain and acquired over 1 trillion dollars worth of assets at rate of pennies on the dollar.

“Let them Fail” is a Great Idea, if you Don’t Need a Line of Credit over Next Five Years

HotAir ran an idiotic piece this morning which amounted to “we should just let every mismanaged financial institution fail.” While I’m glad that Lehman wasn’t bailed out (costs outweighed the benefits,) I’m also happy that Bank of America has been snatching up failing institutions for pennies on the dollar and that the Fed bailed out AIG and Bear Stearns. As I demonstrated in the first segment of this piece, the hysteria that has overcome the vast majority of the market has resulted in having a number of major institutions valued well below the reality. AIG has over $1 trillion in assets, liquid and nonliquid, but their market cap is hovering around $6.1 billion - AIG’s liability is large (hence the bailout,) but it’s certainly not greater than $1 trillion (good solvency, poor liquidity.)

When I hear presidential candidates on both sides of the aisle crying “oh no, not another bail out - we should have let them fail” it makes me think that they lack the vision to lead this country, let alone objectively analyze a complex financial market. So what would happen if AIG, Fannie Mae, Freddie Mac, and Bear Stearns all failed? Who knows, but I’ll tell you what hasn’t happened yet: credit hasn’t totally dried up. Sure, it’s contracted as a result of doubts cast over the entire lending industry, but it’s still available for people who need it and have demonstrated good credit practices in the past.

The fact that the government has stepped in and stopped some of these giants from falling helps nip some of this hysteria in the bud - we haven’t seen any more bank runs since the IndyMac disaster (thank you, Senator Schumer, for causing that.) So what would happen if we just let these major financial institutions fail? In some cases the result is just a gut-punch to the stock market, as we saw with Lehman, but when major mortgage houses start going under without any help from the Fed then we can see bank runs nationwide, and that would be a real crisis, like the kind we saw in the great depression.

The lesson here is that the Fed isn’t bailing out these companies for the sake of preserving these mismanaged organizations. They’re doing it to stop the development of a greater widespread panic which can result in healthy financial institutions being seriously harmed, and if that were to happen the entire credit industry would be set back for years upon years. We are a society that lives on credit - imagine a world where confidence in all credit institutions has been reduced to zero and no one wants to lend for anything; no credit cards, no car loans, no student loans, no nothing. Try to tell me that spending a few hundred billion now to prevent that catastrophe isn’t worth it.

This entire crisis on Wall Street is the result of the housing bubble; what the Fed is trying to do now is to slowly deflate the bubble, whereas the idiots who advocate the “let all of them fail” philosophy would rather have the bubble burst in one go over our heads. They get upset because they see the direct cost of the Fed’s bailouts written in the headlines of every major newspaper, so they assume that there must be no cost for the alternatives, right? As I’ve pointed out - that mentality is DEAD WRONG. Every choice presents costs, and the Fed has calculated that the cost of having these institutions fail is too great for our financial system to bear. The pundits who are against every bailout regardless of the situation are not thinking like economists, who weigh costs with risks - they’re thinking like politicians, who have the exact same cognitive outcome regardless of costs or risks.

How is Regulation Going to Solve the Problem? Isn’t the same Government Responsible who Handled Katrina so Well?

Back to the title of the article: regulation - how is it going to solve the problem? We already have regulatory oversight on public companies in order to prevent them from cooking the books, so do we need some sort of regulation for preventing companies from making bad decisions? Because that’s what caused this problem in the first place - a bunch of investors deviated from their long term objectives in pursuit of a bubble that couldn’t possible last and now they’re paying for it. Am I pleased that the mistakes of these investors are responsible for swiftly deflating the value of my fledgling retirement fund? Of course not, but do I think that having the U.S. Government step in and regulate all possible investment decisions is a good idea? Hell no.

First, let me address the fact that Fannie Mae and Freddie Mac were created by the U.S. Congress and encouraged to help lower income Americans purchase homes by offering sub-prime mortgages. Government is as much to blame for the current financial crisis as the lemming-like investors are on Wall Street.

Second, there seems to be this mentality among the majority of people that individuals should come running to the Government at the first sign of trouble; so a bunch of banks end up getting screwed because they did what they were encouraged to do by said Government - this is clearly a complete and total failure of the free market system therefore we must abolish it and have mother Government take care of everything for us. Sounds a bit drastic to me; this government can’t even keep a handful of levees up to code in a hurricane-ridden area, let alone manage the most efficient market on Earth better than it already is.

Third, these companies are not getting handouts - they’re getting high interest loans and are paying a hefty price for them in the form of equity. So when I read articles where authors whine about “how come the citizens aren’t getting handouts?” I want to answer “it’s because the average person couldn’t afford to repay a loan with 8.5% interest in two years without winning the lottery.”

The fact is that people want to point the finger at Wall Street and make it out to be some abnormal failure that merits a total overhaul of the entire system. Get a grip, people - the problem was caused by human error, a liability that, I assure you, can be found outside of free market economies. To say that we can prevent all human errors with the steady hand of Government is a ludicrous proposition, given that the Government is arguably more error prone than any free market organization. Putting the Wall Street into the hands of Government and calling for more regulation isn’t the answer - it’s an intellectually vacant copout.

So what’s the answer to the current financial crisis? The answer is to learn that the assumptions behind major investment decisions need to be challenged in order to avoid pitfalls like the sub-prime mortgage crisis - this entire quagmire resulted from a flawed assumption (that the average retail price of a home would remain above $250k) that was factored into a computer model. That assumption was never challenged and now we’re paying the price. Regulation is not a method to prevent bad decisions, it’s an excuse for politicians who are too timid to accept the blame for helping create the sub-prime mortgage monster.

As it turns out, the costs of the 3G iPhone are actually higher than the service plan & hardware of the original iPhone. I personally was planning on buying one (despite how much I hate the Apple fan boy culture) until I read article after article about the pricing discrepancies. I know there were plenty of other people who felt the same way I did.

Watching the 3G iPhone buzz erode from early June when some of the deceptive pricing bubbled to the surface of the blogosphere to disastrous iPhone App Store debacle was like witnessing a train wreck in slow motion.

Apple’s marketing campaign had all of the potential to be just as big of a blockbuster as the original  iPhone launch; look at what we consumers were promised:

• Support for high speed cell networks (3G)
• Support for enterprise business applications (Exchange)
• GPS
• And an application store.

But yet the 3G campaign ended up being a horrible comedy of errors when launch day arrived. What the hell happened?

• Pricing disaster - Protip for AT&T and Apple: if it’s easier for me to calculate all of my living expenses for two years than it is for me to figure out how much your phone + service will cost me over the same period of time, you’re doing it wrong. The data plan doesn’t cover text messages, the syncing features cost extra, existing iPhone customers can’t figure out if they’re going to have to pay the full price or $199, and the beat goes on. It’s easy to figure out who screwed this one up:  Apple let AT&T dictate the pricing in the usual giant telecom conglomerate fashion which is to say “vague and unintelligible.” This pricing fiasco deters people not because they’re unable to pay the costs of the phone, but because the apparent disorganization of the pricing makes potential customers insecure. I can’t fit a new wireless service plan into my budget if I can’t figure out how much it costs.
• Apple killed the goose that laid the golden eggs - Most of the people lined up around the street to buy the damn phone were the same fanboys who threw down $599 for the original iPhone, many of them already pissed off about AT&T/Apple’s deceptive pricing. Apple made it abundantly clear that it does not give a shit about these people; let’s review:
  • Apple dropped the price of the original iPhone by $199 not long after the first release, and their “store credit” apology was not well-received even by many hard-core Apple acolytes.
  • The new 3G iPhone pricing is revealed, and guess what? New AT&T/iPhone customers get a better deal than the same folks who already got screwed over once before by the price drop.

  The same hard-core user base who kept Apple alive during the dark days of the mid-late 90s are the same ones who’ve gotten slapped in the face with every update since the iPhone release, and you know what? I think that this time Apple actually killed the goose that laid the golden eggs, and for what? 1 million units sold on one day? What about a lifetime of sales from loyal Apple customers? If Apple starts an annual product cycle for its line of phones then I don’t think we’re going to see as many people line up so enthusiastically next time. They’re not going to drop Apple like a bad habit, but I don’t think those same people will be so quick to shell out money for a new unit every year.

• Apple’s “Bluescreen” moment, the App Store Activation Cock-up - Face it: the opening day activation process for the iPhone was an unmitigated disaster. This is something that we’ve come to expect from Microsoft, not Apple! What happened? Poor scalability design, which is insane given that Apple knew the exact number of maximum activations, which is to say every iPhone old and new. This epic failure is to Apple as what Bill Gates’ infamous “bluescreen moment” is to Microsoft.

Maybe if AT&T figures out its pricing I’ll revisit the possibility of buying a 3G iPhone, but I have to admit, when my service plan with Verizon expires in December I am awfully tempted to buy another Treo.

On that note, what are all of you buying? iPhones? Gphones perhaps?

Let’s just face it - early adopters of any technology are going to be technical people themselves; they’re going to be engineers, enthusiasts, hobbyists, or something else. Early adopters are a blessing for small companies, like the one I work for, because they are willing to take the risk of trying out your product without a lot of prodding. On top of that, if early adopters like your product, they’re generally very vocal about it and provide invaluable word-of-mouth press.

Early adopters are also very vocal when it comes to product feedback; they are never short on suggestions to help you make your product “better.”

Conventional wisdom from TechCrunch, Scoble, or any other big name startup profiler is to treat your early adopters like enlightened sages, to understand that the synergy of their various experiences, their passions, and your company will take your technology across Geoffrey Moore’s chasm.

I don’t question the notion that a technology needs early adopters in order to eventually cross the chasm, that the manufacturer needs the evangelism of passionate early adopters to help get just enough momentum to start attracting mainstream consumers.

But there is one major issue that I take with the sacred value of early adopters: the recommendations of early adopters for your product’s technology can almost certainly prevent you from crossing the chasm, and I’ll explain why.

An Anecdote

Over at the blog that I run for my employer, I published a screencast which demonstrated an important feature in our software. The subject matter of the screencast was crucial; it demonstrated a feature unique to our product that every single one of our users needs to know. However, the feature itself is simple to the point of being trivial - it’s a single button that eliminates what used to be a ton of work. In short, I published a screencast that showed our customers how to click on one button; seems pretty obvious, but what’s the #1 rule of UI design? Nothing is obvious enough.

Anyway, the screencast was incredibly well received; by the numbers it was the most popular screencast that we’ve ever published. However, it was also the first screencast to receive a strikingly negative comment from one of our own customers.

This customer, someone with obvious technological expertise, was angry that we’d waste his time trying to show him how to do something so simple and, to him, unimportant. “Why don’t you show me how to do something tricky with your software, like how all of the Excel and PowerPoint tutorials do!?”

I explained my reasoning behind producing such a trivial screencast, which is that many of our users don’t know about the feature (it can be easy to miss) and they find that spending one minute learning how to use it and how it works is well worth it. What’s “painfully obvious” to many early adopters can be valuable to many mainstream users.

Later I had a discussion with the User Experience Manager for our product about the fine line that we have to walk on; this “fine line” boils down to balancing two equally important concerns:

• Do we keep the product simple for first time users and infrequent users (mainstream users)
• or do we allow for more features, more customization, and more content for advanced users (early adopters) at the expense of the a steeper learning curve for mainstream users?

The answer to this question is the life or death of the company I work for.

A Reality Check - Your Most Valuable Customers Might Be the Least Vocal

During my conversation with the User Experience Manager he mentioned a passage from Bill Buxton’s Sketching User Experiences, which said the following:

Your most vocal users will come from the two fringes of the technical expertise curve: your expert users will complain that they don’t have enough control over their experience and that they want more fine-grain control over what they can and cannot do; at the exact same time, your users with the least technical expertise will complain that your program is too hard to use!

So which is it? You have tons of people telling you that your product is too simplistic and too complicated at the same time! Who’s right and who’s wrong?

The answer? Both of them may have good suggestions from either end of the adoption spectrum, but often times both groups are wrong.

How Early Adopters Can Steer Companies in the Wrong Direction

Laggards aren’t pursued heavily by most tech companies, JitterBug being a notable exception, simply because the cost of marketing a new technology to them outweighs the benefit. A laggard also costs more to support and they are always the first to complain that “your product is too hard to use.” Generally speaking, laggards are considered the “most expensive” kind of customer to acquire.

Early adopters, on the other hand, are considered to be “ideal” target customers:

• they are intuitive and can solve most tech problems themselves,
• they are instrumental in building communities around products and technology,
• they spread the word to other potential customers, and
• they all have ideas to help make your product better.

However, the question that needs to be asked more often is: early adopters want to make your product better for whom?

Technical people, like early adopters, will rarely push a product towards simplicity; they will push your product towards open standards, towards interoperability, towards new features, towards increased efficiency, but hardly ever do they push it towards increased usability for the masses.

Oh, don’t worry, all of the input from your early adopters will make your product more “usable,” for other geeks maybe, but how does it affect the other customers you need to cross the chasm, the early and late majority?

Truthfully, the input of many early adopters can actually prevent your products from being adopted by the majority and can drive your company to invest time and money into the wrong features.

Here’s how early adopters can lead companies astray:

• They push towards over-engineering - Early adopters get hung up on the details, sometimes to a fault. Issues like execution speed, file size, memory usage, and so forth are issues that come to mind; if your product takes forever to run or it has problems with runaway resource consumption then yes, your early adopters are right to tell you that you need to improve your technology in those areas. However, if you have a relatively stable product with speeds that are more than reasonable in the eyes of average consumers, your early adopters will still tell you that you need to spend more time optimizing this and that in order to use less memory, disk space, CPU power, bandwidth, etc… At some point it becomes compulsive engineering for the sake of engineering aesthetics, not engineering for the sake of increasing value for the average user.
• They push towards feature bloat - Microsoft haters constantly whine about the “feature bloat” of Microsoft Office, which is ironic given that they’re the same people who are responsible for feature bloat in the first place. They want new features for the sake of automating complicated, yet obscure tasks, features that will only be used by a tiny fraction of the entire user base. These features have to go somewhere in the interface and each additional feature adds some increase in the overall complexity of your program.
• They push towards increased control - The biggest problem with some of the product suggestions by early adopters is that many of them ask for increased user control over aspects of a technology; product developers put barriers  in place intentionally to prevent average users from digging themselves into holes. For instance, you’d want to lock the toolbars on a piece of software by default just to prevent users from accidentally trashing their interface and being unable to restore it. Many developers refer to this disdainfully as “baby-proofing” software, but it’s a necessary evil. Your early adopters are often the same sort of people who decry the act of “baby-proofing” software; they want more control and they want more access. However, each increase in control that you hand over to the users also increases the total number of pits that the average user can fall into. Increased control can be good for technical users, but it can be just another empirical example of Murphy’s Law for the majority of your technology’s adopters.

The Majority of Your Users are Silent

The point I’ve been alluding to is the fact that the majority of your product’s adopters is the silent majority; user feedback is always a blessing when it comes to product design, but never forget the needs of your core users. The users who scream the loudest usually aren’t representative of the majority. Early adopters are great, but their suggestions might actually make your product less likely to be adopted; after all, it’s that silent majority who has the most say when it comes to crossing that chasm.

This morning I came across Seth Godin’s blog entry entitled “Random thoughts about the Kindle” and was a bit disparaged when I read:

“[The Kindle's] for women and women are buying it. The bestseller list of Kindle titles is much less tech-heavy than Amazon’s list was in the early days of the web. An Oprah book is #1. And the colors and feel of the machine don’t feel like the current uber-geek tech dream device.”

Naturally I’m not going to let some damn marketer insult my manliness and my father’s manliness! How dare he? HOW DARE HE?!

In all seriousness though, the point I take issue with is this:

The Kindle does a fine job of being a book reader, and a horrible job of actually improving the act of reading a book. This is a surprising design choice, I think, and a mistake. Here are three simple examples of how non-fiction books on the Kindle could be better, not just cheaper and thinner:

–Let me see the best parts of the book as highlighted by thousands of other readers.
–Let me see notes in the margin as voted up, Digg-style, by thousands of other readers.
–Let me interact with hyperlinks and smart connections not just within the book but across books

I can think of ten others, and so can you. Instead of making this a dead end (like a book) they could have made it a connector (like the web).

Seth is essentially arguing to make the Kindle an interactive book - make it a social connector where you can interact with other readers and see what they’ve thought about the author’s work. While this sounds well and good there are some, in my opinion, cultural, technological, and feasibility issues that make socializing the Kindle a poor decision.

Reading the Book + Reading Thoughts of Other Readers = Polluted Reading Experience

Book clubs and English classes are existing social mechanisms for discussing books - you read a section of a book or the entire book and then you get together and talk about it among your peers. You can share ideas on what the author’s message was, what you liked, didn’t like, and so forth. What’s the difference between those mechanisms and having a widget inside an eBook that keeps you up to date on what your peers think of any particular section of the book?

The difference is that you don’t have your entire book club looking over your shoulder and shouting out their thoughts in real-time as you try to read the damn book!

I can see where margin notes would be helpful, like in a technical book for instance, but if you’re trying to read a novel, the sort of book that demands your full attention in order to appreciate it, then what would happen if you had additional “social” information on every page of the text? Your reading experience would be ruined.

A book club or an English class is an effective means of engaging other readers about a book because you’ve already had a chance to digest the work by the time you end up discussing it. Discussing the book as you’re reading it simply adds noise to the experience and ultimately cheapens it.

Social Widgets Require Frequent Screen Updates + Kindle’s LCD Doesn’t Use Power Unless It’s Updating the Screen = Bye Bye Battery Longevity

The Kindle uses a special power-saving LCD technology which doesn’t require any (or much) electricity to display an image on its screen; The Kindle only needs juice to change the image on the screen. What this means is that a Kindle doesn’t have to waste energy displaying a single page from a book on the reading screen at any given time thus the battery can last for a very, very long time.

This is also why the Kindle has a separate LCD for the scroll bar.

Social information updates constantly and if that information is to be displayed on Kindle then consumers won’t get to enjoy the extraordinary longevity of Kindle’s battery.

If we were to force consumers to make a choice between

• Getting to have access to all of your books for days and days of use without having to recharge the battery or
• Getting to read comments from idiots who don’t “get” Into the Wild

then what would consumers choose? I think the answer is obvious.

I have nothing but respect for Seth Godin; I’m almost finished with Permission Marketing at the moment and I’ll be reading All Marketers are Liars after that, but Seth’s wrong about messing with the Kindle and adding social networking to it. Reading a book should be a personal experience - discussing a book is something that you do once you’re established your own opinion. Being exposed to hundreds of opinions about what you’re reading at the same time you’re reading it pollutes the experience.

Think about it - if all of the comments from my blog popped up in a constantly updating widget that followed you down the screen as you read my entries then how would that affect your reading experience? Would it be different than if you got to read my entries in their entirety, then read the other comments, then added your own? Absolutely it would. Interacting with other readers is something that shouldn’t be performed synchronously with reading.

CNET broke a big story today about Vista falling out of favor with software developers. The story has a disingenuous premise given that any application written for Windows XP will work with Vista thus making Vista the most widely-adopted platform, but Tom from TomsTechBlog raised an interesting point:

But it does illustrate a bigger problem which is that the Windows Desktop Application market is drying up in many ways.  Lets look at the different types of Apps out there and what has happened in the last few years…

Games: There are still die hard gamers out there but for the most part the era of PC Gaming is dead.  They might not be as powerful but consoles allow developers to have a set feature list to target which means console games almost always look better.  Now that the major consoles support HD there’s just not much reason to stick with the PC anymore.

Is PC Gaming finished? Is everyone going to adopt console gaming as the new standard way to play games?

I don’t think so. Here’s why:

Media: Console platforms rely entirely on hard media for running games, meaning that if you want to play a game you have to have it on disk. Hacked versions of the original XBox have been modified to execute all games off of a hard drive, but other than that there are no platforms that support media-free gaming experiences.

Other than the PC, that is. Not only is it more convenient to play games on a PC due to the fact that most modern games don’t require any media in order to play, but it also gives PCs the advantage of being able to utilize superior content distribution models.

Distribution: In order to get the latest video game for a console system you have to do one of the following:

1. Go out and drive down to E.B. Games, Best Buy, Walmart, or some other electronics retailer and buy the game; or
2. Go onto Amazon.com, order the game, and wait 2-5 business days for the game to arrive via mail.

The PC has a third, more convenient method of distribution: on-demand gaming. The best example of this is Valve’s "Steam" Client, a social network/storefront hybrid that allows you to socialize with other gamers and purchase the latest gaming titles on-demand. All you have to do is download the client, create an account, and then use the storefront to buy registered products.

On-demand gaming clients like Steam and Blizzard Accounts deliver the following advantages to end-users:

1. End-users can purchase any of their games instantly without having to wait in line or wait for shipping;
2. End-users can play the game without having to keep CDs, DVDs, or cartridges lying around; and
3. Best of all: if End-users have to format or replace their computers, they can re-download all of the games that they’ve already purchased at no additional cost.

Consoles simply can’t support this kind of distribution model under their current architecture - most gaming consoles simply don’t have the storage capacity to store full video games in persistent memory.

Massively Multiplayer Experiences: Massively Multiplayer games present a whole new level of gaming complexity that simply can’t carry-over to consoles. MMOs are intrinsically more complicated due to the large number of choices presented in a flexible MMO environment. The biggest thing preventing MMOs from porting over to consoles is the awkward design of the game controllers. Even if you use voice chat you still need to type most of the time (slash commands, broadcasts, keybinds, macros, etc) and typing is an activity that is simply not worth the effort on a console controller.

Basically a mouse and a keyboard are undeniable essentials for MMOs; no one with any experience in an MMO can say otherwise.

High End Experiences: The biggest argument in favor of consoles over PCs is the fact that consoles offer consistent HD-quality images at significantly lower cost than equivalent PC gaming experiences; $600 for the latest high-end console versus thousands of dollars for high-end gaming laptops and desktops.

Consoles are simply a more affordable option for people who want a good gaming experience without breaking the bank; however, computers still offer the richest, fullest gaming experiences due to the flexibility of PC organization. You can always upgrade DirectX, Windows, sound cards, video cards, RAM, and so forth for the absolute premium gaming experiences.

Consumers can’t access that kind of platform flexibility with consoles, but the many gamers are satisfied with what’s offered by consoles. However, there is a large market of wealthier, older gamers who are willing to pay the premium for the best possible gaming experience.

In addition, "$3000" is not what people pay for a high-end gaming system; that number doesn’t factor in a number of sunk costs like the basic PC hardware, the operating system, virus protection, and so forth. Those costs are expenses that a consumer would have to spend on a PC regardless of the PC’s intended use.

Everyone Needs Computers: The biggest single reason why the PC market won’t die is because every person needs to have a computer! They aren’t going away any time soon! I can’t say the same for console systems; they’re simply another entertainment device and they can be replaced by a good PC. Even the best console in the world can’t act as a substitute for a PC.

The True State of the PC Gaming Industry

I found some good data to support what I’m going to say next, but the fact is that the PC games market and the console games market are both growing, rapidly. It looks like console gaming is growing more rapidly and will eventually become a larger market than PC gaming but it will never be able to replace PC gaming for the reasons that I covered in this article.

And now for some questions; feel free to answer these in the blog comments or via Twitter:

• Are you a gamer?
• If so, do you play on a console? A PC? Both?
• What games are you currently playing?
• Age of Konan - how are those memory leaks treating you?

Unless you’ve spent the past week living in a cave you’ve no doubt heard about the 3G iPhone announcement from Apple’s Worldwide Developer Conference (WWDC) last week. I’m not going to get into all of the new features introduced to the next version of the iPhone because they’re insignificant compared to the new iPhone pricing structure.

Apple’s Time-Tested Market Skimming Strategy

Market skimming is a pretty basic pricing strategy:

• Release a new, exciting product at a high premium and skim the greatest possible margin from the customers with the greatest demand;
• Once the sales volume begins to decrease at the original price, incrementally lower the price to increase sales again;
• Repeat this exercise until a stable price with an acceptable margin is determined.

Apple has done this for all of their products historically; most notably was the original $599 iPhone. Remember all of the whining that occurred when Steve Jobs lowered the price to $299? Job’s mistake with the original price drop was doing it too soon - after all, his customers were willing to pay $599 just to be one of the cool kids with a shiny new iPhone a few months prior to the price drop.

I think Bill Maher’s explanation of iPhone market skimming is probably one of the better ones:

However, the announcement of the new 3G iPhone brings with it an entirely different strategy than the original iPhone announcement.

Apple’s New Groove: Market Penetration

Market penetration is yet another basic pricing strategy:

• Set an initial lower price on a new product release in order to achieve large market share acquisition;
• This strategy is only effective in markets that are price-elastic (price-sensitive;)
• This strategy is used best when the producer is a new market entrant or has relatively small market share.

Currently Apple does not have much in the way of Smart Phone market share compared to product lines offered by RIM (BlackBerry) and Palm (Treo.) The results of recent ChangeWave surveys indicate this:

The new 3G iPhone, which includes important business features such as access to Microsoft Exchange, is going to roll out on July 11, 2008 with a price tag of $199. This means that the iPhone’s price will be roughly equal to that of any new Treo or BlackBerry unit; in some instances the iPhone is actually cheaper than the alternatives.

The new, low price and the addition of key enterprise features means two major things for Apple:

• The 3G iPhone’s first target is the business user; there are a lot of technical and infrastructural issues that might prevent businesses from adopting the iPhone en-masse immediately, but the iPhone’s features and price all fall within the same range as competing products offered by Palm and RIM. Apple is gunning for the business user.
• The 3G iPhone’s price will drop from $199 to $99 at some point in the future, this much I can guarantee. When the iPhone’s price does drop the phone will be adopted en-masse by the general consumer market. Every ratty 12 year old with a $5/week allowance will be running around with an iPhone.

This time Apple is setting its price low and its volume high, gunning for the common man instead of the zombie fan.