SMART Letter #49
November 17, 2000

!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() ------------------------------------------------------------ SMART Letter #49 -- November 17, 2000 Copyright 2000 by David S. Isenberg -- "Generous to a Fault" -- -- 1-888-isen-com ------------------------------------------------------------ !@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() CONTENTS > Quote of Note: Judy Estrin on Worst of Both Worlds > Quote of Note: C. Michael Armstrong on AT&T Restructuring > A Smart Remark of My Own, by David S. Isenberg > Smart Remarks from SMART People: > Daniel Stern on monkeys swinging from twisted pairs > "AT&T Solutions" comes to terms with quad-vestiture > "Discouraged" on TeleDanmark's sex-vestiture > Laurence May on national standards and dying dinosaurs > Duane Bowker on cable modem reliability > Toni Mack on politician-pleasing utilities > Greg Kochanski on why I'm wrong about Lucent > "Don't Use My Name" with two Lucent bad-news stories > Jeff Cole on 'the investor is always right' > Conferences on my Calendar, Copyright Notice, Administrivia ------- QUOTE OF NOTE: Judy Estrin "As we merge telecommunications and data communications, if we're not careful we will wind up with the worst of both worlds rather than the best of both." Judy Estrin, former CTO Cisco, currently co-founder of Packet Design, quoted in January 2001 issue of The Cook Report on Internet. ------- QUOTE OF NOTE: C. Michael Armstrong "In the future, the most successful companies will be those that have mastered three skills. First, they will be extremely close to their customers. Second, they will capture - rat her than be captured by - new technologies. And third, they will move faster than their competitors . . . but the truth is that [this is] hard to achieve in a $65-billion company . . . and that's why we are restructuring." C. Michael Armstrong in The Rocky Mountain News, 11/13/00 [The_Innovator's_Dilemma (by Clayton Christensen, Harvard Business School Press, 1997 -- just in case you're looking for it, Mike) explains why a company can't be close to its customers and simultaneously capture new (disruptive) technologies. It also explains how new (disruptive) technologies breed new competitors that are moving fast, but in a brand new space that incumbents can't understand. Furthermore, it explains why an incumbent's old customers aren't going to tell it about this new space no matter how close it gets to them. In Year 2000 a manager that doesn't grok this is a bad manager. -- David I] ------- A Smart Remark of My Own, by David S. Isenberg The networking community has observed that what Einstein said about a theory -- that it should be as simple as possible but no simpler -- also applies to networks. Einstein's dictum applies to writing too. A thought should be expressed in as few words as possible, but no fewer. I'm honored to get comments from SMART People that represent a wide range of viewpoints. I try to make them clear and readable. Usually this means taking out all the words that don't change the meaning. It is hard work, but worth it. See below. ------- Daniel Stern of UgandaConnect [] writes: "Got a good belly laugh from your "undocumented legacy of twisted copper wires dating back to Alexander Graham Bell." In Africa they hang twisted pairs between the banana trees. Monkeys love to swing on 'em, which is a regular cause of line disruption. "The Source, a new cybercafe in Jinja, is connected to its ISP in Kampala by DSL over a leased line. The Source put its network together on-the-cheap, bought routers and a Portmaster on e-Bay. It is the first node outside of Kampala. It is now working on connecting schools in the area." [My friend Iqbal Quadir has coined a phrase that bears repeating -- B3B. B3B means the Bottom 3 Billion, the people who have never made a phone call or logged on to the 'net. I'm glad that Uganda Connect is working to connect the B3B, and for entirely selfish reasons. The B3B business model is that hooking up these people makes *my* network (N+3,000,000,000)^2 more valuable. -- David I] ------- "AT&T Solutions" tries to come to terms with AT&T's quad- vestiture: "[In a previous SMART Letter] when you predicted the end of AT&T I actually got angry! I didn't think that the management could be that stupid. A broadband base with communications service sold on top of it -- what's so complicated about that? Isn't that what we just had put together! It was there and now it's gone. I used to work for AT&T. I'm now working for another company with AT&T's name. I can't fathom what just happened." ------- "Discouraged in Denmark" sees AT&T's quad-vestiture and writes: "I'm working for TeleDanmark, the incumbent operator in Denmark. Like AT&T, TeleDanmark is also in the midst of splitting up into six business lines and a holding company. The six business lines are Fixed lines, Mobile, Internet, Directory service, IT services and CATV. This split up happens after a fusion process that has been going on for five years and just recently has been fully implemented. "Our CEO and he says that the reason for splitting up is to act better in the market. But I speculate that it is that the stock market gain more insight into the company by splitting up. But I don't buy it -- we could have given the same information in the old set-up. " ------- Laurence May, [] writes: "I am having fun watching the US make the same mistakes it did in the past with our VCR protocols, our rejection of GSM, our embracing of copper and cable, all to protect the dying dinosaurs." [Hmmmm. Maybe Einstein's dictum applies to standards too. -- David I] ------- SMART Person (indeed, one of the real doers when we were at AT&T) Duane Bowker [] writes: "I read with great amusement your "Myth of Five Nines" and your recent remarks on poor cable modem performance. I too have @home and Comcast cable modem service. The transmission speed beats dial-up hands-down, but availability has been bad. Lately, not only does it miss "five nines" it's short of "nine fives" as well. "@home has been having problems with their Domain Name Servers (DNS). When you call them, they say "all of New Jersey is having connection problems" (Try pinging their DNS addresses...nobody's home @home!). They have no idea when service will be back up, and they provide no recompense for service unavailability. It's "entertainment", it's permissive, and it's everything you've come to expect from your friendly cable provider. I thought when I got this service, I would discontinue my dial-up ISP service but I just haven't been able to because of poor @home availability." [Duane, an incumbent's road to low cost is paved with skimping. But since bits-is-bits these days, even for end- users, multi-sourcing is a pretty good route to reliability. I have two physically diverse ISPs because my Internet access is mission critical. Competition simultaneously holds down the price and makes end-user multi-sourcing possible. Sure it's twice as expensive, but nevertheless seems like a good deal to me! -- David I] ------- Forbes reporter Toni Mack [], responding to "Talking Back to the News -- SMART Letter #48", writes: "I used to cover electric utilities and their largely successful efforts to avoid deregulation. In a competitive industry, you succeed by pleasing customers. In a regulated industry, you succeed by pleasing regulators and politicians. Ma Bell was a utility, remember? Ma Bell and the electrics wooed and groomed politicians with exquisite finesse and success. "Electric utilities, too, have cried 'Universal Service! We do our job so well it would be foolish to allow market forces to impinge upon this Perfect Machine. The consumers (codespeak: voters) will get hurt.' These utilities treat their largest consumers (businesses, which don't vote) so poorly that George Gilder spied a huge investment opportunity. His Powercosm newsletter is the result. "Businesses like wafer fabs can't afford split-second electrical outages and so must turn to other suppliers -- which do operate in a free market -- for high-quality power. But every consumer, large or small, must endure that abuse known in Orwellian terms as 'customer service.'" [You're right, Toni. Being a regulated utility played a huge part in creating an AT&T culture that was not adapted to competition. Nonetheless, it could've been worse -- in its day Ma Bell was the very best national telephone utility in the world. It wasn't overtly corrupt (had a culture of honesty among employees), it was reasonably technology driven (sustaining tech), and it gave the world Bell Labs (the transistor, the satellite, the DSP, unix, stereo recording, speech coding, and all that). Along with utility culture and the politician-pleasing that goes with it, I think there are several factors that now combine, Perfect-Storm-wise, to sink AT&T. These include competition, Patrimonial Bureaucracy (which you find full- bloom in the private sector too), disruptive technology, bad management, lack of entrepreneurial talent, inability to keep/attract technical talent given the Internet startup boom, a high cost basis, inability to manage for the longer term (a fix rather than replace ethic), de- (or more like re-) regulation, an obsolete value proposition & business model, and corporate old age. -- David I] Toni replies: "I know you're fond of your old Ma, even though you've cut the apron-springs. But I think AT&T was not the coulda-been-worse type because our politicians are not the coulda-been-worse corrupt, overtly bribe-taking types that the Third World suffers." ------- Greg Kochanski [], reacting to "More News Back-Talk -- SMART Letter #48b", writes: "Well, I hate to tell you, but you don't really have an inside view of Lucent anymore. You describe a reasonable extrapolation from AT&T days, and it's partially right, but you appear to speak with more knowledge than you have. "[You describe Tachion's switch, but] have you looked at Lucent's PathStar? IP out the back, any kind of card you want to plug into the front, sounds just like Tachion's box. [Admission: No I have not taken an analytic look at the Lucent Pathstar switch. Then I said, "I mean, fundamentally, it's an impossible problem to solve at a company like Lucent; you can't get there [i.e., function as one integrated company] from here." -- David I Kochanski responds:] "Other than the fact that Lucent *did* get there from here, the company now has the concept of a product manager. Once the project starts flying, it's free to add whatever features it wants, without getting anyone's approval. There's politics, and getting a project off the ground is still non-trivial, but I (and you) know some people on the PathStar project, and it really isn't much like you describe. "Negotiate features between business units? Jeez! What cave did you crawl out of? The trouble with *sultants is that they truly believe that they are the only ones who have received enlightenment. While I can't say that our management is exactly enlightened, the company *has* learned some basic lessons in the last few years. [Touché! Ouch. Then, when I say, "Break it up, spin it out, sell it off, reorganize it, reinvent yourself, get smaller, get leaner," Kochanski responds:] "And, do you expect the spun-off fractions to cooperate? Not likely. You don't seem to be consistent between problems and solutions. This advice seems (to be blunt) standard brainless Wall Street drivel, and I'd expected better from you. It's easy to say, because everyone is saying it, but who actually knows if it's right? "We're both old enough to remember when everyone thought Japan was on the top of the heap. Large consortia (kiretsu) were going to be the business model of the future; companies would cooperate with their partners. Size was power. Government guidance of technological development and research was the way to go. The bureaucrats of MITI could somehow see the future and guide Japan more efficiently than the chaotic, bumbling, short-sighted American market. Remember? "Lots of pundits said it. Unfortunately, they were all wrong. What makes you think you're more likely to be right than they were? Certainly, we do things differently now. However, there are billions of ways to organize an economy, and we've only tried about two or three since we invented the computer. Why should #4 of 1,000,000,000 be the right one? Most likely, it's just the fad of the moment. Everyone believes it because, well, everyone else believes it. [Then I say that an integrated sales force is still a reason for Lucent to remain a company. Kochanski observes:] "Research is the other area where problems from all the business units come together. Research, of course, is unpopular these days. Why solve hard problems, when you can get a gigabuck for an e-commerce platform that uses no technology invented less than 15 years ago?" [Good point about Research. Good point about business fads, too. But fad or not, small is demonstrably more beautiful. The cost of failure is lower. Bad ideas die sooner. Good ideas have a better chance to survive on their merits. Disruptive technology gets a chance to displace old markets and technologies without the ball-and-chain of internal resistance. Small companies create more jobs. Et cetera. Now, in a frictionless economy driven by network effects, small companies that succeed rapidly become large, winner- take-all companies. If that's a fad, then so's capitalism. -- David I] ------- "Don't use my name," inspired by "More News Back-Talk -- SMART Letter #48b", tells two Lucent-hasn't-changed-its-stripes stories: "[Story One:] We're installing two Lucent products for our current client -- the 5ESS and an operations system (OS). We spend half our time mediating among Lucent organizations including OS development, switch development and the local sales team. They send nasty emails back and forth blaming each other for the emergency of the day. Or maybe the OS group calls me asking for information from the switch group. "The second story is a little more amusing. As part of our work we had to sign a contract with the OS side of Lucent. After we signed it took them three weeks just to find out who is the person authorized to sign for Lucent." ------ John Kawakami ( sends this update on the Independent Media Center: "[Re: Talking back to the news -- SMART Letter #48,] see The Independent Media Center has grown considerably since I wrote you earlier this year. We had around six sites then, and now we have over 30. To me, the IMC is a crossroads of humanism, software engineering, cultural creation, and direct democracy. "We're carving out a new space, something between 'journalism' and 'propaganda'. (Or to put it in commercial terms: "reusable content" and 'advertisement'.) We're trying to deconstruct the role of 'journalism' in society and bring the necessity of ethics to the foreground of the new media landscape. "My 'moral compass' is my (relatively limited) understanding of the natural sciences, math, history, statistics, logic, etc., which is critical to deal with the flood of information we're covering. We need basic liberal education more than ever. "But liberal education has to become more global. Xenophobia and racist thinking impede relationships in the "global village". Simply participating in the global village doesn't make someone "global", anymore than taking a trip to India makes you an Indian "Maybe the web will help this process happen from the bottom up, through pen-pals and small business relations created across borders. But now companies (like Coca Cola and McDonalds) are the ones bringing culture across borders as they seek out new markets. Their idea of globalization is that people can be bent to conform to a standard global diet. A hundred years of this, and we might have a global culture based entirely on business. "The issue then, is reclamation. In order to reclaim culture, e.g., to reclaim psychological netspace from the big .coms; this year, it's reflected in the Naderites desire to reclaim politics from corporate takeover." [I am ambivalent about John's invocation of Nader & his followers. Yes, seatbelts and airbags are a good idea. No, the auto companies wouldn't have done seatbelts and airbags without Nader's pressure. But the whole movement towards Washington-mandated auto engineering (directly attributable to Nader) killed an awful lot of innovation. Nobody can do back yard automotive innovation anymore, so in a sense Nader made the corporations stronger. There is **NO** route for disruptive technology to enter the automotive marketplace anymore. I think the problem is deeper -- one aspect is that today's notions of corporate governance and ownership are screwy. If corporations were owned by people with faces who lived in our communities, rather than by pension funds and mutual funds (supposedly owned by *us*, but really run by moral-maze managers and faceless committees), we'd have a leg up. But that's a fantasy -- I don't know how to get there from here. - - David I] ------- Jeff Cole [] Talks Back to the news in SMART Letter #48b: "In the era of "24X7 stock watch" the average Joe and Jane can now view their stock portfolio constantly in real time. Now everyone is not only an investor but also an analyst. All of this has culminated into 'The investor is always right' and no longer 'the customer is always right'." ------- CONFERENCES ON MY CALENDAR November 28-29, 2000. Montreal, Quebec, Canada. THE NETWORKED NATION: CANARIE's 6th Advanced Networks Workshop. I'll be speaking, and so will Francois Menard, Paul Hoffert and other (mostly Canadian) folks who are honing Canada's leading edge. SMART People will remember that last year the word from CANARIE was Ethernet (see CANARIE Sings -- SMART Letter #30, December 9, 1999). Months later the Ethernet story hit The New York Times and Business Communications Review. This year I hope to learn about grids -- watch this space. ------- COPYRIGHT NOTICE: Redistribution of this document, or any part of it, is permitted for non-commercial purposes, provided that the two lines below are reproduced with it: Copyright 2000 by David S. Isenberg -- -- 1-888-isen-com ------- [to subscribe to the SMART Letter, please send a brief, PERSONAL statement to (put "SMART" in the Subject field) saying who you are, what you do, maybe who you work for, maybe how you see your work connecting to mine, and why you are interested in joining the SMART List.] [to unsubscribe to the SMART List, send a brief unsubscribe message to] [for past SMART Letters, see] [Policy on reader contributions: Write to me. I won't quote you without your explicitly stated permission. If you're writing to me for inclusion in the SMART Letter, *please* say so. I'll probably edit your writing for brevity and clarity. If you ask for anonymity, you'll get it. ] ** David S. Isenberg, inc. 888-isen-com 908-654-0772 ** -- The brains behind the Stupid Network -- **