Y2K PROBLEM PROBLEMS
December 31, 1999
SMART Letter #31 - December 31, 1999
Copyright 1999 by David S. Isenberg
isen.com -- "nothing clever to say"
email@example.com -- http://www.isen.com/ -- 1-888-isen-com
> Y2K Problem Problems
> Quote of Note: Tom Atlee on Why Y2K
> LEC of the Future Has Arrived: Metromedia Fiber Network
> Smart Comments from SMART People on NEW ECONOMY:
Elliot Cook, Greg Kochanski, Arthur Einstein,
Scott Berry, David Conrad, Roger Marks
> Conferences on my Calendar, Copyright Notice, Administrivia
Y2K PROBLEM PROBLEMS
With hours until New Year's Eve 1999, the most trustworthy
observers of the Year 2000 Problem don't know what's going to
happen, or how bad it'll be. Here is what some of these
people, who have been working on Y2K long, hard and directly,
are saying as the roar of the falls grows louder:
+ Someone who's worked Y2K since 1998 inside a giant
NYC financial house told me, "We've fixed everything
we know about. Now we're just waiting to see what
+ Charles Halpern, the chair of the Center for Y2K
and Society, says, "No one knows how many systems
will fail or what the global consequences will be."
+ And Ed Yourdon, who has studied the management of
software projects for three decades, says, "No matter
how experienced any of us might be . . . the truth is
that nobody really knows how this complex event will
How intently we have observed over the last two years. How
little our knowledge has grown.
One of the biggest Year 2000 Problem problems is that
institutions have been doing perception management.
Perception management is based on knowing what the 'right'
percepts are, regardless of the uncertainty of the situation
or the attendant threats -- perception is reality.
The US Government, for example, has, to date, succeeded at
keeping people from doing anything too different (changing
buying habits, etc.). In business, competitive pressure and
business-as-usual momentum have motivated companies to divulge
only bland warnings couched as reassurances. So it is
difficult to get hard information upon which to base
reasonable expectations. We're left with perceptions.
There's a lot of attention directed towards Muslim terrorists
and Chinese spies these days. In dangerous times, a scapegoat
is an oft-selected object of public attention, especially a
scapegoat that's 'different from us'. Be aware, especially
when 'the facts' reported by the (ever-so-objective) press
seem to support a conclusion of guilt. The principle of
"Innocent until proven guilty" is not just a legalism; it is a
personal responsibility, especially in these times.
This morning the TV says that somebody was arrested on
suspicion of being a friend of (and the same nationality as)
somebody else who was arrested. There is no specific threat,
the TV says. This is scary.
It is clear there will be Y2K failures. The billing period on
my latest newspaper bill ends on 2/12/??. Amtrak trains will
not roll over the rollover. American Airlines has cancelled
all New Years eve flights except for the one carrying FAA Head
Jane Garvey. (Isn't that special?)
Bill Clinton's Y2K czar John Koskinen says, "The power plants
WE THINK have done their Y2K work. We do not EXPECT there is
any risk." (Emphasis added.) In other words, he doesn't know
either (but don't panic).
How bad will it be? It depends on the tightness of the
coupling between points of failure and the systems they're a
part of. (Charles Perrow wrote the book on complex, tightly
coupled systems -- it's called 'Normal Accidents'.)
In addition, it depends on the degree of public anxiety,
anger, and perceived powerlessness. I had a call from a
reporter for a Florida daily who had it on good information
that HBO sent Time Warner a letter warning that Y2K problems
might interrupt the HBO feed. Whether or not this happens, it
raises an interesting scenario -- what if tens of millions of
US males don't get their New Year's Day football fix? It
could be bad, indeed.
Longer-term Y2K problems are plausible. Here are a couple of
+ Bhopal around the world: Systems, perhaps non-critical
systems, in power plants or refineries or chemical
plants (or water purification plants or sewage treatment
systems or gas pipelines) malfunction. They don't make
some components of these systems anymore, so each devises
a 'chewing gum and bailing wire' work-around.
Most such work-arounds succeed, but some fail in
mid-January, while others last until February . . .
+ Rolling Stones tickets meets Mother's Day: A big
bank's Visa bills go out in mid-January with a
glitch -- every body has been billed for 99 years
of interest and late fees. Or maybe the New
Year's Eve airline 'slowdown' lasts into
January 5 and 6. Watch the phone system overload.
Or . . . ?
Or perhaps we'll get off easy. At this point only time, and
not much of it, will tell.
Happy New Year,
[Big chunks of the above essay appeared on the MetaMarkets.com
website. MetaMarkets is the home of OpenFund.com, the world's
first on-line mutual fund.]
QUOTE OF NOTE: Tom Atlee
"Our system has been designed to make Y2K
disruptions inevitable. We do not have the
institutionalized collective capacity to see
what's happening to us, to reflect on that, and
to take coherent, appropriate action together.
Our governance, market, media and academic systems
are too booby-trapped with special interests, fixed
ideas, missing feedback loops, and weird mass
psychologies to actually generate much collective
Tom Atlee, via email 9 Dec 99
LEC OF THE FUTURE HAS ARRIVED Metromedia Fiber Network's dark
fiber changes the way people use bandwidth.
By David S. Isenberg
Stephen Garofalo's life suddenly synched to the communications
age when he read George Gilder's "The Coming of the
Fibersphere," (Forbes ASAP, Dec. 7, 1992). At the time,
Garofalo had spent 25 years at the head of his family's
electrical contracting business, but he saw his future in
Gilder's vision of dark fiber, dumb bandwidth, all-optical
networks and virtually free communications. He realized that
he could use his electrical contractor's experience with
cables, ducts, risers and rights-of-way to build the
infrastructure of the communications revolution.
So Garofalo founded National Fiber Network in 1993 to bring
dark fiber to the local loop. In 1997, it became Metromedia
Fiber Network (MMFN) when media giant Metromedia bought two-
thirds of the company. The deal catapulted Garofalo into the
ranks of the Forbes 400 richest Americans.
Garofalo's idea was to install massive quantities of fiber-to-
the-basement in cities. He would sell rights to use this dark
fiber by the fiber-mile to all comers on 5-, 10- and 20-year
contracts. He would not light the fiber. He would not meter
minutes or traffic. He would let his customers decide how to
light it and what to carry on it.
Garofalo explains the economics of dark fiber in a street-wise
voice shaped more by his Brooklyn upbringing than by his
recent riches. "Selling dark fiber is like selling customers a
fifty-story building for the price of the first floor," he
says. Then, referring to recent dramatic advances in optical
transmission technologies, he says "If you need more room, you
add more lights and switches and move upstairs."
The economics hinge on the fact that glass is not a precious
commodity. Almost all of the costs of laying fiber are in
acquiring right-of-way and doing construction. Bottom-line
costs hardly change whether MMFN pulls two fibers or a dozen
Once MMFN figures out its initial routing plan in a city, it
pulls an irrationally exuberant number of fibers. Plus, it
installs more empty conduits for future fibers than it can
imagine ever needing. Once this infrastructure is in the
ground, the cost of each fiber is close to zero. Customers are
delighted to buy fibers that are priced far below their cost
of new construction.
MMFN's ultimate goal is to eliminate the tariff system so the
newly abundant marketplace determines the price of
communications. MMFN's business model is simple; it must sell
as many fibers as it can. MMFN wants its customers to run out
of capacity so they have to buy more. Dark fibers, like
airline seats, won't make money if they' re left empty.
Some 70% of MMFN's customers are telecom carriers. The more
carriers there are in a given market, the better. Thus, MMFN
favors unrestricted competition, low end-user prices and
widespread broadband access. Its ultimate goal is to eliminate
the tariff system so the positive elasticities of the newly
abundant marketplace determine the price of communications.
Garofalo denies that MMFN's recent deal with Bell Atlantic,
worth about 20% of MMFN, will change the model. "It is not
exclusive. We are going to remain carrier-neutral," says
Garofalo. "If [another large carrier] wants to partner with us
tomorrow, we can do that too." MMFN will use the infusion of
Bell Atlantic capital to double its previously announced
expansion plans so it can be a first-mover in more cities.
CHANGING TRAFFIC PATTERNS
Data-intensive enterprises are MMFN's other big customer
segment. These include financial service firms, the medical
sector, and increasingly manufacturing, government and the
public sector. Nick Tanzi, a senior MMFN VP, observes that
unmetered bandwidth changes enterprise traffic patterns.
"There used to be an 80-20 rule of networking; 80% on the LAN
and 20% on the WAN. That's blown away," Tanzi says.
The change can surprise even the most experienced network
managers. An amazing 70% of MMFN's enterprise customers come
back for more fibers in their first year of service. (Note
that the original contract is based on the IT staff's most
educated long-term traffic projections.) "Stuff gets put on
the net that used to stay on people's hard drives," Tanzi
Howard Finkelstein, MMFN's president, explains that a DS3 from
the telco costs $3,000 a month, and a comparable MMFN fiber
costs about $5,000. But the fiber can be lit at OC-12 - 14
times faster than DS3 - for $500 more per month (assuming 10-
year depreciation). This works out to about $400 per DS3 per
month. But OC-12 is already yesterday's technology - OC-48,
OC-192 and OC-768 will drop the cost of a DS3 equivalent to a
few bucks a month. With prices like these, and the addictive
positive elasticities that they engender, it won't be too long
before DS3 seems unbearably slow.
[The above article appeared in the December 1, 1999 issue of
America's Network. Copyright 1999 Advanstar Communications.]
Smart Comments from SMART People on NEW ECONOMY
(SMART Letter #29):
Elliot Cook (firstname.lastname@example.org) writes:
"Roach says that productivity is defined by 'work done
per unit time'. How about productivity being defined
as 'results produced per unit time'. The 'foot-
pounds' effort is not the issue in a world of
information. Isn't the correct measurement
'results [measured in inflation adjusted dollars of
profit] produced per unit time'. What explains the
increase in adjusted dollars output/employee and the
consequent constant downsizing in the face of
increasing revenues and profits? That's the whole
idea. Said another way; it's output (not input)."
Greg Kochanski (email@example.com) writes:
"Using the week as the measuring rod only makes sense
for workaholics. Sure, working more hours lets you do
more stuff -- you just cease to have a life outside of
work. Most people don't work because they love it,
they work to get paid, and they find their enjoyment
outside of work. For them, there is a very real
cost to working more hours: lost time with the kids,
cold dinner, no chance to read mysteries, you name it."
And Greg Kochanski makes this observation regarding how old
economic measures can miss certain economic activity:
"[One spurious effect on] GNP happens when you take in
my laundry, and I take in yours. That boosts the GNP
(after all, we pay each other), but we both do exactly
the same work we did before."
Arthur Einstein (firstname.lastname@example.org) responds to issues of
commoditization and customer loyalty as follows:
"In this world of a gazillion data points, customers
also follow trust. This may simply look like inertia,
but smart marketers put a lot of effort into
retention. Where products and services are
undifferentiated, service, experience and relationship
are the differentiators."
Arthur Einstein also addresses the IPO-as-Marketing-Event
concept that Holland Carney laid out at New Economy:
"Unfortunately, the IPO only happens once. But a
Superbowl commercial can go on forever. Apple
introduced the Mac in 1984 with a spot that ran once,
but Jobs and Chiat Day and Regis McKenna had the wit
and skill to make that commercial a year-long PR
event. It has never been done better."
Scott Berry (email@example.com) observes:
"We're seeing two overlapping productivity effects
[that interact] to mask what's really going on. First,
productivity is indeed skyrocketing. How anybody can
doubt this is beyond me. But second, and
counterbalancing the productivity increase, is that
competition is getting more intense. When information
is nearly ubiquitous, and large corporations are on
the same level playing field with garage start-ups,
the effort required to achieve each inch of advantage
rises sharply. Hence the 70 and 80 hour work weeks,
the phone calls during dinner, the Sunday brunch
"We're left with an increase in 'output' per hour,
accompanied by an increased need to work more hours.
Thus it's easy for "old school" economists to say
there's no "macro-visible" productivity increase,
while the "new economists" don't understand why people
can't see a productivity explosion. The effect for the
average person is more variety, cheaper products,
faster growing companies, richer entrepreneurs, and--
unfortunately--a longer work week."
And Scott Berry also says:
"I think you hit the mark about IPO 'branding'. One
of the major reasons my wife and I bought Qualcomm
phones is that we're large -- and very happy --
shareholders. Being an investor encourages one to
delve deeper into a company's products to learn just
why they're better. If they don't have a sustainable
advantage, they're not a good investment nor a good
David Conrad (David_Conrad@isc.org) makes the
following observations about Eric Raymond and the Open
"As ISC [the Internet Software Consortium] was 'open
source' long before the term even existed, I felt I
"A problem with Open Source apps is that there are a
lot of fingers attached to the eyeballs Eric likes to
talk about and (arguably unqualified) people like to
kibitz. An analogy would be a scientific peer review
system that lets the peers reviewing an article modify
the article reviewed.
"Another problem is uncontrolled 'creeping
featurism' . . . unless you have a benevolent dictator
(Linus Torvalds for the Linux kernel, the Apache Core
group for Apache, Eric Allman for Sendmail, ISC for
"The difference between 'Open Source' and a
'Chaordic software organization' is a matter of
reward. I suspect Eric Raymond would argue that the
reward opensourcers are after is recognition instead
of dollars -- they don't care about the intellectual
property they are developing. Bill Joy doesn't see
this as compensation.
"Linux is Chaordic to some extent, in that 'Linux'
is primarily the kernel. The rest of the goop that
folks like Redhat sell are distributions. Linus sets
the standard for the Linux kernel. Redhat (Caldera,
etc.) adds value to that kernel in its own way."
And where SMART Letter #29 ranted, "Why did the Open Source
Movement get so enthusiastic about re-doing unix? . . . Why
doesn't it do an Open Source Java-like system?" David Conrad
"Don't confuse press hype with reality -- open
source movement is all about collaborative
development/peer review of source code, not a
particular software product. (L)Unix is just the one
that gets all the press, but BIND is open source, so
is Apache, Sendmail, etc.
"Re: Java, see http://www.kaffe.org. I'd argue
that Java-like systems are far more dependent on
centralization and hierarchy. In fact, one big
selling point is that you don't have all those people
mucking about with their own systems like they do with
Roger Marks <firstname.lastname@example.org> writes:
"You cite Eric Raymond's concern that 'business has not
figured out how to do effective peer review.' One area
where business _has_ successfully made use of peer
review is the development of technical standards. In
my group (I chair IEEE 802.16, which develops
standards for fixed broadband wireless access
<http://nwest.nist.gov>), we openly invite
contributions on a topic, web-publish the written
responses, and then put the presenters on the floor in
a meeting. The peer review is handled by debate and
voting, both in meetings and by email.
"It's very difficult to slip a questionable idea
past the group, especially since most of the
participants have a direct stake in getting it right.
I am convinced that this kind of review is what has
made IEEE 802's local area network standards the
foundation of so much of the world's information
"This process stands in contrast with the
consortium-dictated specifications that have become so
trendy. One fundamental problem with those is that
they tend to minimize the peer review and go straight
to manufacturing. It's a much riskier procedure."
[As an antidote to Roger Marks' belief that the standards
process is somehow pure, I suggest that he read 'Information
Rules' by Carl Shapiro and Hal Varian -- twice. Or as SMART
Person Don Norman says, "If you do read 'Information Rules',
then please read the Cluetrain Manifesto afterwards to get
that bad taste out of your mouth." I'll review 'Information
Rules' in the next SMART Letter.]
CONFERENCES ON MY CALENDAR
March 9-10, 2000. Washington DC. Legg Mason Investor Workshop
on "Investment Precursors (tm) in Telecom, Internet, and
Electronic Commerce." I'll be on a 'technology visionarys'
panel with SMART People Bob Lucky and Michael Powell. The
other two panelists, Royce Holland and James Crowe, haven't
gotten with it and signed up for the SMART Letter yet. For
more information, contact the Legg Mason Precursor Group at
TELECOSM ASIA (originally March 12-15) has been POSTPONED. As
soon as I have more information, I'll post it here.
March 20-23, 2000. Orlando FL. IBC "Unified Communications
Conference." It's not just "Unified Messaging" anymore! I
think I'm giving the keynote at 8:45 AM on March 21st.
Nothing on the web yet, but watch http://www.ibcusa.com/ or
contact Anne Bacon Blair email@example.com, 508-481-6400
May 7-12, 2000. Birmingham UK. World Telecommunications
Congress. I am an invited speaker for the session entitled,
"What's your network IQ?" Answer: Too high. For info, see
May 23-26, 2000. Laguna Niguel CA. VORTEX. Metcalfe has
invited me to speak this year! Cool, but what I really want
to do is run a session on "The Network We Really Want to Have,
and Why We're Not Building It." Nothing on the web yet. Stay
June 7-10, 2000. Toronto ON. TED CITY. My only role here is
as a paying member of the audience, but I think that Richard
Saul Wurman does a real job with his TED conferences -- every
one I have been to has had deep lasting impact. You can't
shoehorn yourself into his regular Monterrey CA stand in
February, but there are still a few spaces for June, and I
would like SMART People to be there if they can.
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Copyright 1999 by David S. Isenberg
firstname.lastname@example.org -- http://www.isen.com/ -- 1-888-isen-com
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