Now with products like the Kindle and the iPad (and the several others that have come on to the market that will likely fail), we have either arrived at or have become very close to the age of the digital book. It seems quite unlikely that the cost of the ebook reader will go dramatically higher over time and it is more likely that the cost of a good quality ebook reader drops below $100. The price maybe goes to under $50 if the ebook reader can be successfully locked into one type of proprietary book format that locks the reader to one type of store (so that the store can subsidize the cost of the reader in return for future book sales).

Crunchgear recently ran an article with the prediction of the end of paper book.  It is a good article and worth reading.

Here are my predictions:

• within 5 years most (more that 51%) students will not be required to buy paper based books at their college.
• within 5 years I give it 50/50 odds that ebooks with an ISBN number exceed the sale of paper based books with an ISBN.
• within 10 years, I give it 90/10 odds (meaning I would take a 10:1 bet)

The risk in my argument is there may be a rush to non-proprietary standards. Unlike the music industry where it was quite easy to take a CD and convert it to a musical file (and thus was born MP3s and Napster), it is quite difficult to convert your paper based book to an electronic version. So the strength of a non-proprietary standard is not in place. This means it is in the interests of the book industry to lock everyone to their proprietary standard and give away the reader so that they can control the sales of books. I think that Bezos says he gets 10 ebooks from every Kindle, if he can make the math work to get enough ebooks per Kindle to offset the cost down to $50 then he would be fool to not do that.

The recent dropping of the price of the Kindle are a perfect example of giving away the reader to sell more books. Jeff should hire a bunch of marketing guys from Gillette so that he can learn about razors and razor blades. The low cost of the razor is offset with the refill of that razor. He could also hire some folks from HP/Brother/Lexmark as their printer market is also driven the same way.

If the standards become ubiquitous, it is difficult for the books to offset the cost of the reader. The manufacturer of the reader must sell the reader for greater than the cost of manufacturing.  This is not true of the book readers on the market today. Nearly all book readers on the market today can open only one store’s books and therefore there is a symbiotic relationship between the success of the store and the success of the device.

The flip side could also be true. I could see Steve Jobs doing the reverse tactic that may be even more effective. Jobs is in the business of selling computers (although that is arguable considering the amount of money that the iTunes store makes on music). With books, he has the ability to change the argument since there are no ebook MP3 equivalents. He could say, “Buy my reader (iPad) and I will give you 20 ebooks for free out of this limited list of 250 ebooks.” If I was an author and Steve came to me and said, “Let me have your ebook for $1 royalty and I will make it one of the 250,” I would jump at the opportunity. For Steve, this would be a cost of $20 but for the buyer of the iPad, this would be a benefit of $200 to the user. I am not sure that Bezos can make the same deal since his real job is to sell books, not to sell Kindles (which is why his Kindle software sits on so many other platforms). Bezos wants to make the reader proprietary so that he personally can sell more books and his competitors like Barnes & Noble can’t compete with him on selling books.

Steve Jobs should be pushing for the creation of standards and he should be giving away his ebook format to anyone that wants to use it.  Then, he can beat his fellow reader manufacturers and making an insanely great reader – something that his company is uniquely setup to accomplish.

Interestingly, the publishers of books have more to fear from Amazon then they do from Apple (unlike the music publishers). Amazon is sitting at a perfect point to lock up a commanding portion of the market and dictate terms to the publishers. Apple on the other hand will have a much more difficult time in doing to the book market what it did to the music market (by making the iPod the King Kong of music players). While the iPad has the ability to be the commanding presence in the emerging tablet market, it is not nearly as well positioned to be the commanding presence in the book market. There are rumors of an upcoming iPod Touch that is an inch or so larger than the current format so that product may be the horse to ride in the dominance of the ebook marketplace.

For a lover of reading and company strategy, the next 5 years are going to be very interesting. Will my prediction come true? Eventually, I am certain of this, it is really the timing that is in question. I am also certain that my ability to start a company that would ride this wave is probably gone. It will now be fought by multi-billion dollar corporations like Apple, Amazon and the various book publishers.

BTW, if you want to know more about Timm Martin, the founder of the company that I referred to above, check out his blogs on technology at DevTopics and CSharp411.

PS to Steve Jobs: Steve, if you are reading this article and are willing to include a book that I write in each iPad and pay me a buck for that book, please call me!  I will have the book written within a month!!  Heck, I might even get it done for 50 cents!

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This is a little frustrating. I get the antenna being affected by my hand but this proximity sensor problem is just bad engineering (either software or hardware).

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I say “revised” because AT&T and Apple screwed up and missed my first delivery date.  The unit was supposed to ship on July 2 but they updated their date on July 3 to say that it was going to ship a week or so later. I was upset and I called Apple – the very polite and professional rep apologized but couldn’t change the ship date. He did give me a bumper as a consolation gift – good thing too as it turns out.

Like others on the web, I can easily see a degradation of the signal by holding the phone with my left hand.

I wanted to create a video of my experience. Unfortunately, I now understand why most of the videos on the web are so poor – it is really hard to record this experience due to the relatively small signal strength indicator, the very reflective screen, and the fact that you have to physically hold the phone in order to see the problem – you can’t just lay it on a table.

So this post turns into me saying “me too” which, I acknowledge, is pretty boring.

I have slightly larger than normal hands. I also used to be an athlete and my hands are very strong. Due to this, it is quite likely the pad of my hand below my thumb, is larger than most people.  According to the site, we live in INTERESTING TIMES (thanks for the image), this muscle group is the Adductor pollicis, Flexor pollicis brevis, and Abductor pollicis brevis.

When I hold the phone in my right hand, the signal strength is full bars. When I switch the phone to my left hand (still standing in exactly the same place), the number of bars drops over the course of about 5-10 seconds. It drops to virtually be flat line.

I don’t need to hold it tightly, the phenomenon happens in a very lose grip. In fact, my grip can be so loose that if I rotate my hand, the phone will fall out (I did this over a sofa to prove it to myself). I know that other bloggers have suggested that you need to hold it with a death grip, “Kung Fu” grip, or in an awkward Twister style contortion. This appears to be implying that it is inconvenient to hold the phone in the offending way. This is not the case for me, it is a casual grip in the most natural holding position possible. I am assuming that this difference could be the size of the pad of my hand, as I said above.

I have no idea if this will cause a dropped call.  I haven’t had the phone long enough for this to be truly tested.

I know that Apple says this is a software bug. This is pure spin and, forgive my vulgarity, it is pure bullshit. Even if the code was misrepresenting the signal strength in the bars, it is still changing that representation with the position of my hand. This means that it is not software related by environmental.

So, am I so upset that I am returning the phone?  No! It is still the best phone on the market and definitely the best phone on the AT&T network (I am forced to be on this lousy network due a corporate contract with my employer). I will probably have to enclose the phone in some kind of case, something that I have not done for the previous phones that I have owned. I don’t like cases as they exaggerate the size of the phone in my pocket.  I will try to find the thinnest case that I can find.

The iPhone 4 is a dramatic step forward in usability and speed compared to my old iPhone 3G. It is wicked fast and responds to my touches and swipes with a level of fluidity that I would never have expected. It is simply a joy to use.

Members of my family own the various Android phones. They currently are envious of my new iPhone 4 and if the iPhone 4 was available on the Verizon network, they both would trade in their Android phones for a new iPhone 4.

I know that Apple is holding a press conference tomorrow and supposedly this issue will be discussed.  I await their honesty with baited breath! My opinion of Apple for perpetuating this spin has dropped considerably. They should have owned up to it already and I am disappointed that they tried to play the spin game. I can almost guarantee that there were some engineers at Apple that knew that the ’software bug’ ploy was bullshit (there are news reports that this may be true).  If I can come to the conclusion in 3 minutes of testing, surely they could have come to the same conclusion after a day or two of testing.

While I couldn’t do a video of my own, CNET did one that was pretty consistent with what I was trying to do. They have better production tools than I own. The only difference is that I wanted to hold the phone with my left hand, show the degradation, and then switch it to my right hand to show it pop back up.  They say in their video that it takes a minute – my testing shows about 5-10 seconds.

UPDATE:
I just saw this on the Wall Street Journal:

Apple engineers were aware of the risks associated with the iPhone 4’s new antenna design as early as a year ago, but Steve Jobs liked the design it so much that Apple went ahead with its development, said a person familiar with the matter.

The company kept such a shroud of secrecy over the new phone’s development that the device didn’t get the kind of real-world testing that would have exposed such problems in phones by other manufacturers, said people familiar with the matter.

Apple’s iPhone 4 has been dogged by reports of antenna-reception problems since its launch last month.

http://online.wsj.com/article/SB10001424052748704682604575369311876558240.html?mod=djemalertNEWS

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But, is that really the fix? No.

All wireless devices need antennas.  If you are as old as I am, there is a chance that your first mobile phone was a “bag phone” or a “car installed phone”. These phones were massive and required a car or, at least, a briefcase to carry them around. The towers were so far dispersed that you needed a BIG antenna that was putting out mega-wattage to reach them. Putting that antenna up to your head would almost certainly turn your brain to scrambled eggs in a couple of weeks or so. These monsters were also analog and all you could do was talk on them (no texting – how in the world did we survive?).

Technology continued and the infrastructure improved. More towers and better communication technology developed. Analog turned to digital and everything got smaller. Also, people got tired of that stupid stick coming out of the top of their phone so the designers put the stick inside the phone (and not on top).  However, there is one thing that didn’t change – the physics of transmitting energy through the air still requires an antenna. The unfortunate thing is that the bigger the antenna (within reason) the better reception that you get. So Apple did good by putting the antenna into a metal strip that surrounds the phone.

If you are old enough, you may remember “rabbit ears” on your TV set. My job as a young brother was to stand beside the TV and hold the rabbit ears in the perfect pose so that my big brother (who would beat me up if I didn’t comply) could watch ABC’s “Wide World of Sports”. My body touching the antenna improved or hurt the reception of the TV based on where I touched it and how I stood. I stood in some pretty awkward positions in order to avoid my brother’s wrath.

So, when you hold any mobile phone with the antenna carefully hidden inside, your sweaty hands and your big old head are affecting that antenna to some degree. With the iPhone 4, you are making physical contact with that antenna so you are more likely to affect the signal – that is simply physics.

Apple is changing their software so you will be less aware of the issue and stop your damn complaining. They aren’t fixing the root cause; they just don’t want you to be aware of the problem anymore. This is the nature of spin – nothing really changes but your “perception” of the problem is different. If you don’t like it, take the phone back and buy an Android (which has the same problem just not as noticeable).

The issue is even more aggravated because the iPhone is only available on AT&T’s lousy network. Any time you screw with that signal, you will have problems. Since you so rarely have a good signal from AT&T, losing a little bit because you have sweaty hands and are touching the phone in it’s “special parts” just adds frustration. Apple would solve a lot of these problems by just signing a deal with Verizon.

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Let’s face it – there should be no such thing as “too big to fail.” Most of us work for companies that are not in that category. If our employers screw up and the company goes down the tubes then we will individually hurt and perhaps the micro-economy around that company will hurt a bit but for the most part the US GDP won’t even see the speed bump. This is the way that it should be – screw up and fail then just pick yourself up and get on with life.

“Too big to fail” simply stinks of a type of monopoly. I know that monopoly prevention is usually about consumer rights and price gouging, but is this that far from where we are now? Isn’t consumer price gouging exactly what we just went through with the TARP program?  I know that my taxes feel like I am getting gouged! This is especially true when I know that I am paying way too much in taxes and that still doesn’t cover what the US government spends! If it is a choice between taxing me more and the US Government (and the state governments) spending more, than I know the choice that I want to make – cut the damn spending!

So what is my suggestion?

The FDIC was nice enough to give us a list of banks here. The first thing that I see is there are some BIG banks! How can these not be monopolistic when they are that much larger than banks that are ranked just 10 places below them.  We need some sanity here.

1. No bank in the top 100 largest banks can be larger than double the size of the next smallest bank.
2. No bank in the top 100 largest banks can be more than five times larger than a bank that is ranked 10 spots below it.
3. No bank in the top 100 largest banks can be more than ten times larger than a bank that is ranked 20 spots below it.
4. No bank in the top 100 largest banks can be more than twenty times larger than a bank that is ranked 40 spots below it.
5. The top 100 banks combined size cannot exceed double the combined size of the banks ranked 101-500.
6. No FDIC insured bank can have more than 10% of its ownership by a non-US entity.

Yes, I know that the title of this article only says 5 rules but the list has 6 rules. The last rule is simply to reduce our banking exposure to undue influence by foreign nationals. We need to realize that our banking and financial systems is just as much of a strategic US asset as our defense contractors. We want the decisions of our strategic institutions to be governed by good business intentions and not the political aspirations of a foreign body.

Because of all of this re-arrangement, we would have to do this with plenty of warning. I would suggest that the law wouldn’t take effect for 5 years after signing to give the banks time to adjust. Also, in the first 5 years after the law is in effect (years 6-10 after signing), the penalty should simply be a 1% fine for the amount of out of compliance the bank was in e.g. if a bank was too large by $1B than the fine would by $10M. After the first decade, a bank would be taken over by a government agency to accelerate their divestitures, existing management and board of directors would be fired (and forbidden to run a bank for 10 years), and then new management would be installed by the shareholders.

There would also need to be a grace period of perhaps 3 years if banks ranked lower than the bank in violation decreased their size by more than 10% in a year and that caused the non-compliance. We cannot punish one institution due to the acts of another. However, we can require them to adapt to the current situation within a reasonable time, I suggest 3 years.

What would this do for the financial institutions?

The first thing that would likely happen is that the banks below 500 would likely start to get bought up pretty rapidly by the banks that are 101-500.Also, the top 100 banks would start to divest portions of their business to other banks (or create new entities) so that they could balance out. It definitely would mean that the top 10 banks would get smaller relative to the next 20 banks. That is the point, they would no longer be too big to fail. While we wouldn’t want them to fail, we also wouldn’t be on the hook as taxpayers to fix their screw-ups.

With the built-in delays and grace periods, it would probably take 20 years to get to a better balance. That is okay. In the words of some great philosopher: haste makes waste. It took us several decades to get the current mess that we are in and if we try to adjust too quickly, we will screw it up.

I know that there will be a lot of nay-sayers that think this won’t work or some other way will work better. I am sure there are good ideas out there but any idea that still concentrates wealth in the hands of a dozen corporations is simply not a solution to the core problem. Those suggestions are only to take care of a problem that presented itself already – in other words they are a band-aid to an existing cut. My suggestion is that we know that injuries and mistakes will happen in the future (banks will always fail) but let’s not get in trouble as a nation because of the problem.

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I am just aghast at how stupid these companies are. Current reports are that they didn’t install an “acoustic switch” on the well. From NewsInferno:

The Deepwater Horizon oil rig that exploded last week was not outfitted with a safety device that might have prevented the massive oil spill now nearing the U.S. Gulf Coast. The device, known as an acoustic switch, is a last-resort protection against underwater spills, and is required by regulators in Norway and Brazil. Unfortunately, the U.S. has no such regulation for oil wells operating off of its shores.

According to a report in The Wall Street Journal, an acoustic switch is a remote control device that a crew can use in an attempt to trigger an underwater valve that shuts down a well that’s damaged. The switch is meant as a last resort, as the primary shut-off systems almost always work on wells when they are out of control. It can be triggered from a lifeboat if an oil platform has to be evacuated.

According to the Journal, U.S regulators did consider requiring the acoustic switch on offshore wells, but drilling companies resisted because of its cost, and questions about its effectiveness. To be fair, the switches have never been tested in real-world situations, only simulations. U.S. regulators also maintain they are prone to causing unnecessary shutdowns.

Are these guys just plain stupid.  Didn’t they see Jurasic Park where the pessimistic mathematician, Ian Malcolm, talks about if something can go wrong then it will go wrong?

BP AND ITS KIN SHOULD HAVE BACKUP SYSTEMS FOR THE BACKUP SYSTEMS THAT ARE BACKING UP THE BACKUP SYSTEMS.  IF THEY DON’T HAVE 6 FOOLPROOF WAYS OF TURNING OFF A BROKEN WELL THEN THEY SHOULDN’T DRILL!

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It must be private, never go public. There will be no upside investors other than me and the employees. . . . I hope we can pull it off under those conditions because I would be thrilled to lead another group of smart engineers, without all the crap that goes into running a company today. I just don’t want Congress telling me how much I should be paid or firing me. I want to pretend I am back in the 1980s again.

Scott McNealy – co-founder of Sun Microsystems

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Consumers Energy, a Michigan gas and electric company with 2.9 million customers, said it will not take a big first-quarter charge because, like most utility companies, it can try to recover the added costs from its customers through rate hikes.

I am sure the state with the highest unemployment in the country will LOVE having their energy rates increased to pay for medical costs!

I get it, health costs will go down because it will get subsidized by the taxes on energy! We can just rob Peter to pay Paul because Peter is too stupid to realize he got robbed.

The really good news in all that is we may get some more new jobs – the bill gives the IRS $1B a year to hire new employees to collect all of these new taxes – that is about 12,000 new jobs for the IRS! Obama has finally come up with a solution to unemployment – hire the entire US population so that no one is unemployed!

Wall Street Journal has an opinion on all of these charges. They quote:

Towers Watson estimates that the total hit this year will reach nearly $14 billion

This is after AT&T, Deere, Caterpillar, AK Steel, 3M, and Valero announced a total of about 1.4B in combined charges. Verizon has already said they will need to announce charges just not sure how much.

That is okay though – I am sure that these companies are really rich and they will just absorb the charges and they won’t pass them on to the consumers. In fact, I am sure that these companies will now accelerate their plans to hire more people.

Obviously, a lot of what I said above is sarcasm. Here is what really going to happen. The door is open by a bad bill. Now there will be a lot of little fix bills to cover these problems. These little bills won’t get a lot of media attention in fact many will just be amendments on other bills. It won’t matter who controls the legislative or executive branch, the amendments will happen. These and other taxes are going to get taken out because they are stupid and punitive but the promise of free health care will continue (and probably expand) until 20 years from now it is as bad of a monstrosity as Social Security – under-funded and over-extended.

Speaking of Social Security, did you see that Social Security is now paying out more than it brings in as of this year (NY Times – the bastion of socialistic thoughts). Of course this is 6 years earlier than CBO said it would happen. CBO must have made a mistake. Isn’t that the same CBO that said ObamaCare will slightly help the federal deficit? I sure hope that it wasn’t the same group of counters that analyzed both programs since the Social Security analysis sure wasn’t on target!

There is very little that a government can do better than private enterprise. Now we have just placed 1/8 or more of our economy into the hands of the incompetents that can’t get a job in private companies so they run for political jobs.

What in the world are we doing? Will our children curse this day 40 years from now?

Companies say health care costs hard to swallow
By JOSH FUNK
AP Business Writer

The health care overhaul will cost U.S. companies billions and make them more likely to drop prescription drug coverage for retirees because of a change in how the government subsidizes those benefits.

In the first two days after the law was signed, three major companies — Deere & Co., Caterpillar Inc. and Valero Energy — said they expect to take a total hit of $265 million to account for smaller tax deductions in the future.

With more than 3,500 companies now getting the tax break as an incentive to keep providing coverage, others are almost certain to announce similar cost increases in the weeks ahead as they sort out the impact of the change.

Figuring out what it will mean for retirees will take longer, but analysts said as many as 2 million could lose the prescription drug coverage provided by their former employers, leaving them to enroll in Medicare’s program.

White House spokesman Robert Gibbs defended the tax law change Thursday, saying the original provision allowing companies to deduct the federal subsidies from their taxable income was a “loophole” that will be closed by the health care overhaul.

For the government, the tax changes are expected to raise roughly $4.5 billion over the next decade to help pay for the health overhaul. Some of the savings would be negated by retirees enrolling in the Medicare plans.

“You’re increasing the incentive for companies to say ‘We don’t want to be in the health care business any more,’” said James Gelfand, senior manager of health policy for the U.S. Chamber of Commerce, which fought the overhaul.

American industrial companies that are struggling to compete globally against companies with much lower labor costs are particularly likely to eventually drop retiree coverage, said Gene Imhoff, an accounting professor at the University of Michigan.

“Anything that they can use to justify pushing something away from the employees, pushing it back on the employees or the government, they’re going to do it,” Imhoff said. “I’m not sure you can really blame them for trying to do this.”

Caterpillar spokesman Jim Dugan said the company is still studying the health care law and doesn’t yet know what the full impact will be. But he acknowledged that benefit changes are possible.

“Obviously, there’s greater cost pressures on us that could drive changes to plans, but we haven’t made any decisions on that,” Dugan said.

Spokesmen for Deere and Valero said it was to soon to say how the change would affect the benefits they offer retirees.

When Congress approved the Medicare prescription drug program in 2003, it included government incentives for employers to provide drug benefits to retirees so the public system wouldn’t be overwhelmed. Employers that provide prescription drug benefits for retirees can receive subsidies covering 28 percent of eligible costs; those subsidies totaled $3.7 billion in 2008.

Under the 2003 law, companies could deduct the entire amount they spent on the drug benefits from their taxable income — including the government subsidy, an average of $665 per retiree.

The health care law signed by President Barack Obama on Tuesday prohibits companies from writing off the subsidies starting in 2011, meaning they will no longer be able to deduct them from their taxable income.

For example, if a company spent $100 on benefits, including a $28 government subsidy, it could write off the full $100 on its taxes under the old rules. The new rules would allow the same company to write off only $72.

The follow-up health care bill to reshape parts of the overhaul would delay the changes until 2013.

As many as 1.5 million to 2 million retirees could lose the drug benefits provided by their former employer because of the tax changes, according to a study by the Moran Company, a health care consulting firm.

James Klein, president of the American Benefits Council, said between 6 million and 7 million retirees currently get the benefits. But the number of companies offering them has been dwindling for years.

Generally, retirees would prefer to stay with prescription drug coverage provided by their companies as opposed to enrolling in a Medicare Part D plan, said Marilyn Moon, a health care economist with the nonpartisan American Institutes for Research.

She said most of the company-sponsored plans are more generous and almost none have the coverage gap that comes with Part D plans.

“That’s particularly painful and problematic for people who have substantial expenses at any one point in time,” she said.

Industry groups say they lobbied hard against the change in the tax rules before it was added to the health care law over the winter.

“It was in all of our letters and communications that went up to the Hill, and the companies were heavily involved in that,” said Dena Battle, a tax specialist with the National Association of Manufacturers.

Nationwide, companies would take a $14 billion hit on their financial statements if all of the roughly 3,500 companies receiving the subsidies continued to do so, according to a study by Towers Watson, a human resources consulting firm.

That financial hit will be a one-time cost as companies report a new cost estimate for the benefits over the life spans of all retirees.

Deere and Caterpillar were among a group of 10 companies that sent a letter to congressional leaders in December warning of the cost increases. The others were Boeing Co., Con-Way Inc., Exelon Corp., Navistar Inc., Verizon, Xerox Corp., Public Service Enterprise Group Inc. and MetLife Inc.

Most of the other companies that signed the letter said Thursday that it was too soon to estimate their costs. A number of other major U.S. companies also said they did not know how much the tax change would cost them. Some companies might wait until they release their earnings reports next quarter to address the costs so they have time to review the entire law.

The companies that signed the December letter warned that changing the way retiree drug benefits are subsidized would have a broad impact on the economy, and there are already indications that the effects will trickle down to individuals.

Consumers Energy, a Michigan gas and electric company with 2.9 million customers, said it will not take a big first-quarter charge because, like most utility companies, it can try to recover the added costs from its customers through rate hikes.

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What Scott doesn’t point out in his advice is that the change is not always necessary for the good of the company.  In this case, Conan was getting his butt kicked by the more experienced (and more entertaining) Letterman.

Scott’s article is excellent.  Jump over and read it.  Here is some of his advice:

1) Don’t EVER make the assumption that ANY productive employee is ready to be put out to pasture. We work for many reasons, and only ONE of them is money. Zucker’s assumption that Leno was wealthy enough and would want to ride off in the sunset started the disastrous chain of events.

2) Sometimes we have to allow good colleagues to depart. If NBC would have just allowed Conan to move on, instead of trying to sacrifice its business plan to keep him, they would have been in much better shape.

3) We must look to make the decisions that are best for the long-term…what fixes a short-term challenge may create lasting problems. That’s what happened here.

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I am not a bit surprised that Leno is in trouble at NBC. Moving that format to 10P in the 21st century was foolish. It may have been okay in the 50s or 60s but that show was doomed the day that Jay Leno walked on to the stage.

Of course, it doesn’t help that Conan is a flop in the 11:30 time slot.

The executives that put this together should be fired. It should be the first thing that Comcast does now that they have control of the company from GE. Fire the buffoons that did this. Talk about destroying a valuable commodity! Warren Buffet says that you should only invest in companies that can be profitable even if idiots run them. I don’t know if I agree with that advice but I definitely don’t think you should invest in companies that are run by buffoons!

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