Whistling past the Grave Yard...

Traditional print has taken it pretty hard on the chin these last few years and the winds of change have been blowing pretty hard:  high speed inkjets, iPads, phone-based internet.

None of this is new for us in the business.

But the winds of change haven't just been blowing through our woods.

I have been thinking about and reading about how some of these same winds have been blowing through other, far newer and far more "techy" parts of the world as well.

For example, take Microsoft.  This company was started by someone my age.  He's now a retired billionaire.  A geeky kid dropping out of college and writing a BASIC language interpreter.  And this company is still the largest software company be revenue on earth.

But...

"Microsoft ... is so clueless on Web 2.0 it can't make a simple blogging platform people will actually use." 

This is not new, unfortunately.  Microsoft by and large makes Windows.  It controls 90% of its market - more or less.  Why?  Because its really, really good at, no, not software, business.  All those little holographic stamps glued to the bottom of laptops and so forth -  each represent a "cha ching" in the Microsoft cash register when you buy a computer for your right to use Windows.

This is big business at its finest.  Controlling distribution, access, branding and licensing to an incredible level of detail.


I argue that this model, that of control, does not work in the world of "the Internet" (something Bill Gates dismissed early on as relatively unimportant).  This is why Microsoft is not doing well.  Sure, they can write software, but their software is not that good.  If it were, then you wouldn't need all the iron fist of control. 

Microsoft has not been successful in many, many other areas: Zune, IE, and phone OS, etc. 

Then there is Adobe.  Its halcyon days of PDF and PostScript have long since passed. 

Here, as an example, I am working with a customer on a "RIP problem".  A PDF file works well everywhere but on one particular Adobe RIP.  I am watching the communication stream between the vendor and the "RIP team".  Its like watching inter-galactic alien communication or the Matrix with its dribbling green icons.  All the PDF and PostScript brains have been outsourced. 

Then there is what I call CS "n" plus one.  The term n + 1 is a mathematical term used to describe the next thing after, of course, n, as in n - 1, n, n + 1, like (3, 4, 5).  Unfortunately, the world is moving on here.  I don't need all that to do my iPhone app.  The Mac has lots of free developer tools - including some to handle the same things as the expensive Adobe ones.  Soon Apple-like "App Stores" will start to dominate software sales (maybe the $4.99 Illustrator will appear) leaving less need for the current marketing models full of dancing graphics and Flash...  and of course Flash will fizzle.  You get the idea.  

Technology has now taken its place in our lives.  These two companies where there building the computer and graphic arts infrastructures of this modern age.  But that's not the same thing as living "in" that modern age.  Usually those that are great builders move on to build more - rather than hang around to basque in their former glory.  After all, their builders... 

The same was true with John D. Rockefeller and Standard Oil.  His place was to create Standard Oil - a company that, in the late 1800's, had over 100 thousand employees and billions in sales (all without computers I might add).  Oil was nothing before him and everything after.  After he built that company the fun was gone for him personally.  Others ran it.  People hated it.  The government chopped it up into endless little pieces and parts that are forever reorganizing.  He ended up letting his son create the vast Rockefeller charities from his fortune.  He passed away with relatively little. 

What's interesting in the case of both Microsoft and Adobe is how things go as you get out of your comfort zone.  In the case of Microsoft things aren't going as well as they might - no bonus for Steve Ballmer.  In the case of Adobe they have reinvented themselves once transitioning from RIPs so forth to creation platforms.  But these are mostly the result of purchases - Aldus, Macromedia, and so on. 

As with Standard Oil, these companies will go on.  But not as they were created.  What they do is too great to dispose of - just like with print.


But things will be different.

Point, Photoshop, Fraud

I saw an ad for the new Chase iPhone app that allows you to make deposits.

That's right, deposit a check into your bank account via a cell phone.

How it works seems to be quite simple from the ads and reviews that I have been reading.  Basically it involves snapping a picture of the front and back of the check with the phone's camera inside the app.  I imagine that there are various other security features that require you to log in, supply a password, and so forth.

I read a few reviews and there are apparently some deposit limits on this - $1,000 per check, $3,000 per week.

What I have not been able to find is anything about how this works with check fraud or with the varieties of miss use that youngsters looking to "borrow" some money from old mom and dad might come up with.

Let's think about check fraud first.  Years ago Forbes magazine did an article on how crooks were committing check fraud.  Part of the article discussed the basic uses of a tool like PhotoShop to create realistic looking checks.  To anyone with a graphic arts background this is not rocket science.  The only tricky part was using the right kind of MICR toner cartridge to print the routing and account numbers on the checks so that they would correctly process at the bank.

The more crafty aspect of this article was related to what routing and account numbers to use.  Basically they said something to the effect of "find accounts on checks where there is a lot of money and activity".  Examples were along the line of rebate checks (copying info from the one you get in the mail), utility accounts as vendors (they had some discussion of becoming a vendor to a large company), that sort of thing.  Not rocket science but basic, simple fraud.

The idea in the article was that you would create a fictitious business and business checking account, collect a ton of routing and account numbers, fabricate checks, make a months worth of deposits, withdraw the money, and head for the hills.  This was no small effort - creating accounts, acquiring software, printers, toner, and so forth - but for crooks it might be a way to make some quick cash.

This caused quite a stir at the time because it was seen as blatantly promoting fraud.  Forbes pointed out that it was a service so people would know what to look for to prevent fraud.

Which brings us to this app.  Now, the Forbes article I mention was from a number of years back.  But the ideas in it are as old as the hills.  Unfortunately, what I don't see with the Chase app is any way to mitigate fraud - not the kind perpetrated by Nigerians looking for someone to handle their $10 million dollar surplus accounts - but the kind perpetrated by little Johnny and his friends.

It would seem Chase (and not just Chase - other big banks have similar technologies) has taken all the hard work out of check fraud.

Most parents today have had at least on experience with little Johnny or little Suzy using "the Bank Card" in an unfortunate way.  Borrowing the card, taking out more money that you requested them to take out, that sort of thing.  What the money goes for, well, you'll have to ask them but let's just say the days of little Johnny pinching a 5-spot to run down to the quick mart and get cousin Joey to buy him a six pack are long gone.

The other issue here is little Johnny and little Suzy are handy with computers - both phone and laptops - as well as camera and PhotoShop style apps.

Based on this my prediction here is that this app from Chase is really a tool to collect overdraft fees.

If the phone is used only by responsible adults to deposit small checks - then I don't see a problem - but phones get left in the hands of troublemakers whether teens or Latvian gangs.

So let's put ourselves in shoes of little Johnny.

First of all, little Johnny probably already knows your pin number for your bank card as well as any phone passwords - perhaps even better than you.  An no doubt he has watched you use this app.  So, left to his own devices with his friends on a rainy afternoon with your forgotten I phone and this iPhone app its not hard to see how the idea of manufacturing checks to deposit might come into play.

Specifically what they might do I cannot say - but my guess it it will involve you being charged fees to fix it.

Now the whole reason for this app is for you to do the job of the bank teller - Chase does not have to pay the teller, you do all the work, they make all the money.  Here they will simply follow this as well as have the option for you to pay when you (or little Johnny) screws up.  Overdraft fees, fees for multiple deposits, fees to reimburse Johnny's friends parents when deposits are made using their checks.  Trust me, Chase will do well with this...

(Not to mention the fun that Latvian nationals will have when they discover your forgotten phone in the restaurant - cousin Vladimir can always use an extra $3,000 wired to his personal account.)

Four years ago I wrote this article about how big companies profit from things like drugs by "drafting" fees on top of expected account misuse.  This is no different.  Of course you won't turn in little Johnny because he's a minor and its embarrassing - for you, little Johnny, for your friends you might have to repay.

My guess is that enterprising twelve to fourteen year old kids could figure this out - not to mention professional criminals...

So be careful out there...

Causuistry, Randumbness, and Regression to the Moon

Charles Seife writes an interesting book called “Proofiness: The Dark Arts of Mathematical Deception.”

Reviewed here by the NY Times.

The review is very interesting and defines the terms I used in the title of this post.  "Proofiness" - a pun on "truthiness" which is defined as a "truth" that a person claims to know intuitively "from the gut" without regard to evidence, logic, intellectual examination, or facts.

"Proofiness" is sort of the mathematical sub component of "truthiness" where you use statistics and numbers to prove something is true even though it may not be.

My interest here, though, is in a further refinement of "proofiness" which Seife calls "causuistry".  Causuistry is what he calls "wrongly implied causation."

First a little definition of what causation really is.  Remarkably most people really don't understand this.  Causation is the relationship between a first event and a second event where the second event is a consequence of the first event.  Consequence meaning that without the first event there would not be a second event.

For example, "I threw a rock" where the rock flying through the air is caused by my throwing it.  The rock would have remained in my hand had I not thrown it.  Note that this is very different than "I threw the rock and it hit you in the head."  The reason is that the rock "hitting you in the head" could have been caused by one of two things - you standing there and me throwing the rock at you or me throwing the rock and you positioning yourself such that it would hit you.  In this second case your being struck by the rock could have one of two causes or even multiple causes if I through the rock at you and you position yourself to be hit.

So the point here is very simple.  Causation means that something is the direct cause of the result.  It does not mean that there were multiple intervening factors in addition, that there is an unknown, tenuous link between events, or that we don't really know so we just said it because it seemed right.

Small children learn to question this very early.  "Don't touch the stove or you'll get burned."  Usually little Junior figures out he can touch the stove an not get burned - if only the burner is on or the stove is off - because the admonition "you'll get burned" is overly vague.

Now let's see what Seife might mean with this concept in a practical sense.  Let's take this headline from What They Think: "Quad/Graphics gets $46 mill from WI to create 1,300 new jobs."

Now at first blush this seems pretty clear, or maybe not so much if you think about it.

So reading the first paragraph we see "expand their operations and create up to 1,300 new jobs and retain 5,500 existing jobs in Wisconsin."  Now, in my book there is a difference between giving you X dollars and giving you up to X dollars.  Or giving you up to X bricks versus giving you X bricks.  Most people as children learn this by example, usually from older siblings, cousins or friends.

"Hey, little Johnny, I'll give you up to 100 sticks of gum for your dollar."  Little Johnny, not understanding the real difference between "giving 100 sticks" and "giving up to 100 sticks", loses his dollar and gets nothing because getting zero sticks fits the definition of "up to 100".

So is giving the "$46 mill" going to really "create 1,300" jobs in this case.

I don't see a single word that implies a causation relationship between the two.  Certainly the article implies this.  Certainly it seems like this would be the case.  But, on closer inspection we see that there is no causality between the two events.

Later in the article we see the $46 million in tax credits is provided "to support the expansion of Quad/Graphics and the creation of 1,300 jobs in southeastern Wisconsin".

This is not the same as the headline.  All this now implies the money will be used to do three different things: "expand Quad," "retain 5,500 jobs" and "create 1,300 jobs".  By the time we expand Quad, save 5,500 other jobs, what's going to be left for creating the 1,300 jobs?  Perhaps not much.

But you, as the tax payer, will feel good about spending the $46 million because in your mind you'll retain "create 1,300 jobs" even if there is no causal relationship between the two  Certainly the headline would like me to believe that it will be used to "create 1,300 jobs" - but is that just a case of causuistry or causality?

So this is a very simple demonstration of causuistry.  It seems like the $46 million is an investment in 1,300 new jobs.  But there isn't anything that tells me that's what will happen.  You might try and argue that this is just journalistic license and that there isn't room to be specific - but that's nonsense.  I say either you create jobs or you don't.

So I don't buy what the article is selling.

Isn't the job of the news and of journalism to provide accurate information?  How can I decide, for example if its my tax dollars being used, if this $46 million is a good investment?  Certainly if this same sloppy model was used on my 401(k) prospectus or on my savings account, e.g., get up to 50% interested, I would be suspicious or call it a down right fraud.

Why is it that today we've lost our ability to question this sort of thing.  As kids we were always pushing the limit - touching the stove to test out the model of world we were being provided by others.

But today we've lost this.  We don't see past the headlines.  We believe what's put under our knows as if its the truth. 

We don't use simple reasoning to question the most dubious claims...

Where did we go off the tracks?

Printing Newspapers, Digital Text Books

Over at the corporate press there is an article about whether newspapers, and the NY Times, will continue to be printed.  The corporate press discussion is a bit shallow, but they go on to say they may be good news in print for textbooks.

Let's analyze all this a bit more...

I took a little deeper look at the NY Times situation.  First off, they are planning to implement a "pay wall" at the NY Times next year.  This means that you will be able to access some articles per month for free and after that you will have to pay.  This is, however, for the casual user.  If you'd like a web-based subscription that is offered as well.

This is common.  The Wall Street Journal, for example, does basically the same type of thing.

I guess its a good thing that the NY Times realizes they need to be paid.  According to Aurthur Sulzberger, Jr., the chairman and publisher:  "Our pursuit of the pay model is a step in the right direction for us," Sulzberger said. "We believe that serious media organizations must start to collect additional revenue from their readers," and "information is less and less yearning to be free." Readers are becoming increasingly willing to buy information on the web if it enhances their lives, he said.

I find the underlined portion of the statement very interesting, particularly in light of this article.

Here we find the crux of the matter: "The economics of the online news business will not support the infrastructure or newsroom that the printed paper supports."

This is very interesting.  Web-based news reporting cannot support itself.  But it goes on: "We estimate that the NYT currently spends about $200 million a year on its newsroom and generates about $150 million of online revenue."

This coupled with continuous losses on the print side (maybe $12 million a year) are what's driving all of this.  Right now I can access the NYT without restriction - or at least so it seems.

So let's compare this to a less venerable, perhaps down-right evil publication, the Wall Street Journal.  Over at PaidContent.org I found some comments from Rupert Murdoch, the new owner.  Though a bit dated (from 2008) they tell us a lot:

"Rupert Murdoch, the new owner of D conference, and Dow Jones (NYSE: NWS), is speaking in the last keynote of the day today, at his conference. When asked by Walt about the future of newspapers: “I just love communicating with people, whether print, TV, print, mobile and others. Print will be there for at least 20 years, and outlive me.”

On keeping WSJ/Barrons as subscription: “When I saw how much money they were making, I changed my mind on it. People can pay a lot more than we are charging, from $50 a year to $150 million…We have 2000 great journalists….if we can’t fashion something great out of it, then we have something wrong,” he said, elaborating on the premium product that WSJ can build on."

These guys seem to have no problems making money, even with 2,000 journalists.  The NYT, at around the same time, has only about 1,330 journalists working in its news room.

So is print dying or is the NYT just an example of a grossly mismanaged media company?

The real question, I think, is has print tied itself to an unpopular editorial model - one that's losing ground against a more popular one - as well as, in a case like the NY Times, a bad business model.

I think that's the real question.

Let's think about books for a minute - in particular school books.  I've been looking at this article at wired.com for the last couple of days.  This talks about a all-digital text book video-game like text book that the E. O. Wilson Biodiversity Foundation, named after the naturalist and founder, plans to give away.  Now whether or not you agree with E. O. Wilson is another matter but the idea that they can raise $10 million dollars and create a free digital science book is interesting.

My grandchildren are not so interested in sitting down to read physical books - and I don't see how they are different than most these days.  At 7 and 9 they are taught at a cyberschool.  This is a complete on-line school.  No paper, no books.  They've been in this school all along and I don't see how they would go back to paper books.

I imagine that this E. O. Wilson book will be aimed at this model of education.

The growth of cyber schools is amazing (from a 2005 article).  The recent anecdotal evidence I have from my daughter whose children are in there particular school is that the school is growing rapidly.

Students in colleges already all have laptops - cyber grade schools are all computerized - so its really hard for me to see how print will make an inroad.

The Digital Nirvana comments I think are out of touch on both accounts...
 

Adobe Converts Flash to HTML5

In this video...



While only a demo at least its a step in the right direction...

Learn

This link is to a transcript of Apple's call with investors last week.

Scroll down a bit an read the comments by Steve Jobs - they're too long to post fully here.

Once you've read this you will see why Apple is #1 right now.  Jobs knows what's going on across the board.  He understands both the market and technologies and why his products work.

Compare that, say, with the BP CEO Tony Hayward who resigned over the gulf leak.  He had no knowledge of the details of the details - before or after.  On the other hand, I bet those involved with the delay of the iPhone 4 white case are personally known to Jobs - and the results of their activities appear in his in-box minute to minute.

But its not just that.  Look at his depth of knowledge about the technology in his products and why its there.  Even for iPad for which no "white case" type disasters have occurred.

One mistake management of American companies makes is having to much distance between the CEO and the workers and their products.

To borrow an BMism (and to pun on THINK) American CEO's need to

Learn

Music Reinvented...

I wrote here yesterday about the RIAA and copyright issues.  While I may not agree with the RIAA and making everyone a copyright criminal I think that the music industry in general is working on some new ideas for replacing the old model of music distribution.

The most interesting one is the evolutionary progression of the "Rock Band" series of video games.

This started out in 2005 with the release of Guitar Hero.  Basically there was a plastic guitar-like controller with four plastic buttons on the neck and a little bar where you would normally strum the guitar.  The idea of the game was that as a song played little icons would slide into view on the screen telling you when to strum or press buttons on the neck - presumable in sequence and time with the song.  The closer you got to doing exactly what the sliding icons told you to do the better your score.

I have a friend who in my estimation is one of the best acoustic players I've seen - particularly in terms of accuracy and timing.  I was over at his house one day a few years back.  He had the game and said "check this out".  So we fooled around with the game for a couple of hours.  I didn't do well because I had never played it - surprisingly, neither did he.  This has stuck with me over the years...

I've also been watching how this whole genera of games has been changing the "Steal. Mix. MP3." music model pioneered by the iPod.  Like advertising sales at the big newspapers music sales in traditional venues are dropping at a double digit percentage rate.  However, video games continue to show growth.

What's interesting here is that music, through its association with video games, has found a whole new paid distribution model to compete with "Steal. Mix. MP3."

Heavy hitters like the Beatles and Bon Jovi have been signing up to have their music distributed via this model.

PS/3 sales have been increasing and Rock Band has helped contribute to that increase.

But the video game developers have not rested on their laurels, either.  Since the initial 5-button plastic guitar controller was first released there has been a steady development effort to make the "Rock Band" experience even more realistic.

Now, most of you at one point in your lives were probably subjected to music lessons.  Usually in grade school.  Like me you probably hated it.  On the other hand, as the controllers for these new games become more realistic the game becomes a venue to have little Junior spend hours playing.

You may object saying that its just a game and has little to do with actual music.

In the past you'd be right.  But "Rock Band 3" moves the playing experience to a whole new level - bringing in real or nearly real instruments.  Drums, keyboards, and even stringed guitars with amplifiers are becoming part of these games.  Guitars with built in MIDI controllers to drive synthesizers have been around for years.  This fusion with video games will make the cost of this type of instrument drop as the sales volumes for the games increase.

So not only is the video game market driving music sales, its now also pushing the integration of musical instruments into an electronic format.

So is there a corresponding increase in musical knowledge that goes with all this?  Or are we just creating and ever more elaborate version of air guitar or musical masturbation?

Sadly, it would seem that all of this is more the later.

Rock Band and its friends can teach you a number of things about music.  Rhythm in particular seems to be the biggest element learned.  But "learning rhythm" not quite the same as actually learning to, for example, drum.

The biggest problem is that the games are an abstraction of the music playing process.  Its very unlikely that anyone will quickly learn to play guitar like, say David Gilmore, from Rock Band.  The reason is that what makes him so good goes far beyond plucking a given string at the right time.  There's string bending, sustain, flexing the neck, picking style, timing with the rest of the band, and much, much more that your not going to learn from the game.

Which takes me back to my friend not doing well on the game.  He's a musician - not a video gamer.  He plays the instrument based on sound, not visual cues.  Can he become better at the game - of course.  But I think that's why he lost interest ultimately (now he plays Hockey online) - its just not like a real musical experience.

Its also important to realize that, even in Pro mode, the game is not going to give you any sort of realistic real-time feed back in a musical sense.  Playing with real musicians is daunting if you have not done it before.  They don't play like a game for the most part - its much more dynamic.

A player like David Gilmore doesn't just play his instrument.  He also listens to whatever else is going on around him so that his timing relative to the other sounds is correct.  This is probably my biggest dislike with the game (as well as my personal experience with it).  You need to play by ear, not by visual cue.

After you've play a number of years, for example, you can anticipate the motion and sound another player will make.  It becomes almost like telepathy.  You literally "feel" what the other players are doing as they do it.

(So to the developers out there of "Rock Band" - add a no-visuals mode that teaches listening skills - a training mode to teach listening to pitch - create a mode where its more important to have each controller played in sync with the others.)

Rock Band is creating an entirely new model for music distribution - a much better one than the RIAA suing people who share music online.

Is this all a good idea?  Will little Junior learn to be Neil Pert by playing Rock Band.

No.

Will this stimulate interest in music and playing instruments, expose little Junior to music in a way that tedious and boring grade school music lessons will not?

Absolutely.